In Matter of Mark A. Rothberg, DTA No. 823318 (N.Y.S. Tax App. Trib., Jan. 17, 2013), the New York State Tax Appeals Tribunal affirmed the decision of an Administrative Law Judge that a taxpayer is not entitled to a hearing when he had received neither a notification of a tax deficiency nor denial of a refund application.
In Rothberg, the petitioner was a New York resident employed in New Jersey. He filed resident income tax returns for the years 1994 through 2010, but according to the Department did not make full payment of the amounts shown as due in certain years, or any payment in other years. The Department did receive portions of federal income tax refunds owed to Rothberg by the Internal Revenue Service, and applied those payments as offsets to Rothberg’s outstanding New York self-assessments.
Rothberg claimed that, in 2003, in connection with refinancing his apartment, he had been required to and did satisfy all outstanding tax obligations, and that this satisfaction was confirmed in a telephone conversation with a Department official, although no documentation was provided.
Rothberg had commenced a proceeding in Supreme Court, the State’s trial court, seeking to vacate the levy and warrants. That proceeding was dismissed for failure to exhaust administrative remedies. Rothberg then requested a conciliation conference, which was rejected on jurisdictional grounds, leading to a petition filed with the Division of Tax Appeals seeking a hearing.
As reported in the May 2012 issue of New York Tax Insights, the ALJ had held that Rothberg had no right to a hearing. The Tribunal has now affirmed the ALJ’s decision, finding that the only notices issued by the Department were notices and demand for the tax shown due (or determined to be due based on math errors), which are not the same as the assertion of a “deficiency.” Under Tax Law § 173-a(2), a notice and demand “shall not be construed as a notice which gives a person the right to a hearing….” The Tribunal also rejected Rothberg’s argument that the Department waived jurisdiction, holding that jurisdictional issues cannot be waived and may be raised at any time.
After a 2004 statutory amendment, it is clear that the Tax Law provides no right to a hearing before the Division of Tax Appeals when the taxpayer is challenging a notice and demand for unpaid tax, interest, and penalties resulting from a mathematical or clerical error, or from the failure to pay the tax shown due on a return.
However, the Tribunal decision does not deal at all with the issue that was also left unresolved by the ALJ—the fact that Rothberg first tried to bring his action in the state court, where it was dismissed, presumably on the Department’s motion, for failure to exhaust administrative remedies. Although the decision does not specify the waiver argument raised by Mr. Rothberg, perhaps that argument was based on the allegation that, having argued to the court that the action should be dismissed based on failure to exhaust administrative remedies, the Department should be deemed to have waived a jurisdictional objection. Since the Tribunal has now confirmed that Rothberg has no administrative remedies, it seems the only alternative available to Rothberg would be paying all amounts claimed to be due and filing a claim for refund, an option not discussed in the decision.