Esta ley enmienda secciones del Código de Rentas Internas de Puerto Rico de 1994 para aumentar los impuestos sobre bebidas alcohólicas, incluyendo licores destilados, vino y cerveza. La ley detalla las nuevas tasas impositivas por galón para diferentes tipos de bebidas y volúmenes de producción, con una exención especial para productores de cerveza de menor escala. También incluye disposiciones transitorias para el pago de impuestos sobre inventario existente.
(H. B. 2244) (Conference) (Approved May 30, 2002)
To amend Sections 4002 and 4023 of Act No. 120 of October 31, 1994, as amended, known as the Puerto Rico Internal Revenue Code of 1994, in order to increase the tax on distilled spirits, wine and beer.
The principal function of the Department of the Treasury is to ensure that the fiscal policy of the Commonwealth of Puerto Rico is equitable and just and to ascertain that collections covered into the General Fund through the imposition and collection of taxes are sufficient to meet the obligations and expense budgets of the government agencies and entities that render services to the citizenry.
It is of general knowledge that in the past year there was a serious problem regarding the lack of over five hundred million $(500,000,000)$ dollars to cover last fiscal year's budget, due to the high level of the public debt of the Commonwealth of Puerto Rico inherited from the past Administration. This situation forced the present Administration to establish alternate financing sources and develop some fiscal control measures that helped to comply with the Constitutional mandate of closing with a balanced budget.
At the same time, the economic situation the Island has endured has not been the most favorable one. During the 2002 fiscal year, the Island has faced an economic decline that had been anticipated since the beginning of
the 2000 fiscal year, and which could have been foreseen by the past administration. The situation was further affected by the fear and changes in consumer trends exercised by many of our residents, and throughout the world, after the events of September 11, 2001, in New York City. Unfortunately, these circumstances significantly affected the structural deficit gap existing between the revenues and recurrent expenses legislated and approved by the past administration. All these circumstances together, which were beyond our control, had an adverse effect on the estimated collections for the General Fund. As a result, the present administration has had to reduce the budgeted recommended expenses by $4.17 %$ and has had to identify resources from recurring sources.
In spite of the fact that the Government of the Commonwealth of Puerto Rico took extraordinary measures to promote and strengthen the local economy, in addition to fostering the use and consumption of products manufactured on our Island, these measures were not effective enough. The measures that we need to approve should not only balance the budget of the coming fiscal year, but should also guarantee financial solidity and the good credit of the Commonwealth of Puerto Rico. Therefore, we find ourselves in the need to once again assess the measures taken, as well as to seek other alternatives to collect funds for the treasury, providing that the good quality of life that our People deserve is affected in the least possible way. After an analysis of the different alternatives, it is hereby proposed to raise the tax on distilled spirits, wine and beer.
On the other hand, throughout the years there has been a constant and dramatic increase in the consumption of alcoholic beverages. We are aware that the excessive consumption of these products causes serious medical and social problems. Each day there are more drivers under the influence in our
streets, being this one of the main reasons for fatal automobile accidents in our roads.
Alcoholic beverages, like cigarettes are not articles of basic need. Each year, the government incurs millionaire expenses to deal with social, emotional and economic problems produced by the excessive use of these products in our society.
We deem it necessary to recall that the taxes on alcoholic beverages have not been reviewed for approximately twenty (20) years, particularly the items regarding distilled spirits, wine and champagne, and the item regarding beer for twelve years. A raise in taxes on cigarettes and alcoholic beverages shall help the pertinent authorities to discourage, in great measure, the use and abuse of both. Furthermore, this raise would not have an adverse reaction in the universe of our taxpayers.
The tax measures established through this Act should not affect other areas of the economic basis of our Island. Thus, in the case of beer, the mechanism approved by the Supreme Court of Puerto Rico in U.S. Brewers Association v. Secretario de Hacienda 109 D.P.R. 456 (1980) is used to guarantee that industries of less production may continue their operation without any alteration. In those cases, as their productive capacity increases, and as a result thereof, its financial stability, their responsibility before the public treasury shall also gradually increase. In view of this, it is the public policy of the Commonwealth to promote that small industries that produce beer do not suffer the burden of the new tax until their annual production and financial capacity justify it. Specifically it is provided that the beers whose production is less than thirty-one million $(31,000,000)$ gallons measured annually shall be exempted from the tax raise until they achieve a determined annual production, and it shall be increased progressively until it
equals the percent of the increase of the tax levied on breweries of greater production.
This measure together with the public policy of controlling expenses effectively and achieving an increment in our Island's budget, while promoting the economic development of the local economy in general, and along with an efficient monitoring that the tax laws of Puerto Rico are complied with, will contribute to collect the funds needed to strengthen the economic resources of the Commonwealth of Puerto Rico.
Section 1.- Section 4002 of Act No. 120 of October 31, 1994, as amended, is hereby amended to read as follows: "Section 4002.- Taxing Provision An internal revenue tax shall be levied, collected and paid at one time on the following products that are in a warehouse or that have been or may be, in the future, distilled, rectified, produced, manufactured, imported or introduced to Puerto Rico at the following rate:
(a) Distilled Spirits (1) All that obtained through the fermentation and distilling of any product that is not derived from sugarcane shall pay a tax of thirty-one dollars and twenty-nine cents ($31.29) on each gallon measured if said spirit has an alcohol content of less that one hundred degrees proof and on each gallon proof with an alcohol content of one hundred (100) or more degrees proof and a proportional tax at equal rate on each fraction of gallon measure or gallon proof. (2) All that obtained through the fermentation and distilling of any products derived from sugarcane shall pay a tax of
fifteen dollars and twelve cents ( $15.12 ) on each gallon measured if said spirit has an alcohol content of less that one hundred (100) degrees proof and on each gallon proof with an alcohol content of one hundred (100) or more degrees proof and a proportional tax at equal rate on each fraction of gallon measure or gallon proof. Provided, that the taxes fixed in this Subtitle for spirits proceeding from products derived from sugarcane shall only be applicable when said spirits are pure, or when they have been mixed with spirits obtained from the fermentation and distilling of products not derived from sugarcane with an alcohol content not exceeding one hundred and twenty degrees proof, using the same as ingredients in a proportion that does not exceed two and a half percent $(21 / 2 %)$ for the manufacture of rum and in a proportion of five percent $(5 %)$ for the manufacture of other liquors.
(b) Wines (1) On those substandard quality wines whose alcohol content through fermentation has been complemented through exclusive fortification with distilled spirits obtained through the fermentation and distilling of products derived from sugarcane, (excluding champagne and sparkling and carbonated wines, or imitation thereof) or any substitutes thereof, whose alcohol content does not exceed twentyfour percent ( $24 %$ ) per volume, a tax of one dollar and sixty-five cents ( $1.65 ) per gallon measure and a
proportional tax at an equal rate on every fraction of gallon measure. (2) On wine (excluding champagne and sparkling and carbonated wines) and cider, both imported whose alcohol content does not exceed twenty-four percent ( $24 %$ ) per volume, a tax of eleven dollars and thirty-five cents ($11.35) per gallon measure and a proportional tax at an equal rate on every fraction of gallon measure. (3) On all simple or carbonated tropical fruit wines whose alcohol content through fermentation has been complemented through exclusive fortification with distilled spirits obtained through the fermentation and distilling of products derived from sugarcane, and whose alcohol content does not exceed twenty-four percent (24%) per volume, a tax of sixty-two (62) cents per gallon measure shall be paid, and a proportional tax at an equal rate on every fraction of gallon measure. (4) On concentrated must wines (excluding champagne and sparkling and carbonated wines) whose alcohol content through fermentation does not exceed twenty-four percent (24%) per volume, a tax of four dollars and thirteen ($4.13) cents per each gallon measure and a proportional tax at an equal rate on every fraction of gallon measure. (5) Champagne and Sparkling Wine.- (A) On champagne and sparkling, carbonated wines whose alcohol content does not exceed twenty-four percent ( $24 %$ ) per volume, a tax of thirteen dollars
and seventy-five ($13.75) cents shall be paid per each gallon measure and a proportional tax at an equal rate on every fraction of gallon measure. (B) On champagne and sparkling or carbonated concentrate must wines whose alcohol content does not exceed twenty-four percent (24%) per volume, a tax of five dollars and fifty ($5.50) cents shall be paid per each gallon measure and a proportional tax at an equal rate on every fraction of gallon measure. (C) On champagne and substandard sparkling or carbonated wines whose alcohol content does not exceed twenty-four percent (24%) per volume, a tax of two dollars and twenty ($5.50) cents shall be paid per each gallon measure and a proportional tax at an equal rate on every fraction of gallon measure.
(c) Beer (1) On all beers, malt extract and other fermented or unfermented analogous products, whose alcohol content is half of one percent ( $1 / 2$ of $1 %$ ) per volume, and which does not exceed one and half percent (11/2%) per volume, a tax of seventy (70) cents shall be paid per each gallon measure and a proportional tax at an equal rate on every fraction of gallon measure. (2) On all beers, malt extract and other fermented or unfermented analogous products, whose alcohol content
exceeds one and half percent (11/2%) per volume, a tax of four dollars and five cents ($4.05) cents shall be paid per each gallon measure and a proportional tax at an equal rate on every fraction of gallon measure, except as provided in Section 4023 of this Subtitle. (3) On all beers, malt extract and other fermented or unfermented analogous products, whose alcohol content exceeds one and half percent (11/2%) per volume and is sold in containers of five or more gallons measure, a tax of four dollars and twelve cents ($4.12) cents shall be paid per each gallon measure and a proportional tax at an equal rate on every fraction of gallon measure, except as provided in Section 4023 of this Subtitle."
Section 2.- Section 4023 of At No. 120 of October 31, 1994, as amended, is hereby amended to read as follows: "Section 4023.- Special Exemption
(a) In lieu of the tax fixed in paragraphs (2) and (3) of clause
(c) of Section 4002 of this Subtitle on all beer, malt extract and other fermented or unfermented analogous products whose alcohol content exceeds one and half percent (11/2%) per volume referred to in paragraphs (2) and (3) of clause
(c) of said Section, that are produced or manufactured by persons whose total production, if any, of said products during their most recent tax year has not exceeded thirty-one million $(31,000,000)$ gallons measure, a tax shall be collected in the following manner:
Two dollars and fifteen cents ($2.15) per gallon measure produced, up to nine million $(9,000,000)$ gallons measure;
Two dollars and thirty-six cents ($2.36) per gallon measure produced in quantities greater than nine million $(9,000,000)$ but less than ten million $(10,000,000)$;
Two dollars and fifty-seven cents ( $2.57 ) per gallon measure produced in quantities greater than ten million $(10,000,000)$ but less than eleven million $(11,000,000)$;
Two dollars and seventy-eight cents ( $2.78 ) per gallon measure produced in quantities greater than eleven million $(11,000,000)$ but less than twelve million $(12,000,000)$;
Two dollars and ninety-nine cents ( $2.99 ) per gallon measure produced in quantities greater than twelve million $(9,000,000)$ but less than thirty-one million $(31,000,000)$.
Subject to the provisions of Sections 4024 to 4028, the benefits of this Section shall apply for a person in any taxable year following the year in which the total production of the products described in this clause, if any, has not exceeded thirty-one million $(31,000,000)$ gallons measure.
Section 3.- Transitory Provisions
(a) Every customs warehouse that on the effective date of this Act has in its custody distilled spirits, wines, champagne, sparkling wines and beer subject to the
payment of the tax established in this Act, shall have the obligation to declare and pay the rates provided in this Cat before removing said alcoholic beverages from the customs warehouse.
(b) All distilled spirits, wines, champagne, sparkling wines and beer that on the effective date of this Act are in stock in Puerto Rico, destined for sale and for which the internal revenue tax prescribed prior to the approval of this Act has been paid, shall pay an additional tax equal to the difference between the tax paid and the new tax levied by this Act.
(c) The Secretary of the treasury shall establish through regulations, circular letter or other administrative manner of general nature, the norms needed for the application of these transitory provisions.
Section 4.- Separability If any section, subsection, clause, paragraph, subparagraph or any other part of this Act were declared unconstitutional by a Court with competent jurisdiction, the judgment issued to such effects shall not affect, impair or invalidate the remaining provisions of this Act, and its effect shall be limited to the section, subsection, clause, paragraph, subparagraph or part of this Act declared unconstitutional.
Section 5.- This Act shall take effect fifteen (15) after its approval.
I hereby certify to the Secretary of State that the following Act No. 69 (H.B. 2244) (Conference) of the $14^{ ext {th }}$ Session of the $1^{ ext {st }}$ Legislature of Puerto Rico:
AN ACT to amend Sections 4002 and 4023 of Act No. 120 of October 31, 1994, as amended, known as the Puerto Rico Internal Revenue Code of 1994, in order to increase the tax on distilled spirits, wine and beer, has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today $25^{ ext {th }}$ of February of 2004.
Elba Rosa Rodríguez-Fuentes Director
I hereby certify to the Secretary of State that the following Act No. 69 (H.B. 2244) (Conference) of the $14^{ ext {th }}$ Session of the $3^{ ext {rd }}$ Legislature of Puerto Rico:
AN ACT to amend Sections 4002 and 4023 of Act No. 120 of October 31, 1994, as amended, known as the Puerto Rico Internal Revenue Code of 1994, in order to increase the tax on distilled spirits, wine and beer, has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today $24^{ ext {th }}$ of February of 2004.
Elba Rosa Rodríguez-Fuentes Director