An unnecessary consequence of the Covid-19 crisis for the New York tax community has been confusion regarding whether the series of executive orders tolling statewide legal filing deadlines from March 20, 2020, to Nov. 3, 2020, apply to the filing of administrative tax appeals. While the New York City Tax Appeals Tribunal (city tribunal) has provided informal guidance stating that the governor’s executive orders apply to deadlines for filing appeals within its jurisdiction, the New York State Division of Tax Appeals (state DTA) has provided informal guidance and issued recent determinations reaching the opposite conclusion.
While such confusion should have been addressed by the governor and the New York State Legislature months ago, the recent decisions at the state DTA confirm that they should now take action, either through another executive order or through legislation, confirming that the governor’s prior executive orders tolled administrative tax appeals deadlines in the same way that they tolled judicial filing deadlines.
Governor Cuomo’s Executive Orders
As Covid-19 took its toll on New York, on March 7, 2020, Governor Andrew Cuomo (D) issued Executive Order 202, which declared a disaster emergency in the state. The disaster emergency declaration allowed the governor to “temporarily suspend or modify any statute, local law, ordinance, order, rule, or regulation, or parts thereof, of any agency during a State disaster emergency, if compliance with such state, local law, ordinance, order, rule, or regulation would prevent, hinder, or delay action necessary to cope with the disaster emergency.”
Governor Cuomo exercised the broad scope of such power when he issued Executive Order 202.8, tolling state statutes of limitation for initiating a legal proceeding. Specifically, Executive Order 202.8 declared:
“In accordance with the directive of the Chief Judge of the State to limit court operations to essential matters during the pendency of the COVID-19 health crisis, any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to the criminal procedure law, the family court act, the civil practice law and rules, the court of claims act, the surrogate’s court procedure act, and the uniform court acts, or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof, is hereby tolled from the date of this executive order until April 19, 2020[.]”
Subsequent executive orders, with identical language, extended the tolling period until Nov. 3, 2020. While the intention behind the executive orders seems clear—reducing the spread of Covid-19 by excusing individuals from venturing outside their homes to initiate legal actions—its actual impact on administrative tax appeals has been anything but.
New York Tax Appeals Process
Protests of New York assessments and refund denials related to taxes administered by the New York State Department of Taxation and Finance (state department), such as sales and use tax, corporate income tax, and personal income tax, generally proceed through the state DTA. Meanwhile, the city tribunal has jurisdiction over the taxes administered by the New York City Department of Finance (city department), such as New York City’s business corporation tax, utility tax, and commercial rent tax. Both the state DTA and city tribunal are independent agencies that have jurisdiction over direct protests of tax notices and protests of conciliation orders issued by the appropriate conciliation bureau after a taxpayer initially seeks conciliation of a determination by the state department or city department.
Matters before the state DTA and the city tribunal are initiated before an administrative law judge (ALJ) who (1) holds a hearing, (2) establishes the factual record, and (3) reaches a decision on the merits of the issue(s) on appeal. Decisions of ALJs are subject to administrative appeal. At the state DTA, such appeals are heard before the New York State Tax Appeals Tribunal, while at the city tribunal such appeals are heard before the Appeals Division.
State DTA and City Tribunal Offer Differing Interpretations of the Executive Orders
As separate entities, the state DTA and the city tribunal have provided diverging interpretations of Executive Order 202.8 and, specifically, whether it tolls the deadlines for tax litigation. The city tribunal informally published guidance on its website providing that: “In light of the governor’s Executive Orders 202.8, 202.14, 202.28, 202.38, 202.48, 202.55, 202.60 and 202.67 the time limitations relating to the ‘commencement, filing, or service’ in connection with a [city tribunal] proceeding are, as of March 20, 2020, tolled until November 3, 2020.”
Guidance confirming the application of the executive orders to administrative tax appeals appeared on the city tribunal’s website as early as April of 2020.
Even though the city tribunal’s pronouncement was informal, it provided taxpayers with a level of assurance that their disputes before the city tribunal were tolled in the same manner as the executive orders’ sweeping language seemed to intend for all proceedings “as prescribed by the procedural laws of the state.” Notably, such guidance was consistent with similar informal guidance provided by the city department on its website, which provided that the governor’s executive orders extended “the time limitation for filing a Request for Conciliation Conference with the New York City Department of Finance’s Conciliation Bureau.”
In contrast, the state DTA’s website states:
“Please note that neither the [State] Tribunal nor DTA has the authority to waive statutory deadlines. As such, any petition, exception, or request for an extension of time to file an exception must be filed (postmarked or put in the custody of an authorized delivery carrier) by the current statutory deadline.”
While not explicitly referring to the executive orders, the state DTA made its stance clear—deadlines for tax litigation at the state level remained unaffected. Although its guidance is inconsistent with the city tribunal’s guidance, the state DTA has also consistently outlined its position on its website as early as April of 2020.
In January 2021, an ALJ at the state DTA issued an order outlining a legal position for not applying the executive orders. In Matter of Ryan and Wricha Pradhan, an ALJ concluded that the executive orders are “‘[i]n accordance with the directive of the Chief Judge of the State’…[and] such provisions do not apply to administrative procedures by the Division of Tax Appeals, as such procedures are not governed by the Chief Judge of the State.”
Further, the state tribunal recently issued a decision in Matter of Shahid Mahmood, in which it declined to extend the time within which the taxpayer could timely file an appeal of an ALJ decision issued during the period in which Governor Cuomo’s executive orders tolled filing deadlines. In Matter of Mahmood, the taxpayer was issued an ALJ determination on June 11, 2020, and filed an appeal with the state tribunal between July 20 and Aug. 3, 2020—at least nine days after the statutory deadline.
While the taxpayer’s filing would have been treated as timely if the state tribunal applied the governor’s executive orders, the state tribunal concluded that the taxpayer’s filing was untimely without any mention of the executive orders. The state tribunal conceded in its decision that the taxpayer “may have had good cause to request an extension of time” due to the Covid-19 pandemic, but held that because “neither an extension request nor an [appeal] was filed prior to the due date,” it had “no authority to extend the statutory period of limitations.”
While the state tribunal did not undertake the same legal analysis of the executive orders as the ALJ did in Matter of Pradhan, the state tribunal’s determination resulted in the same conclusion—the executive orders do not toll deadlines at the state DTA.
While the city tribunal has provided informal guidance that the executive orders did toll filing deadlines, we may hear more of the issue in the future. There is a risk that the city department could challenge the city tribunal’s informal guidance in future tax appeals. However, such a challenge would be inconsistent with the department’s own guidance provided through its Conciliation Bureau.
Further, the line of reasoning put forth by the ALJ Division of the state DTA in Matter of Pradhan may cause the city tribunal to reconsider its position if it is ever forced to determine whether it has jurisdiction over a tax appeal filed consistent with the executive orders and its own informal guidance. At the state level, taxpayers whose appeals are dismissed by the state DTA may seek application of the executive orders through an appeal to the New York State Supreme Court, Appellate Division, but any such appeal risks costly litigation.
Either way, confusion is likely to remain as more cases make their way through the state DTA and the city tribunal. Such uncertainty could have been avoided if the governor had clarified the application of his executive orders to administrative tax appeals back in April of 2020, when it became clear that the state DTA and the city tribunal were interpreting Executive Order 202.8 inconsistently.
Nevertheless, to eliminate confusion in the future, the governor should clarify the reach of the executive orders, or the legislature should pass legislation confirming that statutory administrative tax appeal filing deadlines during the Covid-19 crisis were tolled consistent with the executive orders. Otherwise, taxpayers will be left continuing to deal with unnecessary consequences of the Covid-19 pandemic in New York.
This column doesn’t necessarily reflect the opinion of The Bureau of National Affairs Inc. or its owners.
Eversheds Sutherland (US) LLP Counsel Michael Hilkin focuses on tax controversy and transactional issues relating to state and local income, franchise, sales and use, gross receipts, and other business taxes. Jeremy Gove is an associate with Eversheds Sutherland in New York whose practice focuses on multistate tax controversy and planning.
Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact us at TaxInsights@bloombergindustry.com.