Opinion 21-98

June 17, 2021

Please Note: See AO-347 concerning the status of Section 100.4(H)(2).

Digest:         On these facts, a full-time judge need not report the described financial transactions under Section 100.4(H)(2). The judge should consult the Unified Court System’s Ethics Commission concerning whether and how to report them under Part 40.

Rules:          22 NYCRR 100.2; 100.2(A); 100.3(F); 100.4(D)(2); 100.4(H)(1); 100.4(H)(2); 100.4(I); Opinion 14-67.

Opinion:

         A full-time judge asks whether two streams of rental income resulting from extra-judicial activity must be reported to the chief clerk of the judge’s court as “compensation” under Section 100.4(H)(2). First, the judge and another relative are the sole members of a limited liability company (LLC), which holds a parcel of real estate. The LLC rents this real estate to a closely held family business (in which the judge does not participate). The LLC’s rental income must be reported on tax returns, but the income merely “covers the expenses of the LLC (real estate taxes, insurance, etc.).” Thus, as a member of the LLC, the judge is allocated a portion of the LLC’s rental income and must report this amount on their taxes, but the judge “never actually receive[s] any money or other direct compensation from the LLC.” Second, the judge and a sibling-executor are the sole beneficiaries of their parent’s estate, which had a rental property as its principal asset. The judge collected rental income on behalf of the estate and used this income, along with personal funds, to pay a portion of the monthly expenses to maintain the property. However, neither the rental income nor the eventual sale of the property (at a loss) was sufficient to cover the estate’s expenses, and thus there are insufficient funds even to reimburse the judge for the judge’s expenditure of personal funds. The judge understands the estate will report the rental income on its tax returns.

         A judge must always avoid even the appearance of impropriety (see 22 NYCRR 100.2) and must always act to promote public confidence in the judiciary’s integrity and impartiality (see 22 NYCRR 100.2[A]). A full-time judge may receive compensation for permissible extra-judicial activities if its source does not give the appearance of influencing the judge’s performance of judicial duties or otherwise give the appearance of impropriety, subject to certain limitations (see 22 NYCRR 100.4[H][1]). Section 100.4(H)(2) provides:

Public Reports. A full-time judge shall report the date, place and nature of any activity for which the judge received compensation in excess of $150, and the name of the payor and the amount of compensation so received… The judge’s report shall be made at least annually and shall be filed as a public document in the office of the clerk of the court on which the judge serves or the office designated by law.

         As the Rules Governing Judicial Conduct do not define “compensation” (except in reference to expense reimbursement), we note that commonly used synonyms for “compensation” include payment, reimbursement, earnings, fee, remuneration, salary, wages, stipend, honorarium, revenue, profits and income. Here, both financial transactions result from permissible extra-judicial activities.¹ Accordingly, we now assess whether they fall within the reporting requirement of the rule.

         On the facts described, we understand the judge has not received any direct or indirect personal income from either activity. While the judge must report an allocated share of the rental income from the LLC on the judge’s taxes, the judge does not, in fact, receive any portion of this income as it is used to pay the LLC’s expenses. Likewise, with respect to the estate’s rental income, the judge has not received any compensation, reimbursement or share of this income, but instead used it to pay the estate’s expenses.

         In our view, the judge is not required to report either financial transaction under Section 100.4(H)(2), as it does not appear the judge has received compensation exceeding the $150 threshold.

         We note there could potentially be reporting obligations under Part 40, which we cannot address.² The Unified Court System’s Ethics Commission (tel. 1-212-428-2899) is the agency with the authority to interpret Part 40. To the extent the judge has not already done so, the judge should contact the Ethics Commission for advice and direction regarding the mechanics of reporting the income, or lack thereof, of the assets described in this inquiry on the judge’s Annual Statement of Disclosure (see Opinion 14-67).

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¹ A full-time judge may “hold and manage investments of the judge and members of the judge's family, including real estate” (22 NYCRR 100.4[D][2]).

² The Rules recognize that a judge’s “income, debts, investments or other assets” may need to be disclosed in three circumstances: where mandated by Section 100.4(H)(2); where needed for remittal of disqualification under Section 100.3(F); or “as required by Part 40 of the Rules of the Chief Judge” (22 NYCRR 100.4[I]).