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103D CONGRESS

2D SESSION H. R. 4233

To amend the Internal Revenue Code of 1986 to allow a taxpayer to elect

to deduct either State and local income taxes or State and local sales taxes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 14, 1994

Mr. SUNDQUIST introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to allow a

taxpayer to elect to deduct either State and local income

taxes or State and local sales taxes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. ELECTION TO DEDUCT STATE AND LOCAL IN4 COME TAX OR STATE AND LOCAL SALES TAX.

5 (a) IN GENERAL.—Section 164(a) of the Internal

6 Revenue Code of 1986 (relating to deduction for taxes)

7 is amended by adding after paragraph (5) the following

8 new paragraph:

9 ‘‘(6) At the election of the taxpayer, either—

10 ‘‘(A) State and local income taxes, or
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1 ‘‘(B) State and local general sales taxes.’’.

2 (b) GENERAL SALES TAXES.—Section 164(b) of such

3 Code (relating to definitions and special rules) is amended

4 by adding at the end the following new paragraph:

5 ‘‘(5) GENERAL SALES TAXES.—

6 ‘‘(A) IN GENERAL.—The term ‘general

7 sales tax’ means a tax imposed at one rate in

8 respect of the sale at retail of a broad range of

9 classes of items.

10 ‘‘(B) SPECIAL RULES FOR FOOD, ETC.—In

11 the case of items of food, clothing, medical sup12 plies, and motor vehicles—

13 ‘‘(i) the fact that the tax does not

14 apply in respect of some or all of such

15 items shall not be taken into account in

16 determining whether the tax applies in re17 spect of a broad range of classes of items,

18 and

19 ‘‘(ii) the fact that the rate of tax ap20 plicable in respect of some or all of such

21 items is lower than the general rate of tax

22 shall not be taken into account in deter23 mining whether the tax is imposed at one

24 rate.
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1 ‘‘(C) ITEMS TAXED AT DIFFERENT

2 RATES.—Except in the case of a lower rate of

3 tax applicable in respect of an item described in

4 subparagraph (B), no deduction shall be al5 lowed under this section for any general sales

6 tax imposed in respect of an item at a rate

7 other than the general rate of tax.

8 ‘‘(D) COMPENSATING USE TAXES.—A com9 pensating use tax in respect of an item shall be

10 treated as a general sales tax. For purposes of

11 the proceeding sentence, the term ‘compensat12 ing use tax’ means, in respect of any item, a

13 tax which—

14 ‘‘(i) is imposed on the use, storage, or

15 consumption of such item, and

16 ‘‘(ii) is complementary to a general

17 sales tax, but only if a deduction is allow18 able under subsection (a)(6) in respect of

19 items sold at retail in the taxing jurisdic20 tion which are similar to such item.

21 ‘‘(E) SPECIAL RULE FOR MOTOR VEHI22 CLES.—In the case of motor vehicles, if the rate

23 of tax exceeds the general rate, such excess

24 shall be disregarded and the general rate shall

25 be treated as the rate of tax.
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1 ‘‘(F) SEPARATELY STATED GENERAL

2 SALES TAXES.—If the amount of any general

3 sales tax is separately stated, then, to the ex4 tent that the amount so stated is paid by the

5 consumer (otherwise than in connection with

6 the consumer’s trade or business) to his seller,

7 such amount shall be treated as a tax imposed

8 on, and paid by, such consumer.’’.

9 (c) CONFORMING AMENDMENT.—Paragraph (3) of

10 section 164(a) of such Code is amended by striking out

11 ‘‘State and local, and foreign,’’ and inserting in lieu there12 of ‘‘Foreign’’.

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 1992.

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