(Bloomberg Law) — Private wealth clients, hedge fund managers and cryptocurrency traders fleeing to Puerto Rico for its huge tax breaks—and to escape President Joe Biden’s proposed capital gains tax increases—are now the focus of a sweeping Internal Revenue Service review.
The country’s tax collector quietly launched a coordinated campaign in late January to examine individuals who took advantage, starting in 2012, of tax incentives designed to lure high net-worth individuals and corporations to Puerto Rico. More than 4,000 mainland U.S. residents and firms have moved to the territory between 2012 and 2019, revealing potentially hundreds of millions of dollars in lost tax revenue to the U.S. government, according to an IRS report delivered to Congress.
Individuals have already started receiving requests for information, according to tax attorneys that advise clients on federal income tax issues under Puerto Rican tax incentive laws. More audits are anticipated now that the U.S. tax filing deadline has passed.