Rev & Tax can recover $4M from Shipyard - KUAM.com-KUAM News: On Air. Online. On Demand.

Rev & Tax can recover $4M from Shipyard

by Mindy Aguon

The Guam Shipyard has been making headlines in recent months, most recently for its decision to allow Watts Constructors to load military cargo at the Guam Shipyard possibly in violation of the law and its sublease with the Guam Economic Development Authority.

But the Shipyard's qualifying certificate - or lack of one - with GEDA has been a point of contention for several years as Rev & Tax continues to pursue the recovery of $4.2 million in taxes owed.  An attorney general's opinion has cleared up some issues that have been disputed for years, which paves the way for Rev & Tax to collect that money which the Government of Guam could use.

Back in August a tax lien was filed with the Department of Land Management setting the stage for the Government of Guam to take the $4.2 million it believes is owed by Guam Industrial Services, Inc. (dba, The Guam Shipyard).  According to the Notice of Guam Tax Lien, demand for payment of this liability has been made but it remains unpaid.

As we reported, the Guam Shipyard and its owner, Mathews Pothen, have been trying to validate a qualifying certificate that GEDA has said does not exist.  The Shipyard and Pothen have asked GEDA to go back and revisit the status of the qualifying certificate that the corporation applied for back in 2002.  According to KUAM archives, Pothen's application back in 2002 included requests for 100% tax relief for corporate income tax for 20 years, 75% corporate dividend tax for 5 years and 100% tax relief for gross receipts taxes for 20 years.

The GEDA board allowed for those tax breaks with the caveat that the Shipyard employ a minimum of 250 full-time employees, run an apprenticeship program and increase its monthly rent to GEDA from 8,000 to 15,000.

The GEDA board never gave final approval of the QC because major changes were made to the original document. Those changes were made by then-governor Carl Gutierrez, who before signing-off on the Shipyard's QC, made handwritten changes, crossing out several key components.

The changes included crossing out key words that means GEDA would have to give the shipyard more than $1.3 million dollars from the proceeds of the sale of the dry dock.  The original QC stipulated that GEDA would not have to pay that money.  Gutierrez also deleted a portion of the agreement raising the Shipyard's monthly rent from $8,000 to $15,000.

Instead, he left the rent at the lesser amount and also crossed out the requirement that the Shipyard maintain no less than 250 full-time employees and instead changed it to read 150 FTEs.

While the issue has been in dispute for a number of years with Pothen arguing the QC's validity and GEDA arguing otherwise, GEDA Administrator Tony Blaz confirms a memo was handed down from the Attorney General's Office last week stating that the governor does not have the authority to make handwritten changes to the contract.  Blaz says this mean the shipyard's entire QC is invalid.

The opinion paves the way for the Department of Revenue & Taxation to pursue a levy so that it could recover the $4.2 million in owed taxes.  Agency Director Art Ilagan meanwhile said he could not comment on whether that has occurred.

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