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Task Force Recommendations Fall Short of Expectations

By on December 20, 2016

The Congressional Task Force on Economic Growth in Puerto Rico has made over 75 recommendations to Congress to jump start Puerto Rico’s economy that include dealing with the Medicaid “cliff,” competitive tax treatment for U.S. subsidiaries, granting child tax credits and increasing loans for small businesses and the rum cover-over tax.

The task force is also asking Congress for help in redeveloping the former Roosevelt Roads Naval Station in Ceiba and the Martín Peña Channel in San Juan, as well as keeping the Arecibo Observatory open.

Sen. Orrin Hatch, Task Force on Economic Growth chairman

Sen. Orrin Hatch, Task Force on Economic Growth chairman

While the group asked the U.S. Commerce Department to conduct a cost-benefit analysis about requiring Electronic Export Information (EEI) filings for air and maritime shipments between the States and Puerto Rico because this trade is interstate commerce and not international commerce, it did not call for the island’s exemption from maritime shipping laws.

Manufacturers Association President Rodrigo Masses said none of the recommendations will have an immediate impact on the local economy, which is what Puerto Rico truly needs. “It is not what I expected, but it is a start,” Masses told Caribbean Business. “Puerto Rico needs short-term and long-term help…. We do need to do more work.”

While U.S. lawmakers have already said they will not deal with the subject of status, the task force says if Puerto Rico holds the plebiscite authorized by Congress, they should take adequate action. Pro-statehood supporters say the island status has contributed to its fiscal crisis, while the current administration says it was the repeal of Section 936 tax credits that began the island’s downward fiscal spiral.

 

Importance of healthcare, social welfare funds

The task force was directed to produce a report that identifies impediments in current federal laws and programs to economic growth in Puerto Rico. In its 125-page report, the group is recommending that Congress enact legislation in early 2017 to address the impending Medicaid “cliff ” so the Health Services Administration can have certainty when formulating capitation payment contracts with its managed care organizations. Federal financing of the Medicaid program in Puerto Rico and the other territories should be more closely tied to the size and needs of the territory’s low-income population.

In Part A, the task force says Congress should provide increased flexibility to the U.S. Department of Health & Human Services to ensure local hospitals are being fairly compensated under a federal program that provides extra payments to hospitals that treat a large percentage of low-income and other vulnerable patients. The group is asking that Medicare beneficiaries be automatically enrolled in Medicare Part B with the option to opt out of coverage. Congress and the Centers for Medicare & Medicaid Services should consider whether additional steps may be warranted to ensure that Medicare Advantage plans in Puerto Rico and the rest of the nation are being fairly and properly compensated for the services they provide to beneficiaries.

Unlike their counterparts in the States, low-income seniors in Puerto Rico and the territories are not eligible for the Low-Income Subsidy. Instead, each territory receives a relatively small annual block grant, under the so-called enhanced allotment program (EAP), which it can use to help low-income seniors afford prescription drugs. The task force says Congress should eliminate the matching requirement for each territory and eliminate the EAP program.

Regarding social welfare, the task force said families in Puerto Rico with one or two children should be able to claim the additional child tax credit to inject $2.9 billion in the economy. The group also says Congress should examine Puerto Rico’s treatment under the Aid to the Aged, Blind & Disabled program, which applies in the territory in lieu of the far better Supplemental Security Income program and include the island in the latter.

 

Myriad economic ‘wish list’

In the economic area, the task force says Congress should make the rum cover-over permanent and increase the cover-over payment from the current $13.25 per proof gallon to $13.50 per proof gallon.

Although business groups requested tax credits for local U.S. subsidiaries, the task force conditioned the approval of competitive tax treatment to U.S. corporations in Puerto Rico to job creation.

The group says Congress should amend the Internal Revenue Code Section 199 domestic production activities deduction, which reduces federal taxes for U.S. companies that operate on the island, so it applies to Puerto Rico on a permanent basis. The task force also called for amendments to Section 181 so film and television producers can receive the same tax benefit for filming in Puerto Rico that they receive for filming in the 50 states. Puerto Rico already has local film credits.

To help make energy affordable, the task force says the U.S. Department of Energy should appoint a team of experts to develop an energy action plan for the island.

The task force recommended steps to enable local entities to better compete for competitive funding under multiple programs administered by the Community Development Financial Institutions Fund, including the New Markets Tax Credit program.

To help small businesses, the task force called for Congress to increase the percentage of small-business loans the Small Business Administration (SBA) guarantees in Puerto Rico; temporarily eliminate or reduce fees to receive an SBA-approved loan; consider giving contracting preference in federal contracts to local businesses and authorize the SBA to make loans available to help small firms recover from economic injuries caused by health-related travel advisories, such as those issued by the Centers for Disease Control & Prevention in connection with the zika virus.

The group added that the 13 federal statistical agencies must include Puerto Rico in statistical programs, and asked that the U.S. Chief Statistician, within the Office of Management & Budget, prioritize Puerto Rico’s inclusion in federal statistical programs.

In the area of infrastructure, the task force says the government of Puerto Rico, in conjunction with the Revitalization Coordinator established in the Puerto Rico Oversight, Management & Economic Stability Act must prioritize the redevelopment of the former Naval Station Roosevelt Roads; the National Science Foundation take all feasible steps to keep the Arecibo Observatory open; Congress should evaluate the state of solid waste landfills and the U.S. Army Corps of Engineers and the federal sponsored Enlace organization finalize the restoration of the Martin Peña Channel.

The task force says Congress must authorize the U.S. Treasury Department to provide technical assistance to the government of Puerto Rico to help it improve its financial management and tax collection systems. The group also says Congress must take steps to reduce drug trafficking in Puerto Rico and the U.S. Virgin Islands.

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