Territorial Economic Recovery Act

H.R. 363 would modify federal tax law to provide favorable tax treatment for certain corporations operating in U.S. territories. Specifically, the bill would exclude income from controlled foreign corporations that conduct active business operations in Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands from being counted as "tested income" under federal tax rules. To qualify, a corporation would need to derive at least 80 percent of its gross income from these territories and have at least 75 percent of its income effectively connected to active business operations within them.

The bill aims to encourage economic investment and business activity in U.S. territories by making such investments more tax-advantaged compared to other foreign investments. This could potentially attract companies to establish operations in these territories, which supporters argue could generate jobs and economic growth. The bill is currently under consideration by the House Committee on Ways and Means and has not yet been voted on by the full House.