To promote the economic recovery of the District of Columbia, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``District of Columbia Fair Federal 
Compensation Act of 2002''.

               TITLE I--DEDICATED INFRASTRUCTURE ACCOUNT

SEC. 101. ESTABLISHMENT OF ACCOUNT.

    There is established in the general fund of the District of 
Columbia an account to be known as the Dedicated Infrastructure Account 
(hereafter in this title referred to as the ``Account''), which shall 
consist of the following amounts:
            (1) Amounts deposited pursuant to section 102.
            (2) Such other amounts as may be deposited pursuant to 
        District of Columbia law.
            (3) Interest earned on amounts in the account.

SEC. 102. DEPOSIT OF REVENUE OBTAINED UNDER NONRESIDENT WAGE TAX.

    All amounts obtained by the District of Columbia which are 
attributable directly to the imposition and withholding of the 
nonresident wage tax under title II shall be deposited into the 
Account.

SEC. 103. USE OF AMOUNTS IN ACCOUNT.

    (a) In General.--Amounts in the Account may be used only for the 
following purposes:
            (1) Building and facility maintenance, construction, and 
        capital improvement projects for District of Columbia public 
        schools and public charter schools.
            (2) Transportation activities, including the payment of the 
        local share of participation in public transportation 
        activities and road construction and improvement projects.
            (3) Information technology improvements for the District 
        government.
            (4) Debt service payments on bonds, notes, and other 
        obligations of the District government.
    (b) Availability of Funds.--Funds appropriated or otherwise made 
available from the Account shall remain available until expended.

      TITLE II--IMPOSITION AND WITHHOLDING OF NONRESIDENT WAGE TAX

SEC. 201. IMPOSITION AND WITHHOLDING OF NONRESIDENT WAGE TAX.

    (a) Imposition of Tax.--Every nonresident individual employed in 
the District of Columbia is subject to a tax equal to 2 percent of 
wages from employment in the District of Columbia and 2 percent of net 
earnings from self-employment in the District of Columbia, so long as 
there is a corresponding Federal credit.
    (b) Exception.--Individuals excluded from the definition of 
``resident'' under the second sentence of section 47-1801.4(17), 
District of Columbia Code, partners in partnerships and sole 
proprietors subject to tax under sections 47-1808.1 through 47-1808.6, 
District of Columbia Code, and members of the military service on 
active duty are not subject to the tax imposed in this section.
    (c) Assessment and Collection of Non-Resident Wage Tax.--Every 
employer making payment of wages and every nonresident partner and sole 
proprietor of unincorporated businesses located in the District shall 
deduct and withhold the nonresident wage tax imposed by this section 
and make returns of tax in accordance with regulations prescribed by 
the Mayor of the District of Columbia.
    (d) Definitions.--
            (1) Employer.--The term ``employer'' has the meaning given 
        such term in section 3401(b) of the Internal Revenue Code of 
        1986.
            (2) Employment in the district of columbia and self-
        employment in the district of columbia.--The terms ``employment 
        in the District of Columbia'' and ``self-employment in the 
        District of Columbia'' shall mean employment or self-employment 
        involving labor or personal services performed in the District 
        of Columbia during the taxable year except that such terms 
        shall not include labor or personal services performed by a 
        nonresident in the District of Columbia for a period not 
        exceeding 45 days during the taxable year.
            (3) Net earnings from self-employment.--The term ``net 
        earnings from self-employment'' shall mean such net earnings as 
        defined in section 1402 of the Internal Revenue Code of 1986.
            (4) Nonresident.--The term ``nonresident'' has the meaning 
        given such term in section 47-1801.4(18), District of Columbia 
        Code.
            (5) Wages.--The term ``wages'' has the meaning given such 
        term in section 3401(a) of the Internal Revenue Code of 1986.

SEC. 202. FEDERAL CREDIT CORRESPONDING TO IMPOSITION OF NONRESIDENT 
              WAGE TAX.

    Section 31 of the Internal Revenue Code of 1986 (relating to 
determination of tax liability) is amended by adding at the end the 
following:
    ``(d) Tax Withheld at Source on Nonresidents of the District of 
Columbia.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by this subtitle an amount equal to the 
        amount withheld at source under section 201 of the District of 
        Columbia Fair Federal Compensation Act of 2002 (relating to the 
        withholding of tax on nonresidents of the District of Columbia 
        employed within the District). No deduction shall be allowed 
        under this chapter for any tax for which credit is allowed 
        under this subsection.
            ``(2) Administration.--The Secretary shall, to the maximum 
        extent practicable, administer the credit allowed under 
        paragraph (1) in a way which provides the benefit of the credit 
        without any requirement to claim the credit on the taxpayer's 
        return.''.

SEC. 203. EFFECTIVE DATE.

    This title and the amendments made by this title shall apply to 
taxable years beginning after December 31, 2002.

Summary: District of Columbia Fair Federal Compensation Act of 2002 - Establishes the Dedicated Infrastructure Account in the general fund of the District of Columbia, which shall consist of: (1) deposits of revenue obtained by the District which are attributable directly to the imposition and withholding of the nonresident wage tax under this Act. (2) such other amounts as may be deposited pursuant to D. C. law. And (3) interest earned on such deposits. Specifies the use of such funds. Subjects, with exceptions, every nonresident individual employed in the District to a tax equal to two percent of wages from such employment and two percent of net earnings from self-employment, so long as there is a corresponding Federal credit. Amends the Internal Revenue Code to allow a credit against the imposed tax in an amount equal to the amount withheld at source under this Act. Prohibits a tax deduction for such tax credit. Requires the Secretary of the Treasury, to the maximum extent practicable, to administer the tax credit in a way which provides its benefit without any requirement to claim the credit on the taxpayer's return.