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HomeNewsArchivesTreasury's Delay May Impact Territory's Financial Picture

Treasury's Delay May Impact Territory's Financial Picture

Dec. 14, 2004 — The U.S. Department of Treasury's delay in handing down the rules and regulations for the recently enacted Jobs Bill has left some Economic Development Commission beneficiaries uncertain as to whether they will remain in the territory.
Benjamin Riviera Jr., USVI Economic Alliance executive director, said Tuesday that a number of the designated financial services or "Category 2A" companies are contemplating pulling out of the EDC program because they are unsure whether they will be able to meet the requirements.
The Jobs Bill further defines the residency laws as residing for no less than 183 days in a particular jurisdiction, which has been met with complaints by some of the financial services companies.
"We've received indicators that there are some companies that are winding down their businesses," Riviera said. "The specific number, I can't say, but these are the types of businesses bringing in the significant revenues."
Riviera said 43 companies currently fall under the designated financial services industry, and they are the ones directly affected by the new bill.
Another source said he knew "first hand" of at least 13 companies, all of them designated financial services businesses, that were pulling out.
"The potential of the businesses leaving is coming as a result of uncertainty," Riviera said. "Representatives of the company don't want to go into a new year without knowing what the new rules will look like."
Riviera said he was told that the Treasury may release its rules and regulations concerning residency between Dec. 21 and Jan. 15.
Attorney Frank Schulterbrandt, chief executive officer of the Economic Development Agency, the agency overseeing the EDC program, said Tuesday that two of the companies have given him written notice that they would "terminate their relationship" with the EDC if they cannot meet the requirements of the Treasury. Schulterbrandt would not identify the two companies.
"The biggest issue is whether business travel for non-tax avoidable purposes would count in the 183 days," Schulterbrandt said.
Schulterbrandt explained that all the clients of the designated financial services companies are off-island so a lot of travel is necessary to meet with those clients. His agency has been trying to get Treasury to include business travel as part of those 183 days.
"Hopefully, by the end of the year we will have some idea of what the temporary rules and regulations will be because the companies need certainty before they can make their decisions," Schulterbrandt said.
Dwain Ford, owner of Ford Real Estate, said he does not think the territory's residents realize how the territory will be impacted if the financial services companies leave.
"If it is not clear by December 31st exactly what the 183 days means, and there is not absolute clarity on the sourcing of the income, the V.I. will be faced with an economic reality that is worse than any hurricane we've ever had," Ford said, adding interested parties have worked for 18 years now with the Internal Revenue Bureau for a clarification of these issues.
Ford said further, "183 days is half a year. You're talking about worldwide people whose work demands constant travel."
Peter Heibert, the V.I. government's legal counsel in Washington, D.C., said Treasury has indicated that the rules and regulations should be developed before the end of the year.
"They are in the process of being developed, currently," Heibert said.

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