Detroit

Dan Gilbert balks at Detroit's request

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Detroit — Dan Gilbert is refusing to give the city personal information of some apartment building tenants in a rare act of defiance.

In response, the city of Detroit is now asking the Wayne County Circuit Court to force Bedrock Management Services, Gilbert’s real estate company, and four other businesses to provide the personal information of their tenants so it can verify whether residents in the five properties properly filed city resident income tax returns.

The properties at the center of the city’s request are the Broadway and Eureka Lofts at 1525 Broadway, the Malcomson Building at 1215 Griswold, Fourteen 56 on Woodward and the Woodward Lofts, according to court documents filed last week.

“We do not believe we have the legal right or contractual permission to release the highly sensitive personal information of all our tenants to any third party, including any governmental entity, without the tenant’s consent to do so, or a constitutionally valid final court order,” Gilbert said in a statement Tuesday.

“...We value the strong relationship our organization shares with Mayor Duggan and our city government partners. We have a dispute over this issue; and in this situation, the privacy rights of our tenants must take priority.”

The city is asking for the information on behalf of its Finance Department’s Income Tax Division. Detroit officials plan to use the information on tenants, such as name, address, Social Security number and employer, and cross-reference it with data from the U.S. Internal Revenue Service.

The city charges a 1.2 percent non-resident tax on wages earned in Detroit by people who live outside its borders, while residents pay the higher income tax of 2.4 percent.

“We’re very serious about collecting taxes. That is a duty of government,” Detroit Corporation Counsel Lawrence Garcia told The News on Tuesday. “To be fair to the people who are paying their taxes, we need to pursue the people who are dodging taxes.”

The city, in its petition, wrote it “endeavors to determine the identity of non-filers who are residents in the apartments and lofts leased seeking taxpayer compliance.”

Some residents, the lawsuit says, use a suburban address of a friend or relative to obtain lower auto insurance rates — which in Detroit are among the highest in the country — or to avoid city income tax liability. The filing contends the city is entitled to the information under a state income tax act and city code.

“The city seeks to identify taxpayers who are avoiding tax liability in a manner that preserves taxpayer confidentiality utilizing powers allowed under state and local tax laws,” the filing adds.

The city sent Bedrock Management Services and the other companies multiple letters requesting the information, but the businesses didn’t comply, according to court documents.

The request made of Bedrock isn’t new, Garcia said. The city first began its program to increase compliance in 2015 and expanded it last summer to include additional properties that the city regards as “low-hanging fruit” in its efforts to pursue tax enforcement.

The project now includes more than 50 properties in Detroit’s downtown and Midtown. All tax years in which a return is not filed could potentially be in the scope of the project, Garcia noted.

Garcia said many property owners have complied with the city’s request but some others have resisted like Bedrock. Detroit previously has prevailed in similar litigation to obtain tenant data for its income tax collection efforts, he said.

“It’s every property owners right to have their day in court, but we’ve had some experience with this question of law, and we have confidence that the system is going to guide us to the right result,” Garcia said.

Despite the legal dispute, Garcia noted the city’s long-standing relationship with Bedrock and that he expects it will continue.

“I don’t think a lawsuit is going to change the nature of that relationship or interfere with any other activities the city has partnered with Bedrock on,” he said.

A status conference on the Bedrock request has been scheduled for Aug. 7 before Judge Robert Colombo.

Garcia said Detroit’s Office of Treasury hopes to have a citywide tenant regulation approved by City Council this spring to regularize the flow of information to its Tax Compliance Branch.

The city’s treasury office will receive and analyze all of the tenant rolls with help from the state Treasurer’s Office.

The focus of the regulation, he said, will be limited to rentals with a monthly payment greater than $750.

The city on Tuesday cited a code that prohibits its treasury office from releasing non-public tax information but said that it did observe a significant improvement in compliance between tax years 2014 and 2015.

cramirez@detroitnews.com

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