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Tier II government employees saw a small increase in their contributions to the Government Employees Retirement System (GERS) starting February 5. The 1% increase follows a similar measure for Tier I employees that took effect January 1. These increases are part of a plan to boost funding for the GERS, which was poised to collapse within a decade without major changes.

Under the new plan, Tier I and Tier II employees’ contributions will increase 1% per year for the next three years, ultimately arriving at 11% for Tier I employees and 11.5% for Tier II employees. Meanwhile, the government’s contribution will be increased just once, from 17.5% to 20.5% — a rate that will be in effect for five years.

According to an August study, GERS has an unfunded liability of $1.84 billion, due to a growing number of pensioners and a decreasing number of current employees paying into the system. This situation would ultimately lead to insolvency by 2025 without legislative action. Contributing to the dire situation has been the sluggish economy, as well as the “Economic Stability Act of 2011”, which encouraged government employees to take early retirement and reduce the Government of the Virgin Islands’ payroll. This had the added effect of increasing the monthly benefits paid out from just under $8.4 million in 2011 to nearly $9.3 million in 2013.

Due to some challenges within the central government, the Virgin Islands Personnel Division was unable to adjust the contribution rate for some employees after the first of the year, but assured workers that the adjustment would be made by February 5. Eventually, GERS will need to collect funds from employees whose contributions were not adjusted on time, but the plan for doing so remains to be implemented.

Additionally, increased contributions were also approved for Tier II hazardous duty employees, as well as senators and judges. Hazardous duty employees will eventually contribute 13.625% to GERS, while senators and judges will increase their contributions to 14%.

With these new increases in employee contributions, GERS is believed to be safely solvent through 2032, although with the ratio of active employees to retirees currently at 1 to 1.2, there is still much concern that the system will continue to experience difficulties striking a sufficiently stable balance between the money coming in and the money going out.

The recent action of the Legislature of the Virgin Islands certainly helps, but whether it will be enough — and whether the benefits of the legislation will last as long as expected — remains to be seen.

BoltNagi is a widely respected and well-established government relations firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

2015_mapp
Kenneth A. Mapp

In his first State of the Territory Address, Governor Kenneth A. Mapp didn’t shy away from speaking to the Legislature and citizens of the U.S. Virgin Islands with candor, especially when it came to the fiscal situation of the Territory. At the start of 2015, the Government of the Virgin Islands has a budget shortfall of $91.2 million, as well as $176 million owed for hospital improvements, the Government Employee Retirement System (GERS) and other important programs. The current financial situation, according to Governor Mapp, is the worst the Territory has ever experienced and drastic changes must be made to improve its financial footing.

Given the state of the Government of the Virgin Islands’ budget, it’s not surprising that Governor Mapp issued some considerable challenges to how the Territory manages its economy. As the Territory’s relationship with Hess Oil draws to a somewhat contentious close, Governor Mapp reiterated the importance of a more diversified economy to the U.S. Virgin Island’s future prosperity.

Taking into account the Territory’s 13% unemployment rate, Governor Mapp announced his intention to implement a jobs plan to try to bring some life back into the territorial economy. Some of these jobs will come from government itself, in the areas of revenue collection, law enforcement, education and health care. Others will come from a continued focus on building the tourism industry, primarily through hotel development and a push to get more visitors to stay in the U.S. Virgin Islands overnight.

Another key aspect of boosting tourism is creating an even more appealing visitor experience, which Governor Mapp says should include additional attention to sports, events and heritage tourism. The Governor also pointed to the opportunities presented by the opening of Cuba as a travel destination for U.S. citizens, which should help Caribbean tourism overall.

In addition to tourism, the Governor covered some proposals in numerous other industries. He would like to see a renewed focus on growing organic produce for use in schools, hospitals and elder care facilities, and a move away from sugar and processed foods. In law enforcement, the Territory is suffering a severe shortage of personnel and an almost total lack of technology for law enforcement officers to do their jobs. In education and elder care, the Governor intends to focus on building and staffing more schools and healthcare facilities.

Finally, Governor Mapp highlighted the pressing need for improvements in and changes to the health care system, as chronic conditions are on the rise and it has become nearly impossible for many people to pay for health care in the Territory.

For business owners, Governor Mapp’s address also offered an unsettling picture of a Territory in which partnerships between the public and private sectors simply cannot happen until the Government’s financial situation is more stable. In the end, the ability to turn to the government for financing has played a major role in getting the U.S. Virgin Islands to its current state. Governor Mapp said he believes his job is to help get the Territory out of that situation.

BoltNagi is a well-established and widely respected government relations law firm serving clients throughout the U.S. Virgin Islands.

2015_fundraising_wikipediaU.S. tax law rewards a variety of groups with tax-exempt status based on two key factors — the designated purpose of the group and the ways in which it makes and spends its money. A social welfare group, as classified under Internal Revenue Code section 501(c)(4), is a group organized solely for the promotion of social welfare and operating as a nonprofit organization.

There are several ways in which a social welfare group must operate to retain classification as a 501(c)(4). For starters, the main purpose of the organization must be to improve the overall community in which it operates. In other words, the people the organization represents must not be a very small subgroup of the community, and the group must not exist to serve as a social club or offer its facilities as an exclusive meeting place for select groups. Finally, a 501(c)(4) cannot function as a business in the way a for-profit company would.

One seemingly small but quite important factor pertaining to 501(c)(4) organizations is that donations made to these groups are not tax deductible. Because of this, social welfare groups can engage in political activity to a much greater extent than 501(c)(3) groups, to which donations are tax deductible.

Political and advocacy work

As the sole purpose of a social welfare group is to work toward specific goals related to the wellbeing of the general public, these groups do have some permissions — as well as restrictions — when it comes to engaging in political activity. Promoting a legislative agenda is completely within the rights of a 501(c)(4) group, as enacting legislation would have an effect on the entire community. In other words, engaging in lobbying activity is permissible for social welfare groups, and it won’t have a negative effect on their tax-exempt status.

A social welfare group can also take part in political campaigns. However, there are some restrictions that are important to note. For starters, the group cannot give money directly to individual political candidates. Second, there must be a direct connection between the group’s purpose and the specific campaign in which it’s taking part. For instance, campaigning on behalf of a candidate whose stated policy towards the group’s particular cause happens to align with the group’s own platform would be a sufficient connection justifying its participation in the campaign.

Finally, political campaigning cannot account for more than half of a social welfare group’s activity if the group intends to retain its 501(c)(4) classification.

The specifics of the tax code can be confusing and the penalties for failing to abide by the appropriate laws and regulations can be very damaging to any organization with tax-exempt status. Seek the input of an experienced attorney if you have any questions or concerns pertaining to a social welfare group’s tax responsibilities.

BoltNagi is a widely respected and established business and corporate law firm proudly serving clients throughout the U.S. Virgin Islands.

2015_injury_pixabay_steinchenAs most business owners know, workers’ compensation is a program that insures both employers and employees in the event a worker suffers an injury or is killed on the job. By compensating injured workers or their families through the Government Insurance Fund of the U.S. Virgin Islands, rather than mandating that compensation be paid directly by employers, the program offers broad protections.

The basic principle of workers’ compensation insurance is that employers will be held financially liable for injuries, diseases and death incurred by workers while performing standard job-related tasks. If a workplace accident occurs, the employer must initiate a claim within eight days of being notified of the incident. Most employers are required by Virgin Islands law to purchase workers’ compensation insurance.

Protecting both employers and employees

Workers’ compensation, as its name suggests, offers substantial protection to injured employees from the considerable financial repercussions that could arise from a serious workplace injury. The law also protects the jobs of injured workers, prohibiting employers from refusing to rehire them, except in cases in which the injury results in a permanent inability to do the job or when employees leaves their job of their own volition. And, even if an employer is uninsured, an employee may still make a workers’ compensation claim.

It’s important to understand that failing to carry workers’ compensation insurance won’t remove the burden of payment from an employer. In fact, uninsured employers must reimburse the Government Insurance Fund for all expenses paid to injured employees, plus a 30 percent fee. Thus, workers’ compensation insurance protects employers just as much as it does their employees. By purchasing workers’ compensation insurance, an employer does not have to shoulder the burden of compensating an injured worker for medical costs, lost wages, pain and suffering and other damages.

An employer’s best course of action is, first and foremost, to comply with the letter of the law by carrying a workers’ compensation insurance coverage in the Territory. Given the financial penalties for failing to have such a policy in the event of a claim being filed, and the damage that can be done to a company’s reputation and finances as a result, it’s best not to take that risk.

Even if your business is covered, you should still be proactive about reporting any accidents to the Virgin Islands Department of Labor in a timely fashion, as it reduces costs and promotes a safer workplace for all.

BoltNagi is a well-established and widely respected employment law firm serving businesses and organizations throughout the U.S. Virgin Islands.

2015_labor_wikipediaFor business owners in the U.S. Virgin Islands, the laws governing employees’ hours and pay are based for the most part upon the standards set forth in the federal Fair Labor Standards Act (FLSA). A landmark piece of legislation, the FLSA includes firm requirements that impact both public and private sector employees.

The original statute was enacted in 1938, but it has been amended on several occasions in the subsequent years. Minimum wage, the number of hours worked, child labor matters, overtime pay and recordkeeping are all covered under the law. The following is a rundown of these requirements:

Minimum wage: The current federal minimum wage of $7.25 an hour applies to most businesses in the U.S. Virgin Islands. However, employers are permitted to pay employees at lower rates in some circumstances. For example, very small businesses that have gross annual receipts amounting to less than $150,000 are allowed to pay a minimum wage of $4.15 per hour. New employees under the age of 20 have a minimum wage of $4.25 per hour for their first 90 days of employment. And full-time students working up to 20 hours per week in certain jobs may be paid $6.16 per hour.

For employees who earn tips, the minimum wage is $2.13 per hour — although employers must ensure that their total pay, with tips, amounts to at least $7.25 an hour.

Overtime pay: When working more than 40 hours in a week, employees are entitled to at least 1.5 times the minimum wage. U.S. Virgin Islands law also requires employers to provide time-and-a-half pay for any time worked above 8 hours in a single day. However, many employees would like a change to this law so that they can enjoy greater scheduling flexibility.

Employees 16 years of age or older may work an unlimited number of hours per week, provided overtime pay is properly provided. Overtime pay is not required for holiday or weekend work unless overtime hours are actually worked.

Hours worked: The FLSA standard for hours worked states that the time in which an employee is either on the employer’s premises, on duty or working off-premises at an arranged workplace are considered hours worked for the purposes of wage calculation and scheduling.

Recordkeeping: The FLSA mandates that employers keep accurate and thorough accounts of employees’ hours worked, as well as accurate records of pay. Businesses and organizations must also post FLSA information in a location accessible to all employees.

Child labor: Minors are prohibited from working in certain jobs and conditions that could be hazardous to their physical health or wellbeing.

Remaining in compliance with the Fair Labor Standards Act is critical for all business owners, but the specifics of the law can be complex, especially for certain types of businesses and organizations. If you have questions about how the law applies to your business or believe your organization might be exempt from certain provisions of the FLSA, speak with a skilled employment law attorney.

BoltNagi is a well-established and widely respected employment and business law firm serving clients throughout the U.S. Virgin Islands.

2015_ice_cream_gratisographyFor many years, one of the perils of being a doctor or lawyer was having to shoulder total responsibility in the event of any sort of professional mistake, and knowing that there was broad public support behind such consequences. It used to be that such professionals were barred from forming corporations, which would provide a limited amount of security should a physician or attorney be accused of malpractice, misconduct or other error related to their area of practice.

Now there are a growing number of professional corporations, which are able to provide backing, support and other professional services to shareholders. The shareholders in a professional corporation — also known as a professional service corporation or professional association — must be licensed within their state or territory, and they must be actively working in their particular field. In addition to the legal and medical professions, accounting and engineering professionals are among those who are likely to form professional corporations.

The advantages of a professional corporation include limited liability for shareholders and some benefits related to taxation. Should a shareholder become the target of a lawsuit, no other shareholder may be sued in the process. Similarly, should the corporation itself be targeted, no individual shareholder can be sued for the corporation’s mistakes, including business debts.

In both of these situations, the protection offered through the professional corporation differs from that provided by many other types of corporations and partnerships. With respect to taxation, a professional corporation may purchase group term life insurance, for which premiums are tax-deductible. In addition, they are allowed to purchase health and accident insurance for their shareholders and deduct those premiums as well, while shareholders can enjoy those benefits tax-free.

When forming a professional corporation, shareholders must file articles of incorporation and state that the corporation’s purpose is solely related to the practice of the relevant profession. The state regulatory or licensing board that oversees the professionals in the state must also approve of the formation and verify that all shareholders are appropriately licensed.

The laws surrounding the establishment of professional corporations can be complicated, and a variety of factors may make your situation different from the norm. An experienced business and corporate law attorney will provide the counsel you need if you have questions about how membership in a professional corporation may affect you and your professional activities. 

BoltNagi is a respected and established corporate and business law firm serving clients throughout the U.S. Virgin Islands.

2015_taxes_flickr_tax_credits_taxcredits.netFor businesses aiming to expand their reach or those interested in enjoying the benefits of operating in an environment that welcomes them, the U.S. Virgin Islands provides such a location. From an official economic development organization that works on their behalf to the numerous tax incentives they can enjoy, business owners have many reasons to consider the U.S. Virgin Islands as an appealing and attractive place to operate and grow.

The U.S. Virgin Islands Economic Development Authority, a government-affiliated agency charged with promoting economic growth in the territory, has several different components through which it strives to make “America’s Paradise” a site for efficient, cost-effective and dynamic business operations. Of primary interest to business owners looking to launch a company in the Territory is the Economic Development Commission, which oversees a robust tax incentive program in an effort to attract more businesses to the territory.

The EDC program offers numerous advantages to businesses. Most tangible are the benefits provided by the tax incentive program, which offers considerable deductions and exemptions. For example, businesses may receive a reduction of up to 90 percent in federal and territorial corporate and personal income taxes, and up to a 100 percent exemption on various taxes and payments—including excise tax payments, business property tax and gross receipt tax. These and other tax incentives help make the U.S. Virgin Islands an attractive place for new businesses, as well as those looking to relocate or expand here.

Although the advantages offered through tax breaks and exemptions are often easy to quantify, there are also many other, less obvious benefits of operating a business in the Territory. Although the U.S. Virgin Islands may seem like an exotic location to tourists, it’s important that business owners remember how easily it can be accessed from the U.S., Europe, South America and the rest of the Caribbean.

The Territory also boasts a skilled and educated population, strong infrastructure, duty-free exports to the U.S. and all of the benefits associated with sharing a currency and a court system with the United States. To business owners currently based on the U.S. mainland, the Territory will seem familiar in many ways. All of these advantages make it clear just how friendly the Territory is for businesses and explain just why economic activity throughout the U>S. Virgin Islands is on the rise.

The EDC program has had an impact on the Territory through its success in attracting manufacturing, service industry, pharmaceutical, outsourcing and other businesses. By taking advantage of the tax incentives available to them, these businesses have been able to play a key role in the continued growth and development of the U.S. Virgin Islands.

BoltNagi is a well-established and widely respected business and corporate law firm serving clients throughout the U.S. Virgin Islands.

2015_eb-5It’s a fairly well known fact that obtaining U.S. residency can be a process rife with difficulty, including considerable expenses and time delays. For foreign investors interested in becoming permanent American residents, one useful route involves making investments in businesses or specific employment areas, and applying for an EB-5 visa.

The EB-5 visa program provides an attractive path to obtaining permanent U.S. residency, as it depends on making a minimum initial investment, maintaining that investment for at least two years and creating at least 10 full-time, permanent jobs. Once these conditions have been successfully satisfied, a permanent green card may be issued. The minimum investments required are $500,000 in targeted employment areas such as the U.S. Virgin Islands as opposed to customary $1 million in other areas. The projects must be approved by one of the U.S. Citizenship and Immigration Services’ EB-5 Regional Center Projects which the Virgin Islands Economic Development Authority is attempting to establish.

During the two-year period in which the investment is maintained and other conditions are being satisfied, the investor has provisional U.S. residency, with all of the benefits and advantages it provides. This is an attractive alternative to many other paths to residency, as the two-year waiting period is much shorter than most other options.

The benefits that come along with the EB-5 visa include the freedom to travel outside of the country—a useful benefit to many foreign investors—and the ability to lead full lives anywhere in the U.S. There is also the fact that the EB-5 program does not place many of the restrictions on applicants that other programs do. For investors interested in eventually becoming U.S. citizens, the two years of provisional residency also count toward the five years required for full citizenship.

The EB-5 process begins when a Regional Center Project provides necessary documents to an interested investor, who then deposits the required funds into an escrow account prior to filing an I-526 petition with USCIS. Once that petition is approved, the investor files for the appropriate visa. Once that application has also been approved, the investor is granted provisional residency for the two-year period. Prior to the end of this period, the investor must file an I-829 petition for the removal of conditions and the granting of permanent residency.

The U.S. Virgin Islands Economic Development Authority has joined with American Regional Center Group to provide services that benefit the organization themselves, as well as potential investors and the overall economic environment in the territory. The promotion of EB-5 investment opportunities is just one aspect of this work. To learn more about the specifics of the EB-5 program and potential opportunities in the U.S. Virgin Islands or the U.S. mainland, contact an experienced business law attorney.

BoltNagi is a widely respected and established corporate and business law firm serving clients throughout the U.S. Virgin Islands.

2015_open_flickr_tara_huntThe U.S. Virgin Islands is a great place to be an entrepreneur. The Territory offers a wide range of tax incentives, and various organizations and agencies have programs available that are geared toward helping new businesses establish themselves and obtain the tools needed for growth and long-term success.

However, many things need to happen before would-be business owners can actually start operating in the U.S. Virgin Islands. After coming up with a workable business plan — a challenging endeavor in its own right — a business owner must fulfill some requirements designed to legitimize and sanction their organization. Incorporating, registering a trade name and obtaining a business license are the three key steps all prospective business owners should consider when setting up shop in the Territory.

The first step to starting a business in the U.S. Virgin Islands is filing articles of incorporation or organization with the Lieutenant Governor’s Office. The articles include some basic information about the company, such as its name and purpose, corporate structure, principals, directors and incorporators and certain data about current finances.

Filing a trade name typically occurs in conjunction with the filing of articles. A trade name is any variant on the full legal name of the business that could be reasonably expected to be used when operating in the territory.

Once the articles and trade name registration have been accepted, a business owner must apply for a business license. To receive a license, the Department of Licensing and Consumer Affairs must first conduct a review process with the police and fire departments, the health department (for food-related businesses) and government departments in charge of tax clearance and zoning. Other requirements may also need to be fulfilled, depending on the nature of the company. For example, board certification is necessary for a number of specialized occupations.

Upon the acceptance and approval of all the required paperwork, a business license will be issued. It’s very important to note that conducting business of any sort prior to the issuing of the license is strictly forbidden.

The steps detailed above are just some of the key items the owner of a new business in the U.S. Virgin Islands must address to ensure the company is starting off on the right foot with the territorial government and the local business community. If you’re considering the launch of a new company in the U.S. Virgin Islands, it’s best to seek the input of a skilled business law attorney to make sure you have a complete understanding of all rules, regulations and processes involved.

BoltNagi is a well-established and widely respected business law firm serving clients throughout the U.S. Virgin Islands.

2015_volunteerWhen considering the issue of taxation, one of the most common points in need of clarification is the distinction between having nonprofit status and having tax-exempt status. It’s possible for an organization to have both, but a nonprofit organization does not automatically have tax-exempt status, and vice versa.

Before an organization may apply for tax-exempt status, it must first be recognized as a nonprofit. However, being a nonprofit does not mean an organization cannot make money. The point is that a nonprofit doesn’t exist merely to make money for its members — any profit made must go right back into the organization. The territorial government grants nonprofit status rather than the federal government.

On the other hand, the federal government confers tax-exempt status on corporations, unincorporated organizations and trusts that apply for the designation. The most common classification for tax exemption occurs under Section 501(c)(3) of the Internal Revenue Code, which allows organizations dedicated to charitable, religious, educational and various other types of pursuits to be declared exempt from federal corporate and income taxes.

Nonprofit and tax-exempt statuses offer certain advantages. For example, an organization that is officially recognized as a nonprofit may have additional opportunities such as contracting with the territorial government, utilizing reduced postal rates or applying for tax exemption. Meanwhile, nonprofits interested in reducing their tax obligations, as well as the obligations of potential donors, have good reasons to apply for tax-exempt status. It also provides additional independence and the ability to directly apply for grants, as many grant applications require proof of 501(c)(3) status.

At the same time, these statuses may also have some disadvantages for organizations. Particularly for organizations just starting out, the time, energy and money required to pursue nonprofit and tax-exempt statuses may be a deterrent, and it might be better to focus on establishing the organization’s operations and track record first.

For groups that have been around a while, have experienced some success and intend to continue operating and growing for the foreseeable future, it might be a good idea to pursue nonprofit and tax-exempt status. This is particularly true if the organization intends to apply for grants or expects to do a lot of business selling goods and services in the future.

To be officially classified as a nonprofit or tax-exempt business, your organization must first file the appropriate applications. This process takes into consideration many of the factors outlined above, and to be certain you’re making the best decision and following the proper procedures, it’s best to seek the counsel of an experienced and qualified business attorney.

BoltNagi is a well-respected and established business and corporate law firm serving clients throughout the U.S. Virgin Islands.