Gerard Towers Company, Inc. v. Roth, 61 N.Y.2d 726 (1984)

The transfer of shares as part of a cooperative plan is a taxable event under Article 31-B of the Tax Law, with the overall cooperative plan being subject to the statute unless specifically exempted.

Summary

Gerard Towers Company sought a declaratory judgment to determine if the transfer of real property underlying a cooperative corporation plan or the transfer of shares was the taxable event under Tax Law Article 31-B. The plaintiffs argued transfers under the plan are exempt from tax. The Court of Appeals held that the transfer of shares as part of a cooperative plan is indeed a taxable event. The Court reasoned that the legislative intent, as evidenced by exemptions and clarifications in the statute, supports this construction. The amendment to Tax Law § 1440(7) was deemed a legislative amplification rather than a change of intent.

Facts

Gerard Towers Company was involved in a cooperative corporation plan regarding real property. A dispute arose concerning whether the transfer of the real property itself or the transfer of shares within the cooperative was the taxable event under New York Tax Law Article 31-B.

Procedural History

The Special Term initially ruled that the transfer of shares of stock by the cooperative corporation was the taxable event. The Appellate Division affirmed this decision. The case then reached the New York Court of Appeals.

Issue(s)

Whether the transfer of real property underlying a cooperative corporation plan or the transfer of shares in the cooperative is the taxable event under Tax Law Article 31-B.

Holding

Yes, the transfer of shares as part of a cooperative plan is a taxable event because the legislative intent, as demonstrated by the structure of Article 31-B, including its exemptions and subsequent amendments, indicates that the transfer of shares within a cooperative is the taxable event.

Court’s Reasoning

The Court of Appeals focused on interpreting the legislative intent behind Tax Law Article 31-B. The court noted that Section 1443(6) specifically exempts certain transfers after the effective date of the act, implying that, generally, transfers of shares in a cooperative plan are taxable. The court further supported this view by pointing to the exception in Section 1440(7) regarding cooperative or condominium plans and Section 1442, which fixes the date of transfer under a cooperative plan. The court stated: “Amendment of a statute, without more, does not require a change in its judicial construction. In view of the fact that the statute in its original form can be so read, the amendment must be regarded as but a legislative amplification of its previous intent.” The court also referenced the State Executive Department Memorandum accompanying the bill that amended the law, which clarified the gains tax treatment of cooperative conversions, supporting the interpretation that the amendment was intended to clarify, not change, the law. The Court thus held that the overall cooperative plan is subject to tax, save for specific exemptions, confirming that the transfer of shares is the taxable event.