An insular area of the United States is a U.S. territory that is not one of the 50 states and is not a Federal district. Article IV, Section 3, Clause 2 of the United States Constitution grants to the United States Congress the responsibility of overseeing these territories.[a] As of 2020, there are 14 U.S. Territories: 3 in the Caribbean Sea and 11 in the Pacific Ocean. These territories are classified by whether they are incorporated (by Congress extending the full body of the Constitution to the territory as it applies to the several states) and whether they have an organized territorial government established by the U.S. Congress through an organic act. All territories but one are unincorporated, and all but four are considered to be unorganized. Five U.S. territories have a permanent, nonmilitary population. Each of them has a civilian government, a constitution, and enjoys some degree of local political autonomy.
The first insular areas that occupied the United States were Baker Island, Howland Island and Navassa Island (1857) then Johnston Atoll and Jarvis Island (both in 1858) would be claimed. After the War between the United States and Spain in 1898, several territories were taken that are still under U.S. sovereignty (Puerto Rico and Guam, both in 1898). Palmyra Atoll was annexed along with the Republic of Hawaii (formerly a Kingdom) that same year. American Samoa was reclaimed the following year (1899). In 1917, at the height of World War I, Denmark sold the Danish Virgin Islands to the United States.
The former British-American condominium of Canton and Enderbury, consisting of the atolls of Canton and Enderbury in the northeast of the Phoenix Islands, became part of this new island state on July 12, 1979, the day of independence from the State of Kiribati.
The U.S. Navy annexed Kingman Reef in 1922. Spain had sold the Northern Mariana Islands to Germany in 1899. The islands passed to Japan, which in turn lost them to the United States in 1945 after the end of World War II. The Guantanamo Bay Naval Base, located on the southern side of Guantanamo Bay and taken from Spain in 1898, is not a U.S. outlying territory but a U.S. military base on formally "leased" land on the island of Cuba.
The Marshall Islands became self-governing in 1979 and fully independent along with the Federated States of Micronesia in 1986. Palau achieved independence in 1994. The three countries maintain sovereignty with free association status with the United States, which provides them with defense assistance and economic resources.
Congress has extended citizenship rights by birth to all inhabited territories except American Samoa, and these citizens may vote and run for office in any U.S. jurisdiction in which they are residents. The people of American Samoa are U.S. nationals by place of birth, or they are U.S. citizens by parentage, or naturalization after residing in a State for three months. Nationals are free to move around and seek employment within the United States without immigration restrictions, but cannot vote or hold office outside American Samoa.
Residents of the five major populated insular areas do not pay U.S. federal income taxes but are required to pay other U.S. federal taxes such as import and export taxes, federal commodity taxes, social security taxes, etc. Individuals working for the federal government pay federal income taxes while all residents are required to pay federal payroll taxes (Social Security and Medicare). According to IRS Publication 570, income from other U.S. Pacific Ocean insular areas (Howland, Baker, Jarvis, Johnston, Midway, Palmyra, and Wake Islands, and Kingman Reef) is fully taxable as income of United States residents.
The U.S. State Department also uses the term insular area to refer not only to territories under the sovereignty of the United States, but also those independent nations that have signed a Compact of Free Association with the United States. While these nations participate in many otherwise domestic programs, and full responsibility for their military defense rests with the United States, they are legally distinct from the United States and their inhabitants are neither U.S. citizens nor nationals.
The following islands, or island groups, are considered insular areas:
Three sovereign UN member states which were all formerly in the U.S. administered United Nations Trust Territory and are currently in free association with the U.S. The U.S. provides national defense, funding, and access to social services.
The people of Puerto Rico will continue to be exempt from Federal income taxes on the income they derive from sources within Puerto Rico, and into their treasury, for appropriation and expenditure as their legislature may decide, will be deposited the proceeds of United States internal revenue taxes collected on articles produced in Puerto Rico and the proceeds of United States tariffs and customs collected on foreign merchandise entering Puerto Rico.