Efforts underway to refine incentive law

The Legislature has been asked to include expansion and upgrading of services by CNMI signatory airline companies in the list of projects qualified to receive incentives under a recently-enacted investments law.

The Commonwealth Development Authority, which handles the implementation of the CNMI Investments Incentive Act of 2000, proposed that an amendment be made to the new law to clearly include other business sectors.

The Senate over the weekend passed a proposed measure that includes the aviation sector in the list of industries that may qualify to apply for perks under the government’s Tax Certificate Program.

Under Senate Bill 12-111, CNMI-based airline companies and other aviation-related activities may apply for a Qualifying Certificate that may allow them to receive incentives like tax cuts.

SB 12-111 also includes in the list of businesses qualified to seek perks under the Investment Incentive Act activities like: restaurants, water parks, aquarium, cultural centers, theme parks, resort hotels and condominium, golf courses, convention centers, dinner theaters, special events such as conventions and sports, manufacturing or processing of high technology products, Internet-related businesses, and any other development or project beneficial to the economic growth of the CNMI.

CDA Executive Director MaryLou S. Ada said there is a need to clearly define which business activities or expansion projects qualify to apply for the tax incentives in order to prevent possible confusion once the law is completely implemented.

She also said CDA has started receiving inquiries and applications from foreign investors under the recently-enacted Investment Incentive Act of 2000, which is now up for an amendment in efforts to address some concerns raised during the drafting of its implementing rules and regulations.

Ms. Ada pointed out that part of the changes that will be made to the existing Investment Incentive Act would be the grounds for the revocation of the perks, which may be caused by a myriad of reasons detailed in the proposed amendment measure.

Grounds for suspension or revocation of the Qualifying Certificate under the proposed measure include fraud, bankruptcy, dissolution, non-compliance and transfer of the perks.

Under the proposed measure, which was submitted to the Senate for immediate action, the governor has the power to revoke or suspend a Qualifying Certificate upon the recommendation of the development authority.

The proposed changes also clarifies some issues that were not properly addressed in the existing public law, including definition of business expansion and structure renovation.

The new measure wants expansion defined as the “extent or amount by which a building, project or activity is increased in dimension, size, volume, capacity or an increase in the number of locations or branches” from which the Qualifying Certificate beneficiary conducts business.

At the same time, it defines renovation as the modernization, reconstruction, remodeling, upgrading or substantial improvement of an existing building, project or activity which substantially increases the commercial potential of the building project or activity.

Officials are confident the new incentive program would build stronger economic backbone for the Northern Marianas, which has been largely dependent on tourism and apparel manufacturing activities.

Under Public Law 12-32, CDA would issue a Compliance Certificate to businesses that have qualified for tax rebates or tax abatements in exchange for a new business activity on the islands.

Businesses that are qualified to become a holder of the Compliance Certificate are those engaged in franchise restaurants, water parks, cultural centers, theme parks, resort hotels and condominium, golf courses, electronic commerce, telecommunications, manufacturing and other tourism-related activities.

Minimum capital that should be involved in the new and expanded investments ranges from $500,000 to $10 million, depending on the type of business that will be established.

Representatives from various business organizations in the CNMI, the Department of Commerce and the Governor’s Economic Revitalization Task Force worked closely with the Legislature to come up with the measure.

Government officials and business leaders have joined forces to plot measures that would spur economic activities in the Northern Marianas primarily because of flat growth in terms of new investments, as well as expansions. (ARF)