In the Matter of AMERICAN SURETY COMPANY OF NEW YORK, Petitioner,
LAZARUS JOSEPH, as Comptroller of the City of New York, Respondent.
PROCEEDING under article 78 of the Civil Practice Act (transferred to the Appellate Division of the Supreme Court in the first judicial department by an order of the Supreme Court at Special Term, entered in New York County) to review a determination of the comptroller of the City of New York assessing petitioner for a 'financial tax' deficiency (Administrative Code of City of New York, ch. 41, tit. RR; ch. 46, tit. B) for the period from July 1, 1946, to June 30, 1950.
William J. O'Shea of counsel (Edward D. Burns with him on the brief; Saxe, Bacon, O'Shea & Bryan, attorneys), for petitioner.
Bernard H. Sherris of counsel (Bernard H. Sherris and Stanley Buchsbaum on the brief; Adrian P. Burke, Corporation Counsel, attorney), for respondent.
Stuart N. Updike of counsel (William P. Hindman, Jr., John V. Bloys and Cornelius F. Keating with him on the brief; Olvany, Eisner & Donnelly, attorneys), for Life Insurance Association of America, amicus curiae.
This is a proceeding under article 78 of the Civil Practice Act to review a determination of the comptroller of the City of New York imposing on New York Casualty Company a so-called financial tax deficiency for the tax periods commencing July 1, 1946, and ending June 30, 1950.
The enabling act (General City Law, § 24-a) authorizing the city to adopt local laws for the imposition of such taxes, provides for (1) a 'general business' or 'gross receipts' tax, not exceeding 1/5 of 1%, measured by the gross receipts from any trade, business, profession, vocation or commercial activity, other than a financial business, carried on for gain or profit in the city; and (2) a financial tax, not exceeding 2/5 of 1%, measured by the gross income of any financial business carried on in the city. A financial business is defined as the 'services and transactions of private banks, private bankers, dealers and brokers in money, credits, commercial paper, bonds, notes, securities and stocks,' etc. (§ 24-a, subsec. 1, par. 2.)
The sole question involved in this proceeding is the right of the comptroller to impose a financial business tax on income of the casualty company which it derives from investments.
The casualty company, which since the levy of the tax has been merged with petitioner American Surety Company of New York, was an insurance company organized under the Insurance Law of this State, and licensed by and subject to the supervision of the Insurance Department. It was authorized to write those kinds of insurance generally classified as casualty and surety. Its principal office was in the city of New York, and almost 90% of its securities were located in that city.
By chapter 199 of the Laws of 1941, the Legislature carefully reframed the enabling act authorizing certain cities to impose a general business and financial tax, and wrote it into
the General City Law in the form of section 24-a. In section 24-a the Legislature set up a complete and comprehensive model law, stating that '[e]very such local law in terms shall be ...