[House Report 108-102]
[From the U.S. Government Publishing Office]
108th Congress Rept. 108-102
HOUSE OF REPRESENTATIVES
1st Session Part 2
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CLARIFYING THE TAX TREATMENT OF BONDS AND OTHER OBLIGATIONS ISSUED BY
THE GOVERNMENT OF AMERICAN SAMOA
_______
October 7, 2003.--Committed to the Committee of the Whole House on the
State of the Union, and ordered to be printed
_______
Mr. Pombo, from the Committee on Resources, submitted the following
R E P O R T
[To accompany H.R. 982]
[Including cost estimate of the Congressional Budget Office]
The Committee on Resources, to whom was referred the bill
(H.R. 982) to clarify the tax treatment of bonds and other
obligations issued by the Government of American Samoa, having
considered the same, report favorably thereon without amendment
and recommend that the bill do pass.
Purpose of the Bill
The purpose of H.R. 982 is to clarify the tax treatment of
bonds and other obligations issued by the Government of
American Samoa.
Background and Need for Legislation
H.R. 982 amends Section 202(b) of Public Law 98-454 to
permit the interest on any bond or other obligation issued by
or on behalf of the American Samoan Government (ASG) to be
exempt from both State and local taxation.
American Samoa, an unincorporated and unorganized U.S.
territory, is comprised of the South Pacific Polynesian islands
of Tutuila, Aunuu, Ofu, Olosega, Tau, Rose, and the Swain
islands. In April 1900, the traditional chiefs of Tutuila and
Aunuu agreed to become a part of the U.S. by treaty of cession
in return for protection of their land and culture. Congress
ratified the treaty of cessions in 1929 (48 U.S.C. Sec. 1661-
1662) and created statutory authority for American Samoa's
civil government. The Department of the Navy controlled
American Samoa up until 1951, upon which jurisdiction was
transferred to the Secretary of the Interior. In the mid-1950s,
the people of American Samoa began drafting a constitution
which was eventually completed in 1960 and approved by the
Secretary of the Interior.
The Samoan Constitution of 1960 created a bicameral
legislature (the Fono), provided for judicial and executive
branches, and contained an extensive bill of rights. The
Constitution was revised and approved by the Samoan people in
1966, and by the Secretary of the Interior the following year,
to provide for increased powers to the Fono. The revised
Constitution is the basis for the current government of
American Samoa. In 1983, the Interior Secretary's authority
over American Samoa was rescinded in the 1983 Omnibus
Territories Act which also provided that any future changes to
American Samoa's Constitution be made only by an act of the
Congress.
Article IV, section 3, clause 2 of the U.S. Constitution,
known commonly as the Territorial Clause, gives Congress
plenary authority over U.S. territories. Relying on this
authority, the Congress has historically passed laws providing
for a greater measure of self- government by territorial
governments. For example, under article II, section 1 of the
Revised American Samoan Constitution, the Fono was given broad
authority to pass legislation with respect to subjects of local
application. This authority provides the ASG the ability to
issue qualified bonds under section 141 of the Internal Revenue
Code.
Historically, Congress has also passed legislation to
facilitate economic development in U.S. territories by
providing assistance and removing statutory impediments. For
instance, under current law, bonds issued by Guam, the Virgin
Islands, Puerto Rico, and the Commonwealth ofthe Northern
Mariana Islands are exempted from taxation by State and local
governments. While the authority to issue similar bonds has been
provided to American Samoa, the interest earned from American Samoan
bonds is subject to taxation by the several States, Washington D.C. and
the other territories. The Committee sees such taxation as an obstacle
to the continuing development of American Samoa's economy.
The enactment of H.R. 982 will exempt bonds issued by
American Samoa from taxation by State and local governments.
H.R. 982 will provide parity for American Samoa.
Committee Action
H.R. 982 was introduced on February 27, 2003, by Delegate
Eni F.H. Faleomavaega (D-AS). The bill was referred to the
Committee on Resources and additionally to the Committee on the
Judiciary. On September 25, 2003, the Full Resources Committee
met to consider the H.R. 982. No amendments were offered and
the bill was then ordered favorably reported to the House of
Representatives by unanimous consent.
While there were no hearings on H.R. 982 in the 108th
Congress, in the 107th Congress, a Subcommittee of the
Committee on the Judiciary held a hearing on identical
legislation (H.R. 1448) on March 6, 2002. Also in the 107th
Congress, the Committee on Resources favorably reported H.R.
1448 on March 3, 2002.
Section-by-Section Analysis
Section 1. Clarification of tax treatment of bonds and other
obligations issued by government of American Samoa
Section 1 amends subsection 202 (b) of Public Law No. 98-
4545 (48 U.S.C. 1670) to exempt bonds issued by the government
of American Samoa from State and local taxes. This exemption
does not apply to gift, estate, inheritance, legacy,
succession, or other wealth transfer taxes.
Section 2. Effective date
Section 2 makes the legislation effective upon its
enactment into law.
Committee Oversight Findings and Recommendations
Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of
rule XIII of the Rules of the House of Representatives, the
Committee on Resources' oversight findings and recommendations
are reflected in the body of this report.
Constitutional Authority Statement
Article I, section 8 and article IV, section 3 of the
Constitution of the United States grant Congress the authority
to enact this bill.
Compliance With House Rule XIII
1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the
Rules of the House of Representatives requires an estimate and
a comparison by the Committee of the costs which would be
incurred in carrying out this bill. However, clause 3(d)(3)(B)
of that rule provides that this requirement does not apply when
the Committee has included in its report a timely submitted
cost estimate of the bill prepared by the Director of the
Congressional Budget Office under section 402 of the
Congressional Budget Act of 1974.
2. Congressional Budget Act. As required by clause 3(c)(2)
of rule XIII of the Rules of the House of Representatives and
section 308(a) of the Congressional Budget Act of 1974, this
bill does not contain any new budget authority, spending
authority, credit authority, or an increase or decrease in
revenues or tax expenditures.
3. General Performance Goals and Objectives. This bill does
not authorize funding and therefore, clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives does not
apply.
4. Congressional Budget Office Cost Estimate. Under clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 403 of the Congressional Budget Act
of 1974, the Committee has received the following cost estimate
for this bill from the Director of the Congressional Budget
Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 26, 2003.
Hon. Richard W. Pombo,
Chairman, Committee on Resources,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 982, a bill to
clarify the tax treatment of bonds and other obligations issued
by the government of American Samoa.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Matthew
Pickford (for federal costs) and Marjorie Miller (for the state
and local impact).
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.
H.R. 982--A bill to clarify the tax treatment of bonds and other
obligations issued by the government of American Samoa
H.R. 982 would amend current law to make bonds issued by
the government of American Samoa exempt from state, local, and
territorial income tax. The bill would not affect federal
taxes, and CBO estimates that implementing H.R. 982 would have
no impact on the federal budget.
H.R. 982 contains an intergovernmental mandate as defined
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates
that the cost of the mandate would be well below the threshold
established in that act ($59 million in 2003, adjusted annually
for inflation). This mandate is a preemption of state and local
taxing authority. The bill would exempt the interest on any
bond issued by the government of American Samoa from state,
local, and territorial taxes. Because American Samoa generally
has only a few million dollars in bonds outstanding at any
time, this preemption would not have a significant cost for
state, local, or territorial governments. Enacting this bill
would benefit the government of American Samoa by reducing its
borrowing costs. The bill contains no private-sector mandates
as defined in UMRA.
On May 9, 2003, CBO transmitted a cost estimate for H.R.
982 as ordered reported by the House Committee on the Judiciary
on May 7, 2003. The two versions of the legislation are
identical, as are the cost estimates.
The CBO staff contacts for this estimate are Matthew
Pickford (for federal costs) and Marjorie Miller (for the state
and local impact). This estimate was approved by Peter H.
Fontaine, Deputy Assistant Director for Budget Analysis.
Compliance With Public Law 104-4
This bill contains no unfunded mandates, as defined by
Public Law 104-4.
Preemption of State, Local or Tribal Law
This bill is not intended to preempt any tribal law. It
does preempt state and local taxing authority, but the
Congressional Budget Office has concluded that ``this
preemption would not have a significant cost for state, local
or territorial governments.''
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SECTION 202 OF THE ACT OF OCTOBER 5, 1984
(Public Law 98-454)
AN ACT To enhance the economic development of Guam, the Virgin Islands,
American Samoa, the Northern Mariana Islands, and for other purposes.
* * * * * * *
Sec. 202. (a) * * *
[(b)(1) Except as provided in paragraph (2), any obligation
shall be exempt from all State and local taxation in effect on
or after October 1, 1984.
[(2) Any obligation issued under subsection (a) shall not be
exempt from State or local gift, estate, inheritance, legacy,
succession, or other wealth transfer taxes.
[(3) For purposes of this subsection--
[(A) The term ``State'' includes the District of
Columbia.
[(B) The taxes imposed by counties, municipalities,
or any territory, dependency, or possession of the
United States shall be treated as local taxes.]
(b) Exemption of All Bonds From Income Taxation by State and
Local Governments.--
(1) In general.--The interest on any bond or other
obligation issued by or on behalf of the Government of
American Samoa shall be exempt from taxation by the
Government of American Samoa and the governments of any
of the several States, the District of Columbia, any
territory or possession of the United States, and any
subdivision thereof.
(2) Exemption applicable only to income taxes.--The
exemption provided by paragraph (1) shall not apply to
gift, estate, inheritance, legacy, succession, or other
wealth transfer taxes.
* * * * * * *