March 15, 2006 – Help for beleaguered V.I. taxpayers inched a bit forward Wednesday when a bill passed the Senate Energy and Natural Resources Committee.
The bill repeals a 1936 property tax law that prevented the territorial government from creating its own tax laws.
The bill now goes to the full Senate. The U.S. House of Representatives Resources Committee is expected to soon consider the bill.
"This measure is important to us because it affirms the territory's right to set its own tax policy," Delegate Donna M. Christensen said in a news release issued Wednesday.
Lt. Gov. Vargrave Richards called the 1936 law an anachronism that interfered with the territory's ability to set its own policies on homeownership and to administer its own property tax laws like any other jurisdiction in the United States.
Christensen said the U.S. Virgin Islands is the only jurisdiction where property taxes are currently based on federal law.
The 1936 law required that both commercial and residential property be taxed at the same rate. This provision was the basis for a U.S. District Court decision in 2000 regarding a suit brought by commercial property owners.
U.S. District Judge Thomas K. Moore ruled that the local government was incorrectly assessing commercial properties. He ordered the government to begin assessing real estate based on market value rather than replacement cost, and to tax all properties at the same rate regardless of whether they were used for residential or commercial purposes.
While Moore's ruling put the territory in line with the 1936 law, it threatened to raise taxes for residential property owners.
Christensen aide Brian Modeste said that Moore's ruling prevents the territory from providing exemptions on property tax bills.
"It could have had the unintended consequence of being applied retroactively to 1957," Christensen said.
Richards said that without the repeal, the territory can't cap increases in property taxes or set lower rates for multifamily housing.
Both Richards and Christensen said that without the repeal of the 1936 statute, property taxes, particularly on St. John, would soar.
Richards explained that the 1936 statute came about as a way to discourage land speculation by large landowners. He said it had long been thought that the 1954 Revised Organic Act, which replaced the 1936 Organic Act, had repealed the 1936 statute, but that turned out not to be the case.
Modeste said that business owners who initiated the case that resulted in Moore's ruling claim that there were other ways to solve the problem.
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