NEW YORK, April 11, 2014 /PRNewswire/ -- This week, a New York appellate court ruled in a complex tax case that a retroactive New York statute violated a taxpayer's constitutional right to due process of law. The statute in issue imposed a tax on a transaction involving the sale of a business that had been completed three and a half years before the statute's enactment. The case involved highly technical issues under the Internal Revenue Code and the New York Tax Law concerning a taxpayer's receipt of installment obligations for the sale of stock of an S Corporation.
In reversing the lower court's ruling, the decision underscores that retroactive tax legislation is looked upon with disfavor by the courts and that a modest period of retroactivity of one year is generally accepted. The Court found the three-and-a-half-year retroactive period to be unreasonable and that the loss of tax collections to the State did not warrant taking away a taxpayer's right to rely on the law as it existed years before enactment of the retroactive legislation.
"The Caprio decision is an important victory for New York taxpayers and should cause the Legislature to be more cautious in adopting retroactive tax legislation," remarked Roger Cukras.
"The Appellate Division grasped the central issue," John Nicolich added. "It is not only unfair, but unconstitutional, to require a taxpayer to pay tax on a transaction that was not taxable at the time the transaction occurred."
Counsel for the taxpayers were Roger Cukras and John G. Nicolich of Ingram Yuzek, with Vincent F. Pitta of Pitta & Giblin LLP as co-counsel.
The case is Caprio v. N.Y.S Department of Taxation & Finance, and was in the Appellate Division, First Judicial Department, of the New York Supreme Court. The Court's opinion was authored by the Honorable Rosalyn A. Richter, joined by Justices Rolando T. Acosta, Karla Moskowitz, and Sallie Manzanet-Daniels. Justice Richard T. Andrias filed a dissent.
About Ingram Yuzek
Based in New York City, Ingram Yuzek provides a broad range of transactional and dispute resolution services to sophisticated clients across the globe. For more information, visit www.ingramllp.com.
Hannah Zweifler | Martini Consulting LLC
860-508-4367 | [email protected]
John Nicolich | Ingram Yuzek LLP
212-907-9685 | [email protected]
SOURCE Ingram Yuzek