Date: July 8, 2004
Contact: Angela Johnson
Phone: 340-773-6449

LIEUTENANT GOVERNOR VARGRAVE RICHARDS CALLS MEETING WITH EDC BENEFICIARIES

In keeping with Governor Charles Turnbull's directive, Lieutenant Governor Vargrave Richards today met on St. Croix with more than 100 principals and individuals representing Economic Development Commission (EDC) companies. The meeting was called to discuss recent developments in Washington, D.C., regarding the notice issued by the Internal Revenue Service relative to applicable tax laws.

Also in attendance were representatives from the Economic Development Authority, V.I. Bureau of Internal Revenue and the Governor's legal counsel Peter Hiebert and Barry Hart of Winston and Strawn.

The Governor's legal counsel discussed issues pending in Congress and before the U.S. Treasury that have raised concerns among the EDC community regarding residency requirements, and effectively connected and source of income issues.

Both Hiebert and Hart emphasized that as the process moves forward, they feel assured that an acceptable set of rules will be developed to provide tax certainty and fairness; rules that will continue to sustain and promote the EDC program in the Virgin Islands.

In addition, Lieutenant Governor Richards reiterated that the Governor's legal counsel has met with congressional tax writing committees and tax policy staff at the U.S. Treasury. "The Treasury Department has indicated that it welcomes the input of the Virgin Islands as part of the rule making process - and that is key," he said. "The Government of the Virgin Islands encourages and welcomes your involvement as we develop a written position on these very technical issues."

Lieutenant Governor Richards also noted that "The economic development commission has achieved significant success in recent years in attracting legitimate new business and investors to the Virgin Islands. The success of the EDC program is reflected in the increase in tax revenues collected by the Bureau of Internal Revenue (BIR), the creation of new jobs, and the general increase in economic activity in the Territory." Richards also recognized and thanked the EDC companies for their philanthropic and in-kind contributions to a host of charities.

Richards underscored the Administration believes, with Hiebert and Hart concurring, that the best way to protect and preserve the EDC Program is through the development of clear and reasonable rules and regulations that will provide needed tax certainty for existing beneficiaries and potential new investors, consistent with established U.S. tax policy for the Virgin Islands. In furtherance of this objective, we have developed a comprehensive strategy that we have begun to implement."

With respect to the notice issued recently by the IRS relative to the EDC program, Hiebert stated that the correspondence was not a tax shelter notice. "It does not by itself have legal effect," Hiebert said. "It does indicate Treasury's position that it might take in an audit situation or in a litigation situation. Treasury has recognized, indicated and stated that ultimately these kinds of issues will be and must be resolved through the issuance of regulations. That is out task. We are committed to finding that reasonable middle ground and we are committed absolutely to preserving, protecting and enhancing this program."

Supporting the Governor's position presented by legal counsel, Lieutenant Governor Richards reiterated the importance of the public and private sectors working together to clarify legal and technical issues in order to strengthen the Territory's economic development program. "In the final analysis, it is important that we all go forward with the understanding that the objective of this Government is to put forth a single, strong position on the EDC program," he said. "Together, we will move aggressively and cohesively to resolve all concerns."

After presentations and a question-and-answer period regarding the EDC Program, the Lieutenant Governor introduced Police Commissioner Elton Lewis, who fielded questions regarding public safety concerns and the need for additional resources to strengthen essential police services.