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 942 - Green Energy Incentives Act of Puerto Rico (§§ 10421 — 10446) › Subchapter II - Green Energy Investment Incentives (§§ 10422 — 10442) › § 10431 - Special deductions

(a) Deductions and carry-over of net operating losses. —
(1) Deduction for current losses in activities not covered by an exemption decree. — If an exempt business that holds a decree granted under this chapter incurs a net operating loss other than that of the operation which has been declared exempt under this chapter, computed without the deduction benefit provided in subsection (b) of this section, such loss may only be used against income not covered under an exemption decree and shall be governed by the provisions of the Internal Revenue Code of Puerto Rico; Provided, however, That the share in losses of special partnerships that own or operate tourist businesses that are exempt under §§ 6001 et seq. of Title 23, or any analogous subsequent act, may be used against the income covered by a tax exemption decree issued under this chapter.
(2) Deduction for current losses incurred in the operation of an exempt business. — If an exempt business that holds a decree granted under this chapter incurs a net loss in the operation declared as exempt under this chapter, computed without the benefit of the special deductions provided in subsection (b) of this section, said loss may be deducted from the GEI of the operation that incurred the loss.
(3) Deduction for carried-over losses from previous years. — A deduction for carry-over of losses incurred in previous years, shall be granted as provided below:
(A) The excess of those losses that are deductible under clause (2) of this subsection may be carried over against the GEI of subsequent taxable years. Said losses shall be carried over in the order they were incurred.
(B) Any net loss incurred in a year in which the option of § 10436(b) of this title is in effect, may be carried over solely against the GEI earned by the exempt business under the decree whereby the option of § 10436(b) of this title was exercised. Said losses shall be carried over in the order they were incurred.
(C) Once the income tax exemption period has expired for the purpose of income taxes the net losses incurred in the operation declared as exempt under this chapter, as well as any amount in excess of the deductions allowed under subsection (b) of this section, which the exempt business is carrying over as of the expiration date of said period, may be deducted from any taxable income in Puerto Rico subject to the limitations provided in Subtitle A of the Internal Revenue Code of Puerto Rico. Said losses shall be deemed to be incurred for the last taxable year in which the exempt business that holds a decree under this chapter enjoyed income tax exemption under the decree.
(D) The total amount of the net operating loss to be carried over shall be computed pursuant to the provisions of Section 1124 of the Puerto Rico Internal Revenue Code.
(b) Special deduction for investments in buildings, structures, machinery and equipment. —
(1) Any exempt business that holds a decree granted under this chapter shall be given the option of deducting, for the year in which they were incurred, its total expenses incurred after the effective date of this act, for the purchase, acquisition or construction of buildings, structures, machinery and equipment, in lieu of any capitalization of expenses required by the Internal Revenue Code of Puerto Rico, provided, that these buildings, structures, machinery and equipment:
(A) Have not been depreciated or previously used by any other business or person in Puerto Rico, and
(B) are being used in the activity for which the benefits provided under this chapter were granted.
(2) The deduction provided under this subsection shall not be granted in addition to any other deduction provided by law, but shall merely be an acceleration of the deduction of the expenses described above. Provided That in the case of machinery and equipment previously used outside of Puerto Rico, but that has not been previously depreciated or used in Puerto Rico, the investment in said machinery and equipment shall qualify for the special deduction provided in this subsection (a) only if as of the date of the acquisition thereof by the exempt business, said machinery and equipment still have at least fifty percent (50%) of their useful life, as determined pursuant to the Internal Revenue Code of Puerto Rico.
(3) The exempt business that holds a decree granted under this chapter, may deduct all expenses incurred after the effective date of this act in remodeling or repairing buildings, structures, machinery and equipment, in the taxable year they are incurred, in lieu of any capitalization of expenses required by the Internal Revenue Code of Puerto Rico, whether said buildings, structures, machinery and equipment have been acquired or built before or after the effective date of this act, and whether they have or have not been depreciated or used by another business or person prior to being acquired by the exempt business that holds a decree granted under this chapter.
(4) The amount of the eligible investment described in clauses (1) and (3) of this subsection for the special deduction provided in this subsection, in excess of the GEI of the exempt business during the investment year, may be claimed as a deduction in subsequent tax years until said excess is exhausted.
(5) The special deduction provided in this subsection, may also be claimed by the exempt business in any year it chooses to select the flexible tax exemption benefit provided in § 10436(b) of this title.
History —July 19, 2010, No. 83, § 2.10.