ECONOMIC incentives & Taxes

“We must create even further tax fairness for our middle class.”
~ Governor Luis Fortuño

Economic Incentives and Equality in Federal Support Programs

Letting people keep more of their money through measures like income tax credits has a significant impact on the lives and communities of our nation’s lowest paid working people. These incentives help lift millions of low and moderate-income families above the federal poverty line.  These credits are particularly important as millions of Americans struggle with the economic crisis, which makes it harder to pay bills and save for the future.

Governor Fortuño is working to have federal tax incentives extended and expanded for Puerto Rico’s individuals and families.

Refundable Child Credit – Families in Puerto Rico are eligible for the Child Credit payments only if they have three or more children.  Governor Fortuño is working to have low-income Puerto Rican workers with one child or two made eligible.

First enacted in 1997, the Child Credit provides financial assistance to working families in the States with children in the form of an income tax credit of $1,000 for each child under the age of 17.  To the extent that eligible families do not have sufficient taxable income to claim a credit against income taxes, they may receive equivalent assistance based on payroll taxes.  This year’s American Recovery and Reinvestment Act made families with lower incomes eligible for the assistance payments. President Obama has proposed to make this expansion permanent. He also has indicated he supports making low-income Puerto Rican workers with one or two children eligible for the credit.

Refundable Earned Income Credit – Governor Fortuño is working to have the credit extended to low-income workers in Puerto Rico. President Obama has supported this.

First enacted in the 1970’s, the earned income tax credit provides financial support to low-income families with children and childless adults in the 50 states and the District of Columbia.  Because the credit is refundable, workers need not owe taxes to receive the benefits, but can receive assistance equal to the tax credit by filing a federal income tax return.  Residents of Puerto Rico have been excluded from the Refundable Earned Income Credit altogether.

Making Work Pay – Under the American Recovery and Reinvestment Act of 2009, low- and middle-income taxpayers were given a $400 tax credit per individual/$800 per working family to help with expenses for two years in these difficult economic times.  The assistance was extended to Puerto Rico through a grant to its Treasury Department. 

President Obama has proposed extending the credit permanently. Governor Fortuño is working to ensure that the assistance is extended permanently for taxpayers in Puerto Rico.

American Opportunity Credit – The American Recovery and Reinvestment Act of 2009 created a new tax credit to help low and middle-income students pay for college tuition and related expenses.  Governor Fortuño is working to ensure that the assistance is extended permanently for students in Puerto Rico.

A portion of the credit -- up to $1,000 -- is refundable, that is, can come in the form of direct assistance rather than a tax credit.  This assistance was extended to Puerto Rico through its Treasury Department.   President Obama has proposed extending the credit permanently.  

Equality in Economic Development Programs

Underdeveloped Communities Legislation – Improving the economic conditions of underdeveloped areas and communities can help jumpstart business and residential development.  The federal government offers a number of incentive programs aimed at encouraging investment and economic growth in underdeveloped communities.

This year Congress will consider proposals for the following incentive-based programs: to renew and possibly enhance provisions establishing Empowerment and Enterprise Zones, Renewal Communities, and the DC Enterprise Zone, providing tax incentives to invest in area needing economic assistance including wage credits, accelerated write-offs of investments in plants and equipment, and exclusions of capital gains from taxation.. 

Governor Fortuño will work to ensure that equivalent investment incentives are extended to Puerto Rico.  President Obama is committed to proposing measures for job-creating investments in the territory.

Domestic Manufacturing Tax Deduction – Current law provides a reduction in federal corporate taxes for manufacturing income from domestic areas of the United States from the .  regular 35% rate to 32%.  Governor Fortuño is working to have a permanent reduction for manufacturing in Puerto Rico.

As Resident Commissioner, Governor Fortuño succeeded in having the reduction available to companies charted in the States or the District of Columbia that manufacture in Puerto Rico.  While the reduction is permanent for income from manufacturing in the states and D.C., the reduction for Puerto Rico is temporary.  It has been extended through the end of 2009. 

Rum Tax Cover Over – federal government rebates to the governments of Puerto Rico and the Virgin Islands a share of the federal excise tax collected on rum imported Permanent law grants Puerto Rico and the U.S. Virgin Islands $10.50 per proof gallon of the $13.50 federal tax on rum produced in the territories and foreign countries.  Temporary law grants an additional $2.75 per proof gallon, for a total of $13.25, through 2009. 

Governor Fortuño is working to further extend the $13.25 grant.

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