V.I. Delegate to Congress Stacey Plaskett and Congressman Ron Estes have put forth bipartisan legislation aimed at restoring the rum cover-over rate, a vital source of revenue for the U.S. Virgin Islands (USVI) and Puerto Rico. This legislation seeks to reinstate the rum cover-over rate to $13.25 per proof gallon, retroactively effective from 2022 and lasting through 2032, which will provide essential funding for economic development and government services in the territories.

The rum cover-over program allows both territories to receive funds from federal excise taxes on distilled spirits produced locally and imported into the mainland U.S. After the aftermath of Hurricanes Irma and Maria, Congress temporarily increased the cover-over rate from $10.50 to $13.25 per proof gallon as part of the Bipartisan Budget Act of 2018. However, this increase expired in December 2021, motivating the introduction of the new legislation.

Ms. Plaskett emphasized the importance of the cover-over program, stating, “These funds, which represent nearly 25% of the Virgin Islands Government’s annual budget, are critical for stabilizing the government employees’ pension program, supporting infrastructure projects, and attracting investments to diversify the economy beyond tourism.”

The bipartisan support for the bill is noteworthy, with Plaskett expressing gratitude for Congressman Estes’ collaboration. She lauded other key figures, including Senate President Milton Potter and various senators, for their advocacy efforts in discussions with Congress members and industry stakeholders to advance policies benefitting the USVI.

As several provisions from the 2017 Tax Cuts and Jobs Act are due to expire in 2025, Plaskett highlighted the challenges in drafting the tax bill for the current year. The proposed legislation complies with the Republican preference for a 10-year limit on tax extenders by being retroactive from 2022 and extending through 2032.

In her capacity on the Ways and Means and Budget Committees, Plaskett stated her commitment to collaborating with her Republican and Democrat colleagues to secure the increased rum cover-over rate, which is vital for the long-term stability and economic growth of the USVI.

Under current regulations, the federal excise tax on imported rum is shared between Puerto Rico and the USVI at the rate of $13.25 per proof gallon. Although $10.50 of this is permanently authorized, the additional $2.75 requires periodic reauthorization by Congress. The new bill aims to amend Section 7652 of the Internal Revenue Code to guarantee the full $13.25 rate remains effective until 2032, thus ensuring sustained financial stability for both territories.