Act 22: Puerto Rico Tax Incentives are Impacting the Island with Response from the Locals

SAN JUAN, Puerto Rico — On Jan. 17, 2012, Puerto Rico’s Individual Investors Act, known as Act 22, was created in order to attract thriving high-income residents and investors to the island for the improvement and growth of the economy by offering tax exemptions. 

But now, Act 22 is a very controversial topic for Puerto Ricans because while other locals welcome all investors, others don’t want them on the island because of their fear of gentrification and the loss of their culture.  

“When, foreign opportunists, as I like to call them, buy properties over the appraisal value, it provokes an imbalance in the market, and it makes it possible that prices increase artificially and it makes these properties be outside of the accessible market for Puerto Ricans,” said Maria De Lourdes, Senator of the Puerto Rican Independence Party.

First, in order to become a resident of Puerto Rico, you also have to be a bonafide resident and qualify for the Presence Test. According to Golding & Golding Law Offices, these are the requirements to satisfy the presence test if you are a U.S. citizen or resident alien:

1. Present in the relevant territory for at least 183 days during the tax year. 

2. Present in the relevant territory for at least 549 days during the 3-year period that includes the current tax year and the two immediately preceding tax years. During each year of the 3-year period, you must be present in the relevant territory for at least 60 days. 

3. Present in the United States for no more than 90 days during the tax year. 

4. Earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant territory than in the United States during the tax year. 

“These laws first create an artificial economy that is the product of incentives where it rewards those that come from outside of the island to invest in Puerto Rico,” said Pedro M. Cardona, a Puerto Rican journalist. “This makes the people that come from outside contribute only 5% of their capital, meanwhile, local Puerto Ricans contribute 30%.”

Pedro Cardona is a well-known journalist and radio host from Puerto Rico and is known as his social media alias, El Urbanista. He fears Act 22 because of the displacement that may happen to the locals that live on the island. 

“If in one community, the cost of rent increases, that results in the people that live there to not have the capacity to afford the new costs, and then they will be displaced from their own homes,” said Cardona. “Therefore, the advantage that these outside people have, is way more superior than any local investor has and the bottom line is that incentives are not always positive.” 

But others welcome all outside investors to the island, with the contingency that they get involved with the locals and embrace the culture.

“It doesn’t bother me for them to be here and it doesn’t bother me if they contribute to the island,” said Yaishira, an entrepreneur from Puerto Rico and the organizer of the Pigeon Park, a national landmark of the island. “If their initiatives are in good faith then welcome, and in order to fully develop we need these companies, but with them respecting our land and our resources and really helping our people grow.”

In Puerto Rico, this graffiti was on the wall, expressing the dismay that many Puerto Ricans feel. The graffiti in red says, “The Colony is Corrupt, and the smaller posters say, “Occupy Our Land” and “We Are Not Leaving.” This shows how locals feel like they are being pushed out of their island. 

After the locals’ fears that have resulted in massive protests and outbursts, the people of Puerto Rico are calling out to politicians to act and change the law. As the graffiti states, locals blame the corruption in the government that is shutting them out.  

“I am under the impression that the government doesn’t care, and there are government officials who are just dazzled and blinded by the United States that they are not going to do anything about it,” said De Lourdes. 

Locals, journalists, activists, and some political figures are still hoping for a change in these laws to help protect their land and their way of life.