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Nassau business penalties an ‘illegal tax,’ judge rules

A state judge ruled Tuesday, Dec. 5, 2017,

A state judge ruled Tuesday, Dec. 5, 2017, that Nassau County assessment fines for commercial property owners failing to file income and expense statements are "unconstitutional." Credit: Newsday / John Paraskevas

A State Supreme Court justice on Tuesday rejected Nassau County’s attempt to collect as much as $36 million in penalties from thousands of commercial property owners for failing to file financial information with the county assessor, saying the fines constituted an “illegal tax.”

The decision could eliminate $5.2 million in anticipated revenue from the county’s already precarious 2018 budget.

It also raises questions about the legality of other charges, such as a $55 traffic ticket surcharge and hefty real estate transaction fees that critics complained would raise more money than the cost of the associated services.

Justice Anthony Marano in Mineola said Nassau had not submitted “scintilla of evidence” that the penalties imposed by the county assessor were intended to pay for assessment operations. Instead, “the bottom line is they are relied on to balance the county’s budget,” he wrote in a 29-page decision.

Marano ruled the assessment fines adopted by the county legislature in December 2013 are “unconstitutional on the grounds that the penalties imposed constitute an illegal tax in view of the manner in which the funds are utilized.”

Some 2,000 commercial property owners challenged the legality of the fines through 11 different law firms early this year after Nassau sent notice of penalties as high as $200,000 for failure to file income and expense statements. Those statements are used by the assessor to develop commercial property values.

Marano’s decision covered 800 commercial property owners represented by tax attorney Donald Leistman. But Leistman said he expected it to apply to anyone who filed a challenge.

“It means the county cannot take any action to enforce the outrageous penalties that they had imposed on commercial properties, totaling in some individual cases, tens of thousands of dollars for what was at best a technical noncompliance,” Leistman said.

County legislators who enacted the fines “just wanted to collect the money and throw it in the budget, so they didn’t have to raise taxes in general,” Leistman said. “That’s illegal and unconstitutional and the judge declared it as such.”

Spokesmen for Republican and Democratic legislators declined to comment.

The court had stayed penalties for litigants but allowed the county to fine property owners who did not go to court, resulting in $800,000 in penalties collected to date. Next year’s county budget includes $5.2 million in revenue from the assessment fines.

County Attorney Carnell Foskey said Nassau will appeal Marano’s ruling and will not refund the fines until the appeal is decided in Appellate Court.

Doug Kellogg, a spokesman for the conservative good-government group Reclaim New York, which has protested excessive fees, reacted to Marano’s decision by saying, “This could be a huge day not only for Nassau taxpayers, homeowners and residents but for all of New York State. It’s never been a question as to whether these kind of fees were illegal. The only question was when the county would be caught.”

Reclaim New York’s executive director, Brandon Muir, is on the board of the nonprofit Government Justice Center, which filed suit against Suffolk in October, challenging $66 million in county fee hikes as “unauthorized taxes.”

Kellogg said, “Now legislators have no way to hide from the fact the fees are illegal and they need to be removed from the Nassau County budget. They also have to be removed from the Suffolk County budget. Using fees to raise revenue is clearly illegal under state law, and it’s time for the counties to have an honest discussion about their budgets.”


A previous version of this story incorrectly said that Reclaim New York is on the board of the Government Justice Center.

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