The mental conversation I just conducted with myself:
“What should I write today about this TiNY Report being late again?”
“How about the truth? You have been diverting your non-billable attentions to the summer because ‘summertime is running out’ and ‘supplies are limited.’”
“No one cares about your personal life. How about ‘no excuses” since you have no excuses.”
“The Alice in Chains song ‘No Excuses?’ That’s a good one. For some reason that song reminds me of the Blues Traveler tune ‘The Mountains Win Again.’
“Wow. 90s much?”
“Shut up.”
“No, you shut up.”
(nothingness)
We present a bunch of pent-up case summaries today, only a few of which have a worthwhile tale to tell. For my money (ed.: there’s actually no money involved) I recommend Saslaw, in which a pro se petitioner won a difficult responsible officer case; Rockaway Realty Associates, involving a local mortgage recording tax refund claim (a unicorn of a case if ever there was); and Lynch, discussing the limitation in the “548-day rule” prohibiting spouses from remaining in New York during the relevant period.
Decisions
Matter of Safford Services Corp. (July 25, 2024); Div’s Rep. Kaitlyn Smith, Esq.; Pet’s Rep. pro se; Articles 28 and 29/Timy (Pete Calleri).
Petitioner was issued a notice of determination on July 1, 2022. Petitioner filed a petition protesting the notice on October 24, 2022. Because the petition was filed after the 90-day statutory limit, the DTA issued a notice of intent to dismiss the petition. The Division provided evidence that it had followed its standard mailing procedure. In response, Petitioner submitted a letter and other documentation and claimed that the notice of determination was not received or seen by him. At the ensuing hearing, the ALJ determined that the Division had met its burden of demonstrating its standard mailing procedure and that such procedure was followed. The ALJ also found that mere denial of receipt of notice by Petitioner, without more, is insufficient to overcome the presumption of receipt and dismissed the petition as untimely.
The Tribunal agreed with the ALJ. The Division demonstrated proper mailing of the notice and Petitioner had failed to rebut the presumption of receipt. It agreed that Petitioner’s testimony amounted to no more than mere denial of receipt, which was insufficient to rebut the presumption. When Petitioner argued that it did not receive the notice due to the failure of its administrative staff, the Tribunal responded that extenuating circumstances do not provide a basis to excuse the late filing of a petition. Accordingly, the Tribunal denied Petitioner’s exception, affirmed the ALJ’s determination, and dismissed Petitioner’s petition.
Matter of John Lanzione (July 11, 2024) Div’s Rep. Nelson Colberg; Pet’s Rep. David Burch, Esq.; Article 8/Driver’s license suspension (Pete Calleri).
The Division issued Petitioner a notice of proposed driver’s license suspension advising that Petitioner had to pay his tax debts or face the possible suspension of his driver’s license. The included consolidated statement of tax liabilities set forth two unpaid assessments, one from 2008 and the other from 2009. The tax, penalties, and interest for both years totaled $14,894.44. At BCMS, the conferee sustained the notice, after which the Petitioner appealed to DTA.
Petitioner protested the notice’s underlying liability, retroactive application of interest to that liability, and asserted that suspension of his driver’s license would cause him “undue economic hardship” under Tax Law § 171-v(5). He argued that suspension of his license would prevent him from operating his business, which required him to drive “several thousand miles” yearly, and that suspension would prevent him from driving to locations required for his work. The Tribunal disagreed and held that this argument was unsupported by facts or law. The Vehicle and Traffic Law provides for expansive business uses of a restrictive license, and even allows one with a restrictive license to transport their children to and from school. The Petitioner was free to obtain this license. Simply contending that his work would be prevented was insufficient to avoid referral for suspension.
Petitioner also argued that interest should not have accrued on any tax due until after the notice of additional tax liability was issued, which would have reduced his overall liability below the $10,000 threshold required for inclusion in the license suspension program under Tax Law § 171-v(1). However, Petitioner failed to comply with Tax Law § 659, which requires a taxpayer to report any change to a federal income tax calculation within 90 days, after which period the Division may issue an assessment without regard to the general limitations period on assessments of tax. Therefore, because Tax Law § 684(i) permits the assessment of interest on an underpayment of tax at any time during the period within which the related tax may be assessed, the Tribunal held that the Division did not err in assessing interest on the federal charges to income in tax years 2008 and 2009.
Accordingly, the Tribunal denied Petitioner’s exception and petition, affirmed the ALJ’s determination, and sustained the notice of proposed driver’s license suspension.
Matter of Trudy Steward-Lanzione (July 11, 2024) Div’s Rep. Nelson Colberg; Pet’s Rep. David Burch, Esq.; Article 8/Driver’s license suspension (Pete Calleri).
The Division issued Petitioner a notice of proposed driver’s license suspension advising that Petitioner had to pay her tax debts or face the possible suspension of her driver’s license. The included consolidated statement of tax liabilities set forth an unpaid assessment from 2009 totaling $13,290.92. At BCMS, the conferee sustained the notice, after which the Petitioner appealed to DTA.
Petitioner protested the notice’s underlying liability, retroactive application of interest to that liability, and argued that suspension of her driver’s license would be “unjust as she had no involvement in the activities giving rise to the income that resulted in additional tax due for tax year 2009” and that she would experience hardship under Tax Law § 171-v(5). She argued that suspension of her license would prevent her from operating her business, which required her to drive “several thousand miles” yearly, and that suspension would prevent her from driving to locations required for her work. The Tribunal disagreed and held that this argument was unsupported by facts or law. The Vehicle and Traffic Law provides for expansive business uses of a restrictive license, and even allows one with a restrictive license to transport their children to and from school. The Petitioner was free to obtain this license. Simply contending that her work would be prevented was insufficient to avoid referral for suspension.
Petitioner also argued that interest should not have accrued on any tax due until after the notice of additional tax liability was issued, which would have reduced her overall liability below the $10,000 threshold required for inclusion in the license suspension program under Tax Law § 171-v(1). However, Petitioner failed to comply with Tax Law § 659, which requires a taxpayer to report any change to a federal income tax calculation within 90 days, after which period the Division may issue an assessment without regard to the general limitations period on assessments of tax. Therefore, because Tax Law § 684(i) permits the assessment of interest on an underpayment of tax at any time during the period within which the related tax may be assessed, the Tribunal held that the Division did not err in assessing interest on the federal charges to income in tax years 2008 and 2009.
Petitioner further contended that she was entitled to an “innocent spouse” exception because she had no knowledge of the tax issues giving rise to the liability. Because BCMS had yet to issue a final conciliation order addressing whether the Division improperly denied innocent spouse relief for 2009, the Tribunal concluded that the ALJ properly found that consideration of the issue was premature (as Tax Law § 170(3-a)(e) provides hearing rights only after issuance of a conciliation order).
Accordingly, the Tribunal denied the exception and petition of the Petitioner, affirmed the ALJ’s determination, and sustained the notice of proposed driver’s license suspension.
Determinations
Matter of Tess (ALJ Maloney, July 25, 2024); Div’s Rep. Stefan Armstrong, Esq.; Petitioner, pro se; Article 22/Timy (Zoe Peppas).
In November 2020, the Division issued a Notice and Demand for payment of tax due to Petitioner. The Notice stated Petitioner did not pay the full amount of tax he reported on his resident income tax return. The discrepancy of tax was $431.
Petitioner filed a request for conciliation conference, and at BCMS, an order was issued dismissing the request stating BCMS did not have jurisdiction over the matter. It stated the “notice at issue, by law, shall not be construed as a notice which gives a person rights to a hearing.”
Petitioner then filed a petition at DTA, attaching copies of the conciliation order, a “Response to Taxpayer Inquiry,” and making the assertion that the Division “voluntarily discharged [him] from further liability by an agreement & estoppel.” The Response to Taxpayer Inquiry stated and included proof that Petitioner stated he made a payment to the IRS, not to New York State, and thus the assessment was sustained.
The Division brought a motion to dismiss and motion for summary determination. Petitioner submitted a memorandum in opposition, including the same Response to Taxpayer Inquiry as before. Petitioner asserted that Response constituted a notice that granted the DTA to hear the subject matter of the petition.
The Judge disagreed, determining that the “Division of Tax Appeals is a forum of limited jurisdiction.” According to Tax Law Section 2008(1), the only written notices that a taxpayer can challenge at the DTA are those that advise the taxpayer of either: a tax deficiency, a determination of tax due, a denial of a refund or credit application, a cancellation, revocation, or a suspension of a license, permit, or registration, or any other notice that gives a taxpayer a right to a hearing. The Response to Taxpayer Inquiry was simply an informal document that explained the petitioner paid the IRS, not New York State. It did not give Petitioner a right to a hearing. Additionally, Notice and Demands also, according to Tax Law Section 173-a(2), do not give a taxpayer the right to a hearing.
Matter of Connecticut Insulation Distributors Corp. (ALJ Baldwin, July 25,2024); Div’s Rep. Aliza Chase, Esq.; Pet’s Rep. pro se; Articles 28 and 29/Timy (Chris Doyle).
The Division mailed its Notice of Determination to Petitioner on May 1, 2015. Petitioner filed its Request for Conciliation Conference on September 21, 2015, which was denied as untimely in an order dated October 9, 2015. On January 4, 2016, Petitioner filed its Petition protesting the Order. Judge Maloney granted the Division’s Motion for Summary Determination finding that Petitioner’s Conciliation Conference Request was filed late.
Petitioner, mistakenly concluding that tax controversy is like shampoo, pursued a “suds, rinse, repeat” strategy by filing another Conciliation Conference Request on November 22, 2022. This second Request was also denied as being even more untimely than the first Request. Petitioner stuck to its strategy by filing another petition challenging the second Order. The Division moved for dismissal on the grounds that the case had already been the subject of DTA review. Judge Baldwin granted the motion and dismissed the petition. A frivolous petition penalty may have been appropriate here, although the Division didn’t ask for one.
Matter of Globalops Network Inc.; Matter of Globalops Network Inc. (Supervising ALJ Gardiner, July 11, 2024); Articles 28 and 29/Proposed Refusal to Issue a Certificate of Authority, jurisdiction of the DTA (Zoe Peppas).
Petitioner filed two petitions at DTA. Neither had a signature, and one didn’t include the Notice being challenged. These formal deficiencies were not cured following a DTA written request. The petitions were dismissed with prejudice.
Matter of Saslaw (ALJ Baldwin, July 11, 2024); Div’s Rep. Melanie Spaulding, Esq.; Pet’s Rep. pro se; Articles 28 and 29/Responsible officer (Chris Doyle).
This was a rare victory for a pro se taxpayer on a substantive legal issue. Petitioner worked at an ice cream shop that didn’t pay all the sales taxes shown on its returns. After the shop went out of business, the Division went after Petitioner alleging he was a responsible officer. The Division’s evidence: a NY partnership return listing Petitioner as “general partner;” A computer transcript indicating Petitioner opened the shop’s on-line services business account at the Department; a Form DTF-17 listing Petitioner as a responsible person, but also listing Petitioner’s ownership percentage as 0%; and a copy of a business tax account update form signed by Petitioner as the shop’s “former director of finance.” Petitioner challenged the resulting Notice with a Conciliation Conference Request, which was denied as late filed. Then Petitioner filed his petition challenging the BCMS Order and argued he a was not a responsible person. Interestingly, the Division didn’t challenge the timeliness of the BCMS request and instead argued the merits of the responsible person case.
Petitioner testified that Brian Smith was the member who managed the shop and directed if and when payments to creditors were made. Petitioner undertook ministerial actions like requesting the Certificate of Authority just to keep the process moving so the shop could open on time. Petitioner testified that he “signed many tax documents and tax returns and had check signing privileges at the time. At the time these taxes were due, none of that was true and none of that existed.” In essence, Petitioner testified that if he ever was a responsible person for the shop, that responsibility ended when the shop fell into distress and the owners, and in particular Mr. Smith, took control over if and when creditors were paid.
Petitioner’s testimony was corroborated by three witnesses who worked at the business and were aware of the situation.
Judge Baldwin found “[w]hether petitioner was a responsible person before the periods at issue is beyond this determination but, as the unrefuted and thus credible testimony establishes, during the periods at issue, petitioner did not have sufficient authority or control over its corporate affairs to assure that sales tax was remitted on behalf of [the shop].” In light of this finding, the Judge canceled the Notices issued to Petitioner.
Matter of Donald (Supervising ALJ Gardiner, July 3, 2024); Div’s Rep. Maria Matos, Esq.; Pet’s Rep. pro se; Article 22/Real estate professional (Chris Doyle).
Petitioners claimed losses for two rental properties they owned. The Division found that the losses constituted passive activities losses that would have been deferred during the years at issue. The Judge agreed.
Real estate rental activities are generally considered passive. If, however, the taxpayer is a “real estate professional” they may be treated as non-passive. Taxpayers may be treated as real estate professionals if (in addition to other requirements) they spend 750 hours or more on their real estate businesses.
The Judge found that the work logs submitted into evidence by Petitioners to prove the time they spent working on their real estate business were unreliable since they contradicted each other, Petitioner husband claimed Petitioner wife was in charge of maintaining the logs, and Petitioner wife testified she was not aware that logs needed to be maintained. Further, neither Petitioner testified as to how the logs were prepared or if they were contemporaneously prepared. So, Judge Gardiner determined that Petitioners failed to satisfy the burden of proving entitlement to the losses with the requisite clear and convincing evidence and sustained the Division’s disallowance of the loss deductions.
Matter of Nunez (Supervising ALJ Gardiner, June 27, 2024); Article 22/Jurisdiction of the DTA (Zoe Peppas).
Petitioner filed a petition. Petitions at DTA require the petitioner’s signature and a copy of the statutory notice being protested. Petitioner, here, did not provide a copy of the statutory notice being protested, nor did he sign the petition. The DTA sent a written request for Petitioner to sign the petition and provide a copy of the statutory notice. Petitioner did not comply with the request. The Petition was dismissed with prejudice.
Matter of Santiago (Supervising ALJ Gardiner, June 27, 2024); Article 22/Jurisdiction of the DTA (Zoe Peppas).
Petitioner filed a petition at DTA. Petitioner failed to respond to the Division’s written request to sign the petition and provide a copy of the statutory notice. The Petition was dismissed with prejudice.
Matter of Lynch (ALJ Russo, June 27, 2024); Div’s rep. Peter Ostwald, Esq.; Pet’s Rep. pro se; Article 22/residency and the 548-day rule (Chris Doyle).
The years at issue were 2015-2018. In an audit of prior years, the Division found that Petitioners were nonresidents under Tax Law § 605 (b)(1)(A)(ii), which allows a New York domiciliary to be treated as nonresident if they are abroad for at least 450 days during a rolling 548-day period. However, there are many special limitations that apply, and one of them is that the taxpayer’s spouse also must also be abroad for at least 450 days during the 548-day period unless the taxpayer and their spouse were “legally separated.”
For the period at issue, Petitioners maintained their New York home and were domiciled in New York. Petitioner husband worked and had a home in London. Petitioner wife moved back to New York at some point in May 2015. Petitioners argued that Petitioner husband should be allowed to continue to treat himself as a nonresident of New York since he was only “present in New York for 18 days in 2014, 22 days in 2015, 9 days in 2016, 36 days in 2017.” Petitioners also argued they were “separated in fact” while Petitioner husband continued to work in London and Petitioner wife lived in New York. Judge Russo found that absent a “legal separation” the 548-day rule required that both spouses needed to be out of the country during the requisite period. And the Judge clarified that the statutory test was not whether they were factually separated, but whether they were legally separated. And she denied the petition because “Petitioners’ contention that a ‘separation in fact’ should be treated the same as a legal separation ignores the plain meaning of the words in the statute… .”
Rockaway Realty Associates, L.P. (ALJ Maloney, June 27, 2024); Div’s Rep. Jennifer Hink-Brennan, Esq.; Pet’s Rep. Matthew Hearle, Esq.; Article 11/Mortgage recording tax (Chris Doyle).
Petitioner paid a mortgage recording tax of $280,000 upon recording a mortgage secured by five properties. The tax paid included $175,000 for New York City mortgage recording tax based on the assumption that all the properties were in New York City. As it turns out, three of the five properties were in Nassau County outside of New York City. So, Petitioner filed a refund claim for $164,442.95 based on a calculation of the portion of the mortgage secured by New York City determined by dividing the value of the property in New York City by the total value of the property securing the mortgage. To determine the values of the five parcels, Petitioner used “estimated market values” instead of the assessed values of the properties. The estimated market values used by Petitioner considered the equalization factors applicable to each jurisdiction so that a more accurate valuation would be determined.
Under audit, the refund awarded by the Division was only $45,013.15. The Judge found that the reduction in the refund was proper since the applicable law (i.e., Tax Law § 260) explicitly requires the use of “assessed values” of the parcels to determine the portion of the mortgage secured by real property local in multiple taxing districts. And because the City’s real property tax approach resulted in relatively higher assessed values, the apportionment calculation resulted in a higher attribution of the mortgage to the City real property, notwithstanding that the relative assessed values were not in line with actual fair market values.
It may not be logical or equitable, but the Judge’s analysis appears to be consistent with a 1978 Court of Appeals decision, so it is probably accurate.
Order
Matter of Forst (ALJ Baldwin, July 18, 2024) Div’s Reps. Amanda Alteri and Emil Kambala; Pet’s Rep. pro se; Article 22/Timy (Pete Calleri).
Petitioner filed her 2020 nonresident tax return and reported unemployment compensation of $13,131 in both the federal and New York State columns, but subtracted $10,200 in both columns, resulting in New York State tax due of $81. On audit, the Division determined that Petitioner failed to include unemployment compensation received from New York State and issued a statement of proposed audit change asserting additional tax of $425 plus interest. The Division explained that the $10,200 excluded on Petitioner’s federal return should have been reported as an add back to Petitioner’s New York State return.
Petitioner (somewhat surprisingly) then paid the $425 owed. However, a few weeks later, the Division issued a notice of deficiency asserting unpaid interest due on the $425 in the amount of $34.74. Petitioner requested a conciliation conference, and BCMS sustained the notice. On appeal, Petitioner argued that the interest was “unfairly incurred” and that “[t]his was a penalty applied to me which I had no control over and would not have occurred if New York notified me immediately, not over a year later.” The Division made a motion to dismiss, arguing that interest was required under Tax Law § 684(a) from the due date of the return to the date the tax is paid in full.
The ALJ denied the Division’s motion to dismiss due to material issues of fact regarding the petition’s timeliness. Although the petition initially appeared to be filed more than 90 days after the date of the conciliation order, the Division had not challenged jurisdiction in its motion and did not provide any proof of the mailing of the conciliation order. As such, the ALJ determined that questions of fact existed as to the Division’s standard procedures for issuing the conciliation order and whether those procedures were followed. Therefore, the Division’s motion was denied, and the matter is scheduled to proceed to a hearing. The Judge did not address the Division’s asserted basis for the motion to dismiss, i.e., that petitioners are not entitled to challenge statutorily imposed interest.
