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I 111TH CONGRESS 2D SESSION H. R. 4679 To amend the Internal Revenue Code of 1986 to assist in the recovery and development of the Virgin Islands by providing for a reduction in the tax imposed on distributions from certain retirement plans’ assets which are invested for at least 30 years, subject to defined withdrawals, under a Virgin Islands investment program. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 24, 2010 Mrs. CHRISTENSEN introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to assist in the recovery and development of the Virgin Islands by providing for a reduction in the tax imposed on dis- tributions from certain retirement plans’ assets which are invested for at least 30 years, subject to defined withdrawals, under a Virgin Islands investment program. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Virgin Islands Im- 4 provement Act of 2010’’. 5 VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS 2 •HR 4679 IH SEC. 2. TAX-FREE DISTRIBUTIONS FROM CERTAIN RETIRE- 1 MENT PLAN ASSETS INVESTED UNDER A VIR- 2 GIN ISLANDS INVESTMENT PROGRAM. 3 (a) IN GENERAL.—Part I of subchapter D of chapter 4 1 of the Internal Revenue Code of 1986 (relating to pen- 5 sion, profit-sharing, stock bonus plans, etc.) is amended 6 by adding at the end the following new section: 7 ‘‘SEC. 409B. TREATMENT OF DISTRIBUTIONS FROM CER- 8 TAIN RETIREMENT PLAN ASSETS INVESTED 9 UNDER A VIRGIN ISLANDS INVESTMENT PRO- 10 GRAM. 11 ‘‘(a) IN GENERAL.—If an individual under the age 12 of 61 makes a one-time designation of an amount of quali- 13 fied retirement savings as being under investment by the 14 Virgin Islands Investment Program for at least 30 years, 15 then, as of the close of the 10th year, such amount (and 16 any earnings properly allocable to such amount) shall be 17 treated for purposes of this title— 18 ‘‘(1) as a designated Roth account in the case 19 of qualified retirement savings described in sub- 20 section (b)(1), or 21 ‘‘(2) as a Roth IRA in the case of qualified re- 22 tirement savings described in subsection (b)(2). No 23 amount shall be includible in gross income by reason 24 of the change in treatment under the preceding sen- 25 tence. 26 VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS 3 •HR 4679 IH ‘‘(b) QUALIFIED RETIREMENT SAVINGS.—For pur- 1 poses of this section, the term ‘qualified retirement sav- 2 ings’ means— 3 ‘‘(1) amounts attributable to elective deferrals 4 under an applicable retirement plan, and 5 ‘‘(2) amounts held in an individual retirement 6 plan which is not a Roth IRA. 7 ‘‘(c) VIRGIN ISLANDS INVESTMENT PROGRAM.—For 8 purposes of this section— 9 ‘‘(1) IN GENERAL.—The term ‘Virgin Islands 10 Investment Program’ means a program of the Virgin 11 Islands which meets the requirements of paragraphs 12 (2), (3), (4), and (5). 13 ‘‘(2) MAXIMUM AMOUNT ACCEPTED FOR MAN- 14 AGEMENT.—A program meets the requirements of 15 this paragraph if the amount accepted for manage- 16 ment under the program does not exceed 17 $50,000,000,000. 18 ‘‘(3) FEES AND TAXES.—A program meets the 19 requirements of this paragraph if— 20 ‘‘(A) the fees charged by investment man- 21 agers under the program do not exceed the fees 22 customarily imposed by investment managers 23 for managing like qualified retirement savings 24 outside the Virgin Islands Investment Program, 25 VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS 4 •HR 4679 IH ‘‘(B) the program imposes an annual tax 1 (in addition to the fees permitted under sub- 2 paragraph (A)) equal to— 3 ‘‘(i) 1.5 percent of the amount des- 4 ignated for management under the pro- 5 gram for the first 10 years of the account, 6 and 7 ‘‘(ii) 1 percent of the amount des- 8 ignated for management under the pro- 9 gram for the remainder of the life of the 10 account without regard to account balance, 11 and 12 ‘‘(C) the 1 percent tax is imposed notwith- 13 standing the Roth designation. 14 ‘‘(4) INVESTMENT MANAGER.—A program 15 meets the requirements of this paragraph if the in- 16 vestment managers under the program are chosen 17 by the Governor of the Virgin Islands. 18 ‘‘(5) SEPARATE ACCOUNTING.—A program 19 meets the requirements of this paragraph if the pro- 20 gram— 21 ‘‘(A) establishes separate accounts for each 22 type of qualified retirement savings held for the 23 benefit of each individual and any earnings 24 properly allocable to such assets, and 25 VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS 5 •HR 4679 IH ‘‘(B) maintains separate recordkeeping 1 with respect to each account. 2 ‘‘(d) USE OF 1 PERCENT ANNUAL TAX.— 3 ‘‘(1) REVENUES TO THE VIRGIN ISLANDS DUR- 4 ING FIRST 20 YEARS.— 5 ‘‘(A) IN GENERAL.—Revenues from the tax 6 referred to in subsection (c)(3)(B) shall be col- 7 lected, held, and distributed for the benefit of 8 the Virgin Islands in a manner similar to sec- 9 tion 7652(b) (relating to rum excise tax). 10 ‘‘(B) DISTRIBUTIONS TO VIRGIN IS- 11 LANDS.—Funds and accrued interest described 12 in subsection (d)(1)(A) may be paid from es- 13 crow to the Virgin Islands for expenditure only 14 if— 15 ‘‘(i) the expenditure is pursuant to a 16 qualified infrastructure development plan, 17 and 18 ‘‘(ii) the expenditure is approved by 19 the Secretary of the Interior as being pur- 20 suant to such plan. 21 ‘‘(C) QUALIFIED INFRASTRUCTURE DEVEL- 22 OPMENT PLAN.—For purposes of this para- 23 graph, the term ‘qualified infrastructure devel- 24 opment plan’ means a plan for improving and 25 VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS 6 •HR 4679 IH enhancing the infrastructure of the Virgin Is- 1 lands which is— 2 ‘‘(i) developed and approved by the 3 committee described in subparagraph (D), 4 and 5 ‘‘(ii) approved by the Governor of the 6 Virgin Islands. 7 ‘‘(D) COMMITTEE.—The committee de- 8 scribed in this subparagraph is a committee— 9 ‘‘(i) comprised of 5 members, each 10 serving a term of either three or five 11 years— 12 ‘‘(I) 2 of whom are appointed by 13 the Governor of the Virgin Islands, 14 one for a 3-year and one for a 5-year 15 term, 16 ‘‘(II) 2 of whom are appointed by 17 the Virgin Islands legislature, one for 18 a 3-year and one for a 5-year term, 19 and 20 ‘‘(III) 1 of whom is appointed by 21 the Secretary of the Interior for a 5- 22 year term, and 23 VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS 7 •HR 4679 IH ‘‘(ii) with respect to which a vacancy 1 is filled in the manner in which the origi- 2 nal appointment was made. 3 ‘‘(2) REVENUES TO THE UNITED STATES AND 4 THE VIRGIN ISLANDS.— 5 ‘‘(A) DURING FIRST 20 YEARS.—Revenues 6 from the fee referred to in subsection (c)(3)(B) 7 imposed on designated assets after the first 10 8 years under management by the Virgin Islands 9 Investment Program shall be collected by the 10 United States Treasury in a manner similar to 11 section 7652, upon which— 12 ‘‘(i) 1⁄3 of the proceeds shall be dis- 13 tributed to the Virgin Islands for the first 14 10 years of management, and 15 ‘‘(ii) half of the proceeds shall be dis- 16 tributed to the Virgin Islands for the next 17 10 years of management. 18 ‘‘(B) AFTER THE FIRST 20 YEARS.—Begin- 19 ning in the 21st year, the entire 1 percent tax 20 collected shall be retained by the United States 21 Treasury. 22 ‘‘(C) MINIMUM HOLDING PERIOD.—No 23 withdrawals may be made by an investor from 24 the account during the minimum holding period 25 VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS 8 •HR 4679 IH of ten years. Should the investor choose to with- 1 draw money from the account during the min- 2 imum holding period, the investor would forfeit 3 the tax advantages of the Fund; any funds 4 withdrawn would be included in gross income 5 and subject to Federal income tax, minus pay- 6 ments of the 1 percent tax. 7 ‘‘(3) EARLY WITHDRAWAL.—Should an investor 8 withdraw the entire balance of the funds after the 9 10-year minimum holding period but before the end 10 of the 30 years, his account will be liable for the en- 11 tire 1 percent tax for each of the remaining years. 12 ‘‘(e) OTHER DEFINITIONS.—For purposes of this 13 section— 14 ‘‘(1) ELECTIVE DEFERRALS; APPLICABLE RE- 15 TIREMENT PLAN.—The terms ‘elective deferrals’ and 16 ‘applicable retirement plan’ have the respective 17 meanings given such terms by section 402A. 18 ‘‘(2) VIRGIN ISLANDS.—The term ‘Virgin Is- 19 lands’ means the United States Virgin Islands. 20 ‘‘(3) SECRETARY OF THE INTERIOR.—The term 21 ‘Secretary of the Interior’ means the Secretary of 22 the Interior or his designee.’’. 23 VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS 9 •HR 4679 IH (b) CLERICAL AMENDMENT.—The table of sections 1 for such part I is amended by adding at the end the fol- 2 lowing new item: 3 ‘‘Sec. 409B. Treatment of distributions from certain retirement plan assets in- vested under a Virgin Islands investment program.’’. (c) EFFECTIVE DATE.—The amendments made by 4 this section shall take effect on the date of the enactment 5 of this Act. 6 Æ VerDate Nov 24 2008 03:48 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\H4679.IH H4679 rfrederick on DSKD9S0YB1PROD with BILLS