[Congressional Record (Bound Edition), Volume 151 (2005), Part 5]
[Extensions of Remarks]
[Page 6157]
[From the U.S. Government Publishing Office, www.gpo.gov]




            INTRODUCTION OF THE INSULAR AREAS TAX CREDIT ACT

                                 ______
                                 

                       HON. MADELEINE Z. BORDALLO

                                of guam

                    in the house of representatives

                        Tuesday, April 12, 2005

  Ms. BORDALLO. Mr. Speaker, today I am introducing legislation that 
would resolve an issue of tax compliance between the United States 
Department of the Treasury and the governments of Guam and the United 
States Virgin Islands. This legislation addresses concerns regarding 
the coordination of the payment of the Earned Income Credit, EIC, and 
Child Tax Credit, CTC, to qualifying taxpayers within these 
jurisdictions.
  The tax codes of Guam and the Virgin Islands mirror that of the 
Internal Revenue Code, IRC, and taxpayers in these jurisdictions file 
their annual returns with their respective local departments of revenue 
and taxation in lieu of filing with the Internal Revenue Service. The 
revenue and taxation departments of Guam and the Virgin Islands must 
incorporate all provisions of the IRC related to individual and 
business taxes for their respective taxpayers, including provisions 
authorizing tax credits such as the EIC and the CTC. Revenues are 
retained by local treasuries, which they may use to cover the costs of 
operating local government agencies and providing for public services.
  The coordination of the EIC and CTC is problematic because it 
requires the treasuries of Guam and the Virgin Islands to pay 
``refundable'' portions of these credits, or those amounts that exceed 
an individual taxpayer's total tax liability. While I support the EIC 
and CTC and believe that low-income taxpayers in my district should be 
able to receive this form of tax relief, requiring the treasuries of 
Guam and the Virgin Islands to cover all ``refundable'' portions of 
these credits constitutes an unfunded federal mandate. In theory, the 
amount of such credit that exceeds an individual taxpayers total tax 
liability is meant to offset the impact of FICA taxes on low-income 
individuals. While residents of Guam and Virgin Islands pay their FICA 
taxes to the U.S. Treasury, the territorial treasuries are tasked with 
covering the cost of the ``refundable'' portion of this credit out of 
local revenues. Our cashstrapped treasuries are simply incapable of 
covering the amount of claimed credit, which constitutes between 6 to 8 
percent of all tax revenues in Guam.
  Congresswoman Christensen and I have been working on a fair 
resolution to this matter over the past 2 years. We have worked with 
the Department of the Treasury and the chairmen and ranking members of 
the House Ways and Means and Senate Finance Committees. The legislation 
I am introducing today is similar to a bill I introduced last year, 
H.R. 2186, but with several revisions aimed at facilitating 
implementation. This legislation proposes a fair federal-territorial 
cost sharing arrangement which will allow low income citizens in the 
territories who pay FICA taxes to realize the same tax benefits as 
their counterparts in the 50 States and the District of Columbia 
without bankrupting the local treasuries of Guam and the Virgin 
Islands.
  I look forward to working with House Ways and Means Committee 
Chairman Thomas and Ranking Member Rangel on this legislation.

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