Territorial Tax Equity and Economic Growth Act of 2023

Bill: 118-hr-1034
Sponsor: full_name: Del. Plaskett, Stacey E. [D-VI-At Large]
Introduced: 2023-02-14
Policy area: Taxation
Latest action: action_date: 2023-02-14
text: Referred to the House Committee on Ways and Means.

Summaries:
action_date: 2023-02-14
action_desc: Introduced in House
text: <p><b>Territorial Tax Equity and Economic Growth Act</b> <b>of 2023</b></p> <p> This bill modifies the residence and income source rules that apply with respect to the taxation of income from U.S. possessions (i.e., Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands).</p> <p>The bill specifies that a bona fide resident of a possession must have a substantial presence in the possession for at least 122 days during the year. Under current law, the person must be present for at least 183 days during the year.</p> <p>Under current law, income is not possession source income if it is treated as (1) income from sources within the United States, or (2) as effectively connected with the conduct of a trade or business within the United States. The bill amends this rule to</p> <ul> <li>specify that it applies only to the extent that the income is attributable to an office or fixed place of business within the United States, </li> <li>specify principles that must be used to determine whether income from sources without a possession is effectively connected with the conduct of a trade or business within the possession, and</li> <li>prohibit income from activities within the United States which are of a preparatory or auxiliary character from being 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. </li> </ul> <p>The bill also modifies the income source rules that apply to certain personal property sales in the Virgin Islands.</p>

tv_txt: I 118th CONGRESS 1st Session H. R. 1034 IN THE HOUSE OF REPRESENTATIVES February 14, 2023 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 2023 . 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, 2022.