‘‘(ii) the qualified reservist’s average 
daily military pay while participating in 
qualified reserve component duty to the ex-
clusion of the qualified reservist’s normal 
employment duties, or 
‘‘(B) $54.80. 
‘‘(3) AVERAGE
DAILY
QUALIFIED
COMPENSA-
TION.—
‘‘(A) IN
GENERAL.—The term ‘average 
daily qualified compensation’ means—
‘‘(i) the qualified compensation of the 
qualified reservist for the one-year period 
ending on the day before the date the 
qualified reservist begins qualified reserve 
component duty, divided by 
‘‘(ii) 365. 
‘‘(B) 
QUALIFIED
COMPENSATION.—The 
term ‘qualified compensation’ means—
‘‘(i) compensation which is normally 
contingent on the qualified reservist’s pres-
ence for work and which would be includ-
ible in gross income, and 
‘‘(ii) compensation which is not char-
acterized by the qualified reservist’s em-
ployer as vacation or holiday pay, or as
sick leave or pay, or as any other form of 
pay for a nonspecific leave of absence. 
‘‘(4) AVERAGE DAILY MILITARY PAY AND AL-
LOWANCES.—
‘‘(A) IN
GENERAL.—The term ‘average 
daily military pay and allowances’ means—
‘‘(i) the amount paid to the qualified 
reservist during the taxable year as mili-
tary pay and allowances on account of the 
qualified reservist’s participation in quali-
fied reserve component duty, determined as 
of the date the qualified reservists begins 
qualified reserve component duty, divided 
by 
‘‘(ii) the total number of days the 
qualified reservist participates in qualified 
reserve component duty during the taxable 
year, including time spent in travel status. 
‘‘(B) MILITARY PAY AND ALLOWANCES.—
The term ‘military pay’ means pay as that term 
is defined in section 101(21) of title 37, United 
States Code, and the term ‘allowances’ means 
the allowances payable to a member of the 
Armed Forces of the United States under chap-
ter 7 of that title.
‘‘(5) 
QUALIFIED
RESERVE
COMPONENT 
DUTY.—The term ‘qualified reserve component duty’ 
means—
‘‘(A) active duty performed, as designated 
in the reservist’s military orders, in support of 
a contingency operation as defined in section 
101(a)(13) of title 10, United States Code, or 
‘‘(B) full-time National Guard duty (as de-
fined in section 101(19) of title 32, United 
States Code) which is ordered pursuant to a re-
quest by the President, 
for a period under 1 or more orders described in 
subparagraph (A) or (B) of more than 90 consecu-
tive days. 
‘‘(c) QUALIFIED RESERVIST.—For purposes of this 
section—
‘‘(1) IN GENERAL.—The term ‘qualified reserv-
ist’ means an individual who is engaged in normal 
employment and is a member of—
‘‘(A) the National Guard (as defined by 
section 101(c)(1) of title 10, United States 
Code), or 
‘‘(B) the Ready Reserve (as defined by sec-
tion 10142 of title 10, United States Code).
‘‘(2) NORMAL EMPLOYMENT.—The term ‘nor-
mal employment duties’ includes self-employment. 
‘‘(d) DISALLOWANCE WITH RESPECT TO PERSONS 
ORDERED TO ACTIVE DUTY FOR TRAINING.—No credit 
shall be allowed under subsection (a) to a qualified reserv-
ist who is called or ordered to active duty for any of the 
following types of duty: 
‘‘(1) Active duty for training under any provi-
sion of title 10, United States Code. 
‘‘(2) Training at encampments, maneuvers, out-
door target practice, or other exercises under chap-
ter 5 of title 32, United States Code. 
‘‘(3) Full-time National Guard duty, as defined 
in section 101(d)(5) of title 10, United States Code. 
‘‘(e) CREDIT INCLUDED IN GROSS INCOME.—Gross 
income includes the amount of the credit allowed the tax-
payer under this section.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 36 of such Code’’. 
(2) The table of sections for subpart C of part 
IV of chapter 1 of the Internal Revenue Code of 
1986 is amended by striking the last item and in-
serting the following new items:
‘‘Sec. 36. Wage differential for activated reservists. 
‘‘Sec. 37. Overpayments of tax.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003.
Æ