The Territorial Tax Parity Act would tweak two technical tax rules that determine whether income counts as coming from a U.S. territory (like Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, or the Northern Mariana Islands) or from the mainland. One change narrows when income earned by a territory resident gets re-sourced to the mainland, limiting it to income tied to a U.S. office or fixed place of business. The other extends an existing source rule for personal property sales to cover U.S. Virgin Islands residents. The stated goal is to support economic recovery in the U.S. possessions, and the changes apply to tax years starting after December 31, 2024.
Congressional Summary
Territorial Tax Equity Parity Act of 2025This bill modifies the income sourcing rules related to taxation of income from U.S. territories.Under the bill, 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. (Currently, income is sourced to a U.S. territory and, thus, may be excluded from the gross income of a bona fide resident of a U.S. territory in calculating U.S. federal income tax if it is not U.S.-sourced income or effectively connected with a U.S. trade or business.)Further, the bill authorizes the Internal Revenue Service (IRS) to limit the income tax payment to the Virgin Islands required to treat income from the sale of certain personal property as foreign-sourced income for federal tax purposes. (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.)
Legislative Subjects
Details
- Congress
- 119th
- Chamber
- House
- Status
- summarized
- Action
- Introduced in House
- Action Date
- 2025-01-13
- Date Added
- 2026-04-28
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