While a host of local companies wait for the Territorial Court to make a decision on millions of dollars worth of disputed back taxes, the Virgin Islands Telephone Corp. and Innovative Communication Corp. are looking to recoup more than $1.2 million in back franchise taxes from the V.I. government in District Court.
Factoring in penalties and interest calculated by the Division of Corporations and Trademarks, Vitelco owes $1.1 million for 20 years. ICC, formerly known as Atlantic Tele-Network, owes $83,320 for 10 years. ICC is Vitelco's parent company and is solely owned by St. Croix businessman Jeffrey Prosser.
The two companies, represented by attorney Kevin Rames, and the V.I. government are now in District Court over the disputed franchise tax calculations. Although the companies protested the recalculated taxes, they paid under protest in September of 1998.
Rames is now asking District Court for relief and recovery of what his clients are claiming are overpaid taxes.
On May 24, however, government lawyers made a motion to dismiss Vitelco and ICC's complaint, saying that the District Court doesn't have jurisdiction in the matter. Rames, who declined to comment about the case, did say the government's motion is pending.
The issue of owed franchise taxes arose in 1998 when then Lt. Gov. Kenneth Mapp declared that the taxes had been miscalculated going back to 1971. The recalculation figured to generate more revenue for the cash-strapped government.
Along with Vitelco and ICC, hundreds of other companies in the V.I. found themselves owing taxes under the new interpretation. In order to obtain a government-issued certificate of good standing, which allows businesses to operate in the territory, most companies paid up but took the issue to Territorial Court. A decision is still pending.
Calls to the V.I. Attorney General's Office weren't returned on Friday.
In late may, AT&T of the V.I. agreed to pay $169,608 of $484,010 in disputed franchise taxes dating back to 1982 to obtain a certificate of good standing. Along with Caneel Bay Resort, AT&T has petitioned Territorial Court for a declarative judgment on how the tax should be calculated.
The dispute is over the definition of the term "capital stock". By standard accounting definition, "capital stock" refers only to the stock that exists at the time the corporation is formed. Basically, it is the amount of money owners pay for acquisition, not money spent on capital improvements.
Companies are required to pay a franchise tax of $1.50 for each $1,000 of capital stock.
When the government reinterpreted the franchise taxes, it included in the calculation a company's "paid in capital."
In the Vitelco/ICC suit, Rames argued that the capital of a corporation may be greater than the value of its stated capital stock. He said that under accepted accounting principals, the difference in value is not considered the legal capital stock of a corporation.
As part of the suit, Rames is also claiming that the statute of limitations on the taxes has expired.
