I 
108TH CONGRESS 
1ST SESSION H. R. 1504
To amend the Internal Revenue Code of 1986 to allow as a deduction 
in determining adjusted gross income the deduction for expenses in 
connection with services as a member of a reserve component of the 
Armed Forces of the United States, to allow employers a credit against 
income tax with respect to employees who participate in the military 
reserve components, and to allow a comparable credit for participating 
reserve component self-employed individuals, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 27, 2003
Mr. VITTER introduced the following bill; which was referred to the Committee 
on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to allow as 
a deduction in determining adjusted gross income the 
deduction for expenses in connection with services as 
a member of a reserve component of the Armed Forces 
of the United States, to allow employers a credit against 
income tax with respect to employees who participate 
in the military reserve components, and to allow a com-
parable credit for participating reserve component self-
employed individuals, and for other purposes.
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 ‘‘Reserve Component 
Tax Assistance Act of 2003’’. 
SEC. 2. DEDUCTION OF CERTAIN EXPENSES OF MEMBERS 
OF THE RESERVE COMPONENT. 
(a) DEDUCTION ALLOWED.—Section 162 of the In-
ternal Revenue Code of 1986 (relating to certain trade or 
business expenses) is amended by redesignating subsection 
(p) as subsection (q) and inserting after subsection (o) the 
following new subsection: 
‘‘(p) TREATMENT OF EXPENSES OF MEMBERS OF 
RESERVE COMPONENT
OF ARMED FORCES
OF
THE 
UNITED STATES.—For purposes of subsection (a), in the 
case of an individual who performs services as a member 
of a reserve component of the Armed Forces of the United 
States at any time during the taxable year, such individual 
shall be deemed to be away from home in the pursuit of 
a trade or business during any period for which such indi-
vidual is away from home in connection with such serv-
ice.’’. 
(b) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ELECTS TO ITEMIZE.—Section 62(a)(2) of the In-
ternal Revenue Code of 1986 (relating to certain trade and 
business deductions of employees) is amended by adding 
at the end the following new subparagraph:
‘‘(D) CERTAIN EXPENSES OF MEMBERS OF 
RESERVE COMPONENTS OF THE ARMED FORCES 
OF THE UNITED STATES.—The deductions al-
lowed by section 162 which consist of expenses 
paid or incurred by the taxpayer in connection 
with the performance of services by such tax-
payer as a member of a reserve component of 
the Armed Forces of the United States.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after December 31, 2002. 
SEC. 3. CREDIT FOR EMPLOYMENT OF RESERVE COMPO-
NENT PERSONNEL. 
(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. 45G. RESERVE COMPONENT EMPLOYMENT CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the reserve component employment credit determined 
under this section is an amount equal to the sum of—
‘‘(1) the employment credit with respect to all 
qualified employees of the taxpayer, plus 
‘‘(2) the self-employment credit of a qualified 
self-employed taxpayer.
‘‘(b) EMPLOYMENT CREDIT.—For purposes of this 
section—
‘‘(1) IN
GENERAL.—The employment credit 
with respect to a qualified employee of the taxpayer 
for any taxable year is equal to 50 percent of the 
amount of qualified compensation that would have 
been paid to the employee with respect to all periods 
during which the employee participates in qualified 
reserve component duty to the exclusion of normal 
employment duties, including time spent in a travel 
status had the employee not been participating in 
qualified reserve component duty. The employment 
credit, with respect to all qualified employees, is 
equal to the sum of the employment credits for each 
qualified employee under this subsection. 
‘‘(2) QUALIFIED COMPENSATION.—When used 
with respect to the compensation paid or that would 
have been paid to a qualified employee for any pe-
riod during which the employee participates in quali-
fied reserve component duty, the term ‘qualified 
compensation’ means compensation—
‘‘(A) which is normally contingent on the 
employee’s presence for work and which would
be deductible from the taxpayer’s gross income
under section 162(a)(1) if the employee were 
present and receiving such compensation, and 
‘‘(B) which is not characterized by the tax-
payer 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 with respect 
to which the number of days the employee par-
ticipates in qualified reserve component duty 
does not result in any reduction in the amount 
of vacation time, sick leave, or other nonspecific 
leave previously credited to or earned by the 
employee. 
‘‘(3) QUALIFIED EMPLOYEE.—The term ‘quali-
fied employee’ means a person who—
‘‘(A) has been an employee of the taxpayer 
for the 21-day period immediately preceding the 
period during which the employee participates 
in qualified reserve component duty, and 
‘‘(B) is a member of the Ready Reserve of 
a reserve component of an Armed Force of the 
United States as defined in sections 10142 and 
10101 of title 10, United States Code. 
‘‘(c) SELF-EMPLOYMENT CREDIT.—
‘‘(1) IN GENERAL.—The self-employment credit 
of a qualified self-employed taxpayer for any taxable 
year is equal to 50 percent of the excess, if any, of—
‘‘(A) the self-employed taxpayer’s average 
daily self-employment 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 component duty to the exclusion of the 
taxpayer’s normal self-employment 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. 
‘‘(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) of the tax-
payer for the taxable year divided by the dif-
ference between—
‘‘(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) 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) CREDIT IN ADDITION TO DEDUCTION.—The 
employment credit provided in this section is in addition 
to any deduction otherwise allowable with respect to com-
pensation actually paid to a qualified employee during any 
period the employee participates in qualified reserve com-
ponent duty to the exclusion of normal employment duties. 
‘‘(e) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—
‘‘(A) IN GENERAL.—The credit allowed by 
subsection (a) for the taxable year—
‘‘(i) shall not exceed $7,500 in the ag-
gregate, and 
‘‘(ii) shall not exceed $2,000 with re-
spect to each qualified employee. 
‘‘(B) CONTROLLED
GROUPS.—For pur-
poses of applying the limitations in subpara-
graph (A)—
‘‘(i) all members of a controlled group 
shall be treated as one taxpayer, and 
‘‘(ii) such limitations shall be allo-
cated among the members of such group in 
such manner as the Secretary may pre-
scribe. 
For purposes of this subparagraph, all persons 
treated as a single employer under subsection
(a) or (b) of section 52 or subsection (m) or 
(o) of section 414 shall be treated as members 
of a controlled group. 
‘‘(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 in which the tax-
payer 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 respect to a vio-
lation 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 under 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, 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 
States Code. 
‘‘(f) GENERAL DEFINITIONS AND SPECIAL RULES.—
‘‘(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
COMPONENT 
DUTY.—The term ‘qualified reserve component duty’ 
includes only active duty performed, as designated in 
the reservist’s military orders, in support of a con-
tingency 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 component duty 
to the exclusion of normal employment or self-em-
ployment duties if the person does not engage in or 
undertake any substantial activity related to the per-
‘‘(16) the reserve component employment credit 
determined under section 45G(a).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by in-
serting after the item relating to section 45F the following 
new item:
‘‘Sec. 45G. Reserve component employment credit.’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2002.
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