Proceed with Caution: Developments in the Crimes Against Revenue Program

Earlier this year, Governor Cuomo announced that 28 district attorneys’ offices around the state would receive grants totaling nearly $15 million under New York’s Crimes Against Revenue Program (CARP), which provides substantial monetary grants to district attorneys’ offices in the state to investigate and prosecute crimes against the public fisc. Using CARP funds, DAs in cash-strapped counties can secure resources for staff and other expenses to investigate and prosecute tax crimes. From what we’re seeing, they’re doing just that.

Until 2010, district attorneys’ offices in only 13 counties—those with the highest income tax revenues—were eligible for CARP awards; however, the program was expanded during the 2010-11 fiscal year to a total of 22 counties. Also, since its inception in 2004, the total statewide CARP awards each year have increased nearly threefold from $5 million in 2004 to upwards of $15 million in each of the last few years. And there’s every indication that this trend will continue.  

This year marked the first time since CARP’s inception that DAs offices in any of the state’s 62 counties could apply for funding under the program. This may have created a new incentive for the DAs in previously-ineligible counties (and even those that have been getting awards all along, desiring to ensure their continued receipt of funds) to step up their prosecutions of perceived tax crimes. Call it what you will, but in the CARP-funded criminal investigations and prosecutions we’ve seen as of late, the DAs offices seem to be functioning more independently—without or with less involvement from the Tax Department—particularly at the earlier stages. Is it a coincidence, a new found motivation, or something else entirely? Some observers are very skeptical, one in particular dubbing CARP an “old-fashioned shakedown.”

As practitioners, it’s hard to have much of an opinion on CARP since so little information has been made public about the program aside from the amount of the grant awards. But the cloak of secrecy seems be slowly unraveling. Now that the program is available to all counties statewide, the Division of Criminal Justice (which oversees the grant awards) posted a request for proposals (RFP) on its website, along with small pieces of guidance here and here, that provides some insight into the inner workings. For instance, the RFP requires the counties seeking CARP funds to specifically identify the targeted revenue crime and then lists the following “solely as examples”:

[I]ndividuals who provide home repair services and do not report the resulting income; sales tax violations rampant in a particular industry; purchasers of used cars who under-report the purchase price to DMV and thereby underpay sales tax; or construction enterprises that employ "off-the-book" workers and thereby underpay withholding taxes, unemployment insurance premiums and workers’ compensation premiums.

When cast in a positive light, CARP is touted as being a self-sustaining program, “funded by the proceeds from investigations that result in tax revenues, fines, and restitution being returned to the state.” But there’s also a word of caution to this tale. As the saying goes: the road to hell is paved with good intentions. When the wrong target is hit by an unfounded criminal prosecution, innocent people suffer severe and lasting consequences. We’ve already seen this in Warren County and, more recently, in Niagara County.  These concerns are only magnified by this year’s development which allows all counties statewide to apply for CARP funds, coupled with the trend of increasing award amounts.  

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