On October 1, the Financial Oversight and Management Board for Puerto Rico (FOMB) called on Administrator Cameron Hamilton to decide whether construction taxes on FEMA work should be considered “allowable costs” under federal law.
The real question for FEMA: Should Puerto Rico’s mayors be allowed to steal disaster funds, and by extension, rob American taxpayers?
In Frontiers of Freedom’s newest letter, co-signed by the National Taxpayers Union and the Taxpayers Protection Alliance, we urge Administrator Hamilton to rule construction taxes on FEMA work “unallowable” and ask him to pause funding to the island until the mayors terminate these taxes.
Legal basis
Under 2 C.F.R. § 200.470, the federal government does not allow taxes when they “disproportionately affect Federal programs.” Furthermore, under § 200.403, federal costs must be “adequately documented,” with records tracking the source and expenditure of federal funds.
The FOMB has found that 22 municipalities are disproportionately taxing the federal government for emergency recovery work. Meanwhile, FEMA funds remain untraceable once they are placed in the municipalities’ “general funds.”
And recent investigations by Frontiers of Freedom have found that municipalities use these general funds to pay for local festivals, events and other nonessential expenses.
Call to action
We urge Administrator Hamilton to use all available legal means to terminate all taxes on past, present and future FEMA projects in Puerto Rico, in line with the Trump administration’s goal of ending waste, fraud and abuse.
Following the letter’s release, George Landrith, President and CEO of Frontiers of Freedom, issued the following statement:
“For years, Puerto Rico has been siphoning emergency aid intended for disaster recovery into municipal treasuries via construction excise taxes.
“The taxes inflate the cost of rebuilding the island, delay the restoration of essential services, and diminishes the value of FEMA funding.
“Our organizations share the goal of protecting American taxpayers. This is why we are requesting immediate action from FEMA.”
