The Restore Economic Vitality and Investment in the Virgin Islands Act (REVIVE VI Act) would change how certain income is treated under the global intangible low-taxed income (GILTI) rules in the Internal Revenue Code. Specifically, it adds a new category called “qualified Virgin Islands services income” and excludes this income from GILTI for a defined group of U.S. shareholders. The income must be compensation for labor or personal services performed in the Virgin Islands by a corporation formed under Virgin Islands law, be attributable to services performed in VI, and be effectively connected with a Virgin Islands trade or business. A special definition of “specified United States shareholder” includes individuals, trusts, estates, and certain closely held C corporations that acquired their stake in the foreign corporation before the end of 2023. The bill directs that these changes apply to foreign corporations’ taxable years after enactment and to U.S. shareholders’ taxable years ending with or within which those foreign years end, and it authorizes regulations to prevent abuse. In short, the bill aims to reduce or remove GILTI exposure for certain Virgin Islands–based service income earned by a VI-formed company, with the intent of boosting Virgin Islands economic activity and investment.
Key Points
- 1Adds a new GILTI category: “qualified Virgin Islands services income.”
- 2Requirements for qualified Virgin Islands services income:
- 3- Compensation for labor or personal services performed in the Virgin Islands by a corporation formed under Virgin Islands law.
- 4- Income attributable to services performed in the Virgin Islands for the benefit of that corporation.
- 5- Income effectively connected with conducting a trade or business in the Virgin Islands.
- 6Defines “specified United States shareholder” as:
- 7- An individual, trust, or estate, or
- 8- A closely held C corporation that acquired its stake in the foreign corporation that derived the VI services income before December 31, 2023.
- 9Regulatory framework: The Secretary would issue regulations or guidance to implement the new subparagraphs and to prevent abuse.
- 10Effective date: Applies to taxable years of foreign corporations beginning after enactment and to taxable years of U.S. shareholders with or within which those foreign years end.