Employers Helping Employees—Are Disaster Relief Payments and Loans Exempt From Puerto Rico Income Tax?

With the havoc wrought by Hurricane Maria in Puerto Rico, employers are exploring options to provide emergency relief to those employees who have encountered financial hardship to meet their necessities and repair their homes in the wake of the disaster. Occasionally, aid from employers to employees comes in the form of disaster-relief monetary payments and interest-free loans. In light of the state of emergency in Puerto Rico declared by local authorities, on October 4, 2017, the Puerto Rico Department of Treasury released Administrative Determination No. 17-21 (AD 17-21), which provides necessary and well-timed guidance on the taxation of this type of assistance.

Qualified Disaster Assistance Payments

Disaster assistance payments, which meet the requirements of AD 17-21, are not includable in an employee’s taxable income and, thus, are exempt from Puerto Rico income tax. Under AD 17-21, any payment made by an employer to an employee, or directly to a provider of goods and/or services, will be considered “qualified” and not treated as taxable compensation provided that:

  1. payments are made in lieu of wages lost by the employee while he or she is not able to work due to the disaster;
  2. payments are made to (a) cover necessary and reasonable expenditures of the employee or the employee’s relatives for food, medications, gas, lodging, medical expenses, the care of children or dependents, power generators, funeral services, and/or the repair of destruction to the employee’s principal residence incurred as a result of Hurricane Maria, as long as the payment is made directly to the provider of goods and/or services; (b) to the employee himself or herself and to mitigate damages or losses resulting from Hurricane Maria, subject to a monthly cap of 1,000; and/or (c) for other purposes, as recognized by AD 17-21;
  3. payments are received by the employee (or the provider of goods and/or services, as appropriate) at any time between September 21, 2017, and December 31, 2017; and
  4. payments are in no way attributable or related to the level of the employee’s position or salary. 

Employers that make qualified disaster assistance payments must report such payments no later than January 31, 2018, by submitting a sworn statement to the Puerto Rico treasury stating the names and social security numbers of the employees who received qualified payments and the total amount of the payments.  Qualified disaster assistance payments made in compliance with AD 17-21 are tax-deductible for the employer.

Interest-Free Loans

Interest-free loans of up to $20,000 (either individually or in the aggregate) granted by an employer to an employee, from September 21, 2017, through June 30, 2018, to cover necessary and reasonable expenses of the employee or the employee’s family and expenditures for the construction or repair of the employee’s principal residence due to damage from Hurricane Maria are exempt from Puerto Rico income tax.

Employers may grant interest-free loans to employees in addition to qualified disaster assistance payments.

This post was written by Enrique A. Del Cueto-Perez & Ryan J. Correia of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved., © 2017
For more Labor & Employment legal analysis, go to The National Law Review

EPA Acts to Increase Supply of Clean Drinking Water in U.S. Virgin Islands

WASHINGTON (September 23, 2017) — The U.S. Environmental Protection Agency (EPA) today issued an order to the Federal Emergency Management Authority (FEMA) and the Department of Defense (DOD) that provides direction on supplying of clean drinking water in the U.S. Virgin Islands in response to impacts to the island’s drinking water system from Hurricane Maria and Hurricane Irma.

The order authorizes FEMA and DOD to install and operate temporary water treatment units that will provide a supply of clean drinking water. U.S. Virgin Islands public water systems are currently not in operational condition. The lack of clean alternative water supplies has created the potential for significant public health impacts. USVI public water systems have been significantly impacted by Hurricanes Maria and Irma and subsequent flooding, including by a loss of electrical power, and are not yet fully able to provide adequately treated water to meet the needs of those affected areas.

EPA is monitoring environmental and public health conditions across the U.S. Virgin Islands and Puerto Rico and is working closely with federal, territorial and local officials to ensure impacts from the hurricanes are addressed in order to protect public health.

Read this article on the EPA website here.

This post was written by the United States Environmental Protection Agency © Copyright 2017
For more Environmental & Energy Legal Analysis go to the National Law Review