Congressional leaders announced today a deal on a landmark federal tax reform proposal that restructures both corporate and individual income tax obligations but does not contain relief for hurricane ravaged Puerto Rico.
When asked about Puerto Rico’s lack of inclusion in the tax package, House of Representatives Ways & Means Committee Chairman Kevin Brady explained that “the major Puerto Rico provision that we had pushed, which was to create and make them eligible for opportunity zones to help them rebuild…and economic development…ultimately did not pass [a procedural rule] in the Senate…and so the Speaker and I decided to put that provision on the supplemental after speaking with delegate Gonzalez to help continue to rebuild Puerto Rico. I think more can be done as well.”
The opportunity zone section of the tax proposal creates incentives to revitalize low income communities in states by deferring capital gains taxation on those investments. The provision applies to states, territories and Washington, D.C. The duration of the Opportunity Zone is 10 years from the date of designation. Gains from investments held for five and seven years would be progressively reduced, and if the taxpayer sells the asset after ten years, no capital gains are taxed at all.
House conferees proposed expanding the tax benefits at the request of Puerto Rico Resident Commissioner in the House, Jenniffer Gonzalez-Colon (R/NPP). It is this proposal, which was not made public, that Chairman Brady referred to in his press conference.
Originally introduced as the Investing in Opportunity Act/S. 293 (Sen. Scott (R-SC)), opportunity zones are intended to promote the creation of new channels for investment in small businesses, support entrepreneurs, develop blighted properties, invest in local infrastructure projects, and generally create new opportunities for local residents.
The bill’s original Senate cosponsors were strictly bipartisan: Cory Booker (D-NJ), Cory Gardner (R-CO), Gary Peters (D-MI), Michael Bennet (D-CO), Lindsey Graham (R-SC), Chris Coons (D-DE), Shelley Moore Capito (R-WV), Kirsten Gillibrand (D-NY) Todd Young (R-IN) and Mark Warner (D-VA).
Upon introduction, the group explained: “Too many American communities have been left behind by widening geographic disparities and increasingly uneven economic growth. We come from different parties and regions, but share the common conviction that all Americans should have access to economic opportunity regardless of their zip code. The Investing in Opportunity Act will unlock new private investment for communities where millions of Americans face the crisis of closing business, lack of access to capital, and declining entrepreneurship. American ingenuity has never failed us, and with this bill, we will dramatically expand the resources to restore economic opportunity, job growth, and prosperity for those who need it most.”
In addition, at tonight’s press event, when asked a follow up question about whether the bill – which makes the Child Tax Credit more generous for families in the 50 states – expands this popular federal program to cover the first and second born children in Puerto Rican families, who are now excluded, the Ways and Means Committee Chairman responded “not yet.”
Click here about previous efforts to include an expanded CTC in Puerto Rico in the pending tax legislation.
The House of Representatives is expected to vote on the final bill on Tuesday next week, with the Senate to follow shortly thereafter. Republicans’ efforts to pass the measure received momentum today when Senator Bob Corker (R-TN), who voted for the Senate bill in November, announced that he would support the compromise legislation. Senator Marco Rubio (R-FL), who pushed for an expanded child tax credit, brokered a deal with conferees and announced his support for the bill as well.
Click here to see the press conference. Puerto Rico is mentioned at 6:38 minutes.