REPRESENTATIVE Ralph N. Yumul on Thursday introduced House Bill 23-74, which would impose a 3% tax on the yearly gross revenue of construction activities that earn over $250,000.
The bill includes a sunset provision: the construction tax will expire in three years or on Dec. 31, 2026.
H.B. 23-74 would also exempt revenue generated from building residential housing intended primarily for living purposes.
The bill, which the House is expected to pass, states: “An additional tax may increase the costs of construction for commercial projects and possibly residential projects as contractors attempt to pass on the increased costs to consumers.”
“Similarly,” it added, “we are also aware that general contractors often hire subcontractors on commercial projects. Relevant to this bill, there are legitimate issues with respect to double taxation. There is also a valid concern that this legislation may increase the final costs that are charged to consumers. These concerns, raised by the CNMI Department of Finance and the CNMI Office of the Attorney General, that call attention to these potential adverse impacts, are valid.”
“We find that there will never be a good time to raise taxes,” the bill stated, but “the Legislature [still] finds that the CNMI should impose an additional 3% tax on yearly gross revenue that is directly derived from construction activities, in excess of $250,000.00.”
Its proponents believe that the construction tax would generate $8 million if it takes effect in the next fiscal year.
The bill, which is similar to H.B. 23-30 introduced by Rep. Roman C. Benavente earlier this year, is backed by House members who do not support the administration’s proposal to increase the business gross revenue tax.
Last week, the Senate and the House of Representatives agreed to reduce the FY 2024 revenue projection to $163.4 million.
Ralph N. Yumul
