Property owners in Erie County's 39 municipalities last year received about $1.1 million in state property tax rebates for more than 1,800 rental properties that were not eligible for such relief under the Basic STAR program, county prosecutors said Monday.
District Attorney Frank J. Clark stopped short of saying the state has been shooting itself in the foot by the way it reimburses New York's 64 counties. But he and James Quinn Auricchio, head of his new Revenue Crimes Bureau, lauded Buffalo officials for aiding them in uncovering what they described as widespread abuse -- either intentional or unintentional -- of the tax rebate program.
Clark and Auricchio stressed that past property-owning offenders who took advantage of the state's poorly worded application form are unlikely to face criminal prosecutions. But they said they are still working with the state Department of Taxation and Finance to determine what, if any, action can be taken to recoup money mistakenly or fraudulently obtained.
Future offenders will face prosecution, they said.
Under state law, municipalities are reimbursed through the Basic School Tax Relief Program for revenue lost due to eligible residential properties that are owner-occupied and whose owners apply for the tax exemption.
Clark and Auricchio said their six-month investigation found properties that were not owner-occupied and still received both reduced tax rates and rebate checks in 2006.
"In many cases, homeowners, including one who lives in California, received relief for more than one home" in Erie County, Clark said.
Clark said that "while the application process for STAR makes it clear that only owner-occupied properties qualify . . . when we began interviewing some homeowners it became clear that many were not aware they were violating the law."
Aside from Buffalo's rental registration program, there has been little incentive for tax assessors to press for information that could reveal when owners are not living on a property, and until recently the state did little to verify a homeowner's qualifications, he added.
Clark refused to identify the California landlord who has been benefiting from Erie County rental properties under the STAR program. Of the "offenders" in Erie County, nearly 600 property owners in Buffalo were discovered thanks to the aid of city assessor's office and the its Task Force on Housing, Clark said.
Clark and Auricchio said they have been assured by the state Department of Taxation and Finance that this year's application form will make it easier for prosecutors to sort out those who are knowingly breaking the law from those who simply forget they're no longer entitled to an exemption for what was once their primary residence.
"If a homeowner applies for relief that they know they are not qualified to receive by including some false information in their application, they may be committing a felony," Clark said.
Thomas Bergin, an Albany spokesman for the state Department of Taxation and Finance, said his agency "obviously is concerned" and looks forward to working with Erie County officials to correct the problem. But Bergin stressed that his department just "cuts the checks" based on information provided by municipalities.
However, when the new STAR application forms come out in early August, checking residences should be much easier since applicants for the first time will have to provide their Social Security number for cross-checking, Bergin said.
Clark said his office's investigation was a product of the same $180,000 state grant that allowed him to set up the Crimes Against Revenue Bureau and which led to the sales tax prosecution of former Erie County Legislator George Holt and the ongoing probe of a businessman he refused to identify.