New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter IX - Procedural Regulations
Part 2500 - New York Reportable Transactions
Section 2500.3 - New York reportable transactions

Universal Citation: 20 NY Comp Codes Rules and Regs ยง 2500.3

Current through Register Vol. 46, No. 12, March 20, 2024

(a) General. A New York reportable transaction is a transaction that has the potential to be a tax avoidance transaction under article 9, 9-A, 22, 32, or 33 of the Tax Law. The term transaction includes all of the factual elements relevant to the expected tax treatment of any investment, entity, plan, or arrangement, and includes any series of steps carried out as part of a plan. There are three categories of New York reportable transactions: New York listed transactions, New York confidential transactions, and New York transactions with contractual protection.

(b) New York listed transactions. A New York listed transaction is a transaction that is the same as or substantially similar to one of the types of transactions that the commissioner has determined to be a tax avoidance transaction and identified by notice or other form of published guidance as a New York listed transaction. For purposes of identifying a New York listed transaction, the determination that a type of transaction is a tax avoidance transaction shall be based upon a finding by the commissioner that:

(1) the transaction is not done for a valid business purpose, that is, one or more business purposes, other than obtaining tax benefits, that alone or in combination constitute the primary motivation for the transaction;

(2) the transaction does not have economic substance apart from its tax benefits; or

(3) the tax treatment of the transaction is based upon an elevation of form over substance.

(c) New York confidential transactions.

(1) General. A New York confidential transaction is a transaction that is offered to a taxpayer under conditions of confidentiality and for which the taxpayer has paid an advisor a fee. For purposes of this subdivision, related persons who bear a relationship to each other as described in section 267(b) or section 707(b) of the Internal Revenue Code will be treated as the same person.

(2) Conditions of confidentiality. A transaction is considered to be offered to a taxpayer under conditions of confidentiality if the advisor who is paid the fee places a limitation on disclosure by the taxpayer of the tax treatment or tax structure of the transaction and the limitation on disclosure protects the confidentiality of that advisor's tax strategies. A transaction is treated as confidential even if the conditions of confidentiality are not legally binding on the taxpayer. A claim that a transaction is proprietary or exclusive is not treated as a limitation on disclosure if the advisor confirms to the taxpayer that there is no limitation on disclosure of the tax treatment or tax structure of the transaction.

(3) Determination of advisor fee. For purposes of this subdivision, a fee includes all fees for a tax strategy or for services for advice (whether or not tax advice) or for the implementation of a transaction. These fees include consideration in whatever form paid, whether in cash or in kind, for services to analyze the transaction (whether or not related to the tax consequences of the transaction), for services to implement the transaction, for services to document the transaction, and for services to prepare tax returns to the extent that the fees exceed the fees customary for return preparation. For purposes of this subdivision, a taxpayer also is treated as paying fees to an advisor if the taxpayer knows or should know that the amount it pays will be paid indirectly to the advisor, such as through a referral fee or fee-sharing arrangement. A fee does not include amounts paid to a person, including an advisor, in that person's capacity as a party to the transaction. For example, a fee does not include reasonable charges for the use of capital or the sale or use of property.

(d) New York transactions with contractual protection.

(1) General. A New York transaction with contractual protection is a transaction for which the taxpayer or a related party (as described in section 267[b] or section 707[b] of the Internal Revenue Code) has the right to a full or partial refund of fees (as described in paragraph [2] of this subdivision) if all or part of the intended tax consequences from the transaction are not sustained. A transaction with contractual protection also is a transaction for which fees (as described in paragraph [2] of this subdivision) are contingent on the taxpayer's realization of tax benefits from the transaction. All the facts and circumstances relating to the transaction will be considered when determining whether a fee is refundable or contingent, including the right to reimbursements of amounts that the parties to the transaction have not designated as fees or any agreement to provide services without reasonable compensation.

(2) Fees. Paragraph (1) of this subdivision only applies with respect to fees paid by or on behalf of the taxpayer or a related party to any person who makes or provides a statement, oral or written, to the taxpayer or related party (or for whose benefit a statement is made or provided to the taxpayer or related party) as to the potential tax consequences that may result from the transaction.

(3) Exceptions.
(i) Termination of transaction. A transaction is not considered to have contractual protection solely because a party to the transaction has the right to terminate the transaction upon the happening of an event affecting the taxation of one or more parties to the transaction.

(ii) Previously reported transaction. If a person makes or provides a statement to a taxpayer as to the potential tax consequences that may result from a transaction only after the taxpayer has entered into the transaction and reported the consequences of the transaction on a filed tax return, and the person has not previously received fees from the taxpayer relating to the transaction, then any refundable or contingent fees are not taken into account in determining whether the transaction has contractual protection.

(e) Exceptions.

(1) General. A transaction will not be considered a New York reportable transaction, or will be excluded from any individual category of New York reportable transaction under subdivisions (c) and (d) of this section, if the commissioner makes a determination by published guidance that the transaction is not subject to the reporting requirements of this Part. The commissioner may also, upon request, make a determination under section 2500.6 of this Part that a specific transaction or type of transaction is not subject to the reporting requirements of this Part.

(2) Special rule for regulated investment companies. For purposes of this Part, a corporation which is a regulated investment company as defined in section 851 of the Internal Revenue Code and subject to Federal income tax under section 852 of the Internal Revenue Code or an investment vehicle that is owned 95 percent or more by one or more regulated investment companies at all times during the course of the transaction is not required to disclose a transaction that is described in subdivisions (c) and (d) of this section unless the transaction is also a New York listed transaction.

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