COVID-19 and Act No. 22 Bona Fide Residents of Puerto Rico
Updated: Mar 31, 2020
Vol. 24 - March 2020 | ©2020 by Vidal, Nieves & Bauzá, LLC. All rights reserved.
Puerto Rico and the United States have, with limited exceptions, either mandated or recommended people remain at home and maintain social distancing in order to attempt to slow down the number of persons infected with the Coronavirus (COVID-19). The rapid spread of the virus may require even more stringent measures, including domestic travel restrictions between the States in the mainland and the territory of Puerto Rico to further prevent contagions. Bona fide residents of Puerto Rico should pay close attention to potential travel restrictions as they may affect each resident´s “bona fide” resident status. “Bona Fide” Residents of Puerto Rico must comply with a Physical Presence requirement. Potential future travel restrictions may affect the ability of a bona fide resident to be physically present in Puerto Rico for the necessary days under the law. The US Internal Revenue Code and its regulations state that an individual will be considered a “bona fide resident” of a U.S. territory (in our case, Puerto Rico) if the individual meets a “physical presence test,” and does not have a “tax home,” or “closer connection” to a jurisdiction outside of Puerto Rico. The law considers the scenario of a major disaster in a US Territory providing that an individual is considered present (in a U.S. territory) on any day that the individual is outside the territory because the individual leaves or is unable to return to the territory during any 14-day period within which a major disaster occurs in the territory. In this case only presidential declarations of a major disaster will be considered. To illustrate this scenario, in the past the IRS decided to extend the 14-day period to a total of 117 days in response to a presidential disaster declaration following the Hurricane Irma and Maria devastation in Puerto Rico (IRS Notice 2017-56). In addition, IRS Notice 2017-56 provided relief to individuals who otherwise may have lost their “bona fide resident” status as a result of the unexpected and prolonged dislocation resulting from Hurricanes Irma and Maria. As of today, no presidential declaration of major disaster has been issued for Puerto Rico due to the Coronavirus pandemic. The law also provides for a temporary absence from Puerto Rico to receive qualified medical treatment in the United States. Any day a bona fide resident who is temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, certain qualified medical treatment (generally provided by or under the supervision of a physician for an illness) is considered present in Puerto Rico. The medical treatment generally involves inpatient care that requires an overnight stay in a hospital, hospice, and/or residential medical care facility. Bona fide residents must prepare, obtain and maintain documentation supporting the claim that such medical treatment meets the criteria to be considered the equivalent of days of presence within Puerto Rico. The local and federal mandate or recommendation to stay at home to reduce the spread of COVID-19 has the potential of affecting the ability of a bona fide resident of Puerto Rico to meet the “physical presence test.” It is important that bona fide residents keep appropriate travel and medical treatment documentation during this Coronavirus pandemic in order to avoid future issues with their bona fide resident status. Should you have any questions or interest with respect to the physical presence requirement of Act No. 22, as amended, you may contact the attorneys at Vidal, Nieves & Bauzá, LLC, a corporate law firm with special emphasis in energy and environmental matters, corporate, tax, transactional, real estate and insurance practices.