P.R. Laws tit. 23, § 6344
(a) Tourism investment credit.— Subject to the provisions of subsection (c) of this section, all investors shall be entitled to a tourism investment credit equal to fifty percent (50%) of an eligible investment made after the effective date of this act, which shall be claimed in two (2) installments: the first half of such 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 such credit, in the following year. All eligible investments made before the due date for filing income tax returns as provided by the Code, including any time extension granted by the Secretary for the filing thereof, shall qualify for the tax credit granted under this section, in the taxable year for which the aforementioned return is being filed, insofar as such investments meet all the requirements of this section. Such credit for tourism investment may be applied against any specific tax of the investor pursuant to Subtitle A and/or Subtitle F that apply to Subtitle A of the Code, including the alternative minimum tax under Section 1017, and the alternate tax for individuals under Section 1011(b) of the Code.
(b) Credit carry-over.— Any tourism investment credit not used in a taxable year may be carried over to subsequent taxable years until it is used in its entirety.
(c) Maximum amount of credit.—
(1) Tourist Investment Credit.— The maximum amount of tourist investment credit for each tourism project that shall be available to investors 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 investors to the exempt business that qualifies as an eligible investment with respect to such project in exchange for stock or shares in the exempt business, whichever is less.
(2) Credit ownership and distribution.— The maximum available amount of investment credit shall be distributed among the investors, 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 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 return. The distribution chosen shall be irrevocable and binding on the exempt business and the investors.
(d) Basis adjustment and recovery of credit.—
(1) 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.
(2) During the term of three (3) years-eight (8) years in the case of special timeshare or vacation club rights projects-from the date of the notice regarding the credit distribution as described in subsection (c)(2) 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 such annual report.
(3) Once the three (3) year term has elapsed-eight (8) years in the case of special timeshare or vacation club rights projects-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 credit for tourism investment taken by the investors exceeds the credit for tourism investment 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.
(4) The provisions on the recovery of tourism investment credit under the above clause (3) shall not apply to investors who are not developers.
(5) 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 starting dates of participation in the program of participating units, 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 is withdrawn from the integrated leasing program.
For purposes of this subsection, 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 chapter 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, provided that recovery for the years in which the unit belonged to an integrated leasing program and another tourist activity that constitutes an exempt business under this chapter shall not be in order.
(e) 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 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 approved previously 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 preceding 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 money or the value of the property received in exchange for the tourism investment credit shall be exempt from taxes under the Code up to an amount equal to the amount of the assigned tourism investment credit.
(3) The tourism investment credit may be assigned, sold, or otherwise transferred only by an investor, except in the following cases:
(A) An investor may assign, sell, or otherwise transfer a tourism investment credit through a broker-dealer registered as such with the Office of the Commissioner of Financial Institutions in the circumstances to be established by regulation by the Executive Director.
(B) An underwriter who, having acted as such, has acquired a tourism investment credit at the time of closing of the financing of a tourism project may assign, sell, or otherwise transfer any tourism investment credit to a third party. Such assignment, sale, or transfer shall be deemed to be made by an investor if he/she complies with the requirements established by regulation by the Executive Director.
(C) In the case of a partner who is a member of a special partnership and who is an Investor, and who in order to complete the balance of capital needed for the financing of a tourism project assigns, sells, or otherwise transfers any tourism investment credit acquired through a distribution or transfer of said special partnership at the time of closing the financing for the same tourism project, said assignment, sale, or other transfer of said credits by the partner who is a member of the special partnership shall be deemed to be made by an Investor.
(D) In the event that a pledge is made to the Government Development Bank, to any other agency of the Government of the Commonwealth of Puerto Rico, or to any other lending entity, of the tourism investment credit granted to an Investor for purposes of financing the eligible cost of a tourism project, the creditor of the pledge may sell, assign, or otherwise transfer such credits acquired by the execution of the pledge to a third party, if such pledge is executable.
(4) The excess of the amount of a tourism investment credit over the money or the value of the property paid by an acquirer of such credit shall not constitute gross income for purposes of the Code.
(5) The following persons shall notify the Secretary of the assignment, sale, or transfer by means of a sworn statement to that effect, to be attached to their income tax return for the year in which the assignment of the tourism investment credit is made:
(A) The investor who has assigned all or part of his/her tourism investment credit;
(B) the broker-dealer, underwriter, or creditor of the pledge who has assigned all or part of his/her tourism investment credit, and
(C) the acquirer of the tourism investment credit.
The sworn statement shall contain such information as the Secretary may deem pertinent by regulation promulgated to that effect.
History —July 10, 2010, No. 74, § 5.