‘‘(1) The term ‘civilian compensation’ means 
the wages or salary that an employee of a State or 
local government normally receives from the employ-
ee’s employment by the State or local government. 
‘‘(2) The term ‘local government’ means an 
agency or political subdivision of a State. 
‘‘(3) The term ‘military pay’ has the meaning 
given the term ‘pay’ in section 101(21) of this title. 
‘‘(4) The term ‘State’ means each of the several 
States of the United States, the District of Colum-
bia, the Commonwealth of Puerto Rico, Guam, the 
Virgin Islands, and other territories or possessions 
of the United States.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
at the beginning of chapter 17 of title 37, United States 
Code, is amended by inserting after the item relating to 
section 909 the following new item: 
‘‘910. Assistance for State and local governments that continue to pay employ-
ees who serve on active duty.’’. 
(c) APPLICATION OF AMENDMENT.—Section 910 of 
title 37, United States Code, as added by subsection (a), 
shall apply with respect to pay periods (as described in 
subsection (b) of such section) beginning on or after the 
date of the enactment of this Act.
SEC. 103. ACTIVE-DUTY RESERVE COMPONENT EMPLOYEE 
CREDIT 
ADDED 
TO 
GENERAL 
BUSINESS 
CREDIT. 
(a) ADDITION OF CREDIT.—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 new section: 
‘‘SEC. 45G. ACTIVE-DUTY RESERVE COMPONENT EMPLOYEE 
CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of an employer, the active-duty reserve compo-
nent employee credit determined under this section for the 
taxable year is an amount equal to 50 percent of the com-
pensation paid by the employer to an employee who is also 
a member of a reserve component during the taxable year 
when the employee was absent from employment for a rea-
son described in subsection (b), but not to exceed 50 per-
cent of the difference (if any) between— 
‘‘(1) the amount of compensation that would 
otherwise have been payable to the employee during 
such absence if the employee’s employment with the 
employer had not been interrupted by the employee’s 
absence; and 
‘‘(2) the amount of military pay that is payable 
to the employee during the absence.
‘‘(b) COVERED PAY PERIODS.—Subsection (a) shall 
apply with respect to an employee who is also a member 
of a reserve component— 
‘‘(1) while the employee serves on active duty 
for a period of more than 30 days; 
‘‘(2) while the employee is hospitalized for, or 
convalescing from, an illness or injury incurred in, 
or aggravated during, the performance of such active 
duty; or 
‘‘(3) during the 14-day period beginning at the 
end of such active duty or the end of the period re-
ferred to in subparagraph (B). 
‘‘(c) LIMITATION.—No credit shall be allowed under 
subsection (a) with respect to an employee on any day on 
which the employee was not scheduled to work (for a rea-
son other than such service on active duty) and ordinarily 
would not have worked. 
‘‘(d) DEFINITIONS.—For purposes of this section— 
‘‘(1) The terms ‘active duty for a period of 
more than 30 days’, ‘member’, and ‘reserve compo-
nent’ have the meanings given such terms in section 
101 of title 37, United States Code. 
‘‘(2) The term ‘compensation’ means any remu-
neration for employment, whether in cash or in kind, 
which is paid or incurred by a taxpayer and which