CNMI to receive $50M in EITC credits

The CNMI expects to disburse $50 million in Earned Income Tax Credit following the U.S. Treasury’s approval of the Commonwealth’s implementation plan.

In an interview with Finance Secretary David Atalig, he said $50 million in credits are expected in the following weeks following the approval of the CNMI’s EITC implementation plan last week.

“We’re expecting $50 million in EITC credits for our Commonwealth so we’re excited about that. The U.S. Treasury just approved our implementation plan. Similar to how we did the stimulus in terms of working with the [Internal Revenue Service], the EITC works the same way,” he said.

Atalig said the Division of Tax and Revenue will soon release guidance on how qualified, low-income families in the CNMI can apply for these credits.

“The Division of Tax and Revenue will be coming up with guidance and forms to ensure that when people submit their tax returns, if they’re qualified, they’ll be able to get these monies. We’re talking a lot of money, up to $6,000 per family that can qualify. This is great for the Commonwealth,” he said.

Atalig said this year, the American Rescue Plan bill allowed the IRS to reimburse the CNMI completely for EITC credits that will be disbursed.

As soon as the funds come in, Atalig said, Treasury will push them out, similar to how the child tax credit is disbursed.

“The EITC is part of the ARPA bill. We weren’t able to implement it last calendar year but we are able to implement it this calendar year. We asked not to upfront the costs because of cash flow. IRS will review and then remit money through us and once we receive the funds, similar to the child tax, then we’ll release the EITC. In terms of the regular tax refunds, for those that qualify and get tax refunds, we will be processing it a lot sooner,” he said.

Meanwhile, Atalig said the Department of Finance is also working on upgrading its revenue system in order for CNMI taxpayers to file their taxes online.

“We’re going to have a contract with a new vendor to upgrade our revenue and tax system and make processes easier by making everything online. Maybe not this calendar year, but next calendar year. We expect to have our people file their taxes online. That’s the goal, make processes more efficient and effective,” he said.

The EITC credit is an offset against taxes owed. A taxpayer who owes $100 in taxes and has a $70 credit would only have to pay $30.

The EITC is also refundable. This means that any amount of the credit not used to offset taxes owed is paid directly to the tax filer. If no taxes are owed, the entire EITC is paid to the tax filer. In this respect, the EITC is the same as the child tax credit, which was also made fully refundable for 2021 by the American Rescue Plan.

How much each taxpayer receives in EITC depends on several factors, including their age, marital status, number of dependents, and income. Single taxpayers without children, for instance, only qualify if their adjusted gross income in 2021 is less than $21,430. For a married taxpayer with three or more children the adjusted gross income limit is $57,414.

Adjusted gross income (line 11 on the CNMI 1040) is the total of wages, interest, retirement, and other income minus educator expenses, student loan interest, and other allowable deductions.