Act 20, 22 and 273 Under Act 60: What Did Not Change About Your Residency Test

Did moving Act 20 and Act 22 into Act 60 change the residency test?

No. Puerto Rico folded its 2012 incentive laws into a single Incentives Code, Act 60 of 2019, but the federal test for bona fide residency is not part of Puerto Rico law and did not move with them. Whether you hold a decree issued under Act 20, Act 22 or the current Code, the IRS decides your residency under section 937, one tax year at a time.

This guide explains where the older acts sit now, why a business decree says nothing about the owner's own residency, how Puerto Rico's residency rule differs from the federal one, and what a federal review found when it looked at decree holders.

Where did Act 20 and Act 22 go?

They became chapters of the Incentives Code. According to the Government Accountability Office's December 2025 report, GAO-26-107225, the resident investor incentive created by Act 22 in 2012 is now part of chapter 2 of the Code, and the export services incentive created by Act 20 in 2012 is now part of chapter 3. The Code is commonly known as Act 60.

People still use the old names. A decree granted in 2014 is called an Act 22 decree by its holder, by advisors and by the IRS, which named its compliance campaign after Act 22.

Act 273 was part of the same 2012 package. It is Puerto Rico's International Financial Center Regulatory Act, and it licenses international financial entities. Like Act 20, it deals with companies. None of the three acts, old or renamed, defines federal residency.

Does a business decree make the owner a bona fide resident?

No. An Act 20 decree, an export services decree under chapter 3, or an Act 273 license belongs to a business. Bona fide residency belongs to an individual. If you own one of these businesses and you claim to be a bona fide resident of Puerto Rico, you meet the federal tests yourself, as a person, for each year.

Bona fide residency is the federal status set out in section 937 of the Internal Revenue Code. Under 26 CFR 1.937-1, you are a bona fide resident of Puerto Rico for a tax year only if you meet three tests for that year:

• The presence test. There are five ways to pass it. Four are counted in days: 183 days in Puerto Rico; 549 days over three years with at least 60 in each; no more than 90 days in the United States; or limited US earned income with more days in Puerto Rico than in the United States. The fifth is having no significant connection to the United States.
• The tax home test. No tax home outside Puerto Rico during any part of the year.
• The closer connection test. No closer connection to the United States or a foreign country than to Puerto Rico during any part of the year.

The IRS put it plainly in its webinar on territory residency: meeting one of the three tests, or even two, does not make you a resident. If you hold an individual Act 22 decree, read the presence test Act 22 decree holders meet each year.

How does Puerto Rico's residency rule differ from section 937?

The two rules overlap. They are not the same rule. GAO describes the Puerto Rico side this way: residency under Puerto Rico law is based on domicile, and domicile is presumed when a person is present in Puerto Rico for 183 days in the year.

The federal side asks more. GAO notes that a person who meets Puerto Rico's 183 day requirement would generally meet the federal presence test, but that there are differences between the two systems. The main one is that section 937 adds the tax home and closer connection tests. A decree holder can satisfy Puerto Rico and still fail the federal standard because of a business run from another state, a family home kept there, or other ties that outweigh the ones in Puerto Rico.

GAO also points out that the IRS has no oversight of Puerto Rico's incentives. It verifies federal residency for the federal exemption. Your decree file and your federal return are judged by different agencies under different laws. For the framework in one place, see the three tests.

What did GAO find about decree holders and the IRS?

The GAO report looked at how the IRS oversees people who claim the federal exemption as Puerto Rico residents, and several findings bear on anyone with a decree.

• Form 8898 filing is low. From 2012 through 2023, 3,108 individuals filed Form 8898, and only about half of the 2021 incentive recipients filed one. The Form 8898 instructions require the form in the year you become or stop being a bona fide resident when your worldwide gross income is over $75,000, with a $1,000 penalty for not filing.
• Referrals happened. In August 2023, Puerto Rico's Department of Economic Development and Commerce referred 179 taxpayers to the IRS who could not show they met Puerto Rico's residency requirement.
• The campaign continues. The IRS launched its Act 22 compliance campaign in January 2021. Its active campaigns page says the campaign addresses taxpayers who claimed Act 22 benefits without meeting section 937.

For a sense of scale, GAO counts 5,852 resident investor decrees granted from 2012 through 2024 and 3,899 export services decrees since 2012. That is a lot of files, and in each one residency is the first question.

For the year you arrived and the Form 8898 rules in more detail, see the year of the move and Form 8898.

What should you keep each year?

Keep a record that shows, for each tax year, which of the five ways you passed the presence test and the evidence behind it. The IRS presenters in the same webinar recommended keeping presence records as you go rather than rebuilding them later, and noted that the burden of proof is on the taxpayer.

A useful yearly file has:

• a day-by-day record of where you were, made at the time;
• the evidence behind it: boarding passes, card statements on a card only you use, phone carrier records;
• documents for the tax home and closer connection tests: lease or deed, where you work, where your family lives, voter registration, the address on your forms.

One83 keeps the first item for you, an automatic day-by-day record built from the calendar on your phone, and shows how you stand on the four ways to pass that are counted in days.

For what examiners ask to see, read documenting presence for an audit.

Bottom line

Act 60 changed the names and the chapters. It did not change section 937. Act 20 and Act 273 attach to companies, Act 22 attaches to an individual, and none of them answers the federal question. Each tax year, you show the presence test, the tax home test and the closer connection test yourself, with a record made at the time.

Frequently Asked Questions

Is an Act 22 decree now an Act 60 decree?

The Act 22 resident investor incentive is now part of chapter 2 of the Puerto Rico Incentives Code, commonly called Act 60, according to GAO. People still refer to decrees granted before 2019 as Act 22 decrees.

Does an Act 20 decree make me a bona fide resident of Puerto Rico?

No. An Act 20 decree is granted to a business. Bona fide residency is a federal status for an individual, decided under section 937 by the presence, tax home and closer connection tests for each tax year.

If I meet Puerto Rico's 183 day requirement, do I meet the federal test?

GAO says a person meeting Puerto Rico's 183 day requirement would generally meet the federal presence test. The federal rule also requires the tax home test and the closer connection test, so meeting Puerto Rico's requirement is not enough on its own.

Do decree holders have to file Form 8898?

Form 8898 is required in the tax year you become or stop being a bona fide resident if your worldwide gross income is over $75,000. The penalty for not filing is $1,000 unless the failure was due to reasonable cause.

One83 is a tracking tool, not tax advice. Consult a licensed tax professional about your situation.