From: Richard Arsinow <richard.arsinow@rauland.com>
Subject: 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.