US Insular Areas Included in the American Rescue Plan

Although the American Rescue Plan has received widespread attention for its historic size and extensive scope, one notable aspect of the new law that has generally escaped notice is its unprecedented resources dedicated to U.S. insular areas.

The U.S. insular areas—consisting of five U.S. territories and three freely associated states (FAS) —are included throughout the provisions of the $1.9 trillion COVID-19 relief legislation signed into law by President Biden on March 11, 2021. The law also enacts meaningful permanent economic assistance to the territories, which are home to more than 3.4 million Americans.

The Freely Associated States

The United States has signed compacts of free association with three sovereign nations that were administered by the United States as a United Nations trusteeship after World War II. The three nations—the Republic of the Marshall Islands, the Federated States of Micronesia and the Republic of Palau—are eligible for select federal programs and visa-free travel to the U.S. in rough exchange for granting the U.S. military exclusive access to the land, sea and air routes in a substantial and strategic area of the Pacific. The free association relationships are a component of U.S. Indo-Pacific strategy.

The American Rescue Plan continues the eligibility of residents of the FAS for U.S. unemployment payments as initially provided in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March of 2020. Under the terms of the new law, FAS residents will continue to qualify for the $300-per-week week benefit until September 6, 2021.

In addition, the U.S. Senate included the FAS in its new Coronavirus Capital Projects Fund on equal footing with neighboring U.S. territories in the Pacific and the U.S. Virgin Islands. The seven entities (the FAS, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands) are granted a $100 million fund to evenly split, leaving each territory or FAS with nearly $14.3 million.

U.S. Territories

The U.S. territories are woven into the provisions of the COVID-19 relief bill extensively, frequently simply defined as a “state” in the legislative text in order to receive equal economic assistance. Federal resources made available nationwide for vaccines, coronavirus testing, local governments, rental assistance, struggling businesses, transit, and education are allocated to the U.S. territories at a level equal or comparable to that of the states.

Comprehensive inclusion of the territories – which also include Puerto Rico – is most pronounced in provisions that apply to individuals, in which permanent reforms long sought by the territories are included. The Joint Committee on Taxation estimates that the permanent changes will provide $14.8 billion to individuals and families in the U.S. territories over the next decade.

The Americans of the territories qualify for the $1,400 recovery rebates. In Puerto Rico the median household income through 2019 was approximately $20,000, making the $1,400 stimulus payments available immediately to all qualifying individuals especially impactful. 

Yet it is the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) provisions that are truly transformative for Puerto Rican families and the islands’ economy. In the immediate term, the American Rescue Plan’s one year expansion of the federal CTC to $3,600 for each child under six and $3,000 for each child aged six to seventeen apply fully through all of the U.S. territories.

The new law also ends CTC limitations that excluded the first two children born in Puerto Rican families from ever qualifying for the federal payments. The law not only includes all Puerto Rican children in the new, expanded CTC payments for 2021, but also continues to cover all Puerto Rican children for the federal CTC in 2022 and beyond, as if they lived in a state.

CTC reform in Puerto Rico is expected to result in more than $4.5 billion in payments to Puerto Rican families through 2026.

This estimate will grow if the federal CTC increase extends beyond its current sunset date of January 1, 2022. President Biden and congressional Democrats have already expressed an interest in making the one-year reform permanent. 

In addition, the American Rescue Plan permanently expands the federal EITC to the U.S. territories. In Puerto Rico, the program will provide triple the value of local EITC program spending, currently valued at roughly $200 million/year. Under the new law, the U.S. government is poised to provide approximately $600 million in additional spending in the first year, creating an $800 million/year local EITC program. 

The U.S. Joint Committee on Taxation estimates that the EITC reform will result in nearly $8.1 billion in federal payments to all territories over the next decade.

Residents of the U.S. territories will also qualify for the American Rescue Plan’s $300 per week unemployment benefit available to workers in the United States through September 6. In December, official estimates indicated that 97,000 people were unemployed in Puerto Rico.

The new law also includes $1 billion for the special federal nutrition assistance programs that American Samoa, the Northern Mariana Islands, and Puerto Rico receive instead of the more generous national Supplemental Nutrition Assistance Program (SNAP).

Contact Information

If you have any questions concerning this alert, please contact:

Karen Goldmeier Green
Washington, D.C.
+1 202.887.4015