109TH CONGRESS 
1ST SESSION H. R. 1635 
To amend the Internal Revenue Code of 1986 to allow employers a credit 
against income tax for hiring military service personnel who served in 
a combat zone or a hazardous duty area. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 14, 2005 
Mr. MCCOTTER (for himself, Mrs. MILLER of Michigan, Mr. PEARCE, Mr. 
MANZULLO, Mr. SWEENEY, Mr. ENGLISH of Pennsylvania, Mr. RENZI, 
Mr. REYES, Mr. SULLIVAN, Mr. SHUSTER, and Mr. JONES of North 
Carolina) introduced the following bill; which was referred to the Com-
mittee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to allow em-
ployers a credit against income tax for hiring military 
service personnel who served in a combat zone or a 
hazardous duty area. 
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 ‘‘Veterans’ Employment 
Transition Support Act of 2005’’ or the ‘‘VETS Act of 
2005’’.
SEC. 2. CREDIT FOR EMPLOYERS HIRING MILITARY SERV-
ICE PERSONNEL WHO SERVED IN A COMBAT 
ZONE OR A HAZARDOUS DUTY AREA. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter 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 new section: 
‘‘SEC. 45J. CREDIT FOR EMPLOYERS HIRING MILITARY 
SERVICE PERSONNEL WHO SERVED IN A 
COMBAT ZONE OR A HAZARDOUS DUTY AREA. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the military service personnel employment credit for the 
taxable year shall be equal to—
‘‘(1) except as provided in paragraph (2), 40 
percent of the qualified first-year wages for such 
year, and 
‘‘(2) in the case of a disabled qualified veteran, 
the applicable percentage of the qualified first-year 
wages for such year. 
‘‘(b) QUALIFIED WAGES.—For purposes of this sec-
tion—
‘‘(1) IN GENERAL.—The term ‘qualified wages’ 
means the wages paid or incurred by the employer 
during the taxable year to individuals who are quali-
fied veterans.
‘‘(2) QUALIFIED
FIRST-YEAR
WAGES.—The 
term ‘qualified first-year wages’ means, with respect 
to any individual, qualified wages attributable to 
service rendered during the 1-year period beginning 
with the day the individual begins work for the em-
ployer. 
‘‘(3) WAGES.—The term ‘wages’ has the mean-
ing given such term by section 51(c), without regard 
to paragraph (4) thereof. 
‘‘(c) QUALIFIED VETERAN; HIRING DATE.—For pur-
poses of this section— 
‘‘(1) IN
GENERAL.—The term ‘qualified vet-
eran’ means any individual who is certified by the 
designated local agency (as defined in section 
51(d)(11))— 
‘‘(A) as being a veteran (as defined in sec-
tion 51(d)(3)(B)) who performed services in an 
area designated by the President for purposes 
of this section as a combat zone or as a haz-
ardous duty area, and 
‘‘(B) as having been honorably discharged 
from active duty in the Armed Forces of the 
United States. 
‘‘(2) HIRING DATE.—The term ‘hiring date’ has 
the meaning given such term by section 51(d).
‘‘(d) DISABLED QUALIFIED VETERAN; APPLICABLE 
PERCENTAGE.—
‘‘(1) IN GENERAL.—The term ‘disabled quali-
fied veteran’ means any qualified veteran who is cer-
tified by the designated local agency (as so defined) 
as having a disability that has been determined 
under the laws administered by the Secretary of Vet-
erans Affairs to be service-connected and that is 
rated by such Secretary (as of the date of the certifi-
cation) as 10 percent or more disabling. 
‘‘(2) APPLICABLE
PERCENTAGE.—The term 
‘applicable percentage’ means the percentage deter-
mined in accordance with the following table:
‘‘Percentage of disability:
Applicable
percentage: 
At least 10 but not over 20 ..................................
At least 20 but not over 30 ..................................
At least 30 but not over 40 ..................................
At least 40 but not over 50 ..................................
At least 50 but not over 60 ..................................
At least 60 but not over 70 ..................................
At least 70 but not over 80 ..................................
At least 80 but not over 90 ..................................
At least 90 but not over 100 ................................
100 percent ...........................................................
‘‘(e) CERTAIN RULES TO APPLY.—Rules similar to 
the rules of section 52, and subsections (d)(11), (f), (g), 
(i) (as in effect on the day before the date of the enact-
ment of the Taxpayer Relief Act of 1997), (j), and (k) 
of section 51, shall apply for purposes of this section.’’.
(b) CREDIT TO BE PART OF GENERAL BUSINESS 
CREDIT.—Subsection (b) of section 38 of such Code is 
amended by striking ‘‘plus’’ at the end of paragraph (18), 
by striking the period at the end of paragraph (19) and 
inserting ‘‘, plus’’, and by adding at the end the following 
new paragraph: 
‘‘(20) the military service personnel employment 
credit determined under section 45J(a).’’. 
(c) TECHNICAL AMENDMENTS.— 
(1) Clause (iii) of section 41(b)(2)(D) of such 
Code is amended to read as follows: 
‘‘(iii) EXCLUSION
FOR
WAGES
TO 
WHICH
EMPLOYMENT
CREDITS
APPLY.— 
The term ‘wages’ shall not include any 
amount taken into account in determining 
the credit under section 45J(a) or 51(a).’’. 
(2) Subparagraph (B) of section 45A(b)(1) of 
such Code is amended to read as follows: 
‘‘(B) COORDINATION
WITH
OTHER
EM-
PLOYMENT
CREDITS.—The 
term 
‘qualified 
wages’ shall not include wages attributable to 
service rendered during the 1-year period begin-
ning with the day the individual begins work for 
the employer if any portion of such wages is
taken into account in determining the credit 
under section 45J or 51.’’. 
(3) Subsection (a) of section 280C of such Code 
is amended by inserting ‘‘45J(a),’’ after ‘‘45A(a),’’. 
(4) Paragraph (3) of section 1396(c) of such 
Code is amended to read as follows: 
‘‘(3) COORDINATION
WITH
OTHER
EMPLOY-
MENT CREDITS.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
wages’ shall not include wages taken into ac-
count in determining the credit under section 
45J or 51. 
‘‘(B) COORDINATION
WITH
PARAGRAPH 
(2).—The $15,000 amount in paragraph (2) 
shall be reduced for any calendar year by the 
amount of wages paid or incurred during such 
year which are taken into account in deter-
mining the credits under sections 45J and 51.’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of such Code is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 45J. Credit for employers hiring military service personnel who served in 
a combat zone or a hazardous duty area.’’.
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to individuals who begin work for 
the employer after the date of the enactment of this Act. 
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