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State continues battle with Paladino; Empire Zone benefits at issue

The Cuomo administration plans to keep fighting developer Carl P. Paladino over Empire Zone benefits that were taken away from one of his companies.

Paladino has won two court battles over the issue already, but the case is headed toward a date with the Court of Appeals, the state's highest court.

In June 2009, the state declared that Paladino's J-P Group no longer qualified for tax credits under the Empire Zone program, after rules were revised by the State Legislature.

As a part of that move, the state revoked the company's certification retroactively to the start of 2008. It was that action by the state -- looking backwards, instead of just being applicable to the future -- that is still in question, said Shannon M. Heneghan of the firm Mosey Persico, which is representing J.P. Group.

Arguing the state changed the rules midstream, Paladino -- who faced then-Attorney General Andrew M. Cuomo in the 2010 gubernatorial contest -- sued in April 2010.

A State Supreme Court justice ruled in favor of Paladino that August. The state appealed, but the Appellate Division, Fourth Department, ruled on Paladino's side this January.

The Appellate Division's ruling scaled back the sweeping victory handed to Paladino by State Supreme Court Justice Joseph R. Glownia but upheld the earlier ruling that changes to the Empire Zone program were not retroactive.

The Appellate Division panel, however, agreed with the state that it had a rational basis for revoking the certification.

Those regulations called for a review of whether a company was receiving more in tax incentives than it was investing and paying in wages and benefits.

In its decision, the Appellate Division noted that the state had a basis for revoking benefits to J-P Group, because Paladino's company was only returning 79.5 cents for every dollar it received in Empire Zone benefits.

Paladino's use of the Empire Zone program drew attention in the 2010 gubernatorial campaign, with Cuomo saying in one ad that the Buffalo developer "got rich by milking New York taxpayers."

The Cuomo administration declined to comment on specifics of the Paladino case Thursday.

The Paladino lawsuit will be heard together with a similar challenge from a Fulton County company that also lost its Empire Zone benefits.

Tom Precious of The News Albany Bureau contributed to this report.