DEFINITIONS AND SPECIAL RULES FOR APPLICATION OF ALLOCATION FORMULAS.

SEC. 109. DEFINITIONS AND SPECIAL RULES FOR APPLICATION OF ALLOCATION FORMULAS. (a) In General.— For purposes of this subtitle— (1) Population.— Population shall be determined on the same basis as resident population is determined by the Bureau of the census for general statistical purposes, (2) Urbanized population.— Urbanized population means the population of any area consisting of a central city or cities of 50,000 or more inhabitants (and of the surrounding closely settled territory for such city or cities) which is treated as an urbanized urea by the Bureau of the Census for general statistical purposes. (3) Income.— Income means total money income received from all sources, as determined by the Bureau of the Census for general statistical purposes. (4) Personal income.— Personal income means the income of individuals, as determined by the Department of Commerce for national income accounts purposes. (5) Dates for determining allocations and entitlements.— Except as provided in regulations, the determination of allocations and entitlements for any entitlement period shall be made as of the first day of the third month immediately preceding the beginning of such period. (6) Intergovernmental transfers.— The intergovernmental transfers of re venue to any government are the amounts of revenue received by that government from other governments as a share in financing (or as reimbursement for) the performance of governmental functions, as determined by the Bureau of the Census for general statistical purposes. (7) Data used; uniformity of data.— (A) General rule.— Except as provided in subparagraph (B), the data used shall be the most recently available data provided by the Bureau of the Census or the Department of Commerce, as the case may be. (B) Use of estimates, etc.— Where the Secretary determines that the data referred to in subparagraph (A) are not current enough or are not comprehensive enough to provide for equitable allocations, he may use such additional data (including data based on estimates) as may be provided for in regulations. (b) Income Tax Amount of States.—For purposes of this subtitle— (1) In general.— The income tax amount of any State for any entitlement period is the income tax amount of such State as determined under paragraphs (2) and (3). 86 Stat. 929 (2) Income tax amount.— The income tax amount of any State for any entitlement period is 15 percent of the net amount collected from the State individual income tax of such State during 1972 or (if later) during the last calendar year ending before the beginning of such entitlement period. (3) Ceiling and floor.— The income tax amount of any State, for any entitlement period— (A) shall not exceed 6 percent, and (B) shall not be less than 1 percent, of the Federal individual income tax liabilities attributed to such State for taxable years ending during 1971 or (if later) during the last calendar year ending before the beginning of such entitlement period. (4) State individual income tax.— The individual income tax of any State is the tax imposed upon the income of individuals by such State and described as a State income tax under section 164(a)(3) of the Internal Revenue Code of 1954. (5) Federal individual income tax liabilities.— Federal individual income tax liabilities attributed to any State for any period shall be determined on the same basis as such liabilities are determined for such period by the Internal Revenue Service for general statistical purposes. (c) General Tax Effort of States.— (1) In general.— For purposes of this subtitle— (A) General tax effort factor.— The general tax effort factor of any State for any entitlement period is (i) the net amount collected from the State and local taxes of such State during the most recent reporting year, divided by (ii) the aggregate personal income (as defined in paragraph (4) of subsection (a)) attributed to Such State for the same period. (B) General tax effort amount.— The general tax effort amount of any State for any entitlement period is the amount determined by multiplying— (i) the net amount collected from the State, and local taxes of such State during the most recent reporting year, by (ii) the general tux effort factor of that State. (2) State and local taxes.— (A) Taxes taken into account.— The State and local taxes taken into account under paragraph (1) are the compulsory contributions exacted by the State (or by any unit of local government or other political subdivision of the State) for public purposes (other than employee, and employer assessments and contributions to finance retirement and social insurance systems, and other than special assessments for capital outlay), us such contributions are determined by the Bureau of the Census for general statistical purposes. (B) Most recent reporting year.— The most recent reporting year with respect to any entitlement period consists of the years taken into account by the Bureau of the Census in its most recent general determination of State and local taxes made lief ore the close of such period. (d) General Tax Effort Factor of County Area.— For purposes of this subtitle, the general tax effort factor of any county area for any entitlement period is— (1) the adjusted taxes of the county government plus the ad- 86 Stat. 930 justed taxes of each other unit of local government within that county area, divided by (2) the aggregate income (as defined in paragraph (3) of subsection (a)) attributed to that county area. (e) General Tax Effort Factor of Unit of Local Government.— For purposes of this subtitle— (1) In general.— The general tax effort factor of any unit of local government for any entitlement period is— (A) the adjusted taxes of that unit of local government, divided by (B) the aggregate income (as defined in paragraph (3) of subsection (a)) attributed to that unit of local government. (2) Adjusted taxes.— (A) In general.— The adjusted taxes of any unit of local government are— (i) the compulsory contributions exacted by such government for public purposes (other than employee and employer assessments and contributions to finance retirement and social insurance systems, and other than special assessments for capital outlay), as such contributions are determined by the Bureau of the Census for general statistical purposes, (ii) adjusted (under regulations prescribed by the Secretary) by excluding an amount equal to that portion of such compulsory contributions which is properly allocable to expenses for education. (B) Certain sales taxes collected by counties.— In any case where— (i) a county government exacts sales taxes within the geographic area of a unit of local government and transfers part or all of such taxes to such unit without specifying the purposes for which such unit may spend the revenues, and (ii) the Governor of the State notifies the Secretary that the requirements of this subparagraph have been met with respect to such taxes, then the taxes so transferred shall be treated as the taxes of the unit of local government (and not the taxes of the county government). (f) Relative Income Factor.— For purposes of this subtitle, the relative income factor is a fraction— (1) in the case of a State, the numerator of which is the per capita income of the United States and the denominator of which is the per capita income of that State; (2) in the case of a county area, the numerator of which is the per capita income of the State in which it is located and the denominator of which is the per capita income of that county area; and (3) in the case of a unit of local government, the numerator of which is the per capita income of the county area in which it is located and the denominator of which is the per capita income of the geographic area of that unit of local government. For purposes of this subsection, per capita income shall be determined on the basis of income as defined in paragraph (3) of subsection (a). (g) Allocation Rules for Five Factor Formula.— For purposes of section 106(b)(3)— (1) Allocation on basis of population.— Any allocation among the States on the basis of population shall be made by86 Stat. 931 allocating to each State an amount which bears the same ratio to the total amount to be allocated as the population of such State bears to the population of all the States. (2) Allocation on basis of urbanized population.— Any allocation among the States on the basis of urbanized population shall be made by allocating to each State an amount which bears the same ratio to the total amount to be allocated as the urbanized population of such State bears to the urbanized population of all the States. (3) Allocation on basis of population inversely weighted for per capita income.— Any allocation among the States on the basis of population inversely weighted for per capita income shall be made by allocating to each State an amount which bears the same ratio to the total amount to be allocated as— (A) the population of such State, multiplied by a fraction the numerator of which is the per capita income of all the States and the denominator of which is the per capita income of such State, bears to (B) the sum of the products determined under subparagraph (A) for all the States. (4) Allocation on basis of income tax collections.— Any allocation among the States on the basis of income tax collections shall be made by allocating to each State an amount which bears the same ratio to the total amount to be allocated as the income tax amount of such State bears to the sum of the income tax amounts of all the States. (5) Allocation on basis of general tax effort.— Any allocation among the States on the basis of general tax effort shall be made by allocating to each State an amount which bears the same ratio to the total amount to be allocated as the general tax effort amount of such State bears to the sum of the general tax effort amounts of all the States.