The billionaire owner of two Caribbean islands that were once owned by Jeffrey Epstein has sued the U.S. Virgin Islands, seeking a tax refund of more than $5.7 million. According to the complaint, which Newsweek has reviewed, attorneys for Stephen Deckoff wrote that he is seeking to recover an alleged overpayment of income tax to the U.S.
Virgin Islands Bureau of Internal Revenue (VIBIR) for the 2021 tax year. The complaint, filed in the District Court of the Virgin Islands in July, says that the U.S. Internal Revenue Service (IRS) had initiated an income tax examination of Deckoff's 2021 taxable year in August 2024.
After that examination, the IRS asserted that Deckoff was not a "bona fide resident" of the Virgin Islands in the 2021 taxable year, therefore he "was not liable" for income tax to the Virgin Islands for income taxes with respect to non-Virgin Islands adjusted gross income, the complaint said. As a result, Deckoff filed a claim in November 2025 "which demanded a refund on income tax paid to the VIBIR with respect to non-Virgin Islands adjusted gross income in the amount of $5,757,038," the complaint said. It added: "The VIBIR has neither allowed nor disallowed the Claim for Refund, and Mr.
Deckoff therefore brings this action to recover the refund." The complaint asks a judge to issue a "final determination" about whether Deckoff was a bona fide resident of the Virgin Islands for the 2021 taxable year. If the court determines that he was not, Deckoff’s attorneys requested a judgment against the Virgin Islands in the amount of $5,757,038 or "such other amount by which the Court determines Mr. Deckoff overpaid his 2021 Virgin Islands income tax, with interest as provided by law." Attorneys for the Virgin Islands have until October 19 to file a response to the complaint.
Newsweek has contacted attorneys for Deckoff and the U.S. Virgin Islands for comment via emails sent outside regular business hours. Deckoff, the founder of Black Diamond Capital Management, purchased the islands—Great St.
James—in 2023 for $60 million. Deckoff’s investment firm, SD Investments, said in a news release at the time that a significant portion of the sale proceeds would go toward the government of the U.S. Virgin Islands as part of a previous deal with Epstein’s estate.
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