New York Law Review

Tag: Tangible Personal Property

  • Citibank, N. A. v. City of New York, 32 N.Y.2d 426 (1973): “Affirmative Action” and Taxation of National Banks

    Citibank, N. A. v. City of New York, 32 N.Y.2d 426 (1973)

    A state legislature’s amendment to a tax law, resulting in meaningful increases in tax rates, constitutes “affirmative action” permitting the imposition of the tax on national banks under federal law; furthermore, a commercial rent tax is considered a tax on tangible personal property, which is exempt from the “affirmative action” requirement.

    Summary

    Citibank and Chase, national banking associations, challenged the imposition of New York City’s commercial rent tax for the period of June 1, 1970, through May 31, 1972, arguing that they were immune under federal law. The banks contended that the city had not taken the “affirmative action” required by United States Public Law No. 91-156 to subject them to the tax. The Court of Appeals held that the state legislature’s amendment to the tax law, which significantly increased the rates, constituted the required “affirmative action.” Furthermore, the court determined the commercial rent tax to be a tax on tangible personal property, exempting it from the “affirmative action” requirement altogether. Thus, the tax was properly levied.

    Facts

    Citibank and Chase, national banks with principal places of business in New York City, were subjected to the city’s commercial rent tax. This tax had been in place since 1963. In 1969, Congress enacted United States Public Law No. 91-156, which affected the ability of states to tax national banks. New York State amended its commercial rent tax law in 1970 (L 1970, ch 166), significantly increasing tax rates. The banks challenged the tax, asserting that the 1970 amendment did not constitute the “affirmative action” required by federal law to subject them to the tax during the period in question.

    Procedural History

    Citibank and Chase separately initiated Article 78 proceedings challenging the tax assessments. The cases were consolidated. The Appellate Division confirmed the New York City Finance Administration’s determinations against the banks and dismissed their petitions. The banks then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the amendment to the New York City commercial rent tax law in 1970, which increased the tax rates, constituted “affirmative action” by the state legislature as required by United States Public Law No. 91-156, thereby permitting the imposition of the tax on national banks.
    2. Whether the New York City commercial rent tax is a tax on tangible personal property, thus exempting it from the “affirmative action” requirement under United States Public Law No. 91-156.

    Holding

    1. Yes, because the amendment, which brought about meaningful increases in the rates of the revenue measure, is permeated with “action.”
    2. Yes, because New York courts have consistently regarded a leasehold interest as tangible personal property for tax purposes.

    Court’s Reasoning

    The court reasoned that the 1970 amendment to the commercial rent tax law constituted “affirmative action” because it significantly increased tax rates. The court rejected the banks’ argument that the federal statute required an explicit decision to subject national banks to the tax, finding no such requirement in the statute itself. Citing Lyon v Manhattan Ry. Co., the court stated that an amendment is a re-enactment of the statute amended, thus the amendment necessarily involved “affirmative” conduct. The court further reasoned that the concern of Congress was the possiblity of inequitable taxation, and the saving provision in the federal statute was designed to avoid upsetting delicately balanced State statutes enacted to equalize taxation.

    Independently, the court held that the commercial rent tax qualifies as a tax on tangible personal property, as established in Ampco Printing-Advertisers’ Offset Corp. v City of New York. Judge Fuld in Ampco described the tax as one “imposed on a tenant of taxable premises according to his base rent for the tax year” and noted that “ ‘It is significant to note that nowhere in the Tax Law has the Legislature characterized a leasehold as taxable real property…A leasehold has consistently been regarded as tangible”. Because United States Public Law No. 91-156 expressly exempts taxes on tangible personal property from the “affirmative action” requirement, the city was permitted to impose the commercial rent tax on the banks without further legislative action. The court also noted that the Senate Committee on Banking and Currency stated the taxes listed in the new section were not considered to be taxes on intangible personal property and they could be imposed on national banks by the States.

  • Matter of Arundel Corp. v. Joseph, 11 N.Y.2d 44 (1962): Application of Use Tax on Property Used Outside City

    Matter of Arundel Corp. v. Joseph, 11 N.Y.2d 44 (1962)

    A municipality can impose a use tax on tangible personal property brought into the city, even if the property was initially purchased and used outside the city for a substantial period, with the tax based on the property’s current value, not the original purchase price.

    Summary

    Arundel Corporation, a West Virginia corporation with its principal place of business in New York City, challenged a New York City Comptroller’s determination imposing a use tax on a dredge and pipeline equipment it owned. Arundel had purchased the dredge in Maryland in 1948, used it for eight years in other states, and brought it to New York City in 1956 for short-term dredging contracts. The Comptroller assessed a tax deficiency because Arundel omitted the dredge and pipeline equipment from its tax returns, arguing the use tax didn’t apply to property purchased and used elsewhere long before being brought into the city. The New York Court of Appeals upheld the Comptroller’s determination, finding that the use tax could be applied to property used within the city regardless of when it was purchased and initially used, with the tax based on the property’s value at the time of use.

    Facts

    Arundel Corporation purchased a dredge in Maryland in 1948 and registered it in New York, N.Y. The dredge was used for dredging operations in South Carolina, Florida, and Virginia for approximately eight years. In July 1956, Arundel brought the dredge to New York City for about six weeks to complete dredging contracts. Following the New York City work, the dredge was moved to Connecticut in September 1956. Arundel also used pipe and pontoon line equipment to transport dredged material. Arundel did not include the dredge and related equipment in its New York City tax returns, believing them exempt from the use tax.

    Procedural History

    The New York City Comptroller determined that Arundel had a tax deficiency. After a hearing, the Comptroller assessed a use tax deficiency of approximately $33,000, including penalties and interest. The Appellate Division unanimously confirmed the Comptroller’s determination. Arundel appealed to the New York Court of Appeals based on constitutional grounds.

    Issue(s)

    1. Whether New York City’s use tax can be imposed on tangible personal property purchased and initially used outside the city several years before being brought into the city.

    2. Whether basing the use tax on the current value of the property, rather than the original purchase price, is a permissible method of taxation.

    3. Whether the use tax, as applied in this case, constitutes an unconstitutional burden on interstate commerce.

    Holding

    1. Yes, because the statute contemplates that a use tax may be imposed on property that has been purchased and used elsewhere before being brought into the city.

    2. Yes, because the Comptroller is empowered to determine the value of the property, and the tax can be based on that value rather than solely on the purchase price.

    3. No, because the possibility of multiple state taxation does not automatically render a use tax unconstitutional, especially when there is no evidence of actual multiple taxation.

    Court’s Reasoning

    The court reasoned that the New York City Administrative Code (§ M46-16.0) imposes a tax on the use of tangible personal property within the city. The court emphasized the Comptroller’s power to determine the “value” of the property, which indicates that the tax is not solely based on the original purchase price. The court cited City Sales and Use Tax Regulation, art. 2(F), stating that the tax is computed on the property’s value when the property has been used outside the city before being used within the city. The court distinguished cases with tax laws applicable to personal property “purchased for use” in the state. Regarding the constitutionality of the use tax, the court noted that the possibility of multiple state taxation does not automatically make a use tax an unconstitutional burden on interstate commerce, citing Southern Pacific Co. v. Gallagher, 306 U. S. 167. The court emphasized that Arundel did not present any evidence of sales or use tax imposed in any other jurisdiction. The court highlighted that the purpose of a use tax is not only to prevent tax avoidance but also to enable city retail sellers to compete with retail dealers in other states or cities exempt from sales tax.

    The Court quoted Henneford v. Silas Mason Co., 300 U. S. 577, 581 stating, “the purpose of a use tax is not only to prevent tax avoidance but to enable city retail sellers ‘to compete upon terms of equality with retail dealers in other states [or cities] who are exempt from a sales tax or any corresponding burden.’”