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 April 30, 2024
NY state flag and the word TAXES made out of money

Before getting into the cases, let us acknowledge that the better-late-than-never politicos in Albany have passed the 2024-25 New York State Program Budget and it has already been signed by the Governor. The Governor stuck to her “no increased tax rates on the wealthy” position even in the face of strong head winds produced by the leadership in the Assembly and Senate. Good for her. Look: She understands that New York can impose higher taxes on the wealthy, but that New York can’t compel the wealthy to pay those taxes when they may be avoided by moving to Florida, Tennessee, or Texas. And she understands it is relatively easy for the wealthy to move to states where they can pay less.  So much less than a few years’ worth of tax savings for a moderately high-income person is enough to buy a really nice house in south Florida. Thank goodness there are still some in Albany who consider taxation a pragmatic endeavor.

So, let’s look under the hood at what was in the Budget. It turns out, there’s not a lot to talk about on the revenue side of the ledger (2024 Laws of NY Ch. 59):

Part A extends the itemized deduction reduction for upper-income taxpayers through 2030. 

Part B extends the penalties for reportable and listed transactions to 2029.

Part C cleans up a technical glitch in the MCTMT that the Department of Taxation and Finance and most taxpayers were ignoring anyway.

Part D closes, for tax years beginning on and after January 1, 2024, a procedural loophole, by allowing Notices of Determination to be issued after a Division of Tax Appeals petition has been filed.

Part E adds what I think will be a “not-worth-the-trouble-to-claim-it” personal income and corporate franchise tax credit of up to $6000 per location per year to smallish retailers that make retail theft deterrent expenditures.  Do you know what would be more effective and easier?  Getting rid of the sales tax on protective and detective services.  But no one in Albany is asking TiNY’s opinion.

Part H permits taxpayers to file amended sales tax returns.  This is a long-overdue procedural reform.

Part J extends the partial sales tax exemption for certain bank bail-out transactions.

Part L converts the cannabis tax from a potency tax to a higher-than-normal (see what I did there?) tax of 9% of consideration paid on distributor-to-retailer sales, and for said sales to a registered organization or a microbusiness a reduced tax would be based on 75% of the consideration paid.  

Part T reduces the sales tax on medical cannabis to 3.15% from 7%.   

And in 2024 Laws of NY ch. 58, Part PP, a sales tax exemption for residential energy storage systems purchased from June 1, 2024, to May 31, 2026, was adopted. 

In other very important non-revenue budget areas, as the result of a COVID hangover, for the next five years you can continue to get drinks-to-go at your local bar (2024 Laws of NY ch. 55, Part Y, which is appropriate, because drinks to go let you “PartY on, dudes” (insert your own mental GIF of Abraham Lincoln in Bill & Ted’s Excellent Adventure here)). And motion picture theatres will now be able to register to sell beverages containing alcohol for on-premises consumption (Part CC). To paraphrase the Roman poet Juvenal’s somewhat famous “bread and circuses” quote: “Give New Yorkers drinks and movies and they will never revolt.” Is there some cosmic parallel that might be conjured comparing the Roman Empire in the 1st Century AD and the Empire State in the 21st Century AD? Let’s hope not. The 1st Century AD were some dark times.

There are a Tribunal decision and four ALJ determinations to discuss this week:


Matter of Zhouchuan Sun (April 11, 2024); Div’s Rep. Maria Matos, Esq.; Pet’s Rep. pro se; Article 22 (Pete Calleri).

In denying Petitioner’s exception, the Tribunal held that (1) the Presiding Officer properly rendered a default determination against Petitioner for failing to appear; (2) Petitioner did not show a reasonable excuse for his default; and (3) Petitioner failed to establish a meritorious case.

In September 2020, Petitioner filed a petition with the Division of Tax Appeals protesting a June 2020 conciliation order that recomputed a notice of deficiency and asserted additional personal income tax for 2015. In January 2023 Petitioner was sent two letters by the DTA: a letter notifying him of the Presiding Officer assigned to the matter, and a notice of hearing. Both indicated the date and time of the hearing was March 2, 2023, at 11:00 am. Petitioner did not respond. And on March 2, Petitioner neither appeared at the hearing nor submitted a written request for an adjournment. The Division’s representative moved that Petitioner be held in default, and the Presiding Officer issued a default determination denying Petitioner’s petition.

Petitioner timely filed an application to vacate the default determination, arguing that he never received the notice of hearing. On review, however, the Supervising ALJ determined that the Presiding Officer properly rendered the default judgment. The Supervising ALJ found that Petitioner had failed to show both an acceptable excuse for not attending the hearing and that he had a meritorious case.

The Tribunal agreed with the Supervising ALJ. First, pursuant to 20 NYCRR 3000.13(b)(2), it was found that the Presiding Officer properly rendered a default determination because Petitioner neither appeared at the hearing nor obtained an adjournment. Second, Petitioner failed to comply with 20 NYCRR 3000.13(b)(3) by not showing a reasonable excuse for his default. Although Petitioner showed that his mailbox was damaged on February 2, 2023, the Postal Service continued to deliver mail to the mailbox. He did not submit any evidence to support his claim that rain and snow soaked the delivered mail rendering it unreadable, and he did not submit any evidence (beyond his unsworn assertion) that his mother-in-law threw the soaked mail away. Let’s pause here for a moment to wonder whether “My mother-in-law threw away my rain-soaked Notice of Deficiency” is the adult equivalent of “my dog ate my homework.” Both seem to have the same level of superficial credibility.

The Tribunal rejected the additional argument that Petitioner could not have reasonably expected that he would receive a notice of hearing in late January 2023 given how long it had been since he filed his petition. Petitioner provided evidence of multiple communications with the Division of Audit and the Division of Tax Appeals as evidence of his intent to appear. But such communication, the Tribunal reasoned, does not excuse the failure to appear.

Finally, while Petitioner’s failure to provide a reasonable excuse for his default was sufficient to deny his exception, the Tribunal also found that Petitioner failed to establish he had a meritorious case. The Tribunal agreed that the Division properly denied Petitioner’s claimed rental real estate loss for the 2015 tax year. Petitioner’s entitlement to that loss turned on whether he was a qualified real estate professional in 2015. Because Petitioner offered no evidence of the number of hours he worked in real property businesses, he was unable to show that his claimed rental real estate activity was more than one-half of his total personal services performed in 2015 as required by IRC § 469(c)(7)(B).


Matter of Bruel (Supervising ALJ Gardiner, April 18, 2024); Div’s Rep. Mark O’Higgins, Esq.; Pet’s Rep. Nora Sweeney, EA; Article 22 (Zoe Peppas).

A typical timey: BCMS issued Petitioner a conciliation order on May 12, 2023. Petitioner filed a petition in protest on August 16, 2023. Since the petition was four days late, Supervising Administrative Law Judge Gardiner issued a notice of intent to dismiss petition as untimely. Petitioner did not respond to the notice of intent to dismiss the petition.

The Division was required to prove a proper mailing of the conciliation order by showing a standard procedure for mailing orders and that the standard procedure was followed in this particular instance. The Division met its burden of establishing proper mailing by submitting a CMR (Certified Record for Manual Mail) and affidavits of Division employees who issued the conciliation order. Petitioner did not respond to the notice of intent to dismiss the petition, and thus the facts alleged by the Division were deemed admitted. So, the Judge found that the conciliation order was properly mailed to Petitioner and Petitioner’s representative.

Taxpayer’s petition was untimely, and thus, was dismissed with prejudice.

Matter of Schrettner (ALJ Chu-Fong, April 18, 2024); Div’s Rep. Peter Ostwald, Esq.; Pet’s Rep. pro se; Article 22 (Chris Doyle).

What a mess. 

Petitioner, a tax return preparer, claimed credits on his 2019 return for child and dependent care and college tuition. On audit, the Division denied some of the credits due to lack of evidence even though Petitioner produced checks for payments of the expenses that, Petitioner asserted, supported the credits claimed. In the run-up to the scheduled hearing date of March 9, 2023, the Division produced an affidavit prepared by a Tax Technician IV. Petitioner requested an adjournment and instructions on how to obtain subpoena documents and witnesses. The ALJ denied the request for adjournment and the subpoena requests. It seems that at least one of the subpoena requests involved Petitioner’s children’s college information and the children did not give written consent for disclosure of the information. The case was reassigned to another ALJ on March 22, 2023. It is not clear from the determination why the hearing that was supposed to happen on March 9 never happened. Petitioner made some more requests, all of which appeared to have been denied by the then-acting Supervising Administrative Law Judge either based on the merits of the requests, or because the requests were not in the form required by the regulations.

There was more back-and-forth between Petitioner and the DTA, with Petitioner seeking subpoenas or orders and the DTA denying same. Eventually, a hearing was held on June 29, 2023. Immediately before and at the hearing, Petitioner made more motions.

The ALJ determined:

  1. A motion for summary determination cannot be made at the hearing.
  2. Petitioner’s motions for subpoenas failed on both procedural and substantive grounds. Subpoenas are required to be filed at least 20 days prior to the hearing, and Petitioner’s last round of subpoenas was filed six days before the hearing. Substantively, Petitioner’s request for the compelled appearance of a Division employee failed because Petitioner’s stated reason for the employee “to back-up Petitioner’s assertions,” was too vague. As for the request to subpoena documents and personnel from one of the colleges attended by two of his children, the DTA had conditioned the grant of that subpoena on Petitioner receiving the children’s permission, and that permission was not obtained.
  3. Petitioner’s objection to the affidavit of the Tax Technician IV was also denied because, the Judge found, affidavits may constitute substantial evidence to support the Department’s actions.
  4. On the merits, Petitioner was found to have failed to prove his entitlement to the dependent care credit. There was no proof of where the children lived during the tax year and there was no evidence affirmatively establishing that the payments to Petitioner’s ex-wife were made for dependent care. Petitioner also failed to establish he was entitled to the college tuition credit. One of the tuition payments related to a different tax year and other payments were not shown by Petitioner to be for qualified expenses (like tuition) and not for other expenses.

Matter of Hernandez (ALJ Baldwin, April 11, 2024); Div’s Rep. Amanda Alteri, Esq.; Pet’s Rep. pro se; Article 22 (Chris Doyle). 

Petitioner filed BOTH a BCMS request AND a petition for ALJ hearing on March 1, 2022, challenging notices of refund disallowance dated May 19, 2021 (for 2019), and October 8, 2021 (for 2018). No notice of denial was submitted for the third year at issue (2020). The DTA, assuming that Petitioner wanted to pursue a BCMS conference, sent Petitioner a withdrawal of hearing form, to which Petitioner did not respond.

A BCMS conference was held in December 2022, and in January 2023 the Conferee issued Consent forms indicating the Conferee intended to sustain the refund denial. Petitioner signed the Consent Forms and returned them to the Conferee, thereby ending the case. Petitioner never withdrew their DTA petition. So, the Division made a motion to dismiss the case, which Judge Baldwin granted. 

Matter of Ramirez  (SALJ Gardiner, April 11, 2024); Div’s Rep. Amanda Alteri, Esq.; Pet’s Rep. pro se; Article 22 (Chris Doyle).

The petition did not include the statutory notice or conciliation order being challenged, and that deficit was not cured following the Division of Tax Appeals’ written request. Accordingly, the petition was dismissed, with prejudice.

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