UF00083703_00002.pdf

UF00083703_00002.txt

UF00083703_00002_pdf.txt

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IELEGRAH June 19. 1969

The detailed treatment of tax-exempt income from all sources,

including municipal bonds, is before the Congress in the form of an

Administration proposal, which requires that individual (not corporate)
taxpayers pro rate itemized deductions as between taxable income and the
amount of nontaxable income in excess of $10,000 from six specified
sources. At the Commissions June 13 meeting, Vice President Agnew

espressed an interest in how the members of the Commission might feel
about this particular provision. the question is
whether tax-exempt interest on State and local bonds should be included
in the taxpayer's nontaxable income in the allocation of non-business
deductions for Federal income tax purposes as between a taxpayer's
taxable and nontaxable income.

As I stated at the Coandssiou meeting, it is not practicable
for the Commission as a body to pass judgment on the proposal in the
absence of a thorough study. Therefore, a response to the Vice
President's request must take the form of expressions of individual
visas by Commission members. He will report the results of this poll

to the Vice President.

In recording their individual views, Commission members might

consider the following three alternatives:

TELEGRAM
Page 2

Alternative Defer taking any position on the grounds that
even a polling of individual views would tend to have
prejudicial effect on recommendations the Commission
might be considering upon completion of the upcoming
staff report dealing with "Alternative Federal Approaches
for Assisting State and Local Governments to Finance Their
Capital Needs." (This topic which is presented under Tab
3 at page 6 of the Docket Book was selected for study
subsequent to the Vice President's appearance at the
meeting.)

Alternative 1. Support the Administration's proposal in which
State and local bond interest along with other types of
nontaxable income will be considered in allocating
deductions.

AlternatiVe I. Oppose the specific inclusion of State and local
bond interest as well as the five other categories of
nontaxable income to be considered in allocating non-
business deductions in the Administration's proposal.

Please let us know by return telegram your preference among

these alternatives. If they fail to convey adequately your views,

please amplify the position you wish to take.

Farris Bryant

Chairman

Advisory Commission on Intergov
mental Re la tions




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