H.R.364 - Territorial Tax Equity and Economic Growth Act of 2025 (119th Congress)
Summary
H.R. 364, the "Territorial Tax Equity and Economic Growth Act of 2025," aims to amend the Internal Revenue Code of 1986 to modify residence and source rules for income earned in U.S. possessions. The bill seeks to stimulate economic recovery in Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. It modifies the definition of a bona fide resident and adjusts source rules for income, including sales of personal property.
Expected Effects
The bill is intended to incentivize residency and business activity in U.S. possessions by altering tax rules. This could lead to increased investment and economic activity in these areas. The changes to source rules may affect how income is taxed, potentially reducing the tax burden on businesses operating in these territories.
Potential Benefits
- Economic Growth: The modifications to tax rules could stimulate economic activity and investment in U.S. territories.
- Increased Residency: Looser residency requirements may attract more individuals to establish residency in these areas.
- Business Incentives: Changes to source rules could make it more attractive for businesses to operate in U.S. possessions.
- Tax Equity: The bill aims to address tax inequities faced by residents and businesses in U.S. territories.
- Simplified Tax Compliance: Modifying the rules could simplify tax compliance for individuals and businesses operating in these areas.
Most Benefited Areas:
Potential Disadvantages
- Potential Revenue Loss: The changes could lead to a decrease in federal tax revenue if businesses shift income to U.S. possessions.
- Complexity: The modified rules, while intending to simplify, could introduce new complexities in tax law.
- Abuse Potential: Altered residency requirements could be exploited for tax avoidance purposes.
- Uncertainty: The economic impact of these changes is uncertain and may not achieve the desired level of economic recovery.
- Limited Scope: The bill focuses solely on tax rules and may not address other factors hindering economic growth in these territories.
Constitutional Alignment
The bill falls under Congress's power to lay and collect taxes, duties, imposts, and excises, as outlined in Article I, Section 8, Clause 1 of the Constitution. Additionally, Article IV, Section 3, Clause 2 grants Congress the power to make rules and regulations respecting the territory or other property belonging to the United States. The bill appears to align with these constitutional provisions by addressing tax policy related to U.S. territories.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).