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.
“I introduced H.R. 2220 and asked that it may be known as the “Derek M. Hodge Virgin Islands Improvement Act of 2011,” as our former Lt. Governor was the driving force behind this bill, which he worked on tirelessly during the last several years because of what it would mean for his beloved Virgin Islands,” said Congresswoman Christensen. “There would not be a more fitting tribute to his life’s work than the enactment of this bill into law,” she said. The Derek M. Hodge Virgin Islands Improvement Act of 2011 would allow taxpayers a onetime transfer of existing IRA, 401k, and other tax deferred investments, up to a total limit of $50 billion, into a special fund with no tax or penalties at the time of the initial transfer. The transferred funds would receive “Roth” like treatment at retirement if taxes are paid as follows:
- For the first ten years a 1.5% tax would be collected by the US Treasury and divided 1.0% to the US Treasury and 0.5% to the U.S. Virgin Islands.
- During the second ten years, a 1.0% tax would be divided equally between the U.S. Treasury and the U.S. Virgin Islands.
- After twenty years, a 1% tax would be continued to be collected only for the benefit of the U.S. Treasury.
The tax funds allocated to the U.S. Virgin Islands would be deposited in an escrow account and the Department of Interior would approve the release of the escrowed funds to pay for projects set out under an approved reconstruction plan.