On July 4th, President Trump signed into law the “One Big Beautiful Bill Act,” a comprehensive tax and spending package with myriad provisions. People across the nation are still trying to figure out how its changes will affect states and individuals. But how will it affect Puerto Rico?
Nutrition assistance
Efforts have been made to transition Puerto Rico away from its Nutrition Assistance Program (NAP), the Island’s capped Federal allocation for nutrition assistance, to the Supplemental Nutrition Assistance Program (SNAP), the open ended assistance program in the states. This has not yet happened, and it could not happen in the OBBA, which was confined to spending decisions to the exclusion of broad policy reforms.
Yet OBBA does impact Puerto Rico’s nutrition program. NAP is a combination of a defined Federal allocation – roughly $1.5 billion/year – plus roughly the same amount as calculated through a cost of living adjustment for food called Thrifty Food Plan. The OBBA flattens the Thrifty Food Plan amount, meaning that this component of payments for Puerto Rico nutrition assistance will not keep up with inflation in the coming years.
Thus, although Puerto Rico’s NAP program is not mentioned at all in the bill, it is likely that residents of Puerto Rico will see some effects. The amount of nutrition. support provided to households in Puerto Rico is already lower than in the states, and it will probably drop, even as prices increase.
Medicaid
Again, Puerto Rico was not specifically mentioned in the OBBA’s section on Medicaid. The Congressional Budget Office (CBO) estimates that 16 million people will lose coverage under the OBBA, but did not discuss possible effects in Puerto Rico specifically. The larger threat to Puerto Rico is on the horizon for September 2027, when Puerto Rico’s substantial add-on payments to its limited Medicaid allocation will expire. This is commonly referred to as Puerto Rico’s Medicaid “cliff.” In the current budget environment, it would have been very difficult politically to extend the extra payments had 2025 been the year of Puerto Rico’s “cliff.”
Medicaid for the Territories
Child Tax Credit (CTC)
The OBBBA increases the child tax credit from $2000 to $2200 per child starting in 2025, indexed to inflation in future years. That’s a direct benefit to Puerto Ricans with a federal income tax liability such as those residents who work for the federal government.
The refundable portion of the child tax credit, which all Puerto Ricans generally qualify for even though they are not part of the federal tax system, grows apace. In 2025, the maximum refundable amount is $1,700 per child.
These changes are made permanent and also will be indexed to keep up with inflation. Because Puerto Rico was added to the CTC in a 2021, Puerto Ricans will be able to benefit from CTC increases.
OBBBA requires a Social Security Number (SSN) for both parents and children. This doesn’t impact the U.S. citizens of Puerto Rico, who can obtain SSNs directly from the government.
GILTI
Global Intangible Low-Taxed Income (GILTI) is a section of the tax code, introduced by the 2017 Tax Cuts and Jobs Act (TCJA), that seeks to ensure U.S. multinational corporations pay a minimum level of tax on their foreign earnings. Before OBBA passage, the difference between the domestic corporate income tax rate (21 percent) and the GILTI rate (10.5 percent) could influence decisions by U.S. companies to set up controlled foreign corporations (CFCs), as opposed to domestic branches, in Puerto Rico.
This delta shrunk in OBBBA by raising the foreign rate (renamed the “Net CFC Tested Income” or NCTI) from 10.5 percent to 12.6 percent.
As a result, it may be less lucrative to do business in Puerto Rico as a CFC than it was before passage of the new law.
Trump Accounts
All US citizens born in 2025 through 2028 will receive a $1000 “baby bonus” payment to a Trump account. This money must be invested in a low cost stock index fund. It cannot be withdrawn before age 18, and must be withdrawn by age 31. It can be withdrawn for any purpose. It is taxed at ordinary income tax rates.
Puerto Rican babies are eligible for these payments.
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