WITH Rep. Thomas John Manglona casting the lone “no” vote, the House of Representatives on Tuesday passed the Senate version of House Bill 23-74, which would impose a 3% tax on construction activities in the CNMI.
Rep. Joseph Flores was excused from the House session.
Authored by Rep. Ralph N. Yumul, the bill now goes to Gov. Arnold I. Palacios.
As amended by the Senate, H.B. 23-74 would impose a 3% tax on construction projects with a $350,000 expenditure threshold.
According to the bill, the 3% tax “shall mitigate the myriad costs to the Commonwealth that are attributable to large scale construction activities, which include waste generation, pollution and emissions from heavy equipment, damage and stress on roads and infrastructure, erosion and pollution control, and the added costs at the ports of entry associated with increased customs activities to ensure that materials and supplies are not co-mingled with contraband.”
H.B. 23-74 recognizes that an additional tax may increase the costs of construction for commercial and government projects as contractors attempt to pass on the increased costs to consumers. The bill also acknowledges that general contractors often hire subcontractors.
“As a result, 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, and have been addressed in this bill,” H.B. 23-74 stated.
It would apply the 3% tax “specifically to the revenues derived from construction activities from projects with a total cost of $350,000 or more. Construction projects below this threshold are not subject to the tax. Moreover, this tax does not apply to revenues attributable to residential construction.”
