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Charlotte Amalie
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DeJongh: Congress Must Act on Cover-Over Extension

The V.I. government is trying to get the U.S. to restore rum tax advances, but ultimately Congress must act, Gov. John deJongh Jr. said Saturday in reply to a request for an update from Senate President Shawn-Michael Malone.

The federal government collects $13.50 in excise taxes on each proof gallon of locally produced rum sold throughout the mainland. Of that amount, $13.25 is remitted to the V.I. government, based on the relative volumes of Puerto Rican and Virgin Islands rum exported. But, while $10.50 of that rate is written into law, the remaining $2.75 must be renewed annually. Earlier this month Congress left for the year without acting on legislation extending the cover-over rate.

Anticipating this congressional inaction, the Department of Interior announced in September it would reduce the amount it advances the territory by 26 percent. So, while the V.I. government requested an advance payment of $263.9 million, Interior reduced the amount it will advance to $193.1 million – $70.8 million less than requested.

It is not the first time Congress left for the holidays without extendingt the rate. In the past, Interior has advanced the territory the full amount, anticipating that Congress would eventually get around to the extension. This year it did not, blowing a hole in the territory’s budget unless Congress approves legislation containing a number of tax provision extenders, including the territories’ rum cover-over extender.

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In a Dec. 19 letter to deJongh, Malone said he has yet to receive a response from the administration about what is being done to achieve the cover-over extension. Malone
asked for an update.

"The Senate continues to discuss revenue-generating measures, which should be helpful in addressing a potential revenue shortfall for FY2014," Malone said in his letter. "We must work together to achieve the increased revenues from the Internal Revenue Matching Fund. I look forward to hearing from you in regard to this," Malone said.

In his response, deJongh said he had met with him "and others in the leadership of the 30th Legislature on at least two occasions since September 19" to discuss the FY 2014 Budget, measures that could be implemented to address the budget shortfall, and the reduction in advance rum revenues.

"Although you were unable to attend the most recent meeting that had been rescheduled … at the Legislature’s request, the meeting did take place with Senator Cole, Senator Graham and the Legislature’s Post Auditor, Mr. Jose George, in attendance," deJongh said.

DeJongh said he was aware the Legislature had planned to meet Dec. 16 to enact legislation to address the budget shortfall. "The session was postponed but we await the Legislature’s actions to provide additional revenues to bridge the revenue shortfall for FY 2014," deJongh said.

Meanwhile, deJongh said he is "hopeful that we will eventually get the cover-rate back to $13.25."

"But it will take Congressional action and is tied up in their discussions on tax reform and tax extenders. We continue to have discussions with the members of Congress and their staff that can assist us and help them to understand that for us the cover-over program is more than a tax program, but is an essential foundation of our economic development program and was established for that purpose by Congress,” deJongh said.

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The V.I. government is trying to get the U.S. to restore rum tax advances, but ultimately Congress must act, Gov. John deJongh Jr. said Saturday in reply to a request for an update from Senate President Shawn-Michael Malone.

The federal government collects $13.50 in excise taxes on each proof gallon of locally produced rum sold throughout the mainland. Of that amount, $13.25 is remitted to the V.I. government, based on the relative volumes of Puerto Rican and Virgin Islands rum exported. But, while $10.50 of that rate is written into law, the remaining $2.75 must be renewed annually. Earlier this month Congress left for the year without acting on legislation extending the cover-over rate.

Anticipating this congressional inaction, the Department of Interior announced in September it would reduce the amount it advances the territory by 26 percent. So, while the V.I. government requested an advance payment of $263.9 million, Interior reduced the amount it will advance to $193.1 million – $70.8 million less than requested.

It is not the first time Congress left for the holidays without extendingt the rate. In the past, Interior has advanced the territory the full amount, anticipating that Congress would eventually get around to the extension. This year it did not, blowing a hole in the territory's budget unless Congress approves legislation containing a number of tax provision extenders, including the territories' rum cover-over extender.

In a Dec. 19 letter to deJongh, Malone said he has yet to receive a response from the administration about what is being done to achieve the cover-over extension. Malone
asked for an update.

"The Senate continues to discuss revenue-generating measures, which should be helpful in addressing a potential revenue shortfall for FY2014," Malone said in his letter. "We must work together to achieve the increased revenues from the Internal Revenue Matching Fund. I look forward to hearing from you in regard to this," Malone said.

In his response, deJongh said he had met with him "and others in the leadership of the 30th Legislature on at least two occasions since September 19" to discuss the FY 2014 Budget, measures that could be implemented to address the budget shortfall, and the reduction in advance rum revenues.

"Although you were unable to attend the most recent meeting that had been rescheduled ... at the Legislature's request, the meeting did take place with Senator Cole, Senator Graham and the Legislature's Post Auditor, Mr. Jose George, in attendance," deJongh said.

DeJongh said he was aware the Legislature had planned to meet Dec. 16 to enact legislation to address the budget shortfall. "The session was postponed but we await the Legislature's actions to provide additional revenues to bridge the revenue shortfall for FY 2014," deJongh said.

Meanwhile, deJongh said he is "hopeful that we will eventually get the cover-rate back to $13.25."

"But it will take Congressional action and is tied up in their discussions on tax reform and tax extenders. We continue to have discussions with the members of Congress and their staff that can assist us and help them to understand that for us the cover-over program is more than a tax program, but is an essential foundation of our economic development program and was established for that purpose by Congress,” deJongh said.