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TREASURY MEMORANDUM The following sections of the Report of the Ad Hoc Advisory Group on Puerto Rico on the proposed Compact of Permanent Union Between Puerto Rico and the United States are of interest to this Department: Section 2 This section outlines the proposed jurisdiction and authority of the Free Associated State of Puerto Rico. Puerto Rico would delegate certain powers enumerated within this Compact to the United States. Powers not so delegated would be reserved to Puerto Rico. The enumerated powers delegated to the United States in the field of taxation are ambiguous. This ambiguity could create many administrative and substantive tax problems which would have to be resolved prior to enactment of the Compact. Also, the Compact should delegate to the United States the specific power to assess, collect and enforce the taxes imposed by the Internal Revenue Code of 1954 (hereinafter cited as "Code") with respect to all persons subject to taxation under the Code. The proposed Compact would grant the United States responsibility for the foreign policy of Puerto Rico, while providing Puerto Rico with jurisdiction over matters of a domestic nature. Presumably, the United States power to determine Puerto Rico's foreign policy would include the power to determine its oceans policy. Section 2(a) of the draft bill would grant Puerto Rico jurisdiction over its seas and seas adjacent to Puerto Rico. This language could be construed to authorize Puerto Rico, in the exercise of its sovereignty over its seas, to extend unilaterally its jurisdiction over oceans adjacent to its territory or territorial sea in conflict with United States policy in the ongoing law of the sea negotiations. Accordingly, we recommend that a sentence be added to section 2(a) to read: "The Free Associated State of Puerto Rico shall exercise its national sovereignty over its seas in a manner consistent with the foreign policy of the United States. It is not clear from the wording of this section whether the coastwise laws of the United States, which cover the transportation of passengers and merchandise on water between points embraced by the coastwise laws and towing and dredging operations in United States waters (see 46 U.S.C. 289, 292, 315, and 883), would continue to be applicable to Puerto Rico itself, or only to water transportation

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    "ocrText": "TREASURY MEMORANDUM\nThe following sections of the Report of the Ad Hoc Advisory\nGroup on Puerto Rico on the proposed Compact of Permanent Union\nBetween Puerto Rico and the United States are of interest to this\nDepartment:\nSection 2\nThis section outlines the proposed jurisdiction and authority\nof the Free Associated State of Puerto Rico. Puerto Rico would\ndelegate certain powers enumerated within this Compact to the\nUnited States. Powers not so delegated would be reserved to Puerto\nRico. The enumerated powers delegated to the United States in the\nfield of taxation are ambiguous. This ambiguity could create many\nadministrative and substantive tax problems which would have to be\nresolved prior to enactment of the Compact. Also, the Compact\nshould delegate to the United States the specific power to assess,\ncollect and enforce the taxes imposed by the Internal Revenue Code\nof 1954 (hereinafter cited as \"Code\") with respect to all persons\nsubject to taxation under the Code.\nThe proposed Compact would grant the United States responsibility\nfor the foreign policy of Puerto Rico, while providing Puerto Rico\nwith jurisdiction over matters of a domestic nature. Presumably,\nthe United States power to determine Puerto Rico's foreign policy\nwould include the power to determine its oceans policy. Section 2(a)\nof the draft bill would grant Puerto Rico jurisdiction over its seas\nand seas adjacent to Puerto Rico. This language could be construed\nto authorize Puerto Rico, in the exercise of its sovereignty over\nits seas, to extend unilaterally its jurisdiction over oceans adjacent\nto its territory or territorial sea in conflict with United States\npolicy in the ongoing law of the sea negotiations. Accordingly, we\nrecommend that a sentence be added to section 2(a) to read: \"The\nFree Associated State of Puerto Rico shall exercise its national\nsovereignty over its seas in a manner consistent with the foreign\npolicy of the United States.\nIt is not clear from the wording of this section whether the\ncoastwise laws of the United States, which cover the transportation\nof passengers and merchandise on water between points embraced by\nthe coastwise laws and towing and dredging operations in United States\nwaters (see 46 U.S.C. 289, 292, 315, and 883), would continue to be\napplicable to Puerto Rico itself, or only to water transportation"
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