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Puerto Rico Agencies Issue Employee-Related Guidance, Tax Relief in Wake of Hurricane

  • October 26, 2017

The passage of Hurricane María through Puerto Rico in September 2017 left catastrophic damages. In an effort to encourage employer assistance and provide temporary economic relief to employees in Puerto Rico, local government agencies have issued the following measures and guidance related to employers concerning their employees.

Income Tax Exemption for Assistance to Employees

On October 4, 2017, the Puerto Rico Treasury Department issued local income tax exemptions for “qualified payments of disaster assistance” made by employers to employees.

Under new Administrative Determination 17-21 (AD 17-21), a “qualified payment for disaster assistance” includes direct monetary assistance or amounts paid for the benefit of an employee or family members for certain necessary and reasonable expenses resulting from Hurricane María. The payment must be made directly to the supplier of goods and services, among others, to be covered under AD 17-21. Qualified payments must be in addition to the compensation the employee normally receives and, in the case of monetary payments to the employee, cannot exceed $1,000 a month. These payments are deductible as taxable income for the employer.

Interest-free loans of up to $20,000 to employees provided through June 30, 2018, also are exempt income under this guidance, if the money is used to address damages related to Hurricane María. The loans can be offered in addition to the qualified payments for disaster assistance described above.

Finally, AD 17-21 provides that employers that make qualified payments of disaster assistance must submit, by January 31, 2018, a sworn statement including the name and Social Security number of each employee that received a qualified payment and the total amount paid from September 21, 2017, through December 31, 2017. The Treasury Department will issue instructions on electronic means to submit the sworn statement.

Suspension of Employee Wage Garnishments for Taxes Owed

On October 15, 2017, the Treasury Department issued Informative Bulletin 17-24 instructing employers to suspend wage garnishments related to Puerto Rico tax debt, including garnishments pursuant to a payment plan established with the Treasury Department. The 90-day stay on tax-related wage garnishments expires on January 13, 2018.

Guidance on Compensation to Employees

On October 17, 2017, the Secretary of the Puerto Rico Department of Labor issued guidance on payment of salary for days not worked in the wake of Hurricanes Irma and María. PR-DOL Opinion 2017-001 cites the Fair Labor Standards Act and its interpretative regulations in summarizing payment obligations for exempt and non-exempt employees due to natural disasters and recovery. For our article on these employer payment obligations under federal law in the wake of natural disasters, see  Paying Employees When Weather Closes the Doors: A Refresher on Employer Obligations.

The PR-DOL Opinion 2017-001 further states that employers can pay non-exempt employees for time not worked due to natural disasters by exhausting accrued vacation leave or other applicable paid leave if an employee so requests.

Jackson Lewis attorneys are available to assist employers and answer inquiries regarding this and other workplace developments.

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