Cook County (Ill.) Sniffs Out Tax Evasion with Analytics

Cook County, Ill., is up $26 million thanks to the help of data analytics, which allowed the city to recover millions in lost tax revenue from the last few years.

While the number may seem staggering, citizens who shirk taxes can cost governments billions that could otherwise help fund public services. In 2013 alone, the IRS reported paying out more than $5 billion in fraudulent tax returns, StateTech reports.

On the flip side, governments can see a significant change to their bottom lines if they are able to sniff out tax fraud or evasion. The IRS, for example, is turning things around with technology. The agency introduced new data elements to system filters in its 2016 season that caught $4.1 billion of identity-related tax fraud, according to a September report by the Treasury Inspector General for Tax Administration.

And at a local level, states are also beginning to implement successful tax fraud and evasion-spotting tech.

Cook County, which contains Chicago and boasts more than 5 million residents — making it the nation’s second-most populated county — is the perfect example of how this technology can pay off in a big way.

How Policy and Digital Tools Saved Cook County Millions

So how did they do it?

The Cook County Assessor's Office (CCAO) implemented an investigative tool known as LexisNexis Homestead Exemption Fraud Detection Solution for its investigative unit. The Erroneous Exemptions Unit was created in 2013 as the result of a piece of legislation that allowed the county to investigate and target when homeowners wrongly receive tax breaks on homes that were not their primary residences, or if they take advantage of exemptions for which they were not actually qualified.

“What we’re tracking down are exemptions that people shouldn’t have and the basic tenet of the exemption laws in Illinois are very simple,” Tom Shaer, Cook County deputy assessor for communications, tells StateScoop. “You only get them on one home and you have to be the primary owner and occupant in that home.”

While the county has already saved more than $26 million, it has actually identified almost $45 million in erroneous tax breaks over the last four years and is currently pursuing an additional $19 million.

"With all recovered revenue returned directly to school districts and other community taxing bodies, the program has already had a huge impact," Cook County Assessor Joseph Berrios, who initially drafted the legislation that made the investigative unit possible, said in a press release. "And this is not a one-time recovery of revenue; the savings continue because erroneous exemptions remain eliminated from future years. The solution is helping us recover millions of dollars for taxpayers at a time when Cook County schools and municipalities struggle with budget issues. Honest taxpayers no longer have to fill the gap created by tax cheats."

But the recovered tax revenue would not have been possible without the data analytics system developed by LexisNexis. The system cross-references names, social security numbers and other identification information with more than 20,000 databases across the country and then alerts the CCAO team of former police officers on suspicious instances of tax exemption.

“It’s an investigative tool that helps us to figure out an exact address using someone’s driver’s license, his various addresses or past addresses,” Tim Monahan, the deputy assessor for Erroneous Exemptions, tells StateScoop. “We have access to social security numbers and we also have access to friends, relatives and neighbors, so it allows us to pinpoint a person to particular location.”

Moreover, the technology’s most significant contribution was that it augmented the six-person staff at the CCAO, saving the county hundreds of man hours, Shaer tells StateScoop.

“The time savings is immeasurable,” Monahan tells StateScoop. “Otherwise it would require phone calls to all these foreign jurisdictions [other states, counties and cities] to see whether or not someone owned property in that particular jurisdiction.”