BILL NUMBER: S8872

SPONSOR: HOYLMAN
 
TITLE OF BILL:

An act to amend the state finance law, in relation to the liability of a
person who makes or uses a false record or statement material to an
obligation to pay money to the state or a local government under the tax
law, or who conceals or improperly avoids or decreases an obligation to
pay money to the state or a local government under the tax law

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 of the bill adds a new subdivision 1-a to section 189 of the
State Finance Law ("Liability for certain acts") to create liability
under New York's False Claims Act for any individual or business with a
net income or sales of one million dollars or more who: (1) makes, uses,
or causes to be made or used, a false record or statement material to
their own obligation to pay taxes owed to the State or a local govern-
ment, or an obligation of a subsidiary, partnership, corporation or
entity that they control; or (2) conceals or improperly avoids or
decreases their own obligation to pay taxes owed to the State or a local
              

government, or an obligation of a subsidiary, partnership, corporation
or entity that they control; where such taxes owed exceed $350,000. In
such instances, the individual or business would be liable for damages,
including interest owed on the unpaid tax obligations.

Section 2 of the bill clarifies the definition of "knowing and knowing-
ly" found in section 188 of the State Finance Law for the purposes of
the False Claims Act.

Section 3 of the bill amends paragraph (a) of subdivision 4 of section
189 of the State Finance Law to clarify that the section applies to
obligations made under the tax law under certain specified circum-
stances.

Section 4 of the bill is the effective date.

 
JUSTIFICATION:

The New York False Claims Act (Article 13 of the State Finance Law) is a
powerful and effective civil fraud-fighting and whistleblowing tool,
providing a cause of action that may be brought by the Attorney General,
a local government, or a private citizen in a qui tam suit for false
claims that have been submitted to New York State or a local government.
Amendments to the New York False Claims Act adopted in 2010 authorized
claims based on knowingly-committed tax fraud where the person or busi-
ness against whom the action is brought has an annual net income or
sales of $1 million or more, and the damages pleaded in the action
exceed $350,000.

This legislation would allow the New York False Claims Act to be used as
a tool to recover large unpaid tax obligations based on false claims
made by wealthy individuals or businesses without the statutory require-
ment that such false claims were made knowingly. Damages in such claims
would be limited to the tax obligation owed, plus consequential damages
including any interest owed on the unpaid obligation pursuant to New
York State Tax Law, as opposed to the treble damages and statutory civil
penalties found elsewhere in the New York False Claims Act.
By doing so, the New York False Claims Act would become an important
tool to complement tax enforcement efforts being undertaken by the New
York State Department of Taxation & Finance, by allowing the Attorney
General, local governments, and citizen whistleblowers to bring claims
to recover taxes that were improperly unpaid to New York State or local
governments by high income individuals and businesses without needing to
clear the evidentiary hurdle of proving that such false claims were made
knowingly.

 
PRIOR LEGISLATIVE HISTORY:

None, new bill.

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to all false
claims, records, statements and obligations concealed, avoided or
decreased on, prior to, or after such effective date,.