N.Y. Comp. Codes R. & Regs. tit. 20 § 3-8.12

Current through Register Vol. 46, No. 25, June 18, 2024

Section 3-8.12 - Subsequent changes

(a) Any change in the amount of a corporation's UNOL must be made by the corporation or the department within the statute of limitations referenced in section 1083(a), determined with regard to an extension of such time period agreed to pursuant to section 1083(c)(2) and the extension of such time period allowed by section 1083(c)(12), for the report on which a PNOLC subtraction as computed in section 3-8.7 of this Subpart is first claimed by the corporation. Any Federal changes that are finalized after the statute of limitations described in the preceding sentence has expired will not be considered in the computation of the UNOL.

(b) Any change in the base year tax rate or base year BAP must be made within the statute of limitations referenced in section 1083(a) for the base year, determined with regard to an extension of such time period agreed to pursuant to section 1083(c)(2) and the extension of such time period allowed by section 1083(c)(12). Any Federal changes that are finalized after the statute of limitations described in the preceding sentence has expired will not be considered in the computation of the base year tax rate or base year BAP.

(c) Except as otherwise provided in this section, if it is determined by either the department or the corporation that an error was made in the calculation or application of the UNOL or the PNOLC subtraction in a tax year or tax years for which the statute of limitations referenced in section 1083(a), as determined with regard to an extension of such time period agreed to pursuant to section 1083(c)(2) and the extension of such time allowed by section 1083(c)(12), has expired, the corporation and the department shall be bound by the position taken by the corporation on the report or reports for such year or years as they pertain to the calculation of the UNOL and the PNOLC subtraction, and the PNOLC subtraction and the unused PNOLC subtraction carryforward shall be corrected for the taxable years for which the statute of limitations is still open and for future taxable years. In the first year in which such correction may be made, the amount of recomputed PNOLC subtraction pool shall be reduced by the amount of PNOLC subtraction that was used erroneously in the tax year or tax years for which the statute of limitations has expired. A new PNOLC subtraction allotment must be computed for the remaining years of the corporation's allotment method using the re-computed PNOLC subtraction pool, and any unused PNOLC subtraction carryforward from the tax year or tax years for which the statute of limitations has expired is disallowed.

(d) Examples.

Example 1: Taxpayer A files its 2014 report using a BAP of 15%. However, on its 2015 report, it computes its PNOLC subtraction using a base year BAP of 100%. Taxpayer A had a UNOL of $1,500,000 and a base year tax rate of 7.1%. It computed a PNOLC subtraction pool of $1,638, 461 and used the 10% allotment method in the determination of its PNOLC subtraction.

In 2015, Taxpayer A had a PNOLC subtraction of $100,000 and claimed a PNOLC subtraction carryforward of $63,846 (10% allotment of $163,846 - $100,000).

The department does not audit Taxpayer A's 2014 and 2015 reports and does not discover the discrepancy in the 2014 reported BAP and the base year BAP used in the PNOLC subtraction pool computation until it audits Taxpayer A's 2016 report in 2019, after the statute of limitations for the 2014 and 2015 tax years has expired. Taxpayer A is bound by the BAP it used on its 2014 report when computing the PNOLC subtraction pool. Thus, as part of the audit of the 2016 report, the department properly recomputes Taxpayer A's PNOLC subtraction pool using the 15% BAP Taxpayer claimed on its 2014 report. Accordingly, Taxpayer A's PNOLC subtraction pool should have been $245,769 ($1,500,000 x .15 x .071/.065). The re-computed PNOLC subtraction pool is reduced by the $100,000 used in 2015 to determine the remaining PNOLC subtraction pool of $145,769. Since Taxpayer A used the 10% allotment method and there are 9 remaining years of allotments to determine, the remaining PNOLC subtraction pool is divided by 9. The PNOLC subtraction allotment for 2016 and the next 8 tax years is $16,197. The PNOLC subtraction carryforward of $63,846 reported on its 2015 return is disallowed. As a result, Taxpayer A has a PNOLC subtraction available for use of $16,197 in the 2016 taxable year.

Example 2: On its 2014 report, Taxpayer B claims to be a qualified manufacturer and used a 0% tax rate for its entire net income base. However, on its 2015 report, it computed a PNOLC subtraction using a base year tax rate of 7.1% and the 10% allotment method. The department does not audit Taxpayer B's 2014 and 2015 reports and does not discover the discrepancy in the 2014 reported tax rate and the base year tax rate used in the PNOLC subtraction pool computation until it audits Taxpayer B's 2016 report in 2019, after the statute of limitations for the 2014 and 2015 tax years has expired. Taxpayer B is bound by the tax rate it used on its 2014 report and, as part of the 2016 audit, the department properly recomputes a PNOLC subtraction pool of $0 and denies the PNOLC subtraction in 2016. Taxpayer B is not entitled to use any PNOLC subtraction in future years.

Example 3: Same facts as Example 2, except that Taxpayer B is a small business taxpayer as defined in section 3-8.1(e)(1) of this Subpart and Taxpayer B used 100% of its PNOLC subtraction pool on its 2015 report. Because the statute of limitations for the 2015 tax year has expired, the department is bound by the taxpayer's actions in 2015 and cannot recoup the PNOLC subtraction the taxpayer used in 2015.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 3-8.12

Adopted New York State Register December 27, 2023/Volume XLV, Issue 52, eff. 12/27/2023