author: Kaye, J. Meyer, J.

text:
    In the Matter of the Claim of Daniel Thomas, Claimant, v Bethlehem Steel Corporation, Respondent. Workers’ Compensation Board, Appellant.
    Argued September 10, 1984;
    decided October 18, 1984

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Morris N. Lissauer, Peter H. Schiff, Carlin Meyer and Reed Brody of counsel), for appellant.
    I. The court below erred in failing to recognize that the 1980 amendments to the Workers’ Compensation Law that liberalized compensation for hearing loss extended, rather than restricted, the applicable limitations period so as to permit the claim here at issue. (Matter of Collins v Aluminum Co., 44 NY2d 692; Matter of Citny v Atlas Steel Casting Co., 33 AD2d 853; Matter ofDi Matteo v Duche & Son, 33 AD2d 1089; Matter of Shannon v Introne, 80 AD2d 834, 53 NY2d 929; McCluskey v Cromwell, 11 NY 593.) II. The court below’s interpretation of the statute is untenable; its construction is contrary to the liberalizing design of the amendments to section 49-bb of the Workers’ Compensation Law and would defeat their underlying purpose and policy. (People v Ryan, 274 NY 149; Matter of Petterson v Daystrom Corp., 17 NY2d 32; Matter of Livingston St., 82 NY 621; Hulbert v Clark, 128 NY 295; Matter of Mlodozeniec v Worthington Corp., 9 AD2d 21, 8 NY2d 918, 364 US 628; Robinson v Robins Dry Dock & Repair Co., 238 NY 271; Becker v Huss Co., 43 NY2d 527; Chase Securities Corp. v Donaldson, 325 US 304; Matter of Schmidt v Wolf Contr. Co., 269 App Div 201, 295 NY 748; Matter of Holbrook v New York State Employees’ Retirement System, 79 AD2d 63, 54 NY2d 603.)

      Ronald E. Weiss, Marvin H. Mason and J. Joseph Wilder for respondent.
    I. The court properly construed the language of section 49-bb so as to disallow the instant claim. (Finger Lakes Racing Assn. v New York State Racing & Wagering Bd., 45 NY2d 471; Civil Serv. Employees Assn. v County of Oneida, 78 AD2d 1004, 53 NY2d 603; Levine v Bornstein, 4 NY2d 241; Rankin v Shanker, 23 NY2d 111; Matter of Mulligan v Murphy, 14 NY2d 223; Sessa v State of New York, 63 AD2d 334, 47 NY2d 976; Chase Securities

      Corp. v Donaldson, 325 US 304; Matter of Chrysler Props. v Morris, 23 NY2d 515; Matter of Mulligan v Murphy, 14 NY2d 223; Matter of McGoldrick v New York Post, 20 AD2d 595.) II. Prospective application of the language of section 49-bb providing a further limitation period must prevail over retroactive application reviving barred claims. (United States v Kubrick, 444 US 111; Sessa v State of New York, 63 AD2d 334, 47 NY2d 976; Matter of Beary v City of Rye, 44 NY2d 398; Matter of Mulligan v Murphy, 14 NY2d 223; Matter of Deutsch v Catherwood, 31 NY2d 487; Matter ofMcGoldrick v New York Post, 20 AD2d 595; 35 Park Ave. Corp. v Campagna, 48 NY2d 813; Wilson Mem. Hosp. v Axelrod, 76 AD2d 968, 53 NY2d 690; Matter of Mlodozeniec v Worthington Corp., 9 AD2d 21, 8 NY2d 918, 364 US 628.) III. Revival of stale claims violates the due process clauses of the United States and New York Constitutions. (Hopkins v Lincoln Trust Co., 233 NY 213; United States v Kubrick, 444 US 111; Wilson v Johns-Manville Sales Corp., 684 F2d 111; Guaranty Trust Co. v United States, 304 US 126; Braswell v Flintkote Mines, 723 F2d 527; Campbell v Holt, 115 US 620; Chase Securities Corp. v Donaldson, 325 US 304; Matter of Chrysler Props, v Morris, 23 NY2d 515; Gallewski v Hentz & Co., 301 NY 164.)
   OPINION OF THE COURT

Kaye, J.

Among recent amendments to the Workers’ Compensation Law relating to occupational hearing losses is a provision that employees whose disablement and knowledge of disablement occurred prior to October 1, 1980 would have six months from such date to file their claims (L 1980, ch 324). The question presented is whether this provision should have retroactive application. We conclude that the provision applies only to claims which were viable on October 1, 1980, and not to all claims where disablement and knowledge existed prior to October 1, 1980, and we therefore affirm the order of the Appellate Division dismissing the claim for compensation, with costs.

In 1980, the statutory scheme governing compensation claims for occupational hearing losses was altered in several respects. Formerly, an employee seeking compensation for such loss was required to be separated from his job for six months, in order to permit time to ascertain the extent of the loss and allow for possible restoration or improvement of hearing. Chapter 324 of the Laws of 1980 reduced the waiting period to three months, in conformity with new medical knowledge that the degree of hearing loss could be determined in a shorter time, and it also permitted a worker to be removed from exposure to the harmful noise itself, as by ear protection devices, rather than requiring separation from employment. Additionally, the amendment provided for a “date of discovery” exception to the Statute of Limitations; irrespective of the two-year limitations period, claims were timely if brought within 90 days after knowledge that the loss of hearing was due to the nature of the employment. Finally, and most directly pertinent, where disablement and knowledge of an occupational hearing loss occurred prior to October 1, 1980, the amended law, in section 49-bb, for the first time provided that an employee shall have six months from such date to file a claim.

Claimant retired from employment with respondent, Bethlehem Steel Corporation, a self-insured employer, on August 1, 1970. On January 16, 1981 — some IOV2 years later — he filed a claim for compensation for an alleged occupational hearing loss. Bethlehem rejected the claim on the ground, inter alia, that it was not filed within two years from the date of disablement, as required by sections 28 and 40 of the Workers’ Compensation Law in effect at the time of claimant’s retirement. The referee disallowed the claim as time-barred, but was reversed by a divided panel of the Workers’ Compensation Board, appellant herein, on the theory that section 49-bb, as amended by chapter 324 of the Laws of 1980, creates a six-month grace period for filing claims. On this same theory, four other claims against Bethlehem, similarly time-barred under the law in effect at the time of disablement, were allowed by the Board.

Each party contends, with some force, that the amendment to section 49-bb supports its position — the Board relying on what it characterizes as the unambiguous language of the provision, and Bethlehem relying on the allegedly clear intendment of the amendments which, while broadening coverage, contemplated limitations periods which would be defeated by the wholesale retroactive application of the section. What these competing contentions point to is not a ready answer to the question presented, but an ambiguity which must be resolved outside the provision itself.

As a threshold matter, this is not as the Board argues a case in which the court should defer to the construction adopted by the agency administering the statute (see Matter of Howard v Wyman, 28 NY2d 434, 438). Rather, the question is one of statutory analysis dependent only on an accurate apprehension of legislative intent, and there is little reason to accord weight to the Board’s interpretation of the amendment (see Kurcsics v Merchants Mut. Life Ins. Co., 49 NY2d 451, 459).

An amendment will in general have prospective effect only, unless its language indicates that it should receive a contrary interpretation (McKinney’s Cons Laws of NY, Book 1, Statutes, § 52, pp 101-102). The language of the amendment here in issue does not clearly indicate that it should be applied retroactively, nor does examination of the available legislative history offer up any definitive expression that it was intended to have unlimited retrospective application. While contained in the Governor’s Bill Jacket for the amendments are several expressions of alarm that the legislation would expose employers to barred claims, there is countervailing indication that the amendments in toto would engender minimal additional costs to employers and insurers, and that the premium increases, if any, resulting from the entire bill would be insignificant. If the amendment were given unlimited retroactivity as the Board urges, employers would be exposed to the revival of claims that became stale decades ago. It is undisputed by the Board — which is surely in the best position to know — that, in addition to the five claims already allowed, several hundred others, some as old as 30 years, already exist at the Board panel and law judge levels. A retroactive application would thus open the door to hundreds of stale claims the defense of which may, by virtue of the passage of time, now be impossible.

From the absence of clear legislative indication that the statute be applied retrospectively, the potential drastic consequences of such an interpretation, and the balance of the legislative scheme, we are persuaded that the measure should not be given retroactive application (see Matter of Beary v City of Rye, 44 NY2d 398). Subdivision 2 of section 49-ee of the Workers’ Compensation Law, at the time of the amendment in question, provided that “in no event shall any employer * * * be liable for the payment of any claim that would otherwise * * * be barred by any of the limitations contained in sections twenty-eight and forty of this chapter.” In the 1980 amendments, this provision was left undisturbed. Now to give the amended section 49-bb retroactive application, reviving claims that were already barred at the time of its enactment, would require us to ignore the provisions of section 28 of the Workers’ Compensation Law. On the other hand, construing the amendment to section 49-bb to apply only to claims which were viable at October 1, 1980 would give force to both sections of the statute, so that neither need be ignored (see McKinney’s Cons Laws of NY, Book 1, Statutes, § 192; see, also, Minkowitz, Practice Commentary, McKinney’s Cons Laws of NY, Book 64, Workers’ Compensation Law, § 49-bb, 1983-1984 Pocket Part, pp 247-248).

We read the six-month “grace” period for employees whose disablement and knowledge of disablement occurred prior to October 1,1980 as a transitional measure for those with viable claims at October 1,1980, who could by virtue of the amendment otherwise have had their remaining time to file claims reduced even below three months. This interpretation provides a rational explanation for the amendment, it puts section 49-bb in harmony with the remainder of the statute, and it avoids revival of long-barred claims, and is therefore to be preferred in the absence of clear contrary expression from the Legislature.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Meyer, J.

(dissenting). Viewed in relation to its wording and the setting in which enacted, the legislative mandate contained in the sixth sentence of section 49-bb of the Workers’ Compensation Law as amended by chapter 324 of the Laws of 1980 that, “An employee whose disablement and knowledge of disablement occurred prior to October first, nineteen hundred eighty shall have six months from such date to file a claim” can have no other meaning than that claims otherwise barred by limitations on October 1, 1980 were revived subject only to the further limitation that such a revived claim be presented on or before March 31, 1981. I, therefore, respectfully dissent.

Considered solely on the basis of the words used the sentence is unambiguous. The natural and obvious import of those words is that it covers all employees whose disablement and knowledge of disablement occurred at any time prior to October 1, 1980. Had the Legislature intended the construction now adopted by the majority, it could readily have added “and not otherwise barred by the limitations contained in sections twenty-eight and forty of this chapter” and, indeed, need only have looked to the second sentence of subdivision 2 of section 49-ee in order to find the appropriate language. The conclusion that the amendment does not clearly indicate that it shall be applied retroactively (majority opn, at p 154) is a strained reading of its language, inconsistent with the normal reading of “an employee” to embrace “any” employee who meets the description that follows. It would, of course, have been possible for the Legislature to have tacked on to the end of the sentence the phrase “even though his claim would otherwise be barred by the limitations contained in sections twenty-eight and forty of this chapter” and thus made indelibly clear its intention. We have not, however, normally required such redundancy in order to establish what the language used, read as commonly understood, imports.

Nor can I agree with the majority’s conception (majority opn, at p 154) that the 1980 amendment fixed “limitations periods which would be defeated by the wholesale retroactive application of the section.” True, the 1980 amendment added to section 49-bb, as a new fifth sentence, preceding the new sixth sentence quoted in the first paragraph of this opinion, the provision that, “A claim for loss of hearing under this article shall not be barred by the failure of the employee or his dependents to file a claim within the two year period prescribed by section twenty-eight of this chapter, provided such claim shall be filed after such two year period within ninety days after knowledge that the loss of hearing is or was due to the nature of the employment.” That sentence, however, added no limitations period that was not already applicable by reason of the proviso in the second sentence of subdivision 2 of section 49-ee that “in no event shall any employer, including the last employer, be liable for the payment of any claim that would otherwise, and regardless of the date of disablement fixed herein, be barred by any of the limitations contained in sections twenty-eight and forty of this chapter.”

That proviso, contained in an article devoted solely to occupational loss of hearing, by referring to “any of the limitations” contained in sections 28 and 40, made applicable to loss of hearing cases all of the limitations provisions of those sections. Section 28 contained two such provisions: one establishing two years after accident or death as a general period of limitations and the other covering disablement from specified causes, not including loss of hearing in the listing but nonetheless made applicable to loss of hearing by the subdivision 2 of section 49-ee proviso quoted above, that a claim “shall not be barred by the failure of the employee to file a claim within such period of two years, provided such claim shall be filed after such period of two years and within ninety days after disablement and after knowledge that the disease is or was due to the nature of the employment.” Subdivision 1 of section 40 required as to an occupational disease that it be contracted within 12 months previous to the date of disablement, but that with respect to disablement resulting from the same list of causes set forth in section 28 (other than those resulting from radiation) the right to compensation “shall [not] * * * be barred by the failure * * * to file a claim within the two-year period prescribed by section twenty-eight, provided such claim shall be filed after such period of two years, within ninety days after disablement and after knowledge that the disease is or was due to the nature of the employment.” Subdivision 2 of section 40 removed radiation diseases from the 12 months contraction requirement but provided that the right to compensation would not “in such cases be barred by the failure * * * to file a claim within the two-year period prescribed by section twenty-eight, provided such claim shall be filed after such period of two years, within ninety days after disablement or death and after knowledge that the disablement or death was due to the nature of the employment.”

It is, thus, apparent that the fifth sentence added to section 49-bb in 1980 fixed no limitations period with respect to occupational loss of hearing that was not already applicable to such a claim, by reason of the incorporation in article 3-A, through subdivision 2 of section 49-ee of the limitations provisions of sections 28 and 40. Indeed the only difference between the proviso in the fifth sentence of section 49-bb and the provisos in sections 28 and 40 is that the former required filing within 90 days after knowledge alone whereas the latter two limited the time for filing to 90 days after disablement and knowledge. That distinction is, however, without a difference in light of the use in sections 28 and 40 of the conjunctive, and of the direction in subdivision 2 of section 49-ee that in no event should the employer be liable for a claim “that would otherwise, and regardless of the date of disablement fixed herein, be barred” under any of the limitation contained in sections 28 and 40. Under any of the three provisions, therefore, a loss of hearing claim is not barred though filed more than two years after disablement if filed within 90 days after knowledge that loss of hearing is or was due to the nature of the employment.

The only other change made by chapter 324 of the Laws of 1980 was to reduce the waiting period from six months to three months and make it run from removal from exposure to harmful noise rather than separation from work for the last employer in whose employment the employee was exposed to harmful noise. The date of disablement from which the two-year period ran was thus placed three months earlier than it had been under the pre-1980 law. That, however, affects only the applicability of the two-year period, not the 90 days after knowledge provision which applies only to a “claim * * * filed after such period of two years” but in no way limits how long after the two-year period a “knowledge” claim can be filed. The 90-day provision is thus an alternate to the two-year limitation, independent of it, and requiring only that, whenever disablement occurred in fact, the claim be made within 90 days after knowledge that loss of hearing was due to the nature of employment. Reduction of the waiting period by three months therefore necessitated no extension as to the knowledge provision, particularly since that provision had been part of the law for more than 20 years (cf. Parmenter v State of New York, 135 NY 154, 167; see Gilbert v Ackerman, 159 NY 118, 124) and since the bill which had been passed by both houses of the Legislature on June 12, 1980 and was signed into law on June 19,1980, was not effective until October 1, 1980, more than three months (and therefore more than 90 days) thereafter.

Notwithstanding that fact, the Legislature in amending section 49-bb directed that any employee “whose disablement and knowledge of disablement” (emphasis supplied) occurred prior to October 1, 1980 would have until March 31, 1981 to file a claim. Had it intended to protect only those whose two-year “disablement” period of limitations would be affected by the 1980 amendment, it need only have said “whose disablement occurred prior to October 1, 1980 and who had not prior to that date had knowledge for more than ninety days that the loss of hearing is or was due to the nature of the employment shall have six months from such date to file a claim.” Having adopted the language that it did and thus gone beyond what the waiting provision reduction necessitated, the Legislature must be held to have intended what the clear import of the words it used conveyed — that a six-month grace period was granted to any employee whose disablement and knowledge of disablement occurred prior to October 1, 1980, no matter how long prior to that date. “[W]e must assume that the Legislature did not deliberately place a phrase in the statute which was intended to serve no purpose” (Matter of Smathers, 309 NY 487, 495; McKinney’s Cons Laws of NY, Book 1, Statutes, § 98, subd a, p 223). Moreover, the 1980 amendment having been enacted on the recommendation of the Workers’ Compensation Board, as the memoranda of the Board and of the sponsor contained in the Governor’s Bill Jacket show, the Board in construing and applying the statute was boiind to effectuate the purpose of the Legislature as thus declared (Matter of Mulligan v Murphy, 14 NY2d 223, 226; Matter of Hotel Assn. v Weaver, 3 NY2d 206, 211).

The conception of the majority (majority opn, at pp 154-155) and of the Appellate Division (95 AD2d 118, 119, n) that there are several hundred other claims and that retroactive application would, therefore, be unfair to employers is bottomed upon nothing more in the record that the statement of Bethlehem’s attorney to the Board panel who heard the appeal that “there are many many cases that involve this very issue that are awaiting decision in one step or another.” We have not normally accepted such argument as fact. Nor is there support in the record for the argument now made before us, though not to the Board panel, that employers may be prejudiced by not having preserved evidence for longer than 30 months after an employee’s date of retirement. The argument is, in any event, irrelevant in light of the alternative “90-day knowledge” limitation provision, in view of which records could not under the prior law safely be destroyed after 30 months, or at any fixed time. The present situation is thus clearly distinguishable from that of Matter of Beary v City of Rye (44 NY2d 398, 413), on which the majority rely, and which emphasized the absence of prior reason to gather and preserve evidence.

As a further reason for the conclusion it reached, the Appellate Division suggested that to construe the amendment otherwise would put in doubt its constitutionality. But section 18 of article I of the State Constitution (“Nothing contained in this constitution shall be construed to limit the power of the legislature to enact laws * * * for the payment * * * of compensation for injuries to employees”) is a complete answer to that suggestion insofar as it rests on the State Constitution (Koutrakos v Long Is. Coll. Hosp., 39 NY2d 1026, affg on opn below 47 AD2d 500, 505-506; Matter of Schmidt v Wolf Contr. Co., 295 NY 748, affg without opn 269 App Div 201, 207; Barrencotto v Cocker Saw Co., 266 NY 139,143). No more of a problem is the due process clause of the Fourteenth Amendment to the Federal Constitution for it is now well settled that the Legislature may constitutionally revive a claim barred by limitations except when the effect of the lapse of time has been to invest the holder of property with title to it (Chase Securities Corp. v Donaldson, 325 US 304; Campbell v Holt, 115 US 620; Gallewski v Hentz & Co., 301 NY 164; Robinson v Robins Dry Dock & Repair Co., 238 NY 271, app dsmd 271 US 649; Barrett v Wojtowicz, 66 AD2d 604; Matter of Strang, 117 App Div 796; see Electrical Workers v Robbins & Myers, 429 US 229; House v Carr, 185 NY 453), or when a judgment, having become final and unalterable because there was no further right of appeal, conferred a vested right and thus constituted property of which the owner could not be deprived by the retroactive grant of a right of appeal (Matter of Chrysler Props, v Morris, 23 NY2d 515, 519). Unlike a judgment, however, the running of a Statute of Limitations creates no such vested or property right. To the contrary, although it bars a remedy on the claim so long as it remains effective, it does not destroy the right or foreclose a change in the legislative policy which resulted in imposition of the bar (Chase Securities Corp. v Donald son, 325 US, at p 314; House v Carr, 185 NY 453, 458, supra; Hulbert v Clark, 128 NY 295, 297-298; Matter of Wood v Queen City Neon Sign Co., 282 App Div 106, 111, mot for lv to app den 306 NY 979).

Finally, Matter of McCann v Walsh Constr. Co. (306 NY 904); Robinson v Robins Dry Dock & Repair Co. (238 NY 271, supra) and Matter of Mlodozeniec v Worthington Corp. (9 AD2d 21, affd without opn 8 NY2d 918, cert den 364 US 628), all applied limitations provisions of the Compensation Law retroactively, and in Matter ofMcGoldrick v New York Post (20 AD2d 595), upon which Bethlehem relies as a contrary decision, the Appellate Division noted that the amendment there involved did not grant employees any extension of time for enforcement of their rights.

There being neither constitutional inhibition nor basis in the rules of construction for refusing to apply the 1980 amendment as did the Workers’ Compensation Board, the order of the Appellate Division should be reversed and the decision of the Board reinstated.

Judges Jones, Wachtler and Simons concur with Judge Kaye; Judge Meyer dissents and votes to reverse in a separate opinion in which Chief Judge Cooke and Judge Jasen concur.

Order affirmed, with costs.

      . Supporting a conclusion that the language of the provision is not free of ambiguity is the fact that another Board panel in another case, Reinhardt v Buffalo Sheet Metals
        Workers’ Compensation Bd., applied the same statute to similar facts, and unanimously reached the opposite result.

      . Contrary to the view of the dissent (at p 157), the date of discovery exception was made applicable to occupational hearing losses by the 1980 amendment to section 49-bb. While sections 28 and 40 of the Workers’ Compensation Law each previously contained date of discovery limitations periods, these were by their terms limited to certain diseases and occurrences, not including occupational hearing losses generally. (See Memorandum of Sponsor, Governor’s Bill Jacket, L 1980, ch 324; see, also, Minkowitz, Practice Commentary, McKinney’s Cons Laws of NY, Book 64, Workers’ Compensation Law, § 49-bb, 1983-1984 Pocket Part, p 247.) On this appeal, appellant Workers’ Compensation Board explicitly recognizes the inapplicability of the 90-day provision to occupational hearing losses before the 1980 amendment.

      . That the sponsor’s memorandum referred to in the majority’s footnote 2 indicates that he was unaware that section 49-ee gave a right to file a claim within 90 days after knowledge of an occupationally related loss of hearing cannot change the fact that the Legislature had earlier so provided (see People v Graham, 55 NY2d 144, 151; People v Whidden, 51 NY2d 457, 462). Of interest in that connection is the fact that the memorandum of the Workers’ Compensation Board in the same Bill Jacket makes no reference to the 90-day provision. Nor, of course, can the Practice Commentary change what section 49-ee provided (see Matter of Lorie C., 49 NY2d 161, 169).

      . By chapter 659 of the Laws of 1984, effective January 1,1985 but applicable only to disablement or death occurring on or after that date, section 40 is repealed and the 90-day period of section 28 is enlarged to two years and made to run from when “the claimant knew or should have known” that his disability was due to the nature of his employment.


source: Caselaw Access Project

author: Simons, J.

license: Public Domain

text:
    In the Matter of Eric P. von Wiegen, an Attorney, Appellant. Committee on Professional Standards, Third Judicial Department, Respondent.
    Argued September 6, 1984;
    decided October 16, 1984

      POINTS OF COUNSEL

      Robert M. Cohen and Arthur L. Rosen for appellant.
    I. There is no evidence to support the charges that were sustained by the court below. (Rochester Tel. Corp. v Green Is. Constr. Corp., 51 NY2d 788; Matter of Capoccia, 59 NY2d 549; Matter of Sutton, 70 AD2d 467, 49 NY2d 799; Little v Streater, 452 US 1; Fedorenko v United States, 449 US 490; Addington v Texas, 441 US 418; Matter of R. M. J., 455 US 191.) II. It is unconstitutional to ban direct mail advertising to accident victims and their families. (Matter of Koffler, 51 NY2d 140; Matter of Greene, 54 NY2d 118; Bates v State Bar of Ariz., 433 US 350; Matter of R. M. J., 455 US 191; Central Hudson Gas & Elec. v Public Serv. Comm., 447 US 557; Virginia Pharmacy Bd. v Virginia Consumer Council, 425 US 748; Linmark Assoc. v Willingboro, 431 US 85; Ohralik v Ohio State Bar Assn., 436 US 447; Bigelow v Virginia, 421 US 809.) III. Appellant has not been using a trade name in violation of DR 2-102 (B), and if DR 2-102 (B) prohibits use of the motto employed by appellant, it is unconstitutional. (Matter of Weinstock, 40 NY2d 1; New York Criminal & Civ. Cts. Bar Assn. v Jacoby, 61 NY2d 130; Bishop v Committee on Professional Ethics & Conduct, 521 F Supp 1219; Virginia Pharmacy Bd. v Virginia Consumer Council, 425 US 748; Bigelow v Virginia, 421 US 809; Friedman v Rogers, 440 US 1.) IV. The sanction of suspension is not warranted on the facts of this case and must be vacated. (Matter of Axtell, 257 NY 210; Matter of Hawes, 217 NY 602; Matter of Flannery, 212 NY 610; Matter of Kelly, 23 NY2d 368; Matter of Pell v Board of Educ., 34 NY2d 222; Sniadach v Family Fin. Corp., 395 US 337; Fuentes v Shevin, 407 US 67; Boddie v Connecticut, 401 US 371; Matter of Koffler, 70 AD2d 252, 51 NY2d 140; Matter of Greene, 78 AD2d 131, 54 NY2d 118.)

      Daniel J. Persing and George B. Burke for respondent.
    I. DR 2-103 and section 479 of the Judiciary Law provide a constitutional ban on direct mail solicitation of accident victims and their families. (Central Hudson Gas & Elec. v Public Serv. Comm., 447 US 557; Matter of Koffler, 51 NY2d 140; Bates v State Bar of Ariz., 433 US 350; Virginia Pharmacy Bd. v Virginia Consumer Council, 425 US 748; Matter of R. M. J., 455 US 191; Ohralik v Ohio State Bar Assn., 436 US 447; Matter of Greene, 54 NY2d 118; Matter of Alessi, 60 NY2d 229; Matter of Primus, 436 US 412; Consolidated Edison Co. v Public Serv. Comm., 447 US 530.) II. There is sufficient evidence to support the charges sustained by the court below. (Matter of Capoccia, 59 NY2d 549; Matter of R. M. J., 455 US 191.) III. Appellant has violated DR 2-102 (B) by using a trade name, a proscription which is constitutional. (Friedman v Rogers, 440 US 1; Virginia Pharmacy Bd. v Virginia Consumer Council, 425 US 748; Bates v State Bar of Ariz., 433 US 350; Matter of Shephard, 92 AD2d 978.) IV. The sanction of suspension is not reviewable by this court on appeal. (Erie County Water Auth. v Western N. Y. Water Co., 304 NY 342; Matter of Robinson, 209 NY 354; Matter of Goodman, 199 NY 143; Matter of Axtell, 257 NY 210; Matter of Flannery, 212 NY 610; Matter of Cohen, 9 AD2d 436, 7 NY2d 488, affd sub nom. Cohen v Hurley, 366 US 117, 374 US 857,379 US 870; Mildner v Gulotta, 405 F Supp 182; Matter of Koffler, 51 NY2d 140; Matter of Greene, 54 NY2d 118; Matter of Shephard, 92 AD2d 978.)
   OPINION OF THE COURT

Simons, J.

This is a lawyer disciplinary proceeding which has resulted in respondent’s suspension from the practice of law for six months because he solicited by mail the victims and families of the 250 persons injured when the sky-walk collapsed at the Hyatt Regency Hotel in Kansas City, Missouri, in July, 1981, he did so by letters that were false and misleading and because, in unrelated advertising, he used a trade name. Respondent contends that the prohibition of direct mail solicitation abridges his constitutional right to free speech (Bates v State Bar ofAriz., 433 US 350; Matter of Koffler, 51 NY2d 140; see, generally, Note, Direct Mail Solicitation by Attorneys: Bates to R. M. J. 33 Syracuse L Rev 1041; Goldblum, Regulation of Lawyer Advertising in New York, 56 NYSBJ, No. 4, May, 1984, p 6), that the evidence before the referee did not establish deception, that the motto he used did not constitute a trade name and that the penalty was excessive.

Respondent graduated from law school in 1974, was admitted to the Michigan Bar and practiced law there for approximately six years before moving to New York. In 1980 he was admitted to practice in this State and he presently maintains his law office in Schenectady. His practice consists principally of personal injury cases.

On April 20,1982 petitioner, Committee on Professional Standards, Third Judicial Department, commenced a disciplinary proceeding against respondent by filing charges alleging that he, in violation of section 479 of the Judiciary Law and the Code of Professional Responsibility, (I) engaged in direct mail solicitation of the victims and/or their families of the Hyatt Regency Hotel disaster in Kansas City, Missouri (DR 2-103 [A], [C], [E]); (II) employed deception and misrepresentation in the letters sent to the accident victims by indicating that a litigation coordinating committee had been formed to assist the victims and that many victims or their families had retained respondent (DR 1-102 [A] [4], [6]; DR 2-101 [A], [B]); and (III), in an unrelated incident, hired two persons to place flyers advertising respondent’s services on automobile windshields in a shopping mall in Schenectady which contained misleading statements and a prohibited trade name — “The Country Lawyer” (DR 2-101 [A], [C], [E]; DR 2-102 [A], [B]). (The letters and the flyer are annexed as an appendix to this opinion.) After a hearing the referee rejected charges I and III in their entirety and sustained charge II insofar as it alleged that the references in the solicitation letter to a committee and to the fact that many victims had retained respondent were misleading. The referee rejected charge I, concluding that under this court’s ruling in Matter of Koffler (51 NY2d 140, supra), respondent’s solicitation could be regulated but not proscribed by statute or disciplinary rule.

The Appellate Division confirmed the referee’s report with respect to the finding of deception contained in charge II, confirmed portions of charge III, and otherwise disaffirmed it. In sustaining charge I, the Appellate Division ruled that a prohibition on direct mail solicitation of accident victims constituted a restriction on the time, place and manner of speech, rather than its content (see Matter of Greene, 54 NY2d 118,120-121, cert den sub nom. Greene v Grievance Committee, 455 US 1035), and noted that such a restriction is supportable if reasonable and related to a substantial State interest (citing Matter of R. M. J., 455 US 191). The court found the ban permissible here because it “related to and supports a variety of substantial State interests, including avoidance of the demoralizing effect such solicitation might have on the profession and the unseemly rivalry reminiscent of ‘ambulance chasing’ it might generate * * * avoidance of stirring up litigation and vexatious conduct * * * and prevention of invasions of privacy” [citations omitted] (101 AD2d 627, 628). Addressing charge II, the court found that proof adduced at the hearing established by a fair preponderance of the evidence that two statements in the letters were deceptive and misleading. In sustaining the trade name count of charge III, it concluded that the use of the phrase “The Country Lawyer” in the flyers violated DR 2-102 (B). The court suspended respondent from the practice of law for six months.

We agree generally with the determinations of the referee and we therefore modify the order of the Appellate Division by dismissing charges I and III and by affirming the determination on charge II.

I

The primary issue on appeal concerns respondent’s right to solicit accident victims by mail. It can be analyzed in two ways, by comparing the cases principally relied on by the Appellate Division and the referee and also by employing a structured constitutional analysis (see Central Hudson Gas & Elec, v Public Serv. Comm., 447 US 557, 565) as we did in Koffler.

The Appellate Division, in sustaining charge I and banning direct mail advertising in personal injury cases, relied on Ohralik v Ohio State Bar Assn. (436 US 447). In Ohralik the Supreme Court held that the potential for fraud, undue influence, intimidation, overreaching, and other forms of vexatious conduct was so likely in the context of in-person solicitation of accident victims that a ban on such conduct was constitutionally justified. In Matter of Koffler (51 NY2d 140, supra), however, we found most of those concerns absent in the direct mail solicitation of real estate clients and held that the mail solicitation employed in that case was constitutionally protected commercial speech which the State may regulate but not proscribe. The question before us now is whether respondent’s solicitation of accident victims and their families by mail implicates the substantial State interests identified in Ohralik (436 US 447, 462, supra) in a way which distinguishes it from Matter of Koffler and justifies proscription of such mailings. Stated another way, is there something unique about lawyer mailings to accident victims as distinguished from similar mailings to prospective real estate clients which requires a result different from that reached in the Koffler case? From its analysis of Ohralik, the Appellate Division concluded that there was, that mail solicitation of accident victims was similar to in-person solicitation of them and posed a significant threat to the victims’ ability to reach a reasoned and informed decision regarding the need for legal representation. That determination suggests that the validity of mailing restrictions depends upon the nature of the legal problem involved, whether it concerns torts or real estate, or some other area of the law.

We view the present case as closer to Koffler, basing our decision on the distinction between mail solicitation and in-person solicitation of accident victims because the latter permits the exertion of subtle pressure and often demands an immediate response without providing an opportunity for comparison and reflection. The Supreme Court’s decision in Ohralik was based on those factors, the elements of intimidation and duress (see Ohralik, 436 US 447, 462-463, 464-466, supra). They are not present in the case of mail solicitation and, as with the real estate client in Koffler, the process of decision-making may actually be aided by information contained in the mailing. For the reasons which follow, we find the restriction here is not related to the time, place and manner of expression but is content-based, and employing the analysis set forth by the Supreme Court in Central Hudson Gas & Elec, v Public Serv. Comm. (447 US 557, 566, supra), we hold the blanket prohibition of mail solicitation of accident victims violates respondent’s rights of expression under the First and Fourteenth Amendments of the United States Constitution.

It is now familiar law that the Constitution protects from unwarranted governmental regulation, commercial expression, i.e., expression which relates solely to the economic interests of the speaker and his audience, because commercial expression not only serves the economic interest of the speaker but furthers a societal interest in the fullest possible dissemination of information (Central Hudson Gas & Elec, v Public Serv. Comm., 447 US 557, 561-562, supra; Virginia Pharmacy Bd. v Virginia Consumer Council, 425 US 748, 762; Bates v State Bar of Ariz., 433 US 350, 363-364, supra; see, also, Tribe, American Constitutional Law, § 12-15, pp 651-656). It is subject to a lesser degree of protection than other traditionally protected types of speech but it does, nevertheless, come within the ambit of the First and Fourteenth Amendments (Ohralik v Ohio State Bar Assn., 436 US 447, 455-456, supra). Lawyer advertising represents commercial expression (Bates v State Bar of Ariz., supra). Thus, although the State, through its professional disciplinary committees, possesses broad power to regulate the legal profession because lawyers are essential to the primary governmental function of administering justice and because they are officers of the court (Matter of Primus, 436 US 412, 422; Goldfarb v Virginia State Bar, 421 US 773, 792), the recognition that lawyer advertising is a form of commercial speech subject to First Amendment protection requires the courts to eschew blanket prohibitions of solicitation and to assess the validity of the regulation by carefully balancing the First Amendment interest at stake with the public interest allegedly served by the regulation. Categorizing the conduct as advertising or solicitation is of little help in that analysis (see Bigelow v Virginia, 421 US 809, 826; Matter of Koffler, 51 NY2d 140, 146-147, supra). Although some authorities have suggested that the degree of regulation permitted for commercial speech depends upon the type of speech involved, i.e., whether it contains explicit product and price information or less substantive matters (see Nowak-Rotunda-Young, Constitutional Law [2d ed], p 941), generally the degree of regulation permitted depends, as it does in all First Amendment cases, on the nature of the restriction, i.e., whether it is a restriction of the time, place and manner of expression (see Consolidated Edison Co. v Public Serv. Comm., 447 US 530, 536; Linmark Assoc, v Willingboro, 431 US 85, 93) or of its subject matter or content (see Erznoznik v City of Jacksonville, 422 US 205) or whether the restriction is acceptable because it is narrowly tailored to serve a compelling State interest (see, e.g., Lehman v City of Shaker Hgts., 418 US 298; Kovacs v Cooper, 336 US 77). On this appeal we are concerned with mail solicitation dealing principally with fees and available services and whether the restriction concerns the time, place and manner of solicitation or the subject matter of the mailing.

The State is permitted considerably more latitude in restricting the time, place and manner of speech than it is when it attempts to restrict content. Time, place and manner restriction are valid if reasonable and rationally related to legitimate State interests. Content or subject matter may be regulated only if substantial State interests are involved and then the regulation may go no further than necessary to serve that interest.

To be considered a time, place and manner restriction, the restriction must be “applicable to all speech irrespective of content” (Erznoznik v City of Jacksonville, 422 US 205, 209, supra; see, also, Consolidated Edison Co. v Public Serv. Comm., 447 US 530, supra). The government may determine how, when or where speech is permitted, but it may only do so without reference to the subject matter or content of the speech. Thus, for example, the government may regulate large street demonstrations because held at rush hour or because amplifiers are used if the regulations are neutral in terms of content (see Grayned v City of Rockford, 408 US 104; Cox v New Hampshire, 312 US 569). It may not, however, prohibit the display of movies visible from a public street when the restrictions apply only to movies containing nudity (Erznoznik v City of Jacksonville, supra).

The Appellate Division, citing Matter of Greene (54 NY2d 118, supra), concluded that prohibition of direct mail solicitation of accident victims regulated the time, place and manner of speech because it focused upon the recipient group rather than the subject matter of the speech. Matter of Greene is distinguishable, however. That decision held that, to the extent section 479 of the Judiciary Law and DR 2-103 (A) of the Code of Professional Responsibility proscribes advertising of attorney’s services by direct mail addressed to real estate brokers, those provisions are a constitutionally valid time, place and manner regulation of commercial speech (54 NY2d, at pp 120-121). A time, place and manner regulation was present because the proscription did not concern the content of the attorney’s letter, i.e., making known to potential clients the availability of his services for real estate matters, but only prohibited the attorney from advertising in a particular manner — through a third party whose interests gave rise to potential conflicts of interest (Matter of Greene, supra, at pp 126-127). Here, the State seeks to regulate respondent’s letter, not because of the involvement of third parties, but because of the subject matter of the communication — the fact that respondent seeks to be retained to represent accident victims and their families. As such, the regulation is plainly content-based (see Bolger v Youngs Drug Prods., 463 US 60; Consolidated Edison Co. v Public Serv. Comm., 447 US 530, 536, supra; Erznoznik v City of Jacksonville, 422 US 205,209, supra; Cox v Louisiana, 379 US 536,554).

Content-based restrictions are judged by a structured four-part analysis (Central Hudson Gas & Elec. v Public Serv. Comm., supra, at pp 557, 566; see, also, Matter of Koffler, 51 NY2d 140,147, supra). The court must consider (1) whether the communication is outside the scope of constitutional protection — i.e., is it misleading or related to unlawful activity? (2) whether the government interests sought to be protected are substantial? (3) how directly the regulation advances those interests? and (4) whether there is a less restrictive alternative?

(1) Is the Communication outside the scope of Constitutional Protection? There is no constitutional right to disseminate false or misleading information or information about unlawful activity (Central Hudson Gas & Elec. v Public Serv. Comm., supra, at p 563). Petitioner contends, therefore, that permitting respondent to solicit business by mail notwithstanding the determination of the referee and the Appellate Division that portions of the communication were misleading, deprives it of its recognized power to prevent deceptive advertising. Our inquiry, however, is whether a particular method of advertising is inherently misleading. If a certain type of information can be presented in a way that is not deceptive, a State may not absolutely prohibit the method used because it is sometimes used to disseminate misleading information (Matter of R. M. J., 455 US 191, 203, supra). Direct mail solicitation of accident victims is not inherently misleading nor is there a history that the practice has led to abuses. Thus, because information on the availability of legal services for accident victims may be communicated in a fair and understandable fashion, absolute prohibition is unwarranted (see, e.g., Matter of Appert, 315 NW2d 204 [Minn]).

(2) What Substantial Governmental Interests are Protected? At least four governmental interests can be identified in support of the outright ban on mail solicitation of accident victims: overcommercialization of the profession and the potential for “ambulance chasing”; invasion of privacy and the possibility of undue pressure; stirring up litigation; and the potential for deception.

The Appellate Division attempted to justify a ban on direct mail solicitation of accident victims as a measure necessary to prevent overcommercialization and the potential for practices reminiscent of “ambulance chasing”. In Matter of Koffler (51 NY2d, at p 149), we noted that overcommercialization is now controlled by the advertising standards set forth in DR 2-101. While lawyer advertising may appear unseemly to many members of the profession, particularly where, as here, it is directed at the unfortunate victims of a disaster or their families, it is constitutionally protected and serves the recognized purpose of informing those in need of the cost and availability of legal services (see Bates v State Bar of Ariz., 433 US 350, 364, supra).

Furthermore, mail solicitation does not constitute a substantial invasion of privacy or present a risk of undue pressure. The simple answer to the claim that it does is that the recipient of a lawyer’s letter “may escape exposure to objectionable material simply by transferring [it] from envelope to wastebasket” (Consolidated Edison Co. v Public Serv. Comm., 447 US 530, 542, supra; Matter of Koffler, 51 NY2d 140,149, supra). Nor is avoidance of the intrusion more difficult because the families of accident victims and the victims themselves may be emotionally upset when they receive a solicitation letter. As we noted in Koffler, it is riot enough to justify a ban upon solicitation that in some situations, such as marital discord or a death in the family, the letter might be offensive (supra, at p 149). The same observation applies to accident victims and their families.

Unlike Matter of Koffler (supra), however, solicitation in personal injury cases does pose a danger that litigation will be stirred up. Historically, the Government has exhibited its strong interest in regulating this problem by the offenses of champerty and barratry and undoubtedly, frivolous litigation continues to result in unwarranted economic and societal costs today. Regulations which prevent or inhibit the stirring up of unwarranted litigation serve an important public purpose. Thus, the courts properly should limit uninvited communications from an attorney which instigate groundless lawsuits and neither further associational values protected by the First Amendment (see Matter of Primus, 436 US 412, supra) nor aid in the dissemination of truthful information about the availability of legal relief to members of the public in need of such information (cf. Matter of Teichner, 75 Ill 2d 88). In this case, however, the victims and their families had evident need for legal counsel and the mail solicitation of them arguably performed an informational function which the State could not proscribe. As the Supreme Court has said, it is better to address such wrongs than to suffer in silence (see Bates v State Bar of Ariz., 433 US 350, 364, 376, supra).

Finally, the potential for deception present in Matter of Koffler (supra) is also a genuine concern here because these mailings are not subject to the public scrutiny that a newspaper or television advertisement would receive (51 NY2d, at p 149). Moreover, many people may perceive a potentially greater incentive for deception in personal injury litigation than in other types of legal business because greater sums of money may be involved, the nature of the representation may be less routine, contingent fee arrangements may be employed, and because of past abuses in the area. These are serious concerns, but they are concerns which must be addressed whether the solicitation is in person or in writing and the potential for deception is not greater in mail solicitation. Indeed it may reasonably be contended that the use of writing and the filing requirement approved in Koffler helps sanitize statements made in the solicitation of personal injury cases.

(3) and (4) How Directly Does the Regulation Advance the Identified Governmental Interests Is there a Less Drastic Alternative? A complete ban on the type of solicitation involved here would obviate any danger of deception. However, complete suppression is constitutionally impermissible because the less drastic alternative of filing the letters is present (Matter of Koffler, supra, at p 150).

In sum, the State cannot establish interests of sufficient magnitude to override the public’s interest in receiving information on the availability of legal services and the danger of deception presented by the mailing may be controlled by the filing requirement.

II

Respondent next contends that petitioner failed to present sufficient evidence to support allegations of deception contained in charge II because testimony by recipients of the mailings was necessary before the writing could be found deceptive.

Petitioner was required to establish the charges by a fair preponderance of the evidence (Matter of Capoccia, 59 NY2d 549, 553). It satisfied that burden with respect to charge II by introducing the letters themselves, which, when interpreted in a commonsense manner, contain two deceptive statements: (1) that a litigation coordinating committee had been formed to assist the Hyatt Regency disaster victims; and (2) that many accident victims and/or their families had requested representation by respondent. The first statement is misleading because respondent and his former secretary were the sole members of the committee and the statement implies the existence of an entity independent of respondent. The second statement is deceptive because some, not many, families had contacted him, and none had in fact requested representation.

Respondent disputes these findings by adopting a hyper-technical analysis of the term “committee”, as encompassing an organization with one member, and a liberal interpretation of “some and many” which minimizes any distinction between those two terms. There was ample support in the record for petitioner’s interpretation and there was no need to establish that the letters actually mislead the recipients. It is the potential for deception which is significant (see Ohralik v Ohio State Bar Assn., 436 US 447, 464, supra).

in

Finally, the Appellate Division concluded that the use of the phrase “The Country Lawyer” constituted a violation of the prohibition against use of a trade name contained in DR 2-102 (B).

The purpose of the prohibition against trade names embodied in DR 2-102 (B) is to prevent the public from being deceived about the identity, responsibility and status of those who use the name (Matter of Shannon, 292 Ore 339; cf. Friedman v Rogers, 440 US 1 [use of trade names by optometrists]). The use of the motto “The Country Lawyer” in respondent’s flyer did not deceive in that way because the lawyer’s name was inserted apart from the motto. The case relied upon by the Appellate Division, Matter of Shephard (92 AD2d 978), is distinguishable. In Shephard, the court found that the corporate name “The People’s Law Firm of Jan L. Shephard, Attorney, P.C.” constituted a trade name because it suggested that the firm was controlled by the public, received public funding or provided legal services on a nonprofit basis. No such potential for deception is present in the use of the term, “The Country Lawyer”.

Accordingly, the order of the Appellate Division should be modified by dismissing charge I and charge III and the matter remitted to the Appellate Division, Third Department, for reconsideration of the sanction imposed, and, as so modified, affirmed, without costs.

Chief Judge Cooke and Judges Jasen, Jones, Meyer and Kaye concur; Judge Wachtler taking no part.

Order modified and matter remitted to the Appellate Division, Third Department, for further proceedings in accordance with the opinion herein and, as so modified, affirmed, without costs.

      . The referee also found, although there was no charge to the effect, that respondent had violated subdivision (k) of section 806.15 of the department’s rules (22 NYCRR) by failing to include his name on the initial letter sent to the disaster victims. Citing Matter of Doherty (28 AD2d 546), the Appellate Division concluded that the charge could not be sustained because it was not contained in the petition.

      . The Appellate Division confirmed the referee’s rejection of petitioner’s objection to the use of caricatures of Abraham Lincoln and George Washington on the flyer, characterizing them as “innocuous drawings”. It also confirmed the referee’s determination that the use of flyers does not, per se, constitute unconstitutional solicitation. The Grievance Committee has not appealed these determinations.

      . Only two State cases have been found which addressed the constitutional issues raised by the mail and in-person solicitation of potential tort plaintiffs (see Matter of Appert, 315 NW2d 204 [Minn] [which permitted mail solicitation]; and Matter of Teichner, 75 Ill 2d 88 [which permitted in-person solicitation of accident victims but also involved associational rights]).


author: Jones, J.

text:
    In the Matter of Clove Development Corporation, Respondent, v Thomas Frey et al., as Assessors of the Town of Highland, et al., Appellants. (And Another Proceeding.)
    Argued September 5, 1984;
    decided October 16, 1984

      POINTS OF COUNSEL

      Edward M. Cooke for appellants.
    I. The history of the forest tax exemption evidences a legislative intent that the assessors determine eligibility for the exemption under section 480-a of the Real Property Tax Law. (Matter of Honeoye Cent. School Dist. v Berle, 72 AD2d 25, 51 NY2d 970; People v Draper, 169 App Div 479; Smull v Delaney, 175 Misc 795; People ex rel. Sheldon v Board of Appeals, 234 NY 484; Matter of Hellerstein v Assessor of Town of Islip, 37 NY2d 1; Mohonk Trust v Board of Assessors, 47 NY2d 476; Matter of Burrows v Board of Assessors, 116 Misc 2d 133.) II. The unambiguous language of section 480-a of the Real Property Tax Law charges the assessor with the duty and provides the power to determine the tax exemption for forest lands. (Matter of Honeoye Cent. School Dist. v Berle, 72 AD2d 25, 51 NY2d 970; People ex rel. Watchtower Bible & Tract Soc. v Haring, 8 NY2d 350; Gospel Volunteers v Village of Speculator, 29 NY2d 622; People ex rel. Mizpah Lodge v Burke, 228 NY 245.) III. Questions of fact exist which bar petitioner-respondent’s motion for summary judgment. (Di Menna & Sons v City of New York, 301 NY 118; Greenberg v Bar Steel Constr. Corp., 22 NY2d 210; Barrett v Jacobs, 255 NY 520; Miller-ton Agway Corp. v Briarcliff Farms, 17 NY2d 57; Matter of

      Honeoye Cent. School Dist. v Berle, 72 AD2d 25, 51 NY2d 970.) IV. Rules and regulations enacted by DEC support the assessors’ power to determine the forest tax exemption. (Matter of Harbolic v Berger, 43 NY2d 102; Matter of Jones v Berman, 37 NY2d 42.) V. Review of the assessor’s determination relating to the forest tax exemption is properly made in an article 7 proceeding. (Matter of Dudley v Kerwich, 52 NY2d 542; Matter of Board of Educ. v Parsons, 61 Misc 2d 838.).

      Ira M. Emanuel and Warren E. Berbit for respondent.
    I. The local assessors have no power to determine eligibility of a tract for the forestry tax exemption. (Park Tower Assoc. v City of New York, 116 Misc 2d 1059.) II. The subject property is eligible for the forestry tax exemption. (Matter of Honeoye Cent. School Dist. v Berle, 72 AD2d 25, 51 NY2d 970; Matter of Association of Bar v Lewisohn, 34 NY2d 143; Mohonk Trust v Board of Assessors, 47 NY2d 476.) III. The DEC’s interpretation of its own rules and regulations and section 480-a may not be overturned. (Matter of Johnson v Joy, 48 NY2d 689; New York State Dept. of Social Servs, v Dublino, 413 US 405; Matter of Fineway Supermarkets v State Liq. Auth., 48 NY2d 464; Matter of Omabuild N. V. v Board of Estimate, 116 Misc 2d 566; Matter of Coffey u Joy, 91 AD2d 923.) IV. Statutory construction rules require that Clove’s interpretation be sustained. (Matter of Association of Bar v Lewisohn, 34 NY2d 143; Matter of Honeoye Cent. School Dist. v Berle, 72 AD2d 25, 51 NY2d 970.) V. The assessors have not made a showing sufficient to defeat a motion for summary judgment. (Mallard Constr. Corp. v County Fed. Sav. & Loan Assn., 32 NY2d 285; Rotuba Extruders v Ceppos, 46 NY2d 223; Sanella v Nassau County Fire Comm., 87 AD2d 625.) VI. Any challenge by Frey to the DEC determination should have been made pursuant to CPLR article 78. (Matter of Whitney Inds. v Board of Assessors, 48 Misc 2d 422.)
   OPINION OF THE COURT

Jones, J.

A tax assessor has no power to make a determination whether property is an “eligible tract” for forest land tax exemption under section 480-a of the Real Property Tax Law, such authority having been committed exclusively to the Department of Environmental Conservation.

Finding that, under the statutory provisions then in effect, lands devoted to growth of forest crops were often being assessed at a level which rendered their continued dedication to such use uneconomical, the State Legislature in 1974 enacted section 480-a of the Real Property Tax Law under which a partial tax exemption could be obtained by owners of eligible tracts who would commit their lands to forest crop production for a specified period of time (L 1974, ch 814). The statute was substantially amended in 1976 by adding a requirement for forest management plans, increasing from 8 to 10 years the minimum period for which the land must be committed to forest crop production, and changing the procedure by which the tax exemption is obtained (L 1976, ch 526).

Under the amended statute, an owner seeking a section 480-a exemption is required to make application first, under subdivision 2 of the section, to the Department of Environmental Conservation (DEC) for certification that the land sought to be benefited is an “eligible tract” as that term is defined in paragraph (d) of subdivision 1 of the section. (For purposes of the present litigation, an eligible tract is a tract of privately owned forest land comprising at least 50 contiguous acres. “Forest land” is “land exclusively devoted to and suitable for forest crop production” and stocked with a stand of forest trees of a prescribed description [§ 480-a, subd 1, par (b)].) With respect to issuance of the certificate, it is provided in subdivision 2: “If the department finds that such tract is an eligible tract it shall forward a certificate of approval to the owner thereof, together with a management plan for the eligible tract specified by the department.”

Subdivision 3 of the section sets out in paragraph (a) how, if the Department has certified eligibility, the tax exemption is thereafter procured, providing first that to qualify for a forest land exemption the owner of “a certified eligible tract” must commit the tract to continued forest crop production for the next 10 years under the management plan that has been specified by DEC. The commitment must be made annually and filed in the county clerk’s office where the tract is situated in manner and form prescribed by DEC. The owner is also required to file an exemption application with the appropriate assessor on forms prescribed by the State Board of Equalization and Assessment, showing on the application that the commitment as just described has been made. The paragraph then provides that “If the assessor is satisfied that the requirements of this section are met he shall approve the application and such eligible tract shall be exempt from taxation as herein provided”. The property continues to be exempt thereafter on receipt by the assessor of a certified copy of a properly filed annual commitment “so long as the certification of the eligible tract shall not be revoked by the department”.

Seeking to avail itself of a partial exemption under section 480-a for 4,142 acres of forest land owned by it in the Town of Highland, Clove Development Corporation in both 1981 and 1982 secured from DEC a certificate of approval together with a management plan for its acreage and filed with the appropriate county clerk a commitment which complied with paragraph (a) of subdivision 3 of the section. In each year it also filed a properly completed application for exemption with respondents town assessors, who in both instances declined to approve the application, and whose refusal was upheld by respondent Board of Assessment Review when Clove filed a complaint with respect to its assessments in the years 1981 and 1982 with that reviewing body. In denying the partial exemptions the assessors took the position that they were not satisfied that the requirements of section 480-a had been met because, in their judgment, the acreage in question was not an “eligible tract” under the section. Their classification of the area as not “eligible” rested on their conclusion that the land was not used “exclusively” for forest crop production and that Clove was not a private owner engaged in such production.

Clove instituted separate proceedings under article 7 of the Real Property Tax Law, which were subsequently consolidated by stipulation of the parties, to review the assessments imposed with respect to the 4,142 acres in the Town of Highland for the years 1981-1982 and 1982-1983. After issues of valuation, also raised in the proceedings, had been settled by stipulation, Clove moved for summary judgment determining that the action of respondents in failing to grant it the exemptions sought under section 480-a was illegal. From the papers submitted it appeared that the issue critical to the disposition of the motion was whether, as respondents contended, the assessors had authority under section 480-a of the Real Property Tax Law to make a determination that the land in question — already certified by DEC as an eligible tract under 480-a — was not eligible for the tax exemption, based on their own conclusion as to the nature of its use and the status of its owner, or whether, as Clove contended, the determination of eligibility was vested exclusively in DEC such that, the Department having found that the tract was an eligible tract and having issued its certificate of approval, and the owner concededly having filed the required commitment with the county clerk and the necessary application for exemption under section 480-a with the appropriate assessor, the assessors were required to approve the exemption.

Resolving that issue in favor of respondents, Supreme Court denied the owner’s motion for summary judgment. The Appellate Division, however, reversed the order of the lower court, granted the motion, and directed that the property be reassessed to give effect to the exemptions sought under section 480-a. We now affirm that disposition.

Respondents’ argument that the town assessors have power, independently of the finding of eligibility made by DEC, to appraise and redetermine eligibility of acreage for which a forest land exemption is sought — an argument for which support is said to be found in an alleged traditional broad prerogative of tax assessors to decide entitlement to tax exemption — must fail, in face of the unambiguous pattern and language of the statute.

Section 480-a, in its structure, clearly distinguishes between and makes discrete provision for the determination of eligibility as privately owned forest land and the granting of a consequent tax exemption — the former being a function of the State agency, one of whose primary responsibilities is the encouragement of environmentally protective land use, and the latter being a function of the local tax assessor.

The section contemplates that before an exemption may be secured there must be, first, the determination that the land in question qualifies as an eligible tract. That determination is evidenced by the certificate which is the subject of subdivision 2 of the section. The power to issue such certificate, after it has found eligibility, is expressly vested in DEC, which is charged concurrently with the responsibility for specifying and delivering to the owner a management plan for the subject tract, containing requirements and standards which the Department deems necessary for continuing production on the land of marketable forest crops. A certificate, once issued, remains subject, however, to the control of the Department, which by a later subdivision (subd 8) is authorized to revoke the same if it finds that the owner has pursued any one of four specific courses of conduct by which the property has been diverted from departmentally approved forest crop production.

Subdivision 3 treats the manner of procurement of a tax exemption once the DEC certificate of eligibility has been obtained. It is at this point that the assessor assumes a role under the statute. Following the mandate that the owner of an already certified eligible tract make and file a 10-year commitment of the land to forest crops production and file an application for tax exemption with the appropriate assessor, the statute directs that the assessor shall approve the exemption if satisfied that the requirements of the section are met — i.e., that the applicant is the owner of a tract that has been certified by DEC as eligible, that the necessary commitment has been made and filed as prescribed by DEC, and that a proper exemption application has been submitted. The review by the assessor to assure that these requirements have been complied with is not insignificant and refutes respondents’ argument that there was no purpose in injecting the assessor in the process if that official is not to be recognized as having the broad power of eligibility determination for which they argue.

There is no basis, either in the language and organization of the statute or having in mind the areas of respective expertise of DEC and tax assessors, for the claim that the tax assessor is empowered to determine whether the subject property is eligible as privately owned forest land (as statutorily defined — which itself requires application of the somewhat elastic concept of exclusive use) for the forest crop production exemption, rather than to determine only whether the tract has been certified as eligible by DEC and the commitment and exemption application requirements have been met.

Determination of eligibility lies peculiarly within the competence of DEC, necessitating as it does not only a judgment of the sufficiency of the stand of forest trees on the acreage but also specification of an individualized management plan designed to promote the statutory objective of forest crop production. Moreover, vesting in the State agency the power to decide eligibility for benefit under section 480-a has the advantage of permitting Statewide uniformity, through departmental regulations and the consistency of departmental determinations, in decisions of the question. This advantage is tellingly demonstrated in the present case. Clove’s 4,142 acres of forest land in the Town of Highland is but a portion of a 12,000 acre tract extending through four other townships. The certificate of eligibility granted by DEC approved employment for forest crop production under section 480-a of the land in all five townships. Were the statute to be read as respondents would have it, five groups of assessors would reexamine the eligibility of pieces of the whole acreage with possibly different determinations and different results as to tax exemption of the several component parcels. (Assessors of three of the other four townships have approved exemptions under the statute. The application for exemption in the fourth has been withdrawn.)

In face of such considerations, it would be strange indeed to read into the statute what in effect would be an authority for review (and possible veto) of the determinations of the State Department of Environmental Conservation by a local public official. Such a sequence would be exactly the opposite of what would normally be expected were provision made for any review procedure and would vest responsibility for the final determination in a local official whose concerns are remote from the objective the statute was designed to serve in comparison with those of the State agency. Further evidence that the matter of eligibility is a function solely of DEC is to be found in the provisions of subdivision 8 of the section, which confer on it both an ongoing authority to monitor operation of certified eligible tracts and authority to revoke the evidence of eligibility (the certificate of approval of the area as an eligible tract) for failure of continued management of the acreage within the approved plan and regulations. Included in the subdivision is a provision that in the event of such revocation “the department shall notify the chief fiscal officer of the county or counties in which such tract is located”, which then will work a termination of the exemption previously granted. Absent receipt of Such a notice of revocation, however, there is no power in an assessor to treat an exemption as forfeited by reason of ineligibility of the tract in light of the provision in paragraph (a) of subdivision 3 that an exemption once procured “shall continue * * * so long as the certification of the eligible tract shall not be revoked by the department”. It is thus apparent that an assessor has no power to make an independent judgment that once-eligible acreage has become ineligible. By like token, the statute admits of no initial determination by that official of any such ineligibility.

Inasmuch as it was undisputed on the papers submitted in connection with the owner’s motion for summary judgment that a certificate approving eligibility of the acreage located in the Town of Highland had been issued by DEC, that the commitments of the land had been properly made and filed, and that applications for tax exemptions for the years 1981-1982 and 1982-1983 had also been properly filed, petitioner’s motion for summary judgment should have been granted and its entitlement to the exemptions sought under section 480-a established.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Judges Jasen, Meyer, Simons and Kaye concur; Chief Judge Cooke and Judge Wachtler taking no part.

Order affirmed, with costs.

      . We observe that DEC is authorized, in the last sentence of subsection 2, to specify uses other than forest crop production which would be permitted as compatible with and supportive of forest crop production.

      . Additionally, we reject respondents’ contention that section 199.4 of DEC rules and regulations enacted in conformity with section 480-a — which provides only that, among other persons, the assessor of an eligible tract shall have the right to enter the area “for the purpose of ascertaining compliance with section 480-a of the Real Property Tax Law or this Part” (6 NYCRR 199.4) — supports their position. The regulation refers to “compliance”, not “eligibility”. As indicated above, a tax exemption may be lost by conduct of a tract owner which is contrary to the prescribed management plan or other departmental regulation of the area. The regulation on which respondents rely simply assures access to a local official who would have a particular interest in any such improper activity and in bringing it to the attention of DEC with possible resulting eligibility-certificate revocation by the agency.


text:
    In the Matter of Westinghouse Electric Corporation, Respondent-Appellant, v James H. Tully, Jr., et al., Constituting the Tax Commission of the State of New York, Appellants-Respondents.
    Argued September 10, 1984;
    decided October 18, 1984

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Francis V. Dow and Peter H. Schiff of counsel), for appellants-respondents.
    The order of the Supreme Court reversing this court’s judgment, insofar as it had approved export tax credits to corporations against their New York franchise taxes, requires disallowance of the credits. (People ex rel. Alpha Portland Cement Co. v Knapp, 230 NY 48, cert den sub nom. State Tax. Comr. v People ex rel. Alpha Portland Cement Co., 256 US 702; Teeval Co. v Stern, 301 NY 346; Wiggins v Town of Somers, 4 NY2d 215; Matter of Orans, 15 NY2d 339.)

      Paul M. Dodyk, Henry W. de Kosmian, David A. Barrett and Simon Friedman for respondent-appellant.
    I. This court should remedy the unconstitutional burden that the DISC export credit places on interstate commerce by invalidating the corporate income tax as applied to DISC income. (Carter v Carter Coal Co., 298 US 238.) II. If this court declines to invalidate the entire scheme of DISC taxation, its discrimination should be remedied by extending the DISC export credit equally to all DISC income.
   OPINION OF THE COURT

Simons, J.

This matter is before us on remand from the United States Supreme Court after it declared unconstitutional portions of the New York Tax Law (Tax Law, § 208 et seq.). The offending portions related to the taxation of domestic international sales corporations (DISCs) and they were invalidated because they authorized credits which favored exports shipped from New York and discriminated against exports shipped from other States (see Westinghouse Elec. Corp. v Tully, 466 US _, 104 S Ct 1856). We are to determine what part of the statute, if any, remains valid. In response to the Supreme Court decision, we hold that clauses (2) and (3) of section 210 (subd 13, par [a]) of the Tax Law are unconstitutional and the remainder valid. The effect of our ruling is to extend the DISC tax credit formerly available only to New York exports to all of the DISC accumulated income attributable to the parent corporation, without regard to the exports’ place of shipment.

The background of this matter is discussed in our previous decision and need not be repeated in full (see Matter of Westinghouse Elec. Corp. v Tully, 55 NY2d 364). It is enough to note that in 1971, as an incentive to increase exports, Congress recognized a business entity it labeled a “domestic international sales corporation” and enacted legislation which granted DISCs certain tax benefits if at least 95% of the DISC’S assets and gross receipts are export-related (see US Code, tit 26, § 992, subd [a]; § 993). Under Federal law DISCs are not taxed on their income (see US Code, tit 26, § 991) but a DISC shareholder, normally a parent corporation, is taxed on 50% of the income, which is called “deemed distributions”, whether that amount is actually distributed or not (US Code, tit 26, § 995). The remaining 50%2 is considered “accumulated income” and taxation of it is deferred until actual distribution to the shareholder or until the DISC no longer qualifies for special tax treatment (US Code, tit 26, § 996).

In 1972, in response to the Federal legislation, New York enacted a comprehensive scheme of taxes and credits for income attributed to a parent corporation from its DISC (see Tax Law, §§ 208-210). Following the Federal lead, New York did not tax DISCs directly but instead elected to tax a parent corporation on its attributable share of the deemed distributions from its DISC (see Tax Law, § 208, subd 9). The State law differed from the Federal law, however, in that it also taxed a parent corporation on its attributable share of its DISC’S accumulated income (see Tax Law, § 208, subd 9, par [i], cl [B]). Although the Legislature decided to tax both DISC accumulated income and deemed distributions to the parent corporation, it provided an offsetting tax benefit in the form of a tax credit that was intended to be comparable to the Federal tax deferral of accumulated income. The credit was calculated by determining the accumulated DISC income attributable to the parent corporation, based upon the percentage of DISC stock it owns, and multiplying that sum by (1) the percentage that the taxpayer’s gross receipts from the sale of export property shipped from a regular place of business in New York bears to the taxpayer’s gross receipts from the sale of export property, (2) the taxpayer’s business allocation percentage (see Tax Law, § 210, subd 3, par [a]), (3) the amount of the credit — 70%, and (4) the franchise tax rate (Tax Law, § 210, subd 13, par [a]). Thus, under the legislative scheme, the larger the percentage of New York exports in relation to out-of-State exports in step 1, the larger the credit against tax.

Petitioner Westinghouse Electric Corporation, a Pennsylvania corporation qualified to do business in New York, was assessed tax deficiencies for the tax years 1972 and 1973 by respondent New York State Tax Commission because it failed to include its “entire net income” (see Tax Law, § 208, subd 9) accumulated income from its wholly owned DISC subsidiary, Westinghouse Electric Export Corporation. It challenged the taxing scheme, alleging that taxing its accumulated DISC income created an undue burden on interstate commerce and violated due process, that the statutory DISC tax credit violated the commerce clause of the Federal Constitution, and that taxing deemed distributions from its DISC also violated due process.

The Appellate Division sustained Westinghouse’s challenge to section 208 (subd 9, par [i], cl [B]), which requires that a DISC’S accumulated income be consolidated with the parent corporation’s entire net income, as an unconstitutional burden on interstate commerce. The court therefore did not address the due process attack on section 208 (subd 9, par [i], cl [B]) nor the constitutionality of the tax credit of section 210 (subd 13, par [a]), but did decide and reject the due process challenge to taxing deemed distributions. In a prior appeal, we modified the Appellate Division decision, rejecting each of Westinghouse’s challenges and upholding the tax and credit scheme in its entirety (see 55 NY2d 364). The United States Supreme Court granted certiorari to review our determination only with respect to the constitutionality of the DISC tax credit. It reversed that determination, holding that “[t]he manner in which New York allows corporations a tax credit on the accumulated income of their subsidiary DISCs discriminates against export shipping from other States, in violation of the Commerce Clause” (Westinghouse Elec. Corp. v Tully, 466 US_, 104 S Ct 1856, 1867-1868, supra).

On remand it remains for this court to determine whether the invalid portion may be severed from the valid and the remainder of the statute preserved. The governing rule was laid down by Judge Cardozo over 60 years ago: “The principle of division is not a principle of form. It is a principle of function. The question is in every case whether the legislature, if partial invalidity had been foreseen, would have wished the statute to be enforced with the invalid part exscinded, or rejected altogether. The answer must be reached pragmatically, by the exercise of good sense and sound judgment, by considering how the statutory rule will function if the knife is laid to the branch instead of at the roots” (People ex rel. Alpha Portland Cement Co. v Knapp, 230 NY 48, 60; see, also, McKinney’s Cons Laws of NY, Book 1, Statutes, § 150, subd d).

We are to discern, as best we can, what form this legislation would have taken if the Legislature had foreseen the Supreme Court’s decision. The answer requires first an examination of the statute and its legislative history to determine the legislative intent and what the purposes of the new law were, and second, an evaluation of the courses of action available to the court in light of that history to decide which measure would have been enacted if partial invalidity of the statute had been foreseen.

The history of the DISC tax and credit provisions demonstrates that the enacted legislation resulted from a balancing of two equally important objectives, the decision to raise State tax revenues and a determination to provide an incentive to the formation and operation of DISCs in New York. These concerns are demonstrated by correspondence from the State Departments of Commerce and Taxation and Finance and the Division of the Budget, each of whom played an active role in drafting both the Senate and Assembly versions of the legislation. In considering the effect on revenues, the Division of Budget estimated that the State would lose approximately $20-$30 million annually if it failed to tax DISCs at all (see Division of Budget Report in Bill Jacket [at p 20] of L 1972, ch 778). It found this result unacceptable and the legislative history indicates that minimizing this potential revenue loss was an important goal of the legislation (see Letter of Norman F. Gallman, Comr of Taxation and Finance, to Governor Nelson A. Rockefeller in Bill Jacket [at p 8] of L 1972, ch 778; Memorandum of Dept of Commerce in Bill Jacket [at p 12] of L 1972, ch 778). Significantly, although the statute contains no generally applicable severability clause, the Legislature did foresee that taxation of DISC accumulated income might be rendered invalid. Thus, it provided that “in the event this paragraph (requiring DISC stockholders to include their attributable share of DISCs accumulated income in their entire net income) should be rendered invalid, all DISC and their shareholders taxable hereunder shall be taxed instead under the remaining portions of this article” (Tax Law, § 208, subd 9, par [i], cl [B], subcl [3]). In effect this provision requires that DISC shareholders continue to be taxed, consistent with Federal law, on deemed distributions in the event taxation of accumulated income is invalidated and it expresses the intention of the Legislature to salvage some revenues from the taxation of DISCs even if the statute was subsequently impaired.

Pertinent comments by various interested parties manifest that an equally important objective was to “provide a positive incentive for increased business activity in New York State” (Division of Budget Report in Bill Jacket [at p 18] of L 1972, ch 778). The Department of Commerce supported the legislation because it would provide an incentive for the retention and expansion of business in the State and allow the State to “maintain our competitive position in regard to the expansion of manufacturing facilities with neighboring states” (Memorandum of Dept of Commerce in Bill Jacket [at p 11] of L 1972, ch 778). The Assembly Rules Committee stated that the purpose of the bill was “to encourage the formation and operation of Domestic International Sales Corporations (DISCs) in New York” (NY Legis Ann, 1972, p 267).

The means selected to achieve this incentive was the DISC tax credit. As we stated when the case was last before us, the credit was designed by the State to provide a tax incentive comparable to that created by the Federal legislation and “to ensure that New York would not lose its competitive position vis-a-vis other States which were also expected to offer tax benefits to DISC owners” (Westinghouse Elec. Corp. v Tully, 55 NY2d 364, 374, supra). The credit provided an incentive in two ways. First, because it was applied only to DISC accumulated income derived from exports shipped from a place of business in New York, it was expected that it would encourage an increase in the amount of exports shipped from the port of New York (see Memorandum of Dept of Commerce in Bill Jacket [at p 11] of L 1972, ch 778; Division of Budget Report in Bill Jacket [at p 16] of L 1972, ch 778). It was this part of the tax credit that the Supreme Court invalidated. Second, it was expected that the credit would also create an incentive for increased manufacturing of export and export-related goods from New York because it resulted in a lower effective tax rate, whether or not the goods were shipped from within the State, by increasing the parent’s allocation percentage (see Division of Budget Report in Bill Jacket [at p 18] of L 1972, ch 778).

Turning, then, to the second step, evaluating the options available in light of this history, the parties suggest three alternatives. Petitioner contends that we should invalidate the entire legislative scheme for taxing DISC accumulated income and deemed distributions along with the tax credit for accumulated income because the tax and credit provisions are inextricably interwoven. This would fail to accomplish the legislative purpose of minimizing an estimated loss of approximately $30 million annually, however, a result which the Legislature found unacceptable and a result which runs counter to the general rule that “[u]nless the conclusion be unavoidable, ‘a general revenue statute should never be declared inoperative in all its parts because a particular part relating to a distinct subject may be invalid’ ” (People ex rel. Alpha Portland Cement Co. v Knapp, 230 NY 48, 62, supra, quoting Field v Clark, 143 US 649, 697). Any other rule could be financially disastrous. In addition, it should be noted that we would not go so far as to invalidate the tax on deemed distributions from DISCs, which is implicit in Westinghouse’s argument, because it would be contrary to the express statutory intent contained in the severability clause. The tax credit that was found partially unconstitutional applied only to DISC accumulated income (see Tax Law, § 210, subd 13, par [a]) and thus was never related to the taxation of deemed distributions. The Legislature, however, specifically provided that deemed distributions would continue to be taxed if taxation of accumulated income was held invalid (see Tax Law, § 208, subd 9, par [i], cl [B], subd [3]). At most, the invalidity of the tax credit could eliminate the tax on accumulated income but it could not be used to reach the tax on deemed distributions.

Conversely, the Tax Commission would have us strike down the whole tax credit for accumulated income, and tax shareholders of DISCs at the full franchise tax rate — 9%.

That remedy affords the greatest protection to the State treasury and furthers the legislative purpose of raising revenues, but it does so by undermining the equally important purpose of encouraging business activity in the State. That was the reason that the Legislature enacted the credit in the first place. Nothing in the legislative history indicates that the Legislature would have enacted a law without any credit provision and several officials expressly opposed full taxation of DISC income either directly or to the shareholders because to do so would encourage DISC formation outside the State and would discourage the manufacturing of export goods in New York (see Letter of Norman F. Gallman, Comr of Taxation and Finance to Governor Nelson A. Rockefeller in Bill Jacket [at p 8] of L 1972, ch 778; Division of Budget Report in Bill Jacket [at p 18] of L 1972, ch 778).

Finally, petitioner suggests, and we adopt, a third alternative, that only that portion of the tax credit that discriminates against exports shipped from outside of New York be invalidated, thus effectively extending the credit to all of a shareholder’s accumulated DISC income that has a constitutional nexus to New York. This is the only alternative of the three available that substantially furthers the dual legislative purposes of the law. The effect is to extend the DISC tax credit to all the DISC accumulated income allocated to New York under the parent corporation’s business allocation percentage. The statute, as so interpreted, promotes the Legislature’s intent to provide a strong incentive for the continuation and expansion of export-related business in New York by lowering the effective tax rate of any business that owns a DISC and it also advances the Legislature’s purpose of minimizing losses because even with an extension of the credit the law will continue to produce substantial tax revenues. Indeed, the Tax Commission concedes that a decision to extend the tax credit to all DISC accumulated income allocated to New York will still produce approximately $24 million annually in increased revenues while total elimination of the credit would produce only slightly more, approximately $30 million.

Accordingly, on reargument following remand by the Supreme Court of the United States, judgment modified by declaring that clauses (2) and (3) of section 210 (subd 13, par [a]) of the Tax Law are unconstitutional, with costs to petitioner, and matter remitted to the Tax Commission for recomputation of the tax in accordance with this opinion and, as so modified, affirmed.

Chief Judge Cooke and Judges Jasen, Jones, Wachtler, Meyer and Kaye concur.

On reargument following remand by the Supreme Court of the United States, judgment modified, with costs to petitioner, and matter remitted to Supreme Court, Albany County, with directions to remand to the Tax Commission for further proceedings in accordance with the opinion herein and, as so modified, affirmed.

      ; If more than 50% is actually distributed then a shareholder is taxed on the actual amount rather than the 50% “deemed distributed”.

      . For the tax years in question in this case, 1972-1973,50% of the DISC income was deemed distributions and the rest was accumulated income. By 1983 Congress had increased the percentage deemed distributed to 57.5% (see Westinghouse Elec. Corp. v Tully, 466 US _, 104 S Ct 1856, 1859, n 3).