Suspends the income tax refund statute of limitations for individuals who are financially disabled

The bill would suspend (toll) the statute of limitations for an "individual taxpayer" who to file a claim for an income tax credit or refund during a period when an individual is unable to manage his or her financial affairs due to a severe physical or mental impairment ("financial disability").

Summary of provisions:

Section 1 of the bill would re-letter current subsection (k) of section 687 of the Tax Law to be subsection (l) and add a new subsection (k).

Proposed paragraph (1) of new subsection (k) would suspend the statute of limitations for an "individual taxpayer" to file a claim for a state or local income tax credit or refund during any period when that individual is "financially disabled?." An individual taxpayer is an individual who is subject to any State or local personal income tax or surcharge administered by the Commissioner of Taxation and Finance.

Proposed paragraph (2) of new subsection (k) provides that an individual taxpayer would be considered "financially disabled" if he or she is unable to manage his or her financial affairs by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. Proof of the existence of such impairment would be provided in the form and manner required by the Commissioner of Taxation and Finance.

Proposed paragraph (3) of new subsection (k) provides that an individual taxpayer would not be treated as financially disabled during any period that the individual's spouse or any other person is authorized to act on behalf of such individual in financial matters.

Section 2 of the bill provides that a similar new subdivision (k) would be added to section 11-1787 of the Administrative Code of the City of New York for purposes of the New York City personal income tax on residents.

Section 3 of the bill provides that it would take effect immediately, and apply to periods of financial disability commencing before, on, or after the date of enactment, but would not apply to any claim for credit or refund that without regard to this bill, would be barred by the operation of any law or rule of law (including res judicata) as of the date of enactment. Therefore, these provisions would not be applicable to claims for which the statute of limitations to file a claim for a credit or refund has expired, or where there has been a final decision on the merits of the claim as of the date of enactment.

Existing law:

This bill would amend the Tax Law and the Administrative Code of the City of New York to include provision's similar to section 6511(h) of the Internal Revenue Code. This would allow the statutory time period to file a claim for a credit or refund of state and local income taxes to be suspended (tolled) during a period when an individual taxpayer is "financially disabled" which is not currently permitted in New York.

Prior Legislative history:

This is a new proposal.

Statement in support:

In the United States Supreme Court case of US v Brockamp, 518 U.S. 347 (1997), the taxpayers were disabled by senility or alcoholism and failed to file timely federal refund claims. The Supreme Court rejected the argument that the refund statute of limitations in the Internal Revenue Code could be tolled for equitable reasons. The Internal Revenue Code was subsequently amended by adding a subsection (h) to section 6511 to allow for tolling of time for individual taxpayers to file a claim for credit or refund when they are unable to take care of their financial affairs because of a severe mental or physical impairment.

Because the New York personal income tax refund statute of limitations provisions in section 687 of the Tax Law (and the similar provisions in section 11-1787 of the Administrative Code of the City of New York) were not similarly amended to include the equitable tolling provisions of section 6511(h) of the Internal Revenue Code, the holding in the Brockamp case is still good law in New York. The New York refund statute of limitations provisions are among various income tax procedural provisions derived from comparable federal provisions in order to "avoid injustices resulting from differing Federal and State remedies where the substantive law is similar or identical." (Memorandum of State Department of Taxation and Finance for Chapter 1011 of the Laws of 1962.) Therefore, the New York refund statute of limitations provisions should be amended to include equitable tolling provisions similar to the federal provisions since it would be equitable for New York personal income taxpayers to be able to take advantage of the same equitable tolling provisions available to them on the federal level.

Budget implications:

It is estimated that this bill will result in a decrease of $750,000 in revenue for SFY 2013-14.

Local Impact:

None.

Effective Date:

The bill would take effect immediately.