Sponsors (9)
The bill grants a narrow, time‑limited tax exclusion and certainty for certain existing owners of Virgin Islands service corporations while reducing federal revenue and risking profit‑shifting and unequal treatment based on ownership date.
U.S. shareholders of Virgin Islands–organized service corporations (who held interests before Dec 31, 2023) will face lower GILTI inclusion and therefore a reduced immediate U.S. tax burden.
Existing owners (interests acquired before Dec 31, 2023) gain clearer, time‑limited tax certainty from an explicit exclusion, reducing compliance ambiguity for those taxpayers.
The bill directs Treasury to issue anti‑abuse regulations to limit aggressive tax planning while implementing the exclusion, which could preserve tax base integrity if effectively enforced.
Taxpayers and the federal budget will be affected because excluding Virgin Islands services income from GILTI reduces U.S. tax revenue, potentially increasing the federal deficit or shifting the tax burden.
Taxpayers and financial institutions may face incentives to shift profits or relocate service activities to the Virgin Islands to exploit the exclusion, complicating enforcement and risking erosion of the U.S. tax base.
Taxpayers and small-business owners are treated unequally because the benefit is limited to owners who held interests before Dec 31, 2023, creating disparate outcomes based solely on acquisition date.
Based on analysis of 2 sections of legislative text.
Excludes qualified Virgin Islands services compensation from the GILTI calculation for specified U.S. shareholders, reducing U.S. tax on that income.
Official title: To amend the Internal Revenue Code of 1986 to determine global intangible low-taxed income without regard to certain income derived from services performed in the Virgin Islands.
Introduced January 31, 2025 by Ron Estes · Last progress January 31, 2025
Excludes certain compensation earned by Virgin Islands corporations and their Virgin Islands–based employees from the calculation of GILTI for eligible U.S. shareholders, effectively lowering the U.S. tax base on that income. It defines which income qualifies, limits eligible U.S. shareholders to certain individuals, trusts, estates, and closely held C corporations that acquired their interest before Dec. 31, 2023, and directs Treasury to issue anti‑abuse rules and implementing guidance.