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Watch Dems press IRS on probe into Puerto Rico tax breaks for wealthy investors– NBC News – Breaking News & Top Stories


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Twelve Democratic members of Congress are pressing the IRS to provide updates about its investigation into about 100 high-income individuals who attempted to avoid US taxation by benefiting from a controversial tax break in Puerto Rico without meeting the appropriate requirements.

Since announcing its investigation in July, the “IRS has not released any information to the public regarding its auditing efforts” to identify and address a lack of compliance with provisions of the Puerto Rico tax incentives law (Act 60) aimed at foreign and mainland investors , traders and other kinds of wealthy people, the lawmakers said in a letter sent to IRS Commissioner Daniel Werfel on Friday.

Under provisions known to residents on the island as Act 22, the law’s original name, individual investors who haven’t previously lived in Puerto Rico between 2006 and 2012 can get a 0% tax rate on capital gains in exchange for buying a residency on the island, living there at least half of the year and donating $10,000 to a nonprofit approved by the Puerto Rican government.

As residents of Puerto Rico, Act 22 beneficiaries also save money by not paying federal income taxes, since Puerto Ricans do not have voting representation in Congress as a US territory. Puerto Rico residents pay local income, payroll, property, municipal and sales taxes.

The Act 22 tax breaks have become a source of controversy on the island since their implementation in 2012 as Puerto Ricans living in mountainous or beach areas have reported being priced out of their neighborhoods after wealthy beneficiaries bought up nearby residential properties.

The Puerto Rico Center for Investigative Journalism found that incoming capital from these investors compounded with a rise in short-term rentals and lack of affordable housing have contributed to a rise in the average price of properties for sale in Puerto Rico between 2012 and 2021, making it is more difficult for working-class residents to find homes.

“Act 22 has only deepened marginalization, displacement and socioeconomic inequality and has helped turn the island into a tax haven for the rich,” Rep. Nydia Velázquez, DN.Y., who led her 11 colleagues in sending a letter to the IRS, said in a statement Monday. “The IRS and the Treasury Department should make enforcement of Act 22 a priority and shed light on their oversight of Americans who illegally claim benefits under this law.”

The IRS did not comment on the contents of the letter or provide NBC News with updates about its investigation.

The letter from lawmakers also states that Act 22 “lacks adequate oversight mechanisms, making it even more crucial that the IRS ensures adequate oversight at the federal level,” since the Puerto Rico Department of Economic Development in charge of overseeing such tax decrees admitted not having enough resources to enforce compliance.

Carlos Fontan, director of the incentives office at the Puerto Rico Department of Economic Development, which oversees the tax decrees, told NBC News on Tuesday that “no public official is ever satisfied with the resources it has.”

But he said that hasn’t stopped his agency from enforcing compliance. He said his office has revoked more than 300 Act 22 decrees over the past year and a half because they did not comply with the laws, with a few of them being revoked as recently as this past week.

In their letter, lawmakers pointed out that the Puerto Rico Department of Economic Development has not published the results of an Act 22 general compliance audit it started in 2021, as well as annual reports of Act 22 beneficiaries.

Fontan said “the audits exist and are ongoing, they have not been completed,” adding that it is a time-consuming process that requires requesting people’s information and engaging in a “back and forth” with them. “When the audits are completed, we will publish the results.”

Puerto Rico’s Department of Economic Development has been collaborating with the IRS in its investigation into about 100 cases involving possible Act 22 fraud. Fontan said this collaboration has helped his office identify some of the cases that ended up getting their tax decrees revoked.

The IRS has said it expects some of these cases to be the subject of criminal investigations.

An estimated 6,000 tax exemption decrees have been approved under Act 22 since it was enacted, according to Fontan. In 2020, the most recent data available, these beneficiaries paid a total of $160 million in local income taxes and $10 million in municipal taxes. Proponents of the law have said this has brought new tax revenue to the island.

Critics of the tax exemptions say this does not compare to estimated tax revenue losses. According to the latest Puerto Rico tax expenditure report, the island has lost an estimated $2.2 billion in tax revenues related to Act 22 since 2017.

“Puerto Rico continues to lose billions of dollars in potential income as Puerto Ricans suffer from rising costs of living and unsustainable housing costs that continue to displace residents,” Marlyn Goyco-Garcia, a national organizing manager with the advocacy group Center for Popular Democracy leading the #NotYourTaxHaven organizing campaign, said in a statement Monday.

“We hope that the IRS will prioritize this issue,” Goyco-Garcia added.

We update regularly World Latest Breaking News here. We update 2023-11-22 02:04:36 this news story from official website –”

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