H.R. 368: Territorial Tax Parity and Fairness Act

This bill excepts individuals who are bona fide residents of the Virgin Islands from including in gross income for U.S. federal tax purposes subpart F income received from certain corporations if such income may be sourced to the Virgin Islands.

Under current law, a U.S. shareholder of a controlled foreign corporation generally is required to include in gross income their pro rata share of dividends, interest, rent, royalties, and certain other types of income of the controlled foreign corporation (collectively known as subpart F income). A U.S. shareholder is a U.S. person (citizen, resident, domestic partnership or corporation, trust, or estate) that owns a certain percentage of stock in the controlled foreign corporation.

However, under current law, the definition of a U.S. person does not include individuals who are bona fide residents of the U.S. territories of Puerto Rico, Guam, America Samoa, and the Northern Mariana Islands who receive subpart F income from controlled foreign corporations that meets certain requirements for being sourced to the territory or being connected to or derived from a trade or business in the territory.

Written by the Congressional Research Service, Library of Congress.