here - Fuerst Ittleman David & Joseph, PL
here - Fuerst Ittleman David & Joseph, PL 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 1001 BRICKELL BAY DRIVE, 32 ND FLOOR, MIAMI, FL 33131 • T: 305.350.5690 • F: 305.371.8989 • WWW.FUERSTLAW.COM 6 | P a g e
Case: 11-1612 Document: 003110561288 Page: 15 Date Filed: 06/13/2011 U.S.C. § 1397. Income taxes imposed under this system are payable to the BIR rather than to the IRS. Under the mirror system ―any changes to, interpretations of, regulations and revenue rulings on and court interpretations of the substantive tax provisions of the Internal Revenue Code are applicable to Virgin Islands tax cases as long as the particular provision at issue is not manifestly inapplicable or incompatible with a separate territorial income tax . . . .‖ Chicago Bridge & Iron Co. v. Wheatley, 430 F.2d 973, 976 (3d Cir. 1970), rev’g 295 F.Supp. 240 (D.V.I. 1969), cert. denied 91 S.Ct. 873 (1971). Five decades ago the U.S. Congress and the USVI government created the EDP to attract business people to establish new businesses in the USVI. See generally 29 V.I.C. § 701 et seq. The Economic Development Commission (―EDC‖) was created by the USVI government to oversee the EDP. See generally 29 V.I.C. § 704 et seq. The EDP offers the opportunity for those approved beneficiaries to receive an income tax credit, pursuant to IRC § 934. Despite the creation of the EDP, and the best efforts of the U.S. Congress and the USVI government, economic growth in the USVI has been, and continues to be, arrested as evidenced by both the number and percentage of the population living below the FUERST ITTLEMAN, PL 1001 BRICKELL BAY DRIVE, 32 ND FLOOR, MIAMI, FL 33131 • T: 305.350.5690 • F: 305.371.8989 • WWW.FUERSTLAW.COM 7 | P a g e
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Case: 11-1612 Document: 003110561288 Page: 15 Date Filed: 06/13/2011<br />
U.S.C. § 1397. Income taxes imposed under this system are payable to the BIR<br />
rather than to the IRS.<br />
Under the mirror system ―any changes to, interpretations of, regulations and<br />
revenue rulings on and court interpretations of the substantive tax provisions of the<br />
Internal Revenue Code are applicable to Virgin Islands tax cases as long as the<br />
particular provision at issue is not manifestly inapplicable or incompatible with a<br />
separate territorial income tax . . . .‖ Chicago Bridge & Iron Co. v. Wheatley, 430<br />
F.2d 973, 976 (3d Cir. 1970), rev’g 295 F.Supp. 240 (D.V.I. 1969), cert. denied 91<br />
S.Ct. 873 (1971).<br />
Five decades ago the U.S. Congress and the USVI government created the<br />
EDP to attract business people to establish new businesses in the USVI. See<br />
generally 29 V.I.C. § 701 et seq. The Economic Development Commission<br />
(―EDC‖) was created by the USVI government to oversee the EDP. See generally<br />
29 V.I.C. § 704 et seq. The EDP offers the opportunity for those approved<br />
beneficiaries to receive an income tax credit, pursuant to IRC § 934. Despite the<br />
creation of the EDP, and the best efforts of the U.S. Congress and the USVI<br />
government, economic growth in the USVI has been, and continues to be, arrested<br />
as evidenced by both the number and percentage of the population living below the<br />
FUERST ITTLEMAN, <strong>PL</strong><br />
1001 BRICKELL BAY DRIVE, 32 ND FLOOR, MIAMI, FL 33131 • T: 305.350.5690 • F: 305.371.8989 • WWW.FUERSTLAW.COM<br />
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