Opportunity Zone Magazine Volume 1, Issue 3 - Page 75

PUERTO RICO’S RARE POSITION IN THE OZ SPACE
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projects that will be considered priority projects. The initial
list was issued on Aug. 21, 2019 and included four activities
which basically involve the development of residential,
commercial and industrial real property for sale or rent. It is
expected that additional activities will be incorporated to
the list during the coming months. An eligible business may
request a tax incentive grant that will include the following
benefits:
• flat income tax rate of 18.5%
• a minimum 25% exemption on municipal taxes
• a minimum of 25% exemption on real and personal
property tax
• 100% exemption on dividend distributions
• a minimum guaranteed 5% investment tax credit, which
may be increased up to 25% of the eligible investment
It is no surprise that almost 50% of the first allocation of
CBDG-DR funds is assigned to home repair, reconstruction
and relocation and that the development of low-income
housing and residential property for sale or rent is included
as an eligible activity that qualifies as a priority project.
According to the “State of the Housing Industry in Puerto
Rico” published by the Puerto Rico Builders Association on
March 28, 2018, Puerto Rico has a great need of housing,
especially on the low- and moderate-income levels of the
population due to accessibility or inadequate and overcrowded
residences. The CBDG-DR funds provide the opportunity
to remedy part of the safe and formal housing need in Puerto
Rico produced by the high cost associated with it. 14 According
to the report, since 2010 the amount of owners of houses has
decreased while the amount of rented properties has increased
in average 8,600 per year. This is mostly because the income
levels of an increasing part of the population is not enough to
qualify for a mortgage. Therefore, the rental of housing market,
which has not been traditional in Puerto Rico, represents a
great opportunity to contribute to the solution of the housing
crisis.
PROMOTING ECONOMIC DEVELOPMENT
Puerto Rico finds itself today in a once in a lifetime position
which it must capitalize on in order to promote the economic
development needed to attract those who have left the
Island and retain those that still live there. All the programs
described above along with Puerto Rico’s skillful people,
geographical position and natural resources are the motors that
will initiate and promote the growth and the change. All this
delivers OZ investors with the chance of obtaining unsurpassed
tax benefits when combining the federal and local programs,
while making impact in the reconstruction and revitalization
of Puerto Rico. The combination of public investment, via
the CBDG-DR funds and the incentive programs, with private
investment through OZs and other programs, will generate
returns on investment not comparable to any other place in
the United States.
Maria de Los Angeles Rivera is a tax partner and IBC Director
with over 35 years of experience in public accounting. Rivera
assists clients with decisions related to tax applications and
audits and helps business clients and their owners to lessen
corporate, individual, estate and gift taxes. She has been
engaged in presentations as guest speaker leading the firm’s
initiatives around the opportunity zones incentives, worked with
grant applications, the development of tax planning structures
for individuals and businesses, and other incentives programs for
eligible taxpayers. Rivera is an active member of the Puerto Rico
State Society of Certified Public Accountants and the American
Institute of Certified Public Accountants.
Sources:
1 26 U.S. Code § 1400Z–1(b)(3)
2 26 U.S. Code § 7701(a)(4) – The term “domestic”
3 Section 1.1400Z-2(d)-1(e)
4 Section 1.1400Z-2(d)-1(e)(1)
5 Section 1.1400Z-2(d)-1(e)(2)
6 Section 1.1400Z-2(d)-1(e)(3)
7 Act 60 of July 1, 2019
8 https://www.cdbg-dr.pr.gov/wp-content/uploads/2019/08/PRDOH_AmendmentTwo_Non-
SubstantialAmendment_EFFECTIVE082319.pdf
9 https://www.cdbg-dr.pr.gov/en/budget/
10 https://www.cdbg-dr.pr.gov/wp-content/uploads/2019/08/PRDOH_AmendmentTwo_Non-
SubstantialAmendment_EFFECTIVE082319.pdf
11 https://www.cdbg-dr.pr.gov/en/programs/
12 https://www.cdbg-dr.pr.gov/wp-content/uploads/2019/08/PRDOH_AmendmentTwo_Non-
SubstantialAmendment_EFFECTIVE082319.pdf
13 Idem
14 “Situación de la Industria de la Vivienda en Puerto Rico”, Asociación de Constructores de
Puerto Rico, 28 de marzo de 2018
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