Legislation

§ 659-a. Reporting of federal partnership adjustments. (a) If any item required to be shown on a federal partnership return, for any partnership that has a resident partner or any income derived from New York sources, including any gross income, gain, loss, deduction, penalty, credit, or tax for any year of such partnership, including any amount of any partner's distributive share, is changed or corrected by the commissioner of internal revenue or other officer of the United States or other competent authority, and the partnership is issued an adjustment under section sixty-two hundred twenty-five of the internal revenue code or makes a federal election for alternative payment with the internal revenue service as part of a partnership level audit, or files an administrative adjustment request, the partnership shall report, in the manner prescribed by the commissioner, each change or correction in sufficient detail to allow for the computation of the New York tax change or correction for the reviewed year within ninety days after the date of each final federal determination, or ninety days after the filing of an administrative adjustment request. (b) Definitions. As used in this section, the following terms shall have the following meanings: (1) "Administrative adjustment request" means an administrative adjustment request filed by a partnership under section sixty-two hundred twenty-seven of the internal revenue code. (2) "Direct partner" means a partner that holds an interest directly in an impacted partnership during the reviewed year. (3) "Federal election for alternative payment" means the election described in section sixty-two hundred twenty-six of the internal revenue code, relating to alternative payment of imputed underpayment by partnership. (4) "Final federal adjustment" means a change to an item of gross income, gain, loss, deduction, penalty, credit, or a partner's distributive share, of an impacted partnership determined under section sixty-two hundred twenty-five of the internal revenue code that is considered fixed and final under the internal revenue code. (5) "Final federal determination date" means the date on which each adjustment or resolution resulting from an internal revenue service examination is assessed pursuant to section sixty-two hundred three of the internal revenue code. (6) "Impacted partnership" means a partnership that (i) was issued a final federal adjustment; or (ii) made a federal election for alternative payment with the internal revenue service as part of a federal partnership level audit; or (iii) filed an administrative adjustment request with the internal revenue service. (7) "Indirect partner" means a partner, member, or shareholder in a partnership or other pass-through entity that itself held an interest indirectly, or through another indirect partner, in an impacted partnership during the reviewed year. (8) "New York election for alternative payment" means the election described in paragraph three of subsection (d) of this section, relating to payment by the impacted partnership in lieu of taxes owed by its direct and indirect partners. (9) "Reviewed year" has the meaning provided in paragraph one of subsection (d) of section sixty-two hundred twenty-five of the internal revenue code. (10) "Tiered partner" means any partner in an impacted partnership where such partner is a partnership, S corporation, or other pass-through entity for New York tax purposes. (c) Reporting adjustments to federal taxable income. Where partnerships and partners were required to report final federal adjustments or administrative adjustment requests for federal purposes by taking such adjustments into account on a timely filed amended federal income tax return for the reviewed year, such partnerships and partners shall report and pay any New York tax owed under article nine-A, twenty-two, thirty-three, or any law authorized by article thirty of this chapter in the same manner for the reviewed year. Such partnerships and partners shall report final federal adjustments arising from an audit or other action by the internal revenue service or reported by the taxpayer on a timely filed amended federal income tax return, including a return or other similar report filed pursuant to section sixty-two hundred twenty-five of the internal revenue code, or federal claim for refund by filing a federal adjustments report and, if applicable, such partnerships and partners shall pay the additional tax due no later than one hundred eighty days after the final determination date. (d) Reporting federal adjustments pursuant to a partnership level audit and administrative adjustment request. Except for adjustments required to be reported under subsection (c) of this section, partnerships and partners shall report final federal adjustments arising from a partnership level audit or an administrative adjustment request and make payments as required under this subsection in the year of adjustment. (1) Unless a de minimis exception applies, impacted partnerships must report any final federal adjustments and administrative adjustment requests regardless of tax impact. Such report must include the impacted partnership's direct and indirect partner identifying information and any other information the commissioner may require. (2) Except for those subject to a properly made election for alternative payment under paragraph three of this subsection, any changes or corrections made by the internal revenue service pursuant to such a final federal adjustment or as a result of an administrative adjustment request must be reported by the impacted partnership as follows: (A) No later than ninety days after the final determination date, the partnership shall: (i) file a completed federal adjustments report, including any information as required by the commissioner; (ii) notify each of its direct partners of their distributive share of the final federal adjustment, including any information required by the commissioner; (iii) file an amended return as required under paragraph one of subsection (c) of section six hundred fifty-eight and section six hundred fifty-nine of this article for the reviewed year; (iv) file an amended group return if the partnership originally filed a group return, and remit the additional amount that would have been due under subsection (c) of section six hundred fifty-eight of this article had the final federal adjustments been properly reported originally as required; and (v) remit any additional amounts that would have been due under paragraph four of subsection (c) of section six hundred fifty-eight of this article had the final federal adjustments been properly originally reported as required. (B) No later than one hundred eighty days after the final determination date, each direct partner of an impacted partnership that is taxed under article nine-A, twenty-two, thirty-three, or any law authorized by article thirty of this chapter, other than a direct partner that is included on a group return under clause (iv) of subparagraph (A) of this paragraph, shall: (i) file a federal adjustments report reporting their distributive share of the adjustments reported to them by the impacted partnership under clause (ii) of subparagraph (A) of this paragraph; and (ii) remit any additional amount of tax due, plus any penalty and interest computed under this article based on the due date of the originally filed return for the reviewed year, less any credit for amounts paid or withheld and remitted on behalf of the direct partner. (3) New York election for alternative payment by the partnership. An impacted partnership making an election under this subsection shall: (A) no later than ninety days after the final determination date, file a completed federal adjustments report, including any information as required by the commissioner, and provide notice, in the manner required by the commissioner, that it is making the election under this subsection. (B) no later than one hundred eighty days after the final determination date, pay an amount, in lieu of taxes owed by its direct and indirect partners. Such amount shall be determined based on the sum of the following: (i) for direct partners subject to tax pursuant to article nine-A or thirty-three of this chapter in the reviewed year, the partner's distributive share of gross income or gain and deduction apportioned to New York using the apportionment rules described in article nine-A of this chapter multiplied by the highest tax rate under such article nine-A in effect for the reviewed year; and (ii) for a direct partner subject to tax under this article that is treated as a nonresident pursuant to paragraph two of subsection (b) of section six hundred five of this article in the reviewed year, the partner's distributive share of gross income or gain and deduction allocated to New York using the allocation rules described in this article multiplied by the highest tax rate under this article in effect for the reviewed year; and (iii) for a direct partner subject to tax under this article that is treated as a resident pursuant to paragraph one of subsection (b) of section six hundred five of this article in the reviewed year, the partner's distributive share of gross income or gain and deduction multiplied by the highest tax rate under this article in effect for the reviewed year; and (iv) for a direct partner subject to tax under article thirty of this chapter that is treated as a resident pursuant to subsection (a) of section thirteen hundred five of this chapter in the reviewed year, the amount described in clause (iii) of this subparagraph and the partner's distributive share of gross income or gain and deduction multiplied by the highest tax rate under section thirteen hundred four of this chapter in effect for the reviewed year; and (v) for tiered partners, include the sum of: (I) the amount of gross income, gain or deduction from the adjustment that would ultimately flow to a taxpayer subject to tax under article nine-A or thirty-three of this chapter in the reviewed year apportioned to New York using the apportionment rules described in article nine-A of this chapter multiplied by the highest tax rate under such article nine-A in effect for the reviewed year; and (II) the amount of gross income, gain or deduction from the adjustment that would ultimately flow to a taxpayer subject to tax under this article and treated as a nonresident pursuant to paragraph two of subsection (b) of section six hundred five of this article in the reviewed year allocated to New York using the allocation rules described in this article multiplied by the highest tax rate under this article in effect for the reviewed year; and (III) the amount of gross income, gain or deduction from the adjustment that would ultimately flow to a taxpayer subject to tax under this article and treated as a resident pursuant to paragraph one of subsection (b) of section six hundred five of this article in the reviewed year multiplied by the highest tax rate under this article in effect for the reviewed year; and (IV) any amount of gross income, gain or deduction from the adjustment that cannot be established to be properly allocable to a taxpayer described in items (I) or (II) of this clause, multiplied by the highest tax rate under this article in effect for the reviewed year; and (vi) any applicable penalty and interest as required by this article. (4) Tiered partners. The direct and indirect partners of an impacted partnership that are tiered partners, and all of the partners of those tiered partners that are subject to tax under article nine-a, twenty-two, thirty-three, or any law authorized by article thirty of this chapter, are subject to the reporting and payment requirements of paragraph two of this subsection and the tiered partners are entitled to make the elections provided in paragraphs three and five of this subsection. The tiered partners or their partners shall make all required reports and payments no later than ninety days after the time for filing and furnishing statements to tiered partners and their partners pursuant to section sixty-two hundred twenty-six of the internal revenue code and the regulations thereunder. (5) Modified reporting and payment method. In the manner required by the commissioner, an impacted partnership or tiered partner may enter into an agreement with the commissioner to utilize an alternative reporting and payment method, including applicable time requirements or any other provision of this section, if the impacted partnership or tiered partner demonstrates that the requested method will reasonably provide for the reporting and payment of taxes, penalties, and interest due under the provisions of this section, or if the impacted partnership or tiered partner can show that their direct partners have agreed to allow a refund of the tax to the entity. Application for approval of an alternative reporting and payment method must be made by the impacted partnership or tiered partner within the time for election as provided in paragraph three or four of this subsection, as appropriate. (6) Effect of election by impacted partnership or tiered partner and payment of amount due. (A) The election made pursuant to paragraph three or five of this subsection is irrevocable, unless the commissioner, in their discretion, determines otherwise. (B) If properly reported and paid by the impacted partnership or tiered partner, the amount determined in subparagraph (B) of paragraph three of this subsection, or similarly under an optional election pursuant to paragraph five of this subsection, will be treated as a payment in lieu of taxes owed by its direct and indirect partners, to the extent applicable, on the same final federal adjustment. The direct partners or indirect partners may not take any deduction or credit for this amount or claim a refund of such amount. Provided, however, that nothing in this paragraph shall preclude a resident direct partner from claiming a credit against taxes paid to the commissioner pursuant to article twenty-two of this chapter for any amounts paid by the impacted partnership or tiered partner on such resident partner's behalf to another state or local tax jurisdiction in accordance with the provisions of section six hundred twenty of this article. (7) Failure of impacted partnership or tiered partner to report or remit. Nothing in this section shall prevent the commissioner from assessing direct or indirect partners for any taxes due, using the best information available, in the event that an impacted partnership, or a direct or indirect partner of an impacted partnership, fails to timely report or remit any report or additional taxes due required by this section for any reason. (e) De minimis exception. The commissioner shall have the discretion to promulgate regulations to establish a de minimis amount upon which a taxpayer shall not be required to comply with subsections (c) and/or (d) of this section. (f) Estimated tax payments during the course of a federal audit. An impacted partnership may make estimated payments of the tax expected to result from a pending internal revenue service audit, prior to the due date of the federal adjustments report and prior to filing the report with the commissioner. If an impacted partnership makes an estimated payment under this subsection, other than an estimated payment made under paragraph four of subsection (c) of section six hundred fifty-eight of this article, such estimated payment must be accompanied by an irrevocable election under paragraph three of subsection (d) of this section. The estimated tax payments shall be credited against any tax liability ultimately found to be due and will limit the accrual of further statutory interest on such amount. If the estimated tax payments exceed the final tax liability and statutory interest ultimately determined to be due, the taxpayer is entitled to a refund or credit of the excess, provided the taxpayer files a federal adjustments report or claim for refund or credit of tax pursuant to section six hundred eighty-six of this article, no later than one year following the final determination date. (g) Claims for refund or credits of tax arising from a final federal adjustment. Except for final federal adjustments required to be reported for the year of the adjustment, a taxpayer may file a claim for refund or credit of tax arising from federal adjustments on or before the later of: (1) the expiration of the last day for filing a claim for refund or credit pursuant to section six hundred eighty-seven of this article, including any extensions; or (2) one year from the date a federal adjustment report pursuant to subsection (c) or (d) of this section, as applicable, was due, including any extensions pursuant to subsection (h) of this section. (h) Scope of adjustments and extensions of time. (1) Unless otherwise agreed in writing by the taxpayer and the commissioner, any adjustments by the commissioner or the taxpayer made after the period of limitations for assessment or refund has terminated under article nine-A, twenty-two, thirty-three, or any law authorized by article thirty of this chapter, is limited to changes to the taxpayer's tax liability arising from such a final federal adjustment. (2) The time periods provided for in this section may be extended: (A) automatically, upon written notice to the commissioner, by sixty days for an impacted partnership or tiered partner which has ten thousand or more direct partners; or (B) by written agreement between the taxpayer and the commissioner. (3) Any extension granted under this subsection for filing a federal adjustments report extends the last day prescribed by law for assessing any additional tax arising from the adjustments to federal taxable income and the period for filing a claim for refund or credit of taxes under article nine-A, twenty-two, thirty-three, or any law authorized by article thirty of this chapter.