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Sunday, April 20, 2014

Dynasty, former Saipan garment firms want to reverse FICA ruling

The owner of Tinian Dynasty Hotel and Casino and former garment manufacturers on Saipan are appealing a federal court ruling on a FICA issue to the U.S. Court of Appeals for the Ninth Circuit.

Tinian Dynasty owner Hong Kong Entertainment (Overseas) Investment Ltd. and former Saipan garment manufacturers notified the U.S. District Court for the NMI on Wednesday about their appeal to the Ninth Circuit.

The appellants want the Ninth Circuit to reverse Chief Judge Ramona Manglona’s dismissal of their two lawsuits filed on their behalf and on behalf of some of their former foreign workers.

In her ruling issued on March 19, 2013, Manglona ruled that Social Security and Medicare taxes—collectively known as Federal Insurance Contributions Act or FICA taxes—are payable on services of foreign workers employed in the CNMI from 2004 to 2008.

Manglona stated that the CNMI is part of the United States for FICA purposes and that the employee-FICA is an excise tax within the meaning of Section 606(b) of the Covenant.

Hong Kong Entertainment and former garment manufacturers disagree.

These manufacturers are American Pacific Textile Inc., Grace International Inc., Handsome Textiles (Saipan) Corp., Hansae (Saipan) Inc., Marianas Garment Manufacturing Inc., Michigan Inc., Neo Fashion Inc., Sam Kwang Saipan Corp., Top Fashion Corp., Uno Moda Corp., and U.S. CNMI Development Corp.

Hong Kong Entertainment (Overseas) Investment Ltd., and Rifu Apparel Corp. are also filing a separate appeal on the same issue.

Hong Kong Entertainment and Rifu Apparel sued the U.S. government to recover allegedly wrongfully paid FICA taxes.

Twelve other defunct manufacturers, including the other group of appellants, and several Chinese nationals employed by the factories and their affiliates, filed separate but similar lawsuit against the U.S. government. They alleged that they erroneously withheld taxes from the wages of their then employees and paid them to the U.S. government when these employees should have been exempt from FICA taxes.

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