The 33rd Legislature Finance Committee approved bills dealing with the gas excise tax, unemployment tax, a tax commission and the territory’s insurance division Tuesday. The approved bills will be forwarded to the Rules and Judiciary which can, if it chooses, pass the bills on to the full Legislature for approval.
Bill No. 33-0052 would allow the Legislature to seek support from the governor and delegate to Congress to apply for a portion of the gasoline excise tax from the federal government once Limetree Bay starts refining gas, reportedly around the end of the year. The requested amount would be half of the federal excise tax of 18.3 cents a galleon.
Director of Management and Budget Jenifer O’Neal told the lawmakers the refinery is expected to produce between 45,000 and 53,000 barrels a day ( A barrel is 45 galleons.) She estimated the federal excise tax revenue between $370,575 and $436,455 a day and if the V.I. government received 50 percent of the excise receipts, it would amount to $67 million to $79 million per year, based on an average of 53,000 barrels per day.
“It should be noted that any additional revenues received by GVI (Government of the Virgin Islands) would help alleviate a difficult financial situation. The estimated structural deficit of GVI is estimated to be between $85 million and $115 million per year,” she testified.
Former Sen. Donald G. Cole also testified in favor of the legislation. He was part of a delegation from the 24th Legislature that petitioned the U.S. Congress to amend the Organic Act to authorize a refund to the U.S. Virgin Islands. The USVI legislation was included in a large funding bill related to the Sept. 11, 2001, terror attacks, drafted by the U.S. House of Representatives but not supported in the U.S. Senate.
Before that, in 1977 the V.I. tried to collect a portion of the tax but was turned down because the U.S. Court ruled the request was not clear and unambiguous, according Sen. Stedman Hodge, who drafted the bill.
Bill Simmons, director of Dutko Government Relations, a private firm that worked with the territory in the 2000 appeal, said the timing in Washington D.C. is “ideal” to try again.
Sen. Dwayne DeGraff said “I vote yes already,” and the rest of the committee approved the measure, adding they need “more action” in the request to Congress.
Bill No. 33-0090 would allow the V.I. Labor Department to implement a new method to assign unemployment insurance taxes to employers. According to commissioner of Labor Gary Molloy the change is necessary to bring the territory into compliance with federal law, will be easier to administer and will ensure the future solvency of the Virgin Islands Trust Fund.
Malloy testified that as of Sept. 11, the Virgin Islands outstanding trust fund loan balance was $63.4 million. There is $4.4 million in the our current trust fund to cover current benefits, he said.
The recession in 2007 and the loss of Hovensa LLC in 2012 depleted the trust fund, which had been $66 million in 2001. The 24th Legislature than decided to lower the rate paid for unemployment insurance to zero for current employers and 1.5 percent for new employers.
“If not for this change, the VIUTF most likely would have remained solvent. This continued imbalance eventually led to the total insolvency of the Virgin Islands Unemployment Trust Fund,” Molloy said.
Although the governor vetoed the bill, the Senate overrode it according to Vialet and not changes were made until 2012 when the rates were raised to one percent and one and a half percent. Then, Molloy raised the rate to a flat 2.5 percent.
The proposed legislation will base the employers’ tax rate on their payroll and contributions into the system – the highs and lows of the company’s payroll – instead of a flat tax rate. Employers being charged for employees who left the business but were not laid off will not be charged.
The U.S. Virgin Islands has until Oct. 31 to come into compliance and eliminate the flat tax rate, according to Molloy.
DeGraff said they didn’t have much choice but to approve the bill.
Sen. Oakland Benta wanted to know if the new rate would hurt small businesses and Molloy said all businesses would be motivated to increase their payroll and that small businesses now carried the brunt.
The bill was approved unanimously.
Also approved quickly and unanimously was Bill No. 33-0033 to create a tax study commission to review laws and the tax structure. The bill had been discussed in committee previously and sponsor Sen. Donna Frett-Gregory presented a list of changes to the original legislation that included creating a commission that meets every five years instead of two.
The last four bills involved changes in the Virgin Islands Code to allow the Division of Banking, Insurance and Financial Regulation to undergo and pass a certification inspection by the National Association of Insurance Commissioners.
Senators commended testifiers, Gwendolyn Brady, Division director and Glendina Matthew, assistant director and legal counsel, on a thorough presentation.
Bill No. 33-0146 will allow the Division to require money transmission, check cashing or currency exchange businesses to renew licenses annually instead of every other year. Gwendolyn Brady, director, said they are “high risk, cash-infused businesses subject to violation of bank secrecy and anti-money laundering laws and need more monitoring.
Bill No. 33-0147 deletes the terms “life” and “disability” from section 232 of Title 22, Chapter 10 of the V.I. Code and adds a section to provide protection for policyholders holding health and life insurance in the territory if a company becomes insolvent. This is required for NAIC confirmation, according to Brady.
Bill No. 33-0148 will require third-party administrators to hold a trust fund account for insurance payments and another from which claims are paid. A third-party administrator is a person who underwrites, collects charges, collateral or premiums or adjusts or settles claims in connection with life, annuity, health or stop-loss coverage.
Bill No. 33-0149 will require insurers domiciled in the territory and alien insurers not doing business anywhere else to submit to the commissioner of Insurance, a governance disclosure report in accordance with NAIC standards. All reports are to be kept confidential, according to the bill.
Speaking on behalf of the legislation, Henry Feuerzeig of Dudley, Newman, Feuerzeig LLP, also the general representative of Underwriters at Lloyds, said the bill will help the Division reach NAIC accreditation and put the territory on par with other U.S. jurisdictions with greater protection for policyholders. Guardian Insurance Company sent a letter supporting accreditation.
Attending the hearing were: Sens. Vialet, Benta, Frett-Gregory, DeGraff, Hodge, Novelle Francis, Marvin Blyden and Janelle Sarauw.
Original Source: https://stjohnsource.com/2019/09/18/finance-committee-sends-bills-on-taxes-insurance-to-rules/