Washington - Treasury Secretary Raul Maldonado said yesterday he found a favorable atmosphere in Congress to approve a proposal seeking federal tax reliefs for those who invest in tourism-related projects on the island.
Last fall, governor Ricardo Rosselló Nevares circulated a proposal in Congress –as part of the requests for the island´s recovery after Hurricane María- that would grant a 25 percent tax credit for certain investments and payroll credit related to tourism projects in Puerto Rico.
Maldonado said he promoted this proposal in meetings he held in Congress during the last two weeks, along with the request for a low tax rate for companies doing business on the island, such as Controlled Foreign Corporations (CFC).
"We acknowledge that Puerto Rico has to diversify" its economy, said Maldonado, in a telephone interview from New York, stressing that he sees in the tourism industry the greatest potential for growth.
According to Maldonado, while Puerto Rico has 15,000 hotel rooms, in the neighboring Dominican Republic they reach 70,000.
After meetings with Congress leaders and officials from the House Ways and Means Committee, which has jurisdiction over tax affairs, Maldonado - who is also director of the Puerto Rico Office of Management and Budget - argued that the tax incentive initiative for tourism projects it is seen "as a measure of economic development framed in PROMESA".
"I think it has a solid chance to be approved," he said.
Maldonado said that, in recent weeks, he had meetings in the House with the Democratic leadership, including Speaker Nancy Pelosi (California), majority leader Steny Hoyer (Maryland); and Representative Nydia Velázquez (New York). He also met with members of the Ways and Means Committee, Democrats Tom Suozzi (New York), Stephanie Murphy (Florida), Dan Kildee (Michigan), Brendan Boyle (Pennsylvania) and Don Beyer (Virginia).
Meanwhile, in the Senate, he is in communication with the office of the Democratic minority leader Charles Schumer (New York), and with advisers to Senator Catherine Cortez Masto (Nevada), whose state, he noted, has a strong tourism industry.
Maldonado explained that the essential message they bring to Congress is that the road toward economic growth must, in turn, ensure the tax base, "especially our manufacturing industry."
Although the language of the proposal was not unveiled, last week, Resident Commissioner in Washington Jenniffer González reintroduced the bill seeking to grant federal tax credits for investment in "Economically Distressed Zones," such as the island.
Although that was not the objective of his meetings in Washington, Maldonado said that, as in the opportunity zones program, "we are taking advantage of every opportunity".
After the 2017 federal tax reform, CFCs have to pay about 10.5 percent on intangible assets - patents and trademarks - they transfer to subsidiaries on the island and other jurisdictions outside the U.S. mainland.
In an effort with the Manufacturers Association and other sectors, the government still seeks some relief for the CFCs, which now represent the core of Puerto Rico's manufacturing sector, totaling about a third of the government´s revenues.
Maldonado said he had meetings in New York yesterday with executives from large manufacturing companies, such as Johnson & Johnson and Amgen, to "build a communication channel to see how to make Puerto Rico more competitive."
In December 2017, amid the emergency caused by Hurricane María, Richard Neal, chairman of the Ways and Means Committee of the House, expressed himself willing to consider a temporary reduction in the tax rate for CFCs in Puerto Rico, as part of the measures aimed at mitigating the catastrophe caused by María on the island.
However, Neal has made no further comments on the matter.