The Battle To Preserve An Unbelievable Loophole In New York’s Tax Code

by | Oct 19, 2022 | Politics

Eight years ago, a whistleblower accused a credit card processor for many of Manhattan’s topflight hotels, including the Waldorf Astoria and the Trump Hotels, of dodging New York state taxes.The person alleged that the company, POST Integrations, was using the fact that it is headquartered in Arizona as an excuse not to pay New York, despite doing much of its business there. The case went to court. AdvertisementBut instead of battling over the core issue — whether POST Integrations knowingly committed tax fraud — the two sides spent years litigating over whether the company had technically ever lied about it. The company initially argued that it couldn’t be accused of submitting a false record because it never filed that New York tax return. And, in a sense, they were right.The New York state law that allows whistleblowers to expose tax fraud has what critics say is a glaring loophole that protects the state’s most skillful tax cheats. While filing a false tax return is criminal, the law doesn’t allow whistleblowers to bring an accusation without pointing to a false record.It remains difficult to prosecute someone who is not paying the taxes they owe but who is clever enough not to leave a paper trail.“Why in the world should it matter to authorities whether someone committed tax fraud by filing a false tax return or by never filing anything?” asked Gregory Krakower, who drafted the original law more than a decade ago as counsel to the New York attorney general and has fought to close the loophole; he is now an adjunct professor at Cardozo Law School. “If a large, out-of-state company knowingly and improperly pays no taxes and never filed a return, are we going to protect and empower that? It makes no sense.”AdvertisementBut as bizarre as the loophole may be, it has survived multiple attempts to slam it shut. Now, a bill to close the loophole is headed to New Yor …

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