Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

USVI Government Issues Guidance on Notifying Policyholders of ‘Underinsurance’

Posted in Insurance

The U.S. Virgin Islands Office of the Lieutenant Governor, Division of Banking, Insurance and Financial Regulation, has issued a guidance to all property and casualty insurance companies regarding how these entities should notify insured individuals of “underinsurance.”

According to the guidance, the Government of the Virgin Islands encourages all insurers to “use all available means” to provide quick relief to insureds, while noting that there have been numerous complaints of insureds being told that they do not have enough insurance to cover the damage done to their properties. With all the devastation caused by hurricane season this past fall, this has placed many policyholders in a precarious situation.

Responding to consumer confusion

The Division, regulates the Territory’s insurance industry, has found that many insureds are unaware of what it means to be “underinsured”. This is especially true for those who thought they were fully insured, only to find out that amendments to the formulas used to determine their properties’ value have changed.

This, according to the guidance, has resulted in a need for the Division of Banking, Insurance and Financial Regulation and insurance companies to better educate policyholders on what it means to be underinsured and how it may affect their claims when damage does occur.

To that end, the Division calls on insurance companies to take the following steps:

  • Provide homeowners’ insurance policyholders with a full explanation of underinsurance, along with examples of how it could affect their ability to collect on a claim.
  • Ensure that policyholders are fully notified of whether or not they are underinsured, and how their status might impact a potential claim in the future.
  • Require that all policyholders review and sign an official Notice of Conditions of Underinsurance whenever they are obtaining or renewing a homeowners’ insurance policy.
  • Inform policyholders of all the common factors that could lead to being underinsured.

Additionally, the Division is directing all insurance companies to provide policyholders with the option to receive a midterm endorsement to increase their policy limit “to an adequate level using a pro rata share” before this year’s hurricane season. These policies may not be back-dated, however.

To be sure, these issues are of particular importance to insurance companies and consumers in the aftermath of Hurricanes Irma and Maria—and the enormous amount of damage they caused throughout the U.S. Virgin Islands. If you have questions about how this guidance could impact your homeowners’ insurance policy or claims process, speak with a skilled insurance law attorney right away.

Mark A. Kragel is a senior attorney in BoltNagi’s Civil Litigation Practice Group with a concentration in insurance defense. BoltNagi PC is a full service business law firm serving the U.S. Virgin Islands.

Questions You Should Never Ask a Job Applicant

Posted in Labor & Employment

Employment law doesn’t just dictate the ways you can and cannot discriminate in your business hiring practices—it also gives some guidelines about the kinds of questions you can and cannot ask job applicants. Therefore, anyone responsible for hiring for your business should familiarize themselves with some of these basic tenets of employment law to ensure they do not land their business (or themselves) in legal trouble.

There are three general categories of questions hiring managers and HR professionals should avoid in interviews: criminal history, credit history and salary history.

Here’s a quick overview of why these questions are prohibited.

What’s your criminal history?

Most of the time, employers are prohibited from asking potential employees about their criminal history in an interview and/or on a job application. Employers are allowed to perform criminal background checks, but there are also special rules that apply in these scenarios. Applicants must be informed in writing that they will be subjected to a criminal background check, and that the findings of that check could influence the decision making process.

Employers should also keep in mind that in some cases there are regulations indicating which types of criminal records can be disqualifying.

What’s your credit history?

Bans on asking questions about credit history vary from jurisdiction to jurisdiction, but they saw a significant boost in popularity in the time immediately following the recession. Sometimes there is a total ban on asking about credit history, in other cases it is allowed to ask about credit history after giving an applicant a conditional offer letter.

These bans were implemented because credit history trouble is typically associated with people who do not come from affluent backgrounds, which meant performing credit history checks as part of a job application process could be classified as discrimination against low-income individuals.

There might be some cases, however, in which it is permissible to ask about credit history. The most common example is in certain types of finance positions, in which an applicant’s credit history could actually be material to his or her job responsibilities.

What’s your salary history?

There has been a growing movement to ban employers from asking about applicants’ salary histories. The idea behind these bans is that employers should be capable of determining a reasonable level of compensation for a position based on that position’s responsibilities and the candidate’s qualifications without having to factor in the person’s previous salaries.

Companies that set a salary based on the individual’s salary history are positioning themselves to continue a cycle of inequitable compensation, which is unfair to the applicant.

While some locations around the United States have already implemented these bans, and even more are considering them, the U.S. Virgin Islands has yet to implement same. The tide however, continues to move in the direction of banning those types of questions entirely, it is best for employers to get into the habit of not asking them.

For more information about hiring best practices, contact an experienced labor attorney in the U.S. Virgin Islands.

Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor and Employment Practice Group at BoltNagi PC, a full service business law firm that serves the U.S. Virgin Islands.

Department of Labor Unable to Act Against Employers to Fail to Make Unemployment Insurance Payments

Posted in Government, Hurricane

Officials from the Department of Labor recently told lawmakers in the U.S. Virgin Islands that understaffing in the DOL has prevented the department from pursuing legal action against employers who have failed to make their unemployment insurance payments. These delayed and missing payments have, in turn, delayed the payment of benefits to newly unemployed citizens.

The DOL representatives revealed this information during a hearing of the Legislature of the Virgin Islands’ Committee on Workforce Development, Consumer Affairs and Culture. At the hearing, the Department of Licensing and Consumer of Affairs, the Department of Tourism and the Virgin Islands Carnival Committee also all testified.

A look at the issue

Elton George, who is the director of the Unemployment Insurance Division, said that when employers do not make their required unemployment insurance payments, the Virgin Islands Department of Labor then begins garnishing the claimant’s financial records to determine the amount of the unemployment check. However, understaffing at the Department of Labor has led to none of the typical legal action being taken against delinquent companies. According to George, the delay has been made even worse by a larger than usual number of unemployment claims coming into the UID.

Virgin Islands lawmakers were not satisfied with the explanation. According to Senator Jean Forde, unemployment has increased dramatically in the wake of the hurricanes that hit the Territory last fall. As such, the Department of Labor should not have understaffing problems, especially considering the vacancies are fully funded. The positions must be filled to allow the Department to process unemployment benefits to help the people in need throughout the territory.

Virgin Islands media became aware of the issue when former employees of the Schneider Regional Center and Juan F. Luis Hospital told reporters they had not received their promised unemployment benefits since losing their jobs. Resulting investigations revealed widespread issues throughout the Virgin Islands with people not receiving the unemployment benefits they are owed.

Considering the harsh living conditions Virgin Islanders have had to deal with since Hurricanes Irma and Maria hit the Territory, it is even more important than it might typically be for citizens to get these benefits in a timely manner so they can afford basic living necessities, not to mention ongoing repairs to their properties.

According to Senator Nereida Rivera O’Reilly, some people who have lodged complaints with the government have not received any unemployment checks since October 2017—that’s months’ worth of missing payments caused by dysfunction in the government.

This is an issue affecting employers and employees alike. For more information about the state of the Department of Labor and how this issue will affect your business’s long-term planning, contact an attorney in the U.S. Virgin Islands.


Ravinder S. Nagi is a shareholder and Chair of the Labor and Employment Practice Group of BoltNagi Pc, a full service business law firm serving the U.S. Virgin Islands.

Tourists are Returning to the U.S. Virgin Islands, but Hotel Rooms are Lacking

Posted in Hurricane

It’s been about six months since the U.S. Virgin Islands were devastated by a pair of Category 5 hurricanes. Some sense of normalcy is finally returning to the Territory—services are back up and running, businesses and homes are rebuilding, and tourists have begun coming back to the U.S. Virgin Islands.

In fact, some airlines are even preparing to launch new flights to the U.S. Virgin Islands. Spirit Airlines, for example, announced that it would begin providing a brand new nonstop flight between Fort Lauderdale and St. Croix running three times a week (Tuesdays, Thursdays and Sundays).

The U.S. Virgin Islands Department of Tourism also announced Spirit along with Delta Air Lines and JetBlue Airways would be expanding its services to St. Thomas, and that in April, United Airlines will resume its services to St. Thomas from cities including Houston, Texas; Washington, D.C. and Newark, New Jersey.

Challenges with accommodations

Still, it will be a long time before the Territory is able to truly return to normal. The hurricanes did a tremendous amount of damage to the islands.

While tourists are starting to come back to the territory, flights are still far below their levels at this time in 2017. St. Thomas is down about 50 percent in flight capacity, and St. Croix’s flight levels are about 15 percent below where they were at this point last year.

The tourists that have been coming back to the Virgin Islands have been having some difficulty finding accommodations. Many of the larger hotels are still closed and awaiting repairs. The lack of available accommodations has wide-reaching effects on the tourism industry, including the Territory’s ability to collect hotel occupancy taxes, as well as the various activities and adventures offered primarily to tourists. The taxi industry and other vendors have also suffered, as there have been significantly fewer visitors so far in 2018.

The U.S. Virgin Islands has been hit perhaps the hardest by the significant decrease in cruise ships arrivals to the Territory since the hurricanes. There’s expected to be a drop off of 30 percent of cruise ship visits to the area. It will be some time before cruise ship visits begin to stabilize and reach their figures before the hurricanes hit, and there’s no denying the economic impact that has on the Territory. These cruise ships are packed with tourists who flood the islands’ restaurants, bars, shops and activities.

Leadership in the tourism industry remains positive about the growth and recovery efforts after the hurricanes, but everyone understands there is still a long way to go.

For more information about recovery efforts and the outlook for your business in 2018, contact a trusted corporate planning attorney in the U.S. Virgin Islands.


Tom Bolt is Managing Attorney of BoltNagi PC, a full service law firm in St. Thomas U.S. Virgin Islands.

A Tax Season Checklist for Residents of the US Virgin Islands

Posted in Tax

We are now in the midst of tax season, which means people across the United States and its territories are busy compiling their records and receipts and preparing their income tax return paperwork. This can be a stressful time of the year, especially if you are not entirely sure what is required out of you in regard to tax preparation.

To help, we have created a tax preparation checklist that covers most individuals’ needs for their individual or joint tax returns. For more personalized information, we strongly encourage you to consult an experienced U.S. Virgin Islands tax planning attorney.

Income information

  • Income you’ve earned from jobs, as evidenced on forms W-2
  • Income earned from investments, using various forms 1099, K-1s and stock option information
  • Alimony income
  • Income from businesses or farming (profit/loss statements, capital equipment information)
  • Home office expenses and the size of your home office space
  • Distributions from IRAs and pensions (forms 1099-R, 8606)
  • Social Security benefits (form SSA, 1099)
  • Income and expenses associated with rental properties (profit/loss statements, suspended loss information)
  • Prior year installment sale info (SSN/address of payer, form 6252)
  • Miscellaneous income (gambling winnings, scholarships, health savings account, lottery)

Income adjustments

The below factors may reduce your taxable income, which can either increase your tax refund or lower amount of money you owe.

  • Energy credits
  • Student loan interest
  • Moving costs
  • HAS contributions
  • Health insurance payments (if self-employed)
  • Alimony payments
  • IRA contributions
  • Educator expenses
  • SIMPLE or other self-employed pension plans


  • Childcare costs
  • Education costs (form 1098-T)
  • Advance Child Tax Credit
  • Adoption costs
  • Investment interest
  • Charitable donations
  • Casualty/theft losses
  • Home mortgage interest and points paid (form 1098)
  • Medical and dental expenses
  • Miscellaneous tax deductions (union dues, seminars, continuing education, uniforms, business travel)

Paid taxes

  • State and local income taxes
  • Real estate taxes
  • Personal property taxes (vehicle license fee)


Adam N. Marinelli is an associate in the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC and concentrates his practice in tax matters. BoltNagi is a full service business law firm serving the U.S. Virgin Islands.

An Overview of Acquisition Agreements for Business Purchases

Posted in Business

When you are preparing to purchase another business, the acquisition agreement is a crucial step in the process. Here’s a brief overview of what you can expect out of an acquisition agreement.

Two models of purchase agreements

There are two general models of purchase agreements: an entity purchase agreement and an asset purchase agreement. The way the transaction actually occurs will really depend on the size and type of each business involved, but you can at least have a general idea of what to expect when you use one of these two models.

In an entity purchase agreement, the buyer purchases the business entity through buying a majority (or all) of its stock. In this situation, the new owner of the company fulfills the role of the previous owners of the purchased company, and also takes on all of that company’s debts.

In an asset purchase agreement, the buyer purchases all of the assets, whether tangible (real estate, inventory, equipment) or intangible (intellectual property, trade secrets). While the structure of the purchased company, along with its original owners, remain in place, there is not really a business to run anymore, because all of the assets are gone.

Selecting a model of acquisition

So which model of purchase agreement works best in your situation?

First, you should consider the tax implications of the purchase. Usually it is better from a tax perspective to use an asset purchase agreement, because the buyer can start depreciating those assets almost instantly. The seller, however, often prefers an entity purchase agreement, because such an arrangement allows the seller to pay taxes at the lower capital gain rate. This is especially true if the seller is a C corporation, because that structure places them at double the tax risk.

The other primary consideration is debts and liabilities. It’s also a better arrangement for the buyer to use an asset sale from this perspective, as the buyer does not take on the business’s debts unless they agree to do so. Obviously, the seller would rather have the debts taken on by the new owner, which makes an entity sale advantageous to them.

Ultimately, coming to an agreement in a sale and the kind of acquisition agreement that will be used for that sale takes a significant amount of negotiation. Trained business planning attorneys are skilled in working with both parties in business sales to help develop arrangements that work for all sides.

To learn more about acquisition agreements and the steps you should take if you are preparing to sell or purchase a business, we encourage you to contact an experienced corporate planning attorney in the U.S. Virgin Islands. We will be happy to answer any questions you have.

Steven K. Hardy is Chair of the Corporate Tax & Estate Planning Practice Group at BoltNagi PC, a full service law firm in St. Thomas, U.S. Virgin Islands.

5 Tax Relief Tips for Victims of Hurricanes Irma and Maria

Posted in Hurricane, Tax

The recent hurricanes in the U.S. Virgin Islands left homeowners and businesses alike with massive damage unlike anything they had seen in the past. These property losses continue to have major implications on families and businesses now that tax season is upon us.

Fortunately, new laws enacted several months ago provide special tax breaks for those who suffered damage due to Hurricanes Harvey, Irma and Maria. Below are a few tips to get some extra tax relief this spring:

Use personal casualty loss write-offs to their fullest extent

You legally suffer a casualty loss whenever the fair market value of your property is reduced by an event such as a storm, flood or earthquake, to the extent those losses are not covered by insurance. These deductions are usually less than what one might expect due to the limitations of standard tax laws, but the laws implemented this fall loosen those restrictions. As a result, hurricane victims can take advantage of more deductions.

A knowledgeable tax planning attorney can provide you with more detailed information about the amount you could save through this deduction.

Use business casualty write-offs if you own business property

You can double dip on casualty write-offs if you suffered major damage to both your personal and business properties. For business property, you would deduct the full amount of uninsured loss as a business expense or, if you operate as a sole proprietor, on Form 1040.

As with personal casualty losses, business casualty write-offs can only be used for federally declared disasters. The hurricanes from this past fall do qualify.

Consider special rules for a primary residence

Special rules apply to any involuntary conversion gains on a primary residence. A primary residence is considered the place that is your main home for the last two years. For owned primary residences, you may use the federal gain exclusion tax to reduce these conversion gains. If, after taking advantage of the gain exclusion tax break, you still have a gain, you have four years (instead of the standard two) to make appropriate payments to repair or replace property and avoid involuntary conversion gains.

If you rent your home, there is no taxable gain from any insurance proceeds that cover losses to personal property. Thus, you do not need to repair or replace damaged items to avoid the conversion gain. Instead, you can do whatever you want with your insurance money.

Leverage your retirement account

The IRS has announced that 401(k) plans and other employer-sponsored retirement accounts can make loans or hardship distributions to hurricane victims and their families. Typically, there would be a 10 percent early withdrawal penalty, but hurricane victims can avoid paying that penalty for a limited amount of time while they fix their homes.

Extend your deadlines

Hurricane victims can benefit from extended deadlines. In the U.S. Virgin Islands, for example, tax filing and payment deadlines that had been set for early September were pushed to January 31, without any application for such an extension being necessary. Taxpayers may apply for other extensions to give themselves more time to get their affairs in order while they concentrate on making repairs.

For more information on tax relief opportunities available to hurricane victims, meet with a skilled tax planning attorney in the U.S. Virgin Islands.

Adam N. Marinelli is an associate in the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC and concentrates his practice in tax matters. BoltNagi is a full service business law firm serving the U.S. Virgin Islands.

The Impact of Federal Tax Cuts on the US Virgin Islands

Posted in Tax & Estate Planning

In December, both houses of Congress passed and President Trump signed into law the “Tax Cuts and Jobs Act”, commonly known as the “tax reform bill.” The $1.5 trillion tax package reduced individual tax rates for the next eight years while cutting the top corporate tax rate to 21 percent indefinitely.

The tax bill will have a significant impact on businesses throughout the U.S. Virgin Islands and most other American territories. One potential problem area is a new 12.5 percent tax on all profits that come from intellectual property that foreign companies hold. While the intention of the tax is to bring these companies back to the United States, it does not consider the U.S. Virgin Islands part of the country, at least when it comes to tax purposes.

In other words, businesses here get treated similarly to those in non-U.S. Caribbean tax havens, even though USVI residents pay into Social Security and Medicare.

At the time, Sen. Marco Rubio of Florida called this a “glitch” in the bill and said that Congress would work to address it. However, as of mid-February, no changes have been made to reduce or eliminate the intellectual property tax for U.S. Virgin Islands-based businesses.

Reduction of excise taxes to have an impact

Another major factor in the tax bill has been the reduction of excise taxes on beer, wine and liquor. This will affect the U.S. Virgin Islands’ ability to service much of its debt through matching fund bonds, commonly known as “rum cover over” funds. These are essentially annual taxes the U.S. Department of the Interior collects from rum sales. Last year, these taxes totaled about $224 million.

However, the Government of the Virgin Islands realizes only a fraction of these funds in its actual coffers. Most of the money gets transferred to government bondholders. Last year, for example, the Territory only saw about $48 million out of the $224 million taxed. Many critics of the policy say the U.S. Virgin Islands Government relies far too heavily on matching fund bonds.

The provisions in the tax cut bill could significantly reduce the amount of revenue generated from beer, wine and liquor taxes. The U.S. Virgin Islands would not be able to rely as much on the matching fund bonds, which could lead to a further downgrade of its credit rating and potentially the Territory’s ability to service the bonds.

While it has been two months since the tax reform bill passed, analysts are still determining just how it will impact businesses of all sizes throughout the United States, including in American-held territories like the U.S. Virgin Islands. If you have questions about the steps you should take to properly plan for the future of your business, consult a dedicated tax planning attorney.

Adam N. Marinelli, is an associate attorney in the Corporate, Tax and Estate Planning Practice Group at BoltNagi, PC and concentrates his practice in tax matters. BoltNagi is a full service business law firm serving the U.S. Virgin Islands.

How to Protect Your Business Against a Client Going Bankrupt

Posted in Business, Corporate & Financial Services

It’s an unfortunate reality that more small businesses fail than make it past their first five years. Even larger companies are not immune to bankruptcy. In fact, the number of businesses filing for bankruptcy protection has steadily grown over the last several years.

This means that if you run a B2B company that has other businesses as clients, it is essential to have a plan to protect your company from any fallout associated with a client going out of business.

The following are some tips to help you achieve this:

  • Never depend on a single source: If you find your company relies too heavily on a single client as a stream of income, consider making efforts to add more clients that could help shoulder the load in the event the large client goes out of business. In a perfect world, you would have at least several large clients, with plenty of smaller clients to serve as safeguards.
  • Ask for upfront payment: The best way to avoid taking a big hit if a client goes bankrupt is to ask for payment up front, before you complete the work. This is especially important if your business does not have a significant amount of operational cash flow.
  • Keep thorough documentation: Document everything about your client, including orders placed, communications and deliveries, in case you ever need to appear in bankruptcy court and appeal for payment. Consider how much work you are willing to put into securing this money if it comes down to litigation.
  • Negotiate if your client is going through financial troubles: If your client goes bankrupt, there’s a strong chance its debt to you will be discharged. This means you should begin negotiating with your client as soon as possible and before a petition for bankruptcy is filed. You might ask for a smaller portion of the payment now and be willing to extend or even forgive the rest of the debt. It may be a better option than receiving nothing at all.
  • Ramp up your marketing: This is especially important if you have a large client going out of business. You’ll need to replace their revenue, and so you should focus your efforts on finding one or more new clients to replace what the now-defunct account was providing to you.
  • Communicate: Keep in communication with your client consistently so you have a rapport and are better able to work out an agreement during times of financial pressure.
  • Be proactive: When a client is going through financial hardship and faces bankruptcy, its leadership is probably not thinking about every single debt owed to various entities. You will need to be your own advocate in this situation to make sure you are not left in an unstable financial situation.

For more tips and guidance on how to safeguard your business against a client going bankrupt, consult a dedicated corporate planning attorney in the U.S. Virgin Islands.

J Nash Davis is an associate in the Real Estate and Financial Services and the Corporate, Tax & Estate Planning Practice Groups of BoltNagi PC, a full service business law firm on St. Thomas, U.S. Virgin Islands.

How This Fall’s Hurricanes Will Play a Role in Tax Season

Posted in Business, Hurricane

This year’s tax season looks a little different than in the past for people who live in areas that were affected by the major hurricanes in 2017. The IRS is still focused on accommodating the various tax needs, including relief efforts, of individuals impacted by the disasters.

On September 29, Congress passed the Disaster Tax Relief and Airport and Airway Extension Act of 2017, and President Trump signed it into law shortly thereafter.  The legislation modifies a few key tax provisions relative to individuals and businesses located in areas affected by Hurricanes Harvey, Irma and Maria.  This includes the U.S. Virgin Islands.

Some of the tax changes the IRS began working on as a result of this bill include the following:

  • Easier withdrawals and loans from retirement plans such as IRAs and 401(k)s to help disaster-stricken taxpayers get their hands on the liquid cash they need;
  • Various employment-related tax credits to help hurricane-affected taxpayers during tax season;
  • Additional deductions for charitable contributions, especially those made toward organizations assisting with disaster relief efforts;
  • Additional deductions for personal casualty losses, providing some relief for those who lost significant assets during the storms;
  • Adjustments to income requirements for the Child Tax Credit and Earned Income Tax Credit.

Steps affected individuals and businesses can take

While the above describes the steps the federal government has taken to make tax season easier on individuals, there are specific strategies affected individuals and businesses can use to realize some savings this tax season as well.

For example, if you suffered property damage from the hurricane(s), you may qualify for a tax break that helps you offset losses not covered by insurance. Under federal law, losses resulting from disasters such as hurricanes and floods are deductible if not reimbursed by insurance. However, if your property is insured and you did not file a homeowner’s insurance claim, you cannot take this deduction.

Only individuals who itemize their taxes can take the write-off for damage to personal property, such as a home or vehicle—and there are some offsets that apply to these losses. When taking the deduction, you must reduce the value of the loss by $100, and then deduct the balance only to the level at which it exceeds 10 percent of your adjusted gross income. For example, if you suffered $20,000 in damage during Hurricane Maria and your adjusted gross income is $100,000, you would subtract the $100, then $10,000 (representing the 10 percent of AGI) from the remaining $19,900. The $9,900 that remains is the amount of money you can deduct on your tax return.

One thing is clear: these deductions and tax policies can be confusing to navigate. For more information and guidance on the various tax considerations in the wake of Hurricanes, meet with a knowledgeable tax planning attorney in the U.S. Virgin Islands.

J. Nash Davis is an associate in the Real Estate and Financial Services and the Corporate, Tax & Estate Planning Practice Groups of BoltNagi PC, a full service business law firm on St. Thomas, U.S. Virgin Islands.