If a federal judge agrees, Guam taxpayers will no longer have to wait years for their tax refunds.
A proposed order filed Friday by the plaintiffs in a class-action lawsuit proposes a federal court order that binds the government of Guam to paying tax refunds within six months of the filing of tax returns. If this becomes part of a federal order, taxpayers who file tax returns starting in January might receive their refunds as soon as in June of next year.
“The government of Guam shall, beginning one month from the entry of this order, process and pay all (Guam territorial income tax) refunds no later than six months after the filing of the claim for refund, irrespective of whether the claims for refunds were submitted before or after the issuance of this order,” according to the proposed order filed by the plaintiffs’ counsel.
The Guam firm Lujan, Aguigui and Perez filed the case and is joined in the class-action suit by California law firm Girard Gibbs LLP for this particular case only.
Years of waiting
The class-action lawsuit seeks to end the local government’s practice of making taxpayers wait up to years for their tax refunds.
The proposed order was submitted in the District Court of Guam yesterday to meet a deadline set by District Judge Consuelo Marshall.
In August, Marshall ruled in favor of the taxpayers in the class-action suit. The judge wants to see plans for a deadline by which all refunds must be paid — possibly as short as six months.
The judge gave the plaintiffs and GovGuam up to Friday to file a proposed plan for paying tax refunds in a timely manner. Taxpayers Sharon M. Zapanta, Rea Mializa O. Paeste and Jeffrey F. Paeste are named part of the class for whom the lawsuit was filed in April 2011.
The local government filed a motion to request an extension of the court’s Sept. 21 deadline.
“The main impediment to developing a plan has been the insufficient cash available to meet all current-year expenditures, unpaid prior-year obligations and unpaid tax refunds, according to a declaration by Department of Administration Director Benita Manglona. Manglona’s declaration was filed on Sept. 20.
Millions paid out
In addition to $105 million that will be owed for the 2012 tax year, GovGuam argues in its motion that it still owes between $30 million and $40 million in tax refunds for tax year 2011.
Sen. Ben Pangelinan has challenged that figure in light of the administration’s announcements that it released $15 million in tax refund checks between August and Sept. 18.
Rev and Tax records show about $33 million was owed in July, but the administration has said more taxpayers have filed tax returns since then.
The governor has proposed $70 million in spending cuts to free up cash for tax refunds but the Legislature has not acted on it, according to the GovGuam court filing.
“It makes no sense for this court to grant plaintiffs’ proposed injunctive relief with which Guam cannot comply and then have Guam immediately subjected to contempt proceedings,” the defendant’s motion stated, as filed by the Guam attorney general’s office.
No expedited refunds
The plaintiffs’ motion also seeks to end the practice of approving the expedited release of tax refunds.
“The federal practice is for the IRS to pay refunds within just weeks of receipt of tax returns, … and refunds are paid in a first-in, first-out sequence, not in an order based on purported hardship,” the plaintiffs said in the motion.
The government of Guam “practice of expediting refunds is too arbitrary and capricious to be rationally related to any legitimate government interest,” the plaintiffs said in the motion.
“The public has an interest in the lawful administration of the (Guam territorial income tax) as indicated by the Guam Legislature’s two attempts to compel the government to pay refunds on time through the passage of legislation,” the plaintiffs said in the federal court filing. “Those laws have been largely ignored and the requested injunctive relief is needed to bring the administration of the (Guam territorial income tax) into compliance with the Organic Act and the Equal Protection Clause.”
The plaintiffs’ proposed order states if there is an error on a tax return, GovGuam must pay the refund no later than after the error is corrected.
The proposed order will not interfere with GovGuam’s right to garnish refunds, according to the plaintiffs’ motion.
Article source: http://www.guampdn.com/article/20120923/NEWS01/209230326