Azarvand Tax Law Working Toward a Solution on Unpaid Statutory Interest Owed to CNMI Taxpayers on Delayed Tax Refunds

SAIPAN, CNMI. Azarvand Tax Law announced today that, in response to a request from the DeLeon Guerrero and Lawrence campaign to opine on and assist in resolving the issue, the firm is working collaboratively with the CNMI Division of Revenue and Taxation to facilitate a solution for taxpayers who received delayed Northern Marianas Territorial Income Tax refunds without the interest federal law requires.

Under Section 601 of the Covenant, the Internal Revenue Code applies in the Commonwealth as the Northern Marianas Territorial Income Tax. As mirrored, Internal Revenue Code Section 6611 provides that interest shall be paid on any overpayment. In general, when a refund is issued more than 45 days after the later of the return's due date or filing date, interest runs at the federal short-term rate plus three percentage points under Section 6621, compounded daily under Section 6622. That rate has ranged from 3% to 8% annually since 2015 and currently stands at 7%. In Paeste v. Government of Guam, the Ninth Circuit affirmed a permanent injunction against the Government of Guam for systematically delaying refunds under the same mirror system, rejecting the position that a territorial government may treat taxpayer refunds as a cash management tool. The firm believes the amount owed to the CNMI community runs into the millions and is not reflected in the government's reported $1.2 billion deficit.

Azarvand Tax Law has offered its assistance on a pro bono basis, including helping develop a methodology for identifying and calculating interest owed and supporting a voluntary resolution framework that pays taxpayers what the law provides. The firm commends the current CNMI administration and the CNMI Division of Revenue and Taxation for their openness and collaborative engagement on this issue, and for their willingness to confront hard fiscal questions.

The same mirror system governs the Guam Territorial Income Tax, and Guam is where the controlling Ninth Circuit precedent was decided. While Azarvand Tax Law has not yet begun a collaboration in Guam, the firm plans to raise the issue with the necessary stakeholders there and hopes Guam will respond in the same collaborative spirit the CNMI has shown, so that taxpayers in both territories receive what the law provides.

The firm's role in this effort is on behalf of taxpayers, and only taxpayers. Azarvand Tax Law represents the interests of taxpayers and the private sector with respect to this issue. The firm does not represent the CNMI government, is not counsel to the Division of Revenue and Taxation, and no attorney-client relationship exists between the firm and any government agency. The firm's collaboration is offered in the shared hope of a voluntary solution, and the firm reserves all rights and remedies available to taxpayers under the mirrored Internal Revenue Code should a voluntary solution not be reached.

"The government has never had difficulty calculating and collecting interest when it is owed money. The same math and the same laws run in both directions. Our goal is a voluntary solution that pays taxpayers what federal law already guarantees them, and our door is open to any official ready to work toward that outcome. But our client is the community, and we will pursue every avenue the law provides on its behalf," said Tina Azarvand, Managing Partner of Azarvand Tax Law.

The firm is grateful to Edith for raising inquiries like this one, as she consistently digs deep into the issues that need addressing on behalf of the community. The present effort continues that shared work in the other direction, securing for taxpayers the interest the government owes them under the same law.

About Azarvand Tax Law

Azarvand Tax Law is a Maryland-based federal tax law firm with team members across the continental United States as well as the CNMI. Managing Partner Tina Azarvand resides on Saipan, where the firm serves individuals and businesses in matters arising under the Northern Marianas Territorial Income Tax and federal tax law.