Comments on Proposed Amendments to Corporate Franchise Tax Regulations Implementing Tax Reform
SUMMARY
The State and Local Taxation Committee wrote a letter to the Office of Counsel of the NYS Department of Taxation and Finance regarding the corporate franchise tax regulations submitted for publication in the August 9, 2023 edition of the State Register. Although the legislation reforming New York’s corporate franchise tax laws was enacted effective in 2015, the eight-year lapse between enactment of the law and promulgation of regulations raises issues of fairness to taxpayers. The Committee believes it would be in the best interests of both taxpayers and the Department for the agency to provide that taxpayer compliance with the prior or newly promulgated regulations, as well as the draft regulations released by the Department since 2015, be accepted as reasonable cause for the abatement of penalties for understatement of tax for tax years beginning in 2015 but before the formal adoption of the proposed regulations. “Taxpayers should not face the prospect of being subjected to penalties for positions taken on returns filed in the 8-year period that were consistent with the prior regulations, the draft regulations released since 2015, or the newly promulgated regulations.”
REPORT
Kathleen D. Chase
Office of Counsel
Department of Taxation and Finance
W. A. Harriman Campus
Building 9, Room 200
Albany, NY 12227
Re: Corporate Tax Reform draft regulations
Dear Ms. Chase,
On behalf of the Committee on State and Local Taxation of the New York City Bar Association, we submit this letter regarding the Corporate Tax Regulations submitted for publication in the August 9, 2023 edition of the State Register.
We commend the Department of Taxation and Finance and you for your work on the important and enormous task of drafting the regulations. However, the fact that the legislation reforming New York’s corporate franchise tax laws was enacted effective in 2015 but only now, eight years later, are the regulations being promulgated raises issues of fairness to taxpayers.
During this 8-year period, taxpayers and tax professionals seeking to ensure the filing of correct tax returns were faced with statutory language, existing regulations that were promulgated under statutes subsequently revised effective in 2015, and draft regulations that came out in stages and different iterations over the years. This placed taxpayers and their advisors in an untenable position. The over 400 pages of explanations and examples contained in the current version of the regulations demonstrate that such guidance is essential to understanding the current law. Taxpayers should not face the prospect of being subjected to penalties for positions taken on returns filed in the 8-year period that were consistent with the prior regulations, the draft regulations released since 2015, or the newly promulgated regulations.
The Committee believes that it would be in the best interests of both taxpayers and the Department for the agency to provide that taxpayer compliance with the prior or newly promulgated regulations, as well as the draft regulations released by the Department since 2015, be accepted as reasonable cause for the abatement of penalties for understatement of tax for tax years beginning in 2015 but before the formal adoption of the proposed regulations.
Respectfully,
Michael J. Hilkin, Chair
State and Local Taxation Committee
Glenn Newman
State and Local Taxation Committee
