Tax Issues #3

Dear Tax Mavens:

You wanted tax info. Here's tax info. At the end of this missive you'll find the complete Norton tax bill--most likely in indecipherable coding.

I also think we need to see a little more weighing in on what you'd like to accomplish with this list. The group, btw, contains almost 50 folks.

Cheers,

Jeffrey Itell

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For my part, I'd like to see this group focus more on changing the tax structure in order to make the District a healthier and more functioning city, i.e., how to encourage an influx of residents and businesses and how to make sure city services are adequate, rather than the "taxpayer justice" approach, which focuses on examples of government waste and seeks to reduce individual tax payments. I guess it's a means/end thing; I'd be happy to have my taxes reduced, but, in a city with as many needs as this one, the primary goal of tax reform should be getting the city to work well. Under the circumstances, the best solution may well involve reducing/exempting income from taxes, but I would not want to participate in a discussion group that had that as its goal. Because of the nature of the District's political status, taxpayer justice is a natural rallying cry, but let's not lose sight of the forest....

On another note, I'm not so certain that $9,000 per resident is enough; does anyone have comparables for other major cities (on top of which we should then add an allowance for "state" functions). I can't imagine that a city like New York, which: (1) has the capacity to tax income from non-residents; (2) receives money from the state; (3) has high bridge and tunnel tolls; and (4) has its own significant city taxes, comes up with any less than $9,000 per resident.

R._Gervase@telesiscorp.com

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What would we like to accomplish with this list? I see this list serving two major purposes:

1) disseminate information about local and federal government action specifically aimed at DC residents that may affect our District or Federal income tax liability. Hopefully those in the know will fill the rest of us in. For example, I still haven't seen the text of the proposed Norton bill.

2) discuss solutions to the problem of taxation without representation. This is a great way to get organized for action.

I wouldn't like to see this discussion group degrade into yet another forum for bitching about the DC government.

Alison Kamat AKAMAT@aol.com

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[Here's the Norton Tax Bill. Sorry for the formatting. Jeff]

FILE h748.ih

HR 748 IH

104th CONGRESS 1st Session

To amend the Internal Revenue Code of 1986 to provide that individuals who are residents of the District of Columbia shall be exempt from Federal income taxation, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES January 31, 1995 Ms. NORTON introduced the following bill; which was referred to the Committee on Ways and Means and, in addition, to the Committee on Government Reform and Oversight, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to provide that individuals who are residents of the District of Columbia shall be exempt from Federal income taxation, and for other purposes.

[Italic->] Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, [<-Italic]

SECTION 1. SHORT TITLE. This Act may be cited as the 'District of Columbia Federal Tax Equity Act'.

SEC. 2. EXEMPTION FROM TAX FOR INDIVIDUALS WHO ARE RESIDENTS OF THE DISTRICT OF COLUMBIA.

(a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by redesignating section 137 as section 138 and by inserting after section 136 the following new section:

'SEC. 137. RESIDENTS OF THE DISTRICT OF COLUMBIA.

'(a) RESIDENTS FOR ENTIRE TAXABLE YEAR- An individual who is a bona fide resident of the District of Columbia during the entire taxable year shall be exempt from taxation under this chapter for such taxable year.

'(b) TAXABLE YEAR OF CHANGE OF RESIDENCE FROM DISTRICT OF COLUMBIA-

'(1) IN GENERAL- In the case of an individual who has been a bona fide resident of the District of Columbia for a period of at least 2 years before the date on which such individual changes his residence from the District of Columbia, income which is attributable to that part of such period of District of Columbia residence before such date shall not be included in gross income and shall be exempt from taxation under this chapter.

'(2) DEDUCTIONS, ETC. ALLOCABLE TO EXCLUDED AMOUNTS NOT ALLOWABLE- An individual shall not be allowed--

'(A) as a deduction from gross income any deductions (other than the deduction under section 151, relating to personal exemptions), or

'(B) any credit, properly allocable or chargeable against amounts excluded from gross income under this subsection.

'(c) DETERMINATION OF RESIDENCY- For purposes of this section, the determination of whether an individual is a bona fide resident of the District of Columbia shall be made under regulations prescribed by the Secretary.'

(b) NO WAGE WITHHOLDING- Paragraph (8) of section 3401(a) of such Code is amended by adding at the end the following new subparagraph: '(E) for services for an employer performed by an employee if it is reasonable to believe that during the entire calendar year the employee will be a bona fide resident of the District of Columbia; or'.

(c) CLERICAL AMENDMENT- The table of sections for such part III is amended by striking the last item and inserting the following new item:

'SEC. 137. RESIDENTS OF THE DISTRICT OF COLUMBIA.

'SEC. 138. CROSS REFERENCES TO OTHER ACTS.'

(d) EFFECTIVE DATE-

(1) IN GENERAL- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

(2) WITHHOLDING- The amendment made by subsection (b) shall apply to remuneration paid after the date of the enactment of this Act.

SEC. 3. LIMITATION ON ESTATE AND GIFT TAXES.

(a) ESTATE TAX-

(1) Subchapter C of chapter 11 of the Internal Revenue Code of 1986 (relating to estate tax) is amended by adding at the end the following new section:

'SEC. 2210. RESIDENTS OF THE DISTRICT OF COLUMBIA. 'For purposes of this chapter, in the case of the estate of a decedent who is a bona fide resident of the District of Columbia at the time of his death--

'(1) the transfer of such an estate shall be subject to tax under this subchapter (and not subchapter A) as if the decedent were an individual to whom this subchapter applies, and

'(2) the value of the gross estate shall not include tangible property located inside the District of Columbia.'

(2) The table of sections for such subchapter C is amended by adding at the end the following new item:

'SEC. 2210. RESIDENTS OF THE DISTRICT OF COLUMBIA.'

(b) GIFT TAX- Section 2501 of such Code is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection:

'(d) RESIDENTS OF THE DISTRICT OF COLUMBIA- For purposes of this chapter, a bona fide resident of the District of Columbia shall be treated in the same manner as individuals meeting the requirements of subsection (c).'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to estates of decedents dying, and gifts made, after the date of the enactment of this Act.

SEC. 4. CREDIT FOR BUSINESSES OPERATED IN THE DISTRICT OF COLUMBIA.

(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. 45C. DISTRICT OF COLUMBIA BUSINESS CREDIT.

'(a) ALLOWANCE OF CREDIT- The District of Columbia business credit determined under this section is an amount equal to the portion of the tax imposed by this chapter which is attributable to the sum of--

'(1) the taxable income from-- '(A) the active conduct of a trade or business within the District of Columbia, or '(B) the sale or exchange of substantially all of the assets used by the taxpayer in the active conduct of such trade or business, and

'(2) the qualified District of Columbia source investment income.

'(b) QUALIFIED DISTRICT OF COLUMBIA SOURCE INVESTMENT INCOME- For purposes of this section, the term 'qualified District of Columbia source investment income' means gross income which--

'(1) is from sources within the District of Columbia, and

'(2) the taxpayer establishes to the satisfaction of the Secretary is attributable to the investment in the District of Columbia (for use therein) of funds derived from the active conduct of a trade or business in the District of Columbia, or from such investment, less the deductions properly apportioned or allocated thereto.'

(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 (10), by striking the period at the end of paragraph (11) and inserting ', plus', and by adding at the end the following new paragraph: '(12) the District of Columbia business credit determined under section 45C(a).'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 5. STUDY OF FEDERAL REVENUES IN DISTRICT OF COLUMBIA.

(a) EFFECTS OF AMENDMENTS- The Mayor of the District of Columbia shall conduct a study on the effects of the amendments made by this Act on revenues of the District of Columbia.

(b) GENERAL EFFECTS OF FEDERAL REVENUES- The Mayor of the District of Columbia (in consultation with the Secretary of the Treasury) shall conduct a study of the extent to which the revenues of the District of Columbia are affected by Federal revenues, including revenues attributable to direct Federal payments to the District of Columbia, other Federal Government spending in the District of Columbia, and income of District of Columbia residents which is attributable to Federal sources, and shall include in the study--

(1) an estimate of the percentage of the revenues of the District of Columbia which is attributable to such Federal revenues;

(2) recommendations for revisions in Federal law (including the Internal Revenue Code of 1986 and the District of Columbia Self-Government and Governmental Reorganization Act) in addition to the amendments made by this Act which will increase District of Columbia revenues attributable to such Federal revenues and other District of Columbia revenues; and

(3) such other recommendations as the Mayor considers appropriate.

(c) REPORT- Not later than 1 year after the date of the enactment of this Act, the Mayor of the District of Columbia shall submit a report to Congress on the studies conducted under this section.

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Jeffrey Itell Publisher: dc.story

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