NY State Senate Bill 2017-S4377

Senate Bill S4377

2017-2018 Legislative Session

Creates the offense of defrauding the government in the first degree and expands the definition of conspiracy in the fourth degree; relates to expanding the definition of tax fraud acts

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Archive: Last Bill Status - In Senate Committee Codes Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 03, 2018	referred to codes
Feb 10, 2017	referred to codes

co-Sponsors

2017-S4377 (ACTIVE) - Details

Current Committee:: Senate Codes
Law Section:: Penal Law
Laws Affected:: Add §195.22, amd §105.10, Pen L; amd §1801, Tax L; amd §11-4002, NYC Ad Cd
Versions Introduced in Other Legislative Sessions:: 2019-2020: S2647
2021-2022: S1331
2023-2024: S2266

2017-S4377 (ACTIVE) - Summary

Creates the offense of defrauding the government in the first degree and expands the definition of conspiracy in the fourth degree; relates to expanding the definition of tax fraud acts.

2017-S4377 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S4377

 TITLE OF BILL :

An act to amend the penal law, in relation to creating the offense of
defrauding the government in the first degree and expanding the
definition of conspiracy in the fourth degree; and to amend the tax
law and the administrative code of the city of New York, in relation
to expanding the definition of tax fraud acts

 PURPOSE :

1. Creates the offense of defrauding the government in the first
degree. 2. Expands the definition of conspiracy in the fourth degree;
relates to expanding the definition of tax fraud acts.

 SUMMARY OF SPECIFIC PROVISIONS :

Section 1 adds section 195.22 to the penal law, creating a first
degree offense for defrauding the government through an automated
sales suppression device, defining automated sales suppression
devices, and extending defrauding government in the first degree as a
class D felony;

Section 2 adds subdivision 4 to section 105.10 of the penal law,
expanding the definition of conspiracy in the fourth degree to include

felony of defrauding government in the first degree;

Section 3 amends subparagraphs 7 and 8 of paragraph (a) in section
1801 of tax law and adds subparagraph 9, expanding the definition of
tax fraud acts to include the use of automatic sales suppression
devices.

Section 4 amends subparagraphs 7 and 8 of paragraph (a) of section
11-4002 of the administrative codes of the city of New York and adds
subparagraph 9, expanding the definition of tax fraud acts to include
the use of automatic sales suppression devices.

Section 5 states the effective date.

 EXISTING LAW :

None.

 JUSTIFICATION :

For years, foreign countries with national sales taxes have struggled
to combat technology that enables retailers to skim sales taxes and
under report other tax liabilities (e.g. personal income tax,
corporate income tax) by concealing from auditors their actual sales
data. This technology, which includes automatic sales suppression
devices, such as "zappers" and "phantom-ware," automatically
suppresses digital sales figures recorded at electronic cash registers
and Point of Sale systems.

It is difficult for auditors to detect the use of automated sales
suppression devices through the traditional process of cross checking
transaction documents because the technology conceals almost all
traces of the digital manipulation. Countries such as Germany and
Greece have required retailers to install technological
countermeasures that make it easier for auditors to detect the use of
automated sales suppression devices. In September 2010, the Canadian
province of Quebec began requiring all restaurants to install in their
electronic cash registers anti-sales suppression devices. This cost
Quebec an estimated $425 million ($410 million U.S.) in 2007-2008.
Richard T. Ainsworth, a Boston University school of Law tax professor
and a leading expert on zappers and other automated sales suppression
devices, estimates that New York has faced a loss of $1.7 billion
annually due to these devices.

Because the United States lacks a national sales tax, there is no
federal initiative to combat this tax fraud and most states are
ill-prepared to deal with this issue. Nationwide, only a handful of
people have been caught using this technology, including two in
Michigan and one in Connecticut. Over 20 states have already enacted
legislation to prohibit and criminalize automated sales suppression
devices. Ainsworth has published several papers documenting the spread
of zappers and phantom-ware in Quebec, Greece, Germany, the
Netherlands and other European nations. Given that the first zappers
were made in the United States and that this technology is widely used
in the Canadian province just above of New York's northern border, it
is imperative for the State to address this issue.

The legislation would establish prohibitions and penalties related to
the manufacture, sale, purchase, or use of automated sales suppression
technology, creation of conspiracy for those who defraud the
government, and the liability of those who perpetrate tax fraud.
Additionally, this legislation would increase tax revenue by over $1
billion annually.

 FISCAL IMPACTS :

Estimates increased tax revenue as high as $1 billion annually.

 EFFECTIVE DATE :
This act shall take effect on the first November next succeeding the
date upon which it shall have become a law.

2017-S4377 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4377
 
                        2017-2018 Regular Sessions
 
                             I N  S E N A T E
 
                             February 10, 2017
                                ___________
 
 Introduced by Sens. KRUEGER, MONTGOMERY -- read twice and ordered print-
   ed, and when printed to be committed to the Committee on Codes
 
 AN  ACT  to  amend the penal law, in relation to creating the offense of
   defrauding the government in the first degree and expanding the  defi-
   nition  of  conspiracy  in the fourth degree; and to amend the tax law
   and the administrative code of the city of New York,  in  relation  to
   expanding the definition of tax fraud acts
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The penal law is amended by adding a new section 195.22  to
 read as follows:
 § 195.22 DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE.
   A  PERSON  IS  GUILTY OF DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE
 WHEN, HE OR SHE KNOWINGLY MANUFACTURES, SELLS,  INSTALLS,  OR  USES,  OR
 ATTEMPTS  TO  MANUFACTURE,  SELL,  INSTALL  OR  USE,  AN AUTOMATED SALES
 SUPPRESSION DEVICE FOR THE PURPOSE OF ENABLING OR ASSISTING  ANY  PERSON
 TO  EVADE  ANY  TAX  OWED TO THE STATE OR A POLITICAL SUBDIVISION OF THE
 STATE OR ANY INSTRUMENTALITY OF THE STATE.
   FOR PURPOSES OF THIS SECTION AN "AUTOMATED SALES  SUPPRESSION  DEVICE"
 IS  A SOFTWARE PROGRAM THAT FALSIFIES ELECTRONIC RECORDS FOR THE PURPOSE
 OF EVADING ANY TAX OWED TO THE STATE, OR ANY  POLITICAL  SUBDIVISION  OF
 THE  STATE,  OR  ANY  INSTRUMENTALITY  OF THE STATE. AN "AUTOMATED SALES
 SUPPRESSION DEVICE" INCLUDES ANY SOFTWARE PROGRAM THAT IS (A) MAINTAINED
 ON A USB MEMORY STICK OR THUMB DRIVE, ZAPPER, REMOVABLE COMPACT DISC  OR
 OTHER EXTERNAL DEVICE, OR (B) EMBEDDED IN THE OPERATING SYSTEM AS "PHAN-
 TOM WARE," OR (C) OTHERWISE ACCESSED REMOTELY.
   DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE IS A CLASS D FELONY.
   § 2. Section 105.10 of the penal law is amended by adding a new subdi-
 vision 4 to read as follows:
   4.  THE  FELONY  OF  DEFRAUDING  THE GOVERNMENT IN THE FIRST DEGREE AS
 DEFINED IN SECTION 195.22 OF THIS PART (DEFRAUDING THE GOVERNMENT IN THE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD08471-01-7

 S. 4377                             2
 
 FIRST DEGREE), BE PERFORMED, HE OR SHE AGREES WITH ONE OR  MORE  PERSONS
 TO ENGAGE IN OR CAUSE THE PERFORMANCE OF SUCH CONDUCT.
   § 3. Subparagraphs 7 and 8 of paragraph (a) of section 1801 of the tax
 law, as added by section 15 of subpart I of part V1 of chapter 57 of the
 laws  of  2009, are amended and a new subparagraph 9 is added to read as
 follows:
   (7) with intent to evade any tax fails to pay that tax; OR
   (8) issues an exemption certificate,  interdistributor  sales  certif-
 icate, resale certificate, or any other document capable of evidencing a
 claim that taxes do not apply to a transaction, which he or she does not
 believe  to  be  true and correct as to any material matter, which omits
 any material information, or which is  false,  fraudulent,  or  counter-
 feit[.]; OR
   (9) USES AN AUTOMATED SALES SUPPRESSION DEVICE AS DESCRIBED IN SECTION
 195.22 OF THE PENAL LAW (DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE).
   §  4. Subparagraphs 7 and 8 of paragraph (a) of section 11-4002 of the
 administrative code of the city of New York, as added by chapter 201  of
 the  laws of 2009, are amended and a new subparagraph 9 is added to read
 as follows:
   (7) with intent to evade any tax imposed under any designated  chapter
 of this title, fails to pay that tax; OR
   (8)  issues  an  exemption certificate, interdistributor sales certif-
 icate, resale certificate, or any other document capable of evidencing a
 claim that taxes imposed under a designated chapter of this title do not
 apply to a transaction, which he or she does not believe to be true  and
 correct as to any material matter, which omits any material information,
 or which is false, fraudulent, or counterfeit[.]; OR
   (9) USES AN AUTOMATED SALES SUPPRESSION DEVICE AS DESCRIBED IN SECTION
 195.22 OF THE PENAL LAW (DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE).
   § 5. This act shall take effect on the first of November next succeed-
 ing the date upon which it shall have become a law.

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Senate Bill S4377

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Sponsored By

Liz Krueger