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New York’s MTA Payroll Tax Found Unconstitutional

Loeb Loeb LLP - Los Angeles Office

February 1, 2013

Previously published on January 2013

New York enacted the Metropolitan Commuter Transportation Mobility Tax, often referred to as the Metropolitan Transportation Authority payroll tax, in 2009 in response to a large MTA budget shortfall. The MTA payroll tax is a quarterly tax on certain employers and self-employed individuals engaging in business within New York’s metropolitan commuter transportation district (MCTD), which includes New York (Manhattan), Bronx, Kings (Brooklyn), Queens, Richmond (Staten Island), Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess and Westchester counties. New York distributes the tax proceeds collected from taxpayers to the MTA.

Last fall, a New York State Supreme Court justice declared the MTA payroll tax unconstitutional. The lawsuit was brought by Edward P. Mangano, a Nassau County executive, whose constituents were directly affected by the tax. Four prior lawsuits challenging the constitutionality of the MTA payroll tax had been dismissed. The court held that the MTA payroll tax is a “special law” because it applies only to counties within the MCTD. A special law will be upheld as constitutional if, among other factors, the law serves a “substantial state interest” or New York followed certain procedural requirements in enacting the legislation. The court found the MTA payroll tax unconstitutional because the legislation did not serve a substantial state interest and New York did not follow the required procedures for enacting a special law. The MTA has appealed the decision.

Taxpayers should consider filing protective refund claims for periods in which the three-year statute of limitations is closing in the event that the decision is not overturned.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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