Gibbs Law Group Announces Win in Guam Tax Refund Lawsuit

Class Action Lawsuit Against the Government of Guam Results in Victory for Guam Taxpayers

San Francisco, CA- The law firm of Gibbs Law Group LLP is pleased to announce that on August 21, 2012, the Honorable Consuelo Marshall of the District Court of Guam granted plaintiffs’ motion for summary judgment in a class action lawsuit against the Government of Guam for late payment of income tax refunds.  The lawsuit, filed by four Guam residents on behalf of a class of Guam taxpayers, alleges that the Government of Guam violated U.S. law by failing to issue timely refunds of taxpayers’ overpayments of Guam Territorial Income Tax as required by the U.S. Internal Revenue Code.  The lawsuit also challenges the Government of Guam’s “expedited refund” program, which pays refunds to some taxpayers ahead of taxpayers who have been waiting longer.  By granting summary judgment, the Court ruled that judgment for the plaintiffs could be granted as a matter of law, and there was no need for a trial.

The plaintiffs filed the lawsuit because of the Government of Guam’s failure to timely pay tax refunds, a practice that has lasted nearly two decades.  When the lawsuit was filed in April 2011, many taxpayers were still waiting for their refunds from 2005 through 2009.  The Guam Legislature (the Liheslaturan Guahan) passed laws in 1994 and 2002 that required revenues to be regularly set aside so the refunds could be paid as they come due, but the Government did not comply with those laws.  In December 2011 and again in June 2012, the Government had to borrow to reduce a portion of its refund liability, but it still owes $30 million in refunds, and will owe over $100 million more next year, with no money set aside to pay the mounting debt.

The plaintiffs also alleged that the Government’s practice of paying “expedited” refunds to Guam taxpayers based on varying levels of “hardship” violates taxpayers’ constitutional right to equal protection of the laws due to the manner in which the program was executed.  Specifically, plaintiffs alleged that the program was arbitrarily enforced, with many Guam residents routinely wait in lines out the door at the Department of Revenue and Taxation to submit requests or check on their refunds, while others receive refunds right away without identifying any hardships.

As a result of the Court’s ruling, the Government of Guam will be required to re-structure its method of tax refunds and pay them in a fair and timely manner going forward.  The Court is expected to enter a permanent injunction implementing its ruling.

“All Guam taxpayers are entitled to timely payments of their refunds without having to wait in long lines or plead with public officials” said attorney Daniel Girard of Gibbs Law Group. “Today’s ruling is an important win for those taxpayers, and will result in a more fair and efficient tax system going forward.”

Gibbs Law Group LLP is one of the nation’s leading firms representing investors, employees, consumers and small businesses in cases involving consumer protection, personal injury, securities, antitrust, and employment laws.