New York Loosens Requirements for Group Returns

January 1999 Issue
New York Loosens Requirements for Group Returns
By Mark H. Levin, CPA
The New York State Department of Taxation and Finance recently announced it has amended regulations for filing group personal income tax returns, which will allow more businesses to file such returns on behalf of their nonresident partners or shareholders.
The amended regulations expand the type of business entities allowed to file a group return to include S corporations. Under these new rules, a partnership or S corporation will need only more than 10 qualified electing partners/shareholders to be eligible. Additionally, the amended regulations permit a nonresident partner/shareholder to qualify for inclusion in a group return if the nonresident partner/shareholder has no more than 10 derivations of New York-sourced income. There were no changes to the other prior requirements; the individual must be a nonresident of New York state for the entire year and cannot maintain a permanent residence in the state at any time during the year.
In addition, certain other special groups authorized by the state tax commissioner may file group returns, e.g., professional athletic teams.
Prior to the amendments, the department permitted only partnerships with more than 35 qualified electing partners to file a group return. The partner could not have more than one New York-sourced income, and also had to meet the residence requirements noted above. These regulations severely limited the number of business entities permitted to file a group return.
To be eligible, the business entity must request permission by submitting Form PR-99, Application for Permission to File a Group Return, no later than the 30th day following the close of the initial taxable year for which it is requesting to file the group return. (Note that the deadline is January 30 for businesses filing with a December 31, 1998 year end.)
After receipt of a properly completed Form PR-99, the department will determine whether it will grant permission and will notify the business entity accordingly. If it grants approval, the department will issue a special New York state employer identification number to the business entity to be used only to file the group return. The department's approval is contingent on its receipt of the group return and is subject to revocation on audit. The approval to file on a group basis will remain in effect unless revoked; however, the business entity must maintain at least 11 qualified electing partners to continue filing on a group basis.
A partnership or S corporation that requests approval to file a group return must appoint one partner/shareholder to act as the group agent. The group agent must have the legal authority to act on behalf of all participating partners/shareholders as in matters relating to the group return. The agent must sign the group return and the department will send any related correspondence to this individual. The group agent will be personally responsible for penalties in regard to making or signing an erroneous, false, or fraudulent return only if the agent was actually responsible for the error.
A partnership that wishes to file a group return on behalf of its qualified electing nonresident partners/shareholders will file Form IT-203-GR. An S corporation that wishes to file a group return on behalf of its qualified electing nonresident shareholders will file Form IT-203-S. A professional athletic team that wishes to file a group return on behalf of its qualified electing nonresident members may do so on Form IT-203-TM. *

Mark H. Levin, a member of the Society's New York State, Municipal, and Local Taxation Committee, is with the firm H.J. Behrman & Co. LLP.

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