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U.S.V.I. Governor Seeks Deemed Designations of Opportunity Zones

NOV. 19, 2021

U.S.V.I. Governor Seeks Deemed Designations of Opportunity Zones

DATED NOV. 19, 2021
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November 19, 2021

The Honorable Janet Louise Yellen
Secretary
United States Department of Treasury
1500 Pennsylvania Avenue, N.W.
Room 3330
Washington D.C. 20220

Re: Request by the Virgin Islands for the Department of Treasury ("Treasury") to use the correct statistical data for poverty in the Virgin Islands during the 2011-2015 five-year period to determine low-income communities for designation as Qualified Opportunity Zones, which would result in census tract numbers 9705 (St. Croix), 9707 (St. Croix), 9715 (St. Croix), 9602 (St. Thomas), 9606 (St. Thomas), and 9608 (St. Thomas), pursuant to the 2010 Decennial Survey map, being recognized as low-income community census tracts to be designated as Qualified Opportunity Zones (collectively, the "Six Additional Census Tracts")

Dear Secretary Yellen,

I am writing to you on behalf of the Honorable Albert Bryan, Jr., the Governor of the Virgin Islands, in connection with our continuing discussions with Department of Treasury (“Treasury”) to address the incorrect statistical data for poverty used by Treasury to determine which census tracts in the Virgin Islands qualified as low-income communities, and the resulting damage caused the Virgin Islands when the Six Additional Census Tracts that qualified as low-income communities were not identified by Treasury as low-income communities, and therefore not designated as Qualified Opportunity Zones. My comments are as follows:

1. The Nomination Instructions provided to the Virgin Islands by Treasury stated that low-income community census tracts were to be determined pursuant to the statistical data for poverty set forth in the 2011-2015 American Community Survey ("2011-2015 ACS") five-year time period. The American Community Survey ("ACS") did not gather any statistical data in the Virgin Islands for the 2011-2015 five-year period.

2. When the United States Census Bureau collects statistical data for decennial census surveys in the Virgin Islands, it works with the University of the Virgin Islands ("UVI") to conduct the survey, and to provide the statistical data to determine poverty. In 2013, Dr. Frank L. Mills, Vice Provost of Research and Public Service of the UVI supervised the 2013 Population and Housing Survey of the Virgin Island, which was published in January, 2016 (the "2013 Census"). In connection with the 2013 Census, the UVI used the same methods and process in collecting the statistical data to determine the poverty level, as it did for the U.S. Census Bureau pursuant to any decennial census. Accordingly, in the absence of the 2011-2015 ACS, Treasury should have used the statistical data for poverty set forth in the 2013 Census, which statistical data on poverty was collected in 2013, within the 2011-2015 five-year period.

3. Instead, Treasury substituted the statistical data for poverty from the 2010 U.S. Census Bureau Decennial Census (the "2010 Census") which covered the 2001-2009 time period, when the Nomination Instructions indicated the eligibility of census tracts for designation as Qualified Opportunity Zones was to be based upon statistical data for poverty collected within the 2011-2015 five-year period. Further, the substitution by Treasury of the statistical data for poverty for the 2010 Census was approximately eight (8) year old in March, 2018, at the time of designation of census tracts in the Virgin Islands, and as such, said statistical data for poverty did not Include the adverse economic impact of the most catastrophic economic event in the history of the Virgin Islands, the closing of the oil refinery on January 1, 2012 when 2,000 refinery jobs were lost, as well as many other jobs in the community that were dependent on the economic activity generated by the refinery, which deprived the Virgin Islands of its right to designate the Six Additional Census Tracts. The Worksheet (Word version of the Worksheet attached hereto as Exhibit “A") provided by Treasury to the Virgin Islands also indicated that the statistical data for poverty used was based upon the 2011-2015 ACS which survey was not conducted in the Virgin Islands.

4. On March 5, 2018, Treasury wrote to the Honorable Kenneth Mapp, the former Governor of the Virgin Islands (the "March 5 Letter"), to inform him which census tracts in his jurisdiction were eligible to be nominated to be Qualified Opportunity Zones, and to provide the requirements and due dates for the nomination, certification and designation of census tracts as Qualified Opportunity Zones.

5. The Nomination Instructions provided that the Worksheet would show the total number of low-income census tracts in each state or territory, the maximum number of census tracts that could be nominated as Qualified Opportunity Zones and the maximum number of Eligible Non-LIC Contiguous Tracts that could be included in the nomination. In the case of the Virgin Islands, the Worksheet provided that: (i) only 13 census tracts in the Virgin Islands qualified as low-income communities, (ii) the maximum number of census tracts that could be nominated was twenty-five (25) and (iii) the maximum number of eligible Non-LIC Contiguous Tracts was one (1).

6. The March 5 Letter advised the governor that he had 13 days (i.e., until March 21, 2018) to submit the nominations of census tracts in the Virgin Islands for designation as Qualified Opportunity Zones from the list of 13 census tracts that Treasury identified as low-income communities. The list of the 13 census tracts identified as low-income communities provided by Treasury is attached hereto as Exhibit B. According to Treasury, the list of 13 census tracts set forth on Exhibit B are the only eligible census tracts for designation as Qualified Opportunity Zones, pursuant to the Nomination Tools, which included the Worksheet.

7. The representations made by Treasury were significant because the Nomination Tools, the Worksheet, as well as the Rev. Proc. 2018 were to inform the CEOs of each State and Territory which census tracts in the jurisdiction qualify as low-income communities, and therefore, which census tracts were eligible to be nominated as Qualified Opportunity Zones. Further, Treasury represented that such qualifications were determined pursuant to the statistical data for poverty set forth in the five-year period 2011-2015 ACS, when no 2011-2015 ACS had been conducted in the Virgin Islands for the 2011-2015 five-year period.

8. The Six Additional Census Tracts qualified as low-income communities, and therefore were eligible for designation as opportunity zones, pursuant to the 2013 Census conducted in the Virgin Islands, during the 2011-2015 five-year period.

9. The use of the statistical data for poverty from the 2010 Census for the Virgin Islands, which did not include such a major economic event as the closing of the Hess oil refinery in January, 2012, would use statistical data for poverty in the Virgin Islands which was at least eight (8) years old, and thereby caused the information provided by Treasury in the Nomination Tool and the Worksheet to inaccurately reflect the current statistical data for poverty in the Virgin Islands for the 2011-2015 five-year period.

10. The use of current statistical data for poverty in the Virgin Islands for the 2011-2015 five-year period, as addressed in the 2013 Census, demonstrates the inaccuracies of the stale statistical data on poverty in the Virgin Islands on the Worksheet, including the failure to identify the Six Additional Census Tracts as low-income communities that should have been designated as Qualified Opportunity Zones. Based upon Treasury's publication of statistical data for poverty set forth in the 2010 Census, which was not collected during the 2011-2015 five-year period, the Virgin Islands is entitled to nominate the Six Additional Census Tracts, for a total of nineteen (19) census tracts as qualified low-income communities, pursuant to the 2013 Census.

11. Please note that the nineteen (19) census tracts that qualified as low-income communities, pursuant to the 2013 Census would not exceed the maximum number of twenty-five (25) low-income community census tracts that could be nominated by the Governor of the Virgin Islands, plus one (1) Non-LIC Contiguous Census Tract, for a total of twenty (20) census tracts.

I have set forth below a chart which lists all 32 census tracts in the Virgin Islands, including the Six Additional Census Tracts, which were not previously designated due to Treasury's failure to use of the statistical data for poverty in the 2011-2015 five-year period, for the purpose of determining poverty in the Virgin Islands. Please note that the Six Additional Census Tracts qualify as low-income communities pursuant to the statistical data set forth in the 2013 Census, as referenced in Column D and Column E of the chart (for ease of use, please note that Column E also includes the acronym "ACT," which stands for Additional Census Tracts, which make it easier to find these census tracts).

 

A.

B.

C.

D.

E.

 

2010 Census Tract Number FIPS code GEOID and island location

Poverty percentage rate for Virgin Islands census tracts pursuant to 2010 Decennial Census statistical data for poverty

Does Census Tract qualify on Poverty Criteria >20% (i.e., a Low-Income Community) pursuant to the 2010 Decennial Census?

Poverty percentage rate for Virgin Islands census tracts pursuant to 2013 Census statistical data for poverty

Does Census Tract Qualify on Poverty Criteria >20% (i.e., a Low-Income Community) pursuant to 2013 Census?

1.

78010970100-STC

12.35

No

13.15

No

2.

78010970200-STC

35.90

Yes

38.23

Yes

3.

78010970300-STC

35.98

Yes

38.22

Yes

4.

78010970400-STC

14.82

No

15.78

No

5.

78010970500-STC

18.94

No

20.17

Yes — ACT

6.

78010970600-STC

12.66

No

13.48

No

7.

78010970700-STC

19.78

No

21.06

Yes — ACT

8.

78010970800-STC

37.23

Yes

39.64

Yes

9.

78010970900-STC

48.54

Yes

51.69

Yes

10.

78010971000-STC

23.54

Yes

25.07

Yes

11.

78010971100-STC

36.72

Yes

39.10

Yes

12.

78010971200-STC

23.87

Yes

25.42

Yes

13.

78010971300-STC

25.63

Yes

27.29

Yes

14.

78010971400-STC

26.39

Yes

28.10

Yes

15.

78010971500-STC

19.52

No

20.78

Yes — ACT

16.

78010990000

N/A

No

N/A

No

17.

78020950100-STJ

15.12

No

18.21

No

18.

78020950200-STJ

14.97

No

18.03

No

19.

78020990000

N/A

No

N/A

No

20.

78030960100-STT

18.09

No

19.95

No

21.

78030960200-STT

18.61

No

20.52

Yes — ACT

22.

78030960300-STT

17.41

No

19.20

No

23.

78030960400-STT

10.81

No

11.92

No

24.

78030960500-STT

9.97

No

10.99

No

25.

78030960600-STT

18.97

No

20.92

Yes — ACT

26.

78030960700-STT

16.27

No

17.94

No

27.

78030960800-STT

21.17

Yes

23.94

Yes — ACT

28.

78030960900-STT

21.13

Yes

23.30

Yes

29.

78030961000-STT

27.42

Yes

30.24

Yes

30.

78030961100-STT

28.00

Yes

30.88

Yes

31.

78030961200-STT

29.95

Yes

33.03

Yes

32.

78030990000

N/A

No

N/A

No

The calculations in determining the increase in the poverty level between 2010 and 2013, are set forth in Exhibit C attached hereto.

Treasury's substitution of obsolete or stale statistical data for poverty in the Virgin Islands pursuant to the 2010 Decennial Census, which statistical data for poverty was not collected within the 2011-2015 five-year period, and therefore would not comply with the legislative intent of the law to use the statistical data for poverty collected within the 2011-2015 five-year period, and Treasury's mislabeling of the 2010 Decennial Census as the statistical data for poverty collected pursuant to the nonexistent 2011-2015 ACS in the Virgin Islands in the Worksheet, deprived the Virgin Islands of its right to nominate the Six Additional Census Tracts, which census tracts qualified as low-income communities pursuant to the statistical data for poverty in the 2013 Census, and therefore were eligible to be nominated as Qualified Opportunity Zones.

In the absence of the 2011-2015 ACS, the use of the statistical data for poverty pursuant to the 2013 Census in determining whether or not a census tract qualified as a low-income community for poverty would be consistent with the stated intention of Treasury to use the statistical data for poverty collected in the Virgin Islands for the 2011-2015 five-year period.

The Virgin Islands relied upon the information provided by Treasury to inform the Virgin Islands as to which census tracts within the jurisdiction of the Virgin Islands were eligible to be nominated to be Qualified Opportunity Zones, and was not aware that Treasury was using the statistical data for poverty from the 2010 Census.

The Virgin Islands has been damaged by Treasury's representation that it was using the statistical data for poverty in the Virgin Islands pursuant to the 2011-2015 ACS, when Treasury had substituted the statistical data for poverty from the 2010 Decennial Census. Treasury's use of statistical data for poverty not conducted within the 2011-2015 five-year period caused the Six Additional Census Tracts not to be nominated as low-income communities, which deprived the Virgin Islands of six more Qualified Opportunity Zones. As a result, the proposed improvements to the Six Additional Census Tracts have been frustrated, including the proposed transshipment and manufacturing improvements on the south shore of St. Croix, which includes the Henry E. Rohlsen Airport, the St. Croix Renaissance Park (previously owned by Alcoa, where it located its alumina refinery and port facilities), and the Limetree Bay refinery and terminal facilities (previously owned by Hovensa).

In order for the Virgin Islands to receive all the benefits under the Tax Cuts and Jobs Act of 2017 that the U.S. Congress intended for the Virgin Islands to receive, Treasury should have used the correct statistical data for poverty collected within the 2011-2015 five-year period, which would have identified the Six Additional Census Tracts as low-income communities, and that Treasury should have designated each of the Six Additional Census Tracts as a Qualified Opportunity Zone.

The Virgin Islands had timely nominated all of the 13 census tracts, plus 1 Non-LIC Contiguous Census Tract set forth on Exhibit B prior to March 21,2018, based upon those census tracts being the only eligible census tracts for designation as Qualified Opportunity Zones, pursuant to information provided by Treasury in the Worksheet. Had the Worksheet provided by Treasury included the Six Additional Census Tracts, using the statistical data for poverty in the Virgin Islands collected in the 2011-2015 five-year period set forth in the 2013 Census, then the Virgin Islands would have nominated all 19 census tracts, plus 1 Non-LIC Contiguous Census Tract, for a total of 20 census tracts.

In order to receive all the intended benefits under the Tax Cuts and Jobs Act of 2017 for the 20 census tracts that qualify as low-income communities, the Virgin Islands respectfully requests that in light of the above-described circumstances, and the legal principle of equitable estoppel, that Treasury designate each of the Six Additional Census Tracts as a Qualified Opportunity Zone. Under these circumstances where the Virgin Islands has been harmed due to Treasury's failure to properly identify the Six Additional Census Tracts as low-income communities, and therefore eligible for nomination, the legal principle of equitable estoppel applies, since the Virgin Islands relied upon the list of 13 census tracts plus 1 Non-LIC Contiguous Census Tract set forth on Exhibit B provided by Treasury, as the only eligible census tracts for designation as Qualified Opportunity Zones, pursuant to information included the Worksheet. Therefore, Treasury is estopped from asserting that the time period for the Virgin Islands to nominate census tracts has expired, since the Virgin Islands detrimentally relied upon the incorrect statistical data and conclusions provided by Treasury, which was not based upon statistical data for poverty in the Virgin Islands conducted during the 2011-2015 five-year period.

Accordingly, the Virgin Islands hereby requests that Treasury designate each of the Six Additional Census Tracts as a Qualified Opportunity Zone, plus 1 Non-LIC Contiguous Census Tract, since it was Treasury that represented to the Virgin Islands that there were only 13 census tracts that were eligible census tracts for designation as Qualified Opportunity Zones, which determination arose out of Treasury's failure to use the correct statistical data for poverty in the Virgin Islands collected in the 2011-2015 five-year period, as set forth in the 2013 Census.

Kindly advise in the event that there are any questions or comments regarding this matter, that I may address. I would be happy to arrange a follow-up Zoom conference call or an in-person meeting at your office in connection with addressing any such questions or comments that you may have regarding this matter.

We appreciate the willingness of Treasury to work with us to address this matter, and I thank you for your consideration herein.

Sincerely,

Thomas V. Eagan
RASCO KLOCK
Coral Gables, FL

cc:
The Honorable Albert Bryan, Jr.
Governor, United States Virgin Islands

David A. Bornn, Chief Legal Counsel

Krishna Vallabhaneni
Tax Legislative Counsel
United States Department of Treasury
Krishna.Vallabhaneni@treasury.gov

Michael Novey
Associate Tax Legislative Counsel
United States Department of Treasury
Michael.Novey@treasury.gov

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