Selling a Puerto Rico Tax Credit: How the Secondary Market Actually Works

A tax credit you cannot use is an asset you are not getting paid for.

That is the situation a surprising number of Puerto Rico claimants find themselves in. The research was real, the credit was certified, and the company does not have enough Puerto Rico income tax liability to absorb it. The credit sits there, technically valuable, practically inert.

Transferability is what solves this, and it is worth understanding how the market around it actually functions.

Why transferability exists

Puerto Rico's incentives framework under Act 60-2019 makes certified credits generally transferable. That is a deliberate policy choice, and the logic is straightforward.

The government wants research activity to happen on the island. It offers a credit to encourage it. But if the credit can only be used by companies with large local tax liabilities, the incentive is weak for exactly the kind of growing or export-oriented operation the island wants to attract.

Making the credit transferable means the incentive has value regardless of the claimant's own tax position. The claimant converts it to cash; a buyer with Puerto Rico liability uses it; the research still happened. Everyone gets what they wanted.

Who buys

The buyer side consists of parties with meaningful Puerto Rico income tax liability and an interest in reducing it at a discount. In practice that means private equity funds, investors, large local taxpayers, and industrial companies operating on the island.

A buyer paying less than face value for a credit they can fully use is making a straightforward return. A seller receiving cash now for an asset they could not otherwise use is also better off. The discount is the price of that trade.

We broker certified credits through our own network of these counterparties, which is a deliberate part of how our practice is built: the firm that substantiates and certifies the claim is the firm that places it.

What actually drives the price

This is the part sellers most want to understand, and the honest answer has several components.

Substantiation quality. This is the big one and the one the seller controls. A buyer is taking on risk. If the claim behind the credit is thin, poorly documented, or built on aggressive classification, that risk is real and it gets priced. A claim with clean project definition, contemporaneous documentation, proper cost allocation and a coherent technical narrative carries less risk and prices better.

Credit type and certification status. A fully certified credit is a different instrument from one still working through the process.

Transfer mechanics and timing. How cleanly the transfer executes, and when, affects what a buyer will pay.

Market conditions. Buyer appetite varies. The number of credits available at a given moment varies. This is a market, and markets move.

Seller urgency. A seller who needs cash this quarter has less leverage than one who can wait for the right counterparty. This is as true here as anywhere.

What a seller actually controls

Of those factors, exactly one is fully within your control, and it is the most important.

Substantiation quality is decided long before anyone discusses price. It is decided while the research is happening, by whether projects were defined properly, whether time was captured against them, whether costs tie to real systems, and whether someone wrote down what was uncertain and how it was resolved.

Companies that build that record as they go sell credits at better prices. Companies that reconstruct it afterward take a discount, and frequently do not realize the discount is the direct cost of the reconstruction.

This is the practical argument for treating documentation as part of the research rather than as a compliance afterthought. It is not about surviving an examination. It is about what the resulting asset is worth.

Things we will not tell you

We do not publish a price range, and you should be careful with anyone who does.

Pricing depends on the specific credit, its certification, the documentation behind it, the counterparty, the timing and market conditions at the moment of sale. Quoting a number in the abstract would be guessing dressed up as expertise.

What we will say is that price discovery across multiple counterparties generally produces better outcomes than accepting the first offer, and that timing sales against the phasing of the credit tends to beat liquidating an entire position at once.

The sequencing that works

The credit is claimed and substantiated properly. Independent CPA-certified audit and agreed-upon procedures reporting supports it. The credit is certified by the Puerto Rico government. Then, and only then, it is a transferable asset that can be priced and placed.

Sellers who start thinking about monetization at the last step have already determined most of their outcome at the first step.

The disclaimer, and it is genuine

Nothing here is a representation that a credit will be certified, issued, or purchased at any particular price, or at all. Transferability, pricing, mechanics and timing depend on your decree, your facts, the credit itself and market conditions. This is indicative advisory context and should be confirmed for your situation before you rely on it.

The point worth remembering

The secondary market is not a workaround or a loophole. It is the mechanism that makes the incentive function as intended for companies whose local tax liability does not match their research investment.

Used properly, it turns a credit into capital that goes back into the operation. Which, from the island's point of view, is exactly what the credit was for.