Assistance program for merchants due to interruption of operations due to Covid-19
Internal Revenue Circular Letter No. 21-04 (“CC RI 21-04”)
TO RETURN
Affair
Assistance program for merchants due to interruption of operations due to Covid-19
Attention
Merchants
Circular Letter CC RI 21-04 02/07/2021 Internal Revenue
I. Statement of Reasons
Section 5001 of Federal Law PL 116-136 of March 27, 2020 known as the "Coronavirus Aid, Relief, and Economic Security (CARES) Act" ("CARES Act"), created a relief fund for Coronavirus (" Coronavirus Relief Fund "or" CRF "for its acronym in English) for all states and territories of the United States of America. In the case of Puerto Rico, the Federal Department of the Treasury assigned the amount of $ 2,240,625,863.80 to be used to cover those necessary expenses incurred as part of the emergency caused by the COVID-19 pandemic, as long as such expenses were not previously budgeted at the March 27, 2020. In addition, these funds were to be used no later than December 30, 2020.
With the approval of the CARES Act, Executive Order OE-2020-40 was issued in order to establish the Strategic Disbursement Plan for the funds received under Section 5001 of the CARES Act (“Strategic Plan”). Under the Strategic Plan, various incentives were granted to the private sector and individuals, including aid on account of prosecutors, aid to SMEs, aid to the tourism sector, the health sector including hospitals and health professionals. Finally, the Payroll Protection Program was created for those businesses that kept their jobs despite the pandemic. These programs were in effect until December 30, 2020. At the conclusion of these programs, funds were still available from those received under the CARES Act.
Subsequently, and as a consequence of the pandemic that still persists, on December 27, 2020, Federal Law PL 116-260 was approved, known as the “Consolidated Appropriations Act, 2021” (“HR 133”). This law extends the use of funds granted under the CARES Act to the states and territories until December 31, 2021.
On January 5, 2021, the Governor of Puerto Rico, Hon. Pedro Pierluisi Urrutia, signed Executive Order 2021-010 (“OE-2021-010”) in order to modify the curfew and partial closure orders of business. In Section 29 of said Executive Order, the governor establishes economic stabilization measures to provide economic assistance to certain businesses that have suffered monetary losses as a result of an interruption in operations since March 15, 2020, as a result of the pandemic. of Covid-19. For the purposes of this assistance, OE-2021-010 establishes that the Department of the Treasury will establish the eligible entities considering with particular emphasis those that have been forced to close as a result of the emergency measures decreed, such as, but not limited to bars and restaurants.
On January 29, 2021, the Disbursement Oversight Committee of the Coronavirus Relief Fund approved the Business Interruption Grant Assistance Program and approved the guidelines for said program (“Guides”). These guides are available at the following link: Guidelines_CRF_BI_Grants_Program.pdf.
In accordance with the foregoing, the Department of the Treasury ("Department") issues this Circular Letter in order to establish the procedure to follow to request assistance under the Assistance Program for Merchants for Interruption of Operations in accordance with the Guidelines.
II. Determination
The Department will distribute the aid established in the Program of Assistance to Merchants for Interruption of Operations (“Program”) following the parameters and procedures established in the Guidelines and below.
B. Eligibility Requirements
The Guidelines establish the following eligibility requirements:
Be a private sector business, be it an individual business, a partnership or a legal entity;
The business must have been operating one of the following: restaurant or bar, hammock or cafeteria, gym or establishment to exercise, spaces for events, concert halls or places dedicated to the presentation of artistic or sporting events, theaters or cinemas or other indoor recreational activities, and support services for arts and events;
The business must have been in operation as of March 15, 2020.
At any time during the first quarter of calendar year 2020, you must have had: (i) no more than six (6) employees to whom the business paid wages subject to employer contributions, or (ii) independent contractors who were paid during the calendar year 2019 at least $ 5,000 and the Informative Return for Paid Services (Form 480.6SP) was filed;
The volume of the business generated during the calendar year 2020 cannot exceed three million (3,000,000) dollars;
The business must have a valid Merchant Registration Certificate and be in operation at the time of requesting the grant, in addition, the Merchant Registration Certificate must have at least one of the following NAICS Codes: 72251, 71113, 71312, 71399, 71119 , 51212, 51213, 71131, 71132, 71394, 72254, 72241, 71111, 71112, 71219, 71311, 71399, 72121 as its main business activity.
In the case of merchants whose Merchants Registration Certificate establishes that they are a Withholding Agent, they must have submitted the Monthly Sales and Use Tax Returns ("SUT Monthly Return") for the months of January, February and March 2020, or at least during one of those months if the business started during 2020 and have reported taxable sales on said returns;
Have submitted the 2019 Income Tax Return, if the business was in operation before January 1, 2020;
Not having received the loan granted by the Small Business Administration known as the Federal Payroll Protection Program (“PPP”).
Have incurred monetary losses due to the interruption of business operations due to emergency measures taken by the government as a result of the COVID-19 pandemic, that is, the volume of business during calendar year 2020 was less than the volume of business generated during the calendar year 2019, assuming that the business was in operation during the 12 months of the calendar year 2019;
The business must have incurred or plans to incur expenses related to the emergency caused by COVID-19 that have not been covered by other aid received or pending receipt and that have not been included in any other request for available aid.
Those businesses that meet the aforementioned requirements will be considered Eligible Businesses to receive the grant under the Program. Every Eligible Business that wishes to request assistance under the Program must consent to the terms and conditions established in the Guidelines, including, but not limited to, submitting any required documents and responding in a timely manner to the requirements in the event of an audit. The Eligible Business must confirm that the funds received under the Program will be used to cover those expenses related to the emergency that have not been covered by other aid received or pending receipt and that will not be included in any other request for available aid. Further,
B. Eligible or Permitted Expenses
According to the Guidelines, funds received by a business under the Program must be used exclusively for costs and losses incurred due to the interruption of business operations or other adverse conditions caused by the COVID-19 pandemic. For the purposes of this Program, costs incurred during a business interruption may be classified as a COVID-19 related cost, include, but are not limited to:
Reimbursement for cost or loss of inventory, equipment (including personal protective equipment and other supplies to promote health and safety), payroll costs, rent, technology to facilitate electronic commerce, professional services acquired (including design and construction of environments necessary to promote physical and social distancing and cleaning and disinfection services);
Other operating costs in accordance with the administrative regulations applicable in the Guidelines, as long as said expenses have been incurred during the period that begins on March 15, 2020 and ends on December 31, 2021; Y
Expenses that are reimbursable under the CRF, as provided in Section 601 (a) of the Social Security Act (“Social Security Act”) and in the guidelines established by the federal government under said section. Provided, that expenses that may be reimbursed under any other federal program shall not be eligible for reimbursement under this Program.
According to the Guidelines, the following expenses are not considered eligible expenses regardless of whether they were incurred due to the pandemic:
Expenses that have already been reimbursed or were included in any other claim related to the COVI-19 emergency, including aid, federal, state, local or compensation received by private insurance;
Compensation paid to employees whose primary residence is located outside of Puerto Rico;
Compensation in excess of one hundred thousand (100,000) dollars annually paid to an employee, as prorated based on the payroll periods that the employer has;
Employer payroll taxes including, but not limited to, the employer's portion of social security, state and federal unemployment taxes, and income taxes withheld from employees.
Payment of sick leave or family leave if said payments were subject to the credit established in sections 7001 and 7003 of Federal Law PL 116-127, known as the “Families First Coronavirus Response Act”.
Bonuses paid to employees
Payment of severance pay;
Bonuses paid to company executives,
Costs related to debt refinancing; Y
Any other expenses determined were not necessary to continue operations under the COVID-19 emergency.
C. Determination of the amount of aid under the Program
The maximum amount that a business may receive assistance under the Program will be based on the loss of income due to the interruption of operations. When submitting the application, it will be considered first, the reduction in income that the business had during the calendar year 2020 compared to the calendar year 2019. Second, all the local and federal aid and loans subject to forgiveness received will be taken into consideration.
According to the Guidelines, the following steps should be followed to determine the amount of aid that the requesting business will receive:
Step 1. Determination of the Total Monetary Loss: The applicant must provide the total business volume generated during the 12 months of 2020 and 12 months of 2019. For these purposes, business volume includes exempt and taxable sales according to they must have been informed in the SUT Monthly Returns. Both totals will be compared to determine the decrease in income (total for the year 2020 - total for the year 2019 = Total Monetary Loss). If the total of the 12 months of the year 2020 equals or exceeds the total of the 12 months of the year 2019, the applicant will not be eligible for aid under the Program.
In the case of taxpayers who were not in operations the 12 months of the calendar year 2019, they must annualize the volume generated during the months that they were in operation during 2019. The annualized business volume will then be the amount to be used as generated in the year 2019 to compare with the volume of business generated during the 12 months of the calendar year 2020.
In the case of taxpayers that began operations after December 31, 2019, but before March 15, 2020, they must annualize the total business volume from the date of commencement of operations until March 15, 2020. You must then Compare this annualized business volume with the current total business volume generated for the year 2020. As an example, “XYZ” began operations on February 1, 2020, as “XYZ”. Therefore, to determine the Monetary Loss due to Interruption of Operations, "XYZ" must take the sales for the month of February and until March 15, 2020 and annualize them.
In the case of merchants who according to their Merchants Registration Certificate are not Withholding Agents and therefore do not have a requirement to file SUT Monthly Returns, they must include their total business volume, that is, they must include their total sales, although they have not been subject to the payment of SUT. In these cases, the same annualization rules explained in the previous paragraphs will apply.
The Department reserves the right to verify the amounts of business volume reported as a step to grant the aid or in subsequent review and may require the return of amounts granted in excess.
Step 2. Determination of the Net Monetary Loss : The amount of the Total Monetary Loss determined in Step 1 must be subtracted from the total federal and local aid received by the applicant and any insurance compensation (Total Monetary Loss - federal aid and premises - insurance compensation = Net Monetary Loss).
For these purposes, the term “federal and local aid” includes all types of aid received under the CRF, including, but not limited to, the total amount received from forgivable loans granted by the Federal Small and Medium Business Administration (“SBA” for its acronym). in English) such as the “EIDL” and any payment for business aid distributed by the Government. In the case of self-employed, the term “federal and local aid” also includes any payment received under Section 2102 of the CARES Act known in English as “Pandemic Unemployment Assistance” (“PUA”).
In addition, the term "insurance compensation" includes any compensation received by insurance or other non-governmental entity as compensation for losses incurred due to the interruption of business operations due to the pandemic. If the amount of aid received is equal to or greater than the Total Monetary Loss calculated in Step 1, the applicant will not be eligible for aid under the Program.
Step 3. The amount of aid to be granted under the Program will be the lesser of the amount of : (i) the Net Monetary Loss; or (ii) the following amounts:
$ 5,000 in the case of an Eligible Business that had no employees during the first quarter of calendar year 2020 or independent contractors to whom it paid no less than $ 5,000 during calendar year 2020.
$ 8,000 in the case of an Eligible Business with at least one (1) but not more than two (2) employees at any time during the first quarter of calendar year 2020 and / or independent contractors to whom I pay not less than $ 5,000 , to each one, for services rendered during the calendar year 2019.
$ 15,000 in the case of an Eligible Business with at least three (3) but no more than six (6) employees at any time during the first quarter of calendar year 2020 and / or independent contractors to whom I pay no less than $ 5,000 , to each one, for services rendered during the calendar year 2019.
D. Procedure to apply for assistance under the Program
The application for assistance under the Program must be submitted through the merchant's account in the Unified Internal Revenue System (“SURI”). As of February 12, 2021, the Department will enable the corresponding link to each of the pre-qualified merchants for assistance under the Program.
The Department will use the information included in the Merchant Certificate to determine those businesses that are eligible for assistance under the Program, based on the NAICS Code. In addition, it will determine eligibility based on the total sales reported in the SUT Monthly Returns filed for the 12 months of 2020
To request payment of the corresponding aid, you must access the link that will be enabled for these purposes in your SURI account entitled "(BIG) Assistance to Merchants for Interruption of Operations".
As part of the application, you must certify that: (1) the amount of the aid will be used for eligible expenses related to the COVID-19 emergency as established in the Program Guidelines; (2) no portion of the payment received may be used to pay executive bonuses, refinance debts, or for prohibited expenses; (3) any amount received that is not used on or before December 31, 2021 or that is determined to be misused must be returned to the Department; (4) the aid will not be used for those expenses for which the business has received, will receive, or plans to apply for and receive aid under any other federal, state, local, or private insurance aid program; and (5) you agree to comply with all other terms and conditions of the program,
Finally, you must provide your bank account information to receive the corresponding aid payment via direct deposit.
E. Recognition of aid for income tax purposes
The payment of aid under the Program made under the provisions of this Circular Letter does not constitute income for the company that receives it. Therefore, such aid will be considered an income exclusion and will not be subject to income tax, including the alternative basic tax applicable to individuals and the alternative minimum tax applicable to corporations.
The Department reserves the right to subsequently evaluate the compliance of the companies receiving the aid paid in accordance with the provisions of this Circular Letter, in order to ensure that the use of the funds is in accordance with the provisions of the Guidelines.
For more information on the eligibility requirements and the terms and conditions to apply for benefits under the Program, see the Guidelines.
III. Validity
The provisions of this Circular Letter are effective immediately.
For additional information related to the provisions of this Circular Letter, you can write a web message through your SURI account.
Cordially,
Atty. Ángel L. Pantoja Rodríguez
Undersecretary