Turning Property Fraud Cases into Newly Found Revenue for Your Jurisdiction

State and local governments lose millions of dollars in tax revenue each year due to property fraud. This happens because many agencies lack access to the information technology (IT) needed for sharing information across jurisdictions and the capability to conduct large-scale data analysis of public records or resources that could detect fraudulent activity. Many agencies also face staffing shortages and shrinking budgets at a time when IT systems need to be modernized to stay ahead of fraud offenders, who are constantly changing their techniques to outpace current fraud detection solutions.

It is a daunting task for agencies to recoup property tax payments after fraud has occurred. And, while it is logical to think that government agencies should be able to share data across jurisdictions to detect fraud, there are data format inconsistencies to deal with and IT systems that don’t speak the same language. What if auditors, assessors and appraisers could detect fraudulent claims and identify millions of dollars in lost tax revenue, while also creating new revenue streams for the future? Let’s take a look at several government agencies that have been successful in identifying and preventing property fraud, while also recouping back taxes and generating millions of dollars in income for their jurisdictions.

Cook County, Illinois, the nation’s second most populated county, recaptured more than $26 million in lost revenue for Chicago by using public records data and analytics to identify property owners who wrongly received tax breaks on homes they did not live in as their primary residence and exemptions for which they did not qualify. The Cook County Assessor’s Office (CCAO) used the tool to analyze more than 5 million residents, identifying about 40,000 properties that needed additional research. The CCAO billed tax evading residents for an additional $46 million, directing recovered taxes to be used for schools, public safety and other local needs.

Other success stories include three Indiana counties, who also used the LexisNexis Homestead Exemption Fraud Detection Solution to discover more than $4.6 million in new revenue by using public records databases and identity analytics technology. The program identified erroneous or false applications for homestead exemptions by owners of rental properties; individuals with multiple properties within Indiana and across multiple states; businesses; and, family members receiving deductions under deceased property owners’ names. These three counties restored millions of dollars in revenue to their tax base and funded essential county services.

In addition to these Homestead Exemption Fraud examples, government agencies can also use the power of public records data and analytics to detect other types of property tax fraud. For example, government agencies can track down delinquent debtors who move frequently to avoid paying their property tax bill, claim multiple exemptions on a home that is not their residence, or someone who uses their home to make income as a short-term rental property, but neglects to pay local taxes. State and local governments can also go after landlords who avoid payment of capital gains taxes, neglect to pay taxes on income generated through long-term property rentals, or hospitality/income taxes on income earned from renting a property for vacation purposes.

State and local governments depend on revenue from property tax collection to provide many vital community services such as education, public works, public safety and social services. While most citizens are responsible and pay their taxes, there are others who don’t pay their fair share. When fraudsters evade tax and revenue departments by inaccurately reporting property values or usage, not filing taxes or engaging in other fraudulent activities, the result causes lost revenue and back taxes totaling millions of dollars. Fortunately, by relying on public records data and analytics, agencies can identify suspicious accounts, moving them closer to collecting taxes from individuals who are defrauding the system.

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Matthew Donahue, Director of Tax and Revenue Market Strategy, LexisNexis Risk Solutions
Matthew Donahue is an information technology consultant with roots in the telecommunications industry. He has headed change management initiatives with several federal and state government agencies. As the former commissioner of the Indiana Department of Revenue, he helped them save over $200 million and identify thousands of identity theft victims. He is currently advising a large client in raising fraud awareness and heightening protection against systems intrusion. He is also supporting the Internal Revenue Service Security Summit process. An Indiana native, he earned both his MBA and bachelor’s degree from Purdue University.