It is becoming increasingly common for taxpayers to seek relief from unfair apportionment situations by requesting state revenue agencies to exercise their discretion and grant permission for the use of alternative apportionment formulae. New York is now—on a formal basis—allowing taxpayers to request such relief in advance of filing their affected tax returns.
The New York State Department of Taxation and Finance has issued a technical memorandum explaining changes to procedures for requesting a discretionary “allocation” adjustment for purposes of both the Business Corporation Tax (Article 9-A) and the Franchise Tax on Banking Corporations (Article 32). TSB-M-11(3)C. Previously, taxpayers had to file their returns and pay tax according to the statutory formulas while simultaneously attaching a request for an adjustment and computation showing the amount of tax that would be due under an alternate method and hope for relief later. 20 NYCRR §§ 4-6.1(c) & 19-8.4.
The amendments to the regulations now instruct taxpayers to submit a separate written request either before or after filing a report that details why the request is made. If the Department grants consent before the taxpayer files its report, the taxpayer may file using the requested method. Alternatively, if the taxpayer has not received consent before the report is due, the taxpayer must compute the tax using the statutory formulas. If the taxpayer receives consent after filing, the taxpayer may amend the report and use the method approved by the Department.
McDermott’s Arthur Rosen Interviews Recently Confirmed New York Commissioner Thomas Mattox
On March 14, 2011, Arthur R. Rosen of McDermott Will & Emery LLP interviewed newly confirmed New York Commissioner of Taxation and Finance Thomas H. Mattox. Click here to read the summary.