Nov. 15, 2004 — New and old beneficiaries of the Economic Development Commission were given a rundown of changes made to the EDC program during a conference at the Marriott Frenchman's Reef Monday.
About 100 individuals representing 50 companies attended the conference to learn how and if their tax-exempt status would be affected by the changes being offered.
Frank Schulterbrandt, executive director of the Economic Development Authority, the umbrella agency of the EDC, told the group that the EDC has redrafted the rules and regulations for the program. However, none of the changes reflect on the JOBS bill recently signed into law by President George W. Bush, which further defines the bonafide residency term as physically being present in a jurisdiction for 180 days in a year. (See "Bush Signs Jobs Bill").
Schulterbrandt said the new law only affected one segment of the EDC program — the Financial Services Industry — and the individuals in this group are currently working on ways to comply with the legislation and have it changed to allow for business travel to be included in those 180 days.
"The majority of the companies are willing to remain," Schulterbrandt said in response to a question posed by the Source. He added that a "small" group has decided not to act until a resolution has been brought to the matter, but that number is "nothing significant."
Schulterbrandt said the new rules and regulations are currently before the governor for his approval and are based on legislation approved by the V.I. Legislature. Beneficiaries would basically have two major changes to observe if the measures are enacted.
One of the new rules stipulates that any company adding partners after the receipt of its certificate must file reports for all additional partners.
Schulterbrandt said this is to assist the Internal Revenue Bureau in knowing how many individuals are receiving exemptions on their taxes.
Also, the minimum requirement for the competitive bidding process was increased from $10,000 to $25,000.
"We did not want the proposed rules and regulations to be burdensome to the beneficiaries," Schulterbrandt told the group at the conference.
Schulterbrandt said set fines and penalties for violations of certificate requirements, which were previously nonexistent, will also be a part of the new set of rules. He said Gov. Charles Turnbull had approved of them about a year and a half ago.
Companies will be fined for failure to file quarterly employment, procurement and investment reports. Subsequently, companies who continually fail to do so may be disallowed the right to renew their EDC certificates.
"The fines and penalties are not to punish you," Schulterbrandt said. "They are there to ensure we get timely reporting of files."
Schulterbrandt said in the past his compliance officers have found that some companies never complied with their certificate requirements. He briefly mentioned Innovative Telephone, formerly Vitelco, which recently settled with the EDC for its noncompliance.
The agency wants to keep its commitment to the community in ensuring that beneficiaries are meeting their requirements, Schulterbrandt said.
Schulterbrandt commended the group for doing its part.
"You should be given recognition for contributing significantly to the socioeconomic growth of these Virgin Islands," Schulterbrandt said.
The EDC also introduced several incentives to lure investors to St. Croix:
– Those locating in the historic district of Frederiksted will be given 30 years of benefits instead of the current 10 years;
– Those locating in Christiansted will be given up to 25 years of benefits;
– Those whose businesses are part of the watch and jewelry making industry will receive 30 years of benefits.
"We are trying to encourage companies to come to St. Croix," Schulterbrandt said in response to a question of whether similar benefits are in the St. Thomas-St. John district. "Choose St. Croix for your businesses and you can get lucrative benefits."
Schulterbrandt said these benefits are being offered because the territory is losing companies to other countries, particularly Asia.
The owner of one company, Transducer, which employs about 100 individuals, recently said the company would pull out in January because the cost of doing business was too high in the territory.
"Most of you wouldn't be here if it wasn't for this program," Schulterbrandt said
Nadine Marchena, assistant chief executive officer of the EDC, told the group one major change would be made to the application as well.
The EDC will now require new applicants to sign a disclosure form as part of their application for benefits and will conduct background checks for civil actions, criminal actions and previous bankruptcies.
"This has been set in place to protect the program," Marchena said. "We need to know who we're talking to, and what we're dealing with."
Marchena said employers and banks often run background and credit checks on individuals and this effort is no different. Marchena added, "Just because something was done previously in your past, does not mean that you will be denied."
The EDC program, which has been in existence for 32 years — previously under the title Industrial Development Commission — provides investors with tax exemptions in exchange for investing in the territory.
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