On‐the‐record Statement:
“The Secretary of Treasury of the Commonwealth of Puerto Rico does not publicly discuss tax‐related claims and disputes with taxpayers.”
Background Talking Points:
Shapiro Statement:
- Doral has hired a celebrity economist to argue their case publicly, but the facts remain clear.
- Mr. Shapiro is misinformed as to the policy of the Commonwealth of Puerto Rico and its account payables.
- Mr. Shapiro fails to distinguish between a valid accounts payable of Puerto Rico and the tax related claim and dispute of one of its taxpayers.
- The Commonwealth has a policy and on‐going commitment to fulfill its contractual obligations and to defray its accounts payable as these become due.
Shapiro Statement:
- Treasury Department has reached the conclusion Doral’s request for a refund is not proper in law.
- The 2012 closing agreement was intended to create a right to a refund for a tax overpayment in the amount of $229,884,087 (equal to an account receivable against the Commonwealth). No evidence has been presented to show that this overpayment ever took place.
- Jesús F. Méndez Rodríguez was Treasury Secretary at the time the agreement was reached, even though it has been said that he was not personally involved with the signature of the agreement. When Mr. Mendez left his post as Treasury Secretary, he then became Executive Vice President – Puerto Rico Operations of Doral Financial Corp. The Puerto Rico Office of Ethics and the Puerto Rico legislature have both began further inquiries into this matter.
- As previously made public by Doral, upon review of this particular closing agreement, Treasury requested Doral to provide all evidence and supporting documents that to prove that in fact Doral had overpaid taxes in connection with revenues related to the IOs (income that according to Doral was later reversed during a restatement of the financial statements). The evidence provided by Doral in response, did not address the representations or determinations made in the closing agreement. The documentation provided by Doral only showed payments made by Doral or its affiliates during the years that were later restated, but failed to show that the payments should be refunded:
- Many of the checks sent as evidence were from subsidiaries totally non‐related to the IOs income, and not related to the restatement of the financial statements;
- The checks sent related to those companies related to the IOs income and the restatement were related to tax returns in which the companies specifically excluded the IOs income from the tax return. The schedules included in Doral’s returns called “Schedule of Reconciliation of Net Income per Books with Net Taxable Income per Return” clearly excluded the IOs income from the tax returns;
- At the time the agreement was executed in 2012 all of the alleged refunds were barred by statute of limitations under the Internal Revenue Code (4 year prescription period, requested refunds were from 1998 to 2005).
- There are no records at Treasury that show that Doral Financial Corporation, or its subsidiaries, overpaid taxes in the amount claimed.
- The closing agreement signed in 2013, mentioned by Mr. Shapiro in his call, has no relation to the 2012 closing agreement, this last statement according to the representations made by Doral to Treasury. Treasury had not reviewed the 2012 closing agreement at the time the 2013 closing agreement was executed.
- Doral’s request regarding the 2012 closing agreement is akin to taking the future depreciation of an asset and having the Treasury Department pay in the present for possible tax savings that may be obtained from that depreciation. For those tax savings to happen, Doral has to show profits in the future.
- Closings agreements in Puerto Rico are considered final, unless there were signed under fraud or false statements. The adherence to the rule of law is not limited to the negotiation and execution of certain agreements, but also to ensure that their enforcement is in compliance with the law. Treasury cannot make refund payments to taxpayers that have not overpaid their taxes.
- The information that the Government of Puerto Rico has, is that the federal regulators decided to inform Doral that it cannot use the so called Treasury account receivable as part of its capital, because of reasons totally independent to the decisions taken by the Government of Puerto Rico. Doral insists in misrepresenting this fact and many others to the market.