Reversing a decision of an Administrative Law Judge, the New York State Tax Appeals Tribunal has overturned the dismissal of Peter Madoff’s petition as untimely and remanded the matter for further proceedings. Matter of Peter Madoff, DTA No. 823411 (N.Y.S. Tax App. Trib., Apr. 19, 2012).
The petition was filed to challenge a Notice of Determination dated May 4, 2009, arising from an audit of Bernard L. Madoff Investment Securities, LLC, assessing sales and use taxes of over $900,000. The Notice was issued to Peter Madoff and, according to the Department, mailed to his home address. Mr. Madoff claimed he never received the Notice, and that the first knowledge he had of the assessment was a Notice and Demand dated August 27, 2009. On September 3, 2009, within a week of receipt of the Notice and Demand, Mr. Madoff’s representative filed a request for a conciliation conference, which was dismissed as untimely, since it had not been filed within 90 days of the May 4 Notice date. Mr. Madoff then filed a petition for a hearing with the Division of Tax Appeals, alleging that the May 4 Notice was not received or properly served, and also challenging the computation of tax and interest.
As reported in the October 2011 issue of New York Tax Insights, the ALJ dismissed the petition, relying on evidence of timely mailing submitted by the Department, including copies of the records of mailing, two affidavits from its employees, and an affidavit from a U.S. Postal Service employee. The documents set forth the usual practice and procedure for processing statutory notices, identified the items that were mailed on September 4, 2009, including the one at issue, and explained the processes used. The ALJ held that the evidence established proper mailing.
The Tribunal disagreed. First, it noted that a presumption of delivery arises when sufficient evidence of mailing has been profferred, and that the Department, in order to establish proper mailing, must first prove standard mailing procedure by testimony of an individual with personal knowledge, and must then prove that the standard procedure was followed in the case at issue. Here, the Department relied on affidavits from its employees, and the Tribunal reviewed the affidavits carefully. One affidavit, submitted by the supervisor of the Case and Resource Tracing System, covered the processing of statutory notices prior to their shipment to the Department’s Mail Processing Center. That affiant was found not competent to prove the procedures in the Mail Processing Center. Another affidavit was submitted by the mail and supply supervisor of the staff of the Mail Processing Center. However, the supervisor’s affidavit indicated that he had been with the Department since February 2010, and did not clearly represent how he knew the Mail Processing Center’s operation and procedures on May 4, 2009, the date the notice was claimed to have been mailed.
Finding that this discrepancy raised “a triable and material issue of fact,” the Tribunal reversed the determination, and remanded to the ALJ for further proceedings on the issue of the timeliness of the petition, and, if appropriate, on the underlying merits of the challenge to the Notice.
Additional Insights. While attempts to challenge the Department’s proof of proper mailing are only rarely successful, the Tax Appeals Tribunal does require that all elements of the Department’s burden be met before a petition is dismissed without reaching the merits. Here, that proof was found to be deficient in a critical element. Further proceedings may reveal whether the defect in the affidavit is easily cured—for instance, by a substitute affidavit from a Department employee with the requisite personal knowledge—or whether the Department remains unable to establish its mailing procedures at the relevant time.