Bay Area Whistleblower Incentives

San Francisco’s Real Estate Watchdog Program

In an effort to recover some of the millions of dollars lost to San Francisco from tax evasion, City Supervisors passed an ordinance in 2006 to award those who report others who are cheating on their property taxes. While the historic Proposition 13 protects property owners from large increases in property taxes each year, it still allows for a tax reassessment when the property changes hands. The amount of property tax due can skyrocket when property ownership changes after several years because of rising property values. Some new property owners commit tax evasion by avoiding disclosing a change of ownership so they don’t pay higher property taxes.

The “Real Estate Watchdog Program,” instituted in 2006, provides a process whereby people can report on those evading property taxes and potentially be awarded 10% of the money reclaimed, up to $500,000.

The largest payout during the past five years was $60,000 to a person who reported an apartment building owner who evaded $1.34 million in property taxes.  The program expired on February 16th of this year but Supervisor David Chiu introduced an ordinance on January 25th to continue the program and reduce the maximum award amount from $500,000 to $100,000.  That ordinance passed on March 8, 2011.

Should Others Adopt Whistleblower Programs?

The Internal Revenue Service (“IRS”) has a whistleblower office that processes tips from individuals who are aware of potential tax evasion by business or individuals.  Whistleblowers may be awarded up to 30% of the amount the IRS collects if the amount in dispute exceeds $2 million or, in the case of an individual tax evader, his or her annual income exceeds $200,000.

For more information, contact Moskowitz, LLP.