Nebraska is losing $11 million annually because thousands of drivers are improperly registering their vehicles or paying sales taxes in Iowa and South Dakota, state officials said Wednesday.
CLARENCE MABIN / Lincoln Journal Star | Posted: Tuesday, April 15, 2008 7:00 pm
Nebraska is losing $11 million annually because thousands of drivers are improperly registering their vehicles or paying sales taxes in Iowa and South Dakota, state officials said Wednesday.
More than 14,000 Nebraskans have potentially registered their vehicles illegally in the two border states, officials said at a news conference announcing a more than two-month investigation of what could amount to widespread tax evasion.
“Noncompliance with motor vehicle registration laws is not a victimless crime,” said Beverly Neth, director of the Department of Motor Vehicles.
“When individuals make a choice to register their vehicles in other states, then the law-abiding taxpayer is the victim.”
Motor Vehicles, the Nebraska State Patrol and the state Department of Revenue are conducting the investigation, which, so far, has generated a list with roughly 14,000 names and one person charged.
“These residents need to be aware they are costing the state of Nebraska millions of dollars in lost revenue, and our investigators are actively pursuing those who choose to violate these laws,” Patrol Col. Bryan Tuma said.
Typically, improperly registered vehicles subject owners to misdemeanor penalties. But motorists who register or title their vehicles in a deliberate attempt to avoid taxes could be charged with a fourth-class felony and, possibly, face prison time.
Tuma said the investigation was ongoing and no decisions have been made on how many of the 14,000 should be contacted, and if so, how.
He encouraged motorists who have skirted the statutes to voluntarily comply with them.
A first step in the process, he said, is for motorists to contact their county treasurer. Residents who voluntarily comply will likely not be subjected to prosecution, he said.
“If they come in, pay their back taxes, we will probably not” investigate, he said.
“Our effort is not to make arrests en masse. This is not our goal.”
The annual estimate of $11 million included revenue lost from motor vehicle taxes and fees and lost sales tax revenue.
Motor vehicle taxes are assessed at the initial registration and then yearly, according to a fact sheet distributed at the news conference. Twenty-two percent of the revenue goes to counties, 60 percent to schools and 18 percent, generally, to cities or villages.
Other motor vehicle fees, such as the registration fee, help fund highways.
About 48 percent of motor vehicle sales tax revenue is distributed to the Department of Roads. Cities and counties receive about 25 percent of the total. Less than 1 percent goes to a bridge fund.
Compared with Nebraska, Iowa has only slightly cheaper costs, but South Dakota’s motor vehicle taxes are substantially less, officials said Wednesday.
Of the 14,000 residents who potentially illegally registered their vehicles, about 9,000 did so in Iowa, Neth said. The rest registered in South Dakota, she said.
Most of the residents live in or near Lincoln and Omaha, officials said.
Neth said for years she had heard anecdotal accounts of Nebraskans registering vehicles in other states. But the investigation didn’t begin until November, apparently spurred by several circumstances.
A fraudulent titling case in Douglas County in 2006 got officials thinking about the problem. And Neth’s Iowa and South Dakota counterparts told her — perhaps at a conference, she said — they were collecting Social Security numbers in a database.
Officials decided to cross-reference Social Security numbers of Nebraska drivers with Social Security numbers on file in Iowa and South Dakota, she said.
The result: 14,000 names.
Neth was hard pressed to come up with any valid reasons for the out-of-state registrations.
Arguments that state taxes and fees were too high don’t fly, she said. “I don’t have the ability to lower fees and taxes,” she said. “They are what they are.”
A Lincoln doctor was the first, and so far, only person charged as part of the investigation.
Dr. Matthew M. Glenn received diversion services earlier this month. He had been charged on suspicion of failure to pay Nebraska sales taxes on a 2005 Porsche. Glenn allegedly paid taxes on the car in South Dakota.
Reach Clarence Mabin at 473-7234 or cmabin@journalstar.com.