On November 9, the New York State Tax Appeals Tribunal (the "Tribunal") issued a landmark decision overturning an Administrative Law Judge's prior determination that our client was subject to income tax by New York State and New York City in 1996 and 1997.
Notwithstanding the general rule provided in the New York Income Tax Regulations that the conclusions set forth in a tax examiner's report following an audit are treated as being presumptively correct, the Tribunal held that the burden of proof is imposed on the New York State Department of Taxation and Finance (the "Department") where it alleges that a taxpayer has changed his domicile to New York. The Tribunal held that the Department had failed to meet such burden and, indeed, that the taxpayer had clearly demonstrated that he had remained a New Jersey domiciliary.
The Tribunal also ruled that our client was not a resident of New York City because he did not maintain an apartment there. In reaching this conclusion, the Tribunal rejected the Department’s argument that where a closely-held limited liability company (an "LLC") rents a company apartment in New York City, such apartment must be treated as maintained by a minority owner (40%) where such individual was the only member of the LLC living in the New York area. The Tribunal ruled that the taxpayer had demonstrated that, although he sometimes used the apartment for personal purposes, he did not have "free and continuous" access to the apartment because it was rented for company business purposes and was often used by business associates.
As reported in State Tax Notes, during the most recently reported fiscal year, taxpayers won complete victories in only 9% of Administrative Law Judge determinations, and the Tribunal upheld Administrative Law Judge decisions against taxpayers in over 80% of the cases that it heard on appeal.