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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 June 25, 2020 (reporting on DTA cases issued June 18)

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A light lift this week with two determinations and an ALJ order. There were no earthshaking rulings in the trio.  However, there were a few interesting tidbits . . . and one run-of-the-mill timy.


Matter of Jimenez; Judge: Russo; Division’s Rep: Karry Culihan; Taxpayer’s Rep: William Comiskey; Proposed Driver License Suspension Referral under Tax Law § 171-v (by Chris Doyle).

Our shop is handling this one. Petitioner was a tax return preparer. The Division audited him and assessed preparer penalties (not taxes) of $700,000. In another DTA proceeding, those penalties were reduced to $180,000. An ALJ issued an order to that effect in May 2016. On December 14, 2016, the Division issued a notice of proposed driver’s licenses suspension (“NOPDLS”). Petitioner timely challenged the NOPDLS by filing a BCMS request, which Petitioner withdrew on August 28, 2017.

On November 20, Petitioner filed its petition. The petition did not raise any of the required statutory defenses, but instead posited that the preparer penalties asserted against Petitioner were not “tax liabilities” as required by the law permitting the suspension of a driver’s license due to unpaid tax liabilities. The Judge noted, however, that the statute provides that “the term ‘tax liabilities’ shall mean any tax, surcharge, or fee administered by the commissioner, or any penalty or interest due on these amounts owed by an individual with a New York driver’s license.” Tax Law § 171-v(1).  In essence, Petitioner argued that preparer penalties are not tax liabilities because they are not based on any tax, surcharge, or fee administered by the Commissioner.

The Judge disagreed, and found that the third “or” in the statute meant that only interest needs to be based on a tax, surcharge, or fee, and that any penalty may be a tax liability. The Judge also noted that, in past decisions, the Tribunal had not previously distinguished between penalties based on taxes and penalties based on other metrics.

Matter of Denton; Judge: Connolly; Division’s Rep: Melanie Spaulding; Taxpayer’s Rep: Isaac Sternheim; Articles 28 an 29 (by Chris Doyle).

The Division brought a motion to dismiss based on Petitioner’s alleged failure to file a timely request for conciliation conference. The Judge found that the Division proved both its standard mailing practices and that they were followed to mail the Notice of Deficiency to Petitioner’s last known address on September 4, 2013. Petitioner’s request for conciliation conference sent on September 10, 2019, was therefore really, really late. Petitioner did not respond to the motion (that’s never a good sign), which the Judge granted.


Matter of Palermo; Judge: Gardiner; Division’s Rep: Maria Matos; Taxpayer’s Rep: pro se; Article 22 (by Chris Doyle).

The Division brought a motion to dismiss based on Petitioner’s alleged failure to file a timely petition.  Petitioner did not respond to the motion. Did that stop the Judge? Hell no.

I am old enough to have seen “2001: A Space Odyssey” in a movie theater when it was first released. Texas Instruments hadn’t come out with its pocket calculator yet. So 2001 was my first impression of a computer. For those of you who have never seen 2001, the HAL 9000 computer had awesome power and could control all of the ship’s functions as well as navigation, etc. But HAL went rogue during the movie, developing self-preservation instincts that fueled a crew-killing spree. This is, perhaps, why I have misgivings over blindly relying on computer systems to always get it right. And, as relevant to this case, my disquietude over computer automation has resulted in a lack of confidence in electronically-issued Notices of Deficiency.

My skepticism may be shared by Judge Gardiner. Among the documents submitted by the Division to show that the Notice of Deficiency was timely issued was an affidavit of a tax technician (“TT”), who explained the standards for electronically processing and delivering statutory notices to taxpayers who have on-line service (“OLS”) accounts with the Department. Taxpayers who (unlike yours truly) are willing to receive notices electronically may “opt-in” to electronic delivery when they open their accounts. If the Division wants to issue a notice to a taxpayer who has opted-in, it uploads the notice to the taxpayer’s OLS account and then sends an email to the taxpayer that says: “sign-in to your OLS account because there is a message from us waiting for you.” According to TT’s affidavit, this is the process the Division used when it uploaded the Notice of Deficiency to Petitioner’s OLS account and sent her an email to that effect on March 20, 2017. If March 20, 2017, was the date the Notice was issued, then Petitioner’s petition filed on August 20, 2019, was more than two years too late.

But here’s the thing:  TT didn’t actually work in the unit of the Department in charge of electronic communications back in 2017, when the Notice at issue was alleged to have been up-loaded. And the affidavit TT submitted did not specify the basis of TT’s knowledge. So the Judge found that the Division had not borne its burden of proving proper mailing, and the case will move forward.

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