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Sec. 934. Limitation On Reduction In Income Tax Liability Incurred To The Virgin Islands

I.R.C. § 934(a) General Rule
Tax liability incurred to the Virgin Islands pursuant to this subtitle, as made applicable in the Virgin Islands by the Act entitled “An Act making appropriations for the naval service for the fiscal year ending June 30, 1922, and for other purposes”, approved July 12, 1921 (48 U.S.C. 1397), or pursuant to section 28(a) of the Revised Organic Act of the Virgin Islands, approved July 22, 1954 (48 U.S.C. 1642), shall not be reduced or remitted in any way, directly or indirectly, whether by grant, subsidy, or other similar payment, by any law enacted in the Virgin Islands, except to the extent provided in subsection (b).
I.R.C. § 934(b) Reductions Permitted With Respect To Certain Income
I.R.C. § 934(b)(1) In General
Except as provided in paragraph (2), subsection (a) shall not apply with respect to so much of the tax liability referred to in subsection (a) as is attributable to income derived from sources within the Virgin Islands or income effectively connected with the conduct of a trade or business within the Virgin Islands.
I.R.C. § 934(b)(2) Exception For Liability Paid By Citizens Or Residents Of The United States
Paragraph (1) shall not apply to any liability payable to the Virgin Islands under section 932(b).
I.R.C. § 934(b)(3) Special Rule For Non-United States Income Of Certain Foreign Corporations
I.R.C. § 934(b)(3)(A) In General
In the case of a qualified foreign corporation, subsection (a) shall not apply with respect to so much of the tax liability referred to in subsection (a) as is attributable to income which is derived from sources outside the United States and which is not effectively connected with the conduct of a trade or business within the United States.
I.R.C. § 934(b)(3)(B) Qualified Foreign Corporation
For purposes of subparagraph (A), the term “qualified foreign corporation” means any foreign corporation if less than 10 percent of—
I.R.C. § 934(b)(3)(B)(i)
the total voting power of the stock of such corporation, and
I.R.C. § 934(b)(3)(B)(ii)
the total value of the stock of such corporation,
is owned or treated as owned (within the meaning of section 958) by 1 or more United States persons.
I.R.C. § 934(b)(4) Determination Of Income Source, Etc.
The determination as to whether income is derived from sources within the United States or is effectively connected with the conduct of a trade or business within the United States shall be made under regulations prescribed by the Secretary.
(Added Pub. L. 86-779, 4(a)(1), Sept. 14, 1960, 74 Stat. 998, and amended Pub. L. 94-455, title XIX, 1901(a)(118), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1784, 1834; Pub. L. 97-248, title II, 213(b), Sept. 3, 1982, 96 Stat. 463; Pub. L. 97-455, 1(c), Jan. 12, 1983, 96 Stat. 2498; Pub. L. 98-369, div. A, title VIII, 801(d)(7), July 18, 1984, 98 Stat. 996; Pub. L. 99-514, title XII, 1275(a)(2)(A), (c)(1), (2), title XVIII, 1876(f)(2), Oct. 22, 1986, 100 Stat. 2598, 2900; Pub. L. 108-357, title IX, Sec. 908(c)(3), Oct. 22, 2004, 118 Stat. 1418.)
BACKGROUND NOTES
AMENDMENTS
2004 - Subsec. (b)(4). Pub. L. 108-357, 908(c)(3), amended par. (4) by striking “the Virgin Islands or” each place it appeared.
1986--Subsec. (a). Pub. L. 99-514, 1275(c)(2)(A), struck out “or (c) or in section 934A” after “subsection (b)”.
Subsec. (b). Pub. L. 99-514, 1275(c)(1), (2)(B), added subsec. (b) and struck out former subsec. (b) which excepted from subsec. (a) domestic or Virgin Islands corporations to the extent they derived income from sources without the United States under certain conditions.
Subsec. (c). Pub. L. 99-514, 1275(c)(1), struck out subsec. (c) which provided an exception to subsec. (a) of this section for individual citizens of the United States residing in the Virgin Islands to the extent their income is derived from sources within the Virgin Islands.
Subsec. (d). Pub. L. 99-514, 1275(c)(1), struck out subsec. (d) which related to requirement to supply information.
Subsec. (e). Pub. L. 99-514, 1275(a)(2)(A), struck out subsec. (e) which provided for tax treatment of intangible property income of certain domestic corporations.
Subsec. (f). Pub. L. 99-514, 1275(a)(2)(A), struck out subsec. (f) which provided a transitional rule for applying subsec. (b)(2) of this section with respect to taxable years beginning after Dec. 31, 1982, and before Jan. 1, 1985.
Pub. L. 99-514, 1876(f)(2), struck out subsec. (f) which provided that subsec. (a) of this section not apply in the case of a Virgin Islands corporation which is a FSC.
1984--Subsec. (f). Pub. L. 98-369 added subsec. (f) relating to FSC.
1983--Subsec. (a). Pub. L. 97-455 inserted “or in section 934A" after “subsection (b) or (c)”.
1982--Subsec. (b)(2). Pub. L. 97-248, 213(b)(1), substituted “65 percent” for “50 percent”.
Subsec. (e). Pub. L. 97-248, 213(b)(2), added subsec. (e).
Subsec. (f). Pub. L. 97-248, 213(b)(2), added a temporary subsec. (f) which provided that in applying subsec. (b)(2) with respect to taxable years beginning after December 31, 1982, and before January 1, 1985, “55 percent” shall be substituted for “65 percent” for taxable years beginning in calendar year 1983 and “60 percent” shall be substituted for “65 percent” for taxable years beginning in calendar year 1984.
1976--Subsec. (b). Pub. L. 94-455, 1901(a)(118), struck out “For the purposes of this subsection, all amounts received by such corporation within the United States, whether derived from sources within or without the United States, shall be considered as being derived from sources within the United States”.
Subsec. (d). Pub. L. 94-455, 1906(b)(13)(A), struck out “or his delegate” after “Secretary” in two places.
EFFECTIVE DATE OF 2004 AMENDMENT
Amendment by section 908(c)(3) of Pub. L. 108-357 effective for taxable years ending after the date of the enactment of this Act [Enacted: Oct. 22, 2004].
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 1275(a)(2)(A), (c)(1), (2) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99-514, set out as a note under section 931 of this title.
Amendment by section 1876(f)(2) of Pub. L. 99-514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99-514, set out as a note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to transactions after Dec. 31, 1984, in taxable years ending after such date, see section 805(a)(1) of Pub. L. 98-369, set out as an Effective Date note under section 921 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Section 1(e) of Pub. L. 97-455 provided that:
“(1) In general.--Except as provided in paragraph (2), the amendments made by this section [enacting this section and amending section 934 of this title] shall apply to amounts received after the date of the enactment of this Act [Jan. 12, 1983] in taxable years ending after such date.
“(2) Withholding.--The amendment made by subsection (b) [enacting section 1444 of this title] shall apply to payments made after the date of the enactment of this Act.”
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-248 applicable to taxable years beginning after Dec. 31, 1982, except that so much of this section to which section 936(h)(6) applies by reason of subsec. (e)(4) of this section is applicable to taxable years ending after July 1, 1982, see section 213(e)(1), (2) of Pub. L. 97-248 set out as a note under section 936 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(118) 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
Section 4(e)(1) of Pub. L. 86-779 provided that: “The amendments made by subsection (a) [enacting this section] shall apply to tax liability incurred with respect to taxable years beginning on or after January 1, 1960.”
REPORT ON POSSESSIONS CORPORATIONS
For provisions requiring the Secretary of the Treasury to submit a report to Congress respecting the operation and effect of subsec. (b) of this section for the year 1981 and each second calendar year thereafter, see section 441(a) of Pub. L. 98-369, set out as a note under section 936 of this title.
[934A. Repealed. Pub. L. 99-514, title XII, 1275(c)(3), Oct. 22, 1986, 100 Stat. 2599]
Section, added Pub. L. 97-455, 1(a), Jan. 12, 1983, 96 Stat. 2497, related to income tax rate on Virgin Islands source income.
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99-514, set out as an Effective Date of 1986 Amendment note under section 931 of this title.
[935. Repealed. Pub. L. 99-514, title XII, 1272(d)(2), Oct. 22, 1986, 100 Stat. 2594]
Section, added Pub. L. 92-606, 1(a), Oct. 31, 1972, 86 Stat. 1494, related to coordination of United States and Guam individual income taxes.
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99-514, set out as an Effective Date of 1986 Amendment note under section 931 of this title.