Lee M. Holmes, Joan S. Holmes v. Director of the Department of Revenue and Taxation, Government of Guam, as the Delegate of the Governor of Guam

In this second appeal, the Guam Department of Revenue (“Guam” or “Department”) seeks to assess additional taxes against individual Guam taxpayers based on their shares in an S corporation chartered in the Commonwealth of the Northern Mariana Islands (“CNMI”). The district court found that the three-year statute of limitations on the individual Guam return ran from the filing of the corporate return in the CNMI, and granted summary judgment. The Department claims on appeal that because Guam and the Marianas are independently administered tax jurisdictions and the corporation was not required to file in Guam, no statute of limitations applies and additional taxes against the individuals may be assessed “at any time.” We disagree and affirm the district court’s ruling.

FACTS

The undisputed facts were set forth in full in our earlier opinion, Holmes v. Director of Revenue and Taxation, Government of Guam I, 827 F.2d 1243 (9th Cir.1987) (“Holmes I”), but are briefly summarized here for convenience. Lee and Joan Holmes, U.S. citizens and residents of Guam, are majority shareholders in a Sub-chapter “S” corporation organized in the CNMI, the Northern Marianas Cable TV company…