The Bond Buyer

Statehood for Puerto Rico would kill its triple-tax-exemption

Only those who reside in Puerto Rico would still enjoy an exemption from state and municipal-level income taxes on the bonds’ interest if it becomes a state. There is no accurate public figure but in recent years some have estimated that Puerto Rico residents own 20% of the commonwealth's bonds.

Aside from the loss of the triple-tax-exemption, “it’s hard to see Puerto Rico being worse off, or less able to raise capital, if it were a state vs. current status,” said Municipal Market Analytics Partner Matt Fabian.

“We have a hard time seeing Puerto Rico statehood as a negative scenario for bondholders, arguing that a material portion of Puerto Rico’s past financial and economic troubles reflected Puerto Rico’s pervasive reliance on a disinterested and uninvolved U.S. Congress," analysts wrote in the April 19 MMA Outlook. "Further, any transition from territory to state would require substantial revenue and administrative reforms and would reasonably involve years of related preparation.”

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