I
104TH CONGRESS
2D SESSION
H. R. 4155
To amend the Internal Revenue Code of 1986 to provide for individuals
who are residents of the District of Columbia a maximum rate of tax
of 15 percent on income from sources within the District of Columbia.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 24, 1996
Ms. NORTON 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 provide
for individuals who are residents of the District of Co-
lumbia a maximum rate of tax of 15 percent on income
from sources within the District of Columbia.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘District of Columbia
Economic Recovery Act’’.
SEC. 2. LIMITATION ON INCOME TAX IMPOSED ON INDIVID-
UALS WHO ARE RESIDENTS OF THE DISTRICT
OF COLUMBIA.
(a) IN GENERAL.—Subchapter A of chapter 1 of the
Internal Revenue Code of 1986 (relating to determination
of tax liability) is amended by adding at the end the fol-
lowing new part:
‘‘PART VIII—LIMITATION ON TAX IMPOSED ON
RESIDENTS OF THE DISTRICT OF COLUMBIA
‘‘Sec. 59B. Limitation on tax.
‘‘SEC. 59B. LIMITATION ON TAX.
‘‘(a) GENERAL RULE.—The net income tax of an in-
dividual who is a resident of the District of Columbia for
the taxable year shall not exceed the limitation determined
under subsection (b) for such year.
‘‘(b) LIMITATION.—The limitation determined under
this subsection is the sum of the amounts determined
under paragraphs (1) and (2).
‘‘(1) 15-PERCENT RATE OF DISTRICT-SOURCED
INCOME IN EXCESS OF EXEMPTION AMOUNT.—The
amount determined under this paragraph is an
amount equal to 15 percent of so much of District-
sourced income as exceeds the exemption amount.
‘‘(2) 
AVERAGE
RATE
OF
NON-DISTRICT-
SOURCED ADJUSTED GROSS INCOME.—The amount
determined under this paragraph is an amount equal
to the average rate of the non-District-sourced ad-
justed gross income.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) RESIDENT OF DISTRICT OF COLUMBIA.—
An individual is a resident of the District of Colum-
bia for the taxable year if—
‘‘(A) such individual used a residence in
the District of Columbia as a place of abode
(and was physically present at such place) for
at least 183 days of such taxable year, and
‘‘(B) such individual files a District of Co-
lumbia income tax return for such taxable year.
‘‘(2) NET INCOME TAX.—The term ‘net income
tax’ means—
‘‘(A) the sum of regular tax liability and
the tax imposed by section 55 (determined with-
out regard to this section), reduced by
‘‘(B) the aggregate credits allowable under
part IV (other than section 31).
‘‘(3) EXEMPTION AMOUNT.—The term ‘exemp-
tion amount’ means—
‘‘(A) $30,000 in the case of a joint return
or a surviving spouse,
‘‘(B) $15,000 in the case of—
‘‘(i) an individual who is not a mar-
ried individual and is not a surviving
spouse, and
‘‘(ii) a married individual filing a sep-
arate return, and
‘‘(C) $25,000 in the case of a head of a
household.
‘‘(4) AVERAGE RATE.—The term ‘average rate’
means the percentage determined by dividing—
‘‘(A) the sum (determined without regard
to this section) of the taxpayer’s regular tax li-
ability and the tax imposed by section 55, by
‘‘(B) the taxpayer’s taxable income.
If the percentage determined under the preceding
sentence is not a whole number of percentage points,
such percentage shall be rounded to the nearest
whole number of percentage points.
‘‘(5) REGULAR TAX LIABILITY.—The term ‘reg-
ular tax liability’ has the meaning given to such
term by section 26(b).
‘‘(d) DISTRICT-SOURCED INCOME.—For purposes of
this section, the term ‘District-sourced income’ means ad-
justed gross income reduced by the sum of—
‘‘(1) non-District-sourced adjusted gross in-
come,
‘‘(2) net capital gain determined by taking into
account only gains and losses sourced in the District
of Columbia,
‘‘(3) the deduction allowed by section 170, and
‘‘(4) the deduction allowed by section 163 to
the extent attributable to qualified residence interest
(as defined in section 163(h)).
‘‘(e) NON-DISTRICT-SOURCED ADJUSTED GROSS IN-
COME.—For purposes of this section, the term ‘non-Dis-
trict-sourced adjusted gross income’ means gross income
of the taxpayer from sources outside the District of Co-
lumbia reduced (but not below zero) by the deductions
taken into account in determining adjusted gross income
which are allocable to such income.
‘‘(f) SOURCES OF INCOME.—For purposes of this sec-
tion—
‘‘(1) RETIREMENT INCOME AND OTHER INCOME
NOT SOURCED UNDER SUBSECTION.—The source of
any income not specifically provided for in this sub-
section shall be treated as from sources within the
District of Columbia.
‘‘(2) PERSONAL SERVICES.—
‘‘(A) IN GENERAL.—Compensation (other
than retirement income) for services performed
by the taxpayer as an employee, and net earn-
ings from self-employment (as defined in sec-
tion 1402)), shall be sourced at the place such
services are performed.
‘‘(B) SERVICES PERFORMED IN WASHING-
TON-BALTIMORE
AREA
TREATED
AS
PER-
FORMED
IN
THE
DISTRICT
OF
COLUMBIA.—
Services performed in the Washington-Balti-
more area shall be treated as performed in the
District of Columbia.
‘‘(C) INDIVIDUALS
PERFORMING
PER-
CENT OF SERVICES WITHIN WASHINGTON-BAL-
TIMORE AREA.—If, during any taxable year, at
least 80 percent of the hours of service per-
formed by an individual are performed within
the Washington-Baltimore area, all such service
shall be treated for purposes of this paragraph
as performed within the District of Columbia.
‘‘(D) WASHINGTON-BALTIMORE
AREA.—
For purposes of this paragraph, the term
‘Washington-Baltimore area’ means the area
consisting of—
‘‘(i) the Washington/Baltimore Con-
solidated Metropolitan Statistical Area (as
designated by the Office of Management
and Budget), and