Newsmaker: Diana Leyden, New York City’s First Taxpayer Advocate

By:
Chris Gaetano, Trusted Professional Staff
Published Date:
Nov 1, 2015

In July, Diana Leyden became New York City’s first-ever Taxpayer Advocate, a new office within the city’s Department of Finance from which she will help taxpayers navigate the city’s tax code, while also working to address systemic issues that impede taxpayer compliance. A former law professor at the University of Connecticut, Leyden has written extensively on low-income taxpayer advocacy and, in 2006, testified before the U.S. Treasury’s IRS Oversight Board on how the service can be more responsive to taxpayer needs. She took the opportunity to share with NYSSCPA members her plans for the new office, how it will partner with the CPA community and why even an accomplished law professor with two advanced degrees finds explaining New York City’s property tax rules a challenge. 

In what ways is your office, due to being part of New York City government, unique?

This Taxpayer Advocate’s office is unique in the sense that New York City is the only one with an advocate within a finance department for property tax. We really expect property tax to be one of the major sources of complaints and inquiries, and I think the hope is that if we do our job really well, we won’t have as many cases as … we’ll have in the beginning, because the value to this office is that, in addition to responding to individual complaints, we’ll also be addressing trends and systemic problems. That’s one of my big goals. In fact, I’m already seeing things that can be done better so taxpayers and their rights are protected. We are working on changing, for instance, the Taxpayer Bill of Rights to be more customercentric and getting more stuff on our website so people can self-help. I’ve been in two other departments of revenue, and it can be a daunting task to be the new person coming in saying, ‘You do this why? You’ve been doing this how long?’ But we need to rethink how we do things.

Can you go into more detail about your work on a new Taxpayer Bill of Rights? How will it be different from the current one?

The Taxpayer Bill of Rights that we did have was aimed at saying what the department would do and explaining its procedures. But on the federal level, the IRS has led the charge, through Nina Olson, to make the bill read from the taxpayer’s perspective: the right to be informed, to have an appeal, to know where to go [for assistance]. And that’s what we’d like to have here. … It is a way for taxpayers, if they think their rights are being impaired, to say that [GC1] and talk to our office. We will have criteria on our website, along with a form that can be mailed or faxed. If you look at the IRS’s [taxpayer bill of rights], it is very similar in that it is from the perspective of the taxpayer. … Our bill of rights includes the right to be informed, to know what your exemptions are and how your property is assessed and valued—things along those lines.

What has been the most surprising thing about being a taxpayer advocate since coming into the position?

I think the complexity of the property tax is the most challenging thing. Several people have contacted me and asked some very common sense questions, and I try to explain the property system that New York City has inherited, what it is they’re doing, how it was created, and walk people through the complexity. I have two advanced degrees and I can explain everything, but it’s a real challenge. Still, it has to be done, and we’re not going to give up. But I didn’t expect how difficult it would be to explain the complexity.

What role will CPAs play in your new office? Do you plan to take primarily a legal approach, or is there an accounting angle as well?

One role I think accountants will play is with helping me identify and brainstorm changes on systemic problems. That’s something I’m really looking forward to. We have a Web page on the Department of Finance website where anyone can submit what they think is a systemic problem, and I’m really hoping that’s what I’ll get from the accounting community.

The other value they’ll serve is trying to identify for me complex processes that could be simplified. I’ve gone to a lot of different professional groups, [including] the NYSSCPA, and I think it will be very useful to have that cross-fertilization. But one of the things I’m hoping I can encourage CPAs to do is provide me the pro bono hours. For example, we have a case where there’s a building that’s facing foreclosure and the owners are very low income, and they don’t even know where to begin figuring out what they do or don’t owe, so I was very pleased to contact the CPA Society, and they’re looking to see if they can get a forensic accountant to look at this.

These are the kinds of things that CPAs can help with—freeing up the office to do some of the thornier, systemic problems. I hope we can have a partnership in the future.

What kind of reactions has the rest of the department, as well as the municipal government as a whole, had to the presence of this new position and the work it does with them?

In terms of outside the department, that has yet to be seen. … We’re capturing a lot of information on a lot of cases, so [I can envision collaborating with] housing and preservation and development. It could be tenant organizations, et cetera.  We’re still trying to find our way here, but we’re hoping to collaborate with them.

Within the department, the response has been pretty good. I’m kind of surprised. I have to say that’s a function of the leadership and message the commissioner has delivered throughout the agency, which is that we’re not going to do business as usual, we’re going to really try to be fair and transparent, efficient and customercentric, and everyone has gotten that message. I think the challenge is—and this is seen in both departments I’ve worked in before—a lot of times, the employees see the pathology of taxes, they see everything that goes wrong and they get pretty jaded, so trying to help them see the people who are hurt along the way can help, maybe, reorganize or rethink how they deal with customers.

What is the biggest misconception that people within tax administration have about how best to effectively manage taxpayers?

I think part of the problem is people who work in departments of revenue over a period of time become so accustomed to terminology and to process that they no longer question. And I think that’s the biggest challenge. I’m the one who translates for the finance department what the taxpayer is saying, and then I go to the taxpayer and say, ‘This is really what the rule is and what they’re trying to say,” and I can do this because I have a foot in both camps. People, though, get so accustomed to concepts, to processes, that they don’t often reflect whether they still follow what they should be doing because you get used to doing it. So, you need to step back and say, ‘Wait a second, do you know this hardship here—maybe there is a better way to do this.’ I’ve seen employees be mostly receptive, and I think this reflects well on the commissioner who came in to make space within this agency to have employees rethink things.

Conversely, what is the biggest misconception taxpayers have about how taxes work in New York City?

A lot of people think there’s no ability to change things. They come in thinking this is just one big bureaucracy and they’ll do what they want to do, and I’m a little person and nothing will happen. That’s something we’re really trying to get people to shed because everyone should be able to come in and get questions answered. In the tax administration world, there’s a term, “responsive regulation,” which was first done in Australia. The idea is to think of issues as a pyramid: For the largest amount of people at the bottom, just a few tweaks or giving out some information is often enough to keep voluntary compliance, but the higher up you go, the more resistance you encounter. You save enforcement for the top of the pyramid, where [there are] people who you can’t help, and that’s where you’ll need all your tools, but the bulk of people should be able to be helped to stay compliant.

I think fairness comes with transparency. If I’m a homeowner and I think it’s unfair my house is valued one way and my neighbor’s is valued at less, one way to address that is to give a person inquiring all the information they need on how that other person’s house was valued. In the property tax area especially, there are exemptions and approaches where two [seemingly] similarly situated properties have two different tax burdens, so when you explain the layers that go into it, it can help people understand, and perhaps say, ‘I understand it’s not that you don’t like me or my property, it’s that the other property has other conditions.’ Likewise, this is also a way for that person to say ‘Wait, you’re saying comparable values, but did you look at these other properties? Maybe they’re not comparable.’ So, they help the department be more fair, in turn. I think it’s very important to help our taxpayers understand how things are done, so the fairness issue will really be part and parcel with transparency.

 

What kind of relationship do you envision having with the preparer community? What role can preparers play?

Access is one role. Anyone can call my office, get ahold of me, on behalf of their clients, so we will be helping taxpayers and any other person having a problem to help figure out the best way to navigate the department. But, again, I think the biggest benefit for practitioners is letting me know where they think things need to be changed at the department. Some things maybe we can’t do administratively, where it needs a legislative fix, but in general, I hope we can partner with various professional groups and receive their proposals for positive change. 

What is a major issue you hope to tackle over the long term?

The largest issue is something that, within the department, we can’t fix, and that’s the structure of the property tax. I think there is a need to look at the structure, but that is a political question that must be decided by the council or New York state. What I want to see is something systemic—everyone should have the same opportunities. But short of that, I think a lot of people just don’t understand it—they don’t get how property is valued, they don’t understand how exemptions work. An informed taxpayer will be a happier one because they’re the ones who can say, ‘I understand what is going on and this is wrong.’ OK, let’s have that conversation—vs. ‘I don’t understand what’s going on,’ and then it’s harder to help them.

You've written extensively on advocating for taxpayers, particularly low-income taxpayers (I'm thinking in particular about your book, Advocating for Low Income Taxpayers: A Clinical Studies Casebook). To what degree, do you think, is your previous research and writing applicable to your current position?

Well, it was a great training ground because, through that work, I’ve seen soft spots in revenue departments and have a sense of how far they can go administratively. So, I’m taking that knowledge here and trying to use that to get those soft spots worked on internally so I can better advocate for low-income taxpayers. I think the greatest value I got out of that was truly understanding how difficult it is for most people—especially people with mental health challenges, language differences, any type of disability—in navigating a mammoth organization. This work helped me understand how important it is for, internally, people to be trained and skilled in working with these populations.

Similarly, you’ve also testified before the IRS Oversight Board on effective customer service. Do you think the things you talked about during your testimony are applicable to New York City tax matters? [GC2] 

Absolutely! I’m a big subscriber to what I call the “nudge”: The idea is that you can’t possibly have enough resources in any kind of government to enforce everything, but you can push people in one direction or another, and, many times, people will take that path because it really is something that is common sense or something easy for them to do. Agencies like the Department of Finance can go a long way using that. My undergraduate area was in behavioral economics, and I love to say the problem with classical economics is there’s no rational consumer, no completely rational person at all. So, I think the advantage is for an agency to understand the general irrational actions by taxpayers and figure out how you can take that and move them to voluntary compliance. That’s something I want to try to investigate while I’m here.

What was the last really good book you read?

One of the challenges I came in with was trying to get a handle on co-ops and condos. So a good book, which I recommend to anyone, was done by Peter Eisenstadt [Rochdale Village: Robert Moses, 6,000 Families, and New York City’s Great Experiment in Integrated Housing], which was about one of the first large scale co-ops built in South Jamaica [Queens]. The initial thought of why this co-op would be different was it was seen as an opportunity to, amid desegregation, integrate housing, and it’s sad because the story is that, in the beginning, it really was that, but … it didn’t end that way. It’s a fascinating look at history and co-ops and New York City politics.

 
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