Aug. 29, 2006 – The U.S. Treasury Department has published guidelines for certain businesses that could spell good news for the UVI-planned technology park by further defining the regulations about source income for those businesses.
Releases from both Government House and the office of Delegate Donna M. Christensen lauded the guidelines released Tuesday.
Treasury has clarified that certain types of income relative to e-commerce and intellectual property can be considered V.I. source income or effectively connected for purposes of the U.S. tax law and the local Economic Development Commission tax benefits program.
"This is very good news for us, especially as it relates to the business models being actively pursued by officials of the University of the Virgin Islands and its technology park," Christensen said. "We have been trying for some time to get Treasury to clarify that income streams that would be generated by businesses being contemplated for inclusion in the UVI Technology Park would qualify for EDC benefits. Today's notice at long last clarifies that it does."
Brian Modeste, Christensen legal aide, said some of the people who were interested in getting into the technology park weren't satisfied with assurances that the rules — developed by Treasury after the American Jobs Creation Act of 2004 gutted much of the EDC program — would allow them to take advantage of the generous tax benefits afforded by the program. "They wanted further clarification from Treasury and IRS," Modeste said Tuesday afternoon.
According to the Government House release, the Treasury notice was issued in response to a request by Lt. Gov. Vargrave Richards, who was made the point person when problems with the EDC program emerged a few years ago.
Richards had been approached by representatives of the UVI tech park, the release said, who said that lack of clear guidelines was having an "adverse effect on potential investors interested in developing e-commerce businesses in the Virgin Islands."
Modeste said what the Treasury guidelines do is lay out three or four scenarios where software licenses, intellectual property and e-commerce income that may have been generated in the states or elsewhere would be considered effectively connected, as long as the businesses were only operating in the Virgin Islands.
Gov. Charles W. Turnbull is quoted as saying, "While some of the more difficult issues are still under consideration by the Treasury and won't be resolved until Treasury issues final regulations later this year, the interim guidance provided by the Treasury notice is welcome."
He also said government officials are still trying to iron out tax issues for other types of businesses including offshore insurance and financial services.
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