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  • Writer's pictureThe San Juan Daily Star

Don’t advance bill to give tax credit to residents who took a loss on bond investments

By The Star Staff

The Financial Oversight and Management Board warned the government this week against moving forward a bill that would establish a tax credit for Puerto Rico residents who suffered losses on investments made in commonwealth bonds and closed-end funds.

House Bill (HB) 1582 says the amount of the tax credit is based on the total net loss, with a maximum tax credit of $200,000 per resident.

New Progressive Party Rep. Ángel Morey Noble introduced HB 1582 in January of this year to help some 60,000 local residents recover some of the money they lost after investing in Puerto Rico’s bonds. Before Puerto Rico declared bankruptcy in 2017, credit rating agencies had lowered Puerto Rico bonds to junk status in 2014.

“We have introduced this measure to provide economic relief to nearly 60,000 Puerto Ricans who entrusted their savings and possibly their retirement money in Puerto Rico’s general obligation bonds, betting on the security of these investments,” Morey Noble said.

The oversight board, in a letter to Gov. Pedro Pierluisi Urrutia and legislative leaders, said the bill is inconsistent with the Certified Commonwealth Fiscal Plan, the commonwealth plan of adjustment, and the Title III court order dated Jan. 18, 2022 confirming the fiscal plan. Its enactment and implementation would violate the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), and invite taxpayers to act in contempt of the confirmation order.

“HB 1582 would establish sizable tax credits without providing offsetting savings or identifying new revenues to compensate for the cost of the bill,” the oversight board said in the letter. “The Oversight Board is continuing its evaluation of the Bill, but it seems certain the Bill, if implemented in its current form, would have a negative fiscal impact. While the Oversight Board appreciates the desire to help Puerto Rico residents, any bill that has a negative fiscal impact without corresponding savings or new revenues is not revenue neutral and, therefore, is inconsistent with the Fiscal Plan.”

The bill violates the “Plan and Confirmation Order” as it changes the fiscal plan to favor certain creditors over others, the oversight board noted. Paragraph 65 of the confirmation order prohibits any “Entity” – which includes any governmental unit – “from taking any action including enacting legislation against any of the Released Parties.”

Third, the bill threatens to violate PROMESA to the extent that, if passed, it would necessitate a reprogramming requiring prior oversight board approval, which has not yet been requested or provided.

“Section 204(c) prohibits the Legislature from “adopting a reprogramming … until the Oversight Board has provided the Legislature with an analysis that certifies such reprogramming will not be inconsistent with the Fiscal Plan and Budget,” the letter notes.

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Rose Rose
Rose Rose
24 févr. 2023

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