Summer is supposed to be a time of breezy beach reads, but lately I’ve had my nose in decisions from the Appellate Division of state Supreme Court. Best sellers these aren’t, but they’re page-turners nonetheless.
That’s because they tell the tale of New York’s decision to end a once-vaunted economic development initiative, begun in 1986 as the Economic Zones Development Program and succeeded in 2000 by the Empire Zones Program. While not mirror images, the two programs provided tax benefits and credits when businesses — new or existing — invested money and created jobs in economically distressed areas of the state.
But where it gets interesting is several years ago, after persistent questions about whether businesses participating in the program were as vigorous at investing and job-creating as they should have been. By then, the Empire Zones Program had about 8,500 certified businesses and was providing some $600 million in annual tax credits.
To answer critics, the state Legislature added several new qualifying criteria in the spring of 2009, including a provision that in order to remain certified, a business had to produce more than $1 in wages, benefits and investments for every $1 in tax incentives it received — the so-called 1:1 benefit-cost test.
The amendments required that every business participating in the program be subjected to the test before 2009 ended, and by that summer close to 600 were on notice that their certifications were in jeopardy. A year later, as the Empire Zones Program itself was petering out (it no longer was taking new applications for tax credits), many permanent decertifications had been handed out.
The amendments, which some say also owed their existence to the state’s 2009 budget crisis, made the decertifications retroactive to Jan. 1, 2008 — meaning businesses bounced from the program lost an extra year of tax benefits. That rankled enough companies that they turned to the courts for relief, claiming the state’s action was arbitrary and capricious. After those cases were decided at the state Supreme Court level, some wound up as appeals at the Appellate Division when either side, the business or the state, disagreed with a ruling.
At the Appellate Division’s Albany-based Third Department, which covers a swath of New York stretching from the North Country to the Catskills and west to the Finger Lakes, a handful of decisions on Empire Zones appeals have been released since May. While the contentions differ in many of the appeals, it’s worth noting that when a business argued against the retroactivity of its decertification, the justices listened.
“[W]e conclude that the retroactive application of the April 2009 amendments constituted an unlawful taking of petitioner’s property and, as such, violated its right to due process,” they wrote, with that phrasing appearing in two of the released decisions.
Also common to those decisions, as well as being found in a third, is this related view: that the Empire Zones Program’s 2009 amendments “may only be prospectively applied,” rather than made retroactive to Jan. 1, 2008, the justices wrote.
But these decisions, too, are subject to appeal, and so far two of them — one coming out of the Appellate Division here and one in western New York — have found their way onto the new-filings page of New York’s high court, the Court of Appeals, where they could be heard come the fall.
Which means I’ll have even more page-turners to immerse myself in when those decisions are handed down. I can’t wait.