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Friday, April 28, 2006

Taxing Embassies. The City of New York tried to tax parts of embassies that were used in a manner that would subject them to property tax. Embassy buildings are exempt from taxes only if they are used for embassy offices and the quarters of a diplomat. The builidngs at issue also had living space for embassy employees who were not diplomats. Under the law, that portion of the premises would be taxable. India and Mongolia did not pay their tax bills, and the City obtained tax liens. It commenced an action to establish the validity of the liens on the embassy (acutally missions to the UN) property.

India and Mongolia claimed to be exempt by sovereign immunity, but the district court disagreed, holding that an exception to the Foreign Sovereign Immunity Act. The Act exempts any case in which rights in immovable property situated in the United States are in issue. The Second Circuit affirmed and remanded the case for further proceedings. The Court emphasized that it was not deciding the merits of the dispute. It merely decided that the case was not barred by sovereign immunity.

The decision in City of New York v. Permanent Mission of India to the United Nations can be found here.

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