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Not Much New in Fight to Change Onerous EDC Rules

Sept. 29, 2005 – With an Oct. 15 deadline looming — when some Economic Development Commission beneficiaries will decide whether they stay or go – a V.I. delegation is again in Washington, pleading the territory's case.
Lt. Gov. Vargrave Richards led a group of 16 people to Washington, D.C., this week to speak to members of the U.S. House of Representatives and U.S. Senate about changes to EDC regulations by the U.S. Treasury.
In a telephone interview from Washington, D.C., on Thursday morning, Richards said, "This is a fix-it effort. We want to come up with a resolution that satisfies the people of the Virgin Islands and the congressmen. They have legitimate concerns and we want the program to be run with complete integrity."
He said V.I. government officials and private citizens don't want to see the EDC program crippled by the regulations resulting from amendments to the Internal Revenue Code made by the American Jobs Creation Act of 2004. This was at least the fourth trip to the capital by Richards or Gov. Charles W. Turnbull to plead the V.I. case.
This trip was critical because of the timing. Richards said companies are still confused about where they should pay their 2004 taxes – to the U.S. Internal Revenue Service or to the V.I. Bureau of Internal Revenue. He said beneficiaries have received extended deadlines until Oct. 15, but can't extend beyond that date.
Richards said that he has been told by companies, if they must start paying to the IRS this Oct. 15, they won't be coming back to the Virgin Islands.
The effort to save the EDC program is proceeding on two tracks. The track that has been foremost in the last year concerns the regulations that came out of Treasury as a result of the act. Government officials and beneficiaries are concerned that the regulations concerning source income and residency requirement would be too stringent for beneficiaries to comply with.
The U.S. Treasury Department and Internal Revenue Service published proposed regulations in April. (See "EDC Regulations Are Out, Effects Being Determined").
Richards and others perceive the way those proposed regulation are worded as potentially "devastating" to the program.
Public comment was taken up to mid-July on those regulations and a public hearing was held at the end of July in Washington, with many V.I. government officials and residents attending.
If the regulations are not written in a way that satisfies the EDC advocates, they could follow the second route, which is an amendment to the Jobs Creation Act.
Richards said, since Hurricane Katrina, the Washington officials have shifted their focus and are not worrying about matters in the Virgin Islands. Projections have been that the final regulations will be promulgated by the end of this year.
But, with the Oct. 15 deadline, that might be too late for many V.I. companies.
Richards said about the meetings, "Great emphasis was placed on the timely adoption of regulations which are critical to the beneficiaries and their ability to file their taxes in the territory by Oct. 15, 2005."
Richards and his delegation met with Sen. Chuck Grassley, chairman Senate Finance Committee, Sen. Max Baucus, Sen. Gordon Smith, Sen. Craig Thomas and Sen. Roy Blunt, acting House majority leader. Richards said Blunt was called in the midst of the meeting with the V.I. delegation and told that Majority Leader Tom Delay had been indicted and Blunt would be taking on his responsibilities.
Included in the V.I. delegation were David Nissman, attorney for Bridge Capital, Delegate Donna M. Christensen, attorney Marjorie Roberts, William Neville of US Viking LLC, and Cornel Williams, a senior executive with an EDC company. Also flying from the V.I. to Washington to take part in the meetings were: Nathan Simmonds,director of the Office of Fiscal and Economic Recovery Implementation; Sandra Brunet, assistant to Richards; Ira Mill, director of the Office of Management and Budget; Bernice Turnbull, Finance commissioner; and Frank Schulterbrandt, director of the Economic Development Authority.
Richards called the meetings "very fruitful and productive."
At the beginning of the teleconference, Richards said, "The meetings are another vital step to impress the critical importance of the EDC program to the Virgin Islands."
Richards said he was aware that after the meeting, some of the congressman had called Treasury to express their concern about the EDC regulations.
He said EDC beneficiaries have significantly boosted the V.I. economy, expanded the job market and made major contributions to non-profit organizations.
Christensen said in a press release Thursday afternoon, "We were able to present our case for the possibility of legislation to the chairman and ranking member of the Senate Finance Committee as well as to the Majority Whip of the House and the New Majority Leader, Roy Blunt,"
Christensen added about the congressmen. "While they continued to urge Treasury to make the final regulations amenable to the territory, they also expressed a willingness to work with us should we need to enact corrective legislation."

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