PERMITTING WITHHOLDING ON THE COMPENSATION OF FEDERAL EMPLOYEES FOR PURPOSES OF INCOME TAXES IMPOSED BY CERTAIN CITIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00965R000400090023-3
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 3
• Document Creation Date: December 15, 2016
• Document Release Date: September 5, 2003
• Sequence Number: 23
• Publication Date: August 11, 1959
• Content Type: REPORT

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BETH CONGRESS ~ HOUSE OF REPRESENTATIVES ~ $EroRT
1st Session - No. 872
PERMITTING WITHHOLDING ON THE COMPENSATION
OF FEDERAL. EMPLOYEES FOR PURPOSES OF INCOME
TAXES IMPOSED BY CERTAIN CITIES
Auc:usm 11, 1959.-Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. MILLS, from the Committoe on Ways-and Means, submitted the
following
.REPORT
[To accompany H.It. 3X51]
The Committee on Ways and Means, to whom was referred the bill.
(H.R. 3151) relating to withholding, for purposes of the income tax im-
posed by certain cxtxes, on the compensation of Federal employees,
having considered the same, report favorably thereon without amend-
ment and recommend ths,t the bill do pass.
I. GENERAL STATEMENT
Present law (66 Stat. 765)., in general, provides that where State Or
Territorial laws require the collection of a tax by withholding by
employers, the Federal Government upon request is to enter into an
agreement to withhold th.c '.State or Territorial tax from compensation
paid Federal employees who arc employed in the State or 'Cerritory.
H.R. 3151 amends this statute to also provide for withholding of city
taxes by the Federal Government, with respect to its employees who
are employed in a city with such a tax, if the -city has a population
(according to the most recent decennial census) of 75,000 or more.
This bill, which the Treasury Department has indicated it favors,
has been approved unanimously by your committee.
I:I. REASONS FOR BILL
In 1952, in-the report on the- bill (ILR. 5157, 82d Cong., 2d sess.)
which provided for withholding by tho Federal Government of State
or Territorial taxes collected through withholding, your .committee
pointed aut that at that time Federal agencies lacked the authority to
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`L FEDERAL WITIiHOLDING FOR CITY INCOME TAXES
withhold State end 'Territorial income taxes from the _ salaries of
Federal employees.. Izi that_ report it was -urged that provision be
made for withholding of State and Territorial income taxes with respect ?
to Federal employees in view of the cooperation of theState and
Territorial ~?ovc;rnmcnts with the Federal Government with- respect to
fiscal matters generally, and particularly in view of the fact the States
- and Tert?itories were withholding Federal income taxes from their
employees. Your committee believes that the same reasons should
also requieo t1LC Federal Government to withhold city income taxes
from Federal employees. The cities also- have cooperated with the
Federal Government with respect to fiscal matters generally and also
withhold ' Federal incdine taxes from compensation paid their
employees.
The bill provides. for withholding by the I+edet?al Government only
irx the case of incorporated cities with populations of 75,000 or more
in order to limit -the administrative burden being assumed by the
Federal Government.. Where taxes are imposed by smaller munici-
palitics the number of Federal employees involved is likely to be fow
in number with the result that the h'ederal Government, if it were to
withhold in such. cases would be required to set up withholding pro-
cedures for t;~,:.xcs invo'Iving relatively few Federal employees.
Your com.n~ittee has been informed that municipal taxes which
provide for withholding on componsation presently are in effect in
five States: Alabama, I~entucliy, .?!'lissouri, Ohio, and Pennsylvania.
In these States there are 1.5 cities with populations of 75,000 or more
which levy municipal income taxes which are withheld by employers.
The income tax rates imposed by these cities are flat-rate taxes vary-
ing from one-half of 1 percent to 1'/percent. The 15 cities involved
are:.
Pennsylvania : Ohio
Allentown Canton.
Altoona Cincinnati
Erio Columbus
Philadelphia Dayton
Pittsburgh Springfield
Scranton Toledo
Missouri: St. Louis- Youngstown
Kentucky :.Louisville
It is important to noto that there are a number of restrictions
in existing law, now applicable to State. withholding taxes which
will also apply to the city withholding taxes. These are designed
both tai limit the administrative burdens of the withholding by
the Federal Government anal to prevent hardship and discrimination
in the. case bf the Federal employees involved. These restrictions
fan be summarized as follows:
(1) 'The law is limited so that withholding by the Federal Govern-
ment will not be required with respect to taxes of a city which requires
withholding only with respect to nonresidents.
(2) Withholding. will be required only with respect to Federal
employees whose regular place of Federal employment is within the
boundaries of the city imposing- flee withholding tax.
(3) No withholding of city tax will be required with respect to
compensation for service as a member of the Armed Forces (since suc$
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service frequently is temporary in nature and may be of a transient
character).
(4j The' Federal Government specificially does ildt consenti~to'the
application of any provision of a city's law which has 'the effect of
imposing more burdensome requirements upon the United States
than it Imposes upon other employers or which has the effect of
subjecting the United States or any of its officers or employees to a,ny
penalty or liability as a result of this law.
It also should be noted that this bill merely provides for a method
of collecting taxes already imposed by the device of withholding of
municipal income taxes by the Federal Government on its employees,
Issues, such as the jurisdiction of a city to tax any employee or group
of employees, would still be matters to bo settled by the appropriate
courts, unaffected by t'he fact that the Federal Government has
withheld tax.
lII. CHANGES IN :EXISTING LAw
In compliance with clause 3 of rule XTII of the Rules of the House
of Representatives, changes in existing law made by the bill, as intro-
duced, are shown as follotivs (existing law proposed to be omitted is
enclosed in black brackets, new matter is printed in italic, existing
law in which no change is proposed is shown in roman):
FIRST SECTION OF ACT OF JULY 17, 1952
(5 U.S.C., sec. 84b)
Be it enacted by the Senate and House of IZepresentatiUes of the 7ln,ited
States of America in Congress assembled, That where--
(1) the law of arty [State or Territory] State, Territory, or
city provides for the collection of a tax by imposingg upon em-
ployers generally the duty of withholding sums from t11e compen-
sation of employees and making returns of such sums to the
authorities of such I~State or Territory] State, Territory, or city,
and
(2) such duty to withhold is imposed generally with respect to
the compensation of employees who are residents of such [State
or Territory] State, :l'erritory, or city,
then the Secretary of the Treasury, pursuant to Regulations promul-
gated by the Pl~esi~ent,, is authorized and directed to enter Into an
agreement with 'such '[Stifle or Territory] State, Territory, or city
within 'one hundred Gild. twenty days of the ,request for agreemen
from the proper official of such [State or Territory] State, Territory,
or city. Such agreement shall provide t11at the head of each depart-
ment or agency of the United States shall comply with the require-
ments of such law in tlLO case of employees of such agency or depart-
ment who are subject to such tax and whose regular place of Federal
employment is within the [State or Territory] State, Territory, or city
with which such agreement is entered into. No such agreement shall
apply with respect to compensation for service as a member of the
Armed Forces of the United States. For the purposes of this section,
the term "city" means only a city which is incorporated under the law of a
State or Territory and which, had a population (according to the last
decennial census) of seventy-five thousand or more individuals.
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