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EDC Companies May Be Required to Donate to Scholarship Fund

May 31, 2006 – Companies applying for Economic Development Commission tax benefits may have to contribute $1,000 for student scholarships if a bill going through the Legislature is approved.
During an Economic Development, Planning and Environmental Protection Committee meeting Wednesday, Sen. Liston Davis, the bill's sponsor, said the measure sets up a permanent funding source for the Territorial Scholarship Fund, which is used to subsidize scholarships awarded to students by the V.I. Board of Education.
Davis said that more than 100 students apply for the scholarships annually, which "easily depletes" the fund. "The Board of Education can't afford to provide scholarships for that many students," he added. "So we're simply requiring that individuals seeking EDC benefits give $1,000 annually to the fund."
When asked about the viability of such a requirement, Nadine Marchena Kean, assistant executive director of the EDC, said that most companies could afford to pay the $1,000. However, she also cautioned senators against imposing new requirements on EDC applicants. "The recently enacted American Jobs Creation Act of 2004 by the U.S. Congress made significant changes to the federal tax rules and regulations and has created much uncertainty and instability in the EDC program," she explained.
"So, until the final rules and regulations are issued by the U.S. Department of Treasury on residency and sourcing of income, we think that any proposed legislation…could erode confidence in the tax incentive program and inhibit its rehabilitation, stability and future growth."
Adding to these statements, attorney Marjorie Roberts, who has represented various EDC beneficiaries, said that senators should be reaching out to companies "to demonstrate how business friendly the territory can be" instead of implementing a new mandate.
"Now is not the time for the U.S. Virgin Islands to be enacting a host of new requirements," she said, explaining that many EDC companies have been "critical" in funding "important needs throughout the community."
Kean further stated that beneficiaries are obligated to make various in-kind or financial donations and can choose to make a contribution to education. "Usually those contributions are made directly by the company," she said. "Or the beneficiary can chose to make a contribution to the EDC – in which case, 50 percent of that money goes toward public education in the territory."
Despite the testimony, however, senators unanimously voted to send the bill onto the Rules Committee for further consideration.
Senators were less supportive, however, of bills which further seek to close loopholes in the local EDC law.
Sponsored by Sen. Louis P. Hill, one of the bills requires individuals seeking employment with EDC companies to be registered with the Department of Labor. "Currently, many of these positions are being filled by individuals from the mainland," Hill explained. "This bill seeks to address that particular discrepancy."
While supporting the intent of the bill, Kean said that the EDC has already addressed the issue by requiring that 80 percent of the employees hired by beneficiaries be local residents. However, since V.I. law grants residency to individuals who have lived in the territory for one year or more, there are cases in which nonlocals are hired to fill EDC positions, she added. "That's the real loophole that exists," Kean said. "That's what needs to be fixed."
Roberts further stated that while all local businesses are already required to seek employees through the Department of Labor, many beneficiaries do hire residents who have left the territory "due to the lack of opportunities."
"Many of these individuals find out about such opportunities through the online versions of the newspapers or by word of mouth and might not have been actively seeking to return to the territory because they weren't aware of opportunities," she said. "Also, many people might not want their current employer to know they are seeking to improve their jobs and hence would not want to list themselves with the Department of Labor. In short – they are underemployed, but not unemployed."
Senators unanimously voted to hold the bill in committee for further amendments.
Another bill designed to set up safeguards for employees when an EDC beneficiary changes ownership was also held in committee after receiving opposition from testifiers, who said that the bill would force companies to close down their operations before selling their business.
While Hill, the bill's sponsor, said the measure ensures that the rank and benefits given to an employee are maintained when a company is sold or bought, Kean said that such a law could trigger a "plant closing," where the employer can choose to shut down and sell their assets to another company.
"That way the company that buys the particular business can start anew and does not have to deal with the employee issue," she said, adding that certificates granted to EDC beneficiaries state that employee benefits are transferred once a company changes ownership. She said that once a business is sold, employees should also be given severance packages.
Kean instead suggested that certain provisions outlining what benefits would be granted to employees once a company is bought or sold should be included in the certificate awarded to EDC beneficiaries once their benefits are granted.
Present at Wednesday's meeting were Sens. Craig W. Barshinger, Lorraine L. Berry, Davis, Pedro "Pete" Encarnacion, Hill, Neville James, and Norman Jn Baptiste.
Sen. Usie R. Richards was absent.

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