Some Developments Of Interest To Our New York Readers


Changes to New York Offer in Compromise Program. The New York State Department of Taxation and Finance recently enacted legislation that expands the eligibility of taxpayers to participate in New York's Offer in Compromise Program and provides the Commissioner with more flexibility with respect to amounts that can be accepted in compromise of a tax liability. In addition to previously eligible taxpayers that have been discharged in a bankruptcy proceeding or are proven to be insolvent, eligible taxpayers now include individuals who can demonstrate that a full collection of any tax liability will cause the taxpayer undue economic hardship. An undue economic hardship occurs when a taxpayer is unable to pay reasonable basic living expenses. In determining whether an undue economic hardship exists, the Department of Taxation and Finance will look to the IRS's Collection Financial Standards to help determine a taxpayer's allowable basic living expenses and will consider other factors that can impact an individual's financial condition, e.g., age, employment status, illness or disability, obligations to dependents, or extraordinary circumstances.

The amount that the Commissioner previously could have accepted in compromise of a tax liability could not have been less than the amount recoverable through legal proceedings. The new law generally permits the Commissioner to accept amounts in compromise that reasonably reflect collection potential or are otherwise justified by the proof offered by the taxpayer.

The new law retains the requirement of a New York State Supreme Court justice's approval for fixed and final liabilities where the amount to be compromised is over $100,000 (excluding penalties and interest), but raises the threshold from $25,000 to $50,000 (including penalties and interest) before requiring an opinion of counsel to finalize offers for liabilities that are not fixed and final.

New York Statute of Limitations for Collection of Tax Liabilities. New York recently amended the law that imposes a 20 year statute of limitations to collect tax liabilities to clarify that such 20 year period begins from the first date the Commissioner could have filed a warrant (a legal action against a taxpayer that creates a lien against the taxpayer's real and personal property), without regard to whether the warrant is actually filed. Where there is no right to a hearing, the first date the Commissioner could have filed a warrant is the day after the...

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