Tax exempt issue delays audit of Settlement Fund

U.S. District Court for the NMI designated Judge Frances Tydingco-Gatewood wants a full briefing on the CNMI Settlement Fund trustee Joyce C.H. Tang’s position that the Settlement Fund is a non-profit, tax exempt entity under CNMI law.

Tang asked the court last week to confirm the non-profit tax exempt status of the Fund, since this issue has delayed the completion of the Fund’s fiscal year 2014 audit.

In her order, Tydingco-Gatewood ordered Tang and the counsel for Betty Johnson’s class action to file a joint motion on this issue no later than Dec. 29, 2015.

Tydingco-Gatewood gave the CNMI government until Jan. 5, 2016, to file its response.

The judge will hear the case on Jan. 21, 2016.

Tydingco-Gatewood said she and Tang shall participate in the hearing by video teleconference, and counsel for Johnson’s class action may participate in the hearing by telephone.

Tang recently sought a legal opinion from CNMI Attorney General Edward Manibusan to affirm her interpretation and understanding of the Settlement Fund’s status as a non-profit, tax exempt entity.

Tang said Manibusan declined to render a legal opinion stating that the Settlement Fund “does not fall within the scope of representation”—presumably because it is not a CNMI government agency.

According to Tang, the audit for the Settlement Fund fiscal year 2014 by Ernst & Young began in January 2015 and has been completed.

However, Tang said, because of a disagreement between the NMI government and the Settlement Fund on the issue of whether the Settlement Fund is a non-profit tax exempt entity, the completion of the audit has been delayed.

Tang said the Settlement Fund’s purpose is not to make a profit.

Tang said as Settlement Fund acting administrator Lillian Pangelinan points out, the Retirement Fund does invest much of its capital and consult with third-party experts in order to accumulate a larger reserve of funds.

However, Tang said that, according to Pangelinan the Retirement Fund’s main objective is not to make a profit for those who contribute to the Fund, and thus have an ownership interest in it.

Tang said the tax exemption should equally apply to the Settlement Fund because it is a “creature” of the U.S. District Court for the NMI.