Puerto Rico Governor Ricardo Rosselló Nevares has sent a bill to the Legislative Assembly to create incentives that promote opportunity zone investments in Puerto Rico. The program is expected to inject more than $600 million in new investments into the local economy.
The opportunity zone program was established as part of the U.S. Tax Cuts and Jobs Act of 2017 and offers capital gains tax relief for new investments in certain economically distressed areas nationwide that are designated as qualified opportunity zones.
To qualify as an opportunity zone, an area must have a population census that qualifies as a low-income community. Under federal regulation, all low-income communities in Puerto Rico were automatically designated as qualified opportunity zones, while in the States, governors can designate up to 25 percent of their population census tracts. The governor noted that efforts by Resident Commissioner Jennifer González allowed 95 percent of Puerto Rico to be designated.
“This is one of the best economic development tools we have, and we will maximize it by offering incentives that promote private investment,” said Rosselló Nevares. “For this, we have to present this piece of legislation in order to establish the program in Puerto Rico.”
Among the proposed incentives are a 20 percent contribution on the net income of an exempt business; exemption in the taxation of dividends; partial exemption in patents and property taxes; 100 percent exemption from construction taxes; and the creation of an investment credit of up to 15 percent, which is transferable and for which priority will be given to investments in priority projects in opportunity zones.
The project proposes an incentive framework for a period of 15 years, similar to other incentives already offered in Puerto Rico.
The bill also provides for the deferral of capital gains taxation for residents of Puerto Rico who invest in an opportunity zone funds in Puerto Rico, as well as a tax exemption for interest accrued on loans to exempt businesses.
Finally, the project provides for an expedited permitting procedure for exempt businesses and public-private-partnership projects.
“We have already seen great interest from the private sector throughout the United States to make use of this tool and we cannot let Puerto Rico stay out, as it is the most benefited area with the designation,” the governor added.
Puerto Rico, which is an unincorporated territory, is controlled by the United States government but is not part of the United States. There are currently more than 8,700 designated opportunity zones, which cover parts of all 50 states, the District of Columbia, and five U.S. territories, including Puerto Rico.