On February 17, 2011 Governor de Jongh submitted The Austerity Measures of FY 2011 and FY 2012 Act to the Virgin Islands Legislature for consideration. Included in the measures was an increase in the gross receipts tax to five percent (5%). In response, the Legislature introduced a two-bill package as a substitute. Included in the bill was a provision which would raise the existing gross receipts tax from four percent (4%) to four and one half percent (4.5%).  Despite the fact that the revised legislation fell short of the projected budget deficit, de Jongh signed the legislation  into law this weekend.

In case you missed it…Judge Gomez of the District Court of the Virgin Islands has lifted the injunction freezing tax values and rates at the 1998 levels.

There is an interesting Timeline of the VI property tax dispute and a helpful Frequently Asked Questions section at the end of the article.

Important Dates:

February 17, 2011 – 2006 tax bills begin to accrue penalties and interest

February 2011 – 2007 property tax bills will be issued

Summer 2011 – 2008 property tax bills will be issued.

This blog is particularly interested in helping businesses run better.  I find one the best ways to make a business run better is to make sure that the business has more money in its pocket…especially during difficult times.  That is why I plan to post a lot about tax incentives businesses should utilize, especially when new legislation is passed on the federal or local level that increases a tax incentive for a business.  With that in mind, I’d like to discuss Section 179 Deductions:

Section 179 of the Internal Revenue Code allows businesses to deduct certain types of property on their income tax as an expense, rather than requiring the property to be capitalized and depreciated.

The Small Business Jobs Act of 2010 (“SBJA”) allows businesses to expense up to $500,000 of section 179 property for tax years 2010 and 2011.  This is a significant increase from the $250,000 for 2010 and $25,000 for 2011 expensing limit that would have been in effect without SBJA.

This is how it works:

Under Section 179 of the Internal Revenue Code (“IRC”), businesses can immediately expense the first $500,000 they spend on qualified property.  The catch is that if your business spends in excess of $2,000,000, then each dollar over this limit will decrease the amount of deduction you can claim dollar for dollar.  So, for example, if a company spends $2,010,000 investing in machinery and equipment in 2011, they will only get a $490,000 deduction ($500,000 minus $10,000 spent over the $2,000,000 limit).  If a company spends $2,500,000 investing in machinery and equipment they get no deduction.

Qualified property is limited to tangible, depreciable, personal property which is acquired by purchase for use in the active conduct of a trade or business.  Although, the definition of “qualified property” under IRC Section 179 was expanded by the SBJA to include qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property, albeit only up to a  $250,000 limit.

Contact your tax professional to see how you can take full advantage of 179 Deductions.