49–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–51 

STATE AND LOCAL SALES TAX DEDUCTION FAIRNESS 

ACT OF 2015 

APRIL 6, 2015.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. RYAN of Wisconsin, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 622] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 622) to amend the Internal Revenue Code of 1986 to 

make permanent the deduction of State and local general sales 

taxes, having considered the same, report favorably thereon with 

an amendment and recommend that the bill as amended do pass. 

CONTENTS 

Page 

I. SUMMARY AND BACKGROUND ............................................................... 2 

A. Purpose and Summary ..................................................................... 2 

B. Background and Need for Legislation ............................................. 2 

C. Legislative History ............................................................................ 3 

II. EXPLANATION OF THE BILL ................................................................... 3 

A. Deduction for State and local sales taxes (sec. 2 of the bill 

and sec. 164 of the Code) ............................................................... 3 

III. VOTES OF THE COMMITTEE .................................................................... 4 

IV. BUDGET EFFECTS OF THE BILL ............................................................ 5 

A. Committee Estimate of Budgetary Effects ...................................... 5 

B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority .................................................................. 7 

C. Cost Estimate Prepared by the Congressional Budget Office ....... 7 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 10 

A. Committee Oversight Findings and Recommendations ................. 10 

B. Statement of General Performance Goals and Objectives ............. 10 


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C. Information Relating to Unfunded Mandates ................................ 10 

D. Applicability of House Rule XXI 5(b) .............................................. 10 

E. Tax Complexity Analysis .................................................................. 10 

F. Congressional Earmarks, Limited Tax Benefits, and Limited 

Tariff Benefits ................................................................................. 11 

G. Duplication of Federal Programs ..................................................... 11 

H. Disclosure of Directed Rule Makings .............................................. 11 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 11 

A. Text of Existing Law Amended or Repealed by the Bill, as 

Reported .......................................................................................... 11 

B. Changes in Existing Law Proposed by the Bill, as Reported ........ 15 

VII. DISSENTING VIEWS ................................................................................... 20 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘State and Local Sales Tax Deduction Fairness Act 

of 2015’’. 

SEC. 2. PERMANENT EXTENSION OF DEDUCTION OF STATE AND LOCAL GENERAL SALES 

TAXES. 

(a) IN GENERAL.—Section 164(b)(5) of the Internal Revenue Code of 1986 is 

amended by striking subparagraph (I). 

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable 

years beginning after December 31, 2014. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

H.R. 622, reported by the Committee on Ways and Means, provides a permanent itemized deduction for State and local government sales taxes in lieu of the itemized deduction for State and 

local income taxes. A temporary deduction for sales taxes paid to 

State and local governments expired for tax years beginning after 

December 31, 2014. 

B. BACKGROUND AND NEED FOR LEGISLATION

While the Committee continues actively to pursue comprehensive 

tax reform as a critical means of promoting economic growth and 

job creation, the Committee also believes that it is important to 

provide individuals and small businesses with certainty concerning 

tax provisions like the itemized deduction for State and local sales 

taxes. In the context of comprehensive tax reform that simplifies 

the tax code and lowers rates for all taxpayers, policymakers might 

consider repealing or reducing the deduction for all types of State 

and local taxes in return for lower rates. Outside of tax reform, 

however, allowing an itemized deduction for State and local income 

taxes, but not for State and local sales taxes, discriminates against 

residents of States that impose a sales tax rather than an income 

tax. The itemized deduction for sales taxes in lieu of the deduction 

for income taxes has been a temporary provision of the tax code 

since 2004, having now been extended for an entire ten-year budget 

window. Instead of repeatedly extending this provision on a temporary basis, the Committee believes the itemized deduction for 

State and local sales taxes should be made permanent to provide 

taxpayers much-needed certainty in the tax code while Congress 

works to enact comprehensive tax reform. 


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C. LEGISLATIVE HISTORY

Background 

H.R. 622 was introduced on January 30, 2015, and was referred 

to the Committee on Ways and Means. 

Committee action 

The Committee on Ways and Means marked up H.R. 622, the 

‘‘State and Local Sales Tax Deduction Fairness Act of 2015’’ on 

February 12, 2015, and ordered the bill, as amended, favorably reported (with a quorum being present). 

Committee hearings 

The need for permanent rules regarding State and local sales 

taxes was discussed at two hearings during the 112th and 113th 

Congresses: 

• Select Revenue Measures Subcommittee Hearing on Certain Expiring Tax Provisions (April 26, 2012); and 

• Full Committee Hearing on the Benefits of Permanent Tax 

Policy for America’s Job Creators (April 8, 2014). 

II. EXPLANATION OF THE BILL 

A. DEDUCTION FOR STATE AND LOCAL SALES TAXES (SEC. 2 OF THE

BILL AND SEC. 164 OF THE CODE) 

PRESENT LAW

For purposes of determining regular tax liability, an itemized deduction is permitted for certain State and local taxes paid, including individual income taxes, real property taxes, and personal property taxes. The itemized deduction is not permitted for purposes of 

determining a taxpayer’s alternative minimum taxable income. For 

taxable years beginning before 2015, at the election of the taxpayer, an itemized deduction may be taken for State and local general sales taxes in lieu of the itemized deduction provided under 

present law for State and local income taxes. As is the case for 

State and local income taxes, the itemized deduction for State and 

local general sales taxes is not permitted for purposes of determining a taxpayer’s alternative minimum taxable income. Taxpayers have two options with respect to the determination of the 

sales tax deduction amount. Taxpayers may deduct the total 

amount of general State and local sales taxes paid by accumulating 

receipts showing general sales taxes paid. Alternatively, taxpayers 

may use tables created by the Secretary of the Treasury (‘‘Secretary’’) that show the allowable deduction. The tables are based on 

average consumption by taxpayers on a State-by-State basis taking 

into account number of dependents, modified adjusted gross income 

and rates of State and local general sales taxation. Taxpayers who 

live in more than one jurisdiction during the tax year are required 

to pro-rate the table amounts based on the time they live in each 

jurisdiction. Taxpayers who use the tables created by the Secretary 

may, in addition to the table amounts, deduct eligible general sales 

taxes paid with respect to the purchase of motor vehicles, boats, 

and other items specified by the Secretary. Sales taxes for items 


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1Sec. 164(b)(5)(B). 

that may be added to the tables are not reflected in the tables 

themselves. 

A general sales tax is a tax imposed at one rate with respect to 

the sale at retail of a broad range of classes of items.1 No deduction 

is allowed for any general sales tax imposed with respect to an 

item at a rate other than the general rate of tax. However, in the 

case of food, clothing, medical supplies, and motor vehicles, the 

above rules are relaxed in two ways. First, if the tax does not apply 

with respect to some or all of such items, a tax that applies to other 

such items can still be considered a general sales tax. Second, the 

rate of tax applicable with respect to some or all of these items 

may be lower than the general rate. However, in the case of motor 

vehicles, if the rate of tax exceeds the general rate, such excess is 

disregarded and the general rate is treated as the rate of tax. 

A compensating use tax with respect to an item is treated as a 

general sales tax, provided such tax is complementary to a general 

sales tax and a deduction for sales taxes is allowable with respect 

to items sold at retail in the taxing jurisdiction that are similar to 

such item. 

REASONS FOR CHANGE

The Committee believes that parity should exist between taxpayers who live in States and localities that choose to fund their 

operations through the use of income taxes, and those who live in 

States and localities that choose to fund their operations through 

the use of a sales tax. 

EXPLANATION OF PROVISION

The provision extends permanently the provision allowing taxpayers to elect to deduct State and local sales taxes in lieu of State 

and local income taxes. 

EFFECTIVE DATE

The provision is effective for taxable years beginning after December 31, 2014. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 622, the ‘‘State and Local Sales Tax Deduction 

Fairness Act of 2015’’ on February 12, 2015. 

The bill, H.R. 622, was ordered favorably reported to the House 

of Representatives as amended by a roll call vote of 22 yeas to 14 

nays (with a quorum being present). The vote was as follows: 


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IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the bill, H.R. 622, as reported. 

The bill, as reported, is estimated to have the following effect on 

Federal budget receipts for fiscal years 2015–2025: 


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FISCAL YEARS 

[Millions of dollars] 

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015–20 2015–25 

¥148 ¥3,332 ¥3,462 ¥3,656 ¥3,872 ¥4,074 ¥4,298 ¥4,539 ¥4,772 ¥5,021 ¥5,267 ¥18,543 ¥42,440 

NOTE: Details do not add to totals due to rounding. 


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Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the bill amending the Internal Revenue Code of 1986: the gross budgetary effect 

(before incorporating macroeconomic effects) in any fiscal year is 

less than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year; therefore, the bill is 

not ’’major legislation’’ for purposes of requiring that the estimate 

include the budgetary effects of changes in economic output, employment, capital stock and other macroeconomic variables. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new or increased budget authority. The Committee further states that the revenue-reducing tax provisions involve increased tax expenditures. (See amounts in table in Part IV.A., 

above.) 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by CBO is provided. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, February 19, 2015. 

Hon. PAUL RYAN, 

Chairman, Committee on Ways and Means, House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 622, the State and Local 

Sales Tax Deduction Fairness Act of 2015. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Logan Timmerhoff. 

Sincerely, 

ROBERT A. SUNSHINE

(For Douglas W. Elmendorf). 

Enclosure. 

H.R. 622—State and Local Sales Tax Deduction Fairness Act of 

2015 

H.R. 622 would amend the Internal Revenue Code to permanently extend the provision allowing taxpayers who itemize their 

tax deductions to elect to deduct state and local sales taxes in lieu 

of state and local income taxes. That provision expired at the end 

of tax year 2014. 

The staff of the Joint Committee on Taxation (JCT) estimates 

that enacting H.R. 622 would reduce revenues, thus increasing federal deficits, by about $42 billion over the 2015–2025 period. 

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct 


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spending and revenues. Enacting H.R. 622 would result in revenue 

losses in each year beginning in 2015. The estimated increases in 

the deficit are shown in the following table. 

JCT has determined that the bill contains no intergovernmental 

or private-sector mandates as defined in the Unfunded Mandates 

Reform Act. 

The CBO staff contact for this estimate is Logan Timmerhoff. 

The estimate was approved by David Weiner, Assistant Director for 

Tax Analysis. 


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CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 622, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON FEBRUARY 12, 2015 

By fiscal year, in millions of dollars— 

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015–2020 2015–2025 

NET INCREASE IN THE DEFICIT 

Statutory Pay-As-You-Go Impact ............... 148 3,332 3,462 3,656 3,872 4,074 4,298 4,539 4,772 5,021 5,267 18,543 42,440 

Source: Staff of the Joint Committee on Taxation. Note: Components may not sum to totals because of rounding. 


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V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committee’s review of 

the provisions of H.R. 622 that the Committee concluded that it is 

appropriate to report the bill, as amended, favorably to the House 

of Representatives with the recommendation that the bill do pass. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the bill, and 

states that the bill does not involve any Federal income tax rate 

increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Restructuring 

and Reform Act of 1998 requires the staff of the Joint Committee 

on Taxation (in consultation with the Internal Revenue Service and 

the Treasury Department) to provide a tax complexity analysis. 

The complexity analysis is required for all legislation reported by 

the Senate Committee on Finance, the House Committee on Ways 

and Means, or any committee of conference if the legislation includes a provision that directly or indirectly amends the Internal 

Revenue Code and has widespread applicability to individuals or 

small businesses. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the bill contains no 

provisions that amend the Internal Revenue Code and that have 


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‘‘widespread applicability’’ to individuals or small businesses, within the meaning of the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with Sec. 3(g)(2) of H. Res. 5 (114th Congress), the 

Committee states that no provision of the bill establishes or reauthorizes: (1) a program of the Federal Government known to be duplicative of another Federal program, (2) a program included in any 

report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or (3) a program related 

to a program identified in the most recent Catalog of Federal Domestic Assistance, published pursuant to the Federal Program Information Act (Public Law 95–220, as amended by Public Law 98– 

169). 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), the 

following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

A. TEXT OF EXISTING LAW AMENDED OR REPEALED BY THE BILL, AS

REPORTED

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of 

the House of Representatives, the text of each section proposed to 

be amended or repealed by the bill, as reported, is shown below: 

SECTION 164 OF THE INTERNAL REVENUE CODE OF 1986 

SEC. 164. TAXES. 

(a) GENERAL RULE.—Except as otherwise provided in this section, the following taxes shall be allowed as a deduction for the taxable year within which paid or accrued: 

(1) State and local, and foreign, real property taxes. 

(2) State and local personal property taxes. 

(3) State and local, and foreign, income, war profits, and excess profits taxes. 

(4) The GST tax imposed on income distributions. 

In addition, there shall be allowed as a deduction State and local, 

and foreign, taxes not described in the preceding sentence which 

are paid or accrued within the taxable year in carrying on a trade 

or business or an activity described in section 212 (relating to expenses for production of income). Notwithstanding the preceding 


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sentence, any tax (not described in the first sentence of this subsection) which is paid or accrued by the taxpayer in connection 

with an acquisition or disposition of property shall be treated as 

part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition. 

(b) DEFINITIONS AND SPECIAL RULES.—For purposes of this section— 

(1) PERSONAL PROPERTY TAXES.—The term ‘‘personal property 

tax’’ means an ad valorem tax which is imposed on an annual 

basis in respect of personal property. 

(2) STATE OR LOCAL TAXES.—A State or local tax includes 

only a tax imposed by a State, a possession of the United 

States, or a political subdivision of any of the foregoing, or by 

the District of Columbia. 

(3) FOREIGN TAXES.—A foreign tax includes only a tax imposed by the authority of a foreign country. 

(4) SPECIAL RULES FOR GST TAX.— 

(A) IN GENERAL.—The GST tax imposed on income distributions is— 

(i) the tax imposed by section 2601, and 

(ii) any State tax described in section 2604 (as in effect before its repeal), 

but only to the extent such tax is imposed on a transfer 

which is included in the gross income of the distributee and to 

which section 666 does not apply. 

(B) SPECIAL RULE FOR TAX PAID BEFORE DUE DATE.— Any 

tax referred to in subparagraph (A) imposed with respect 

to a transfer occurring during the taxable year of the distributee (or, in the case of a taxable termination, the trust) 

which is paid not later than the time prescribed by law (including extensions) for filing the return with respect to 

such transfer shall be treated as having been paid on the 

last day of the taxable year in which the transfer was 

made. 

(5) GENERAL SALES TAXES.—For purposes of subsection (a)— 

(A) ELECTION TO DEDUCT STATE AND LOCAL SALES TAXES

IN LIEU OF STATE AND LOCAL INCOME TAXES.—At the election of the taxpayer for the taxable year, subsection (a) 

shall be applied— 

(i) without regard to the reference to State and local 

income taxes, and 

(ii) as if State and local general sales taxes were referred to in a paragraph thereof. 

(B) DEFINITION OF GENERAL SALES TAX.—The term ‘‘general sales tax’’ means a tax imposed at one rate with respect to the sale at retail of a broad range of classes of 

items. 

(C) SPECIAL RULES FOR FOOD, ETC.—In the case of items 

of food, clothing, medical supplies, and motor vehicles— 

(i) the fact that the tax does not apply with respect 

to some or all of such items shall not be taken into account in determining whether the tax applies with respect to a broad range of classes of items, and 

(ii) the fact that the rate of tax applicable with respect to some or all of such items is lower than the 


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general rate of tax shall not be taken into account in 

determining whether the tax is imposed at one rate. 

(D) ITEMS TAXED AT DIFFERENT RATES.—Except in the 

case of a lower rate of tax applicable with respect to an 

item described in subparagraph (C), no deduction shall be 

allowed under this paragraph for any general sales tax imposed with respect to an item at a rate other than the general rate of tax. 

(E) COMPENSATING USE TAXES.—A compensating use tax 

with respect to an item shall be treated as a general sales 

tax. For purposes of the preceding sentence, the term 

‘‘compensating use tax’’ means, with respect to any item, 

a tax which— 

(i) is imposed on the use, storage, or consumption of 

such item, and 

(ii) is complementary to a general sales tax, but only 

if a deduction is allowable under this paragraph with 

respect to items sold at retail in the taxing jurisdiction 

which are similar to such item. 

(F) SPECIAL RULE FOR MOTOR VEHICLES.—In the case of 

motor vehicles, if the rate of tax exceeds the general rate, 

such excess shall be disregarded and the general rate shall 

be treated as the rate of tax. 

(G) SEPARATELY STATED GENERAL SALES TAXES.—If the 

amount of any general sales tax is separately stated, then, 

to the extent that the amount so stated is paid by the consumer (other than in connection with the consumer’s trade 

or business) to the seller, such amount shall be treated as 

a tax imposed on, and paid by, such consumer. 

(H) AMOUNT OF DEDUCTION MAY BE DETERMINED UNDER

TABLES.— 

(i) IN GENERAL.—At the election of the taxpayer for 

the taxable year, the amount of the deduction allowed 

under this paragraph for such year shall be— 

(I) the amount determined under this paragraph 

(without regard to this subparagraph) with respect to motor vehicles, boats, and other items 

specified by the Secretary, and 

(II) the amount determined under tables prescribed by the Secretary with respect to items to 

which subclause (I) does not apply. 

(ii) REQUIREMENTS FOR TABLES.—The tables prescribed under clause (i)— 

(I) shall reflect the provisions of this paragraph, 

(II) shall be based on the average consumption 

by taxpayers on a State-by-State basis (as determined by the Secretary) of items to which clause 

(i)(I) does not apply, taking into account filing status, number of dependents, adjusted gross income, 

and rates of State and local general sales taxation, 

and 

(III) need only be determined with respect to adjusted gross incomes up to the applicable amount 

(as determined under section 68(b)). 


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(I) APPLICATION OF PARAGRAPH.—This paragraph shall 

apply to taxable years beginning after December 31, 2003, 

and before January 1, 2015. 

(c) DEDUCTION DENIED IN CASE OF CERTAIN TAXES.—No deduction shall be allowed for the following taxes: 

(1) Taxes assessed against local benefits of a kind tending to 

increase the value of the property assessed; but this paragraph 

shall not prevent the deduction of so much of such taxes as is 

properly allocable to maintenance or interest charges. 

(2) Taxes on real property, to the extent that subsection (d) 

requires such taxes to be treated as imposed on another taxpayer. 

(d) APPORTIONMENT OF TAXES ON REAL PROPERTY BETWEEN

SELLER AND PURCHASER.— 

(1) GENERAL RULE.—For purposes of subsection (a), if 

real property is sold during any real property tax year, 

then— 

(A) so much of the real property tax as is properly allocable to that part of such year which ends on the day before the date of the sale shall be treated as a tax imposed 

on the seller, and 

(B) so much of such tax as is properly allocable to that 

part of such year which begins on the date of the sale shall 

be treated as a tax imposed on the purchaser. 

(2) SPECIAL RULES.— 

(A) in the case of any sale of real property, if— 

(i) a taxpayer may not, by reason of his method of 

accounting, deduct any amount for taxes unless paid, 

and 

(ii) the other party to the sale is (under the law imposing the real property tax) liable for the real property tax for the real property tax year, 

then for purposes of subsection (a) the taxpayer shall be 

treated as having paid, on the date of the sale, so much of such 

tax as, under paragraph (1) of this subsection, is treated as imposed on the taxpayer. For purposes of the preceding sentence, 

if neither party is liable for the tax, then the party holding the 

property at the time the tax becomes a lien on the property 

shall be considered liable for the real property tax for the real 

property tax year. 

(B) In the case of any sale of real property, if the taxpayer’s taxable income for the taxable year during which 

the sale occurs is computed under an accrual method of accounting, and if no election under section 461(c) (relating 

to the accrual of real property taxes) applies, then, for purposes of subsection (a), that portion of such tax which— 

(i) is treated, under paragraph (1) of this subsection, 

as imposed on the taxpayer, and 

(ii) may not, by reason of the taxpayer’s method of 

accounting, be deducted by the taxpayer for any taxable year, 

shall be treated as having accrued on the date of the sale. 

(e) TAXES OF SHAREHOLDER PAID BY CORPORATION.—Where a corporation pays a tax imposed on a shareholder on his interest as a 


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shareholder, and where the shareholder does not reimburse the 

corporation, then— 

(1) the deduction allowed by subsection (a) shall be allowed 

to the corporation; and 

(2) no deduction shall be allowed the shareholder for such 

tax. 

(f) DEDUCTION FOR ONE-HALF OF SELF-EMPLOYMENT TAXES.— 

(1) IN GENERAL.—In the case of an individual, in addition to 

the taxes described in subsection (a), there shall be allowed as 

a deduction for the taxable year an amount equal to one-half 

of the taxes imposed by section 1401 (other than the taxes imposed by section 1401(b)(2)) for such taxable year. 

(2) DEDUCTION TREATED AS ATTRIBUTABLE TO TRADE OR BUSINESS.—For purposes of this chapter, the deduction allowed by 

paragraph (1) shall be treated as attributable to a trade or 

business carried on by the taxpayer which does not consist of 

the performance of services by the taxpayer as an employee. 

(g) CROSS REFERENCES.— 

(1) For provisions disallowing any deduction for certain 

taxes, see section 275. 

(2) For treatment of taxes imposed by Indian tribal governments (or their subdivisions), see section 7871. 

B. CHANGES IN EXISTING LAW PROPOSED BY THE BILL, AS REPORTED

In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of 

the House of Representatives, changes in existing law proposed 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 164 OF THE INTERNAL REVENUE CODE OF 1986 

SEC. 164. TAXES. 

(a) GENERAL RULE.—Except as otherwise provided in this section, the following taxes shall be allowed as a deduction for the taxable year within which paid or accrued: 

(1) State and local, and foreign, real property taxes. 

(2) State and local personal property taxes. 

(3) State and local, and foreign, income, war profits, and excess profits taxes. 

(4) The GST tax imposed on income distributions. In addition, there shall be allowed as a deduction State and local, and 

foreign, taxes not described in the preceding sentence which 

are paid or accrued within the taxable year in carrying on a 

trade or business or an activity described in section 212 (relating to expenses for production of income). Notwithstanding the 

preceding sentence, any tax (not described in the first sentence 

of this subsection) which is paid or accrued by the taxpayer in 

connection with an acquisition or disposition of property shall 

be treated as part of the cost of the acquired property or, in 

the case of a disposition, as a reduction in the amount realized 

on the disposition. 

(b) DEFINITIONS AND SPECIAL RULES.—For purposes of this section— 


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(1) PERSONAL PROPERTY TAXES.—The term ‘‘personal property 

tax’’ means an ad valorem tax which is imposed on an annual 

basis in respect of personal property. 

(2) STATE OR LOCAL TAXES.—A State or local tax includes 

only a tax imposed by a State, a possession of the United 

States, or a political subdivision of any of the foregoing, or by 

the District of Columbia. 

(3) FOREIGN TAXES.—A foreign tax includes only a tax imposed by the authority of a foreign country. 

(4) SPECIAL RULES FOR GST TAX.— 

(A) IN GENERAL.—The GST tax imposed on income distributions is— 

(i) the tax imposed by section 2601, and 

(ii) any State tax described in section 2604 (as in effect before its repeal), 

but only to the extent such tax is imposed on a transfer 

which is included in the gross income of the distributee and to 

which section 666 does not apply. 

(B) SPECIAL RULE FOR TAX PAID BEFORE DUE DATE.— Any 

tax referred to in subparagraph (A) imposed with respect 

to a transfer occurring during the taxable year of the distributee (or, in the case of a taxable termination, the trust) 

which is paid not later than the time prescribed by law (including extensions) for filing the return with respect to 

such transfer shall be treated as having been paid on the 

last day of the taxable year in which the transfer was 

made. 

(5) GENERAL SALES TAXES.—For purposes of subsection (a)— 

(A) ELECTION TO DEDUCT STATE AND LOCAL SALES TAXES

IN LIEU OF STATE AND LOCAL INCOME TAXES.—At the election of the taxpayer for the taxable year, subsection (a) 

shall be applied— 

(i) without regard to the reference to State and local 

income taxes, and 

(ii) as if State and local general sales taxes were referred to in a paragraph thereof. 

(B) DEFINITION OF GENERAL SALES TAX.—The term ‘‘general sales tax’’ means a tax imposed at one rate with respect to the sale at retail of a broad range of classes of 

items. 

(C) SPECIAL RULES FOR FOOD, ETC.—In the case of items 

of food, clothing, medical supplies, and motor vehicles— 

(i) the fact that the tax does not apply with respect 

to some or all of such items shall not be taken into account in determining whether the tax applies with respect to a broad range of classes of items, and 

(ii) the fact that the rate of tax applicable with respect to some or all of such items is lower than the 

general rate of tax shall not be taken into account in 

determining whether the tax is imposed at one rate. 

(D) ITEMS TAXED AT DIFFERENT RATES.—Except in the 

case of a lower rate of tax applicable with respect to an 

item described in subparagraph (C), no deduction shall be 

allowed under this paragraph for any general sales tax imVerDate Sep 11 2014 07:22 Apr 08, 2015 Jkt 049006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6602 E:\HR\OC\HR051.XXX HR051

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17 

posed with respect to an item at a rate other than the general rate of tax. 

(E) COMPENSATING USE TAXES.—A compensating use tax 

with respect to an item shall be treated as a general sales 

tax. For purposes of the preceding sentence, the term 

‘‘compensating use tax’’ means, with respect to any item, 

a tax which— 

(i) is imposed on the use, storage, or consumption of 

such item, and 

(ii) is complementary to a general sales tax, but only 

if a deduction is allowable under this paragraph with 

respect to items sold at retail in the taxing jurisdiction 

which are similar to such item. 

(F) SPECIAL RULE FOR MOTOR VEHICLES.—In the case of 

motor vehicles, if the rate of tax exceeds the general rate, 

such excess shall be disregarded and the general rate shall 

be treated as the rate of tax. 

(G) SEPARATELY STATED GENERAL SALES TAXES.—If the 

amount of any general sales tax is separately stated, then, 

to the extent that the amount so stated is paid by the consumer (other than in connection with the consumer’s trade 

or business) to the seller, such amount shall be treated as 

a tax imposed on, and paid by, such consumer. 

(H) AMOUNT OF DEDUCTION MAY BE DETERMINED UNDER

TABLES.— 

(i) IN GENERAL.—At the election of the taxpayer for 

the taxable year, the amount of the deduction allowed 

under this paragraph for such year shall be— 

(I) the amount determined under this paragraph 

(without regard to this subparagraph) with respect to motor vehicles, boats, and other items 

specified by the Secretary, and 

(II) the amount determined under tables prescribed by the Secretary with respect to items to 

which subclause (I) does not apply. 

(ii) REQUIREMENTS FOR TABLES.—The tables prescribed under clause (i)— 

(I) shall reflect the provisions of this paragraph, 

(II) shall be based on the average consumption 

by taxpayers on a State-by-State basis (as determined by the Secretary) of items to which clause 

(i)(I) does not apply, taking into account filing status, number of dependents, adjusted gross income, 

and rates of State and local general sales taxation, 

and 

(III) need only be determined with respect to adjusted gross incomes up to the applicable amount 

(as determined under section 68(b)). 

ø(I) APPLICATION OF PARAGRAPH.—This paragraph shall 

apply to taxable years beginning after December 31, 2003, 

and before January 1, 2015.¿ 

(c) DEDUCTION DENIED IN CASE OF CERTAIN TAXES.—No deduction shall be allowed for the following taxes: 

(1) Taxes assessed against local benefits of a kind tending to 

increase the value of the property assessed; but this paragraph 


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18 

shall not prevent the deduction of so much of such taxes as is 

properly allocable to maintenance or interest charges. 

(2) Taxes on real property, to the extent that subsection (d) 

requires such taxes to be treated as imposed on another taxpayer. 

(d) APPORTIONMENT OF TAXES ON REAL PROPERTY BETWEEN

SELLER AND PURCHASER.— (1) GENERAL RULE.—For purposes of subsection (a), if real 

property is sold during any real property tax year, then— 

(A) so much of the real property tax as is properly allocable to that part of such year which ends on the day before the date of the sale shall be treated as a tax imposed 

on the seller, and 

(B) so much of such tax as is properly allocable to that 

part of such year which begins on the date of the sale shall 

be treated as a tax imposed on the purchaser. 

(2) SPECIAL RULES.— 

(A) in the case of any sale of real property, if— 

(i) a taxpayer may not, by reason of his method of 

accounting, deduct any amount for taxes unless paid, 

and 

(ii) the other party to the sale is (under the law imposing the real property tax) liable for the real property tax for the real property tax year, 

then for purposes of subsection (a) the taxpayer shall be 

treated as having paid, on the date of the sale, so much of such 

tax as, under paragraph (1) of this subsection, is treated as imposed on the taxpayer. For purposes of the preceding sentence, 

if neither party is liable for the tax, then the party holding the 

property at the time the tax becomes a lien on the property 

shall be considered liable for the real property tax for the real 

property tax year. 

(B) In the case of any sale of real property, if the taxpayer’s taxable income for the taxable year during which 

the sale occurs is computed under an accrual method of accounting, and if no election under section 461(c) (relating 

to the accrual of real property taxes) applies, then, for purposes of subsection (a), that portion of such tax which— 

(i) is treated, under paragraph (1) of this subsection, 

as imposed on the taxpayer, and 

(ii) may not, by reason of the taxpayer’s method of 

accounting, be deducted by the taxpayer for any taxable year, 

shall be treated as having accrued on the date of the sale. 

(e) TAXES OF SHAREHOLDER PAID BY CORPORATION.—Where a corporation pays a tax imposed on a shareholder on his interest as a 

shareholder, and where the shareholder does not reimburse the 

corporation, then— 

(1) the deduction allowed by subsection (a) shall be allowed 

to the corporation; and 

(2) no deduction shall be allowed the shareholder for such 

tax. 

(f) DEDUCTION FOR ONE-HALF OF SELF-EMPLOYMENT TAXES.— 

(1) IN GENERAL.—In the case of an individual, in addition to 

the taxes described in subsection (a), there shall be allowed as 


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19 

a deduction for the taxable year an amount equal to one-half 

of the taxes imposed by section 1401 (other than the taxes imposed by section 1401(b)(2)) for such taxable year. 

(2) DEDUCTION TREATED AS ATTRIBUTABLE TO TRADE OR BUSI- NESS.—For purposes of this chapter, the deduction allowed by 

paragraph (1) shall be treated as attributable to a trade or 

business carried on by the taxpayer which does not consist of 

the performance of services by the taxpayer as an employee. 

(g) CROSS REFERENCES.— (1) For provisions disallowing any deduction for certain 

taxes, see section 275. 

(2) For treatment of taxes imposed by Indian tribal governments (or their subdivisions), see section 7871. 


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(20) 

VII. DISSENTING VIEWS 

The two permanent tax extender bills approved by the Republicans at the markup would add more than $224 billion to the deficit. Together with the seven bills that were approved by the Republicans in the previous markup, these nine bills would add more 

than $317 billion to the deficit. In the 113th Congress, Ways and 

Means Committee Republicans selectively approved 14 of the more 

than 50 expired tax provisions, totaling more than $825 billion 

worth of deficit-financed, permanent tax cuts. This selective approach failed last Congress, with none of these permanent provisions being enacted into law. The bills marked up by the Committee set us down a partisan path, when we should be embracing 

bipartisanship and working in a responsible, bipartisan manner on 

tax reform. 

Even though these bills were introduced individually with some 

bipartisan support, the opposition to these bills is based on the position that these tax provisions should not be made permanent by 

adding to the deficit without any revenue offset. We recognize that 

a deduction for state and local sales taxes in lieu of state and local 

income taxes is particularly valuable to taxpayers in states that 

currently do not have income taxes. But the approach that the 

Committee Republicans are taking with respect to this and other 

important legislation undermines the bipartisan support that the 

provisions enjoy. Indeed, this provision was not included in the Republican tax reform plan introduced by the Ways and Means Committee Chairman last Congress, and the plan specifically repealed 

the deduction for state and local income taxes. The American people expect a tax code that maintains and supports our shared priorities, and each time the Committee considers these bills in a piecemeal approach, it is taking a step in the wrong direction and away 

from comprehensive tax reform. 

We all support the policy of providing parity for taxpayers in 

states that do not have income taxes. The markup was not to debate the merits of H.R. 622, which would make permanent the provision that allows for a deduction for state and local sales taxes in 

lieu of state and local income taxes. 

Finally, we also oppose the manner in which Republicans are 

proceeding—selecting to make permanent another two provisions 

in addition to the previously passed seven provisions at a cost of 

more than $317 billion without any offset from the more than 50 

tax provisions that expired at the end of last year. This approach 

is both fiscally irresponsible and contrary to the goals of bipartisan, 

comprehensive tax reform. 

Expired provisions must be dealt with in a comprehensive manner. The Republicans did not take up other tax extenders that also 

are important to Democratic Committee Members. Left to an uncertain fate are provisions like the Work Opportunity Tax Credit, 


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the New Markets Tax Credit, and the renewable energy tax credits, 

as well as the long-term status of the Earned Income Tax Credit, 

the Child Tax Credit, and the American Opportunity Tax Credit. 

SANDER LEVIN. 

Æ 


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