CAPITOL HILL Saipan — Rep. Ray N. Yumul of the 15th Northern Mariana Islands House of Representatives is introducing legislation that would amend the incentive program to better define parameters in which tax rebates may be granted.

House Bill 15-125 would limit the tax benefits allowed under the current Qualifying Certificate program to a fixed dollar amount and the percentage of the capital investment to be made by the investor. But the Saipan Chamber of Commerce while in agreement with most provisions of the bill will continue to make recommendations. The chamber wants to ensure tax benefits would be based on the total investment and projected revenue and not on the initial capitalization alone.

Yumul said he introduced the bill following mounting concerns about the law’s “ambiguities” and its implementation by the Commonwealth Development Authority. The Commonwealth Development Authority reviews QC applications and makes recommendations to the governor for approval.

The Saipan Economic Development Council a policy review group issued a report in November 2005 stating that since the QC program was created six years ago enacted through Public Law 12-32 the “Investment Incentive Act of 2000 ” was only able to generate $2.6 million in non-retroactive investments — or an average of $526 000 a year.

SEDC citing a Journal story said that only two out of nine non-retroactive investment QCs have actually been accepted by applicants and that there had only been one new investor that applied. (See “Saipan hotels wish CDA believed in tax holidays” in the March 21 2005 edition of the Journal.)

“We are tweaking the QC law. We are going to try to remove a lot of the ambiguities from CDA ” Yumul told the Journal.

“Right now CDA — I don’t want to say they’re inconsistent but they don’t speak in plain terms when it comes to business investment dollar value and type of activity. Some entities CDA gives 100% to 25 years tax rebate; others get only 50%. CDA makes it very difficult for the investors to get a solid footing ” Yumul said. “We are going to identify what types of taxes CDA is authorized to rebate and out a dollar value the percentages will be assigned to the dollar value ” he said.

Alexander A. Sablan vice president of the chamber; said while the bill took off a lot of recommendations offered by the Saipan Economic Development council more suggestions will be forthcoming.

“It answers a lot of what we have requested. But we’d like to tweak it some more. We have some recommendations that are coming forward ” Sablan said.

The chamber is represented on the Saipan Economic Development Council along with the Hotel Association of the Northern Mariana Islands and other private sector groups.

According to Sablan the chamber does not approve of the bill’s provision that would base the tax benefits on the initial investment.

“We don’t necessarily agree with holding the line on the amount of the abatement the investors would get from the amount of investment. We’d like to have CDA consider the value of an investment from the basis of what is projected in a proposal ” Sablan said.

Moreover Sablan indicated the chamber would oppose the bill’s provision that would give the governor the decision-making power in granting the tax benefits. This provision is also contained in the QC program and had been criticized by SEDC because it “brings the appearance of politics entering into the decision process.

“We’d like to have CDA as the agency that has purview over this ultimately. We want CDA to ultimately decide when they’ve considered all of the facts … about the project and at face value; and decide the abatement they will provide the investor on the merits of the investment itself ” Sablan said.

Other salient features of Yumul’s bill are provisions that would:

• Make the tax benefits conditional on the investor putting money on public improvements separate from infrastructure development needed by his or her business;

• Require the investor to offer 10% or more of the corporate equity to qualified NMI residents;

• Require the investor to establish profit-sharing and stock ownership programs;

• Establish an in-house training program;

• Require the investor to procure services or products from NMI-licensed vendors;

• Require the investor to invest within NMI less than 50% of any tax rebated or abated.

The bill is under review with the House Committee on Commerce and Tourism headed by Rep. Martin B. Ada. MBJ