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[Senate Report 106-421]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 830
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-421
_______________________________________________________________________

                       VESSEL WORKER TAX FAIRNESS

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                 S. 893

  September 26 (legislative day, September 22), 2000.--Ordered to be 
                                printed

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
79-010                     WASHINGTON : 2000

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                       one hundred sixth congress
                             second session

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             JOHN D. ROCKEFELLER IV, West 
TRENT LOTT, Mississippi                  Virginia
KAY BAILEY HUTCHISON, Texas          JOHN F. KERRY, Massachusetts
OLYMPIA SNOWE, Maine                 JOHN B. BREAUX, Louisiana
JOHN ASHCROFT, Missouri              RICHARD H. BRYAN, Nevada
BILL FRIST, Tennessee                BYRON L. DORGAN, North Dakota
SPENCER ABRAHAM, Michigan            RON WYDEN, Oregon
SAM BROWNBACK, Kansas                MAX CLELAND, Georgia
                       Mark Buse, Staff Director
                   Ann H. Choiniere, General Counsel
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
                Gregg Elias, Democratic General Counsel

                                                       Calendar No. 830
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-421

======================================================================

 
                       VESSEL WORKER TAX FAIRNESS
                                _______
                                

  September 26 (legislative day, September 22), 2000.--Ordered to be 
                                printed

                                _______
                                

       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 893]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 893) ``A bill to amend title 
46, United States Code, to provide equitable treatment with 
respect to State and local income taxes for certain individuals 
who perform duties on vessels'', having considered the same, 
reports favorably thereon without amendment and recommends that 
the bill do pass.

                          Purpose of the Bill

  The bill will amend section 11108 of title 46, United States 
Code, in order to prevent merchant mariners who perform duties 
on the navigable waters of more than one state from being taxed 
in multiple jurisdictions.

                          Background and Needs

  The Interstate Commerce Act exempts truck drivers, airline 
pilots, and railroad employees from being taxed by state and 
local jurisdictions in which they do not reside. Merchant 
mariners operating vessels in more than one state argue that 
they should be afforded the same tax treatment due to the 
interstate nature of their business.

                      Summary of Major Provisions

  The bill will prevent merchant mariners engaged in interstate 
commerce from being taxed in or having taxes withheld in state 
or local jurisdictions in which they do not reside.

                          Legislative History

   Senator Gorton introduced S. 893 on April 27, 1999. A 
similar measure was introduced in the House during the 103rd 
Congress.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 11, 2000.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 893, a bill to amend 
title 46, United States Code, to provide equitable treatment 
with respect to state and local income taxes for certain 
individuals who perform duties on vessels.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Victoria Heid 
Hall.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 893--A bill to amend title 46, United States Code, to provide 
        equitable treatment with respect to state and local income 
        taxes for certain individuals who perform duties on vessels

    S. 893 would prohibit state and local governments from 
imposing income taxes on individuals working on vessels 
operating on the navigable waters of more than one state unless 
that individual resides in the jurisdiction assessing the tax. 
Such a prohibition is an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA). CBO estimates that 
the costs of this mandate would be well below the threshold 
established in UMRA ($55 million in 2000, adjusted annually for 
inflation). S. 893 would have no impact on the federal budget 
and contains no new private-sector mandates as defined in UMRA.
    According to the Federation of Tax Administrators (FTA), 
under current law the amount of state and local income taxes 
owed by the individuals affected by this bill is based on the 
jurisdiction with the highest applicable income tax rate: 
either the jurisdiction where the income is earned, or the 
jurisdiction where the worker resides. In contrast, under S. 
893 state and local income taxes would be based solely on where 
a vessel worker resides. In that case, some individuals would 
pay lower income taxes than they would under current law, 
resulting in a net loss nationwide in state and local income 
tax revenues. Little data are available on the number of 
workers on vessels that operate on the navigable waters of more 
than one state and on the states in which they reside. 
Consequently, CBO cannot precisely estimate those losses. Based 
on information from FTA, the U.S. Coast Guard's National 
Maritime Center, and the Bureau of Labor Statistics, however, 
CBO estimates that the revenues forgone by state and local 
government would be small and would not exceed the threshold 
established in UMRA ($55 million in 2000, adjusted annually for 
inflation).
    The CBO contact is Victoria Heid Hall. This estimate was 
approved by Robert A. Sunshine, Assistant Director for Budget 
Analysis.

                      Regulatory Impact Statement

    In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:
  Because S. 893 does not create any new programs, the 
legislation will have no additional regulatory impact, and will 
result in no additional reporting requirements. The legislation 
will have no further effect on the number or types of 
individuals and businesses regulated, the economic impact of 
such regulation, the personal privacy of affected individuals, 
or the paperwork required from such individuals and businesses.

                       number of persons covered

  S. 893 as reported will cover all merchant mariners employed 
in interstate commerce but will not impose a regulatory impact 
on individuals.

                            economic impact

  The bill as reported does not impose new regulatory 
requirements on individuals and businesses and therefore should 
not have significant economic impact.

                                privacy

  The bill as reported should have no significant impact on 
individual privacy.

                               paperwork

  The bill as reported should not significantly impact 
paperwork requirements for individuals or businesses.

                      Section-by-Section Analysis

Section 1. Amendment of chapter 111 of title 46, United States Code

  This section declares individuals engaged on a vessel to 
perform assigned duties in more than one state as a pilot 
licensed or authorized under the laws of a state, or 
individuals who perform regularly-assigned duties while engaged 
as a master, officer, or crewman on a vessel operating on the 
navigable waters of more than one state, shall be exempt from 
income taxation laws of states or political subdivisions of 
which that individual is not a resident.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, 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 material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                           TITLE 46. SHIPPING

                    SUBTITLE II. VESSELS AND SEAMEN

             PART G. MERCHANT SEAMEN PROTECTION AND RELIEF

                   CHAPTER 111. PROTECTION AND RELIEF

Sec.  46. TAXES.

  (a) Withholding._Wages due or accruing to a master or seaman 
on a vessel in the foreign, coastwise, intercoastal, 
interstate, or noncontiguous trade or an individual employed on 
a fishing vessel or any fish processing vessel may not be 
withheld under the tax laws of a State or a political 
subdivision of a State. However, this section does not prohibit 
withholding wages of a seaman on a vessel in the coastwise 
trade between ports in the same State if the withholding is 
under a voluntary agreement between the seaman and the employer 
of the seaman.
  (b) Liability.--
          (1) Limitation on jurisdiction to tax.--An individual 
        to whom this subsection applies is not subject to the 
        income tax laws of a State or political subdivision of 
        a State, other than the State and political subdivision 
        in which the individual resides, with respect to 
        compensation for the performance of duties described in 
        paragraph (2).
          (2) Application.--This subsection applies to an 
        individual--
                  (A) engaged on a vessel to perform assigned 
                duties in more than one State as a pilot 
                licensed under section 7101 of this title or 
                licensed or authorized under the laws of a 
                State; or
                  (B) who performs regularly-assigned duties 
                while engaged as a master, officer, or crewman 
                on a vessel operating on the navigable waters 
                of more than one State.

                                  
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