On New Year’s Eve 2021, New York’s Governor Hochul vetoed Senate Bill S. 4730, delivering a win to taxpayers. The bill as passed by the New York Legislature earlier this year proposed to expand New York’s already overreaching False Claims Act (FCA).
Most states have a false claims act that is modeled after the federal False Claims Act, which includes a bar against tax claims. But since it was amended in 2010, New York’s FCA has allowed private citizens to bring certain tax claims pursuant to the FCA. According to the sponsor of S.4370, the intent of bill was to expand New York’s FCA by permitting claims under the FCA against “wealthy individuals and corporations that knowingly and illegally fail to file New York tax returns.”
In a letter to the Governor’s Office, a coalition of organizations pointed out that the actual language of S. 4730 would have a broader impact on the FCA, allowing “routine types of audit issues to be overtaken by third party or Attorney General enforcement measures.” In her veto message, the Governor agreed with the coalition’s concerns, stating that “the language in [S. 4370] . . . would implicate more tax filing controversies . . . than just non-filers.” According to the Governor, such an expansion would be “incongruent with the way other states and the federal government pursue False Claims Act violations, and could have the effect of incentivizing private parties to bring unjustified claims under the law.”
While the Governor recognized there are “administrative and criminal remedies in the law currently that address” non-filers, she added that she remains “fully supportive” of legislative efforts to ensure that non-filers may be subject to FCA claims. Therefore, new legislation that proposes to amend the FCA to cover non-filers may be introduced in the current legislative session.