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Turnbull Testifies in Favor of EDC Benefits

July 21, 2005 – About 20 Virgin Islanders testified Thursday in Washington, D. C., regarding proposed regulations affecting the Economic Development Commission.
Gov. Charles W. Turnbull said in a phone interview that everyone who gave testimony was in support of preserving the program.
Residency requirements were one of three areas he focused on, he said. V.I. officials were advocating making 122 days the criteria for a bona fide resident instead of the 183 days called for in the temporary regulations. The 122 days would be calculated as an average over a three-year period. Turnbull said he believed everyone saw this as the way to go because, "In today's world, there is just a lot of traveling back and forth."
The second area he emphasized was source income. He said he named several areas such as royalties and insurance fees that should be considered V.I. source income.
The third area he advocated was "grandfathering." Many of the businesses that have been operating under previous rules should be allowed to continue to do so, Turnbull said.
During the interview, the governor also responded to questions about Memorandums of Understanding between the U.S. Internal Revenue Service and the V.I. Bureau of Internal Revenue. Many residents have conjectured about the contents of those memorandums that the government has kept secret. Some people have speculated that the V.I. tax department is receiving bounties for alerting the IRS to residents who might have paid their taxes to the Virgin Islands when they really should have paid them to the IRS.
"Those fears can be put to rest," Turnbull said. "There is nothing detrimental to the EDC program in the memorandums." He said he had lawyers at Winston & Strawn, the V.I. government's Washington, D.C., legal counsel, review the MOUs.
When asked whether the memorandums would be made public, he said he didn't think so because they were privileged information.
Turnbull said V.I. officials emphasized that, "We are not supporting those who abuse the program. We are supporting those who have followed the rules and contributed to the community. We told them that the program was a vital part of the V.I. economy."
Delegate Donna M. Christensen, who had previously submitted her comments on the proposed regulations in a letter to Treasury Secretary John Snow, attended the meeting.
A press release from her office said she took advantage of the period before the hearing to speak with Treasury Department and IRS officials to request a meeting following the hearing with her colleagues from the House Ways and Means Committee. This will follow up on previous meetings, which included Rep. Dave Camp, R-Mich., who chairs the Ways and Means Subcommittee on Select Revenue Measures, and Rep. Charles Rangel, D-N.Y., the ranking Democrat of the committee.
Christensen stated at the meeting that she and her colleagues would reiterate their concerns about proposed changes and further voice their support for Turnbull's position.
In her letter to Treasury, Christensen also covered the three areas Turnbull emphasized — residency, source income and transition relief.
"I don't believe that U.S. citizens should be treated less favorably than non-citizens," she said, indicating that requiring businessmen to be physically present in the territory for 183 days would be restrictive. Christensen also argued that qualified income should depend on the materiality of the economic activity in the Virgin Islands. "Treasury should be guided by the principle that qualified income must be attributable to a V.I office or fixed place of business," she said. She also appealed for special consideration of the concerns of the UVI Research and Technology Park and appropriate "grandfather relief" for those investors who had already moved to the territory and made investments under prior law.
"It is also important that while the IRS and Treasury have broad latitude in designing the regulations, they must be compliant with the law — the JOBS Act of 2004," Christensen stated in the press release. "We therefore continue to plan for the possibility of a legislative fix should the final regulations not provide a full remedy."
Turnbull said the expectation is that the final regulations will be out by the end of this year.
Other witnesses who testified on behalf of the EDC program included: David Cohen, deputy assistant secretary of the Department of the Interior; Lorraine L. Berry, V.I. Senate president; and LaVerne Ragster, president of the University of the Virgin Islands.
Representing the Internal Revenue Service at the hearing was Benedetta Kissel, deputy associate chief counsel and Douglas Giblen, senior technical reviewer. Gretchen Sierra represented the Treasury Department.
In a press release issued after the telephone interview, Turnbull said, "The hearing today provided our government the opportunity to argue in favor of our requested changes to the Jobs Act, which will protect the territory's economic incentive program. I am grateful for the support we have received from the federal government, members of Congress, other local government officials and our EDC beneficiaries. I will continue to work with these individuals to ensure that statutory or regulatory changes to the Jobs Act are implemented for the benefit of the EDC program."
Turnbull said Thursday that he had no more meetings in Washington, D.C., and would be attending the funeral of Attorney General Alva A. Swan on Saturday.

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