With its current debt at more than $70 billion, Puerto Rico has been forced to consider new ways to balance its budget and meet its financial obligation. The territory no longer controls its own finances as of June 30, 2016, when then-President Barack Obama signed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). The legislation created a new committee void of any elected Puerto Rican officials to oversee all the territory’s finances.

There are some similarities to Puerto Rico’s situation to the one we are experiencing in the U.S. Virgin Islands. In fact, just like us, Puerto Ricans have to pay two or three times as much as the average American for electricity, as they are dependent on foreign oil imports and the utility company the government owns is billions of dollars in debt.

What caused the economic turmoil in Puerto Rico?

Economists blame the downturn in Puerto Rico on two primary factors: a repeated irresponsible issuance of bonds by the local government and a decision by Congress to cut corporate tax breaks on the island.

The latter issue dates back to 1976, when Congress passed Section 936 of the Internal Revenue Code. This enabled American corporations to get tax breaks from any income originating in U.S. territories. Manufacturers decided to flock in large numbers to Puerto Rico to take full advantage of these benefits. However, in 1996, Congress voted to phase out these tax breaks over the course of 10 years, and as of 2006, they were eliminated.

Until that time, Puerto Rico had enjoyed 28 years of economic growth, but suddenly the island faced economic problems. Beginning in 2006, eight of the next 10 years featured negative growth for Puerto Rico.

New tax incentives, technology look to boost economy

Since 2008, Puerto Rico has been focused on rebuilding and signing several new tax incentives into law. Two of these, Act 73 of 2008 and Act 20 of 2012, set a new fixed income tax rate for commercial manufacturers and companies exporting services away from Puerto Rico at 4 percent. There is also a new 50 percent tax credit available for research and development activities, with the goal to bring in more technology, research and entrepreneurism to the territory.

Technology is now the foundation on which Puerto Rico looks to rebuild its economy. Infosys has made significant investments in the territory, as have Honeywell and EMI—the latter of which is building a new research lab set to create more than 300 jobs.

It will take some time for Puerto Rico to dig itself out of its massive debt, but its plan is clearly to commit to technology and entrepreneurism. For more information on the various tax credits available to businesses located in U.S. territories, consult an experienced corporate and tax planning attorney.

 

Tom Bot is a tax benefits attorney with BoltNagi, a widely respected and established business and corporate law firm serving clients throughout the U.S. Virgin Islands.

During his campaign, President Donald Trump put forth a tax plan that would cap itemized deductions, barring single people from deducting more than $100,000 and preventing couples from deducting more than $200,000. This proposal would help raise more than $1 trillion over the course of a decade.

However, according to the Tax Policy Center, the new policy would only affect about 160,000 individuals, which is a fraction of the nation’s 89 million taxpayers. Meanwhile, only 230,000 couples would be affected out of the 59 million people who file jointly each year. In other words, the taxpayers who would be affected by the proposed cap are ultra-wealthy.

Of the single filers affected, only 50,000 or so make less than $200,000 in expanded cash income. Out of joint filers, only 20,000 make less than the same amount.

As the laws currently exist, approximately 75 percent of all filers take the standard deduction and are exempt from caps on itemized deductions. President Trump’s plan would raise the standard deduction, so the percentage of people itemizing would drop to about 10 percent.

What happens to those affected?

Out of the people who would continue to itemize under Trump’s plan, most would deduct significantly less than the newly implemented cap. Fourteen million of the 14.6 million single people who itemize deduct less than $50,000. Among itemizing joint couples, 22 million of the 25.7 million deduct less than $50,000. Itemizing couples deduct an average of just under $38,000.

The only people who average more than $100,000 in deductions are single people making $1 million or more per year (deducting an average of $440,000) and couples making $1 million or more (an average of $379,000).

A new look for tax plans

The plan Trump has put forth is drastically different from the plan House Republicans put forth in the summer of 2016. Under that plan, most itemized deductions would be repealed, except for charitable giving and mortgage interests. There would not have been any new limits on those few remaining deductions beyond any limits already implemented.

It is also a different plan in several ways from other types of tax limits that Trump recently proposed. President Obama had previously proposed limits to values of deductions and exclusions to about 28 percent.

Overall, while the itemized deduction caps only impact high-income taxpayers, the rest of the plan could potentially affect average citizens as well. On average, the plan cuts taxes significantly more for high-income households than middle- and low-income households. The cap also does not offset the costs of tax rate cuts to individuals and businesses.

For more information about how President Trump’s proposed tax plans could affect your business, work with a U.S. Virgin Islands tax planning attorney.

 

BoltNagi is well-established and respected tax planning law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

Members of the U.S. Virgin Islands Senate recently met to discuss a variety of issues, including the financial affairs of the Government of the Virgin Islands. Of particular interest were the opinions of senators on Gov. Kenneth Mapp’s proposed “sin taxes” for the territory.

These taxes would include new levies on cigarettes, alcohol, carbonated sugar beverages and timeshare rentals. They did not get approval from the 31st Legislature, but could pass through the new Legislature this year.

Governor Mapp proposed the taxes to help stimulate the Territory’s economy. In late 2016, the Legislature authorized a sale of $247 million worth of new bonds, but as of December, the Government determined it would not proceed in the bond market due to unfavorable conditions. It attempted to move forward in the bond market again in January, but the government had to call off the transaction after discovering orders for just $127 million in senior lien bonds and $13 million in subordinate lien bonds.

Governor Mapp said this lack of sufficient bonds was due to the Territory’s increased reliance on going into debt to pay off current expenses, along with the federal intervention that recently took place to satisfy Puerto Rico’s debt responsibilities. Because of that, borrowers’ perceptions of the U.S. Virgin Islands’ credit state have been significantly soured, which has led the three major bond rating companies to downgrade the Territory’s debt and increase the costs of borrowing.

A contentious issue

According to one U.S. Virgin Islands senator, however, the bond rating companies have been tougher on the territory because they do not have confidence in the Governor’s five-year tax plan. Senators have also heard some significant concerns from business owners on the potential sin taxes that have been the cause of a great deal of discussion over the last few years since first proposed.

Some senators also accused Government House officials of making the Territory’s financial situation appear worse than it actually is by leaving out potential new revenue sources from its evaluations, including money that would come in through “racinos” to be established on St. Croix and St. Thomas.

Members of the Senate Minority Caucus say there are alternatives to the sin tax proposals the Government could consider. Examples would include cutting back administrative personnel deemed to be unnecessary or redistributing employees within these oversaturated areas in the Government to offices that need more assistance. Some senators have also advocated for the legalization and taxation of recreational marijuana.

Meet with a skilled government relations attorney to learn more about how these issues could impact businesses and organizations in the U.S. Virgin Islands.

 

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

If you own a business or have an ownership stake in a corporation, you will need to account for these activities in your estate planning. You have likely spent years building up your business, so the last thing you want is for the estate tax or other issues to significantly reduce its value upon your death.

There are a few key ways in which good estate planning can benefit your business in the short and long term.

1. It ensures greater longevity for your business

When you have spent such a significant portion of your life building your business from the ground up, you almost certainly want to ensure it continues to thrive long after you are gone. Through estate planning, you can continue to pass along the ideas and designs you have developed with your company to future generations.

Estate planning allows you to plan your ownership transition in great detail so that when the time comes, it goes as smoothly as possible. Businesses with owners that do not take the time to plan how they will transition out are much more likely to struggle after their initial owners are gone.

2. It provides you with more long-term options for running your business

For example, with proper estate planning, you can take advantage of what’s called a buy-sell agreement. If your business has multiple co-owners, such an agreement will make sure the interest of any owners who pass away is automatically purchased by other owners in the agreement. This prevents beneficiaries of the deceased owner—such as children, spouses or other relatives or loved ones—from accidentally becoming owners of a company they do not want or are incapable of running themselves.

3. It helps you minimize potential estate taxes

There are several estate planning tools available to help minimize the potential tax impact your business would face upon your death. For example, you may transfer business assets to your children while still retaining some income through a grantor retained annuity trust (GRAT). As your business assets grow, the appreciation in value and equity for your business would not be subject to taxation.

4. It keeps you looking toward the future

As difficult a subject it can be, you can never know for sure when your time to pass has come, so you should always be prepared for all possibilities. A cohesive succession plan could take as long as a decade to really work well, so you should have the groundwork laid for it well in advance.

The estate planning tools and processes you use depends largely on the type of business you have and the value of your company and any business-related assets you have. To learn more about how to account for your business in your estate plan, contact a trusted attorney.

 

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

In legal terms, a fiduciary is a person who acts in the best interests of another person. To that end, within a corporation, there are certain people who have “fiduciary responsibilities” to others. These may include promoters, officers, directors and, in some cases, shareholders.

Let’s take a quick look at the various fiduciary responsibilities associated with running a corporation.

Fiduciary responsibilities of promoters

A corporate promoter is responsible for finding and organizing investors. This person’s fiduciary relationship is to the corporation, investors and co-promoters.

Promoters must always be honest in their actions and work in the best interests of the corporation and its shareholders. For example, if a promoter finds out about a business opportunity because of his or her position, that person is legally forbidden from taking advantage of that opportunity at the expense of the corporation and shareholders. Otherwise, the promoter may be guilty of insider trading, a type of fraud.

Fiduciary responsibilities of directors

Directors have two main fiduciary duties: duty of care and duty of loyalty.

Duty of care requires a director to always act honestly and in good faith in a way that promotes the corporation’s best interests. For example, directors should keep up to date on all corporate matters, attend board meetings and act in a way that improves the corporation’s standing.

Duty of loyalty requires directors to place the interests of stockholders and the corporation above their own, much in the same way as promoters. They are not allowed to take advantage of their position or knowledge that would benefit them in any way that would be to the detriment of the corporation.

Fiduciary responsibilities of officers

Directors typically delegate various day-to-day tasks of running a corporation to officers. These officers, like directors, have a duty of care and a duty of loyalty as they carry out their tasks and responsibilities. They must act in good faith at all times, using care in their decision making to the same standard that a reasonably careful person would act. They also must avoid potential conflicts of interest.

Fiduciary responsibilities of shareholders

Although shareholders typically do not have any fiduciary responsibility, as they do not have any oversight capacity, there are some circumstances in which shareholders may become members of the board of directors. In this situation, the shareholder would have the same fiduciary responsibilities any other director.

The level of liability directors, officers and promoters assume can vary, but it’s important for business leaders to have at least a basic understanding of how fiduciary responsibility works. For further information and guidance on this important issue, consult a skilled corporate planning attorney serving U.S. Virgin Islands businesses.

 

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

Many small businesses rent out office space in commercial buildings, likely sharing that space with various other businesses and organizations. Before you decide you are going to rent shared office space, however, it’s important to conduct the proper due diligence to ensure it’s the right move for your company.

In most cases, it’s in your best interest to share space with other businesses similar to yours. For example, a couple of law firms focused on different areas of practice might choose to share a floor of a large office building, or several doctors could have small practices in the same building. Any business that sees clients or patients may especially benefit from this arrangement, as it otherwise can be costly to maintain offices with reception areas or private meeting rooms.

The following are a few issues you will need to consider if you decide to share office space with another business or organization:

  • Each company’s responsibilities for the space: Who is going to have primary responsibility for the workspace? This likely depends on who owns the building. If one of the business owners also is the owner of the building and is simply renting it out to other similar companies, then that entity will likely be responsible for maintenance and other issues. If you have joined with other companies to find a place to share, then you may need to split these responsibilities.
  • Decisions on how to use the space: You will need to decide how you are going to make decisions regarding the use of your shared office space. This could include anything from the types of business activities allowed to how you will decorate the property. Depending on ownership of the building, some of these decisions may or may not under your control.
  • Division of costs: No matter who owns the shared office space, you must come to an agreement regarding who is responsible for making various payments. If the use of the space is not equal, you will have to design a payment arrangement that is fair to all parties sharing the space. Make sure these arrangements are flexible so you can easily change them if one tenant’s needs change or if a new company moves in.
  • Use of common space: If there is any common space included with your shared office, you should determine how it will be used. This could include warehouses, kitchen facilities, separate conference rooms, office equipment, administrative areas or anything else that does not fall in one company’s assigned space. How will you keep these spaces clean? How will you split costs for these spaces? These issues and more deserve some thought before you sign a lease.

If you could use assistance with this or a wide range of other issues related to your company’s success, meet with a skilled and knowledgeable corporate and business law attorney in the U.S. Virgin Islands.

 

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

Natural disasters like hurricanes and floods do not just damage or destroy buildings and utilities. They could also result in the loss of some extremely important documents, such as mortgage information, estate planning documents, green cards and birth certificates.

As you recover from the losses you have suffered in the recent hurricanes in the U.S. Virgin Islands, you may realize some of your important documents have been lost or damaged. Below is some information that can help you replace them:

Bank checks, ATM/debit cards or safe deposit boxes

Connect with the Federal Deposit Insurance Corporation, which can cover your losses.

Phone: 877-275-3342

Website: www.fdic.gov

 

Credit cards

Here is the contact information for each of the major credit card institutions:

For bank issued credit cards, which include Master Card and Visa, please contact your local bank.

 

Credit reports

You will need to reach out to Equifax, Experian or TransUnion. There is a single phone number and website to make these efforts easier.

Phone: 877-322-8228
Website: www.annualcreditreport.com

 

Medicare cards

Phone: 800-772-1213
Website: www.socialsecurity.gov/medicarecard/

 

Passport

Phone: 202-955-0430 or 1-877-487-2778
Website: //travel.state.gov/content/passports/english/passports/lost-stolen.html 

Social Security Card

Phone: 800-772-1213
Website: www.ssa.gov

 

Medicare cards

Phone: 800-772-1213
Website: www.socialsecurity.gov/medicarecard/

 

Tax Returns

Contact the Virgin Islands Bureau of Internal Revenue
6115 Estate Smith Bay, Suite 225
St. Thomas, U.S. Virgin Islands 00802
Phone: 340-715-1040
Website: www.bir.vi.gov

4008 Estate Diamond, Plot 7B
St. Croix, U.S. Virgin Islands 00820
Phone: 340-773-1040

 

Real estate and property records

Contact the Office of Recorder of Deeds
No. 5049 Kongens Gade
St. Thomas, U.S. Virgin Islands 00802
Phone: 340-774-9906
Website: www.ltg.gov.vi/recorder-of-deeds.html

1105 King Street
Christiansted, U.S. Virgin Islands 00820
Phone: 340-773-6449

 

Birth, death

Contact the VI Department of Health (Vital Statistics)
Knud Hansen Complex, Hospital Ground
St. Thomas, U.S. Virgin Islands 00802
Phone: 340-774-9000, ext. 4621
Website: http://vitalrec.com/vi.html

Charles Harwood Memorial Complex
Christiansted, St. Croix, U.S. Virgin Islands 00820
Phone: 340-773-1311

 

Marriage Certificates

Contact the Superior Court of the Virgin Islands
Alexander A. Farrelly Justice Center
5400 Veteran’s Drive
St. Thomas, U.S. Virgin Islands 00802
Phone: 340-774-6680
Website: www.visuperiorcourt.org

R.H. Amphlett Leader Justice Center
RR1 9000
Kingshill, St. Croix, U.S. Virgin Islands 00850
Phone: 340-778-9750

 

Estate planning documents

Talk to your estate planning attorney, who should have copies of your estate planning documents on record. Wills can also be stored for “safe keeping” at the Superior Court of the Virgin Islands.

 

Medical bills and history

Your medical provider should have a thorough record of the treatment you have received and the bills you have paid, so check with them first.

For more information on the various locations to contact if you have lost or damaged documents that need to be replaced, contact the team at BoltNagi. We would be happy to assist.

Attorney Steven K. Hardy is Chair of the Corporate, Tax and Estate Planning Practice Group at BoltNagi, an established and widely respected corporate tax planning law firm serving clients throughout the U.S. Virgin Islands.

Small businesses dealing with health insurance-related challenges received some welcome news in December with the passage of the 21st Century Cures Act, a new federal law that allows employers to expand their use of qualified small employer health reimbursement arrangements (QSEHRAs).

While the law contains numerous provisions, the ones most relevant to small businesses allow those with fewer than 50 employees to reimburse for qualifying healthcare expenses, such as premiums for coverage purchased independently. To be eligible, a business cannot offer any type of group healthcare plan to any of its employees. Those receiving the reimbursements also may not apply QSEHRA funds to health savings accounts established through their spouses.

The 21st Century Cures Act provides much-needed relief to small employers, who have been in a state of limbo over whether or not they would be able to continue their existing health reimbursement arrangements. These arrangements had been prohibited under the Patient Protection and Affordable Care Act, although the Department of Labor had issued several extensions to allow businesses to continue them for limited periods of time. Thus, the new law offers a more permanent solution.

Stipulations of QSEHRAs for small businesses

It is important to understand that QSEHRAs come with a number of requirements, including the following:

  • All employees must receive access to reimbursements on the same terms. Some exceptions apply for those who have been with a company fewer than 90 days, part-time and seasonal workers and other exempt employees.
  • Only employer contributions may fund the QSEHRA, with no withholdings from employee paychecks allowed.
  • Employers may only contribute up to $4,950 for HRAs covering one employee, or up to $10,000 for family HRAs.
  • To receive reimbursements, employees must provide documentation for all healthcare expenses, including insurance premiums, doctor’s visits, prescription costs and other qualifying expenses.

Federal law requires employers that plan on offering a QSEHRA to provide written notice to all qualifying employees at least 90 days prior to the start of the plan year or the date the employee becomes eligible for the reimbursement. This notice must include the maximum yearly amount available to the employee and any relevant tax or Affordable Care Act-related issues the employee may need to know before receiving HRA funds. For example, an HRA could impact an individual’s ability to receive tax credits from the federal government to pay for health coverage.

The rules and regulations surrounding healthcare coverage for employers are incredibly complicated—and there are likely more changes on the way with the incoming administration in Washington, D.C. To learn more about your options and to ensure you remain in compliance with federal and U.S. Virgin Islands law, consult a knowledgeable labor and employment law attorney.

 

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

With President-Elect Donald J. Trump set to take office this Friday, January 20, there may be numerous changes to U.S. labor policy on the horizon.

Trump, who during his campaign pledged to roll back regulations on businesses, will have the benefit of Republican majorities in both houses of Congress, potentially enabling him to take quick action on a number of policy items. Although it’s difficult to say for sure what this will look like, it appears likely that the incoming president will push back against some of the more worker-friendly policies of current President Barack Obama.

In December, Trump nominated Andrew Puzder, a former fast food industry executive, as his Secretary of Labor. Puzder has been a vocal opponent of movements like the push to raise the minimum wage, and he generally believes that businesses are over-regulated across the United States.

One of the more immediate impacts we are likely to see in a Trump administration is the complete suspension of the overtime exemptions that had been set to take effect back in December. The Department of Labor’s new exemptions were supposed to nearly double the minimum salary required for white-collar employees to qualify for overtime pay. However, in late November, a federal judge issued a temporary injunction on the rule’s implementation.

The rule, which would impact more than 4 million workers throughout the United States and its territories, could be suspended or completely reversed under a Trump administration.

Equal pay and immigration issues in question

One interesting development to watch with the new administration will be pay equity. While Trump has expressed support for legislation that would require employers to provide equal pay for equal work, Vice President-Elect Mike Pence and other top Republicans have publicly opposed these measures. The question thus becomes whether the president will push back against his own party to support pay equity.

When it comes to immigration, Trump has signaled that he would push for a national E-Verify program, which is now only required of private employers in 20 states. It may also become more difficult for businesses to secure H1-B visas for highly skilled workers, and I-9 audits could become more commonplace. All this has businesses that employ large numbers of immigrant workers concerned about their ability to hire and retain staff members in the near future.

This is certainly a time of upheaval in the world of immigration and employment law in the United States and its territories. We will continue to monitor these issues in the months to come, and advise our numerous clients on how they should prepare for and react to policy changes as they occur. If you have any questions about these issues and how they could impact your business or organization, be sure to contact an experienced attorney.

 

Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor and Employment Law Practice Group at BoltNagi, a well-established and respected labor law firm serving clients throughout the U.S. Virgin Islands.

Imagine you have a great idea for a business and have picked out the perfect name. You rush to GoDaddy to register it, only to find that some other party has already purchased it and is apparently doing nothing with it. Unfortunately, it’s an issue many entrepreneurs face across the globe.

Known as cybersquatting, this practice involves individuals or organizations registering numerous domain names attached to various trademarks, with the intention of cashing in if and when those trademarks get sold. These squatters try to purchase as many domain names as possible that are closely linked to a high-profile individual or business, profiting by association. They might, for example, register domain names with slight misspellings to get people who enter typos into their web searches.

There are a few ways you can tell if you have been the victim of a cybersquatter. Your first step should be to check to see if the domain name you wish to register has been claimed by someone else. If so, visit the website and see if it’s legitimate. If it is a functional site that’s related to the domain name, then you were probably not the victim of a squatter. You should probably look at other domain name options.

However, if any of the following factors apply to the site, then you could very well be looking at a squatter-owned site:

  • The website is perpetually under construction, likely for at least a year or more
  • Your browser is unable to find the website or displays an error, despite evidence showing that someone owns the domain name
  • The website has no relation to the domain name in question

Although these indicators do not necessarily mean someone is squatting your domain, they are certainly enough evidence to provide reasonable suspicion.

What to do if you suspect a squatter

If you have reason to believe the person is cybersquatting, you have several strategies available to you. First, you can visit www.whois.com to look up the information of the domain name registrant, and then directly contact that person to determine the purpose of the domain. In many cases, it is far cheaper to pay for the domain name, as litigation can be costly and take up a lot of time. This is, of course, what the squatter is counting on.

However, you are able file a civil claim under the “Anti-Cybersquatting Consumer Protection Act” (ACPA). If you win the suit, the cybersquatter will receive a court order to transfer the domain name to you, and potentially pay you damages.

Here’s what it takes to be successful in this type of lawsuit:

  • Proof that you had a distinctive trademark when the domain name was registered;
  • Proof the domain name registrant registered the domain in bad faith with intent to profit;
  • Proof the registered domain is identical or at least reasonably similar to your trademark; and
  • Proof your trademark is protectable under federal law

If the registrant is to successfully defend against the claim, they must prove there was a reason for them to register the domain other than to eventually sell it.

To learn more about the issue of cybersquatting and to determine if you need to take legal action, consult an experienced corporate law and intellectual property attorney who is up to date on the latest in cybersecurity.

 

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