[House Report 108-102]
[From the U.S. Government Publishing Office]
108th Congress Rept. 108-102
HOUSE OF REPRESENTATIVES
1st Session Part 1
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TO CLARIFY THE TAX TREATMENT OF BONDS AND OTHER OBLIGATIONS ISSUED BY
THE GOVERNMENT OF AMERICAN SAMOA
_______
May 15, 2003.--Ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 982]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 982) to clarify the tax treatment of bonds and other
obligations issued by the Government of American Samoa, having
considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 1
Background and Need for the Legislation.......................... 2
Hearings......................................................... 3
Committee Consideration.......................................... 3
Vote of the Committee............................................ 3
Committee Oversight Findings..................................... 3
Performance Goals and Objectives................................. 3
New Budget Authority and Tax Expenditures........................ 3
Congressional Budget Office Cost Estimate........................ 3
Constitutional Authority Statement............................... 4
Section-by-Section Analysis and Discussion....................... 5
Changes in Existing Law Made by the Bill, as Reported............ 5
Markup Transcript................................................ 6
Purpose and Summary
H.R. 982, a bill to clarify the tax treatment of bonds and
other obligations issued by the Government of American Samoa,
amends current law to exempt bonds issued by the government of
American Samoa from local and State, income taxes. Currently,
Federal law exempts government bonds issued by States,
territories and possessions from these taxes.
Background and Need for the Legislation
FEDERAL LAWS GOVERNING AMERICAN SAMOA
American Samoa was defined by a treaty signed by the United
States, Britain, and Germany in 1899. \1\ Unlike other U.S.
territories such as Guam, the Virgin Islands, and Puerto Rico,
Congress has not provided American Samoa with an organic act
establishing its governmental institutions. Rather, American
Samoa is an ``unincorporated'' territory the administration of
which was transferred from the Department of the Navy to the
Department of the Interior in 1951. The Interior Secretary
subsequently delegated authority to American Samoa to organize
its own governmental institutions. While the territory ratified
its own Constitution in 1966, \2\ the Department of the
Interior retains ultimate oversight over the territory.
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\1\ CIA: The World Factbook, American Samoa. http://www.cia.gov/
cia/publications/factbook/geos/aq.html. [Visited February 26, 2002].
\2\ 48 U.S.C. Sec. 1661-1670 (2001).
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SAMOAN GOVERNMENT BONDS
Like most States and localities, American Samoa issues
government bonds to fund a variety of public projects. However,
its bond issuing activities are very limited. American Samoa's
last major bonding project was in 1988, when it raised $22
million for a governmental office building. \3\ Currently, the
government of American Samoa owes about $18 million in
outstanding bonds. \4\ Relevant sections of the Internal
Revenue Code exclude interest from State and local bonds from
Federal taxation. This exemption specifically applies to the
``District of Columbia and any possession of the United
States.'' \5\ This definition, however, does not explicitly
encompass United States territories.
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\3\ Samoa Seeks Further Debt Authorization, Bond Buyer, vol. 336,
no. 31122, Friday, April 20, 2001.
\4\ American Samoan Governor Negotiates Refinancing of Loan, Pac.
Islands Broad. Ass'n News Serv., Monday, December 27, 1999.
\5\ 48 U.S.C. Sec. 103(c)(2) (2001).
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LEGISLATION PERTAINING TO THE TAX TREATMENT OF BONDS ISSUED BY U.S.
TERRITORIES OTHER THAN AMERICAN SAMOA
Bonds issued by almost all U.S. territories are exempt from
Federal, State, and local taxes. For example, Federal statute
provides that ``all bonds issued by the government of Guam or
by its authority shall be exempt . . . from taxation by the
Government of the United States or by the government of Guam,
or by any State or territory of any political subdivision
thereof, or by the District of Columbia.'' \6\ Bonds issued by
the government of the Northern Mariana Islands are also
``exempt, as to principal and interest, from taxation by the
United States, or by any State [or locality] . . . or the
District of Columbia.'' \7\ In addition, Federal law provides
that bonds issued by the government of the Virgin Islands or
any of its municipalities are exempt from State and local
taxes. \8\ Finally, interest on bonds issued by the government
of Puerto Rico are immune from State and Federal taxation. \9\
H.R. 982 was introduced by Representative Eni Faleomovaega on
February 27, 2003 to harmonize the taxing status of American
Samoan government bonds with other States, territories, and
possessions.
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\6\ 48 U.S.C. Sec. 1423(a) (2000).
\7\ Id. Sec. 1801.
\8\ Id. Sec. 1403.
\9\ Id. Sec. 745.
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Hearings
There were no Committee hearings on H.R. 982 in the 108th
Congress. In the 107th Congress, the Subcommittee on Commercial
and Administrative Law held a hearing on identical legislation
(H.R. 1448) on March 6, 2002. Rep. Eni Faleomovaega was the
sole witness.
Committee Consideration
On May 7, 2003, the Committee met in open session and
ordered favorably reported the bill H.R. 982, without amendment
by voice vote, a quorum being present.
Vote of the Committee
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee notes that there
were no recorded votes during the Committee's consideration of
H.R. 982.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Performance Goals and Objectives
H.R. 982 does not authorize funding. Therefore, clause
3(c)(4) of rule XIII of the Rules of the House of
Representatives is inapplicable.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the H.R. 3180, the following estimate and comparison
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 9, 2003.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 982, 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), who can be reached at 226-2860,
and Marjorie Miller (for the State and local impact), who can
be reached at 225-3220.
Sincerely,
Douglas Holtz-Eakin.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 982--A bill to clarify the tax treatment of bonds and other
obligations issued by the government of American Samoa.
H.R. 982 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. 982 would have
no impact on the Federal budget.
H.R. 982 contains an intergovernmental mandate as defined
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates
that the cost of the mandate would be well below the threshold
established in that act ($59 million in 2003, 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 bill contains no private-sector mandates
as defined in UMRA.
The CBO staff contacts for this estimate are Matthew
Pickford (for Federal costs), who can be reached at 226-2860,
and Marjorie Miller (for the State and local impact), who can
be reached at 225-3220. This estimate was approved by Peter H.
Fontaine, Deputy Assistant Director for Budget Analysis.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8 of the Constitution.
Section-by-Section Analysis and Discussion
Section 1. Clarification of Tax Treatment of Bonds and
Other Obligations Issued by Government of American Samoa.
Section 1 amends Sec. 202(b) of Pub. L. No. 98-4545 (48 U.S.C.
1670) so that it exempts bonds issued by the government of
American Samoa from State and local taxes. This exemption does
not apply to gift, estate, inheritance, legacy, succession, or
other wealth transfer taxes.
Section 2. Effective Date. Section 2 makes the legislation
effective upon its enactment into 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 italics, 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'' included 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.
* * * * * * *
Markup Transcript
BUSINESS MEETING
WEDNESDAY, MAY 7, 2003
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:00 a.m., in
Room 2141, Rayburn House Office Building, Hon. F. James
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
[Intervening business.]
Chairman Sensenbrenner. The next item on the agenda,
pursuant to notice, I now call up the bill H.R. 982, to clarify
the tax treatment of bonds and other obligations issued by the
Government of American Samoa for purposes of markup and move
its favorable recommendation to the full House.
Without objection, the bill will be considered as read and
open for amendment at any point.
[The bill, H.R. 982, follows:]
Chairman Sensenbrenner. The Chair recognizes the gentleman
from Utah, Mr. Cannon, to explain the bill.
Mr. Cannon. Thank you, Mr. Chairman.
H.R. 982 amends Federal law to exempt bonds issued by the
Government of American Samoa from State and local taxation. The
legislation was introduced by Delegate Eni Faleomavaega of
American Samoa. Government bonds issued by States and U.S.
territories such as Guam, Puerto Rico, and the U.S. Virgin
Islands currently enjoy this exemption. Thus the purpose of
H.R. 982 is not to craft a special exception to a general rule
but to harmonize the tax treatment of American Samoan and the
bonds to enable the Samoan Government to better attend to its
public--the public needs of its residents.
Identical legislation was reported by this Committee and
approved by the House under suspension of the rules in the last
Congress after receiving a hearing before the Subcommittee on
Commercial and Administrative Law. I urge support of this
noncontroversial but necessary measure.
Thank you, Mr. Chairman. I yield back.
Chairman Sensenbrenner. The gentleman from Virginia.
Mr. Scott. I have no comment, Mr. Chairman.
Chairman Sensenbrenner. Without objection, all Members may
include opening statements in the record at this point.
Are there amendments? Are there amendments? There are no
amendments. A reporting quorum is still not present, and,
without objection, the previous question will be ordered on
reporting the bill favorably.
[Intervening business.]
The unfinished business now is the motion to report
favorably the bill H.R. 982, to clarify the tax treatment of
bonds and other obligations issued by the Government of
American Samoa. A reporting quorum is present.
Those in favor of reporting the bill favorably will as your
names are--will say aye.
Opposed, no.
The ayes appear to have it. The ayes have it. The motion to
report favorably is agreed to.
Without objection, the Chair is authorized to move to go to
conference pursuant to House rules. Without objection, the
staff is directed to make any technical and conforming changes,
and all Members will be given 2 days, under House rules, in
which to submit additional dissenting, supplemental, or
minority views.