21 N.Y.3d 233
NY2013Background
- The Empire Zones Program originated from the 1986 EDZ Act and was renamed in 2000 to emphasize broader business development and job creation incentives.
- Qualified businesses could obtain certificates of eligibility and claim tax credits; eligibility depended on wage, employment, and investment goals.
- The 2009 Amendments added new criteria (shirt-changing and a 1:1 benefit-cost standard) and directed a retroactive review of certified participants, with the program closed to new participants.
- The 2009 Amendments were intended to apply to years starting on/after January 1, 2008, but retroactivity was not initially enacted; later August 2010 clarification treated decertifications as retroactive.
- Plaintiffs certified before 2008 were decertified beginning June 29, 2009 for violations under the new criteria, prompting multiple lawsuits challenging retroactivity.
- The courts split: some decisions held retroactivity unconstitutional under due process; others upheld certain recoveries or limited retroactivity, leading to consolidated appeals heard by the Court of Appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether retroactive application of the 2009 Amendments violates due process | Plaintiffs relied on old law and forewent alterations; retroactivity punishes past behavior. | Legislature validly amended the law to curb abuses and raise revenue; retroactivity is permissible under Replan factors. | Retroactive application violates due process. |
| Whether the 2009 amendments effect constitutes an unconstitutional taking | Retroactive decertifications deprive property rights without just compensation. | Tax credits are not vested property rights; retroactivity does not amount to a taking. | Not a taking; due process analysis governs. |
| Whether the August 2010 clarification changed the retroactivity analysis | The 2010 act was a substantive retroactivity, extending the period. | 2010 clarification was merely interpretive, not expanding retroactivity. | Retroactivity remains unconstitutional based on earlier analysis. |
| Consistency of 5 NYCRR 11.9 (c) (2) with General Municipal Law § 959 | Regulation improperly narrows consideration to 2001-2007 BARs, conflicting with total remuneration and investments. | Regulation is a rational interpretation that aligns with statutory language and practical program administration. | Regulation is rational and not arbitrary or capricious. |
| Whether due process analysis requires considering all 1:1 benefit-cost criteria for all years | Full retroactive application penalizes broadly; lack of warning harms reliance. | Legislature targeted program abuses; retrospective effects are justified. | Court affirms the due process finding against retroactive application. |
Key Cases Cited
- Landgraf v. USI Film Products, 511 U.S. 244 (U.S. 1994) (due process retroactivity balancing framework; fairness and expectations)
- Matter of Replan Dev. v Department of Hous. Preserv. & Dev. of City of N.Y., 70 N.Y.2d 451 (N.Y. 1987) (multifactor balancing test for retroactive tax effects)
- Welch v. Henry, 305 U.S. 134 (U.S. 1938) (public policy considerations in retroactivity of taxes)
- United States v. Carlton, 512 U.S. 26 (U.S. 1994) (premise that tax legislation is not a guaranteed contract right; retroactivity debated)
- Houck v. Little River Drainage Dist., 239 U.S. 254 (U.S. 1915) (takings discussion linking exigent circumstances to retroactivity)
- Concrete Pipe & Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern Cal., 508 U.S. 602 (U.S. 1993) (takings vs. due process; different standards apply)