The deadline is quickly approaching for businesses that want to pursue refunds on money paid to the controversial MTA payroll tax. New York business owners have to act fast if they want to try and get back all the money they’ve paid toward the MTA payroll tax, though it may be months before an appeals court
decides whether the State Supreme Court decision that ruled that the payroll taxes imposed by the MTA on business and institutions throughout the metropolitan area are unconstitutional will be upheld. Businesses will have until November 2, 2012 to file an amended tax return for monies paid between March 2009 and December 2009.
The MTA’s Payroll Mobility Tax was first created in 2009 to help the transit authority close a record $2 billion deficit. Pursuant to this tax, 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) and Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester counties, must pay the MTA a tax at the rate of 0.34 percent of payroll. Based on recently passed legislation, 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, as are certain small businesses and private schools.
The very first lawsuit challenging the tax was initiated by Campolo, Middleton & McCormick on behalf of Bill Schoolman, president of Classic Coach bus company, based in Bohemia. Schoolman and the firm attorneys crusaded around Long Island raising money and drumming up support to challenge the
constitutionality of the tax on the grounds that it did not receive the required two-thirds vote from the legislature. The plaintiffs also claimed that it was grossly unfair to tax businesses and governments in the suburban counties for services they would never use.
The counties of Nassau and Suffolk picked up on the suit after meeting with the firm and adopting the firm’s legal brief almost word for word. On Wednesday, August 22, 2012 a New York State Supreme Court Justice ruled that the tax should be voided because it did not receive the two-thirds vote from the state legislature and was imposing a tax on one region that does not serve a substantial state interest.
Because there is a three-year statute of limitations to file an amended tax return in New York, employers have until November 2, 2012 to formally stake their claim and file amended returns on the money they paid from March 2009 to September 2009. Affected taxpayers should consult with their legal and tax advisors to determine how this decision impacts their specific situation and consider filing protective refund claims for MTA payroll taxes previously remitted.