CDA approves $22M tax breaks for Laolao owner

The Commonwealth Development Authority board has approved to modify the qualifying certificate of the Saipan Laulau Development Inc., which will entitle the company to receive $22 million in tax breaks if the governor approves the agency’s recommendation.

From the initial $18 million tax benefits approved in September 2008, the new QC granted an additional $4 million for the company but the agency capped the QC application period from 25 years to just 20 years.

CDA board chair Pete Itibus disclosed yesterday that the modified QC has been transmitted to Gov. Benigno R. Fitial, who is expected to sign the document.

“The board approved it and is now awaiting the governor’s positive action,” he told Saipan Tribune, adding that the island’s chief executive has 45 days to act on the recommendation.

Saipan Laulau Development Inc. is an affiliate company of the Kumho Group that also owns Asiana Airlines. The conglomerate acquired the Laolao Golf Bay Resort from the United Micronesian Development Agency with the intention to build a luxurious golf resort, equipped with state-of-the-art equipment and facilities.

Itibus said it was SLDI that asked for the changes to its qualifying certificate. CDA amended its policy to accommodate the company’s request.

The company was the first to benefit under the new regulation, which states that QC modification is only available and only applies to requests made on or after Oct. 1, 2008.

“We decided to give them $22 million…but we reduced the years to 20. Our decision was based on consideration that the company would help boost our economy and will help increase the flights to the islands which we very much need at this time,” Itibus said.

In an early interview with SLDI president Kim Yun, he revealed that the modification request was made in consideration of the increased investment for the Laolao project—from $54 million to $70 million.

He said one major phase of the Laolao project was the completion of the clubhouse, which costs $50 million. Other components of the project include villas, golftel tower, and a golf course.

Because of the depreciation of the Korean won, Yun said its target completion—the end of 2009—may be affected.

Under the approved new QC, SLDI is entitled to 100 percent rebates on gross revenue tax and excise taxes in 20 years of business operation. It is required to make contributions of not less than $150,000 annually to health and educational programs and activities, excluding its educational tax credit donations.

CDA, in consultation with the Finance Department’s Division on Revenue and Taxation, stated that the amendments to the QC rules and regulations were formulated to restate, enhance and clarify the existing regulations and were necessary to effectively carry out the intent of the Investment Incentive Act of 2000, which created the QC program.