Puerto Rico needs to enable areas for investment as it recovers from the devastation. That is the objective of the bill introduced by Resident Commissioner in Washington, Jenniffer González, so that the federal government would grant new tax credits to companies that invest on the island.
The bill proposes that Puerto Rico and other US jurisdictions with high poverty rates be designated - by the federal government - as economically distressed zones in order to access to tax benefits. The zones would be under the jurisdiction of the US Departments of Treasury and Commerce.
The bill proposes credits of up to 40 percent on the provisions added to employees salaries supplemental benefits, and on the property depreciation of companies established in those areas. It also seeks a 40 percent credit for customers who buy services and equipment from minority group companies, and 30 percent for acquisitions from other companies that operate in special zones.
The requirements of a strategic plan and the identification of private and federal funds that would be used in special zones projects are among the key issues of the bill. This way, the bill anticipates the planned use of resources and discourages abuse of the tax benefit.
González's initiative would be an additional tool to others that aim to promote private investment and job creation in Puerto Rico. Supporting this initiative is an important step to persuade Congress and the White House of the merits of the bill for the island´s economic development strategy and that of other jurisdictions with similar difficulties. They all have poverty rates of more than 35 percent, low labor force participation and economic difficulties.
Most of Puerto Rico, about 30 counties in the United States and American Samoa and Northern Mariana Islands territories would qualify for these new incentives.
In this context, it seems wise to have filed the bill along with Bennie Thompson, Democratic Congressman from Mississippi´s 2nd Congressional District. This state is considered the poorest in the union, with about three million inhabitants.
The Democratic Congressman´s support can encourage the bipartisan endorsement to the bill, which was referred to the House Committee on Ways and Means.
The tool proposed by González and Thompson could mean a compelling attraction in Puerto Rico just as federal funds are being channeled to launch a wide range of reconstruction works.
Since last April, Puerto Rico participates in the Opportunity Zone designation, under the Tax Cuts and Jobs Act (TCJA), along with 18 other jurisdictions. This selection of the US Department of the Treasury and the Internal Revenue Service makes the island eligible to receive preferential treatment in federal taxes. Among other advantages, it allows investors to reinvest capital gains in low-income communities and under the federal tax reform.
Puerto Rico already has a certified fiscal plan as a platform for fiscal adjustment and public debt restructuring. At state level, the island offers investors a highly skilled and motivated workforce. Federal tax incentives - provided through González and Thompson bipartisan bill - can expand the interest to invest in Puerto Rico.
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