26 CFR 1.931-1 - Exclusion of certain income from sources within Guam, American Samoa, or the Northern Mariana Islands.
(a) General rule. (1) An individual (whether a United States citizen or an alien), who is a bona fide resident of a section 931 possession during the entire taxable year, will exclude from gross income the income derived from sources within any section 931 possession and the income effectively connected with the conduct of a trade or business by such individual within any section 931 possession, except amounts received for services performed as an employee of the United States or any agency thereof. For purposes of section 931(d) and this section, an employee of the government of a section 931 possession will not be considered an employee of the United States or of an agency of the United States.
(2) The following example illustrates the application of the general rule in paragraph (a)(1) of this section:
(b) Deductions and credits. In any case in which any amount otherwise constituting gross income is excluded from gross income under the provisions of section 931, there will not be allowed as a deduction from gross income any items of expenses or losses or other deductions (except the deduction under section 151, relating to personal exemptions), or any credit, properly allocable to, or chargeable against, the amounts so excluded from gross income. For purposes of the preceding sentence, the rules of § 1.861-8 will apply (with creditable expenditures treated in the same manner as deductible expenditures).
(c) Definitions. For purposes of this section -
(1) The term section 931 possession means a possession that is a specified possession and that has entered into an implementing agreement, as described in section 1271(b) of the Tax Reform Act of 1986, Public Law 99-514 (100 Stat. 2085), with the United States that is in effect for the entire taxable year;
(2) The term specified possession means Guam, American Samoa, or the Northern Mariana Islands;
(3) The rules of § 1.937-1 will apply for determining whether an individual is a bona fide resident of a section 931 possession;
(4) The rules of § 1.937-2 will apply for determining whether income is from sources within a section 931 possession; and
(5) The rules of § 1.937-3 will apply for determining whether income is effectively connected with the conduct of a trade or business within a section 931 possession.
(d) Effective/applicability date. This section applies to taxable years ending after April 9, 2008.