Puerto Rico Manufacturing Proposition Analysis

Non-exhaustive To further strengthen PR's competitiveness, continue evaluating additional federal and local legislation, and improvements to broader value proposition Ideas captured from stakeholder discussions and additional research Federal Local Federal and local incentives for further exploration . Increase cap on foreign tax credit vs. GILTI • Amend BEAT1 to reduce liability for payments to PR CFCs Seek permanent exemption of rules for foreign air transport of cargo² Increase Free Trade Zone coverage with Commerce Dept. approval ⚫ Loosen Jones Act restrictions on shipping (e.g., exemption for mfg products) Phase-out or reduce excise tax burden, with clarity around timetable for tax revenue replacement options (e.g., source income tax) Provide additional innovation credits for businesses, grants for universities to increase research conducted on island Provide tax credits for hiring/retaining local talent > Fundamental changes to strengthen PR value proposition • Increase economic certainty by improving . • • . Transparency around process (e.g., mfg permits, consent agreements) Clarity on leg. prerogatives (e.g., excise tax, vision for biopharma/medtech) Strengthen industrial infrastructure (e.g., electrical grid, water supply) Improve surface transport (e.g., quality, reach of roads) • Shift narrative about island to strength of resilience of operations when faced with natural hazards (e.g., hurricane, earthquake) • Increase incentives for talent to stay local (e.g., credits for hiring PR talent) 1. Base Erosion and Anti-Abuse Tax (BEAT) 2. Building on the temporary waiver granted to PR by the Dept. of Transportation on April 29, 2020 (Order 2020-4-10) 24 Copyright 2020 by Boston Consulting Group. All rights reserved.

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