I 

113TH CONGRESS 

2D SESSION H. R. 3821 

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 

JANUARY 8, 2014 

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 distributions from certain retirement plans’ assets which 

are invested for at least 30 years, subject to defined 

withdrawals, under a Virgin Islands investment program. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Derek M. Hodge Vir5 gin Islands Improvement Act of 2013’’. 


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1 SEC. 2. TAX-FREE DISTRIBUTIONS FROM CERTAIN RETIRE2 MENT PLAN ASSETS INVESTED UNDER A VIR3 GIN ISLANDS INVESTMENT PROGRAM. 

4 (a) IN GENERAL.—Part I of subchapter D of chapter 

5 1 of the Internal Revenue Code of 1986 (relating to pen6 sion, profit-sharing, stock bonus plans, etc.) is amended 

7 by adding at the end the following new section: 

8 ‘‘SEC. 409B. TREATMENT OF DISTRIBUTIONS FROM CER9 TAIN RETIREMENT PLAN ASSETS INVESTED 

10 UNDER A VIRGIN ISLANDS INVESTMENT PRO11 GRAM. 

12 ‘‘(a) IN GENERAL.—If an individual under the age 

13 of 61 makes a one-time designation of an amount of quali14 fied retirement savings as being under investment by the 

15 Virgin Islands Investment Program for at least 30 years, 

16 then, as of the close of the 10th year, such amount (and 

17 any earnings properly allocable to such amount) shall be 

18 treated for purposes of this title— 

19 ‘‘(1) as a designated Roth account in the case 

20 of qualified retirement savings described in sub21 section (b)(1), or 

22 ‘‘(2) as a Roth IRA in the case of qualified re23 tirement savings described in subsection (b)(2). 

24 No amount shall be includible in gross income by reason 

25 of the change in treatment under the preceding sentence. 


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1 ‘‘(b) QUALIFIED RETIREMENT SAVINGS.—For pur2 poses of this section, the term ‘qualified retirement sav3 ings’ means— 

4 ‘‘(1) amounts attributable to elective deferrals 

5 under an applicable retirement plan, and 

6 ‘‘(2) amounts held in an individual retirement 

7 plan which is not a Roth IRA. 

8 ‘‘(c) VIRGIN ISLANDS INVESTMENT PROGRAM.—For 

9 purposes of this section— 

10 ‘‘(1) IN GENERAL.—The term ‘Virgin Islands 

11 Investment Program’ means a program of the Virgin 

12 Islands which meets the requirements of paragraphs 

13 (2), (3), (4), and (5). 

14 ‘‘(2) MAXIMUM AMOUNT ACCEPTED FOR MAN15 AGEMENT.—A program meets the requirements of 

16 this paragraph if the amount accepted for manage17 ment under the program does not exceed 

18 $50,000,000,000. 

19 ‘‘(3) FEES AND TAXES.—A program meets the 

20 requirements of this paragraph if— 

21 ‘‘(A) the fees charged by investment man22 agers under the program do not exceed the fees 

23 customarily imposed by investment managers 

24 for managing like qualified retirement savings 

25 outside the Virgin Islands Investment Program, 


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1 ‘‘(B) the program imposes an annual tax 

2 (in addition to the fees permitted under sub3 paragraph (A)) equal to— 

4 ‘‘(i) 1.5 percent of the amount des5 ignated for management under the pro6 gram for the first 10 years of the account, 

7 and 

8 ‘‘(ii) 1 percent of the amount des9 ignated for management under the pro10 gram for the remainder of the life of the 

11 account without regard to account balance, 

12 and 

13 ‘‘(C) the 1 percent tax is imposed notwith14 standing the Roth designation. 

15 ‘‘(4) INVESTMENT MANAGER.—A program 

16 meets the requirements of this paragraph if the in17 vestment managers under the program are chosen 

18 by the Governor of the Virgin Islands. 

19 ‘‘(5) SEPARATE ACCOUNTING.—A program 

20 meets the requirements of this paragraph if the pro21 gram— 

22 ‘‘(A) establishes separate accounts for each 

23 type of qualified retirement savings held for the 

24 benefit of each individual and any earnings 

25 properly allocable to such assets, and 


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1 ‘‘(B) maintains separate recordkeeping 

2 with respect to each account. 

3 ‘‘(d) USE OF 1 PERCENT ANNUAL TAX.— 

4 ‘‘(1) REVENUES TO THE VIRGIN ISLANDS DUR5 ING FIRST 20 YEARS.— 

6 ‘‘(A) IN GENERAL.—Revenues from the tax 

7 referred to in subsection (c)(3)(B) shall be col8 lected, held, and distributed for the benefit of 

9 the Virgin Islands in a manner similar to sec10 tion 7652(b) (relating to rum excise tax). 

11 ‘‘(B) DISTRIBUTIONS TO VIRGIN IS12 LANDS.—Funds and accrued interest described 

13 in subsection (d)(1)(A) may be paid from es14 crow to the Virgin Islands for expenditure only 

15 if— 

16 ‘‘(i) the expenditure is pursuant to a 

17 qualified infrastructure development plan, 

18 and 

19 ‘‘(ii) the expenditure is approved by 

20 the Secretary of the Interior as being pur21 suant to such plan. 

22 ‘‘(C) QUALIFIED INFRASTRUCTURE DEVEL23 OPMENT PLAN.—For purposes of this para24 graph, the term ‘qualified infrastructure devel25 opment plan’ means a plan for improving and 


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1 enhancing the infrastructure of the Virgin Is2 lands which is— 

3 ‘‘(i) developed and approved by the 

4 committee described in subparagraph (D), 

5 and 

6 ‘‘(ii) approved by the Governor of the 

7 Virgin Islands. 

8 ‘‘(D) COMMITTEE.—The committee de9 scribed in this subparagraph is a committee— 

10 ‘‘(i) comprised of 5 members, each 

11 serving a term of either three or five 

12 years— 

13 ‘‘(I) 2 of whom are appointed by 

14 the Governor of the Virgin Islands, 

15 one for a 3-year and one for a 5-year 

16 term, 

17 ‘‘(II) 2 of whom are appointed by 

18 the Virgin Islands legislature, one for 

19 a 3-year and one for a 5-year term, 

20 and 

21 ‘‘(III) 1 of whom is appointed by 

22 the Secretary of the Interior for a 5- 

23 year term, and 


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1 ‘‘(ii) with respect to which a vacancy 

2 is filled in the manner in which the origi3 nal appointment was made. 

4 ‘‘(2) REVENUES TO THE UNITED STATES AND

5 THE VIRGIN ISLANDS.— 

6 ‘‘(A) DURING FIRST 20 YEARS.—Revenues 

7 from the fee referred to in subsection (c)(3)(B) 

8 imposed on designated assets after the first 10 

9 years under management by the Virgin Islands 

10 Investment Program shall be collected by the 

11 United States Treasury in a manner similar to 

12 section 7652, upon which— 

13 ‘‘(i) 26.67 percent of the proceeds 

14 shall be distributed to the Virgin Islands 

15 for the first 10 years of management, and 

16 ‘‘(ii) half of the proceeds shall be dis17 tributed to the Virgin Islands for the next 

18 10 years of management. 

19 ‘‘(B) AFTER THE FIRST 20 YEARS.—Begin20 ning in the 21st year, the entire 1 percent tax 

21 collected shall be retained by the United States 

22 Treasury. 

23 ‘‘(C) MINIMUM HOLDING PERIOD.—No 

24 withdrawals may be made by an investor from 

25 the account during the minimum holding period 


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1 of ten years. Should the investor choose to with2 draw money from the account during the min3 imum holding period, the investor would forfeit 

4 the tax advantages of the Fund. Any funds so 

5 withdrawn would be included in gross income 

6 and subject to Federal income tax, minus pay7 ments of the 1 percent tax. 

8 ‘‘(3) EARLY WITHDRAWAL.—Should an investor 

9 withdraw the entire balance of the funds after the 

10 10-year minimum holding period but before the end 

11 of the 30 years, his account will be liable for the en12 tire 1 percent tax for each of the remaining years. 

13 ‘‘(e) OTHER DEFINITIONS.—For purposes of this 

14 section— 

15 ‘‘(1) ELECTIVE DEFERRALS; APPLICABLE RE16 TIREMENT PLAN.—The terms ‘elective deferrals’ and 

17 ‘applicable retirement plan’ have the respective 

18 meanings given such terms by section 402A. 

19 ‘‘(2) VIRGIN ISLANDS.—The term ‘Virgin Is20 lands’ means the United States Virgin Islands. 

21 ‘‘(3) SECRETARY OF THE INTERIOR.—The term 

22 ‘Secretary of the Interior’ means the Secretary of 

23 the Interior or his designee.’’. 


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1 (b) CLERICAL AMENDMENT.—The table of sections 

2 for such part I is amended by adding at the end the fol3 lowing new item: 

‘‘Sec. 409B. Treatment of distributions from certain retirement plan assets invested under a Virgin Islands investment program.’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall take effect on the date of the enactment 

6 of this Act. 

Æ 


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