Officials see fed tax credit as boost to local economy

The Saipan and Northern Islands Municipal Council is upbeat on the multiplier effect to the local economy of some $10 million worth of federal tax credits which are now being made available to local families following its implementation in the mainland U.S. in 1998.

In a resolution, the Council said the U.S. Child Tax Credit will bring financial relief to many local families who are now in need for additional funds, as well as revitalize the CNMI economy through increased consumer spending.

Council Chair Gregorio Deleon Guerrero said efforts of the U.S. Internal Revenue Service to fast-track the implementation of the federal tax credit into the Northern Marianas and other insular areas should be recognized.

Mr. Guerrero pointed out that the infusion of the several millions of federal money into the local economy is expected to result in increased business activities on the island, especially during at a time the economy is at its lowest stage.

Once released to hundreds of local families who are eligible to receive the tax credit, the federal funds amounting to about $10 million that will be sourced out of the U.S. Treasury will intensify consumer spending.

“This U.S. Child Tax Credit not only bring financial relief to the local families but will help reinvigorate the CNMI’s ailing economy through increased consumer spending,” said the Council in a resolution.

Both the CNMI government and the IRS are expecting the federal tax credit law to benefit more then 3,500 families in the Northern Marianas which have three or more dependent children under 17 years old.

The IRS said around $10 million in additional cash is expected to flow into the Commonwealth economy at least before Christmas from the implementation of the Additional Child Tax Credit Program in the CNMI.

Under the program, individuals or couples who have three or more children under the age of 17 are entitled to a tax refund of $400 per child for 1998, and $500 per dependent for 1999 and onwards.

Officials estimate that about 3,700 families on the island are eligible to make the claims under the recently-implemented tax program, which may translate to between $8 million and $10 million in total credits for 1998 and 1999.

The Additional Child Tax Credit Program was implemented in the mainland U.S. beginning 1998. All insular territories were left out. IRS started reviewing the law only after a resident of one of the U.S. territories asked for a refund.

The IRS is also working with the local tax agencies in Guam, American Samoa, Puerto Rico and the U.S. Virgin Islands for the implementation of the program.

The tax credit will be paid to recipients out of funds from the U.S. Treasury although the claims will be filed to the Department of Finance’s Revenue and Taxation Division.

IRS has developed a framework which is currently being put in place in coordination with the CNMI taxation division, in order to do the paper works for the claim within 15-20 minutes.

The tax credits will be refunded directly to the individual recipient in no more than 45 days after the filing date. He also mentioned that claims for 1998 should have been made on or before April 15, 2002.

For this year, IRS and the Revenue and Taxation Division will process tax refund claims for 1998 and 1999, while succeeding processing will be right on target.