# 26 U.S.C. § 937: Residence and source rules involving possessions Source: OLRC release point 119-134 . Cite pinpoints as 26 U.S.C. § 937(a)(1). ## § 937(a) Bona fide resident For purposes of this subpart, section 865(g)(3), section 876, section 881(b), paragraphs (2) and (3) of section 901(b), section 957(c), section 3401(a)(8)(C), and section 7654(a), except as provided in regulations, the term “bona fide resident” means a person— **§ 937(a)(1)** who is present for at least 183 days during the taxable year in Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, or the Virgin Islands, as the case may be, and **§ 937(a)(2)** who does not have a tax home (determined under the principles of section 911(d)(3) without regard to the second sentence thereof) outside such specified possession during the taxable year and does not have a closer connection (determined under the principles of section 7701(b)(3)(B)(ii)) to the United States or a foreign country than to such specified possession. For purposes of paragraph (1), the determination as to whether a person is present for any day shall be made under the principles of section 7701(b). ## § 937(b) Source rules Except as provided in regulations, for purposes of this title— **§ 937(b)(1)** except as provided in paragraph (2), rules similar to the rules for determining whether income is income from sources within the United States or is effectively connected with the conduct of a trade or business within the United States shall apply for purposes of determining whether income is from sources within a possession specified in subsection (a)(1) or effectively connected with the conduct of a trade or business within any such possession, and **§ 937(b)(2)** any income treated as income from sources within the United States or as effectively connected with the conduct of a trade or business within the United States shall not be treated as income from sources within any such possession or as effectively connected with the conduct of a trade or business within any such possession. ## § 937(c) Reporting requirement **§ 937(c)(1) In general.** If, for any taxable year, an individual takes the position for United States income tax reporting purposes that the individual became, or ceases to be, a bona fide resident of a possession specified in subsection (a)(1), such individual shall file with the Secretary, at such time and in such manner as the Secretary may prescribe, notice of such position. **§ 937(c)(2) Transition rule.** If, for any of an individual’s 3 taxable years ending before the individual’s first taxable year ending after the date of the enactment of this subsection, the individual took a position described in paragraph (1), the individual shall file with the Secretary, at such time and in such manner as the Secretary may prescribe, notice of such position. ## Regulations - [Treas. Reg. § 1.937-1](/26/reg/1.937-1.md): Bona fide residency in a possession. (interprets § 937) - [Treas. Reg. § 1.937-2](/26/reg/1.937-2.md): Income from sources within a possession. (interprets § 937) - [Treas. Reg. § 1.937-3](/26/reg/1.937-3.md): Income effectively connected with the conduct of a trade or business in a possession. (interprets § 937) ## Final rules - [90 FR 2977](https://www.federalregister.gov/documents/2025/01/14/2024-31372/classification-of-digital-content-transactions-and-cloud-transactions) (2025): Classification of Digital Content Transactions and Cloud Transactions - [85 FR 79837](https://www.federalregister.gov/documents/2020/12/11/2020-21817/source-of-income-from-certain-sales-of-personal-property) (2020): Source of Income From Certain Sales of Personal Property - [73 FR 19350](https://www.federalregister.gov/documents/2008/04/09/08-1105/source-rules-involving-us-possessions-and-other-conforming-changes) (2008): Source Rules Involving U.S. Possessions and Other Conforming Changes - [71 FR 66232](https://www.federalregister.gov/documents/2006/11/14/E6-19135/residence-rules-involving-us-possessions) (2006): Residence Rules Involving U.S. Possessions - [71 FR 4996](https://www.federalregister.gov/documents/2006/01/31/06-818/residence-rules-involving-us-possessions) (2006): Residence Rules Involving U.S. Possessions - [70 FR 18920](https://www.federalregister.gov/documents/2005/04/11/05-7087/residence-and-source-rules-involving-us-possessions-and-other-conforming-changes) (2005): Residence and Source Rules Involving U.S. Possessions and Other Conforming Changes ## Leading cases - [Sanders v. Commissioner, 144 T.C. 63 (2015)](https://www.courtlistener.com/opinion/4697485/sanders-v-commr/) ## Proposed regulations (not in force) - [Prop. Treas. Reg. § 1.937-1](/26/prop/1.937-1_2015-21258.md): (REG-109813-11, proposed 2015-08-27) ## Connections Cites: § 865 Source rules for personal property sales; § 876 Alien residents of Puerto Rico, Guam, American Samoa, or the Northern Mariana Islands; § 881 Tax on income of foreign corporations not connected with United States business; § 901 Taxes of foreign countries and of possessions of United States; § 911 Citizens or residents of the United States living abroad; § 957 Controlled foreign corporations; United States persons; § 3401 Definitions; § 7654 Coordination of United States and certain possession individual income taxes; § 7701 Definitions Cited by: § 24 Child tax credit; § 1472 Withholdable payments to other foreign entities; § 5000A Requirement to maintain minimum essential coverage; § 6688 Assessable penalties with respect to information required to be furnished under section 7654; § 9511 Patient-Centered Outcomes Research Trust Fund ## Amendments - 2004-10-22: [Pub. L. 108-357](/26/act/108-357.md), 118 Stat. 1655