There are a lot of theories about the sources of Jeffrey Epstein’s wealth and how he earned his one-time reputation as a brilliant money manager. One thing that isn’t disputed is that he knew how to cut his tax bills by setting up shop in the U.S. Virgin Islands.

That didn’t require any particular skill on Epstein’s part. The rules set by the Economic Development Commission in St. Thomas allow some businesses in the U.S territory to, after meeting certain conditions, significantly lower their exposure to federal corporate and personal income taxes. By, possibly, 90%.

The rules have tightened since Epstein made his first major investment in Virgin Islands in the late 1990s. But the question remains: Since one of his self-professed specialties was helping the ultra-rich reduce their tax income, what role did the Virgin Islands play in enriching Epstein and his clients?

Six years passed between Epstein’s buying a private island in the territory and 2004, when authorities began enforcing stricter rules on tax-break eligibility. By then Epstein was a veteran player -- and perhaps wizened adviser -- who has incorporated multiple dozens of businesses.

Huge Gift
Even now, what’s legally on offer there “is a huge gift” for people of means, said Tim Richards, a lawyer specializing in international tax at Richards & Partners in Miami.

The rules could allow businesses like Epstein’s to avoid paying regular U.S. taxes, for example, by counting the company’s income where its computer servers are located.

The tax systems of U.S. territories like the Virgin Islands mirror those of the mainland except that the recipient is not the U.S. Treasury but the local government. For non-U.S. income, they have the authority to reduce taxes in some cases, such as to bolster economic development.

“It’s one of the only places that U.S. citizens can actually reduce their federal income tax liability,” said William Blum, an international tax lawyer at Solomon Blum Heymann LLP, who served as counsel to a former governor of the USVI.

Epstein started benefiting around two decades back, when he moved his firm, originally called J Epstein & Co., from New York to St. Thomas. Mystery still surrounds the operations of the business, renamed Financial Trust Co., though a few investments have come to light, including $80 million invested into hedge fund DB Zwirn & Co. between 2002 and 2005.

He made another tax play in 2012, securing approval for his Southern Trust Co. to join the tax-incentive program as a designated service business, documents show. His 50-50 partnership in a local marina with New York real estate developer Andrew Farkas is also a beneficiary of the program.

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