July 28, 2001- Millions of mainland American taxpayers began getting U.S. Treasury Department checks in the mail this week from the Internal Revenue Service for up to $600 under the 2001 tax credit program initiated by the Bush administration and approved by Congress to stimulate the nation's economy.
Not one check has gone out from the Internal Revenue Bureau in the Virgin Islands, which under its "mirror" system with the federal government is bound by the same rules and regulations as the IRS. Nor, the IRB director, Louis Willis, said this week, will any in the near future.
On Tuesday, Willis said on the "Topp Talk" show on WVWI Radio that his intention is to give taxpayers a credit against their 2001 income taxes that come due April 15, 2002. The difference between what he proposes and what the federal government is doing is a matter of timing. Both are offering "tax credits." But the IRS is doing it now, in cold cash, while Willis plans to wait until after next April 15, without being clear as to just what the mechanism will be.
That, according to the Republican Party of the U.S. Virgin Islands, isn't what the law requires — and isn't acceptable. Also, the party contends, it isn't smart, as "the $11 million in tax rebate checks would stimulate the economy" here.
Michael Bornn, who co-chairs (with Noel Loftus on St. Croix) the territorial party's Policy Committee for the Bush-Cheney Leadership Team, said Willis told him the day before appearing on the radio show that about $11 million was due in tax credits in the territory. "He said he couldn't tell me how many filers that meant, but simple math makes it about 36,000 if it's a $300 check, or 18,000 if it's $600. so, it's somewhere there in between," Bornn said.
Willis said on the radio show that his estimated price tag for the rebates is $9 million to $12 million. "We are going to pay, but we are going to pay it next year," he stated. First, he said, "We want to get the refunds for 2000 out; that is our priority right now."
In addition to the 2000 V.I. income tax refund checks that have already gone out, "we have another 5,000 processed to get out, to the tune of $7 million more," he said, with maybe a further $6 million to come after that.
"We will have to do the rebates, but we will concentrate on that next year," he added.
Bornn said Friday that Willis "says he doesn't have the money — and, more emphatically, that he doesn't have the time to do it. So he is going to give it as a tax credit [at the time that tax payment is due next year]. And that's not what the law says."
The word "rebate," while being used broadly in connection with the program, is not accurate. The checks are neither rebates nor refunds. Actually, they might best be called "prebates." What they are is advance payment of a 2001 tax credit as provided for in the Economic Growth and Tax Relief Reconciliation Act of 2001. And that's what the IRS is calling them — "advance payments." (As a reduction of tax, by the way, the money is not taxable income.)
Who's to get what
The amount of the tax credit — and thus, of the check — is calculated on the following formula, based on personal income tax returns filed for 2000:
Individuals with taxable income of less than $6,000 will receive 5 percent of that amount.
Individuals with taxable income of $6,000 or more will receive $300.
Married couples filing jointly with taxable income of less than $12,000 will receive 5 percent of that amount.
Married couples filing jointly with taxable income of $12,000 or more will receive $600.
Heads of household with taxable income of less than $10,000 will receive 5 percent of that amount.
Heads of household with taxable income of $10,000 or more will receive $500.
In the views of some, Willis hedged on the cash vs. on-paper credit issue on the talk show. One interpretation of his remarks is that the government will add the amount of the credit owed onto any 2001 income tax refund due next year and send a single check for both. (It is unclear what would happen in this case if the taxpayer had a net liability instead of being due a refund.) Another view is that the amount of the rebate will simply be credited against a taxpayer's 2001 tax liability.
In the view of the V.I. Republican Party leadership, nothing Willis has said is acceptable.
In a release issued a week ago, in response to comments made earlier by the IRB director, the party leadership said: "The Turnbull administration has decided not to send you a check now but instead to give you a tax credit next year. This is the same administration that just boasted about a $100 million surplus in revenue collections. It is also the same administration that vetoed a number of bills before that because there was no money."
Stating that approximately 22,000 Virgin Islanders are due tax-credit checks, the party criticized what it called the administration's "public-be-damned attitude."
The GOP release stated, "Virgin Islanders are owed $11 million from the Bush tax rebate … No matter the priorities of the V.I. government, the priorities of the individual taxpayer are greater. The individual taxpayer can spend his $300 to $600 a lot better than the V.I. government."
According to Bornn, the situation cannot be resolved by seeking yet another supplemental appropriation from the governor and the Legislature. "No legislation is required," he said. "It's legally due, period. It's not up to anybody to interpret. If the government says it has a $100 million surplus, that $11 million comes off the top, period. Instead of a $100 million surplus, they have $89 million. It's not the V.I. government's money, and it's not for government officials to determine how they are going to spend it."
A drop-dead date of Dec. 31
Furthermore, Bornn said, the federal law "is very explicit that checks are to be cut by Oct. 1. The whole idea of the law is that checks are to be cut now — to stimulate the economy, to encourage people to do some spending." What's more, he said, in the federal legislation, "There's a drop-dead date of Dec. 31 for cutting checks," after which the tax credit "is no longer valid, it's no longer even due."
The TaxPlanet.com web site has posted an "Excerpt from Congressional explanation of conference committee agreement on tax bill (5-26-01)" which includes the following statements:
"The [congressional] conferees anticipate that the Department of the Treasury will make every effort to issue all checks before Oct. 1, 2001, to taxpayers who timely filed their 2000 tax returns. Taxpayers who filed late or pursuant to extensions will receive their checks later in the fall…
"In no event may the Department of the Treasury issue checks after Dec. 31, 2001. This is designed to prevent errors by taxpayers who might claim the full amount of the credit on their 2001 tax returns and file those returns early in 2002, at the same time the Treasury check might be mailed to them." This latter statement carries a footnote reading: "For administrative reasons, the Department of the Treasury may need to establish an earlier termination date in order to fully implement the intent of this provision."
Bornn declined to say whether the Republican Party leadership was prepared to go to court over the issue, but he added, "We're meeting on it tomorrow [Saturday] morning."
On the mainland, the tax refunds are being mailed according to an estimated schedule based on the last two digits of a person's Social Security number. For those whose numbers end in 00 through 09, checks were mailed out this week. For those with numbers ending in 10 through 19, they are to go out in the coming week. The week-by-week schedule ends with paym
ents for people whose numbers end in 90 through 99 to go out the week of Sept. 24.
Telephone messages for Willis were left repeatedly at the IRB offices on St. Thomas and St. Croix throughout the week. He did not return any calls to the Source. On Friday, repeated calls to the two offices were not answered at all. After approximately 20 rings, an intercept recording stated that the party being called was not answering and that the connection was being terminated.
A question posed to the Internal Revenue Service office on St. Thomas was whether those individuals required to pay taxes and file tax returns both in the territory and on the mainland would get more than one rebate check. An official referred the query to the IRS tax-information hotline, (800) 829-1040.
That number provided no opportunity to access an individual, offering only the recorded information that "There is nothing you need to do to receive this check," which "will be mailed automatically to those who are eligible." The recording refers callers to another IRS 800 number, 829-4477, to find out what week their check is scheduled to be mailed out. That information, and much more, can be accessed at the IRS web site, www.irs.gov/ind_info/apinfo/index.html. The same information is posted at the U.S. Treasury site, www.irs.ustreas.gov/ind_info/apinfo/.
