[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4420 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 4420

  To amend the Internal Revenue Code of 1986 to allow a deduction for 
State and local general sales taxes and to compensate for the resulting 
  revenue loss by providing that only 75 percent of the amount of all 
         State and local taxes shall be allowed as a deduction.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 12, 1994

Mr. Smith of Michigan 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 allow a deduction for 
State and local general sales taxes and to compensate for the resulting 
  revenue loss by providing that only 75 percent of the amount of all 
         State and local taxes shall be allowed as a deduction.

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

SECTION 1. RESTORATION OF DEDUCTION FOR STATE AND LOCAL GENERAL SALES 
              TAXES; LIMITATION ON DEDUCTION FOR ALL STATE AND LOCAL 
              TAXES.

    (a) Allowance of Deduction for State and Local General Sales 
Taxes.--
            (1) In general.--Subsection (a) of section 164 of the 
        Internal Revenue Code of 1986 (relating to deduction for taxes) 
        is amended by redesignating paragraphs (4) and (5) as 
        paragraphs (5) and (6), respectively, and by inserting after 
        paragraph (3) the following new paragraph:
            ``(4) 75 percent of the amount of State and local general 
        sales taxes.''.
            (2) Definitions.--Subsection (b) of section 164 of such 
        Code is amended by adding at the end thereof the following new 
        paragraphs:
            ``(5) Definitions relating to general sales taxes.--For 
        purposes of subsection (a)(4)--
                    ``(A) In general.--The term `general sales tax' 
                means a tax imposed at one rate in respect of the sale 
                at retail of a broad range of classes of items.
                    ``(B) Special rules for food, etc.--In the case of 
                items of food, clothing, medical supplies, and motor 
                vehicles--
                            ``(i) the fact that the tax does not apply 
                        in respect of some or all of such items shall 
                        not be taken into account in determining 
                        whether the tax applies in respect of a broad 
                        range of classes of items, and
                            ``(ii) the fact that the rate of tax 
                        applicable in respect of some or all of such 
                        items is lower than the general rate of tax 
                        shall not be taken into account in determining 
                        whether the tax is imposed at one rate.
                    ``(C) Items taxed at different rates.--Except in 
                the case of a lower rate of tax applicable in respect 
                of an item described in subparagraph (B), no deduction 
                shall be allowed under this section for any general 
                sales tax imposed in respect of an item at a rate other 
                than the general rate of tax.
                    ``(D) Compensating use taxes.--A compensating use 
                tax in respect of an item shall be treated as a general 
                sales tax. For purposes of the preceding sentence, the 
                term `compensating use tax' means, in respect of any 
                item, a tax which--
                            ``(i) is imposed on the use, storage, or 
                        consumption of such item, and
                            ``(ii) is complementary to a general sales 
                        tax, but only if a deduction is allowable under 
                        subsection (a)(4) in respect of items sold at 
                        retail in the taxing jurisdiction which are 
                        similar to such item.
                    ``(E) Special rule for motor vehicles.--In the case 
                of motor vehicles, if the rate of tax exceeds the 
                general rate, such excess shall be disregarded and the 
                general rate shall be treated as the rate of tax.
            ``(6) Separately stated general sales taxes.--If the amount 
        of any general sales tax is separately stated, then, to the 
        extent that the amount so stated is paid by the consumer 
        (otherwise than in connection with the consumer's trade or 
        business) to his seller, such amount shall be treated as a tax 
        imposed on, and paid by, such consumer.''.
    (b) Limitation on Deductions.--Paragraphs (1), (2), and (3) of 
section 164(a) of such Code are each amended by inserting ``75 percent 
of the amount of'' before ``State and local''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

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