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 1005 - Computation of Taxable Income (§§ 30101 — 30157) › Subchapter C - Deductions (§§ 30121 — 30140) › § 30127 - Depreciation, amortization, and depletion

(a) Current depreciation.— A reasonable allowance for exhaustion, wear and tear, including a reasonable allowance for obsolescence of:
(1) Property used in trade or business,
(A) Using the applicable straight-line method and the recovery and acquisition period provided in § 30182 of this title for tangible property (other than property described in paragraph (B)) acquired after December 31, 2010, or similar provisions of the Federal Internal Revenue Code and the regulations approved thereunder may apply, if no depreciation terms are fixed by § 30182 of this title, until the Secretary promulgates the corresponding regulations; or
(B) using the applicable depreciation method and the recovery and acquisition period provided in § 30182 of this title for tangible property acquired by purchase during taxable years beginning after June 30, 1995;
(C) that constitutes goodwill acquired by purchase during taxable years commencing after June 30, 1995, using the straight-line method and a useful life of fifteen (15) years;
(D) that constitutes intangible property, other than goodwill, acquired by purchase or developed during taxable years commencing after December 31, 2009, by using the straight-line method and a useful life of fifteen (15) years or the useful life of said intangible property, whichever is less;
(E) using any alternative accelerated depreciation method, as provided in special laws;
(F) For purposes of paragraphs (A) through (E) of this clause, the term “purchase” means any acquisition of property, provided that the transferor is not a related party and the basis of the property in the hands of the transferee is not determined in whole or in part by reference to the basis of such property in the hands of the transferor. The term “related party” shall have the meaning provided in § 30045 of this title.
(G) Any business that during the taxable year has generated less than three million dollars ($3,000,000) of gross income may opt to deduct the total cost of computer equipment and installation thereof during the year of its acquisition and installation. Any equipment previously depreciated or acquired by the related party shall not qualify for the accelerated depreciation.
(H) Any business that during the taxable year has generated less than three million dollars ($3,000,000) of gross income may determine the deduction established in paragraph (A) of this clause, by using the useful life of two (2) years for ground transportation equipment, except for automobiles (as defined in clause (3) of this subsection), and environmental conservation equipment.
(I) In the case of property acquired before January 1, 2010, by using the straight-line method for property other than goodwill or property with respect to which an option to claim flexible depreciation under § 1117 of the Internal Revenue Code of 1994 or property described in paragraph (B) is in effect.
(J) If, for taxable years commencing before January 1, 2011, the taxpayer used a depreciation method with respect to any property other than the straight-line or accelerated depreciation method allowed under the Internal Revenue Code of 1994, then in applying paragraph (A) to such property, the taxpayer shall use the adjusted basis of the property as of January 1, 2011.
(2) Property held for the production of income.— In the case of property with usufruct for life held by one person, and the bare legal title of another, the deduction shall be computed as if the usufructuary were the absolute owner of the property and it shall be allowed to the usufructuary. In the case of property held in trust, the allowable deduction shall be prorated between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each.
(A) In the case of any new property built or acquired after December 31, 1976, or built or acquired before January 1, 1976, but not used for any purpose until after said date, which, when used for the first time were destined to be leased for residential purposes, the allowance for current depreciation shall be computed on a basis of a thirty-year (30) period, while the same is used for such purposes.
(B) In the case of any structure, whose construction began after May 31, 1980, and before January 1, 1996, and which is destined to be leased for residential purposes, the allowance for depreciation shall be computed on a basis of a ten-year (10) period, if the structure is made of wood, or of fifteen (15) years in all other cases, while the same is used for residential purposes.
(3) Limitation to the amount of the deduction for depreciation for properties that are automobiles.—
(A) General rule.— In the case that the property is an automobile, as said term is defined in paragraph (B), the amount of the deduction to be allowed under this subsection shall not exceed six thousand dollars ($6,000) annually per automobile up to a maximum of thirty thousand dollars ($30,000) for the useful life of the automobile.
(i) In the event that the taxpayer is a salesperson, the amount of the deduction to be allowed under this subsection shall not exceed ten thousand dollars ($10,000) annually per automobile up to a maximum of thirty thousand dollars ($30,000) for the useful life of the automobile.
(ii) Limitation for personal use of the automobile.— In case an automobile is used by the taxpayer in his/her trade or business or for the production of income and the same is also used for personal purposes, the amount of the deduction determined under this paragraph shall be reduced by the amount corresponding to the personal use of the automobile.
(B) Definition of automobile.— For purposes of this clause, the term “automobile” means any motor vehicle manufactured principally to be used in public streets, highways, and avenues, provided by any means of self-propulsion which may have been designed for transporting persons, except for:
(i) Automobiles used directly in the business of transporting passengers or property for compensation or pay such as limousines, taxis, and public vehicles.
(ii) Hearses, wreath carriages, omnibuses, ambulances, motorcycles, trucks, vans and any other similar vehicle used principally in the transportation of cargo.
(iii) Automobiles leased or possessed for leasing by persons regularly devoted to automobile leasing.
(C) Automobile leases.— In the cases of automobile leases, which would be tantamount to a purchase as provided in paragraph (D) of this clause, no deduction for depreciation granted under paragraph (A) of this clause shall be allowed. In lieu of the depreciation, the sum paid for leasing the automobile during the taxable year that shall not exceed six thousand dollars ($6,000) annually per automobile, up to thirty thousand dollars ($30,000) for the useful life of the automobile shall be allowed as deduction.
(i) If the taxpayer is a salesperson, the amount of the deduction to be allowed under this paragraph shall not exceed ten thousand dollars ($10,000) annually per automobile up to a maximum of thirty thousand dollars ($30,000) for the useful life of the automobile.
(D) Automobile leases that are tantamount to a purchase.— An automobile lease shall be considered as essentially equivalent to a purchase if, under the lease, one of the following requirements is fulfilled:
(i) If, under the lease contract, the title to the property is transferred to the lessee.
(ii) If the lease contract contains an option to purchase at a substantially lower price than the fair market value of the automobile at the time the option is exercised.
(iii) If the term of the lease contract is equal to or greater than seventy-five percent (75%) of the useful life of the leased automobile.
(iv) If the present value of the minimum lease payments, excluding administrative expenses, is equal to or greater than ninety percent (90%) of the fair market value of the leased automobile.
(E) Deduction in the case of operating leases.— In the case of an operating lease, as established in paragraph (F) of this clause, the amount of rent paid during the taxable year shall be allowed as a deduction up to six thousand dollars ($6,000) annually per automobile. If the taxpayer is a salesperson, the amount of the deduction to be allowed on account of operating lease shall be the rent paid up to a maximum of ten thousand dollars ($10,000). Notwithstanding the foregoing, the amount of the rent paid on account of an operating lease shall not be deductible as an expenditure under the provisions of § 30121 of this title.
(F) Operating lease.— An operating lease shall be that in which, under the lease contract, none of the requirements established in paragraph (D) is fulfilled.
(G) Deductions for expenses in connection with motor vehicle use and maintenance.— In the case of expenses incurred or paid for the use and maintenance of an automobile, including, but not limited to repairs, insurance, maintenance, gas, and related expenditures, such expenses shall not be allowed as automobile use and maintenance expenses. In lieu of such expense, there shall be allowed a deduction for the use of an automobile to carry out trade or business, computed on a standard mileage rate basis. The Secretary shall determine through regulations the standard mileage rate applicable to each taxable year.
(H) Requirement to report payment automobile lease.— Any entity engaged in the automobile leasing business that are tantamount to a purchase, as defined in paragraph (D) of this clause, shall be required to file an information return that includes the amount paid for the automobile lease during the calendar year. Said information return shall be filed as provided in § 30301 of this title.
(b) Depletion.— In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case;
(1) Such reasonable allowance in all cases to be made under rules and regulations to be prescribed by the Secretary;
(2) in any case in which it is ascertained as a result of operations or of development work that the recoverable units are greater or less than the prior estimate thereof, then such prior estimate, but not the basis for depletion, shall be revised and the allowance under this subsection for subsequent taxable years shall be based upon such revised estimate;
(3) in the case of leases the deductions shall be equitably apportioned between the lessor and lessee;
(4) in the case of property held by one person for life and whose bare ownership is held by another, the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant.
(5) In the case of property held in trust the allowable deduction shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each.
(c) Basis for depreciation and depletion.— The basis upon which depletion, exhaustion, wear and tear, and obsolescence are to be allowed in respect to any property shall be as provided in § 30128 of this title.
History —Jan. 31, 2011, No. 1, § 1033.07, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 29.