[Congressional Record Volume 157, Number 141 (Wednesday, September 21, 2011)]
[House]
[Pages H6278-H6279]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  PUERTO RICO INVESTMENT PROMOTION ACT

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
Puerto Rico (Mr. Pierluisi) for 5 minutes.
  Mr. PIERLUISI. Mr. Speaker, the coming months represent a defining 
moment for our Nation. Responsible leaders from both political parties 
understand that we must come together on behalf of the American people 
to create jobs for millions of unemployed workers and to put our Nation 
on the path to fiscal stability.
  President Obama has transmitted the American Jobs Act to Congress, 
and I hope its key components will be enacted into law. The 
supercommittee has begun its work of proposing responsible ways to grow 
our economy while reducing our deficits. The work that lies ahead will 
not be easy, but it must be done.
  With this as backdrop, I rise this morning to discuss the Puerto Rico 
Investment Promotion Act, which I will introduce tomorrow. The bill is 
designed to attract investment to Puerto Rico and to create jobs on the 
island, where the unemployment rate over the last decade has 
consistently stood six to eight percentage points above the national 
average. At the same time, the bill seeks to generate new revenue for 
the Federal Government and to encourage job-creating investment in the 
50 States, where unemployment now exceeds 9 percent.
  This bill is endorsed by Puerto Rico's Governor, Luis Fortuno, the 
leaders of Puerto Rico's two main political parties, and the island's 
business community.
  At the outset, it is important to explain why I'm promoting 
legislation of this sort. Like the States, the U.S. territory of Puerto 
Rico faces serious economic challenges. However, the economic problems 
of Puerto Rico have proven to be structural and chronic, not cyclical 
and temporary.
  I believe that Puerto Rico's economy will never unleash its 
tremendous potential under its current political status. And I support 
statehood for the island in part because history shows that every 
territory that joins the union experiences substantial increases in its 
economic activity and standard of living. However, until a majority of 
Puerto Rico's people express a desire for statehood and Congress 
welcomes the island as a full member of the American family, it is 
incumbent upon me to take all reasonable steps to strengthen the 
island's economy within the severe constraints imposed by the current 
territorial status.
  My aspiration for Puerto Rico is that it will enjoy the political, 
social, and economic equality that only statehood offers; and I look 
forward to the day when it will no longer be necessary for Puerto 
Rico's leaders to petition the U.S. Congress for customized, island-
specific legislation to encourage job-creating investment, and to 
compensate--at least somewhat--for the countless ways in which our 
political status does damage to our people. But until that day arrives, 
we must be as pragmatic about the present as we are hopeful about the 
future.
  To explain the bill, a little background is in order. Currently, 
nearly all of the large U.S. firms that conduct business in Puerto Rico 
are organized as controlled foreign corporations, CFCs. A CFC's 
earnings are not subject to any Federal taxation until they're 
distributed, usually in the form of a dividend, to its U.S. parent, a 
process known as repatriation. CFCs in Puerto Rico and in foreign 
countries have little incentive to repatriate because

[[Page H6279]]

those earnings, once received by the parent, are subject to full 
Federal taxation. As a result, billions of dollars in CFC earnings 
remain in foreign banks, where they generate no Federal revenue and 
create no American jobs.
  My legislation seeks to integrate Puerto Rico companies into the U.S. 
tax system. It would authorize, but not require, companies that are 
incorporated in Puerto Rico and that earn at least 50 percent of their 
income on the island to operate as domestic U.S. companies. The bill 
would promote consistency and uniformity by bringing the treatment of 
an electing Puerto Rico company in line with the current treatment of a 
Puerto Rico individual under section 933 of the Internal Revenue Code.
  Specifically, an electing company would be subject to Federal 
taxation on its worldwide income, except on the income it earns in 
Puerto Rico. Because it is a domestic rather than a foreign firm, the 
Puerto Rico corporation could distribute its earnings to its U.S. 
parent in the form of a dividend under section 243 of the Tax Code, 
which allows the parent to deduct a substantial amount of a dividend, 
depending on the parent's ownership stake in the subsidiary. Therefore, 
profits that were previously kept outside of the United States are now 
more likely to be brought back into this country, where they may be 
subject to a reduced, but still meaningful, level of taxation under 
section 243 and used to create jobs in America.
  Moreover, as I already noted, under this legislation, electing 
corporations that have income derived from sources outside Puerto 
Rico--whether in the States or foreign countries--would become subject 
to Federal taxation on that income. This will generate additional 
revenue for the U.S. Treasury, since CFCs with non-Puerto Rico-source 
income currently pay no Federal tax on that income.
  I hope my colleagues will support this bill.
  This legislation is a substantial improvement over earlier proposals 
put forward by leaders in Puerto Rico with the goal of encouraging job-
creating investment on the Island. Those proposals were carefully 
considered by the Federal Government and were met with resistance, even 
by Members of Congress and other Federal officials sensitive to Puerto 
Rico's unique circumstances. The primary shortcoming of those proposals 
is that they sought benefits without burdens. My legislation, by 
contrast, is balanced. It would benefit both Puerto Rico and our 
Nation. I hope my colleagues on both sides of the aisle will support 
it.

                          ____________________