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Senators mull imposing fee on remittances

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WITH the arrival of stimulus checks for which many nonresident workers are eligible, the Senate Committee on Fiscal Affairs discussed on Tuesday the possibility of imposing a “certain amount of fee” on money sent out of the CNMI.

The committee invited Finance Secretary David DLG Atalig and Assistant Attorney General for Revenue and Taxation Dustin Rollins who attended the meeting via teleconference.

There is no formal draft bill yet, said the Fiscal Affairs Committee chairman, Senate Vice President Jude U. Hofschneider, but he added that a “vehicle bill” stating the intent of the proposal was sent to the Division of Revenue and Taxation, which is under the Department of Finance.

Jude Hofschneider

According to Rollins, “The proposed legislation violates the Commerce Clause of the U.S. Constitution because it discriminates against interstate commerce. The Commerce Clause operates to prohibit state regulatory activities, which unduly burden interstate commerce. Facially discriminatory state laws interfering with interstate commerce are virtually always per se invalid. The proposed legislation imposes fees on remittances abroad and to other U.S. jurisdictions, but exempts ‘transmitting money or monetary value that is to only be received or retrieved at a physical location within the CNMI.’ Thus, because the law only imposes a fee on interstate transactions (and excludes intrastate transaction) it is facially discriminatory and violates the Commerce Clause as a result.”

Rollins added, “The proposed legislation may [also] violate the Equal Protection Clause of the U.S. Constitution because it has a disparate impact on aliens lawfully working in the CNMI. State laws that have a disparate impact on legal aliens may be subject to the highest level of scrutiny in an equal protection challenge. While the proposed legislation does not discriminate on its face, it would overwhelmingly impact aliens lawfully working in the CNMI. The disparate impact is further compounded by the exclusion of intrastate transfers, the vast majority of which are presumably conducted by U.S. citizens residing in the CNMI, not foreign workers. To the extent the underlying purpose of the legislation is to impose a fee on aliens legally present in the CNMI, it would likely fail a constitutional challenge.”

In addition, Rollins said the “proposed legislation may violate the Equal Protection Clause of the U.S. Constitution because based on the stated purpose of the bill, there is not a rational basis for treating business entities differently from individuals. If neither fundamental right nor a suspect classification is implicated, then, the law will receive highly deferential review, and will be upheld so long as the classification is shown to have some rational basis to a legitimate government interest. Here, where the stated purpose is keeping funds in the CNMI, there is no rational basis for excluding corporate remittances. Considering the nature of the CNMI’s economy and the number of foreign corporations active in the CNMI, one would expect that those actors would also cause a substantial number of remittances. Accordingly, excluding business entities runs counter to the Legislature’s stated purpose and it has not provided a rational basis for such an exclusion.”

During the meeting, Finance Secretary David DLG Atalig told the committee members that he would support the bill’s primary intent as long it addresses the constitutional issues raised by the assistant AG.

Rollins, for his part, said if the goal is to “keep financial resources in the Commonwealth,” an indirect way of doing this is to increase taxes on remittance centers.

Sen. Sixto Igisomar said before considering the introduction of the bill, they will also have to check if the Covenant allows the Commonwealth to enact laws that “intervene” with international trade.

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