New York Advisory Opinion TSB-A-11(7)C: From what date does interest run on a corporate franchise tax and MTA surcharge refund based on amended returns?

Plain-English summary

The company filed amended New York corporate franchise tax (and MTA surcharge) returns with refund claims after a federal change, and asked from what date the State owes it interest on the refund.

The Department concluded interest runs from the filing date of the amended returns. The company complied with Tax Law § 211.3 by filing its amended New York returns with the refund claims within 90 days of filing its amended federal return. Because § 211.3 was satisfied, § 1087(c) -- which conditions refund interest on § 211.3 compliance -- did not prevent interest. And since the refund was not paid within three months of the claims, the no-interest rule in § 1088(c)(1) did not apply. So under § 1088(a)(3), the company should have received overpayment interest beginning May 13, 2008, the day it filed the amended returns with its refund claims.

What this means for you

Corporations claiming refunds after a federal change

If you report a federal change on time -- amended New York returns within 90 days of the amended federal return -- you preserve your right to interest on any resulting refund, running from the date you filed the claim. Miss the 90-day window and § 1087(c) can cut off that interest.

Accountants and tax professionals

Two timing rules drive the interest: § 211.3 compliance (90 days) keeps interest alive under § 1087(c), and the State avoids paying interest only if it refunds within three months (§ 1088(c)(1)). Interest otherwise accrues from the claim/amended-return filing date (§ 1088(a)(3)).

Common questions

Q: When does interest start on a franchise tax refund from amended returns?
A: From the date the amended returns and refund claims were filed (here May 13, 2008), under Tax Law § 1088(a)(3).

Q: What could have denied interest?
A: Failing the § 211.3 90-day reporting rule (which § 1087(c) ties interest to), or the State paying the refund within three months (§ 1088(c)(1)).

Q: Does this apply to the MTA surcharge too?
A: Yes; the opinion addresses interest on both the corporate franchise tax and the MTA surcharge refund.

Citations and references

• Tax Law § 211.3 (report of federal changes; amended New York return within 90 days)
• Tax Law § 1087(c) (refund interest conditioned on section 211.3 compliance)
• Tax Law § 1088(a)(3) (interest from the date of the claim on an amended return); Tax Law § 1088(c)(1) (no interest where the refund is paid within three months)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2011.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a11_7c.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-11(7)C
Corporation Tax
April 7, 2011

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C110112B

On January 12, 2011, the Department of Taxation and Finance received a Petition for Advisory
Opinion from name and address redacted. Petitioner asks:
1. Whether interest payable on a refund claim for overpaid corporate franchise tax for taxable
year ended December 31, 2006 is limited by Section 1087(c) or any other provision of the
Tax Law where Petitioner filed its refund claim on the same day it filed its amended Federal
tax return; and
2. How interest payable on a refund claim for taxable year ended December 31, 2006 should be
computed where the Petitioner receives payment of an amount less than overpaid tax and
interest accrued under Section 1096(e) of the Tax Law to the date of partial payment.
We conclude that interest should have been paid on Petitioner’s refund claim beginning on the
date that Petitioner filed its New York amended return.
Facts
On May 13, 2008, Petitioner amended its 2006 Federal corporation tax return to reflect its
distributive share of losses from two partnerships in which it had minority interests. This change reduced
Federal taxable income, and a refund of tax was requested. The refund claim did not involve a net
operating loss carryback or a capital loss carryback. On the same date, Petitioner filed amended returns to
claim a corporate franchise tax refund and MTA surcharge refund from New York State. The reduction
in tax shown on the amended returns arose solely as a result of the adjustment to Federal taxable income.
The amounts are as follows:
Reduction in corporate franchise tax:
Reduction in MTA surcharge:
Total refund

$1,414,498
288,558
$1,703,056

On June 9, 2008, the Income/Franchise Desk Audit Bureau of the Department of Taxation and
Finance notified Petitioner that its 2006 returns and the claims for refund were being audited and requests
were made for information to support the claims. Petitioner responded to all requests.
On November 4, 2008, the Income/Franchise Desk Audit Bureau sent a denial of Petitioner’s
refund claims by certified mail. The denial stated that evidence of acceptance by the Internal Revenue
Service of the change in Federal taxable income was required before the refund claims could be given
further consideration. In the absence of a response from the Internal Revenue Service on its federal
refund claim, Petitioner filed a complaint in the United States Court of Federal Claims on December 17,
2008, seeking judicial review of the claim.

-2-

TSB-A-11(7)C
Corporation Tax
April 7, 2011

Petitioner orally notified the Income/Franchise Desk Audit Bureau on September 28, 2010 of an
agreement between Petitioner and the Tax Division of the U.S. Department of Justice for entry of
judgment in favor of Petitioner. On or about October 1, 2010, Petitioner sent by fax to the Audit Bureau a
copy of the stipulation of judgment in the Court of Federal Claims and IRS Form 4549-A indicating
Federal acceptance of the Petitioner’s adjustments to Federal taxable income. The Audit Bureau
acknowledged receipt of the documentation by a letter dated October 18, 2010, and confirmed the
timeliness of the submission with respect to the refund claims.
A refund check was issued to the Petitioner on December 20, 2010 which did not include
statutory interest because the check was sent within 90 days of the Petitioner’s submission of the
documentation evidencing Federal acceptance of the adjustments to federal taxable income. Petitioner
requests that statutory interest be added to the refund, calculated from the date the amended return was
filed.
Analysis
Petitioner complied with the reporting requirements of section 211.3 of the Tax Law by filing
New York amended returns with its refund claims within 90 days of filing an amended Federal return.
Therefore, section 1087(c) of the Tax Law, which requires compliance with section 211.3 of the Tax Law
for interest purposes, does not prevent the Petitioner from receiving statutory interest on its refund claims.
Also, the refund was not paid within three months of the claims for refund on the amended returns so as
to prohibit the payment of overpayment interest (section 1088[c][1] of the Tax Law). Petitioner should
have received interest on its refund beginning on May 13, 2008, the day it filed the amended returns with
its claims for refund in accordance with section 1088(a)(3) of the Tax Law.

DATED: April 7, 2011

NOTE:

/S/
DANIEL SMIRLOCK
Deputy Commissioner and Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set
forth therein and is binding on the Department only with respect to the person or entity to
whom it is issued and only if the person or entity fully and accurately describes all relevant
facts. An Advisory Opinion is based on the law, regulations, and Department policies in effect
as of the date the Opinion is issued or for the specific time period at issue in the Opinion.