‘‘(A) as a deduction from gross income any
deductions (other than the deduction under sec-
tion 151, relating to personal exemptions), or
‘‘(B) any credit,
properly allocable or chargeable against amounts ex-
cluded from gross income under this subsection.
‘‘(c) DETERMINATION
OF RESIDENCY.—For pur-
poses of this section, the determination of whether an indi-
vidual is a bona fide resident of the District of Columbia
shall be made under regulations prescribed by the Sec-
retary.’’
(b) NO WAGE WITHHOLDING.—Paragraph (8) of
section 3401(a) of such Code is amended by adding at
the end the following new subparagraph:
‘‘(E) for services for an employer per-
formed by an employee if it is reasonable to be-
lieve that during the entire calendar year the
employee will be a bona fide resident of the Dis-
trict of Columbia; or’’.
(c) CLERICAL AMENDMENT.—The table of sections
for such part III is amended by striking the last item and
inserting the following new item:
‘‘Sec. 137. Residents of the District of Columbia.
‘‘Sec. 138. Cross references to other Acts.’’
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after the date of the enactment of this Act.
(2) WITHHOLDING.—The amendment made by
subsection (b) shall apply to remuneration paid after
the date of the enactment of this Act.
SEC. 3. LIMITATION ON ESTATE AND GIFT TAXES.
(a) ESTATE TAX.—
(1) Subchapter C of chapter 11 of the Internal
Revenue Code of 1986 (relating to estate tax) is
amended by adding at the end the following new sec-
tion:
‘‘SEC. 2210. RESIDENTS OF THE DISTRICT OF COLUMBIA.
‘‘For purposes of this chapter, in the case of the es-
tate of a decedent who is a bona fide resident of the Dis-
trict of Columbia at the time of his death—
‘‘(1) the transfer of such an estate shall be sub-
ject to tax under this subchapter (and not sub-
chapter A) as if the decedent were an individual to
whom this subchapter applies, and
‘‘(2) the value of the gross estate shall not in-
clude tangible property located inside the District of
Columbia.’’
(2) The table of sections for such subchapter C
is amended by adding at the end the following new
item:
‘‘Sec. 2210. Residents of the District of Columbia.’’
(b) GIFT TAX.—Section 2501 of such Code is amend-
ed by redesignating subsection (d) as subsection (e) and
by inserting after subsection (c) the following new sub-
section:
‘‘(d) RESIDENTS OF THE DISTRICT OF COLUMBIA.—
For purposes of this chapter, a bona fide resident of the
District of Columbia shall be treated in the same manner
as individuals meeting the requirements of subsection (c).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying, and
gifts made, after the date of the enactment of this Act.
SEC. 4. CREDIT FOR BUSINESSES OPERATED IN THE DIS-
TRICT OF COLUMBIA.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business related credits) is amended by
adding at the end the following new section:
‘‘SEC. 45C. DISTRICT OF COLUMBIA BUSINESS CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—The District of Co-
lumbia business credit determined under this section is an
amount equal to the portion of the tax imposed by this
chapter which is attributable to the sum of—
‘‘(1) the taxable income from—
‘‘(A) the active conduct of a trade or busi-
ness within the District of Columbia, or
‘‘(B) the sale or exchange of substantially
all of the assets used by the taxpayer in the ac-
tive conduct of such trade or business, and
‘‘(2) the qualified District of Columbia source
investment income.
‘‘(b) QUALIFIED DISTRICT OF COLUMBIA SOURCE
INVESTMENT INCOME.—For purposes of this section, the
term ‘qualified District of Columbia source investment in-
come’ means gross income which—
‘‘(1) is from sources within the District of Co-
lumbia, and
‘‘(2) the taxpayer establishes to the satisfaction
of the Secretary is attributable to the investment in
the District of Columbia (for use therein) of funds
derived from the active conduct of a trade or busi-
ness in the District of Columbia, or from such in-
vestment, less the deductions properly apportioned
or allocated thereto.’’
(b) CREDIT TO BE PART OF GENERAL BUSINESS
CREDIT.—Subsection (b) of section 38 of such Code is
amended by striking ‘‘plus’’ at the end of paragraph (10),
by striking the period at the end of paragraph (11) and
inserting ‘‘, plus’’, and by adding at the end the following
new paragraph:
‘‘(12) the District of Columbia business credit
determined under section 45C(a).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 5. STUDY OF FEDERAL REVENUES IN DISTRICT OF CO-
LUMBIA.
(a) EFFECTS OF AMENDMENTS.—The Mayor of the
District of Columbia shall conduct a study on the effects
of the amendments made by this Act on revenues of the
District of Columbia.
(b) GENERAL EFFECTS OF FEDERAL REVENUES.—
The Mayor of the District of Columbia (in consultation
with the Secretary of the Treasury) shall conduct a study
of the extent to which the revenues of the District of Co-
lumbia are affected by Federal revenues, including reve-
nues attributable to direct Federal payments to the Dis-
trict of Columbia, other Federal Government spending in
the District of Columbia, and income of District of Colum-
bia residents which is attributable to Federal sources, and
shall include in the study—