percentage (as shown on such return) of
such interest shall be treated as from
sources within the District of Columbia.
The preceding sentence shall apply only if
such percentage is furnished to the tax-
payer in writing on or before January 31
of the year following the calendar year in
which such interest is paid.
‘‘(ii) 
OTHERS.—Interest 
shall 
be
treated as from sources within the District
of Columbia if the interest is paid during
a calendar year by a debtor—
‘‘(I) which was required to file
(and filed) an income tax return with
the District of Columbia for the debt-
or’s taxable year ending during the
prior calendar year, and
‘‘(II) which is not required to file
a franchise tax return with the Dis-
trict of Columbia for such taxable
year.
‘‘(D) SPECIAL RULE FOR DETERMINATION
OF D.C. PERCENTAGE FOR NEW BUSINESSES.—
Interest shall be treated as from sources within
the District of Columbia if the interest is paid
during a calendar year by a debtor which was
required to file (and filed) a franchise tax re-
turn with the District of Columbia for such
debtor’s taxable year ending during such cal-
endar year, but which was not required to file
such a return for such debtor’s prior taxable
year.
‘‘(4) DIVIDENDS.—
‘‘(A) IN GENERAL.—Dividends received or
accrued during the taxable year shall be treated
as from sources outside the District of Colum-
bia.
‘‘(B) EXCEPTION FOR SMALL AMOUNTS OF
NON-DISTRICT-SOURCED
DIVIDENDS.—Divi-
dends which would (but for this subparagraph)
be treated as from sources outside the District
of Columbia shall be treated as from sources in
the District of Columbia to the extent the
amount of such dividends do not exceed $400.
‘‘(C) EXCEPTION FOR DIVIDENDS PAID BY
CORPORATION ENGAGED IN BUSINESS IN THE
DISTRICT OF COLUMBIA.—In the case of divi-
dends paid during a calendar year by a corpora-
tion which was required to file (and filed) a
franchise tax return with the District of Colum-
bia for the debtor’s taxable year ending during
the prior calendar year, an amount equal to the
D.C. percentage (as shown on such return) of
such dividends shall be treated as from sources
within the District of Columbia. The preceding
sentence shall apply only if such percentage is
furnished to the taxpayer in writing on or be-
fore January 31 of the year following the cal-
endar year in which such dividends are paid.
‘‘(5) DISPOSITION OF TANGIBLE PROPERTY.—
Income, gain, or loss from the disposition of tangible
property shall be sourced to the place such property
is located at the time of the disposition.
‘‘(6) 
DISPOSITION
OF
INTANGIBLE
PROP-
ERTY.—
‘‘(A) IN GENERAL.—Income, gain, or loss
from the disposition of intangible property shall
be treated as from sources outside the District
of Columbia.
‘‘(B) EXCEPTION.— If any portion of the
most recent income received or accrued before
such disposition which was attributable to such
property was from sources within the District
of Columbia, a like portion of the income, gain,
or loss from such disposition shall be treated as
from sources within the District of Columbia.
‘‘(7) RENTALS.—Rents from property shall be
sourced at the place where such property is located.
‘‘(8) ROYALTIES.—Royalties shall be treated as
from sources outside the District of Columbia.
‘‘(9) INCOME FROM PROPRIETORSHIP.—
‘‘(A) IN GENERAL.—In the case of a trade
or business carried on by the taxpayer as a pro-
prietorship, income from such trade or business
(other than income which is included in net
earnings from self-employment by the taxpayer)
shall be treated as from sources outside the
District of Columbia.
‘‘(B) EXCEPTION
FOR
DISTRICT
OF
CO-
LUMBIA
BUSINESSES.—If the taxpayer is re-
quired to file (and files) a franchise tax return
with the District of Columbia for the taxable
year, subparagraph (A) shall not apply to an
amount equal to the D.C. percentage of such
income.
‘‘(10) INCOME
FROM
PARTNERSHIPS
AND
S
CORPORATIONS.—
‘‘(A) PARTNERSHIPS.—In the case of a
taxpayer who is a partner in a partnership, in-
come from such partnership (other than income
which is included in net earnings from self-em-
ployment by any partner) shall be treated as
from sources outside the District of Columbia.
‘‘(B) EXCEPTIONS.—
‘‘(i) Subparagraph (A) shall not apply
to a partnership which was required to file
(and filed) a franchise tax return with the
District of Columbia for the partnership’s
taxable year ending with or within the tax-
payer’s taxable year to the extent of the
D.C. percentage of the taxpayer’s distribu-
tive share of the partnership income.
‘‘(ii) Subparagraph (A) shall not
apply to a partnership which was not re-
quired to file a franchise tax return with
the District of Columbia for the partner-
ship’s taxable year ending with or within
the taxpayer’s taxable year to the extent of
the taxpayer’s distributive share of part-
nership income which is not (as determined
under this subsection) from sources outside
the District of Columbia.
‘‘(C) S CORPORATIONS.—Rules similar to
the rules of this paragraph shall apply to share-
holders of an S corporation.
‘‘(11) INCOME IN RESPECT OF A DECEDENT;
INCOME FROM AN ESTATE.—Income in respect of a
decedent, and income from an estate, shall be
sourced at the place where the decedent was domi-
ciled at the time of his death.
‘‘(12) INCOME FROM A TRUST.—Income (other
than retirement income) from a trust shall be treat-
ed as from the same sources as the income of the
trust to which it is attributable.
‘‘(g) DEFINITIONS RELATING TO SUBSECTION (f).—
For purposes of subsection (f)—
‘‘(1) RETIREMENT INCOME.—The term ‘retire-
ment income’ has the meaning given such term by
section 114(b)(1) of title 4, United States Code (de-
termined without regard to subparagraph (I) there-
of).
‘‘(2) D.C. PERCENTAGE.—The term ‘D.C. per-
centage’ means the percentage determined by divid-
ing—
‘‘(A) the net income taxable in the District
of Columbia (as shown on the original return
for the taxable year), by
‘‘(B) total net income from all sources (as
shown on such return).
The preceding sentence shall be applied based on
amounts shown on the original applicable District of
Columbia franchise or income tax return.
‘‘(h) SECTION NOT TO APPLY TO ESTATES AND
TRUSTS.—This section shall not apply to an estate or
trust.
‘‘(i) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section, including regula-
tions to prevent the abuse of the purposes of this section
through the manipulation of the rules of subsection (f) by
means of personal service corporations or otherwise.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 55(c) of such Code
is amended by adding at the end the following:
‘‘Such regular tax shall be determined without re-
gard to section 59B.’’
(2) The table of parts for subchapter A of chap-
ter 1 of such Code is amended by adding at the end
the following new item:
‘‘Part VIII. Limitation on tax imposed on residents of the District
of Columbia.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
SEC. 3. ANNUAL TREASURY STUDY ON IMPACT OF TAX RE-
DUCTIONS FOR RESIDENTS OF DISTRICT OF
COLUMBIA.
(a) IN GENERAL.—The Secretary of the Treasury or
his delegate shall conduct an annual study of the impact
of part VIII of subchapter A of chapter 1 of the Internal
Revenue Code of 1986 (relating to limitation on tax im-
posed on residents of the District of Columbia) on the
economy of the District of Columbia. In determining such
impact, the study shall include an evaluation of changes
in the following (among others):
(1) The number and characteristics of individ-
uals who are residents of the District of Columbia
who claim the benefits provided by such part and
the number and characteristics of such individuals
who choose not to claim such benefits.
(2) Investment in the District of Columbia.
(3) Capital gain net income of such individuals
determined for property within the District of Co-
lumbia.
(4) Tax revenues to the District of Columbia.
(5) The number of new businesses in the Dis-
trict of Columbia, the number and size of establish-
ments in the District of Columbia, and the growth
of existing businesses as measured by growth in em-
ployment and taxes payable to the District of Co-
lumbia.
(6) The number and characteristics of house-
holds residing in the District of Columbia.
(7) The employment and earnings of individuals
who are residents of the District of Columbia.
(8) Changes in the characteristics of employ-
ment within the District of Columbia, including the
proportion of jobs in the District of Columbia which
are held by residents of the District of Columbia.
(9) Home sales and residential rental activity in
the District of Columbia, by price levels of the prop-
erty involved.
(10) Tax structure in the District of Columbia,
including incentives for businesses to operate in the
District of Columbia.
(11) The number and characteristics of Federal
income tax filers (by filing and income category)
claiming deductions for charitable contributions,
home mortgage interest, and investment interest.
(12) Comparable factors, by jurisdiction, for
other governmental jurisdictions within the Wash-
ington metropolitan statistical area.
(b) REPORTS.—The report of each such study shall
be submitted to—
(1) the Committee on Ways and Means, and
the Committee on Governmental Reform and Over-
sight, of the House of Representatives, and
(2) the Committee on Finance, and the Com-
mittee on Governmental Affairs, of the Senate.
(c) BASELINE.—As soon as practical after the date
of the enactment of this Act, the Secretary of the Treasury
or his delegate shall collect baseline data for purposes of
the study under subsection (a).
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