COURT ENJOINS TAX COMMISSION’S REQUIREMENT
THAT OWNER’S PROVIDE AFFIDAVIT
OF NON-AFFILIATION WITH INDICTED INDIVIDUALS
AS A PREREQUISITE TO A MERIT’S REVIEW OF TAX ASSESSMENTS

While expressing sympathy for New York City’s plight in dealing with rank corruption uncovered in the tax assessor’s office, the New York State Supreme Court in Matter of 439 East 88 Owners Corporation v. The Tax Commission of the City of New York 1 preliminarily enjoined the Tax Commission from requiring property owner’s to provide an affidavit of non-affiliation with certain indicted individuals as a prerequisite to a merits review of tax assessment challenges.

On February 25, 2002, the United States Attorney for the Southern District of New York announced the arrests of 18 persons charged in a bribery scheme to reduce real property taxes in the City of New York. The indictment charged that two former New York City tax assessors named Albert Schussler and Alan G. Edelstein systematically gave bribes, on behalf of clients, to 16 then-current City assessors to reduce assessments on Manhattan properties. In response to the indictments, the Tax Commissioner instituted a procedure whereby, as a prerequisite to a merits review of tax assessment challenges, owners were required to provide an affidavit of non-affiliation with Schussler and/or Edeslstein. Specifically, the form (TC-152) required owners to disclose under oath whether they had engaged the services of Schussler or Edeslstein regarding the property’s tax assessment and whether Schussler or Edeslstein, on behalf of said owners, had contacted any members of the tax assessor’s office of the City of New York in connection with the tax assessment of said owner’s properties.

Real property taxes are computed by multiplying the effective mill rate by the amount of a property’s tax assessment. A reduction in the tax assessment will result in lower property taxes. Tax assessments are made by the City’s assessor’s office. Under the New York City Administrative Code, property assessments are subject to administrative review by the Tax Commission. Under the Tax Commission’s new procedure, the failure to complete the form TC-152 resulted in a denial of a merits review of the property’s assessment and confirmation by the Tax Commission of the assessor’s determination. As a result, such property owners were deprived of any further administrative remedy and forced, if they wanted to challenge the assessment, to proceed in court under Article 78 of the Civil Practice Law and Rules.

On or about August 13, 2002, the Tax Commission mailed the petitioner in Matter of 439 East 88 Owners Corporation v. The Tax Commission of the City of New York, a notice that petitioner was eligible for review of its property assessment by the Tax Commission but only if it completed Form TC-152. Thereafter, petitioner elected not to complete Form TC-152 and commenced a proceeding in the Supreme Court seeking the following relief:

The court’s decision came in the context of the petitioner’s motion for a preliminary injunction pursuant to CPLR 6301 restraining the Tax Commission from summarily confirming the owner’s tax assessment because of its refusal to complete form TC-152. In support of its claims for relief, the petitioner made seven distinct arguments, as follows:

1. That the process of requiring completion of form TC-152 as a prerequisite of a merits review was ultra vires the power of the Tax Commissioner;

2. That the process violates the New York City Administrative Procedure Act (“CAPA”) because it was not instituted in compliance with such act;

3. That the process violates the substantive due process guaranteed by the 14th Amendment to the United States Constitution and Article 1, Section 6 of the New York State Constitution because it is arbitrary and capricious;

4. That the process violates the procedural due process guaranteed by the Federal and State Constitutions because it denies petitioner the right to a hearing;

5. That the process violates the separation of powers doctrine because the process is investigatory whereas the Tax Commission is adjudicative;

6. That the process violates the constitutional guarantees of Equal Protection because the Tax Commission is imposing it only on owners of Manhattan properties; and

7. That the process violates constitutional guarantees of the privilege against self-incrimination because information obtained from the affidavit could be used in criminal proceedings against the person compelled to make disclosure.

The City moved, pursuant to CPLR 3211(a)(7) and 7804(f), to dismiss so much of the petition as sought to enjoin the mandated disclosure.

The court noted in making its decision that the City did not deny that an affirmative response to any of the requested disclosure in Form TC-152 would result in summary confirmation of the tax assessment.

In granting the petitioner’s motion for an injunction and denying the City’s motion to dismiss, the court, in a lengthy and well-reasoned decision, agreed with four of seven petitioner’s arguments. First, the court held that the process of requiring the completion of form TC-152 as a precondition of a merits review required information that had no relation to the statutory criteria for reviewing a tax assessment. Such criteria could only be expanded by the legislature and, thus, the process of requiring such disclosure was ultra vires the authority of the Tax Commissioner. Second, the court noted that, as an adjudicatory agency, the Tax Commission was subject to the strictures of CAPA. Since the Tax Commission’s process was not adopted in compliance with CAPA, it was illegally promulgated. Third, the court held that the process was illegal because it deprived the petitioner of a merits review hearing based on guilt by association in violation of its constitutional rights to due process. Finally, the court held that the requirement of the completion of Form TC-152 as a condition of a merits review violated the privilege against self-incrimination. The court noted that owners were entitled to a merits review as a matter of statute and, that to deprive such review based on an owner’s failure to disclose potentially self-incrimination information, violated petitioner’s privilege against self-incrimination.

In making its ruling, the court expressed sympathy for the City’s plight. However, the court did note, in enjoining the implementation of Form TC-152 with respect to the petitioner and similarly situated owners, that the “despicable acts” out of which this case rose “were not done to the City so much as by the City” as it appeared that rank corruption had existed in the City for years, if not decades, whereby former City employees passed bribes to current employees.