any other form of pay for a nonspecific 
leave of absence, and 
‘‘(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, and, 
in the case of a qualified employee, is receiving 
qualified compensation (as defined in paragraph 
(1)(C)) for which an employment credit is al-
lowed as determined under paragraph (1). 
‘‘(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 40 percent of so much of the excess 
(if any) of— 
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‘‘(A) the qualified self-employed taxpayer’s 
average daily qualified compensation 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 component duty to the exclusion of the 
taxpayer’s normal self-employment duties, 
for the aggregate number of days the taxpayer par-
ticipates in qualified reserve component duty during 
the taxable year (including time spent in a travel 
status) as does not exceed $25,000. 
‘‘(2) AVERAGE
DAILY
QUALIFIED
COMPENSA-
TION AND AVERAGE DAILY MILITARY PAY AND AL-
LOWANCES.—As used with respect to a qualified 
self-employed taxpayer— 
‘‘(A) the term ‘average daily qualified com-
pensation’ means the qualified compensation of 
the qualified self-employed taxpayer for the tax-
able year divided by 365 days, 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-
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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 COMPENSATION.—When used 
with respect to the compensation paid to a qualified 
self-employed taxpayer for any period during which 
the qualified self-employed taxpayer participates in 
qualified reserve component duty, the term ‘qualified 
compensation’ means— 
‘‘(A) the self-employment income (as de-
fined in section 1402(b) of the taxpayer which 
is normally contingent on the taxpayer’s pres-
ence for work, 
‘‘(B) compensation which is not character-
ized 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 
‘‘(C) the amount paid for insurance which 
constitutes medical care for the taxpayer for 
such year (within the meaning of section 
162(l)). 
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‘‘(4) 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 this chapter 
with respect to compensation paid to any employee shall 
be reduced by the credit allowed by this section with re-
spect 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, 30, 30B, and 
30C, over 
‘‘(B) the tentative minimum tax for the 
taxable year. 
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‘‘(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. 
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‘‘(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) ELIGIBLE SMALL BUSINESS EMPLOYER.— 
‘‘(A) IN
GENERAL.—The term ‘eligible 
small business employer’ means, with respect to 
any taxable year, any employer which— 
‘‘(i) employed an average of 100 or 
fewer employees on business days during 
such taxable year, and 
‘‘(ii) under a written plan of the em-
ployer, provides the excess amount de-
scribed in subsection (b)(1)(A) to every 
qualified employee of the employer. 
‘‘(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. 
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