A cash grab to augment deficiency in funds
There has been a very important bill that has been in the works for two years that unifies all different tax incentive codes under one cohesive law whose main architect was former DDEC Secretary, José Pérez Riera. Conceptually, this is a great idea because some laws relating to the tax incentives are outdated and others may even have conflicting language. The negative of trying to unify such a disparate and large number of laws in one place is complicated (the current bill is almost 600 pages) and it provides politicians the opportunity to tinker with things and rewrite important elements of the bill that affect all of us.
The most prominent changes under the code of incentives is for Laws 20 and 22 which will no longer go by those names. In the process of this rewrite, there were 3 elements that changed that actually we believe are good for Puerto Rico, despite recipients not being happy about it (nor DDEC but to get it passed they need to compromise). The bill reintroduces the employment requirement, which we are supportive of at a macro level, it requires purchase of real estate, which we also feel makes sense to show some local roots, and it increased the charitable donation requirement from $5,000 to $10,000 annually. We are also supportive of this despite the cost because the island is still in crisis and collectively this is a meaningful amount of money well in excess of up to $20 million annually (depending on if the bill has retroactive or prospective effect) to help local charities.
Unfortunately, this last element has been used as an opportunity to grab funds that normally would be directed to any legally approved official Puerto Rico Code section 1101.01 charity on the island that the donor sees as a deserving entity, and now requires all money go to the government (where it would not be deductible) into a fund that will have a list of approved charities by a special committee. What is the purpose and benefit of this? It's certainly not more efficient, as now you have an administrative behemoth having to collect funds and then administer them after some committee, that has no involvement from the donor, decides where such funds go.
Another very suspect element, is that the bill previously required that eligible charities also have a Federal Code 501(c)(3) designation because federal requirements require transparency of funds with reporting requirements that are available online through the publication of each charity's Forms 990 to the general public. This was removed for no valid reason. It's easy to see how a favorite charity working with the government (or favorite charity of a politician) added the language that required a committee to select where funds go and eliminate the federal designation requirement.
Also, the government might have quasi-governmental organizations that it works with, which have the 1101.01 designation and that technically will qualify for such funds.If the donor could choose, they would never direct the funds this way and that's the point. This is a cash grab to control and augment deficiency in funds in other areas potentially, and that is completely unacceptable and potentially illegal. With all the political scandals since hurricane María relating to contracts resulting in multiple indictments of government officials and contractors, one would think such obvious misbehavior would stop. Apparently in Puerto Rico, such behavior has occurred so often that it has become normalized. That should not mean it's ok, nor should it be allowed to continue.
Otras columnas de Robb Rill
jueves, 28 de mayo de 2020
We do not believe the donations should be mandated to a special legislative list controlled by a few key politicians, writes Robb Rill
lunes, 27 de abril de 2020
Robb Rill says that opening the economy of Puerto Rico in stages, following the plan suggested to the government, is an option
martes, 10 de marzo de 2020
Puerto Rico’s attractiveness as a business jurisdiction is more uncertain than ever as a result of constant changes, writes Robb Rill
martes, 25 de junio de 2019
Robb Rill defiende las leyes 20 y 22 del Código de Incentivos de Puerto Rico