addition to any deduction otherwise allowable with
respect to compensation actually paid to a qualified
employee during any period the employee partici-
pates in qualified reserve duty to the exclusion of
normal employment duties.
‘‘(c) SELF-EMPLOYMENT CREDIT.—
‘‘(1) IN GENERAL.—In the case of a qualified
self-employed taxpayer, the self-employment credit
for any taxable year is equal to 50 percent of the ex-
cess (if any) of—
‘‘(A) the taxpayer’s average daily self-em-
ployment income for the taxable year over
‘‘(B) the average daily military pay and al-
lowances received by the taxpayer during the
taxable year while participating in qualified re-
serve duty to the exclusion of the taxpayer’s
normal self-employment duties for the number
of days the taxpayer participates in qualified re-
serve duty during the taxable year, including
time spent in a travel status.
‘‘(2) AVERAGE
DAILY
SELF-EMPLOYMENT
IN-
COME AND AVERAGE DAILY MILITARY PAY AND AL-
LOWANCES.—As used with respect to a self-em-
ployed taxpayer—
‘‘(A) AVERAGE DAILY SELF-EMPLOYMENT
INCOME.—The term ‘average daily self-employ-
ment income’ means the net earnings from self-
employment (as defined in section 1402) of the
taxpayer for the taxable year divided by the dif-
ference between—
‘‘(i) 365, and
‘‘(ii) the number of days the taxpayer
participates in qualified reserve duty dur-
ing the taxable year, including time spent
in a travel status.
‘‘(B) AVERAGE DAILY MILITARY PAY AND
ALLOWANCES.—The term ‘average daily mili-
tary pay and allowances’ means—
‘‘(i) the amount paid to the taxpayer
during a taxable year as military pay on
account of the taxpayer’s participation in
qualified reserve duty, divided by
‘‘(ii) the total number of days the tax-
payer participates in qualified reserve duty,
including, if applicable, time spent in travel
status.
‘‘(3) QUALIFIED SELF-EMPLOYED TAXPAYER.—
The term ‘qualified self-employed taxpayer’ means a
taxpayer who—
‘‘(A) has net earnings from self-employ-
ment (as defined in section 1402) for the tax-
able year, and
‘‘(B) is a member of the Ready Reserve of
a reserve component of an Armed Force of the
United States.
‘‘(d) LIMITATIONS.—
‘‘(1) MAXIMUM
CREDIT.—The credit deter-
mined under subsection (a) for the taxable year shall
not exceed $7,500.
‘‘(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 by reason of subsection (a) to a tax-
payer for—
‘‘(A) any taxable year in which the tax-
payer complies with 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 two succeeding taxable years.
‘‘(3) DISALLOWANCE WITH RESPECT TO PER-
SONS ORDERED TO ACTIVE DUTY FOR TRAINING.—
No credit shall be allowed by reason of subsection
(a) to a taxpayer with respect to any period for
which the person on whose behalf the credit would
otherwise be allowable is called or ordered to active
duty for any of the following types of duty—
‘‘(A) active duty for training under any
provision of title 10 of the United States Code;
‘‘(B) training at encampments, maneuvers,
outdoor target practice, or other exercises under
chapter 5 of title 32, United States Code; or
‘‘(C) full-time National Guard duty, as de-
fined in section 101(d)(5) of title 10, United
State Code.
‘‘(e) GENERAL DEFINITIONS.—
‘‘(1) MILITARY
PAY
AND
ALLOWANCES.—The
term ‘military pay’ means pay as that term is de-
fined in section 101(21) of title 37, United States
Code, and the term ‘allowances’ means the allow-
ances payable to a member of the Armed Forces of
the United States under chapter 7 of that title.
‘‘(2) QUALIFIED
RESERVE
DUTY.—The term
‘qualified reserve duty’ includes only active duty per-
formed in support of, as designated in the reservist’s
military orders, a contingency operation as defined
in section 101(a)(13), of title 10, United States
Code.
‘‘(3) NORMAL
EMPLOYMENT
AND
SELF-EM-
PLOYMENT DUTIES.—A person shall be deemed to
be participating in qualified reserve duty to the ex-
clusion of normal employment or self-employment
duties if the person does not engage in or undertake
any substantial activity related to the person’s nor-
mal employment or self-employment duties while
participating in qualified reserve duty unless in an
authorized leave status or other authorized absence
form military duties. If a person engages in or un-
dertakes any substantial activity related to the per-
son’s normal employment or self-employment duties
at any time while participating in a period of quali-
fied reserve duty, unless during a period of author-
ized leave or other authorized absence from military
duties, the person shall be deemed to have engaged
in or undertaken such activity for the entire period
of qualified reserve duty.
‘‘(f) CONTROLLED GROUPS.—All persons treated as
a single employer under subsection (a) or (b) of section
52 shall be treated as a single employer for purposes of
this section.’’