New York City has decided to get tough with entities that have been cheating on their property tax payments by fraudulently obtaining nonprofit exemptions.
The Department of Finance has begun taking steps to collect $9.2 million from 72 properties that have been getting the nonprofit tax break in spite of the fact that they actually function as money-making entities. The agency’s first move was to recently mail letters to the deceptive property owners that gave them an ultimatum of 45 days to furnish proof of their nonprofit status and consequent exemption from taxes. If the owners will be unable to prove their eligibility for exemption, they will be legally obligated to pay the amount due, stated department spokesman Owen Stone.
“If you are entitled to an exemption, we want you to get it, but if you are not entitled to an exemption, we want to take it away from you,” Stone said matter-of-factly. “It is not fair to those who play by the rules when someone takes property-tax benefits that they are not entitled to.”
According to Stone, the practical difference between businesses that attempt to avoid paying property taxes and those that willingly pay the full amount they owe the city “really puts the businesses that do the right thing at a tremendous disadvantage.”
The most notorious offender in this regard is the Chatwal Hotel in Times Square, which owes $2.9 million for a tax exemption that was officially revoked in 1999, the city says. According to a report last year in the New York Post, the hotel owed New York City five years’ worth of back taxes because it continued to be awarded the nonprofit exemption that had been assigned to a church that once was in operation at the same address.
At the time of that report, the department admitted their ongoing allowance of the exemption was an oversight, but the hotel continued to withhold any property taxes – a debt that has now accrued for a total of 14 years.
The second largest debt is a physician’s office in Brooklyn that has received the nonprofit tax exemption since 2001, in spite of its total lack of legal qualification, according to city data. The owner of that office currently owes the city a staggering $1.5 million in back taxes.
The Department of Finance is also attempting to obtain $208,000 in back taxes from St. Demetrios Greek Orthodox Church in Jamaica, Queens, which for a number of years has been claiming nonprofit status for a neighboring 99-cent store under the church’s management. When the Post initially reported on the situation last year, the DOF conducted an investigation and determined that St. Demetrios’ discount store is not a charity enterprise.
Another of these “tax-dodging” cases concerns a Brooklyn property that has built up a tax debt of $56,000 since 1984, according to information obtained by the Post.
This latest crackdown is not the first time New York City has made a concerted effort to collect such taxes. In 2012, it commenced the taxation of 821 properties that collectively owed $25 million for improperly receiving nonprofit exemptions.
Tax exemptions for nonprofit entities are granted to a broad range of properties, including schools, hospitals, houses of worship and museums, among many others.