June 10, 2005 — With 75 to 100 business people sitting around eating lunch on Friday, Gertrude's Restaurant did not look like a war room.
However, Edward Fickess, from the law firm of Marcus Andreozzi Fickess, told St. Croix Chamber of Commerce members that the U.S. Government's changes to the regulations governing the Economic Development Commission program amounted to a declaration of war against the economic health of the territory. He added that Virgin Islanders need a battle plan.
He then gave steps and strategies, using the war analogy, for the Virgin Islands to follow to preserve the EDC program.
Fickess, who worked for the Internal Revenue Service for 15 years, said there were people in the Departments of Interior and Treasury who saw the Virgin Islands as nothing more than a tax haven and that those people have guided the policy in Washington, D.C.
He urged the business community to come up with a strategy that encompassed the whole economic picture of the Virgin Islands and not just go to Washington, D.C. and complain, "You are hurting our EDC program."
He mentioned what he saw as very critical dates coming up for the EDC community. The hearing in Washington D.C. on the proposed regulations is July 21, but there are deadlines June 22 and June 30 for written comments and proposals of presentations to be made at that hearing.
He said the business community had to speak as a unified voice and various other segments of the community needed to take part in those presentations.
His position was that, if the EDC program fails, the effect on the V.I. economy would be dramatic. He said, "EDC companies employ 8 percent of the people employed. If those people are suddenly unemployed, your unemployment rate will skyrocket."
Fickess also said he has heard that charitable donations in the islands have already dropped.
"You should have religious leaders there to talk about their needs and the islands' problems," Fickess added.
Government leaders should play a key role in the whole process, according to Fickess. He praised Gov. Charles Turnbull for writing a "powerful letter" to Treasury Secretary John Snow.
As far as abuses of the EDC program, Fickess said, in his opinion, the U.S. government used a nuclear weapon to kill a mosquito.
He added he did not think there was "due diligence" done in researching the effects of the new regulations on the economy of the Virgin Islands.
He took the federal government to task for letting the program get to the point where abuses could occur. He said the Treasury Department was supposed to write regulations long ago, adding "but that never happened."
He said this war had to be fought on many fronts. One front he suggested was to have an effort to have a grandfather clause inserted in the regulations. He said the least this would do is "if ever we have to choose a case and take it to court, we would have shown that we exhausted all administrative remedies."
According to Fickess, Virgin Islanders will have to prove to U.S. officials just how important the EDC program is to maintaining the infrastructure of the island and the autonomy of the government. Most important, he said, is for business people to show what a "chilling effect" the demise of the program would have on future investment in the Virgin Islands.
Another front the battle could take is in the V.I. Senate. Fickess said the Senate could consider its own definition of residency, so U.S. officials would see Virgin Islanders were serious about making sure the program worked without abuse being rampant.
He said that the Virgin Islander's best chance for success was making the changes needed in the regulations. He said waiting for fall and saving the program through new U.S. legislation was "full of peril."
He added there were other fronts where businesses could fight. They could make challenges during individual audits and also might be able to make challenges to the Memorandum of Understandings that were signed by the IRS and the V.I. Bureau of Internal Revenue. He asked, "Did the V.I. Bureau of Internal Revenue have the authority to enter into those agreements?"
He told the Source, after the meeting, that there was the possibility the V.I. Bureau of Internal Revenue was working in ways that was harmful to the collection of taxes for the local government. He said there was no way of being sure now because the MOU were not made public.
Another strategy his firm is recommending is that companies being audited file a protective claim for refund with the BIR.
He raised the specter of a business being found to owe taxes to the IRS that it had paid to the BIR and the BIR no longer under obligation to refund the previous tax payments.
He said that time limits on tax refunds run out two years after they are paid or three years after a tax return is filed.
He said companies were now being audited for the year 2003 and the time for refunds would expire in 2006 and the audits might not be complete by then.
He told the Source that a company that filed for a protective refund and not presently under audit might be raising a red flag.
He said right now the IRS "might just be on a fishing trip" to see if there is a pattern of abuse in the EDC program.
Ben Rivera, executive director of the Chamber of Commerce, said he came in contact with the law firm of Marcus Andreozzi Fickess, when he worked the Economic Alliance, an organization representing EDC companies.
Rivera said the firm had clients on the Virgin Islands (Fickess did not name them) and was thinking of opening an office here.
The firm offered to make the appearance at the Chamber meeting, which was much better attended than most chamber meetings, free of charge.
Randy Andreozzi, a partner in the firm, helped answer questions. A couple of the questions concerned the mindset of officials in Washington D.C. and what they really wanted.
Andreozzi, who also spent many years working in the IRS, said, "The buzzword up there is not compliance. It is enforcement."
Both attorneys said that the tendency in Washington D.C. was to operate a little more heavy handedly since the September 11 tragedy.
Fickess said there were other factors beside 9/11 that created the new attitude in the U.S. government. He mentioned Enron.
Rivera said the Chamber was going to do whatever it could to preserve the EDC program. He said St.Thomas and St. John chamber members were helping in this effort.
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