Hundreds of national and international investors listened past week in Las Vegas and yesterday in San Juan about the island’s advantages for the development of Opportunity Zones projects.
The U.S. Treasury Department anticipates that $100 billion in private capital will be dedicated towards creating jobs and economic development in Opportunity Zone (OZone) projects, and Puerto Rico government hopes at least $600 million will be directed locally.
Gerardo Portela, Puerto Rico’s first-ever Chief Investment Officer, went to the OZ Expo in Las Vegas last Friday –the largest conference for Opportunity Zones– to highlight that Puerto Rico is more than 97 percent OZone qualified.
Also, the Government of Puerto Rico held yesterday the First Summit of Zones of Opportunity at the Puerto Rico Convention Center with the attendance of Daniel Kowalski and Bradley Wendt, advisors to the Secretary of the Federal Treasury; Denise Cleveland, regional administrator of Housing and Urban Development; several bankers and other experts in tax laws and investments.
During his remarks, Gov. Ricardo Rosselló signed Puerto Rico Senate Bill 1147, which establishes the regulatory framework for the development of Opportunity Zones in compliance with the 2017 Federal Tax Reform (Tax Cuts and Jobs Act of 2017).
“From now on, Puerto Rico will benefit from the Puerto Rico Economic Development Opportunity Zones Act. This statute makes us the best place in the Nation to invest. This will promote millionaire investment and the creation of thousands of new jobs. But above all this measure will have a significant impact on the recovery of Puerto Rico after the onslaught of Hurricane Maria. Today we are not only advancing toward a fairer society, but we are providing access to capital in different areas that will allow Puerto Rico to be even more competitive,” Rosselló said.
Under the Opportunity Zone program, investors may defer capital gains tax on the sale of an asset, carried out prior to January 1, 2027, if they invest an amount equal to the profits earned in a Qualified Opportunity Fund.
“Opportunity Zones will be a ‘game changing’ economic development catalyst and we will use this mechanism to change our current paradigm and revitalize Puerto Rico,” Portela pointed out.
“Puerto Rico is an American territory that has a largely bilingual and highly qualified workforce for jobs in various industries and economic areas, so this law facilitates citizens’ access to these important areas,” the Chief Investment Officer added.
The Opportunity Zones, created under federal law, provide tax benefits to low-income communities in order to achieve their economic development. Puerto Rico, as well as several other jurisdictions in the United States, must comply with certain population and economic criteria in order to obtain the many and important benefits provided by this law.
As a result of intense lobbying by resident commissioner Jenniffer González, and former Puerto Rico Federal Affairs Administration executive director Carlos Mercader, 97% of the Island was designated as an Opportunity Zone, encompassing all low-income communities in Puerto Rico, which makes the island more attractive in the investment field.
To achieve the economic development provided under this law, it proposes an incentive framework for a 15-year period.
Key Aspects of Opportunity Zones:
• A 18.5% tax on the net income of an exempt business
• Dividend tax exemption
• 25% exemption from patents and property taxes
• 25% exemption from construction taxes
• Maximum investment credit of 25%, transferable
• A credit preference system for priority projects in Opportunity Zones
• Capital gains tax deferral for profits invested in a qualified opportunity fund on the Island under rules similar to those passed in federal legislation
• Tax exemption for interest earned on loans to exempt businesses
• Agile procedure for the evaluation and issuance of permits for exempt businesses and projects
By Yennifer Álvarez, The Weekly Journal