The number of criminal subpoenas issued by the New York State Department of Taxation and Finance fell in the last decade, records obtained by the New York Daily News under the Freedom of Information Act show.
But the number of civil subpoenas soared in the same period, which may reflect a shift in priority or strategy by the tax department after a 2010 change in the state’s tax whistleblower law, a former deputy state tax commissioner said. The Legislature amended New York’s False Claims Act that year to allow private citizens to bring treble-damage false claims lawsuits against taxpayers that engaged in tax fraud or filed false returns knowingly, with some oversight by the attorney general’s office.
The number of subpoenas issued by the criminal investigations division at the tax department overall fell to 858 in 2017 from 1,327 in 2008—a 35 percent decrease—after reaching a high of 1,699 in 2010, records requested under FOIA by the Daily News show. The number rose to 1,306 for one year in 2015 before dropping again.
Criminal Division investigations referred for prosecution also generally declined in the last decade with the exception of 2011, when there were 601 probes referred for prosecution—a year following the new law—and 2016 when there were 516 such probes. Last year, 259 criminal cases were referred for prosecution down from 406 in 2008.
In the same 10-year period, however, the number of subpoenas issued by the civil enforcement division soared from just one in 2010 to 1,057 in 2017. The number of civil subpoenas filed by the tax department increased most from 2013 to 2014, a jump of 56.5 percent.
A spokesman for the tax commissioner declined to comment on the data, which the office provided.
But William Comiskey, a partner at the Albany office of Hodgson Russ, a former deputy tax commissioner who left the office in 2010, said the department has begun utilizing data analytics and other statistical tools that “has impacted how they enforce things.”
“They have streamlined certain areas of enforcement and the rise of the use of subpoenas in civil enforcement makes sense,” Comiskey said. “They have far more auditors than criminal investigators,” he said of the department.
“If an audit uncovers tax liability, the matter only becomes public if the taxpayer contests the liability in the Division of Tax Appeals or if the department files a warrant,” he said, which can be an inducement to settle.
“If recovery is the goal, you recover more in the civil area than criminal. Criminal enforcement is an important part of a tax department’s total enforcement efforts. It brings credibility to the whole concept of deterrence. But there is lots of room for strategic decision-making (in what kind of course you take) and stomach for the criminal area,” he said.
The largest tax settlement under the state False Claims Act to date was a $40 million settlement in state Supreme Court in New York County in April 2017 with Alabama-based Harbert Management Corp., fund sponsors for Harbinger Capital Management, and top executives, who neither admitted nor denied the allegations.