What This Bill Does · Plain English
Summary · Congress.gov
Territorial Tax Equity and Economic Growth Act of 2025 This bill lowers the residency requirements and modifies the income sourcing rules related to taxation of income from U.S. territories. Currently, bona fide residents of a U.S. territory may exclude income sourced to the territory in calculating U.S. federal income tax. A bona fide resident of a territory is a person that, in part, is present in the territory for at least 183 days in a tax year. Income is sourced to a U.S. territory if it is not U.S.-sourced income or effectively connected with a U.S. trade or business. This bill reduces the presence requirement to 122 days, specifies that income is U.S.-sourced income or effectively connected to a U.S. trade or business only if attributable to an office or fixed place of business in the United States, and specifies that income from U.S.-based activities that are preparatory or auxiliary may not be considered U.S.-sourced income. Currently, income from certain personal property sales from a fixed place of business in a U.S. territory by a U.S. resident may be U.S.-sourced income unless an income tax of at least 10% is paid to the U.S. territory. The Internal Revenue Service (IRS) may limit the 10% tax payment requirement related to income from personal property sales in Guam, American Samoa, the Northern Mariana Islands, and Puerto Rico. This bill expands the IRS’s authority to include limiting the tax requirement for personal property sales in the Virgin Islands.
Action Timeline
2025-01-13
Referred to the House Committee on Ways and Means.
2025-01-13
Introduced in House
2025-01-13
Introduced in House
Frequently Asked Questions
Did HR.364 pass?
HR.364 is still alive. Current stage: COMMITTEE. Pass likelihood: 45%.
What does HR.364 do?
Territorial Tax Equity and Economic Growth Act of 2025 This bill lowers the residency requirements and modifies the income sourcing rules related to taxation of income from U.S. territories. Currently, bona fide residents of a U.S. territory may exclude income sourced to the territory in calculating U.S. federal income tax. A bona fide resident of a territory is a person that, in part, is present in the territory for at least 183 days in a tax year. Income is sourced to a U.S. territory if it is not U.S.-sourced income or effectively connected with a U.S. trade or business. This bill reduces t…
Who sponsored HR.364?
HR.364 was sponsored by Stacey E. Plaskett (D-Virgin Islands).
Full Bill Text
119 HR 364 IH: Territorial Tax Equity and Economic Growth Act of 2025 U.S. House of Representatives 2025-01-13 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain. 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.
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