AICPA and CPA Societies for U.S. Territories Seek Clarification from Congress
About Applicability of the Net Investment Income Tax to Bona Fide Residents of the Territories
Published August 11, 2014
WASHINGTON (Aug. 11, 2014) – The American Institute of CPAs (AICPA), the Virgin Islands Society of Certified Public Accountants (VISCPA), and the Guam Society of Certified Public Accountants (GSCPA) submitted a letter to Congress on Aug. 7 requesting clarification regarding the section 1411 net investment income tax (NIIT) applicability to bona fide residents of the U.S. Virgin Islands (USVI), Guam, and the Commonwealth of the Northern Mariana Islands (CNMI).
Specifically, clarification is needed as to whether the NIIT is a mirrored tax to be collected by tax authorities for the USVI, Guam and CNMI. (Under the “mirror code” system of taxation, the substantive provisions of the Internal Revenue Code are applicable as the income tax laws of the USVI, Guam and the CNMI.)
The letter stated, “The wording of proposed and final [IRS] regulations regarding NIIT appears to exempt from the NIIT bona fide residents of the U.S. Territories; however, the VIBIR [Virgin Islands Bureau of Internal Revenue] has issued a statement and the GDRT [Guam Department of Revenue and Taxation] Deputy Tax Commissioner has stated that the NIIT applies to bona fide residents of the U.S. Territories, causing much confusion among taxpayers and practitioners. Clarity on the applicability of the NIIT to bona fide residents of the U.S. Territories is needed. Practitioners and taxpayers need clarity in order to file 2013 tax returns by the extended due date of October 15, 2014.”
“The AICPA, VISCPA, and GSCPA believe, as a matter of clarity and fair interpretation and application of Congressional intent, Congress should request that Treasury provide clarification on whether the NIIT applies to bona fide residents of the mirror code U.S. Territories. In addition, if bona fide residents of mirror code U.S. Territories are exempt from the NIIT, the extension of this exemption to mirror code U.S. Territories estates and trusts should be clarified as well,” the organizations wrote