New York Appellate Division Rejects Retroactive Application Of Tax Law

Author:Mr Marc A. Simonetti and William L. Bennett
Profession:Pillsbury Winthrop Shaw Pittman LLP

On December 26, 2019, the New York State Supreme Court Appellate Division issued a strong rebuke to retroactivity by holding that a law with a 97-day retroactivity period violated the taxpayer's Due Process rights. Matter of Mackenzie Hughes LLP et al. v. New York State Tax Appeals Trib. The Supreme Court Appellate Division, Third Department—New York's intermediate appellate court—held the taxpayer's Due Process rights were violated because: 1) the retroactive application of the law did not serve a public purpose; 2) the taxpayer did not have adequate forewarning of the law change; and 3) the application of the law represented a 97-day retroactivity period.

The Appellate Division reversed the New York State Tax Appeals Tribunal decision, which found that the retroactive application was not significant enough to violate the Due Process Clause. While it recognized that the retroactivity period was relatively brief, the Appellate Division held that no public purpose was served by the retroactive application of the law (citing James Sq. Assoc. LP v. Mullen (21 NY3d 233, 249-250 [N.Y. 2013]). Further, the Appellate Division held that...

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