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Reclaim Your MTA Taxes!

GARDEN CITY, NY, September 25, 2012 -- A New York State Supreme Court justice recently declared the Metropolitan Transportation Authority ("MTA") payroll tax (commonly referred to as the Metropolitan Commuter Transportation Mobility Tax or MCTMT) unconstitutional, holding that the tax was improperly enacted by the New York State legislature.

What Is The MTA Tax?
Enacted in 2009 as part of New York State's effort to help offset a record MTA deficit, employers and self-employed individuals in the Metropolitan Commuter Transportation District ("MCTD"), which is comprised of New York City (the Bronx, Brooklyn, Manhattan, Queens, and Staten Island), Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester counties, must pay the MTA a tax at the rate of 0.34 percent of payroll. Employers with quarterly payroll of less than $312,500 and self-employed individuals with net self-employment earnings of less than $50,000 are not subject to the MTA payroll tax, per a recent ruling.

Why Is The MTA Tax Unconstitutional?
The NYS Supreme Court found the MTA payroll tax to be a "special law" - a law that affects one or more, but not all counties, since the tax only applies to counties within the MCTD. A special law such as this can be constitutionally upheld if the law serves a "substantial state interest" or the State followed certain procedural requirements in enacting the legislation, among other factors. In this instance, the court found that the subject legislation did not serve a substantial state interest and the required procedures for enacting a special law were not followed. Therefore, the MTA payroll tax was deemed unconstitutional.

Though the decision declared the tax unconstitutional, it remains in place as the NYS Supreme Court considers appeals from the MTA and New York State.

What Can You Do?
It may be months before the appeals court decides the fate of the levy, and there are no guarantees. On the chance that the recent ruling stands, there is a small window of opportunity for taxpayers to formally stake a claim to get back monies paid toward the tax. A protective refund claim will need to be filed by filing an amended tax return. Due to a three year statute of limitations in New York to file an amended tax return, employers have until November 2, 2012 to reclaim monies paid from March 2009 to September 2009. New York State will announce the process in early October. Each situation is different, and any taxpayer who is affected should consult with their tax advisors to determine how this decision impacts their specific situation. Remember, should a taxpayer go through the expense of filing an amended return, and the ruling is overturned on appeal, the original taxes will still be owed.

For more information on the MTA tax, or other tax or accounting issue, please contact Israeloff Trattner & Co., CPAs, PC at 516-240-3300.

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