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New York State Appellate Court Declares Metropolitan Commuter Transportation Mobility Tax Constitutional

A focus on asset managers


The Appellate Division (2nd Dept.) of the New York State Supreme Court recently ruled in Mangano v. Silver1 that the Metropolitan Commuter Transportation Mobility Tax ("MCTMT") as enacted by the New York Legislature was not in violation of certain provisions of the New York State Constitution. This reversed an earlier ruling by the New York State Supreme Court, Nassau County (a lower court) that the MCTMT legislation was unconstitutionally enacted.2 This tax alert summarizes this decision.


The MCTMT generally applies at a rate of up to 0.34% on compensation paid to employees based in the Metropolitan Commuter Transportation District ("MCTD") and on self-employment income sourced to the MCTD.3

The tax became effective March 1, 2009, and its revenue is dedicated to the New York State Metropolitan Transportation Authority. The tax is administered under procedures similar to those of the New York State personal income tax.

Generally, asset management companies with employees or partners in the MCTD are subject to the tax payment and reporting and requirements of the MCTMT. Partners of partnerships (or members of an LLC treated as a partnership for federal tax purposes) may be able to elect to be part of a group filing via a group agent, which is designated by the partnership (or LLC) and has legal authority to act as an agent in matters relating to the group estimated MCTMT payments and group MCTMT returns, for all partners electing to participate in the group. The group agent is required to maintain records relating to the portion of the total estimated tax paid on behalf of each partner and to sign the group return.

Summary of the Court's rulings

Article IX, Section 2(b)(2) of the New York State Constitution (the "Home Rule Clause") normally prevents the State’s Legislature from enacting laws affecting "the property, affairs or government" of local governments unless such a special law is requested by a super-majority vote of the local legislature (referred to as a "home rule message"). However, an exception to the Home Rule Clause exists for special law that serves a substantial State concern. Due to the importance of mass transit to the health of both the New York City region and entire New York State economy, the MCTMT was found to have fulfilled a substantial State concern and its enactment was not in violation of the Home Rule Clause. Therefore, the decision of the lower court was reversed.

Since the New York State Department of Taxation and Finance has continued to collect the MCTMT while this matter was under appeal, taxpayers who are in compliance with the MCTMT provisions should not be affected by the ruling. Based on the Appellate Court's decision, protective refund claims filed by taxpayers in the procedure established by the Department4 will not be granted.

The local governments involved in this dispute may request a review of this decision by the New York State Court of Appeals (the highest court in the State). At the time of this writing, no appeal has been filed.
1 2013 N.Y. App. Div. LEXIS 4699; 2013 NY Slip Op 4783 (June 26, 2013).
2 See our previous Multistate Tax Alert dated September 6, 2012,"New York State Court Declares MTA Payroll Tax Unconstitutional."
3 N.Y. Tax Law Article 23, § 801. The MCTD consists of New York City and Nassau, Suffolk, Westchester, Rockland, Dutchess, Orange and Putnam Counties. See N.Y. Tax Law Article 23, § 800. There are certain exceptions to the tax that are not addressed in this Tax Alert.
4 See The New York State Department of Taxation and Finance.

For additional information or questions, please contact:

Jerry Gattegno
Deloitte Tax LLP
+1 212 436 3360
  Russ Banigan
Deloitte Tax LLP
+1 516 918 7283


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