A South Dakota company set up to recruit wealthy foreign investors in an investment-for-visa program that became entangled in scandal and eventually swept up into in last year's U.S. Senate race must pay a state banking tax.
The state Department of Revenue also said it will examine whether it can retroactively collect taxes from SDRC Inc., the private firm founded by Joop Bollen.
The Department of Labor and Regulation Division of Banking earlier this month issued a license to SDRC, the Aberdeen-based firm managing loans to projects in the EB-5 program, that allows it to be a nonresidential mortgage lender. That means the firm must pay the state's bank franchise tax, said Banking Division director Bret Afdahl.
"It was my opinion that they needed to be licensed and in the end they obviously agreed because they applied for the license," Afdahl said.
The Revenue Department received notice of the license last week and will collect the tax moving forward. It will also determine whether it can assess and collect taxes from before the license was issued, Jason Evans, property and special taxes deputy director, said.
"From a department perspective, we're interested in collecting all those taxes that are duly owed to the state and the department," Evans said, noting that no taxes have been collected yet.
It's unclear what the firm's tax burden is moving forward. It's also not certain how much money is at stake if the department decides to collect potential back taxes, but it will begin examining the issue very soon, he said.
"It's not something that happens very often," Evans said. "We don't very regularly have to collect taxes from prior years."
The license is a reminder that many of the loose ends from the EB-5 scandal, which eventually got swept up in the state's 2014 Senate campaign, still remain unresolved.
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, a company he founded. The state ended its contract with SDRC in September 2013 amid state and federal investigations.
Bollen, reached Saturday at his home, declined to comment.
It came out last fall that the Division of Banking was examining whether SDRC should be considered a financial institution because it administers loans. Afdahl said the process to make the determination took slightly longer than usual.
Tony Venhuizen, chief of staff to Gov. Dennis Daugaard, said the Division of Banking notified the governor's office about the license, though it's not directly involved. Venhuizen said the case is being treated the same as any other one like it.
Source : ArgusLeader