[House Report 107-417]
[From the U.S. Government Publishing Office]



107th Congress                                            Rept. 107-417
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

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CLARIFICATION OF TAX TREATMENT OF BONDS AND OTHER OBLIGATIONS ISSUED BY 
                      GOVERNMENT OF AMERICAN SAMOA

                                _______
                                

                 April 23, 2002.--Ordered to be printed

                                _______
                                

  Mr. Hansen, from the Committee on Resources, submitted the following

                              R E P O R T

                        [To accompany H.R. 1448]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Resources, to whom was referred the bill 
(H.R. 1448) to clarify the tax treatment of bonds and other 
obligations issued by the Government of American Samoa, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. CLARIFICATION OF TAX TREATMENT OF BONDS AND OTHER 
                    OBLIGATIONS ISSUED BY GOVERNMENT OF AMERICAN SAMOA.

    (a) Exemption of All Bonds from Income Taxation by State and Local 
Governments.--Subsection (b) of section 202 of Public Law 98-454 (48 
U.S.C. 1670) is amended to read as follows:
    ``(b) Exemption of All Bonds from Income Taxation by State and 
Local Governments.--
          ``(1) In general.--The interest on any bond or other 
        obligation issued by or on behalf of the Government of American 
        Samoa shall be exempt from taxation by the Government of 
        American Samoa and the governments of any of the several 
        States, the District of Columbia, any territory or possession 
        of the United States, and any subdivision thereof.
          ``(2) Exemption applicable only to income taxes.--The 
        exemption provided by paragraph (1) shall not apply to gift, 
        estate, inheritance, legacy, succession, or other wealth 
        transfer taxes.''.
    (b) Effective Date.--This Act shall apply to obligations issued 
after the date of the enactment of this Act.

                          Purpose of the Bill

    The purpose of H.R. 1448 is to clarify the tax treatment of 
bonds and other obligations issued by the Government of 
American Samoa.

                  Background and Need for Legislation

    Under U.S. law, Congress has expressly provided for the 
exemption of state and local taxes for bonds issued by Guam, 
the Virgin Islands, Puerto Rico and the Northern Mariana 
Islands. While American Samoa can issue bonds similar to the 
other territories, the interest earned from American Samoan 
bonds is subject to taxation by the several States, Washington, 
D.C. and the other territories. H.R. 1448 will provide parity 
for American Samoa. This legislation amends U.S. law to allow 
interest earned on bonds issued by the American Samoan 
Government to be exempt from state, local and territorial 
taxation. This will make American Samoa bonds more attractive 
to investors and could provide additional sources of funds for 
the government of American Samoa.

                            Committee Action

    H.R. 1448 was introduced on April 4, 2001, by Delegate Eni 
F.H. Faleomavaega (D-AS). The bill was referred to the 
Committee on Ways and Means, and additionally to the Committees 
on Resources and the Judiciary. On September 6, 2001, the bill 
was rereferred to the Committee on Resources, and additionally 
to the Committee on the Judiciary. On March 20, 2002, the 
Resources Committee met to consider the bill. Mr. Faleomavaega 
offered an amendment in the nature of a substitute that struck 
section 1 (a) and (c) to correct a drafting error in the 
original bill. It was adopted by voice vote. The bill as 
amended was then ordered favorably reported to the House of 
Representatives by voice vote.

            Committee Oversight Findings and Recommendations

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Resources' oversight findings and recommendations 
are reflected in the body of this report.

                   Constitutional Authority Statement

    Article I, section 8 and Article IV, section 3 of the 
Constitution of the United States grants Congress the authority 
to enact this bill.

                    Compliance With House Rule XIII

    1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(3)(B) 
of that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act. As required by clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, spending 
authority, credit authority, or an increase or decrease in 
revenues or tax expenditures.
    3. General Performance Goals and Objectives. This bill does 
not authorize funding and therefore, clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives does not 
apply.
    4. Congressional Budget Office Cost Estimate. Under clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for this bill from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 5, 2002.
Hon. James V. Hansen,
Chairman, Committee on Resources,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1448, a bill to 
clarify the tax treatment of bonds and other obligations issued 
by the government of American Samoa.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Matthew 
Pickford (for federal costs); and Marjorie Miller (for the 
state and local impact).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 1448--A bill to clarify the tax treatment of bonds and other 
        obligations issued by the government of American Samoa

    H.R. 1448 would amend current law to make bonds issued by 
the government of American Samoa exempt from state, local, and 
territorial income tax. The bill would not affect federal 
taxes, and CBO estimates that implementing H.R. 1448 would have 
no impact on the federal budget. Because the bill would not 
affect direct spending or governmental receipts, pay-as-you-go 
procedures would not apply. The bill contains no private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    H.R. 1448 contains an intergovernmental mandate as defined 
in UMRA, but CBO estimates that the cost of the mandate would 
be well below the threshold established in that act ($58 
million in 2002, adjusted annually for inflation). This mandate 
is a preemption of state and local taxing authority. The bill 
would exempt the interest on any bond issued by the government 
of American Samoa from state, local, and territorial taxes. 
Because American Samoa generally has only a few million dollars 
in bonds outstanding at any time, this preemption would not 
have a significant cost for state, local, or territorial 
governments. Enacting this bill would benefit the government of 
American Samoa by reducing its borrowing costs.
    The CBO staff contacts for this estimate are Matthew 
Pickford (for federal costs), and Marjorie Miller (for the 
state and local impact). This estimate was approved by Peter H. 
Fontaine, Deputy Assistant Director for Budget Analysis.

                    Compliance With Public Law 104-4

    This bill contains no unfunded mandates as defined by 
Public Law 104-4.

                Preemption of State, Local or Tribal Law

    This bill will preempt State or local law regarding the 
taxation of bonds issued by American Samoa. It will not affect 
tribal law.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

               SECTION 202 OF THE ACT OF OCTOBER 5, 1984


                          (Public Law 98-454)

AN ACT To enhance the economic development of Guam, the Virgin Islands, 
 American Samoa, the Northern Mariana Islands, and for other purposes.

    Sec. 202. (a)  * * *
    [(b)(1) Except as provided in paragraph (2), any obligation 
shall be exempt from all State and local taxation in effect on 
or after October 1, 1984.
    [(2) Any obligation issued under subsection (a) shall not 
be exempt from State or local gift, estate, inheritance, 
legacy, succession, or other wealth transfer taxes.
    [(3) For purposes of this subsection--
          [(A) The term ``State'' includes the District of 
        Columbia.
          [(B) The taxes imposed by counties, municipalities, 
        or any territory, dependency, or possession of the 
        United States shall be treated as local taxes.]
    (b) Exemption of All Bonds from Income Taxation by State 
and Local Governments.--
          (1) In general.--The interest on any bond or other 
        obligation issued by or on behalf of the Government of 
        American Samoa shall be exempt from taxation by the 
        Government of American Samoa and the governments of any 
        of the several States, the District of Columbia, any 
        territory or possession of the United States, and any 
        subdivision thereof.
          (2) Exemption applicable only to income taxes.--The 
        exemption provided by paragraph (1) shall not apply to 
        gift, estate, inheritance, legacy, succession, or other 
        wealth transfer taxes.

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