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59–010 Calendar No. 44 110TH CONGRESS REPORT " ! SENATE 1st Session 110–19 REPEAL CERTAIN SECTIONS OF THE ACT OF MAY 26, 1936 PERTAINING TO THE VIRGIN ISLANDS FEBRUARY 15, 2007.—Ordered to be printed Mr. BINGAMAN, from the Committee on Energy and Natural Resources, submitted the following R E P O R T [To accompany H.R. 57] The Committee on Energy and Natural Resources, to which was referred the Act (H.R. 57) to repeal certain sections of the Act of May 26, 1936, pertaining to the Virgin Islands, having considered the same, reports favorably thereon without amendment and rec- ommends that the Act do pass. PURPOSE OF THE MEASURE The purpose of H.R. 57 is to repeal certain sections of the Act of May 26, 1936 (sections 1401–1401e of title 48, of the United States Code), to provide the Government of the United States Vir- gin Islands the ability to fully regulate real property tax matters in the territory. BACKGROUND AND NEED H.R. 57 would repeal an outdated 1936 Federal statute which limits the authority of the Virgin Islands Government to assess and collect real property taxes in the Territory. The 1936 statute was enacted to address the tax policies of the Danish-era municipal councils in the Virgin Islands. The 1936 statute was generally thought to have been repealed by the enactment of the Revised Or- ganic Act of 1954, as amended, which abolished the municipal councils and created a comprehensive system of local government with sufficient legislative powers to resolve local property tax issues without the need for Federal intervention. A 2004 Third Circuit Court of Appeals Federal court decision, however, has revived the 1936 statute, which requires that all real VerDate Aug 31 2005 01:45 Feb 21, 2007 Jkt 059010 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\SR019.XXX SR019 hmoore on PROD1PC68 with HMRPT 2 property be taxed at the same rate without regard to classification or use. The decision, among other things, struck down a local stat- ute capping the amount of any increase in the assessment of resi- dential real property (and therefore any increase in the property tax owed) in any assessment period. If not now repealed by Congress, the 1936 statute will hinder the exercise of the Government’s power, as conferred by the Revised Organic Act, to assess, administer and collect real property taxes in the Virgin Islands. Indeed, by precluding classification of prop- erty by use and requiring a uniform rate of tax between residential and commercial property, the 1936 statute puts at risk long-stand- ing Government policies designed to develop the economy, promote social welfare, and protect homeownership in the Virgin Islands. Without the authority to limit such increases by capping such as- sessments or similar methods commonly used by other jurisdic- tions, the now revived 1936 statute may have the anomalous result of pricing land and homeownership beyond the reach of many Vir- gin Islanders. The 1936 statute has long outlived its usefulness and now inter- feres with the Virgin Islands ability to perform an essential govern- mental function. The assessment and collection of real property taxes is fundamentally a local government issue with no Federal impact. No other State, Territorial, or local government is subject to such Federal restrictions. The Revised Organic Act of 1954, as amended, confers upon the people of the Virgin Islands full powers of local self-government. The 1936 statute is an anachronism that needs to be repealed. LEGISLATIVE HISTORY H.R. 57, introduced by Virgin Islands Delegate Christensen, passed the House of Representatives by a voice vote on January 17, 2007 and was referred to the Committee on Energy and Natural Resources. A companion measure, S. 279, was introduced by Sen- ator Bingaman (for himself and Senator Domenici) on January 12, 2007. During the 109th Congress, the Committee considered identical legislation, S. 1829, introduced by Senator Domenici (for himself and Senator Bingaman), by request, on October 6, 2005. The Com- mittee held a hearing on S. 1829 on October 25, 2005 (S. Hrg. 109– 291). The bill was ordered reported by the Committee on March 15, 2006, S. Rept. 109–236. The Senate passed S. 1829 by unanimous consent on September 29, 2006. The House of Representatives passed S. 1829, with an amendment and an amendment to the title, by a voice vote on December 6, 2006. No further action oc- curred prior to the sine die adjournment of the 109th Congress. COMMITTEE RECOMMENDATION The Committee on Energy and Natural Resources, in open busi- ness session on January 31, 2007, by voice vote of a quorum present, recommends that the Senate pass H.R. 57. SUMMARY OF THE MEASURE H.R. 57 repeals sections 1 through 6 of the Act of May 26, 1936 (48 U.S.C. 1401 et seq.), effective July 22, 1954. VerDate Aug 31 2005 01:45 Feb 21, 2007 Jkt 059010 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\SR019.XXX SR019 hmoore on PROD1PC68 with HMRPT 3 COST AND BUDGETARY CONSIDERATIONS The following estimate of costs of this measure has been provided by the Congressional Budget Office: H.R. 57—An act to repeal certain section of the Act of May 26, 1936, pertaining to the Virgin Islands H.R. 57 would repeal sections 1 through 6 of the 1936 Organic Act of the Virgin Islands, which govern the levying of property taxes in the United States Virgin Islands (a territory of the United States). CBO estimates that enacting H.R. 57 would have no im- pact on the federal budget because it would affect the territory’s property taxes and would have no impact on federal revenue. H.R. 57 contains no intergovernmental or private sector man- dates as defined in the Unfunded Mandates Reform Act. Enacting this legislation would benefit the government of the Virgin Islands by repealing an existing federal preemption and establishing local authority over the territory’s property tax. The long-term impact of this change on tax revenues in the territory would depend on local decisions regarding the structure of the property tax. This legisla- tion would impose no costs on any other state, local, or tribal gov- ernment. The CBO staff contacts for this estimate are Matthew Pickford (for federal costs) and Marjorie Miller (for the state and local im- pact). This estimate was approved by Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. REGULATORY IMPACT EVALUATION In compliance with paragraph 11(b) of rule XXVI of the Standing Rules of the Senate, the Committee makes the following evaluation of the regulatory impact which would be incurred in carrying out H.R. 57. The Act is not a regulatory measure in the sense of impos- ing Government-established standards or significant economic re- sponsibilities on private individuals and businesses. No personal information would be collected in administering the program. Therefore, there would be no impact on personal privacy. Little, if any, additional paperwork would result from the enact- ment of H.R. 57, as ordered reported. EXECUTIVE COMMUNICATIONS Because H.R. 57 is similar to legislation considered by the Com- mittee during the 109th Congress (and which itself was introduced at the request of the Administration), the Committee did not re- quest Executive Agency views on H.R. 57. The testimony provided by the Department of the Interior on Oc- tober 25, 2005 at a hearing on S. 1829 in the 109th Congress fol- lows: STATEMENT OF NIKOLAO I. PULA, ACTING DEPUTY ASSIST- ANT SECRETARY OF THE INTERIOR FOR INSULAR AFFAIRS Mr. Chairman and Members of the Committee on En- ergy and Natural Resources, I am pleased to appear before you today to discuss S. 1829. I am Nikolao Pula, Acting VerDate Aug 31 2005 01:45 Feb 21, 2007 Jkt 059010 PO 00000 Frm 00003 Fmt 6659 Sfmt 6969 E:\HR\OC\SR019.XXX SR019 hmoore on PROD1PC68 with HMRPT 4 Deputy Assistant Secretary of the Interior for Insular Af- fairs. S. 1829 would repeal sections 1 through 6 of the 1936 Organic Act of the Virgin Islands of the United States, which deal with property taxation in the territory. In 2003, the Fourth Circuit Court of Appeals held that the property tax provisions in the 1936 Organic Act, requiring market valuation, were still in effect despite enactment of the Re- vised Organic Act of 1954. This decision has had the effect of invalidating local Virgin Islands’ statutes that give prop- erty tax exemptions to residents such as veterans and sen- iors. In a rapidly escalating real estate market, people on lim- ited incomes, including many veterans and seniors, can be forced from their homes due to an inability to pay the in- creased levies. Adverse social consequences can follow. For decades, the Department of the Interior has spon- sored or backed measures that increase self-government for the territories. S. 1829 advances Virgin Islands citi- zens’ self-government, consistent with Departmental pol- icy. Additionally, it is my understanding that there is no Federal regulation of property taxation in any other state or territory under the American flag. S. 1829 would return control of the property tax to the Government of the Virgin Islands, and property taxes would be levied as they were prior to the Fourth Circuit’s decision. The Administration supports enactment of S. 1829. CHANGES IN EXISTING LAW In compliance with paragraph 12 of rule XXVI of the Standing Rules of the Senate, changes in existing law made by the Act H.R. 57, as ordered reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, existing law in which no change is proposed is shown in roman): ACT OF MAY 26, 1936 [CH. 450, 49 STAT. 1372] AN ACT To establish an assessed valuation real property tax in the Virgin Islands of the United States øBe it enacted by the Senate and House of Representa- tives of the United States of America in Congress assem- bled, That it is the policy of Congress to equalize and more equitably to distribute existing taxes on real property in the Virgin Islands of the United States and to reduce the burden of taxation now imposed on land in productive use in such islands. øSEC. 2. For the calendar year 1936 and for all suc- ceeding years all taxes on real property in the Virgin Is- lands shall be computed on the basis of the actual value of such property and the rate in each municipality of such islands shall be the same for all real property subject to VerDate Aug 31 2005 01:45 Feb 21, 2007 Jkt 059010 PO 00000 Frm 00004 Fmt 6659 Sfmt 6969 E:\HR\OC\SR019.XXX SR019 hmoore on PROD1PC68 with HMRPT 5 taxation in such municipality whether or not such property is in cultivation and regardless of the use to which such property is put. øSEC. 3. Until local tax laws conforming to the require- ments of this Act are in effect in a municipality the tax on real property in such municipality for any such calendar year shall be at the rate of 1.25 per centum of the assessed value. If the legislative authority of a municipality shall fail to enact laws for the levy, assessment, collection, or enforcement of any tax imposed under authority of this Act within three months after the date of its enactment, the President shall then prescribe regulations for the levy, as- sessment, collection, and enforcement of such tax, which shall be in effect until the legislative authority of such mu- nicipality shall make regulations for such purposes. øSEC. 4. All taxes so levied and collected shall be depos- ited in the municipal treasury of the municipality in which such taxes are collected. øSEC. 5. The Virgin Islands Company shall pay annually into the municipal treasuries of the Virgin Islands in lieu of taxes an amount equal to the amount of taxes which would be payable on the real property in the Virgin Is- lands owned by the United States and in the possession of the Virgin Islands Company, if such real property were in private ownership and taxable, but the valuation placed upon such property for taxation purposes by the local tax- ing authorities shall be reduced to a reasonable amount by the Secretary of the Interior if, after investigation, he finds that such valuation is excessive and unreasonable. The Virgin Islands Company shall also pay into the municipal treasuries of the Virgin Islands amounts equal to the amounts of any taxes of general application which a pri- vate corporation similarly situated would be required to pay into the said treasuries. Similar payments shall be made with respect to any property owned by the United States in the Virgin Islands which is used for ordinary business or commercial purposes, and the income derived from any property so used shall be available for making such payments. øSEC. 6. Nothing in this Act shall be construed as alter- ing, amending, or repealing the existing exemptions from taxation of property used for educational, charitable, or re- ligious purposes. Subject to the provisions of this Act, the legislative authority of the respective municipalities is hereby empowered to alter, amend, or repeal, subject to the approval of the Governor, any law now imposing taxes on real and personal property.¿ Æ VerDate Aug 31 2005 01:45 Feb 21, 2007 Jkt 059010 PO 00000 Frm 00005 Fmt 6659 Sfmt 6611 E:\HR\OC\SR019.XXX SR019 hmoore on PROD1PC68 with HMRPT