JCF: Bill boosting tax break for adoptive parents goes against fiscal plan
By The Star Staff
The Financial Oversight and Management Board for Puerto Rico informed the island Senate on Monday that proposed legislation that would provide adoptive parents with a higher annual tax exemption for the adoption of a minor goes against the fiscal plan.
In a letter to Senate Treasury Committee Chairman Juan Zaragoza Gómez, the oversight board, or JCF by its Spanish initials, said that while it understands and shares the belief that the government should encourage adoption and support parents who will provide and care for an adopted child, the legislation is in contradiction of the requirements of the recently certified Commonwealth Fiscal Plan.
Senate Bill 387 would have a negative fiscal impact that ranges from $115,849 to $3.8 million over five years, without specifying offsetting revenues or savings, the oversight board said.
“Putting aside the merits of the Bill’s purposes, any bill that has a negative fiscal impact without offsetting savings or new revenues is, by definition, inconsistent with the Fiscal Plan and in violation of PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act],” said the letter signed by Oversight Board Executive Director Natalie Jaresko.
However, if the bill is a priority for the Legislature, the oversight board said, it would be willing to work with lawmakers to discuss how the bill could be modified to be consistent with the Fiscal Plan and compliant with PROMESA.
The oversight board’s preliminary analysis of SB 387 indicates that the legislation is inconsistent with the Fiscal Plan as it provides increased tax exemptions for adoptive parents that would reduce tax revenue without providing offsetting revenues or savings.
The estimated fiscal impact reflects the combined revenue loss from the increase in tax deductions and lower expenditures on minors leaving the state care system. The wide fiscal impact range is due to the uncertainty of whether the policy will apply to all adopted dependent children or only to the children adopted after the law goes into effect, the board said.
“In sum, under either interpretation of the Bill, the increased tax exemption will reduce the taxable income of the adopting family and so reduce the personal income tax revenue of the Commonwealth without an equal reduction in the costs to the Commonwealth of caring for the adopted children,” the oversight board said.