Billionaire Wins Bid to Avoid Paying Taxes

Billionaire Wins Bid to Avoid Paying New York City Income Taxes
Joel Stashenko

New York Law Journal

November 03, 2009
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A New York state administrative law judge has decided that billionaire Julian H. Robertson Jr. did not spend enough days in New York City for purposes of exposing himself to tens of millions of dollars' worth of city tax liability in 2000.

State tax auditors had tried to show that the financier spent the requisite 183 days as a city resident and was subject to $26.7 million in city income taxes and another $21 million in interest for that year alone.

But Dennis M. Galliher, an administrative law judge with the Division of Tax Appeals, concluded that state tax auditors did not conclusively prove their case that the globe-trotting Mr. Robertson was a New York City resident for purposes of the law.

"Notably, the standard is not clear and convincing documentary evidence, but rather is clear and convincing evidence, such that clear and credible testimony viewed in light of all of the evidence and not impugned by contrary or contradicting evidence can, as here, suffice to meet the burden of proof," Galliher wrote in Matter of Robertson, 822004.

Under state and city laws, a person becomes a "statutory" resident of New York City if he lives 183 or more days in the city in a calendar year. That makes him subject to New York City personal income taxes.

In 2000, Robertson was chairman of Tiger Management, which manages large hedge funds. Galliher's ruling described Robertson as the "trigger puller" with authority to close multi-million-dollar deals for the fund.

Robertson's various hedge funds were subsequently closed down and Tiger began the transition in 2000 from managing hedge funds to seeding other funds.

Forbes magazine in September 2009 estimated Robertson's wealth at $2.2 billion, making him one of the richest people in the United States.

At issue in the tax case was how many days Robertson spent at his Central Park South apartment.

Robertson and his wife, Josephine, also spent time at their 10-acre estate in Locust Valley, Long Island; at their home in the Hamptons; in Sun Valley, Idaho; in Australia; New Zealand; and other locations overseas.

In 1998 and 1999, the couple was listed on tax returns as New York City residents. As Galliher noted, the Robertsons needed to be in the city both years as Ms. Robertson received medical treatment at New York City hospitals.

But the following year, Mr. Robertson designated an assistant, his scheduler Julie Depperschmidt, to keep a careful count of where the Robertsons were from day to day in 2000 and to make sure they did not spend 183 days or more in New York City.

They were residents of New York state in that year, counting the time they spent in the city and on Long Island.

Under the city's tax laws, the time spent passing over New York City on an airplane does not count for residency purposes, but a morning Robertson woke in his Central Park residence and was taken to his private plane, which was waiting at a metro-region airport, would count as his having spent a day in the city.

State tax auditors argued that Robertson spent all or parts of four days in the city in 2000 that he claimed he did not and that the days were enough to push him to the 183-day threshold.

Galliher disagreed.

He found that Robertson had designated Depperschmidt to track the financier's whereabouts on "non-NYC" versus "NYC" or "tax-days" and that she seems to have generally done so carefully.

Though her records on the four days being contested by the state are somewhat ambiguous, Galliher concluded that the Robertsons were in Locust Valley or elsewhere outside New York City on all four days based on the couple's habits, their charge card receipts and on Depperschmidt's methods of tracking their travels.

"It is, of course, possible that petitioner was physically present in New York City on any (or all) of the four disputed days," Galliher wrote. "However, when viewed in light of all of the evidence presented, this mere possibility of presence is insufficient to outweigh the most likely actual fact and conclusion that petitioner was not present in New York City on those days."

The Department of Taxation and Finance has 30 days to appeal Galliher's ruling to the Division of Tax Appeals. A state spokesman said Monday the ruling was being reviewed and no appeal decision had been reached.

Robertson's attorney, Fred Feingold of Feingold & Alpert, said the Robertsons asked the state to abandon the case based on the merits, but that the offer was declined.

"At a certain point in time they probably felt they didn't have such a good case, yet they proceeded," Feingold said Monday.

The lawyer argued that Robertson's considerable resources gave him the opportunity to pursue a case that most taxpayers would not have had.

"Very few people were able to mount the defense that this taxpayer was able to mount," Feingold said.