Resident Commissioner in Washington Pedro Pierluisi said Thursday that H.R. 3020, which proposes adding a new section to the U.S. Internal Revenue Code to drum up local investments, is facing several challenges in Congress.
For one, he said there is a great chance it could be shut out of the package the Congressional supercommittee is drafting to reduce the U.S. mainland’s deficit by at least $1.2 billion, which it must present for evaluation before Nov. 23. The package, he said, will probably not consider proposals for job creation or IRS Code reforms.
The Puerto Rico Investment Promotion Act, as H.R. 3020 is known, proposes creating Section 933A of the IRS Code to, among other things, allow corporations organized in Puerto Rico to get the same the federal tax treatment given to individuals residing on the island.
Corporations that generate at least 50 percent of their income from sources within Puerto Rico and choose to be recognized as domestic — instead of their current status as controlled foreign corporations — would be treated as U.S. corporations for federal tax purposes.
Its proponents believe it will result in benefits for Puerto Rico and the U.S. coffers, as it promotes the distribution of dividends to the U.S., generating a consistent cash flow that could be invested in job creation, research and development and corporate infrastructure.
“We also face the challenge that the Joint Committee on Taxation may use a methodology that considers that H.R. 3020 will cause a loss of revenue for the federal treasury, although for practical purposes we are convinced that, on the contrary, the bill will increase that income,” Pierluisi said.
So, he said the best “alternative to achieve the approval of 933A is to push for its inclusion in a later bill that proposes a comprehensive reform of the tax laws at the federal level.”
Stepping up lobbying in Washington
That said, the Puerto Rico Manufacturers Association announced Thursday it will head a delegation of public, private and labor leaders in a lobbying effort in Washington, D.C. next week to drum up support for bill.
The PRMA, along with members of the Puerto Rico Chamber of Commerce, the Marketing, Industry and Food Distribution Chamber, known as MIDA, the Bankers Association, the Securities Association and several labor groups, has scheduled nine meetings with lawmakers or their staffers, including supercommittee member Sen. Rob Portman (R-OH), PRMA President Pedro Watlington said.
“All of these sectors are deeply concerned with the sober outlook for Puerto Rico’s economy Rico, so they are joining forces to support this common goal,” Watlington said. “Through this section we can create economic development, both in the U.S. and Puerto Rico, which means American jobs. It also maintains the development of critical and important technology on American soil.”
The group will also meet with members of the U.S. Senate Finance Committee and the U.S. House of Representatives Ways and Means committee are also on the list of people to visit next week, namely Sen. Orrin Hatch (R-UT), Sen. Bill Nelson (D-FL), Sen. John Cornyn (R-TX), Rep. Chris Murphy (D-CT), Rep. Rosa DeLauro (D-CT), Rep. Alcee Hastings (D-FL), Rep. Jeb Hensarling (R-TX), and Rep. Sam Johnson (R-TX).
“Section 933A has created something that unfortunately is not very common in Puerto Rico — unity of purpose and action. The proposal has received support from the island’s two major political parties and has been formally endorsed by of you, the business community, and the unions,” Pierluisi told PRMA members during a luncheon Thursday.
Pierluisi, a Democrat, is working closely with Gov. Luis Fortuño, a Republican, to secure bipartisan support in Washington, which the said is fundamental for H.R. 3020’s approval.