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 February 27, 2024
NY state flag and the word TAXES made out of money

There are exciting changes here at the TiNY editorial offices. My colleagues, Zoe Peppas and Peter Calleri, have agreed to help out on some of the case summaries. This week’s edition includes examples of our new authors’ work, and they seem worthy of TiNY’s high editorial standards. I hope you agree.

As editor-in-chief, I get to hold the pen last. So, TiNY’s twelve (or so) loyal readers should continue to blame me for anything written in TiNY that is wrong, offensive, or just plain stupid. And absent special acknowledgement, the introductory paragraphs will continue to be written by yours truly. We wouldn’t want to deprive you of my wit.

We are also revising our editorial schedule since we followed the old schedule only accidentally. Under our new schedule, we’ll post our summaries on the Tuesday following the Thursday the cases are issued by the DTA.

Finally, TiNY’s “Portraits in Courage” award this week goes to the Honorable Jennifer Baldwin, who was the Division’s advocate in Matter of E. & J. Gallo Winery and the ALJ in Matter of Charles.


Matter of Kwit  (February 15, 2024); Div’s Rep. Daniel Schneider, Esq.; Pet’s Rep. pro se; Article 22/Jurisdiction (Author: Chris Doyle, Esq.)

The Tribunal sustained the ALJ’s determination that the DTA didn’t have jurisdiction to hear Petitioner’s case. Petitioner did not attach a copy of the Notice being challenged to his petition, and then didn’t provide a copy of the Notice after being notified by the DTA, in writing, that failure to provide a copy of the Notice could result in the dismissal of his petition.


Matter of Bhasin (ALJ Taylor, February 15, 2024); Div’s Rep. Peter Ostwald, Esq.; Pet’s Rep. pro se; Article 22/Timeliness of refund claim (Author: Zoe Peppas, Esq.).

Petitioner filed amended returns claiming refunds for the 2014 and 2015 years in 2020 and 2019, respectively. The Division denied the claimed refunds as untimely. Following a conciliation conference at which the notices of refund denial were sustained, Petitioner petitioned for an ALJ hearing. The division filed a motion for summary determination on the matter. Petitioner did not respond to the motion within the 90-day period.

Petitioner argued he was wrongly advised by his accountant that he had five years to file amended returns, and thought he was timely in filing his amended returns within that timeframe.

Under to Tax Law 687(a), a claim for credit or refund of personal income tax must be submitted before the later of three years from the date the return was filed or two years from the date the tax was paid. And even if there is a timely refund claim, the amount refundable is limited to the taxes paid, or deemed paid, within the prior three years. Petitioner did not file his claims until more than three years after the taxes were deemed paid, so his refund claims were limited to zero.

Had Petitioner made a mistake of fact, as opposed to a mistake of law, he may have qualified for the Commissioner’s discretionary refund authority, but the mistake here was one of law (i.e., the maximum period allowed by law for claiming a refund). And, has the DTA ever recognized that a petitioner seeking a discretionary refund has made a mistake of fact? Not to the best of my knowledge.

Matter of Charles (ALJ Baldwin, February 15, 2024); Div’s Rep. Stefan Armstrong, Esq.; Pet’s Rep. Emmanuel Joseph, CPA; Article 22/Timy (Author: Peter Calleri).

Typical timy, typical result. The Division proved both its standard mailing practices and that they were followed when the Division mailed the Notice of Deficiency to Petitioners’ last known address on January 5, 2022. Petitioners’ BCMS request was filed more than four months later, on May 9, 2022, and was therefore untimely.

Matter of E. & J. Gallo Winery (ALJ Behuniak, February 15, 2024); Div’s Rep Jennifer Baldwin, Esq.; Pet’s Reps. Michael Kerman, Esq. and Leah Robinson, Esq.; Article 9-A/QNYM (Author: Peter Calleri).

The issues here were as follows: (1) whether petitioner met the requirements of a “qualified New York manufacturer” (“QNYM”) under Tax Law § 210(1)(a)(vi) for the period January 1, 2016, through December 31, 2019; and (2) whether substantial understatement penalties should be abated.

Petitioner was a multinational beverage manufacturing, distributing, and marketing company whose products included wines, spirits, and grape concentrates. Petitioner owned vineyards and in 2016 expanded into New York by purchasing Nutt Road Vineyard.

Petitioner did not use its own employees to operate the Nutt Road Vineyard. Instead, Petitioner entered into a service agreement with Martini Vineyards, Inc., which undertook the management, control, and operation of the Vineyard from 2016 through 2019 (the years at issue). When filing its New York taxes, Petitioner computed its tax using the reduced rates for QNYMs in Tax Law § 210(1). On audit, however, the Division concluded that Petitioner was not eligible for the QNYM reduced tax rates and issued notices of deficiency totaling $7,061,064.

Judge Behuniak disagreed with the Division, finding that Petitioner satisfied the three QNYM requirements under Tax Law § 210(1)(a)(vi)—Petitioner: (1) was “principally engaged” in (i.e., derived more than 50% of its gross receipts from) the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture, or commercial fishing; (2) owned property located in New York that had an adjusted basis of at least $1,000,000 at the close of each taxable year; and (3) principally used such property in the production of goods by the same list of activities noted in (1) above, including manufacturing and viticulture.

The Division’s primary argument against QNYM status involved the third prong of Tax Law § 210(1)(a)(vi). The Division attempted to advance a narrow interpretation of the term “used”—requiring that Petitioner have employees working at the Nutt Road Vineyard in New York. It argued that, by engaging a third-party contractor to operate the property, Petitioner’s Nutt Road Vineyard was not “used in the production of goods” by Petitioner. Judge Behuniak dismissed this argument, noting that nothing in Tax Law § 210(a) suggests that property is not “used by” its owner if the owner contracts with another entity to perform labor on the property. Furthermore, he distinguished the situation from that of a lease because Petitioner maintained control over what Martini Vineyards, Inc. was required to do with the land and what the land could be used for. The QNYM provisions only require that a taxpayer derive 50% of its gross receipts from qualifying sales and have at least $1 million of qualifying property in New York used to produce goods. Therefore, Petitioner qualified as a QNYM.

The Divisions also argued that Petitioner could not qualify as a QNYM for the tax year 2016 because its assets were not “used in the production of goods” between the date it purchased the Nutt Road Vineyard and the close of the 2016 taxable year. This argument failed because, even though Petitioner purchased the Nutt Road Vineyard on Dec. 15, 2016, and the vineyard was dormant during the last two weeks of the year, Petitioner immediately became responsible for “protecting and nurturing” the grape plants. Therefore, it used the vineyard for the rest of the taxable year and qualified as a QNYM for the entire 2016 taxable year.

Credit Judge Behuniak for recognizing that: the QNYM requirements were in a provision imposing a tax, the Division’s interpretation was entitled to no deference, and the statute was “to be construed most strongly against the government and in favor of the taxpayer.” And additional kudos to the Judge for actually following that rule of statutory construction in adjudicating the case.

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