October 24, 2004
Bush signs tough new EDC rules into law
ST. CROIX - As expected, President Bush signed a revised corporate tax law that includes an amendment setting strict new residency and source-of-income rules for the Economic Development Commission program that offers tax breaks to companies in the Virgin Islands.
The residency and income requirements that opponents fear will cripple the tax incentive program were added in a last-minute amendment to the American Jobs Creation Act in a conference committee earlier this month. The bill passed the U.S. House of Representatives on Oct. 7, and the U.S. Senate passed it three days later.
Bush signed the legislation, which includes $136 billion in new tax breaks for U.S. businesses, farmers and other groups, just before hitting the campaign trail Friday afternoon.
Acting Gov. Vargrave Richards said in a released statement that in anticipation of the president's signing the bill into law, the Turnbull administration commissioned a study from PricewaterhouseCoopers to assess its economic impact on the EDC tax-incentive program.
Posted by afinta at 06:06 PM
October 22, 2004
National Park worth $128M to St. John last year, study finds
ST. JOHN - The V.I. National Park generated $128 million in sales and 2,500 jobs on St. John last year, according to a recent study that examined the park's regional economic impact.
The Friends of Virgin Islands National Park made their findings public Thursday at the park's maintenance area in Cruz Bay.
Friends of the Park is a nonprofit organization and official park partner that raises funds for activities to preserve and protect its natural and cultural resources.
The study is said to be the most comprehensive conducted to date to track the park's financial influence.
"Ideas have been thrown about that the park has an economic impact, but no one has tried to quantify it," said Jane Israel, an independent consultant hired by Friends of the Park to conduct the study.
Posted by afinta at 04:59 PM
October 16, 2004
Officials seek ways to soften impact of new EDC rules on V.I.
By MEGAN POINSKI
Friday, October 15th 2004
ST. THOMAS - Gov. Charles Turnbull said Thursday that he is working with other government and business officials to soften the blow that legislation the U.S. Congress passed this week will have on the territory's economic development tax-incentive program.
The new rules strengthening and further defining who qualifies as a "bona fide" resident of the territory and what can be considered as V.I. source income could have a chilling effect on the Economic Development Commission program that offers tax breaks to companies locating in the Virgin Islands.
Turnbull assured residents that the government is working hard to ease the burden the new law could be to the economy at a press conference Thursday.
Currently, about 100 businesses are beneficiaries of the EDC program, which brings an estimated $100 million annually to the territory.
"The bottom line is that this bill will become a law, and it will impact the territory," Turnbull said. "We - the government, the Senate, the Delegate to Congress and the business leaders - are working together to make sure the impact is mitigated to its lowest extent."
The strict new residency and income requirements that could cripple the EDC tax-incentive program were added in a last-minute amendment to the American Jobs Creation Act in a conference committee early this month. The bill passed the U.S. House of Representatives on Oct. 7, and the U.S. Senate passed it Monday. President Bush is expected to sign the legislation.
At this point, the territory can only lobby for the president's understanding and try to ensure that the new federal rules and regulations as they apply to the program are written in a way that is the least harmful to the territory, Turnbull said.
On Wednesday, Washington, D.C., legal counsel to the territory Peter Heibert and V.I. Republican National Committeeman Holland Redfield II spoke about the issue with Reuben Barales, Bush's assistant for intergovernmental affairs. Two deputy secretaries from the U.S. Interior Department also passed along the territory's concerns to the White House.
Turnbull said he believes Bush does not want to hurt the V.I. economy and would like to preserve the EDC program. The governor has been invited to travel to Washington and discuss possible solutions with White House officials very soon, he said.
Because the language affecting the EDC program was introduced less than two weeks ago, Turnbull said, the potential damage has not been assessed. Accounting firm PricewaterhouseCoopers is analyzing the socioeconomic impact of the changes on the territory's economy.
Turnbull said preliminary results of that assessment should be available in two weeks, with a final report expected at the end of the year. Turnbull and Office of Fiscal and Economic Recovery Director Nathan Simmonds would not estimate the economic impact on Thursday.
Revenues expected from the EDC program constitute "a substantial portion" of the budgetary projections used to put together the Fiscal Year 2005 budget, Turnbull said. The V.I. Senate passed a $607 million budget on Oct. 4.
Turnbull said that the budget proposals have not made it to Government House for his signature but that the changes in the law will affect the fiscal year's revenue. Turnbull plans to meet with senators early next week.
Economic Development Authority Chief Executive Officer Frank Schulterbrandt said that though the program's future is uncertain, no companies have withdrawn. Lt. Gov. Vargrave Richards said he has received some inquiries and met with some EDC beneficiaries but knows of none who have decided to take their business elsewhere.
Schulterbrandt said Wednesday that the changes' impact will vary depending on the beneficiaries.
"Their CPAs and tax attorneys first have to assess the situation and find out what the impact to the individual company would be," Schulterbrandt said Wednesday. "Over time, they will see if they can fit in the program with the new changes in the law."
Richards' office will post updates on the EDC program online at http://www.revitalizestcroix.com.
The new proposal makes two major changes - one in residency requirements and one in income eligible for tax breaks. According to the bill, EDC beneficiaries must live in the territory for six months out of the year starting in 2005. Current law requires EDC company owners to live in the territory but has no set amount of time they need to be here.
Only income made in the territory would be eligible for tax breaks, according to the new proposal. Money that an EDC company makes on the U.S. mainland could not be counted as earnings made in the territory.
Recent developments have come after months of negotiating between the territory and the federal government to find ways to curb abuses of the program while preserving the territory's efforts to improve its economy.
Accusations of abuse in the program prompted investigations into at least two EDC beneficiaries.
Posted by afinta at 12:49 PM
October 14, 2004
U.S. Virgin Islands Balks at Tax Changes
From the AP:
Investors and government officials criticized a U.S. congressional bill that drastically reformed a corporate tax break program in the U.S. Virgin Islands, warning it could derail the territory's 2005 budget.
The bill, which the U.S. Congress passed Monday, imposed stricter rules for corporations receiving tax breaks under the 17-year-old Economic Development Commission program.
The program has lured more than 100 companies to the U.S. Caribbean territory, employing thousands of residents and contributing up to 25 percent of government revenue through spending and taxes, officials have said.
Critics warned the new rules could chase away businesses expected to contribute more than US$115 million in taxes next year - about 19 percent of the US$605 million 2005 budget.
Gov. Charles Turnbull warned the new regulations could "have serious financial consequences for the territory."
He said government officials hoped to meet with officials from the Treasury Department and the Internal Revenue Service to discuss how the bill will be implemented, vowing to "use all our resources and leave no stone unturned in our efforts to protect this important and essential program."
Officials based the 2005 budget on an estimated 30 percent increase in government revenue. But the new rules could lead to a drop in revenue if businesses pull out of the territory, said U.S. Virgin Islands Senator Shawn-Michael Malone.
"I don't want to scare people, but I want people to see the potential loss," Malone said.
Under the new rules, businesses must conduct all their transactions inside the U.S. Virgin Islands to be eligible for the tax breaks. Before, some businesses with transactions outside the territory qualified.
The new regulations also require a company's primary assets to be located in the territory. Business owners also must reside in the U.S. Virgin Islands for at least 182 days a year.
The Economic Development Commission program came under criticism earlier this year after a man was convicted for falsely claiming he lived in the U.S. Virgin Islands to get tax breaks.
"This is a terrible blow to our economy. There's no question there will be serious fallout in the program," said Rick Moman, chairman of Corporate Services Group, LLP, which has real estate and financial consulting firms in the U.S. Virgin Islands and has benefited from the program since 1996.
Moman said he was still studying the new regulations to determine how they would affect his business.
Other companies that benefit from the tax breaks include hotels, museums, rum distilleries and construction material manufacturers.
Posted by afinta at 12:11 PM
More quotes from the auto dealer
Here is another story about Jamie Auffenberg -
Auto dealer says tax break was proper
BY MIKE FITZGERALD
BELLEVILLE - A controversial tax shelter program based in the U.S. Virgin Islands enabled car dealer Jamie Auffenberg to save $1.4 million on his federal income tax bill four years ago.
However, Auffenberg disputed recent media reports that he only paid $97,000 in taxes in 2000 on income of $6.4 million -- instead of the $2.3 million tax bill he would have faced if he had claimed Illinois as his legal residence.
To bolster his case, Auffenberg showed a Belleville News-Democrat reporter copies of his personal tax returns for 2000 showing he paid $458,418 in income taxes that year.
Auffenberg, 53, acknowledged that he has benefited from taking part in the tax incentive program. But he said stories in the New York Times and St. Louis Post-Dispatch understated the level of commitment he has had to make to the Virgin Islands' economy to receive the tax benefit.
October 13, 2004
Car dealer gets break living abroad
Well, the news is coming from all over the place. Here is an article from a St. Louis, MO newspaper site about an auto dealer there who is in the EDC program and managed to pay only 100k in taxes on 2.4 million of income. I don't have a lot of sympathy for a guy like this - this isn't what the program was set up for, and fools like this (I can't believe the guy actually gave the reporter quotes - just shut up and call your lawyer) who have abused this system are the reason the rules are going to become much tougher, and probably drive legitimate businesses from the Territorty.
By William Lamb
Of the Post-Dispatch
Jamie Auffenberg, who operates 12 Metro East car dealerships, was able to save nearly $2.1 million in federal income taxes four years ago by claiming St. Croix, in the Virgin Islands, as his primary residence, court documents show.
Auffenberg acknowledged in a telephone interview last week that he participates in a tax-incentive program that Congress created in 1960 to promote economic activity in the Virgin Islands. Federal authorities say that the program, which taxes certain qualified residents at an annual rate of just 3.5 percent, has become a target for abuse by wealthy Americans.
Auffenberg is president of the St. Clair Auto Mall in O'Fallon, Ill. His wife, Margaret, has a house in Swansea that is listed in her name. Jamie Auffenberg said he had established legal residency in St. Croix in 2000 and insisted that the arrangement is legal and proper.
Posted by afinta at 02:36 PM
October 12, 2004
U.S. Senate expected to pass bill today that could cripple EDC program
This is pretty big news around here. The EDC program has brought a lot of investment, jobs, and income to the territory. I don't want to over state the possible negative effects about the whole thing but in the short term it could make the local economy, especially the part that doesn't count on tourism so much, a lot tougher. It may also halt the rising prices of real estate.
By MEGAN POINSKI
Monday, October 11th 2004
The U.S. Senate is expected to approve today legislation that could severely curtail the territory's Economic Development Commission tax-incentive program.
The territory discovered last week that language in an amendment to the federal Jumpstart Our Business Strength bill coming out of the Congressional conference committee. The new version of the bill passed the U.S. House of Representatives on Thursday. The U.S. Senate has debated through the weekend and at 1:40 p.m. Sunday, senators approved a motion for cloture, which limits further debate to 30 hours. After 30 hours have passed, a vote on the measure must be taken.
If the bill becomes law, money that EDC beneficiaries make on the mainland will not be eligible for tax breaks. Those tax breaks - as much as 100 percent of personal income in some cases - form the backbone of the EDC program.
Posted by afinta at 10:59 AM
October 10, 2004
Proposed EDC changes create air of uncertainty
More news about the new changes to the EDC program -
By PATRICK JOY
Saturday, October 9th 2004
ST. CROIX - Government officials and attorneys representing V.I. Economic Development Commission tax-break beneficiaries said Friday that the effects of federal tax law changes, which the U.S. Senate is expected to approve today, could be hit-or-miss for the approximately 100 companies in the program.
What is certain is that under those changes, the U.S. Internal Revenue Service will deliver a hard hit to a program that has brought more than $100 million into the territory.
The new rules are attached in an amendment to the American Jobs Creation Act, which the U.S. House of Representatives passed late Thursday night. The U.S. Senate did not get to it Friday, but the Senate Press Office said it was on the Senate agenda for this weekend.
Posted by afinta at 11:47 AM
October 08, 2004
Feds poised to clamp down on EDC without delay
Tax breaks for money earned on U.S. mainland would cease this year, rather than next, if bill becomes law
By PATRICK JOY
Friday, October 8th 2004
ST. CROIX - The federal government moved forward Thursday with drastic measures to close loopholes in the territory's Economic Development Commission's tax-incentive program - just hours after Acting Gov. Vargrave Richards incorrectly announced that the territory had won a one-year reprieve from the crackdown.
While the territory did manage to temporarily dodge enforcement of the strict new residency rules, it did not succeed in postponing the second, and equally important, prong of the federal government's attack on the EDC program.
That attack - aimed at removing tax breaks for income that Virgin Islands companies earn on the U.S. mainland - could hit this year if Congress passes, and President Bush signs, the American Jobs Creation Act, to which the EDC reform measure is attached in amendment form.
Posted by afinta at 05:32 PM
October 06, 2004
Feds poised to crack down on EDC companies
Changes to JOBS bill would set strict residency guidelines for tax-break beneficiaries
By PATRICK JOY
Wednesday, October 6th 2004
ST. CROIX - Three months after it fired the first warning shot over the bow of the territory's Economic Development Commission tax-incentive program, the federal government took direct aim this week at residency loopholes it says have led to abuse and fraud within the program.
New language inserted Monday into an amendment to the federal Jumpstart Our Business Strength bill would set strict definitions for tax residency in U.S. territories and remove tax breaks from money made on the U.S. mainland.
Government officials and EDC representatives said the changes - added in conference committee - came as a shock and could cripple the tax-incentive program that officials estimate bring approximately $100 million into the territory annually.
Companies operating here could leave, taking their jobs and island investments with them, they said, and companies considering a move to the territory may reconsider if the new rules are in place.
"This could have a major impact on our watch factories and EDC companies," said Acting Gov. Vargrave Richards. "This could have a numbing, devastating and debilitating effect."
Gov. Charles Turnbull was out of the territory Tuesday.
Territory officials said they thought they had negotiated a compromise on the issue, with language in the U.S. Senate version of the bill tightening residency standards but allowing for several options to establish residency. They said the single-option language that appeared Monday came as a surprise.
V.I. Delegate to Congress Donna Christensen said the changes were made by committee Chairman Rep. Bill Thomas, R-Calif., but originated in the Treasury Department.
Posted by afinta at 06:47 PM
October 04, 2004
Goats Expelled From Virgin Islands Park
Somehow the AP picked up this story about goats on St. John - pretty funny to find this on a website from Tuscaloosa!
By MAT PROBASCO
Associated Press Writer
October 04, 2004
Chewing exotic flowers and common weeds, the indiscriminate eating habits of free-roaming goats have earned them expulsion from a U.S. Virgin Islands national park, officials said Monday.
Goats, left behind by early European explorers for food on future journeys to the Caribbean, tear through the Virgin Islands National Park's 737 known species of plants - some of which are facing extinction, said Rafe Boulon, the park's resource management chief.
About 200 goats wander the 7,150-acre national park in St. John - a forest island where native species account for 85 percent of plant life - sometimes leaving behind swaths of bare ground from their voracious grazing, Boulon said.