The New York Supreme Court, Appellate Division, ruled that a tax exemption that applied to New York special non-profit local development corporations only did not violate the equal protection clause or commerce clause of the US Constitution. New York imposes a mortgage recording tax on each mortgage of real property situated in New York and also provides an exemption from taxing the income and operations of not-for-profit local development corporations incorporated in New York. The taxpayer was a non-for-profit corporation incorporated in New Jersey and sought a declaratory judgment that the exemption only available to New York corporations was unconstitutional. The Supreme Court determined that the taxpayer failed to demonstrate that there was no “rational basis” for the New York Legislature’s determination to limit the availability of the mortgage recording tax exemption only to entities incorporated under New York’s not-for-profit corporation statute concerning local development corporations; that the taxpayer, as a general New Jersey not-for-profit corporation, failed to demonstrate that its exclusion from the tax exemption was based solely on its incorporation in New Jersey and not on its nonconforming business structure; or that there was any discriminatory treatment between it and a New York not-for-profit that did not otherwise meet the requirements of the special non-profit local development corporation rules. Accordingly, the Court reversed the decision of the lower court finding the failure to afford this tax exemption to a New Jersey not-for-profit violated the Equal Protection and Commerce Clause.
Trenton Business Assistance Corporation v. O’Connell, N.Y. App. Div., No. 2018-01203 (2021)