Campaniello et al v. New York State Department Of Taxation And Finance et al

Filing 39

OPINION AND ORDER: re: 34 MOTION to Dismiss Amended Complaint filed by Commissioner of Taxation and Finance, New York State Division of Tax Appeals Tax Appeals Tribunal, New York State Department Of Taxation And Finance. For the foregoing reasons, Defendants' motion to dismiss is GRANTED. The Clerk of Court is respectfully directed to close the motion at Docket Number 34 and close this case. (Signed by Judge Lorna G. Schofield on 7/27/2017) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
:
THOMAS CAMPANIELLO, et al.,
Plaintiffs, :
:
:
-against:
:
NEW YORK STATE DEPARTMENT OF
:
TAXATION AND FINANCE, et al.,
Defendants. :
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7/27/2017

16 Civ. 8989 (LGS)
OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:
Plaintiffs Thomas Campaniello (“Thomas”) and Sandra Campaniello (“Sandra”)
(collectively, “Plaintiffs”) bring this action against Defendants New York State Department of
Taxation and Finance (“Department of Taxation”); New York State Division of Tax Appeals,
Tax Appeals Tribunal (“TAT”); Commissioner of Taxation and Finance (“Commissioner”);
James H. Tully, Jr. and Roberta Moseley Nero (collectively, “Defendants”), alleging that
Defendants violated their constitutional and civil rights under 42 U.S.C. § 1983 and the
Fourteenth Amendment. Defendants move to dismiss Plaintiffs’ Amended Complaint
(“Complaint”) for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure
12(b)(1). For the following reasons, Defendants’ motion is granted.
BACKGROUND
The following facts are taken from Plaintiffs’ Complaint and accompanying exhibits. All
uncontroverted facts in the Complaint are construed, and all reasonable inferences are drawn, in
favor of Plaintiffs as the party asserting jurisdiction. See Fed R. Civ. P. 10(c); Fountain v.
Karim, 838 F.3d 129, 134 (2d Cir. 2016).
Plaintiffs Thomas and Sandra are happily married and spend at least half their time in
separate residences. Thomas lives in Florida in an apartment that he purchased in 1981. With

the exception of his family, Thomas’s business, social and community ties have been in Florida
since at least 2006. Thomas has a Florida driver’s license, which he obtained in 1998 and
renewed in 2008. He also owns several investment properties in Florida in which Sandra “holds
no interest.” Sandra lives in New York in an apartment that she formerly shared with Thomas
full time (the “New York Apartment”). Between 2001 and 2006, Thomas and Sandra were
separated for more than half of each year, but Thomas frequently traveled -- and continues to
travel -- to New York to be with his wife, daughter and grandson.
On November 19, 2007, Thomas sold one of his Florida properties and realized a capital
gain of $5,392,445 from the sale, which he reported on his federal tax return. Believing he was a
Florida resident, Thomas filed nonresident tax returns in New York for both 2006 and 2007.
Sandra filed resident tax returns in New York for both years.
In 2011, a Department of Taxation auditor determined that Thomas was a New York
resident and should have filed a New York resident tax return for 2006 and 2007. The
Commissioner served Thomas with a Notice of Deficiency for the 2007 tax year, claiming that
Thomas owed the state of New York a $729,501.39 tax deficiency and penalty for capital gains
taxes on the sale of the Florida property.
Thomas filed a petition challenging the determination of deficiency. On June 25, 2015,
an Administrative Law Judge (“ALJ”) issued a determination that Thomas was a domiciliary of
New York City in 2007 and thus properly subject to tax as a New York resident for that year.
The ALJ found that as of the date of the hearing, Thomas continued to own, maintain and use the
New York Apartment. Among numerous other findings, the ALJ also found that Thomas had a
pattern of spending a portion of each week in both Florida and New York, worked at a New
York office while in New York, continued to see New York doctors, had personal belongings

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and clothing in the New York Apartment and listed the Bronx as his county of residence on his
2006 nonresident tax form. The ALJ considered Thomas’s arguments that he did not live at the
New York Apartment and that no negative inference should be drawn from the fact that he and
his wife lived in different states, but concluded that Thomas was domiciled in New York City for
the relevant tax year.
Thomas appealed the ALJ’s determination to the TAT, arguing (1) that the ALJ’s
determination was unconstitutional because it denied Thomas his “constitutionally protected
right” to live in a different state than his wife, and (2) that he was domiciled in Florida for the
2007 tax year. The TAT considered Thomas’s arguments and rejected them in a July 21, 2016,
decision written by Defendants Tully and Nero. The TAT found that the New York Tax Law
(“Tax Law”) “does not require a husband and his spouse to have the same domicile,” and that
Thomas and Sandra had the right to “live apart together” if desired. However, because the TAT
also found that Thomas did not establish that he was a Florida domiciliary within the meaning of
the Tax Law, the TAT affirmed the ALJ’s determination.
On November 18, 2016, Plaintiffs filed the above-captioned case asserting one cause of
action, a violation of 42 U.S.C. § 1983 and the Fourteenth Amendment of the United States
Constitution, and seeking (1) a declaration that “living apart together” is a constitutionallyprotected type of marriage, (2) a declaration that Defendants’ conduct violated Plaintiffs’
constitutional rights to “live apart together” and (3) a “mandatory injunction prohibiting
Defendants from applying the [Tax Law] . . . such that it penalizes married parties choosing to
‘live together apart.’” The Complaint alleges that this Court has subject matter jurisdiction based
on diversity of citizenship, and federal question jurisdiction over certain civil rights actions. See
28 U.S.C. §§ 1332, 1343(3)–(4).

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Concurrent with the filing of this action, Thomas appealed TAT’s decision to the New
York Supreme Court Appellate Division, Third Department, alleging that the TAT’s decision
was arbitrary and capricious under New York law. Thomas did not raise his federal
constitutional argument before the Third Department, choosing instead to raise it only in federal
court.
STANDARD
“A district court properly dismisses an action under [Rule] 12(b)(1) for lack of subject
matter jurisdiction if the court lacks the statutory or constitutional power to adjudicate it . . . .”
Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.A.R.L., 790 F.3d 411, 416–17 (2d Cir.
2015) (citation and internal quotation marks omitted). “In resolving a motion to dismiss under
Rule 12(b)(1), the district court must take all uncontroverted facts in the complaint . . . as true,
and draw all reasonable inferences in favor of the party asserting jurisdiction.” Fountain, 838
F.3d at 134 (quoting Tandon v. Captain’s Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243
(2d Cir. 2014)). Plaintiffs have the burden of proving by a preponderance of the evidence that
the court has subject matter jurisdiction. Id.
DISCUSSION
The Complaint is dismissed because the Tax Injunction Act (“TIA”), 28 U.S.C. § 1341,
and the comity doctrine on which it is based, deprive the Court of subject matter jurisdiction; and
because the Declaratory Judgment Act does not create an independent basis for jurisdiction.
A.

The TIA

The TIA provides that federal district courts “shall not enjoin, suspend or restrain the
assessment, levy or collection of any tax under State law where a plain, speedy and efficient
remedy may be had in the courts of such State.” Id.; accord Bernard v. Spring Valley, N.Y., 30

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F.3d 294, 297 (2d Cir. 1994) (“[T]he Tax Injunction Act . . . prevents federal courts from giving
injunctive relief or declaratory relief, as long as there is a plain, speedy and efficient remedy in
state court.”) (citation omitted). The TIA’s prohibition is jurisdictional and strips the court of
subject matter jurisdiction. See Entergy Nuclear Vt. Yankee, LLC v. Shumlin, 737 F.3d 228, 231
(2d Cir. 2013).
As is relevant here, an “assessment” under the TIA refers to “the official recording of a
taxpayer’s liability,” and “might also be understood more broadly to encompass the process by
which that [liability] is calculated.” Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124, 1130 (2015).
“Collection” is “the act of obtaining payment of taxes due.” Id. A “plain, speedy, and efficient
remedy” exists “where the available state-court procedures satisfy certain minimal procedural
criteria, including a full hearing and judicial determination at which [a taxpayer] may raise any
and all constitutional objections to the tax.” Entergy, 737 F.3d at 233–34 (alteration in original)
(citation and internal quotation marks omitted).
The TIA bars the majority of Plaintiffs’ requested relief. A declaration that Defendants
violated Plaintiffs’ constitutional rights by assessing and attempting to collect resident taxes from
Thomas and an injunction against similar acts would enjoin and restrain Defendants’ ability to
assess and collect taxes under the Tax Law. See id. at 229, 235 (TIA barred federal district court
from issuing (1) declaratory judgment that state tax violated the United States Constitution and
(2) injunctive relief preventing its enforcement); Direct Mktg. Ass’n, 135 S. Ct. at 1132 (lawsuit
“restrain[s]” assessment and collection of taxes under the TIA if it stops acts of assessment and
collection).
Plaintiffs assert that they are “not seeking to enjoin assessment, levy, or collection of a
local tax” because they are raising a constitutional challenge to the decision by New York

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officials to treat Thomas as a New York domiciliary for tax purposes. In seeking a declaration
that Defendants’ conduct violated Plaintiffs’ constitutional rights and an injunction prohibiting
such treatment in the future, Plaintiffs are doing exactly what they claim not to be -- seeking to
enjoin and restrain the assessment and collection of income tax under New York law. A request
for declaratory and injunctive relief that effectively seeks a “federal-court ruling on a local tax
matter” is “precisely the type of suit that the TIA . . . [is] intended to prohibit.” See, e.g.,
Greenberg v. Scarsdale, 477 F. App’x 849, 850 (2d Cir. 2012) (summary order); see also Islamic
Cmty. Ctr. for Mid Westchester v. Yonkers Landmark Pres. Bd., No. 16 Civ. 7364, 2017 WL
2804997, at *5 (S.D.N.Y. June 28, 2017) (claim that defendants administered the state tax
system in a manner that violated plaintiffs’ constitutional rights was “plainly” barred by the
TIA). Thus, so long as the state courts provide a “plain, speedy and efficient remedy” to
litigants, the TIA deprives the Court of jurisdiction over Plaintiffs’ claims. See Entergy, 737
F.3d at 233–34.
Both the United States Supreme Court and the Second Circuit have consistently found
that New York courts provide the “plain, speedy and efficient remedy” contemplated by the TIA.
See, e.g., Tully v. Griffin, Inc., 429 U.S. 68, 76–77 (1976); Abuzaid v. Mattox, 726 F.3d 311, 316
(2d Cir. 2013). Consequently, the Court lacks jurisdiction over Plaintiffs’ challenge to the
application of the Tax Law. See Entergy, 737 F.3d at 231 (TIA strips district courts of subject
matter jurisdiction).
B.

The Comity Doctrine

Most of Plaintiffs’ requested relief is also barred by the comity doctrine. The comity
doctrine is “more embracive” than the TIA, and “restrains federal courts from entertaining claims
for relief that risk disrupting state tax administration,” Levin v. Commerce Energy, Inc., 560 U.S.

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413, 417 (2010), “so long as the plaintiffs have access to state remedies that are plain, adequate,
and complete, and may ultimately seek review of the state decisions in [the Supreme] Court.”
Abuzaid, 726 F.3d at 315 (citation and internal quotation marks omitted). As discussed above,
Plaintiffs’ claims would disrupt state tax administration by enjoining the assessment and
collection of taxes from individuals who live apart but have been deemed by the state to be
domiciled in New York.
Plaintiffs do not dispute the general applicability of the comity doctrine to this case, but
instead argue incorrectly that the New York courts do not provide an adequate remedy for either
Thomas or Sandra. First, Plaintiffs argue that Thomas does not have an adequate remedy in state
court because he chose not to raise his constitutional argument before the Third Department, and
that claim is now “being preserved . . . principally in this federal-court action.” That Thomas
may have failed to preserve his argument in state court does not bar the application of the comity
doctrine. See, e.g., Morpurgo v. Sag Harbor, No. 07 Civ. 1149, 2007 WL 3375224, at *16
(E.D.N.Y. Oct. 11, 2007) (“plaintiff’s decision to forgo his state remedies in the first instance
does not permit this court to disregard its responsibility to preserve notions of comity and
federalism”) (citation omitted).
Second, Plaintiffs argue that the history of the Third Department’s review of TAT
decisions “demonstrates that the forum does not give taxpayers an ‘adequate’ remedy.” This
argument is unavailing, as both the Supreme Court and the Second Circuit have consistently
found that New York state courts provide a “plain, adequate, and complete remedy” for litigants.
See, e.g., Abuzaid, 726 F.3d at 316.
Third, Plaintiffs argue that the New York state courts do not provide an adequate remedy
for Sandra, who Plaintiffs contend “has the constitutional right to be treated, for New York State

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tax purposes, as a resident of New York who is married but may file tax returns separately from
her nonresident husband.” Nothing in the Complaint suggests that Sandra cannot file tax returns
separately from her husband. In fact, the Complaint states that she did so in at least 2006 and
2007. To the extent that Sandra wishes to file returns separately from her nonresident husband,
the question at issue is whether Thomas can be considered a New York resident for tax purposes,
which is properly heard by a state court under the comity doctrine. See Joseph v. Hyman, 659
F.3d 215, 221 (2d Cir. 2011) (applying the comity doctrine in affirming district court’s refusal to
hear constitutional challenge to state tax scheme and noting that “New York courts are not
powerless to strike down unconstitutional laws or otherwise prevent enforcement of
unconstitutional taxes”).
C.

Declaratory Judgment Act

Plaintiffs also seek a declaration that “living apart together” is a constitutionallyprotected type of marriage. Divorced from Plaintiffs’ other claims, which are dismissed on the
grounds discussed above, the Court lacks a jurisdictional basis to grant this relief. See 28 U.S.C.
§ 2201(a) (“In a case of actual controversy within its jurisdiction . . . any court of the United
States . . . may declare the rights and other legal relations of any interested party seeking such
declaration, whether or not further relief is or could be sought.”) (emphasis added). “[T]he
Declaratory Judgment Act does not by itself confer subject matter jurisdiction on the federal
courts . . . . Rather, there must be an independent basis of jurisdiction before a district court may
issue a declaratory judgment.” Correspondent Servs. Corp. v. First Equities Corp. of Fla., 442
F.3d 767, 769 (2d Cir. 2006) (internal citation omitted). Thus, Plaintiffs’ final claim for
declaratory relief is also dismissed.

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CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss is GRANTED. The Clerk of
Court is respectfully directed to close the motion at Docket Number 34 and close this case.

Dated: July 27, 2017
New York, New York

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