A seven-year long legal battle with New York City is won by India with a federal appeals court ruling that nations with diplomatic housing do not have to pay city property taxes. The unanimous ruling by the federal Second Circuit Court of Appeals in Manhattan Tuesday lets India off the hook for $42.5 million in back taxes and interest. and Mongolia for another $4.3 million on their missions to the United Nations.
The three-judge panel ruled a controversial June 2009 decision by the State Department to exempt diplomatic staff residences from $7 million a year in property taxes also applied retroactively to the past-due bills. The Foreign Missions Act allows the State Department to issue tax exemptions that pre-empt state and municipal tax laws, the court said. “While there is perhaps some unfairness to the city…this unfairness inheres in the federal government’s unquestioned supremacy in the management of foreign relations,” it said.