Introduced in House

[Congressional Bills 119th Congress] [From the U.S. Government Publishing Office] [H.R. 364 Introduced in House (IH)] 119th CONGRESS 1st Session H. R. 364 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 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. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

SECTION 1. SHORT TITLE. This Act may be cited as the ``Territorial Tax Equity and Economic Growth Act of 2025''.

SEC. 2. MODIFICATION TO RESIDENCE AND SOURCE RULES INVOLVING

SEC. 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)(2), rather than rules similar to the rules in

section 864(c)(4), shall apply for purposes of determining

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, 2024.