Puerto Rico Manufacturing Proposition Analysis slide image

Puerto Rico Manufacturing Proposition Analysis

Track and continue to assess key elements of federal legislation Important terms that determine scope Related impacts to track for outreach strategy Additional considerations to monitor closely • • • • • Qualified employee (e.g., full-time vs. part-time, local talent) Scope of wages and benefits to include (e.g., salary, healthcare) Allowed depreciating property (e.g., real property, personal property, short/medium/long-life property) Qualified manufacturing line/facility (e.g., line/facility moved to the US) Geographic scope of applicability (e.g., including US territories) Qualifying companies (e.g., CFCs, domestic branches, CDMOs) • Defined list of essential products Could include non-finished products (e.g. sub- assembly, excipients) • Biannual review of pharma and medtech • . supply chain resilience by Dept HHS Degree to which SecHHS empowered to redefine list (e.g., item must be at least 5x required level for shortage designation before considered for removal) Carry forward/back allowances for credits (e.g., %/$ of allowable credits, furthest period for carry forward/back) Effective date of Dec. 2019 (e.g., bill goes into effect immediately) 1. Base Erosion and Anti-Abuse Tax (BEAT) 2. Currently not in any proposed legislation 3. Currently proposed in HR 6930 4. Elimination of excise tax could increase in PR source income tax to cover shortfall. Unlike excise tax, source income tax payments can be used for foreign tax credit purposes; increasing credit cap would enable companies, to use more of these incremental tax dollars as foreign tax credits against GILTI Source: Congress. Gov, synthesized expert interviews, BCG analysis Amend BEAT1 to reduce BEAT liability for US companies with PR CFCs² Changes could stimulate high-margin US companies (e.g., Brand Cos., OEMs) to invest more in PR via CFCs Increase foreign tax credit cap vs. GILTI (e.g., from 80% to 100%)³ Magnitude of impact potentially tied to changes in excise tax4 22 22 Copyright © 2020 by Boston Consulting Group. All rights reserved.
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