I

104TH CONGRESS

1ST SESSION H. R. 748

To amend the Internal Revenue Code of 1986 to provide that individuals

who are residents of the District of Columbia shall be exempt from

Federal income taxation, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 31, 1995

Ms. NORTON introduced the following bill; which was referred to the Committee on Ways and Means and, in addition, to the Committee on Government Reform and Oversight, for a period to be subsequently determined

by the Speaker, in each case for consideration of such provisions as fall

within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to provide

that individuals who are residents of the District of

Columbia shall be exempt from Federal income taxation,

and for other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘District of Columbia

5 Federal Tax Equity Act’’.
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1 SEC. 2. EXEMPTION FROM TAX FOR INDIVIDUALS WHO ARE

2 RESIDENTS OF THE DISTRICT OF COLUMBIA.

3 (a) IN GENERAL.—Part III of subchapter B of chap4 ter 1 of the Internal Revenue Code of 1986 (relating to

5 items specifically excluded from gross income) is amended

6 by redesignating section 137 as section 138 and by insert7 ing after section 136 the following new section:

8 ‘‘SEC. 137. RESIDENTS OF THE DISTRICT OF COLUMBIA.

9 ‘‘(a) RESIDENTS FOR ENTIRE TAXABLE YEAR.—An

10 individual who is a bona fide resident of the District of

11 Columbia during the entire taxable year shall be exempt

12 from taxation under this chapter for such taxable year.

13 ‘‘(b) TAXABLE YEAR OF CHANGE OF RESIDENCE

14 FROM DISTRICT OF COLUMBIA.—

15 ‘‘(1) IN GENERAL.—In the case of an individual

16 who has been a bona fide resident of the District of

17 Columbia for a period of at least 2 years before the

18 date on which such individual changes his residence

19 from the District of Columbia, income which is at20 tributable to that part of such period of District of

21 Columbia residence before such date shall not be in22 cluded in gross income and shall be exempt from

23 taxation under this chapter.

24 ‘‘(2) DEDUCTIONS, ETC. ALLOCABLE TO EX25 CLUDED AMOUNTS NOT ALLOWABLE.—An individual

26 shall not be allowed—
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1 ‘‘(A) as a deduction from gross income any

2 deductions (other than the deduction under sec3 tion 151, relating to personal exemptions), or

4 ‘‘(B) any credit,

5 properly allocable or chargeable against amounts ex6 cluded from gross income under this subsection.

7 ‘‘(c) DETERMINATION OF RESIDENCY.—For pur8 poses of this section, the determination of whether an indi9 vidual is a bona fide resident of the District of Columbia

10 shall be made under regulations prescribed by the Sec11 retary.’’

12 (b) NO WAGE WITHHOLDING.—Paragraph (8) of

13 section 3401(a) of such Code is amended by adding at

14 the end the following new subparagraph:

15 ‘‘(E) for services for an employer per16 formed by an employee if it is reasonable to be17 lieve that during the entire calendar year the

18 employee will be a bona fide resident of the Dis19 trict of Columbia; or’’.

20 (c) CLERICAL AMENDMENT.—The table of sections

21 for such part III is amended by striking the last item and

22 inserting the following new item:

‘‘Sec. 137. Residents of the District of Columbia.

‘‘Sec. 138. Cross references to other Acts.’’

23 (d) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to taxable years beginning

3 after the date of the enactment of this Act.

4 (2) WITHHOLDING.—The amendment made by

5 subsection (b) shall apply to remuneration paid after

6 the date of the enactment of this Act.

7 SEC. 3. LIMITATION ON ESTATE AND GIFT TAXES.

8 (a) ESTATE TAX.—

9 (1) Subchapter C of chapter 11 of the Internal

10 Revenue Code of 1986 (relating to estate tax) is

11 amended by adding at the end the following new sec12 tion:

13 ‘‘SEC. 2210. RESIDENTS OF THE DISTRICT OF COLUMBIA.

14 ‘‘For purposes of this chapter, in the case of the es15 tate of a decedent who is a bona fide resident of the Dis16 trict of Columbia at the time of his death—

17 ‘‘(1) the transfer of such an estate shall be sub18 ject to tax under this subchapter (and not sub19 chapter A) as if the decedent were an individual to

20 whom this subchapter applies, and

21 ‘‘(2) the value of the gross estate shall not in22 clude tangible property located inside the District of

23 Columbia.’’
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1 (2) The table of sections for such subchapter C

2 is amended by adding at the end the following new

3 item:

‘‘Sec. 2210. Residents of the District of Columbia.’’

4 (b) GIFT TAX.—Section 2501 of such Code is amend5 ed by redesignating subsection (d) as subsection (e) and

6 by inserting after subsection (c) the following new sub7 section:

8 ‘‘(d) RESIDENTS OF THE DISTRICT OF COLUMBIA.—

9 For purposes of this chapter, a bona fide resident of the

10 District of Columbia shall be treated in the same manner

11 as individuals meeting the requirements of subsection (c).’’

12 (c) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to estates of decedents dying, and

14 gifts made, after the date of the enactment of this Act.

15 SEC. 4. CREDIT FOR BUSINESSES OPERATED IN THE DIS16 TRICT OF COLUMBIA.

17 (a) IN GENERAL.—Subpart D of part IV of sub18 chapter A of chapter 1 of the Internal Revenue Code of

19 1986 (relating to business related credits) is amended by

20 adding at the end the following new section:

21 ‘‘SEC. 45C. DISTRICT OF COLUMBIA BUSINESS CREDIT.

22 ‘‘(a) ALLOWANCE OF CREDIT.—The District of Co23 lumbia business credit determined under this section is an

24 amount equal to the portion of the tax imposed by this

25 chapter which is attributable to the sum of—
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1 ‘‘(1) the taxable income from—

2 ‘‘(A) the active conduct of a trade or busi3 ness within the District of Columbia, or

4 ‘‘(B) the sale or exchange of substantially

5 all of the assets used by the taxpayer in the ac6 tive conduct of such trade or business, and

7 ‘‘(2) the qualified District of Columbia source

8 investment income.

9 ‘‘(b) QUALIFIED DISTRICT OF COLUMBIA SOURCE

10 INVESTMENT INCOME.—For purposes of this section, the

11 term ‘qualified District of Columbia source investment in12 come’ means gross income which—

13 ‘‘(1) is from sources within the District of Co14 lumbia, and

15 ‘‘(2) the taxpayer establishes to the satisfaction

16 of the Secretary is attributable to the investment in

17 the District of Columbia (for use therein) of funds

18 derived from the active conduct of a trade or busi19 ness in the District of Columbia, or from such in20 vestment, less the deductions properly apportioned

21 or allocated thereto.’’

22 (b) CREDIT TO BE PART OF GENERAL BUSINESS

23 CREDIT.—Subsection (b) of section 38 of such Code is

24 amended by striking ‘‘plus’’ at the end of paragraph (10),

25 by striking the period at the end of paragraph (11) and
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1 inserting ‘‘, plus’’, and by adding at the end the following

2 new paragraph:

3 ‘‘(12) the District of Columbia business credit

4 determined under section 45C(a).’’

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to taxable years beginning after

7 the date of the enactment of this Act.

8 SEC. 5. STUDY OF FEDERAL REVENUES IN DISTRICT OF CO9 LUMBIA.

10 (a) EFFECTS OF AMENDMENTS.—The Mayor of the

11 District of Columbia shall conduct a study on the effects

12 of the amendments made by this Act on revenues of the

13 District of Columbia.

14 (b) GENERAL EFFECTS OF FEDERAL REVENUES.—

15 The Mayor of the District of Columbia (in consultation

16 with the Secretary of the Treasury) shall conduct a study

17 of the extent to which the revenues of the District of Co18 lumbia are affected by Federal revenues, including reve19 nues attributable to direct Federal payments to the Dis20 trict of Columbia, other Federal Government spending in

21 the District of Columbia, and income of District of Colum22 bia residents which is attributable to Federal sources, and

23 shall include in the study—
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1 (1) an estimate of the percentage of the reve2 nues of the District of Columbia which is attrib3 utable to such Federal revenues;

4 (2) recommendations for revisions in Federal

5 law (including the Internal Revenue Code of 1986

6 and the District of Columbia Self-Government and

7 Governmental Reorganization Act) in addition to the

8 amendments made by this Act which will increase

9 District of Columbia revenues attributable to such

10 Federal revenues and other District of Columbia rev11 enues; and

12 (3) such other recommendations as the Mayor

13 considers appropriate.

14 (c) REPORT.—Not later than 1 year after the date

15 of the enactment of this Act, the Mayor of the District

16 of Columbia shall submit a report to Congress on the stud17 ies conducted under this section.

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