1. (1) Where any personfails to timely file a return, fails to timely pay any taxes due orfails to meet or fulfill any other act or requirement of the Tax Law,thereby subjecting such person to the additions to tax, penalties,or interest penalty imposed pursuant to section 182-a(10)(b), 289-b(1)(a),289-b(2), 433(1)(a), 481(1)(a)(i), 512(1)(a), 527(b), 658(c)(4)(C)(i),685(a), 685(f), 685(h), 685(o), 685(u), 685(v), 685(w), 1085(a), 1085(n),1085(o), 1145(a)(1)(i), 1145(c), 1145(e), or 1416(b) of the Tax Law,or the interest amount imposed pursuant to section 1145(a)(1)(ii)of such law, the applicable additions to tax, penalties, interestpenalty and/or the interest amount, as listed above, must be imposedunless it is shown that such failure was due to reasonable cause andnot due to willful neglect. In the event that these amounts have beenimposed and it is later determined any such failure was due to reasonablecause and not due to willful neglect, all or part of these amountswill be cancelled. The absence of willful neglect alone is not sufficientgrounds for not imposing or for cancelling these amounts.
2. (2) As used in this section,the term taxpayer means the person against whom the amountsdescribed in paragraph (1) of this subdivision have been assessedor are assessable.
3. (3) As used in this section,the phrase articles governed by article 27 of the Tax Law meansand includes articles 9 (Corporation Tax), 9-A (Franchise Tax on BusinessCorporations), 13 (Tax on Unrelated Business Income), 32 (FranchiseTax on Banking Corporations), 33 (Franchise Taxes on Insurance Corporations)and 33-A (Tax on Independently Procured Insurance) of such law.

4. (b) Except where reasonablecause exists or is presumed to exist pursuant to subdivision (c) ofthis section, all of the facts alleged as a basis for reasonable causemay be required to be affirmatively shown in a written statement madeby the taxpayer. Where the taxpayer is unable to provide such a statementor does not have a personal knowledge of such facts, a showing ofreasonable cause may be made on the taxpayer's behalf by an individualwith a personal knowledge of such facts. In determining whether reasonablecause exists, in addition to an evaluation of such facts, the taxpayer'sprevious compliance record with respect to all of the taxes imposedpursuant to the Tax Law may be taken into account.

   1. (1) Reasonable causeshall not be determined to exist as a basis for not imposing or forcancelling the additions to tax for failure to file a return, pursuantto section 685(a)(1) or 1085(a)(1) of the Tax Law, or for failureto pay the amount of tax shown on such return, pursuant to section685(a)(2) or 1085(a)(2) of such law, where it is determined that thetaxpayer or the taxpayer's duly authorized representative couldhave reasonably been expected to timely request extensions of timeto file the return or extensions of time to pay the tax due, but failedto do so. However, reasonable cause may be determined to exist withrespect to these additions to tax where:

      1. (i) no extensions oftime to file the return or no extensions of time to pay the tax duehave been requested and it is determined that, given the circumstances,it would have been unreasonable to expect such extensions to be requested;
      2. (ii) a taxpayer hascomplied with and exhausted all of the provisions with respect toextensions of time for filing the return or extensions of time forpaying the tax due but was nevertheless unable to file or to pay onor before the extended due dates; or
      3. (iii) for purposesof the additions to tax under 1085(a)(1) and (2), a taxpayer has attemptedto comply, pursuant to subparagraph (e)(3)(i) of this section, withthe provisions relating to an extension of time for filing the return.

   2. (2) A showing of reasonablecause with respect to the addition to tax under section 685(a)(2)of the Tax Law will be presumed, with respect to any underpaymentof tax, where the taxpayer has:

      1. (i) satisfied the requirementsof section 157.2 of this Title, relating to an automatic extensionof time for filing a tax return; and
      2. (ii) the excess ofthe amount of tax shown on the tax return over the amount of tax paidon or before the date prescribed for the filing of the tax return(by virtue of tax withheld, payments of estimated tax and the paymentin full of the estimated tax liability pursuant to section 157.2[a][4]of this Title) is no greater than 10 percent of the amount of taxshown on the tax return; and
      3. (iii) any balance dueshown on the tax return is remitted with such return.
   3. (3) A showing of reasonablecause with respect to the additions to tax under section 1085(a)(2)of the Tax Law (except in the case of such an addition to tax imposedwith respect to a liability arising under article 33-A of such law)will exist for purposes of articles 9-A, 13, 32 and 33, or will bepresumed to exist for purposes of article 9 or 22, with respect toany underpayment of tax, where the taxpayer has a valid automaticor initial extension of time for filing the return.

   4. (4) The existence orpresumption of reasonable cause provided for in paragraphs (2) and(3) of this subdivision will apply to only that period of time forwhich a taxpayer has a valid automatic or initial extension of timefor filing the return and, if any, the additional extensions of timefor filing such return.

      (d) Grounds for reasonablecause.

      The following exemplify grounds forreasonable cause, where clearly established by or on behalf of thetaxpayer:

   5. (1) Death, illnessor absence.

      1. (i) The death or seriousillness of the taxpayer or the taxpayer's unavoidable absencefrom its usual place of business, which precluded timely compliance,may constitute reasonable cause, provided that: within a justifiable periodof time after the death, illness or absence. A justifiable periodof time is that period which is substantiated by or on behalf of thetaxpayer as a reasonable period of time for filing the return and/orfor paying any tax, based on the facts and circumstances in each case.

         1. (a) in the case of the failure tofile any return, the applicable return is filed; or
         2. (b) in the case of the failure topay, pay over or deposit any tax, such amount is paid, paid over ordeposited,

      2. (ii) As used in subparagraph(i) of this paragraph, the term taxpayer also includes:

         1. (a) for purposes of articles12-A, 18, 20, 21, 21-A and 33-A of the Tax Law, a responsible partner,officer, director, shareholder, employee or other representative ofthe taxpayer;
         2. (b) for purposes of article 22 of the Tax Law, a member of the taxpayer'sfamily or the taxpayer's personal representative or employer;
         3. (c) for purposes ofthe articles governed by article 27 of the Tax Law (not including,for purposes of this paragraph, article 33-A of such law), a responsibleofficer, employee or other representative of the taxpayer;
         4. (d) for purposes of article28 of the Tax Law, a partner, responsible partner, officer, director,shareholder, employee or other representative of the taxpayer; and
         5. (e) for purposes ofarticle 31 of the Tax Law, any other person acting in a fiduciaryor representative capacity for the taxpayer.

   6. (2) Destruction of placeof business or business records.

      1. (i) The destructionof the taxpayer's place of business or business records by afire or other documented casualty, which precluded timely compliance,may constitute reasonable cause, provided that: within a justifiable periodof time after the casualty has taken place. A justifiable period oftime is that period which is substantiated by or on behalf of thetaxpayer as a reasonable period of time for filing the return and/orfor paying any tax, based on the facts and circumstances in each case.

         1. (a) in the case of the failure tofile any return, the applicable return is filed; or
         2. (b) in the case of the failure topay, pay over or deposit any tax, such amount is paid, paid over ordeposited,

      2. (ii) As used in subparagraph(i) of this paragraph, the phrase taxpayer's place of businessor business records includes:

         1. (a) for purposes of articles 12-A, 18, 21, 21-A and 28of the Tax Law and the articles governed by article 27 of such law,the place of business or business records of the taxpayer's representatives;
         2. (b) for purposes ofarticle 20 of the Tax Law, the place of business or business recordsof taxpayer's representative or the taxpayer's inventoryor stamps;
         3. (c) for purposes of article 22 of the Tax Law, the place of businessor business records of the taxpayer's personal representativeor employer, or the taxpayer's resident or income records (includingwage and tax statements and returns of information); and
         4. (d) for purposes of article31 of the Tax Law, the place of business or the business records ofany other person acting in a fiduciary or representative capacityfor the taxpayer.
   7. (3) Inability to timelyassemble information. Except as provided in subdivision (e) of thissection, the inability for reasons beyond the taxpayer's controlto timely obtain and assemble essential information required for thepreparation of a complete return, despite the exercise of reasonableefforts, may constitute reasonable cause provided a return, togetherwith a statement of facts, is timely filed and any tax is timely paidor paid over on that portion of the tax liability which can be ascertained.The relevant facts affecting that portion of the tax liability whichcannot be ascertained must be fully disclosed with the timely filedreturn. When such liability is ascertained, and where applicable collected,an amended return must be immediately filed together with paymentof any additional tax due.

   8. (4) Pending petitions,actions or proceedings. A pending petition to the Commissioner ofTaxation and Finance for an advisory opinion or a declaratory ruling,a pending conciliation conference proceeding in the Bureau of Conciliationand Mediation Services of the Division of Taxation, a pending petitionto the Division of Tax Appeals or a pending action or proceeding forjudicial determination may constitute reasonable cause, until thetime at which the taxpayer has exhausted its administrative or judicialremedies, as applicable, for one or more taxable periods (or conveyancesfor purposes of article 31 of the Tax Law), the return or returnsfor which are due subsequent to the filing of the petition with theCommissioner of Taxation and Finance, the commencement of the conciliationconference proceeding, the filing of the petition with the Divisionof Tax Appeals or the commencement of the judicial action or proceeding.The ground for reasonable cause described in this paragraph is subjectto the following conditions:

      1. (i) the petition, actionor proceeding must involve a question or issue affecting whether ornot the person or entity or conveyance is subject to tax and/or requiredto file a return or, for purposes of article 28 of the Tax Law, whethersuch person or entity is required to file a return and collect andremit sales tax or file a return and pay use tax;
      2. (ii) the petition,action or proceeding must not be based on a position which is frivolousnor may it be intended to delay or impede the administration of theapplicable article of the Tax Law; and
      3. (iii) the facts andcircumstances for such taxable period(s) or conveyance(s) must beidentical or virtually identical to those covered by the petition,action or proceeding.

   9. (5) Additional grounds.Any other ground for delinquency which would appear to a person ofordinary prudence and intelligence as a reasonable cause for delayand which clearly indicates an absence of willful neglect may be determinedto be reasonable cause.

      (e)

   10. (1) Except as providedfor in paragraph (3) of this subdivision, for purposes of article22 of the Tax Law and for purposes of the articles governed by article27 of such law, an inability to timely obtain and assemble essentialinformation (including wage and tax statements or returns of informationfrom an employer or payor) required for the preparation of a completereturn shall not be a basis for reasonable cause.

   11. (2) Where an inabilityto timely obtain and assemble essential information required for thepreparation of a complete return exists and where extensions of timefor filing the return are available, such extensions of time for filingmust be obtained, a return which reflects the known tax liabilitymust be filed on or before the extended due date for filing, and anybalance of tax must be paid with the return on that portion of thetax liability which can be ascertained and shown on such return. Therelevant facts affecting that portion of the tax liability which cannotbe ascertained must be fully disclosed with such timely filed returns.When such liability is ascertained, an amended return must be immediatelyfiled together with any additional tax due.

       1. (i) However, for purposesof the articles governed by article 27 of the Tax Law, where a taxpayer: an inability for reasons beyond the taxpayer'scontrol to obtain and assemble essential information may constitutereasonable cause for failure to file a return and for failure to paythe amount shown as tax on the return, where such inability precludedthe taxpayer from properly estimating the tax as finally determinedthereby invalidating the extensions of time for filing the return.

          1. (a) makes a timely applicationfor an extension of time to file the return;
          2. (b) makes a good-faith effort toproperly estimate the tax due; and
          3. (c) pays with the application for extension of timefor filing any unpaid balance of the tax as estimated;

       2. (ii) In support ofthe ground described in subparagraph (i) of this paragraph as a basisfor reasonable cause, the taxpayer or the taxpayer's representativemust:

          1. (a) indicate whythe estimated tax would not be predicated on the preceding year'stax;
          2. (b) indicatewhat information was unavailable;
          3. (c) explain the reason or reasons why such informationwas unavailable, despite reasonable efforts by or on behalf of thetaxpayer to obtain the missing information; and
          4. (d) further explain how the originalestimation of tax was derived and what allowances, if any, were includedin the estimation to provide for the unknown tax liability.
       3. (iii) Where the TaxLaw does not provide for an extension of time for filing, a returnwhich reflects the known tax liability must be filed on or beforethe prescribed due date for filing and the tax must be paid with thereturn on that portion of the tax liability which can be ascertainedand shown on such return. The relevant facts affecting that portionof the tax liability which cannot be ascertained must be fully disclosedwith such timely filed returns. When such liability is ascertained,an amended return must be immediately filed together with any additionaltax due.

       (3)

   (c)

5. (f) The provisions ofthis section shall apply to the extent pertinent where any personis subject to the penalty imposed by section 685(k) of the Tax Law.in addition to any relevant grounds for reasonable cause as exemplifiedin subdivision (d) of this section, further grounds for reasonablecause for failure to secure and supply any identifying numbers (asdescribed in such section 685[k]), where clearly established,may include the following:

   1. (1) a reliance in goodfaith on an identifying number provided to such person which subsequentlyproves to be erroneous; or

   2. (2) awaiting the issuanceof an identifying number or the inability to secure an identifyingnumber despite repeated, documentable attempts to do so.

      (g)

   3. (1) The provisions ofthis section shall apply to the extent pertinent where any taxpayeris subject to the additions to tax or penalties imposed pursuant tosections 685(p), 1085(k) and 1145(a)(1)(vi) of the Tax Law and suchunderstatement or omission (as described in such sections), or partthereof, was due to reasonable cause and, for purposes of section1145(a)(1)(vi), is not due to willful neglect. In such a case, reasonablecause, and the absence of willful neglect, if applicable, may be determinedto exist only where the taxpayer has acted in good faith. Further,reasonable cause and good faith, and the absence of willful neglect,if applicable, shall be considered as a basis for cancellation orwaiver of all or part of the assessed or assessable additions to taxor penalties imposed pursuant to such sections of the Tax Law onlyafter the understatement of tax or omission has been reduced, in accordancewith the provisions of such sections, by that portion of the tax attributableto any item for which there is or was substantial authority for thetax treatment thereof, or for which the relevant facts affecting thetax treatment were adequately disclosed with the original return,if applicable.

   4. (2) In determining whetherreasonable cause and good faith exist, the most important factor tobe considered is the extent of the taxpayer's efforts to ascertainthe proper tax liability. In addition to any relevant grounds forreasonable cause as exemplified in subdivision (d) of this section,circumstances that indicate reasonable cause and good faith with respectto the substantial understatement or omission of tax, where clearlyestablished by or on behalf of the taxpayer, may include the following:

      1. (i) an honest misunderstandingof fact or law that is reasonable in light of the experience, knowledgeand education of the taxpayer;
      2. (ii) a computationalor transcriptional error;
      3. (iii) the filing ofan amended return which shows an additional amount of tax due or whichadequately discloses the tax treatment of an item which should havebeen adequately disclosed with the original return, provided the amendedreturn is filed prior to the time the taxpayer is first contactedby the Department of Taxation and Finance concerning an audit or anexamination of the return; and

      4. (iv) the reliance bythe taxpayer on any written information, professional advice or otherfacts, provided such reliance was reasonable and the taxpayer hadno knowledge of circumstances which should have put the taxpayer uponinquiry as to whether such facts were erroneous;

         1. (a) reliance on professional advice.The provisions regarding a taxpayer's reliance on professionaladvice found in this subparagraph shall be applied as follows:

            1. (1) facts and circumstances;minimum and requirements. All facts and circumstances must be takeninto account in determining whether a taxpayer has reasonably reliedin good faith on professional advice as to the treatment of the taxpayerunder the Tax Law. However, in no event will a taxpayer be consideredto have reasonably relied in good faith on professional advice unlessthe requirements of this subclause are satisfied. The fact that theserequirements are satisfied will not necessarily establish that thetaxpayer reasonably relied in good faith on professional advice. Forexample, reliance may not be reasonable or in good faith if the taxpayerknew, or should have known, that the advisor lacked knowledge in therelevant aspects of the Tax Law;

               1. (i) all facts and circumstancesconsidered. The advice must be based upon all pertinent facts andcircumstances and the law as it relates to those facts and circumstances.For example, the advice must take into account the taxpayer'spurposes (and the relative weight of such purposes) for entering intoa transaction and for structuring a transaction in a particular manner.In addition, the requirements of this subclause are not satisfiedif the taxpayer fails to disclose a fact that it knows, or shouldknow, to be relevant to the proper tax treatment of an item;
               2. (ii) no unreasonable assumptions.The advice must not be based on unreasonable factual or legal assumptions(including assumptions as to future events) and must not unreasonablyrely on the representations, statements, findings, or agreements ofthe taxpayer or any other person. For example, the advice must notbe based upon a representation or assumption which the taxpayer knows,or has reason to know, is unlikely to be true, such as an inaccuraterepresentation or assumption as to the taxpayer's purposes forentering into a transaction or for structuring a transaction in aparticular manner;
            2. (2) advice mustbe reasonable. Reliance upon professional advice as a basis for reasonablecause will not be supported where the advice received is unreasonable.For example, professional advice may be considered to be unreasonablewhere such advice is contrary to written guidance or published informationapplicable or relevant to the given facts or circumstances.
   5. (3) No inference shallbe drawn from any of the provisions of this subdivision with respectto establishing reasonable cause pursuant to any other subdivisionof this section. However, the provisions of subparagraphs (2)(i) and(iv) of this subdivision may be applicable, under the appropriatecircumstances, to establishing reasonable cause pursuant to subdivision(d) of this section, (see paragraph [d][5] ofthis section).

6. (h) The provisions ofthis section shall also apply to the extent pertinent where any personis subject to penalty under section 1145(a)(3), 1145(a)(4), 1145(g)or 1145(h). A determination of reasonable cause with respect to thesefailures will be based on the facts and circumstances leading to thefailure at issue. It must be established by or on behalf of a persondescribed in this subdivision that the failure occurred despite theexercise of ordinary business care and prudence.

   1. (1) Pursuant to statutoryprovisions for joint administration and applicability, the provisionsof this section will also apply as follows:

      1. (i) to the extent thatthe provisions of this section apply to article 12-A of the Tax Law,they will also apply to the taxes imposed pursuant to article 13-A(Tax on Petroleum Businesses) of such law;
      2. (ii) to the extentthat the provisions of this section apply to article 22 of the TaxLaw, they will also apply to the taxes imposed pursuant to articles26 (Estate Tax) and 26-A (Gift Tax) and to the local taxes imposedpursuant to the authority of articles 30 (City of New York PersonalIncome Tax on Residents), 30-A (City of Yonkers Income Tax Surchargeon Residents) and 30-B (City of Yonkers Earnings Tax on Nonresidents)of such law, and to article 2-E (City of New York Earnings Tax onNonresidents) of the General City Law; and
      3. (iii) to the extentthat the provisions of this section apply to article 28 of the TaxLaw, they will also apply to the taxes imposed pursuant to article28-A (Passenger Car Rentals) and to the taxes imposed pursuant tothe authority of article 29 (Local Enabling Act) of such law.
   2. (2) See sections 2396.11and 2397.7 of this Title for provisions regarding reasonable causethat are applicable to the Electronic Filing and Funds Transfer Programfor Certain Taxpayers Remitting Withholding Taxes and the ElectronicFunds Transfer Program For Certain Taxpayers Remitting Taxes Underand Pursuant to the Authority of articles 12-A, 13-A, 28 and 29 ofthe Tax Law, provided for by sections 9 and 10, respectively, of theTax Law.

   (i)

(a)