AN ACT 

To improve the tax administration by repealing and reenacting 4 CMC Division I (Revenue 

and Taxation); and for other purposes. 

BE IT ENACTED BY THE NINTH NORTHERN MARIANAS COMMONWEALTH 

LEGISLATURE: 

Section I. Repealer and Reenactment 4 CMC Division 1 Chapters 2 through 7 are hereby 

repealed and reenacted to read as follows: 

"CHAPTER2 

WAGE AND SALARY AND EARNINGS TAXES 

§ !201. 

§ !202. 

§ !203. 

§ !204. § !205. § !206. 

Wage and Salary Tax 

Earnings Tax Exemptions 

Ammmt ofT ax 

Non-refundable Credit 

Filing Returns 

§ 1201. Wage and Salatv Tax. There is imposed on every employee, a yearly tax on 

the employee's total wages and salaries. 

§ 1202. Earnings Tax. 

(a) There is imposed on every person a yearly tax on such person's total 

eanungs. 

(b) For purposes of this Chapter, 'earnings' shall mean: 

(1) a gain as detetn1ined under NMTIT section 1001 received from the 

sale of personal property, tangible or intangible, by a resident that was not in 

the course of carrying on a business. 
not in the course of canying on a business. For purposes of tills paragraph, 

"net income from leasing real property including the assignment of any lease", 

means the income less expenses fi:om the rental of real property as determined 

under the NMTIT. 

(4) interest, dividends, rents, royalties, or similar income earned in and 

derived fmm a person in the Commonwealth and received by a resident not 

in the course of carrying on a business. 

(5) gross winnings received from any gaming, lottery, raffle or other 

gambling activity in the Commonwealth. 

(6) all other types of income that a resident individual must report in 

determining his NMTIT, except 

(A) payments received by an employee or his beneficiaty from 

a retirement plan, including the CNMI retirement plan, or as 

unemployment compensation. For purposes of this paragraph, the 

tenn 'retirement plan', other. than the CNMI retirement plan means a 

plan that qualifies under Subchapter D, Subtitle A of the NMTIT. 

(B) amounts received as alimony or separate maintenance 

payments as defined under section 71 ofNMTIT. 

(C) unemployment compensation as defined under section 85 

ofNMTIT. 

(D) social security benefits as de'fined under section 86 of 

NMTIT. 

In addition to the items included within subparagraphs (A) -(D) of this 

paragraph, the Secretary by mling or regulation may exempt other income 

when the Secretary determines that imposing the Earnings Tax would result 
(d) In detennining the total earnings, a person shall not reduce any eamings 

by any loss. 

§ 1203. Exemptions. Section 1202 of this Act shall not apply to: 

(a) A person exempt from the NMTIT, under NMTIT §§ 501(c)(3), 

50l(c)(4), 50l(c)(5), 50l(c)(6), 50l(c)(8), 501(c)(IO) or as a qualified plan under 

NMTIT § 40l(a). This exemption, however, shall not apply to: 

( 1) earnings from any trade or business, the conduct of which is not 

substantially related (aside from the need of such organization for income or 

funds or the use it makes of the profits derived) to the exercise or 

perfonnance by such organization of its charitable, educational, or other 

purpose or function constituting the basis for its exemption, except for trade 

or businesses carried on by the organization primarily for the convenience of 

its members, student, patients, officers, or employees, or 

(2) a person who does not apply for exempt status and comply with 

the procedures prescribed by the Secretary for exemptions under this 

subsection. 

The Secretary may prescribe by regulation that persons exempt under the 

Internal Revenue Code (IRC) §§ 50l(c)(3), 50l(c)(4), 50l(c)(5), 50l(c)(6), 

50l(c)(8), 50l(c)(10) shall also be exempt under this section. 

(b) Earnings to the extent that they are deemed to be from sources without the 

Commonwealth under Section 1712 of this Act. 

§ 1204. Amount Of Tax. The amount of tax imposed by Sections 1201 ancl1202 

of this Act shall be dete1mined in accordance with the following schedule: 

If the total yearly wages 

or total yearly earnings are: 

The tax on the total 

yearly wages and salaries 

or total yearly earnings is: 
(e) $

5,00

to $

,000 

(f) $22,00 I to $30,000 

(g) $30,001 to $40,000 (h) $40,001 to $50,000 ((k) over $50,000 

§ 1205. Non-refundable Credit. 

5% o

t

e a

ou

t ove

$0 

6% of the amount over $0 

7% of the amount over $0 

8% of the amount over $0 

9% of the amount over $0 

(a) Except as provided in subsections(b) and (c) of this section, a person may 

take any NMTIT as a non-refundable credit against the tax imposed on wages and 

salmies or eamings, Wlder this chapter before calculation of the rebate allowed under 

Section 1708 of this Act. 

(b) The amount of the non-refundable credit shall be the lesser of: 

(1) the amount of the NMTIT paid with respect to such wages and 

salaries or earnings and for which a rebate is allowed under this Act, or 

(2) Earnings and Wage and Salary Taxes shown on the applicable tax 

return. 

(c) A person may not take the credit allowed under this section if the person. 

has deducted the Earnings and Wage and Sala1y Taxes in determining the taxable 

income under the NMTIT. The person may elect any deduction allowed under the 

NMTIT or the credit allowed under this section. 

§ 1206. Filing Returns. All persons subject to tax under this Chapter shall file the 

appropriate return in the manner prescribed by the Secretary. The required filing date for 

such n::turn shall be no later than the GJteenth day of the fourth month following the close of 

the tax year. The retum shall include all information as the Secretary may require by 

regulation. 

CHAPTER3. 

GROSS REVENUE TAX 
§ 1304. 

§ 1305. 

§1306. 

§!307. 

Tax on Banks, Banking Institutions, Build

g 

Associations, and Other Financial Institutions 

Exemptions 

Returns and Payments ofT ax on Gross Revenue 

Gross Revenue Deduction 

§ 1301. Tax on Gross Revenue. 

(a) Except as otherwise provided, there is imposed on every person, a yearly 

tax on the person's total gross revenue. The tax shall be determined in accordance 

with the following schedule: 

$0, 

If the yearly total 

gross revenue is between: 

(1) $0 to $5,000, 

(2) $5,001 to $50,000 

(3) $50,001 to $100,000 

(4) $100,001 to $250,000 

(5) $250,001 to $500,000 

(6) $500,001 to $750,000 

(7) $750,001 and over 

The tax on the yearly 

total gross revenue is: 

No Tax 

1.5%oftheamountover 

2.0% of the amount over $0, 

2.5% of the amountover $0, 

3.0% of the amount over $0, 

4.0% of the amount over $0 

5.0% of the amount over SO, 

(b) A person who during the year conducts two or more separate and distinct 

businesses, sells more than one property or is entitled to distributive shares from more 

than one partnership, shall pay the yearly tax under this section on the combined total 

gross revenue of all the businesses, all sales of property or all the distributive shares 

that are otherwise subject to Gross Revenue Tax for the year. 

§ 1302. Tax On Agriculture Producers And Fishing. 

(a) In lieu of the tax rates of Section 130l(a), the tax imposed on persons 
g

(A) $0 to $20,000, 

(B) over $20,000 

g

no tax 

1.0% of total gross 

revenues m 

excess of $20,000. 

(b) Subsection (b) of Section 1301 shall apply in detetmining the yearly total gross 

revenue of persons subject to subsection (a) of this section. 

(c) All persons subject to this section shall file the returns required under Section 

1306 of this Act whether or not any tax is due. 

§ 1303. Tax On Manufacturers or Wholesalers. 

(a) In lieu of the tax rates of Section 130l(a), the tax imposed on persons engaged in 

the business of manutacnning and selling of goods shall be in accordance with the following 

schedule: 

If the yearly total gross 

revenue is between: 

(1) $0 to $5,000, (2) $5,001 to $50,000, 

The tax on the yearly 

total gross revenue is: 

no tax. 

1.5% of total gross revenue in excess of$0. 

(3) $50,001 and over, 2% of total gross revenue in excess of$0. 

(b) Subsections (b) of Section 1301 shall apply in detetmining the yearly total gross 

revenues of persons subject to subsection (a) of this section. 

(c) All persons subject to this section shall maintain separate records and accounts, 

showing the gross revenue from manufacturing and selling, selling al wholesale, selling at 

retail, and other business activities. 

§ 1304. Tax On Banks. Banking Institutions. Building and Loan Associations and Other 

Financial Institutions. 

(a) In lieu of Section 130l(a), the tax imposed on persons operating any bank, banking 
less the following deductions: 

(I) Salaries or bonuses and other compensation paid for personal services; 

(2) Interest or discount paid; (3) Rents paid; ( 4) Ordinary operating expenses such as supplies, utility services, insurance 

premiums other than for life insurance; Provided, that any deductible insurance 

expense shall be allowable only to the extent that such a premium is applicable to the 

tax period against which it is claimed; 

(5) Loans or obligations charged off the books of the bank as losses unless 

charged against reserves then in existence; 

(6) Losses other than loan losses, such as those occasioned by fire or other 

casualty, theft, embezzlement, and the like, but only to the extent not covered by 

insurance proceeds collected; 

(7) Transfers from earnings to reserve for bad debts or other contingencies 

provided for to the extent allowable under the NMTIT; 

(8) Miscella,neous direct expenses such as legal advertising, auditing, and the 

like; and 

(9) Loss on prope11y sold and depreciation on property o\.Vlled. 

(c) All deductions allowed pursuant to subdivision (b) shall be limited to the portion 

attributable to gross revenue earned or accrued, whichever is earlier, within the 

Commonwealth. 

§ 1305. Exemptions. Notwithstanding any other provision, Section 1301(a), § 1302, and 

§ 1303 shall not apply to the gross revenue: 

(a) derived solely from the expm1 sales of goods, resources, food, fish or agricultural 

products produced or manufactured in the Commonwealth and delivered by the manufacturer 

or producer to the buyer outside the Commonwealth. 
(e) earned by banking corporations. 

(f) to the extent that they are treated as sources from without the Commonwealth 

under Section 1712 of this Act. 

(g) earned by a person exempt from the NMTIT under NMTIT §§ 501(c)(3), 

50! (c)(4), 50l(c)(5), 50!(c)(6), 50l(c)(8), or 50l(c)(!O) or as a qualified plan under NMTIT 

§ 401(a) and to the extent allowed under§ 527 of the NMTIT. This exemption, however, 

does not apply: 

( 1) to gross revenue from any trade or business, the conduct of which is not 

substantially related (aside from the need of such organization for income or funds or 

the use it makes of the profits derived) to the exercise or perfonnance by such 

organization of its charitable, educational, or other purpose or function constituting 

the basis for its exemption, except for trade or businesses carried on by the 

organization primarily for the convenience of its members, students, patients, officers, 

or employees, or 

(2) to a person who does not apply for exempt status and comply with the 

procedures prescribed by the Secretary for the _exemptions under this subsection. 

The Secretary may prescribe by regulation that persons exempt under IRC §§ 

501(c)(3), 50J(c)(4), 50l(c)(5), 50l(c)(6), 50I(c)(8), 50I(c)(10) shall also be exempt 

under this section. 

§ 1306. Returns and Payment of Tax on Gross Revenue. 

(a) In GeneraL Every person subject to this Chapter shall flle a return and pay the tax, 

if any, on a qumicrly basis. The Secretary shall by regulation prescribe quarterly rates 

necessruy to carryout the intent and purpose of this section. 

(b) Filing Returns and Payment. The quruierly returns and tax payments under 

subsection (a) shall be filed and the tax paid, if any, on or before the last day of the month 

following the close of each quarter, to wit: on or before April 30, July 31, October 31, 
section, make a full, true, and correct return showing all such gross revenue received, 

accrued, or eamed, whichever is earlier, and the amounts deducted and set aside on account 

during the preceding quarter. This retum shall be filed with the Secretaty and include such 

other inf01mation as may be required or prescribed by the Secretary. The Secretary, for good 

cause, may extend the time for making payments and returns, but not beyond the last day of 

the first month succeeding the regular due date. 

(c) Tax Returns of Transferor. The requirement to deduct, withhold and pay over tax 

for the account of the transferor shall not relieve the transferor from the duty to file any tax 

retums required by law. 

(d) Penalty. Failure to comply with the provisions ofthis section shall be punishable 

under the penalties prescribed by this Act. 

§ 1307. Non-refundable Credit. 

(a) Except as provided in subsection (c) of this section, a person may take a nonrefundable credit against the tax imposed on gross revenues under Section 1301 or any other 

Commonwealth tax or fee imposed in lieu of such tax (such as 4 CMC 2202(h)), 

(b) For purposes of this section, the amount of the non-refundable credit shall be the 

lesser of: 

(I) The amount of the NMTIT paid with respect to gross revenues from 

sources within the Commonwealth; or 

(2) The Gross Revenue Tax shown on the retum. 

(c) A Person may not take the credit allowed under this section if the person has 

deducted the Gross Revenue Tax in determining taxable income under the NMTIT. The 

person may elect any deduction allowed under the NMTIT or the credit allowed under this 

section. 

CHAPTER4 

ARTICLE I 
§ 1404. 

§ 1405. 

§ 1406. § 1407. 

§ 1408. § 1409. § 1410. 

§ 1411. 

Fuel Tax Exemption 

Beverages Container Excise Tax 

Exemption 

Payment of Tax; Time; Release of Goods 

Exports 

Refunds-Limitation Period 

Declaration Required Penalties 

§ 1401. Definitions. For purposes of this Chapter: 

(a) 'Ad valorem' means the value of goods, commodities, resources or merchandise. 

(b) 'Alcoholic Beverage' means beer or other malt beverage, distilled alcoholic 

beverage, wine or sake and any other beverage, which contains at least one-half of one 

percent (0.5%) of alcohol by volume and which is fit for human consumption. 

(c) 'Beer and other malt beverage' means any beverage made by the alcoholic 

fetmentation of an infusion or decoction, or combination of both, in potable brewing water, 

of malted barley with hops, or their p;;ui:s, or their products, and with or without other malted 

cereals, and with or without the addition ofurunalted or prepared cereals, other carbohydrates or products prepared therefrom, and with or without the addition of carbon dioxide, and with 

or without other wholesome products suitable for human consumption. 

(d) 'Cigarette' means and includes any preparation of finely cut tobacco or other 

smokable substance, material, or product rolled and enclosed so that it is held together for 

smoking. 

(e) 'Construction material' means materials which are part of the basic components of 

a building structure. The basic components of a building structure include cement, gravel, 

lumber, nails, rebars, windows, doors, pipes, hollow blocks, electrical and plumbing supplies, 

door and window frames, doorknobs, ceramics, tiles, sinks, toilets, and paint. 
sustenance of life, and suitable for human consumption including dairy products, bottled 

drinking water, 100% fmit or vegetable juices, and any ingredient primarily used in the 

preparation of food. 

(h) 'Hygiene Products' means goods, merchandise or products necessary for the 

personal health, safety and cleanliness of an individual; except for child care products 

exempted under Section l402(b)(5) of this Chapter. 

(i) '.Tcwehy' means all articles made of precious metal or precious or semi~precious 

stones and capable of being worn for personal adorrunent. 

G) 'Liquid fuel' means and includes all liquids ordinarily, practically and conunercially 

usable in internal combustion for the generation of power and shall include all distillates of, 

and condensates from petroleum, natural gas, coal, coal tar and vegetable or plant fennents, 

such distillates and condensates being ordinarily designated as gasoline, butane, naphtha, 

benzol, benzene, kerosene and alcohol so usable but not restricted to such designation. 

(k) 'Leather goods or related products' means a11icles made of fur on the hide, pelts, 

or any animal skin dressed for use or in which such article has as a component fur on the hide, 

pelts or any animal skin. Leather goods or related products does not include footwear. 

(l) 1Passenger vehicle' means any vehicle of four wheels or more: 

(1) which is manufactured primarily for use on public streets, roads, and 

highways, and 

(2) which is rated at 2.5 ton (or its metric equivalent) gross vehicle weight or 

less. 

(m) 'Sake' means an alcoholic beverage of fermented rice which is nola beer and does 

not contain malt. 

(n) 'Soft Drink' means any readily drinkable carbonated or non~carbonated non~ alcoholic beverage, other than drinkable dairy products, 100% fruit or vegetable juices, and 

bottled drinking water. 
substance, material or product capable of preparation for smoking or snuffing. 

(p) 'Wine' shall mean a beverage for human consumption consisting of the product of 

the normal alcoholic fennentation of the juice of any fmit or any natural produce and not 

containing more than 24 percent (24%) alcohol by volume. Wine shall not include any 

beverage which contains distilled alcohol such as liqueurs, cordials and similar compounds. 

The Secretaty may prescribe regulations which fwther define any of the above terms or define 

any other term necessary for the administration of this chapter. 

§ 1402. Excise Tax. 

(a) Gene~.·al. For the ptivilege of first sale, use, manufacture, lease or rental of goods, 

commodities, resources, or merchandise in the Commonwealth for business purposes or for 

personal use exceeding the value specified in subsection (c), there is imposed an excise tax 

as follows: 

( 1) Soft drinks, one-half of one cent ($0.005) per fluid ounce or fractional 

equivalent thereof; 

(2) Foodstuffs, one percent (I%) ad valorem; 

(3) Commodities used in the production of agricultural prodjlcts, including 

fertilizers, seed, animal feeds, pesticides and herbicides, agiicultural equipment, 

machineiy, tools, irrigation equipment and accessories intended specifically for 

agricultural use, one percent (l %) ad valorem. 

(4) Perfumery, mticles of perfumery including cologne and other fragrances 

whether in sachets or othe~.wise, thirty percent (30%) ad valorem for three years after 

the passage of this Act into law; thereafter twenty percent (20%); 

(5) Cosmetics, including all preparations used as applications to the hair or 

skin, lipsticks, eye shadows, mascara, pomades, powders, makeup and other 

preparations not having medicinal properties or hygienic purposes, thirty percent 

(30%) ad valorem for three years after the passage of this Act into law; thereafter 
machinery, three percent (3%) ad valorem; 

(9) Leather goods or related products, twenty-five percent (25%) ad valorem 

for three years after the passage of this Act into law; thereafter ten percent (10%); 

(I 0) Jewelry, twenty five percent (25%) ad valorem for three years after the 

passage of this Act into law; thereafter ten percent (1 0%); 

( 11) Precious metals, precious or semi-precious stones or related 

commodities, twenty five percent (25%) ad valorem for three years after the passage 

of this Act into law; thereafter ten percent (10%); 

( 12) Passenger vehicle having a value not exceeding $30,000 per unit, five 

percent ( 5%) ad valorem; 

(13) Passenger vehicle having a value in excess of $30,000 per unit, ten 

percent (10%) ad valorem for three years after the passage of this Act into law; 

thereafter five percent (5%); 

( 14) Boats and yachts, whether capable of being powered by sail or motor, 

and having a value not exceeding $50,000 per unit, five percent (5%) ad valorem; 

( 15) Boats and. yachts, whether capable of being powered by sail or motor, 

and having a value in excess of $50,000 per unit, ten percent (I 0%) ad valorem for 

three years after the passage of this Act into law; thereafter five percent (5%); 

(16) Goods, commodities, resources, or merchandise manufactured grown or 

entirely derived from sources within the Commonwealth, one percent (1%) of retail 

price, unless othetwise specified within this Chapter. 

(17) Cigarettes, fifty (50) cents per every twenty (20) cigarettes or fractional 

equivalent thereof for three years after the passage oftllls Act into law; thereafter 

twenty-five (25) cents per every twenty (20) cigarettes or fractional equivalent 

thereof; 

( 18) Tobacco or tobacco substitute or chewable tobacco product, or other 
tax: 

(20) Distilled alcoholic beverages, 12 cents per t1uid ounce or fractional 

equivalent thereof; 

(21) Wine and sake, 3 cents per fluid ounce or :fiactional equivalent thereof; 

(22) AU other goods, commodities, resources, or merchandise not otherwise 

provided by law, five percent (5%) ad valorem; 

(b) Exemptions from Excise Tax. The following items shall be exempt from excise 

(1) Capital equipment and machinery used in businesses primarily engaged in 

manufacturing for expott with a fair market value exceeding $1,000 per unit and raw 

materials used in businesses primarily engaged in manufacturing for expmt. 

(2) Sacramental wine for use in religious rites of a religious organization. 

(3) Books and other educational materials purchased for non-business use by 

a public or private school or a library open to the public. 

(4) Merchandise, equipment, devices, and other items, including wheelchairs, 

hearing aids, braille mate1ial, canes, walkers, prosthetic devices, braces, crutches, or 

presctiption lenses and eye glasses brought in by persons to be used by handicapped 

individuals who are either residing or visiting in the Commonwealth, provided 

however, that such merchandise, equipment, devises and other items are not brought 

into the Commonwealth for sale, lease, or rent to the handicapped. 

(5) Merchandise, equipment, devices, hygiene products, cribs, strollers, 

diapers, lotions, creams, powders, and other products primarily intended for use in the 

daily and ordinary care of children aged lwenty-four months or less. 

(6) solar panels and other such devices for the conversion of solar energy into 

heat or electricity. 

(7) Personal and office computer equipment having a value of Jess than 

$5,000, including CPUs, monitors, keyboards, and hard drives, but not including 
temporarily imported under this subsection must be entered pursuant to a written 

application as presctibed by the Secretary and filed with the Secretary. The Secretary 

may by regulation place restrictions on any temporary impm1ation free of tax under 

this section to ensure that all relevant goods, commodities, resources, or merchandise 

are in fact used only for temporary display or demonstration. 

(6) The Secretary may prescribe regulations to exempt any other goods, 

commodities, resom·ces, or merchandise from taxation under this Chapter. 

(c) Non-business use exemption. Any person may bring for personal use and 

consumption exempt from excise tax imposed by this section the following goods, 

commodities, resources, or merchandise: 

(1) any goods, commodities, resources or merchandise (including those 

exempt) that do not exceed a combined total value of $1000, except as otherwise 

provided in tills section. For purposes of ascertaining which goods, conunodities, 

resources or merchandise equal the first $1000 of exempted goods, commodities, 

resources or merchandise, the value of those goods, commodities, resources, or 

meryhandise with the lowest excise rate shall be included first. 

(2) An amoW1t of cigarettes that are commercially packaged and that do not 

exceed 30 packages of20 cigarettes per package. 

(3) an amount of tobacco or tobacco substitute, or chewable tobacco product 

or other smokable or snuffable substance, material or product other than cigarettes, 

not to exceed one pound, provided that such substance, mate1ial or product is not 

contraband. 

( 4) an amount of distilled alcoholic beverages not to exceed seventy~seven 

(77) ounces. 

(5) an amOW1t of beer or other malt beverage not to exceed 288 fluid ounces. 

(6) an amount of wine and sake not to exceed 128 ounces. 
taxation under this section, The Secretary shall prescribe by regulation the nature of the proof 

required to show the non-business purpose. 

(e) Special Rule on Separate Purchases of Articles and Parts and Accessories. Under 

regulations prescribed by the Secretary; 

(1) In General. Except as provided by paragraph (2) and (3), if: 

(A) the owner, Jessee, or operator of any passenger vehicle, boat or 

yacht taxable under Section l402(a)(I3) & (15), (determined without regard 

to price) installs (or causes to be installed) any part or accessmy on such 

ruticle, and 

(B) such installation is not later than the date 6 months after the date 

the article was first placed in service, 

then there is hereby imposed on such first sale or use a tax equal to the sum of: 

(AA) 10 percent of the total price of such part or accessory, plus 

(BB) l 0 percent of the atiicle taxable under this Chapter (detennined 

without regard of price). 

(2) Limitation. "Where the article taxable under this section was previously 

taxed under subsection 1402(a), the tax imposed by paragraph (1) shall be reduce by 

that tax previously imposed and paid under subsection 1402(a). 

(3) Exceptions. Paragraph (I) shall not apply if: 

(A) the part or accessory installed is a replacement part or accessmy, 

or 

(B) the aggregate price of the parts and accessories described in 

paragraph (I) with respect to the taxable mticle does not exceed $200 (or 

such other amount or amounts as the Secretrny may by regulation presctibe ). 

§ 1403. Fuel Tax. 

(a) Liquid Fuel Tax. Except as provided in subsection (b) and (c), for the privilege 
other aviation fuel in the Commonwealth, there is imposed an excise tax at the rate of three 

percent (3%) ad valorem. 

§ 1404. Fuel Tax Exemption. The Secretary may by regulation reduce or waive the fuel tax 

imposed under~ 1403 where: 

(a) The price of aviation fuel without the aviation fuel tax would be more competitive 

than the price of aviation fuel elsewhere and the airline would purchase the aviation fuel in 

the Commonwealth. 

(b) the sale of diesel fuel for use in any vessel 1s commercial operations that are 

primarily outside the territorial waters of the Commonwealth. 

§ 1406. Beverage Container Tax. 

(a) Soft Drink Beverage Containers. There is imposed a tax upon all soft drink 

beverage containers in the amount of five (5) cents per container. 

(b) Alcoholic Beverage Containers. There is imposed a tax upon each container of 

any alcoholic beverage in the amount of five ( 5) cents per container. 

§ 1406. Exemption. Any goods, commodities, resources, or merchandise subject to tax 

under this Chapter and requiring customs inspection and clearance may be exempted from such tax 

if such goods, commodities, resources, or merchandise is certified as damaged or not received by the 

carrier or his agent. 

§ 1407. Payment ofT ax; Time: Release of Goods: Container Tampering. 

(a) Generally. All taxes required by this Chapter shall be paid within 30 calendar days 

after the first sale, use, completion of manufacture, lease or rental in the Commonwealth of 

goods, commodities, r<!sources, or merchandise subject to excise tax. 

(b) Customs Inspection and Clearance Required. In the case of those goods, 

commodities, resources, or merchandise whose first use in the Corrunonwealth requires 

customs inspection and clearance, payment shall be made within 30 days after entry. Such 

goods, commodities, resources, or merchandise may be released prior to payment of excise 
(c) Release of Goods. No person is allowed to release or deliver goods, commodities, 

resources, or merchandise to any person without prior Customs clearance when required. 

Any person who releases or delivers any goods, commodities, resources, or merchandise 

without prior Customs clearance shall be subject to a civil penalty of no more than $10,000 

and any other applicable penalty under this Act. 

(d) Tampering With Containerized Cargo. Pursuant to 6 CMC § 2305, no person is 

allowed to open or otherwise tamper with containerized cargo prior to customs clearance. 

Any person who opens or otherwise tampers with containerized cargo shall be subject to a 

civil penalty of no more than $10,000 including any penalty under 6 CMC § 2301 (b) and any 

other applicable penalty under this Act. 

§ 1408. Refunds- Expm1s. Upon application to the Secretary, any person who imports 

goods, commodities, resources, or merchandise into the customs tenito:ty of the Commonwealth for 

sale, use, lease or rental and expm1s them to a buyer outside of the customs territory of the 

Commonwealth shall be entitled to a refund of tax actually paid on those items, provided however, 

that such goods, commodities, resources, or merchandise exported were not used, sold, leased or 

rented within the Commonwealth prior to export. 

§ 1409. Refunds-Limitation Period. Application for refund pursuant to § 1408 of this 

Chapter shall be filed with the Secretary within one year from the date the tax was paid or required 

to be paid or goods, commodities, resources, or merchandise entered the Commonwealth, whichever 

is earlier. 

§ 1410. Declaration Required. Any person who imports any goods, commodities, resources, 

or merchandise limn outside the Conunonwealth and is subject to excise tax imposed on those goods, 

commodities, resources, or merchandise by this Chapter shall declare the entry of such goods, 

commodities, resomces, or merchandise on a fonn prescribed by the Secreta:ty. 

§ 1411. Penalties. The following penalties for this Chapter are in addition to the other 

penalties provided by this Act: 
documentation which fails to declare to the Secretary goods, commodities, resources, or 

merchandise subject to tax, or under·declares, or failed to declare their correct amount or 

value of such goods, commodities, resources, or merchandise; 

(b) In the case of goods, commodities resources, or merchandise subject to excise tax 

in the Conunonwealth for which penalties are assessed under this Act, the Secretary shall have 

the authority to withhold the release of any and all goods, commodities resources, or 

merchandise from the consignee or owner until settlement of the amount of excise tax and 

penalty due and payment is made or adequate bond is posted to guarantee such payment. 

(c) Any tax, penalty, or interest charge imposed by this Chapter and unpaid, or any 

violation of any of the provisions of this Act may result in the Secretary forfeiting the affected 

goods, commodities, resomces, or merchandise pursuant to 6 CMC §2150. 

ARTICLE II 

3.5 PERCENT CUSTOMS SERVICE CERTIFICATION. 

§ 1421. User Fees 

§ 1422. 

§ 1423. 

Authorization 

Penalty 

§ 1421. User Fees. Any person requiring the cet1ification of the Department of Finance for 

country of origin or other purposes relating to exports from the Commonwealth shall be charged a 

user fee. The user fee shall be three and one half percent (3.5%) of the gross value of the 

merchandise to be ce11ified which shall become due and payable to the Commonwealth Treasury upon 

certification. Nu less than fin: percent (5%) of the amount collected shall be reserved for usc by the 

Division of Customs Services without further approp1iation. The Secretary shall impose the interest 

charge imposed by Section 1819 of this Act on all user fees not paid when due. 

§ 1422. Authorization. The Secretruy or his designee is hereby authorized to collect the fees 

provided in Section 1421 of this Chapter when due and collectible. 
CHAPTERS 

MISCELLANEOUS TAXES AND LICENSE FEES 

§ 1501. Bat· Tax. 

§ 1501. 

§ 1502. 

§ 1503. § 1504. 

§ 1505. 

§ 1506. 

§ 1507. § 1508. 

Bar Tax Hotel Occupancy Tax 

Amusement Machines 

Limitation on Number of Poker Machine Licenses 

Issued 

Gaming Machine Jackpot Tax Criminal Penalty 

Regulation Reservation of License Revenue 

(a) There is imposed upon any person doing business in any establislunent located in 

the Commonwealth which is licensed to serve alcoholic beverages for consumption on the 

premises of the establishment, a tax in the amount often percent (I 0%) of the total charge 

for any beverage sold or consumed at the establishment. After three years have from 

the effective date of this Act, tills tax shall be in the amount of six percent (6%). 

(b) Every person subject to the tax imposed by this section shall make a monthly 

return to the Secretary of all amounts received from the sale of beverages and shall pay the 

taxes required to be paid on or before the 20th day of the succeeding month. 

§ 1502. Hotel Occupancy Tax. 

(a) An occupancy tax is imposed upon transient o<.:cupants of a room or rooms in a 

hotel, lodging house, or similar facility located in the Commonwealth. The tax shall be ten 

percent (1 0%) of the amount charged or paid for the accommodations. 

(b) The tax imposed by this section shall be collected by the person who operates, 

owns or manages a hotel, lodging house or similar facility as and when paid or charged to the 
§ 1503. Amusement Machines. 

(a) There is imposed the following annual license fees for the conunercial operation 

of amusement machines in the Conunonwealth as follows: 

(I ) For amusement machines (other than poker or similar amusement 

machines) whose major element is skill and whose only reward or prize is limited to 

additional games or other use of the machine (e.g., video games, pinball machines, 

pool tables, etc.), $150 per machine. 

(2) For amusement machines whose major element is chance which provides 

a reward or prize of value or for poker machines or similar amusement machines the 

fee is $7,500 per machine. After three years have passed from the effective date of 

this Act, this fee shall be $6,000 per year. 

(3) For all jukeboxes, coin-activated phonographs CD players or other coinactivated music producing machines, $150 per machine. 

(4) For all coin-activated kiddie ride machines, designated for children under 

the age of 16, $25 per machine. 

(b) The fee imposed by this section shall be the liability of any owner or lessee of the 

amusement device, or any person operating or managing any business at which such 

amusement machine is offered for patronage. 

(c) License fees shall be paid in full prior to the issuance of a license. 

(d) Every poker machine owner and operator as a condition of any license issued shall 

maintain and operate poker machines in a separate room. No minor shall be pennitted to 

enter this room and no alcoholic beverages or other intoxicants shall be allowed in tills room. 

An owner or operator who violates this subsection or who allows it to be violated and who 

knew or should have known that a violation was taking place shall be guilty of a misdemeanor 

punishable by up to $500 fine and thirty days imprisonment, and further shall be liable to the 

revocation of the licenses of all poker machines that he may own, operate, or control. 
shall be operated. No machine shall be operated in more than one district, and no machine 

shall be operated in a district other than the one designated on the license. 

(c) Notwithstanding any other provision of this section, a senatorial district may by 

initiative, pursuant to the Commonwealth Northern Mariana Islands' Constitution, legalize 

gambling in that district, thus the number of poker machines in that district will not be 

restricted by subsection (a). 

(d) No additional poker machine licenses shall be issued in Senatorial District No.3, 

unless the total number of existing licenses is less than that specified in subsection (a). 

(e) The renewal of a license existing prior to the effective date of this Act shall not be 

limited by subsection (a). 

Upon the failure of any person to renew a license, that license shall not be reissued to any 

other person if it will cause the number of such licenses to exceed that amount provided for in 

subsection (a). 

§ 1505. Gaming Machine Jackpot Tax. A taxoflO% is hereby levied on all jackpot winnings 

fi"om poker machines, pachinko machines, slot machines, pachinko slot machines, and similar gaming 

devices. 

(a) 'Jackpot winnings' are defined as winnings where the machine pays back $1,000.00 

and over. 

(b) The operator of the machine shall be responsible for collecting this tax and for 

keeping all applicable records, and may be held liable for all uncollected taxes. 

(c) The Secretary may promulgate appropriate regulations to enforce this section. 

§ 1505. Criminal Penalty. 

(a) A person commits a criminal offense when he places or causes to be placed into 

operation an unlicensed poker machine and, upon conviction, shall be punished by a fine not 

to exceed five thousand dollars ($5,000) or six months imprisomnent, or both. 

(b) A person, including an owner, or operator of a poker machine, a parent or a legal 
(a) The Secretruy of Finance shall promulgate reasonable rules and regulations which 

shall provide for, inter alia, the issuance of licenses, relocation of amusement machines, 

temporary suspension or pennanent revocation of licenses, seizure of amusement machines, 

to prohibit the transfer of a license to a replacement machine in the event a licensed machine 

is defective or malfunctioning, and regarding machines which are operated on premises on 

which any other business activity is cunied on. 

(b) The Secretmy may by regulation provide that he shall be present at all times when 

monies are withdrawn fi:om amusement machines. 

§ 1507. Reservation of License Revenue. 

(a) The Secretmy of Finance shall deposit 10% of all revenues raised from the 

licensing of amusement machines under Section 1503(a)(2) in a separate trust account in the 

General Fund to be known as the Human Resources Development Trust Fund. The revenues 

deposited in this account shall be reserved for the Job Training Partnership Act Progratn. 

(b) The Secretmy of Finance shall reserve 90% of all revenues raised from the 

licensing of amusement machines under Section 1503(a)(2) for the Northern Mariana Islands 

Retirement Fund and shall promptly deposit such revenues with the Copunonwealth Treasury 

without further appropriation. 

CHAPTER6. 

FOREIGN SALES TAX INCENTIVES 

§ 1601. Definitions 

§ 1602. 

§ 1603. 

§ 1604. 

§ 1605. 

§ 1606. 

§ 1607. 

Tax Exemptions 

FSC License 

Infonnational Returns 

License Revocation or Cancellation 

Rebate 

Regulations 
Revenue Code of 1986, as the same may be amended from time to time, and 

(2) the holder of a valid FSC business license. 

(b) 'Foreign Trade Income' means income which is foreign trade income as defined in 

Section 923 of the United States Internal Revenue Code of 1986, as the same may be 

amended from time to time. 

§ 1602. Tax Exemptions. 

(a) In accordance with Section 927(e)(5) of the United States Internal Revenue Code 

of 1986, as amended, and notwithstanding any other law to the contrary, no tax shall be 

imposed by the Commonwealth on any foreign trade income detived before Janumy 1, 1987. 

(b) Notwithstanding any other provision of law, a FSC which qualifies under 

subsection (c) of this section shall be exempt from the following taxes and fees: 

(1) Any and all tax on its business gross revenue under Chapter 3 of this Act, 

as the same may from time to time be amended. 

(2) Any and all license fees except the FSC license fee as provided in Section 

1603 of this Chapter. 

(3) Any tax on any ir).come under the Covenant Section 601 minor image 

Northern Marianas Tenitorial Income Tax including but not limited to all interest, 

dividends, royalties, and other investment income, and all carrying charges, received 

or accrued by a FSC, as defmed in Sections 921 ( d)(2) & (3) and 92 7( c) & (d) of the 

U.S. Internal Revenue Code of 1986 as amended. 

(c) A FSC qualifies for the exemptions under subsection (b) of this Section only if it 

satisfiGs all of the following conditions: 

( 1) the FSC has obtained a FSC business license required lUlder Section 1603 

of this Chapter; 

(2) the FSC files the information returns required under Section 1604 of this 

Chapter; 
(d) The exemption provided in subsection (b) of this Section shall remain in effect for 

so long as foreign sales corporations receive a tax exemption for foreign trade income under 

the United States Internal Revenue Code of 1986, as amended. 

§ 1603. FSC License. In order to qualify for the tax exemptions of Section 1602(b ), a FSC 

shall first obtain a license from the Secretary of Finance. The FSC license shall be issued upon 

application by the FSC and payment of the annual license fee of $500. The initial application to the 

Secretary shall be accompanied by: 

(a) A copy of its articles of incorporation and bylaws (A license shall not be delayed 

to a newly-organized FSC, not yet chartered, if its articles have been filed with the Registrar 

of Corporations). 

(b) A copy of its most recent election under the United States lntemal Revenue Code 

of 1986, as amended, to be treated as a FSC and, if applicable, to be treated as a small FSC; 

or if the applicant has not yet made an election it shall pledge to finnish the Secretmy a copy 

of its election within 90 days after making the election. 

(c) h1fom1ation identifying its resident director and the location of its Commonwealth 

office. 

The FSC license shall be renewed upon application and payment of the annual license 

fee. The FSC license may be revoked or suspended in accordance with the procedures of 

Section 1605. 

No other business license shall be required of a FSC license holder if the activities 

undertaken by the licensee or its agents in the Commonwealth are related to the eaming of 

foreign trade income. A FSC shall be required to obtain business licenses for conducting 

activities not related to emning foreign trade income and to pay all applicable taxes in the 

same manner as any other corporation doing business in the Commonwealth. 

§ 1604. Informational Returns. Even if no tax is due, a FSC shall file an infonnational tax 

return with the Chief of the Division of Revenue and Taxation, Department of Finance. The 
FSC to submit additional infom1ation substantiating its qualification for tax exemption of this Chapter 

or for FSC treatment under the United States Internal Revenue Code. 

The administrative provisions of this Act, and of the Internal Revenue Code as it applies to 

the Commonwealth pursuant to Covenant Section 601 as a Territorial Income Tax shall apply to 

FSCs. 

§ 1605. License Revocation or Cancellation. 

(a) So long as a licensed FSC pays its annual license fee and otherwise complies with 

Section 1603, a FSC shall be presumed to be validly licensed. 

(b) In the event the Secretary of Finance has any cause to believe any FSC license was 

invalidly issued or that any FSC license is subject to revocation or cancellation because the 

holder is not in compliance with applicable Commonwealth law, then the Secretaty shall 

provide written notice to the FSC, specifying the grounds for revocation or cancellation of 

the FSC license. The FSC shall then have a period of90 days to correct any deficiencies and 

bring itself into compliance with the Commonwealth law and cure any grounds for revocation 

or cancellation. In the event the Secreta1y of Finance after such 90 day period believes the 

FSC is still not in ~ompliance with the applicable Conunonwealth law or otherwise has not 

cured the grounds for revocation or cancellation, the Secretary shall have the right upon not 

less than 30 days written notice to the FSC to conduct a hearing and thereafter, if the cause 

be found, to revoke or cancel the FSC license. 

(c) Any cancellation or revocation order issued by the Secretary of Finance shall be 

subject to judicial review in the Commonwealth Superior Court pursuant to the 

Administrative Procedure Ad (I CMC, Division 9). 

§ 1606. I 00% Rebate of Mirror Tax Procedure. 

(a) Rebate. To the extent any foreign trade income, or interest, dividends, royalties 

and other investment income and carrying charges, received or accrued by a FSC, as defined 

in Sections 92l(d)(2) & (3) and 927(c) & (d) of the U.S. Internal Revenue Code of 1986, as 
(b) Tax Return Filing Procedures. 

(1) A true copy of the FSC business license shall be attached to any income 

tax return of the FSC and the amount of tax due prior to rebate shall be paid by a 

FSC. The amount paid shall not be placed in the General Fund or commingled with 

other fi.mds, but shall be deposited by the Secretaty of Finance in special purpose ttust 

accounts in one or more FDIC insured or collateralized deposit banks with offices 

within the Commonwealth and shall be withdrawn from such accounts only for the 

purpose of: 

(A) making rebates as provided herein, or 

(B) payment into the General Fund after a final detetmination, 

including a judicial detennination if requested by the FSC taxpayer, that taxes 

are validly due and payable and that the FSC is not entitled to any rebate. 

(2) Upon filing by a FSC of any tax return, the Secretaty of Finance shall 

immediately thereafter cause the return to be reviewed, and, if the rebate appears to 

be in order shall cause the amount of tax paid by the FSC to be returned to the FSC 

within 45 days from the !fate the return is required to be filed. If for any reason th~ amount to be rebated is not returned to the FSC within 45 days from the date the 

return is required to be filed, the unreturned amount shall bear interest at the rate 

detennined W1der Section 6611 of the United States Internal Revenue Code of 1986, 

as amended, from the date of payment of the tax until the date oheturn to the FSC 

of the money due to it. 

(3) In the event of any failure to make the rebate provided for herein within 

90 days fi:om the date of payment of the tax by a FSC of the taxes due prior to rebate, 

the Gove11U11ent of the Commonwealth consents to suit and consents to a decree of 

specific performance being entered against it for payments found to be lawfully due. 

The 45 day review by the Secretary of Finance of a tax return of a FSC shall not 
included within the gross income of the FSC for tax purposes. 

§ 1607. Regulations. The Secretary or his designee may issue regulations consistent 

with the purposes of this Chapter. 

CHAPTER?. 

NORTHERN MARIANAS TERRITORIAL INCOME TAX. 

§ 1701. Application of the Intemal Revenue Code 

§ 1702. § 1703. § 1704. § 1705. 

§ 1706. 

§ 1707. 

§ 1708. 

§ 1709. 

§ l7l0. 

§ 171 L 

§ 1712. 

Internal Revenue Code Adopted 

Non-Retroactivity 

Anti-Avoidance 

Clarifying Provisions 

Disincentives to Off-island Investment 

Private Letter Ruling Procedures 

Tax Relief Tax on Overpayments 

Foreign Sales Corporations 

Rebate Procedure 

Special Sourcing Rules of United States Persons 

§ 1713. Interest on Overpayments 

§ 1701. Application of the Internal Revenue Code. In General. 

(a) The United States Internal Revenue Code Cintemal Revenue Code' or 'IRC'), made 

applicable by this Chapter, is a statute adopted as a local territorial income tax. The IRC as 

herein is made a part of Commonwealth law and may be cited, as the 'Northern 

Marianas Territorial Income Tax' ('NMTIT'). 

(b) The administration and enforcement of the NMTIT shall be perfmmed by or under 

the supervision of the Governor. Any function needful to the administration and enforcement 

of the NMTIT shall be performed by any officer or employee of the Government of the 
officials of the executive branch have with respect to the United States income tax. Needful 

rules and regulations for enforcement of the NMTIT shall be prescribed by the Governor or 

his delegate pursuant to Section 1820 of this Act. The Governor or his delegate shall have 

authority to issue, from time to time, in whole or in part, the text of the income tax laws in 

force in the Commonwealth pursuant to this Chapter. 

(d) Confidentiality, Disclosure, and Coordination. 

(I) Returns and return infmmation shall be confidential, and except as 

authorized by NMTIT Section 6103 and § l953(b) of this Act, no officer or employee 

of the Commonwealth shall disclose any return or return infonnation obtained by him 

in any mallller in COllllection with his seivices as such an officer or employee or 

otherwise. For purposes of this subsection, the term 1officer or employee' includes a 

fmmer officer or employee. 

(2) The Governor may enter into an agreement with the Secretary of the 

United States Treasury, the Governor of Guam or his delegate, or the Executive 

Head or his delegate of any state, possession or territory of the United States, to 

coordinate tax administration programs of the Commonwealth, the United States or 

any state, possession or territory thereof, and Guam, including provisions for 

exchanging information and protecting the confidentiality of returns and return 

information. 

(e) In applying the NMTIT for any purpose contained within this Act, except where 

it is manifestly otherwise required, the applicable provisions of the IRC shall be read so as to 

substitute 'Commonwealth of the Northern Mariana Islands' for 'United States', 'Governor or 

his delegate' for 'Secretary or his delegate', 'Governor or his delegate' for 'Conunissioner of 

Internal Revenue' and 'Collector of Internal Revenue', 'Superior Court of the Nmthem 

Mariana Islands' for 'district court', Supreme Court of the Northern Mariana Islands' for 

'United States Courts of Appeal', 'Attorney General' for 'district counsel', 'Attorney General's 
Commonwealth of the Northem Mariana Islands. 

(g) The NMTIT, as herein adopted, is to be applied and construed in all respects in 

conformity with the Covenant and this Chapter. 

(h) The Governor or his delegate may by regulations inte1pret, modify, or suspend any 

provision of the NMTIT which is manifestly inapplicable or incompatible with the intent of 

Article VI of the Covenant or with the intent of this Chapter, so as to make the provision 

compatible therewith. Any such inapplicable or incompatible provisions shall be without force 

or effect. 

(i) The Governor or his delegate may waive any additions to the tax, additional 

amounts, or penalties or any part thereof, attaching to acts performed or not perf01med by 

any taxpayer acting in reasonable reliance on this Chapter or on any rules and regulations 

promulgated hereunder. 

G) In addition to such other jurisdiction as the Superior Court of the Northern 

Mariana Islands has with respect to the NMTIT under this Chapter, it shall also have the same 

jurisdiction with regard to the NMTIT as the Tax Court of the United States has with respect 

to the United States Income Tax. The Superior Court of the Northern Mariana Islands shall 

implement this jurisdiction, as may be necessary, by adopting the United States Tax Comi 

Rules of Practice and Procedure to the extent not inconsistent or incompatible with this Act. 

§ 1702. Internal Revenue Code Adopted. 

(a) Definitions; 'Internal Revenue Code'. 'Internal Revenue Code' means the following 

provisions of the Internal Revenue Code of 1986 as further amended as below specified, 

where not manifestly inapplicable or incompatible with the intent of Lhe Covenant or this 

Chapter and to the extent the IRC of 1954 remains applicable as set forth in the provisions 

under Subtitle G of United States Public law 99-514: Subtitle A (26 U.S.C.A. sec. I et 

seq.)(not including Chapter 2 (26 U.S.C.A. sec. 1401 et seq.) and section 931 (26 U.S.C.A. 

sec. 93!)); chapters 24 and 25 of subtitle C (26 U.S.C.A. sees. 2401 et seq. and 3501 et seq.) 
(b) Internal Revenue Code; Further Amendments Adopted. 

All amendments to the Internal Revenue Code enacted into law after October 21, 

1986 and before January I, 1994 are adopted and incorporated by reference into this 

Chapter. 

(c) Intemal Revenue Code; Future Amendments Adopted. 

Except as otherwise provided, all future an1endments to the Internal Revenue Code 

(and the effective dates thereof) are adopted and incorporated by reference into this 

Chapter. 

(d) The following autho1i.ties are to be treated by the Govemor, when perfonning his 

duties under this Chapter, as authoritative interpretations of the NMTIT: 

(I) all present and future US Federal court cases, including Tax Court cases, 

decided under the US income tax Jaws adopted by this Chapter to the extent 

consistent with this Chapter; 

(2) all present and future Revenue Rulings, Revenue Procedures, and Treasury 

Decisions of the US Treasury Department, promulgated under US income tax laws 

adopted by this Chapter or regulations prescribed by the Governor, to the extent 

consistent with this Chapter, until such time as changed by the Governor pursuant to 

this Chapter; 

(3) all present and future regulations under the Internal Revenue Code, 

promulgated under US income tax laws adopted by this Chapter, to the extent 

consistent with this Chapter, until such time as changed by the Governor pursuant to 

this Chapter. 

§ 1703. Non~Retroactivitv ofT ax on CNMI Sourced Income. In regard to the taxation under 

the NMTIT of income accming on or prior to January 1, 1985, the NMTIT shall in all cases be 

interpreted as subjecting to the NMTIT only that income which is not "CNMI Sourced Income". 

(a) The introductory section of Section 6l(a) of the NMTIT shall be construed as 
whatever source detived, including (but not limited to) the following items:" 

(b) Effective Date. Confonning Provisions. 

(1) NMTIT Effective Date. Confmming Provisions. To the extent necessary 

to assure that 'CNMI Sourced Income' accruing prior to January 1, 1985, and after 

February 28, 1913, is not retroactively subject to the NMTIT and to the extent 

allowed by subsection (c) of this section, all Internal Revenue Code provisions drafted 

with reference to the inception date of a new tax and intended to assure that the IRC 

is not retroactively applied, and all authorities interpreting such provisions, shall be 

construed by replacing each reference to the inception date and the last day of the old 

U.S. tax regime with the words "January l, 1985" and "December 31, 1984", 

appropriately. 

(2) I.R.C. Effective Date. Conforming Provisions. To the extent necessmy 

to assure that all sources of income accruing prior to Februaty 28, 1913, are not 

retroactively subject to the NrvtTIT, alll.R.C. provisions drafted with reference to the 

inception date of a new tax and intended to assure that the I.R.C. is not retroactively 

applied to ru1y source of income, and all authorities interpreting such provisi.ons, shall 

be construed by utilizing the dates specified within the I.R.C. code provisions, i.e., 

March 1, 1913 and February 28, 1913. 

(3) I.R.C. Subpart F Effective Date. Conforming Provisions. To the extent 

necessary to assure taxes imposed by subpart F and related taxes on US owners of 

certain controlled foreign corporations accming prior to January 1, 1962, are not 

retroactively subject to tbe NMTIT, all I.R.C. provisions drafted with reference to the 

inception date of taxes imposed by subpart F and related taxes on US owners of 

certain controlled foreign corporations and intended to assure that taxes imposed by 

subpart F and related taxes on US owners of certain controlled foreign corporations 

are not retroactively applied to any source of income, and all authorities interpreting 
amortization and like purposes, of all Qualified Fresh-Start Assets shall be the higher 

of their basis as detetmined under the NMTIT, or their fair market value on January 

l, 1985. 

(2) 'Qualified Fresh-start assets' means: 

(A) all real property located in the CNMI; 

(B) all personal property owned, directly or indirectly, immediately 

prior to and on January I, 1985, by an individual bona fide resident of the 

CNNll immediately prior to and on January 1, 1985, the amount realized from 

the actual sale of which would have been CNMI Sourced Income as 

determined in subsection (d) and would not have been subject to income 

taxation on December 31, 1984 by any of the following jurisdictions: the 

United States. the Virgin Islands, American Samoa, Puet1o Rico, and Guam; 

and 

(C) all personal property owned, directly or indirectly immediately 

prior to and on January 1, 1985, by a corporation incorporated in or under the 

laws of the CNMI, the amount realized from the actual sale of which would 

have been CNMI Sourced Income as determined in subsection (d) and would 

not have been subject to income taxation on December 31, 1984 by any of the 

following jurisdictions: the United States, the Virgin Islands, Ametican 

Samoa, Puerto Rico, and Guam. 

(3) For purposes of this section, personal property means all personal propet1y 

wheresoever located, whether tangible or intangible, (including, bul not limited to, 

installment sales contracts, annuity contracts, interests in employee benefit plans, 

whether vested or unvested, and inventoty items). 

(4) The fair market value of any Qualified Fresh-Start Asset shall be 

established at the taxpayer's election by: 
(C) a pro-rata allocation of the difference between its cost basis, as 

adjusted under NMTIT Sec. 1016, and its sales price, with respect to the 

periods it was held, before and after January 1, 1985, respectively; or 

(D) any other method provided by the Governor by regulation. 

(d) Recapture. If during any taxable year an asset is disposed of and a portion or all 

of the proceeds received from the disposition of the asset is not CNMI Sourced Income, the 

benefit of any deduction for depreciation, am011ization, and like purposes previously claimed 

under tllis section attributable to such asset is to be recaptured and appropriately taxed. The 

Secretary shall presctibe by regulations the method and manner by which any such deductions 

are to be recaptured for purposes of this subsection. 

§ 1704. Anti-Avoidance. Deductions and Credits. In order to prevent the mismatching of 

income and con-esponding deductions and credits, which, in a stm1-up setting, would result in 

complete avoidance and not just defen-al: 

(a) NMTIT Section 161 shall be construed as though it contained the following 

second sentence: 'No deduction shall, however, be allowed for any expenditure with respect 

to any transaction, event or course of conduct taking place prior to January l, 1985, unless 

it is established to the satisfaction of the Governor that such expenditure was not deferred 

into 1985 as part of a plan one of the principal purposes of which was the avoidance of 

income taxes under this Chapter.' 

(b) No credit against the tax shall be allowed for any expenditure with respect to any 

transaction, event or course of conduct taking place prior to January I, 1985, unless it is 

established to the satisfaction of the Governor that such expenditure was not deferred into 

1985 as pa11 of a plan one of the principal purposes of which was the avoidance of income 

taxes under this Chapter. 

§ 1705. ClarifYin!I Provisions. 

(a) The Accelerated Cost Recovery System shall be applicable to all Qualified Fresh~ 
of the NMTIT or Regulations thereunder, shall be filed with the Division of Revenue and 

Taxation. Any failure to file such fonns, retums, statements, or other documents shall be 

subject to penalties as provided by the NMTIT. 

§ 1706. Disincentives to Off-island Investment. 

(a) The amount of any deduction allowed to any taxpayer under the NMTIT sections 

enumerated in subsection (d) of this section shall be deemed additional gross business 

revenues, and taxed accordingly under Chapter 3 of this Act. 

(b) A tax is imposed on all taxpayers in the amount of any credit allowed to such 

taxpayer under the NMTIT sections enwnerated in subsection (e) of this section. 

(c) Limitations. Such tax will be waived with respect to any such deduction or credit 

under subsections (a) or (b) to the extent that it is established by mles and regulations that 

such deduction or credit resulted fi·om an expenditure with respect to activities or assets used 

predominantly within the CNMI, or to the extent that the taxpayer receives no tax benefit 

from such deduction or credit. 

(d) NMTIT sections subject to subsection (a) are: 

taxes; 

(1.) Sec. 169, amortization of pollution control facilities; 

(2) Sec. 179, election to expense depreciable property; 

(3) Sec. 181, fanners' fertilizer expenditures; 

(4) Sec. 182, fanners' land clearing expenditures; 

(5) Sec. 184, amortization of railroad rolling stock; 

(6) Sec. 185, amortization of railroad grading and tunnel bores; 

(7) Sec. 188, child care facilities, amortization; 

(8) Sec. 189, amortization of real propetty construction period interest and 

(9) Sec. 190, expensing of removing of barriers to handicapped and elderly; 

(10) Sec. 193, tetiiary injectants; 
(15) Sec. 245, dividends from foreign corporations; 

( 16) Sec. 248, organizational expenditures; (17) Sec. 263(c), expensing of intangible drilling costs, to the extent in excess 

of depreciation and amortization; 

(18) Sec. 613 and 613A, percentage depletion, to the extent in excess of cost 

depletion; 

(l9) Sec. 616(a), expenses of mining development costs, to the extent in 

excess of the amount deductible tmder Sec. 616(b) as a defetTed expense; 

(20) Sec. 617, mining exploration costs, to the extent in excess of the amount 

allowable as a deduction had the costs been capitalized and deducted ratably over I 0 

years; and 

(21) Sec. 631, special rules for timber, coal and iron ore. 

(e) NMTIT sections subject to subsection (b) are: 

(l) Sec. 21, household and dependent care; 

(2) Sec. 38, lTC; (3) Sec. 39, gas and special fi+els; (4) Sec. 40, work incentive programs; 

(5) Sec. 44C, residential energy credit; 

(6) Sec. 44D, nonconventional source fuel; (7) Sec. 44E, alcohol used as fuel; 

(8) Sec. 44F, increasing research activities; 

(9) Sec. 44G, employee stock ownership plan; and 

( l 0) Sec. 44H, clinical testing, rare disease drugs. 

§ 1707. Private Letter Ruling Procedures. 

(a) A ruling is a written statement issued to a taxpayer or his authorized representative 

by the Secretmy of Finance which interprets and applies the tax law to a specific set of facts. 
including the names, addresses, and taxpayer identification numbers of all interested 

parties; 

(2) a complete statement of all the relevant laws and regulations relating to the 

transaction including the section numbers and relevant text that the taxpayer seeks to 

have applied to the transaction; 

(3) a full and precise statement of the business reasons for the transaction; 

( 4) a detailed description of the transaction including true copies of all relevant 

documents relating to the entire transaction must be submitted; 

(5) the text of the proposed ruling to be issued to the taxpayer by the 

Secretruy of Finance that interprets and applies the tax laws to a specific set of facts. 

The proposed text shall include: 

(A) taxpayer's views on the results of the transaction and its 

suppmting authority, and 

(B) information and discussion of any contrary authority to the 

position advanced. If no contrary authority exists, a statement that none 

exists is required; 

(6) Signature of taxpayer or authorized representative of taxpayer; and 

(7) A statement attesting to the accuracy of the request or accuracy of any 

additional statement or statements or documents subsequently submitted which 

declares: 'Under the penalties of perjury, I declare that I have examined this request, 

including accompanying documents and to the best of my knowledge and belief, the 

facts presented in support of the requested ruling m·e true, correct and complete.' 

This declaration must be signed by the taxpayer, not the taxpayer's representative. 

(c) Separate requests for rulings are required for issues under the NMTIT and for 

issues other than the NMTIT. 

(d) If a request does not comply with all the requirements set forth herein, the request 
(e) The Department of Finance shall not issue rulings in the following areas: 

( l) Completed transactions after the return has been filed; 

(2) The transaction is part of an integrated transaction; 

(3) Where there is not a bona fide business purpose for the transaction; 

(4) Where the matter involved hypothetical situations; 

(5) Where the request involves tax consequences of proposed legislation; 

(6) Any matter where the dete1mination requested is p1imarily one of fact (e.g. 

market value of property); 

(7) Tax effect of any transaction to be consummated at some indefinite future. 

(f) A taxpayer may not rely on a ruling in connection with another transaction. 

(g) The Secretary of Finance shall determine all ruling requests as expeditiously as 

possible. A final detennination shall be the binding position of the Department of Finance 

with respect to the tax treatment of the proposed transaction. 

(h) The non-refundable application fee for a letter ruling shall be a minimum of$500. 

The Secretary may by regulation prescribe a fee schedule which bears relationship to the 

nature and complexity of~he issues. Upon payment cifthe application fee, the fee shall be 

credited to a special fund that the Secretary or his designee may expend without further 

appropriation solely for the pmpose of effective administration and enforcement of tax laws 

applicable in the Commonwealth. 

(i) Upon the deletion of the names of the taxpayers and any other personal facts that 

are not essential to an understanding of the ruling, the Department of Finance shall make 

public any private letter ruling that it issues. All rulings shall be filed with the Conunonwealth 

Register within 60 days of the ruling's issuance. 

U) Request for a Conference. To request a conference on the issues involved, the 

taxpayer should indicate in writing at the time of filing the request or within 30 days of filing 

the request. 
(C) a decision of the Commonwealth Superior Court; or 

(D) the issuance of temporary or final regulations. 

(2) Except in rare or unusual circumstances, the revocation or modification 

of a tener tuling will not be applied retroactively to the taxpayer for whom the letter 

ruling was issued or to a taxpayer whose tax liability was directly involved in the letter 

ruling provided that: 

(A) there has been no misstatement or omission of material facts; 

(B) the facts at the time of the transaction are not materially different 

from the facts on which the letter ruling was based; 

and 

(C) there has been no change in the applicable law or regulations; 

(D) the letter ruling was originally issued for a prospective transaction; 

(E) the taxpayer directly involved in the letter ruling acted in good 

faith in relying on the letter ruling, and revoking the letter ruling retroactively 

would be to the taxpayer's detriment. 

{3) Withdrawal ofReque.st by Taxpayer. A taxpayer may withdraw a request 

for a letter ruling at any time before the letter of reply is signed by the Secretaty. 

Correspondence and exhibits relating to a request that is withdrawn will not be 

returned to the taxpayer. The application fee will not be returned to the taxpayer. 

(l) The Secretary may prescribe regulations to carry out the purpose and intent of this 

section. 

§ 1708. Tax Rdicf. 

(a) General Rule. Every person subject to the NMTIT shall be entitled to a rebate 

in the amotmt detennined under subsection (b) of this section. Provided, however, that the 

taxpayer has paid the income tax reported on the return before any rebate is allowed. 

(b) Rebate Amount. 
over $1,000 but not 

over $2,500; 

over $2,500; 

$900 plus 70% of 

the rebate base over $1,000. 

$1,950 plus 50% of the rebate base over 

$2,500 

(B) In the case of a taxpayer who is a corporation: 

If the rebate base is: 

not over $20,000; 

over $20,000 but not 

over $100,000; 

over $1 00,000; 

The rebate amount is: 

90% of the rebate base. 

$18,000 plus 70% of 

the excess of the rebate base over 

$20,000. 

$74,000 plus 50% of the excess 

of the rebate base over $100,000. 

(2) TI1e rebate amount for any person who fails to timely file (determined with 

regard to any extensions of time for filing) a tax return for the taxable year shall be the 

rebate amount detennined under subsection (b)( 1) of this section minus ten percent 

of the rebate amount under subsection (b)(l) for each mont!1 or pmt of a month that 

the person has not filed the retum. A person who has failed to file a tax retum for 

more than 180 days ffom the date on which the return should have been filed shall 

not be entitled to any rebate under this section. 

(3) Notwithstanding subsection (a), a person shall not be entitled to any rebate 

under this section with respect to: 

(A) NMTlT taxes collected upon income effectively cmmeded with 

the sale of diesel fuel for use in any vessel's commercial operations that are 

primarily outside the territorial waters of the Conunonwealth; 

(B) The amount of any underpayment of NMTIT taxes as defined in 

NMTIT § 6664, except that this subparagraph shall not apply to an 
to be paid. 

(c) Rebate Base. The rebate base is: 

(1) the income tax under Subtitle A of the NMTIT imposed on income derived 

from sources within the Commonwealth and paid by the person, less 

(2) the amount of non-refundable credit allowable under Section 1205 of this 

Act. 

(d) Limitations. 

( l) Notwithstanding subsection (a) of this section, 

(A) A person is not entitled to any rebate with respect to any 

accumulated earnings tax paid by the person pursuant to Section 531 of the 

NMTIT. 

(B) a person, who has any income from sources within the 

Commonwealth that is not subject to any taxes under Chapter 2 or 3, shall not 

be entitled to any rebate under this section with respect to the tax on such 

mcome. This paragraph shall not apply to income: 

(i) exempted from the definition of eamings under section 

1103 (!)(8). 

(ii) exempted from the Gross Revenues Tax under section 

1305 (a) or (d) of this Act. 

(iii) taxed under Article 2 of Chapter 4 of this Act. 

(2) Notwithstanding paragraph (l)(B) of this subsection, a person, who has 

any income from sources within the Cmmnonwealth that is not subject to any tax~s 

under Chapter 2 or 3 of this Act, may elect to have that income taxed as if it were 

subject to the applicable tax under Chapter 2 or 3 of this Act. If a person so elects 

and pays the applicable tax, such person shall be entitled to the rebate allowed under 

subsection (a) of this section. A person shall make the election in a manner and on 
or (d) of this Act. 

(c) taxed under article 2 of Chapter 4 of this Act. 

(3) No portion of the User Fee may be subject to credit, deduction or rebate. 

(e) Sources within the Commonwealth. For purposes of dete1mining the rebate, the 

tenn "Sources within the Commonwealth", except as provided in §1712 of this Act, shall be 

determined by Regulations prescribed by the Secrctmy. Such regulations prescribed shall be 

similar to those sourcing rules of the NMTIT in §861 et. seq. 

([) The rebate allowed under this section shall not be used as a credit against the 

income tax shown or required to be shown on an income tax return under the NMTIT. 

§ 1709. Tax On Overpavments. There is imposed on every person who is subject to the 

NMTIT and who has an overpayment arising from any excessive credit, other than a credit relating 

to taxes withheld, estimated taxes paid or earned income credit claimed by individuals with qualifying 

children, a separate additional tax fof such taxable year equal to the amount of the excess credit. 

§ 1710. Forei~n Sales Cot:porations Special Rule. 

To the extent provided in Chapter 6 of this Act, a Foreign Sales Corporation is exempt from 

taxation under this Chapter. 

§ 1711. Rebate Procedure. 

(a) Amounts properly subject to rebate under Section 1708 of this Act, shall be 

rebated by filing a timely income tax return which includes the claim for rebate fonn for the 

taxable year to -which the rebate relates. However, claims for rebate under this Act shall not 

be subject to 1 CMC § 2553(k). 

(b) The amounl of the rebate shall be made as .soon as practicable, but no later than 

6 months from the due date of the return or the date of filing, whichever is later. 

§ 1712. Special Sourcin~ Rules of Certain United States Individual. 

(a) For any United States individual moving to the Commonwealth from Guam, 

American Samoa, and/or the United States, irrespective of any other provision of law, the 
American Samoa, or the Commonwealth. 

(b) If such a individual during a 10 year period was a resident of the United States 

and/or Guam and/or American Samoa and then such individual thereafter moved to the CNMI 

and became a resident, the rules found iniRC Section 877(c) without regard to 877(a) or (b) 

will apply to both moves as follows: 

(1) For ten years after leaving the United States for Guam or American 

Samoa, IRC Section 877(c) without regard to 877(a) or (b) will apply to all items of 

gross mcome. 

(2) Ten years after leaving Guam or American Samoa, IRC Section 877(c) 

without regard to 877(a) or (b) will apply as amended, to mirror the tenn Guam or 

American Samoa where the term United States appears in that statute. 

(c) Every taxpayer having income subject to these somcing rules shall file and pay the 

appropriate tax pursuant to Section 935 of the Intemal Revenue Code without a foreign tax 

credit. 

(d) This Section shall apply to dispositions after December 31, 1985, in taxable years 

ending after such date. 

§ 1713. Interest on Overpayments Interest as allowed by NMTIT §6611 on an overpayment 

shall be calculated only on the amount not already rebated. 

Section 2. Tax Task Force. A special Tax Task Force is hereby created. 

(a) Purpose. The pmpose and function of this Tax Task Force will be to study existing tax 

law and tax regulations and to make recommendations to the Governor and the Commonwealth 

Legislature on ways such law:; and regulations may be improved. The Task Force shall review the 

manner in which tax revenues are being spent, and shall consider the amount of revenues without 

significant adverse effects on businesses and individual taxpayers. The Task Force will recommend 

reforms after appraising and assessing how the proposed reforms will affect the economy. Due 

consideration will be given to different sectors of the economy and how reforms can be tailored to 
1. The Secretary of Finance, 

2. The Governor's Special Assistant for Management and Budget, 

3. A person appointed by the President of the Senate, 

4. A person appointed by the Speaker of the House, 

5. A person appointed by the Saipan Chamber of Commerce, 

6. A person appointed by the Saipan Garment Manufacturer's Association, 

7. A person appointed by the Hotel Association of the Northern Mariana Islands, 

8. A person appointed by the CNMI Bar Association, 

9. A person appointed by the CNMI Contractor's Association, 

10. The following persons to be appointed by majority vote of the above nine 

members; a tax accountant; a person representing small businesses, and two persons from the 

previous CNM1 Tax Task Force." 

Section 3. Business License Fees. 4 CMC Division 5 is amended to add a new "Chapter 6" 

to read as follows: 

"Chapter 6 

. Business License Fees 

§ 5611. Business License Fees. 

(a) Business License Required. Before engaging in or continuing in a business, a 

person shall first obtain from the Secretary of the Department of Commerce a license to 

engage in or conduct that business. 

(b) In no event shall a business be required to purchase more than one general 

business license LOr th~ same line of business for any location or locations in the 

Commonwealth. 

(c) Tetms. Licenses issued under this section are valid for one year and are not 

transferable. 

(d) Fees. The following rumual fees shall be paid to the Secretary of the Department 
(4) Insurance companies, $300; 

( 5) Insurance brokers, $1 00; 

(6) Insurance agents, $75; 

(7) Public utilities, $300; 

(8) Manufacturers, $50; 

(9) Wholesalers, $50; 

(1 0) Roadside vendors selling local agricultural and fishety products, $5; 

(II) Scuba instruction and scuba diving tour operations, $1 00; 

(12) General business license covering all other businesses unless othen:vise 

provided by this Act, $50. 

(e) Renewal. A licensee may renew a license upon its expiration by the payment of 

the annual license fee. 

(f) Conditions for Revocation or Suspension. 

(1) The Secreta1y of the Depru_1ment of Commerce may revoke or suspend any 

license issued under this section upon finding after two weeks public notice and a 

hearing conducted pursuant to 1 CMC §§ 9108-9111 that 

(A) The application of the licensee contained false or fraudulent 

infonnation; 

(B) The licensee b1ibed or othetwise unlawfully influenced any person 

to issue the permit other than on the merits of the application; 

(C) The licensee presented false or fraudulent information to any 

person in support of his application; or 

(D) The licensee violated any provision of Commonwealth law or any 

rule or regulation issued thereunder. 

(2) Any person aggrieved by a license suspension ot revocation shall be 

entitled to a review of the same by the Commonwealth Superior Court upon written 
g, 

d 

o

thly update, of all business licenses issued to the Department of Finance. 

(h) Unless the Secreta1y of Commerce provides otherwise, this section shall not effect 

public health or alcoholic beverage control licensing." 

Section 4. Severability. If any provision of this Act or the application of any such provision 

to any person or circumstance should be held invalid by a com1 of competent jurisdiction, the 

remainder of this Act or the application of its provisions to persons or circumstances other than those 

to which it is held invalid shall not be affected thereby. 

Section 5. Savings Qause. This Act and any repealer contained herein shall not be construed 

as affecting any existing right acquired under contract or acquired under statutes repealed or under 

any rule, regulation or order adopted under the statutes. Repealers contained in this Act shall not 

affect any proceeding instituted under or pursuant to prior law. The enactment of this Act shall not 

have the effect of terminating, or in any way modifYing, any liability civil or criminal, which shall 

already be in existence at the date this Act becomes effective. 

Section 6. Effective Date. This Act shall take effect on January I, 1995 upon approval by 

the Governor or upon it becoming law without such approval. 

CERTIFIED BY: 

Is/ Diego T. Benavente 

DIEGO T. BENAVENTE 

Speaker 

House of Representatives 

_ _..oA.._PLPR"'O"V.LC<ED.,_ __ this 24th 

lsi Jesus C. Borja 

ATTESTED BY: 

Is/ Evelyn C. Fleming 

EVELYN C. FLEMING 

House Clerk 

day of JANUARY , I 995 

FROILAN C. TENORIO JESUS C. BORJA 

Acting Governor