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Tax Policy: Puerto Rico and the Section 936 Tax Credit

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Report Type Reports and Testimonies
Report Date June 8, 1993
Report No. GGD-93-109
Subject
Summary:

This report presents information on proposals that would revise the Internal Revenue Code section 936 tax credit, which mainly affects Puerto Rico and the subsidiaries of U.S. companies that operate there. Under section 936, income earned by U.S. firms from operations in U.S. possessions is exempt from federal corporate income taxes. Section 936 also exempts income from some passive investments of section 936 corporations in U.S. possessions and other qualified locations. GAO provides background information, discusses issues concerning estimating the effects of alternatives to the section 936 tax credit, and examines the multiplier effects of section 936 firms on the Puerto Rican economy. GAO also summarizes information on changes in the Puerto Rican economy since 1971 and the distribution of tax benefits, employment, and compensation among section 936 manufacturing firms.

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