Motion — Replan Development, Inc. v. Department of Housing Preservation & Development

7 ; Supreme Ort, ry

'| FIRED

No. 87-1275 MAR 3 1998

IN THE pie

SUPREME COURT OF THE UNITED

OCTOBER TERM, 1987

REPLAN DEVELOPMENT, INC. and

EDWARD C. RUBIN,

- Appellants,

-against-

DEPARTMENT OF HOUSING PRESERVATION

AND DEVELOPMENT OF THE CITY OF NEW

YORK and THE CITY OF NEW YORK,

Appellees.

ON APPEAL FROM THE NEW YORK STATE

COURT OF APPEALS

MOTION TO DISMISS OR AFFIRM

PETER L. ZIMROTH

Corporation Counsel

of the City of New York

100 Church Street

New York, New York 10007

Tel. (212) 566-4515

EDITH I. SPIVACK,

JOSEPH I. LAUER,

JUDITH R. GREENWALD,

LISA KAPLAN,

of Counsel.

March 2, 1988

TABLE OF CONTENTS

TABLE OF AUTHORITIES .........

r o o

QUESTION PRESENTED .........

yr

OPINIONS BELo y

ARGUMENT

THIS APPEAL SHOULD BE

DISMISSED FOR LACK OF A

SUBSTANTIAL FEDERAL

QUESTION. THE JUNE 1983

RE-ENACTMENT OF J51 DID

NOT DEPRIVE APPELLANTS

OF ANY CONSTITUTIONAL

RIGHT. RELIANCE COULD

NOT REASONABLY BE

PLACED ON RE-ENACTMENT

WITH THE SAME BENEFITS;

THERE WAS NO VESTED

RIGHT IN THE EXEMPTION;

AND THE NEWLY ENACTED

PROVISIONS SERVED A

LEGITIMATE PUBLIC

PURPOSE AND WERE

REASONABLE IN DURATION

ö re

APPENDIX

Statutory Provisions ............

13

30

TABLE OF AUTHORITIES

Cases Page

Adelman X. Adelman,

58 Misc 2d 803, 296 NYS2d 999

(Sup. Ct., Queens Co., 1969)...... 22

—

.

Brearley School, Limited v.

Ward, 201 N.Y. 358, 94 N. E.

ß,, ˙⁰¼ ( 21

Bronx Garment Center v. City

of New York, 199 Misc. 513,

106 NYS2d 720

(Sup. Ct., Bronx Co., 1951),

aff'd, 279 App. Div. 1048, 113

NYS2d 257 (Ist Dept.),

leave to appeal denied,

280 App. Div. 890, 115 NYS2d

eC . 21

Chrysler Properties Inc.,

Matter of v. Morris, 23

NY2d 515, 245 NE2d 395,

297 NYS2d 722 (1969)............... 20

Estate of Ekins v. Commissioner

of Internal Revenue, 797 F.2d

„„ 17,18

Gattis v. Gravett, 806 F.2d 778 ;

. 21

Grossman, Matter of v. Wagner,

20 Misc 2d 707, 192 NYS2d 557

(Sup. Ct., N. . Co., 1058)........ 22,23

e

LE. E. X. Co. v. Temporary

State Housing Rent Commission,

10 NY2d 263, 176 NE2d 822,

219 NYS2d 249 (1961), appeal dismissed,

%%% w 21

LeCroy Research Systems Corporation,

v. Commissioner of Internal Revenue,

751 F.2d 123 (2d Cir. 1984) .......

London, Matter of v. Wagner,

22 Misc 2d 360, 195 NYS2d 550

(Sup. Ct., N.Y. Co., 1959),

aff'd, 13 AD2d 479, 214

NYS2d 647 (Ist Dept., 1961),

aff'd, 11 NY2d 762, 181 NE2d

759, 227 NYS2d 13 (1962) _.........

Milliken v. United States,

. Ere

Neuner, Matter of v.

Weyant, 63 AD2d 290,

408 NYS2d 89 (2d Dept., 1978),

appeal dismissed, 48 NY2d 974,

425 NYS2d 1030, 401

Z eeeee)- ——t—i—“‘i—s—s—sC ww ww ww

Preston Co. v. Funkhouser,

261 N.Y. 140, 184 N. E. 737,

aif'd, 290 U.S.163 (1933) .........

Purvis v. United States, 501 F.2d 311

(9th Cir. 1974), cert. denied, 420

JJ. Be Sere

Welch X. Henry, 305 U.S.

R 13,17

West, Matter of, 289 N.Y.

423, 46 NE2d 501 (1943),

. Demorest v. City

Bank Farmers Trust Co., 321 U.S.

a — 21

Co., Inc. v.

rnal Revenue,

127 F.2d 514 (2d Cir.),

cert. denied, 317 U.S.

TT. ˙— . e 13, 20,

Statutes

Administrative Code of the

i City of New York

; §11-243 (formerly §J51-2.5).... 2,3,5

7,1

r

New York City Local Law

V 7

W _ ae 80 7

T2 Sb cdvcccccccceds 5,6

V onc ccccccecccccs 7

New York Real Property Tax Law

r ˙•§˖ ²˙. .... 2,3, 4,

5,7, 10

New York State Laws of 1983

D . 5,6

Rules

J51 Tax Exemption and Tax

Abatement Rules and Regulations ... 6

.

No. 87-1275

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1987

REPLAN DEVELOPMENT, INC. and

EDWARD C. RUBIN,

Appellants,

-against-

DEPARTMENT OF HOUSING PRESERVATION

AND DEVELOPMENT OF THE CITY OF NEW

YORK and THE CITY OF NEW YORK,

Appellees.

ON APPEAL FROM THE NEW YORK STATE

COURT OF APPEALS

MOTION TO DISMISS OR AFFIRM

STATEMENT

Appellees move to dismiss appellants’

appeal or, in the alternative, to affirm the

judgment of the Court of Appeals of the

State of New York entered November 19,

1987. The appeal does not present a

substantial federal question. The law as to

retroactive tax legislation is well established

and was properly applied.

QUESTION PRESENTED

Do §489 of the New York Real Property

Tax Law and §11-243 (formerly §J51-2.5) of

the Administrative Code of the City of New

York, enacted pursuant thereto (collectively

referred to as the "J51 law"), deprive

appellants of any constitutional right, given

that: (a) there could be no _ justified

reliance on the prior law; (b) there were no

vested rights to any tax benefits

thereunder; (c) the retroactivity was for

only one year; and (d) its public purpose

was to prevent evasive measures occurring

between the introduction of the bill and its

enactment into law?

FACTS

(1)

"J51" is a statutory tax incentive

program, originally enacted in 1955, to

encourage improvements and alterations to

existing buildings so as to increase the short

supply of safe and habitable class A multiple

dwellings. It is based on Real Property Tax

Law ("RPTL") §489, the state enabling law,

and Administrative Code of the City of New

York ("Admin. Code") §11-243, the local law

enacted for its effectuation.

The program provides for benefits in

the form of partial exemption from real

property taxation and abatement of remaining

taxes to recoup the costs of alterations over

a specified period of years. It is

administered by the City's Department of

Housing Preservation and Development

("HPD") which is authorized to promulgate

rules and to make decisions.

All of the statutory conditions must be

met to qualify for benefits. These include,

inter alia, commencement and completion of

reconstruction within the time limits set forth

in the statute. Determination as_ to

entitlement to benefits and the extent thereof

is made by HPD after the application is

received. Application cannot be made until

after the work is finished. Consequently,

no benefits vest merely upon commencement

of a project.

The J51 law has been re-enacted and

amended several times following its original

enactment, each time with a fixed expiration

date. Benefits have been expanded for

certain types of projects and curtailed for

others, in keeping with problems revealed by

experience and goals of the program. The

last re-enactment of RPTL §489, the enabling

statute, became effective June 30, 1983. It

was made retroactive to June 1, 1982, the

date when the prior version expired. Laws

of 1983, chapter 401, §6 (M-A-1).!

Consistent therewith, Admin. Code §J51-2.5

(now §11-243) was amended November 7,

192, and also made retroactive to June 1,

1982. Local Law No. 56 of 1983, 811

(M-A-2).

As amended, these statutes expressly

prohibit the grant of benefits for

conversions of multiple dwellings that were

used in whole or in part for single room

occupancy ("SRO's") to class A multiple

dwellings that are not so used. RPTL

§489(1)(a)(1) and (13); Admin. Code

511-2430) (6); (M-A-1-3). However, they

contain a "grandfather clause" so that

1 Parenthetical references to M-A are to

the Appendix attached to this motion.

Parenthetical references to JS-A are to the

Appendix accompanying appellants'

Jurisdictional Statement.

conversions of SRO's commenced prior to

July 1, 1982 remained eligible for benefits.

L. 1983, c. 401, §15 (M-A-1); Admin. Code

911-2430) (6) and Local Law No. 56 of 1983

§11(1) (M-A-2-3). "Commencement" is

defined in Section 2.4(5) of the J51 Tax

Exemption and Tax Abatement Rules and

Regulations as the date of issuance of a

permit by a City agency (JS-A-41).”

SRO's serve to shelter low-income

elderly and infirm persons and thus

constitute an important part of the City's

housing stock. When the J5l1 program

resulted in large numbers of SRO's being

2 On page A- 30 of the Jurisdictional

Statement, appellants reprint a definition of

commencement that is not taken from the J51

law or the rules promulgated thereunder. It

comes from a different local law separately

codified in the Administrative Code. The

state courts rejected a previous attempt to

apply this irrelevant section of the Code to

this case (JS-A-10).

eliminated by conversion and demolition, the

consequence was a serious loss in low-cost

housing, forcing many former occupants to

become homeless. To prevent this loss from

growing even worse, the State Legislature,

followed by the City Council, amended J51 to

eliminate tax incentives for the conversion of

SRO's to housing beyond the means of the

low-income people who formerly occupied

them. This was a clear legislative response

to a public emergency.”

3 indeed, the homeless problem addressed

by RPTL 6489(13) and Admin. Code

$11-243(1)(6) ts so grave that other

ameliorative measures have also been enacted

in an attempt to halt its expansion. Local

Law No. 59 of 1985 prescribes a moratorium

on any and all conversions, alterations, and

demolitions of SRO's, and amends Local Law

No. 19 of 1983 to tighten the regulatory

controls of SRO landlords first instituted by

Local Law No. 56 of 1982.

111 ˙ »

(2)

Appellants are the owners of property

located at 427-429 West 22nd Street, Borough

of Manhattan (officially designated Block 720,

Lots 33, 34). When it was acquired, it

consisted of two vacant class B multiple

dwellings, certified as SRO's. Thereafter,

appellants converted the buildings into one

class A multiple dwelling containing eight

cooperative apartments, not certified as an

SRO. The permit for this conversion was

issued by the City's Department of Buildings

on April 7, 1983.

On January 11, 1984, after the J51 law

was amended to prohibit benefits for the

conversion of SRO's, appellants applied to

HPD for benefits for the conversion of their

buildings. HPD denied the applications on

the ground that the conversion was

commenced after July 1, 1982, the statutory

cut-off date, and thus did not qualify.

OPINIONS BELOW

SUPREME COURT, NEW YORK COUNTY

(Not Reported)

The Supreme Court of the State of New

York, New York County, upheld the

constitutionality of the re-enactment and

amendment of the J51 law. After examining

the criteria established by court decisions to

determine when _ retroactive legislation is

constitutional, the court held that: (a) there

was no evidence in this case that appellants

would not have voluntarily taken exactly the

same actions regardless of the impending

legislation, as evidenced in part by their

completion of the conversion even after the

new law was enacted; (b) there could be no

justifiable reliance on the law when it was no

longer extant; (e) the length of the

retroactive period was not excessive under

the circumstances; and (d) the retroactivity

served a valid public purpose of deterring

evasive maneuvers in the period between the

-9-

al)

introduction of the SRO bill and its

enactment into law (JS-A-9-12).

APPELLATE DIVISION

125 AD2d 1014

508 NYS2d 965 (Ist Dept., 1986)

The Appellate Division affirmed the

judgment of Special Term, without opinion

(JS-A-7-8).

NEW YORK COURT OF APPEALS

70 NY2d 451

517 NE2d 200

522 NYS2d 485 (1987)

The Court of Appeals unanimously

affirmed the order of the Appellate Division.

Judge Alexander, writing for the Court,

stated that at the time appellants commenced

their project, they could not have justifiably

relied on the continued availability of J51 tax

benefits. Under the circumstances,

therefore, the retroactive application of the

amendment to RPTL §489 and Admin. Code

§11-243 did not effect an unconstitutional

deprivation of due process rights.

The opinion reiterates the well

established law, enunciated by both the New

York state and federal courts, _ that

retroactivity provisions in tax statutes, when

limited to a short period, are generally valid

and not vulnerable to due process

challenges. The only exception is when the

law is so harsh and oppressive that it

transgresses the constitutional bounds. This

is a question of degree, requiring a

balancing of the equities.

The factors that must be balanced are

the following: (a) forewarning to the

taxpayer of a change in the law and, thus,

the reasonableness of reliance on the old

law; (b) the strength of the claim to the

benefit prior to enactment of the new

legislation; (c) the length of retroactivity;

and (d) the public purposes served by

retroactivity.

As noted in the opinion, the relevant

considerations here did not militate in

appellants’ favor. The period of

retroactivity was not excessive (conceded by

appellants themselves, JS-A-5); the

objectives of retroactive application served a

valid public purpose; and most important,

reliance on the continuation of the tax

incentive program was not justified.

Appellants were forewarned that

changes might be made in the program when

the state enabling legislation expired on June

1, 1982, and was not immediately renewed.

Therefore, appellants could not claim that,

notwithstanding the signs to the contrary, it

was reasonable to anticipate that their SRO

conversions, commenced after the cut-off

date, would qualify for the expired benefits.

The Court of Appeals concluded that there

could be no reasonable expectation of

entitlement to prior J51 tax benefits based

-12-

.

on renovations commenced in 1983

(JS-A-1-6).

ARGUMENT

THIS APPEAL SHOULD BE

DISMISSED FOR LACK OF A

SUBSTANTIAL FEDERAL

QUESTION . THE JUNE 1983

RE-ENACTMENT OF J51 DID NOT

DEPRIVE APPELLANTS OF ANY

CONSTITUTIONAL RIGHT.

RELIANCE COULD NOT

REASONABLY BE PLACED ON

EXEMPTION; AND THE NEWLY

ENACTED PROVISIONS SERVED A

LEGITIMATE PUBLIC PURPOSE

AND WERE REASONABLE IN

DURATION.

There is universal agreement that

retrospective tax legislation is not

necessarily unconstitutional. Welch iv.

Henry, 305 U.S. 134, 146 (1948); Wilgard

Realty Co., Inc. v. Commissioner of Internal

Revenue, 127 F.2d 514 (2d Cir.), cert.

denied, 317 U.S. 655 (1942); Matter of

Neuner v. Weyant, 63 AD2d 290, 298, 408

NYS2d 89, 94 (2d Dept., 1978), appeal

dismissed, 48 NY2d 974, 401 NE2d 434, 425

NYS2d 1030 (1979).

Neuner involved the constitutionality of

retroactive tax legislation, designed to delay

implementation of a real property tax

exemption. As shown by the federal and

state case law discussed therein, retroactive

tax legislation is generally upheld. With

reference thereto the opinion specifically

notes:

"Legislation readjusting rights and

burdens is not unlawful solely

because it upsets otherwise settled

expectations" (Usery „ Turner

Elkhorn Min. Co., 428 US 1, 16),

and "taxpayers have no vested right

either in any decision or in any

statute” (Harte v United States, 152

F Supp 793, 797, d 252 F2d 259).

Retroactive tax legislation con-

stitutes “legislative decision-making

in the economic domain and "[o]rdi-

narily, as long as the legislature's

economic policies fall within the

scope of its constitutional authority,

foster no invidious discrimination,

infringe no independent

constitutionally protected interest,

and reasonably serve legitimate

legislative purposes, the substantive

14

requirements of Due Process are

satisfied" (Matter of Cartridge Tel.,

535 F2d 1388, 1392).

63 AD2d at 299, 408 NYS2d at 95.

Accordingly, the standards to determine

whether retrospective tax legislation

constitutes a denial of due process are: (1)

whether the taxpayer took voluntary actions

in reasonable reliance on the superseded

law, (2) the strength of the taxpayer's claim

to benefits, (3) whether a valid public

purpose was served by retroactivity, and

(4) whether the period of retroactivity was

justifiable.

Applying these standards to the J5l

legislation involved herein leaves no doubt

that appellants’ claim of unconstitutionality

has no merit.

(1)

The first standard has two aspects: (a)

whether the taxpayer's reliance on the

superseded law was voluntary, and (b)

15

whether this reliance was justified based on

the forewarning of a change in the

legislation.

(a)

with reference to voluntary reliance,

appellants argue that the 351 program

induced them to purchase and renovate their

buildings and that no change in that

program was forewarned. They contend

that, since the courts have generally held

retroactive gift tax legislation to be

attend on the ground that a

taxpayer would not have voluntarily made

the gift if change had been foreseen, the

1983 J51 law by analogy must similarly be

held unconstitutional.

This strained argument has been

properly rejected by the courts. To give a

gift and to expect not to be taxed on it, is

hardly comparable to buying taxable real

property for reconstruction with the idea

-16-

that at some future date, if a variety of

statutory qualifications are satisfactorily met,

an application for a then to be determined

amount of exoneration from tax liability might

be granted. As stated in Welch v. Henry,

305 U.S. at 147: "Property taxes and

benefit assessments of real estate,

retroactively applied, are not open to the

objection successfully urged in the gift

cases."

Furthermore, the cases in which

retroactive gift taxes were struck down were

based on the important fact, not present

herein, that it was a new tax never before

imposed so that it could not have been

reasonably anticipated. Welch v. Henry, 305

U.S. at 147; Estate of Ekins v. Commissioner

of Internal Revenue, 797 F.2d 481, 484 (7th

Cir. 1986). The retroactive elimination of a

pre-existing tax exemption, as in the case at

bar, however, is vitally different from

-17-

retroactive imposition of a new tax.

Consequently, its validity is not governed

by the precedent of the retroactive gift tax

cases.

The significant distinction between the

two types of tax laws was clearly drawn in

Ekins. That case upheld the

constitutionality of a retroactive amendment

to the Internal Revenue Code, which "had

the effect of eliminating an exemption for :

transfers of life insurance policies from the

taxable value of decedent's gross estate."

797 F.2d at 482, 483 (emphasis added).

The court discussed two types of

retroactive tax legislation, one that imposes

a new tax, generally held to be

unconstitutional because it could not be

reasonably anticipated, and the other that

involves merely a fluctuation in tax rate,

which have been upheld as constitutional.

As stated in the opinion, an elimination of an

-18-

i

exemption is more analogous to the

retroactive increase of the tax base of an

already-existing tax approved in Darusmont

[449 U.S. 292] than of a retroactive

imposition of a wholly new kind of tax in the

early decisions like Coolidge [274 U.S. 531

or 282 U.S. 582]." 797 F.2d at 484. The

reasoning was that the tax was already in

existence and the law _ eliminating the

exemption merely reduced the categories of

property eligible for exclusion from the

pre-existing tax. Finally, the court opined

that, "[wJere we to reverse the United

States Tax Court's decision, we would be

taking the position that tax exemptions can

never be repealed or enacted because of

retroactivity." 797 F.2d at 485.

(b)

Nor can appellants succeed by citing

gift tax cases to show that it was reasonable

-19-

—

for them to have relied on re-enactment of

the expired statute without change.

Even if the J51 statute were like

retroactive gift tax case legislation, this still

would not make it unconstitutional. See,

e.g., Milliken v. United States, 283 U.S. 15

(1931), which upheld a retroactive gift tax.

"The broader focus is upon whether the

taxpayer's ‘reliance’ has been justified under

all the circumstances of the case and

whether his ‘expectations as to taxation

[have been] unreasonably disappointed.' "

Neuner, 63 AD2d at 300, 408 NYS2d at 96

(emphasis in original) (quoting Wilgard

Realty Co., Inc. v. Commissioner of Internal

Revenue, 127 F.2d at 517). Also cited in

Neuner is Matter of Chrysler Properties v.

Morris, 23 NY2d 515, 521, 245 NE2d 395,

398, 297 NYS2d 723, 727 (1969), which

indicates that at some point the reliance

factor becomes the predominant element.

-20-

Here, not only do the facts fail to show

reasonable reliance but, also, the law is well

settled that there is no vested right in

existing legislation or rules of law to

preclude their change or repeal. I.L.F.Y.

Co. v. Temporary State Hout ung Rent

Commission, 10 NY2d 263, 270, 176 NE2d

822, 826, 219 NYS2d 249, 254 (1961), appeal

dismissed, 369 U.S. 795 (1962); Matter of

West, 289 N.Y. 423, 431, 46 NE2d 501, 505

(1943), aff'd sub nom. Demorest v. City

Bank Farmers Trust Co., 321 U.S. 36

(1944); Preston Co. v. Funkhouser, 261

N.Y. 140, 144, 184 N. E. 737, 739, aff'd, 290

U.S. 163 (1933).

Even more particularly, there is no

vested right in statutory privileges and

exemptions. Gattis v. Gravett, 806 F.2d 778

(8th Cir. 1987); Brearley School, Limited v.

Ward, 201 N.Y. 358, 94 N.E. 1001 (1911);

Bronx Garment Center v. City of

-21-

—

New York, 199 Misc. 513, 106 NYS2d 720

(Sup. Ct., Bronx Co., 1951), aff'd, 279

App. Div. 1048, 113 NYS2d 257, leave to

appeal denied, 280 App. Div. 890, 115

NYS2d 524 (ist Dept., 1952). In Adelman v.

Adelman, 58 Misc 2d 803, 806, 296 NYS2d

999, 1004 (Sup. Ct., Queens Co., 1969), the

court explained that a right is not vested

unless it is something more than a mere

expectation based upon an anticipated

continuation of the general iaw.

In Matter of Grossman v. Wagner, 20

Misc 2d 707, 712, 192 NYS2d 557, 563 (Sup.

Ct., N.Y. Co., 1959), concerning a new

subdivision added to the J51 law eliminating

benefits for certain projects, the court

opined:

It is well settled that statutes

granting tax exemption and similar

statutes are, in the absence of a

contract to continue the exemptions

or other privileges granted,

revocable at the will of the

Legislature, and this is 80

notwithstanding the fact that persons

22

Lx — n

may have performed acts or

expended money in reliance upon the

statutes prior to their repeal or

modification. The rule is stated as

follows in Cooley's authoritative Law

of Taxation (4th ed., Vol. 2), in

section 701: "If the grant of an

exemption does not constitute a

contract it is revocable by the power

which made the grant. = @

perfectly well settled that an

exemption granted from motives of

state policy merely, and where the

state and the citizen do not meet on

a basis of bargain and consideration,

is to be deemed expressive only of

the present will of the state on the

subject; and the law granting it,

like laws in general, is subject to

modification or repeal in the

legislative discretion, and it is

immaterial that while it continued in

force persons have acted in reliance

upon it. * * * a state may, at its

pleasure, withdraw an _ exemption

which is a mere gratuity possessing

no element of a contract, even

though the corporation may have

incurred expense on the faith

thereof." (Citing in n. Grand Lodge

F. & A. Masons of Louisiana v. City

of New Orleans, 166 U.S. 143;

emphasis mine.) The cases .

| supporting athe language of the text

are legion.

‘ This position was adopted by the court at

a later stage of the Grossman case in

(Footnote Continued)

23

—— ̃ St

In light of the facts and the law,

appellants could not and should not have

relied on re-enactment of the enabling

legislation with all the benefits formerly

provided. The fact that the enabling statute

was allowed to expire, although the local law

remained in effect for a slightly longer term,

was alone a definite warning that J51

benefits were being subjected to review and

open to change in the enactment of any new

enabling statute. See "J-51's Uncertain

Future Slows Major Renovations", New York

Law Journal 11/17/82, p. 35. This was

noted by the Court of Appeals as follows:

[W]e are persuaded that petitioner

could not have justifiably relied on

the tax inducement as it existed in

(Footnote Continued)

dismissing the challenges to the J5l

amendment. Matter of London v. Wagner, 22

Misc 2d 360, 363-64, 195 NYS2d 550, 555

(Sup. Ct., N.Y. Co., 1959), aff'd, 13 AD2d

479, 214 NYS2d 647 (ist Dept., 1961), aff'd,

11 NY2d 762, 181 NE2d 759, 227 NYS2d 13

(1962).

-24-

oe, was „„

—

—

— ce Rei Ae

—

3

:

:

é

1

a

j

>

i

1982. New York City's J-51 program

-- although extended by local law to

1984 -- was subject to such changes

as may have been made in the State

enabling legislation itself, which

authorized the tax exemption in the

first instance. Petitioner was

forewarned that the state

authorization expired on June 1,

1982, thereby calling into question

the continued validity of the local

law after that date. With such

notice, petitioner may not now claim

he entertained a settled reasonable

expectation of entitlement to the

City's exemption based upon

renovation he did not commence until

April 1983.

70 NY2d at 457, 517 NE2d at 203, 522 NYS2d

at 488 (JS-A-6).

Moreover, both under the old as well as

the new statute, benefits do not come into

being until HPD determines. that all

conditions of the J51 program are met. The

record leaves no doubt that appellants were

well aware that, under the program, benefits

did not vest upon commencement, but only

after the project was completed and

application was made to HPD for a

determination of eligibility. Thus, even if

-25-

the statute had been re-enacted without any

change, there was still no assurance,

certainly no guaranty, that appellants would

receive benefits and, if so, to what extent.

The J51 program, like other legislated

tax exemptions, confers no vested rights.

For appellants to contend that they were

induced to buy SRO's for conversion to

cooperatives in reliance on the same

exemptions being granted without regard to

currently revealed public needs is manifestly

unreasonable and in no way impugns the

constitutionality of legislative changes made

to meet those needs.

5 Contrary to appellants’ assertion on

pages 6 and 8 of their Jurisdictional

Statement, there is no conflict between the

decision below and LeCroy Research Systems

Corporation v. Commissioner of Internal

Revenue, 751 F.2d 123 (2d Cir., 1984). In

LeCroy, the Internal Revenue Service was

estopped from retroactively applying a

regulation where specific prior assurances

(Footnote Continued)

-26-

(2)

As to the second standard (supra, p.

15), there is no strength to appellants’ claim

to benefits. As demonstrated above,

appellants had no legal right to rely on

benefits remaining unchanged (supra, pp.

21-23) and the facts do not support any

such reliance (supra, pp. 24-26). Thus,

there is no vested right and no valid claim

to the exemption.

(3)

Coming to the third standard (supra,

p. 15), there can be no doubt about the

public purpose served by the limited

retroactivity at issue in this case. As

stated by the Court of Appeals: "The

objectives of the retroactive application - to

forestall the loss of SRO housing and to

discourage the precipitous eviction of tenants

(Footnote Continued)

had been given that the regulation would

only be prospective.

27

are valid public purposes. 70 NY2d at

457, 517 NE2d at 203, 522 NYS2d at 488

(JS-A-5-6).

Accordingly, the retroactivity of the

legislation here, where the government had a

legitimate concern “that evasive measures

taken after introduction of a bill but before

enactment might frustrate the purpose of the

legislation", was necessary and properly

sanctioned. Matter of Neuner, 63 AD2d at

302, 408 NYS2d at 97 (quoting Purvis u.

United States, 501 F.2d 311 (9th Cir. 1974),

gert, denied, 420 U.S. 947 (1975)).

(4)

Finally, the period of retroactivity

meets the fourth standard of being justifiable

(supra, p. 15). Retroactivity in taxation

which would otherwise be so arbitrary as to

be unconstitutional may escape such

disability if it is not too great in point of

time." Wilgard Realty Co, Ime. V.

4.

Commissioner of Internal Revenue, 127 F. 2d

at 517, cert. denied, 317 U.S. 655 (five

years retroactivity upheld). The Court of

Appeals here observed that appellants,

themselves, conceded that the period of

retroactivity is not excessive (JS-A-5).

In sum, the decision of the Court of

Appeals correctly evaluated the facts and

applied the governing law. There is no

merit in appellants’ attempt to obtain further

judicial review.

-29-

“?

CONCLUSION

The appeal should be dismissed or,

alternatively, the judgment appealed from

should be affirmed.

5

5

i

;

March 2, 1988

N Respectfully submitted,

PETER L. ZIMROTH

: Corporation Counsel

of the City of New York

Attorney for Appellees

EDITH I. SPIVACK,

JOSEPH I. LAUER,

JUDITH R. GREENWALD,

LISA KAPLAN,

of Counsel

e i ‘ . Sa ae ho, Ft

‘ i ieee ä it ak GL tay Ke Dee SE psa nit u - .

-30-

5

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APPENDIX

= . ae eee

*

Statutory Provisions

New York Real Property Tax Law 94891

provides in part:

1. (a) Any eity to

which the multiple dwelling law is

applicable, acting through its local

legislative body or other governing

agency, is hereby authorized and

empowered, to and including June

first, nineteen hundred eighty-six,

to adopt and amend local laws or

ordinances providing that any

increase in assessed valuation of real

property shall be exempt from

taxation for local purposes, as

provided herein, to the extent such

increase results from:

(1) conversion of

buildings or structures on such

property to class A multiple

dwellings not used in whole or in

part for single room occupancy....

XR X *

1 As amended by L. 1983, c. 401, 86,

effective June 30, 1983, retroactive to June

1, 1982. The amendment deleted from

subdivision 1(a)(1) a reference to the

conversion of "class B multiple dwellings,"

added subdivision 13, and at 815 of e. 401

stated: "this act shall only apply to

conversions, alterations or improvements

commenced on or after July first, nineteen

hundred eighty-two."

A-1

13. Additional limitation.

The benefits of this section shall not

apply to any conversion of or

alteration or improvement to any

class B multiple dwelling or class A

multiple dwelling used in whole or in

part for single room occupancy,

regardless of the status or use of

the building after the conversion,

alteration or improvement unless

such conversion, alteration or

improvement is carried out with the

substantial assistance of grants,

loans or subsidies from any federal,

state or local agency or

instrumentality.

Section 11-243 (formerly §J51-2.5)? of the

Administrative Code of the City of New York

provides in part:

i. The benefits of this

section shall not apply: ;

x * *

1 (6) to any conversion of

or alteration or improvement,

commenced on or after July first,

nineteen hundred eighty-two, to any

class B multiple dwelling or class A

multiple dwelling used in whole or in

part for single room occupancy,

regardless of the status or use of

the building after the conversion,

alteration or improvement unless

such conversion, alteration or

improvement is carried out with the

2 As amended by Local Law No. 56 of

1983, enacted on November 7, 1983, to be

effective immediately and to be deemed to

have been in full force and effect since June

1, 1982.

A-2

substantial assistance of grants,

loans or subsidies from any federal,

state or local agency or

instrumentality.

3 According to §11(1) of Local Law No.

56, relating to the law's effective date,

"paragraph (6) of subdivision i... shall

apply only to conversions, alterations or

improvements commenced on or after July

first, nineteen hundred eighty- two“.

A-3