U.S. Territories & Insular Areas

The United States governs five permanently inhabited territories — Puerto Rico (~3.2 million residents), Guam (~170K), U.S. Virgin Islands (~87K), Commonwealth of the Northern Mariana Islands (~47K), and American Samoa (~45K) — covering approximately 3.5 million Americans who have no Electoral College votes and, for most, no voting representation in Congress. The foundational constitutional question governing the territories was answered (badly) in the Insular Cases (1901–1922): the Supreme Court held that territories are not "incorporated" into the United States and thus the Constitution does not fully apply — a doctrine premised on racist colonial-era reasoning that courts have never fully overturned. Territorial residents born on U.S. territory are U.S. citizens (except American Samoans, who hold the unique status of "U.S. nationals") but cannot vote for President while residing in a territory. Congress has plenary power over the territories under Article IV, Section 3. The most significant current territorial governance issue is Puerto Rico's PROMESA framework — the Puerto Rico Oversight, Management, and Economic Stability Act (2016) created a federal oversight board (FOMB) to manage Puerto Rico's $70 billion debt restructuring, which has been the largest municipal bankruptcy-equivalent in U.S. history. Three Freely Associated States (Marshall Islands, Federated States of Micronesia, Palau) are sovereign nations with special economic and defense relationships with the United States under Compacts of Free Association.

Current Law (2026)

Legal Authority

• 48 U.S.C. § 731-752 — Puerto Rico (established as Commonwealth; self-governing under local constitution; Federal Relations Act; application of federal laws)
• 48 U.S.C. § 1401-1469 — Virgin Islands (Revised Organic Act of 1954; local government structure; application of federal laws; tax system mirrors Internal Revenue Code with local variations)
• 48 U.S.C. § 1421-1424 — Guam (Organic Act of 1950; local self-government; application of federal laws; Guam Development Fund)
• 48 U.S.C. § 1801-1808 — CNMI (Covenant to Establish a Commonwealth; self-governing; application of certain federal laws; immigration transition)
• 48 U.S.C. § 1681 — American Samoa (administered by DOI under executive order; limited self-governance; U.S. nationals, not citizens)
• 48 U.S.C. § 1901-1972 — Compact of Free Association (Compact States — Marshall Islands, Micronesia, Palau; economic assistance; defense relationship; immigration privileges; renewed 2023)
• 48 U.S.C. § 2101-2241 — PROMESA (Puerto Rico Oversight, Management, and Economic Stability Act; Financial Oversight Board; fiscal plan approval; debt restructuring; Title III bankruptcy-like proceedings)

How It Works

The U.S. territories and insular areas occupy a unique and often misunderstood position in American governance. Their approximately 3.5 million residents are overwhelmingly U.S. citizens who cannot vote for President, have no voting representation in Congress, and are subject to a patchwork of federal law application that differs from territory to territory.

Each territory has its own organic act (statutory charter from Congress) establishing its government structure — Puerto Rico and the CNMI are styled "commonwealths" with their own constitutions, but this designation has no legal effect distinct from other territories; all are ultimately subject to Congress's plenary power under the Territorial Clause (Article IV, Section 3). Each territory has an elected governor, local legislature, local courts, and a non-voting House delegate who can participate in debate and committee work but cannot vote on final passage. Federal laws apply to the territories only if Congress explicitly extends them or they apply "by their own terms," creating a patchwork: the Constitution applies in territories but not identically to states (under the early-1900s Insular Cases doctrine). Social Security and Medicare Part A apply fully; Medicaid is capped as a block grant rather than an open-ended federal match, costing territories billions in foregone coverage; and Supplemental Security Income (SSI) does not apply in any territory — the Supreme Court upheld this exclusion in United States v. Vaello-Madero (2022).

Puerto Rico's fiscal crisis illustrates the stakes of this patchwork. By 2016, the Commonwealth had accumulated over $70 billion in debt and $50 billion in unfunded pension obligations. Congress enacted PROMESA (48 U.S.C. §§ 2101–2241), creating a Financial Oversight and Management Board with authority to approve fiscal plans, certify budgets, and restructure debt through Title III proceedings modeled on municipal bankruptcy. Puerto Rico completed its restructuring in 2022 — reducing debt from $70+ billion to approximately $7 billion in the largest municipal debt restructuring in U.S. history — and the Oversight Board remains in place until Puerto Rico achieves sustained balanced budgets. Three Freely Associated States (Marshall Islands, Federated States of Micronesia, Palau) are sovereign nations whose citizens may live and work in the U.S. without visas; in exchange, the U.S. has strategic military access, including the Kwajalein missile testing range. The Compacts were renewed in 2023 for approximately $7 billion over 20 years. Territorial tax systems vary: the USVI and Guam operate "mirror code" systems — applying the Internal Revenue Code but collecting taxes locally rather than to the IRS; Puerto Rico has its own independent tax code; territorial residents generally pay no federal income tax on territory-earned income but are excluded from some federal tax benefits (the EITC was only recently extended to Puerto Rico). The Jones Act significantly affects all territorial economies by requiring U.S.-built and -crewed vessels for shipping between the mainland and territories.

How It Affects You

If you live in Puerto Rico: You are a U.S. citizen — but the federal social safety net treats you differently than a resident of any of the 50 states. SSI (Supplemental Security Income) does not apply in Puerto Rico — the Supreme Court upheld this in United States v. Vaello-Madero (2022), leaving Puerto Rican residents with disabilities or elderly in poverty without the federal income floor that every mainland state resident has. Medicaid is capped at a federal block grant rather than matching the open-ended federal commitment that applies to states — Puerto Rico receives roughly $400 million/year in federal Medicaid matching, while its actual Medicaid costs run several times that amount, forcing the Commonwealth to either restrict coverage or subsidize the gap from its own revenue. SNAP is similarly provided through a capped Nutrition Assistance Program (NAP) rather than the full federal entitlement. What does apply: Social Security (retirement, disability, survivors), Medicare, VA benefits, and most federal civil rights laws. For electoral rights: you can vote in presidential primaries if you participate in a primary election, but not in the general election for President. Your representative in Congress is a non-voting Resident Commissioner, elected to a 4-year term, who can vote in committee but not on the House floor. PROMESA's Financial Oversight Board continues to oversee the Commonwealth's fiscal plan following the 2022 debt restructuring.

If you live in Guam, U.S. Virgin Islands, or the Northern Mariana Islands (CNMI): You are a U.S. citizen under your respective organic acts and share the same voting limitations as Puerto Rican residents — no presidential vote, a non-voting House delegate. Federal program gaps vary by territory: Guam and the USVI operate "mirror code" tax systems, collecting local income taxes using the federal Internal Revenue Code structure but keeping revenues locally. The CNMI had a unique immigration transition that placed it under federal immigration law (previously it operated its own immigration system), and the CNMI-Only Transitional Worker (CW-1) visa category exists specifically for foreign workers in the CNMI who cannot use H-2B visas under the standard federal system. Guam's longstanding land claims — arising from federal seizure of Chamorro land after World War II — remain politically significant, with HR 7673 in the 119th Congress proposing to return excess federal land to original owners. All three territories are heavily dependent on federal grants and transfers, and federal disaster recovery assistance (Hurricane Maria in Puerto Rico, typhoons in Guam) has highlighted both the federal commitment and its limitations.

If you are from American Samoa or are an American Samoan national: American Samoans hold a unique and contested legal status — you are U.S. nationals (not citizens) by birth under 8 U.S.C. § 1408. You can live and work anywhere in the U.S., serve in the military (American Samoa has one of the highest per-capita military service rates of any jurisdiction), and travel on a U.S. passport — but you cannot vote in federal elections unless you naturalize through the standard citizenship process. The Fitisemanu v. United States litigation challenged this status, arguing that the 14th Amendment's Citizenship Clause ("all persons born or naturalized in the United States") requires citizenship for those born in American Samoa. Federal courts have split on this question; the Supreme Court has not definitively resolved it. The American Samoa government itself has formally opposed automatic citizenship extension, citing concerns about local customs (particularly communal land ownership) that could be disrupted by applying the full set of constitutional protections that accompany citizenship. If you are an American Samoan who wants to become a full citizen, naturalization is available after 5 years of lawful permanent residence in a U.S. state or DC.

If you're an investor or business considering operations in a U.S. territory: Territorial tax incentives — particularly in Puerto Rico — can be significant for individuals and businesses qualifying under local programs. Puerto Rico's Act 60 (2019, consolidating prior Acts 20/22) offers individual investors who relocate to Puerto Rico reduced tax rates on capital gains and passive income (potentially as low as 0% on Puerto Rico-sourced gains for qualifying new residents) and corporate tax rates for export services businesses (4%). These benefits require genuine residency or operational presence in Puerto Rico and careful compliance with both Puerto Rico law and IRS anti-abuse rules — the IRS has stepped up enforcement of Act 20/22/60 compliance, including audits of taxpayers who claim Puerto Rico residency while maintaining substantial U.S. connections. Separately, the CNMI, USVI, and Guam have their own economic incentive programs aimed at attracting investment in tourism, manufacturing, and services. The Jones Act significantly affects business logistics in all territories — goods shipped between the mainland and territories must use Jones Act-compliant vessels, increasing shipping costs and affecting everything from grocery prices to construction materials.

State Variations

Territories are not states — they are governed by Congress under the Territorial Clause. Key differences from states:

• No Electoral College votes (no presidential vote)
• Non-voting delegates in Congress (no senators)
• Federal law application varies by territory
• Medicaid funding is capped (not open-ended as in states)
• SSI does not apply
• Territorial courts are Article IV courts (judges lack life tenure)
• Congress has plenary power over territories — territorial laws can be overridden

Implementing Regulations

• 43 CFR Part 12 — DOI administrative requirements for insular area grants. Individual territory organic acts create self-governing frameworks. 48 U.S.C. codifies territorial law, but each territory operates primarily under its own locally enacted codes.

• 32 CFR Part 935 — Wake Island Code (73 sections): the complete civil and criminal legal code for Wake Island — a U.S. unincorporated territory consisting of Wake, Peale, and Wilkes Islands plus their surrounding reefs, lagoons, and airspace in the central Pacific. Wake Island illustrates the extreme of military territorial administration: unlike the populated territories (Puerto Rico, Guam) which have civilian organic acts and elected governments, Wake Island has no permanent civilian population and its entire legal order is administered by the Secretary of the Air Force, with civil administration authority delegated to the Air Force General Counsel and then to the Island Commander (§ 935.10).

  • Legal system: Wake Island has its own court — the Wake Island Court — which handles both civil and criminal matters. The Island Attorney prosecutes criminal offenses. There is no trial by jury on Wake Island (§ 935.105(b)) — all cases are decided by a judge. This is constitutionally permissible because the Supreme Court's Insular Cases doctrine holds that the right to a jury trial (a fundamental but not "natural" right) does not automatically apply in unincorporated territories.
  • Criminal procedure (Subpart K): follows U.S. District Court Rules of Criminal Procedure to the extent "practicable and necessary to the ends of justice"; bail is set by a Judge or Clerk at no more than the maximum fine for the offense (§ 935.100); contraband is forfeited to the United States (§ 935.101)
  • Permits and licensing (Subpart O — Registration and Island Permits): persons and vehicles on Wake Island require permits; unauthorized presence is a criminal offense; this reflects Wake Island's status as a restricted military installation where access requires Air Force authorization
  • Motor Vehicle Code (Subpart N): applies to all vehicles operated on the island; the largest single subpart (11 sections), reflecting the practical reality that vehicles on a small atoll are a common source of incidents
  • Recent amendment: 90 FR 34763 (2025) reflects the Air Force's most recent update to the Wake Island Code — the existence of an active 2025 Federal Register amendment confirms the Code remains operative law even as Wake Island hosts only temporary Air Force and contractor personnel
  • The Wake Island Code is a rare example of the federal government serving as the complete legislature, executive, and judiciary for a piece of U.S. territory — a power that flows directly from Congress's plenary authority over territories under Article IV, Section 3 of the Constitution

• 15 CFR Part 303 — ITA Watches, Watch Movements, and Jewelry Program: administers production incentive certificates that allow U.S. Virgin Islands and Guam manufacturers to export watches, watch movements, and jewelry to the U.S. mainland duty-free, up to annual territorial quotas. The program was established by Pub. L. 97-446 (1983) as a tool for economic development in the two territories and is jointly administered by Commerce (ITA) and Interior (Office of Insular Affairs).

  The mechanics: each eligible territorial manufacturer applies annually to ITA for a duty-exemption certificate tied to its production volume. The certificate entitles the holder to bring a proportionate share of watches or jewelry into the U.S. without paying the standard import duty — in effect, a conditional duty refund linked to territorial employment and production.

  • § 303.12 — Production incentive certificates issued to eligible territorial producers; certificates are allocated in proportion to each producer's verified production; producers must maintain records of territorial manufacturing operations and employment
  • § 303.13 — Administrative appeals procedure for certificate allocation decisions; producers may challenge ITA determinations within 30 days of receiving their allocation notice
  • § 303.14 — Allocation formula: each territory (USVI and Guam) has its own quota ceiling; within that ceiling, certificates are allocated among qualifying producers based on prior-year production data; new entrants receive a minimum initial allocation
  • § 303.17 — Annual duty-refund applications submitted on Form ITA-334P; the form documents actual imports during the year, prior production levels, and territorial employment; filing deadline is established by ITA notice each year
  • § 303.18 — Business succession rule: when a certificate-holding business is sold or transferred, entitlement to the program carries with the business assets if ITA approves the transfer; prevents manufacturers from stripping certificates from operating facilities

  The watch and jewelry program is one of the few sector-specific trade incentives that exist specifically for U.S. territorial economies. For USVI and Guam, it supports light manufacturing in industries that would otherwise struggle to compete with duty-free imports from countries with lower labor costs. The program has operated continuously since 1983, with ITA updating annual quota ceilings to reflect territory-wide production capacity.

Pending Legislation

• S 3958 (Sen. Wicker, R-MS) — Puerto Rico Nutrition Assistance Fairness Act: would phase Puerto Rico into the regular SNAP program, replacing the capped Nutrition Assistance Program (NAP) with full SNAP benefits and eligibility. Status: Introduced.
• HR 7397 — Puerto Rico Water Infrastructure Resilience Act: would authorize federal investment in Puerto Rico's water and wastewater infrastructure, addressing chronic system failures. Status: Introduced.
• HR 6479 — Would require establishment of an ACA health insurance exchange in Puerto Rico, extending marketplace coverage to island residents. Status: Introduced.
• HR 5976 — Would address passport labeling for U.S. nationals from American Samoa, clarifying their status documentation. Status: Introduced.
• HR 5656 — Would extend commercial driver's license (CDL) eligibility and reciprocity to residents of the U.S. Virgin Islands and Puerto Rico. Status: Introduced.
• HR 6063 — Would establish a USDA Rural Development Office in Guam, improving access to federal agricultural and rural development programs. Status: Introduced.
• HR 7673 — Would require the return of excess federal land in Guam to its original owners or their heirs, addressing longstanding land claims from post-WWII seizures. Status: Introduced.

Recent Developments

• Puerto Rico completed its historic debt restructuring under PROMESA Title III in 2022
• The Supreme Court's United States v. Vaello-Madero (2022) upheld the exclusion of territories from SSI
• Congress extended Compact of Free Association agreements with the Marshall Islands, Micronesia, and Palau in 2023 (~$7 billion over 20 years)
• Puerto Rico statehood, independence, and status referendum legislation has been introduced but not enacted
• Ongoing debates over equalizing federal program funding (Medicaid, SNAP, EITC) between territories and states
• American Samoa citizenship status litigation continues — Fitisemanu v. United States addressed whether persons born in American Samoa are citizens under the 14th Amendment
• OBBBA Medicaid risk for territories (2025): The One Big Beautiful Bill Act's Medicaid cuts — including new work requirements and expanded state cost-sharing — would disproportionately affect U.S. territories, where Medicaid is funded through capped federal block grants rather than the open-ended federal matching formula applicable to states. Puerto Rico, USVI, Guam, CNMI, and American Samoa receive Medicaid funding under FMAP-equivalent block grants with a cap; the ACA temporarily raised these caps but ongoing Medicaid equity for territories requires periodic congressional action. OBBBA's overall Medicaid framework could reduce territory grants if base caps are reduced, even without specific territory-targeted cuts. Puerto Rico's $2.4 billion annual Medicaid program is particularly exposed.
• Trump Pacific strategy and COFA alignment (2025): The Trump administration has reaffirmed the Compacts of Free Association with Palau, FSM, and RMI as central to Pacific security strategy, countering Chinese influence. COFA citizens in U.S. territories and the mainland benefit from various federal program eligibility provisions; OBBBA's potential restrictions on Medicaid and SNAP access for COFA citizens (who are not U.S. nationals) in states that expanded coverage beyond minimum requirements creates uncertainty. DOGE has targeted the Office of Insular Affairs for staffing reductions, affecting the federal capacity to administer territory programs and COFA obligations.
• Puerto Rico bankruptcy/PROMESA — debt restructuring nearing completion (2025): PROMESA's Financial Oversight and Management Board (FOMB) has overseen Puerto Rico's bankruptcy restructuring since 2016. The Commonwealth government's debt was substantially restructured in a 2022 plan of adjustment; remaining restructuring of PREPA (Puerto Rico Electric Power Authority) debt was progressing through 2024-2025. As PROMESA restructuring nears completion, debate has intensified over whether the FOMB should be dissolved or its role reduced — Puerto Rico's elected government has sought full fiscal autonomy. The statehood vs. enhanced commonwealth debate is unresolved, with Trump expressing personal ambivalence about Puerto Rican statehood.