TiNY Report for January 11, 2024

I’ve been off the air for a while. I took a vacation abroad that put me behind schedule, and it took until the holidays to dig out. But that wasn’t the only thing that was going on. During my vacation, the DTA issued a determination on one of our cases. As regular readers know, I try to “Joe Friday” the cases in which Hodgson represents the taxpayer. But I found this particular determination so irksome that I couldn’t objectively describe it.  

And I froze-up. Yep, full-on “bloggers block.”  Couldn’t write up a DTA case … for months.

But it’s time to get back on the horse. I am going to cover all the December cases in this edition of TiNY. I don’t plan on going back before then and covering the other cases that fell through the cracks. And the next time I get jammed-up like this, I’m just going to list the determination/decision’s name, indicate it is a Hodgson Russ case and not write it up.

ALJ Orders

Matter of Woolridge (SALJ Gardiner, 12/07/2023); Div’s Rep. Christopher O’Brien, Esq.; Pet’s Rep. pro se; Article 22. Petitioner didn’t show up on the March 2023 date scheduled for his Small Claims hearing, so the Hearing Officer issued a default determination in favor of the Division.  Nineteen days after the issuance of the default determination, Petitioner applied to have the default judgement vacated. In his application, Petitioner stated he was out of the state from January through May of 2023 due to COVID restrictions, there was a problem with his mail forwarding, and he didn’t know about the hearing. But he did not address the merits of his case.

SALJ Gardiner denied the application for vacating the default finding that Petitioner did not provide an acceptable excuse for not attending the original hearing and that he did not provide any indication that he had a meritorious case.

Are “COVID restrictions” still a good excuse for anything? I mean, sure, I might play that card to try to skip out on going to my spouse’s cousin’s fourth wedding. But I’m pretty sure that my wife would say that I’m going to that damned wedding unless I actually have COVID.

Matter of Weinberger (ALJ Maloney 12/21/2023); Div’s Rep. Maria Matos, Esq.; Pet’s Rep. pro se; Article 22. The Division moved for Summary Determination on the basis that Petitioner did not file a timely request for conciliation conference following the issuance of a Notice of Disallowance dated December 27, 2018. ALJ Maloney denied the motion finding that the Division failed to produce any evidence of its standard procedure for the issuance of a Notice of Disallowance. According to Judge Maloney: “[T]he Division must show proof of a standard procedure used by the Division for the issuance of statutory notices by one with knowledge of the relevant procedures and must also show proof that the standard procedure was followed in this particular instance.”  A hearing will be scheduled.

Matter of Pollo D. Maria, Corp. (ALJ Russo 12/21/2023); Div’s Rep. Elizabeth Lyons, Esq.; Pet’s Rep. pro se; Articles 28 and 29.  The Division moved for Summary Determination on the basis that Petitioner did not file a timely request for conciliation conference following the issuance of a Notice of Determination” dated April 8, 2021.  Petitioner filed its BCMS request on September 16, 2022. Judge Russo denied the motion finding that the Division failed to show that the standard procedures were followed when the notice was issued to Petitioner. There was clearly a mix-up about the notice numbers being challenged, and the Judge found that the confusion required a hearing to clear up the resulting uncertainty.

ALJ Determinations

Matter of Williams (SALJ Gardiner, 12/07/2023); Div’s Rep. Amanda Alteri, Esq.; Pet’s Rep. pro se; Article 22. Judge Gardiner found that the Division proved both its standard mailing practices and that they were followed when the Division mailed a Notice of Deficiency to Petitioner at his last known address on July 28, 2021. Therefore, Petitioner’s petition dated November 17, 2022, was about a year too late. Consequently, the Judge dismissed the petition.

Matter of Tyberg (SALJ Gardiner, 12/07/2023); Div’s Rep. Peter Ostwald, Esq.; Pet’s Rep. pro se; Article 22. In 2020, the Division wrote to Petitioner to let him know it had no record of receiving a return for 2014. After a bit of back and forth, Petitioner submitted a return (without payment) showing he owed $34,080. The Division reviewed the return and then adjusted the tax due upwards by $315. Thereafter the Division issued a Notice of Deficiency to Petitioner for $34,395. From Judge Gardiner: “At the hearing, petitioner claimed that his gambling winnings, as he reported on his 2014 return, appeared to be much larger than he remembered winning during that year. Petitioner testified that he was divorced in 2014 and that, as a single father of four children, he did not have the time to engage in gambling at the level required to win that amount of money. Petitioner asserted that someone else must have engaged in gambling using his player card from the casino. Petitioner never explained why he reported winnings in the amount of $648,855.00 on his 2014 return.” 

The old “being-a-single-parent-I didn’t-have-enough-time-to-win-that-much-money-gambling” defense hardly ever works. And it didn’t this time.

Matter of Mitchell (ALJ Law, 12/07/2023); Div’s Rep. Laura Krzeminski, Esq.; Pet’s Rep. Nicholas Nesi, CPA; Articles 28 and 29. Judge Law found that the Division proved both its standard mailing practices and that they were followed when the Division mailed a Notice of Determination to Petitioner at his last known address on June 18, 2020. Therefore, Petitioner’s petition dated May 3, 2022, was more than a year too late. As a consequence, the Judge dismissed the petition. 

Matter of Bryant (ALJ Behuniak, 12/07/2023); Div’s Rep. Maria Matos, Esq.; Pet’s Rep. Me’Linda Bryant; Article 22. Judge Behuniak found that Petitioner did not submit sufficient evidence to prove that he was entitled to a noncustodial parent earned income credit.

Matter of Maritnez (ALJ Russo, 12/14/2023); Div’s Rep. Maria Matos, Esq.; Pet’s Rep. pro se; Article 22. Judge Russo found that Petitioner did not submit sufficient evidence to prove that she was entitled to an Empire State Child credit. Petitioner failed to prove she earned the required amount of income during the year.

Matter of Alamari (ALJ Law, 12/14/2023); Div’s Rep. Aliza Chase, Esq.; Pet’s Rep. pro se; Article 20 (Cigarette Tax). Petitioner entered an “Alford plea” in his criminal case for possession of untaxed cigarettes. An Alford plea is a guilty plea entered by a defendant for a lesser defense who claims to be innocent.

This determination involved Petitioner’s challenge of the propriety of the civil penalty issued against him by the Division for possession of untaxed cigarettes. The Division made a motion for summary determination in its favor on the civil penalty case based on the Alford plea. Petitioner did not respond to the motion and, unsurprisingly, the motion was granted.

Matter of Mapp (SALJ Gardiner, 12/28/2023); Div’s Rep. Christopher O’Brien, Esq.; Pet’s Rep. pro se; Article ?  Petitioner filed a Petition to challenge the denial of his School Tax Relief (STAR) Credit. The DTA issued a Notice of Intent to Dismiss. Petitioner did not respond. Interestingly, the Division submitted a letter in opposition to dismissal!

Supervising ALJ Gardiner found that the DTA could not hear the case since the petition was not filed in response to any of the specified statutory notices that would have conferred jurisdiction on the DTA.

Matter of Garzone (ALJ Law, 12/28/2023); Div’s Rep. Christopher O’Brien, Esq.; Pet’s Rep. Stephen Garzone; Article 22. This is a squirrels’ nest of a case, the ultimate result of which was a finding that the DTA didn’t have jurisdiction to hear any of the issues Petitioner brought before it.

The Garzones filed joint returns for the 2008 through 2014 tax years claiming a variety of refundable tax credits, and credits for estimated tax payments. The Division issued several notices denying many of the credits claimed. At some point, the husband (who was not a petitioner in this case) went through a personal bankruptcy. And on January 21, 2021, Petitioner sought innocent spouse relief.

At the hearing, the Division submitted evidence that the Notices were mailed to Petitioner’s last known address. But neither Petitioner nor the Division submitted a copy of a notice in which the Division denied Petitioner’s claim for innocent spouse relief. Judge Law issued a Notice of Intent to Dismiss with respect to the Notices for which the applicable time limits had expired. But a hearing was held at which Petitioner’s husband alleged the Notices were not properly issued. Interestingly, Petitioner did not attend the hearing herself.

Judge Law determined that the challenges to the Notices of Deficiency were time-barred, and the DTA did not have the jurisdiction to address the propriety of subsequently issued Notices and Demand. He also found that the DTA did not have jurisdiction to address Petitioner’s claim for innocent spouse relief because there was no indication that the Division ever denied Petitioner’s request for innocent spouse relief.

Matter of Bokaer (SALJ Gardiner, 12/28/2023); Div’s Rep. Christopher O’Brien, Esq.; Pet’s Rep. pro se; Article ?  Petitioner filed a Petition to challenge the denial of his School Tax Relief (STAR) Credit. The DTA issued a Notice of Intent to Dismiss. Petitioner did not respond. As in Mapp, above, the Division submitted a letter in opposition to dismissal!

Supervising ALJ Gardiner found that the DTA did not have jurisdiction to hear the case since the petition was not filed in response to a statutory notice that would have conferred jurisdiction on the DTA.

Matter of Black (SALJ Gardiner, 12/28/2023); Div’s Rep. Christopher O’Brien, Esq.; Pet’s Rep. pro se; Article ?  Petitioner filed a Petition to challenge the denial of his School Tax Relief (STAR) Credit. The DTA issued a Notice of Intent to Dismiss. Petitioner did not respond. The Division submitted a letter in opposition to dismissal!

Supervising ALJ Gardiner found that the DTA did not have jurisdiction to hear the case since the petition was not filed in response to a statutory notice that would have conferred jurisdiction on the DTA.

Tribunal Decisions

Matter of Williams (Tax Appeals Tribunal, 12/07/2023); Div’s Rep. Colleen McMahon, Esq.; Pet’s Rep. pro se; Article 22. Petitioner filed a return for her 2013 tax year showing tax due of $3,925. She did not pay the tax with the return, so the Division issued a Notice and Demand for the tax shown as due on the return. Petitioner paid that tax in installments with the final payment being made on December 5, 2016. On December 3, 2020, Petitioner filed an amended return for 2013 claiming a refund of the entire amount she paid.

The Tribunal found that the ALJ properly determined that Petitioner’s refund request was time-barred. From the Tribunal: “Tax Law § 687 (a) provides that a claim for refund of an overpayment of income tax must be filed by the taxpayer within three years from the time the return was filed or within two years from the time the tax was paid, whichever period expires the latest. Here, the period that expires the latest is two years from the time the tax was paid.” Petitioner’s refund claim was filed more than four years after she made the final payment of her 2013 taxes, so the entire refund claim was barred by the statute of limitations.

Matter of Gelco Corporation (Tax Appeals Tribunal, 12/21/2023); Div’s Rep. Anita Luckina, Esq.; Pet’s Rep. Peter Larsen, Esq. and David Rosen, Esq.; Articles 28 and 29.

Petitioner entered into vehicle leases in which the lease amount paid was subject to adjustment at the end of leases. For instance, cars returned at the end of a lease in better shape with lower miles would be entitled a “terminal rental adjustment clause” (“TRAC”) payment by Petitioner to the lessee to reflect the higher residual value of the returned vehicle. This would often result in a refund to the lessee of some of the tentative periodic rental payments made by the lessee. If, on the other hand, the lessee was required to pay more (i.e., because the car was in worse condition than projected), then Petitioner would collect an additional payment from the lessee with sales tax and remit the sales tax to the Division. If it was found that the lessee overpaid (i.e., because the residual value of the vehicle was higher than estimated), Petitioner repaid the overpayment, including the sales tax it had collected on the overpayment. Thereafter, Petitioner took a credit on its sales tax return for the sales tax it repaid to the lessee.

The Tribunal agreed with the ALJ that Petitioner was not entitled to refunds of the sales tax it refunded to its Lessees. The Tribunal noted that the Legislature had adopted particular rules for leases of commercial vehicles where the leases included options to extend the lease. The Tribunal cited Tax Law § 1111(i)(B) as support for the proposition that it was proper for the Division to insist on the payment of sales tax on the anticipated lease payments to be received over the first 32 months of the leases, and that vehicle leases are treated as unique transactions subject to sales tax at the time the lease is entered into. The Tribunal found that the payment of sales tax on the required lease payments was proper, and that repayment of certain lease payments upon the termination of certain leases should not influence the sales tax result. So, the Tribunal sustained the Division’s denial of a refund for the sales tax remitted to Petitioner’s customers upon recalculation of the lease payments.

I appreciate where the Division and Tribunal are coming from given the language of the statute under which “all receipts due or consideration given or contracted to be given under such lease for the first 32 months, or the period of the initial term if greater, of such lease shall be deemed to have been paid or given and shall be subject to tax [at the inception of the lease].” But I wonder if this language also means that additional payments made by lessees upon termination of the leases should NOT be subject to sales tax. If the residual value of a vehicle is lower than estimated, then the lessees were required to pay more upon termination of the lease. But that additional amount results from a recalculation of the previous lease payments, all of which are, by statute, “deemed to have been paid.”  If all of the payments are deemed to have been paid at the time the lease was entered into, then, arguably, no additional sales tax should be due on the lease termination “true-up payments” made by the lessees.

The Tribunal also noted that the Legislature amended the statute to explicitly permit sales tax refunds related to TRAC payments made on and after June 1, 2022.

Comment