S.1986 - To amend the Internal Revenue Code of 1986 to extend the temporary increase in limitation on the cover over of distilled spirits taxes to Puerto Rico and the Virgin Islands. (119th Congress)
Summary
S.1986 aims to amend the Internal Revenue Code of 1986, specifically Section 7652(f)(1), to extend a temporary increase in the limitation on the cover over of distilled spirits taxes to Puerto Rico and the Virgin Islands. The bill proposes changing the sunset date from January 1, 2022, to January 1, 2032. This extension would apply to distilled spirits brought into the United States after December 31, 2021.
The bill effectively continues a tax benefit for Puerto Rico and the Virgin Islands related to distilled spirits. This continuation could have implications for their economies and fiscal situations.
The bill was introduced in the Senate by Mr. Cassidy and referred to the Committee on Finance, indicating the initial stages of the legislative process.
Expected Effects
The primary effect of this bill, if enacted, would be to extend the period during which Puerto Rico and the Virgin Islands receive a higher level of tax revenue from distilled spirits taxes. This could provide continued financial support to these territories.
This extension could influence economic activity related to the distilled spirits industry in these regions. It may also affect the overall fiscal stability of the territorial governments.
Without the extension, the cover over would revert to its previous lower limit, potentially impacting the economies of Puerto Rico and the Virgin Islands.
Potential Benefits
- Continued Revenue Stream: Ensures Puerto Rico and the Virgin Islands maintain a higher level of tax revenue from distilled spirits. This can support essential government services.
- Economic Stability: Provides a degree of economic stability for these territories by supporting the distilled spirits industry.
- Investment Incentive: May encourage further investment and job creation within the distilled spirits sector in these regions.
- Budget Predictability: Allows for better budget planning and forecasting for the territorial governments.
- Supports Local Economies: The revenue generated can be reinvested in local infrastructure and community development projects.
Most Benefited Areas:
Potential Disadvantages
- Potential for Dependency: Could create a dependency on the federal government and the distilled spirits industry.
- Missed Revenue Opportunity for US Treasury: Extends a tax benefit, potentially reducing revenue collected by the US Treasury.
- Competitive Disadvantage: May create an unfair competitive advantage for Puerto Rico and the Virgin Islands compared to other regions.
- Lack of Sunset Provision Review: Extending the provision without review may perpetuate inefficiencies or unintended consequences.
- Limited Scope: The benefit is limited to the distilled spirits industry, potentially neglecting other sectors of the economy.
Constitutional Alignment
The bill appears to align with the constitutional principle of Congress's power to lay and collect taxes, duties, imposts, and excises, as outlined in Article I, Section 8, Clause 1. The bill pertains to the regulation of taxes related to distilled spirits, which falls under this enumerated power. Furthermore, the bill's focus on Puerto Rico and the Virgin Islands can be viewed in the context of Congress's authority over territories and possessions of the United States, as implied by Article IV, Section 3, Clause 2.
However, the bill's specific focus on benefiting particular territories could raise questions related to equal treatment under the law. While Congress has broad authority over territories, the principle of fairness and non-discrimination, though not explicitly stated in this context, could be considered.
Overall, the bill seems constitutionally permissible under the enumerated powers of Congress, particularly regarding taxation and governance of territories.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).