BY JOSE ALVARADO VEGA

While Resident Commissioner Pedro Pierluisi said Friday that status legislation has the votes to be approved by the end of the current session in Congress, a fellow Puerto Rican congresswoman from New York noted the focus on health reform could make that difficult.

“We still don’t have a date yet, but we do have the votes,” said Pierluisi during a press conference at the Manufacturers Association headquarters in Guaynabo, where a forum on the possible impact of congressional legislation on controlled foreign corporations, or CFCs, was being held.

But in a later press conference, Rep. Nydia Velázquez (D-N.Y.), who was the other featured speaker at the forum, said that she had not discussed status legislation with House Speaker Nancy Pelosi. 

Last year, Pelosi did not allow similar legislation to come down for a vote.

Velázquez, one of the Puerto Ricans in Congress, is head of the Hispanic Caucus. 

“Everyone [in Congress] is focused on health care, which is very important given the critical situation we are going through,” she said. “To positively impact the U.S. economy requires addressing the health system.”

She said the approval of this legislation is vital for other issues of interest to Hispanics, such as migration reform, to receive President Obama’s attention.

“If health reform does not pass, the administration will be weakened,” she said.

On possible changes to federal tax legislation that could affect Section 901, which allows CFCs in Puerto Rico, Velázquez said that “no immediate action is seen in the short term,” but that upcoming tax reform legislation must be monitored to see if the island is affected.

“We will be calling on President Obama as well House Ways and Means Chairman [Charles Rangel] to the fact that Puerto Rico needs special treatment so that jobs [in CFCs] are not lost,” she said.

Many subsidiaries of companies under phased-out Section 936 have remained on the island after reorganizing as CFCs under Section 901, which considers the island a foreign territory for federal tax purposes. Most of the CFCs are pharmaceutical operations, which currently generate the most income in the local manufacturing sector. 

CFCs are allowed to defer paying federal taxes on their offshore profits until they are repatriated to the United States. They usually reinvest the dividends in offshore operations.

Pierluisi said that while legislation making changes to CFCs has not been drawn up and is not foreseen until next year, it is likely given the need to shore up tax revenues as stimulus spending to counteract the deep U.S. recession has driven the nation’s deficit to a record high $1.5 trillion, or 11 percent of its gross national product. 

“There is pressure to raise revenues by changing the rules of the game governing [U.S.] subsidiaries overseas,” he said, noting he is making the argument that while Puerto Rico is treated as a foreign country for federal tax purposes, such legislation should make an exception for such operations on the island, given that they generate “American jobs.”

He said, though, that any such initiative will face resistance in the Senate, where the 200 biggest U.S. corporations are lobbying against it, arguing it would affect the nation’s competitiveness.

“My battle will be to make them see that if any changes are made, Puerto Rico cannot be treated as a foreign country, because it is not,” said Pierluisi, noting that he does not rule out changes in the future, but that implementing them now would threaten jobs in the middle of a severe recession.