Individual Income Tax Insights: States are Naming Names When it Comes to Delinquent Taxes

Some states are making a list, and they’re checking it twice. They’re going to find out who can be persuaded into paying their delinquent taxes.

Yes, a number of states are persuading taxpayers to pay their delinquent taxes by publishing their names online, and it has turned out to be a very profitable practice at that. Roughly a third of the states publish annual lists of delinquent taxpayer names, taxes owed, and any amount that they have paid, according to a May 28 article from The PEW Charitable Trusts. These lists usually include corporations, other non-corporate businesses, individuals, or a mix of all three. As the article points out, almost all of the states that have taken up this strategy have been exceptionally happy with the results.

For example, the Burlington Free Press reported in February that Vermont has recouped $850,366 in delinquent taxes since the program began. According to the California Franchise Tax Board, the state has recovered $430,011.85 as of June 8, from the current list of 500 delinquent taxpayers, and, since the state began to publish this list, 90 percent of all delinquent taxpayers listed have made payments in excess of $427 million.  

Mechanically, these programs seem to be fairly simple. First, the state creates a list of taxpayers in arrears. The number of taxpayers included on these lists differs from state to state. New York lists both the state’s top 250 individual and business debtors. By contrast, California has a list of their top 500 corporate and individual income tax delinquents. 

Generally, prior to publishing this list for all of the world to see, the state will contact the people listed, and give them the option to either pay their delinquent taxes outright, or at the very least, enter into a payment plan with the state. Georgia, California, and Vermont all subscribe to this practice. New York only lists individuals who have an outstanding tax warrant, a process in which the taxpayer is given both notice and the ability to appeal the debt long before being added to the list.  

If taxpayers comply prior to the list being published, they are left off the list completely; if they comply after the list has been published, they are removed from the list. For example, Georgia revises and publishes a new list weekly, and New York posts a new revised list every month. If debtors in either New York or Georgia resolve their outstanding tax liability, their names will remain on the list until it is updated, at which time their names will be replaced by the names of new delinquent taxpayers.

Even with all of its success, the practice of publishing delinquent taxpayer information isn’t without critics. Many have raised questions of taxpayer privacy. However, regardless, of privacy concerns, the one thing that can’t be questioned is the effectiveness of this new tool in collecting delinquent taxes for the state.

Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Is it a violation of taxpayer privacy to publish a list of delinquent taxpayer names?

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