Enterprise Zone Law

*** Statutes current through Act 6991 of the 2008 Regular Session ***
*** Annotations current through April 3, 2008 ***

Subchapter II.  Enterprise zone benefits

29 V.I.C. § 1014  (2008)

§ 1014.  Tax credits; tax benefits; benefit options

1. Each Enterprise Zone Business shall qualify for the following tax credits and tax benefits:
   
   
• A nonrefundable gross receipts tax credit or an income tax credit equal to twenty-five percent (25%) of the actual value expended within a fiscal year for construction of a new building within the Enterprise Zone;
  
  
• A nonrefundable gross receipts tax credit or an income tax credit equal to twenty-five percent (25%) of the actual value expended within a fiscal year for rehabilitation of buildings or other real property within the Enterprise Zone;
  
  
• A nonrefundable gross receipts tax credit or an income tax credit equal to ten percent (10%) of the expenditures within a fiscal year for investment in machinery and equipment for exclusive use by the Enterprise Zone Business;
  
  
• A gross receipts tax rate of three percent (3%) for gross receipts derived by the Enterprise Zone Business, pursuant to Title 33, Chapter 3, section 43, Virgin Islands Code;
  
  
• A one-time nonrefundable $500 income tax credit for every job created within the Enterprise Zone for which a resident of the Virgin Islands as defined in section 1003 herein is hired, which credit shall be taken for the fiscal year in which the resident is hired;
  
  
• A property tax credit against taxes imposed pursuant to, Title 33, Chapter 81, section 2301, Virgin Islands Code, equal to the increase in property taxes assessed due to renovation, rehabilitation, or construction of property within the Enterprise Zone.
  
  
2. The Enterprise Zone Business must indicate for the fiscal year that an expenditure is made whether it is taking the gross receipts or the income tax credit pursuant to subsections (a), (b), and (c) for such expenditure, and the credit must be taken on the appropriate tax return for the fiscal year during which the actual value was expended, or carried back on an amended return for up to two years before the actual value was expended, or carried forward for a period of up to eight years after the actual value was expended. An Enterprise Zone Business that qualifies for more than one of the credits can elect to take one or more credits against income tax (for example, for new construction and machinery) and another credit against gross receipts tax, but in no case can an expenditure be used in calculating more than one credit.
   
   
3. Any credit derived by an entity that is not taxable at the entity level, such as a limited liability company, partnership, or Subchapter S corporation, shall flow through to its owners as long as they are residents of the Virgin Islands as defined in section 1003 herein.
   
   
4. Only expenditures incurred over a consecutive five-year period can give rise to tax credits under this chapter, and each Enterprise Zone Business can elect the commencement date of such five-year period (the "Benefit Period"). An Enterprise Zone Business can elect a commencement date for expenditures of up to two years prior to the date that the Enterprise Zone Business has been granted benefits under this chapter, and in such case the Enterprise Zone Business can take the credits for expenditures made in that year or those years by filing amended returns with the Virgin Islands Bureau of Internal Revenue and the Finance Department, as appropriate. The benefits can be taken over a period of up to ten years--commencing two years before the benefits are granted and extended up to eight years after the benefits are granted--but each benefit must be utilized to the extent possible in a year before any balance is carried forward to the subsequent year with regard to credits and other benefits carried forward. However, an Enterprise Zone Business shall make an election at the same time that it elects the commencement date of its benefits indicating whether it Will utilize its benefits on a carry-back basis, and such election cannot be subsequently changed.
   
   
5. The property tax benefit and the reduced gross receipts tax rate will apply for the benefit period.
   
   
6. Each Enterprise Zone Business must obtain and maintain a valid license to conduct business in the territory for each year in which it receives tax benefits under this section, and if for any reason an Enterprise Zone Business does not have a valid license in place for one or more years, it will not be entitled to the tax benefits under this section without further action on the part of the Enterprise Zone Commission.
   
   
7. Any duly licensed bank or other financial institution doing business in the territory shall be entitled to a reduction in its income tax liability for up to five years per loan, equivalent to the percentages set forth in the table in subsection (8) of this section, of the income taxes incurred to the Virgin Islands by such duly licensed bank or other financial institution that are attributable to interest received on loans granted to Enterprise Zone Businesses at below-market rates. The proceeds of such loans must be utilized exclusively by the Enterprise Zone Business within one or more Enterprise Zones, and the Enterprise Zone Business must so represent in writing to the bank or other financial institution as a condition for receipt of the loan. If a loan is extended for more than five years to an Enterprise Zone Business, the benefits of this subsection shall apply only to interest received in those years that the borrower is an Enterprise Zone Business within the meaning of section 1003(5) of this chapter.
   
   
8. The reduction in income tax liability established for duly licensed banks and other financial institutions described in subsection (7) of this section shall be as follows:  Click here to view image.
   
   
9. (a) The owner of real property located within a designated Blighted Area that is reconstructed, rehabilitated or upgraded to accommodate either a business or a residence shall receive a property tax credit of 100% of the property taxes authorized under title 33, chapter 81, of this code, beginning on the date of finance closing and shall continue for one and one half (11/2) the financing period, not to exceed a total of five (5) years. In the event the reconstruction, rehabilitation or upgrading is not completed within five (5) years, except where the delay is caused by an act of God, the owner shall become liable for all property tax credits which were received. If the reconstruction, rehabilitation or upgrading is fully funded by the property owner, the tax credit shall commence on the date a Certificate of Occupancy is issued by the Department of Public Works.
   
   
10. (b) At the expiration of the initial property tax credit period, the owner shall be eligible to receive a property tax credit of 25% of the property taxes paid for an additional five (5) years if the property continues to be maintained in a habitable condition.
    
    
11. The Virgin Islands Bureau of Internal Revenue shall issues rules and regulations for the administration of subsections (1)(a) through (e), (2), (3), (4), (6), (7), and (8) of this section; and, the Department of Finance shall issue rules and regulations for the administration of subsections (1)(f) and (9) of this section.