To amend the Internal Revenue Code of 1986 to provide an exemption from employer social security taxes with respect to service members and veterans, and to provide a business credit for the retention of such individuals for at least 1 year.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Combat Veterans Back to Work Act of 
2011''.

SEC. 2. PAYROLL TAX FORGIVENESS FOR HIRING COMBAT VETERANS.

    (a) In General.--Section 3111 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(e) Special Exemption for Certain Individuals Hired in 2011 and 
2012.--
            ``(1) In general.--Subsection (a) shall not apply to wages 
        paid by a qualified employer with respect to employment during 
        the period beginning on the day after the date of the enactment 
        of this subsection and ending on December 31, 2012, of any 
        qualified individual for services performed--
                    ``(A) in a trade or business of such qualified 
                employer, or
                    ``(B) in the case of a qualified employer exempt 
                from tax under section 501(a), in furtherance of the 
                activities related to the purpose or function 
                constituting the basis of the employer's exemption 
                under section 501.
            ``(2) Qualified employer.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified employer' 
                means any employer other than the United States, any 
                State, or any political subdivision thereof, or any 
                instrumentality of the foregoing.
                    ``(B) Treatment of employees of post-secondary 
                educational institutions.--Notwithstanding subparagraph 
                (A), the term `qualified employer' includes any 
                employer which is a public institution of higher 
                education (as defined in section 101(b) of the Higher 
                Education Act of 1965).
            ``(3) Qualified individual.--For purposes of this 
        subsection, the term `qualified individual' means any 
        individual who--
                    ``(A) begins employment with a qualified employer 
                after June 30, 2011, and before January 1, 2013,
                    ``(B) is a current member of the National Guard or 
                other reserve component of the Armed Forces or a 
                veteran (as defined in section 101 of title 38, United 
                States Code),
                    ``(C) within 18 months before beginning such 
                employment, returned from a deployment of at least 180 
                days in support of a contingency operation (as defined 
                in section 101 of title 10, United States Code) or 
                under section 502(f) of title 32, United States Code,
                    ``(D) is not employed by the qualified employer to 
                replace another employee of such employer unless such 
                other employee separated from employment voluntarily or 
                for cause, and
                    ``(E) is not an individual described in section 
                51(i)(1) (applied by substituting `qualified employer' 
                for `taxpayer' each place it appears).
            ``(4) Election.--A qualified employer may elect to have 
        this subsection not apply. Such election shall be made in such 
        manner as the Secretary may require.''.
    (b) Coordination With Work Opportunity Credit.--Section 51(c) of 
such Code is amended by adding at the end the following new paragraph:
            ``(6) Coordination with payroll tax forgiveness.--The term 
        `wages' shall not include any amount paid or incurred to a 
        qualified individual (as defined in section 3111(e)(3)) during 
        the 1-year period beginning on the hiring date of such 
        individual by a qualified employer (as defined in section 
        3111(e)) unless such qualified employer makes an election not 
        to have section 3111(e) apply.''.
    (c) Transfers to Federal Old-Age and Survivors Insurance Trust 
Fund.--There are hereby appropriated to the Federal Old-Age and 
Survivors Trust Fund and the Federal Disability Insurance Trust Fund 
established under section 201 of the Social Security Act (42 U.S.C. 
401) amounts equal to the reduction in revenues to the Treasury by 
reason of the amendments made by subsection (a). Amounts appropriated 
by the preceding sentence shall be transferred from the general fund at 
such times and in such manner as to replicate to the extent possible 
the transfers which would have occurred to such Trust Fund had such 
amendments not been enacted.
    (d) Application to Railroad Retirement Taxes.--
            (1) In general.--Section 3221 of the Internal Revenue Code 
        of 1986 is amended by redesignating subsection (d) as 
        subsection (e) and by inserting after subsection (c) the 
        following new subsection:
    ``(d) Special Rate for Certain Individuals Hired in 2011 and 
2012.--
            ``(1) In general.--In the case of compensation paid by a 
        qualified employer during the period beginning on the day after 
        the date of the enactment of this subsection and ending on 
        December 31, 2012, with respect to having a qualified 
        individual in the employer's employ for services rendered to 
        such qualified employer, the applicable percentage under 
        subsection (a) shall be equal to the rate of tax in effect 
        under section 3111(b) for the calendar year.
            ``(2) Qualified employer.--The term `qualified employer' 
        means any employer other than the United States, any State, or 
        any political subdivision thereof, or any instrumentality of 
        the foregoing.
            ``(3) Qualified individual.--For purposes of this 
        subsection, the term `qualified individual' means any 
        individual who--
                    ``(A) begins employment with a qualified employer 
                after June 30, 2011, and before January 1, 2013,
                    ``(B) is a current member of the National Guard or 
                other reserve component of the Armed Forces or a 
                veteran (as defined in section 101 of title 38, United 
                States Code),
                    ``(C) within 18 months before beginning such 
                employment, returned from a deployment of at least 180 
                days in support of a contingency operation (as defined 
                in section 101 of title 10, United States Code) or 
                under section 502(f) of title 32, United States Code,
                    ``(D) is not employed by the qualified employer to 
                replace another employee of such employer unless such 
                other employee separated from employment voluntarily or 
                for cause, and
                    ``(E) is not an individual described in section 
                51(i)(1) (applied by substituting `qualified employer' 
                for `taxpayer' each place it appears).
            ``(4) Election.--A qualified employer may elect to have 
        this subsection not apply. Such election shall be made in such 
        manner as the Secretary may require.''.
            (2) Transfers to social security equivalent benefit 
        account.--There are hereby appropriated to the Social Security 
        Equivalent Benefit Account established under section 15A(a) of 
        the Railroad Retirement Act of 1974 (45 U.S.C. 231n-1(a)) 
        amounts equal to the reduction in revenues to the Treasury by 
        reason of the amendments made by paragraph (1). Amounts 
        appropriated by the preceding sentence shall be transferred 
        from the general fund at such times and in such manner as to 
        replicate to the extent possible the transfers which would have 
        occurred to such Account had such amendments not been enacted.
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to wages paid after the date of the enactment of this 
        Act.
            (2) Railroad retirement taxes.--The amendments made by 
        subsection (d) shall apply to compensation paid after the date 
        of the enactment of this Act.

SEC. 3. BUSINESS CREDIT FOR RETENTION OF CERTAIN NEWLY HIRED VETERANS.

    (a) In General.--In the case of any taxable year ending after the 
date of the enactment of this Act, the current year business credit 
determined under section 38(b) of the Internal Revenue Code of 1986 for 
such taxable year shall be increased by an amount equal to the product 
of--
            (1) $1,000, and
            (2) the number of retained workers with respect to which 
        subsection (b)(2) is first satisfied during such taxable year.
    (b) Retained Worker.--For purposes of this section, the term 
``retained worker'' means any qualified individual (as defined in 
section 3111(e)(3) of the Internal Revenue Code of 1986)--
            (1) who was employed by the taxpayer on any date during the 
        taxable year,
            (2) who was so employed by the taxpayer for a period of not 
        less than 52 consecutive weeks, and
            (3) whose wages for such employment during the last 26 
        weeks of such period equaled at least 80 percent of such wages 
        for the first 26 weeks of such period.
    (c) Limitation on Carrybacks.--No portion of the unused business 
credit under section 38 of the Internal Revenue Code of 1986 for any 
taxable year which is attributable to the increase in the current year 
business credit under this section may be carried to a taxable year 
beginning before the date of the enactment of this section.
    (d) Treatment of Possessions.--
            (1) Payments to possessions.--
                    (A) Mirror code possessions.--The Secretary of the 
                Treasury shall pay to each possession of the United 
                States with a mirror code tax system amounts equal to 
                the loss to that possession by reason of the 
                application of this section (other than this 
                subsection). Such amounts shall be determined by the 
                Secretary of the Treasury based on information provided 
                by the government of the respective possession.
                    (B) Other possessions.--The Secretary of the 
                Treasury shall pay to each possession of the United 
                States which does not have a mirror code tax system 
                amounts estimated by the Secretary of the Treasury as 
                being equal to the aggregate benefits that would have 
                been provided to residents of such possession by reason 
                of the application of this section (other than this 
                subsection) if a mirror code tax system had been in 
                effect in such possession. The preceding sentence shall 
                not apply with respect to any possession of the United 
                States unless such possession has a plan, which has 
                been approved by the Secretary of the Treasury, under 
                which such possession will promptly distribute such 
                payments to the residents of such possession.
            (2) Coordination with credit allowed against united states 
        income taxes.--No increase in the credit determined under 
        section 38(b) of the Internal Revenue Code of 1986 against 
        United States income taxes for any taxable year determined 
        under subsection (a) shall be taken into account with respect 
        to any person--
                    (A) to whom a credit is allowed against taxes 
                imposed by the possession by reason of this section for 
                such taxable year, or
                    (B) who is eligible for a payment under a plan 
                described in paragraph (1)(B) with respect to such 
                taxable year.
            (3) Definitions and special rules.--
                    (A) Possession of the united states.--For purposes 
                of this subsection, the term ``possession of the United 
                States'' includes the Commonwealth of Puerto Rico and 
                the Commonwealth of the Northern Mariana Islands.
                    (B) Mirror code tax system.--For purposes of this 
                subsection, the term ``mirror code tax system'' means, 
                with respect to any possession of the United States, 
                the income tax system of such possession if the income 
                tax liability of the residents of such possession under 
                such system is determined by reference to the income 
                tax laws of the United States as if such possession 
                were the United States.
                    (C) Treatment of payments.--For purposes of section 
                1324(b)(2) of title 31, United States Code, rules 
                similar to the rules of section 1001(b)(3)(C) of the 
                American Recovery and Reinvestment Tax Act of 2009 
                shall apply.

Summary: Combat Veterans Back to Work Act of 2011 - Amends the Internal Revenue Code to: (1) allow nongovernmental employers an exemption from, or reduction in, employment taxes for the period beginning after the enactment of this Act and ending on December 31, 2012, for wages paid to a qualified individual; and (2) allow an employer a business tax credit for each such worker retained by such employer who has been employed for not less than 52 consecutive weeks at a specified wage level. 

Defines a "qualified individual" as any individual who: (1) begins employment after June 30, 2011, and before January 1, 2013; (2) is a current member of the National Guard or a reserve component; (3) within 18 months before beginning such employment, returned from a deployment of at least 180 days in support of a contingency operation; and (4) has not been hired to replace another employee unless such other employee separated from employment voluntarily or for cause.