SOUTHINGTON — Town leaders are considering auditing the private property of hundreds of local businesses.
Business owners are required to list equipment, machinery, and other items associated with their companies, but nearly 500 people refuse to do so or own them, according to town assessor Teresa Babon. You have not identified the property you own. So she needs to take her best guess as to the value of her taxable property, she told city council leaders this week.
Businesses are taxed on real estate and automobiles, in addition to smaller items such as computers, office supplies and furniture.
“We are working to ensure that the proper percentage of taxes is paid by businesses as well as residents,” she said Monday.
Babon proposed that the state-owned company, Tax Management Associates Inc., undertake a three-year effort to audit all companies with personal assets of $50,000 or more. This equates to her over 400 local businesses subject to audit.
A representative for Tax Management Associates told city councilors that the audit would likely result in an additional $2 million in taxes. In thousands of similar audits conducted countywide, they found that less than half of businesses misreported private property, and most fixes lead to more taxes owed to the town.
The company will be paid a percentage of the additional tax revenue discovered.
In addition to the year of audit, the auditor will look at the property values of the previous two years. State law calls for a 25% tax penalty on him if discrepancies are found.
Babon says her department conducts about 10 audits a year. We do not have enough personnel to check a business’s declared private property list or investigate a business that does not provide such a required declaration.
About 2,300 groups in the town are required to file movable property declarations.
“I’m not getting the information I need from these companies,” she told members of the town council.
Bavon said the purpose of the townwide audit is not to raise taxes, but to make sure everyone pays what they are due.
“That’s the inequality we’re trying to fix,” she said. Some companies “are not paying their fair share”.
City council members from both parties were concerned about the strain on businesses from auditing private property. Such an audit requires gathering documents and meeting with an auditor for an on-site inspection of the company’s private property.
Republican Rep. Bill Dziedzic said it’s a burden for many small businesses that also face other challenges. Not all businesses need to be audited, Dziedzic suggested a more limited number of audits should the tax department appear to be problematic.
“A couple of years after Covid, this is the worst time,” he said. “This is a very unbusiness, very unfriendly policy change.”
Dziedzic is a property manager and owner of a real estate company. We don’t know if his business has private property worth more than his $50,000 and whether his business would be subject to an audit if it ran. Dziedzic was also unclear whether there would be any conflicts of interest between him and other business owners, such as Democratic Rep. Jack Perry, if the issue went to a vote.
Perry, owner of a local garbage and recycling company, also opposed a townwide audit.
“If nothing is found, who will reimburse (business owners)?” he asked about the audit. “We are auditing the entire town and all businesses. I think we are just sending the wrong message to the community.”
Democratic Rep. Val DePaolo spoke in favor of an audit at Monday’s meeting, but said Tuesday he had not made a firm decision on the issue.
DePaolo said assessment firms already conduct audits, and hiring Tax Management Associates or a similar firm is a more efficient and fair way to conduct audits.
“I think it’s a matter of fairness and fairness. Look with (Tax Management Associates), are they accurate?” DePaolo said.
The council took no action on the issue Monday night. Republican town council speaker Victoria Triano said the issue needed further investigation and discussion.
“We all have to go back to the caucuses,” she said. “There are a lot of concerns about this, concerns about our business. At the same time, yes, it could generate income for the town.”
Republican Town Commissioner and Fire Commissioner Mark Rajoy spoke out against a townwide audit at a meeting Monday.
“I don’t think it’s in the best interests of small businesses and taxpayers in our town to start something like this,” he said.
Republicans have a majority on the council.