Senate Bill S3889

                                 BILL NUMBER:  S3889

 TITLE OF BILL :  An act to amend the tax law, in relation to
permitting the commissioner of taxation and finance to seek judicial
review of decisions of the tax appeals tribunal


 PURPOSE :

This bill would provide the Commissioner of Taxation and Finance
("Commissioner") with the authority to seek judicial review of
decisions of the Tax Appeals Tribunal.

 SUMMARY OF PROVISIONS :

Section 1 of the bill amends Tax Law § 2016 to provide the
Commissioner with the authority to seek judicial review of decisions
of the Tax Appeals Tribunal.

Section 2 of the bill provides that the bill takes effect immediately.

 EXISTING LAW :

Disputes between the Department of Taxation and Finance ("Department")
and taxpayers are adjudicated by the Division of Tax Appeals through
an administrative hearing process. Either the taxpayer or the
              

Commissioner may appeal a determination of an administrative law judge
and request a review by the three-member Tax Appeals Tribunal.
However, judicial review in an Article 78 proceeding with respect to
the merits of an adverse decision rendered by the Tax Appeals Tribunal
is available only to the taxpayer.

 LEGISLATIVE HISTORY :

In 2007, S.4119 (Winner) was introduced at the request of the
Department, but not introduced in the Assembly.

 STATEMENT IN SUPPORT :

The absence of a right to appeal adverse Tax Appeals Tribunal
decisions by the Commissioner is a significant flaw in the Tax Law.
Several rulings illustrate this clearly. For example, in 1988, the Tax
Appeals Tribunal held in favor of the taxpayer when it ruled that a
cable television company was subject to tax as a general business
corporation under Article 9-A, rather than Article 9, of the Tax Law
(Matter of Capitol Cablevision Systems. Inc., TSB-D88(3)C). This
decision adversely affected many cable television companies that
benefited from taxation under Article 9. However, because the
Department could not appeal the determination, the only way for the
cable companies to resolve the matter was to start the litigation
process all over again. Thus, in Matter of New channels Corporation
and Matter of Upstate Community Antenna, Inc., taxpayers were forced
to go through the entire hearing process and then appeal the issue of
the taxable status of cable television companies to the courts, where
the issue was finally resolved in 2001 by the reversal of the
Tribunal's decision. Denying the Commissioner the right to seek
judicial review of the Capitol Cablevision decision resulted in
duplicative litigation, expense for the taxpayers and the State, and a
13-year delay in reaching final judicial resolution of the issues,
during which the entire cable television industry was in doubt as to
its taxable status.

Another example is the Tribunal's 1992 decision in Matter of General
Electric. Some taxpayers benefited from the decision and others were
disadvantaged. Because the Department could not appeal, it challenged
the holding of the General Electric decision in several subsequent
cases, but it was not until the Tribunal's 2003 decision in Matter of
CWM Chemical Services, Inc. and CWM Chemical Services, LLC that the
Tribunal reversed its General Electric decision. In this case it took
over 10 years to reverse a Tribunal decision and, during that time,
the companies in this industry were subject to a great deal of
uncertainty as to how to structure their contracts for waste disposal.

Because the Commissioner has no right to appeal an adverse Tax Appeals
Tribunal decision, the only remedy available is to seek a legislative
change. However, obtaining legislative relief from an adverse decision
is not an efficient way to effectuate the needed change, and has been
sought only in very few instances.

The Commissioner's lack of a right to appeal is at odds with the
independent nature of the Division of Tax Appeals and is inconsistent
with the right to appeal afforded to other State agencies. For
example, the Industrial Board of Appeals and the Unemployment
Insurance Appeals Board have jurisdiction to review certain actions
taken by the Commissioner of Labor, and the Commissioner has the right
to seek judicial review of decisions rendered by these boards.
Further, other states with an independent administrative body charged
with the resolution of tax disputes provide the tax administrator with
the right to appeal the administrative body's decision to a court.
Among those states are Massachusetts, Michigan, Minnesota, New Jersey,
Ohio, Pennsylvania, Idaho, Iowa and Wisconsin.

 BUDGET IMPLICATIONS :

The impact of this bill on the State's finances is difficult to
quantify, but over the longer term it is likely to have a positive
impact, since the State may be successful in its appeal of decisions
that would otherwise not be appealable. Moreover, because this bill
establishes a more balanced set of litigation risks, it may lead to
some reduction in the volume of litigation, creating the potential for
reduced costs and improved voluntary compliance.

 EFFECTIVE DATE
This bill would take effect immediately.