One of the responses of the Federal Government to deal with the financial difficulties caused by the pandemic was the approval of the “American Rescue Plan Act of 2021”, ARPA, that provides $350 billion of direct assistance to all USA states and territories. The USA Department of Treasury allocated the sum of $2.47 billion to Puerto Rico.
To this effect, the Governor of Puerto Rico assigned $100 millions of the available funds to establish the Return-to-Work Incentives Program. The Program intends to grant financial incentives to those eligible persons that return to work. The Financial Advisory and Fiscal Agency Authority (AAFAF) has issued the Guidelines that itemize the eligibility criteria, the amount of the incentives to be granted and the process for requesting the incentives.
To inform on the eligibility requisites established on the Guidelines and to establish the process that the Treasury Department (TD) will follow for granting these incentives, the TD Secretary issued Internal Revenue Circular Letter No. 21-18 (CC RI 21-18).
Eligibility Requisites
According to the Guidelines, both employers and employees must comply with the following requisites:
Eligible Employer: The employer must comply with the following:
- Must be an employer of the private sector, either as an individual owner, a partnership, or a legal entity.
- The business must be operating at the moment the request for the incentives is filed.
- The business must be engaged in one of the following commercial activities: restaurant or bar, hotel or lodging services, agriculture, or construction.
The business must have its Merchant’s Registration Certificate in effect and must include at least one of the NAICS Codes that define the type of business of its main endeavor.
- If it was doing business during 2020, it must have filed the Income Tax Return for 2020; or, if the 2020 Tax Return has not yet been filed, it must present proof of the extension request for filing the Tax Return.
Eligible Employee: Any individual that complies with the following requisites may be eligible.
- The individual received benefits from the Unemployment Insurance or from the Pandemic Unemployment Assistance (PUA) up until he began working for an employer engaged in one of the Eligible Industries.
- The individual informed the Labor Department that he began a new job and as a result stopped receiving the unemployment benefits.
- The new business on which he is now working is considered an Eligible Employer.
- The individual started working either full or part time within the period covered from July 1, 2021, to September 4, 2021.
- The individual commits to comply with all the terms and conditions of the Program.
- The individual accepts to return the funds received if it is determined that he did not comply with any of the eligibility requisites.
The term “private sector employer” includes all those non-profit entities certified by the TD that maintain employees subject to payroll and employer contributions and are engaged in the activities itemized on the NAICS Codes.
Eligible or Allowed Expenses
The funds requested must only be used as an incentive for returning to work.
The following expenses are not considered eligible expenses no matter they were incurred due to the pandemic:
- Payment to employees whose main residence is outside Puerto Rico
- Payments to individuals, third-party employees and independent contractors that do not comply with the requisites
Amount of the Incentive
The monetary incentive to be granted to each Eligible Employee will be of $2,000, to be paid in two installments. The initial payment for each Eligible Employee will be $500. The final payment will be sent as soon as the employer presents the final proof of employment on or before the 90-day period after the initial payment was made but no later than November 30, 2021. The final payment will be of $1,500.
Process for Requesting the Incentive
The request for the incentive must be submitted through the employer’s account in SURI. The TD has set-up a link titled “Incentive-Return to Work”. The employer must submit the information for each Eligible Employee. SURI has also set-up an Excel option for the submission of the information. It can be downloaded once the employer has entered the request in SURI.
TD’s Response and Process for Issuing Payments
Once the TD receives the request, it will proceed to revise the information; and, as soon as the information is verified, it will notify the employer whether the request was approved for each Eligible Employee. The TD will then proceed to send the initial incentive of $500 directly to the employee’s bank account as informed by the employer on the request.
Ninety days after the initial payment has been sent, the employer must submit through SURI a confirmation that the employee has continued to work for him, and thus eligible for the final payment. The TD will then send the final payment of $1,500 to the employee’s bank account.
Income Tax
The payment of this incentive is not considered as income either for the employer or for the employee. Therefore, it will be considered as an exclusion of income and will not be subject to income tax.
The information included in this Bulletin is only a summary of the content of both CC RI 21-18 and AAFAF Guidelines. For detailed information and help on filing the request, please contact us at TCG.
