Chapter 16 - Tax Incentives for Businesses

Chapter 16 - Tax Incentives for Businesses

11.1601 Purpose-Grant and extent of tax exemptions.

(a) In order to establish a firm foundation for self-government and to assist the people of American Samoa in improving their living standards and prospects for employment, it is the policy of the government to promote economic development and capital investment in American Samoa by tax incentives.

(b) A temporary exemption from the payment of some or all taxes, duties, business license fees, and similar charges imposed or levied by the government may be granted for the establishment or expansion of a qualifying industrial or business enterprise as provided in this chapter.

(c) No exemption may be granted with respect to income derived from or activities carried on outside of American Samoa. No exemption from a tax, fee, duty, or levy not enumerated shall be implied. A tax exemption certificate issued to a processor of fish may exempt from some or all taxes on the owners or operators of fishing vessels, motherships, reefer transports, and supply vessels which supply the processor with fish, subject to such conditions and limitations as the Governor deems appropriate.

(d) In no event shall the original period of tax exemption exceed 10 years, and no extensions of the original period may be granted. The tax exemption may be made to terminate earlier if the cumulative amount of taxes forgiven equals 200% of noncurrent investment.

11.1602 Promotion of incentive program.

The Department of Administrative Services shall promote the industrial incentive program provided for in this chapter and shall provide such informational or other related services as may be useful for that purpose.

11.1603 Tax Exemption Board-Composition.

There is established a Tax Exemption Board of 5 members, hereinafter called the "Board". The Board shall include the Treasurer of American Samoa, and 4 residents of American Samoa who shall be appointed by the Governor and serve at his pleasure.

11.1604 Application for tax exemption certificate.

All applications for tax exemption certificates or amendments to certificates shall be filed with the Board.

11.1605 Powers and duties of Board regarding tax exemptions.

The Board, acting by vote of any 3 members, shall have the following powers and duties:

(a) The Board shall give public notice of, and conduct public hearings on, all applications for a certificate of tax exemption, and shall recommend to the Governor whether he should grant or deny an application.

(b) The Board shall recommend to the Governor that he grant a certificate of tax exemption if it is satisfied that:

(1) the industrial or business activity engaged in or expanded by the applicant will promote the public interest by furthering the economic development of American Samoa; and

(2) the establishment or expansion of the activity in American Samoa requires incentive in the form of a temporary tax exemption; and

(3) the applicant qualifies under the provisions of 11.1607.

(c) The Board shall submit to the Governor its recommendations with respect to appli-cations for amended certificates.

(d) The Board shall recommend to the Governor that he revoke a certificate of tax exemption if it finds, after due notice and hearing, that the grantee of a tax exemption certificate:

(1) has failed to maintain substantial compliance with the conditions of the tax exemp-tion certificate or any regulation issued under this chapter;

(2) has engaged in a business not named in the certificate without applying for a required amended certificate;

(3) has failed to carry on the business named in the certificate;

(4) has transferred a portion of his business without obtaining a required amended certificate;

(5) In the case of a corporation, has been dissolved, or has filed or is the subject of a petition in, bankruptcy which has been approved.

(e) The Board shall investigate all applications for tax exemptions and determine compliance with the provisions of this chapter or regulations issued pursuant to this chapter.

(f) In connection with any hearings or investigations required by the provisions of this chapter or of any rules and regulations issued pursuant to this chapter, the Board may subpoena witnesses, records, and books and inspect properties and facilities with respect to which a certificate of a tax exemption has been granted or is requested.

(g) The Board may request and obtain from the Department of Administrative Services such auditing and other services as it may consider necessary in connection with the performance or exercise of its powers and duties.

11.1606 Governor’s powers regarding tax exemptions.

(a) The Governor of American Samoa shall have the following powers:

(1) After considering recommendations of the Board submitted within a reasonable time, he may deny, grant or amend a certificate of tax exemption, with such terms and conditions as he considers appropriate.

(2) He may revoke any tax exemption certificate for the reasons stated in subsection(d) of 11.1605.

(3) He may renew a tax exemption certificate, in whole or in part, if he believes that the industrial or business enterprise is contributing to the economic development of American Samoa and cannot be operated without such exemption.

(4) He may adopt such rules, regulations and reporting requirements as he deems necessary for the purposes of this chapter.

(b) All recommendations of the board relating to the qualification of applicants or the issuance, denial, revocation, modification, amendment, suspension or transfer of certificates of tax exemption shall be subject to the approval of the Governor; and no certificate, or any revocation, modification, suspension, amendment, or transfer thereof shall be deemed valid without the written approval of the Governor.

11.1607 General requirements for exemption.

In order to qualify for a certificate of tax exemption, an industrial or business enterprise must:

(1) be an enterprise owned by a person who is, or a partnership one of whose members is, a resident of American Samoa; or be a corporation created under the laws of American Samoa or a foreign corporation authorized by the laws of American Samoa to do business in American Samoa;

(2) undertake to employ, at the prevailing wage rate, or at not less than the minimum wage rate provided by law, residents of American Samoa to the extent of at least 75% of the total working force, with the concurrence of the Governor. A temporary waiver may be granted for a period not to exceed 6 months at any one time when residents with the necessary ability to perform the services required at the prevailing wage rates are not available within American Samoa and the industry or business will be greatly handicapped as a result of hiring 75% American Samoans. The Board, with the concurrence of the Governor, may revoke or modify the temporary waiver before its expiration if it determines that residents possessing the necessary ability have become available in American Samoa and that such information has been furnished to the person, partnership or corporation. A resident means any person who has resided continuously in American Samoa for not less than 5 years immediately prior to the date of application for employment, or who was born in American Samoa and who has resided therein not less than 1 year immediately prior to the application.

11.1608 Contents of certificate—Contract.

(a) A certificate of tax exemption shall be issued in the name of the government by the Governor. It shall specify:

(1) the name of the grantee;

(2) the business or industrial activity which qualifies for tax exemption;

(3) the taxes, fees, duties, or levies from which the grantee is exempted;

(4) the dates on which the tax exemption begins and ends;

(5) the date by which any required financial investment shall have been completed by the grantee;

(6) a statement that the grant of tax exemption is conditioned upon the substantial performance and observance of all requirements contained in the certificate, in this chapter, and in any regulations issued under this chapter, and that in the event of nonperformance all taxes shall be due and payable;

(7) a statement that the certificate of tax exemption either does or does not include an exemption from any new type of tax, fee, duty, or levy that may be imposed by the government in the future;

(8) such other conditions as the Governor shall deem applicable or appropriate, as are not inconsistent with the provisions of this chapter.

(b) Each certificate of tax exemption granted under the provisions of this chapter shall be regarded as a contract between the government and the grantee, and the government declares that it will not adopt any legislation or take any action that would impair or limit the obligation of such contract.

11.1609 Amendment of certificate.

(a) If, after a tax exemption certificate has been issued, the grantee engages in any business in American Samoa not enumerated in the certificate, and one new business accounts for more than 5% of the gross sales receipts of the grantee in any year, the grantee shall promptly apply for appropriate amendment of the certificate.

(b) An amended certificate shall be issued, which may exclude from or extend to the new business some or all of the tax exemption initially granted. The amended certificate shall be effective as of the beginning of the year in which the new business accounted for more than 5% of the gross sales receipts.

(c) A failure to apply for an amended certificate in accordance with the provisions of this section may be deemed substantial non-performance of a condition of the tax exemption certificate.

11.1610 Limitation of exemption—Prior exemption

(a) If at the time of application the grantee is engaged in more than one business or industrial activity, the certificate of tax exemption may limit the tax exemption to the portion of the business which qualifies for tax exemption under the provisions of this chapter. The full amount of taxes, fees, duties, and levies now or hereafter imposed by the government shall remain payable with respect to business activities not enumerated in the certificate.

(b) Nothing in this chapter permits the granting of a tax exemption certificate to any person, partnership, or corporation with respect to any industrial or business activity that was granted a tax exemption prior to 1963.

(c) For the purpose of this chapter, no physical plant, facilities, inventory or any other item of investment, upon the basis of which tax exemption was granted prior to this amendment of the Industrial Incentive Act, shall be taken into consideration for the purpose of determining the minimum investments required for qualification under this chapter.

(d) Subsections(b) and(c) shall not apply where written commitments have been made with respect to the grant of a tax exemption but the tax exemption certificate has not been issued.

11.1611 Transfer of certificate.

(a) A certificate of tax exemption granted under the provisions of this chapter may be transferred, for the unexpired portion of any tax-exempt periods provided in the certificate, to another person, partnership or corporation which qualifies under 11.1607, and which succeeds the grantee in carrying on, or in operating, substantially all of the business which originally qualified for tax exemption. Thereafter, the transferor of the certificate shall lose all tax exemption under this chapter and shall be subject to the operation of the tax laws of American Samoa.
(b) If the grantee of a certificate of tax exemption transfers to a corporation in which it owns at least 51% of the outstanding common stock and which qualifies under 11.1607, less than substantially all of the business which originally qualified for tax exemption, an amended certificate shall be issued indicating the specific tax exemptions which are transferred from one party to the other, or both will apply to both parties for the unexpired term. If such transfer is made to a person, partnership or corporation in which the transferor does not own 51% of the outstanding common stock, an amended certificate may be issued to the transferor in the discretion of the Governor, on such terms and conditions as he deems warranted, after considering the alteration or reduced volume of the transferor’s business and investment. The transferee may receive a new certificate only if he applies and qualifies under the other provisions of this chapter.

11.1612 Construction to avoid double exemption.

The provisions of this chapter shall be strictly construed to discourage and frustrate the use of any subterfuge, device or scheme, whether by means of sale, transfer, assignment of assets or interests, or otherwise, designed to secure a tax exemption for any person, partnership, or corporation previously granted or enjoying such exemption upon the basis of the same or substantially the same investment.

11.1801 Legislative findings and purposes.

The Legislature Finds and declares that:

(1) The United States Congress has established, in Title VIII of the Tax Reform Act of 1984, various tax incentives to encourage foreign export trade by United States companies and has provided that tax-favored Foreign Sales Corporations may be established in possessions of the United States, including American Samoa, and that no tax shall be imposed by these possessions on foreign trade income derived before 1 January 1987;

(2) It is in the best interests of American Samoa to support export activity by United States companies and to attract United States companies which are engaged in export trade to establish Foreign Sales Corporations in American Samoa, and that special tax incentives are necessary for this purpose;

(3) There is a need to attract to American Samoa economic activity of the type which is incident to the establishment of Foreign Sales Corporations, including banking, legal, financial, and real estate services; and

(4) In order to improve the prosperity and welfare of the Territory and its inhabitants, it is desirable to broaden the tax base of the Territory by providing for a corporation franchise tax and encouraging the organization of new corporations within the Territory which are subject to such corporation franchise tax.