2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 15 - Puerto Rico Industrial Incentives Generally (§§ 10001 — 10855) › PART III - Other Tax Incentives (§§ 10401 — 10855) › Chapter 953 - Economic Incentives Act For The Development Of Puerto Rico (§§ 10641 — 10673) › Subchapter I - Economic Incentives (§§ 10641 — 10661) › § 10644 - Special deductions

(a) Deduction and carryover of net operating losses. —
(1) Deduction for current losses incurred in activities not covered by an exemption decree. — If a tax-exempt business that holds a decree granted under this chapter incurs a net loss on operations other than the operation which has been declared exempted under this chapter, computed without factoring in the benefit of the deduction provided for in subsection (b) of this section, the same may be used only against income not covered by an exemption decree and shall be governed by the provisions of the Puerto Rico Internal Revenue Code. The share in losses sustained by special partnerships that own or operate tourist businesses exempted under the Puerto Rico Tourism Development Act of 1993, §§ 6001 et seq. of Title 23, may be used against income covered by a tax exemption decree issued under this chapter or under preceding tax incentives laws.
(2) Deduction for current losses incurred in the operation of a tax-exempt business. — If a tax-exempt business that holds a decree granted under this chapter incurs a net loss in the operation declared to be exempted under this chapter, computed without factoring in the benefit of the special deduction provided for in subsection (b) of this section, said business may deduct said loss against its industrial development income derived from the operation which incurred the loss or from operations covered by other exemption decrees under this chapter or under preceding tax incentives laws.
(3) Deduction for carryover of losses from previous years. — A deduction for the carryover of losses incurred in previous years shall be granted pursuant to the following provisions:
(A) The excess over the losses deductible under clause (2) of this subsection may be carried over against the industrial development income from subsequent taxable years. Losses shall be carried over in the order these were incurred.
(B) Any net loss incurred in a year in which a choice under § 10650(b) of this title is in effect, may be carried over only against industrial development income generated by the tax-exempt business under the decree whereby § 10650(b) of this title was opted for. Losses shall be carried over in the order these were incurred.
(C) Upon expiration of the exemption period for income tax purposes, the net losses incurred in the operation declared to be exempted under this chapter, as well as any excess over the deduction allowed under subsection (b) of this section which is being carried over by the tax-exempt business as of the date of expiration of said period, may be deducted against any income which is taxable in Puerto Rico, subject to the limitations provided for in Subtitle A of the Puerto Rico Internal Revenue Code. Said losses shall be deemed to have been incurred during the last taxable year in which the tax-exempt business that holds a decree under this chapter enjoyed exemption from income taxes under the decree.
(D) The amount of the net loss on operations to be carried over shall be computed pursuant to the provisions of Section 1124 of the Puerto Rico Internal Revenue Code, except that in addition to the exceptions, additions and limitations provided for in said section, the loss shall be adjusted by the income derived from activities which are eligible under § 10642(j) of this title.
(b) Special deduction for investment in buildings, structures, machinery, and equipment. — Any tax-exempt business that holds a decree granted under this chapter shall be given the choice to deduct in the taxable year during which these were incurred, in lieu of any capitalization of expenses required under the Puerto Rico Internal Revenue Code, the total expenses incurred after the date of effectiveness of this act for the purchase, acquisition or construction of buildings, structures, machinery and equipment, provided said buildings, structures, machinery and equipment: (i) have not been used or depreciated previously by any other business or person in Puerto Rico; and (ii) are used to manufacture the products or to render the services for which the benefits provided for in this chapter were granted. The deduction provided for in this subsection shall not be additional to any other deduction provided for by law, but rather, merely an acceleration of the deduction of the aforementioned expenses. Provided, That in the case of machinery or equipment previously used outside of Puerto Rico, but not previously used or depreciated in Puerto Rico, the investment in said machinery and equipment shall qualify for the special deduction provided for in this subsection only if said machinery and equipment still has left, as of the date of its acquisition by the tax-exempt business, at least fifty percent (50%) of its useful life, determined pursuant to the Puerto Rico Internal Revenue Code. The tax-exempt business that holds a decree granted under this chapter may deduct, within the taxable year in which these are incurred, the total amount for expenses incurred after the date of effectiveness of this act in remodeling or repairing buildings, structures, machinery and equipment, in lieu of any capitalization of expenses required under the Puerto Rico Internal Revenue Code, in the event that said buildings, structures, machinery and equipment have been acquired or built before or after the date of effectiveness of this act, as well as in the event the same have or have not been used or depreciated by another business or person prior to the acquisition thereof by the tax-exempt business that holds a decree granted under this act or under preceding tax incentives laws. The amount of the investment that shall be eligible for the special deduction provided for in this subsection in excess of the net industrial development income of the tax-exempt business that holds a decree granted under this chapter during the year the investment was made, may be claimed as a deduction in subsequent taxable years, until said excess is depleted. No deduction shall be allowed under this subsection in relation to that portion of the investment pertaining to buildings, structures, machinery and equipment over which the tax-exempt business claims or has claimed any of the credits provided for in § 10645 or 10646 of this title.
Provided, That the special deduction provided for in this subsection may also be claimed by the tax-exempt business during any year in which the same opts to choose the flexible tax exemption benefit provided for in § 10650(b) of this title.
History —May 28, 2008, No. 73, art. 1, § 4, eff. July 1, 2008.