Legislator pushes land buys over exchanges

Rep. Heinz Hofschneider yesterday urged the government to adopt a policy that will allow cash compensation rather than land exchange on private properties used for public purposes as a means to save the scarce land resources on the island.

He also stressed the need to push an equitable tax structure in the land compensation system of the government so that those who opt for cash payment will not be shortchanged in the transaction.

Hofschneider’s statement followed after the House of Representatives passed his bill seeking to correct technical deficiencies in the recently implemented law that waives payment of earned income tax on cash compensation on land transactions by the government.

The legislators said it will be better for the island government to have a policy of monetary compensation in view of the scarce public lands in the Northern Marianas.

“If we are really sincere about reserving properties or public land for future generation, then whenever the government acquires private land for public purpose, it is in our interest to protect the future generation by compensating those people (with cash),” Hofschneider told in an interview after the session.

The government is mandated under the law to exchange properties for public purpose, such as for school construction and widening of roads, on the basis of fair market value done through appraisal.

An individual has the option to choose if he wants to be paid in cash or receive as payment a real property owned by the government.

However, “the person’s income is further reduced in terms of compensation because there is a tax imposed on the monetary compensation which effectively reduces the total appraisal value compensated,” Hofschneider pointed out.

“If that person accepts land and the following day he sells it, that’s a direct benefit whereas this person who receives cash compensation is already deprived of the actual appraisal value,” he added.

During the early 90’s, according to Hofschneider, there were huge land exchange undertakings, not cash compensation, when they bought private properties for public purposes.

The administration then under priced government properties, exchanging them with private lands that cost less than 30 times the market value of the public lands.

“Where is justice here,” asked Hofschneider. “The bill attacks it from both fundamental policies — one is that we have a need to protect the scarce public land and we also have a need to ensure that when you do compensate people monetarily, you don’t further diminish the appraisal value.”

Under his measure signed into law last year, any cash compensation is considered tax-free, but a land exchange has to be taxed under the federal Internal Revenue Code.

House Bill 11-374, which heads to Senate for action seeks to amend that law.

“There is a difference however, a technical correction in the exemption on the tax so that they can be rebated,” Hofschneider explained. “We cannot amend the IRC, however we can provide for a rebate system under our tax code.”