ACT NO. 7651 EXPANDS EDC BENEFITS
On October 13, 2014, Governor John P. de Jongh signed Bill Number 30-0300 into law, enacting sweeping positive changes to the U.S. Virgin Islands EDC program. The revisions to the existing legislation expand the scope of eligible businesses and seek to spur massive capital investment in the territory by new and existing beneficiaries of the program. The revisions have been met with the approval of the local business community as the USVI seeks to lessen the impact of alternative programs in other territories.
Perhaps the most significant change is the extension of benefit periods for businesses located both in the St. Thomas/St. John and St. Croix Districts. The extension of the benefit periods is immediately available to new beneficiaries and available to existing beneficiaries upon request and subsequent approval by the Governing Board of the EDC (“Board”) and the Governor.
Section 2(h) of Act No. 7651 provides for the following benefits:
- Thomas/St. John District: Twenty (20) years of benefits
- Croix District: Thirty (30) years of benefits
Additional time is granted for companies that make a significant investment in the territory in the form of capital investment in infrastructure, new construction, or refurbishment. Approved companies (or approved subsidiary entities) that make a capital investment in excess of One Million Dollars ($1,000,000) but less than Ten Million Dollars ($10,000,000) are entitled to an additional one hundred percent (100{75f0df2d6e7f7161edac4c5c1d00f29fbd5b5b131330c7e7899506e898c5a87a}) of benefits for five (5) years upon a finding of good cause by the Board. Approved companies (or approved subsidiary entities) that make a capital investment of Ten Million Dollars ($10,000,000) or more are entitled to an additional ten (10) years of benefits at one hundred percent (100{75f0df2d6e7f7161edac4c5c1d00f29fbd5b5b131330c7e7899506e898c5a87a}).
Section 2(h) also radically changes the availability of extensions for beneficiary companies. Under the existing legislation, the general rule is that a company is eligible for an extension of benefits for a period of ten (10) years at ninety percent (90{75f0df2d6e7f7161edac4c5c1d00f29fbd5b5b131330c7e7899506e898c5a87a}) of the initial benefits – which results in a reduction of the income tax credit to eighty one percent (81{75f0df2d6e7f7161edac4c5c1d00f29fbd5b5b131330c7e7899506e898c5a87a}) and a reduction of all other credits to eighty percent (80{75f0df2d6e7f7161edac4c5c1d00f29fbd5b5b131330c7e7899506e898c5a87a}). Act No. 7651 provides for a ten (10) year extension at one hundred percent (100{75f0df2d6e7f7161edac4c5c1d00f29fbd5b5b131330c7e7899506e898c5a87a}) of the original benefits upon approval.
Act No. 7651 also revises the types of business that are eligible for benefits. Designated service business, previously referred to as Category IIA businesses and now Category IV businesses are deemed to include:
(1) Commercial Distribution and Trading Services;
(2) Public Relations Services, including but not limited to publicity, mail order firms;
(3) International Banking and Insurance entities that have been duly licensed under Title 9 and Title 22, Chapter 9, respectively of the VI Code;
(4) Business and Management Consulting Services (including but not limited to strategic accounting, economic, scientific services);
(5) Investment Managers and Advisors;
(6) Call Centers;
(7) Family Offices;
(8) Venture Capital Management and Investment;
(9) Investment Banking and Financial Services;
(10) Film and Print Industry Activities (including news syndicate, still and motion pictures);
(11) Computer, Data, High Technology, E-Commerce, and Call Services Center Businesses;
(12) Development/Engineering of Software, Blueprints, Intellectual Property;
(13) Medical (including Dental, Optical, and Ophthalmological) laboratories and specialty medical services: and
(14) Any other businesses serving clients located outside of the Virgin Islands deemed appropriate by the Commission.
Unlike the previous version of the legislation which required that benefits commence within five (5) years, pursuant to Act No. 7651, benefits must commence within one (1) year from the date the Governor approves benefits.
Additional changes were made to provisions relative to reconsideration, suspension and termination of benefits.
