A group representing U.S. corporations that have operations in Puerto Rico has warned lawmakers against reducing a key tax credit, saying such a move would create economic problems for Puerto Rico.

At issue is the possessions tax credit, known commonly as Section 936, which provides federal tax incentives for investment in Puerto Rico. Legislation pending in the House would cut the tax credit by 15%.

Carl A. Nordberg Jr., with the Washington law firm of Groom and Nordberg, told the House Ways and Means Committee that the tax credit has spurred much-needed manufacturing employment in Puerto Rico.

"U.S. companies utilizing Section 936 today directly employ 115,000 workers, representing over 72% of all manufacturing employees on the island," Mr. Nordberg said in testimony on behalf of the Puerto Rico U.S.A. Foundation.

"This employment has been supplemented by nearly 200,000 indirect jobs created by Section 936 with suppliers and service businesses for this growing industrial sector, so that Section 936 now accounts for one-third of Puerto Rico's total work force of 925,000 people," Mr. Nordberg said.

Mr. Nordberg said that though the tax credit has been successful, "the economic development of Puerto Rico remains incomplete" and the credit should be maintained as it is.

The outlook for the pending legislation is uncertain.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.