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The Puerto Rico Treasury Department (PRTD) granted additional time (Informative Bulletin (IB) 19-01) to request the employee retention benefit (Benefit) related to Hurricanes Irma and María (Extension). For more information on the benefit, see Tax Alert 2018-1297. The original due date expired on December 31, 2018; under IB 19-01, the new deadline is March 31, 2019.

The PRTD also issued a procedure (Circular Letter (CL) 18-20) on December 28, 2018, for employers to modify their filed application for the employee retention benefit related to Hurricanes Irma and Maria by allowing the submission of a claim (Claim). CL 18-20 was modified by IB 19-01 to extend further the due date to file the Claim from February 28 to April 30, 2019.

Extension procedures

The PRTD stated that it received requests and petitions from employers that have not had enough time to comply with the December 31, 2018 due date to file for the Benefit. The PRTD is also cognizant of the difficulties still being confronted by most employers that are trying to recover from Hurricanes Irma and María. In response to those factors, the PRTD agreed with the U.S. Department of Treasury to amend the Employee Retention Tax Credit Implementation Plan to grant additional time for employers in Puerto Rico to apply for the Benefit.

The extended due date is March 31, 2019. Employers may request the Benefit through the PRTD's digital website, and must follow the procedure in Circular Letters 18-11 and 18-20.

Claim procedures

Under CL 18-20, employers that have requested the employee retention benefit under CL 18-11, as of December 31, 2018, may file a Claim if they: (1) have not received the benefit; (2) did not receive the expected amount under the eligibility rules; or (3) believe that the information submitted needs to be modified. Employers may file a Claim for the following reasons:

• To adjust salaries paid to employees during the eligible period (i.e., the period beginning after September 4, 2017, for Hurricane Irma and after September 16, 2017, for Hurricane Maria and ending on the date the business resumed significant operations again or December 31, 2017, whichever occurred first)
• To add localities that were inoperable during the eligible period for which the employer has the right to request the benefit
• To modify the benefit rate applicable to the employer, depending on the net income subject to tax for tax year 2017
• To add eligible employees for an inoperable locality
• For any other reason that merits a benefit adjustment

If the modification results in an additional benefit, the payment may be made only through direct deposit to the account indicated on the Claim. If the employer has received more than the amount for which the employer was eligible, the excess amount will be returned to the Government through the PRTD's digital platform.

Employers may file the Claims for the employee retention benefit from January 1, 2019, to April 30, 2019. Once the employer files a claim, the PRTD will evaluate the Claim and issue a written determination approving or denying it.

Implications

Employers that have not filed for the Benefit may want to re-evaluate the eligibility rules to determine if requesting the Benefit makes sense for them. Employers should be reminded that the amount of the Benefit received does not constitute taxable income for Puerto Rico income tax purposes. For those employers that may have had technical difficulties in submitting their application for the Benefit by December 31, 2018, the March 31, 2019 extended due date certainly presents an excellent opportunity to try to fix those difficulties and submit the request.

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