“The Recovery Act was created to provide a structured process for Puerto Rico’s government entities and their creditors to restructure the debt of those entities in an orderly fashion”.
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“We are pleased with (the) Supreme Court’s decision”, said GDB President Melba Acosta.
Enacted in May, Puerto Rico’s Act 72-2015 increases to 6.5 percent from 2 percent the tax on goods imported from offshore affiliates to local companies with gross revenues of more than $2.75 billion.
Puerto Rico’s creditors have argued that a bankruptcy mechanism would give the Caribbean island an unfair legal authority to impose deep repayment cuts.
Puerto Rico continues to struggle over its fiscal situation.
The high court granted Puerto Rico’s petition for writ of certiorari, taking up the appeal of a First Circuit decision invalidating the territory’s so-called Recovery Act, which would have established a restructuring regime for the territory.
If Justice Alito doesn’t participate when the court rules, Puerto Rico will need to win the votes of five of the other eight justices.
Under federal law, states can authorize bankruptcy filings by their municipalities, including public utilities, but Puerto Rico and the District of Columbia can’t. His most recent financial disclosure report indicates that either he or his wife owns shares in a Franklin fund that holds Puerto Rico municipal bonds.
With debt restructuring talks ongoing throughout the island, it was not clear whether Puerto Rico would utilize a bankruptcy statute, but the threat of one could give the territory leverage in the discussions. That decision also has forced Puerto Rico to plead for help from what has thus far been a reluctant U.S. Congress.
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It said Treasury Secretary Juan Zaragoza and other top government officials untruthfully accused it of evading taxes by manipulating the prices paid between related entities to underreport Puerto Rico income. Barbara Morgan, a spokeswoman for the governor’s office, had no immediate comment. The Obama administration and congressional Democrats say Puerto Rico should be granted broad bankruptcy powers, while Republicans are working on proposals that could include a federal financial control board.
