2023 Laws of Puerto Rico › TITLE TWENTY-ONE - Municipalities (§§ 1-4 — 6756) › Subtitle 3 - General Provisions (§§ 621-639 — 1100a) › Chapter 71 - Municipal License Taxes (§§ 621-639 — 652y) › § 651o - Assessment and collection of deficiency—Proceedings generally

(a) Notice of deficiency and resources of the person.— Except as otherwise provided in §§ 651–652y of this title:
(1) If the Finance Director determines that a person has a deficiency with regard to the license tax imposed by authority of §§ 651–652y of this title, the Finance Director shall notify the person of said deficiency by certified mail, and within thirty (30) days following the date said notice was deposited in the mail, or within the extension of time granted by the Finance Director to such ends, the person may request the Finance Director, in writing, for a reconsideration of said deficiency, or an administrative hearing with regard thereto. If the person does not request a reconsideration in the form or within the term provided herein, or if after requesting it, the deficiency notified is affirmed in whole or in part, the Finance Director shall notify the person by certified mail, in either case, of his/her final determination, stating the amount of the bond the person must post if he/she wishes to resort to the Court of First Instance against said deficiency determination. Said bond shall not exceed the amount of the license tax, plus interest on the deficiency, computed for the period of one (1) additional year at nine percent (9%) per annum.
(2) When a person does not agree with a final deficiency determination notified by the Finance Director as provided in clause (1) of this subsection, said person may appeal said determination before the Court of First Instance, by filing a complaint as provided by law, within the term of thirty (30) days from the date the notice of the final determination was deposited in the mail, upon posting bond in the name of the Finance Director, before him/her, and subject to his/her approval, in the amount stated in said notice of final determination. Provided, however, That the person may pay the part of the license tax with which he/she is in agreement, and litigate the rest, in which case the bond shall not exceed the amount of the license tax being litigated, plus interest on the deficiency computed in the manner provided in clause (1) of this subsection. In the case of a person who dies on or after the date the final determination is deposited in the mail, but before said term of thirty (30) days has expired, the heirs or legal representatives shall have a term of sixty (60) days from the date the notice of the final deficiency determination is deposited in the mail, to post the bond required herein and to resort before the Court of First Instance. Except as otherwise provided in this paragraph, the posting of the bond in the amount stated by the Finance Director in the final deficiency determination notice, as well as the filing of the complaint before the Court of First Instance, both within the term provided above, shall be shall be mandatory, without whose compliance the Court of First Instance shall not take cognizance of the matter.
(3) The person may file the complaint mentioned in clause (2) of this subsection in such part of the Court of First Instance as to which the municipality of his residence may correspond, and notwithstanding any other provisions of law as to change of venue, or venue, he shall be entitled, by reason of the witnesses’ convenience, that his case be litigated in said part of the Court of First Instance.
(4) If the person cannot post bond in the amount required by the Finance Director, or is unable to post bond, or if having posted it in the amount required, the Finance Director rejected it before the complaint was filed, the person, nevertheless, may file the complaint in the Court of First Instance within the term provided above, but in such cases, he/she must include a petition which shall be notified to the Finance Director together with said complaint, for the Court of First Instance to reduce the amount of the bond, or excuse him/her from furnishing it, or approve the bond that has been posted, as the case may be, stating the reasons therefor. Within ten (10) days from the date on which he/she was notified of the person’s petition for the reduction, exoneration, or approval of the bond, or within the term of any extension granted by the court to such ends, the Finance Director shall file in court whatever objections he/she has against the person’s petition, within any extension granted by the court to such ends, after which the court shall conduct a hearing and shall hear the parties without entering into the merits of the deficiency that has been notified, and shall render an opinion, either to sustain the amount of the bond, or reduce the amount thereof, or excusing the person from posting the bond, or approve the bond that the Finance Director rejected, or order the person to post another.
(5) If the person has furnished a bond in the amount required and prior to filing suit, said bond has not been rejected, the Finance Director shall have a term of thirty (30) days from the date he/she received notice, of the suit, to file any objections he/she might have against the bond thus posted before the court, with due notice to the person, and if such objections are not made within the above-mentioned term of thirty (30) days, or within any extension granted by the court to such ends, if shall be construed that the bond has been approved by the Finance Director. If the Finance Director objects to such bond, the person shall file his/her answer to said objections within ten (10) days from the date he/she received notice thereof, or within any extension granted by the court to such ends, after which the court shall conduct a hearing and shall hear the parties on the objections to the bond without entering into the merits of the deficiency, and shall render an opinion, either upholding the bond posted by the person or requiring him/her to post another in the form and with the guarantees determined by the court.
(6) In every case that the court determines that the person should post bond, it shall be presented to the Finance Director for his/her approval within a reasonable term fixed by the court, according to the circumstances of each case, which at no time shall exceed the term of sixty (60) days from the date on which the order of the court fixing said bond is final and enforceable. If the Finance Director does not object to the bond thus submitted within thirty (30) days, or within any extension of time that the court has granted to such ends, it shall be construed that the same has been approved by him/her.
(7) If the person does not include with the complaint, the petition required by clause (4) of this subsection for the reduction of the bond, or to be exempted from posting it, or for the approval of the bond thus posted; or fails to answer the objections of the Finance Director to any bond after the case is before the court, or to appear at the hearing in connection with any bond; or fails to post any bond required by the court within the term granted therefor; or fails to file suit in the Court of First Instance within the term prescribed therefor; or otherwise fails to comply with any of the requirements imposed by this subdivision so that the Court of First Instance may take cognizance in the matter, it shall be sufficient cause to dismiss the complaint. In cases in which the judgment of dismissal is entered on the grounds that the person has failed to post any bond required by the court by virtue of the order which may be reviewed by certiorari granted herein, said judgment of dismissal shall be final and binding.
(8) The decisions of the Court of First Instance on the merits in any bond incident, as well as its decisions taking cognizance or refusing to take cognizance of a matter for alleged noncompliance on the part of the taxpayer with the requirements established herein for the court to take cognizance of the matter, shall be unappealable, but any aggrieved party may request review thereof by the Supreme Court by certiorari, within ten (10) days after notice of said decision.
(9) The final judgments of the Court of First Instance entered on the merits of the deficiency may be appealed to the appellate forum with jurisdiction to take cognizance of said appeal in accordance and pursuant to the provisions of Act No. 11 of July 24, 1952, as amended, and said appeal shall be entered in the form and within the term provided by the rules adopted to such purposes, being subject, besides, to the requirements imposed by subsection (b) of this section. In the cases that the Court of First Instance judgment determines that there is a deficiency, the filing of the license tax computation shall be ordered and said judgment shall not be deemed final, and the appellate term shall not begin to run for the parties, until the date in the record of the filing of the notice to the person, and to the Finance Director of the judgment of the Court of First Instance approving the computation of the license tax determined by said court.
(10) No assessment with respect to the license tax levied by authorization of §§ 651–652y of this title shall be made, and no distress proceeding or court proceeding shall be commenced or prosecuted for its collection until notice of the final determination mentioned in clause (1) of this subsection has been sent by registered mail to the person, or until the term granted by §§ 651–652y of this title to the person to appeal to the Court of First Instance from said final determination has expired, or if an appeal was taken to the Court of First Instance, until the judgment of that court becomes final. Notwithstanding the provisions of § 652s(a) of this title, said assessment, or the commencement of said distress proceeding or court proceeding during the term herein prohibited, may be barred or set aside by judicial proceedings.
(b) Collection of deficiency after appeal to the Court of First Instance. —
(1) General rule.— If the person appeals to the Court of First Instance from a final determination of deficiency and said court pronounces judgment declaring itself without jurisdiction to take cognizance of the matter, or determining that there is a deficiency, the final deficiency determined by the Finance Director or the deficiency determined by the court, as the case may be, shall be assessed once the judgment is final and shall be paid through notice and request of the Finance Director. No part of the amount determined as a deficiency by the Finance Director but rejected as such by a final judgment of the Court of First Instance shall be assessed or collected by court action or proceeding with or without assessment.
(2) In case of appeal.— When a person appeals from a judgment of the Court of First Instance determining a deficiency, he/she shall be bound to pay the full amount of the deficiency so determined within the term to appeal, and failure to comply with said requirement to pay, except as provided below in clauses (3) and (4) of this subsection, shall deprive the corresponding appellate forum, pursuant to Act No. 11 of July 24, 1952, as amended, of the faculty to take cognizance of the appeal on its merits. If the appellate forum decides that the deficiency determined by the Court of First Instance or any part thereof does not exist, and the person has paid said deficiency wholly or partially upon appealing, the Financial Director shall proceed to reimburse him/her of the proper amount pursuant to the judgment of the appellate forum, plus interest at six percent (6%) per annum on the amount to be refunded, computed from the date of payment, from any available funds in the municipality. If the Finance Director should appeal the judgment of the Court of First Instance determining that there is no deficiency, in whole or in part, or if having appealed, the person in question fails to pay the full license tax in any of the cases in which the judgment of the appellate forum is favorable to the Finance Director, the deficiency determined on appeal, or the unpaid part thereof, shall be assessed and shall be paid upon notice and demand by the Finance Director.
(3) In the case of a person who appeals from a judgment of the Court of First Instance finding a deficiency and is unable to comply with the requirement of payment of the deficiency, or is able to pay only part of the deficiency, the Court of First Instance may order, provided the appeal involves a substantial question and subject to the provisions hereinafter prescribed, that the appeal continue its course until the final decision thereof on the merits without full payment of said deficiency. In such case, the person shall file with his notice of appeal in the Court of First Instance a petition stating the reasons why he cannot pay the deficiency in whole or in part and the grounds on which he claims the appeal involves a substantial question; if the Court of First Instance determines that the person cannot pay the deficiency, or that he can only pay part thereof, and that the appeal involves a substantial question, it shall order instead of full payment, as the case may be:
(A) That the appeal continue its course under the bond furnished to appeal to the Court of First Instance, if such bond were sufficient to answer for the deficiency finally determined plus interest; or
(B) that the person post a new bond, to the satisfaction of the court, in an amount sufficient to answer for the deficiency and its interest for a reasonable term, or
(C) that the person pay part of the deficiency and the unpaid part be secured by any of the means previously provided in paragraphs (A) and (B). In the case of a person who has been acquitted from furnishing bond to litigate the deficiency in the Court of First Instance, and who shows that he cannot pay the license tax, nor post bond, if the appeal involves a substantial question, the Court of First Instance shall order that the appeal continue its course until final decision on the merits without any requirement of payment or bond.
(4) If the Court of First Instance determines that the person can pay the deficiency, or a part thereof, or that he/she should post bond, the person shall proceed to pay the deficiency or the part thereof that was determined or to post bond, within the term of thirty (30) days from the date of the notification of the Court of First Instance’s judgment to such effects, and the payment of the deficiency or the part thereof that was determined, or the posting of the bond within said term, shall perfect the appeal for all legal purposes. If within said thirty (30) day term the person does not make payment, or does not post bond as required, or if having posted a bond that was not accepted, does not post another within the term granted by the Court of First Instance, the appellate forum shall not have jurisdiction to take cognizance of the appeal on its merits, and it shall be dismissed. The resolutions of the Court of First Instance issued under the provisions of clauses (3) and (4) of this subsection, shall not be appealable, but any party may request a review thereof by the corresponding appellate forum by certiorari, within ten (10) days from the date he/she was notified of any of said resolutions, pursuant to Act No. 11 of July 24, 1952, as amended.
(c) In the absence of appeal.— If the person does not file a complaint before the Court of First Instance against a final determination of deficiency notified to him/her, in the form provided in subsection (a) of this section, the deficiency shall be assessed and it shall be paid through notice and demand of the Finance Director.
(d) Waiver of restrictions.— The person shall have the right at any time, through written notice filed with the Finance Director, to waive the restrictions on the assessment and collection of all or part of the deficiency provided in subsection (a) of this section.
(e) Jurisdiction of the Court of First Instance to increase deficiency, additional amounts or additions to the license tax.— The Court of First Instance shall have the power to redetermine the correct amount of the deficiency even though the amount so redetermined should be greater than the amount of the deficiency notified by the Finance Director in the form provided in subsection (a) of this section, and to determine whether any additional amounts or additions to the license tax should be imposed, provided that the Finance Director or his/her representative files a claim to such effects at any time before judgment is entered.
(f) Additional deficiencies restricted.— If the Finance Director has mailed a notice of a deficiency as provided in subsection (a) of this section to the person, and the person has appealed to the Court of First Instance within the term and in the form provided by §§ 651–652y of this title, the Finance Director shall not be entitled to determine any additional deficiency whatsoever with respect to the same accounting year, [except] in case of fraud and except as provided in subsection (e) of this section (regarding the power of the Court of First Instance to determine a deficiency), and subsection (c) of § 651p of this title (regarding to the assessment of a tax in jeopardy). If the person were to be notified that due to a mathematical error it appears from the face of the tax return that he/she owes a tax in excess of the amount declared in the return, and that a tax assessment has been or shall be made on the basis of what should be the correct amount of the tax, except for the mathematical error, such notice shall not be considered, for the purposes of this subsection or of subsection (a) of this section, as a notice of deficiency, and the person shall not be entitled to appeal to the Court of First Instance from said notice and neither said assessment or its collection shall be forbidden by the provisions of subsection (a) of this section.
(g) Power of Court of First Instance over other accounting years.— In considering a deficiency with respect to any accounting year, the Court of First Instance shall consider such facts as are related to the license taxes for other tax years, as it may be necessary to determine correctly the amount of such deficiency, but in so doing it shall not be empowered to decide whether the license tax for any other accounting year has been paid in excess or for a less amount.
(h) Extension of time for payment of deficiency.— When it is shown to the satisfaction of the Finance Director that the payment of a deficiency at the time prescribed therefor shall create undue inconvenience to the person, the Finance Director shall grant an extension for the payment of said deficiency for a period not to exceed eighteen (18) months, and in exceptional cases, for an additional period that shall not exceed twelve (12) months. If an extension is granted, the Finance Director may require the person to post bond for an amount not greater than twice the amount of the deficiency, and with such sureties that the Finance Director deems necessary to ensure payment of the deficiency according to the terms of the extension. No extension shall be granted if the deficiency is due to negligence, or intentional disregard of the rules and regulations, or fraud with the intention of tax evasion.
(i) Address for deficiency notice.— In the absence of notice to the Finance Director of the existence of a fiduciary relationship under § 652c of this title, the notice of a deficiency with respect to a tax levied hereunder shall be sufficient for the purposes of §§ 651–652y of this title, if it was mailed to the person to his/her last known address, even if said person shall have died, or is legally disabled, or in the case of a corporation or a partnership, is not longer in existence.
History —July 10, 1974, No. 113, Part 1, p. 371, § 16; Nov. 17, 1992, No. 93, § 10.