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SECTION 1. SHORT TITLE.

This Act may be cited as the ''____ Act of 2003''.

SEC. 2. CREDIT FOR EMPLOYMENT OF RESERVE COMPONENT PERSONNEL.

(a) In General.--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. 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 100 percent of 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 allowances
received by the qualified employee during the taxable
year,
while participating in qualified reserve component duty to the
exclusion of the qualified employee's normal 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 credit, 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 compensation and average
daily military pay and allowances.--As used with respect to a
qualified employee--
''(A) the term 'average daily qualified
compensation' means the qualified compensation of the
qualified employee for the taxable year divided 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 military
pay and allowances on account of the qualified
employee's participation in qualified 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 period during which the qualified
employee participates in qualified reserve component duty, the
term 'qualified compensation' means--
''(A) compensation which is normally contingent 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 receiving such compensation,
''(B) compensation which is not characterized 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 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 qualified employee, and
''(C) group health plan costs (if any) with respect
to the qualified employee.
''(4) Qualified employee.--The term 'qualified 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 100 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 allowances
received by the taxpayer during the taxable year, while
participating in qualified reserve 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 income and average
daily military pay and allowances.--As used with respect to a
self-employed taxpayer--
''(A) the term 'average daily self-employment
income' means the self-employment income (as defined in
section 1402) of the taxpayer 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 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 taxpayer's
participation in qualified reserve component
duty, divided by
''(ii) the total number of days the
taxpayer participates in qualified reserve
component 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-employment (as
defined in section 1402) for the taxable 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 compensation actually paid to a qualified
employee during any period the qualified employee participates in
qualified reserve component duty to the exclusion of normal employment
duties.
''(e) Limitations.--
''(1) 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 taxpayer 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 violation of chapter 43 of such
title, and
''(B) the 2 succeeding taxable years.
''(2) Disallowance with respect to persons 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 defined 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 defined in section 101(21) of title
37, United States Code, and the term 'allowances' means the
allowances 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 contingency operation as defined in section
101(a)(13) of title 10, United States Code.
''(3) Normal employment and self-employment duties.--A
person shall be deemed to be participating in qualified reserve
component duty to the exclusion of normal employment or self-
employment duties if the person does not engage in or undertake
any substantial activity related to the person'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
related to the person's normal employment or self-employment
duties at any time while participating in a period of qualified
reserve component duty, unless during a period of authorized
leave or other authorized 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) of the Internal Revenue
Code of 1986 (relating 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 paragraph (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 of the Internal Revenue Code of
1986 is amended by inserting after the item relating to section 45F the
following new item:

''Sec. 45G. Reserve component employment
credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2002.
Amends the Internal Revenue Code to allow employers an income tax credit with respect to employees who participate in the military reserve components, and to allow a comparable credit for participating reserve component self-employed individuals.