New York Codes, Rules and Regulations › Title 20 - DEPARTMENT OF TAXATION AND FINANCE › Chapter I - Franchise and Certain Business Taxes › Subchapter A - Business Corporation Franchise Tax › Part 3 - COMPUTATION OF TAX › Subpart 3-8 - COMPUTATION OF THE PRIOR NET OPERATING LOSS CONVERSION (PNOLC) SUBTRACTION › Section 3-8.12 - Subsequent changes

Current through Register Vol. 46, No. 28, July 10, 2024
(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.