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Senate Expanding Arts Tax Breaks

Existing V.I. tax breaks for movie and video productions in the territory will be completely rewritten to meet film industry expectations and to allows companies sell tax credits if the credits are larger than their tax obligation, if a bill approved in committee Thursday becomes law.

The bill sponsored by Sen. Clifford Graham repeals and replaces the STARS Act, which was enacted in 2011 and gave large tax breaks to encourage video and film production. (See Related Links below)

Introducing the measure, Graham said film industry representatives had expressed a desire to have benefits that were more comparable to those offered by a number of states. The new version also ties some benefit levels directly to the employment and spending on the project, so that larger productions get more generous benefits, but always with a net benefit to the territory.

Graham’s bill gives tax credits of 10 to 17 percent of the wages and salaries of Virgin Islands residents employed on the project, which the company can then sell to any other V.I. taxpaying business, if they owe less than the credit. The credits were set up that way to give bigger incentives to bigger projects, while also ensuring the territory still benefited.

It also gives a break on the territory’s hotel occupancy tax, based on the number of rooms booked and for how many nights.

"The Virgin Islands is not on par with a lot of jurisdictions with which it competes for music and video production," Graham said at Thursday’s committee hearing. He said the measure would help tourism too, and emphasized that the tax breaks only happen after the businesses spend money by renting hotel rooms, hiring people and so on.

Another bill sent on for a final vote at Thursday’s hearing will expand preferential status for local contractors on government contracts by further reducing preferential bonding requirements and requiring semiautonomous government agencies to give preferred provider benefits.

Under the V.I. Preferred Provider Act enacted in 1971, central government contracts entered into by the Department of Property and Procurement are required to go to local contractors on a list of preferred providers, even when the local bid is more expensive, as long as the local provider’s bid exceeds the lowest bid by no more than 15 percent. That law, which has been amended several times over the years, also has reduced bonding requirements for preferred providers, with bid bonds capped at 2 percent of the bid amount for up to $300,000, and 5 percent for contracts greater than $500,000. Performance bonds are capped at 25 percent of the bid for preferred providers.

The bill sponsored by Sen. Diane Capehart, expands the reach of the Preferred Provider Act to include contracts by semiautonomous agencies that do not rely on Property and Procurement. That includes the University of the Virgin Islands, the V.I. Water and Power Authority and the territory’s hospitals, among others.

It removes language in the law saying the commissioner of Property and Procurement "may accept forms of surety from preferred bidders other than bid bonds or performance bonds," replacing it with a short list of specific alternative forms of surety, including "a 20 percent cash escrow" of the performance bond cap of 25 percent of the bid.

This would mean that on a $100,000 government contract, a preferred provider could set aside $5,000 in escrow and that would suffice as surety to guarantee performance on the contract.

The Rules and Judiciary Committee also sent on another bill sponsored by Capehart that would allow police learning of a missing minor or dependent adult to get to work immediately tracking him or her down instead of waiting 24 hours.

Capehart said the bill was prompted by a tragic event in which a minor child was reported missing, but police said they had to wait 24 hours, and the child was found dead in a swimming pool. A small territory does not need the delay, she said.

The committee also approved bills:
– turning a block of Frederiksted’s Strand Street into a one-way street;
– making it a misdemeanor to make or sell fake a driver’s license or identification card [30-0288];
– commending St. Thomas-born V.I. Olympic volleyball player Megan C. Hodge for her athletic achievements;
– and appropriating $41 million in funds available from the partial settlement of the South Shore NRD litigation over environmental cleanup on St. Croix and putting all of it into the General Fund for the current fiscal year.

An amendment to the South Shore settlement restores funding to the Office of the Governor that the Senate cut earlier in the year in a symbolic slap at the outgoing administration of Gov. John deJongh Jr.

The amendment also adds $100,000 for Gov. Kenneth Mapp’s inauguration and $390,000 to pay for ongoing election recounts and for early voting, which was enacted this year without funding.

All the measures approved in committee Thursday were passed without opposition. Present were Capehart, Sens. Sammuel Sanes, Donald Cole, Kenneth Gittens, Shawn-Michael Malone, Myron Jackson and Janette Millin Young.

Non-committee members, Sens. Clifford Graham and Craig Barshinger were also present.

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