As we have discussed many times before in past blog posts, whistleblowers play an essential role in our society. They help protect the general public and ensure legal fairness. They often do this by reporting ethical and financial wrongdoing they witness.
And, unlike the federal law, the New York False Claims Act allows whistleblowers to do just that when it comes to tax fraud.
New York has the strongest laws to fight fraud
The Federal False Claims Act, established in 2007, allows the government or individuals to take legal action and seek damages if they:
- Know someone deliberately concealed or ignored information for their own financial gain; or
- Presented a false claim for payment and gain.
Tax fraud is one of the most common incidents of false claims, but the federal law does not allow whistleblowers to make reports of tax fraud.
However, in 2010, state lawmakers amended the New York False Claims Act to allow individuals to bring claims regarding state tax code violations. Our state’s False Claims Act is one of the strongest in the country – even stronger than the federal False Claims Act. It helps our state, one of the largest economic hubs in the world, to combat financial fraud and recover millions of dollars of stolen or hidden money each year.
So, what can tax whistleblowers do under the New York False Claims Act?
The law is generally so effective because individuals are held responsible for fraud if they meet three conditions, including:
- If they made a false claim, record or statement under New York tax law;
- If they earned a net income equal to or more than $1 million in any taxable year; and
- The financial damages resulting from that individual’s false claims add up to equal to or more than $350,000.
However, the state’s False Claims Act also enforces a low burden of proof on the whistleblower. They do not have to prove all three of the above elements to file a report. They must only prove that the individual knowingly submitted a false claim. The law also allows tax whistleblowers to collect between 10% and 30% of the reward.
Our state’s effective False Claims Act allows individuals to protect their rights, while still holding others accountable for fraud.