India wins property tax battle with NY City

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New York, NY: India has won a seven-year legal battle with New York City with a federal appeals court ruling that nations with diplomatic housing do not have to pay city property taxes.

The unanimous ruling by the federal Second Circuit Court of Appeals in Manhattan on August 17 lets India off the hook for $42.5 million in back taxes and interest, and Mongolia for another $4.3 million on their missions to the United Nations.

The three-judge  panel  ruled a controversial June 2009 decision by the State Depart-ment to exempt diplomatic staff residences from $7 million a year in property taxes also applied retroactively to the past-due bills.

The Foreign Missions Act allows the State Department to issue tax exemptions that pre-empt state and municipal tax laws, the court said.

“While there is perhaps some unfairness to the city…this unfairness inheres in the federal government’s unquestioned supremacy in the management of foreign relations,” it said.

“Certainly, we’re thrilled with the result,” said Aaron Stiefel, a lawyer, who represented India and Mongolia in the litigation. “It’s a complete victory,” he said. “We got everything we wanted.”

The appeals decision nullifies a lower court’s finding in 2008 that India owed $42.5 million in taxes related to a 26-story tower in Manhattan near the United Nations with 20 floors of apartments occupied by diplomatic employee.

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