Puerto Rico CTC

changelog_entry.yaml

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+- bump: minor
+  changes:
+    added:
+    - Puerto Rico implementation of CTC and ACTC

policyengine_us/parameters/gov/territories/pr/tax/income/credits/actc/amount.yaml

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+description: Puerto Rico allows this amount of credit per child for the ACTC.
+values:
+  2023-01-01: 1_700
+metadata:
+  unit: currency-USD
+  period: year
+  label: Puerto Rico ACTC amount
+  reference:
+    - title: 2024 Form 1040-SS
+      href: https://www.irs.gov/pub/irs-pdf/f1040ss.pdf#page=2
+    - title: U.S.C 26 U.S. Code § 24(k)(2)
+      href: https://www.law.cornell.edu/uscode/text/26/24#k_2
+

policyengine_us/parameters/gov/territories/pr/tax/income/credits/actc/fraction.yaml

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+description: Puerto Rico takes this fraction of self-employment taxes in the ACTC calculation.
+values:
+  2023-01-01: 0.5
+metadata:
+  unit: float
+  period: year
+  label: Puerto Rico ACTC fraction for self-employment tax
+  reference:
+    - title: 2024 Form 1040-SS
+      href: https://www.irs.gov/pub/irs-pdf/f1040ss.pdf#page=2 
+    - title: U.S.C 26 U.S. Code § 24(d)(2)(A)
+      href: https://www.law.cornell.edu/uscode/text/26/24#d_2_A

policyengine_us/parameters/gov/territories/pr/tax/income/credits/actc/income_limit/joint.yaml

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+description: Puerto Rico phases out the ACTC to joint filers with income above the limit.
+values:
+  2023-01-01: 400_000
+metadata:
+  unit: currency-USD
+  period: year
+  label: Puerto Rico ACTC income limit joint
+  reference:
+    - title: 2024 Form 1040-SS
+      href: https://www.irs.gov/pub/irs-pdf/f1040ss.pdf#page=2
+    - title: U.S.C 26 U.S. Code § 24(b)(2)
+      href: https://www.law.cornell.edu/uscode/text/26/24#b_2

policyengine_us/parameters/gov/territories/pr/tax/income/credits/actc/income_limit/other.yaml

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+description: Puerto Rico phases out the ACTC to all filers other than joint with income above the limit.
+values:
+  2023-01-01: 200_000
+metadata:
+  unit: currency-USD
+  period: year
+  label: Puerto Rico ACTC income limit all other filing statuses
+  reference:
+    - title: 2024 Form 1040-SS
+      href: https://www.irs.gov/pub/irs-pdf/f1040ss.pdf#page=2
+    - title: U.S.C 26 U.S. Code § 24(b)(2)
+      href: https://www.law.cornell.edu/uscode/text/26/24#b_2
+

policyengine_us/parameters/gov/territories/pr/tax/income/credits/actc/income_multiple.yaml

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+description: Puerto Rico computes a fraction of the income by rounding income to a multiple of this number.
+values:
+  2023-01-01: 1_000
+metadata:
+  unit: currency-USD
+  period: year
+  label: Puerto Rico ACTC income multiple
+  reference:
+    - title: 2024 Form 1040-SS
+      href: https://www.irs.gov/pub/irs-pdf/f1040ss.pdf#page=2
+    - title: U.S.C 26 U.S. Code § 24(k)(2)
+      href: https://www.law.cornell.edu/uscode/text/26/24#k_2

policyengine_us/parameters/gov/territories/pr/tax/income/credits/actc/income_rate.yaml

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+description: Puerto Rico computes a fraction of income by multiplying income by this rate. 
+values:
+  2023-01-01: 0.05
+metadata:
+  unit: /1
+  period: year
+  label: Puerto Rico ACTC income rate
+  reference:
+    - title: 2024 Form 1040-SS
+      href: https://www.irs.gov/pub/irs-pdf/f1040ss.pdf#page=2 
+    - title: U.S.C 26 U.S. Code § 24(k)(2)
+      href: https://www.law.cornell.edu/uscode/text/26/24#k_2

policyengine_us/tests/policy/baseline/gov/territories/pr/tax/income/credits/actc/integration.yaml

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+- name: integration test 1, a single parent with 2 dependents
+  period: 2024
+  input:
+    people:
+      person1: 
+        age: 40
+        is_tax_unit_head_or_spouse: true
+        self_employment_tax: 100
+      person2:
+        age: 16
+        is_tax_unit_spouse: false
+      person3:
+        age: 5
+        is_tax_unit_spouse: false
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3]
+        filing_status: SINGLE
+        pr_modified_agi: 10_000
+    households:
+      household:
+        members: [person1, person2, person3]
+        state_code: PR
+  output: 
+    pr_actc_eligibility: true
+    pr_actc_modified_income_excess_applies: false
+    pr_actc_modified_income_fraction: 0
+    pr_actc_sum_taxes_paid: 50
+    pr_actc: 50

policyengine_us/tests/policy/baseline/gov/territories/pr/tax/income/credits/actc/pr_actc.yaml

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+- name: Modified AGI higher than threshold, earned income calculation lower
+  period: 2024
+  input:
+    ctc_qualifying_children: 2
+    pr_actc_modified_income_fraction: 200
+    pr_ctc: 3_000
+    pr_actc_sum_taxes_paid: 3_000
+    pr_additional_medicare_tax_withheld: 100
+    pr_excess_social_security_withheld: 100
+  output:
+    pr_actc: 2_800
+
+- name: Modified AGI lower than threshold, earned income calculation lower
+  period: 2024
+  input:
+    ctc_qualifying_children: 1
+    pr_actc_modified_income_fraction: 0
+    pr_ctc: 2_000
+    pr_actc_sum_taxes_paid: 3_000
+    pr_additional_medicare_tax_withheld: 100
+    pr_excess_social_security_withheld: 100
+  output:
+    pr_actc: 1_700
+
+- name: Modified AGI lower than threshold, ss medicare calculation lower
+  period: 2024
+  input:
+    ctc_qualifying_children: 4
+    pr_actc_modified_income_fraction: 0
+    pr_ctc: 8_500
+    pr_actc_sum_taxes_paid: 1_000
+    pr_additional_medicare_tax_withheld: 100
+    pr_excess_social_security_withheld: 100
+  output:
+    pr_actc: 800

policyengine_us/tests/policy/baseline/gov/territories/pr/tax/income/credits/actc/pr_actc_eligibility.yaml

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+- name: No children, not eligible
+  period: 2024
+  input:
+    ctc_qualifying_children: 0
+    pr_ctc: 1_000
+    pr_actc_modified_income_fraction: 900
+    pr_excess_social_security_withheld: 100
+    pr_actc_sum_taxes_paid: 200
+  output:
+    pr_actc_eligibility: false
+
+- name: Modified income greater than CTC amount, not eligible
+  period: 2024
+  input:
+    ctc_qualifying_children: 2
+    pr_ctc: 4_500
+    pr_actc_modified_income_fraction: 4_500
+    pr_excess_social_security_withheld: 100
+    pr_actc_sum_taxes_paid: 200
+  output:
+    pr_actc_eligibility: false
+
+- name: Excess social security greater than taxes paid
+  input:
+    ctc_qualifying_children: 2
+    pr_ctc: 4_500
+    pr_actc_modified_income_fraction: 3_000
+    pr_excess_social_security_withheld: 200
+    pr_actc_sum_taxes_paid: 100
+  output:
+    pr_actc_eligibility: false
+
+- name: Eligible for ACTC
+  input:
+    ctc_qualifying_children: 2
+    pr_ctc: 4_500
+    pr_actc_modified_income_fraction: 3_000
+    pr_excess_social_security_withheld: 100
+    pr_actc_sum_taxes_paid: 200
+  output:
+    pr_actc_eligibility: true

policyengine_us/tests/policy/baseline/gov/territories/pr/tax/income/credits/actc/pr_actc_modified_income_excess_applies.yaml

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+- name: Income over threshold, joint
+  period: 2024
+  input:
+    pr_modified_agi: 401_000
+    filing_status: JOINT
+  output:
+    pr_actc_modified_income_excess_applies: true
+
+- name: Income below threshold, single
+  period: 2024
+  input:
+    pr_modified_agi: 200_000
+    filing_status: SINGLE
+  output:
+    pr_actc_modified_income_excess_applies: false

policyengine_us/tests/policy/baseline/gov/territories/pr/tax/income/credits/actc/pr_actc_modified_income_fraction.yaml

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+- name: Income under threshold, joint
+  period: 2024
+  input:
+    pr_modified_agi: 10_000
+    filing_status: JOINT
+  output:
+    pr_actc_modified_income_fraction: 0
+
+- name: Income over threshold, married filing separately
+  period: 2024
+  input:
+    pr_modified_agi: 253_020
+    filing_status: SEPARATE
+  output:
+    pr_actc_modified_income_fraction: 2700
+
+- name: Income over threshold, single
+  period: 2024
+  input:
+    pr_modified_agi: 201_000
+    filing_status: SINGLE
+  output:
+    pr_actc_modified_income_fraction: 50

policyengine_us/tests/policy/baseline/gov/territories/pr/tax/income/credits/actc/pr_actc_sum_taxes_paid.yaml

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+- name: Basic test
+  period: 2024
+  input:
+    self_employment_tax: 36
+    additional_medicare_tax: 100
+    pr_federal_taxes: 500
+  output:
+    pr_actc_sum_taxes_paid: 568

policyengine_us/tests/policy/baseline/gov/territories/pr/tax/income/credits/ctc/pr_ctc.yaml

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+- name: Max minus reduction is negative
+  period: 2024
+  input:
+    ctc_maximum_with_arpa_addition: 100
+    pr_ctc_phase_out: 200
+  output:
+    pr_ctc: 0
+
+- name: Max minus reduction is positive
+  period: 2024
+  input:
+    ctc_maximum_with_arpa_addition: 200
+    pr_ctc_phase_out: 100
+  output:
+    pr_ctc: 100

policyengine_us/tests/policy/baseline/gov/territories/pr/tax/income/credits/ctc/pr_ctc_phase_out.yaml

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+- name: Income over threshold, joint
+  period: 2024
+  input:
+    adjusted_gross_income: 150_000
+    pr_gross_income: 7_000
+    ctc_phase_out_threshold: 150_000
+  output:
+    pr_ctc_phase_out: 350
+
+- name: Income under threshold, single
+  period: 2024
+  input:
+    adjusted_gross_income: 74_000
+    pr_gross_income: 1_000
+    ctc_phase_out_threshold: 75_000
+  output:
+    pr_ctc_phase_out: 0

policyengine_us/variables/gov/territories/pr/tax/income/credits/actc/pr_actc.py

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+from policyengine_us.model_api import *
+
+
+class pr_actc(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Puerto Rico ACTC amount"
+    definition_period = YEAR
+    reference = "https://www.irs.gov/pub/irs-pdf/f1040ss.pdf#page=2"
+    defined_for = "pr_actc_eligibility"
+
+    def formula(tax_unit, period, parameters):
+        p = parameters(period).gov.territories.pr.tax.income.credits.actc
+        num_children = tax_unit("ctc_qualifying_children", period)
+
+        # line 2
+        base_actc_amount = num_children * p.amount
+        # line 6
+        inc_fraction = tax_unit("pr_actc_modified_income_fraction", period)
+        # CTC + ODC amount, line 9
+        ctc_amount = tax_unit("pr_ctc", period)
+
+        # earned income method to calculate credit amount
+        # if modified agi > threshold -> minimum of the two amounts, lines 10 and 11 (credit_amt_alt)
+        # if modified agi < threshold -> original credit amount, line 5 (credit_amt)
+        credit_amt_alt = min(base_actc_amount, ctc_amount - inc_fraction)
+        earned_inc_credit_amt = select(
+            [
+                inc_fraction == 0,
+                inc_fraction != 0,
+            ],
+            [
+                base_actc_amount,
+                credit_amt_alt,
+            ],
+        )
+
+        # another calculation of the credit through taxes
+        # lines 12a-14
+        taxes_paid = tax_unit("pr_actc_sum_taxes_paid", period)
+        # like a credit
+        taxes_paid = taxes_paid - tax_unit(
+            "pr_additional_medicare_tax_withheld", period
+        )
+
+        # line 15
+        excess_ss_tax = tax_unit("pr_excess_social_security_withheld", period)
+
+        # line 18
+        ss_medicare_credit_amt = taxes_paid - excess_ss_tax
+
+        # line 19
+        return min_(earned_inc_credit_amt, ss_medicare_credit_amt)

policyengine_us/variables/gov/territories/pr/tax/income/credits/actc/pr_actc_eligibility.py

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+from policyengine_us.model_api import *
+
+
+class pr_actc_eligibility(Variable):
+    value_type = bool
+    entity = TaxUnit
+    label = "Puerto Rico ACTC eligiblity"
+    definition_period = YEAR
+    reference = "https://www.irs.gov/pub/irs-pdf/f1040ss.pdf#page=2"
+
+    def formula(tax_unit, period, parameters):
+        num_children = tax_unit("ctc_qualifying_children", period)
+        ctc_amount = tax_unit("pr_ctc", period)
+        excess_ss_tax = tax_unit("pr_excess_social_security_withheld", period)
+        taxes_paid = tax_unit("pr_actc_sum_taxes_paid", period)
+
+        # eligibility: at least one child under age of 17, line 1
+        num_children_eligible = num_children >= 1
+        # must not have too high of an income, line 10
+        # if modified agi < threshold, modified income calculation = 0, then this will be true
+        income_eligible = (
+            tax_unit("pr_actc_modified_income_fraction", period) < ctc_amount
+        )
+        # taxes paid must be greater than excess social security tax withheld, line 18
+        taxes_paid_eligible = taxes_paid > excess_ss_tax
+
+        return num_children_eligible & income_eligible & taxes_paid_eligible