GT Alert

New York State Offers Tax Amnesty

November 2002
By David Bunning, Greenberg Traurig, New York Office

  View or download the PDF version of this Alert here.

New York is currently offering an amnesty on unpaid state taxes. Amnesty is available for taxpayers who did not file a return, understated a liability on a return, or have had tax assessed. But the opportunity is fleeting. Application must be made by January 31, 2003. Because of the broad scope of the tax amnesty program, if you owe New York State taxes, whether they have been assessed or not, now is a good time to consider payment.

"Because of the broad scope of the tax amnesty program, if you owe New York State taxes, whether they have been assessed or not, now is a good time to consider payment."

Under the amnesty program, which began on November 18, 2002, non-filers and those who have underpaid a state tax liability can pay back taxes and interest at a rate two percentage points lower than the applicable statutory interest rate, with a waiver of penalties and immunity from future administrative, civil, and criminal action. To obtain these benefits, a taxpayer must submit an application for tax amnesty by January 31, 2003 and make full payment by March 15, 2003 or the date in a bill sent by the New York State Department of Taxation. Interest rates will return to normal after amnesty and then will increase by an additional two percentage points on April 1, 2003.

Taxes and Tax Periods Covered

All tax periods ending on or before December 31, 2000 are covered. 2001 and 2002 taxes do not qualify for amnesty. In the case of sales taxes and excise taxes with quarterly returns, amnesty applies to tax periods pending or transactions or uses occurring on or before February 28, 2001. In the case of the New York State estate tax, amnesty applies to estate tax liabilities of decedents who died on or before February 1, 2000. The taxes covered are:

• New York State personal income tax, New York City personal income tax, and the City of Yonkers personal income tax surcharge and nonresident earnings tax
• Withholding taxes for personal income tax
• Corporation franchise tax and related taxes
• Sales and compensating use tax
• Special tax on passenger car rentals
• Taxes authorized for cities, counties, or school districts
• Motor fuel tax
• Beverage container tax
• Petroleum business tax
• Highway use tax
• Estate tax
• Gift tax
• Generation-skipping transfer tax
• Real property transfer gains tax (repealed for transfers on or after June 15, 1996).

Eligibility Restrictions

Amnesty is not available to taxpayers who were granted tax amnesty under either the 1994 or the 1996-1997 New York State tax amnesty programs for the type of tax for which amnesty is now sought. However, amnesty is available for other types of taxes. For example, a taxpayer who received amnesty for income tax under an earlier tax amnesty program is not eligible for amnesty for income tax, but is eligible for amnesty for sales tax.

Amnesty is limited to business taxpayers who employ 500 or fewer employees in the United States on the date the amnesty application is filed.

A taxpayer is not eligible for tax amnesty for a tax and period in which the taxpayer is a party to a criminal investigation or a pending criminal or civil litigation. However, a taxpayer is eligible for amnesty with respect to other taxes and periods. A taxpayer who has been convicted of a crime related to a tax for which tax amnesty is sought is not eligible for any period or assessment for that type of tax.

If an application for tax amnesty is denied because of an ongoing criminal investigation or pending criminal prosecution, the taxpayer may resubmit the application for amnesty if the criminal proceeding does not result in conviction even if this occurs after January 31, 2003, the last day to apply for tax amnesty. Such resubmission must be made within 30 days of official notice that investigation has been terminated or the conclusion of the criminal prosecution. If the taxpayer has not been officially notified of the termination of a criminal investigation, the resubmission must be within five years and 30 days of the mailing of the notice denying tax amnesty.

If civil litigation is pending, eligibility for amnesty exists if the applicant withdraws from the litigation before the amnesty is granted. If the tax for which amnesty is sought is being contested in the Bureau of Conciliation and Mediation Services or the Division of Tax Appeals, the case must be withdrawn before tax amnesty is granted.

Application and Payment Due Dates

Mailed applications must be postmarked by January 31, 2003. Online applications must be submitted by midnight, Eastern Standard Time, on January 31, 2003. Tax amnesty payments must be made in full by the later of the date set forth in a tax amnesty bill or March 15, 2003. Amnesty will be denied if the payment is late. Payment may be made by electronic funds withdrawal or by Discover, Novus, or Mastercard.

Observations

Some of the provisions have not been in previous New York amnesty programs, such as the reduction of interest and the resubmission of applications in certain situations after the close of the amnesty period.

Further, amnesty may apply to situations which are not immediately obvious. For example, if a taxpayer has previously entered into an installment agreement, the program permits payment of the remaining tax without penalty and with reduced interest. The savings due to penalty abatement and reduction of interest may be substantial, particularly if the payments already made were designated to the payment of tax only. Further, if a tax liability is contested, a taxpayer may obtain amnesty for a portion of the liability (which must be paid within the amnesty deadlines) and contest the remainder.

If you owe New York State tax, regardless of the circumstances, you should consider the amnesty program.

Additional Information

Additional information may be obtained from the New York State tax amnesty website, www.nystaxamnesty.com, or from Greenberg Traurig. The website, which sports the slogan "Get caught up... before you get caught," contains questions and answers on a variety of amnesty-related issues.

The author gratefully acknowledges the assistance of Charles A. Simmons and Barbara T. Kaplan with this alert.
© 2002 Greenberg Traurig

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