106TH CONGRESS

2D SESSION S. 2230

To provide tax relief in relation to, and modify the treatment of, members

of a reserve component of the Armed Forces, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 9, 2000

Mr. GRAMS introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To provide tax relief in relation to, and modify the treatment

of, members of a reserve component of the Armed

Forces, and for other purposes.

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 ‘‘Military Guard and

5 Reserve Fairness Act of 2000’’.
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1 TITLE I—TAX BENEFITS FOR RE2 SERVES OF THE ARMED

3 FORCES

4 SEC. 101. INCOME EXCLUSION FOR PAY OF CERTAIN RE5 SERVISTS DEPLOYED OVERSEAS.

6 (a) IN GENERAL.—Part III of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 (relating to

8 items specifically excluded from gross income) is amended

9 by inserting after section 112 the following new section:

10 ‘‘SEC. 113. CERTAIN COMPENSATION OF MEMBERS OF RE11 SERVE COMPONENT.

12 ‘‘(a) ENLISTED MEMBERS.—Gross income does not

13 include compensation received for active service as a mem14 ber below the grade of commissioned officer in a reserve

15 component of the Armed Forces of the United States by

16 reason of such member’s active duty performed, as des17 ignated in the member’s military orders, in support of a

18 contingency operation (as defined in section 101(a)(13) of

19 title 10, United States Code) while deployed outside the

20 United States.

21 ‘‘(b) COMMISSIONED OFFICER.—Gross income does

22 not include so much of the compensation as does not ex23 ceed the maximum enlisted amount received for active

24 service as a commissioned officer in a reserve component

25 of the Armed Forces of the United States by reason of
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1 such officer’s active duty performed, as designated in the

2 officer’s military orders, in support of a contingency oper3 ation (as so defined) while deployed outside the United

4 States.

5 ‘‘(c) DEFINITIONS.—For purposes of this section—

6 ‘‘(1) IN GENERAL.—Any terms used in this sec7 tion have the meaning given such terms in section

8 112(c).

9 ‘‘(2) DEPLOYED.—The term ‘deployed’ means

10 that a member is performing services in a training

11 exercise or operation at a location or under cir12 cumstances that make it impossible for the member

13 to spend off-duty time at the member’s official home

14 of record.

15 ‘‘(3) UNITED STATES.—The term ‘United

16 States’ includes the District of Columbia, American

17 Samoa, the Federated States of Micronesia, Guam,

18 the Republic of the Marshall Islands, the Common19 wealth of the Northern Mariana Islands, the Com20 monwealth of Puerto Rico, the Republic of Palau,

21 and the United States Virgin Islands.’’.

22 (b) DEFINITION OF RESERVE COMPONENT.—Section

23 7701(a) of the Internal Revenue Code of 1986 (relating

24 to definitions) is amended by adding at the end the fol25 lowing new paragraph:
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1 ‘‘(47) RESERVE COMPONENT OF THE ARMED

2 FORCES OF THE UNITED STATES.—The term ‘re3 serve component of the Armed Forces of the United

4 States’ means a reserve component described in sec5 tion 10101 of title 10, United States Code.’’.

6 (c) CONFORMING AMENDMENT.—The table of sec7 tions for part III of subchapter B of chapter 1 of the In8 ternal Revenue Code of 1986 is amended by inserting

9 after the item relating to section 112 the following new

10 item:

‘‘Sec. 113. Certain compensation of members of reserve components.’’.

11 (d) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to service in taxable years begin13 ning after December 31, 2000.

14 SEC. 102. TAX CREDIT FOR RESERVE FORCES PARTICIPA15 TION.

16 (a) IN GENERAL.—Subpart D of part IV of sub17 chapter A of chapter 1 of the Internal Revenue Code of

18 1986 (relating to business-related credits) is amended by

19 adding at the end the following new section:

20 ‘‘SEC. 45D. RESERVE FORCE PARTICIPATION CREDIT.

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

22 the reserve force participation credit determined under

23 this section for the taxable year is an amount equal to

24 the sum of—
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1 ‘‘(1) the employment credit with respect to all

2 qualified employees of the taxpayer, plus

3 ‘‘(2) the self-employment credit of a qualified

4 self-employed taxpayer.

5 ‘‘(b) LIMITATION ON MAXIMUM CREDIT.—The credit

6 allowed under subsection (a) with respect to a taxpayer

7 for the taxable year shall not exceed $30,000.

8 ‘‘(c) EMPLOYMENT CREDIT.—For purposes of this

9 section—

10 ‘‘(1) IN GENERAL.—The employment credit

11 with respect to a qualified employee of the taxpayer

12 for any taxable year is equal to 50 percent of the

13 amount of qualified compensation that the taxpayer

14 would have paid to the employee during the taxable

15 year had the employee not been participating in

16 qualified reserve duty, but only with respect to peri17 ods during which the employee participates in such

18 duty to the exclusion of normal employment duties.

19 ‘‘(2) QUALIFIED COMPENSATION.—

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

21 compensation’ means compensation which is—

22 ‘‘(i) normally contingent on the em23 ployee’s presence for work and which

24 would be deductible from the taxpayer’s

25 gross income under section 162 if the em-
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1 ployee were present and receiving such

2 compensation, and

3 ‘‘(ii) not characterized by the taxpayer

4 as vacation or holiday pay, or as sick leave

5 or pay, or as any other form of pay for a

6 nonspecific leave of absence, and the re7 ceipt of which does not result in any reduc8 tion in the amount of vacation time, sick

9 leave, or other nonspecific leave previously

10 credited to or earned by the employee with

11 respect to the number of days covered by

12 such compensation.

13 ‘‘(B) ONLY FIRST $2,000 PER YEAR TAKEN

14 INTO ACCOUNT.—The amount of qualified com15 pensation which may be taken into account with

16 respect to a qualified employee shall not exceed

17 $2,000 per year.

18 ‘‘(3) QUALIFIED EMPLOYEE.—The term ‘quali19 fied employee’ means a person who—

20 ‘‘(A) has been an employee of the taxpayer

21 for the 21-day period immediately preceding the

22 period during which the employee participates

23 in qualified reserve duty, and

24 ‘‘(B) is a member of the Ready Reserve

25 (as described in section 10142 of title 10,
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1 United States Code) of a reserve component of

2 the Armed Forces of the United States.

3 ‘‘(d) SELF-EMPLOYMENT CREDIT.—

4 ‘‘(1) IN GENERAL.—The self-employment credit

5 of a qualified self-employed taxpayer for any taxable

6 year is 50 percent of an amount equal to—

7 ‘‘(A) the excess, if any, of—

8 ‘‘(i) the average daily self-employment

9 income of the self-employed taxpayer for

10 the taxable year, over

11 ‘‘(ii) the average daily military pay

12 and allowances received by the self-em13 ployed taxpayer, while participating in

14 qualified reserve duty to the exclusion of

15 the taxpayer’s normal self-employment du16 ties, multiplied by

17 ‘‘(B) the number of days the taxpayer par18 ticipates in qualified reserve duty during the

19 taxable year.

20 ‘‘(2) AVERAGE DAILY SELF-EMPLOYMENT IN21 COME; AVERAGE DAILY MILITARY PAY AND ALLOW22 ANCES.—For purposes of paragraph (1)—

23 ‘‘(A) AVERAGE DAILY SELF-EMPLOYMENT

24 INCOME.—The term ‘average daily self-employ25 ment income’ means an amount equal to—
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1 ‘‘(i) the self-employment income (as

2 defined in section 1402(b)) of the taxpayer

3 for the taxable year, divided by

4 ‘‘(ii) a number equal to the excess, if

5 any, of—

6 ‘‘(I) 365, over

7 ‘‘(II) the number of days the tax8 payer participates in qualified reserve

9 duty during the taxable year.

10 ‘‘(B) AVERAGE DAILY MILITARY PAY AND

11 ALLOWANCES.—The term ‘average daily mili12 tary pay and allowances’ means an amount

13 equal to—

14 ‘‘(i) the amount received by the tax15 payer during the taxable year as military

16 pay and allowances in relation to the tax17 payer’s participation in qualified reserve

18 duty, divided by

19 ‘‘(ii) the total number of days the tax20 payer participates in qualified reserve duty

21 during the taxable year.

22 ‘‘(3) QUALIFIED SELF-EMPLOYED TAXPAYER.—

23 The term ‘qualified self-employed taxpayer’ means a

24 taxpayer who—
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1 ‘‘(A) has net earnings from self-employ2 ment (as defined in section 1402) for the tax3 able year, and

4 ‘‘(B) is a member of the Ready Reserve

5 (as so described) of a reserve component of the

6 Armed Forces of the United States.

7 ‘‘(e) CREDIT IN ADDITION TO DEDUCTION.—The em8 ployment credit allowed under this section with respect to

9 a taxpayer shall be in addition to any other deduction al10 lowable with respect to compensation paid to a qualified

11 employee during any period the employee participates in

12 qualified reserve duty to the exclusion of normal employ13 ment duties.

14 ‘‘(f) OTHER DEFINITIONS.—For purposes of this

15 section—

16 ‘‘(1) MILITARY PAY.—The term ‘military pay’

17 has the same meaning as the term ‘pay’ under sec18 tion 101(21) of title 37, United States Code.

19 ‘‘(2) ALLOWANCES.—The term ‘allowances’

20 means the allowances payable to a member of the

21 Armed Forces of the United States under chapter 7

22 of such title.

23 ‘‘(3) QUALIFIED RESERVE DUTY.—The term

24 ‘qualified reserve duty’, with respect to a Reserve

25 who is a qualified employee or qualified self-em-
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1 ployed taxpayer, means active duty performed, as

2 designated in the Reserve’s military orders, in sup3 port of a contingency operation (as defined in sec4 tion 101(a)(13) of title 10, United States Code).

5 Such term includes any period in which the Reserve

6 is in a travel status in connection with such duty.

7 ‘‘(g) SPECIAL RULES.—

8 ‘‘(1) TREATMENT OF EMPLOYER.—All employ9 ers treated as a single employer under subsection (a)

10 or (b) of section 52 or subsection (m) or (o) of sec11 tion 414 shall be treated as a single employer for

12 purposes of this section.

13 ‘‘(2) FAILURE TO COMPLY WITH EMPLOYMENT

14 OR REEMPLOYMENT RIGHTS OF MEMBERS OF THE

15 RESERVE COMPONENTS OF THE ARMED FORCES.—

16 No credit shall be allowed under subsection (a) with

17 respect to a taxpayer for any taxable year, and the

18 2 taxable years immediately following such year, in

19 which the taxpayer is under a final order, judgment,

20 or other process issued or required by a district

21 court of the United States under section 4323 of

22 title 38, United States Code, with respect to a viola23 tion of chapter 43 of such title.

24 ‘‘(3) PERSONS ORDERED TO ACTIVE DUTY FOR

25 TRAINING.—An individual shall not be treated as a
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1 qualified employee or qualified self-employed tax2 payer with respect to any period during which the

3 individual is called or ordered to active duty for any

4 portion of such period for any of the following types

5 of duty:

6 ‘‘(A) Active duty for training under any

7 provision of title 10, United States Code.

8 ‘‘(B) Training at encampments, maneu9 vers, outdoor target practice, or other exercises

10 under chapter 5 of title 32, United States Code.

11 ‘‘(C) Full-time National Guard duty (as

12 defined in section 101(d)(5) of title 10, United

13 States Code).

14 ‘‘(4) NORMAL EMPLOYMENT AND SELF-EM15 PLOYMENT DUTIES.—For purposes of subsection

16 (c)(1) or (d)(1), an individual shall be deemed not

17 to be participating in qualified reserve duty to the

18 exclusion of normal employment or self-employment

19 duties with respect to the entire period of qualified

20 reserve duty if, for any portion of such period, such

21 individual engages in or undertakes any substantial

22 activity related to the normal employment or self23 employment duties of such individual, other than ac24 tivities engaged in or undertaken while such indi-
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1 vidual is in an authorized leave status or other au2 thorized absence from military duties.

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

4 to the rules of subsections (c), (d), and (e) of section

5 52 shall apply for purposes of this section.’’.

6 (b) CONFORMING AMENDMENT.—Section 38(b) of

7 the Internal Revenue Code of 1986 (relating to general

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

9 of paragraph (11), by striking the period at the end of

10 paragraph (12) and inserting ‘‘, plus’’, and by adding at

11 the end the following new paragraph:

12 ‘‘(13) the reserve force participation credit de13 termined under section 45D(a).’’.

14 (c) CLERICAL AMENDMENT.—The table of sections

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

16 of the Internal Revenue Code of 1986 is amended by in17 serting after the item relating to section 45C the following

18 new item:

‘‘Sec. 45D. Reserve force participation credit.’’.

19 (d) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to taxable years beginning after

21 December 31, 2000.

22 SEC. 103. DEDUCTION OF CERTAIN EXPENSES OF RESERV23 ISTS.

24 (a) DEDUCTION ALLOWED.—Section 162 of the In25 ternal Revenue Code of 1986 (relating to trade or business
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1 expenses) is amended by redesignating subsection (p) as

2 subsection (q) and inserting after subsection (o) the fol3 lowing new subsection:

4 ‘‘(p) TREATMENT OF EXPENSES OF MEMBERS OF

5 RESERVE COMPONENT OF ARMED FORCES OF THE

6 UNITED STATES.—For purposes of subsection (a), in the

7 case of an individual who performs services as a member

8 of a reserve component of the Armed Forces of the United

9 States at any time during the taxable year, such individual

10 shall be deemed to be away from home in the pursuit of

11 a trade or business during any period for which such indi12 vidual is away from home in connection with such serv13 ice.’’.

14 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX15 PAYER ELECTS TO ITEMIZE.—Section 62(a)(2) of the In16 ternal Revenue Code of 1986 (relating to certain trade and

17 business deductions of employees) is amended by adding

18 at the end the following new subparagraph:

19 ‘‘(D) CERTAIN EXPENSES OF MEMBERS OF

20 RESERVE COMPONENTS OF THE ARMED FORCES

21 OF THE UNITED STATES.—The deduction al22 lowed by section 162 paid or incurred by the

23 taxpayer in connection with the performance of

24 services by such taxpayer as a member of a re-
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1 serve component of the Armed Forces of the

2 United States.’’.

3 (c) ALLOWANCE OF DEDUCTION FOR ENTERTAIN4 MENT EXPENSES.—Subsection (e) of section 274 of the

5 Internal Revenue Code of 1986 (relating to disallowance

6 of certain entertainment, etc., expenses) is amended by

7 adding at the end the following new paragraph:

8 ‘‘(10) EXPENSES INCURRED BY MEMBERS OF

9 RESERVE COMPONENTS OF THE ARMED FORCES OF

10 THE UNITED STATES.—Expenses paid or incurred

11 by a taxpayer in connection with the performance of

12 services by such taxpayer as a member of a reserve

13 component of the Armed Forces of the United

14 States.’’.

15 (d) INAPPLICABILITY OF 50 PERCENT CEILING ON

16 DEDUCTION FOR MEAL AND ENTERTAINMENT EX17 PENSES.—Subparagraph (A) of section 274(n)(2) of the

18 Internal Revenue Code of 1986 (relating to exceptions) is

19 amended by striking ‘‘or (9)’’ and inserting ‘‘(9), or (10)’’.

20 (e) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to amounts paid or incurred in tax22 able years beginning after December 31, 2000.
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1 TITLE II—ADDITIONAL BENE2 FITS FOR RESERVES OF THE

3 ARMED FORCES

4 SEC. 201. SHORT TITLE.

5 This title may be cited as the ‘‘Reserve Components

6 Equity Act of 2000’’.

7 SEC. 202. TRAVEL BY RESERVES ON MILITARY AIRCRAFT

8 OUTSIDE CONTINENTAL UNITED STATES.

9 (a) SPACE-REQUIRED TRAVEL FOR TRAVEL TO

10 DUTY STATIONS OCONUS.—(1) Subsection (a) of section

11 18505 of title 10, United States Code, is amended—

12 (A) by inserting ‘‘annual training duty or’’ be13 fore ‘‘inactive-duty training’’ both places it appears;

14 and

15 (B) by inserting ‘‘duty or’’ before ‘‘training if’’.

16 (2) The heading of such section is amended to read

17 as follows:

18 ‘‘§ 18505. Space-required travel: Reserves traveling to

19 annual training duty or inactive-duty

20 training OCONUS’’

21 (b) SPACE-AVAILABLE TRAVEL FOR MEMBERS OF

22 SELECTED RESERVE AND GRAY AREA RETIREES.—(1)

23 Chapter 1805 of such title is amended by adding at the

24 end the following new section:
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1 ‘‘§ 18506. Space-available travel: Selected Reserve

2 members and reserve retirees under age

3 60; dependents

4 ‘‘(a) ELIGIBILITY FOR SPACE-AVAILABLE TRAVEL.—

5 The Secretary of Defense shall prescribe regulations to

6 provide persons described in subsection (b) with transpor7 tation on aircraft of the Department of Defense on a

8 space-available basis under the same terms and conditions

9 (including terms and conditions applicable to travel out10 side the United States) as apply to members and former

11 members of the armed forces entitled to retired pay.

12 ‘‘(b) ELIGIBLE PERSONS.—Subsection (a) applies to

13 the following persons:

14 ‘‘(1) A person who is a member of the Selected

15 Reserve in good standing (as determined by the Sec16 retary concerned).

17 ‘‘(2) A person who is a member or former mem18 ber of a reserve component under age 60 who, but

19 for age, would be entitled to retired pay under chap20 ter 1223 of this title.

21 ‘‘(c) DEPENDENTS.—A dependent of a person de22 scribed in subsection (b) shall be provided transportation

23 under this section on the same basis as dependents of

24 members and former members of the armed forces entitled

25 to retired pay.
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1 ‘‘(d) LIMITATION ON REQUIRED IDENTIFICATION.—

2 Neither the ‘Authentication of Reserve Status for Travel

3 Eligibility’ form (DD Form 1853) nor any other form,

4 other military identification and duty orders or other

5 forms of identification required of active duty personnel,

6 may be required to be presented by persons requesting

7 space-available transportation within or outside the conti8 nental United States under this section.

9 ‘‘(e) DEPENDENT DEFINED.—In this section, the

10 term ‘dependent’ has the meanings given that term in sub11 paragraphs (A), (B), (C), (D), and (I) of section 1074(2)

12 of this title.’’.

13 (2) The table of sections at the beginning of such

14 chapter is amended by striking the item relating to section

15 18505 and inserting the following:

‘‘18505. Space-required travel: Reserves traveling to annual training duty or inactive-duty training OCONUS.

‘‘18506. Space-available travel: Selected Reserve members and reserve retirees

under age 60; dependents.’’.

16 (c) EFFECTIVE DATE.—The regulations required

17 under section 18506 of title 10, United States Code, as

18 added by subsection (b), shall be prescribed not later than

19 180 days after the date of the enactment of this Act.
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1 SEC. 203. BILLETING SERVICES FOR RESERVE MEMBERS

2 TRAVELING FOR INACTIVE DUTY TRAINING.

3 (a) IN GENERAL.—(1) Chapter 1217 of title 10,

4 United States Code, is amended by inserting after section

5 12603 the following new section:

6 ‘‘§ 12604. Billeting in Department of Defense facili7 ties: Reserves attending inactive-duty

8 training

9 ‘‘(a) AUTHORITY FOR BILLETING ON SAME BASIS AS

10 ACTIVE DUTY MEMBERS TRAVELING UNDER ORDERS.—

11 The Secretary of Defense shall prescribe regulations au12 thorizing a Reserve traveling to inactive-duty training at

13 a location more than 50 miles from that Reserve’s resi14 dence to be eligible for billeting in Department of Defense

15 facilities on the same basis and to the same extent as a

16 member of the armed forces on active duty who is trav17 eling under orders away from the member’s permanent

18 duty station.

19 ‘‘(b) PROOF OF REASON FOR TRAVEL.—The Sec20 retary shall include in the regulations the means for con21 firming a Reserve’s eligibility for billeting under sub22 section (a).’’.

23 (2) The table of sections at the beginning of such

24 chapter is amended by inserting after the item relating

25 to section 12603 the following new item:
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‘‘12604. Billeting in Department of Defense facilities: Reserves attending inactive-duty training.

1 (b) EFFECTIVE DATE.—Section 12604 of title 10,

2 United States Code, as added by subsection (a), shall

3 apply with respect to periods of inactive-duty training be4 ginning more than 180 days after the date of the enact5 ment of this Act.

6 SEC. 204. ELIMINATION OF CAP ON MAXIMUM RESERVE RE7 TIREMENT POINTS THAT MAY BE CREDITED

8 IN ANY YEAR.

9 Section 12733(3) of title 10, United States Code, is

10 amended by striking ‘‘but not more than’’ and all that

11 follows and inserting ‘‘but not more than—

12 ‘‘(A) 60 days in any one year of service be13 fore the year of service that includes September

14 23, 1996; and

15 ‘‘(B) 75 days in the year of service that in16 cludes September 23, 1996, and in any subse17 quent year of service before the year of service

18 that includes the date of the enactment of the

19 Reserve Components Equity Act of 2000.’’.

20 SEC. 205. AUTHORITY FOR PROVISION OF LEGAL SERVICES

21 TO RESERVE COMPONENT MEMBERS FOL22 LOWING RELEASE FROM ACTIVE DUTY.

23 (a) LEGAL SERVICES.—Section 1044(a) of title 10,

24 United States Code, is amended—
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1 (1) by redesignating paragraph (4) as para2 graph (5); and

3 (2) by inserting after paragraph (3) the fol4 lowing new paragraph (4):

5 ‘‘(4) Members of reserve components of the

6 armed forces not covered by paragraph (1) or (2)

7 following release from active duty under a call or

8 order to active duty for more than 30 days issued

9 under a mobilization authority (as determined by the

10 Secretary of Defense), but only during the period

11 that begins on the date of the release and is equal

12 to twice the length of the period served on active

13 duty under such call or order to active duty.’’.

14 (b) DEPENDENTS.—Paragraph (5) of such section,

15 as redesignated by subsection (a)(1), is amended by strik16 ing ‘‘and (3)’’ and inserting ‘‘(3), and (4)’’.

17 (c) IMPLEMENTING REGULATIONS.—Regulations to

18 implement the amendments made by this section shall be

19 prescribed not later than 180 days after the date of the

20 enactment of this Act.

Æ