Peduto orders crackdown on contractors committing tax fraud

Apr. 15—Pittsburgh Mayor Bill Peduto used Thursday — April 15, traditionally the deadline for tax filings — to announce an executive order to crack down on construction companies that skirt tax laws.

Although the tax deadline has been extended until May 17 this year because of the coronavirus pandemic, Peduto used the traditional "tax day" to impose the order calling for a crackdown on what amounts to tax fraud.

"Fraud has a devastating impact on worker safety and tax revenue, and it takes experts working together to fully address it. I want to thank all of our partners on working together on this effort, which will reward legitimate construction firms, protect workers and protect the city's bottom line," Peduto said in a statement.

The executive order directs the city's Permits, Licenses and Inspections (PLI) and Finance departments to form a committee with trade groups to come up with a legal definition for "construction contractor" to promote those who abide by legitimate business practices and to crack down on those that don't.

The idea is to stop contractors from paying workers "under the table" without deducting taxes. Those who do so not only violate the law, they also violate workers' rights and don't provide health care, workers' compensation and other benefits to their employees, a study by a task force convened by Peduto in 2017 found.

The task force issued its report earlier this year.

"Keeping employees 'off the books' is an illegal practice common in the construction industry. It benefits unscrupulous contractors who operate in an underground economy at the expense of the honest taxpayer," Eastern Atlantic States Regional Council of Carpenters representative Steve Mazza wrote in the task force's report.

Mazza led the task force that compiled a 94-page report that detailed numerous cases of fraud in Pittsburgh.

Councilman Corey O'Connor represented council on the task force. He called the construction industry the "backbone of our region's middle class."

In 2019, the industry accounted for 54,000 jobs in the area, according to the report.

"The Joint Task Force's findings clearly show there are businesses operating in Pittsburgh that evade their tax obligations, undermine the work of law-abiding businesses, and create unsafe working conditions," O'Connor said.

After the committee is formed and legitimate contractors are identified, they will be listed on the city's website to enhance transparency and build accountability for those that do not make the list.

"Our union is proud of its participation and leadership in the task force and its goal to educate and advocate against wage theft, worker misclassification, and all forms of construction industry tax fraud," William Sproule, executive secretary-treasurer of the Eastern Atlantic States Regional Council of Carpenters, said. "This is a step by the City of Pittsburgh to uphold workers' rights, and create standards to help our industry work on a level playing field."

Tom Davidson is a Tribune-Review staff writer. You can contact Tom at 724-226-4715, tdavidson@triblive.com or via Twitter .