‘Proposed QC changes too much for investors’

Certain provisions of the new qualifying certificate bill are prohibitive or impose too much on potential investors, according to the Department of Commerce.

Acting Commerce Secretary James Santos said that, while House Bill 15-125 generally attempts to expand the coverage of the qualifying certificate program and promotes local employment, the proposed legislation contains provisions that may defeat its purpose of encouraging investment.

Under the qualifying certificate program, the Commonwealth Development Authority provides tax rebate or abatement benefits to qualified investors.

Authored by Rep. Ray Yumul, H.B. 15-125 seeks to reform the QC program by clarifying some ambiguous provisions, including public benefit contributions or investments as a requirement for the tax incentive, enforcing the required training provisions, and assisting CNMI residents in establishing or expanding industries.

The measure is pending before the House Committee on Commerce and Tourism.

Santos, upon reviewing the proposed legislation, pointed out prohibitive provisions in the bill. He referred to new requirements for the investor to be established or incorporated in the CNMI, for 10 percent local participation in the ownership of applicant businesses, and for 40-percent minimum U.S. citizen and permanent resident workforce.

On the incorporation requirement, Santos said: “We feel that imposing this requirement may be prohibitive and will ultimately discourage the entry of potential investors For example, if Disney wishes to open a theme park in the CNMI, according to the proposed bill, Disney would have to separately incorporate in the CNMI, in order to qualify under the program.”

He added that local participation should be made an incentive for qualifying for the program, not a requirement “since investors know best what to do with their investments.”

The Commerce secretary also said the proposal to require QC holders to report on a quarterly basis would seem too much of an imposition. He suggested that the Legislature consider a semi-annual reporting instead.

In addition, Santos said the bill should provide a specific factor to determine when it is appropriate to discontinue the program, rather than simply inserting a five-year sunset provision.

“Should the magic number be 5, 8, or 10 years? In any case, we ultimately have to be able to balance development and economic sustainability,” he said.