Page:United States Statutes at Large Volume 100 Part 3.djvu/788

 100 STAT. 2596

PUBLIC LAW 99-514—OCT. 22, 1986 ^ '•

be effectively connected with the conduct of a trade or business in such a possession or the United States for the 3-year period ending with the close of the taxable year of such corporation (or for such part of such period as the corporation or any predecessor has been in existence), and A'A •.. "(C!) no substantial part of the income of such corporation is used (directly or indirectly) to satisfy obligations to per^, j^ sons who are not bona fide residents of such a possession or '^'*''^ the United States." J

(2) T E C H N I C A L AMENDMENTS.—

(A) Subsection (b) of section 881 is amended by redesignating paragraph (3) as paragraph (2) and by striking out paragraph (4). (B) Subsection (c) of section 1442 is amended to read as follows: "(c) EXCEPTION FOR CERTAIN POSSESSIONS CORPORATIONS.—For purposes of this section, the term 'foreign corporation' does not include a corporation created or organized in Guam, American Samoa, the Northern Mariana Islands, or the Virgin Islands or under the law of any such possession if the requirements of subparagraphs (A), (B), and (C) of section 881(b)(1) are met with respect to such corporation." PART II—TREATMENT OF THE VIRGIN ISLANDS

)

SEC. 1274. COORDIN.ATION OF IMTED STATES AND VIR(,IN ISLANDS INCOME TAXES.

(a) IN GENERAL.—Subpart D of part III of subchapter N of chapter 1 is amended by inserting after section 931 the following new section: "SEC. 932. COORDIN.ATION OF UNITED ST.ATES.AND VIRGIN ISLANDS INCO.ME T.4XES. "(a) TREATMENT OF UNITED STATES RESIDENTS.— •; "(1) APPLICATION OF SUBSECTION.—This subsection

shall apply

to an individual for the taxable year if^ "(A) such individual— "(i) is a citizen or resident of the United States (other H than a bona fide resident of the Virgin Islands at the •-,-,.. close of the taxable year), and &bj_.-. < "(ii) has income derived from sources within the Virgin Islands, or effectively connected with the conduct of a trade or business within such possession, for the taxable year, or ? "(B) such individual files a joint return for the taxable eyear with an individual described in subparagraph (A). "(2) FILING REQUIREMENT.—Each individual to whom this n- subsection applies for the taxable year shall file his income tax J' return for the taxable year with both the United States and the 1 Virgin Islands. i' "(3) EXTENT OF INCOME TAX LIABILITY.—In the case of an individual to whom this subsection applies in a taxable year for 5 purposes of so much of this title (other than this section and -^ section 7654) as relates to the taxes imposed by this chapter, the United States shall be treated as including the Virgin Islands. "(b) PORTION OF UNITED STATES TAX LIABILITY PAYABLE TO THE VIRGIN ISLANDS.—

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