by Bill Rochelle, ABI Editor at Large
By permanently enjoining Puerto Rico’s minimum alternative corporate income tax, a federal district judge underscored the urgency for the Supreme Court or Congress to give the island access to chapter 9 municipal bankruptcy. The tax, referred to as the AMT, was aimed at Wal-Mart Puerto Rico Inc., the largest private employer and largest retail taxpayer in Puerto Rico. District Judge Jose Antonio Fuste in Puerto Rico held in his March 28 opinion that Wal-Mart has no prayer of ever obtaining a refund of the AMT because the commonwealth “is insolvent and no longer able to pay its debts as they come due.” Puerto Rico’s legislature enacted the AMT in May 2015 in 12 days. In his 109-page opinion written after a four-day trial in early February, Judge Fuste concluded that the AMT “is a legislative money grab pure and simple.” Read more.
In related news, Puerto Rico Governor Alejandro Garcia Padilla welcomed proposed federal legislation that would help the island restructure its $70 billion of debt, while saying that it imposes too much U.S. control over the commonwealth, Bloomberg News reported today. A draft measure by House Republicans that has circulated on Capitol Hill would give a federal control board the legal authority to oversee a reduction of the island’s debts, instead of entrusting that power to local officials. The board would have the ability to cut the budget if Puerto Rico lawmakers are unable to erase the chronic deficits that are at the root of the fiscal crisis -- a step that would take key decisions away from the island’s legislature and governor. “The section on restructuring the debt is positive, but the price is too high,” Garcia Padilla told reporters Monday in San Juan. Read more.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
