June 8, 2005 Businesses participating in the Economic Development Commission program have been saying for years that all they want is clarity in the program. They evidently did not get that when the Jobs Creation Act of 2004 passed last fall or when the regulations were rewritten this spring.
Many are no longer sure even if they are supposed to pay their taxes to the U.S. Internal Revenue Service or the V.I. Bureau of Internal Income.
Attorneys Edward Fickess and Randy Andreozzi, partners in the law firm of Marcus Andreozzi Fickess, will try to clear up the picture when they speak at the St. Croix Chamber of Commerce's luncheon Friday, June 10, at Gertude's Restaurant. Their goal will be to avoid the worst-case scenario where a taxpayer ends up paying taxes in both places.
A press release from the Chamber said, "Current audit positions taken by the United States Internal Revenue Service may result in V.I. taxpayers owing taxes from years past to the IRS instead of the V.I. Bureau of Internal Income. Under some circumstances, due to lapse of time, the BIR may no longer have an obligation to refund the individual's previous tax payments. Therefore, law firms are advising individuals to file a protective claim for refund with the BIR to avoid double taxation."
The release added that the IRS, in auditing individuals and EDC companies, is focusing on whether the taxpayer can actually be categorized as a bona fide resident of the USVI without having any "closer connection" or "tax home" elsewhere. Also being questioned is whether income is effectively sourced in the Virgin Islands or sourced with a U.S. trade or business.
After those questions are answered, then a determination is made if tax should have been paid to the IRS instead of the BIR.
The release continues, "Depending upon the findings of such audits, the IRS could collect taxes on income on which the BIR has already collected tax payment an effective double payment."
Jim Carney, a tax accountant with an office in Gallows Bay and who specializes in EDC companies, said a taxpayer should review his options carefully before rushing to file a protective claim.
He wrote in an e-mail, "The agreement of partnership last fall between the Virgin Islands and the IRS (which has been shrouded in secrecy) could hold the final key to this issue. It is inconceivable to me that the V.I. government would furnish V.I. Bureau audit staff employees to challenge taxpayers whether the money earned by the V.I. EDC companies was effectively connected to the V.I. This could bankrupt the territorys treasury as Attorney Fickess has pointed out."
If Carney's and Fickess' concerns are true then it is not just the public that is confused about what the changes in the EDC program mean.
The Chamber urges all interested parties to attend this luncheon event.
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