‘‘(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’ 
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. 
‘‘(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 
(f)(1) for such taxable year (in this paragraph 
referred to as the ‘unused credit year’), such 
excess shall be a credit carryback to the taxable 
year 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 
VerDate Aug 31 2005 
23:16 Oct 16, 2007
Jkt 059200
PO 00000
Frm 00013
Fmt 6652
Sfmt 6201
E:\BILLS\H3827.IH
H3827
mstockstill on PROD1PC66 with BILLS
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 ‘‘30D,’’ before ‘‘45A(a),’’. 
(c) CONFORMING AMENDMENT.—Section 55(c)(2) of 
the Internal Revenue Code of 1986 is amended by insert-
ing ‘‘30D(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 following new item: 
‘‘Sec. 30D. Employer wage credit for activated military reservists.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid in taxable years 
beginning after December 31, 2006. 
SEC. 3. DIFFERENTIAL WAGE PAYMENTS. 
(a) INCOME TAX WITHHOLDING ON DIFFERENTIAL 
WAGE PAYMENTS.— 
VerDate Aug 31 2005 
23:16 Oct 16, 2007
Jkt 059200
PO 00000
Frm 00014
Fmt 6652
Sfmt 6201
E:\BILLS\H3827.IH
H3827
mstockstill on PROD1PC66 with BILLS
(1) IN GENERAL.—Section 3401 of the Internal 
Revenue Code of 1986 (relating to definitions) is 
amended by adding at the end the following new 
subsection: 
‘‘(h) DIFFERENTIAL WAGE PAYMENTS TO ACTIVE 
DUTY MEMBERS OF THE UNIFORMED SERVICES.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), any differential wage payment shall be treated 
as a payment of wages by the employer to the em-
ployee. 
‘‘(2) DIFFERENTIAL
WAGE
PAYMENT.—For 
purposes of paragraph (1), the term ‘differential 
wage payment’ means any payment which— 
‘‘(A) is made by an employer to an indi-
vidual with respect to any period during which 
the individual is performing service in the uni-
formed services while on active duty for a pe-
riod of more than 30 days, and 
‘‘(B) represents all or a portion of the 
wages the individual would have received from 
the employer if the individual were performing 
service for the employer.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to remuneration paid 
after December 31, 2007. 
VerDate Aug 31 2005 
23:16 Oct 16, 2007
Jkt 059200
PO 00000
Frm 00015
Fmt 6652
Sfmt 6201
E:\BILLS\H3827.IH
H3827
mstockstill on PROD1PC66 with BILLS
(b) TREATMENT
OF DIFFERENTIAL WAGE PAY-
MENTS FOR RETIREMENT PLAN PURPOSES.— 
(1) PENSION PLANS.— 
(A) IN GENERAL.—Section 414(u) of the 
Internal Revenue Code of 1986 (relating to spe-
cial rules relating to veterans’ reemployment 
rights under USERRA) is amended by adding 
at the end the following new paragraph: 
‘‘(11) TREATMENT
OF
DIFFERENTIAL
WAGE 
PAYMENTS.— 
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, for purposes of applying this 
title to a retirement plan to which this sub-
section applies— 
‘‘(i) an individual receiving a differen-
tial wage payment shall be treated as an 
employee of the employer making the pay-
ment, 
‘‘(ii) the differential wage payment 
shall be treated as compensation, and 
‘‘(iii) the plan shall not be treated as 
failing to meet the requirements of any 
provision described in paragraph (1)(C) by 
reason of any contribution or benefit which 
is based on the differential wage payment. 
VerDate Aug 31 2005 
23:16 Oct 16, 2007
Jkt 059200
PO 00000
Frm 00016
Fmt 6652
Sfmt 6201
E:\BILLS\H3827.IH
H3827
mstockstill on PROD1PC66 with BILLS
‘‘(B) 
SPECIAL
RULE
FOR
DISTRIBU-
TIONS.— 
‘‘(i) IN
GENERAL.—Notwithstanding 
subparagraph (A)(i), for purposes of sec-
tion 401(k)(2)(B)(i)(I), 403(b)(7)(A)(ii), 
403(b)(11)(A), or 457(d)(1)(A)(ii), an in-
dividual shall be treated as having been 
severed from employment during any pe-
riod the individual is performing service in 
the uniformed services described in section 
3401(h)(2)(A). 
‘‘(ii) LIMITATION.—If an individual 
elects to receive a distribution by reason of 
clause (i), the plan shall provide that the 
individual may not make an elective defer-
ral or employee contribution during the 6- 
month period beginning on the date of the 
distribution. 
‘‘(C) 
NONDISCRIMINATION
REQUIRE-
MENT.—Subparagraph (A)(iii) shall apply only 
if all employees of an employer (as determined 
under subsections (b), (c), (m), and (o)) per-
forming service in the uniformed services de-
scribed in section 3401(h)(2)(A) are entitled to 
receive differential wage payments on reason-
VerDate Aug 31 2005 
23:16 Oct 16, 2007
Jkt 059200
PO 00000
Frm 00017
Fmt 6652
Sfmt 6201
E:\BILLS\H3827.IH
H3827
mstockstill on PROD1PC66 with BILLS