Empire Zone decision from New York State Court of Appeals June 4, 2013

7/28/2019 Empire Zone decision from New York State Court of Appeals June 4, 2013

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=================================================================Thi s opi ni on i s uncor r ect ed and subj ect t o r evi si on bef or epubl i cat i on i n the New Yor k Repor t s.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -No. 87J ames Square Associ at es LP, etal . ,

Respondent s,v.

Denni s Mul l en, Commi ss i oner NewYor k St at e Depar t ment of Economi c

Devel opment , et al . ,Appel l ant s.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -No. 88I n t he Mat t er of J - P Gr oup, LLC,

Respondent ,v.

New Yor k St at e Depar t ment ofEconomi c Devel opment , et al . ,

Appel l ant s,et al . ,

Respondent .- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

No. 89I n t he Mat t er of Mor r i s Bui l der s,LP, et al . ,

Respondent s,v.

Empi r e Zone Desi gnat i on Boar d etal . ,

Appel l ant s.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -No. 90I n the Mat t er of HagueCor por at i on,

Respondent ,

v.Empi r e Zone Desi gnat i on Boar d, etal . ,

Appel l ant s.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -No. 91

I n t he Mat t er of WL, LLC,

Respondent - Appel l ant ,

v.

Depar t ment of Economi c

Devel opment , Al so Known as Empi r e


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St at e Devel opment , et al . ,

Appel l ant s- Respondent s.

Case No. 87:Andr ew D. Bi ng, f or appel l ant s.

J onathan B. Fel l ows, f or r espondent s.

Case No. 88:

Andr ew D. Bi ng, f or appel l ant s.

J enni f er C. Per si co, f or r espondent .

Case No. 89:


Phi l i p M. Hal per n, f or r espondent s.

Case No. 90:


Mi chel l e L. Mer ol a, f or r espondent .

Case No. 91:

Rober t K. Wei l er , f or r espondent - appel l ant .

Andr ew D. Bi ng, f or appel l ant s- r espondent s.

LI PPMAN, Chi ef J udge:

The common quest i on present ed by t hese appeal s i s

whet her t he ret r oact i ve appl i cat i on of t he 2009 Amendment s t o t he

Empi r e Zones Pr ogr am compl i es wi t h t he Due Process Cl ause of t he

Fi f t h Amendment . Eval uat i ng t hese cases under t he bal anci ng t est

of Mat t er of Repl an Dev. v Depar t ment of Hous. Preser v. & Dev. of

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Ci t y of N. Y. ( 70 NY2d 451, 456 [1987] ) , we concl ude t hat t he

r et r oact i ve appl i cat i on of t he 2009 Amendment s vi ol ated

pl ai nt i f f s ' due pr ocess r i ght s and af f i r m on sl i ght l y di f f er entgr ounds f r om t hose i nvoked by t he Appel l at e Di vi si on.

I . FACTS and PROCEDURAL HI STORY

A. The Empi r e Zones Pr ogr am

I n 1986, t he l egi sl at ur e enact ed New Yor k St at e' s

Economi c Devel opment Zones Act ( t he EDZ Pr ogr am) . The goal of

t he EDZ Progr am was t o st i mul at e pr i vat e i nvest ment , pr i vat e

busi ness devel opment , and j ob cr eat i on i n cer t ai n geogr aphi c

areas character i zed by per si st ent pover t y, hi gh unempl oyment ,

shr i nki ng t ax bases, and dependence on publ i c ass i st ance ( see

Gener al Muni ci pal Law 956) . The EDZ Progr am of f er ed a var i et y

of st at e t ax i ncent i ves desi gned t o at t r act new busi nesses t o t he

st ate and t o enabl e exi st i ng busi nesses t o expand and create more

j obs ( see i d. ) . Over t i me, t he EDZ Pr ogram gr adual l y shi f t ed i t s

f ocus on pover t y reduct i on t o busi ness devel opment by rel axi ng

el i gi bi l i t y requi r ement s, and the name of t he pr ogr am was changed

t o t he Empi r e Zones Progr am Act ( t he Pr ogr am) i n May of 2000

( L 2000, ch 63, Par t GG) . 1

1See al so New Yor k St at e Of f i ce of t he Compt r ol l er ,

Assessi ng t he Empi r e Zones Pr ogr am: Ref or ms Needed to I mprove

Pr ogr am Eval uat i on and Ef f ect i veness ( Apr i l 2004) , avai l abl e atht t p: / / osc. st at e. ny. us/ r epor t s/ empi r ezone3- 2005. pdf( accessed May28, 2013) . The Empi r e Zones Pr ogram i s overseen by t heDepar t ment of Economi c Devel opment and t he Empi r e St at eDevel opment Corporat i on pur suant t o Gener al Muni ci pal Law Ar t i cl e18- B.

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Busi nesses l ocat ed i n qual i f yi ng Empi r e Zone areas and

t hat ot her wi se meet t he st at ut e' s cr i t er i a coul d appl y to t he

Depar t ment of Economi c Devel opment ( DED) f or a Cer t i f i cat e ofEl i gi bi l i t y, whi ch t hey coul d t hen submi t t o t he Tax Depar t ment

i n suppor t of t hei r cl ai m f or t ax cr edi t s ( see Gener al Muni ci pal

Law 959 [ a] ) . Among t he t ax cr edi t s avai l abl e t o qual i f yi ng

busi nesses were t he Empi r e Zone Wage Tax Cr edi t , permi t t i ng

cer t i f i ed Pr ogr am par t i ci pant s t o cl ai m a credi t of $1500 t o

$3000 per new j ob cr eat ed agai nst t hei r New Yor k St at e t ax

l i abi l i t y ( see Tax Law 210 [ 19] ; 606 [ k] ) . Si nce 2000, t he

Pr ogr am has pr ovi ded t hat a company' s cont i nued el i gi bi l i t y f or

Pr ogr am benef i t s r equi r es i t t o meet t he Pr ogr am' s wage,

empl oyment , and i nvest ment goal s, and new t ax cr edi t s and

exempt i ons wer e added f or qual i f i ed Empi r e Zone ent er pr i ses ( see

Bi l l J acket , L 2000, ch 63, Par t GG) . The St at e Compt r ol l er

i ssued t wo repor t s ( one i n 2004 and one i n 2007) not i ng pr obl ems

wi t h ver i f yi ng t hat Pr ogr am par t i ci pant s wer e meet i ng t he j ob

cr eat i on and i nvest ment goal s of t he Pr ogr am.

B. The 2009 Amendment s

On Apr i l 7, 2009, Gover nor Pat er son si gned l egi sl at i on

enact i ng cer t ai n amendments ( t he 2009 Amendments) t o Gener al

Muni ci pal Law 959 ( L 2009, ch 57, Par t S- 1, 3) . The 2009

Amendment s i nt r oduced t wo new cr i t er i a t hat busi nesses must meet

t o r et ai n t hei r Cer t i f i cat es of El i gi bi l i t y f or t he Pr ogr am. The

l egi sl at ur e al so r equi r ed t he Commi ssi oner of Economi c

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Devel opment t o r evi ew al l cer t i f i ed busi nesses dur i ng 2009 t o

det er mi ne i f t hey shoul d be decer t i f i ed under t he new cr i t er i a

and cl osed t he Pr ogr am t o new par t i ci pant s ( Gener al Muni ci pal Law 959 [ w] ) . The i mpet us f or t he 2009 Amendment s was t he

Gover nor ' s Enact ed Budget Fi nanci al Pl an, whi ch st at ed t hat

r ef orms were necessary t o rei n i n abuses i n t he Empi r e Zones

Pr ogr am. The Gover nor proj ect ed t hat t he 2009 Amendment s woul d

pr ovi de savi ngs of $90 mi l l i on i n 2009- 2010 t o the St at e.

The new cr i t er i a i ncl uded deter mi ni ng whether Pr ogram

par t i ci pant s engaged i n a pr act i ce known as " shi r t - changi ng. "

Busi nesses wer e pr event ed f r om r ei ncor por at i ng or t r ansf er r i ng

empl oyees or asset s among rel at ed ent i t i es i n or der t o appear t o

have cr eat ed new j obs or made new i nvest ment s t o maxi mi ze Pr ogr am

benef i t s ( see Gener al Muni ci pal Law 959 [ a] ) . An addi t i onal

cr i t er i on was t hat a par t i ci pant must have "pr ovi de[ d] economi c

r et ur ns t o t he st at e i n t he f or m of t ot al r emuner at i on t o i t s

empl oyees ( i . e. wages and benef i t s) and i nvest ment s i n i t s

f aci l i t y gr eat er i n val ue t o t he t ax benef i t s t he busi ness

ent er pr i se used and had r ef unded t o i t " ( Gener al Muni ci pal Law

959 [ a] [ v] [ 6] ) . Thi s r equi r ement was al so r ef er r ed t o as t he

"1: 1 benef i t - cost s t andar d. " A busi ness t hat f ai l ed t o meet

ei t her st andar d was subj ect t o decer t i f i cat i on.

The 2009 Amendment s wer e t o t ake ef f ect i mmedi at el y,

and sect i on 44 of t he l egi sl at i on sai d t hat t he amendment s t o t he

Tax Law r el at i ng t o t he car r yover of t ax cr edi t s "shal l appl y t o

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t axabl e years begi nni ng on and af t er J anuary 1, 2008" ( L 2009, ch

57, Par t S- 1, 44) . However , t he l egi sl at ur e di d not adopt t he

pr ovi si ons of t he Gover nor ' s 2009 Budget Bi l l t hat provi ded t hatdecer t i f i cat i ons made pur suant t o t he new cr i t er i a and r equi r ed

r evi ew by t he Commi ssi oner woul d be r et r oact i ve t o J anuary 1,

2008. 2 Never t hel ess, bot h t he Commi ssi oner of Economi c

Devel opment and t he Depar t ment of Taxat i on and Fi nance ( DTF)

announced t hat t he 2009 Amendment s appl i ed t o t he t ax year s

begi nni ng on and af t er J anuary 1, 2008.

C. The August 2010 Cl ar i f i cat i on

The l egi sl at ure amended t he st at ut e i n August 2010 t o

st ate t hat t he decer t i f i cat i ons pur suant t o the 2009 Amendment s

wer e ef f ect i ve as of J anuary 1, 2008. The 2010 update st ated,

" I t i s t he i nt ent of t he l egi sl at ur e t o cl ar i f y and conf i r m t hat

t he [ 2009] amendment s . . . are i nt ended t o be ef f ect i ve f or t he

2

The pr oposed l anguage of t he bi l l st at ed:

"Wi t h r espect t o any busi ness ent er pr i sedecer t i f i ed pur suant t o subpar agr aph si x ofpar agr aph ( i i ) of t hi s subdi vi si on, t hatdecer t i f i cat i on ( 1) wi l l be ef f ect i ve f ort axabl e year begi nni ng on or af t er J anuar yf i r st , t wo t housand ei ght and bef or e J anuar yf i r st , t wo t housand ni ne and f or subsequentt axabl e year s f or a busi ness ent er pr i se f orwhi ch a revi ew i s r equi r ed t o be conduct edpur suant t o subdi vi si on ( w) of t hi s sect i on

i n cal endar year t wo t housand ni ne. "

Thi s l anguage di d not appear i n t he l egi sl at i on as ul t i mat el ypassed and si gned by t he Gover nor i n 2009.

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t axabl e year . . . . [ S] uch r evocat i ons of cer t i f i cat i on . . .

are deemed t o be i n ef f ect f or t he t axabl e year commenci ng on or

af t er J anuary 1, 2008 and bef ore J anuary 1, 2009" ( L 2010, ch 57,Par t R, 1) .

D. Pr ocedur al Hi st or y

Pl ai nt i f f s are busi nesses whi ch wer e cer t i f i ed under

t he Pr ogr am and wer e i ssued Cer t i f i cat es of El i gi bi l i t y by t he

St at e pr i or t o 2008. On J une 29, 2009, t he DED i ssued l et t er s t o

each of t he pl ai nt i f f s to not i f y t hem of t hei r decer t i f i cat i on

f r om t he Empi r e Zones Pr ogr am. Each l et t er s t at ed t hat t he

r evocat i on was ef f ect i ve J anuar y 1, 2008, pur suant t o t he 2009

Amendment s. Pl ai nt i f f s wer e decer t i f i ed f or ei t her "shi r t -

changi ng, " f ai l i ng t o meet t he 1: 1 benef i t - cost st andar d, or f or

bot h vi ol at i ons.

I n t he J ames Squar e v Mul l en act i on, pl ai nt i f f s f i l ed

t hei r compl ai nt whi l e t hei r admi ni st r at i ve appeal s wer e pendi ng,

seeki ng a decl ar at i on t hat t he decer t i f i cat i on const i t ut ed an

i mpr oper r et r oact i ve appl i cat i on of t he 2009 Amendment s. Supr eme

Cour t gr ant ed t he J ames Square pl ai nt i f f s' summary j udgment

mot i on and concl uded t hat t he St at e def endant s3 act ed wi t hout

l egal aut hor i t y when t hey appl i ed t he new cr i t er i a f or t he Empi r e

Zones Pr ogr am r et r oact i vel y.

3Def endant s i n t hese f i ve act i ons i ncl ude Denni s Mul l en, t he

Commi ssi oner of t he DED; J ami e Woodar d, Commi ssi oner of t he DTF;t he DED; t he DTF, t he Empi r e St at e Devel opment Corporat i on; andt he Empi r e Zone Desi gnat i on Boar d ( col l ect i vel y, t he St at e) .

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Af t er t he l egi sl at ur e cl ar i f i ed i t s i nt ent i on and

st at ed t hat t he 2009 Amendment s t o t he Empi r e Zone Pr ogr am were

t o be appl i ed ret r oact i vel y t o J anuar y 1, 2008, Supr eme Cour tgr ant ed t he St at e' s mot i on t o renew i t s previ ous mot i on f or

summary j udgment but adhered t o i t s pr i or determi nat i on. The

cour t det er mi ned t hat t he l egi sl at ur e' s "cl ar i f i cat i on" i n f act

al t er ed t he l egi sl at i on and creat ed a per i od of r et r oact i vi t y of

t wo years and ei ght mont hs. The cour t decl ared t hat t he

l egi sl at ur e' s cl ar i f i cat i on as appl i ed was an unconst i t ut i onal

t aki ng of t he J ames Squar e pl ai nt i f f s' pr oper t y.

The Appel l at e Di vi si on af f i r med i n J ames Square ( 91

AD3d 164, 165 [ 4t h Dept 2011] ) . Though t he cour t agr eed t hat t he

l egi sl at ur e made cl ear i t s i nt ent t o make t he Empi r e Zone

Amendment s r et r oact i ve, t he cour t concl uded that t he

r et r oact i vi t y of t he 2009 Amendment s vi ol at ed t he J ames Square

pl ai nt i f f s' due pr ocess r i ght s. The cour t det er mi ned t hat t he

t i me per i od at i ssue, t he l ack of war ni ng t o pl ai nt i f f s, and t he

l ack of l egi t i mat e publ i c pur pose of t he r et r oact i ve appl i cat i on

of t he 2009 Amendment s r ender ed i t unconst i t ut i onal , nul l , and

voi d.

Pl ai nt i f f J - P Gr oup LLC owns and manages commerci al

r ent al pr oper t i es i n Buf f al o and was cer t i f i ed as a qual i f i ed

Empi r e Zone ent er pr i se i n Mar ch 2002. J - P Gr oup' s cer t i f i cat i on

was revoked r et r oact i vel y t o J anuary 2008 on t he gr ound t hat i t

f ai l ed t he 1: 1 benef i t - cost t est . Supr eme Cour t gr ant ed J - P

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Gr oup' s pet i t i on t o annul t he St at e' s decer t i f i cat i on of J - P

Gr oup as a qual i f i ed Empi r e Zone ent er pr i se. The cour t st at ed

t hat t he decer t i f i cat i on of J - P Gr oup was ar bi t r ar y andcapr i ci ous. The Appel l at e Di vi si on modi f i ed, af f i r mi ng onl y t o

t he ext ent t hat i t determi ned t hat t he amendment s t o t he General

Muni ci pal Law 959 ar e pr ospect i ve onl y ( 91 AD3d 1363, 1364 [4t h

Dept 2012] ) . The cour t st at ed, "Al t hough t he Legi sl at ur e

i nt ended that t he subj ect amendment s wer e to appl y ret r oact i vel y,

we have r ecent l y hel d [ i n J ames Square] t hat such ' r et r oacti ve

appl i cat i on . . . vi ol at es [a par t y' s] due pr ocess r i ght s' "

( i d. ) .

Pl ai nt i f f s Mor r i s Bui l der s LP and Mor r i s I ndust r i al

Bui l der s LP ( Mor r i s Bui l der s) r ecei ved t hei r Empi r e Zones Progr am

cer t i f i cat i on i n 2004, and t he cer t i f i cat i on was r evoked

r et r oact i vel y on t he gr ound t hat i t f ai l ed t he 1: 1 benef i t - cost

t est . Pl ai nt i f f Hague Cor por at i on obt ai ned i t s cer t i f i cat i on as

an Empi r e Zone busi ness i n 1995, and i t s cer t i f i cat i on was al so

r evoked f or f ai l i ng t he 1: 1 benef i t - cost t est . I n t wo separ at e

deci si ons, Supr eme Cour t det er mi ned t hat t he ret r oact i ve

appl i cat i on of t he 2009 Amendment s di d not vi ol at e Morr i s

Bui l der s' and Hague' s due pr ocess r i ght s. I n bot h cases, t he

Appel l at e Di vi si on modi f i ed t o t he ext ent of gr ant i ng t he par t of

pl ai nt i f f s' pet i t i ons seeki ng a decl ar at i on t hat t he 2009

Amendment s coul d not be appl i ed ret r oact i vel y t o J anuary 1, 2008

( 96 AD3d 1144, 1147 [ 3d Dept 2012] ; 95 AD3d 1381, 1384- 1385 [ 3d

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Dept 2012] ) .

Pl ai nt i f f WL, a commer ci al r eal est at e company,

obt ai ned cer t i f i cat i on as an Empi r e Zone busi ness on May 9, 2000.On J une 9, 2000, WL acqui r ed commerci al r eal est at e and

i mpr ovement s at 217 Sout h Sal i na St r eet i n Syr acuse, a f aci l i t y

i n an economi cal l y di st r essed downtown area. I n May 2009, WL

r ecei ved an i ni t i al l et t er f r om t he St at e r el ayi ng t hat an

exami nat i on of WL' s busi ness r ecor ds r eveal ed t hat i t

"appear [ ed] " t hat WL di d not meet t he qual i f i cat i ons of cont i nued

cer t i f i cat i on. On J une 29, 2009, WL r ecei ved a l et t er t hat

st at ed WL' s cer t i f i cat i on was r evoked ef f ect i ve on J anuar y 1,

2008. WL appeal ed t o t he Board, and t he Board det ermi ned t hat WL

f ai l ed t o pr ovi de suf f i ci ent evi dence t hat t he Commi ssi oner ' s

f i ndi ng was i n er r or . The Boar d r evoked WL' s cer t i f i cat i on

because i t f ai l ed t he 1: 1 benef i t - cost t est .

WL mai ntai ned t hat i f WL' s year 2000 i nvest ment s were

i ncl uded i n t he St at e' s eval uat i on, i t s benef i t - cost r at i o woul d

be gr eat er t han 4: 1. WL r epor t ed payi ng $1. 6 mi l l i on f or i t s

pur chase of t he bui l di ng i n t he year 2000, and r ecei ved t ax

cr edi t s bet ween 2001 and 2007 amount i ng t o $473, 366. General

Muni ci pal Law 959 ( w) st at es t hat t he DED' s decer t i f i cat i on

r evi ew woul d be based on at l east t hr ee Busi ness Annual Repor t s

( BARs) t hat t he busi ness had pr epared and f i l ed wi t h t he Pr ogr am.

DED had pr omul gated regul at i ons i n 5 NYCRR 11. 9 ( c) ( 2) st at i ng

t hat i t woul d r evi ew t he BARs f r om t he years 2001 t o 2007, and,

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as a r esul t , onl y WL' s cont r i but i ons f r om 2001 t o 2007 wer e

consi der ed i n t he 1: 1 benef i t - cost t est . WL ar gued, bef or e t he

Boar d and i n t he pr esent mat t er , t hat 5 NYCRR 11. 9 ( c) ( 2)conf l i ct s wi t h t he st at ut or y di r ect i ve t o consi der an Empi r e Zone

busi ness' s " t ot al " per f or mance i n t he Pr ogr am.

Supr eme Cour t di smi ssed WL' s pet i t i on seeki ng t o annul

t he Boar d' s det ermi nat i on t o revoke WL' s Empi r e Zone

cer t i f i cat i on. The cour t concl uded t hat t he St at e' s

det er mi nat i on was not arbi t r ary and capr i ci ous and t he St ate was

not r equi r ed by t he Gener al Muni ci pal Law t o consi der

document at i on f r om t he year 2000. The Appel l at e Di vi si on agai n

modi f i ed t o t he ext ent of gr ant i ng t hat par t of t he pet i t i on

seeki ng a decl arat i on t hat t he 2009 Amendment s coul d not be

appl i ed ret r oact i vel y t o J anuary 1, 2008 ( 97 AD3d 24 [ 3d Dept

2012] ) . Addi t i onal l y, t he cour t det er mi ned t hat t he "2009

amendment s do not r equi r e t hat DED exami ne ever y BAR f i l ed by an

ent i t y" and t he Boar d had a rat i onal basi s t o base i t s r evi ew on

WL' s per f ormance dur i ng the 2001- 2007 t i me per i od ( i d. at 29) .

The cour t st at ed, " [ T] he 20012007 t i me f r ame ut i l i zed by DED i n

i t s r evi ew was uni f orml y appl i ed t o more t han 8, 000 compani es,

i ncl udi ng t hose, l i ke [ WL] , t hat had been cer t i f i ed pr i or t o 2001

as par t i ci pant s i n t he EDZP" ( i d. at 30) . The Appel l at e Di vi si on

not ed t hat t he 2009 Amendment s onl y requi r e t he Boar d t o revi ew

t hr ee BARs and so t he Boar d was aut hor i zed t o conduct a l i mi t ed

r evi ew of WL' s BARs.

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The St at e appeal ed as of r i ght pur suant t o CPLR 5601

( b) ( 1) i n al l of t hese cases on t he i ssue of whet her t he 2009

Amendment s can be appl i ed r et r oact i vel y. Thi s Cour t gr ant ed WLl eave t o cr oss- appeal ( 20 NY3d 853 [ 2012] ) . The cr oss appeal

r ai ses t he addi t i onal i ssues of whet her 5 NYCRR 11. 9 ( c) ( 2) can

be har moni zed wi t h General Muni ci pal Law 959 and whet her DED

vi ol at ed WL' s due pr ocess r i ght i n r evoki ng WL' s cer t i f i cat i on.

I I . RETROACTI VE APPLI CATI ON OF THE 2009 AMENDMENTS

"[ F] or cent ur i es our l aw has har bor ed a si ngul ar

di st r ust of r et r oact i ve st at ut es" ( East er n Ent er pr i ses v Apf el ,

524 US 498, 547 [ 1998, Br eyer , J . , di ssent i ng] ) . The Uni t ed

St at es Supr eme Cour t st at ed i n Landgr af v USI Fi l m Pr oduct s t hat

"[ e] l ement ar y consi der at i ons of f ai r ness di ct at e t hat i ndi vi dual s

shoul d have an oppor t uni t y t o know what t he l aw i s and t o conf orm

t hei r conduct accor di ngl y; set t l ed expect at i ons shoul d not be

l i ght l y di sr upt ed" ( 511 US 244, 265 [ 1994] ) . However , t he

r et r oact i vi t y pr ovi si ons of a t ax st at ut e ar e not necessar i l y

unconst i t ut i onal and ar e gener al l y t ol er at ed and consi der ed val i d

i f f or a shor t per i od ( Mat t er of Repl an Dev. v Depar t ment of

Hous. Preser v. & Dev. of Ci t y of N. Y. , 70 NY2d 451, 455 [ 1987] ) .

Thi s i s because t axat i on i s "but a way of appor t i oni ng t he cost

of government among t hose who i n some measure are pr i vi l eged t o

enj oy i t s benef i t s and must bear i t s bur dens" ( Wel ch v Henr y, 305

US 134, 146 [ 1938] ) . The cour t s must exami ne " i n l i ght of ' t he

nat ur e of t he t ax and t he ci r cumst ances i n whi ch i t i s l ai d' ,

- 11 -


13/27

- 12 - No. 87, 88, 89, 90, 91

[ whet her ] t he r et r oact i vi t y of t he l aw i s ' so har sh and

oppr essi ve as t o t r ansgr ess t he const i t ut i onal l i mi t at i on' "

( Repl an, 70 NY2d at 455 [ 1987] [ quot i ng Wel ch v Henr y, 305 US at147] ) . I n Repl an, t hi s Cour t l ai d out a mul t i - f act or bal anci ng-

of - equi t i es t est t o det er mi ne whet her a r et r oact i ve t ax i nf r i nges

on a t axpayer ' s due pr ocess r i ght s ( see 70 NY2d at 456) . The

i mpor t ant f act or s i n det er mi ni ng whet her a ret r oact i ve tax

t r ansgr esses t he const i t ut i onal l i mi t at i on ar e 1) "t he t axpayer ' s

f or ewar ni ng of a change i n t he l egi sl at i on and t he r easonabl eness

of [ ] r el i ance on t he ol d l aw, " 2) "t he l engt h of t he r et r oact i ve

per i od, " and 3) "t he publ i c pur pose f or r et r oact i ve appl i cat i on"

( i d. ) .

The Appel l at e Di vi si on deci si ons bel ow i ncor r ect l y

char act er i ze t he r et r oact i ve appl i cat i on of t he t ax st at ut e her e

as an unconst i t ut i onal t aki ng of pr oper t y. Whi l e t he Fi f t h

Amendment ' s Taki ngs Cl ause i s but one of many const i t ut i onal

pr ovi si ons t hat expr ess pr i nci pl es of ant i r et r oacti vi t y ( see

Landgr af , 511 US at 266; see e. g. Ex Post Fact o Cl ause [ US Const ,

ar t I , 9 ( 3) ; US Const , ar t I , 10 ( 1) ] ; pr ohi bi t i on on t he

i mpai r ment of cont r act s [ US Const , ar t I , 10 ( 1) ] ; pr ohi bi t i on

on Bi l l s of At t ai nder [ US Const , ar t I , 9 ( 3) ; US Const , ar t I ,

10 ( 1) ] ) , pl ai nt i f f s' cl ai ms ar e not val i d Taki ngs Cl ause

chal l enges. The Taki ngs Cl ause pr event s gover nment act ors " f r om

depr i vi ng pr i vat e per sons of vest ed pr oper t y r i ght s except f or a

publ i c use and upon payment of j ust compensat i on" ( Landgr af , 511

- 12 -


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- 13 - No. 87, 88, 89, 90, 91

US at 266; US Const , 5t h Amend) . " [ A] part y chal l engi ng

gover nment al act i on as an unconst i t ut i onal t aki ng bear s a

subst ant i al bur den, " and eval uat i ng whet her an act i on i s a" t aki ng" r equi r es a cour t t o consi der t he "economi c i mpact of t he

r egul at i on, i t s i nt er f er ence wi t h r easonabl e i nvest ment backed

expect at i ons, and the char act er of t he gover nment al act i on"

( East er n Ent er pr i ses, 524 US at 523- 524) .

The pur por t ed t aki ng here i s pl ai nt i f f s' obl i gat i on t o

pay tax t o t he St at e i n t he absence of a val i d t ax cr edi t .

However , " [ t ] he mer e i mposi t i on of an obl i gat i on t o pay money . .

. does not gi ve r i se t o a cl ai m under t he Taki ngs Cl ause of t he

Fi f t h Amendment " ( Ki t t v Uni t ed St at es, 277 F3d 1330, 1336 [ Fed

Ci r 2002] , on r ehear i ng i n part , 288 F3d 1355 [ 2002] [ i nt er nal

quot at i on mar ks and ci t at i on omi t t ed] ) . Feder al cour t s have hel d

t hat "[ f ] or r et r oact i ve t axat i on t o be a t aki ng, i t must be ' so

ar bi t r ar y as t o const r ai n t o t he concl usi on t hat i t was not t he

exer t i on of t axat i on' " ( Ki t t , 277 F3d at 1337 [ quot i ng Br ushaber

v Uni on Paci f i c RR Co. , 240 US 1, 24- 25 [ 1916] ; see Houck v

Li t t l e Ri ver Dr ai nage Di st . , 239 US 254, 265 [ 1915] [ a t ax i s onl y

a t aki ng i f i t i s a "f l agr ant abuse, and by r eason of i t s

ar bi t r ar y char act er i s mer e conf i scat i on of par t i cul ar

pr oper t y"] ) . The r et r oact i ve t ax l i abi l i t y i mposed i n t he

pr esent case cannot be char act er i zed as so f l agr ant as t o

const i t ut e t he conf i scat i on of pr oper t y under t he Taki ngs Cl ause.

Pl ai nt i f f s had no guar ant ee t hat t hey woul d ever r ecoup t hei r

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- 14 - No. 87, 88, 89, 90, 91

busi ness i nvest ment s t hr ough t he r ecei pt of t ax credi t s, and t he

New Yor k Const i t ut i on pr ovi des t hat t ax exempt i ons are f r eel y

r epeal abl e ( NY Const , ar t XVI , 1) .4

The di ssent mai nt ai ns t hat exami ni ng al l r et r oact i ve

t ax st at ut es as pur por t ed t aki ngs of vest ed pr oper t y r i ght s woul d

hel p t o cl ar i f y t hi s ar ea of l aw. The di ssent ' s vi ew

unnecessar i l y compl i cates t he l aw because the t est f or whet her a

r et r oact i ve t ax vi ol at es t he Due Pr ocess Cl ause i s di f f er ent f r om

t he t est f or whet her a r et r oact i ve t ax i s an unconst i t ut i onal

t aki ng. An aggr i eved t axpayer may choose t o make a cl ai m t hat a

r et r oact i ve t ax vi ol at es t he Due Pr ocess Cl ause under t he

st andards i n Uni t ed St ates v Car l t on ( 512 US 26 [ 1994] ) and our

pr ecedent i n Repl an. The f ocus of t he t hr ee- pr onged t est i s

f ai r ness. The t axpayer addi t i onal l y may choose t o chal l enge t he

st at ut e under t he Taki ngs Cl ause, but must r ecogni ze t hat i t i s

mor e di f f i cul t t o pr ove t hat t he t ax amount ed t o " f l agr ant abuse"

and t he sei zure of pr oper t y ( see Houck, 239 US at 265) . The

Supr eme Cour t has r ecogni zed t hat i t i s mor e di f f i cul t t o make

out vi ol at i ons of t he Taki ngs Cl ause t han a vi ol at i on of t he Due

Pr ocess Cl ause ( see Concr et e Pi pe & Pr oduct s of Cal . , I nc. v

Const r uct i on Labor er s Pensi on Tr ust f or Sout her n Cal . , 508 US

602, 641 [ 1993] ) . The Taki ngs Cl ause j ur i spr udence t her ef or e

does not cl ar i f y t he due pr ocess i nqui r y i n Repl an; i t i s a

4 Mor eover , pl ai nt i f f s do not ar gue t hat t hei r pr ospect i vedecer t i f i cat i on f r om t he Empi r e Zones Pr ogr am const i t ut eunconst i t ut i onal t aki ngs.

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- 15 - No. 87, 88, 89, 90, 91

di f f er ent quest i on al t oget her .

We now t ur n t o that ot her quest i on: whet her pl ai nt i f f s'

due pr ocess r i ght s wer e i nf r i nged by t he st at ut e ut i l i zi ng t het hr ee f act or s ar t i cul at ed i n Repl an. I n t er ms of "t he t axpayer ' s

f or ewar ni ng of a change i n t he l egi sl at i on and t he r easonabl eness

of hi s r el i ance on t he ol d l aw" ( Repl an, 70 NY2d at 456) , t he

pl ai nt i f f s had no war ni ng and no oppor t uni t y at anyt i me i n 2008

t o al t er t hei r behavi or i n ant i ci pat i on of t he i mpact of t he 2009

Amendment s. The 2009 Amendment s wer e not i nt r oduced i n t he

l egi sl atur e unt i l J anuary 2009. Though t he 2004 and 2007 r eport s

f r om t he Compt r ol l er poi nt ed out weaknesses i n t he Empi r e Zones

Pr ogr am, i t di d not spel l out t he new cr i t er i a on shi r t - changi ng

and 1: 1 benef i t - cost cal cul at i ons t o be i mpl ement ed f or exi st i ng

Pr ogr am par t i ci pant s i n 2009. The t axpayer ' s i nsuf f i ci ent

r el i ance i n Uni t ed St at es v Car l t on can be cont r ast ed because t he

r et r oact i ve ef f ect of t he t ax deduct i on was t o cor r ect an er r or

made by Congr ess t hat cr eat ed a "si gni f i cant and unant i ci pat ed

r evenue l oss" ( 512 US at 31- 32 [ " I t seems cl ear t hat Congr ess di d

not cont empl at e such br oad appl i cabi l i t y of t he deduct i on when i t

or i gi nal l y adopt ed 2057"] ) . I n cont r ast , t he 2009 Amendment s

wer e not meant t o cur e an uni nt ended er r or by t he l egi sl atur e.

The mai n pur pose of t he 2009 Amendments was t o i ncr ease t ax

r ecei pt s f or t he St at e budget . Pl ai nt i f f s appear ed t o have

conduct ed t hei r busi ness af f ai r s i n a manner consi st ent wi t h

exi st i ng Pr ogr am r equi r ement s i n 2008, j ust i f i abl y r el yi ng on t he

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17/27

- 16 - No. 87, 88, 89, 90, 91

r ecei pt of t he t ax benef i t s t hat wer e t hen i n ef f ect . Ther ef or e,

t he f i r st Repl an f actor wei ghs i n f avor of pl ai nt i f f s.

The second f act or , t he l engt h of t he per i od ofr et r oact i vi t y, al so benef i t s pl ai nt i f f s. The par t i es di sput e,

and i ndeed t he Thi r d and Four t h Depar t ment di sagr eed, as t o

whet her t he per i od of r et r oact i vi t y spans 16 or 32 mont hs.

Pl ai nt i f f s ar gue t hat t he actual per i od of r et r oacti ve

appl i cat i on f or t he 2009 Amendment s shoul d not be measur ed f r om

J anuar y 2008 t o Apr i l 2009, but f r om J anuar y 2008 t o August 2010,

a t ot al of 32 mont hs. Pl ai nt i f f s cont end t hat t he August 2010

l egi sl at i on was not a "cl ar i f i cat i on" as st at ed by t he

l egi sl at ur e but a subst ant i ve act of l egi sl at i on. The St at e

ar gues t hat t he per i od of r et r oact i vi t y shoul d be measur ed f r om

J anuar y 2008 t o Apr i l 2009 f or a per i od of 16 mont hs. Whi l e t he

l anguage of t he August 2010 bi l l suppor t s t he vi ew t hat t he

l egi sl at ur e' s 2010 acti on was si mpl y a cl ar i f i cat i on of i t s

pr evi ous i nt ent , t he l egi sl at ur e' s over t omi ssi on of

r et r oact i vi t y l anguage i n t he 2009 Amendment s i s i ndi cat i ve t hat

August 2010 was t he f i r st t i me t he l egi sl atur e made t he Progr am

cr i t er i a ret roact i ve.

Regar dl ess of whet her t he per i od of r et r oact i vi t y i s

deemed t o span 16 or 32 mont hs, t he l engt h of r et r oact i vi t y

shoul d be consi der ed excessi ve and wei ghs agai nst t he St ate.

Whi l e one year of r et r oact i vi t y i s not consi der ed excessi ve

accor di ng to Repl an, t he per i od of r et r oact i vi t y was l ong enough

- 16 -


18/27

- 17 - No. 87, 88, 89, 90, 91

i n t he pr esent case so t hat pl ai nt i f f s gai ned a r easonabl e

expect at i on t hat t hey woul d " secur e repose" i n t he exi st i ng t ax

scheme ( Repl an, 70 NY2d at 456 [ i nt ernal quot at i on marksomi t t ed] ) . Whi l e t he St at e poi nt s t o var i ous f eder al and st at e

cases wher e t ax l aws wi t h l onger per i ods of r et r oact i vi t y wer e

uphel d, many of t he cases concer ned curat i ve measures by

l egi sl at ur es t o cor r ect er r or s, i nst ances wher e l ogi st i cal i ssues

made r et r oact i vi t y necessary ( e. g. Wel ch v Henr y, 305 US 134,

144- 149 [ 1938] [ r et r oact i vi t y per i od of t wo year s uphel d wher e

Wi sconsi n Legi sl atur e onl y met ever y t wo years and acted at i t s

f i r st oppor t uni t y] ) , or t he l ack of det r i ment al r el i ance by t he

t axpayer s ( e. g. Mat t er of Var r i ngt on Cor p. v Ci t y of N. Y. Dept .

of Fi n. , 85 NY2d 28, 33 [ 1995] [ t wo- year per i od of r et r oact i vi t y

uphel d wher e t axpayer di d not det r i ment al l y r el y on the

t empor ar i l y al t er ed t ax pol i cy] ) . As none of t hese poi nt s i s

pr esent her e, t he cases ci t ed by the St at e ar e di st i ngui shabl e.

On t he t hi r d f actor, di sposi t i ve i n t hi s case, t he

St at e f ai l s t o set f or t h a val i d publ i c pur pose f or t he

r et r oact i ve appl i cat i on of t he 2009 Amendment s. The l egi sl at ur e

di d not have an i mpor t ant publ i c pur pose t o make t he l aw

r et r oact i ve. I t was not at t empt i ng t o cor r ect an er r or i n t he

t ax code as i n Car l t on, or t o pr event t he "t he l oss of [ Si ngl e

Room Occupancy] housi ng and t o di scour age t he pr eci pi t ous

evi ct i on of t enant s" as i n Repl an ( 70 NY2d at 457) . The Empi r e

Zones Progr am' s cost t o the St at e budget i n 2008- 2009 was not an

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20/27

- 19 - No. 87, 88, 89, 90, 91

Busi ness Annual Repor t s f i l ed bet ween 2001 and 2007 f or

decer t i f i cat i on pur poses, i s i nconsi st ent wi t h t he wor di ng of t he

st at ut e. We concl ude t hat DED' s r egul at i on does not conf l i ctwi t h t he st at ut or y di r ect i ve i n Gener al Muni ci pal Law 959 t o

consi der an Empi r e Zone busi ness' s "t otal " per f ormance. Gener al

Muni ci pal Law 959 ( a) ( v) ( 6) pr ovi des t hat one of t he cr i t er i a

f or decer t i f i cat i on i s t hat "t he busi ness ent er pr i se has f ai l ed

t o pr ovi de economi c ret ur ns t o t he st at e i n t he f or m of t ot al

r emuner at i on t o i t s empl oyees ( i . e. wages and benef i t s) and

i nvest ment s i n i t s f aci l i t y gr eat er i n val ue t o t he t ax benef i t s

t he busi ness ent er pr i se used and had r ef unded t o i t . " Fi r st of

al l , t he wor d " t ot al " can be r ead t o modi f y " r emuner at i on t o i t s

empl oyees. " The l egi sl at ur e pr ovi ded what " t ot al r emuner at i on"

t o empl oyees i s, by l i st i ng "wages and benef i t s. " Addi t i onal l y,

sect i on 959 ( w) pr ovi des t hat t he Commi ssi oner may base

decer t i f i cat i on on a r evi ew of at l east t hr ee BARs. Whi l e i t i s

arguabl e whether t hi s r equi r ement was meant t o pr event busi nesses

oper at i ng f or f ewer t han t hr ee year s f r om bei ng decer t i f i ed, t he

st at ut e di d not speci f i cal l y r equi r e t hat t he DED l ook at al l

avai l abl e BARs i n maki ng a decer t i f i cat i on deci si on under t he 1: 1

benef i t - cost t est . The r esponsi bl e agency, DED, gave t he

ambi guous s t at ut e a r at i onal i nt er pr et at i on t hat was not

i nconsi st ent wi t h t he pl ai n l anguage ( see Mat t er of Br own v Wi ng,

93 NY2d 517, 524 [ 1999] [ det er mi ni ng t hat i t i s " pr oper t o ut i l i ze

a rat i onal i nt er pr et at i on by t he agency r esponsi bl e f or

- 19 -


21/27

- 20 - No. 87, 88, 89, 90, 91

admi ni st er i ng t he st at ut e"] ) .

Mor eover , i t i s unl i kel y t hat t he l egi sl at ur e woul d

r equi r e t he DED t o l ook at ever y Busi ness Annual Report f or ever ybusi ness i n t he Pr ogr am f or ever y year of par t i ci pat i on. Some of

t he Pr ogr am busi nesses have been cer t i f i ed si nce 1986, and t he

r equi r ement s and benef i t s of t he Progr am have changed over t i me.

Not abl y, t he Empi r e Zones Progr am changed i t s name i n 2000 and

i mpl ement ed new r equi r ement s f or busi nesses t o pass empl oyment

t est s t o qual i f y f or new credi t s and benef i t s. Because of t he

shi f t i n r equi r ement s and benef i t s and t he passage of t i me, i t

was pr act i cal f or r emuner at i on and busi ness i nvest ment s t o be

cal cul at ed f r om t he st ar t of t he Empi r e Zones Progr am onwar ds.

Though i t may have been mor e preci se t o st ar t r ecogni zi ng

i nvest ment s made on or af t er May 16, 2000, t he i ncept i on dat e of

t he Pr ogr am, i t was not ar bi t r ar y and capr i ci ous f or t he DED t o

choose t o commence recogni t i on of i nvest ment s as of J anuary 1,

2001 ( t he begi nni ng of t he f i r st f ul l year of t he Pr ogr am) . The

Busi ness Annual Repor t s det ai l t he busi ness i nvest ment s and wages

pai d per cal endar year and do not break down remunerat i on or

i nvest ment s on a mont h- t o- mont h basi s. I t woul d have been

di f f i cul t f or t he DED t o col l ect i nf or mat i on r egar di ng

i nvest ment s and wages f or onl y a por t i on of t he year 2000.

Ther ef or e, t he DED coul d r at i onal l y deci de t o t al l y i nvest ments

begi nni ng i n 2001, and i t s decer t i f i cat i on of WL was not

ar bi t r ar y and capr i ci ous.

- 20 -


22/27

- 21 - No. 87, 88, 89, 90, 91

Accor di ngl y, i n each of t he f i r st f our above- capt i oned

cases, t he or der of t he Appel l at e Di vi si on, i nsof ar as appeal ed

f r om, shoul d be af f i r med, wi t h cost s, and i n WL, LLC v Dept . ofEcon. Dev. t he or der of t he Appel l at e Di vi si on shoul d be

af f i r med, wi t hout cost s.

- 21 -


23/27

J ames Square Associ at es LP, et al . v Denni s Mul l en, Commi ssi oner ,New York Stat e Depar t ment of Economi c Devel opment , et al .

Mat t er of J - P Gr oup, LLC v New Yor k St at e Depar t ment of Economi cDevel opment , et al .

Mat t er of Mor r i s Bui l der s, LP, et al . v Empi r e Zone Desi gnat i onBoar d, et al .

Mat t er of Hague Corporat i on v Empi r e Zone Desi gnat i on Boar d, etal .

Mat t er of WL, LLC v Depar t ment of Economi c Devel opment , et al .

SMI TH, J . ( di ssent i ng i n par t ) :

I di ssent t o t he ext ent t hat t he maj or i t y hol ds t he

r et r oact i ve appl i cat i on of t he 2009 Amendment s unconst i t ut i onal .

The quest i on of when a t ax st at ut e may be made

r et r oact i ve i s one on whi ch t he deci ded cases pr ovi de

f r ustr at i ngl y l i t t l e gui dance. I t i s cl ear t hat some

r et r oact i vi t y i s al l owed, but not t oo much. I f we ask how much

i s t oo much, we ar e t ol d t o consi der whet her " r et r oact i ve

appl i cat i on i s so har sh and oppr essi ve as t o t r ansgr ess t he

const i t ut i onal l i mi t at i on" ( Wel ch v Henr y, 305 US 134, 147

[ 1938] ) - - gui dance har dl y more usef ul t han bei ng t ol d t o deci de

whet her t he St ate or t he t axpayer wi ns t he case. Uni t ed St ates v

Car l t on ( 512 US 26, 30 [ 1994] ) says t hat t he Wel ch f ormul at i on

"' does not di f f er f r om t he pr ohi bi t i on agai nst ar bi t r ar y and

- 1 -


24/27

- 2 - Nos. 87- 91

i r r at i onal l egi sl at i on' t hat appl i es gener al l y t o enactment s i n

t he spher e of economi c pol i cy" ( quot i ng Pensi on Benef i t Guar ant y

Corp. v R. A. Gr ay & Co. , 467 US 717, 733 [ 1984] ) . Car l t on al so

says: "Tax l egi sl at i on i s not a pr omi se, and a taxpayer has no

vest ed r i ght i n t he I nt er nal Revenue Code" ( 512 US at 33) . Yet

t he Car l t on opi ni on i t sel f exami nes a r et r oact i ve t ax st at ut e

more mi nut el y t han t he l anguage I have quot ed woul d seem t o

suggest , st r essi ng t he beni gn mot i ve of Congr ess ( i d. at 32) and

t he pr ompt ness wi t h whi ch Congr ess acted ( i d. at 32- 33) . Mat t er

of Repl an Dev. v Depart ment of Hous. Preserv. & Dev. of Ci t y of

N. Y. ( 70 NY2d 451, 456 [ 1987] ) est abl i shes a bal anci ng t est and

l i st s t he f act or s t o be consi der ed, chi ef among whi ch ar e " t he

t axpayer ' s f or ewar ni ng of a change . . . and t he reasonabl eness

of hi s r el i ance, " but i t i s no mor e pr eci se t han ot her

aut hor i t i es i n st at i ng t he quest i on t hat t he bal anci ng i s

supposed to answer .

I do not have a f or mul a f or br i ngi ng gr eat cl ar i t y and

cer t ai nt y t o t hi s ar ea. But I t hi nk t he maj or i t y creat es mor e

conf usi on by sayi ng, i n subst ance, t hat t he "proper t y" t hat i s

pr ot ect ed by t he Due Pr ocess Cl ause i s di f f er ent f r om t he

pr oper t y r i ght s pr ot ect ed by ot her cl auses of t he Const i t ut i on

( maj or i t y op at 12- 13) . I woul d appr oach r et r oact i ve t axat i on

cases i n t he opposi t e way: I t hi nk i t i s hel pf ul , and consi st ent

wi t h pr ecedent , t o ask whet her i t was reasonabl e f or t he t axpayer

t o rel y on f avor abl e t ax t r eat ment as i t mi ght r el y on a pr oper t y

- 2 -


25/27

- 3 - Nos. 87- 91

or cont r act r i ght pr ot ect ed under t he Taki ngs Cl ause or t he

Cont r act Cl ause of t he Const i t ut i on. Thi s, i t seems t o me, i s

t he i dea suggest ed by t he t r adi t i onal t er m "vest ed r i ght " - - a

t er m l ong out of f ashi on ( see Mat t er of Chr ysl er Pr ops. , I nc. v

Mor r i s, 23 NY2d 515, 521 [ 1969] ) , but at l east as usef ul as any

of t he t er mi nol ogy used i n l ater cases. The appr oach I suggest

woul d by no means el i mi nat e t he vagueness t hat pervades t hi s area

of t he l aw; nor woul d i t super sede t he Repl an bal anci ng t est .

But I t hi nk i t may hel p t o cl ar i f y t he quest i on we ar e t r yi ng t o

answer when we appl y Repl an.

Rej ect i ng t hi s appr oach, t he maj or i t y seems t o say t hat

t he di f f er ence bet ween a ret r oact i ve t ax st at ut e that i s a t aki ng

and one t hat onl y vi ol at es due pr ocess i s bet ween one that i s so

"arbi t r ar y" as not be "an exer t i on of t axat i on" at al l ( maj or i t y

op at 13, quot i ng Ki t t v Uni t ed St ates, 277 F3d 1330, 1337 [ Fed

Ci r 2002] and Br ushaber v Uni on Pac. RR Co. , 240 US 1, 24- 25

[ 1916] ) , and one t hat i s l ess ar bi t r ar y but st i l l f ai l s the t est

of " f ai r ness" ( maj or i t y op at 14) . The maj or i t y does not say how

cour t s ar e t o di st i ngui sh t he gr eat er unf ai r ness f r om t he l esser

one, nor expl ai n why i t i s usef ul t o do so. Nor does i t expl ai n

how t hi s di st i nct i on squar es wi t h Car l t on' s st at ement , whi ch I

quot ed above ( at 1- 2) t hat onl y "arbi t r ar y and i r r at i onal "

r et r oact i ve t ax l egi sl at i on vi ol at es t he Due Pr ocess Cl ause. I

t hi nk i t i s t he maj or i t y' s appr oach, not mi ne, t hat

"unnecessar i l y compl i cat es t he l aw" ( maj or i t y op at 14) .

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26/27

- 4 - Nos. 87- 91

Appl yi ng t he appr oach I t hi nk cor r ect t o t hi s case, I

cannot see t hat t he t axpayer s wer e j ust i f i ed i n r el yi ng on t hei r

Empi r e Pr ogr am Cer t i f i cat i ons as t hough t hey wer e pr oper t y or

cont r act r i ght s. I n gener al , as Car l t on makes cl ear , t axpayer s

ar e on not i ce t hat t he t ax l aws ar e subj ect t o change. The

bal anci ng of t he Repl an f act or s, as I woul d per f or m i t , f avor s

t he St at e. The l engt h of t he r et r oact i ve per i od, even put t i ng i t

at t hi r t y- t wo mont hs, was not out r ageous; and f or ni net een of

t hose t hi r t y- t wo mont hs - - f r om t he t i me t he Gover nor pr oposed

t he 2009 Amendment s, i n J anuary 2009, unt i l t he r et r oact i ve

l egi sl at i on was enact ed i n August 2010 - - i t was publ i c knowl edge

t hat a change ret r oact i ve t o J anuary 1, 2008 was bei ng sought .

I ndeed, af t er t he 2009 Amendment s were passed i n Apr i l 2009, t he

Gover nor and hi s appoi nt ees openl y st at ed t hei r bel i ef t hat

r et r oact i vi t y had al r eady been accompl i shed; even i f t hey wer e

wr ong, t he ver y debat e on t he subj ect gave t he t axpayers r eason

t o be caut i ous i n r el yi ng on t hei r cer t i f i cat i ons. The r eason

f or t he r et r oact i ve amendment s was, as t he maj or i t y acknowl edges,

t o remedy "weaknesses i n the Empi r e Zones Pr ogr am" ( maj or i t y op

at 15) and "t o st em abuses" i n t hat pr ogr am ( i d. at 17- 18) . The

maj or i t y says t hat t he l egi sl at i on was not desi gned " t o cor r ect

an er r or " ( i d. at 17) - - but t he di st i nct i on bet ween cor r ect i ng

er r or s and st emmi ng abuses i s a t hi n one, i f i t exi st s at al l .

I t i s al so t r ue, of cour se, t he t hat t he l egi sl at i on was desi gned

t o rai se revenues and bal ance t he budget - - but t hat i s what al l

- 4 -


27/27

- 5 - Nos. 87- 91

t axat i on does.

I woul d hol d t hi s l egi sl at i on t o be const i t ut i onal .

* * * * * * * * * * * * * * * * *

For Case Nos. 87, 88, 89 and 90. Or der , i nsof ar as appeal edf r om, af f i r med, wi t h cost s. Opi ni on by Chi ef J udge Li ppman.J udges Gr af f eo, Read, Pi got t and Ri ver a concur . J udge Smi t hdi ssent s i n an opi ni on. J udge Abdus- Sal aam t ook no par t .

For Case No. 91: Or der af f i r med, wi t hout cost s. Opi ni on byChi ef J udge Li ppman. J udges Gr af f eo, Read, Pi got t and Ri ver aconcur . J udge Smi t h di ssent s i n par t i n an opi ni on. J udgeAbdus- Sal aam t ook no part .

Deci ded J une 4, 2013

- 5 -

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Empire Zone decision from New York State Court of Appeals June 4, 2013

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