§934 Limitation on reduction in income tax liability incurred to the Virgin Islands

Statute Text — 26 U.S.C. §934

(a)General rule

Tax liability incurred to the Virgin Islands pursuant to this subtitle, as made applicable in the Virgin Islands by the Act entitled “An Act making appropriations for the naval service for the fiscal year ending June 30, 1922, and for other purposes”, approved July 12, 1921 (48 U.S.C. 1397), or pursuant to section 28(a) of the Revised Organic Act of the Virgin Islands, approved July 22, 1954 (48 U.S.C. 1642), shall not be reduced or remitted in any way, directly or indirectly, whether by grant, subsidy, or other similar payment, by any law enacted in the Virgin Islands, except to the extent provided in subsection (b).

(b)Reductions permitted with respect to certain income

(1)In general

Except as provided in paragraph (2), subsection (a) shall not apply with respect to so much of the tax liability referred to in subsection (a) as is attributable to income derived from sources within the Virgin Islands or income effectively connected with the conduct of a trade or business within the Virgin Islands.

(2)Exception for liability paid by citizens or residents of the United States

Paragraph (1) shall not apply to any liability payable to the Virgin Islands under section 932(b).

(3)Special rule for non-United States income of certain foreign corporations

(A)In general

In the case of a qualified foreign corporation, subsection (a) shall not apply with respect to so much of the tax liability referred to in subsection (a) as is attributable to income which is derived from sources outside the United States and which is not effectively connected with the conduct of a trade or business within the United States.

(B)Qualified foreign corporation

For purposes of subparagraph (A), the term “qualified foreign corporation” means any foreign corporation if less than 10 percent of—

(i)

the total voting power of the stock of such corporation, and

(ii)

the total value of the stock of such corporation, is owned or treated as owned (within the meaning of section 958) by 1 or more United States persons.

(4)Determination of income source, etc.

The determination as to whether income is derived from sources within the United States or is effectively connected with the conduct of a trade or business within the United States shall be made under regulations prescribed by the Secretary.

Treasury Regulations

Treas. Reg. §Treas. Reg. §1.934-1 Limitation on reduction in income tax liability incurred to the Virgin Islands
Treas. Reg. §Treas. Reg. §1.934-1(a) General rule.
Treas. Reg. §Treas. Reg. §1.934-1(b) Exception for Virgin Islands income—(1) In general.
Treas. Reg. §Treas. Reg. §1.934-1(c) Exception for qualified foreign corporations—(1) In general.
Treas. Reg. §Treas. Reg. §1.934-1(d) Examples.
Treas. Reg. §Treas. Reg. §1.934-1(e) Effective/applicability date.
Treas. Reg. §Treas. Reg. §1.934-1(i) §1.934-1(i)

4 Citing Cases

George C. Huff, Petitioner and The Government of the United States Virgin Islands, Intervenor, Petitioners 135 T.C. No. 30 · 2010

taxable year, (B) who, on his return of income tax to the Virgin Islands, reports income from all sources and identifies the source of each item shown on such return, and (C) who fully pays his tax liability referred to in section 934 (a) to the Virgin Islands with respect to such income, for purposes of calculating income tax liability to the United States, gross income shall not include any amount included in gross income on such return, and allocable deductions and credits shall not be taken

Helen Mining Co v. James Elliott, Sr. 859 F.3d 226 · Cir.

Vento v. Director of Virgin Islands Bureau of Internal Revenue 58 V.I. 753 · Cir.

Coffey v. Commissioner 663 F.3d 947 · Cir.

§934 — Limitation on reduction in income tax liability incurred to the Virgin Islands

4 Citing Cases