H.R. 364

119 HR 364 IH: Territorial Tax Equity and Economic Growth Act of 2025
 U.S. House of Representatives
 2025-01-13
 text/xml
 EN
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 I  119th CONGRESS  1st Session  H. R. 364  IN THE HOUSE OF REPRESENTATIVES   January 13, 2025   Ms. Plaskett  introduced the following bill; which was referred to the  Committee on Ways and Means    A BILL
To amend the Internal Revenue Code of 1986 to modify the residence and source rules to provide for economic recovery in the possessions of the United States.
1.
Short title
This Act may be cited as the   Territorial Tax Equity and Economic Growth Act of 2025  .
2.
Modification to residence and source rules involving possessions
(a)
Bona fide resident
 Section 937(a)  of the Internal Revenue Code of 1986 is amended—
(1)
by striking the last sentence, and
(2)
by amending paragraph (1) to read as follows:
(1)
who has a substantial presence (determined under the principles of section 7701(b)(3)(A) (applied by substituting  122 days  for  31 days  in clause (i) thereof) without regard to sections 7701(b)(3)(B), (C), and (D)) during the taxable year in Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, or the Virgin Islands, as the case may be, and
 .
(b)
Source rules
Section 937(b) of such Code is amended—
(1)
in paragraph (1), by striking  and  at the end,
(2)
in paragraph (2), by striking the period at the end and inserting  , but only to the extent such income is attributable to an office or fixed place of business within the United States (determined under the rules of section 864(c)(5)), , and
(3)
by adding at the end the following new paragraphs:
(3)
for purposes of paragraph (1), the principles of section 864(c)(2), rather than rules similar to the rules in section 864(c)(4), shall apply for purposes of determining whether income from sources without a possession specified in subsection (a)(1) is effectively connected with the conduct of a trade or business within such possession, and
(4)
for purposes of paragraph (2), income from activities within the United States which are of a preparatory or auxiliary character shall not be treated as income from sources within the United States or as effectively connected with the conduct of a trade or business within the United States.
 .
(c)
Source rules for personal property sales
Section 865(j)(3) of such Code is amended by inserting  , 932,  after  931 .
(d)
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2024.