The Federal government enacted the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (the “Act”). The Act provides for the Employee Retention Tax Credit (“ERTC”). The ERTC is a refundable credit that will range from 26% to 32% of up to $6,000 of the qualified salary paid per employee. Qualified employers and employees are defined as follows:
- Qualified employer:
- Conducted an active trade or business,
- After the impact of Hurricane Maria and before January 1, 2018 became inoperable as a result of the damage caused by the hurricane
- Continued to pay wages to eligible employees during the time they were inoperable.
- Filed the following forms and returns before requesting the ERTC:
- 2017 Withholding Vouchers (Form 499R-2/W-2PR)
- 2017 Income Tax Withholding Quarterly Return (Form 499 R-1B)
- Unemployment and Incapacity Quarterly Return (Form PR-SD-10)
- Federal Unemployment Quarterly Return (Form 941-PR)
- Qualified employee:
- Hired before September 16, 2017
- Principal place of employment with an eligible employer in Puerto Rico
The qualified wages are those that were paid during the period beginning on the date on which the business first became inoperable and ending on the date on which the business resumed significant operations. For the purpose of ERTC, the business was inoperable if the structure of the business was damaged, the business was not physically available for employees or clients, the business was unable to receive raw material or inventory or if the business had not electricity, water or communication. Operations are not considered to be significant resumed if unstable, reduced by lack of raw materials or inventory, reduced by lack of electricity or water, reduced by instability or lack of telecommunications services, have not reached 80% or more of the activities before the passage of the hurricane.
Qualified wages excludes payments to owners of 51% or more of the entity, payments to relatives of the owners any disaster assistance payments. The evidence and supporting documents requested by the Puerto Rico Department of Treasury must be submitted at https://planillatrimestralpatronal.hacienda.gobierno.pr/. You can download the official guidance at http://www.hacienda.gobierno.pr/sites/default/files/publicaciones/2018/06/guia_del_ertc_-_preguntas_y_respuestas.pdf .
