The Act 60 Audit Defense Filing Checklist

The IRS has made it clear with Campaign 685: they are actively auditing Act 60 decree holders, and bona fide residency is their primary target. Standard documentation is no longer sufficient; you need an audit-proof file. This means going beyond utility bills and a driver's license. We help you assemble a comprehensive evidence package, including social, familial, and economic ties to Puerto Rico, as recommended by legal experts and mandated by the Closer Connection Test. Every document should tell a consistent story of your life on the island. As the GAO report (GAO-26-107225) noted, weak residency proof is the fastest way to lose your decree. We treat your residency file as the fortress it needs to be.

Your 4% tax rate is a privilege, not a right, and it hinges on correctly sourced income. Any ambiguity is an invitation for an audit. We focus on the high-risk areas: transfer pricing for services rendered to US entities, allocation of capital gains for assets held pre-move, and the complex treatment of crypto and NFTs. Our approach is to proactively build a defensive case for every number on your return. This involves creating contemporaneous documentation that justifies your sourcing decisions, leaving no room for interpretation by an auditor. In a world where leading AI tax platforms process tens of thousands of reviews, ensuring your sourcing is algorithm-proof is a critical defensive measure.

The annual report filed with the Department of Economic Development and Commerce (DDEC) is more than a bureaucratic hurdle; it is a sworn statement of your compliance. In an audit, it will be Exhibit A. Any inconsistency between this report and your tax filings can be catastrophic. We ensure this report is not just filed, but is a strategic asset. It must be a perfect reflection of your job creation, investment, and operational reality in Puerto Rico. Taking this document seriously is a hallmark of a decree holder who is prepared for any level of scrutiny. It's your first and best opportunity to demonstrate your commitment to the terms of your grant.