Territorial Tax Parity and Clarification Act
Territorial Tax Parity and Clarification Act is a short bill that would adjust how income from the sale of personal property is sourced for taxpayers living in U.S. possessions (such as territories like Puerto Rico, Guam, U.S. Virgin Islands, and American Samoa). Specifically, it amends the Internal Revenue Code to add reference to a second sourcing rule (section 932) alongside the existing rule (section 931) in the rule that determines where such income is taxed. The intent appears to be to ensure parity and reduce ambiguity between the different territorial sourcing rules, so gains from personally owned property sale in possessions are taxed consistently with other rules. The change would take effect for tax years beginning after December 31, 2023 (i.e., starting with the 2024 tax year).
Key Points
- 1The bill amends Section 865(j)(3) of the Internal Revenue Code by inserting “, 932,” after “931,” to modify the source rules for personal property sales in possessions.
- 2The purpose is to create parity between the sourcing rules, clarifying that both sections 931 and 932 apply to residents of U.S. possessions in determining the source of gains from personal property sales.
- 3Effective date: the change applies to taxable years beginning after December 31, 2023 (starting with the 2024 tax year).
- 4Scope: limited to how income from the sale of personal property by residents of U.S. possessions is sourced for tax purposes.
- 5Nature of change: a targeted, technical adjustment rather than a broad overhaul of possession tax rules.