Over the past several weeks, some of our clients have received IRS “educational letters” related to Puerto Rico tax incentives, including Act 22 and Act 60. While these letters are not audit notices, their timing and purpose are closely tied to recent developments in IRS enforcement efforts.

The issuance of these letters appears to be directly related to an investigation conducted by the U.S. Government Accountability Office (GAO) into the IRS’s oversight of taxpayers claiming Puerto Rico residency and related federal tax exemptions. The GAO’s investigation was conducted from December 2023 through December 2025, and its final report was published on Friday, December 12.

According to the GAO report, although the IRS launched its Puerto Rico residency compliance campaign in 2020, it did not begin receiving meaningful taxpayer data from the Puerto Rico Department of Economic Development and Commerce (DDEC) or the Puerto Rico Department of Treasury (Hacienda) until 2024. In April of this year, the IRS initiated formal discussions with Hacienda to improve ongoing information sharing.

One of the GAO’s key recommendations was that the IRS increase the use of “educational letters” as a compliance tool for the Act 22 population. As stated in the report:

“Educational letters are a cost-effective tool, and IRS is also able to track the efficacy of these efforts by identifying taxpayers who filed amended returns after receiving an educational letter.”

In light of this recommendation, it is likely that a significant portion of Act 22 and Act 60 decree holders will receive similar letters in the coming months. We have already begun to see this trend, as noted above, with several clients receiving these notices.

While the letters do not require an immediate response, they signal increased IRS focus on bona fide residency and income sourcing, and they should be taken seriously. Taxpayers receiving these letters should consider reviewing their residency facts, income sourcing, and filing positions to ensure they are fully compliant.

We are available to discuss these developments, review individual circumstances, and assist with proactive compliance planning. Schedule Your Consultation