A judge has lifted the injunction freezing VI tax values and rates at the 1998 level, ending the long battle over the Virgin Islands property tax system. A settlement was signed Jan. 7 between the government and the group of property owners who sued the territory over taxes more than 10 years ago.
Background
The lawsuit claimed the tax system was unfair and unconstitutional. Parties reached a settlement in 2000, but after three years of government inaction, they returned to court. In 2003, the VI court ruled in the plaintiffs' favor, and issued an injunction freezing property valuations at 1998 levels, the last valuation year deemed fair by the court. It also ordered the government to revalue all property using fair market values plus demonstrate a functional Tax Review Board. Quoting Shakespeare and case law in his opinion, District Judge Curtis Gomez wrote that the V.I. government has experienced a "positive sea change" and the Tax Review Board is now functioning as it should.
A visiting judge, a special mediator, from Pennsylvania, worked with both sides to reach agreement. He basically locked everyone in the room until an agreement was reached. All involved agree the settlement is a compromise, and have reported they are comfortable with the conclusions and feel them fair.
Specifics of the Agreement
-The Tax Review Board hearing examiner's report will be given to the taxpayer before the hearing.
- The taxpayer shall be notified of the hearing and the right to appear and present objections.
- If the board fails to make a decision 120 days after an appeal has been filed, the appeal automatically will be granted and the assessed value will revert to the prior year's assessed value.
- If there is a continuance in a board proceeding, the parties may agree to give the board an additional 30 days to make a decision. If the taxpayer refuses the request, the board has the right to advise the taxpayer that unless consent is given, the appeal must be denied without consideration.
- The 1998 property values and tax rates shall continue for the 2007, 2008, 2009 tax years.
- The governor will submit legislation to the V.I. Senate to extend the waiver of interest and penalties for six months on the 2009 tax year bills.
- The plaintiffs will withdraw their appeal currently before the 3rd U.S. Circuit Court of Appeals.
- The court retains jurisdiction to decide pending attorney's fees motions.
How the Ruling Affects VI Property Owners
Under the agreement, the government will not be able to collect property taxes using fair market values or the new tax rate structure - made law in 2007 - until the 2010 tax year. Because the government did not issue any tax bills at all for four years, taxpayers will receive two years' worth of bills each year until the bills are current. The 2010 tax bill will not be issued until 2012.
In the Future
While getting rid of the injunction will help the government collect more revenue in the long run, the territory's financial problems will not be solved immediately. The Fiscal Year 2011 budget already depends on collecting the 2007 and 2008 property taxes at the 1998 levels, and that does not change with the court ruling. Once the government begins to use fair market values to assess taxes in 2010, its ability to borrow money will increase dramatically.
Contact me with any questions you have about upcoming tax bills and I'll try to get you answers. Read more about the decision and history of this complex issue at VirginIslandsDailyNews.com.
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