text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Reserve Component Tax Assistance Act 
  of 2001''.
  
  SEC. 2. DEDUCTION OF CERTAIN EXPENSES OF MEMBERS OF THE RESERVE 
                COMPONENT.
  
      (a) Deduction Allowed.--Section 162 of the Internal Revenue Code of 
  1986 (relating to certain trade or business expenses) is amended by 
  redesignating subsection (p) as subsection (q) and inserting after 
  subsection (o) the following new subsection:
      ``(p) Treatment of Expenses of Members of Reserve Component of 
  Armed Forces of the United States.--For purposes of subsection (a), in 
  the case of an individual who performs services as a member of a 
  reserve component of the Armed Forces of the United States at any time 
  during the taxable year, such individual shall be deemed to be away 
  from home in the pursuit of a trade or business during any period for 
  which such individual is away from home in connection with such 
  service.''.
      (b) Deduction Allowed Whether or Not Taxpayer Elects To Itemize.--
  Section 62(a)(2) of the Internal Revenue Code of 1986 (relating to 
  certain trade and business deductions of employees) is amended by 
  adding at the end the following new subparagraph:
                      ``(D) Certain expenses of members of reserve 
                  components of the armed forces of the united states.--
                  The deductions allowed by section 162 which consist of 
                  expenses paid or incurred by the taxpayer in connection 
                  with the performance of services by such taxpayer as a 
                  member of a reserve component of the Armed Forces of 
                  the United States.''.
      (c) Effective Date.--The amendments made by this section shall 
  apply to amounts paid or incurred in taxable years beginning after 
  December 31, 2001.
  
  SEC. 3. 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. 45E. 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 50 percent of the amount of qualified compensation 
          that would have been paid to the employee with respect to all 
          periods during which the employee participates in qualified 
          reserve component duty to the exclusion of normal employment 
          duties, including time spent in a travel status had the 
          employee not been participating in qualified reserve component 
          duty. 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) 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 employee 
          participates in qualified reserve component duty, the term 
          `qualified compensation' means compensation--
                      ``(A) which is normally contingent on the 
                  employee's presence for work and which would be 
                  deductible from the taxpayer's gross income under 
                  section 162(a)(1) if the employee were present and 
                  receiving such compensation, and
                      ``(B) 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 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 employee.
              ``(3) 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 50 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 
                  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 employee participates in qualified 
  reserve component duty to the exclusion of normal employment duties.
      ``(e) Limitations.--
              ``(1) Maximum credit.--
                      ``(A) In general.--The credit allowed by subsection 
                  (a) for the taxable year--
                              ``(i) shall not exceed $7,500 in the 
                          aggregate, and
                              ``(ii) shall not exceed $2,000 with respect 
                          to each qualified employee.
                      ``(B) Controlled groups.--For purposes of applying 
                  the limitations in subparagraph (A)--
                              ``(i) all members of a controlled group 
                          shall be treated as one taxpayer, and
                              ``(ii) such limitations shall be allocated 
                          among the members of such group in such manner 
                          as the Secretary may prescribe.
                  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 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 two succeeding taxable years.
              ``(3) 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 (12),
              (2) by striking the period at the end of paragraph (13) and 
          inserting ``, plus'', and
              (3) by adding at the end the following new paragraph:
              ``(14) the reserve component employment credit determined 
          under section 45E(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 45D the 
  following new item:
  
                                ``Sec. 45E. Reserve component employment 
                                          credit.''.
      (d) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 2001.
target: Reserve Component Tax Assistance Act of 2001 - Amends the Internal Revenue Code to allow as a business or trade deduction the expenses of a member of the reserve component of the U.S. armed forces in connection with such service. Makes such deduction available to itemizers and non-itemizers.Establishes related reserve component business-related employment and self-employment credits.
feat_title: A bill to amend the Internal Revenue Code of 1986 to allow as a deduction in determining adjusted gross income the deduction for expenses in connection with services as a member of a reserve component of the Armed Forces of the United States, 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 participating reserve component self-employed individuals, and for other purposes.