New York – The secretary of the Department of Economic Development and Commerce of Puerto Rico (DDEC), Manuel Cidre, said that the Internal Revenue Service (IRS) has not asked them for additional information about the investigation they are carrying out on a hundred Americans with decrees tax exemption under Law 22.
Cidre argued that it is not unusual for the IRS to make information requests such as those related to the beneficiaries of the Law to Incentive the Transfer of Individual Investors to Puerto Rico.
“That’s ‘business as usual.’ Today is for the topic of Law 22; In the past it was for tax exemption issues. The IRS is a custodian of the American revenue and sovereignty structure and has every right to investigate; and from time to time investigate. There are investigations that are completed and culminate in some type of prosecution. There are investigations that begin and end,” he asked questions from El Diario de NY.
The interviewee assured that any additional information that the federal authorities need as part of the investigations will be sent to them.
“The important thing about all this is that Puerto Rico, like the United States, is a country of law, a country of order. Here everything is facing the sun, and any information they need from any of our lieutenant decrees in the Department of Economic Development we are always eager to give it to them,” he added.
DDEC alleges that the number of revocations due to non-compliance with the law has increased
Cidre defended the agency’s work to supervise Law 22 under the argument that there has been an increase in the revocation of decrees in recent years.
“In 2021, 29 decrees were revoked. Between 2021 and 2024 there are 400. So the increase has definitely been considerable because we have focused on streamlining processes, we have strengthened the Tax Incentives Office, we have strengthened the issue of supervision because obviously we are a country of law and order. This is not simply a tax haven where (foreigners) do whatever they want. There is a decree and they have to comply,” he said.
So far this year, the DDEC has revoked 90 decrees, the official said.
Previous reports on that management indicated that the agency had annulled 311 decrees. However, a report last September from the Center for Investigative Journalism (CPI) warned that this figure was the same as provided in August 2022; and that among those cases, four had been left without effect, and in another 29, the revocation had not been final. The previous figures show statistics until February 2023 when the Government had granted about 2,000 exemptions.
Regarding the reasons for the revocations, Cidre rejected that the majority are related to criminal acts.
According to Cidre, the decrees were invalidated because the beneficiaries either did not submit their annual reports or their financial reports.
“The issue of tax exemptions and decrees are advantages that Puerto Rico has, but also with the same force and the same energy that we grant them, with the same force we supervise them and with the same force we renounce them if they are not correct,” he insisted.
“I don’t feel like we’re displacing anyone.”
Regarding the questions related to gentrification and the displacement of locals who cannot compete on equal terms with wealthy foreigners in the purchase of housing, Cidre stated: “I think it is a shot at the stands…the second group that contributes the most pays in Puerto Rico are precisely the taxpayers of Law 22, they pay $190 million. That’s number 1; Number 2, the residents of Dorado who sold their houses, did not sell it because they put a gun to their neck, they sold it because they must have given them a lot of money, and with that money they bought another residence in San Juan.
“I don’t feel like we’re displacing anyone. On the contrary, I believe that we are developing areas that had high potential, and that were not done for years. Areas like Miramar, Río Mar, Palmas, Rincón, Dorado, are definitely in a better position,” he said.
The DDEC is the agency that is supposed to supervise the recipients of Law 22.
Law 22 is in turn part of the Tax Incentives Code or Law No. 60-2019, which includes other decrees, incentives and tax subsidies.
The law establishes that the exemptions will be effective until December 31, 2035.
Under the Law to Incentive the Transfer of Individual Investors to Puerto Rico, beneficiaries are exempt from paying taxes on dividends, interest, shares and capital gains in exchange for these foreigners establishing themselves on the island, investing and creating jobs.
The law establishes that “investors” covered under Law 22 must be “bona fides” residents of the island and remain in the territory for a period of 183 days a year.
IRS confirmed investigation into millionaire tax evaders
In July of last year, the IRS confirmed in an entry on its website that it was investigating about 100 recipients of the decrees for lying about their stay on the island to avoid paying taxes in the United States on income of American origin.
“In recent months, our Criminal Investigation team has closed a long list of cases in which wealthy taxpayers have been convicted of tax evasion, money laundering and filing false tax returns. Instead of paying taxes, these evaders spent money owed to the government on casino gambling, vacations, and purchasing luxury items. For example, in a single case the person was ordered to pay more than $6 million in restitution,” reads the entry under the subtopic “Chasing Millionaire Tax Evaders.”
Under the heading “Fraud Strategy in Puerto Rico,” the IRS adds the following as a highlighted matter: “We recently identified around 100 high-income individuals who are claiming benefits in Puerto Rico without complying with the residency and source rules related to the These wealthy individuals are attempting to avoid U.S. taxes on U.S.-source income, and we expect many of these cases to proceed to criminal investigation.”
Days before, a Bloomberg report had warned of the investigation. In the US Congress, Democratic representatives from the most progressive wing are pushing for the IRS to expedite the results of the investigation.
Last November, 13 representatives sent a letter to the IRS asking that the tax collection agency expedite the evaluation of the request to expedite a request under the Freedom of Information Act (FOIA) filed by a coalition of organizations in Puerto Rico and the United States. US
“The tax haven that Law 22 has created in Puerto Rico has proliferated the use of short-term rentals (“STRs”), increasing cash property sales and speculation in the market and has caused the displacement of Puerto Ricans” , states the letter dated November 12. “Accordingly, we consider it essential to understand the extent to which the IRS and the Puerto Rico Treasury Department are monitoring these Americans and businesses claiming benefits for Law 22 as the number of Law 22/Law 60 beneficiaries continues to grow. exponentially,” the subscribers added.
The congressmen also stated that the statute has caused substantial losses to revenues of both the PR and federal governments. “Analysis by the government of Puerto Rico estimates that the island will lose about $4.5 billion in revenue related to Law 22 between 2020 and 2026. The IRS also revealed that between 2012 and 2019, 647 Americans who were granted benefits paid A total of $557,978,112 in federal taxes in the five years prior to their relocation to Puerto Rico. Although the uncertainty about the extent of Bill 22’s impact on the US tax base is severely limited, this calculation offers a glimpse into the critical funds the US is losing due to the tax evasion scheme. taxes created by law,” they pointed out.
Groups from the Puerto Rican diaspora have demanded legislative actions to close the legal loophole created by section 933 of the United States Internal Revenue Code for foreigners in Puerto Rico to pay taxes.
Income received from sources in Puerto Rico is exempt from US tax under section 933 of the US Internal Revenue Code, except salaries and pensions received as a civil or military employee of the United States government.
“The objective of many of these groups is to present a bill in Congress that taxes 22-year-olds or that the tax exemption is only for residents of Puerto Rico and their descendants, and not for these foreigners who are coming. , living 183 days a year, supposedly, and are not creating enough economic activity. So that’s the prospect. Obviously, this is going to take time. “This is a campaign that only started last year…” explained the spokesperson for the “Losing Puerto Rico” campaign, Federico De Jesús, in a previous interview with El Diario.
Keep reading:
Democratic representatives in Congress ask the comptroller general to investigate the fiscal impact in Puerto Rico of tax decrees for foreigners under Law 22
Interview: Representative Delia Ramírez closely follows the issue of foreigners who do not pay taxes under Law 22 and displacement in Puerto Rico
Nydia Velázquez once again joins diaspora organizations against Law 22 that grants tax exemptions to foreigners to settle in Puerto Rico