Fitial seeks IRS consultation on FICA tax

Gov. Benigno R. Fitial is seeking clarification from the U.S. Internal Revenue Service on the purported expiration of federal tax exemptions for Filipino and Korean workers in the CNMI, and expects that the CNMI will be consulted prior to any “significant change in tax policy.”

Fitial wrote a letter to IRS chief counsel William J. Wilkins, seeking clarification on an unofficial copy of an Oct. 5 communication from the IRS stating that Filipino workers are no longer exempted from paying Federal Insurance Contribution Act taxes because of the implementation of federal immigration in the CNMI.

FICA covers Social Security and Medicare taxes.

The governor, in his one-page letter, said the position identified in the attached IRS document is contrary to long-standing U.S. tax policy, and would have significant impact on the CNMI.

“I would anticipate that prior to the implementation of any significant change in tax policy that there would be prior consultation with both my office and that of Congressman Sablan,” Fitial told Wilkins.

The governor, in his letter, said he would like to request a meeting with Wilkins and both Delegate Gregorio Kilili Sablan (Ind-MP) and himself to discuss the matter.

In an interview, Fitial said he strongly believes that there should not be two policies for the same subject when it comes to taxes.

“I don’t believe that there should be two different policies for FICA for the same type of subject. In other words, Filipinos working in Guam are exempted from FICA and Filipinos working in the CNMI are not exempted,” he said in an interview after meeting with visiting officials from the International Association of Fire Chiefs at Fiesta Resort & Spa in Garapan yesterday afternoon.

Saipan Chamber of Commerce president Douglas Brennan also sought the help of Sablan, Interior Assistant Secretary for Insular Affairs Tony Babauta, and the Fitial administration in clarifying the impact of federalization on FICA tax exemptions for certain workers in the CNMI.

The government and the business community said requiring employees and employers to pay FICA taxes is an added cost during these times when businesses barely earn revenue.

A minimum wage earner in the CNMI pays over $45 in FICA taxes a month. Their employers’ share is almost $62 a month.