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Government Affairs Albany Update

June 10, 2005

FOIL Legislation Moves in Senate

Staff Contact: Ken Pokalsky
The Senate has moved a bill (S.5129-A/Flanagan) to the floor (3rd Reading, Calendar # 1440) that would significantly alter the State's Freedom of Information Law as it pertains to trade secrets. Currently, material submitted by a business to a State agency that is determined to be a trade secret is protected against disclosure under FOIL. “Trade secrets” are defined in FOIL as information whose disclosure “would cause substantial injury to the competitive position of the enterprise.” In a change described as “streamlining” the procedure for making trade secret determinations, S.5129-A would impose a limit of “up to one year” on any such “trade secret” determinations. Businesses could apply for a six month extension of such determinations, although the bill is unclear as to whether multiple extensions can be requested. If the business fails to submit a written request for an extension of its trade secret determination within a period starting one month before its expiration, the business would lose its disclosure protection. Business Council member companies have already expressed concerns about the effectiveness of existing FOIL protections against the disclosure of business confidential information submitted to agencies. This concern about unwarranted disclosure of trade secrets is exacerbated as agencies increasingly rely on electronic means to disseminate information, making it less likely that inadvertently released trade secret information can be recovered. This legislation would make existing disclosure protections even more tenuous. If this legislation is of concern to your business, please contact us, and weigh in with your State Senate contacts. This legislation could be “active” on the Senate calendar as early as next Tuesday.

New "Definitional" Issue Arises At Conference On State Taxation

In a topic presentation by the New York State Division of Tax Appeals at last Friday's Conference On State Taxation in Saratoga Springs, a Personal Income Tax scenario embracing 2004-enacted legislation which overrode the Appellate Division's decision in Matter of Donal Meyers (201 AD2d 185, 615 NYS2d 90, lv denied 84 NY2d 810, 621 NYS 2d 519) involving prepayment hearing rights was discussed.

A married couple - both New York residents, but, only one a New York City resident - filed a joint Personal Income Tax return with the State Department of Taxation & Finance; in their computation of their New York City tax liability, the couple calculated the tax using the income of only the New York City spouse.

The couple's entry on the New York City tax liability line on their tax return was interpreted as a mathematical error and the Department issued a Notice and Demand (demand for payment of tax already assessed).

Part F of Chapter 60 of the Laws of 2004 removed a taxpayer's prepayment hearing rights in cases, among others, where tax, interest, and/or penalty is owed due to mathematical or clerical error.

The couple's petition to the Division of Tax Appeals is being contested as outside the jurisdiction of the Division of Tax Appeals on the grounds that prepayment hearing rights no longer exist in a case of mathematical error since December 1, 2004 (the effective date of Part F of Chapter 60).

If the couple's petition is dismissed on jurisdictional grounds, it would require the couple - and others similarly situated - to pay the full demanded tax liability, including interest and/or penalty, first and then file a claim for refund; and, if the Department of Taxation & Finance denies the refund claim, the couple may then apply for a conciliation conference in the Bureau of Conciliation and Mediation Services or petition for a hearing in the Division of Tax Appeals. Whether the scenario equates to ambiguous tax form design or fits the non-existent definition of a mathematical error needs to be decided.