Let’s take a look at some tax incentives given by the US government since the early 19th century.
Many have said that the US has done nothing but help the island and its occupants. One of the ways they do so is by offering companies incentives to create job on the island that should hire Puerto Rican natives.
My own history is rooted in the tail end of Operation Boot strap that forced my parents migrating to NJ in the early 80’s for the promise of work. We never went back. My father died in the streets of Newark and the rest of us became a statistic in more ways than one.
So before I write memoir that tells the horrors of the crack cocaine epidemic and how Puerto Rican got caught up; or how foster care took children from parents and never returned. Let’s first address the long history of financial distress American placed on Puerto Rico in the name of growth.
Early 19th Century to Early 20th Century
1900s: Foraker Act (Organic Act of 1900)
- Established a civilian government and free trade between Puerto Rico and the U.S., creating a framework for future tax incentives.
Who benefited from the Foraker Act?
1917: Jones–Shafroth Act
- Granted U.S. citizenship to Puerto Ricans and established a tax-exempt bond market, encouraging investment in the island’s infrastructure.
Mid 20th Century
1947: Industrial Incentives Act
- Provided significant tax exemptions for manufacturing industries, fostering industrialization.
1950s-1970s: Operation Bootstrap
- A series of economic policies that included tax exemptions and other incentives to attract U.S. businesses, transforming Puerto Rico’s economy from agriculture to manufacturing.
Late 20th Century
1976: Section 936 of the Internal Revenue Code
- Allowed U.S. corporations to operate in Puerto Rico with tax benefits, such as exemption from federal taxes on income earned from Puerto Rican operations.
1996: Repeal of Section 936
- Phased out by 2006, this led to the need for new local tax incentives to maintain economic stability.
21st Century
2012: Act 20 (Export Services Act)
- Offered a 4% corporate tax rate and 100% tax exemption on dividends for companies exporting services from Puerto Rico.
2012: Act 22 (Individual Investors Act)
- Provided 100% tax exemptions on all dividends, interest, and capital gains for new residents.
2015: Act 73 (Economic Incentives for the Development of Puerto Rico Act)
- Aimed at fostering economic development by offering various tax credits and exemptions for businesses.
2017: Act 74 (Tourism Development Act)
- Encouraged tourism-related businesses with tax credits and exemptions.
2019: Act 60 (Puerto Rico Incentives Code)
- Consolidated previous acts, including Acts 20, 22, 73, and 74, under one comprehensive incentives code, maintaining many of the same benefits and streamlining the process for new applicants.
2020s
2022-2023: Amendments to Act 60
- Further refined and updated incentives to adapt to changing economic conditions and ensure compliance with U.S. tax regulations.
Sources:
- Government of Puerto Rico. Economic Development Administration.
- Puerto Rico Department of Economic Development and Commerce. Incentives Code (Act 60).
- IRS. Section 936.
- The World Bank. Puerto Rico’s Industrial Incentives.
- Historical Acts and Legislation Archives.
This timeline outlines the major tax incentives and legislative acts that have impacted foreign investment in Puerto Rico. Each period reflects changes in economic strategy and policy adjustments aimed at fostering growth and attracting foreign capital.