NYC Property Tax Filing Needs Major Reform: Grand Jury Report

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A state grand jury has found New York City's property tax system is compromised.

The current laws and regulations fail to prevent false property tax filings and impose inadequate penalties on those who commit fraud, according to the grand jury report announced Tuesday by Manhattan District Attorney Cyrus Vance Jr.

Property taxes are the largest source of New York City's revenue, generating nearly $18 billion in fiscal year 2012. But it's impossible to estimate how much money fraudulent claims cost the city, according to the Department of Finance and the city's Tax Commission. Officials in both departments characterized the battle against fraud as an issue of fairness.

"If someone lies on their income and expense forms and has a lower assessment because of that, everybody else is picking up that burden," Tax Commission president Glenn Newman said in an interview.

The report examined the Real Property Income and Expense (RPIE) statements required for properties with assessed values of more than $40,000— which is about 70,000 to 80,000 properties in the city, according to the Department of Finance.

The owners of rental properties, co-cops, condos, hotels, motels, department stores, power plants, theaters and parking garages and lots must submit RPIE forms.

The grand jury report made seven recommendations for greater oversight of tax filings and stiffer penalties for people and businesses that submit false or inaccurate forms. The changes would give the DA’s office more power to prosecute, but it prefers to stop the problems from happening in the first place.

"We're really more interested in deterring this than in prosecuting it," Chief Assistant District Attorney Daniel Alonso said.

As is, those who commit fraud often go undetected or get a slap on the wrist.

"This is the lowest-level felony," Alonso said. "Punishable by no mandatory minimum and, at most, one and a third to four years in prison."

The grand jury recommendations would make real property tax evasion a more serious felony. It also calls for an earlier deadline for tax-related filings, which would give the Department of Finance more time to conduct a review, and false filers to be prosecuted for perjury, a felony offense.

The City Council has introduced a bill that would make those two recommendations law.

Other suggestions, such as civil sanctions and updated fraud detection technology, would require approval or action by the State Legislature, Mayor's Office, or various city agencies.