Espacios Abiertos sues Treasury Dept. for earned income tax credit data

Espacios Abiertos Executive Director Cecille Blondet on Monday announced that the nonprofit organization has sued the Puerto Rico Treasury Department so that the government agency will identify the exact amount of money disbursed to Puerto Rican families under the Earned Income Tax Credit (EITC) federal benefit.

“We have been working for several years on the Earned Income Tax Credit, since 2013-2014, because we believe that the economic security that Puerto Ricans experience require direct actions,” Blondet said in a virtual roundtable with reporters.

Blondet explained that in the mainland US, the EITC has helped reduce poverty levels amongst eligible families that request it.

“It has helped people be less poor,” she said, while noting that the analysis made by Espacios Abiertos shows that there is still room for more local affirmative actions to be taken.

The information obtained by Espacios Abiertos from the Treasury Department, from 2019 to 2022 tax returns “allows us to carry out a very accurate analysis.”

She further explained that Espacios Abiertos has obtained a lot of information [from the government] that allowed the nonprofit to draft the report presented Monday.

“However, we are still missing important data, so we have to denounce that the Treasury Department has been resistant in divulging information that is very important and that Espacios Abiertos has requested. By not having that information, an obstacle has been created with regard to the disbursement of public funds, in this case the funds that have been assigned for the EITC,” she added.

The request for this information has reached the point of “becoming a lawsuit,” Blondet said.

“So we have sued the Treasury Department … and there have been several motions filed from one party to the other,” she said, adding that she expects for the San Juan Superior Court to issue a final determination on the matter within the next few days. “We are asking for the Treasury Department to identify the exact amount disbursed for each tax unit in Puerto Rico related to the EITC. So far the information Treasury has provided is related to the amount of money claimed [not disbursed].”

Meanwhile, with regard to the Child Tax Credit (CTC) Blondet explained that several issues have delayed these funds from reaching Puerto Rican families that have requested it.

“There are several things happening with the disbursement of the Child Tax Credit,” Blondet said when asked by News is my Business.

“One of things is that many of the tax units in Puerto Rico or that many of the people in Puerto Rico that did not qualify before for this credit are requesting it for the first time this year and because this is the first time they are requesting it they do not appear in the Internal Revenue Service (IRS) registry. Since these people don’t appear in the IRS registry, the IRS is requesting more information to identify these people,” Blondet said, while adding that in some cases the minor’s social security number appears in another tax return or another federal transaction and hence an alert of possible fraud is created.

“All of these [issues] are delaying the process,” Blondet said.

Furthermore, contrary to the local tax returns that are filed electronically, the 1040PR can be filed via air-mail, Blondet said.

“If you filed your 1040PR tax return through air-mail you could have to wait months, maybe even years to obtain the credit,” she added.

Tax returns highlight the impact the new work credit has on local family’s economic security
Meanwhile, the analysis by Espacios Abiertos’ research and data science team concluded that while changes to the local EITC and CTC this year have had a positive impact on out-of-pocket relief for more than 515,000 and 223,000 families, respectively, greater measures are required to effectively combat economic insecurity and sustainably increase the rate of labor participation in the formal workforce over time.

Espacios Abiertos Senior Analyst of Public Policy and Research Director Daniel Santamaría-Ots noted that the study was based on information corresponding to almost four million reviews of individual tax returns, which allowed to evaluate 20 variables of each of the tax units from year to year during the last three years. The report has greater emphasis on the EITC, a program that has proven to have a dramatic effect on poverty in the U.S. (helping more than 5.6 million people rise above the poverty level annually and improving economic security for another 16.5 million).

Santamaría recommended that the EITC federal contribution to Puerto Rico should be equal to the average per capita distribution at the US mainland and that the CTC should be transferred from the IRS to the Puerto Rico Treasury Department to prevent thousands of families from not receiving that credit, as had been the case until Oct. 2022.

“Our analysis shows that progress has been made, although the amount of federal funds invested in EITC remains insufficient to fight economic insecurity and increase the labor participation rate in Puerto Rico,” the economist assured. “In addition, a substantial number of people are not receiving the CTC in Puerto Rico when they could have received it early in April. The most vulnerable families need the money in their pocket as soon as possible.”

The Espacios Abiertos team estimated that in the 2021 tax returns, 44,999 tax units (or 99,272 people) exceeded the poverty level when receiving the EITC. That figure represents a reduction in the poverty rate of approximately 3.1% (37.4%) from 40.5% to 37.44%, Santamaría said.