here - Fuerst Ittleman David & Joseph, PL

Case: 11-1612 Document: 003110561288 Page: 14 Date Filed: 06/13/2011
issued in respect to Mr. Gangi, and the proceedings below is required. Each will
be address in turn.
A. TAX TREATMENT OF USVI RESIDENTS
The USVI is a territory of the United States which was acquired from
Denmark in 1917. 7 In 1921, Congress created the so-called ―mirror system‖ of
taxation, under which United States income tax laws constitute the income tax laws
of the USVI, with the only difference being that USVI residents pay tax to the
USVI rather than to the United States. See Naval Service Appropriation Act of
July 12, 1921, 48 U.S.C. § 1397; see also Chase Manhattan Bank, N.A. v. Gov’t of
the Virgin Islands, 300 F.3d 320, 322-23 (3d Cir. 2002), overruling 173 F.Supp.2d
386 (D.V.I. 2001).
The purpose of the ―mirror system‖ was ―to impose upon the inhabitants of
the Virgin Islands . . . a territorial income tax, payable directly into the Virgin
Islands treasury, to assist the Islands in becoming self-supporting.‖ HMW Indus.,
Inc. v. Wheatley, 504 F.2d 146, 150 (3d Cir. 1974), aff’g 368 F.Supp. 915 (D.V.I.
1973). Pursuant to the mirror system the words ―Virgin Islands‖ are substituted for
the words ―United States‖ wherever they appear in the Internal Revenue Code. 48
7 Convention between the United States and Denmark, 39 Stat. 1706, proclaimed
January 25, 1917.
FUERST ITTLEMAN, PL
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