P.R. Laws tit. 7, § 1242
For the purposes of this chapter, the following terms shall have the meaning stated hereinafter:
(a) Administrator of the fund. — Shall mean the person in charge of investing a fund’s capital, administer its remaining brokerage portfolio and keep those books and registries, and file those reports, income tax returns or any other documentation required under this chapter and the regulations promulgated hereunder to such effects.
(b) Taxable year. — Shall mean the accounting year of the fund or the designated entity, for the purposes of its financial statements.
(c) Bank. — Shall mean the Economic Development Bank for Puerto Rico, created by means of §§ 611 et seq. of this title.
(d) Internal base. — Shall mean, with regard to each proprietary interest in a fund or a designated entity, the sum of money received by the fund or the designated entity on the primary issue or offering date of said proprietary interest, reduced by the total amount of the investment credit admissible under § 1254 of this title, but not to less than zero (whether or not the investor who acquired such proprietary interest has claimed or ceded the total amount of the admissible credit under said § 1254 of this title), and by the amount of the distributions made by a fund or a designated entity with regard to said proprietary interest. The internal base of each proprietary interest in a fund or a designated entity shall be determined solely and exclusively by said fund or a designated entity, and shall not be affected by the sale, exchange, disposition, or other type of transfer of said proprietary interest after its primary issue or offering date.
(e) Restricted use capital. — Shall mean that portion of capital received in cash by the fund or the designated entity for the sale of eligible proprietary interests in the fund or the designated entity.
(f) Unrestricted use capital. — Shall mean the moneys received by the fund or the designated entity that do not constitute restricted use capital.
(g) Paid-in capital. — Shall mean the total sum of money received by the fund in exchange of proprietary interests therein.
(h) Commissioner. — Shall mean the Financial Institutions Commissioner as provided in §§ 2001 et seq. of this title.
(i) Exempt distribution. — Shall mean every distribution made and designated as such by the fund or the designated entity, through a written notice mailed to the stockholders or persons who have a proprietary interest in said fund or designated entity, no later than sixty (60) days following the close of the fund’s or designated entity’s taxable year, which are derived coming from distributions of industrial development income received by the fund or the designated entity.
(j) Distribution of industrial development income. — Shall mean any dividend or distribution (including a distribution in liquidation) received by the fund or the designated entity from an exempt business, whose operations are covered by a tax exemption decree issued under the Incentives Act and that consists of “industrial development income,” as said term is defined in §§ 10038 et seq. of Title 13.
(k) Primary issue or offering. — Shall mean the first date on which the fund or the designated entity’s shares, stocks or other proprietary interests are made available to the public. This term is known in English as “issue or offering date”.
(l) Real estate enterprises. — Shall mean the entities engaged in the real estate brokerage, the real estate speculation, appraisals, contractors and construction companies.
(m) Designated entity. — Shall mean any trust, corporation or partnership (including any special partnership, as the term is defined in §§ 8401 et seq. of Title 13) designated jointly by the Bank, the Commissioner and the Secretary through a resolution to such effects as an authorized issuer of eligible proprietary interests under § 1250a of this title, that is not an investment capital fund.
(n) Investment capital fund or Fund. — Shall mean every trust, corporation or partnership that as a diversified investment entity, functions according to the purposes and meets the requirements established in this chapter. A diversified investment entity shall be understood to be a fund created with the purpose to invest no more than twenty percent (20%) of its capital paid in a single venture business, project or activity, and whose investors share in the benefits and risks of every venture business, project or activity in which said fund invests, in proportion to their proprietary interest in the fund. The Bank shall establish through regulations the procedure to be followed in order to authorize the investment in those cases in which, after a fund is created and established as a diversified investment entity, proposed investments arise which cause that more than twenty percent (20%) of the Fund’s paid-in capital is invested in one single venture business, project or activity. Under no circumstances, shall such percentage exceed thirty percent (30%) of said fund’s paid-in capital. No fund may evade the proportional participation requirement of each investor in the risks and benefits of all of the fund’s investments through the creation of different classes of eligible proprietary interests, the benefits or losses from which one or more than one, but not all of the venture businesses, projects or activities in which the fund invested are derived.
(o) Proprietary interests. — Shall mean shares or stock or other capital values (not of debts) issued by a fund or designated entity.
(p) Eligible proprietary interests. — Shall mean the proprietary interests in a fund or a designated entity whose investment qualifies for the credits granted by §§ 1254 and 1256 of this title.
(q) Investment in the fund or designated entity’s proprietary interests. — Shall mean the adjusted base of the proprietary interests in a fund or designated entity, determined pursuant to §§ 8401 et seq. of Title 13, known as the Internal Revenue Code, acquired by a resident or nonresident individual, estate, trust. partnership or corporation.
(r) Passive investor. — Shall mean the owner of proprietary interests in a designated entity who does not participate significantly in the creation, organization, promotion, development or administration of said designated entity, limiting his/her intervention in the entity to the acquisition of proprietary interests therein and to the exercise of those rights that are granted by such investment.
(s) Non-passive investor. — Shall mean the owner of proprietary interests in a designated entity who is not a passive investor.
(t) Internal Revenue Code. — Shall mean the 1994 Internal Revenue Code of Puerto Rico as amended, §§ 8006 et seq. of Title 13.
(u) Incentives Act. — Shall mean §§ 10038 et seq. of Title 13, known as the Puerto Rico Tax Incentives Act of 1987, or any other act of a similar nature that replaces or substitutes it.
(v) Venture business, project or activity. — Shall mean every economic activity undertaken to develop the sectors specified in subsections (a) and (b) of § 1243 of this title and for which the investment capital needed for its partial or total financing is not obtainable under the market’s conventional conditions, or whose recovery value is uncertain or insignificant at the time of the investment, and therefore, said capital is not accessible in the conventional capitalization media.
(w) Person. — Shall mean an individual, corporation, trust, partnership or estate.
(x) Exempt person. — Shall mean the United States of America, its agencies, instrumentalities and political subdivisions (including the states and their political subdivisions); the Commonwealth of Puerto Rico, its agencies, instrumentalities and political subdivisions; foreign governments, including their agencies, instrumentalities and political subdivisions; international organizations (as said term is defined for the purposes of § 8520(b) of Title 13); and the entities and organizations listed in § 8501 of Title 13.
(y) Secretary. — Shall mean the Secretary of the Treasury of the Commonwealth of Puerto Rico.
(z) Financial services. — Shall mean banking entities, financial institutions, cooperatives, leasing companies, stock brokerage houses, investment companies and any other operation addressed to capture funds or loan money.
(aa) Professional services. — Shall mean:
(1) Services rendered by individuals whose profession requires their membership, certification or personal license, or
(2) economic, marketing, financial or management consulting services.
(3) The term “professional services” shall not include hospitals, clinics, homes for patients with terminal diseases, homes for the elderly or institutions for disabled persons, nor medical laboratories that constitute an integral part of any of the health services institutions above mentioned.
(bb) Insurance services. — Shall mean every business related to any kind of insurance field.
Any other terms used in this chapter, that have not been expressively defined therein, shall have the same meaning they have in §§ 8401 et seq. of Title 13, known as the Internal Revenue Code.
History —Oct. 6, 1987, No. 3, p. 840, § 2; July 11, 1996, No. 70, § 2.