Last month, New York State passed its 2023-24 Budget, better late than never. We highlighted a lot of the new provisions in a recent Tax Alert, but there are a couple of changes involving the Metropolitan Commuter Transportation Mobility Tax (the “MCTMT”) worthy of special note. The MCTMT functions somewhat like a payroll tax on employers in the Metropolitan Commuter Transportation District (which includes the counties of New York, Bronx, Kings, Queens, Richmond, Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester). And it also applies to self-employed individuals, including partners in partnerships.
Edward Zelinsky, a Connecticut resident and professor at the Benjamin N. Cardozo School of Law in New York City, recently added another chapter to his New York tax chronicles, once again challenging New York’s convenience of the employer rule. Professor Zelinsky lost his previous battle with New York, Zelinsky v. Tax Appeals Tribunal, 1 N.Y.3d 85 (2003), cert. denied, 541 U.S. 1009 (2004), but this one has a bit of a different twist, as outlined in his 2019 and 2020 petitions for a hearing with the Division.
Pay taxes or lose your liquor license. When it comes to liquor licensing, it is important for license holders to remit taxes and all associated tax forms to New York State properly and timely, or your liquor license will quickly be in jeopardy.
After years of considering a move from your high-income-tax state (I’m looking at you New York and California) to an income-tax-friendly state (hello Florida), you’ve finally decided to take the plunge. What do you do now? How do you ensure that you change your residence in a way that an auditor looking to collect tax revenue for the Tax Department in your former home state will respect?
My first piece of advice—don’t look to the internet for sophisticated legal advice on this topic.
In an unfortunate blow to Taxpayers, the Washington State Supreme Court ruled 7-2 on Friday, March 24, 2023, to uphold the constitutionality of the state’s capital gains tax. The ruling comes as a sharp reversal of a lower court decision striking down the tax as unconstitutional, which we reported on here.
Last month, New York’s highest court denied leave to appeal in Matter of Obus v. New York State Tax Appeals Trib., 206 A.D.3d 1511 (3d Dep’t. 2022), closing the book on litigation that will have lasting implications on New York’s ability to tax vacation-home owners, and perhaps others with tenuous connections to a New York dwelling, as tax “residents” of New York. The New York Court of Appeals’ refusal to hear the appeal leaves the lower court’s decision in Obus intact.
Another win for telecommuters! Yes, you read that right! We recently covered a case involving a Pennsylvania-based employee who won a Covid-related telecommuting case in Ohio. Now remote employees have another win to add to their pile of Covid-related telecommuting cases. In Missouri, a judge just ruled that St. Louis improperly applied its 1% earnings tax on nonresident employees who worked outside the city during the Covid-19 pandemic.
As residents and SALT practitioners in New York, we see firsthand how high income tax rates drive the personal decision making of taxpayers as well as enforcement efforts by tax departments. On the taxpayer side, we’ve seen tangible (albeit anecdotal) evidence that taxpayers will make decisions on where to work or live based on their taxes. We saw this in 2018 with the explosion of moves following the implementation of the SALT cap, and again in New York in 2021 when, combined with Covid, taxpayers exited New York at a record-breaking pace, coincidentally around the time that the New York legislature raised the highest combined tax rate for New York State and City resident taxpayers to 14.7%. Of course, over the years New York has become somewhat of a leader in personal income tax enforcement, particularly in the residency area, to address the movement of taxpayers both in and out of the state. For example, over the course of 2018 through 2022, the tax department reports performing over four thousand residency audits per year. More recently, the tax department has put in place a massive “desk audit” program specifically to have a process that immediately questions taxpayers who left the state in 2020 or 2021.
An interesting residency case came out last summer on a statutory residency issue, and it may have got lost in all the hubbub around the Obus case (which we covered here). In Matter of Joseph Pilaro, the Tax Appeals Tribunal held that the taxpayer didn’t maintain a permanent place of abode (PPA) for substantially all of 2014, even though he had a place in New York for most of the year. The decision provides several helpful nuggets for future residency battles.
The New York City Pass-Through Entity Tax (“NYC PTET”) online application is now available, allowing individuals eligible to opt in to the NYC PTET on behalf of an eligible city partnership or eligible city resident S corporation.