Rep. Méndez Núñez warns of effect on PR should the Inflation Reduction Act become law
By John McPhaul
Rep. Carlos “Johnny” Méndez Núñez, the New Progressive Party (NPP) minority leader in the island House of Representatives, warned on Monday about the impact on Puerto Rico if the Inflation Reduction Act, approved on Saturday in the U.S. Senate, becomes law.
The lawmaker noted that the Senate, in a partisan vote (51 Democrats in favor and 50 Republicans against) endorsed the imposition of a 15 percent tax rate on any company that generates more than $1 billion in profits, a situation that could affect Puerto Rich directly, he said.
“The Senate, with the vote of the vice president, Kamala Harris, approved a minimum fixed rate of 15 percent on a series of companies that operate in the nation and its territories, such as Puerto Rico. This impacts around 150 companies, half of them in manufacturing. There is no doubt that this will have an effect on these types of companies that operate on our soil,” Méndez Núñez said in a written statement. “That is why we urge the members of the federal House of Representatives to amend the ‘Act’ to exclude the island from that application.”
The U.S. House of Representatives, controlled by Democrats, hopes to endorse the inflation reduction bill this month. While President Joe Biden is sure to sign it as soon as it lands on his desk.
In addition to the imposition of a new minimum contribution of 15 percent on all corporations that generate over $1 billion in annual profits and report some operating losses on their books, the new tax platform is very complex and, according to experts, will have the effect of increasing product costs in a dual way: due to its direct implementation and due to the sophistication of its tabulation.
“According to experts, 49.7 percent of the companies that are impacted by this new law are associated with manufacturing,” Méndez Núñez said. “This is one of the sectors that, after years of near inactivity, mainly due to the COVID-19 virus pandemic, is finally beginning to stand out on the island. We definitely have to act and we will. I urge the Democratic leadership, mainly Speaker Nancy Pelosi (D-Calif.) to amend this bill to exclude territories, such as Puerto Rico, from its application in this line of taxation.”
The NPP vice president said the new tax imposition is similar to the international mandatory tax of 15 percent on basically this type of corporation -- something that has not generated interest in Congress.
“An amendment that can help us is that companies eligible under the new law pay that 15 percent to the government of Puerto Rico and that said amount paid be recognized as a credit in their federal taxes,” Méndez Núñez said. “This would be something similar to Law 154-2010 and it would help us. That is, in the worst case.”