Lt. Gov. Gerard Luz James II chaired a meeting Thursday with members of the Virgin Islands FSC Association and a cadre of government representatives, trying to find a way to turn the Foreign Sales Corporation business into some other sort of financial services industry.
The federal FSC tax program will close out at the end of next year if legislation pending in Congress is passed. With it will go an estimated $10 million in annual revenue to the Virgin Islands, which hosts several thousand foreign sales corporations.
James is recommending creation of a private/public sector task force to study if and how the territory can offer other services to U.S. companies that currently house their FSC subsidiaries in the Virgin Islands.
The FSC was created in 1984 as a mechanism by which the federal government can give a tax break to U.S. manufacturers on their export profits. They qualify by running those sales through a foreign subsidiary, the foreign sales corporation.
The European Union challenged the program at the World Trade Organization as an unfair trade practice, and last year the WTO upheld that challenge, setting in motion Congress' move to dismantle the FSC program.
About a dozen small companies operate in the Virgin Islands as FSC management companies, handling the paperwork for FSC clients and acting as their "foreign" office. Most of the management companies were represented at Thursday's meeting.
Government participants included Peter Hiebert of Winston and Strawn, the law firm that represents the Virgin Islands in Washington, D.C., Brian Modeste, congressional aide to V.I. Delegate Donna Christensen, several of James' top aides, and a representative of the Industrial Development Commission. Former Lt. Gov. Derek Hodge, an attorney, also attended.
James issued a written statement after the meeting saying he "was pleased with the turnout" and with "the open dialogue."
Meanwhile, the federal legislation closing the FSC program is still stuck in Congress behind a bevy of appropriations bills that members are trying to push out so they can adjourn and return to home districts to campaign for the November elections.
