CPI: film tax-credit benefits questioned

On May 1, 2013, CPI questioned whether film tax credits — the basis of the “Hollywood in the Caribbean” nickname — truly benefit Puerto Rico’s fisc. Reports by specialist groups and journalism in other jurisdictions placed those incentives far from the panacea their defenders proclaim. The shift toward credits, cash rebates, stipends and exemptions surged around 2003 and peaked in the United States in 2009, when 40 states and Puerto Rico offered some incentive; by late 2011 programs had nearly halved.

A special report casts Puerto Rico as the place where credits are transferable and refundable, and as the only one that pays half the eligible credit before filming occurs. Jorge Marchand Herencia, former legal adviser to the Puerto Rico Film Corporation (CCPR), explained the secondary market: the credit is sold to other taxpayers — for example Walmart or Home Depot — who deduct it from their tax liability.

Marchand’s own example: if a production spends $1 million on the Island with a 40% credit, Hacienda issues a $400,000 check; brokers in the chain take between 10% and 30%, and that credit gain generates no tax. Mariana Fernández Manzano (CCPR) said she was seeking more effective ways to administer the incentive law and denied knowing the pre-filming payment scheme “as described.”

By 2012, 17 of 40 states had ended or suspended programs; Iowa (fraud/misappropriation) and Michigan (pension collateral for retirees) figure as alerts in New York Times series and Tax Foundation findings recommending auditors external to government. Transferable credit ≠ crime. Overseas scandal ≠ conviction in Puerto Rico. Primary: CPI 2013-05-01.

Source: Centro de Periodismo Investigativo. https://periodismoinvestigativo.com/2013/05/cuestionado-el-beneficio-de-los-creditos-contributivos-al-cine/