Reconsideration of District of Columbia 9-1-1 Emergency Telephone System Surcharge and Effect of New Amendments, B-302230, December 30, 2003

B-302230 Dec 30, 2003 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights This responds to two requests from the office of the District of Columbia Corporation Counsel with regard to the District of Columbia 9-1-1 Emergency Telephone System considered in B-288161, April 8, 2002, to James M. Eagen III, Chief Administrative Officer of the House of Representatives. The Corporation Counsel asked us to reconsider our decision that the U.S. House of Representatives is not required to pay the District 9-1-1 emergency telephone system surcharge as originally enacted in 2000. The Corporation Counsel also asked whether recent amendments to District law that made fundamental changes to the nature and applicability of the surcharge cured the problem identified in our 2002 decision that made the surcharge an impermissible tax on the federal government. For the reasons given below, we find no basis to change our previous determination that the House of Representatives was not required to pay the District's 9-1-1 emergency telephone system surcharges, as originally enacted. However, the recent amendments to the District 9-1-1 emergency telephone system surcharge changed the nature of the tax. As now imposed, the legal incidence of the tax is not on the federal government, but on the provider of services. Therefore, federal agencies may pay service provider bills that include itemization of the amended District 9-1-1 surcharge. View Decision B-302230, Reconsideration of District of Columbia 9-1-1 Emergency Telephone System Surcharge and Effect of New Amendments, December 30, 2003 B-302230 December 30, 2003 Mr. Robert J. Spagnoletti Corporation Counsel Government of the District of Columbia Subject: Reconsideration of District of Columbia 9-1-1 Emergency Telephone System Surcharge and Effect of New Amendments Dear Mr. Spagnoletti: This responds to two requests of your office with regard to the District of Columbia 9-1-1 Emergency Telephone System considered in B'288161, Apr. 8, 2002, to James M. Eagen III, Chief Administrative Officer of the House of Representatives.You asked us to reconsider our decision that the U.S. House of Representatives is not required to pay the District 9-1-1 emergency telephone system surcharge as originally enacted in 2000. You also asked whether recent amendments to District law that made fundamental changes to the nature and applicability of the surcharge cured the problem identified in our 2002 decision that made the surcharge an impermissible tax on the federal government. For the reasons given below, we find no basis to change our previous determination that the House of Representatives was not required to pay the Districts 9-1-1 emergency telephone system surcharges, as originally enacted.However, the recent amendments to the District 9-1-1 emergency telephone system surcharge changed the nature of the tax. As now imposed, the legal incidence of the tax is not on the federal government, but on the provider of services. Therefore, federal agencies may pay service provider bills that include itemization of the amended District 9-1-1 surcharge. BACKGROUND Your office disagrees with our conclusion in B-288161 that the District 9-1-1 emergency telephone system surcharge, as originally enacted, was an impermissible tax on the federal government. In our 2002 decision, we considered whether the United States and its instrumentalities must pay the District 9-1-1 surcharge, or whether the surcharge amounted to a tax impermissibly imposed on the federal government. Citing McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), our decision noted that the United States and its instrumentalities are constitutionally immune from direct taxation by state and local governments. We concluded that, despite its use of the term user fee, the Districts 9-1-1 emergency telephone system surcharge constituted a tax, the legal incidence of which fell directly upon the federal government as user of telephone services in the District of Columbia. Accordingly, we held that the federal government, including the House of Representatives, was constitutionally immune from, and need not pay, the Districts 9-1-1 emergency telephone system surcharge. B-288161, supra.[2] After we issued B-288161, your office requested that we reconsider our conclusion. You said that your research had not revealed any case in which a court had invoked the tax immunity doctrine to set aside a district tax levied upon the United States or one of its instrumentalities. You believe that the constitutional considerations underpinning the McCulloch tax immunity doctrine do not apply to the District, given its unique status as a federal district and a partially independent governmental unit.