Page 1 of 16
Claimant Name HU J
Social Security #
Client File No. us CNMI FICA 00256
EXHIBIT 1: FORM 843 Claim for Refund and Request for Abatement
2003 2004 2005
2006 '1 / ..
EXHIBIT 2: Copy of Passport Copy of Social Securit Card
EXHIBIT 3: FORM 2848 Power of Attorney and Declaration of Representation
Page 2 of 16
US CNMI FICA 00256
(Rev. November .2005.)
1"tim91 Revenue S'e",f¿e'
586 57 9284
and Request for Abatement
.. Se'eseparate' lnstruètlóns..
OMS No. 1545-0024
your çlaifr involves (a) one.of thètexes shown on. Jine Sa or (bJa refund :or abatement of intere.st, penalties, Farro 843 aMy if Use or additidnstotax on line 4a.
Do not use Form 843 if your cJàiin istot"
.An ove¡payment of. income taxe.s;
.. A reftihdfói nòfitaxable USe
(of sales) óffuel;or
Your SSN or ITIN
.. An óvèltulýfreht of excise takes reported on Fofrn(s) L1-C, 720, 730, ôr 229.o~ "
'á .. Cl
Näniéof cläÌlnäiit HU, JILIN Äddress(ALJper, street, aiidroqm or sLlitEòno.) PMB 504, PO Box 10000 CIO Fallon Law Offce, state; and zip codé Clfy or town; Saipan, MP 96950 Nameândaddress showli on retUrn ifciiff$reritfi'm abWe
Empïoyer identification number (EIN)
PMB '68, "PO Box: 10003
Ämountto be' refunded
Perod~ Prepare a separate
Form;$4äfor each tax. period.
3a Type oftax¡ penalty, o:r additiôl to tax
51 EmPloyme(it 0 Estâte' DG.ift 0 EXCi~e(seein$truttjoris)
o Pel'~lty~IRÇ9é.ctioh ~
b Type of rèturnfiled (see ihstructí(5nS):
o 706 0709 D94'D' ~941 0943 0945 D99ó-PF
4a Request for
o Other (speciM
abatement or refund ot
o Interest ~$ a result o
IHS errtS grge!ays.
Aperiålty oj'.aÒ$Jîtrqn tq. taxas,.e.resùlt ôJ 6itói'eousâqïtice fh:J1i,, tha IHS~
b Dât~ofpåýirïeiit ~
5'Explanaüon and addiíonal'claims.Explain:whyyoubèlievethtsciaimshould.bealIowedi'andshow thecomputatkinof your
t¡: refund oraqateitenfcQfii:tejrèSì. .pe¡r)älty.o-r additier) tq.tei. Ilyoli rieeçl mtire. spcjc;e,¡;ftacn adçlitiqpal.sheets.
Attached opinion letterô
04 16 iOm
04 i 8 ZOO1
IRS - PHILA1 PA
$i9nafurê. if youai'e fiÏír1g'. Fòrm 84áto request" a'. refuìidorâbatëmehf. relatih~ to' äjoiht return;, both~öUätid y.ourspo'Us6 muSt
sign the claim. Giajmsfiledby corporatibns must be. e.c.companied by
Unl:et ¡)iilaesófPéiiur. rdéëlarè:tliitl mÍleioriiiiêd ths.clilm, incILil:insacipanYiOø.sèöêdu . emeiïtst and,lótle'besõf"m\iknOlledge äid ./....
b:~~~~~_::~~:~~_~~ _~: _~~~~:~~__ _ __ _ ______ ___ _ ___ ___ ______ __d_~Jt~l_t _ ___2 ~1jtl7--- :~:~l;;..
S.ignaWe.(TTt¡¡.; ifappficáble.Olaihii;.by CQrporatiøns mU$be s¡grie~ 't¡' an qfc;e(;) Oät. r
$ist;;r;~.~ -. ---. --. 0- ,. c.' -. '" -.' - C - -" -. -- - c---.- - .co- -. -, -.' -. -.0. -. ,.--, - -. c-, c,- .-.. -. -. - -- - -. -.- -- - - -'-.. -. -'. - ..c. C..-'C -FQrPrlvacY.Aat ançlPaperwQrk Red1l9t¡QIAetNptiçe,see separ;teìn.wictiQns.
the off.cel"stíte. . ' .
signed by' a
corporate offk:er.authonzec:toslgn, andtl1e signature mtlst be
6~:¡;OC- .-- 0'.- --. -. --. -- --...
Form ~43(RéV, 11-¿OO$)
Page 3 of 16
SUBSTITUTE FORM APPROVED BY REWAX
DEPARTMENT OF FINANCE DIVISION OF REVENUE AND TAXTION COMMONWEALTH OF THE NORTHERN MARIANAS ISLADS
a1. FederallD Number
a2. CNMI Tax ID no.
b. Senal number
g. Loc. code
h. Days out of CNMI
i. Cil coe
I. Entr permit no.
To Be Filed With
c. Name, address and zip code of employer
US-CNM Development Corporation
PMB 68, Box 10003
2a. Income ta withheld (Chap 7)
2b. Local wage & salary
1. Wages, tips, other compensation
- S;;ä~,M:p 96950
ta withheld (Chap 2)
3. Social security wages
4. Social security ta withheld
d. Employee social security number
e. Employee first name and initial 5. Medicare wages & tips
6. Medicare ta withheld
7. Social security tips
8. Allocated tips
10. Dependent care benefits
f. Employee address and zip code
9. Advance EIC payment
11. Nonqualified plans
PMB 68. Box 10003 Saipan, MP 96950
12a. See instrctions for box 12
0 0 0
$ $ $
Page 4 of 16
US CNMI FICA 00256
Power of Attorney and Dèclaration of Represent~tive
be hof:ied for any pu.is~ othertnan the IRS.
586 57 9284
OMS. For IRS USe
No, 1545-0150 Only
intern.. R':ve"úe Servce .. Type or prim. .. See thê setrate Ihstructlôns.
~ Power of Attorney
~ caiJöti:Fbrm2S48\~ijJf not
HU JILIN 586! 57 !
Saipan, MP 96950
2 Representative(s) must sign and date this form
1 Táxp.wer inf9fätiol1. Tåxpayer(s) ml.st sign and date this fClrmPn page
and address 8QCiI ~cur
Oiite I J
Employer identificaion number
CIO Fallon Law Offce, PMB 504, PO Box 10000
Daytit' telepho~e number Plan riLi.rnber(ifapplicõlI:1é)
herebyappoint(s) the following representative(s) asattorney(sHn-fact
on page 2; P,ait il.
Ale.s Ffüion, E'sq. .PMB.. 504": P.O. Bôx 10000' Saipan,~1P. 9è950
OAF No; ....9~9.l~:2.~_t~~i;..,...~...........
Check if new: Address
. " ax ..(3:. ........ ....,............."................., FN:. t88ß~ 553-334,4 No. 0
0 Telephone No. 0 Fax
Teteph9iie NQ.. .j~7.9J~~.e.~:.Q9.1§;L_.........
.OAF Nö, .._ù_.c.........c..............cc........ ;:~~h~, .~~: _ ::: :::: :~:: :::::: ::::::::: ::: :::::
Check if riëw: AddressD TelephónêNQ. o
OAF NÇi~ ............._...__........................
Tel.ephone Nö; ..~..,..¡,~¡,..¡,..............¡,.¡,.......
.' '. Fa¡ No., ....,,_..__...__-._...__..._-.~_.__.__..._.....
Gheck if new: Adi:ress 0 T:elephone No, 0 Pax Nti; 0
to represent tlietaxpayer(s) before the Internel ReVenqe Serviçe for thE; followiiigtax matters:
$ Tax matters'
itpe,qftax Oncønie; EmplØyrlênt; EXc1$E¡,ètc;¡
Penalty (seethe ìnstruçtionsoforline 3)
94l _f; 94i-ss,
(seethe instructions for nne~)
4, Speèifiç.useJ19lreC9.rc~ön central!:zedl.4IIi~atiOl File (CAf).If.hepaYlØrolattoxney i$'l'obØ.spéèjficl.$enot,Jèëqrqed
on C.A¡= óh.etk thi$ bax,Se, th,e,instnJêtióÌ1sfo'r I.ne4,SpeCiló UsesnøHe.c()ëldQl'f tAR. . . . . .. . . i¡ 0
.~. ActS, a!Jh9rirè~. Th~ tcêpr$sei:tatN?$areauthQnz.eq to tetêive ä;d inspegt.c,oriftçleritiatt$ ihforrnätiÇiJj al'gt9 pedormarìy
andeill acts Lhat J(we)canper(orm.withresPElttothe;tax mattersdesctibed;çm Iìne$¡ton~xampleí the, authority
.~r~~~h~ä~~~t~~qti$E:&~ta~. ....e:ßfJ~At~tI~~~~~~~~i3Ve; 1~~1~.1~~~thP~t41~i~ó~~v:Ç)~~P~.~t~è(~~e~i~$~
forclisPIQsure.iof.tax réturnsor return infQrmatlontoe Jhirdpar;eeetheJine!;í il'$~ructi9ns fQr more il'formatibn,
i~it ..lu~t1~st~~roo~:~ïl~~:p~~;~~1&~¿~;i~i.t~:¿ë~fl~~ i~~fQ&~R~r''-~~~d7i~, ~glh~~~t~Jttt$t~~~i
taxpayersto theextentprovided in section
of CIi:ulaf230, SeeAhe hne.5 in$truçtlons.forrEltrictions ontax matters
.Listany'specifi(, additions ördeletions totheactsotherwiseeiutho:red.in this power of
.......,;..' ..:......._........~... -_...:.--......_...oo '':..:. '......:. ...;. __""_ -...;".._:. :.........;...,;.. ........:....,.. ..,;,; ;.....:_......... .._......... ..;"';;;....... .....:..__._"-_....... ..:...... ............J ..__....;... .."_"'; '-"-'.. ..'.;... ~........ :..,;" .......................
-'''.'' -~.... ....-., ~ ....-~ ....... "-." 00_...":............. ":'' '"-;-- --... ..-~ ~_.. ....:' ..""-...-:"...':.... ....-...-=-.. -.-.-..:'"".._.... ...... -....-~~~ ......O! ...,.~ .,..~....- _ .......~-.. ....... ~--".,="~'-~:-'" ':-.r ..__.. ~......". _.... _ _.__ __~.. .......
....:"-_.. ...... ~ -....... ~"~."",~'''~'''''':'''''''''~''''~'' ':.~,-":...-.. --.. - ..:....:-.. ....,-~ ~.l'~" ,"~ .,...... ".--': ......~. "J-::...:-........ ~::--.. ":...::':.-~....:'.. oi "'..... ..,:"-...-:...':..~.. ........................ ".-,~,,,! -....... .."'........... -- -...... ~--.
6' Receipt of refund chcks, If-you want tauthonze'a representative named onlii1ê.:ftCr reCêÍV$', âú'r NOT TO ENDORSE
OR,CAsH. refund checks¡ tnitlal here U . .' ameotthatrepresentative below;
Name of representa-tiiie'tó rece.ive' refund chèëk(s)
i=QrPivacyAÇt'all~ Páp~t)Vè;k f!e(juctl9J l\tltrçe, ~eé pàge'4 óftnélrst
Fòmi 2S4ä (ReV,~H!J041
Form 284 (Rev~ 3~2004)
Page 5 of 16
US CNMI FICA 00256
586 57 9284
sent to. you and a copy to
7 Notices and communications.. Original notices and.other written commUnications will be
first representative listed on line 2.
a If you also WJlnthe 'sedono representativE¡ Ii$t~d to receive
a copy of riQtlcësand Commiinications, chec.k this box . . ~ ~
sent to your rèpresentc\tive(s), ch~k this
b If you do not want any notices or communications
box "..... ~ 0
8 Retention/revocation of pror power(slof attorney. The filing of this power of attorney automatically. revokes all earlier povíer(s) ofattorneYClri file with thè.lnternal ReveriueService forthe same tiim.atters and years or periods covere by
thls.dop.ument. Ifyou.c;o not want to revokee prior po;werof attorney"check here, . . .. . . . . . . . . ~ 0
YOU MUST ATTACH A.cOPY ÓF ANY 9. Sisnature of taxpayer(s).lf a ta matter concerns POWER OF ATTORNt: YOU WANT a joiiit return,
TO REMAIN IN EFFECT.
both husband'and wife must sign if
~ IF NOT SIßNED AND DATED; THIS POWER
~~~pa~ . ..
reqlJested, otherWise, see. the instructions. If receiver; edministrator, or trustee on behalfof the taxpayer; i
joint representation is
maters partner; executor¡ on behalf this form.
signed by a corporate officer; partner¡ guardìan; tax certify .thar I have the authori to execute
OF ATTÖRN .y wni BE RETURNED'.
. -. _.,. --0'- -:--0 - - - - --.- '---""--sigri:~tiù;~""" ..' -' - -.- O' .--- --.-
Print namë of
........-. ...._- .¡;¡:r~tÑ.~~;._.' .... .....-... PIN Number
......; .'_....... ........ .......... "-.~:"'"'' .,-;- ,; ..Oo'..'- .."___.... _.. _".. ......__ ¡,_..
--,:'~-:-"::-~--',!,.-:-:-.-_ "l '!-
taxpayer from line 1 if other than individual
~...- ..-_._....... ..----_.. ':~ -.--- -.",:-" ~-,-,. '!--- -:-- --~ --;-,.,. --..._---,. -_.. -_._.... -~--..-""- -- _...~
Titla (if applicable)
ID IJetlaration of R-eprese"tativ.e
Prç9rarh.s.ée.the lt¡stric:#òns fQrPaitfJ: Under penalties
t;auüøn:Students with aspecïàfqrde.rtorepre.sent taxpayørs ìr::rQuafifed Low..fncome TaxpayerCfinicsor the .Student Tax ëfínic
of perjuiy, i deplarethi;t;
. l äm not currently under suspension or disbarment from practicebefòrethe InternalREwenue Service;
. I amiaware ofregi;latións coïitairiea in Tr$asii!Y Dep,aÇtniiantGiitLll.atNp;2SQ(31 CfR, Part 10), asa.ehpeci; cç;ncèttìing thepractite 0fettorneýs,cenifièd pLlblicaçcountants,èiirnlled ágènts, eritqllèii;ptü¡:nes, ariq otHers; .. i amaLiHóriied to repreerít thêtaXpaYet(sl idèntlfieq in P¡att I fQt tnetaxt'attei:s)$'pecifi$ô th,er.e;a(id
. I ar, qhé, Qfthø fqllówing:
a Attorney-a member in good standingofthebarof the highestcourt ohhe..'jurÎsdiction shown below,
b êertified Public Àccountant.ouly qualifiedJo practice as a certified pubiio,accountantin thejurlsdictionshown below;
c Enrolled Agent-enröllèd asar iagcant under tl1ereqlilrementsof'Treasul' Departmentê1rculat No:2:3ä
.cl Offb:e¡r.;e'poria fiaËl:Ciffjcer of thø texpaye(:$ C5rganitátien,..
e Full-ime Ei:p!PYe;a. fyll-timearnpJoyee,ofthe taíPàYé,(
f F~iiHýMen1PØr-a memoerofthetàkpa-Yét$ ìmmeØißtefah1ily(i,~."spo4sei pår~nt;chJld, brothei; or sistea.
G'Eninllea Actt:ary"-nl(~iièCá$:an. áctJ.atY-LiY the JpintEQatd fp-r tneËrifølimetit of AtlLlpr¡ê$ unøør;29 li,s.Q, 1242 (tha
,authority to practice befor:the Service is limited byseeron, 10.3(0') of'Tresury Department
Circular No. 230).
h Unenrólièd'Rßtùrl1 Prepäret;.heäuthorityto ptaetícë bëfore flielrieihai Révéntie;Service is Iimitëd byTteiisury Department return ín:'questlonandthe return must be:under Öircular No; 230, section i O.7(c)(11(YÎÍn, Voumust have, prepared the
exeminetion py the IR$.:. See Unenrolle R~turn, Prep.rer 9)1 p.aøe 2dfll:ainstr:uetion$.,
"" IF: THIS D~LARATIQNQFRi:PRe$ENTATIVE is. NÓTSIGNEQ: AND DATED; THE
BE.RETORI\EaS~ the Pàrt 11 iñstructìgfl$..
pesignatíõri:-Ir:sei:f ábcVê lètt(~)
-J1A - ~/)/) tt 1,L.Y
FOr 2848 (Rev, SC2O:04~
,,~,,-'.,~ ..,."_..,, ~",~. ".~.;.~...y-.." ",.
Page 6 of 16
i" ""iW~:&~:Æ~g~-1F3î'~4f~ì;¥:i1tllL ~~W:#.a~'X-f. ¥:xìÌ li-'
G 15 7 4611Z9CHN780~Q9:,.F OQ9a8419?0;320.80(~O(O('(~1 ()
Page 7 of 16
FALLON LAW OFFICE
PMB 504 P.O. BOX 10000
ALEXIS FALLON. ESQ. TEL: (670) 323-0061 FAX: (670) 323-1061
Internal Revenue Service 11601 Roosevelt Blvd Philadelphia, P A 19114
PAN, MP 96950
Att: J. McCandless
RE: FICA LEGAL OPINION FOR FORM 843
Dear Mr. McCandless,
Please note that ths letter is to serve as the formal opinon letter attached to all of the
Form 843 requests for refud of overpayment of the Federal Insuance Deposit Act
contributions (FICA) that were sent by my office earlier this week. Each application
contains a Form 843 for each tax year along with their identity and the relevant W-2's. In
the Form 843 it references tls Legal Opinion. If you could note that in your receipt of
all the refud clais that this is the legal opinion so referenced.
A. PROCEDURA POSTUR
1. All applicants have filed a Form 843 for each tax year.
2. All applicants have attached their W-2 forms to their respective Form 843s
to the extent that it is in their possession.
3. To the extent
that the IRS desires to know their filing status for income tax
puroses, the client wil provide ths data on request, or alternatively, the IRS can
contact the CNM Division of Revenue and Taxation and request verification of
4. None of the applicants have fied U.S. income. tax retus. . Rather, all
applicants fied income tax retus with the CNM Division of Revenue and
Taxation as provided by IRe Section 935 and Covenant Section 601.
B. . FACTS
Page 8 of 16
All of the applicants are similarly situated with the same immigration status: Each applicant is a non u.s. Citizen that is a curent or former CN contract worker. A Copy
the each applicant's passport has been attached to their refund claim.
All of the applicant were issued U.S. Social Security cards with the legend "Valid For
Work Only With DRS Authorization" or "Valid For Work Only With INS
Authorization." This legend requires the card holder to present a valid U.S. work visa to
employment eligibility "Form 1-9." . None of the applicants have
successfully completed Form 1-9.
C. SUMMY OF POSITION
First and foremost, the geographic definition of FICA does not include the CNMI. This is directly contrar to how the United States Congress has applied FICA to all the other
U.S. Possessions. Secondly, the IRS has never promulgated any regulations in regard to
the applicability of FICA to the CNMI. There is scant regulatory guidance as to why the
FICAtax should apply to the CN1. The Covenant between the U.S. and the CNMI is
clearly ambiguous with regard to the application of FICA to contract workers permtted to work only in the CNM. It is clearly ambiguous because Congress never addressed the
fudamental differences that exist between Guam and the CNMI. This ambiguity creates
an impossibility of a self-executing provision of the Covenant.
1. Application of
Federal Insurance Contributions Act
The Federal Insurance Contribution Act (FICA), 26 U.S.C. §§ 3101-3127, supports the
Federal program of Old-age, Surivors, Disability Insurance ("Social Security") and the
Federal program of hospital insurance ("Medicare"). This tax is collected on services
performed by an employee "withi the United States." 26 U.S.C. § 3121(b). FICA
obligates the employer to match any of its employee's FICA contributions. The term "United States" is specifically defined for this statute in Section 3121(e). The Section
Section 3121(e) State, United States, and citizen.
For purposes of
this Chapter(1) State. The term "State" includes the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa. (2) United States. The term "United States" when used in the geographical sense includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam and
The terms "State" and "United States" define the geography of the IRS' collection authority to administer the FICA ta. As a consequence of ths defmition, FICA applies by its own terms to the Virgin Islands, Guam, Puerto Rico and' American Samoa and
Page 9 of 16
"Social Security Taxes" (i.e. taxes imposed by FICA) and is therefore collected in those territories in the same maner as the States.
The Commonwealth of the Northern Mariana Islands ("CNMI") was never added to the
definition of "the United States", or to the term "state" as found in Section 3121(e).
Without clear Congressional action amending Section 3121 to include the CNMI in the definition of either state or geography sections, it creates an ambiguity. Unlike what occured legislatively in the other U.S Territories, where there was clear legislative
action. This omission is a significant distinction from the other Terrtories.
At ths time, it would be prudent to review the enabling legislation makg FICA
applicable to the U.S. Territories. In every instance of the application to the terrtories (Puerto Rico, Virgin Islands, Guam and American Samoa), there was a Congressional act
that specifically amended the Internal Revenue Code to apply
FICA to those Territories.
When the U.S. Congress applied FICA to the Virgin Islands and Puerto Rico, it did so in
the Revenue Act of 1950, Pub. L. No. 50-814. The House Committee Report to this Act stated:
The House bil and Senate amendment both provided that, notwthstading any other provision of law respecting taxation in the Virgin Islands or Puerto Rico, all taxes imposed by the Self-Employment Contributions Act shall be collected by the Bureau of Internal Revenue under the direction of the Secreta of Treasur and shall be paid into the Treasury of United States as internal-revenue collections. H. R. Committee Report H. R. 8920 (emphasis added).
With regards to Gua and American Samoa, U.S. Congress in Pub. L. No 86-778 Sec. 103, specifically amended section 202(i) of the Social Security Act by strikng out "Puerto Rico or the Virgin Islands" and inserted in lieu thereof "the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa." See also H.R. Rep.No. 2165, 86th Cong., 2d Sess. 18 (1960) (conference report)(Guam and American Samoa); and S. Rep.No. 1669, 81st Cong., 2d Sess. 17 & 292 (1950) (Puerto Rico and the Virgin Islands). All these amendments were eventually codified into what is today, IRC Section
As stated previously in the CNMI matter, the U.S. Congress has not taken any legislative
action to amend the Internal Revenue Code, as Congress has done for Puerto Rico, American Samoa, Guam' and the Virgin Islands. As for the arguent of legislative
oversight, such a position is incredulous as the U.S. Congress has amended IRC Section
3121 seventeen times since the passage of
the Covenant in 1978. In 2003, PL. 108-121;
in 2000, P.L. 106-554; in 1998, P.L. 105-206; in 1997, P.L. 105-61; in 1996, P.L. 104188; in 1994, P.L. 103-387; in 1993, P.L. 103-178; in 1992, P.L. 102-572, in 1990, P.L.
101-508; in 1989, P.L. 101-239; in 1988, P.L. 100-647, in 1987, P.L. 99-514, in 1984,
P.L. 98-369; and in 1983, P.L. 98-118. Congress. had no fewer than seventeen
opportties to specificaly include the CNM in IRC Section 3121(e). However, in the
Page 10 of 16
same timeframe the U.S. Congress has amended other sections of
the IRC to include the
CNMI, for example IRC Sections 881,931,935 and 937.
B. Effect of
Northern Mariana Islands in Political Union with the United States of America
the Covenant to Establish a Commonwealth of
The Commonwealth of the Northern Marana Islands is unque among the u.s. insular
possessions. As the terms of this political union were negotiated between the paries and
ratified in a plebiscite, and subsequently approved by the Senate and the full U.S.
Congress in Pub. L. No. 94-241, 90 stat. 263 (1976), codified at 48 U.S.C. §1801. Thjs
agreement is commonly known as the Covenant To Establish a Commonwealth of the
Nortern Mariana Islands in Political Union with the United States of America
On November 3, 1986, with all of the terms of the Covenant in effect, the United States terminated the Trusteeship Agreement with a Presidential Proclamation. United States
ex. reI. Richards v. Guerrero, 4 F.3d 749 (9th Cir. 1993). Curently, authority of the United States towards the CN1 arises solely from the Covenant. Hilbloom v. United States, 896 F.2d 426 (9th Cir. 1990). To fuher the goal of CNM self-governance,
Covenant Section 105 provides that cert provisions of the Covenant may only be
modified with the joint consent of the U.S. and the CNMI. With regards to taxation, immigration and minmum wage, the Covenant may be amended by unlateral action of
Congress, but only by specific reference to the relevant Covenant Sections.
i. Covenant Section 606(b) and the applicabilty of FICA
Covenant Section 606(b) provides that:
the United States which impose excise and self-employment taxes to support or which provide benefits from the United States Social Security System will on Januar 1 of the first calendar year following the the Trusteeship Agreement or upon such earlier date as may termination of be agreed to by the Governent of the Northern Mariana Islands and the
Those laws of
Governent of the United States become applicable to the Nortern
Mariana Islands as they apply to Guam. (Incorporating amendments
found in Pub. L. No. 98-213, § 9)
Under this Section, one of
two possible conditions precedent must occur before Congress
precedent were either
has the right to apply FICA laws to the CNM. These conditions
(1) the termnation of the Trusteeship or (2) by an agreement prior to the termnation of the Trusteeship between the United States and the governent of the Northern Mariana Islands. The language of Section 606(b) is conspicuous with the use of the word "will".
This could be interpreted that Congress wished to create a self-executing provision for
the application of FICA to the CNMI upon the occurence of either of these events. Under this interpretation, when the Truteeship over the CNMI was termnated on
Page 11 of 16
November 3, 1986, the laws that impose excise and self-employment taxes could then be imposed.
The central issue of this matter is whether Covenant Section 606 (b) was sufficiently
clear to be self-executing, and even if this clause is found to be self-executing, did ths clause encompass the significant differences that exist between Gua and the CNMI.
Arguably, to rely on Section 606(b) exclusively as providing suffcient legislative FICA to the CNMI is in direct confict with the legislative authority for the application of history surounding the application of FICA to the other U.S. Possessions. As stated previously, in every instance Congress specifically amended the applicable sections of the Internal Revenue Code to apply FICA to these areas. Even if ths Covenant section
provided sufcient legislative authority, it did not address the actual mechancs as to which Internal Revenue Code sections would apply and in what maner these sections
Moreover, Section 606(b) by itself does not amend the existing statutes that apply FICA to the CNM. If it did, IRC Section 3121 ( e) would include the CNM in the definition of "state" and "United States" in its laundry list. The Research Institute of America and other ta legal authorities have never referenced Covenant Section 606(b) as amending IRC Section 3121(e), because if they did so, they would have included the CNMI in
The phrase "as they apply to Guam" creates a latent ambiguty. Guam is not in charge of its own immigration. All of the contract workers who are in Gua obtain a U.S. Visa
issued by the Deparment of Homeland Security (replacing the Immigration
Natualization Service (IS)). Unlike Guam, contract workers enter the CNM enter on a
FICA to CNM contmct workers is at minimum questionable and more likely than not unsupportble with the present legislative statutes for the reasons stated below.
CNMI Immgration visa. Due to ths critical difference, the application of
In 2004, the U.S. Social Security Administration (SSA) reversed its opiron of coverage
of CNMI foreign contract workers. Whle the enabling language of the revised
regulations states that ths is the first time that U.S. Social Securty has addressed the coverage issues of CNMI Foreign Contract workers it is in error. Attached hereto is an
excerpt of the VanCleve Memorandum 1, it this memorandum Ruth VanCleve references "HHS advises informally that its regulations and guidelines treat national and citizens so
that Samoans in the States would thereby be eligible. This section, however, has the effect of excluding the large alien population in the Nortern Mariana Islands, where
such aliens, who have entered the Northern Marianas for a temporar period for
employment, are believed now to outnumber local residents. Because under the Covenant federal immigration laws do not apply to the Northern Mariana Islands, these workers are
not aliens "lawflly admitted for permanent residence" as the phrase is used in federal law. They thus do not meet the statutory requirement, and alien temporar workers in the Nortern Mariana Islands are therefore ineligible for SSI benefits. (citing HHS ".. ...in
i Ruth Van Cleve, Departent ofInterior Memorandum no. 42-3.
Page 12 of 16
order to be eligible for SS1, a non-citizen (or national) must be either (1) "Lawfully
for permanent residence" or (2) "permanently residing ...under the color of law" (other wise known as PRUCOL). However, (any) suggestion that adITssion of guest
workers under the laws of the NM would meet the first test is incorrect "lawfl
admssion for a temporar period, no matter how long, does not satisfy ths test.")
It is Congress' job to clarif the application of ths tax and not the Agency's sole
discretion to apply jurisdiction. This analysis reversed their prior decision in the SSI
benefits area and is not considering the express exclusion of the CNMI from the
Immigration Nationality Act found in the Covenant Section 503(a) where the Covenant excludes the application of INA Section 506.1
ii. Without an explicit statutorY amendment to IRe Section 312l(e), the Internal Revenue Service does not have any jurisdiction to enforce the collection of this tax on CNM Contract workers who are not present in the
United States and not authorized to work in the United States.
The territorial application of the FICA tax would, if IRC Section 3121(e) had been
amended, satisfy in rem
jurisdiction. Quite simply, without a specifc amendment to IRC Section 3121(e), the IRS lacks in rem jurisdiction to enforce the collection of the tax
authorized to work in the United States. The IRS has exclusive administration authority
agaist CNMI Contract Workers who are not present in the United States and not
over the Intern Revenue Code, as codified in Title 26. IRC Section 7801 provides that
"except as otherwse provided by law, the admstration and enforcement of ths title
shall be performed by or under the supervision of the Secretar of the Treasur." So failing explicit statutory authority of granting jurisdiction in rem, the secondary method of taxation is jursdiction in personam.
With regards..o possible in personam jursdiction, there is no explicit statutory authority over persons in the CNMJ. Typically, IRC Section 876 grants the IRS jurisdiction over resident aliens in U.S. possessions. For reasons stated below, IRC Section 876 is not
applicable to the CNMJ.
The Tax Reform Act of 1986 (TRA 1986) amended IRe Section 876 to provide that bona
fide residents of Puerto Rico, Guam, American Samoa or CNMJ would be taxed as resident aliens. However, Section 1277 (b) of the TRA 1986, P.L. 99-5143, fuer
2 Yang Bi Kei v. American Intern'l Knitters Corp., 789 F. Supp 1074 (D.N.Mar.I. 1992).
3 Application of Oct. 22, 1986 amendments; special rules. Act Oct. 22, 1986, P.L. 99-514, Title XII,
Subtitle G, § 1277, 100 Stat. 2600; Nov. 10, 1988, P.L. 100-647, Title I, § 1012(z), 102 Stat. 3530,
, I I i
(a) In general. Except as otherwise provided in this Section, the amendments made by this subtitle (for full classification, consult uses Tables volumes) shall apply to taxable years beginning after December 31, 1986. (b) Special rule for Guam, American Samoa, and the Northern Mariana Islands. The amendments made by this subtitle shall apply with respect to Guam, American Samoa, or
the Nortern Mariana Islands (and to residents thereof and corporations created or
Page 13 of 16
provided that' "the amendments made by this subtitle shall apply with respect to Guam,
American Samoa, or the Nortern Mariana Islands (and to residents thereof and
corporations created or organzed therein) only if (and so long as) an implementing
agreement under Section 1271 (note to ths Section) is in effect between the United States
and such possession." (Emphasis added.)
TRA 1986 Sections 1271, 1272, and 1277 are encompassed in TRA 1986 Title XII -Foreign Tax Provisions, Subtitle G -- Tax Treatment of
Possessions. TRA 1986 Sections
1271 and 1272 are in par I of subtitle G. Par I specifically addresses the "Treatment of Guam, American Samoa, and the Northern Mariana Islands." TRA 1986 Section 1271, does not appear in, or make any changes to the IRC. Rather, that provision grants Guam,
American Samoa, and the CNM, under certain conditions, the right to enact their own
tax laws independent of the IRC with respect to income (1) from sources with, or
effectively connected with the conduct of a trade or business withi, the possession, or
(2) received or accrued by a resident of the possession.4 TRA 1986 Section 1271(b) makes that grant of authority applicable to Guam, American Samoa, or the CNMI provisional on the existence of an implementing agreement between the United States and such possession.5
TRA 1986 Section 1272 amends old Section 876 as well as other Code provisions not pertinent here. In TRA 1986 Section 1277(b), Congress makes the application of those
amendments conditional on the existence of the requied implementation agreement
between the United States and the specified possession, but only as to Guam, American
Samoa, and the CNM, and the residents and 'corporations thereof. 6
Therefore, the Tax Reform Act of 1986 rules coordinating United States and specified possessions (including CNM) taxation generally apply to taxable years beginnng afer. 1986, or as soon as the applicable possession agrees to cooperate with the United States
in tax matters. 7 Comequently, as long as an implementing agreement is not signed
between the United States and the CNMI, Section 876 of the Tax Reform Act of i 986 does not apply to the CNM.
A carefu review of the language of Covenant Section 606(b) wil demonstrate that there
is no conferment to the Internal Revenue Service for enforcement which would
undermine the deference afford to U.S Treasur regarding promulgation of regulations.
But U.S. Treasur has never promulgated reguations on this issue. The only regulations that have been proposeCl is by the Social Security Administration. .
organized therein) only if (and so long as) an implementing agreement under Section
1271 is in effect between the United States and such possession.
26 USCS § 931 note. 4 TRA 1986 sec. 127 i (a).
5 Speckingv. Comm'r, i 17 T.C. 95 (2001).
, Also See Joint Committee on Taxation, Summary ofH.R, 3838 (Tax Reform Act of 1986) as Reported by
the Senate Committee on Finance (JCS-12-86), June.
5, 1986. .
Page 14 of 16
If there is an ambiguity as to the legislative language indicates, then in accordance with
Chevron Us.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), "If
intent of Congress is clear, that is the end of the matter; for the cour, as well as the
agency, must give effect to the unambiguously expressed intent of Congress. If, however, the cour determines Congress has not directly addressed the precise question at issue, the
court does not simply impose its own construction on the statue, as would be necessar in
the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the questions for the cour is whether the agency's answer is based on a permssible construction of the statute." Id. at 843. In
Cottage Savings Ass'n v. Commissioner, 499 U.S. 554, 560-561, 113 L.Ed. 2d 589, 111
S. Ct. 1503 (1991), the Supreme Cour conspicuously did not cite Chevron and appeared to apply the traditional rule of tax deference: "Because Congress had delegated to the
Commissioner the power to promulgate 'ali needful rules and regulations for the
enforcement of the (Internal revenue Code), 26 U.S.c. § 7805(a), we must defer to his regulatory interpretations ofthe Code so long as they are reasonable." Id., at 560-61
Please note the enabling language in the application of FICA to Puerto Rico and the Virgin Islands where Congress was quite explicit in its conferment of authority of the U.S. Treasur to enforce and retain the collection of monies for FICA. The same is tre
for the amendments for Guam and American Samoa. The absence of an explicit conferment coupled with the failure of Covenant Section 606(b) to amend the relevant
Internal Revenue Code sections, means the IRS does not have the requisite explicit jurisdictional authority to enforce the FICA tax as to the CNM Contract Workers who
are not admtted in the United States and are not authonzed to work in the United States.
in. The Tax Status of CNM Contract Workers
As stated previously, Covenant Section 606(b) contains ambiguous language that states that excise taxes and self-emplQyment taxes will become applicable to the CNMI in the same maner as Guam. This language does not address the significant difference between the CNM and Guam. As stated previously, the CNM Governent controls its own immgration. In fact, Social Security regulations prohibit the issuance of Social Security Cards for work without the satisfaction of Deparent of Homeland Security (replacing Immigration Naturalization Service) Visa permittng an individual to work. 20 CFR Section 422.104. Section 422.104 states, that an alien is eligible for a Social Security number where "An alien lawfly admitted to the United States for permanent residence or under other authority of law permtting you to work in the United States (§ 422.105 describes how we determine if a nonigrant alien is permitted to work in the United States)" 20 CFR 422.l04(a)(2)(emphasis addedJ.
In fact the Social Security Regulation creates a presumption of authority of a
nonimmigrant alien to engage in employment if the individual alien provides a Form 194. "...(I)f your Form 1-94 does not reflect a classification permtting work, you must submit a curent document authorized by the Deparent of Homeland Security that verifies authorization to work has been granted' e.g. an employment authorization
Page 15 of 16
document, to enable SSA to issue an SSN card that is valid for work." 20 C.F. R.
Since the CNM controls its own immgration policies, CNMI contract workers are not admitted into the United States for work puroses. Covenant Section 503 states that the immigration and natualization laws are inapplicable to the Nortern Mariana Islands.8 From the plain meanng of Covenant 503, the only exceptions from the inapplicability of the Immgration Natualization Act are those listed in Covenant Section 506. As you wil note, there is no reference to the CNM work visas issued to the alien contract workers being designated or approved by the INS. In Yang Bi Kei v. American International Knitters Corporation et. al., 789 F. Supp. 1074 (D.N.Mar.I. 1992), the U.S. District Cour considered the issue of the imigration power of the CNMI. "Unlike any of the several States and Territories or Commonwealths, Congress has granted the CNMI authority over
its oWn immigration."
Foreign contract workers enter into the CNMI on a CNMI work visa that does not
provide them access to, nor the right to work in the United States. (See Memorandum of
Agreement Between the U.S. Deparent of Interior, Offce of Insular Affairs and the Commonwealth of the Northern Marana Islands, signed September, 2003; see also
Section lOl(a)(38) of
the Immigration and Nationality Act, 8 U.S.C. §llOl(a)(38)). So
8 Covenant Section 506 states the following:
(a) Notwithstanding the provisions of Subsection 503(a), upon the effective date of this
Section the Nortern Mariana Islands wil be deemed to be a par of the United States
under the Immigration and Nationality Act, as amended for the following purposes only, and the said Act will apply to the Nortern Mariana Islands to the extent indicated in each this Section. of the following Subsections of
(b) With respect to children born abroad to United States citizen or non-citizen national
parents permanently residing in the Northern Mariana Islands the provisions of Séction the said Act wil apply. 301 and 308 of
(c) With respect to aliens who are "immediate relatives" (as defined in Subsection 201(b) of the said Act) of United States citizens who are permanently residing in the Northern Mariana Islands all the provisions of the said Act wil apply, commencing when a claim is made to entitlement to "immediate relative" status. A person who is certified by the
Government of the Northern Mariana Islands both to have been a lawful permanent
resident of the Northern Mariana Islands and to have relationship denoted herein on the effective date of been admitted to the United States for lawfl permanent
had the "immediate relative"
this Section wil be presumed to have that date without residence as of
the requirement of any of the usual procedures set fort in the said Act. For the purposes
of the requirements of judicial naturalization, the Northern Mariana fslands will be
deemed to constitute a State as defined in Subsection 101(a) paragraph (36) of
Act. The Courts of record of the Northern Mariana Islands and the District Court for the
Northern Mariana Islands will be included among the court specified in Subsection 310(a) of the said Act and will have jurisdiction to naturalize Rersons who become
eligible under this Section and who reside within their respective jurisdictions.
(d) With respect to persons who wil become citizens or nationals of this Covenant or under this Section the loss of
the United States under Article II of
nationality provisions ofthe said Act
Page 16 of 16
while Social Security has been issuing cards to CNM Contract Workers, it does so with the following adrornshment stamped upon the cards, "Valid for Work Only with DRS (formerly INS) Authorization". This stamp is on every single card issued to CNM Contract workers. The very face of the Social Security Card upholds this analysis that working in the CNM is not workig in the United States. See Evidence Requirements
20 C.F. R. 422.107. Section 422.107 states clearly the need for DRS work visas that will allow for the issuance of. a Social Securty Card for an alien. None of the Social Security
regulations acknowledge that the issuance of CNMI work visas satisfies the prerequisites
for obtairnng a right to work and pay Social Security Tax in the United States. The
absence of regulations is the result of Congressional failure to amend the Federal
Insurance Contribution Act to include the CNMI and the application of the associated
provisions of the Social Security Act.
The failure of the drafer's action in Pub. 1. 98-213 (the Amendment to §606(b) of the
Covenant), is that it created more confsion and did not provide definitive guidance to
the treatment of persons who are adITtted in the CNM on work visas not issued by the
Deparent of Homeland Security, but by the Commonwealth Deparent of
Immigration. Moreover, while the amendment is reflective of Congressional intent with respect to the application of various social security taxes, it is not a specific amendment
that is requied for statutory constrction in matters of taxation. At best, ths section
could be termed "tax by implication", which not only violates the U.S. Constitution, but
also fails to provide the necessar statutory authority for the Internal Revenue Service to
admirnster the ta.
Based on the foregoing, the Covenant between the U.S. and the CNMI is clearly ambiguous with regard to the application of FICA to contract workers permtted to work
only in the CNM. This ambiguity coupled with Congressional failure to amend IRC Section 3121 to include the CNMI creates a reasonable basis for the refud requests for
their respective FICA contributions.
This matter wil be fuer addressed in other communcations with the Internal Revenue
Service and the Social Security Admistration. Please be advised that tls legal opinon
covers all the applicants for a refud claims from this offce as referenced in each Form 843 processed by this offce.
Fallon Law Offices