Cook County, Ill., has discovered approximately $9.4 million in new revenue thanks to a new state law and an analytics-based fraud detection solution.
Illinois lawmakers passed SB 41 last year, enabling counties to pursue individuals who took erroneous and fraudulent property tax exemptions. Previously the maximum penalty for those getting caught taking illegal exemptions was $40. Now counties that opt-in to the law can go after the full amount of tax owed.
Once SB 41 went into effect, Cook County partnered with LexisNexis Risk Solutions to streamline the review of property tax records. The company’s Homestead Exemption Fraud Detection Solution takes the county’s property tax database, analyzes it using analytics and public records, and delivers a report to the Cook County Assessor’s office that flags individuals who may be erroneously claiming exemptions.
County staff research those individuals, and if they appear to have filed fraudulent claims, issue a bill for the proper amount of property tax owed.
The new billing process started in March, and since then, Cook County has recovered $5.1 million. An additional $4.3 million is still outstanding, with most of the individuals who owe going through the county’s hearing process on the issue, according to Cook County Assessor Joseph Berrios. If taxpayers don’t pay what they owe within 30 days, the county places a lien on their home for the owed amount.
In an interview with Government Technology, Berrios said SB 41 enables his office to go back three years in the records to bill for property taxes owed if an individual is found to have filed one or two fraudulent homestead exemptions. If more than two erroneous exemptions were claimed, the county is permitted to bill up to six years in arrears.
Homestead exemption laws protect the value of a person’s home against creditors and property taxes in certain situations by exempting a certain amount of a home’s assessed value, requiring the owner to pay less in taxes. The law varies depending on the state, but in general, it applies only to a person’s primary residence, not multiple properties — and that’s where fraud becomes an issue.
Berrios admitted that he was surprised at the number of fraudulent exemptions taken by people in Cook County. But he doesn’t believe the problem is over just because the county now has a system in place to catch people and recoup the money.
“There’s a tendency for some of these people to continue to cheat,” Berrios said. “So it’s an ongoing process.”
Tightening up property tax fraud laws and cracking down on violators is a growing trend in state and local governments. Two years ago, Delaware County, Ind., deployed a similar system that uncovered $1.5 million in lost revenue. In addition, Florida tweaked state law to enable assessors to go back as far as 10 years to evaluate whether homestead exemptions were abused by property owners, according to Berrios.
LexisNexis isn’t the only player in the fraud detection technology game. In 2012, Thomson Reuters’ Government Revenue Management Insight tool helped Miami-Dade County, Fla., discover more than $5 million in back taxes owed by county residents.
Looking ahead to 2015, Berrios said he wants to go back to the Illinois Legislature to increase county jurisdictional authority under SB 41.
The assessor explained that if his office notifies a taxpayer of an erroneous exemption that is at the tail end of the three- or six-year timeline cutoff, there can be a problem collecting if a taxpayer’s hearing and appeal process goes into the next calendar year. So Berrios wants to add language that reserves the county’s ability to collect what fraudsters owe, even if it is from a calendar year outside the current scope of the law.
“After working the bill as we had in the last year, we see that it’s more time consuming than I thought it would be,” Berrios said. “Because when you go through these investigations, there’s a lot to be done to verify.”