(a) No tax shall be imposed under sections 871(a)(1) and 881 of the Internal Revenue Code upon citizens and residents of the United States and upon corporations organized in the United States with respect to payments received from sources within the United States Virgin Islands derived from the foreign trade income, investment income and carrying charges, or foreign trade related income of an VIFSC, of which such citizen, resident or corporation is a shareholder. However, the exemption from tax under this section shall apply to payments made by a former VIFSC only to the extent such payment is made with respect to expenses paid or accrued from foreign trade income or foreign trade related income earned by the former VIFSC during taxable years in which it was an VIFSC.
(b) For the purposes of this section, distributions shall he deemed to first be made from foreign trade income and foreign trade related income earned by an VIFSC, or by a former VIFSC in a taxable year during which the former VIFSC was an VIFSC.