Current through Register Vol. 46, No. 12, March 20, 2024
(a)
(1) Where any person fails to timely file a
return, fails to timely pay any taxes due or fails to meet or fulfill any other
act or requirement of the Tax Law, thereby subjecting such person to the
additions to tax, penalties, or interest penalty imposed pursuant to section
182-a(10)(b),
289-b(1)(a),
289-b(2),
433(1)(a),
481(1)(a)(i),
512(1)(a),
527(b),
658(c)(4)(C)(i),
685(a),
685(f),
685(h),
685(o),
685(u),
685(v),
685(w),
1085(a),
1085(n),
1085(o),
1145(a)(1)(i),
1145(c),
1145(e), or
1416(b) of the Tax Law, or
the interest amount imposed pursuant to section 1145(a)(1)(ii) of such law, the
applicable additions to tax, penalties, interest penalty and/or the interest
amount, as listed above, must be imposed unless it is shown that such failure
was due to reasonable cause and not due to willful neglect. In the event that
these amounts have been imposed and it is later determined any such failure was
due to reasonable cause and not due to willful neglect, all or part of these
amounts will be cancelled. The absence of willful neglect alone is not
sufficient grounds for not imposing or for cancelling these amounts.
(2) As used in this section, the term
taxpayer means the person against whom the amounts described in paragraph (1)
of this subdivision have been assessed or are assessable.
(3) As used in this section, the phrase
articles governed by article 27 of the Tax Law means and includes articles 9
(Corporation Tax), 9-A (Franchise Tax on Business Corporations), 13 (Tax on
Unrelated Business Income), 32 (Franchise Tax on Banking Corporations), 33
(Franchise Taxes on Insurance Corporations) and 33-A (Tax on Independently
Procured Insurance) of such law.
(b) Except where reasonable cause exists or
is presumed to exist pursuant to subdivision (c) of this section, all of the
facts alleged as a basis for reasonable cause may be required to be
affirmatively shown in a written statement made by the taxpayer. Where the
taxpayer is unable to provide such a statement or does not have a personal
knowledge of such facts, a showing of reasonable cause may be made on the
taxpayer's behalf by an individual with a personal knowledge of such facts. In
determining whether reasonable cause exists, in addition to an evaluation of
such facts, the taxpayer's previous compliance record with respect to all of
the taxes imposed pursuant to the Tax Law may be taken into account.
(c)
(1)
Reasonable cause shall not be determined to exist as a basis for not imposing
or for cancelling the additions to tax for failure to file a return, pursuant
to section
685(a)(1) or
1085(a)(1) of the Tax Law,
or for failure to pay the amount of tax shown on such return, pursuant to
section 685(a)(2) or 1085(a)(2) of such law, where it is determined that the
taxpayer or the taxpayer's duly authorized representative could have reasonably
been expected to timely request extensions of time to file the return or
extensions of time to pay the tax due, but failed to do so. However, reasonable
cause may be determined to exist with respect to these additions to tax where:
(i) no extensions of time to file the return
or no extensions of time to pay the tax due have been requested and it is
determined that, given the circumstances, it would have been unreasonable to
expect such extensions to be requested;
(ii) a taxpayer has complied with and
exhausted all of the provisions with respect to extensions of time for filing
the return or extensions of time for paying the tax due but was nevertheless
unable to file or to pay on or before the extended due dates; or
(iii) for purposes of the additions to tax
under 1085(a)(1) and (2), a taxpayer has attempted to comply, pursuant to
subparagraph (e)(3)(i) of this section, with the provisions relating to an
extension of time for filing the return.
(2) A showing of reasonable cause with
respect to the addition to tax under section
685(a)(2) of the Tax Law
will be presumed, with respect to any underpayment of tax, where the taxpayer
has:
(i) satisfied the requirements of
section
157.2
of this Title, relating to an automatic extension of time for filing a tax
return; and
(ii) the excess of the
amount of tax shown on the tax return over the amount of tax paid on or before
the date prescribed for the filing of the tax return (by virtue of tax
withheld, payments of estimated tax and the payment in full of the estimated
tax liability pursuant to section
157.2[a][4]
of this Title) is no greater than 10 percent of the amount of tax shown on the
tax return; and
(iii) any balance
due shown on the tax return is remitted with such return.
(3) A showing of reasonable cause with
respect to the additions to tax under section
1085(a)(2) of the Tax Law
(except in the case of such an addition to tax imposed with respect to a
liability arising under article 33-A of such law) will exist for purposes of
articles 9-A, 13, 32 and 33, or will be presumed to exist for purposes of
article 9 or 22, with respect to any underpayment of tax, where the taxpayer
has a valid automatic or initial extension of time for filing the
return.
(4) The existence or
presumption of reasonable cause provided for in paragraphs (2) and (3) of this
subdivision will apply to only that period of time for which a taxpayer has a
valid automatic or initial extension of time for filing the return and, if any,
the additional extensions of time for filing such return.
(d) Grounds for reasonable cause. The
following exemplify grounds for reasonable cause, where clearly established by
or on behalf of the taxpayer:
(1) Death,
illness or absence.
(i) The death or serious
illness of the taxpayer or the taxpayer's unavoidable absence from its usual
place of business, which precluded timely compliance, may constitute reasonable
cause, provided that:
(a) in the case of the
failure to file any return, the applicable return is filed; or
(b) in the case of the failure to pay, pay
over or deposit any tax, such amount is paid, paid over or deposited,
within a justifiable period of time after the death, illness
or absence. A justifiable period of time is that period which is substantiated
by or on behalf of the taxpayer as a reasonable period of time for filing the
return and/or for paying any tax, based on the facts and circumstances in each
case.
(ii) As
used in subparagraph (i) of this paragraph, the term taxpayer also includes:
(a) for purposes of articles 12-A, 18, 20,
21, 21-A and 33-A of the Tax Law, a responsible partner, officer, director,
shareholder, employee or other representative of the taxpayer;
(b) for purposes of article 22 of the Tax
Law, a member of the taxpayer's family or the taxpayer's personal
representative or employer;
(c) for
purposes of the articles governed by article 27 of the Tax Law (not including,
for purposes of this paragraph, article 33-A of such law), a responsible
officer, employee or other representative of the taxpayer;
(d) for purposes of article 28 of the Tax
Law, a partner, responsible partner, officer, director, shareholder, employee
or other representative of the taxpayer; and
(e) for purposes of article 31 of the Tax
Law, any other person acting in a fiduciary or representative capacity for the
taxpayer.
(2)
Destruction of place of business or business records.
(i) The destruction of the taxpayer's place
of business or business records by a fire or other documented casualty, which
precluded timely compliance, may constitute reasonable cause, provided that:
(a) in the case of the failure to file any
return, the applicable return is filed; or
(b) in the case of the failure to pay, pay
over or deposit any tax, such amount is paid, paid over or deposited,
within a justifiable period of time after the casualty has
taken place. A justifiable period of time is that period which is substantiated
by or on behalf of the taxpayer as a reasonable period of time for filing the
return and/or for paying any tax, based on the facts and circumstances in each
case.
(ii) As
used in subparagraph (i) of this paragraph, the phrase taxpayer's place of
business or business records includes:
(a)
for purposes of articles 12-A, 18, 21, 21-A and 28 of the Tax Law and the
articles governed by article 27 of such law, the place of business or business
records of the taxpayer's representatives;
(b) for purposes of article 20 of the Tax
Law, the place of business or business records of taxpayer's representative or
the taxpayer's inventory or stamps;
(c) for purposes of article 22 of the Tax
Law, the place of business or business records of the taxpayer's personal
representative or employer, or the taxpayer's resident or income records
(including wage and tax statements and returns of information); and
(d) for purposes of article 31 of the Tax
Law, the place of business or the business records of any other person acting
in a fiduciary or representative capacity for the taxpayer.
(3) Inability to timely
assemble information. Except as provided in subdivision (e) of this section,
the inability for reasons beyond the taxpayer's control to timely obtain and
assemble essential information required for the preparation of a complete
return, despite the exercise of reasonable efforts, may constitute reasonable
cause provided a return, together with a statement of facts, is timely filed
and any tax is timely paid or paid over on that portion of the tax liability
which can be ascertained. The relevant facts affecting that portion of the tax
liability which cannot be ascertained must be fully disclosed with the timely
filed return. When such liability is ascertained, and where applicable
collected, an amended return must be immediately filed together with payment of
any additional tax due.
(4) Pending
petitions, actions or proceedings. A pending petition to the Commissioner of
Taxation and Finance for an advisory opinion or a declaratory ruling, a pending
conciliation conference proceeding in the Bureau of Conciliation and Mediation
Services of the Division of Taxation, a pending petition to the Division of Tax
Appeals or a pending action or proceeding for judicial determination may
constitute reasonable cause, until the time at which the taxpayer has exhausted
its administrative or judicial remedies, as applicable, for one or more taxable
periods (or conveyances for purposes of article 31 of the Tax Law), the return
or returns for which are due subsequent to the filing of the petition with the
Commissioner of Taxation and Finance, the commencement of the conciliation
conference proceeding, the filing of the petition with the Division of Tax
Appeals or the commencement of the judicial action or proceeding. The ground
for reasonable cause described in this paragraph is subject to the following
conditions:
(i) the petition, action or
proceeding must involve a question or issue affecting whether or not the person
or entity or conveyance is subject to tax and/or required to file a return or,
for purposes of article 28 of the Tax Law, whether such person or entity is
required to file a return and collect and remit sales tax or file a return and
pay use tax;
(ii) the petition,
action or proceeding must not be based on a position which is frivolous nor may
it be intended to delay or impede the administration of the applicable article
of the Tax Law; and
(iii) the facts
and circumstances for such taxable period(s) or conveyance(s) must be identical
or virtually identical to those covered by the petition, action or
proceeding.
(5)
Additional grounds. Any other ground for delinquency which would appear to a
person of ordinary prudence and intelligence as a reasonable cause for delay
and which clearly indicates an absence of willful neglect may be determined to
be reasonable cause.
(e)
(1) Except as provided for in paragraph (3)
of this subdivision, for purposes of article 22 of the Tax Law and for purposes
of the articles governed by article 27 of such law, an inability to timely
obtain and assemble essential information (including wage and tax statements or
returns of information from an employer or payor) required for the preparation
of a complete return shall not be a basis for reasonable cause.
(2) Where an inability to timely obtain and
assemble essential information required for the preparation of a complete
return exists and where extensions of time for filing the return are available,
such extensions of time for filing must be obtained, a return which reflects
the known tax liability must be filed on or before the extended due date for
filing, and any balance of tax must be paid with the return on that portion of
the tax liability which can be ascertained and shown on such return. The
relevant facts affecting that portion of the tax liability which cannot be
ascertained must be fully disclosed with such timely filed returns. When such
liability is ascertained, an amended return must be immediately filed together
with any additional tax due.
(3)
(i) However, for purposes of the articles
governed by article 27 of the Tax Law, where a taxpayer:
(a) makes a timely application for an
extension of time to file the return;
(b) makes a good-faith effort to properly
estimate the tax due; and
(c) pays
with the application for extension of time for filing any unpaid balance of the
tax as estimated;
an inability for reasons beyond the taxpayer's control to
obtain and assemble essential information may constitute reasonable cause for
failure to file a return and for failure to pay the amount shown as tax on the
return, where such inability precluded the taxpayer from properly estimating
the tax as finally determined thereby invalidating the extensions of time for
filing the return.
(ii) In support of the ground described in
subparagraph (i) of this paragraph as a basis for reasonable cause, the
taxpayer or the taxpayer's representative must:
(a) indicate why the estimated tax would not
be predicated on the preceding year's tax;
(b) indicate what information was
unavailable;
(c) explain the reason
or reasons why such information was unavailable, despite reasonable efforts by
or on behalf of the taxpayer to obtain the missing information; and
(d) further explain how the original
estimation of tax was derived and what allowances, if any, were included in the
estimation to provide for the unknown tax liability.
(iii) Where the Tax Law does not provide for
an extension of time for filing, a return which reflects the known tax
liability must be filed on or before the prescribed due date for filing and the
tax must be paid with the return on that portion of the tax liability which can
be ascertained and shown on such return. The relevant facts affecting that
portion of the tax liability which cannot be ascertained must be fully
disclosed with such timely filed returns. When such liability is ascertained,
an amended return must be immediately filed together with any additional tax
due.
(f) The
provisions of this section shall apply to the extent pertinent where any person
is subject to the penalty imposed by section
685(k) of the Tax Law. in
addition to any relevant grounds for reasonable cause as exemplified in
subdivision (d) of this section, further grounds for reasonable cause for
failure to secure and supply any identifying numbers (as described in such
section 685[k]), where clearly established, may include the following:
(1) a reliance in good faith on an
identifying number provided to such person which subsequently proves to be
erroneous; or
(2) awaiting the
issuance of an identifying number or the inability to secure an identifying
number despite repeated, documentable attempts to do so.
(g)
(1) The
provisions of this section shall apply to the extent pertinent where any
taxpayer is subject to the additions to tax or penalties imposed pursuant to
sections
685(p),
1085(k) and
1145(a)(1)(vi) of the Tax
Law and such understatement or omission (as described in such sections), or
part thereof, was due to reasonable cause and, for purposes of section
1145(a)(1)(vi), is not due to willful neglect. In such a case, reasonable
cause, and the absence of willful neglect, if applicable, may be determined to
exist only where the taxpayer has acted in good faith. Further, reasonable
cause and good faith, and the absence of willful neglect, if applicable, shall
be considered as a basis for cancellation or waiver of all or part of the
assessed or assessable additions to tax or penalties imposed pursuant to such
sections of the Tax Law only after the understatement of tax or omission has
been reduced, in accordance with the provisions of such sections, by that
portion of the tax attributable to any item for which there is or was
substantial authority for the tax treatment thereof, or for which the relevant
facts affecting the tax treatment were adequately disclosed with the original
return, if applicable.
(2) In
determining whether reasonable cause and good faith exist, the most important
factor to be considered is the extent of the taxpayer's efforts to ascertain
the proper tax liability. In addition to any relevant grounds for reasonable
cause as exemplified in subdivision (d) of this section, circumstances that
indicate reasonable cause and good faith with respect to the substantial
understatement or omission of tax, where clearly established by or on behalf of
the taxpayer, may include the following:
(i)
an honest misunderstanding of fact or law that is reasonable in light of the
experience, knowledge and education of the taxpayer;
(ii) a computational or transcriptional
error;
(iii) the filing of an
amended return which shows an additional amount of tax due or which adequately
discloses the tax treatment of an item which should have been adequately
disclosed with the original return, provided the amended return is filed prior
to the time the taxpayer is first contacted by the Department of Taxation and
Finance concerning an audit or an examination of the return; and
(iv) the reliance by the taxpayer on any
written information, professional advice or other facts, provided such reliance
was reasonable and the taxpayer had no knowledge of circumstances which should
have put the taxpayer upon inquiry as to whether such facts were erroneous;
(a) reliance on professional advice. The
provisions regarding a taxpayer's reliance on professional advice found in this
subparagraph shall be applied as follows:
(1)
facts and circumstances; minimum and requirements. All facts and circumstances
must be taken into account in determining whether a taxpayer has reasonably
relied in good faith on professional advice as to the treatment of the taxpayer
under the Tax Law. However, in no event will a taxpayer be considered to have
reasonably relied in good faith on professional advice unless the requirements
of this subclause are satisfied. The fact that these requirements are satisfied
will not necessarily establish that the taxpayer reasonably relied in good
faith on professional advice. For example, reliance may not be reasonable or in
good faith if the taxpayer knew, or should have known, that the advisor lacked
knowledge in the relevant aspects of the Tax Law;
(i) all facts and circumstances considered.
The advice must be based upon all pertinent facts and circumstances and the law
as it relates to those facts and circumstances. For example, the advice must
take into account the taxpayer's purposes (and the relative weight of such
purposes) for entering into a transaction and for structuring a transaction in
a particular manner. In addition, the requirements of this subclause are not
satisfied if the taxpayer fails to disclose a fact that it knows, or should
know, to be relevant to the proper tax treatment of an item;
(ii) no unreasonable assumptions. The advice
must not be based on unreasonable factual or legal assumptions (including
assumptions as to future events) and must not unreasonably rely on the
representations, statements, findings, or agreements of the taxpayer or any
other person. For example, the advice must not be based upon a representation
or assumption which the taxpayer knows, or has reason to know, is unlikely to
be true, such as an inaccurate representation or assumption as to the
taxpayer's purposes for entering into a transaction or for structuring a
transaction in a particular manner;
(2) advice must be reasonable. Reliance upon
professional advice as a basis for reasonable cause will not be supported where
the advice received is unreasonable. For example, professional advice may be
considered to be unreasonable where such advice is contrary to written guidance
or published information applicable or relevant to the given facts or
circumstances.
(3) No inference
shall be drawn from any of the provisions of this subdivision with respect to
establishing reasonable cause pursuant to any other subdivision of this
section. However, the provisions of subparagraphs (2)(i) and (iv) of this
subdivision may be applicable, under the appropriate circumstances, to
establishing reasonable cause pursuant to subdivision (d) of this section, (see
paragraph [d][5] of this section).
(h) The provisions of this section
shall also apply to the extent pertinent where any person is subject to penalty
under section 1145(a)(3), 1145(a)(4), 1145(g) or 1145(h). A determination of
reasonable cause with respect to these failures will be based on the facts and
circumstances leading to the failure at issue. It must be established by or on
behalf of a person described in this subdivision that the failure occurred
despite the exercise of ordinary business care and prudence.
(i)
(1)
Pursuant to statutory provisions for joint administration and applicability,
the provisions of this section will also apply as follows:
(i) to the extent that the provisions of this
section apply to article 12-A of the Tax Law, they will also apply to the taxes
imposed pursuant to article 13- A (Tax on Petroleum Businesses) of such
law;
(ii) to the extent that the
provisions of this section apply to article 22 of the Tax Law, they will also
apply to the taxes imposed pursuant to articles 26 (Estate Tax) and 26-A (Gift
Tax) and to the local taxes imposed pursuant to the authority of articles 30
(City of New York Personal Income Tax on Residents), 30-A (City of Yonkers
Income Tax Surcharge on Residents) and 30-B (City of Yonkers Earnings Tax on
Nonresidents) of such law, and to article 2-E (City of New York Earnings Tax on
Nonresidents) of the General City Law; and
(iii) to the extent that the provisions of
this section apply to article 28 of the Tax Law, they will also apply to the
taxes imposed pursuant to article 28- A (Passenger Car Rentals) and to the
taxes imposed pursuant to the authority of article 29 (Local Enabling Act) of
such law.
(2) See
sections
2396.11
and
2397.7
of this Title for provisions regarding reasonable cause that are applicable to
the Electronic Filing and Funds Transfer Program for Certain Taxpayers
Remitting Withholding Taxes and the Electronic Funds Transfer Program For
Certain Taxpayers Remitting Taxes Under and Pursuant to the Authority of
articles 12-A, 13-A, 28 and 29 of the Tax Law, provided for by sections 9 and
10, respectively, of the Tax Law.