10 years of income tax relief proposed for rehab of abandoned commercial properties
By THE STAR STAFF
In an effort to stimulate commercial activity and promote the reuse of abandoned structures, District 6 Rep. Ángel Morey Noble filed a bill proposing a 10-year income tax exemption for those who rehabilitate such properties.
The proposal, the “Law to Incentivize the Rehabilitation of Abandoned Commercial Structures and Public Nuisances,” establishes a tax incentive conditional on the rehabilitation of commercial structures that have been vacant and unused for five years or more, or that have been declared public nuisances, provided they are returned to commercial leasing.
“We have commercial structures that have been closed and deteriorating for years, while our communities face the consequences of having abandoned spaces that could be generating economic activity and avoid becoming a problem for municipalities,” stated Morey Noble, whose district covers Guaynabo and parts of Cataño and Bayamón. “This measure seeks to incentivize investment to rehabilitate them, return them to the commercial market, and create new opportunities for municipalities. We are also providing additional assistance and opportunities to our business owners.”
The project stipulates that, to qualify, the owner must invest at least $150,000 or 30% of the appraised value of the structure, including the land, in the rehabilitation project before the start of the work, whichever is greater. The investment must be documented with a certification from a certified public accountant, accompanied by the corresponding contracts, invoices and proof of payment.
The tax benefit would apply to the income received or accrued from the commercial lease for 10 years, starting from the first rent payment after the issuance of the occupancy permit. The exemption would cover income from renting the rehabilitated structure, even if it is leased in parts or to more than one tenant.
The proposal also stipulates that if the property is sold during the exemption period, the new owner can benefit from the incentive for the remaining term, provided they maintain the structure for commercial lease and comply with the requirement to notify the Treasury Department of the transfer.
“Rehabilitating a commercial structure requires a considerable investment,” the legislator added. “With this proposal, we seek to make the tax incentive a tool to make these projects viable and ensure that the works generate economic activity through construction, the contracting of services, and the purchase of materials.”
The measure also establishes that property owners who receive the benefit and the businesses occupying the rehabilitated structures will continue to be subject to the payment of municipal licenses and corresponding construction fees. It also does not exempt them from property taxes or other applicable taxes, contributions or fees.
As part of the oversight mechanisms, and to maintain transparency, the bill requires the Treasury secretary to submit an annual report on the implementation of the law no later than March 31. The document must detail, by municipality, the exemption certificates issued, the investment made in the rehabilitation work, and the estimated amount of income taxes exempted. It will also include information on issued municipal certifications, construction fees, and permits applicable to the rehabilitated structures.
