Ley 118 del 2001

(No. 118)

(Approved August 17, 2001)

AN ACT

To amend subsection

(c) , add new subsections

(d) and

(g) and redesignate the present subsections

(d) ,

(e) ,

(f) and

(g) as subsections

(e) ,

(f) ,

(h) and

(i) respectively of Section 2; amend Section 3; amend Section 4; amend subsection

(e) of Section 5; amend Section 7; amend Section 8; and amend Section 10 of Act No. 47 of June 26, 1987, as amended, known as the "Public and Private Sector Copartnership for the New Housing Operation Act", in order to identify the middle class as a group of our society that needs to be attended to by the program created in this Act; allow for the sale of public land to be used for the development of housing projects for middle class families; establish an exemption on the income derived from the sale of housing to middle class families of two thousand five hundred (2,500) dollars per housing unit; and extend the effective term of the program created by virtue of the provisions of this Act.

STATEMENT OF MOTIVES

One of the main concerns of the Government of the Commonwealth of Puerto Rico is to work towards solving the lack of adequate housing in Puerto Rico. At present, the demand for adequate housing units is greater than the available supply of this type of housing. In spite of private and government efforts it has not been possible to meet said demand in recent years. The development of this type of housing depends on the continuous and concerted efforts of the public and the private sectors. The Government must be in charge of promoting the construction of housing in conjunction with the private sector.

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With the approval of Act No. 47 of June 26, 1987, amended, the Commonwealth of Puerto Rico and the private sector set a course of mutual collaboration with the purpose of undertaking tasks of great social significance that neither the private sector nor the Government, acting independently, had been able to carry out.

In its beginnings the program created under the aforementioned Act No. 47, sought to stimulate the private sector so it would undertake the construction and rehabilitation of housing units to be sold or rented exclusively to low or moderate income families. The Government would grant the owners of said projects certain incentives to stimulate and channel their investment and efforts.

With the passing years we have verified the fact that families from other sectors also have housing needs that have not been attended to adequately by the Government or by the private sector, particularly in the case of middle class families. The need of these families for housing is greater than the actual available supply. To attend to this particular situation it is necessary to extend the incentives provided for the developers to build homes for these families, thus promoting the availability of housing for middle class families, as defined in this Act.

By extending the tax incentives available to the developers, this legislation provides the means of encouraging the development of housing for middle class families. These families have the financial resources needed to acquire a home but the selling price of the units available in the market is beyond their means.

Another purpose of these amendments is to extend the term of the Program created by Act No. 47 to ensure eligibility for the purpose of the tax incentives provided in the statute in effect whose expiration date is July 1,

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2003. The extension of the term is important so that the developers may contribute in attending to the needs of the groups identified.

BE IT ENACTED BY THE LEGISLATURE OF PUERTO RICO:

Section 1.- Subsection

(c) is hereby amended, new subsections

(d) and

(g) added and the present subsections

(d) ,

(e) ,

(f) and

(g) are re-designated as subsections

(e) ,

(f) ,

(h) and

(i) respectively of Section 2 of Act No. 47 of June 26, 1987, as amended, to read as follows: "Section 2.-Definitions.- For the purposes of this Act, the following terms shall have the meaning expressed below:

(a) ...

(b) ...

(c) "Owner" means any natural or juridical person who is the absolute owner of a housing project to be sold or rented to low or moderate income families or of a housing project to be sold to middle class families.

(d) "Middle class family or person" means any family or person who does not own a home and whose annual income exceeds the income established for low or moderate income families by the affordable housing programs of the Government of the Commonwealth of Puerto Rico or the Government of the United States, for up to thirty-five percent (35%) of the maximum amount insurable by the Federal Housing Administration (FHA) for the area.

(e) ...

(f) ...

(g) "Middle Class Housing" means any housing unit whose total selling price exceeds the maximum price of affordable housing units, as it varies from time to time, but that does not exceed eighty percent (80%) of

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the maximum insurable by the Federal Housing Administration (FHA) for the area.

(h) ...

(i) ...".

Section 2.-Section 3 of Act No. 47 of June 26, 1987, as amended, is hereby amended to read as follows: "Section 3.-Creation and Purposes of the Program.- A "Copartnership Program of the Public and Private Sector for the New Housing Operation" is hereby created, with the purpose of encouraging and promoting the development and rehabilitation of housing units to be sold or rented to low or moderate income families and to be sold to middle class families.

It is the public policy of the Commonwealth of Puerto Rico to ensure that every Puerto Rican family may have the opportunity of enjoying an adequate dwelling, to the extent the Government's resources and efforts will allow. Pursuant to this public policy, the purpose of this Act is to encourage and achieve a close collaboration between the government and the private sector that will lead in some degree and as soon as possible, to the attention and solution of the housing shortage problem faced by low or moderate income families and by middle class families. Through the Program created by this Act, private enterprises and individuals shall invest the capital and assume the risks of such an investment, while the Government of the Commonwealth of Puerto Rico will grant them, as a stimulus to their investment and risks, certain incentives translated into exemptions to specific taxes, as well as the opportunity to purchase lands owned by the Government that have no public use, provided they are devoted to the development of projects of affordable housing units and middle class

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housing to be sold or rented to such families according and pursuant to the conditions established in this Act".

Section 3.-Subsections

(a) ,

(c) and

(d) of Section 4 of Act No. 47 of June 26, 1987, as amended, are hereby amended to read as follows: "Section 4.-Tax Exemption in Income Derived from the Sale of Housing.-

The income received by an owner of a newly constructed or rehabilitated affordable housing project from the same thereof, shall be exempt from the payment of income taxes, provided that:

(a) The construction or rehabilitation of the housing units to be sold was started after the effective date of this Act and before July 1, 2005.

(b) ...

(c) The buyer of the housing unit is a low or moderate income family or a middle class family, as defined in this Act and certified as eligible by the mortgagee who originates the permanent mortgage financing for the housing.

(d) The income on which the tax exemption is claimed, in the case of affordable housing, is the product of profits that do not exceed a maximum of five thousand (5,000) dollars per housing unit derived from the sale of affordable housing units and that said profits have an exclusive direct relationship with the affordable housing project to which said income is attributed. In the case of middle class housing, an exemption of two thousand five hundred (2,500) dollars shall only be granted per housing unit against the profits derived from the sale of middle class housing units when said profits are directly related to the middle class housing project to which said revenues are attributed. However, the exemption of two thousand five hundred (2,500) dollars provided in this subsection may be used against the

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profits from the sale of a regular housing project of the same developer as described below. A developer may take the exemptions corresponding to the construction of four (4) middle class housing units, or ten thousand (10,000) dollars, against the profits from the sale of each regular housing unit of the same developer. The exemption of two thousand five hundred (2,500) dollars provided in this subsection shall be available only for middle class housing units built after July 1, 2001. ..." Section 4.-Subsection

(e) of Section 5 of Act No. 47 of June 26, 1987, as amended, is hereby amended to read as follows: "Section 5.-Income Tax Exemption Derived from Housing Rentals.-

(e) The construction and rehabilitation of the housing units to which rental income is attributed has commenced after the approval of this Act and before July 1, 2005. ..." Section 5.-Section 7 of Act No. 47 of June 26, 1987, as amended, is hereby amended to read as follows: "Section 7.-Procedure and Conditions for the Exemption.- Any owner who constructs or rehabilitates affordable housing to be sold or rented to low or moderate income persons and middle class housing to be sold to middle class persons and who wishes to avail him or herself of the tax exemption established in Sections 4, 5 and 6 of this Act, as they apply, must file with the Secretary of the Treasury, an application for exemption accompanied by the documents and information required by regulations. The Secretary of the Treasury shall take action regarding said application within sixty (60) days as of the date on which the same was filed.

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Any owner who requests to avail himself or herself of the benefits of this Act must be up-to-date in the payment of all taxes levied by the laws of the Commonwealth of Puerto Rico, including those about which he/she acts as withholding agent, and shall likewise keep up-to-date in the payment of such taxes for the during which he/she enjoys the benefits granted in this Act".

Section 6.-Subsections

(c) and

(d) and the last paragraph of Section 8 of Act No. 47 of June 26, 1987, as amended, are hereby amended to read as follows: "Section 8.-Sale of Public Land for Affordable and Middle Class Housing.-

The agencies of the Government of the Commonwealth of Puerto Rico are hereby empowered to sell, with the prior approval of the Planning Board, any lands owned by them or any interest on them to natural or juridical persons, subject to the following conditions:

(a) ...

(b) ...

(c) That they be land not needed for the public works and programs of the Government of the Commonwealth of Puerto Rico, but that are useful for the development of affordable or middle class housing.

(d) That the buyer devotes them to the development of affordable housing units to be sold or rented to low or moderate income families or to middle class housing to be sold to middle class families.

For every transaction for the sale of land, the Secretary of Housing, the Secretary of the Treasury and the President of the Government Development Bank, shall jointly guarantee that a subordinate obligation be established concerning the difference between the appraisal value and the agreed selling price in order to ensure that in the event of a subsequent

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profitable sale of the individual units or the sale and change of one of the rental housing projects within the periods established by regulations, the deferred value reverts to the public treasury and that the activities for the construction of the housing projects to be developed are commenced after the approval of this Act and before July 1, 2005".

Section 7.-Section 10 of Act No. 47 of June 26, 1987, as amended, is hereby amended to read as follows: "Section 10.-Regulations and Adoption of Specifications.- The Secretary of Housing, the Secretary of the Treasury and the President of the Government Development Bank, shall jointly establish through regulations the specifications and the selling price of the housing units pursuant to the provisions of Section 2(g) and 2(h) and the schedules applicable to tax exemptions pursuant to the provisions of this Act as well as the criteria, procedures and documents that shall be required to determine whether the owner of a project qualifies to avail him or herself of the tax exemptions established in this Act.

They shall likewise jointly adopt regulations to establish the terms and conditions under which the transactions for the sale of public lands authorized by this Act shall be conducted, subject to the prior approval of the Governor of Puerto Rico.

In all other cases, the Secretary of Housing, the Secretary of the Treasury and the President of the Government Development Bank, shall be empowered to approve the regulations needed to put into effect those aspects of this Act that may be of their competence".

Section 8.-This Act shall take effect immediately after its approval.