P.R. Laws tit. 23, § 11006b
(a) Granting of the tax credit.— In accordance with this chapter, grantees engaged in film projects or infrastructure projects shall be allowed a credit against the taxes imposed by Subtitle A of the Code or the taxes provided under § 11007(a)(1)(A) of this title, any other income tax imposed under a special law, or any combination thereof, as provided herein. Subject to the limitations described in this section, such tax credit shall be available to grantees upon commencement of the activities covered by the grant in the case of film projects and, in the case of infrastructure projects, when such project is completed and ready for use as certified by the Secretary of Development. When the requirements of subsection (f) of this section have been satisfied, the Secretary of Development shall authorize the amount of tax credits issued and available, pursuant to the certification issued by the Secretary of the Treasury, and confirm by letter to the grantee.
(b) Amount of the tax credit.—
(1) In the case of film projects, the credit granted in subsection (a) shall be equal to:
(A) Forty percent (40%) of the amounts certified by the Auditor as disbursed in connection with all Puerto Rico production expenditures, except for payments made to above-the-line nonresidents, and
(B) twenty percent (20%) of the amounts certified by the auditor as disbursed in connection with Puerto Rico production expenditures consisting of payments to above-the-line nonresidents. Credits generated on account of Puerto Rico production expenditures consisting of payments to above-the-line nonresidents shall not be subject to the limitations imposed in clause (3) of this subsection.
(2) In the case of infrastructure projects, the credit granted in subsection (a) shall be equal to twenty-five percent (25%) of those amounts certified by the auditor to have been disbursed in connection with the development and/or expansion of the infrastructure project in question.
(3) The credits set forth in this section shall be subject to the following limitations:
(A) Except as provided herein and in clause (1)(B) of this subsection, credits computed pursuant to clause (1) of this subsection shall be subject to a fifty million dollars ($50,000,000) annual cap. Notwithstanding, film projects can apply for credits in excess of this annual limit of fifty million dollars ($50,000,000) if any portion of Puerto Rico production expenditures have been incurred within a film development zone:
(i) Up to an additional annual limit of fifty million dollars ($50,000,000);
(ii) up to an additional annual limit of one hundred fifty million dollars ($150,000,000) in excess of the additional annual limit of fifty million dollars ($50,000,000) set forth in subparagraph (i) above, if the development budget of the large-scale studio within the corresponding film development zones, as certified by the auditor, exceeds two hundred million dollars ($200,000,000), and
(iii) up to an additional annual limit of one hundred million dollars ($100,000,000) in excess of the additional annual limits of fifty million dollars ($50,000,000) and one hundred fifty million dollars ($150,000,000) set forth [in] subparagraphs (i) and (ii) above, respectively, if the amount of credits issued, computed pursuant to clause (1) of this subsection, equals two hundred fifty million U.S. dollars ($250,000,000) for two consecutive years.
In all cases, credits in excess of the initial annual limit of fifty million dollars ($50,000,000) shall require the approval of the Secretary of Development and the Secretary of the Treasury, at their discretion, consistent with promoting the best interests of Puerto Rico.
(B) Credits issued pursuant to clause (2) of this subsection shall be subject to a ten million dollars ($10,000,000) aggregate annual cap for all infrastructure projects claiming credits in any given year; Provided, however, That credits issued under this chapter for all infrastructure projects shall be subject to a lifetime cap of one hundred fifty million dollars ($150,000,000).
(c) Use of the tax credit.— The tax credit, as certified by the Auditor, may be taken against the taxes imposed under Subtitle A of the Code or the contributions imposed by § 11007(a)(1)(A) of this title, any other income tax imposed under a special law, or any combination thereof, and may be claimed
(1) In the case of film projects, in the taxable year when the activities covered by the grant commence;
(2) In the case of infrastructure projects, in the taxable year or period during which such project is completed and ready for use as certified by the Secretary of Development;
(3) The cap limitation provided in subsection (b)(3)(A) of this section shall be set at the time the credit is granted; and
(4) The cap limitation provided in subsection (b)(3)(B) of this section shall be applied and assessed every year in which the grantee or a transferee of the tax credit claims the credit. Grantees or their transferees, claiming credits for infrastructure projects during any given taxable year shall confirm with the Secretary of Development every year, before claiming these credits, the amount of credit available to be claimed for such year. The Secretary of Development shall have absolute discretion to make tax credit cap allocations between persons claiming credits for infrastructure projects.
(5) The tax credit shall be nonrefundable.
(6) Any unused tax credits may be carried over by the taxpayer until exhausted, subject to the limitations provided herein.
(d) Recapture of the credit.— In the event a grant is revoked pursuant to § 11008(b) of this title, an amount equal to the tax credits granted therein shall be deemed to be income taxes owed for the taxable year in which the revocation takes place, to be paid by the grantee affected by the revocation in two (2) installments, the first of which shall become due on the due date for filing the income tax return for the year in which the revocation takes place, without considering any extensions granted, and the second installment shall become due on the due date for filing the tax return, without considering any extension granted, for the following year.
(e) Transfer and carryover of the tax credit.— All or any portion of tax credits issued in accordance with this section may be transferred to other persons, subject to the same limitation on use imposed under subsection (c) of this section. Any tax credit that is Transferred and claimed against taxes imposed by Subtitle A of the Code or by § 11007(a)(1)(A) of this title, or any other income tax imposed under a special law shall be nonrefundable. Any unused tax credits may be carried forward by the transferee until exhausted. The tax credits for infrastructure projects issued pursuant to subsection (b)(2) of this section may be carried over to a subsequent taxable year, if such credits are claimed against income taxes, or to subsequent months only if the grantee, in relation to which such credits were granted, is conducting operations of the corresponding infrastructure project under the terms described in the grant.
The proceeds from the sale of tax credits granted pursuant to this section are hereby exempt from the payment of any tax imposed by the Government of Puerto Rico. Any discount received by a transferee of the tax credits granted pursuant to this section is hereby exempt from the payment of any tax imposed by the Government of Puerto Rico.
Prior to any transfer, the transferor shall submit to the Secretary of the Treasury a statement that describes the amount of tax credit for which the transfer of the tax credit is eligible. The transferor shall provide the Secretary of the Treasury with such information as the Secretary of the Treasury may require for the proper allocation of the credit.
(f) Advance of the tax credit.— In the case of film projects, fifty percent (50%) of the tax credit granted in subsection (a) of this section, shall be available in the taxable year in which the auditor certifies to the Secretary of Development and to the Secretary of the Treasury that fifty percent (50%) or more of the Puerto Rico production expenditures has been disbursed, and the Secretary of Development determines that the other applicable provisions of this chapter have been complied with. The grantee may advance this fifty percent (50%) of the tax credit granted in subsection (a) of this section, at any time after having obtained a grant, if a bond in which the Secretary of the Treasury is designated as beneficiary is posted. In such case, grantee shall receive from the Secretary of the Treasury a certification that:
(1) The bond was posted to his/her satisfaction, and
(2) as to the amount of tax credits issued and available.
The remaining fifty percent (50%) of the tax credit, or the full tax credit if no advance was authorized, shall be available in the taxable year in which the auditor certifies to the Secretary of Development and to the Secretary of the Treasury that all Puerto Rico production expenditures have been paid.
(g) The confirmation referenced in subsection (a) must be provided within thirty (30) days as of the date of receipt of the auditor’s certification. This thirty-day (30) term shall be considered to be stayed when the Secretary of the Treasury requests additional information. However, upon stay of the thirty-day (30) term and upon furnishing the information thus requested, the Secretary of the Treasury shall only have the days remaining in the thirty-day (30) term from the date of receipt of auditor’s certification to issue the tax credit certification provided that the Secretary of the Treasury has all documents to be evaluated available.
If, as of the date established in this section for credit availability, the grantee determines that the total of the credit is greater than the total credit to which it is entitled under this section (actual credit), the portion of credit available under this section shall be reduced by the difference between the credit authorized by the Secretary of Development and confirmed by the Secretary of the Treasury and the actual credit.
(h) Credits issued hereunder shall be available for the taxable year in which the Secretary of the Treasury confirms the amount of tax credits issued and available. Credits issued on or before the due date for filing an income tax return, including any extensions, may be claimed for the preceding taxable year associated with said return.
Notice This section has more than one version with varying effective dates. Second of two versions of this section.
History —Mar. 4, 2011, No. 27, § 7.3; July 13, 2012, No. 140, § 7; Dec. 21, 2012, No. 304, § 3; May 19, 2015, No. 69, § 4; July 29, 2016, No. 92, § 1.