The Value of Giving: The Cost of Complacency
During the nearly five years I have been on the island of Puerto Rico, I have seen the Acts 20/22 program grow from a dozen or so grantees to well over 1,000 in this brief timeframe. This is a great success by almost any measure, yet it is not without some costs.
At the 20/22 Act Society’s biannual events and the numerous smaller gatherings we host, we invite both leaders of the local community and current and future recipients of Acts 20 and 22. At these gatherings, I always stress the importance of giving back to the island, becoming integral members of the community and providing opportunities for local workers and businesses.
The members of the 20/22 Act Society, by the very nature of their membership, have demonstrated their commitment to giving back to the island through the charitable efforts of the 20/22 Foundation and their interest and willingness to expand and seek new opportunities locally. However, not everyone who is here to take advantage of the Acts is similarly invested. Many in the local Puerto Rican community view recipients as taking advantage and not contributing much outside of buying multimillion-dollar homes in gated communities and high-rises on the beach.
Nick Prouty and Keith St. Clair are recognized names to many locals because they have been willing and able to make significant investments in the island, but they are the minority.
Last year, we had an event highlighting an amazing law, called PE185, which allows local investment incentives (up to a 60% write-off on one’s personal taxes) on the amount of the investment. There is nothing even close to this tax incentive in the States and yet, out of the estimated 100 high-net-worth investors in attendance, only a handful inquired further to learn more.
There is also Law 120 that encourages local investment and helps pay for the cost of hiring locals who have limited skill sets by reimbursing up to 50% of those wages and allowing for a 5% income-tax rate that scales up modestly to 15%. This law should certainly be of interest, but considering that many new recipients are unwilling or unable to hire a substantial number of employees, it is underutilized.
Unsurprisingly, there is simmering animosity among a growing contingent of people about whether these laws should continue as currently written. Locals can benefit from Law 20, but most do not know this. One 20/22 Society role is to introduce local opportunities to the 20/22 community at large, provide accurate information and dispel myths to prevent further division. We recently worked with the municipality of Guaynabo to craft incentives for those who locate their offices there. We see this as a win-win for both local businesses and recipients, and continually seek to create more of these opportunities.
Unfortunately, we do not have the power to force all recipients to do the right thing, and we meet with potential new recipients weekly who are not interested in giving anything to the island. Because there is the perception that the local contribution has been so little and exclusionary, there is another bill, which some recipients object to, that would require an annual charitable donation of $5,000 per each Act 22 grantee. Our members fully support this requirement, understanding that if each recipient gave, at minimum, $5,000 to his or her charity of choice, it would create both positive visibility and positive results for the island.
It is surprising how many recipients believe their decrees are immutable. They are not. Some local politicians are already seizing upon local anger and using that as a platform to garner support at our expense. An example of this is legislation recently introduced to eliminate Laws 20/22 is called Senate Bill 502. SB 376 was also introduced to require grantees to stay for their full term, plus an additional five years after the term ends, and pay normalized tax rates during those extra five years or face claw back.
Recipients need to decide if they are going to perpetuate negative perceptions and risk these amazing incentives by failing to invest in Puerto Rico and give back to an island that is in such need, or if they are going to commit to local investment, hiring and involvement. The Society will continue to do everything possible to lead the way to encourage current recipients and new ones alike of the value of these actions that lead to a win-win for recipients and this generous island. Everyone’s future here depends upon it.