From Casetext: Smarter Legal Research

Matter of Koner v. Procaccino

Court of Appeals of the State of New York
Apr 1, 1976
39 N.Y.2d 258 (N.Y. 1976)

Opinion

Argued February 10, 1976

Decided April 1, 1976

Appeal from the Appellate Division of the Supreme Court in the Third Judicial Department.

Jed B. Wolkenbreit for appellants.

Louis J. Lefkowitz, Attorney-General (Francis V. Dow and Ruth Kessler Toch of counsel), for respondents. Robert M. Cavallo, amicus curiae.


The respondent Tax Commission has determined that the petitioners, both of whom are self-employed photographers, must pay the unincorporated business tax (Tax Law, art 23). In an article 78 proceeding, brought by the petitioners, the Appellate Division, Third Department, unanimously confirmed this determination, dismissed the petition and denied leave to appeal to our court. The petitioners claimed that they are engaged in a profession and thus should be exempt from the tax pursuant to subdivision (c) of section 703 of the Tax Law. We granted leave to review the point.

In 1969 the petitioners received notices of audit change and tax deficiency from the State Income Tax Bureau. In Koner's case the bureau demanded $2,084.98 in taxes and penalties for 1966 and 1967. In Peterson's case $5,536.53 was sought in taxes and penalties for 1965, 1966 and 1967. Both admitted that they had not filed unincorporated business tax returns for the year indicated but claimed that as free-lance photographers they enjoyed professional status and thus qualified for exemption under subdivision (c) of section 703 of the Tax Law which states: "The practice of law, medicine, dentistry or architecture, and the practice of any other profession in which capital is not a material income producing factor and in which more than eighty per centum of the unincorporated business gross income for the taxable year is derived from personal services actually rendered by the individual * * * shall not be deemed an unincorporated business." (Emphasis added.)

It is conceded that the petitioners meet the "capital" and "80%" requirements and the only contested issue is whether their income was derived from the practice of a profession. In each case a hearing was held which resulted in the following findings of fact on this issue.

The Koner case

"During the years 1966 and 1967, petitioner Marvin Koner's business income was derived from his activities as a free-lance photographer. He specialized in taking photographs to illustrate stories and articles appearing in national magazines. He was retained to take photographs by magazines such as Playboy, Fortune, Redbook, Esquire Pageant, and Infinity.

"Petitioner, Marvin Koner, received a B.A. degree in Biology from Alfred University in 1941. He attended Air Force schools in photography, photo intelligence and aerial photography while serving in the Air Force between 1943 and 1946. He attended the Germain School of Photography in 1947. He also attended seminars for talented photographers in New York City conducted by Alex Brodevitch. He lectured on photography at numerous universities and photography clubs. He wrote several articles for publications in the field of photography."

The Peterson case

"During the years 1965, 1966 and 1967, petitioner Gosta Peterson's business income was derived from his activities as a free-lance photographer. Approximately 20% of his income during said years was received in connection with photographs taken for commercial advertising and promotional purposes. He concedes that this portion of his income was subject to the unincorporated business tax. The balance of his income for said years was derived from editorial fashion photography. He was retained principally by Conde Nast Publications and the New York Times to take photographs in connection with fashion articles in magazines published by them. The articles and the photographs illustrating said articles were not used to sell or promote the particular items, but rather to express the opinions of the fashion editors. He had the sole discretion to determine how and where to pose and photograph the models used in connection with said articles. All he was given by a magazine was a copy of the text and in most cases the particular garment the magazine wished to use in the article."

In each case the "conclusions of law" were identical, viz., the petitioner's activities during the period in question "although requiring special knowledge and experience, did not constitute the practice of a profession exempt from the imposition of the unincorporated business tax in accordance with the meaning and intent of § 703(c) of the Tax Law." The penalties however were "waived" on the ground that the petitioners "had reasonable cause" for failing to file the returns.

Petitioners then commenced these article 78 proceedings raising two primary issues: (1) the commission erred in finding that they were not professionals within the meaning of subdivision (c) of section 703 of the Tax Law; (2) to exempt certain artists, but not photographers, is a denial of equal protection since all persons similarly situated must be treated equally. Pursuant to CPLR 7804 (subd [g]) these proceedings were transferred to the Appellate Division, Third Department, where they were consolidated for appeal. As indicated the Appellate Division unanimously affirmed the determination.

Initially we find no merit to the alleged denial of equal protection. Although "the States, in the exercise of their taxing power, are subject to the Equal Protection Clause of the Fourteenth Amendment", the Supreme Court has consistently held "that clause imposes no iron rule of equality, prohibiting the flexibility and variety that are appropriate to reasonable schemes of state taxation. The State may impose different specific taxes upon different trades and professions and may vary the rate of excise upon various products." (Allied Stores of Ohio v Bowers, 358 U.S. 522, 526-527; see, also, Lehnhausen v Lake Shore Auto Parts, 410 U.S. 356; Shapiro v City of New York, 32 N.Y.2d 96.)

Similarly the question as to what constitutes a profession within the meaning of the unincorporated business tax statute has been before the courts innumerable times. The guiding principle was set forth in People ex rel. Tower v State Tax Comm. ( 282 N.Y. 407, 412) in which we held that the requirements of a profession are fulfilled for the purposes of the exemption statute, when it is shown that "the service rendered * * * requires knowledge of an advanced type in a given field of science or learning gained by a prolonged course of specialized instruction and study."

Later in Matter of Voorhees v Bates ( 308 N.Y. 184, 189, 190), the first decision from our court "involving one of 'the arts' — painting, sculpture, music, drama, dancing, writing, etc." we expressly applied the same standard in determing the professional status of an orchestra conductor. And recognizing the realities of artistic development, we noted that "advanced formal education does not appear to be a necessary element" (emphasis supplied). The fact that the petitioner, "an orchestral conductor or musical director", had commenced his musical training at the age of five, entered his professional career while still in high school and was conceded by the commission to be "'qualified for what he was doing'", was held to be sufficient to establish his "vocation" as a profession within the meaning of the tax statute. We further held that the exemption applied to money earned as a result of the fact that petitioner had "during 1941, the year in question, rehearsed and conducted the orchestras used on the weekly broadcasts of American Telephone and Telegraph's radio program 'The Telephone Hour' and of DuPont's 'Cavalcade of America'" (Voorhees, supra, p 187).

Several years later in Matter of White v Murphy ( 11 A.D.2d 854) a free-lance "commercial artist" or "commercial illustrator" sought an exemption for money earned by illustrating magazine advertisements for department stores. Confirming the commission's denial of the exemption, the Appellate Division, Third Department, stated: "Upon this record we cannot hold arbitrary or capricious the commission's determination that 'the taxpayer's activities, which consisted entirely of the execution of drawings or illustrations for business or commercial advertising purposes, constituted the carrying on of a taxable unincorporated business rather than the non-taxable practice of a profession within the meaning of Section 386 of the Tax Law.'" We affirmed, without opinion ( 9 N.Y.2d 995).

There is no doubt then that an artist may be a professional within the meaning of the statute. But it does not necessarily follow that all income earned by an artist qualifies for the professional exemption. The final question, in other words, is not whether the taxpayer is an artist, but rather whether the particular activities he is engaged in constitute the "practice of [a] profession" as opposed to a purely commercial or business enterprise. This often becomes a delicate question determined solely by the facts of the particular case. It is, in short, essentially a question of fact to be determined by the commission subject to very limited judicial review.

It is true of course, as we noted in Matter of Good Humor Corp. v McGoldrick ( 289 N.Y. 452, 455) and later in Voorhees (supra, at p 188) that the "determination of what articles or transactions are taxable is a legislative function. It is not the function of an administrative officer to determine where the line shall be drawn which divides the field subject to taxation from the field where no tax has been imposed. * * * Where the facts are not disputed, the question whether a particular article falls within that field is a question of law * * * [and a] 'statute which levies a tax is to be construed most strongly against the government and in favor of the citizen'." But different rules apply where the taxpayer claims the benefit of a statute providing an exemption from taxation. Then the burden of proof shifts to the taxpayer. The statute is construed against the taxpayer and the courts assume a lesser role upon review (Matter of Grace v New York State Tax Comm., 37 N.Y.2d 193).

Here the petitioners claim an exemption from the unincorporated business tax and the Legislature has empowered the commission to make the initial determination (Tax Law, § 689). In such a case "[w]here the question is one of specific application of a broad statutory term in a proceeding in which the agency administering the statute must determine it initially, the court's function is limited." (Matter of Young v Bragalini, 3 N.Y.2d 602, 605; Matter of Mounting Finishing Co. v McGoldrick, 294 N.Y. 104, 108.) If the evidence supporting the commission's determination is negligible or based on a clearly erroneous interpretation of the law or the facts, the determination will be set aside (People ex rel. Maloney v Graves, 289 N.Y. 178, 180; People ex rel. Hull v Graves, 289 N.Y. 173, 177; Matter of Voorhees v Bates, supra, at pp 191, 192). But "if there are facts or reasonable inference to be drawn from the record to support the determinations of the commission, the assessments must be confirmed" (Matter of Young v Bragalini, supra, at p 605; People ex rel. Freeborn Co. v Graves, 257 App. Div. 587; see, also, Matter of Grace, supra).

In Voorhees incidentally there was no real dispute as to the petitioner's professional status. The court was divided solely on the question as to whether the 80% requirement had been met, i.e., whether 80% of the income had been derived from personal services or from the services of musicians and arrangers employed by the petitioner. The majority found that apart from an erroneous tax return there was nothing to indicate that the income was not derived from personal services. However they noted that "[i]f there were evidence to support contrary conclusions, the Tax Commission's determination in this respect would of course be unassailable" (Voorhees, supra, at p 191).

Judged by this standard there was clearly sufficient evidence to support the commission's determination.

The judgment appealed from should be affirmed.


While I agree with the majority that it is for the Tax Commission to make the initial determinations both as to which occupations are properly classified as professional and as to whether a given applicant for the exception is actually practicing the profession for which he is qualified, I do not believe that our review of such administrative determinations is so limited that we cannot recognize error of law or lack of substantial evidence when we see them. In my view, both are present here.

The Tax Commission found that these two petitioners work on a free-lance basis. Each one accepts commissions from magazines for photographic essays illustrative of a general theme selected by the magazine editors. In some instances, the entire "story" is told by the pictures; in others, the photographs complement a writer's text. Neither the text nor the pictures are directed toward the promotion of any specific product; rather, both are directed toward the communication of their creators' ideas or concepts. It was in the face of these findings, that the commission ruled that petitioners were not practicing a profession, rationalizing its decision on the ground that their work was expected to appear in periodicals, which, like most newspapers for example, are owned by publishers who conduct them as private business enterprises.

Certainly, the petitioners, if practitioners of a profession within the scope of the statute, were not ineligible for the exemption because the professional activity to which they devoted themselves produced the means of their support. Nor is there a disqualifying commercial taint because those who pay for the activity that produces the income for an artist are profit-motivated in doing so. If that were so, lawyers and physicians, who are specifically covered by the statute, would be ruled out because they engage in private practice.

In short, the test is not simply whether the activity produces an income or not. It is, rather, whether the professional who creates a manifestation of his own concepts, whether of imagination, or of reality, or of beauty, does so unfettered by restrictions on his judgment placed there by employers or by the need to make a product look commercially appealing (see Matter of White v Murphy, 11 A.D.2d 854, affd 9 N.Y.2d 995; Matter of Voorhees v Bates, 308 N.Y. 184). It is not merely what he does, but how he does it.

The commission has been compelled to recognize that "artists" and, for that matter, "musicians" are professional classifications within the embrace of the "other profession[s]" contemplated by subdivision (c) of section 703 of the Tax Law (20 N.Y.CRR 203.11 [b] [1] [iv]). And the work of a painter, for instance, certainly does not become a commercial product because it is sold to or through a gallery, rather than to an individual, any more than poets and writers are commercial rather than professional persons because they earn their livings from the publication of their work in books or magazines sold for profit by publishers. In the same way, the petitioners' work forms a part of the content of the magazines in which it appears and not a part of the advertising such publications may sell for supplemental revenue (cf. Matter of White v Murphy, supra).

The vital distinction here is thus between the artist and the artisan. It is not dependent on the medium in which the creator works. Creative concepts can be expressed with the help of a variety of implements, be they the brush of a Pablo Picasso, the acetylene torch of an Alexander Calder, the piano of an Artur Rubenstein, or the camera of an Ansel Adams.

Any view, therefore, which confines the definition of an artist to one who paints pictures meets neither the spirit nor the letter of the statute and regulation before us. It ignores completely that photography has for long now taken its place alongside our older art forms and "artistic" photographers alongside "artistic" painters, "artistic" sculptors and "artistic" writers. As the Encylopedia of World Art records: "From the time of World War I, artistic photography has grown in volume and achievements, accompanied by the emergence of new forms and new personalities. The efforts of photographic 'chroniclers' such as Henri Cartier-Bresson, Werner Bischof, Margaret Bourke-White, Dorothea Lange, Walker Evans, Barbara Morgan, Bernice Abbott, and the painter Ben Shahn (q.v.) combined to make photography heir to the historical and anecdotal functions once fulfilled by painting * * * Andreas Feininger, author of the Creative Photographer (1955), believes that 'creative photography' takes on the quality of art according to the photographer's capacity for selection; Otto Steinert maintains that there is an artistic quality inherent in the photographic medium, valid in itself and not in its pictorial content or evocative elements. * * * As was the case with design, advertising, and prefabricated architecture, photography developed and entered into the realm of the arts by merit of technological progress and the intervention of artificial, sometimes mechanical means; however it has been successfully transformed into a valid medium or artistic expression, presenting new and original creations." (Vol XI, pp 316-317 [McGraw-Hill, 1966]; see, also, Flemming, Arts and Ideas [Holt, Rinehart Winston, 1968], pp 504-505; Newhall, History of Photography [produced by the Museum of Modern Art, distributed by Doubleday Co., 1964], p 201.)

See Matter of Teague v Graves ( 261 App. Div. 652, affd 287 N.Y. 549), in which this court recognized as a profession the new field of industrial design, based on the achievements of a single generation of its practitioners plus the approval signified by its inclusion in the curricula of a number of distinguished colleges and universities as a specialized field in which professional degrees are granted. (The petitioner in Teague did not have one of these degrees; having taught himself the profession, he then taught classes at some of these institutions.) If such educational signals of recognition strike some amongst us as important, then it should be noted here that the degree of Masters in Fine Arts in Photography is awarded by such universities as Harvard, Yale, Princeton, and our own State University. This is the same degree awarded to those budding painters, art historians, and musicians who choose to take their apprenticeships within the confines of a traditional college setting.

The evidence indicates that the petitioners are following squarely in the footsteps of the illustrious chroniclers named above. As such, they are fully entitled to the appellation "artist" under the tax regulation in issue here. To deny this to them is tantamount to saying, as indeed the commission in effect said, that no photographers are ever to be regarded as artists.

Accordingly, I would reverse the order of the Appellate Division.

Chief Judge BREITEL and Judges JASEN, GABRIELLI, JONES and COOKE concur with Judge WACHTLER; Judge FUCHSBERG dissents and votes to reverse in a separate opinion.

Judgments affirmed, with costs.


Summaries of

Matter of Koner v. Procaccino

Court of Appeals of the State of New York
Apr 1, 1976
39 N.Y.2d 258 (N.Y. 1976)
Case details for

Matter of Koner v. Procaccino

Case Details

Full title:In the Matter of MARVIN KONER, Appellant, v. MARIO A. PROCACCINO et al.…

Court:Court of Appeals of the State of New York

Date published: Apr 1, 1976

Citations

39 N.Y.2d 258 (N.Y. 1976)
383 N.Y.S.2d 295
347 N.E.2d 658

Citing Cases

Matter of Shmaruk v. State Tax Commission

(Emphasis added.) It is apparent from a reading of the statute and the regulation that the term "other…

Matter of Willett v. Dugan

The substantial evidence issue is controlled by our prior decision involving the same issue, the same…