Earlier this year, the Internal Revenue Service (IRS) included various forms of abusive trust schemes on its 2026 “Dirty Dozen” list, and it followed this up with the publication of an extensive Abusive Trust Tax Evasion Schemes Toolkit outlining what it considers to be an abusive trust arrangement for federal tax compliance purposes. Now, following an investigation conducted by IRS Criminal Investigation (IRS CI), the U.S. Department of Justice (DOJ) has announced charges against two individuals who are accused of promoting abusive trust schemes that “resulted in tens of millions of dollars in federal income taxes not being paid to the IRS.”

Puerto Rico Act 60 allows qualifying individuals and businesses to avoid federal income tax for both ordinary income and capital gains. However, while this was precisely the purpose for which the Act (and its predecessors—Puerto Rico Acts 20 and 22) was established, the Internal Revenue Service (IRS) is now cracking down on U.S. taxpayers who use the Act to avoid federal tax liability. Crucially, the IRS is pursuing criminal inquiries in some cases, and these IRS criminal tax audits present risks for both substantial fines and prison time.