Saturday, December 15, 2018

X-Ray of Foreign Corporations in Puerto Rico After Hurricane Maria

By on September 20, 2018

Editor’s note: The following report originally appeared in the Sept. 20, 2018, issue of Caribbean Business.

BY RAFELLI GONZÁLEZ COTTO AND EFRÉN RODRÍGUEZ MARTÍNEZ

A list of foreign corporations authorized to do business in Puerto Rico provided by the local State Department revealed that between September 2017 and August 2018, 1,146 foreign companies received government approval to establish themselves on the island.

During the specified period when these companies from abroad were duly registered to operate locally after hurricanes Irma and Maria struck the island in September, up until August of this year, the monthly trend of corporate formations rose from tens to hundreds. May 2018 saw the largest number of registered businesses: 115. Meanwhile, the month with the fewest registrations was September 2017, naturally due to the effect of back-to-back hurricanes affecting government operations, and when only eight companies were approved.

Although Puerto Rico’s controlled foreign corporation (CFC) structure allowed income from products sold to the U.S. mainland to be exempt from federal taxes, on Dec. 22, President Trump signed the Tax Cuts & Jobs Act, under which the island is now treated as a foreign jurisdiction, and forces companies to pay higher taxes than corporations on the U.S. mainland. CFCs on the island must now pay a 12.5 percent tax on intellectual property.

This development did not seem to stem the flow of registrations, as most of the corporations, or 1,122 of them, came from several U.S. states. Of these, 1,031 are for-profit companies and 91 are nonprofits. Of the stateside-based companies, 449 are corporations and 569 are limited liability companies (LLCs).

Among the new companies on the island that stood out on the list is Barclays Capital Real Estate Inc. It offers mortgage collection, liquidation, property valuation and real-estate-owned management services. The loan servicer also provides interim, primary, default, backup and subservicing; as well as reconveyance, trail document and overflow processing services.

According to Bloomberg, the company was formerly known as HomEq Servicing Corp., but “changed its name to Barclays Capital Real Estate Inc. in November 2006.” The company was founded in 1993 and is based in North Highlands, Calif. “As of August 2010, Barclays Capital Real Estate Inc. operates as a subsidiary of Barclays PLC.”

However, its business in Puerto Rico will be limited to the “origination of commercial mortgage loans,” according to the State Department registry. Another 12 corporations declared an interest in providing services in the island’s mortgage industry.

Meanwhile, 139 foreign companies requested authorization to conduct business in Puerto Rico’s construction industry–to provide building materials and labor, as well as consulting and other services. A quick online search using the keyword “hurricane” produced 37 results for companies that used the word to describe their commercial activity on the island. Among these companies, debris removal, and recovery and relief efforts were the most common operation descriptions cited.

Another LLC that stood out was 13 Tons. According to its LinkedIn account, the business has “1-10” employees. Its website–which only says it has an inventory of “thousands of items essential for process manufacturing, including valves, heat exchangers, tanks, agitators and vessels” after acquiring an abandoned project to build a 60 million-gallon ethanol plant–indicates that its main corporate office is located in San Clemente, Calif.

Curiously, however, its description on the State Department registry reads, “All permitted commercial activity included but not limited to the installation of blue tarps/roofs as part of relief efforts for damages caused by hurricanes Irma and Maria.” Two additional companies included “blue tarp” as part of their product or service offering.

Twenty companies list their business as providing services to the Federal Emergency Management Agency (FEMA). According to the registry, among the most repeated commercial activities are grant management, general contractor, parts and supplies, corporate housing for workers and technical consulting.

The local insurance market caught the interest of 60 foreign corporations, with public adjusters being the predominant commercial activity found in the document. Other services, such as catastrophe-claim consulting; and business, personal and life insurance, are the most repeated among new businesses with a presence in Puerto Rico.

Eight corporations came to the island to offer community assistance, according to the document.

Where are they from?

The states from which the largest number of companies–which in descending order fluctuate from hundreds to then dozens–that came to Puerto Rico were Delaware, Florida, Texas, Louisiana, New York, California, Georgia, Virginia, Maryland and Pennsylvania. Naturally, Delaware is where most companies were incorporated because of the tax advantages that state offers, or 268 companies, of which 262 are for-profit and six nonprofit.

Of the total number of companies, 24 are listed as international, or coming from countries in the Caribbean; Latin, Central or North America; Europe; and Africa, the Bahamas, Chile, Panama, Mexico, Canada, Spain, Poland, the Netherlands, Austria, United Kingdom, Switzerland, Norway and Morocco. Of these companies, 22 are for-profit and only two are nonprofit, while 12 are corporations and 10 are LLCs.

However, with respect to the type of organization, of these 22 companies, only two included details, with one “community based,” providing “economic, social and community” services, and another describing itself as offering services of a “religious” nature. The same field for the other 20 companies are marked with N/A, the abbreviation for either not applicable, not available or no answer.

Moreover, as can be inferred from the State Department data, of all the companies, the number that classifies them as “philanthropic” totals 25. Of these, six specify their services as “economic, social and community” related; six have “other” in the type of organization text field; five provide “educational research services”; three “health” services or products; two put down “housing”; two “donation”; and one “religious.” Under this column, all are U.S.-based nonprofits.

Eighteen companies are classified as “community-based.” Of these, six detail that the organization’s services are “economic, social and community” in nature; two are dedicated to “educational research services”; two say “health”; two only say “other”; two filled in the text field with “art and culture”; one with “social”; one with “housing”; one with “legal and right defense”; and another with “international activities.” Under this heading, all are stateside nonprofits, except for one, which is listed as an international company, because it is geographically outside the United States. On the other hand, 15 companies are classified as “religious” organizations. Of these, 10 detail that the nature of their services is “religious,” while three are denominated as “other”; one “economic, social and community”; and one “social.” Under this line, all are U.S. mainland nonprofits, except for one that is listed as international.

Fifteen foreign corporations are classified as a “foundation.” Five of these are dedicated to “economic, social and community” services, four are marked as “other,” three provide “educational research services,” two say “donation” and one says “social.” Under this classification, all are stateside-based nonprofits.

On the other hand, 11 companies are classified as “institutional.” Of these, four say the nature of their services is “institutional,” while five provide “educational research services” and two are classified as “economic, social and community.” All are U.S.-registered nonprofits.

Meanwhile, six companies are listed as “professional,” three offer “educational research services,” one is listed as “environmental,” one as “social,” and one as “economic, social and community.” Under this heading, all are U.S. nonprofits.

Of the three companies under the “civic” section, one filled in the text field with “international activities,” another with “economic, social and community,” and the last only says “other.” They also are all stateside-based nonprofits.

Finally, under the “type of organization” field, a substantial 1,053 do not specify the nature of their services and are simply marked “N/A.” All are for-profit corporations.

 

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