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Taxes in New York (TiNY) is a blog by the Hodgson Russ LLP State and Local Tax Practice Group. The weekly reports are intended to go out within 24 hours of the Division of Tax Appeals’ (DTA) publication of 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 14, 2021 (reporting on DTA cases issued January 28)

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Since our last edition, there were one ALJ Order and three Determinations posted by the DTA, dated January 28. Nothing says “Be mine” on Valentine’s Day like a new TiNY Report.


Matter of Jessop; Judge Russo; Division’s Rep.: Ellen Krejci; Petitioner’s Rep.: pro se; Article 41 Award of Costs (by Chris Doyle)

It is rare to see a request for costs, and rarer still to see such a request made by a pro se petitioner.

Petitioner’s claim for certain credits was denied on audit. Following a hearing, it was determined that Petitioner should receive less than half of his claimed credits. Petitioner filed an application for $367.50 of costs about 55 days after the Determination was issued.

Judge Russo found Petitioner was not entitled to costs. Applications for costs must be filed within 30 days following final judgement, so Petitioner’s application was more than three weeks too late. Furthermore, the Judge found Petitioner failed to prove he was a “prevailing party” under the law. Getting less than half of the credits you claimed is not, in the Judge’s eyes, “substantially prevailing.” The Judge found that pro se litigants are not entitled to an award of costs for their own appearances. And, finally, the Judge found that Petitioner had not established that his net worth was less than $2 million at the time the petition was filed.


Matters of Goldstein and Schreiber; Judge Behuniak; Division’s Rep.: Christopher O’Brien; Petitioners’ Rep.: David Burch; Article 22 (by Chris Doyle)

Since these Petitioners were co-owners of the same company and the Determinations pertained to the same issue, I combined the summaries.

Petitioners owned interests in B&H Foto, which was an S corporation doing business in New York City. Petitioners were New York residents during the years at issue, and B&H was a qualified empire zone enterprise (“QEZE”). This case considered the calculation of Petitioners’ QEZE Tax Reduction Credit (the “TRC”). The TRC is the product of four factors, only one of which was relevant in this case: the tax factor. The numerator of the  tax factor is the income from QEZEs owned by the taxpayer, and the denominator is the taxpayer’s total New York income. Like many New York resident shareholders of QEZE S Corporations, Petitioners took the common-sense approach of treating all of the income flowed-through from B&H as being from a QEZE. This is logical because, without the benefit of QEZE status, resident shareholders of S corporations pay New York tax on all of the income flowed-through from the S corporation, and QEZEs were supposed to be able to operate tax-free in New York. However, the Division took the position that, for QEZE S corporation shareholders, only that portion of the S corporation’s income apportioned to New York using the corporation’s business allocation percentage was to be taken into account in the numerator of a resident shareholder’s tax factor.  And the DTA and the Appellate Division, Third Department have agreed with the Division. So, the Judge granted the Division’s motion for Summary Determination.

Matter of Sattelberg; Supervising ALJ Friedman; Division’s Rep.: Ellen Krejci; Petitioner’s Rep.: pro se; Article 22 (by Chris Doyle)

Petitioner’s petition did not include a copy of either a Notice of Deficiency or a Conciliation Order being challenged. The DTA wrote to Petitioner regarding the insufficiencies in the petition and gave Petitioner 30 days to cure the inadequacies. Petitioner did not cure, so the DTA issued a Notice of Intent to Dismiss. Staying true to form, Petitioner did not respond to the Notice. So, the Judge dismissed the case.

NOTEWORTHY (by Chris Doyle)

  1. Even though she is still listed on the DTA website, we have heard from several reliable sources that Roberta Mosely Nero has retired/resigned as President of the Tax Appeals Tribunal. I found her open-minded and willing to engage. Under her leadership the Tribunal issued decisions that were solidly researched and logically reasoned. I did not agree with them all. And while most decisions were what I expected, there were a couple of shockers, some welcome and some disappointing.

    I enjoyed appearing before her, and I wish her well. Hers will be tough shoes to fill.

  2. The proposed budget includes a provision to let the Division appeal adverse Tribunal decisions. I’m OK with that, but only if the Division is required to pay all of the taxpayer’s legal fees if the Division loses the appeal. If the Division can’t get the Tribunal’s imprimatur for its position and appeals, it should have some skin in the game. Otherwise there is nothing to keep the Division from appealing every adverse Tribunal decision, thereby making it uneconomical for many taxpayers with worthy cases but small amounts at issue to engage in the administrative appeals process. Also, the standard of review needs to be the same at the Appellate Division regardless of whether a petitioner or the Division is appealing. So the Tribunal’s decision (against the Division) should be affirmed unless it is arbitrary and capricious or not supported by substantial evidence, and the Tribunal’s interpretation of statutes should be given significant deference.

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