US Territory Tax Reform: New Residency and Income Sourcing Rules for Economic Growth.
This bill modifies the tax rules defining who qualifies as a bona fide resident of US territories (like Puerto Rico or Guam), increasing the required physical presence to 122 days annually. It also updates income sourcing rules, clarifying how income earned by territory residents is taxed, specifically aiming to boost economic recovery in these areas. These changes directly affect the federal tax obligations of territory residents.
Key points
The requirement to be considered a bona fide resident of a US territory is increased to 122 days of physical presence during the tax year.
New rules clarify that income from preparatory or auxiliary activities conducted in the US will not be treated as US-sourced income for territory residents.
The amendments apply to tax years beginning after December 31, 2022.
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