GOVERNOR Arnold I. Palacios on Monday vetoed House Bill 23-74, which would impose a 3% tax on construction activities.
He expressed support, however, for a new version of the bill, which the House of Representatives passed last week.
The governor vetoed H.B. 23-74, authored by Rep. Ralph N. Yumul, who proposed to impose a tax on construction projects that cost $350,000 or more “to mitigate the myriad costs to the Commonwealth that are attributable to large scale construction activities, which include waste generation, pollution and emissions from heavy equipment, damage and stress on roads and infrastructure, erosion and pollution control, and the added costs at the ports of entry associated with increased customs activities to ensure that materials and supplies are not co-mingled with contraband.”
In his veto message to Speaker Edmund S. Villagomez and Senate President Edith Deleon Guerrero, the governor said, “in this time of severe fiscal challenge for the Commonwealth, I support this measure to raise much-needed revenue to sustain essential public services.”
Palacios said revenue-generating measures must always be balanced with the burdens they impose on businesses and the public.
He said he also shares “the Legislature’s conviction that this measure passes the cost-benefit analysis, in part by mitigating the strains construction activity imposes on the Commonwealth infrastructure,” the governor said.
However, as written, H.B. 23-74 “is insufficiently protective of the reliance interests of contractors, which entered into construction contracts prior to the bill’s effective date. Retroactively imposing new taxes on vested contractual interest is unfair and may be unlawful,” the governor said.
On Friday last week, the House, by a 18-1 vote, passed a similar bill, H.B. 23-120.
Introduced by Speaker Villagomez, the bill states that the 3% construction tax would not apply retroactively to contracts awarded on or before Dec. 31, 2024, unless there is a change order that occurs after Jan. 1, 2025.
The governor extended his appreciation to the Legislature for its “diligent work” in crafting the new bill.
