Permits the limited filing of amended personal income tax returns in certain cases after the time period permitted by law has lapsed.
TITLE OF BILL:
An act to amend the tax law, in relation to filing of amended personal income tax returns
This bill equates the rights and responsibilities of a New York taxpayer, who is also a taxpayer in another state, when the other state makes changes or corrections in income tax returns filed with that state, to the rights and responsibilities of a New York taxpayer when the Internal Revenue Service makes changes or corrections in a federal income tax return.
SUMMARY OF PROVISIONS: Section one states Legislative findings that the complexity of income tax laws, particularly affecting income earned in one state by a taxpayer residing in another state, has contributed to unfair situations. The Legislature determines to remedy this problem by treating changes to a New York taxpayer's obligations to another state in the same fashion as changes made to federal obligations. Section two amends section 659 of the Tax Law to provide that the rights and responsibilities of a New York taxpayer when his or her income tax obligations to another state are changed or corrected by that state will be the same as currently provided when a change or correction in federal tax obligations is made by the Internal Revenue Service. Section three amends section 687 of the Tax Law to expand a cross reference to section 659 by deleting restrictive references to "federal" changes or corrections. Section four enacts a transition provision which provides to current taxpayers an extension of time for filing a claim for credit of taxes paid to another state in a similar fashion as the amendments to sections 659 and 687 will provide to future taxpayers. Section five is the effective date.
EXISTING LAW: Existing section 659 of the Tax Law establishes the rights and responsibilities of a New York taxpayer when that taxpayer's federal income tax return is changed or corrected by the Internal Revenue Service. Generally, the taxpayer must file an amended New York State income tax return reflecting the changes within 90 days after a final federal determination. Existing section 687 of the Tax Law then provides that when a taxpayer files an amended state return pursuant to section 659, that taxpayer may claim a New York State credit or refund within two years of the final federal determination.
JUSTIFICATION: The Tax Law has long recognized the inter-relationship between federal income tax returns and New York State income tax returns filed by the same taxpayer. When changes or corrections to federal returns are made by the Internal Revenue Service, a New York taxpayer is given time to file parallel amendments to his or her state return, and to pay additional taxes or to receive the benefit of additional credits
or refunds. There is no equivalent provision when a resident New York taxpayer files income tax returns with both New York and another state or states. Because of this omission, a taxpayer may be substantially harmed if another state makes a change -- after the effectiveness of New York's statute of limitations -- which results in increased taxes owed to that state, but reduced taxes owed to New York. In that case, the taxpayer must pay the other state, but is too late to claim a refund from New York, causing the taxpayer to pay the same tax twice. This bill would treat the other state's change the same as if it were a change made by the IRS, so the New York taxpayer has two years from the change in order to file for a credit or refund, regardless of the statute of limitations on the original New York filing.
LEGISLATIVE HISTORY: 2006, S.6683B/A.9896B, Passed Senate 2007, S.920/A.1644, Passed Senate 2008, S.920/A.10103, Passed Senate/Referred to Ways and Means 2009, S.1174/A.3331, Investigations and Government Operations/Ways and Means
FISCAL IMPLICATIONS: Minimal. Any credits or refunds properly belong to the taxpayer.
LOCAL FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Immediate. Transition provisions permit existing taxpayers to file for applicable credits on returns filed up to four years past the current statute of limitations, while the new Tax Law provisions are applicable to tax years starting on or after January 1, 2012.
STATE OF NEW YORK ________________________________________________________________________ S. 3248 A. 5196 2011-2012 Regular Sessions S E N A T E - A S S E M B L Y February 14, 2011 ___________IN SENATE -- Introduced by Sen. FARLEY -- read twice and ordered print- ed, and when printed to be committed to the Committee on Investi- gations and Government Operations IN ASSEMBLY -- Introduced by M. of A. AMEDORE, TOBACCO, McDONOUGH -- read once and referred to the Committee on Ways and Means AN ACT to amend the tax law, in relation to filing of amended personal income tax returns THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Legislative findings. The legislature finds that the increasing complexity of income tax laws, particularly those affecting income earned in one state by a taxpayer residing in another state, has contributed to unfair and inequitable situations. Although a New York taxpayer may offset taxes paid to another state against his or her state income tax liability, delays in assessment and notification by the other state may cause filing of an amended return to be barred by the statute of limitations. As a result, the New York taxpayer is forced to pay the same tax obligation twice, once to New York and again to the other state. In an effort to provide an equitable remedy for affected taxpay- ers, the legislature determines to treat changes to a taxpayer's obli- gations to another state in the same fashion as changes made to a taxpayer's federal obligations. S 2. Section 659 of the tax law, as amended by chapter 577 of the laws of 1997, is amended to read as follows: S 659. Report of
[federal]changes, corrections or disallowances. (A) If the amount of a taxpayer's federal taxable income, federal items of tax preference, total taxable amount or ordinary income portion of a lump sum distribution or includible gain of a trust reported on his OR HER federal income tax return for any taxable year, or the amount of a taxpayer's earned income credit or credit for employment-relatedEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD07745-01-1 S. 3248 2 A. 5196
expenses set forth on such return, or the amount of any federal foreign tax credit affecting the calculation of the credit for Canadian provin- cial taxes under section six hundred twenty or six hundred twenty-A of this article, or the amount of any claim of right adjustment, is changed or corrected by the United States internal revenue service or other competent authority or as the result of a renegotiation of a contract or subcontract with the United States, or the amount an employer is required to deduct and withhold from wages for federal income tax with- holding purposes is changed or corrected by such service or authority or if a taxpayer's claim for credit or refund of federal income tax is disallowed in whole or in part, the taxpayer or employer shall report such change or correction or disallowance within ninety days after the final determination of such change, correction, renegotiation or disal- lowance, or as otherwise required by the commissioner, and shall concede the accuracy of such determination or state wherein it is erroneous. The allowance of a tentative carryback adjustment based upon a net oper- ating loss carryback pursuant to section sixty-four hundred eleven of the internal revenue code shall be treated as a final determination for purposes of this section. Any taxpayer filing an amended federal income tax return and any employer filing an amended federal return of income tax withheld shall also file within ninety days thereafter an amended return under this article, and shall give such information as the commissioner may require. The commissioner may by regulation prescribe such exceptions to the requirements of this section as he or she deems appropriate. For purposes of this section, (i) the term "taxpayer" shall include a partnership having a resident partner or having any income derived from New York sources, and a corporation with respect to which the taxable year of such change, correction, disallowance or amendment is a year with respect to which the election provided for in subsection (a) of section six hundred sixty of this article is in effect, and (ii) the term "federal income tax return" shall include the returns of income required under sections six thousand thirty-one and six thousand thirty-seven of the internal revenue code. In the case of such a corporation, such report shall also include any change or correction of the taxes described in paragraphs two and three of subsection (f) of section thirteen hundred sixty-six of the internal revenue code. Reports made under this section by a partnership or corporation shall indicate the portion of the change in each item of income, gain, loss or deduction (and, in the case of a corporation, of each change in, or disallowance of a claim for credit or refund of, a tax referred to in the preceding sentence) allocable to each partner or shareholder and shall set forth such identifying information with respect to such partner or shareholder as may be prescribed by the commissioner. (B) IF THE AMOUNT OF A TAXPAYER'S OBLIGATION TO ANOTHER STATE PURSUANT TO THAT STATE'S INCOME TAX LAWS IS CHANGED OR CORRECTED BY A COMPETENT AUTHORITY OF THAT STATE, THE RIGHTS AND RESPONSIBILITIES OF SUCH TAXPAY- ER SHALL BE THE SAME AS IF THE CHANGE OR CORRECTION HAD BEEN MADE BY THE UNITED STATES INTERNAL REVENUE SERVICE PURSUANT TO SUBSECTION (A) OF THIS SECTION. S 3. Subsection (c) of section 687 of the tax law, as amended by chap- ter 61 of the laws of 1989, is amended to read as follows: (c) Notice of
[federal]change or correction.-- A claim for credit or refund of any overpayment of tax attributable to a [federal]change or correction required to be reported pursuant to section six hundred fifty-nine OF THIS ARTICLE shall be filed by the taxpayer within twoS. 3248 3 A. 5196
years from the time the notice of such change or correction or such amended return was required to be filed with the commissioner of taxa- tion and finance. If the report or amended return required by section six hundred fifty-nine OF THIS ARTICLE is not filed within the ninety day period therein specified, no interest shall be payable on any claim for credit or refund of the overpayment attributable to the
[federal]change or correction. The amount of such credit or refund shall not exceed the amount of the reduction in tax attributable to such [federal]change, correction or items amended on the taxpayer's amended [federal]income tax return. This subsection shall not affect the time within which or the amount for which a claim for credit or refund may be filed apart from this subsection. S 4. Transition provision. Notwithstanding the provisions of section 683 of the tax law, a taxpayer who filed an income tax return for the tax years beginning January 1, 2000, January 1, 2001, January 1, 2002, January 1, 2003, or January 1, 2004, may file an amended return to claim a credit pursuant to section 620 of the tax law which was allowed during such periods but not claimed by such taxpayer. Any such amended return shall be filed within ninety days after the effective date of this act. S 5. This act shall take effect immediately; provided that sections two and three of this act shall apply to taxable years beginning on and after January 1, 2012.