Establishes a 20 year time limit to collect tax liability

Summary of provisions

Section 1 of the bill adds a new section 174-b to the Tax Law to provide for a 20-year statute of limitations on the time to collect tax liabilities. The statute of limitations will be solely for taxes administered by the Commissioner of Taxation and Finance ("Commissioner"). A tax liability will not be enforceable and will be extinguished after 20 years from the first date a warrant could be filed by the Commissioner. The first date a warrant could be filed means the day after the last day specified for payment by the notice and demand issued for the tax liability where there is no right to a hearing with respect to such notice and demand. Where there is a right to a hearing with respect to a notice and demand for a tax liability, the first date a warrant could be filed means the day after opportunity for a hearing or review has been exhausted. The Commissioner and the taxpayer can consent in writing to extend the time period during which tax warrants may be collected.

Section 2 of the bill provides that the bill takes effect immediately.

Existing law

The time period during which tax warrants may be collected is governed by the provisions of CPLR § 211(b). This section provides that a money judgment, including a tax warrant, is presumed to be paid and satisfied after the expiration of twenty years from the time when the party recovering it was first entitled to enforce it. This presumption is conclusive, except as against a person who within the twenty years acknowledges an indebtedness in writing, or makes a payment, including an involuntary payment.

While state law cannot restrict the rights of the IRS to collect federal tax debt, the CPLR restrictions apply to the Department of Taxation and Finance ("Tax Department") in its collection of state tax debts in a similar manner as applicable to private creditors.

Legislative history

This is a new proposal.

Statement in support

The intent of this legislation is to limit the period for the Tax Department to collect unpaid tax liabilities. The acknowledgement or payment on the debt provisions in the CPLR will no longer extend the collection period, and thus, the Department will have 20 years from the first date a warrant could be filed to collect tax liabilities. After this time, the tax liability will not be enforceable and will be extinguished.

Enactment of this bill will have a positive result for both the state and taxpayers. Taxpayers should have notice of the last date the Tax Department can enforce the collection of tax liabilities. Pursuant to this proposal, twenty years after a tax warrant could be filed, the tax liability will be extinguished. Under current law, the limitation on enforcing tax collection is not certain, as the period to collect taxes is extended if the taxpayer acknowledges an indebtedness in writing, or makes a payment, including an involuntary payment, such as wage garnishments and bank levies. This proposal would give taxpayers more certainty in tax enforcement, as the time limit on enforcing tax collection will not be extended under these circumstances.

Enactment of this bill will help the Tax Department conserve resources, by eliminating the need to dedicate time and manpower to the collection of aged and difficult to collect accounts, while at the same time free the Department to shift those resources toward more productive uses. Similarly, the exactness of the 20-year time period during which tax warrants may be collected will eliminate the need to track acknowledgements, which can be very difficult.

The bill will apply to tax liabilities that could have been warranted before the bill takes effect. Thus, if the 20-year time limit was up at the time the bill takes effect, it would be extinguished and would not be enforceable as of that date. If the 20-year time limit is not up at the time the bill takes effect, then the tax liability could be collected and would not be extinguished until the balance of the 20-year period has expired.

Budget implications

It is estimated that this proposal would result in a negligible animal revenue loss beginning in State fiscal year 2011-12.

Effective date

The bill would take effect immediately upon enactment.