U.S. Third Circuit Uses Vento for Guidance on Residency

U.S. Virgin Islands residents pay income taxes to the Virgin Islands Bureau of Internal Revenue (VIBIR) rather than the Internal Revenue Service (IRS). The appellants in the recently decided case, Vento v. Director of Virgin Islands Bureau of Internal Revenue, (C.A. 3 April 17, 2013). Richard and Lana Vento filed a joint 2001 income tax return with the VIBIR, as did their three adult daughters. The United States argued that Richard and Lana Vento and their daughters (collectively, "The Ventos") were required to file those returns with the IRS instead. The proper tax jurisdiction depended upon whether they were bona fide residents of the U.S. Virgin Islands as of December 31, 2001.

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Effective Planning for the Newly Divorced

If you are newly divorced, you’re probably overwhelmed with all of the changes going on in your life.You should seriously consider stepping back, taking a deep breath and began developing a plan to secure your future.  One of the basic steps in moving forward after this major event in your life is updating your estate plan.

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Keeing the VI Bureau of Internal Revenue at Bay on Audits

There is no guarantee that you will not be audited by the Virgin Islands Bureau of Internal Revenue (BIR), but there are four (4) simple steps that you can take to minimize your chances of being audited and, if you are audited, to minimize your chances of having to pay additional taxes, penalties and interest.

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Governor Promotes Urban Renewal with Tax Benefits

U.S. Virgin Islands Governor John P. de Jongh  De Jongh has executed an executive order this past week laying the groundwork for new economic and cosmetic renewal projects in historic towns on St Croix and St Thomas.

“The United States Virgin Islands recognizes the importance of revitalizing these once-vibrant towns with an infusion of new business and economic opportunities, to renew their physical appearance, and to rejuvenate and diversify the local economy by providing incentives for business relocation and job creation,” de Jongh said in the order.

Accordingly, Government House will establish Enterprise Zones within those towns “in order to attract new businesses and provide incentives for investment in order to sustain the future preservation of these towns for the People of the Virgin Islands.”

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New VI Tax Break Legislation Introduced in U.S. Congress

U.S. Virgin Islands Delegate to Congress Donna Christensen has introduced legislation that would create an innovative tax program that would leverage private pension assets to raise funds for infrastructure development in the U.S. Virgin Islands.  The bill amends the Internal Revenue Code of 1986 to assist in the recovery and development of the Territory by providing for a reduction in the tax imposed on distributions from certain retirement plans’ assets which are invested for at least 30 years under a U.S. Virgin Islands investment program.  The new program is projected to raise approximately $250 million a year dedicated to infrastructure of the U.S. Virgin Islands, while simultaneously raising an additional $500 million a year for the U.S. Treasury.

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Third Circuit Overrules Tax Court on EDC Case

An interesting tax case with implications for beneficiaries of the Virgin Islands Economic Development Program is currently being fought in U.S. Tax Court.  On April 1, 2010, Arthur I. Appleton filed a Petition with the Tax Court to challenge as void the tax assessments leveled against him by the Internal Revenue Service (“IRS”) because, he argued, the assessments were imposed after the expiration of the statute of limitations.

Under Section 932 of the Internal Revenue Code, Virgin Islands residents, like Appleton, are required to pay income tax directly to the Bureau of Internal Revenue (“BIR”), not the IRS, pursuant to the “mirror code”, where the term “Virgin Islands” is substituted for the “United States” in the Internal Revenue Code. Yet, the IRS retains audit and assessment powers. 

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Tech Park Can Offer Investors Savings and Simplicity

The USVI attracts many businesses to its shores by offering generous tax incentives to qualifying companies that are approved by the Economic Development Commission (“EDC”). However, fewer people seem to be aware that those same benefits—90% reduction in income tax liability; 100% exemption on real property taxes, gross receipts taxes, and excise taxes, and a reduction in customs duties—are available to technology-based businesses through partnership with the University of the Virgin Islands Research and Technology Park the (“Technology Park” or “Park.”)

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Virgin Islands 90 Day Gross Receipt Amnesty

The Virgin Islands Bureau of Internal Revenue (“BIR”) recently announced a 90 day gross receipts tax amnesty, which will expire on January 25, 2011. The amnesty was signed into law in October and allows businesses to file delinquent gross receipts tax returns with the BIR and pay any outstanding balances due without having to pay penalties and interest.

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Preserving Peace in the Family

 

Discussing your estate plan with heirs can be a very difficult conversation to have, but no matter how uncomfortable it may be, it can be quite effective in reducing potential conflicts among family members and make sure your heirs understand the choices you have made. If your children will not receive equal amounts of inheritance, it would be helpful to explain why. Maybe you previously helped one child buy a house, so the other is receiving a larger percentage of your estate. Maybe one child will require medical care, so you wish to make sure they are taken care of into the future.

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Gross Receipts Tax Amnesty In Effect

The Virgin Islands Bureau of Internal Revenue has implemented a 90 day gross receipts tax amnesty program.  The waiver of penalties and interest for failure to timely file territorial gross receipts taxes was granted as a result of Act No. 7233 which was signed into law by Governor John P. deJongh, Jr. on October 26, 2010.

Daniel J. Gravel, Chair of BoltNagi's Corporate, Tax and Estate Planning Practice Group said that "taxpayers who file and pay their delinquent gross receipts taxes before the January 25, 2011 deadline will be exempt from the payment of penalties and interest for the late filing."  Gravel further noted, "Unlike previous amnesty programs that were enacted, all delinquent gross receipts taxes are eligible for the current amnesty program.  It is an outstanding value to Virgin Islands taxpayers."

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The Importance of Estate Planning

 

As we all know, questions concerning death and disability are sometimes difficult for many families to discuss. However, individuals must address these issues in advance to ensure that their family members are in a strong position to deal with illness and death. Consider these vital questions, for starters:

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Have You Received Your "Making Work Pay" Credit?

As part of the Federal 2009 Economic Recovery Tax Law, taxpayers, including U.S. Virgin Islands residents, could be entitled to two tax credits on your 2009 federal income tax return, the “Making Work Pay Credit” and “Government Retiree Credit”.

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Territory Receives New Probate Code

After over a decade of discussion, review and deliberation by the Virgin Islands bench and bar as well as the Law Revision Commission and several Legislatures, on February 8, 2010, U.S. Virgin Islands Governor John P. deJongh signed into law sweeping reforms of the Territory’s probate practice and procedure.

This new legislation reduces needless expense and delay in the administration of estates and trusts, enhances protections for those under guardianship and increases uniformity with other states and territories. This summary highlights five areas of important reforms enacted by the new legislation.

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Preparing an Individual Income Tax Return with U.S. Virgin Islands Income

The first "opportunity for solution" that you have in preparing a U.S. Virgin Islands Individual Income Tax return is that your tax preparation software doesn’t have a state module for the U.S. Virgin Islands. This is not a problem. A U.S. Virgin Islands income tax return is prepared using the same Form 1040 U.S. Individual Income Tax Return that is used throughout the United States. The major difference is the tax is paid to the U.S. Virgin Islands Treasury rather than the United States Treasury. This entry will cover some minor differences and practical tips which you may want to pass on to your tax preparer.

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Federal Estate and Generation-Skipping Tax Repeal in 2010

Congress failed to address pressing estate and generation-skipping transfer tax matters before it adjourned in December. Consequently, as of January 1, 2010, the provisions of 2001 federal tax legislation (the “2001 Act”) will cause the federal estate and federal generation-skipping transfer (GST) taxes to be repealed for one year, starting on January 1, 2010.    

For 2009, there was a $3.5 million exemption for each tax and a 45 percent top tax rate for each tax. Under the 2001 Act, the federal estate and GST taxes will come back into effect on Jan. 1, 2011, but with only a $1 million exemption for estate tax, a $1.1 million exemption for GST tax (indexed for inflation), and a top rate of (generally) 55 percent for each tax.

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St Thomas Attorney Advocates New Probate Code

In order to clarify outdated and inappropriate legal guidelines and streamline the Territory’s slow probate process, the Senate Rules and Judiciary Committee passed a bill Thursday that will adopt the Uniform Probate Code currently enacted in 19 states.

In the U.S. Virgin Islands, probate, the legal proceeding in which a court determines how an estate will be divided, can sometimes take up to 20 or 30 years.  This long and arduous process has been known to deplete estates of any monies while properties stand empty and dilapidated due to years of legal wrangling.

According to Dan Gravel, an attorney with Tom Bolt & Associates, P.C. who concentrates his practice in trusts and estates and who testified in favor of the bill, the Uniform Probate Code (UPC) “will lessen the burden on courts and on families who have to navigate the probate process.” 
 

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Changes to Required Minimum Distribution Rules Impact Virgin Islanders

Retired? Over 70½? It may be time to see your tax advisor about September 2009 changes to the Required Minimum Distribution rules. The Internal Revenue Service in Notice 2009-82 just announced guidance relating to the waiver of 2009 Required Minimum Distribution (“RMD”) rules which also apply to Virgin Islanders.

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Stimulus Legislation Provides Tax Relief For Certain Debt Restructurings

One of the most significant tax provisions contained in the recently enacted American Recovery and Reinvestment Act of 2009 might prove helpful to certain taxpayers looking to restructure their balance sheets.

A debtor generally recognizes income from the cancellation of its debt. A debtor recognizes COD income when it purchases the debt instrument for less than the adjusted issue price of the debt or exchanges an old obligation for a new obligation with a reduced adjusted issue price from the old obligation. For this purpose the same result occurs upon a modification of debt that is treated as an exchange. A debtor also recognizes COD income when a person who bears a relationship to the debtor described in Code section 267(b) or Code section 707(b) acquires the debtor's debt for less than the adjusted issue price of the debt.

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Year-End Gifts

          With only two full weeks remaining until the New Year, time is of the essence to execute crucial tax-saving donations. "The year end is a good time to review your charitable giving to ensure that it is being done in the most tax-efficient manner,"offers Attorney Carl R. Williams of Tom Bolt and Associates, P.C.  Charitable giving is a form of estate planning, because a gift to charity will never be subject to estate or gift tax. If you are planning to make a large gift before January 1, 2008, it is important to review the impact on your 2007 income tax liability and whether it may make sense to defer all or a portion of the gift until 2008. If the gift is of real property and will require an appraisal, it is critical to start the process as soon as possible so that the appraisal is available before year end.

          "In addition to charitable giving, my clients also express an interest in making inter-family donations," says Attorney Williams. Every person may give up to $12,000 free of gift tax to as many individuals as they wish. Because annual exclusions do not carry over into subsequent years, you will lose your annual exclusions for 2007 gifts if you do not make them before Dec. 31, 2007. An annual exclusion gift may consist of almost any asset, including stocks, bonds, real estate, cash, and partnership interests. Subject to special rules, annual exclusion gifts may also be made in trust.

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Living Wills In The News


The importance of a Living Will made headlines again on Monday evening during remarks from Republican presidential candidate Fred Thompson. Last month, Thompson sidestepped a question about the Terri Schiavo right-to-die case. However, on Monday Thompson said he did so because he had to face a similar situation in his personal life with the death of his own daughter. Thompson's remarks indicated that his daughter had been on life support and ultimately died on Jan. 30, 2002, six days after being brought unconscious to a hospital emergency room.

Thompson went on to say, "These things need to be decided by the family, and I was at that bedside, and I had to make those decisions with the rest of my family. I will assure you one thing, no matter which decision you make, you will never know whether or not you made exactly the right decision, Thompson said. " He added, "should be decided by families. The federal government and the state government, too — except for the court system — ought to stay out of it, as far as I'm concerned."

While Thompson’s remarks did not indicate whether his daughter Elizabeth Thompson Panici had a Living Will, it is reasonable to assume that the excruciating decisions the Thompson’s had to make as a family could have been avoided if Ms. Thompson, then age 38, had prepared a Living Will addressing the possibility of her permanent incapacity and shared her feelings with her family.

A Living Will, also referred to as an Advanced Health Care Directive, is a legal document that expresses specific instructions as to the course of medical treatment that is to be taken by caregivers, or, in some cases the refusal of certain types of medical treatment. Once executed, the Living Will does not have any force or effect until the individual is unable, due to their incapacity, to personally provide a caregiver informed consent to proceed with certain medical treatments.

An executed Living Will may declare that when a client is certified to be permanently unconscious, as is usually determined by the client's attending physician and a second examining physician, that artificial life-support systems be disconnected or withheld altogether. The client may also elect to discontinue or prevent artificial nutrition and hydration through feeding tubes or intravenous methods.

I am the first to acknowledge that on the best of days, it is hard to conceive the issues concerning our own mortality, and understandably more difficult to talk about them. But I suggest that if you are able to set aside time to explore your own feelings about the end of your life or the potential for unexpected injury that could result in a terminal condition, and then express those wishes in a meaningful and legal document, the comfort and peace of mind you will bring -- not only to yourself, but also to those closest to you -- will greatly offset its difficulty.



International Lawyers Learn of Virgin Islands EDC Program

Tom Bolt, Managing Attorney of Tom Bolt & Associates, PC, addressed the Annual Meeting of the Network of Leading Law Firms at their Annual Meeting in New York this past week.  Bolt explained the Virgin Islands Economic Development Program that allows taxpayers to pay only 10% of their federal income tax liability and no other state or federal taxes.

"The IRS's recent tax opinion, IRS Tax Opinion 76-2006, is a green light for the software industry," Bolt told the international group of attorneys.  "The IRS has said if you are a software developer and establish your operations in the United States Virgin Islands, you can exempt your sale of software anywhere in the world.  In addition, if you place your servers in the Territory and customers download your software or utlize your programs throughout the world, that income is exempt too." Bolt said.  "It is a great undiscovered program just waiting to be tapped."

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IRS Delivers Christmas Early to Virgin Islands

The United States Internal Revenue Service delivered an early Christmas present to the United States Virgin Islands, its Economic Development Program and particularly to software developers and companies.  IRS Notice 76-2006 issued in late August specifically cited the USVI tax abatement program for utlization by software companies.  The lucrative benefits of the program include a 90% abatement of federal income taxes and a 100% abatement of all other taxes.