May 9, 2006 – The local and federal governments have streamlined the procedure required when there's a dispute between the federal Internal Revenue Service and the local Bureau of Internal Revenue over where an Economic Development Commission beneficiary should pay income taxes.
"Such disputes might include, for example, situations where the IRB has determined that a taxpayers is a bona fide Virgin Islands resident and the IRS has determined otherwise," according to Lt. Gov. Vargrave Richards in a news release issued Tuesday.
Richards' press secretary, Celeste Lawrence, said that the change allows the federal and local governments to "dialogue" on disagreements over tax issues rather than the taxpayer getting involved.
"This is so the taxpayer doesn't get caught in the middle and have to pay twice," she said.
The new process is called a revenue procedure, and it allows V.I. taxpayers to invoke formal consultations between the IRS and the BIR though a process called "competent authority," Richards said.
Tammy Smalls, an attorney with the local IRB, said that the change was minor in nature.
She said that the "competent authority" agreement between the local and federal tax departments was initially signed in 1987.
Richards said that it's important that the government speak with one voice on EDC matters because they are critical to the survival and success of the EDC program.
The territory's EDC program came under fire from the IRS in 2004 because of questions about residency and source of income requirements for EDC beneficiaries.
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