City Takes Philippines to Court Over Property Taxes
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After pursuing the governments of India and Mongolia up to the U.S. Supreme Court over a property tax dispute, lawyers for New York City will head to a lower court on Friday to press a similar case against the Philippines.
At issue during the scheduled argument in U.S. District Court in Manhattan will be whether the city may tax a series of Philippine government ventures, including a bank and a restaurant, run from the cellar of the country’s Fifth Avenue consulate.
The city won permission to bring these types of lawsuits in June, when the U.S. Supreme Court ruled that federal courts had jurisdiction to hear some property tax cases against foreign governments, which generally receive immunity in American courts. With jurisdiction established, the district court must now decide whether the restaurant or bank should be tax exempt because they served diplomatic purposes. The city’s suit against the Philippines, which seeks more than $20 million in back taxes and interest over three decades, is a test case. A win is likely to prompt the city to sue additional countries for running businesses or leasing out parts of their consulates.
The suit is part of an ongoing push by the city to collect taxes and fees from the consulates and missions to the United Nations that dot Midtown and the Upper East Side. The effort began during the Koch administration, when the city began to require that missions pay for water usage.
“Any monies owed the city that the city seeks to collect is good news,” Mayor Koch said yesterday, when asked about the hearing involving the Philippines.
The Philippines, represented by law firm Kaye Scholer, says the restaurant, Maharlika, served primarily a diplomatic purpose as it provided “a showcase for Philippine culture, dance, and music,” according to a court brief. The bank provided payroll services for the diplomatic staff. The restaurant closed 23 years ago and the bank 11 years ago.
“Even if the Philippines’ purpose in leasing to these entities was the promotion of commerce and tourism, these activities were nevertheless commercial in nature,” the city argues in its brief.
