The Appellate Division has upheld the New York State Tax Department’s disallowance of an individual’s losses from her photography business that she claimed on her New York State Personal Income Tax Returns. Mayo v. Div. of Tax Appeals, Tax Appeals Trib., No. 525172, 2019 NY Slip Op. 03705 (3d Dep’t, May 9, 2019). The taxpayer claimed that she was deprived of her due process rights because the Department had issued tax bills based on the disallowance of her losses before it had conducted an audit or given her an opportunity to respond to requests for documentation. The Third Department held that the Tax Law gives the Department the discretion to determine the most suitable standards and procedures for examining a tax return, and there was no showing of any impropriety by the Department in the method chosen. The court also noted that despite having engaged in conciliation proceedings and a hearing before the Division of Tax Appeals, the taxpayer never documented the claimed business losses.


The New York State Tax Appeals Tribunal has affirmed the decision of an ALJ disallowing qualified empire zone enterprise (“QEZE”) credits for the 2009 tax year, finding that the decertification of the petitioners’ businesses by the Department of Economic Development in June 2009 based upon a statutory change could be applied retroactively to the entire 2009 year. Matter of Carl Montante, Sr. & Carol Montante, et al., DTA Nos. 827235-827239 (N.Y.S. Tax App. Trib., May 2, 2019). While agreeing with the petitioners that application of a statutory change in June 2009 back to the beginning of 2009 is indeed retroactive, as it had also found in similar cases, the Tribunal determined that the short period of retroactivity from June to January 2009 did not violate the Due Process Clause. Even though the Tribunal agreed that the retroactive amendment lacked a valid public purpose, it concluded, just as it had last year in Matter of Clayton H. Hale, Jr. & Patricia H. Hale, et al., DTA No. 827149 et al. (N.Y.S. Tax App. Trib., June 14, 2018), that “the extremely short period of retroactivity outweighs the lack of a public purpose.”