[House Report 108-102]
[From the U.S. Government Publishing Office]



108th Congress                                            Rept. 108-102
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================



 
 TO CLARIFY THE TAX TREATMENT OF BONDS AND OTHER OBLIGATIONS ISSUED BY 
                    THE GOVERNMENT OF AMERICAN SAMOA

                                _______
                                

                  May 15, 2003.--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. 982]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 982) to clarify the tax treatment of bonds and other 
obligations issued by the Government of American Samoa, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
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.................................     3
New Budget Authority and Tax Expenditures........................     3
Congressional Budget Office Cost Estimate........................     3
Constitutional Authority Statement...............................     4
Section-by-Section Analysis and Discussion.......................     5
Changes in Existing Law Made by the Bill, as Reported............     5
Markup Transcript................................................     6

                          Purpose and Summary

    H.R. 982, a bill 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 and State, 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 the administration of 
which 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 the territory ratified 
its own Constitution in 1966, \2\ the Department of the 
Interior retains ultimate oversight over the territory.
---------------------------------------------------------------------------
    \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 issuing 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.
---------------------------------------------------------------------------
    \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. 982 was introduced by Representative Eni Faleomovaega on 
February 27, 2003 to harmonize the taxing status of American 
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. Sec. 745.
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                                Hearings

    There were no Committee hearings on H.R. 982 in the 108th 
Congress. In the 107th Congress, the Subcommittee on Commercial 
and Administrative Law held a hearing on identical legislation 
(H.R. 1448) on March 6, 2002. Rep. Eni Faleomovaega was the 
sole witness.

                        Committee Consideration

    On May 7, 2003, the Committee met in open session and 
ordered favorably reported the bill H.R. 982, without amendment 
by voice vote, a quorum being present.

                         Vote of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee notes that there 
were no recorded votes during the Committee's consideration of 
H.R. 982.

                      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. 982 does not authorize funding. Therefore, clause 
3(c)(4) 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 9, 2003.
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. 982, 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,
                                       Douglas Holtz-Eakin.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 982--A bill to clarify the tax treatment of bonds and other 
        obligations issued by the government of American Samoa.
    H.R. 982 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. 982 would have 
no impact on the Federal budget.
    H.R. 982 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates 
that the cost of the mandate would be well below the threshold 
established in that act ($59 million in 2003, 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. The bill contains no private-sector mandates 
as defined in UMRA.
    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. 
Section 1 amends Sec. 202(b) of Pub. L. No. 98-4545 (48 U.S.C. 
1670) so that it exempts bonds issued by the government of 
American Samoa from State and local taxes. This exemption does 
not apply to gift, estate, inheritance, legacy, succession, or 
other wealth transfer taxes.
    Section 2. Effective Date. Section 2 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 or local gift, estate, 
        inheritance, legacy, succession, or other wealth 
        transfer taxes.
            [(3) For purposes of this subsection--
                    [(A) The term ``State'' included 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 7, 2003

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:00 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
    [Intervening business.]
    Chairman Sensenbrenner. The next item on the agenda, 
pursuant to notice, I now call up the bill H.R. 982, to clarify 
the tax treatment of bonds and other obligations issued by the 
Government of American Samoa for purposes of markup and move 
its favorable recommendation to the full House.
    Without objection, the bill will be considered as read and 
open for amendment at any point.
    [The bill, H.R. 982, follows:]
    
    
    Chairman Sensenbrenner. The Chair recognizes the gentleman 
from Utah, Mr. Cannon, to explain the bill.
    Mr. Cannon. Thank you, Mr. Chairman.
    H.R. 982 amends Federal law to exempt bonds issued by the 
Government of American Samoa from State and local taxation. The 
legislation was introduced by Delegate Eni Faleomavaega of 
American Samoa. 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. 982 is not to craft a special exception to a general rule 
but to harmonize the tax treatment of American Samoan and the 
bonds to enable the Samoan Government to better attend to its 
public--the public needs of its residents.
    Identical legislation was reported by this Committee and 
approved by the House under suspension of the rules in the last 
Congress after receiving a hearing before the Subcommittee on 
Commercial and Administrative Law. I urge support of this 
noncontroversial but necessary measure.
    Thank you, Mr. Chairman. I yield back.
    Chairman Sensenbrenner. The gentleman from Virginia.
    Mr. Scott. I have no comment, Mr. Chairman.
    Chairman Sensenbrenner. Without objection, all Members may 
include opening statements in the record at this point.
    Are there amendments? Are there amendments? There are no 
amendments. A reporting quorum is still not present, and, 
without objection, the previous question will be ordered on 
reporting the bill favorably.
    [Intervening business.]
    The unfinished business now is the motion to report 
favorably the bill H.R. 982, to clarify the tax treatment of 
bonds and other obligations issued by the Government of 
American Samoa. A reporting quorum is present.
    Those in favor of reporting the bill favorably will as your 
names are--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 Chair 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, under House rules, in 
which to submit additional dissenting, supplemental, or 
minority views.

                                
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