New York Court of Appeals upholds sweeping authority for collection action against New York Non-Residents

New York non-residents long-held belief that they are relatively safe from New York tax collection efforts has been shaken, and those non-residents may now need to take additional action to safe-guard their assets from the long arm of New York.

In Koehler v. Bank of Bermuda Ltd., which is not even a tax case, the Court of Appeals upheld a lower court decision permitting a non-New York creditor to bring suit in  New York to force a bank (doing business in New York) to turnover a non-New Yorker’s intangible property held by the bank in a foreign country.  In this case, the debtor and the creditor were not New York residents, the property was not located in New York, and none of the transactions even happened in this state.  However, the case was brought in New York simply due to the fact that the Bank of Bermuda had a jurisdictional presence in the “financial capital of the world”. Accordingly, this holding seems to broaden New York’s jurisdiction over a debtors’ property, both tangible and intangible, and may make New York a mecca for judgment creditors collection actions.

To put this case in a Tax-collection context, if a non-resident owes New York State back taxes, they will need to ensure that whatever financial institution they utilize for their banking/investments has presence in the State of New York, or they run the risk of the NYS Tax Department obtaining a levy on their accounts.

If you wish to discuss the implications of the Koehler case, please feel free to contact Jim O’Connor, Tax Principal at 631-434-9500 or at via email at joconnor@avz.com.