July 11, 1978
Page 20230
By Mr. MUSKIE:
S. 3278. A bill to amend the Internal Revenue Code of 1954 to provide that service performed by a citizen of the United States as an employee of the Roosevelt Campobello International Park Commission shall constitute employment for purposes of the Federal Unemployment Tax Act; to the Committee on Finance.
Mr. MUSKIE. Mr. President, the Roosevelt Campobello International Park was created in 1964 by a Canadian-American treaty to commemorate and preserve the summer home of Franklin Delano Roosevelt on Campobello Island in New Brunswick, Canada. In accordance with the spirit of that agreement and the statutes which established the park, the park has a policy of equal opportunity in employment, compensation and fringe benefits for both Canadian and American employees.
The park currently employs 13 U.S. residents. These employees are subject to U.S. social security taxes; and are eligible for old age, survivors and disability insurance benefits, as well as workmen's compensation. In nearly all ways they are treated as though they were employed on U.S. soil.
However, these U.S. citizens have been unable to secure unemployment insurance coverage. The Maine Employment Security Commission has taken the position that they cannot be covered under Maine law. Neither can they be covered under the Federal Unemployment Tax Act.
The Canadian Department of National Revenue has taken the position that the U.S. employees of the park will be subject to Canadian unemployment insurance premiums until and unless they can be brought under unemployment insurance coverage in the United States.
While U.S. employees will therefore be eligible for Canadian Unemployment Insurance, there are serious obstacles which prevent them from taking advantage of the Canadian benefits.
The U.S. employees live in Lubec, Maine, which is just 300 yards from Campobello Island. The Canadian mainland is 50 miles away by road. Thus, a U.S. employee of the park would have difficulty proving himself available for employment in the Canadian labor force and would be unlikely to find employment in Canada within a reasonable commuting distance from home.
Mr. President, as chairman of the Roosevelt Campobello International Park Commission I am pleased to introduce today legislation to resolve this inequity. This bill would amend the Internal Revenue Code of 1954 to provide that U.S. employees of the park shall be considered as employed inside the United States.
This legislation will insure United States and Canadian employees of the park are employed on an equal basis. It is supported by the Commission and is in accord with the agreement reached between the United States and Canadian Governments on this issue.
Mr. President, I would like to express my appreciation to the Canadian Government and the United States Treasury Department for their assistance in resolving this matter. I urge my colleagues to act quickly on this bill in order that the problem may be finally resolved.
Mr. President, I ask unanimous consent that the text of the bill and related documents be printed in the RECORD.
There being no objection, the bill and material were ordered to be printed in the RECORD, as follows:
S. 3278
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 3306(c) of the Internal Revenue Code of 1954 (relating to the definition of employment for purposes of the Federal Unemployment Tax Act) is amended by adding at the end thereof the following new sentence:
"Notwithstanding any other provision of this subsection, service performed by a citizen of the United States as an employee of the Roosevelt Campobello International Park Commission shall be deemed to be employment for purposes of this chapter.".
SEC. 2. The amendment made by the first section of this Act shall be effective with respect to remuneration paid after December 31, 1978 for service performed after such date.
THE SECRETARY OF THE TREASURY,
Washington, D.C.,
April 6, 1978.
Hon. EDMUND S. MUSKIE,
Chairman,
Roosevelt Campobello International Park Commission,
United States Senate,
Washington., D.C.
DEAR ED: On October 12, 1977, you wrote me concerning the unemployment insurance situation of the employees of the Roosevelt Campobello International Park Commission. On November 28, I wrote you concerning the results of our preliminary study of the problem, and stated that we would keep you informed of the progress of our further study. We have developed further ideas on ways to resolve this matter, and I thought it would be useful to communicate these to you before the Commission's upcoming meeting April 7-8.
As I indicated in my letter of November 28, it is our understanding that the Canadian Department of National Revenue has taken the position that the employees will be subject to Canadian unemployment insurance premiums until and unless the employees can be brought under unemployment insurance coverage in the United States. The question in light of this position is whether the employees can be brought within the coverage of either the Maine Employment Security law or the Federal Unemployment Tax Act (FUTA).
We understand from the staff of the Commission that the Maine Employment Security Commission has taken the position that the employees of the Commission cannot be covered under Maine law.
FUTA presently covers services performed by an employee within the United States, services upon an American vessel or aircraft under a contract executed in the United States, and any service "performed after 1971 outside the United States (except in a contiguous country with which the United States has an agreement relating to unemployment compensation) by a citizen of the United States as an employee of an American employer." An "American employer" is defined to include individual residents of the United States, corporations organized under the laws of a state or of the United States, trusts all of the trustees of which are United States residents, and partnerships two-thirds of the partners of which are United States residents.
The Commission employees' situation arguably fails to meet the definition of "employment" because the services are not performed for an "American employer." And in any event, this situation clearly fails to meet the definition because the services are performed "in a contiguous country with which the United States has an agreement relating to unemployment compensation."
It appears therefore that it would be necessary to amend FUTA to cover the Commission specifically. Extension to those employees could be accomplished by adding a provision at the end of section 3306(c) stating that "Notwithstanding any other provision of this subsection, service performed by a citizen of the United States as an employee of an international park commissicn established under Chapter 22 of Title 16 shall be deemed to be employment for purposes of this chapter." A copy of a draft bill that would accomplish this is enclosed.
I hope this answers the questions you raised in your October 12 letter. Please let us know if we may be of further assistance in this matter.
Sincerely,
W. MICHAEL BLUMENTHAL.
CANADIAN EMBASSY, AMBASSADE DU CANADA,
Washington, D.C.,
September 27, 1977.
Hon. EDMUND S MUSKIE,
Chairman,
Roosevelt Compobello International Park Commission,
The United States Senate,
Washington, D.C.
DEAR SENATOR MUSKIE: You will recall that last April, you sent to my predecessor, Jake Warren, a legal analysis of the taxation problems of United States employees of the Roosevelt Compobello International Park Commission. As Mr. Warren informed you by letter dated May 5, the memorandum was forwarded to our authorities to Ottawa for their consideration
I am now pleased to inform you that a review of the status of the United States employees of the Park Commission has been concluded by the Canadian Departments of National Revenue and Justice together with the United States Internal Revenue Service. It has been agreed that both part-time and full-time U.S. employees of the Commission fall within the provisions of Article VI of the Canada/United States Tax Convention and are therefore exempt from Canadian income tax deductions. This exempting provision in turn has application for the purposes of the Canada Pension Plan, thereby removing any requirement to withhold Canada Pension Plan contributions.
It was also the opinion of the review group that under Canadian Unemployment Insurance legislation, all American employees, both full and part-time, were liable for Canadian Unemployment Insurance premiums. However, in discussions with the U.S. Internal Revenue Service, it was agreed that the U.S. Authorities would consider ways, including the possibility of a bilateral agreement with Canada through which American employees could eventually be covered under either the Maine Unemployment Insurance Plan or the Federal Special Unemployment Assistance Program.Until such time as an agreement of that sort has been negotiated, it was agreed that the American employees would be liable for Canadian Unemployment Insurance deductions.
I would be grateful if you would inform Park Commission Officials, and especially Henry Stevens, of the results of the review, and ask that arrangements be made for deductions of Unemployment Insurance commencing with the month of October, 1977. The St. Johns, New Brunswick District Office of Revenue Canada would be pleased to provide further information and assistance to Park officials.
We are grateful for your interest in this matter which has enabled us to reach this happy resolution of the problem.
Yours sincerely,
P. M. Towe, Ambassador.