Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

Governor Vetoes Bill Eliminating Customs Duties in U.S. Virgin Islands

Posted in Government Relations

U.S. Virgin Islands Governor  Kenneth Mapp recently vetoed legislation that would have eliminated customs duties, while at the same time transferring money that would have been collected through a different provision in the proposed bill.

The bill, sponsored by Sen. Kurt Vialet, would have mandated the Bureau of Internal Revenue to create and present a report to the legislature with suggestions for appropriate changes to excise taxes upon import within 90 days of the bill’s implementation. The idea behind it was that the bill would force an evaluation of alternatives to customs duties as a main revenue source for the territory. The money collected from the new revenue source would then have gone to the U.S. Virgin Islands government to help pay off its structural deficit.

Governor Mapp instead decided he would veto the bill, citing concerns about how the legislation would be an unnecessary risk to the territory’s economy. He said he understood the need for the territory to collect its fair share of customs duties, but the bill as proposed had implications that could have been detrimental to an economy that’s still in recovery mode.

What are customs duties?

Customs duties, also referred to as import duties, are taxes collected on all imports and some exports by a customs authority. The tax is typically contingent on how much the goods being transported are worth and the country of origin, among other factors.

Customs duties are levied when imported goods first come into the territory, crossing the border. The cost of the duty typically gets added to the price consumers pay for the good, which means the same good produced domestically should typically cost less. The idea is to give an advantage to local businesses and manufacturers rather than those located overseas.

Congress sets all duty rates in the United States. All import rates are listed in a registry known as the Harmonized Tariff Schedule, which comes from the International Trade Commission. There is a general rate for countries that have normal trade relations with America and special rates applied to countries that may not be developed or do not have an international trade program.

These duties may also be impacted by international organizations and treaties. There are a few countries that have worked hard to reduce duties to promote free international trade. The World Trade Organization (WTO) also promotes commitments among its member nations to cut tariffs. These agreements occur after numerous rounds of negotiations among WTO members.

Another example of a treaty that helps reduce tariffs is the North American Free Trade Agreement (NAFTA), which includes the Canada, Mexico and the United States. As of 2008, all tariffs among the three nations have been eliminated.

For further insights into how Gov. Mapp’s decision to veto the customs duties bill could affect businesses in the U.S. Virgin Islands, consult a knowledgeable corporate planning attorney.

 

BoltNagi is a widely respected and established business and corporate law firm serving clients throughout the U.S. Virgin Islands.

The Economic Impact of Zika on the US Virgin Islands

Posted in Community Affairs, Labor & Employment

Throughout 2016, there were widespread concerns among travelers about heading to the Caribbean region, as the Zika virus outbreak caused concern particularly among pregnant women. The mosquito-borne disease is linked to brain damage in fetuses. Fears were particularly heightened when the media reported there were more than 100 positive cases in the U.S. Virgin Islands.

Given the number of countries and territories in the Caribbean that depend on tourism for their economic vitality, there were many worries that the virus would have devastating financial impacts.

However, despite the Centers for Disease Control and Prevention (CDC) providing a warning for pregnant women in April 2016 to avoid certain Caribbean nations, the Caribbean Tourism Organization (CTO) announced the industry “got off to a fast start” in 2016. According to the CTO’s announcement June 2, there was a 7.3 percent increase in the first quarter of the year over the same period in 2015. At the time, the CTO also said it expected tourist numbers to continue to increase throughout the year by a total of 4.5 to 5.5 percent.

Beverly Nicholson-Doty, who serves as commissioner of tourism for the U.S. Virgin Islands, stated there were initial cancellations of more than $250,000, but that overall the territory’s tourism industry was not particularly impacted.

Not all Caribbean nations and territories were lucky

Although the U.S. Virgin Islands managed to see healthy tourism in 2016, not all nations and territories in the Caribbean were so fortunate.

Puerto Rico, for example, had a 7 percent increase in tourism arrivals in January. After the CDC announcements, there was a 3 percent decline in February, a 5 percent decline in March and a 4 percent decline in April over the previous year. Additionally, about 41,000 room nights in Puerto Rico were canceled for up to two years—a loss of $28 million total through 2018. Many of these rooms were booked for business and convention purposes.

Cancellations across the region were much more prevalent among people of childbearing age. Fewer than 10 percent of travel agents reported having clients over 40 cancel their Caribbean trips, while 26 percent of agents reported having clients in their 20s or 30s do so.

Still, tourists did not seem too bothered with the Zika virus when surveyed. One national survey performed by Travel Leaders Group suggested that the “vast majority” of travelers were still opting to go through with their travel plans.

Overall, while the Zika virus may have caused a small dent in the U.S. Virgin Islands’ potential to have a huge year financially in the tourism industry, it does not appear to have had any significant adverse effects.

 

BoltNagi is a respected and established business law firm serving clients throughout the U.S. Virgin Islands.

All Employers Must Use New I-9 Immigration Form

Posted in Immigration

Ever since President Donald J. Trump and his administration took office in January, the White House has taken a hardline stance on immigration. As such, employers must be prepared for certain adjustments to their laws they must abide by when hiring and employing immigrant workers.

One of these adjustments is the newly updated Employment Eligibility Verification form, more commonly referred to as the I-9 form. U.S. Citizenship and Immigration Services (USCIS) released a revised version of the I-9 form November 14. According to the updates, all employers should have begun using the form effective January 22, 2017. Any businesses still using the old I-9 form must immediately switch to the new version or risk potential penalties for noncompliance.

USCIS has taken certain steps to make the new version as convenient as possible, creating an interactive PDF that can be accessed at the above link. It includes handy drop-down menus, automatic prompts to verify correct information, error notifications in real time, built-in help features and a unique barcode for each form.

Of course, if desired, you still have the option of printing out a blank form and completing the paperwork by hand, or you may fill out the form electronically and print it out. Employers should still print and sign the documents and keep hard copies in storage.

Differences from old forms

What makes the new I-9 employment form different from the previous version? Here are a few of the notable changes:

  • What had previously been the “Other Names Used” field is now replaced by the more specific “Other Last Names Used” field. This increases privacy and avoids potential discrimination against transgender people.
  • Any foreign nationals who have authorization to work in the United States were, under the old system, required to provide an I-94 number and foreign passport information. Now, authorized foreign nationals can simply provide either one of these (or an alien registration number).
  • The previous form had just one signature field for translators and/or preparers, which made it difficult if multiple people assisted in filling out the form. There are now spots for up to five preparers and/or translators to add their signatures.

Although these might not seem like particularly substantive changes, it is important to comply with the new versions of the forms. You do not, however, have to go back and re-do any old I-9 forms you have already completed for your existing employees. Those employees are grandfathered into the new system.

For more information on the new I-9 forms, the differences from the old version and how the change could affect your business, consult a knowledgeable immigration law attorney in the U.S. Virgin Islands.

 

BoltNagi is a widely respected immigration law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

With Puzder Out, Trump Turns to Acosta for Labor Secretary

Posted in Government Relations, Labor & Employment

Andrew F. Puzder, who rose to prominence as a fast food executive, recently withdrew from consideration to be President Donald Trump’s Secretary of Labor. Puzder had been the subject of a great deal of debate and scorn since his announcement in December, particularly among progressive groups and labor unions. After records of spousal abuse from his 1988 divorce surfaced, Republican U.S. senators began to turn on him, as well.

To replace Puzder, President Trump appointed Alexander Acosta, currently the dean of Florida International University’s College of Law.

Before the 48-year-old Acosta came to FIU, he served as the U.S. Attorney for the Southern District of Florida. While at the university, he helped establish a J.M. degree program in banking compliance, BSA and anti-money laundering. FIU’s law graduates ranked first among Florida’s 11 law schools three years in a row in terms of passage rate of the Florida bar (July 2015, February 2016 and July 2016).

Acosta’s most relevant experience to the position was the time he served on the National Labor Relations Board from 2002 to 2003, under President George W. Bush. Bush then appointed Acosta to be assistant attorney general for the civil rights division of the U.S. Department of Justice.

What to expect from the Acosta selection

With Acosta looking like a sure bet to be approved for the position, what should employers and employees alike expect?

BoltNagi’s Managing Attorney Tom Bolt served on a American Bar Association Board with Acosta and noted that he should prove to be an advocate for anti-discrimination laws. When he testified in front of Congress in 2011 regarding the civil rights of Muslims in America, Acosta argued vehemently that they should be treated and viewed just as any other American. “Alex is a remarkably balanced leader who is capable of examining issues in detail without micromanaging the people underneath him.” Bolt noted.

There are a couple issues that are likely to come up during confirmation hearings. In 2008, Acosta was investigated by the Justice Department’s Inspector General, who was looking into whether certain hiring practices or case assignments in Acosta’s civil rights division were politically motivated. One report indicated Acosta ignored some warning signs about those problems in the department.

In 2004, Acosta received criticism for justifying “vote caging,” in which Ohio citizens challenged whether black voters were eligible to vote. Some saw this as a strategy to disenfranchise minorities.

However, both these issues have already come up in previous analyses of Acosta and are unlikely to overrule what appears to be general bipartisan support for his appointment.

It is important for businesses in the U.S. Virgin Islands to be aware of their obligations under federal and territorial labor laws. For guidance and advice you need, meet with a dedicated employment law attorney.

 

BoltNagi is a widely respected and well-established labor law firm serving employers throughout the U.S. Virgin Islands.

What the Incoming Commerce Secretary Could Mean for Business

Posted in Government Relations

President Donald Trump recently nominated Wilbur Ross to serve as U.S. Secretary of Commerce. With Ross’ confirmation by the Senate on February 27, 2017, economists are already looking at what the appointment will mean for businesses across the country—including here in the U.S. Virgin Islands.

Most of the discussions that took place during the congressional hearings focused on the foreign trade policies that President Trump’s administration would likely pursue, along with strategies that could improve infrastructure domestically and other industry needs.

Ross’s previous experience includes service in the U.S. Army and work in consolidating failing steel companies into a company now known as International Steel Group. The latter experience made him one of the most influential figures in the realm of global finance.

Potential impact on business

Ross has experience conducting business in 23 different countries, and he’s known for being skilled at negotiating foreign trade agreements that are beneficial to the U.S. economy. He is likely to put America first in regards to business deals, saying at one point that he is “not pro-trade or anti-trade, but pro-sensible trade.” He defines this as trade that’s good for American businesses and workers alike.

Ross is likely to be much more involved in negotiating trade agreements for the Trump administration than those who have previously held his position. Much of his work might reflect tasks typically overseen by the U.S. trade representative. Ross mentioned during hearings that neither he nor the President intend to do anything in violation of the trade representative’s mandates, and that it was a sensible decision to bring in the intellectual resources he possesses to resolve various trade issues that will arise during his tenure.

We can expect Ross to play a role in President Trump’s promise to revisit and potentially back out of the North American Free Trade Agreement (NAFTA). When asked about the deal, Ross was quoted as saying that “we need to solidify relationships in the best way that we can in our own territory before we go off to other jurisdictions.”

Ross could also be a key figure in analyzing foreign trade policies with China, which he has described as “the most protectionist country” out of all the world’s major powers. Finally, the Trump administration could form bilateral trade agreements with various foreign nations, as they are quicker and easier to negotiate compared to multilateral agreements.

One thing is clear, Ross is likely to have a greater impact on the business world than many of the U.S. Commerce secretaries that came before him. That could have interesting effects on the business community and the economy overall.

 

Steven K. Hardy is Chair of the Corporate, Tax & Estate Planning Practice Group at BoltNagi, a highly respected business and corporate law firm serving clients throughout the U.S. Virgin Islands.

Puerto Rico Looks to Entrepreneurism to Ease Financial Problems

Posted in Government Relations

With its current debt at more than $70 billion, Puerto Rico has been forced to consider new ways to balance its budget and meet its financial obligation. The territory no longer controls its own finances as of June 30, 2016, when then-President Barack Obama signed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). The legislation created a new committee void of any elected Puerto Rican officials to oversee all the territory’s finances.

There are some similarities to Puerto Rico’s situation to the one we are experiencing in the U.S. Virgin Islands. In fact, just like us, Puerto Ricans have to pay two or three times as much as the average American for electricity, as they are dependent on foreign oil imports and the utility company the government owns is billions of dollars in debt.

What caused the economic turmoil in Puerto Rico?

Economists blame the downturn in Puerto Rico on two primary factors: a repeated irresponsible issuance of bonds by the local government and a decision by Congress to cut corporate tax breaks on the island.

The latter issue dates back to 1976, when Congress passed Section 936 of the Internal Revenue Code. This enabled American corporations to get tax breaks from any income originating in U.S. territories. Manufacturers decided to flock in large numbers to Puerto Rico to take full advantage of these benefits. However, in 1996, Congress voted to phase out these tax breaks over the course of 10 years, and as of 2006, they were eliminated.

Until that time, Puerto Rico had enjoyed 28 years of economic growth, but suddenly the island faced economic problems. Beginning in 2006, eight of the next 10 years featured negative growth for Puerto Rico.

New tax incentives, technology look to boost economy

Since 2008, Puerto Rico has been focused on rebuilding and signing several new tax incentives into law. Two of these, Act 73 of 2008 and Act 20 of 2012, set a new fixed income tax rate for commercial manufacturers and companies exporting services away from Puerto Rico at 4 percent. There is also a new 50 percent tax credit available for research and development activities, with the goal to bring in more technology, research and entrepreneurism to the territory.

Technology is now the foundation on which Puerto Rico looks to rebuild its economy. Infosys has made significant investments in the territory, as have Honeywell and EMI—the latter of which is building a new research lab set to create more than 300 jobs.

It will take some time for Puerto Rico to dig itself out of its massive debt, but its plan is clearly to commit to technology and entrepreneurism. For more information on the various tax credits available to businesses located in U.S. territories, consult an experienced corporate and tax planning attorney.

 

Tom Bot is a tax benefits attorney with BoltNagi, a widely respected and established business and corporate law firm serving clients throughout the U.S. Virgin Islands.

The Economic Impact of President Trump’s Proposed Tax Plan on the US Virgin Islands

Posted in Government Relations, Tax & Estate Planning

During his campaign, President Donald Trump put forth a tax plan that would cap itemized deductions, barring single people from deducting more than $100,000 and preventing couples from deducting more than $200,000. This proposal would help raise more than $1 trillion over the course of a decade.

However, according to the Tax Policy Center, the new policy would only affect about 160,000 individuals, which is a fraction of the nation’s 89 million taxpayers. Meanwhile, only 230,000 couples would be affected out of the 59 million people who file jointly each year. In other words, the taxpayers who would be affected by the proposed cap are ultra-wealthy.

Of the single filers affected, only 50,000 or so make less than $200,000 in expanded cash income. Out of joint filers, only 20,000 make less than the same amount.

As the laws currently exist, approximately 75 percent of all filers take the standard deduction and are exempt from caps on itemized deductions. President Trump’s plan would raise the standard deduction, so the percentage of people itemizing would drop to about 10 percent.

What happens to those affected?

Out of the people who would continue to itemize under Trump’s plan, most would deduct significantly less than the newly implemented cap. Fourteen million of the 14.6 million single people who itemize deduct less than $50,000. Among itemizing joint couples, 22 million of the 25.7 million deduct less than $50,000. Itemizing couples deduct an average of just under $38,000.

The only people who average more than $100,000 in deductions are single people making $1 million or more per year (deducting an average of $440,000) and couples making $1 million or more (an average of $379,000).

A new look for tax plans

The plan Trump has put forth is drastically different from the plan House Republicans put forth in the summer of 2016. Under that plan, most itemized deductions would be repealed, except for charitable giving and mortgage interests. There would not have been any new limits on those few remaining deductions beyond any limits already implemented.

It is also a different plan in several ways from other types of tax limits that Trump recently proposed. President Obama had previously proposed limits to values of deductions and exclusions to about 28 percent.

Overall, while the itemized deduction caps only impact high-income taxpayers, the rest of the plan could potentially affect average citizens as well. On average, the plan cuts taxes significantly more for high-income households than middle- and low-income households. The cap also does not offset the costs of tax rate cuts to individuals and businesses.

For more information about how President Trump’s proposed tax plans could affect your business, work with a U.S. Virgin Islands tax planning attorney.

 

BoltNagi is well-established and respected tax planning law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

Governor Vetoes Bill Eliminating Customs Duties in U.S. Virgin Islands

Posted in Government Relations

U.S. Virgin Islands Governor Kenneth Mapp recently vetoed legislation that would have eliminated customs duties, while at the same time transferring money that would have been collected through a different provision in the proposed bill.

The bill, sponsored by Sen. Kurt Vialet, would have mandated the Bureau of Internal Revenue to create and present a report to the legislature with suggestions for appropriate changes to excise taxes upon import within 90 days of the bill’s implementation. The idea behind it was that the bill would force an evaluation of alternatives to customs duties as a main revenue source for the territory. The money collected from the new revenue source would then have gone to the U.S. Virgin Islands government to help pay off its structural deficit.

Gov. Mapp instead decided he would veto the bill, citing concerns about how the legislation would be an unnecessary risk to the territory’s economy. He said he understood the need for the territory to collect its fair share of customs duties, but the bill as proposed had implications that could have been detrimental to an economy that’s still in recovery mode.

What are customs duties?

Customs duties, also referred to as import duties, are taxes collected on all imports and some exports by a customs authority. The tax is typically contingent on how much the goods being transported are worth and the country of origin, among other factors.

Customs duties are levied when imported goods first come into the territory, crossing the border. The cost of the duty typically gets added to the price consumers pay for the good, which means the same good produced domestically should typically cost less. The idea is to give an advantage to local businesses and manufacturers rather than those located overseas.

Congress sets all duty rates in the United States. All import rates are listed in a registry known as the Harmonized Tariff Schedule, which comes from the International Trade Commission. There is a general rate for countries that have normal trade relations with America and special rates applied to countries that may not be developed or do not have an international trade program.

These duties may also be impacted by international organizations and treaties. There are a few countries that have worked hard to reduce duties to promote free international trade. The World Trade Organization (WTO) also promotes commitments among its member nations to cut tariffs. These agreements occur after numerous rounds of negotiations among WTO members.

Another example of a treaty that helps reduce tariffs is the North American Free Trade Agreement (NAFTA), which includes the Canada, Mexico and the United States. As of 2008, all tariffs among the three nations have been eliminated.

For further insights into how Gov. Mapp’s decision to veto the customs duties bill could affect businesses in the U.S. Virgin Islands, consult a knowledgeable corporate planning attorney.

 

BoltNagi is a widely respected and established business and corporate law firm serving clients thorughout the U.S. Virgin Islands.

 

Legislators Look at ‘Sin Taxes’ to Address USVI Financial Situation

Posted in Government Relations

Members of the U.S. Virgin Islands Senate recently met to discuss a variety of issues, including the financial affairs of the Government of the Virgin Islands. Of particular interest were the opinions of senators on Gov. Kenneth Mapp’s proposed “sin taxes” for the territory.

These taxes would include new levies on cigarettes, alcohol, carbonated sugar beverages and timeshare rentals. They did not get approval from the 31st Legislature, but could pass through the new Legislature this year.

Governor Mapp proposed the taxes to help stimulate the Territory’s economy. In late 2016, the Legislature authorized a sale of $247 million worth of new bonds, but as of December, the Government determined it would not proceed in the bond market due to unfavorable conditions. It attempted to move forward in the bond market again in January, but the government had to call off the transaction after discovering orders for just $127 million in senior lien bonds and $13 million in subordinate lien bonds.

Governor Mapp said this lack of sufficient bonds was due to the Territory’s increased reliance on going into debt to pay off current expenses, along with the federal intervention that recently took place to satisfy Puerto Rico’s debt responsibilities. Because of that, borrowers’ perceptions of the U.S. Virgin Islands’ credit state have been significantly soured, which has led the three major bond rating companies to downgrade the Territory’s debt and increase the costs of borrowing.

A contentious issue

According to one U.S. Virgin Islands senator, however, the bond rating companies have been tougher on the territory because they do not have confidence in the Governor’s five-year tax plan. Senators have also heard some significant concerns from business owners on the potential sin taxes that have been the cause of a great deal of discussion over the last few years since first proposed.

Some senators also accused Government House officials of making the Territory’s financial situation appear worse than it actually is by leaving out potential new revenue sources from its evaluations, including money that would come in through “racinos” to be established on St. Croix and St. Thomas.

Members of the Senate Minority Caucus say there are alternatives to the sin tax proposals the Government could consider. Examples would include cutting back administrative personnel deemed to be unnecessary or redistributing employees within these oversaturated areas in the Government to offices that need more assistance. Some senators have also advocated for the legalization and taxation of recreational marijuana.

Meet with a skilled government relations attorney to learn more about how these issues could impact businesses and organizations in the U.S. Virgin Islands.

 

Tom Bolt is Managing Attorney and Chair of the Government Relations Practice at BoltNagi, a well-established and respected government relations law firm proudly serving clients throughout the U.S. Virgin Islands.

How Sound Estate Planning Benefits Your Business

Posted in Tax & Estate Planning

If you own a business or have an ownership stake in a corporation, you will need to account for these activities in your estate planning. You have likely spent years building up your business, so the last thing you want is for the estate tax or other issues to significantly reduce its value upon your death.

There are a few key ways in which good estate planning can benefit your business in the short and long term.

1. It ensures greater longevity for your business

When you have spent such a significant portion of your life building your business from the ground up, you almost certainly want to ensure it continues to thrive long after you are gone. Through estate planning, you can continue to pass along the ideas and designs you have developed with your company to future generations.

Estate planning allows you to plan your ownership transition in great detail so that when the time comes, it goes as smoothly as possible. Businesses with owners that do not take the time to plan how they will transition out are much more likely to struggle after their initial owners are gone.

2. It provides you with more long-term options for running your business

For example, with proper estate planning, you can take advantage of what’s called a buy-sell agreement. If your business has multiple co-owners, such an agreement will make sure the interest of any owners who pass away is automatically purchased by other owners in the agreement. This prevents beneficiaries of the deceased owner—such as children, spouses or other relatives or loved ones—from accidentally becoming owners of a company they do not want or are incapable of running themselves.

3. It helps you minimize potential estate taxes

There are several estate planning tools available to help minimize the potential tax impact your business would face upon your death. For example, you may transfer business assets to your children while still retaining some income through a grantor retained annuity trust (GRAT). As your business assets grow, the appreciation in value and equity for your business would not be subject to taxation.

4. It keeps you looking toward the future

As difficult a subject it can be, you can never know for sure when your time to pass has come, so you should always be prepared for all possibilities. A cohesive succession plan could take as long as a decade to really work well, so you should have the groundwork laid for it well in advance.

The estate planning tools and processes you use depends largely on the type of business you have and the value of your company and any business-related assets you have. To learn more about how to account for your business in your estate plan, contact a trusted attorney.

 

Steven K. Hardy is Chair of the Corporate, Tax and Estate Planning Practice Group at BoltNagi, a well-established and respected business and corporate law firm proudly serving clients throughout the U.S. Virgin Islands.