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Wednesday, September 21, 2011

Pierluisi Seeks Support on House Floor for Puerto Rico Investment Promotion Act

Washington, DC- Today, on the floor of the U.S. House of Representatives, Resident
Commissioner Pedro Pierluisi sought the support of his Congressional colleagues for legislation he will soon introduce to attract investment and create jobs in Puerto Rico, explaining how the bill would benefit the Island’s economy and the national economy.

The Resident Commissioner discussed the forthcoming legislation, the Puerto Rico Investment Promotion Act (PRIPA), in the context of the current economic situation in the United States, where elected officials are seeking a responsible path forward in the effort in create jobs and reduce deficits.

“The bill that I will introduce tomorrow is designed to attract investment to Puerto Rico and to create jobs on the Island, where the unemployment rate over the last decade has consistently stood six to eight percentage points above the national average. At the same time, the bill seeks to generate new revenue for the federal government and to encourage job-creating investment in the 50 states, where unemployment now exceeds nine percent,” explained the Resident Commissioner.

Pierluisi underscored that the measure has been endorsed by Puerto Rico Governor Luis Fortuño, the leaders of Puerto Rico’s two principal political parties, and the Island’s business community.

“Like the states, the U.S. territory of Puerto Rico faces serious economic challenges. However, the economic problems in Puerto Rico have proven to be structural and chronic, not cyclical and temporary,” he said.

Pierluisi insisted that Puerto Rico’s economy will never unleash its tremendous potential under its current political status.

“I support statehood for the Island, in part because history shows that every territory that joins the Union experiences a substantial increase in its economic activity and standard of living.

However, until a majority of Puerto Rico’s people express a desire for statehood and Congress welcomes the Island as a full member of the American family, it is incumbent upon me to take all reasonable steps to strengthen the Island’s economy within the severe constraints imposed by the current territorial status,” he said in his speech.

PRIPA would authorize companies that are incorporated in Puerto Rico—many of which are now organized as controlled foreign corporations—and that earn at least 50% of their income on the Island to operate as domestic U.S. companies. The bill would promote consistency and uniformity by bringing the treatment of any electing Puerto Rico company in line with thecurrent treatment of a Puerto Rico individual under Section 933 of the Internal Revenue Code. Specifically, an electing company would be subject to federal taxation on its worldwide income, except on the income it earns in Puerto Rico.

Moreover, as a domestic rather a foreign firm, an electing Puerto Rico corporation could distribute its earnings to its U.S. parent in the form of a dividend under Section 243 of the tax code, which allows the parent to deduct 70, 80 or 100 percent of that dividend, depending on the parent’s ownership stake in the subsidiary.

“This legislation is a substantial improvement over earlier proposals put forward by leaders in Puerto Rico with the goal of encouraging job-creating investment on the Island. Those proposals were carefully considered by the federal government and were met with resistance each time, even by Members of Congress and other federal officials sensitive to Puerto Rico’s unique circumstances. The primary shortcoming of those proposals is that they sought benefits without burdens. My legislation, by contrast, is balanced. It would benefit both Puerto Rico and our nation,” said Pierluisi.