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Rum Tax Rebate Moving Through Congress

Dec. 13, 2005–The U.S. House of Representatives unanimously passed legislation recently to extend the territory's $13.25 per proof gallon rum tax rebate for one more year, Delegate Donna M. Christensen announced recently.
The territory receives tens of millions of dollars each year from the tax rebate. It was scheduled to expire at the end of 2005. Without the extension, the tax would revert to its former rate of $10.50 per proof gallon. Christensen said in a release Friday that the House passed the extension as part of the Tax Revision Act of 2005.
The bill extends certain tax provisions that could not be included in the Tax Relief Extension Reconciliation Act of 2005 because of budgetary rules, the release said.
The extension measure must now pass the U. S. Senate, and be signed into law. Brian Modeste, Christensen's legislative director, said Tuesday that getting the Senate to approve the measure shouldn't be a problem.
"It's a question of when," Modeste said. "The expectation now is it may not pass until next year, and it may have to be done retroactively." That would not result in an interruption of the current tax, he said, because the adjustments are done in three-month periods, and the tax program wouldn't be adversely affected.
Asked whether he thought the time would come when Christensen would not have to revisit the issue every year or two, Modeste said, "There's always hope."
The battle to retrieve a greater share of the tax has been going on for years. Congress first imposed the tax in 1984, in response to a scheme developed by Puerto Rico to "redistill" alcohol originally distilled on the U.S. mainland to increase the commonwealth government's share of the federal taxes.
As part of that 1984 legislation, Congress shut down the "redistillation" program and set the portion of rum taxes to be returned to Puerto Rico and the Virgin Islands at $10.50 per proof gallon. It was later raised to $11.30 and then, in 1999, to the current $13.25. It has been an ongoing battle to retain the $13.25 ever since.
Marvin Pickering, V.I. Rum Industries Ltd. senior vice president and chief financial officer, said the territory received $87.8 million in rebates for fiscal year 2005 for the 6.6 million proof gallons shipped to the U. S. mainland.
The rum distillery started on St. Croix in 1760, exporting rum worldwide. However, it was not until after 1933 and the end of Prohibition that the distillery began running continuously.
Cruzan Rum, previously owned by Angostora Ltd., a Venezuelan company, was sold in August to V&S Vin Spirit AB, an international wine and spirits company run by the government of Sweden. Since 2003, Cruzan has had a distribution agreement with V&S. (See
Sale of Cruzan Rum Finalized.) Pickering said Monday he projects sales for 2006 to increase to about 7.1 million gallons, which includes bulk rum shipments to the states, as well as the Cruzan label.
Pickering said in August that the company is trying to negotiate a deal with the V.I. government where some of the new tax money generated by increased rum production is given back to the company to use for marketing. He said at the time that the governor had requested an investigation into the plan.
Monday, Pickering said he has not yet heard back from the government on the status of that investigation. James O 'Bryan, Gov. Charles W. Turnbull's spokesman, said Tuesday that there is a meeting to update the investigation "going on today," but he said a final decision was not anticipated from that meeting.

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