New York – An informant revealed to officials in Congress that the investigation carried out by the Internal Revenue Service (IRS) for tax evasion of beneficiaries of Law 22 in Puerto Rico has barely resulted in 1% of foreigners being audited.
The person with knowledge of the investigation sent a letter to the United States Senate, which in turn prompted a formal investigation by the Finance Committee of that legislative body, The New York Times reported this Tuesday.
“I understand that no evaluations have been carried out by any office at the national level for a campaign that has been open for three years,” reads the letter. The report notes that the figure of less than 1% is equivalent to two dozen beneficiaries.
Among other things, the Senate investigation seeks to get the IRS to speed up the pace of audits.
Law 22 or “Law to Encourage the Transfer of Individual Investors to Puerto Rico” grants total tax exemption on dividends, interest and capital gains to foreigners who settle in Puerto Rico for at least 183 days a year. It is assumed that, in return, they invest, generate employment and in this way contribute to the economy of PR.
The document shows that the IRS has done very little to bring to book those who are abusing the benefits of Act 22 by allegedly lying about their stay on the island to avoid paying taxes in the US on US-source income. .
IRS has not even sent “soft letters” to alleged evaders with Law 22
According to information in the possession of the NYT, the IRS usually sends letters (soft letters) as a tool for evaders to fix the irregularities detected in their tax reports and comply with their tax obligation.
But, according to the informant, not even the IRS has done this in the cases of Law 22 recipients under investigation.
“This is completely absurd in light of the amount of tax dollars in controversy,” the person wrote.
IRS commissioner reacts
In an interview with the aforementioned media, IRS Commissioner Danny Werfel acknowledged that these letters had not been sent as part of the investigation, but highlighted the dozens of cases audited.
He argued that the campaign is in the preliminary phase and that they expect the processes to move forward after the agency received $80 billion in funds as a result of the Inflation Reduction Act (IRA) of 2022.
“We are still coming out of our period of underinvestment, and we are still building the muscle that atrophied,” the commissioner alleged.
IRS investigations into beneficiaries of Law 22 began in 2021. It was not until last March that officials from the entity responded to a letter sent by the Democratic representative of New York, Nydia Velázquez, and 12 other legislators in which they asked them to disclose data from the course of the investigation.
The request of the Democratic representatives was on behalf of the Center for Popular Democracy (CPD) and the “Not Your Tax Haven” campaign (PR No Se Vende).
Last year, these groups submitted a Freedom of Information Act (FOIA) request as part of efforts to oversee Act 22 decrees.
At that time, the IRS refused to delve deeper into the investigation despite having some 3,306 pages in response to the request.
The office merely told Velázquez that the files in response to the FOIA request had been collected and were under review. They also made reference to the impact of the IRA law on the processes.
What does the IRS investigation of the beneficiaries of Law 22 focus on?
Last summer, an entry on the IRS website confirmed that the investigation of some 100 beneficiaries of the tax decrees under Law 22 remained active.
“The IRS is working to ensure high-income taxpayers pay the taxes they owe. Before the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to hide their income and evade paying their share. The IRS is now taking quick and aggressive action to close this gap,” reads some of the information on irs.gov.
“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,” the IRS added.
Under the subtopic “Puerto Rico Fraud Strategy,” the IRS noted the following: “We recently identified about 100 high-income individuals claiming benefits in Puerto Rico without complying with residency and source rules related to the assets of the individuals. “U.S. These wealthy individuals are trying to avoid U.S. taxes on U.S.-source income, and we expect many of these cases to proceed to criminal investigation.”
Co-founder of “Losing Puerto Rico” insists on addressing tax loophole
In light of new information about the delay in the conclusion of the audits, Federico de Jesús, co-founder of “Losing Puerto Rico”, insisted on his proposal for Congress to act on the tax loophole that facilitates the evasion of federal taxes by of some beneficiaries of the statute.
“The IRS does not have the capacity, resources or jurisdiction to stop the displacement caused by tax evaders under Law 22, and therefore this issue is a distraction. The solution is to close the tax loophole, or ‘tax loophole’, through legislative action and in the absence of action by the Puerto Rican legislature, Congress is called to act so that Puerto Rico stops being a tax haven and thus protect Puerto Ricans “said the political analyst and founder of the government consulting firm, FDJ Solutions, in statements to El Diario.
The groups that support the Losing Puerto Rico proposal, which includes a multimedia campaign against Law 22 and the displacement of premises as a result of its application, seek to present a piece of legislation at the federal level in order to resolve the loophole. tax that created section 933 of the United States Internal Revenue Code, which provides that income obtained from sources in Puerto Rico is exempt from US income tax.
Keep reading:
Puerto Rico: foreigner guilty of appropriating $110 million from the cryptocurrency and child pornography market has a decree under Law 22
“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