Monday. October 22. 2018

Monday. October 22. 2018 VIRGIN ISLANDS The Virgin Islands Daily News 3 Excise tax violates U.S. Constitution, Gomez rules By BRIAN O'CONNOR Dairy News Staff A federal judge's ruling could imperil $45 million in government tax revenues, court records show. US. District Court Judge Curtis Gomez ruled on Sept. 28 that the excise Lax — levied against items and goods imported into the Virgin Islands — violated the Commerce Clause of the U.S. Constitution. The tax is worth 545 million in revenue for the territorial govern- ment, budget documents show. It wasn't clear whether the rul- ing would free businesses from ex• else tax obligations. or create new taxes for businesses not currently covered by the tax. The government. represented by V.I. Attorney General Claude Walker. has filed for an appeal with the 3rd U.S. Circuit Court of Appeals. The Commerce Clause gives the federal government sole power to regulatecommerceamong the states. The lawsuit that sparked the ruling Curbs Gomez involves Reerce Services lac., rep- resented by Alex Golubssky. Reefro spc• cialires in in• stalling refrig- eration units. air conditionen, is makers and water makers on local boats. according to Gomee's ruling. The V.I. Internal Revenue Bureau — which col- lects taxes for the government — changed Reck° for importing vari- ous items over a number of years. Territorial law allows an exemp- tion to the excise tax for boats, boat engines and boat pans. Reel& sued the government. arguing that the tax collected was improper. The government argued that the pans in question — in- eluding small refrigerators and ice makers — were not boat parts. In an amended complaint, Reef- ea also argued that the excise tax was unconstitutional. Gomez ini• daily dismissed that portion of the complaint. in pan because the gov- ernment is neither a person. nor a federal agency, which arc covered under other sections of federal law. However. the Commerce Clause — and constitutional law generally — allows for claims against gov- ernments. so Gomez reversed his dismissal. Excise taxes in the territory — <sealed in V.I. Code Title 33, Sec- tion 42 — date back at least as far as 1980, when Congress passed a law allowing for the collection of the tax whenever an item is brought into the territory Two years later. Congress instructed federal offi• cials to assist in the collection of the tax. In 1987, a case challenging the excise tax as an illegal barrier to commerce made it to the U$. Su- preme Court. Justices judged the ease moot, in pan because of a 1984 change to the law that required excise tax to be levied against goods made in the Virgin Islands, in addition to goods imported into the Virgin Islands. However, Internal Revenue Bu- reau employees testified during a deposition that the government has not charged local businesses the exetse tax, despite the change in law. Gomez wrote. The opinion quotes Glenford Hodge. the supervisor of excise tax for the Internal Revenue Bureau. as representative of the govern- ment position. "We have no basis to charge a tax on something that's not im- ported into the territory." Hodge is quoted as saying. Government regulations relating to the excise tax have not been up• dated since 1983. Gomez wrote in his opinion. The government "ignores the corrective amendment to Section 42 and continues to implement the pre.1984 statute that the Third Circuit held was invalid under the Commerce Clause." he wrote. The law thus represents illegal economic protectionism. Gomez wrote. The government "has not as- serted any 'legitimate local pur- pose' for this scheme, let alone evidence or argument dot 'this purpose could not be served as well by available nonditetimina- tory means.'" Gomez wrote, quot- ing earlier case law. "Accordingly. the Court holds that the Section 42 — as interpreted and enforced by the GVI — violates the Commerce Clause." Gomez ordered $5.287.74 in collected excise taxes returned to Reefco Internal Revenue Bureau Di- rector Marvin Pickering directed questions to Walker. Walker declined to comment, citing the ongoing legal case. The case is tentatively scheduled for hearing during a December 2019 visit by the 3rd Circuit judg- es. court documents show. — Contact Brian O'Connor as 140414.9130 or email boron- [email protected]. Yacht Haven Grande, EDA come to terms over benefits By BRIAN WCONNOR Ciatay News Stan ST THOMAS — The VI. Foe- norm Development Authority and the owners of Yacht Haven Grande have settled over the company's tax exempt slam officials said. The disagreement prompted EDA officials to hold a "show cause" hear- ing last week, in which the company was ordered to show cause why it's status should not be revoked suspend• ed cc rrinds&d Officials from Yacht Haven USVI. which is owned by Island Global Yachting, lad taken the position that in-kind contnbutions — donations of time and space for events for com- munity stoups —should coon( finan- cially ;ward community contribution obligations required to maintain the company's Economic Development Commission program status. EDA staff said they were bound by the letter of the law to consider only monetary contributions toward the total. Thomas Mukamal. CEO of Island Global Yachting. said the company routinely often space at Yacht Haven Grande foe community events Those events come at a cost to his company. Mukarnal "We donate the venue and then provide the cleaning services. Hai- My staff, if it's an indoor maw." he said. 'All of that stuff can be quite expensive." The dispute reached the Economic Development Commission in part Thomas Mukamal bfc30‘f EDA lud Ixot unckat about \View: Of ram in. kind contr-Sut ions mild be counted, NIL:41331 said "It would have been cheaper to pay the fine a year ago," he said. "We wanted to force them to take a position." The dispute over comnbutions is the second time this year finthrial tensions between WA aril Island Global Yacht- ing have spilled into public. IG1LAYII St. Thomas Holdings. aruther subsid- iary company. was paced under a ben for 549.036.90in unpaid gross receipts taxes on June 25. The company was re- leased from the lien — metwating the tows had been paid or administrathey waived — on Oct. 4. The AYH stands for Amman Yacht Haim, anodes EDC bor.& ciary. Mukamal said. The Red lkok• based retail location was awaiting miewal of its EDC benefits for two years, at which point the Internal Rev awe Bureau mistakenly charged the company gross receipts tax it was ex- =ivied front. Mukamal said. "They mina have bawd us up for that pence he said. The taxes were waned on renewal. Mukamal said Community contributions, mini- mum employment standards, and lo - :tie veers Of Men he V.I. Revive Festwal in December draws a large crowd to Yacht Haven Grange on St. Thomas. The Economic Development Authority and the Property's owners have settled a dispute over the company's tax-exempt taws and whether in.krid contnbutons of space ft( events for community groups shosid count toward nsoblgatons under the Economic Development Con-reason program cal hire rewirenwrns are all part of the EUM EDC program_ In exclanµe for meeting MOW Cnteria — rewired community contributions can vary from company to company and num- ber in the lens of thousands of dollars — EDC beneficiaries reccnv the fol- towbar:tax benefits: • 90 perms reduction in corporate income tax • 90 percent ;Simian in personal interne lax • I00 percent exemption on gross receipt tax • 100 percent exemption on business property sex • 100 percent exemption on excise tax payments • Reduction in the custorm duty from the standard 6 percent to I percent EDA Assistant Executive Direct& Waync Biggs Jr. said officals were togued 1'acht Haven's certificate — %%Inch lists 'he compuny -speak re- quirerrtnts for the program to count mccetary donations instead "Mk follow the a...Idioms" lie said. "The certificate. when it done, is a contract between the EDC and the Island Global las filed at applica- tion to tredify its certificate to count ith kind retributions in addition to mon- easy contributiorn. Rigid aid. EDA staff are m theI:cocoa of mincing the spoken:m.84;gs said. Similar settlements are a regular pan of the EDC pecgram. Biggs said. "1 think stele moving ahead." he said "Settlements are all pan of the proca Once additinnal monetary contribu- tions are made. Pt company will be fully renewed Bus said. The FDA welcomes in-kind contributions. but officials are bound a follow the, kites of the law, Boggs said. "Now that we've settled, we consider them to be in fullcompliance." he sari Homier. Mukamal said the corn- pony will hue to scrutinize community events to host at Yacht Ibsenasa result of the decision. "Now we know" he said. "When somebody asks us to do it. We'll likey have to be a little mote selective in how we do it. That's a potential and unfortunate" EDA board members Jose Pam. Haklane Davies. Juan Figuerea and Eugene Farrell vend unanimously for the scnkmag EFTA00811471