THE Senate on Tuesday unanimously passed House Bill 22-19, which will restore the earned income tax credit for qualified working families and taxpayers in the CNMI.
Authored by Rep. Tina Sablan, the measure also removes ambiguity in CNMI tax laws as to other refundable tax credits by amending Public Law 11-25, which imposes a 100% tax on earned income credit that would be refunded.
Sablan said the EITC, which will be federally funded, “rewards work and boosts earnings for lower-income individuals and families, and is linked to improved health and educational outcomes for children in struggling households.”
H.B. 22-19 now goes to the governor’s desk.
The bill as passed by the House in March originally seeks to “repeal” the relevant CNMI tax law but as recommended by the Department of Finance, the word “repeal” was changed to “amend.”
The bill in its final form also includes a floor amendment offered by Rep. Angel Demapan to exempt from the territorial tax “any overpayment arising from a tax credit that is accounted for by an authorized funding source.”
This floor amendment, Demapan said, “is a safeguard for the CNMI government in the event that federal funds stop being covered over to pay for EITC disbursements.”
Currently, EITC payouts are estimated at $25 million annually, he said, adding that his floor amendment, which the House unanimously adopted, ensures that the CNMI government “doesn’t get locked into an unfunded liability in case the U.S. Congress discontinues federal funding to cover EITC.”
The CNMI EITC program was discontinued in 1998 due to a lack of local funds following the Asian currency crisis.
For his part, Finance Secretary David DLG Atalig said, “With or without this bill, the American Rescue Plan Act authorizes and appropriates funds for EITC for the CNMI.”
He noted that the original bill “was to repeal the entire tax code where EITC is being taxed by the Commonwealth. The original bill was not supported by the Division of Revenue & Taxation. Now, the bill as passed by the Senate is supported by the Department of Finance and the Division of Revenue & Taxation. The passed bill protects the Commonwealth from being 100% obligated to pay the EITC with or without federal cover-over (or reimbursement). Without ARPA, we are in no position, financially, to pay for this tax credit. This could cost up to $25 million [a year].”
He added, “On another note, I am very happy and excited for our Commonwealth to receive ARPA funding for 100% EITC cover-over from the federal government. This is needed by our community and the Commonwealth will definitely benefit.”
Tina Sablan
