Puerto Rico freezes tax credits, $1.8B in funds amid crisis

SAN JUAN, Puerto Rico — Puerto Rico's government announced Tuesday that it is freezing all future tax credits and nearly $2 billion in funds for special assignments to help improve cash flow and balance the budget for a U.S. territory mired in a decade-long recession.

They are the latest measures taking effect as a federal control board that oversees the island's finances gets ready to approve a fiscal plan many believe will be amended to include severe austerity measures.

Puerto Rico Treasury Secretary Raul Maldonado said his agency will help evaluate some $140 million worth of tax credits to determine which ones would best help the U.S. territory's economy. The credits chosen will be paid over four years instead of a single annual payment, with officials aiming to save between $75 million to $100 million, he said.

"We want to analyze what kind of credits are really being awarded," Maldonado said, noting that the previous administration released up to $300 million in tax credits in recent years.

The measure is expected to affect tax credits awarded to companies in areas including tourism, housing and the film industry.

Government officials said they also are freezing $1.8 billion in funds that were set aside in recent years for such things as consulting services, cultural trips and sporting events. A committee will decide which items they will get rid of to save $625 million, said Elias Sanchez, the governor's representative to the federal control board.

Sanchez said that in 2016 alone, the previous administration set aside $1.3 billion of the $1.8 billion for unknown expenses. The committee also will investigate why that amount was assigned and where that money went.

He said that even if those items formed part of previous budgets, they would still be paid out of the current one.

"That's why Puerto Rico is dragging such extraordinary deficits," he said.

Opposition legislators warned the measure will affect nonprofit organizations because they receive a portion of the $1.8 billion being targeted.

The island has a nearly $70 billion public debt load that it wants to restructure this year. Puerto Rico's governor has requested that a stay on lawsuits be extended until year's end so officials can negotiate with creditors amid continuing multimillion-dollar defaults. The board has not responded to that request.