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RE: Tax Treatment Under Kolbe-Stenholm


Thank you, Rep. Kolbe, for your prompt reply.

I am puzzled, however, by your response (4). As I understand the proposal, deposits to ISAs are from three sources:

*A portion of employee FICA, which, because it cannot be excluded from reported gross income nor deducted, is post-tax.

*Voluntary contributions, which, as you explained under (2), are post-tax.

and

*Limited tax credits. Tax credits, to my knowledge, have never been taxable, so I must consider them post-tax.

It seems all deposits to the ISAs are post-tax. There would need to be a basis adjustment for all deposits, and only earnings would be taxed, in keeping with the spirit of your response (4), to prevent double taxation.

Richard Arsinow

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