Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

U.S. Virgin Islands Uses Tax Breaks to Lure More Small Businesses

Posted in Corporate & Financial Services

via Flickr Creative Commons

The U.S. Virgin Islands has recently begun to offer significant corporate tax breaks to small businesses in an attempt to encourage job creation and diversity within the territory’s economy, currently valued at $4.2 billion.

In early March, Governor John P. deJongh toured New York with regional economic development officials to meet with investors and interested business owners. The tour was also an opportunity to promote the U.S. Virgin Islands’ 90 percent cut in federal income taxes to manufacturing organizations, financial firms and other businesses. The territory is also offering a 90 percent cut in personal income tax, along with significant exemptions for property, excise and import taxes.

The need for the Virgin Islands tax incentive program has been highlighted, in part, by the territory’s loss of its largest taxpayer and employer, the HOVENSA oil refinery. When the refinery shut down in 2012, the U.S. Virgin Islands lost approximately 2,000 jobs and $100 million in revenue, worsening an economy already struggling to recover from the global recession.

The tax incentive program is sanctioned by the U.S. Congress and Treasury, distinguishing it from other well-known corporate tax havens like the Cayman Islands and Bermuda and making the U.S. Virgin Islands a legally secure environment for businesses to operate. For a company to take advantage of these tax incentives, it must commit to hiring at least 5 local residents and invest at least $100,000 in the proposed venture. This requirement is designed to help offset any lost tax revenue. So far, the program has attracted at least 85 corporate beneficiaries, with another 15 applications pending.

These types of tax incentives have been shown to be effective in attracting new businesses to specific geographical areas, as demonstrated by the United States Empowerment Zone (EZ) program designed to create jobs and business opportunities by providing tax credits and cash incentives in economically distressed areas. Overall, the EZ program has had a positive and statistically significant impact on attracting new companies, particularly in the retail and service industries.

The Government of the Virgin Islands is working to attract small businesses rather than large public companies in an attempt to avoid any controversy surrounding alleged corporate tax evasion.

As the U.S. Virgin Islands faces a sluggish economic recovery, a program like this could be a tremendous incentive for more job-creating organizations to relocate to the territory.

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

U.S. Virgin Islands Government Workers Will Soon Receive Mandatory Assessments

Posted in Government Relations

The Government Employee’s Service Commission Health Insurance Board recently passed an important change to territorial government worker health policies in the U.S. Virgin Islands. The new rule stipulates that active government employees and retirees under the age of 65 are required to receive health risk assessments. The alternative is to pay a steep financial penalty, in addition to the health care premiums employees pay.

Currently, Government of the Virgin Islands employees are able to have health risk assessments voluntarily. According to one expert, about 1,400 employees completed a health risk assessment in 2013. By making them mandatory, however, about 11,000 employees will now need to be assessed — or opt out by paying a financial penalty. The penalty is a bi-weekly payment of $20.83 in fiscal year 2015, paid in addition to insurance premiums. This rule applies only to employees, and not family members also covered under the health plans. Furthermore, it only affects current employees and retirees under 65.

The Government Employee’s Service Commission Health Insurance Board has made the change in an effort to lower overall premium costs. These types of health risk assessments are often used to further study environmental stressors, which may include toxins and chemicals introduced either in natural settings or in workplaces. Assessments attempt to determine how stressors impact health in relation to other factors, such as gender and age.

According to information currently available, employees undergoing the health care assessment should expect the entire process to last about 20 minutes, and the first 5,000 people will receive a $25 gift card as an added bonus. By doing this, officials hope they can get the program off to a strong start and encourage people to have their assessment completed right away, rather than waiting until it’s too late.

If you are a current Government of the Virgin Islands employee or retiree under the age of 65, it’s important to understand your rights and obligations under this new rule. This may affect how you approach your health care, and if you fail to get an assessment promptly enough, you may be subject to fees that go beyond your health insurance premiums.

Time will tell whether this new rule makes a difference in terms of health care costs for U.S. Virgin Islands government employees. For now, individuals impacted by the rule change need to remain updated and aware of what they need to do to meet the new requirements.

BoltNagi is a widely respected and well-established government relations law firm serving clients throughout the U.S. Virgin Islands. 

Could the U.S. Virgin Islands Face Bankruptcy Issues Like Detroit?

Posted in Community Affairs, Government Relations

Recent concerns surrounding the U.S. Virgin Islands’ growing debt has led some to wonder whether the territory might soon face bankruptcy issues similar the city of Detroit, Michigan.

Detroit filed for Chapter 9 bankruptcy on July 18, 2013, and was declared eligible on December 3 of the same year. The municipal bankruptcy filing was the largest in U.S. history, with debt reaching an estimated $18.5 billion — or $25,660 per resident. Reactions to this decision were mixed, with some claiming that it was the only course of action and others arguing that the decision was premature. Detroit is currently in the process of determining which of its assets belong to the city outright and can be monetized to settle creditor claims.

The U.S. Virgin Islands has been in significant debt for nearly 30 years, according to some sources. Currently, the territory’s combined debt of $1.74 billion (composed of bond market debt and retirement system unfunded liability) works out to be $29,965 per resident—higher than that of Detroit.

In addition, the Government owes another $300 million in retroactive salary increases previously promised to its employees in the 1990s. However, the issue of retroactive salary increases is controversial — some government officials, who claim that the obligation to pay only exists if the government has enough money, have disputed the increase. If these retroactive increases are factored into the amount owed, the total per-capita debt goes up to $32,578 per resident.

While the government of the Virgin Islands borrowed $120 million in 2012 to be used as working capital over the next few years, the administration has announced that it will not take out any more loans. At the same time, the territory is experiencing a $40 million deficit in this year’s budget.

Although the territorial government has been in debt for decades, some have attributed the drastic borrowing increase in recent years to the global economic recession. Between 2008 and 2009 the Government’s General Fund revenues dropped by about 37 percent. However, there are also concerns that the recession aggravated an existing problem, one that is unlikely to resolve itself unless the Government acts soon to live more within its means.

The financial issues facing the U.S. Virgin Islands government are substantial, and it will be interesting to see how the territory handles them in the years to come.

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

Proposed Law Regulating Roadside Signs Could Impact Local Businesses

Posted in Government Relations

A proposed law in the U.S. Virgin Islands legislature related to roadside signage may have a significant impact on local businesses if adopted by the 30th Legislature.

billboardCurrently, the yearly cost for posting business signs and roadside billboards is $10 per year, but the new law could increase that amount to $200. More specifically, the proposed permit fee would increase to $100 paid every six months instead of the current $10 annual payment. In all, this would represent the first increase since 1968.

The Legislature is considering this action as it would raise some much-needed revenue for the government of the U.S. Virgin Islands. It would also reduce the number of roadside advertisements, which some have complained take away from the natural beauty of our islands.

There are many local businesses that would be impacted by increased fees, however, and critics argue that it would jeopardize business owners’ ability to draw in customers. Given the current sluggish economy, it could also prevent some companies from being able to afford the higher fees, thereby greatly reducing their ability to market themselves — especially to tourists unfamiliar with local businesses. A $10 per year fee raised to $200 is a substantial increase, and one that’s likely to impact smaller businesses more than large ones.

To be sure, larger businesses can afford to pay more for marketing and tend to have a diverse strategy for advertising themselves. Smaller businesses, on the other hand, may not be able to find it in their meager marketing budgets to pay the signage fees. This, in turn, would impact their ability to attract new customers and potentially put them at risk of going out of business. Proponents of the measure claim it will help clean up the area from cluttered advertisements, but the side effect could be undue hardships on local companies.

If you own a small business in the U.S. Virgin Islands, this proposed law may impact you, and it is important to pay attention to what’s happening in our Legislature — whether you’re for or against it. For further guidance on this and other issues, speak with an experienced business law attorney.

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

Is the U.S. Virgin Islands Getting a Fair Shake with the Implementation of ACA?

Posted in Government Relations

The implementation of the Affordable Care Act (ACA) continues to move forward rapidly, with 7.1 million people signing up by April 1, 2014 through the exchanges created through the law. This is happening despite the fact that certain elements of the ACA lack a degree of clarity, especially related to how the law will affect American territories like the U.S. Virgin Islands, Puerto Rico, Guam and the Northern Mariana Islands.

One issue of note is the appearance that the ACA treats territories differently and unequally, putting governments such as the U.S. Virgin Islands in a difficult situation when it comes to dealing with large numbers of uninsured residents.

While some critics have argued that the only certainty is that territories are not able to participate in federal exchanges, the reality is that the ACA bill does address territories specifically. The two pages dedicated to the territories effectively state that they have one of two options: implement their own exchange or boost overall funding for Medicaid. While this has little effect in Puerto Rico, which has relatively low rates of uninsured people, it directly impacts the U.S. Virgin Islands and other insular territories.

The U.S. Virgin Islands has a higher rate of uninsured than the average in the United States. In response to the vague language within the ACA bill, the Governor of the Virgin Islands, John P. de Jongh, has created a task force to determine the costs associated with creating an exchange. The task force concluded that it would cost $251 million to implement and subsidize an exchange for five years, something many critics consider an impossible option. Medicaid funding also would not address the overall uninsured rate, so the second option seems unrealistic to many, as well.

The ambiguity of the text concerning the territories and the ACA also leaves much of the implementation up to the U.S. Department of Health and Human Services. Representatives from the U.S. Virgin Islands are attempting to work with the federal agency to determine a suitable solution to this problem. And with some critics saying that residents of the Virgin Islands are being treated as “second-class citizens,” there’s a lot riding on these efforts.

It’s important for residents throughout the U.S. Virgin Islands to remain updated on progress with the ACA related to our territory. If you have more detailed questions, consider working with an experienced attorney for guidance.

BoltNagi is a well-established and respected government relations law firm serving clients throughout the U.S. Virgin Islands. 

Effective Methods for Protecting Your Company’s Intellectual Property

Posted in Corporate & Financial Services

Recently, one of our firm’s clients inquired as to our protecting their intellectual property, and BoltNagi submitted to an in-depth technology audit. Large companies like Google, Microsoft and Apple use considerable resources to protect their intellectual property. An organization of any size, however, can suffer due to intellectual property theft, and small businesses in particular are more vulnerable than well-established companies, as they tend to have more at stake when it comes to new ideas and future projects. Thus, if key intellectual property is stolen, a business could have inadequate resources to defend itself or even lack the ability to continue operations.

For this reason, small businesses need to protect anything that can legally be classified as intellectual property. There are a number of strategies that help you do this, often simply requiring a little knowledge, consultation and creativity.

Learn the basics

Begin with educating yourself and your team on the concepts of trademarks, copyrights, patents and trade secrets. You may search the web for credible articles or read books on these subjects, as well as attend professional seminars or course that deal with these complex issues.

To further your knowledge and receive guidance on how to approach intellectual property protection, consult an attorney with experience in this area. Although this may require some investment from your business, it will be well worth it to ensure your ideas and trade secrets remain protected well into the future.

Take action

Once you have educated yourself and spoken with a business lawyer, immediately begin work on patenting anything that is important to you — or that may be important to a competitor. The quicker you file the better, as patents can take up to five years to complete. Don’t worry if the idea is not fully developed, as you can expand on the initial ideas in your patent for up to a year. Also keep in mind that an American patent protects you in the United States and its territories, but not internationally, so spend some time researching international patents as well.

In addition, work with your attorney to develop a sound non-disclosure agreement for your employees and business partners to sign. Finally, conduct an audit of your company’s intellectual property to help determine your registered and unregistered trademarks and copyrights. Understanding everything you legally own and do not own is critical to protecting yourself from theft.

Remember, the risks are too great to avoid protecting yourself right away, so for the future of your company and its employees, get started developing a plan to secure your intellectual property.

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

Cockfighting May Soon Be Illegal in the U.S. Virgin Islands

Posted in Community Affairs

A key provision of the federal Agricultural Act of 2014 (known commonly as the farm bill), recently signed into law by President Barack Obama, may soon make cockfighting illegal in the U.S. Virgin Islands, Puerto Rico and Guam.

mnwelldir/Creative Commons

Currently, the laws related to cockfighting in U.S. territories are ambiguous. An entertainment tax is placed on cockfighting in the U.S. Virgin Islands if tickets are sold, effectively making the sport legal. The new farm bill, which does not directly address cockfights but instead makes it illegal to attend them, may void some legal precedents that had allowed cockfighting in our territory.

The provision was most likely inserted into the farm bill to give further legal backing to states in which cockfights are illegal. In effect, however, it could mean that in insular territories such as the U.S. Virgin Islands, which has a long tradition of the sport, attending such an event could be punishable by law. According to the bill, attending a cockfight is punishable by up to one year in jail and a $100,000 fine. Bringing a minor under the age of 16 to a cockfight is punishable by up to three years in jail and a $250,000 fine.

Advocates of these measures — including animal right groups like the Humane Society of the United States — argue that cockfighting is immoral and cruel to the animals involved. Defenders of this tradition, on the other hand, view it as a sport comparable to many others, such as boxing, and wish to defend a cherished local tradition and pastime.

The future of cockfighting in the U.S. Virgin Islands remains uncertain given the ambiguity of the farm bill, especially in terms of whether or not the law will be enforced in American territories. The U.S. Department of Justice has not yet offered much guidance on this matter and will most likely approach it case by case, even though representatives of the territories have raised questions regarding the change in the law. The U.S. Attorney’s office has also declined to comment thus far.

Considering this lack of legal guidance, the legality of cockfighting will likely be settled in courts on a case-by-case basis. Defenders of this local tradition and animal right advocates alike are eagerly waiting for this legal matter to be sorted out.

BoltNagi is a widely respected and well-established civil litigation law firm serving clients throughout the U.S. Virgin Islands. 

Recent Case Illustrates When a Bench Trial May Be Requested

Posted in Litigation

In some cases that would otherwise go before a jury, legal counsel instead recommends requesting a bench trial, in which the judge makes the final ruling. This typically occurs when either the plaintiffs or defendants do not believe they will otherwise receive a fair trial. To make this request, they must officially waive their right to a jury trial with the court.

There are limits to doing this, however, as was illustrated by a recent ruling from the Superior Court of the Virgin Islands. In the People of the Virgin Islands v. Velasquez(Case No. SX-2012-cr-063), the defendants requested a bench trial after arguing that too many of the prospective jurors had expressed bias that would prevent them from receiving a fair trial.

In a February opinion, the Superior Court denied the defendants’ waiver of their right to a jury trial on the grounds that the prosecution did not agree to it. In other words, both sides must consent before a bench trial is warranted.

Although this example is from a criminal case, bench trials can play a role in civil matters, as well. If both parties in a case agree to it, they can forego bringing in a jury and allow the judge to conduct all fact finding and issue the verdict afterward.

Let’s say you’re involved in a case in which an employee accuses your company of discrimination in the workplace. If both sides in the case agree to a bench trial, the judge would be responsible for establishing the legal standards for what constitutes workplace discrimination, and then make a decision based on the arguments both parties make.

In other situations, you may not have a choice between a jury or bench trial. This includes cases involving injunctions, in which one party seeks court action to stop an individual or organization from engaging in certain activities. Generally, if the plaintiff is not pursuing monetary damages, there will likely be a bench trial.

As with many legal issues, there is a lot of middle ground, and whether you wish to seek a jury trial or bench trial may depend on the circumstances of your specific case. If you have questions about this issue, be sure to consult a knowledgeable civil litigation attorney.

BoltNagi is a respected and well-established civil litigation law firm serving clients throughout the U.S. Virgin Islands.

Could the Definition of Citizenship Change for Residents of US Territories?

Posted in Immigration

A case related to citizenship for residents of American Samoa could have an indirect impact on constitutional protections for people living in the U.S. Virgin Islands.

Creative Commons photo courtesy of flickr user Samantha DeckerAs we all know, being born in the U.S. Virgin Islands means you have automatic U.S. citizenship, although you’re prevented from certain rights such as voting for President or having a voting representative in Congress. However, if you’d like to move to one of the U.S. states, you would have full citizenship under the U.S. Constitution, and all of the rights that come with it.

Like the U.S. Virgin Islands, American Samoa is a U.S. territory — only its residents are referred to as “noncitizen nationals.” This is a key difference, as residents of American Samoa who want to move to a U.S. state must go through the regular nationalization process, along with the hefty fees that go along with it.

The reason for this difference is because of a legal precedent that gives Congress the ability to determine the citizenship rights of the people living in U.S. territories. Residents of the U.S. Virgin Islands were granted citizenship in 1927, but American Samoans never were.

The case related to American Samoa, Tuaua v. United States Civil Case No. 12-01143 (RJL)., challenges Congress’s ability to make the determination of citizenship for U.S. territories at will. If successful, the case could help redefine citizenship for American Samoans and people in various other territories who are now considered noncitizen nationals.

So how does this impact the U.S. Virgin Islands? Notably, a change in the law would revoke the right of Congress to take away the U.S. citizenship rights of U.S. Virgin Islands residents any time in the future. Currently, the U.S. Constitution does not guarantee American citizenship for people in the Territory; rather, it’s based solely on a decision made by Congress nearly 100 years ago. A successful result in the Tuaua case could change this, potentially guaranteeing full constitutional protections for all U.S. territories.

The likelihood of this case being successful is unknown, but it’s an issue all U.S. Virgin Islands residents should watch carefully. If residents of U.S. territories are provided full constitutional rights, could the next step be statehood for the U.S. Virgin Islands, and our sister territories?

BoltNagi is a widely respected and well-established immigration law firm based throughout the U.S. Virgin Islands.

Hiring Your First Employee: Your Company’s Key Legal Requirements

Posted in Labor & Employment

One of the biggest milestones for any start-up or small business in the U.S. Virgin Islands is hiring your first employee. This can be more difficult than some business owners initially think, and there are a number of legal requirements you need to keep in mind as you engage in this process.

Before extending an offer of employment to an individual, your company must complete the following:

1. Obtain an Employer Identification Number (EIN): This is the first step in gaining legal employment abilities. To receive an EIN, you must fill out an SS-4 form and submit it to the U.S. Internal Revenue Service. The form is available for download on the official IRS website, at www.irs.gov.

2. Set up a payroll system to withhold taxes: A key requirement in the employment process is making sure that territorial, federal and other applicable taxes are deducted from an employee’s paycheck. The information to correctly calculate tax deductions for each employee can be obtained through a W-4 or a W-2 form. These forms indicate the marital status, number of dependents and various other factors that affect the amount of taxes that should be taken from each paycheck.

3. Verify employee’s eligibility: One of the most basic steps in gaining an employee is determining whether or not that individual is legally eligible for employment at your company. This can be achieved by having the potential new hire fill out an I-9 form from the USCIS.

4. Obtain worker’s compensation insurance: In the case that your new hire becomes injured on the job, it is necessary to have a worker’s compensation insurance policy. This will allow for an employee to receive medical treatment and applicable recovery time from an injury without losing wages. In the U.S. Virgin Islands, organizations with one or more employees must carry this insurance coverage, regardless of wages. The Virgin Islands Department of Labor oversees the Worker’s Compensation program and more information is available at their website.

5. Keep your employee informed: To ensure employees are meeting all of your expectations, it is necessary to create an employee handbook to guide and inform their decisions in the workplace. Additionally, you must post notices outlining worker’s rights under U.S. Department of Labor rules and regulations.

6. Register with the U.S. Virgin Islands New Hire Reporting Program: Within 20 days of adding a new employee to your payroll, you must register that employment with the U.S. Virgin Islands government. This information may be used to determine if your employee owes child support or other obligations upon becoming employed.  Further information is available from the Virgin Islands Department of Labor.

Following these steps will help ensure you are meeting all of the legal requirements for brining on a new employee. However, some requirements vary depending on your type of business, so if you have any questions, speak with an employment law attorney right away.

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