2023 Laws of Puerto Rico › TITLE SEVEN - Banking (§§ 1 — 3116) › PART VII - Other Financial Institutions (§§ 3001-3012 — 3116) › Chapter 142 - Capital Investment Funds Act of 1999 (§§ 3021 — 3047) › § 3029 - Taxing of the capital investment fund and disposal of income from investments in risk-free businesses

(a) Tax exemption. — Every fund with a license in effect issued by the Commissioner during the entire taxable year, or that part thereof that applies to the first or last year of operations, shall be exempted from the income taxes imposed by §§ 8401 et seq. of Title 13, except for the provisions of subsection (f) of this section.
(b) Exemption from filing returns. — A fund with a license in effect issued by the Commissioner during the entire taxable year or that part of said period that applies to the first or last year of operations, shall be exempted from filing the corresponding income tax return required by §§ 8401 et seq. of Title 13, except for the provisions of subsection (f) of this section.
(c) Withholding and/or taxation of distributions of industrial development income, tourist development income, and agribusiness income. — Notwithstanding the above, every capital investment fund that during its entire taxable year or that part thereof that applies to the first or last year of operations, has an license or permit in effect issued by the Commissioner and receives distributions of profits or dividends of industrial development income, of tourist development income and of agribusiness income, in those cases where it applies, shall be subject to taxation through withholdings at source or any other means provided in the Incentives Act, §§ 10101 et seq. of Title 13, the Tourist Development Act, §§ 6001 et seq. of Title 23, and the Agricultural Tax Incentives Act, §§ 10401 et seq. of Title 13, on said distributions.
(d) Notice to investors. — On or before the last day of the month of February of each year, the fund shall inform those persons who are investors in the fund, the amount of taxes that were withheld on the portion of any industrial development income, tourist development income and agribusiness income attributable to each one of them.
(e) Disposal of restricted use capital investment income in risk-free businesses, including those outside of Puerto Rico. — Income from investments with restricted use capital in risk-free businesses, including those made outside of Puerto Rico pursuant to subsections (g) and (h) of § 3022 of this title, shall be regulated as follows:
(1) At the close of the fiscal year of the fund that includes the third anniversary of the end of each issue, the fund must have invested a minimum of seventy percent (70%) of the restricted use capital funds derived from that offering in activities authorized under subsections (a), (b) and (c) § 3022 of this title, it being allowed to invest a maximum of thirty percent (30%) in risk-free businesses authorized by the Bank pursuant to § 3022(d) of this title. If on said fiscal year or any subsequent fiscal year, the fund exceeds the limit allowed to be invested in authorized risk-free investments, the fund shall be bound to transfer to the Secretary a sum equal to seventy-five percent (75%) of the net income in excess of the thirty percent (30%) authorized limit derived from those authorized risk-free businesses.
(2) For each fiscal year after commencing operations, the fund shall be bound to transfer to the Secretary a sum equal to ninety percent (90%) of the net income derived from restricted use capital investments in those activities not authorized by subsections (a), (b), (c) and (d) of § 3022 of this title.
(3) The fund shall deposit with the Secretary the corresponding sum determined pursuant to the provisions of this subsection, within the term of ninety (90) days following the closing date of their taxable year.
(4) Every amount owed to the Secretary under this subsection shall be treated as a tax on income imposed by the Internal Revenue Code subject to the provisions of §§ 8045—8063 of Title 13.
(5) For the purposes of this subsection, “net income” shall mean the gross income received by the fund, reduced by the operating and management expenses of the fund, which income and expenses are determined under the cash basis accounting method which in the case of expenses, the provisions of § 8444 of Title 13 shall apply. To determine the amount of the net income of the fund for a specific year derived from the investment of restricted use capital in risk-free businesses in excess of the authorized thirty percent (30%) limit, the total sum of the net income of the fund for said year shall be multiplied by a fraction whose numerator shall be the total gross income received by the fund during the year from the investment of restricted use capital in risk-free businesses in excess of the authorized thirty percent (30%) limit, and whose denominator shall be the gross income received by the fund during the year. The net income derived from the investment of restricted use capital in unauthorized risk-free businesses shall also be determined on the basis this formula, except that the numerator shall be the gross income received by the fund during the year of the investment of the restricted use capital in unauthorized risk-free businesses.
(6) In those cases in which investments are made outside of Puerto Rico with restricted use capital that do not meet the provisions of subsection (g) or (h) of § 3022 of this title, as the case may be, said investments shall be subject to the provisions of clause (1) of this subsection.
(f) Disposal of income from investment of unrestricted use capital in risk-free businesses. — Income from investments with unrestricted use capital in activities not comprised in subsections (a), (b) and (c) of § 3022 of this title, shall be subject to taxes on income imposed by §§ 8401 et seq. of Title 13. With regard to the income mentioned above, the fund shall be allowed to deduct part of its operating and management expenses, pursuant to the provisions of the Internal Revenue Code. Therefore, the fund shall only be bound to file the corresponding income tax return required by §§ 8401 et seq. of Title 13, only with regard to the income described in this subsection.
History —Jan. 28, 2000, No. 46, § 10.