ALJ Holds that Division of Tax Appeals May Review Discretionary Act of the Department

Reviewing simultaneous motions for summary judgment made by the taxpayers and by the Department of Taxation and Finance, a New York State ALJ has held that the Division of Tax Appeals has jurisdiction to review the Department's adjustment of Qualified Empire Zone Enterprise ("QEZE") credits claimed for real property taxes, and found that a full hearing will be necessary to resolve factual issues. Matter of Schahet et al., DTA Nos. 827351-54 (N.Y.S. Div. of Tax App., July 27, 2017). The petitioners, all members of an LLC that was certified as a QEZE, argued that the Department's refusal to permit them to retroactively disregard negative adjustments to the LLC's federal tax basis for purposes of the QEZE credits was arbitrary and capricious, while the Department argued that its exercise of discretionary authority to make adjustments was not reviewable by the Division of Tax Appeals. The ALJ rejected the Department's arguments as being "without merit," holding that the Division of Tax Appeals has jurisdiction to review discretionary acts by the Department where the notices that are the subject of the taxpayers' protest were, as in this case, directly impacted by the Department's actions.

Tribunal Upholds ALJ's Determination of Tax Liability and Fraud Penalty

Affirming the decision of an ALJ, the New York State Tax Appeals Tribunal has held that the doctrine of collateral estoppel precluded the taxpayers from contesting the amount of personal income tax assessed by the Department of Taxation and Finance. Matter of Frank S. and Christina Yerry, DTA No. 827291 (N.Y.S. Tax App. Trib., Aug. 10, 2017). The Tribunal found that Mrs. Yerry had pleaded guilty in a previous criminal proceeding and signed a restitution agreement acknowledging the amount of the funds she had illegally obtained using forged checks, and agreeing to make restitution. The Tribunal concluded that the previous criminal matter "conclusively established both the fact and the amount" of the larceny; that since stolen money is income, the asserted deficiency was "plainly rational"; and that Mrs. Yerry's plea to attempted grand larceny also justified the imposition of a fraud penalty.

Couple's New York City Apartment Found to Be a Permanent Place of Abode, Causing Them to Be Statutory Residents

A New York State ALJ granted the Department's summary judgment motion, finding that a married couple, who were domiciled in New Jersey but maintained an apartment in New York City and were present in the City for more than 183 days each year, were statutory residents of the State and City. Matter of John D. Radice and Lee S. Shearer, DTA No. 827213 (N.Y.S. Div. of Tax App., July 20, 2017). The taxpayers had argued that, because they leased their New York City apartment solely due to the wife's residency and fellowship training as a doctor at New York Presbyterian Hospital, the apartment was only temporary in nature and not a permanent place of abode. The ALJ held that the language in the regulations regarding presence in New York on a temporary basis for a particular purpose was removed in December 2008, prior to the years in issue.

Furnishing of Custom Satellite Imaging Reports Found to Be a Nontaxable Information Service

The Department of Taxation and Finance has concluded that the furnishing of custom reports on business facilities by a satellite imaging analysis provider is not subject to sales tax because, while it constitutes an information service, the report service is personal or individual in nature and may not be substantially incorporated into reports furnished to others. Advisory Opinion, TSB-A-17(12)S (N.Y.S. Dep't of Taxation & Fin., July 31, 2017). The Department based its conclusion on the fact that the provider is precluded by contract from furnishing the images or its analysis to other customers, and that the provider may not reuse its analysis or materials for other customers. Moreover, the facility images are specially ordered, and do not come from a common source or database.