NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9975
SPONSOR: Weinstein TITLE OF BILL:
An act to amend the state finance law, in relation to the liability of a
person who presents false claims for money or property to the state or a
local government
PURPOSE OF BILL:
Repeals a section of the State Finance Law to expand liability to weal-
thy individuals and corporations that knowingly and illegally fail to
file New York tax returns.
SUMMARY OF PROVISIONS OF BILL:
This bill amends section 189 of the State Finance Law by repealing
subsection 4(a)iii) to make individuals and corporations with a net
income or sales of over $1 million liable under the False Claims Act for
knowingly and illegally failing to file tax returns that cost the state
or local government at least three hundred fifty thousand dollars in
lost revenue.
JUSTIFICATION:
In 2013 the New York False Claims Act was amended to expand civil
liability to persons who defraud the state or local governments by
"knowingly concealing" or "knowingly and improperly" avoiding obli-
gations to pay money to the State or a local government. However, a
loophole exempted wealthy and individuals and businesses that knowingly
conceal or knowingly and improperly avoid established tax obligations by
not filing any tax returns at all. Due to this omission, such individ-
uals and businesses are liable under section 189(1)(g) of the New York
False Claims Act for knowingly using false records to commit a tax fraud
(including by filing false tax returns), but are not necessarily liable
for knowingly and illegally failing to file any tax returns at all.
This legislation remedies that oversight by repealing this tax fraud
loophole, so that wealthy individuals and large corporations are as
liable for knowingly not filing tax returns as they are for knowingly
filing false tax returns and statements.
It should make no difference whether a wealthy individual or large
corporation knowingly violates New York tax law by knowingly filing
false tax returns or by knowingly and improperly not filing any tax
returns (or using any other false records) at all.
LEGISLATIVE HISTORY:
2021-21: A.2543 - Passed both Houses. Veto 83 '21.
2020: A.11061 - Referred to Ways & Means.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
To be Determined.
EFFECTIVE DATE:
Immediately.
STATE OF NEW YORK
________________________________________________________________________
9975
IN ASSEMBLY
April 27, 2022
___________
Introduced by M. of A. WEINSTEIN -- read once and referred to the
Committee on Ways and Means
AN ACT to amend the state finance law, in relation to the liability of a
person who presents false claims for money or property to the state or
a local government
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraphs (a) and (b) of subdivision 4 of section 189 of
2 the state finance law, as amended by section 8 of part A of chapter 56
3 of the laws of 2013, are amended to read as follows:
4 (a) This section shall apply to claims, records, [or] statements, and
5 obligations made under the tax law only if: (i) the net income or sales
6 of the person against whom the action is brought equals or exceeds one
7 million dollars for any taxable year subject to any action brought
8 pursuant to this article; (ii) the damages pleaded in such action exceed
9 three hundred and fifty thousand dollars; [and (iii) the person is
10 alleged to have violated paragraph (a), (b), (c), (d), (e), (f) or (g)
11 of subdivision one of this section; provided, however, that nothing in
12 this subparagraph shall be deemed to modify or restrict the application
13 of such paragraphs to any act alleged that relates to a violation of the
14 tax law] and (iii) for purposes of such application to paragraph (h) of
15 subdivision one of this section, knowledge shall not be established
16 because of an act occurring by mistake or as a result of mere
17 negligence.
18 (b) The attorney general shall consult with the commissioner of the
19 department of taxation and finance prior to filing or intervening in any
20 action under this article that is based on the filing of false claims,
21 records or statements made under the tax law on any knowing violation of
22 the tax law. If the state declines to participate or to authorize
23 participation by a local government in such an action pursuant to subdi-
24 vision two of section one hundred ninety of this article, the qui tam
25 plaintiff must obtain approval from the attorney general before making
26 any motion to compel the department of taxation and finance to disclose
27 tax records. No qui tam action allowed by this subparagraph that
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD15362-03-2
A. 9975 2
1 alleges a violation of paragraph (h) of subdivision one of this section
2 shall be allowed that is otherwise barred under paragraph (a) of subdi-
3 vision nine of section one hundred ninety of this article. If the attor-
4 ney general or a local government does not proceed with a qui tam
5 action alleging a violation of paragraph (h) of subdivision one of this
6 section, and the person bringing the action conducts the action, the
7 court may award to the defendant its reasonable attorneys' fees and
8 expenses if the defendant prevails in the action and the court finds
9 that the claim of the person bringing the action was clearly frivolous,
10 clearly vexatious, or brought primarily for purposes of harassment.
11 § 2. This act shall take effect immediately and shall apply to all
12 false claims, records, statements and obligations concealed, avoided or
13 decreased on, prior to, or after such effective date.
