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"The net operating loss rules were enacted to ameliorate the unduly drastic consequences of taxing income strictly on an annual basis. They were designed to permit a taxpayer to set off its lean years against its lush years, and to strike something like an average taxable income computed over a period longer than one year.” Libson Shops, Inc. v. Koehler, 353 U.S. 382, 386 (1957).
One of its tax measures is the allowance of a carry-back period of two years for businesses with a volume of business of $10 million or less for losses realized as a result of the COVID-19 emergency during 2020 (“2020 Losses”). The maximum amount of loss will be $200,000 and the maximum refund for income tax paid in previous taxable years will be $50,000. This benefit is not available for Large Taxpayers.
The carryover to subsequent taxable years of 2020 Losses will not be limited to the 90% of the normal tax net income and will be applied after other losses have been applied.
On May 11, 2021, the Puerto Rico Treasury Department (“Treasury”) issued Informative Bulletin 21-04 to announce that eligible taxpayers should submit an electronic request to avail the benefits of this carryback provision through the Unified System of Internal Revenue (Spanish acronym “SURI”). Treasury indicates they will publish a Circular Letter to establish the process, and terms and conditions of the program to claim this deduction. The Bulletin clarifies that taxpayers should not amend their respective returns to claim this deduction.
We will monitor any developments in connection with these tax relief measures and will keep you updated on this matter. Please contact our Tax Department should additional information be required regarding this or any other tax issue. We will be glad to assist you.
