‘Amount of cover over tax not yet determined’

While the CNMI claims that it is owed over $100 million in cover over tax since 2002, the federal government has not yet established enough grounds to make an estimate of the claim.

Both Interior deputy secretary-designee P. Lynn Scarlett and Insular Affairs deputy assistant secretary David B. Cohen said that the U.S. Treasury has yet to come up with its own figure.

“It is my understanding that the Treasury Department is essentially working with the CNMI to present paper work and documentation so that they can determine exactly what amount is owed. I think there is a general acknowledgement of the cover over payment issue. The real challenge at this point is to determine what exactly is the amount,” said Scarlett.

She said this “hinges upon the CNMI working with the Treasury Department.”

As for the Interior Department, she said, “we are in discussion with Treasury on that issue.”

“It is ultimately the Treasury Department that makes the determination,” she added.

Cohen said that the process of determining the actual amount takes time because “it’s very difficult to go back to the records into the 1970s.”

“The CNMI came up with an estimate of over $100 million but there are issues that need to be worked on. It may not be that high. We don’t know. The federal government is still looking at it. We at Interior don’t have the records, although we are very focused in making sure that the CNMI gets whatever it is entitled to,” he said.

Gov. Juan N. Babauta said early this year that the CNMI needs congressional approval for the release of federal tax refunds known as cover over tax after the U.S. Treasury reportedly expressed hesitation to release the funds to the CNMI right away.

“There’s a little reluctance on the part of the [Bush] administration, the Treasury. Obviously, they don’t want to just release out $100 million. They’re kind of protective with their turf and I don’t blame them. They just want to make sure that they have [the] authority to do it,”

He said the CNMI would have to work with Congress to prompt Treasury to turn over the “cover over” tax to the CNMI.

He said the amount is a rough estimate and requires a lot of work from the CNMI administration. Babauta said the work involves a very complicated process. “We don’t want to get people’s hopes too high,” he said.

The administration has hired a consultant, Daryl Owen & Associates, to pursue the claim for the CNMI. So far, the consultancy firm has turned in a total of $1.2 million.

Local authorities said that under existing laws, the U.S. government should return to the CNMI taxes paid to the federal government by certain employees and businesses based in the Commonwealth since about 1976.

The administration said that over the years, CNMI soldiers and federal employees in the CNMI have forked out tax obligations that should have been channeled to local coffers.