[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4358 Introduced in House (IH)]







106th CONGRESS
  2d Session
                                H. R. 4358

  To amend the Internal Revenue Code of 1986 to promote the economic 
                 recovery of the District of Columbia.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 2, 2000

  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 promote the economic 
                 recovery of the District of Columbia.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Omnibus District of Columbia Tax 
Incentive Recovery Act of 2000''.

      TITLE I--IMPOSITION AND WITHHOLDING OF NONRESIDENT WAGE TAX

SEC. 101. SHORT TITLE.

    This title may be cited as the ``District of Columbia Nonresident 
Tax Credit Act of 2000''.

SEC. 102. IMPOSITION AND WITHHOLDING OF NONRESIDENT WAGE TAX.

    (a) Imposition of Tax.--Every nonresident individual employed in 
the District of Columbia is subject to a tax equal to 2 percent of 
wages from employment in the District of Columbia and 2 percent of net 
earnings from self-employment in the District of Columbia, so long as 
there is a corresponding Federal credit.
    (b) Exception.--Individuals excluded from the definition of 
``resident'' under the second sentence of section 47-1801.4(17), 
District of Columbia Code, partners in partnerships and sole 
proprietors subject to tax under sections 47-1808.1 through 47-1808.6, 
District of Columbia Code, and members of the military service on 
active duty are not subject to the tax imposed in this section.
    (c) Assessment and Collection of Nonresident Wage Tax.--Every 
employer making payment of wages and every nonresident partner and sole 
proprietor of unincorporated businesses located in the District shall 
deduct and withhold the nonresident wage tax imposed by this section 
and make returns of tax in accordance with regulations prescribed by 
the Mayor of the District of Columbia.
    (d) Definitions.--
            (1) Employer.--The term ``employer'' has the meaning given 
        such term in section 3401(b) of the Internal Revenue Code of 
        1986.
            (2) Employment in the district of columbia and self-
        employment in the district of columbia.--The terms ``employment 
        in the District of Columbia'' and ``self-employment in the 
        District of Columbia'' shall mean employment or self-employment 
        involving labor or personal services performed in the District 
        of Columbia during the taxable year except that such terms 
        shall not include labor or personal services performed by a 
        nonresident in the District of Columbia for a period not 
        exceeding 45 days during the taxable year.
            (3) Net earnings from self-employment.--The term ``net 
        earnings from self-employment'' shall mean such net earnings as 
        defined in section 1402 of the Internal Revenue Code of 1986.
            (4) Nonresident.--The term ``nonresident'' has the meaning 
        given such term in section 47-1801.4(18), District of Columbia 
        Code.
            (5) Wages.--The term ``wages'' has the meaning given such 
        term in section 3401(a) of the Internal Revenue Code of 1986.

SEC. 103. FEDERAL CREDIT CORRESPONDING TO IMPOSITION OF NONRESIDENT 
              WAGE TAX.

    Section 31 of the Internal Revenue Code of 1986 (relating to 
determination of tax liability) is amended by adding at the end the 
following:
    ``(d) Tax Withheld at Source on Nonresidents of the District of 
Columbia.--There shall be allowed as a credit against the tax imposed 
by this subtitle an amount equal to the amount withheld at source under 
section 102 of the District of Columbia Nonresident Tax Credit Act of 
2000 (relating to the withholding of tax on nonresidents of the 
District of Columbia employed within the District). No deduction shall 
be allowed under this chapter for any tax for which credit is allowed 
under this subsection.''.

SEC. 104. EFFECTIVE DATE.

    This title and the amendments made by this title shall apply to 
taxable years beginning after December 31, 2000.

  TITLE II--MODIFICATIONS TO ENTERPRISE ZONE BENEFITS AVAILABLE WITH 
                  RESPECT TO THE DISTRICT OF COLUMBIA

SEC. 201. SHORT TITLE.

    This title may be cited as the ``District of Columbia City-Wide 
Enterprise Zone Act of 2000''.

SEC. 202. MODIFICATIONS TO ENTERPRISE ZONE BENEFITS AVAILABLE WITH 
              RESPECT TO THE DISTRICT OF COLUMBIA.

    (a) Entire District of Columbia Treated as Empowerment Zone.--
            (1) In general.--Subsection (a) of section 1400 of the 
        Internal Revenue Code of 1986 (relating to establishment of DC 
        Zone) is amended to read as follows:
    ``(a) Designation.--For purposes of this title--
            ``(1) the District of Columbia--
                    ``(A) is hereby designated as the District of 
                Columbia Enterprise Zone, and
                    ``(B) shall be treated as an empowerment zone 
                designated under subchapter U, and
            ``(2) the terms `District of Columbia Enterprise Zone' and 
        `DC Zone' mean the District of Columbia.''
            (2) Conforming amendments.--
                    (A) Section 1400 of such Code is amended by 
                striking subsections (b) and (c) and by redesignating 
                subsections (d), (e), and (f) as subsections (b), (c), 
                and (d), respectively.
                    (B) Subsection (b) of section 1400 of such Code, as 
                redesignated by subparagraph (A), is amended to read as 
                follows:
    ``(b) Special Rule for Application of Employment Credit.--In the 
case of the DC Zone, section 1396 (relating to empowerment zone 
employment credit) shall be applied by substituting `20' for `15' in 
the table contained in section 1396(b). The preceding sentence shall 
apply only with respect to qualified zone employees, as defined in 
section 1396(d), determined by treating no area other than the DC Zone 
as an empowerment zone or enterprise community.''
                    (C) Paragraph (2) of section 1400(d) of such Code, 
                as redesignated by subparagraph (A), is amended by 
                striking ``the census tracts referred to in subsection 
                (b)(1) as an enterprise community'' and inserting ``the 
                enterprise community in the District of Columbia''.
                    (D) Section 1400B of such Code is amended by 
                striking subsection (d) and by redesignating 
                subsections (e), (f), and (g) as subsections (d), (e), 
                and (f), respectively.
                    (E) Paragraph (1) of section 1400B(c) of such Code 
                is amended by striking ``section 1400(e)'' and 
                inserting ``section 1400(c)''.
    (b) Capital Gains Exclusion Available for Assets Held More Than 2 
Years.--
            (1) In general.--Subsection (a) of section 1400B of such 
        Code is amended by striking ``5 years'' and inserting ``2 
        years''.
            (2) Conforming amendment.--Paragraph (7) of section 
        1400B(b) of such Code is amended--
                    (A) by striking ``5-year'' in the heading and 
                inserting ``2-year'', and
                    (B) by striking ``5-year'' in the text and 
                inserting ``2-year''.
    (c) Modifications to Definition of DC Zone Business.--Subsection 
(c) of section 1400B of such Code is amended to read as follows:
    ``(c) DC Zone Business.--For purposes of this section--
            ``(1) In general.--The term `DC Zone business' means any 
        entity which is an enterprise zone business (as defined in 
        section 1397B), determined--
                    ``(A) after the application of section 1400(c),
                    ``(B) without regard to subsections (b)(1) and 
                (d)(2)(B) of section 1397B, and
                    ``(C) by treating no area other than the District 
                of Columbia as an empowerment zone or enterprise 
                community.
            ``(2) Special rule for businesses holding intangibles.--
        Paragraph (4) of section 1397B(d) shall not apply in 
        determining whether a business is a DC Zone business if--
                    ``(A) at least 80 percent of the employees of such 
                business are residents of the District of Columbia, and
                    ``(B) at least 50 percent of the wages (as defined 
                by section 3401(a)) paid by such business are paid to 
                residents of the District of Columbia.''
    (d) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by section 701 of the 
Taxpayer Relief Act of 1997.

SEC. 203. 5-YEAR EXTENSION OF ENTERPRISE ZONE TREATMENT.

    (a) Effective Period of Designation.--Subsection (f) of section 
1400 of the Internal Revenue Code of 1986 is amended by striking 
``December 31, 2002'' each place it appears and inserting ``December 
31, 2007''.
    (b) Economic Development Bonds.--Subsection (b) of section 1400A of 
such Code is amended by striking ``December 31, 2002'' and inserting 
``December 31, 2007''.
    (c) Zero Percent Capital Gains Rate.--
            (1) Paragraphs (2)(A)(i), (3)(A), (4)(A)(i), and 
        (4)(B)(i)(I) of section 1400B(b) of such Code are each amended 
        by striking ``January 1, 2003'' and inserting ``January 1, 
        2008''.
            (2) Subsections (e)(2) and (g) of section 1400B of such 
        Code are each amended by striking ``2007'' each place it 
        appears and inserting ``2012''.

  TITLE III--LIMITATION ON INCOME TAX IMPOSED ON INDIVIDUALS WHO ARE 
                 RESIDENTS OF THE DISTRICT OF COLUMBIA

SEC. 301. SHORT TITLE.

    This title may be cited as the ``District of Columbia Economic 
Recovery Act of 2000''.

SEC. 302. LIMITATION ON INCOME TAX IMPOSED ON INDIVIDUALS 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 following 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 individual 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 
        adjusted gross income.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Resident of district of columbia.--An individual is a 
        resident of the District of Columbia 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 Columbia 
                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 without regard to 
                this section), reduced by
                    ``(B) the aggregate credits allowable under part IV 
                (other than section 31).
            ``(3) Exemption amount.--The term `exemption 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 married 
                        individual and is not a surviving spouse, and
                            ``(ii) a married individual filing a 
                        separate 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 liability 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 `regular 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 adjusted gross income reduced by 
the sum of--
            ``(1) non-District-sourced adjusted gross income,
            ``(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 Income.--For purposes of 
this section, the term `non-District-sourced adjusted gross income' 
means gross income of the taxpayer from sources outside the District of 
Columbia 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 section--
            ``(1) Retirement income and other income not sourced under 
        subsection.--The source of any income not specifically provided 
        for in this subsection 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 earnings from self-
                employment (as defined in section 1402)), shall be 
                sourced at the place such services are performed.
                    ``(B) Services performed in washington-baltimore 
                area treated as performed in the district of 
                columbia.--Services performed in the Washington-
                Baltimore area shall be treated as performed in the 
                District of Columbia.
                    ``(C) Individuals performing 80 percent of services 
                within washington-baltimore area.--If, during any 
                taxable year, at least 80 percent of the hours of 
                service performed 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 Consolidated 
                        Metropolitan Statistical Area (as designated by 
                        the Office of Management and Budget), and
                            ``(ii) St. Mary's County, Maryland.
            ``(3) Interest.--
                    ``(A) In general.--Interest received or accrued 
                during the taxable year shall be treated as from 
                sources outside the District of Columbia.
                    ``(B) Exception for small amounts of non-district-
                sourced interest.--Interest 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 interest does not exceed $400.
                    ``(C) Exception for interest paid by district of 
                columbia businesses and residents.--
                            ``(i) Businesses.--In the case of interest 
                        paid during a calendar year by a debtor which 
                        was required to file (and filed) a franchise 
                        tax return with the District of Columbia for 
                        the debtor's taxable year ending with or within 
                        the prior calendar year, an amount equal to 
the D.C. 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 
taxpayer 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 
                                debtor's taxable year ending during the 
                                prior calendar year, and
                                    ``(II) which is not required to 
                                file a franchise tax return with the 
                                District 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 return with the District of Columbia for 
                such debtor's taxable year ending during such calendar 
                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 Columbia.
                    ``(B) Exception for small amounts of non-district-
                sourced dividends.--Dividends 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 dividends paid during a calendar year by a 
                corporation which was required to file (and filed) a 
                franchise tax return with the District of Columbia 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 before January 31 of the year following the 
                calendar 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 property.--
                    ``(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 
                proprietorship, 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 columbia 
                businesses.--If the taxpayer is required 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, income from such 
                partnership (other than income which is included in net 
                earnings from self-employment 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 taxpayer's taxable 
                        year to the extent of the D.C. percentage of 
                        the taxpayer's distributive share of the 
                        partnership income.
                            ``(ii) Subparagraph (A) shall not apply to 
                        a partnership which was not required to file a 
                        franchise tax return with the District of 
Columbia for the partnership's taxable year ending with or within the 
taxpayer's taxable year to the extent of the taxpayer's distributive 
share of partnership 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 shareholders 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 
        domiciled at the time of his death.
            ``(12) Income from a trust.--Income (other than retirement 
        income) from a trust shall be treated 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 `retirement income' has 
        the meaning given such term by section 114(b)(1) of title 4, 
        United States Code (determined without regard to subparagraph 
        (I) thereof).
            ``(2) D.C. percentage.--The term `D.C. percentage' means 
        the percentage determined by dividing--
                    ``(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 regulations 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 regard to section 59B.''
            (2) The table of parts for subchapter A of chapter 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. 303. ANNUAL TREASURY STUDY ON IMPACT OF TAX REDUCTIONS 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 imposed 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 individuals 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 Columbia.
            (4) Tax revenues to the District of Columbia.
            (5) The number of new businesses in the District of 
        Columbia, the number and size of establishments in the District 
        of Columbia, and the growth of existing businesses as measured 
        by growth in employment and taxes payable to the District of 
        Columbia.
            (6) The number and characteristics of households 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 employment 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 property 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 Washington 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 Oversight, of the House of 
        Representatives, and
            (2) the Committee on Finance, and the Committee 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).

  TITLE IV--FIRST-TIME HOMEBUYER CREDIT FOR DISTRICT OF COLUMBIA MADE 
                               PERMANENT

SEC. 401. SHORT TITLE.

    This Act may be cited as the ``District of Columbia $5,000 
Homebuyer Credit Act of 2000''.

SEC. 402. FIRST-TIME HOMEBUYER CREDIT FOR DISTRICT OF COLUMBIA MADE 
              PERMANENT.

    Subsection (i) of section 1400C of the Internal Revenue Code of 
1986 (relating to first-time homebuyer credit for District of Columbia) 
is amended by striking ``, and before January 1, 2002''.
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