Wednesday, July 18, 2018

Puerto Rico gov’t extends emergency period under moratorium act

By on July 19, 2017

SAN JUAN — On Wednesday, Puerto Rico Gov. Ricardo Rosselló signed into law House Bill 1133, which extends the commonwealth’s emergency period under the Financial Emergency & Fiscal Responsibility Act until at least Dec. 31.

The fiscal emergency law, or Act 5 of 2017—this administration’s spinoff of former Gov. Alejandro García Padilla’s Emergency Moratorium & Financial Rehabilitation Act—allows the commonwealth to impose a moratorium on its debt service obligations, as well as to redirect, or claw back, certain revenues that previously covered public debt payments.

Puerto Rico Gov. Ricardo Rosselló and his representative before the island’s financial control board, Elías Sánchez. (CB Photo)

The emergency period was set to expire Aug. 1, after Gov. Rosselló extended its duration on April 30 via executive order. Act 5 originally provided for an emergency period that would last until May 1, but allowed the governor to extend it by an additional three months.

The new amendments to Act 5 redefine the emergency period’s term, which now runs until Dec. 31. After this, the governor may sign executive orders to extend it for six-month terms while the island’s fiscal control board is in place.

As the commonwealth embarks on bankruptcy proceedings under Title III of the federal Promesa law, a legal stay broadly applies to creditor actions that may arise from the government’s use of moratorium and fiscal emergency powers provided under Act 5.

House Bill 1133, moreover, amends other laws in a bid to increase government revenues. It also seeks to ensure compliance with the commonwealth’s certified fiscal plan, Public Affairs Secretary Ramón Rosario said in a written statement.

For instance, certain businesses will now have to remit the sales tax they charge on a bi-weekly basis, instead of monthly. This will apply to businesses whose average monthly sales tax deposits during the previous calendar year exceed $2,000 a month.

The recently signed bill also intends to increase collections of the island’s room occupancy tax by allowing entities such as Airbnb and Homeaway to collect the tax and send it directly to the commonwealth government.

Rosario stated that without this bill, “there was no legal responsibility for these companies to collect the room tax.” He added that the revenue-enhancement measures under House Bill 1133 will help the commonwealth improve its cash flow position.

Lastly, the measure also amends Act 3 of 2017—or the Act to Address the Economic, Fiscal & Budgetary Crisis to Ensure Government Operations—so that instead of sending quarterly reports on how they met obligations and targets under the law, covered agencies would do so every semester.

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