[Senate Report 109-236]
[From the U.S. Government Publishing Office]
Calendar No. 398
109th Congress Report
SENATE
2d Session 109-236
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REPEAL SECTIONS OF THE MAY 26, 1936 ACT PERTAINING TO THE VIRGIN
ISLANDS
_______
April 20, 2006.--Ordered to be printed
Filed, under authority of the order of the Senate of April 7, 2006
_______
Mr. Domenici, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany S. 1829]
The Committee on Energy and Natural Resources, to which was
referred the bill (S. 1829) to repeal certain sections of the
Act of May 26, 1936, pertaining to the Virgin Islands, having
considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
Purpose of the Measure
The purpose of S. 1829 is to repeal certain sections of the
Act of May 26, 1936 (sections 1401-1401e of title 48, of the
United States Code), to provide the Government of the United
States Virgin Islands the ability to fully regulate real
property tax matters in the territory.
Background and Need
S. 1829 would repeal an outdated 1936 Federal statute which
limits the authority of the Virgin Islands Government to assess
and collect real property taxes in the Territory. The 1936
statute was enacted to address the tax policies of the Danish-
era municipal councils in the Virgin Islands. The 1936 statute
was generally thought to have been repealed by the enactment of
the Revised Organic Act of 1954, as amended, which abolished
the municipal councils and created a comprehensive system of
local government with sufficient legislative powers to resolve
local property tax issues without the need for Federal
intervention.
A 2004 Third Circuit Court of Appeals Federal court
decision, however, has revived the 1936 statute, which requires
that all real property be taxed at the same rate without regard
to classification or use. The decision, among other things,
struck down a local statute capping the amount of any increase
in the assessment of residential real property (and therefore
any increase in the property tax owed) in any assessment
period.
If not now repealed by Congress, the 1936 statute will
hinder the exercise of the Government's power, as conferred by
the Revised Organic Act, to assess, administer and collect real
property taxes in the Virgin Islands. Indeed, by precluding
classification of property by use and requiring a uniform rate
of tax between residential and commercial property, the 1936
statute puts at risk long-standing Government policies designed
to develop the economy, promote social welfare, and protect
homeownership in the Virgin Islands.
Without the authority to limit such increases by capping
such assessments or similar methods commonly used by other
jurisdictions, the now revived 1936 statute may have the
anomalous result of pricing land and homeownership beyond the
reach of many Virgin Islanders.
The 1936 statute has long outlived its usefulness and now
interferes with the Virgin Islands ability to perform an
essential governmental function. The assessment and collection
of real property taxes is fundamentally a local government
issue with no Federal impact. No other State, Territorial or
local government is subject to such Federal restrictions. The
Revised Organic Act of 1954, as amended, confers upon the
people of the Virgin Islands full powers of local self-
government. The 1936 statute is an anachronism that needs to be
repealed.
Legislative History
S. 1829 was introduced by Senator Domenici (for himself,
and Senator Bingaman), by request, on October 6, 2005. The
Committee on Energy and Natural Resources held a hearing on
October 25, 2003 (S. Hrg. 109-291). At the business meeting on
March 15, 2006, the Committee ordered S. 1830, as amended,
favorably reported.
Committee Recommendation
The Committee on Energy and Natural Resources, in open
business session on March 15, 2006, by unanimous voice vote of
a quorum present, recommends that the Senate pass S. 1829.
Section-By-Section Analysis
Section 1 repeals Sections 1 through 6 of the Act of May
26, 1936 (48 U.S.C. 1401 et seq.), effective July 22, 1954.
Cost and Budgetary Considerations
The following estimate of costs of this measure has been
provided by the Congressional Budget Office.
S. 1829--A bill to repeal certain sections of the Act of May 26, 1936,
pertaining to the Virgin Islands
S. 1829 would repeal sections 1 through 6 of the 1936
Organic Act of the Virgin Islands, which governs the levying of
property taxes in the United States Virgin Islands (a territory
of the United States). CBO estimates that enacting S. 1829
would have no impact on the federal budget because it would
affect the territory's property taxes and would have no impact
on federal revenue.
S. 1829 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
Enacting this bill would benefit the government of the Virgin
Islands by repealing an existing federal preemption and
establishing local authority over the territory's property tax.
The long-term impact of this change on tax revenues in the
territory would depend on local decisions regarding the
structure of the property tax. This legislation would impose no
costs on any other state, local, or tribal government.
The CBO staff contact for this estimate is Matthew Pickford
(for federal costs) and Marjorie Miller (for the state and
local impact). This estimate was approved by Peter H. Fontaine,
Deputy Assistant Director for Budget Analysis.
Regulatory Impact Evaluation
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out S. 1829. The bill is not a regulatory measure in
the sense of imposing Government-established standards or
significant economic responsibilities on private individuals
and businesses.
No personal information would be collected in administering
the program. Therefore, there would be no impact on personal
privacy.
Little, if any, additional paperwork would result from the
enactment of S. 1829, as ordered reported.
Executive Communications
At a hearing before the Committee on Energy and Natural
Resources on October 25, 2005, the Department of the Interior
provided the following testimony with respect to S. 1829:
Statement of Nikolao I. Pula, Acting Deputy Assistant Secretary of the
Interior for Insular Affairs
Mr. Chairman and Members of the Committee on Energy and
Natural Resources, I am pleased to appear before you today to
discuss S. 1829. I am Nikolao Pula, Acting Deputy Assistant
Secretary of the Interior for Insular Affairs.
S. 1829 would repeal sections 1 through 6 of the 1936
Organic Act of the Virgin Islands of the United States, which
deal with property taxation in the territory. In 2004, the
Third Circuit Court of Appeals held that the property tax
provisions in the 1936 Organic Act, requiring market valuation,
were still in effect despite enactment of the Revised Organic
Act of 1954. This decision has had the effect of invalidating
local Virgin Islands' statutes that give property tax
exemptions to residents such as veterans and seniors.
In a rapidly escalating real estate market, people on
limited incomes, including many veterans and seniors, can be
forced from their homes due to an inability to pay the
increased levies. Adverse social consequences can follow.
For decades, the Department of the Interior has sponsored
or backed measures that increase self-government for the
territories. S. 1829 advances Virgin Islands citizens' self-
government, consistent with Departmental policy. Additionally,
it is my understanding that there is no Federal regulation of
property taxation in any other state or territory under the
American flag.
S. 1829 would return control of the property tax to the
Government of the Virgin Islands, and property taxes would be
levied as they were prior to the Third Circuit's decision. The
Administration supports enactment of S. 1829.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the bill S. 1829, as ordered reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italic, existing law in
which no change is proposed is shown in roman):
Act of May 26, 1936
[Ch. 450, 49 Stat. 1372]
AN ACT To establish an assessed valuation real property tax in the
Virgin Islands of the United States
[Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled, That it
is the policy of Congress to equalize and more equitably to
distribute existing taxes on real property in the Virgin
Islands of the United States and to reduce the burden of
taxation now imposed on land in productive use in such islands.
[Sec. 2. For the calendar year 1936 and for all succeeding
years all taxes on real property in the Virgin Islands shall be
computed on the basis of the actual value of such property and
the rate in each municipality of such islands shall be the same
for all real property subject to taxation in such municipality
whether or not such property is in cultivation and regardless
of the use to which such property is put.
[Sec. 3. Until local tax laws conforming to the
requirements of this Act are in effect in a municipality the
tax on real property in such municipality for any such calendar
year shall be at the rate of 1.25 per centum of the assessed
value. If the legislative authority of a municipality shall
fail to enact laws for the levy, assessment, collection, or
enforcement of any tax imposed under authority of this Act
within three months after the date of its enactment, the
President shall then prescribe regulations for the levy,
assessment, collection, and enforcement of such tax, which
shall be in effect until the legislative authority of such
municipality shall make regulations for such purposes.
[Sec. 4. All taxes so levied and collected shall be
deposited in the municipal treasury of the municipality in
which such taxes are collected.
[Sec. 5. The Virgin Islands Company shall pay annually into
the municipal treasuries of the Virgin Islands in lieu of taxes
an amount equal to the amount of taxes which would be payable
on the real property in the Virgin Islands owned by the United
States and in the possession of the Virgin Islands Company, if
such real property were in private ownership and taxable, but
the valuation placed upon such property for taxation purposes
by the local taxing authorities shall be reduced to a
reasonable amount by the Secretary of the Interior if, after
investigation, he finds that such valuation is excessive and
unreasonable. The Virgin Islands Company shall also pay into
the municipal treasuries of the Virgin Islands amounts equal to
the amounts of any taxes of general application which a private
corporation similarly situated would be required to pay into
the said treasuries. Similar payments shall be made with
respect to any property owned by the United States in the
Virgin Islands which is used for ordinary business or
commercial purposes, and the income derived from any property
so used shall be available for making such payments.
[Sec. 6. Nothing in this Act shall be construed as
altering, amending, or repealing the existing exemptions from
taxation of property used for educational, charitable, or
religious purposes. Subject to the provisions of this Act, the
legislative authority of the respective municipalities is
hereby empowered to alter, amend, or repeal, subject to the
approval of the Governor, any law now imposing taxes on real
and personal property.]