Senators Urge Equity for Puerto Rico in U.S. Tax Credits

U.S. Senators Bob Menendez (D-NJ) and Marco Rubio (R-FL) introduced the Child Tax Credit Equity for Puerto Rico Act (S. 698) last year. Now they’ve written to Majority Leader Mitch McConnell (R-KY.) and Minority Leader Charles E. Schumer (D-NY) encouraging them to include its provisions in the coronavirus stimulus blll the Senate is planning.

Child Tax Credit

The Child Tax Credit is a refundable tax credit providing up to $2,000 per child for eligible families of which $1,400 is refundable. The credit reduces a family’s tax bill by that amount for each child in the family. For the refundable portion, the credit can reduce the tax bill below zero and provide a cash refund even for families who owe no taxes.

In all 50 states, the Child Tax Credit is available for every child in an eligible family. In Puerto Rico, there is no credit for the first and second children in a family. Only the third and additional children are counted in the Child Tax Credit. Since Puerto Rico’s average family size is just 3.43, very few people in Puerto Rico benefit from the Child Tax Credit.

“As you consider additional legislation to alleviate the economic impact of the COVID-19 pandemic, we write to urge you to include our Child Tax Credit Equity for Puerto Rico Act (S. 698) in any such package,” the senators wrote. “This common sense legislative solution has bipartisan support in both the House and Senate. If enacted, this bill would significantly reduce child poverty on an island plagued by recent hurricanes, earthquakes and the COVID-19 pandemic and where nearly 60 percent of its children live below the federal poverty line.”

“Current law allows families in Puerto Rico to be eligible for the federal child tax credit only when they have their third child,” the letter continues. “The first two children born to American families living in Puerto Rico never qualify for the tax credit. This long-standing discrepancy is fundamentally unfair to Puerto Rican families who should have access to the same tax incentive as families who live on the mainland.”

Earned Income Tax Credit

Senator Menendez also introduced legislation to extend the Earned Income Tax Credit to Puerto Rico and the other territories. S.3883, “A bill to amend the Internal Revenue Code of 1986 to make the earned income tax credit available to residents of possessions of the United States,” would do just that.

Democratic Leader Chuck Schumer (D-NY.) and Senators Richard Blumenthal (D-CT), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), and Kirsten Gillibrand (D-NY) cosponsored the bill.

“It is our responsibility to help our fellow American citizens living in Puerto Rico who are recovering from a string of natural disasters and a downward spiraling economy worsened by the effects of the COVID-19 pandemic,” said Sen. Menendez.  “By expanding the Earned Income Tax Credit we can help support working families in Puerto Rico and boost labor force participation on an island where nearly half of its residents live under the federal poverty line.”

Sen Warren said, “We must do everything we can to support our fellow U.S. citizens in Puerto Rico, who have been suffering from an economic crisis, were ravaged by natural disasters, and are now combatting this deadly pandemic. The Earned Income Tax Credit has a proven track record of raising earnings and lifting families out of poverty.”

The EITC, also a refundable credit, provides tax relief for working families. Studies have found that payments from EITC refunds are often used for transportation, training, and other expenses that help low-income workers keep their jobs and move up in their careers.

HEROES Act

The House of Representatives has passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, a coronavirus stimulus bill that includes tax credit equity for the territories. However, the Senate intends to develop its own bill on its own time frame. Senate leaders have explained that they want to see the results of earlier coronavirus bills before passing new relief legislation.

Senate leadership has predicted that their bill will be ready toward the end of July. The House and Senate will then negotiate to create a unified bill to send to the President for his signature.

However, Senators Rubio and Menendez pointed out in their letter that the CTC proposal has received bipartisan, bicameral support for years. “As you know, in 2016, the Congressional Task Force on Economic Growth in Puerto Rico report included a bipartisan recommendation that Congress provide parity in the child tax credit (CTC) for American families living on the island,” the authors wrote. “We hope that Congress will heed this recommendation by enacting this critical reform.”

Read more about the report from the Congressional Task Force on Economic Growth in Puerto Rico.

Read the full letter:

Menendez/Rubio Letter to Senate Leadership re Puerto Rico

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