Sunday, October 24, 2021

Dignity Project candidate for Washington aims for permanent tax incentives to attract manufacturing

By on November 2, 2020

Ada Norah Henríquez, Proyecto Dignidad’s candidate for Puerto Rico resident commissioner in the U.S. Congress (Courtesy)

Henríquez would push for Controlled Territorial Enterprises (CTEs) if elected resident commissioner; seeks Medicare drug parity for low-income seniors 

Editor’s note: Read about the other candidates for resident commissioner in the Oct. 29 to Nov. 4 issue of Caribbean Business.

SAN JUAN — Attorney Ada Norah Henríquez, who is running for resident commissioner on the Proyecto Dignidad (Dignity Project Party) ballot, seeks to recharge Puerto Rico’s economy by pushing for key legislation in Washington to benefit local businesses—with special emphasis on a new, permanent tax status for U.S. controlled foreign corporations (CFCs) to attract manufacturing on a more stable basis. 

In her first bid for Puerto Rico’s only seat in the U.S. Congress, Henríquez is proposing to amend the U.S. Internal Revenue Code to allow American manufacturers that relocate to the island and other U.S. territories to register as Controlled Territorial Enterprises (CTEs), a federal tax status that would be distinct from CFCs and domestic corporations. 

Puerto Rico, an unincorporated U.S. territory, is considered a foreign jurisdiction for federal tax purposes. 

The Proyecto Dignidad candidate would also amend President Donald Trump’s 2017 Tax Cuts and Jobs Act to reduce the global intangible low-taxed income (GILTI) rules for CFCs operating in U.S. territories, including Puerto Rico, by 50 percent between 2020 and 2026. She also proposes reducing the base erosion anti-abuse tax (BEAT) by 50 percent for those same years. 

Approval of these measures would establish a tax treatment at the federal level that would be “coherent, just and, above all, stable,” allowing Puerto Rico to develop strategies for economic growth, Henríquez said in an interview with Caribbean Business. 

“We would leave behind the tax disadvantage of being treated as a foreign country, which we are not, and it would generate stability in manufacturing operations in Puerto Rico. It would not only be attractive for pharmaceutical companies but also for other industries such as electronics,” she said, noting that the tax incentive would not be a temporary measure based on national security concerns due to the Covid-19 pandemic and targeted to economically depressed areas, which is the basis of legislation filed in Congress by incumbent Resident Commissioner Jenniffer González. 

Henríquez explained that Puerto Rico’s manufacturing workforce and infrastructure has greater global recognition than it did in 1976, when section 936 of the U.S. Internal Revenue Code was approved by Congress, which attracted pharmaceutical and medical device operations to the island.  

“When in 1976 section 936 was created, the idea was to create jobs but, instead, a tax haven was created,” the attorney said. “Then you had talk in the United States of unfair treatment for other industries. Now, with this crisis, we are in the same position that we were in 1976… Back then we were in a financial crisis but we had nothing to offer because we had the employees but the [industry] expertise had not been developed. We were not recognized at a worldwide level for that infrastructure. But in 2020, we do have those assets to offer.”  

Several bills have been introduced in Congress to facilitate reshoring to U.S. territories, particularly Puerto Rico. 

González’s bill, the National Supply Chain Act of 2020 (H.R. 6443), cosponsored by Florida Sen. Marco Rubio, would provide incentives to manufacturers to relocate to economically depressed areas, also known as distressed zones, in the United States, including the territories. The bill would provide a dollar-for-dollar credit against federal taxes to U.S. companies for 50 percent of wages, investments and purchases made in the areas by manufacturing operations producing needed medical supplies shifted from overseas locations.  

Another bill was filed by U.S. Virgin Islands Delegate Stacey Plaskett. The congresswoman’s measure would eliminate GILTI rules for CFCs operating in U.S. territories, including Puerto Rico, that restrict deferral of federal taxes and require these companies to pay a minimum income tax.   

Former Puerto Rico Gov. Aníbal Acevedo Vilá—who served as resident commissioner is running for the congressional seat again in the Nov. 3 elections—told Caribbean Business last month that he has used his influence on Capitol Hill to get colleagues such as New Jersey Democratic Sen. Bob Menéndez and Mississippi Republican Sen. Roger Wicker, chairman of the Commerce Committee, to introduce legislation that would also amend GILTI rules for CFCs operating in Puerto Rico to attract pharmaceutical investments and jobs. He said the legislation was introduced in the House last week by New York Democratic reps. Nydia Velázquez and Tom Suozzi, who is a member of the House Means and Ways Committee. 

Henríquez said that if elected she would follow up on these measures, but would give priority to her proposals. 

“I would not have any problem with following up [on those measures], but I would not give up on this alternative,” she said. “These other measures are temporary and will lead to another type of crisis when these industries grow and others feel they are discriminated against. They would be like putting another Band-Aid on Puerto Rico, a temporary solution to a problem that is organic.

“My proposal could be a parallel measure to the others that is stable and healthy because it would allow the creation of other businesses around these industries. It would be organic and the companies would not be waiting for a window to open to take off with the profits from the patent, because there is no greater commitment for permanence.” 

Henríquez would also push for approval of the Small Business Contracting Act, which she said was filed specifically for Puerto Rico by Rep. Velázquez, and would double the number of contracts that small and midsize businesses can obtain from the federal government. The measure requires Puerto Rico’s Financial Oversight and Management Board (FOMB) to expedite the approval of these contracts, she said.  

“The aim here is to assure that locally based businesses can benefit. Many times, U.S.-based firms that know how to manage these funds are the ones that land the contracts. We want to ensure that Puerto Rican companies can participate,” she said. “Moreover, federal agencies with real estate properties in Puerto Rico that they are not using are provided with the opportunity to businesses to have their properties in Puerto Rico, free of cost. This is to benefit new entrepreneurs, particularly women who want to start out in business.” 

Despite assurances by Acevedo Vilá that he got Congress to pass equality of treatment for Puerto Rico in the 2003 Medicare Modernization Act, which introduced a Part D entitlement benefit for prescription drugs for senior citizens, Henríquez said the island is still not covered by Medicare’s Low Income Subsidy Part D. She said obtaining parity in this regard is one of her major goals in Washington. 

“What Puerto Rico gets for medications is less than what the states get,” she said. 

Metrics to stem fed funding loss

In fact, another major objective for Henríquez as resident commissioner would be to ensure Puerto Rico receives the full allotment of federal funds for emergency and recurrent programs. She said situations like the recent loss of $1 billion in Medicaid allocated to Puerto Rico that went unused cannot occur again, adding that as resident commissioner, her office would push local agencies to “establish metrics” for the immediate use of those funds. 

“The problem in Puerto Rico is that we are assigned a large amount of funding and we allow the deadline on their use to expire and lose those funds,” she said. “Those metrics will not only allow us to be agile in the use of those funds but also build up credibility in their use, because corruption involving the use of federal funds costs us a dollar for every dollar of federal funds assigned to Puerto Rico. This means a reduction of 50 percent in the allotment of federal funds.” 

Henríquez, who served as director of the legal division of the Puerto Rico Infrastructure Financing Authority (Prifa) under former Gov. Luis Fortuño, said she would push for hiring bilingual liaisons between local and federal governments in each commonwealth agency, as well as create an office to assist citizens and agencies with the protocols and translations involved in crafting proposals for federal funding.  

“For example, if we have $1 billion and the money must be used before a certain time, we not only must establish what we want it for but also how will we use it on a monthly basis,” the Proyecto Dignidad candidate explained. “If we only use $80 million of $100 million allotted for a certain month for bedridden patients at home, that allows me to look into the deficiencies, where the money is and what can be improved, so that gradually we can see the advances in the administrative part, overcoming the challenges and being accountable. Why are we not using money for essential services? It makes no sense. That is why we need periodic evaluations that we have yet to have.” 

Henríquez said that federal funding is being handled by commonwealth agencies for federal programs for which they have no expertise, citing as an example federal Community Development Block Grant-Disaster Recovery (CDBG-DR) Program funds assigned to the Puerto Rico Housing Department for agricultural programs. 

“I am worried that the agency is not agile enough to use these funds. They would have to subcontract people to comply with fund guidelines,” said the attorney, who also served as deputy administrator of resident occupation at the Puerto Rico Public Housing Administration under Fortuño. “This reduces the money that the people get.” 

Commitment to solve status 

Henríquez said she believes that Puerto Rico’s political status conundrum cannot be solved with either a constitutional convention nor a referendum, until the commonwealth “enters into an agreement with the U.S. Congress so that it lays out the conditions for an immediate transition for each status preference.”  

“And we must see where Congress has its heart in terms of status options, where are they willing to cede or not, and we should know this before choosing,” she said. “So that when people choose any status option, whether it be statehood, independence or associated republic, they will know what will happen immediately after all the votes are counted… as well as the Congress, which would have committed to a solution. This is will be the sixth status vote and Congress has always crossed their arms and said they are not bound by such votes.” 

Regarding legislation introduced by Rep. Raúl M. Grijalva (D-Ariz.), chairman of the House Committee on Natural Resources—which oversees Puerto Rico matters—to curb the powers of the island’s Financial Oversight and Management Board (FOMB), created to lead commonwealth debt restructuring efforts, Henríquez said that “there are parts of Grijalva’s measure that are common sense, such as declaring as essential services public safety and education.”  

“Now the oversight board is changing its makeup and that brings an additional problem,” she said. “This is the case with the appointment of [Justin] Peterson, who is linked to bondholders and was bound to have a conflict with the board. His presence there constitutes an appearance of a conflict of interest, undermining the credibility of the oversight board.” 

Henríquez would also pursue a human and a faith rights agenda in Washington, including pushing for legislation to fight the sexual exploitation of children online and trafficking of minors in prostitution rings.  

BIO: Ada Norah Henríquez 

  • Born Oct. 31, 1970 
  • Graduated from Dra. María Cadilla de Martínez High School in Arecibo (1986) 
  • Bachelor’s degree in psychology, University of Puerto Rico (UPR) (1990) 
  • Juris doctorate degree, UPR School of Law (1997) 
  • Certified as Mediator and Arbitrator (2005) 

Professional Life: 

  • Social worker and family therapist, New York Foundling Hospital (1990-1994) 
  • Admitted to U.S. District Court in San Juan (1998) 
  • Private practice in litigation (1998-2009) 
  • Director of the legal division of the Puerto Rico Infrastructure Financing Authority (Prifa) (2009) 
  • Lecturer on issues concerning constitutional law, juvenile delinquency and criminology, University of Turabo in Yabucoa (2009-2010) 
  • Deputy administrator of resident occupation at the Puerto Rico Public Housing Administration (2010) 
  • Private practice in federal bankruptcy (2011-Present) 

Community Activism: 

  • Spokeswoman for the Defense of the Family Citizen Coalition (2008) 
  • Ad-honorem member of the Defending Freedom Alliance (2008-Present) 
  • Collaborator with initiatives of the Family Research Council (2011-Present) 
  • First spokeswoman for the Citizen Interaction with Police Committee in the Humacao region (2012-2015) 
  • Pastoral liaison with the Municipality of Yabucoa for the Decree of Fasting and Prayer (2014-2016) 

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