Sponsored by Rep. David M. Apatang, R-Saipan, House Bill 16-177 aims to address the “problems” with the QC program which was created by the Investment Incentive Act of 2000, which originally aimed to provide tax breaks to new investors.
Apatang’s bill noted the lack of proper tax benefit guidelines in the existing program and the inconsistency of the terms and conditions of previously issued QCs.
According to the bill, there is a lack of correlation between the amount of investment and the amount of tax benefits as well as a lack of data from the Department of Finance regarding the tax benefits of QC recipients.
“The QC program was not originally intended to issue certificates to existing and established recipients, thereby permitting a recipient to claim exemptions twice or more,” the bill stated.
It added that there’s a need to re-evaluate the existing program to restore its initial purpose of providing economic incentives to new investors.
The bill will suspend the issuance of new QCs and prohibit the modification, and the granting, of extensions to existing QCs except for downward modifications due to noncompliance with the terms and conditions of the certificate.
The bill will create a qualifying certificate assessment workgroup to evaluate the effectiveness of the QC program and submit recommendations to the Legislature and the governor.
The QC has generated $2.6 million in new investments of the $305.1 million in potential investments from 2000 to 2005.
The proposed moratorium is not applicable to QC applicants that have submitted all the documents required by the Commonwealth Development Authority.
The assessment workgroup will conduct a cost and benefit analysis regarding the effectiveness of the QC previously issued by CDA and formulate a permanent plan for a future program.
The workgroup will have seven members —- the speaker of the House or his designee, the CDA executive director, the secretary of Commerce, the director of Revenue and Taxation, the attorney general, and one representative each from Saipan Chamber of Commerce and the private sector, both appointed by the governor.
The workgroup, which will serve without compensation, will be terminated upon submission of its report.
Since the inception of the program, CDA issued 13 QCs to recipients of which five are now inactive.
The seven beneficiaries that are considered active by CDA are SandCastle Saipan, Tinian Dynasty Casino & Hotel, Hard Rock Café, Tony Roma’s & Caprissiosa, World Resort Saipan, Bridge Capital, We Manage Calls Inc., and Saipan Laulau Development Inc. which received its QC on Sept. 26, 2008.
CDA will conduct a hearing for the revocation of We Manage Calls’ QC.
Last week, the CDA board amended its policy so it can accommodate Laulau Development’s request for a higher amount of tax breaks.
The QC program, first enacted in December 2000, was set up to provide various tax incentives for investors to build, expand, and operate commercial projects in the CNMI.
Enacted by the 12th Legislature, the Investment Incentive Act of 2000, or P.L. 12-50 has been amended twice to allow existing businesses in the CNMI to apply for QCs.
