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Title 26 — Internal Revenue CodeRelease 119-73

§7654 Coordination of United States and certain possession individual income taxes

Title 26 › Subtitle Subtitle F— - Procedure and Administration › Chapter CHAPTER 78— - DISCOVERY OF LIABILITY AND ENFORCEMENT OF TITLE › Subchapter Subchapter D— - Possessions › § 7654

Last updated Apr 6, 2026|Official source

Summary

The United States must send the net income taxes it collects from people who qualify under sections 931 or 932(c) to the treasury of the U.S. possession where they are bona fide residents. “Net” means the amount after making proper adjustments for credits and refunds. Transfers must happen at least once a year. Specified possessions are Guam, American Samoa, the Northern Mariana Islands, and the Virgin Islands. The U.S. must also pay each possession withheld taxes for two groups: (1) members of the Armed Forces stationed there who owe no local tax because of the Servicemembers Civil Relief Act (50 U.S.C. 3901 et seq.), and (2) employees of the United States paid for work in the possession unless sections 931 or 932(c) apply. The Secretary must make rules to carry out these requirements, including rules to stop rebates of taxes that are tied to U.S.-source income and to require information from affected individuals.

Full Legal Text

Title 26, §7654

Internal Revenue Code — Source: USLM XML via OLRC

(a)The net collection of taxes imposed by chapter 1 for each taxable year with respect to an individual to whom section 931 or 932(c) applies shall be covered into the Treasury of the specified possession of which such individual is a bona fide resident.
(b)For purposes of this section—
(1)In determining net collections for a taxable year, an appropriate adjustment shall be made for credits allowed against the tax liability and refunds made of income taxes for the taxable year.
(2)The term “specified possession” means Guam, American Samoa, the Northern Mariana Islands, and the Virgin Islands.
(c)The transfers of funds between the United States and any specified possession required by this section shall be made not less frequently than annually.
(d)In addition to the amount determined under subsection (a), the United States shall pay to each specified possession at such times and in such manner as determined by the Secretary—
(1)the amount of the taxes deducted and withheld by the United States under chapter 24 with respect to compensation paid to members of the Armed Forces who are stationed in such possession but who have no income tax liability to such possession with respect to such compensation by reason of the Servicemembers Civil Relief Act (50 U.S.C. 3901 et seq.), and
(2)the amount of the taxes deducted and withheld under chapter 24 with respect to amounts paid for services performed as an employee of the United States (or any agency thereof) in a specified possession with respect to an individual unless section 931 or 932(c) applies.
(e)The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section and section 931 and 932, including regulations prohibiting the rebate of taxes covered over which are allocable to United States source income and prescribing the information which the individuals to whom such sections may apply shall furnish to the Secretary.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Servicemembers Civil Relief Act, referred to in subsec. (d)(1), is act Oct. 17, 1940, ch. 888, 54 Stat. 1178, which is classified generally to chapter 50 (§ 3901 et seq.) of Title 50, War and National Defense. For complete classification of this Act to the Code, see section 3901 of Title 50 and Tables.

Amendments

2018—Subsec. (d)(1). Pub. L. 115–141 substituted “50 U.S.C. 3901 et seq.” for “50 App. U.S.C. 501 et seq.” 2003—Subsec. (d)(1). Pub. L. 108–189 substituted “Servicemembers Civil Relief Act” for “Soldiers’ and Sailors’ Civil Relief Act”. 1988—Subsec. (a). Pub. L. 100–647 substituted “an individual to whom” for “an individual to which”. 1986—Pub. L. 99–514 amended section generally, substituting provisions relating to coordination of United States and certain possession individual income taxes for provisions relating to coordination of United States and Guam individual income taxes. 1983—Subsec. (d). Pub. L. 98–67 repealed

Amendments

made by Pub. L. 97–248. See 1982 Amendment note below. 1982—Subsec. (d). Pub. L. 97–248 provided that, applicable to payments of interest, dividends, and patronage dividends paid or credited after
June 30, 1983, subsec. (d) is amended by inserting “subchapter A of” before “chapter 24”. section 102(a), (b) of Pub. L. 98–67, title I, Aug. 5, 1983, 97 Stat. 369, repealed sub­title A (§§ 301–308) of title III of Pub. L. 97–248 as of the close of
June 30, 1983, and provided that the Internal Revenue Code of 1954 [now 1986] [this title] shall be applied and administered (subject to certain exceptions) as if such subtitle A (and the

Amendments

made by such subtitle A) had not been enacted. 1976—Subsecs. (d), (e). Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing. 1972—Pub. L. 92–606 substituted provisions relating to individual income taxes in Guam and their sharing by the United States and Guam, for provisions relating to payment to Guam and American Samoa of proceeds of tax on coconut and other vegetable oils.

Statutory Notes and Related Subsidiaries

Effective Date

of 1988 AmendmentAmendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date

of 1986 AmendmentAmendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99–514, set out as a note under section 931 of this title.

Effective Date

of 1972 AmendmentAmendment by Pub. L. 92–606 applicable with respect to taxable years beginning after Dec. 31, 1972, see section 2 of Pub. L. 92–606, set out in part as an

Effective Date

note under section 931 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 7654

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73