Wednesday, January 29, 2020

US Senate passes tax reform legislation in a 51-49 vote

By on December 2, 2017

SAN JUAN – The U.S. Senate passed, in a 51-49 vote early Saturday, its version of the tax reform bill, the Tax Cuts and Jobs Act, which would negatively impact Puerto Rico as is.

The vote was a major victory for President Donald Trump. The only GOP senator to vote against it was Sen. Bob Corker, a Republican from Tennessee, amid concerns the legislation would significantly raise the deficit to the tune of $1.4 trillion over 10 years in order to cut taxes for businesses.

Puerto Rico made efforts to include amendments in the Senate bill that would declare the island a free-trade zone, but the bill was passed without language that would benefit the island, according to the Washington Post. The information could not be immediately confirmed.

Puerto Rico gov’t proposals for federal tax reform stress island isn’t foreign

Senators were given copies of the 500-page measure only a few hours before the vote and some complained they did not have enough time to read it. Several Democratic senators posted photos on social media of a page in the bill that even had handwritten notes.

They also criticize that the bill only lowers tax rates for individuals until 2026 while permanently reducing the corporate tax rate from 35% to 20%.

The vote was expected to be passed Friday when Senate Majority Leader Mitch McConnell had said had the votes needed for passage after a GOP lawmaker meeting to fine-tune the legislation, the Associated Press reported.

Sen. Ron Johnson of Wisconsin and Steve Daines of Montana, the two votes needed by the delegation, declared they would finally support the bill after complaining that pass-through companies, or those whose owners pay tax on income derived from that business in their personal returns, would be at a disadvantage under the reform.

Johnson said Republican colleagues accepted his request to increase the deduction on pass-through businesses, which was increased to 23% from 17.4% and would be offset by an increase to the one-time repatriation tax on multinational company earnings abroad.

Senate Republicans agreed to adopt a House proposal to levy a 14% tax on those companies’ liquid assets and 7% to illiquid ones, such as facilities, instead of the 10% and 5%, respectively that was being considered.

In the Senate bill, as well as in the House’s recently approved bill, Puerto Rico is considered a foreign jurisdiction for tax purposes. This means stateside-based companies on the island would pay a 12.5% tax on patents and intellectual property, according to the upper chamber’s version, while with the House’s bill, they would pay 20% on imports and 10% on profits.

A final bill would be handed to President Trump after both chambers hash out a compromise in conference committee, where Puerto Rico officials hope their lobbying efforts will result in favorable changes introduced for the island.

Puerto Rico fiscal board urged to engage in federal tax reform process

 

 

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