[Congressional Record Volume 150, Number 130 (Monday, October 11, 2004)]
[Extensions of Remarks]
[Page E1950]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   CONFERENCE REPORT ON H.R. 4520, AMERICAN JOBS CREATION ACT OF 2004

                                 ______
                                 

                       HON. DONNA M. CHRISTENSEN

                         of the virgin islands

                    in the house of representatives

                       Thursday, October 7, 2004

  Ms. CHRISTENSEN. Mr. Speaker, the American Jobs Creation Act of 2004 
is misnamed as it relates to my congressional district, the U.S Virgin 
Islands, because of changes it makes to our Economic Development 
Program. These changes could ``likely cripple our Economic Development 
Commission (EDC) program, robbing it of many of the incentives it uses 
to lure mainland businesses to the islands, if companies decide to pull 
their investments, jobs and money out of the territory.''
  The conference report contains a new provision, not previously 
considered by either the House or Senate, which poses a serious risk to 
our EDC program. The Government of the Virgin Islands strongly opposes 
this provision as currently drafted. This provision, which was added in 
a closed door meeting with House and Senate tax writers over this past 
weekend and unveiled in the draft conference report late last Monday 
night, would require V.I. taxpayers to be physically present in the 
Virgin Islands at least 183 days in any tax year in order to be deemed 
a ``bona fide V.I. resident'' under the U.S. Internal Revenue Code. The 
new provision eliminates the alternative 3-year 122-day test included 
in the original Senate bill.
  The new provision also restricts the type of income that can qualify 
for EDC benefits to V.I. source income. It would eliminate the 
possibility that some of an EDC beneficiary's U.S. source income that 
is ``effectively connected'' with a V.I. trade or business could 
qualify for tax reduction under the EDC program. The 1986 Tax Reform 
Act specifically permitted the Virgin Islands to reduce tax liability 
on income ``effectively connected'' with a conduct of a V.I. trade or 
business even when such income is sourced outside of the Virgin Islands 
in certain circumstances. Neither the House nor the Senate bill 
contained any provision on source of income rules.
  Mr. Speaker, we recognize and accept that the genesis of this new 
provision is the fact that there have been participants of our EDC 
program that have taken positions that they are bona fide Virgin 
Islands residents when they did not in fact spend a significant amount 
of time in the territory. We also acknowledge that there have been 
situations where individuals have received EDC tax exemptions even 
though they continued to live and work in the United States. We agree 
that the rules governing this situation need to be clarified and made 
certain. And to that end, we look forward to working with the Treasury 
Department in crafting reasonable regulations which accomplishes these 
goals while preserving the essential elements of our program which was 
designed to promote fiscal autonomy for the Virgin Islands.
  We encourage the Treasury Department to develop reasonable rules, 
post haste, that will ensure the integrity and effectiveness of the 
Virgin Islands EDC program and promote both tax compliance and economic 
growth. Without such rules, the impact of the conference report 
language on legitimate businesses in the Virgin Islands or on local 
government revenues could be enormous, creating the financial 
equivalent of a massive hurricane leveling the islands.

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