Michael Sanders
Blank RomeJune 13, 2019
Yes.
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Does Puerto Rico benefit from the Opportunity Zone program in the same way that other Qualified Opportunity Zone census tracts in the U.S. do?
Are there any differences?
Answers
Yes.
No difference. The entire island is in the zone.
There are no differences between the U.S. tax benefits for QOZs in Puerto Rico and the QOZs on the mainland. Puerto Rico received a special accommodation under the QOZ program insofar as almost all of the island is considered a QOZ.
I believe so. I fact, I think all of Puerto Rico is an Opportunity Zone, so an investment anywhere on the island should qualify.
The Opportunity Zone law gives no special advantages to Puerto Rico over any other Opportunity Zone in the United States. However, the Opportunity Zone does not interfere with other tax-advantaged programs that may be available to Puerto Rico.
Yes and more. Puerto Rico is comprised almost 98% of designated zones. In addition to the benefits of the U.S. code, a very robust tax incentive program makes investments in PR the best in any jurisdiction.
Yes. Investing in the 95% qualified census tracts in Puerto Rico provides the same benefits as investing in the continental U.S. Puerto Rico is generally treated as a foreign country for U.S. tax purposes, so there will be some unique tax treatments from any flow-through income in year one to nine. Also, there are different depreciation rules for foreign assets.
Puerto Rico does benefit from the OZ program in a similar manner to other Qualified Opportunity Zone census tracts. There are a few differences. One that I know is if the Qualified Opportunity Fund ("QOF") is created in Puerto Rico, it can only invest in Puerto Rico Opportunity Zones (so it cannot invest in any Opportunity Zones outside of Puerto Rico). Whereas QOFs that are created on the mainland can invest in Opportunity Zones within the 50 states but also Puerto Rico as well. I'm not an expert in Puerto Rico tax law, so there might be a couple other differences, but in general the program works the same in PR as in the U.S.
Puerto Rico benefits from the QOZ and then some. Under recent law, PR created rules for investing in Opportunity Zones consistent with the federal law, and created additional incentives: exemption from dividend taxation; 18.5 percent tax on the net income of an exempt business; 25 percent exemption on patents and property taxes; 25 percent exemption on construction taxes; maximum investment credit of 25 percent, which is transferable; a credit priority system; tax exemption for interest earned on loans to exempt businesses. Stated were capped at 25% of their low-income census tracts for QOZ designation. Puerto Rico was able to designate 100 percent of its low-income census tracts as Opportunity Zones, which impacts most of the island.
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