October 23, 2021

Eric Adams’ Townhouse Trouble Tax Filing ‘Mistake’ and Blown-Off Buildings Inspector

Eric Adams, the Democratic nominee for mayor, is also a landlord who owns a four-unit red-brick Brooklyn townhouse where he says he rents out three apartments and, since 2017, has lived on the ground floor.

But tax and city records show potentially serious irregularities tied to his management of the Bedford-Stuyvesant property.

The city Department of Buildings is investigating a complaint alleging an illegal conversion of an apartment in the Lafayette Avenue building — and hasn’t heard from Adams since an inspector plastered a notice on his door more than a month ago, demanding a response.

Meanwhile, amended personal income tax documents Adams released following his June 22 primary victory clash with his claim that he uses the building’s ground floor as his residence — reporting zero days living at the property.

The filings could have allowed him to reduce his taxable income by tens of thousands of dollars, accountants who reviewed the records at THE CITY’s request say. After amending three years of tax returns once already, he will be refiling for 2017, 2018 and 2019 yet again after THE CITY pointed out irregularities to his campaign.

And THE CITY has learned that the accountant who signed Adams’ tax returns was fired from his job four years ago managing a Harlem co-op building following accusations of embezzlement.

Adams purchased the Lafayette Avenue building in Bedford-Stuyvesant from the federal government for $361,000 in 2003 when he was an NYPD captain. Last summer, after POLITICO NY raised questions about where he actually lives, Adams gave the press a tour of what he said was his apartment there.

“Welcome to my humble home,” Adams proclaimed as he led journalists through the ground-floor unit where he says he’s lived since 2017, even opening his refrigerator to display some of the vegan dishes he says he prefers (as well as non-vegan salmon).

On Notice

Just weeks after Adams narrowly won the Democratic nomination for mayor after a grueling primary battle, someone phoned 311 to allege there was an illegal apartment at his property, records show.

The Department of Buildings sent an inspector — Badge No. 2999 — to see if that was true. A DOB filing indicates that on Aug. 5 the inspector rang the doorbells and knocked on the door, but could not gain access.

The inspector, as required, plastered a one-page notice known as an LS-4 on Adams’ “cellar door” advising the owner to call DOB.

The notice warns in all caps boldface, “FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN THE DEPARTMENT OBTAINING AN ACCESS WARRANT AUTHORIZING THE INSPECTION OF THE PREMISES.”

It provides direct phone numbers to the DOB unit that tried to inspect the address and requests the owner to call and arrange a proper inspection.

As of Friday, six weeks after the notice went up, Adams had yet to reach out to DOB to set up an appointment. Also as of Friday, a DOB spokesperson said the department was preparing to schedule another visit.

A spokesperson for the Adams campaign, Evan Thies, said an email from THE CITY was the first the mayoral frontrunner had heard of an inspector looking into the property. “Eric is not aware of a DOB notice and will reach out for more information and to resolve the issue if necessary,” he said.

This marked the second time Adams has sidestepped city building inspectors. In 2017, he didn’t respond to two notices slapped up by inspectors looking into a complaint of an illegal conversion there.

City records have been inconsistent about the number of apartments in the building.

It’s listed on Adams’ 2003 deed and on his 2008 Senate financial disclosure form as a three-family property. But in city building and property tax records, the building is described as having four units.

‘It Was a Mistake’

As previously reported by THE CITY and POLITICO NY, Adams did not pay taxes for 2017, 2018 or 2019 on rental income he collects from tenants, informing the Internal Revenue Services in his amendments that he spent just enough on repairs to the building to write off the entire amount he collects.

The IRS allows property owners to write off expenses on rental units — but not take deductions on apartments where they live.

Yet amended tax documents Adams’ campaign released after the election, detailing his landlord expenses, do not inform the IRS that Adams lived at the property. The write-offs appear to apply to the entire building — including his apartment.

Asked about the discrepancy by THE CITY, Adams spokesperson Thies conceded that the filings were erroneous. Thies said Adams would refile his forms with corrections.

“It was a mistake. He should have let them know he lived there, because he did,” Thies said.

It’s not the first time Adams has submitted corrected tax returns to the IRS after reporters raised red flags.

In his original tax filings for 2017, 2018 and 2019, Adams reported he had zero taxable rental income. He neglected to send the IRS what’s known as a Schedule E filing, spelling out that he’d actually collected some $100,000 in rental income during those years, but had written off enough repairs to zero it out as taxable. He only agreed to amend his returns after POLITICO NY inquired.

He filed amended forms with the IRS in May, before the primary, but didn’t release them to the public until last month — after he’d won the Democratic nomination.

Zero ‘Personal Days’

Two accountants reviewed the three years of Adams’ amended tax forms at the request of THE CITY. Speaking on the condition of anonymity so as not to alienate the man who could be New York City’s next mayor, they said the amended forms as filed could have the effect of lowering Adams’ tax burden by thousands of dollars.

In the amended filings, Adams reported that in each year he had collected $36,000 in rental income and spent around the same amount on repairs, utilities and other expenses on the four-family rental property. That allowed him to claim zero rental income.

But he reports only three of the four units are actual rentals, which means Adams can only legitimately write off three-quarters of the expenses, according to the two accountants.

Counting Adams’ own unit as a rental and including it among expenses claimed for repairs would allow him to write off an extra $9,000 a year in each of those years — or $27,000 more in taxable income over the three years.

Adams could have easily disclosed that he lived in the ground-floor unit simply by answering a question on the form that asks landlords to report their “personal use days” in the building.

Under “personal use days” in 2017, 2018 and 2019, Adams wrote in zero each year.

Adams’ spokesperson, Thies, said that all landlord-related expenses Adams used to write off his rental income applied only to the three rental units — not to his apartment. But the accountants consulted by THE CITY pointed out inconsistencies in the filings that weigh against that claim.

One of the accountants flagged Adams’ on-again, off-again use of the mortgage-interest deduction.

Homeowners are allowed to write off mortgage interest on properties, but landlords can also do the same thing as a landlord-related expense in buildings they rent out, under Schedule E.

The accountant said that Adams appeared to write off half of his mortgage interest as a landlord-related expense only in 2018 — the year the other landlord-related expenses didn’t add up to cover the $36,000 in rental income.

By adding in the mortgage interest as a landlord expense that year, he was able to bring the amount of expenses up to zero out the $36,000 in rental income as taxable income. In the other two years — 2017 and 2019 — he already had enough landlord-related expenses, such as repairs and utilities. In those years, he didn’t include mortgage interest as a landlord-related expense.

Elusive Accountant

The revised and original tax filings also raise questions about the credentials of Adams’ listed tax preparer, Clarence Harley.

Harley’s employer identification number listed on a tax form did not come up in a search of a national business database, and his name was not found in a search of two state databases, one for registered tax preparers and the other for certified accountants.

His business address is listed at 115 W. 30th Street in Manhattan, suite 401.

But a representative for Justin Management, which rents out units in that building, said the firm has no records of an office rental by Harley at that location.

The rep said the most recent tenant in suite 401 was the company Enfocus, which leased the unit from 2006 until the spring of 2020.

The suite has been empty since, and has no sign currently posted on the door, a recent visit found.

Court filings also show that Harley was terminated from his job in 2017 as a managing agent for a Harlem co-op, 30 Macombs Place HDFC, for alleged financial improprieties.

The board also successfully evicted him the following year, according to current 30 Macombs Place board president Erika Smith.

Financial issues included the alleged embezzlement of more than $86,000 from the corporation’s account, according to the court filings, as well as failure to pay the building’s property taxes, water bills and oil charges, according to Smith.

“Mr. Harley had been using the Corporation quite literally as a personal expense account and piggy bank,” say court papers submitted by then-HDFC attorney Adam Silverstein in December 2017.

“In addition to liberating approximately $50,000 from the Corporation’s accounts since 2014…. Harley failed to keep the building up to date on its various obligations,” the filing says. “Without the funds available from the pending sale [of certain units], all the residents of the Corporation’s building are in peril of losing their homes.”

The filings also say that Harley lived rent-free in the building for seven years.

Smith said the board filed a criminal complaint in late 2017 with the Manhattan District Attorney’s Office but never heard back after an initial acknowledgement.

‘Difficult Times’

The office of DA Cy Vance Jr. has no record of criminal charges being filed against Harley, according to spokesperson Danny Frost. He declined comment when asked what happened to the complaint filed by 30 Macombs Place HDFC.

Smith said Harley could be friendly and charming, but said he had no office — instead working from his document-filled apartment or a paper-covered desk located in the basement of the building.

Smith added that Harley’s eviction took nine months to go through after his termination, and that she later heard that a building tenant had spotted Harley at a homeless shelter.

In a radio interview last year, as noted by POLITICO NY, Adams told Hot 97 that he couldn’t reach his accountant for two weeks before learning that the man had become homeless.

He said “Eric, I’m living in a homeless shelter. I lost my apartment, they doubled my rent, I’m going through difficult times,” Adams told the radio station, in the context of a discussion on gentrification and displacement in New York City.

Adams didn’t name the accountant during the interview.

Thies told POLITICO that Harley had moved out of his West 30th Street office sometime during the COVID pandemic.

Responding to questions from THE CITY about Harley, Thies said: “We will let Mr. Harley speak for himself.”

Harley didn’t respond to multiple voice and text messages left on the cell phone number he provided on Adams’ tax forms.

This article was originally posted on Eric Adams’ Townhouse Trouble Tax Filing ‘Mistake’ and Blown-Off Buildings Inspector