invest usvi

Invest USVI An Opportunity Zones, Family Offices & 1031 Exchange Super Fund 

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alexander hamilton, st. croix usvi

St. Croix, US Virgin Islands

St. Croix, US Virgin is the genesis and architect of the robust American Financial System by American Founding Father Alexander Hamilton and the first US Treasury Secretary.


Come discover and explore St. Croix, USVI, Alexander Hamilton boyhood home for investments in opportunity zones with very attractive ROI. 


The USVI is a unique opportunity zone investment proposition for a number ofl reasons,  the USVI offers investment and development incentives in the areas of EDC & UVI RT Park Tax Incentives, 1031 Exchange, land subsidies, Tax Increment Financing (TIF), Jones Act Exemption, special Hotel Development Act, Public Financing Mechanism, Enterprise Zones, EB-5  Funding, Made in the USA branding for Foreign Manufacturing and Assembling of goods to be exported to the US Mainland Duty-Free.  The USVI and the Invest USVI Fund will provide some very unique investment opportunities to combine and stack these various tax incentives benefits and economic development mechanisms to establish a super fund providing investor and shareholder value.


Over the next 3-5 years  Public Spending on Capital Projects for Infrastructure is estimated to be $8-$10 Billion in the USVI.


 

USVI Economic Development Authority (EDA) EDC & UVI Research & Technology Park Tax Benefits A Program Sanctioned By the U.S. Government


The Economic Development Commission (EDC) offers a unique and attractive tax incentive program for companies located in the USVI. This is a competitive offshore tax benefit program that is sanctioned by the U.S. Government. Below are some of the benefits your business can reap if eligible for the EDC program:


  • 90% reduction in corporate income tax
  • 90% reduction in personal income tax
  • 100% exemption on gross receipt tax
  • 100% exemption on business property tax
  • 100% exemption on excise tax payments
  • Reduction in the customs duty from the standard 6% to 1%
  • Tax reduction on royalty income from software developed in the USVI and sold to non-US customers
  • Availability of rental space at below market rates in the St. Croix and St. Thomas Industrial Parks


What is a 1031 Exchange? Where do 1031 exchanges work?


The Northern Marianas, Guam, and the U.S. Virgin Islands are all listed as viable locations to carry out a U.S. to U.S. 1031 exchange thanks to a series of government treaty interpretations and regulations last updated in 2005. However, Puerto Rico is not included on this list of coordinated territories. Meaning that while Puerto Rico is most certainly a United States Territory, you cannot carry out a 1031 exchange selling within the 50 United States and purchasing there.


Foreign Property


In 1989, Section 1031 was amended with Subsection (h)(1) stating that real property located in the United States is not considered like-kind with real property located outside the United States. Foreign real and personal property used predominantly in a foreign country is eligible for 1031 exchange tax deferral treatment when exchanged for real and personal property located in a foreign country.


Virgin Islands


Section 7701 of the Internal Revenue Code (IRC) defines the borders of the United States as all fifty states and the District of Columbia. The Internal Revenue Service defined the borders of the U.S. to include the U.S. Virgin Islands for 1031 eligibility given the Exchangor is:


(1) A citizen or resident of the United States and


(2) Has income derived from sources within the U.S. Virgin Islands, is effectively connected to the performance of a trade or business in the U.S. Virgin Island or files a joint return with an individual who derives an income or is connected to a trade or business within the U.S. Virgin Islands.


Both requirements must be satisfied to exchange real property in the fifty states and real property located in the U.S. Virgin Islands. 


 WHAT IS A 1031 EXCHANGE? 

 

What is a 1031 exchange? In brief, a 1031 exchange allows for the deferral of capital gains and depreciation recapture of real property if held for trade, business or investment purposes and reinvested into “like kind” property. Internal Revenue Code §1031 represents the ability to defer federal capital gains and recaptured depreciation taxes when selling real property held for investment or in the production of income or in a business and replacing with real property that is also held for investment or in the production of income or in a business.


By deferring the tax, the Exchangor is able to use the tax deferred as additional capital towards the purchase of more real property. Rather than paying the tax which is then deferred until the sale of the replacement property, the gain or the dollars it represents can be used to purchase a greater value of property, thus maximizing the marginal use of each taxable dollar.


Ok, so what does this mean? Let’s look at this example rental property purchased for $50,000 with a $25,000 loan and later after ten years sold for $150,000. The structure is valued at $25,000 and was depreciated each year, totaling $9,091. Selling expenses include realtor sales commission, title insurance and other associated closing expenses of $13,500. The total capital gain is $95,591.


If a 1031 exchange is initiated, the total tax deferred is $15,248 (recaptured depreciation of $2,273 + federal capital gain of $12,975). Rather than exiting the closing with after tax equity of $96,252, initiate a 1031 exchange reinvesting $150,000 or more in the replacement property and allow the $15,248 to continue to work in your interest. Effectively, the 1031 is an interest free loan of $15,248, allowing a cash infusion to fund new opportunities.


Types of 1031 Exchanges


There are multiple types of exchanges that exist, some differing in sequence and others differing in what is accomplished. The most common type of 1031 exchange is a “Forward,” or “Delayed Exchange,” that involves two properties. Typically, the taxpayer will sell or “relinquish” their investment property and then “replace” the property within the 180-day exchange period. It is also possible to purchase your “replacement” property prior to selling your “relinquished” property; this is called a “Reverse Exchange.”

Less common are International exchanges, or exchanges outside of the US, Build-to-Suit exchanges where the proceeds of the relinquished property are used for improvements on land purchased, and finally Leasehold Improvement exchanges where the proceeds of the sold relinquished property are utilized to improve land that is already held by the taxpayer.


Forward Exchange – The taxpayer sells their property and then replaces with another property.


Reverse Exchange – The taxpayer purchases the replacement property prior to selling their property. This is achieved by utilizing an EAT “Exchange Accommodator Titleholder.”


International Exchange – Property outside of the United States (excluding Guam, The Virgin Islands and Puerto Rico) is exchanged with other property located outside of the United States.


Build-to-Suit Exchange – The taxpayer sells their property and identifies a parcel of land and utilizes the exchange funds to improve the land within the 180-day exchange period.


Leasehold Improvement Exchange – Similar to a Build to Suit Exchange, the proceeds of the relinquished property are utilized to improve property already owned by the taxpayer.


Is a 1031 exchange complicated? We often get asked this question in consultations. There are very clear 1031 exchange rules and requirements that must be followed; experience in accommodating exchanges is essential in knowing how to execute properly.


Qualified Properties of a 1031 Exchange

The “Like Kind” requirement of a 1031 exchange is a key tenet of a successful exchange. In this section, we will outline the property types that are able to be considered as “Like Kind” and eligible for 1031 exchange treatment.


Residential – Property ranging from single family homes, apartments and duplexes to vacation rental condominiums and townhomes. This category is the most common type of 1031 exchange.


Commercial – Convenience stores, gas stations, shopping malls, strip centers, parking lots, golf courses, marinas, nursing homes and office buildings cover an expansive list of properties that qualify.


Agriculture – Farm land, including ranches, mixed use primary residences on land and timberland are eligible for 1031 exchange treatment.


Conservation Easements – Land trust and conservation easements are eligible for 1031 exchange.


Oil, Gas, Mineral, Water and Ditch Rights – Given there is a perpetual interest involved, oil, gas, mineral and ditch rights are eligible. Royalties are considered real property and therefore qualify.


Tenants in Common or Delaware Statutory Trusts – Multi party ownership, including TIC and DST interests are eligible.


Though this list is not entirely comprehensive, it represents the vast majority of “Like Kind” properties that are engaged in 1031 exchange treatment. (Source: Atlas 1031)



The EB-5 and Opportunity Zone programs have plenty in common, and EB-5 developers and fund managers are well-positioned to pivot into Opportunity Zone projects.  


Both EB-5 and OZ funds have similar goals and were designed to bring new capital to struggling communities.



EB-5 is basically private equity with immigration investors, and Opportunity Zones are basically private equity with tax-incentive.  



USCIS administers the EB-5 program, created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Under a program initially enacted as a pilot in 1992, and regularly reauthorized since then, investors may also qualify for EB-5 classification by investing through regional centers designated by USCIS based on proposals for promoting economic growth. On Nov. 21, 2019, President Trump signed a law extending the Regional Center Program through Dec. 20, 2019.



The minimum investment amounts by filing date and investment location are:


Petition Filing Date

Before 11/21/2019



Minimum Investment Amount – 8 CFR 204.6(f)(1).


$1,000,000



Targeted Employment Area Investment Amount – 8 CFR 204.6(f)(2)


$500,000



High-Employment Area Investment Amount – 8 CFR 204.6(f)(3)

$1,000,000


Petition Filing Date


On or After 11/21/2019



Minimum Investment Amount – 8 CFR 204.6(f)(1).


$1,800,000



Targeted Employment Area Investment Amount – 8 CFR 204.6(f)(2)


$900,000



High-Employment Area Investment Amount – 8 CFR 204.6(f)(3)

$1,800,000


Future adjustments will be tied to inflation (per the Consumer Price Index for All Urban Consumers, or CPI-U) and occur every five years.
 

Learn More

The United States Virgin Islands is an unincorporated US Territory in the Caribbean, to include St. Thomas, St. John and St. Croix.  Click on Find Out More below for project opportunities and overview.