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Monday, February 27, 2012

Resident Commissioner and Puerto Rico Treasury Department Join Forces to Describe Tax Benefits Available in Puerto Rico

Federal Tax Credits Enhance Tax Relief Provided by Local Tax Reform

San Juan, PR – Resident Commissioner Pedro Pierluisi and the Secretary of the Puerto Rico Treasury Department (“Hacienda”), Jesús F. Méndez Rodríguez, today provided information about federal tax credits for individuals and employers that are available in Puerto Rico: the “Hire and Retain” tax credit, the “VOW to Hire Heroes” tax credit, and the “American Opportunity” tax credit.

The Resident Commissioner urged eligible individuals, families and employers to take advantage of these federal tax credits, which are designed to create American jobs and promote economic growth throughout the United States.

“As part of our fight in Washington for just treatment for Puerto Rico, we secured the Island’s inclusion in these three federal tax credits, among others. It is important to understand that these credits apply to otherwise eligible individuals and companies in Puerto Rico even if they do not file a federal income tax return. Pursuant to federal law, Hacienda offers the credit in question through the local tax system and is reimbursed by the U.S. Treasury Department for the foregone revenue. I want to thank Secretary Méndez and his team for working with the U.S. Treasury Department to develop and implement plans to offer these credits. We must ensure that all potentially eligible individuals and companies in Puerto Rico are aware of these credits and take full advantage of them to reduce their tax liability,” said Pierluisi.

The Hire and Retain tax credit was established in the HIRE Act, enacted in February 2010. Under this law, an employer can claim a $1,000 credit for every employee it hired in calendar year 2010 and retained for at least 52 weeks. This credit can be claimed by employers in tax year 2011.

The VOW to Hire Heroes tax credit was enacted in December 2011, and provides a tax credit to companies that hire unemployed veterans before the end of 2012. Specifically, the law provides a tax credit to companies of up to $5,600 for hiring veterans who have been looking for a job for more than six months, as well as a $2,400 credit for hiring veterans who have been unemployed for more than four weeks but less than six months. In addition, the law provides a tax credit to companies of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months. This credit can be claimed by employers in tax year 2012.

The American Opportunity tax credit was enacted in March 2009 as part of the American Recovery and Reinvestment Act. It applied in tax year 2009 and 2010, and also applies in tax year 2011 and 2012. Pursuant to this initiative, Puerto Rico students and their families are eligible for a credit of up to $1,000—per student, per school year—to offset the cost of college tuition and related expenses like books, school supplies, and equipment.

As Pierluisi explained: “Each time that President Obama has proposed and Congress has enacted tax credits to create jobs and spur economic growth, I have lobbied for Puerto Rico to be fully and fairly included. Historically, we have been excluded from these credits, which apply against income taxes. Despite this history, each time I lobbied for inclusion in the last three years, that effort was successful.”

“Over 31,000 students in Puerto Rico have already taken advantage of the American Opportunity tax credit to date, saving over $25 million. Given the number of university students on the Island, this credit could potentially benefit over 150,000 households. In difficult economic times like these, a well-prepared student is a sound investment in our future,” said the Resident Commissioner.

For his part, the Secretary of Hacienda underscored the new benefits available for employers as a result of the Administration’s local tax reform. Under the reform, the top corporate rate has dropped from 39 percent to 30 percent, with the previous seven-tier corporate bracket simplified into three lowered rates: 20 percent, 25 percent and 30 percent.

Secretary Méndez also highlighted the benefits of the local tax reform for individuals, noting that average tax rates will be cut in half over six years and the Alternative Minimum Tax (AMT) will be eliminated over four years, In addition, to encourage work, the local earned income tax credit will be doubled from $300 to $600, and the income eligibility limit increased from $20,000 to $35,000.

“Taken together, the local tax reform and the federal tax credits provide significant tax relief to individual and corporate taxpayers in Puerto Rico, which will help generate economic activity and job creation on the Island,” said Secretary Méndez.