Territorial Tax Equity and Economic Growth Act of 2025 · Introduced in House (2025-01-13)

119th CONGRESS 1st Session

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.

IN THE HOUSE OF REPRESENTATIVES · January 13, 2025 · Sponsor: Ms. Plaskett · Committee: Committee on Ways and Means

SEC. 2. Modification to residence and source rules involving possessions

(a) Bona fide resident

of the Internal Revenue Code of 1986 is amended— Section 937(a)
- by striking the last sentence, and
  - who has a substantial presence (determined under the principles of section 7701(b)(3)(A) (applied by substituting for 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 122 days 31 days
- by amending paragraph (1) to read as follows:

(b) Source rules

Section 937(b) of such Code is amended—
- in paragraph (1), by striking and at the end,
- in paragraph (2), by striking the period at the end and inserting , and
  - 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
  - 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.
- by adding at the end the following new paragraphs:

Section 865(j)(3) of such Code is amended by inserting after .

(d) Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2024.

H.R. 364

Table of contents

SEC. 1. Short title

SEC. 2. Modification to residence and source rules involving possessions