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Tax refunds numbers aren’t adding up

Excerpt from the 9th Circuit Court of Appeals' final ruling on the merits of the landmark Paeste tax refunds case

By Troy Torres

(Tumon, Guam) On Tuesday, September 17, Gov. Lou Leon Guerrero called into the Patti Arroyo show on NewsTalk K57. She told Ms. Arroyo during that interview that tax refunds owed for people who filed between April 1 and April 15 equaled about $17 million.

Gov. Lou Leon Guerrero

The problem with that statement made on that day is that the Department of Revenue and Taxation hadn’t processed the refunds filed between April 1 and April 15 until Sunday, September 22.

Unless our governor has a crystal ball we don’t know about, how in the world did she know that $17 million figure five days before the tally happened? As it turns out, she was right on the money; her seeming Wiccan powers worked. The 8,500 refunds mailed on September 27 for April 1 through April 15 filers totaled about $17 million. There's something rotten at Adelup; and it ain't the ghosts that roam its hallways.

But that’s just the tip of the iceberg in the perplexing mathematical vortex between the public statements and promises on tax refunds made by Ms. Leon Guerrero’s administration, and the actual numbers. It truly is a phenomenon if both are to be believed.

The records or the press releases: Which are true?

Kandit has been pouring over Income Tax Refund Status reports. These are the monthly reports generated by the Department of Revenue and Taxation and sent to the Speaker of the Legislature. These reports are by the numbers, with data of filings for every tax year from 2006 to 2018. They tell us, among other things, how many tax returns have been filed for each year. Of those returns, how many are for people and companies owed a refund? How much has been paid out for each tax year? How much still is owed to individual and corporate filers? How much interest is accruing in each tax year? How many returns haven’t even been processed yet?

Many people still are waiting for their tax refunds. Thousands more are anticipated to file returns, with tens of millions more to be refunded for Tax Year 2018 alone.

On September 27, when those 8,500 checks went out, Ms. Leon Guerrero’s office announced that the checks, which covered filers between April 1 and April 15, once paid signaled that the “Leon Guerrero Tenorio Administration has paid all ‘Status A’ refunds for a total of $144 million fiscal year to date.” One part of that statement is false, one part is misleading, and the money part of the sentence is a classic case of stealing credit from someone else’s work.

FALSE PART: The administration has not paid out all of the refunds. There’s still everyone who filed after April 15, everyone whose refund is in error status or has been suspended and awaiting Status A release, and everyone who hasn’t even filed yet.

MISLEADING PART: According to the reports, tens of millions in tax refunds haven’t been paid because of some kind of error or audit of specific filings. To celebrate Status A refunds without qualification is to mislead people to believe the job is finished, when it’s far from over, considering the large sum.

CREDIT TAKING PART: Ms. Leon Guerrero’s administration did not preside over the refunding of $144 million in taxes last fiscal year. Former Gov. Eddie Calvo was responsible for refunding the first $27 million of tax overpayments in Fiscal Year 2019, as Ms. Leon Guerrero wasn’t the governor until January 2019. The first three months of the fiscal year, October through December 2018, were Mr. Calvo’s last three months in office.

August 2019 tax refunds report excerpt of tax year paid balances

January 2019 tax refunds report excerpt of tax year paid balances

Ms. Leon Guerrero claimed that the payments of 2018 refunds seemed slow because DRT had to square away prior refunds. At least that’s what she told Ms. Arroyo. That’s also untrue. According to the August 2019 Income Tax Refund Status report, Ms. Leon Guerrero’s administration had refunded $71 million in overpaid taxes for 2018. The difference from the payments made for 2006 through 2017 tax refunds as of August 2019 from the payments already made when she came to office was only $4.18 million. As a matter of fact, the prior year tax refunds debt Mr. Calvo left behind is marginal, most of the amount due had been unable to be paid due to errors and suspensions on the tax returns filed.

Records indicate that former Gov. Eddie Calvo squared away most of the tax refunds debt that occurred during his administration prior to leaving office.

That same report shows that as of the end of August (the report was run on September 3, 2019) - well before DRT had processed tax returns for April 1 through April 15 filers or knew the amounts that would be owed to them - the government already owed individual and corporate taxpayers $59.06 million. Three days later on September 6, she told Ms. Arroyo on her show that there was only $30 million left to pay tax filers. Even if this were the slip of the tongue, as the governor is known to do, and she meant to qualify her statement to say that only $30 million is left to pay for 2018 refunds, that also wouldn’t be true. As of that report, there were $41 million left to pay to individual income tax filers alone, not including interest that had accrued to that point.

And that’s without even factoring the refunds that had yet to be processed for April 1 through April 15 filers.

Numbers don’t lie

The Leon Guerrero administration, before September 20, had paid $71.05 million in 2018 refunds, and another $4.18 million for prior year refunds since she took office, according to her own reports. During the weekend that began Friday, September 20, she released another $24.4 million in tax refunds filed for all prior tax years and through March 31, 2019. Her office stated that 10,668 refunds comprised that $24.4 million release.

But that wasn’t even half of the amount owed to taxpayers ($59.02 million) who had filed through March 31 by the time of that release. And, apparently, that payable increased by at least another $17 million just a few days later, as DRT processed the refunds owed for April 1 through April 15 filers.

By Sunday, September 22, DRT had processed and printed the checks for everyone who filed through April 15 and was owed a refund.

On Friday, September 27, she released another 8,500 tax refunds, amounting to about $17 million in total payments. This doesn’t include the payable now owed for everyone who filed between April 1 and April 15 with an error of suspension status.

That August report showed there were 24,466 refunds owed, well before the tally of the 8,500 tax refunds for the April 1 through April 15 filing period. If only 10,668 refunds were released, when will the other 13,798 individual- and corporate-income tax filers be refunded their tax overpayment?

Is the governor breaking the law?

Coincidentally, $17 million is the amount owed to individual and corporate tax filers who overpaid taxes for tax years 2006 through 2017.

When Ms. Leon Guerrero first told Ms. Arroyo on September 17 that a second bout of refund releases would be paid amounting to about $17 million, we assumed this was for prior year refunds. We thought the reason for releasing these refunds after the 2018 refunds meant that this batch of $17 million was entering a final stage of auditing. But when news broke that the second batch amounting to $17 million was for filers between April 1 and April 15, we wondered, what happened to everyone owed prior year refunds?

It’s quite possible that these refunds are awaiting the green light if they’re flagged as suspended or error status. The problem is that the vast majority of these filings would have been flagged and untouched for 10 months now; the amounts in each tax year category are, by and large, unchanged. Is Ms. Leon Guerrero’s fiscal team purposely not moving on these amounts owed to people for prior years?

In the final appeal of the merits of the Paeste v. Government of Guam landmark case that ordered the payment of refunds within six months of filing, the U.S. Court of Appeals for the Ninth Circuit plainly ruled the practice of withholding refund payments illegal. Circuit Judge Marsha S. Berzon, in the opinion she penned for the Court, wrote in part:

We acknowledge that many governments struggle to balance their budgets, particularly in times of economic uncertainty and increasing fiscal demands. But, as the district court correctly concluded, Guam's solution—refusing to pay concededly valid requests for income tax refunds for years on end—was illegal.

So the questions are: Where’s everyone else’s tax refund? When will they be paid? How much interest is accruing? Will Ms. Leon Guerrero be able to improve her thus-far dismal record of paying tax refunds in the upcoming calendar year?

That rotten stench at Adelup is emanating from broken terminals of math and truth. The early medieval philosopher Augustine said that numbers, truth and light are concepts one in the same with God. They are infallible and absolute. These forms are absolutely missing from the Governor's Office. And so are 13,798 tax refunds.

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