By The Star Staff
After conducting a preliminary review, the Financial Oversight and Management Board rejected two bills from the island House of Representatives, one of which would establish a tax credit for residents who suffered losses on investments in Puerto Rico bonds.
In a letter Wednesday addressed to Rep. Ángel Morey Noble, the oversight board’s legal adviser, Jaime A. El Koury said House Bill (HB) 1537 and HB 1582 are inconsistent with the Certified Commonwealth Fiscal Plan.
HB 1537 establishes an amnesty program for taxpayers with outstanding tax liability, while HB 1582 establishes a tax credit for Puerto Rico residents who lost money on investments made in Puerto Rico bonds.
The oversight board said “the Bills are inconsistent with the Fiscal Plan, to the extent that HB 1537 deposits 75% of funds collected through the amnesty program in the Pension Reserve Trust, generating a loss to the Commonwealth’s General Fund,” the letter said. “HB 1582 favors certain creditors while establishing sizable tax credits, without providing offsetting savings or identifying new revenues to compensate for implementation costs.”
The board said it appreciates the opportunity to review the bills under Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, and shares a desire to collect unpaid taxes, provide some relief to Puerto Rico’s residents who may be struggling to pay their tax debts, and support residents’ economic security.
HB 1537, among other things, establishes an amnesty program for taxpayers with outstanding tax liability incurred prior to Dec. 31, 2021, inclusive of previous tax years up to that date. The amnesty would allow taxpayers to either pay the entirety of their outstanding tax liability immediately and avoid paying interest and penalties owed, or pay through an installment plan over a period of up to four years, with a waiver of penalties and a reduction of interest due. The amnesty applies to income, excise, sales, withholding, and special tax debt.
“The Oversight Board’s estimates show that the implementation of the proposed amnesty program would lead to the collection of approximately $76.8 million in owed taxes. However, as proposed by the Bill, 75% of amnesty collections would go to the Pension Reserve Trust instead of the General Fund,” the board said. “Therefore, while HB 1537 would likely increase overall tax revenues, the General Fund would lose approximately $20 million over the next four years.”
In addition to the $20 million General Fund revenue loss, the oversight board noted, HB 1537 would also likely entail additional administrative expenditures, violates the Plan and Confirmation Order for the commonwealth and favors certain creditors over others.