26 U.S.C. § 932

Coordination of United States and Virgin Islands income taxes

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(a) Treatment of United States residents(1) Application of subsectionThis subsection shall apply to an individual for the taxable year if—(A) such individual—(i) is a citizen or resident of the United States (other than a bona fide resident of the Virgin Islands during the entire taxable year), and(ii) has income derived from sources within the Virgin Islands, or effectively connected with the conduct of a trade or business within such possession, for the taxable year, or(B) such individual files a joint return for the taxable year with an individual described in subparagraph (A).(2) Filing requirement

Each individual to whom this subsection applies for the taxable year shall file his income tax return for the taxable year with both the United States and the Virgin Islands.

(3) Extent of income tax liability

In the case of an individual to whom this subsection applies in a taxable year for purposes of so much of this title (other than this section and section 7654) as relates to the taxes imposed by this chapter, the United States shall be treated as including the Virgin Islands.

(b) Portion of United States tax liability payable to the Virgin Islands(1) In general

Each individual to whom subsection (a) applies for the taxable year shall pay the applicable percentage of the taxes imposed by this chapter for such taxable year (determined without regard to paragraph (3)) to the Virgin Islands.

(2) Applicable percentage(A) In general

For purposes of paragraph (1), the term “applicable percentage” means the percentage which Virgin Islands adjusted gross income bears to adjusted gross income.

(B) Virgin Islands adjusted gross income

For purposes of subparagraph (A), the term “Virgin Islands adjusted gross income” means adjusted gross income determined by taking into account only income derived from sources within the Virgin Islands and deductions properly apportioned or allocable thereto.

(3) Amounts paid allowed as credit

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the taxes required to be paid to the Virgin Islands under paragraph (1) which are so paid.

(c) Treatment of Virgin Islands residents(1) Application of subsectionThis subsection shall apply to an individual for the taxable year if—(A) such individual is a bona fide resident of the Virgin Islands during the entire taxable year, or(B) such individual files a joint return for the taxable year with an individual described in subparagraph (A).(2) Filing requirement

Each individual to whom this subsection applies for the taxable year shall file an income tax return for the taxable year with the Virgin Islands.

(3) Extent of income tax liability

In the case of an individual to whom this subsection applies in a taxable year for purposes of so much of this title (other than this section and section 7654) as relates to the taxes imposed by this chapter, the Virgin Islands shall be treated as including the United States.

(4) Residents of the Virgin IslandsIn the case of an individual—(A) who is a bona fide resident of the Virgin Islands during the entire 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 into account.(d) Special rule for joint returns

In the case of a joint return, this section shall be applied on the basis of the residence of the spouse who has the greater adjusted gross income (determined without regard to community property laws) for the taxable year.

(e) Special rule for applying section to tax imposed in Virgin Islands

In applying this section for purposes of determining income tax liability incurred to the Virgin Islands, the provisions of this section shall not be affected by the provisions of Federal law referred to in section 934(a).

(Added Pub. L. 99–514, title XII, § 1274(a), Oct. 22, 1986, 100 Stat. 2596; amended Pub. L. 100–647, title I, § 1012(w)(1)–(3), Nov. 10, 1988, 102 Stat. 3530; Pub. L. 108–357, title VIII, § 908(c)(2), Oct. 22, 2004, 118 Stat. 1656.)Editorial NotesPrior Provisions

A prior section 932, acts Aug. 16, 1954, ch. 736, 68A Stat. 292; Nov. 13, 1966, Pub. L. 89–809, title I, § 103(m), 80 Stat. 1554; Oct. 31, 1972, Pub. L. 92–606, § 1(f)(2), (3), 86 Stat. 1497; Apr. 7, 1986, Pub. L. 99–272, title XII, § 12103(a), 100 Stat. 285, related to income taxation of citizens of possessions of the United States, prior to repeal by Pub. L. 99–514, title XII, § 1272(d)(1), Oct. 22, 1986, 100 Stat. 2594.

Amendments

2004—Subsecs. (a)(1)(A)(i), (c)(1)(A), (4)(A). Pub. L. 108–357 substituted “during the entire taxable year” for “at the close of the taxable year”.

1988—Subsec. (c)(2). Pub. L. 100–647, § 1012(w)(3), substituted “an income tax return” for “his income tax return”.

Subsec. (c)(4). Pub. L. 100–647, § 1012(w)(2), amended par. (4) generally. Prior to amendment, par. (4) read as follows: “In the case of an individual who is a bona fide resident of the Virgin Islands at the close of the taxable year and 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, 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.”

Subsec. (e). Pub. L. 100–647, § 1012(w)(1), substituted current heading for “Section not to apply to tax imposed in Virgin Islands” and amended text generally. Prior to amendment, text read as follows: “This section shall not apply for purposes of determining income tax liability incurred to the Virgin Islands.”

Statutory Notes and Related SubsidiariesEffective Date of 2004 Amendment

Amendment by Pub. L. 108–357 applicable to taxable years ending after Oct. 22, 2004, see section 908(d)(1) of Pub. L. 108–357, set out as an Effective Date note under section 937 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date

Enactment of section 932 and repeal of prior section 932 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99–514, set out as an Effective Date of 1986 Amendment note under section 931 of this title.

Regulations

Pub. L. 99–514, title XII, § 1274(c), Oct. 22, 1986, 100 Stat. 2598, as amended by Pub. L. 100–647, title I, § 1012(w)(4), Nov. 10, 1988, 102 Stat. 3530, provided that: “The Secretary of the Treasury or his delegate shall prescribe such regulations as may be necessary or appropriate for applying the Internal Revenue Code of 1986 [this title] for purposes of determining tax liability incurred to the Virgin Islands.”

Authority To Impose Nondiscriminatory Local Income Taxes

Pub. L. 99–514, title XII, § 1274(b), Oct. 22, 1986, 100 Stat. 2597, provided that: “Nothing in any provision of Federal law shall prevent the Virgin Islands from imposing on any person nondiscriminatory local income taxes. Any taxes so imposed shall be treated in the same manner as State and local income taxes under section 164 of the Internal Revenue Code of 1954 [now 1986] and shall not be treated as taxes to which section 901 of such Code applies.”

Notes of Decisions

Cited in 48 cases (1 in the last 5 years), 1931–2021 · leading case: Vento v. Dir. of Virgin Islands Bureau of Internal Revenue, 715 F.3d 455 (3rd Cir. 2013).

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Vento v. Dir. of Virgin Islands Bureau of Internal Revenue, 715 F.3d 455 (3rd Cir. 2013). · cites it 9× “” 26 U.S.C. § 932 (c) (1986). If the taxpayer “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 “fully pays his tax liability .”

Comm'r of IRS v. Est. of Travis L. Sanders, 834 F.3d 1269 (11th Cir. 2016). · cites it 3× “26 U.S.C. § 932 (c)(2). Taxpayers who have USVI-sourced income but are not bona fide residents of the USVI must file tax returns with both the VIBIR and the United States Internal Revenue Service (“IRS”).”

Bartholomew v. Dist. of Columbia Off. of Tax & Revenue, 78 A.3d 309 (D.C. 2013). · cites it 8× “04 (2001), and 26 U.S.C. § 932 (c) (2003). 2 OTR reaffirmed its determination that Bartholomew was not a bona fide resident of the USVI: No new information was presented at the informal conference, which was held on 3/17/2011, to establish your intent to abandon your residence…”

Gov't of the United States Virgin Islands v. Comm'r of IRS, 743 F.3d 790 (11th Cir. 2014). · cites it 2× “Under the rules governing United States and Virgin Islands taxation, bona fide Virgin Islands residents satisfy both their United States and Virgin Islands tax obligations by filing a return with the Virgin Islands Bureau of Internal Revenue (“BIR”) and paying taxes on their…”

Randolph v. Comm'r of Internal Revenue, 76 F.2d 472 (8th Cir. 1935). · cites it 3× “9 , 10, 26 USCA § 932 (a), which provides: “The term ‘dividend’ when used in this title [chapter] * * * means any distribution made by a corporation to its shareholders, whether in money or in other property, out of its earnings or profits accumulated after February 28, 1913.”

Comm'r of Internal Revenue v. Babson, 70 F.2d 304 (7th Cir. 1934). · cites it 3× “The Board of Tax Appeals decided that the payments in redemption of stock should be treated as capital transactions, and that only the gain was taxable under section 201 (c) and (h) of the Revenue Act of 1926, 26 USCA § 932 (c, h) 1 . In other words, the Board held that the…”

Coffey v. Comm'r, 663 F.3d 947 (8th Cir. 2011). · cites it 2× “” 26 U.S.C. §§ 932 (c)(2), 7654(a); 48 U.S.”

Hyman v. Helvering, 71 F.2d 342 (D.C. Cir. 1934). · cites it 2× “(g), Revenue Act 1926 (26 USCA § 932 (g) does not turn every partial liquidation into a dividend whenever there are undistributed earnings in the corporation but only when the distribution is made under specified circumstances; in other words, that it is the time and manner of…”

Comm'r of Internal Revenue v. Brown, 69 F.2d 602 (7th Cir. 1934). · cites it 3× “These eases are brought here by the Commissioner to reverse a holding of the Board of Tax Appeals that the redemption and cancellation of the preferred stock in question did not take place “at such time and in such manner” as to make it essentially equivalent to the distribution…”

Judith Coffey v. CIR, 987 F.3d 808 (8th Cir. 2021). “, citing 26 U.S.C. §§ 932 (c)(2), 7654(a); and 48 U.”

Comm'r of Internal Revenue v. Cordingley, 78 F.2d 118 (1st Cir. 1935). · cites it 2× “253, 255, 26 USCA § 932 and note), and 1926, c. 27, § 201 (g) (44 Stats.”

Harter v. Helvering, 79 F.2d 12 (2d Cir. 1935). · cites it 2× “The commissioner held that since the Boxboard Company, when it got the New Company shares, did not get its assets, the payment made by it to retire the preferred shares was not a payment out of the earnings of the New Company; it was borrowed money and not “essentially…”

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— 26 U.S.C. § 932(a) — 1 case

Comm'r of Internal Revenue v. Aaron Ward & Sons, 65 F.2d 758 (3rd Cir. 1933).

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