P.R. Laws tit. 23, § 591
For the purposes of this chapter the following words and phrases shall have the meaning and scope expressed below:
(a) Theatrical investor. — Shall mean any natural or juridical person who during the tax year for which he or she claims the deductions, exemptions or benefits provided by this chapter, possesses a current certification issued by the Chairperson of the Planning Board upon prior consultation with the Secretary of the Treasury, which certifies that during said year said person was devoted to the exploitation of an activity which qualifies as a theatrical business as said term is defined in subsection (b) of this section and who derives fifty percent (50%) or more of his or her gross income from a theatrical business as operator, owner, or lessee, as indicated in the income tax return.
(b) Theatrical business. — Means the operation or exploitation of one (1) or more of the following businesses:
(1) The construction of new buildings or theaters to be used to present plays, located within the geographical area indicated in this chapter.
(2) The rehabilitation of buildings or theaters historically devoted to the presentation of plays, located within the geographical area indicated in this chapter.
(3) Buildings currently devoted to show films, located within the geographical area indicated in this chapter.
(4) Buildings currently devoted to the presentation of plays, located within the geographical area indicated in this chapter.
(5) Buildings to be devoted to activities which complement the theatrical experience such as art galleries, gallery cafés, café theaters and any other type of business or venue for presenting concerts, operas and comedies and [containing] costume, props and scenery businesses.
(c) Theater district. — Means the geographical zone along the length of Avenida Ponce de León, from Calle Bolívar to Calle Ernesto Cerra.
(d) Property taxes. — Taxes levied by §§ 5001 et seq. of Title 21, known as the “Municipal Property Tax Act of 1991”, on the value of any personal and real property used by the theatrical investor in the operation of its theatrical business.
(e) Personal and real property. — Means the definition established in § 5061 of Title 21, part of the Municipal Property Tax Act of 1991, referring to that property used for the development of theatrical activities.
(f) Income tax. — Tax levied under §§ 8006 et seq. of Title 13, known as the “Puerto Rico Internal Revue Code of 1994”, on the net income of the annual production of theatrical enterprises and on the net income on account of the interest, revenues and dividends and any other income derived from the same.
[For the purposes of this chapter, net income shall be determined in conformity with that provided in §§ 8421, 8422 and 8423 of Title 13, part of the 1994 Internal Revenue Code.]
(g) Municipal license tax. — Municipal tax on the sales generated by theatrical activities as established in §§ 651 et seq. of Title 21, known as the “Municipal License Tax Act of 1974”.
(h) Securities funds or funds. — Shall mean any fund, corporation or partnership, including a partnership which has conducted an election under Act No. 91 of June [29], 1954, as amended, known as the Income Tax Act of 1954, or §§ 8006 et seq. of Title 13, known as the “Puerto Rico Internal Revenue Code of 1994”, which as an investment entity operates according to the purposes in compliance with the requirements established in Act No. 3 of October 6, [1987], §§ 1241 et seq. of Title 7, as amended, known as the “Capital Investment Fund”, or in any other law of a similar nature which substitutes or complements the latter and the current regulations promulgated under the same.
(i) Investor. — Means any person who makes an eligible investment. When the person who makes the eligible investment is a fund, the participants in said fund, and not the fund, shall be deemed to be the investors.
(j) Participant. — Means the person who invests in the primary issue of the securities of a fund.
(k) Eligible investment means. —
(1) The cash amount contributed to be used in a theatrical business in exchange for:
(A) Shares in the corporation, if the theatrical business is a corporation.
(B) The participation or the increase in the participation in a partnership or joint enterprise or an individual business.
(2) The value of the land contributed to be used in a theatrical business in exchange for:
(A) Shares in the corporation, if the theatrical business is a corporation;
(B) a participation or the increase in the participation in a partnership or joint enterprise or an individual business.
The value of the land contributed shall be the fair market value, minus the total amount of the balance of the mortgages which encumber the land at the time the contribution is made. The fair market value shall be determined on the basis of assessment of said land conducted by one (1) or more professional appraisers duly licensed in Puerto Rico. The chairperson of the task force shall approve the value of the land as determined by the appraiser before the same is contributed to the theatrical business.
(3) Cash contributions made by a fund to a public corporation of the Commonwealth of Puerto Rico or any of its subsidiaries, in exchange for:
(A) The stock or shares in a theatrical business held by said corporations or its subsidiaries, or
(B) the subordinate debt owed by the theatrical business to said corporations or subsidiaries.
(4) The cash or the value of the land contributed shall constitute an eligible investment regarding the primary issue of shares or participations in a theatrical business that conducts said operations during a period of at least ten (10) consecutive years, provided the funds obtained from said issue be solely and exclusively used to:
(A) Establish and operate new theatrical businesses. — The term “new theatrical business” means any theatrical business, as defined in this chapter, that is initiated or begun on or after the initial capitalization of the business. The funds used to acquire an already existing theatrical business shall not qualify as an eligible investment. However, the moment [sic] of the purchase price of an existing theatrical business shall be deemed as an eligible investment when, as part of said acquisition, the purchaser contributes additional capital to the theatrical business for a sum of not less than two hundred percent (200%) of the purchase price. The previous provisions shall not apply to the purchase or acquisition of an existing theatrical business by related persons. The term “related persons” shall be determined pursuant to the criteria established in §§ 8424(b) and 8428 of Title 13, part of the “Puerto Rico Internal Revenue Code of 1994”.
The term “eligible investment” shall not include an investment made with the cash proceeding from a loan secured by the theatrical business itself or by its assets.
(B) The substantial renovation or expansion of existing theatrical businesses. — The funds contributed for the substantial renovation or expansion shall qualify as an eligible investment only if said renovation or expansion equals at least twenty-five percent (25%) of:
(i) The value of the land used for the existing theatrical business; or
(ii) the book value of the real property used in the existing theatrical business, without considering the land. The term “eligible investment” shall not include an investment made with the cash proceeding from a loan secured by the theatrical business itself or by its assets.
(C) Acquisition of machinery, equipment or working capital. — The funds contributed for the acquisition of machinery, equipment or working capital shall qualify as an eligible investment provided the machinery, equipment or working capital are used exclusively in the theatrical business. For these ends, the acquisition of the machinery or equipment previously used in a theatrical business in Puerto Rico shall not be deemed to be an eligible use of funds. Furthermore, the term “working capital” shall not include funds used for the establishment of reserves.
In case one of the contributions described in clauses (1) and (2) of this subsection is made, said contribution shall de deemed to be an eligible investment only if said investment is made in the primary issue of the shares or participations.
History —Aug. 18, 2000, No. 178, § 2.