I 

108TH CONGRESS 

2D SESSION H. R. 4655 

To amend the Internal Revenue Code of 1986 to provide to employers a 

tax credit for compensation paid during the period employees are performing service as members of the Ready Reserve or the National Guard. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 23, 2004 

Mr. MCGOVERN (for himself and Mr. LANTOS) 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 provide 

to employers a tax credit for compensation paid during 

the period employees are performing service as members 

of the Ready Reserve or the National Guard. 

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 ‘‘Patriotic Employers 

5 of Guard and Reservists Act of 2004’’. 
2 

•HR 4655 IH 

1 SEC. 2. READY RESERVE-NATIONAL GUARD EMPLOYEE 

2 CREDIT AND READY RESERVE-NATIONAL 

3 GUARD REPLACEMENT EMPLOYEE CREDIT. 

4 (a) READY RESERVE-NATIONAL GUARD CREDIT.— 

5 (1) IN GENERAL.—Subpart D of part IV of 

6 subchapter A of chapter 1 of the Internal Revenue 

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

8 amended by adding at the end the following: 

9 ‘‘SEC. 45G. READY RESERVE-NATIONAL GUARD EMPLOYEE 

10 CREDIT. 

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

12 the Ready Reserve-National Guard employee credit deter13 mined under this section for any taxable year with respect 

14 to each Ready Reserve-National Guard employee of an em15 ployer is an amount equal to 50 percent of the lesser of— 

16 ‘‘(1) the actual compensation amount with re17 spect to such employee for such taxable year, or 

18 ‘‘(2) $30,000. 

19 ‘‘(b) DEFINITION OF ACTUAL COMPENSATION

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

21 compensation amount’ means the amount of compensation 

22 paid or incurred by an employer with respect to a Ready 

23 Reserve-National Guard employee on any day when the 

24 employee was absent from employment for the purpose of 

25 performing qualified active duty. 
3 

•HR 4655 IH 

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

2 respect to any day that a Ready Reserve-National Guard 

3 employee who performs qualified active duty was not 

4 scheduled to work (for reason other than to participate 

5 in qualified active duty). 

6 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur7 poses of this section— 

8 ‘‘(1) QUALIFIED ACTIVE DUTY.—The term 

9 ‘qualified active duty’ means— 

10 ‘‘(A) active duty, other than the training 

11 duty specified in section 10147 of title 10, 

12 United States Code (relating to training re13 quirements for the Ready Reserve), or section 

14 502(a) of title 32, United States Code (relating 

15 to required drills and field exercises for the Na16 tional Guard), in connection with which an em17 ployee is entitled to reemployment rights and 

18 other benefits or to a leave of absence from em19 ployment under chapter 43 of title 38, United 

20 States Code, and 

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

22 ‘‘(2) COMPENSATION.—The term ‘compensa23 tion’ means any remuneration for employment, 

24 whether in cash or in kind, which is paid or incurred 
4 

•HR 4655 IH 

1 by a taxpayer and which is deductible from the tax2 payer’s gross income under section 162(a)(1). 

3 ‘‘(3) READY RESERVE-NATIONAL GUARD EM4 PLOYEE.—The term ‘Ready Reserve-National Guard 

5 employee’ means an employee who is a member of 

6 the Ready Reserve of a reserve component of an 

7 Armed Force of the United States as described in 

8 sections 10142 and 10101 of title 10, United States 

9 Code. 

10 ‘‘(4) CERTAIN RULES TO APPLY.—Rules similar 

11 to the rules of section 52 shall apply. 

12 ‘‘(e) PORTION OF CREDIT REFUNDABLE.— 

13 ‘‘(1) IN GENERAL.—In the case of an employer 

14 of a qualified first responder, the aggregate credits 

15 allowed to a taxpayer under subpart C shall be in16 creased by the lesser of— 

17 ‘‘(A) the credit which would be allowed 

18 under this section without regard to this sub19 section and the limitation under section 38(c), 

20 or 

21 ‘‘(B) the amount by which the aggregate 

22 amount of credits allowed by this subpart (de23 termined without regard to this subsection) 

24 would increase if the limitation imposed by sec25 tion 38(c) for any taxable year were increased 
5 

•HR 4655 IH 

1 by the amount of employer payroll taxes imposed 

2 on the taxpayer during the calendar year in 

3 which the taxable year begins. 

4 The amount of the credit allowed under this sub5 section shall not be treated as a credit allowed under 

6 this subpart and shall reduce the amount of the 

7 credit otherwise allowable under subsection (a) with8 out regard to section 38(c). 

9 ‘‘(2) EMPLOYER PAYROLL TAXES.—For pur10 poses of this subsection— 

11 ‘‘(A) IN GENERAL.—The term ‘employer 

12 payroll taxes’ means the taxes imposed by— 

13 ‘‘(i) section 3111(b), and 

14 ‘‘(ii) sections 3211(a) and 3221(a) 

15 (determined at a rate equal to the rate 

16 under section 3111(b)). 

17 ‘‘(B) SPECIAL RULE.—A rule similar to 

18 the rule of section 24(d)(2)(C) shall apply for 

19 purposes of subparagraph (A). 

20 ‘‘(3) QUALIFIED FIRST RESPONDER.—For pur21 poses of this subsection, the term ‘qualified first re22 sponder’ means any person who is— 

23 ‘‘(A) employed as a law enforcement offi24 cial, a firefighter, or a paramedic, and 
6 

•HR 4655 IH 

1 ‘‘(B) a Ready Reserve-National Guard em2 ployee.’’. 

3 (2) CREDIT TO BE PART OF GENERAL BUSI4 NESS CREDIT.—Subsection (b) of section 38 of such 

5 Code (relating to general business credit) is amend6 ed by striking ‘‘plus’’ at the end of paragraph (14), 

7 by striking the period at the end of paragraph (15) 

8 and inserting ‘‘, plus’’, and by adding at the end the 

9 following: 

10 ‘‘(16) the Ready Reserve-National Guard em11 ployee credit determined under section 45G(a).’’. 

12 (3) DENIAL OF DOUBLE BENEFIT.—Section 

13 280C(a) of such Code (relating to rule for employ14 ment credits) is amended by inserting ‘‘45G(a),’’ 

15 after ‘‘45A(a),’’. 

16 (4) CONFORMING AMENDMENT.—The table of 

17 sections for subpart D of part IV of subchapter A 

18 of chapter 1 of such Code is amended by inserting 

19 after the item relating to section 45F the following: 

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

20 (5) EFFECTIVE DATE.—The amendments made 

21 by this subsection shall apply to amounts paid or in22 curred after September 30, 2004, in taxable years 

23 ending after such date. 

24 (b) READY RESERVE-NATIONAL GUARD REPLACE25 MENT EMPLOYEE CREDIT.— 
7 

•HR 4655 IH 

1 (1) IN GENERAL.—Subpart B of part IV of 

2 subchapter A of chapter 1 of such Code (relating to 

3 foreign tax credit, etc.) is amended by adding after 

4 section 30A the following new section: 

5 ‘‘SEC. 30B. READY RESERVE-NATIONAL GUARD REPLACE6 MENT EMPLOYEE CREDIT. 

7 ‘‘(a) ALLOWANCE OF CREDIT.— 

8 ‘‘(1) IN GENERAL.—In the case of an eligible 

9 taxpayer, there shall be allowed as a credit against 

10 the tax imposed by this chapter for the taxable year 

11 the sum of the employment credits for each qualified 

12 replacement employee under this section. 

13 ‘‘(2) EMPLOYMENT CREDIT.—The employment 

14 credit with respect to a qualified replacement em15 ployee of the taxpayer for any taxable year is equal 

16 to 50 percent of the lesser of— 

17 ‘‘(A) the individual’s qualified compensa18 tion attributable to service rendered as a quali19 fied replacement employee, or 

20 ‘‘(B) $12,000. 

21 ‘‘(b) QUALIFIED COMPENSATION.—The term ‘quali22 fied compensation’ means— 

23 ‘‘(1) compensation which is normally contingent 

24 on the qualified replacement employee’s presence for 
8 

•HR 4655 IH 

1 work and which is deductible from the taxpayer’s 

2 gross income under section 162(a)(1), 

3 ‘‘(2) compensation which is not characterized 

4 by the taxpayer as vacation or holiday pay, or as 

5 sick leave or pay, or as any other form of pay for 

6 a nonspecific leave of absence, and 

7 ‘‘(3) group health plan costs (if any) with re8 spect to the qualified replacement employee. 

9 ‘‘(c) QUALIFIED REPLACEMENT EMPLOYEE.—For 

10 purposes of this section— 

11 ‘‘(1) IN GENERAL.—The term ‘qualified re12 placement employee’ means an individual who is 

13 hired to replace a Ready Reserve-National Guard 

14 employee or a Ready Reserve-National Guard self15 employed taxpayer, but only with respect to the pe16 riod during which such Ready Reserve-National 

17 Guard employee or Ready Reserve-National Guard 

18 self-employed taxpayer participates in qualified ac19 tive duty, including time spent in travel status. 

20 ‘‘(2) READY RESERVE-NATIONAL GUARD EM21 PLOYEE.—The term ‘Ready Reserve-National Guard 

22 employee’ has the meaning given such term by sec23 tion 45G(d)(3). 

24 ‘‘(3) READY RESERVE-NATIONAL GUARD SELF25 EMPLOYED TAXPAYER.—The term ‘Ready Reserve- 
9 

•HR 4655 IH 

1 National Guard self-employed taxpayer’ means a tax2 payer who— 

3 ‘‘(A) has net earnings from self-employ4 ment (as defined in section 1402(a)) for the 

5 taxable year, and 

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

7 a reserve component of an Armed Force of the 

8 United States as described in section 10142 

9 and 10101 of title 10, United States Code. 

10 ‘‘(d) COORDINATION WITH OTHER CREDITS.—The 

11 amount of credit otherwise allowable under sections 51(a) 

12 and 1396(a) with respect to any employee shall be reduced 

13 by the credit allowed by this section with respect to such 

14 employee. 

15 ‘‘(e) LIMITATIONS.— 

16 ‘‘(1) APPLICATION WITH OTHER CREDITS.— 

17 The credit allowed under subsection (a) for any tax18 able year shall not exceed the excess (if any) of— 

19 ‘‘(A) the regular tax for the taxable year 

20 reduced by the sum of the credits allowable 

21 under subpart A and sections 27, 29, and 30, 

22 over 

23 ‘‘(B) the tentative minimum tax for the 

24 taxable year. 
10 

•HR 4655 IH 

1 ‘‘(2) DISALLOWANCE FOR FAILURE TO COMPLY

2 WITH EMPLOYMENT OR REEMPLOYMENT RIGHTS OF

3 MEMBERS OF THE RESERVE COMPONENTS OF THE

4 ARMED FORCES OF THE UNITED STATES.—No credit 

5 shall be allowed under subsection (a) to a taxpayer 

6 for— 

7 ‘‘(A) any taxable year, beginning after the 

8 date of the enactment of this section, in which 

9 the taxpayer is under a final order, judgment, 

10 or other process issued or required by a district 

11 court of the United States under section 4323 

12 of title 38 of the United States Code with re13 spect to a violation of chapter 43 of such title, 

14 and 

15 ‘‘(B) the 2 succeeding taxable years. 

16 ‘‘(f) GENERAL DEFINITIONS AND SPECIAL RULES.— 

17 For purposes of this section— 

18 ‘‘(1) ELIGIBLE TAXPAYER.—The term ‘eligible 

19 taxpayer’ means a small business employer or a 

20 Ready Reserve-National Guard self-employed tax21 payer. 

22 ‘‘(2) SMALL BUSINESS EMPLOYER.— 

23 ‘‘(A) IN GENERAL.—The term ‘small busi24 ness employer’ means, with respect to any tax25 able year, any employer who employed an aver-
11 

•HR 4655 IH 

1 age of 50 or fewer employees on business days 

2 during such taxable year. 

3 ‘‘(B) CONTROLLED GROUPS.—For pur4 poses of subparagraph (A), all persons treated 

5 as a single employer under subsection (b), (c), 

6 (m), or (o) of section 414 shall be treated as a 

7 single employer. 

8 ‘‘(3) QUALIFIED ACTIVE DUTY.—The term 

9 ‘qualified active duty’ has the meaning given such 

10 term by section 45G(d)(1). 

11 ‘‘(4) SPECIAL RULES FOR CERTAIN MANUFAC12 TURERS.— 

13 ‘‘(A) IN GENERAL.—In the case of any 

14 qualified manufacturer— 

15 ‘‘(i) subsection (a)(2)(B) shall be ap16 plied by substituting ‘$20,000’ for 

17 ‘$12,000’, and 

18 ‘‘(ii) paragraph (2)(A) of this sub19 section shall be applied by substituting 

20 ‘100’ for ‘50’. 

21 ‘‘(B) QUALIFIED MANUFACTURER.—For 

22 purposes of this paragraph, the term ‘qualified 

23 manufacturer’ means any person if— 

24 ‘‘(i) the primary business of such per25 son is classified in sector 31, 32, or 33 of 
12 

•HR 4655 IH 

1 the North American Industrial Classifica2 tion System, and 

3 ‘‘(ii) all of such person’s facilities 

4 which are used for production in such busi5 ness are located in the United States. 

6 ‘‘(5) CARRYBACK AND CARRYFORWARD AL7 LOWED.— 

8 ‘‘(A) IN GENERAL.—If the credit allowable 

9 under subsection (a) for a taxable year exceeds 

10 the amount of the limitation under subsection 

11 (e)(1) for such taxable year (in this paragraph 

12 referred to as the ‘unused credit year’), such 

13 excess shall be a credit carryback to each of the 

14 3 taxable years preceding the unused credit 

15 year and a credit carryforward to each of the 

16 20 taxable years following the unused credit 

17 year. 

18 ‘‘(B) RULES.—Rules similar to the rules of 

19 section 39 shall apply with respect to the credit 

20 carryback and credit carryforward under sub21 paragraph (A). 

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

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

24 52 shall apply.’’. 
13 

•HR 4655 IH 

1 (2) NO DEDUCTION FOR COMPENSATION TAKEN

2 INTO ACCOUNT FOR CREDIT.—Section 280C(a) of 

3 such Code (relating to rule for employment credits) 

4 is amended— 

5 (A) by inserting ‘‘or compensation’’ after 

6 ‘‘salaries’’, and 

7 (B) by inserting ‘‘30B,’’ before ‘‘45A(a),’’. 

8 (3) CONFORMING AMENDMENT.—Section 

9 55(c)(2) of such Code is amended by inserting 

10 ‘‘30B(e)(1),’’ after ‘‘30(b)(3),’’. 

11 (4) CLERICAL AMENDMENT.—The table of sec12 tions for subpart B of part IV of subchapter A of 

13 chapter 1 of such Code is amended by adding after 

14 the item relating to section 30A the following new 

15 item: 

‘‘Sec. 30B. Ready Reserve-National Guard replacement employee 

credit.’’. 

16 (5) EFFECTIVE DATE.—The amendments made 

17 by this subsection shall apply to amounts paid or in18 curred after September 30, 2004, in taxable years 

19 ending after such date. 

Æ