Horowitz v. New York City Tax Appeals Tribunal

Determination of respondent New York City Tax Appeals Tribunal, dated September 1, 2005, sustaining deficiencies of New York City unincorporated business tax found by respondent Commissioner of Finance of the City of New York as a result of rejecting deductions from City unincorporated business gross income that petitioner, a sole practitioner attorney, took for (1) one half of his federal self-employment tax, (2) the cost of his self-employed health insurance premiums and (3) the contributions to a defined benefit pension plan, confirmed, without costs, the petition denied and the proceeding dismissed. A tax deduction is not a matter of right; rather, it is allowed only as a matter of “legislative grace” (Matter of Grace v New York State Tax Commn., 37 NY2d 193, 197 [1975]; Matter of Royal Indem. Co. v Tax Appeals Trib., 75 NY2d 75, 78 [1989]). Therefore, the taxpayer bears the burden of establishing his or her entitlement to specific tax deductions (see Matter of Colt Indus. v New York City Dept. of Fin., 66 NY2d 466, 471 [1985]; Royal Indem. Co. at 78; Administrative Code of City of NY § 11-529 [e]). Where the taxpayer seeks to exclude items from taxation, “the presumption is in favor of the taxing power” (Matter 102 of Mobil Oil Corp. v Finance Adm’r of City of N.Y., 58 NY2d 95, 99 [1983]). Moreover, the reviewing power of a court is limited “where the question is one of specific application of a broad statutory term in a proceeding in which the agency administering the statute must determine it initially” (NLRB v Hearst Publications, Inc., 322 US 111, 131 [1944]; Matter of American Tel. & Tel. Co. v State Tax Commn., 61 NY2d 393, 400 [1984]; cf. Lorillard Tobacco Co. v Roth, 99 NY2d 316, 323 [2003]). Petitioner has not sustained his burden. The subject payments, although deductible for federal income tax purposes, can be reasonably construed as remuneration for services for petitioner’s benefit, and, as such, are not deductible under Administrative Code of the City of NY § 11-507 (3) (cf. Old Colony Trust Co. v Commissioner, 279 US 716, 729 [1929] [payment of tax by employer was in consideration of services rendered by employee]; Matter of Town of Haverstraw v Newman, 75 AD2d 874 [1980] [health insurance is a form of compensation]; Internal Revenue Code [26 USC] § 401 [d] [contributions to defined benefit plan on behalf of owner-employee may be made only with respect to earned income derived from business with respect to which plan is established]). The Tribunal’s interpretation that the subject payments, although made to third parties, were for services benefitting petitioner, is neither irrational nor unreasonable, and, therefore, should be upheld (see Colt, 66 NY2d at 471). Concur—Andrias, J.P., Marlow, Sweeny and Malone, JJ.