I.R.C. § 931(a) General Rule —
In the case of an individual who is a bona fide resident of a specified possession
during the entire taxable year, gross income shall not include—
I.R.C. § 931(a)(1) —
income derived from sources within any specified possession, and
I.R.C. § 931(a)(2) —
income effectively connected with the conduct of a trade or business by such individual
within any specified possession.
I.R.C. § 931(b) Deductions, Etc. Allocable To Excluded Amounts Not Allowable —
An individual shall not be allowed—
I.R.C. § 931(b)(1) —
as a deduction from gross income any deductions (other than the deduction under section
151, relating to personal exemptions), or
I.R.C. § 931(b)(2) —
any credit, properly allocable or chargeable against amounts excluded from gross
income under this section.
I.R.C. § 931(c) Specified Possession —
For purposes of this section, the term “specified possession"
means Guam, American Samoa, and the Northern Mariana Islands.
I.R.C. § 931(d) Employees Of The United States —
Amounts paid for services performed as an employee of the United States (or any
agency thereof) shall be treated
as not described in paragraph (1) or (2) of subsection (a).
(Aug. 16, 1954, ch. 736, 68A Stat. 291; Nov. 13, 1966,
Pub. L. 89-809, title I, 107(a), 80 Stat. 1571; Dec. 10, 1971, Pub. L. 92-178, title
V, 502(d), 85 Stat. 550; Oct. 31, 1972, Pub. L. 92-606, 1(f)(1), 86 Stat. 1497; Oct.
4, 1976, Pub. L. 94-455, title X, 1051(c), title XIX, 1901(a)(117), 1906(b)(13)(A),
90 Stat. 1645, 1784, 1834; May 23, 1977, Pub. L. 95-30, title I, 101(d)(12), 91 Stat.
134; July 18, 1984, Pub. L. 98-369, div. A, title VII, 711(c)(2)(A)(iv), 98 Stat.
945; Oct. 22, 1986, Pub. L. 99-514, title XII, 1272(a), 100 Stat. 2593; Oct. 22,
2004, Pub. L. 108-357, title IX, 908(c)(1), 118 Stat. 1418.)
BACKGROUND NOTES
Amendments to Subpart
1986--Pub. L. 99-514, title XII, 1272(d)(12), 1274(d), 1275(c)(8), Oct. 22, 1986,
100 Stat. 2595, 2598, 2599, substituted
“Guam, American Samoa, or the Northern Mariana Islands” for “possessions of the United
States” in item 931, added item 932, and struck out former item 932 “Citizens of possessions
of the United States”, item 934A “Income tax rate on Virgin Islands source income”
and item 935
“Coordination of United States and Guam individual income taxes”.
1983--Pub. L. 97-455, 1(d)(1), Jan. 12, 1983, 96 Stat. 2498, added item 934A.
1972--Pub. L. 92-606, 1(f)(5), Oct. 31, 1972, 86 Stat. 1497, added item 935.
1960--Pub. L. 86-779, 4(a)(2), Sept. 14, 1960, 74 Stat. 999, added item 934.
AMENDMENTS
2004 - Subsec. (d). Pub. L. 108-357, Sec. 908(c)(1), amended subsec. (d). Before amendment,
it read as follows:
“(d) Special rules
“For purposes of this section--
“(1) Employees of the United States
“Amounts paid for services performed as an employee of the United States (or any agency
thereof) shall be treated as not described in paragraph (1) or (2) of subsection (a).
“(2) Determination of source, etc.
“The determination as to whether income is described in paragraph (1) or (2) of subsection
(a) shall be made under regulations prescribed by the Secretary.
“(3) Determination of residency
“For purposes of this section and section 876, the determination of whether an individual
is a bona fide resident of Guam, American Samoa, or the Northern Mariana Islands shall
be made under regulations prescribed by the Secretary.”
1986--Pub. L. 99-514 amended section generally, substituting provisions relating to income
from sources within Guam, American Samoa, or the Northern Mariana Islands, for former
provisions relating to income from sources within possessions of the United States,
which had declared in: subsec. (a), general rule as to gross income, including requirements
relating to 3-year period and trade or business; subsec. (b), rule as to amounts received
in United States; subsec. (c), definition of “possession of the United States”; subsec.
(d), general rule allowing deductions only to extent connected with income from sources
within United States, and specific exceptions to limitations of general rule; subsec.
(e), deduction for personal exemption; subsec. (f), allowance of deductions and credits;
subsec. (g), foreign tax credit; subsec. (h), provisions relating to employees of
United States.
1984--Subsec. (d)(2)(B). Pub. L. 98-369 substituted “for losses” for “,for losses of property
not connected with the trade or business if arising from certain casualties or theft,”.
1977--Subsec. (d)(3). Pub. L. 95-30 struck out par. (3) which made a cross reference to
section 142(b)(2) for disallowance of the standard deduction.
1976--Subsec. (a). Pub. L. 94-455, 1051(c)(1), struck out all references to domestic corporations
and made subsection applicable only to individual citizens.
Subsec. (c). Pub. L. 94-455, 1051(c)(2), substituted
“Commonwealth of Puerto Rico, the Virgin Islands of the United States, or Guam” for
“Virgin Islands of the United States, and such term when used with respect to citizens
of the United States does not include Puerto Rico or Guam” after “does not include
the”.
Subsec. (d)(1). Pub. L. 94-455, 1051(c)(3), 1906(b)(13)(A), substituted “a citizen
of the United States” for “persons” after “in the case of” and struck out “or his
delegate” after “Secretary”.
Subsec. (f). Pub. L. 94-455, 1051(c)(3), 1906(b)(13)(A), substituted “A citizen of
the United States” for “Persons” after “Allowance of deductions and credits” and struck
out in two places “or his delegate"
after “Secretary”.
Subsecs. (h), (i). Pub. L. 94-455, 1901(a)(117), redesignated subsec. (i) as (h).
Former subsec. (h), relating to the status of a citizen of the United States who has
been interned by the enemy, was struck out.
1972--Subsec. (c). Pub. L. 92-606 substituted “Puerto Rico or Guam” for “Puerto Rico”.
1971--Subsec. (a). Pub. L. 92-178 provided for non-application of section in the case
of a corporation for a taxable year for which it is a DISC or in which it owns at
any time stock in a DISC or former DISC.
1966--Subsec (d). Pub. L. 89-809 made applicable to United States citizens and domestic
corporations engaged in trade or business in possessions, who qualify for the special
tax treatment of income qualifying for the exclusion relating to income from United
States possessions, provisions which allow deductions to nonresident aliens or foreign
corporations engaged in trade or business in the United States by allowing deductions
only where they are allocable to income effectively connected with the trade or business
in the United States and by spelling out the exceptions allowing deductions whether
or not connected with income from sources within the United States in the case of
losses not connected with the trade or business but incurred in transactions entered
into for profit, casualty losses, and charitable contributions.
EFFECTIVE DATE OF 2004 AMENDMENT
Section 908(d) of Pub. L. 108-357 provided that:
“The amendments made by this section shall apply to taxable years ending after
the date of the enactment of this Act [Enacted:
Oct. 22, 2004].
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1277 of subtitle G (1271-1277) of title XII of Pub. L. 99-514, as amended
by Pub. L. 100-647, title I, 1012(z), Nov. 10, 1988, 102 Stat. 3530, provided that:
“(a) In General.--Except as otherwise provided in this section, the amendments made
by this subtitle [enacting section 932 of this title, amending sections 28, 32, 48,
63, 153, 246, 338, 864, 876, 881, 931, 933, 934, 936, 957, 1402, 1442, 3401, 6091,
7651, 7654, and 7655 of this title, repealing sections 932, 934A, and 935 of this
title, and enacting provisions set out as notes under sections 931 and 932 of this
title] shall apply to taxable years beginning after December 31, 1986.
“(b) Special Rule for Guam, American Samoa, and the Northern Mariana Islands.--The
amendments made by this subtitle shall apply with respect to Guam, American Samoa,
or the Northern Mariana Islands (and to residents thereof and corporations created
or organized therein) only if (and so long as) an implementing agreement under section
1271 [set out below] is in effect between the United States and such possession.
“(c) Special Rules for the Virgin Islands.--
“(1) In general.--The amendments made by section 1275(c) [amending sections 28, 48,
338, 864, and 934 of this title and repealing section 934A of this title] shall apply
with respect to the Virgin Islands (and residents thereof and corporations created
or organized therein) only if (and so long as) an implementing agreement is in effect
between the United States and the Virgin Islands with respect to the establishment
of rules under which the evasion or avoidance of United States income tax shall not
be permitted or facilitated by such possession. Any such implementing agreement shall
be executed on behalf of the United States by the Secretary of the Treasury, after
consultation with the Secretary of the Interior.
“(2) Section 1275(b).--
“(A) In general.--The amendment made by section 1275(b) [amending section 7651 of
this title] shall apply with respect to--
“(i) any taxable year beginning after December 31, 1986, and
“(ii) any pre-1987 open year.
“(B) Special rules.--In the case of any pre-1987 open year--
“(i) the amendment made by section 1275(b) shall not apply to income from sources
in the Virgin Islands or income effectively connected with the conduct of a trade
or business in the Virgin Islands, and
“(ii) the taxpayer shall be allowed a credit-- “(I) against any additional tax imposed
by subtitle A of the Internal Revenue Code of 1954 [now 1986] (by reason of the amendment
made by section 1275(b)) on income not described in clause
(i),
“(II) for any tax paid to the Virgin Islands before the date of the enactment of this
Act [Oct. 22, 1986] and attributable to such income. For purposes of clause
(ii)(II), any tax paid before January 1, 1987, pursuant to a process in effect before
August 16, 1986, shall be treated as paid before the date of the enactment of this
Act.
“(C) Pre-1987 open year.--For purposes of this paragraph, the term ‘pre-1987 open
year’ means any taxable year beginning before January 1, 1987, if on the date of the
enactment of this Act [Oct. 22, 1986] the assessment of a deficiency of income tax
for such taxable year is not barred by any law or rule of law.
“(D) Exception.--In the case of any pre-1987 open year, the amendment made by section
1275(b) shall not apply to any domestic corporation if--
“(i) during the fiscal year which ended May 31, 1986, such corporation was actively
engaged directly or through a subsidiary in the conduct of a trade or business in
the Virgin Islands and such trade or business consists of business related to marine
activities, and
“(ii) such corporation was incorporated on March 31, 1983, in Delaware.
“(E) Exception for certain transactions.--
“(i) In general.--In the case of any pre-1987 open year, the amendment made by section
1275(b) shall not apply to any income derived from transactions described in clause
(ii) by 1 or more corporations which were formed in Delaware on or about March 6,
1981, and which have owned 1 or more office buildings in St. Thomas, United States
Virgin Islands, for at least 5 years before the date of the enactment of this Act
[Oct. 22, 1986].
“(ii) Description of transactions.--The transactions described in this clause are--
“(I) the redemptions of limited partnership interests for cash and property described
in an agreement (as amended) dated March 12, 1981,
“(II) the subsequent disposition of the properties distributed in such redemptions,
and “(III) interest earned before January 1, 1987, on bank deposits of proceeds received
from such redemptions to the extent such deposits are located in the United States
Virgin Islands.
“(iii) Limitation.--The aggregate reduction in tax by reason of this subparagraph
shall not exceed $8,312,000. If the taxes which would be payable as the result of
the application of the amendment made by section 1275(b) to pre-1987 open years exceeds
the limitation of the preceding sentence, such excess shall be treated as attributable
to income received in taxable years in reverse chronological order.
“(d) Report on Implementing Agreements.--If, during the 1-year period beginning on
the date of the enactment of this Act
[Oct. 22, 1986], any implementing agreement described in subsection
(b) or (c) is not executed, the Secretary of the Treasury or his delegate shall report
to the Committee on Finance of the United States Senate, the Committee on Ways and
Means, and the Committee on Interior and Insular Affairs of the House of Representatives
with respect to--
“(1) the status of such negotiations, and
“(2) the reason why such agreement has not been executed.
“(e) Treatment of Certain United States Persons.--Except as otherwise provided in
regulations prescribed by the Secretary of the Treasury or his delegate, if a United
States person becomes a resident of Guam, American Samoa, or the Northern Mariana
Islands, the rules of section 877(c) of the Internal Revenue Code of 1954 [now 1986]
shall apply to such person during the 10-year period beginning when such person became
such a resident. Notwithstanding subsection
(b), the preceding sentence shall apply to dispositions after December 31, 1985, in
taxable years ending after such date.
“(f) Exemption From Withholding.--Notwithstanding subsection (b), the modification
of section 884 of the Internal Revenue Code of 1986 by reason of the amendment to
section 881 of such Code by section 1273(b)(1) of this Act shall apply to taxable
years beginning after December 31, 1986.”
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning after Dec. 31, 1983,
see section 711(c)(2)(A)(v) of Pub. L. 98-369, set out as a note under section 165
of this title.
EFFECTIVE DATE OF 1977 AMENDMENT
Amendment by Pub. L. 95-30 applicable to taxable years beginning after Dec. 31, 1976,
see section 106(a) of Pub. L. 95-30, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1051(c) of Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1975, with certain exceptions, see section 1051(i)
of Pub. L. 94-455, set out as a note under section 27 of this title.
Amendment by section 1901(a)(117) of Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out
as a note under section 2 of this title.
EFFECTIVE DATE OF 1972 AMENDMENT
Section 2 of Pub. L. 92-606 provided in part that:
“The amendments made by section 1 [enacting sections 935 and 6688 of this title, amending
sections 931, 932, 7654, and 7701 of this title and section 1421i of Title 48, Territories
and Insular Possessions, and enacting provisions set out as notes under sections 881
and 1442 of this title] (other than section 1(e)) [amending sections 881 and 1442
of this title] shall apply with respect to taxable years beginning after December
31, 1972.”
EFFECTIVE DATE OF 1971 AMENDMENT
Amendment by Pub. L. 92-178 applicable with respect to taxable years ending after
Dec. 31, 1971, except that a corporation may not be a DISC for any taxable year beginning
before Jan. 1, 1972, see section 507 of Pub. L. 92-178, set out as an Effective Date
note under section 991 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Section 107(b) of Pub. L. 89-809 provided that:
“The amendment made by this section [amending this section] shall apply with respect
to taxable years beginning after December 31, 1966.”
AUTHORITY OF GUAM, AMERICAN SAMOA, AND THE NORTHERN MARIANA ISLANDS TO ENACT REVENUE
LAWS
Section 1271 of Pub. L. 99-514 provided that:
“(a) In General.--Except as provided in subsection
(b), nothing in the laws of the United States shall prevent Guam, American Samoa,
or the Northern Mariana Islands from enacting tax laws (which shall apply in lieu
of the mirror system) with respect to income--
“(1) from sources within, or effectively connected with the conduct of a trade or
business within, any such possession, or
“(2) received or accrued by any resident of such possession.
“(b) Agreements To Alleviate Certain Problems Relating to Tax Administration.--Subsection
(a) shall apply to Guam, American Samoa, or the Northern Mariana Islands only if (and
so long as) an implementing agreement is in effect between the United States and such
possession with respect to--
“(1) the elimination of double taxation involving taxation by such possession and
taxation by the United States,
“(2) the establishment of rules under which the evasion or avoidance of United States
income tax shall not be permitted or facilitated by such possession,
“(3) the exchange of information between such possession and the United States for
purposes of tax administration, and
“(4) the resolution of other problems arising in connection with the administration
of the tax laws of such possession or the United States.
Any such implementing agreement shall be executed on behalf of the United States by
the Secretary of the Treasury after consultation with the Secretary of the Interior.
“(c) Revenues Not To Decrease.--The total amount of the revenue received by any possession
referred to in subsection
(a) pursuant to its tax laws during the implementation year and each of the 4 fiscal
years thereafter shall not be less than the revenue
(adjusted for inflation) which was received by such possession pursuant to tax laws
for its last fiscal year before the implementation year.
“(d) Nondiscriminatory Treatment Required.--Nothing in any tax law of a possession
referred to in subsection (a) may discriminate against any United States person or
any resident (corporate or otherwise)
of any other possession.
“(e) Enforcement.--
“(1) In general.--If the Secretary of the Treasury (after consultation with the Secretary
of the Interior)
determines that any possession has failed to comply with subsection
(c) or (d), the Secretary of the Treasury shall so notify the Governor of such possession
in writing. If such possession does not comply with subsection (c) or (d) (as the
case may be) within 90 days of such notification, the Secretary of the Treasury shall
notify the Congress of such noncompliance. Unless the Congress by law provides otherwise,
the mirror system of taxation shall be reinstated in such possession and shall be
in full force and effect for taxable years beginning after such notification to the
Congress.
“(2) Special rule for revenue requirements.--If the failure to comply with subsection
(c) is for good cause and does not jeopardize the fiscal integrity of the possession,
the Secretary may waive the requirements of subsection (c) for such period as he determines
appropriate.
“(f) Definitions and Special Rules.--
“(1) Implementation year.--For purposes of this section, the term “implementation
year” means the 1st fiscal year of the possession in which the tax laws authorized
by subsection (a) take effect.
“(2) Mirror system.--For purposes of this section, the mirror system of taxation consists
of the provisions of law (in effect on the day before the date of the enactment of
this Act [Oct. 22, 1986]) which make the provisions of the income tax laws of the
United States (as in effect from time to time) in effect in a possession of the United
States.
“(3) Special rule for northern mariana islands.--Notwithstanding the provisions of
the last clause of section 601(a) of Public Law 94-241 [48 U.S.C. 1681 note], the Commonwealth of the Northern Mariana Islands may elect to continue its
mirror system of taxation without regard to whether Guam enacts tax laws under the
authority provided in subsection (a).”
