In a reminder of the strict jurisdictional rules governing challenges to assessments, a New York State Administrative Law Judge has dismissed a petition filed by Peter Madoff seeking to challenge a responsible person assessment for nearly $1 million in allegedly unpaid sales and use tax. Matter of Peter Madoff, DTA No. 823411 (N.Y.S. Div. of Tax App., August 25, 2011).
A Notice of Determination dated May 4, 2009, arising from a sales tax audit of Bernard L. Madoff Investment Securities, LLC, 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, 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. The Department moved to dismiss, and the only issue considered was the timeliness of the request for a conciliation conference.
To establish that the May 4 Notice had been properly mailed via certified mail, the Department presented 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, including the one at issue, and explained the processes used. Although the records originally listed 192 pieces of mail, only 191 were received at the post office, and the affidavits explained that one piece of mail was pulled and a line drawn through the entry. Postmarks of both May 4 and May 5, 2009 appear on each page; the May 5 date was crossed off, and the affidavit of the Postal Service employee explained that indicated an error had been caught and corrected.
The ALJ held that the evidence established proper mailing on May 4, and that Mr. Madoff’s attempts to challenge the mailing based on discrepancy between 191 and 192 pieces of mail and the two different postmark dates did not prevent the records from being regarded as reliable, since there were clear and reasonable explanations provided. The ALJ found it “readily apparent” that standard mailing procedures were followed, and that the alleged defects had no bearing on the notice in question. He also rejected the arguments that, because the Department was seeking to hold Mr. Madoff liable for the sales tax of a defunct business, its “less than conclusive evidence of mailing” should not be considered sufficient to warrant dismissal, or that the lateness was a “mere technicality,” noting that the 90- day period is jurisdictional. Finally, the ALJ also noted that Mr. Madoff was not without a remedy, since he could pay the assessment and file a claim for refund.
Additional Insights. Attempts to challenge the Department’s proof of proper mailing are rarely successful, and tend to involve unusual circumstances, such as the case described in the August issue of New York Tax Insights, in which the taxpayer’s apartment had been destroyed by a fire that prevented delivery of mail. Matter of Lassana Jabateh, DTA No. 824176 (N.Y.S. Div. of Tax App., July 7, 2011). Once the Department demonstrates its usual practice, and the records show mailing of the particular notice in question, a presumption of receipt arises and it is extremely difficult to prove the notice was not mailed. There is no requirement that notices be sent with “return receipt requested” or that actual receipt by a taxpayer be demonstrated by the Department. While the prospect of having to pay a large assessment in order to challenge it is certainly daunting, there may be no other choice if the original notice has gone astray and the taxpayer does not learn of the purported liability until the jurisdictional period for challenge has elapsed.