II 

109TH CONGRESS 

1ST SESSION S. 624 

To amend title 10, United States Code, to protect the financial condition 

of members of the reserve components of the Armed Forces who are 

ordered to long-term active duty in support of a contingency operation, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 15, 2005 

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

the Committee on Finance 

A BILL 

To amend title 10, United States Code, to protect the financial condition of members of the reserve components 

of the Armed Forces who are ordered to long-term active 

duty in support of a contingency operation, 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 ‘‘Patriot Penalty Elimi5 nation Act of 2005’’. 
2 

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1 SEC. 2. INCOME PRESERVATION PAY FOR RESERVES SERV2 ING ON ACTIVE DUTY IN SUPPORT OF A CON3 TINGENCY OPERATION. 

4 (a) AUTHORITY.—Chapter 1209 of title 10, United 

5 States Code, is amended by inserting after section 12316 

6 the following new section: 

7 ‘‘§ 12316a. Reserves: income preservation pay 

8 ‘‘(a) REQUIREMENT TO PAY.—The Secretary of the 

9 military department concerned shall pay income preserva10 tion pay under this section to an eligible member of a re11 serve component of the armed forces in connection with 

12 the member’s active-duty service as described in sub13 section (b). 

14 ‘‘(b) ELIGIBLE MEMBER.—A member is eligible for 

15 income preservation pay if— 

16 ‘‘(1) the member is called or ordered to active 

17 duty (other than voluntarily) under a provision of 

18 law referred to in section 101(a)(13)(B) of this title; 

19 ‘‘(2) pursuant to such call or order, the member 

20 serves on active duty outside the United States dur21 ing at least 6 out of 12 consecutive months; and 

22 ‘‘(3) with respect to such active-duty service, 

23 the amount of the member’s preservice earned in24 come determined under subparagraph (A) of sub25 section (c)(1) exceeds the amount of the member’s 
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1 military service income determined under subpara2 graph (B) of such subsection. 

3 ‘‘(c) AMOUNT.—(1) Subject to paragraph (2), the 

4 amount payable under this section to a member in connec5 tion with active-duty service is the amount equal to the 

6 excess (if any) of— 

7 ‘‘(A) the amount computed by multiplying— 

8 ‘‘(i) the preservice average monthly earned 

9 income of the member, by 

10 ‘‘(ii) the total number of the member’s 

11 service months for such active-duty service, over 

12 ‘‘(B) the amount computed by multiplying— 

13 ‘‘(i) the military service average monthly 

14 income of the member, by 

15 ‘‘(ii) the total number of months deter16 mined under subparagraph (A)(ii). 

17 ‘‘(2) The total amount of income preservation pay 

18 that is paid to a member under this section may not ex19 ceed $50,000. 

20 ‘‘(d) PRESERVICE AVERAGE MONTHLY EARNED IN21 COME.—For the purposes of this section, the preservice 

22 average monthly earned income of a member who serves 

23 on active duty as described in subsection (b) shall be com24 puted by dividing 12 into the total amount of the mem25 ber’s earned income for the 12 months immediately pre-
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1 ceding the member’s first service month of the period for 

2 which income preservation pay is to be paid to the member 

3 under this section. 

4 ‘‘(e) MILITARY SERVICE AVERAGE MONTHLY IN5 COME.—For the purposes of this section, the military serv6 ice average monthly income of a member who serves on 

7 active duty as described in subsection (b) is the amount 

8 determined by dividing— 

9 ‘‘(1) the sum of the total amount of the mem10 ber’s earned income (other than basic pay) and the 

11 total amount of the member’s basic pay (under sec12 tion 204 of title 37) for the member’s service 

13 months for such active-duty service, by 

14 ‘‘(2) the total number of such months. 

15 ‘‘(f) TIME AND MANNER OF PAYMENT.—(1) Subject 

16 to paragraph (2), the total amount of income preservation 

17 pay that is payable under this section to a member in con18 nection with service on active duty is due and payable, 

19 in one lump sum, not later than 30 days after the date 

20 on which the member is released from the active duty. 

21 ‘‘(2) The Secretary concerned may make advance 

22 payment of income preservation pay in whole or in part 

23 under this section to a member, under such terms and 

24 conditions as the Secretary determines appropriate, if it 

25 is clear from the circumstances that it is likely that the 
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1 member’s active-duty service will satisfy the requirements 

2 of subsection (b). In any case in which advance payment 

3 is made to a member whose period of such active-duty 

4 service does not satisfy such requirements, the Secretary 

5 concerned may waive recoupment of the advance payment 

6 if the Secretary determines that recoupment would be 

7 against equity and good conscience or would be contrary 

8 to the best interests of the United States. 

9 ‘‘(g) DEFINITIONS.—In this section: 

10 ‘‘(1) The term ‘‘earned income’’ has the mean11 ing given such term in section 32(c)(2) of the Inter12 nal Revenue Code of 1986. 

13 ‘‘(2) The term ‘service month’, with respect to 

14 service of a member of a reserve component of the 

15 armed forces on active duty, means a month during 

16 any part of which the member serves on active duty. 

17 ‘‘(h) TERMINATION OF AUTHORITY.—This section 

18 shall cease to be effective on the first day of the first 

19 month that begins on or after the date that is five years 

20 after the date of the enactment of the Patriot Penalty 

21 Elimination Act of 2005.’’. 

22 (b) RECHARACTERIZATION OF EXISTING SECTION ON

23 PAYMENT OF CERTAIN RESERVES ON ACTIVE DUTY.— 

24 The heading of section 12316 of title 10, United States 

25 Code, is amended to read as follows: 
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1 ‘‘§ 12316. Reserves: payment of other entitlement in2 stead of pay and allowances’’. 

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

4 at the beginning of chapter 1209 of title 10, United States 

5 Code, is amended by striking the item relating to section 

6 12316 and inserting the following new items: 

‘‘12316. Reserves: payment of other entitlement instead of pay and allowances. 

‘‘12316a. Reserves: income preservation pay.’’. 

7 (d) EFFECTIVE DATE.—Section 12316a of title 10, 

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

9 take effect as of January 1, 2003, and shall apply with 

10 respect to active-duty service that begins on or after such 

11 date. 

12 SEC. 3. READY RESERVE-NATIONAL GUARD EMPLOYEE 

13 CREDIT. 

14 (a) IN GENERAL.—Subpart D of part IV of sub15 chapter A of chapter 1 of the Internal Revenue Code of 

16 1986 (relating to business-related credits) is amended by 

17 inserting after section 45I the following new section: 

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

19 CREDIT. 

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

21 the Ready Reserve-National Guard employee credit deter22 mined under this section for any taxable year with respect 

23 to each Ready Reserve-National Guard employee of the 
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1 taxpayer is an amount equal to 50 percent of the lesser 

2 of— 

3 ‘‘(1) the actual compensation amount with re4 spect to such employee for such taxable year, or 

5 ‘‘(2) $30,000. 

6 ‘‘(b) DEFINITION OF ACTUAL COMPENSATION

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

8 compensation amount’ means the amount of compensation 

9 paid or incurred by a taxpayer with respect to a Ready 

10 Reserve-National Guard employee on any day when the 

11 employee was absent from employment for the purpose of 

12 performing qualified active duty. 

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

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

15 employee who performs qualified active duty was not 

16 scheduled to work (for reason other than to participate 

17 in qualified active duty). 

18 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur19 poses of this section— 

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

21 ‘qualified active duty’ means— 

22 ‘‘(A) active duty outside the United States 

23 under an order or call for a period in excess of 

24 179 days or for an indefinite period, other than 

25 the training duty specified in section 10147 of 
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1 title 10, United States Code (relating to train2 ing requirements for the Ready Reserve), or 

3 section 502(a) of title 32, United States Code 

4 (relating to required drills and field exercises 

5 for the National Guard), in connection with 

6 which an employee is entitled to reemployment 

7 rights and other benefits or to a leave of ab8 sence from employment under chapter 43 of 

9 title 38, United States Code, and 

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

11 ‘‘(2) COMPENSATION.—The term ‘compensa12 tion’ means any remuneration for employment, 

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

14 by a taxpayer and which is deductible from the tax15 payer’s gross income under section 162(a)(1). 

16 ‘‘(3) READY RESERVE-NATIONAL GUARD EM17 PLOYEE.—The term ‘Ready Reserve-National Guard 

18 employee’ means an employee who is a member of 

19 the Ready Reserve of a reserve component of an 

20 Armed Force of the United States as described in 

21 sections 10142 and 10101 of title 10, United States 

22 Code. 

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

24 to the rules of section 52 shall apply. 
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1 ‘‘(e) TERMINATION.—This section shall not apply 

2 with respect to amounts paid or incurred in taxable years 

3 that begin more than 5 years after the date of enactment 

4 of the Patriot Penalty Elimination Act of 2005.’’. 

5 (b) CREDIT TO BE PART OF GENERAL BUSINESS

6 CREDIT.—Subsection (b) of section 38 of the Internal 

7 Revenue Code of 1986 (relating to general business credit) 

8 is amended by striking ‘‘plus’’ at the end of paragraph 

9 (18), by striking the period at the end of paragraph (19) 

10 and inserting ‘‘, plus’’, and by adding at the end the fol11 lowing: 

12 ‘‘(20) the Ready Reserve-National Guard em13 ployee credit determined under section 45J(a).’’. 

14 (c) DENIAL OF DOUBLE BENEFIT.—Section 280C(a) 

15 of the Internal Revenue Code of 1986 (relating to rule 

16 for employment credits) is amended by inserting 

17 ‘‘45J(a),’’ after ‘‘45A(a),’’. 

18 (d) CONFORMING AMENDMENT.—The table of sec19 tions for subpart D of part IV of subchapter A of chapter 

20 1 of the Internal Revenue Code of 1986 is amended by 

21 inserting after the item relating to section 45I the fol22 lowing: 

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

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

24 this section shall apply to amounts paid or incurred after 
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1 December 31, 2004, in taxable years ending after such 

2 date. 

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