Sec. 101 Short title
This division may be cited as the “Puerto Rico Disaster Tax Relief Act of 2020”.
Division B — Puerto Rico Disaster Tax Relief Act of 2020
B Puerto Rico Disaster Tax Relief Act of 2020
Sec. 102 Qualified Puerto Rico disaster zone defined
For purposes of this division, the term qualified Puerto Rico disaster zone means any area—
with respect to which a major disaster was declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of the earthquakes occurring in or near Puerto Rico beginning on December 28, 2019, and ending on the date which is 60 days after the date of the enactment of this Act, and
which was determined by the President to warrant individual or individual and public assistance from the Federal Government under such Act by reason of such earthquakes.
Sec. 103 Child tax credit for Puerto Rico and other possessions of the United States
Puerto Rico—
Same treatment of families in Puerto Rico with one child or two children that is currently provided to families in Puerto Rico with three or more children— Section 24(d) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
“(4) Residents of Puerto Rico—In the case of an individual who is a bona fide resident of Puerto Rico (within the meaning of section 937(a)) for the taxable year, paragraph (1)(B)(ii) shall be applied by substituting “1 or more qualifying children” for “3 or more qualifying children”.”
Effective date— The amendment made by paragraph (1) shall apply to taxable years beginning after December 31, 2019.
Mirror code possessions— The Secretary of the Treasury shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss to that possession by reason of the application of section 24 of the Internal Revenue Code of 1986 with respect to taxable years beginning after 2019. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.
American Samoa— The Secretary of the Treasury shall pay to American Samoa amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits that would have been provided to the residents of American Samoa by reason of the application of section 24 of such Code for taxable years beginning after 2019 if the provisions of such section had been in effect in American Samoa. The preceding sentence shall not apply unless American Samoa has a plan, which has been approved by the Secretary of the Treasury, under which American Samoa will promptly distribute such payments to the residents of American Samoa in a manner which replicates to the greatest degree practicable the benefits that would have been so provided to each such resident.
Definitions and special rules—
In general— No credit shall be allowed against United States income taxes for any taxable year under section 24 of the Internal Revenue Code of 1986 to any person—
to whom a credit is allowed against taxes imposed by a possession with a mirror code tax system by reason of the application of section 24 of such Code in such possession for such taxable year, or
who is eligible for a payment under a plan described in subsection (c) with respect to such taxable year.
Mirror code tax system— For purposes of this section, the term mirror code tax system means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.
Treatment of payments— For purposes of section 1324(b)(2) of title 31, United States Code, the payments under subsections (b) and (c) shall be treated in the same manner as a refund due from the credit allowed under section 24 of the Internal Revenue Code of 1986.
Sec. 104 Application of earned income tax credit in possessions of the United States
In general— Chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:
“7529. Application of earned income tax credit to possessions of the United States
“(a) Puerto Rico
“(1) In general—With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to Puerto Rico equal to—
“(A) the specified matching amount for such calendar year, plus
“(B) in the case of calendar years 2021 through 2025, the lesser of—
“(i) the expenditures made by Puerto Rico during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to the earned income tax credit, or
“(ii) $1,000,000.
“(2) Requirement to reform earned income tax credit—The Secretary shall not make any payments under paragraph (1) with respect to any calendar year unless Puerto Rico has in effect an earned income tax credit for taxable years beginning in or with such calendar year which (relative to the earned income tax credit which was in effect for taxable years beginning in or with calendar year 2019) increases the percentage of earned income which is allowed as a credit for each group of individuals with respect to which such percentage is separately stated or determined in a manner designed to substantially increase workforce participation.
“(3) Specified matching amount—For purposes of this subsection—
“(A) In general—The term specified matching amount means, with respect to any calendar year, the lesser of—
“(i) the excess (if any) of—
“(I) the cost to Puerto Rico of the earned income tax credit for taxable years beginning in or with such calendar year, over
“(II) the base amount for such calendar year, or
“(ii) the product of 3, multiplied by the base amount for such calendar year.
“(B) Base amount
“(i) Base amount for 2021—In the case of calendar year 2021, the term base amount means the greater of—
“(I) the cost to Puerto Rico of the earned income tax credit for taxable years beginning in or with calendar year 2019 (rounded to the nearest multiple of $1,000,000), or
“(II) $200,000,000.
“(ii) Inflation adjustment—In the case of any calendar year after 2021, the term base amount means the dollar amount determined under clause (i) increased by an amount equal to—
“(I) such dollar amount, multiplied by—
“(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting “calendar year 2020” for “calendar year 2016” in subparagraph (A)(ii) thereof.
“(4) Rules related to payments and reports
“(A) Timing of payments—The Secretary shall make payments under paragraph (1) for any calendar year—
“(i) after receipt of the report described in subparagraph (B) for such calendar year, and
“(ii) except as provided in clause (i), within a reasonable period of time before the due date for individual income tax returns (as determined under the laws of Puerto Rico) for taxable years which began on the first day of such calendar year.
“(B) Annual reports—With respect to calendar year 2021 and each calendar year thereafter, Puerto Rico shall provide to the Secretary a report which shall include—
“(i) an estimate of the costs described in paragraphs (1)(B)(i) and (3)(A)(i)(I) with respect to such calendar year, and
“(ii) a statement of such costs with respect to the preceding calendar year.
“(C) Adjustments
“(i) In general—In the event that any estimate of an amount is more or less than the actual amount as later determined and any payment under paragraph (1) was determined on the basis of such estimate, proper payment shall be made by, or to, the Secretary (as the case may be) as soon as practicable after the determination that such estimate was inaccurate. Proper adjustment shall be made in the amount of any subsequent payments made under paragraph (1) to the extent that proper payment is not made under the preceding sentence before such subsequent payments.
“(ii) Additional reports—The Secretary may require such additional periodic reports of the information described in subparagraph (B) as the Secretary determines appropriate to facilitate timely adjustments under clause (i).
“(D) Determination of cost of earned income tax credit—For purposes of this subsection, the cost to Puerto Rico of the earned income tax credit shall be determined by the Secretary on the basis of the laws of Puerto Rico and shall include reductions in revenues received by Puerto Rico by reason of such credit and refunds attributable to such credit, but shall not include any administrative costs with respect to such credit.
“(b) Possessions with mirror code tax systems
“(1) In general—With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands equal to—
“(A) 75 percent of the cost to such possession of the earned income tax credit for taxable years beginning in or with such calendar year, plus
“(B) in the case of calendar years 2021 through 2025, the lesser of—
“(i) the expenditures made by such possession during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to such earned income tax credit, or
“(ii) $50,000.
“(2) Application of certain rules—Rules similar to the rules of subparagraphs (A), (B), (C), and (D) of subsection (a)(4) shall apply for purposes of this subsection.
“(c) American Samoa
“(1) In general—With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to American Samoa equal to—
“(A) the lesser of—
“(i) 75 percent of the cost to American Samoa of the earned income tax credit for taxable years beginning in or with such calendar year, or
“(ii) $12,000,000, plus
“(B) in the case of calendar years 2021 through 2025, the lesser of—
“(i) the expenditures made by American Samoa during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to such earned income tax credit, or
“(ii) $50,000.
“(2) Requirement to enact and maintain an earned income tax credit—The Secretary shall not make any payments under paragraph (1) with respect to any calendar year unless American Samoa has in effect an earned income tax credit for taxable years beginning in or with such calendar year which allows a refundable tax credit to individuals on the basis of the taxpayer’s earned income which is designed to substantially increase workforce participation.
“(3) Inflation adjustment—In the case of any calendar year after 2021, the $12,000,000 amount in paragraph (1)(A)(ii) shall be increased by an amount equal to—
“(A) such dollar amount, multiplied by—
“(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting “calendar year 2020” for “calendar year 2016” in subparagraph (A)(ii) thereof.
“(4) Application of certain rules—Rules similar to the rules of subparagraphs (A), (B), (C), and (D) of subsection (a)(4) shall apply for purposes of this subsection.
“(d) Treatment of payments—For purposes of section 1324 of title 31, United States Code, the payments under this section shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.”
Clerical amendment— The table of sections for chapter 77 of such Code is amended by adding at the end the following new item:
Sec. 105 Low-income housing credit allocations for Puerto Rico
In general— For purposes of section 42 of the Internal Revenue Code of 1986, the State housing credit ceiling for Puerto Rico for calendar year 2020 shall be increased by $50,000,000.
Qualified Puerto Rico disaster zones treated as difficult development areas—
In general— For purposes of section 42 of the Internal Revenue Code of 1986, in the case of a qualified building placed in service in a qualified Puerto Rico disaster zone (as defined in section 102), such area shall be treated as a difficult development area under subclause (I) of section 42(d)(5)(B)(iii) but shall not be taken into account for purposes of applying the limitation under subclause (II) of such section.
Qualified building— For purposes of this subsection, the term qualified building means any building which is allocated a housing credit dollar amount during calendar year 2020 or 2021.
Other definitions— Terms used in this section which are also used in section 42 of the Internal Revenue Code of 1986 shall have the same meaning when used in this section as when used in such section 42.
Sec. 106 New markets tax credit allocations for Puerto Rico
the new markets tax credit limitation otherwise determined under subsection (f)(1) thereof for each of 2020 and 2021 shall be increased by $500,000,000, to be allocated among specified community development entities to make qualified low-income community investments in Puerto Rico, and
section 45D(f)(3) shall be applied—
separately with respect to the amounts of the increases under paragraph (1), and
solely with respect to the amounts of the increases described in subparagraph (A), the last sentence of such section shall not prevent such amounts from being carried to calendar year 2026.
Specified community development entities— For purposes of this section, the term specified community development entity means any qualified community development entity if such entity has a history of making qualified low-income community investments in federally declared disaster areas or Puerto Rico.
Other definitions— Terms used in this section which are also used in section 45D of the Internal Revenue Code of 1986 shall have the same meaning when used in this section as when used in such section 45D.
Sec. 107 Cover over of distilled spirits taxes
Repeal of limitation on cover over of distilled spirits taxes to Puerto Rico and Virgin Islands—
In general— Section 7652 of the Internal Revenue Code of 1986 is amended by striking subsection (f) and by redesignating subsections (g) and (h) as subsections (f) and (g), respectively.
Conforming amendment— Section 7652(f)(1) of such Code, as redesignated by paragraph (1), is amended by—
striking subparagraph (B), and
by striking “as if—” and all that follows through “the use and tax” and inserting “as if the use and tax”.
Effective date— The amendments made by this subsection shall apply to distilled spirits brought into the United States after December 31, 2019.
Transfer to Puerto Rico Conservation Trust Fund of portion of Puerto Rico rum cover over—
In general— Section 7652(e) of the Internal Revenue Code of 1986 is amended by redesignating paragraphs (3), (4), and (5) as paragraphs (4), (5), and (6), respectively, and by inserting after paragraph (2) the following new paragraph:
“(2) Transfer to Puerto Rico Conservation Trust Fund of portion of rum cover over
“(A) In general—From any amount otherwise required to be covered over to the treasury of Puerto Rico under this section with respect to taxes collected on rum under section 5001(a)(1) or subsection (a) of this section, the Secretary of the Treasury shall transfer to the Puerto Rico Conservation Trust Fund an amount equal to $0.46 per proof gallon of rum to which such cover over is attributable. Any amount transferred under the preceding sentence shall be treated for purposes of this section (other than this paragraph) as having been covered over to the treasury of Puerto Rico.
“(B) Puerto Rico Conservation Trust Fund—For purposes of this section, the term Puerto Rico Conservation Trust Fund means the fund established pursuant to a Memorandum of Understanding between the United States Department of the Interior and the Commonwealth of Puerto Rico, dated December 24, 1968.”
Effective date— The amendments made by this section shall apply to rum brought into the United States after December 31, 2019.
Cover over determined without regard to certain rate reductions—
In general— Section 7652 of the Internal Revenue Code of 1986, as amended by subsection (a)(1), is amended by adding at the end the following new subsection:
“(h) Cover over determined without regard to certain rate reductions—For purposes of subsections (a)(3), (b)(3), and (e), the amount of taxes imposed and collected under section 5001(a)(1) shall be determined without regard to section 5001(c).”
Conforming amendment— Section 7652(e) of such Code, as amended by subsection (b)(1), is amended by striking paragraph (6).
Effective date— The amendments made by this subsection shall take effect as if included in section 13807 of Public Law 115–97.
Sec. 108 Employee retention credit with respect to individuals employed in the qualified Puerto Rico disaster zone
In general— The Secretary of the Treasury shall pay to Puerto Rico the amount determined under subsection (b) for the purpose of providing an employee retention credit with respect to individuals employed in a qualified Puerto Rico disaster zone (as defined in section 102). The preceding sentence shall not apply unless Puerto Rico has a plan for implementing such employee retention credit—
which is similar to the plan approved under section 504(d)(1)(B) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017,
under which Puerto Rico will promptly distribute such payments to its residents, and
which has been approved by the Secretary of the Treasury for purposes of this section.
Determination of payment amount—
In general— The amount determined under this subsection is the product of—
the aggregate amount of payments made under section 504(d)(1)(B) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017, multiplied by
the population adjustment ratio.
Population adjustment ratio— For purposes of this subsection, the term population adjustment ratio means the ratio of—
the number of individuals estimated by the Secretary of the Treasury to have been present in the qualified Puerto Rico disaster zone (as defined in section 102), over
the number of individuals estimated by the Secretary of the Treasury to have been present in the Hurricane Maria disaster zone (as defined in section 501(c) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017).
Report to Congress— Not later than 90 days after substantially all of the employee retention credits under this section have been paid or allowed to taxpayers in Puerto Rico, the Secretary of the Treasury of Puerto Rico shall submit a written report to Congress documenting the implementation of such credits.