Nov. 17, 2001 – A bill that would give offshore companies doing business in the Virgin Islands a new reason to stay passed the Senate Finance Committee Thursday.
Sen. Alicia "Chucky" Hansen, committee chair, sponsored the legislation, which would drastically reduce the annual franchise fees the foreign sales corporations, or FSC's, pay the V.I. government. It would establish a blanket franchise tax of $300 and require a $100 annual license fee. Currently, franchise taxes range from $400 to $25,000 a year.
The vast majority of the territory's approximately 3,500 FSC's are expected to close up by Dec. 31, 2001, when the United States replaces the FSC tax incentive program for U.S. exporters with one it hopes will be more acceptable to its trade partners.
Since the 1980s, the Virgin Islands has been realizing an estimated $7 million to $10 million a year from the industry, most of it in franchise taxes. In order to honor agreements the U.S. government has with other nations, the federal legislation allows for relatively few FSC's to operate beyond the Dec. 31 deadline.
Lt. Gov. Gerard Luz James II formed a task force earlier this year to seek a solution to the federal mandate and keep the FSC's in the territory, but the body has yet to produce any proposals, according to a report in the Virgin Islands Daily News. The report said James asked Hansen in a Nov. 15 letter to hold off on her bill because "decisions abetting far-reaching legislation should be reasoned and deliberate."
Hansen's bill passed unanimously. It now will go to the Rules Committee before proceeding to the full Senate for a final vote.