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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 2, 2017 (covering DTA cases issued October 26)

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A solitary Decision for the week. There are no Orders or Determinations this week.

Matter of van Rossem; Division’s Rep: Christopher O’Brien ; Taxpayer’s Rep: pro se; Article 22.  We represent taxpayers.  And at least one of us distrusts the audit process, which often seems to have evolved into an approach more intended to lead to an assessment than to the calculation of the correct amount of tax due.  So I guess it should be no surprise that—try as we might to be purely objective—our writings here sometimes skew in favor of petitioners.  And just like the scorpion who stings the frog half way across the river, we do not apologize, for this is our nature.  But sometimes petitioners make it damned difficult to view them with favor, even when viewed through the rose-tinted Coke-bottle lenses we sometimes wear.  And this case is one of those times.

This pro se petitioner lived in Pennsylvania and worked at SUNY Binghamton in 2011.  According to the IRS and the NYS Comptroller’s Office, Petitioner was paid $52,133.26 by NYS for his work, but did not file a New York tax return for 2011.  After applying the standard deduction and reducing the tax liability by the amount of the tax withheld by his employer, the Division issued a Notice of Deficiency for $568 of additional tax and interest and penalties.  Petitioner filed a timely challenge arguing that:  (1) his salary from NYS was not “wages” includable in gross income; and (2) he is entitled to deduct the value of his labor from his salary under IRC § 83(a).  The ALJ found against Petitioner (citing numerous federal “tax protestor” decisions) and imposed a $500 frivolous petition penalty.

Petitioner excepted to the ALJ’s determination arguing that the Tribunal should address the propriety of collection activities of the Department with respect to years other than 2011, and that his labor was “property” and thus his salary should have been reduced by the value of his labor in determining his gross income.  The Tribunal held that:  (1)  It had no jurisdiction for years other than 2011; (2)  Petitioner’s SUNY salary was includable in gross income (even though Petitioner had dropped this argument); (3) his labor was not property the value of which should be deducted in calculating gross income; and (4) since the Division’s counsel provided no fact testimony at the hearing, it was not improper for the ALJ to have failed to swear-in the Division’s counsel.  Since Petitioner did not take exception to the ALJ’s sustaining the audit penalties and assertion of the frivolous petition penalty, the Tribunal neither addressed nor disturbed those decisions.

And what, dear reader, may we conclude from the above?  Not much, really.  The only meritorious take-away I have is that the Legislature needs to increase the cap on the frivolous petition penalty.

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