Territory leaders defended a long-sought provision included in the Trump administration’s budget bill that would exempt some Virgin Islands companies from paying a federal tax typically levied on U.S. businesses operating in foreign countries.
“It ensures that investors view the Virgin Islands as a viable, stable, and fair destination for long-term economic development,” Gov. Albert Bryan Jr. said. “We remain committed to transparency and accountability in our tax incentive programs and welcome reforms that level the playing field.”
The statement came in response to an article about the exemption published in the Washington Post over the weekend and follow-up questions from the Source. The article attributed the exemption of the global intangible low-taxed income to years of lobbying by Golub Capital, a multibillion-dollar credit asset management firm whose local affiliate enjoys tax benefits through the V.I. Economic Development Commission, and by the Virgin Islands government.
“This is a provision that didn’t exist before the law changed under the Obama administration,” Bryan said. “This change simply corrects what we believe was an oversight in the original bill. It penalized EDC beneficiaries and made offshore jurisdictions — like the Cayman Islands and other foreign tax shelters — more advantageous than our own U.S.-based program, particularly when U.S. partners were involved.”
Though attributed to the Obama administration, GILTI was applied to investments by the 2017 Tax Cuts and Jobs Act, which set the minimum tax rate at 10.5%. According to Bryan, the provision discourages U.S. citizens’ investment in the territory by subjecting them to an additional layer of taxation.
“Ironically, the GILTI clause was aimed at preventing Americans from using foreign tax incentive programs to avoid U.S. taxes,” he said. “We are not foreign. We are American. We should not fall victim to a law that was never intended to apply to us.”
Bryan said three administrations have worked to fix the provision and called Del. Stacey Plaskett “a tireless advocate on our behalf in Congress, ensuring our unique status is recognized and respected.”
“It’s a complicated issue that many don’t fully understand, but this correction will make our EDC program more competitive, more resilient, and more aligned with the national interest of keeping investment within U.S. borders,” he said.
Golub Capital, which operates local offices as GC Investment Management, has donated at least $5,300 to Plaskett’s campaigns since 2019, according to the nonprofit opensecrets.org. A representative from the V.I. Economic Development Authority did not immediately respond to the Source’s questions about the nature of tax benefits the firm enjoys locally, but the exemption outlined in the Trump administration’s “Big Beautiful Bill” would also save the firm from having to pay the 10.5% minimum tax currently applied to U.S. businesses operating in foreign countries and U.S. territories.
In a statement shared with the Source, Plaskett forcefully defended the territory’s economic development program as a mechanism for attracting businesses and retaining educated Virgin Islanders who would otherwise have few employment opportunities in the territory.
“The Virgin Islands economic development program is not a tax haven program; it provides real jobs and support for an AMERICAN jurisdiction, the Virgin Islands,” she wrote. “In fact, from 2013-2015 before the GILTI provision, the economic development program provided: 19,308 full-time equivalent jobs in the Virgin Islands, more than $1 billion in wages and salaries, more than $1.4 billion in Territory-wide economic output, $309,446,213 in taxes and duties, and $9,698,447 in charitable donations.”
The Tax Cuts and Jobs Act’s GILTI regime “has stunted the growth of the economic development program, and in recent years, many participants have departed the U.S. Virgin Islands,” she added. “The economic development program should be growing, but instead, we have seen its contraction. The Virgin Islands is losing young, brilliant minds and the correction of the 2017 action through this provision will help reverse the brain drain.”
Plaskett said she worked with colleagues to include language in the budget bill to prevent fraud.
“The door is closed to corporate abuse and only includes income that facilitates jobs and investments through the Economic Development program,” she wrote. “It excludes digital services, royalties, carried interest, and other types of income which might be earned without actually employing USVI workers or expanding real operating business activity in the USVI.”
While aimed at restoring the territory’s attractiveness for U.S.-based companies, the provision’s ability to do so could be limited. The exemption would apply only to individuals, trusts, estates, or services income derived by Virgin Islands companies that were bought by “closely held” U.S. companies — ones owned by a single or small number of shareholders — before Dec. 31, 2023.
Bryan told the Source he did not know why the cap was included in the bill and referred questions to Plaskett’s office, which did not respond by press time.
Local leaders have long inveighed against any suggestion that the U.S. Virgin Islands functions as a tax haven, but the territory remains on the European Union’s list of noncooperative jurisdictions for tax purposes, commonly referred to as the EU’s “blacklist.” Other nations and territories included on the list since its most recent update in February include: American Samoa, Anguilla, Fiji, Guam, Palau, Panama, Russia, Samoa, Trinidad and Tobago, and Vanuatu.
In explaining the U.S. Virgin Islands’ inclusion, the Council of the European Union wrote that the territory “does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, has harmful preferential tax regimes (Economic Development Programme, Exempt companies, International Banking Center Regulatory Act), and has not committed to addressing these issues.”
That list has been repeatedly criticized, including by the poverty-focused nongovernmental organization Oxfam, for failing to hold its own member states to the same standard. During a Senate Finance Committee budget hearing last week, Nathan Simmonds, the V.I. Public Finance Authority finance and administration director, said the territory’s inclusion on the list is being worked on by the government’s Washington-based consultants as well as a firm in Germany.
St. Croix Source
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