Wal-Mart sues Puerto Rico over tax hike

The high court granted Puerto Rico’s petition for writ of certiorari, taking up the appeal of a First Circuit decision invalidating the territory’s so-called Recovery Act, which would have established a restructuring regime for the territory.

Wal-Mart’s Puerto Rico operation is asking the federal court in San Juan to void what it calls an “onerous” and “unconstitutional” tax that unfairly targets the USA retail giant.

WASHINGTON-The Supreme Court agreed Friday to hear Puerto Rico’s effort to restructure its public utilities’ debts by enacting its own bankruptcy law. Although, the act would only resolve some of the debt, it could create a model for how the rest of the debt could be restructured, Williams said.

Justices will decide whether the decision conflicts with federal bankruptcy code.

The bondholders say Puerto Rico’s utilities aren’t alone. The court also took up a companion case filed by representatives of the publicly owned Government Development Bank (GDB) for Puerto Rico.

“For 68 years, the states, the District of Columbia, and Puerto Rico alike all observed this prohibition”, BlueMountain argued.

It said Treasury Secretary Juan Zaragoza and other top government officials untruthfully accused it of evading taxes by manipulating the prices paid between related entities to underreport Puerto Rico income.

“It’s clearly an issue of national importance”, said Matt Fabian, a partner at Concord, Mass.-based Municipal Market Analytics.

In January, the court will hear arguments in Puerto Rico v. Sanchez Valle, a criminal case that will determine whether the commonwealth and the US are “separate sovereigns” under the Constitution’s double jeopardy clause. He added, “We urge Congress to take action now”.

Puerto Rico passed the law to give certain public corporations, with around $20 billion in debt, the ability to restructure financially in an orderly process.

Puerto Rico Gov. Alejandro Garcia Padilla announced in June that the commonwealth’s public debt was “not payable” and said its agencies would seek concessions from creditors. But Mr. Padilla warned the U.S. Senate Judiciary Committee the same day that the island is running out of cash, and it was not clear whether other payments would be made.