interview with william comiskey, former new york state tax

Interview With William Comiskey,Former New York State Tax Official

by Billy Hamilton

The movie Star Warshas given us a genera-tion’s worth of culturalreferences that are usefulfor all sorts of purposes,including tax administra-tion. In the tax agencywhere I worked, we usedto say that our fellow em-ployees that went to workfor private tax firms hadgone over to the dark side.

Little did we know that on those rare occasionswhen someone ventured in the other direction, pri-vate firms referred to that as going over to the darkside.

William Comiskey prefers not to think of eitherside as the dark side. He has worked on the govern-ment side as an attorney for 30 years, most recentlyas deputy commissioner of the Office of Tax Enforce-ment with the New York Department of Taxationand Finance. Recently, he left government to workfor Hodgson Russ LLP, a 200-attorney law firm thatpractices in many legal areas, including state andlocal tax practice in New York and nationwide. Aninteresting point of trivia — former presidents Mill-ard Fillmore and Grover Cleveland used to work atHodgson Russ, giving you a sense of how long it’sbeen around. Comiskey’s experience tells him thatboth sides have their part to play in the tax world.He said:

We need to ratchet down the drama so theprocess doesn’t become adversarial. The stateis trying to make sure that all of the taxes thatare owed are paid, and the vast majority oftaxpayers are trying to pay what they owe.Everyone has an interest in seeing that tax-payers pay what’s owed and no more.

Well, maybe not everyone shares the interest thatwas the focus of Comiskey’s attention for the three-and-a-half years that he headed the state’s taxenforcement efforts. One of his most visible suc-cesses was an investigation of tax return preparers

that he described in State Tax Notes1 last January.The article reported on the results of an ongoingtwo-year-old program that involved undercover NewYork agents, outfitted with recording devices, posingas taxpayers with questions, who had visited 177preparers to that point. The sting discovered that 57of the preparers — 32 percent — either coached theundercover agents on how to cheat on their returnsor urged them not to file a return at all.

‘‘We were amazed at how comfortable they [thetax return preparers] were talking about this tototal strangers who were paying them just a fewhundred dollars,’’ Comiskey said in an interview. Hesaid the dishonesty on the part of the preparerswasn’t limited to unlicensed preparers. Seventeen ofthe 57 ‘‘fraud coaches,’’ as one article put it, werelicensed CPAs. One CPA, for example, bragged thathe specialized in creating ‘‘plain vanilla’’ returnsthat would allow the agent to cheat without trigger-ing an audit. According to one report, another CPAgenerated draft tax returns that gave the agent achoice of paying 25 percent, 50 percent, 75 percent,or all the taxes owed.

One CPA generated draft taxreturns that gave the agent achoice of paying 25 percent, 50percent, 75 percent, or all thetaxes owed.

The sting on dishonest preparers drew a lot ofpublicity, which Comiskey said helps to make thesystem work better for most taxpayers and pre-parers who are trying to comply with the tax law.‘‘Effective tax administration,’’ he said, ‘‘requires acommitment to aggressive and visible enforcement.’’He said that the Holy Grail of enforcement is toencourage voluntary compliance. ‘‘If you can get

1‘‘Taking Aim at Tax Professionals Who Coach Their Cli-ents to Cheat,’’ State Tax Notes, Jan. 4, 2010, p. 33, Doc2009-25532, or 2010 STT 1-1.

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This article originally appeared in State Tax Notes, November 29, 2010. Reprinted with permission.

people to understand the law and understand theconsequences for not complying, then enforcementbecomes less important. That’s the goal.’’

Comiskey developed this view of aggressive en-forcement through an unusual career that hasranged well beyond tax administration. He beganhis law career as an assistant district attorney inNew York City, the first important step in a careerhe didn’t consciously set out to create. Coming out oflaw school, he worked for a judge for two years andthen was headed to work for a private law firm. Inthe course of his work for the judge, though, he raninto a lawyer from the Manhattan District Attor-ney’s Office. ‘‘He invited me for coffee. He told me ifI wanted to have fun, try cases and argue in court, Ishould give him a call and maybe come to work forthe DA. I did, and that conversation changed thepath of my career for 30 years,’’ Comiskey said.

Here’s another bit of trivia. In the Manhattandistrict attorney’s office, Comiskey worked for fameddistrict attorney Robert Morgenthau. For those ofyou who, like me, are fans of the long-runningtelevision show Law and Order, District AttorneyAdam Schiff in the series was loosely based onMorgenthau. I asked Comiskey just how true-to-lifethe series was and whether the assistant districtattorneys were all as insufferably self-righteous asAssistant District Attorney (later District Attorney)Jack McCoy, played by Sam Waterston. ‘‘You know,in the early years of the series — and this wasawhile after I left — I thought it was surprisinglyaccurate, although I don’t remember quite thatmany good-looking people running around the of-fices. The character Jerry Orbach played [detectiveLennie Briscoe] was probably closer to reality. Ithought he nicely captured the essence of the smartand dedicated New York cops that I had the pleasureof working with.’’ After four years, Comiskey joineda white-collar defense firm in New York, but he wasdrawn back to public service before long, joining theNew York State Organized Crime Task Force for 10years. There followed a rapid succession of jobs — tothe Department of Health as chief prosecutor ofphysician misconduct cases, to the Attorney Gener-al’s Office to prosecute white-collar crime and offi-cial misconduct. In 2003 he became deputy attorneygeneral in charge of the Medicaid Fraud ControlUnit under then-Attorney General Eliot Spitzer. Itwas Spitzer’s office that asked Comiskey to join theFinance and Taxation Department when Spitzerbecame governor in 2007. ‘‘If you look at my ré-sumé,’’ Comiskey said, ‘‘you might think I can’t holda job, but they all have one thing in common —enforcing the state’s laws.’’

He has a point. Comiskey came to the job with thetax department with wide experience in enforce-ment and a sure sense that just throwing people atthe complexities of modern government was nolonger enough. He said that modern enforcement

includes, inevitably, not only investing in ‘‘boots onthe ground’’ but also the strategic application oftechnology. ‘‘You just can’t make tax administrationwork today without an investment in technology,’’ hesaid. ‘‘In the old days, the state could only look at atiny portion of returns. Technology today makes itpossible to look at all of them.’’

‘You just can’t make taxadministration work today withoutan investment in technology,’Comiskey said.

Comiskey said that New York, a state that hasn’tbeen a stranger to budget problems lately, has beena leader in applying sophisticated analytical tech-niques to tax enforcement. ‘‘In the last 10 years, thestate has spent a lot of money building up itstechnical capabilities,’’ he said, the point being touse technology to more effectively direct tax enforce-ment efforts where they are most needed and can bemost effective. ‘‘In the 1990s, the state installed itsfirst tax administration data warehouse. It bringstogether data from all sorts of sources to use in theaudit process,’’ he said.

The system is called the Case Identification andSelection System (CISS, pronounced ‘‘kiss’’). Theaudit division wanted a better way to select casesand manage its inventory. Priorities were to reducescreening time on individual returns by focusing onthe common features of noncompliant returns, toidentify the characteristics of successful and unsuc-cessful audits, to identify the types of returns thathistorically have produced successful audits, and tobetter direct limited audit time.

Comiskey said the technology has proven of great-est value in sifting through the thousands of per-sonal and corporate income tax returns the depart-ment receives annually. ‘‘The system really provesits worth during the tax refund season. The day arefund request lands in the agency, it’s pumped intothe warehouse and pushed up against the data inthe system to check its probable validity,’’ he said.‘‘Returns are scored to ascertain if they are seekingquestionable refunds — and it all begins on the daythe return hits the agency.’’ He said returns aresorted into different ‘‘buckets,’’ with some passedalong in the process and others set aside for greaterscrutiny.

The system doesn’t stop there, though. The de-partment’s analytics not only look at returns forpossible issues but also factor in staffing levels todetermine the best use of resources. The computerhelps audit and enforcement staff determine whereit should focus its efforts to have a maximum effecton collections. The program has, he said, yielded bigdividends for the state. ‘‘The program has saved the

State Tax Merry-Go-Round

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state more than $1 billion since its inception. Today,it saves the state about $300 million a year inquestionable refunds alone,’’ Comiskey said. He saidit also helps the department make the best use of itslimited staff resources by helping with case identi-fication and selection.

The technology also learns as it goes along andhas the capacity to make adjustments as it discoversnew patterns of taxpayer behavior. Adjustments canbe made on the fly if necessary, using math thatComiskey probably went to law school at least partlyto avoid. ‘‘They showed me one of the algorithmsused in the model,’’ he said, laughing. ‘‘I couldn’tmake heads or tails of what it meant, but I had it puton slide and would show it when I made speeches. I’doffer to buy dinner for anyone who could explain it.I didn’t get any takers.’’

The department has recently applied the samesystem to help with collections as well as audits.There the system is used in a predictive manner,again with the goal of making the most effective useof agency resources. ‘‘The system looks at a delin-quent account, examines the obligation, and deter-mines the right next step that’s most likely toproduce a good collection result — whether it’s asimple phone call, a field visit, or some other option,’’he said. ‘‘It basically churns out a listing of the nextbest thing to do on any given case.’’

Comiskey said the department has been pleasedwith the results to date. ‘‘They are on target forcollecting about an additional $30 million a yearusing the technology. Who knows? Results couldcontinue to improve. The machine learns as it goesalong, and it’s difficult to predict the possibilities. Ido know that this is just the tip of the iceberg formodern tax administration,’’ he said.

States may need the help that sophisticated tech-nology can provide. The taxpayer population isgrowing, and the issues grow more complex witheach passing year. Taxpayers — and inevitably taxcheats — also become more sophisticated. I askedComiskey if he had a sense of what sort of tax gapNew York is dealing with these days. He said thestate hasn’t done an in-depth analysis of the tax gaplike the one that the IRS occasionally prepares. Infact, most states haven’t done those studies, whichtake time and resources and at times produce re-sults that tax agencies aren’t eager to publicize.

The IRS pioneered the idea of estimating the taxgap 40 years ago. Its estimates show that over thepast 30 years the tax gap has ranged from 16 to 20percent of total federal tax liability — that is, up to$1 of every $5 that is owed to the government can becollected only through tax enforcement efforts —and often not then. Despite vigorous enforcement bythe IRS, a significant amount of revenue remainsunreported and unpaid. In 2005 the IRS estimatedwhat it characterizes as the ‘‘gross tax gap’’ to beapproximately $345 billion or slightly more than 16

percent of tax liability. About $55 billion of that totaleventually is collected through enforcement actionsand other late payments, leaving a net tax gap ofapproximately $290 billion. Those estimates, whichare the most recent available, were developed usingdata collected in tax year 2001 and earlier. The sizeof the tax gap, obviously, could have grown signifi-cantly in the succeeding years simply because ofeconomic growth and increases in the taxpayerpopulation.

States’ estimates of their own tax gaps vary, andthe simple truth is that in most cases, like New York,there are no estimates. Only a handful of states haveprepared these studies in the past decade, andbecause of the enormous amount of analysis associ-ated with them, they appear only at irregular inter-vals. Most of the states that have done studiesconclude that their level of noncompliance falls intothe range found by the IRS in its studies, from a lowof 80 percent compliance to 90 percent. Still, thenumbers represent a considerable amount of lost taxrevenue, and the states that have focused theirattention on the issue typically have invested in

William Comiskey, formerly deputy commissioner with theNew York State

Department of Taxation and Finance, is now a partner withHodgson Russ LLP.

Office of Tax Enforcement of the



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efforts to close the gap. Other states proceed, pre-sumably, with the recognition that a tax gap existseven if they haven’t got an estimate of its exact size.That tax cheats are abroad in the world isn’t a statesecret — and it’s logical to assume that their num-bers are growing.

‘‘I’m not sure of the tax gap’s size, but even withthe steps we’ve taken, I wouldn’t be surprised to findthat it’s growing given the current economic situa-tion,’’ Comiskey said. ‘‘Anyone in the departmentprobably would say that it’s in the multibillions ofdollars. As the economic situation has grown for allstates, it’s a problem that’s more difficult for them toignore.’’

Comiskey said that New York, aware of the needto address the problems of both inadvertent andintentional noncompliance, built a plan for address-ing the tax gap into its recent strategic plans. ‘‘Thetax gap is caused by a host of issues,’’ he said. ‘‘Thecomplexity of the tax system is a big factor. Even themost honest and compliant taxpayer can be at a lossfor what to do. But the problem that I focused on waspeople that are determined not to pay what theyowe.

‘‘The most compelling evidence of tax evasion isthe level of complicity we found among preparers,’’Comiskey said. He said there are many areas of thetax law in which it’s difficult to identify tax evasionwithout detailed examination, something tax agen-cies have the resources to do for only a relativelysmall percentage of returns. ‘‘You get a sense of thescope of the problem when you see how some taxpreparers would point their clients toward areaswhere it’s easiest to cheat without much fear ofgetting caught,’’ he said.

‘‘States need to invest even more in fair but robustenforcement,’’ Comiskey said. ‘‘You leverage thatwith technology that makes that enforcement smart,and you can begin to make a dint in the problem.’’It’s the strategy he followed in New York. ‘‘If statesdon’t target their enforcement efforts intelligently —with the resources at hand — then they’ll findthemselves spinning their wheels,’’ he said

Comiskey believes this strategy ultimately ben-efits honest taxpayers — presumably like his soon-to-be clients and himself. ‘‘As a private citizen, Ishould hope that every tax system is made as fairand comprehensible as possible,’’ he said. ‘‘Wheneveryone is paying their fair share of taxes, theneveryone is paying the fewest taxes possible.’’

In that sense, Comiskey doesn’t see a wide gapbetween what he’s been doing and what he’ll bedoing at Hodgson Russ. The firm, he said, is com-pletely engaged in state taxes. ‘‘They paid attentionto what we were doing at the agency and weighed inwhen they thought we were being overly aggressive,but they also help their clients to make the best taxchoices,’’ he said.

His background, Comiskey thinks, can be of ben-efit in that regard. ‘‘Because my background hasbeen so diverse in working with government regula-tion and security,’’ he said, ‘‘I believe I can helpclients navigate through the complexity of the law tomake sound decisions and to do the right thing.’’ Hesaid his goal will be to help taxpayers get to a pointat which, if they do fall under the government’sscrutiny, they can honestly say they did the rightthing in complying with the law — that they made itsuccessfully through the maze. ‘‘That feels very rightand consistent with what I’ve done in my career,’’ hesaid.

Comiskey will be working on a variety of compli-ance issues in his new job, not just taxes, althoughthat will be one important role. He’ll also be involvedin areas such as healthcare compliance.

One of the first things Comiskey will be doing istalking to taxpayers and tax practitioners aboutNew York’s new amendments to its False ClaimsAct. That’s certainly a subject with which largetaxpayers should familiarize themselves. The actincreases the protections and incentives for anyonewho presents evidence of fraud against the state orone of its local governments — that is, whistle-blowers. The amendments permit qui tam plaintiffsto bring actions for tax fraud when a defendant’s netincome or sales exceed $1 million and damages tothe state exceed $350,000.

There really is no dark side instate taxes, just two sides of thesame coin with divergent yetcommon interests.

Because whistleblowers are awarded 15 to 25percent of the recovery or settlement under the act,the presumption is that employees have an incentiveto report any tax law violations by their employers.The amendments also strengthen the act’s retalia-tion provisions to protect a broad range of potentialwhistleblowers, including ‘‘any current or formeremployee, contractor, or agent of any private orpublic employer who [has been] discharged, de-moted, suspended, threatened, harassed or in anyother manner discriminated against in the termsand conditions of employment, or otherwise harmedor penalized by an employer, or prospective em-ployer.’’ It protects employees who obtain ‘‘docu-ments, data, correspondence, electronic mail, or anyother information’’ in support of a whistlebloweraction, even if obtaining the incriminating material‘‘may violate a contract, employment term, or dutyowed to the employer or contractor.’’ The state ex-pects to recover more than $20 million a year fromincreased reporting as a result of the recent amend-ments.


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I suspect Comiskey will have a busy first fewmonths on the job. Having gone through a similartransition not long ago, I can sympathize with hissituation. Whatever uneasiness you might haveabout leaving a job you know well, it’s exciting tostart a new chapter in your career — indeed to evenhave a new chapter to start in this economy. It alsoworks better when you realize that despite the jokesand Star Wars references, there really is no darkside in state taxes, just two sides of the same coinwith divergent yet common interests. ‘‘It’s prettyexciting,’’ Comiskey said. ‘‘It’s a new chapter, and Ithink it’s going to be very rewarding helping peopleout. I’m energized by the whole process. It’s a shift inthinking, but I believe it won’t be hard to look atthings and see them from a new perspective.’’

When you latch onto a cliché, you might as wellride it to the end, so I asked Comiskey how hethought he’d make out on the dark side — or howhe’d make out leaving the dark side for the light ifyou prefer. Comiskey laughed, and said, ‘‘My wifelooks at me and asks if I can make the transition.I’m energized and looking forward to it. I think I canmake the transition very well, but that is the milliondollar question.’’ ✰

Billy Hamilton was the deputy comptroller for the TexasOffice of the Comptroller of Public Accounts from 1990until he retired in 2006. He is now a private consultant.



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interview with william comiskey, former new york state tax

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