Opportunity Zone Magazine Volume 1, Issue 3 | Page 75

PUERTO RICO’S RARE POSITION IN THE OZ SPACE 75 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 OPPORTUNITYZONE.COM