New York – After legislators in the United States Senate began to put pressure on the Internal Revenue Service (IRS) to expedite the investigation of tax evasion of multimillionaire foreigners with decrees under Law 22 in Puerto Rico, the office allocated more resources to carry out audits.
A report this Friday in Bloomberg Tax revealed that the audit plan designed for senior tax office officials emerged in anticipation of the group’s meetings with investigators from the Senate Finance Committee.
The article quotes an IRS official with direct knowledge of the decision, who notes that the agency plans to deploy a team of additional agents and open more audits of Americans who are exempt from paying taxes on the island as a result of the application of Law 22, which is part of the Puerto Rico Incentives Code (Law 60).
The move by the IRS also comes in response to a letter sent by an anonymous informant from the entity to senators in which he points out that the investigation for tax evasion of certain recipients of the statute approved in 2012 has barely translated into 1% of audited foreigners.
The information provided by the source familiar with the investigations in turn provoked the official investigation of the Senate committee, The New York Times reported at the end of last month.
“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 letter further notes that the IRS response to this fraud is “woefully unproductive” and is considered a “clown show” by Americans claiming immunity from U.S. taxes.
Some of the senators who received the letter included Finance Committee Chairman Ron Wyden, D-Ore., and Ranking Member Mike Crapo, R-Idaho.
Committee members plan to meet with IRS personnel later this month as part of a follow-up to the investigation, according to information handled by Bloomberg.
“Apparently, a significant number of wealthy tax evaders decided that they would buy some property in the mountains or on the beach outside of San Juan, visit from time to time, and abuse Law 22 in a way that defrauds both taxpayers in Puerto Rico as well as those on the mainland,” Wyen indicated on Thursday in written statements. “At this point, they have bet that they can stay ahead of any effort by the authorities, and that approach has paid off,” the senator argued.
The IRS evaluation of beneficiaries of Law 22 began in 2021. The investigation seeks to determine whether beneficiaries of the tax exemption decrees have lied about their stay on the island to avoid paying taxes in the US on income of US origin.
In an entry on the IRS website last summer, the agency notes that it is working to ensure that 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 part of the information on irs.gov dated July 14.
“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 “Fraud Strategy in Puerto Rico,” the IRS disclosed the following: “We recently identified about 100 high-income individuals who are claiming benefits in Puerto Rico without complying with the 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.”
Several Democratic representatives have thundered from the plenary session against the alleged tax evasion by beneficiaries of Law 22.
One of the first was Delia Ramírez, Democrat of Illinois. In an interview with El Diario last January, the congresswoman reaffirmed her position that the law is a key factor in the displacement of locals who cannot compete with foreigners in the acquisition of homes.
In addition, he insisted on the impact that evasion of federal taxes by beneficiaries of Law 22 in the territory has on communities in the United States.
“It is assumed that only a certain group of congressmen cares about what happens in Puerto Rico. It is important that my colleagues and Americans and communities understand that Puerto Rico’s ability to move forward should matter to all of us. I was raised in Humboldt Park, mostly a Puerto Rican community… There is an idea that if you are not Puerto Rican or if you are not Guatemalan, or if you are not this, you can’t care about a situation. And for me it is very important that, first, it is understood that the Puerto Rican community has more and more people who want a better future for Puerto Rico; who understand the connection between the diaspora and the people on the island,” she assured.
“And if you don’t care about Puerto Rico the way I do, you should care about the number of Americans who don’t want to pay taxes in your district and how that is affecting investment in education in your district, health care and solvency in social programs. That is not being paid for because what is happening in Puerto Rico, we are letting it happen,” she putnualized.
This week, Democratic representative Ro Khanna, from the most liberal wing of the party, also spoke out against the effects of Law 22, while highlighting the need for a decolonization process on the island.
The US has kept Puerto Rico as a territory for more than 125 years. Over 3 million people have been denied full political rights.
Colonialism was wrong in India during my grandfather’s lifetime. And it is wrong in Puerto Rico in 2024. pic.twitter.com/pfhjA4RivS
— Rep. Ro Khanna (@RepRoKhanna) June 5, 2024
“I am committed to working directly with Puerto Ricans on this matter. It is not our place to tell them what to choose, but we must end harmful public policies like Law 22, which allows tax evasion by the rich at the expense of Puerto Rico, and end the lack of food sovereignty in Puerto Rico,” he stated in his 1-minute turn in the House chamber.
Other Democratic representatives sent a letter last November to the IRS requesting information about the course of the investigation involving about 100 Act 22 recipients following a request under the Freedom of Information Act (FOIA).
In March of this year, officials from the entity responded to the letter signed by 12 legislators calling on the IRS to expedite the disclosure of the results of the audits.
Law 22 exempts foreigners who settle in Puerto Rico for at least 183 days a year from paying taxes on dividends, interest and capital gains. The expectation is that they invest in the territory, create jobs and stimulate the economy. However, in the opinion of the law’s detractors, the privileges granted to this group of wealthy people have led PR to become a tax haven.
Keep reading:
Puerto Rico: Representative Cori Bush and Chicago councilors join the call against Law 22 and ask to close a legal loophole that benefits millionaire foreigners
Puerto Rico: DDEC confirms supply of information to the IRS for investigation of foreigners with decrees under Law 22
Councilors from San Luis, Missouri, ask the US Congress to abolish Law 22 that benefits millionaire foreigners in Puerto Rico
Puerto Rico: foreigner guilty of appropriating $110 million from the cryptocurrency and child pornography market has a decree under Law 22