In the Virgin Islands, What Defines a Resident?

Mark Diggs, who built Software Innovators Inc. of Little Rock into a division of Brightstar Technology Group and who is chairman and CEO of Ontology Works Inc. of Odenton, Md., gave up his USVI residency this spring because he couldn't spend enough time there.

"(I) had a driver's license, bought a home, but my business kept bringing me back to Arkansas," Diggs said.

Phil Whisenhunt, an Arkansas native who co-owns a limited liability company in the USVI that he wouldn't name, said he hired 10 people, bought a condominium and votes in the Virgin Islands.

"I'm not going back and forth every week," Whisenhunt said.

Little Rock tax lawyer Teddy Skokos, who manages Clearwater and lives on St. John, said, "There's no law on the federal level to define that term (of residency). If you're asking if I'm a VI resident, to make a shady case out of this ... you tell me the law to determine residency. There was supposed to be a law 17 years ago, but the federal government hasn't done it yet."

His father, Theodore C. "Ted" Skokos, publicly declared his residency of the USVI in a May 2003 letter resigning as chairman of the Arkansas State Bank Board. He couldn't be reached for comment.

Spending time in the USVI is obviously among the key components to establishing residency. But it doesn't take much.

There aren't precise rules for residency in the Virgin Islands, said Marjorie Roberts, chief counsel of the Virgin Islands Bureau of Internal Revenue from 1988 to 1995. Roberts now makes a private law practice of helping affluent clients access the tax benefits available in the USVI.

Residency is based on "end of the tax year" status, she said. Someone can be a resident at the end of a tax year and any federal or state income from elsewhere would be refunded to them in the USVI. The trick, she said, is to make sure that more than half of a year isn't spent in one other state.

She e-mails potential relocaters a list of at least 19 ways to prove residency and also tells them that "... a person might only need to be physically present in the USVI for a couple of months each year to be a bona fide resident if the taxpayer has several other homes and travels extensively."

The correspondence describes the chance of an IRS audit as small because "a taxpayer files a single return, reporting worldwide income (minus) any applicable tax credits, with the Virgin Islands Bureau of Internal Revenue."

Some of the proofs include:

• a place to reside. It can be a single room, condo, house, apartment, boat or castle, and it can be rented or owned;

• the filing of a USVI tax return;

• a USVI driver's license, which can be obtained without a driving test;

• local voter registration, which means giving up the right to vote for president;

• a local bank account.

Roberts also said it can be a no-no for the children of USVI residents to claim in-state resident tuition rates if they attend public colleges in the states.

Roberts' advice, though, rubs up against residency standards in various states, including Arkansas.

The Arkansas Supreme Court defines residency in part as the "totality of circumstances," including "someone's lifestyle and what it says about the person's (residency) intent" and if they're here more than six months of a year, said John Theis, assistant commissioner of the Arkansas Department of Finance and Administration.

The agency's audits and investigations involve requesting documentation from tax filers, or candidates with questionable residency status, such as for where they own a home, work, vote, auto registration and children's schools. But that information wouldn't be verified with the USVI or anywhere else, Theis said.

Whisenhunt said doing business in the Caribbean is always tainted with an "unfair impression" that something illegal goes on.

"Stereotypes are assigned to a lot of things ... and this is one of them," Whisenhunt said. "I've had some success, worked hard and everything I do is ethical.

"(The USVI) looks like a big scheme, and that's not the case."

More on the Virgin Islands

•?State and federal authorities are investigating whether U.S. Virgin Islands residency claims by tax filers — including former Arkansans — are legitimate.
•?A U.S. Virgin Islands senator questions whether massive tax breaks are working for the benefit of the territory.