U.S. Department of Justice Tax Division trial attorney Jeremy M. Hendon informed the U.S. District Court for the NMI yesterday that he is still reviewing information from IRS. As counsel for the U.S. government, Hendon said he needs more time to review and analyze that IRS information.
The deadline for the U.S. government to respond to the CNMI government’s lawsuit is today, Friday.
Hendon said the additional time they are asking for will allow them to prepare an appropriate response. He insists that his request is not being made to delay the case.
Assistant attorney general James R. Stump, counsel for the CNMI government, agreed to extend the time for the U.S. government to respond to the complaint to Aug. 29, 2012.
The CNMI government filed the lawsuit on Jan. 19, 2012.
In the lawsuit, the CNMI asserts that extending the FICA liability to Filipino and Korean nonresident workers could result in the imposition of $24 million annually in illegal taxes on the Commonwealth economy.
“Imposition of the unlawful FICA tax on businesses struggling in the contracting economy will certainly cause a large percentage of businesses to close,” according to Stump. The CNMI’s economy will be further devastated and the government’s budget will be further reduced, he added.
Co-defendants in the lawsuit are Treasury Secretary Timothy Geithner and Internal Revenue Commissioner Douglas Shulman.
The CNMI is suing the defendants for breach of the Covenant and violation of Consolidated Natural Resources Act.
The CNMI wants the district court to declare that the imposition of FICA taxes on Philippine and Korean workers under a CW-I status violates the Covenant and the CNRA.
Stump stated in the lawsuit that U.S. law provides an exemption from employer and employee FICA taxation for employment associated with “service performed in Guam by a resident of the Philippines and by a resident of the Republic of Korea while in Guam on a temporary basis as a nonimmigrant alien admitted to Guam.”
Stump said the stated purpose of these exemptions was to avoid imposing FICA taxation on alien individuals who, due to the limited nature of their visa status, would be unlikely to receive benefits.
By Ferdie de la Torre