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Telephone Company Tax Payments Not Documented

Sept. 8, 2004 — More than a week has passed since the last Public Services Commission hearing, but the PSC still has not received proof from Innovative Telephone showing the company paid its taxes after the expiration of its tax benefits in September 2003.
At a meeting Aug. 25, David Sharp, Innovative president, was unable to say whether or not Innovative had paid its taxes. Sharp told the PSC he would give them within one week the documents showing that Innovative had done so.
However, Valencio Jackson, PSC chairman, said Wednesday the commission still had not heard from the telephone company.
"At this present time, I have not received any documents from Innovative concerning taxes," Jackson said when called about the matter.
Jackson said he will "do what I have to do" to get the proof the company paid its taxes, if indeed it did. However, Jackson would not specify the action the commission would take.
Telephone company officials had told the PSC in the spring of 2003 that the company would not reapply for Economic Development Commission tax benefits when they expired in September of that year. Based upon the statements, Innovative was granted a rate increase. However, in December the company sought to reapply for benefits without approaching the PSC.
The phone company — formerly known as V.I. Telephone Corp., or Vitelco — was first granted beneficiary status in May of 1996 by what was then called the Industrial Development Commission. The certificate it received, effective Oct. 1, 1998, through Sept. 30, 2003, allowed the company to receive the following tax breaks in exchange for certain obligations:
– Exemption from gross receipts taxes.
– Exemption from excise taxes on the importation of raw materials and component parts used in its production process and of building equipment and machinery.
– Exemption on real property taxes.
– 90 percent exemption from V.I. income taxes.
– Exemptions on withholding tax on dividends and interest.
(See "Phone Company Seeking Renewal of Tax Breaks")
At a July meeting, attorney Maria Tankenson Hodge said, based on Innovative's benefits expiring last September, the company would owe $7 million in taxes. She asked Julio Brady, Innovative's legal counsel, if the telephone company had paid the government. Brady said he didn't know. (See "PSC Irked by Innovative Bid to Renew Tax Breaks")
Sharp said at the Aug. 25 meeting that company officials realized they were going to need the benefits to make infrastructure improvements, so they reapplied. (See "PSC Hears Apologies from Phone Company President" )
Sharp added that Innovative is seeking tax breaks of "about 40 percent" in its current application and this would be worth $2.5 million a year.
But Frank Schulterbrandt, chief executive officer of the Economic Development Authority, told the Source in March there were compliance issues from Innovative's last benefit period that needed to be addressed before the phone company's new application could be considered.
Sharp did not return calls to his office Wednesday.
Representatives from Innovative and its parent company, Innovative Communication Corp., will be at a PSC hearing 10 a.m. Friday to discuss the telephone company's financial viability and its sale of preferred stock.
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