Relates to personal income tax or corporate franchise tax overpayment

Summary of provisions

Sections 1 and 3 of this bill would amend Tax Law §§ 686(e) and 1086(b) to allow taxpayers to request the reversal of the crediting of their personal income tax or corporate franchise tax overpayment to estimated tax for the succeeding taxable year on or before the prescribed filing date of the return for the succeeding taxable year, plus any extension granted. Section 3 would also delete references to articles of the Tax Law that have been repealed.

Section 5 of the bill would make corresponding amendments to Administrative Code of the City of New York § 11-1786(e) for the New York City personal income tax on residents.

Under these amendments, if good cause is shown, the crediting will be reversed, and the Commissioner of Taxation and Finance may, in his or her discretion, credit the overpayment against a liability of the taxpayer or refund the overpayment without interest. However, the taxpayer would not be relieved of liability for penalties for an underpayment of estimated tax caused by the reversal of the credit. The decision of the Commissioner to grant or deny the request would be final and would not be subject to any further administrative or judicial review.

Sections 2, 4 and 6 of the bill would amend cross-references to Tax Law §§ 686(e) and 1086(b), and Administrative Code of the City of New York § 11-1786(e).

Section 7 of the bill provides that it would take effect immediately.

Existing law

When a taxpayer files a personal income tax or corporate franchise tax return and has an overpayment (credits and prepayments are more than the tax owed), an election may be made by the taxpayer to have some or all of the overpayment refunded or

credited to estimated tax for the succeeding taxable year. Tax Law 686(e) and 1086(b), and Administrative Code of the City of New York 11-1786(e) provide that if an overpayment is credited against estimated tax for the succeeding taxable year, the amount is considered to be a payment of tax for the succeeding taxable year and no claim for credit or refund of the overpayment will be allowed for the taxable year for which the overpayment arises.

Legislative history

This bill was introduced in the Senate as S. 3886 on April 2, 2009 and a same-as bill was introduced as A.8175 on May 6, 2009 in the Assembly. The Assembly passed A.8175 on June 2, 2009, but it failed to pass in the Senate and was returned to the Assembly. The Assembly passed A. 8175 again on March 9, 2010, and it was referred to the Senate Committee on Investigations and Government Operations. No further action was taken on the bill in the 2010 Legislative Session.

Statement in support

The virtually irreversible election to credit an overpayment to estimated tax for the succeeding taxable year has at times caused problems for taxpayers. In some cases, because of a software or return preparation error, the overpayment has been entered on the credit-to estimated-tax line rather than on the refund line. Taxpayers who expected a refund have been frustrated by the inability to correct this error. Further, a taxpayer may become aware of another liability before the due date of the return for the succeeding taxable year and may prefer to use the overpayment against that liability instead of using it to pay estimated tax for the next year.

In addition, there may be other situations that would call for reversing the crediting of an overpayment, such as a significant change in the taxpayer's economic situation. The ability to request the reversal of the crediting of the overpayment to estimated tax would last until the prescribed due date of the return for the succeeding taxable year, plus any extensions granted the...taxpayer. Once the return for the succeeding taxable year is filed, the taxpayer would be able t6 request any overpayment on that return be refunded or credited against estimated tax liabilities for the next succeeding taxable year.

The decision to grant or deny the request is in the discretion of the Commissioner of Taxation and Finance. To promote efficient settlement of the affected tax years, the Commissioner's decision would not be subject to further administrative or judicial review.

Budget implications

There are no known budget implications associated with this bill.

Effective date

The bill would take effect immediately upon enactment.