Esta ley enmienda la Ley de Incentivos Contributivos de 1998 para añadir una deducción especial del 15% sobre la compra de productos hechos en Puerto Rico por negocios exentos, como alternativa al crédito existente, con el fin de estimular el consumo local.
(Approved September 16, 2004)
To add a new subsection
(f) and redesignate current subsection
(f) as subsection
(g) of Section 4 of Act No. 135 of December 3, 1997, as amended, known as the "Tax Incentives Act of 1998," in order to provide for a special deduction of $15 %$ on the purchase of products made in Puerto Rico.
Act No. 110 of August 17, 2001, amended Act No. 135 of December 2, 1997, as amended, with the purpose of increasing credit on the purchase of products made in Puerto Rico up to twenty-five (25) percent. This amendment was aimed at stimulating the consumption of products made in Puerto Rico by businesses exempted under any preceding tax incentives acts.
However, during the three years of effectiveness of this amendment, the credit provided for in the Act has not yielded positive results as to its use, even though it was increased. The reason for this lies in the incremental nature of said credit, which is why it is useful mostly for businesses that are starting out, since these have no tax base against which to reduce the average of the purchases made for the three preceding years. On the other hand, businesses that are already established are able to benefit from this credit only if they have an increase in purchases over the average for the base
period of the three years prior to the taxable year in which said credit is claimed.
In view of this reality, it becomes necessary to explore effective and viable alternatives to successfully stimulate the purchase of products made in Puerto Rico by exempt businesses. For these purposes, an alternative being proposed for consideration is that a deduction of fifteen (15) percent, in lieu of the credit of twenty-five (25) percent, be allowed for purchases of products made in Puerto Rico. This deduction represents a tool an alternate promotional tool for those businesses that are already established at the time of filing their tax exemption return, since the same is not limited by the movable base period required for the credit at present.
This deduction provides exempt businesses with an option either to avail themselves of the credit provided by the Act at present, subject to the movable rate, or to avail themselves of the $15 %$-deduction we are proposing, whichever is most convenient, in the taxable year in which they generate the industrial development income against which one of the tax benefits shall be taken.
Section 1.-A new subsection
(f) is hereby added to Section 4 of Act No. 135 of December 2, 1997, as amended, to read as follows: "Section 4.—Special Deductions.—
(a) $\ldots$
(b) $\ldots$
(c) $\ldots$
(d) $\ldots$
(e) $\ldots$
(f) Deduction for Purchases of Products Made in Puerto Rico.Any business exempted under this Act or under preceding tax incentives acts shall be granted, as an alternative, a deduction for purchasing products made in Puerto Rico in an amount equal to fifteen (15) percent of the purchase of said products, reduced by the average of purchases of said products made for the year 2000. This deduction is granted only for purchases of products made by businesses not related to the exempt business. For purposes of the preceding calculation, said purchases from unrelated businesses shall be excluded from the total purchases of products made in Puerto Rico made by the exempt business.
The deduction provided for in this subsection shall be used only in the taxable year in which the industrial development income against which the deduction is being taken is generated. This deduction may not be carried over to subsequent taxable years.
The exempt business that avails itself of this provision during a specific taxable year may not enjoy simultaneously the credit provided for in subsection
(b) of Section 5 of this Act."
Section 2.-Current subsection
(f) is hereby renamed as subsection
(g) .
Section 3.—This Act shall take effect immediately after its approval.
I hereby certify to the Secretary of State that the following Act No. 367 (H.B. 4473) of the $7^{ ext {th }}$ Session of the $14^{ ext {th }}$ Legislature of Puerto Rico:
AN ACT to add a new subsection
(f) and redesignate current subsection
(f) as subsection
(g) of Section 4 of Act No. 135 of December 3, 1997, as amended, known as the "Tax Incentives Act of 1998," in order to provide for a special deduction of $15 %$ on the purchase of products made in Puerto Rico, 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