2023 Laws of Puerto Rico › TITLE TWELVE - Conservation (§§ 1-16 — 8162) › Subtitle 4 - Water Law (1903) › PART III - Water Rights (§§ 701 — 785p) › Chapter 78 - Conservation Easements (§§ 785 — 785p) › § 785m-1 - Tax credit

(a) Any natural or juridical person that constitutes an eligible conservation easement or donates eligible land pursuant to the provisions of this chapter shall be able to opt for a tax credit equal to fifty percent (50%) of the value of the eligible conservation easement or eligible land by the date of the donation, to be paid in two (2) installments: the first half of said credit, in the year in which the conservation easement is constituted, or the donation of the eligible land takes place; the balance of said credit, in the following year. Any constitution of an eligible conservation easement or eligible land donation made prior to the filing date of the income tax return, as provided in the Puerto Rico Internal Revenue Code, including any extension granted by the Secretary of the Treasury to file the same shall qualify for the tax credit herein provided in the taxable year for which the aforementioned income tax return is filed; provided, that requirements set forth in this section are met.
It shall be clarified that any natural or juridical person that constitutes an eligible conservation easement or donates eligible land pursuant to the provisions of this chapter may opt for the tax deduction allowed under §§ 30130, 30135(a)(3), 30332(a)(5) and 30412 of Title 13, or any successor law, or for the tax credit set forth in this section. Said person may not avail himself of both tax benefits at the same time. Likewise, a property that meets the necessary requirements may be used to generate either a credit for the constitution of a conservation easement or a credit for the donation of eligible land, but not both.
(b) Use and availability of the credit.— The credit may be used against any tax established under the Puerto Rico Internal Revenue Code, including the alternative minimum tax and the alternate base tax. The credit shall be available to be used once the requirements set forth in this chapter are met and once the Secretary of the Treasury certifies the availability of the credit as set forth in this section.
(c) Credit carryover.— Any unused credit in a taxable year may be carried over up to a maximum of ten (10) subsequent taxable years.
(d) Credit amount.— The amount of credit shall be fifty percent (50%) of the value of the conservation easement or eligible land on the date of the donation. If there is more than one donor, the amount of the credit shall be distributed among the donors in the proportions determined by them. Donors shall notify the distribution of the credit to the Secretary of the Treasury on or before the date established by the Puerto Rico Internal Revenue Code to file the income tax return for the first year in which they are entitled to take the credit, including extensions granted by the Secretary of the Treasury to file the same. The distribution shall be irrevocable and mandatory for the donors.
The Secretary of the Treasury shall be the sole person authorized to establish the value of the conservation easement or of the eligible land which shall be used as a basis to determine the maximum amount of credit. Said value shall be the one set in the appraisal or valuation report drafted and revised in accordance with the requirements of this chapter.
(e) Adjustment of base and recovery of the credit.—
(1) The tax base of the donor(s), determined pursuant to the Puerto Rico Internal Revenue Code, on the property object of the conservation easement or on the eligible land, as the case be, shall be reduced by the amount taken as credit but may never be reduced to less than zero.
(2) The owner or owners of a property encumbered by a conservation easement or the donor or donors in the case of eligible land, shall be subject to the recovery of the credits granted in the event that the tax credit was obtained through fraud, or that the obligations contained in the deed of constitution of a conservation easement or donation of an eligible land are not complied with, as the case may be. In the event of noncompliance with the obligations contained in the deed of constitution of a conservation easement or donation of eligible land, the recovery shall proceed but only in those cases where the land cannot be restored to its original condition, as provided in this chapter.
Also, the owner or owners of a property encumbered by a conservation easement shall be subject to the recovery of the credits granted by the constitution of an eligible conservation easement in the event that there is non-compliance with the perpetuity requirement provided for in § 785i of this title.
The invalidated credit shall be treated as an insufficiency of payment of the income tax for the year in which any of the aforementioned non-compliance occurs, to be paid in two (2) installments, together with applicable interest, surcharges and penalties, beginning with the taxable year in which any of the non-compliances occurs, and the second installment shall be paid the following taxable year.
(3) Any person who acquires a credit from the owner of the property subject to taxation or the donor of eligible land by means of a transfer, sale or any other means of assignment, does not become owner or donor, as may apply, of said property for purposes of the recovery set forth in subsection (e) of this section; however, the credit assigned shall maintain its original characteristics for purposes of the limitation established by the provisions of subsection (a) of this section, to such effects that not more than half of the credit generated may be taken in the first tax year in which the right to take the referred credit arises.
(f) Assignment of the credit.—
(1) After the certification of the Secretary of the Treasury as to the availability of the credit provided in this section in its subsection (g) of this section, the credit provided in this section may be assigned, sold or otherwise transferred, wholly or in part, by the donor or donors to any other person. Once thus transferred, the credit may not be assigned, sold, or otherwise transferred. For purposes of this clause, a change of control by the person who owns a credit granted pursuant to this chapter shall not constitute a transfer of the credit. Neither shall it constitute a credit transfer, the transfer of the property of a deceased person to his/her estate or to the transfer by legacy or inheritance. The previous exceptions to the transfer rule shall be informed to the Secretary of the Treasury within thirty (30) days of their occurrence.
(2) The tax base of the donor or donors, determined pursuant to the Puerto Rico Internal Revenue Code, on the property object of the conservation easement or the eligible land, as the case may be, shall be reduced by the value of the assigned, sold, or otherwise transferred credit, but shall never be reduced to less than zero.
(3) The donor or donors who have assigned, sold or transferred their credit in whole or in part, as well as the acquirer of said credit shall notify the Secretary of the Treasury of the assignment, sale or transfer by means of a declaration to such effects which shall be attached to their income tax return for the year in which the assignment of the credit takes effect. The declaration shall contain:
(A) The name and address and social security number of the transferor;
(B) the name and address and social security number of the transferee;
(C) the total amount of the credit approved by the Secretary of the Treasury;
(D) the total amount of the credit of the transferor;
(E) the amount of credit taken and/or assigned by the transferor;
(F) the amount of assigned credit;
(G) the date of the assignment and the tax year in which the assigned credit may be taken, pursuant to the provisions of subsection (a) of this section, and
(H) the consideration given to each change in the credit.
(4) The money or value of the property received in exchange for the credit shall be exempt from taxation under the Puerto Rico Internal Revenue Code, up to an amount that is equal to the amount of the credit assigned.
(5) The validity of the credit that has been assigned, sold or transferred shall not be affected if the provisions on recovery apply pursuant to the provisions of this chapter.
(6) When the tax credit granted pursuant to this chapter is assigned, sold or transferred, the difference between the amount of the credit and the amount paid for the same shall not be considered as income for the buyer of the credit.
(g) Application for the tax credit certificate.—
Any donor interested in obtaining a credit shall submit an application for a tax credit certificate to the Secretary of the Treasury pursuant to this chapter, and in accordance with the specifications and requirements of any regulations or circular letters approved for such purpose. The donor or donors shall be required to file the following documents and information with the Secretary of the Treasury as a condition for the approval of a certificate under this chapter:
(1) The documents stated in § 785m of this title.
(2) Negative debt certificates from the Department of the Treasury and the Municipal Revenue Collections Center (CRIM).
(3) Certification of the filing of tax returns from the Department of the Treasury.
(4) A copy of the deed of the donation whereby the conservation easement is constituted or the eligible land is donated.
(5) Proof of the registration or filing with the Property Registry of the public deed whereby the conservation easement is constituted or the eligible land is donated.
(6) A title search for the property being donated, or where the conservation easement is to be constituted, conducted on a date that is not too far from the date of issue of the Application for the Tax Credit Certificate of the Secretary of the Treasury.
(7) As part of the facts and information of the application, the owner of the property or land for which the credit is being granted shall furnish a statement indicating that said property or land meets the requirement that the government agencies, departments, instrumentalities, municipalities, or public corporations have not established the conservation of the land or property, in whole or in part, as a condition or requirement for the approval of a construction project, and that said land is not undergoing an acquisition or eminent domain process in any of the aforementioned government agencies or entities engaged in the acquisition of properties or lands.
(8) An appraisal or valuation report of the conservation easement or the eligible land that meets the requirements established by the Secretary of the Treasury through regulations, and the following:
(A) The report has been prepared using the appraisal methods applicable to conservation easements, such as the appraisal guidelines of the Land Trust Alliance and the U.S. Internal Revenue Service, as required by the Secretary of the Treasury through regulations.
(B) The report has been prepared by an appraiser duly licensed in Puerto Rico, who also holds a certified professional appraiser license, and a general certification, and has completed the courses on the appraisal of conservation easements in accordance with the practices recommended by the Land Trust Alliance Certification, and the Uniform Standards of Professional Appraisal Practice, as well as the laws and regulations course certifications, all of which shall be current at the time of drafting the conservation easement’s valuation or appraisal report, a copy of which shall be enclosed with the report.
(C) The report shall be drafted on a full appraisal form and in accordance with the provisions of the Uniform Standards of Professional Appraisal Practice.
(D) It shall exclude any building located on the eligible land, or on the land on which the conservation easement was constituted, except for buildings with cultural significance and which have been certified as such by the Institute of Puerto Rican Culture. The appraisal of the building certified by the Institute of Puerto Rican Culture, and the land appraisal shall be filed separately.
(E) The registry description, the capacity, the entry in the Property Registry, and the cadastre number of each parcel shall be included separately for each of the lands and properties appraised, together with a survey plan or a map of the georeferenced location for each of the lands and properties appraised.
(F) The appraisal report shall include a certification under oath indicating that the appraiser is aware of the law; that he has prepared the report in accordance with the requirements established by law; and therefore recognizes that the Secretary of the Treasury shall be the person who uses this report for the purpose of acting on a certification request for a conservation easement tax credit in accordance with this chapter; and that the appraisal established in said report shall be used by the Secretary of the Treasury as the basis to calculate the amount of the tax credit to be granted to the petitioner; and that the appraiser shall make himself available to the Secretary of the Treasury for the purpose of providing any additional information or explanation necessary while the tax credit certificate is being processed; and that the professional appraisal criteria he used to prepare the report is correct and reasonable.
(G) The appraiser shall conduct investigations, as prescribed by the Secretary of the Treasury through regulations, with the Planning Board; the autonomous municipalities in which the conservation easement land or the eligible land is located; and any other government agency, department, instrumentality, or public corporations engaged in the acquisition of property or lands and which may be exempt from filing their cases with the Planning Board, for the purpose of verifying that the property or land on which a conservation easement is being constituted is not undergoing an acquisition or eminent domain process in any such entities; and that the conservation of the property or land, in whole or in part, has not been established as a condition or requirement for the approval of a construction project, even if the government agency, public corporation, or any other government instrumentality, or municipality has not specified which part of the property or land must be conserved. For such purposes, the appraiser shall attach certificates from the pertinent entities to the appraisal report, as provided by the Secretary of the Treasury through regulations, which prove that the appraiser conducted these investigations. The pertinent agencies shall be required to issue these documents within ninety (90) days as of the date of request.
(H) The report must be reviewed, at the expense of the tax credit applicant, by an appraiser who is registered in the appraiser registry that shall be created by the Secretary of the Treasury through regulations, with the advice of the Conservation Trust of Puerto Rico, the Secretary of Natural and Environmental Resources, the Secretary of the Department of Agriculture, and the Director of the Institute of Puerto Rican Culture. The appraiser registry shall be created according to the type of property. The appraisers appearing in the registry for the purpose of having them appraise properties or lands of natural significance must have the approval of each of the following agencies or entities: the Department of the Treasury, the Department of Natural and Environmental Resources, and the Conservation Trust of Puerto Rico. Appraisers appearing in the registry for purposes of having them appraise properties of lands of agricultural significance must have the approval of both the Department of the Treasury and the Department of Agriculture. A review shall not be necessary when using the services of an appraiser appearing in the appraiser registry which shall be created by the Secretary of the Treasury. For purposes of determining the value to be used to calculate the tax credit that shall be granted, the appraised value, as revised, shall be used if it were lower.
(9) The donors shall submit to the Secretary of the Treasury any additional permit or document required through regulations.
(10) A draft of the public deed shall be enclosed within the appraisal report whereby the conservation easement or the donation of eligible land is constituted.
(h) The terms established in this section shall begin to elapse upon receipt by the Secretary of the Treasury of an application duly filed in accordance with this chapter. The Secretary of the Treasury shall evaluate the application to ensure compliance with the applicable tax laws, or any other law that may be under his jurisdiction.
(i) Tax credit certificate.— The certificate shall be entitled tax credit certificate under the chapter. The certificate shall be issued per applicant. If the land or property in question is owned by multiple applicants, the share of each applicant on the land or property shall be stated on the certificate. The certificate shall at least include the following information:
(1) Findings of fact.—
(A) Names of the applicants;
(B) registry description, capacity, entry in the Property Registry, the cadastre number of each parcel individually for the lands and property in question;
(C) reference to the Certificate of Natural or Cultural Significance;
(D) reference to the constitution of the conservation easement or to the donation according to the public deed;
(2) Conclusions of law.—
(A) The property value according to the appraisal report;
(B) the tax credit amount;
(C) the tax year in which the credit may be used; and
(D) the particulars of the use or usage of the tax credit in accordance with the law and with the Puerto Rico Internal Revenue Code of 2011.
(j) Once the Secretary of the Treasury issues the certification provided herein, he shall establish a public registry including certain non-sensitive information, as specified through regulations, identifying the property or land where a conservation easement has been constituted.
(k) The granting of the certification in subsection (g) shall be contingent on the donor or donors’ meeting the requirements prescribed by Secretary of the Treasury through regulations and this chapter.
(l) Credits cap per year.— The maximum amount of tax credits available in a specific fiscal year of the Commonwealth of Puerto Rico to be allocated in accordance with this subchapter shall be fifteen million dollars ($15,000,000).
(m) The Secretary of the Treasury shall establish a tax credit reserve. The entities that issue the natural, agricultural, or cultural significance certifications shall request from the Secretary of the Treasury the tax credit reserve and shall indicate the Government’s fiscal year in which they wish to reserve the credit on behalf of the donor of the conservation easement or eligible land or property. The fiscal year in which the tax credit shall be reserved must be the same year in which the donation was made, pursuant to subsection (a) of this section; likewise, the date on which the deed constituting the conservation easement or donation is filed with the Property Registry, pursuant to § 785 of this title, shall also be taken into consideration. The request to reserve the credit shall be enclosed with at least the certificate of natural, agricultural, or cultural significance (original and final document), the appraisal report (original and final document), and the draft of the deed of the donation or constitution of the conservation easement, pursuant to §§ 785b-785l of this title. As of the date on which the Secretary of the Treasury responds to the reservation request, the petitioner shall have three (3) months to file the tax credit request application with the Secretary of the Treasury. The tax credit shall be reserved once the application for the tax credit is received within the aforementioned period. The tax credit shall be reserved for the period of time it takes the Secretary of the Treasury to issue the credit certificate.
(n) Any person, including, but not limited to the appraiser of the conservation easement or eligible land and the tax credit applicant, among others, who makes or attempts to make, on his behalf or on behalf of another person, any false or fraudulent representation with respect to any credit application or certificate pursuant to this chapter shall be deemed to be guilty of a felony, and upon conviction, shall be punished either by a fine of fifty-thousand dollars ($50,000) or twenty-five percent (25%) of the value of the appraised properties in question, whichever is greater, or a term of imprisonment that shall not exceed five (5) years, or both penalties, plus legal expenses, at the discretion of the court.
History —Dec. 27, 2001, No. 183, added as § 17 on June 4, 2004, No. 138, § 3; Aug. 9, 2008, No. 238, § 2; July 12, 2011, No. 127, § 5; Nov. 17, 2015, No. 187, § 77, eff. Jan. 1, 2016; Dec. 28, 2016, No. 208, § 20.