Sec. 5000.5. Filing of offer in compromise

(a) Filing.

An offer in compromise may only be made after the issuance to the taxpayer of a written notice of the Commissioner of Taxation and Finance advising the taxpayer of a tax deficiency, determination of tax due, assessment, or denial of a refund, credit or reimbursement application. The taxpayer shall file an offer in compromise as prescribed in the forms.

(b) Supporting documents.

(1) An offer in compromise based on doubt as to liability must be supported by appropriate documents and briefs, and the amount acceptable will depend upon the degree of doubt found in the particular case.

(2) An offer in compromise based on doubt as to collectibility requires a showing that the taxpayer has been discharged in bankruptcy, is insolvent, or that collection in full would cause an individual taxpayer undue economic hardship. A statement of financial condition and other information (Form DTF-5) is required in all offer-in-compromise cases based on the taxpayer's inability to pay the total amount due or that full payment will cause undue economic hardship, regardless of the type of tax or amount of liability involved. The amount acceptable in compromise must reasonably reflect collection potential (reasonable collection potential) or otherwise be justified by proof offered by the taxpayer. Reasonable collection potential is based on the total realizable value of the taxpayer’s assets and the amount that could reasonably be expected to be collected from the taxpayer’s anticipated future income, after giving effect to all priorities granted to New York State and applicable statutes of limitations on collections.

(i) The realizable value of the taxpayer’s assets is the amount that could reasonably be expected from the sale of the assets within 90 days or less (quick sale value) minus any amount owed to a secured creditor with priority over the department’s interest. Assets such as real property, personal and business assets, and vehicles will generally be valued at 80 percent of fair market value to determine the quick sale value.

(ii) Generally, anticipated future income is calculated over the remainder of the collection period, but no less than a period of 5 years and no more than a period of 10 years, unless there are circumstances indicating that a significant recovery can reasonably be expected if a longer period is used. Other circumstances, including the age of taxpayer, the age of the liability, and the best interests of the State are also considered. Collateral agreements, such as agreements pertaining to payments from future income may also be required based on the facts in a particular case.