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business in the USVI would have to file a return with the IRS
declaring its worldwide income, as well as a return with the BIR
declaring its USVI source income. See Bizcap, Inc. v. Olive,
supra; Condor Intl., Inc. v. Commissioner, supra.
Section 28(a) of the Revised Organic Act amended the Naval
Appropriations Act regarding dual return requirements and
provided as follows:
SEC. 28. (a) The proceeds of customs duties, the
proceeds of the United States income tax, the proceeds
of any taxes levied by the Congress on the inhabitants
of the Virgin Islands, * * * shall be covered into the
treasury of the Virgin Islands, and shall be available
for expenditure as the Legislature of the Virgin
Islands may provide: Provided, That the term
"inhabitants of the Virgin Islands" as used in this
section shall include all persons whose permanent
residence is in the Virgin Islands, and such persons
shall satisfy their income tax obligations under
applicable taxing statutes of the United States by
paying their tax on income derived from all sources
both within and outside the Virgin Islands into the
treasury of the Virgin Islands: * * * [Emphasis
added.]
The foregoing provision, which became known as the "inhabitant
rule", allowed taxpayers such as petitioner to satisfy their
obligation with respect to both United States and USVI taxes by
filing one income tax return, reporting all income earned, with
the BIR and by paying to the BIR the appropriate amount of tax.
See Bizcap, Inc. v. Olive, supra; Condor Intl., Inc. v.
Commissioner, supra.
During 1986, Congress enacted the Tax Reform Act of 1986
(TRA 1986), Pub. L. 99-514, 100 Stat. 2085. Section 1275(b) of
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