Tax Alert: New Employee Retention Benefit for Employers Affected by 2020 Natural Disasters

Publication Date: June 17, 2025 
 

Reference: Circular Letter of Internal Revenue No. 25-14 ("CC RI 25-14") – Puerto Rico Department of Treasury  

General Overview

The Puerto Rico Department of Treasury has issued Circular Letter No. 25-14, establishing the rules and eligibility requirements for employers in Puerto Rico to apply for a refundable employee retention tax benefit in response to the natural disasters that impacted the island in 2020.

This initiative is part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, approved under the Consolidated Appropriations Act, 2021. This tax benefit aims to provide financial relief to businesses that continued paying employees despite operational interruptions caused by federally declared disasters, such as the earthquakes, Tropical Storm Isaias, and localized flooding events.

Key Highlights of the Employee Retention Benefit

1. Eligibility Criteria

  a) Employer operated a business in a municipality affected by a federally declared      Qualified Disaster during its official “Incident Period”.  

The following is a summary of each Qualified Disaster along with its corresponding Incident Period, as established by FEMA:

• The earthquakes beginning on December 28, 2019 – July 3, 2020;  
• Tropical Storm Isaias, which impacted Puerto Rico in July 29–31, 2020; and
• The flooding in Arecibo during September 13, 2020.

b) Retained eligible employees on payroll at the time of the disaster. An Eligible Employee is one with a valid Social Security number whose primary place of work was in the affected municipality.

c) Business operations were fully or partially suspended due to the disaster.

d) Paid Qualified Wages during the applicable Eligible Period.

e) Filed all required payroll tax documents for the 2019–2021 tax years, including Forms 499R-2/W-2PR, 499 R-1B, PR-SD-10, and 941-PR.

 2. Benefit Amount

The benefit is calculated based on Qualified Wages paid to each Eligible Employee during the Eligible Period, up to a maximum of $6,000 per employee, regardless of the number of disasters that may have affected the employer.  

Note: The Eligible Period is not the same as the FEMA-designated Incident Period.

The applicable benefit percentage is determined by the employer’s 2020 net taxable income, as outlined below:

Note: The $6,000 cap applies in the aggregate per Eligible Employee. Employers may not claim the benefit on wages already used to request:

• Forgiveness under the Paycheck Protection Program (PPP)
• The federal Employee Retention Credit (ERC; or
• other federal tax credits

   3. Tax Treatment

The tax benefit is not treated as taxable income for Puerto Rico tax purposes, including the alternate minimum tax (AMT).

   4. Application Process

Eligible employers must file electronically through the SURI platform between June 6, 2025, and December 1, 2025. 
 

Important: Once submitted, the application cannot be amended. The approved benefit will be disbursed via direct deposit to the bank account indicated by the employer during application.

RSM Puerto Rico is ready to assist with any questions, eligibility analysis, documentation review, and the SURI application process.

Contact Us

Email: [email protected] 
Phone: (787) 751-6164 
San Juan, PR 00922-0528