NY Fed Can Fight City's $320M Land Valuation
(CN) - A federal judge has green-lit a challenge of a tax assessment that values New Jersey land used by the Federal Reserve Bank of New York at $320 million.
The New York Fed owns and uses two parcels of land in East Rutherford, N.J., to operate a satellite facility. It filed suit earlier this year when East Rutherford assessed the value of the New York Fed's property at roughly $320 million this year.
It claimed that the assessment was "not in accordance with the common level of assessment, or whatever ratio or percentage of full or true value at which other property in [East Rutherford] [were] being assessed."
The two-count complaint asserts violations of the bank's rights under the New Jersey Constitution and the 14th Amendment of the United States Constitution.
East Rutherford moved to dismiss under the doctrine of comity and for lack of subject matter jurisdiction under the Tax Injunction Act.
But U.S. District Judge William Martini denied the motion last week, tossing aside the borough's claim that, because the suit is based on a state tax statute, it is not a "suit of a civil nature at common law or equity" under U.S. Code Section 632.
"East Rutherford is incorrect: 'Section 632 creates federal subject matter jurisdiction over all civil actions to which a Federal Reserve Bank is a party, and does not exclude civil actions based solely on a state statute' (emphasis in original)," Martini wrote, quoting the 11th Circuit's 2000 ruling in Fed. Reserve Bank of Atlanta v. Thomas. "Accordingly, because the New York Fed is a party in this civil action, it does not matter whether the New York Fed's claims are grounded in state statutes."
As the New York Fed is a federal instrumentality, the Tax Injunction Act does not divest the court of subject-matter jurisdiction either, according to the Aug. 26 ruling.
Neither does the doctrine of comity warrant dismissal, the court found. "Under Section 632, there is a federal interest in hearing the Federal Reserve's civil cases in federal court," Martini wrote.
Finally, the court declined to abstain from exercising its jurisdiction, the ruling states.
"The real question is whether this case involves difficult questions of state law or whether exercising jurisdiction would disrupt state efforts to establish a coherent public policy," Martini wrote. "The answer is no. It does not appear that deciding whether the New York Fed's tax assessment was too high or whether East Rutherford discriminated against the New York Fed involves particularly difficult or unsettled questions of state law."