Clear Water - Power Point

CLEARWATER CONSULTING CONCEPTS, LLLP A United States Virgin Islands Economic Development Commission Beneficiary

________________________________________________ The U.S. Virgin Islands Economic Development Commission is authorized to grant federal tax incentives to local USVI businesses (“Beneficiaries”) pursuant to a federal mandate by the United States Congress codified in Internal Revenue Code Sections 934 and 937

U.S. Virgin Islands Economic Development Commission What Do You Get? • • • • • •

Federal Income Tax: 90% reduction State Income Tax: None in USVI Sales Tax: None in USVI Gross Receipts Tax: 100% exemption from 4% USVI tax U.S. Territory: No expatriation and repatriation of money since it is a U.S. Territory Other: Various other tax benefits are also available (i.e. duty taxes on imports and exports)

U.S. Virgin Islands Economic Development Commission What Does Clearwater Give to USVI? • • • •

Hiring and training of local resident USVI employees Purchasing of all goods and services locally from eligible suppliers approved by the EDC Significant annual charitable contributions to local charities Taxes are paid to the USVI Bureau of Internal Revenue (“BIR”) and stay within the USVI economy

U.S. Virgin Islands Economic Development Commission Why Does it Exist and Work? •

Mutual Trade-Off: EDC beneficiaries save taxes in exchange for providing much needed private sector stimulation of the USVI economy through providing employment and career opportunities for local residents, local procurement of goods and services, and increased tax revenues from business revenues that otherwise would not exist within the USVI.

•

Trickle Down Economics: Sales of real estate, automobiles, groceries, home services, goods and services for other local business, etc… The existence of the EDC Program and its beneficiary companies such as Clearwater in the U.S Virgin Islands is immensely important to the economy of the U.S Virgin Islands.

U.S. Virgin Islands Economic Development Commission What Do You Need to Do? •

USVI Source Income: For personal service income, only the reasonable value of personal services performed outside of the United States qualifies for EDC tax benefits

•

USVI Bona Fide Resident: - Generally, you must be physically present in the USVI for at least 183 days during a given tax year or you must meet one of several exceptions to the 183 day physical presence test (and other factors such as obtaining a VI drivers license) - Alternatively, a USVI C Corporation as the “USVI resident”

CLEARWATER CONSULTING CONCEPTS, LLLP General Partner Provides Management and Resources • •

• • • •

Employees and human resources 2 fully-functional, high-end resort offices: - Ritz-Carlton Resort - Elysian Resort EDC compliance and government filings Accounting Documentation of work Tax planning

CLEARWATER CONSULTING CONCEPTS, LLLP Manager of General Partner and Chief Executive Officer Theodore C. “Teddy” Skokos, Jr. Tax Attorney

Clearwater Consulting Concepts, LLLP Flexibility for Limited Partners • • • • •

No ten year EDC commitment No leases of office space No binding agreements for length of participation No exit strategy concerns No EDC compliance concerns

Clearwater Consulting Concepts, LLLP Costs •

Management fees are paid to the General Partner (based upon annual net partnership revenues) in exchange for benefits of the EDC Certificate, turnkey business solution including high-end resort offices, telephone lines and systems, fax machines, copiers, printers, T-1 internet line, high-end video conferencing equipment with HDTV plasma displays and other common business resources.

•

If applicable, additional costs may include: – Dedicated Clearwater employees – Compensation study by independent expert to determine reasonableness of fees paid to Clearwater for tax purposes – Tax opinion letter / attorney fees for your specific circumstances

Example: Individual Partner Facts: John Doe meets the requirements to be taxed as a bona-fide resident of the USVI and becomes a limited partner in Clearwater Consulting Concepts, LLLP. John works one full year in St. Thomas generating net revenues for Clearwater sourced outside of the United States in the amount of $1,000,000. Additionally, John generates $1,000,000 of income sourced from within the United States through various investments and other United States business income.

Example: Individual Partner A.

EDC Income

$ 1,000,000

Non-EDC Income (i.e. U.S. Source) B.

Total Income

C.

Federal Tax Rate

D.

Federal Tax (Before EDC Credit)

E.

% of EDC Income to Total Income (A ÷ B)

F.

Federal Tax Subject to EDC Exemption (D x E)

G.

EDC Exemption Percentage

H.

Federal Tax Savings (EDC Credit) (F x G)

1,000,000 $ 2,000,000 x $

35% 700,000 x 50%

$

350,000 x

90%

$ 315,000

Example: C Corporation Partner Facts: John Doe does not intend to meet the requirements to be taxed as a bona fide resident of the USVI. John owns 100% of a USVI C Corporation that becomes a limited partner in Clearwater Consulting Concepts, LLLP. John works for 3 months during the year in St. Thomas generating net revenues for Clearwater sourced outside of the United States in the amount of $1,000,000.

Example: C Corporation Partner CORPORATION A.

EDC Income

B.

Federal Tax Rate (assuming a 35% marginal tax rate)

C.

Federal Tax (Before EDC Credit)

D.

EDC Exemption Credit Percentage

E.

Federal Tax After EDC Credit (3.5% + 10% VI Surtax)

$ 1,000,000 x

35% 350,000

x

90%

$

38,500

$

961,500

SHAREHOLDER (NON-USVI RESIDENT) F.

Corporate Dividend (A – E)

G.

Federal Tax Rate on Corporate Dividends

H.

Federal Tax

$

144,225

I.

Total Federal Tax (E + H)

$

182,725

J.

Federal Tax Savings (C – I)

$ 167,275

x

15%

Example: C Corporation Partner CORPORATION A.

EDC Income

B.

Federal Tax Rate (assuming a 35% marginal tax rate)

C.

Federal Tax (Before EDC Credit)

D.

EDC Exemption Credit Percentage

E.

Federal Tax After EDC Credit (3.5% + 10% VI Surtax)

$ 1,000,000 x

35% 350,000

x

90%

$

38,500

$

961,500

SHAREHOLDER (USVI RESIDENT) F.

Corporate Dividend (A – E)

G.

Federal Tax Rate on Corporate Dividends

H.

Federal Tax

$

14,423

I.

Total Federal Tax (E + H)

$

52,923

J.

Federal Tax Savings (C – I)

$ 297,077

x

1.5%