Taitague: Keep defense contractors at 5% BPT, lower BPT for other businesses
Sen. Telo T. Taitague has proffered an amendment to Sen. Eulogio Shawn Gumataotao’s business privilege tax rollback bill.
Taitague’s amendment aims to keep the current 5% BPT rate on all military-related defense contracts while lowering the rate for other business down to 4%.
Sen. Telo T. Taitague speaks at a public hearing at the Guam Legislature building. Photo by Skyler Obispo
She said in a July 14 statement that the amendment draws a clear line between struggling businesses and military contractors.
“If you’re a business that’s barely holding on after years of economic hardship, you deserve relief. But if your profits are driven by billions of dollars in defense spending and you are profiting from multimillion dollar defense contracts, you can afford to keep paying your share,” she said. In addition, Taitague said that the BPT is already factored into contractors’ bids, budgets, and profit calculations.
The senator expects that in the next three to five years, Guam will be expected to exceed $5 billion in large-scale defense projects, including infrastructure development and upgrades and strategic missile defense.
However, the Guam Chamber of Commerce says that this amendment raises significant constitutional and policy issues, specifically under the Federal Supremacy Clause outlined in Article VI of the U.S. Constitution.
“This proposal would likely be seen as conflicting with federal procurement policy, thus triggering preemption under the Supremacy Clause,” the Chamber said in a July 15 statement. “Singling out federal prime contractors for higher taxation could be construed as placing a burden on the federal government’s ability to contract freely and efficiently, especially when tax costs are incorporated into bid pricing and ultimately passed on to the federal government.”
The Chamber also wrote that the amendment, if passed, could tarnish Guam’s reputation as a cooperative federal partner.
Vice speaker of the 38th Guam Legislature, Sen. V. Anthony Ada, spoke on the matter of federal tax leakages on July 9, stating that language should be included in the fiscal year 2026 National Defense Authorization Act to address underreporting and non-compliance to Guam tax policies by federal contractors.
Ada wrote to House Armed Service Committee chairman Mike Rogers and Senate Armed Service Committee chairman Roger F. Wicker, requesting to add a NDAA provision requiring BPT registration and compliance for Guam contracts and a directive for a Guam-specific clause under the Defense Federal Acquisition Regulation Supplement.
According to the letter sent to Rogers and Wicker, the proposed NDAA provision would require contractors to:
Register with the Guam Department of Revenue and Taxation for the purpose of complying with Guam’s BPT and other tax laws; and
Provide documentary evidence of such registration and tax compliance as a condition for the receipt of final or progress payments under any applicable contract.
Additionally, Ada’s proposed clause under the DFARS would:
Require all contractors performing Department of Defense funded work in Guam to register with the Guam DRT;
Certify compliance with Guam’s BPT and other tax laws; and
Incorporate the requirements into future procurement processes and federal acquisition systems.
Ada said that non-Guam firms have secured approximately $846 million in federal contracts on the island and that local law only requires prime contractors to pay BPT and not local subcontractors.
Krystal Paco San Agustin, Office of the Governor of Guam’s director of communications, told the Journal that Adelup understands Taitague’s intent is to balance the BPT rollback, but there are fiscal and legal concerns with the amendment.
“There are serious questions about whether singling out federal contracts – especially those tied to the Department of Defense – for a higher tax rate compared to everyone else could raise legal challenges,” she said.
In other federal news, the Saipan Chamber of Commerce has issued its support for Northern Mariana Islands delegate, Kimberlyn King-Hinds’s NMI Labor Stabilization Policy Framework.
King-Hinds’s proposed framework would replace the NMI’s CW-1 transitional worker program.
The CW-1 program allows employers in the NMI to hire foreign workers who are ineligible to work under other nonimmigrant worker categories.
Under the proposed framework, it would set a flexible limit of 15,000 CW-1 permits annually with a cap of 3,000 designated for construction workers.
The SCC recommended the inclusion of at least 500 CW-1 permits for healthcare workers to “help alleviate severe shortages impacting local healthcare services.” mbj
Guam is stepping up its regional tourism efforts by supporting a visa waiver for the Philippines and hosting Malaysian travel media to promote the island as a destination.
At the July 9 meeting of the Civil-Military Coordination Council attended by Government of Guam and U.S. military personnel, the group heard from the Missile Defense Agency relative to the final Environmental Impact Study timeline, according to a July 11 release from Joint Region Marianas.
