Purpose of Audit

The purpose of our audit was to review local assessors’ administration of the STAR Program for the period January 1, 2010, through July 31, 2011.

Background

The STAR exemption in the Real Property Tax Law provides a partial exemption from school taxes for most owner-occupied, primary residences. Property owners are eligible for one exemption for a primary residence only. Local assessors accept and process residents’ applications for STAR exemptions. The STAR program lowers the school real property tax burden for homeowners, and makes up the difference by increasing State aid to school districts. The State’s costs for underwriting this benefit for taxpayers have grown significantly since the program’s inception, from $582 million in 1998-99 to $3.2 billion in 2010-11.

Key Findings

• Local assessors have granted a significant number of exemptions to individuals or entities not eligible to receive them. Our tests of one class of potentially ineligible exemptions at 46 sampled municipalities showed that 19.6 percent of the exemptions should not have been granted because they were duplicate or improper. We project that the State lost $13 million in the 2010-11 fiscal year - and will lose an additional $73 million through the 2015-16 fiscal year - just for exemptions with this specific risk indicator (i.e., having a mailing address that receives STAR exemptions for multiple parcels).
• Local assessors do not have the ability to search the Office of Real Property Tax Services (ORPTS) database of existing STAR exemptions statewide. But even if they had such access, local assessors would still find it difficult to identify potential duplicates because STAR applicants are not assigned a unique identifier.
• New York State does not aggressively partner with other states to identify individuals who improperly claim a STAR (or similar) exemption in more than one state.

Key Recommendations

To State Policy Makers:

• Strengthen the law and regulations governing the program to ensure that clear guidance is available.
• Establish a mechanism that allows local assessors to search for duplicates in a shared database that contains STAR information from other assessing jurisdictions in New York and other states.
• Require a unique identifier to more easily monitor exemptions.
• Consider developing working relationships with other states to establish a system of information sharing.