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Territorial Tax Parity Act of 2025
2/11/2025, 5:08 AM
Summary of Bill HR 365
The bill seeks to address the unique challenges faced by US territories and possessions, such as Puerto Rico, Guam, and the US Virgin Islands, by making it easier for businesses and individuals in these areas to access tax benefits and incentives. By modifying the residence and source rules, the bill aims to encourage investment and economic development in these regions.
Overall, the Economic Recovery in US Possessions Act is designed to support the economic recovery and growth of US territories and possessions by providing them with the tools and resources needed to attract investment and create jobs. The bill is an important step towards ensuring that all parts of the United States can thrive and prosper.
Congressional Summary of HR 365
Territorial Tax Equity Parity Act of 2025
This 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.)
