Comptroller Stringer Audit: Department of Finance Gave $4 Million in Veterans’ and School Tax Reductions to 1,500 Ineligible Property Owners

An additional $2 million may have been lost to ineligible owners of 571 co-ops and other properties.

  The Department of Finance (DOF) improperly gave away over $4 million in property tax reductions that are intended to benefit veterans and individual homeowners, a new audit from New York City Comptroller Scott M. Stringer shows. The audit report shows that DOF improperly granted or continued Veterans’ Exemptions to over 1,500 ineligible property owners.  In more than 1,000 of those cases, DOF failed to remove the tax breaks after the eligible veteran or family member moved or passed away, and the agency also allowed 60 corporations and LLC’s to receive the exemptions inappropriately.  In some cases, the eligible veterans had moved away in the 1960s, in other cases, the veteran had died in the early 2000s, yet DOF allowed the properties to continue receiving Veterans’ Exemptions through at least July 1, 2016.

 The Comptroller’s audit analyzed records regarding property owners who have received Veterans’ Exemptions over a six-year period beginning July 1, 2011 and calculated the losses from improperly-continued exemptions through June 30, 2017. In total, the Comptroller’s Office identified over $4 million lost to the City from tax reductions improperly given to ineligible property owners through Veterans’ and School Tax exemptions.

 In addition, DOF allowed Veterans’ Exemptions and resulting tax deductions to continue for 571 properties—456 cooperative properties and 115 others—after the eligible veteran died, where no other eligible recipient was named in DOF’s records. Those cases may have cost the city nearly $2 million more in improper tax reductions.

 “This is just wrong. When city government stops minding the store, city taxpayers lose. As Memorial Day approaches, we’re finding out that our city government is handing over millions of dollars that are supposed to help our veterans—to those who aren’t veterans. It’s incredible,” said New York City Comptroller Scott M. Stringer. “Our veterans mean so much to our city and our country. With 1,500 property owners getting veterans’ tax breaks they haven’t earned, it’s time for our Department of Finance to correct the inequity and recover the funds that should be supporting essential City services.” 

Key findings from the audit include:

• DOF failed to remove Veterans’ Exemptions from 740 ineligible properties that were transferred to owners who were not authorized exemption-recipients, costing the City at least $1,654,869 in uncollected revenue. 

• DOF failed to remove Veterans’ Exemptions from at least 341 properties after the eligible homeowners died, which resulted in the loss of at least $798,346.

• DOF may have inappropriately applied Veterans’ Exemptions and resulting tax reductions totaling $1,804,979 to 456 cooperative properties and 115 other properties after the eligible veteran’s death. 

• DOF allowed 162 homeowners to receive multiple Veterans’ Exemptions simultaneously, which is not allowed.

• DOF allowed at least 60 properties owned by ineligible corporations and limited liability companies (LLCs) to improperly receive Veterans’ Exemptions. As to those 60 instances, the audit covered a seven-year period dating back to July 1, 2010.

The Comptroller’s audit laid out a series of 18 recommendations for DOF to correct the tax rolls, recoup lost revenue, and prevent recurrence of these costly errors going forward.

Those recommendations include: 

• Remove Veterans’ Exemptions from properties that were transferred from eligible to ineligible owners, retroactive to the date of transfer. 

• Implement controls to remove Veterans’ Exemptions retroactively to the date of transfer when new owners who do not demonstrate eligibility for them.

• Recover the $1,654,869 in unwarranted tax reductions that resulted from the improper continuation of Veterans’ Exemptions after the properties were transferred to new, presumptively-ineligible owners.

• Verify whether homeowners eligible for Veterans’ Exemptions are deceased as reported by the Social Security Administration (SSA) and this audit report, and determine whether the current property owners are eligible for the exemption as qualified recipients.

• Implement controls to remove the exemptions from properties whose eligible owners are deceased, retroactive to the date of death. 

• Recover the $798,346 in unwarranted tax reductions that resulted from the improper continuation of Veterans’ Exemptions after the qualifying homeowners died.

• Investigate whether the 456 cooperative units and 115 other properties that have continued to receive Veterans’ Exemptions following the death of the eligible veteran-homeowner are currently owned by eligible individuals.

• Recover the $915,173 in unwarranted tax reductions improperly granted to properties containing four or more units. 

• Remove the unwarranted Veterans’ Exemptions from properties owned by either corporations or LLCs. 

• Implement adequate controls to prevent properties owned by corporations or LLCs from receiving Veterans’ Exemptions and school tax exemptions.

• Implement computer edit checks that will automatically:
  • Reject Veterans’ Exemptions for properties owned by corporations and LLCs;
  • Prorate Veterans’ Exemptions for properties that contain more than four units; and
  • Reject multiple Veterans’ Exemptions for each on property owned by an individual veteran or other eligible owner.

To read the full audit, click here.