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The bill delegates to the Secretary of the
Treasury the authority to prescribe regulations to
determine whether income is sourced in, or effectively
connected with the conduct of a trade or business in,
one of these possessions, and to determine whether an
individual is a resident of one of these possessions.
The committee anticipates that the Secretary will use
this authority to prevent abuse. * * *
Id. Thus, Congress stated a reasonable purpose for enacting
section 931(d)(2): to prevent abuse. This reading of section
931(d)(2) avoids any conflict between it and section 931(a).
Third, in closely related provisions in the 1986 TRA (i.e.,
sections 1271, 1272, and 1277(b),8 applicable to Guam, American
Samoa, and the CNMI), Congress used explicit language to impose a
precondition to implementation of the section 931(a) exclusion.
That is, Congress explicitly provided that the amendments to
section 931(a) and the grant to the possessions of authority over
their local tax systems would take effect only upon adoption of
tax implementation agreements between the U.S. and Guam, American
Samoa, and the CNMI. 1986 TRA secs. 1271(b), 1277(b). In
contrast, Congress did not use similar language conditioning
8 1986 TRA sec. 1277(b), 100 Stat. 2600, provides as
follows:
(b) Special rule for Guam, American Samoa, and the
Northern Mariana Islands.--The amendments made by this
subtitle shall apply with respect to Guam, American
Samoa, or the Northern Mariana Islands (and to
residents thereof and corporations created or organized
therein) only if (and so long as) an implementing
agreement under section 1271 is in effect between the
United States and such possession.
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