President Bill Clinton signed the legislation Friday that will increase the rum tax rebate to the territory from $10.50 to $13.25 per proof gallon through December 2001.
The increase could mean up to $20 million a year into the V.I. treasury.
Gov. Charles W. Turnbull, who made the announcement, is in Washington this week attending the Democratic Governors' Association meeting.
He said, "This is a big win for the Virgin Islands. I am very grateful for the personal support of President Clinton on this measure during the tough budget negotiations in the last weeks of the congressional session."
It was expected that the president would sign the bill that was passed in the U.S. House of Representatives by a vote of 418-2 and approved by the full Senate last month.
Congressional Delegate Donna Christian-Christiansen said she had been assured that the White House supported the temporary lifting of the cap.
The rum-tax cap increase provision was part of the Work Incentive Improvement Act. It includes lifting the cap on rum-excise taxes for Puerto Rico too.