EMPLOYEE RETENTION BENEFIT
For employers affected by hurricanes Irma
and María
Puerto Rico Treasury Department
Rev. June 19, 2018
Agenda
1
Requirements to qualify for the benefit
Eligible Employee
Eligible Employer
Inoperable Business
Resumed Significant Operations
Qualified Wages
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Benefit Amount
Benefit Application
Benefit Payment
Benefit Amount
In the US and USVI, the benefit is a credit equal to 40% of the first
$6,000 of Qualified Wages paid to each Eligible Employee.
The US Code provides that if a taxpayer does not claim the credit in
the current taxable year, the credit can be carryback for one-year and
forward for 20 years.
This credit was enacted in P.L.115-63, known as the "Disaster Tax
Relief and Airport and Airway Extension Act of 2017" of September 29,
2017.
Benefit Amount
Benefit Amount
The US Treasury determined the benefit applicable to Puerto Rico
taxpayers after an amended to the benefit introduced by Section 20201(b)
of the Bipartisan Budget Act of 2018, which provides that the credit will be
subject to the provisions of Section 280C(a) of the US Code.
Section 280C(a) of the US Code provides that no deduction shall be
allowed for that portion of the wages or salaries incurred for the taxable
year that equals the credit for the taxable year.
For resident employers of Puerto Rico, the US Treasury authorized that the
net benefit of the credit be distributed as a refundable credit in 2017.
Benefit Amount
According to the US Treasury, the net benefit of the
credit is 26% or 32% of the first $6,000 of Qualified
Salaries paid by the Eligible Employer to each Eligible
Employee.
The applicable percentage will be determined based on
the net income subject to normal tax of the Eligible
Employer.
Benefit Amount
In Puerto Rico
Taxable Year 2017
Net Income Subject to Normal TaxApplicable Percentage
$10,000,001 or more 26%
$10,000,00 or less 32%
Benefit Amount
For purposes of the Puerto Rico income tax return:
• The benefit does not affect the right to claim a deduction
for wages paid.
• The benefit is not considered taxable income.
In the case of controlled groups, each member of the group
will compute separately the amount of the benefit. The
Qualified Wages used by a member of the controlled group
cannot be used by any other member.
A branch of a US corporation or any other jurisdiction, is eligible
for the benefit for the Qualified Salaries paid to its Eligible
Employees in Puerto Rico. However, in the case of US
corporations, the entity cannot:
• Claim the Employee Retention Tax Credit available in the US
• Claim the work opportunity credit under Code Sec. 51 of the
US IRC.
Benefit Amount
Eligible Employer
An eligible employer is an employer:
• Who conducted an active trade or business in Puerto Rico
on September 16, 2017 (September 4, 2017 in case of
Hurricane Irma)
• Whose trade or business became inoperable, on any day
after said date and before January 1, 2018
• Continued to pay or accrue wages to the employees during
the period the business was inoperable
Who is an
Eligible Employer?
Eligible Employer includes:
• Flow through entities
• Corporations
• Any self employed individual taxpayer who hires employees
to carry its business
Exempted entities (such as non-for profit under Section 1101.01
of the PR Code) are not considered Eligible Employers under
the Act.
Who is an
Eligible Employer?
Requirements to qualify for
The Benefit
The eligible employer must have filed the following forms:
• All the required 499R-2/W-2 PR
• The Employer’s Quarterly Federal Employment Tax Returns (Form
941PR) for the Tax Year 2017
• PR Employer’s Quarterly Unemployment & Disability Insurance Tax
Report (Form PRSD-10) for the taxable year 2017
• The PR Employer’s Quarterly Returns of Income Tax Withheld at
Source (Form 499R-1 A) for the taxable year 2017
The employer must be registered in the Merchant Registry of the
Puerto Rico Treasury Department
** If the employer has not filed the forms mentioned above, the same should be filed prior to claiming the
Benefit.
Requirements to qualify for the benefit
Eligible Employee
Hurricane María – an eligible employee is an employee of an
eligible employer whose principal place of employment on
September 16, 2017 was in Puerto Rico.
Hurricane Irma – in this case, the principal place of employment
of the employee on September 4, 2017 must has been in the
following municipalities: Canóvanas, Cataño, Culebra, Dorado,
Fajardo, Loíza, Luquillo, Toa Baja, Vega Baja and Vieques.
Employees hired after these dates will not be considered Eligible
Employees.
Who is an
Elegible Employee?
The term “Eligible Employee” excludes relatives hired by:
• An individual who is self-employed.
• The owner of a corporation or partnership:
• Owner of the corporation is the shareholder who owns,
directly or indirectly, more than 50% in value of its
outstanding stocks.
• Owner of the partnership is the partner who owns, directly or
indirectly, 51% or more of the partnership interest.
Who is an
Elegible Employee?
Eligible Employee
Example of Hired Relatives who are
NOT considered Eligible Employees
Son
-
Daughter
Brother
-
Sister
Father
-
Mother
Stepfather
-
Stepmother
Nephew
-
Niece
Uncle
-
Aunt
Son-in-law
-
Daughter-in-
Law
Father-in-law
-
Mother-in-law
.
Qualified Wages
Qualified wages are those wages paid or incurred
during the period beginning on the date on which the
trade or business first became inoperable at the
employee’s principal place of employment.
What are
Qualified Wages?
Hurricane Irma – after September 4, 2017
Hurricane María – after September 16, 2017
The period ends on the date on which the trade or business has
resumed Significant Operations at such principal place of
employment before January 1, 2018.
Eligible Period
for the Qualified Wages
The amount of Qualified Wages the employer can
take into account with respect to an employee is up
to $6,000 per Eligible Employee.
What are
Qualified Wages?
Qualified Wages for purposes of the Benefit are payments
that qualify as wages for purposes of the Federal
Unemployment Tax Act (FUTA) and the Puerto Rico
Unemployment Security Act.
It includes the following:
• Commissions
• Bonuses
• The cash value of remuneration paid in any medium other
tan cash.
Qualified Wages
• Late payment under any local or federal act
• Vacation and sick leave payments
• Any amount paid or incurred for medical or
hospitalization expenses in connection with sickness or
accident disability
Qualified Wages
• Wages paid without regard to whether the employee
performs any services or performs services at a different
place of employment than the principal place of
employments
• Accrued or paid wages for services performed by an
Eligible Employee at his principal place of employment,
after the impact of the hurricane but before significant
operations have resumed.
Qualified Wages
Wages paid by a third-party payer (including an employee
leasing company, a professional employer organization, or a
Certified Professional Employer Organization) to Eligible
Employees of an Eligible Employer are considered Qualified
Wages incurred by the Eligible Employer.
Only the Eligible Employer, and not the third-party payer,
can take into account such Qualified Wages in claiming the
Benefit.
Qualified Wages
If the principal business was rendered inoperable by
Hurricane María, the opening at the new location is not
treated as the resumption of operations at the employee’s
principal place of employment. Thus, the employee’s wage
payments made through December 31, 2017, are eligible for
the Benefit, because the business never resumed operations
at the employee’s work place.
Qualified Wages exclude any pay for disaster assistance.
Qualified Wages
Inoperable Business
A business becomes inoperable when the trade or business of an
employer could not be carried out as a result of the hurricanes for
one or more of the following reasons:
• Structural damages to the business
• The business is physically inaccessible to employees or
customers
• The business could not receive raw materials or inventories
• Lack of utilities, such as electricity, water or communication
access, etc.
Inoperable Business
Can the employer claim the benefit if he eventually decides to close the
business? Yes
Example:
An employer owned a commercial establishment located in an area impacted
by Hurricane Maria. The establishment was rendered inoperable by the
disaster. The employer continued to pay wages to its employees. However
on November 15, 2017, decided not to rehabilitate the building in which the
business was located; and permanently laid off the employees as of
November 30, 2017. The employer paid salaries to its employees through
November 30, 2017.
In this case, the employer can claim the benefit with respect to all wages paid
from September 17 to November 30, 2018, up to $6,000 per eligible
employee.
Inoperable Business
Resumed Significant Operations
Each employer should make a reasonable and good faith
interpretation of what significant means in relation to its
particular business.
The Significant Operations test applies to each principal place
of employment. Thus, it applies separately to each place of
employment.
Resumed
Significant Operations
The following circumstances can be used as guidelines to
determine whether a business has not resumed Significant
Operations.
• If operations are unstable
• Lack of raw materials or inventory
• Instability of the utilities or communications services
• The business has not reached at least 80% of its
activities
Resumed
Significant Operations
Benefit Application
The benefit can only be claimed through a new platform
created on the electronic system of PRTD’s Internet page
Prior to claiming the Benefit, the Eligible Employer must
confirm that Forms for the taxable year 2017 have been
duly filed.
The platform to claim the benefit will be available until
December 31, 2018.
Benefit Claim
The platform is available on the same electronic
system employers use to file the Employer’s
Quarterly Returns of Income Tax Withheld (Form
499 R-1B) with the Puerto Rico Treasury
Department
Benefit Claim
Required information
to claim the benefit:
Merchant Registry
Number of the main
location
01. Date on which the business
resumed Significant
Operations*
Date on which the
business became
inoperable
02.
Name of each Eligible
Employees (Name,
Middle Initial,
Surnames)
04.
03.
Social Security
Number of each
Employee
05. Total of Qualified Salaries paid
or accrued per Eligible
Employee during the period the
business was inoperable
06.
*If the date is after December 31, 2017, the date that will be provided is December 31, 2017.
Electronic
Platform
Click Here
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Benefit Payment
The Benefit will be paid only by means of direct deposits to
the bank account indicated at the time of claiming the Benefit.
PRTD will pay the benefit two weeks after the employer
completes the claim, only if the Federal Treasure has
transferred the funds to our agency and the funds are
available to proceed with the payment.
Benefit
Payment
Additional
Information
For additional information related to the Benefit,
you can send an email to:
You can also call us at:
(787) 622-0123 (option 8)
Questions and Answers
Thank You
for Your Time
and Company