Law Could End Audits For Some in Virgin Islands
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WASHINGTON — A tax provision making its way through the House of Representatives would close down IRS audits on hundreds of wealthy Americans who live part of the year in the U.S. Virgin Islands and avoid the higher income taxes paid by mainlanders.
Under law, Americans who maintain a primary residence in the Virgin Islands, run a local business, and spend an average of 183 days a year there qualify for a low tax rate. The House Ways and Means Committee voted last week to limit to three years the time that the IRS could go back and audit individuals it suspects have been falsely claiming to meet those residence requirements. Currently the audits can reach back many more years.
The provision, which was backed by the committee’s chairman, Rep. Charles Rangel, would lose $38 million for the U.S. Treasury over 10 years, according to estimates by the nonpartisan Joint Committee on Taxation.
The delegate of the Virgin Islands in Congress, Donna Christian-Christensen, a Democrat, said in an interview that low tax rates had been intended to bolster the Virgin Islands economy by attracting wealthy Americans who might invest in the islands’ economy and hire local workers.
A spokesman for Mr. Rangel called the provision a “fundamental matter of fairness.”
