Oversight board warns gov’t over municipal tax implementation

Vicky González Vega, deputy executive director of the Puerto Rico Fiscal Agency and Financial Advisory Author

By THE STAR STAFF

The Financial Oversight and Management Board for Puerto Rico has raised concerns that two recently enacted laws -- Act 141-2024 and Act 215-2024 -- may be implemented by municipalities despite failing to meet federal requirements under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA).

In a letter dated Dec. 30, 2025, addressed to Vicky González Vega, deputy executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF by its initials in Spanish), the oversight board said it has not received critical information about the laws’ compliance with the Fiscal Plan and PROMESA, nor confirmation that they are not being enforced locally. The board noted indications that portions of Act 215 are already in effect.

Act 215 amends the Puerto Rico Municipal Code to allow municipalities to impose construction excise taxes on projects carried out for legal entities -- even if those entities are exempt from such taxes. Such impositions could include projects funded by commonwealth or federal dollars, with municipalities potentially applying higher tax rates than usual.

The oversight board warned that taxing federally funded projects could jeopardize more than $4 billion in obligated federal funds, including disaster recovery and infrastructure initiatives.

“Taxing these projects could be viewed as a misuse of federal funds and discourage future allocations to Puerto Rico,” the letter stated.

The board also argued in the letter that such taxes could undermine energy infrastructure reconstruction efforts, increase project costs, and deter competitive bidding -- contradicting the Fiscal Plan’s economic growth goals.

“Such taxes obviously make the projects more expensive,” the oversight board said. “In doing so, they can render projects less profitable or even unprofitable, thereby discouraging necessary construction projects from proceeding or causing planned construction projects to be abandoned. Similarly, the increased costs imposed by excise taxes can dissuade the best developers from bidding on projects, potentially depriving the commonwealth of the best vendors and/or limiting bidders such that the commonwealth does not obtain the most competitive pricing.”

The oversight board emphasized that the island government has repeatedly missed deadlines to provide required certifications and assurances. Despite extensions granted through October 2025, the board said it still lacks confirmation that municipalities are adhering to pre-Act 215 and pre-Act 141 procurement requirements.

The board directed the government to submit all outstanding materials by this Friday, warning that it reserves the right to take actions under PROMESA to nullify or prevent enforcement of the laws if compliance is not achieved.