To provide compensation to members of the reserve components who suffer discrepancies between their military and nonmilitary compensation as a result of being ordered to serve on active duty for a period of more than 30 days, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Equity for Reservists Pay Act of 
2003''.

SEC. 2. NONREDUCTION IN PAY WHILE FEDERAL EMPLOYEE IS SERVING ON ACTIVE 
              DUTY IN A RESERVE COMPONENT OF THE UNIFORMED SERVICES.

    (a) In General.--Subchapter IV of chapter 55 of title 5, United 
States Code, is amended by adding at the end the following new section:
``Sec. 5538. Nonreduction in pay while serving on active duty in a 
              reserve component
    ``(a) An employee who is also a member of a reserve component and 
is absent from a position of employment with the Federal Government 
under a call or order to serve on active duty for a period of more than 
30 days shall be entitled to receive, for each pay period described in 
subsection (b), an amount equal to the difference (if any) between--
            ``(1) the amount of civilian basic pay that would otherwise 
        have been payable to the employee for such pay period if the 
        employee's civilian employment with the Government had not been 
        interrupted by the service on active duty; and
            ``(2) the amount of military compensation that is payable 
        to the employee for the service on active duty and is allocable 
        to such pay period.
    ``(b)(1) Amounts under this section shall be payable with respect 
to each pay period (which would otherwise apply if the employee's 
civilian employment had not been interrupted) that occurs--
            ``(A) while the employee serves on active duty for a period 
        of more than 30 days;
            ``(B) while the employee is hospitalized for, or 
        convalescing from, an illness or injury incurred in, or 
        aggravated during, the performance of such active duty; or
            ``(C) during the 14-day period beginning at the end of such 
        active duty or the end of the period referred to in 
        subparagraph (B).
    ``(2) Paragraph (1) shall not apply with respect to a pay period 
for which the employee receives civilian basic pay (including by taking 
any annual, military, or other paid leave) to which the employee is 
entitled by virtue of the employee's civilian employment with the 
Government.
    ``(c) Any amount payable under this section to an employee shall be 
paid--
            ``(1) by employing agency of the employee;
            ``(2) from the appropriations or fund that would be used to 
        pay the employee if the employee were in a pay status; and
            ``(3) to the extent practicable, at the same time and in 
        the same manner as would civilian basic pay if the employee's 
        civilian employment had not been interrupted.
    ``(d) In consultation with Secretary of Defense, the Office of 
Personnel Management shall prescribe such regulations as may be 
necessary to carry out this section.
    ``(e)(1) In consultation with the Office, the head of each agency 
referred to in section 2302(a)(2)(C)(ii) of this title shall prescribe 
procedures to ensure that the rights under this section apply to the 
employees of such agency.
    ``(2) The Administrator of the Federal Aviation Administration 
shall, in consultation with the Office, prescribe procedures to ensure 
that the rights under this section apply to the employees of that 
agency.
    ``(f) In this section:
            ``(1) The terms `active duty for a period of more than 30 
        days', `member', and `reserve component' have the meanings 
        given such terms in section 101 of title 37.
            ``(2) The term `civilian basic pay' includes any amount 
        payable under section 5304 of this title.
            ``(3) The term `employing agency', as used with respect to 
        an employee entitled to any payments under this section, means 
        the agency or other entity of the Government (including an 
        agency referred to in section 2302(a)(2)(C)(ii) of this title) 
        with respect to which the employee has reemployment rights 
        under chapter 43 of title 38.
            ``(4) The term `military compensation' has the meaning 
        given the term `pay' in section 101(21) of title 37.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 55 of title 5, United States Code, is amended by inserting 
after the item relating to section 5537 the following new item:

``5538. Nonreduction in pay while serving on active duty in a reserve 
                            component.''.
    (c) Application of Amendment.--Section 5538 of title 5, United 
States Code, as added by subsection (a), shall apply with respect to 
pay periods (as described in subsection (b) of such section) beginning 
on or after the date of the enactment of this Act.

SEC. 3. ASSISTANCE FOR STATE AND LOCAL GOVERNMENTS THAT CONTINUE TO PAY 
              EMPLOYEES WHO SERVE ON ACTIVE DUTY IN A RESERVE COMPONENT 
              OF THE UNIFORMED SERVICES.

    (a) In General.--Chapter 17 of title 37, United States Code, is 
amended by adding at the end the following new section:
``Sec. 910. Assistance for State and local governments that continue to 
              pay employees who serve on active duty
    ``(a) Continuation of Civilian Basic Pay.--It is the purpose of 
this section to encourage States and local governments to continue to 
pay a portion of the civilian compensation of those employees who are 
also members of a reserve component and are absent from a position of 
employment with the State or local government under a call or order to 
serve on active duty for a period of more than 30 days so that the 
employees receive compensation in an amount that, when taken together 
with their military pay, is at least equal to their civilian 
compensation.
    ``(b) Reimbursement Offered.--(1) At the request of a State or 
local government that continues to pay all or a portion of the civilian 
compensation of an employee described in subsection (a), the Secretary 
concerned shall reimburse the State or local government for 50 percent 
of the civilian compensation paid by the State or local government for 
each pay period described in subsection (c), but not to exceed 50 
percent of the difference (if any) between--
            ``(A) the amount of civilian compensation that would 
        otherwise have been payable to the employee for such pay period 
        if the employee's civilian employment with the State or local 
        government had not been interrupted by the service on active 
        duty; and
            ``(B) the amount of military pay that is payable to the 
        employee for the service on active duty and is allocable to 
        such pay period.
    ``(2) If the pay periods described in subsection (c) extend more 
than nine consecutive months after the first day of the first month 
during which the employee began to serve on active duty for a period of 
more than 30 days, the reimbursement rate shall become 100 percent for 
the subsequent payments. However, as is the case under paragraph (1), 
reimbursement shall be provided only for the difference (if any) 
between--
            ``(A) the amount of civilian compensation that would 
        otherwise have been payable to the employee for such pay period 
        if the employee's civilian employment with the State or local 
        government had not been interrupted by the service on active 
        duty; and
            ``(B) the amount of military pay that is payable to the 
        employee for the service on active duty and is allocable to 
        such pay period.
    ``(c) Pay Periods.--Reimbursement shall be provided under this 
section with respect to each pay period (which would otherwise apply if 
the employee's civilian employment had not been interrupted) that 
occurs--
            ``(1) while the employee serves on active duty for a period 
        of more than 30 days;
            ``(2) while the employee is hospitalized for, or 
        convalescing from, an illness or injury incurred in, or 
        aggravated during, the performance of such active duty; or
            ``(3) during the 14-day period beginning at the end of such 
        active duty or the end of the period referred to in 
        subparagraph (B).
    ``(d) Effect of Failure to Return to Employment.--(1) If an 
employee described in subsection (a), with respect to whom 
reimbursement is provided to a State or local government under this 
section, fails to report or apply for employment or reemployment with 
the State or local government by the end of the period referred to in 
subsection (c)(3), the employee shall refund to the Secretary concerned 
the total amount of the reimbursement provided with respect to the 
employee.
    ``(2) Subject to paragraph (3), an obligation to refund moneys to 
the United States imposed under paragraph (1) is for all purposes a 
debt owed to the United States.
    ``(3) The Secretary concerned may waive, in whole or in part, a 
refund required under paragraph (1) if the Secretary concerned 
determines that recovery would be against equity and good conscience or 
would be contrary to the best interests of the United States.
    ``(4) A discharge in bankruptcy under title 11 that is entered less 
than five years after the end of the period referred to in subsection 
(c)(3) does not discharge the employee from a debt arising under 
paragraph (1). This paragraph applies to any case commenced under title 
11 after the date of the enactment of this section.
    ``(e) Regulations.--The Secretaries concerned shall prescribe 
regulations to carry out this section.
    ``(f) Definitions.--In this section:
            ``(1) The term `civilian compensation' means the wages or 
        salary that an employee of a State or local government normally 
        receives from the employee's employment by the State or local 
        government.
            ``(2) The term `local government' means an agency or 
        political subdivision of a State.
            ``(3) The term `military pay' has the meaning given the 
        term `pay' in section 101(21) of this title.
            ``(4) The term `State' means each of the several States of 
        the United States, the District of Columbia, the Commonwealth 
        of Puerto Rico, Guam, the Virgin Islands, and other territories 
        or possessions of the United States.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 17 of title 37, United States Code, is amended by inserting 
after the item relating to section 909 the following new item:

``910. Assistance for State and local governments that continue to pay 
                            employees who serve on active duty.''.
    (c) Application of Amendment.--Section 910 of title 37, United 
States Code, as added by subsection (a), shall apply with respect to 
pay periods (as described in subsection (b) of such section) beginning 
on or after the date of the enactment of this Act.

SEC. 4. ACTIVE-DUTY RESERVE COMPONENT EMPLOYEE CREDIT ADDED TO GENERAL 
              BUSINESS CREDIT.

    (a) Addition of Credit.--Subpart D of part IV of subchapter 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. ACTIVE-DUTY RESERVE COMPONENT EMPLOYEE CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
employer, the active-duty reserve component employee credit determined 
under this section for the taxable year is an amount equal to 50 
percent of the compensation paid by the employer to an employee who is 
also a member of a reserve component during the taxable year when the 
employee was absent from employment for a reason described in 
subsection (b), but not to exceed 50 percent of the difference (if any) 
between--
            ``(1) the amount of compensation that would otherwise have 
        been payable to the employee during such absence if the 
        employee's employment with the employer had not been 
        interrupted by the employee's absence; and
            ``(2) the amount of military pay that is payable to the 
        employee during the absence.
    ``(b) Covered Pay Periods.--Subsection (a) shall apply with respect 
to an employee who is also a member of a reserve component--
            ``(1) while the employee serves on active duty for a period 
        of more than 30 days;
            ``(2) while the employee is hospitalized for, or 
        convalescing from, an illness or injury incurred in, or 
        aggravated during, the performance of such active duty; or
            ``(3) during the 14-day period beginning at the end of such 
        active duty or the end of the period referred to in 
        subparagraph (B).
    ``(c) Limitation.--No credit shall be allowed under subsection (a) 
with respect to an employee on any day on which the employee was not 
scheduled to work (for a reason other than such service on active duty) 
and ordinarily would not have worked.
    ``(d) Definitions.--For purposes of this section--
            ``(1) The terms `active duty for a period of more than 30 
        days', `member', and `reserve component' have the meanings 
        given such terms in section 101 of title 37, United States 
        Code.
            ``(2) The term `compensation' means any remuneration for 
        employment, whether in cash or in kind, which is paid or 
        incurred by a taxpayer and which is deductible from the 
        taxpayer's gross income under section 162(a)(1).''.
    (b) Credit To Be Part of General Business Credit.--Subsection (b) 
of section 38 of such Code (relating to general business credit) is 
amended by striking ``plus'' at the end of paragraph (14), by striking 
the period at the end of paragraph (15) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(16) the active-duty reserve component employee credit 
        determined under section 45G(a).''.
    (c) Conforming 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 inserting after the item relating to section 45F the 
following new item:

                              ``Sec. 45G. Active-duty reserve component 
                                        employee credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

Summary: Equity for Reservists Pay Act of 2003 - Entitles a Federal employee who is also a member of the reserves and who is absent from his or her civilian employment position under a call or order for active duty service of more than 30 days, to receive an amount equal to the difference in pay between the military compensation received and the civilian compensation that otherwise would have been received during such period. Makes such amounts also payable during: (1) any period of hospitalization or convalescence required as a result of such service; and (2) the 14-day period following such service.Directs the Secretary of the military department concerned to reimburse a State or local government for 50 percent of the civilian compensation paid by such government for pay periods when a State or local government employee is performing active duty service of more than 30 days. Increases such rate to 100 percent if the employee's active duty service period extends beyond nine months. Requires such reimbursement during periods of hospitalization or convalescence and for 14 days after service.Amends the Internal Revenue Code to provide that, for purposes of the general business credit, the Active-Duty Reserve Component employee credit is 50 percent of the compensation paid by the employer to the employee during the period of active duty.