Judge to hear arguments over Puerto Rico Sales Tax Financing Corp.
SAN JUAN – U.S. District Court Judge Laura Taylor Swain will hear arguments Tuesday over the constitutionality of the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym).
The judge will hear arguments in connection with requests for summary judgments related to an adversary proceeding that was begun last year to resolve the so-called Commonwealth-Cofina dispute. At issue is whether, after considering all procedural and substantive defenses and counterclaims, including constitutional issues, the sales and use taxes pledged by Cofina to secure debt are the property of the commonwealth.
Cofina agent Bettina Whyte filed a motion for summary judgment stating that the dedicated sales tax fund and the pledged sales tax revenues are not the property of the commonwealth and should not be used to pay general obligation bond creditors.
The Cofina bonds are non-recourse bonds that are payable from and secured by a security interest in sales and use tax collected by the government. The money is used to pay commonwealth expenses.
If the judge decides the taxes belong to the commonwealth, there could then be no funds to pay Cofina debt. If they belong to Cofina, the commonwealth would not have access to these funds to pay its other liabilities and expenses.
Judge Swain gave each party 90 minutes to present their side.