Jay Nanavati and Micah Cerynik co-wrote an article for CPA Journal titled “Puerto Rico Act 60 Investigations: How the DOJ and IRS Get Evidence from Investors’ Own Lawyers.”
Jay and Micah explain how the Department of Justice (DOJ) and IRS have significantly escalated their criminal investigation into alleged abuses of Puerto Rico's Act 60 (formerly known as Act 20 and Act 22) by seeking access to confidential communications between investors and their lawyers.
DOJ and IRS have been particularly focused on whether investors have falsely claimed residency in Puerto Rico; have improperly characterized gains that accrued before their Puerto Rico residency as eligible under Act 60; and/or have utilized structured transactions to avoid taxes on income that would otherwise be taxable.
In ramping up their scrutiny of Puerto Rico’s Act 60, the DOJ and IRS have been using powerful investigatory tools that investors may not know about.
As Jay and Micah state, “For Act 60 investors, one tool deserves special attention: the use of grand jury subpoenas to acquire privileged and confidential documents and testimony from investors’ own lawyers. Understanding how subpoena power and the crime-fraud exception to the attorney-client privilege operate is critical to assessing risk.”
The duo explains that, while attorney-client privilege generally protects communications between lawyers and clients, federal grand juries have broad subpoena powers. In particular, the government can use the “crime-fraud exception” to circumvent attorney-client privilege protections. If prosecutors can convince a court that a client used legal advice to further a crime or fraud, the privilege can be pierced, even if the attorney acted entirely in good faith and had no knowledge of any wrongdoing.
Investors who sought legal advice in good faith to comply with Act 60 should still be protected by attorney-client privilege. The exception only applies if the client's purpose was to further criminal or fraudulent conduct.
While attorney-client privilege remains a strong protection for taxpayers who sought legal advice legitimately, the government appears prepared to litigate the crime-fraud exception to obtain otherwise confidential communications if it believes they were used to facilitate tax fraud. Therefore, privileged communications may not remain protected if prosecutors can establish evidence of fraudulent intent.
Read the complete article here.
About Jay
Jay is a criminal tax defense attorney and a fellow of both the American College of Trial Lawyers and the American College of Tax Counsel. He represents individuals and entities facing investigations and prosecutions by the IRS, the FBI, state investigative agencies, U.S. Attorney’s offices, and the Department of Justice Tax Division. Jay has defended clients against federal investigations and charges throughout the country, and he has substantial experience representing clients accused of promoting or participating in so-called tax shelters, including captive insurance programs, conservation easements, and Puerto Rico’s Act 20/Act 22 program. In many instances, Jay represents tax professionals facing such accusations.
About Micah
Micah graduated from the University of Virginia in May 2025, where he majored in Political Philosophy, Policy, and Law, an honors interdisciplinary major, and minored in Religious Studies.
