99–006

107TH CONGRESS REPT. 107–417 " ! HOUSE OF REPRESENTATIVES 2d Session Part 1

CLARIFICATION OF TAX TREATMENT OF BONDS AND

OTHER OBLIGATIONS ISSUED BY GOVERNMENT OF

AMERICAN SAMOA

APRIL 23, 2002.—Ordered to be printed

Mr. HANSEN, from the Committee on Resources,

submitted the following

R E P O R T

[To accompany H.R. 1448]

[Including cost estimate of the Congressional Budget Office]

The Committee on Resources, to whom was referred the bill

(H.R. 1448) to clarify the tax treatment of bonds and other obligations issued by the Government of American Samoa, having considered the same, report favorably thereon with an amendment and

recommend that the bill as amended do pass.

The amendment is as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. CLARIFICATION OF TAX TREATMENT OF BONDS AND OTHER OBLIGATIONS

ISSUED BY GOVERNMENT OF AMERICAN SAMOA.

(a) EXEMPTION OF ALL BONDS FROM INCOME TAXATION BY STATE AND LOCAL GOVERNMENTS.—Subsection (b) of section 202 of Public Law 98-454 (48 U.S.C. 1670) is

amended to read as follows:

‘‘(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.’’.

(b) EFFECTIVE DATE.—This Act shall apply to obligations issued after the date of

the enactment of this Act.

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PURPOSE OF THE BILL

The purpose of H.R. 1448 is to clarify the tax treatment of bonds

and other obligations issued by the Government of American

Samoa.

BACKGROUND AND NEED FOR LEGISLATION

Under U.S. law, Congress has expressly provided for the exemption of state and local taxes for bonds issued by Guam, the Virgin

Islands, Puerto Rico and the Northern Mariana Islands. While

American Samoa can issue bonds similar to the other territories,

the interest earned from American Samoan bonds is subject to taxation by the several States, Washington, D.C. and the other territories. H.R. 1448 will provide parity for American Samoa. This legislation amends U.S. law to allow interest earned on bonds issued

by the American Samoan Government to be exempt from state,

local and territorial taxation. This will make American Samoa

bonds more attractive to investors and could provide additional

sources of funds for the government of American Samoa.

COMMITTEE ACTION

H.R. 1448 was introduced on April 4, 2001, by Delegate Eni F.H.

Faleomavaega (D–AS). The bill was referred to the Committee on

Ways and Means, and additionally to the Committees on Resources

and the Judiciary. On September 6, 2001, the bill was rereferred

to the Committee on Resources, and additionally to the Committee

on the Judiciary. On March 20, 2002, the Resources Committee

met to consider the bill. Mr. Faleomavaega offered an amendment

in the nature of a substitute that struck section 1 (a) and (c) to correct a drafting error in the original bill. It was adopted by voice

vote. The bill as amended was then ordered favorably reported to

the House of Representatives by voice vote.

COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of rule XIII

of the Rules of the House of Representatives, the Committee on Resources’ oversight findings and recommendations are reflected in

the body of this report.

CONSTITUTIONAL AUTHORITY STATEMENT

Article I, section 8 and Article IV, section 3 of the Constitution

of the United States grants Congress the authority to enact this

bill.

COMPLIANCE WITH HOUSE RULE XIII

1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the Rules of

the House of Representatives requires an estimate and a comparison by the Committee of the costs which would be incurred in carrying out this bill. However, clause 3(d)(3)(B) of that rule provides

that this requirement does not apply when the Committee has included in its report a timely submitted cost estimate of the bill prepared by the Director of the Congressional Budget Office under section 402 of the Congressional Budget Act of 1974.

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2. Congressional Budget Act. As required by clause 3(c)(2) of rule

XIII of the Rules of the House of Representatives and section

308(a) of the Congressional Budget Act of 1974, this bill does not

contain any new budget authority, spending authority, credit authority, or an increase or decrease in revenues or tax expenditures.

3. General Performance Goals and Objectives. This bill does not

authorize funding and therefore, clause 3(c)(4) of rule XIII of the

Rules of the House of Representatives does not apply.

4. Congressional Budget Office Cost Estimate. Under clause

3(c)(3) of rule XIII of the Rules of the House of Representatives and

section 403 of the Congressional Budget Act of 1974, the Committee has received the following cost estimate for this bill from the

Director of the Congressional Budget Office:

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, April 5, 2002.

Hon. JAMES V. HANSEN,

Chairman, Committee on Resources,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1448, 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); and Marjorie Miller (for the state and local impact).

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

H.R. 1448—A bill to clarify the tax treatment of bonds and other

obligations issued by the government of American Samoa

H.R. 1448 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. 1448 would have no impact on

the federal budget. Because the bill would not affect direct spending or governmental receipts, pay-as-you-go procedures would not

apply. The bill contains no private-sector mandates as defined in

the Unfunded Mandates Reform Act (UMRA).

H.R. 1448 contains an intergovernmental mandate as defined in

UMRA, but CBO estimates that the cost of the mandate would be

well below the threshold established in that act ($58 million in

2002, 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.

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The CBO staff contacts for this estimate are Matthew Pickford

(for federal costs), and Marjorie Miller (for the state and local impact). This estimate was approved by Peter H. Fontaine, Deputy

Assistant Director for Budget Analysis.

COMPLIANCE WITH PUBLIC LAW 104–4

This bill contains no unfunded mandates as defined by Public

Law 104–4.

PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

This bill will preempt State or local law regarding the taxation

of bonds issued by American Samoa. It will not affect tribal 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 italic,

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) * * *

ø(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.

ø(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.

ø(3) For purposes of this subsection—

ø(A) The term ‘‘State’’ includes the District of Columbia.

ø(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.

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