SD Law Bars EB-5 Loan Firm’s Past Tax Liability Disclosure
SIOUX FALLS, S.D. (AP) — South Dakota law prohibits the state Department of Revenue from disclosing whether it will decide to pursue back taxes from a company set up to recruit wealthy foreign investors in an investment-for-visa program that became entangled in scandal, the department said Tuesday.
Last month, the state’s Division of Banking issued a license to SDRC Inc., the Aberdeen-based firm managing loans to projects in the EB-5 visa program, that allows it to be a nonresidential mortgage lender. That means the firm must pay the state’s bank franchise tax, the division said.
The Revenue Department is examining whether it can retroactively collect the bank taxes from SDRC, a private firm founded by Joop Bollen, a department spokesman said. But Jason Evans, property and special taxes deputy director, told The Associated Press that state law bars the department from disclosing whether it decides to pursue those taxes.
“It’s confidential taxpayer information,” Evans said. “I don’t know that we’ll ever be able to disclose that to give you the closure that you’re looking for.”
The Revenue Department received notice of the license in March and will collect the tax moving forward, but it’s unclear what the firm’s ongoing tax burden will be.
South Dakota was one of the pioneers in EB-5 financing under Bollen, a former state administrator who oversaw the program as a public employee and then with SDRC, and the late Richard Benda, a former Governor’s Office of Economic Development secretary. The program recruits wealthy immigrant investors for projects in exchange for green cards.
Benda’s October 2013 death was ruled a suicide. At the time, Attorney General Marty Jackley was preparing to file felony theft charges against Benda amid allegations of financial misconduct at GOED surrounding EB-5.
Bollen initially ran the EB-5 program for the state when he was in charge of the South Dakota International Business Institute at Northern State University. He privatized it in 2009 and turned it over to SDRC. The state ended its contract with SDRC in September 2013 amid state and federal investigations.
It came out last fall that the Division of Banking was examining whether SDRC should be considered a financial institution because it administers loans. The Brown County Commission requested this month that the Department of Revenue retroactively collect bank franchise taxes from SDRC.
Commissioner Tom Fischbach, who offered the resolution, said he thinks the public has the right to know whether the Revenue Department collects the taxes.
“I would sure think the public would have the right to know if they have to pay it or not,” he said. “That’s my opinion, but it’s not a legal one.”
Tony Venhuizen, chief of staff to Gov. Dennis Daugaard, said state officials are required to follow the law. He said the statute reflects the public’s expectation that the information they file when paying taxes remains private.
“That is only a prohibition against state officials,” Venhuizen said. “(SDRC is) certainly free to tell you whatever they like, but we really can’t.”
Bollen declined to comment Tuesday.
