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Problem: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.
Solution:
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.