For those who practice regularly in New York’s complex Tax Law, it will come as no surprise that the law and its associated regulations often leave taxpayers unsure of how these rules will apply to specific factual situations. To help address potential ambiguities in the law and regulations, the Tax Department publishes memoranda, tax return instructions, notices, bulletins, and advisory opinions. Advisory opinions are binding on the Department with respect to the taxpayers who requested the opinions, provided that the taxpayers fully and accurately described the relevant facts. Although not binding on the Department with respect to all taxpayers, advisory opinions provide the public with additional illumination as to how the Department will interpret and apply specific statutory or regulatory provisions. Consequently, these opinions can be valuable tools in helping taxpayers structure and manage their business affairs to comply with their obligations under the law. By law, the Department is required to issue the opinions within 90 days of the request. In practice, it often takes much, much longer.[1]
Unfortunately, many taxpayers and tax practitioners find that, in practice, these opinions do not provide a practical benefit due to the amount of time it can take for the Tax Department to issue them. That brings us back to the opinion that was recently issued. It’s difficult to know when the taxpayer first submitted its advisory opinion request. While we cannot pinpoint exactly when the taxpayer submitted its request in this instance, there is a significant clue in the facts of the opinion. The opinion states, “Petitioner anticipates that remediation of the Site will be complete, and a CoC issued, in 2016.” In other words, when the advisory opinion petition was submitted, the remediation of the site was not yet complete and no Certificate of Completion had been issued. The taxpayer “anticipated” that these events would occur in 2016. This implies that the request for the opinion was submitted during 2016, or, more likely, sometime prior. And the taxpayer was looking to the Department for guidance regarding the timing of the credits. That guidance arrived in 2018, two or more years later.
Let’s be clear, we have no idea why this opinion seems to have taken so long. Perhaps the delay was caused by the taxpayer. Oftentimes, the Department requires additional facts to properly address the question presented, and taxpayers may not provide the requisite information in a timely manner. Or, perhaps the question presented dealt with an area of the law that was in flux, which caused some delay (the Brownfield tax credit program was significantly amended for the 2015 tax year). But many taxpayers and tax practitioners have found that the amount of time it takes to process the opinions renders them ineffective in clarifying tax issues that may be governed by other time-sensitive issues (statutes of limitations, business timelines and contractual obligations, sunset dates, etc.).
Let us also be clear that we are not criticizing the Tax Department’s Office of Counsel, the group within the Tax Department that drafts and issues the opinions. Moreover, we have often found that Department personnel will informally respond to questions when the taxpayer does not have the time to seek a formal, binding opinion. And we greatly appreciate those efforts. However, it appears that some of the delays in the process may result from a basic lack of resources. In other words, there simply may not be enough people to address the number of requests received. We’re sympathetic to this problem – let’s not forget, New York recently faced a budget deficit that exceeded $4.4 billion.
We applaud the State’s willingness and efforts to address taxpayer inquiries: many states do not have a structured means to petition for guidance. But, for the advisory opinions to be useful, their process time must not render them ineffective at answering taxpayer inquires in a meaningful, practical and timely way. So, it would be nice to see the State devote more resources to the Tax Department, and for those additional resources to be used to help the Department provide interpretive guidance, including advisory opinions, in a more timely fashion.
[1] In the interest of full disclosure, under a particularly peculiar set of circumstances one of our corporate clients received an advisory opinion within two weeks of its request!
