Section 936 and the 2006 sunset

Section 936 of the Internal Revenue Code was a possessions tax credit. U.S. firms that booked profits in Puerto Rico could, under rules that changed over time, keep those profits outside the ordinary federal income tax. Combined with the local exemption, the credit made the island a pharmaceutical and electronics site as well as a factory site. It was federal law. It was not a Fomento brochure.

936 is the federal credit. Bootstrap is the local 1947 exemption. They stacked. They are not the same statute.

Congress began the phase-out in 1996 in the Small Business Job Protection Act. The credit then wound down until 2006, when it expired. Firms left, shrank, or restructured. The sunset is one of the dated roots of the later fiscal crisis: a revenue and employment base built on a federal preference was asked to live without it, while public debt and a high-cost grid remained.

Do not count this as a moral fable about lazy government or holy industry. A tax preference created a cluster. Removing the preference, without a replacement industrial base or a resolved energy system, removed payrolls and the closures followed. Agriculture could not absorb the people. The mainland labor market could. Post-936 migration shows up in the census long before María.

PROMESA and the oversight board are a later legal story, one phrase here: federal fiscal control arrived after the credit was already gone. The Jones Act remains a cabotage statute, not the engine of 936. If a paragraph cannot tell them apart, it is not about this sunset.

Phase-out 1996 to 2006. Print the window. The photograph of the empty plant is not a source by itself.

The plants that remain are a mix of surviving manufacturers and shells. PRIDCO still has a list. The Internal Revenue Code still has a history section where 936 used to work. Read both. The crisis did not start in a hurricane, and it did not start in 1500. It has a 2006 date among its roots.

Sources: Internal Revenue Code § 936 (crédito fiscal de posesiones); phaseout de la Small Business Job Protection Act. Freeze 2026-08-22.