Act 60 IRS Audits: What Enforcement Actually Looks Like

Last verified: August 16, 2026

Yes — IRS scrutiny of Act 60 is real, active, and increasing, and Puerto Rico's own tax authority is enforcing even harder. The IRS has run a dedicated compliance campaign since January 2021, has identified roughly 100 decree holders for civil and criminal investigation, and Puerto Rico's Hacienda has audited about 1,800 more. What enforcement targets is not the program — it's people who claimed the benefits without genuinely living on the island or who mislabeled mainland income as Puerto Rico income.

Most Act 60 marketing skips this page. We think it's the most important one on the site, because the difference between a decree that survives an audit and one that doesn't is knowable in advance. Here's what enforcement actually looks like in 2026, with numbers from the government's own reports.

Is the IRS really auditing Act 60 decree holders?

Yes. The IRS's Puerto Rico Act 22 Campaign — covering individual investor decree holders under Act 22 and its Act 60 successor — was one of 46 active Large Business & International compliance campaigns as of mid-2025, according to the Government Accountability Office's December 2025 report. The IRS has publicly identified approximately 100 high-income individuals for audit, with many cases referred to its Criminal Investigation division. The Department of Justice has gone further, subpoenaing law firms for client files on residency analyses and the opinion letters behind aggressive planning strategies.

The population under the microscope is not small: Puerto Rico granted 5,852 resident investor decrees from 2012 through 2024, with the peak in 2021.

How does the IRS pick audit targets?

Data matching, mostly. Everyone who becomes a bona fide Puerto Rico resident files Form 8898 with the IRS; Puerto Rico publishes decree-holder information; and the GAO has recommended — with IRS concurrence — that the agency obtain current decree-recipient data directly from Hacienda. Cross-referencing those datasets against tax returns is how paper residents surface: someone who filed Form 8898 but kept a mainland W-2, whose credit card trail lives in Miami, or whose "Puerto Rico-source" income traces to work performed in New York.

The examinations then focus on the same three things every time: whether the bona fide residency tests — 183 days of presence, tax home, closer connection — were genuinely met each year; whether income claimed as Puerto Rico-source actually was; and whether gains that accrued before the move were improperly claimed at the decree rate. That last one deserves emphasis, because it's the most common misunderstanding in the entire program: pre-move appreciation is never covered at 0% or 4%, and claiming it is how ordinary aggressive planning becomes a fraud referral.

What is Puerto Rico itself doing?

Enforcing harder than the IRS, by the numbers. Hacienda and the island's incentives office have audited roughly 1,800 Act 20/22 decree holders, added reporting requirements, and strengthened background checks on new applicants. And beginning in January 2026, enforcement became partly automatic: late annual-report filings now draw fines starting at $1,000, a new Compliance Audit Committee can impose penalties up to $10,000 for broader violations, and the committee can recommend decree revocation with clawback of up to three years of benefits.

This matters for a reason prospective applicants often miss: your decree is a contract with Puerto Rico, and Puerto Rico — not just the IRS — polices its terms. The $10,000 annual donation, the $5,000 filing fee, the annual report, the primary-residence requirement: skipping the housekeeping now has a price list.

Is Congress coming for the program?

Pressure exists, and it's worth stating plainly. The Senate Finance Committee has pressed the IRS on enforcement, and in April 2025 Senator Wyden referred specific Act 60 attorneys to the IRS in connection with a pending criminal matter. Separate proposed legislation would tax Puerto Rico residents' cryptocurrency gains federally — aimed directly at the program's most popular pitch to digital-asset investors. None of that has changed the law as of this writing, and existing decrees are contracts. But anyone entering the program should do so knowing the political weather, not just the statutory text. Puerto Rico's own answer to the criticism was Act 38-2026 — raising the individual rate to 4% for new applicants and tightening eligibility, a reform designed to make the program more defensible, not to end it.

What separates the people who get hurt from the people who don't?

Every reported enforcement action shares one through-line: the person treated Act 60 as a mailing-address trick instead of a relocation. The failure patterns are consistent — day counts that don't survive a subpoena of flight records, a "primary residence" that's an empty condo while the family lives stateside, mainland service income routed through a Puerto Rico entity that performs no work on the island, and pre-move gains claimed at the decree rate.

The inverse is equally consistent: people who actually moved — home, family, day count, documented — with income cleanly sourced, face a favorable statutory framework and manageable compliance risk. The scrutiny is not a lottery. It's a filter, and which side of it you land on is a choice made before you file.

So should the audits scare you off?

They should scare you into doing it properly — which is different. The benefits are statutory and real; the enforcement targets abuse of them. Practically, that means: track your days with evidence, not vibes. Make the island your actual tax home and closer connection. Source income honestly, with professional analysis where it's genuinely complicated. File the annual report, make the donation, keep the residence. And if you're racing the December 31, 2026 filing deadline, remember that the deadline pressure is exactly when corners get cut — a rushed application is fixable, but a fabricated residency is not.

For current decree holders who suspect past-year problems: options exist, from amended filings to, in serious cases, the IRS voluntary disclosure practice — and reforms proposed in March 2026 may reduce the penalty structure for disclosures. That's a conversation for qualified counsel, not a blog page, and sooner is categorically better than after an audit letter arrives.

Frequently Asked Questions

Is the IRS auditing Act 60 participants? Yes. A dedicated IRS compliance campaign has run since January 2021, with roughly 100 decree holders identified for civil and criminal investigation, alongside DOJ subpoenas of professionals connected to aggressive planning.

Is Act 60 legal? Yes. The incentives are Puerto Rico statute, and the federal exclusion is IRC Section 933. Enforcement targets people who claim the benefits without meeting the requirements, not the program itself.

How many Act 60 decree holders have been audited? Roughly 100 by the IRS (civil and criminal) plus approximately 1,800 audited by Puerto Rico's own authorities, out of 5,852 resident investor decrees granted from 2012 through 2024.

What triggers an Act 60 audit? Data matching — Form 8898 filings cross-referenced against decree-holder lists and tax returns — followed by examination of the residency tests, income sourcing, and treatment of pre-move gains.

What are the penalties for Act 60 non-compliance? Federally: back taxes, penalties, and criminal exposure in fraud cases. In Puerto Rico, as of January 2026: automatic fines starting at $1,000 for late annual reports, penalties up to $10,000, and possible decree revocation with up to three years of benefit clawback.

Can my decree be revoked? Yes. Puerto Rico's Compliance Audit Committee can recommend revocation for violations, with clawback of benefits. Decrees are contracts with obligations on both sides.

Does the December 31, 2026 deadline change audit risk? No — the filing date determines your rate, not your scrutiny. Applications filed in the deadline rush face the same residency and sourcing tests as any other; rushing the move is riskier than rushing the paperwork.

What if I already have a decree and I'm worried about past years? Talk to qualified tax counsel promptly. Remediation options range from amended returns to the IRS voluntary disclosure practice, and acting before an audit begins preserves options that disappear after.

Want your residency plan or existing decree stress-tested before the IRS does it for you? Schedule a consultation — we'll connect you with the attorneys and CPAs who handle Act 60 compliance and audits every week.

This article is general information, not tax or legal advice. Enforcement postures and penalty rules change; consult qualified counsel about your specific situation.