Apply separate-filer casualty limits in Arkansas and statutory loss limits in Puerto Rico

changelog.d/fix-ar-pr-casualty-loss.fixed.md

@@ -0,0 +1 @@
+Exclude dependents' casualty losses from Arkansas returns, apply each separate-filing spouse's casualty reduction and AGI floor before proration, and limit Puerto Rico's casualty deductions to the two statutory items with the personal-property cap.

policyengine_us/parameters/gov/states/ar/tax/income/deductions/itemized/casualty_loss/exclusion.yaml

@@ -11,8 +11,10 @@ metadata:
       href: https://www.arkleg.state.ar.us/Acts/FTPDocument?path=%2FACTS%2F2009R%2FPublic%2F&file=372.pdf&ddBienniumSession=2009%2F2009R#page=5
     - title: Act 372 of 2009, § 25 (effective for tax years beginning on or after January 1, 2009)
       href: https://www.arkleg.state.ar.us/Acts/FTPDocument?path=%2FACTS%2F2009R%2FPublic%2F&file=372.pdf&ddBienniumSession=2009%2F2009R#page=10
-    - title: 26 U.S.C. § 165(h), 2008 edition (as in effect on January 1, 2009)
-      href: https://www.govinfo.gov/content/pkg/USCODE-2008-title26/html/USCODE-2008-title26-subtitleA-chap1-subchapB-partVI-sec165.htm
+    - title: 26 U.S.C. § 165(h)(1), 2011 edition (individual casualty loss limitation adopted by Ark. Code § 26-51-424(b))
+      href: https://www.govinfo.gov/content/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleA-chap1-subchapB-partVI-sec165.pdf#page=1
+    - title: 26 U.S.C. § 165(h)(5)(B), 2011 edition (joint-return spouses treated as one individual)
+      href: https://www.govinfo.gov/content/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleA-chap1-subchapB-partVI-sec165.pdf#page=2
     - title: 2018 Arkansas Form AR4684, Line 11
       href: https://www.dfa.arkansas.gov/wp-content/uploads/2018_Final_AR4684_BC_FI.pdf#page=1
     - title: 2025 Arkansas Form AR4684, Line 11

policyengine_us/parameters/gov/states/ar/tax/income/deductions/itemized/casualty_loss/income_floor.yaml

@@ -10,8 +10,10 @@ metadata:
       href: https://www.arkleg.state.ar.us/Acts/FTPDocument?path=%2FACTS%2F2009R%2FPublic%2F&file=372.pdf&ddBienniumSession=2009%2F2009R#page=5
     - title: Act 372 of 2009, § 25 (effective for tax years beginning on or after January 1, 2009)
       href: https://www.arkleg.state.ar.us/Acts/FTPDocument?path=%2FACTS%2F2009R%2FPublic%2F&file=372.pdf&ddBienniumSession=2009%2F2009R#page=10
-    - title: 26 U.S.C. § 165(h), 2008 edition (as in effect on January 1, 2009)
-      href: https://www.govinfo.gov/content/pkg/USCODE-2008-title26/html/USCODE-2008-title26-subtitleA-chap1-subchapB-partVI-sec165.htm
+    - title: 26 U.S.C. § 165(h)(2)(A)(ii), 2011 edition (individual casualty loss limitation adopted by Ark. Code § 26-51-424(b))
+      href: https://www.govinfo.gov/content/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleA-chap1-subchapB-partVI-sec165.pdf#page=1
+    - title: 26 U.S.C. § 165(h)(5)(B), 2011 edition (joint-return spouses treated as one individual)
+      href: https://www.govinfo.gov/content/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleA-chap1-subchapB-partVI-sec165.pdf#page=2
     - title: 2025 Arkansas Form AR4684, Line 17
       href: https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR4684_Casualties_and_Thefts.pdf#page=1
     - title: 2015 Arkansas Individual Income Tax Instructions, Form AR3 Line 18

policyengine_us/parameters/gov/territories/pr/tax/income/taxable_income/deductions/casualty_loss/personal_property_cap.yaml

@@ -0,0 +1,38 @@
+# SEPARATE means Puerto Rico filing status 3: spouses living together at the
+# end of the year who file separately. A married person not living with the
+# spouse files as an individual taxpayer under the $5,000 cap.
+description: Puerto Rico limits the deduction for casualty losses of automobiles, furniture and other household goods to this amount, based on filing status.
+metadata:
+  propagate_metadata_to_children: true
+  unit: currency-USD
+  period: year
+  label: Puerto Rico personal property casualty loss deduction cap
+  breakdown:
+    - filing_status
+  breakdown_label:
+    - Filing status
+  reference:
+    - title: P.R. Internal Revenue Code of 2011, Section 1033.15(a)(10)(B)(i) (13 L.P.R.A. § 30135), as enacted by Act 1-2011
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/0001-2011.pdf#page=189
+    - title: P.R. Internal Revenue Code of 2011, Section 1033.15(a)(10)(B)(i), OGP English compilation (Rev. June 18, 2026)
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/1-2011.pdf#page=167
+    - title: Código de Rentas Internas de Puerto Rico de 2011, Sección 1033.15(a)(10)(B)(i), OGP compilation (Rev. 28 de mayo de 2026)
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/C%C3%B3digos/1-2011/1-2011.pdf#page=182
+    - title: Act 1-2011, Section 6100.04(a)(1) (Subtitle A applies to taxable years starting after December 31, 2010)
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/0001-2011.pdf#page=1313
+    - title: 2023 Individual Income Tax Return Instructions Booklet, Schedule A Individual, Part I, line 5
+      href: https://hacienda.pr.gov/sites/default/files/inst_individuals_2023.pdf#page=26
+    - title: 2024 Individual Income Tax Return Instructions Booklet, Schedule A Individual, Part I, line 5
+      href: https://hacienda.pr.gov/sites/default/files/inst_individuals_2024.pdf#page=26
+    - title: 2025 Individual Income Tax Return Instructions Booklet, Schedule A Individual, Part I, line 5
+      href: https://hacienda.pr.gov/sites/default/files/inst_individuals_2025.pdf#page=26
+SINGLE:
+  2011-01-01: 5_000
+JOINT:
+  2011-01-01: 5_000
+SEPARATE:
+  2011-01-01: 2_500
+HEAD_OF_HOUSEHOLD:
+  2011-01-01: 5_000
+SURVIVING_SPOUSE:
+  2011-01-01: 5_000

policyengine_us/parameters/gov/territories/pr/tax/income/taxable_income/deductions/casualty_loss/separate_percentage.yaml

@@ -1,14 +1,29 @@
-description: Puerto Rico deducts this percentage of casualty loss for separate filers.
+# SEPARATE means Puerto Rico filing status 3: spouses living together at the
+# end of the year who file separately. A married person not living with the
+# spouse files as an individual taxpayer and claims the whole loss.
+description: Puerto Rico allows each spouse filing a separate return this share of the couple's casualty losses on the principal residence and on household personal property.
+values:
+  2011-01-01: 0.5
 metadata:
   unit: /1
   period: year
-  label: Puerto Rico casualty loss deduction separate filing status percentage  
+  label: Puerto Rico casualty loss deduction separate filing share
   reference:
-    - title: P.R. Laws tit. 13, § 30135 (10)(A)(ii)
-      href: https://law.justia.com/codes/puerto-rico/title-thirteen/subtitle-17/part-ii/chapter-1005/subchapter-c/30135/
-    - title: Gov. of Puerto Rico Individual Income Tax Return Form 482.0 4 
-      href: https://hacienda.pr.gov/sites/default/files/individuals_2024_rev._jul_12_24_9-30-24_informative.pdf#page=4
-    - title:  Individual Income Tax Return Instructions Booklet 2023
+    - title: P.R. Internal Revenue Code of 2011, Section 1033.15(a)(10)(A)(ii) (13 L.P.R.A. § 30135), as enacted by Act 1-2011
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/0001-2011.pdf#page=188
+    - title: P.R. Internal Revenue Code of 2011, Section 1033.15(a)(10)(A)(ii), OGP English compilation (Rev. June 18, 2026)
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/1-2011.pdf#page=167
+    - title: P.R. Internal Revenue Code of 2011, Section 1021.03(a)(4) (50% attribution of Section 1033.15(a)(10) deductions), OGP English compilation (Rev. June 18, 2026)
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/1-2011.pdf#page=40
+    - title: P.R. Internal Revenue Code of 2011, Section 1061.01(b)(2)(B) (separate returns follow Section 1021.03(a)(1)-(6)), OGP English compilation (Rev. June 18, 2026)
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/1-2011.pdf#page=321
+    - title: Act 1-2011, Section 6100.04(a)(1) (Subtitle A applies to taxable years starting after December 31, 2010)
+      href: https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/0001-2011.pdf#page=1313
+    - title: 2023 Individual Income Tax Return Instructions Booklet, Schedule A Individual, Part I, line 2
       href: https://hacienda.pr.gov/sites/default/files/inst_individuals_2023.pdf#page=24
-values:
-  2023-01-01: 0.5
+    - title: 2024 Individual Income Tax Return Instructions Booklet, Schedule A Individual, Part I, line 2
+      href: https://hacienda.pr.gov/sites/default/files/inst_individuals_2024.pdf#page=24
+    - title: 2025 Individual Income Tax Return Instructions Booklet, filing status 3 (married filing separately)
+      href: https://hacienda.pr.gov/sites/default/files/inst_individuals_2025.pdf#page=14
+    - title: 2025 Individual Income Tax Return Instructions Booklet, Schedule A Individual, Part I, line 2
+      href: https://hacienda.pr.gov/sites/default/files/inst_individuals_2025.pdf#page=24

policyengine_us/parameters/gov/territories/pr/tax/income/taxable_income/deductions/sources.yaml

@@ -2,6 +2,7 @@ description: Puerto Rico deductions from taxable income.
 values:
   2023-01-01:
     - pr_casualty_loss_deduction
+    - pr_personal_property_casualty_loss_deduction
     - pr_charitable_deduction
     - pr_medical_expense_deduction
     - pr_mortgage_deduction

policyengine_us/tests/policy/baseline/gov/states/ar/tax/income/deductions/itemized/ar_casualty_loss_deduction_indiv.yaml

@@ -55,23 +55,110 @@
   output:
     ar_casualty_loss_deduction_indiv: 0
 
-- name: 2025, losses of both spouses are treated as one casualty
-  # 12,000 + 8,000 - 100 - 10% * (30,000 + 20,000) = 14,900
-  period: 2025
+- name: 2017, separate spouses each apply the casualty reduction and AGI floor
+  # (12,000 - 100 - 3,000) + (8,000 - 100 - 2,000) = 14,800.
+  period: 2017
   input:
     people:
       person1:
+        age: 40
         casualty_loss: 12_000
         ar_agi_indiv: 30_000
       person2:
+        age: 40
         casualty_loss: 8_000
         ar_agi_indiv: 20_000
     tax_units:
       tax_unit:
         members: [person1, person2]
+        filing_status: JOINT
     households:
       household:
         members: [person1, person2]
         state_code: AR
   output:
-    ar_casualty_loss_deduction_indiv: 14_900
+    ar_casualty_loss_deduction_indiv: 14_800
+
+- name: 2025, a spouse without a casualty does not supply an additional AGI floor
+  # max(0, 12,000 - 100 - 3,000) + max(0, 0 - 100 - 2,000) = 8,900.
+  period: 2025
+  input:
+    people:
+      person1:
+        age: 40
+        casualty_loss: 12_000
+        ar_agi_indiv: 30_000
+      person2:
+        age: 40
+        casualty_loss: 0
+        ar_agi_indiv: 20_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        filing_status: JOINT
+    households:
+      household:
+        members: [person1, person2]
+        state_code: AR
+  output:
+    ar_casualty_loss_deduction_indiv: 8_900
+
+- name: 2025, a dependent's loss is not deductible on the filer's return
+  # 26 U.S.C. § 165(h), as adopted by Ark. Code § 26-51-424(b), allows the
+  # loss of the individual who sustained it, on that individual's return.
+  period: 2025
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        is_tax_unit_dependent: false
+        ar_agi_indiv: 30_000
+      person2:
+        is_tax_unit_head: false
+        is_tax_unit_dependent: false
+        ar_agi_indiv: 20_000
+      person3:
+        is_tax_unit_head: false
+        is_tax_unit_dependent: true
+        casualty_loss: 20_000
+        ar_agi_indiv: 0
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3]
+    households:
+      household:
+        members: [person1, person2, person3]
+        state_code: AR
+  output:
+    ar_casualty_loss_deduction_indiv: 0
+
+- name: 2025, spouses apply separate casualty limits and leave out a dependent's loss
+  # (12,000 - 100 - 3,000) + (8,000 - 100 - 2,000) = 14,800;
+  # the dependent's 5,000 is excluded.
+  period: 2025
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        is_tax_unit_dependent: false
+        casualty_loss: 12_000
+        ar_agi_indiv: 30_000
+      person2:
+        is_tax_unit_head: false
+        is_tax_unit_dependent: false
+        casualty_loss: 8_000
+        ar_agi_indiv: 20_000
+      person3:
+        is_tax_unit_head: false
+        is_tax_unit_dependent: true
+        casualty_loss: 5_000
+        ar_agi_indiv: 0
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3]
+    households:
+      household:
+        members: [person1, person2, person3]
+        state_code: AR
+  output:
+    ar_casualty_loss_deduction_indiv: 14_800

policyengine_us/tests/policy/baseline/gov/states/ar/tax/income/deductions/itemized/ar_casualty_loss_deduction_joint.yaml

@@ -87,6 +87,56 @@
   output:
     ar_casualty_loss_deduction_joint: 14_500
 
+- name: 2025, a dependent's loss is not deductible on the filer's return
+  # 26 U.S.C. § 165(h), as adopted by Ark. Code § 26-51-424(b), allows the
+  # loss of the individual who sustained it, on that individual's return.
+  period: 2025
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        is_tax_unit_dependent: false
+        ar_agi_joint: 50_000
+      person2:
+        is_tax_unit_head: false
+        is_tax_unit_dependent: true
+        casualty_loss: 20_000
+        ar_agi_joint: 0
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: AR
+  output:
+    ar_casualty_loss_deduction_joint: 0
+
+- name: 2025, only the filer's own loss counts when a dependent also has one
+  # 12,000 - 100 - 10% * 50,000 = 6,900; the dependent's 3,000 is excluded.
+  period: 2025
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        is_tax_unit_dependent: false
+        casualty_loss: 12_000
+        ar_agi_joint: 50_000
+      person2:
+        is_tax_unit_head: false
+        is_tax_unit_dependent: true
+        casualty_loss: 3_000
+        ar_agi_joint: 0
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: AR
+  output:
+    ar_casualty_loss_deduction_joint: 6_900
+
 - name: A spouse's loss that makes the joint AGI negative does not raise the casualty loss deduction
   period: 2024
   input:

policyengine_us/tests/policy/baseline/gov/states/ar/tax/income/deductions/itemized/ar_itemized_deductions_indiv.yaml

@@ -81,6 +81,60 @@
   output:
     ar_itemized_deductions_indiv: [590, 410]
 
+- name: A spouse's casualty loss is split by AGI share, not by owner
+  # Only the spouse had a loss. Apply that spouse's casualty limitations:
+  # 20,100 - 100 - 10% * 40,000 = 16,000.
+  # AR3 lines 31-35 split the line 30 total by AGI share:
+  # 60% * 16,000 = 9,600 and 40% * 16,000 = 6,400.
+  period: 2025
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        is_tax_unit_dependent: false
+        ar_agi_indiv: 60_000
+      person2:
+        is_tax_unit_head: false
+        is_tax_unit_dependent: false
+        casualty_loss: 20_100
+        ar_agi_indiv: 40_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: AR
+  output:
+    ar_casualty_loss_deduction_indiv: 16_000
+    ar_itemized_deductions_indiv: [9_600, 6_400]
+
+- name: 2025, separate casualty limitations precede AR3 proration
+  # (12,000 - 100 - 3,000) + (8,000 - 100 - 2,000) = 14,800.
+  # AR3 prorates this total 60% and 40%: 8,880 and 5,920.
+  period: 2025
+  input:
+    people:
+      person1:
+        age: 40
+        casualty_loss: 12_000
+        ar_agi_indiv: 30_000
+      person2:
+        age: 40
+        casualty_loss: 8_000
+        ar_agi_indiv: 20_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        filing_status: JOINT
+    households:
+      household:
+        members: [person1, person2]
+        state_code: AR
+  output:
+    ar_casualty_loss_deduction_indiv: 14_800
+    ar_itemized_deductions_indiv: [8_880, 5_920]
+
 - name: 2020 gambling loss deduction is prorated by AGI when married filing separately
   period: 2020
   input: