Excise Tax Assessment? Taxpayers, Know Your Rights
Shanon, Milette, The CPA Journal
As the result of differences in the statutory language governing New York State and New York City income taxes (i.e., the State's Corporate Franchise Tax imposed under Article 9A, the City's General Corporation Tax or "GCT," the Unincorporated Business Tax or "UBT," and the personal income tax administered by the State under Article 22) and the State's and City's excise taxes (e.g., the Commercial Rent Tax, Real Property Transfer Tax, Liquor License Tax, Annual Vault Charge, Utility Tax), excise taxpayers may be unaware of several pitfalls which they face.
Excise taxpayers should be aware of the following discrepancies: 1. Most of the excise taxes have a statute of limitations for requesting refunds which is at least one year shorter than that applicable to income tax claims.
2. No interest accrues on New York City excise tax refunds, and 3. If an excise tax taxpayer does not make a formal protest of an excise tax deficiency within 90 days of receiving a Notice of Determination, in virtually all cases, the taxpayer loses any further right to appeal.
It is this third issue (Prong 3) that is discussed here. In an era when so many jurisdictions have promulgated taxpayer rights laws, prong three is unduly harsh. Nevertheless, the only body that can offer relief from the predicaments caused by this rule is the New York State Legislature.
As the recipient of a Notice of Determination (NOD) for an Article SA, Article 22, GCT, or UBT assessment, a taxpayer has the right to file a Petition for Hearing or a Request for Conciliation Conference within 90 days of receipt of the NOD. Should the taxpayer fail to take advantage of this opportunity, it may still rectify the mistake by paying the tax and filing a claim for refund. Since the city's Refund Unit is not equipped to evaluate audit issues, a Notice of Disallowance of Refund will generally be issued to the taxpayer. At this point, the taxpayer once again has 90 days to file a Petition for Hearing or a Request for Conciliation. Thus, a GCT or UBT taxpayer can ultimately recoup any erroneously paid tax even when the taxpayer has ignored its initial right to Petition.
However, a taxpayer who receives a Notice of Determination reflecting certain excise tax assessments and who fails to file a petition within ninety days of the NOD, does not have the same recourse as does an Article 9-A, Article 22, UBT, or GCT taxpayer. A regulatory example, 20 NYCRR 575.16(c), states: A person shall not be entitled to a refund of tax, interest, or penalty determined to be due pursuant to section 1411 of the tax law (i.e., the Real Estate Transfer Tax provision) where the person has had a hearing or an opportunity for a hearing or has failed to take advantage of the remedies provided.
Likewise, New York City Administrative Code Sec. 11-709(c) which addresses Commercial Rent Tax Refunds states as follows:
A person shall not be entitled to a refund or credit under this section of a tax, interest, or penalty, which had been determined to be due pursuant to the provisions of section 11-708 of this chapter (i.e., the Notice of Determination provision) where such person has had a hearing or an opportunity for a hearing, as provided in said section, or has failed to avail himself or herself of the remedies therein provided. No refund or credit shall be made of a tax, interest, or penalty paid after a determination by the Commissioner of Finance made pursuant to section 11-708 of this chapter unless it be found that such determination was erroneous, illegal, or unconstitutional, or otherwise improper, by the tax appeals tribunal after a hearing, or if such tax appeals tribunal affirms in whole or in part the determination of the Commissioner of Finance, in a proceeding under article seventyeight of the civil practice law and rules, pursuant to the provisions of said section, in which event refund or credit without interest shall be made of the tax, interest, or penalty found to have been overpaid (emphasis added). …