SPECIAL LITIGATION FUND

DEAR ACT 22 AND ACT 60 INVESTOR:

We hope you are healthy and well amidst the Covid-19 pandemic. As you know, the $5,000 annual fee increase originally introduced by HB 2419 became a reality through the recent passage Act 40 of 2020. This law, once again spearheaded by House Representative Antonio “Tony” Soto, was focused on reintroducing numerous revenue-neutral amendments to the PR Internal Revenue Code that were previously part of HB 2172, a bill vetoed by the Governor.

However, this new version contained an unexpected sting to the entire community of Act 22and Act 60 individual investors. In what has been another substantial change undermining the stability of the ever-changing 20/22 program, effective immediately all Act 22 and Act 60 individual investors must accompany their annual reports to the Department of Economic Development and Commerce (DDEC, by its Spanish acronym) with a filing fee payment of $5,000, as opposed to the prior $300 filing fee that is currently in effect.

We should not view this as a mere annual fee increase, but a dangerous precedent on law changes on a prospective vs. retroactive basis. This is yet another change to the Acts 20/22 programs, which has historically changed the rules of the game almost every year since it started back in 2012 but never on a retroactive basis to existing grantees until now. The nature of this fee increase has serious legal implications that erode the constitutionality of decrees granted, since the increase was made in the form of essentially a $4,700 tax to all Act 22 and 60 investors that will be used towards Puerto Rico Treasury’s General Fund.

After learning about the introduction of HB 2419, the 20/22 Act Society undertook strong advocacy efforts against the harmful effects of this fee increase. We voiced our concerns through main media outlets, met with DDEC Secretary, and also met with multiple representatives and senators to advocate about the unreasonableness of the increase and about how detrimental it was to again change the rules of the game for those who have already made Puerto Rico their new home. Although our concerns were universally accepted as valid, our advocacy efforts were not fruitful to provoke a reversal.

As a result, we joined forces with representatives of the Tax Incentives Association towards finding a legal solution to defend the constitutionality of the grants in view of this new $4,700 tax, costumed as a fee, which will be applicable from tax year 2019 forward. The sanctity of the Act 22 and 60 individual investor contracts has been jeopardized as now there is no certainty whether there will be future, ex post facto substantial tax increases. This change also threatens the spirit of exemptions provided under the Acts 22 and 60 programs. It also erodes Puerto Rico’s trust after the promotional efforts and representations made by its government with regards to the immutability of the exemptions available under these programs.

We are proud to share that we have retained the services of a special constitutional law attorney that will be representing members and those interested individual grantees that will join under the umbrella of the 20/22 Act Society. Seasoned constitutional law attorney and professor Pedro Ortiz Álvarez and his firm will be leading the efforts towards demonstrating the unconstitutionality of the new $4,700 tax imposed to every Act 22 and Act 60 decree holder.

The 20/22 Act Society has set up a special legal fund towards covering total litigation expenses. We will need to raise a minimum of $100,000 first—before we file—for a preliminary injunction with the Puerto Rico Court of First Instance. After that, we will file a lawsuit that is reasonably expected to be eventually heard by the Puerto Rico Supreme Court, with an anticipated total cost of $150,000. However, we must be prepared since costs could exceed $250,000 depending on potential appeals and related litigation procedures. The official complaint is in later stages of drafting and we are requesting members and nonmembers to contribute to the special litigation fund to ensure we can commence with this action. We are asking for $5,000 per individual grantee to do this. If we do not raise at least $100,000 in the next 7-14 days, we will not proceed, and if we cannot find a viable path forward, we will provide a refund to those who participated minus applicable credit card processing charges.

We have been advised about how having the 20/22 Act Society along with other co-plaintiff members is beneficial, as individuals will not be otherwise covered even by a favorable ruling at lower courts, unless the case goes up to the Puerto Rico Supreme Court, where every grantee will be covered regardless of membership. Anyone who is an active member of the Society will enjoy the benefits of injunctive relief and a lower court ruling, in the event the Supreme court decides against hearing this case. Even if the Supreme court decides to hear our case, it may take multiple years before any ruling is affirmed. If you are interested in being a co-plaintiff, please send an email to: info@the2022actsociety.org.

Honorary Membership

Any nonmembers or inactive members who wish to renew their regular membership who contribute to the special fund will also become active members of the 20/22 Act Society in order to be covered by this suit arguing against the constitutionality of the fee. However, any payments to the fund will not represent tax-deductible donations, because they will be used specifically for purposes of funding the lawsuit. Any unused funds will be pledged towards supporting charitable organizations through the 20/22 Act Foundation.

The 20/22 Act Society reiterates its commitment to address those concerns that continuously affect the stability of Acts 20, 22, and 60 incentives programs. This is another example of changing the rules of the game that continues to affect the stability of incentive programs in Puerto Rico, and we will be at the forefront of advocacy efforts to preserve the competitiveness of these programs going forward. We appreciate your continued support and will keep you updated as we progress through this sensitive matter. Time is of the essence, so we ask that you do not delay in your special contribution to this litigation fund, and please share this with nonmember Act 22 and Act 60 decree holders, so they can also have the same protections from this egregious action.

Warm Regards,

The 20/22 Act Society

Robb and Tara Rill
Enid Concepción
Jorge Y. Kuilan
Tanja Aragunde
Valerie Rivera