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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 20, 2020 (covering DTA cases issued February 13)

By on

This we week have ten (?!) orders. There are really only two issues in the ten orders, so I’ve condensed the summaries down to two: one covering two of the orders and the other covering the other eight orders. I would never ask our valued readers (all twelve or so of you) to suffer through eight of the exact same summaries.

ORDERS

Matter of DeMarco; Matter of Lang; Matter of Tortorici ; Matter of Tonkin; Matter of Quigley; Matter of Semetsis; Matter of Costa; Matter of Carlo; Judge DiFiore; Division’s Rep: Colleen McMahon; Taxpayers’ Rep: Thomas Carrella, EA; Article 22 (by Emma Savino)

Since I’m grouping these together, I’m just going to refer to the taxpayers generally as “Petitioners.”

Petitioners timely filed petitions seeking reversal of the Division’s disallowance of income tax refunds claimed with respect to items of income Petitioners felt should be excluded from their taxable incomes. These amounts were excluded by Petitioners because they claimed that their employers mistakenly reported line-of-duty injury pay as includable income. After filing its answers, the Division served Petitioners with demands for a bill a particulars. The demands requested information such as facts supporting Petitioners’ position, details regarding Petitioners’ injuries while in the line of duty, and the grounds for Petitioners’ legal arguments. Petitioners did not respond to the demands.

The Division then filed motions to preclude Petitioners from offering evidence at the hearing on matters that the Division included in the demands. And after discovering that the “Round One” motions were delayed in the mail, the Division filed “Round Two” motions for orders that its previous motions were timely, or granting an extension to make motions to preclude, and it included affidavits establishing the date of mailing of the motions.

Petitioners did not respond to any of the motions (uh-oh).

Where a party fails to respond to a demand for a bill of particulars, the initiating party can make a motion to preclude the other party from giving evidence at hearing with respect to the particulars requested. Such a motion to preclude must be made within 30 days after the time limit to respond to the demand expires. The Judge determined that the Division’s motions to preclude were timely because the Division was able to prove timely filing. The Judge also explained that a demand for a bill of particulars is appropriately directed to the party (like Petitioners) who bears the burden of proof. However, the Judge ultimately denied the motions to preclude because she found that the petitions were sufficient to place the Division on notice as to the facts and legal issues in dispute. The Judge also found that the demands sought information that was evidentiary in nature, and thus were “palpably improper.”

I gotta say, three-quarters of the way through the order, I thought Petitioners were going down. After the Judge found that: (1) Petitioners were appropriate recipients of the demand, and (2) Petitioners’ representative failed to respond to the demand or the motions, and in most such cases it is appropriate to find that the Petitioners “have waived all objections,” I figured the easy road for the Judge would be to grant the Division’s motions to preclude. But kudos to Judge DiFiore for going the extra mile to rule in favor of the Petitioners on this procedural issue by finding that the Motions were palpably improper in the first instance.

Matters of Gerwitz; Judge Connolly; Division’s Rep: Karry Culihan; Taxpayer’s Rep: pro se; Article 22 and Tax Law § 171-v Driver License Suspension (by Emma Savino)

Petitioners share the same last name – I’m guessing that they are (or were) married – hence the caption matters (plural).

Mr. Gerwitz filed a petition protesting 4 Notices of Deficiency and the validity a 60-day Notice of Proposed Driver License Suspension. Ms. Gerwitz also filed a petition which protested 2 Notices of Deficiency, both of which were also issued to Mr. Gerwitz, as well as the validity of a 60-day Notice of Proposed Driver License Suspension. The petitions did not challenge the Division’s timely issuance—or Petitioners’ receipt of—the Notices of Deficiency on procedural grounds. Neither did the petitions substantively challenge the basis for the 60-day Notices. Instead, the petitions alleged that the original Notices of Deficiency were based on incomplete information and that the deficiency would be minimal with complete information.

The Division moved to dismiss: (1) the portion of the petitions challenging the Notices of Deficiency on substantive grounds based on timeliness, and (2) the portion of the petitions seeking relief from the 60-day Notice based on Petitioners’ failure to plead any of the statutorily-enumerated defenses.

The Judge found that the Division failed to introduce any proof of mailing with respect to one of the Notices of Deficiency issued to each Petitioner, and he denied the motion with respect to that Notice. With regard to the remaining Notices of Deficiency (i.e. three issued Mr. Gerwitz and one issued to Ms. Gerwitz), the Judge found that the Division introduced adequate proof of the standard mailing procedures, but not that they were followed because the Division submitted into evidence a facially-flawed certified mailing receipt. So the Division was found to have not proven proper mailing. But the Judge determined that the Division proved Petitioners’ actual receipt of the Notices of Deficiency on November 9, 2017, through its submission of USPS forms 3811-A and USPS responses to the Division’s inquiries.

The petitions were received on June 25, 2018, but the envelopes did not contain postmarks. To be timely, the petitions would have had to have been mailed by February 7, 2018. And relying on a prior Tribunal decision, the Judge determined that the petitions would have had to have been mailed no more than five days prior to their receipt. Since the petitions were not received until June 25, 2018, the Judge found that the petitions were not timely with respect to the four remaining Notices of Deficiency.

The Division failed to present any evidence regarding the mailing of the 60-day Notices, so the Judge assumed that Petitioners had timely protested them, and did not dismiss that portion of the petitions. That victory was for naught because the Judge found that the Division made a prima facie showing that Petitioners met the requirements for the license suspension because the tax liability was in excess of $10,000, even with the exclusion for each Petitioner of one Notice. And since Petitioners did not plead any of the enumerated grounds for relief—Petitioners did not respond to the Division’s motion or allege anything besides the deficiencies being incorrect—the Judge granted summary determination in favor of the Division.

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