Court Reverses Itself in Malpractice Insurance Ruling

, New York Law Journal

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the judges of the Court of Appeals
Standing, left to right: Judges Jenny Rivera, Robert Smith, Susan Phillips Read, Sheila Abdus-Salaam, and Eugene Pigott Jr. Seated, Judge Victoria Graffeo and Chief Judge Jonathan Lippman

She added that the county's law represented an "impermissible intrusion" on the power of taxation that the state has reserved for itself in its constitution.

Local Law 18 was enacted as part of the county's decade-long effort to escape a deficit that county fiscal managers have blamed in part on the county's chronic need to pay certiorari awards of $80 million or more a year.

Critics contended that the 2010 law was Nassau County's attempt to shift fiscal responsibility for its faulty tax assessment process to local taxing units such as school districts.

David Yaffe of Hamburger, Maxson, Yaffe, Knauer & McNally of Melville, represented Baldwin and other school districts.

"The county had no right to place the burden of its incompetent tax assessments onto school districts, and its act of doing so was clearly, as the Court of Appeals held, unconstitutional," Yaffe said. "The county is responsible for its own errors."

Yaffe said the county's assessments for school taxes account for the largest portion of the refunds made each year through certiorari proceedings. Of the $80 million in court-ordered refunds annually, about $53 million are in overcharges on school taxes and were shifted to the districts for repayment.

Maureen Liccione of Jaspan Schlesinger of Garden City represented the Town of North Hempstead and other municipal plaintiffs. "The decision is correct," Liccione said Tuesday. "It comports with the bedrock principle of New York law that the Legislature is the sole jurisdiction with respect to taxing. Local governments have no authority to enact tax laws without the state's approval."

Catherine Battle of the New York State United Teachers in Manhattan represented individual taxpayers Barbara Hafner and Linda Wiener.

Ronald Rosenberg of Rosenberg Calica & Birney in Garden City argued for Nassau County.

Tuesday's ruling affirmed a determination by the Appellate Division, Second Department that also found the 2010 Nassau County tax change unconstitutional.

Resident, Residence

Also Tuesday, the court decided in Matter of Gaied, 26, that the state tax department's traditional way of defining what a "permanent place of abode" means for purposes of establishing a person's place of residence is not correct.

The 7-0 court said in a ruling by Pigott that a taxpayer may "maintain" a dwelling place within the state without "residing" in it for purposes of qualifying as a resident.

Pigott wrote that there is "no rational basis" in tax statutes for the state's interpretation that the mere act of "maintaining" a residence qualifies as being a resident. He said the tax department must prove more in order to establish that a dwelling qualified as a residence, and that taxpayers were residents who were subject to state taxes.

"The legislative history of the statute, to prevent tax evasion by New York residents, as well as the regulations, support the view that in order for a taxpayer to have maintained a permanent place of abode in New York, the taxpayer must, himself, have a residential interest in the property," Pigott wrote.

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