April 10, 2005 – While many are still holding back comments about new regulations governing Economic Development Commission companies, some are raising concerns after their reviews of the 128-page document.
Rich Difede, chairman of the board for the USVI Economic Alliance; Anne Golden, who worked the program's enabling legislation through the Virgin Islands' 23rd Legislature; and Marjorie Roberts, a tax attorney who represents some EDC companies, each ventured some assessments this week. Gov. Charles W. Turnbull also jumped into the fray with a press release Tuesday.
Residents William and Doretta Bradshaw may have had the most personal reaction.
They sent a letter Tuesday to the V.I. senators saying they are losing their residency. The couple bought a home on St. Croix 26 years ago and became residents after determining they spent more time here than anywhere else. Their letter stated: "The Congress with its current attempt to change the rules on the EDC program has taken away our V. I. citizenship. We do not spend 183 days here, nor do we spend 183 days anywhere else, but we do spend the majority of our time on this beautiful island we call our home."
The Bradshaws urged the Senate to establish its own laws concerning what constitutes residency in Virgin Islands. They said the U.S. government would never get away with telling a state what its residency requirements should be.
In a phone interview Friday, attorney Roberts said she really did not see "any compromises" concerning residency requirements. She said the regulations made the residency requirements even stiffer than most thought the law implied. She said she had hoped their would have been more fexibility in the regulations, "that they would have reflected more the reality of living and working in the Virgin Islands."
In the Bradshaw's case, all time in the states is now lumped together. The Bradshaws have a vacation home in New Mexico and own an old family home in Indiana. Previously, they would have had to spend more time in New Mexico than in the Virgin Islands or more time in Indiana than in the Virgin Islands to be denied V.I. citizenship. Now, according to the new regulations, if their combined time anywhere in the states is more than the time in the Virgin Islands, they can't be residents of the territory.
There are exceptions to 183-days in the Virgin Islands rule. If a person doesn't have a permanent home in the United States or spends less than 90 days in the states he or she can claim V.I. residency.
Besides the stiff residency requirements, Roberts said she saw "no surprises" in the regulations that resulted from changes made to the program in the Jobs Creation Act passed by Congress and signed by President George Bush last November.
(See "EDC Regulations Are Out, Effects Being Determined").
She said the exceptions made to the residency requirements have "very limited applicability" to most EDC beneficiaries. On the other hand, according to Roberts, the rules concerning profits made from goods manufactured in the Virgin Islands were defined liberally and would have a positive effect for the program.
Roberts said she doesn't see "anything different" as far as source income for financial institutions goes. This income, often included in a category called designated service businesses, is of great concern to the V.I. government because these businesses contribute an estimated $114 million to government coffers.
She said fees and management income that is earned by people while they are in the Virgin Islands would still be eligible. Income derived from activities taking place outside of the Virgin Islands will not be eligible.
Anne Golden, who was in the 23rd Legislature and introduced the enabling legislation for the creation of the Economic Development Commission, did not comment on the specifics of the new regulations but made comments on the overall program. She said in an interview Friday that she was proud of the legislation but disappointed in the direction it went.
"Our intent with the legislation was to create jobs. We want zero unemployment in the Virgin Islands," she said. She did not like seeing how few jobs some of the program beneficiaries created, she added. "The plan was, we give you some benefits, and you give some benefits to Virgin Islanders."
She said it was too early to assess what damage, if any, had been done to the program. But if there is damage, "Some fine minds will just have to come up with something else to help our economy," Golden said.
On Tuesday, Difede said, "We are glad that, after 17 years, they have brought some clarity to what qualifies as source income."
He added that clarity may force financial companies to take another look at their business model to see if it will continue to work within the EDC program.
Difede, who is a part owner of Gold Coast Yachts, an EDC company, said he thought the regulation that spells out that income from goods manufactured in the Virgin Islands and sold in the United States is eligible as V.I. source income would be a positive for the program.
His overview was, "The regulations were clearly drawn from the U.S. Treasury's perspective to generate revenue for the U.S. Treasury."
Turnbull said in his release, "While I have been informed and pleased that Treasury made some changes in the residency rules that will help some taxpayers, only minimal changes were made in the rules governing the type of income that can qualify for EDC benefits." He added, "Consequently the proposed rules pose a continuing threat to the Virgin Islands EDC program."
He also said in the release that he would direct legal and legislative counsel to aggressively fight for changes in the regulations.
He concluded, "We support the objective of the federal government to prevent individuals who live and work in the United States from taking unfair advantage of Virgin Islands tax reduction benefits. However, the long-term impact of the proposed regulations, as currently written, would negatively impact the EDC program, which has served as the backbone of our economy."
Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.