Recent decisions issued by the New York State Tax Appeals Tribunal have upheld the suspension of individuals’ New York State driver’s licenses under a controversial New York State statute enacted in 2013 that authorizes the suspension of an individual’s driver license by the State as a tool to enforce delinquent New York State tax liabilities of $10,000 or more.
Background on N.Y. License Suspension Law. Under Tax Law § 171-v—a 2013 law that was modeled after a New York State license suspension law for the enforcement of delinquent child support payments—an individual with more than $10,000 in unpaid State tax assessments (inclusive of interest and penalties) who receives a notice of driver’s license suspension must within 60 days challenge the amounts assessed or else have his or her New York State driver’s license suspended until the amounts are paid.
There are six narrow grounds on which to challenge the license suspension, none of which involve financial hardship to the taxpayer or give the taxpayer the ability to contest the underlying tax deficiency. Among the permissible grounds for protesting the license suspension is that the individual receiving the 60-day notice is not in fact the taxpayer, or that the past-due tax liabilities have already been satisfied.
Since the failure to protest within 60 days results in the imminent suspension of a taxpayer’s driver’s license, the law creates a strong incentive to protest the proposed suspension, since the protest halts suspension for the duration of the taxpayer’s challenge, even if the taxpayer does not fit within any of the six grounds on which to challenge it. Presumably, many taxpayers receiving 60-day notices will file protests with the hope that by the end of the administrative appeal process, the taxpayer will have resolved his or her tax delinquencies. Given the broad restrictions on challenging a license suspension, however, it is not surprising that most taxpayers so far have been unsuccessful in challenging their suspensions.
After a driver’s license has been suspended, the only remedies are to try to negotiate a payment arrangement “satisfactory to the Commissioner” or else to seek a restrictive-use license (e.g., permitting the taxpayer to drive only to or from work or school).
Recent Tribunal Decisions. Recent Tribunal decisions highlight the limited remedies available to delinquent taxpayers under the State driver’s license suspension program.
In Matter of Jeffrey S. Balkin, DTA No. 826366 (N.Y.S. Tax App. Trib., Feb. 10, 2016), the Tribunal had upheld a driver’s license suspension against a claim that the law was being applied retroactively in violation of the individual’s due process rights for taxes that became due prior to the 2013 enactment of the statute. The Tribunal relied on U.S. Supreme Court precedent in League v. State of Texas, 184 U.S. 156 (1902), where the Court held that a state may constitutionally adopt “new remedies” to enforce already delinquent tax liabilities. In Matter of Juan Kip Lenoir, DTA No. 826389 (N.Y.S. Tax App. Trib., Mar. 18, 2016), the Tribunal held that a driver’s license is not a “fundamental right,” and that the need to collect past-due liabilities constituted a rational basis for suspending the driver’s licenses of those with unpaid past-due tax liabilities in excess of $10,000.
Most recently, in Matter of Mary E. Jacobi, DTA No. 826332 (N.Y.S. Tax App. Trib., May 12, 2016), the Tribunal rejected a taxpayer’s due process challenge alleging that the Department unreasonably failed to accept her offer in compromise—at a small fraction of the tax liabilities being asserted—and that she must be given an opportunity to be heard on the reasonableness of the rejection of her proposal. The Tribunal held that the law does not permit challenges to a license suspension based on the alleged unreasonableness of the Department’s rejection of an offer in compromise. The Tribunal thus sustained a 60-day Notice of Proposed Driver’s License suspension.
Policy Concerns and Possible Remedies. Although the State should have the right to enforce collection of delinquent taxes, the suspension of a driver’s license, particularly for a relatively small threshold amount of $10,000 which, because it includes penalties and interest, means that the triggering tax delinquency can be significantly less than $10,000, can have harsh consequences on some taxpayers. Given the broad scope of the license suspension statute, the Department and the Tribunal have only a limited ability to prevent those harsh consequences. Thus, there have been suggestions made that the license suspension law should be amended to provide for a taxpayer hardship exemption or to increase the $10,000 threshold for suspension (although it should be noted that the Governor’s 2015–16 proposed budget would have lowered the threshold to $5,000, a proposal that was not enacted).
In the short term, there will likely be more protested cases—and more Tribunal decisions upholding license suspensions—unless the law is amended to ameliorate some of the harsher aspects of the program, or unless an appellate court holds that certain aspects of the law are unconstitutional either facially or as applied.