I 

109TH CONGRESS 

1ST SESSION H. R. 2296 

To amend the Internal Revenue Code of 1986 to protect the financial stability 

of activated members of the Ready-Reserve and National Guard while 

serving abroad. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 11, 2005 

Mrs. LOWEY 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 protect 

the financial stability of activated members of the ReadyReserve and National Guard while serving abroad. 

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 ‘‘Guard and Reserve 

5 Financial Stability Act of 2005’’. 

6 SEC. 2. READY RESERVE-NATIONAL GUARD EMPLOYEE 

7 CREDIT AND READY RESERVE-NATIONAL 

8 GUARD REPLACEMENT EMPLOYEE CREDIT. 

9 (a) READY RESERVE-NATIONAL GUARD CREDIT.— 
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1 (1) IN GENERAL.—Subpart D of part IV of 

2 subchapter A of chapter 1 of the Internal Revenue 

3 Code of 1986 (relating to business-related credits) is 

4 amended by inserting after section 45I the following 

5 new section: 

6 ‘‘SEC. 45J. READY RESERVE-NATIONAL GUARD EMPLOYEE 

7 CREDIT. 

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

9 in the case of an eligible taxpayer, the Ready Reserve-Na10 tional Guard employee credit determined under this sec11 tion for any taxable year with respect to each Ready Re12 serve-National Guard employee of such taxpayer is an 

13 amount equal to 50 percent of the lesser of— 

14 ‘‘(1) the actual compensation amount with re15 spect to such employee for such taxable year, or 

16 ‘‘(2) $30,000. 

17 ‘‘(b) DEFINITION OF ACTUAL COMPENSATION

18 AMOUNT.—For purposes of this section, the term ‘actual 

19 compensation amount’ means the amount of compensation 

20 paid or incurred by an eligible taxpayer with respect to 

21 a Ready Reserve-National Guard employee on any day 

22 when the employee was absent from employment for the 

23 purpose of performing qualified active duty. 

24 ‘‘(c) LIMITATIONS.—No credit shall be allowed with 

25 respect to any day that a Ready Reserve-National Guard 
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1 employee who performs qualified active duty was not 

2 scheduled to work (for reason other than to participate 

3 in qualified active duty). 

4 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur5 poses of this section— 

6 ‘‘(1) ELIGIBLE TAXPAYER.— 

7 ‘‘(A) IN GENERAL.—The term ‘eligible tax8 payer’ means a small business employer. 

9 ‘‘(B) SMALL BUSINESS EMPLOYER.— 

10 ‘‘(i) IN GENERAL.—The term ‘small 

11 business employer’ means, with respect to 

12 any taxable year, any employer who em13 ployed an average of 50 or fewer employees 

14 on business days during such taxable year. 

15 ‘‘(ii) CONTROLLED GROUPS.—For 

16 purposes of clause (i), all persons treated 

17 as a single employer under subsection (b), 

18 (c), (m), or (o) of section 414 shall be 

19 treated as a single employer. 

20 ‘‘(2) QUALIFIED ACTIVE DUTY.—The term 

21 ‘qualified active duty’ means— 

22 ‘‘(A) active duty under an order or call for 

23 a period in excess of 179 days or for an indefi24 nite period, other than the training duty speci25 fied in section 10147 of title 10, United States 
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1 Code (relating to training requirements for the 

2 Ready Reserve), or section 502(a) of title 32, 

3 United States Code (relating to required drills 

4 and field exercises for the National Guard), in 

5 connection with which an employee is entitled to 

6 reemployment rights and other benefits or to a 

7 leave of absence from employment under chap8 ter 43 of title 38, United States Code, and 

9 ‘‘(B) hospitalization incident to such duty. 

10 ‘‘(3) COMPENSATION.—The term ‘compensa11 tion’ means any remuneration for employment, 

12 whether in cash or in kind, which is paid or incurred 

13 by a taxpayer and which is deductible from the tax14 payer’s gross income under section 162(a)(1). 

15 ‘‘(4) READY RESERVE-NATIONAL GUARD EM16 PLOYEE.—The term ‘Ready Reserve-National Guard 

17 employee’ means an employee who is a member of 

18 the Ready Reserve of a reserve component of an 

19 Armed Force of the United States as described in 

20 sections 10142 and 10101 of title 10, United States 

21 Code. 

22 ‘‘(5) CERTAIN RULES TO APPLY.—Rules similar 

23 to the rules of section 52 shall apply. 

24 ‘‘(e) TERMINATION.—This section shall not apply to 

25 any amount paid or incurred after December 31, 2006.’’. 
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1 (2) CREDIT TO BE PART OF GENERAL BUSI2 NESS CREDIT.—Subsection (b) of section 38 of the 

3 Internal Revenue Code of 1986 (relating to general 

4 business credit) is amended by striking ‘‘plus’’ at the 

5 end of paragraph (18), by striking the period at the 

6 end of paragraph (19) and inserting ‘‘, plus’’, and 

7 by adding at the end the following: 

8 ‘‘(20) the Ready Reserve-National Guard em9 ployee credit determined under section 45J(a).’’. 

10 (3) DENIAL OF DOUBLE BENEFIT.—Section 

11 280C(a) of the Internal Revenue Code of 1986 (re12 lating to rule for employment credits) is amended by 

13 inserting ‘‘45J(a),’’ after ‘‘45A(a),’’. 

14 (4) CONFORMING AMENDMENT.—The table of 

15 sections for subpart D of part IV of subchapter A 

16 of chapter 1 of the Internal Revenue Code of 1986 

17 is amended by inserting after the item relating to 

18 section 45I the following: 

‘‘Sec. 45J. Ready Reserve-National Guard employee credit.’’. 

19 (5) EFFECTIVE DATE.—The amendments made 

20 by this subsection shall apply to amounts paid or in21 curred after September 30, 2004, in taxable years 

22 ending after such date. 

23 (b) READY RESERVE-NATIONAL GUARD REPLACE24 MENT EMPLOYEE CREDIT.— 
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1 (1) IN GENERAL.—Paragraph (1) of section 

2 51(d) of the Internal Revenue Code of 1986 (relat3 ing to members of targeted groups) is amended by 

4 striking ‘‘or’’ at the end of subparagraph (G), by 

5 striking the period at the end of subparagraph (H) 

6 and inserting ‘‘, or’’ and by adding at the end the 

7 following new subparagraph: 

8 ‘‘(I) a qualified replacement employee.’’. 

9 (2) QUALIFIED REPLACEMENT EMPLOYEE.— 

10 Section 51(d) of the Internal Revenue Code of 1986 

11 is amended by redesignating paragraphs (10), (11), 

12 and (12) as paragraphs (11), (12), and (13), respec13 tively, and by inserting after paragraph (9) the fol14 lowing new paragraph: 

15 ‘‘(10) QUALIFIED REPLACEMENT EMPLOYEE.— 

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

17 replacement employee’ means an individual who 

18 is certified by the designated local agency as 

19 being hired by an eligible taxpayer to replace a 

20 Ready Reserve-National Guard employee of 

21 such taxpayer, but only with respect to the pe22 riod during which such Ready Reserve-National 

23 Guard employee participates in qualified active 

24 duty, including time spent in travel status. 
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1 ‘‘(B) GENERAL DEFINITIONS AND SPECIAL

2 RULES.—For purposes of this paragraph— 

3 ‘‘(i) ELIGIBLE TAXPAYER.—The term 

4 ‘eligible taxpayer’ means a small business 

5 employer. 

6 ‘‘(ii) SMALL BUSINESS EMPLOYER.— 

7 ‘‘(I) IN GENERAL.—The term 

8 ‘small business employer’ means, with 

9 respect to any taxable year, any em10 ployer who employed an average of 50 

11 or fewer employees on business days 

12 during such taxable year. 

13 ‘‘(II) CONTROLLED GROUPS.— 

14 For purposes of subclause (I), all per15 sons treated as a single employer 

16 under subsection (b), (c), (m), or (o) 

17 of section 414 shall be treated as a 

18 single employer. 

19 ‘‘(iii) READY RESERVE-NATIONAL

20 GUARD EMPLOYEE.—The term ‘Ready Re21 serve-National Guard employee’ has the 

22 meaning given such term by section 

23 45J(d)(3). 
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1 ‘‘(iv) QUALIFIED ACTIVE DUTY.—The 

2 term ‘qualified active duty’ has the mean3 ing given such term by section 45J(d)(1). 

4 ‘‘(C) DISALLOWANCE FOR FAILURE TO

5 COMPLY WITH EMPLOYMENT OR REEMPLOY6 MENT RIGHTS OF MEMBERS OF THE RESERVE

7 COMPONENTS OF THE ARMED FORCES OF THE

8 UNITED STATES.—No credit shall be allowed 

9 under subsection (a) by reason of paragraph 

10 (1)(I) to a taxpayer for— 

11 ‘‘(i) any taxable year, beginning after 

12 the date of the enactment of this section, 

13 in which the taxpayer is under a final 

14 order, judgment, or other process issued or 

15 required by a district court of the United 

16 States under section 4323 of title 38 of the 

17 United States Code with respect to a viola18 tion of chapter 43 of such title, and 

19 ‘‘(ii) the 2 succeeding taxable years.’’. 

20 (3) EXTENSION OF CREDIT WITH RESPECT TO

21 QUALIFIED REPLACEMENT EMPLOYEES.—Subpara22 graph (B) of section 51(c)(4) of such Code (relating 

23 to termination) is amended by inserting ‘‘(December 

24 31, 2006, in the case of amounts paid or incurred 
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1 to an individual who is a qualified replacement em2 ployee)’’ after ‘‘2005’’. 

3 (4) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to amounts paid or in5 curred to an individual who begins work for the em6 ployer after September 30, 2004. 

7 (c) STUDY BY GAO.— 

8 (1) IN GENERAL.—The Comptroller General of 

9 the United States shall study the following: 

10 (A) What, if any, problems exist in recruit11 ing individuals for a reserve component of an 

12 Armed Force of the United States. 

13 (B) Whether the credit allowed under sec14 tion 45J of the Internal Revenue Code of 1986 

15 (as added by this section) is an effective incen16 tive for the hiring and retention of employees 

17 who are individuals described in subparagraph 

18 (A) and whether there exists any compliance 

19 problems in the administration of such credit. 

20 (2) REPORT.—The Comptroller General of the 

21 United States shall report on the results of the 

22 study required under paragraph (1) to the Com23 mittee on Finance of the Senate and the Committee 
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1 on Ways and Means of the House of Representatives 

2 before December 1, 2005. 

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