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Closing a tax loophole
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Posted on Feb 10 2005
The changes in U.S. tax law set out in the American Jobs Creation Act of 2004 are welcome and overdue. These changes are a fair IRS reaction to close a significant loophole that allows an unfortunate evasion scheme to exist.
Under current law, there is a significant loophole available to creative U.S. taxpayers who spend only a small part of the year in the CNMI, yet declare themselves CNMI residents for purpose of paying far less taxes than they would had they remained in the U.S. and paid their taxes there. What these taxpayers have done is falsely expatriated to the CNMI, much like the old Millard/Computerland group, who caused much embarrassment to the CNMI in the 1980s for these tax shenanigans.
It is high time that federal law clearly recognizes that only U.S. taxpayers who fully and properly expatriate themselves full-time to the CNMI be able to take advantage of lower CNMI tax rates. The biggest losers in this new legal climate will likely be well to do local families who have decided to spend most of the year at their U.S. homes but still claim CNMI residency and pay taxes in the CNMI.
Thomas Sheldon
Guam
