DHCR Can't Investigate Tenant Tax Fraud

LVT Number: #22030

Landlord applied for high-rent/high-income deregulation of rent-controlled tenant's apartment each year between 2000 and 2003. Each of these applications was denied, based on findings that in 1999 and 2001 tenant's household income was below the $175,000 deregulation threshold. Landlord appealed, claiming that tenant fraudulently concealed significant amounts of income from the DHCR, the DTF, and the IRS in an intentional effort to evade the luxury deregulation law. Landlord said that tenant manipulated and shifted large amounts of self-directed pension trust income distributions.

Landlord applied for high-rent/high-income deregulation of rent-controlled tenant's apartment each year between 2000 and 2003. Each of these applications was denied, based on findings that in 1999 and 2001 tenant's household income was below the $175,000 deregulation threshold. Landlord appealed, claiming that tenant fraudulently concealed significant amounts of income from the DHCR, the DTF, and the IRS in an intentional effort to evade the luxury deregulation law. Landlord said that tenant manipulated and shifted large amounts of self-directed pension trust income distributions.
The DHCR ruled against landlord. The DHCR does not have the authority or the technical expertise to independently investigate or determine a tenant's income. The rent control law defines annual income for purposes of high-rent/high-income deregulation as "the federal adjusted gross income as reported on the New York State income tax return." The law further states that deregulation will occur "if the department of taxation and finance determines" that a tenant's income exceeds the deregulation threshold. By law, the DHCR must rely on DTF records. Here, the DRA did so and properly dismissed the deregulation applications.

1000 Park Avenue: DHCR Adm. Rev. Docket No. WI420004RP - WI420007RP (4/28/09) [8-pg. doc.]

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