N.Y. Comp. Codes R. & Regs. Tit. 20 § 538.2 - General

Tax Law, § 1142-A(g), (i), (j), (k)

(a) Applicability.

Parking facility operators which provide parking services in New York County (Manhattan) are subject to the special requirements imposed by section 1142-A of the Tax Law and this Part.

(b) Hardship.

(1) A parking facility operator may apply to the department for an exemption from complying with some or all of the provisions of this Part and section 1142-A of the Tax Law. The application shall be submitted on the form prescribed by the department for such purpose to the Audit Division-Sales Tax Bureau, Building 9, W.

A. Harriman Campus, Albany, NY 12227. The operator shall keep a copy of such application and any response from the department regarding the application, for a period of at least three years, as described in section 538.4(g) of this Part, as part of the additional records required to be kept by section 1142-A of the Tax Law and this Part. To be granted such an exemption, the operator must demonstrate that:

(i) the operator has limited annual liability; and

(ii) the provisions of section 1142-A of the Tax Law and this Part create undue hardship for the operator.

(2) Where the department grants any such exemption, the department will specify the period of time for which such exemption is granted. The department may grant any such exemption for a limited period of time. The department may impose such other recordkeeping requirements in lieu of some or all of the requirements exempted under this subdivision as the department finds necessary to ensure compliance with the requirements of articles 28 and 29 of the Tax Law, and which permit the department to determine accurately the parking facility operator's tax liability. Any such other necessary records shall be kept for a period of at least three years as described in section 538.4(g) of this Part, as part of the additional records required to be kept by this Part and section 1142-A of the Tax Law.

(3) Where a parking facility operator's annual sales and use tax liability under articles 28 and 29 of the Tax Law reaches or exceeds $25,000 in any 12-month period, or can reasonably be expected to reach or exceed $25,000 in any such 12-month period, on an annualized basis, then any exemption granted under this subdivision to such operator shall automatically terminate as of the last day of the sales tax quarter (the last day of either February, May, August or November) immediately following the quarter in which such liability reaches or exceeds, or can reasonably be expected to reach or exceed, $25,000, on an annualized basis. Such operator shall then be required to comply with the provisions of section 1142-A of the Tax Law and this Part on and after the first day of the sales tax quarter immediately succeeding the date of termination of exemption.

(4) The department may terminate or modify any exemption granted by the department under this subdivision if:

(i) information which the parking facility operator provided to the department prior to the date such exemption was granted was inaccurate or incomplete; or

(ii) the department believes that collection of any liability for tax, penalty or interest due from the parking facility operator which received an exemption under this subdivision is in jeopardy.

(5)

(i) If the department finds that the financial condition of a parking facility operator to which the department has granted an exemption under this subdivision has significantly changed, the department may modify or terminate the exemption granted.

(ii) Action may be taken by the department under subparagraph (i) of this paragraph only if:

(a) notice of such finding is provided to the parking facility operator no later than 30 days prior to the date of such action; and

(b) such notice includes the reasons why the department believes a significant change in the financial condition of the parking facility operator has occurred.

(6) The department may modify or terminate an exemption granted by the department under this subdivision in the case of the failure of the parking facility operator:

(i) to comply with the provisions of articles 28 and 29 of the Tax Law or of this Part;

(ii) to pay any tax liability at the time such liability is due; or

(iii) to furnish additional information relating to the operator's responsibilities and liabilities under such articles 28 and 29 and this Part, as requested by the department.

(7)

(i) In determining whether undue hardship has been shown, a principal factor to be taken into consideration is the amount of the cost to the operator of meeting the requirements of section 1142-A of the Tax Law and this Part. Whether the costs of meeting such requirements create an undue hardship for a parking facility operator where the operator is a member of an affiliated group of persons shall be considered with regard to whether the costs of meeting such requirements create such a hardship for such group as a whole.

(ii) For purposes of this subdivision, a parking facility operator is a member of an affiliated group of persons where the operator is:

(a)

(1) a corporation which is a member of an affiliated group of corporations, as such term affiliated group of corporations is used in paragraph (28) of subdivision (a) of section 1115 of the Tax Law read without regard to the exception for clause (ii) of subparagraph (6) of paragraph (b) of subdivision (17) of section 208 of the Tax Law; or

(2) a partnership in which one or more members of an affiliated group of corporations (as described in subclause [1] of this clause) have, directly or indirectly, at least a 50 percent capital or profits interest;

(b) a partnership where any other person or persons (other than a corporation which is a member of an affiliated group of corporations as described in clause [a] of this subparagraph) having, directly or indirectly, at least a 50 percent capital or profits interest in such partnership are themselves parking facility operators;

(c) a partnership which has, directly or indirectly, at least a 50 percent capital or profits interest in any other parking facility operator or owns, directly or indirectly, at least 50 percent in value of the outstanding stock of any corporation which is a parking facility operator;

(d) a person which has, directly or indirectly, at least a 50 percent beneficial interest in an estate or trust which is a parking facility operator;

(e) an estate or trust which has, directly or indirectly, at least a 50 percent capital or profits interest in any other parking facility operator or owns, directly or indirectly, at least 50 percent in value of the outstanding stock of any corporation which is a parking facility operator;

(f) an individual whose sibling, parent, spouse, or child or grandchild (whether or not adopted), or any combination of them, is either a parking facility operator or has, directly or indirectly, at least a 50 percent or more capital or profits interest in a parking facility, or owns, directly or indirectly, at least 50 percent in value of the outstanding stock of any corporation which is a parking facility operator; or

(g) a corporation where:

(1) at least 50 percent in value of the outstanding stock thereof is directly or indirectly owned solely by an individual or by an individual and the individual's sibling, parent, spouse, or child or grandchild (whether or not adopted), or any combination of them; and

(2) the individual or the individual's sibling, parent, spouse, or child or grandchild (whether or not adopted), or any combination of them, has, directly or indirectly, at least a 50 percent or more capital or profits interest in a parking facility operator, or owns, directly or indirectly, at least 50 percent in value of the outstanding stock of any corporation which is a parking facility operator; or

(h) a person which is created or acts in pursuance of a plan having as a principal purpose the evasion of tax under article 28 or 29 of the Tax Law or the avoidance or evasion of compliance with the provisions of section 1142-A of the Tax Law or this Part.

Example 1:

A Corp. operates a parking facility in Manhattan. B Corp. owns 100 percent of the stock of A Corp., as well as 100 percent of the stock of C Corp. Neither B Corp. nor C Corp. is a parking facility operator. Since A and C Corps. are wholly owned subsidiaries of B Corp., A, B and C Corps. are all members of an affiliated group of corporations. As such, they are members of an affiliated group of persons. If A Corp. has limited annual liability and applies to the department for exemption under this subdivision, the department will consider whether the costs for A Corp. to comply with the requirements of section 1142-A of the Tax Law and this Part create undue hardship for the group A, B and C Corps. as a whole, pursuant to clause (7)(ii)(a) of this subdivision. It does not matter that B and C Corp. are not parking facility operators themselves, since A, B and C Corps. are members of an affiliated group of corporations, as described in clause (a) of this subparagraph.

Example 2:

The BMK Partnership operates a parking facility in Manhattan. B, M and K are individuals. B has a 25 percent profits interest in BMK and also operates, herself, a parking facility in Manhattan. M also owns a 25 percent profits interest in BMK and owns 100 percent of a corporation which operates a parking facility in Manhattan. K owns the remaining 50 percent profits interest in BMK. K does not own or operate any parking facility. BMK is not a member of an affiliated group of persons for the following reasons: B, herself an operator, owns less than a 50 percent profits interest in the BMK Partnership. M also owns less than a 50 percent profits interest in BMK. K, the only owner of at least a 50 percent profits interest in the BMK Partnership, is not himself an operator. Thus, if BMK has limited annual liability and applies for a hardship exemption under this subdivision, the department will consider only whether BMK's costs of complying with the requirements of section 1142-A of the Tax Law and this Part create an undue hardship for BMK, and will not consider whether such costs create an undue hardship for BMK together with any of its partners.

Example 3:

A-1 Partnership owns 80 percent of the capital and profits interest in B Partnership. B Partnership owns 70 percent of the stock of C Corp. A-1 Partnership and C Corp. each separately operate a parking facility in Manhattan, but B Partnership does not operate any parking facility. For purposes of this subdivision, A-1 Partnership indirectly owns 56 percent of the stock of C Corp. through its 80 percent interest in B Partnership which owns 70 percent of the stock of C Corp. (80 percent × 70 percent). Thus, A-1 Partnership and C Corp., each a parking facility operator, are members of an affiliated group of persons. If either A-1 Partnership or C Corp. has limited annual liability and applies for an exemption under this subdivision, the costs to comply with the requirements of section 1142-A of the Tax Law and this Part of the operator which makes the exemption application will be considered with regard to whether such costs create an undue hardship for A-1 Partnership and C Corp. together.

Example 4:

P owns and operates four parking facilities in Manhattan. P gives or sells a facility to each of P's three children, C1, C2 and C3. C2 has limited annual liability and applies for a hardship exemption. P, C1, C2 and C3 are members of an affiliated group of persons, pursuant to clause (7)(ii)( f) of this subdivision. Thus, the department will consider whether the costs for C2 to comply will create an undue hardship for the group (P, C1, C2 and C3) as a whole.

Example 5:

H and W, husband and wife, own five parking facilities in Manhattan designated as F1, F2, F3, F4 and F5. They transfer facility F1 to CH Corp., a corporation wholly owned by H. They transfer facility F2 to CW Corp., a corporation wholly owned by W. They transfer facility F3 to their two children, Bill & Sue, who form the BillSue Partnership as equal partners to operate F3. They transfer facility F4 to H's brother, HB, who transfers it to X Corp. in exchange for 30 percent of the outstanding stock of X Corp. The remaining 70 percent of X Corp. stock is owned by unrelated persons. HB does not operate any parking facility himself. H & W transfer facility F5 to the PQ Partnership pursuant to a secret arrangement whereby PQ will operate F5 merely as nominees for H and W, so that H and W will receive the income and other benefits of ownership from F5. CH Corp., CW Corp., BillSue Partnership and PQ Partnership are members of an affiliated group of persons, but HB and X Corp. are not members of the group. CH Corp. and CW Corp. are corporations which each operate a parking facility where at least 50 percent of the value of the outstanding stock in each corporation is owned by spouses, pursuant to clause (7)(ii)(g) of this subdivision. BillSue Partnership is a member of the group because at least 50 percent of either the capital or profits interest in the partnership is owned by the child of an individual who owns at least 50 percent of the value of the outstanding stock of a corporation which is an operator, pursuant to clause (g) of this subdivision. Bill and Sue are the children of H & W who own at least 50 percent of the value of the outstanding stock in CH Corp. and CW Corp., respectively. PQ Partnership is a member of the group because a principal purpose of the transfer of F5 to PQ Partnership was for H & W to evade complying with the requirements of section 1142-A of the Tax Law and this Part, pursuant to clause (7)(ii)(h) of this subdivision, since H & W receive the benefit of ownership of F5. HB is not a member since he does not operate a parking facility himself. X Corp. is not a member of the affiliated group, since HB, H' s brother, does not own at least 50 percent of the value of the outstanding stock of X Corp., and the 70 percent balance of X Corp. stock is not owned by any member of the group or any person whose ownership would make the person a member of the group. If H, W, Bill or Sue or CH Corp. or CW Corp. or BillSue Partnership, or any combination of them, owned at least 20 percent of X Corp.'s stock, then their holdings, combined with HB's holdings of X Corp. stock, would constitute at least 50 percent of the value of X Corp.'s stock and X Corp. would be a member of the group with CH Corp., CW Corp., BillSue Partnership and PQ Partnership.

(c) Exemption from requirements.

(1) An organization described in section 1116 of the Tax Law which is also a parking facility operator is exempt from the requirements of section 1142-A of the Tax Law and this Part.

(2) However, where any other person operates a parking facility for or on behalf of an organization described in section 1116 of the Tax Law, such other person shall not be exempt from the requirements imposed by section 1142-A of the Tax Law and this Part.

Notes

N.Y. Comp. Codes R. & Regs. Tit. 20 § 538.2