119-hr364

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 364 Introduced in House

    (IH) ]

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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.

 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 
 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, 2024.
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