Possessions Tax Credit

Possessions Tax Credit means:
a credit or other debt instrument that may be claimed by domestic corporations with business operations in U.S. possessions. Under Section 936, they may elect to eliminate the U.S. tax on certain income related to their possession-based operations. The credit spares the electing corporation of U.S. tax whether or not it pays income tax to the possession.

To qualify for this credit, a domestic corporation must derive at least 75% of its gross income from the active conduct of a trade or business within a possession over a 3-year period, and at least 80% of its gross income from sources within a possession during that period. Former IRC (check if this IRC provision is current here) §936(a).

See also the entries Income Tax and State Income Tax in the American Encyclopedia of Law.