109TH CONGRESS 

1ST SESSION H. R. 1635 

To amend the Internal Revenue Code of 1986 to allow employers a credit 

against income tax for hiring military service personnel who served in 

a combat zone or a hazardous duty area. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 14, 2005 

Mr. MCCOTTER (for himself, Mrs. MILLER of Michigan, Mr. PEARCE, Mr. 

MANZULLO, Mr. SWEENEY, Mr. ENGLISH of Pennsylvania, Mr. RENZI, 

Mr. REYES, Mr. SULLIVAN, Mr. SHUSTER, and Mr. JONES of North 

Carolina) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to allow employers a credit against income tax for hiring military 

service personnel who served in a combat zone or a 

hazardous duty area. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Veterans’ Employment 

5 Transition Support Act of 2005’’ or the ‘‘VETS Act of 

6 2005’’. 
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1 SEC. 2. CREDIT FOR EMPLOYERS HIRING MILITARY SERV2 ICE PERSONNEL WHO SERVED IN A COMBAT 

3 ZONE OR A HAZARDOUS DUTY AREA. 

4 (a) IN GENERAL.—Subpart D of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of 

6 1986 (relating to business-related credits) is amended by 

7 adding at the end the following new section: 

8 ‘‘SEC. 45J. CREDIT FOR EMPLOYERS HIRING MILITARY 

9 SERVICE PERSONNEL WHO SERVED IN A 

10 COMBAT ZONE OR A HAZARDOUS DUTY AREA. 

11 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

12 the military service personnel employment credit for the 

13 taxable year shall be equal to—

14 ‘‘(1) except as provided in paragraph (2), 40 

15 percent of the qualified first-year wages for such 

16 year, and 

17 ‘‘(2) in the case of a disabled qualified veteran, 

18 the applicable percentage of the qualified first-year 

19 wages for such year. 

20 ‘‘(b) QUALIFIED WAGES.—For purposes of this sec21 tion—

22 ‘‘(1) IN GENERAL.—The term ‘qualified wages’ 

23 means the wages paid or incurred by the employer 

24 during the taxable year to individuals who are quali25 fied veterans. 
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1 ‘‘(2) QUALIFIED FIRST-YEAR WAGES.—The 

2 term ‘qualified first-year wages’ means, with respect 

3 to any individual, qualified wages attributable to 

4 service rendered during the 1-year period beginning 

5 with the day the individual begins work for the em6 ployer. 

7 ‘‘(3) WAGES.—The term ‘wages’ has the mean8 ing given such term by section 51(c), without regard 

9 to paragraph (4) thereof. 

10 ‘‘(c) QUALIFIED VETERAN; HIRING DATE.—For pur11 poses of this section— 

12 ‘‘(1) IN GENERAL.—The term ‘qualified vet13 eran’ means any individual who is certified by the 

14 designated local agency (as defined in section 

15 51(d)(11))— 

16 ‘‘(A) as being a veteran (as defined in sec17 tion 51(d)(3)(B)) who performed services in an 

18 area designated by the President for purposes 

19 of this section as a combat zone or as a haz20 ardous duty area, and 

21 ‘‘(B) as having been honorably discharged 

22 from active duty in the Armed Forces of the 

23 United States. 

24 ‘‘(2) HIRING DATE.—The term ‘hiring date’ has 

25 the meaning given such term by section 51(d). 
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1 ‘‘(d) DISABLED QUALIFIED VETERAN; APPLICABLE

2 PERCENTAGE.—

3 ‘‘(1) IN GENERAL.—The term ‘disabled quali4 fied veteran’ means any qualified veteran who is cer5 tified by the designated local agency (as so defined) 

6 as having a disability that has been determined 

7 under the laws administered by the Secretary of Vet8 erans Affairs to be service-connected and that is 

9 rated by such Secretary (as of the date of the certifi10 cation) as 10 percent or more disabling. 

11 ‘‘(2) APPLICABLE PERCENTAGE.—The term 

12 ‘applicable percentage’ means the percentage deter13 mined in accordance with the following table:

‘‘Percentage of disability: Applicable

percentage:

At least 10 but not over 20 .................................. 41

At least 20 but not over 30 .................................. 42

At least 30 but not over 40 .................................. 43

At least 40 but not over 50 .................................. 44

At least 50 but not over 60 .................................. 45

At least 60 but not over 70 .................................. 46

At least 70 but not over 80 .................................. 47

At least 80 but not over 90 .................................. 48

At least 90 but not over 100 ................................ 49

100 percent ........................................................... 50

14 ‘‘(e) CERTAIN RULES TO APPLY.—Rules similar to 

15 the rules of section 52, and subsections (d)(11), (f), (g), 

16 (i) (as in effect on the day before the date of the enact17 ment of the Taxpayer Relief Act of 1997), (j), and (k) 

18 of section 51, shall apply for purposes of this section.’’. 
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1 (b) CREDIT TO BE PART OF GENERAL BUSINESS

2 CREDIT.—Subsection (b) of section 38 of such Code is 

3 amended by striking ‘‘plus’’ at the end of paragraph (18), 

4 by striking the period at the end of paragraph (19) and 

5 inserting ‘‘, plus’’, and by adding at the end the following 

6 new paragraph: 

7 ‘‘(20) the military service personnel employment 

8 credit determined under section 45J(a).’’. 

9 (c) TECHNICAL AMENDMENTS.— 

10 (1) Clause (iii) of section 41(b)(2)(D) of such 

11 Code is amended to read as follows: 

12 ‘‘(iii) EXCLUSION FOR WAGES TO

13 WHICH EMPLOYMENT CREDITS APPLY.— 

14 The term ‘wages’ shall not include any 

15 amount taken into account in determining 

16 the credit under section 45J(a) or 51(a).’’. 

17 (2) Subparagraph (B) of section 45A(b)(1) of 

18 such Code is amended to read as follows: 

19 ‘‘(B) COORDINATION WITH OTHER EM20 PLOYMENT CREDITS.—The term ‘qualified 

21 wages’ shall not include wages attributable to 

22 service rendered during the 1-year period begin23 ning with the day the individual begins work for 

24 the employer if any portion of such wages is 
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1 taken into account in determining the credit 

2 under section 45J or 51.’’. 

3 (3) Subsection (a) of section 280C of such Code 

4 is amended by inserting ‘‘45J(a),’’ after ‘‘45A(a),’’. 

5 (4) Paragraph (3) of section 1396(c) of such 

6 Code is amended to read as follows: 

7 ‘‘(3) COORDINATION WITH OTHER EMPLOY8 MENT CREDITS.— 

9 ‘‘(A) IN GENERAL.—The term ‘qualified 

10 wages’ shall not include wages taken into ac11 count in determining the credit under section 

12 45J or 51. 

13 ‘‘(B) COORDINATION WITH PARAGRAPH

14 (2).—The $15,000 amount in paragraph (2) 

15 shall be reduced for any calendar year by the 

16 amount of wages paid or incurred during such 

17 year which are taken into account in deter18 mining the credits under sections 45J and 51.’’. 

19 (d) CLERICAL AMENDMENT.—The table of sections 

20 for subpart D of part IV of subchapter A of chapter 1 

21 of such Code is amended by adding at the end the fol22 lowing new item: 

‘‘Sec. 45J. Credit for employers hiring military service personnel who served in 

a combat zone or a hazardous duty area.’’. 
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1 (e) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to individuals who begin work for 

3 the employer after the date of the enactment of this Act. 

Æ