No Taxation Without Representation Act

Summary: No Taxation Without Representation Act   Amends the Internal Revenue Code to allow bona fide residents of the District of Columbia an exclusion from gross income for income derived from sources within the District of Columbia and for income effectively connected with a trade or business within the District of Columbia.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``No Taxation Without Representation 
Act''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) The phrase ``no taxation without representation'' was a 
        rallying cry of many American colonists during the period of 
        British rule in the 1760s and early 1770s. The slogan gained 
        widespread notoriety after the passage of the Sugar Act on 
        April 5, 1764.
            (2) American colonists increasingly resented being levied 
        taxes without having actual legislators seated and voting in 
        Parliament in London. The idea that there should be no taxation 
        without representation dated back even further. Benjamin 
        Franklin stated, ``it is suppos'd an undoubted Right of 
        Englishmen not to be taxed but by their own Consent given thro' 
        their Representatives.''.
            (3) This issue became even more defined in 1765 with the 
        passage of the Stamp Act which was the first true attempt to 
        levy a direct tax on the American colonies. Ultimately the tax 
        was repealed, but the idea of no taxation without 
        representation persisted.
            (4) Article I, section 2, clause 1 of the United States 
        Constitution, states, ``The House of Representatives shall be 
        composed of Members chosen every second Year by the People of 
        the several States, and the Electors in each State shall have 
        the Qualifications requisite for Electors of the most numerous 
        Branch of the State Legislature.''.
            (5) The Organic Act of 1801 placed Washington, DC, under 
        the exclusive jurisdiction of the United States Congress and 
        people in the District were no longer considered residents of 
        Virginia or Maryland.
            (6) Many in Washington, DC, were immediately opposed to the 
        idea of being taxed without congressional representation and 
        over the years several congressional leaders introduced 
        constitutional amendments to give the District of Columbia 
        voting representation, though none were successful.
            (7) In 1898, Puerto Rico was acquired by the United States 
        and currently has a Resident Commissioner with limited voting 
        rights. Section 933 of the Internal Revenue Code of 1986 
        exempts bona fide citizens who are residents of Puerto Rico for 
        the entire taxable year from Federal taxes on income earned in 
        Puerto Rico.
            (8) On March 31, 1917, the United States took possession of 
        the Virgin Islands and in 1927, the territory's residents were 
        granted citizenship. Under section 932 of the Internal Revenue 
        Code of 1986, individuals who are bona fide residents of the 
        United States Virgin Islands during the entire taxable year, 
        and who fully pay all income tax liabilities to the United 
        States Virgin Islands, are not subject to Federal income taxes 
        on their income.
            (9) Guam was established as a territory of the United 
        States after the passage of the Guam Organic Act of 1950. Under 
        the provisions of section 935 of the Internal Revenue Code of 
        1986, residents of Guam are required to file tax returns with 
        Guam, but not with the United States Federal Government and 
        therefore the residents do not have to pay United States 
        Federal income taxes.
            (10) The Commonwealth of the Northern Mariana Islands was 
        established in 1975 after residents decided not to pursue 
        independence, but instead they opted to enter into territory 
        negotiations. The tax treatment of the Northern Mariana Islands 
        is similar to the structure of Guam in that bona fide residents 
        are not required to pay Federal income taxes.
            (11) American Samoa, which is technically considered 
        ``unorganized'' because no Organic Acts have been passed by 
        Congress, is governed by section 931 of the Internal Revenue 
        Code of 1986. Under this section, bona fide year-round 
        residents are exempt from Federal taxes on income they earn in 
        Samoa, Guam, and Northern Mariana Islands, but are subject to 
        Federal taxes on income earned elsewhere.
            (12) In keeping with the early history and democratic 
        traditions of the United States, the principles established in 
        the Constitution, and in conformance with the other territories 
        of the United States which have delegates but no 
        Representative, the residents of the District of Columbia 
        should be exempt from paying United States Federal income 
        taxes.

SEC. 3. EXCLUSION FROM GROSS INCOME FOR INCOME FROM SOURCES WITHIN THE 
              DISTRICT OF COLUMBIA.

    (a) In General.--Subpart D of part III of subchapter N of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 938. INCOME FROM SOURCES WITHIN THE DISTRICT OF COLUMBIA.

    ``(a) General Rule.--In the case of an individual who is a bona 
fide resident of the District of Columbia during the entire taxable 
year, gross income shall not include--
            ``(1) income derived from sources within the District of 
        Columbia, and
            ``(2) income effectively connected with the conduct of a 
        trade or business by such individual within the District of 
        Columbia.
    ``(b) Deductions, etc. Allocable to Excluded Amounts Not 
Allowable.--An individual shall not be allowed--
            ``(1) as a deduction from gross income any deductions 
        (other than the deduction under section 151, relating to 
        personal exemptions), or
            ``(2) any credit, properly allocable or chargeable against 
        amounts excluded from gross income under this section.
    ``(c) Bona Fide Resident and Other Applicable Rules.--For purposes 
of this section, rules similar to the rules of section 876, 937, 
957(c), 3401(a)(8)(D), and 7654 shall apply.''.
    (b) Clerical Amendment.--The table of sections for subpart D of 
part III of subchapter N of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 938. Income from sources within the District of Columbia.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.