2023 New York Laws › TAX - Tax › Article 22 - Personal Income Tax › Part 6 - Procedure and Administration › 685 - Additions to Tax and Civil Penalties.

§  685. Additions to tax and civil penalties.--(a) (1) Failure to file
tax return.--
(A) In case of failure to file a tax return under this article  on  or
before  the  prescribed date (determined with regard to any extension of
time for filing), unless it  is  shown  that  such  failure  is  due  to
reasonable cause and not due to willful neglect, there shall be added to
the  amount  required  to be shown as tax on such return five percent of
the amount of such tax if the failure is for not more  than  one  month,
with  an  additional  five percent for each additional month or fraction
thereof during which such failure continues, not  exceeding  twenty-five
percent in the aggregate.
(B) In the case of a failure to file a return of tax within sixty days
of the date prescribed for filing of such return (determined with regard
to  any  extension  of  time  for  filing), unless it is shown that such
failure is due to reasonable cause and not due to willful  neglect,  the
addition  to  tax  under subparagraph (A) of this paragraph shall not be
less than the lesser of one hundred dollars or one  hundred  percent  of
the amount required to be shown as tax on such return.
(C)  For  purposes of this paragraph, the amount of tax required to be
shown on the return shall be reduced by the amount of any  part  of  the
tax  which  is  paid on or before the date prescribed for payment of the
tax and by the amount of any credit against the tax which may be claimed
upon the return.
(2) Failure to pay tax shown on return.--In case of failure to pay the
amounts shown as tax on any return  required  to  be  filed  under  this
article  on or before the prescribed date (determined with regard to any
extension of time for payment), unless it is shown that such failure  is
due  to  reasonable cause and not due to willful neglect, there shall be
added to the amount shown as tax on such return one-half of one per cent
of the amount of such tax if the failure is not for more than one month,
with an additional one-half of one per cent for each additional month or
fraction thereof during which  such  failure  continues,  not  exceeding
twenty-five  per cent in the aggregate. For the purpose of computing the
addition for any month, the amount of tax shown on the return  shall  be
reduced  by the amount of any part of the tax which is paid on or before
the beginning of such month and by the amount of any credit against  the
tax  which may be claimed upon the return. If the amount of tax required
to be shown on a return is less than the amount shown  as  tax  on  such
return,  this  paragraph  shall  be  applied  by substituting such lower
amount.
(3) Failure to pay tax required to be shown  on  return.--In  case  of
failure  to pay any amount in respect of any tax required to be shown on
a return required to be filed under this article which is not  so  shown
(including  an assessment made pursuant to subsection (a) of section six
hundred eighty-two of this article) within twenty-one calendar  days  of
the  date  of  a  notice  and  demand therefor (ten business days if the
amount for which such notice and demand is made equals  or  exceeds  one
hundred  thousand  dollars), unless it is shown that such failure is due
to reasonable cause and not due to willful neglect, there shall be added
to the amount of tax stated in such notice and demand  one-half  of  one
percent  of such tax if the failure is not for more than one month, with
an additional one-half of one  percent  for  each  additional  month  or
fraction  thereof  during  which  such  failure continues, not exceeding
twenty-five percent in the aggregate. For the purpose of  computing  the
addition  for  any  month,  the  amount  of tax stated in the notice and
demand shall be reduced by the amount of any part of the  tax  which  is
paid before the beginning of such month.
(4) Limitations on additions.--
(A)  With  respect  to  any  return,  the amount of the addition under
paragraph one of this subsection shall be reduced by the amount  of  the
addition  under  paragraph two of this subsection for any month to which
an addition applies under both paragraphs  one  and  two.  In  any  case
described  in  subparagraph (B) of such paragraph one, the amount of the
addition under such paragraph one shall not be reduced below the  amount
provided in such subparagraph.
(B)  With  respect  to  any return, the maximum amount of the addition
permitted under paragraph three of this subsection shall be  reduced  by
the  amount  of  the  addition  under  paragraph  one of this subsection
(determined without regard to subparagraph (B) of such paragraph)  which
is  attributable  to the tax for which the notice and demand is made and
which is not paid within ten days of such notice and demand.
(b) Deficiency due to negligence.--
(1) If any part of a deficiency is due to  negligence  or  intentional
disregard of this article or rules or regulations hereunder (but without
intent  to  defraud), there shall be added to the tax an amount equal to
five percent of the deficiency.
(2) There shall be added  to  the  tax  (in  addition  to  the  amount
determined  under  paragraph  one of this subsection) an amount equal to
fifty  percent  of  the  interest  payable  under  section  six  hundred
eighty-four with respect to the portion of the underpayment described in
such   paragraph   one  which  is  attributable  to  the  negligence  or
intentional disregard referred to in such paragraph one, for the  period
beginning  on  the  last  date  prescribed  by  law  for payment of such
underpayment (determined without regard to any extension) and ending  on
the  date  of the assessment of the tax (or, if earlier, the date of the
payment of the tax).
(3) If any payment is shown on a return made by a payor  with  respect
to  dividends,  patronage dividends and interest under subsection (a) of
section six thousand forty-two, subsection (a) of section  six  thousand
forty-four  or  subsection (a) of section six thousand forty-nine of the
internal revenue code, respectively, and the payee fails to include  any
portion  of  such payment in New York adjusted gross income, any portion
of an underpayment attributable to such failure shall  be  treated,  for
purposes  of  this  subsection,  as  due to negligence in the absence of
clear and convincing evidence to the contrary. If any penalty is imposed
under this subsection by reason of the preceding sentence, the amount of
the penalty imposed by paragraph one of this subsection  shall  be  five
percent  of the portion of the underpayment which is attributable to the
failure described in the preceding sentence.
(c) Failure by individual to pay estimated income tax.--
(1) Addition  to  the  tax.--Except  as  otherwise  provided  in  this
subsection  and  subsection  (d)  of  this  section,  in the case of any
underpayment of estimated tax by an individual, there shall be added  to
the  tax under this article for the taxable year an amount determined by
applying the underpayment  rate  established  under  subsection  (j)  of
section  six hundred ninety-seven of this part, or if no rate is set, at
the rate of seven and one-half percent per annum, to the amount  of  the
underpayment  for  the period of the underpayment. Such period shall run
from the due date for the required installment to  the  earlier  of  the
fifteenth  day  of  the  fourth month following the close of the taxable
year or, with respect to any portion of the underpayment,  the  date  on
which  such  portion  is  paid. For purposes of determining such date, a
payment of estimated tax  shall  be  credited  against  unpaid  required
installments  in the order in which such installments are required to be
paid. There shall be four required installments for each  taxable  year,

due  on  April fifteenth, June fifteenth and September fifteenth of such
taxable year and on January fifteenth of the following taxable year.
(2) Amount of underpayment.--For purposes of paragraph one, the amount
of the underpayment shall be the excess of the required installment over
the  amount,  if  any, of the installment paid on or before the due date
for the installment.
(3) Required installment. (A) Except as provided in paragraph four  of
this  subsection,  the  amount  of  any  required  installment  shall be
twenty-five percent of the required annual payment.
(B) The required annual payment is the lesser of
(i) ninety percent of the tax shown on the return for the taxable year
(or, if no return is filed, ninety percent of the tax for such year), or
(ii) one hundred percent of  the  tax  shown  on  the  return  of  the
individual  for  the  preceding taxable year. Provided, however, the tax
shown on such return for taxable years beginning  in  two  thousand  two
shall  be  the  tax  calculated  as  if such years began in two thousand
three. Provided further, however, that the tax shown on such return  for
taxable  years beginning in two thousand eight shall be calculated as if
paragraph three of subsection (f) of section six hundred fifteen of this
article has been in effect for taxable years beginning in  two  thousand
eight.  Further  provided  that the tax shown on such return for taxable
years beginning in two thousand eight shall be the tax calculated as  if
such  years  began in two thousand nine. Provided, however, that the tax
shown on such return for taxable years beginning in  two  thousand  nine
shall be calculated as if paragraph two of subsection (g) of section six
hundred  fifteen  of  this  article  was  in  effect  for  taxable years
beginning in two thousand nine and ending before two thousand thirteen.
Clause (ii) of this subparagraph shall  not  apply  if  the  preceding
taxable  year  was  not  a  taxable  year  of  twelve  months  or if the
individual did not file a return for such preceding taxable year.
(C) Limitation on use of preceding year's tax.
(i) General. If the New York adjusted gross income shown on the return
of the individual for the preceding taxable  year  exceeds  one  hundred
fifty  thousand  dollars,  clause  (ii)  of  subparagraph  (B)  of  this
paragraph shall be applied by substituting "one hundred ten percent" for
"one hundred percent".
(ii) Separate returns. In the case of a  husband  and  wife  who  file
separate  returns  pursuant  to  subsection  (b)  of section six hundred
fifty-one for the taxable year for which the amount of  the  installment
is being determined, clause (i) of this subparagraph shall be applied by
substituting  "seventy-five  thousand  dollars"  for  "one hundred fifty
thousand dollars".
(4) Annualized income installment.--(A) In general.--In  the  case  of
any  required  installment,  if  the  individual  establishes  that  the
annualized income installment determined under subparagraph (B) of  this
paragraph  is less than the amount determined under paragraph three, the
annualized income installment shall be  the  required  installment.  Any
reduction  in  a  required installment resulting from the application of
this subparagraph shall be recaptured by increasing the  amount  of  the
next required installment determined under paragraph three by the amount
of such reduction, and by increasing successive required installments as
necessary to effect full recapture.
(B)  Determination  of  annualized income installment.--In the case of
any required installment,  the  annualized  income  installment  is  the
excess,  if  any, of an amount equal to the applicable percentage of the
tax for the taxable year computed by placing on an annualized basis  the
taxable income for months in the taxable year ending before the due date
for  the  installment,  over  the aggregate amount of any prior required

installments for the taxable year. The applicable percentage of the  tax
shall  be  twenty-two  and  one-half  percent  in  the case of the first
installment, forty-five percent in the case of the  second  installment,
sixty-seven  and  one-half  percent in the case of the third installment
and ninety percent in the case of the fourth installment, and  shall  be
computed  without  regard to any increase in the rates applicable to the
taxable year unless such increase was enacted at least thirty days prior
to the due date of the installment.
(5) Definitions and special rules.--(A) Definition of the term tax and
application of credits against tax.--For purposes of this subsection and
subsection (d), the term "tax" means the tax imposed under this  article
minus the credits against tax allowed under this article, other than the
credit under section six hundred seventy-three, relating to tax withheld
on wages. The credit allowed under section six hundred seventy-three for
the  taxable  year  shall  be  deemed a payment of estimated tax, and an
equal part of such amount shall be deemed paid on each  installment  due
date for such taxable year, unless the taxpayer establishes the dates on
which  all  amounts were actually withheld, in which case the amounts so
withheld shall be deemed payments of estimated tax on the dates on which
such amounts were actually withheld.
(B)  Special  rule  where  return   filed   on   or   before   January
thirty-first.--If,  on  or  before January thirty-first of the following
taxable year, the taxpayer files a return for the taxable year and  pays
in  full  the amount computed on the return as payable, then no addition
to tax shall  be  imposed  under  paragraph  one  with  respect  to  any
underpayment of the fourth required installment for the taxable year.
(C)  Special  rules  for  farmers and fishermen.--For purposes of this
subsection, if an individual is a farmer or fisherman  for  any  taxable
year  there shall be only one required installment for the taxable year,
due on January fifteenth of the following  taxable  year  in  an  amount
equal to the required annual payment determined under paragraph three by
substituting  sixty-six  and  two-thirds  percent for ninety percent and
without  regard  to  subparagraph  (C)  of  paragraph  three   of   this
subsection.  Subparagraph  (B)  of  this  paragraph  shall be applied by
substituting March first for January thirty-first and  by  treating  the
required  installment  under  this  subparagraph  as the fourth required
installment. An individual is a farmer or fisherman for any taxable year
if the  individual's  federal  gross  income  from  farming  or  fishing
(including  oyster  farming) for the taxable year is at least two-thirds
of the total federal gross income from all sources for the taxable  year
or  if  such  individual's  federal gross income from farming or fishing
(including oyster farming) shown on the return of the individual for the
preceding taxable year is at least two-thirds of the total federal gross
income from all sources shown on such return.
(D) Fiscal years.--In applying  this  subsection  to  a  taxable  year
beginning  on  any  date  other  than  January  first,  there  shall  be
substituted, for the months specified in  this  subsection,  the  months
which correspond thereto.
(E)  Short  taxable year.--This subsection shall be applied to taxable
years  of  less  than  twelve  months  in  accordance  with  regulations
prescribed by the tax commission.
(F)  Joint  estimated tax of husband and wife.--A husband and wife may
make the required annual payment determined under paragraph three as  if
they  were one taxpayer, in which case the liability under paragraph one
with respect to the estimated tax shall be joint and  several.  No  such
joint  payment  may  be  made  if husband and wife are separated under a
decree of divorce or separate maintenance, or  if  they  have  different
taxable years. If a joint payment is made but husband and wife determine

their  taxes  under  this article separately, the estimated tax for such
year may be treated as the estimated tax of either husband or  wife,  or
may be divided between them, as they may elect.
(6)  Trusts  and  certain  estates. (A) General. This subsection shall
apply to any trust or estate except as provided in subparagraphs (B) and
(C) of this paragraph.
(B) Exception for estates and certain trusts.  This  subsection  shall
not  apply  with  respect to any taxable year ending before the date two
years after the date of the decedent's death to (i) the estate  of  such
decedent  or (ii) any trust all of which was treated (under subpart E of
part I of subchapter J of chapter one of the internal revenue  code)  as
owned  by the decedent and to which the residue of the decedent's estate
will pass under his will (or, if no will is admitted to  probate,  which
is  the trust primarily responsible for paying debts, taxes and expenses
of administration).
(C) Special rule for annualizations. In the  case  of  any  estate  or
trust,  subparagraph  (B)  of paragraph four of this subsection shall be
applied by substituting "ending before the date one month before the due
date for the installment" for  "ending  before  the  due  date  for  the
installment".
(D) In the case of a trust, the trustee may elect to treat any portion
of a payment of estimated tax made by such trust for any taxable year of
the  trust  as a payment made by a beneficiary of such trust. Any amount
so treated shall be treated as paid or credited to  the  beneficiary  on
the  last day of such taxable year, and for purposes of this subsection,
the amount so treated shall not be treated as a payment of estimated tax
made by the trust, but shall be treated as a payment  of  estimated  tax
made  by  such beneficiary on the January fifteenth following the end of
the trust's taxable year.
(E) An election under subparagraph (D) of this paragraph shall be made
on or before the sixty-fifth day after the close of the taxable year and
in  such  manner  as  the  commissioner  of  taxation  and  finance  may
prescribe.
(F)  Extension  to last year of estate.--In the case of a taxable year
reasonably expected to be the  last  taxable  year  of  an  estate,  any
reference  in  subparagraph  (D)  of  this paragraph to a trust shall be
treated as including a reference to an estate, and the fiduciary of  the
estate shall be treated as the trustee.
(d)  Exceptions to addition to tax for failure to pay estimated income
tax.--
(1) Where tax is small amount.--No addition to tax  shall  be  imposed
under subsection (c) for any taxable year if the tax shown on the return
for  such  taxable year (or, if no return is filed, the tax), reduced by
the credit allowable under section six hundred  seventy-three,  is  less
than three hundred dollars.
(2) Where no tax liability for preceding taxable year.--No addition to
tax  shall  be  imposed under subsection (c) for any taxable year if the
preceding taxable  year  was  a  taxable  year  of  twelve  months,  the
individual did not have any liability for tax under this article for the
preceding  taxable  year  and  throughout the preceding taxable year the
individual was a resident of this state or a  nonresident  or  part-year
resident who had New York source income.
(3)  Installment  due  on or after individual's death.--No addition to
tax  shall  be  imposed  under  subsection  (c)  with  respect  to   any
installment due on or after the individual's death.
(4)  Waiver  in  certain  cases.--(A)  In general.--No addition to tax
shall be imposed under subsection (c) with respect to  any  underpayment
to  the extent the tax commission determines that by reason of casualty,

disaster or other unusual circumstances the imposition of such  addition
to tax would be against equity and good conscience.
(B)  Newly  retired or disabled individuals.--No addition to tax shall
be imposed under subsection (c) with respect to any underpayment if  the
tax  commission  determines that in the taxable year for which estimated
payments were required to be made or in the taxable year preceding  such
taxable year the taxpayer retired after having attained age sixty-two or
became  disabled, and that such underpayment was due to reasonable cause
and not to willful neglect.
(e) Deficiency due to fraud.--(1) If any part of a deficiency  is  due
to  fraud,  there shall be added to the tax an amount equal to two times
the deficiency.
(2) The addition to tax under this subsection shall be in lieu of  any
other addition to tax imposed by subsection (a) or (b).
(3) In the case of a joint return under section six hundred fifty-one,
this  subsection  shall  not  apply  with respect to the tax of a spouse
unless some part of the underpayment is due to the fraud of such spouse.
(f) Non-willful failure to pay withholding  tax.--  If  any  employer,
without intent to evade or defeat any tax imposed by this article or the
payment  thereof,  shall fail to make a return and pay a tax withheld by
him at the time required by or  under  the  provisions  of  section  six
hundred  seventy-four,  such  employer  shall be liable for such tax and
shall pay the same together with interest thereon and  the  addition  to
tax  provided  in  subsection (a), and such interest and addition to tax
shall not be charged to or collected from the employee by the  employer.
The  tax  commission  shall  have  the  same  rights  and powers for the
collection of such tax,  interest  and  addition  to  tax  against  such
employer as are now prescribed by this article for the collection of tax
against an individual taxpayer.
(g) Willful failure to collect and pay over tax.-- Any person required
to collect, truthfully account for, and pay over the tax imposed by this
article  who  willfully  fails to collect such tax or truthfully account
for and pay over such tax or willfully attempts in any manner  to  evade
or  defeat  the  tax or the payment thereof, shall, in addition to other
penalties provided by law, be liable to a penalty equal to  the  sum  of
(i)  the  total  amount  of  the  tax  evaded,  or not collected, or not
accounted for and paid over, and (ii) the interest that has  accrued  on
the total amount of tax evaded on the date this penalty is first imposed
until  this  penalty  is  paid with interest thereon. No addition to tax
under subsections (b) or (e) of this section shall be  imposed  for  any
offense  to which this subsection applies. The tax commission shall have
the power, in its discretion, to waive, reduce or compromise any penalty
under this subsection.
(h) Failure to file  certain  information  returns.--  (1)  Except  as
otherwise  provided in this paragraph, in case of each failure to file a
statement of a payment to another person, required  under  authority  of
subsection   (d)   of  section  six  hundred  fifty-eight  (relating  to
information at source) on the date prescribed therefor (determined  with
regard  to  any  extension  of time for filing), unless it is shown that
such failure is due to reasonable cause  and  not  to  willful  neglect,
there  shall, upon notice and demand by the commissioner and in the same
manner as tax, be paid by the person so failing to file the statement, a
penalty of fifty dollars for each statement not so filed, but the  total
amount imposed on the delinquent person for all such failures during any
calendar year shall not exceed ten thousand dollars.
(2)  If  any  partnership,  S corporation, or trust required to file a
return or report under subsection (c) or subsection (f) of  section  six
hundred  fifty-eight  or  under  section  six hundred fifty-nine of this

article for any taxable year fails to file such return or report at  the
time  prescribed  therefor  (determined  with regard to any extension of
time for filing), or files a return or report which fails  to  show  the
information  required  under  such subsection (c) or section six hundred
fifty-nine of this article, unless it is shown that such failure is  due
to  reasonable  cause  and not due to willful neglect, there shall, upon
notice and demand by the commissioner and in the same manner as tax,  be
paid  by  the  partnership or S corporation a penalty for each month (or
fraction thereof) during which such failure continues (but not to exceed
five months). The amount of such penalty for any month is the product of
fifty dollars, multiplied by the number of partners in  the  partnership
or shareholders in the S corporation during any part of the taxable year
who  were  subject  to  tax  under  this article during any part of such
taxable year, except that, in the case of a trust, the penalty shall  be
equal  to  one  hundred fifty dollars a month up to a maximum of fifteen
hundred dollars per taxable year.
(i) Additional penalty.--Any person who with fraudulent  intent  shall
fail  to  pay,  or  to  deduct or withhold and pay, any tax, or to make,
render, sign or certify any return, or to supply any information  within
the  time  required by or under this article, shall be liable to penalty
of not more than one thousand dollars, in addition to any other  amounts
required  under  this  article, to be imposed, assessed and collected by
the tax commission. The tax commission shall  have  the  power,  in  its
discretion,  to  waive,  reduce  or  compromise  any  penalty under this
subsection.
(j) Fraudulent statement or failure to furnish statement to  employee.
--  In  addition  to  any criminal penalties provided by law, any person
required under the provisions of  section  six  hundred  seventy-two  to
furnish  a  statement  to an employee, who wilfully furnishes a false or
fraudulent statement, or who wilfully fails to furnish  a  statement  in
the  manner,  at  the  time,  and showing the information required under
section six hundred seventy-two, or regulations  prescribed  thereunder,
shall  for  each such failure be subject to a penalty under this article
of fifty dollars.
(k) Failure to supply identifying numbers. -- If  any  person  who  is
required  by  regulations prescribed under subsection (b) of section six
hundred fifty-eight
(1) to include his identifying number in  any  return,  statement,  or
other document;
(2) to furnish his identifying number to another person; or
(3)  to  include  in any return, statement or other document made with
respect to another person the identifying number of such  other  person,
fails  to  comply  with  such requirement at the time prescribed by such
regulations, such person shall, unless it is shown that such failure  is
due to reasonable cause and not due to willful neglect, pay a penalty of
five  dollars  for  each such failure described in paragraph one of this
subsection  and  fifty  dollars  for  each  such  failure  described  in
paragraphs  two  and  three  of  this  subsection, except that the total
amount imposed on such person for all such failures during any  calendar
year  shall  not exceed ten thousand dollars; except that for failure to
include his own identification number in any return, statement or  other
document,  such  penalty  shall  not be imposed unless such person shall
have failed to supply his identification number to  the  tax  commission
within thirty days after demand therefor.
(l)  Additions  treated  as tax. -- The additions to tax and penalties
provided by this section shall be paid upon notice and demand and  shall
be  assessed,  collected  and  paid in the same manner as taxes, and any
reference in this article to income tax or tax imposed by this  article,

shall  be  deemed  also  to  refer to the additions to tax and penalties
provided  by  this  section.  For  purposes  of  section   six   hundred
eighty-one, this subsection shall not apply to --
(1) any addition to tax under subsection (a) except as to that portion
attributable to a deficiency;
(2) any addition to tax under subsection (c);
(3)  any penalty under subsection (h) and any additional penalty under
subsection (i); and
(4) any penalties under subsections (j), (k), (q), (r), (s), (u),  (v)
and (w).
(m)  Determination  of  deficiency. -- For purposes of subsections (b)
and (e), the amount shown as the tax by the  taxpayer  upon  his  return
shall  be taken into account in determining the amount of the deficiency
only if such return was filed on or before the last day  prescribed  for
the  filing  of  such return, determined with regard to any extension of
time for such filing.
(n) Person defined. For purposes of subsections (g), (i), (o), (q) and
(r), the term person includes an individual, corporation, partnership or
limited liability company or an officer or employee of  any  corporation
(including  a  dissolved  corporation),  or  a member or employee of any
partnership, or a member, manager or employee  of  a  limited  liability
company,  who  as  such  officer, employee, manager or member is under a
duty to perform the act in respect of which the violation occurs.
(o) Failure to make deposits of taxes. -- In case of  failure  by  any
person required by this article, or by regulations of the tax commission
under  this  article,  to  deposit  on  the date prescribed therefor any
amount of tax  imposed  by  this  article  in  a  depository  authorized
pursuant  to  subsection  (a)  of section six hundred ninety-two of this
article to receive such deposits, unless it is shown that  such  failure
is  due  to reasonable cause and not due to willful neglect, there shall
be imposed on such person a penalty of five per cent of  the  amount  of
the   underpayment.   For   purposes   of   this   subsection  the  term
"underpayment" means the excess of the amount of the tax required to  be
so  deposited  over  the amount, if any, thereof, deposited on or before
the date prescribed therefor.
* (p) Substantial understatement of liability.-- (1)  If  there  is  a
substantial  understatement  of  income  tax for any taxable year, there
shall be added to the tax an amount equal to ten percent of  the  amount
of any underpayment attributable to such understatement. For purposes of
this subsection, there is a substantial understatement of income tax for
any  taxable  year  if  the amount of the understatement for the taxable
year exceeds the greater of ten percent of the tax required to be  shown
on  the  return  for  the  taxable  year,  or  two thousand dollars. For
purposes of the preceding sentence, the term "understatement" means  the
excess  of  the amount of the tax required to be shown on the return for
the taxable year, over the amount of tax imposed which is shown  on  the
return  reduced  by  any rebate (within the meaning of subsection (g) of
section six hundred eighty-one). The excess under the preceding sentence
shall be determined without regard to items to which subsection (p-1) of
this section applies. The commissioner may waive all or any part of  the
addition to tax provided by this subsection on a showing by the taxpayer
that there was reasonable cause for the understatement, or part thereof,
and that the taxpayer acted in good faith.
(2)  The  amount  of  the  understatement under paragraph (1) shall be
reduced by that portion of the understatement which is  attributable  to
(A)  the  tax  treatment  of any item by the taxpayer if there is or was
substantial authority for  such  treatment,  or  (B)  any  item  if  the

relevant  facts  affecting  the  item's  tax  treatment  are  adequately
disclosed in the return or in a statement attached to the return.
(3)(A)  Subparagraph (B) of paragraph two of this subsection shall not
apply to any item attributable to a tax shelter.
(B) For purposes of this paragraph, the term "tax shelter" means
(i) a partnership or other entity,
(ii) any investment plan or arrangement, or
(iii) any other plan or arrangement,
if  a  significant  purpose  of  such  partnership,  entity,  plan,   or
arrangement is the avoidance or evasion of tax.
* NB Effective until July 1, 2029
* (p)   Substantial   understatement  of  liability.--If  there  is  a
substantial understatement of income tax for  any  taxable  year,  there
shall  be  added to the tax an amount equal to ten percent of the amount
of any underpayment attributable to such understatement. For purposes of
this subsection, there is a substantial understatement of income tax for
any taxable year if the amount of the  understatement  for  the  taxable
year  exceeds the greater of ten percent of the tax required to be shown
on the return for  the  taxable  year,  or  two  thousand  dollars.  For
purposes  of the preceding sentence, the term "understatement" means the
excess of the amount of the tax required to be shown on the  return  for
the  taxable  year, over the amount of tax imposed which is shown on the
return reduced by any rebate (within the meaning of  subsection  (g)  of
section six hundred eighty-one). The amount of such understatement shall
be  reduced  by that portion of the understatement which is attributable
to the tax treatment of any item by the taxpayer  if  there  is  or  was
substantial  authority  for  such treatment, or any item with respect to
which  the  relevant  facts  affecting  the  item's  tax  treatment  are
adequately  disclosed  in  the  return or in a statement attached to the
return. The tax commission may waive all or any part of the addition  to
tax  provided by this subsection on a showing by the taxpayer that there
was reasonable cause for the understatement, or part thereof,  and  that
the taxpayer acted in good faith.
* NB Effective July 1, 2029
* (p-1) Reportable transaction understatement.-- (1) If a taxpayer has
a  reportable  transaction  understatement  for  any taxable year, there
shall be added to the tax an amount  equal  to  twenty  percent  of  the
amount of such understatement.
(2)  For  purposes  of  this section, the term "reportable transaction
understatement" means the sum of:
(A) the product of--
(i) the amount of the increase (if any) in  the  applicable  tax  base
which  results  from a difference between the proper tax treatment of an
item to which this section applies and the taxpayer's treatment of  such
item (as shown on the taxpayer's return of tax), and
(ii) the highest rate of tax imposed by this article, and
(B)  the  amount  of  the decrease (if any) in the aggregate amount of
credits determined under this article which results  from  a  difference
between  the  taxpayer's  treatment  of  an  item  to which this section
applies (as shown on the taxpayer's return of tax) and  the  proper  tax
treatment of such item.
For  purposes  of subparagraph (A) of this paragraph, any reduction of
the excess of deductions allowed for the taxable year over gross  income
for  such  year, and any reduction in the amount of capital losses which
would (without regard to section one thousand two hundred eleven of  the
internal  revenue code) be allowed for such year, shall be treated as an
increase in the applicable tax base.
(3) This subsection shall apply to any item which is attributable to--
(A) any listed transaction, and
(B)  any reportable transaction (other than a listed transaction) if a
significant purpose of such transaction is the avoidance or  evasion  of
tax.
(4)  Paragraph one of this subsection shall be applied by substituting
"thirty percent" for "twenty percent" with respect to the portion of any
reportable  transaction  understatement  with  respect  to   which   the
requirement  of  clause (i) of subparagraph (B) of paragraph ten of this
subsection is not met.
(5)  For  purposes  of  this   subsection,   the   terms   "reportable
transaction"  and  "listed  transaction" have the meanings given to such
terms by section twenty-five  of  this  chapter,  the  term  "reportable
transaction"  shall  include  a  "New  York  reportable  transaction" as
defined in such section twenty-five, and the term  "listed  transaction"
shall  include any transaction designated as a tax avoidance transaction
pursuant to such section twenty-five.
(6) In the case of an understatement (as defined in subsection (p)  of
this section):
(A)  the  amount  of such understatement (determined without regard to
this paragraph) shall be increased by the aggregate amount of reportable
transaction understatements for purposes  of  determining  whether  such
understatement  is  a substantial understatement under subsection (p) of
this section, and (B) the addition to tax under subsection (p)  of  this
section  shall apply only to the excess of the amount of the substantial
understatement (if any) after the application of this subparagraph  over
the aggregate amount of reportable transaction understatements.
(7)  References  to  an understatement (or a deficiency) in subsection
(e) of this section shall  be  treated  as  including  references  to  a
reportable transaction understatement.
(8)   This   subsection   shall  not  apply  to  any  portion  of  any
understatement on which a penalty is imposed  under  subsection  (e)  of
this section.
(9)  Except as provided in regulations prescribed by the commissioner,
in no event shall any  tax  treatment  included  with  an  amendment  or
supplement  to  a return of tax be taken into account in determining the
amount of any reportable transaction understatement if the amendment  or
supplement  is filed after the earlier of the date the taxpayer is first
contacted by the commissioner regarding the examination of the return or
such other date as is specified by the commissioner.
(10)(A) No penalty shall be imposed under this subsection with respect
to any portion of a reportable transaction understatement if it is shown
that there was a reasonable cause for such portion and that the taxpayer
acted in good faith with respect to such portion.
(B) Subparagraph  (A)  of  this  paragraph  shall  not  apply  to  any
reportable transaction understatement unless
(i)  the  relevant  facts  affecting the tax treatment of the item are
adequately disclosed in accordance  with  section  twenty-five  of  this
chapter,
(ii) there is or was substantial authority for such treatment, and
(iii)  the  taxpayer  reasonably believed that such treatment was more
likely than not the proper treatment.
A taxpayer failing to adequately disclose  in  accordance  with  section
twenty-five of this chapter shall be treated as meeting the requirements
of  clause  (i) of this subparagraph if the penalty for such failure was
rescinded under subsection (x) of this section.
(11)(A) A taxpayer shall be treated as having a reasonable belief with
respect to the tax treatment of an item only if such belief
(i) is based on the facts and law that exist at the  time  the  return
which includes such tax treatment is filed, and
(ii) relates solely to the taxpayer's chances of success on the merits
of  such treatment and does not take into account the possibility that a
return will not be audited, such treatment will not be raised on  audit,
or such treatment will be resolved through settlement if it is raised.
(B)(i) An opinion of a tax advisor may not be relied upon to establish
the reasonable belief of a taxpayer if
(I)  the tax advisor is described in clause (ii) of this subparagraph,
or
(II) the opinion is described in clause (iii) of this subparagraph.
(ii) A tax advisor is described in this clause if the tax advisor
(I) is a material advisor (within the meaning of section six  thousand
one  hundred  eleven of the internal revenue code or within such meaning
as it also applies to a New York reportable transaction  as  defined  in
section   twenty-five   of   this   chapter)  and  participates  in  the
organization, management, promotion, or sale of the  transaction  or  is
related  (within  the  meaning  of subsection (b) of section two hundred
sixty-seven of the internal revenue code or subsection  (b)  of  section
seven  hundred  seven of the internal revenue code) to any person who so
participates,
(II) is compensated directly or indirectly by a material advisor  with
respect to the transaction,
(III)  has  a fee arrangement with respect to the transaction which is
contingent on all  or  part  of  the  intended  tax  benefits  from  the
transaction being sustained, or
(IV)  has  a  disqualifying  financial  interest  with  respect to the
transaction.
(iii) For purposes of clause (i) of this subparagraph, an  opinion  is
disqualified if the opinion
(I)  is  based on unreasonable factual or legal assumptions (including
assumptions as to future events),
(II) unreasonably relies on representations, statements, findings,  or
agreements of the taxpayer or any other person,
(III) does not identify and consider all relevant facts, or
(IV)  fails  to  meet  any  other  requirement as the commissioner may
prescribe.
* NB Repealed July 1, 2029
(p-2) No penalty will be imposed pursuant to subsection (c) or (p)  of
this section for a taxable year beginning on or after January first, two
thousand  eight  and  before  January first, two thousand nine resulting
from the denial of an empire zone tax credit  claimed  by  the  taxpayer
because  an empire zone retention certificate was not issued pursuant to
subdivision (w) of  section  nine  hundred  fifty-nine  of  the  general
municipal  law  to the empire zone enterprise which is the basis for the
tax credit or credits claimed on the return.
(q) Frivolous tax returns and specified frivolous  submissions.--  (1)
If  any individual files what purports to be a return of any tax imposed
by this article but which does not  contain  information  on  which  the
substantial  correctness  of  the  self-assessment  may  be  judged,  or
contains information that on its face indicates that the self-assessment
is substantially incorrect; and such conduct is due to a position  which
is  frivolous,  including  a  position  identified  as  frivolous  under
paragraph three of this subsection, or an intent to delay or impede  the
administration of this article, then such individual shall pay a penalty
not  exceeding  five thousand dollars. This penalty shall be in addition
to any other penalty provided by law.
(2) Penalty for specified frivolous submissions. (A)  Any  person  who
submits  a  specified  frivolous  submission shall pay a penalty of five
thousand dollars. This penalty shall be in addition to any other penalty
provided by law.
(B)  The  term  "specified  frivolous  submission"  means  a specified
submission if any portion of that submission (i) is based on a  position
that  the commissioner has identified as frivolous under paragraph three
of this subdivision, or (ii) reflects a desire to delay  or  impede  the
administration of this chapter.
(C)  The  term "specified submission" means a request for conciliation
conference, a petition to the division of tax  appeals,  an  application
for an installment payment agreement, or an offer in compromise.
(D)  If  the  commissioner  provides  an individual with notice that a
submission is a specified frivolous submission and that person withdraws
the submission within thirty days after such notice, the penalty imposed
under this paragraph will not apply with respect to that submission.
(3) Listing of frivolous positions. The  commissioner  will  prescribe
(and  periodically revise) a list of positions that the commissioner has
identified as frivolous for purposes of this subsection.
(4) Reduction of penalty. The commissioner may reduce  the  amount  of
any  penalty  imposed  under this section if the commissioner determines
that such a reduction would promote compliance with  and  administration
of this chapter.
(r)  Aiding or assisting in the giving of fraudulent returns, reports,
statements or other documents.--(1) Any person who, with the intent that
tax be evaded, shall, for a fee or other compensation or as an  incident
to  the  performance  of  other  services for which such person receives
compensation, aid or assist in,  or  procure,  counsel,  or  advise  the
preparation  or  presentation  under,  or  in connection with any matter
arising under this article of any return, report, declaration, statement
or other document which is  fraudulent  or  false  as  to  any  material
matter,  or  supply  any false or fraudulent information, whether or not
such falsity or fraud is with the knowledge or  consent  of  the  person
authorized  or  required  to  present  such return, report, declaration,
statement or other document shall  pay  a  penalty  not  exceeding  five
thousand dollars.
(2)  For  purposes  of  paragraph  one  of  this  subsection, the term
"procures" includes ordering (or otherwise causing) a subordinate to  do
an  act, and knowing of, and not attempting to prevent, participation by
a subordinate in an act. The term "subordinate" means any  other  person
(whether  or not a director, officer, employee, or agent of the taxpayer
involved) over whose activities the person has  direction,  supervision,
or control.
(3)  For  purposes  of  paragraph  one  of  this  subsection, a person
furnishing typing, reproducing,  or  other  mechanical  assistance  with
respect  to  a document shall not be treated as having aided or assisted
in the preparation of such document by reason of such assistance.
(4) The penalty imposed by this subsection shall be in addition to any
other penalty provided by law.
(s) False information with respect to withholding.--In addition to any
criminal penalty provided by law, if any individual  makes  a  statement
under section six hundred seventy-one which results in a decrease in the
amounts deducted and withheld under part five of this article, and as of
the time such statement was made, there was no reasonable basis for such
statement,  such  individual shall pay a penalty of five hundred dollars
for such statement. The tax commission shall waive the  penalty  imposed
under  this  subsection  if  the  taxes  imposed  with  respect  to  the
individual under this article for the taxable year are equal to or  less

than  the sum of the credits against such taxes allowed by this article,
and the payments of estimated  tax  which  are  considered  payments  on
account of such taxes.
(t)  Unwarranted  reduction  in  utility  costs  in an empire zone. If
during a taxable year a taxpayer has received a reduction  in  the  rate
charged  for gas, electric, steam or water sold, or gas, electric, steam
or water service rendered, pursuant to subdivision eight of section  one
hundred  eighty-six-a  of this chapter, based upon a certification as to
the claiming of a credit under subsection (k) of section six hundred six
of this article, and it is finally determined that such taxpayer is  not
entitled  to such credit in any part, such taxpayer shall be liable to a
penalty in an amount equal to such reduction in cost, with interest from
the last day of such year, at the rate applicable  to  underpayments  of
tax  pursuant  to this article. The tax commission shall have the power,
in its discretion, to waive, reduce or compromise such penalty.
(u)  Failure  of  tax  return   preparer   to   conform   to   certain
requirements.--(1)  Failure to sign return or claim for refund. If a tax
return preparer who is required pursuant to paragraph one of  subsection
(g)  of section six hundred fifty-eight of this article to sign a return
or claim for refund fails to comply with such requirement  with  respect
to  such  return  or  claim for refund, the tax return preparer shall be
subject to a penalty of two hundred fifty dollars for each such  failure
to sign, unless it is shown that such failure is due to reasonable cause
and  not  due to willful neglect. The maximum penalty imposed under this
paragraph on any tax return  preparer  with  respect  to  returns  filed
during  any calendar year by the tax return preparer must not exceed ten
thousand dollars. Provided, however, that if a tax return  preparer  has
been  penalized  under  this paragraph for a preceding calendar year and
again fails to sign his or her name on any return that requires the  tax
return  preparer's signature during a subsequent calendar year, then the
penalty under this paragraph for  each  failure  will  be  five  hundred
dollars, and no annual cap will apply. This paragraph shall not apply if
the   penalty  under  paragraph  three  of  subsection  (g)  of  section
thirty-two of this chapter is imposed on the tax  return  preparer  with
respect to such return or claim for refund.
(2)  Failure  to  furnish identifying number. If a tax return preparer
fails to include any identifying number required to be included  on  any
return  or  claim for refund pursuant to paragraph two of subsection (g)
of section six hundred fifty-eight  of  this  article,  the  tax  return
preparer  shall  be subject to a penalty of one hundred dollars for each
such failure, unless it is shown that such failure is due to  reasonable
cause  and  not  willful neglect. The maximum penalty imposed under this
paragraph on any tax return  preparer  with  respect  to  returns  filed
during  any  calendar  year  must  not  exceed two thousand five hundred
dollars; provided, however, that if  a  tax  return  preparer  has  been
penalized  under  this paragraph for a preceding calendar year and again
fails to include the identifying number on one or more returns during  a
subsequent calendar year, then the penalty under this paragraph for each
failure will be two hundred fifty dollars, and no annual cap will apply.
this  paragraph  shall  not apply if the penalty under paragraph four of
subsection (g) of section thirty-two of this chapter is imposed  on  the
tax return preparer with respect to such return or claim for refund.
(3)  Failure  to  furnish  copy  to  taxpayer. Any person who is a tax
return preparer with respect to any return or claim for refund,  who  is
required  under paragraph three of subsection (g) of section six hundred
fifty-eight of this article to furnish a copy of such  return  or  claim
for  refund to the taxpayer, and who fails to comply with such provision
with respect to such return or claim for refund, shall be subject  to  a

penalty  of fifty dollars for each such failure, unless it is shown that
such failure is due to reasonable cause and not due to willful  neglect.
The  maximum  penalty  imposed  under  this paragraph on any person with
respect  to  returns or claims for refund filed during any calendar year
shall not exceed twenty-five thousand dollars.
(4) Failure to retain copy or list. Any person who  is  a  tax  return
preparer with respect to any return or claim for refund, who is required
under   paragraph   four  of  subsection  (g)  of  section  six  hundred
fifty-eight of this article to: (i) retain a  copy  of  such  return  or
claim  for  refund or retain on a list the name and taxpayer identifying
number of the taxpayer for whom such return  or  claim  for  refund  was
prepared  and  (ii) make such copy or list available for inspection upon
request by the commissioner, and who fails to comply with the  retention
requirement  or who complies with the retention requirement but fails to
comply with such request by the commissioner,  shall  be  subject  to  a
penalty  of fifty dollars for each such failure, unless it is shown that
such failure is due to reasonable cause and not due to willful  neglect.
The  maximum  penalty  imposed  under  this paragraph on any person with
respect to any calendar  year  shall  not  exceed  twenty-five  thousand
dollars.
* (5)  Failure  to  electronically  file.  If a tax return preparer is
required to file returns electronically pursuant  to  paragraph  ten  of
subsection  (g)  of section six hundred fifty-eight of this article, and
such preparer fails to file one or more of such returns  electronically,
then  such  preparer  shall be subject to a penalty of fifty dollars for
each such failure to electronically file a return, unless  it  is  shown
that  such  failure  is  due  to reasonable cause and not due to willful
neglect.
* NB Effective January 1, 2030
(6) For purposes of this subsection, the term  "tax  return  preparer"
shall  have  the same meaning as defined in paragraph five of subsection
(g) of section six hundred fifty-eight of this article.
(v) Failure to perform certain acts  with  respect  to  the  quarterly
combined  withholding, wage reporting and unemployment insurance return.
(1) Failure to file. (A) Delinquency. (i) General. If an employer  fails
to   file   a   quarterly   combined  withholding,  wage  reporting  and
unemployment insurance return, or any portion thereof,  as  required  by
paragraph  four of subsection (a) of section six hundred seventy-four of
this article, then such employer shall, unless it  is  shown  that  such
failure is due to reasonable cause and not due to willful neglect, pay a
penalty  equal  to the greater of one thousand dollars or the product of
fifty dollars multiplied by the number of employees shown  on  the  last
quarterly   combined   withholding,   wage  reporting  and  unemployment
insurance return filed by such employer, or if no such return  has  been
filed, the number of employees may be estimated by the commissioner from
any  information  in  the commissioner's possession. The total amount of
the penalty imposed by this clause on an employer for any  such  failure
shall not exceed ten thousand dollars.
(ii)  Coordination  of delinquency penalty with other additions to tax
and penalties for failure to  file.  Except  as  otherwise  provided  in
subparagraph  (C)  of  this  paragraph,  an employer failing to file the
quarterly  combined  withholding,  wage   reporting   and   unemployment
insurance  return,  or any portion thereof, shall only be liable for the
penalty prescribed by this subparagraph;  such  employer  shall  not  be
liable for the addition to tax prescribed by paragraph one of subsection
(a)  of  this  section or for the penalty prescribed by paragraph (b) of
subdivision two of section five hundred eighty-one of the labor law.
(B) Late filing. (i) Within thirty days  of  notice.  If  an  employer
fails  to  file  a  quarterly  combined  withholding, wage reporting and
unemployment insurance return, or any portion thereof, by the  due  date
prescribed  by  paragraph  four of subsection (a) of section six hundred
seventy-four  of this article, but files such return or any such portion
thereof within thirty days after the date the department sends notice of
such failure to such  employer  by  certified  mail,  then  the  penalty
prescribed  by  subparagraph  (A)  of this paragraph shall be abated. In
addition, such employer shall not be liable  for  the  addition  to  tax
prescribed  by  paragraph  one of subsection (a) of this section and the
penalty prescribed by paragraph (b) of subdivision two of  section  five
hundred  eighty-one  of  the labor law. Provided, however, such employer
shall remain liable  for  the  other  additions  to  tax  prescribed  by
subsection  (a)  of this section, if applicable. Provided, further, that
where such employer fails to  file  such  return  or  any  such  portion
thereof  by  the due date prescribed by paragraph four of subsection (a)
of section six hundred seventy-four of this article but  is  not  liable
for  the  penalty  prescribed  by subparagraph (A) of this paragraph for
such failure because such employer complied with the provisions of  this
clause  or  clause  (iii)  of  this  subparagraph, and where within four
successive calendar quarters of such initial  failure  to  file  by  the
prescribed  due  date,  such employer again fails to file such return or
portion thereof by such due date, then the  provisions  of  this  clause
relating  to  abatement and non-imposition of other additions to tax and
penalties for failure to file shall not apply to any such failure within
such four successive calendar quarters. In such a case, if such employer
files such return or portion thereof within thirty days after  the  date
the  department  sends  notice of such second failure by certified mail,
such employer shall be liable for a penalty equal to the lesser  of  the
product  of fifty dollars multiplied by the number of employees actually
shown on such employer's late filed quarterly combined withholding, wage
reporting and unemployment insurance  return,  but  not  less  than  one
thousand  dollars  nor more than ten thousand dollars, or the sum of the
addition to tax prescribed by paragraph one of subsection  (a)  of  this
section  and  the penalty prescribed by paragraph (b) of subdivision two
of section five hundred eighty-one of the labor law.
(ii) After thirty days of notice. If  an  employer  fails  to  file  a
quarterly   combined   withholding,   wage  reporting  and  unemployment
insurance return, or any portion thereof, by the due date prescribed  by
paragraph  four of subsection (a) of section six hundred seventy-four of
this article, but files such return or any  such  portion  thereof  more
than  thirty  days  after  the  date the department sends notice of such
failure to file to such employer by certified mail, then  such  employer
shall  be  liable  for  a penalty equal to the greater of the product of
fifty dollars multiplied by the number of employees  actually  shown  on
such   employer's   late  filed  quarterly  combined  withholding,  wage
reporting and unemployment insurance  return,  but  not  less  than  one
thousand  dollars  nor more than ten thousand dollars, or the sum of the
addition to tax prescribed by paragraph one of subsection  (a)  of  this
section  and  the penalty prescribed by paragraph (b) of subdivision two
of section five hundred eighty-one of the labor law.
(iii) Late filing prior to notice. If an  employer  fails  to  file  a
quarterly   combined   withholding,   wage  reporting  and  unemployment
insurance return, or portion thereof, by  the  due  date  prescribed  by
paragraph  four of subsection (a) of section six hundred seventy-four of
this article but files such return or any such  portion  thereof  before
the  department  sends notice of such failure to file by certified mail,
then the penalty prescribed by subparagraph (A) of this paragraph  shall

not  be  imposed. In addition, such employer shall not be liable for the
addition to tax prescribed by paragraph one of subsection  (a)  of  this
section  and  the penalty prescribed by paragraph (b) of subdivision two
of  section five hundred eighty-one of the labor law. Provided, however,
such employer shall  remain  liable  for  the  other  additions  to  tax
prescribed  by  subsection (a) of this section, if applicable. Provided,
further, that where such employer fails to file such return or any  such
portion  thereof  by  the  due  date  prescribed  by  paragraph  four of
subsection (a) of section six hundred seventy-four of this  article  but
is  not  liable  for  the penalty prescribed by subparagraph (A) of this
paragraph for such failure  because  such  employer  complied  with  the
provisions  of this clause or clause (i) of this subparagraph, and where
within four successive calendar quarters of such initial failure to file
by the prescribed due date, such  employer  again  fails  to  file  such
return or any such portion thereof by such due date, then the provisions
of  this  clause  relating  to  non-imposition  of  penalties  and other
additions to tax for failure to file shall not apply to any such failure
within such four successive calendar quarters. In such a case,  if  such
employer  files  such  return  or  portion thereof before the department
sends notice of such failure by certified mail, such employer  shall  be
liable for a penalty equal to the lesser of the product of fifty dollars
multiplied  by the number of employees actually shown on such employer's
late  filed  quarterly  combined   withholding,   wage   reporting   and
unemployment  insurance  return,  but not less than one thousand dollars
nor more than ten thousand dollars, or the sum of the  addition  to  tax
prescribed  by  paragraph  one of subsection (a) of this section and the
penalty prescribed by paragraph (b) of subdivision two of  section  five
hundred eighty-one of the labor law.
(C)  Audit  following  failure to file. If an employer fails to file a
quarterly  combined  withholding,  wage   reporting   and   unemployment
insurance  return and an audit is subsequently commenced with respect to
such employer by the department, the department of labor or  both,  such
employer  shall,  in  addition to the penalty prescribed by subparagraph
(A) of this paragraph, be liable for the addition to tax  prescribed  by
paragraph  one of subsection (a) of this section, the penalty prescribed
by paragraph (b) of subdivision two of section five  hundred  eighty-one
of the labor law, or both, as applicable.
(D)  Protests and collection. The department of labor shall adjudicate
all disputes regarding the imposition of the penalty prescribed by  this
paragraph  (whether  alone  or  in  conjunction with the addition to tax
prescribed by paragraph one of subsection (a) of this  section  and  the
penalty  prescribed  by paragraph (b) of subdivision two of section five
hundred eighty-one of the labor law), in accordance with the  provisions
contained  in article eighteen of the labor law; provided, however, that
the  department  shall  adjudicate  disputes  in  accordance  with   the
procedures  prescribed  by this chapter where (i) an employer only fails
to file the portion of a quarterly combined withholding, wage  reporting
and unemployment insurance return relating to withholding reconciliation
information, (ii) the penalty prescribed by clause (iii) of subparagraph
(B)  of  this  paragraph is imposed, or (iii) the department conducts an
audit described in subparagraph (C) of this paragraph  with  respect  to
withholding tax liability. Once the penalty prescribed by this paragraph
is  finally  determined  and  no  longer  subject  to  administrative or
judicial review, the amount thereof shall be deemed to be an  obligation
owed  jointly  to the department and the department of labor, and either
of such departments may collect  such  amount  in  accordance  with  the
procedures  prescribed  by this chapter or the labor law, as applicable.
Any penalty amount so collected shall, if  necessary,  be  allocated  as

between  the  withholding  tax  program  and  the unemployment insurance
program, and shall be  deposited  and  disposed  of  by  the  respective
department in accordance with applicable law.
(3)  Failure  to  provide  complete  and  correct employee withholding
reconciliation information. In the case of a failure by an  employer  to
provide  complete and correct quarterly withholding information relating
to individual  employees  on  a  quarterly  combined  withholding,  wage
reporting  and  unemployment  insurance  return  covering  each calendar
quarter of a year, such employer shall, unless it  is  shown  that  such
failure is due to reasonable cause and not due to willful neglect, pay a
penalty  equal  to  the product of one hundred dollars multiplied by the
number  of  employees  for  whom  such  information  is  incomplete   or
incorrect;  provided,  however,  that  if  the  number of such employees
cannot be determined  from  the  quarterly  combined  withholding,  wage
reporting  and  unemployment  insurance  return,  the  commissioner  may
utilize any information in the commissioner's possession in making  such
determination.  The total amount of the penalty imposed pursuant to this
paragraph on an employer for any such failure for each calendar  quarter
of a year shall not exceed twenty thousand dollars.
(4)  Failure  to  provide  complete  and correct quarterly withholding
information not relating to individual  employees.  In  the  case  of  a
failure  by  an  employer  to  provide  complete  and  correct quarterly
withholding information  not  relating  to  individual  employees  on  a
quarterly   combined   withholding,   wage  reporting  and  unemployment
insurance return, such employer shall, unless  it  is  shown  that  such
failure is due to reasonable cause and not due to willful neglect, pay a
penalty equal to five percent of the quarterly withholding tax liability
required  to  be  shown by such employer for the quarter covered by such
return, or if such liability required to be shown by such  employer  for
the  quarter  cannot  be ascertained, the commissioner may estimate such
liability from any information in the commissioner's possession. If such
employer provides complete and correct quarterly withholding information
not relating to  individual  employees  within  thirty  days  after  the
department  sends  notice  of  such failure to the employer by certified
mail, then such penalty shall be abated. No penalty under this paragraph
shall be imposed if the  department  is  able  to  properly  verify  and
reconcile   withholding   and   wage  reporting  information  using  the
information furnished by the employer. The total amount of  the  penalty
imposed  pursuant  to this paragraph on an employer for any such failure
shall not exceed ten thousand dollars.
(5) Failure to file using prescribed format. In the case of a  failure
by  an employer to file a quarterly combined withholding, wage reporting
and unemployment insurance return using the  format  prescribed  by  the
department  pursuant to the authority of paragraph two of subsection (d)
of section six hundred  fifty-eight  of  this  article  and  regulations
promulgated  thereunder,  such  employer  shall, unless it is shown that
such failure is due to reasonable cause and not due to willful  neglect,
pay  a  penalty  equal to the product of fifty dollars multiplied by the
number of employees required  to  be  shown  on  such  return.  If  such
employer  files  such  return  using the prescribed format within thirty
days after the department sends notice of such failure to  the  employer
by  certified  mail, then such penalty shall be abated. The total amount
of the penalty imposed pursuant to this paragraph on an employer for any
such failure shall not exceed ten thousand dollars.
(6) Except as otherwise provided in this subsection,  and  except  for
the  penalties  prescribed  by  paragraph  one  of  subsection  (h)  and
subsection (k)  of  this  section,  the  penalties  prescribed  by  this

subsection  shall be in addition to any other penalty or addition to tax
provided by law.
(w)   Failure  to  file  report  regarding  newly  hired  or  re-hired
employees.   If any employer required  to  file  a  report  pursuant  to
section  one  hundred  seventy-one-h  of this chapter fails to file such
report at the time prescribed therefor, or files a report which fails to
show the information required  pursuant  to  such  section  one  hundred
seventy-one-h, unless it is shown that such failure is due to reasonable
cause  and  not  due  to  willful  neglect, there shall, upon notice and
demand by the commissioner and in the same manner as tax, be paid by the
employer a penalty equal to the product of twenty dollars, multiplied by
the number of employees the employer failed to  report,  but  the  total
amount imposed on the employer for all such failures during any calendar
year  shall  not exceed ten thousand dollars. If the failure is a result
of a conspiracy between the employer and the employee to not supply  the
required  report  or to supply a false or incomplete report, the penalty
shall be equal to the product of four hundred fifty  dollars  multiplied
by the number of employees the employer failed to report.
* (x)   Failure   to   disclose   or  provide  reportable  transaction
information.-- (1) Any person who fails to file, disclose or provide any
statement, return or other document which is required under  subdivision
(a)  of  section  twenty-five of this chapter shall pay a penalty in the
amount determined under paragraph two of this subsection.
(2)(A) Except as provided in subparagraph (B) of this  paragraph,  the
amount  of  the  penalty under paragraph one of this subsection shall be
ten thousand dollars.
(B) The amount of the penalty under paragraph one of  this  subsection
with  respect  to  a  listed  transaction  shall be twenty-five thousand
dollars.
(3)  For  purposes  of  this   subsection,   the   terms   "reportable
transaction"  and  "listed  transaction" shall have the same meanings as
used in section twenty-five of this chapter, and  the  term  "reportable
transaction"  shall  include  a  "New  York  reportable  transaction" as
defined in such section twenty-five, and the term  "listed  transaction"
shall  include any transaction designated as a tax avoidance transaction
pursuant to such section twenty-five.
(4) The commissioner may rescind all or any  portion  of  any  penalty
imposed by this subsection with respect to any violation if
(A)  the  violation  is with respect to a reportable transaction other
than a listed transaction, and
(B)  rescinding  the  penalty  would  promote  compliance   with   the
requirements of this chapter and effective tax administration.
(5)  The  penalty  imposed by this section shall be in addition to any
other penalty imposed by this chapter.
* NB Repealed July 1, 2029
* (y) Failure to disclose or provide reportable transaction  return.--
(1)  Any  person  who  fails to file, disclose or provide any statement,
return or other document which is  required  under  subdivision  (b)  of
section  twenty-five  of  this chapter shall pay a penalty in the amount
determined under paragraph two of this subsection.
(2)(A) Except as provided in subparagraph (B) of this  paragraph,  the
amount  of  the  penalty under paragraph one of this subsection shall be
twenty thousand dollars.
(B) The amount of the penalty under paragraph one of  this  subsection
with respect to a listed transaction shall be the greater of
(i) fifty thousand dollars or,
(ii)  fifty percent of the gross income that the organizer or material
advisor derived with respect to activities that were the basis  for  the

requirement to file, disclose or provide information pursuant to section
six  thousand  eleven  of  the internal revenue code, to the extent such
gross income is attributable to the avoidance of any tax  imposed  under
this article.
(C) Clause (ii) of subparagraph (B) of this paragraph shall be applied
by  substituting  "seventy-five percent" for "fifty percent" in the case
of an intentional failure or act described  in  paragraph  one  of  this
subsection.
(3)   For   purposes   of   this  subsection,  the  terms  "reportable
transaction" and "listed transaction" shall have the  same  meanings  as
used  in  section  twenty-five  of  this  chapter,  the term "reportable
transaction" shall  include  a  "New  York  reportable  transaction"  as
defined  in  such section twenty-five, and the term "listed transaction"
shall include any transaction designated as a tax avoidance  transaction
pursuant to such section twenty-five.
(4)  The  commissioner  may  rescind all or any portion of any penalty
imposed by this subsection with respect to any violation if
(A) the violation is with respect to a  reportable  transaction  other
than a listed transaction, and
(B)   rescinding   the  penalty  would  promote  compliance  with  the
requirements of this chapter and effective tax administration.
(5) The penalty imposed by this subsection shall be in addition to any
other penalty imposed by this chapter, except that no penalty  shall  be
imposed  under  subparagraph  (A)  or  clause (i) of subparagraph (B) of
paragraph two of subsection (q) of section one thousand  eighty-five  of
this  chapter for the same failure that is the basis for a penalty under
this subsection. Nothing in this paragraph shall preclude the imposition
of a penalty under clause (ii) of subparagraph (B) of paragraph  two  of
subsection  (q)  of section one thousand eighty-five of this chapter for
the same failure that is the basis for a penalty under  clause  (ii)  of
subparagraph (B) of paragraph two of this subsection.
* NB Repealed July 1, 2029
* (z) Failure to maintain list of advisees.-- (1) If any person who is
required to maintain a list under subdivision (c) of section twenty-five
of  this  chapter fails to make a duplicate of such list available, upon
written request by the commissioner in accordance with  such  subsection
within  twenty  business days after the date of the request, such person
shall pay a penalty of ten thousand dollars for each day of such failure
after such twentieth day.
(2) No penalty shall be imposed by paragraph one  of  this  subsection
with  respect  to  the  failure  on  any  day  if such failure is due to
reasonable cause.
* NB Repealed July 1, 2029
(aa) Tax preparer penalty.-- (1) If a  tax  return  preparer  takes  a
position  on  any  income  tax  return  or credit claim form that either
understates the tax liability or increases the claim for a  refund,  and
the  preparer  knew, or reasonably should have known, that said position
was not proper, and such position was not adequately  disclosed  on  the
return  or  in  a  statement  attached  to  the  return, such income tax
preparer shall pay a penalty of between one  hundred  and  one  thousand
dollars.
(2) If a tax return preparer takes a position on any income tax return
or  credit  claim  form  that  either  understates  the tax liability or
increases the claim for a refund  and  the  understatement  of  the  tax
liability  or  the  increased  claim for refund is due to the preparer's
reckless or intentional disregard of the law, rules or regulations, such
preparer shall pay a penalty of between five hundred and  five  thousand
dollars.  The  amount  of the penalty payable by any person by reason of

this paragraph shall be reduced by the amount of  the  penalty  paid  by
such person by reason of paragraph one of this subsection.
(3)  For  purposes of this subsection, the term "understatement of tax
liability" means any understatement  of  the  net  amount  payable  with
respect  to  any  tax imposed under this article or any overstatement of
the net amount creditable or refundable with respect to any such tax.
(4) For purposes of this subsection, the term  "tax  return  prepared"
shall  have  the same meaning as defined in paragraph five of subsection
(g) of section six hundred fifty-eight of this article.
(5) This subsection shall not apply if the  penalty  under  subsection
(r)  of  this section is imposed on the tax return preparer with respect
to such understatement.
* (bb) Promoting abusive tax shelters.-- (1) Any person who
(A)(i) organizes (or assists in the organization of)
(I) a partnership or other entity,
(II) any investment plan or arrangement, or
(III) any other plan or arrangement, or
(ii) participates (directly or indirectly) in the sale of any interest
in an entity or plan or arrangement referred to in clause  (i)  of  this
subparagraph, and
(B) makes or furnishes or causes another person to make or furnish (in
connection with such organization or sale)
(i)  a  statement with respect to the allowability of any deduction or
credit, the excludability of any income, or the securing  of  any  other
tax  benefit  by  reason  of  holding  an  interest  in  the  entity  or
participating in the plan or arrangement which the person knows  or  has
reason to know is false or fraudulent as to any material matter, or
(ii) a gross valuation overstatement as to any material matter, and
(C) satisfies any of the following conditions
(i) the person is organized in this state,
(ii) the person is doing business in this state,
(iii) the person is deriving income in this state, or
(iv)   the   person  conducts  any  of  the  activities  described  in
subparagraph (A) or (B) of this paragraph within the state of New  York,
shall  pay,  with respect to each activity described in subparagraph (A)
of this paragraph, a penalty equal to one thousand dollars  or,  if  the
person  establishes  that it is lesser, one hundred percent of the gross
income derived (or to be derived) by such person from such  activity  to
the extent such gross income is attributable to the avoidance of any tax
imposed  under this article; provided, however, that if an activity with
respect to which a penalty imposed  under  this  subsection  involves  a
statement  described  in clause (i) of subparagraph (B) of paragraph one
of this subsection, the penalty shall be equal to fifty percent  of  the
gross  income  derived  (or to be derived) from that activity within the
state by the person on which the penalty is imposed. For purposes of the
preceding sentence, activities described in clause (i)  of  subparagraph
(A)  of  this paragraph with respect to each entity or arrangement shall
be treated as  a  separate  activity  and  participation  in  each  sale
described  in clause (ii) of subparagraph (A) of this paragraph shall be
so treated.
(2)(A) For purposes of this  subsection,  the  term  "gross  valuation
overstatement"  means  any  statement as to the value of any property or
services if
(i) the value so stated exceeds two  hundred  percent  of  the  amount
determined to be the correct valuation, and
(ii) the value of such property or services is directly related to the
amount  of  any  deduction or credit allowable under this chapter to any
participant.
(B) The commissioner may waive all or any part of the penalty provided
by paragraph one of this subsection with respect to any gross  valuation
overstatement  on  a  showing  that there was a reasonable basis for the
valuation and that such valuation was made in good faith.
(3) The penalty imposed by this subsection shall be in addition to any
other penalty provided by law.
* NB Repealed July 1, 2029
(cc) False or fraudulent document penalty. Any taxpayer that submits a
false  or  fraudulent  document  to  the department will be subject to a
penalty of one hundred dollars per document submitted, or  five  hundred
dollars  per  tax  return submitted. This penalty will be in addition to
any other penalty or addition provided by law.
(dd) Failure to supply all the  information  required  or  to  provide
correct information in secretary of state statements. Unless it is shown
that  such  failure to provide the statement and information required by
subdivision (e) of section three hundred one of  the  limited  liability
company law, subdivision (g) of section 121-1500 of the partnership law,
and subdivision (f) of section 121-1502 of the partnership law is due to
reasonable  cause  and  not to willful neglect, there shall, upon notice
and demand by the commissioner and in the same manner as tax, be paid by
the entity failing to supply complete and correct information, a penalty
of  two  hundred  and  fifty  dollars  per  limited  liability  company,
registered  limited liability partnership or New York registered foreign
limited liability partnership required to provide  such  information  on
its filing fee payment form.