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Report: Some Puerto Rico Act 22 beneficiaries evade donation rule

Transparency groups explore what they called “questionable charitable giving practices” to maintain tax breaks.

Hedge Clippers, the Center for Popular Democracy (CPD) and the “Puerto Rico No Se Vende/Puerto Rico Not for Sale” coalition published an investigation exploring certain Puerto Rico tax break beneficiaries who are required to provide an annual donation of $10,000 to local nonprofits. 

In their report, the left-leaning advocacy organizations argue that some individuals decreed under the island’s Act to Promote the Relocation of Individual Investors to Puerto Rico, known as Act 22, but amended into the Act 60 incentives code, allegedly “adopt questionable charitable giving practices to maintain” their tax exemption, given that they “appear to be creating loopholes and founding their own tax-exempt charities to meet the charitable giving requirement on paper.”

The report says the beneficiaries create organizations benefiting from their own donations and use the nonprofits for lobbying efforts. It examines two organizations founded by Act 22 beneficiaries. 

One of these is the Rain and Rose Fund, whose “goal is that 100 percent of donations go directly to fighting poverty,” according to its website.

“However, a deep dive into the group’s financial statements and IRS tax filings shows a different picture,” the report reads. “In 2021, the group’s annual Ritz Carlton golf tournament cost $289,536. While the organization received $795,907 in contributions in 2021, it only donated $47,154 to Puerto Rican charities per financial statements. That means only 6% of its revenues went to local charities that year.”

The report also profiles the 20/22 Act Foundation, “a registered 501c3 public charity,” and “its sister organization, the 20/22 Act Society,” which it says is “a 501c4 that is allowed to lobby under the law,” and “functions more like a powerful trade association or lobbying group than a non-profit.” 

The organization, the report adds, helps beneficiaries comply with legal requirements through membership fees and donations, but “does not disclose their donors,” and “according to the 2021 IRS filings … ‘did not make its governing documents, conflict of interest policy, and financial statements available to the public during the year.’”

“The Not Your Tax Haven/Puerto Rico No se Vende campaign, and the local organizations that are part of the coalition, have long denounced the negative impacts of Act 22/60, including displacement, exorbitant increases in housing costs and environmental impacts,” said Julio López-Varona, co-chief of campaigns at the CPD.

“But it is still incredible to see how even the requirement of philanthropic donations [stated in] the law has been manipulated by beneficiaries for their own profit. As if it weren’t enough that these individuals are tax-exempt and that the law has no investment requirement, they can’t even donate to local philanthropic organizations without somehow taking advantage,” he added.

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