Commerce, biz leaders back tax overhaul to attract digital, financial firms

Commerce Secretary Remedio C. Mafnas and several business and economic development leaders voiced support for House Bill 24-58 during a House of Representatives Ways & Means Committee hearing last Jan. 13, describing the measure as a needed modernization of the CNMI tax code to attract service-based, digital, and financial businesses.

Several lawmakers, however, cautioned that the bill lacks a fiscal impact analysis and sufficient safeguards.

HB 24-58 seeks to modernize the CNMI tax code to attract digital, service-based, and financial businesses by aligning local rules more closely with U.S. federal law. The measure would expand Business Gross Revenue Tax exemptions to cover exported services—such as professional, technical, and digital work produced in the CNMI but sold outside the Commonwealth—as well as the sale or exchange of securities, including virtual currencies and other digital assets, because service exporters and financial firms generate economic value similar to already-exempt manufacturers and are discouraged by gross-revenue taxation even when trades incur losses.

It would also amend Northern Marianas Territorial Income Tax rebate provisions to ensure newly exempt activities remain eligible, avoiding unintended penalties, and repeal a 1987 sourcing law found to conflict with current Internal Revenue Code standards and to deter relocation and investment.

Mafnas told the committee the bill reflects an effort to update the Commonwealth’s tax model to keep pace with how services and financial activity are increasingly conducted beyond traditional geographic boundaries. She said the current application of the Business Gross Revenue Tax, which applies regardless of profitability, discourages service and finance firms—particularly those operating on narrow margins or in early growth stages—from locating in the CNMI.

If implemented carefully, Mafnas said, the HB 24-58 could attract legitimate businesses that would establish a real presence in the Commonwealth, generate employment, and contribute through income and wage taxes tied to work performed locally.

However, Mafnas warned that expanding tax exemptions carries risks for a jurisdiction with a limited tax base. She stressed the need for tightly defined eligibility standards, strong enforcement, and sufficient administrative capacity to verify economic presence and compliance, cautioning that exemptions alone do not produce public benefit without effective oversight. She also urged clarity on transition rules and implementation details to avoid disputes and uneven application.

Saipan Chamber of Commerce president Joe C. Guerrero echoed support for the bill, noting the Chamber backed a similar measure in the previous legislature. Guerrero said HB 24-58 could open new revenue streams and attract businesses that otherwise would not consider operating in the CNMI.

Guerrero acknowledged potential concerns but said they could be addressed through regulations and inter-agency coordination.

“We’re smart enough here in the Commonwealth to figure out how to patch any loopholes,” he said, urging lawmakers not to let uncertainty stall action. He added that the bill aligns with Gov. David M. Apatang and Lt. Gov. Dennis C. Mendiola’s economic vision and that the CNMI “can’t lose what we don’t have” if the goal is to grow the economy by attracting new taxpayers.

Vin Armani, president of the Trade Council of the Marianas and chair of the economic diversification committee of the Governor’s Council of Economic Advisers, said HB 24-58 would correct outdated provisions enacted decades before the internet and digital economy existed.

Armani said the bill would place the export of services on equal footing with the export of goods, incentivizing companies to sell services outside the CNMI while bringing new money into the local economy. He also said the bill addresses deficiencies in gross revenue taxation of securities trading that have effectively prevented financial firms from basing operations in the Commonwealth.

In addition, Armani said the measure would repeal a 1987 law that many in the legal and accounting community believe has long discouraged investment and the return of Northern Mariana Islanders. He said the current system can penalize retirees and returning residents who dispose of stocks or bonds, costing both individuals and the CNMI potential revenue. Armani argued the bill would diversify the economy without raising taxes or harming existing industries by expanding the number of taxpayers and income sourced to the Commonwealth.

Carina Boston Pinales, an Economic Recovery Corps fellow for the CNMI, also supported the bill but urged lawmakers to proceed cautiously. Pinales said economic recovery strategies should prioritize Northern Mariana Islanders and be informed by lessons learned in other jurisdictions that have adopted similar tax policies.

She encouraged the Legislature to think beyond short-term gains and consider long-term sustainability, noting the CNMI’s limited land and resources. Pinales said regulations should include clear parameters and adaptive mechanisms to ensure that economic growth benefits local residents and future generations.

Casa Marianas co-founder Blaine Graboyes-Goldman said HB 24-58 would unlock immediate capital for local investment by removing tax penalties on the sale of securities—even in cases where assets are sold at a loss. He said the current system has contributed to the absence of financial services firms in the CNMI.

Graboyes-Goldman argued that exemptions and rebates would free up capital for startups and small businesses, spur job creation, and encourage reinvestment through what he described as a positive economic “flywheel.” He said the bill would open the Commonwealth to new industries, particularly financial services, while promoting long-term investment and retirement savings.

Despite broad support from business and administration witnesses, several lawmakers raised concerns. Floor leader Rep. Marissa Flores said she could not support the bill without a fiscal impact and cost-benefit analysis.

“I like that there's a lot of flowery words that support it, but when you're talking to Ways & Means, and you're talking about tax exemptions, and you're talking about the possibility of economic growth, I'd like to see cost benefits analysis. I'd like to see the impacts on how and what monies are we either going to save or we're going to see come in, who is going to be relieved of another burden since we're now exempting somebody else to come in and do business here. While I do understand that to doing business here is a privilege, I also understand that certain taxes are aimed at building and protecting social programs such as public safety, education, and health care,” she said.

Flores said she would withhold her vote and proposed tabling the bill until further analysis could be conducted, including discussions with the Governor’s Council of Economic Advisers and the Saipan Chamber of Commerce.

Other lawmakers echoed concerns about unclear definitions and administrative challenges raised by the Division of Revenue and Taxation.

Rep. Julie Ogo, chair of the House Committee on Commerce and Tourism, said she supports economic growth in principle but was not comfortable voting on HB 24-58 without a financial impact analysis.

Ogo said that based on her initial review, the bill appeared to create an unfair approach by waiving taxes for foreign or digital asset-related businesses without clear assurances that local businesses would receive similar treatment. She questioned whether existing CNMI businesses engaged in online or digital activity would also qualify for the exemptions.

She also compared the measure to the CNMI Economic Development Authority’s qualifying certificate program, suggesting HB 24-58 could function as an easier alternative without the same level of scrutiny. Ogo said she needed more detailed information before taking a position and requested that the bill be tabled.

Rep. Joel C. Camacho expressed general support for the bill’s intent, but raised procedural and administrative concerns based on comments submitted by the Division of Revenue and Taxation.

Camacho said several key terms in the bill were not clearly defined and noted that Revenue & Taxation would be responsible for administering the exemptions and rebates. He said those ambiguities could create problems in enforcement and compliance.

Rather than opposing the bill outright, Camacho urged the committee to seek clarification from affected agencies and stakeholders while they were present. He later moved to dissolve into a Committee of the Whole to allow direct questioning before any vote was taken.

At the conclusion of the meeting, the committee agreed to table HB 24-58. Ways & Means chair Rep. John Paul Sablan said additional meetings would be scheduled with the Department of Finance, Revenue & Taxation, CEDA, Chamber, and other stakeholders to address fiscal impacts, definitions, and implementation issues before the bill is reconsidered.