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January 30, 2006
JS-3089
Treasury and IRS Issue Final Regulations Relating to U.S Possessions
WASHINGTON, DC – The Treasury Department and IRS today issued final regulations to provide guidance regarding taxation in U.S. possessions. The regulations reflect amendments to the Internal Revenue Code made by the American Jobs Creation Act of 2004 (AJCA). The final regulations provide guidance for determining whether an individual is a bona fide resident of the following U.S. possessions: American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands.
The income tax laws of the United States have long contained special provisions for the taxation of individuals residing in U.S. possessions. AJCA revised certain aspects of these provisions to prevent individuals who live and work in the United States from inappropriately reducing their combined U.S. and possessions tax. The Treasury Department and IRS issued a comprehensive package of proposed and temporary regulations in April of 2005 relating to U.S. possessions, including the determination of bona fide residency in a possession. In response to extensive comments on the regulations dealing with the determination of residency, Treasury and the IRS have amended and finalized the regulations dealing with residency. These final regulations incorporate many of the comments received on the proposed and temporary regulations, including a number of revisions intended to better reflect the realities of possessions life.
The text of the proposal regulations is attached.
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