Court Opinion

ID: 5872877
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:51:15.260464+00
Date Added: 2024-06-11T08:44:46.009248
License: Public Domain

Appeal from a judgment of the Supreme Court at Special Term (Hughes, J.), entered July 8, 1983 in Albany County, which dismissed petitioner’s application, in a proceeding pursuant to CPLR article 78, to annul a determination of the State Tax Commission sustaining a special franchise tax assessment imposed pursuant to article 9-A of the Tax Law.
Petitioner is a Maryland corporation which has been doing business in New York State since 1961, the year of its incorporation. Petitioner owned an investment portfolio which included a variety of short-term corporate obligations. Pursuant to article 9-A of the Tax Law, petitioner’s income was divided into “business income” and “investment income” (Tax Law, § 208, subds 6, 8, 9), depending on whether it was traceable to “business capital” or “investment capital” (Tax Law, § 208, subds 5, 7). An allocation percentage is applied against each kind of income to arrive at the amount of income taxable by New York (Tax Law, § 210, subd 3). Petitioner originally reported business income and no investment income for the years 1973 and 1974. Subsequently it amended its returns to report substantial investment income and filed a claim for a refund of a portion of the franchise taxes paid in those years. The Department of Taxation and Finance allowed all but $15,438 of the refund. Petitioner challenged this determination before respondent, but its claim was rejected. The instant CPLR article 78 proceeding was then instituted and Special Term upheld respondent’s determination. This appeal followed.
“As a general matter courts should defer to the interpretation given a statute by the agency charged with its enforcement if the interpretation is neither irrational, unreasonable, nor inconsistent with the governing statute” (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588, 597). And “where the interpretation of a statute or its application involves a special knowledge, courts regularly defer to administrative expertise” (Matter of Burger King v State Tax Comm., 51 NY2d 614, 621). *949“Where, however * * * the words of the statute are clear and the question simply involves the proper application of the provision ‘there is little basis to rely on any special competence or expertise of the administrative agency and its interpretive regulations’, especially when the interpretation, as embodied in a regulation directly contravenes the plain words of the statute” (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, supra, p 597, quoting Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459).
This case does not fall into the latter category mentioned above. The term “other securities” in subdivision 5 of section 208 of the Tax Law is patently ambiguous. The statute is part of a comprehensive and complex scheme for the imposition, computation, assessment and collection of the State franchise tax on business corporations (Tax Law, art 9-A). Respondent has been vested with broad powers to administer and enforce this and other taxing provisions, including the authority to make reasonable rules and regulations not inconsistent with the statutes (Tax Law, § 171). In view of the patent ambiguity of the statute, the regulation interpreting the term “other securities”, in effect during the tax years at issue, cannot be said to run counter to the clear wording of a statutory provision. Under such circumstances, judicial review is limited to whether the interpretation embodied in the regulation is irrational or unreasonable (see Matter of Consolidated Mut. Ins. Co. [Arcade Cleaning Contrs. — Superintendent of Ins.], 60 NY2d 1, 8).
On the issue of the rationality of the regulation and respondent’s reliance on the literal wording of that regulation, Matter of International Harvester Co. v State Tax Comm. (58 AD2d 125) appears to be dispositive. In International Harvester (supra, p 127), this court concluded that, by the express terms of the regulation, short-term notes were specifically excluded from the term “other securities” in subdivision 5 of section 208 of the Tax Law and that respondent was bound by the clear wording of its own regulation. Respondent subsequently amended the regulation to comport with its long-standing policy of including short-term notes and other commercial papers as “other securities” under certain limited circumstances. Inasmuch as the amendment occurred after the tax years at issue herein, respondent properly adhered to the express terms of the prior regulation, as directed by this court in International Harvester, and excluded the disputed short-term notes from the class of “other securities” as that term is used in subdivision 5 of section 208 of the Tax Law. Special Term’s judgment dismissing the petition should, therefore, be affirmed.
*950Judgment affirmed, without costs. Main, J. P., Casey and Yesawich, Jr., JJ., concur.