S. 1938 modifies how federal taxes on distilled spirits—particularly rum—are distributed to Puerto Rico and the U.S. Virgin Islands. The bill removes a previous cap that limited how much tax revenue could be transferred to these territories, effectively restoring full tax coverage for spirits produced there. Additionally, the bill requires Puerto Rico to allocate a portion of rum tax revenues (ranging from zero to a maximum amount based on tax rates above $10.50 per proof gallon) to the Puerto Rico Conservation Trust Fund, which supports natural area conservation and reforestation efforts on the island. These changes apply retroactively to spirits brought into the United States after December 31, 2021, and are supported by lawmakers from both parties who represent affected regions.
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