Malkin v. Tully

• Decision Date: 28 December 1978
• Parties: In the Matter of Irving MALKIN, Petitioner, v. James H. TULLY, Jr., et al., Constituting the State Tax Commission, Respondents.
• Court: New York Supreme Court — Appellate Division

Page 186

412 N.Y.S.2d 186

65 A.D.2d 228

In the Matter of Irving MALKIN, Petitioner, v. James H. TULLY, Jr., et al., Constituting the State Tax Commission, Respondents.

Supreme Court, Appellate Division, Third Department.

Dec. 28, 1978.

Arthur Chodosh, New York City, for petitioner.

Louis J. Lefkowitz, Atty. Gen., Albany (Hastings S. Morse, Jr., and Ruth Kessler Toch, Albany, of counsel), for respondents.

Before SWEENEY, J. P., and KANE, STALEY, MAIN and MIKOLL, JJ.

SWEENEY, Justice Presiding.

There is substantial agreement as to the following pertinent facts. In 1969 petitioner became affiliated with two others, Lane and Bartolucci, and formed LBM Lithographers, Inc. (LBM). Petitioner owned 50% Of the stock and a corporation owned by the other two owned the other 50%. Petitioner was the president of LBM. He could sign corporate checks if countersigned by either Lane or Bartolucci. Petitioner, as president, signed the two New York State tax forms for the period covering the assessment in question. Neither form was accompanied by a remittance. Thereafter, respondent made a deficiency assessment of personal income taxes in the sum of approximately $9,000. After a requested hearing the notice of deficiency was sustained. This article 78 proceeding ensued and was subsequently transferred to this court.

Petitioner raises three issues in this proceeding, urging annulment. He maintains that the respondent has failed to show that the notice of deficiency was mailed to him; that he is not a "person" required to collect and pay over withholding taxes due from a corporation, and that he did not "willfully" fail to collect and pay over the taxes due.

The statute provides that a notice of deficiency shall be mailed by certified or registered mail to the taxpayer (Tax Law, § 681, subd. (a)). This issue, however, was not raised before the hearing officer. The only reference to the mailing of the notice of deficiency was petitioner's answer "I honestly don't recall" to a question inquiring whether he had received a letter dated April 3, 1978 (notice of deficiency). As a general rule objections not raised at the hearing or board level may not be raised for the first time in the application for judicial review (see Matter of Consolidated Edison Co. of N. Y. v. State Bd. of Equalization & Assessment, 60 A.D.2d 356, 359, 401 N.Y.S.2d 871, 873). Petitioner's reliance on Matter of MacLean v. Procaccino, 53 A.D.2d 965, 386 N.Y.S.2d 111 is misplaced since in that case there was no administrative hearing and the petitioner was raising the issue at the first opportunity. Consequently, the issue raised here for the first time will not be considered in this proceeding.

As to the second issue, the pertinent statute provides that "(a)ny person required to collect, truthfully account for, and pay over the tax imposed * * *" who wilfully fails to collect or pay over such tax shall be liable to a penalty equal to the amount of the tax evaded (Tax Law, § 685, subd. (g)). Subdivision (n) of the same section defines the term "person" to include, Inter alia, an officer or employee of a corporation who "* * * is under a duty to perform the act in respect of which the violation occurs." Such an issue is a factual one and, while we find no New York case on point, the question has been examined by the Federal courts in considering similar language in section 6671 (subd. (b)) of the Internal Revenue Code (U.S.Code, tit. 26, § 6671, subd. (b)). Factors therein considered important were whether the petitioner signed the tax return (Cushman v. Wood, D.C., 149 F.Supp. 644), derived a substantial part of his income from the corporation (Campbell v. Nixon, D.C., 207 F.Supp. 826), or had the right to hire and fire employees (Koegel v. United States, 437 F.Supp. 176, 181). While no one factor is controlling, all must be considered. In our review we must bear in mind that petitioner has the burden of overcoming the assessment (Matter of Minkin...