Ampco Printing-Adv. Corp. v. City of New York, 14 N.Y.2d 16 (1964)
A commercial rent tax imposed on tenants is constitutional and not an unconstitutional tax on real estate, ad valorem tax on intangible property, or a violation of due process or equal protection.
Summary
This case addresses the constitutionality of New York City’s Commercial Rent or Occupancy Tax Law, which taxes tenants based on their rent. Plaintiffs, including businesses and a property owner, challenged the law, arguing it violated the New York State Constitution and the U.S. Constitution. The New York Court of Appeals upheld the tax, finding it was not a tax on real estate, nor an ad valorem tax on intangible personal property, and that it did not violate due process or equal protection. The court emphasized the tax was on the tenant’s use of property for commercial purposes, a valid exercise of the state’s taxing power.
Facts
The City of New York enacted Local Law No. 38 imposing a tax on persons occupying premises for commercial activities, measured by rent paid. Ampco Printing and other plaintiffs, including a parking business and a real property owner, challenged the law as unconstitutional. They argued it was essentially a real estate tax exceeding constitutional limits, an improper tax on intangible property, and discriminatory.
Procedural History
Plaintiffs filed actions seeking a declaratory judgment that the enabling act and local law were unconstitutional. The City of New York and the Attorney General intervened as defendants. All parties moved for summary judgment. Special Term rejected the plaintiffs’ contentions and upheld the law. The plaintiffs appealed directly to the New York Court of Appeals on constitutional grounds.
Issue(s)
1. Whether the commercial rent or occupancy tax is a tax on real estate in violation of Article VIII, Section 10 of the New York State Constitution?
2. Whether the tax constitutes an ad valorem tax on intangible personal property in violation of Article XVI, Section 3 of the New York State Constitution?
3. Whether the tax violates the due process or equal protection clauses of the State or Federal Constitution?
Holding
1. No, because the tax is imposed on tenants, not on real estate or owners of real estate; leaseholds are considered personal property.
2. No, because the tax is not an ad valorem tax and even if it were, it would be on a leasehold, which is not intangible personal property.
3. No, because the tax is a valid exercise of the taxing power and the classification between tenant occupants and owner occupants is not arbitrary.
Court’s Reasoning
The court reasoned that the tax was imposed on tenants based on their rent for using premises for commercial purposes, not directly on the real estate itself. The court cited precedent establishing that a leasehold is considered personal property (a “chattel real”), not real property. The court rejected the argument that the tax’s economic impact made it equivalent to a real estate tax, citing Bromley v. McCaughn, stating that “a tax imposed upon a particular use of property or the exercise of a single power over property incidental to ownership, is an excise.”
Regarding the ad valorem argument, the court noted that the tax was not based on the value of the property but on the rent paid. Moreover, even if it were an ad valorem tax, it would be on a tangible leasehold, not an intangible asset. The court further explained that the intent of Article XVI, Section 3 was to protect nonresidents from taxes on money and securities held in New York, not to exempt leaseholds.
Finally, the court held that the tax did not violate due process, as it was a valid exercise of the taxing power, or equal protection. The court emphasized the broad power of classification in taxation and found the distinction between tenants and owners, or between tenants paying different rent amounts, was not arbitrary. The court reasoned that a “state of facts reasonably can be conceived that would sustain it.” The court noted that the tax was imposed solely to raise revenue and was not motivated by any other purpose.