Tax insight

New York trial court upholds P.L. 86-272 regulation, but rejects retroactive application

Insight
5 minute read
May 02, 2025

What happened?

On April 28, the New York Supreme Court, County of Albany, held that the Department of Taxation and Finance’s regulation implementing P.L. 86-272 does not violate the federal law and is supported by the US Supreme Court’s Wayfair decision. However, the court declined to apply the regulation retroactively, finding that the Department’s December 2023 adoption was the first time that taxpayers were warned of the Department’s intention.

[American Catalog Mailers Association v. Department of Taxation and Finance, N.Y. Supreme Court (Albany), No. 903320-24, 4/28/2025]

Why is it relevant?

The New York court’s decision is the first in the nation to address a substantive challenge to an expansive interpretation of P.L. 86-272 reflecting Multistate Tax Commission (MTC) guidelines. These guidelines deem “virtual” connections to constitute in-state business activity that can defeat P.L. 86-272 protections.

Actions to consider

Taxpayers should consider the potential application of the New York regulation and similar policies and proposals in other states (e.g., California, New Jersey, and Massachusetts) to their particular facts. Taxpayers also should monitor potential changes to the federal law in this area (see PwC’s Insight on recent budget reconciliation proposals, here).