2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART V - Sales and Use Tax (§§ 32001 — 32171) › Chapter 1045 - Deduction, Credit and Refund (§§ 32121 — 32130) › § 32127 - Municipal Development Fund—Creation

(a) Creation of the Fund.— A “Municipal Development Fund” is hereby created under the custody of the Bank:
(1) For periods before July 1, 2014, the Municipal Development Fund shall be nourished from a special fund to be created by the Commonwealth of Puerto Rico; and
(2) For periods beginning as of July 1, 2014, the Municipal Development Fund shall be nourished in accordance with the provisions, terms, and other conditions set forth in the Municipal Administration Fund Act, and the provisions regarding the increase in the State IVU established in §§ 32021 and 32022 of this title.
(b) Responsibility of the Municipal Development Fund.— The President of the Bank shall be the official responsible for implementing the procedure to be followed for the administration of the Municipal Development Fund, including all matters related to the distribution of the moneys accrued or deposited in the Fund to be distributed among all the municipalities of Puerto Rico, as provided hereinafter, after the repayment of the one-million-dollar ($1,000,000) contribution to defray the cost of programming the collection system of the Department of the Treasury, as provided in § 32126(h) of this title. If there are funds corresponding to any fiscal year after Fiscal Year 2013-2014, whose municipality of origin cannot be reasonably determined by the Secretary, upon certification to such effect at the time of transferring the funds to the Bank, the Bank shall be authorized, for purposes of depositing the same in the Municipal Development Fund and of distributing or using such funds pursuant to this section, to accumulate the same in a special account and allocate such unidentified funds to the municipalities in the same proportion identified funds were distributed in the Municipal Development Fund during said fiscal year within one hundred and twenty (120) days after the end of the corresponding fiscal year.
(c) Establishment of the formula or criteria for the distribution of the moneys deposited in the “Municipal Development Fund”.— The Bank shall distribute the moneys deposited in the Municipal Development Fund pursuant to the following criteria or formula:
(1) Ten percent (10%) of the Municipal Development Fund shall be distributed to each municipality on the basis of the inverse proportion corresponding to each municipality with respect to the proceeds of the sales and use tax collected by all municipalities pursuant to the authorization established by §§ 33001 et seq. of this title.
(2) Seventy-five percent (75%) of the Municipal Development Fund shall be distributed to every municipality on the basis of the inverse proportion corresponding to the individual budget of the regular fund with respect to the budget of the regular fund of all municipalities. For such purposes, said proportion shall be determined taking as basis the budgets of the regular funds of the municipalities during the immediately preceding fiscal year.
(3) Fifteen percent (15%) of the Municipal Development Fund shall be distributed to each municipality on the basis of the direct proportion corresponding to its population with respect to the population of all the municipalities. For these purposes, said proportion shall be determined taking as basis the U.S. Census, as it is revised from time to time, according to the periodicity with which it is prepared.
(d) Limitations.— The amounts of money determined to be received by each of the municipalities as the result of the application of the formula provided in subsection (c) of this Section shall be subject to the following limitations:
(1) No municipality shall receive, during a fiscal year, an amount greater than one million three hundred thousand dollars ($1,300,000), taking in the aggregate the amounts determined on a monthly basis through the application of the formula.
(2) In accordance to the foregoing, the amounts determined through the application of said formula in favor of any of the municipalities, regardless of their size, in excess of one million three hundred thousand dollars ($1,300,000), shall be distributed using the same formula for the payment of the operating debt of the municipalities with any financial institution. In the event that the municipality does not have an operational debt with any financial institution, these funds shall be covered into its regular fund.
(e) Distribution of the moneys deposited in the Municipal Development Fund.— The moneys corresponding to each of the municipalities as determined pursuant to the implementation of the formula provided in subsection (c) of this section shall be distributed and deposited monthly by the Bank in the particular account of each of the municipalities not later than the tenth (10th) day of the following month, after said moneys are received by the Bank, subject to the limitations established in subsection (d) of this section. To such effect, it is established that the delay in the distribution of said moneys for a period of ten (10) days after being received by the Bank, shall entail the payment of interest on the amount not distributed on time, to be computed on the basis of a ten percent (10%) annual rate on the amount not distributed on time.
(f) Revision of the formula.— The formula established in subsection (c) of this section shall be revised annually by the President of the Bank, not later than July 31 of each fiscal year, regarding the changing factors thereof that require revision for the purpose of its implementation for the following fiscal year and, specifically, all matters related to the amount of the sales and use tax collected by each one of the municipalities, the operating budgets of each one of the municipalities, and the U.S. Census, as it may correspond. Notwithstanding the foregoing, the revision of said factors does not constitute an actual authorization to change or modify said formula by the Bank. Accordingly, the changes to be made that comprise a modification of said formula shall be approved through legislation by the Legislative Assembly. Furthermore, the Bank shall provide information to the Legislative Assembly on the changing factors used for the annual implementation of said formula.
(g) Use of the moneys from the Municipal Development Fund.— The moneys proceeding from the Municipal Development Fund distributed monthly to the municipalities through the implementation of the formula established in subsection (c) may be used by the municipalities for solid waste collection and recycling programs; the construction of capital works and improvements; health and security, including the payment of payrolls and related expenses, such as employer contribution or payroll taxes; and in any activity or project within the sound public administration of the municipality, except for payroll and expenditures related to such programs or projects.
(h) Audit.— The President of the Bank shall direct that an annual external audit be conducted to evaluate the accuracy and propriety of the application of the formula established in subsection (c) of this section, and of the deposits made in the particular accounts of each of the municipalities, including a special certification expressing an opinion on such respect. A copy of said audit, as well as of the special certification issued for such purposes, shall be sent to the Legislative Assembly and to the Office of the Commissioner of Municipal Affairs (hereinafter “OCAM”, Spanish acronym), within a term of thirty (30) days after they have been concluded or issued, as it may correspond. In this respect, OCAM shall furnish said information to the municipalities that request it within a term of five (5) business days.
History —Jan. 31, 2011, No. 1, § 4050.07, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 145; June 30, 2013, No. 40, § 47; Nov. 27, 2013, No. 139, § 1; Jan. 24, 2014, No. 19, § 8.