Court Opinion

ID: 5848324
Source: CourtListenerOpinion
Date Created: 2022-01-12 23:52:54.236361+00
Date Added: 2024-06-11T08:44:00.082863
License: Public Domain

Herlihy, J. (dissenting).
Yesawich, Jr., and Herlihy, JJ., dissent and vote to confirm in the following memorandum by Herlihy, J. The critical distinction in this case between New York gross income and Federal gross income is in the initial determination of the amount to be reported as such before deductions. It would seem apparent that New York State has an interest in assuring that as to New York based partnerships the income earned in New York be taxable. The respondents’ construction of subdivision (a) of section 607, subdivision (b) of section 617, section 632 (subd [a], par [1]) and section 637 (subd [b], par [2]) of the Tax Law is neither irrational nor illegal. Allowance of the Internal Revenue Code section 911 exclusion prior to a computation of New York income would result in a New York taxable income less than the income reported for Federal purposes. Such a result is implicitly contrary to legislative intent as expressed in section 637 (subd [b], par [2]) of the Tax Law in regard to partnership agreements. Under such circumstances, we cannot conclude that the Tax Commission was without a rational basis for determining that the allowance of Federal deductions as required by subdivision (b) of section 617 was intended to be limited so that New York source income would not be less than its true relation to earnings, but also will not exceed Federal gross income. (Cf. Matter of Jablin v State Tax Comm., 65 AD2d 891, 892.) Since the Tax Commission’s construction and application of section 637 (subd [b], par [2]) rest on a rational basis, and are not contrary to law, the determinations should not be disturbed (Matter of Pell v Board of Educ., 34 NY2d 222). The determinations should be confirmed and the petitions dismissed.