US Virgin Islands Controlled group subsidiary of US parent

[Guest Jose Rosario]

I'm looking into the treatment of USVI

plans in general, and, specifically, how to test coverage when a USVI subsidiary is part of a controlled group of a US parent.

I have read IRC S. 932, which exempts USVI residents from US income taxation, similar to PR residents.

However, I have not been able to locate an exemption for USVI trusts from US income taxation similar to the exemption for PR trusts

found at Sec. 1022(i)(l), PL 93-406, 9/2/74 (at note to Code Sec. 501).

My conclusion is that if the plan

is organized under a US trust, then US rules

concerning annual limits, coverage, etc. apply.

I do want to point out that it would appear to be ideal that the plan be organized under a PR trust, thus the trust would be exempt from US taxation, and its participants (presumably, all of whom are USVI residents) would also be exempt from US income taxation, and thus any USVI subsidiary could be excluded in its entirety from the controlled group's coverage testing, although it would have to satisfy the coverage requirements independently.

Any comments?