WASHINGTON -- Legislation to exempt high-speed rail bond issues from the private-activity volume cap was derailed in the House yesterday as a number of lawmakers objected to a provision that would institute a new tax-reporting requirement for states and localities.
Also yesterday, the House passed a bill by voice vote that would allow New York City to issue tax-exempt bonds to expand the offices of the United Nations and thereby attempt to keep the organization from moving some of its agencies out of the city.
The two bills were among a spate of tax measures approved earlier this month by the House Ways and Means Committee. To move them quickly through the House, committee Chairman Dan Rostenkowski, D-III., asked that they be included among groups of noncontroversial "suspension " bills the House routinely passes each Monday by voice vote.
While the United Nations bill passed easily under the procedure yesterday, the high-speed rail bill stalled because Rep. Fred Grandy, R-Iowa, demanded a roll-call vote, which is scheduled for today.
House rules on suspension bills require the rail bill to pass by a two-thirds vote. Municipal lobbyists said there may be enough opposition in the House to the reporting requirement to stop the bill from passing.
The proposal for the reporting requirement would force governments below the state level - including cities, towns, and counties - to notify taxpayers and the Internal Revenue Service as to the amount of property tax paid by residents each year that is deductible for federal income tax purposes. The requirement would become effective Jan. 1, 1994.
Rep. Bill Coyne, D-Pa., proposed the requirement to offset revenue losses expected to occur if his proposal for high-speed rail bonds is enacted. Under current law, 75% of each high-speed rail bond issue is exempt from the volume cap. Rep. Coyne's bill would make those issues completely exempt.
Proponents of the reporting requirement have said it would raise revenues for the federal government by decreasing the amount of property tax deductions claimed by taxpayers on their federal income tax forms.
Currently, many local governments do not send itemized property tax bills to residents, but instead charged them one amount that may include fees for trash collection and other services in addition to the property tax charge - fees that are not deductible items. Rather than attempt to calculate how much of the total is an eligible deduction, taxpayers often report the entire amount and claim a larger deduction than they are entitled to.
But municipal lobbyists, who became aware of the tax-reporting proposal last week, say the requirement would be an unwarranted burden on local governments, and they have been waging a campaign to create opposition to it in the House.
In a June 24 letter to House members, eight lobbying organizations said the proposed reporting requirement constituted an "unfunded federal mandate [that] would impose tremendous new costs and additional administrative burdens on local governments."
The groups signing the letter include the National Association of Counties, the Government Finance Officers Association, the National League of Cities, and the U.S. Conference of Mayors.
One problem with the new requirement is that it would require local governments to make a careful analysis of whether a charge on a tax bill is a tax or a fee, the counties group said in a notice to its members about the proposal. Determining whether to classify a charge as a tax or a fee is particularly difficult because IRS rules in this area are unclear, the counties group said.
During House debate on the measure yesterday, Rep. Grandy said the benefits of expanding tax-exempt financing for high-speed rail systems would be "outweighed by the administrative burdens on state and local governments" if the reporting requirement became law.
"The last thing we need is the federal government making their lives harder," he added. Several other Republicans also said they oppose the measure.
The United Nations bond proposal, meanwhile, passed the House after little debate. New York officials have said they need the measure because they are trying to derail an effort by Germany to lure some of the agency's offices to Bonn.
The German government has offered rent-free office space in Bonn to four U.N. agencies. To keep those agencies in New York, officials there want to offer incentives to the United Nations that would include additional office space financed with tax-exempt bonds. The bill would repeal a provision in the Tax Reform Act of 1986 that prevents tax-exempt bonds from being issued for that purpose.
