Stephen Deckoff—who bought Great St. James and Little St. James, once owned by Jeffrey Epstein—has sued the U.S. Virgin Islands seeking a $5,757,038 refund for alleged 2021 income tax overpayments. The IRS examined Deckoff's 2021 residency in August 2024 and concluded he was not a "bona fide resident" for that year, prompting a refund claim in November 2025 that VIBIR has not acted on. The complaint, filed in July 2026, asks the court to decide Deckoff's residency status and order repayment plus interest if appropriate.
Owner Of Former "Epstein Island" Sues U.S. Virgin Islands For $5.757M Tax Refund
Jeffrey Epstein's former home on Little Saint James Island, in the U.S. Virgin Islands, is pictured on May 17, 2026.
Stephen Deckoff, the billionaire who purchased Great St. James and Little St. James—private Caribbean islands once owned by Jeffrey Epstein—has filed a federal lawsuit asking the U.S. Virgin Islands to refund $5,757,038 he says was erroneously paid in 2021 income taxes.
Lawsuit And Tax Claim
According to a complaint reviewed by Newsweek, Deckoff's attorneys say the refund demand arises from an Internal Revenue Service examination that concluded Deckoff was not a "bona fide resident" of the U.S. Virgin Islands for the 2021 taxable year. The IRS examination began in August 2024, the complaint says.
After the IRS determination, Deckoff submitted a formal refund claim in November 2025 requesting repayment of income tax he says was paid to the U.S. Virgin Islands Bureau of Internal Revenue (VIBIR) on income attributable to sources outside the territory—totaling $5,757,038. The complaint, filed in the U.S. District Court for the Virgin Islands in July 2026, says VIBIR "has neither allowed nor disallowed the Claim for Refund," prompting the current litigation.
What Deckoff Is Asking The Court To Decide
The suit asks the court to make a "final determination" on whether Deckoff was a bona fide resident of the Virgin Islands for 2021. If the court finds he was not, the complaint requests a judgment against the territory for $5,757,038 or whatever lesser amount the court determines was overpaid, plus interest as provided by law. Court records show attorneys for the Virgin Islands have been given until Oct. 19, 2026 to respond.
"I've been proud to call the U.S. Virgin Islands home for more than a decade and am tremendously pleased to be able to bring the area a world-class destination befitting its natural grace and beauty," Deckoff said in a statement when he announced his purchase.
Background: The Islands And The Planned Development
Deckoff, founder of Black Diamond Capital Management, bought Great St. James and Little St. James in 2023 for $60 million. His investment company SD Investments said a sizable portion of the sale proceeds would be paid to the government of the U.S. Virgin Islands under terms connected to a prior settlement with Epstein's estate.
At the time of purchase, Deckoff announced plans to build a five-star, 25-room resort intended to create jobs and boost tourism. The project was expected to open in 2025 but the resort has not yet been built.
Epstein Legacy And Ongoing Scrutiny
Little St. James—widely referred to as "Epstein Island" or "Pedophile Island"—was Epstein's primary residence after he purchased it in 1998. Authorities have said Epstein abused young girls at properties on the islands. One accuser, Virginia Giuffre, who died last year, alleged she was trafficked to the island and abused there. Epstein died by suicide in a New York jail cell in August 2019 while awaiting trial on federal sex-trafficking charges.
The story has continued to draw public and political scrutiny, including questions about government handling of related files and the conduct of high-profile associates.
Reporting Note
Newsweek contacted legal representatives for Deckoff and for the U.S. Virgin Islands seeking comment via email outside regular business hours.
Photo caption: Jeffrey Epstein's former home on Little St. James Island, U.S. Virgin Islands, pictured May 17, 2026.
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