Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

Are HOA’s Required to File Tax Returns?

Posted in Real Estate, Tax & Estate Planning

Homeowners, condominium and timeshare associations (“Associations”) often make the mistake of not filing tax returns based on the belief that they are exempt from having to do so.  However, Associations are required to file tax returns like any other corporation, even if they’re not-for-profit.

Fortunately, most Associations don’t have much, if any, tax liability.  This is partially due to the fact that most Associations generally only take in funds to operate and maintain their facilities, rather than for the purposes of generating profit.

Section 528 (“528”) of the Internal Revenue Code governs the taxation of qualified Associations, and most Associations elect to be taxed under this Section for tax purposes.  528 defines Homeowners and Condominium Associations as follows:

  • Organized to provide for the acquisition, construction, management, maintenance, and care of association property;
  • At least 60% of the Association’s gross income consists of membership dues, fees, or assessments paid by the owners;
  • 90% or more of the Association’s expenditures are made for the purposes of acquisition, construction, management, maintenance, and care of Association property;
  • No part of the net earnings inures solely to the benefit of any private shareholder or individual.

Thus, to qualify under 528, an Association must be legally organized pursuant to the statute, generate most of its revenue from dues and assessments from the owners, and use that revenue to maintain its property.  In addition, 85% of the units must be used as residences.  Qualified Associations under 528 are exempt from paying taxes, otherwise assessed at a rate of 30%, on all income which consists of membership dues, fees, or assessments from the owners of the housing units.[1]

There are two common tax return forms applicable to Associations: IRS Form 1120-H and IRS Form 1120.  Which form is filed will generally depend on the status of the Association; specifically, whether or not it qualifies under 528.  If the Association meets the requirements as set forth in 528, most Associations will file Form 1120-H in order to receive the tax exemption provided therein.

If, on the other hand, the Association does not qualify under Section 528 or is filing late, the Association will need to file the applicable income tax return which is generally Form 1120, U.S. Corporate Income Tax Return.  Filing a Form 1120 can also have certain tax advantages and incentives however.  For example, non-exempt taxable income under 528 is assessed at a rate of 30%, whereas the applicable corporate tax rate can be as low as 15% when filing Form 1120.

Virgin Islands homeowners, condominium and time share associations should consult with an attorney experienced in real estate and real estate tax matters prior to filing their returns.  Critical evaluations need to be applied in order to achieve the maximum tax incentives available.

 

Attorney J. Nash Davis is an Associate in the Real Estate and Financial Services Practice Group of BoltNagi PC, a U.S. Virgin Islands law firm with extensive experience in real estate and tax issues which regularly advises homeowners, condominium and time share associations.       

 

[1] Payments from nonmembers and certain other sources of income are not exempt under Section 528 and are taxable at the rate of 30%.  See Section 528 of the I.R.C.

Incorporation and Registration in the U.S. Virgin Islands

Posted in Corporate & Financial Services

Seal_of_the_United_States_Virgin_IslandsThe U.S. Virgin Islands provides business owners with some significant tax incentives as a means of boosting its economy and encouraging businesses to open up shop in the Territory. While qualified businesses are able to reduce up to 90 percent of their personal and corporate federal income taxes, and could even receive a full exemption on local taxes such business property, excise and gross receipt taxes, there are a few basic items you should know about registration and incorporation in the U.S. Virgin Islands that all corporations must go through to be legally incorporated in the Territory.

Articles of incorporation

You must file articles of incorporation if you are to officially form a corporation in the U.S. Virgin Islands. Unlike most states, however, there is not a standard form for incorporation—so it is up to the corporations to draft this document themselves.

The three types of corporations that can be formed in the territory are:

  • Domestic corporations: These corporations are located in the Territory and do business here. They are eligible for tax incentives if they meet the qualifications put forth by the Economic Development Authority.
  • Exempt companies: These companies are not allowed to engage in any active trade in the U.S. Virgin Islands or United States. Residents of the United States or the Territory are not allowed to own 10 percent or more of the company. Such companies are exempt from income, gross receipts, license requirements and withholding taxes in the territory.

Registering as a foreign corporation

Any company that wants to conduct business in the U.S. Virgin Islands, but does not wish to incorporate, is required to file a document known as a Certificate of Appointment of Process Agent and Sworn Statement. This document must be submitted to the Territory’s Office of the Lieutenant Governor.

Additionally, the corporation is required to provide a statement of its liabilities, assets and capital stock to the lieutenant governor. The certificate filed must include a copy of the company’s Certificate of Incorporation and any amendments that have followed, along with a Certificate of Good Standing from its domestic jurisdiction. Signed consent from a registered agent is also required to show the named agent has agreed to serve in that role.

Individuals wishing to start a corporation in the U.S. Virgin Islands have a variety of options at their disposal. For more information on how to get a corporation registered and the types of benefits that are associated with becoming a corporation in the territory, consult an experienced business law attorney.

 

Tom Bolt is Managing Attorney at BoltNagiPC,  a widely respected and well-established corporate law firm serving clients throughout the U.S. Virgin Islands.

A Simple Guide to Preparing for Business Litigation

Posted in Corporate & Financial Services, Labor & Employment

lawsuitWhen you own or operate a business, it’s very possible that you will find yourself involved in some type of dispute. In the more serious cases, you may even face a lawsuit.

The following are a few simple actions that can protect you in the event of business litigation:

Get insured: Having a high-quality business insurance is absolutely imperative if you hope to protect yourself and your company in a lawsuit. Because insurers are obliged to defend you if there is a possibility for an issue to be covered under your policy, your provider might have to pay for an attorney who will represent you in litigation. The company will also be obligated to cover you against any judgments up to policy limits if you are liable for claims covered under that policy.

Have sound policies in place: It pays to be several steps ahead at all times. While planning for hypothetical scenarios might seem like a waste of time, doing so could ultimately save you a great deal of money and hassle if a lawsuit happens. You should have thorough, well-drafted policies and procedures in place for potential business lawsuits.

Be clear with employees: All of your employees should have handbooks with workplace expectations, and should receive continuing education about these expectations. Employees should be very well educated about any type of issue relating to their performance at work. Not only does this promote a safer and more efficient work place, but it also helps your business to stay in compliance with the law.

Implement corporate compliance programs: Establish a program at your company in which managers regularly review all of your operations to ensure they are in compliance with the various regulations that govern the workplace, such as rules by the Occupational Safety and Health Administration (OSHA).

Even if you do end up being considered liable in a claim, having a compliance program in place will help to lessen the damage done to your business, as it is evidence that you have at least been working to do the right thing and follow the rules. It might even protect you from criminal liability in severe circumstances.

Work with an attorney: Even if you don’t have an immediate need for an attorney as far as representation in court goes, legal counsel can still pinpoint areas in your company that need to be addressed and help you prepare documents and processes that will prevent disputes. In this way, attorneys can save you an extreme amount of money by helping you avoid litigation.

For more information and advice on how to prepare for business and corporate ligation, meet with a skilled attorney as soon as possible.

 

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

Applying for a Nonimmigrant Visa Hranka Waiver

Posted in Immigration

USA_Passport_StampThere are a number of complicated legal issues foreign individuals will need to address before entering the United States or its territories—even if they are on a temporary nonimmigrant visa. The good news is that there are certain waivers for grounds of inadmissibility that can help to ease the process for foreign nationals.

Most of these waivers are highly specific, but the Hranka waiver applies to the broadest variety of people. Under the Immigration and Naturalization Act (INA), an individual who wishes to enter the United States as a nonimmigrant, but who is ineligible for a nonimmigrant visa or otherwise admissible, may still be admitted into the country at the discretion of U.S. immigration authorities. This clause is referred to as the Hranka waiver because it arose out of a major immigration case: Matter of Hranka.

Considerations for entrance

Under the Hranka waiver, there are three main factors immigration authorities must consider if they are to ultimately grant the waiver to the applicant:

  • If (or how much) risk of harm an admission of the applicant into the United States would have to society
  • The seriousness of any immigration or criminal violations by the applicant in the past
  • The reason why the applicant wishes to enter the United States

An applicant’s reasons for coming to the United States do not need to be compelling. The reason could be as simple as wanting to make social visits to friends or family. In other words, more than just workers or humanitarian aid missionaries are allowed through under Hranka waivers.

Although immigration authorities are allowed to deny a Hranka waiver at any time for any reason, they may also approve a Hranka waiver at any time for just about any reason. Even if applicants are below the bar for admissibility under other circumstances, they still have a chance to make a case to immigration officials about why they should be allowed to visit the country.

This is not to say that there are no grounds for admissibility under Hranka. For example, immigration authorities will not let an applicant into the country if there is reasonable grounds to believe he or she is attempting to come to the United States specifically for unlawful reasons. People who have participated in extrajudicial killings, genocide, Nazi-related activity or torture will also be summarily denied.

If you wish to apply for a Hranka waiver, you may request one from a consular office while applying for a visa. If you already have a valid visa, you may apply for the waiver at a United States Port of Entry using Form I-192. Consult an immigration attorney for further information and guidance on this issue.

 

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

Several Factors May Result in a Challenge to a Will

Posted in Tax & Estate Planning

5599532152_c5b5772620_bChallenging a will is often a very difficult process. An overwhelming majority of wills go through the probate process without much problem, which means their validity is verified. Unless there are unusual circumstances, court officials aim to have wills go through just as the testator intended.

There are some circumstances, however, in which an individual or family can successfully challenge a will in the U.S. Virgin Islands. In most cases, successful will challengers are the spouses of the deceased. Wills may be successfully challenged and voided in a variety of situations, including:

  • Lack of capacity: Only people at least 18 years of age who are of sound mental state are legally able to create a valid will. The most common challenges to will validity are due to a lack of mental capacity to create the document. These challenges usually arise when the deceased suffered from dementia, insanity or Alzheimer’s disease, or was under the influence of drugs or alcohol at the time of creation.
  • Fraud or forgery: Wills may be successfully challenged and voided if the challenger is able to prove the document was not actually created and signed by the testator.
  • Undue influence: If the testator was under undue influence by another person who was manipulating their decisions, the will is invalid. Of course, the challenger must be able to prove the presence of such an influence.
  • Will is outdated: In some cases, a potential challenger might uncover the presence of a more recent version of the will. If this newer will is valid, it overrides any previous iteration of the will. Thus, an outdated will that has already gone to probate could be invalidated.
  • Lack of witnesses: Any copies of the will must be dated and signed by at least two adult witnesses in addition to the testator. Some jurisdictions may require more witnesses. It is important to be familiar with the witness requirements in the state or territory in which you created the will to ensure it will be valid.
  • Lack of certain provisions: In most cases, a valid will must specifically state it was made by the testator, include at least one substantive clause and name a person to serve as the estate executor or personal representative.
  • Residence factors: There are some factors in which where the person lived when he or she created the will or where the person passed away could play a role into whether or not the will is technically valid.

Challenging a will is usually an uphill battle, but there are some situations in which doing so makes sense and could protect a beneficiary’s inheritance. To learn more about how to proceed with challenging a will, speak with a skilled U.S. Virgin Islands estate planning attorney.

 

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

How Mediation Can Help Resolve Employment Disputes

Posted in Labor & Employment

arrow-1538706_960_720Disputes between employees and employers can quickly get ugly, and we’ve seen them arise from just about every situation one might imagine. In the worst cases, these disputes could result in lawsuits, serious damage to a company’s public reputation and a variety of other negative consequences.

One key fact to keep in mind when these disputes come up is that it is in the best interest of both parties to reach a resolution as quickly as possible. Very rarely is there a situation in which the employee filing a claim actually wants to go to court, as it is both expensive and time consuming. As a result, one of the best means of resolving these disputes is mediation.

Through this process, both parties meet with a third-party mediator, whose job is essentially to keep communication open and constructive. The mere presence of a mediator greatly increases the chances of resolving the dispute outside of court. A mediator is able to keep each party focused on finding a resolution that meets both of their needs and is able to put a stop to any bickering or sidetracking that occurs.

While neither party is under any obligation to accept recommendations mediators make and the entire process is non-binding, it can be incredibly helpful toward reaching a positive conclusion to an employment dispute.

What types of disputes may be resolved through mediation?

There are several situations in which disputes between employers and employees can arise. These include the following:

  • An employee might accuse an employer, a manager or a coworker of some form of harassment
  • An employee might contend that they are either terminated or denied a promotion because of race, religion, skin color, sexual orientation, age or disability
  • An employee could argue he or she was wrongfully terminated
  • An employee could argue they are the victim of workplace retaliation for any reason, such as after alerting supervisors to wrongful actions taking place within the organization

There are a variety of laws at both the federal and territorial levels that outline certain elements of workplace conduct. Employers are expected to follow these guidelines at all times. If they do not, they could face serious legal consequences.

Even if the employer is not directly responsible for any wrong done to an employee, it could still face consequences. For example, an employer could be considered liable for a single supervisor harassing employees—even in a situation in which the employee does not report the incident. One of the best ways to address this issue is using mediation, which is typically considered a sufficient means of approaching the problem and attempting to resolve it without further litigation.

For more information on when and how to turn to mediation when facing a workplace dispute, consult an experienced employment and labor law attorney in the U.S. Virgin Islands.

 

Ravinder S. Nagi is Chair of the Labor & Employment Law Practice Group at BoltNagi, a widely respected and established labor law firm serving businesses and organizations throughout the U.S. Virgin Islands.

Defend Trade Secrets Act Offers Federal Protection to Trade Secrets

Posted in Corporate & Financial Services, Government Relations

Trade secrets are a valuable type of intellectual property—and they’re now subject to a number of federal protections similar to patents, copyrights and trademarks. This development is thanks to the new Defend Trade Secrets Act, which was written and approved to help strengthen the protection of trade secrets in the United States and its territories.

Intellectual property experts are calling this the “most significant trade secret reform” in the past 20 years, and it received tremendous bipartisan support in Congress. No senators and only two House members voted against the bill, which was then signed into law by President Barack Obama in May.

Before this bill, trade secrets were protected only by state laws, which have different elements to consider from state to state and territory to territory. DTSA now sets a federal standard for the defense of a variety of information, such as software programs, manufacturing methods, formulas, client lists, business methods and sales techniques that companies would want to keep private.

Cases involving trade secrets typically involve business contracts with nondisclosure agreements, employees discussing business with outside sources or the public and unfair competition after terminating an employee’s contract.

The U.S. Virgin Islands had previously approved a piece of legislation known as the Uniform Trade Secrets Act, companion legislation to the new DTSA. Now, the Territory will be covered by DTSA as well as the Uniform Trade Secrets Act.

 

Effects of DTSA 

Thanks to the new law, the way trade secrets are protected will now be standardized throughout the country, meaning businesses will not have to navigate a variety of different state or territorial rules depending on where the issue originates. Potential remedies for claims involving misappropriation of trade secrets include injunctive relief, actual damages and payment of royalties. The law also includes a stipulation that allows for exemplary damages to be recovered of no more than twice the amount of damages that were or would otherwise be awarded for malicious misappropriation.

Trade secret owners may also now seek ex parte orders to seize any trade secrets that have been allegedly stolen from them. To obtain such an order, the trade secret holder must be able to demonstrate the information in question was a company trade secret that was misappropriated, and that the company either had or will suffer irreparable harm without the use of such a seizure.

There are also provisions in place in the law providing immunity for civil and criminal liability for disclosing trade secrets in the midst of whistleblower cases. Employers are required to notify contractors and employees of this immunity in contracts and agreements with them.

This is a significant step forward in the defense of trade secrets across the nation. For more information on how this could affect your business or organization, consult an experienced corporate planning attorney.

 

Tom Bolt is Managing Attorney for BoltNagi PC, a trusted and experienced corporate planning law firm assisting a diverse variety of clients in the U.S. Virgin Islands and is a Commissioner of the National Conference of Commissioners on Uniform State Laws.

 

Protecting Your Intellectual Property Through Estate Planning

Posted in Real Estate, Tax & Estate Planning

Intellectual propertyIf you are a business owner or simply own valuable intellectual property, you can pass these assets down to your chosen heir(s) through smart estate planning, just as you would with any other property.

Intellectual property rights do not end with the death of the creator—they are allowed to be passed on through a number of estate planning tools, such as wills and trusts. Here in the U.S. Virgin Islands, legislators are considering passing the Uniform Fiduciary Access to Digital Assets Act, which would expand the protections afforded to intellectual property rights in estate planning.

It is highly recommended that you include any intellectual property to which you have ownership rights in your estate plans. The following are a few important considerations to keep in mind as you take this action:

The life of a trademark is endless. As long as the trademark is continually used and renewed, there is no expiration date. If you own a trademark that has either financial or sentimental value to you, the last thing you want is for someone to grab it as soon as you pass way. You can put plans in place for succession long after your passing. If you do not decide who gets the rights to the trademark in the future, you may lose all control over its future.

Many estate plans do not factor in intellectual property rights. Most people do not have intellectual property that they need to account for in their estate plans. Therefore, it is important that you are proactive by speaking with your attorney about all of the intellectual property rights you hold so you can implement strategies for passing them on through your estate plan. Be sure to consult a lawyer with experience in this area.

Copyright outlives the creator. If you have created any sort of artistic work or any other work that would be covered under general copyright law, that copyright outlives you by 70 years. This helps protect your work should it see a bump in popularity or value after you pass away.

All earnings from your works would still go to the beneficiaries of your estate, rather than to people who would seek to snatch up the copyright immediately after your passing. These rights apply to a wide variety of creations, including books, music, art, recipes, inventions, businesses and much more.

The estate planning tools you use to pass on your intellectual property rights to your heirs depend on your preferences and the circumstances of your estate. Some people find trusts to be better tools than wills, especially if they are seeking to limit or completely avoid estate taxes. Again, it’s best to work with an experienced estate planning attorney to make sure you are protecting your assets and your best interests.

 

Tom Bolt is Managing Attorney at BoltNagi PC,  a respected and well-established estate and tax planning law firm proudly serving clients throughout the U.S. Virgin Islands and serves as a Uniform Law Commissioner.

Ensuring Compliance with the Law When Hiring Foreign Workers

Posted in Immigration

Whenever your company is looking to hire new, internationally based employees, it’s important to be completely familiar with all of the federal regulations associated with employee eligibility. More specifically, you should be familiar with the Immigration and Nationality Act (INA), which addresses information such as employment eligibility and non-discrimination against foreign workers.

Employee eligibility

As an employer, you are required by federal law to verify that an employee is actually eligible to work in the United States. Within three days of the hiring, you must fill out an Employment Eligibility Verification Form, typically referred to as an I-9 form. To do this, you will need to review a variety of documentation that confirms the employee’s citizenship—or documents like work visas that confirm the employee’s eligibility to work in the United States and its territories.

You are only allowed to request documentation from the employee that is listed on the I-9 form. In fact, any employers that ask for other forms of documentation not included on such a form open themselves up to potential discrimination lawsuits.

Once the form is complete, you are required to keep it in your files for at least three years after the hiring date or one year after the end of employment, whichever is later. You must then have this information prepared for presentation in the event of an audit by U.S. Immigration and Customs Enforcement (ICE). This agency regularly conducts workplace audits to ensure all employers are complying with federal laws related to employee eligibility.

Non-discrimination

Other provisions of the INA protect citizens and work-authorized individuals from outside of the country from discrimination by employers based on their immigration status or citizenship. This means employers are not allowed to discriminate against a potential employee on the basis of national origin or ethnicity, and are not allowed to subject employers of foreign backgrounds to unfair documentary practices in the process of employment eligibility verification.

No-match letters

In some cases, you might send an employee’s W-2 form to the Social Security Administration (SSA) and receive what’s called a “no-match letter.” These letters are sent when the SSA and/or ICE are unable to verify the employee’s information, such as a name or Social Security number. In this case, there is no match between this information and government records.

No-match letters do not necessarily mean an employee falsified information—they simply mean the information provided did not match government records. Firing an employee after receiving a no-match letter could be grounds for a discrimination lawsuit, so you should be sure to tread lightly around this issue.

Incorporation and Registration in the U.S. Virgin Islands

Posted in Corporate & Financial Services, Government Relations, Labor & Employment

Incorporation-or-Registration-of-Company-Stages-Functions-of-Promoters-Certificate-of-IncorporationThe U.S. Virgin Islands provides business owners with some significant tax incentives as a means of boosting its economy and encouraging businesses to open up shop in the Territory. While qualified businesses are able to reduce up to 90 percent of their personal and corporate federal income taxes, and could even receive a full exemption on local taxes such business property, excise and gross receipt taxes, there are a few basic items you should know about registration and incorporation in the U.S. Virgin Islands that all corporations must go through to be legally incorporated in the Territory.

Articles of incorporation

 You must file articles of incorporation if you are to officially form a corporation in the U.S. Virgin Islands. Unlike most states, however, there is not a standard form for incorporation—so it is up to the corporations to draft this document themselves.

The three types of corporations that can be formed in the territory are:

  • Domestic corporations: These corporations are located in the Territory and do business here. They are eligible for tax incentives if they meet the qualifications put forth by the Economic Development Authority.
  • Exempt companies: These companies are not allowed to engage in any active trade in the U.S. Virgin Islands or United States. Residents of the United States or the Territory are not allowed to own 10 percent or more of the company. Such companies are exempt from income, gross receipts, license requirements and withholding taxes in the territory.

Registering as a foreign corporation

Any company that wants to conduct business in the U.S. Virgin Islands, but does not wish to incorporate, is required to file a document known as a Certificate of Appointment of Process Agent and Sworn Statement. This document must be submitted to the Territory’s Office of the Lieutenant Governor.

Additionally, the corporation is required to provide a statement of its liabilities, assets and capital stock to the lieutenant governor. The certificate filed must include a copy of the company’s Certificate of Incorporation and any amendments that have followed, along with a Certificate of Good Standing from its domestic jurisdiction. Signed consent from a registered agent is also required to show the named agent has agreed to serve in that role.

Individuals wishing to start a corporation in the U.S. Virgin Islands have a variety of options at their disposal. For more information on how to get a corporation registered and the types of benefits that are associated with becoming a corporation in the territory, consult an experienced business law attorney.

 

Tom Bolt is Managing Attorney at BoltNagiPC,  a widely respected and well-established corporate law firm serving clients throughout the U.S. Virgin Islands.