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The bill that aims to grant corporations established in Puerto Rico the same tax treatment than individuals at a federal level could be included as a section in the tax reform to be discussed next year in Congress.

Said is the forecast provided by three top officials linked to the manufacturing sector on the island who assured the lobbying efforts they have carried out in support of Section 933A have borne fruit since the bill was submitted last September.

According to Pedro Watlington, president of the Puerto Rico Manufacturers Association (PRMA) nearly 11 congresspeople have decided to endorse the H.R. 2030.

The top executive added that PRMA officials were at the U.S. capital this week in order to give some follow up to the process of educating Congress regarding the gravity of the economic contraction on the island, thus highlighting the need of passing said piece of legislation.

For his part, attorney and CPA Jorge Cañellas noted that the Promoting Investment for Puerto Rico Act has a good chance of becoming a section in the U.S. Tax Reform because amending the Internal Revenue Code is becoming an impending matter.

Cañellas explained that the statutory rate at a corporate level in the United States would become the highest in the world, once Japan reduces its rates to 38 percent next month and to 36 percent by 2015.  

Cañellas noted that the Joint Tax Committee -- a congressional office dedicated to assessing the fiscal impact of tax proposals -- hasn’t assessed the H.R. 2030 yet because of the high volume of bills that have been filed lately. Nevertheless, he said that the bill includes favorable aspects for the island as well as for the federal government.  

In that line of thought, Carlos J. Bonilla, chairman of PRMA’s tax affairs committee, said that the bill has the ability to promote consensus at federal fora because it addresses many of the historical challenges that have marked for years the local manufacturing sector. Said challenges range from the belief that Puerto Rico is only interested in preferential treatment to the assumption that corporations don’t pay taxes.

The expert lobbyist explained that contrary to the facts that brought the elimination of Section 936 local manufacturing companies had an effective tax rate at federal level of 21 percent.

But now, as the controlled foreign corporations (CFC) category has emerged, the federal government not only lost what it deemed as insufficient before, but its mechanism hasn’t produced the revenues it had expected, Bonilla explained.

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