D.C. tax office error costs taxpayers $25M in fine revenue
By: Michael Neibauer
Examiner Staff Writer
May 21, 2009
The District’s real property tax office has failed to collect at least $25 million in fine-derived revenue over the last three years from commercial property owners who did not file legally required reports, a new audit shows.
Income and expense forms must be turned in annually by most owners of income-producing properties in the District — there were 13,546 such buildings registered in 2006. The Real Property Tax Administration’s assessment division uses the paperwork to determine revised values. Owners who do not file face a penalty equal to 10 percent of their property’s assessed value.
Put to the test
Auditors’ test of 2006 I&E forms
» 13,546 mailed to property owners
» 7,176 completed and submitted
» 1,683 exempted from submission
» 4,694 missing for properties assessed at $118 million
But the property tax administration, until recently, had no system in place for identifying commercial property owners who did not file, filed late, or filed inaccurate information, the D.C. inspector general found in a recent audit. There was no system for penalizing owners.
And there was no enforcement of the reporting provisions in at least a decade.
Auditors searched for but could not find 4,694 tax year 2006 income and expense forms, according to the report. The properties associated with the missing forms were assessed at $118 million, meaning $11.8 million in fines should have been billed but were not, the IG concluded. The top 36 owners who failed to file in 2006 would each have paid $50,000 or more in penalties.
Auditors concluded that at least another $13.2 million was lost in 2007 and 2008, based on estimates from the data.
The review was requested by the Office of Tax and Revenue, an agency under a constant microscope since mid-2007 when a decades-long, $50 million theft led by a longtime employee was uncovered. The inspector general has since reported, and its audits have confirmed, that waste costs the District far more than fraud.
In a May 1 letter to the inspector general, Chief Financial Officer Natwar Gandhi wrote that his staff over several months has devised a “comprehensive set of procedures” related to I&E forms, with particular attention paid to penalizing noncompliant filers.
Following the 2009 filing period, Gandhi wrote, the tax and revenue office discovered 2,563 noncompliant taxpayers, and each was billed the 10 percent penalty in their first-half 2009 property tax bill. The fines amounted to $6.5 million.
Natalie Wilson, tax office spokeswoman, said the auditor’s estimate of missed penalty revenue is “excessive.”
mneibauer@washingtonexaminer.com
