DC MOU 3.7.97 version

6:54 PM 07 Mar 1997

Attached is the latest version of the DC MOU. This version incorporates
agency and OMB comments. Please provide any comments to Jill Gibbons or
Scott Quehl by 2:00 Monday, March 10th. Thanks

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Draft 3.7. 1997 Hex-Dump Conversion

MEMORANDUM OF UNDERSTANDING BETWEEN:

THE DISTRICT OF COLUMBIA

Marion Barry, Jr., Mayor
Charlene Drew Jarvis, Council President Pro Tern

DISTRICT OF COLUMBIA FINANCIAL RESPONSIBILITY AND MANAGEMENT
ASSISTANCE AUTHORITY

Andrew Brimmer, Chair (Given the way in which this is structured it may be better to have the
Authority "Affirm or Attest")

OFFICE OF MANAGEMENT AND BUDGET, EXECUTIVE OFFICE OF THE
PRESIDENT

Franklin D. Raines, Director

Dated: - - - - - - - -
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SECTION I. PURPOSE

The parties respect the Home Rule Charter as the fundamental basis for governance in the
District. The purpose of this memorandum is to strengthen Home Rule and to agree to work
toward the revitalization of the District of Columbia.

This memorandum is intended only to improve the management of, and the relationship between,
the District of Columbia and the Federal Government, and is not intended to and does not create
any right, benefit, trust or responsibility, substantive or procedural, enforceable at law or equity
by a party against the United States, its agencies, its officers, or any person.

SECTION II. PUBLIC LAW 104-8, "THE DISTRICT OF COLUMBIA FINANCIAL
RESPONSIBILITY AND MANAGEMENT ASSISTANCE ACT OF
1995"

The parties recognize the effectiveness of PL 104-8 and dedicate themselves to the cooperative
implementation of its provisions. Among these provisions: (Note the purpose of this listing of
provisions is to remind everyone of the obligations that the District already has. Treasury at one
time had wanted "general conditions" I believe that a restatement of the Authority language
(either these provisions or others) serves this purpose. However, we could easily delete the
specifics. )

Finance.

For each Fiscal Year for which the District is in a control period, the Mayor shall develop
and submit to the Financial Authority and Council a financial plan and budget for the
applicable Fiscal Year and the next 3 Fiscal Years.

Expenditures for the District government for each Fiscal Year, beginning in FY1999, may
not exceed revenues for that Fiscal Year.

During Fiscal Years 1996, 1997, and 1998, the District government shall make
continuous, substantial progress toward equalizing its expenditures and revenues.

The District may not borrow money during a control year unless the Authority provides
prior certification that the borrowing is consistent with the financial plan and budget for
the year.

For the Secretary of the Treasury to make a short-term advance to the District, an
Authority-approved budget and financial plan must be in place, the Mayor must submit a
requisition for an advance including a schedule for timing and amounts for advances, the
Inspector General certifies the accuracy of the information provided to the Secretary, the
Secretary determines -- and the Authority certifies -- that the District lacks market access
on reasonable terms, and that the Treasury has reasonable assurance of being reimbursed.
.\Ianagement System
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Management.

An Office of the Chief Financial Officer will be established in the executive branch of the
District government, headed by the Chief Financial Officer, and including the Office of
the Treasurer, Controller, Budget, Financial Information Services, and Finance and
Revenue.

An Office of the Inspector General will be established in the executive branch of the
District government.

During the control period, the Mayor shall submit proposed contracts and leases to the
Authority for review, and cannot enter into a contract or a lease unless the Authority
determines it is consistent with the financial plan and budget.

The Authority may submit recommendations to the Mayor, the Council, the President,
and Congress on actions the
District or Federal
governments may take to
ensure the District's
compliance with a financial
plan and budget or promote
its financial stability,
management responsibility,
and service delivery
efficiency. The Mayor and
the Council shall submit a
statement to the Authority,
President, and Congress
providing notice as to
whether the District will
adopt the recommendations.
An affirmative statement
must include a written
implementation plan, with
performance measures and a
schedule for audit
compliance. If the statement
rejects the recommendations,
the Authority may vote to
take what actions it deems
appropriate, after consulting
with Governmental Affairs
Committee of the Senate and
the House Government

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Reform and Oversight
Committee,

SECTION III. GENERAL PROVISIONS

1. Balanced Budget, PL 104-8 requires that the District balance its budget by FY1999,
By this agreement, the District agrees to present and/or approve a balanced budget for the
Fiscal Year beginning October 1, 1997,

2. Agreement to be Bound. The District agrees to be bound by and to use its offices and
best efforts to implement this agreement.

SECTION IV. SUBMISSION OF LEGISLATION & FEDERALLY ASSUMED
FUNCTIONS

On behalf of the Executive Office of the President, the Director of the Office
Management and Budget intends to recommend the submission of legislation to the Congress
that is consistent with the National Capital Revitalization and Self Government Improvement
Plan announced by the President on January 14, 1997,

Once implemented, the Plan will provide the District substantial relief from its operating
expenditures, relief which will grow over time, It will also invest considerable resources to
improve the City's criminal justice systems and capital infrastructure, If this legisIati~)J1 is
enacted. the Federal government will The Federal government agrees to undertake the functions
described below. The Federal government will not undertake a function until the District
government meets the conditions for that function, described in Section V,

1. Medicaid, The Federal government will increase its share of the District's Medicaid
payments to 70 percent, thereby reducing the District's share to 30 percent. The
Department of Health and Human services will provide more intensive technical
assistance to help the District improve the management of its Medicaid program.

2. Pensions. The Federal government will take financial and administrative
responsibility for virtually all pension benefits accrued under the plans for all active
and retired police and firefighters, teachers, and judges. Assets of the retirement
plans will be transferred to the Federal government. The Federal government will pledge
its full faith and credit to meet its responsibilities to these beneficiaries. It will "freeze"
benefits payable to current employees based on service earned as of the date the
legislation is introduced, and will pay their future retirement, death and some of their
disability benefits to the extent they are earned based on the frozen service. While the
Federal government will not be responsible for benefits earned during future years of
service by members of the current retirement programs, these members will get the
benefit of pay increases on the frozen benefits, Frozen benefits will continue to be subject
to cost-of-living adjustments under the terms of the existing programs. For those

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emplovees covered bv new plans, their contributions will be paid into those plans. The
Secretary of the Treasury will appoint a third-party Trustee to administer the plans and
manage pension assets.

3. Intermediate-Term and Short-Term Lending. The United States Treasury will provide
an intermediate-term loan to eliminate the accumulated fund balance deficit of no more
than 15 years, at an interest rate of Treasuries plus 1I8th of 1 percent. The Treasury may
also provide inter-year loans for liquidity purposes. The combined amount of the
intermediate-term and inter-year liquidity loans will not exceed $500 million. The
Treasury may also provide intra-year loans for the purposes of liquidity.

4. Criminal Justice. The Federal and District governments, in consultation with
representatives of the Federal and District judiciary, will develop and implement a
transition plan transferring responsibility over a three-to-five-year period for incarcerating
felons of D.C. Code violations. The Federal Bureau of Prisons (BOP) will house felons
who are convicted of violating the D.C. Code and sentenced to terms of imprisonment in
correctional institutions operated or contracted by the BOP, after BOP's capacity has been
increased through new construction at Lorton and other locations selected by BOP,
through renovation of existing facilities at Lorton, Virginia. After October 1, 200 I, the
BOP will also designate to Federal correctional institutions sentenced D.C. felons in the
custody of the D.C. Department of Corrections, as the Director of BOP deems
appropriate, in accordance with available capacity, until they have all been designated to
Federal institutions. The BOP will accept employment applications from persons
currently employed by the D.C. Department of Corrections for existing BOP vacancies,
and will process such applications in accordance with existing Federal procedures and
standards.
The Attorney General will select, with the approval of the Chairman of the D.C. Financial
Responsibility and Management Assistance Authority, and in consultation with the
Mayor of the District of Columbia, a Trustee to oversee operations of the D.C.
Department of Corrections until the BOP assumes responsibility for all incarcerated
District felons.

Consulting with representatives of the Federal and District judiciary, the Federal and
District governments will also develop and implement a transition plan transferring
responsibility for D.C. Code violation offender pre-trail, parole, probation, and
post-adjudicationlpost-conviction adult offender supervISIOn from the District
government to the Federal government over a three-to-five-year period. The United
States Parole Commission will continue to assume responsibility for all D.C. felons
housed in Federal Correctional Institutions who have sentences subject to provisions of
parole. The Federal government will take direct responsibility for funding the District
Court System. The Courts will remain self-managed.

5. Economic Development. The Federal government will make tax benefits available to the
District both to encourage hiring by firms throughout the District of District residents of
distressed areas and to encourage economic revitalization throughout the District, and to
encourage the employment of disadvantaged D.C. residents.

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An economic development corporation (EDC) will be established as a non Federal public
authority in the District of Columbia, with the mission of revitalizing the nation's capital
and benefitting the residents and businesses of Washington, D.C. A majority of the
EDC's Board will be private sector, community and civic leaders, with Federal and local
representation as well. The Federal government will provide the initial capitalization of
the EDC. Building on current strategic planning and development efforts, the EDC will
formulate a strategic economic development plan for the District, and will have
significant powers to spur largescale and other development to implement that plan, in
all of the District's neighborhoods.

6. Infrastructure. The National Capital Infrastructure Commission (NClC) will be
established to assume certain Statelike responsibilities for selection. funding. and
oversight of National Highwav Svstem capital projects (including roads. bridges. and
transit) and NHS operations and maintenance projects (excluding police authority,
National Park Service roads. and tnll1sit) within the District. The NCIC will be governed
bva fivemember board to he composed of three representatives from the District and two
representatives from the Department of Transportation. Contract administration will be
pertl)t111ed bv the Federal Highwav Administration. In addition, eligibility for Surface
Transportation Program (STP) funds will be expanded to include local public roads. To
support NC IC projects. thc National Capital Infrastructure Fund (NCIF) will be
established in FY1998 with $108 million for road, bridge, and transit capital projects.
An additional $17 million will be provided in FY 1998-03 for NHS operations and
maintenance. Federalaid funds for the District's NHS, Interstate Maintenance. and
Bridue programs will be transferred to the NCIC in FY 1998-03. The Administration
. also proposes that the NCIC he authorized to accepted contributions from other sources.

7. Personal Income Tax Collection. The Internal Revenue Service will assume
responsibility from the District of Columbia for administering and enforcing D.C.
individual income and payroll taxes. This would include the processing of those taxes
paid by individuals, as well as the payment of related employment and payroll taxes.
The District of Columbia will maintain processing and collection responsibility for all
other taxes collected for the City.
Upon enactment of the legislation to implement the Plan. the parties to the MOt.) will
review the legislation and confer on whether anv revisions to the MOU are necessary to ensure
its eonsistenev with the legislation.

SECTION V. DISTRICT CONDITIONS

The District government understands that it will be expected to undertake siunificant
actions as part of the National Capital Revitalization and Self-Government Improvement Plan.
This section sets out the actions that the District government agrees to take as a condition of the
Federal government actions under the legislation to CatTY out the Improvement Plan.

1. Medicaid. The District agrees to develop and implement plans satisfactory to the
Secretary of Health and Human Services to accomplish each of the following:

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1.1. To develop an effective system for the identification and collection of amounts owed by
third parties for medical care and services furnished to individuals under the District's
Medicaid plan.

1.2. To ensure the timely audit and settlement of cost reports of institutional providers
(including hospitals, nursing facilities, and intermediate care facilities for the mentally
retarded) under the District's Medicaid plan, including prompt elimination of the backlog
of such audits and settlements.

1.3. To develop and implement, directly or under contract, a comprehensive health care
management information system that will standardize data base development and
management, and integrate health care delivery with a public health data system. Such a
system shall at a minimum have the capacity to accomplish the following functions:

1.3.1. To assist eligibility verification.

1.3.2. To create utilization and financial profiles of providers.

1.3.3. To identify services (including preventive services) received by program beneficiaries.

1.3.4. To monitor the claims processing and other Medicaid operations of the fiscal agent.

1.3.5. To monitor the quality of care provided under managed care contracts.

1.3.6. To coordinate information management with respect to the District's Medicaid program
and other public health programs and functions.

1.4. To develop a comprehensive behavioral managed health care system, which combines
substance abuse and mental health grant programs. Development of such a plan shall
include a pilot project for better evaluation of inpatient acute psychiatric patient
adinissions, and the purchase of a comprehensive, risk-based system for managed care of
behavioral health which covers all eligible populations and services.

1.5. To complete the delegation to the District's Department of Health of independent
authority for contracting and personnel activities and to establish and ensure adequate
procurement and personnel systems and controls.

2. Pensions. The District Government agrees:'

See Definitions in Appendix I.

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2.1. Te establish replaeemeRt retiremeRt pregrams, threMgh eelleetiye bargaiRiRg if
applieable, that eever RewaRd elcistiRg empleyees whe are er weMld ha'ie beeR eeyered
by the traRsferred retiremeRt pre grams.

2.1.1. ORee the Rew retiremeRt pregrams are adepted, they may Ret be ameRded te iRerease
their eests witheMt pre't'idiRg a meaRS to fMRd the iRerease.

2.1. To establish a Replacement Plan for the Retirement Program

2.1.1. The Replacement Plan will oyer all existing and new Employees who are. or would be,
covered by the Retirement Program, if the Retirement Program continucd unchanged, and
will bc established by the date specified in legislation.

2.1.2. To the extent required by eU1Tcnt law, the Replacement Plan will be established through
collective bargaining.

2.1.3. After the Adoption Date, the Replacement Plan may not be amended in anv manner that
materially increases the cost of the Replacement Plan without provision of a mechanism
for funding such increases, in accordance with Section 2.2.

2.2 That the replacement retirement programs will use appropriate funding methods and costs
that do not exceed the sum available in the District of Columbia Budget and Financial
Plan.

2.2.1. The cost of any defined benefit plan will be determined in accordance with the
measurement standards of Governmental Accounting Standards Board Statement No. 27
(GASB 27), with the following additional restrictions:

2.2.1.1. funding methods will be limited to entry age or frozen entry age; and

2.2.1.2. amortization of any unfunded actuarial liability is required over no more than 30
years on a closed basis.

2.2.2. The cost of any defined contribution plan is the employer contribution required under the
provisions of the plan.

2.2.3. All costs of the replacement retirement programs must be reflected in the D. C. Budget
and Financial Plan in accordance with the standards described above.

2.2.4. All costs of the replacement retirement program must be paid in a timely manner.

2.2.5. For those emplovces covered bv new plans. their contributions will be paid into those
plans.

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2.3. To transfer copies of books and records of the Retirement Program and the Fund and to
be financially responsible for errors and omissions, includinu all necessarv records of
individual emplovees.

2.3.1. Copics of any books and records pertaining to the Retirement Program and the Fund
required bv the Secretary of the Treasurv or the Trustee must be madc available to the
Secretary or Trustee within 30 days after the Secretary or Trustee requests them.

2.3.2. The District will reimburse the Trustee for all costs. including benefit pavments. resulting
from errors or omissions in the books and records pertaining to the Fund.

2.4. To transfer assets from the Fund

2.4.1. Any and all assets of the Fund required to be transferred to the Trustee shall be
transferred on the Transfer Date in a form specified by the Trustee.

2.4.2. The District of Columbia Retirement Board will administer the retirement programs until
the Trustee assumes these responsibilities. The District government will reimburse the
Fund before the transfer date for any benefits paid out of the fund between the freeze date
and the transfer date that exceed payments that would have been the responsibility of the
Federal government if the transfer had occurred simultaneously with the freeze.

2.5. To implement reforms in the retirement program

2.5.1. Double COLAs Ito come: legal opinion as to the Districfs capacity to rescind double
COLAs through amending D.C. Code and technical analvsis of economic materiality of
double COLAs still pendingl.

3. Intermediate-Term and Short-Term Lending The District agrees that:

3.1. Any intermediate-term loan to eliminate the accumulated fund balance deficit would be
for no more than 15 years, with an interest rate of Treasuries + 118 of I percent.

3.2. Any inter-year loan for liquidity purposes and/or intermediate-term loan to eliminate the
accumulated fund balance deficit will not exceed the amount of $500 million.

3.3. The Secretary of the Treasury may require early reimbursement if the District can obtain
credit on the commercial market on favorable terms for refinancing as determined by the
Secretary.

3.4. The District must be in compliance with the approved Budget and Financial Plan
before any lending can occur.

3.5. The District must provide a requisition for an advance of funds and a promissory
note to reimburse the Treasury for the advance.

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3.6. The Financial Responsibility and Management Assistance Authority must certify
that there is an approved Budget and Financial Plan in effect for the District for the
Fiscal Year that the requisition is made.

3.7. The Secretary of the Treasury must receive certification that the District is unable
to obtain enough credit elsewhere to meet the DC government's need for financing.

3.8. The Federal government will work with the District government to amend its debt limit
provisions in order to allow implementation of the District's capital plan in an orderly and
sustainable manner.

4. Criminal Justice. [EXOP and Agencies have not had a chance to comment on this
language. Comments will be included, where appropriate, on Monday.]

This Memorandum of Understanding (MOU) between the Federal government and the District of
Columbia government (D.C.) outlines the offer of the Federal government to assist D.C. by
taking over certain traditionally State responsibilities and the conditions that D.C. must agree to
and fulfill should it choose to accept that offer as it relates to criminal justice functions including,
but not limited to, certain defendant and offender services, corrections, and the judiciary. The
MOU sets forth the expectations and responsibilities relating to proposed changes and reforms in
the District of Columbia criminal justice and judicial system and the procedures (including the
new statutory and regulatory provisions) the Federal government and D.C. will use to implement
the MOU. '

In particular, the MOU is designed to:

ensure an appropriate transfer and transition of responsibility from D.C. to the Federal
government for D.C. Code violation pretrial, public defender, parole, probation, and
post-conviction supervision and services for adult defendants and offenders.

ensure an appropriate transfer of responsibility from D.C. to the Federal government for
the incarceration of felons convicted of D.C. Code violations.

provide the framework for needed reforms in the D.C. sentencing system which are a
prerequisite for the Federal government accepting responsibility for the incarceration of
felons convicted of D.C. Code violations.

provide the basis for establishing an independent budgetary, financial oversight, and
administrative support system for the District of Columbia courts.

define the respective roles of the District of Columbia and the Federal government in
relation to lawsuits and resulting liability" as they may be affected by the reforms agreed
to in this memorandum of understanding.

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ensure development by D.C. and the Federal government of transition plans

(in consultation with the Federal and D.C. judiciaries ) for transferring
responsibility for D.C. Code violation pretrial, public defender, parole, probation,
and post-conviction supervision and services for adult defendants and offenders
over a transition period of (one to three) years from the enactment date of the
Federal implementing legislation.

for transferring responsibility over approximately a three to five year period for
incarcerating felons convicted ofD.C. Code violations.

(in consultation with the D.C. judiciary) for transferring responsibility for funding
the D.C. Courts system and related services, including plans relating to retirement
benefits and other personnel matters.

4.1. Administration of District of Columbia Jails and Pretrail, Public Defender, Parole,
Probation, and Post-Conviction Offender Supervision and Services

4.1.1. Federal Government Responsibilities

4.1.1.1. The Attorney General will select, with the approval of the Chairman of the D. C.
Financial Responsibility and Management Assistance Authority (Financial
Authority), and in consultation with representatives of the Federal and D.C.
judiciary, and the Mayor of the District of Columbia, among others, an Offender
Supervision and Courts Services Trustee to:

A. assure the smooth transition and continued operations of the District of
Columbia's Pretrial Services Agency and Public Defender Service (PDS)

B. implement timely shutdown of the D.C. Parole Board in coordination with
the U.S. Parole Commission

C. establish and initially operate a new D.C. Offender Supervision and
Services Agency

D. accomplish without disruption of services the transfer of the adult offender
probation supervision functions of the D. C. Courts Social Services
Division,

until the Federal government assumes responsibility for each of these functions.

4.1.1.2. During the transition period, under the auspices of the Trustee, the D.C. Pretrial
Services Agency will continue uninterrupted to provide services and support for
both juvenile and adult D.C. Code and Federal defendants and offenders to the
U.S. District Court for the District of Columbia, the U.S. Court of Appeals for the
District of Columbia, the Superior Court for the District of Columbia, and the

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District of Columbia Court of Appeals. The executive committee of the Pretrial
Services Agency will continue to include the chief judges of the courts served by
the agency; mayoral appointment of part of the executive committee will be
terminated.

4.1.1.3. Following the transitIOn period, the D.C. Pretrial Services Agency will be
organizationally housed in a new Federal D.C. Offender Supervision and Services
Agency.

4.1.1.4. After the Offender Supervision and Courts Services Trustee establishes a
transition agency with the capacity to provide adequate field supervision to adult
D.C. offenders on parole, probation or supervised release, and the U.S. Parole
Commission is capable of carrying out parole functions for D.C. Code offenders,
the D.C. Board of parole will be terminated, and its functions and jurisdiction will
be assumed by the U.S. Parole Commission. The District of Columbia Superior
Court Division of Social Services will continue to provide supervision to D.C.
Code juvenile offenders.

4.1.1.5. The Offender Supervision and Courts Services Trustee will accept employment
applications from persons currently employed by the District of Columbia Parole
Board for new positions in the Offender Supervision and Services Agency and
will process such applications in accordance with existing Federal procedures and
standards. Positions for related agencies will be advertised prior to being filled.

4.1.1.6. During the transition period, the Federal government will transfer funds for the
Pretrial Services Agency, the Public Defender Service and the supervision of D.C.
offenders through the Control Board to the Offender Supervision and Courts
Services Trustee. The head of any Federal department or agency may provide the
services of any personnel to the Trusteeship to assist in carrying out its duties.

4.1.1. 7. During the transition period, under the general auspices of the Trustee, the PDS
will continue uninterrupted to provide services to D.C. Code defendants and the
District of Columbia court system. The Director of PDS shall employ such
personnel as may be necessary.

4.1.1.8. During the transition period, the employees of and funds allocated to the Offender
Services and Courts Trustee and the agencies for which the Trustee is responsible
shall not be counted against the personnel and budget ceiling imposed on the
District of Columbia by the Control Board or Congress. (N.B. placeholder
language required clarification and/or citation).

4.1.1.9. The Federal government will assess the feasibility and cost-effectiveness of
contracting for limited bed space at the District's Correctional Treatment Facility
(CTF) as may be necessary to supplement existing Federal detention and
treatment contracts.

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4.1.2. District a/Columbia Responsibilities

4.1.2.1. The District of Columbia will maintain responsibility for all D.C. Code juvenile
offenders not prosecuted as adults.

4.1.2.2. The District of Columbia will have responsibility for housing and supervising
persons charged and/or convicted of misdemeanor violations in D.C. superior
Court, both before and after sentencing.

4.1.2.3. the District of Columbia will continue to house persons charged with felonies, and
persons convicted of felonies but not yet sentenced., in the district of Columbia
Superior Court. To the extent beds are available, the District of Columbia will
continue to house persons charged with felonies, and persons c.onvicted of
felonies but not yet sentenced, in the District Court, and will continue to receive
reimbursement by the Federal government at a mutually negotiated rate for the
costs of housing such persons. "House" and "housing" include subsistence,
transportation of persons to and from court appearances and medical facilities, and
the maintaining of necessary prison records.

4.1.2.4. The District of Columbia will continue to house persons sentenced by the
Superior Court and detained pending a hearing for revocation of parole, probation,
or supervised release, and will provide suitable facilities for such hearings. To
the extent beds are available, the District of Columbia will house persons
sentenced by the District Court and detained pending a hearing for revocation of
parole, probation, or supervised release, will provide suitable facilities for such
hearings, and will continue to receive reimbursement by the Federal government
at a mutually negotiated rate for the costs of housing such persons and for
providing such facilities. "House" and "housing" include subsistence,
transportation of persons to and from court appearances, revocation hearings, and
medical facilities, and the maintenance of necessary prisoner records.

4.1.2.5. The Trustee will operate under the general auspices of the Chairman of the
Control Board and can be removed only by the Attorney General.

4.1.2.6. the Trustee will propose funding requests for offender supervision and services to
the Control Board, and the request will be included in the Control Board budget to
the President and Congress each fiscal year.

4.1.2.7. the Trustee will allocate funds for offender supervision in the District of
Columbia, including funds for short term improvements, equipment contracts, and
salary increases that are necessary to retain key personnel, maintain and enhance
current levels of service, including offender drug testing, and provide for the
safety and security of the community.

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4.1.2.8. Upon receipt from the Control Board of funds identified by congress or other
entities for Pretrial Services, the Trustee will immediately transfer such funds to
the Pretrial Services Agency.

4.1.2.9. Upon receipt from the Control Board, the D.C. Court system, or the
Administrative Office of the United States Courts, of funds identified by Congress
or other entities for the D.C. Public Defender Service the Trustee will
immediately transfer such funds to the Public Defender Service.

4.1.2.10 In view of the responsibility to be undertaken by the U.S. parole Commission to
carry out the functions of the D.C. Board of Parole pursuant to the parole laws and
regulations of the District of Columbia, effective immediately, the D.C. Council
will not enact legislation that changes or modifies these laws and regulations
without the concurrence of the Attorney General. Following the assumption by
the Parole Commission of the functions of the D.C. Board of Parole, the council
will cede to Congress the sole authority to legislate changes to the District of
Columbia Code that pertain to the parole of D.C. felony offenders.

4.1.2.11. It is expected that the transition period for these offender and court services will
end no sooner than one year nor later than three years after the enactment of the
related legislation. (Insert respective effective dates)

4.1.2.12. The D.C. Corporation Counsel will provide representation for the Trustee and
Trustee supervised agencies. (See litigation and liability section)

4.2. Administration of District of Columbia and Federal Prisons

4.2.1. Federal Government Responsibilities

4.2.1.1. The Bureau of Prisons (BOP) will house felons, in correctional institutions
operated or contracted by the Federal Bureau of Prisons, who were convicted of
violating the D.C. Code and sentenced to terms of imprisonment, after the BOP's
capacity has been increased through renovation of existing facilities and new
construction at the corrections complex in Lorton, Virginia and other locations
seiected by the BOP. D.C. Code offenders will be housed together with Federal
offenders in BOP facilities based on inmate program and security needs and BOP
population management regulations. The BOP will oversee the operation of
community corrections centers in the District of Columbia as necessary to provide
an appropriate transition for inmates who are nearing release from Federal
prisons, including those convicted of D.C. Code violations. The BP intends to
use existing community corrections centers in the District of Columbia to the
extent practicable and will work with D.C. officials in the identification of
prospective sites, as needed to establish new community correction facilities.

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4.2.1.2. The BOP intends to operate several correctional facilities in Lorton, Virginia and
elsewhere to house a mix of both Federal and D.C. felons. Every effort will be
made to house D.C. felons at facilities that are as close to the District of Columbia
as permitted by inmate program and security needs and BOP population
management regulations. D.C. felons will be designated in the same manner as
Federal inmates, and ordinarily initially assigned to institutions located within a
SOO-mile radius of their residence. BOP also will work with D.C. officials to
identify sites for possible Federal correctional facility construction within the
District.

4.2.1.3. Based upon assurances from the District of Columbia that felons convicted of
violating the D.C. Code will, in the future, receive sentences similar to those
received by comparable offenders convicted of comparable Federal offenses,
during the transition period, the BOP will house those sentenced D.C. felons in
the custody of the D.C. Department of Corrections as the Director of the BOP
deems appropriate in accordance with available capacity. After October 1, 2001,
the BOP will accept D.C. felons sentenced under the new sentencing structure in
accordance with the capacity of the BOP. By October 1, 2002, and assuming
fulfillment of all requisite conditions, the BOP will have assumed responsibility
for incarcerating all D.C. felons.

4.2.1.4. The BOP will accept employment applications from persons currently employed
by the District of Columbia Department of Corrections for BOP vacancies and
will make hiring selections in accordance with existing Federal procedures and
standards. Positions for new BOP facilities will be advertised prior to being
filled.

4.2.1.5. The Attorney General will select, with the approval of the Chairman of the D.C.
Financial Responsibility and Management Assistance Authority, and in
consultation with the Mayor of the District of Columbia, a Trustee to oversee
operations of the District of Columbia Department of Corrections relating to
incarcerated felons, until the BOP assumes responsibility for all incarcerated D.C.
felons.

4.2.1.6. The Federal government will transfer funds for the incarceration of D.C. felons
through the Financial Authority to the Trustee. The head of any Federal
department or agency may provide the services of any personnel to the Trustee to
assist in carrying out the Trustee's duties.

4.2.1.7. Of the funds received by the Trustee from Congress through the Financial
Authority, the Trustee will reimburse to the BOP those funds identified by
Congress to be used for the construction of new facilities and the renovation of
existing facilities. The Federal Bureau of Prisons will be responsible and
accountable for determining how these funds will be used, including type, security
level, and location of new facilities.

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4.2.1.8. During the transition period, the employees of, and appropriations allocated to, the
Corrections Trustee and the agencies for which the Trustee is responsible shall not
be scored or counted against the personnel and budget ceilings imposed on the
District of Columbia by the Financial Authority or Congress. [N.B. placeholder
language requires clarification].

B. District a/Columbia Responsibilities

4.2.2.1. Offenders convicted of violations of the D.C. Code shall be sentenced pursuant to
a new D.C. sentencing system, described below. If the new sentencing system is
not promulgated within [24 months], however, the BOP may not obligate any
funds appropriated for the absorption of D.C. Code felons into the Federal prison
system and will have no responsibility to house any persons convicted of felony
offenses under the D.C. Code.

4.2.2.2. The District of Columbia will continue to house felons sentenced to terns of
imprisonment by the District of Columbia Superior Court until such persons have
been designated by the BOP. To the extent beds are available, the District of
Columbia will continue to house felons sentenced to .terms of imprisonment by
the U.S. District Court until such persons have been designated by the BOP, and
will continue to receive reimbursement at a mutually negotiated rate by the
Federal government for costs of housing such persons.

4.2.2.3. The Trustee will operate under the general auspices of the Chairman of the
Financial Authority and can be removed only by the Attorney General.

4.2.2.4. The Trustee will propose funding requests for the incarceration of D.C. felons to
the Financial Authority, and the request will be included in the Financial
Authority budget to the President and Congress each fiscal year.

4.2.2.5. The Trustee will allocate funds to the District of Columbia Department of
Corrections, including funds for short-term improvements that are necessary for
the safety and security of staff, inmates, and the community.

4.2.2.6. Upon receipt from the Financial Authority of Federal funds identified by Congress
for constructing new prisons and making major renovations to existing facilities
for the incarceration of D.C. felons, the Trustee will immediately reimburse such
funds to the BOP.

4.2.2.7. The D.C. Corporation Counsel will provide representation for the Trustee and
Trustee-supervised agencies (see the litigation and liability section).

4.3. Sentencing

The District of Columbia understands and agrees that the D.C. sentencing system will be
changed, pursuant to the proposed Act, in the following manner:

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4.3.1. Congress will amend the D.C. Code to abolish parole for all persons convicted of D.C.
offenses (felonies and misdemeanors) committed on or after 3 years from the date of
enactment of the Act.

4.3.2. Congress will amend the D.C. Code so that good time calculations for all persons
convicted of D.C. offenses (felonies and misdemeanors) committed on or after 3 years
from the date of enactment of the Act will be made according to the Federal
requirements.

4.3.3. Congress will establish a new D.C. Board of Criminal Sentences (the Board) as an
independent body within the D.C. government. All persons convicted of D.C. felonies
committed on or after 3 years from the date of enactment of the Act will be sentenced
according to a determinate sentencing system promulgated by the Board no later than 18
months after the date of enactment of the Act.

4.3.4. The Board will develop such amendments or repeals of provisions in the D.C. Code
relating to the maximum and minimum prison terms as are necessary to accomplish the
purposes of the Act. Ninety days after they are promulgated by the Board, the sentencing
system, amendments and repeals will become effective unless disapproved as a whole by
a majority of the District of Columbia Council. If disapproved by the Council, the
system may be enacted by Congressional action.

4.3.5. The promulgated sentencing system will supersede any inconsistent provision of the D.C.
Code and will provide for post-release supervision of offenders.

4.3.6. Congress will repeal certain other provisions of the D.C. Code to conform with the new
sentencing system (D.C. Code Title 24, Chapters 2 and 8], including the Youth
Rehabilitation Act.

4.3.7. The sentencing system developed will ensure the effective continuation of the D.C.
Superior Court Drug Intervention Program by including appropriate minimum mandatory
sentences and adequate related judicial discretion.

4.3.8. Congress will amend the D.C. Code Title 33, section 541 to adopt certain mandatory
penalties necessary for effective local law enforcement.

4.3.9. The Board will not have the authority to provide for capital punishment under any law
applicable exclusively in the District of Columbia.

4.3.10. The Board will have seven voting members. The Attorney General (or her designee) will
chair the Board. The other members will include two judges of the D.C. Superior Court
and one representative each for the D.C. Council, the Executive Branch of the D.C.
government, the D.C. Public Defender Service, and the U.S. Attorney for the District of
Columbia. A representative of the Bureau of Prisons will serve as a non-voting, ex
officio member.

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4.3.11. An affirmative vote of at least six Board members will be necessary to adopt guidelines,
promulgate the sentencing system, and make any amendments or repeals of D.C. Code
provisions relating to maximum and minimum prison terms.

4.3.12. In developing the sentencing system, the Board will hold three or more public hearings,
review appropriate State system models, consult with sentencing reform experts, and
solicit written comments from the public.

4.3.13. If the Board fails to promulgate a sentencing system within 18 months, the Board will
terminate and the Attorney General will develop the system and transmit it to the Council
for approval. The system will take effect unless the D.C. Council disapproves the system
and Congress, in tum, does not approve it.

4.3.14. The Board will have the mandate to ensure that the sentencing system it establishes,
among other things:

4.3.14.1. Will result in sentences for those convicted of felony offenses similar to those that
would be imposed upon comparable offenders convicted of comparable offenses
in the Federal system;

4.3.14.2. Will result in sentences that reflect the seriousness of the offense and provide for
just punishment, afford adequate deterrence to potential future criminal conduct of
the offender and others, and provide the defendant with needed educational or
vocational training, medical care, and other correctional treatment;

4.3.14.3. Will provide certainty and fairness in meeting the purposes of sentencing,
avoiding unwarranted sentencing disparities among similar defendants, while
maintaining sufficient flexibility to permit individualized sentences;

4.3.14.4. Will take into account the high volume of sentencing proceedings in the District
of Columbia Superior Court as bearing upon the degree of complexity of the
sentencing system; and

4.3.14.5. Will ensure that the system is neutral as to the race, sex, marital status, ethnic
origin, religious affiliation, national origin, creed, socioeconomic status, and
sexual orientation of offenders, if not related to the commission of the offense.

4.3.15. As part of the sentencing system, the Board will develop binding guidelines for use in
. determining the sentence to be imposed upon convicted felons. The guidelines will
specify:

4.3.15.1. When to impose a sentence to probation, a fine, or a term of imprisonment and the
appropriate amount or length, as well as intermediate sanctions;

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4.3.15.2. When to impose a term of supervised release following imprisonment, and the
appropriate length; and

4.3.15.3. Whether multiple sentences to terms of imprisonment should run concurrently or
consecutively.

4.3.16. Thirty days after promulgating the sentencing system, the Board will be terminated.
There will be a successor Federal agency in the judicial branch to amend the guidelines
consistent with the purposed of the Act. The D.C. Council may recommend to Congress
whether or not these amendments should be approved. The amendments will take effect
as prescribed by the successor agency, however, unless they are modified or disapproved
by Congress. The successor agency will have no powers to revise the District of
Columbia Code but will recommend changes to the Code as may be necessary to further
the purposes of the Act.

4.3.17. The D.C. Superior Court, D.C. Department of Corrections, and other agencies as
necessary will submit information about convicted felons as required by the Board and
the U.S. Department of Justice. This would permit an assessment of the extent to which
sentences imposed by the D.C. Superior Court are comparable to those imposed for
comparable offenders by U.S. District Courts. The results of this assessment would be
used by the Board in developing the new sentencing system for the District of Columbia.

4.3.18. Four years after the new sentencing system takes effect, there will be an evaluation to
determine the extent to which the sentencing system has succeeded in accomplishing the
goals set forth in the Act.

4.4. Liability and Litigation Authority

4.4.1. Federal Government Responsibilities

4.4.1.1. United States, its agencies, and personnel will not incur any liability on the basis
of the activities of the District of Columbia, its agencies, or personnel as a result
of the reforms agreed to in this Memorandum of Understanding.

4.4.1.2. The Attorney General, in her discretion, will have the authority to direct any
litigation involving the Trustees, pretrial services, and sentencing reform during
the transitional period, and to provide litigation services for the Trustees and the
agencies responsible for pretrial services and sentencing reform during the
transitional period in lieu of representation by the District of Columbia.

4.4.2. District of Columbia Responsibilities

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4.4.2.1. The District of Columbia will remain responsible for the defense of pending suits
against the District of Columbia or its personnel, and will remain responsible for
any liability resulting from such suits.

4.4.2.2. The District of Columbia will be responsible for the defense of suits arising from
the correctional, offender supervision, pretrial services, public defender, parole,
and sentencing reform activities of agencies of the District of Columbia, and for
any resulting liability, notwithstanding the contemplated transfer of these
functions to existing or new Federal agencies. This will include responsibility for
defense of suits and for resulting liability arising from the activities of the
Corrections Trustee and the offender Supervision and Courts Services Trustee.

4.4.2.3. The District of Columbia Corporation Counsel will provide litigation services as
required to carry our this section, but the Trustees and the agencies responsible for
pretrialial services, public defender services, and sentencing reform during the
transitional period will also have the option of making their own arrangements for
litigation services or requesting such services from the Financial Authority.

4.5. District of Columbia Courts

4.5.1. Congress will make all necessary amendments to the D.C. Code and other laws to
terminate budgetary control and other involvement of the D.C. government in the
finances and administration of the District of Columbia court system, including the D.C.
Superior Court and the D.C. Court of Appeals.

4.5.2. The Joint Committee on Judicial Administration of the D.C. Courts will prepare and
submit the budget for the D.C. Court system. The budgetary requests of the D.C. Courts
will not be subject to revision by the D.C. government or the Executive Branch of the
Federal government.
4.5.3. The D.C. Court system, through its Executive Office, will be authorized to contract with
D.C. and Federal agencies, and with other public and private entities, for necessary
supplies, equipment,. and services.

4.5.4. Expenditures of the District of Columbia Courts will be paid out of funds appropriated
for those Courts, and credited to a Treasury account established for that purpose. Funds
received by the District of Columbia Courts will no longer be part of the funds of the
District of Columbia.

4.5.5. During a transitional period of one to three years, the implementing legislation may
provide that the budgetary requests of the D.C. Courts are to be submitted through the
Offender Supervision and Courts Services Trustee or other appropriate intermediary, and
that the designated intermediary is to be responsible for receiving and transmitting to the
District of Columbia Court system all funds appropriated for the District of Columbia
Courts.

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5. Economic DeveLopment The District agrees that:

5.1. Consistent In eoopeFiltion with ongoing private sector recommendations, the D.C.
government efforts, it will implement ftHlFe timely and efficient zoning, permitting
and licensing processes, bv the end of FY1997.

5.2. The District government will offer personnel resources and fully cooperate with the
EDC in its review and evaluation of existing economic development plans for the
District of Columbia, in the development of the EDC strategic plan, and in
subsequent implementation of the plan.

5.3. The District government willlllloellte support a 'Iegislative allocation to the EDC 50
1
percent of the applicable State ceiling on the authority of the District government to
issue private activity bonds in each calendar year under section 141 of the Internal
Revenue Code.

5.4. The District government will give expedited and favorable attention to the EDC's
requests for land transfers (including transfers from the RLA), zoning adjustments
(including variances and special exceptions), and building and other permits and
licenses for projects and activities 6f as requested bv the EDC, and will support the
legislative granting of authority to the I<:nc to exercise certain powers, including the
right of eminent domain.

I 5.5. The District will cooperate with the Federal government and the private sector to
establish promptly an Organizing Committee which is primarily composed of
members of the private sector. The Organizing Committee will be responsible for
encouraging businesses and other members of the private and non-profit
communities -- District, regional and national -- to invest in the District. through the
ED(;.

6. Infrastructure.

The District agrees:

6.1. Establishment of the National Capital Infrastructure Commission (NCIC)

6.1.1. Beginning on October I, 1997, the NCIC shall assume certain State-like responsibilities
for selection (consistent with the planning requirements in 23 U.S.C. 134 and 135),
funding and oversight of the National Highway System (NHS) capital projects and shall
assume responsibilities for funding the operations and maintenance of the NHS within the
District of Columbia (exclusive of police authority and exclusive of funding those NHS
routes currently under the jurisdiction of the National Park Service) with funds made
available under Title - -

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6.1.2. The NCIC shall be governed by a five member Board of Governors (one member to be
appointed by the Mayor, one member to be appointed by the City Council, one member to
be appointed by the Financial Responsibility and Management Assistance Authority, and
two members to be appointed by the Secretary of Transportation), all of whom are voting
members.

6.1.3. The NCIC shall implement its responsibilities for funding and oversight and shall
advance NHS projects through the Department of Transportation, Federal Highway
Administration (FHW A). T~e FWHA s~all provide staffiRg SHPPOrt to assist tae ~tClC
iR fulfilliRg its fespof!sieilities aRd s~all seP,'e as t~e eORtfaetif!g ageRt fof e)(eeHtif!g all
eORtfaets fof peffoffflaRee of eligiele ~m8 aetivities aRd pfojeets, as defif!ed if!
Title.

6.1.4. Beginning on October 1. 1997. the NCIC rat the discretion of the District of Columbial
shall assume responsibilitv for advancing those NI-IS projects approved prior to that date
that are not under construction or under a contract f()f such construction bv October 1,
1997. runless the NCIC and the District of Columbia agree to continue to vest
responsibilitv for such project advancement with the District of Columbia]. Such
projects that are transferred under this section shall also be governed bv the requirements
contained in section 6.2.4.

6.1.5. The NCIC mav lkx National Capital Infi'astructure Funds authorized under section
and Nl-IS apportioned funds authorized to be transferred under section to ot hcr
Federal-aid highway funding categories. consistent 'with Title '3. United States Code
flexing provisions, provided performance measures relating to bridge, pavement. safetv or
other such perllmnanee measures that are established bY the Secretarv. or that shall be
established. are met. In the event the SecretarY of Transportation determines that such
performance measures arc not being met. NHS funds made available under Title
shall not be flexed to another funding categorv. but shall onlv remain available for
eligible Nl-IS projects.

6.1.6. Funds made available to the NCIC shall be administered by FHW A, which shall obligate
and expend funds as the agent for the NCIC in accordance with such procedures that shall
be established by the Secretary.

6.1.7. For FY1998, $108 million is authorized to be appropriated to the National Capital
Infrastructure Fund, which shall be used for construction, reconstruction, and
rehabilitation of the NHS in accordance with 23 U.S.C. 103(i).

6.1.8. In each of the fiscal years 1998 through 2003, the Secretary shall transfer to the NCIC:

6.1.8.1. 100 percent of the District of Columbia's apportionment for the NHS;

6.1.8.2. 100 percent of the apportionment for Interstate Maintenance; and

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6.1.8.3. 75 percent of the apportionment for the Highway Bridge Replacement for use
consistent with 23 U.S.c. 103(i).

6.1.9. In each of the fiscal years 1998 through 2003, $17 million is authorized to be
appropriated to fund the operation and maintenance of the NHS within the District of
Columbia, exclusive of the NHS routes under the jurisdiction and control of the National
Park Service and to fund the administrative costs of the NCIC.

6.1.10. The NCIC shall be responsible for funding those operations and maintenance activities
and costs, excluding police services (except for those construction zone, incident
management, and other police activities are eligible for Federal-aid highway
reimbursement under Title 23, United States Code) associated with the management and
operation of NHS highways including the following activities: routine maintenance of
roadways and rights-of-way, and road repair, snow removal, repair, lighting, signage, and
those utilities necessary for NHS operations.

6.2. District of Columbia Responsibilities

6.2.1. The District of Columbia shall continue to be responsible for providing police services on
NHS highways (including, but not limited to civil police functions, crime prevention,
investigations including traffic and accident investigation, and emergency traffic
direction). The District shall continue to own the right-of-way ofNHS highways that are
located within the District of Columbia.

6.2.2. The District of Columbia will continue to be responsible f()r all utilities and utility work
that are not necessarv for op-eration of the NJ-IS, even if such utilities are located within
the right-of-wav of the NI-IS. The Distriet of Columbia shall eontinl:le to be responsible
for nOR NH8 projeets funded with Federal aid highway funds. The al:lthorit)' to use
8urfaee Transportation Program funds on loeal streets, highways, and roadways does not
relieve the Distriet of Columbia of the responsibility for the non Federal matehing share.
The use of other Federal aid highway apportioned funds by the Distriet of Columbia other
than as provided below also require a Ron Federal matehing share.

6.2.3. The District of Columbia shall continue to be responsible for non-NI-1S projects funded
with Federal-aid highway funds. The authority to use Surf~lce Transp-ortation Program
funds on local streets. highways, and roadways (except alleywavs) does not relieve the
District of Columbia or the responsibilitv for the non-Federal matching share. The use
of other Federal-aid highway apportioned funds bv the District of Columbia other than as
provided below also requires a non-Federal matching share.

6.2.4. Beginning on October 1, 1997, the District of Columbia is relieved ofthe responsibility to
provide the non-Federal match for NHS projects that are funded by the NCIC with
monies made available for NHS projects under Title _ _ . The relief from providing
the non-Federal match shall not include those projects that were appnwed bv FI-IWA
prior to October I. 1997, for which Federal-aid higlnvav funds have been obliged. The
District of Columbia is responsible for providing the non-Federal match. the Federal-aid

22
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funds. and any obligation authority for any such projects transfen-ed to the NCIC for
project administration. oversight. or contracting.

6.3. Department of Transportation Responsibilities

The Secretary agrees to:

6.3.1. Continue to provide oversight and technical assistance to the District of Columbia for
projects not funded with NCIFINCIC funds.

6.3.2. To have FHWA provide technical assistance to the NCIC on project planning and
selecting criteria consistent with 23 U.S.C. 134 and 135.

6.3.3. To have the FHWA serve (on a reimbursable basis) as the executive agent of the NCIC to
enter into any agreements or contracts with any entity to advance, construct, reconstruct,
rehabilitate, repair, maintain, and operate the NHS within the District of Columbia,
excluding those NHS roadways under the jurisdiction and control of the National Park
Service, consistent with 23 U.S.C. 103(i) and have FHWA provide staffing support to
assist the NCIC in ful1illing its responsibilities as forth in Title

6.3.4. To be responsible for management of those funds that are authorized and appropriated for
the NCIF or authorized or transferred to the NCIC for the NHS, consistent with 23 U.S.C.
103(i).

6.3.5. To encourage the hiring of local labor bv contractors awarded contracts. including
welfarc-lo-work labor on NHS projects financed under Title to the maximum extent
possible and consistent with Federal law.

7. Personal Income Tax Administration The District agrees that:

7.1. General

7.1.1. The IRS shall administer and enforce the District's individual income and employment
taxes.

7.1.2. The District shall continue to administer its unemployment benefits program.

7.2. Tax Codes

7.2.1. The IRS will administer the District's existing individual income and employment tax
laws. The only provision the IRS cannot administer is the District's refundable property
tax credit. If the District wishes to retain this provision, it must be transferred to its real
estate tax administration.

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7.2.2. All of the administrative, procedural, and enforcement provisions of the Internal Revenue
Code of 1986 and related statutes will govern IRS administration of District taxes. The
District will have to amend its own tax code to achieve this. The specific provisions of
District law and the manner in which they must be amended are set forth on the attached
Exhibit 7-A.

7.2.3. To avoid the possibility of any inconsistent interpretations of similar provisions, the
District will have to amend its definitional provisions to conform them to the Internal
Revenue Code. The specific provisions of District law and the manner in which they
must be amended are set forth on the attached Exhibit 7-A.

7.2.4. The District must notify the Secretary of the Treasury of any future changes to its
individual income and employment tax laws. The Secretary may object. if, in his
judgement, the prospective change would prove overly burdensome to the IRS, in which
case such change shall not be administered or enforced by the IRS. If the Secretary does
not object within 60 days after notification, the IRS will administer the provision within a
reasonable time after enactment.

7.3. Transfers to the District

7.3.1. The IRS will set up separate accounting and deposit systems for its collections of District
taxes. The District must, in tum, identify the person and/or office authorized to receive
transfers of collected amounts and set up related deposit accounts.

7.4. Effective Date

7.4.1. The IRS administration of District taxes shall be prospective, starting on January 1 of the
calendar year that is at least 18 months after the Secretary certifies that the District of
Columbia has met the conditions set forth in the Memorandum of Understanding dated
___ between the United States and the District of Columbia.

24
Appendix 1 Ilex-DulllP Conversioll

DEFINITIONS FOR THE PENSIONS SECTION OF THE MOU

"Adoption Date" means the date the Replacement Plan is adopted by the District Government or,
ifiater, October I, 1997.

"District Government" means, as appropriate, the "District government" as defined by section
305(5) of the District of Columbia Financial Responsibility and Management Assistance Act of
1995 (Pub. L 104-8) or the District of Columbia Retirement Board as defined in section 102(5)
of the Reform Act.

"Freeze Date" means the date of introduction of the Revitalization Act.

"Fund" means the District of Columbia Police Officers and Fire Fighters' Retirement Fund, the
District of Columbia Teachers' Retirement Fund, and the District of Columbia Judges'
Retirement Fund as defined in section 102(10) of the Reform Act.

"Reform Act" means the District of Columbia Retirement Reform Act (Pub. L. 96-122).

"Replacement Plan" means the plan or plans described under Title I of the Revitalization Act.

"Retirement Program" means any of the retirement programs as described in section 102(7) of
the Reform Act as in effect on the day before the freeze dat~.

"Revitalization Act" means the "District of Columbia Revitalization Act of 1997."

"Secretary" means the Secretary of the Treasury or the Secretary's designee.

"Transfer Date" means the date on whieh the assets and obligations of the Fund are transferred to
the Trust.

"Trust" means the. District of Columbia Retirement Trust created under Title I of the
Revitalization Act.

"Trustee" means the person designated by the Secretary of the Treasury under Title I of the
Revitalization Act.

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EXHIBIT 7-A

AMENDMENTS TO DISTRICT OF COLUMBIA CODE

Pursuant To

MEMORANDUM OF UNDERSTANDING
BETWEEN THE UNITED STATES AND
THE DISTRICT OF COLUMBIA
AND THE
DISTRICT OF COLUMBIA TAX ASSISTANCE ACT

26
AMENDMENTS TO DISTRICT OF COLUMBIA CODE .
. Hex-Dump Conversion
Pursuant to Memorandum ofUnderstandmg Between
the United States and the District of Columbia
and DISTRICT OF COLUMBIA TAX ASSISTANCE ACT

Page

Title 47 Taxation and Fiscal Affairs ....... ....

Ch.l General Provisions .............

Ch.4 Collection and Disbursement of Taxes .... 2

Ch.5 Tax Rates, Records, and Surplus Funds 3

Ch. 18 Income and Franchise Taxes ......... 3

Ch. 33 Superior Court, Tax Division ........ 7

Title 11 Organization and Jurisdiction of the Courts ... 8

Ch.12 Tax Division of the Superior Court ..... 8

Title 46 Social Security ................. 9

Ch.l Unemployment Compensation .......... 9

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TITLE 47. TAXATION & FISCAL AFFAIRS

CHAPTER I. GENERAL PROVISIONS

CHAPTER IA. TAX RETURN PREP ARERS

47-161 Definitions.

47 -162 Penalty for fail ure to sign return.

47-163 Understatement of taxpayer's liability.

47 -164 Penalty for aiding & abetting understatement.

47-165 Frivolous tax return.

47-166 Statute of limitations on assessment of penalties.

47-167 Determination of penalty.

47-168 Claim for refund.

47-169 Right to judicial appeal.

47-170 Abatement of penalty.

(New section) Amend the chapter by adding a new introductory override section that, for
income and employment taxes, makes applicable the IRC provisions
relating to tax return preparers (e.g. IRC 6694, 6695, 6713, 7407, 7427,
7701 (a)(36)), in lieu of the above D.C. Code provisions, as follows:

"Sec. 47-16Ia. Tax Return Preparers - Income and Employment
Taxes. Notwithstanding any other
provision of this chapter or any other chapter
of this title, the provisions of sections 6060,
6107, 6694, 6695, 6713, 7407, 7427, and
7701 (a)(36) of the Internal Revenue Code of
1986 shall be applicable to income tax
return preparers of returns of individual
income taxes imposed by the District of
Columbia."

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CHAPTER lB. CREDITING OF TAX REFUNDS AGAINST DELINQUENT
TAXES

47 -171 Definitions.

47-172 Crediting a tax refund.

47-173 Multiple party returns.

47-174 Priority over intercepts.

47-175 Notice; protest.

47-176 Remedy not exclusive.

(New section) Amend the chapter by adding a new introductory override section that, for
income and employment taxes, makes applicable the IRC provisions
relating to credits and refunds (IRC ch. 65), in lieu of the above D.C. Code
provisions, as follows:

"Sec. 47-171a Crediting of Tax Refunds Income and
Employment Taxes. Notwithstanding any other
provision of this chapter or any other chapter of this
title, the provisions of chapter 65 of subtitle F of the
Internal Revenue Code of 1986 (except section
6405 relating to reports to the Joint Committee on
Taxation) shall constitute the procedures relating to
credits and refunds of overpayments of income and
employment taxes imposed by the District of
Columbia."

CHAPTER 4. COLLECTION AND DISBURSEMENT OF TAXES

47-404 Account books.

47-405 Tax certificates. These provisions require the Collector of Taxes (a now abolished
position) to maintain tax account books and furnish certificates of taxes
and assessments due. Amend Ch. 4 to assign such functions to Secretary
of the Treasury for income and employment taxes.

47-407 Waiver of interest & penalties. Amend to exclude income and employment
taxes.

47-408 Omission from records. Amend to exclude income and employment taxes.

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47-453 Interest. Amend to reference IRS 6601 et seq. for determination of interest on
income and employment taxes (including interest rate).

47-454 Substantial understatement penalty. Amend to reference IRC 6662 for
determination of penalty on income and employment taxes (including
penalty rate).

47-455 Failure to pay penalty. Amend to reference IRC 6651 for determination of
penalty on income and employment taxes (including penalty rate).

47-456 Fraud penalty. Amend to reference IRC 6663 for determination of penalty on
income and employment taxes (including penalty rate).

47-457 Garnishment. Amend to exclude income and employment taxes; cross reference
Secretary of the Treasury's collection authority under Chapter 18,
Subchapter XII.

47-458 Collection. Amend to reference IRC 6601(e) for collection of interest and
penalties on income and employment taxes.

CHAPTER 5. TAX RATES, RECORDS, AND SURPLUS FUNDS

47-504 Tax rates. No amendment. D.C. retains the right to set tax rates.

CHAPTER 18. INCOME AND FRANCHISE TAXES

47-1801.1 Applicability. Amend to add broad enabling language specifying that the
administration of D.C. income taxes, including withholding, are
(beginning on specified effective date) to be administered by the Secretary
of the Treasury pursuant to the applicable provisions of the IRC and
related statutes, including the making of returns; examination of books,
records and witnesses; determination, assessment and collection of taxes,
and the imposition of civil and criminal penalties. (See Vermont Code
5820 for model language.)

47-1801.1a Transition Rules. Amend to specify applicable transition rules (civil and
criminal) with respect to subject amendments.

47.1801.3 Effective Date. Amend to add effective date rules with respect to subject
amendments.

47-1801.4 General definitions. Amend to add "pre-emptive" introductory clause
specifying that, with respect to income and employment taxes, the
definition of any term will be only as defined or treated under the IRe.

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47-1803.3 Standard deduction. No amendment; the D.C. standard deduction amount
will be retained.

47-1803.3(d) Deductions not allowed. Amend to reference IRC sec 261 et seq. for
definition of terms used.

47-1803.3(e) Lower income rental housing depreciation deduction. (Needs more
analysis as to applicability in income taxes)

47-1804.1 Accounting oeriods. Amend to include override language that, for
income taxes, the applicable provisions ofIRC ( 444 et seq.) will apply.

47-1804.2 Year of inclusion. Amend to include override language that, for income
taxes, the applicable provisions ofIRC ( 61,451 et seq.) will apply.

47-1804.3 Year of deductions. Amend to include override language that, for income
taxes, the applicable provisions of IRC ( 162,461 et seq.) will apply.

47-1804.4 Installment sales. No change.

47-1804.5 Inventories. Amend to include override language that, for income taxes,
the applicable provisions ofIRC ( 471 et seq.) will apply.

47-1804.6 Authority to reject returns. Amend to include override language that, for
income taxes, the provision is inapplicable.

47-1804.7 Amounts. Amend to include override language that, for income taxes, the
applicable provisions ofIRC ( 6102) will apply.

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Subchapter V. Returns

47-1805.1 Returns - Forms.
47-1805.2 Persons required to file.
47-1805.3 Time and place of filing.

For the above provisions, amend the subchapter with a single new override
section that, for income taxes, the applicable provisions of IRC (Subtitle F,
Chapter 61) will apply (e.g. requirements for returns (6011); persons required to
file (6012); time and place for filing (6071, 6091, 7502)).

47-1805.4 Divulgence of information. Amend to reconcile the treatment of return
information with IRC 6103 by adding a new subsection (i) as follows:

"(i) Federal tax information.--Confidentiality and disclosure of
all documents filed with, and all information generated or collected
by, the Secretary of the Treasury or his delegate with respect to the
administration of specified District of Columbia taxes pursuant to
the provisions of sections 6371 through 6374 of the Internal
revenue Code of 1986, shall be governed by the provisions of
section 6103 of the Internal Revenue Code of 1986."

Subchapter VI. Tax on Residents and Nonresidents

47-1806.1 Taxable income defined. No change
47-1806.2 Personal exemptions.
Amend section to conform to definition of qualified dependents in IRC
151(c).
47-1806.3 Rates. No change. D.C. will set tax rates.
47-1806.4 Credits. Amend subsection (b) to include override language that, for
income taxes, IRC 31 applies.
Amend subsection (c) (credit for household and dependent care services)
to conform to IRC 2l.
Repeal Subsection (e) (low income credit) as there is no federal
counterpart.
47-1806.6 Property tax credit.
Repeal this section which has no federal counterpart.
47-1810.1 Purpose of chapter. No change. .
47-1811.3 Bases - property dividends. Amend to reference IRC sec. 301(D), for
income tax purposes, for determination of property dividends.

Subchapter XII. Assessment and Collection

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47-1812.1 General duties of Mayor.
47-1812.2 Records and statements.
47-1812.3 Examination of books & witnesses.
47-1812.4 Duty of Mayor to make return.
47-1812.5 Determination of deficiency.
47-1812.6 Jeopardy assessment.
47-1812.7 Payment of tax.
47-1812.8 Withholding of tax.
47-1812.9 Lien liability.
47-1812.10 Period of limitation upon assessment & collection.
47-1812.11a Tax check-off.
47-1812.11 Credits and refunds for overpayments.
47-1812.12 Closing agreements.
47-1812.13 Compromises.
47-1812.15 "Person" defined.
47-1812.16 Collection by Mayor.
47-1812.17 Furnishing copy of federal return.

(New Section) Amend the subchapter by adding a new introductory override section that,
for income and employment taxes, makes applicable the IRC
provisions relating to assessment and collection, in lieu of the
above D.C. Code ~rovisions, as follows:

"Sec. 47-1812.la Assessment and Collection of Income and
Employment Taxes by Secretary of the
Treasurv. Notwithstanding any other
provision of this subchapter or any other
subchapter or chapter of this title, the
provisions of subtitle F, subtitle G and
chapter 24 of the Internal Revenue Code of
1986 shall apply to the administration by the
Secretary of the Treasury of District of
Columbia income and employment taxes,
pursuant to the District of Columbia Tax
Assistance Act."

In addition, amend each of the above D.C. Code provisions to reference new section
47-1812.1a as the overriding authority for income and employment taxes.

47-1812.8 Repeal current DC Code provisions and replace with:

a. The provisions of chapter 24 of the Internal Revenue Code
shall apply.

b. The provision of section 3501 of the Internal Revenue Code
shall apply.

33
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c. The provIsIons of section 3502 of the Internal Revenue
Code shall apply but nothing contained therein shall be
construed to not allow a deduction from federal income
taxes under section 164 of the Internal Revenue Code that
would otherwise be allowable.

d. The provisions of sections 3504, 3505, 3506, 3508 and
3509 of the Internal Revenue Code shall apply.

e. The provisions of section 530 of the Revenue Act of 1978,
as amended, shall apply with regard to the income tax
withholding provisions and the unemployment insurance
contributions of the DC Code.

47-1812.11(b) Repealed.

47-1812.II(c) Repealed.

Subchapter XIII. Penalties and Interest

47-1813.1 Additions to tax - delinquencies.
47-1813.2 Same - Interest on deficiencies.
47-1813.3 Same - Fraud.
47-1813.4 Same - Nonpayments.
47-1813.5 Same - Payment extensions.

(New Section) Amend the subchapter by adding a new introductory override section that,
for income and employment taxes, makes applicable the IRC
provisions relating to penalties and interest, in lieu of the above
D.C. Code provisions, as follows:

"Sec. 47-1813.la Penalties and Interest on Income and
Emplovment Taxes. Notwithstanding any
other provision of this subchapter or any
other subchapter or chapter of this title, the
provisions of subtitle F, subtitle G and
chapter 24 of the Internal R~venue Code of
1986 shall apply to the determination and
administration of penalties and interest on
income and employment taxes."
In addition, amend each of the above D.C. Code provisions to reference new section
47-1813.la as the overriding authority for penalties and interest on income and employment
taxes.

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"47-1813.6 (a) Criminal violations.--All criminal
penalties and sanctions relating to the administration of the United
States internal revenue laws (including but not limited to title 26
and title 18 of the United States Code) shall apply to the District of
Columbia taxes specified in 26 U.S.c. 6372. In all criminal
actions brought under this section, the interests of the District of
Columbia shall be represented by the United States in the same
manner in which the interests of the United States are represented
in corresponding proceedings involving the administration of the
internal revenue laws. All criminal actions shall be brought in the
judicial courts and applying the judicial procedures that apply to
the administration of the internal revenue laws."

Subchapter XV. Appeal

47-1815.1 Right of aggrieved persons to judicial appeal. Amend to exclude income
and employment taxes.

Subchapter XVI. Rules and Regulations

47-1816.1 Rules and regulations.
47-1816.2 Same - Revenue Act of 1956. Amended both sections to specify that, for
income and employment taxes, rules and regulations will be prescribed by
the Secretary of the Treasury.
47-1816.3 Report on amendment of IRC. Amend to specify that, for income and
employment tax amendments to the IRC, the applicable reporting
requirements will be carried out by the Secretary of the Treasury.

CHAPTER 33. SUPERIOR COURT, TAX DIVISION

47-3301 Tax appeals; definitions.

47-3303 Appeal from assessment.

47-3304 Review by Court; finality of decision.

47-3306 Refund of erroneous collections.

47-3307 Certain suits forbidden.

47-3308 Manner of serving notices.

47-3309 Reference by Mayor to Superior Court.

35
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47-3310 Overpayments; refund; appeal.

Amend the above provisions to exclude jurisdiction over any matters relating to income
and employment taxes.

TITLE 11 ORGANIZATION AND JURISDICTION OF THE COURTS

CHAPTER 12. TAX DIVISION OF THE SUPERIOR COURT

11-1201 Exclusive jurisdiction.

11-1202 Abolition of other remedies.

11-1203 Rules and regulations.

Amend the above provisions to exclude jurisdiction over any matters, including civil or
criminal proceeding, involving income and employment taxes.

TITLE 46 SOCIAL SECURITY

CHAPTER 1. UNEMPLOYMENT COMPENSATION

Amend as follows:

1. Unemployment Compensation Contributions I. ...

3. Section 46-101 (1) shall be amended to include the provisions of IRC
3306 with the following exceptions:

a. (b)(1) ... equal to $7,000 such amount as is determined in section
46-103 herein ...

b. (b)(1) ... with respect to employment equal to $7,000 such amount
as is determined in section 46-103 herein ...

c. Section 3306(c)(7) and (8) of the Internal Revenue Code shall not
be included in section 46-101(1).

36
EMAILS RECEIVED
ARMS - BOX 005 - FOLDER -005

[03/07/1997 - 0311011997]

Attachment

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Raines, Director Dated: - - - - - - - - Hex-Dump Conversion SECTION I. PURPOSE The parties respect the Home Rule Charter as the fundamental basis for governance in the District. The purpose of this memorandum is to strengthen Home Rule and to agree to work toward the revitalization of the District of Columbia. This memorandum is intended only to improve the management of, and the relationship between, the District of Columbia and the Federal Government, and is not intended to and does not create any right, benefit, trust or responsibility, substantive or procedural, enforceable at law or equity by a party against the United States, its agencies, its officers, or any person. SECTION II. PUBLIC LAW 104-8, "THE DISTRICT OF COLUMBIA FINANCIAL RESPONSIBILITY AND MANAGEMENT ASSISTANCE ACT OF 1995" The parties recognize the effectiveness of PL 104-8 and dedicate themselves to the cooperative implementation of its provisions. Among these provisions: (Note the purpose of this listing of provisions is to remind everyone of the obligations that the District already has. Treasury at one time had wanted "general conditions" I believe that a restatement of the Authority language (either these provisions or others) serves this purpose. However, we could easily delete the specifics. ) Finance. For each Fiscal Year for which the District is in a control period, the Mayor shall develop and submit to the Financial Authority and Council a financial plan and budget for the applicable Fiscal Year and the next 3 Fiscal Years. Expenditures for the District government for each Fiscal Year, beginning in FY1999, may not exceed revenues for that Fiscal Year. During Fiscal Years 1996, 1997, and 1998, the District government shall make continuous, substantial progress toward equalizing its expenditures and revenues. The District may not borrow money during a control year unless the Authority provides prior certification that the borrowing is consistent with the financial plan and budget for the year. For the Secretary of the Treasury to make a short-term advance to the District, an Authority-approved budget and financial plan must be in place, the Mayor must submit a requisition for an advance including a schedule for timing and amounts for advances, the Inspector General certifies the accuracy of the information provided to the Secretary, the Secretary determines -- and the Authority certifies -- that the District lacks market access on reasonable terms, and that the Treasury has reasonable assurance of being reimbursed. .\Ianagement System Ikx-Dump Conversion Management. An Office of the Chief Financial Officer will be established in the executive branch of the District government, headed by the Chief Financial Officer, and including the Office of the Treasurer, Controller, Budget, Financial Information Services, and Finance and Revenue. An Office of the Inspector General will be established in the executive branch of the District government. During the control period, the Mayor shall submit proposed contracts and leases to the Authority for review, and cannot enter into a contract or a lease unless the Authority determines it is consistent with the financial plan and budget. The Authority may submit recommendations to the Mayor, the Council, the President, and Congress on actions the District or Federal governments may take to ensure the District's compliance with a financial plan and budget or promote its financial stability, management responsibility, and service delivery efficiency. The Mayor and the Council shall submit a statement to the Authority, President, and Congress providing notice as to whether the District will adopt the recommendations. An affirmative statement must include a written implementation plan, with performance measures and a schedule for audit compliance. If the statement rejects the recommendations, the Authority may vote to take what actions it deems appropriate, after consulting with Governmental Affairs Committee of the Senate and the House Government 2 f,!ei.-j)~l11ll (,:onversion Reform and Oversight Committee, SECTION III. GENERAL PROVISIONS 1. Balanced Budget, PL 104-8 requires that the District balance its budget by FY1999, By this agreement, the District agrees to present and/or approve a balanced budget for the Fiscal Year beginning October 1, 1997, 2. Agreement to be Bound. The District agrees to be bound by and to use its offices and best efforts to implement this agreement. SECTION IV. SUBMISSION OF LEGISLATION & FEDERALLY ASSUMED FUNCTIONS On behalf of the Executive Office of the President, the Director of the Office Management and Budget intends to recommend the submission of legislation to the Congress that is consistent with the National Capital Revitalization and Self Government Improvement Plan announced by the President on January 14, 1997, Once implemented, the Plan will provide the District substantial relief from its operating expenditures, relief which will grow over time, It will also invest considerable resources to improve the City's criminal justice systems and capital infrastructure, If this legisIati~)J1 is enacted. the Federal government will The Federal government agrees to undertake the functions described below. The Federal government will not undertake a function until the District government meets the conditions for that function, described in Section V, 1. Medicaid, The Federal government will increase its share of the District's Medicaid payments to 70 percent, thereby reducing the District's share to 30 percent. The Department of Health and Human services will provide more intensive technical assistance to help the District improve the management of its Medicaid program. 2. Pensions. The Federal government will take financial and administrative responsibility for virtually all pension benefits accrued under the plans for all active and retired police and firefighters, teachers, and judges. Assets of the retirement plans will be transferred to the Federal government. The Federal government will pledge its full faith and credit to meet its responsibilities to these beneficiaries. It will "freeze" benefits payable to current employees based on service earned as of the date the legislation is introduced, and will pay their future retirement, death and some of their disability benefits to the extent they are earned based on the frozen service. While the Federal government will not be responsible for benefits earned during future years of service by members of the current retirement programs, these members will get the benefit of pay increases on the frozen benefits, Frozen benefits will continue to be subject to cost-of-living adjustments under the terms of the existing programs. For those 3 Hex..Dump Conversion emplovees covered bv new plans, their contributions will be paid into those plans. The Secretary of the Treasury will appoint a third-party Trustee to administer the plans and manage pension assets. 3. Intermediate-Term and Short-Term Lending. The United States Treasury will provide an intermediate-term loan to eliminate the accumulated fund balance deficit of no more than 15 years, at an interest rate of Treasuries plus 1I8th of 1 percent. The Treasury may also provide inter-year loans for liquidity purposes. The combined amount of the intermediate-term and inter-year liquidity loans will not exceed $500 million. The Treasury may also provide intra-year loans for the purposes of liquidity. 4. Criminal Justice. The Federal and District governments, in consultation with representatives of the Federal and District judiciary, will develop and implement a transition plan transferring responsibility over a three-to-five-year period for incarcerating felons of D.C. Code violations. The Federal Bureau of Prisons (BOP) will house felons who are convicted of violating the D.C. Code and sentenced to terms of imprisonment in correctional institutions operated or contracted by the BOP, after BOP's capacity has been increased through new construction at Lorton and other locations selected by BOP, through renovation of existing facilities at Lorton, Virginia. After October 1, 200 I, the BOP will also designate to Federal correctional institutions sentenced D.C. felons in the custody of the D.C. Department of Corrections, as the Director of BOP deems appropriate, in accordance with available capacity, until they have all been designated to Federal institutions. The BOP will accept employment applications from persons currently employed by the D.C. Department of Corrections for existing BOP vacancies, and will process such applications in accordance with existing Federal procedures and standards. The Attorney General will select, with the approval of the Chairman of the D.C. Financial Responsibility and Management Assistance Authority, and in consultation with the Mayor of the District of Columbia, a Trustee to oversee operations of the D.C. Department of Corrections until the BOP assumes responsibility for all incarcerated District felons. Consulting with representatives of the Federal and District judiciary, the Federal and District governments will also develop and implement a transition plan transferring responsibility for D.C. Code violation offender pre-trail, parole, probation, and post-adjudicationlpost-conviction adult offender supervISIOn from the District government to the Federal government over a three-to-five-year period. The United States Parole Commission will continue to assume responsibility for all D.C. felons housed in Federal Correctional Institutions who have sentences subject to provisions of parole. The Federal government will take direct responsibility for funding the District Court System. The Courts will remain self-managed. 5. Economic Development. The Federal government will make tax benefits available to the District both to encourage hiring by firms throughout the District of District residents of distressed areas and to encourage economic revitalization throughout the District, and to encourage the employment of disadvantaged D.C. residents. 4 HexDump Conversion An economic development corporation (EDC) will be established as a non Federal public authority in the District of Columbia, with the mission of revitalizing the nation's capital and benefitting the residents and businesses of Washington, D.C. A majority of the EDC's Board will be private sector, community and civic leaders, with Federal and local representation as well. The Federal government will provide the initial capitalization of the EDC. Building on current strategic planning and development efforts, the EDC will formulate a strategic economic development plan for the District, and will have significant powers to spur largescale and other development to implement that plan, in all of the District's neighborhoods. 6. Infrastructure. The National Capital Infrastructure Commission (NClC) will be established to assume certain Statelike responsibilities for selection. funding. and oversight of National Highwav Svstem capital projects (including roads. bridges. and transit) and NHS operations and maintenance projects (excluding police authority, National Park Service roads. and tnll1sit) within the District. The NCIC will be governed bva fivemember board to he composed of three representatives from the District and two representatives from the Department of Transportation. Contract administration will be pertl)t111ed bv the Federal Highwav Administration. In addition, eligibility for Surface Transportation Program (STP) funds will be expanded to include local public roads. To support NC IC projects. thc National Capital Infrastructure Fund (NCIF) will be established in FY1998 with $108 million for road, bridge, and transit capital projects. An additional $17 million will be provided in FY 1998-03 for NHS operations and maintenance. Federalaid funds for the District's NHS, Interstate Maintenance. and Bridue programs will be transferred to the NCIC in FY 1998-03. The Administration . also proposes that the NCIC he authorized to accepted contributions from other sources. 7. Personal Income Tax Collection. The Internal Revenue Service will assume responsibility from the District of Columbia for administering and enforcing D.C. individual income and payroll taxes. This would include the processing of those taxes paid by individuals, as well as the payment of related employment and payroll taxes. The District of Columbia will maintain processing and collection responsibility for all other taxes collected for the City. Upon enactment of the legislation to implement the Plan. the parties to the MOt.) will review the legislation and confer on whether anv revisions to the MOU are necessary to ensure its eonsistenev with the legislation. SECTION V. DISTRICT CONDITIONS The District government understands that it will be expected to undertake siunificant actions as part of the National Capital Revitalization and Self-Government Improvement Plan. This section sets out the actions that the District government agrees to take as a condition of the Federal government actions under the legislation to CatTY out the Improvement Plan. 1. Medicaid. The District agrees to develop and implement plans satisfactory to the Secretary of Health and Human Services to accomplish each of the following: 5 Hex-Dwnp Conversion 1.1. To develop an effective system for the identification and collection of amounts owed by third parties for medical care and services furnished to individuals under the District's Medicaid plan. 1.2. To ensure the timely audit and settlement of cost reports of institutional providers (including hospitals, nursing facilities, and intermediate care facilities for the mentally retarded) under the District's Medicaid plan, including prompt elimination of the backlog of such audits and settlements. 1.3. To develop and implement, directly or under contract, a comprehensive health care management information system that will standardize data base development and management, and integrate health care delivery with a public health data system. Such a system shall at a minimum have the capacity to accomplish the following functions: 1.3.1. To assist eligibility verification. 1.3.2. To create utilization and financial profiles of providers. 1.3.3. To identify services (including preventive services) received by program beneficiaries. 1.3.4. To monitor the claims processing and other Medicaid operations of the fiscal agent. 1.3.5. To monitor the quality of care provided under managed care contracts. 1.3.6. To coordinate information management with respect to the District's Medicaid program and other public health programs and functions. 1.4. To develop a comprehensive behavioral managed health care system, which combines substance abuse and mental health grant programs. Development of such a plan shall include a pilot project for better evaluation of inpatient acute psychiatric patient adinissions, and the purchase of a comprehensive, risk-based system for managed care of behavioral health which covers all eligible populations and services. 1.5. To complete the delegation to the District's Department of Health of independent authority for contracting and personnel activities and to establish and ensure adequate procurement and personnel systems and controls. 2. Pensions. The District Government agrees:' See Definitions in Appendix I. 6 Hex-Dwnp LUflversion 2.1. Te establish replaeemeRt retiremeRt pregrams, threMgh eelleetiye bargaiRiRg if applieable, that eever RewaRd elcistiRg empleyees whe are er weMld ha'ie beeR eeyered by the traRsferred retiremeRt pre grams. 2.1.1. ORee the Rew retiremeRt pregrams are adepted, they may Ret be ameRded te iRerease their eests witheMt pre't'idiRg a meaRS to fMRd the iRerease. 2.1. To establish a Replacement Plan for the Retirement Program 2.1.1. The Replacement Plan will oyer all existing and new Employees who are. or would be, covered by the Retirement Program, if the Retirement Program continucd unchanged, and will bc established by the date specified in legislation. 2.1.2. To the extent required by eU1Tcnt law, the Replacement Plan will be established through collective bargaining. 2.1.3. After the Adoption Date, the Replacement Plan may not be amended in anv manner that materially increases the cost of the Replacement Plan without provision of a mechanism for funding such increases, in accordance with Section 2.2. 2.2 That the replacement retirement programs will use appropriate funding methods and costs that do not exceed the sum available in the District of Columbia Budget and Financial Plan. 2.2.1. The cost of any defined benefit plan will be determined in accordance with the measurement standards of Governmental Accounting Standards Board Statement No. 27 (GASB 27), with the following additional restrictions: 2.2.1.1. funding methods will be limited to entry age or frozen entry age; and 2.2.1.2. amortization of any unfunded actuarial liability is required over no more than 30 years on a closed basis. 2.2.2. The cost of any defined contribution plan is the employer contribution required under the provisions of the plan. 2.2.3. All costs of the replacement retirement programs must be reflected in the D. C. Budget and Financial Plan in accordance with the standards described above. 2.2.4. All costs of the replacement retirement program must be paid in a timely manner. 2.2.5. For those emplovces covered bv new plans. their contributions will be paid into those plans. 7 Hex-Dump Conversion 2.3. To transfer copies of books and records of the Retirement Program and the Fund and to be financially responsible for errors and omissions, includinu all necessarv records of individual emplovees. 2.3.1. Copics of any books and records pertaining to the Retirement Program and the Fund required bv the Secretary of the Treasurv or the Trustee must be madc available to the Secretary or Trustee within 30 days after the Secretary or Trustee requests them. 2.3.2. The District will reimburse the Trustee for all costs. including benefit pavments. resulting from errors or omissions in the books and records pertaining to the Fund. 2.4. To transfer assets from the Fund 2.4.1. Any and all assets of the Fund required to be transferred to the Trustee shall be transferred on the Transfer Date in a form specified by the Trustee. 2.4.2. The District of Columbia Retirement Board will administer the retirement programs until the Trustee assumes these responsibilities. The District government will reimburse the Fund before the transfer date for any benefits paid out of the fund between the freeze date and the transfer date that exceed payments that would have been the responsibility of the Federal government if the transfer had occurred simultaneously with the freeze. 2.5. To implement reforms in the retirement program 2.5.1. Double COLAs Ito come: legal opinion as to the Districfs capacity to rescind double COLAs through amending D.C. Code and technical analvsis of economic materiality of double COLAs still pendingl. 3. Intermediate-Term and Short-Term Lending The District agrees that: 3.1. Any intermediate-term loan to eliminate the accumulated fund balance deficit would be for no more than 15 years, with an interest rate of Treasuries + 118 of I percent. 3.2. Any inter-year loan for liquidity purposes and/or intermediate-term loan to eliminate the accumulated fund balance deficit will not exceed the amount of $500 million. 3.3. The Secretary of the Treasury may require early reimbursement if the District can obtain credit on the commercial market on favorable terms for refinancing as determined by the Secretary. 3.4. The District must be in compliance with the approved Budget and Financial Plan before any lending can occur. 3.5. The District must provide a requisition for an advance of funds and a promissory note to reimburse the Treasury for the advance. 8 llex-Dump Conversion 3.6. The Financial Responsibility and Management Assistance Authority must certify that there is an approved Budget and Financial Plan in effect for the District for the Fiscal Year that the requisition is made. 3.7. The Secretary of the Treasury must receive certification that the District is unable to obtain enough credit elsewhere to meet the DC government's need for financing. 3.8. The Federal government will work with the District government to amend its debt limit provisions in order to allow implementation of the District's capital plan in an orderly and sustainable manner. 4. Criminal Justice. [EXOP and Agencies have not had a chance to comment on this language. Comments will be included, where appropriate, on Monday.] This Memorandum of Understanding (MOU) between the Federal government and the District of Columbia government (D.C.) outlines the offer of the Federal government to assist D.C. by taking over certain traditionally State responsibilities and the conditions that D.C. must agree to and fulfill should it choose to accept that offer as it relates to criminal justice functions including, but not limited to, certain defendant and offender services, corrections, and the judiciary. The MOU sets forth the expectations and responsibilities relating to proposed changes and reforms in the District of Columbia criminal justice and judicial system and the procedures (including the new statutory and regulatory provisions) the Federal government and D.C. will use to implement the MOU. ' In particular, the MOU is designed to: ensure an appropriate transfer and transition of responsibility from D.C. to the Federal government for D.C. Code violation pretrial, public defender, parole, probation, and post-conviction supervision and services for adult defendants and offenders. ensure an appropriate transfer of responsibility from D.C. to the Federal government for the incarceration of felons convicted of D.C. Code violations. provide the framework for needed reforms in the D.C. sentencing system which are a prerequisite for the Federal government accepting responsibility for the incarceration of felons convicted of D.C. Code violations. provide the basis for establishing an independent budgetary, financial oversight, and administrative support system for the District of Columbia courts. define the respective roles of the District of Columbia and the Federal government in relation to lawsuits and resulting liability" as they may be affected by the reforms agreed to in this memorandum of understanding. 9 lIex-Dump Conversion ensure development by D.C. and the Federal government of transition plans (in consultation with the Federal and D.C. judiciaries ) for transferring responsibility for D.C. Code violation pretrial, public defender, parole, probation, and post-conviction supervision and services for adult defendants and offenders over a transition period of (one to three) years from the enactment date of the Federal implementing legislation. for transferring responsibility over approximately a three to five year period for incarcerating felons convicted ofD.C. Code violations. (in consultation with the D.C. judiciary) for transferring responsibility for funding the D.C. Courts system and related services, including plans relating to retirement benefits and other personnel matters. 4.1. Administration of District of Columbia Jails and Pretrail, Public Defender, Parole, Probation, and Post-Conviction Offender Supervision and Services 4.1.1. Federal Government Responsibilities 4.1.1.1. The Attorney General will select, with the approval of the Chairman of the D. C. Financial Responsibility and Management Assistance Authority (Financial Authority), and in consultation with representatives of the Federal and D.C. judiciary, and the Mayor of the District of Columbia, among others, an Offender Supervision and Courts Services Trustee to: A. assure the smooth transition and continued operations of the District of Columbia's Pretrial Services Agency and Public Defender Service (PDS) B. implement timely shutdown of the D.C. Parole Board in coordination with the U.S. Parole Commission C. establish and initially operate a new D.C. Offender Supervision and Services Agency D. accomplish without disruption of services the transfer of the adult offender probation supervision functions of the D. C. Courts Social Services Division, until the Federal government assumes responsibility for each of these functions. 4.1.1.2. During the transition period, under the auspices of the Trustee, the D.C. Pretrial Services Agency will continue uninterrupted to provide services and support for both juvenile and adult D.C. Code and Federal defendants and offenders to the U.S. District Court for the District of Columbia, the U.S. Court of Appeals for the District of Columbia, the Superior Court for the District of Columbia, and the 10 lIex-Dump Conversion District of Columbia Court of Appeals. The executive committee of the Pretrial Services Agency will continue to include the chief judges of the courts served by the agency; mayoral appointment of part of the executive committee will be terminated. 4.1.1.3. Following the transitIOn period, the D.C. Pretrial Services Agency will be organizationally housed in a new Federal D.C. Offender Supervision and Services Agency. 4.1.1.4. After the Offender Supervision and Courts Services Trustee establishes a transition agency with the capacity to provide adequate field supervision to adult D.C. offenders on parole, probation or supervised release, and the U.S. Parole Commission is capable of carrying out parole functions for D.C. Code offenders, the D.C. Board of parole will be terminated, and its functions and jurisdiction will be assumed by the U.S. Parole Commission. The District of Columbia Superior Court Division of Social Services will continue to provide supervision to D.C. Code juvenile offenders. 4.1.1.5. The Offender Supervision and Courts Services Trustee will accept employment applications from persons currently employed by the District of Columbia Parole Board for new positions in the Offender Supervision and Services Agency and will process such applications in accordance with existing Federal procedures and standards. Positions for related agencies will be advertised prior to being filled. 4.1.1.6. During the transition period, the Federal government will transfer funds for the Pretrial Services Agency, the Public Defender Service and the supervision of D.C. offenders through the Control Board to the Offender Supervision and Courts Services Trustee. The head of any Federal department or agency may provide the services of any personnel to the Trusteeship to assist in carrying out its duties. 4.1.1. 7. During the transition period, under the general auspices of the Trustee, the PDS will continue uninterrupted to provide services to D.C. Code defendants and the District of Columbia court system. The Director of PDS shall employ such personnel as may be necessary. 4.1.1.8. During the transition period, the employees of and funds allocated to the Offender Services and Courts Trustee and the agencies for which the Trustee is responsible shall not be counted against the personnel and budget ceiling imposed on the District of Columbia by the Control Board or Congress. (N.B. placeholder language required clarification and/or citation). 4.1.1.9. The Federal government will assess the feasibility and cost-effectiveness of contracting for limited bed space at the District's Correctional Treatment Facility (CTF) as may be necessary to supplement existing Federal detention and treatment contracts. 11 IIex-Dump Conversion 4.1.2. District a/Columbia Responsibilities 4.1.2.1. The District of Columbia will maintain responsibility for all D.C. Code juvenile offenders not prosecuted as adults. 4.1.2.2. The District of Columbia will have responsibility for housing and supervising persons charged and/or convicted of misdemeanor violations in D.C. superior Court, both before and after sentencing. 4.1.2.3. the District of Columbia will continue to house persons charged with felonies, and persons convicted of felonies but not yet sentenced., in the district of Columbia Superior Court. To the extent beds are available, the District of Columbia will continue to house persons charged with felonies, and persons c.onvicted of felonies but not yet sentenced, in the District Court, and will continue to receive reimbursement by the Federal government at a mutually negotiated rate for the costs of housing such persons. "House" and "housing" include subsistence, transportation of persons to and from court appearances and medical facilities, and the maintaining of necessary prison records. 4.1.2.4. The District of Columbia will continue to house persons sentenced by the Superior Court and detained pending a hearing for revocation of parole, probation, or supervised release, and will provide suitable facilities for such hearings. To the extent beds are available, the District of Columbia will house persons sentenced by the District Court and detained pending a hearing for revocation of parole, probation, or supervised release, will provide suitable facilities for such hearings, and will continue to receive reimbursement by the Federal government at a mutually negotiated rate for the costs of housing such persons and for providing such facilities. "House" and "housing" include subsistence, transportation of persons to and from court appearances, revocation hearings, and medical facilities, and the maintenance of necessary prisoner records. 4.1.2.5. The Trustee will operate under the general auspices of the Chairman of the Control Board and can be removed only by the Attorney General. 4.1.2.6. the Trustee will propose funding requests for offender supervision and services to the Control Board, and the request will be included in the Control Board budget to the President and Congress each fiscal year. 4.1.2.7. the Trustee will allocate funds for offender supervision in the District of Columbia, including funds for short term improvements, equipment contracts, and salary increases that are necessary to retain key personnel, maintain and enhance current levels of service, including offender drug testing, and provide for the safety and security of the community. 12 Hex-Dump Conversion 4.1.2.8. Upon receipt from the Control Board of funds identified by congress or other entities for Pretrial Services, the Trustee will immediately transfer such funds to the Pretrial Services Agency. 4.1.2.9. Upon receipt from the Control Board, the D.C. Court system, or the Administrative Office of the United States Courts, of funds identified by Congress or other entities for the D.C. Public Defender Service the Trustee will immediately transfer such funds to the Public Defender Service. 4.1.2.10 In view of the responsibility to be undertaken by the U.S. parole Commission to carry out the functions of the D.C. Board of Parole pursuant to the parole laws and regulations of the District of Columbia, effective immediately, the D.C. Council will not enact legislation that changes or modifies these laws and regulations without the concurrence of the Attorney General. Following the assumption by the Parole Commission of the functions of the D.C. Board of Parole, the council will cede to Congress the sole authority to legislate changes to the District of Columbia Code that pertain to the parole of D.C. felony offenders. 4.1.2.11. It is expected that the transition period for these offender and court services will end no sooner than one year nor later than three years after the enactment of the related legislation. (Insert respective effective dates) 4.1.2.12. The D.C. Corporation Counsel will provide representation for the Trustee and Trustee supervised agencies. (See litigation and liability section) 4.2. Administration of District of Columbia and Federal Prisons 4.2.1. Federal Government Responsibilities 4.2.1.1. The Bureau of Prisons (BOP) will house felons, in correctional institutions operated or contracted by the Federal Bureau of Prisons, who were convicted of violating the D.C. Code and sentenced to terms of imprisonment, after the BOP's capacity has been increased through renovation of existing facilities and new construction at the corrections complex in Lorton, Virginia and other locations seiected by the BOP. D.C. Code offenders will be housed together with Federal offenders in BOP facilities based on inmate program and security needs and BOP population management regulations. The BOP will oversee the operation of community corrections centers in the District of Columbia as necessary to provide an appropriate transition for inmates who are nearing release from Federal prisons, including those convicted of D.C. Code violations. The BP intends to use existing community corrections centers in the District of Columbia to the extent practicable and will work with D.C. officials in the identification of prospective sites, as needed to establish new community correction facilities. 13 Hex-Dump Conversion 4.2.1.2. The BOP intends to operate several correctional facilities in Lorton, Virginia and elsewhere to house a mix of both Federal and D.C. felons. Every effort will be made to house D.C. felons at facilities that are as close to the District of Columbia as permitted by inmate program and security needs and BOP population management regulations. D.C. felons will be designated in the same manner as Federal inmates, and ordinarily initially assigned to institutions located within a SOO-mile radius of their residence. BOP also will work with D.C. officials to identify sites for possible Federal correctional facility construction within the District. 4.2.1.3. Based upon assurances from the District of Columbia that felons convicted of violating the D.C. Code will, in the future, receive sentences similar to those received by comparable offenders convicted of comparable Federal offenses, during the transition period, the BOP will house those sentenced D.C. felons in the custody of the D.C. Department of Corrections as the Director of the BOP deems appropriate in accordance with available capacity. After October 1, 2001, the BOP will accept D.C. felons sentenced under the new sentencing structure in accordance with the capacity of the BOP. By October 1, 2002, and assuming fulfillment of all requisite conditions, the BOP will have assumed responsibility for incarcerating all D.C. felons. 4.2.1.4. The BOP will accept employment applications from persons currently employed by the District of Columbia Department of Corrections for BOP vacancies and will make hiring selections in accordance with existing Federal procedures and standards. Positions for new BOP facilities will be advertised prior to being filled. 4.2.1.5. The Attorney General will select, with the approval of the Chairman of the D.C. Financial Responsibility and Management Assistance Authority, and in consultation with the Mayor of the District of Columbia, a Trustee to oversee operations of the District of Columbia Department of Corrections relating to incarcerated felons, until the BOP assumes responsibility for all incarcerated D.C. felons. 4.2.1.6. The Federal government will transfer funds for the incarceration of D.C. felons through the Financial Authority to the Trustee. The head of any Federal department or agency may provide the services of any personnel to the Trustee to assist in carrying out the Trustee's duties. 4.2.1.7. Of the funds received by the Trustee from Congress through the Financial Authority, the Trustee will reimburse to the BOP those funds identified by Congress to be used for the construction of new facilities and the renovation of existing facilities. The Federal Bureau of Prisons will be responsible and accountable for determining how these funds will be used, including type, security level, and location of new facilities. 14 Hex-Dump Conversion 4.2.1.8. During the transition period, the employees of, and appropriations allocated to, the Corrections Trustee and the agencies for which the Trustee is responsible shall not be scored or counted against the personnel and budget ceilings imposed on the District of Columbia by the Financial Authority or Congress. [N.B. placeholder language requires clarification]. B. District a/Columbia Responsibilities 4.2.2.1. Offenders convicted of violations of the D.C. Code shall be sentenced pursuant to a new D.C. sentencing system, described below. If the new sentencing system is not promulgated within [24 months], however, the BOP may not obligate any funds appropriated for the absorption of D.C. Code felons into the Federal prison system and will have no responsibility to house any persons convicted of felony offenses under the D.C. Code. 4.2.2.2. The District of Columbia will continue to house felons sentenced to terns of imprisonment by the District of Columbia Superior Court until such persons have been designated by the BOP. To the extent beds are available, the District of Columbia will continue to house felons sentenced to .terms of imprisonment by the U.S. District Court until such persons have been designated by the BOP, and will continue to receive reimbursement at a mutually negotiated rate by the Federal government for costs of housing such persons. 4.2.2.3. The Trustee will operate under the general auspices of the Chairman of the Financial Authority and can be removed only by the Attorney General. 4.2.2.4. The Trustee will propose funding requests for the incarceration of D.C. felons to the Financial Authority, and the request will be included in the Financial Authority budget to the President and Congress each fiscal year. 4.2.2.5. The Trustee will allocate funds to the District of Columbia Department of Corrections, including funds for short-term improvements that are necessary for the safety and security of staff, inmates, and the community. 4.2.2.6. Upon receipt from the Financial Authority of Federal funds identified by Congress for constructing new prisons and making major renovations to existing facilities for the incarceration of D.C. felons, the Trustee will immediately reimburse such funds to the BOP. 4.2.2.7. The D.C. Corporation Counsel will provide representation for the Trustee and Trustee-supervised agencies (see the litigation and liability section). 4.3. Sentencing The District of Columbia understands and agrees that the D.C. sentencing system will be changed, pursuant to the proposed Act, in the following manner: 15 Hex-Dump Conversion 4.3.1. Congress will amend the D.C. Code to abolish parole for all persons convicted of D.C. offenses (felonies and misdemeanors) committed on or after 3 years from the date of enactment of the Act. 4.3.2. Congress will amend the D.C. Code so that good time calculations for all persons convicted of D.C. offenses (felonies and misdemeanors) committed on or after 3 years from the date of enactment of the Act will be made according to the Federal requirements. 4.3.3. Congress will establish a new D.C. Board of Criminal Sentences (the Board) as an independent body within the D.C. government. All persons convicted of D.C. felonies committed on or after 3 years from the date of enactment of the Act will be sentenced according to a determinate sentencing system promulgated by the Board no later than 18 months after the date of enactment of the Act. 4.3.4. The Board will develop such amendments or repeals of provisions in the D.C. Code relating to the maximum and minimum prison terms as are necessary to accomplish the purposes of the Act. Ninety days after they are promulgated by the Board, the sentencing system, amendments and repeals will become effective unless disapproved as a whole by a majority of the District of Columbia Council. If disapproved by the Council, the system may be enacted by Congressional action. 4.3.5. The promulgated sentencing system will supersede any inconsistent provision of the D.C. Code and will provide for post-release supervision of offenders. 4.3.6. Congress will repeal certain other provisions of the D.C. Code to conform with the new sentencing system (D.C. Code Title 24, Chapters 2 and 8], including the Youth Rehabilitation Act. 4.3.7. The sentencing system developed will ensure the effective continuation of the D.C. Superior Court Drug Intervention Program by including appropriate minimum mandatory sentences and adequate related judicial discretion. 4.3.8. Congress will amend the D.C. Code Title 33, section 541 to adopt certain mandatory penalties necessary for effective local law enforcement. 4.3.9. The Board will not have the authority to provide for capital punishment under any law applicable exclusively in the District of Columbia. 4.3.10. The Board will have seven voting members. The Attorney General (or her designee) will chair the Board. The other members will include two judges of the D.C. Superior Court and one representative each for the D.C. Council, the Executive Branch of the D.C. government, the D.C. Public Defender Service, and the U.S. Attorney for the District of Columbia. A representative of the Bureau of Prisons will serve as a non-voting, ex officio member. 16 Hex-Dump Conversion 4.3.11. An affirmative vote of at least six Board members will be necessary to adopt guidelines, promulgate the sentencing system, and make any amendments or repeals of D.C. Code provisions relating to maximum and minimum prison terms. 4.3.12. In developing the sentencing system, the Board will hold three or more public hearings, review appropriate State system models, consult with sentencing reform experts, and solicit written comments from the public. 4.3.13. If the Board fails to promulgate a sentencing system within 18 months, the Board will terminate and the Attorney General will develop the system and transmit it to the Council for approval. The system will take effect unless the D.C. Council disapproves the system and Congress, in tum, does not approve it. 4.3.14. The Board will have the mandate to ensure that the sentencing system it establishes, among other things: 4.3.14.1. Will result in sentences for those convicted of felony offenses similar to those that would be imposed upon comparable offenders convicted of comparable offenses in the Federal system; 4.3.14.2. Will result in sentences that reflect the seriousness of the offense and provide for just punishment, afford adequate deterrence to potential future criminal conduct of the offender and others, and provide the defendant with needed educational or vocational training, medical care, and other correctional treatment; 4.3.14.3. Will provide certainty and fairness in meeting the purposes of sentencing, avoiding unwarranted sentencing disparities among similar defendants, while maintaining sufficient flexibility to permit individualized sentences; 4.3.14.4. Will take into account the high volume of sentencing proceedings in the District of Columbia Superior Court as bearing upon the degree of complexity of the sentencing system; and 4.3.14.5. Will ensure that the system is neutral as to the race, sex, marital status, ethnic origin, religious affiliation, national origin, creed, socioeconomic status, and sexual orientation of offenders, if not related to the commission of the offense. 4.3.15. As part of the sentencing system, the Board will develop binding guidelines for use in . determining the sentence to be imposed upon convicted felons. The guidelines will specify: 4.3.15.1. When to impose a sentence to probation, a fine, or a term of imprisonment and the appropriate amount or length, as well as intermediate sanctions; 17 Hex-Dump Conversion 4.3.15.2. When to impose a term of supervised release following imprisonment, and the appropriate length; and 4.3.15.3. Whether multiple sentences to terms of imprisonment should run concurrently or consecutively. 4.3.16. Thirty days after promulgating the sentencing system, the Board will be terminated. There will be a successor Federal agency in the judicial branch to amend the guidelines consistent with the purposed of the Act. The D.C. Council may recommend to Congress whether or not these amendments should be approved. The amendments will take effect as prescribed by the successor agency, however, unless they are modified or disapproved by Congress. The successor agency will have no powers to revise the District of Columbia Code but will recommend changes to the Code as may be necessary to further the purposes of the Act. 4.3.17. The D.C. Superior Court, D.C. Department of Corrections, and other agencies as necessary will submit information about convicted felons as required by the Board and the U.S. Department of Justice. This would permit an assessment of the extent to which sentences imposed by the D.C. Superior Court are comparable to those imposed for comparable offenders by U.S. District Courts. The results of this assessment would be used by the Board in developing the new sentencing system for the District of Columbia. 4.3.18. Four years after the new sentencing system takes effect, there will be an evaluation to determine the extent to which the sentencing system has succeeded in accomplishing the goals set forth in the Act. 4.4. Liability and Litigation Authority 4.4.1. Federal Government Responsibilities 4.4.1.1. United States, its agencies, and personnel will not incur any liability on the basis of the activities of the District of Columbia, its agencies, or personnel as a result of the reforms agreed to in this Memorandum of Understanding. 4.4.1.2. The Attorney General, in her discretion, will have the authority to direct any litigation involving the Trustees, pretrial services, and sentencing reform during the transitional period, and to provide litigation services for the Trustees and the agencies responsible for pretrial services and sentencing reform during the transitional period in lieu of representation by the District of Columbia. 4.4.2. District of Columbia Responsibilities 18 Hex-Dump Conver,ion 4.4.2.1. The District of Columbia will remain responsible for the defense of pending suits against the District of Columbia or its personnel, and will remain responsible for any liability resulting from such suits. 4.4.2.2. The District of Columbia will be responsible for the defense of suits arising from the correctional, offender supervision, pretrial services, public defender, parole, and sentencing reform activities of agencies of the District of Columbia, and for any resulting liability, notwithstanding the contemplated transfer of these functions to existing or new Federal agencies. This will include responsibility for defense of suits and for resulting liability arising from the activities of the Corrections Trustee and the offender Supervision and Courts Services Trustee. 4.4.2.3. The District of Columbia Corporation Counsel will provide litigation services as required to carry our this section, but the Trustees and the agencies responsible for pretrialial services, public defender services, and sentencing reform during the transitional period will also have the option of making their own arrangements for litigation services or requesting such services from the Financial Authority. 4.5. District of Columbia Courts 4.5.1. Congress will make all necessary amendments to the D.C. Code and other laws to terminate budgetary control and other involvement of the D.C. government in the finances and administration of the District of Columbia court system, including the D.C. Superior Court and the D.C. Court of Appeals. 4.5.2. The Joint Committee on Judicial Administration of the D.C. Courts will prepare and submit the budget for the D.C. Court system. The budgetary requests of the D.C. Courts will not be subject to revision by the D.C. government or the Executive Branch of the Federal government. 4.5.3. The D.C. Court system, through its Executive Office, will be authorized to contract with D.C. and Federal agencies, and with other public and private entities, for necessary supplies, equipment,. and services. 4.5.4. Expenditures of the District of Columbia Courts will be paid out of funds appropriated for those Courts, and credited to a Treasury account established for that purpose. Funds received by the District of Columbia Courts will no longer be part of the funds of the District of Columbia. 4.5.5. During a transitional period of one to three years, the implementing legislation may provide that the budgetary requests of the D.C. Courts are to be submitted through the Offender Supervision and Courts Services Trustee or other appropriate intermediary, and that the designated intermediary is to be responsible for receiving and transmitting to the District of Columbia Court system all funds appropriated for the District of Columbia Courts. 19 Hex-Dump Conversion 5. Economic DeveLopment The District agrees that: 5.1. Consistent In eoopeFiltion with ongoing private sector recommendations, the D.C. government efforts, it will implement ftHlFe timely and efficient zoning, permitting and licensing processes, bv the end of FY1997. 5.2. The District government will offer personnel resources and fully cooperate with the EDC in its review and evaluation of existing economic development plans for the District of Columbia, in the development of the EDC strategic plan, and in subsequent implementation of the plan. 5.3. The District government willlllloellte support a 'Iegislative allocation to the EDC 50 1 percent of the applicable State ceiling on the authority of the District government to issue private activity bonds in each calendar year under section 141 of the Internal Revenue Code. 5.4. The District government will give expedited and favorable attention to the EDC's requests for land transfers (including transfers from the RLA), zoning adjustments (including variances and special exceptions), and building and other permits and licenses for projects and activities 6f as requested bv the EDC, and will support the legislative granting of authority to the I<:nc to exercise certain powers, including the right of eminent domain. I 5.5. The District will cooperate with the Federal government and the private sector to establish promptly an Organizing Committee which is primarily composed of members of the private sector. The Organizing Committee will be responsible for encouraging businesses and other members of the private and non-profit communities -- District, regional and national -- to invest in the District. through the ED(;. 6. Infrastructure. The District agrees: 6.1. Establishment of the National Capital Infrastructure Commission (NCIC) 6.1.1. Beginning on October I, 1997, the NCIC shall assume certain State-like responsibilities for selection (consistent with the planning requirements in 23 U.S.C. 134 and 135), funding and oversight of the National Highway System (NHS) capital projects and shall assume responsibilities for funding the operations and maintenance of the NHS within the District of Columbia (exclusive of police authority and exclusive of funding those NHS routes currently under the jurisdiction of the National Park Service) with funds made available under Title - - 20 i;"x-iJump Conversion 6.1.2. The NCIC shall be governed by a five member Board of Governors (one member to be appointed by the Mayor, one member to be appointed by the City Council, one member to be appointed by the Financial Responsibility and Management Assistance Authority, and two members to be appointed by the Secretary of Transportation), all of whom are voting members. 6.1.3. The NCIC shall implement its responsibilities for funding and oversight and shall advance NHS projects through the Department of Transportation, Federal Highway Administration (FHW A). T~e FWHA s~all provide staffiRg SHPPOrt to assist tae ~tClC iR fulfilliRg its fespof!sieilities aRd s~all seP,'e as t~e eORtfaetif!g ageRt fof e)(eeHtif!g all eORtfaets fof peffoffflaRee of eligiele ~m8 aetivities aRd pfojeets, as defif!ed if! Title. 6.1.4. Beginning on October 1. 1997. the NCIC rat the discretion of the District of Columbial shall assume responsibilitv for advancing those NI-IS projects approved prior to that date that are not under construction or under a contract f()f such construction bv October 1, 1997. runless the NCIC and the District of Columbia agree to continue to vest responsibilitv for such project advancement with the District of Columbia]. Such projects that are transferred under this section shall also be governed bv the requirements contained in section 6.2.4. 6.1.5. The NCIC mav lkx National Capital Infi'astructure Funds authorized under section and Nl-IS apportioned funds authorized to be transferred under section to ot hcr Federal-aid highway funding categories. consistent 'with Title '3. United States Code flexing provisions, provided performance measures relating to bridge, pavement. safetv or other such perllmnanee measures that are established bY the Secretarv. or that shall be established. are met. In the event the SecretarY of Transportation determines that such performance measures arc not being met. NHS funds made available under Title shall not be flexed to another funding categorv. but shall onlv remain available for eligible Nl-IS projects. 6.1.6. Funds made available to the NCIC shall be administered by FHW A, which shall obligate and expend funds as the agent for the NCIC in accordance with such procedures that shall be established by the Secretary. 6.1.7. For FY1998, $108 million is authorized to be appropriated to the National Capital Infrastructure Fund, which shall be used for construction, reconstruction, and rehabilitation of the NHS in accordance with 23 U.S.C. 103(i). 6.1.8. In each of the fiscal years 1998 through 2003, the Secretary shall transfer to the NCIC: 6.1.8.1. 100 percent of the District of Columbia's apportionment for the NHS; 6.1.8.2. 100 percent of the apportionment for Interstate Maintenance; and 21 Hex-Dwnp Conversion 6.1.8.3. 75 percent of the apportionment for the Highway Bridge Replacement for use consistent with 23 U.S.c. 103(i). 6.1.9. In each of the fiscal years 1998 through 2003, $17 million is authorized to be appropriated to fund the operation and maintenance of the NHS within the District of Columbia, exclusive of the NHS routes under the jurisdiction and control of the National Park Service and to fund the administrative costs of the NCIC. 6.1.10. The NCIC shall be responsible for funding those operations and maintenance activities and costs, excluding police services (except for those construction zone, incident management, and other police activities are eligible for Federal-aid highway reimbursement under Title 23, United States Code) associated with the management and operation of NHS highways including the following activities: routine maintenance of roadways and rights-of-way, and road repair, snow removal, repair, lighting, signage, and those utilities necessary for NHS operations. 6.2. District of Columbia Responsibilities 6.2.1. The District of Columbia shall continue to be responsible for providing police services on NHS highways (including, but not limited to civil police functions, crime prevention, investigations including traffic and accident investigation, and emergency traffic direction). The District shall continue to own the right-of-way ofNHS highways that are located within the District of Columbia. 6.2.2. The District of Columbia will continue to be responsible f()r all utilities and utility work that are not necessarv for op-eration of the NJ-IS, even if such utilities are located within the right-of-wav of the NI-IS. The Distriet of Columbia shall eontinl:le to be responsible for nOR NH8 projeets funded with Federal aid highway funds. The al:lthorit)' to use 8urfaee Transportation Program funds on loeal streets, highways, and roadways does not relieve the Distriet of Columbia of the responsibility for the non Federal matehing share. The use of other Federal aid highway apportioned funds by the Distriet of Columbia other than as provided below also require a Ron Federal matehing share. 6.2.3. The District of Columbia shall continue to be responsible for non-NI-1S projects funded with Federal-aid highway funds. The authority to use Surf~lce Transp-ortation Program funds on local streets. highways, and roadways (except alleywavs) does not relieve the District of Columbia or the responsibilitv for the non-Federal matching share. The use of other Federal-aid highway apportioned funds bv the District of Columbia other than as provided below also requires a non-Federal matching share. 6.2.4. Beginning on October 1, 1997, the District of Columbia is relieved ofthe responsibility to provide the non-Federal match for NHS projects that are funded by the NCIC with monies made available for NHS projects under Title _ _ . The relief from providing the non-Federal match shall not include those projects that were appnwed bv FI-IWA prior to October I. 1997, for which Federal-aid higlnvav funds have been obliged. The District of Columbia is responsible for providing the non-Federal match. the Federal-aid 22 Hex-Dump Conversion funds. and any obligation authority for any such projects transfen-ed to the NCIC for project administration. oversight. or contracting. 6.3. Department of Transportation Responsibilities The Secretary agrees to: 6.3.1. Continue to provide oversight and technical assistance to the District of Columbia for projects not funded with NCIFINCIC funds. 6.3.2. To have FHWA provide technical assistance to the NCIC on project planning and selecting criteria consistent with 23 U.S.C. 134 and 135. 6.3.3. To have the FHWA serve (on a reimbursable basis) as the executive agent of the NCIC to enter into any agreements or contracts with any entity to advance, construct, reconstruct, rehabilitate, repair, maintain, and operate the NHS within the District of Columbia, excluding those NHS roadways under the jurisdiction and control of the National Park Service, consistent with 23 U.S.C. 103(i) and have FHWA provide staffing support to assist the NCIC in ful1illing its responsibilities as forth in Title 6.3.4. To be responsible for management of those funds that are authorized and appropriated for the NCIF or authorized or transferred to the NCIC for the NHS, consistent with 23 U.S.C. 103(i). 6.3.5. To encourage the hiring of local labor bv contractors awarded contracts. including welfarc-lo-work labor on NHS projects financed under Title to the maximum extent possible and consistent with Federal law. 7. Personal Income Tax Administration The District agrees that: 7.1. General 7.1.1. The IRS shall administer and enforce the District's individual income and employment taxes. 7.1.2. The District shall continue to administer its unemployment benefits program. 7.2. Tax Codes 7.2.1. The IRS will administer the District's existing individual income and employment tax laws. The only provision the IRS cannot administer is the District's refundable property tax credit. If the District wishes to retain this provision, it must be transferred to its real estate tax administration. 23 IIex-Dump Conversion 7.2.2. All of the administrative, procedural, and enforcement provisions of the Internal Revenue Code of 1986 and related statutes will govern IRS administration of District taxes. The District will have to amend its own tax code to achieve this. The specific provisions of District law and the manner in which they must be amended are set forth on the attached Exhibit 7-A. 7.2.3. To avoid the possibility of any inconsistent interpretations of similar provisions, the District will have to amend its definitional provisions to conform them to the Internal Revenue Code. The specific provisions of District law and the manner in which they must be amended are set forth on the attached Exhibit 7-A. 7.2.4. The District must notify the Secretary of the Treasury of any future changes to its individual income and employment tax laws. The Secretary may object. if, in his judgement, the prospective change would prove overly burdensome to the IRS, in which case such change shall not be administered or enforced by the IRS. If the Secretary does not object within 60 days after notification, the IRS will administer the provision within a reasonable time after enactment. 7.3. Transfers to the District 7.3.1. The IRS will set up separate accounting and deposit systems for its collections of District taxes. The District must, in tum, identify the person and/or office authorized to receive transfers of collected amounts and set up related deposit accounts. 7.4. Effective Date 7.4.1. The IRS administration of District taxes shall be prospective, starting on January 1 of the calendar year that is at least 18 months after the Secretary certifies that the District of Columbia has met the conditions set forth in the Memorandum of Understanding dated ___ between the United States and the District of Columbia. 24 Appendix 1 Ilex-DulllP Conversioll DEFINITIONS FOR THE PENSIONS SECTION OF THE MOU "Adoption Date" means the date the Replacement Plan is adopted by the District Government or, ifiater, October I, 1997. "District Government" means, as appropriate, the "District government" as defined by section 305(5) of the District of Columbia Financial Responsibility and Management Assistance Act of 1995 (Pub. L 104-8) or the District of Columbia Retirement Board as defined in section 102(5) of the Reform Act. "Freeze Date" means the date of introduction of the Revitalization Act. "Fund" means the District of Columbia Police Officers and Fire Fighters' Retirement Fund, the District of Columbia Teachers' Retirement Fund, and the District of Columbia Judges' Retirement Fund as defined in section 102(10) of the Reform Act. "Reform Act" means the District of Columbia Retirement Reform Act (Pub. L. 96-122). "Replacement Plan" means the plan or plans described under Title I of the Revitalization Act. "Retirement Program" means any of the retirement programs as described in section 102(7) of the Reform Act as in effect on the day before the freeze dat~. "Revitalization Act" means the "District of Columbia Revitalization Act of 1997." "Secretary" means the Secretary of the Treasury or the Secretary's designee. "Transfer Date" means the date on whieh the assets and obligations of the Fund are transferred to the Trust. "Trust" means the. District of Columbia Retirement Trust created under Title I of the Revitalization Act. "Trustee" means the person designated by the Secretary of the Treasury under Title I of the Revitalization Act. 25 Hex-Dump Conversion EXHIBIT 7-A AMENDMENTS TO DISTRICT OF COLUMBIA CODE Pursuant To MEMORANDUM OF UNDERSTANDING BETWEEN THE UNITED STATES AND THE DISTRICT OF COLUMBIA AND THE DISTRICT OF COLUMBIA TAX ASSISTANCE ACT 26 AMENDMENTS TO DISTRICT OF COLUMBIA CODE . . Hex-Dump Conversion Pursuant to Memorandum ofUnderstandmg Between the United States and the District of Columbia and DISTRICT OF COLUMBIA TAX ASSISTANCE ACT Page Title 47 Taxation and Fiscal Affairs ....... .... Ch.l General Provisions ............. Ch.4 Collection and Disbursement of Taxes .... 2 Ch.5 Tax Rates, Records, and Surplus Funds 3 Ch. 18 Income and Franchise Taxes ......... 3 Ch. 33 Superior Court, Tax Division ........ 7 Title 11 Organization and Jurisdiction of the Courts ... 8 Ch.12 Tax Division of the Superior Court ..... 8 Title 46 Social Security ................. 9 Ch.l Unemployment Compensation .......... 9 27 IIex-Dump Conversion TITLE 47. TAXATION & FISCAL AFFAIRS CHAPTER I. GENERAL PROVISIONS CHAPTER IA. TAX RETURN PREP ARERS 47-161 Definitions. 47 -162 Penalty for fail ure to sign return. 47-163 Understatement of taxpayer's liability. 47 -164 Penalty for aiding & abetting understatement. 47-165 Frivolous tax return. 47-166 Statute of limitations on assessment of penalties. 47-167 Determination of penalty. 47-168 Claim for refund. 47-169 Right to judicial appeal. 47-170 Abatement of penalty. (New section) Amend the chapter by adding a new introductory override section that, for income and employment taxes, makes applicable the IRC provisions relating to tax return preparers (e.g. IRC 6694, 6695, 6713, 7407, 7427, 7701 (a)(36)), in lieu of the above D.C. Code provisions, as follows: "Sec. 47-16Ia. Tax Return Preparers - Income and Employment Taxes. Notwithstanding any other provision of this chapter or any other chapter of this title, the provisions of sections 6060, 6107, 6694, 6695, 6713, 7407, 7427, and 7701 (a)(36) of the Internal Revenue Code of 1986 shall be applicable to income tax return preparers of returns of individual income taxes imposed by the District of Columbia." 28 IIex-Dump Conversion CHAPTER lB. CREDITING OF TAX REFUNDS AGAINST DELINQUENT TAXES 47 -171 Definitions. 47-172 Crediting a tax refund. 47-173 Multiple party returns. 47-174 Priority over intercepts. 47-175 Notice; protest. 47-176 Remedy not exclusive. (New section) Amend the chapter by adding a new introductory override section that, for income and employment taxes, makes applicable the IRC provisions relating to credits and refunds (IRC ch. 65), in lieu of the above D.C. Code provisions, as follows: "Sec. 47-171a Crediting of Tax Refunds Income and Employment Taxes. Notwithstanding any other provision of this chapter or any other chapter of this title, the provisions of chapter 65 of subtitle F of the Internal Revenue Code of 1986 (except section 6405 relating to reports to the Joint Committee on Taxation) shall constitute the procedures relating to credits and refunds of overpayments of income and employment taxes imposed by the District of Columbia." CHAPTER 4. COLLECTION AND DISBURSEMENT OF TAXES 47-404 Account books. 47-405 Tax certificates. These provisions require the Collector of Taxes (a now abolished position) to maintain tax account books and furnish certificates of taxes and assessments due. Amend Ch. 4 to assign such functions to Secretary of the Treasury for income and employment taxes. 47-407 Waiver of interest & penalties. Amend to exclude income and employment taxes. 47-408 Omission from records. Amend to exclude income and employment taxes. 29 Hex-Dump Conversion 47-453 Interest. Amend to reference IRS 6601 et seq. for determination of interest on income and employment taxes (including interest rate). 47-454 Substantial understatement penalty. Amend to reference IRC 6662 for determination of penalty on income and employment taxes (including penalty rate). 47-455 Failure to pay penalty. Amend to reference IRC 6651 for determination of penalty on income and employment taxes (including penalty rate). 47-456 Fraud penalty. Amend to reference IRC 6663 for determination of penalty on income and employment taxes (including penalty rate). 47-457 Garnishment. Amend to exclude income and employment taxes; cross reference Secretary of the Treasury's collection authority under Chapter 18, Subchapter XII. 47-458 Collection. Amend to reference IRC 6601(e) for collection of interest and penalties on income and employment taxes. CHAPTER 5. TAX RATES, RECORDS, AND SURPLUS FUNDS 47-504 Tax rates. No amendment. D.C. retains the right to set tax rates. CHAPTER 18. INCOME AND FRANCHISE TAXES 47-1801.1 Applicability. Amend to add broad enabling language specifying that the administration of D.C. income taxes, including withholding, are (beginning on specified effective date) to be administered by the Secretary of the Treasury pursuant to the applicable provisions of the IRC and related statutes, including the making of returns; examination of books, records and witnesses; determination, assessment and collection of taxes, and the imposition of civil and criminal penalties. (See Vermont Code 5820 for model language.) 47-1801.1a Transition Rules. Amend to specify applicable transition rules (civil and criminal) with respect to subject amendments. 47.1801.3 Effective Date. Amend to add effective date rules with respect to subject amendments. 47-1801.4 General definitions. Amend to add "pre-emptive" introductory clause specifying that, with respect to income and employment taxes, the definition of any term will be only as defined or treated under the IRe. 30 Hex-Dump Conversion 47-1803.3 Standard deduction. No amendment; the D.C. standard deduction amount will be retained. 47-1803.3(d) Deductions not allowed. Amend to reference IRC sec 261 et seq. for definition of terms used. 47-1803.3(e) Lower income rental housing depreciation deduction. (Needs more analysis as to applicability in income taxes) 47-1804.1 Accounting oeriods. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 444 et seq.) will apply. 47-1804.2 Year of inclusion. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 61,451 et seq.) will apply. 47-1804.3 Year of deductions. Amend to include override language that, for income taxes, the applicable provisions of IRC ( 162,461 et seq.) will apply. 47-1804.4 Installment sales. No change. 47-1804.5 Inventories. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 471 et seq.) will apply. 47-1804.6 Authority to reject returns. Amend to include override language that, for income taxes, the provision is inapplicable. 47-1804.7 Amounts. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 6102) will apply. 31 Hex-Dump Conversion Subchapter V. Returns 47-1805.1 Returns - Forms. 47-1805.2 Persons required to file. 47-1805.3 Time and place of filing. For the above provisions, amend the subchapter with a single new override section that, for income taxes, the applicable provisions of IRC (Subtitle F, Chapter 61) will apply (e.g. requirements for returns (6011); persons required to file (6012); time and place for filing (6071, 6091, 7502)). 47-1805.4 Divulgence of information. Amend to reconcile the treatment of return information with IRC 6103 by adding a new subsection (i) as follows: "(i) Federal tax information.--Confidentiality and disclosure of all documents filed with, and all information generated or collected by, the Secretary of the Treasury or his delegate with respect to the administration of specified District of Columbia taxes pursuant to the provisions of sections 6371 through 6374 of the Internal revenue Code of 1986, shall be governed by the provisions of section 6103 of the Internal Revenue Code of 1986." Subchapter VI. Tax on Residents and Nonresidents 47-1806.1 Taxable income defined. No change 47-1806.2 Personal exemptions. Amend section to conform to definition of qualified dependents in IRC 151(c). 47-1806.3 Rates. No change. D.C. will set tax rates. 47-1806.4 Credits. Amend subsection (b) to include override language that, for income taxes, IRC 31 applies. Amend subsection (c) (credit for household and dependent care services) to conform to IRC 2l. Repeal Subsection (e) (low income credit) as there is no federal counterpart. 47-1806.6 Property tax credit. Repeal this section which has no federal counterpart. 47-1810.1 Purpose of chapter. No change. . 47-1811.3 Bases - property dividends. Amend to reference IRC sec. 301(D), for income tax purposes, for determination of property dividends. Subchapter XII. Assessment and Collection 32 Hex-Dump Conversion 47-1812.1 General duties of Mayor. 47-1812.2 Records and statements. 47-1812.3 Examination of books & witnesses. 47-1812.4 Duty of Mayor to make return. 47-1812.5 Determination of deficiency. 47-1812.6 Jeopardy assessment. 47-1812.7 Payment of tax. 47-1812.8 Withholding of tax. 47-1812.9 Lien liability. 47-1812.10 Period of limitation upon assessment & collection. 47-1812.11a Tax check-off. 47-1812.11 Credits and refunds for overpayments. 47-1812.12 Closing agreements. 47-1812.13 Compromises. 47-1812.15 "Person" defined. 47-1812.16 Collection by Mayor. 47-1812.17 Furnishing copy of federal return. (New Section) Amend the subchapter by adding a new introductory override section that, for income and employment taxes, makes applicable the IRC provisions relating to assessment and collection, in lieu of the above D.C. Code ~rovisions, as follows: "Sec. 47-1812.la Assessment and Collection of Income and Employment Taxes by Secretary of the Treasurv. Notwithstanding any other provision of this subchapter or any other subchapter or chapter of this title, the provisions of subtitle F, subtitle G and chapter 24 of the Internal Revenue Code of 1986 shall apply to the administration by the Secretary of the Treasury of District of Columbia income and employment taxes, pursuant to the District of Columbia Tax Assistance Act." In addition, amend each of the above D.C. Code provisions to reference new section 47-1812.1a as the overriding authority for income and employment taxes. 47-1812.8 Repeal current DC Code provisions and replace with: a. The provisions of chapter 24 of the Internal Revenue Code shall apply. b. The provision of section 3501 of the Internal Revenue Code shall apply. 33 IIex-Dump Conversion c. The provIsIons of section 3502 of the Internal Revenue Code shall apply but nothing contained therein shall be construed to not allow a deduction from federal income taxes under section 164 of the Internal Revenue Code that would otherwise be allowable. d. The provisions of sections 3504, 3505, 3506, 3508 and 3509 of the Internal Revenue Code shall apply. e. The provisions of section 530 of the Revenue Act of 1978, as amended, shall apply with regard to the income tax withholding provisions and the unemployment insurance contributions of the DC Code. 47-1812.11(b) Repealed. 47-1812.II(c) Repealed. Subchapter XIII. Penalties and Interest 47-1813.1 Additions to tax - delinquencies. 47-1813.2 Same - Interest on deficiencies. 47-1813.3 Same - Fraud. 47-1813.4 Same - Nonpayments. 47-1813.5 Same - Payment extensions. (New Section) Amend the subchapter by adding a new introductory override section that, for income and employment taxes, makes applicable the IRC provisions relating to penalties and interest, in lieu of the above D.C. Code provisions, as follows: "Sec. 47-1813.la Penalties and Interest on Income and Emplovment Taxes. Notwithstanding any other provision of this subchapter or any other subchapter or chapter of this title, the provisions of subtitle F, subtitle G and chapter 24 of the Internal R~venue Code of 1986 shall apply to the determination and administration of penalties and interest on income and employment taxes." In addition, amend each of the above D.C. Code provisions to reference new section 47-1813.la as the overriding authority for penalties and interest on income and employment taxes. 34 Hex-Dump Conversion "47-1813.6 (a) Criminal violations.--All criminal penalties and sanctions relating to the administration of the United States internal revenue laws (including but not limited to title 26 and title 18 of the United States Code) shall apply to the District of Columbia taxes specified in 26 U.S.c. 6372. In all criminal actions brought under this section, the interests of the District of Columbia shall be represented by the United States in the same manner in which the interests of the United States are represented in corresponding proceedings involving the administration of the internal revenue laws. All criminal actions shall be brought in the judicial courts and applying the judicial procedures that apply to the administration of the internal revenue laws." Subchapter XV. Appeal 47-1815.1 Right of aggrieved persons to judicial appeal. Amend to exclude income and employment taxes. Subchapter XVI. Rules and Regulations 47-1816.1 Rules and regulations. 47-1816.2 Same - Revenue Act of 1956. Amended both sections to specify that, for income and employment taxes, rules and regulations will be prescribed by the Secretary of the Treasury. 47-1816.3 Report on amendment of IRC. Amend to specify that, for income and employment tax amendments to the IRC, the applicable reporting requirements will be carried out by the Secretary of the Treasury. CHAPTER 33. SUPERIOR COURT, TAX DIVISION 47-3301 Tax appeals; definitions. 47-3303 Appeal from assessment. 47-3304 Review by Court; finality of decision. 47-3306 Refund of erroneous collections. 47-3307 Certain suits forbidden. 47-3308 Manner of serving notices. 47-3309 Reference by Mayor to Superior Court. 35 Hex-Dump Comcrsion 47-3310 Overpayments; refund; appeal. Amend the above provisions to exclude jurisdiction over any matters relating to income and employment taxes. TITLE 11 ORGANIZATION AND JURISDICTION OF THE COURTS CHAPTER 12. TAX DIVISION OF THE SUPERIOR COURT 11-1201 Exclusive jurisdiction. 11-1202 Abolition of other remedies. 11-1203 Rules and regulations. Amend the above provisions to exclude jurisdiction over any matters, including civil or criminal proceeding, involving income and employment taxes. TITLE 46 SOCIAL SECURITY CHAPTER 1. UNEMPLOYMENT COMPENSATION Amend as follows: 1. Unemployment Compensation Contributions I. ... 3. Section 46-101 (1) shall be amended to include the provisions of IRC 3306 with the following exceptions: a. (b)(1) ... equal to $7,000 such amount as is determined in section 46-103 herein ... b. (b)(1) ... with respect to employment equal to $7,000 such amount as is determined in section 46-103 herein ... c. Section 3306(c)(7) and (8) of the Internal Revenue Code shall not be included in section 46-101(1). 36 EMAILS RECEIVED ARMS - BOX 005 - FOLDER -005 [03/07/1997 - 0311011997]

DC MOU 3.7.97 version

6:58 PM 07 Mar 1997

Message Creation Date was at 7-MAR-1997 18:52:00

Attached is the latest version of the DC MOU. This version incorporates agency
and OMB comments. Please provide any comments to Jill Gibbons or Scott Quehl
by 2:00 Monday, March 10th. Thanks

The following attachments were included with this message:

TYPE FILE
NAME DCMOU.M7

================== END ATTACHMENT 1 ==================
Unable to convert OA$SHARA684:ZWSXR3PM5.WPC to ASCII,
The following is a HEX DUMP:

MEMORANDUM OF UNDERSTANDING BETWEEN:

THE DISTRICT OF COLUMBIA

Marion Barry, Jr., Mayor
Charlene Drew Jarvis, Council President Pro Tern

DISTRICT OF COLUMBIA FINANCIAL RESPONSIBILITY AND MANAGEMENT
ASSISTANCE AUTHORITY

Andrew Brimmer, Chair (Given the way in which this is structured it may be better to have the
Authority "Affirm or Attest")

OFFICE OF MANAGEMENT AND BUDGET, EXECUTIVE OFFICE OF THE
PRESIDENT

Franklin D. Raines, Director

Dated: - - - - - - - -
Hex-Dump Conversion

SECTION I. PURPOSE

SECTION II. PUBLIC LAW 104-8, "THE DISTRICT OF COLUMBIA FINANCIAL
RESPONSIBILITY AND MANAGEMENT ASSISTANCE ACT OF
1995"

Finance.

Expenditures for the District government for each Fiscal Year, beginning in FY1999, may
not exceed revenues for that Fiscal Year.

During Fiscal Years 1996, 1997, and 1998, the District government shall make
continuous, substantial progress toward equalizing its expenditures and revenues.

The District may not borrow money during a control year unless the Authority provides
prior certification that the borrowing is consistent with the financial plan and budget for
the year.

Management.

An Office of the Chief Financial Officer will be established in the executive branch ofthe
District government, headed by the Chief Financial Officer, and including the Office of
the Treasurer, Controller, Budget, Financial Infonnation Services, and Finance and
Revenue.

An Office of the Inspector General will be established in the executive branch of the
District government.

During the control period, the Mayor shall submit proposed contracts and leases to the
Authority for review, and cannot enter into a contract or a lease unless the Authority
detennines it is consistent with the financial plan and budget.

The Authority may submit recommendations to the Mayor, the Council, the President,
and Congress on actions the
District or Federal
governments may take to
ensure the District's
compliance with a financial
plan and budget or promote
its financial stability,
management responsibility,
and service delivery
efficiency. The Mayor and
the Council shall submit a
statement to the Authority,
President, and Congress
providing notice as to
whether the District will
adopt the recommendations.
An affinnative statement
must include a written
implementation plan, with
perfonnance measures and a
schedule for audit
compliance. If the statement
rejects the recommendations,
the Authority may vote to
take what actions it deems
appropriate, after consulting
with Governmental Affairs
Committee of the Senate and
the House Government

2
Hex-Dump Conversion

Refonn and Oversight
Committee.

SECTION III. GENERAL PROVISIONS

1. Balanced Budget. PL 104-8 requires that the District balance its budget by FY1999.
By this agreement, the District agrees to present and/or approve a balanced budget for the
Fiscal Year beginning October 1, 1997.

2. Agreement to be Bound. The District agrees to be bound by and to use its offices and
best efforts to implement this agreement.

SECTION IV. SUBMISSION OF LEGISLATION & FEDERALLY ASSUMED
FUNCTIONS

Once implemented, the Plan will provide the District substantial relief from its operating
expenditures, relief which will grow over time. It will also invest considerable resources to
improve the City's criminal justice systems and capital infrastructure. If this legislation is
enacted, the Federal govemment will The Federal governmeffi agrees to undertake the functions
described below. The Federal govemment will not undertake a function until the District
government meets the conditions for that function, described in Section V.

1. Medicaid. The Federal govemment will increase its share of the District's Medicaid
payments to 70 percent, thereby reducing the District's share to 30 percent. The
Department of Health and Human services will provide more intensive technical
assistance to help the District improve the management of its Medicaid program.

2. Pensions. The Federal government will take fmancial and administrative
responsibility for virtually all pension benefits accrued under the plans for all active
and retired police and firefighters, teachers, and judges. Assets of the retirement
plans will be transferred to the Federal govemment. The Federal govemment will pledge
its full faith and credit to meet its responsibilities to these beneficiaries. It will "freeze"
benefits payable to current employees based on service eamed as of the date the
legislation is introduced, and will pay their future retirement, death and some of their
disability benefits to the extent they are eamed based on the frozen service. While the
Federal government will not be responsible for benefits eamed during future years of
service by members of the current retirement programs, these members will get the
benefit of pay increases on the frozen benefits. Frozen benefits will continue to be subject
to cost-of-living adjustments under the tenns of the existing programs. For those

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employees covered by new plans, their contlibutions will be paid into those plans, The
Secretary of the Treasury will appoint a third-party Trustee to administer the plans and
manage pension assets.

3. Intermediate-Term and Short-Term "Lending. The United States Treasury will provide
an intermediate-term loan to eliminate the accumulated fund balance deficit of no more
than 15 years, at an interest rate of Treasuries plus 1I8th of I percent. The Treasury may
also provide inter-year loans for liquidity purposes. The combined amount of the
intermediate-term and inter-year liquidity loans will not exceed $500 million. The
Treasury may also provide intra-year loans for the purposes of liquidity.

4. Criminal Justice. The Federal and District governments, in consultation with
representatives of the Federal and District judiciary, will develop and implement a
transition plan transferring responsibility over a three-to-five-year period for incarcerating
felons of D.C. Code violations. The Federal Bureau of Prisons (BOP) will house felons
who are convicted of violating the D.C. Code and sentenced to terms of imprisonment in
correctional institutions operated or contracted by the BOP, after BOP's capacity has been
increased through new construction at Lorton and other locations selected by BOP,
through renovation of existing facilities at Lorton, Virginia. After October 1,2001, the
BOP will also designate to Federal correctional institutions sentenced D.C. felons in the
custody of the D.C, Department of Corrections, as the Director of BOP deems
appropriate, in accordance with available capacity, until they have all been designated to
Federal institutions. The BOP will accept employment applications from persons
currently employed by the D.C. Department of Corrections for existing BOP vacancies,
and will process such applications in accordance with existing Federal procedures and
standards.
The Attorney General will select, with the approval of the Chairman of the D.C. Financial
Responsibility and Management Assistance Authority, and in" consultation with the
Mayor of the District of Columbia, a Trustee to oversee operations of the D.C.
Department of Corrections until the BOP assumes responsibility for all incarcerated
District felons.

Consulting with representatives of the Federal and District judiciary, the Federal and
District governments will also develop and implement a transition plan transferring
responsibility for D.C. Code violation offender pre-trail, parole, probation, and
post-adjudicationlpost-conviction adult offender supervision" from the District
government to the Federal government over a three-to-five-year period. The United
States Parole Commission will continue to assume responsibility for all D.C. felons
housed in Federal Correctionallnstitutions who have sentences subject to provisions of
parole. The Federal government will take direct responsibility for funding the District
Court System. The Courts will remain self-managed.

5. Economic Development. The Federal govemment will make tax benefits available to the
District both to encourage hiring by firms throughout the District of District residents of
distressed areas and to encourage economic revitalization throughout the District, and to
encourage the employment of disadvantaged D.C. residents.

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An economic development corporation (EDC) will be established as a non-Federal public
authority in the District of Columbia, with the mission of revitalizing the nation's capital
and benefitting the residents and businesses of Washington, D.C. A majority of the
EDC's Board will be private sector, community and civic leaders, with Federal and local
representation as well. The Federal government will provide the initial capitalization of
the EDC. Building on current strategic planning and development efforts, the EDC will
formulate a strategic economic development plan for the District, and will have
significant powers to spur large-scale and other development to implement that plan, in
all ofthe District's neighborhoods.

6. Infrastructure. The National Capital Infrastructure Commission (NCIC) will be
established to assume certain State-like responsibilities for selection, funding, and
oversight of National Highway System capital projects (including roads, bridges, and
transit) and NHS operations and maintenance projects (excluding police auth0l1ty,
National Park Service roads, and transit) within the District. The NCIC will be govemed
by a tive-member board to be composed ofthree representatives from the District and two
representatives from the Department of Transportation. Contract administration will be
pertonned by the Federal Highway Administration. In addition, eligibility for Surface
Transportation Program (STP) funds will be expanded to include local public roads. To
support NCIC projects, the National Capital Infrastructure Fund (NCIF) will be
established in FY 1998 with $108 million for road, b11dge, and transit capital projects.
An additional $17 million will be provided in FY1998-03 for NHS operations and
maintenance. Federal-aid funds for the District's NHS, Interstate Maintenance, and
Bridge programs will be transferred to the NCIC in FY1998-03. The Administration
also proposes that the NCIC be authorized to accepted contributions from other sources.

7. Personal Incom'e Tax Collection. The Intemal Revenue Service will assume
responsibility from the District of Columbia for administering and enforcing D.C.
individual income and payroll taxes. This would include the processing of those taxes
paid by individuals, as well as the payment of related employment and payroll taxes.
The District of Columbia will maintain processing and collection responsibility for all
other taxes collected for the City.
Upon enactment of the legislation to implement the Plan, the pmiies to the MOU will
review the legislation and confer on whether any revisions to the MOU are necessary to ensure
its consistency with the legislation.

SECTION V. DISTRICT CONDITIONS

The Dist11ct government understands that it will be expected to undertake signiticant
actions as part of the National Capital Revitalization and Self-Govemment Improvement Plan.
This section sets out the actions that the District govemment agrees to take as a condition of the
Federal government actions under the legislation to carry out the Improvement Plan.

1. Medicaid. The District agrees to develop and implement plans satisfactory to the
Secretary of Health and Human Services to accomplish each of the following:

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1.1. To develop an effective system for the identification and collection of amounts owed by
third parties for medical care and services furnished to' individuals under the District's
Medicaid plan.

1.3 .1. To assist eligibility verification.

1.3.2. To create utilization and financial profiles of providers.

1.3.3. To identify services (including preventive services) received by program beneficiaries.

1.3.4. To monitor the claims processing and other Medicaid operations of the fiscal agent.

1.3.5. To monitor the quality of care provided under managed care contracts.

1.3.6. To coordinate information management with respect to the District's Medicaid program
and other public health programs and functions.

1.4. To develop a comprehensive behavioral managed health care system, which combines
substance abuse and mental health grant programs. Development of such a plan shall
include a pilot project for better evaluation of inpatient acute psychiatric patient
admissions, and the purchase of a comprehensive, risk-based system for managed care of
behavioral health which covers all eligible populations and services.

2. Pensions. The District Government agrees: i

See Definitions in Appendix 1.

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2.1. Te establish replaeemeflt retirement programs, threugh eelleetie bargaining if
applieable, that ee'fer new ans existing empleyees vAle are er weuls have been eOYferes
by the transferres retirement programs.

2.1.1. Gnee the new retiremeflt programs are aseptes, they may net be amenses te inerease
their eests withem provising a meffilS te funs the in6rease.

2.1. To establish a Replacement Plan for the Retirement Program

2.1.1. The Replacement Plan will over all existing and new Employees who are, or would be,
covered by the Retirement Program, if the Retirement Program continued unchanged, and
will be established by the date specified in legislation.

2.1.2. To the extent required by current law, the Replacement Plan will be established through
collective bargaining.

2.1.3. After the Adoption Date, the Replacement Plan may not be amended in any manner that
matetially increases the cost of the Replacement Plan without provision of a mechanism
for funding such increases. in accordance with Section 2.2.

2.2 That the replacement retirement programs will use appropriate funding methods and costs
that do not exceed the sum available in the District of Columbia Budget and Financial
Plan.

2.2.1.1. funding methods will be limited to entry age or frozen entry age; and

2.2.1.2. amortization of any unfunded actuarial liability is required over no more than 30
years on a closed basis.

2.2.2. The cost of any defined contribution plan is the employer contribution required under the
provisions of the plan.

2.2.3. All costs of the replacement retirement programs must be reflected in the D.C. Budget
and Financial Plan in accordance with the standards described above.

2.2.4. All costs of the replacement retirement program must be paid in a timely manner.

2.2.5. For those employees covered by new plans. their contributions will be paid into those
plans.

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2.3. To transfer copies of books and records of the Retirement Program and the Fund and to
be financially responsible for errors and omissions, including all necessary records of
individual employees.

2.3.1. Copies of any books and records peliaining to the Retirement Program and the Fund
required by the Secretary of the Treasury or the Trustee must be made available to the
Secretmy or Trustee within 30 days after the Secretary or Trustee requests them.

2.3.2. The District will reimburse the Trustee for all costs, including benetit payments, resulting
from elTors or omissions in the books and records peliaining to the Fund.

2.4. To transfer assets from the Fund

2.4.1. Any and all assets of the Fund required to be transferred to the Trustee shall be
transferred on the Transfer Date in a form specified by the Trustee.

2.4.2. .The District of Columbia Retirement Board will administer the retirement programs until
the Trustee assumes these responsibilities. The District government will reimburse the
Fund before the transfer date for any benefits paid out of the fund between the freeze date
and the transfer date that exceed payments that would have been the responsibility of the
Federal government if the transfer had occurred simultaneously with the freeze.

2.5. To implement reforms in the retirement program

2.5.1. Double COLAs [to come: legal opinion as to the District's capacity to rescind double
COLAs through amending D.C. Code and technical analysis of economic materiality of
double COLAs still pending].

3. Intermediate-Term and Short-Term Lending The District agrees that:

3.1. Any intermediate-term loan to eliminate the accumulated fund balance deficit would be
for no more than 15 years, with an interest rate of Treasuries + 118 of 1 percent.

3.2. Any inter-year loan for liquidity purposes and/or intermediate-term loan to eliminate the
accumulated fund balance deficit will not exceed the amount of $500 million.

3.3. The Secretary of the Treasury may require early reimbursement if the District can obtain
credit on the commercial market on favorable terms for refinancing as determined by the
Secretary.

3.4. The District must be in compliance with the approved Budget and Financial Plan
before any lending can occur.

3.5. The District must provide a requisition for an advance of funds and a promissory
note to reimburse the Treasury for the advance.

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3_6_ The Financial Responsibility and Management Assistance Authority must certify
that there is an approved Budget and Financial Plan in effect for the District for the
Fiscal Year that the requisition is made.

3.7. The Secretary ofthe Treasury must receive certification that the District is unable
to obtain enough credit elsewhere to meet the DC government's need for rmancing.

4. Criminal Justice. [EXOP and Agencies have not had a chance to comment on this
language. Comments will be included, where appropriate, on Monday.]

In particular, the MOU is designed to:

ensure an appropriate transfer of responsibility from D.C. to the Federal government for
the incarceration of felons convicted of D.C. Code violations.

provide the basis for establishing an independent budgetary, financial oversight, and
administrative support system for the District of Columbia courts.

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ensure development by D.C. and the Federal government of transition plans

for transferring responsibility over approximately a three to five year period for
incarcerating felons convicted of D.C. Code violations.

4.l. Administration of District of Columbia Jails and Pretrail, Public Defender, Parole,
Probation, and Post-Conviction Offender Supervision and Services

4.1.1. Federal Government Responsibilities

4.1.l.l. The Attorney General will select, with the approval of the Chairman of the D. C.
Financial Responsibility and Management Assistance Authority (Financial
Authority), and in consultation with representatives of the Federal and D.C.
judiciary, and the Mayor of the District of Columbia, among others, an Offender
Supervision and Courts Services Trustee to:

A. assure the smooth transition and continued operations of the District of
Columbia's Pretrial Services Agency and Public Defender Service (PDS)

B. implement timely shutdown of the D.C. Parole Board in coordination with
the U.S. Parole Commission

C. establish and initially operate a new D.C. Offender Supervision and
Services Agency

D. accomplish without disruption of services the transfer of the adult offender
probation supervision functions of the D. C. Courts Social Services
Division,

until the Federal government assumes responsibility for each of these functions .

. 4.1.1.2. During the transition period, under the auspices of the Trustee, the D.C. Pretrial
Services Agency will continue uninterrupted to provide services and support for
both juvenile and adult D.C. Code and Federal defendants and offenders to the
U.S. District Court for the District of Columbia, the U.S. Court of Appeals for the
District of Columbia, the Superior Court for the District of Columbia, and the

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4.1.1.3. Following the transition period, the D.C. Pretrial Services Agency will be
organizationally housed in a new Federal D.C. Offender Supervision and Services
Agency.

4.1.1.6. During the transition period, the Federal government will transfer funds for the
Pretrial Services Agency, the Public Defender Service and the supervision ofD.C.
offenders through the Control Board to the Offender Supervision and Courts
Services Trustee. The head of any Federal department or agency may provide the
services of any personnel to the Trusteeship to assist in carrying out its duties.

4.1.1.7. During the transition period, under the general auspices of the Trustee, the PDS
will continue uninterrupted to provide services to D.C. Code defendants and the
District of Columbia court system. The Director of PDS shall employ such
personnel as may be necessary.

4.1.1.8. During the transition period, the employees of and funds allocated to the Offender
Service's and Courts Trustee and the agencies for which the Trustee is responsible
shall not be counted against the personnel and budget ceiling imposed on the
District of Columbia by the Control Board or Congress. (N.B. placeholder
language required clarification and/or citation).

4.1.1.9. The Federal govemment will assess the feasibility and cost-effectiveness of
contracting for limited bed space at the District's Correctional Treatment Facility
(CTF) as may be necessary to supplement existing Federal detention and
treatment contracts.

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4.1.2. District of Columbia Responsibilities

4.1.2.1. The District of Columbia will maintain responsibility for all D.C. Code juvenile
offenders not prosecuted as adults.

4.1.2.3. the District of Columbia will continue to house persons charged with felonies, and
persons convicted of felonies but not yet sentenced., in the district of Columbia
Superior Court. To the extent beds are available, the District of Columbia will
continue to house persons charged with felonies, and persons convicted of
felonies but not yet sentenced, in the District Court, and will continue to receive
reimbursement by the Federal government at a mutually negotiated rate for the
costs of housing such persons. "House" and "housing" include subsistence,
.transportation of persons to and from court appearances and medical facilities, and
the maintaining of necessary prison records.

4.1.2.5. The Trustee will operate under the general auspices of the Chairman of the
Control Board and can be removed only by the Attorney General.

4.1.2.7. the Trustee will allocate funds for offender supervISIOn in the District of
Columbia, including funds for short term improvements, equipment contracts, and
salary increases that are necessary to retain key personnel, maintain and enhance
current levels of service, including offender drug testing, and provide for the
safety and security ofthe community.

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4.l.2.8. Upon receipt from the Control Board of funds identified by congress or other
entities for Pretrial Services, the Trustee will immediately transfer such funds to
the Pretrial Services Agency.

4.l.2.9. Upon receipt from the Control Board, the D.C. Court system, or the
Administrative Office ofthe United States Courts, of funds identified by Congress
or other entities for the D.C. Public Defender Service the Trustee will
immediately transfer such funds to the Public Defender Service.

4.l.2.10 In view of the responsibility to be undertaken by the U.S. parole Commission to
carry out the functions of the D.C. Board of Parole pursuant to the parole laws and
regulations of the District of Columbia, effective immediately, the D.C. Council
will not enact legislation that changes or modifies these laws and regulations
without the concurrence of the Attorney General. Following the assumption by
the Parole Commission of the functions of the D.C. Board of Parole, the council
will cede to Congress the sole authority to legislate changes to the District of
Columbia Code that pertain to the parole of D.C. felony offenders.

4.l.2.12. The D.C. Corporation Counsel will provide representation for the Trustee and
Trustee supervised agencies. (See litigation and liability section)

4.2. Administration of District of Columbia and Federal Prisons

4.2.1. Federal Government Responsibilities

4.2.1.1. The Bureau of Prisons (BOP) will house felons, in correctional institutions
operated or contracted by the Federal Bureau of Prisons, who were convicted of
violating the D.C. Code and sentenced to terms of imprisonment, after the BOP's
capacity has been increased through renovation of existing facilities and new
construction at the corrections complex in Lorton, Virginia and other locations
selected by the BOP. D.C. Code offenders will be housed together with Federal
offenders in BOP facilities based on inmate program and security needs and BOP
population management regulations. The BOP will oversee the operation of
community corrections centers in the District of Columbia as necessary to provide
an appropriate transition for inmates who are nearing release from Federal
prisons, including those convicted of D.C. Code violations. The BP intends to
use existing community corrections centers in the District of Columbia to the
extent practicable and will work with D.C. officials in the identification of
prospective sites, as needed to establish new community correction facilities.

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4.2.1.2. The BOP intends to operate several correctional facilities in Lorton, Virginia and
elsewhere to house a mix of both Federal and D.C. felons. Every effort will be
made to house D.C. felons at facilities that are as close to the District of Columbia
as permitted by inmate program and security needs and BOP population
management regulations. D.C. felons will be designated in the same manner as
Federalinmates, and ordinarily initially assigned to institutions located within a
SOO-mile radius of their residence. BOP also will work with D.C. officials to
identify sites for possible Federal correctional facility construction within the
District.

4.2.l.3. Based upon assurances from the District of Columbia that felons convicted of
violating the D.C. Code will, in the future, receive sentences similar to those
received by comparable offenders convicted of comparable Federal offenses,
during the transition period, the BOP will house those sentenced D.C. felons in
the custody of the D.C. Department of Corrections as the Director of the BOP
deems appropriate in accordance with available capacity. After October 1, 2001,
the BOP will accept D.C. felons sentenced under the new sentencing structure in
accordance with the capacity of the BOP. By October 1, 2002, and assuming
fulfillment of all requisite conditions, the BOP will have assumed responsibility
for incarcerating all D.C. felons.

4.2.l.4. The BOP will accept employment applications from persons currently employed
by the District of Columbia Department of Corrections for BOP vacancies and
will make hiring selections in accordance with existing Federal procedures and
standards. Positions for new BOP facilities will be advertised prior to being
filled.

4.2.l.6. The Federal government will transfer funds for the incarceration of D.C. felons
through the Financial Authority to the Trustee. The head of any Federal
department or agency may provide the services of any personnel to the Trustee to
assist in carrying out the Trustee's duties.

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B. District of Columbia Responsibilities

4.2.2.2. The District of Columbia will continue to house felons sentenced to terns of
imprisonment by the District of Columbia Superior Court until such persons have
been designated by the BOP. To the extent beds are available, the District of
Columbia will continue to house felons sentenced to terms of imprisonment by
the U.S. District Court until such persons have been designated by the BOP, and
will continue to receive reimbursement at a mutually negotiated rate by the
Federal government for costs of housing such persons.

4.2.2.3. The Trustee will operate under the general auspices of the Chairman of the
Financial Authority and can be removed only by the Attorney General.

4.2.2.7. The D.C. Corporation Counsel will provide representation for the Trustee and
Trustee-supervised agencies (see the litigation and liability section).

4.3. Sentencing

The District of Columbia understands and agrees that the D.C. sentencing system will be
changed, pursuant to the proposed Act, in the following manner:

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4.3.1. Congress will amend the D.C. Code to abolish parole for all persons convicted of D.C.
offenses (felonies and misdemeanors) cornmitted on or after 3 years from the date of
enactment of the Act.

4.3.5. The promulgated sentencing system will supersede any inconsistent provision of the D.C.
Code and will provide for post-release supervision of offenders.

4.3.6. Congress will repeal certain other provisions of the D.C. Code to conform with the new
sentencing system (D.C. Code Title 24, Chapters 2 and 8], including the Youth
Rehabilitation Act.

4.3.8. Congress will amend the D.C. Code Title 33, section 541 to adopt certain mandatory
penalties necessary for effective local law enforcement.

4.3.9. The Board will not have the authority to provide for capital punishment under any law
applicable exclusively in the District of Columbia.

4.3.10. The Board will have seven voting members. TheAttomey General (or her designee) will
chair the Board. The other members will include two judges of the D.C. Superior Court
and one representative each for the D.C. Council, the Executive Branch of the D.C.
government, the D.C. Public Defender Service, and the U.S. Attorney for the District of
Columbia. A representative of the Bureau of Prisons will serve as a non-voting, ex
officio member.

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.
4.3.11. An affinnative vote of at least six Board members will be necessary to adopt guidelines,
promulgate the sentencing system, and make any amendments or repeals of D.C. Code
provisions relating to maximum and minimum prison tenns.

4.3.12. In developing the sentencing system, the Board will hold three or more public hearings,
review appropriate State system models, consult with sentencing refonn experts, and
solicit written comments from the public.

4.3.13. If the Board fails to promulgate a sentencing system within 18 months, the Board will
tenninate and the Attorney General will develop the system and transmit it to the Council
for approval. The system will take effect unless the D.C. Council disapproves the system
and Congress, in tum, does not approve it.

4.3.14. The Board will have the mandate to ensure that the sentencing system it establishes,
among other things:

4.3.14.1. Will result in sentences for those convicted offelony offenses similar to those that
would be imposed upon comparable offenders convicted of comparable offenses
in the Federal system;

4.3 .14.2. Will result in sentences that reflect the seriousness of the offense and provide for
just punishment, afford adequate deterrence to potential future criminal conduct of
the offender and others, and provide the defendant with needed educational or
vocational training, medical care, and other correctional treatment;

4.3.14.4. Will take into account the high volume of sentencing proceedings in the District
of Columbia Superior Court as bearing upon the degree of complexity of the
sentencing system; and

4.3.15. As part of the sentencing system, the Board will develop binding guidelines for use in
detennining the sentence to be imposed upon convicted felons. The guidelines will
specify:

4.3.15.1. When to impose a sentence to probation, a fine, or a tenn of imprisonment and the
appropriate amount or length, as well as intennediate sanctions;

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4.3.15.2. When to impose a tenn of supervised release following imprisonment, and the
appropriate length; and

4.3.15.3. Whether multiple sentences to tenns of imprisonment should run concurrently or
consecutively.

4.3.16. Thirty days after promulgating the sentencing system, the Board will be tenninated.
There will be a successor Federal agency in the judicial branch to amend the guidelines
consistent with the purposed of the Act. The D.C. Council may recommend to Congress
whether or not these amendments should be approved. The amendments will take effect
as prescribed by the successor agency, however, unless they are modified or disapproved
by Congress. The successor agency will have no powers to revise the District of
Columbia Code but will recommend changes to the Code as may be necessary to further
the purposes of the Act.

4.3.17. The D.C. Superior Court, D.C. Department of Corrections, and other agencies as
necessary will submit infonnation about convicted felons as required by the Board and
the U.S. Department of Justice. This would pennit an assessment of the extent to which
sentences imposed by the D.C. Superior Court are comparable to those imposed for
comparable offenders by U.S. District Courts. The results of this assessment would be
used by the Board in developing the new sentencing system for the District of Columbia.

4.3.18. Four years after the new sentencing system takes effect, there will be an evaluation to
detennine the extent to which the sentencing system has succeeded in accomplishing the
goals set forth in the Act.

4.4. Liability and Litigation Authority

4.4.1. Federal Government Responsibilities

4.4.1.2. The Attorney General, in her discretion, will have the authority to direct any
litigation involving the Trustees, pretrial services, and sentencing refonn during
the transitional period, and to provide litigation services for the Trustees and the
agencies responsible for pretrial services and sentencing refonn during the
transitional period in lieu of representation by the District of Columbia.

4.4.2. District of Columbia Responsibilities

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4.5. District of Columbia Courts

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5. Economic Development The District agrees that:

5.1. Consistent III eoopel'9tioll with ongoing private sector recommendations, the D.C.
government effurts, it will implement IIl&Fe timely and efficient zoning, permitting
and licensing processes, by the end of FY1997.

I 5.3. The District government will oUoeote support a legislative allocation to the EDC 50
percent of the applicable State ceiling on the authority of the District government to
issue private activity bonds in each calendar year under section 141 of the Internal
Revenue Code.

5.4. The District government will give expedited and favorable attention to the EDC's
requests for land transfers (including transfers from the RLA), zoning adjustments
(including variances and special exceptions), and building and other permits and
licenses for projects and activities 6f as requested bv the EDC, and will support the
legislative granting of authority to the EDC to exercise certain powers, including the
right of eminent domain.

I 5.5. The District will cooperate with the Federal government and the private sector to
establish promptly an Organizing Committee which is primarily composed of
members of the private sector. The Organizing Committee will be responsible for
encouraging businesses and other members of the private and non-profit
communities - District, regional and national - to invest in the District. thFOUgh the
ED{;.

6. Infrastructure.

The District agrees:

6.1. Establishment of the National Capital Infrastructure Commission (NCIC)

6.1.1. Beginning on October 1, 1997, the NCIC shall assume certain State-like responsibilities
for selection (consistent with the planning requirements in 23 U.S.C. 134 and 135),
funding and oversight of the National Highway System (NHS) capital projects and shall
assume responsibilities for funding the operations and maintenance of the NHS within the
District of Columbia (exclusive of police authority and exclusive of funding those NHS
routes currently under the jurisdiction of the National Park Service) with funds made
available under Title - -

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6.1.3. The NCIC shall implement its responsibilities for funding and oversight and shall
advance NHS projects through the Department of Transportation, Federal Highway
Administration (FHWA). The FHWA shall proviee staffing support to assist the NCIC
in fulfilling its responsibilities ane shall serve as the eontraeting ag6fl:t for exeeetiag all
eoHtraets for perfofffianee of eligible NH8 aetivities lIHe projeets, as eefiaee ia
Title

6.1.4. Beginning on October L 1997. the NCIC [at the discretion of the District of Columbia]
shall assume responsibility for advancing those NHS projects approved prior to that date
that are not under construction or under a contract for such construction bv October 1.
1997. [unless the NCIC and the District of Columbia agree to continue to vest
responsibility for such project advancement with the District of Columbia). Such
projects that are transferred under this section shall also be governed by the requirements
contained in section 6.2.4.

6.1.5. The NCIC may flex National Capital Infrastructure Funds authorized under section
and NBS apportioned funds authorized to be transferred under section to other
Federal-aid highway funding categories. consistent with Title 23. United States Code
flexing provisions. provided performance measures relating to bridge. pavement, safety or
other such perfom1ance measures that are established by the Secretary. or that shall be
established. are met. In the event the Secretary of TranspOliation detennines that such
performance measures are not being met. NHS funds made available under Title
shall not be flexed to another funding category, but shall only remain available for
eligible NBS projects.

6.1.6. Funds made available to the NCIC shall be administered by FHWA, which shall obligate
and expend funds as the agent for the NCIC in accordance with such procedures that shall
be established by the Secretary.

6.1.8. In each ofthe fiscal years 1998 through 2003, the Secretary shall transfer to the NCIC:

6.1.8.1. 100 percent of the District of Columbia's apportionment for the NHS;

6.1.8.2. 100 percent of the apportiomnent for Interstate Maintenance; and

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6.1.8.3. 75 percent of the apportionment for the Highway Bridge Replacement for use
consistent with 23 U.S.C. 103 (i).

6.2. District of Columbia Responsibilities

6.2.2. The District of Columbia will continue to be responsible for all utilities and utility work
that are not necessary for operation of the NHS, eyen if such utilities are located within
the right-of-wav of the NHS. The Distriet of ColtHHbia shall eontiBUe to be resf)onsiBle
for non ~lHS f)rojeets funded with Federal aid highway funds. The ffi:lthority to lise
Swiaee TraBsf)ortation Program funds on loeal streets, highways, and roadways does not
relieve the Distriet of Col1iFRbia of the resf)onsibility for the non Federal matehing share.
The lise of other Federal aid highvfay af)f)ortioned funds by the Distriet of ColliffiBia other
than as f)fOvided beloYI also require a non Federal matching share.

6.2.3. The District of Columbia shall continue to be responsible for non-NHS projects funded
with Federal-aid highway funds. The authority to use Surface Transportation Program
funds on local streets, highways, and roadways (except alleyways) does not relieve the
District of Columbia of the responsibility for the non-Federal matching share. The use
of other Federal-aid highway apportioned funds by the District of Columbia other than as
proyided below also requires a non-Federal matching share.

6.2.4. Beginning on October 1, 1997, the District of Columbia is relieved of the responsibility to
provide the non-Federal match for NHS projects that are funded by the NCIC with
monies made available for NHS projects under Title _ _. The relief from providing
the non-Federal match shall not include those projects that were approved by FHWA
Plior to October L 1997, for which Federal-aid highway funds have been obliged. The
District of Columbia is responsible for providing the non-Federal match, the Federal-aid

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funds, and any obligation authority for any such projects transferred to the NCIC for
project administration, oversight. or contracting.

6.3. Department of Transportation Responsibilities

The Secretary agrees to:

6.3.1. Continue to provide oversight and technical assistance to the District of Columbia for
projects not funded with NCIFINCIC funds.

6.3.2. To have FHWA provide technical assistance to the NCIC on project planning and
selecting criteria consistent with 23 U.S.C. 134 and 135.

6.3.4. To be responsible for management of those funds that are authorized and appropriated for
the NCIF or authorized or transferred to the NCIC for the NHS, consistent with 23 U.S.C.
103(i).

6.3.5. To encourage the hiring of local labor by contractors awarded contracts, including
welfare-to-work labor on NHS projects financed under Title to the maximum extent
possible and consistent with Federal law.

7. Personal Income Tax Administration The District agrees that:

7.1. General

7.1.1. The IRS shall administer and enforce the District's individual income and employment
taxes.

7.1.2. The District shall continue to administer its unemployment benefits program.

7.2. Tax Codes

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7.2.2. All ofthe administrative, procedural, and enforcement provisions of the Internal Revenue
Code of 1986 and related statutes will govern IRS administration of District taxes. The
District will have to amend its own tax code to achieve this. The specific provisions of
District law and the manner in which they must be amended are set forth on the attached
Exhibit 7-A.

7.2.4. The District must notify the Secretary of the Treasury of any future changes to its
individual income and employment tax laws. The Secretary may object if, in his
judgement, the prospective change would prove overly burdensome to the IRS, in which
case such change shall not be administered or enforced by the IRS. If the Secretary does
not object within 60 days after notification, the IRS will administer the provision within a
reasonable time after enactment.

7.3. Transfers to the District

7.3.1. The IRS will set up separate accounting and deposit systems for its collections of District
taxes. The District must, in turn, identify the person arid/or office authorized to receive
transfers of collected amounts and set up related deposit accounts.

7.4. Effective Date

7.4.1. The IRS administration of District taxes shall be prospective, starting on January 1 of the
calendar year that is at least 18 months after the Secretary certifies that the District of
Columbia has met the conditions set forth in the Memorandum of Understanding dated
- - - between the United States and the District of Columbia.

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DEFINITIONS FOR THE PENSIONS SECTION OF THE MOU

"Adoption Date" means the date the Replacement Plan is adopted by the District Government or,
iflater, October 1, 1997.

"Freeze Date" means the date of introduction of the Revitalization Act.

"Reform Act" means the District of Columbia Retirement Reform Act (Pub. L. 96-122).

"Replacement Plan" means the plan or plans described under Title I of the Revitalization Act.

"Retirement Program" means any of the retirement programs as described in section 102(7) of
the Refonn Act as in eirect on the day before the freeze date.

"Revitalization Act" means the "District of Columbia Revitalization Act of 1997."

"Secretary" means the Secretary of the Treasury or the Secretary's designee.

"Transfer Date" means the date on which the assets and obligations of the Fund are transferred to
the Trust.

"Trust" means the District of Columbia Retirement Trust created under Title I of the
Revitalization Act.

"Trustee" means the person designated by the Secretary of the Treasury under Title I of the
Revitalization Act.

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EXHIBIT 7-A Hex-Dump Conversion

AMENDMENTS TO DISTRICT OF COLUMBIA CODE

Pursuant To

MEMORANDUM OF UNDERSTANDING
BETWEEN THE UNITED STATES AND
THE DISTRICT OF COLUMBIA
AND THE
DISTRICT OF COLUMBIA TAX ASSISTANCE ACT

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AMENDMENTS TO DISTRICT OF COLUMBIA CODE
Pursuant to Memorandum of Understanding Between
the United States and the District of Columbia
and DISTRICT OF COLUMBIA TAX ASSISTANCE ACT

Page

Title 47 Taxation and Fiscal Affairs ....... '" . 1

Ch.l General Provisions ............. 1

Ch.4 Collection and Disbursement of Taxes .... 2

Ch.5 Tax Rates, Records, and Surplus Funds 3

Ch. 18 Income and Franchise Taxes ......... 3

Ch. 33 Superior Court, Tax Division ........ 7

Title 11 Organization and Jurisdiction of the Courts ... 8

Ch.12 Tax Division of the Superior Court..... 8

Title 46 Social Security ................. 9

Ch.l Unemployment Compensation.......... 9

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TITLE 47. TAXATION & FISCAL AFFAIRS

CHAPTER 1. GENERAL PROVISIONS

CHAPTER lA. TAX RETURN PREP ARERS

47-161 Definitions.

47-162 Penalty for failure to sign return.

47-163 Understatement of taxpayer's liability.

47 -164 Penalty for aiding & abetting understatement.

47-165 Frivolous tax return.

47-166 Statute oflimitations on assessment of penalties.

47 -167 Determination of penalty.

47-168 Claim for refund.

47 -169 Right to judicial appeal.

47-170 Abatement of penalty.

(New section) Amend the chapter by adding a new introductory override section that, for
income and employment taxes, makes applicable the IRC provisions
relating to tax return preparers (e.g. IRC 6694, 6695, 6713, 7407, 7427,
7701(a)(36)), in lieu of the above D.C. Code provisions, as follows:

"Sec. 47-161a. Tax Return Preparers - Income and Employment
Taxes. Notwithstanding any other
provision of this chapter or any other chapter
of this title, the provisions of sections 6060,
6107, 6694, 6695, 6713, 7407, 7427, and
7701 (a)(36) of the Internal Revenue Code of
1986 shall be applicable to income tax
return preparers of returns of individual
income taxes imposed by the District of
Columbia."

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CHAPTER IB. CREDITING OF TAX REFUNDS AGAINST DELINQUENT
TAXES

47-171 Definitions.

47-172 Crediting a tax refund.

47-173 Multiple party returns.

47-174 Priority over intercepts.

47-175 Notice; protest.

47-176 Remedy not exclusive.

(New sectio).1) Amend the chapter by adding a new introductory override section that, for
income and employment taxes, makes applicable the IRC provisions
relating to credits and refunds (IRC ch. 65), in lieu of the above D.C. Code
provisions, as follows:

"Sec. 47-171a Crediting of Tax Refunds Income and
Employment Taxes. Notwithstanding any other
provision of this chapter or any other chapter of this
title, the provisions of chapter 65 of subtitle F of the
Intemal Revenue Code of 1986 (except section
6405 relating to reports to the Joint Committee on
Taxation) shall constitute the procedures relating to
credits and refunds of overpayments of income and
employment taxes imposed by the District of
Columbia."

CHAPTER 4. COLLECTION AND DISBURSEMENT OF TAXES

47-404 Account books.

47-407 Waiver of interest & penalties. Amend to exclude income and employment
taxes.

47-408 Omission from records. Amend to exclude income and employment taxes.

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47-453 Interest. Amend to reference IRS 6601 et seq. for detennination of interest on
income and employment taxes (including interest rate).

47-454 Substantial understatement penalty. Amend to reference IRC 6662 for
detennination of penalty on income and eml?loyment taxes (including
penalty rate).

47-455 Failure to Dav Denaltv. Amend to reference IRC 6651 for determination of
penalty on income and employment taxes (including penalty rate).

47-456 Fraud penalty. Amend to reference IRC 6663 for determination of penalty on
income and employment taxes (including penalty rate).

47-457 Garnishment. Amend to exclude income and employment taxes; cross reference
Secretary of the Treasury's collection authority under Chapter 18,
Subchapter XII.

47-458 Collection. Amend to reference IRC 6601(e} for collection of interest and
penalties on income and employment taxes.

CHAPTER 5. TAX RATES, RECORDS, AND SURPLUS FUNDS

47-504 Tax rates. No amendment. D.C. retains the right to set tax rates.

CHAPTER 18. INCOME AND FRANCHISE TAXES

47-1801.1a Transition Rules. Amend to specify applicable transition rules (civil and
criminal) with respect to subject amendments.

47.1801.3 Effective Date. Amend to add effective date rules with respect to subject
amendments.

47-1801.4 General definitions. Amend to add "pre-emptive" introductory clause
specifying that, with respect to income and employment taxes, the
definition of any tenn will be only as defined or treated under the IRe.

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47-1803.3 Standard deduction. No amendment; the D.C. standard deduction amount
will be retained.

47-1803.3(d) Deductions not allowed. Amend to reference IRC sec 261 et seq. for
definition of terms used.

47-1803.3(e) Lower income rental housing depreciation deduction. (Needs more
analysis as to applicability in income taxes)

47-1804.1 Accounting oeriods. Amend to include override language that, for
income taxes, the applicable provisions ofIRC ( 444 et seq.) will apply.

47-1804.2 Year of inclusion. Amend to include override language that, for income
taxes, the applicable provisions ofIRC ( 61, 451 et seq.) will apply.

47-1804.3 Year of deductions. Amend to include override language that, for income
taxes, the applicable provisions ofIRC ( 162,461 et seq.) will apply.

47-1804.4 Installment sales. No change.

47-1804.5 Inventories. Amend to include override language that, for income taxes,
the applicable provisions ofIRC ( 471 et seq.) will apply.

47-1804.6 Authority to reject returns. Amend to include override language that, for
income taxes, the provision is inapplicable.

47-1804.7 Amounts. Amend to include override language that, for income taxes, the
applicable provisions ofIRC ( 6102) will apply.

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Subchapter V. Returns

47-1805.1 Returns - Forms.
47-1805.2 Persons required to file.
47-1805.3 Time and place of filing.

47-1805.4 Divulgence of information. Amend to reconcile the treatment of return
information with IRC 6103 by adding a new subsection (i) as follows:

"(i) Federal tax information.--Confidentiality and disclosure of
all documents filed with, and all information generated or collected
by, the Secretary of the Treasury or his delegate with respect to the
administration of specified District of Columbia taxes pursuant to
the provisions of sections' 6371 through 6374 of the Intemal
revenue Code of 1986, shall be governed by the provisions of
section 6103 of the Internal Revenue Code of 1986."

Subchapter VI. Tax on Residents and Nonresidents

. 47-1806.1 Taxable income defined. No change
47-1806.2 Personal exemptions.
Amend section to conform to definition of qualified dependents in IRC
151(c).
47-1806.3 Rates. No change. D.C. will set tax rates.
47-1806.4 Credits. Amend subsection (b) to include override language that, for
income taxes, IRC 31 applies.
Amend subsection (c) (credit for household and dependent care services)
to conform to IRC 21.
Repeal Subsection (e) (low income credit) as there is no federal
counterpart.
47-1806.6 Property tax credit.
Repeal this section which has no federal counterpart.
47-1810.1 Purpose of chapter. No change.
47-1811.3 Bases - property dividends. Amend to reference IRC sec. 301(D), for
income tax purposes, for determination of property dividends.

Subchapter XII. Assessment and Collection

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47-1812.1 General duties of Mayor.
47-1812.2 Records and statements.
47-1812.3 Examination of books & witnesses.
47-1812.4 Duty of Mayor to make return.
47-1812.5 Determination of deficiency.
47-1812.6 Jeopardy assessment.
47-1812.7 Payment of tax.
47-1812.8 Withholding oftax.
47-1812.9 Lien liability.
47-1812.10 Period oflimitation upon assessment & collection.
47-1812.11a Tax check-off.
47-1812.11 Credits and refunds for overpayments.
47-1812.12 Closing agreements.
47-1812.13 Compromises.
47-1812.15 "Person" defined.
47-1812.16 Collection by Mayor.
47-1812.17 Furnishing copy offederal return.

"Sec. 47-1812.1a Assessment and Collection of Income and
Employment Taxes by Secretary of the
Treasury. Notwithstanding any other
provision of this subchapter or any other
subchapter or chapter of this title, the
provisions of subtitle F, subtitle G and
chapter 24 of the Internal Revenue Code of
1986 shall apply to the administration by the
Secretary of the Treasury of District of
Columbia income and employment taxes,
pursuant to the District of Columbia Tax
Assistance Act."

In addition, amend each of the above D.C. Code provisions to reference new section
47-1812.1a as the overriding authority for income and employment taxes.

47-1812.8 Repeal current DC Code provisions and replace with:

a. The provisions of chapter 24 of the Internal Revenue Code
shall apply.

b. The provision of section 3501 of the Internal Revenue Code
shall apply.

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c. The provisions of section 3502 of the Internal Revenue
Code shall apply but nothing contained therein shall be
construed to not allow a deduction from federal income
taxes under section 164 of the Internal Revenue Code that
would otherwise be allowable.

d. The provisions of sections 3504, 3505, 3506, 3508 and
3509 of the Internal Revenue Code shall apply.

e. The provisions of section 530 of the Revenue Act of 1978,
as amended, shall apply with regard to the income tax
withholding provisions and the unemployment insurance
contributions of the DC Code.

47-1812.11(b) Repealed.

47-1812.11(c) Repealed.

Subchapter XIII. Penalties and Interest

47-1813.1 Additions to tax - delinquencies.
47-1813.2 Same - Interest on deficiencies.
47-1813.3 Same - Fraud.
47-1813.4 Same - Nonpayments.
47-1813.5 Same - Payment extensions.

"Sec. 47-1813.1a Penalties and Interest on Income and
Employment Taxes. Notwithstanding any
other provision of this subchapter or any
other subchapter or chapter of this title, the
provisions of subtitle F, subtitle G and
chapter 24 of the Internal Revenue Code of
1986 shall apply to the determination and
administration of penalties and interest on
income and employment taxes."
In addition, amend each of the above D.C. Code provisions to reference new section
47-1813.1a as the overriding authority for penalties and interest on income and employment
taxes.

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"47-1813.6 (a) Criminal violations.--All criminal
penalties and sanctions relating to the administration of the United
States internal revenue laws (including but not limited to title 26
and title 18 ofthe United States Code) shall apply to the District of
Columbia taxes specified in 26 U.S.C. 6372 .. In all criminal
actions brought under this section, the interests of the District of
Columbia shall be represented by the United States in the same
manner in which the interests of the United States are represented
in corresponding proceedings involving the administration of the
internal revenue laws. All criminal actions shall be brought in the
judicial courts and applying the judicial procedures that apply to
the administration of the internal revenue laws."

Subchapter xv. Appeal

47-1815.1 Right of aggrieved persons to judicial appeal. Amend to exclude income
and employment taxes.

Subchapter XVI. Rules and Regulations

CHAPTER 33. SUPERIOR COURT, TAX DIVISION

47-3301 Tax appeals; definitions.

47-3303 Appeal from assessment.

47-3304 Review by Court; finality of decision.

47-3306 Refund of erroneous collections.

47-3307 Certain suits forbidden.

47-3308 Manner of serving notices.

47-3309 Reference by Mayor to Superior Court.

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47-3310 Overpayments; refund; appeal.

Amend the above provisions to exclude jurisdiction over any matters relating to income
and employment taxes.

TITLE 11 ORGANIZATION AND JURISDICTION OF THE COURTS

CHAPTER 12. TAX DIVISION OF THE SUPERIOR COURT

11-1201 Exclusive jurisdiction.

11-1202 Abolition of other remedies.

11-1203 Rules and regulations.

Amend the above provisions to exclude jurisdiction over any matters, including civil or
criminal proceeding, involving income and employment taxes.

TITLE 46 SOCIAL SECURITY

CHAPTER 1. UNEMPLOYMENT COMPENSAnON

Amend as follows:

I. Unemployment Compensation Contributions I....

3. Section 46-101(1) shall be amended to include the provisions of IRC
3306 with the following exceptions:

a. (b)(I) ... equal to $7,000 such amount as is determined in section
46-103 herein ...

b. (b)(I) ... with respect to employment equal to $7,000 such amount
as is detennined in section 46-103 herein ...

c. Section 3306(c)(7) and (8) of the Internal Revenue Code shall not
be included in section 46-101(1).

Attachment

==================== ATTACHMENT 1 ==================== ATT CREATION TIME/DATE: 7-MAR-1997 18:58:00.00 ATT BODY PART TYPE:D TEXT: The following attachments were included with this message: TYPE FILE NAME DCMOU.M7 ==================== ATTACHMENT 2 ==================== ATT CREATION TIME/DATE: 7-MAR-1997 18:58:00.00 ATT BODYPART TYPE:p ATT SUBJECT: DCMOU TEXT: Unable to convert OA$SHARA684:ZWSXR3PM5.WPC to ASCII, The following is a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l00006C030000005528000300 4E0000007704000009250100000006000000C50400000B300300000028000000CB040000087701 00000040000000F304000008340100000014000000330500000802010000000F00000047050000 08050100000008000000560500000208010000007D0000005E0500000055070000003COOOOOODB 05000000550200000028000000170600000055010000004EOOOOOO3F06000000550C0002004EOO 00008D06000000550000010020000000DB0600000943010000001A000000FB0600000942010000 001D000000150700000942010000002A000000320700000942010000001D0000005C0700000942 010000001D000000790700000B30020000006C000000960700000B300200000044000000020800 Hex-Dump Conversion Draft 3.7.1997 MEMORANDUM OF UNDERSTANDING BETWEEN: THE DISTRICT OF COLUMBIA Marion Barry, Jr., Mayor Charlene Drew Jarvis, Council President Pro Tern DISTRICT OF COLUMBIA FINANCIAL RESPONSIBILITY AND MANAGEMENT ASSISTANCE AUTHORITY Andrew Brimmer, Chair (Given the way in which this is structured it may be better to have the Authority "Affirm or Attest") OFFICE OF MANAGEMENT AND BUDGET, EXECUTIVE OFFICE OF THE PRESIDENT Franklin D. Raines, Director Dated: - - - - - - - - Hex-Dump Conversion SECTION I. PURPOSE The parties respect the Home Rule Charter as the fundamental basis for governance in the District. The purpose of this memorandum is to strengthen Home Rule and to agree to work toward the revitalization of the District of Columbia_ This memorandum is intended only to improve the management of, and the relationship between, the District of Columbia and the Federal Government, and is not intended to and does not create any right, benefit, trust or responsibility, substantive or procedural, enforceable at law or equity by a party against the United States, its agencies, its officers, or any person. SECTION II. PUBLIC LAW 104-8, "THE DISTRICT OF COLUMBIA FINANCIAL RESPONSIBILITY AND MANAGEMENT ASSISTANCE ACT OF 1995" The parties recognize the effectiveness of PL 104-8 and dedicate themselves to the cooperative implementation of its provisions. Among these provisions: (Note the purpose of this listing of provisions is to remind everyone of the obligations that the District already has. Treasury at one time had wanted "general conditions" I believe that a restatement of the Authority language (either these provisions or others) serves this purpose. However, we could easily delete the specifics. ) Finance. For each Fiscal Year for which the District is in a control period, the Mayor shall develop and submit to the Financial Authority and Council a financial plan and budget for the applicable Fiscal Year and the next 3 Fiscal Years. Expenditures for the District government for each Fiscal Year, beginning in FY1999, may not exceed revenues for that Fiscal Year. During Fiscal Years 1996, 1997, and 1998, the District government shall make continuous, substantial progress toward equalizing its expenditures and revenues. The District may not borrow money during a control year unless the Authority provides prior certification that the borrowing is consistent with the financial plan and budget for the year. For the Secretary of the Treasury to make a short-term advance to the District, an Authority-approved budget and financial plan must be in place, the Mayor must submit a requisition for an advance including a schedule for timing and amounts for advances, the Inspector General certifies the accuracy of the information provided to the Secretary, the Secretary determines -- and the Authority certifies -- that the District lacks market access on reasonable terms, and that the Treasury has reasonable assurance of being reimbursed. Hex-Dump Conversion Management. An Office of the Chief Financial Officer will be established in the executive branch ofthe District government, headed by the Chief Financial Officer, and including the Office of the Treasurer, Controller, Budget, Financial Infonnation Services, and Finance and Revenue. An Office of the Inspector General will be established in the executive branch of the District government. During the control period, the Mayor shall submit proposed contracts and leases to the Authority for review, and cannot enter into a contract or a lease unless the Authority detennines it is consistent with the financial plan and budget. The Authority may submit recommendations to the Mayor, the Council, the President, and Congress on actions the District or Federal governments may take to ensure the District's compliance with a financial plan and budget or promote its financial stability, management responsibility, and service delivery efficiency. The Mayor and the Council shall submit a statement to the Authority, President, and Congress providing notice as to whether the District will adopt the recommendations. An affinnative statement must include a written implementation plan, with perfonnance measures and a schedule for audit compliance. If the statement rejects the recommendations, the Authority may vote to take what actions it deems appropriate, after consulting with Governmental Affairs Committee of the Senate and the House Government 2 Hex-Dump Conversion Refonn and Oversight Committee. SECTION III. GENERAL PROVISIONS 1. Balanced Budget. PL 104-8 requires that the District balance its budget by FY1999. By this agreement, the District agrees to present and/or approve a balanced budget for the Fiscal Year beginning October 1, 1997. 2. Agreement to be Bound. The District agrees to be bound by and to use its offices and best efforts to implement this agreement. SECTION IV. SUBMISSION OF LEGISLATION & FEDERALLY ASSUMED FUNCTIONS On behalf of the Executive Office of the President, the Director of the Office Management and Budget intends to recommend the submission of legislation to the Congress that is consistent with the National Capital Revitalization and Self Government Improvement Plan announced by the President on January 14, 1997. Once implemented, the Plan will provide the District substantial relief from its operating expenditures, relief which will grow over time. It will also invest considerable resources to improve the City's criminal justice systems and capital infrastructure. If this legislation is enacted, the Federal govemment will The Federal governmeffi agrees to undertake the functions described below. The Federal govemment will not undertake a function until the District government meets the conditions for that function, described in Section V. 1. Medicaid. The Federal govemment will increase its share of the District's Medicaid payments to 70 percent, thereby reducing the District's share to 30 percent. The Department of Health and Human services will provide more intensive technical assistance to help the District improve the management of its Medicaid program. 2. Pensions. The Federal government will take fmancial and administrative responsibility for virtually all pension benefits accrued under the plans for all active and retired police and firefighters, teachers, and judges. Assets of the retirement plans will be transferred to the Federal govemment. The Federal govemment will pledge its full faith and credit to meet its responsibilities to these beneficiaries. It will "freeze" benefits payable to current employees based on service eamed as of the date the legislation is introduced, and will pay their future retirement, death and some of their disability benefits to the extent they are eamed based on the frozen service. While the Federal government will not be responsible for benefits eamed during future years of service by members of the current retirement programs, these members will get the benefit of pay increases on the frozen benefits. Frozen benefits will continue to be subject to cost-of-living adjustments under the tenns of the existing programs. For those 3 Hex-Dump Conversion employees covered by new plans, their contlibutions will be paid into those plans, The Secretary of the Treasury will appoint a third-party Trustee to administer the plans and manage pension assets. 3. Intermediate-Term and Short-Term "Lending. The United States Treasury will provide an intermediate-term loan to eliminate the accumulated fund balance deficit of no more than 15 years, at an interest rate of Treasuries plus 1I8th of I percent. The Treasury may also provide inter-year loans for liquidity purposes. The combined amount of the intermediate-term and inter-year liquidity loans will not exceed $500 million. The Treasury may also provide intra-year loans for the purposes of liquidity. 4. Criminal Justice. The Federal and District governments, in consultation with representatives of the Federal and District judiciary, will develop and implement a transition plan transferring responsibility over a three-to-five-year period for incarcerating felons of D.C. Code violations. The Federal Bureau of Prisons (BOP) will house felons who are convicted of violating the D.C. Code and sentenced to terms of imprisonment in correctional institutions operated or contracted by the BOP, after BOP's capacity has been increased through new construction at Lorton and other locations selected by BOP, through renovation of existing facilities at Lorton, Virginia. After October 1,2001, the BOP will also designate to Federal correctional institutions sentenced D.C. felons in the custody of the D.C, Department of Corrections, as the Director of BOP deems appropriate, in accordance with available capacity, until they have all been designated to Federal institutions. The BOP will accept employment applications from persons currently employed by the D.C. Department of Corrections for existing BOP vacancies, and will process such applications in accordance with existing Federal procedures and standards. The Attorney General will select, with the approval of the Chairman of the D.C. Financial Responsibility and Management Assistance Authority, and in" consultation with the Mayor of the District of Columbia, a Trustee to oversee operations of the D.C. Department of Corrections until the BOP assumes responsibility for all incarcerated District felons. Consulting with representatives of the Federal and District judiciary, the Federal and District governments will also develop and implement a transition plan transferring responsibility for D.C. Code violation offender pre-trail, parole, probation, and post-adjudicationlpost-conviction adult offender supervision" from the District government to the Federal government over a three-to-five-year period. The United States Parole Commission will continue to assume responsibility for all D.C. felons housed in Federal Correctionallnstitutions who have sentences subject to provisions of parole. The Federal government will take direct responsibility for funding the District Court System. The Courts will remain self-managed. 5. Economic Development. The Federal govemment will make tax benefits available to the District both to encourage hiring by firms throughout the District of District residents of distressed areas and to encourage economic revitalization throughout the District, and to encourage the employment of disadvantaged D.C. residents. 4 Hex-Dump Conversion An economic development corporation (EDC) will be established as a non-Federal public authority in the District of Columbia, with the mission of revitalizing the nation's capital and benefitting the residents and businesses of Washington, D.C. A majority of the EDC's Board will be private sector, community and civic leaders, with Federal and local representation as well. The Federal government will provide the initial capitalization of the EDC. Building on current strategic planning and development efforts, the EDC will formulate a strategic economic development plan for the District, and will have significant powers to spur large-scale and other development to implement that plan, in all ofthe District's neighborhoods. 6. Infrastructure. The National Capital Infrastructure Commission (NCIC) will be established to assume certain State-like responsibilities for selection, funding, and oversight of National Highway System capital projects (including roads, bridges, and transit) and NHS operations and maintenance projects (excluding police auth0l1ty, National Park Service roads, and transit) within the District. The NCIC will be govemed by a tive-member board to be composed ofthree representatives from the District and two representatives from the Department of Transportation. Contract administration will be pertonned by the Federal Highway Administration. In addition, eligibility for Surface Transportation Program (STP) funds will be expanded to include local public roads. To support NCIC projects, the National Capital Infrastructure Fund (NCIF) will be established in FY 1998 with $108 million for road, b11dge, and transit capital projects. An additional $17 million will be provided in FY1998-03 for NHS operations and maintenance. Federal-aid funds for the District's NHS, Interstate Maintenance, and Bridge programs will be transferred to the NCIC in FY1998-03. The Administration also proposes that the NCIC be authorized to accepted contributions from other sources. 7. Personal Incom'e Tax Collection. The Intemal Revenue Service will assume responsibility from the District of Columbia for administering and enforcing D.C. individual income and payroll taxes. This would include the processing of those taxes paid by individuals, as well as the payment of related employment and payroll taxes. The District of Columbia will maintain processing and collection responsibility for all other taxes collected for the City. Upon enactment of the legislation to implement the Plan, the pmiies to the MOU will review the legislation and confer on whether any revisions to the MOU are necessary to ensure its consistency with the legislation. SECTION V. DISTRICT CONDITIONS The Dist11ct government understands that it will be expected to undertake signiticant actions as part of the National Capital Revitalization and Self-Govemment Improvement Plan. This section sets out the actions that the District govemment agrees to take as a condition of the Federal government actions under the legislation to carry out the Improvement Plan. 1. Medicaid. The District agrees to develop and implement plans satisfactory to the Secretary of Health and Human Services to accomplish each of the following: 5 Hex-Dump Conversion 1.1. To develop an effective system for the identification and collection of amounts owed by third parties for medical care and services furnished to' individuals under the District's Medicaid plan. 1.2. To ensure the timely audit and settlement of cost reports of institutional providers (including hospitals, nursing facilities, and intermediate care facilities for the mentally retarded) under the District's Medicaid plan, including prompt elimination of the backlog of such audits and settlements. 1.3. To develop and implement, directly or under contract, a comprehensive health care management information system that will standardize data base development and management, and integrate health care delivery with a public health data system. Such a system shall at a minimum have the capacity to accomplish the following functions: 1.3 .1. To assist eligibility verification. 1.3.2. To create utilization and financial profiles of providers. 1.3.3. To identify services (including preventive services) received by program beneficiaries. 1.3.4. To monitor the claims processing and other Medicaid operations of the fiscal agent. 1.3.5. To monitor the quality of care provided under managed care contracts. 1.3.6. To coordinate information management with respect to the District's Medicaid program and other public health programs and functions. 1.4. To develop a comprehensive behavioral managed health care system, which combines substance abuse and mental health grant programs. Development of such a plan shall include a pilot project for better evaluation of inpatient acute psychiatric patient admissions, and the purchase of a comprehensive, risk-based system for managed care of behavioral health which covers all eligible populations and services. 1.5. To complete the delegation to the District's Department of Health of independent authority for contracting and personnel activities and to establish and ensure adequate procurement and personnel systems and controls. 2. Pensions. The District Government agrees: i See Definitions in Appendix 1. 6 Hex-Dump Conversion 2.1. Te establish replaeemeflt retirement programs, threugh eelleetie bargaining if applieable, that ee'fer new ans existing empleyees vAle are er weuls have been eOYferes by the transferres retirement programs. 2.1.1. Gnee the new retiremeflt programs are aseptes, they may net be amenses te inerease their eests withem provising a meffilS te funs the in6rease. 2.1. To establish a Replacement Plan for the Retirement Program 2.1.1. The Replacement Plan will over all existing and new Employees who are, or would be, covered by the Retirement Program, if the Retirement Program continued unchanged, and will be established by the date specified in legislation. 2.1.2. To the extent required by current law, the Replacement Plan will be established through collective bargaining. 2.1.3. After the Adoption Date, the Replacement Plan may not be amended in any manner that matetially increases the cost of the Replacement Plan without provision of a mechanism for funding such increases. in accordance with Section 2.2. 2.2 That the replacement retirement programs will use appropriate funding methods and costs that do not exceed the sum available in the District of Columbia Budget and Financial Plan. 2.2.1. The cost of any defined benefit plan will be determined in accordance with the measurement standards of Governmental Accounting Standards Board Statement No. 27 (GASB 27), with the following additional restrictions: 2.2.1.1. funding methods will be limited to entry age or frozen entry age; and 2.2.1.2. amortization of any unfunded actuarial liability is required over no more than 30 years on a closed basis. 2.2.2. The cost of any defined contribution plan is the employer contribution required under the provisions of the plan. 2.2.3. All costs of the replacement retirement programs must be reflected in the D.C. Budget and Financial Plan in accordance with the standards described above. 2.2.4. All costs of the replacement retirement program must be paid in a timely manner. 2.2.5. For those employees covered by new plans. their contributions will be paid into those plans. 7 Hex-Dump Conversion 2.3. To transfer copies of books and records of the Retirement Program and the Fund and to be financially responsible for errors and omissions, including all necessary records of individual employees. 2.3.1. Copies of any books and records peliaining to the Retirement Program and the Fund required by the Secretary of the Treasury or the Trustee must be made available to the Secretmy or Trustee within 30 days after the Secretary or Trustee requests them. 2.3.2. The District will reimburse the Trustee for all costs, including benetit payments, resulting from elTors or omissions in the books and records peliaining to the Fund. 2.4. To transfer assets from the Fund 2.4.1. Any and all assets of the Fund required to be transferred to the Trustee shall be transferred on the Transfer Date in a form specified by the Trustee. 2.4.2. .The District of Columbia Retirement Board will administer the retirement programs until the Trustee assumes these responsibilities. The District government will reimburse the Fund before the transfer date for any benefits paid out of the fund between the freeze date and the transfer date that exceed payments that would have been the responsibility of the Federal government if the transfer had occurred simultaneously with the freeze. 2.5. To implement reforms in the retirement program 2.5.1. Double COLAs [to come: legal opinion as to the District's capacity to rescind double COLAs through amending D.C. Code and technical analysis of economic materiality of double COLAs still pending]. 3. Intermediate-Term and Short-Term Lending The District agrees that: 3.1. Any intermediate-term loan to eliminate the accumulated fund balance deficit would be for no more than 15 years, with an interest rate of Treasuries + 118 of 1 percent. 3.2. Any inter-year loan for liquidity purposes and/or intermediate-term loan to eliminate the accumulated fund balance deficit will not exceed the amount of $500 million. 3.3. The Secretary of the Treasury may require early reimbursement if the District can obtain credit on the commercial market on favorable terms for refinancing as determined by the Secretary. 3.4. The District must be in compliance with the approved Budget and Financial Plan before any lending can occur. 3.5. The District must provide a requisition for an advance of funds and a promissory note to reimburse the Treasury for the advance. 8 Hex-Dump Conversion 3_6_ The Financial Responsibility and Management Assistance Authority must certify that there is an approved Budget and Financial Plan in effect for the District for the Fiscal Year that the requisition is made. 3.7. The Secretary ofthe Treasury must receive certification that the District is unable to obtain enough credit elsewhere to meet the DC government's need for rmancing. 3.8. The Federal government will work with the District government to amend its debt limit provisions in order to allow implementation of the District's capital plan in an orderly and sustainable manner. 4. Criminal Justice. [EXOP and Agencies have not had a chance to comment on this language. Comments will be included, where appropriate, on Monday.] This Memorandum of Understanding (MOU) between the Federal government and the District of Columbia government (D.C.) outlines the offer of the Federal government to assist D.C. by taking over certain traditionally State responsibilities and the conditions that D.C. must agree to and fulfill should it choose to accept that offer as it relates to criminal justice functions including, but not limited to, certain defendant and offender services, corrections, and the judiciary. The MOU sets forth the expectations and responsibilities relating to proposed changes and reforms in the District of Columbia criminal justice and judicial system and the procedures (including the new statutory and regulatory provisions) the Federal government and D.C. will use to implement the MOU. In particular, the MOU is designed to: ensure an appropriate transfer and transition of responsibility from D.C. to the Federal government for D.C. Code violation pretrial, public defender, parole, probation, and post-conviction supervision and services for adult defendants and offenders. ensure an appropriate transfer of responsibility from D.C. to the Federal government for the incarceration of felons convicted of D.C. Code violations. provide the framework for needed reforms in the D.C. sentencing system which are a prerequisite for the Federal government accepting responsibility for the incarceration of felons convicted of D.C. Code violations. provide the basis for establishing an independent budgetary, financial oversight, and administrative support system for the District of Columbia courts. define the respective roles of the District of Columbia and the Federal government in relation to lawsuits and resulting liability" as they may be affected by the reforms agreed to in this' memorandum of understanding. 9 Hex-Dump Conversion ensure development by D.C. and the Federal government of transition plans (in consultation with the Federal and D.C. judiciaries ) for transferring responsibility for D.C. Code violation pretrial, public defender, parole, probation, and post-conviction supervision and services for adult defendants and offenders over a transition period of (one to three) years from the enactment date of the Federal implementing legislation. for transferring responsibility over approximately a three to five year period for incarcerating felons convicted of D.C. Code violations. (in consultation with the D.C. judiciary) for transferring responsibility for funding the D.C. Courts system and related services, including plans relating to retirement benefits and other personnel matters. 4.l. Administration of District of Columbia Jails and Pretrail, Public Defender, Parole, Probation, and Post-Conviction Offender Supervision and Services 4.1.1. Federal Government Responsibilities 4.1.l.l. The Attorney General will select, with the approval of the Chairman of the D. C. Financial Responsibility and Management Assistance Authority (Financial Authority), and in consultation with representatives of the Federal and D.C. judiciary, and the Mayor of the District of Columbia, among others, an Offender Supervision and Courts Services Trustee to: A. assure the smooth transition and continued operations of the District of Columbia's Pretrial Services Agency and Public Defender Service (PDS) B. implement timely shutdown of the D.C. Parole Board in coordination with the U.S. Parole Commission C. establish and initially operate a new D.C. Offender Supervision and Services Agency D. accomplish without disruption of services the transfer of the adult offender probation supervision functions of the D. C. Courts Social Services Division, until the Federal government assumes responsibility for each of these functions . . 4.1.1.2. During the transition period, under the auspices of the Trustee, the D.C. Pretrial Services Agency will continue uninterrupted to provide services and support for both juvenile and adult D.C. Code and Federal defendants and offenders to the U.S. District Court for the District of Columbia, the U.S. Court of Appeals for the District of Columbia, the Superior Court for the District of Columbia, and the 10 Hex-Dwnp Cor., ,rsioJl District of Columbia Court of Appeals. The executive committee of the Pretrial Services Agency will continue to include the chief judges of the courts served by the agency; mayoral appointment of part of the executive committee will be terminated. 4.1.1.3. Following the transition period, the D.C. Pretrial Services Agency will be organizationally housed in a new Federal D.C. Offender Supervision and Services Agency. 4.1.1.4. After the Offender Supervision and Courts Services Trustee establishes a transition agency with the capacity to provide adequate field supervision to adult D.C. offenders on parole, probation or supervised release, and the U.S. Parole Commission is capable of carrying out parole functions for D.C. Code offenders, the D.C. Board of parole will be terminated, and its functions and jurisdiction will be assumed by the U.S. Parole Commission. The District of Columbia Superior Court Division of Social Services will continue to provide supervision to D.C. Code juvenile offenders. 4.1.1.5. The Offender Supervision and Courts Services Trustee will accept employment applications from persons currently employed by the District of Columbia Parole Board for new positions in the Offender Supervision and Services Agency and will process such applications in accordance with existing Federal procedures and standards. Positions for related agencies will be advertised prior to being filled. 4.1.1.6. During the transition period, the Federal government will transfer funds for the Pretrial Services Agency, the Public Defender Service and the supervision ofD.C. offenders through the Control Board to the Offender Supervision and Courts Services Trustee. The head of any Federal department or agency may provide the services of any personnel to the Trusteeship to assist in carrying out its duties. 4.1.1.7. During the transition period, under the general auspices of the Trustee, the PDS will continue uninterrupted to provide services to D.C. Code defendants and the District of Columbia court system. The Director of PDS shall employ such personnel as may be necessary. 4.1.1.8. During the transition period, the employees of and funds allocated to the Offender Service's and Courts Trustee and the agencies for which the Trustee is responsible shall not be counted against the personnel and budget ceiling imposed on the District of Columbia by the Control Board or Congress. (N.B. placeholder language required clarification and/or citation). 4.1.1.9. The Federal govemment will assess the feasibility and cost-effectiveness of contracting for limited bed space at the District's Correctional Treatment Facility (CTF) as may be necessary to supplement existing Federal detention and treatment contracts. 11 Hex-Dump Conversion 4.1.2. District of Columbia Responsibilities 4.1.2.1. The District of Columbia will maintain responsibility for all D.C. Code juvenile offenders not prosecuted as adults. 4.1.2.2. The District of Columbia will have responsibility for housing and supervising persons charged and/or convicted of misdemeanor violations in D.C. superior Court, both before and after sentencing. 4.1.2.3. the District of Columbia will continue to house persons charged with felonies, and persons convicted of felonies but not yet sentenced., in the district of Columbia Superior Court. To the extent beds are available, the District of Columbia will continue to house persons charged with felonies, and persons convicted of felonies but not yet sentenced, in the District Court, and will continue to receive reimbursement by the Federal government at a mutually negotiated rate for the costs of housing such persons. "House" and "housing" include subsistence, .transportation of persons to and from court appearances and medical facilities, and the maintaining of necessary prison records. 4.1.2.4. The District of Columbia will continue to house persons sentenced by the Superior Court and detained pending a hearing for revocation of parole, probation, or supervised release, and will provide suitable facilities for such hearings. To the extent beds are available, the District of Columbia will house persons sentenced by the District Court and detained pending a hearing for revocation of parole, probation, or supervised release, will provide suitable facilities for such hearings, and will continue to receive reimbursement by the Federal government at a mutually negotiated rate for the costs of housing such persons and for providing such facilities. "House" and "housing" include subsistence, transportation of persons to and from court appearances, revocation hearings, and medical facilities, and the maintenance of necessary prisoner records. 4.1.2.5. The Trustee will operate under the general auspices of the Chairman of the Control Board and can be removed only by the Attorney General. 4.1.2.6. the Trustee will propose funding requests for offender supervision and services to the Control Board, and the request will be included in the Control Board budget to the President and Congress each fiscal year. 4.1.2.7. the Trustee will allocate funds for offender supervISIOn in the District of Columbia, including funds for short term improvements, equipment contracts, and salary increases that are necessary to retain key personnel, maintain and enhance current levels of service, including offender drug testing, and provide for the safety and security ofthe community. 12 Hex-Dump Conversion 4.l.2.8. Upon receipt from the Control Board of funds identified by congress or other entities for Pretrial Services, the Trustee will immediately transfer such funds to the Pretrial Services Agency. 4.l.2.9. Upon receipt from the Control Board, the D.C. Court system, or the Administrative Office ofthe United States Courts, of funds identified by Congress or other entities for the D.C. Public Defender Service the Trustee will immediately transfer such funds to the Public Defender Service. 4.l.2.10 In view of the responsibility to be undertaken by the U.S. parole Commission to carry out the functions of the D.C. Board of Parole pursuant to the parole laws and regulations of the District of Columbia, effective immediately, the D.C. Council will not enact legislation that changes or modifies these laws and regulations without the concurrence of the Attorney General. Following the assumption by the Parole Commission of the functions of the D.C. Board of Parole, the council will cede to Congress the sole authority to legislate changes to the District of Columbia Code that pertain to the parole of D.C. felony offenders. 4.1.2.11. It is expected that the transition period for these offender and court services will end no sooner than one year nor later than three years after the enactment of the related legislation. (Insert respective effective dates) 4.l.2.12. The D.C. Corporation Counsel will provide representation for the Trustee and Trustee supervised agencies. (See litigation and liability section) 4.2. Administration of District of Columbia and Federal Prisons 4.2.1. Federal Government Responsibilities 4.2.1.1. The Bureau of Prisons (BOP) will house felons, in correctional institutions operated or contracted by the Federal Bureau of Prisons, who were convicted of violating the D.C. Code and sentenced to terms of imprisonment, after the BOP's capacity has been increased through renovation of existing facilities and new construction at the corrections complex in Lorton, Virginia and other locations selected by the BOP. D.C. Code offenders will be housed together with Federal offenders in BOP facilities based on inmate program and security needs and BOP population management regulations. The BOP will oversee the operation of community corrections centers in the District of Columbia as necessary to provide an appropriate transition for inmates who are nearing release from Federal prisons, including those convicted of D.C. Code violations. The BP intends to use existing community corrections centers in the District of Columbia to the extent practicable and will work with D.C. officials in the identification of prospective sites, as needed to establish new community correction facilities. 13 Hex-Dump Conversion 4.2.1.2. The BOP intends to operate several correctional facilities in Lorton, Virginia and elsewhere to house a mix of both Federal and D.C. felons. Every effort will be made to house D.C. felons at facilities that are as close to the District of Columbia as permitted by inmate program and security needs and BOP population management regulations. D.C. felons will be designated in the same manner as Federalinmates, and ordinarily initially assigned to institutions located within a SOO-mile radius of their residence. BOP also will work with D.C. officials to identify sites for possible Federal correctional facility construction within the District. 4.2.l.3. Based upon assurances from the District of Columbia that felons convicted of violating the D.C. Code will, in the future, receive sentences similar to those received by comparable offenders convicted of comparable Federal offenses, during the transition period, the BOP will house those sentenced D.C. felons in the custody of the D.C. Department of Corrections as the Director of the BOP deems appropriate in accordance with available capacity. After October 1, 2001, the BOP will accept D.C. felons sentenced under the new sentencing structure in accordance with the capacity of the BOP. By October 1, 2002, and assuming fulfillment of all requisite conditions, the BOP will have assumed responsibility for incarcerating all D.C. felons. 4.2.l.4. The BOP will accept employment applications from persons currently employed by the District of Columbia Department of Corrections for BOP vacancies and will make hiring selections in accordance with existing Federal procedures and standards. Positions for new BOP facilities will be advertised prior to being filled. 4.2.1.5. The Attorney General will select, with the approval of the Chairman of the D.C. Financial Responsibility and Management Assistance Authority, and in consultation with the Mayor of the District of Columbia, a Trustee to oversee operations of the District of Columbia Department of Corrections relating to incarcerated felons, until the BOP assumes responsibility for all incarcerated D.C. felons. 4.2.l.6. The Federal government will transfer funds for the incarceration of D.C. felons through the Financial Authority to the Trustee. The head of any Federal department or agency may provide the services of any personnel to the Trustee to assist in carrying out the Trustee's duties. 4.2.1.7. Of the funds received by the Trustee from Congress through the Financial Authority, the Trustee will reimburse to the BOP those funds identified by Congress to be used for the construction of new facilities and the renovation of existing facilities. The Federal Bureau of Prisons will be responsible and accountable for determining how these funds will be used, including type, security level, and location of new facilities. 14 Hex-Dump Conversion 4.2.1.8. During the transition period, the employees of, and appropriations allocated to, the Corrections Trustee and the agencies for which the Trustee is responsible shall not be scored or counted against the personnel and budget ceilings imposed on the District of Columbia by the Financial Authority or Congress. [N.B. placeholder language requires clarification]. B. District of Columbia Responsibilities 4.2.2.1. Offenders convicted of violations of the D.C. Code shall be sentenced pursuant to a new D.C. sentencing system, described below. If the new sentencing system is not promulgated within [24 months], however, the BOP may not obligate any funds appropriated for the absorption of D.C. Code felons into the Federal prison system and will have no responsibility to house any persons convicted of felony offenses under the D.C. Code. 4.2.2.2. The District of Columbia will continue to house felons sentenced to terns of imprisonment by the District of Columbia Superior Court until such persons have been designated by the BOP. To the extent beds are available, the District of Columbia will continue to house felons sentenced to terms of imprisonment by the U.S. District Court until such persons have been designated by the BOP, and will continue to receive reimbursement at a mutually negotiated rate by the Federal government for costs of housing such persons. 4.2.2.3. The Trustee will operate under the general auspices of the Chairman of the Financial Authority and can be removed only by the Attorney General. 4.2.2.4. The Trustee will propose funding requests for the incarceration of D.C. felons to the Financial Authority, and the request will be included in the Financial Authority budget to the President and Congress each fiscal year. 4.2.2.5. The Trustee will allocate funds to the District of Columbia Department of Corrections, including funds for short-term improvements that are necessary for the safety and security of staff, inmates, and the community. 4.2.2.6. Upon receipt from the Financial Authority of Federal funds identified by Congress for constructing new prisons and making major renovations to existing facilities for the incarceration of D.C. felons, the Trustee will immediately reimburse such funds to the BOP. 4.2.2.7. The D.C. Corporation Counsel will provide representation for the Trustee and Trustee-supervised agencies (see the litigation and liability section). 4.3. Sentencing The District of Columbia understands and agrees that the D.C. sentencing system will be changed, pursuant to the proposed Act, in the following manner: 15 Hex-Dump Conversion 4.3.1. Congress will amend the D.C. Code to abolish parole for all persons convicted of D.C. offenses (felonies and misdemeanors) cornmitted on or after 3 years from the date of enactment of the Act. 4.3.2. Congress will amend the D.C. Code so that good time calculations for all persons convicted of D.C. offenses (felonies and misdemeanors) committed on or after 3 years from the date of enactment of the Act will be made according to the Federal requirements. 4.3.3. Congress will establish a new D.C. Board of Criminal Sentences (the Board) as an independent body within the D.C. government. All persons convicted of D.C. felonies committed on or after 3 years from the date of enactment of the Act will be sentenced according to a determinate sentencing system promulgated by the Board no later than 18 months after the date of enactment of the Act. 4.3.4. The Board will develop such amendments or repeals of provisions in the D.C. Code relating to the maximum and minimum prison terms as are necessary to accomplish the purposes of the Act. Ninety days after they are promulgated by the Board, the sentencing system, amendments and repeals will become effective unless disapproved as a whole by a majority of the District of Columbia Council. If disapproved by the Council, the system may be enacted by Congressional action. 4.3.5. The promulgated sentencing system will supersede any inconsistent provision of the D.C. Code and will provide for post-release supervision of offenders. 4.3.6. Congress will repeal certain other provisions of the D.C. Code to conform with the new sentencing system (D.C. Code Title 24, Chapters 2 and 8], including the Youth Rehabilitation Act. 4.3.7. The sentencing system developed will ensure the effective continuation of the D.C. Superior Court Drug Intervention Program by including appropriate minimum mandatory sentences and adequate related judicial discretion. 4.3.8. Congress will amend the D.C. Code Title 33, section 541 to adopt certain mandatory penalties necessary for effective local law enforcement. 4.3.9. The Board will not have the authority to provide for capital punishment under any law applicable exclusively in the District of Columbia. 4.3.10. The Board will have seven voting members. TheAttomey General (or her designee) will chair the Board. The other members will include two judges of the D.C. Superior Court and one representative each for the D.C. Council, the Executive Branch of the D.C. government, the D.C. Public Defender Service, and the U.S. Attorney for the District of Columbia. A representative of the Bureau of Prisons will serve as a non-voting, ex officio member. 16 Hex-Dump Conversion . 4.3.11. An affinnative vote of at least six Board members will be necessary to adopt guidelines, promulgate the sentencing system, and make any amendments or repeals of D.C. Code provisions relating to maximum and minimum prison tenns. 4.3.12. In developing the sentencing system, the Board will hold three or more public hearings, review appropriate State system models, consult with sentencing refonn experts, and solicit written comments from the public. 4.3.13. If the Board fails to promulgate a sentencing system within 18 months, the Board will tenninate and the Attorney General will develop the system and transmit it to the Council for approval. The system will take effect unless the D.C. Council disapproves the system and Congress, in tum, does not approve it. 4.3.14. The Board will have the mandate to ensure that the sentencing system it establishes, among other things: 4.3.14.1. Will result in sentences for those convicted offelony offenses similar to those that would be imposed upon comparable offenders convicted of comparable offenses in the Federal system; 4.3 .14.2. Will result in sentences that reflect the seriousness of the offense and provide for just punishment, afford adequate deterrence to potential future criminal conduct of the offender and others, and provide the defendant with needed educational or vocational training, medical care, and other correctional treatment; 4.3.14.3. Will provide certainty and fairness in meeting the purposes of sentencing, avoiding unwarranted sentencing disparities among similar defendants, while maintaining sufficient flexibility to pennit individualized sentences; 4.3.14.4. Will take into account the high volume of sentencing proceedings in the District of Columbia Superior Court as bearing upon the degree of complexity of the sentencing system; and 4.3.14.5. Will ensure that the system is neutral as to the race, sex, marital status, ethnic origin, religious affiliation, national origin, creed, socioeconomic status, and sexual orientation of offenders, if not related to the commission of the offense. 4.3.15. As part of the sentencing system, the Board will develop binding guidelines for use in detennining the sentence to be imposed upon convicted felons. The guidelines will specify: 4.3.15.1. When to impose a sentence to probation, a fine, or a tenn of imprisonment and the appropriate amount or length, as well as intennediate sanctions; 17 Hex-Dump Conversion 4.3.15.2. When to impose a tenn of supervised release following imprisonment, and the appropriate length; and 4.3.15.3. Whether multiple sentences to tenns of imprisonment should run concurrently or consecutively. 4.3.16. Thirty days after promulgating the sentencing system, the Board will be tenninated. There will be a successor Federal agency in the judicial branch to amend the guidelines consistent with the purposed of the Act. The D.C. Council may recommend to Congress whether or not these amendments should be approved. The amendments will take effect as prescribed by the successor agency, however, unless they are modified or disapproved by Congress. The successor agency will have no powers to revise the District of Columbia Code but will recommend changes to the Code as may be necessary to further the purposes of the Act. 4.3.17. The D.C. Superior Court, D.C. Department of Corrections, and other agencies as necessary will submit infonnation about convicted felons as required by the Board and the U.S. Department of Justice. This would pennit an assessment of the extent to which sentences imposed by the D.C. Superior Court are comparable to those imposed for comparable offenders by U.S. District Courts. The results of this assessment would be used by the Board in developing the new sentencing system for the District of Columbia. 4.3.18. Four years after the new sentencing system takes effect, there will be an evaluation to detennine the extent to which the sentencing system has succeeded in accomplishing the goals set forth in the Act. 4.4. Liability and Litigation Authority 4.4.1. Federal Government Responsibilities 4.4.1.1. United States, its agencies, and personnel will not incur any liability on the basis of the activities of the District of Columbia, its agencies, or personnel as a result of the refonns agreed to in this Memorandum of Understanding. 4.4.1.2. The Attorney General, in her discretion, will have the authority to direct any litigation involving the Trustees, pretrial services, and sentencing refonn during the transitional period, and to provide litigation services for the Trustees and the agencies responsible for pretrial services and sentencing refonn during the transitional period in lieu of representation by the District of Columbia. 4.4.2. District of Columbia Responsibilities 18 Hex-Dump Conversion 4.4.2.1. The District of Columbia will remain responsible for the defense of pending suits against the District of Columbia or its personnel, and will remain responsible for any liability resulting from such suits. 4.4.2.2. The District of Columbia will be responsible for the defense of suits arising from the correctional, offender supervision, pretrial services, public defender, parole, and sentencing reform activities of agencies of the District of Columbia, and for any resulting liability, notwithstanding the contemplated transfer of these functions to existing or new Federal agencies. This will include responsibility for defense of suits and for resulting liability arising from the activities of the Corrections Trustee and the offender Supervision and Courts Services Trustee. 4.4.2.3. The District of Columbia Corporation Counsel will provide litigation services as required to carry our this section, but the Trustees and the agencies responsible for pretrialial services, public defender services, and sentencing reform during the transitional period will also have the option of making their own arrangements for litigation services or requesting such services from the Financial Authority. 4.5. District of Columbia Courts 4.5.1. Congress will make all necessary amendments to the D.C. Code and other laws to terminate budgetary control and other involvement of the D.C. government in the finances and administration of the District of Columbia court system, including the D.C. Superior Court and the D.C. Court of Appeals. 4.5.2. The Joint Committee on Judicial Administration of the D.C. Courts will prepare and submit the budget for the D.C. Court system. The budgetary requests of the D.C. Courts will not be subject to revision by the D.C. government or the Executive Branch of the Federal government. 4.5.3. The D.C. Court system, through its Executive Office, will be authorized to contract with D.C. and Federal agencies, and with other public and private entities, for necessary supplies, equipment, and services. 4.5.4. Expenditures of the District of Columbia Courts will be paid out of funds appropriated for those Courts, and credited to a Treasury account established for that purpose. Funds received by the District of Columbia Courts will no longer be part of the funds of the District of Columbia. 4.5.5. During a transitional period of one to three years, the implementing legislation may provide that the budgetary requests of the D.C. Courts are to be submitted through the Offender Supervision and Courts Services Trustee or other appropriate intermediary, and that the designated intermediary is to be responsible for receiving and transmitting to the District of Columbia Court system all funds appropriated for the District of Columbia Courts. 19 Hex-Dump Conversion 5. Economic Development The District agrees that: 5.1. Consistent III eoopel'9tioll with ongoing private sector recommendations, the D.C. government effurts, it will implement IIl&Fe timely and efficient zoning, permitting and licensing processes, by the end of FY1997. 5.2. The District government will offer personnel resources and fully cooperate with the EDC in its review and evaluation of existing economic development plans for the District of Columbia, in the development of the EDC strategic plan, and in subsequent implementation of the plan. I 5.3. The District government will oUoeote support a legislative allocation to the EDC 50 percent of the applicable State ceiling on the authority of the District government to issue private activity bonds in each calendar year under section 141 of the Internal Revenue Code. 5.4. The District government will give expedited and favorable attention to the EDC's requests for land transfers (including transfers from the RLA), zoning adjustments (including variances and special exceptions), and building and other permits and licenses for projects and activities 6f as requested bv the EDC, and will support the legislative granting of authority to the EDC to exercise certain powers, including the right of eminent domain. I 5.5. The District will cooperate with the Federal government and the private sector to establish promptly an Organizing Committee which is primarily composed of members of the private sector. The Organizing Committee will be responsible for encouraging businesses and other members of the private and non-profit communities - District, regional and national - to invest in the District. thFOUgh the ED{;. 6. Infrastructure. The District agrees: 6.1. Establishment of the National Capital Infrastructure Commission (NCIC) 6.1.1. Beginning on October 1, 1997, the NCIC shall assume certain State-like responsibilities for selection (consistent with the planning requirements in 23 U.S.C. 134 and 135), funding and oversight of the National Highway System (NHS) capital projects and shall assume responsibilities for funding the operations and maintenance of the NHS within the District of Columbia (exclusive of police authority and exclusive of funding those NHS routes currently under the jurisdiction of the National Park Service) with funds made available under Title - - 20 Hex-Dump Conversion 6.1.2. The NCIC shall be governed by a five member Board of Governors (one member to be appointed by the Mayor, one member to be appointed by the City Council, one member to be appointed by the Financial Responsibility and Management Assistance Authority, and two members to be appointed by the Secretary of Transportation), all of whom are voting members. 6.1.3. The NCIC shall implement its responsibilities for funding and oversight and shall advance NHS projects through the Department of Transportation, Federal Highway Administration (FHWA). The FHWA shall proviee staffing support to assist the NCIC in fulfilling its responsibilities ane shall serve as the eontraeting ag6fl:t for exeeetiag all eoHtraets for perfofffianee of eligible NH8 aetivities lIHe projeets, as eefiaee ia Title 6.1.4. Beginning on October L 1997. the NCIC [at the discretion of the District of Columbia] shall assume responsibility for advancing those NHS projects approved prior to that date that are not under construction or under a contract for such construction bv October 1. 1997. [unless the NCIC and the District of Columbia agree to continue to vest responsibility for such project advancement with the District of Columbia). Such projects that are transferred under this section shall also be governed by the requirements contained in section 6.2.4. 6.1.5. The NCIC may flex National Capital Infrastructure Funds authorized under section and NBS apportioned funds authorized to be transferred under section to other Federal-aid highway funding categories. consistent with Title 23. United States Code flexing provisions. provided performance measures relating to bridge. pavement, safety or other such perfom1ance measures that are established by the Secretary. or that shall be established. are met. In the event the Secretary of TranspOliation detennines that such performance measures are not being met. NHS funds made available under Title shall not be flexed to another funding category, but shall only remain available for eligible NBS projects. 6.1.6. Funds made available to the NCIC shall be administered by FHWA, which shall obligate and expend funds as the agent for the NCIC in accordance with such procedures that shall be established by the Secretary. 6.1.7. For FY1998, $108 million is authorized to be appropriated to the National Capital Infrastructure Fund, which shall be used for construction, reconstruction, and rehabilitation of the NHS in accordance with 23 U.S.C. 103(i) .. 6.1.8. In each ofthe fiscal years 1998 through 2003, the Secretary shall transfer to the NCIC: 6.1.8.1. 100 percent of the District of Columbia's apportionment for the NHS; 6.1.8.2. 100 percent of the apportiomnent for Interstate Maintenance; and 21 H . agement System eX-Dump Conversion 6.1.8.3. 75 percent of the apportionment for the Highway Bridge Replacement for use consistent with 23 U.S.C. 103 (i). 6.1.9. In each of the fiscal years 1998 through 2003, $17 million is authorized to be appropriated to fund the operation and maintenance of the NHS within the District of Columbia, exclusive of the NHS routes under the jurisdiction and control of the National Park Service and to fund the administrative costs of the NCIC. 6.1.10. The NCIC shall be responsible for funding those operations and maintenance activities and costs, excluding police services (except for those construction zone, incident management, and other police activities are eligible for Federal-aid highway reimbursement under Title 23, United States Code) associated with the management and operation of NHS highways including the following activities: routine maintenance of roadways and rights-of-way, and road repair, snow removal, repair, lighting, signage, and those utilities necessary for NHS operations. 6.2. District of Columbia Responsibilities 6.2.1. The District of Columbia shall continue to be responsible for providing police services on NHS highways (including, but not limited to civil police functions, crime prevention, investigations including traffic and accident investigation, and emergency traffic direction). The District shall continue to own the right-of-way ofNHS highways that are located within the District of Columbia. 6.2.2. The District of Columbia will continue to be responsible for all utilities and utility work that are not necessary for operation of the NHS, eyen if such utilities are located within the right-of-wav of the NHS. The Distriet of ColtHHbia shall eontiBUe to be resf)onsiBle for non ~lHS f)rojeets funded with Federal aid highway funds. The ffi:lthority to lise Swiaee TraBsf)ortation Program funds on loeal streets, highways, and roadways does not relieve the Distriet of Col1iFRbia of the resf)onsibility for the non Federal matehing share. The lise of other Federal aid highvfay af)f)ortioned funds by the Distriet of ColliffiBia other than as f)fOvided beloYI also require a non Federal matching share. 6.2.3. The District of Columbia shall continue to be responsible for non-NHS projects funded with Federal-aid highway funds. The authority to use Surface Transportation Program funds on local streets, highways, and roadways (except alleyways) does not relieve the District of Columbia of the responsibility for the non-Federal matching share. The use of other Federal-aid highway apportioned funds by the District of Columbia other than as proyided below also requires a non-Federal matching share. 6.2.4. Beginning on October 1, 1997, the District of Columbia is relieved of the responsibility to provide the non-Federal match for NHS projects that are funded by the NCIC with monies made available for NHS projects under Title _ _. The relief from providing the non-Federal match shall not include those projects that were approved by FHWA Plior to October L 1997, for which Federal-aid highway funds have been obliged. The District of Columbia is responsible for providing the non-Federal match, the Federal-aid 22 Hex-Dump Conversion funds, and any obligation authority for any such projects transferred to the NCIC for project administration, oversight. or contracting. 6.3. Department of Transportation Responsibilities The Secretary agrees to: 6.3.1. Continue to provide oversight and technical assistance to the District of Columbia for projects not funded with NCIFINCIC funds. 6.3.2. To have FHWA provide technical assistance to the NCIC on project planning and selecting criteria consistent with 23 U.S.C. 134 and 135. 6.3.3. To have the FHWA serve (on a reimbursable basis) as the executive agent of the NCIC to enter into any agreements or contracts with any entity to advance, construct, reconstruct, rehabilitate, repair, maintain, and operate the NHS within the District of Columbia, excluding those NHS roadways under the jurisdiction and control of the National Park Service, consistent with 23 U.S.C. 103(i) and have FHWA provide staffing support to assist the NCIC in fulfilling its responsibilities as forth in Title 6.3.4. To be responsible for management of those funds that are authorized and appropriated for the NCIF or authorized or transferred to the NCIC for the NHS, consistent with 23 U.S.C. 103(i). 6.3.5. To encourage the hiring of local labor by contractors awarded contracts, including welfare-to-work labor on NHS projects financed under Title to the maximum extent possible and consistent with Federal law. 7. Personal Income Tax Administration The District agrees that: 7.1. General 7.1.1. The IRS shall administer and enforce the District's individual income and employment taxes. 7.1.2. The District shall continue to administer its unemployment benefits program. 7.2. Tax Codes 7.2.1. The IRS will administer the District's existing individual income and employment tax laws. The only provision the IRS cannot administer is the District's refundable property tax credit. If the District wishes to retain this provision, it must be transferred to its real estate tax administration. 23 Hex-Dump Conversion 7.2.2. All ofthe administrative, procedural, and enforcement provisions of the Internal Revenue Code of 1986 and related statutes will govern IRS administration of District taxes. The District will have to amend its own tax code to achieve this. The specific provisions of District law and the manner in which they must be amended are set forth on the attached Exhibit 7-A. 7.2.3. To avoid the possibility of any inconsistent interpretations of similar provisions, the District will have to amend its definitional provisions to conform them to the Internal Revenue Code. The specific provisions of District law and the manner in which they must be amended are set forth on the attached Exhibit 7-A. 7.2.4. The District must notify the Secretary of the Treasury of any future changes to its individual income and employment tax laws. The Secretary may object if, in his judgement, the prospective change would prove overly burdensome to the IRS, in which case such change shall not be administered or enforced by the IRS. If the Secretary does not object within 60 days after notification, the IRS will administer the provision within a reasonable time after enactment. 7.3. Transfers to the District 7.3.1. The IRS will set up separate accounting and deposit systems for its collections of District taxes. The District must, in turn, identify the person arid/or office authorized to receive transfers of collected amounts and set up related deposit accounts. 7.4. Effective Date 7.4.1. The IRS administration of District taxes shall be prospective, starting on January 1 of the calendar year that is at least 18 months after the Secretary certifies that the District of Columbia has met the conditions set forth in the Memorandum of Understanding dated - - - between the United States and the District of Columbia. 24 Appendix 1 Hex-Dump Conversion DEFINITIONS FOR THE PENSIONS SECTION OF THE MOU "Adoption Date" means the date the Replacement Plan is adopted by the District Government or, iflater, October 1, 1997. "District Government" means, as appropriate, the "District government" as defined by section 305(5) of the District of Columbia Financial Responsibility and Management Assistance Act of 1995 (Pub. L 104-8) or the District of Columbia Retirement Board as defined in section 102(5) of the Reform Act. "Freeze Date" means the date of introduction of the Revitalization Act. "Fund" means the District of Columbia Police Officers and Fire Fighters' Retirement Fund, the District of Columbia Teachers' Retirement Fund, and the District of Columbia Judges' Retirement Fund as defined in section 102(10) ofthe Reform Act. "Reform Act" means the District of Columbia Retirement Reform Act (Pub. L. 96-122). "Replacement Plan" means the plan or plans described under Title I of the Revitalization Act. "Retirement Program" means any of the retirement programs as described in section 102(7) of the Refonn Act as in eirect on the day before the freeze date. "Revitalization Act" means the "District of Columbia Revitalization Act of 1997." "Secretary" means the Secretary of the Treasury or the Secretary's designee. "Transfer Date" means the date on which the assets and obligations of the Fund are transferred to the Trust. "Trust" means the District of Columbia Retirement Trust created under Title I of the Revitalization Act. "Trustee" means the person designated by the Secretary of the Treasury under Title I of the Revitalization Act. 25 EXHIBIT 7-A Hex-Dump Conversion AMENDMENTS TO DISTRICT OF COLUMBIA CODE Pursuant To MEMORANDUM OF UNDERSTANDING BETWEEN THE UNITED STATES AND THE DISTRICT OF COLUMBIA AND THE DISTRICT OF COLUMBIA TAX ASSISTANCE ACT 26 Hex-Dump Conversion AMENDMENTS TO DISTRICT OF COLUMBIA CODE Pursuant to Memorandum of Understanding Between the United States and the District of Columbia and DISTRICT OF COLUMBIA TAX ASSISTANCE ACT Page Title 47 Taxation and Fiscal Affairs ....... '" . 1 Ch.l General Provisions ............. 1 Ch.4 Collection and Disbursement of Taxes .... 2 Ch.5 Tax Rates, Records, and Surplus Funds 3 Ch. 18 Income and Franchise Taxes ......... 3 Ch. 33 Superior Court, Tax Division ........ 7 Title 11 Organization and Jurisdiction of the Courts ... 8 Ch.12 Tax Division of the Superior Court..... 8 Title 46 Social Security ................. 9 Ch.l Unemployment Compensation.......... 9 27 Hex-Dwnp Conversion TITLE 47. TAXATION & FISCAL AFFAIRS CHAPTER 1. GENERAL PROVISIONS CHAPTER lA. TAX RETURN PREP ARERS 47-161 Definitions. 47-162 Penalty for failure to sign return. 47-163 Understatement of taxpayer's liability. 47 -164 Penalty for aiding & abetting understatement. 47-165 Frivolous tax return. 47-166 Statute oflimitations on assessment of penalties. 47 -167 Determination of penalty. 47-168 Claim for refund. 47 -169 Right to judicial appeal. 47-170 Abatement of penalty. (New section) Amend the chapter by adding a new introductory override section that, for income and employment taxes, makes applicable the IRC provisions relating to tax return preparers (e.g. IRC 6694, 6695, 6713, 7407, 7427, 7701(a)(36)), in lieu of the above D.C. Code provisions, as follows: "Sec. 47-161a. Tax Return Preparers - Income and Employment Taxes. Notwithstanding any other provision of this chapter or any other chapter of this title, the provisions of sections 6060, 6107, 6694, 6695, 6713, 7407, 7427, and 7701 (a)(36) of the Internal Revenue Code of 1986 shall be applicable to income tax return preparers of returns of individual income taxes imposed by the District of Columbia." 28 Hex-Dump Conversion CHAPTER IB. CREDITING OF TAX REFUNDS AGAINST DELINQUENT TAXES 47-171 Definitions. 47-172 Crediting a tax refund. 47-173 Multiple party returns. 47-174 Priority over intercepts. 47-175 Notice; protest. 47-176 Remedy not exclusive. (New sectio).1) Amend the chapter by adding a new introductory override section that, for income and employment taxes, makes applicable the IRC provisions relating to credits and refunds (IRC ch. 65), in lieu of the above D.C. Code provisions, as follows: "Sec. 47-171a Crediting of Tax Refunds Income and Employment Taxes. Notwithstanding any other provision of this chapter or any other chapter of this title, the provisions of chapter 65 of subtitle F of the Intemal Revenue Code of 1986 (except section 6405 relating to reports to the Joint Committee on Taxation) shall constitute the procedures relating to credits and refunds of overpayments of income and employment taxes imposed by the District of Columbia." CHAPTER 4. COLLECTION AND DISBURSEMENT OF TAXES 47-404 Account books. 47-405 Tax certificates. These provisions require the Collector of Taxes (a now abolished position) to maintain tax account books and furnish certificates of taxes and assessments due. Amend Ch. 4 to assign such functions to Secretary of the Treasury for income and employment taxes. 47-407 Waiver of interest & penalties. Amend to exclude income and employment taxes. 47-408 Omission from records. Amend to exclude income and employment taxes. 29 Hex-Dump Conversion 47-453 Interest. Amend to reference IRS 6601 et seq. for detennination of interest on income and employment taxes (including interest rate). 47-454 Substantial understatement penalty. Amend to reference IRC 6662 for detennination of penalty on income and eml?loyment taxes (including penalty rate). 47-455 Failure to Dav Denaltv. Amend to reference IRC 6651 for determination of penalty on income and employment taxes (including penalty rate). 47-456 Fraud penalty. Amend to reference IRC 6663 for determination of penalty on income and employment taxes (including penalty rate). 47-457 Garnishment. Amend to exclude income and employment taxes; cross reference Secretary of the Treasury's collection authority under Chapter 18, Subchapter XII. 47-458 Collection. Amend to reference IRC 6601(e} for collection of interest and penalties on income and employment taxes. CHAPTER 5. TAX RATES, RECORDS, AND SURPLUS FUNDS 47-504 Tax rates. No amendment. D.C. retains the right to set tax rates. CHAPTER 18. INCOME AND FRANCHISE TAXES 47-1801.1 Applicability. Amend to add broad enabling language specifying that the administration of D.C. income taxes, including withholding, are (beginning on specified effective date) to be administered by the Secretary of the Treasury pursuant to the applicable provisions of the IRC and related statutes, including the making of returns; examination of books, records and witnesses; determination, assessment and collection of taxes, and the imposition of civil and criminal penalties. (See Vennont Code 5820 for model language.) 47-1801.1a Transition Rules. Amend to specify applicable transition rules (civil and criminal) with respect to subject amendments. 47.1801.3 Effective Date. Amend to add effective date rules with respect to subject amendments. 47-1801.4 General definitions. Amend to add "pre-emptive" introductory clause specifying that, with respect to income and employment taxes, the definition of any tenn will be only as defined or treated under the IRe. 30 Hex-Dump Conversion 47-1803.3 Standard deduction. No amendment; the D.C. standard deduction amount will be retained. 47-1803.3(d) Deductions not allowed. Amend to reference IRC sec 261 et seq. for definition of terms used. 47-1803.3(e) Lower income rental housing depreciation deduction. (Needs more analysis as to applicability in income taxes) 47-1804.1 Accounting oeriods. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 444 et seq.) will apply. 47-1804.2 Year of inclusion. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 61, 451 et seq.) will apply. 47-1804.3 Year of deductions. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 162,461 et seq.) will apply. 47-1804.4 Installment sales. No change. 47-1804.5 Inventories. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 471 et seq.) will apply. 47-1804.6 Authority to reject returns. Amend to include override language that, for income taxes, the provision is inapplicable. 47-1804.7 Amounts. Amend to include override language that, for income taxes, the applicable provisions ofIRC ( 6102) will apply. 31 Hex-Dump Conversion Subchapter V. Returns 47-1805.1 Returns - Forms. 47-1805.2 Persons required to file. 47-1805.3 Time and place of filing. For the above provisions, amend the subchapter with a single new override section that, for income taxes, the applicable provisions of IRC (Subtitle F, Chapter 61) will apply (e.g. requirements for returns (6011); persons required to file (6012); time and place for filing (6071,6091, 7502)). 47-1805.4 Divulgence of information. Amend to reconcile the treatment of return information with IRC 6103 by adding a new subsection (i) as follows: "(i) Federal tax information.--Confidentiality and disclosure of all documents filed with, and all information generated or collected by, the Secretary of the Treasury or his delegate with respect to the administration of specified District of Columbia taxes pursuant to the provisions of sections' 6371 through 6374 of the Intemal revenue Code of 1986, shall be governed by the provisions of section 6103 of the Internal Revenue Code of 1986." Subchapter VI. Tax on Residents and Nonresidents . 47-1806.1 Taxable income defined. No change 47-1806.2 Personal exemptions. Amend section to conform to definition of qualified dependents in IRC 151(c). 47-1806.3 Rates. No change. D.C. will set tax rates. 47-1806.4 Credits. Amend subsection (b) to include override language that, for income taxes, IRC 31 applies. Amend subsection (c) (credit for household and dependent care services) to conform to IRC 21. Repeal Subsection (e) (low income credit) as there is no federal counterpart. 47-1806.6 Property tax credit. Repeal this section which has no federal counterpart. 47-1810.1 Purpose of chapter. No change. 47-1811.3 Bases - property dividends. Amend to reference IRC sec. 301(D), for income tax purposes, for determination of property dividends. Subchapter XII. Assessment and Collection 32 Hex-Dump Conversion 47-1812.1 General duties of Mayor. 47-1812.2 Records and statements. 47-1812.3 Examination of books & witnesses. 47-1812.4 Duty of Mayor to make return. 47-1812.5 Determination of deficiency. 47-1812.6 Jeopardy assessment. 47-1812.7 Payment of tax. 47-1812.8 Withholding oftax. 47-1812.9 Lien liability. 47-1812.10 Period oflimitation upon assessment & collection. 47-1812.11a Tax check-off. 47-1812.11 Credits and refunds for overpayments. 47-1812.12 Closing agreements. 47-1812.13 Compromises. 47-1812.15 "Person" defined. 47-1812.16 Collection by Mayor. 47-1812.17 Furnishing copy offederal return. (New Section) Amend the subchapter by adding a new introductory override section that, for income and employment taxes, makes applicable the IRC provisions relating to assessment and collection, in lieu of the above D.C. Code provisions, as follows: "Sec. 47-1812.1a Assessment and Collection of Income and Employment Taxes by Secretary of the Treasury. Notwithstanding any other provision of this subchapter or any other subchapter or chapter of this title, the provisions of subtitle F, subtitle G and chapter 24 of the Internal Revenue Code of 1986 shall apply to the administration by the Secretary of the Treasury of District of Columbia income and employment taxes, pursuant to the District of Columbia Tax Assistance Act." In addition, amend each of the above D.C. Code provisions to reference new section 47-1812.1a as the overriding authority for income and employment taxes. 47-1812.8 Repeal current DC Code provisions and replace with: a. The provisions of chapter 24 of the Internal Revenue Code shall apply. b. The provision of section 3501 of the Internal Revenue Code shall apply. 33 Hex-Dump Conversion c. The provisions of section 3502 of the Internal Revenue Code shall apply but nothing contained therein shall be construed to not allow a deduction from federal income taxes under section 164 of the Internal Revenue Code that would otherwise be allowable. d. The provisions of sections 3504, 3505, 3506, 3508 and 3509 of the Internal Revenue Code shall apply. e. The provisions of section 530 of the Revenue Act of 1978, as amended, shall apply with regard to the income tax withholding provisions and the unemployment insurance contributions of the DC Code. 47-1812.11(b) Repealed. 47-1812.11(c) Repealed. Subchapter XIII. Penalties and Interest 47-1813.1 Additions to tax - delinquencies. 47-1813.2 Same - Interest on deficiencies. 47-1813.3 Same - Fraud. 47-1813.4 Same - Nonpayments. 47-1813.5 Same - Payment extensions. (New Section) Amend the subchapter by adding a new introductory override section that, for income and employment taxes, makes applicable the IRC provisions relating to penalties and interest, in lieu of the above D.C. Code provisions, as follows: "Sec. 47-1813.1a Penalties and Interest on Income and Employment Taxes. Notwithstanding any other provision of this subchapter or any other subchapter or chapter of this title, the provisions of subtitle F, subtitle G and chapter 24 of the Internal Revenue Code of 1986 shall apply to the determination and administration of penalties and interest on income and employment taxes." In addition, amend each of the above D.C. Code provisions to reference new section 47-1813.1a as the overriding authority for penalties and interest on income and employment taxes. 34 Hex-Dump Conversion "47-1813.6 (a) Criminal violations.--All criminal penalties and sanctions relating to the administration of the United States internal revenue laws (including but not limited to title 26 and title 18 ofthe United States Code) shall apply to the District of Columbia taxes specified in 26 U.S.C. 6372 .. In all criminal actions brought under this section, the interests of the District of Columbia shall be represented by the United States in the same manner in which the interests of the United States are represented in corresponding proceedings involving the administration of the internal revenue laws. All criminal actions shall be brought in the judicial courts and applying the judicial procedures that apply to the administration of the internal revenue laws." Subchapter xv. Appeal 47-1815.1 Right of aggrieved persons to judicial appeal. Amend to exclude income and employment taxes. Subchapter XVI. Rules and Regulations 47-1816.1 Rules and regulations. 47-1816.2 Same - Revenue Act of 1956. Amended both sections to specify that, for income and employment taxes, rules and regulations will be prescribed by the Secretary of the Treasury. 47-1816.3 Report on amendment of IRC. Amend to specify that, for income and employment tax amendments to the IRC, the applicable reporting requirements will be carried out by the Secretary of the Treasury. CHAPTER 33. SUPERIOR COURT, TAX DIVISION 47-3301 Tax appeals; definitions. 47-3303 Appeal from assessment. 47-3304 Review by Court; finality of decision. 47-3306 Refund of erroneous collections. 47-3307 Certain suits forbidden. 47-3308 Manner of serving notices. 47-3309 Reference by Mayor to Superior Court. 35 Hex-Dump Conversion 47-3310 Overpayments; refund; appeal. Amend the above provisions to exclude jurisdiction over any matters relating to income and employment taxes. TITLE 11 ORGANIZATION AND JURISDICTION OF THE COURTS CHAPTER 12. TAX DIVISION OF THE SUPERIOR COURT 11-1201 Exclusive jurisdiction. 11-1202 Abolition of other remedies. 11-1203 Rules and regulations. Amend the above provisions to exclude jurisdiction over any matters, including civil or criminal proceeding, involving income and employment taxes. TITLE 46 SOCIAL SECURITY CHAPTER 1. UNEMPLOYMENT COMPENSAnON Amend as follows: I. Unemployment Compensation Contributions I.... 3. Section 46-101(1) shall be amended to include the provisions of IRC 3306 with the following exceptions: a. (b)(I) ... equal to $7,000 such amount as is determined in section 46-103 herein ... b. (b)(I) ... with respect to employment equal to $7,000 such amount as is detennined in section 46-103 herein ... c. Section 3306(c)(7) and (8) of the Internal Revenue Code shall not be included in section 46-101(1). 36

from:	M. Jill Gibbons
to:	MAZUR M, Alan B., Albert, Ananias Blocker, Barry, Barry T., Bradley W. Kyser, Bruce D., Catherine A., David E., David J., Dennis K., Diane R., Elena Kagan, Ellen S. Seidman, enneth L., Harry G. Meyers, james b. kazel, Justine F. Rodriguez, Kathleen M., Kumiki S. Gibson, Larry R. Matlack, Lewis P., Marcia D., Mark A., Mark D., Mark E., Michael L. Goad, Nani A., Robert B., Robert G., Rosalyn J. Rettman, William P.
cc:	Carol, Daniel M. Tangherlini, G. E., James C. Murr, James J. Jukes, Michael, Scott

from:	M. Jill Gibbons
to:	MAZUR M, Alan B., Albert, Ananias Blocker, Barry, Barry T., Bradley W. Kyser, Bruce D., Catherine A., David E., David J., Dennis K., Diane R., Elena Kagan, Ellen S. Seidman, Harry G. Meyers, james b. kazel, Justine F. Rodriguez, Kathleen M., Kenneth L. Schwartz, Kumiki S. Gibson, Larry R. Matlack, Lewis P., Marcia D., Mark A., Mark D., Mark E., Michael L. Goad, Nani A., Robert B., Robert G., Rosalyn J. Rettman, William P.
cc:	James C. Murr, James J. Jukes, Michael

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