On July 4, 2025, President Donald Trump (R) signed HR 1 into law, referred to as the “One Big Beautiful Bill Act.” First introduced on May 20 by Representative Jodey Arrington (R) of Texas, the bill includes signature policies from President Trump’s second-term agenda. Primarily, the bill is an extension of his first-term Tax Cuts and Jobs Act, which was set to expire at the end of the year. The bill has significant cuts to funding towards Medicaid and nutrition programs, and it extends funding towards others. Notably, it includes a $150 billion increase towards United States military spending, allocates $100 billion to Immigration and Customs Enforcement (ICE), and calls for an end to the Biden-era clean energy tax credits. The Senate narrowly approved the Bill in a vote of 51-50 that required Vice President JDance to act as the tiebreaker in the US Senate. Afterward, the US House of Representatives approved HR 1 in a vote of 218 to 214.
While US territory representatives to the United States Congress are non-voting delegates, numerous congresspeople have made public statements on the impacts of the One Big Beautiful Bill on their territories. On June 16, the delegates of American Samoa and Puerto Rico joined together to successfully urge the Senate to include a provision in HR 1. This provision, found in Sec. 70427 in the HR 1 summary, restores the enhanced rum cover-over rate for Puerto Rico and the US Virgin Islands. For context, the United States collects a $13.50 per “proof gallon” tax on alcohol, referring to a measurement of the alcohol content. This is a significant provision for both island territories. The US Virgin Islands is home to major distilleries, and Puerto Rico is often referred to as the “Rum Capital of the World.”
When rum is imported from Puerto Rico or the US Virgin Islands, the US collects this tax. However, it sends most of the money back to the governments of these territories through the “rum cover-over.” Unfortunately for the local governments, from 2022 to 2026, the US was set to send back $10.50 per proof gallon. The Big Beautiful Bill will change this rate by permanently adding an extra $2.75 per gallon. Hence, both Puerto Rico and the US Virgin Islands will permanently get more money back from the taxes collected on their rum. In Puerto Rico, the provision is expected to provide an increase of over $110 million above the current $400 million received annually by the Government, helping to ensure that rum operations stay on the island. In the US Virgin Islands, delegate Stacey Plaskett (D) of the US Virgin Islands stated that “these funds, which represent nearly 25% of the Virgin Islands Government’s annual budget,” are critical to attract investments to diversify the economy beyond tourism.
In delegate Stacey Plaskett (D) of the US Virgin Islands’ July 10 statement on the impacts of the bill, she expands the discussion beyond rum, focusing on its changes to SNAP, Medicaid, Medicare, and other federal programs. Because of the funding cuts to this program, her office has reached out to both local legislation and finance committees.
“It will be imperative for the Virgin Islands local government to focus on finding new revenues and act creatively to remedy the impacts of federal cuts locally,” she said.
She emphasizes that, in terms of the increased rum-cover rate, her new priorities are ensuring the US Virgin Islands receives a proper share of worldwide rum revenue and works alongside companies to utilize the rum-cover rate and increase funds that go directly towards the island’s government.
For Resident Commissioner Pablo José Hernández (D) of Puerto Rico, he highlighted many of the positive impacts of HR 1 in his personal statement on July 3rd. Although he’s stated that he has “serious concerns about various aspects of HR 1,” this statement focused on the favorable aspects. These include maintaining Medicaid and Nutrition Assistance Program funding in Puerto Rico, extending the Additional Child Tax Credit, ensuring the Opportunity Zones policy remains permanent, and the monumental success in restoring the rum cover-over to its full “historical level.”
Ultimately, the “One Big Beautiful Bill Act” represents both opportunity and challenge for the territories, and the territorial delegates’ responses highlight the complex trade-offs embedded within HR 1 for these territories.
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