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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 November 15, 2018 (covering DTA cases issued November 8)

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After two weeks of subsistence dieting, this week we are back on our feed with two ALJ Determinations and one Tribunal decision.   


Matter of Hari Armit Corp.; Judge: Law; Division’s Rep: M. Greg Jones; Taxpayer’s Rep: Michael Buxbaum; Articles 28 and 29.  After determining that detailed records were not available for Petitioner’s convenience store, the Division resorted to an estimated sales tax audit method using 70 days of Petitioner-provided cash register tapes and daily sales summaries.  The Division calculated credit card sales ratios and taxable sales ratios from the available information and then extrapolated an estimated additional tax due for the entire audit period.  Petitioner argued that the resulting Notice issued by the Division lacked a rational basis and that penalties were inappropriate.  In support of its argument “Petitioner did not present any witnesses or produce any documentary evidence at the hearing, and did not file a post-hearing brief.”  You are probably as shocked as we are that Judge Law sustained the Notice in its entirety.   

TiNY Practice Parable:  While it may be stupid to bring a knife to a gun fight, it’s better to bring a knife than to show up naked.    

Matter of NRG Energy, Inc.; Judge: Gardiner; Division’s Rep: David Markey; Taxpayer’s Rep: Daniel Hurteau and Jena Rotheim; Article 9-A.  This determination results from a Tribunal remand requesting that the ALJ consider the constitutionality of the retroactive application to Petitioner of certain 2009 amendments to the Empire Zones program.

In the original ALJ determination the Judge found that the amendments were not applied retroactively.   On exception, the Tribunal reversed and remanded the case back to the ALJ with the instruction to test the constitutionality of the application of the amendments (which the Tribunal found was retroactive) using the three-pronged analysis set out in Replan Development.  While the case on remand was pending, the Tribunal decided a similar case, Matter of Hale, finding that one of the three prongs (forewarning and reliance) was to be accorded no weight, and the other two prongs (length of retroactive period and public purpose) conflicted.  Ultimately the Tribunal in Hale found that the period of retroactivity was short enough to triumph over the absence of public purpose and that the retroactive application of the amendment was not unconstitutional.

Judge Gardiner tracked the Tribunal’s analysis in Hale to similarly determine that retroactive application of the amendments to Petitioner was not unconstitutional.  But we have a couple of concerns:  (1) The three-prong analysis in Replan is supposed to be used to test the constitutionality of retroactively-applicable tax statutes.  The 2009 amendments were to the General Municipal Law and NOT to the Tax Law.  Admittedly, New York’s highest court blazed the trail to Replan when it applied it in James Square v. Mullen.  So we see how the Judge got there. But it still is an annoyance that no court has acknowledged that the test for retroactive application of an amendment to a tax statute is being applied to the retroactive application of an amendment to the GML.  (2) The fundamental focus of the Replan test is fairness, and we would have liked to have seen some analysis in the Determination as to why the result obtained was subjectively “fair,” particularly given that the three prongs of the test mathematically resulted in a tie.  (3) The Judge seems to summarily follow the Hale analysis on the “forewarning” prong, and the Tribunal made it clear that its ruling was limited to the Hales’ “unique circumstances”.  In particular, it appears from the Decision in Hale that it was the Hales’ irreversible “shirt-changing” transactions that drove the Tribunal’s conclusion on the forewarning prong.  But it is not clear from the Judge’s determination in this case whether Petitioner was a shirt-changer or was de-certified under the benefit/cost test of the 2009 amendments.  Clearly, with enough advanced warning a business de-certified under the benefit/cost test could have increased its investment/employee compensation enough to remain certified.

I imagine that we have not seen the last of this case.


Matter of Rosenbaum; Division’s Rep: Frank Nuara; Taxpayer’s Rep: pro se; Articles 28 and 29.  The Division proved its standard mailing practices and that they were followed when the Division mailed the Notice of Determination to Petitioner’s last known address on June 3, 2016.  Petitioner did not challenge the Notice until he filed a request for conciliation conference on May 12, 2017, well after the 90-day deadline to do so had expired.  Accordingly, the Tribunal affirmed the ALJ’s summary determination that the challenge was untimely.

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