SAN JUAN, Puerto Rico (AP) -- Rum producers in U.S. Caribbean territories will see some benefits from a tax rebate that was widely defended earlier this month as a measure to help island governments, the Virgin Islands' delegate to Congress said Monday.
Although the money goes directly to state coffers, the government will use some of the rebate to provide incentives for distillers, Congresswoman Donna M. Christensen said.
"It comes back to use as we see fit to use it," Christensen said in an interview with The Associated Press.
The rebate is estimated to be worth $192 million over 10 years.
The rum provision dates back to 1917, but it received unusual scrutiny this month after it was tucked into the massive economic bailout package. As the legislation came under fire, officials in Puerto Rico and the Virgin Islands said the rebate would benefit their governments, not distillers.
But Taxpayers for Common Sense, a Washington-based watchdog group, said Monday the governments of Puerto Rico and the Virgin Islands will provide as much as 35 percent of the rebate revenue back to distillers. The payments were also reported Sunday by ProPublica, a nonprofit news organization.
The watchdog group said the Virgin Islands struck a deal with London-based alcohol maker Diageo to put nearly half the rebate toward marketing and other support of the Captain Morgan brand. In exchange, the group said, Diageo agreed to shift rum production to the Virgin Islands from Puerto Rico.
Puerto Rican and U.S. Virgin Islands governments say they use the money mainly to finance infrastructure and public services. The rebate -- which sends back all but 25 cents of the $13.50 in federal excise taxes levied per proof gallon of rum produced in the islands -- expired at the end of 2007. The bailout bill approved by Congress extends it through 2009 and makes it retroactive to Jan. 1.
Christensen said she did not know the details of the arrangement with Diageo, but the Virgin Islands provides a small amount to rum maker Cruzan as an incentive based on sales increases. She denied that her office mischaracterized the purpose of the rebate.
"I think it was pretty clear. That's why some people objected to it," she said.
Frank Coleman of the Washington-based Distilled Spirits Council, who had also defended the rebate as a direct benefit for island governments, said Monday he had no knowledge of how the governments intended to spend the money.
"You can't be more forthcoming with information if you don't have it," he said.