[Congressional Record Volume 148, Number 17 (Tuesday, February 26, 2002)]
[Extensions of Remarks]
[Page E196]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            FEDERAL EMPLOYEES OF AMERICAN SAMOA INCOME TAXES

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                       HON. ENI F.H. FALEOMAVAEGA

                           of american Samoa

                    in the house of representatives

                       Tuesday, February 26, 2002

  Mr. FALEOMAVAEGA. Mr. Speaker, I rise today to introduce legislation 
which will repeal a provision in the Internal Revenue Code which 
requires certain federal employees in American Samoa to pay more in 
income taxes than a citizen with the same taxable income but who is not 
a federal employee.
  By way of background, U.S. citizens with incomes above a certain 
threshold and residing in a U.S. possession are required to file tax 
returns with the Internal Revenue Service or a territorial government 
on their world-wide income. In the past, U.S. citizen-residents of 
American Samoa were able to claim a dollar for dollar tax credit for 
all taxes paid or owing to the territory. The taxpayers claimed a 
foreign tax credit on their federal return, and the amount of the 
income tax collected by the IRS was either covered over to the American 
Samoa Government, or was returned to the taxpayers to be paid to the 
local government. Either way, U.S. citizens paid income taxes at the 
federal rates to the American Samoa Government.
  Section 931 of the Internal Revenue Code sets forth the general rule 
on income from sources within American Samoa, Guam and the Commonwealth 
of the Northern Mariana Islands. The general rule is that income 
derived from one of the specified possessions shall not be included as 
gross income for federal tax purposes. On its face, Section 931(d)(1) 
creates an exception to this general rule for federal employees who 
reside in one of these three territories, although the section is 
currently applicable only to American Samoa. Under this exception, a 
federal employee's income is considered as part of gross income. As 
incomes have risen in recent years, more taxpayers are not coming 
within the laws governing the alternative minimum tax (AMT). Under 
Section 59 of the Code (one of the AMT provisions), taxpayers can only 
claim 90 percent of their foreign tax credit against the taxes they owe 
to the federal government.
  The net result of Section 59 and 931 as they are applied to federal 
employees residing in American Samoa is that the federal employees have 
to pay the usual tax at federal rates, which is paid over to the 
territorial government. Some federal employee-taxpayers then pay an 
additional tax to the IRS. If the taxpayers were not federal employees, 
their federal wages would not be included in their gross income and 
they would not have to pay this additional tax.
  The legislation I introduce today will make Section 931(d)(1) of the 
Internal Revenue Code inapplicable to American Samoa. When this section 
is changed, these U.S. citizens will still pay taxes, and they will 
still be subject to the alternative minimum tax like any other 
taxpayer.
  Mr. Speaker, I see no reason we should require our federal civil 
workers to pay more in taxes than any other citizen does just because 
he or she has chosen to serve our government. I urge my colleagues to 
support this bill.

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