Tax & Compliance The IRS Just Issued a Warning About AI and Your Tax Data. Here Is What It Means for Your Business. The rules that govern tax professionals apply fully to AI-assisted work. There is no AI exception, no grace period, and no “the computer did it” defense. If your accountant or tax attorney is using artificial intelligence to prepare your returns, the IRS has something to say about it. And as a business owner, you should be paying attention, because the data at risk is yours. On June 24, 2026, the IRS Office of Professional Responsibility (OPR) issued Alert 2026-19, “Introductory Guidelines for Responsible AI Use in Federal Tax Practice.” Its message is direct: the rules that govern tax professionals, Treasury Circular 230 (31 C.F.R. Part 10), apply fully to AI-assisted work. In the OPR’s words, technology is a powerful tool, not a substitute for professional judgment. Here is what the warning actually says, and what it means for you. The IRS’s Core Warning: AI Can Fabricate Data, and Your Data Can Leak The bulletin identifies two risks every business owner should understand. First, AI makes things up. Generative AI can produce fabricated outputs (hallucinations), bias, and opaque reasoning. Courts have sanctioned lawyers for filings containing fake citations, with penalties including financial sanctions of several thousand dollars, public censure, mandatory ethics courses, default judgments, removal from cases, and referrals to state bar authorities. And it is not just lawyers. The OPR cites a report Deloitte Australia prepared for the Australian government in 2025 that contained invented quotes attributed to a judge, references to non-existent reports, and books ascribed to the wrong author, all apparently produced by generative AI. Deloitte reportedly refunded part of its fee. If your tax professional files something built on fabricated AI output, the professional gets disciplined, but your return is the one that is wrong. Second, and more important for you: AI tools can expose your confidential tax data. The OPR describes a risk most business owners have never considered: data a firm feeds into an AI system for one client can be repurposed by the program when answering questions about a different client. Your financials could literally bleed into someone else’s file. On top of that, uploading data to public or unsecured AI platforms risks unauthorized disclosure of tax return information, which carries civil and criminal penalties under IRC Sections 6713 and 7216(a), and separately violates Circular 230 Section 10.51(a)(15). “Tax return information” is defined broadly and includes your name, address, and identifying numbers (Treas. Reg. Section 301.7216-1(b)(3)). The IRS’s instruction to practitioners: handle all client data using only secure, enterprise-approved AI. If your tax preparer pastes your financial statements into a free public chatbot, they may be violating federal law with your data. Public AI vs. Private AI: What Is the Difference? The bulletin tells practitioners to use only “secure, enterprise-approved AI” and to never upload sensitive data to public or unsecured systems. Here is what that actually means. Public AI is the free, consumer version of a chatbot, used with no contract governing your data. Think free ChatGPT, free Google Gemini on a personal account, Meta AI inside WhatsApp or Instagram, or any chatbot someone signed up for with a personal email. On these platforms there is no agreement protecting confidentiality, inputs may be used to train the model, and the firm has no control over where the data goes or who can access it. When client financials are pasted into one of these tools, the information has left the firm’s control. Period. Private (enterprise) AI is a tool deployed under a commercial agreement with real data protections: the provider commits in writing that your inputs are not used to train models, data is encrypted, access is controlled by the firm, and usage can be audited. Examples include Claude for Work, ChatGPT Enterprise, Microsoft 365 Copilot running inside a firm’s own Microsoft environment, Azure OpenAI deployments, and the AI built into professional research platforms like Westlaw Edge, Bloomberg Tax, and Lexis-Nexis, which the IRS bulletin itself mentions. Some firms go further and run AI models entirely on their own computers, so sensitive data never leaves the office at all. The Three-Question Test Is there a signed commercial agreement covering confidentiality and data use? Does the provider commit in writing that inputs are not used to train its models? Can the firm control access, monitor usage, and delete data? Yes to all three means enterprise-approved. No to any means the tool should be treated as public, and your data should stay out of it. Watch for the trap in the middle: a paid individual subscription to a consumer chatbot is still not enterprise-approved, because the firm has no agreement, no administrative control, and no audit trail. The account belongs to the employee, not the firm. A simple analogy: public AI is like discussing your finances in a crowded café, where you cannot control who is listening. Private AI is a conference room in your advisor’s office with the door closed and confidentiality agreements signed by everyone inside. What the IRS Now Requires of Your Tax Professional The bulletin walks through five Circular 230 provisions that directly affect the service you receive: 1. Due diligence (Section 10.22). Your practitioner must thoroughly review every AI-created document before it reaches you or the IRS, verifying the accuracy of facts, citations, and calculations. Sole reliance on AI is not permitted; human scrutiny and editing are essential. 2. Fees (Section 10.27(a)). This one goes straight to your bottom line. Billing clients for time not actually spent because AI did the work faster, or double billing for AI-assisted tasks, may constitute an “unconscionable fee.” The OPR says cost savings should be passed on openly, that practitioners should disclose the AI activities performed, and that they should fairly credit cost reductions to the client’s account. 3. Competence (Section 10.35). Practitioners must understand both the tax law and the AI systems they use, including how those systems generate content,
The Tourism Tax Benefits Puerto Rico Built for You
Act 60 Tourism Incentives Puerto Rico, Explained for Entrepreneurs Who Actually Build Things Puerto Rico’s Act 60 Tourism Chapter isn’t just for major hotel chains. It’s a powerful tax framework built for the entire visitor economy, from mountain glamping to nautical charters. When Mateo first walked his family’s acreage in the mountains of Utuado, he didn’t see just a coffee farm. He saw a destination. He envisioned luxury tents above the clouds, farm-to-table dining, and guided agrotourism tours: a business built around the land he already owned. What he didn’t immediately see was the legal and financial framework that would make it bankable. Like most Puerto Rican entrepreneurs, Mateo initially dismissed Act 60’s Tourism Chapter as something for billion-dollar hotel chains, not a startup in the cordillera. He also thought maybe he could turn to short-term rentals. The turning point came when he sat down with me and realized Puerto Rico’s Act 60 tourism incentives weren’t written just for the Ritz and there is a better way to do tourism in Puerto Rico than with AirBnB. Act 60 was written for the visitor economy, i.e. businesses that support tourism (from locals and foreigners). Every business that contributes to why people visit Puerto Rico, and spend money while they’re here, has a seat at this table. What Actually Qualifies as “Tourist Activity” On the lodging side, the qualifying designations are broader than most entrepreneurs expect. Traditional hotels and condohotels qualify with a minimum of fifteen units, a front desk, and employment requirements. Posadas Puertorriqueñas and Guest Houses operations with seven or more units. Bed and breakfasts (minimum three rooms, resident owner, breakfast required). For those building in the agricultural space, agro-lodging, which refers to accommodations with three rooms integrated into a property operated by a bona fide farmer with a tourism incentive extension, is also an eligible designation. Glamping operations with seven or more units qualify, as do tourist villas, defined as a minimum of seven separate units. Hostels with twelve or more beds and one room, round out the lodging side. The experience side is equally broad. Nautical tourism operations such as vessel charters and jet ski rentals qualify, as do tourist marinas. Agrotourism tours on bona fide agricultural land, theme parks, golf courses operated by or associated with a qualifying hotel, casinos operated within a qualifying tourism project, and medical tourism facilities serving patients traveling from around the globe are all eligible as well. And if a project doesn’t fit neatly into any of those categories, there is a catch-all provision under Section 5(i): the Secretary of DDEC has discretionary power to qualify facilities or activities that significantly stimulate the visitor economy. Also, important to note that lenders and property owners that rent their property to tourism developers can also benefit from incentives. Hotels Condohotel Bed and breakfast Posada Guest House Touristic Villa Agrotourism Paradores Vacation Club Glamping Golf course Nautical Tourism Tourism Marina Medical Tourism 15 year contract 4% Income Tax 0% Distributions 75% exemption on real and personal property taxes (CRIM) 50% exemption on municipal taxes (patente) 100% exemption on SUT 100% 4% capital gains 12% royalties The Decree: Your Tax Environment, Contractually Guaranteed Accessing Act 60’s benefits requires obtaining a tax exemption decree, a formal binding contract with the Government of Puerto Rico protected by the constitution. A decree typically runs 15 years with the option to renew for an additional 15. For a startup navigating unpredictable early revenue, that kind of stability is itself a strategic asset. Under the Tourism Chapter, a qualifying business enjoys a 4% fixed income tax rate on eligible tourism income. For businesses with annual revenue under $3 million in their first year, the PYME (Small and Medium Business) designation reduces that rate to 2% for the first five years, a meaningful advantage during the period when cash flow is most constrained. The income tax rate is only part of the picture. The decree also provides a 100% exemption on dividends, meaning profits distributed to the owner are not taxed at the individual level. For overhead, the law offers a 75% exemption on real and personal property taxes (CRIM) and a 50% exemption on municipal taxes (patente). For operations under construction, the 100% sales and use tax and excise tax exemption on qualifying goods, services, and 75% exemption on construction materials can represent a significant reduction in build-out costs. Tourism: Non-Dilutive Capital for the Build Tax Credits While the decree protects what you earn, Tourism Investment Tax Credits help fund the project itself. Think of these as government-issued certificates with a specific dollar value tied to your qualifying investment: non-dilutive capital that doesn’t require giving up equity. Under Act 60, entrepreneurs choose between two credit structures based on their cash flow needs. The 30% Tax Credit Option is front-loaded and favored by projects with significant upfront construction costs. An initial 10% of the credit is released upon obtaining financing, with the remaining 20% distributed in three parts starting at the anniversary of the first guest’s arrival. The 40% Tax Credit Option offers a larger total credit but is back-loaded: the entire 40% is distributed across three equal installments beginning only after that first anniversary of the commencement of operations and first guest stay. Choosing between them is a function of when the project needs capital most. Larger projects or those that the construction may take years will often prefer the 30% structure for its earlier liquidity. A project with lower construction costs but higher operational ramp-up may find the 40% structure more advantageous over time. Three Ways to Turn Credits into Cash Sophisticated operators do not wait for a tax liability to monetize these certificates. There are three primary paths. The most straightforward is direct offset: applying the credit against the business’s own Puerto Rico income tax liability, dollar for dollar. Alternatively, the tax credits can be sold on the secondary market to a third-party taxpayer for cash, which is the most common route. Conservative underwriting typically assumes 90 to 92 cents on the dollar, though peak demand around tax season has driven secondary market pricing as high as 94 to 95 cents. For those
Tax Season Started. Are you ready?
How 480s can keep more money in your pockets Puerto Rico’s tax compliance has many steps; income tax returns, volume of business returns, CRIM personal property return, DOS and DDEC annual reports, informative returns, DTRH returns, and federal returns. Please take this as a reminder that there is an upcoming deadline for your required informative returns (Forms 480). WHAT ARE FORMS 480? Forms 480 are Puerto Rico informative returns, similar to U.S. Forms 1099. They report payments made by a business to vendors, service providers, and other payees during the year. Filing some of these forms is not optional, they are a statutory compliance requirement under the Puerto Rico Internal Revenue Code. For example, you are generally required to file a Form 480.6SP for any professional service provider you paid in excess of $500 and include the amounts withheld or the withholding waiver. Additionally, if Alternative Minimum Tax (AMT) applies, reporting may be required starting at $1 to preserve the deduction. There are also other Forms 480, including but not limited to those applicable to technological tools and subscriptions, royalties, advertising expenses, insurance premiums, among others. WHY ARE 480s CRITICAL? The Puerto Rico Internal Revenue Code conditions the deductibility of many business expenses on the proper and timely filing of the required Forms 480 and, when applicable, the remittance of withholding taxes. Additionally, if you are applying for tax credits under an incentives decree (including Act 60), Forms 480 are an essential part of the AUP evaluation of the compliance process. Failure to file the required 480s may result in the disallowance of expense deductions, even if the expenses were legitimately incurred. WHO MUST FILE AND WHEN? • One Form 480 must be filed by the Company per vendor for payments made during the 2025 tax year. • Filing deadlines vary by form; however, most Forms 480 are due on or before February 28, 2026. Confirm applicable deadlines with your tax preparer. PENALTIES FOR NONCOMPLIANCE. Noncompliance carries significant penalties: • $500 per form for late filing. • $500 per form for failure to file. Penalties apply per vendor, per form. IMPORTANT REMINDERS • Filing Forms 480 is separate from issuing invoices or paying vendors. • Certain payments require withholding unless a valid waiver or certificate of relief applies. • Payments for services rendered by individuals, corporations, and partnerships are generally reported on Form 480.6SP. ACTION REQUIRED. You must contact your tax preparer immediately to: Review all vendors and service providers paid during 2025; Prepare and file all required Forms 480; and Ensure that deductions and tax credits are not jeopardized due to noncompliance. Discuss with your tax preparer about your filing obligations and submitting the required forms accurately and on time. This will enable you to keep more money in your pocket by being compliant. This communication and the attached information are provided for reference and coordination purposes only. Please note that Izquierdo Law LLC is a law firm and does not preparer tax filings. We can provide you with contact information for tax preparers, if you do not have one.
No le pague taxes a Hacienda – legalmente.
Incentivo para Jóvenes Empresarios en Puerto Rico: Una Oportunidad para el Éxito Empresarial Puerto Rico tiene incentivos increíbles. El mejor es para que los empresarios jóvenes creen su negocio sin preocuparse del Hacienda, el CRIM o patentes municipales. La Ley Núm. 60-2019, según enmendada, conocida como el Código de Incentivos, (“Ley 60”) provee el Incentivo para Jóvenes Empresarios en Puerto Rico ofreciendo un apoyo financiero significativo para que estos jóvenes entre 16 y 35 años conviertan sus sueños en realidades. Este incentivo proporciona exenciones completas contributivas y beneficios económicos diseñados para fomentar la innovación, retención del talento joven y el crecimiento económico entre los jóvenes empresarios. 1. Beneficios Claves del Incentivo Los jóvenes empresarios que califiquen pueden disfrutar de los siguientes beneficios: Exención del 100% sobre el impuesto sobre ingresos – Aplica a los primeros tres años de operación o hasta alcanzar $500,000 en ingresos brutos, lo que ocurra primero. Exención del 100% sobre impuestos municipales, incluyendo: Impuesto sobre la Propiedad Mueble e Inmueble (CRIM) – Exención del pago de impuestos sobre bienes raíces y equipos comerciales. Patente Municipal – Exención del impuesto municipal normalmente aplicado a los ingresos de los negocios. Si eres Joven Empresario admitido a la práctica de la medicina, de la pediatría, sea un(a) cirujano(a) dentista o practique alguna especialidad de la odontología tienes un proceso expedito de solicitud. 2. ¿Quiénes son Elegibles? Para calificar al Incentivo para Jóvenes Empresarios, los solicitantes deben cumplir con los siguientes requisitos: Tener entre 16 y 35 años. Ser residente de Puerto Rico. Tener un grado de escuela superior o grado equivalente o estar estudiando para estos propósitos. Para un nuevo negocio en Puerto Rico que no haya estado operando previo a radicar la solicitud de decreto. Que el negocio no haya sido operado por una afiliada o por razón de reorganización. 3. Restricciones Tener solo un negocio nuevo. No tener otros decretos. Solo aplica a negocios que comenzaron luego de radicar la solicitud con el Departamento de Desarrollo Económico y Comercio (DDEC). El negocio sólo puede ser dueño jóvenes empresarios. 4. ¿Cómo Solicitar el Incentivo? El proceso de solicitud es más sencillo que otros decretos y está diseñado para agilizar el inicio de negocios: Organización: Determina si vas a formar una compañía como corporación intima, compañía de responsabilidad limitada o vas a operar como un DBA. Es importante que tu selección permita que los ingresos de la compañía fluyan a tu planilla, ya que el decreto es tuyo. Si no sabes que es mejor para ti, consulta una abogado o CPA que sepa. Prepara los documentos y la solicitud: Vas a necesitar describir la entidad, cual es el negocio que vas a ofrecer, si vas a tener un producto o servicio, y cuantos empleados vas a tener (te puedes incluir). También recomendamos explicar como generaría el negocio ingresos y alguna proyección de ingresos si la tienes. Recopila la Documentación Requerida – Debes obtener e incluir: Declaración jurada Copia de tu certificado de nacimiento, Identificación con foto emitida por PR o USA; Diploma de escuela superior, equivalente, o educación posterior. Si esta cursando estudios de escuela superior una evidencia que certifique dichos estudios. De Hacienda certificados de no deuda y radicación de planillas últimos 5 años (los consigues en SURI). Certificado de deuda de CRIM. Certificado de cumplimiento de ASUME De ser una compañía, se necesita adicionalmente De Hacienda certificados de no deuda y radicación de planillas últimos 5 años (los consigues en SURI). Certificado de deuda de CRIM. Certificado de cumplimiento de ASUME Certificado de formación o incorporación Información adicional que puedes proveer, pero no es requerida automáticamente por DDEC: registro de comerciante; un plan de negocios o, aunque sea unos párrafos explicando tu visión del negocio, plan de contratación y como la compañía va a generar ingresos; sí haz participado de alguna incubadora; certificado de antecedentes penales; curriculum vitae o resume y otros documentos que denoten tu capacidad de operar un negocio con éxito. Solicitar a través del Portal de Incentivos – Envía tu solicitud en línea a través del Portal de Incentivos de Puerto Rico. Aprobación y Cumplimiento – Una vez aprobado, presentas la aceptación mediante declaración jurada. Luego, debes proveer copia del decreto al CRIM y a la oficina de patente de tu municipio. Recuerda que el decreto te exime de pagar contribuciones sobre ingresos, de propiedad mueble e inmueble al igual que patente. No obstante, debes hacer las radicaciones apropiadas según sean requeridas y recuerda que tienes que pagar debes cumplir con todos los requisitos para mantener la elegibilidad a las exenciones. 5. Apoyo Adicional para Jóvenes Empresarios Puerto Rico también ofrece otros programas para fortalecer el éxito de los jóvenes empresarios, tales como: Incubadoras y Aceleradoras de Negocios – Programas como Grupo Guayacán, Parallel18, y Colmena66 ofrecen mentoría, redes de contactos, herramientas y acceso a capital. Subvenciones y Préstamos a Bajo Interés – El Banco de Desarrollo Económico (BDE) proporciona financiamiento y el decreto de joven empresario que puede hacer elegible para otros fondos del DDEC son los fondos de incentivos económicos y los créditos de investigación y desarrollo. Este apoyo financiero para ayudar a los emprendedores con su capital inicial. Estos recursos ayudan a los jóvenes empresarios a desarrollar modelos de negocio sostenibles y a recibir orientación de expertos. 6. ¿Por qué Puerto Rico? Puerto Rico cuenta con una combinación ideal de ubicación estratégica, jurisdicción estadounidense y beneficios contributivos para negocios, lo que lo convierte en un destino atractivo para los jóvenes empresarios. Además, el costo de vida es más bajo que en muchas ciudades principales de EE. UU., permitiendo a los emprendedores maximizar sus recursos financieros. La Ley 60 reemplazó la Ley Núm. 135-2014 con el objetivo de simplificar y mejorar el acceso a incentivos para jóvenes empresarios. Aunque los beneficios se mantienen en gran medida, la nueva ley ofrece un proceso más centralizado, exenciones más claras y mayor estabilidad en su implementación. Conclusión El Incentivo para Jóvenes Empresarios bajo la Ley 60 es una oportunidad única para jóvenes que desean establecer un negocio en Puerto Rico. Con hasta tres años de exenciones contributivas al 100% o hasta $500,000 en ingresos brutos, los jóvenes empresarios pueden construir el negocio de sus sueños y quedarse con más dinero