U.S. Code » Title 26 » Subtitle Subtitle A— Income Taxes › Chapter CHAPTER 1— NORMAL TAXES AND SURTAXES › Subchapter Subchapter N— Tax Based on Income From Sources Within or Without the United States › Part PART III— INCOME FROM SOURCES WITHOUT THE UNITED STATES › Subpart Subpart D— Possessions of the United States

26 U.S.C. § 933

Income from sources within Puerto Rico

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The following items shall not be included in gross income and shall be exempt from taxation under this subtitle:(1) Resident of Puerto Rico for entire taxable year

In the case of an individual who is a bona fide resident of Puerto Rico during the entire taxable year, income derived from sources within Puerto Rico (except amounts received for services performed as an employee of the United States or any agency thereof); but such individual shall not be allowed as a deduction from his gross income any deductions (other than the deduction under section 151, relating to personal exemptions), or any credit, properly allocable to or chargeable against amounts excluded from gross income under this paragraph.

(2) Taxable year of change of residence from Puerto Rico

In the case of an individual citizen of the United States who has been a bona fide resident of Puerto Rico for a period of at least 2 years before the date on which he changes his residence from Puerto Rico, income derived from sources therein (except amounts received for services performed as an employee of the United States or any agency thereof) which is attributable to that part of such period of Puerto Rican residence before such date; but such individual shall not be allowed as a deduction from his gross income any deductions (other than the deduction for personal exemptions under section 151), or any credit, properly allocable to or chargeable against amounts excluded from gross income under this paragraph.

(Aug. 16, 1954, ch. 736, 68A Stat. 293; Pub. L. 99–514, title XII, § 1272(d)(3), Oct. 22, 1986, 100 Stat. 2594.)Editorial NotesAmendments

1986—Pub. L. 99–514 inserted “, or any credit,” in pars. (1) and (2).

Statutory Notes and Related SubsidiariesEffective Date of 1986 Amendment

Amendment by Pub. L. 99–514 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 a note under section 931 of this title.

Notes of Decisions
Cited in 40 cases (2 in the last 5 years), 1930–2022 · leading case: United States v. Vaello Madero, 596 U.S. 159 (2022).
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United States v. Vaello Madero, 596 U.S. 159 (2022). · cites it 2× “, 26 U. S. C. §§933 , 2209, 4081–4084. But just as not every federal tax extends to residents of Puerto Rico, so too not every federal benefits program extends to residents of Puerto Rico.”
Vento v. Dir. of Virgin Islands Bureau of Internal Revenue, 715 F.3d 455 (3rd Cir. 2013). · cites it 2× “3d at 61-62 (taxpayers were not bona fide residents of Puerto Rico under 26 U.S.C. § 933 when they spent 93 days there compared to 138 days in Illinois); Johansson, 336 F.”
Williams v. Comm'r of Internal Revenue, 44 F.2d 467 (8th Cir. 1930). · cites it 6× “The sections establishing the method of computing the gain or loss are sections 202 and 204 (26 USCA §§ 933, 935). Whether such gain or loss shall be recognized after it has been computed, and to what exent, depends upon section 203 (26 USCA § 934), the opening sentence of which…”
United States v. Flete-Garcia, 925 F.3d 17 (1st Cir. 2019). “See 26 U.S.C. § 933 (1). As a result, Puerto Rico residents were particularly attractive targets for Flete-Garcia's scheme because they were less likely to file authentic federal income tax returns.”
Bergersen v. Comm'r, 109 F.3d 56 (1st Cir. 1997). · cites it 2× “26 U.S.C. § 933 . After the plant moved, Ortho-Tain elected to be treated as a possessions corporation, exempting it from U.”
United States v. Vaello-Madero, 956 F.3d 12 (1st Cir. 2020). “-30- federal government), see 26 U.S.C. § 933 , justifies the categorical exclusion of low income, poorly resourced elderly, disabled, and blind individuals residing in Puerto Rico.”
Crane v. Comm'r of Internal Revenue, 68 F.2d 640 (1st Cir. 1934). · cites it 2× “The rights of the parties are determined by section 202 (a) and (b) and section 204 (b) of the Revenue Act of 1926, 26 USCA §§ 933 (a, b), 935 (b), as interpreted by Regulations 69, article 1561, the pertinent provisions whereof follow: "Sec.”
Medchem (P.R.), Inc. v. Comm'r, 295 F.3d 118 (1st Cir. 2002). “individual citizens, the Puerto Rican source income exclusion is now contained in 26 U.S.C. § 933 . 10 . Since 1976, there have been many amendments to the possessions corporations taxation system in general and to § 936 in particular, including those imposed by the Tax Equity…”
Gautier Torres v. Mathews, 426 F. Supp. 1106 (D.P.R. 1977). · cites it 2× “[2] Nor in fact has Congress done so historically. See Leibowitz, supra note 1, at 269-70.”
Igartúa-De La Rosa v. United States, 386 F.3d 313 (1st Cir. 2004). “26 U.S.C. § 933 . This is an irrelevant benefit to most residents of Puerto Rico because of their low income levels.”
Larkin v. United States, 78 F.2d 951 (8th Cir. 1935). “11 (26 USCA § 933 (a). “Sec. 204. (a) The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property.”
Clinton Cotton Mills v. Comm'r of Internal Rev., 78 F.2d 292 (4th Cir. 1935). “9 , 11 (26 USCA § 933 (a, b, c); Revenue Act of 1928, c.”
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— 26 U.S.C. § 933(b) — 1 case
Fid.-Philadelphia Trust Co. v. Comm'r of Int. Rev., 47 F.2d 36 (3rd Cir. 1931).
— 26 U.S.C. § 933(d) — 1 case
Williams v. Comm'r of Internal Revenue, 44 F.2d 467 (8th Cir. 1930). “The sections establishing the method of computing the gain or loss are sections 202 and 204 (26 USCA §§ 933, 935). Whether such gain or loss shall be recognized after it has been computed, and to what exent, depends upon section 203 (26 USCA § 934), the opening sentence of which…”
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