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In 1986, Congress concluded that the Internal Revenue Code,
developed for the complex U.S. economy, may be inappropriate for
Guam, American Samoa, and the CNMI. S. Rept. 99-313, at 477-478
(1985), 1986-3 C.B. (Vol. 3) 477-478. Thus, except as explained
in the next paragraph of this opinion, Congress granted to those
possessions control over their local tax systems. 1986 TRA sec.
1271(a), 100 Stat. 2591.
3. Concerns About the Potential for Abuse Under the Mirror
System of Taxation
In 1986, Congress also concluded that the mirror systems of
tax then in effect in Guam, American Samoa, and the CNMI created
opportunities for abuse by U.S. taxpayers. S. Rept. 99-313,
supra at 478, 1986-3 C.B. (Vol. 3) at 478. As a result, for each
of the specified possessions, Congress delayed (1) implementation
of the 1986 amendments to section 931, and (2) the grant of
control over the local tax system until that possession and the
Secretary executed a tax implementation agreement providing for
elimination of double taxation, prevention of tax abuse, and
sharing of tax information. 1986 TRA sec. 1271(b), 100 Stat.
2592.7
7 Sec. 1271(b) of the Tax Reform Act of 1986 (1986 TRA),
Pub. L. 99-514, provides:
(b) Agreements To Alleviate Certain Problems
Relating to Tax Administration.–-Subsection (a) shall
apply to Guam, American Samoa, or the Northern Mariana
Islands only if (and so long as) an implementing
agreement is in effect between the United States and
(continued...)
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