What This Bill Does
This bill changes federal tax rules for certain people living in the Virgin Islands. It says that residents of the Virgin Islands who own shares in companies organized there will not be treated as U.S. persons for certain income calculations related to those companies.
Who It Affects
- Bona fide residents of the Virgin Islands who own stock in Virgin Islands corporations
- Virgin Islands corporations organized under Virgin Islands law
- The Internal Revenue Service (the federal agency that collects taxes)
Key Provisions
- Bona fide residents of the Virgin Islands who own shares in Virgin Islands corporations will not be counted as "United States persons" when calculating certain income inclusions from those corporations (Sec. 2(a))
- This rule only applies if dividends received by the resident from that corporation would be treated as income coming from within the Virgin Islands under existing tax law (Sec. 2(a))
What Changes
The definition of "United States person" in the Internal Revenue Code will be expanded to exclude Virgin Islands residents who own shares in Virgin Islands companies, but only under the specific conditions listed above.
Important Definitions
- Bona fide resident: Not defined in bill text
- Taxable year: Not defined in bill text
Effective Date
The changes apply to taxable years of foreign corporations beginning after December 31, 2022, and taxable years of individuals that overlap with those corporation tax years. (Sec. 2(c))
I
118TH CONGRESS
1ST SESSION H. R. 1039
To amend the Internal Revenue Code of 1986 to provide that certain bona
fide residents of the Virgin Islands who are shareholders of corporations
organized under the laws of the Virgin Islands are not treated as United
States persons for purposes of determining certain inclusions in gross
income with respect to such corporations.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 14, 2023
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 provide
that certain bona fide residents of the Virgin Islands
who are shareholders of corporations organized under
the laws of the Virgin Islands are not treated as United
States persons for purposes of determining certain inclu-
sions in gross income with respect to such corporations.
Be it enacted by the Senate and House of Representa-
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tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘Territorial Tax Parity
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and Fairness Act’’.
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•HR 1039 IH
SEC. 2. CERTAIN BONA FIDE RESIDENTS OF VIRGIN IS-
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LANDS.
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(a) IN GENERAL.—Section 957(c) of the Internal
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Revenue Code of 1986 is amended by striking ‘‘and’’ at
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the end of paragraph (1), by redesignating paragraph (2)
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as paragraph (3), and by inserting after paragraph (1)
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the following new paragraph:
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‘‘(2) with respect to a corporation organized
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under the laws of the Virgin Islands, such term does
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not include an individual who is a bona fide resident
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of the Virgin Islands, if a dividend received by such
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individual during the taxable year from such cor-
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poration would, for purposes of section 934(b)(1), be
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treated as income derived from sources within the
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Virgin Islands, and’’.
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(b) CONFORMING AMENDMENT.—Section 957(c) of
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such Code is amended by striking ‘‘paragraph (2)’’ in the
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last sentence and inserting ‘‘paragraph (3)’’.
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(c) EFFECTIVE DATE.—The amendments made by
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this section shall apply to taxable years of foreign corpora-
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tions beginning after December 31, 2022, and taxable
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years of individuals within which or with which such tax-
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able years of foreign corporations end.
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Æ
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