False Claims Act will hold tax scofflaws to account

Since 2010, New York has recouped over $585 million from these big-money tax dodgers, including $330 million from Sprint-nextel in what was the largest sales tax fraud in American history. That’s over half a billion dollars that regular New Yorkers would have had to make up for in their own taxes.

There are costs that come with living in a modern state, like investing in roads, first responders, or water infrastructure. To pay for those costs we have taxes. We can and should argue about whether those taxes are too high, or who should pay more or less, but there’s one thing we can all agree on: When large, powerful corporations and wealthy individuals cheat the system and don’t pay their taxes, honest businesses are disadvantaged, and the rest of us are forced to pick up the tab.

Unfortunately, existing state laws allow some of the biggest, richest out-ofstate tax cheats to get away scot-free. And because of Gov. Kathy Hochul’s veto pen, they’ll continue to do so, leaving regular New Yorkers holding the bag.

The problem rests with a bizarre loophole in New York’s tax whistleblower law, the False Claims Act. The law was the first of its kind anywhere to only target tax enforcement against large corporations and wealthy taxpayers, when they knowingly file a false tax return to avoid paying over $350,000 in taxes.

Since 2010, New York has recouped over $585 million from these big-money tax dodgers, including $330 million from Sprint-nextel in what was the largest sales tax fraud in American history. That’s over half a billion dollars that regular New Yorkers would have had to make up for in their own taxes.

So far, so good — so good, in fact, that several other states and Washington, D.C., have similar laws. But those other localities wisely closed a key loophole that remains in our law, one that lets tax scofflaws off the hook when they cheat by knowingly not filing any tax return at all. Since there is no false record, there is no liability. In other words, big out-ofstate corporations and wealthy individuals can get away with not paying any of the taxes they owe to New York state, and all they have to do is … nothing.

That’s why we introduced legislation to close this loophole. The legislation passed overwhelmingly in 2021, only to be vetoed by Hochul on New Year’s Eve of that year. During last year’s legislative session, we worked with the governor’s office to address her concerns, and we introduced and once again passed an updated version of the bill.

However, on January 30, the bill was vetoed again.

The governor said she was concerned because the legislation was “retroactive,” allowing the state to go after tax cheating that had occurred in the past. Yet as she was aware, the False Claims Act has always been retroactive — when it passed in 2007, and when it was amended in 2010 and again in 2013 — because people who try to conceal activity to defraud the government should not be rewarded because they succeed.

Furthermore, when the tax cheats themselves argued in court that the retroactive application of the False Claims Act violated their due process, the state attorney general and the Court of Appeals rejected their argument — the same argument the governor is making. And it’s a good thing too, because if the court had agreed with Gov. Hochul, most of that $585 million would still be in the pockets of the companies who stole it.

So here we are again, back where we started, with a law on the books that allows big corporations and the richest of the rich to potentially steal hundreds of millions of dollars from New York taxpayers and get away with it, without lifting a finger. We deserve better.