Compliance with Law Cited as 1998 Tax Suit Dropped

July 15, 2004 – In 1998, Sen. Adlah "Foncie" Donastorg sued the V.I. government, charging it with failing to enforce a 1980 law calling for a portion of the territory's income tax collections to be set aside for the purpose of issuing refunds.
In July of last year, Territorial Court Judge Brenda Hollar rejected administration efforts to get the lawsuit dismissed, assuring Donastorg his day in court. He said at the time that he didn't want to win the case; he just wanted the executive branch to enforce "a good law." (See "Court Says Senator Has a Case over Tax Law".)
On Wednesday, Attorney Henry Smock, representing Donastorg, and Assistant Attorney General Mark D. Hodge, representing the government, asked Territorial Judge Leon Kendall to dismiss the case based on Donastorg's conclusion that the administration is now in compliance with the law.
According to the two-page document requesting dismissal of the case, Donastorg met with Finance Commissioner Bernice Turnbull on May 25 and also examined documents submitted by the administration concerning "compliance issues." As a result, it states, the senator is "satisfied that the government is now maintaining a general ledger of the General Fund … an account designated as a reserve for internal revenue tax refunds."
And, the document states, the senator also is "satisfied that there is being credited to such reserve account no less than 10 percent of the receipts from income-tax collections, as verified by the Virgin Islands Bureau of Internal Revenue."
Smock told Donastorg on Wednesday in a letter that Virgin Islanders "owe you a vote of gratitude for your unceasing efforts" to ensure that money collected by the Internal Revenue Bureau is being "properly withheld and distributed as required by laws."
Further, the lawyer said, "Having set this precedent, should the government ever fall behind in its obligations in the future, we will now have a speedy remedy to address this issue."
When Donastorg filed his suit, the defendants were Gov. Roy Schneider, Finance Commissioner Juan Centeño, IRB director Joseph Aubain and OMB director Nellon Bowry.
While the 1980 law was not of Donastorg's making, an amendment to it was. The 1980 law called for at least 4.5 percent of income tax collections to be set aside each year for refunds. Donastorg, concluding that a larger set-aside was needed, introduced legislation that was passed in 1999 increasing the percentage to at least 10 percent.
In June 2003, when "fiscal crisis" was the hot political topic of the day, Nathan Simmonds, director of the Office of Fiscal and Economic Recovery Implementation, appeared before the Senate Finance Committee — which Donastorg chairs — in connection with Gov. Charles W. Turnbull's bid to borrow another $235 million on the bond market. Simmonds at that time said the government owed more than $50 million in income-tax refunds and that it had deferred such payments that month in order to make payroll.
The governor got his bond issue, and $100 million of it was earmarked for income-tax refunds and vendor payments.

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