The White House has released a report documenting how the American Rescue Plan advanced equity throughout the United States. The report notes in particular how the 2021 law made a big difference for Puerto Rico.
“We knew that the implementation of this historic piece of legislation would be one of the first tests of the President’s Executive Order on Advancing Racial Equity and Support for Underserved Communities,” the report begins. “That is why from day one the American Rescue Plan Implementation Team, charged with overseeing the distribution and implementation of $1.9 trillion in relief funds, has worked hand-in-hand with the Domestic Policy Council, which is charged with implementation of the Executive Order.”
Permanent Expansion of Tax Relief to Puerto Rico Families
One of the many inequities facing Puerto Rico residents was the lack of tax credits enjoyed by workers in the States. The White House report notes how American Rescue Plan (ARP) changed the rules:
The American Rescue Plan made permanent changes to tax benefits for Puerto Rico families. Changes include: 1) lifting previous restrictions that prevented families in Puerto Rico with fewer than three children from claiming the federal Child Tax Credit (CTC), and 2) providing up to roughly $600 million annually in matching funds to bolster Puerto Rico’s locally administered Earned Income Tax Credit (EITC)—resulting in an expected quadrupling of EITC benefits provided starting in the 2021 tax year. Together, these permanent changes are expected to provide over $1 billion in additional tax relief to families in Puerto Rico on an annual basis.
This is good news for families in Puerto Rico. Yet there is a complication. “Thanks to the changes included in ARP, a low-income family in Puerto Rico with two children under age six could be eligible for EITC and CTC benefits of up to $11,200 for the 2021 tax year,” a new report explains. “However, realizing the full poverty-reducing and welfare-enhancing effects of those benefits requires that eligible families complete both local income tax returns—to receive the EITC provided by Puerto Rico’s local tax authority—and federal income tax returns—to receive the CTC – making the task of claiming both credits complicated, burdensome, and potentially confusing.”
Residents of Puerto Rico do not pay federal income tax on wages earned in Puerto Rico. Most families, therefore, are not required to file federal income tax returns. The federal government recognized that Puerto Ricans might not realize that they needed to file and might need assistance in filing their federal income tax returns.
ARP included one million dollars for an educational campaign to make sure people filed as necessary to receive the tax credits they were entitled to. However, these funds were not provided to Puerto Rico up front. The government needed to pay the costs up front and then apply for reimbursement.
White House support
The federal government appointed an American Rescue Plan Coordinator to help with outreach for the Child Tax Credit (CTC). This individual, along with Treasury Officials and White House Intergovernmental Affairs, met with representatives of Puerto Rico to develop outreach strategies.
One element of the outreach was providing one-on-one help for Puerto Rican taxpayers. They established Volunteer Income Tax Assistance (VITA) centers and Facilitated Self-Assistance (FSA) sites across the territory. These centers had never previously been in place on this scale.
The territorial government, the Puerto Rico Department of Housing, and local representatives of the IRS worked together to register 280 public housing coordinators to help in their neighborhoods. It is estimated that these coordinators can reach 20,000 families.
The administration also hosted a website and supported local efforts to hold in-person events to make sure families had the information they needed to claim the credits due them.
Reclama tu dinero
Reclama tu Dinero is another piece of the puzzle. This organization is a collaboration among a number of nonprofits. They coordinated events and educational materials for residents.
UnidosUS, United Way Worldwide, United Way Puerto Rico, Hispanic Federation, and Espacios Abiertos were among the organizations that worked on these efforts.
More than 240 employees of municipal and state agencies attended trainings on the tools being used to help with filing. The chosen software included MyFreeTaxes and Tax Slayer. Mayors and their staffs also attended trainings on the use of ARP State & Fiscal Recovery Funds.
One week before the regular tax filing deadline, the First Lady hosted a virtual awareness-raising event to make sure residents were aware of the child tax credit.
In May of 2022, the federal government created a plan for a simplified portal for CTC claims, similar to GetCTC.org, one built for stateside residents the previous year. Code for America intends to produce this tool by the end of the year.
This portal will require only the information needed to establish eligibility for the CTC, “avoiding requests for information that can be potentially confusing or intimidating,” the report explains, “that would be collected for purposes other than establishing CTC eligibility.”
Recognizing that these awareness and skill-building activities will continue to be needed in the next few years, the administration also pointed out in the report that the lessons learned from this experience will help with similar efforts for people in the States who may have limited English or other challenges in claiming tax credits.