MoFo New York Tax Insights - Volume 9, Issue 9

Morrison & Foerster LLP


The Appellate Division, Third Department, has reversed a decision of the New York State Tax Appeals Tribunal that had denied a refund of personal income tax based on a claimed credit for real property taxes paid by a real estate management company certified as a qualified empire zone enterprise (“QEZE”). Balbo v. N.Y.S. Tax Appeals Trib., No. 524161, 2018 NY Slip Op. 05540 (3d Dep’t, July 26, 2018). The court held that, under the circumstances of this case, payment of the real property taxes in question to a mortgage tax escrow account did not preclude the amounts from qualifying as QEZE real property tax credits.

Factual History. Petitioner Angelo Balbo is the sole shareholder of Angelo Balbo Realty Corp. (“Balbo Realty”), and the sole member of Angelo Balbo Management, LLC (“Balbo Management”), which is certified as a QEZE. In 2006, Balbo Management acquired an office complex in Poughkeepsie, New York, and executed a mortgage agreement with a lender. The next year, Balbo Management refinanced the mortgage agreement with the lender, which by this time had brought on Wells Fargo as its servicing agent. Wells Fargo required various modifications to the original mortgage agreement, resulting in, among other changes, the transfer of ownership of the property from Balbo Management to Balbo Realty, and the monthly property tax payments being sent to Wells Fargo, where they would be held in escrow and thereafter remitted to the appropriate taxing authority on behalf of Balbo Realty, the property owner. In January 2008, Balbo Realty leased the property to Balbo Management pursuant to a lease that specified, among other terms, that Balbo Management was solely responsible for all taxes. Balbo Management made the required tax payments to Wells Fargo, which thereafter paid the real property taxes that were due to the receiver of taxes for the City of Poughkeepsie.

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