[Congressional Record Volume 140, Number 141 (Monday, October 3, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[Congressional Record: October 3, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
           LIMITING STATE TAXATION OF CERTAIN PENSION INCOME

  Mr. BROOKS. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 546) to limit State taxation of certain pension income, and 
for other purposes, as amended.
  The Clerk read as follows:

                                H.R. 546

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

     SECTION 1. LIMITATION ON STATE INCOME TAXATION OF CERTAIN 
                   PENSION INCOME.

       (a) Amendment.--Chapter 4 of title 4, United States Code, 
     is amended by adding at the end the following:

     Sec. 114. Limitation on State income taxation of certain 
       pension income

       ``(a) Except as provided in subsection (b), no State may 
     impose an income tax on any qualified pension income of an 
     individual who is not a resident or domiciliary of such State 
     (as determined under the laws of such State).
       ``(b)(1) Subsection (a) shall not apply to the extent that 
     the aggregate amount of qualified pension income of an 
     individual for any calendar year exceeds $30,000. There shall 
     not be taken into account under the preceding sentence any 
     amount which is exempt from State taxation by reason of other 
     Federal law.
       ``(2) If more than 1 State would (but for this section) 
     impose an income tax on qualified pension income received by 
     an individual during a calendar year, the dollar amount 
     otherwise applicable under paragraph (1) for such calendar 
     year shall be allocated among such States in such amounts as 
     such individual may determine.
       ``(3) If more than 1 individual receives qualified pension 
     income during a calendar year which is attributable to 
     services performed by 1 individual--
       ``(A) all such individual receiving such income shall be 
     treated as 1 individual, and
       ``(B) the dollar amount applicable under paragraph (1) 
     shall be allocated among such individuals in proportion to 
     their respective shares of such income received during such 
     calendar year.
       ``(c) For purposes of this section--
       ``(1) The term `qualified pension income' means any income 
     from--
       ``(A) a qualified trust under section 401(a) of the 
     Internal Revenue Code that is exempt under section 501(a) 
     from taxation;
       ``(B) a simplified employee pension as defined in section 
     408(k) of such Code;
       ``(C) an annuity plan described in section 403(a) of such 
     Code;
       ``(D) an annuity contract described in section 403(b) of 
     such Code;
       ``(E) an individual retirement plan described in section 
     7701(a)(37) of such Code;
       ``(F) an eligible deferred compensation plan (as defined in 
     section 457 of such Code);
       ``(G) a governmental plan (as defined in section 414(d) of 
     such Code); or
       ``(H) a trust described in section 501(d)(18) of such Code.

     Such term includes any retired or retainer pay of a member or 
     former member of a uniform service computed under chapter 71 
     of title 10, United States Code.
       ``(2) The term `income tax' has the meaning given such term 
     by section 110(c).
       ``(3) The term `State' includes any political subdivision 
     of a State, the District of Columbia, and the possessions of 
     the United States.
       ``(d) In the case of any calendar year after 1995, the 
     dollar amount contained in subsection (b) shall be increased 
     by the amount determined by the Secretary of the Treasury to 
     be equal to such dollar amount, multiplied by the cost-of-
     living adjustment determined under section 1(f)(3) of such 
     Code by substituting `calendar year 1994' for `calendar year 
     1992' in subparagraph (B) thereof. If any increase determined 
     under the preceding sentence is not a multiple of $1,000, 
     such increase shall be rounded to the nearest multiple of 
     $1,000. Not later than December 1 of each calendar year, the 
     Secretary of the Treasury shall publish in the Federal 
     Register the amount determined under this subsection which is 
     applicable to the following calendar year.
       ``(e) Nothing in this section shall be construed as having 
     any effect on the application of section 514 of the Employee 
     Retirement Income Security Act of 1974.''
       ``(b) Conforming Amendment.--The table of sections for 
     chapter 4 of title 4, United States Code, is amended by 
     adding at the end the following:

``114. Limitation on State income taxation of certain pension 
              income.''.

       ``(c) Effective Date.--The amendments made by this section 
     shall apply to amounts received after December 31, 1994.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Texas [Mr. Brooks] will be recognized for 20 minutes, and the gentleman 
from New York [Mr. Fish] will be recognized for 20 minutes.
  The Chair recognizes the gentleman from Texas [Mr. Brooks].
  Mr. BROOKS. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. BROOKS asked and was given permission to revise and extend his 
remarks.)
  Mr. BROOKS. Mr. Speaker, I rise in support of H.R. 546 which 
restricts the authority of States to tax the pension income of 
nonresidents. The bill was introduced and tirelessly advocated by the 
gentlelady from Washington [Mrs. Unsoeld]. She deserves great credit in 
this body and from retirees all across the Nation for her good work on 
the issue.
  The Supreme Court has upheld the right of States to tax income earned 
within their borders by those who live in other States. A number of 
States, relying on this source-based theory of taxation, presently tax 
the pension income of former residents--individuals who have retired 
and moved to other States. Unfortunately, these pension source taxes 
frequently saddle lower income retirees with unreasonable burdens.
  As reported by the Judiciary Committee, H.R. 546 addresses the source 
tax issue in a manner that preserves vital State taxing interests while 
providing much-needed relief to thousands of our Nation's retirees.
  It would prohibit States from taxing the first $30,000 in annual 
qualified pension income received by any former resident--whether in 
the form of a monthly pension check or a lump-sum payment. The 
exemption would be adjusted annually to account for inflation.
  Mr. Speaker, on three separate occasions in the past two Congresses, 
the Senate has approved source tax restrictions. The substitute before 
us was adopted by the Judiciary Committee with board bipartisan 
support. I urge its adoption by the full House.
  Mr. Speaker, I reserve the balance of my time.

                              {time}  1230

  Mr. FISH. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, our consideration today of H.R. 546 is the culmination 
of many years of hard work by my colleague from Nevada, Mrs. Vucanovich 
and the sponsor of this bill, Mrs. Unsoeld. I have been a supporter and 
cosponsor of this legislation for the past several Congresses, and I am 
pleased that the House is finally voting on this measure today.
  Mr. Speaker, since the mid-1980's, some States have attempted to 
collect taxes on the pension income of individuals who are no longer 
residents of those States. This practice affected so many retirees 
that, in 1988, the organization, Retirees to Eliminate State Income 
Source Tax [RESIST], was formed to fight it. That organization now has 
thousands of members nationwide, and the support of other national 
organizations including the National Association of Retired Federal 
Employees and the National Taxpayers Union.
  These citizens argue that it is unfair for a State to tax the 
retirement income of individuals who have moved to a different State, 
and who no longer benefit from services of the taxing State. Some 
States, like California, have been particularly aggressive in 
attempting to collect taxes on the pension income of retirees who once 
worked in California but have since moved to other States to live out 
their retirement years. These States consider pension income to be 
deferred compensation, upon which taxes were withheld to encourage 
participation in retirement plans. They argue that they should not be 
deprived of this revenue simply because they chose to tax it at a later 
time.
  H.R. 546 strikes a compromise between nonresident pensioners and 
State taxing authorities by imposing a ceiling of $30,000 below which 
nonresident retiree's pension income may not be taxed. The legislation 
does not distinguish between single lump-sum payouts or equally 
distributed payouts, it simply imposes a $30,000 ceiling across-the-
board. This limitation is the result of a substitute amendment adopted 
in the Judiciary Committee and represents a compromise which is 
supported by the sponsors of the legislation and by citizens' 
organizations which initiated this legislative effort.
  Mr. Speaker, H.R. 546 ensures that nonresident pensioners are treated 
fairly, and that has been the goal of this legislation from the 
beginning. I support H.R. 546 and urge my colleagues to support the 
bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. BROOKS. Mr. Speaker, I yield such time as she may consume to the 
gentlewoman from Washington [Mrs. Unsoeld].
  (Mrs. UNSOELD asked and was given permission to revise and extend her 
remarks.)
  Mrs. UNSOELD. Mr. Speaker, I thank the chairman for yielding. I rise 
today in support of H.R. 546, my legislation to relieve our Nation's 
retirees from onerous out-of-State taxes on their pensions.
  My thanks to Representative Synar, Representative Vucanovich, and 
Senator Reid for their hard work on this legislation.
  But most of all, I thank Chairman Brooks. With 10,000 more important 
bigger pieces of legislation all clamoring for his attention, he did 
not forget these people who worked hard all their lives and earned 
their pensions and a right to retire with peace of mind and security.
  I am also particularly grateful for the spirit of cooperation and 
compromise that produced this final version of the bill and allowed it 
to come to the floor today.
  The American Revolution was fought some 200 years ago in large part 
to end the injustice of taxation without representation. But because of 
source taxes, hundreds of thousands of retired Americans are still 
fighting that battle.
  For these people it is blatantly unfair that several States assess 
so-called source taxes on retirees who once worked within their borders 
but now live in other States. These taxes are an injustice because the 
retirees forced to pay them are not allowed to vote in the States 
levying the income taxes, nor do they benefit from those States' police 
or roads or other services.
  The source tax relief legislation on the floor today is a strong 
expression of the American tradition that people should be able to live 
where they want and enjoy the pension incomes they have earned over a 
lifetime of work.
  Once again, I thank Chairman Brooks for his leadership in coming to 
the help of these freedom-loving Americans and I urge this House to 
support this effort to restore the rights of our Nation's retirees.
  Mr. FISH. Mr. Speaker, I forget how many years ago it was, certainly 
two or three Congresses ago, that the gentlewoman from Nevada [Mrs. 
Vucanovich] approached our committee and asked for a hearing on this 
subject. Largely through her tenacity and interest in this legislation, 
we are here today finally as a House of Representatives to deal with 
this issue.
  Mr. Speaker, I yield such time as she may consume to the gentlewoman 
from Nevada [Mrs. Vucanovich].
  Mrs. VUCANOVICH. I thank the gentleman for yielding this time to me.
  Mr. Speaker, I am pleased to lend my strong support to H.R. 546, a 
measure that curtails the source tax. Source taxing States levy taxes 
on the pension income of retirees who no longer reside in the taxing 
State.
  Just as I have in every Congress since 1988, at the beginning of the 
103d Congress I introduced H.R. 702, legislation that would 
prohibit States from collecting the source tax. My bill has 179 
bipartisan cosponsors. Other similar measures that have been introduced 
in this Congress also share widespread support from both sides of the 
aisle.

  I have heard from countless retirees, not only in my own State of 
Nevada, but also from other parts of the country, who are 
understandably irate at having to pay taxes to a State they do not live 
in--and in many cases these people moved from the taxing State years 
ago.
  The legislation we are considering this afternoon goes a long way in 
protecting retirees from this unjust tax, and I commend the chairman 
and ranking member of the Judiciary Committee for moving it forward.
  The only substantive difference between my bill, H.R. 702, and the 
measure we are considering today, is that H.R. 546 includes a $30,000 
annual ceiling on the amount of pension income exempted from the source 
tax. While my bill includes no such ceiling, I fully and strongly 
support H.R. 546.
  Even with the ceiling, it is estimated that more than 80 percent of 
all those subject to the source tax will no longer have to pay these 
taxes to a State in which they no longer live.
  Moreover, the $300,000 ceiling is indexed for inflation. Since many, 
if not most, pensions do not receive a full inflation adjustment each 
year, the net effect of the inflation adjustment in the compromise 
amendment will be to gradually increase the real value of the ceiling.
  Finally, Mr. Speaker, I would like to thank Bill Hoffman of Carson 
City, the president of Retirees to Eliminate State Income Source Tax 
[RESIST] of America. RESIST has done more than any other organization 
to see this bill pass, and I want Bill to know how much I appreciate 
his tireless efforts to put an end to the source tax.
  Mr. Speaker, I want to again thank the gentleman from Texas [Mr. 
Brooks], the chairman of the committee, and the ranking member, the 
gentleman from New York [Mr. Fish].
  Mr. BROOKS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Nevada [Mr. Bilbray] who has worked tirelessly trying to 
draft this legislation. He is a stalwart leader.
  (Mr. BILBRAY asked and was given permission to revise and extend his 
remarks.)
  Mr. BILBRAY. I thank the chairman for yielding this time to me.
  Mr. Speaker, I rise today in strong support of H.R. 546, a bill which 
prohibits States from levying source taxes or taxes on the pension 
income of retirees who no longer reside in the taxing State or, in some 
cases, have never actually lived in the State but their pension funds 
are based in that State.
  It often comes as a shock to retirees who left the State where they 
were employed to come to a State like Nevada, with no income taxes, and 
receive a notice in the mail that former State of residence expects 
them to continue paying taxes. Also in some cases, they actually have a 
tax bill based on their entire income, even that part which is not part 
of the retirement fund. With penalties and interest and so forth, it is 
far in excess of the amount paid. These people come to my office 
constantly in dire shape, some with very limited pensions. The fact is 
it was unfair from the very beginning.
  As I stated before, you do not even have to have lived in that State 
at sometime in your life. You could just have your pension fund based 
in that State and they would turn around and tax you as if you had been 
a resident all along.
  I know Senator Bryan, Senator Reid, and I met with the chairman of 
the committee, the gentleman from Texas, Mr. Brooks, just a few months 
ago asking for his help in moving this legislation. I commend my 
colleague, the gentlewoman from Nevada [Mrs. Vucanovich], for the work 
she has done, and the gentleman from New York [Mr. Fish], for his 
cooperation. We will sorely miss him in this House, but hope we will 
have another Fish taking his place. I again would like to thank, 
gratefully, our chairman for the help he has given us in this. I know 
he will be glad now that I will not be constantly grabbing him every 
time he comes to the floor asking where the bill on source tax was and 
what can we do about it.

                              {time}  1240

  Mr. Speaker, I thank the committee for their work on this, and, Mr. 
Speaker, I yield back the balance of my time.
  Mr. SYNAR. Mr. Speaker, the subject of State source taxation is an 
issue that has long been before this Congress and it is an issue that 
will continue to hound us until we pass into law a reasonable 
compromise solution.
  As my colleagues know, the right of States to raise tax revenues in a 
manner of their own choosing is essential to preserving a strong and 
vibrant Federal system in this Nation. However, there are times when 
State taxing policies may impose unreasonable burdens on taxpayers. I 
believe taxing the pension income of former residents is one of those 
times. Therefore, I feel this is one of those infrequent situations 
where commonsense Federal action is necessary.
  But any action we take here in Washington must be reasonable and 
balanced so as to preserve the legitimate interests States have in this 
issue. I believe the compromise bill we have before us today passes 
these two tests.
  As most of my colleagues know, Mrs. Unsoeld, Mrs. Vucanovich, and 
Senator Reid from the other body have led the efforts to reform State 
source tax practices. Their efforts have been tireless and I am 
heartened that they have agreed to support the compromise version of 
the legislation before us today.
  The approach which they originally championed would allow retirees 
who elect to receive their pension income in the form of periodic 
payments to exempt all of that income from any State income tax applied 
by a State in which they formerly resided. Additionally, their approach 
mandates that those retirees who elect to take a one-time lump-sum 
payment or an irregular series of payments over the years would only 
enjoy a one-time exemption of $25,000 and all amounts in excess of this 
exemption would be subject to tax.
  While I understand the motivations behind this approach, I have some 
serious concerns about an approach that hinges source tax protection on 
the form and the timing of pension payments. I also think that 
relatively high-income retirees should be subject to some tax.
  Therefore the amendment I offered during the Judiciary Committee's 
consideration of this legislation, which is before us today provides an 
annual exemption of $30,000 that would apply to both periodic payments 
and lump sum distributions. In other words, the first $30,000 in 
qualified pension income received by an individual would be exempt from 
source taxes by a State of former residence. Amounts in excess of this 
exemption would remain taxable. Additionally this exemption amount 
would be adjusted periodically to account for increases in costs of 
living.
  I believe this is a fair and balanced approach to the source tax 
conundrum facing Congress. I urge all Members to support this bill.
  Mrs. MINK of Hawaii. Mr. Speaker, I rise in support of H.R. 546 not 
only because it limits the ability of any State to tax the pensions of 
nonresidents but because it ensures that all States treat the pension 
incomes of nonresidents similarly.
  Under current law, a State may, in addition to taxing the personal 
income of its residents, tax any income whose source is also in the 
State. As such, the pension benefits of a person who once worked and 
contributed to a pension in one State can have his or her benefits 
taxed by that State although he or she is no longer residing there.
  Most States with a personal income tax provide a credit to any 
resident who pays income taxes to another State. As such, most 
individuals whose pensions are taxed by the State in which they once 
worked are not also taxed by the State in which they not reside. For 
those individuals who now reside in a State without a personal income 
tax, however, no such credit is provided for income taxes paid to 
another State.
  H.R. 546 would, by prohibiting States from taxing the first $30,000 
per year in pension benefits of those who are not residents of the 
State ensure that the States treat the pension benefits of all 
nonresidents equitably.
  I urge the House to pass H.R. 546.
  Mr. FISH. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mr. BROOKS. Mr. Speaker, I, too, yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Montgomery). The question is on the 
motion offered by the gentleman from Texas [Mr. Brooks] that the House 
suspend the rules and pass the bill, H.R. 546, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof), the rules were suspended, and the bill, as amended, was 
passed.
  A motion to reconsider was laid on the table.

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