I 
108TH CONGRESS 
1ST SESSION H. R. 2399
To amend the Internal Revenue Code of 1986 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 partici-
pating reserve component self-employed individuals. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 10, 2003
Mr. BARRETT of South Carolina (for himself and Mr. WILSON of South Caro-
lina) 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 em-
ployers a credit against income tax with respect to em-
ployees who participate in the military reserve compo-
nents and to allow a comparable credit for participating 
reserve component self-employed individuals.
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 ‘‘Guardsmen and Re-
servist Employer Tax Act of 2003’’.
SEC. 2. 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 the excess, if any, 
of—
‘‘(A) the qualified employee’s average daily 
qualified compensation for the taxable year, 
over 
‘‘(B) the average daily military pay and al-
lowances received by the qualified employee 
during the taxable year,
while participating in qualified reserve component 
duty to the exclusion of the qualified employee’s nor-
mal employment duties for the number of days the 
qualified employee participates in qualified reserve 
component duty during the taxable year, including 
time spent in a travel status. The employment cred-
it, with respect to all qualified employees, is equal to 
the sum of the employment credits for each qualified 
employee under this subsection. 
‘‘(2) AVERAGE
DAILY
QUALIFIED
COMPENSA-
TION AND AVERAGE DAILY MILITARY PAY AND AL-
LOWANCES.—As used with respect to a qualified em-
ployee—
‘‘(A) the term ‘average daily qualified com-
pensation’ means the qualified compensation of 
the qualified employee for the taxable year di-
vided by the difference between—
‘‘(i) 365, and 
‘‘(ii) the number of days the qualified 
employee 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 qualified 
employee during the taxable year as mili-
tary pay and allowances on account of the 
qualified employee’s participation in quali-
fied reserve component duty, divided by 
‘‘(ii) the total number of days the 
qualified employee participates in qualified 
reserve component duty, including time 
spent in travel status. 
‘‘(3) 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 qualified employee participates 
in qualified reserve component duty, the term ‘quali-
fied compensation’ means—
‘‘(A) compensation which is normally con-
tingent on the qualified employee’s presence for 
work and which would be deductible from the 
taxpayer’s gross income under section 162(a)(1) 
if the qualified employee were present and re-
ceiving such compensation, 
‘‘(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
with respect to which the number of days the 
qualified employee participates in qualified re-
serve component duty does not result in any re-
duction in the amount of vacation time, sick 
leave, or other nonspecific leave previously cred-
ited to or earned by the qualified employee, and 
‘‘(C) group health plan costs (if any) with 
respect to the qualified employee. 
‘‘(4) 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 the excess, if any, of—
‘‘(A) the self-employed taxpayer’s average 
daily self-employment income for the taxable 
year over, and
‘‘(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 plus the amount paid 
for insurance which constitutes medical care for 
the taxpayer for such year (within the meaning 
of section 162(l)) divided by the difference be-
tween—
‘‘(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 qualified employee participates in qualified re-
serve component duty to the exclusion of normal employ-
ment duties. 
‘‘(e) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—
‘‘(A) IN GENERAL.—The credit allowed by 
subsection (a) for the taxable year shall not ex-
ceed $25,000 with respect to each qualified em-
ployee. 
‘‘(B) CONTROLLED
GROUPS.—For pur-
poses of applying the limitation 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 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 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-
son’s normal employment or self-employment duties 
while participating in qualified reserve component 
duty unless in an authorized leave status or other
SEC. 2. 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 the excess, if any, 
of—
‘‘(A) the qualified employee’s average daily 
qualified compensation for the taxable year, 
over 
‘‘(B) the average daily military pay and al-
lowances received by the qualified employee 
during the taxable year,
while participating in qualified reserve component 
duty to the exclusion of the qualified employee’s nor-
mal employment duties for the number of days the 
qualified employee participates in qualified reserve 
component duty during the taxable year, including 
time spent in a travel status. The employment cred-
it, with respect to all qualified employees, is equal to 
the sum of the employment credits for each qualified 
employee under this subsection. 
‘‘(2) AVERAGE
DAILY
QUALIFIED
COMPENSA-
TION AND AVERAGE DAILY MILITARY PAY AND AL-
LOWANCES.—As used with respect to a qualified em-
ployee—
‘‘(A) the term ‘average daily qualified com-
pensation’ means the qualified compensation of 
the qualified employee for the taxable year di-
vided by the difference between—
‘‘(i) 365, and 
‘‘(ii) the number of days the qualified 
employee 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 qualified 
employee during the taxable year as mili-
tary pay and allowances on account of the 
qualified employee’s participation in quali-
fied reserve component duty, divided by 
‘‘(ii) the total number of days the 
qualified employee participates in qualified 
reserve component duty, including time 
spent in travel status. 
‘‘(3) 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 qualified employee participates 
in qualified reserve component duty, the term ‘quali-
fied compensation’ means—
‘‘(A) compensation which is normally con-
tingent on the qualified employee’s presence for 
work and which would be deductible from the 
taxpayer’s gross income under section 162(a)(1) 
if the qualified employee were present and re-
ceiving such compensation, 
‘‘(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
with respect to which the number of days the 
qualified employee participates in qualified re-
serve component duty does not result in any re-
duction in the amount of vacation time, sick 
leave, or other nonspecific leave previously cred-
ited to or earned by the qualified employee, and 
‘‘(C) group health plan costs (if any) with 
respect to the qualified employee. 
‘‘(4) 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 the excess, if any, of—
‘‘(A) the self-employed taxpayer’s average 
daily self-employment income for the taxable 
year over, and
‘‘(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 plus the amount paid 
for insurance which constitutes medical care for 
the taxpayer for such year (within the meaning 
of section 162(l)) divided by the difference be-
tween—
‘‘(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 qualified employee participates in qualified re-
serve component duty to the exclusion of normal employ-
ment duties. 
‘‘(e) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—
‘‘(A) IN GENERAL.—The credit allowed by 
subsection (a) for the taxable year shall not ex-
ceed $25,000 with respect to each qualified em-
ployee. 
‘‘(B) CONTROLLED
GROUPS.—For pur-
poses of applying the limitation 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 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 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-
son’s normal employment or self-employment duties 
while participating in qualified reserve component 
duty unless in an authorized leave status or other
authorized absence from military duties. If a person 
engages in or undertakes any substantial activity re-
lated to the person’s normal employment or self-em-
ployment duties at any time while participating in a 
period of qualified reserve component duty, unless 
during a period of authorized leave or other author-
ized absence from military duties, the person shall 
be deemed to have engaged in or undertaken such 
activity for the entire period of qualified reserve 
component duty. 
‘‘(4) CERTAIN RULES TO APPLY.—Rules similar 
to the rules of subsections (c), (d), and (e) of section 
52 shall apply for purposes of this section.’’. 
(b) CONFORMING AMENDMENT.—Section 38(b) (re-
lating to general business credit) is amended—
(1) by striking ‘‘plus’’ at the end of paragraph 
(14), 
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘, plus’’, and 
(3) by adding at the end the following new 
paragraph: 
‘‘(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
is amended by inserting after the item relating to section 
45F the following new item:
‘‘45G. Reserve component employment credit.’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2002.’’.
Æ