text:
    In the Matter of Rubin Sterngass, Appellant, v County of Rockland et al., Respondents.
    Decided May 2, 1985
   Appeal dismissed, without costs, by the Court of Appeals sua sponte, upon the ground that no appeal lies from the judgment of Supreme Court which has already been reviewed on appeal (96 AD2d 925, affd 62 NY2d 812).


source: Caselaw Access Project

license: Public Domain

text:
    In the Matter of Alfred J. Vent, Appellant, v Robert Abrams, Individually and as Attorney-General of the State of New York, et al., Respondents.
    Submitted March 25, 1985;
    decided May 2, 1985
   On the court’s own motion, appeal dismissed, without costs, upon the ground that no appeal lies as of right from the unanimous order of the Appellate Division (NY Const, art VI, § 3; CPLR 5601; see, Cohen and Karger, Powers of the New York Court of Appeals § 27, at 110; § 47, at 208).

Motion for leave to appeal denied.


author: Kaye, J.

text:
    The People of the State of New York, Respondent, v Cullen Taylor, Appellant.
    Argued March 21, 1985;
    decided April 30, 1985

      POINTS OF COUNSEL

      Samuel J. Castellino, Public Defender (William J. Lodico of counsel), for appellant.
    I. The failure of the People to properly serve notice of their intention to introduce at trial identification testimony by witnesses who had made prior out-of-court identifications of defendant rendered such testimony inadmissible. (United States v Wade, 388 US 218; Gilbert v California, 388 US 263; Stovall v Denno, 388 US 293; People v Adams, 53 NY2d 241; People v Cannon, 97 Misc 2d 762; People v Iveys, 67 AD2d 349; People v Briggs, 38 NY2d 319; People v Brown, 83 AD2d 699.) II. The photo array at which potential identification witnesses initially identified defendant was suggestive and therefore inadmissible. (People v Adams, 53 NY2d 241; Manson v Brathwaite, 432 US 98; Kirby v Illinois, 406 US 682; People v Sutton, 47 AD2d 455; People v Adams, 90 AD2d 1.) III. The failure of the People to provide discovery of prior written reports and testimony of their witness at the Huntley hearing constituted a denial of defendant’s constitutional rights to due process, and to confrontation of witnesses. (Jackson v Denno, 378 US 368; People v Huntley, 15 NY2d 72; Miranda v Arizona, 384 US 436; Jencks v United States, 353 US 657; People v Rosario, 9 NY2d 286; People v Boice, 89 AD2d 33.) IV. The failure of the People to properly respond to defendant’s demand to produce constituted a failure on the People’s part to comply with the notice requirement regarding their intention to introduce defendant’s oral statements and rendered such statements inadmissible. (People v Briggs, 92 Misc 2d 1015; People v Fort, 109 Misc 2d 990.) V. The circumstances in which defendant gave his written statement were so likely to yield an unreliable statement as to render the statement involuntarily made and therefore inadmissible. (Miranda v Arizona, 384 US 436; In re Gault, 387 US 1.)

      James T. Hayden, District Attorney, for respondent.
    I. Defendant’s plea of guilty constitutes a waiver of nonjurisdictional defects. (People v Thomas, 74 AD2d 317, 53 NY2d 338; People v Dodson, 48 NY2d 36; People v Friscia, 51 NY2d 845; People v Cohen, 52 NY2d 584; People v Rodriguez, 55 NY2d 776; People v Quackenbush, 98 AD2d 875, 62 NY2d 653; People v Petgen, 55 NY2d 529; People v Sobotker, 61 NY2d 44; People v La Ruffa, 34 NY2d 242; People v Brown, 83 AD2d 699.) II. The trial court’s decision to allow the identification testimony should not be disturbed. (People v Leonti, 18 NY2d 384.) III. The court properly denied defendant’s motion to suppress his statement to law enforcement authorities. (People v Leonti, 18 NY2d 384.)
   OPINION OF THE COURT

Kaye, J.

By pleading guilty, a defendant forfeits his right to seek reversal of his conviction on the ground that identification testimony or evidence of prior statements is inadmissible because the prosecution failed to provide the required notice of intention to offer such evidence at trial.

On May 24, 1982, a man and a woman entered an Anderson-Little store in the Town of Big Flats and purchased a suit with a check drawn on the account of Diane Gardner. The same day, they went to a Chess King store and bought a leather coat with a check drawn on the same account. Both checks were forgeries.

According to the officer assigned to investigate the crimes, suspicion centered on defendant and he was arrested on a parole violation on June 16, 1982. The officer took defendant to the Corning police station, where questioning resulted in a two-page statement transcribed by the officer but signed by defendant. Defendant said a woman known to him as “Al” approached him and displayed some blank checks, informing him that she could “deal the checks.” He said he went with the woman to Anderson-Little and Chess King, and obtained a suit and a leather jacket paid for by Al with the blank checks. He admitted knowing that the checks did not belong to Al. Later in the day, however, at the Horseheads State Police barracks, defendant admitted that he, rather than Al, had obtained the checks.

The Grand Jury indicted defendant on two counts of second degree forgery on June 17, 1982. Also on that date, the People served defendant with notice that “during the trial of this matter, the People intend to offer evidence of a statement made by the defendant to a public servant.” The prosecutor provided defendant with a copy of the written statement, but made no mention of the oral admission at the Horseheads barracks.

On June 30, 1982, an Anderson-Little employee identified defendant’s picture from an array of six photographs, and on July 26, 1982 a Chess King employee identified defendant’s photo from the same array. The People did not provide defendant with notice of intent to introduce identification testimony of these two witnesses.

Defendant moved to suppress his written statement and a Huntley hearing was held November 29,1982. When the officer testified as to defendant’s oral statement, defense counsel objected, stating that he had received no notice of intent to introduce the oral statement. The prosecutor responded that the defense was aware the People intended to introduce statements. He claimed that defendant was not prejudiced and could, if he desired, request an adjournment. No such request was made.

The prosecution announced in the course of the Huntley hearing that “Wade issues” would be involved. Defense counsel protested because he had received no notice under CPL 710.30. He suggested that the court proceed with the Huntley hearing, and noted that the statute permitted the People to make an application to file a late notice. The prosecutor then explained that the testimony would concern a photo array, and that the two store employees were available to testify. The court said it would conduct the Huntley hearing and then adjourn for a Wade hearing. At the close of the Huntley hearing, the court scheduled the Wade hearing for the following afternoon. Defense counsel registered an objection to proceeding with the Wade hearing based on the lack of timely notice under CPL 710.30. The court responded that the “objection will be duly noted,” and the Wade hearing went forward the next day.

By decisions dated November 30 and December 1, 1982, the court denied defendant’s suppression motions, finding the statements voluntary and the identification procedures not unduly suggestive. On January 25, 1983, defendant pleaded guilty to second degree forgery and was sentenced as a predicate felon to a two- to four-year term of imprisonment. The Appellate Division affirmed, concluding that the People’s failure to provide adequate notice under CPL 710.30 did not require reversal because the procedure employed in this case satisfied the goal of the statute — “to afford a defendant adequate time in preparing his case.” We affirm, but for a different reason.

A guilty plea generally represents a compromise or bargain struck after negotiation between defendant and the People. As such, it marks the end of a criminal case, not a gateway to further litigation. More than a confession, a guilty plea signals defendant’s “intention not to litigate the question of his guilt, and necessarily involves the surrender of certain constitutional rights, including the right to confrontation, the privilege against self incrimination and the right to trial by jury” (People v Lynn, 28 NY2d 196, 201-202; see also, Tollet v Henderson, 411 US 258). A guilty plea not only constitutes an actual waiver of certain rights associated with a trial, but also effects a forfeiture of the right to renew many arguments made before the plea. Examples include an alleged unconstitutional presumption in a statute (People v Thomas, 53 NY2d 338); a claimed deficiency in a jurisdictionally sufficient accusatory instrument (People v Levin, 57 NY2d 1008; People v Cohen, 52 NY2d 584); and an allegation of selective or vindictive prosecution (People v Rodriguez, 55 NY2d 776) or preindictment prosecutorial misconduct (People v Di Raffaele, 55 NY2d 234).

Not every claim is forfeited by a guilty plea. Some the Legislature has chosen to preserve for appellate review (see, e.g., CPL 710.70 [2]). There is no mechanical rule fixing when a claim is otherwise waived; however, since a plea usually removes the issue of factual guilt from a case, resolution of the question may be guided by determining whether the claim relates to the factual elements of the crime charged, or to some other, fundamental matter. A guilty plea does not forfeit the right to raise a jurisdictional defect, such as an insufficient accusatory instrument (People v Case, 42 NY2d 98). Nor does it preclude certain rights of constitutional dimension, for example, the right to a speedy trial (People v Blakley, 34 NY2d 311; People v White, 32 NY2d 393), the protection against double jeopardy (Menna v New York, 423 US 61), the unconstitutionality of statutory prohibition of certain admitted conduct (People v Lee, 58 NY2d 491), or the competency of a defendant to stand trial (People v Armlin, 37 NY2d 167; People v Francabandera, 33 NY2d 429). Also embraced within this general category is an attack on an accusatory instrument as void because of the prosecutor’s knowledge that the only evidence supporting it is false (People v Pelchat, 62 NY2d 97, 108).

The prosecutor’s failure to provide timely notice of intent to introduce evidence at trial does not affect the court’s jurisdiction, and it does not impinge on rights of constitutional dimension. The question, then, is whether defendant is permitted by statute to raise this issue after a plea of guilty.

According to CPL 710.70 (2), “[a]n order finally denying a motion to suppress evidence may be reviewed upon an appeal from an ensuing judgment of conviction notwithstanding the fact that such judgment is entered upon a plea of guilty.” The Appellate Division held that this section includes an order permitting the People to file a late notice of intention under CPL 710.30. We disagree. Under CPL 710.20, the defendant in essence may move to suppress evidence obtained as a result of an unlawful search and seizure, illegal eavesdropping, an “involuntarily made” confession, improper administration of a blood test, or an invalid pretrial identification procedure. CPL 710.30 provides where the prosecutor intends to offer at trial defendant’s statement or identification testimony by a witness who previously identified defendant, the prosecutor must serve notice of intent to use the evidence within 15 days of arraignment or subsequently upon a demonstration of good cause for the delay.

The People’s failure to provide timely notice of intent is not one of the grounds for a suppression motion under CPL 710.20. Nor is the notice requirement a mere ingredient of a motion to suppress statements or identifications under subdivision 3 or 6 of CPL 710.20. By definition, CPL 710.30 operates independently, in advance of the suppression motion. The motion to suppress does not become necessary unless and until the court allows the defaulting prosecutor to provide late notice.

True, the notice requirement of CPL 710.30 is related to two of the constitutional bases for suppression under CPL 710.20 — involuntary statements and improper identifications. But as we recently stated in a similar context, “[i]n cases where a constitutional right survives a plea, we have held that a related statutory right is forfeited by the plea when the statute would confer on the defendant greater rights than the Constitution demands” (People v Sobotker, 61 NY2d 44, 48). An application of this principle is found in the fact that a claim based on the constitutional right to a speedy trial survives the guilty plea, but one based on the related right conferred by CPL 30.30 does not (see, People v Howe, 56 NY2d 622; People v Thill, 52 NY2d 1020, cert denied 454 US 829; People v Friscia, 51 NY2d 845).

People v Petgen (55 NY2d 529) is analogous to the present case. In Petgen, defendant’s motion for permission to file a late motion to suppress under CPL 710.40 (2) was denied, and he thereafter pleaded guilty. This court held that defendant by his plea had forfeited the right to appellate review of the order denying his motion. Noting that the statutory right to appeal after a guilty plea was limited to review of an order denying a suppression motion, we underscored the distinction between a motion to suppress and an application for leave to file a late suppression motion (at p 534): “The granting of [the application to file a late motion] depended on a factual determination that, ‘owing to unawareness of facts constituting the basis thereof or to other factors, the defendant did not have reasonable opportunity to make the motion previously’ (CPL 710.40, subd 2); it did not involve consideration or denial of the merits of the constitutional contentions which defendant might later have asserted on a motion to suppress had permission been granted him to make such a motion.”

Here, too, the decision as to whether to preclude the People from introducing statements or identifications because of a late notice of intent involves factual determinations which are unrelated to the merits of defendant’s constitutional contentions.

People v Evans (58 NY2d 14) is not to the contrary. In Evans, defendant’s suppression motion was made on a ground not specifically authorized by CPL 710.20, but the prosecutor made no objection {id., at p 21, n 1), and the argument was therefore not considered forfeited by defendant’s plea. Here, by contrast, the motion to suppress was premised on a violation of defendant’s constitutional rights. Though defendant objected to the late notice, the court impliedly allowed the prosecutor to provide late notice when it noted defense counsel’s objection and continued with the hearings, and late notice was not the basis for the suppression motion. Unlike Evans, the People had no reason to argue that a suppression motion can be based only on the grounds specified in CPL 710.20.

In sum, by now complaining of the People’s late notice of intent, defendant seeks to invoke a statutory right designed to facilitate the introduction into evidence of trustworthy statements and identifications at a trial on the issue of guilt. As such, the right bears directly on defendant’s factual guilt. But by his guilty plea, defendant has removed this issue from the case and, lacking express statutory authorization, he cannot resuscitate it on appeal.

Defendant’s remaining contentions are without merit. Accordingly, the order of the Appellate Division should be affirmed.

Chief Judge Wachtler and Judges Jasen, Meyer, Simons and Alexander concur.

Order affirmed.

       CPL 710.30 reads:
      “1. Whenever the people intend to offer at a trial (a) evidence of a statement made by a defendant to a public servant, which statement if involuntarily made would render the evidence thereof suppressible upon motion pursuant to subdivision three of section 710.20, or (b) testimony regarding an observation of the defendant either at the time or place of the commission of the offense or upon some other occasion relevant to the case, to be given by a witness who has previously identified him as such, they must serve upon the defendant a notice of such intention, specifying the evidence intended to be offered.
      “2. Such notice must be served within fifteen days after arraignment and before trial, and upon such service the defendant must be accorded reasonable opportunity to move before trial, pursuant to subdivision one of section 710.40, to suppress the specified evidence. For good cause shown, however, the court may permit the people to serve such notice thereafter and in such case it must accord the defendant reasonable opportunity thereafter to make a suppression motion.
      “3. In the absence of service of notice upon a defendant as prescribed in this section, no evidence of a kind specified in subdivision one may be received against him upon trial unless he has, despite the lack of such notice, moved to suppress such evidence and such motion has been denied and the evidence thereby rendered admissible as prescribed in subdivision two of section 710.70.”


author: Per Curiam.

text:
    The People of the State of New York, Respondent, v Alfredo Gomez, Appellant.
    Argued March 20, 1985;
    decided April 30, 1985
    POINTS OF COUNSEL

      Ellen M. Saideman and William E. Hellerstein for appellant.
    Appellant’s guilt of depraved mind murder was not established where the intoxicated appellant, driving an automobile negligently and recklessly, unintentionally collided with another automobile and, as a result of the accident, mounted the sidewalk and struck and killed two children. (People v Poplis, 30 NY2d 85; People v Register, 60 NY2d 270; People v France, 57 AD2d 432; People v Richardson, 97 AD2d 693; People v Beiter, 77 AD2d 214; People v Kibbe, 35 NY2d 407; People v Fountain, 44 AD2d 685.)

      Robert M. Morgenthau, District Attorney (Susan Corkery and Amyjane Rettew of counsel), for respondent.
    By driving along congested Manhattan sidewalks at a speed exceeding even that allowed on the roadway, defendant evinced depraved indifference to human life. (People v Register, 60 NY2d 270.)
   OPINION OF THE COURT

Per Curiam.

Defendant appeals from an order of the Appellate Division affirming his conviction of two counts of murder in the second degree (Penal Law § 125.25 [2] [depraved mind murder]) and four counts of reckless endangerment in the first degree (Penal Law § 120.25). The charges arose out of an incident in which defendant drove his car several blocks on a busy New York City street and the sidewalks adjacent to it, killing two children and endangering the lives of several pedestrians. Defendant’s only contention on this appeal is that the evidence was insufficient to support the convictions of depraved mind murder.

Inasmuch as the Appellate Division affirmed the jury’s guilty verdict, we must view the evidence in the light most favorable to the People (see, People v Pena, 50 NY2d 400, 407, cert denied 449 US 1087). So viewed, it established that sometime between 7:30 and 8:00 p.m. on July 7,1981, defendant drove a car, owned by Americo Junco, out of a gas station located on the west side of 10th Avenue at 45th Street in Manhattan and entered 10th Avenue at a speed of approximately 40 miles an hour. He then accelerated across 10th Avenue, struck and careened off a parked car and continued traveling north, weaving from lane to lane. As he did so, he struck the left side of a moving vehicle, accelerated to over 50 miles an hour, and mounted the curb of the sidewalk adjacent to a parking lot entrance south of the southwest corner of 46th Street. He then drove the car along the sidewalk at a high rate of speed and struck a boy riding his bicycle, Daniel Galibar, throwing him completely across 46th Street. An occupant of the car testified that at that point he told defendant to apply the brakes, but defendant responded: “No I cannot brake, I cannot put the brakes on any longer. I have killed a person already.”

Defendant then accelerated his speed further, crossed 46th Street and mounted the opposite sidewalk where several people were standing. He drove up the block on the sidewalk, striking another child riding a bicycle, Rene Mercado, near the corner of 47th Street, and dragging his body approximately 80 feet. Junco’s vehicle then crossed 47th Street and mounted the curb on the northwest corner. He again sped along the sidewalk at over 50 miles an hour nearly striking several people standing along 48th Street until defendant braked for the first time and the car came to rest. After the car stopped, defendant attempted to escape but he was apprehended and arrested.

After a jury trial, defendant was convicted and sentenced to two consecutive indeterminate terms of imprisonment of 25 years to life on the murder counts and four concurrent indeterminate terms of imprisonment of two and one-third to seven years on the reckless endangerment counts. On appeal, the Appellate Division modified the sentences by ordering that the terms imposed on the two murder counts run concurrently to each other and to the four concurrent terms on the reckless endangerment counts. It also upheld the jury’s finding of guilt, stating that the proof was sufficient to establish that defendant acted with depraved indifference to life. One Justice dissented. He would have reduced the sentences on the murder counts further to 15 years to life on each count to run concurrently. He also found the evidence that defendant had acted with depraved indifference to human life insufficient, stating that he feared that the court’s holding would result in murder prosecutions against drivers involved in reckless motor vehicle accidents.

The judgment must be supported by evidence that defendant, “[u]nder circumstances evincing a depraved indifference to human life”, recklessly engaged in conduct which created a grave risk of death to another person and thereby caused death (Penal Law § 125.25 [2]). Driving a speeding motor vehicle onto a busy Manhattan street and then down a crowded sidewalk at a high rate of speed for two blocks satisfies the requirement that the defendant acted recklessly, i.e., that he was aware of and consciously disregarded a substantial and unjustifiable risk (Penal Law § 15.05 [3]). In addition, the People were required to satisfy the depraved indifference element, meaning that defendant evidenced by his conduct a wanton indifference to human life or depravity of mind (People v Register, 60 NY2d 270, 274). The phrase “[ujnder circumstances evincing a depraved indifference to human life” is not a mens rea element focusing on the subjective intent of the defendant but rather involves “an objective assessment of the degree of risk presented by defendant’s reckless conduct” {id,, p 277). It “refers to the wantonness of defendant’s conduct and converts the substantial risk present in manslaughter into a very substantial risk present in murder” {id.).

The risks posed by defendant’s conduct in this case and his callous indifference to them entitled the jury to conclude that his conduct placed the crime on the same level as intentional murder. As to the first murder count, defendant sped out of the gas station and entered traffic on a busy New York street at a speed in excess of 40 miles per hour. After striking two cars, he continued accelerating for nearly a block, partly on a sidewalk, until he struck the first victim. These factors, particularly the y excessive speed and the failure to brake, satisfy the depraved indifference element. Turning to the second murder count, similar conduct is present, including excessive speed and failure to brake when requested to do so by an occupant of the car, but there is also the additional evidence of depraved indifference to be found in defendant’s comment as he continued down the sidewalk and before the second victim was struck that he could not stop because he had already killed someone.

Finally, it is necessary to address the concern of the dissenting Justice at the Appellate Division that murder prosecutions will now result from fatal accidents involving reckless driving. As he noted, an automobile has obvious social utility and may be driven in a safe manner and certainly most motor vehicle accidents causing death would not constitute murder (see, e.g., People v France, 57 AD2d 432). However, an automobile also vz may be used, as here, in a wanton and callous manner, thereby posing a grave risk of death and in fact causing death. The focus of the depraved mind murder statute is to allow a trier of fact to discern depravity of mind from the circumstances under which an object or instrumentality is used. The depraved conduct cannot be excused by the inherent social utility of the object or instrumentality used to cause death.

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

Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye and Alexander concur in Per Curiam opinion.

Order affirmed.


author: Simons, J.

text:
    In the Matter of Robert J. Hunt et al., as Personal Representatives of the Estate of Dwight W. Winkelman, Deceased, et al., Appellants, v State Tax Commission, Respondent. In the Matter of Louis Marx, Jr., et al., Appellants, v State Tax Commission et al., Respondents. In the Matter of Howard Ross et al., Appellants, v State Tax Commission, Respondent.
    Argued March 21, 1985;
    decided April 30, 1985

      POINTS OF COUNSEL

      Jerome J. Caulfield for appellants in the first above-entitled proceeding.
    The principle of conformity is applicable to the question presented here and requires that petitioners prevail.

      Susan F. Klein and Philip Zimet for appellants in the second above-entitled proceeding.
    I. The State minimum tax, construed in light of its legislative purpose, did not authorize the inclusion of State and city income taxes as items of tax preference. (Matter of Kreiss v State Tax Commn., 61 NY2d 916; Helvering v Stockholms Bank, 293 US 84; Chertkof v United States, 676 F2d 984; Rockefeller v Commissioner, 676 F2d 35; Matter of Avien, Inc., 390 F Supp 1335, 532 F2d 273; Healy v Commissioner, 345 US 278; Union Trust Co. v Commissioner, 111 F2d 60, 311 US 658; Matter of Marx v Bragalini, 6 AD2d 393, 6 NY2d 322; Rosenblatt v New York State Tax Commn., 106 Misc 2d 490, 85 AD2d 770; Matter of Watson, 70 AD2d 777.) II. In reversing the judgment of Special Term, the court below misconstrued the tax benefit rule and misstated the significance of State modifications to Federal items of tax preference predating the 1976 Federal amendments.

      Richard E. Halperin and Ronald D. Lefton for appellants in the third above-entitled proceeding.

      Robert Abrams, Attorney-General (Wayne L. Benjamin, Francis V. Dow, Robert Hermann and Peter H. Schiff of counsel), for State Tax Commission, respondent in the first, second and third above-entitled proceedings.
    There was no statutory authority in 1976 or in 1977 allowing petitioners to deduct New York State and local income taxes from their itemized deductions to reduce their Federal items of tax preference in arriving at New York items of tax preference upon which the New York State minimum tax is based. (Matter of Gurney v Tully, 67 AD2d 303, 51 NY2d 818; Matter of Long Is. Light. Co. v State Tax Commn., 45 NY2d 529; Matter of Grace v New York State Tax Commn., 37 NY2d 193; Matter of Kreiss v State Tax Commn., 61 NY2d 916; Matter of Howard v Wyman, 28 NY2d 434; Matter of Lezette v Board of Educ., 35 NY2d 272.)
   OPINION OF THE COURT

Simons, J.

The issue on these appeals is whether the Federal tax benefit rule applies to exclude State and local income taxes when computing New York items of tax preference subject to New York minimum income tax under Tax Law §§ 622 and 623 for the tax years 1976 and 1977. We hold that it does and reverse the order of the Appellate Division in each proceeding.

New York State imposes a “minimum income tax” on the New York “minimum taxable income” of every individual, estate or trust (Tax Law § 601-A). Its purpose is to limit the ability of high income taxpayers to avoid any tax burden through various tax shelters by requiring such taxpayers to pay a tax on certain “items of tax preference” from which they benefit. Thus, the minimum income tax is the sum of the “items of tax preference” reduced by specified amounts (Tax Law § 622 [a]). The term “items of tax preference” is defined as “the federal items of tax preference”, subject to certain modifications found in the State statute (Tax Law § 622 [b]). In 1976 and 1977, the years at issue in these proceedings, the statute did not modify the Federal rule which included deductions for State and local income taxes as items of tax preference to be included in the minimum tax computations. Nevertheless, petitioners did not include their deductions for New York State and city income taxes in computing their New York State and city minimum income tax for those years and thereby diminished their minimum income tax liability. They did so claiming they had received no State tax benefit from the payments because the payments were not deductible on the State tax returns. The State Department of Taxation sent petitioners notices of deficiency stating that the Tax Law “does not currently allow a modification to be made for State and local income taxes in the computation of New York items of tax preference.” Following a hearing in the Hunt case and after review of submissions in Marx and Ross, respondent State Tax Commission sustained the notices of deficiency and ruled that petitioners incorrectly computed their New York items of tax preference subject to New York minimum tax.

These article 78 proceedings seek review of respondent’s determinations. Petitioners contend that the imposition of the New York minimum tax on the itemized deduction for State and local income taxes was contrary to law because they received no New York income tax benefit as a result of their payment of New York income taxes and this violated the Federal tax benefit rule applicable to the computation of New York taxes through the conformity principle (see, Tax Law § 607 [a]; see also, Tax Law § 622 [b]). In Marx and Hunt, Special Term annulled respondent’s determination, concluding that the deductions used in the computation of minimum income tax at the Federal level must be permitted under State law as a matter of fundamental fairness. In Ross, Special Term dismissed the petition holding that there was no recognized legal basis to exclude the deduction for State and local taxes from the computation of State items of tax preference subject to the minimum tax. The Appellate Division held against the taxpayers, reversing in Marx and Hunt and affirming in Ross. It held that the tax benefit rule does not apply for New York minimum tax purposes because of the existence of specific provisions in our statute modifying Federal items of tax preference which do not include the tax benefit rule for city or State taxes. It held that these provisions of Tax Law § 622 (b) (2)-(4) are exclusive and indicate that the Legislature did not intend general application of the tax benefit rule for New York minimum tax purposes.

In 1960, New York revised its personal income tax law to achieve close conformity with the Federal system of income taxation. The purpose of the revision was to simplify tax preparation, improve enforcement, and aid interpretation of tax law provisions (see, Matter of Friedsam v State Tax Commn., 64 NY2d 76, 79-80). In doing so, the Legislature provided that: “Any term used in this article shall have the same meaning as when used in a comparable context in the laws of the United States relating to federal income taxes, unless a different meaning is clearly required” (Tax Law § 607 [a]). Subsequently, in 1969, the Federal Government enacted a minimum tax and New York adopted a similar tax in 1970 (Pub L 91-172, tit III, § 301 [a], 83 US Stat 581; L 1970, ch 1005, § 10). In 1976 the Federal Government enacted a new item of tax preference used in computing the minimum tax — “excess itemized deductions” — defined as a taxpayer’s itemized deductions which exceed 60% of his adjusted gross income (26 USC § 57 [a] [1]; [b] [1]). For the years in question, State and local taxes were a Federal itemized deduction (26 USC § 164). Thus, in applying the Federal minimum tax, petitioners were taxed on the deductions they had claimed for State and local taxes because they had received a corresponding benefit for those items in the form of reductions in their Federal adjusted gross income. Under New York law this item was included as a tax preference item subject to the minimum tax by principles of conformity although taxpayers received no benefit from it because they could not deduct State and local taxes on their State returns. They thus paid a minimum tax to the State based in part on taxes previously paid to the State. Petitioners contend that to avoid this inequity the Federal tax benefit rule should be applied to New York’s tax assessments, through principles of conformity, and that the application of that rule authorizes the exclusion of the State and local taxes they paid from petitioners’ Federal tax preference items used in computing New York minimum tax.

The tax benefit rule is found in section 58 (h) of the Internal Revenue Code (26 USC § 58 [h]). It provides that the Secretary of the Treasury shall prescribe regulations “under which items of tax preference shall be properly adjusted where the tax treatment giving rise to such items will not result in the reduction of the taxpayer’s tax under this subtitle for any taxable years.” Inasmuch as Tax Law § 607 (a) provides that all present and future provisions of the Federal income tax laws shall be incorporated in our tax laws this Federal tax benefit rule applies to the computation of petitioners’ New York minimum tax for the years in question, unless the Commissioner’s failure to promulgate regulations on the Federal level renders section 58 (h) nugatory or, as the Appellate Division held, the existence of specific provisions of the State law modifying Federal items of tax preference manifests the Legislature’s intention to exclude application of the Federal tax benefit rule.

Contrary to respondent’s contention, the tax benefit rule found in section 58 (h) is not a rule to be applied administratively to Federal taxes. The statute was given full effect by the United States Tax Court in Occidental Petroleum Corp. v Commissioner (82 USTC 819, 829), notwithstanding the failure to promulgate regulations interpreting it, when it held that: “the failure to promulgate the required regulations can hardly render the new provisions of section 58(h) inoperative * * * Congress could hardly have intended to give the Treasury the power to defeat the legislatively contemplated operative effect of such provisions merely by failing to discharge the statutorily imposed duty to promulgate the required regulations [footnote omitted]. As already indicated, we must give effect to these provisions in the absence of regulations” (82 USTC, at p 829).

Furthermore, the Internal Revenue Service regularly issues letter rulings applying the tax benefit rule (see, e.g., Letter Ruling 7913008 [Dec. 13, 1978] [involving taxable year 1978]; Letter Ruling 7938005 [May 11, 1979] [involving taxable year 1976]; Letter Ruling 8102015 [Sept. 29,1980] [involving taxable year 1977]).

Addressing the rationale adopted by the Appellate Division to sustain the respondent’s determination, we hold that the existence of specific provisions modifying Federal items of tax preference found in Tax Law § 622 (b) (2)-(4) does not indicate an intent by the Legislature to exclude application of the tax benefit rule. Section 622 (b) (2)-(4), which incorporates the Federal definition of items of tax preference, was enacted at various times between 1970 and 1972 and there was no further amendment to it until 1981. The tax benefit rule did not enter into the calculation of items of tax preference for Federal purposes until the enactment of section 58 (h) of the Internal Revenue Code in 1976. Thus, it cannot be presumed that the Legislature intended that its 1970-1972 provisions would control an issue that did not exist when they were enacted and only arose after the adoption of the subsequent Federal legislation. Moreover, the three modifications to the Federal definitions specified in Tax Law § 622 (b) (2)-(4) are instances in which the New York income tax differs from the Federal income tax and were apparently enacted to make appropriate adjustments to the New York minimum tax to reflect these differences in regular income tax treatment.

The interpretation of the statute is also supported by the strong principle of conformity we confirmed recently in Matter of Friedsam v State Tax Commn. (64 NY2d 76, supra). In that case, the Tax Commission denied petitioner, a nonresident taxpayer, an alimony credit to reduce his adjusted gross income although New York residents were allowed it. The Commission viewed the adjustment as a personal expense unrelated to the production of the New York income and therefore not deductible (see, Tax Law § 632 [b] [1] [B]). We held that such disparate treatment of nonresidents violated the State’s tax policy of substantial equality embodied in Tax Law § 635 (c) (1). Central to our holding was a recognition that alimony payments were deductible under Federal law and that the Federal rule “automatically inured” to petitioner’s benefit under the principle of conformity.

We also applied the principle of conformity in Matter of Kreiss v State Tax Commn. (61 NY2d 916) but in that case it resulted in the denial of a benefit to petitioners. Petitioners in Kreiss reported a capital gain of $40,000 on their 1974 Federal and State income tax returns resulting from the sale of three taxicab medallions. Three years later, as a result of litigation contesting ownership rights to the medallions, petitioners were required to pay part of that sum to others and ultimately realized a capital gain of only $16,700. They filed amended State and Federal tax returns to claim refunds for the 1974 overpayment. The Federal claim was disallowed because the 1974 income was correctly reported. A Federal refund was permitted, however, under the “claim of right” doctrine (see, 26 USC § 1341). The State Tax Commission also disallowed amendment of petitioners’ 1977 return because their adjusted gross income for 1974 was correctly reported. The State did not permit a refund under the claim of right statute because section 1341 was a unique provision of Federal law which did not change petitioners’ Federal adjusted gross income for 1974. The Appellate Division reversed the Commission and granted petitioners’ relief holding that strict application of the conformity principle would produce an inequity inasmuch as petitioners overpaid their 1974 tax and were not permitted a deduction in 1977. This court reversed and reinstated the State Tax Commission’s determination. We held that the principle of strict conformity applied with the result that petitioners’ adjusted gross income reported on their 1974 Federal income tax return matched the State return insofar as both reflected the $40,000 capital gain and that the refund petitioners obtained under the Federal claim of right statute did not mandate a refund under State law because the Federal statute was a procedural mechanism to recoup taxes having no New York counterpart. Unlike the provisions here and in Friedsam which concern State and Federal tax provisions directly related to the computation of income, the claim of right doctrine concerns ultimate tax liability (see, Bonney v State Tax Commn., 43 AD2d 879, lv denied 34 NY2d 515; Matter of Alaimo v State Tax Comma., 69 Misc 2d 484). Thus, more than the general incorporation language of Tax Law § 607 was required to grant the taxpayers in Kreiss relief for the State overpayment.

Accordingly, in each proceeding the order of the Appellate Division is reversed, with costs, petition granted, determination of the State Tax Commission annulled and matter remitted to the Supreme Court, Albany County, with directions to remand to the Tax Commission for redetermination of petitioners’ tax liability.

Judges Jasen, Meyer, Kaye, Alexander and Kane concur; Chief Judge Wachtler taking no part.

In each case: Order reversed, etc.

      . Petitioners Hunt and Winkelman are contesting only the inclusion of the State tax deduction for 1976. A comparable provision for a minimum income tax is set forth in chapter 46, title T of the Administrative Code of the City of New York and petitioners Ross and Marx are contesting not only the State but also city deductions for 1976 under these code provisions. Petitioner Marx is contesting State and city deductions for 1977 also. In addressing the issues presented, unless otherwise specified, all references to particular sections of article 22 of the Tax Law should be deemed references, although uncited, to comparable provisions of title T of the Administrative Code.

      . Tax Law § 622 (b) (5) was added in 1980 and applies to tax years beginning after December 31,1979. The amendment adds a further modification to items of tax preference involving the Federal deduction for State and local income taxes (L 1980, ch 669, § 1). That amendment is not applicable to the proceedings before us.

       Designated pursuant to NY Constitution, article VI, § 2.


author: Simons, J. Kane, J.

text:
    Donald J. Trump et al., Appellants, v Roderick Chu, Individually and as Commissioner of the Department of Taxation and Finance, Respondent.
    Argued March 21, 1985;
    decided April 30, 1985

      POINTS OF COUNSEL

      Milton S. Gould, Roy M. Cohn, Stuart A. Smith, Alice P. Henkin and Louis Biancone for appellants.
    The trial court erred in sustaining the constitutionality of the 10% tax, which unlawfully discriminates between identically situated taxpayers in violation of their right to equal protection of the laws. (Stewart Dry Goods Co. v Lewis, 294 US 550; Valentine v Great Atl. & Pac. Tea Co., 299 US 32; Merit Oil v State Tax Commn., 111 Misc 2d 118; Shell Oil Co. v State Tax Commn., 91 AD2d 81; Colonial Pipeline Co. v Traigle, 421 US 100; Carmichael v

      Southern Coal Co., 301 US 495; Matter of Vanderbilt, 281 NY 297, affd sub nom. Whitney v Tax Commn., 309 US 530; Johnson v Smith, 297 NY 165; Allied Stores v Bowers, 358 US 522; Royster Guano Co. v Virginia, 253 US 412.)

      Robert Abrams, Attorney-General (Robert Hermann, Peter H. Schiff, Richard G. Liskov and August L. Fietkau of counsel), for respondent.
    Appellants have failed to meet the burden of showing beyond a reasonable doubt that article 31-B offends equal protection guarantees because no conceivable basis can be found to support the tax classifications it makes. (Matter of Malpica-Orsini, 36 NY2d 568; Madden v Kentucky, 309 US 83; Carmichael v Southern Coal Co., 301 US 495; O’Donnell v Antin, 81 Misc 2d 849, 36 NY2d 941; Western & S. Life Ins. Co. v Board of Equalization, 451 US 648; United States v Carolene Prods. Co., 304 US 144; Maresca v Cuomo, 64 NY2d 242; Clark v Titusville, 184 US 329; Magoun v Illinois Trust & Sav. Bank, 170 US 283; Quong Wing v Kirkendall, 223 US 59.)

      John T. DeGraff, Jr., and Michael T. Wallender for New York State Association of Realtors, Inc., amicus curiae. Article 31-B violates the constitutional guarantee of equal protection of the laws.

      (Johnson v Robison, 415 US 361; Stewart Dry Goods Co. v Lewis, 294 US 550; Merit Oil v State Tax Commn., 111 Misc 2d 118; Frontiero v Richardson, 411 US 677; Weinberger v Wiesenfeld, 420 US 636; Califano v Goldfarb, 430 US 199; Caban v Mohammed, 441 US 380; Califano v Westcott, 443 US 76; Benson Realty Corp. v Beame, 50 NY2d 994.)

      John G. McGarrahan and Roy A. Klein for Citizens Tax Council, Inc., amicus curiae.

    Article 31-B of the New York Tax Law violates the equal protection clause of the United States and New York State Constitutions. (Carmichael v Southern Coal Co., 301 US 495; Magoun v Illinois Trust & Sav. Bank, 170 US 283; Gulf, Col. & Santa Fe Ry. v Ellis, 165 US 150; Royster Guano Co. v Virginia, 253 US 412; Louisville Gas Co. v Coleman, 277 US 32; Air-Way Corp. v Day, 266 US 71; Schlesinger v Wisconsin, 270 US 230; Oil Co. v Conway, 281 US 146; Allied Stores v Bowers, 358 US 522; Reed v Reed, 404 US 71.)
   OPINION OF THE COURT

Simons, J.

Plaintiffs Donald J. Trump and Richard Pellicane seek a judgment declaring that Tax Law article 31-B which imposes a 10% tax on gains derived from real property transfers {see, Tax Law §§ 1440 — 1449-c), violates the equal protection clause of both the United States Constitution (US Const 14th amend) and the New York State Constitution (NY Const, art I, §11) and a permanent injunction prohibiting defendant Commissioner of the Department of Taxation and Finance from enforcing it. Special Term upheld the statute and plaintiffs are before us by direct appeal from its judgment (see, NY Const, art VI, § 3 [b] [2]; CPLR 5601 [b] [2]). We affirm Special Term’s holding but modify the judgment to declare that Tax Law article 31-B (L 1983, ch 15, § 181) does not violate either the State or Federal Constitution (see, Lanza v Wagner, 11 NY2d 317, 334).

Article 31-B was enacted in 1983 as part of a comprehensive package of tax measures designed to provide necessary revenues for the 1983-1984 State budget (L 1983, ch 15). It imposes a tax of 10% on gains derived from the transfer of real property within the State payable by the transferor (see, Tax Law §§ 1441,1442). The statute defines “gain” as “the difference between the consideration for the transfer of real property and the original purchase price of such property, where the consideration exceeds the original purchase price” (id. § 1440 [3]). It also contains several exemptions from the tax, but for purposes of this appeal the only relevant exemption is for transfers in which the consideration is less than one million dollars (see, id. § 1443 [1]). In determining whether a transfer is for one million dollars or more, the statute provides different modes of treatment for condominiums or cooperatives sold by the developer, on the one hand, and subdivided parcels of real property improved with residences on the other. In the former situation, if the aggregate consideration to the developer for the sale of the entire development equals or exceeds one million dollars and there is a gain, the initial sale of any individual unit will be taxed on a proportionately allocated basis. When a developer sells a subdivided plot of land improved with individual residences, however, the price of the single residence is deemed the consideration for purposes of the one million dollar exemption (see, id. § 1440 [7]).

Plaintiff Donald Trump is a real estate developer who holds a beneficial interest in a joint venture known as the Trump-Equitable Fifth Avenue Company, the developer of Trump Tower in Manhattan. The 38 floors of Trump Tower house 266 residential units that are being sold pursuant to a condominium plan for a projected gross revenue of $277 million. Since the passage of article 31-B, Trump-Equitable has sold several units in Trump Tower and, as transferor, has paid the 10% gains tax imposed by that statute under protest. Plaintiff Richard Pellicane is a real estate developer in Suffolk County who is the fee owner of several parcels of real property in that county that are subject to the 10% gains tax imposed by article 31-B.

Plaintiff Trump instituted an action in Supreme Court, New York County, and plaintiff Pellicane brought his action in Supreme Court, Suffolk County. Both plaintiffs asserted that the 10% gains tax violates the equal protection clause of the Federal and State Constitutions in that it creates arbitrary and discriminatory classifications between: (1) transferors who sell their real property for one million dollars or more and those who sell property for less than one million dollars, (2) condominium/ cooperative developers and developers of subdivided residential plots and (3) transferors of real property and transferors of other tangible and intangible property. In addition, plaintiff Pellicane alleged that the gains tax violates the due process clause of the United States and New York State Constitutions because it is a retrospective tax (see, US Const 14th amend; NY Const, art I, § 6). After answering, defendant moved to dismiss the Trump complaint and the Pellicane amended complaint for failure to state a cause of action and plaintiffs cross-moved for summary judgment. Plaintiffs’ motion to consolidate the actions and remove the Pellicane action to Supreme Court, New York County, was granted and the actions were consolidated. Special Term upheld the gains tax in its entirety, denied plaintiffs’ cross motions for summary judgment and granted defendant’s motion to dismiss.

On this appeal, plaintiffs raise two equal protection challenges to the constitutionality of the gains tax. First, they assert that by exempting transfers for less than one million dollars the gains tax treats identically situated taxpayers differently on the basis of varying levels of gross receipts, e.g., a taxpayer who sells his property for $999,999 and has a gain of $500,000 owes no tax whereas a taxpayer who sells his property for $1,000,001 and has a similar $500,000 gain must pay a tax of $50,000. Thus, plaintiffs allege that the gains tax is indistinguishable from gross receipts taxes that have been declared unconstitutional based upon findings that the gross receipts have no rational correlation to the amount of the gain. Second, plaintiffs contend that by requiring the aggregation of consideration in connection with the sale of condominium and cooperative dwellings for purposes of meeting the one million dollar taxing threshold, but not for the sale of subdivided parcels with improved residences, the gains tax unconstitutionally discriminates against developers of condominiums and cooperative dwellings.

The scope of our review is narrow. Taxing statutes, like other social and economic legislation that neither classify on the basis of a suspect class nor impair a fundamental right, must be upheld if the challenged classification is rationally related to achievement of a legitimate State purpose (Western & S. Ins. Co. v Board of Equalization, 451 US 648, 657). Moreover, the statute enjoys a presumption of constitutionality which “can be overcome only by the most explicit demonstration that [the] classification is a hostile and oppressive discrimination against particular persons and classes. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it” (Madden v Kentucky, 309 US 83, 88 [nn omitted]; see, Maresca v Cuomo, 64 NY2d 242,250; Allied Stores v Bowers, 358 US 522, 527-528). When examining classification, it should be remembered that in the field of taxation the Legislature is “not required to resort to close distinctions or to maintain a precise, scientific uniformity with reference to composition, use or value” (Allied Stores v Bowers, supra, at p 527) but rather it has “large leeway in making classifications and drawing lines which in [its] judgment producéis] reasonable systems of taxation” (Lehnhausen v Lake Shore Auto Parts Co., 410 US 356, 359; Shapiro v City of New York, 32 NY2d 96, 103). Thus, the equal protection clause does not prevent State Legislatures from drawing lines that treat one class of individuals or entities differently from others unless the difference in treatment is “palpably arbitrary” or amounts to an “invidious discrimination” (see, Lehnhausen v Lake Shore Auto Parts Co., supra, at p 360; Allied Stores v Bowers, supra, at p 527; Shapiro v City of New York, supra, at p 103).

Addressing the discriminatory effect of the exemption for transfers of real property for less than one million dollars, plaintiffs contend that our decision is controlled by Stewart Dry Goods Co. v Lewis (294 US 550; see also, Merit Oil v State Tax Commn., 111 Misc 2d 118). In Stewart Dry Goods, the United States Supreme Court invalidated a graduated gross receipts tax imposed on the sale of retail merchandise because the rate of tax increased as the total gross receipts of sales increased. The statute taxed similar transactions differently, therefore, depending on the amount of receipts obtained from previous transactions. The only conceivable justification for this different treatment was that a merchant’s net income and consequently his ability to pay the tax increased as his volume of sales increased {id., at pp 557-558). The court held this was not a rational basis for the tax because the gross receipts tax was imposed regardless of whether a merchant made a profit. Thus, merchants with a large volume of business but an actual net loss paid more tax than a low volume merchant with a substantial profit {id., at pp 560-561). Similarly, the statute at issue in Merit Oil imposed a 2% gross receipts tax on all companies engaged in importing, extracting, producing, refining, manufacturing, compounding or selling petroleum but granted retailers who sold not more than 60,000,000 gallons of petroleum during the preceding taxable year a total exemption (Tax Law § 182 [former 2] [a], as added by L 1980, ch 271, § 3). Special Term, relying exclusively on Stewart Dry Goods, found this classification of retailers violated equal protection because after the 60,000,000 gallon threshold was reached the retailer was taxed on gross receipts for all sales from “dollar one” (Merit Oil v State Tax Commn., 111 Misc 2d 118, 120, supra).

Stewart Dry Goods and Merit Oil stand for the proposition that gross receipts taxes that treat similarly situated taxpayers differently based on sales volume violate equal protection because they are imposed without regard to profits. Stated differently, Stewart holds that the Legislature may not classify taxpayers on the basis of gross receipts or sales volume for the purpose of imposing different tax rates and then utilize the amount of gross receipts to determine the amount of tax due as well (see, Mobil Oil Corp. v Tully, 113 Misc 2d 885, 886, affd sub nom. Shell Oil Co. v State Tax Commn., 91 AD2d 81). This case is distinguishable from Stewart Dry Goods and Merit Oil, however, because although liability for the tax imposed by article 31-B is determined by the amount of gross consideration, the actual calculation of the tax due depends entirely on the gain realized from the real property transfer. As Special Term recognized, “[t]he gross consideration of a million dollars or more merely sets the parameters of the class of property subject to the tax.” The tax imposed is not on the gross consideration received but rather on the gain that results when the consideration received for the transfer exceeds the original purchase price of the real property (see, Tax Law § 1440 [3]).

Plaintiffs also contend that the statutory definition of “original purchase price” does not adequately reflect the basis of the real property and will lead to imposition of the tax when a net loss is sustained (see, id. § 1440 [5]). The statute defines “gain”, however, as the difference between “consideration” (after deduction of brokerage fees) and the “original purchase price” (see, Tax Law § 1440 [1], [3], [5]) and the regulations promulgated by the Department of Taxation and Finance to implement the statute make it clear that all customary, reasonable and necessary costs related to the acquisition and improvement of real property are included in the original purchase price so that the tax will be imposed only in the case of a net profit (see, 20 NYCRR part 590).

The Legislature may establish the exemption at one million dollars for at least two related reasons despite the inequalities that may result. So long as it taxes only net gains, it rationally could believe that “generally speaking” profits increase as the amount of gross consideration received increases (see, Stewart Dry Goods Co. v Lewis, 294 US 550, 559, supra). This is especially true in light of the Legislature’s conceivable view that imposing the tax on every gain resulting from the transfer of real property, no matter how small the transaction, would be economically inefficient and counterproductive. Additionally, “[administrative convenience and expense in the collection or measurement of the tax are alone a sufficient justification for the difference between the treatment of small incomes or small taxpayers and that meted out to others * * * We cannot say that the expense and inconvenience of collecting the tax from small * * * [real estate transactions] would not be disproportionate to the revenue obtained” (Carmichael v Southern Coal Co., 301 US 495, 511; see also, Spatt v City of New York, 13 NY2d 618, 619; Matter of Kenning v State Dept. of Taxation & Fin., 72 Mise 2d 929, 933, affd 43 AD2d 815). Since it is established that the Legislature may exempt some taxpayers on this basis, where it draws the line “is peculiarly a question for legislative decision” (Carmichael v Southern Coal Co., supra, at p 511) especially in the field of taxation where, “even more than in other fields, legislatures possess the greatest freedom in classification” (Madden v Kentucky, 309 US 83, 88, supra).

Turning to the Legislature’s different tax treatment of condominium and cooperative developers on the one hand and subdivided improved realty on the other, it is apparent that the classification employed is rationally related to the legitimate State purpose of raising the revenues necessary to finance the State budget and provide needed government services because: (1) condominium and cooperative developments involve greater administrative cost to State government as a result of more extensive special laws, regulations and inquiries than apply to subdivided improved realty (see, e.g., General Business Law §§ 352-e — 352-eeee [application of Martin Act to condominiums and cooperatives]; Real Property Law §§ 339-d — 339-ii [Condominium Act]); (2) condominium and cooperative developments, because they are more likely to occur in urban areas than subdivisions, make greater demands on needed public services; and (3) treating sales of condominium and cooperative units as separate tax transactions would entail greater administrative costs than in the case of subdivided realty, thereby reducing the net revenue produced by the tax. In addition, the Legislature rationally could have believed that the challenged classification would further the conceivable purposes of encouraging the development of individually owned residences while at the same time discouraging the rapid conversion of scarce rental apartments to condominiums and cooperatives.

These are legitimate State purposes justifying the classifications adopted, whether they are the purposes which actually motivated the Legislature or not, and inasmuch as the classifications are rationally related to their achievement, the legislation has a rational basis (see, Maresca v Cuomo, 64 NY2d 242, 251, supra; McGinnis v Royster, 410 US 263, 276).

Accordingly, the judgment of Supreme Court should be modified, with costs, to declare that Tax Law article 31-B (L 1983, ch 15, § 181) is constitutional and, as so modified, affirmed, with costs to defendants.

Kane, J.

(dissenting). As the majority notes, a heavy burden is cast upon one who challenges the constitutional validity of a revenue measure on the ground that it is violative of the equal protection clause of both the United States Constitution (US Const 14th amend) and the New York State Constitution (NY Const, art I, § 11). Indeed, we all agree that to pass constitutional muster “the classification challenged [must] be rationally related to a legitimate state interest” (see, New Orleans v Dukes, 427 US 297, 303). Contrary to the majority, however, I am unable to conclude that the challenged classifications are rational.

I turn first to a consideration of the classification between transferors who sell their real property for $1,000,000 or more and those who sell property for less than $1,000,000. In this regard, it should be noted that in order for a tax classification to be rational, not arbitrary, the classes must be so defined that those in similar circumstances are treated with at least approximate equality. Upon a mere cursory examination of the provisions of Tax Law § 1443, one can legitimately conclude that small profits may be taxed, while large profits may escape the tax. Furthermore, persons who make the same amount of profit from the sale of two similar pieces of real property may or may not pay a tax, depending only on the amount of consideration; namely whether that consideration be $1,000,000 or $999,999. Such a result does not even approximate equality. Of course, a State Legislature is free to establish taxable status without adherence to rigid rules (Carmichael v Southern Coal Co., 301 US 495, 509). But this power is not absolute and must rest on principles of fairness and equity since: “there is a point beyond which the State cannot go without violating the Equal Protection Clause. The State must proceed upon a rational basis and may not resort to a classification that is palpably arbitrary. The rule often has been stated to be that the classification ‘must rest upon some ground of difference having a fair and substantial relation to the object of the legislation.’ Royster Guano Co. v. Virginia, 253 U. S. 412, 415; Louisville Gas & Electric Co. v. Coleman, 277 U. S. 32, 37; Air-Way Electric Appliance Corp. v. Day, 266 U. S. 71, 85; Schlesinger v. Wisconsin, 270 U. S. 230, 240; Ohio Oil Co. v. Conway, 281U. S. 146, 160.” (Allied Stores v Bowers, 358 US 522, 527.)

In this case, it seems to me the classification misses the mark. The classes created are suspect because they do not originate from other than natural circumstances. The differences are mere differences that do not exist apart from the statute. They are artificially created by the statute (Louisville Gas Co. v Coleman, 277 US 32, 37; see also, Metropolitan Life Ins. Co. v Ward, 470 US _, 105 S Ct 1676). Even if one accepts the majority’s conclusion that the Legislature may establish an exemption of $1,000,000 despite the resulting inequality in the amount of tax to be paid, the classification is still invalid for “classification good for one purpose may be bad for another; and it does not follow that because the state may classify for the purpose of proportioning the tax, it may adopt the same classification to the end that some shall bear a burden of taxation from which others under circumstances identical in all respects save in respect of the matter of value, are entirely exempt” (Louisville Gas Co. v Coleman, 277 US 32, 38, supra).

Further, the attempted classification is purely arbitrary because, as established, it is not related to the purpose of the tax. The tax is, essentially, a tax on profits; it is not a property tax. Thus, the classification based on property value is not related to the subject matter of the tax. No one would deny the power of the Legislature to enact a 10% capital gain surcharge on every taxable transfer of real property in the State, but when such a tax statute arbitrarily treats similarly situated sellers of real property differently, in a discriminatory manner without rational basis to support the disparate treatment, it runs afoul of the equal protection clause. There is no argument advanced that inequality is justified for any economic or social policy reasons or that the tax is upon the competitive advantage of one group over the other, for, as has been demonstrated, those with large profits may escape the tax, while those in a so-called weak position may have to pay.

Moreover, any claim that the classification is founded upon ability to pay should be rejected when practical economic considerations are examined more closely. It cannot be denied that, pursuant to the statute, classification is based entirely upon the amount of the consideration, while the tax is computed solely on the amount of the gain. We should not indulge in the stereotyped assumption that a seller in the taxed class is better able to pay the tax than a seller in the exempt class, for the contrary may well be true. Such thinking is seriously flawed because when the tax imposed is based entirely upon the amount of gain realized, it is not rationally related to the seller’s ability to pay just because the sale price was over $1,000,000. A similar rationale may be found in Stewart Dry Goods Co. v Lewis (294 US 550), wherein the court held that ability to pay cannot be used as a justification for treating classes of taxpayers disparately if the bases for creating these classifications are not related to the ability to pay. This same case also addressed the concept of “administrative convenience” as supplying a rational basis for classification of taxpayers (id., at p 560). We need not concern ourselves with that argument in this case, for it is certain that, in any event, where applicable, the tax will be collected. It is statutorily mandated that no transfer of an interest in real property in New York State can be recorded in the appropriate land records unless the parties provide the recording officer with the applicable affidavit (furnished by the New York State Department of Taxation and Finance), showing payment of the tentative tax due, or the State Tax Commission’s statement that no tax is due (Real Property Law § 333 [1-f] [a]).

There are additional grounds to invalidate the tax. In the determination of the quantum of “gain” on a particular transaction, the majority finds comfort in a recently promulgated regulation of the Department of Taxation and Finance which permits the inclusion of all customary, reasonable and necessary costs related to the acquisition and improvement of real property in the “original purchase price” so that the tax will be imposed only in case of a net profit (see, 20 NYCRR part 590). It should be noted, however, that “soft costs” related to selling are excluded from a determination of the “original purchase price” (Tax Law § 1440 [3]). These costs include such items as advertising, public relations and marketing, field office expenses, maintenance expenses, business taxes and warranty costs (see, 35 Syracuse L Rev 609, 615 [1984]). These expenses, which may be considerable, do not reduce the net gain subject to the tax and again offend the principle set forth in Stewart (supra). Additionally, in the statutory scheme the foreclosure of a mortgage can result in taxation of a party who has realized no gain (Tax Law § 1447 [3]; § 1440 [7]; see also, 35 Syracuse L Rev 609, 619-620 [1984], supra). For example, if a borrower obtains a mortgage loan in excess of the purchase price of the mortgaged property, defaults and the mortgage is foreclosed, the tax must be paid on the “gain” (Tax Law § 1440 [1], [3], [7]). If the borrower cannot pay the tax, the new transferee, such as a bank bidding in on foreclosure sale or any other third party, must pay the tax in order to record the referee’s deed (Real Property Law § 333 [1-f]).

Finally, the disparate tax treatment of condominium and cooperative developers on the one hand, and developers of subdivided residential realty on the other, is equally offensive under the tests applied above. Condominium and cooperative developments are not peculiar to urban areas. Indeed, cluster-type condominium development is encouraged for ecological as well as practical reasons (cf. Matter of Friends of Shawangunks v Knowlton, 64 NY2d 387, 393-396). The indiscriminate classification between developers of condominiums and cooperative dwellings, and developers of subdivided parcels with improved residences, lacks any rational basis in law or in logic (see, Weissman v Evans, 56 NY2d 458).

The tax violates the equal protection clause of both the United States Constitution (US Const 14th amend) and the New York State Constitution (NY Const, art I, § 11). Plaintiffs’ cross motion for such a declaration should therefore be granted.

Judges Jasen, Meyer and Alexander concur with Judge Simons; Judge Kane dissents and votes to reverse in a separate opinion; Chief Judge Wachtler and Judge Kaye taking no part.

Judgment modified, with costs to defendant, in accordance with the opinion herein and, as so modified, affirmed.

      . Tax Law § 1440 (7) provides: “Transfer of real property shall also include partial or successive transfers pursuant to an agreement or plan to effectuate by partial or successive transfers a transfer which would otherwise be included in the coverage of this article, provided that the subdividing of real property and the sale of such subdivided parcels improved with residences to transferees for use as their residences, other than transfers pursuant to a cooperative or condominium plan, shall not be deemed a single transfer of real property.”

      . The rate of tax for the first $400,000 of annual sales was V2oth of 1%. The rate increased on each additional $100,000 of sales between $400,000 and $1,000,000. On all sales over $1,000,000 the rate was 1%. The higher rate of tax applied only to the gross receipts in excess of the preceding bracket (see, Stewart Dry Goods Co. v Lewis, 294 US 550,554). Thus, the sale of a radio, say, for $50 at the beginning of the year was taxed at 1/2oth of 1% but the sale of an identical $50 radio after $1,000,000 in previous sales would be taxed at the rate of 1%.

      . Although the opinion in Merit Oil refers to the tax as a “gross profits tax” it was in fact a “gross receipts” tax (see, Tax Law § 182 [former 1], [former 2] [b], as added by L 1980, ch 271, § 3).

      Designated pursuant to NY Constitution, article VI, § 2.


author: Kane, J.

text:
    The People of the State of New York, Appellant, v Matty Principe et al., Defendants, and Tom Velez, Maria Gruezo, Patty Bell, Lillian Hayes and Jarret Weinrich et al., Respondents.
    Argued March 18, 1985;
    decided May 7, 1985
    POINTS OF COUNSEL

      Robert M. Morgenthau, District Attorney (Robert M. Pitler and Ronald G. Blum of counsel), for appellant.
    I. Larceny, possession of stolen property and forgery of motor vehicle documents which, among other things, permit unqualified people to obtain driver’s licenses are offenses dangerous to life, limb, and property within the meaning of 18 USC § 2516 (2), and thus the New York Legislature could and did empower Judges to authorize electronic surveillance to gather evidence of those crimes. (People v Shapiro, 50 NY2d 747; People v Illardo, 48 NY2d 408; People v Banks, 55 AD2d 795; United States v Zwego, 657 F2d 248, 455 US 919; United States v Elliott, 571 F2d 880, cert denied sub nom. Hawkins v United States, 439 US 953.) II. The courts below should not have dismissed the indictments or counts and overt acts thereof, because the alleged inadmissibility of the wiretap evidence at trial does not render that evidence insufficient to establish a prima facie case before the Grand Jury. (People v McGrath, 46 NY2d 12, 440 US 972; United States v Calandra, 414 US 338; People v Oakley, 28 NY2d 309; People v Ball, 89 AD2d 353; People v Mauceri, 74 AD2d 833.)

      Howard Alan Kave for Jarret Weinrich, respondent.
    I. The holding in People v Shapiro (50 NY2d 747 [1980]) and the standard of 18 USC § 2516 (2) prohibited the issuance of the eavesdropping warrant below, which was based upon allegations of the commission of crimes which, while punishable by imprisonment for more than one year, were neither enumerated offenses pursuant to 18 USC § 2516 (2), nor “dangerous to life, limb, or property”. (Olmstead v United States, 277 US 438.) II. The courts below properly dismissed those counts of the indictment which were established entirely through the use of evidence obtained by unauthorized eavesdropping. (People v Steuding, 6 NY2d 214; People v Oakley, 28 NY2d 309.)

      Brian Barrett for Anthony Mazzucca, respondent.
    I. None of the offenses set forth in the affidavit and supporting documents underlying the instant warrant and its extensions and modifications is enumerated in 18 USC § 2516 (2) or is a felony offense “dangerous to life, limb, or property” within the language and meaning of that State statute enabling legislation and, thus, the affidavit and warrant were unauthorized and impermissible. (Berger v New York, 388 US 41; People v Shapiro, 50 NY2d 747; People v Tutt, 38 NY2d 1011; United States v Frederickson, 581 F2d 711; United States v Clemente, 482 F Supp 102, 633 F2d 207; United States v Tortorello, 342 F Supp 1029, 480 F2d 764, 414 US 866; People v Ardito, 106 Misc 2d 100.) II. Dismissal of the indictment was proper and appropriate since the eavesdropping evidence was the product of a warrant by a court lacking jurisdiction to issue the warrant. (People v Oakley, 28 NY2d 309.)
   OPINION OF THE COURT

Kane, J.

The standards and procedures for court-authorized eavesdropping in New York State are set forth in CPL article 700. The authority for a State Legislature to enact such legislation is found in title 3 of the Omnibus Crime Control and Safe Streets Act of 1968 (18 USC § 2516 [2]), which provides that electronic eavesdropping is permissible “when such interception may provide or has provided evidence of the commission of the offense of murder, kidnapping, gambling, robbery, bribery, extortion, or dealing in narcotic drugs, marihuana or other dangerous drugs, or other crime dangerous to life, limb, or property, and punishable by imprisonment for more than one year, designated in any applicable State statute authorizing such interception, or any conspiracy to commit any of the foregoing offenses” (emphasis supplied).

The issue on this appeal is whether court-ordered eavesdropping for evidence of forgery, larceny and related crimes listed as “Designated offenses” in CPL 700.05 (8) is within the umbrella of the Federal act as “other crime dangerous to life, limb, or property” (18 USC § 2516 [2]).

The Appellate Division, in a consolidated appeal, affirmed orders of Criminal Term, which granted motions to suppress evidence so obtained and dismissed counts of indictments founded upon such evidence. For the reasons hereinafter set forth, we reverse the orders of the Appellate Division and reinstate those counts of the indictments.

Initially, we note that on this appeal by the People, we are concerned with only 7 of an original 11 defendants. The seven are charged in various counts of separate indictments with the crimes of forgery, criminal possession of a forged instrument, criminal possession of stolen property, offering a false instrument for filing, issuing a false certificate, attempted tampering with public records, tampering with public records and conspiracy. These accusations arose out of the investigation of an organized criminal network which had operated for some 10 years at the 125th Street Auto School in the City of New York. Through allegedly corrupt employees of the New York State Department of Motor Vehicles (DMV), defendant Jarret Weinrich was able to process applications for duplicate certificates of title and thus provide an avenue for the disposal of vehicles stolen by other members of the criminal network. In addition, Weinrich, as proprietor of the 125th Street Auto School, offered such “related” services as driver’s licenses without road tests and inspection stickers without inspections.

An investigation began in June 1981, when documents in the possession of the automobile crime division of the New York City Police Department revealed that a stolen vehicle identification number (VIN) from a 1978 Audi owned by a Manuel R. Martin had been installed on another 1978 Audi registered in the name of Barbara Phillips. The transfer of title to Phillips was accomplished by the forgery of Martin’s name on a duplicate certificate of title. A close examination of the Phillips vehicle and its manufacturer’s confidential VIN disclosed that it had been stolen from a third party in the New York City area. Additional inquiry disclosed that the Phillips duplicate title application was one of a number of such requests for late model vehicles made through the 125th Street Auto School. Shortly thereafter, one Daniel Scott was found to be in possession of an automobile with an unauthorized VIN and was arrested for criminal possession of stolen property in the first degree. He agreed to assist the police in their continuing investigation and subsequently implicated others who were involved in the actual theft of vehicles and the sale of VINs to Weinrich.

This information provided the foundation for an eavesdropping warrant to intercept oral communications at the 125th Street Auto School for evidence of the crimes of grand larceny, criminal possession of stolen property, forgery, falsifying business records, offering a false instrument for filing and other related crimes, including conspiracy to commit such crimes. Information obtained by electronic surveillance, in accordance with the provisions of the warrant and court-authorized extensions thereof, provided much of the evidence upon which the Grand Jury relied in returning subsequent indictments. The recorded conversations corroborated information furnished by Scott and provided further evidence of theft of motor vehicles, illegal transfers of VINs, altered documents and forged certificates implicating Weinrich and his associates, Tom Velez, Michael Cerrato and Anthony Mazzucca, together with three employees of the DMV, Maria Gruezo, Patty Bell and Lillian Hayes, who, for a consideration, actively participated in the enterprise by entering verifying information into the DMV computer to accommodate forged certificates of title provided by Weinrich.

Although conceding that the eavesdropping orders were authorized by State law (CPL 700.05), defendants contend that the Legislature exceeded the permissible scope of State regulation as defined by title 3 of the Omnibus Crime Control and Safe Streets Act of 1968 (18 USC § 2516 [2]) in authorizing electronic surveillance to investigate the criminal activities found here. Criminal Term agreed and ordered suppression of the evidence obtained by court-ordered electronic surveillance and dismissed the indictments founded thereon. The Appellate Division affirmed for the reasons set forth in the memorandum of the suppression court, which held that the crimes designated in the eavesdropping warrant were not crimes for which such a warrant may be lawfully obtained since they are not specifically designated in 18 USC § 2516 or includable therein as “other crime dangerous to life, limb, or property” (18 USC § 2516 [2]). In its decision, the Appellate Division relied heavily on this court’s opinion in People v Shapiro (50 NY2d 747), wherein it was held that the crimes of sexual abuse and promotion of prostitution involving children and minors are not proper subjects for court-ordered electronic surveillance since “they cannot be said to be ‘crime[s] dangerous to life [or] limb’ ” (People v Shapiro, supra, p 764).

The matter before us is clearly distinguishable from the isolated circumstances found in Shapiro. There, the criminal conduct involved only consensual conduct, absent any use of force and of the nature and type which, apparently, the Congress expressly intended to exclude (Sen Rep No. 1097, 90th Cong, 2d Sess, 1968, US Code Cong & Admin News, at 2187).

This record demonstrates the presence of an established and pervasive criminal operation involving the corrupt activities of public employees who furnished necessary documents, authentication, information and assistance in order to promote and sustain the illegal enterprise. Defendants’ scheme to circumvent the regulations which establish the requirements for valid operator’s licenses and vehicle inspections certainly endangers people and property. Such practices place upon the highways operators and vehicles prohibited by those very regulations which were promulgated to protect the general public. Moreover, the stealing of VINs and the forging of documents directly endangers property by concealing and facilitating the theft of motor vehicles. This view finds support in the United States Senate instruction that “[t]he term ‘property’ * * * is not to be read restrictively” (see, Sen Rep No. 1097, 90th Cong, 2d Sess, 1968, US Code Cong & Admin News, at 2187; see also, Bellacosa, Practice Commentary, McKinney’s Cons Laws of NY, Book 11 A, CPL 700.05, p 464).

Additionally, it is logical to conclude that in the use of the singular in the “catch all” phrase “or other crime dangerous to life, limb, or property” (18 USC § 2516 [2]), Congress intended the word “crime” to be construed genetically and did not seek to unreasonably limit the power of a State Legislature to enact enabling legislation. Finally, we note that the activities described are within the permissible scope of electronic eavesdropping since they portray a well-organized criminal enterprise representing major offenses that are “ ‘intrinsically serious or * * * [are] characteristic of the operations of organized crime’ [Sen Rep No. 1097, 90th Cong, 2d Sess, 1968, US Code Cong & Admin News, at 2234]” (People v Shapiro, supra, p 764).

The orders insofar as appealed from should be reversed and the indictments reinstated.

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

Orders insofar as appealed from reversed, etc.

      . The above-named persons are the seven defendants mentioned previously and that part of the orders appealed from which dismissed the indictments against four others are not before us for review.

      . In describing the requirement that crimes designated in a State statute would have to be “dangerous to life, limb, or property, and punishable by imprisonment for more than one year”, the Senate report stated, “This limitation is intended to exclude such offenses as fornication and adultery, which do not involve danger to life, limb, or property” (Sen Rep No. 1097, 90th Cong, 2d Sess, 1968, US Code Cong & Admin News, at 2187).