NYC Sues Nigeria For Unpaid Real Estate Taxes

by Lorys Charalambous, Tax-News.com, Cyprus

13 January 2010

Mayor Michael R. Bloomberg has announced that New York City has filed an action in the Federal District Court against the Nigerian government for claims of up to USD16m in real estate taxes payable on the building the latter owns in Manhattan.

The City has confirmed that it provides a tax exemption to all foreign governments for their United Nations Mission, their Consulate and the residences of the Permanent Representative and Consul General. However, Michael A. Cardozo, Corporation Counsel, said: "The law is well established that foreign consulates and missions involved in commercial activity must pay taxes on these spaces to the City."

He added: "The District Court has also held that housing for staff other than the head of the UN mission or the consulate is taxable. This second issue is now awaiting decision by the United States Court of Appeals in cases that the City brought against India and Mongolia. In those cases we established in the United States Supreme Court in 2007 that all foreign governments are subject to the jurisdiction of the federal courts in cases like this."

The building at 828 Second Avenue, known as "Nigeria House", is used partially for tax-exempt purposes, including as offices for the Nigerian Consulate and the Nigerian Mission to the United Nations. However, the City believes that, at least since 2002, and possibly as far back as 1993, portions of the building have also been used for commercial and other non-tax exempt purposes.

For example, it is claimed that a Nigeria Airways office formerly occupied space in the building’s lobby, while space was leased to the United Nations on the second, third, fifth, and sixth floors. The building’s fourth floor, it is understood, contained private businesses, and the twentieth floor contained a residential unit. These spaces, the City says, are fully taxable.

Depending on the scope and duration of these non-exempt activities, which are not precisely known and await more documentation, the City is seeking between USD4.1m and USD16m in unpaid taxes, other charges and interest from the Nigerian government.

Michael Bloomberg said: "The courts have ruled, and the State Department agrees, that foreign governments do not qualify for a tax exemption on property used for commercial purposes. For non-diplomatic uses, we expect foreign governments to pay their fair share of property taxes."

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