A US Appeals Court ruled on Tuesday against New York City in its long-running dispute with India and Mongolia over whether they owe about $47 million in taxes on property that houses staff assigned to consulates and United Nations missions. The demands by the city that hosts the United Nations headquarters for property taxes from several foreign governments had become an irritant in diplomatic relations, according to a US Department of State notice cited by the three-judge panel.
-- India, Mongolia do not owe nearly $47m to NYC
The June 2009 notice granted an exemption from property taxes on property owned by foreign governments and used to accommodate their personnel in the United States. The City of New York argued the properties should be taxable, despite the department's order under the Foreign Missions Act.
But the written ruling by the US Court of Appeals for the 2nd Circuit in New York said that under the notice "the City's tax liens are invalid and no taxes on property owned by foreign governments and used to house staff of permanent missions to the United Nations or of consular posts are due and owing."
New York began its litigation in 2003 and won approval four years later from the US Supreme Court to proceed with its claims. Turkey and the Philippines settled for $6 million and $9 million respectively and the City won judgements in Manhattan federal court for unpaid property taxes plus interest ordering India to pay more than $42.4 million and Mongolia to pay more than $4.3 million.
The City's chief lawyer, Michael Cardozo, said in a statement that the appeals court decision "provides a free ride for foreign countries owning certain properties in New York City while unnecessarily burdening local taxpayers." Cardozo said the City would ask the US Supreme Court to review the decision.
Aaron Stiefel, the lawyer who represented India and Mongolia, described the decision as "a complete victory both prospectively and retrospectively." The appeals court said the State Department notice "also applies to all property taxes that 'have been or will be assessed' on such property."
It said the United States "benefits financially much more than other countries from an international practice exempting staff residences from real property taxes, and it stands to lose the most if the practice is undermined." The cases are The City of New York v The Permanent Mission of India to the United Nations et al, US Court of Appeals for the 2nd Circuit, No 08-1805 and 08-1806.