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US Congress Passes Puerto Rico Debt Relief Bill

by Mike Godfrey,, Washington

04 July 2016

The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which is intended to assist a restructuring of Puerto Rico's debt, has been passed by the US Congress, without the inclusion of an eligibility for federal tax credits.

PROMESA, finally passed by the US Senate on June 29 with a bipartisan vote of 68-30, provides the breathing space for an Oversight Board to formulate and enforce budgetary plans and creditor negotiations. There is, however, no provision for the extension of the US federal tax credits, such as the earned income tax credit (EITC) and child tax credit (CTC), to Puerto Rican residents, as had been suggested previously by some Democratic lawmakers.

In his speech supporting PROMESA, Senate Majority Leader Mitch McConnell (R – Kentucky) explained that "this bill won't cost the taxpayers a dime. What it will do is help Puerto Rico restructure its financial obligations and provide much-needed oversight to put into place reforms."

Previous proposals to extend the EITC and CTC into Puerto Rico had been criticized by Republicans. For example, Senate Finance Committee Chairman Orrin Hatch (R – Utah) had pointed out that "offering these refundable tax credits … would ultimately be cash payments offered directly to lower-income residents of Puerto Rico."

President Barack Obama confirmed his approval for the bill, saying that it "is not perfect, but it is a critical first step." Treasury Secretary Jacob Lew added that "Puerto Rico will now have access to a restructuring process to adjust its debts to a sustainable level," but that "Congress must redouble its efforts to promote Puerto Rico's long-term success. That includes encouraging economic growth."

Lew had originally stated that "the Administration's proposal released last year would address the longer-term issues facing Puerto Rico, such as rewarding work and supporting growth through a locally administered EITC."

TAGS: tax | fiscal policy | law | budget | tax credits | legislation | Puerto Rico | United States

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