N.Y. Comp. Codes R. & Regs. tit. 20 § 2500.4

Current through Register Vol. 46, No. 45, November 2, 2024

Section 2500.4 - Definitions

Tax Law, § 25(a)(2)

For purposes of this Part, the following terms are defined as follows:

(a)Taxpayer.

(1) The term taxpayer means any person who is required to file a return or report under article 9, 9-A, 22, 32, or 33 of the Tax Law.

(2) As used in this Part, the term taxpayer includes:

(i) corporations subject to tax under section 183, 184, 185, or 186 of article 9 of the Tax Law and persons subject to tax under section 186-a or 186-e of article 9 of the Tax Law;

(ii) general business corporations subject to tax under article 9-A of the Tax Law;

(iii) individuals (including sole proprietors), partnerships (including a limited liability company [LLC] that is treated as a partnership for Federal income tax purposes), estates and trusts, partners in a partnership (including members of a LLC that is treated as a partnership for Federal income tax purposes), shareholders of an S corporation and beneficiaries of an estate or trust subject to tax or required to file a tax return under article 22 of the Tax Law;

(iv) banking corporations subject to tax under article 32 of the Tax Law; and

(v) insurance corporations and captive insurance companies subject to tax under article 33 of the Tax Law.

(3) The term taxpayer also includes each member of a combined group filing under article 9-A, 32, or 33 of the Tax Law. Each member must disclose its participation in a New York reportable transaction on a separate basis in the manner and form prescribed by the commissioner.

(b)Participation.

(1) New York listed transactions. A taxpayer has participated in a New York listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described by notice or other form of published guidance that lists the transaction under section 2500.3(b) of this Part. A taxpayer also has participated in a New York listed transaction if the taxpayer knows or has reason to know that the taxpayer's tax benefits are derived directly or indirectly from tax consequences or a tax strategy described by notice or other form of published guidance that lists a transaction under section 2500.3(b) of this Part. A published notice or other form of guidance may identify other types or classes of persons that will be treated as participants in a New York listed transaction.

(2) New York confidential transactions. A taxpayer has participated in a New York confidential transaction if the taxpayer's tax return reflects a tax benefit from the transaction and the taxpayer's disclosure of the tax treatment or tax structure of the transaction is limited in the manner described in section 2500.3(c) of this Part. If a partnership's, S corporation's or trust's disclosure is limited, and the partner's, shareholder's, or beneficiary's disclosure is not limited, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the New York confidential transaction.

(3) New York transactions with contractual protection. A taxpayer has participated in a New York transaction with contractual protection if the taxpayer's tax return reflects a tax benefit from the transaction and, as described in section 2500.3(d) of this Part, the taxpayer has the right to the full or partial refund of fees or the fees are contingent. If a partnership, S corporation, or trust has the right to a full or partial refund of fees or has a contingent fee arrangement, and the partner, shareholder, or beneficiary does not individually have the right to the refund of fees or a contingent fee arrangement, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the New York transaction with contractual protection.

(4) Shareholder of foreign corporation. A taxpayer who owns or controls, either directly or indirectly, more than 50 percent of the voting stock of a corporation not subject to New York State tax is deemed to participate in a transaction described in section 2500.3(b), (c) and (d) of this Part if such corporation would be considered to participate in the transaction under the rules of this section if it were a taxpayer filing a tax return that reflects the items from the transaction and the tax return of the controlling shareholder reflects a tax benefit from the transaction.

(5) Examples. The following examples illustrate the provisions of this subdivision:

(i) Example of participation in a New York confidential transaction. XYZ is a limited liability company treated as a partnership for New York State tax purposes and is required to file a tax return under article 22 of the Tax Law. X, Y, and Z are members of XYZ and are taxpayers for New York State purposes. X is an individual, Y is an S corporation, and Z is a partnership. XYZ enters into a New York confidential transaction under section2500.3(c) of this Part. X is bound by the confidentiality agreement, but Y and Z are not bound by the agreement. As a result of the transaction, XYZ, X, Y, and Z all reflect a tax benefit on their tax returns. Both XYZ's and X's disclosure of the tax treatment and tax structure are limited in the manner described in section 2500.3(c) of this Part and their tax returns reflect a tax benefit from the transaction. Therefore, XYZ and X have participated in the New York confidential transaction. Neither Y nor Z has participated in the New York confidential transaction because they are not subject to the confidentiality agreement.

(ii) Example of participation in a New York transaction with contractual protection. Corporation A is required to file a return under article 9-A of the Tax Law. Corporation A enters into a New York transaction with contractual protection under section 2500.3(d) of this Part. Corporation A is bound by the terms of the agreement which outlines potential tax consequences that may result from participation in the transaction, and includes a contingent fee arrangement based on Corporation A's realization of tax benefits. Corporation A has participated in the New York transaction with contractual protection because its tax return reflects a tax benefit from the transaction and the fee was contingent upon the tax benefit realized from the transaction. Therefore, Corporation A has participated in a New York transaction with contractual protection.

(c)Substantially similar.

The term substantially similar includes any transaction that is expected to obtain the same or similar types of tax consequences and that is either factually similar or based on the same or similar tax strategy. Receipt of any written advice regarding the tax consequences of the transaction is not relevant to the determination of whether the transaction is the same as or substantially similar to another transaction. Further, the term substantially similar must be broadly construed in favor of disclosure.

(d)Tax.

The term tax means franchise and excise taxes and the tax on furnishing of utility services under article 9, business corporation franchise tax under article 9-A, personal income tax under article 22, franchise tax on banking corporations under article 32, and franchise taxes on insurance corporations under article 33.

(e)Tax benefit.

A tax benefit includes deductions, exclusions, and modifications included in gross receipts, gross earnings, income (including entire net income, gross income, New York source income, New York adjusted gross income), gain, loss, assets, liabilities, total capital, capital stock, tax credits, nonrecognition of gain, status as an entity exempt from New York State taxation, and any other tax consequences that may reduce a taxpayer's New York State's tax liability by affecting the amount, timing, character, or source of any such item, amount or activity.

(f)Tax return.

For purposes of this Part, the term tax return includes original returns or reports, amended returns or reports and applications for credit or refund of tax.

(g)Tax treatment.

The tax treatment of a transaction is the purported or claimed New York State tax treatment of the transaction.

(h)Tax structure.

The tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed New York State tax treatment of the transaction.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 2500.4