New York – The Municipal Council of San Luis, in Missouri, approved this Friday a resolution in which they ask that the United States Congress act to repeal Law 22 in Puerto Rico for granting tax exemptions that lead to the “exploitation” of the local for the benefit of millionaire foreigners who relocate to the island.
The resolution presented on March 29 by Puerto Rican councilor Daniela Velázquez was co-sponsored by 10 other members of the municipal body.
The resolution adopted by the legislative body calls for closing the tax loophole that makes it easier for Americans who move to Puerto Rico with decrees under Law 22 (Law to Incentive the Transfer of Individual Investors to Puerto Rico) under the promise of investment not only not to have to pay certain taxes on the island, but they can evade their tax responsibilities in the US.
“Law 22 has overwhelmingly failed in its objectives to promote positive investment and economic development,” say Velázquez and his colleagues in the document provided to El Diario.
“For the more than 6,000 ‘resident individual investors’ who have benefited from Law 22, real investment in real estate, specifically the purchase of properties to convert them into short-term rentals, has become extremely lucrative,” the councilors add.
According to the councilors, this has led to speculation in the investment market with enormous profits for tax-exempt foreigners at the expense of Puerto Ricans trying to buy a home.
The resolution also points out that the incentives granted by the Department of Development and Commerce of Puerto Rico (DDEC) have led to a 36% increase in housing prices on the island (according to data from the Federal Housing Financing Agency). , while 41% of the population lives in poverty (Census).
The subscribers also mention that the number of jobs that Law 22 has created is minimal, despite the fact that that was one of the main purposes under which it was devised.
“Recipients of tax exemptions under Law 22 have created minimal jobs in Puerto Rico, with estimates, in 2019, from the consulting firm Estudios Técnicos revealing the creation of less than three jobs per recipient versus the hundreds projected per recipient of the decree – and random sampling of recipients of decrees reveal that more than 37% do not own any business in Puerto Rico,” the letter specifies.
The resolution also refers to data from Intelligent Economics that indicates that average rents in the territory have skyrocketed by 593% since Hurricane María devastated the island in 2017.
The councilors asked to abolish Law 22 in accordance with the request made by Democratic representatives in Congress in Washington.
“Our call joins those made, not only by Representative Cori Bush (MO-1), but also by Representatives Delia Ramírez (IL-3), Chuy García (IL-4), Nydia Velázquez (NY-7), Raúl Grijalva (AZ-7), Alexandria Ocasio-Cortez (NY-14), and Ritchie Torres (NY-15) to abolish Law 22,” they claim.
“Congress must legislate immediately to stop the tremendous damage that this tax loophole is causing to Puerto Ricans and Americans,” they point out.
A law approved in 2012 in the Capitol of Puerto Rico
Law 22 was approved in 2012 in the Legislature in Puerto Rico. Since 2019, the statute has been part of the Puerto Rico Incentives Code (Law 60). Foreigners covered under the law are exempt from paying taxes on interest, dividends and capital gains.
The different bills presented in recent years to amend it have not advanced in the legislative process. The reasons are not clear, but it is a fact that some of those called to take action regarding the scope of this statute have ties to resident investors and even they have donated money to their campaigns.
The action from the San Luis Council yesterday came as a result of the activism of diaspora groups such as Power4PuertoRico that seek Congress to act to address the tax loophole that allows wealthy Americans to evade paying federal taxes, an issue that in these is currently being investigated by the Internal Revenue Service (IRS).
Last March, Bush joined the list of representatives who denounced from the House floor the displacement of Puerto Rican communities due to the growing number of foreigners relocating to the island with decrees under the 2022 Law.
Previously, Delia Ramírez and José “Chuy” Ramírez did the same in their turns of messages in the chamber.
Added to the legislative action is the one taken at the beginning of the year by the Chicago Council.
Led by Councilwoman Jessie Fuentes, also of Puerto Rican origin, the organization adopted a resolution calling for amendments to the US Tax Code.
Through the document, the federal Congress is called upon to clarify the US Tax Code to prevent the misuse of tax incentives in Puerto Rico and the negative economic impact on its people.
“Any amendment to the tax code must preserve the original intent of promoting growth in Puerto Rico while preventing potential misuse and addressing negative economic impacts on the population,” reads the text sent to the main leaders of the Legislature in Washington. .
IRS does not release information about investigation for tax evasion of beneficiaries of Law 22
In addition to these efforts, entities such as the Center for Popular Democracy (CPD) and the “Puerto Rico No Se Vende” campaign are pushing for the IRS (Internal Revenue Service) to disclose information about the audits it carries out on beneficiaries. of the law for alleged federal tax evasion.
Precisely this week, CPD activists denounced that, practically a year after they requested an update on the results of the investigation through a request under the “Freedom of Information Act” (FOIA), The IRS responded in the negative.
The IRS also responded last week to the letter that Velázquez sent them along with 12 other Democrats requiring them to expedite the disclosure of the results of the investigations.
“We apologize for the late response. I am pleased to inform you that files in response to the FOIA request have been collected. The files are currently under review and any withholding provided by law…” was part of the response from the tax collection office.
Currently, the IRS is investigating about 100 recipients of Act 22 decrees for allegedly lying about their stay on the island to avoid paying taxes in the US on US-source income.
Keep reading:
IRS responds to letter from Nydia Velázquez about millionaires with decrees under Law 22 in Puerto Rico, but does not give details of the investigation
“Losing Puerto Rico” launches new video to denounce displacements of Puerto Ricans by millionaire investors 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
Puerto Rico: DDEC confirms supply of information to the IRS for investigation of foreigners with decrees under Law 22