Territorial Tax Equity and Economic Growth Act of 2025

H.R. 364, the Territorial Tax Equity and Economic Growth Act of 2025, would amend federal tax law to modify how income is taxed for residents of U.S. territories including Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands. Currently, people who are bona fide residents of a U.S. territory and meet certain residency requirements can exclude income sourced to that territory from their federal income taxes. This bill would lower those residency requirements and modify the rules for determining where income originates, potentially making it easier for people to qualify for these tax benefits.

The bill is intended to support economic recovery and growth in these U.S. territories by providing more equitable tax treatment and clarifying the rules for determining residency and income sourcing. The legislation is currently in the House Committee on Ways and Means and has not yet been voted on by the full House. If enacted, the changes could affect how residents and businesses in these territories calculate their federal tax obligations.