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House Ways & Means OKs tax offset bill

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THE House Ways and Means Committee on Tuesday unanimously endorsed the passage of House Bill 21-98, which would authorize the governor “to enter into agreements to offset the Commonwealth’s judgment liabilities against a judgment creditor’s tax liability.”

A judgment creditor is “a party to which a debt is owed that has proved the debt in a legal proceeding and that is entitled to use judicial process to collect the debt.”

Sheila Babauta

Introduced by a minority bloc member, Rep. Sheila Babauta, the bill is supported by the House leadership and the administration.

The bill contains these key provisions:

“a. The judgment against the Commonwealth Government in Tano Group v. DPL, Civ. No. 05-0100 may be offset against any tax liability, including penalties and interest, of the judgment creditor in such action.

“b. The judgment against the Commonwealth Government in Manglona v. CNMI, Civ. No. 97-0486 may be offset against any tax liability, including penalties and interest, of the judgment creditor in such action, as well as tax liabilities, including penalties and interest, of other individuals and entities agreed upon between the judgment creditor and the Governor.

“c. The Governor in consultation with the Secretary of Finance shall determine and approve the amount of the offset to be applied.”

These judgments against the CNMI government continue to grow due to interest and penalties.

In an interview, Rep. Babauta said the measure is an “alternative way” to address the dire financial condition of the the Commonwealth government. Aside from cost-cutting and revenue-generating measures, she said allowing the governor to offset judgments against tax obligations is one way “to plug the holes in the canoe to prevent it from sinking.”

“Right now, there are lots of holes to plug,” she added.

Babauta said she worked closely with the Division of Revenue and Taxation in drafting the bill, which will be discussed in the next House session.

November 2020 pssnewsletter

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