Pago Pago, AMERICAN SAMOA — A High Court decision has resulted in the Administration submitting legislation for Fono approval to amend the American Samoa tax code pertaining to the tax brackets, exemptions, and personal deductions at 2000 levels, Gov. Lemanu P. S Mauga wrote in a letter to Fono leaders that was included the bill.

In his Jan. 09 letter, the governor explained that the local Income Tax Act was intended “to fix our income rates at the levels set in 2000” by the federal Internal Revenue Code.

“However, the Internal Revenue Code in 2000 provided automatic change to tax brackets, exemptions, personal deductions and interest rates,” the governor explained further.

And this bill is intended to ensure that the rate for exemptions, personal deductions and interest rates remain fixed at 2000 levels.

“The need for this change is brought about by a decision made by the High Court of American Samoa in a case by a taxpayer against ASG,” the governor revealed. “The proposed changes remove the potential for other such lawsuits in the future.”

The legislation was introduced last week in both the Senate and House, with a Senate Budget and Appropriation Committee hearing held yesterday, in which ASG Tax Office manager, Tanoa’i Vaaimamao Poufa, also revealed that the bill was the result of the high court case and that the amendment addresses the court’s decision.

The major proposed change in the bill would add a new section — Deductions fixed at levels in effect on December 31, 2000 — to current law as follow:

•           Except as amended by this Title, all adjustments for inflation or cost of living as required by the U.S Internal Revenue Code including those for tax brackets, exemptions, personal deductions, and interest rates are set to the rates in effect on December 31, 2000 in the United States Internal Revenue Code without adjustments, retroactive” to the effective date of Public Law (PL) 27-15, Oct. 22, 2001.

PL 27-15 adopted the Internal Revenue Code of 2000 as the Samoan Income Tax Act. And this means the tax code for the territory was frozen in 2000 and no longer adopted any new Internal Revenue Code laws.

According to the bill’s preamble, the Legislature’s intent at the time was to fix tax brackets, exemptions, personal deductions, and interest rates at 2000 levels.

However, language in the Internal Revenue Code in 2000 provided for automatic change to tax brackets, exemptions, personal deductions, and interest rates, the preamble points out.

And “there is an urgent need to maintain the tax rates and provisions” of the Internal Revenue Code applicable to American Samoa at levels in effect on Dec. 31, 2000.

During the Senate hearing yesterday, committee chairman Sen. Utu Sila Poasa commended the Administration for presenting this measure and pointed out that the cost of living continues to rise.

The Tax Manager acknowledged the statement and explained that the governor’s plan has his appointed committees considering another type of tax break to benefit local residents.

The bill — which is effective immediately when passed by the Fono and approved by the Governor — was endorsed by senators in second reading yesterday, during the Senate session. Final reading is set for today.