Court Opinion

ID: 6028260
Source: CourtListenerOpinion
Date Created: 2022-01-13 12:34:16.633371+00
Date Added: 2024-06-11T08:51:06.727262
License: Public Domain

Nardelli, J.,
dissents in a memorandum as follows: Initially, I disagree with the majority’s determination that we should defer to respondent’s expertise, since deference is not given to an administrative agency with respect to questions of law, such as when the agency applies a statute or its own regulations. “Where the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom, the courts regularly defer to the governmental agency charged with the responsibility for administration of the statute. If its interpretation is not irrational or unreasonable, it will be upheld. (Matter of Howard v Wyman, 28 NY2d 434; cf. Ostrer v Schenck, 41 NY2d 782, 786.) Where, however, the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent, there is little basis to rely on any special competence or expertise of the administrative agency and its interpretive regulations are therefore to be accorded much less weight. And, of course, if the regulation runs counter to the clear wording of a statutory provision, it should not be accorded any weight [citation omitted].” (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459.)
Here, the respondent determined that the income attributable to notes purchased by petitioner from its parent corporation did not constitute investment income but rather was taxable as interest income from “business capital.” This analysis was made based on the affiliation between the parent RCA, which issued the notes, and petitioner, which is a subsidiary with a very close relationship. However, the State Tax Appeals Tribunal has previously indicated that there is no authority for the proposition that “whether an instrument is an investment depends upon the source of the decision to advance the funds” (Matter of Siemens Capital Corp., 1994 NY Tax LEXIS 640, *31 [emphasis added]).
In addition, the notes yielded substantial interest that was attributable solely to RCA’s efforts (see, Matter of Carret & Co. v State Tax Commn., 148 AD2d 40, 42) and the interest received was higher than that from the short-term certificates of deposit in foreign third parties in which petitioner had previously been investing its excess funds.
Finally, I believe that there was substantial evidence in the record that, contrary to respondent’s findings, the notes were not purchased solely to serve RCA’s needs in that there was an investment purpose as well as an investment strategy on the part of petitioner. Buying notes sold to third parties directly *394from the issuer without the expense of brokerage fees, thereby-increasing the effective return, is a good investment strategy. Furthermore, petitioner, being closely affiliated to the issuer, could have had faith in the stability and risk-free character of the commercial paper it was purchasing.
Accordingly, I would annul the determination of respondent and find that the notes did constitute investment capital under section R46-2.0 (4) of the Administrative Code of the City of New York.