After a series of legal losses, an appeals court has ruled that The Walt Disney Company owes the state of New York more than $6 million — $4 million in taxes surcharges and $2.3 million in interest. The ruling comes after a Tax Tribunal investigated The House of Mouse and ruled that Disney had not claimed millions in royalties on its taxes filed in the state between 2008 and 2010. Disney claimed that the royalties were tax-exempt, but the tribunal ruled that Disney had violated the law because the royalties were not from companies based in New York.
The Times Union reported more on the Appellate Court’s decision:
The genesis of the legal battle was an audit that the state Department of Taxation and Finance conducted of Disney for the period of 2008 to 2010. The department’s fiscal review determined Disney was ineligible for the exclusions because the foreign entities were not based in New York. It sent Disney notice of deficiency stating it owed nearly $4 million in additional tax and surcharges, plus more than $2.3 million in interest.
Disney appealed the decision to the Division of Tax Appeals, where an administrative law judge sided with the tax department. The Tax Appeals Tribunal upheld the administrative law judge’s decision. Disney, in turn, appealed to the Third Department justices.
In arguments last month, Disney attorney Marc A. Simonetti told the justices that Disney was entitled to the exclusions “based on the plain meaning of the law and the constitutional limitations on state taxation.” Tax Appeals Tribunal attorney Frederick Brodie countered that Disney was seeking a “windfall in which royalties paid from an alien affiliate to a New York affiliate would escape New York taxation entirely. No policy supports that outcome.”
Disney tried to argue that the tribunal had unfairly discriminated against foreign commerce — saying that it wasn’t right that companies that don’t file taxes in New York should be excluded from the royalties’ exemption when companies that file taxes in the state are not. Multiple judges and Appellate Courts rejected that argument.
This is only the latest in a number of legal battles Disney is fighting. Recently, two Walt Disney World Annual Passholders filed a lawsuit against Disney for “predatory” business practices in selling its Passes that claim to have no blackout dates. That is actually the second Annual Pass lawsuit — the first was filed by a Disneyland Magic Key Holder, who claimed the same issue.
Disney has not publicly responded to the Walt Disney World Passholder lawsuit. The company tried to get the $5 million Magic Key lawsuit dismissed, but a judge denied the motion and said that the lawsuit may move forward.