Fiscal board nixes signing of law that would boost film industry incentives
A scene from “Captain America: Civil War.” The Financial Oversight and Management Board said new legislation awaiting the governor’s signature that would raise the cap on some film industry incentives “impairs or defeats the purposes of PROMESA.”
By THE STAR STAFF
The Financial Oversight and Management Board has barred Gov. Pedro Pierluisi Urrutia from signing into law new incentives for the film industry because the commonwealth will not be able to offset the additional costs.
The oversight board in a letter dated Dec. 2 conveyed to La Fortaleza its serious concerns regarding Senate Bill (SB) 552.
After consultation with its advisers, the oversight board said “SB 552 impairs or defeats the purposes of PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act] …”
“If you sign SB 552 into law, in violation of PROMESA Section 108(a)(2), PROMESA Sections 204(c) and 108(a)(2) will bar the Executive branch from implementing the law,” the board said in the letter.
The oversight board also noted that the proposed bill amends Act 60-2019, known as the “Puerto Rico Incentives Code,” to increase the current cap on certain film industry tax incentives from $38 million to $100 million per year.
The bill grants the Puerto Rico Fiscal Agency and Financial Advisory Authority, the Department of Economic Development and Commerce, and the Office of Management and Budget the authority to identify and execute all possible actions to implement SB 552.
The 2022 Certified Commonwealth Fiscal Plan focuses on reforming the tax structure established in the Puerto Rico Incentives Code, including establishing a new standard “so that incentives are concentrated on those projects most likely to provide net economic benefits to the commonwealth.”
The fiscal plan requires that “any tax reform or tax law initiative that the Government undertakes or pursues during a year within the 2022 Fiscal Plan period must be revenue neutral; that is, all tax reductions must be accompanied by specific, offsetting revenue measures of the same amount that are identified in the enabling legislation …”
The current tax incentives for film production in Puerto Rico are capped at $38 million and are not revenue neutral, costing the commonwealth some $23 million annually.
The oversight board’s advisers estimate that the increased cap to $100 million created by SB 552 would not be revenue neutral, and that any increased economic activity from the increased cap would be insufficient to offset the additional cost to the commonwealth from the higher cap, the board said.
By reducing commonwealth revenues by $38 million without identifying offsetting savings or additional sources of revenues, SB 552 is inconsistent with the 2022 fiscal plan, the oversight board said.
Also by reducing commonwealth revenues by $38 million without identifying offsetting savings or additional sources of revenue, SB 552 creates a significant risk that the commonwealth’s expenditures will exceed its revenues in fiscal year 2023, the board noted.