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§937 Residence and Source Rules Involving Possessions

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter N — Tax Based on Income From Sources Within or Without the United States › PART III — INCOME FROM SOURCES WITHOUT THE UNITED STATES › Subpart D — Possessions of the United States › § 937

Last updated Sep 22, 2026|Official source

Summary

Says who counts as a "bona fide resident" of Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, or the Virgin Islands for certain tax rules. A person must be in the possession at least 183 days in the tax year, must not have a tax home outside that possession, and must not have a closer connection to the United States or another country than to that possession. Whether a day counts is decided the same way as under section 7701(b). Says how to decide where income comes from for those possessions: use rules like the ones for U.S. source and U.S. business‑connected income, but if income is already treated as U.S. source or U.S. business‑connected, it is not treated as from the possession. If someone claims on their tax return that they became or stopped being a bona fide resident of one of these possessions, they must file a notice with the Secretary when and how the Secretary requires. If they took that position in any of their 3 tax years that ended before their first tax year ending after this rule was enacted, they must also file the notice.

Title 26, §937

Internal Revenue Code, Source: USLM XML via OLRC

(a)Bona fide resident

For purposes of this subpart, section 865(g)(3), section 876, section 881(b), paragraphs (2) and (3) of section 901(b), section 957(c), section 3401(a)(8)(C), and section 7654(a), except as provided in regulations, the term “bona fide resident” means a person—

(1)who is present for at least 183 days during the taxable year in Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, or the Virgin Islands, as the case may be, and

(2)who does not have a tax home (determined under the principles of section 911(d)(3) without regard to the second sentence thereof) outside such specified possession during the taxable year and does not have a closer connection (determined under the principles of section 7701(b)(3)(B)(ii)) to the United States or a foreign country than to such specified possession.

For purposes of paragraph (1), the determination as to whether a person is present for any day shall be made under the principles of section 7701(b).

(b)Source rules

Except as provided in regulations, for purposes of this title—

(1)except as provided in paragraph (2), rules similar to the rules for determining whether income is income from sources within the United States or is effectively connected with the conduct of a trade or business within the United States shall apply for purposes of determining whether income is from sources within a possession specified in subsection (a)(1) or effectively connected with the conduct of a trade or business within any such possession, and

(2)any income treated as income from sources within the United States or as effectively connected with the conduct of a trade or business within the United States shall not be treated as income from sources within any such possession or as effectively connected with the conduct of a trade or business within any such possession.

(c)Reporting requirement

(1)In general

If, for any taxable year, an individual takes the position for United States income tax reporting purposes that the individual became, or ceases to be, a bona fide resident of a possession specified in subsection (a)(1), such individual shall file with the Secretary, at such time and in such manner as the Secretary may prescribe, notice of such position.

(2)Transition rule

If, for any of an individual’s 3 taxable years ending before the individual’s first taxable year ending after the date of the enactment of this subsection, the individual took a position described in paragraph (1), the individual shall file with the Secretary, at such time and in such manner as the Secretary may prescribe, notice of such position.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The date of the enactment of this subsection, referred to in subsec. (c)(2), is the date of enactment of Pub. L. 108–357, which was approved Oct. 22, 2004.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 108–357, title VIII, § 908(d), Oct. 22, 2004, 118 Stat. 1657, provided that: “(1) In general.—Except as otherwise provided in this subsection, the

Amendments

made by this section [enacting this section and amending section 931, 932, 934, 935, 957, and 6688 of this title] shall apply to taxable years ending after the date of the enactment of this Act [Oct. 22, 2004]. “(2) 183-day rule.—section 937(a)(1) of the Internal Revenue Code of 1986 (as added by this section) shall apply to taxable years beginning after the date of the enactment of this Act. “(3) Sourcing.—section 937(b)(2) of such Code (as so added) shall apply to income earned after the date of the enactment of this Act.”