N.Y. Tax Law § 659-a: Reporting of federal partnership adjustments

§ 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.