This Insight updates PwC Insights published October 26, 2017, and February 28, 2018, relating to the Puerto Rico Employee Retention Tax Credit (the Credit) in order to address new rules relating to a refundable Puerto Rico Disaster Relief opportunity now available to taxpayers (the PwC Insights can be found here and here).
On June 8, 2018, the Puerto RIco Treasury Department (PRTD) issued Internal Revenue Circular Letter No. 18-11 (CL 18-11), providing a refundable version of the Credit and offering guidance regarding the eligibility requirements for employers in Puerto Rico and the procedure to be followed by them to claim the Credit. The Credit is limited to 26% or 32% of the firm $6,000 of qualified wages paid by Eligible Employers to Eligible Employees, depending on taxable income of the Eligible Employer. The benefit, which is paid as a cash grant to the Eligible Employer, requires electronic application by December 31, 2018.
Subsequently, on June 11, 2018, the PRTD issued detailed guidance related to the Credit for employers in Puerto Rico.
The guidance offers a refundable option to companies with operations in Puerto Rico that do not have taxable income or whose wages are not included in the federal US 1120 Income tax return. The program also may appeal to flow-through entities or taxpayers that already filed their 2017 tax returns and did not take advantage of the program at the time of filing.
Another item for consideration is that the guidance outlines an 80% substantially resumed test, which had not been outlined in previous versions of similar credits.