November 21, 2017 Comments Closed

Recent Changes to Puerto Rico Film Tax Credits

Posted by:Beth Peterson onNovember 21, 2017

Puerto Rico’s film tax credits have been the subject of recent changes.  In a series of resolutions issued prior to Hurricane Maria, the PR government had limited the use of certain tradeable tax credits to 25% of a taxpayer’s liability.  In light of the damage caused by Hurricane Maria, the government issued a new resolution in which it relaxed the 25% limitation with regards to certain credits and it gives the Disbursement Authorization and Tax Concession Committee the authority to  grant a full or partial waiver of the 25% limitation for pending and completed tax credit applications.  The resolutions are included below as well as a brief summary of the highlights:

Resolution 2017-01

  • defines Granted Credits as those for which the final audit report was submitted as of March 7, 2017 or in the case of a tax credit advance the partial audit was submitted or bond posted as of March 7, 2017.
  • clarifies that when Granted Credits are used in 2016, no limitations will apply (other than those that apply under the Film Act);

Resolution 2017-05

  • Granted Credits available to be used in tax year 2017 or subsequent years will be limited to 25 % of the holder’s tax liability.
  • Carryforward period for said Granted Credits will be limited to 4 years, beginning in 2017 (plus a possible extension).
  • Granted credits that will be available to use for the first time in tax year 2017 will not be subject to the 25% limitation until tax year 2018.

Resolution 2017-08

  • Defines “Tax Credit Applications” as any application for tax credits under a the Film Act, not covered by resolution 2017-01, 2017-05, 2017-09.
  • Defines “Pending Tax Credit Applications” as an application for tax credits filed on or before March 7, 2017 if the application is not deemed a “granted credit” and the application was pending approval because the government did not have all the documents required under the applicable incentives law.
  • Provides new procedures for Tax Credit Applications to follow to apply, including economic impact study, etc., Committee review, etc.
  • Tax Credit Applications will be subject to new rules of use:
    • Holders may use against 25% of income tax liability regardless of year of use;
    • Maximum carryforward period is 4 consecutive years (may be extended).

Resolution 2017-09

  • Defined “Completed Tax Credit Application” as tax credit applications submitted on or before March 7, 2017 for which the government was in a position to approve as of the date of the order, without requesting additional documents.
  • Provides new procedures for Completed Tax Credit Application approval;
  • Completed Tax Credit Applications will be subject to new rules of use:
    • Holders may use against 25% of income tax liability regardless of year of use;
    • Maximum carryforward period is 4 consecutive years (may be extended).

Resolution 2017-10

  • Tax credits approved under Resolution 2017-08 will not be subject to the 25% limitation, with the exclusion of Pending Tax Credit applications.
  • Tax Credits granted pursuant to Pending Tax Credit Application and Completed Tax Credit Applications may request a waiver of the 25% limitation rule after showing such waiver will contribute to government’s efforts to reactivate the economy, in terms of new investments and job creation.

fafaa-resolution2017-05
resolution2017-01-english
resolution2017-08-english
resolution2017-09-english
AFFAFresolucion2017-10

For questions, please call Lisa Nadal, Esq. at 787-525-8050.

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