Chapter 05 - Amendments to Internal Revenue Code

Chapter 05 - Amendments to Internal Revenue Code

11.0501 Amendments to Internal Revenue Code, as adopted.


The United States Internal Revenue Code of 1954, as adopted by American Samoa, is amended as set forth in this chapter.

11.0502 Section 5 redesignated as Section 6.


Section 5, relating to cross-reference with respect to tax on individuals, is redesignated as Section 6.

11.0503 Section 5 added.


Section 5 is added to read:

"SEC. 5. ALTERNATE MINIMUM TAX. In the case of a taxpayer other than a corporation, if an amount equal to 4% for tax year 2001 and 4% for tax years thereafter of the adjusted gross income exceeds the regular tax for the taxable year then there is imposed a tax equal to such excess. For the purpose of this section the term "regular tax" means the tax imposed by sections 1 and 3 for the taxable year reduced by the credits allowable under subpart A of Part IV of this subchapter other than that allowed by section 31. This alternate minimum tax does not apply to a handicapped taxpayer who earns $1,000 or less, or to the first $5,000 earned by a taxpayer age 65 or over during the taxable year. The term handicapped taxpayer means an individual with a mental disability resulting in subaverage intellectual functioning or impaired social competence, or with a physical disability, infirmity, malformation, or disfigurement which is caused by bodily injury, birth defect, or illness, including epilepsy. It shall include without limitation any degree of paralysis; amputation; lack of physical coordination; blindness or visual impediment; deafness or hearing impediment; muteness or speech impediment; or physical reliance on a guide dog for the blind, a wheelchair, or any other remedial appliance or device.

11.0504 Effective date of Section 38.


Section 38, relating to investment credit, shall be effective on all property placed into service on or after 1 January 1978.

11.0505 Last sentence of Section 48(d), and all of Section 48(g) deleted.


The last sentence of Section 48(d), relating to certain leased property, and all of Section 48(g), relating to adjustment to basis of property, are deleted.

11.0506 Section 63(a) amended.


Section 63(a), relating to the definition of taxable income, is amended by deleting "Except as provided in subsection(b)," and by inserting in lieu thereof "Except as provided in subsections(b) and(c)".

11.0508 Section 876 deleted.


Section 876, relating to alien residents of Puerto Rico, is deleted.

11.0509 Section 881(a)(1) amended.


Section 881(a)(1) relating to the imposition of tax on income of foreign corporations not connected with American Samoa business is amended by inserting after the word "dividends" the following: "(other than dividends paid by a corporation organized under the laws of one of the states or territories of the United States to a corporation organized under the laws of one of the states or territories of the United States)".

11.0510 Paragraph(e) added to Section 881.


Section 881 relating to the tax on income of foreign corporations not connected with American Samoa business is amended by adding after paragraph(d), the following new paragraph:

"(e) Motion picture rentals. In the case of revenues derived by foreign corporations from the rental of motion pictures to businesses in American Samoa, the tax imposed under paragraph(a) of this section shall be 15% of the amount of the revenues received."

11.0512 Section 931 deleted.


Section 931, relating to income from sources within possessions of the United States, is deleted.

11.0513 Section 932 deleted.


Section 932, relating to citizens of possessions of the United States, is deleted.

11.0514 Paragraphs(1) and(2) of Section 933 amended.


Paragraphs(1) and(2) of Section 933, relating to income from sources within Puerto Rico, are amended by deleting: "(except a-mounts received for services performed as an employee of the United States or any agency thereof)."

11.0515 Section 1441(c) amended.


Section 1441(c), relating to exceptions from withholding of tax on nonresident aliens, is amended by adding the following new paragraph:

"Payments by the United States. No deduction or withholding under subsection(a) shall be required in case of amounts paid to a nonresident alien, individual who is employed by the United States or any agency thereof, other than American Samoa or any agency thereof."

11.0516 Section 1441(b) amended.


Section 1441(b) relating to withholding of income tax is amended by inserting after the word "dividends" the following: "(other than dividends paid by a corporation organized under the laws of one of the states or territories of the United States to a corporation organized under the laws of one of the states or territories of the United States)".

11.0517 Paragraph(d) added to Section 1442.


Section 1442 relating to the withholding of tax on foreign corporations is amended by adding after paragraph(c) the following paragraph:

"(d) Motion picture rentals. In the case of revenues derived by foreign corporations from the rental of motion pictures to businesses in American Samoa, there shall be deducted and withheld at the source a tax equal to 15% thereof.

11.0518 Paragraph(e) added to Section 1442.


Section 1442 relating to the withholding of tax on foreign corporations is amended by adding after paragraph (d) the following new paragraph:

“(e) Reinsurance Premiums—In the case of premiums derived by foreign corporations from reinsurances in respect of insurance business transacted in American Samoa there shall be deducted and withheld at source a tax equal to 10% thereof.”

11.0519 Section 3401 amended.


Section 3401, relating to definitions for the collection of income tax at source on wages, is amended to read as follows:

“SEC. 3401 —DEFINITIONS.
(a) Wages. For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a public official) paid in cash for services performed by an employee for his employer; except that such term shall not include remuneration paid:
(1) For active service as a member of the Armed Forces of the United States; or
(2) For agricultural labor (as defined in section 3121 (g)); or
(3) For service not in the course of the employer’s trade or business performed in any calendar quarter by an employee, unless the cash remuneration paid for such service is $10 or more and such service is performed by an individual who is regularly employed by such employer to perform such service. For purposes of this paragraph, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if:
(A) On each of some 24 days during such quarter such individual performs for such employer for some portion of the day service not in the course of the employer’s trade or business; or
(B) Such individual was regularly employed (as determined under subparagraph (A), by such employer in the performance, of such services during the preceding calendar quarter; or
(4) For services for a government (other than American Samoa) or any agency thereof or an international organization; or
(5) For services for American Samoa or any agency thereof performed by a citizen or resident of the United States; or
(6) For services performed by a nonresident alien individual; or
(7)(A) For services for an employer (other than American Samoa or any agency thereof) performed by a citizen of American Samoa, if, at the time of the payment of such remuneration it is reasonable to believe that such remuneration will be excluded from gross income under section 911; or
(B) For services performed in a foreign country or in a possession of the United States (other than American Samoa) by a citizen of American Samoa if, at the time of payment of such remuneration, the employer is required by the law of such foreign country or possession of the United States to withhold income tax upon such remuneration; or
(C) For services for an employer performed by a citizen or resident of American Samoa within Puerto Rico, if it is reasonable to believe that during the entire calendar year the employee will be a bona fide resident of Puerto Rico; or
(8) For services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order; or
(9) To, or on behalf of, an employee or his beneficiary:
(A) From or to a trust described in section 401(e) which is exempt from tax under section 501(a) at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and not as a beneficiary of the trust; or
(B) Under or to an annuity plan which, at the time of such payment, meets the requirements of section 401(a)(3), (4), (5), and (6); or
(10) For services performed as a volunteer or volunteer leader within the meaning of the Peace Corps Act of the United States.
(b) Payroll period. For purposes of this chapter, the term “payroll period” means a period for which a payment of wages is ordinarily made to the employee by his employer, and the term “miscellaneous payroll period” means a payroll period other than a daily, weekly, biweekly, semimonthly, quarterly, semiannual, or annual payroll period.
(c) Employee. For purposes of this chapter, the term “employee” includes an officer, employee, or elected official of American Samoa or any agency thereof. The term “employee” also includes an officer of a corporation.
(d) Employer. For purposes of this chapter, the term “employer” means the person for whom an individual performs or performed any services, of whatever nature, as the em-ployee of such person, except that:
(1) If the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, the term “employer” (except for purposes of subsection (a)) means the person having control of the payment of such wages;
(2) In the case of a person paying wages on behalf of a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within American Samoa, the term “employer” (except for purpose of subsection (a)) means such person.
(e) Number of withholding exemptions claimed. For purposes of this chapter, the term “number of withholding exemptions claimed” means the number of withholding exemptions in a withholding exemption certificate in effect under section 3402(f). If no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero, and the employer shall deduct and withhold upon any wages a tax equal to 1 8 percent of such wages.

11.0520 Section 3402(a) amended.


Section 3402(a), relating to requirements of withholding with respect to income tax collected at the source, is amended to read as follows:
“(a) Requirement of withholding:
(1) Except as provided in paragraph (2), every employer making payment of wages shall deduct and withhold upon such wages a tax equal to 18 percent of the amount by which the wages exceed the number of withholding exemptions claimed, multiplied by the amount of one such exemption as shown in subsection (b)(l);
(2) If, based upon the information contained in an employee’s exemption certificate, it appears that such employee will be subject to the tax imposed by section 5 of chapter 1, every employer making payment of wages to such individual shall deduct and withhold upon such wages a tax equal to 2 percent of such wages.

11.0521 Section 3402(c)(1) amended.


Section 3402(c)(1), relating to wage bracket withholding with respect to collection of income tax at source on wages, is amended to read as follows:

"(c) Wage bracket withholding:

(1)(A) In lieu of the tax required to be deducted and withheld under subsection(a)(l), the employer may elect to deduct and withhold upon the wages paid to an employee a tax determined in accordance with the tables provided in this subsection;

(B) In lieu of the tax required to be deducted and withheld under subsection(a)(a), the employer may elect to deduct and withhold upon the wages paid to an employee a tax determined as one-ninth of the tax determined in accordance with the tables provided in this subsection as if the number of withholding exemptions claimed is zero.

11.0522 Subsection(c),(f)(6), and(j) of Section 3402 deleted.


Subsection (c), relating to included and excluded wages, subsection (f)(6) relating to exemption of certain nonresident aliens, and subsection (j), relating to noncash remun-eration to retail commission salesmen, of Section 3402, are deleted.

11.0523 Section 3402(f)(1) amended.


Section 3402(f)(1), relating to withholding exemptions, is amended by deleting "An employee receiving wages shall on any day be entitled to the following withholding exemptions:" and by inserting in lieu thereof "An employee receiving wages, with respect to which a tax is required to be deducted and withheld under subsection(a)(1), shall on any day be entitled to the following withholding exemptions".

11.0524 Section 3402(f)(2) amended.


Section 3402(f)(2) is amended to read as follows:

"(2) Exemption certificates:

(A) On commencement of employment. On or before the date of the commencement of employment with an employer, the employee shall furnish the employer with a signed withholding exemption certificate relating to the number of withholding exemptions which he claims, which shall in no event exceed the number to which he is entitled, and stating whether it is reasonable to believe that he will be subject to the tax imposed by section 5 of chapter 1;

(B) Change of status: If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is less than the number of withholding exemptions claimed by the employee on the withholding exemption certificate then in effect with respect to him or it is no longer reasonable to believe, notwithstanding the statement on such certificate, that he will be subject to the tax imposed by section 5 of chapter 1, the employee shall within 10 days thereafter furnish the employer with a new withholding exemption certificate relating to the number of withholding exemptions which the employee then claims, which shall in no event exceed the number to which he is entitled on such day, and stating that it is reasonable to believe that he will not be subject to the tax imposed by section 5 of chapter 1. If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is greater than the number of withholding exemptions claimed or it is reasonable to believe, notwithstanding a prior statement to the contrary, that he will be subject to the tax imposed by section 5 of chapter 1, the employee may furnish the employer with a new withholding exemption certificate relating to the number of withholding exemptions which the employee then claims, which shall in no event exceed the number to which he is entitled on such day, and stating that it is reasonable to believe that he will be subject to the tax imposed by section 5 of chapter 1;

(C) Change of status which affects next calendar year: If, on any day during the calendar year, the number of withholding exemptions to which the employee will be, or may reasonably be expected to be, entitled at the beginning of his next taxable year under subtitle A is different from the number to which the employee is entitled on such day or it appears that the expectation may change as to the imposition of tax under section 5 of chapter 1, the employee shall, in such cases and at such times as the Governor or his delegate may by regulations prescribe, furnish the employer with a withholding exemption certificate relating to the number of withholding exemptions which he claims with respect to such next taxable year, which shall in no event exceed the number to which he will be, or may reasonably be expected to be, so entitled, and stating whether it will be reasonable to believe that he will be subject to the tax imposed by section 5 of chapter 1.

11.0525 Adds(7) to Section 3402(f).


Section 3402(f) is amended by adding the following new paragraph:

"(7) Zero withholding exemptions: An employee receiving wages, with respect to which a tax is required to be deducted and withheld under subsection (a)(2), shall not be entitled to any withholding exemptions."

11.0526 Section 3404 amended.


Section 3404, relating to return and payment by governmental employer, is amended to read as follows:
“SEC. 3404—RETURN AND PAYMENT BY GOVERNMENTAL EMPLOYER: If the employer is American Samoa, the return of the amount deducted and withheld upon any wages may be made by an officer or employee of American Samoa having control of the payment of such wages, or appropriately designated for that purpose.”

11.0527 Adds(33) to Section 7701(a).


Section 7701(a), relating to definitions, is amended by adding the following new para-graph:

"(33) Citizen of American Samoa. The term citizen of American Samoa shall be considered not to include a citizen of American Samoa who is also a citizen of the United States.

11.0528 Chapter 2 deleted.


Chapter 2, relating to tax on self-employment income, is deleted.

11.0529 Chapter 4 deleted.


Chapter 4, relating to rules applicable to recovery of excessive profits on government contracts, is deleted.

11.0530 Sections 43 and 3507 deleted.


Section 43, relating to the earned income credit, and Section 3507, relating to advance payment of the earned income credit by employers, are deleted for all tax years beginning after 31 December 1979.

11.0531 Renumbers Section 221 to 222 and adds new Section 221.


Section 221, relating to cross-references with respect to additional itemized deductions for individuals is redesignated as Section 222. New Section 221 is added to read:

"SEC. 221. STUDENT TUITION DEDUCTION

A taxpayer may deduct from his adjusted gross income, if he elects to itemize his deductions, all cost for tuition paid in the current taxable year for the education of a dependent who is attending either public or private elementary school, a high school, a college, university, or graduate school anywhere in the United States.

11.0532 Section 457(d)(1) amended.


Section 457(d)(1) providing definitions is amended to read:

"(1) State. The term "state" means a State, a Territory or the United States, a political subdivision of a State or Territory, and an agency or instrumentality of a State, Territory or political subdivision of a State or Territory".

11.0533 Partial recoupment of corporate taxes.


(a) Section 11(b), relating to the amount of tax imposed on corporations for taxable years beginning on and after July 1, 1987, is amended to read:

11(b) Amount of tax.

The amount of tax imposed by subsection(a) shall be the sum of;

(1) 15 percent of so much of the taxable income as does not exceed $50,000,

(2) 25 percent of so much of the taxable income as exceeds $50,000 but does not exceed $75,000,

(3) 34 percent of so much of the taxable income as exceeds $75,000 but does not exceed $650,000, and

(4) 44 percent of so much of the taxable income as exceeds $650,000.

In the case of a corporation which has taxable income in excess of $100,000 for any taxable year, the amount of tax determined under the preceding sentence for such taxable year shall be increased by the lesser of(a) 5 percent of such excess or(b) $11,750.

11.0534 Maximum tax imposed upon corporations.


Notwithstanding the provisions of section 11.0533, the maximum amount of income tax imposed in a taxable year upon any corporation operating under a certificate of exemption issued pursuant to the tax incentives for businesses act, section 11.1601 et seq., shall not exceed the amount of income tax which would have been imposed upon such corporation in such year under the provisions of this title, as in effect on December 31, 1986 (without regards to the Tax Reform Act of 1986, U.S. Public Law No. 99-514) and as applied in accordance with the terms of the certificate of exemption issued to such corporation."

11.0535 Section 876 amended.


Section 876 relating to alien residents of Guam, Puerto Rico, the Northern Marianas Islands and the United States is amended to read:

(a) Alien individuals. This subpart shall not apply to any alien individual who is a bona fide resident of Puerto Rico, Guam, the Northern Mariana Islands, or the United States during the entire taxable year and such alien shall be subject to the tax imposed by section 1.

(b) Foreign corporations. Sections 881, 884 and 1442 shall not apply to corporations formed in the United States, any of the 50 states or any territory of the United States.

11.0536 Section 1442(c) deleted.


Section 1442(c) relating to corporations formed in Guam and other territories is deleted.

11.0537 Section 881(b) deleted.


Section 881(b) relating to corporations formed in Guam and other territories is deleted.