Oct. 22, 2004 President George W. Bush signed into law the "American Jobs Creation Act of 2004" Friday. The legislation is expected to dramatically impact the way the Virgin Islands conducts its lucrative tax benefits program.
The White House Web site says the bill "repeals the extraterritorial income exclusion in current tax law; provides domestic manufacturing and other business tax relief, including energy-related tax credits; allows for itemized deduction of State and local sales taxes; provides for reform of tobacco subsidies; includes international tax reform and simplification provisions; and includes various revenue-raising provisions."
Both the repeal of the extraterritorial income exclusion and the international tax reform provisions will impact the territory's Economic Development Commission program, which gives up to 90 percent tax breaks to certified beneficiaries. The bill's 183-day residency requirement provision has some beneficiaries and officials worried, too.
In the two weeks since the legislation emerged from a House Ways and Means Conference Committee, the territory's EDC beneficiaries and government officials have been on a roller-coaster ride of fear and uncertainty.(See "EDC Woes Bring Canceled Hearings, Analyst Meetings").
Some have predicted the loss of as much as one third of the territory's revenues, although more upbeat projections say that while the territory will lose a few of the companies that also donate heavily to charity and non-profit organizations, but that the solid, legitimate companies will restructure and stay on.
Support for the optimism came Thursday when a new-beneficiary hearing that had been postponed in the wake of the news from Washington was rescheduled for Nov. 4, with only two of the original eight applicants missing from the agenda.
Nadine Marchena, Economic Development Authority assistant executive director, said Friday evening that the applicants and their attorneys "most likely … feel confident about moving forward," despite uncertainty about the new regulations.
In a release from Government House, acting Gov. Vargrave Richards said local officials were trying to schedule a post-Election Day meeting with Washington officials in order to "discuss specific ways in which the impact of the new rules on the EDC program can be mitigated."
"We continue to move forward with the completion of the PricewaterhouseCoopers study to assess the economic impact of this law on the EDC program and the USVI economy," Richards added.
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