Last December, the Congressional Task Force on Economic Growth in Puerto Rico (Task Force) issued a final report recommending that Congress extend the Child Tax Credit (CTC) to families in Puerto Rico who have one child or two children. The popular tax credit of $1,000 per child covers all eligible children in the fifty states and applies to Puerto Rico families beginning with their third child.
The Task Force’s CTC recommendation was its only tax proposal to help families that achieved consensus. The eight-member group was chaired by U.S. Senate Finance Committee Chairman Orrin Hatch (R-UT), who is now leading Senate efforts to overhaul the Federal tax code.
Congress is contemplating the most significant changes to the U.S. tax code since 1986. It is unclear what is in the U.S. Senate Finance Committee’s evolving package. What is known is that Sen. Hatch is leading this effort, and he has an opportunity to enact a policy that he considered important enough for his Task Force to endorse.
The U.S. Senate Finance Committee is actively working to complete a tax reform proposal by November 8, with full committee consideration to follow during the week of November 13th. Senate Majority Leader Mitch McConnell (R-KY) has announced that the Senate may consider the bill by Thanksgiving.
Two facts are clear. First, none of the recommendations proposed by the Congressional Task Force on Economic Growth in Puerto Rico in its December 20, 2016 final report have been enacted into law. None.
Second, the Federal tax reform proposal introduced in the House of Representatives last week did not include an expansion of the Child Tax Credit or any of the Task Force’s other recommendations. Yet the House proposal did increase the child tax credit for residents of the fifty states. Under the House plan, the CTC would grow to $1,600/child, with the first $1,000 remaining refundable, meaning that if the value of the credit exceeds the amount of tax a family owes, the family may receive a full or partial refund of the difference. The House bill would also institute a new family flexibility and non-child dependents credit of up to $300/year for the next five years to state residents.
The House proposal would not apply to the U.S. citizens of Puerto Rico, rebuilding their lives after the devastation of Hurricane Maria. In fact, there is nothing in the House tax proposal that would directly help individuals and families in Puerto Rico.
Studies have shown that refundable tax credits like the Child Tax Credit reward work, reduce childhood poverty, and place children on a firmer foundation for success. Parents in families that receive refundable credits such as the Child Tax Credit are more likely to work and contribute to the economy. Children in those families have greater academic success and higher earning potential as adults. In Puerto Rico, 46% of the population lives under the poverty line, and more than half of children in Puerto Rico live in poverty.
Puerto Rico would clearly benefit from having the same access to the Child Tax Credit that their fellow U.S. citizens do.
Tax reform bill writers in the House of Representatives have endorsed the CTC as a valuable tool for economic growth. Senate Finance Committee Chairman Orrin Hatch (R-UT) has already specifically recommended the extension of the full CTC to Puerto Rico in a report, but this report is meaningless without the force of law. The report’s CTC recommendation must be added to the Senate tax bill to have any impact.
Now is Chairman Hatch’s chance to act, and he must act quickly. Take Action by contacting Sen. Hatch and urging him to fully expand the Child Tax Credit to Puerto Rico.