Oct. 11, 2007 — The U.S. House of Representatives Wednesday passed a bill that would spare every V.I. resident making more than $75,000 a year a tax audit by the Internal Revenue Service.
The bill sets the statute of limitations on audits to three years for taxpayers making over $75,000 a year and who file their tax returns only in the Virgin Islands. Those making under $75,000 a year were already covered under a previous ruling.
The bill still needs passage by the U.S. Senate and President Bush's signature before it becomes law. The bill is retroactive to 1986 and gives V.I. residents the same rights as state residents.
Without this bill, all V.I. residents making over $75,000 a year, not just the Economic Development Commission beneficiaries intended as targets by the IRS, would have faced audits. Couples filing jointly would have been included.
"It's a problem for every V.I. taxpayer," Brian Modeste, an aide to Delegate Donna M. Christensen, said Thursday.
Gov. John deJongh Jr. said in a news release issued Wednesday that this was a major milestone in his administration's efforts to correct a regulatory injustice.
"The need for Congressional action became critical when the IRS ruled last year that statute of limitations protections did not begin to run for Virgin Islanders whose residency status was questioned unless they filed an income tax return with the IRS," deJongh said.
He said that without passage of this legislation, the IRS could assert unlimited authority to audit Virgin Islands taxpayers, and assess back taxes and penalties, for tax years that would otherwise be considered closed.
"This is a matter of fundamental fairness and simple justice," deJongh added.
Both the governor and Christensen had nice words for Rep. Charles Rangel, who sponsored the bill.
"I am grateful that my friend Chairman Rangel was able to heed the call of my constituents to address this inequity in the way V.I. taxpayers are treated," Christensen said in a news release issued Wednesday.
DeJongh also said that the bill is important to the territory's Economic Development Commission program.
The statute of limitations change, which happened earlier this year, had had a chilling effect on the territory's EDC program because many beneficiaries faced audits far outside of the normal three-year statute of limitations.
"During the past several months, I have been busy educating key Democratic and Republican Senators about the statute of limitations issue, the Virgin Islands economy and the importance of our EDC program to job creation. I have been meeting with key senators and am confident that our statute of limitations amendment will also receive a fair hearing in the U.S. Senate," deJongh said.
No one returned a phone call made to the EDC for more information.
The bill also includes a provision to ban the use of private debt collectors to collect delinquent taxes owed to the IRS.
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