P.R. Laws tit. 23, § 6013
(a) Kinds of credit.—
(1) Tourism investment credit.— Subject to the provisions of subsection (c) of this section, any investor (including a shareholder) shall be entitled to a tourism investment credit equal to fifty percent (50%) of his/her eligible investment made after the effective date of this act, to be taken in two installments: the first half of said credit in the year in which the exempt business obtained the necessary financing for the total construction of the tourism project, and the balance of said credit, in the following year. Any eligible investment made prior to the income tax return filing date provided by the Code, including any time extension granted by the Secretary for the filing thereof, shall qualify for the tax credit of this section in the taxable year for which the aforementioned return is being filed, provided that it meets all of the requirements of this section. Said tourism investment credit may be applied against any tax of the investor or shareholder, determined under Subtitle A and/or Subtitle F that applies to Subtitle A of the Code, including the alternative minimum tax of Section 1017 and the alternate tax for individuals of Section 1011(b) of the Code.
(b) Credit carryover.— Any credit for tourist related investment not used in a taxable year may be carried over to subsequent taxable years until it is used up in its totality.
(c) Maximum credit cap.—
(1) Tourism investment credit.— The maximum tourism investment credit cap for each tourism project that shall be available to investors and to shareholders, shall not exceed ten percent (10%) of the total cost of the tourism project, as determined by the Director; or fifty percent (50%) of the cash contributed by the investors to the exempt business that qualifies as an eligible investment with respect to such project in exchange for stock or shares of the exempt business, whichever is less.
(2) Ownership and distribution of credits.—
(A) Tourism investment credits.— The maximum amount of tourism investment credit available shall be distributed among investors and shareholders, in the proportions they want. The exempt business shall notify the credit distribution to the Director, the Secretary, and its stockholders and partners on or before the due date set in the Code to file the income tax return for the first year of operations of the exempt business, including any time extension granted by the Secretary to file the same. The distribution chosen shall be irrevocable and binding on the exempt business, the investors, and the shareholders.
(d) Basis adjustment and recovery of credit.—
(1) Tourism investment credit.—
(A) The basis of all eligible investments shall be reduced by the amount taken as tourism investment credit, but it may never be reduced to less than zero.
(B) During the term of three (3) years from the date of the notice regarding the credit distribution as described in subsection (c) of this section, the exempt business shall render an annual report to the Director and the Secretary with a breakdown of the total sum invested in the tourism project as of the date of said annual report.
(C) Once the three (3) year term has elapsed from the date of the notice described in subsection (c) of this section, the Director shall determine the total investment made by the exempt business in the tourism project. In the event that the tourism investment credit taken by the investors exceeds the tourism investment credit computed by the Director, based on the total investment made by the exempt business in the tourism project, such excess shall be owed as income taxes to be paid by the investors in two installments, starting with the first taxable year following the expiration date of the aforesaid three (3) year period. The Director shall notify the Secretary of any excess of credit taken by the investors.
The three (3) year term may be postponed by the Director by means of an order issued by him/her, but never for an additional period longer than three (3) years.
(D) The provisions on the recovery of the tourism investment credit under the above paragraph (C) shall not apply to shareholders or investors who are not developers.
(E) As for condo hotels, the operator of the integrated leasing program shall render an annual report to the Director and the Secretary, identifying the units participating in the integrated leasing program. Said report shall indicate the dates in which participating units enrolled in the program, as well as the date or dates on which one or more units were withdrawn from the program.
If any unit is withdrawn from the program before the expiration of the ten (10) year period, the investor shall owe as income taxes an amount equal to the tourism investment credit taken by the investor with respect to said unit, multiplied by a fraction whose denominator shall be ten (10), and whose numerator shall be the balance of the ten (10) year period as required by this chapter. The amount owed as income taxes shall be paid in two installments, starting with the first taxable year following the date on which the unit was withdrawn from the integrated leasing program.
For purposes of this clause, the fact that an investor in a condo hotel fails to comply with any requirement established in the grant conferred to him/her for such purposes or if such grant is revoked for any reason, it shall be deemed that the investor no longer devoted the condo hotel unit(s) covered under said grant to an integrated leasing program.
Provided, That in those cases in which the unit is withdrawn from the integrated leasing program to be devoted to any other tourist activity that constitutes an exempt business under the act for a period of not less than the time remaining to complete the ten (10) year period under the integrated leasing program, the recovery of the income tax shall not apply to the investor; if this condition is not complied with, the next acquirer of the unit shall be responsible for any amount that must be subsequently recovered as income taxes taken in excess, it being understood that recovery for the years in which the unit was enrolled in an integrated leasing program and another tourist activity that constitutes an exempt business under this chapter shall not be in order.
(e) Credit for loss.— Subject to the conditions provided in this subsection, all losses resulting from the sale, exchange or other disposition, including redemption or liquidation, of an eligible investment or worth of a fund to which a credit for tourist investment was distributed pursuant to subsection (c) of this section, by an investor or shareholder who is not a developer, shall be deemed as a capital loss, but said investor or shareholder may choose to claim said loss as a credit against the tax determined for the taxable year of said loss and the following four (4) years. The amount of the loss that he or she may claim as a credit on each of the years previously indicated shall not exceed one-third of the loss. Any loss claimed as a credit against income taxes shall reduce the base of the eligible investment or of the worth of a fund in the same amount as the credit claimed, but said base shall never be reduced to less than zero. Likewise, only for the purposes of the credit for losses herein provided, any distribution of tourist development revenues conducted by an exempted business to an investor or shareholder shall reduce the base of the eligible investment or of the worth of a fund possessed by said investor or shareholder in relation to said exempted business in the same amount of the distribution, but said base shall never be reduced to less than zero. The option to claim the loss as credit against income taxes shall not be allowed if the base of the eligible investment or the worth of a fund equals zero.
For purposes of determining the amount of the credit for losses, the base of the share in a special partnership shall not be adjusted to reflect the increases to said base computed according to §§ 8006 et seq. of Title 13. On the other hand, any reduction in the base determined according to said sections shall be recognized for purposes of computing the credit for losses, but only up to the amount of the tax benefit derived by the investor or shareholder from the transaction or event which gave rise to the reduction in the base under §§ 8006 et seq. of Title 13.
The total amount of the credit for loss shall not exceed ten percent (10%) of the total cost of the tourist industry project. The investors and shareholders who claimed or otherwise transferred their tourist investment credits as a result of their eligible investment or investments in securities of a fund, shall distribute among themselves the right to benefit from the credit by using the mechanism provided in subsection (c) of this section. Once the distribution has been made, the provisions of subsection (f) of this section, which refer to the conveyance, sale or transfer of credit, shall not apply.
Any excess credit thus granted on the tax determined in the abovementioned five (5) taxable years shall not be claimed as a deduction or a credit, nor may it be reverted or carried over to another taxable year.
(f) Assignment of credit.—
(1) Tourism investment credit.— After the date of notice of the distribution of the tourism investment credit provided in subsection (c)(1) of this section, the tourism investment credit provided in this section may be assigned, sold, or otherwise transferred in whole or in part by an investor or shareholder to any other person; except that the developer of a tourism project may only assign or otherwise transfer the tourism investment credit provided in this section under such terms and conditions as the Director and the Secretary have previously approved for the case in question. The terms under which the Director and the Secretary shall approve the sale of credits by developers shall include, but not be limited to, the posting of a bond or any other kind of surety, which must be kept in effect until the Director certifies that the construction and development of the entire tourism project has been completed. Whenever they deem necessary, the Director and the Secretary may require that the money generated by the sale of credits be deposited into an escrow account or any other similar instrument, in which case, the surety required shall only cover the difference between the amount of the credits so assigned, sold, or transferred and the amount of money deposited in the aforesaid account.
A tourism project developer who wishes to assign, sell, or transfer his/her tourism investment credit after the construction and development of the entire tourism project has been completed as determined by the Director through a certification to that effect, may carry out such assignment, sale, or transfer without being subject to the limitations of the above paragraph.
In the case of investment credit, the eligible investment basis shall be reduced by the value of the assigned tourism investment credit.
(2) The investor or shareholder who has assigned all or part of his/her tourism investment credit, as well as the acquirer of the tourism investment credit, shall notify the Secretary of such assignment through a declaration to that effect which shall be attached to his/her income tax return for the year in which the assignment of the tourism investment credit is carried out. The declaration shall contain any such information as the Secretary may deem pertinent through regulations promulgated to that effect.
(3) The money or the value of the property received in exchange for the tourism investment credit shall be exempted from taxes under the Code up to an amount equal to the amount of the assigned tourism investment credit.
(g) Special rules for investments made by investment capital funds created under §§ 1241 et seq. of Title 7.—
(1) Any capital investment fund created under §§ 1241 et seq. of Title 7, which is an investor or shareholder in a tourist industry project shall be subject to all of the provisions of this section except that:
(A) It shall be entitled to a tourist industry investment credit equivalent to only twenty-five percent (25%) of its eligible investment or its investment in securities of a fund, instead of the fifty percent (50%) mentioned in subsection (a) of this section. The total amount of the twenty-five percent (25%) credit of its investment may be taken in the year in which the exempted business obtained the financing needed for the total construction of the tourist project.
(B) For purposes of the limitation imposed by subsection (c) of this section to the effect that the total tourist investment credit shall not exceed ten percent (10%) of the total cost of the tourist project, as determined by the director; or, fifty percent (50%) of the cash amount outlaid by the investors and shareholders, whichever is less, the computation shall be made as if the investment capital funds created under §§ 1241 et seq. of Title 7 had taken fifty percent (50%) of their eligible investment.
(C) The capital investment funds created under §§ 1241 et seq. of Title 7 shall not be entitled to the credit for losses provided in subsection (e) of this section.
History —Sept. 10, 1993, No. 78, § 5; Jan. 8, 1994, No. 3, § 3; Sept. 27, 1994, No. 114, § 3; Aug. 17, 1999, No. 272, § 2; Feb. 18, 2008, No. 13, § 2; Aug. 9, 2008, No. 241, § 2, retroactive to July 1, 2008; July 10, 2010, No. 74, § 18.