New Bill in Albany Aims to ‘Shine Light’ on Foreign Property Owners, Shady LLCs

Under the proposed legislation, owning and operating a building in New York will be subject to transparency laws and LLCs will be required to disclose the identities and addresses of their beneficial owners to the New York Department of State, which will be tasked with creating a public database of LLCs.

Corporations will also be required to include ownership information on their annual tax returns.

“For the international superrich, LLCs are used as shell companies to move vast sums of money without little concern of detection,” Hoylman said in a statement. “[This bill will] assist our state and federal governments in targeting international financial criminals, force tax scofflaws to pay their fair share and ensure all business operators in our state — including bad landlords — are held accountable for any misdeeds.”

Under the current law, to form an LLC owners only need to register an official name, the county in which it operates and an address (which could belong to a post office box or the law firm that filed the paperwork). And anonymous LLCs have long raised eyebrows.

LLCs protect property owners from personal liabilities but also creates a veil of secrecy for the true owner of a building, which can make it hard for tenants to take a bad landlord to court, The New York Times reported.

“Money laundering, tax avoidance, evasion of sanctions and systemic code violations have been protected for too long in New York by the veil of LLC anonymity. Sometimes tenants don’t even know who their landlord actually is,” Gallagher said in a statement. “Senator Holyman and I believe it’s time to shine a light on shell corporations, such as LLCs, so we can actually enforce the laws of our state, no matter how rich or powerful the business operator. Our legislation is simple, effective and urgent.”

But one organization of landlords was skeptical that the bill would create any meaningful change apart from creating a database for easy access.

One source told Commercial Observer the bill could be a redundancy as laws requiring public disclosure of ownership behind LLCs are already in existence. For example, there is the federal National Defense Authorization Act, enacted in March 2016, which allowed the United States Department of the Treasury to keep tabs on players benefiting from all-cash deals.

But the National Defense Authorization Act was ridiculed by those in the industry who said it has done little to shine a light on LLCs thanks to its share of loopholes, such as not tracking wire transfers, according to The Real Deal.

Mark Hallum can be reached at mhallum@commercialobserver.com.