Golden v. Tully

Mahoney, P. J., and Levine, J.,

dissent and vote to confirm the determination and dismiss the petition in the following memorandum by Levine, J. Levine, J. (dissenting). The majority concedes that in disallowing a deduction for petitioners’ expense in moving their residence from New Jersey to New Mexico, respondent correctly applied the provisions of subdivision (b) of section 632 of the Tax Law, since the expense was not “attributable” in either to “the ownership of any interest in * * * property in this state” or to “a business, trade, profession or occupation carried on in this state”. The majority nevertheless invalidates the application of the statute to petitioners’ expenses of moving from one out-of-State residence to another under the privileges and immunities clause of the United States Constitution. The majority’s reasoning appears to be that since moving expenses are not particularly related either to residence or activities within the State, there is no rational basis for allowing the deduction to a New York resident and not to a non-New York resident. Under our reading of Shaffer v Carter (252 US 37) and Travis v Yale & Towne Mfg. Co. (252 US 60), the two landmark United States Supreme Court cases on discriminatory State taxation under the privileges and immunities clause, the majority’s correct determination that petitioners’ moving expenses are not in any way attributable to any New York income-producing source or activity effectively forecloses any constitutional objections to the disallowance of such expenses as a deduction. Shaffer and Travis hold that the quid pro quo of limiting taxation of nonresidents solely to their income from New York-based property or activities is a sufficient constitutional basis for limiting deductions of such nonresidents solely to expenses derived from such New York sources. Indeed, Travis explicitly upheld the very same statutory limitation of deductions to those arising out of New York income-producing activities and property involved here, when, in referring to Shaffer, it held: “That there is no unconstitutional discrimination against citizens of other States in confining the deduction of expenses, losses, etc., in the case of non-resident taxpayers, to such as are connected with income arising from sources within the taxing State, likewise is settled by that decision” (Travis v Yale & Towne Mfg. Co., supra, pp 75-76) (emphasis added). Thus, out-of-State residence, coupled with taxation solely of in-State income of the nonresident, overcomes any privileges and immunities clause objection, even in the “case of occasional or accidental inequality due to circumstances personal to the taxpayer” (id., at p 80). The rough equality of the tax treatment that the Constitution requires comes from the fact that New York residents are taxed on all sources of income, while out-of-Staters are taxed on only their New York sources. Thus, the majority opinion in Austin v New Hampshire (420 US 656) expressed the decisive reason for invalidating the “Commuters Income Tax” as follows: “The overwhelming fact, as the State concedes, is that the tax falls exclusively on the income of nonresidents; and it is not offset even approximately by other taxes imposed upon residents alone” (id., at p 665)(emphasis added). * Whatever confusion existed concerning the validity of disallowance of deductions for personal *1061expenses unrelated to New York income-producing sources such as involved here should have finally been laid to rest by our decision in Matter of Goodwin v State Tax Comm. (286 App Div 694, affd 1 NY2d 680, app dsmd 352 US 805). There, just as here, a New Jersey taxpayer derived all of his income from the practice of law in New York State. In Goodwin, the taxpayer objected not only to the disallowance of his New Jersey real property taxes, as alluded to in the majority’s decision, but also to the disallowance of deductions for interest payments, medical expenses, and life insurance premiums, all of which were properly deductible by New York residents. We held in Goodwin that such disparate treatment was entirely valid because expenses arising out of a taxpayer’s personal activities “must be regarded as having taken place in the State of New Jersey, the State of his residence” (Matter of Goodwin v State Tax Comm., 286 App Div 694, 701, supra). The payment of life insurance premiums, interest charges, and medical expenses, no matter where incurred, by a New York resident are as unrelated to the factor of residence as that of moving expenses. Goodwin does not require us to pick and choose among allowable personal deductions to find some elusive social policy basis related to the factor of residence in order to justify the different tax treatment, as the majority suggests. The majority appears to find decisive the absence of any domestic social policy to justify tax relief for the expenses of moving from New York to another State. However, the moving expense deduction for State residents does not require moving out of the State and would apply to virtually all moves wholly within the State (US Code, tit 26, § 217, subd [c], par [1] [35-mile limitation on- moving expense deduction]). Thus, there still remains no discernible distinction on the basis of social policy between the moving expense personal deduction at issue here and the deductions involved in Goodwin. The only other way to apply the majority’s social policy rationale would be to limit its invalidation of different tax treatment to cases involving interstate moving expenses (where no social policy exists), but not intrastate moving expenses (where a social policy relating to residence may exist). The Constitution does not require such fine tuning in State tax statutes. As stated in Austin v New Hampshire (420 US 656, 661, supra): “In resolving constitutional challenges to state tax measures this Court has made it clear that ‘in taxation, even more than in other fields, legislatures possess the greatest freedom in classification’ ”. For-all of the foregoing reasons, the determination should be confirmed and the petition dismissed.

In this regard, it should be noted that New Jersey, during the taxable year in question, did not impose an income tax on its residents. Allowing them deductions for *1061personal expenses will thus not equalize treatment, but will give many such out-of-State residents a tax advantage over comparable New York residents.