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'India,UN missions owe no property tax to NYC'

August 18, 2010 13:00 IST

News on taxIndia and other countries do not owe tens of millions of dollars in property taxes on New York City buildings which they use as diplomatic missions, a federal appeals court ruled on Wednesday, exempting Indian government from paying $42.4 million to the city.

The three judge panel of the 2nd US Circuit Court of Appeals in Manhattan upheld the the State Department intervention in 2009, which exempts taxes on property owned by foreign governments and UN missions that housed diplomatic staff.

"While there is perhaps some unfairness to the City when the federal government retroactively declares property taxes imposed by the City against foreign countries to be null and void, this unfairness inheres in the federal government's unquestioned supremacy in the management of foreign relations," the three-judge appeals panel wrote in the judgement, as quoted by the NY Daily News.

India owns a 26-story property near the United Nations.

In 2008, a Manhattan federal court judge ordered India to pay more than $42.4 million and Mongolia more than $4.3 million to the City.

The panel cited a June 2009 US Department of State notice granting an exemption from property taxes on property owned by foreign governments and used to accommodate their personnel.

The State Department had argued that if foreign properties in the US were taxed, then the US would have to pay millions of dollars on taxes for its own diplomatic buildings in many countries.

The city began its litigation against several foreign missions in 2003, seeking judgements for unpaid property taxes, other unpaid charges, plus interest.

At that time, the city filed suit that India owed $16.4 million in taxes.

The city was only willing to exempt bottom six floors and basement the Indian mission because they were used for diplomatic work.

India argued that tax exemption applied to the entire 26 floor property including residences.

The city also sued Mongolia, Philippines and Turkey but the latter two settled with the city for $9 million and $5 million respectively.

The city counsel Michael Cardozo expressed disappointment at today's judgement and said that decision would be appealed in the US Supreme Court.

In 2008, US District Judge Jed S Rakoff ruled in favour of the city following which the State Department issued its edict.

Betwa Sharma in New York
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