Treasury Secretary Francisco Parés Alicea
By THE STAR STAFF
A digital application called the Tax Credits Manager (MCC by its Spanish initials), will be available starting today through the Unified Internal Revenue System (SURI), Treasury Secretary Francisco Parés Alicea said Wednesday.
“In the Department, we continue to improve our inspection processes, and with this tool it will be easier to identify non-compliers and increase tax capture,” Parés Alicea said.
The increase in tax collections will reduce the tax burden for those who comply with their tax obligation, he added.
Parés Alicea highlighted that for the first time the Department will have a centralized system, which will cover all the credits granted, leaving aside the individualized administration maintained by each regulatory agency.
With the MCC (Manejador de Créditos Contributivos), the Treasury Department will have an updated record of the tax credits granted by the Puerto Rico government. The digital tool will also facilitate administration and supervision. The Treasury Department may monitor the tax credit from its granting until its eventual claim in the income tax return.
“From now on, we are going to work with more precise information on the tax impact of the tax credits,” Parés Alicea noted. “We will have updated data to carry out periodic reviews of the performance indicators of each credit.”
The leading agencies administering the tax credits are the Department of Economic Development and Commerce, the Tourism Co. and the Treasury Department. The tax credits claimed against income tax represent an average of $270 to $280 million annually, according to the 2023 Tax Expenditure Report.
The tax credits that the MCC will administer are for investment. Therefore, they do not include incentives claimed on individual returns, such as the credit for work, the senior credit, or the withholding tax, among others.
Through the new tool, taxpayers with tax credits may register credits granted by other regulatory agencies, request tax credits from the Treasury Department, submit evidence of self-determined credits on their return, and handle claims against income tax, among other actions.
“This is a very important technological advance for the Department and for the government in general. We are going to facilitate our work and that of the taxpayers at the same time, creating a file to keep the transactions related to their tax credits,” the Treasury chief said. “The MCC will provide us with a complete overview of the granting and use of credits, also strengthening the commitment of Governor Pedro Pierluisi to the transparency of government efforts.”
Parés Alicea noted that any tax credit granted prior to Jan. 1 of this year will be considered a pre-MCC credit and will not be registered with the manager. Those credits will have certain transition rules, which include a period of three taxable years after the date of implementation of the MCC for claiming them against income taxes.
The first taxable year of the transition period is 2023, so the pre-MCC credits may be claimed until taxable year 2025. Any balance available and not used at the end of the three-year period may not be claimed or carried over to subsequent consecutive years.
On the other hand, credits that are granted as of Jan. 1, the date of implementation of the MCC, will be considered post-MCC credits, and in order to claim them in the return, it will be a requirement that the credit be registered in the MCC.
To facilitate the implementation of the tool, the Treasury Department established a freezing period between Jan. 1 and Jan. 17, 2023, during which regulatory agencies could receive and evaluate new applications for tax credits, but not issue certifications.