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The Secretary could have proposed that change when section 1.863-
8, Proposed Income Tax Regs., was proposed. We consider the
absence of proposed changes to section 1.863-6, Income Tax Regs.,
to be an indication that the Secretary intended section 1.863-6,
Income Tax Regs., not incorporate the rules of section 863(d)
relating to income earned from personal services performed in
international waters.
4. Whether Section 863(d) Violates the Anti-Discrimination
Provisions of the 1986 TRA or Results in Discriminatory
Treatment
Petitioner points out that section 931 was amended in 1986
because (inter alia):
[t]he possessions need tax systems that help them to
pursue development policies and to exercise greater
control over their own economic welfare.
H. Rept. 99-426, supra at 485, 1986-3 C.B. (Vol. 2) at 485; S.
Rept. 99-313, supra at 478, 1986-3 C.B. (Vol. 3) at 478.
Petitioner contends that it would be inconsistent for Congress to
give the possessions control over their economic welfare while
taking away their ability to tax their residents’ income earned
from personal services in international waters. We disagree that
Congress intended to end all U.S. taxation of the income of
residents of the possessions. Congress made this clear in the
Senate report, which states:
An individual who is a bona fide resident of Guam,
American Samoa, or the CNMI during the entire taxable
year is subject to U.S. taxation in the same manner as
a U.S. resident. * * * Thus, even a bona fide resident
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