Proposed regs seek to allow changes to approved QCs

The Commonwealth Development Authority is promulgating regulations to allow changes to approved tax breaks for investors.

The proposed regulations, which appear on the Dec. 1, 2008 issue of the Commonwealth Register, provide procedures for modifications to active qualifying certificates.

The public notice state that the proposed amendments to existing rules are necessary “to effectively carry out the intent of the Investment Incentive Act of 2000,” which created the qualifying certificate program to attract investors to the Commonwealth.

The proposed regulations, now subject to a 30-day public comment period, are believed to be designed to accommodate Saipan LauLau Development Inc. The Kumho-Asiana subsidiary has been granted up to $18 million in tax relief for its multimillion-dollar construction at the LaoLao Bay Golf Resort. It is now asking CDA for more incentives.

Under the proposed rules, a good standing beneficiary can request changes to the qualifying certificate within 90 days of receiving it. Changes will only be made to requests filed on or after Oct. 1, 2008.

The CDA board of directors then has 45 days to either disapprove the request or recommend approval by the governor. If CDA fails to act on the request, the request goes directly to the governor. The governor will then have 45 days to act on the request. If no action is taken, the request will be deemed rejected.

The House of Representatives last month adopted a resolution asking the Commonwealth Development Authority to deny Laulau’s request for more tax benefits. The resolution says the Legislature has been accommodating enough to the investor. It points to the new 40-year lease agreement for 161 hectares of land at a rental rate of $103,000 a year, a substantial decrease from the original rental amount of $384,000. It adds that the investor has been given relief from all applicable taxes, except for alcoholic beverage tax.

Gov. Benigno R. Fitial, who supports giving Kumho Asiana additional tax breaks, has called the resolution “an attempt to sabotage the CNMI’s economic recovery efforts during a time of global financial crisis.” He says that this is not the time to be withholding critical investment incentives, especially from a “committed investor” such as Kumho Asiana.

Earlier this year, CDA and Fitial approved a plan to provide up to $18 million in tax relief for the $68.8 million golf hotel, or “golftel,” a complex with condominium-style apartments for golf tourists. The tax relief ceiling is significantly less than the $27.7 million the resort had requested.
In November, officials of LaoLao Bay Golf Resort disclosed that the construction project has been scaled down because of the global economic crisis. The total investment to the resort has been reduced to $60 million. The completion of the project, originally set for July 1, 2009, is now expected in the end of 2009.