NY State Senate Bill 2019-S2647

Senate Bill S2647

2019-2020 Legislative Session

Creates the offense of defrauding the government in the first degree and expands the definition of conspiracy in the fourth degree; relates to expanding the definition of tax fraud acts

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Archive: Last Bill Status - In Senate Committee Codes Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

View Actions

	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 08, 2020	referred to codes
Jun 20, 2019	committed to rules
Jun 03, 2019	advanced to third reading
May 30, 2019	2nd report cal.
May 29, 2019	1st report cal.981
Jan 28, 2019	referred to codes

Votes

- May 29, 2019 - Codes Committee Vote
  S2647
  
  11
  
  Aye
  
  0
  
  Nay
  
  2
  
  Aye with Reservations
  
  0
  
  Absent
  
  0
  
  Excused
  
  0
  
  Abstained
  - - Codes Committee Vote: May 29, 2019
      
      aye (11)
      
      Akshar
      
      Bailey
      
      Benjamin
      
      Biaggi
      
      Boyle
      
      Gounardes
      
      Kaminsky
      
      Kavanagh
      
      Lanza
      
      Myrie
      
      Savino
      
      aye wr (2)
      
      Gallivan
      
      O'Mara

co-Sponsors

2019-S2647 (ACTIVE) - Details

See Assembly Version of this Bill:: A7408
Current Committee:: Senate Codes
Law Section:: Penal Law
Laws Affected:: Add §195.22, amd §105.10, Pen L; amd §1801, Tax L; amd §11-4002, NYC Ad Cd
Versions Introduced in Other Legislative Sessions:: 2017-2018: S4377
2021-2022: S1331
2023-2024: S2266

2019-S2647 (ACTIVE) - Summary

Creates the offense of defrauding the government in the first degree and expands the definition of conspiracy in the fourth degree; relates to expanding the definition of tax fraud acts.

2019-S2647 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S2647

SPONSOR: KRUEGER
 
TITLE OF BILL:

An act to amend the penal law, in relation to creating the offense of
defrauding the government in the first degree and expanding the defi-
nition of conspiracy in the fourth degree; and to amend the tax law and
the administrative code of the city of New York, in relation to expand-
ing the definition of tax fraud acts

 
PURPOSE:

1. Creates the offense of defrauding the government in the first degree.

2. Expands the definition of conspiracy in the fourth degree; relates to
expanding the definition of tax fraud acts.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 adds section 195.22 to the penal law, creating a first degree

offense for defrauding the government through an automated sales
suppression device, defining automated sales suppression devices, and
extending defrauding government in the first degree as a class D felony;

Section 2 adds subdivision 4 to section 105.10 of the penal law, expand-
ing the definition of conspiracy in the fourth degree to include felony
of defrauding government in the first degree;

Section 3 amends subparagraphs 7 and 8 of paragraph (a) in section 1801
of tax law and adds subparagraph 9, expanding the definition of tax
fraud acts to include the use of automatic sales suppression devices.

Section 4 amends subparagraphs 7 and 8 of paragraph (a) of section
11-4002 of the administrative codes of the city of New York and adds
subparagraph 9, expanding the definition of tax fraud acts to include
the use of automatic sales suppression devices.

Section 5 states the effective date.

 
LEGISLATIVE HISTORY:

2017-18: S.4377 - Codes

 
EXISTING LAW:

None.

 
JUSTIFICATION:

For years, foreign countries with national sales taxes have struggled to
combat technology that enables retailers to skim sales taxes and under
report other tax liabilities (e.g. personal income tax, corporate income
tax) by concealing from auditors their actual sales data. This technolo-
gy, which includes automatic sales suppression devices, such as
"zappers" and "phantom-ware," automatically suppresses digital sales
figures recorded at electronic cash registers and Point of Sale systems.


It is difficult for auditors to detect the use of automated sales
suppression devices through the traditional process of cross checking
transaction documents because the technology conceals almost all traces
of the digital manipulation. Countries such as Germany and Greece have
required retailers to install technological countermeasures that make it
easier for auditors to detect the use of automated sales suppression
devices. In September 2010, the Canadian province of Quebec began
requiring all restaurants to install in their electronic cash registers
anti-sales suppression devices. This cost Quebec an estimated $425
million ($410 million U.S.) in 2007-2008. Richard T. Ainsworth, a Boston
University school of Law tax professor and a leading expert on zappers
and other automated sales suppression devices, estimates that New York
has faced a loss of $1.7 billion annually due to these devices.

Because the United States lacks a national sales tax, there is no feder-
al initiative to combat this tax fraud and most states are ill-prepared
to deal with this issue. Nationwide, only a handful of people have been
caught using this technology, including two in Michigan and one in
Connecticut. Over 20 states have already enacted legislation to prohibit
and criminalize automated sales suppression devices. Ainsworth has
published several papers documenting the spread of zappers and phantom-
ware in Quebec, Greece, Germany, the Netherlands and other European
nations. Given that the first zappers were made in the United States and
that this technology is widely used in the Canadian province just above
of New York's northern border, it is imperative for the State to address
this issue.

The legislation would establish prohibitions and penalties related to
the manufacture, sale, purchase, or use of automated sales suppression
technology, creation of conspiracy for those who defraud the government,
and the liability of those who perpetrate tax fraud.  Additionally, this
legislation would increase tax revenue by over $1 billion annually.

 
FISCAL IMPACTS:

Estimates increased tax revenue as high as $1 billion annually.

 
EFFECTIVE DATE:
This act shall take effect on the first November next succeeding the
date upon which it shall have become a law.

2019-S2647 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   2647
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                             January 28, 2019
                                ___________
 
 Introduced by Sens. KRUEGER, MONTGOMERY -- read twice and ordered print-
   ed, and when printed to be committed to the Committee on Codes
 
 AN  ACT  to  amend the penal law, in relation to creating the offense of
   defrauding the government in the first degree and expanding the  defi-
   nition  of  conspiracy  in the fourth degree; and to amend the tax law
   and the administrative code of the city of New York,  in  relation  to
   expanding the definition of tax fraud acts
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The penal law is amended by adding a new section 195.22  to
 read as follows:
 § 195.22 DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE.
   A  PERSON  IS  GUILTY OF DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE
 WHEN, HE OR SHE KNOWINGLY MANUFACTURES, SELLS,  INSTALLS,  OR  USES,  OR
 ATTEMPTS  TO  MANUFACTURE,  SELL,  INSTALL  OR  USE,  AN AUTOMATED SALES
 SUPPRESSION DEVICE FOR THE PURPOSE OF ENABLING OR ASSISTING  ANY  PERSON
 TO  EVADE  ANY  TAX  OWED TO THE STATE OR A POLITICAL SUBDIVISION OF THE
 STATE OR ANY INSTRUMENTALITY OF THE STATE.
   FOR PURPOSES OF THIS SECTION AN "AUTOMATED SALES  SUPPRESSION  DEVICE"
 IS  A SOFTWARE PROGRAM THAT FALSIFIES ELECTRONIC RECORDS FOR THE PURPOSE
 OF EVADING ANY TAX OWED TO THE STATE, OR ANY  POLITICAL  SUBDIVISION  OF
 THE  STATE,  OR  ANY  INSTRUMENTALITY  OF THE STATE. AN "AUTOMATED SALES
 SUPPRESSION DEVICE" INCLUDES ANY SOFTWARE PROGRAM THAT IS (A) MAINTAINED
 ON A USB MEMORY STICK OR THUMB DRIVE, ZAPPER, REMOVABLE COMPACT DISC  OR
 OTHER EXTERNAL DEVICE, OR (B) EMBEDDED IN THE OPERATING SYSTEM AS "PHAN-
 TOM WARE," OR (C) OTHERWISE ACCESSED REMOTELY.
   DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE IS A CLASS D FELONY.
   § 2. Section 105.10 of the penal law is amended by adding a new subdi-
 vision 4 to read as follows:
   4.  THE  FELONY  OF  DEFRAUDING  THE GOVERNMENT IN THE FIRST DEGREE AS
 DEFINED IN SECTION 195.22 OF THIS PART (DEFRAUDING THE GOVERNMENT IN THE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD06760-01-9

 S. 2647                             2
 
 FIRST DEGREE), BE PERFORMED, HE OR SHE AGREES WITH ONE OR  MORE  PERSONS
 TO ENGAGE IN OR CAUSE THE PERFORMANCE OF SUCH CONDUCT.
   § 3. Subparagraphs 7 and 8 of paragraph (a) of section 1801 of the tax
 law, as added by section 15 of subpart I of part V1 of chapter 57 of the
 laws  of  2009, are amended and a new subparagraph 9 is added to read as
 follows:
   (7) with intent to evade any tax fails to pay that tax; OR
   (8) issues an exemption certificate,  interdistributor  sales  certif-
 icate, resale certificate, or any other document capable of evidencing a
 claim that taxes do not apply to a transaction, which he or she does not
 believe  to  be  true and correct as to any material matter, which omits
 any material information, or which is  false,  fraudulent,  or  counter-
 feit[.]; OR
   (9) USES AN AUTOMATED SALES SUPPRESSION DEVICE AS DESCRIBED IN SECTION
 195.22 OF THE PENAL LAW (DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE).
   §  4. Subparagraphs 7 and 8 of paragraph (a) of section 11-4002 of the
 administrative code of the city of New York, as added by chapter 201  of
 the  laws of 2009, are amended and a new subparagraph 9 is added to read
 as follows:
   (7) with intent to evade any tax imposed under any designated  chapter
 of this title, fails to pay that tax; OR
   (8)  issues  an  exemption certificate, interdistributor sales certif-
 icate, resale certificate, or any other document capable of evidencing a
 claim that taxes imposed under a designated chapter of this title do not
 apply to a transaction, which he or she does not believe to be true  and
 correct as to any material matter, which omits any material information,
 or which is false, fraudulent, or counterfeit[.]; OR
   (9) USES AN AUTOMATED SALES SUPPRESSION DEVICE AS DESCRIBED IN SECTION
 195.22 OF THE PENAL LAW (DEFRAUDING THE GOVERNMENT IN THE FIRST DEGREE).
   § 5. This act shall take effect on the first of November next succeed-
 ing the date upon which it shall have become a law.

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Senate Bill S2647

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Sponsored By

Liz Krueger