Spain initially claimed the islands that later comprised the territory of the Trust Territory of the Pacific Islands (TTPI). Subsequently, Germany established competing claims over the islands. The competing claims were eventually resolved in favor of Germany when Spain, following its loss of several possessions to the United States during the Spanish–American War, ceded its claims over the islands to Germany in 1899 pursuant to the German–Spanish Treaty (1899). Germany, in turn, continued to retain possession until the islands were captured by Japan during World War I. The League of Nations formally placed the islands in the former South Pacific Mandate, a mandate that authorized Japanese administration of the islands. The islands then remained under Japanese control until captured by the United States in 1944 during World War II.
The TTPI entered UN trusteeship pursuant to Security Council Resolution 21 on July 18, 1947, and was designated a "strategic area" in its 1947 trusteeship agreement. Article 83 of the UN Charter provided that, as such, its formal status as a UN trust territory could be terminated only by the Security Council, and not by the General Assembly as with other trust territories. The United States Navy controlled the TTPI from a headquarters in Guam until 1951, when the United States Department of the Interior took over control, administering the territory from a base in Saipan.
The Territory contained 100,000 people scattered over a water area the size of continental United States. They represented a variety of cultures and spoke nine languages. The Ponapeans and Kusaieans, Marshallese and Palauans, Truckese, Yapese and Chamorros had little in common, except they were in the same general area of the Pacific Ocean.
The large distances between people, lack of an economy, language and cultural barriers, all worked against the union. The six district centers became upscale slums, containing deteriorated Japanese-built roads, with electricity, modern music and distractions, alienated youth and bewildered elders. The remainder of the islands stayed as they were historically, not progressing, but not regressing.
A Congress of Micronesia first levied an income tax in 1971. It affected mainly foreigners working at military bases in the region.