Opinion ID: 214076
Heading Depth: 3
Heading Rank: 2

Heading: Effect of Congressional Legislation on the Scope of FICA in the CNMI

Text: We next consider Appellants' arguments that two statutes, enacted after the Covenant was approved but before Covenant § 606(b) became effective in 1987, limit the application of FICA taxes through the Covenant. The two statutes at issue are 42 U.S.C. § 1301 and the 1983 Act. We, like the Court of Federal Claims, Op. at 282-86, reject Appellants' arguments. With regard to 42 U.S.C. § 1301, the general definitions section of the Social Security Act, Appellants contend that Congress's amendments to this statute in 1981 altered Appellants' obligation to pay FICA taxes. Specifically, Appellants point to the fact that Congress amended the definition of State in § 1301(a)(1) to include the CNMI with regard to some, but not all, Social Security benefit laws. According to Appellants, these amendments demonstrate that Congress intended to treat Guam and the CNMI differently for some programs and the same for others. Thus, Appellants contend, it is improper to mechanically substitute CNMI for Guam in Covenant § 606(b). As drafted, the terms of the Covenant expressly provide for substitution of Guam for the CNMI for tax purposes. See, e.g., Covenant §§ 601(c), 606(b). Contrary to Appellants' arguments, Congress did not subsequently abandon the substitution of Guam for the CNMI by enacting 42 U.S.C. § 1301. Appellants correctly point out that § 1301(a)(1) defines the term State differently for Guam and the CNMI for certain provisions of the Social Security Act. However, § 1301 does not refer to the Covenant or to FICA taxation. Appellants' argument is in essence an assertion that § 1301 repealed by implication express terms of the Covenant, including the application of FICA to the CNMI. Construing a statute as a repeal by implication is generally disfavored, Riggin v. Office of Senate Fair Emp't Practices, 61 F.3d 1563, 1566 (Fed.Cir.1995), and `where two statutes are capable of co-existence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective,' Cathedral Candle Co. v. U.S. Int'l Trade Comm'n, 400 F.3d 1352, 1365 (Fed.Cir.2005) (quoting Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1018, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984)). Because Appellants have not identified a clearly expressed congressional intention to alter the substitution of the CNMI for Guam in the Covenant, we conclude that the amendments to 42 U.S.C. § 1301 are not pertinent to FICA tax policy in the CNMI. With regard to the 1983 Act, Appellants argue that this statute limits FICA taxation in the CNMI. Specifically, Appellants assert that § 19 of the 1983 Act excludes CNMI aliens from participating in, and paying taxes to support, federal benefits programs conditioned upon United States citizenship. The Court of Federal Claims concluded that this argument lacks merit, Op. at 286, and we agree. Section 19 of the 1983 Act provides that: (a) The President may . . . by proclamation provide that the requirement of United States citizenship or nationality provided for in any of the statutes listed on pages 63-74 of the [First Interim Report] shall not be applicable to the citizens of the Northern Mariana Islands. . . . (b) A statute which denies a benefit or imposes a burden or a disability on an alien, his dependents, or his survivors shall, for the purposes of this Act, be considered to impose a requirement of United States citizenship or nationality. 1983 Act § 19, 97 Stat. at 1464 (emphases added). According to Appellants, § 19 confirms Congress's intent to limit social security benefits under Covenant § 606 to CNMI domiciliaries and to exclude aliens not entitled to United States citizenship. In essence, Appellants read § 19(a) and (b) as wholly independent provisions; the former enables CNMI citizens to enjoy federal benefits, whereas the latter excludes all aliens, i.e., nonimmigrants, in the CNMI from both the benefits and burdens of those social security laws for which United States citizenship is a condition to receipt. Unlike Appellants, the government views § 19(a) and (b) as bound by a common objective: to accelerate CNMI citizens' receipt of certain statutory benefits to which they otherwise would not have been entitled until termination of the Trusteeship Agreement. According to the government, § 19(b) serves to clarify the scope of the phrase requirement of United States citizenship or nationality in § 19(a), by specifying that [a] statute which denies a benefit or imposes a burden. . . on an alien shall be considered to impose a requirement of United States citizenship or nationality. The government therefore understands alien in § 19(b) to refer back to the citizens of the Northern Mariana Islands specified in § 19(a). Put differently, the government interprets aliens in § 19(b) from the perspective of the United States ( i.e., as including CNMI citizens), whereas Appellants interpret the same phrase from the perspective of the CNMI ( i.e., as referring to non-CNMI citizens, including nonimmigrant contract workers such as the Zhang plaintiffs). We view the government's interpretation of § 19(b) as more faithful to the statutory text as a whole. Section 19(b) of the 1983 Act cannot be construed in isolation. See Hawkins v. United States, 469 F.3d 993, 1001 (Fed.Cir.2006) ([W]e must follow the cardinal rule that statutory language must be read in context since a phrase gathers meaning from the words around it. (internal quotation marks omitted)). In the context of the 1983 Act, § 19(a) refers to the requirement of United States citizenship or nationality, and § 19(b) clarifies how this phrase is to be understood for the purposes of this Act. Section 19 as a whole is thus limited to the statutes listed on pages 63-74 of the Interim Report, which do not encompass FICA. [8] 1983 Act § 19(a). In context, the term alien in § 19(b) refers to CNMI citizens and residents who were not yet United States citizens and were treated as aliens under the statutes enumerated in § 19(a). [9] To the extent that the parties' disagreements reveal an ambiguity as to the meaning of alien in § 19(b), the purpose of § 19 of the 1983 Act makes it clear that the government's interpretation is the correct one. Covenant § 504, as noted above, created a Commission on Federal Laws to recommend to Congress which federal laws should be made applicable to the CNMI, and to what extent and in what manner this should be accomplished. The Commission published its First Interim Report in January 1982, which recommended that Congress enact legislation to extend certain statutory rights and privileges of U.S. citizenship to the citizens of the Northern Mariana Islands prior to their becoming citizens of the United States. First Interim Report, supra, at 4. As the First Interim Report explained: In general. Many federal laws require United States citizenship as a prerequisite to enjoyment of rights and privileges conferred by those laws. Citizens of the Northern Mariana Islands are not now citizens of the United States. On full implementation of the Covenant, however, they will become citizens of the United States. At that time they will no longer be denied these rights and privileges on citizenship grounds. Only until implementation of the Covenant, then, is legislation necessary for citizens of the Northern Mariana Islands to be treated as citizens of the United States for purposes of these Statutes. . . . . . . The date for termination of the trusteeship is not yet known. During the possibly-lengthy period between now and the end of the trusteeship, no sound reason for denying citizens of the Northern Mariana Islands access to the rights and privileges provided by these statutes is apparent. Removal of these citizenship barriers should ease the integration of the Northern Mariana Islands into the American political family. Id. at 4-6 (emphases added; internal footnote and citation omitted). To ease the integration of CNMI citizens, id. at 6, the Report recommended that Congress enact legislation that would treat CNMI citizens as United States citizens for certain listed statutes; proposed legislative language was provided in the Report, id. at 63-75. Congress enacted such legislation, with reference to pages 63-74 of the First Interim Report, as § 19 of the 1983 Act. Op. at 284. The purpose of § 19 of the 1983 Act was to remove the citizenship barriers for CNMI citizens until the Trusteeship Agreement was terminated and the Covenant was fully implemented, at which time CNMI citizens would become United States citizens. Construing alien in § 19(b) to refer to the CNMI citizens referenced in § 19(a) comports with this objective. Construing this term to refer generally to nonresident aliens does not. As the Court of Federal Claims correctly stated, [t]he 1983 Act has nothing do to with the applicability of Social Security laws to non-resident aliens in general, nor can plaintiffs extract from its legislative history the slightest evidence that Congress was concerned with the plight of foreign temporary contract workers in the CNMI. Op. at 285. Accordingly, we conclude that neither 42 U.S.C. § 1301 nor the 1983 Act alters the general application of FICA to the CNMI. [10]