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Case: 11-1612 Document: 003110561288 Page: 16 Date Filed: 06/13/2011 poverty line and the per capital income in the Territory that ranks behind all 50 States and the District of Columbia. 8 In 1986, Congress enacted Section 932 of the Internal Revenue Code, which draws a clear distinction between individuals who are bona fide USVI residents and those who are not. A United States resident who derives income from the USVI, but who is not a bona fide USVI resident, must file two tax returns, one with the IRS and the other with the USVI. IRC § 932(a). Such individuals pay tax on USVI source income to the BIR, and tax on non-USVI source income to the IRS. IRC § 932(b). In contrast, a bona fide resident of the USVI must file a return only with the BIR, and pays tax on all income, regardless of its source, to the USVI. IRC § 932(c). By paying the BIR the correct amount of tax on all worldwide income, a bona fide USVI resident is relieved of any income tax liability to the United States, even on non-USVI source income. Id.; see also Abramson Enters., Inc. v. Gov’t of the V.I., 994 F.2d 140 (3d Cir. 1993). In enacting IRC § 932, Congress contemplated that the USVI BIR would provide the IRS with information regarding Virgin Islands residents that report non-Virgin Islands income: [a] Virgin Islands resident deriving gross income from sources outside the Virgin Islands will report all items of such income on 8 Available at http://www.statemaster.com/graph/eco_gdp_percap-product-currentdollars-per-capita, last Accessed June 12, 2011. FUERST ITTLEMAN, <strong>PL</strong> 1001 BRICKELL BAY DRIVE, 32 ND FLOOR, MIAMI, FL 33131 • T: 305.350.5690 • F: 305.371.8989 • WWW.FUERSTLAW.COM 8 | P a g e
Case: 11-1612 Document: 003110561288 Page: 17 Date Filed: 06/13/2011 his or her Virgin Islands return. Information contained on these returns will be compiled by the Virgin Islands Bureau of Internal Revenue and transmitted to the Internal Revenue Service to facilitate enforcement assistance. S. Rep. 99-313, at 482. Consistent with this understanding, the United States and the USVI entered into an agreement ―for the exchange of information and mutual assistance with respect to taxes in order to prevent the evasion or avoidance of United States or Virgin Islands taxes.‖ Tax Implementation Agreement Between the United States of America and the Virgin Islands, p. 1 Feb. 24, 1987, 1989-1 C.B. 347. 9 Doc. # 6-1; A-000229. Among other things, the Virgin Islands agreed to ―routinely supply‖ the United States with ―information about any taxpayer subject to Virgin Islands tax with non-Virgin Islands source income who files an income tax return with the Virgin Islands claiming for the first time to be a Virgin Islands resident.‖ Id., Art. 4, § 2(b)(iii). B. IRS SUMMONSES It is against this backdrop that Mr. Gangi filed his personal income tax returns and paid tax for 2000 through 2004 (including the years subject to the summonses in question) with the BIR. Mr. Gangi timely filed with the BIR a tax return for 2000 through 2004, properly using the same Form 1040 that United 9 This is not a typographical error. The Agreement was first published by the Service in the 1989 Cumulative Bulletin, two years after it was signed. FUERST ITTLEMAN, <strong>PL</strong> 1001 BRICKELL BAY DRIVE, 32 ND FLOOR, MIAMI, FL 33131 • T: 305.350.5690 • F: 305.371.8989 • WWW.FUERSTLAW.COM 9 | P a g e
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