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Albany lawmakers look to crack down on hidden foreign assets in NYC
By
Jake Offenhartz
Published Mar 5, 2022
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Mary Altaffer/AP/Shutterstock
By
Jake Offenhartz
Published Mar 5, 2022
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As Russian forces lay siege to Ukraine, President Joe Biden warned oligarchs and enablers of the Putin regime this week that the U.S. will “find and seize your yachts, your luxury apartments, your private jets.”
Lawmakers in Albany are using the moment to go after one of the more popular means of masking assets in New York: limited liability companies, or LLCs.
“It's understood by the IRS and Justice Department that there’s billions of hot dollars, including from Russian oligarchs, in New York City,” said John Kaehny, the executive director of the watchdog group Reinvent Albany. “The LLCs are the key to keeping that money secret.”
Under legislation introduced this week by State Senator Brad Hoylman and Assemblymember Emily Gallager, any person seeking to purchase property through an LLC would be required to submit their identity to the state and include it in their tax returns.
In New York, property owners have had wide latitude to shield their identities behind LLCs. So the hunt for Russian oligarch’s assets – known as Operation KleptoCapture – will likely bring federal attention to Manhattan’s real estate market, where luxury towers have long served as stash pads for foreign wealth. Until recently, there’s been little momentum to meaningfully crack down on LLCs, in part because of resistance from powerful real estate interests that have benefited from the flow of global wealth into Manhattan, according to Kaehny. But that may be starting to change.
The Hoylman/Gallagher bill would apply to “beneficial owners” – defined as the actual person who owns the property, rather than layers of faceless corporations or other representatives, such as attorneys, who are frequently listed in titles to evade scrutiny.
“It’s been out of sight, out of mind in the case of LLCs,” said Hoylman, whose district includes Billionaire’s Row, a haven for overseas wealth. “There’s more information required to get a library card than there is to create an LLC.”
The legislation would stop short of requiring a public database of all owners, something that transparency advocates have called for. But the state would publicize which LLCs share common ownership, with additional information available by request.
The bill would go further than past state efforts in Albany, including 2019 legislation signed by former Gov. Andrew Cuomo that only applied to one-to-four family properties. It follows a Treasury Department initiative that sought to track secret buyers in Manhattan and Miami to crack down on money laundering.
Experts predict that requiring full disclosures would send shockwaves through the real estate industry, which has increasingly relied on foreign investment. In Manhattan, more than half of properties worth at least $5 million are bought with anonymous shell companies, according to a report in The New York Times.
They include properties purchased by some of Russia’s most powerful oligarchs, including Roman Abramovich, whose purchase of three townhouses on East 75th Street was set to make him the owner of Manhattan’s largest single-family residence. (The property was reportedly transferred to his ex-wife.)
The expectation of privacy for high-end property owners hasn’t always been the norm. Up until the early 1990s, the vast majority of real estate purchases were made under official names, allowing Americans to easily figure out who owns what property.
James Parrott, the director of fiscal policies at the Center for New York City Affairs at the New School, said the shift toward LLCs could be traced back to the vast income polarization of recent decades.
“Concentrated wealth ownership has gotten so pronounced that it's embarrassing for a lot of people,” Parrott said. “They’ve translated that economic power into political power and are trying to rewrite laws and longstanding practices.”
The effort to shine a light on LLCs could have ripple effects in New York’s housing market. Tenants have long claimed that anonymous landlords have contributed to code violations, and the state’s effort to distribute rent relief last year was hampered by unresponsive anonymous landlords, according to Hoylman.
A spokesperson for the Real Estate Board of New York said they were still reviewing the bill. A spokesperson for Governor Kathy Hochul said her office would review the legislation.
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Ukraine
russia
llc loophole
Jake Offenhartz
Jake Offenhartz is a former Gothamist reporter.
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Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
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