Dec. 12, 2005 U.S. Treasury officials hope to have final regulations on the Virgin Islands Economic Development Commission tax program before the end of the year, according to officials who met with Delegate Donna M. Christensen last Friday.
Christensen met with Deputy Assistant Secretary John Emling and Special International Tax Counsel Gretchen Sierra to get an update on the new regulations and to urge them to heed the recommendations made at a July hearing, according to a release sent Monday from Christensen's office.
In July, a contingent of about 20 Virgin Islanders traveled to Washington, D.C. to offer testimony to U.S. Treasury and Internal Revenue Service officials on the various issues threatening the health of the tax benefit program that fuels a good portion of the V.I. economy. (See Turnbull Testifies in Favor of EDC Benefits.)
"We were told that they were very deeply affected by the presentations made at the July hearing and believe that there are places where they can tailor the final regulations to address the abuses that concerned Congress without an adverse affect on businesses that were following the law," Christensen said.
A little over a year ago quite to the surprise of V.I. officials, lobbyists and Christensen Treasury formed new regulations that substantially changed the parameters of the program that directly brings an estimated $100 million to the V.I. coffers annually. There is no clear figure on what indirect revenues are derived from the program that offers substantial tax breaks to companies setting up business in the V.I. in exchange for making certain investments and employment opportunities in the territory.
Treasury's new rules became law in early 2005 when President George Bush signed the Jobs Creation Act of 2004.
The businesses affected by the new tax laws are primarily what's known as designated services businesses mostly investment companies.
The stakes are big and the stakeholders and companies that have not left the territory have been on pins and needles waiting to see how the final rules and regulations will shake out relative to changed residency requirements and source income issues.
In her hopeful release, Christiansen said, "They also agreed to consider transitional relief for those U.S. citizens who had moved to the USVI, made investments, and started businesses in reliance on the availability of tax credits under prior law. Recognizing the urgency of the situation, Treasury is pushing to get the regulations out by the end of this year. In the meantime, we will continue to look for the opportunities to address the situation as the legislative calendar winds down for the first session of Congress."
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