2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1013 - Other Special Taxpayers (§§ 30501 — 30622) › Subchapter B - Registered Investment Companies (§§ 30521 — 30522) › § 30522 - Special rules for certain registered investment companies and their stockholders or partners

(a) Special tax rate or income tax exemption.— Any exempt investment trust, as defined in § 32001(a)(34) of this title that fulfills during its entire taxable year the requirements and conditions established in the Puerto Rico Investment Companies Act of 2013, and the requirements of subsections (b) or (c) of this section, as applicable, shall be subject to the following special tax treatment:
(1) Exempt investment trusts shall enjoy full tax exemption on their taxable income, if such trusts file as a domestic corporation;
(2) the tax rate of stockholders provided in § 30086(b) of this title on eligible distributions of the exempt investment trust is reduced from ten percent (10%) to zero percent (0%) of the total amount received by the eligible person, or
(3) stockholders, members, or partners of the exempt investment trust shall enjoy full tax exemption on the taxable income of such partners from the registered investment company, if such trust elects to file as a partnership, as provided in § 30041(a)(34) of this title.
(b) Requirements for exempt investment trusts filing as domestic corporations.— An exempt investment trust filing as a domestic corporation shall not qualify during a taxable year for the tax exemption described in subsection (a)(1) of this section and its stockholders shall not qualify for the special rate provided in subsection (a)(2) of this section, unless:
(1) It files, together with its income tax return, an election to be treated as an eligible exempt investment trust, or on a previous taxable year has made an election which remains in effect;
(2) at least seventy-five percent (75%) of its gross income during the taxable year is derived from eligible sources, as defined in subsection (d), and
(3) at the close of every quarter of the taxable year, at least sixty percent (60%) of the market value of its total assets is represented by assets generating income from eligible sources, cash or cash items (including receivables), and securities and obligations of the Government of Puerto Rico or the United States and any instrumentalities or political subdivisions thereof.
(c) Requirements for partners of exempt investment trusts filing as partnerships.— An exempt investment trust filing as a partnership and the partners thereof shall not qualify during a taxable year for the tax exemption described in subsection (a)(3) of this section, unless:
(1) The exempt investment trust files an election with the Department of the Treasury to be treated as an eligible exempt investment trust or on a previous taxable year has made an election which remains in effect;
(2) the exempt investment trust files with the Department of the Treasury an annual certification stating in detail all of its gross income items, including those derived from eligible activities and those that are not;
(3) at least seventy-five percent (75%) of its gross income during the taxable year derives from eligible sources, as defined in subsection (d);
(4) the exempt investment trust provides its partners with a certification, which such partners shall attach to their income tax returns, stating the exact amount of their income derived from such exempt investment trust and attesting to the fact that it has filed with the Department of the Treasury an election to be treated as an eligible exempt investment trust; and
(5) at the close of each quarter of the taxable year, at least sixty percent (60%) of the market value of its total assets is represented by assets generating income from eligible sources, cash or cash items (including receivables), and securities and obligations of the Government of Puerto Rico or the United States and any instrumentalities or political subdivisions thereof.
(d) Determination of eligible activities.— Eligible activities shall be the activities of the private sector with the potential to be particularly effective in the creation of jobs, excluding activity existing as of July 31, 2013. Any activity related to assets that are not in use as of July 31, 2013 shall not be deemed to be an existing activity. The Secretary of Economic Development shall define, through regulations, what would constitute an eligible activity under this Section, using as guidelines:
(1) The job creation and preservation potential of such economic activity in Puerto Rico;
(2) the economic support that such economic activity may provide to a geographical area in need of capital investment in Puerto Rico;
(3) the public interest related to such activity in Puerto Rico, giving priority to tourism, manufacturing, scientific research, and technology development, and
(4) whether such activity promotes the raising of Puerto Rican capital.
(e) Activities automatically eligible.— In addition to those established in the regulations set forth in subsection (d) of this section, eligible activities shall include:
(1) Loans granted after July 31, 2013, for or investment in the construction or renovation of hotels, paradores (inns), and for other tourist activities described in § 6341(a)(1) of Title 23, to the extent such investment is eligible for a tourist investment credit under § 6344 of Title 23;
(2) eligible investments under subsections (e) and (g) of § 1095g of Title 21, in projects started after July 31, 2013, even if the credits under this chapter have not been issued by the Department of the Treasury;
(3) investment made after July 31, 2013 in businesses financed through loans secured or originated by the Economic Development Bank or the Government Development Bank subject to the limitations established by the Secretary through regulations, administrative determination, circular letter, information bulletin or any other general communication;
(4) loans granted after July 31, 2013 for the construction of real property or the acquisition of intangible property for eligible businesses;
(5) purchase of obligations, or preferred nonvoting stocks of eligible businesses, in order to provide working capital or refinance short-term obligations whose interest rates exceed eight percent (8%) APR;
(6) investment in eligible businesses, as such term is defined in subsection (g) of this section;
(7) the purchase of obligations or stocks in businesses organized or created after July 31, 2013 that are parties to a public-private partnership for investment in new infrastructure, pursuant to §§ 2601 et seq. of Title 27, or
(8) investment in real estate investment trusts organized or created after July 31, 2013, as defined in § 30401 of this title.
(f) Termination of election.—
(1) Failure to qualify.— An election, in the case of an eligible exempt investment trust, shall terminate if, in the taxable year the election is made, or in any subsequent taxable year, the exempt investment trust fails to comply with the provisions of this section. Such termination shall take effect in the taxable year in which the exempt investment trust fails to comply with the provisions of this section and for all subsequent taxable years.
(2) Revocation.— An election, in the case of a exempt investment trust eligible under this section, may be revoked for any taxable year following the year in which the election was made and must be made not later than ninety (90) days after the beginning of the first taxable year for which the revocation shall be effective. The revocation shall be made in the manner prescribed by the Secretary through regulations.
(3) Election after termination or revocation.— Except as provided in clause (4), as a result of a termination or revocation the registered exempt investment trust shall not be eligible to make another election for any taxable year prior to the fifth (5th) taxable year beginning after the first taxable year for which such termination or revocation is effective.
(4) Exception related to the eligible income requirement.— Exception related to the eligible income requirement.—An exempt investment trust that has failed to comply with the provisions of subsection (b)(2) or subsection (c)(3) for a taxable year, shall be considered to have complied with such subsection if:
(A) The exempt investment trust submits to the Department of the Treasury a breakdown of the nature and amount of each gross income item, whether in an attachment to its income tax return under subsection (b)(1) or in its annual certification under subsection (c)(2);
(B) any incorrect information included in the report required under paragraph (A) is not due to fraud with intent to evade tax; and
(C) it is established to the satisfaction of the Secretary that the noncompliance with the provisions of subsection (b)(2) or subsection (c)(3) is due to reasonable cause and not due to gross negligence.
(5) Exemption related to the eligible assets requirement.— Every exempt investment trust that meets the requirements of subsections (b)(3) or (c)(4) at the close of any quarter shall not lose its eligible status for the benefits of this Section by reason of a discrepancy, during any subsequent quarter, between the value of all its investments and such requirements unless such discrepancy exists immediately after the acquisition of any security or other property and is wholly or partly the result of such acquisition. An exempt investment trust which fails to meet such requirements at the close of any quarter of any fiscal year by reason of a discrepancy existing immediately after the acquisition of any security or other property which is wholly or partly the result of such acquisition during such quarter shall not lose, for such quarter, its eligible status for the benefits of this section, if such discrepancy is eliminated within thirty (30) days after the close of such quarter and, in such cases, it shall be considered to have met such requirements at the close of such quarter for purposes of applying the preceding sentence. For purposes of this clause, the term “value” means, with respect to securities for which market quotations are readily available, the market value of such securities or fair value (when there is no determinable market value) as determined according to the valuation methods established by the Secretary through regulations.
(g) Eligible business.— For purposes of clauses (4), (5), and (6) of subsection (e) of this section, eligible business shall be:
(1) The export of goods or services from Puerto Rico;
(2) the development of new technologies and processes in Puerto Rico;
(3) the development of intellectual property rights in Puerto Rico;
(4) the trading and marketing of new goods and services in Puerto Rico; and
(5) tourist activities, as defined in § 6342(a)(1) of Title 23, and
(6) the acquisition of the facilities of a closed manufacturing plant in order to rehabilitate them and operate a manufacturing business similar to that previously operating in such facilities.
(h) New infrastructure.— For purposes of subsection (e)(7) of this section, new infrastructure shall be the construction or substantial renovation with a hard cost investment of at least fifty percent (50%) of the current total value of the partnership, of:
(1) Equipment and transportation systems, including land, air, and sea facilities such as roads, trains, terminals, runways, piers, and ships;
(2) telecommunications facilities, including the installation of broadband lines;
(3) training and education facilities;
(4) sports and convention venues, and
(5) aqueduct, sewage, solid waste, and electric power facilities.
History July 30, 2013, No. 93, § 4; Nov. 27, 2013, No. 137, § 21.