US VIRGIN ISLANDS: An Introduction to General Business Law
United States Virgin Islands: Business Law Global Overview 2022 – Shades of Blue and Green
Contributor: Marjorie Rawls Roberts, PC
Marjorie Roberts, Sean Foster, Renée André, and Lisa Wisehart
1. Overview: The United States Virgin Islands (“USVI”) is an unincorporated territory of the US located approximately 1,100 miles south-east of Miami, Florida. The USVI was acquired from Denmark in 1917 and is made up of the islands of St. Croix, St. John, St. Thomas and Water Island, plus numerous uninhabited cays, with a total population of approximately 90,000. The USVI uses US currency and no exchange controls exist.
The USVI offers banks that are FDIC-insured and is covered by the US’s extensive network of bilateral investment treaties. The USVI has two federal judges and is part of the Third Circuit Court of Appeals.
The USVI’s Governor is Albert Bryan, Jr., who is in the fourth year of his first term. Governor Bryan previously served as Commissioner of the Department of Labor and as Chair of the Economic Development Commission, so he has been very involved in the USVI’s economic development and workforce training initiatives. The USVI has a non-voting delegate to the US Congress, Stacey Plaskett, an attorney by training who previously served as General Counsel to the Economic Development Commission. Congresswoman Plaskett serves on the Ways and Means Committee and is very focused on tax policy and the USVI’s economic development. Finally, the USVI has a unicameral legislature with fifteen senators. The Senate President is Donna Frett-Gregory, and she sits on the Committee on Finance and the Committee on Economic Development & Agriculture, among other interests.
As a US territory, the USVI occupies a unique status. Although the USVI is part of the US, it has been granted authority by the US Congress to enact special tax laws to encourage investment in business operations. The USVI has set up several economic development programs, several of which offer a tax credit equal to 90 percent for income received from qualifying activities and exemptions from many local taxes. The principal programs are administered by the USVI Economic Development Authority (the “EDA”). The USVI therefore offers many opportunities for investors and especially entrepreneurs who seek a politically stable, low-tax jurisdiction under the US flag with legitimate protection of their assets from taxes, and an attractive location offering excellent telecommunications.
The USVI’s recent economic development initiatives have focused on the colors blue and green. The USVI is seeking to leverage its sublime tropical location as a prime site for “blue economy” or marine-related businesses – from marinas to coral research to low-impact developments on unspoiled islands to boat manufacturers – and for “green economy” or environmentally sensitive businesses – including the expanded uses of alternative energy sources. The USVI is also focused on preserving and celebrating its history and has enacted incentives to encourage redevelopment of its historic towns of Frederiksted, Christiansted, and Charlotte Amalie by focusing on the creation of museums, art galleries, experiential tourism, and specifically businesses that promote the USVI’s history and culture.
2. Business Law Basics: The USVI provides many options when choosing to form a legal entity, including corporations, limited liability companies and partnerships. The USVI offers several types of partnerships including general partnerships, limited partnerships, limited liability limited partnerships and limited liability partnerships, as well as trusts. The USVI has adopted the Uniform Limited Liability Company Act, and formation and governance of an LLC is similar to that imposed in the 50 states and the District of Columbia. Federal laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934, apply in the USVI. Additionally, the USVI has adopted the Uniform Securities Act for territorial-level securities regulation and the Uniform Commercial Code. Apart from general partnerships, which are formed by the agreement of the partners, and trusts, all entities are formed through filings with the USVI Office of the Lieutenant Governor, Division of Corporations and Trademarks. All entities receive employer identification numbers from the Internal Revenue Service (“IRS”), and businesses are required to obtain business licenses from the Department of Licensing and Consumer Affairs in order to engage in business in the USVI.
3. The “Blue” and “Green” Economies: In 2021, the USVI completed Vision 2040, which engaged multiple stakeholders, with a strong emphasis on understanding diverse perspectives of residents and businesses to set the tone and pace for future economic growth. Governor Bryan tasked the EDA, headed by CEO Wayne Biggs, with overseeing the project. Vision 2040 identified several goals in the “blue economy space” including becoming a research center of excellence for ocean-based tropical environments, supporting marine and maritime businesses, using such renewable energy sources as tidal and wave technologies, and conducting research into climate change. Vision 2040 also identified several goals in the “green economy space” such as focusing on solar, wind and biomass for renewable energy, USVI-Style Tourism focusing on culture and heritage, agribusiness and regional food manufacturing.
The USVI has always been a popular yachting location, but the USVI also has enacted incentives for yachts and its two major marinas, Yacht Haven Grande and American Yacht Harbor, have seen recent upgrades. For example, the USVI has exempted all boats, boat engines, and boat parts from USVI excise taxes and customs duties. Yacht Haven Grande recently hosted the inaugural Caribbean Charter Yacht Show and is attracting growing numbers of superyachts seeking a secure and well-located home base.
The USVI, and specifically the island of St. Croix, is the location of one of the foremost boat manufacturers in the Caribbean – Gold Coast Yachts. Gold Coast Yachts has constructed more than 135 custom multihulls in the USVI by a team of dedicated and locally trained craftspeople and exemplifies the type of business sought by the USVI in support of its “blue” and “green” economic initiatives.
The USVI has also become a center for coral research. Coral World Ocean Park, on the east end of St. Thomas, has as its mission statement: “To inspire and educate visitors to protect our worldwide ocean by providing meaningful and fun experiences with marine life." The owners of Coral World have also spearheaded the creation of the Coral World Ocean and Reef Initiative, Inc., which is a USVI non-profit corporation and IRS-approved charity formed several years ago which engages in research in coral health and disease, coral reef monitoring and assessment, and coral reef restoration, as well as wildlife rescue and rehabilitation. In 2021, Reefs Unknown Inc. was formed in the USVI, spearheaded by marine biology graduate students at the University of the Virgin Islands (“UVI”), to perform scientific research related to the marine environments of deep coral mesophotic coral reefs and other unusual reef formations. These and other USVI organizations are at the forefront of researching – and seeking to reverse – coral diseases that jeopardize marine ecosystems globally.
The USVI has taken legislative steps to protect coral reefs, including recent bans on single-use plastic bags and plastic straws, as well as the passage of a “safe sunscreen” law banning sunscreen that contains oxybenzone, octinoxate and octocrylene, which are known to destroy coral. USVI nonprofits, including Island Green Living Association, have played a pivotal role in public education and community awareness regarding the importance of “green” practices for USVI residents and visitors.
Recent hotel construction also has embraced the importance of the blue and green economies to the USVI’s economic development. Lovango Resort and Beach Club, which opened in 2020, is located on an island between St. John and St. Thomas. It offers tree houses and glamping tents and is sustainably powered using wind and solar energy. Lovango is also working with UVI to replenish the coral reefs surrounding Lovango Cay, offering underwater signage to educate snorkelers about each of the research sites. On St. John, in the Virgin Islands National Park, Cinnamon Bay Campground underwent a comprehensive reconstruction and recently reopened, offering 40 cottage units, 55 eco-tent sites and 31 bare sites. It offers paddle boards, kayaks and other low-impact recreational activities. It also offers sustainable products such as organic cotton beach towels and sun shirts and hats made from recycled plastic bottles. On St. Croix, the Fred Hotel is composed of six renovated and preserved historic structures and is eco-friendly with a focus on Crucian history. On the far west end of St. Thomas, across from land owned by the Nature Conservancy, the Botany Hotel is under construction, with 68 individual cottages being constructed in three phases to preserve and celebrate the existing flora and fauna.
The USVI is advancing initiatives to promote food security and sustainable agriculture, including increasing agriculture-related industrial production and providing (in partnership with World Central Kitchen) grants and loans to support smallholder farms, fishers and fisheries and agribusiness. The rise in small-scale, eco-friendly hotels in the USVI has opened doors for farm-to-table and plant-based menus that provide tourists access to the USVI’s distinctive culinary offerings.
Further, several agri-business projects are in the works – focusing on hemp, cassava and fresh produce that can be consumed in the USVI and exported throughout the Caribbean and beyond. The USVI has also authorized the production and distribution of medical cannabis.
The USVI Waste Management Authority is actively seeking ways to reduce waste in the USVI, and programs for green waste diversion are underway, while landfill expansion projects are slated to include composting, as well as augmented recyclables sorting and diversion. Similarly, new initiatives are in the works on St. John and St. Thomas to divert ocean-bound plastic from the waste stream and repurpose in industrial manufacturing, as well as aluminum recycling operations. Public and private entities alike are working to overcome the challenges to waste reduction and recycling in an island territory that has limited or no recycling industry within its borders.
Finally, with new executive leadership at the Virgin Islands Water and Power Authority (“WAPA”) as of January 2022, the USVI is advancing efforts to generate energy from renewable and alternative sources. WAPA’s Chief Executive Officer, Andrew Smith, announced that he intends to transition WAPA from producing electricity by burning fossil fuels to a heavily renewable-based system with battery storage. Governor Bryan also recently announced a low-interest revolving loan program to fund the installation of solar energy for residential customers, and in his January 2022 State of the Territory address named the fast-tracking of renewable energy projects in the pipeline as an urgent priority.
4. Covid in Paradise: Like in the rest of the world, Covid-19 has struck the USVI and impacted the economy, with cruise ships being absent for more than a year. Yet, unlike the rest of the Caribbean, the USVI has experienced double-digit increases in overnight stays. Vaccinations and boosters have been readily available since January 2021, and outdoor dining is the norm, along with year-round outdoor activities such as hiking and water sports. As of February 15th travelers to the USVI must present negative Covid-19 tests taken within five days of travel (for domestic travel).