To amend the Internal Revenue Code of 1986 to allow employers a credit against income tax for hiring military service personnel who served in a combat zone or a hazardous duty area.

April 14, 2005

Mr. MCCOTTER (for himself, Mrs. MILLER of Michigan, Mr. PEARCE, Mr. MANZULLO, Mr. SWEENEY, Mr. ENGLISH of Pennsylvania, Mr. RENZI, Mr. REYES, Mr. SULLIVAN, Mr. SHUSTER, and Mr. JONES of North Carolina) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to allow employers a credit against income tax for hiring military service personnel who served in a combat zone or a hazardous duty area.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Veterans' Employment Transition Support Act of 2005' or the `VETS Act of 2005'.

SEC. 2. CREDIT FOR EMPLOYERS HIRING MILITARY SERVICE PERSONNEL WHO SERVED IN A COMBAT ZONE OR A HAZARDOUS DUTY AREA.

(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. 45J CREDIT FOR EMPLOYERS HIRING MILITARY SERVICE PERSONNEL WHO SERVED IN A COMBAT ZONE OR A HAZARDOUS DUTY AREA.

`(a) General Rule- For purposes of section 38, the military service personnel employment credit for the taxable year shall be equal to--

`(1) except as provided in paragraph (2), 40 percent of the qualified first-year wages for such year, and

`(2) in the case of a disabled qualified veteran, the applicable percentage of the qualified first-year wages for such year.

`(b) Qualified Wages- For purposes of this section--

`(1) IN GENERAL- The term `qualified wages' means the wages paid or incurred by the employer during the taxable year to individuals who are qualified veterans.

`(2) QUALIFIED FIRST-YEAR WAGES- The term `qualified first-year wages' means, with respect to any individual, qualified wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer.

`(3) WAGES- The term `wages' has the meaning given such term by section 51(c), without regard to paragraph (4) thereof.

`(c) Qualified Veteran; Hiring Date- For purposes of this section--

`(1) IN GENERAL- The term `qualified veteran' means any individual who is certified by the designated local agency (as defined in section 51(d)(11))--

`(A) as being a veteran (as defined in section 51(d)(3)(B)) who performed services in an area designated by the President for purposes of this section as a combat zone or as a hazardous duty area, and

`(B) as having been honorably discharged from active duty in the Armed Forces of the United States.

`(2) HIRING DATE- The term `hiring date' has the meaning given such term by section 51(d).

`(d) Disabled Qualified Veteran; Applicable Percentage-

`(1) IN GENERAL- The term `disabled qualified veteran' means any qualified veteran who is certified by the designated local agency (as so defined) as having a disability that has been determined under the laws administered by the Secretary of Veterans Affairs to be service-connected and that is rated by such Secretary (as of the date of the certification) as 10 percent or more disabling.

`(2) APPLICABLE PERCENTAGE- The term `applicable percentage' means the percentage determined in accordance with the following table:

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`Percentage of disability: Applicable percentage: 

      At least 10 but not over 20                                   41 

      At least 20 but not over 30                                   42 

      At least 30 but not over 40                                   43 

      At least 40 but not over 50                                   44 

      At least 50 but not over 60                                   45 

      At least 60 but not over 70                                   46 

      At least 70 but not over 80                                   47 

      At least 80 but not over 90                                   48 

     At least 90 but not over 100                                   49 

                      100 percent                                   50 

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`(e) Certain Rules to Apply- Rules similar to the rules of section 52, and subsections (d)(11), (f), (g), (i) (as in effect on the day before the date of the enactment of the Taxpayer Relief Act of 1997), (j), and (k) of section 51, shall apply for purposes of this section.'.

(b) Credit to Be Part of General Business Credit- Subsection (b) of section 38 of such Code is amended by striking `plus' at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting `, plus', and by adding at the end the following new paragraph:

`(20) the military service personnel employment credit determined under section 45J(a).'.

(c) Technical Amendments-

(1) Clause (iii) of section 41(b)(2)(D) of such Code is amended to read as follows:

`(iii) EXCLUSION FOR WAGES TO WHICH EMPLOYMENT CREDITS APPLY- The term `wages' shall not include any amount taken into account in determining the credit under section 45J(a) or 51(a).'.

(2) Subparagraph (B) of section 45A(b)(1) of such Code is amended to read as follows:

`(B) COORDINATION WITH OTHER EMPLOYMENT CREDITS- The term `qualified wages' shall not include wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer if any portion of such wages is taken into account in determining the credit under section 45J or 51.'.

(3) Subsection (a) of section 280C of such Code is amended by inserting `45J(a),' after `45A(a),'.

(4) Paragraph (3) of section 1396(c) of such Code is amended to read as follows:

`(3) COORDINATION WITH OTHER EMPLOYMENT CREDITS-

`(A) IN GENERAL- The term `qualified wages' shall not include wages taken into account in determining the credit under section 45J or 51.

`(B) COORDINATION WITH PARAGRAPH (2)- The $15,000 amount in paragraph (2) shall be reduced for any calendar year by the amount of wages paid or incurred during such year which are taken into account in determining the credits under sections 45J and 51.'.

(d) Clerical Amendment- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 45J. Credit for employers hiring military service personnel who served in a combat zone or a hazardous duty area.'.

(e) Effective Date- The amendments made by this section shall apply to individuals who begin work for the employer after the date of the enactment of this Act.

END