The Department of the Interior defers on this issue to the Department of Treasury, which will present a detailed report an these sectims for the Administration. We stress, however, that the issues raised by these sections are complex. tory but not amther. Also, the application of United States income tax laws differs from territory to territory. For example, the mirror theory of taxation applies in the Virgin Islands, but not in the other territories; United States income tax laws apply in Sama, not by virtue of Federal enactment but by virtue of territorial incorporation of Federal law. — The collection of taxes has been traditionally the function of lecal territorial goverrments. TheGovernors of Guan and the Virgin Islands believe that the Federal acministration of taxes would intrute into territorial prerogatives and therefore oppose mardatary Federal collection of territorial taxes. <We agree that the proposal now contained in H.R. 3756 raises a significant question as to whether it reverses the long-standing United States Goverrment policy of fostering greater local self-goverrment for the territories. The Interagency Task Force reviewing territorial policy is addressing various issues, including tax administration, considered in these sections. Presidential decisions will be forthcoming later this year. Among the options to be considered by the Administration wilt be Federal training ard technical assistance for territorial tax collection Section 204 - - Section 204 would;extend the date‘of-inittel applicebiity of the Federa) income tax,to, the.Northern Mariana Islands from Jamary 1, 1979, to Jamuary 1, 1982. Federal incom tax laws became applicable to the Northern Mariana Islands beginning Jamary 1, 1979. TheAdministration has no objection to section 204. The Governar.of theNorthern Mariane Islands states that: pectign 204 would result in the loss of approximtely$300,000 in reverme to the anas'. treasury. and he prefers the provisions of section 3(d) Northern. of P.L. 95-348 to section 204. tte. i a