Congress quietly opens crypto tax shelter for Puerto Rico's wealthy

What it does

This bill amends the tax code to allow Puerto Rican residents who qualify for Act 60 tax benefits to exclude income from digital assets (cryptocurrency, NFTs, and similar holdings) from Puerto Rico source income calculations. Instead of that income being taxed as Puerto Rican-source income at local rates, it will be treated as foreign-source income, allowing residents to potentially avoid or defer U.S. federal taxation on crypto gains while maintaining their Act 60 residency status.

Why we flagged it

The bill's operative mechanism is a targeted tax exclusion for digital asset income earned by Act 60 residents in Puerto Rico. It functions as a tax carve-out for a specific asset class and residency status, not a general tax reform or fairness measure despite the title's framing.

What the text implies

• The bill interacts with Act 60 (formerly Acts 20/60), Puerto Rico's territorial tax incentive regime. Act 60 residents already receive preferential tax treatment; this bill extends that shelter specifically to crypto income by reclassifying it as foreign-source, potentially creating a loophole where crypto gains escape both Puerto Rican and U.S. federal taxation.
• The definition of 'digital asset' is broad ('any digital representation of value recorded on a cryptographically-secured distributed ledger') and may capture emerging asset classes beyond cryptocurrency, including tokenized securities, real estate, and commodities, expanding the scope of the tax shelter.

The full analysis lists 4 implications of this text.

Who stands to gain

high-net-worth cryptocurrency investors; Act 60 residents in Puerto Rico; cryptocurrency exchanges and custodians (indirect, through increased client migration to Puerto Rico