WASHINGTON, D.C. (Office of the CNMI Congressional Delegate) — U.S. Congresswoman Kimberlyn King-Hinds sent a formal request to U.S. Treasury Secretary Scott Bessent seeking clarification on how the department applies Section 703(b) of the CNMI’s Covenant with the United States of America. The section requires that federal income taxes and other federal revenues derived from sources in the CNMI be returned to the CNMI Treasury.
In her letter, Congresswoman King-Hinds raised concerns that significant tax revenues linked to federal activity in the CNMI are not being returned to the local government as the Covenant provides. She pointed specifically to recent Department of Defense construction projects on Tinian totaling more than $153 million. Despite the scale of federal spending, the CNMI government received only $87,000 in reported tax revenue.
“This provision was included in the Covenant to ensure that when activity happens in the CNMI, the returns from that activity are shared with the CNMI,” said Congresswoman King-Hinds.
“The people of the Northern Marianas and our government should see the benefit of economic activity occurring in their islands, especially when it is federally funded.”
Section 703(b) outlines a range of federal taxes that are to be paid into the CNMI Treasury, including income taxes derived from the CNMI and taxes on goods produced or consumed in the Commonwealth. Congresswoman King-Hinds noted that the provision applies regardless of where a contractor is headquartered, so long as the income is derived from work in the CNMI.
“Nearly five decades after this language was adopted, we still do not have clear implementation of this section,” said Congresswoman King-Hinds. “As more federal funding and contract work flows into the CNMI, the question of how those revenues are treated under the Covenant is increasingly urgent.”
King-Hinds is requesting that the Treasury Department clarify its interpretation of Section 703(b) and determine whether income taxes collected on work performed in the CNMI, particularly by off-island contractors, are appropriately credited to the CNMI government.
She also indicated that if legislative steps are needed to reinforce the Covenant’s requirements, she is prepared to work with Congress to advance those changes.
“This is a practical issue with real consequences for the CNMI’s ability to operate and plan for the future,” said Congresswoman King-Hinds. “The Covenant will only endure if we remain committed to upholding its terms and ensuring its provisions are followed, including making certain the CNMI receives the revenues it is owed. I appreciate Secretary Bessent’s attention to this request and look forward to a constructive dialogue on how we can ensure the Covenant is implemented as intended.”
