UNITED STATES DISTRICT COURT 

DISTRICT OF PUERTO RICO

 

 ) PROMESA

In re ) 

) 

Title III 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as representative of 

THE COMMONWEALTH OF PUERTO RICO

et al.,

1

) 

) 

) 

) 

) 

) 

) 

No. 17-BK-3283 (LTS) 

(Jointly Administered) 

Re: 23026, 22847 

Debtors. ) 

 ) 

 

SUPPLEMENTAL DECLARATION OF KATHERINE STADLER IN SUPPORT 

OF TENTH INTERIM AND CONSOLIDATED SEMIANNUAL APPLICATION 

OF THE FEE EXAMINER AND GODFREY & KAHN, S.C. 

I, Katherine Stadler, hereby declare under penalty of perjury: 

1. I am a shareholder with Godfrey & Kahn, S.C. (“Godfrey & Kahn”), a 

law firm with its principal offices at 833 East Michigan Street in Milwaukee, Wisconsin, 

and One East Main Street in Madison, Wisconsin, and other offices in Wisconsin and in 

Washington, D.C. I am authorized to make this Declaration on behalf of myself, the Fee 

1

 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case number and the last 

four (4) digits of each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth 

of Puerto Rico (the “Commonwealth”) (Bankruptcy Case No. 17-BK-3283-LTS) (Last Four Digits of 

Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax Financing Corporation (“COFINA”) (Bankruptcy Case 

No. 17-BK-3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) Puerto Rico Highways and 

Transportation Authority (“HTA”) (Bankruptcy Case No. 17-BK-3567-LTS) (Last Four Digits of Federal 

Tax ID: 3808); (iv) Employees Retirement System of the Government of the Commonwealth of Puerto 

Rico (“ERS”) (Bankruptcy Case No. 17-BK-3566-LTS) (Last Four Digits of Federal Tax ID: 9686); (v) 

Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17-BK-4780-LTS) (Last Four 

Digits of Federal Tax ID: 3747); and (vi) Puerto Rico Public Buildings Authority (“PBA”) (Bankruptcy 

Case No. 19-BK-5523-LTS) (Last Four Digits of Federal Tax ID: 3801) (Title III case numbers are listed 

as Bankruptcy Case numbers due to software limitations). 

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Examiner Brady C. Williamson, and Godfrey & Kahn in compliance with the Order 

Concerning Tenth Interim and Consolidated Semiannual Application of the Fee 

Examiner and Godfrey& Kahn, S.C. [Dkt. No. 23026 in Case No. 17-3286] (the “Order 

to Supplement”), entered on December 8, 2022. 

2. This Declaration supplements the Tenth Interim and Consolidated 

Semiannual Application of the Fee Examiner and Godfrey & Kahn, S.C., Counsel to the 

Fee Examiner, for Allowance of Compensation for Services Rendered and 

Reimbursement of Expenses for the Period from April 1, 2022 Through September 30, 

2022 [Dkt. No. 22847 in Case No. 17-3283] (the “Tenth Semiannual Fee Application”) 

based on my personal knowledge. If called to testify, I could and would testify 

competently to the written statements made in this Declaration. 

3. On November 11, 2022, through Puerto Rico co-counsel, I filed the Tenth 

Semiannual Fee Application, requesting $893,779.30 in fees and $103.90 in expenses 

incurred for the period April 1, 2022 through September 30, 2022, and $116,526.30 in 

previously withheld taxes. This Declaration outlines the basis of the request for the tax 

refund portion of the Tenth Semiannual Fee Application. 

4. Godfrey & Kahn and the Fee Examiner have filed, and the Court has 

approved, nine previous semiannual fee applications as set forth below: 

 Application 

Docket 

Number (Case 

No 17-3283) 

Order Date Order Docket 

Number (Case 

No. 17-3283) 

“First Semiannual Fee Application” 

(October 6, 2017-March 31, 2018) 

3425 July 11, 2018 3480 

“Second Semiannual Fee Application” 

(April 1, 2018-September 30, 2018) 

4203 December 6, 2018 4425 

 

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 Application 

Docket 

Number (Case 

No 17-3283) 

Order Date Order Docket 

Number (Case 

No. 17-3283) 

“Third Semiannual Fee Application” 

(October 1, 2018-March 31, 2019) 

7813 July 26, 2019 8285 

“Fourth Semiannual Fee Application” 

(April 1, 2019-September 30, 2019) 

9262 December 17, 

2019 

9601 

“Fifth Semiannual Fee Application” 

(October, 1 2019-March 31, 2020) 

13099 June 2, 2020 13352 

“Sixth Semiannual Fee Application” 

(April 1, 2020-September 30, 2020) 

15102 December 8, 2020 15378 

“Seventh Semiannual Fee Application” 

(October 1, 2020-March 31, 2021) 

18117 October 6, 2021 18411 

“Eighth Semiannual Fee Application” 

(April 1, 2021-September 30, 2021) 

19004 December 14, 

2021 

19512 

“Ninth Semiannual Fee Application” 

(October 1, 2021-March 31, 2022) 

21592 August 22, 2022 21889 

“Tenth Semiannual Fee Application” 

(April 1, 2022-September 30, 2022) 

22847 

5. Presumably in reliance on “Determination 13-14”,2

 the Puerto Rico 

Department of Treasury (“Hacienda”), withheld portions of Godfrey & Kahn’s Courtordered fee payments for the First through Sixth Semiannual Fee Applications, as set 

forth in Exhibit J to the Tenth Semiannual Fee Application and in the attached Exhibit A. 

6. Godfrey & Kahn tax professionals have advised me that, pursuant to 

§1062.03(b)(8) of the Puerto Rico Internal Revenue Code, Godfrey & Kahn has no tax 

2

 Determinación Administrativa Núm. 13-14,Aclaración al alcance de la imposición de la aportación 

especial bajo la ley Núm.48-2013 (Aug.28, 2013), available in Spanish at 

http://www.hacienda.pr.gov/sites/default/files/publicaciones/2014/05/13-14.pdf (“Determination 13-14”). 

An unofficial English translation of Determination 13-14 is attached as Exhibit B. See also Order 

Granting the Motion of the Official Committee of Retired Employees and its Professionals Requesting 

Leave to Cite a Spanish-Language Administrative Determination and for Extension of Time to File a 

Certified Translation [Dkt. No. 18121 in Case No. 17-3283]. No official Spanish language translation of 

Determination 13-14 appears in the record, presumably because the Official Committee of Retirees 

withdrew the underlying motion. 

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liability to the Commonwealth of Puerto Rico for services provided in the 

Commonwealth of Puerto Rico within the first three years following the beginning of 

Godfrey & Kahn’s provision of services within Puerto Rico. Through counsel for 

AAFAF, I informed Hacienda that this tax code provision exempted Godfrey & Kahn 

from any tax liability to the Commonwealth, but the withholdings occurred, nonetheless. 

7. Godfrey & Kahn has provided no services within the Commonwealth of 

Puerto Rico since at least March, 2020—less than three years after Godfrey & Kahn 

began providing services within Puerto Rico around October, 2017. 

8. On September 14, 2021, the Official Committee of Retired Employees 

(“OCR”) filed the Motion of the Official Committee of Retired Employees and its 

Professionals to Compel the Puerto Rico Department of Treasury to Comply with the 

First and Second Amended Orders Setting Procedures for Interim Compensation and 

Reimbursement of Expenses of Professionals [Dkt. No. 18114 in Case No. 17-3283] (the 

“OCR Motion to Compel”), asking this Court to compel Hacienda to refund what the 

OCR alleged were improper withholdings from Court-approved fee payments. 

9. On September 21, 2021, the Official Committee of Unsecured Creditors 

filed the Official Committee of Unsecured Creditors’ Joinder to Official Committee of 

Retired Employees and its Professionals’ Motion to Compel Puerto Rico Department of 

Treasury to Comply with the First and Second Amended Orders Setting Procedures for 

Interim Compensation and Reimbursement of Expenses of Professionals [Dkt. No. 18190 

in Case No. 17-3283]. 

10. On September 30, 2021, the OCR withdrew the OCR Motion to Compel 

[Dkt. No. 18338 in Case No. 17-3283]. Subsequently, Hacienda discontinued 

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withholding taxes from Godfrey & Kahn’s Court-approved interim fee awards and has 

never resumed withholding. No one communicated to me or to Godfrey & Kahn the 

reason that the tax withholding ceased. 

11. Determination 13-14, on its face, required Hacienda to withhold 29 

percent of any non-Puerto Rico PROMESA Title III professional’s fees incurred in 

Puerto Rico and 1.5 percent of all non-Puerto Rico PROMESA Title III professionals’ 

fees incurred outside Puerto Rico. 

12. Godfrey & Kahn did not receive an accounting from Hacienda (or any 

other party) illustrating the reason for or calculation of the amounts withheld. Therefore, 

to the best of my ability, I applied the statutory percentages to the Court-approved fee 

awards to estimate the amount of tax withholding stated in footnotes to the Second 

through Ninth Semiannual Fee Applications.3

13. Before including the request for payment of withheld taxes in the Tenth 

Semiannual Fee Application, I requested the preparation of Exhibit A, hereto (identical in 

substance to Exhibit J to the Tenth Semiannual Fee Application) to determine the actual 

amount of taxes withheld. This amount differed from the amounts calculated using the 

statutory percentages and included in the footnotes to prior Semiannual Fee Applications. 

I am unaware of the reason for the discrepancy. 

3 See Second Semiannual Fee Application at p. 2, fn. 4; Third Semiannual Fee Application at p. 2, fn. 2; 

Fourth Semiannual Fee Application at p. 3, fn. 3; Fifth Semiannual Fee Application at p.2, fn. 2; Sixth 

Semiannual Fee Application at p. 3, fn. 2; Seventh Semiannual Fee Application at p. 3, fn. 2; Eighth 

Semiannual Fee Application at p. 3, fn. 1; Ninth Semiannual Fee Application at p. 3, fn. 1. Footnotes also 

highlighted the applicability of the three-year grandfathering clause in P.R. I.R.C. §1062.03(b)(8). 

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14. Based on a review of accounting records created and maintained in the 

ordinary course of Godfrey & Kahn’s regularly conducted business activity, at or near the 

time of the fee payments, and transmitted to me by a person with knowledge of the 

accounting records, the amounts set forth on Exhibit A to this Declaration represent funds 

Hacienda has withheld from Court-ordered fee payments to Godfrey & Kahn, whether 

explained by tax withholding or any other reason. 

15. I am unaware of any unpaid tax liability to the Commonwealth of Puerto 

Rico. 

 Dated this 8th day of December 2022. 

GODFREY & KAHN, S.C. 

 s/ Katherine Stadler 

Katherine Stadler 

One East Main Street, Suite 500 

Madison, Wisconsin 53703 

Telephone: (608) 257-3911 

Facsimile: (608) 257-0609 

E-mail: kstadler@gklaw.com 

Counsel to the Fee Examiner

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Dated: December 8, 2022. 

WE HEREBY CERTIFY that on this date, we electronically filed the foregoing 

declaration with the Clerk of the Court using the CM/ECF system that will send 

notification of such filing to all attorneys of record registered in the use of the CM/ECF 

system. 

EDGE LEGAL, LLC 

 /s/ Eyck O. Lugo 

Eyck O. Lugo 

252 Ponce de León Avenue 

Citibank Tower, 12th Floor 

San Juan, Puerto Rico 00918 

Telephone: (787) 522-2000 

Facsimile: (787) 522-2010 

Puerto Rico Counsel for Fee Examiner 

 GODFREY & KAHN, S.C. 

 /s/ Katherine Stadler

Katherine Stadler, Admitted Pro Hac Vice 

One East Main Street, Suite 500 

P.O. Box 2719 

Madison, Wisconsin 53701-2719 

Telephone: (608) 257-3911 

Facsimile: (608) 257-0609 

E-mail: bwilliam@gklaw.com 

 kstadler@gklaw.com 

Attorneys for the Fee Examiner

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EXHIBIT A 

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Exhibit A to the Supplemental Declaration of Katherine Stadler

In Support of Tenth Interim and Consolidated Semiannual Application

of the Fee Examiner and Godfrey Kahn, S.C

G&K Interim Application 

(Six Month Periods)

Fees and Expenses 

Approved by Court

Fees and Expenses Paid 

to G&K Total Tax Withholding

First $793,011.95 $769,797.41 $23,214.54

Second $1,008,082.11 $991,067.17 $17,014.94

Third $1,070,405.81 $1,049,485.55 $20,920.26

Fourth $1,208,659.76 $1,183,283.48 $25,376.28

Fifth $1,207,714.27 $1,189,421.05 $18,293.22

Sixth $781,546.12 $769,839.06 $11,707.06

Total Tax Refund Due $116,526.30

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EXHIBIT B

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Matter 

Clarification of the scope of the taxation of the special contribution under Act No. 48-2013 

Attention 

Taxpayers who have a contract with the Commonwealth of Puerto Rico to provide professional, advisory, 

advertising, public relations, communications, legal, training or orientation, and lobbying services 

Administrative Determination DA 13-14 08/28/2013 Internal Revenue 

I. Statement of Reasons

Article 1 of Act No. 48-2013, ("Act 48-2013") imposes a special contribution equivalent to one point five 

percent (1.5%) of the total amount of all professional, advisory, advertising services contracts, public 

relations, communications, training or orientation, and lobbying, granted by an agency, dependency or 

instrumentality of the Commonwealth of Puerto Rico ("ELA"), public corporation, as well as the Legislative 

Assembly and the Judicial Branch ("Special Contribution" ). 

The Special Contribution must be withheld by the Department of the Treasury ("Department") or by the 

corresponding government entity at the time of making the payment for the services provided under the 

contract. On August 9, 2013, the Department issued the Accounting Circular Letter Central No. 

1300-03-14 (“CC 1300-03-14”) to establish the procedure for collecting the Special Contribution from

professional service providers Subsequently, on August 16, 2013, the Department issued the Circular

Letter of Central Accounting Num. [sic] with the purpose of amending CC 130043344 to inform that the

media advertisements, reimbursed expenses and costs of equipment or materials that invoice the

governmental entity as part of a contract, should be excluded from the Special Contribution.

On August 20, 2013, the Department issued Administrative Determination No. 13-12 ("DA 13-12") in 

order to clarify which services are subject to the Special Contribution. However, the Department has 

received additional consultations related to the application of Law 48-2013. Therefore, this 

Administrative Determination is issued to repeal DA 13-12 and to clarify the scope of the imposition of 

the Special Contribution under Law 48-2013. 

II. Discussion

 Exhibit B

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The contracts subject to the Special Contribution under Act 48-2013 are those contracts to provide 

professional services, as defined in Act 237-2004. According to said law, the term "professional and 

advisory services" includes those services whose main provision consists of the product of intellectual, 

creative or artistic work, or the management of highly technical or specialized skills. Any contract that is 

classified as a professional or consultive Services Contract under Act 237-2004, is subject to the Special 

Contribution provided in Article 1 of Act 423-2013. 

In addition, as provided in Act 453-2013, services provided under public relations, communications, legal 

and lobbying contracts will be subject to the Special Contribution, regardless of whether these services 

are considered professional or advisory services under Act 237-2004. Within the categories of services 

mentioned here, there are services considered as Services product of intellectual, creative or artistic 

work, but in other cases, routine services that do not involve intellectual or creative work and for that 

reason should not be subject to the Special Contribution. 

It should be noted that Act 48-2013 establishes that the Special Contribution applies to any contract for 

professional, advisory, advertising, training or orientation services, including the services described in the 

previous paragraph, (hereinafter "Professional and Consultative Services") that is granted by a 

government entity of the Commonwealth. Said law does not specify that the Special Contribution is 

applicable only to services provided in Puerto Rico. Therefore, any contract for Professional and 

Consultative Services that is subscribed by a government agency of any of the branches of government, 

is subject to the Special Contribution, regardless of whether the services are provided outside of Puerto 

Rico or by a supplier that is not engaged in an industry or business in Puerto Rico. 

III. Determination

A. Repeal of DA 13-12

The DA is repealed, effective as of the date of issuance of this determination. 

B. Services subject to the Special Contribution

This Department determines that the following services are considered professional and advisory 

services subject to the Special Contribution provided in Act 48-2013 

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Services provided by licensed professionals, such as, lawyers, doctors, nurses, pharmacists, accountants, 

engineers, agricultural surveyors, architects, agronomists, real estate brokers or sellers, draftsmen, real 

estate appraisers or evaluators, geologists, among others; 

Specialized or technical services such as computer consultants, computer programmers, financial 

analysts, economists, electricians, plumbers, mechanics, installers, among others; 

Personnel services such as evaluation, selection and promotion of temporary personnel, whether at an 

administrative, managerial or professional level and coordination of human resources; 

Lobbying services; 

Consulting services of all kinds; 

Management services; 

Insurance services and commissions (excluding the payment of insurance premiums) 

Legal services; 

Cleaning services that require specialized personnel 

Training, education and orientation services for personnel; 

Advisory services of all kinds, whether provided by an individual or by a legal entity, through its 

employees; 

Waste collection and disposal services that require specialized personnel for their removal, such as 

biomedical, industrial, toxic waste or asbestos removal, among others. 

Public relations related services; Y 

Communications services (except for the cost of publicity advertisement). 

In the case of Communications services, there are several types of Services. Among these is the Creative 

service of the writing and design of the art of the advertisement[,] or advertising strategy. In addition, a 

communications contract may contain ad publicity and expense reimbursement services, as well as 

telecommunications services (as defined in Section 4010.01 (kk) of Act 1-2011, as amended). Expenses 

related to media advertising, expense reimbursements and telecommunications services are not 

considered professional services and, therefore, should not be subject to the Special Contribution of Act 

48-2013.

The Special Contribution applies to the contracts for services described herein regardless of whether said 

services have been provided outside of Puerto Rico or if the service supplier is a foreigner not engaged in 

an industry or business in Puerto Rico. In addition, the Special Contribution applies regardless of the 

funds or account number from which the payment to the supplier comes. 

As an example, the “MVX” law firm with offices in Washington DC is contracted by the Government 

Agency for Consulting services related to the application of certain federal laws. The services provided by 

the “MVX” law firm are provided from the Washington offices and through emails and telephone 

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calls. The Government Agency must retain 1.5% to “MVX” when it sends the payment for the services 

rendered. The amount withheld must be remitted to the Department of the Treasury in accordance with 

the provisions of CC 1300-03-14. 

C. Services not subject to the Special Contribution

The Department determines that the following services, among others, are not considered professional 

and advisory services and, therefore, are not subject to the Special Contribution provided in Act 48-2013: 

Collection and waste services (except disposal of biomedical, industrial or toxic waste or that require 

specialized personnel); 

Leases; 

Security services; 

Office cleaning services ([“]Janitorial Services ”); 

Storage services; 

Courier services or document delivery, including management services; 

Life, health, property and contingency insurance contract premiums 

Financial services provided by financial institutions (as defined in Section 1033.17 (f) (4) of the Code) 

Construction contracts (except that the design and advice phase are considered professional services 

subject to the Special Contribution); and 

Account collection services ("collection services"); 

Telecommunications services (as said term is defined in Section 4010.01 (kk) of Act 1-2011, as amended) 

Services provided by non-for-profit organizations 

This Department also determines that the following items will not be considered part of the "total 

amount of the contract" on which the withholding of the Special Contribution is imposed: 

any amount representing reimbursement of expenses; 

any amount representing the cost of the ad in the case of a contract to provide professional advertising 

services; or 

any amount that represents the price of any machinery, equipment, accessory or material that is 

provided as part of the professional service that was rendered, 

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However, in order to exclude these items from the "total amount of the contract" they must be duly 

identified in the invoice submitted by the service provider. Otherwise, the corresponding item will be 

subject to withholding the Special Contribution. 

As an example, the advertising agency “XYZ” signs an advertising services contract with a Government 

Agency. Said contract includes the design of the website, the preparation of the advertising and publicity 

campaign and the placement of the advertisements on radio, press and television. Of the total amount of 

the contract, the amounts identified as the cost of the advertising on radio, press and television do not 

constitute professional services subject to the Special Contribution. Therefore, the total amount of the 

contract must be reduced by the portion attributable to the advertising, and the remainder of the 

contract would be subject to the withholding of one point five percent (1.5%) of the Special Contribution. 

On the other hand, if the agency schedules the advertisements directly with the press, radio or 

television, said advertisement contract does not constitute a contract for professional and advisory 

services and, therefore, is not subject to the withholding at source of the Special Contribution. by the 

agency. 

IV. Validity

This Administrative Determination is effective immediately. 

For additional information about this Administrative Determination, you can Contact the General 

Consultations Section at (787)722-0216 option 8. 

Cordially, 

Melba Acosta Febo 

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