FOR IMMEDIATE RELEASE
January 29, 2009
MAYOR BLOOMBERG ANNOUNCES THAT THE PHILIPPINES AGREES TO PAY $9 MILLION IN BACK PROPERTY TAXES AND INTEREST TO THE CITY
Settlement Follows City’s Victory in the U.S. Supreme Court - Establishing the Right to Sue - and the U.S. District Court - Setting the Amount that the Country Owed
During Tight Budget Times, City Pursues Every Dollar Owed
Mayor Michael R. Bloomberg today announced that the City and the Philippines have settled a lawsuit that sought unpaid taxes on portions of a Philippines-owned building that has housed a branch of the Philippine National Bank, an office of the Philippine Airlines, and a Filipino restaurant. Under the terms of the settlement, the Philippines paid $9 million in back property taxes and interest - approximately 85 percent of the amount the City had sought - in exchange for the City's dismissal of the case. Foreign countries receive exemptions for their diplomatic missions in New York City but must pay their fair share for property used for non-exempt purposes.
"These are tough economic times, and I have asked City agencies to stretch every tax dollar further - but I also want to make sure that we pursue those who fail to pay their taxes," said Mayor Bloomberg. "It is only fair that foreign government owned properties used for non-exempt purposes pay their fair share of property taxes, because that is what every other law-abiding property owner does."
The settlement follows last February's ruling by Judge Jed Rakoff of the U.S. District Court for the Southern District of New York, which awarded the City $10.9 million in taxes and interest on those portions of the property used as a bank and airlines office. The District Court held that the bank and airlines offices were used commercially, but the restaurant had a consular purpose and was therefore exempt. The Philippines had appealed this ruling with respect to the bank and the airlines office, and the City had cross-appealed the Court's failure to award taxes and interest on the restaurant. The appeal had not yet been scheduled for argument.
The taxes in question were imposed during the period 1974 to 1996. Of the $10.9 million District Court judgment, $437,456 was principal and the remainder was interest. On appeal, the Philippines argued that its building was exempt from taxation, and that the City's statutory 18 percent interest rate was equivalent to punitive damages, which by law may not be assessed against a foreign sovereign.
"We commend the Philippines for working with the City and
finding an amicable resolution to the matter, and encourage the other countries
to follow this important example," said Marjorie Tiven, Commissioner, New York
City Commission for the United Nations, Consular Corps and Protocol. "In tight
budget times, the City will aggressively pursue every dollar that it's owed."
In June 2007 the U.S. Supreme Court ruled that U.S. courts had jurisdiction to hear the merits of the City's tax claims against foreign governments. John Low-Beer, Brad Snyder, and Sarah Stewart of the New York City Law Department worked on the case, joined by Scott Shorr on the appeal, as well as Bradford E. Billet, Deputy Commissioner, Commission for the United Nations, Consular Corps and Protocol, who originally identified the issue, and Linda Wayner, Legal Counsel for the Commission. The Supreme Court case was argued by Corporation Counsel Cardozo.
New York City hosts the largest diplomatic community in the world-the United Nations, 192 permanent missions to the United Nations and 110 consulates. The New York City Commission for the United Nations, Consular Corps and Protocol is the City's primary liaison with the United Nations, the missions, the consulates and the U.S. Department of State. The Commission, part of the Office of the Mayor, is the point of first contact for City officials with foreign governments and for diplomats on City matters.
Stu Loeser / Jason Post (212) 788-2958
Kate Ahlers (Law) (212) 788-0400