S. 3217 (106th): District of Columbia Economic Renaissance Act of 2000

106th Congress, 1999–2000. Text as of Oct 18, 2000 (Introduced).

Status & Summary | PDF | Source: GPO

S 3217 IS

106th CONGRESS

2d Session

S. 3217

To amend the Internal Revenue Code of 1986 to provide for individuals who are residents of the District of Columbia a maximum rate of tax of 15 percent on income from sources within the District of Columbia, and for other purposes.

IN THE SENATE OF THE UNITED STATES

October 18 (legislative day, SEPTEMBER 22), 2000

Mr. MACK (for himself and Mr. BROWNBACK) introduced the following bill; which was read twice and referred to the Committee on Finance


A BILL

To amend the Internal Revenue Code of 1986 to provide for individuals who are residents of the District of Columbia a maximum rate of tax of 15 percent on income from sources within the District of Columbia, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘District of Columbia Economic Renaissance Act of 2000’.

SEC. 2. SPECIAL RULES FOR TAXATION OF INDIVIDUALS WHO ARE RESIDENTS OF THE DISTRICT OF COLUMBIA.

    (a) IN GENERAL- Subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to determination of tax liability) is amended by adding at the end the following new part:

‘PART VIII--SPECIAL RULES FOR TAXATION OF INDIVIDUALS WHO ARE RESIDENTS OF THE DISTRICT OF COLUMBIA

‘Sec. 59B. Limitation on tax imposed on residents of the District of Columbia.

‘SEC. 59B. LIMITATION ON TAX IMPOSED ON RESIDENTS OF THE DISTRICT OF COLUMBIA.

    ‘(a) GENERAL RULE- If a taxpayer elects the application of this section, the net income tax of an individual who is a resident of the District of Columbia for the taxable year shall not exceed the limitation determined under subsection (b) for such year.

    ‘(b) LIMITATION-

      ‘(1) IN GENERAL- The limitation determined under this subsection is the sum of the following amounts:

        ‘(A) 15-PERCENT RATE- 15 percent of so much of District-sourced income as exceeds the exemption amount.

        ‘(B) AVERAGE RATE- An amount equal to the average rate of the non-District-sourced adjusted gross income.

      ‘(2) DISTRICT-SOURCED CAPITAL GAINS-

‘For exclusion from tax of capital gains, see section 1400B.

    ‘(c) DEFINITIONS- For purposes of this section--

      ‘(1) RESIDENT OF DISTRICT OF COLUMBIA- An individual is a resident of the District of Columbia for the taxable year if--

        ‘(A) such individual used a residence in the District of Columbia as a place of abode (and was physically present at such place) for at least 183 days of such taxable year, and

        ‘(B) such individual is subject to the District of Columbia income tax for such taxable year.

      ‘(2) NET INCOME TAX- The term ‘net income tax’ means--

        ‘(A) the sum of regular tax liability and the tax imposed by section 55 (determined without regard to this section), reduced by

        ‘(B) the aggregate credits allowable under part IV (other than section 31).

      ‘(3) EXEMPTION AMOUNT- The term ‘exemption amount’ means--

        ‘(A) $30,000 in the case of a joint return or a surviving spouse,

        ‘(B) $15,000 in the case of--

          ‘(i) an individual who is not a married individual and is not a surviving spouse, and

          ‘(ii) a married individual filing a separate return, and

        ‘(C) $25,000 in the case of a head of a household.

      ‘(4) AVERAGE RATE- The term ‘average rate’ means the percentage determined by dividing--

        ‘(A) the sum (determined without regard to this section) of the taxpayer’s regular tax liability and the tax imposed by section 55, by

        ‘(B) the taxpayer’s taxable income.

      If the percentage determined under the preceding sentence is not a whole number of percentage points, such percentage shall be rounded to the nearest whole number of percentage points.

      ‘(5) REGULAR TAX LIABILITY- The term ‘regular tax liability’ has the meaning given to such term by section 26(b).

    ‘(d) DISTRICT-SOURCED INCOME- For purposes of this section, the term ‘District-sourced income’ means adjusted gross income reduced by the sum of--

      ‘(1) non-District-sourced adjusted gross income,

      ‘(2) the deduction allowed by section 170, and

      ‘(3) the deduction allowed by section 163 to the extent attributable to qualified residence interest (as defined in section 163(h)).

    ‘(e) NON-DISTRICT-SOURCED ADJUSTED GROSS INCOME- For purposes of this section, the term ‘non-District-sourced adjusted gross income’ means gross income of the taxpayer from sources outside the District of Columbia reduced (but not below zero) by the deductions taken into account in determining adjusted gross income which are allocable to such income.

    ‘(f) SOURCES OF INCOME- For purposes of this section--

      ‘(1) RETIREMENT INCOME AND OTHER INCOME NOT SOURCED UNDER SUBSECTION- The source of any income not specifically provided for in this subsection shall be treated as from sources within the District of Columbia.

      ‘(2) PERSONAL SERVICES-

        ‘(A) IN GENERAL- Compensation (other than retirement income) for services performed by the taxpayer as an employee, and net earnings from self-employment (as defined in section 1402)), shall be sourced at the place such services are performed.

        ‘(B) SERVICES PERFORMED IN WASHINGTON-BALTIMORE AREA TREATED AS PERFORMED IN THE DISTRICT OF COLUMBIA- Services performed in the Washington-Baltimore area shall be treated as performed in the District of Columbia.

        ‘(C) INDIVIDUALS PERFORMING 80 PERCENT OF SERVICES WITHIN WASHINGTON-BALTIMORE AREA- If, during any taxable year, at least 80 percent of the hours of service performed by an individual are performed within the Washington-Baltimore area, all such service shall be treated for purposes of this paragraph as performed within the District of Columbia.

        ‘(D) WASHINGTON-BALTIMORE AREA- For purposes of this paragraph, the term ‘Washington-Baltimore area’ means the area consisting of--

          ‘(i) the Washington/Baltimore Consolidated Metropolitan Statistical Area (as designated by the Office of Management and Budget), and

          ‘(ii) St. Mary’s County, Maryland.

      ‘(3) INTEREST-

        ‘(A) IN GENERAL- Interest received or accrued during the taxable year shall be treated as from sources outside the District of Columbia.

        ‘(B) EXCEPTION FOR SMALL AMOUNTS OF NON-DISTRICT-SOURCED INTEREST- Interest which would (but for this subparagraph) be treated as from sources outside the District of Columbia shall be treated as from sources in the District of Columbia to the extent the amount of such interest does not exceed $400.

        ‘(C) EXCEPTION FOR INTEREST PAID BY DISTRICT OF COLUMBIA BUSINESSES AND RESIDENTS-

          ‘(i) BUSINESSES- In the case of interest paid during a calendar year by a debtor which was required to file (and filed) a franchise tax return with the District of Columbia for the debtor’s taxable year ending with or within the prior calendar year, an amount equal to the D.C. percentage (as shown on such return) of such interest shall be treated as from sources within the District of Columbia. The preceding sentence shall apply only if such percentage is furnished to the taxpayer in writing on or before January 31 of the year following the calendar year in which such interest is paid.

          ‘(ii) OTHERS- Interest shall be treated as from sources within the District of Columbia if the interest is paid during a calendar year by a debtor--

            ‘(I) which was required to file (and filed) an income tax return with the District of Columbia for the debtor’s taxable year ending with or within the prior calendar year, and

            ‘(II) which is not required to file a franchise tax return with the District of Columbia for such taxable year.

        ‘(D) SPECIAL RULE FOR DETERMINATION OF D.C. PERCENTAGE FOR NEW BUSINESSES- Interest shall be treated as from sources within the District of Columbia if the interest is paid during a calendar year by a debtor which was required to file (and filed) a franchise tax return with the District of Columbia for such debtor’s taxable year ending with or within such calendar year, but which was not required to file such a return for such debtor’s prior taxable year.

      ‘(4) DIVIDENDS-

        ‘(A) IN GENERAL- Dividends received or accrued during the taxable year shall be treated as from sources outside the District of Columbia.

        ‘(B) EXCEPTION FOR SMALL AMOUNTS OF NON-DISTRICT-SOURCED DIVIDENDS- Dividends which would (but for this subparagraph) be treated as from sources outside the District of Columbia shall be treated as from sources in the District of Columbia to the extent the amount of such dividends do not exceed $400.

        ‘(C) EXCEPTION FOR DIVIDENDS PAID BY CORPORATION ENGAGED IN BUSINESS IN THE DISTRICT OF COLUMBIA- In the case of dividends paid during a calendar year by a corporation which was required to file (and filed) a franchise tax return with the District of Columbia for the corporation’s taxable year ending with or within the prior calendar year, an amount equal to the D.C. percentage (as shown on such return) of such dividends shall be treated as from sources within the District of Columbia. The preceding sentence shall apply only if such percentage is furnished to the taxpayer in writing on or before January 31 of the year following the calendar year in which such dividends are paid.

        ‘(D) SPECIAL RULE FOR DETERMINATION OF D.C. PERCENTAGE FOR NEW BUSINESSES- Dividends shall be treated as from sources within the District of Columbia if the dividends are paid during a calendar year by a corporation which was required to file (and filed) a franchise tax return with the District of Columbia for such corporation’s taxable year ending with or within such calendar year, but which was not required to file such a return for such corporation’s prior taxable year.

      ‘(5) DISPOSITION OF TANGIBLE PROPERTY- Income, gain, or loss from the disposition of tangible

property shall be sourced to the place such property is located at the time of the disposition.

      ‘(6) DISPOSITION OF INTANGIBLE PROPERTY-

        ‘(A) IN GENERAL- Income, gain, or loss from the disposition of intangible property shall be treated as from sources outside the District of Columbia.

        ‘(B) EXCEPTION- If any portion of the most recent income received or accrued by the taxpayer before such disposition which was attributable to such property was from sources within the District of Columbia, a like portion of the income, gain, or loss from such disposition shall be treated as from sources within the District of Columbia.

      ‘(7) RENTALS- Rents from property shall be sourced at the place where such property is located.

      ‘(8) ROYALTIES- Royalties shall be treated as from sources outside the District of Columbia.

      ‘(9) INCOME FROM PROPRIETORSHIP-

        ‘(A) IN GENERAL- In the case of a trade or business carried on by the taxpayer as a proprietorship, income from such trade or business (other than income which is included in net earnings from self-employment by the taxpayer) shall be treated as from sources outside the District of Columbia.

        ‘(B) EXCEPTION FOR DISTRICT OF COLUMBIA BUSINESSES- If the taxpayer is required to file (and files) a franchise tax return with the District of Columbia for the taxable year, subparagraph (A) shall not apply to an amount equal to the D.C. percentage of such income.

      ‘(10) INCOME FROM PARTNERSHIP-

        ‘(A) IN GENERAL- In the case of a taxpayer who is a partner in a partnership, income from such partnership (other than income which is included in net earnings from self-employment by any partner) shall be treated as from sources outside the District of Columbia.

        ‘(B) EXCEPTIONS- Subparagraph (A) shall not apply to a partnership--

          ‘(i) which was required to file (and filed) a franchise tax return with the District of Columbia for the partnership’s taxable year ending with or within the taxpayer’s taxable year to the extent of the D.C. percentage of the taxpayer’s distributive share of the partnership income, or

          ‘(ii) which was not required to file a franchise tax return with the District of Columbia for the partnership’s taxable year ending with or within the taxpayer’s taxable year to the extent of the taxpayer’s distributive share of partnership income which is not (as determined under this subsection) from sources outside the District of Columbia.

      ‘(11) INCOME IN RESPECT OF A DECEDENT; INCOME FROM AN ESTATE- Income in respect of a decedent, and income from an estate, shall be sourced at the place where the decedent was domiciled at the time of his death.

      ‘(12) INCOME FROM A TRUST- Income (other than retirement income) from a trust shall be treated as from the same sources as the income of the trust to which it is attributable.

    ‘(g) DEFINITIONS RELATING TO SUBSECTION (f)- For purposes of subsection (f)--

      ‘(1) RETIREMENT INCOME- The term ‘retirement income’ has the meaning given such term by section 114(b)(1) of title 4, United States Code (determined without regard to subparagraph (I) thereof).

      ‘(2) D.C. PERCENTAGE- The term ‘D.C. percentage’ means the percentage determined by dividing--

        ‘(A) the net income taxable in the District of Columbia (as shown on the original return for the taxable year), by

        ‘(B) total net income from all sources (as shown on such return).

      The preceding sentence shall be applied based on amounts shown on the original applicable District of Columbia franchise or income tax return.

    ‘(h) SECTION NOT TO APPLY TO ESTATES AND TRUSTS- This section shall not apply to an estate or trust.

    ‘(i) ELECTION- The election provided in subsection (a) shall be made at such time and in such manner as the Secretary may by regulations prescribe. Any such election shall apply to the first taxable year for which such election was made and for each taxable year thereafter until such election is revoked by the taxpayer.

    ‘(j) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.’.

    (b) CONFORMING AMENDMENTS-

      (1) Section 55(c)(1) of the Internal Revenue Code of 1986 is amended by adding at the end the following: ‘Such regular tax shall be determined without regard to section 59B.’

      (2) The table of parts for subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

‘Part VIII. Special rules for taxation of individuals who are residents of the District of Columbia.’

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

SEC. 3. MODIFICATION OF ZERO PERCENT CAPITAL GAINS RATE.

    (a) INCLUSION OF ALL CENSUS TRACTS IN DC- Section 1400B(d) of the Internal Revenue Code of 1986 (relating to treatment of Zone as including census tracts with 10 percent poverty rate) is amended to read as follows:

    ‘(d) TREATMENT OF ZONE AS INCLUDING ALL CENSUS TRACTS REGARDLESS OF POVERTY RATE- For purposes of applying this section (and for purposes of applying this subchapter and subchapter U with respect to this section), the DC Zone shall be treated as including all census tracts which are located in the District of Columbia.’.

    (b) EXCLUSION MADE PERMANENT- Section 1400B of the Internal Revenue Code of 1986 (relating to zero percent capital gains rate) is amended--

      (1) in subsection (b)--

        (A) by striking ‘, before January 1, 2003,’ in each of paragraphs (2)(A)(i) and (3)(A),

        (B) by striking ‘and before January 1, 2003,’ in paragraph (4)(A)(i), and

        (C) by striking ‘before January 1, 2003’ in paragraph (4)(B)(i)(I),

      (2) by striking ‘, or after December 31, 2007’ in each of subsections (c)(2) and (g)(2), and

      (3) by striking ‘OR AFTER 2007’ in the heading of subsection (c)(2).

    (c) 2-YEAR HOLDING PERIOD FOR ASSETS-

      (1) IN GENERAL- Section 1400B(a) of the Internal Revenue Code of 1986 (relating to exclusion) is amended by striking ‘5’ and inserting ‘2’.

      (2) CONFORMING AMENDMENTS- Section 1400B(b)(7) of such Code is amended--

        (A) by striking ‘5-YEAR’ in the heading and inserting ‘2-YEAR’, and

        (B) by striking ‘5-year’ and inserting ‘2-year’.

    (d) MODIFICATIONS TO DEFINITION OF DC ZONE BUSINESS- Section 1400B(c) of the Internal Revenue Code of 1986 is amended to read as follows:

    ‘(c) DC ZONE BUSINESS- For purposes of this section--

      ‘(1) IN GENERAL- The term ‘DC Zone business’ means any entity which is an enterprise zone business (as defined in section 1397B), determined--

        ‘(A) after the application of section 1400(e), and

        ‘(B) by treating no area other than the District of Columbia as an empowerment zone or enterprise community.

      ‘(2) SPECIAL RULE FOR BUSINESSES HOLDING INTANGIBLES- Paragraph (4) of section 1397B(d) shall not apply in determining whether a business is a DC Zone business if--

        ‘(A) at least 80 percent of the employees of such business are residents of the District of Columbia, and

        ‘(B) at least 50 percent of the wages (as defined by section 3401(a)) paid by such business are paid to residents of the District of Columbia.’

    (e) EFFECTIVE DATE- The amendments made by subsections (a), (c), and (d) shall apply to property placed in service in taxable years beginning after December 31, 2000.

SEC. 4. MODIFICATION OF FIRST-TIME HOMEBUYER CREDIT.

    (a) CREDIT MADE PERMANENT- Section 1400C(i) of the Internal Revenue Code of 1986 (relating to application of section) is amended by striking ‘, and before January 1, 2002’.

    (b) CREDIT ALLOWABLE AGAINST AMT-

      (1) IN GENERAL- Section 1400C(g) of the Internal Revenue Code of 1986 (relating to credit treated as nonrefundable personal credit) is amended--

        (A) by striking ‘For purposes of this’ and inserting the following:

      ‘(1) IN GENERAL- Except as provided in paragraph (2), for purposes of this’, and

        (B) by adding at the end the following new paragraph:

      ‘(2) LIMITATION BASED ON AMOUNT OF TAX- The credit allowable under subsection (a) for any taxable year shall not exceed the sum of--

        ‘(A) the taxpayer’s regular tax liability (as defined in section 26(b)) for the taxable year, reduced by the sum of the credits allowable under subpart A of part IV of subchapter A (other than this section) and the foreign tax credit allowable under section 27(a), and

        ‘(B) the tax imposed by section 55(a) for the taxable year.’.

      (2) CONFORMING AMENDMENT- Section 1400C(d) of the Internal Revenue Code of 1986 (relating to carryover of credit) is amended by striking ‘section 26(a)’ and all that follows through ‘this section)’ and inserting ‘subsection (f)(2)’.

    (c) REPEAL OF LIMITATION BASED ON MODIFIED GROSS INCOME-

      (1) IN GENERAL- Section 1400C of the Internal Revenue Code of 1986 is amended by striking subsection (b).

      (2) CONFORMING AMENDMENTS-

        (A) Section 1400C of such Code is amended by redesignating subsections (c), (d), (e), (f), (g), (h), and (i), as subsections (b), (c), (d), (e), (f), (g), and (h), respectively.

        (B) Section 1016(a)(27) of such Code is amended by striking ‘1400C(h)’ and inserting ‘1400C(g)’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

SEC. 5. CERTAIN DC SOURCE INCOME EXCLUDED FOR PURPOSES OF ALTERNATIVE MINIMUM TAX.

    (a) INDIVIDUAL DC SOURCE INCOME- Section 56(b) of the Internal Revenue Code of 1986 (relating to adjustments applicable to individuals) is amended by adding at the end the following new paragraph:

      ‘(4) TREATMENT OF DC SOURCE INCOME- In the case of a resident of the District of Columbia (as defined in section 59B(c)(1)), no income treated as income from sources within the District of Columbia under section 59B(f) shall be included in gross income for purposes of determining alternative minimum taxable income.’.

    (b) CORPORATE DC SOURCE INCOME- Section 56(c) of the Internal Revenue Code of 1986 (relating to adjustments applicable to corporations) is amended by adding at the end the following new paragraph:

      ‘(4) TREATMENT OF DC SOURCE INCOME-

        ‘(A) IN GENERAL- In the case of a DC Zone business (as defined in section 1400B(d)), no DC source income shall be included in gross income for purposes of determining alternative minimum taxable income.

        ‘(B) DC SOURCE INCOME- For purposes of subparagraph (A), the term ‘DC source income’ means gross income derived from the active conduct of such business within the DC Zone, including income derived from property located in such Zone and from services performed in such Zone.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to income received or accrued in taxable years beginning after December 31, 2000.