[House Report 107-417]
[From the U.S. Government Publishing Office]
107th Congress Rept. 107-417
HOUSE OF REPRESENTATIVES
2d Session Part 2
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CLARIFICATION OF TAX TREATMENT OF BONDS AND OTHER OBLIGATIONS ISSUED BY
GOVERNMENT OF AMERICAN SAMOA
_______
May 20, 2002.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 1448]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1448) to clarify the tax treatment of bonds and
other obligations issued by the Government of American Samoa,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 1
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 2
Hearings......................................................... 3
Committee Consideration.......................................... 3
Vote of the Committee............................................ 3
Committee Oversight Findings..................................... 3
Performance Goals and Objectives................................. 4
New Budget Authority and Tax Expenditures........................ 4
Congressional Budget Office Cost Estimate........................ 4
Constitutional Authority Statement............................... 5
Section-by-Section Analysis and Discussion....................... 5
Changes in Existing Law Made by the Bill, as Reported............ 5
Markup Transcript................................................ 6
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. CLARIFICATION OF TAX TREATMENT OF BONDS AND OTHER
OBLIGATIONS ISSUED BY GOVERNMENT OF AMERICAN SAMOA.
(a) Exemption of All Bonds from Income Taxation by State and Local
Governments.--Subsection (b) of section 202 of Public Law 98-454 (48
U.S.C. 1670) is amended to read as follows:
``(b) Exemption of All Bonds from Income Taxation by State and
Local Governments.--
``(1) In general.--The interest on any bond or other
obligation issued by or on behalf of the Government of American
Samoa shall be exempt from taxation by the Government of
American Samoa and the governments of any of the several
States, the District of Columbia, any territory or possession
of the United States, and any subdivision thereof.
``(2) Exemption applicable only to income taxes.--The
exemption provided by paragraph (1) shall not apply to gift,
estate, inheritance, legacy, succession, or other wealth
transfer taxes.''.
(b) Effective Date.--This Act shall apply to obligations issued
after the date of the enactment of this Act.
Purpose and Summary
H.R. 1448, ``To clarify the tax treatment of bonds and
other obligations issued by the Government of American Samoa,''
amends current law to exempt bonds issued by the Government of
American Samoa from local, State, and Federal income taxes.
Currently, Federal law exempts government bonds issued by
States, territories and possessions from these taxes.
Background and Need for the Legislation
Federal Laws Governing American Samoa
American Samoa was defined by a treaty signed by the United
States, Britain, and Germany in 1899.\1\ Unlike other U.S.
Territories such as Guam, the Virgin Islands and Puerto Rico,
Congress has not provided American Samoa with an organic act
establishing its governmental institutions. Rather, American
Samoa is an ``unincorporated'' territory whose administration
was transferred from the Department of the Navy to the
Department of the Interior in 1951. The Interior Secretary
subsequently delegated authority to American Samoa to organize
its own governmental institutions. While American Samoa
ratified its own Constitution in 1966,\2\ the Department of the
Interior retains ultimate oversight over the territory.
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\1\ CIA: The World Factbook, American Samoa. http://www.cia.gov/
cia/publications/factbook/geos/aq.html. [Visited February 26, 2002].
\2\ 48 U.S.C. Sec. 1661-1670 (2001).
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Samoan Government Bonds
Like most States and localities, American Samoa issues
government bonds to fund a variety of public projects. However,
its bond raising activities are very limited. American Samoa's
last major bonding project was in 1988, when it raised $22
million for a governmental office building.\3\ Currently, the
Government of American Samoa owes about $18 million in
outstanding bonds.\4\ Relevant sections of the Internal Revenue
Code exclude interest from State and local bonds from Federal
taxation. This exemption specifically applies to the ``District
of Columbia and any possession of the United States.'' \5\ This
definition, however, does not explicitly encompass United
States territories.
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\3\ Samoa Seeks Further Debt Authorization, Bond Buyer, vol. 336,
no. 31122, Friday, April 20, 2001.
\4\ American Samoan Governor Negotiates Refinancing of Loan, PAC.
Islands Broad. Ass'n News Serv., Monday, December 27, 1999.
\5\ 48 U.S.C. Sec. 103 (c)(2) (2001).
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Legislation Pertaining to the Tax Treatment of Bonds Issued by U.S.
Territories Other Than American Samoa
Bonds issued by almost all U.S. territories are exempt from
Federal, State, and local taxes. For example, Federal statute
provides that ``all bonds issued by the government of Guam or
by its authority shall be exempt . . . from taxation by the
Government of the United States or by the government of Guam,
or by any State or Territory of any political subdivision
thereof, or by the District of Columbia.'' \6\ Bonds issued by
the Government of the Northern Mariana Islands are also
``exempt, as to principal and interest, from taxation by the
United States, or by any State [or locality] . . . or the
District of Columbia.'' \7\ In addition, Federal law provides
that bonds issued by the Government of the Virgin Islands or
any of its municipalities are exempt from State and local
taxes.\8\ Finally, interest on bonds issued by the government
of Puerto Rico are immune from State and Federal taxation.\9\
H.R. 1448 was introduced by Representative Eni Faleomovaega to
harmonize the taxing status of Samoan government bonds with
other States, territories, and possessions.
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\6\ 48 U.S.C. Sec. 1423(a) (2000).
\7\ Id. Sec. 1801.
\8\ Id. Sec. 1403.
\9\ Id. at Sec. 745.
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Hearings
The Committee's Subcommittee on Commercial and
Administrative Law held a hearing on H.R. 1448 on March 6,
2002.
Committee Consideration
On March 6, 2002, the Subcommittee on Commercial and
Administrative Law met in open session and ordered favorably
reported the bill H.R. 1448 by voice vote, a quorum being
present. On May 8, 2002, the Committee met in open session and
ordered favorably reported the bill H.R. 1448, with amendment
by voice vote, a quorum being present.
Vote of the Committee
There were no recorded votes on H.R. 1448.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Performance Goals and Objectives
H.R. 1448 does not authorize funding. Therefore, clause
3(c) of rule XIII of the Rules of the House of Representatives
is inapplicable.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the H.R. 3180, the following estimate and comparison
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 10, 2002.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1448, a bill to
clarify the tax treatment of bonds and other obligations issued
by the government of American Samoa.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Matthew
Pickford (for Federal costs), who can be reached at 226-2860,
and Marjorie Miller (for the State and local impact), who can
be reached at 225-3220.
Sincerely,
Dan L. Crippen, Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 1448--A bill to clarify the tax treatment of bonds and other
obligations issued by the government of American Samoa.
H.R. 1448 would amend current law to make bonds issued by
the government of American Samoa exempt from State, local, and
territorial income tax. The bill would not affect Federal
taxes, and CBO estimates that implementing H.R. 1448 would have
no impact on the Federal budget. Because the bill would not
affect direct spending or governmental receipts, pay-as-you-go
procedures would not apply. The bill contains no private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
H.R. 1448 contains an intergovernmental mandate as defined
in UMRA, but CBO estimates that the cost of the mandate would
be well below the threshold established in that act ($58
million in 2002, adjusted annually for inflation). This mandate
is a preemption of State and local taxing authority. The bill
would exempt the interest on any bond issued by the government
of American Samoa from State, local, and territorial taxes.
Because American Samoa generally has only a few million dollars
in bonds outstanding at any time, this preemption would not
have a significant cost for State, local, or territorial
governments. Enacting this bill would benefit the government of
American Samoa by reducing its borrowing costs.
On April 5, 2002, CBO transmitted a cost estimate for H.R.
1448 as ordered reported by the House Committee on Resources on
March 20, 2002. The two versions of the legislation are
identical, as are the cost estimates.
The CBO staff contacts for this estimate are Matthew
Pickford (for Federal costs), who can be reached at 226-2860,
and Marjorie Miller (for the State and local impact), who can
be reached at 225-3220. This estimate was approved by Peter H.
Fontaine, Deputy Assistant Director for Budget Analysis.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8 of the Constitution.
Section-by-Section Analysis and Discussion
Section 1. Clarification of Tax Treatment of Bonds and
Other Obligations Issued by Government of American Samoa.
This section exempts bonds issued by the Government of
American Samoa from Federal, State, and local taxes income
taxes. This exemption does not apply to gift, estate,
inheritance, legacy, succession, or other wealth transfer
taxes.
Finally, this section repeals section 202 of Public Law 98-
454 (48 U.S.C. 1670) and makes the legislation effective upon
its enactment into law.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
SECTION 202 OF THE ACT OF OCTOBER 5, 1984
(Public Law 98-454)
AN ACT To enhance the economic development of Guam, the Virgin Islands,
American Samoa, the Northern Mariana Islands, and for other purposes.
Sec. 202. (a) * * *
[(b)(1) Except as provided in paragraph (2), any obligation
shall be exempt from all State and local taxation in effect on
or after October 1, 1984.
[(2) Any obligation issued under subsection (a) shall not
be exempt from State of local gift, estate, inheritance,
legacy, succession, or other wealth transfer taxes.
[(3) For purposes of this subsection--
[(A) The term ``State'' includes the District of
Columbia.
[(B) The taxes imposed by counties, municipalities,
or any territory, dependency, or possession of the
United States shall be treated as local taxes.]
(b) Exemption of All Bonds from Income Taxation by State
and Local Governments.--
(1) In general.--The interest on any bond or other
obligation issued by or on behalf of the Government of
American Samoa shall be exempt from taxation by the
Government of American Samoa and the governments of any
of the several States, the District of Columbia, any
territory or possession of the United States, and any
subdivision thereof.
(2) Exemption applicable only to income taxes.--The
exemption provided by paragraph (1) shall not apply to
gift, estate, inheritance, legacy, succession, or other
wealth transfer taxes.
Markup Transcript
BUSINESS MEETING
WEDNESDAY, MAY 8, 2002
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:03 a.m., in
Room 2141, Rayburn House Office Building, Hon. F. James
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
Chairman Sensenbrenner. [Presiding.] The Committee will be
in order.
[Intervening business.]
The next item on the agenda is H.R. 1448 to clarify the tax
treatment of bonds and other obligations issued by the
government of American Samoa. The Chair recognizes the
gentleman from Georgia, Mr. Barr, Chairman of the Subcommittee
on Commercial and Administrative Law, for a motion.
Mr. Barr. Mr. Chairman, the Subcommittee on Commercial and
Administrative Law reports favorably the bill H.R. 1448 with a
single amendment in the nature of a substitute and moves its
favorable recommendation to the full House.
Chairman Sensenbrenner. Without objection, the bill be
considered as read and open for amendment at any point. And the
Subcommittee amendment in the nature of a substitute, which the
Members have before them, will be considered as read and be
considered as the original text for purposes of amendment.
[The amendment follows:]
Chairman Sensenbrenner. The Chair recognizes the gentleman
from Georgia, Mr. Barr, to strike the last word.
Mr. Barr. Thank you, Mr. Chairman.
Introduced by Representative Faleomavaega of American
Samoa, H.R. 1448 amends Federal law to exempt bonds issued by
the government of American Samoa from Federal, State, and local
taxation.
Government bonds issued by States and U.S. territories,
such as Guam, Puerto Rico, and the U.S. Virgin Islands,
currently enjoy this exemption. Thus, the purpose of H.R. 1448
is not to craft a special exception to a general rule but to
harmonize the tax treatment of American Samoan bonds and
thereby enable the Samoan government to better attend to the
public needs of its residents.
An amendment to limit this exemption strictly to
government-issued bonds was reported by the Subcommittee. The
House Resources Committee has reported identical legislation,
and I urge support of this noncontroversial but necessary
measure today.
Chairman Sensenbrenner. Does the gentleman yield back?
Mr. Barr. I yield back.
Chairman Sensenbrenner. Does the gentleman from North
Carolina wish to say anything? Good.
Without objection----
Mr. Watt. Let the record reflect my thumbs-up, Mr.
Chairman.
Chairman Sensenbrenner.--all Members by insert opening
statements at this point in time.
Are there amendments?
The gentleman from California.
Mr. Issa. I have no amendment. I have a statement and would
like to put it in the record.
Chairman Sensenbrenner. And move to strike the last word.
Mr. Issa. I move to strike the last word.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Issa. Thank you, Mr. Chairman.
I'd like to thank you and the Ranking Member for holding
this markup of H.R. 1448. I welcome the opportunity to discuss
the financial obligations as they relate to the government of
American Samoa.
In January 1997, my constituent, Robert Shaffer, signed a
special services employment contract with the government of
American Samoa and as executive director of the Centennial 2000
program.
In August 2000, Mr. Shaffer was informed by the Governor's
office that his employment contract had been terminated. As a
result, reimbursements, per diem, travel expense, and salary
were never fully paid under the terms of this contract. To
date, Mr. Shaffer is still owed approximately $90,000 by the
government of American Samoa for services rendered.
On February 4th of this year, I sent a letter to the
Governor, requesting assistance on behalf of Mr. Shaffer. Two
months later, I received a letter from the Governor that cited
various settlement offers that are significantly less that the
$90,000 owed, although there was no claim of a lesser amount
actually owed.
Additionally, the settlement offer suggested that Mr.
Shaffer keep the 3,000 centennial books that remained in his
possession. Let me tell you, the market for the American Samoa
centennial book in southern California is small at best. In
other words, this offer was clearly unacceptable and not in
good faith.
Mr. Chairman, I have a problem with this Committee
supporting legislation that will benefit this island territory
when they are unable or unwilling to meet their financial
obligation with their vendors.
I will support passage of 1448. However, I want the
Governor to know that, regardless of the distance from the
United States, he is still accountable for his actions. And I
want him to know that this Congressman is putting him on
notice.
Mr. Chairman, thank you for this opportunity to make an
opening statement. And I look forward to the bill's passage.
[The prepared statement of Mr. Issa follows:]
Prepared Statement of the Honorable Darrell Issa, a Representative in
Congress From the State of California
Mr. Chairman and Ranking Member Conyers, I thank you for holding a
markup on H.R. 1448. I welcome the opportunity to discus the financial
obligations as they relate to government of American Samoa.
In January of 1997, my constituent, Robert Shaffer signed a special
services employment contract with the government of America Samoa as
Executive Director of the Centennial 2000 program. In August of 2000,
Mr. Shaffer was informed by the Governor's office that his employment
and contract had been terminated. As a result, reimbursements, per
diem, travel expenses, and salary were never fully paid under the terms
of the contract. To date, Mr. Shaffer is still owed approximately
$90,000 by the government of America Samoa for services rendered.
On February 4th of this year, I sent a letter to the Governor of
American Samoa, Tauese Sunia, requesting his assistance on behalf of
Mr. Shaffer. Two months later, I received a letter from the Governor
that cited various settlement offers that are significantly less than
the $90,000 owed to Mr. Shaffer, including a preposterous proposal that
compensation should come from the proceeds of the sale of over 3,000
Centennial books that remain in Robert Shaffer's possession. Let me
tell you, the market for American Samoa Centennial books in Southern
California is very small. In other words, this offer is unacceptable.
Mr. Chairman, I have a problem with this committee supporting
legislation that will benefit this island territory when they are
unable to meet their financial obligations with their vendors. I will
support passage of H.R. 1448. However, I want Governor Sunia to know
that regardless of the distance to the United States, he is still
accountable for his actions, and I want him to know that this
Congressman is putting him on notice.
Thank you Mr. Chairman for holding this markup.
Chairman Sensenbrenner. Are there amendments? If there are
no amendments, the question is on the amendment in the nature
of a substitute as reported by the Subcommittee.
Those in favor will say aye.
Opposed, no.
The ayes appear to have it. The ayes have it, and the
Subcommittee amendment in the nature of a substitute is agreed
to.
The Chair notes the presence of a reporting quorum.
The question now occurs on the motion to report the bill
H.R. 1448 favorably, as amended by the amendment in the nature
of a substitute.
Those in favor will say aye.
Opposed, no.
The ayes appear to have it. The ayes have it. The motion to
report favorably is agreed to.
Without objection, the Chairman is authorized to move to go
to conference pursuant to House rules. Without objection, the
staff is directed to make any technical and conforming changes.
And all Members will be given 2 days, as provided by House
rules, in which to submit additional, dissenting, supplemental,
or minority views.