Puerto Rico’s Acts 20 & 22 Tax Incentives Celebrate 3rd Birthday

Puerto Rico’s Acts 20 & 22 Tax Incentives Celebrate 3rd Birthday


Puerto Rico’s Acts 20 & 22, tax incentive laws aimed at luring wealthy American investors to move there and at reviving the Island’s economy, are celebrating their third anniversary this month.

Critics have argued that Puerto Rico’s tax breaks sound too good to be true and if the U.S. Congress becomes concerned enough about the initiative, it could eliminate Puerto Rico’s tax exempt status. But this would require a big change to Puerto Rico’s status as a territory, and so far, there’s no sign of any movement building in Congress to do this.'

Back in 1976, Congress adopted Section 936 of the U.S. Tax Code, allowing US-based manufacturers that opened plants in Puerto Rico to repatriate their profits at a preferential rate. Many of the large pharmaceutical companies, including Johnson & Johnson, Pfizer, and GlaxoSmithKline, began manufacturing on the Island. But in 1996, Congress voted to remove the incentives, which were fully phased out by 2006. During the thirty year duration of these tax breaks though, not only did the US Treasury lose billions in tax payments, but thousands of jobs as well. This time around, mainland Americans won’t be losing jobs, making it even less likely that Congress will act quickly, if ever, to close down these incentives.

Editor’s Note: This Forbes article, and the fact that Puerto Rico’s tax incentives are proving sustainable, is no surprise to us. We have long said they are 100% legitimate and for those who obtain them, they are here to stay. See here for a thorough debunking of the notion that they are “too good to be true.”

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