US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 934

Limitation on reduction in income tax liability incurred to the Virgin Islands

(a)

General rule

48 U.S.C. 139748 U.S.C. 1642Tax liability incurred to the Virgin Islands pursuant to this subtitle, as made applicable in the Virgin Islands by the Act entitled “An Act making appropriations for the naval service for the fiscal year ending , and for other purposes”, approved (), or pursuant to section 28(a) of the Revised Organic Act of the Virgin Islands, approved (), shall not be reduced or remitted in any way, directly or indirectly, whether by grant, subsidy, or other similar payment, by any law enacted in the Virgin Islands, except to the extent provided in subsection (b).

(b)

Reductions permitted with respect to certain income

(1)

In general

Except as provided in paragraph (2), subsection (a) shall not apply with respect to so much of the tax liability referred to in subsection (a) as is attributable to income derived from sources within the Virgin Islands or income effectively connected with the conduct of a trade or business within the Virgin Islands.

(2)

Exception for liability paid by citizens or residents of the United States

Paragraph (1) shall not apply to any liability payable to the Virgin Islands under section 932(b).

(3)

Special rule for non-United States income of certain foreign corporations

(A)

In general

In the case of a qualified foreign corporation, subsection (a) shall not apply with respect to so much of the tax liability referred to in subsection (a) as is attributable to income which is derived from sources outside the United States and which is not effectively connected with the conduct of a trade or business within the United States.

(B)

Qualified foreign corporation

For purposes of subparagraph (A), the term “qualified foreign corporation” means any foreign corporation if less than 10 percent of—
(i)
the total voting power of the stock of such corporation, and
(ii)
the total value of the stock of such corporation, is owned or treated as owned (within the meaning of section 958) by 1 or more United States persons.
(4)

Determination of income source, etc.

The determination as to whether income is derived from sources within the United States or is effectively connected with the conduct of a trade or business within the United States shall be made under regulations prescribed by the Secretary.

Pub. L. 86–779, § 4(a)(1)74 Stat. 998Pub. L. 94–455, title XIX90 Stat. 1784Pub. L. 97–248, title II, § 213(b)96 Stat. 463Pub. L. 97–455, § 1(c)96 Stat. 2498Pub. L. 98–369, div. A, title VIII, § 801(d)(7)98 Stat. 996Pub. L. 99–514, title XII, § 1275(a)(2)(A)100 Stat. 2598Pub. L. 108–357, title VIII, § 908(c)(3)118 Stat. 1656(Added , , ; amended , §§ 1901(a)(118), 1906(b)(13)(A), , , 1834; , , ; , , ; , , ; , (c)(1), (2), title XVIII, § 1876(f)(2), , , 2900; , , .)

Editorial Notes

Amendments

Pub. L. 108–3572004—Subsec. (b)(4). struck out “the Virgin Islands or” before “the United States” in two places.

Pub. L. 99–514, § 1275(c)(2)(A)1986—Subsec. (a). , struck out “or (c) or in section 934A” after “subsection (b)”.

Pub. L. 99–514, § 1275(c)(1)Subsec. (b). , (2)(B), added subsec. (b) and struck out former subsec. (b) which excepted from subsec. (a) domestic or Virgin Islands corporations to the extent they derived income from sources without the United States under certain conditions.

Pub. L. 99–514, § 1275(c)(1)Subsec. (c). , struck out subsec. (c) which provided an exception to subsec. (a) of this section for individual citizens of the United States residing in the Virgin Islands to the extent their income is derived from sources within the Virgin Islands.

Pub. L. 99–514, § 1275(c)(1)Subsec. (d). , struck out subsec. (d) which related to requirement to supply information.

Pub. L. 99–514, § 1275(a)(2)(A)Subsec. (e). , struck out subsec. (e) which provided for tax treatment of intangible property income of certain domestic corporations.

Pub. L. 99–514, § 1275(a)(2)(A)Subsec. (f). , struck out subsec. (f) which provided a transitional rule for applying subsec. (b)(2) of this section with respect to taxable years beginning after , and before .

Pub. L. 99–514, § 1876(f)(2), struck out subsec. (f) which provided that subsec. (a) of this section not apply in the case of a Virgin Islands corporation which is a FSC.

Pub. L. 98–3691984—Subsec. (f). added subsec. (f) relating to FSC.

Pub. L. 97–4551983—Subsec. (a). inserted “or in section 934A” after “subsection (b) or (c)”.

Pub. L. 97–248, § 213(b)(1)1982—Subsec. (b)(2). , substituted “65 percent” for “50 percent”.

Pub. L. 97–248, § 213(b)(2)Subsec. (e). , added subsec. (e).

Pub. L. 97–248, § 213(b)(2)Subsec. (f). , added a temporary subsec. (f) which provided that in applying subsec. (b)(2) with respect to taxable years beginning after , and before , “55 percent” shall be substituted for “65 percent” for taxable years beginning in calendar year 1983 and “60 percent” shall be substituted for “65 percent” for taxable years beginning in calendar year 1984.

Pub. L. 94–455, § 1901(a)(118)1976—Subsec. (b). , struck out “For the purposes of this subsection, all amounts received by such corporation within the United States, whether derived from sources within or without the United States, shall be considered as being derived from sources within the United States”.

Pub. L. 94–455, § 1906(b)(13)(A)Subsec. (d). , struck out “or his delegate” after “Secretary” in two places.

Statutory Notes and Related Subsidiaries

Effective Date of 2004 Amendment

Pub. L. 108–357section 908(d)(1) of Pub. L. 108–357section 937 of this titleAmendment by applicable to taxable years ending after , see , set out as an Effective Date note under .

Effective Date of 1986 Amendment

Pub. L. 99–514section 1277 of Pub. L. 99–514section 931 of this titleAmendment by section 1275(a)(2)(A), (c)(1), (2) of applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as a note under .

section 1876(f)(2) of Pub. L. 99–514Pub. L. 98–369, div. Asection 1881 of Pub. L. 99–514section 48 of this titleAmendment by effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , to which such amendment relates, see , set out as a note under .

Effective Date of 1984 Amendment

Pub. L. 98–369section 805(a)(1) of Pub. L. 98–369section 245 of this titleAmendment by applicable to transactions after , in taxable years ending after such date, see , as amended, set out as a note under .

Effective Date of 1983 Amendment

Pub. L. 97–455, § 1(e)96 Stat. 2498

“(1)

In general .—

Except as provided in paragraph (2), the amendments made by this section [enacting section 934A and amending this section] shall apply to amounts received after the date of the enactment of this Act [] in taxable years ending after such date.
“(2)

Withholding .—

section 1444 of this titleThe amendment made by subsection (b) [enacting ] shall apply to payments made after the date of the enactment of this Act.”
, , , provided that:

Effective Date of 1982 Amendment

Pub. L. 97–248Pub. L. 97–248section 246 of this titleAmendment by applicable to taxable years beginning after , except that so much of this section to which former section 936(h)(6) applied by reason of subsec. (e)(4) of this section was applicable to taxable years ending after , see section 213(e)(1), (2) of set out as a note under .

Effective Date of 1976 Amendment

section 1901(a)(118) of Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by applicable with respect to taxable years beginning after , see , set out as a note under .

Effective Date

Pub. L. 86–779, § 4(e)(1)74 Stat. 1000

“The amendments made by subsection (a) [enacting this section] shall apply to tax liability incurred with respect to taxable years beginning on or after .”
, , , provided that:

Plan Amendments Not Required Until January 1, 1989

Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .