James Square Associates LP, et al., Respondents,v.Dennis Mullen, Commissioner New York State Department of Economic Development, et al., Appellants.

Brief

N.Y.April 23, 2013

To be argued by: Owen Demuth Time Requested: 20 minutes Court of Appeals of the State of New York JAMES SQUARE ASSOCIATES, LP, MOHAWK GLEN ASSOCIATES, LLC, PIONEER FULTON SHOPPING CENTER, LLC, PIONEER MANAGEMENT GROUP, LLC, AND WATERFRONT ASSOCIATES, LLC, Plaintiffs-Respondents, -AGAINST- DENNIS MULLEN, AS COMMISSIONER OF THE NEW YORK STATE DEPARTMENT OF ECONOMIC DEVELOPMENT, AND JAMIE WOODWARD, AS COMMISSIONER OF THE NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, Defendants-Appellants. BRIEF FOR DEFENDANTS-APPELLANTS BARBARA D. UNDERWOOD Solicitor General ANDREW D. BING Deputy Solicitor General OWEN DEMUTH Assistant Solicitor General of Counsel ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Defendants-Appellants The Capitol Albany, New York 12224 Telephone: (518) 474-6639 Facsimile: (518) 473-8963 OAG No. 09-102711 Dated: March 22, 2012 Reproduced on Recycled Paper i TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES ............................................................................... iii PRELIMINARY STATEMENT............................................................................1 ISSUE PRESENTED............................................................................................2 JURISDICTIONAL STATEMENT ......................................................................3 STATUTORY AND REGULATORY BACKGROUND........................................4 Overview of the Empire Zones Program....................................................4 Compliance With Program Requirements.................................................5 The April 2009 Amendments .....................................................................7 The Review Process Under the April 2009 Amendments.........................9 The August 2010 Amendments ................................................................10 STATEMENT OF THE CASE............................................................................11 A. The Commissioner’s Revocation of Plaintiffs’ Certificates of Eligibility.....................................................................................11 B. This Action ......................................................................................14 C. Supreme Court’s First Decision .....................................................15 D. Supreme Court’s Second Decision..................................................16 E. The Fourth Department’s Decision................................................17 ii Table of Contents (cont’d) PAGE ARGUMENT THE LIMITED RETROACTIVE APPLICATION OF THE APRIL 2009 AMENDMENTS DOES NOT VIOLATE THE DUE PROCESS CLAUSE ........................................................................18 A. Plaintiffs Had Sufficient Forewarning of Amendments to General Municipal Law § 959 ........................................................23 B. The Retroactivity Period Was Not Excessive ................................29 C. The Amendments Serve Valid Public Purposes ............................31 CONCLUSION....................................................................................................35 ADDENDUM......................................................................................................A1 iii TABLE OF AUTHORITIES CASES PAGE Astoria Fed. Savings & Loan Ass’n v. State of New York, 222 A.D.2d 36 (2d Dep’t), appeal dismissed, 88 N.Y.2d 1064 (1996)...............................................................................31 Canisius Coll. v. United States of Am., 799 F.2d 18 (2d Cir. 1986), cert. denied, 481 U.S. 1014 (1987) .................................................................................31 Capital Fin. Corp., Matter of v. Commissioner of Tax. & Fin., 218 A.D.2d 230 (3d Dep’t), appeal dismissed, 88 N.Y.2d 874 (1996), lv. denied, 88 N.Y.2d 811 (1996)....................... 26n Clarendon Trust v. State Tax Commission, 43 N.Y.2d 933 (1978).................................................................................34 Furlong v. Commissioner of Internal Rev., 36 F.3d 25 (7th Cir. 1994)....................................................................28,33 Grace, Matter of v. New York State Tax Comm’n, 37 N.Y.2d 193 (1975).............................................................................. 26n James Square Associates LP v. Mullen, 91 A.D.3d 164 (4th Dep’t 2011) ................................................................17 Lacidem Realty Corp., Matter of v. Graves, 288 N.Y.354 (1942)....................................................................................30 Majewski v. Broadalbin Perth Cent. School Dist., 91 N.Y.2d 577 (1998).............................................................................. 18n Moran Towing Corp., Matter of v. Urbach, 1 A.D.3d 722 (3d Dep’t 2003)................................................................. 29n Neuner, Matter of v. Weyant, 63 A.D.2d 290 (2d Dep’t 1978), appeal dismissed, 48 N.Y.2d 975 (1979)..................................................................... 23-24, 34 iv Table of Authorities (cont’d) CASES PAGE Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984) ...................................................................................20 People v. Brooklyn Garden Apts., 283 N.Y. 373 (1940)...................................................................................25 Replan Dev., Matter of v. Department of Hous. & Preservation of City of N.Y., 70 N.Y.2d 451 (1987).........................................................................passim Rocanova v. United States of Am., 955 F. Supp. 27 (S.D.N.Y. 1996), aff’d, 109 F.3d 127 (2d Cir. 1997), cert. denied, 522 U.S. 821 (1997)..............................................................33 Roosevelt Raceway, Inc., Matter of v. Monaghan, 9 N.Y.2d 293 (1961)...................................................................................24 St. Claire Nation, Matter of v. City of New York, 14 N.Y.3d 452 (2010).............................................................................. 18n Tate & Lyle, Inc. v. Commissioner of Internal Revenue, 87 F.3d 99 (3d Cir. 1996) .................................................................... 30-31 United States v. Carlton, 512 U.S. 26 (1994) .............................................................................passim United States v. Darusmont, 449 U.S. 292 (1981) .......................................................................... 26n, 28 Varrington Corp., Matter of v. City of New York Dept. of Finance, 85 N.Y.2d 28 (1995)................................................................. 20-21, 23, 30 Venable v. Commissioner of Internal Revenue, 2003 WL 21921052 (U.S. Tax Ct. 2003), aff’d, 110 Fed. Appx. 421, 2004 WL 2297334 (5th Cir. 2004)..........................................33 v Table of Authorities (cont’d) CASES PAGE Welch v. Henry, 305 U.S. 134 (1938) .................................................................20, 21, 22, 30 Wiggins v. Commissioner of Internal Rev., 904 F.2d 311 (5th Cir. 1990).................................................................. 26n STATE CONSTITUTION N.Y. Const. art. XVI, § 1 ................................................................................24,25 STATE STATUTES C.P.L.R. 5601(b)(1) ..................................................................................................3 General Municipal Law Article 18-B .................................................................................................4 § 959 ........................................................................................passim § 959(a) ........................................................................................5, 6, 11 § 959(a)(v)(5)................................................................................................8 § 959(a)(v)(6)................................................................................................8 § 959(w) ......................................................................................8, 10, 12 § 960 ................................................................................................10 Tax Law § 210(12-B) ..................................................................................................5 § 210(12-C) ..................................................................................................5 § 210(19) ..................................................................................................5 § 210(20) ..................................................................................................5 § 606(j-1) ..................................................................................................5 § 606(k) ..................................................................................................5 § 606(l) ..................................................................................................5 § 1456(d) ..................................................................................................5 vi § 1456(e) ..................................................................................................5 § 1511(g) ..................................................................................................5 § 1511(h) ..................................................................................................5 Table of Authorities (cont’d) STATE STATUTES (cont’d) PAGE L. 2005, ch. 63, Part A, § 2..................................................................................27 L. 2005, ch. 63, Part A(w), § 2 ..............................................................................6 L. 2009, ch. 57, Part R § 1 ................................................................................................11 § 2 ................................................................................................11 L. 2009, ch. 57, Part S-1 § 3 ..................................................................................................7 § 10 .............................................................................................. 6-7 §§ 11-22 ..................................................................................................8 § 44 ..................................................................................................9 STATE RULES AND REGULATIONS 5 N.Y.C.R.R. § 11.9(c) ..................................................................................................9 § 11.9(c)(1) ..................................................................................................8 § 11.9(c)(2) ..................................................................................................8 MISCELLANEOUS Office of the State Comptroller, Assessing the Empire Zones Program-Reforms Needed to Improve Program Evaluation and Effectiveness, Report 3-2005 (April 2004), available at www.osc.state.ny.us/reports/empirezone3-2005.pdf ...........................4, 32 Office of the State Comptroller-Division of Local Government and School Accountability, The Effectiveness of Empire Zones: Follow-up Report, 2007-MS-2(2007) available at www.osc.state.ny.us/localgov/audits/swr/empirezones.pdf.................6, 32 vii Table of Authorities (cont’d) MISCELLANEOUS (cont’d) PAGE Press Release, Governor Paterson submits legislation creating the Excelsior Jobs Program (June 18, 2010), available at: http://www.governor.ny.gov/archive/paterson/press/06810Excelsior JobsProgram.Html................................................................................7, 32 II Revised Record of the Constitutional Convention of the State of New York (1938)........................................................................................25 PRELIMINARY STATEMENT The Empire Zone Program is a set of legislatively created tax incentives for economic development in certain regions of New York. In April 2009, the Legislature, to rein in long-documented abuses in the Empire Zone Program and to raise immediately much-needed revenue for the 2009-2010 fiscal year, amended the Empire Zone Program statutes. The amendments added two criteria that businesses were required to meet as of January 2008 in order to claim state tax credits available to Program participants for 2008. Plaintiffs are five companies that failed to meet those criteria and thus were decertified from the Program and denied their 2008 tax credits. Plaintiffs brought this action claiming, among other things, that the retroactive revocation of their eligibility for the tax credits denied them due process of law. Supreme Court and the Appellate Division agreed, and the defendants appealed as of right to this Court. This Court should reverse. The Legislature’s limited retroactive denial of the Program tax credits was constitutional and did not violate plaintiffs’ due process rights. Both the Supreme Court of the United States and this Court have repeatedly upheld retroactive tax legislation against due process challenges, and this case fits squarely within the pattern the Courts have approved. In particular, this Court’s analysis in Matter of Replan Dev. v. Department of Hous. & Preservation of City of N.Y., 70 N.Y.2d 451 (1987), 2 demonstrates that the April 2009 amendments are constitutional because (1) plaintiffs were forewarned of the possibility of Program changes and thus could not reasonably rely on the continued availability of the tax credits, (2) the period of retroactivity, slightly more than 15 months, to the beginning of the year before the year of enactment, has been routinely upheld and is not excessive, and (3) the amendments serve two legitimate public purposes by curing abuses of the Program and providing savings for the State and its taxpayers. Accordingly, the limited retroactive effect of the April 2009 amendments satisfies due process because the retroactive effect is supported by legitimate legislative purposes furthered by rational means. This Court should reverse the Fourth Department’s order, and defendants’ motion for summary judgment dismissing the complaint should be granted. ISSUE PRESENTED Whether the limited period of retroactivity of the April 2009 amendments, providing for the revocation of eligibility for Empire Zone Program tax credits for companies that failed to meet certain criteria during 2008, complied with the Due Process Clause. 3 JURISDICTIONAL STATEMENT This Court has jurisdiction of this appeal pursuant to C.P.L.R. 5601(b)(1). This action originated in Supreme Court, Onondaga County, which denied defendants’ motion for summary judgment and declared that the decertification of plaintiffs retroactive to January 1, 2008, was unconstitutional (219, 229).1 The Fourth Department affirmed in an opinion and order, holding that the April 2009 amendments were unconstitutionally retroactive; that order finally determined this action (472-479). Accordingly, the question whether the retroactivity of the April 2009 amendments unconstitutionally denied plaintiffs due process of law is directly involved in this appeal. The issues presented in this appeal are preserved for this Court’s review because, as reflected in the decisions of Supreme Court and the Appellate Division (226-228, 474, 478), and in our briefs filed in those courts, defendants argued in both courts that the April 2009 amendments were constitutional. 1 Numbers in parentheses refer to pages in the Record on Appeal. 4 STATUTORY AND REGULATORY BACKGROUND Overview of the Empire Zones Program An overview of the Empire Zones Program and the April 2009 amendments giving rise to this case demonstrates that, from its inception, the Program has been subject to review and oversight by the Department of Economic Development (“DED”), the Legislature and the Comptroller to ensure that it was accomplishing its goals in a cost-effective manner. New York State adopted the Empire Zones Program in 2000 as a successor to the Economic Development Zones Program to encourage economic development in disadvantaged areas of the State. Benefits available to Program participants included, among other things, tax credits for investment and job creation. See generally Office of the State Comptroller, Assessing the Empire Zones Program- Reforms Needed to Improve Program Evaluation and Effectiveness, Report 3- 2005 (April 2004), available at www.osc.state.ny.us/reports/empirezone3- 2005.pdf. The Commissioner of Economic Development (the “Commissioner”) administers the Program pursuant to General Municipal Law Article 18-B. Businesses that build in qualifying Empire Zone areas and otherwise meet the statute’s criteria may apply to the Commissioner for “Certificates of Eligibility,” which they may then submit to the Tax Department in support of their claim for 5 tax credits. See General Municipal Law § 959(a). Among the tax credits generally available to qualified businesses are the Empire Zone Wage Tax Credit, permitting certified Program participants to claim a credit of $1,500 to $3,000 per new job created against their New York State tax liability. See Tax Law §§ 210(19), 606(k). For the wage tax credit and other tax credits, the Tax Law provided that certified Program participants may carry over unused portions of the credit to the following tax year. See Tax Law § 210(12-B), (12-C), (19), (20); § 606(j-1), (k), (l); § 1456(d), (e); § 1511(g), (h). Compliance With Program Requirements Since its creation in 2000, the Program has provided that a company’s continued eligibility for Program benefits requires it to meet the Program’s wage, employment, and investment goals. Before the Legislature’s enactment of the April 2009 amendments involved here, the Commissioner was authorized to revoke the Program certification of any business that, among other things, made misrepresentations or failed to disclose information in its application for certification, “failed to construct, expand, rehabilitate or operate or invest in its facility substantially in accordance with the representations contained in its application for certification,” or that, for reasons not beyond its control, “failed to create new employment or prevent a loss of employment” in their designated Empire Zone. General Municipal Law § 959(a). The Commissioner was directed 6 to decertify and remove from the Program any business that failed to satisfy these criteria; the decertification would take effect on “the date determined to be the earliest event constituting grounds for revoking certification.” Id. In reports issued in 2004 and 2007, the State Comptroller noted problems with verifying that Program participants were meeting the job creation and investment goals that were the reason for the Program's existence. See id.; see also Office of the State Comptroller-Division of Local Government and School Accountability, The Effectiveness of Empire Zones: Follow-up Report, 2007-MS-2 (2007), available at www.osc.state.ny.us/localgov/audits/swr/empirezones.pdf. In particular, there was growing concern that some firms participating in the Progam had received more in tax benefits than the economic returns they were providing and that some firms were claiming benefits for existing jobs, and counting them as new jobs (173-174). Consequently, in 2005, the Legislature tightened the Program requirements, mandating that companies entering the Program meet a cost- benefit test in order to be certified, but this requirement was not applied to companies already in the Program. See L. 2005, ch. 63, Part A (sub-part W), § 2. And in April 2009, the Legislature adopted the amendments at issue here, which are described below, and made them applicable to all Program participants. Also in 2009, the Legislature closed the Program to new participants. L. 2009, ch. 57, 7 Part S-1, § 10, effective as of June 30, 2010. In 2010, when Governor Paterson proposed legislation to replace the Empire Zones Program with a new economic development incentive, he explained, “[t]he Empire Zone program was continually hampered by abuses, lack of results and skyrocketing costs. Despite annual Empire Zone expenditures in excess of $550 million the State’s returns of investment have been difficult to quantify, and businesses participating in the programs have not been held accountable.” Press Release, Governor Paterson submits legislation creating the Excelsior Jobs Program (June 18, 2010), available at http://www. governor.ny.gov/archive/paterson/press/06810Excelsior JobsProgram.html (“Press Release”). The April 2009 Amendments On April 7, 2009, the Legislature enacted amendments to General Municipal Law § 959, L. 2009, ch. 57, part S-1, § 3, that introduced two new criteria that businesses must meet to retain their certificates of eligibility (53-78, 186-207). The impetus for the amendments was the Governor’s Enacted Budget Financial Plan, which identified a series of revenue-saving actions for the 2009- 2010 fiscal year (174, 185, 367). The Governor’s plan indicated that the new criteria and other reforms were necessary to “rein in long-documented abuses in the Empire Zone program” (185). The Governor projected that the amendments would “provide savings of $90 million in 2009-10” (185). 8 The April 2009 amendments required the Commissioner to verify during 2009 that Program participants met the following criteria: (1) the businesses must not have simply reincorporated or transferred employees or assets among related entities in order to appear have created new jobs or made new investments to maximize Program benefits, a practice known in agency parlance as “shirt-changing,” see General Municipal Law § 959(a)(v)(5); and (2) the businesses must have “provide[d] economic returns to the state . . . greater in value to the tax benefits the business enterprise used and had refunded to it,” also referred to as the “1:1 benefit-cost standard” (64-65). General Municipal Law § 959(a)(v)(6). A business that failed to meet either of these standards would be subject to Program decertification. Id.; see also 5 N.Y.C.R.R. § 11.9(c)(1), (2). The April 2009 amendments also amended twelve separate provisions of the Tax Law regarding Program tax credits. The amendments to each of these statutes was similar, directing that a carryover of the credit from a prior taxable year would not be allowed if the company was not issued a retention certificate pursuant to General Municipal Law § 959(w) (70-71). L. 2009, ch. 57, Part S-1, §§ 11-22. The April 2009 amendments provided that the sections amending General Municipal Law § 959 would “take effect immediately, provided, however,” that the corresponding amendments to the Tax Law “shall apply to 9 taxable years beginning on and after January 1, 2008” (78). L. 2009, ch. 57, Part S-1, § 44. Both the Commissioner and the Department of Taxation and Finance (the “Tax Department”) announced that the amendments to the General Municipal Law regarding revocation of certification applied to tax years beginning on and after January 1, 2008. The Commissioner’s regulations mirror language from the 2009 amendments and provide that “[t]he effective date of decertification . . . shall be January 1, 2008” (109-111). 5 N.Y.C.R.R. § 11.9(c). Additionally, in a Technical Services Bureau Memorandum, the Tax Department advised Program participants that they must “obtain the [Empire Zone] retention certificate to receive any Empire Zone benefits for tax years beginning on or after January 1, 2008” (39). The Tax Department further advised that "when filing a tax return claiming any [Program] credits (including carryovers) for a tax year that begins on or after January 1, 2008, you must attach an Empire Zone retention certificate to your tax return" (39-40). Claims for such credits for this period without an accompanying retention certificate would be denied (39, 38-42). The Review Process Under the April 2009 Amendments The 2009 amendments directed the Commissioner to “[c]onduct a review during [2009] of all business enterprises to determine whether the business enterprises should be decertified pursuant to [General Municipal Law 10 § 959(a)(v)(5) and (6)]” (67-68). General Municipal Law § 959(w). In applying the 1:1 benefit-cost standard criterion, the Commissioner was directed to analyze data “contained in at least three business annual reports [“BARs”] filed by the business enterprise.” Id. Businesses that demonstrated their continuing eligibility under this statute would receive an “empire zone retention certificate”; businesses that did not would be notified that their Program certificates of eligibility would be revoked. Id. The Commissioner was required to provide the company with written notice of the revocation and the reasons for it, together with notice that the company may administratively appeal the revocation to the Empire Zones Designation Board (“Board”). Id. The Board is a different entity from the Commissioner’s office and it finally determines whether or not a company’s certificate of Program eligibility should be revoked. Compare General Municipal Law § 959 with General Municipal Law § 960. The Board is authorized to reverse the Commissioner’s notice of revocation only if the Board unanimously finds that there was sufficient evidence presented that the Commissioner’s decision was in error. See General Municipal Law § 960. The August 2010 Amendments In August 2010, in response to Supreme Court’s first decision in this case, described below, the Legislature amended the Program statutes to confirm that 11 decertifications pursuant to the April 2009 amendments were effective as of January 1, 2008. As relevant here, the August 2010 amendments stated: [i]t is the intent of the legislature to clarify and confirm that the [April 2009] amendments . . . are deemed to be in effect for the taxable year commencing on or after January 1, 2008 and before January 1,2009. (258). See L. 2010, ch. 57, Part R, § 1. The Legislature additionally amended General Municipal Law § 959(a) to provide that “with respect to any business enterprise whose certification has been revoked pursuant to subparagraph five or six of this paragraph . . . revocation . . . will be effective for a taxable year beginning on or after January first, two thousand eight and before January first, two thousand nine and for subsequent taxable years, unless the business enterprise is subsequently re- certified” (260). See id at § 2. STATEMENT OF THE CASE A. The Commissioner’s Revocation of Plaintiffs’ Certificates of Eligibility Plaintiffs are five private companies that were issued certificates of Program eligibility by the Commissioner, effective in 2002 or 2003 (113-117). Plaintiffs’ certificates provide that they “shall continue in effect until terminated 12 by operation of law or by action taken pursuant to such laws, rules and regulations as may be applicable” (id.) As directed by General Municipal Law § 959(w), the Commissioner conducted a review of its Program accounts in 2009 and subsequently decertified plaintiffs for their engagement in “shirt-changing” or their failure to meet the 1:1 benefit-cost standard, or both (119-128, 176). The Commissioner separately notified plaintiffs of the revocation by letters dated June 29, 2009 (id.). The Commissioner’s notification explained to each plaintiff that it was revoking its certificate of eligibility because it had either failed the 1:1 criterion, that is, it had “failed to provide economic returns to the state in the form of total remuneration to its employees (i.e. wages and benefits) and investments greater in value to the tax benefits [plaintiffs] used and had refunded to it,” or it had participated in “shirt-changing” by “caus[ing] individuals to transfer from existing employment with another business enterprise with similar ownership . . . to similar employment,” or “had transferred to it real property previously owned by an entity with similar ownership, regardless of form of incorporation or organization” (id.). The Commissioner’s letters also informed plaintiffs that they “may appeal this determination by sending a written notice of such appeal to [the Board] no later than 15 business days from the date of this Notice of Revocation of 13 Certification” (id.). The letters provided further instructions to plaintiffs regarding how to prosecute the appeal, and cautioned them that if such appeal was not made, the Commissioner’s “revocation determination will be implemented at the end of the 15 business day period noted above,” effective January 1, 2008 (id.). All of the plaintiffs but James Square Associates pursued an administrative appeal to the Board. The Board met on February 2, 2010 to review and consider the administrative appeals (176-178, 442-446). The Board upheld the Commissioner’s revocations and decertified three of the plaintiffs, including James Square Associates, pursuant to Board Resolution No. 1 of 2010 for failing to meet the 1:1 criterion (id.).2 The resolution stated that plaintiffs had “not provided sufficient evidence to demonstrate that the Commissioner’s finding with regard to revocation under [General Municipal Law] § 959(a)(v)(6) 2 The Board subsequently superseded Resolution No. 1 by adopting Resolution No. 3 on March 10, 2010, after plaintiffs had filed their complaint and defendants had moved for summary judgment. Resolution No. 3 mirrored Resolution No. 1 in that it upheld the revocation of the certificates of eligibility of three of the plaintiffs and used identical language. Resolution No. 3 is not included in the Record on Appeal. The Record on Appeal also does not include Resolution No. 17, dated October 15, 2010, which decertified plaintiff Mohawk Glen Associates for failing the 1:1 criterion, and Resolution No. 18, dated October 15, 2010, which decertified plaintiffs Pioneer Fulton Shopping Center, LLC, and Pioneer Management Group, LLC, for failing the shirt-changer criterion. (Pioneer Fulton Shopping Center, LLC, was also decertified at a different location in resolution No. 1 for failing the 1:1 criterion.) Copies of these resolutions, as well as of Resolution No. 3, are attached to this brief as an addendum for the convenience of the Court. 14 was in error and therefore the Commissioner’s determination to revoke the [Program] certification of these firms is upheld” (443). B. This Action While their administrative appeals were pending, plaintiffs brought this action, seeking a declaration that the decertifications constituted an improper retroactive application of the 2009 amendments that was not contemplated by the Legislature (26-37). Plaintiffs primarily argued that the statute is prospective in application because the Legislature’s direction that the amendments take effect “immediately” was insufficient to justify retroactive application (33, 35-36). Plaintiffs further argued that their retroactive decertification was unconstitutional because it effected “a deprivation of property without due process of law,” namely, their right to claim Program tax credits for the 2008 tax year (36). In affidavits attached to the complaint, plaintiffs alleged that they “operated throughout 2008” as eligible businesses and that they “closed out” their books and records for 2008 at the end of that year (160-161, 165, 169). Plaintiffs did not provide any details regarding any investments or employment that they undertook during 2008 in reliance upon their continued certification for that year. Finally, plaintiffs made no argument that they satisfied the eligibility criteria and did not challenge their decertification prospectively from 15 the amendment’s April 7, 2009 enactment date. The parties cross-moved for summary judgment. C. Supreme Court's First Decision Supreme Court (Cherundolo, J.) granted plaintiffs’ motion for summary judgment, denied defendants’ cross-motion, and declared that “the June 29, 2009 decertification of the plaintiffs, to the extent that it was applied by the defendants retroactively to January 1, 2008, was without legal authority and, thus, hereby declared and adjudged to be null and void” (15-16) Basing its ruling on statutory rather then constitutional grounds, the court found that defendants had not met their burden of demonstrating that the 2009 amendments could be applied to the 2008 tax year. The court reasoned that the amendments to General Municipal Law § 959 provided that they would take effect “immediately” and that the legislation limited retroactive application to certain other sections (13-14). Based on this analysis, the court concluded that “the only logical date when §§ 959(a)(v)(5) and 959(a)(v)(6) should have taken effect, was immediately upon the signing of the amendments into law by Governor Patterson [sic], or April 7, 2009” (14). The court did not reach plaintiffs' constitutional arguments. 16 D. Supreme Court's Second Decision Defendants renewed their motion for summary judgment following enactment of the August 2010 amendments (230-236, 258-267). Supreme Court granted defendants’ motion to renew, but denied their renewed motion for summary judgment (218-229). The court rejected defendants’ argument that the August 2010 amendments were merely meant to clarify the reach of the April 2009 amendments (226-227). Instead, the court found that the amendments were substantive in nature because they were intended to supply the retroactive application that the court had found was missing from the April 2009 amendment (id.). The court held that the August 2010 amendments could not constitutionally make the decertifications effective as of January 1, 2008, because the time between that date and the enactment of the 2010 amendments “stripped those businesses, including [plaintiffs], of their Empire Zone tax credits; tax credits that had been worked into their books and figured into their bottom lines and counted on for two years” (227). Accordingly, the court held that this period was “excessively long in its retroactivity and [divested] them of tax credits that were earned during the 2008 tax year and on which they reasonably relied” (225). The court concluded that the August 2010 amendments resulted in “an unconstitutional taking” of plaintiffs’ property (229). 17 E. The Fourth Department’s Decision By opinion and order entered November 18, 2011, the Fourth Department affirmed (471-479). See James Square Associates LP v. Mullen, 91 A.D.3d 164 (4th Dep’t 2011). The court disagreed with Supreme Court that the April 2009 amendments were not meant to be retroactive to January 1, 2008 (476-477). Instead, the court held that the legislative history of the April 2009 amendments and the related Tax Law provisions that were expressly given retroactive effect supported defendants’ construction of the statute (id.). However, the court found that the retroactivity of the April 2009 amendments was unconstitutional (477-479). In the court’s view, the retroactive denial of the Program tax credits for 2008 violated plaintiffs’ due process rights. Citing this Court’s decision in Matter of Replan Development v. Department of Housing Preservation and Development of City of New York, 70 N.Y.2d 451 (1987), the Fourth Department concluded that retroactive application of the April 2009 amendments was unconstitutional because (1) “[t]here is no indication in the record that plaintiffs had any warning that the criteria [for Program certification] were going to change, prospectively or retroactively, prior to April 2009”; (2) plaintiffs “were induced to conduct their businesses in a particular way in specified disadvantaged areas in reliance upon the availability of [Program] tax credits”; and (3) defendants failed to provide a “legitimate 18 public purpose” for retroactive application of the April 2009 amendments (478). Accordingly, the Fourth Department held that “the revocations of plaintiffs’ certifications, to the extent they were made retroactive to January 1, 2008, are null and void” (479). ARGUMENT THE LIMITED RETROACTIVE APPLICATION OF THE APRIL 2009 AMENDMENTS DOES NOT VIOLATE THE DUE PROCESS CLAUSE The Fourth Department erred in holding that the retroactive operation of the April 2009 amendments was unconstitutional.3 The effect of the amendments was to deny companies that did not satisfy the 1:1 and shirt- changer criteria their Program tax credits for the preceding year. This limited 3 Preliminarily, the Fourth Department correctly held that the Legislature intended the April 2009 amendments to be retroactive to January 1, 2008, based on the language of the statute and its legislative history. Legislation is retroactive where “the language expressly or by necessary implication requires it.” Matter of St. Clair Nation v. City of New York, 14 N.Y.3d 452, 457 (2010), quoting Majewski v. Broadalbin Perth Cent. School Dist., 91 N.Y.2d 577, 584 (1998). The Fourth Department’s decision succinctly summarized the reasons supporting its holding that the Legislature intended retroactive application all along (476-477). First, the legislative history demonstrates that the 2009 amendments “were intended, at least in part, to generate revenue during 2009-2010, revenue that would not be generated if those amendments were to be applied prospectively”(476). Second, the 2009 Tax Law amendments affecting carryover Empire Zone credits were linked to the new eligibility criteria, and those Tax Law amendments “were expressly effective retroactive to January 1, 2008”(477). Third, the Legislature acted swiftly in August 2010 to correct Supreme Court’s mistaken first decision in this case holding that the 2009 amendments were not retroactive (477). 19 retroactive denial of the tax credits was constitutional and did not violate plaintiffs’ due process rights. The Supreme Court of the United States has repeatedly upheld retroactive tax legislation against due process challenges. See United States v. Carlton, 512 U.S. 26, 30 (1994) (collecting cases). Carlton upheld a retroactive tax law change, and the decision illustrates the judicial deference accorded to legislative judgments in this area. In that case, Congress retroactively limited eligibility for an estate tax deduction by adding a new requirement 14 months after the deduction was enacted. In the interim, the taxpayer, to qualify for the pre- amendment version of the deduction, had engaged in a stock transaction that cost it over $600,000 but would have allowed the taxpayer to save over $2,500,000 in estate tax. The transaction did not qualify for the deduction under the statute as amended, and Congress made the amended statute effective back to the date of its original enactment, with the result that the taxpayer lost its eligibility for the deduction. The Court found that the retroactive amendment satisfied the requirements of due process. See id. at 32-34. The Court explained that, although some of its precedents had stated that due process prohibits retroactive tax statutes that are “harsh and oppressive,” that standard is the same due process standard applicable to retroactive economic legislation generally, 20 namely, whether “the retroactive application of a statute is supported by a legitimate legislative purpose furthered by rational means.” Id. at 30-31 (quoting Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 729-730 (1984). Applying that standard, the Court observed that the purpose of the amendment, to correct a mistake in the original deduction statute, “was neither illegitimate nor arbitrary.” Id. at 32. In addition, the Court found that the 14 month-period between the enactment of the deduction and its amendment was “only a modest period of retroactivity.” Id. The Court explained, id. at 33, that in Welch v. Henry, 305 U.S. 134 (1938), it had upheld a Wisconsin income tax adopted in 1935 on dividends received in 1933, concluding in Welch that a permissible period of retroactivity included “the receipt of income during the year of the legislative session preceding that of its enactment.” Welch, 305 U.S. at 150 (emphasis added). Finally, the Carlton Court held that neither the taxpayer’s reliance on the deduction as in effect before its amendment (at a cost of over $600,000 in addition to the loss of the deduction) nor the taxpayer’s lack of notice regarding the amendment, established a due process violation. Carlton, 512 U.S. at 33-34. This Court’s decisions are in accord with Carlton and Welch. “Retroactive tax legislation may be treated as valid, unless it reaches so far into the past or so unfairly as to constitute a deprivation of property without due process.” Matter 21 of Varrington Corp. v. City of New York Dept. of Finance, 85 N.Y.2d 28, 32 (1995). Such legislation will be upheld unless its retroactivity is “so harsh and oppressive as to transgress the constitutional limitation.” Replan Dev., Inc. v. Department of Hous. Preservation & Dev. of City of N.Y., 70 N.Y.2d 451, 455 (1987), quoting Welch v. Henry, 305 U.S. 134, 147 (1938). And, as noted above, Carlton confirms that the “harsh and oppressive” standard is simply another way of phrasing due process rational basis review. See Carlton, 512 U.S. at 30- 31. As the Appellate Division recognized (477-478), Replan is this Court’s leading decision regarding retroactive tax amendments. In Replan, this Court upheld the retroactive repeal of a real property tax exemption after the taxpayer, a developer, had incurred significant expenses in reliance on the availability of the exemption. The taxpayer purchased and began to restore two buildings formerly used for single room occupancy (SRO). The taxpayer planned to use the buildings for non-SRO multiple occupancy, and at the time it purchased the buildings and began renovation, a provision of the city code exempted from taxation increases in value resulting from the conversion of a building from SRO to non-SRO multiple occupancy. The city code provided that this program would be in effect until 1984. See Replan, 70 N.Y.2d at 454. Thereafter, pursuant to a repeal of the enabling provision of state law, the city code exemption was 22 repealed, effective retroactively to conversions, including the taxpayer’s, commenced in the year before the repeal. Id. Relying in part on United States Supreme Court decisions including Welch v. Henry, this Court in Replan rejected the taxpayer’s due process challenge to the retroactive repeal of the tax exemption. This Court explained that the determination of whether a retroactively applied tax statute is “harsh and oppressive” requires a balancing of three factors: (1) the taxpayer’s forewarning of a change in the legislation and the reasonableness of his reliance on the old statute “under all the circumstances”; (2) the length of the retroactive period, and (3) the public purpose advanced by the retroactive legislation. Id. at 456 (citation omitted). Applying those factors in Replan, this Court first noted that the taxpayer agreed “that the period of retroactivity - one year - is not excessive” and that the purposes of the retroactive application - to forestall the loss of SRO housing and discourage the eviction of tenants - were valid public purposes. Id. at 457. The Court concluded that the taxpayer could not have justifiably relied on the tax exemption as in effect when it bought the buildings, because the city code provision was subject to changes in the state enabling legislation which authorized the exemption in the first instance. Id. 23 In the present case, the analyses in Replan and Carlton compel the conclusion that the limited retroactive effect of the April 2009 amendments satisfies due process because it is supported by legitimate legislative purposes furthered by rational means and thus is not harsh and oppressive. Replan and Carlton upheld retroactive revocations of tax benefits that taxpayers indisputably relied on to their substantial financial detriment, because, as here, the revocation was reasonably foreseeable, was of limited duration (there, 12 and 14 months, respectively, compared to 15 months here), and was justified by legitimate governmental purposes, which in this case included ensuring that the Program served its intended economic development purposes at a reasonable cost and raising the revenues necessary to address the State’s 2009 budget shortfalls. The Appellate Division misapplied Replan’s three factors and came to the erroneous conclusion that the 2009 amendments were unconstitutional. We demonstrate below that the retroactivity here is well within due process limits. A. Plaintiffs Had Sufficient Forewarning of Amendments to General Municipal Law § 959. The mere fact of plaintiffs’ reliance is not sufficient to establish a constitutional violation, because “[t]ax legislation is not a promise, and a taxpayer has no vested right in the” Tax Law. Carlton, 512 U.S. at 33; see also Matter of Varrington Corp., 85 N.Y.2d at 33 (same); Matter of Neuner v. Weyant, 24 63 A.D.2d 290, 300 (2d Dep’t 1978) (“almost all new laws upset some expectations, and frequently changes are made in the legal consequence of prior conduct”). Plaintiffs could not reasonably rely on the pre-April 2009 version of General Municipal Law § 959 as an assurance that their tax credit eligibility could never be altered, and thus, their expectations as to taxation have not been unreasonably disappointed. Replan, 70 N.Y.2d at 456-57. As an initial matter, it is settled that New York’s constitutional restrictions on tax exemptions preclude taxpayers from claiming any vested right in the continuation of tax credits, exemptions or beneficial rates. Under article XVI, § 1, subject to narrow exceptions not relevant here, “[t]he power of taxation shall never be surrendered, suspended or contracted away” and “[e]xemptions may be altered or repealed.” N.Y. Const., art. XVI, § 1. As this Court held in Matter of Roosevelt Raceway, Inc. v. Monaghan, 9 N.Y.2d 293, 307 (1961), under article XVI, § 1, “the State may not be said to have breached any contract or agreement with Roosevelt to maintain its state tax at the level provided for in 1956 for the reason that no one was empowered to enter into such an agreement on behalf of the State” (emphasis added). Accordingly, the Appellate Division erred (478) in concluding that plaintiffs had a stronger reliance claim here because they “did not merely rely 25 on” existing tax law but were induced by the State’s promises of tax credits to make investments and incur employment expenses in order to participate in the Program, and for that reason the tax credits “‘may not be invalidated by subsequent legislation’” (quoting this Court’s decision in People v. Brooklyn Garden Apts., 283 N.Y. 373, 380 (1940)). As explained above, the New York Constitution adopted in 1938 made tax exemptions freely repealable and thus undermined the reasoning of the decision in Brooklyn Garden Apts., which involved pre-1938 housing tax benefits. See N.Y. Const., Art. XVI, § 1 (adopted Nov. 8, 1938, effective January 1, 1939); see also II Revised Record of the Constitutional Convention of the State of New York 1127 (1938) (citing housing tax exemptions that under pre-1938 law could not be repealed as an example of the law to be reversed by the new provision). More generally, the Appellate Division erred in concluding that plaintiffs had a stronger reliance claim than would have resulted from “merely” relying on the continuing benefit of a tax statute. The due process claim plaintiffs assert here is no different from the taxpayer’s argument in Replan that it “acted in reliance on the inducement” of the tax exemption to participate in the SRO conversion program, 70 N.Y.2d at 455, or in Carlton that it “specifically and detrimentally relied on the preamendment version” of the estate tax deduction statute when it engaged in the stock transaction. 512 U.S. at 33. Indeed, similar 26 inducements and reliance are the hallmarks of all tax incentives, which exist to encourage taxpayers to engage in the tax-favored transactions. In any event, here, the Appellate Division recognized that the April 2009 amendments “alter plaintiffs’ eligibility for tax credits, and the cases addressing the retroactive application of tax statutes are therefore instructive” (477).4 Accordingly, the reliance claim here is the same as those the taxpayers advanced in Carlton and Replan, and it should be similarly rejected. Thus, plaintiffs knew that the Legislature could repeal the Empire Zone Program tax credits at any time, and that plaintiffs could have no claim against the State for continued tax benefits, regardless of the extent of any investment that they might have been induced to make by the Program. Indeed, plaintiffs’ certificates of eligibility explicitly provided that eligibility would continue “until terminated by operation of law or by action taken pursuant to such laws, rules 4 In addition, retroactive tax credit legislation presents fewer constitutional notice and reliance issues than legislation that “create[s] a new tax” and seeks to apply it retroactively. United States v. Darusmont, 449 U.S. 292, 300 (1981); cf. Wiggins v. Commissioner of Internal Rev., 904 F.2d 311, 314 (5th Cir. 1990) (“[t]here is no new tax here” because the taxpayers “were already subject to tax from recapture of the investment tax credit and to the alternative minimum tax”); Matter of Capital Fin. Corp. v. Commissioner of Tax. & Fin., 218 A.D.2d 230, 233 (3d Dep’t), appeal dismissed, 88 N.Y.2d 874 (1996) (rejecting taxpayer’s argument that it had a vested property right to carryovers of mortgage recording tax credits it had earned prior to the disputed amendment). And tax credits are, like exemptions, “a matter of legislative grace.” Matter of Grace v. New York State Tax Comm’n, 37 N.Y.2d 193, 196 (1975) (tax exemptions “are allowed only as a matter of legislative grace”). 27 and regulations as may be applicable” (113-117). Similarly, in Replan, this Court relied specifically on the fact that the city code provision “was subject to such changes as may have been made in the State enabling legislation itself.” 70 N.Y. 2d at 457. Here too, the likelihood of further statutory amendments was manifest. Accordingly, the Fourth Department was wrong to hold that “[t]here is no indication . . . that plaintiffs had any warning that the criteria for certification of Empire zone[] businesses were going to change, prospectively or retroactively, prior to April 2009” (478). Since the Program’s inception in 2001, plaintiffs and all other businesses that were enrolled in the Program were on notice that their eligibility for tax benefits depended on their ability to create new jobs and investment opportunities in the State, the paramount reason for the Program’s existence. Indeed, the Legislature amended the statutory eligibility requirements several times prior to April 2009, including in 2005, when it enacted a cost-benefit standard similar to the one at issue and directed that it would apply to new Program participants. See L. 2005, ch. 63, Part A, § 2. As Mr. Coburn explained, the April 2009 amendments did not appear without warning, but resulted from “increasing scrutiny” over “several years,” based on concerns that “some firms participating in the Program have received more in tax benefits than economic returns they are returning in the form of 28 wages paid to workers and capital investment in their facilities” (173-174). The April 2009 amendments were also foreshadowed by the 2004 and 2007 public reports of the Comptroller, who found that the Program, based on the then- existing statutory eligibility criteria, was not meeting its job creation and investment goals. Thus, it was “reasonably foreseeable” that the Program’s eligibility criteria would change to address these concerns, particularly since plaintiffs’ own certificates of eligibility warned them that this could happen. See, e.g., Furlong v. Commissioner of Internal Rev., 36 F.3d 25, 28 (7th Cir. 1994) (tax on loans from certain pension plans was reasonably foreseeable because it was not a “wholly new tax”). Plaintiffs’ reliance claim is further undermined by the fact that they did not demonstrate that they engaged in any particular activities during 2008, the period of retroactivity, in reliance on the Program tax credits they expected to claim for 2008. Instead, plaintiffs alleged only that they “operated throughout 2008” as an “eligible business” and “closed out [their] books and records for 2008 as of December 31, 2008” (160-161, 165, 169). Nor did plaintiffs present any proof that they had already completed and filed their 2009 returns claiming the credits before the April 2009 amendments were enacted. In the absence of any evidence that plaintiffs would have “altered [their] behavior to avoid the [loss of tax credits for 2008],” United States v. Darusmont, 449 U.S. 292, 299 (1981), and 29 in light of plaintiffs’ burden to demonstrate their entitlement to the tax credits at issue, the Fourth Department erred in presuming that that plaintiffs “were induced to conduct their businesses in a particular way . . . in reliance upon the availability of [Program] tax credits” (478). For all of these reasons, the Appellate Division mistakenly concluded that plaintiffs did not have any warning before April 2009 that the eligibility criteria could change. The likelihood of such changes was inherent in the Program, as expressed in plaintiffs’ certificates. Thus, the first Replan factor favors the constitutionality of the limited period of retroactivity here. B. The Retroactivity Period Was Not Excessive. Consistent with the second factor considered in Replan, the 15-month retroactivity period of the April 2009 amendments is not constitutionally excessive. 5 The Fourth Department did not discuss this factor, but held that 5 Even if measured from the enactment of the August 2010 amendment (rather than from April 2009, as the Fourth Department correctly held), the resulting retroactivity period is nevertheless constitutional for the reasons stated in this section and because the August 2010 amendment was a “curative measure.” United States v. Carlton, 512 U.S. at 31-32 (upholding retroactive application of statute limiting estate tax deductions because the amendment was rationally adopted in order to stem “a significant and unanticipated revenue loss”); Matter of Moran Towing Corp. v. Urbach 1 A.D.3d 722, 724 (3d Dep’t 2003) (“when legislation is curative, retroactivity may be liberally construed”). Accordingly, the 2009 amendments are constitutional whether their period of retroactivity is measured from April 2009 or August 2010. 30 “[w]hether that period is excessive . . . cannot be resolved in the abstract, but only in light of the other factors, i.e., notice and reliance” (478). But both the United State Supreme Court and the New York Court of Appeals have declared that even tax legislation that imposes new tax liabilities (rather than simply limiting credits for existing taxes) may constitutionally be applied to the beginning of the year preceding the legislation’s enactment, as the Legislature did here with the disputed tax credit amendments. See United States v. Carlton, 512 U.S. at 33 (tax laws may be retroactively applied “to include the receipt of income during the year of the legislative session preceding that of its enactment” (quoting Welch, 305 U.S. at 150); Matter of Lacidem Realty Corp. v. Graves, 288 N.Y. 354, 357 (1942) (invoking tax legislation’s saving clause to uphold 14-month retroactive period for statute imposing tax on sales of sub-metered electric current); see also Matter of Varrington Corp., 85 N.Y.2d at 33 (retroactive period of nearly two years for tax regulation that required the taxpayer to return a refund previously issued was not unconstitutional). Indeed, courts regularly uphold tax legislation and regulations with far greater retroactive periods of operation than the 15 months here. See, e.g., Welch, 305 U.S. at 144-49 (retroactivity period of two years for statute levying emergency tax relief on dividends did not violate taxpayer’s due process or equal protection rights); Tate & Lyle, Inc. v. Commissioner of Internal Revenue, 87 F.3d 31 99, 107 (3d Cir. 1996) (upholding six-year retroactivity period of a Treasury Regulation requiring the taxpayer to use a cash method of accounting); Canisius Coll. v. United States of Am., 799 F.2d 18, 27 (2d Cir. 1986) (holding that four-year retroactivity period for a FICA tax amendment did not violate due process in light of its curative purpose); Astoria Fed. Savings & Loan Ass’n v. State of N.Y., 222 A.D.2d 36, 46 (2d Dep’t) (retroactivity period of more than six years for amendment changing tax exemption eligibility was not harsh and oppressive), appeal dismissed, 88 N.Y.2d 1064 (1996). These decisions have even greater force here because, as explained above at note 4, the Legislature did not impose a new tax but simply limited the use of credits against existing taxes. Thus, the second Replan factor also supports the validity of the modest period of retroactivity provided by the 2009 amendments. C. The Amendments Serve Valid Public Purposes. Finally, the Fourth Department mistakenly concluded that “defendants offer no justification for retroactive application of the 2009 amendments apart from the additional revenue that the State would realize by retroactively eliminating tax credits for certain participants in the Empire Zones Program,” and that this reason was “insufficient” (478). In fact, the April 2009 amendments furthered two valid public purposes: to correct “long-documented 32 abuses” by Program participants who were not making good on their promises to create new investments and jobs in New York in return for Program tax credits, and to provide the State approximately $90 million in much needed savings for the 2009-2010 fiscal year (185, 367). See Office of the State Comptroller-Division of Local Government and School Accountability, The Effectiveness of Empire Zones: Follow-up Report, 2007-MS-2 (2007), available at www.osc.state.ny.us/localgov/audits/swr/empirezones.pdf. (noting the difficulty of obtaining reliable data to confirm whether the benefits of the Program outweigh its costs, and the lack of progress in getting municipalities to identify performance shortfalls within their respective Empire Zones); Office of the State Comptroller, Assessing Empire Zones Program-Reforms Needed to Improve Program Evaluation and Effectiveness, Report 3-2005 (2004), available at www.osc.state.ny.us/reports/empirezone3-2005.pdf. (same). The Governor specifically criticized the Program’s “abuses, lack of results and skyrocketing costs,” as well as its lack of accountability. Press Release, available at http://www/governor.ny.gov/archive/paterson/press/06810ExcelsiorJobsProgram. html. The Fourth Department improperly disregarded the legitimate and uncontested remedial purpose of the April 2009 amendments, namely, to increase “its cost-effectiveness, strategic focus and accountability” by ensuring 33 that Program participants return more to the community “in the form of wages paid to workers and capital investments in their facilities” than they received in tax benefits (173-174). Plaintiffs do not dispute that they were not meeting these Program goals and thus, could not satisfy the 1:1 benefit-cost test (165- 166, 170). Accordingly, the Fourth Department should have taken this valid legislative goal into account when considering the third Replan factor. In addition to the Fourth Department’s failure to consider the remedial goals of the April 2009 amendments, that court erred in holding that the revenue-raising purpose of the April 2009 amendments was not a valid public purpose. The Legislature may rationally retroactively amend a statute to stem “a significant and unanticipated revenue loss.” Carlton, 512 U.S. at 32; accord Furlong, 36 F.3d at 28; see Rocanova v. United State of Am., 955 F. Supp. 27, 29- 30 (S.D.N.Y. 1996), aff’d, 109 F.3d 127 (2d Cir. 1997), cert. denied, 522 U.S. 821 (1997) (Congress’s intent in enacting a retroactive amendment to the Internal Revenue Code -- “to raise revenue without raising taxes or imposing a new tax” -- was “rational and reasonable”); Venable v. Commissioner of Internal Revenue, 2003 WL 21921052, *7 (U.S. Tax Ct. 2003), aff’d, 110 Fed. Appx. 421, 2004 WL 2297334 (5th Cir. 2004) (Congress’s retroactive application of statute that narrowed income tax exclusion was “rationally linked to the legitimate objective of raising revenue”). Here, the Legislature recognized that the State was losing 34 a substantial sum of money from the Program in its current state, and reasonably acted “to provide savings of $90 million” that the State and its taxpayers could realize during fiscal year 2009-2010 (185). Each of these purposes amply justifies the short retroactive period of the April 2009 amendments and outweighs plaintiffs’ limited claim to the 2008 Program tax credits they might have claimed had they not been decertified. See Matter of Neuner v. Weyant, 63 A.D.2d 290, 304 (2d Dep’t 1978), appeal dismissed, 48 N.Y.2d 975 (1979) (retroactive application of tax legislation “served an important public purpose by delaying the effective date of a ‘loosely drawn’ tax exemption which would, in all probability, have permitted large-scale tax avoidance by land owners who were not intended to be benefitted”). For these reasons, the Appellate Division’s reliance (479) on this Court’s pre-Replan decision in Clarendon Trust v. State Tax Commission, 43 N.Y.2d 933 (1978), is misplaced; in that case, unlike this one, there was no “persuasive reason for retroactivity.” Id. at 935. In conclusion, all three of the factors identified by this Court in Replan support the constitutionality of the retroactive tax statutes at issue here. Accordingly, the limited retroactive effect of the April 2009 amendments satisfies due process because it is supported by legitimate legislative purposes furthered by rational means. This Court should reverse the order of the Appellate Division and the complaint should be dismissed. CONCLUSION The Fourth Department's opinion and order should be reversed insofar as it held that retroactive application of the April 2009 amendments to General Municipal Law § 959 to January 1, 2008, violated plaintiffs' due process rights, and plaintiffs' complaint should be dismissed in its entirety. Dated: Albany, New York March 22,2012 Respectfully submitted, ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney fo~~fendants-Appellants BY:~~ OWEN DEMUTH Assistant Solicitor General Office of the Attorney General The Capitol Albany, New York 12224 (518) 474-6639 BARBARA D. UNDERWOOD Solicitor General ANDREW D. BING Deputy Solicitor General OWEN DEMUTH Assistant Solicitor General of Counsel Reproduced on Recycled Paper 35 RESOLUTION 1# 3 OF 2010 WHEREAS. pursuant to Chapter 57 oftha Laws of2009 and the bylaw. oftha Empire Zone Designation Board (..the Board"), the Board is authorized to review the written submissions of businesses appealing the revocation ofthea certi&arlODS by the Commissioner ofEconomic Development (the_ "Commissioner') pursuant to GML §9S9(w); WHEREAS, pursuant to GML §959(w), businesses appealing the revocation of their certi fication by the Commissioner were required to indicate to the Board that they would be appealing this determination by sending a written notiee to the Board ofsuch appeal no later than ti fteen (IS) bUBiness days from the date ofthe Commissioners revocation notification and then follow up within sixty (60) days ofthe date ofCommissioner's revocation notification with a written submission explaining why their certifiCation should be continued; WHEREAS. the Board has received and reviewed the notices ofappeals. and, where provided, written submissions by businesses whose certification was revoked by the Commissioner because lhey failed to provide economic returns to the stale in the form of total remuneration to their t:mpJoyees (i.e. wages and benefits) and investments in their facility greater in value to the tax benefits they used and had refunded to them pursuant to GML §9S9(aXv)(6). WHEREAS, under GML §9S9(w), the Board shall consider the explanation provided by lhe business enterprise, but shall only reverse the determination to revoke the business enterprise's certification ifthe Board unanimously finds that there was sufficient evidence presented demonstrating that the Commissioner'fl finding, with respect to subparagraph six of paragraph (v) of subdivision (a) ofthis section, was in error; THEREFORE, BE IT RESOLVED, that the Board, after careful consideration of the documentation presented by companies listed in APJleDdix A ofthis resolution, has determined that such companies listed in AppendiX A ofthis resolution. have not provided sufficient evidence to demonstrate that the Commissioner's finding with regard to revocation under GML §9S9(aXv)(6) was in \.'tTOr and therefore the Commissioner's detemtination to revoke the empire zones cenification of these finns is upheld and the companies listed in Appendix A shall not have their certification reinstated. ADOPTED DATE: ,-I 1/1..2<'-'ID· , - (':'- / -'/~' Sccrctary:m, __ .. ,/·D")..-J:sd_6...d=/~C . I...,.rl' ADD END U M A1 APPENDIX A Resolution # 3 of 2010 Company Name 111-117 Business Park Realty Corp. 1256 Hertel Associates, LLC 1801 Sixth Avenue, LLC 201 Sawmill River Road Dey. Co 2301 Jerome Avenue Realty Corp. 231 Hawthorne Ave., LLC 299 Meserole Corp. 3339 Park, LLC 350 Gerard Ave. Corp. 390 Riverdale Avenue Corp. 450 S. Salina Street Partnership 453, LLC 579 So. Broadway Realty 600 Erie Place, LLC 600 Erie PlacePartnership II, LLC 728 East Realty Corp. 819 Yonkers Ave. Realty Corp. 870 Nepperhan Avenue, LLC Alan I: Byer Grantor Trust Alpha 2000, LLC Atom Holdings, Ltd. BCK Properties, LLC BOG Gotham Plaza, LLC Bergchester Corp. Broadway Arcade LLC Bronx South Realty, LLC Carpe Diem Realty of Poughkeepsie, LLC Clark Trading Corporation Con AGG Recycling Real Estate. LLC Coolidge Salina Street, LLC Dan DiMarino Daniel G. Hickey & Robert W. Finn Dunkirk Power, LLC DuRoss Realty Corp. Elmira ASC Management, LLC Erie Boulevard Hydro Power, LP Four Star Realty Corp. Gottlieb & Deitchman Realty, Inc. Greece Town Mall, L.P. Gregory Beobide Hast Properties Co. Hiawatha Assoc., LLC James Square Associates A2 . ... J-P Group, LLC Juno's Glass, LLC Kelly-Duke, Inc Laurel Street Associates Macabe Family Development, LLC Macabe Family Development, LLC. Mark & Scott Vrancich Midland Realty Associates, Inc. Miter Realty Corp. Molly II, Inc. Morris Builders, LP New Hope Mills Manufacturing, Inc. Office Building Associates, LLC OHM, LLC Orion Development RA L, LLC Oswego Harbor Power, LLC P.N.S., LLC PAR-K Properties of Fulton, LLC Pascaler Enterprises, LLC PDJ Simone Realty, L.P. Persico Realty Corp. . Pioneer Fulton Shopping Center, LLC PJ Associates. LP Plainview Associates - Elmira, LLC POTSDAM ASSOCIATES Po~ghkeepsie Properties, LLC Pur Energy I, LLC Q Ford Management, LLC R & M Associates, LLC .Rago Syracuse Corp. Regal Buick Properties, LLC Rojan Realty S & T Bronx Realty, LLC Saboy, LLC Simone Development Co., LLC Simone Development Company, LLC Sixty Road Associates, L.P. Skyway Properties, LLC SL & D Properties. LLC South Fulton Corp. The Hague Corporation Third National Associates Group Third National Associates, LLC Toby Peck, LLC Two Chickens Realty Coop. , LLC Waterfront Associates, LLC WL, LLC Zeller Properties, LLC A3 RESOLUTiON # 17 OF2010 Wl-lEREAS, pursuant to Chapter 57 of the Laws of 2009 and the bylaws of the Empire Zone Designation Board ("the Board"), the Board is authorized to review the written submissions of businesses appealing the revocation of their certifications by the Commissioner of Economic Development (the "Commissioner'') pursuant to GML §959(w); WHEREAS, pursuant to GML §959(w), businesses appealing the revocation of their ccrti Ikation by the Commissioner were required to indicate to the Board that they would be appealing this detcnnination by sending a written notice to the Board ofsuch appeal no later than Ii Iteen (15) business days from the date of the Commissioner's revocation noti fication and then follow up wilhin sixty (60) days or the' date ofCommissioner's revocation notification with a written submission explaining why their certification should be continued; WHEREAS. the Board has received and reviewed the nolices ofappeal, .md, where provided. written submissions by businesses whose certification was revoked by the Commissioner because they t~liled to provide economic returns to the state in the fonn oftotal remuneration to their <_'mployees (i.e. wages and benefits) and investments in their facility greater in value to the tax henefits they used and had refimded to them pursuant to GML §959(a)(v)(6). WHEREAS, tUlder GML §959(w). the Board shall consider the explanation provided by lhe business enterprise, but shall only reverse the determination to revoke the business t~nlerprise's certitication if the Board unanimously tinds that there was sufficient evidence presented demonstrating that the Commissioner's finding, with respect to subparagraph six of paragraph (v) of subdivision (a) of this section, was in error; THEREFORE, BE IT RESOLVED, that the Board, alter careful consideration of the documentation presented by companies listed in Appendix A ofthis resolution, has determined that the companies lisled in Appendix A of this resolution have not provided sufficient evidence to demonstrate that the Commissioner's finding with regard to revocation under GML §959(a)(v)(6) was in cmlf and thererore the Commissioner's detennination to revoke the. empire zones certification of these firms is upheld and the companies listed in Appendix A shall not have their ccrti fications reinstated. .'\DOPTED A4 :\PPENDIX A - Resolution 170[2010 L'Aquila Realty, LLC Manhattan Nursing Home Realty, Inc. Hudson River Valley, LlC Mohawk Glen Associates, llC Ulster Acquisitions II, LLC Simone Development Co., LLC RochwiJ Associates PDJ Simone Realty, LP One Forrnan Park, llC Dunk & Bright Furniture Co., Inc. Center Armory Associates, llC Ulster Business Complex, lLC NRG Energy, Inc. Jorii PropertyTrust, LLC AG Properties of Kingston, LLC A5 IU<:SOLlJTION # 18 OF 1010 \V f IEREAS, pursuant to Chapter 57 of the laws of 2009 and the bylaws of the Empire Zone Iksig,nmion Board ("the Board"), the Uoard ig authorized to review the written submissions ofbusinesses ~lr,~aJing (ht: revocation of their certifications by the Commission(.,[, of Economic Development (the "( "JIlunissiol1er") pursuant to GML *959(w}; WJJEREAS, pursuant to GML ~959(w), businesses appealing the revoc,ltion of their certification by th~ Clllnmissi,mer had to indicute to the Board that they would be appealing this detennination by sending a \,riI1cn n\lticc to the Board of such appeal no latcrthantillcen (15) business days from the date of the C.Jrnmis'Sj(lI1cr's revoc~\tion notitication and then tollow lip within slxty(60) days of the dIlte of (\lll101i:;sioncr'~revocation notit1cation with a written submission explaining why its c<..Ttification should he Llliltinw:d: WHEREAS, the Board has received and reviewed the notices ofappeal. and. where providt.'Ci, the \v rilten _,ubmissiortS by l'llIsinessl..'S whose ccrtilication wall revoked by the Commissioner because they. if . l\r~;t cl.:rtiiied prior to the lirst day of August. 2002, caused individuals to trnnsfer from existing employment ".\ llh ,mother business ~nterprise with similar ownership located in New York state to similar employment wi Ih the ccr1i tied business enterprise or if the enterprise acquired. purchased, leased or had transferred to it I'L'at property prcviol.lsly ownl:d by an entity with similar ownership, regardless of tbnn of incorporation or l)rgani..-;ttion. pursuant to Gt\(L §959(a)(v)(5); \V II bREAS. unuer G~lL §9S9(w), the Board shall consider the explanation provided by the hll,illt':$s Gnlt:rprise, but shall only reverse the determinatiun to revoke the business enterprise's c<:rti t!cation if the Ooard unanimously linds that there was sufficient evidence presented demonstrating thaI. Wilh n:srectto subparagmph nvc of par{lgraph (v) of subdivision (n) of this section, any t;.\ Imort linary ci rwmstances occurred whkh would j usti fy the continued c~rti fi~ation ofthe business ,~J1 tcrprr",:: n IEREFORE. BE IT RESOLVED, Ihat the Board. ulkr careful consideration of the documentation prt:"cnlcd by th~ companies Iisted in Appendix A of1his resolution :md atlcr consultation with the (\ltl1lnis<;ioJ1cr (lfT:lxntion ,md Finance with respect to additional c'1111iJcntial tax return infonnation the ('ullllnissiol1ct rcvic.:wcd, has dctcmnincd that the compunks listed in Appendix A of this resolution have Ctello. Coone,! tems Carp. :''i, LLe A8 ,\PPENDIX A . [{t.:solulion 1801'2010 ~ilcGr;]nn p.,per Corporation McNeil Development Co., LLC 1'.lelvin ,'i Melvin, PLLC Michael Anthony Jewelers Real Estate, Inc. Mid-Hudson Limousine Services Mid-Hudson Property Management, Inc. My Grain, LLC New Hope Mills Manufacturing.. Inc. NIKOLAOS Realty Corp. Nojaim, Inc. Northcrest Associates, LLC Northern Health Care Linen Services Co., Inc. Old Editions, Inc. Owasco Beverage, Inc. Panos Enterprises of ~est Oswego, Inc. d/b/a MeDon Park Hill Ave Associates, LLC . Piccolo Properties, LLC Pioneer Fulton Shopping tenter, LLC Pioneer ManagementGroup, LLC Prevalere life Sciences, Inc. Homano Subaru Inc., d/b/a Romano NY, Inc. Sack & Associates Consulting Engineers, PLLC ')"Hna Electronics, Inc. Sal-Mark Restaurant Corp. dba Mariner's Harbor Seneca Commons, LLC SGP Associates ')uperflex Realty, LlC TJglia Operations, Inc. The Michael J. lumbolo Financial Management Group, The Three All1igo~ LlC rhe UnHand Partnership of Delaware, L.P. (Buffalo) rhe Uniland P;:Jrtnership of Delaware, LP (Tonawanda) Thi~ra-S~~rv, Ll.C Uni'lNsal ,\uto Parts Corp. Unl'JPrsity Hill Hf~alt,,.., LLC 'Nin~nut Properties, LLC '(onkers Property ManJgement of New York, Inc. A9