41 CFR § 302-17.43 - Income tax liability to the Commonwealth of Puerto Rico.

---
identifier: "/us/cfr/t41/s302-17.43"
source: "ecfr"
legal_status: "authoritative_unofficial"
title: "41 CFR § 302-17.43 - Income tax liability to the Commonwealth of Puerto Rico."
title_number: 41
title_name: "Public Contracts and Property Management"
section_number: "302-17.43"
section_name: "Income tax liability to the Commonwealth of Puerto Rico."
chapter_number: 302
chapter_name: "RELOCATION ALLOWANCES"
subchapter_number: "F"
subchapter_name: "MISCELLANEOUS ALLOWANCES"
part_number: "302-17"
part_name: "17—TAXES ON RELOCATION EXPENSES"
positive_law: false
currency: "2026-03-24"
last_updated: "2026-03-24"
format_version: "1.1.0"
generator: "[email protected]"
authority: "5 U.S.C. 5724b; 5 U.S.C. 5738; E.O. 11609, 36 FR 13747, 3 CFR, 1971-1975 Comp., p. 586."
regulatory_source: "FTR Case 2025-05, 90 FR 56893, Dec. 8, 2025, unless otherwise noted."
cfr_part: "302-17"
---


# 302-17.43 Income tax liability to the Commonwealth of Puerto Rico.

A Federal employee who is relocated to or from a point, or between points, in the Commonwealth of Puerto Rico may be subject to income tax by both the Federal Government and the government of Puerto Rico. However, under current Puerto Rico law, an employee receives a credit on their Puerto Rico income tax for the amount of taxes paid to the Federal Government. Therefore:

(a) If the applicable Puerto Rico marginal tax rate, as shown in the tables provided by the Commonwealth of Puerto Rico, is *equal to or lower* than the applicable Federal marginal tax rate, then the agency uses the Federal marginal tax rates and the formula in § 302-17.40(c) in calculating the CMTR.

(b) If the applicable Puerto Rico marginal tax rate, as shown in the tables provided by the Commonwealth of Puerto Rico, is *higher* than the applicable Federal marginal tax rate, and if all of the States involved either have no income tax or *allow* an adjustment or credit for income taxes paid to the other state(s) and Puerto Rico, then the agency uses the rate for Puerto Rico in place of the Federal marginal tax rate in the formula in § 302-17.40(c).

(c) If the applicable Puerto Rico marginal tax rate, as shown in the tables provided by the Commonwealth of Puerto Rico, is *higher* than the applicable Federal marginal tax rate and one or more of the state(s) involved *does not allow* an adjustment or credit for income taxes paid to the other state(s) and/or Puerto Rico, then the agency uses the following formula:

****Equation 1 to Paragraph (c)

CMTR = P + S + L

Where:

P = Puerto Rico marginal tax rate.

S = State marginal tax rate, if any.

L = Local marginal tax rate, if any.