Are Attorney Consulting Services Taxable In Ny

Out-of-State Attorney Not Subject to New York State Income Revenue enhancement

https://www.hodgsonruss.com/practices-State_Local_Tax.html Map of New York State We have all heard the jokes. "How many lawyers does it take to screw in a low-cal bulb?" "Why won't sharks assault lawyers?" "What'south the departure betwixt an accountant and a lawyer?" Or, "How many lawyer jokes are there?" Well, actually, the last one's easy. Only 3. The remainder are true stories.

But despite the general public's lampooning of attorneys, New York State taxpayers might have institute a lawyer they can celebrate (in addition, of course, to their friends at Hodgson Russ). Meet Patrick J. Carr, a retired New York Country attorney living in Florida. Last calendar month, a state administrative law judge (ALJ) ruled that Mr. Carr did not have to pay a $68,000 revenue enhancement pecker for services rendered in Florida. Mr. Carr was a fellow member of the New York and New Jersey state bars and was admitted pro hac vice in Florida (for non-lawyer readers, "pro hac vice" is a fancy Latin way of saying that an attorney who has not been admitted to practice in a certain jurisdiction is permitted to assistance litigate a particular case in that country). And although Mr. Carr did non perform whatever services or maintain whatever office in the country, New York attempted to revenue enhancement his income solely because of his New York constabulary license. Are yous starting to root for Mr. Carr? Thankfully, however, ALJ Barbara Russo dismissed the state'southward position and announced that "merely holding a license to exercise in New York is not the equivalent of carrying on a profession in New York country." So why did New York recollect that information technology had the right to tax Mr. Carr?

New York Country actually has a long history of going after nonresident'due south income. And as was the case with Mr. Carr, issues of nonresident resource allotment (that is, determining what portion of a nonresident's income is subject to New York tax) often ascend in the context of a residency audit. This is because New York does have the right to tax the income of nonresidents if that income is derived from or continued to New York sources (residents, on the other hand, are taxed on all their income, regardless of where it is earned). More specifically, and equally was relevant to Mr. Carr, Revenue enhancement Police department 631 provides that New York-source income includes income from a business organization or profession carried on in the state. Income from intangible assets (such as professional person legal licenses) is mostly not considered to exist continued with New York sources, unless the intangible property is employed in a New York business.

Although the state in Mr. Carr's case agreed that he performed no services in New York and did not maintain a New York office, the state argued that "because the income was received from Florida on the basis of [a] pro hac vice admission, it is field of study to New York income tax since it was attributable to a profession carried out in New York State." The land'due south theory was that Mr. Carr's pro hac vice access in Florida was based on his New York law license (the state conveniently left out the fact that his pro hac vice license could take too been attributable to his New Jersey law license). And the land attempted to rely on 2 prior rulings that upheld New York'south correct to tax the out-of-state services of New York attorneys (Carpenter 5. Chapman, 276 A.D. 634 (3d Dept. 1950) and Thing of Vigliano, Tax Appeals Tribunal, January twenty, 1994). But as highlighted by ALJ Russo, the 2 cases relied on by the state both involved attorneys who were only licensed in New York and nowhere else, had New York offices, maintained practices in New York, and did non have offices outside of the state. Conversely, Mr. Carr did not maintain a New York office, was admitted (admitting pro hac vice) to exercise in another state, and his Florida legal work was conducted entirely from a Florida function location. Accordingly, ALJ Russo found that Mr. Carr's income was non subject area to New York tax.

This instance highlights simply how aggressive New York Land can be at targeting individuals who claim to take moved out of the state. As noted above, Mr. Carr's example began as a residency audit, and although he successfully convinced the country that he had moved to Florida, his case underscores that taxpayers demand to empathise that fifty-fifty if they plant residency outside of New York, the state may still seek (and, in many cases, be entitled to) a portion of their income. Just, equally Mr. Carr's example also highlights, New York State can become likewise far. And when someone stands upwardly to the state to check its overly-aggressive interpretation of the tax law, virtually New Yorkers will applaud. Because if there'southward ane thing the general public laments more than lawyers, it's taxes.