Audit Finds DOF Mismanagement of Property-Related Taxes

NYC Comptroller Scott M. Stringer recently released a new audit that found the New York City Department of Finance (DOF) performed lackluster oversight of its Real Property Transfer Tax (RPTT) review processes and its tax collections in Fiscal Years 2016 and 2017. According to the analysis, in 2016 and 2017, the DOF failed to collect at least $620,000 it was due from levies on property sales and more than $2 million in annual assessments on houses, apartments, and commercial properties.

In a sample of 179 RPTT returns, auditors found that approximately $620,000 in RPTT revenue may not have been collected for the city due to inadequate control of these operations and errors in the system the agency used to determine the RPTT amount due. Of the sample of RPTT returns examined in the audit, 40 percent were missing one or more key documents required by DOF to be filed, which restricted the agency’s ability to verify whether the appropriate tax owed to the city as part of the property transaction was applied.

In addition, of the sampled returns, the audit found that DOF’s computer system — Automated City Register Information System (ACRIS) — did not function as intended, resulting in zero tax owed on some occasions when, in fact, taxes were owed to the city.

The analysis also found the agency's process for revoking tax exemptions problematic. Stringer's team identified 26 cases in which the department didn’t properly reinstate the full fiscal burden upon a property despite it passing from a tax-exempt use to a non-tax-exempt one. This resulted in a loss of $2,095,701 for the city.

The report recommends that the city enhance its training and review procedures, upgrade ACRIS to check for missing materials and miscalculated tax assessments, and automatically reimpose the Real Estate Tax any time a property changes hands.