P.R. Laws tit. 13, § 33124
(a) Initial penalty.—
(1) On a disqualified person.— Any disqualified person who receives payment of excess benefits from a tax-exempt organization under the provisions of § 30471(a)(1), (2), (3), (4)(A), (4)(B), and (4)(C) of this title, shall be required to return such amounts of excess benefits paid and, in addition, a penalty equal to twenty-five percent (25%) of the amount of each excess benefits transaction shall be imposed on such person. The penalty imposed under this section shall be paid by any disqualified person as described in subsection (e)(1) of this section in connection with such transaction.
(2) On management.— In the event that a penalty under clause (1) is imposed, a penalty equal to ten percent (10%) of the excess benefits shall also be imposed on each organization manager who, knowing such approval, has participated in the excess benefit transaction, unless it is shown that such participation was not willful.
(b) Additional penalty for disqualified persons.— In any case in which the initial penalty imposed under subsection (a)(1) of this section for an excess benefit transaction, if such situation is not corrected within the same taxable period, an additional penalty equal to two hundred percent (200%) of the excess benefit paid shall be imposed. The penalty imposed under this subsection shall be paid by any disqualified person referred to in subsection (a)(1) in connection with such transaction.
(c) Excess benefits transaction.— For purposes of this section:
(1) Excess benefits transaction.—
(A) In general.— The term “excess benefit transaction” refers to any transaction in which an economic benefit is provided by a tax-exempt organization under § 30471(a)(1), (2), (3), (4)(A), (4)(B), and (4)(C) of this title, directly or indirectly to or for the use of any disqualified person, if the value of the economic benefit thus provided exceeds the value of the consideration (including the performance of services) received for providing such benefit. For purposes of the preceding sentence, an economic benefit shall not be treated as a consideration for the performance of services, unless such organization clearly indicated its intent to so treat such benefit.
(B) Excess benefits.— The term “excess benefits” means the excess referred to in paragraph (A) of this clause.
(2) An excess benefit transaction shall be deemed to be any activity that a tax-exempt organization under § 30471(a)(1), (2), (3), (4)(A), (4)(B), and (4)(C) of this title conducts, whose income is used to pay benefits to a disqualified person, and which activity is not covered under said § 30471(a)(1), (2), (3), (4)(A), (4)(B), and (4)(C) of this Code.
(d) Tax-exempt organization.— For purposes of this section, the term “tax-exempt organization” means:
(1) Any tax-exempt organization under § 30471(a)(1), (2), (3), (4)(A), (4)(B), and (4)(C) of this title, and
(2) any organization that qualifies under such sections at any time during the five (5) years ending on the date of the transaction.
(e) Other definitions.— For purposes of this section:
(1) Disqualified person.— The term “disqualified person” means, with respect to any transaction:
(A) Any person who was, at any time during the five (5)-year period ending on the date of such transaction, in a position to exercise substantial influence over the affairs of the organization.
(B) A relative of the individual described under paragraph (A); and
(C) A thirty-five percent (35%) entity controlled described in paragraphs (A) and (B) of this clause.
(2) Organization manager.— The term “organization manager” means, with respect to any tax-exempt organization under § 30471(a)(1), (2), (3), (4)(A), (4)(B), and (4)(C) of this title, any officer, director, receiver, or trustee of such organization, or any individual having powers or responsibilities similar to those of such officers, directors, receivers, or trustees of the organization.
(3) Thirty-five percent (35%)-controlled entity.—
(A) In general.— The term “thirty-five percent (35%)-controlled entity” means:
(i) A corporation in which persons described in paragraphs (A) or (B) of clause (1) of this subsection own more than thirty-five percent (35%) of the total combined voting power;
(ii) partnership in which such persons own more than thirty-five percent (35%) of profits interest, or
(iii) a trust in which such persons own more than thirty-five percent (35%) of the beneficial interest.
(4) Family member.— The member of a disqualified person’s family shall be determined pursuant to § 30045 of this title, except that such members shall also include the spouses of the brothers and sisters of the disqualified person.
(5) Taxable period.— The term “taxable period” means, with respect to any excess benefit transaction, the period beginning with the date on which the transaction occurs and ending on the earliest of:
(A) The date notice is sent with respect to an amount imposed under subsection (a)(1) of this section, or
(B) the date on which the penalty imposed under subsection (a)(1) of this section is determined.
(6) Correction.— The term “correction” means, with respect to any excess benefit transaction, undoing the excess benefit and taking additional measures necessary to restore the organization to a financial position equal to that in which it would be if the disqualified person were dealing under the highest fiduciary standards.
History —Jan. 31, 2011, No. 1, § 6041.14, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 165.