Butkovitz Finds Tax-Exempt Property Used as For-Profit Business

Audit Date: October 5, 2009
Audit Categories
  • Investigation
Controller: Alan Butkovitz

Executive Summary

For Immediate Release:
Oct. 5, 2009

Contact: Harvey Rice

Butkovitz Finds Tax-Exempt Property Used as For-Profit Business
Controller’s investigation uncovers more than $200,000 in back taxes owed the City


PHILADELPHIA – City Controller Alan Butkovitz today released the findings of a special investigation that uncovered $217,794 in unpaid property taxes over the past 10 years that resulted from an incorrect property tax classification and assessment by the Bureau of Revision of Taxes (BRT).

While the property located at 5901 Woodbine Avenue is leased to two non-profit charter schools, Ad Prima Charter School and Laboratory Charter School of Communication and Languages, the property owners are engaged in a for-profit making enterprise and are required to pay property taxes.

For the last 10 years, this privately owned property was incorrectly classified and assessed by the BRT as tax-exempt, resulting in $217,794 in unpaid property taxes.

“This is a two-fold problem highlighted by the BRT’s ineptness and the owners’ failure to meet their responsibility and pay their local property taxes,” said Butkovitz. “The BRT failed to accurately classify and assess this property and the property owners sought to avoid paying property taxes.”

According to the Controller’s investigation, BRT’s records failed to identify the 5901 Woodbine Avenue property as a valid tax account. Deed transfer records identified the property as also having an address of 5900 Drexel Road, which was listed in the name of Federation Day Care Services, Inc., a Pennsylvania non-profit corporation. From 1986 to 1999, Federation Day Care Services resided at 5900 Drexel Road until the property was purchased by the current owners.

“Not only was there one property with two different addresses, but the information was outdated for 10 years,” said Butkovitz. “There is no excuse for these owners to not pay their taxes. It appears that the longer the property remained wrongly classified by the BRT, the more confident the owners felt that they could get away with not paying their taxes.”

According to Butkovitz, “Our investigation revealed the property owners were ‘seasoned’ real estate investors with numerous transactions over the years. They knew that by leasing the property and earning a profit that it was not tax-exempt and that they were required to pay property taxes.”

As a result of the Controller’s investigation, information concerning the misapplication of property tax rules was transmitted to the BRT and the records were updated and the property was reassessed and the appropriate taxes were applied. Once the Revenue Department was forwarded this information, the property owners were billed and the appropriate liens were placed on the property.