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Territorial legislature has incorporated by reference the United States Internal Revenue Code, 26 U.S.C., for income taxation in American Samoa. A.S.C.A. § 11.0403. Klauk v. American Samoa Government, 13 A.S.R.2d 52.

Employers and employees within American Samoa must pay U.S. Social Security taxes, as the Federal Insurance Contributions Act applies to any employment performed within the United States or to any employment performed outside the United States by her citizens or residents for an American employer. 26 U.S.C. §§ 3101-3128. Alamoana Recipe Inc. v. American Samoa Government, 24 A.S.R.2d 156.

American Samoa's income tax law does not conflict with or purport to supplant federal tax laws, but it merely creates an additional, territorial tax modelled on the federal tax law. A.S.C.A. § 11.0403. Alamoana Recipe Inc. v. American Samoa Government, 24 A.S.R.2d 156.

Suits to restrain assessment or collection of any federal tax in any court are prohibited by the federal Anti-Injunction Act. 26 U.S.C. § 7421(a). Alamoana Recipe Inc. v. American Samoa Government, 24 A.S.R.2d 156.

The Federal Anti‑Injunction Act prevents the High Court, at any level, from restraining the assessment of collection of any federal tax. 26 U.S.C. §§ 876, 7421(a). Alamoana Recipe Inc., v. American Samoa Gov't, 25 A.S.R.2d 46.

The Federal Anti‑Injunction Act is applicable to temporary, as well as permanent pleas for injunctive relief. Alamoana Recipe Inc., v. American Samoa Gov't, 25 A.S.R.2d 46.

Federal FICA applies to any employment performed within the U.S. or outside the U.S. if performed by U.S. citizens or residents, pursuant to 26 U.S.C. § 3121(b), and applies specifically to American Samoa, pursuant to 26 U.S.C. § 3121(e). Alamoana Recipe, Inc., v. American Samoa Government, 25 A.S.R.2d 97.

Federal laws need not be passed by the American Samoa legislature, since Congress has the constitutional power to make rules and regulations for the territories, pursuant to U.S. Const. art. VI, and the federal Constitution and laws are the supreme law of the land, pursuant to U.S. Const. art. IV, § 3. Alamoana Recipe, Inc., v. American Samoa Government, 25 A.S.R.2d 97.

§ 2 Procedural Issues

§2(1) General Provisions

Order staying payment of taxes pending litigation on tax exemption is not authorized by Federal Rules. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Court will allow amendment of petition substituting Governor for Director of Tax Office as respondent in challenge to alleged tax deficiency, despite running of 90 days statutory period for amendment, since High Court will hear matter in any event and denial of amendment would result in injustice. Patu v. Westervelt, 4 A.S.R. 818.

Under rules governing tax litigation, a party may amend pleadings by leave of court which shall be given freely when justice requires. Tax Court Rule 41. King v. Commissioner of Revenue, 7 A.S.R.2d 90.

In proceeding involving issue of fraudulent intent to evade tax, government bears burden of proof by clear and convincing evidence. 26 U.S.C. § 7454. Ah San v. Lutali, 4 A.S.R.2d 177.

§2(2) Statutes of Limitations

Normal three-year statute of limitations for collection of delinquent taxes expands to six years when taxpayer failed to report over 25 percent of his includible gross income in tax return. 26 U.S.C. § 6501(e)(1)(A). Ah San v. Lutali, 4 A.S.R.2d 177.

§2(3) Jurisdiction

SEE CIVIL PROCEDURE § 1 – JURISDICTION

High Court sits as Tax Court if petition is timely filed challenging notice of deficiency, otherwise High Court sits as District Court to hear refund claim. Patu v. Westervelt, 4 A.S.R. 818.

High Court of American Samoa has exclusive and original jurisdiction over territorial income tax proceedings, sitting as a District Court in refund cases and a Tax Court in deficiency proceedings. A.S.C.A. §§ 11.0401, 11.0408. Klauk v. American Samoa Government, 13 A.S.R.2d 52.

According to Tax Court rule, a 90-day notice must have been issued for the court to have jurisdiction in a deficiency proceeding initiated by a taxpayer. United States Tax Court Rule 13(a). Klauk v. American Samoa Government, 13 A.S.R.2d 52.

For a court to have jurisdiction over a suit to recover taxes erroneously or illegally assessed or collected, the government must have assessed such taxes and the taxpayer must have timely filed a refund claim with the Tax Office. 26 U.S.C. § 7422. Klauk v. American Samoa Government, 13 A.S.R.2d 52.

Statutory requirement that petition for redetermination of deficiency of income taxes be made within 90 days after notice of deficiency was mailed is jurisdictional. 26 U.S.C. § 6213(a); A.S.C.A. § 11.0401. Stephens v. American Samoa Government, 15 A.S.R.2d 87.

The High Court, while sitting as a Tax Court for deficiency proceedings, does not have jurisdiction to hear such a deficiency proceeding unless it was filed within the statutory deadline; while sitting as a District Court for refund cases, it lacks jurisdiction until there has been payment or collection of disputed taxes. 26 U.S.C. § 7422; A.S.C.A. § 11.0409. Stephens v. American Samoa Government, 15 A.S.R.2d 87.

The High Court lacks jurisdiction to block enforcement of federal tax laws. Alamoana Recipe, Inc., v. American Samoa Government, 25 A.S.R.2d 97.

The High Court lacks jurisdiction to grant relief for unauthorized tax collection by the IRS, since such actions must be brought in a district court of the United States, pursuant to 26 U.S.C. § 7433(a). Alamoana Recipe, Inc., v. American Samoa Government, 25 A.S.R.2d 97.

American Samoans may litigate unauthorized tax collections in the federal district court where the defendant resides, where a substantial part of the claim arose, or where a substantial part of the relevant property is situated. Alamoana Recipe, Inc., v. American Samoa Government, 25 A.S.R.2d 97.

§ 3 Specific Taxes

§3(1) Property Taxes

Language of tax statute which uses property and land interchangeably cannot be construed to include tax on leased houses. Government v. Bird, 2 A.S.R. 102.

Court takes judicial notice that Attorney-General construed tax on leased property not to include lease of houses. Government v. Bird, 2 A.S.R. 102.

Admission of ownership of land for tax purposes by Samoan usually means admission of right to use family lands assigned to him by matai. Government v. Bird, 2 A.S.R. 102.

§3(2) Excise Taxes

Fono has power to impose excise tax on incidental importation of used motor vehicles, even if Hawaii and California have legislatively chosen not to do so. Letuli v. Government, 4 A.S.R. 830.

Statute imposing excise tax on imported motor vehicles applies whether or not vehicle imported is used and imported incidental to change of residence by owner. 34 A.S.C. §§ 401, 402(a)(3)(C). Letuli v. Government, 4 A.S.R. 830.

§ 4 Collection

Government must issue a statutory notice of deficiency (90-day letter) by registered mail before assessing or collecting any deficiency, and is expressly prohibited from such assessment or collection until it has done so. 26 U.S.C. §§ 6212(a), 6213(a). Klauk v. American Samoa Government, 13 A.S.R.2d 52.

§ 5 Refunds

The American Samoa Government does not have, and cannot obtain, any ownership interest in the monies representing income tax refunds. The Senate v. Lutali, 27 A.S.R.2d 157.

The American Samoa Government collects income taxes, through wage withholdings, periodic estimated payments and other means, with the clear-cut statutory obligation to pay refunds for overpayments. 26 U.S.C.A. § 6402; A.S.C.A. § 11.0403(a). The Senate v. Lutali, 27 A.S.R.2d 157.

Refund monies are the taxpayers' private funds. The Senate v. Lutali, 27 A.S.R.2d 157.

The American Samoa Government holds tax refund monies with the fiduciary duty to account for and refund those monies to the taxpayers as the rightful owners, with interest if not timely paid. The Senate v. Lutali, 27 A.S.R.2d 157.

The American Samoa Government's fiduciary obligations regarding income tax refunds are absolute, regardless of the tax year in which the government assumes responsibility to return to its taxpayers their excess tax payments in the government's possession. The Senate v. Lutali, 27 A.S.R.2d 157.

§ 6 Power of Levy, Distraint & Tax Liens

Leins to secure the payment of taxes may only be established by statute or some act of the legislature. Moimoi v. Howden, 1 A.S.R. 3.

When Board of Assessors established a “Sa” pursuant to an order of the Commandant of the Naval Station, valid tax lien was created. Moimoi v. Howden, 1 A.S.R. 3.

Samoan custom of “Sa” establishes a lien on property for purposes of taxation. Moimoi v. Howden, 1 A.S.R. 3.

Before the government can distrain and seize a taxpayer's property, it must validly assess a deficiency by preparing and sending a 90-day statutory notice to the taxpayer before the statute of limitations expires. 26 U.S.C. §§ 6212(a), 6501(a). Klauk v. American Samoa Government, 13 A.S.R.2d 52.

A taxpayer may sue and enjoin the government from levying on, distraining, or seizing property under the authority of purported deficiency assessments where the government did not issue a 90-day statutory notice of deficiency. 26 U.S.C. § 6213(a). Klauk v. American Samoa Government, 13 A.S.R.2d 52.

Tax laws permitting the seizure and sale of property must be strictly construed. Klauk v. American Samoa Government, 13 A.S.R.2d 52.

Government violates due process when it seizes a taxpayer's property for unpaid taxes without following the procedures mandated by the Internal Revenue Code for distraint and levy. Klauk v. American Samoa Government, 13 A.S.R.2d 52.

Where government failed to issue a 90-day statutory notice of deficiency before seizing plaintiff's property for unpaid taxes, it was enjoined from depriving plaintiff of his right to due process, either by continuing to deprive him of his rights under the Internal Revenue Code to challenge and contest income tax deficiencies or by withholding the property it had seized from plaintiff, until it complied with the applicable Code provisions pertaining to distraint and levy. Klauk v. American Samoa Government, 13 A.S.R.2d 52.

Power of levy and distraint over a taxpayer's property may be invoked without intervention of judicial process, on the theory that the taxpayer has already had the opportunity to invoke administrative and judicial remedies. 26 U.S.C. § 6331(a). Klauk v. American Samoa Government, 13 A.S.R.2d 52.

§ 7 Marital Deduction

The "marital deduction" is a deduction from a decedent's gross estate allowed in computing the estate's liability for federal estate tax. 26 U.S.C. § 2056. Beaver v. Craven, 19 A.S.R.2d 14.

The "marital deduction" was intended to equalize the treatment of estates of married decedents in community property and common law states. 26 U.S.C. § 2056. Beaver v. Craven, 19 A.S.R.2d 14.

Intended to permit marital property to be taxed in two stages and not to allow a tax-exempt transfer to succeeding generations, the "marital deduction" is generally restricted to the transfer of property interests that will (unless disposed of or consumed) ultimately be included in the surviving spouse's estate. 26 U.S.C. § 2056. Beaver v. Craven, 19 A.S.R.2d 14.

No "marital deduction" is allowed for most terminable interests which perish at the survivor's death and would not be included in her taxable estate or for property which passes to the survivor without having first been included in decedent's gross estate. 26 U.S.C. § 2056. Beaver v. Craven, 19 A.S.R.2d 14.

The "marital deduction" allows a couple to arrange their affairs so that their combined wealth is divided between their estates in a manner that achieves the lowest net total tax. 26 U.S.C. § 2056. Beaver v. Craven, 19 A.S.R.2d 14.

The essence of a "life estate power of appointment" trust, qualifying for the "marital deduction," is the combination of income for life and a general power to appoint, both vested in the surviving spouse. Beaver v. Craven, 19 A.S.R.2d 14.

Distributions from decedent's estate to a "power of appointment" trust qualify for the "marital deduction" if they are first included in the gross estate, but the survivor's power to appoint must be quite broad to qualify for the marital deduction. 26 U.S.C. § 2056(a). Beaver v. Craven, 19 A.S.R.2d 14.

§ 8 Sovereign Immunity

SEE AMERICAN SAMOA GOVERNMENT § 6 – SOVEREIGN RIGHTS

SEE TORTS § 10 – GOVERNMENT TORT LIABILITY ACT

Sovereign immunity does not bar a taxpayer's suit to recover property seized by the government for unpaid taxes where the government failed to comply with the procedures of the Internal Revenue Code, because Congress deliberately waived sovereign immunity by providing for deficiency hearings and refund suits. Klauk v. American Samoa Government, 13 A.S.R.2d 52.

§ 9 Taxpayer Offenses

§9(1) Failure to File

Willful failure to file return requires prosecution to prove only deliberate intention not to file returns which defendant knew ought to have been filed. Government v. King, 4 A.S.R. 785

Failure to file income tax return, although knowledgeable is not willful is not deliberate, intentional and is based upon reliance on Government agent who failed to prepare return. Government v. King, 4 A.S.R. 785.

§9(2) Failure to Pay

Willful failure to pay tax requires Government to meet stronger burden than willful failure to file a return. Government v. King, 4 A.S.R. 785.

Willful failure to pay income tax requires prosecution to prove that defendant had a bad purpose or evil motive in not paying. Government v. King, 4 A.S.R. 785.

Failure to pay income tax timely with intent to deprive Government of payment as time required is prompted by bad purpose and thus willful. Government v. King, 4 A.S.R. 785.

It is not defense to a charge of failure to pay income tax that defendant has made voluntary partial payment. Government v. King, 4 A.S.R. 785.

It is not defense to a charge of failure to pay income tax that defendant objects to Government or detests its activities. Government v. King, 4 A.S.R. 785.

§9(3) Taxpayer Omissions

In determination whether taxpayer omitted 25 percent or more of gross income from return, in order to trigger special six-year statute of limitation, an item is not "omitted" if taxpayer did not include the item in gross income but referred to it elsewhere in the return or in an attachment in a matter sufficient to apprise the government of its nature and amount. 26 U.S.C. § 6501(e)(1)(A). Ah San v. Lutali, 4 A.S.R.2d 177.

Where government's own documents indicate that taxpayer included allegedly omitted items on return, but simply did not include them in calculation of gross income, items were not "omitted" so as to justify special six-year limitation of actions to remedy taxpayer omissions of over 25 percent of gross income. 26 U.S.C. § 6501(e)(1)(A). Ah San v. Lutali, 4 A.S.R.2d 177.

§ 10 Deficiency Proceedings

Deficiency proceedings, which allow a taxpayer to litigate the government's determination of a deficiency before paying such deficiency, are an essential part of the statutory scheme. 26 U.S.C. § 6213(a). Klauk v. American Samoa Government, 13 A.S.R.2d 52.

§ 11 Industrial Incentive Act

§11(1) Tax Exemption Policy Generally

Samoa Industrial Incentive Act empowers Governor to grant tax exemptions for new businesses which are in public interest on recommendation of Tax Exemption Board. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

A primary objective of Industrial Incentive Act is to establish firm foundation for self-government and to attain maximum possible self-support, and this is construction to be given term “public interest.” Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

§11(2) Authority of Governor, Board

SEE AMERICAN SAMOA GOVERNMENT § 4 – THE EXECUTIVE

Under provisions of Industrial Incentive Act, if tax exemption board and Governor find applicant is new business, fill tax exemption must be granted unless Governor makes affirmative finding that new business is not in public interest. A.S.C. 1961, Ch. 26.01. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Questions of Governor’s approving or disapproving application for tax exemption under Industrial Incentive Act, on grounds of public interest, is discretionary, and courts have no power to interfere with Governor’s authority on questions involving his discretion and judgment. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Determination as to whether business is in public interest is function of Governor. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Governor’s decision to permit tax exemption for initial capital investment which would benefit local economy, but not to permit exemption for imported materials which would not, was reasonable. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Industrial Incentive Act required Governor to grant or deny tax exemption and did not authorize discretion to grant partial tax exemption. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 938.

Governor’s granting tax exemption on initial capital investment in plant and equipment only was disapproval of application of industry for full tax exemption. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Tax Exemption Board is not required by statute to make recommendation to Governor nor to grant tax exemption, but such recommendation is not illegal. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Trial Division erred in holding that appellant Bottling Corporation was not entitled to full tax exemption, under provisions of Industrial Incentive Act. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 938.

§11(3) Proof of Public Interest

When challenging disapproval by Governor, burden of proof is on industry to show it is in public interest and therefore entitled to tax exemption under Industrial Incentive Act. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Five local employees and a few shareholders do not necessarily mean business is in public interest. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

Governor’s decision to consider industry which takes money out of economy for non-necessity not in public interest was reasonable. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

§11(4) Constitutionality

If Industrial Incentive Act gives Governor authority to grant partial tax exemptions without prescribing guidelines or standards, then it is unconstitutional. Bottling Corporation of Samoa v. Lee, 4 A.S.R. 499.

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