House Natural Resources Committee Dems Uncover Puerto Rico Tax Break for Ultra-Rich Could Cost American Taxpayers Millions

New GAO Report finds Tax Break Provides Little Evidence of Economic Benefit for Puerto Rico

Washington, D.C. – Today, Ranking Member Jared Huffman (D-Calif.) and Reps. Nydia Velázquez (D-N.Y.), Alexandria Ocasio-Cortez (D-N.Y.), and Ritchie Torres (D-N.Y.) released a Government Accountability Office report exposing how special tax breaks for the wealthy are costing the rest of American taxpayers “hundreds of millions of dollars per year” with little evidence they’re delivering economic benefits to the people of Puerto Rico.

"While families across Puerto Rico struggle to make ends meet, millionaires and billionaires are swooping in to exploit the island as a personal tax shelter," said Ranking Member Huffman. "This watchdog report confirms exactly what we've suspected: these tax breaks are draining hundreds of millions in federal revenue while delivering next to nothing for Puerto Rico's working families. And thanks to Trump gutting the IRS, there's barely anyone left to check if these wealthy transplants are even playing by the rules and meeting the basic residency requirements to justify these tax breaks, let alone contributing to the community. The people of Puerto Rico deserve real investment and economic opportunities that lift up families, not a rigged system that lets the ultra-rich dodge their taxes on the island's back."

In 2023, House Natural Resources Committee Democrats asked the GAO to investigate how certain tax breaks in Puerto Rico’s Act 60 of 2019 could create an unfair tax haven for the ultra-wealthy and do nothing to benefit the people of Puerto Rico.

The report found that the Internal Revenue Service (IRS) lost 38% of its enforcement staff during the Trump-Musk government purge, making it easier for wealthy people to cheat their way into getting tax breaks because there aren’t enough staff to verify they meet eligibility requirements. One example of that fallout uncovered was 179 people getting the tax break despite not even meeting the basic requirement of living in Puerto Rico for at least half the year.

The report also raises the possibility that many millionaires would have moved to Puerto Rico even without a handout for the ultra-wealthy, wasting taxpayer money.

“GAO’s findings confirm what many of us have warned for years: the IRS has not taken enforcement of Act 60 seriously, fueling tax evasion problems both on the island and the mainland. While the agency failed to implement basic checks, the wealthy were able to game the system and dodge millions in taxes, leaving Puerto Ricans to shoulder the consequences through rising housing costs, displacement, and underfunded public services. GAO’s report provides a clear roadmap to fix this broken system, and the IRS must act quickly to implement these recommendations and bring real oversight and accountability,” said Congresswoman Nydia M. Velázquez.

“The GAO's findings show that wealthy mainland Americans are using Act 60 to avoid paying hundreds of millions of dollars in federal taxes per year without actually residing in Puerto Rico. Not only is this policy driving up wealth inequality on the island, it is also stealing valuable federal tax revenue used to fund Social Security, Medicare, and other essential federal programs out of American’s pockets. I urge the IRS to implement the recommendations in this report and crack down on the severe level of abuse driven by Act 60 and the wealthy who profit from it,” said Representative Alexandria Ocasio-Cortez.

“This GAO report makes clear that Act 60 is falling far short of its promises. Despite the generous tax breaks it provides, there is little evidence that the program is delivering meaningful economic benefits for Puerto Rico. Without stronger oversight and real accountability for those who profit from these incentives, Act 60 risks functioning more as a loophole than a development tool. Puerto Rico deserves a program that truly strengthens its economy, not one that leaves its impact in doubt,” said Rep. Ritchie Torres.

The full report, entitled Puerto Rico: IRS Should Improve Oversight of Taxpayers Claiming Exemption from Federal Taxes (GAO-26-107225), can be accessed in English. The highlights page can be accessed in English or Spanish.

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