I
119THCONGRESS
1
STSESSION 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
JANUARY13, 2025
Ms. P
LASKETTintroduced 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 Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Territorial Tax Equity 4
and Economic Growth Act of 2025’’. 5
SEC. 2. MODIFICATION TO RESIDENCE AND SOURCE RULES 6
INVOLVING POSSESSIONS. 7
(a) B
ONAFIDERESIDENT.—Section 937(a) of the 8
Internal Revenue Code of 1986 is amended— 9
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(1) by striking the last sentence, and 1
(2) by amending paragraph (1) to read as fol-2
lows: 3
‘‘(1) who has a substantial presence (deter-4
mined under the principles of section 7701(b)(3)(A) 5
(applied by substituting ‘122 days’ for ‘31 days’ in 6
clause (i) thereof) without regard to sections 7
7701(b)(3)(B), (C), and (D)) during the taxable 8
year in Guam, American Samoa, the Northern Mar-9
iana Islands, Puerto Rico, or the Virgin Islands, as 10
the case may be, and’’. 11
(b) S
OURCERULES.—Section 937(b) of such Code 12
is amended— 13
(1) in paragraph (1), by striking ‘‘and’’ at the 14
end, 15
(2) in paragraph (2), by striking the period at 16
the end and inserting ‘‘, but only to the extent such 17
income is attributable to an office or fixed place of 18
business within the United States (determined under 19
the rules of section 864(c)(5)),’’, and 20
(3) by adding at the end the following new 21
paragraphs: 22
‘‘(3) for purposes of paragraph (1), the prin-23
ciples of section 864(c)(2), rather than rules similar 24
to the rules in section 864(c)(4), shall apply for pur-25
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poses of determining whether income from sources 1
without a possession specified in subsection (a)(1) is 2
effectively connected with the conduct of a trade or 3
business within such possession, and 4
‘‘(4) for purposes of paragraph (2), income 5
from activities within the United States which are of 6
a preparatory or auxiliary character shall not be 7
treated as income from sources within the United 8
States or as effectively connected with the conduct 9
of a trade or business within the United States.’’. 10
(c) S
OURCERULES FOR PERSONALPROPERTY 11
S
ALES.—Section 865(j)(3) of such Code is amended by 12
inserting ‘‘, 932,’’ after ‘‘931’’. 13
(d) E
FFECTIVEDATE.—The amendments made by 14
this section shall apply to taxable years beginning after 15
December 31, 2024. 16
Æ
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