State Tax Snapshot: In the Digital Age, Snitches Retain Place in Property Tax Enforcement Arsenals

They may not top the FBI’s Ten Most Wanted list, but significant rewards are being offered for reporting them to the proper authorities. We’re talking about property tax cheats, of course.

Local taxing authorities around the country have been increasingly trying to combat diminished revenues because of those who cheat the system. In 2011, San Francisco City Supervisor David Chiu introduced an ordinance to continue the city’s five-year-old “real estate watchdog program,” under which property tax whistleblowers can receive as a reward a percentage of any taxes the city collects from the property owner turned in, up to a maximum of $100,000. [S.F., Cal., Ordinance 0048-11 (March 15, 2011)]

In San Francisco, properties are reassessed when ownership changes hands, but if the city overlooks an ownership change, the property’s value will stay the same, and the new owner will be paying property taxes based on an outdated market value. To date, the largest payout was $60,000, which went to the person who exposed an apartment building owner who owed more than $1.3 million in property taxes, according to a San Francisco Examiner article . 

Offering incentives for ratting out fellow taxpayers is nothing new—before its admission to the Union, Arizona’s Territorial Legislature authorized rewards for whistleblowers bringing to light instances of fraudulent under-reporting of property values. However, some taxing districts are taking a novel approach to deal with the age-old problem.

More recently, Franklin County, Ohio began using aerial photography and computer technology to detect when property owners fail to report improvements to their properties. The county’s computerized mapping technology allows property-checkers to zoom in on specific parcels closely enough to detect any unreported changes or improvements since the county’s last reassessment. Even small add-ons to single-family residential homes can be detected.

Through this new system, Franklin County has cut the number of property-checkers it employs by nearly two-thirds, saving county taxpayers roughly $1.5 million annually.

Similarly, Miami-Dade County announced last year that it has a new “smart weapon” to combat property tax fraud—a software system that helps detect improperly claimed exemptions. In a six-month period in 2012, the software identified violations that the county estimated would generate over $22 million in additional liens.  

However, despite these 21st-century methods of combating property tax fraud, don’t expect the “old-school” approach to fall by the wayside. Even with its advanced computer system, Franklin County still encourages residents to simply notify the county auditor if they notice instances of noncompliance, pointing out that when their neighbors cheat the system, they have to make up the difference.

By Michael Kerman

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