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The revised bipartisan legislative framework introduced into the US Congress to address the urgent need for a restructuring of Puerto Rico's debt does not include an eligibility for federal tax credits......
by Mike Godfrey
Tax-News.com
Washington, 23 May 2016
The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), introduced into the House of Representatives on May 18, would establish an Oversight Board with the authority to enforce budgetary plans and creditor negotiations, but there is no provision for the extension of the US earned income tax credit (EITC) and child tax credit (CTC) into Puerto Rico, as had been suggested previously by some Democratic lawmakers.
A House Committee on Natural Resources explanatory memorandum explained that, although PROMESA "promotes economic and regulatory reform so that the territory can grow its economy and meet its debt obligations, … no [US federal] taxpayer money is used to pay Puerto Rico's debt or otherwise bailout the territory." The previous proposals to extend the EITC and CTC into Puerto Rico had been criticized by Republicans. For example, Senate Finance Committee Chairman Orrin Hatch (R – Utah) had already called the idea "problematic for a number of reasons." He had pointed out that "offering these refundable tax credits … would ultimately be cash payments offered directly to lower-income residents of Puerto Rico."
The revised bipartisan legislative framework introduced into the US Congress to address the urgent need for a restructuring of Puerto Rico's debt does not include an eligibility for federal tax credits.
A House Committee on Natural Resources explanatory memorandum explained that, although PROMESA "promotes economic and regulatory reform so that the territory can grow its economy and meet its debt obligations, … no [US federal] taxpayer money is used to pay Puerto Rico's debt or otherwise bailout the territory." The previous proposals to extend the EITC and CTC into Puerto Rico had been criticized by Republicans. For example, Senate Finance Committee Chairman Orrin Hatch (R – Utah) had already called the idea "problematic for a number of reasons." He had pointed out that "offering these refundable tax credits … would ultimately be cash payments offered directly to lower-income residents of Puerto Rico."
With such senior lawmakers as the House Speaker Paul Ryan (R – Wisconsin) and House Minority Leader Nancy Pelosi (D – California) reacting positively to PROMESA, it is now likely to progress through Congress. The Administration has also indicated its approval to the modified proposals. In a statement on May 19, Treasury Secretary Jacob Lew said that he is "disappointed the bill does not include our proposals to promote economic growth. … However, [it] represents a fair, but tough bipartisan compromise."
"The Administration has been clear that any legislation to address the crisis in Puerto Rico must provide a workable, comprehensive restructuring authority and appropriate oversight that respects Puerto Rico's self-governance," he added. "The Administration's proposal released last year would also address the longer-term issues facing Puerto Rico, such as rewarding work and supporting growth through a locally-administered EITC."
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