Cantor Fitzgerald’s Sept. 11 Relief Grant Deemed Taxable Income

Grant funds given to a unit of New York City-based financial services firm Cantor Fitzgerald LP as part of a post-Sept. 11 recovery program are subject to income tax, the US Tax Court said Tuesday.

The court held CF Headquarters Corp. must include the $3.1 million cash disbursement grant from 2007 in its income after determining it couldn’t be treated as a gift or as disaster aid for tax purposes. But, the court determined the Cantor Fitzgerald subsidiary isn’t liable for about $211,000 in accuracy penalties for failing to do so.

Cantor Fitzgerald had a securities office in the North Tower of the World Trade Center, where 658 employees were killed in the Sept. 11, 2001 terrorist attacks. The grant stemmed from the city’s World Trade Center Job Creation and Retention Program, a public-private partnership that reimbursed rent and employment expenses for companies affected by the attacks.

The US Department of Housing and Urban Development provided funding for the program.

The payments to Cantor Fitzgerald were “not detached and disinterested generosity,” Judge Kathleen M. Kerrigan said. The funds were an effort to help the company recover and stimulate economic revitalization, Kerrigan said.

In 2007, the IRS determined that the Cantor Fitzgerald subsidiary had a tax deficiency of about $1.1 million for not including the grant proceeds in either a Form 1120 income tax return or a disclosure statement. The company petitioned the Tax Court to examine whether the grant money should be treated as income because the program didn’t specify that.

Prior case law establishes that the income from the grant can’t be classified as other tax-exempt kinds of money, such as nonshareholder contribution to capital, a gift for tax purposes, or as qualified disaster relief payments, Kerrigan said.

Cantor Fitzgerald had pointed to three Supreme Court decisions about tax treatment of grant programs as part of its argument for not including the grant as income.

Kerrigan opted against imposing penalties on the company because tax law has evolved since the job retention program’s establishment.

Kevin M. Flynn of Kostelanetz LLP represents Cantor Fitzgerald.

The case is CF Headquarters Corp. v. Commissioner, T.C., No. 22321-12, tax court opinion 3/4/25.