Acevedo Re-Releases Old Endorsements… Kerry Plan Would Close Billion $ Loophole Of Firms With Island Plants… Admiral Who Closed Puerto Rico Bases Helping Florida Keep Bases… Kerry Pledges Presidential Visit To Puerto Rico… House Republicans Defy Bush On Highway And Rail Bill… Bush Enlists Puerto Ricans To Campaign In The States

April 2, 2004
Copyright © 2004 THE PUERTO RICO HERALD. All Rights Reserved.

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Acevedo Re-Releases Old Endorsements

Puerto Rico Resident Commissioner Anibal Acevedo Vila this week publicly re-released endorsements of his gubernatorial campaign from members of Congress that he that he has publicly released before.

The re-release was an apparent effort to blunt the political impact of generally more-impressive endorsements that his main rival for the governorship, Pedro Rossello (statehood/D), has recently received.

"Commonwealth" party candidate Acevedo issued a list of 40 members of Congress who support him. The list in favor of nominal national Democrat Acevedo was led by conservative Republican Roger Wicker (MS). Most of the names on the list were not new. A notable newcomer in Acevedo’s camp, however, was Senator Jon Corzine (D-NJ).

One of the more interesting Acevedo endorsements came from Representative Ciro Rodriguez (TX) Chairman of the House’s caucus of Hispanic Democrats. Rodriguez has said that Puerto Rico’s territorial status — which Acevedo supports — is a "second-class type of operation." Rodriguez says that the territory should become a State of the U.S. or an independent country, whichever Puerto Ricans prefer.

At the same time, two members of the U.S. Senate issued their own news releases endorsing Rossello. Both are members of the Energy and Natural Resources Committee, which has lead jurisdiction over territorial issues.

The two were Senator Evan Bayh (D-IN) and Senator Mary Landrieu (D-LA). Bayh is mentioned as a possible running-mate for Democratic presidential nominee and fellow senator John Kerry (MA). He and Rossello became friends while both served as governors.

Kerry Plan Would Close Billion $ Loophole Of Firms With Island Plants

Democratic presidential candidate Kerry’s proposal to create 10 million manufacturing jobs in the U.S. would have major impacts on several companies with large plants in Puerto Rico.

The companies are currently avoiding federal income taxation on tens of billions of dollars of earnings outside the States by generating the profits through Controlled Foreign Corporations (CFCs). CFC profits are not taxed until sent to the States. The companies are keeping the profits out of the States.

Among the companies with plants in Puerto Rico that would be the most affected are Merck, with $18 billion kept out of the States including $3 billion earned last year alone, and Hewlett-Packard with $14.4 billion untaxed.

Kerry’s plan would end the deferral of taxation on CFC profits kept out of the States unless the money was earned through sales outside the States. The profits would otherwise be taxed as if they were earned in the States.

Many of the affected companies would, however, also receive tax benefits from Kerry’s plan. It would permanently lower the corporate income tax rate from 35 to 33.25%. It would also temporarily lower the rate to 10% for earnings now held out of the States that are ‘repatriated’ to the States. The 10% rate would apply for one year only to encourage companies to move profits from CFC locations to the States. Companies hold an estimated $639 billion outside the States.

Kerry’s plan runs directly counter to the proposal of Puerto Rico Governor Sila Calderon ("commonwealth"/no national party) and Acevedo that 85-100% of profits sent to the States from CFCs in Puerto Rico be permanently exempted from taxation. Acevedo has also opposed a Kerry proposal to apply a tax cut for manufacturing in the States to Puerto Rico.

Many companies that formerly took advantage of tax code section 936 tax credits for income attributed to Puerto Rico reincorporated as CFCs and began to take unintended advantage of CFC deferral when section 936 was sunset.

Admiral Who Closed Puerto Rico Bases Helping Florida Keep Bases

The admiral who helped determine the closure of the U.S. Navy’s training range on the island of Vieques, Puerto Rico and, later, the Navy’s Roosevelt Roads base on the island of Puerto Rico is now helping Florida retain its 21 U.S. military bases.

Florida Governor Jed Bush (R) hired recently retired Admiral Robert Natter to head Florida’s effort to keep the bases from a scheduled closing and consolidation of U.S. military bases around the world next year. Natter is a former Commander-in-Chief of the Atlantic Fleet, Deputy Chief of Naval Operations, and top representative of the U.S. Navy to Congress.

About one-fifth of the military’s current base capacity is expected to be closed through the 2005 process. Under it, the Congress will act on the recommendations of an independent commission. The major issue for Puerto Rico in the process will be whether U.S. Army Fort Buchanan in San Juan is closed.

Natter helped then President Bill Clinton and then Governor Pedro Rossello determine the May 1, 2003 date for the closure of the Vieques range. Natter also led the efforts to close Roosevelt Roads when Governor Calderon and Acevedo acted contrary to the Government of Puerto Rico’s commitments in a federal-territorial agreement for the Vieques closure.

The Roosevelt Roads base officially closed this week. When the Vieques agreement that Calderon and Acevedo broke was reached, it was expected that Roosevelt Roads would remain operational and Fort Buchanan would close through the 2005 process.

Kerry Pledges Presidential Visit To Puerto Rico

Democratic presidential candidate Kerry last week promised to visit Puerto Rico as president.

The senator from Massachusetts made the promise in a conversation with Puerto Rico statehood party Senate leader and Democratic National Committeeman Kenneth McClintock. McClintock requested a visit.

Although Puerto Rico is home to 3.9 million American citizens and residents, no president has visited Puerto Ricans since John Kennedy did in December 1961. The territory’s lack of votes in the election of the president is the main reason why. The intensely negative approach of some politicians in the territory is another reason, according to aides to former presidents.

Presidents have been in Puerto Rico since Kennedy’s visit but the trips did not relate to the territory or its residents.

McClintock has made an issue of the lack of presidential visits. He recognizes that presidents often bring benefits to a jurisdiction when they visit. He also recognizes that the lack of visits makes Puerto Ricans feel unappreciated by and alienated from their national government.

Kerry is the only one of 2004’s presidential candidates who has visited Puerto Rico in connection with his campaign. The primary purpose of his trip was to raise funds but he also sought political support. McClintock was one of his principal objectives. The senator from Massachusetts went to the Puerto Rico senator’s office as a part of his effort.

While Kerry and McClintock established a rapport, a meeting with top leaders of the "commonwealth" party did not go smoothly. Governor Calderon boycotted the meeting. Resident Commissioner Acevedo and then Economic Development and Commerce Secretary (and now Calderon husband) Ramon Cantero Frau were antagonistic towards Kerry.

The reason was that they had raised tens of thousands of dollars for Kerry but he refused to support their proposed amendment to section 956 of the federal tax code to permanently exempt from taxation 85-100% of the profits that CFCs send to the States from Puerto Rico.

Later, when Kerry expressed support for an extension of code section 30A a tax credit for the wages, investments, and local taxes of U.S. companies in Puerto Rico, Acevedo said that he would not support the Massachusetts senator. Section 30A was developed by then President Clinton, Democrats in the U.S. Senate, and Rossello. (After it became clear that Kerry would be the Democratic nominee, Acevedo relented and said he would campaign for the Massachusetts senator "when" he has "time.")

Kerry was taken to Puerto Rico by one of his two top Hispanic fundraisers, lobbyist Manuel Ortiz, who represents Puerto Rican clients.

House Republicans Defy Bush On Highway And Rail Bill

The U.S. House of Representatives Friday defied a veto threat from President Bush and passed a bill to authorize spending of $275 billion on road and rail transportation over the next six years.

Bush wants to limit the spending to $256 billion but the U.S. Senate earlier passed a billion to authorize spending of $318 billion.

Leading the charge for the House bill was Transportation and Infrastructure Committee Chairman Don Young (R-AK), a leading advocate of meeting Puerto Rico’s needs.

The bill would authorize $457 million to extend a rail system for the San Juan area to Carolina and $115 million a year for roads in Puerto Rico.

Bush Enlists Puerto Ricans To Campaign In The States

President George Bush’s re-election campaign this week enlisted a number of Puerto Ricans to help it win votes in the States from individuals of Puerto Rican and other Hispanic heritage.

The effort will be led by San Juan Mayor Jorge Santini (statehood/R) and co-chaired by Republican National Committeeman and statehood party congressional candidate Luis Fortuno. A committee includes Senator Miriam Ramirez (statehood/R), Fajardo Mayor Anibal Melendez (statehood), Federation of Municipalities President Carlos Mendez, and statehood party activist Roberto Arango. Former Puerto Rico Representative Angel Cintron will serve as coordinator of the overall effort, Manati Mayor Juan Cruz will coordinate events, and Tere Suarez will handle public communications.

The "Washington Update" appears weekly.

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