August 4, 2008

NEW YORK TAXPAYERS:

VOLUNTARILY DISCLOSING PAST TAX OBLIGATIONS AVERTS PENALTIES, PROSECUTION

New York State’s 2008-2009 budget1 includes a Voluntary Compliance and Disclosure Program (the Voluntary Disclosure Program) relating to New York State and New York City taxes and a Voluntary Compliance Initiative (the VCI), which relates to New York State and New York City tax liabilities attributable to certain “tax avoidance transactions.”

Part of the Budget Bill recently signed into law by Governor
David Paterson, the Voluntary Disclosure Program codifies a
procedure by which an eligible taxpayer may avoid civil penalties and criminal prosecution for past tax obligations. Pursuant to this program, which effectively formalizes an existing informal program, a taxpayer can avoid penalties and criminal prosecution by voluntarily disclosing those obligations and entering into a disclosure and compliance agreement
with the New York State Department of Taxation and Finance
(the Tax Department).2

The VCI resembles a traditional amnesty program, insofar as it includes enhanced penalties for failure to disclose and is time-limited. It essentially reopens the 2005-2006 Voluntary Compliance Initiative (the 2005-2006 Initiative). This program will be available from November 1, 2008 through January 31, 2009 and applies to any taxpayer that discloses, or has previously disclosed, participation in one or more “tax avoidance transactions” pursuant to the requirements of section 11 of part N of chapter 61 of the laws of 2005.3

For our readers, we have prepared a brief summary of these programs. Please read it here.

1   S. 6807C, 231st Gen. Assem., Reg. Sess. (N.Y. 2008).
2   New York State Department of Taxation and Finance, Office of Tax Policy Analysis, Summary of Tax Provisions SFY 2008-2009 Budget (2008).
3   Id.