Esta ley enmienda el Código de Rentas Internas de Puerto Rico de 1994 para permitir una deducción detallada por los gastos incurridos en el cuidado de una persona dependiente de edad avanzada. Establece los límites máximos de la deducción, las restricciones aplicables (como la dependencia de la persona mayor, la edad, la necesidad de que el contribuyente trabaje y el lugar donde se presta el cuidado) y los requisitos de documentación para reclamar la deducción.
(Approved September 16, 2004)
To add subclause (S) to clause (2) of subsection (aa) of Section 1023 of Act No. 120 of October 31, 1994, as amended, known as the "Puerto Rico Internal Revenue Code of 1994," in order to grant an itemized deduction for expenses incurred by persons while in charge of the care of a dependent who is an elderly person.
The results of the census conducted in the year 2000 show that the elderly population in Puerto Rico has increased according to the estimates. In 1950, the average age of the Puerto Rican population was 18.4, whereas in 2000, the average age is 32.1. Furthermore, the census for 2000 reported that the inhabitants aged 65 and over constitute $11.2 %$ of our population, which represents over 425,000 people.
To this number we must add the baby boomer generation-those born between 1946 and 1964 -which is composed by 939,552 inhabitants, or $25 %$ of the entire population at present. This generation, which is to reach the age of 65 by the upcoming decade, is expected to cause great impact as to the numbers of the elderly demographic, which in turn will cause a substantial increase in the demand for services such as care, transportation, housing and financial assistance for this sector.
This incontrovertible fact poses a state of urgency for the Government in term of the planning of these services. Aware of this situation and the
uncertainty that looms over the solidity of the federal Social Security program, the State is compelled to make the necessary provisions to protect this sector of the population, which is considerably rising.
As with parents, who have to incur expenses for the care of their children while they are working, it is reasonable to conclude, so should these children eventually be financially responsible for the care of their parents and grandparents and thus keep family ties strong, which would, in turn, improve the quality of life of Puerto Rican society.
Section 1.-Subclause (S) is hereby added to clause (2) of subsection (aa) of Section 1023 of Act No. 120 of October 31, 1994, as amended, to read as follows: "Section 1023.—Deductions to Gross Income.— In computing net income, the following shall be allowed as deductions:
(a) $\ldots$ (aa) Option of fixed deduction or itemized deductions.- (1) $\ldots$ (2) Itemized deductions.-For the purposes of this subsection, the taxpayer may claim as itemized deductions, in lieu of the optional fixed deduction, the following items: (A) $\ldots$ (S) Deduction for expenses incurred in the care of elderly persons.-In the case of an individual, all amounts expended in the care of an elderly person shall be admitted as a deduction, so long as these amounts have been paid to persons who are not dependents of the taxpayer. The persons to whom
the amounts have been paid shall be those who perform functions as household assistants or as home health aides. These persons shall perform basic functions such as house cleaning, laundering, preparing meals, assisting at bath time, and buying groceries, as well as any other function to provide basic assistance to the elderly person. The criteria to determine the need of the elderly person for said assistance shall be established through regulations. The amounts expended in the care of an elderly person shall be allowed only up to the limit and subject to the restrictions indicated below: i. Maximum deduction limit.-This deduction shall not exceed six hundred (600) dollars for one (1) elderly person and one thousand, two hundred $(1,200)$ dollars for two (2) or more elderly persons. In the case of a married person living with spouse by the end of the tax year and who files a separate tax return, the aggregate amount of the admissible deduction for each spouse shall not exceed three hundred (300) dollars for one (1) elderly person and six hundred (600) dollars for two (2) or more elderly persons. ii. Restrictions.- I. The elderly person on account of whom deduction is being claimed must be a dependent of the taxpayer. II. The elderly person on account of whom deduction is being claimed must have reached the age of sixty (60) within the taxable
year in which the deduction is being claimed for the first time. III. This deduction shall be granted only when the amounts are expended in order for the taxpayer to be able to engage in work or in profitable activities. In the case of a married individual living with spouse by the end of the taxable year, both spouses must be engaged in work or in profitable activities. IV. The amounts referred to in this subclause are those expended with the main purpose of guaranteeing the elderly person's wellbeing, safety, and protection. V. If amounts are paid to a person to perform functions such as household work in the home of the taxpayer, in addition to taking care of the elderly person, only the amounts destined to the payment of care shall be allowed as deduction. VI. The care of the elderly person must be given at the elderly person's home or at the home of the taxpayer entitled to claim the deduction granted under this subclause. The deduction shall not be available is such care is given at long-term care institutions, as these are defined by Act No. 94 of July 22, 1977. iii. Requirements.-An individual who claims a deduction under this subclause must enclose with his/her
income tax return cancelled checks or receipts bearing the name, address, and social security number of the person to whom the payment was made.
An individual who claims one or more of the deductions provided for in subclauses (C), (D), (E), (G), (L), (M), (N), (O), (P), (Q), or (S) must enclose with his/her income tax return cancelled checks, receipts, or certifications as proof for the deductions claimed. The preceding notwithstanding, the Secretary may, when he/she deems pertinent, exempt the taxpayer from this requirement and similar requirements provided for in any other subclause under this clause (2) for any particular taxable year. The taxpayer shall keep the evidence in connection with the deduction claimed under this subsection for a period of six (6) years."
Section 2.-Effectiveness.- This Act shall take effect immediately after its approval, but its provisions shall be applicable to taxable years beginning after December 31, 2003.
I hereby certify to the Secretary of State that the following Act No. 365 (H.B. 4451) of the $7^{ ext {th }}$ Session of the $14^{ ext {th }}$ Legislature of Puerto Rico:
AN ACT to add subclause (S) to clause (2) of subsection (aa) of Section 1023 of Act No. 120 of October 31, 1994, as amended, known as the "Puerto Rico Internal Revenue Code of 1994," in order to grant an itemized deduction for expenses incurred by persons while in charge of the care of a dependent who is an elderly person, has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today $8^{ ext {th }}$ of June of 2006.
Francisco J. Domenech Director