Ranking Member Grijalva, Reps. Velázquez, Ocasio-Cortez, Torres Ask Government Watchdog to Examine Excessive Tax Breaks for Wealthy in Puerto Rico
Washington, D.C. – House Natural Resources Committee Ranking Member Raúl M. Grijalva (D-Ariz.), Rep. Nydia M. Nydia Velázquez (D-N.Y.), Rep. Alexandria Ocasio-Cortez (D-N.Y.), and Rep. Ritchie Torres (D-N.Y.) today sent a letter to the U.S. Government Accountability Office (GAO) requesting an assessment of certain tax breaks provided to individuals and businesses under Puerto Rico’s Act 60 of 2019. While the provisions are intended to lure individuals and businesses to the island, there are concerns that Act 60—which consolidated and updated prior tax breaks, including Acts 20 and 22—merely creates a tax haven for the wealthy, while providing no benefit to the people of Puerto Rico.
In their letter, the lawmakers highlight how Act 60 creates a uniquely and excessively advantageous tax-exempt status for wealthy individuals and businesses: “In addition to allowing these individuals and businesses to avoid local taxes, Puerto Rico’s territorial status also exempts their Puerto Rico-sourced income from federal taxes. This results in tax benefits that Americans could not obtain anywhere else in the world.” The lawmakers point out that these tax exemptions “stand in stark, unfavorable contrast with the treatment of long-time Puerto Ricans and most other individuals and corporate residents of the territory.”
The lawmakers further describe how the Act 60 provisions are hurting economic development in Puerto Rico, exacerbating inequities already created by the island’s territory status:
“In addition, the attraction of wealthy individuals to the island can have a negative impact on local Puerto Ricans. According to the Puerto Rico Tax Expenditure Report for Tax Year 2023, Puerto Rico lost around $2.22 billion of revenues related to Act 22 between 2017 and 2023. In 2023 alone, Puerto Rico is expected to lose a projected $342 million because of the tax giveaways. On top of the significant losses to Puerto Rico’s tax revenues, demand for housing can be skewed by an influx of wealthy individuals that must purchase residences on the island in order to qualify for tax relief. Furthermore, Act 60 prioritizes an influx of existing businesses to the island for tax avoidance, potentially crowding out Puerto Rican entrepreneurs and forcing local businesses to compete for resources, including talent, customers, and infrastructure.”
Citing these negative impacts on the island, in addition to evidence of fraud, the lawmakers are requesting that GAO examine details on the residency, relocation, and income of Act 60 beneficiaries, the impacts of the tax benefits on Puerto Rico’s economy, and efforts to monitor fraud, among other aspects of the law.
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