On June 26, 2013, the Appellate Division of the Supreme Court of the State of New York reversed an August 22, 2012 decision finding the New York MTA Payroll Tax (MTA MCTMT) to have been unconstitutionally enacted.
The MTA MCTMT Tax is imposed on certain employers, self-employed individuals and partners in a partnership conducting business within the Metropolitan Commuter Transportation District which includes the boroughs of New York City, the counties of Nassau, Rockland, Suffolk, Orange, Putnam, Dutchess and Westchester. The highest effective rate is .34% of net earnings for self-employed individuals, partners, and employer's payroll expense for covered employees.
Edward Mangano, Nassau County Executive, and others brought suit and originally prevailed in the lower court, which found in 2012, that the enactment of the statute was unconstitutional. The Appellate Division, in a very brief opinion, reviewed the basis for the enactment of the statute and found that because there was a direct benefit for mass transit users and to the regional and state economies, a substantial State concern was addressed. As a result, the statute was not unconstitutionally passed and was within the legislature's authority to impose.
Subsequent to the 2012 ruling, the State issued procedures for taxpayers to file electronic protective claims to insure they could qualify for refunds if the tax was ultimately found unconstitutional. At that time they recommended taxpayers continue to pay the tax and file all required forms. Now that New York State has prevailed in the Appellate Division, it remains to be seen what actions the original Plaintiffs will take. Will they appeal the Appellate Division ruling to the highest New York Court, the Court of Appeals, or otherwise seek corrective action within the New York State Legislature?
At this time, the MTA MCTMT Tax is back and remains constitutional. Taxpayers must continue to file and pay until there are other decisions from the Courts or the New York Legislature.
Late Thursday June 27, Nassau County advised it will indeed challenge the decision by appeal. Stay Tuned!
Marcum LLP will continue to keep you apprised of all developments. If you have any questions or need further assistance, please contact your dedicated Marcum LLP SALT professional.
|A special thanks to article contributor Robert Spielman, Partner, Tax & Business|