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State and Local Tax Blog

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Taxes in New York (TiNY) is a blog by the Hodgson Russ LLP State and Local Tax Practice Group members Chris Doyle, Peter Calleri, and Zoe Peppas. The weekly reports are intended to go out every Tuesday after the New York State Division of Tax Appeals (DTA) publishes new ALJ Determinations and Tribunal Decisions. In addition to the weekly reports, TiNY may provide analysis of and commentary on other developments in the world of New York tax law.

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TiNY Report for January 11, 2018 (covering DTA cases issued January 4)

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This week we have two ALJ Determinations and one Tribunal decision.  No orders.

ALJ DETERMINATIONS

Matter of Silverstein; Judge: Russo; Division’s Rep: David Gannon; Taxpayer’s Rep: pro se; Articles 28 & 29.  The Tribunal previously issued a decision, Matter of Silverstein (Silverstein I), on December 7, 2017, to the Petitioner of this matter.  In that decision, the Tribunal determined that Petitioner was a person responsible to collect and pay sales tax on behalf of Metro Auto Leasing, Inc. (Metro) and that the Division’s audit method was reasonable in the sales tax audit.  In this matter, the Division moved for summary determination on the basis of collateral estoppel arguing the same issues in this case were already addressed, litigated, and decided in Silverstein I for the same periods.  Judge Russo agreed, holding that the issues were indeed identical to the issues decided in Silverstein I and that Petitioner had a full and fair opportunity to litigate those issues in the prior proceeding.  Because Petitioner again failed to produce any evidence in admissible form to dispute the Division’s determination, she found there were no material issues, and granted the Division’s motion for summary determination against the Petitioner.  A few unexplained curiosities: (1) The Division issue two Notices to the same taxpayer, as a responsible officer of the same entity, for the same period, but in different amounts.  (2)  The notices did not get consolidated for hearing.  (3) The Tribunal and the ALJ found that the audit method used by the Division was reasonable, but it is unclear from the determination why that method resulted in separate Notices in different amounts for the same period. 

Matter of Montante, et al.; Judge: Law; Division’s Rep: Tobias Lake; Taxpayer’s Rep: Christopher Doyle and Andrew Wright; Article 22.  This case, litigated by one of your TiNY authors, involved the disallowance of QEZE credits claimed by Petitioners for the 2009 year.  In April 2009, the Legislature enacted amendments to the Empire Zones program “effective immediately” that created new tests for continued certification in the QEZE program.  Petitioners were notified in June 2009 their QEZE’s were being decertified for years beginning in and after 2008.  In 2010, the Legislature enacted “clarifying” provisions, making the amendments retroactive back to 2008.  Litigation ensued to challenge the law’s retroactive application.  The New York State Court of Appeals issued a decision in James Square Assocs. LP v. Mullen, which held the retroactive application was unconstitutional.  In Montante Petitioners argued James Square controlled and that the de-certifications could not be applied retroactively to 2008 or the period in 2009 prior to the law change.  Judge Law held that the Petitioners’ loss of QEZE benefits for the 2009 year was permissible.  In the Judge’s view, the decertification for all of 2009 was not a retroactive application of the new law.  And even if it could be viewed as a retroactive application, Judge Law opined that retroactivity would still be permitted under the balancing test applicable to such matters.  Even though the Judge acknowledged that much of the Petitioners’ conduct was tailored years earlier at the start of the Empire Zones program, he determined that the length of the retroactive period was relatively short and that the amendments’ purpose served a legitimate public interest that was not overridden by the Petitioners’ continuing expectation of tax credits (which began in the early 2000’s when the Petitioners took actions to comply with the Empire Zones program).  The Judge determined the retroactive application to the 2009 year was not a due process violation.  Lastly, the Judge addressed the issue of whether garbage district and fire district charges were eligible real property taxes.  The Judge held the charges fell within the definition of special assessments, which are not included in the definition of eligible real property taxes, and so they did not constitute property taxes.  We find anti-taxpayer legislation that has retroactive effect abhorrent.  So, even if this wasn’t one of our cases, we’d disagree with the result.  But we were not surprised at the result since the same judge ruled similarly in September in Matter of Calagiovanni.  We understand that the same issue is currently before the Tribunal in Matter of NRG.  So stay tuned!

TRIBUNAL DECISION

Matter of Clifton; Division’s Rep: Charles Fishbaum; Taxpayer’s Rep: pro se; Article 22.  The Division issued to Petitioner a Notice of Deficiency because it received information from the IRS indicating Petitioner was a NY resident with federal taxable income in the 2006 tax year.  The Tribunal noted such information provided a rational basis to conclude the Petitioner was required to file a NY income tax return for that year, and Petitioner failed to do.  So, the Division estimated Petitioner’s NY tax liability using the information it received from the IRS.  The Tribunal agreed with the ALJ’s determination concluding the Division’s use of the IRS’s information as the basis for the Notice was rational.  Where a Notice of Deficiency has been properly issued, the Notice is presumed correct, and the taxpayer then has the burden to prove the deficiency is erroneous.  The Tribunal disagreed with Petitioner that the Division was required to first prove the information it got from the IRS was accurate.  Moreover, Petitioner failed to provide any evidence that the IRS information was incorrect.  The Tribunal also agreed with the ALJ’s rejection of Petitioner’s “tax protestor” argument that he was not a federal employee or officer and thus his payments weren’t wages subject to income tax.  The Tribunal affirmed the ALJ’s determination and sustained the Notice against the Petitioner.  Observation for the week:  You can’t write “Tax protestor loses” without “pro se.

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