Nov. 26, 2001 — Your tax credit check's not in the mail, and it's not about to be.
That's the bottom line of a ruling Monday by District Court Judge Thomas Moore.
The judge ruled that the Virgin Islands government acted unlawfully by not sending out the 2001 income tax credit checks mandated by President George W. Bush's tax reform act last summer. But he went on to say that he could not realistically expect the government to
send out the checks now, before the Dec. 31 statutory deadline, especially given that the government doesn't have the money to cover the payments.
The order on Monday came at the end of a court hearing in the case brought by former senator Violet-Anne Golden of St. Croix and Leo D. Goubourn of St. Thomas against the V.I. government and its Internal Revenue Bureau. Suing on behalf of all taxpayers in the Virgin Islands, the plaintiffs asked the court to order IRB to comply with guidelines laid out in Bush's Economic Growth and Tax Relief Reconciliation Act, which was enacted by Congress in May and signed into law by the president on June 7.
That act lowered the bottom income-tax bracket from 15 percent to 10 percent on the first $6,000 of income for singles, $10,000 for heads of households and $12,000 for couples filing jointly. Since it was too late to apply the reduced taxes to withholding on 2001 income, the act called for the U.S. Treasury to send checks to most year 2000 income taxpayers, giving them an advance payment of a 2001 tax credit owed them because of the tax reduction.
The effect was that those who filed 2000 tax returns could expect a check of up to $300 for singles, $500 for heads of household and $600 for couples. Such checks began going out in July in the rest of the country, and most of them were in people's hands by the start of October.
V.I. government officials said in July that taxpayers would not receive such tax-credit checks but would instead get to claim the credit when filing their 2001 income-tax returns next year. That led to the lawsuit, which claimed that the local government, whose income tax structure mirrors the federal one, was violating the law.
In court papers opposing the plaintiff's charges, V.I. government attorneys claimed that the Virgin Islands tax code is not bound by the federal provisions mandating the credit checks. Assistant Attorney General Richard Prendergast also stated that the federal court could not order the V.I. government to allocate money — in this case an estimated $11 million — that had not been appropriated by the Legislature.
"The Virgin Islands government does not have a surplus to return to the taxpayers, as the federal government did," Prendergast wrote, contending that the territorial government is operating at a deficit of more than $1 billion.
Moore has not yet put his order into writing, but the effect is that he will not force the government to send the checks out.
Golden and Goubourn's attorney, Chad Messier, noted that the judge ruled that the tax-relief legislation applied to the Virgin Islands, but that it was impractical to order the government to comply with the law at this late date.
"From a practical point of view, you won't be getting your check," Messier said. "But more important, people should be cognizant that you're not getting your check because the government is acting illegally. That's the law, and the law applies to us."
