Act 22: nonprofit donations with holes and ghost names

Act 22 — now under the Incentives Code, Act 60 — requires many resident investors to donate each year to nonprofit entities in Puerto Rico. An investigation by the Centro de Periodismo Investigativo (CPI), with 2022 data from the Department of Economic Development and Commerce (DDEC), found irregularities in that requirement: more than 300 entities received about 9.2 million, but the list includes recipients that do not meet what the law asks.

The opening example is Lahar Foundation, which is not registered in Puerto Rico and appears in searches linked to a sanctuary in Washington that speaks of extraterrestrial contact. Even so it figures among those that in 2022 received more than 60,000 dollars from incentive beneficiaries. CPI identified 36 cases — about 11% of the entities on that list — that do not appear on the roster of nonprofits approved by Hacienda; a dozen are registered in the United States, not on the Island. The same DDEC list includes more than 500,000 dollars to generic names such as “charity,” “na” or “unspecified.”

Since 2017 the program asks for at least 5,000 dollars a year (10,000 dollars for decrees from 2020 on) to entities exempt under section 1101.01 of the Internal Revenue Code and authorized by the Joint Special Commission on Legislative Funds for Community Impact. Some 1,160 beneficiaries with decrees before 2017 do not have that donation obligation.

Carlos Fontán, director of DDEC’s Office of Incentives, admitted failures in 2022 but said the percentage is “very, very, very low” and that donating to an uncertified entity is “curable”: the investor can amend the report and donate again. Hacienda confirmed to CPI that 36 of 39 entities flagged never had an exemption in Puerto Rico. The agency said it had sent 37 notices in early 2024. Fontán confirmed that DDEC has never revoked a decree for failing the donation requirement.

Among recipients with exemption, Partnership for Modern Puerto Rico — linked to Alberto Bacó Bagué, former DDEC secretary — received more than 200,000 dollars in 2022. Gaudium et Spes reported 228,856 dollars from resident investors and, according to its federal 990, that year moved more than 240,000 dollars to projects outside the Island (about 40% of its contributions went to nonprofits in Puerto Rico). For-profit entities also appear on the DDEC list, such as Holberton School (10,000 dollars), which explained that the money goes to a scholarship fund administered by the Community Foundation.

CPI stresses that the incentive does not require a minimum investment or job creation: housing, 185 days on the Island, an annual report and — for many — the donation. Meanwhile, part of that social “payment” lands in entities without a Hacienda exemption or in structures that redirect funds off-island or through intermediaries.