BRUCE DAMEWORTH and FE`OFA`AKI DAMEWORTH,v.AMERICAN SAMOA GOVERNMENT

BRUCE DAMEWORTH and FE`OFA`AKI DAMEWORTH,
Plaintiffs,
v.
AMERICAN SAMOA GOVERNMENT, Defendant.
High Court of American Samoa
Trial Division
CA No. 24-02
October 3, 2002

 

[1] If the party moving for summary judgment makes a prima facie case
that would entitle the movant to a directed verdict if uncontroverted at
trial, the burden shifts to the adverse party, who must set forth specific
facts showing that there is a genuine issue for trial.
[2] American Samoa has adopted certain income tax laws and rules of
the United States through A.S.C.A. § 11.0403(a).
[3] The Samoan Income Tax Act consists of chapters 4 and 5 of the
American Samoa Code and the provisions of the United States Internal
252
Revenue Code adopted by § 11.0403(a).
[4] By rejecting the Governor’s several proposals to remove the child tax
credit from the Samoan Income Tax Act, the Legislature has evidenced
clear intent to recognize the child tax credit as the law of American
Samoa.
[5] Neither the Governor nor any other member of the Executive Branch
may undo what the Legislature of American Samoa has put in place as
law without having a statutory basis for such action.
[6] The Legislature has enacted the child tax credit as the law of
American Samoa and only the Legislature may remove the credit from
the Samoan Income Tax Act.
[7] Tax credit refunds need not be expressly funded by appropriations
since the government does not have, and cannot obtain, any ownership
interest in monies representing tax refunds.
[8] The government holds tax credit refund monies with a fiduciary duty
to account for and refund those monies to the taxpayers as the rightful
owner, with interest if not timely paid.
[9] Because legislative appropriations to pay tax refunds are
unnecessary, the entire appropriation process is irrelevant to an action
seeking payment of tax refunds.
[10] For a taxpayer claiming the child tax credit and having one or two
children, the credit is nonrefundable, meaning the taxpayer can only
offset income tax liability in excess of the mandated alternative
minimum tax for all American Samoa taxpayers, but not recover any
refund for the amount of the credit over the amount of tax liability.
[11] For a taxpayer claiming the child tax credit and having three or
more children, a portion of the credit is treated as refundable.
[12] Taxpayers that prevailed in action against government for recovery
of tax refund entitled to court costs and reasonable attorney fees.
Before RICHMOND Associate Justice, SAGAPOLUTELE, Associate
Judge, and MAMEA, Associate Judge.
Counsel: For Plaintiffs, Daniel R. King
For Defendant, Benton H. Walton IV, Asst. Attorney General
253
ORDER GRANTING PLAINTIFFS AND DENYING
DEFENDANT SUMMARY JUDGMENT

Plaintiffs Bruce Dameworth and Fe`ofa`aki Dameworth (“the
Dameworths”) filed a complaint for an additional refund of income taxes
for the year 2000 in the amount of $2,429.00. Defendant American
Samoa Government (“ASG”) answered, denying any additional refund
liability. First, the Dameworths, and then, ASG moved for summary
judgment. The Court heard these motions of July 12, 2002. Counsel for
both parties were present.
Discussion
A. Summary Judgment Standard of Review
[1] Summary judgment is appropriate when there is “no genuine issue as
to any material fact” and “the moving party is entitled to judgment as a
matter of law. T.C.R.C.P. 56(c). If the moving party makes a prima
facie case that would entitle the movant to a directed verdict if
uncontroverted at trial, the burden shifts to the adverse party, who must
set forth specific facts showing that there is a genuine issue for trial.”
T.C.R.C.P. 56(e). The court must view the pleadings and supporting
papers in the light most favorable to the non-moving party. Amerika
Samoa Bank v. United Parcel Serv., 25 A.S.R.2d 159, 161 (Trial Div.
1994); Ah Mai v. Am. Samoa Gov’t (Mem.), 11 AS.R.2d 133, 136 (Trial
Div. 1989).
B. Undisputed Facts
The Dameworths timely filed a joint American Samoa income tax return,
Form 390, for the tax year 2000. They reported a tax liability of
$7,384.00 and credits of $10,307.00, which resulted in an overpayment
of $2,923.00. The stated tax credits consisted of $8,307.00 of income
tax withheld from wages and $2,000.00 as the child tax credit ($500.00
for each of four qualifying children). The Dameworths also timely filed
an amended tax return, Form 390X, for the tax year 2000 to report
reduced wages and an additional overpayment of $379.00, which
decreased their actual tax liability to $7,005.00. The two added
overpayments are $3,302.00. ASG paid the Dameworths a refund of
$873.00 for tax year 2000 after deducting a $50.00 penalty for not
supplying a tax identification number for a dependent listed on their
1999 income tax return. The Dameworths accepted the penalty
assessment. Thus, the stated net overpayment amount still outstanding is
$3,302.00 less $923.00, or $2,379.00.
ASG does not contest the Dameworths’ calculations. However, it

disputes the applicability of the child tax credit in American Samoa. On
March 21, 2000, the Governor of American Samoa ordered the Treasurer
of American Samoa to cease recognition and payment of any child tax
credit claims. Then, on August 5, 2001, the Governor confirmed the
earlier directive and ordered the Treasurer to pay the additional child tax
credit only to the extent federal funds are received to pay the credit. In
both directives, he cited the lack of locally appropriated funds as the
reason for the directive. The Legislature of American Samoa has not
appropriated funds for the payment of refunds for the basic child tax
credit.
C. Legal Basis of the Child Tax Credit
[2] American Samoa has adopted the income tax laws and rules of the
United States through A.S.C.A. § 11.0403(a), which reads:
(a) The income tax and the income tax rules in force in the United
States of America and those which may hereafter be enacted or
adopted, where not clearly inapplicable or incompatible with the
intent of this section, are adopted by American Samoa, and shall be
deemed to impose a separate territorial income tax, payable to the
government. These laws include, but are not limited to, the
following provisions of the United States internal Revenue Code of
1986; subtitle A; chapters 24 and 25 of subtitle C, with reference to
the collection of income tax at sources on wages; and all
provisions of subtitle P which apply to the income tax, including
provisions as to crimes, other offenses and forfeitures contained in
chapter 75.1
[3] The provisions of A.S.C.A. chs. 11.04 and 11.05 and of the United
States Internal Revenue Code (“IRC”) adopted by § 11.0403(a)
constitute the Samoan Income Tax Act (“SITA”). A.S.C.A. §
11.0403(b).
1 The original reference in A.S.C.A. § 11.0403(a) was to the United
States Internal Revenue Code of 1954. In 1988, the reference was
changed to the Internal Revenue Code of 1985. P.L. No. 20-51. In
2001, the Legislature froze the automatic adoption of congressional
changes in the Internal Revenue Code to those in effect on December 31,
2000. P.L. No. 27-15. In other words, any subsequent congressional
changes do not become law in American Samoa unless the Legislature
sees fit to first enact them as positive territorial law. The basic child tax
credit was the law of American Samoa prior to P.L. No. 27-15, and the
freeze of this legislation did not impact the application of the credit in
the territory.
255
At issue is the child tax credit in the IRC, 26 U.S.C.A. § 24 (“SITA §
24”). The statute in part reads:
§ 24. Child tax credit
(a) Allowance of credit--There shall be allowed as a
credit against the tax imposed by this chapter for the
taxable year with respect to each qualifying child of the
taxpayer an amount equal to $500 . . . .
Subtitle A of the IRC includes 26 U.S.C.A. § 24, and the child tax credit
is therefore at face value a provision of the American Samoa income tax
laws as SITA § 24.
ASG argues that the exception in A.S.C.A. § 11.0403(a) “where not
clearly inapplicable or incompatible with the intent of this section”
comes into play in this regard. The exception provides an ultimate safety
valve, as ASG argues, to ensure that provisions contrary to the territory’s
public interest are not enacted into law. ASG then attempts to illustrate a
basis for finding an implicit legislative intent to disallow the credit
We disagree with ASG. The Legislature has not, as is discussed further
below, enabled the Governor to enact laws, specifically for purposes of
this action to repeal income tax laws, without legislative approval.
Though not needed at all, as is also discussed further below, the lack of
legislated appropriations for child tax credit refunds does not equate with
any legislative intent to disallow the credit.
[4] The Governor’s several proposals to remove the child tax credit from
the SITA and the Legislature’s several rejections of the proposals, which
we judicially notice as a matter of common knowledge, demonstrate just
the opposite. Contrary to ASG’s reasoning, the Legislature has
evidenced clear intent to recognize the child tax credit as the law of
American Samoa. Moreover, ASG fails to articulate, let alone prove,
any specific public interest rendering the basic child tax credit clearly
inapplicable or incompatible with the intent of AS.C.A. § 11.0403.
We hold that the child tax credit is not clearly inapplicable or
incompatible with the intent of A.S.C.A, § 11.0403(a), and therefore, the
credit is the law of American Samoa.
D. Governor’s Non-Payment Directive
ASG contends that even if the basic child tax credit is the law in
American Samoa, the Governor’s directive prohibiting any payment of
the child tax credit was still a lawful exercise of the Governor’s authority
as ASG’s chief executive.
256
ASG characterizes the Governor’s action as comparable with the
Treasurer’s regulatory authority under the SITA. It rationalizes that the
Governor, as the Treasurer’s superior, may fill the Treasurer’s role,
denoted in AS.C.A. § 11.0401,2 in administering American Samoa’s
income tax laws. As examples, ASG cites SITA § 481, 42, and 1502,
which make reference to the Treasurer’s authority to prescribe
regulations that further the implementation of the tax laws. It also notes
the Governor’s constitutional authority to issue executive regulations not
in conflict with laws of the United States applicable to American Samoa,
laws of American Samoa, or with [the] Constitution.” AM. SAMOA REV.
CONST., art. IV, § 6.3 All of the cited statutory and constitutional
regulatory authority relate to the power to provide administrative
guidance to carry out, not effectively annul as does the Governor’s
directive of non-payment of the child tax credit, the income tax or for
that matter any other laws.4
[5-6] The underlying principle in point is the time-honored doctrine of
the separation of executive and legislative powers for sound
government—a legislature makes the laws, and the executive branch
undertakes the public role in the execution of those laws. See The Senate
v. Lutali, 27 A.S.R.2d 126, 135 (Trial Div. 1995) (hereinafter Lutali I).
Neither the Governor nor any other member of ASG’s Executive Branch
may undo what the Legislature of American Samoa has put in place as
law without having a statutory basis for such action. The Legislature has
enacted the child tax credit as the law of American Samoa and only the
Legislature may remove the credit from the SITA.
2 ASG equates the phrase “except where it is clearly otherwise required”
in A.S..C.A. § 11.0401 as somehow granting the Executive Branch
legislative authority to limit the application of the IRC provisions on
American Samoa taxpayers. The statute only pertains to sensible
substitution of terms for purposes of the SITA. It has nothing to do with
any regulatory power, whether legislative or administrative in nature.
3 ASG’s comment on this constitutional power is a gross non sequitur.
The lack of appropriated funds to pay the basic child tax credit refunds
simply does not remove the bald-faced conflict of the Governor’s
directive with the existence of the credit as statutory law.
4 We point out, as further examples, that the Legislature has given the
Governor statutory authority to legislate, in effect, by imposing import
excise taxes, A.S.C.A § 11.1003, or by suspending the operation of laws
and administrative regulations to cope with an existing or imminent
natural disaster, A.S.C.A. § 26.0105, as short-term emergency measures
(emphasis added). We stress that this gubernatorial authority is
statutorily based.

Therefore, we hold that as a matter of law the Governor’s directive to not
pay the child tax credit abrogated neither the credit in American Samoa
law, nor its benefit to the taxpayers of the territory.
E. Non-Appropriation of Funds
ASG next asserts that even if basic child tax credit is the law in
American Samoa, and the Governor did not have authority to direct nonpayment
of credit refunds, the lack of appropriated funding to pay credit
refunds, the reason for the Governor’s action cited in the two directives,
legally justified non-payment of the refund to the Dameworths.
This argument first focuses on the anti-deficiency statute, A.S.CA. §
10.0601. This statute prohibits any ASG officer or employee from
making or authorizing expenditures or obligations in excess of the
amount of appropriated funds available for the purpose of the
expenditure, or from expending before appropriations are made for the
purpose of the expenditure unless authorized by law. See id. The
argument proceeds with recognition of the constitutional prohibition on
legislative appropriations in excess of available revenues. AM. SAMOA
REV. CONST. art. II, § 1(c). It concludes with the assertion that tax
refunds are outlays of funds for which legislative appropriations are
essential and have not been made.
ASG’s argument is abstractly valid. See Lutali I, 27 A.SR.2d at 133-35.
Normally, the Executive Branch develops an annual budget, assessing
projected revenues and anticipated expenditures, and the Legislature
approves the final budget, enacting the necessary appropriations. Id. at
135-137. The Legislature did not appropriate funds for payment of basic
child tax credit refunds during the fiscal year in which the Dameworths’
claimed refund would become payable (fiscal year 2001 from October 1,
2000, to September 30, 2001). It actually appears that no consideration
was even made of past experience with the funding requirements for
child tax credit refunds when the Executive Branch prepared the annual
budget, or when the Legislature acted upon the Executive Branch’s
annual budget submission. If anything, the Executive Branch can be
faulted for the miscalculated shortfall of funds earmarked, within or
without the annual budget, for payment of the credit.
[7-8] However, tax credit refunds need not be expressly funded by
appropriations. “ASG does not have, and cannot obtain, any ownership
interest in monies representing tax refunds.” See The Senate v. Lutali,
27 A.S.R.2d 157, 159 (Trial Div. 1995) (hereinafter Lutali II). “ASG
holds these monies with a fiduciary duty to account for and refund those
monies to the taxpayers as the rightful owner, with interest if not timely
paid.” Id. If the Legislature has neither authority to appropriate these
258
private funds [owed as refunds] nor any legal role in the payment of the
refunds.” Id
In short, we hold that as a matter of law, the absence of appropriated
funds for the payment of the basic child tax credit refunds does not, and
cannot, excuse ASG from its fiduciary obligation to pay the credit
refunds.
F. Impracticality and Futility of Ordering Compliance
Finally, ASG argues that ordering compliance with the child tax credit
provision would be an impractical and futile act.5
ASG again refers to the appropriations process to underpin the claimed
impractical and futile nature of the relief requested by the Dameworths.
First, ASG points out that unless obligated by the end of the applicable
fiscal year, in this case September 30, 2001, any funds appropriated by
the Legislature to pay refunds for the child tax credit would have lapsed
at the end of that year and would no longer be available to ASG to
expend in payment of the credit. See Lutali I, 27 A.S.R.2d at 13l-33.
ASG then returns to the actual lack of appropriated funds for basic child
tax credit refund purposes for the tax year 2000 during fiscal year 2001
(October 1, 2000, to September 30, 2001). Hence, for both reasons,
ASG argues that a court order requiring ASG to pay the child tax credit
to the Dameworths would be an impractical and futile act.
5 The “impractical and futile” terminology comes from ASG’s cited case,
Golden v. Virgin Islands Gov’t, CA No. 2001-0162 (V.I. Dist. Ct. Nov.
30, 2001) (order granting plaintiffs declaratory relief and granting
defendants summary judgment). Golden is an unpublished case, and
ASG has been unable to provide the complete document containing the
order or other information about the case. It appears that the Golden
court declared that U.S. taxpayers in the United States Virgin Islands
were entitled to refunds from the Virgin Islands Government related to
an advance credit on 2001 taxes under the Federal Economic Growth and
Tax Relief Act of 2001, Pub. L. 107-16, but then awarded the
government summary judgment, holding that it would be “impractical
and futile” to grant the “equitable relief” sought by the plaintiffs when
the government could not issue refund checks before a mandated
deadline. The Golden decision is not very helpful in our case without
having detailed information on the facts and issues, before the Virgin
Islands court. Moreover, the District Court order has been vacated and
the case remanded to that court for further proceedings on the plaintiffs’
standing. Golden v. Virgin Islands Gov’t, No. 02-1068, slip op. (3d Cir.
July 19, 2002).
259
[9] ASG ignores once again the fact that tax refund monies ware never
its property, and it holds the funds merely in a fiduciary capacity for the
taxpayers. Lutali II, 27 A.S.R.2d at 159. As a fiduciary, ASG owed a
duty to make sure this money was returned to those to whom it was
owed. Id. Appropriations to pay tax refunds are unnecessary. Id. Thus,
the appropriation process is irrelevant to the issue in this action.
It is not an equitable solution to find that as a result of ASG’s own
breach of its fiduciary duty, ASG is now excused from making
restitution as a matter of impracticality and futility. Such a holding
would open up a slippery slope where ASG could conceivably refuse to
pay any income tax refunds, and if it battled long enough in or out of
court until payment was impracticable, it would be entitled to keep all
the unpaid funds. The court has no role to instruct ASG on how to meet
its responsibilities, rather it is to advise ASG as to what the law requires.
In this instance, the law requires ASG to honor the child tax credit.
Generally speaking, tax credits fall into two categories: nonrefundable
and refundable credits. See SITA § 21-26, 31-35. Nonrefundable tax
credits “can only be used to offset tax that would otherwise be owed.”
Sorenson v Sec’y of Treasury, 475 U.S. 851, 854 (1986); see also In re
Dever, 250 B.R. 701, 706 (2000). On the other hand, “if an individual’s
[refundable tax credits] exceeds his tax liability, the excess amount is
considered an overpayment of tax under [SITA] § 6401(b).” Sorenson,
475 U.S. at 854. “Subject to specified setoffs, [SITA] § 6402(a) directs
the [Treasurer of America Samoa] to credit or refund ‘any overpayment’
to the person who made it.” Id.
[10] The child tax credit, SITA § 24, is codified within subtitle A of the
IRC, and hence within that part of the SITA, that lists nonrefundable tax
credits. A taxpayer having one or two children and claiming the credit is
only able to offset income tax liability, in excess of the mandated
alternative minimum tax for all American Samoa taxpayers (2 of
adjusted gross income in tax year 2000), A.S.C.A. § 11.0503, but not
recover any refund for the amount of the credit over the amount of tax
liability. See In re Steinmetz, 261 B.R. 32, 33-34 (2001).
[11] However, SITA § 24(d) provides, with certain limitations, that “if a
taxpayer’s family has three or more children, a portion of the child tax
credit is treated as refundable credit.” In re Steinmetz, 261 B.R. at 34.
The Dameworths have four qualifying children, making them eligible for
a refund under this additional child tax credit provision. Aside from
ASG’s fruitless claim that it need not comply with the child tax credit
provision at all, it does not dispute the Dameworths’ eligibility for the
additional credit of $2,000.00 ($500.00 for each child) as the amount of
the Dameworths’ credit entitlement.
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[12] The Dameworths are therefore entitled to recover by way of
summary judgment $2,379.00 from ASG. They are also entitled to, in
accordance with SITA §§ 6611 and 6621, interest on the outstanding
principal amount and to, in accordance with SITA § 7430, reasonable
court costs, which we find to be the ordinary local costs of suit, and
reasonable attorney’s Fees not to exceed $125.00 per hour. ASG is not
entitled to a summary judgment against the Dameworths.
Order
1. The Court grants summary judgment to the Dameworths against ASG,
and denies summary judgment to ASG against the Dameworths. ASG
shall pay the judgment to the Dameworths in the amount of $2,379.00,
plus interest on the unpaid balance in accordance with SITA § 6611,
6621, and ordinary local costs of suit and reasonable attorney’s fees, not
to exceed $125.00 per hour, in accordance with SITA § 7430.
2. It the Dameworths seek the court’s adjudication of the amounts of the
interest, ordinary court costs, or reasonable attorney’s fees owed to them
by ASG, they may file with the Court and serve on ASG one or more
affidavits of their counsel or other suitable person(s) setting forth the
amounts claimed.
If ASG contests the amounts, the Court will conduct an evidentiary or
other appropriate hearing and determine the issues.
It is so ordered.