Territorial Tax Parity Act of 2025

The Territorial Tax Parity Act of 2025 would modify federal income tax rules affecting residents of U.S. territories including Puerto Rico, Guam, American Samoa, the Northern Mariana Islands, and the Virgin Islands. The bill would likely adjust residency requirements and income sourcing rules that determine how much income territory residents can exclude from U.S. federal taxation. Currently, residents who meet a "bona fide resident" standard (spending at least 183 days per year in the territory) may exclude certain territory-sourced income from their U.S. federal tax calculations. The bill would potentially lower these residency thresholds and modify rules about which income qualifies as territory-sourced versus U.S.-sourced, which could affect tax obligations for people living in or relocating to these territories. 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.