I
107TH CONGRESS
2D SESSION
H. R. 3756
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
FEBRUARY 13, 2002
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 2002’’.
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, 2001.
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. 45E. 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-
‘‘(14) the reserve component employment credit
determined under section 45E(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 45D the following
new item:
‘‘Sec. 45E. Reserve component employment credit.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
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