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Noonan’s Notes Blog is written by a team of Hodgson Russ tax attorneys led by the blog’s namesake, Tim Noonan. Noonan’s Notes Blog regularly provides analysis of and commentary on developments in the world of New York and multistate tax law. Noonan's Notes Blog is a winner of CreditDonkey's Best Tax Blogs Award 2017.

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NY’s Driver’s License Suspension Program: Thousands of Miles of Open NY Road, as Seen From the Passenger Seat

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New York’s driver’s license suspension program, used to encourage and enforce delinquent tax collection, is still in its infancy. Two of my colleagues wrote an informative piece about the mechanics of the program, which began in 2013, and they also detailed appeals strategies in the event a taxpayer receives a suspension notice from the New York Tax Department that wasn’t warranted.

This post is less of a substantive analysis of the new program, and more of a warning about the inevitable hiccups a new program like this—one that auto-generates notices and requires elaborate coordination between state agencies/divisions—will endure. The driver’s license suspension program allows the Tax Department to instruct the State’s Department of Motor Vehicles to suspend a taxpayer’s New York (non-commercial) license when the taxpayer has a liability, one that is fixed and final and can no longer be appealed, of $10,000 or more. If your client doesn’t have a New York license, this isn’t something he or she needs to worry about. The $10,000 threshold can be met by any combination of tax, surcharge, or fee administered by the Tax Department, or interest and penalties thereon—what matters is the liability meets or exceeds the $10,000 threshold, and is otherwise statutorily delinquent. 

Here’s where things get interesting. As practitioners, we are constantly working toward reaching the correct and fair resolution of an audit or tax controversy. Sometimes this culminates with entering into a settlement contract, called a closing agreement, with the New York Tax Department, and these agreements sometimes involve a structured payment plan contractually agreed to by both parties. For example, a taxpayer might agree to pay $11,000 now and another $11,000 during the following January and February. This liability is usually fixed and final, and it exceeds $10,000. Now, a liability like this might never make it to collections unless the taxpayer doesn’t make a payment when required. If it did though, should the taxpayer’s driver’s license be subject to suspension under the terms of an agreement like this or in similar settlements where both parties structure a contract with a liability payment plan? No way.

In the Tax Department’s new suspension program, however, we’re seeing situations where taxpayers who have contractually agreed to pay a liability at a later point in time through a payment plan (not necessarily through a formal collections payment plan, but through a formal settlement contract), are receiving 60-day driver’s license proposed suspension notifications.  These notices are sometimes auto-generated after the terms of the settlement agreement are communicated to the Tax Department’s collection and enforcement division. The Tax Department’s audit and enforcement divisions are aware of this glitch, and we are told they are working toward a solution. In the interim, and until this no longer occurs, two steps can lessen the potential stress of a client or taxpayer receiving one of these notices.  First, you can remind the Tax Department when resolving the case that the payment agreement as structured should not result in the issuance of a driver’s license proposed suspension notice. Second, make sure you and your client are on the lookout for any correspondence from the Tax Department or DMV after the settlement agreement is processed. If you catch the notice after it’s issued and contact the Tax Department, they should be able to straighten the facts out and cancel it before the matter is referred to the DMV. If the Tax Department can’t or won’t cancel the notice, the taxpayer can consider a valid appeal of the proposed suspension.

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