[Congressional Record Volume 147, Number 57 (Tuesday, May 1, 2001)]
[House]
[Pages H1683-H1684]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   GUAM FOREIGN INVESTMENT EQUITY ACT

  Mr. HEFLEY. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 309) to provide for the determination of withholding tax 
rates under the Guam income tax.
  The Clerk read as follows:

                                H.R. 309

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

     SECTION 1. GUAM FOREIGN INVESTMENT EQUITY ACT.

       (a) Short Title.--This section may be cited as the ``Guam 
     Foreign Investment Equity Act''.
       (b) In General.--Subsection (d) of section 31 of the 
     Organic Act of Guam (48 U.S.C. 1421i) is amended by adding at 
     the end the following new paragraph:
       ``(3) In applying as the Guam Territorial income tax the 
     income-tax laws in force in Guam pursuant to subsection (a) 
     of this section, the rate of tax under sections 871, 881, 
     884, 1441, 1442, 1443, 1445, and 1446 of the Internal Revenue 
     Code of 1986 on any item of income from sources within Guam 
     shall be the same as the rate which would apply with respect 
     to such item were Guam treated as part of the United States 
     for purposes of the treaty obligations of the United States. 
     The preceding sentence shall not apply to determine the rate 
     of tax on any item of income received from a Guam payor if, 
     for any taxable year, the taxes of the Guam payor were 
     rebated under Guam law. For purposes of this subsection, the 
     term `Guam payor' means the person from whom the item of 
     income would be deemed to be received for purposes of 
     claiming treaty benefits were Guam treated as part of the 
     United States.''
       (c) Effective Date.--The amendment made by subsection (b) 
     shall apply to amounts paid after the date of the enactment 
     of the Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Colorado (Mr. Hefley) and the gentleman from Guam (Mr. Underwood) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Colorado (Mr. Hefley).
  Mr. HEFLEY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise today in support of H.R. 309, the Guam Foreign 
Investment Equity Act. This bill, introduced by the gentleman from Guam 
(Mr. Underwood), amends the Organic Act of Guam to provide the 
government of Guam with the authority to tax foreign investors at the 
same rate as states under the U.S. tax treaties with foreign nations.
  H.R. 309, which is supported by both the Republican Speaker and 
Democratic Governor of Guam, deals exclusively with a Guam territorial 
income tax that is collected and administered by their government. 
Because the territorial government of Guam does not have the authority 
to amend the Organic Act nor their tax rate, congressional action is 
necessary to conform their income tax rate on foreign investors to that 
of the 50 States.
  In conclusion, I would like to thank the gentleman from Guam (Mr. 
Underwood) and the gentleman from Utah (Chairman Hansen) for their hard 
work on this legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. UNDERWOOD. Mr. Speaker, I yield myself such time as I may 
consume.
  (Mr. UNDERWOOD asked and was given permission to revise and extend 
his remarks.)
  Mr. UNDERWOOD. Mr. Speaker, as you would acknowledge, this is a very 
important piece of legislation for the people of Guam, and I would like 
to urge my colleagues to support H.R. 309, the Guam Foreign Investment 
Equity Act.
  This legislation, which passed the House Committee on Resources on 
March 28, provides the government of Guam with the authority to tax 
foreign investors at the same rates as states under U.S. tax treaties. 
I would particularly like to thank the gentleman from Utah (Mr. 
Hansen), the chairman of the Committee on Resources, and the ranking 
member, the gentleman from West Virginia (Mr. Rahall), for helping me 
to expeditiously move this bill to the floor.
  During the 106th Congress, virtually identical legislation passed the 
House as part of an omnibus Guam bill on July 25, 2000. Unfortunately, 
while agreement was reached with the Treasury Department on the 
provisions of the bill last year, the Senate was unable to act on this 
important legislation before sine die adjournment.
  H.R. 309 is direly needed by the people of Guam. Given Guam's 
struggling economy and 15 percent unemployment rate, which is more than 
three times the national average, unlike the rest of the Nation which 
has experienced unprecedented economic growth and low unemployment 
rates the past few years, Guam's economy and tourism industry continues 
to recover from the Asian financial crisis, given our island's ties to 
the economies of Asia.
  Moreover, given the impact of a likely Federal tax-cut package on the 
government of Guam's revenue stream, because Guam's tax code exactly 
mirrors the U.S. Tax Code, I believe that H.R. 309 is also good public 
policy. The revenues from foreign investment that this legislation will 
generate for the government of Guam and for the economy of Guam is one 
way to help mitigate the reduction in local revenues anticipated under 
any new Federal tax-cut plan.
  Currently, under the U.S. Internal Revenue Code there is a 30 percent 
withholding tax rate for foreign investors in the United States. Since 
Guam's tax law mirrors the rate established under the U.S. Code, the 
standard rate for foreign investors in Guam is 30 percent. However, 
under U.S. tax treaties, it is a common feature for countries to 
negotiate lower withholding rates on investment returns.
  Unfortunately, because there are different definitions for the term 
``United States'' under these treaties, Guam is not included. As an 
example, with Japan, which has the biggest impact on

[[Page H1684]]

our economy, the U.S. rate for foreign investors is 10 percent. That 
means that while Japanese investors are taxed at a rate of 10 percent 
withholding tax on their investments in the 50 States, those same 
investors are taxed at a 30 percent withholding rate on Guam.
  While the long-term solution for this is for U.S. negotiators to 
include Guam in the definition of the term ``United States'' for all 
future tax treaties, the immediate solution is to amend the Organic Act 
of Guam and authorize the government of Guam to tax foreign investors 
at the same rates as the 50 States.
  Other territories under U.S. jurisdiction have already remedied this 
problem or are able to offer alternative tax benefits to foreign 
investors to delineate their unique covenant agreements with the 
Federal Government or through Federal statute. Guam alone is therefore 
the only State or territory in the United States which is unable to 
provide this tax benefit.
  The Congressional Budget Office has indicated that the legislation 
will not have an effect on the Federal budget. It simply allows the 
government of Guam to lower its withholding rate for foreign investors. 
While the bill will result in the loss of revenue for the government of 
Guam in the short term, these losses are expected to be offset by the 
generation of increased tax revenues through increased foreign 
investments in the long run. Some 75 percent of Guam's current 
commercial development is funded by foreign investors.
  H.R. 309 also incorporates changes recommended by the Treasury 
Department to ensure that a foreign investor who benefits from this 
legislation cannot simultaneously benefit from tax rebates under Guam 
territorial law.
  My legislation is supported by Governor of Guam, Carl Gutierrez, the 
Speaker of the Guam Legislature, Tony Unpingco, and the Guam Chamber of 
Commerce. I also want to thank my good friend, Senator Ben Pangelinan 
in the Guam Legislature, who initially suggested this legislation a few 
years ago.
  I have worked closely on this measure with the House Committee on 
Resources, the House Committee on Ways and Means, the Senate Finance 
Committee, the Senate Energy and Natural Resources Committee, the 
Interior Department, Treasury Department and the White House National 
Economic Council.
  I urge my colleagues to support H.R. 309. It is good for Guam's 
economy, and it is sound national policy towards foreign investments in 
the United States.

                              {time}  1515

  Mr. Speaker, I yield such time as he may consume to the gentleman 
from American Samoa (Mr. Faleomavaega).
  (Mr. FALEOMAVAEGA asked and was given permission to revise and extend 
his remarks.)
  Mr. FALEOMAVAEGA. Mr. Speaker, I certainly want to commend the 
gentleman from Guam for his leadership and for the authorship of this 
important legislation. I want to thank our colleague, the gentleman 
from Colorado (Mr. Hefley) for his leadership in managing the 
legislation pertaining to the Committee on Resources. I thank the 
gentleman from Utah (Chairman Hansen) and the gentleman from West 
Virginia (Mr. Rahall), the ranking minority member, for their support 
of this legislation.
  Mr. Speaker, I rise in strong support of H.R. 309, a bill to provide 
for the determination of withholding tax rates on the Guam income tax 
law. I am often critical of the relationship, or should I say, a lack 
of a well-defined relationship, currently existing between American 
Samoa and the United States.
  Unlike Guam, the Virgin Islands, Puerto Rico, or the Commonwealth of 
the Northern Mariana Islands, American Samoa does not have an Organic 
Act setting forth the basic structure of the government, or a covenant 
relationship that defines such a relationship, as is currently the case 
with the Commonwealth of the Northern Mariana Islands.
  On the other hand, Mr. Speaker, once a territory becomes organized, 
the local government loses much of its flexibility that it otherwise 
would have in addressing many of its social and economic issues.
  Mr. Speaker, as many of my colleagues may not be aware, the territory 
of American Samoa is an unorganized and unincorporated territory of the 
United States. This year marks the very unique political relationship 
between American Samoa and the United States which has now existed for 
over 101 years.
  American Samoa now has a territorial Constitution that was approved 
by the Secretary of the Interior in 1967, but was never approved by the 
Congress. A law was passed by the Congress in 1984 to prohibit any 
changes in the territorial Constitution without the consent of the 
Congress, but at the same time, Congress passed a law in 1929 to 
delegate all military, judicial, and administrative authority under the 
control of the President or his designee, currently the Secretary of 
the Interior. Mr. Speaker, how would we like to figure that one out?
  Mr. Speaker, the issue addressed by this legislation is one example 
of the inflexibility of existing Organic Acts. Under current Federal 
tax law, there is a 30 percent State income tax rate for foreign 
investors, or I am sorry, 10 percent for foreign investors in the 
United States. Guam's territorial tax law is imposed under Federal law, 
so an act of Congress is needed to change it.
  Even though the United States enters into treaties with foreign 
governments authorizing lower income tax rates for foreign investors in 
the States of the United States, current treaties do not include the 
territories as part of the United States. The net result is that if a 
Japanese businessman invests in a State of the United States and has an 
income of $100,000, that investor pays a $10,000 tax on the income. 
That very same investor earning the same $100,000 in income from an 
investment in Guam would have to pay $30,000 in tax, or three times as 
much.
  Given Guam's proximity to Japan and other Asian countries, and given 
the number of nonaffiliated islands in the Pacific, the 30 percent 
income tax rate is a considerable disincentive for foreign investors to 
do business in a territory like Guam, thus hampering Guam's economic 
development.
  I welcome this proposed change in Federal law to permit the governing 
authority in Guam to tax foreign investors at the same rates as States 
under U.S. tax treaties with foreign nations.
  While American Samoa does not have this problem because it has 
authority to enact its own tax laws, I would suggest that future tax 
treaty negotiators include U.S. territories within treaty provisions so 
separate legislation is not necessary.
  Mr. Speaker, I urge my colleagues to support this legislation.
  Mr. UNDERWOOD. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I thank the gentleman from Colorado (Mr. Hefley) for 
those kind remarks and for his indulgence in seeing this through.
  Mr. Speaker, I yield back the balance of my time.
  Mr. HEFLEY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I would encourage my colleagues to support this broadly-
supported bill, a bipartisan bill, a good bill. I commend the gentleman 
from Guam (Mr. Underwood) for his hard work on it.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Hastings of Washington). The question is 
on the motion offered by the gentleman from Colorado (Mr. Hefley) that 
the House suspend the rules and pass the bill, H.R. 309.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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