Purpose

The objective of our examination was to determine whether the Property Tax Freeze Credit (PTF Credit) payments approved by the Department of Taxation and Finance (Department) were appropriate and complied with New York State Tax Law.

Background

The PTF Credit is intended to reimburse qualified New York State homeowners for increases in school and municipal taxes on their primary residences.To receive the PTF Credit for tax year 2015, homeowners must receive the STAR property tax exemption (i.e., the property must be the homeowner’s primary residence and the total household income must be $500,000 or less) and the taxing jurisdictions where the homeowner’s primary residence is located must comply with the New York State Property Tax Cap. In addition to complying with the Property Tax Cap, the homeowner’s school district must also have a State-approved efficiency plan that will achieve savings for taxpayers. The Department approved nearly 2.1 million PTF Credit payments totaling $600.7 million through June 30, 2016.

 
Key Findings

Using data analytics, we examined 138,962 individual high-risk PTF Credit payments totaling more than $75.9 million. We identified and returned to the Department 31,924 questionable payments totaling almost $8 million for follow-up evaluation and appropriate action. Specifically, we returned:

• 25,567 payments totaling $5,480,752 due to calculation errors.
• 3,998 payments totaling $1,621,590 where either the homeowner or property was not eligible for the STAR property tax exemption. This includes out-of-state residents, household incomes that exceeded the eligibility limit, secondary residences or business properties.
• 2,052 payments totaling $818,766 to deceased homeowners.
• 246 duplicate payments totaling $43,504.
• 61 payments totaling $8,722 due to other issues.

Although the Department maintains the necessary data to identify out-of-state residents, household incomes that exceed eligibility limits, secondary residences, business properties and deceased homeowners, it did not always review that data prior to submitting payments to our Office for approval.

In addition to the payments noted above, we worked with the Department to identify an additional 12,786 PTF Credit payments totaling $2.55 million that were incorrect due to improper data formatting. These were returned to the Department for correction and reprocessing.

Key Recommendations

• Ensure PTF Credit payment amounts are correct prior to submitting those payments for approval.
• Continue working with the local assessor offices to ensure data provided is standardized, complete, and accurate.
• For the 2016 tax year, use relevant Department data to ensure only eligible taxpayers receive the PTF credit.