‘‘(iii) group health plan costs (if any) 
with respect to the qualified replacement 
employee. 
‘‘(C) 
QUALIFIED
REPLACEMENT
EM-
PLOYEE.—The term ‘qualified replacement em-
ployee’ means an individual who is hired to re-
place a qualified employee or a qualified self- 
employed taxpayer, but only with respect to the 
period during which such employee or taxpayer 
participates in qualified reserve component 
duty, including time spent in travel status. 
‘‘(c) SELF-EMPLOYMENT CREDIT.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The self-employment credit 
of a qualified self-employed taxpayer for any taxable 
year is equal to the lesser of— 
‘‘(A) the excess, if any, of— 
‘‘(i) the self-employed taxpayer’s aver-
age daily self-employment income for the 
taxable year, over 
‘‘(ii) the average daily military pay 
and allowances received by the taxpayer 
during the taxable year, while participating 
in qualified reserve component duty to the 
exclusion of the taxpayer’s normal self-em-
ployment duties for the number of days the 
taxpayer participates in qualified reserve 
component duty during the taxable year, 
including time spent in a travel status, or 
‘‘(B) $15,000. 
‘‘(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) the term ‘average daily self-employ-
ment income’ means the self-employment in-
come (as defined in section 1402(b)) of the tax-
payer for the taxable year plus the amount paid 
for insurance which constitutes medical care for 
the taxpayer for such year (within the meaning 
of section 162(l)) divided by the difference be-
tween— 
‘‘(i) 365, and 
‘‘(ii) the number of days the taxpayer 
participates in qualified reserve component 
duty during the taxable year, including 
time spent in a travel status, and 
‘‘(B) the term ‘average daily military pay 
and allowances’ means—
‘‘(i) the amount paid to the taxpayer 
during the taxable year as military pay 
and allowances on account of the tax-
payer’s participation in qualified reserve 
component duty, divided by 
‘‘(ii) the total number of days the tax-
payer participates in qualified reserve com-
ponent duty, including 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(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. 
‘‘(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.
‘‘(3) DISALLOWANCE WITH RESPECT TO PER-
SONS ORDERED TO ACTIVE DUTY FOR TRAINING.— 
No credit shall be allowed under subsection (a) to a 
taxpayer with respect to any period by taking into 
account any person who 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, United States Code. 
‘‘(B) Training at encampments, maneu-
vers, outdoor target practice, or other exercises 
under chapter 5 of title 32, United States Code. 
‘‘(C) Full-time National Guard duty, as 
defined in section 101(d)(5) of title 10, United 
States Code. 
‘‘(f) GENERAL DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) 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. 
‘‘(2) 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. 
‘‘(3) 
QUALIFIED
RESERVE
COMPONENT 
DUTY.—The term ‘qualified reserve component duty’ 
means active duty performed for a period not less 
than 180 days under a call or order to active duty 
under a provision of law referred to in section 
101(a)(13)(B) of title 10, United States Code. 
‘‘(4) 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). 
‘‘(5) CERTAIN RULES TO APPLY.—Rules similar 
to the rules of subsections (c), (d), and (e) of section 
52 shall apply.’’. 
(b) NO DEDUCTION
FOR COMPENSATION TAKEN 
INTO ACCOUNT FOR CREDIT.—Section 280C(a) of the In-
ternal Revenue Code of 1986 (relating to rule for employ-
ment credits) is amended— 
(1) by inserting ‘‘or compensation’’ after ‘‘sala-
ries’’, and 
(2) by inserting ‘‘30B,’’ before ‘‘45A(a)’’. 
(c) CONFORMING AMENDMENT.—Section 55(c)(2) of 
the Internal Revenue Code of 1986 is amended by insert-
ing ‘‘30B(e)(1),’’ after ‘‘30(b)(3),’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end 30A the following new item: 
‘‘Sec. 30B. Employer wage credit for activated military reservists.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid after the date of
the enactment of this Act, in taxable years ending after 
such date. 
SEC. 303. REDUCTION FROM 60 TO 55 IN AGE FOR ELIGI-
BILITY FOR RECEIPT OF NONREGULAR SERV-
ICE MILITARY RETIRED PAY. 
Section 12731(a)(1) of title 10, United States Code, 
is amended by striking ‘‘60 years of age’’ and inserting 
‘‘55 years of age’’. 
TITLE IV—HEALTH CARE 
BENEFITS 
SEC. 401. EXPANDED ELIGIBILITY OF READY RESERVE 
MEMBERS UNDER TRICARE PROGRAM. 
(a) UNCONDITIONAL ELIGIBILITY.—Subsection (a) 
of section 1076b of title 10, United States Code, is amend-
ed by striking ‘‘and receive benefits’’ and all that follows 
through ‘‘an employer-sponsored health benefits plan’’. 
(b) PERMANENT AUTHORITY.—Subsection (l) of such 
section is repealed. 
(c) CONFORMING AMENDMENTS.—Such section is 
further amended— 
(1) by striking subsections (i) and (j); and 
(2) by redesignating subsection (k) as sub-
section (i).
SEC. 402. CONTINUATION OF NON-TRICARE HEALTH BENE-
FITS PLAN COVERAGE FOR CERTAIN RE-
SERVES CALLED OR ORDERED TO ACTIVE 
DUTY AND THEIR DEPENDENTS. 
(a) REQUIRED CONTINUATION.—(1) Chapter 55 of 
title 10, United States Code, is amended by inserting after 
section 1078a the following new section: 
‘‘§ 1078b. Continuation of non-TRICARE health bene-
fits plan coverage for dependents of cer-
tain Reserves called or ordered to active 
duty 
‘‘(a) PAYMENT OF PREMIUMS.—The Secretary con-
cerned shall pay the applicable premium to continue in 
force any qualified health benefits plan coverage for the 
members of the family of an eligible reserve component 
member for the benefits coverage continuation period if 
timely elected by the member in accordance with regula-
tions prescribed under subsection (g). 
‘‘(b) ELIGIBLE MEMBER; FAMILY MEMBERS.—(1) A 
member of a reserve component is eligible for payment of 
the applicable premium for continuation of qualified 
health benefits plan coverage under subsection (a) while 
serving on active duty for a period of more than 30 days 
pursuant to a call or order issued under a provision of 
law referred to in section 101(a)(13)(B) of this title dur-
ing a war or a national emergency declared by the Presi-
dent or Congress. 
‘‘(2) For the purposes of this section, the members 
of the family of an eligible reserve component member in-
clude only the member’s dependents described in subpara-
graphs (A), (D), and (I) of section 1072(2) of this title. 
‘‘(c) QUALIFIED HEALTH BENEFITS PLAN COV-
ERAGE.—For the purposes of this section, health benefits 
plan coverage for the members of the family of a reserve 
component member called or ordered to active duty is 
qualified health benefits plan coverage if— 
‘‘(1) the coverage was in force on the date on 
which the Secretary notified the reserve component 
member that issuance of the call or order was pend-
ing or, if no such notification was provided, the date 
of the call or order; 
‘‘(2) on such date, the coverage applied to the 
reserve component member and members of the fam-
ily of the reserve component member; and 
‘‘(3) the coverage has not lapsed. 
‘‘(d) APPLICABLE PREMIUM.—The applicable pre-
mium payable under this section for continuation of health 
benefits plan coverage for the family members of a reserve 
component member is the amount of the premium payable 
by the member for the coverage of the family members.
‘‘(e) BENEFITS
COVERAGE
CONTINUATION
PE-
RIOD.—The benefits coverage continuation period under 
this section for qualified health benefits plan coverage for 
the family members of an eligible reserve component mem-
ber called or ordered to active duty is the period that— 
‘‘(1) begins on the date of the call or order; and 
‘‘(2) ends at the end of the day on which the 
active duty terminates. 
‘‘(f) EXTENSION
OF PERIOD
OF COBRA COV-
ERAGE.—Notwithstanding any other provision of law— 
‘‘(1) any period of coverage under a COBRA 
continuation 
provision 
(as 
defined 
in 
section 
9832(d)(1) of the Internal Revenue Code of 1986) 
for an eligible reserve component member under this 
section shall be deemed to be equal to the benefits 
coverage continuation period for such member under 
this section; and 
‘‘(2) with respect to the election of any period 
of coverage under a COBRA continuation provision 
(as so defined), rules similar to the rules under sec-
tion 4980B(f)(5)(C) of such Code shall apply. 
‘‘(g) REGULATIONS.—The Secretary of Defense shall 
prescribe regulations for carrying out this section. The 
regulations shall include such requirements for making an
election of payment of applicable premiums as the Sec-
retary considers appropriate.’’. 
(2) The table of sections at the beginning of such 
chapter is amended by inserting after the item relating 
to section 1078a the following new item: 
‘‘1078b. Continuation of non-TRICARE health benefits plan coverage for de-
pendents of certain Reserves called or ordered to active duty.’’. 
(b) APPLICABILITY.—Section 1078b of title 10, 
United States Code (as added by subsection (a)), shall 
apply with respect to calls or orders of members of reserve 
components of the Armed Forces to active duty as de-
scribed in subsection (b) of such section, that are issued 
by the Secretary of a military department before, on, or 
after the date of the enactment of this Act, but only with 
respect to qualified health benefits plan coverage (as de-
scribed in subsection (c) of such section) that is in effect 
on or after the date of the enactment of this Act. 
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