In Administrative Determination (AD) 2022-11, the Puerto Rico Treasury Department (PRTD) announced that its new tax credit management system, established by Act 52-2022, will be available in the Internal Revenue Unified System (SURI) beginning January 18, 2023. (For more information on Act 52-2022, see Tax Alert 2022-1289.)

Implementation date

The PRTD established that January 1, 2023, is the implementation date of the tax credit management system. That date will be used for purposes of determining tax credits authorized before or after the implementation of the tax credit management system. Accordingly, tax credits authorized before January 1, 2023, are tax credits authorized before the tax credit management system (pre-credits), and tax credits authorized on or after January 1, 2023, are tax credits authorized after the tax credit management system (post credits). Taxpayers should register post credits in the tax credit management system to claim or transfer them.

Tax credit management system availability

The tax credit management system will be a tool available in SURI beginning January 18, 2023. The PRTD plans to issue a circular letter outlining the process taxpayers must follow to register post credits in the tax credit management system. The circular letter also will detail the steps taxpayers must follow to notify the PRTD of the sale, assignment or transfer of the tax credits, as well as to request application of the tax credits against their income tax liability.

Registration requirement

AD 2022-11 lists the credits that taxpayers must register in the tax credit management system. Taxpayers will not be able to claim post credits against their income tax liability if those credits are not registered in the tax credit management system.

Transition rules

Taxpayers may claim pre-credits against their income tax liability for the three tax years following the implementation date of the tax credit management system (January 1, 2023). Any credits remaining at the end of that three-year period may not be claimed in subsequent tax years. Taxpayers do not have to register pre-credits.

Implications

Taxpayers that obtain post credits should take the necessary steps to register them in the tax credit management system, so that they are properly reflected in the system.

Although taxpayers with pre-credits do not need to register them in the system, taxpayers will only be able to use the pre-credits until tax year 2025. Thus, taxpayers with pre-credits should review their outstanding credits to plan their potential use in the remaining three tax years.

Taxpayers may transfer or sell pre-credits during the three-year transition period and as permitted under pertinent laws, but the purchaser must use the credits within the transition period.

Research and development credits registered in the existing Integrated Tax Credits Portal as of January 18, 2023, will be considered pre-credits. Also, any carryover balances of tax credits reflected in the tax returns for tax years commencing before January 1, 2023, will be considered pre-credits.

———————————————

Published by NTD’s Tax Technical Knowledge Services group; Jennifer A Brittenham, legal editor