Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

IRS Makes Changes, Clarifications to Estate Tax Lien Discharge Process

Posted in Tax & Estate Planning

Over the past several months, the U.S. Internal Revenue Service has made some changes to the releasing of liens related to the estates of deceased individuals.

This started last summer, when the agency began funneling the processing of Form 4422 to its Estate Tax Lein Group. Form 4422 becomes necessary when an estate needs to transfer assets before filing Form 706, assuming those assets are subject to an estate tax lien.

As you might imagine, this can get quite complicated for those dealing with the estate of a deceased person. The bottom line is that when someone passes away, there’s an estate tax lien that gets attached to all assets and property contained within that individual’s gross estate.

Anyone who inherits property from the deceased will likely want to get that lien released as soon as possible. Before 2016, the IRS would typically release the lien within several days. But now, all applications for releasing liens must go through the agency’s Specialty Collection, Offers, Liens and Advisory department. The IRS requires that the net proceeds from any sale of property from an estate be deposited into an escrow account or an IRS estate tax account, and the agency may also make the final decision regarding the taxes owed before releasing the proceeds in escrow.

 

Mass confusion leads to memo

These changes have caused a great deal of confusion for accountants and attorneys—not to mention the individuals and families dealing with the death of their loved ones. In early April, the IRS issued a memo with guidance on how its agents should process requests for discharging estate tax liens, providing some level of clarification. The memo also directs agents to review whether there are adequate assets to cover any estate tax liabilities.

If the estate does not owe any taxes, the IRS will not require the extra step of placing assets in escrow—as it had been requiring for the past several months. To that end, the memo at least provided some greater flexibility in how the lien discharge process moves forward in most scenarios.

The tax issues associated with high-value estates can be incredibly complicated and unwelcome, especially when you are already dealing with the passing away of someone close to you. For further guidance on this and related legal issues, meet with a skilled U.S. Virgin Islands trust and estate planning attorney.

 

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

Will Trump’s Executive Order Impact the Hiring of International Workers?

Posted in International, Labor & Employment

An executive order signed by President Donald Trump in April will make it more difficult for companies to recruit low-wage international workers that the President says unfairly harm U.S. citizens looking for work.

The order, which Trump announced during a visit to Wisconsin, also directs federal agencies to carefully analyze existing rules and trade agreements to determine their effectiveness related to their requirements for purchasing American products and services.

 

Changes to H-1B implemented

Notably, the executive order does not end the H-1B visa program, which Trump regularly criticized while on the campaign trail. That program allows technology companies to bring in skilled workers to fill key positions. In 2016, the federal government allowed 85,000 people to enter the country to work through H-1B visas.

President Trump has argued that the H1-B program enables companies to replace American workers with foreign employees they can pay less. Officials within the Trump Administration did say that the executive order would make considerable changes to the program. Among them is a new requirement for applicants and their prospective employers to prove that visas will go only to the most highly skilled workers available. To that end, President Trump aims to eliminate what he claims is a widespread practice: tech firms using H-1B visas as a cheaper alternative to hiring American workers.

Tech executives have been vocal in their opposition to the order, arguing that the H-1B visa program is critical to their ability to find and hire skilled people.

Earlier in April, U.S. Citizenship and Immigration Services issued a memo announcing that the agency will focus more of its attention on companies that have 15 percent or more of its workforce on H-1B visas. Until now, firms did not have to prove they could not find a U.S. worker to fill a position if it paid $60,000 or more per year—a number that has not been adjusted since the 1990s.

Critics say that threshold should be increased by as much as 100 percent, as many American workers would require salaries of $120,000 or more for those jobs today.

 

Knowing your options

The H-1B visa program is a valuable resource for businesses that need to find highly skilled talent, but are unable to fill key positions through American workers alone. This new executive order could put them in a difficult position, potentially preventing them from making the hires that will allow them to grow.

If you have questions about how adjustments to the H-1B visa program and other immigration policies could impact your company, consult a knowledgeable immigration law attorney in the U.S. Virgin Islands. It will be important to remain up to date as changes continue to occur.

 

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

Checklist for Selling Real Estate in the US Virgin Islands

Posted in Real Estate

If you’re preparing to sell property in the U.S. Virgin Islands, it’s important to know all the steps you’ll need to take and items to check off your list. This is true whether you’re a first-time seller or an experienced real estate investor.

Below are a number things you will need to consider when selling real estate, along with some individual steps to take within each of those categories.

Determine the extent of your need to sell

  • Determine your personal financial and real estate goals for the next 10 years
  • Determine the pros and cons of selling your property
  • Determine if you can afford to purchase a new property
  • Calculate the equity you have in your property
  • Consider if it is worthwhile to you financially or otherwise to rent the property

Figure out how much it will cost you to sell

  • List all the repairs and projects you will need to conduct to get the property in selling condition
  • Consider remodeling projects and green upgrades that will increase the value of your property
  • Factor in costs such as capital gains taxes, property inspections, penalties for mortgage payoffs, moving costs, marketing and staging costs and expenses associated with getting a new property loan

Develop a strategy for selling your property

  • Figure out how fast you need to sell your property
  • Research multiple brokers and/or attorneys before deciding which you will consult
  • Determine the unique selling characteristics of your property
  • Determine your property’s fair market value and then set a price

Market the property

  • Use MLS listings
  • Put up “for sale” signs
  • List your property on real estate publications, Craigslist, newspapers and other websites
  • Send out email notices or flyers about your property to potential interested parties
  • Take as many high-quality photos of different views of the property as possible
  • Consider hiring a professional stager for your photos
  • Arrange showings and open houses as people make their interest known

Take offers and negotiate

  • Review the prices, preapproval letters, contingencies, earnest money and closing dates for each offer
  • Have a process in place to help you quickly review offers if you expect to receive multiple offers
  • Take the opportunity to negotiate offers you like
  • Have a pre-set window in which you will compromise

For more information and tips on the legal aspects of selling real estate in the U.S. Virgin Islands, work with a skilled attorney.

 

Steven K. Hardy is Chair of the Real Estate and Financial Services Practice Group at BoltNagi, a widely respected and established real estate law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

Governor Signs Sin Tax Measure, Additional Bills into Law

Posted in Government Relations

U.S. Virgin Islands Governor Kenneth Mapp recently signed five new bills into law, one of which is the revised Revenue Enhancement and Recovery Act. It’s popularly known as the “sin tax bill.”

The bill increases the taxes levied on alcoholic beverages, cigarettes, timeshares and sugary carbonated beverages throughout the territory. While the total amount of the increase was slightly lower than previously thought, they will still be an important step to help bring some new and much-needed revenue into the territory.

The measure has been long expected and is now finally official. It has been the subject of some debate among lawmakers and residents of the U.S. Virgin Islands, who have generally been on the side of avoiding more taxation. However, the governor commended lawmakers for recognizing the need for additional revenue in passing the bill.

Also approved was Bill No. 32-0007, which establishes a baseline property tax of $360 after applying certain credits and exemptions. The bill also officially defines “commercial real property” for assessment purposes.

On the other hand, Mapp vetoed a section of the legislation that would have denied certain economic benefits or tax breaks to developers of timeshares that had previously been used as hotels or other similar facilities. He reasoned that he believed this measure would pose a significant barrier to the development of new timeshares in the territory. He also vetoed a portion of the bill that would have implemented certain austerity measures on the executive branch of government.

Additional proposed bill vetoed

One other bill did not get Mapp’s approval. Bill No. 32-0018 would have created tax amnesties that waived penalties and interest on delinquent gross excise, property and receipt taxes before 2015. The measure would have lasted for six months.

Additionally, the bill would have required the Economic Development Authority to submit a proposal for expedited application processes to the legislature within 30 days. It also would have taken the governor out of the process of approving new Economic Development Commission applicants, while also putting the Department of Licensing and Consumer Affairs in charge of approving these licenses within the first 30 days for all first-time applicants.

Mapp’s reasoning for vetoing the bill was that it would put unnecessary burdens on the Department of Licensing and Consumer Affairs and the Department of Planning and Natural Resources. The former agency, he said, should not be under any legal requirement to act on some applications within an allotted timeframe.

As far as removing the governor from the EDC application process, Mapp said doing so would potentially send a message to people who would benefit that they would not need to fully comply with their contracts, as current law requires the governor to fully explain any benefits of which he does not approve.

There has been discussion both in the media and in private that the 32nd Legislature’s Majority Caucus that a motion will be made at the next Legislative Session to override the Governor’s veto of Bill No. 32-0018.

For more information on how these bills and other action within the territorial government could affect your business, meet with a knowledgeable corporate law attorney in the U.S. Virgin Islands.

 

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

Tips for Negotiating a Contract that Meets Your Needs

Posted in Tax & Estate Planning

Before you finalize any business contract, you will likely go through a period of negotiations to figure out all the details of the agreement in question. If you are new to the process of contract negotiation, it’s important to understand how you can advocate for your best interest without asking for too much and derailing the process.

The following are some common contract negotiation strategies you and your attorney may be able to employ:

  • Negotiate in parts: Too many contract negotiations fall apart because the parties try to force each other to agree to all their terms without compromise. Instead, break the negotiation down into sections and reach an agreement on each individual portion of the deal. This will help you build momentum by resolving numerous issues consecutively, and will also work to keep the deal making process amicable.
  • Emphasize industry standards: During this type of negotiation, you would emphasize that what you are requesting is in line with the standards in your market. This means you have no obligation to justify your terms and should not have to spend much time advocating for them.
  • Attempt to take control: If you can control the time, location, topics or pace of the negotiation, you may have an advantage. This does not mean you should be overly assertive or aggressive with the interview process. An attorney can help you better understand how to use this strategy effectively.
  • Always look for common ground: Taking a more upbeat approach to the negotiations and finding points of agreement can help you create a more collaborative process. The more positivity in the meeting, the more likely it is that you will end up with a good outcome.
  • Have research to back you up: In general, the negotiating party that comes to the table with more information and research will have more leverage in negotiations. The information you attempt to collect varies depending on the type of contract you are negotiating, but it never hurts to know as much about the other party and information that is pertinent to the contract as possible.
  • Always prioritize: There are some revenues and risks in contract negotiations that may be more important than others. You should always be able to clearly definite your priorities and how they rank to help you stay focused on your goals during the negotiation.
  • Offer concessions: Determine what would be some acceptable concessions for you to make during the negotiation process, and use those as bargaining chips to help the other side feel like they are getting a good deal. You should always leave yourself room to negotiate, so never start off with your bottom line.

For further tips and advice when you’re negotiating an important business contract, meet with a skilled corporate law attorney in the U.S. Virgin Islands.

 

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

USVI Begins Overtime Pay Cuts for Public Workers

Posted in Government Relations

To help mitigate the potential financial crisis facing the U.S. Virgin Islands, Governor Kenneth E. Mapp recently ordered dramatic cuts in overtime work hours as he reviews ways to keep the Territory’s government operational.

The Virgin Islands Police Department (VIPD) became one of the first public agencies to drastically reduce its overtime work hours in response to these orders. The move has been met with disdain by officers throughout the Territory.

Reports have emerged of dips in officers’ morale since the action. Many depended on their overtime pay to be part of their family budgets, with some even taking out mortgages based on the assurances that they would consistently receive the extra pay. Police Commissioner Delroy Richards responded by saying it is never a good idea to do this, as overtime is never guaranteed. Instead, he said officers should develop their personal budgets based on their regular salaries.

Richards also noted a longstanding need for there to be controls in place to limit overtime at the VIPD to improve the agency’s financial stability. A 2015 report found that overtime cost the department about $11 million per year. The Commissioner said that officers sometimes rack up an “enormous amount of overtime, and the productivity can’t be justified.”

What are the extent of the cuts?

A recent document published by the Virgin Islands Consortium details just how significant the cuts are to overtime pay in the police department.

Any officers who have an annual salary of under $40,000 will have their biweekly overtime cut down to 16 hours. Those who make between $40,000 and $55,000 will get 14 hours of biweekly overtime, those with salaries of between $55,000 and $60,000 will receive 12 hours of biweekly overtime work and those making $60,000 to $65,000 will get 10 hours of biweekly overtime work. Officers who make more than $65,000 annually will get just eight hours of biweekly overtime.

According to the document, these drastic overtime reductions are the VIPD’s alternative to laying off or furloughing employees. Additionally, the document notes that any “exceptional circumstance” instances of overtime must be approved by the deputy chief, chief or higher-ranking official within the department before officers’ clock in for overtime. For example, a captain, lieutenant or commander may not work holiday overtime without getting approval from the proper authorities.

It remains to be seen how these cost-cutting measures will affect the police force’s ability to continue improving public safety throughout the territory. St. Croix, for example, has had only one homicide so far in 2017, which public officials believe is in large part due to improved police patrolling.

In the wake of Puerto Rico’s debt struggles in recent years, it appears that the U.S. Virgin Islands government is looking at a variety of options to avoid the same fate here in the Territory. If you have any questions about how these cuts could impact you or your business, speak with a knowledgeable government relations attorney.

 

Tom Bolt is Managing Attorney and Chair of the Government Relations Practice Group at BoltNagi, PC which staffs experienced government relations attorneys who proudly assist clients throughout the U.S. Virgin Islands.

Are You Paying Your Tipped Employees Correctly?

Posted in Labor & Employment

Many employees of the service industry receive tips from customers on top of their regular wages. In many cases, these employees actually earn more in tips than they do in wages.

Tips are treated differently than regular wages under U.S. and Territorial labor laws, even though they are considered a form of compensation. It’s important for businesses to understand the rules associated with tips and wages in service industries to make sure they are in full compliance.

Basic information and rules on tipping

The most basic rule employers must remember is that all tips belong to employees and you are not allowed to require employees to give any portion of their tips to the business, unless there is a valid tip pooling arrangement in place. Even then, the tips are only to be divided amongst other employees—and none should go to the employer.

In the U.S. Virgin Islands, employers may even make tip pooling a regular arrangement. When that occurs, all employees affected by the pool must put in a portion of the tips they make to be divided amongst all workers. However, there are restrictions on the amount employers can ask employees to put into the pool, and employees must at least be able to hold on to the full minimum wage.

The money from a tip pool may only get split amongst employees who would otherwise receive tips as part of their regular job duties. For example, waiters or bartenders in a tip pool would not have to share their tips with cooks or dishwashers—but they could if they so desired.

Employers can pay any employees receiving tips less than the minimum wage, so long as those employees are able to make enough money in tips to make up the difference. This lower rate of pay is what’s known as a “tip credit.”

How do mandatory service charges affect tips?

In some situations, there are mandatory service charges applied to bills. This most often occurs when there are large tables, private parties or catered events at restaurants. Federal labor laws dictate that these service charges are not to be considered tips. To that end, employers may keep any money designated as service charges. In some cases, there may be some confusion that arises among guests, who might mistake the mandatory service charge to be a tip.

Some states and territories have rules in place to ensure employers are making it quite clear to guests what the service charge covers. In general, however, it’s good for employee morale to make sure you explain to customers that a service charge is not a tip, and that it’s merely a convenience fee for having a large party or private event.

Understanding how to pay tipped employees can be complicated, just like many other employment legal issues. If you have further questions, consult an experienced labor law attorney to discuss your company’s situation.

 

Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor and Employment Law Practice at BoltNagi, a widely respected and well-established employment and labor law firm serving 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.

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.