DOJ insists: FICA laws apply to the CNMI

The United States has jurisdiction to assess and collect Social Security and Medicare taxes-collectively known as FICA taxes-in the CNMI, according to the U.S. Attorney’s Office.

U.S. Department of Justice’s tax division trial attorney Andy R. Camacho asserted that Congress intended to apply both the employer and employee portions of FICA laws to the CNMI.

The statute is clear that FICA laws apply to the CNMI as they apply to Guam, said Camacho in the U.S. motion to dismiss the lawsuit filed by Hong Kong Entertainment (Overseas) Investment Ltd. and a defunct garment manufacturer Rifu Apparel Corp. against the U.S. government to recover allegedly wrongfully paid FICA taxes.

Hong Kong Entertainment and Rifu Apparel, argue, among other things, that the Covenant cannot apply FICA taxes to the CNMI as they apply to Guam because the United States sets Guam’s immigration policies and contract workers enter Guam under U.S. visas. The CNMI, however, used to set its own immigration policies, and contract workers entered the CNMI under CNMI visas, they said.

In a footnote to his pleadings, Camacho said that nonresident aliens are also eligible to receive the U.S. Social Security benefits they have earned if their countries of citizenship either have no generally applicable social insurance system, or have a generally applicable social insurance system that pays benefit to U.S. citizens who have earned them.

But even if they were not eligible, Camacho said, Congress has the authority to subject them to FICA taxes.

Camacho, however, pointed out that persons who pay FICA or SECA taxes accrue no property interest in Social Security benefits.

He said Congress is justified in treating nonresident alien workers unlike residents for purposes of Social Security taxes and benefits.

Camacho said it is the Covenant and the Internal Revenue Code that made plaintiffs liable for FICA taxes.

Eleven other defunct garment factories as well as the former Concorde Garment Manufacturing Corp. and numerous Chinese nationals formerly employed by Concorde and its affiliated companies also filed last year separate but similar lawsuits against the U.S. government.

The plaintiffs alleged that they erroneously withheld taxes from the wages of their then employees and paid them to the U.S. government.