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 per-
forming 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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Patriotic Employers 
of Guard and Reservists Act of 2004’’.
SEC. 2. READY RESERVE-NATIONAL GUARD EMPLOYEE 
CREDIT 
AND 
READY 
RESERVE-NATIONAL 
GUARD REPLACEMENT EMPLOYEE CREDIT. 
(a) READY RESERVE-NATIONAL GUARD CREDIT.— 
(1) IN GENERAL.—Subpart D of part IV of 
subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 (relating to business-related credits) is 
amended by adding at the end the following: 
‘‘SEC. 45G. READY RESERVE-NATIONAL GUARD EMPLOYEE 
CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the Ready Reserve-National Guard employee credit deter-
mined under this section for any taxable year with respect 
to each Ready Reserve-National Guard employee of an em-
ployer is an amount equal to 50 percent of the lesser of— 
‘‘(1) the actual compensation amount with re-
spect to such employee for such taxable year, or 
‘‘(2) $30,000. 
‘‘(b) 
DEFINITION
OF
ACTUAL
COMPENSATION 
AMOUNT.—For purposes of this section, the term ‘actual 
compensation amount’ means the amount of compensation 
paid or incurred by an employer with respect to a Ready 
Reserve-National Guard employee on any day when the 
employee was absent from employment for the purpose of 
performing qualified active duty.
‘‘(c) LIMITATIONS.—No credit shall be allowed with 
respect to any day that a Ready Reserve-National Guard 
employee who performs qualified active duty was not 
scheduled to work (for reason other than to participate 
in qualified active duty). 
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) QUALIFIED
ACTIVE
DUTY.—The term 
‘qualified active duty’ means— 
‘‘(A) active duty, other than the training 
duty specified in section 10147 of title 10, 
United States Code (relating to training re-
quirements for the Ready Reserve), or section 
502(a) of title 32, United States Code (relating 
to required drills and field exercises for the Na-
tional Guard), in connection with which an em-
ployee is entitled to reemployment rights and 
other benefits or to a leave of absence from em-
ployment under chapter 43 of title 38, United 
States Code, and 
‘‘(B) hospitalization incident to such duty. 
‘‘(2) COMPENSATION.—The term ‘compensa-
tion’ means any remuneration for employment, 
whether in cash or in kind, which is paid or incurred
by a taxpayer and which is deductible from the tax-
payer’s gross income under section 162(a)(1). 
‘‘(3) READY
RESERVE-NATIONAL
GUARD
EM-
PLOYEE.—The term ‘Ready Reserve-National Guard 
employee’ means an employee who is a member of 
the Ready Reserve of a reserve component of an 
Armed Force of the United States as described in 
sections 10142 and 10101 of title 10, United States 
Code. 
‘‘(4) CERTAIN RULES TO APPLY.—Rules similar 
to the rules of section 52 shall apply. 
‘‘(e) PORTION OF CREDIT REFUNDABLE.— 
‘‘(1) IN GENERAL.—In the case of an employer 
of a qualified first responder, the aggregate credits 
allowed to a taxpayer under subpart C shall be in-
creased by the lesser of— 
‘‘(A) the credit which would be allowed 
under this section without regard to this sub-
section and the limitation under section 38(c), 
or 
‘‘(B) the amount by which the aggregate 
amount of credits allowed by this subpart (de-
termined without regard to this subsection) 
would increase if the limitation imposed by sec-
tion 38(c) for any taxable year were increased
by the amount of employer payroll taxes imposed 
on the taxpayer during the calendar year in 
which the taxable year begins. 
The amount of the credit allowed under this sub-
section shall not be treated as a credit allowed under 
this subpart and shall reduce the amount of the 
credit otherwise allowable under subsection (a) with-
out regard to section 38(c). 
‘‘(2) EMPLOYER
PAYROLL
TAXES.—For pur-
poses of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘employer 
payroll taxes’ means the taxes imposed by— 
‘‘(i) section 3111(b), and 
‘‘(ii) sections 3211(a) and 3221(a) 
(determined at a rate equal to the rate 
under section 3111(b)). 
‘‘(B) SPECIAL
RULE.—A rule similar to 
the rule of section 24(d)(2)(C) shall apply for 
purposes of subparagraph (A). 
‘‘(3) QUALIFIED FIRST RESPONDER.—For pur-
poses of this subsection, the term ‘qualified first re-
sponder’ means any person who is— 
‘‘(A) employed as a law enforcement offi-
cial, a firefighter, or a paramedic, and
‘‘(B) a Ready Reserve-National Guard em-
ployee.’’. 
(2) CREDIT TO BE PART OF GENERAL BUSI-
NESS CREDIT.—Subsection (b) of section 38 of such 
Code (relating to general business credit) is amend-
ed by striking ‘‘plus’’ at the end of paragraph (14), 
by striking the period at the end of paragraph (15) 
and inserting ‘‘, plus’’, and by adding at the end the 
following: 
‘‘(16) the Ready Reserve-National Guard em-
ployee credit determined under section 45G(a).’’. 
(3) DENIAL
OF
DOUBLE
BENEFIT.—Section 
280C(a) of such Code (relating to rule for employ-
ment credits) is amended by inserting ‘‘45G(a),’’ 
after ‘‘45A(a),’’. 
(4) CONFORMING AMENDMENT.—The table of 
sections for subpart D of part IV of subchapter A 
of chapter 1 of such Code is amended by inserting 
after the item relating to section 45F the following: 
‘‘Sec. 45G. Ready Reserve-National Guard employee credit.’’. 
(5) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to amounts paid or in-
curred after September 30, 2004, in taxable years 
ending after such date. 
(b) READY RESERVE-NATIONAL GUARD REPLACE-
MENT EMPLOYEE CREDIT.—
(1) IN GENERAL.—Subpart B of part IV of 
subchapter A of chapter 1 of such Code (relating to 
foreign tax credit, etc.) is amended by adding after 
section 30A the following new section: 
‘‘SEC. 30B. READY RESERVE-NATIONAL GUARD REPLACE-
MENT EMPLOYEE CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.— 
‘‘(1) IN GENERAL.—In the case of an eligible 
taxpayer, there shall be allowed as a credit against 
the tax imposed by this chapter for the taxable year 
the sum of the employment credits for each qualified 
replacement employee under this section. 
‘‘(2) EMPLOYMENT CREDIT.—The employment 
credit with respect to a qualified replacement em-
ployee of the taxpayer for any taxable year is equal 
to 50 percent of the lesser of— 
‘‘(A) the individual’s qualified compensa-
tion attributable to service rendered as a quali-
fied replacement employee, or 
‘‘(B) $12,000. 
‘‘(b) QUALIFIED COMPENSATION.—The term ‘quali-
fied compensation’ means— 
‘‘(1) compensation which is normally contingent 
on the qualified replacement employee’s presence for
work and which is deductible from the taxpayer’s 
gross income under section 162(a)(1), 
‘‘(2) compensation which is not characterized 
by the taxpayer as vacation or holiday pay, or as 
sick leave or pay, or as any other form of pay for 
a nonspecific leave of absence, and 
‘‘(3) group health plan costs (if any) with re-
spect to the qualified replacement employee. 
‘‘(c) QUALIFIED REPLACEMENT EMPLOYEE.—For 
purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘qualified re-
placement employee’ means an individual who is 
hired to replace a Ready Reserve-National Guard 
employee or a Ready Reserve-National Guard self- 
employed taxpayer, but only with respect to the pe-
riod during which such Ready Reserve-National 
Guard employee or Ready Reserve-National Guard 
self-employed taxpayer participates in qualified ac-
tive duty, including time spent in travel status. 
‘‘(2) READY
RESERVE-NATIONAL
GUARD
EM-
PLOYEE.—The term ‘Ready Reserve-National Guard 
employee’ has the meaning given such term by sec-
tion 45G(d)(3). 
‘‘(3) READY RESERVE-NATIONAL GUARD SELF- 
EMPLOYED TAXPAYER.—The term ‘Ready Reserve-
National Guard self-employed taxpayer’ means a tax-
payer who— 
‘‘(A) has net earnings from self-employ-
ment (as defined in section 1402(a)) for the 
taxable year, and 
‘‘(B) is a member of the Ready Reserve of 
a reserve component of an Armed Force of the 
United States as described in section 10142 
and 10101 of title 10, United States Code. 
‘‘(d) COORDINATION WITH OTHER CREDITS.—The 
amount of credit otherwise allowable under sections 51(a) 
and 1396(a) with respect to any employee shall be reduced 
by the credit allowed by this section with respect to such 
employee. 
‘‘(e) LIMITATIONS.— 
‘‘(1) APPLICATION
WITH
OTHER
CREDITS.— 
The credit allowed under subsection (a) for any tax-
able year shall not exceed the excess (if any) of— 
‘‘(A) the regular tax for the taxable year 
reduced by the sum of the credits allowable 
under subpart A and sections 27, 29, and 30, 
over 
‘‘(B) the tentative minimum tax for the 
taxable year.
‘‘(2) DISALLOWANCE FOR FAILURE TO COMPLY 
WITH EMPLOYMENT OR REEMPLOYMENT RIGHTS OF 
MEMBERS OF THE RESERVE COMPONENTS OF THE 
ARMED FORCES OF THE UNITED STATES.—No credit 
shall be allowed under subsection (a) to a taxpayer 
for— 
‘‘(A) any taxable year, beginning after the 
date of the enactment of this section, in which 
the taxpayer is under a final order, judgment, 
or other process issued or required by a district 
court of the United States under section 4323 
of title 38 of the United States Code with re-
spect to a violation of chapter 43 of such title, 
and 
‘‘(B) the 2 succeeding taxable years. 
‘‘(f) GENERAL DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) ELIGIBLE TAXPAYER.—The term ‘eligible 
taxpayer’ means a small business employer or a 
Ready Reserve-National Guard self-employed tax-
payer. 
‘‘(2) SMALL BUSINESS EMPLOYER.— 
‘‘(A) IN GENERAL.—The term ‘small busi-
ness employer’ means, with respect to any tax-
able year, any employer who employed an aver-
age of 50 or fewer employees on business days 
during such taxable year. 
‘‘(B) CONTROLLED
GROUPS.—For pur-
poses of subparagraph (A), all persons treated 
as a single employer under subsection (b), (c), 
(m), or (o) of section 414 shall be treated as a 
single employer. 
‘‘(3) QUALIFIED
ACTIVE
DUTY.—The term 
‘qualified active duty’ has the meaning given such 
term by section 45G(d)(1). 
‘‘(4) SPECIAL RULES FOR CERTAIN MANUFAC-
TURERS.— 
‘‘(A) IN
GENERAL.—In the case of any 
qualified manufacturer— 
‘‘(i) subsection (a)(2)(B) shall be ap-
plied 
by 
substituting 
‘$20,000’ 
for 
‘$12,000’, and 
‘‘(ii) paragraph (2)(A) of this sub-
section shall be applied by substituting 
‘100’ for ‘50’. 
‘‘(B) QUALIFIED
MANUFACTURER.—For 
purposes of this paragraph, the term ‘qualified 
manufacturer’ means any person if— 
‘‘(i) the primary business of such per-
son is classified in sector 31, 32, or 33 of
the North American Industrial Classifica-
tion System, and 
‘‘(ii) all of such person’s facilities 
which are used for production in such busi-
ness are located in the United States. 
‘‘(5) CARRYBACK
AND
CARRYFORWARD
AL-
LOWED.— 
‘‘(A) IN GENERAL.—If the credit allowable 
under subsection (a) for a taxable year exceeds 
the amount of the limitation under subsection 
(e)(1) for such taxable year (in this paragraph 
referred to as the ‘unused credit year’), such 
excess shall be a credit carryback to each of the 
3 taxable years preceding the unused credit 
year and a credit carryforward to each of the 
20 taxable years following the unused credit 
year. 
‘‘(B) RULES.—Rules similar to the rules of 
section 39 shall apply with respect to the credit 
carryback and credit carryforward under sub-
paragraph (A). 
‘‘(6) CERTAIN RULES TO APPLY.—Rules similar 
to the rules of subsections (c), (d), and (e) of section 
52 shall apply.’’.
(2) NO DEDUCTION FOR COMPENSATION TAKEN 
INTO ACCOUNT FOR CREDIT.—Section 280C(a) of 
such Code (relating to rule for employment credits) 
is amended— 
(A) by inserting ‘‘or compensation’’ after 
‘‘salaries’’, and 
(B) by inserting ‘‘30B,’’ before ‘‘45A(a),’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
55(c)(2) of such Code is amended by inserting 
‘‘30B(e)(1),’’ after ‘‘30(b)(3),’’. 
(4) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part IV of subchapter A of 
chapter 1 of such Code is amended by adding after 
the item relating to section 30A the following new 
item: 
‘‘Sec. 30B. Ready Reserve-National Guard replacement employee 
credit.’’. 
(5) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to amounts paid or in-
curred after September 30, 2004, in taxable years 
ending after such date. 
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