TiNY Report for 6/8/2017

This TiNY Report covers the four ALJ Determinations and one Tribunal Decision issued during the week of May 29, 2017.  We have been sitting on the ALJ cases for a week to give the litigants a chance to digest them before we report on them.  Since we don’t get paid to publish these Reports, we can afford to be principled.  The Tribunal decision is one that wasn’t posted until this morning.

At the time of this writing, no Orders from the week of May 29 have been posted.

ALJ DETERMINATIONS FROM JUNE 1, 2017

Matter of Gordon-Patterson; Judge Galliher; Division’s Rep: Mary Hurteau; Taxpayer’s Rep: pro se; Article 22.  The taxpayer’s petition for redetermination of a deficiency or for refund was dismissed for lack of jurisdiction because it lacked pretty much everything.  The petition lacked any statutory document giving rise to a right to a hearing, the petition wasn’t in proper form, and there was nothing indicating that the bank account levy referred to in the petition was by or for the benefit of the Division.  According to the Judge, the taxpayer was given an opportunity to cure the deficiencies in her petition, but did not respond.

Matter of Leblanc, McJury, and Wagner; Judge Gardiner; Division’s Rep: Christopher O’Brien; Taxpayer’s Rep: Michael Cooke; Articles 22 & 30-A.  Here, the taxpayers’ investment tax credit claims were denied.  The taxpayers were shareholders in an S corporation.  The issue appeared to be the calculation of the corporation’s cost basis and resulting calculation for the taxpayers’ claims of investment tax credits.  The taxpayers elected to expense rather than depreciate some property, so the Division argued the cost was not eligible for the investment tax credit.  The taxpayers argued there was nothing in the Tax Law language saying property upon which a federal election to claim an IRC 179 expense had been made was ineligible for a NYS investment tax credit.  However, the Judge found the Tax Law language was clear, and specifically provided for a credit for property that’s “depreciable.”  The Judge found the property at issue was depreciable, but implied that the property became un-depreciable as a result of the IRC 179 election.  The Judge supported her conclusion with federal guidance, providing that a section 179 deduction for the cost of qualifying business property decreases the basis of the property by the deduction, which resulted in a zero basis to compute the investment tax credit.  We have some trouble swallowing the Judge’s rationale since the statute specifically states that the investment credit base includes “the cost or other basis for federal income tax purposes [of the credit-qualified property].”  In our opinion, whether the cost of the asset is going to be recovered entirely in year 1, or ratably over a three, five, seven or 39.5 year period shouldn’t matter with respect to the application of the credit.  To construe the law as the Division does defeats the purpose of the credit, which is to encourage the purchase of credit-qualifying assets.  If the assets otherwise qualify, why does the cost-recovery period matter?   

Matter of Landolfi; Judge Law; Division’s Rep: Robert Maslyn; Taxpayer’s Rep: Joseph Marra; Articles 28 & 29.  Taxpayer’s BCMS request was untimely filed.  The Division adequately proved the taxpayer’s last known address and its standard mailing procedures, but didn’t prove the standard procedures were followed.  However, the Division proved through other evidence (USPS Forms 3811-A) that the taxpayer received the Notices of Determination more than one year prior to the filing of the petition.  So the petition was dismissed on timeliness grounds.

Matter of Wiesen; Judge Maloney; Division’s Rep: Peter Ostwald; Taxpayer’s Rep: Pro Se; Article 22.  The parties agreed to submit this case without a hearing.  When the issue is residency, not having a hearing is only a good idea if you’re pretty sure that you’d lose if you had a hearing (e.g. if your client is not a sympathetic witness).  2007 and 2008 were at issue in this case.  As the facts play out in the determination, it seems the taxpayer (a former NYU professor) had a pretty good case that he was not a City resident in 2008:  The auditor admitted that the taxpayer was in the City for only 91 days as compared to 260 days in Florida/East Hampton (with 11 unknown days).  Still, the Judge sustained the audit findings that the taxpayer had not changed his domicile.  The Judge did not address whether more than 183 days was spent in New York for statutory residency purposes.  Even though the issue of statutory residence was mooted and the Judge made no finding regarding stat. res. day count, the taxpayer was nonetheless found to have “maintained” a permanent place of abode in New York City because he had a rent-controlled apartment there (the lease for which he was purportedly trying to get assigned to his son).  Interestingly, the Judge totally ignored the Gaied “residential interest” analysis when determining whether there was a New York PPA.  Then again, it is not clear to me that the pro se taxpayer ever raised  the issue.  OF CONCERN:  The auditor was found to have issued several subpoenas to credit card companies after the Notice of Deficiency had been issued.  Some practitioners (this writer among them) feel that post-audit administrative subpoenas are an abuse of process intended to subvert the explicit prohibition against unlimited discovery in matters before the Division of Tax Appeals.  A fight for another day?

TAX APPEALS TRIBUNAL DECISIONS FROM JUNE 1, 2017

Matter of Manthas; Division’s Rep: Michael Hall; Taxpayer’s Rep: Michael Buxbaum; Articles 28 & 29.  In this responsible officer case the taxpayer’s petition was found to be filed late.  The Division adequately proved the taxpayer’s last known address, its standard mailing procedures, and that the standard procedures were followed when it mailed the BCMS Order.  The petition for an ALJ hearing was found to have been filed 749 days after the BCMS Order was mailed to the taxpayer.  So the ALJ’s dismissal of the petition on timeliness grounds was sustained by the Tribunal.  The taxpayer made arguments that his home address (i.e. the address to which the BCMS Order was sent) was not his preferred mailing address and that the Division was on notice of his preferred mailing address.  The Tribunal found these arguments unavailing because, among other reasons, the taxpayer’s income tax return filed before the BCMS order was issued listed the address to which the order was sent.  The taxpayer’s request for oral argument was denied.  Hmmm.

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