1. (1) The term taxpayer means any person who is required to file a return or report underarticle 9, 9-A, 22, 32, or 33 of the Tax Law.

2. (2) As used in this Part,the term taxpayer includes:

   1. (i) corporations subjectto tax under section 183, 184, 185, or 186 of article 9 of the TaxLaw and persons subject to tax under section 186-a or 186-e of article9 of the Tax Law;
   2. (ii) general businesscorporations subject to tax under article 9-A of the Tax Law;
   3. (iii) individuals (includingsole proprietors), partnerships (including a limited liability company [LLC]that is treated as a partnership for Federal income tax purposes),estates and trusts, partners in a partnership (including members ofa LLC that is treated as a partnership for Federal income tax purposes),shareholders of an S corporation and beneficiaries of an estate ortrust subject to tax or required to file a tax return under article22 of the Tax Law;
   4. (iv) banking corporationssubject to tax under article 32 of the Tax Law; and
   5. (v) insurance corporationsand captive insurance companies subject to tax under article 33 ofthe Tax Law.

3. (3) The term taxpayer also includes each member of a combined group filing under article9-A, 32, or 33 of the Tax Law. Each member must disclose its participationin a New York reportable transaction on a separate basis in the mannerand form prescribed by the commissioner.

   (b) Participation.

4. (1) New York listed transactions.A taxpayer has participated in a New York listed transaction if thetaxpayer's tax return reflects tax consequences or a tax strategydescribed by notice or other form of published guidance that liststhe transaction under section 2500.3(b) of this Part. A taxpayer alsohas participated in a New York listed transaction if the taxpayerknows or has reason to know that the taxpayer's tax benefitsare derived directly or indirectly from tax consequences or a taxstrategy described by notice or other form of published guidance thatlists a transaction under section 2500.3(b) of this Part. A publishednotice or other form of guidance may identify other types or classesof persons that will be treated as participants in a New York listedtransaction.
5. (2) New York confidentialtransactions. A taxpayer has participated in a New York confidentialtransaction if the taxpayer's tax return reflects a tax benefitfrom the transaction and the taxpayer's disclosure of the taxtreatment or tax structure of the transaction is limited in the mannerdescribed in section 2500.3(c) of this Part. If a partnership's,S corporation's or trust's disclosure is limited, and thepartner's, shareholder's, or beneficiary's disclosureis not limited, then the partnership, S corporation, or trust, andnot the partner, shareholder, or beneficiary, has participated inthe New York confidential transaction.
6. (3) New York transactionswith contractual protection. A taxpayer has participated in a NewYork transaction with contractual protection if the taxpayer'stax return reflects a tax benefit from the transaction and, as describedin section 2500.3(d) of this Part, the taxpayer has the right to thefull or partial refund of fees or the fees are contingent. If a partnership,S corporation, or trust has the right to a full or partial refundof fees or has a contingent fee arrangement, and the partner, shareholder,or beneficiary does not individually have the right to the refundof fees or a contingent fee arrangement, then the partnership, S corporation,or trust, and not the partner, shareholder, or beneficiary, has participatedin the New York transaction with contractual protection.
7. (4) Shareholder of foreigncorporation. A taxpayer who owns or controls, either directly or indirectly,more than 50 percent of the voting stock of a corporation not subjectto New York State tax is deemed to participate in a transaction describedin section 2500.3(b), (c) and (d) of this Part if such corporationwould be considered to participate in the transaction under the rulesof this section if it were a taxpayer filing a tax return that reflectsthe items from the transaction and the tax return of the controllingshareholder reflects a tax benefit from the transaction.

8. (5) Examples. The followingexamples illustrate the provisions of this subdivision:

   1. (i) Example of participationin a New York confidential transaction. XYZ is a limited liabilitycompany treated as a partnership for New York State tax purposes andis required to file a tax return under article 22 of the Tax Law.X, Y, and Z are members of XYZ and are taxpayers for New York Statepurposes. X is an individual, Y is an S corporation, and Z is a partnership.XYZ enters into a New York confidential transaction under section2500.3(c) of this Part. X is bound by the confidentiality agreement,but Y and Z are not bound by the agreement. As a result of the transaction,XYZ, X, Y, and Z all reflect a tax benefit on their tax returns. BothXYZ's and X's disclosure of the tax treatment and tax structureare limited in the manner described in section 2500.3(c) of this Partand their tax returns reflect a tax benefit from the transaction.Therefore, XYZ and X have participated in the New York confidentialtransaction. Neither Y nor Z has participated in the New York confidentialtransaction because they are not subject to the confidentiality agreement.

   2. (ii) Example of participationin a New York transaction with contractual protection. CorporationA is required to file a return under article 9-A of the Tax Law. CorporationA enters into a New York transaction with contractual protection undersection 2500.3(d) of this Part. Corporation A is bound by the termsof the agreement which outlines potential tax consequences that mayresult from participation in the transaction, and includes a contingentfee arrangement based on Corporation A's realization of tax benefits.Corporation A has participated in the New York transaction with contractualprotection because its tax return reflects a tax benefit from thetransaction and the fee was contingent upon the tax benefit realizedfrom the transaction. Therefore, Corporation A has participated ina New York transaction with contractual protection.

      (c) Substantiallysimilar.

      The term substantially similar includes any transaction that is expected to obtain the same orsimilar types of tax consequences and that is either factually similaror based on the same or similar tax strategy. Receipt of any writtenadvice regarding the tax consequences of the transaction is not relevantto the determination of whether the transaction is the same as orsubstantially similar to another transaction. Further, the term substantiallysimilar must be broadly construed in favor of disclosure.

      (d) Tax.

      The term tax means franchise and excise taxesand the tax on furnishing of utility services under article 9, businesscorporation franchise tax under article 9-A, personal income tax underarticle 22, franchise tax on banking corporations under article 32,and franchise taxes on insurance corporations under article 33.

      (e) Tax benefit.

      A tax benefit includes deductions, exclusions,and modifications included in gross receipts, gross earnings, income(including entire net income, gross income, New York source income,New York adjusted gross income), gain, loss, assets, liabilities,total capital, capital stock, tax credits, nonrecognition of gain,status as an entity exempt from New York State taxation, and any othertax consequences that may reduce a taxpayer's New York State'stax liability by affecting the amount, timing, character, or sourceof any such item, amount or activity.

      (f) Tax return.

      For purposes of this Part, the term tax return includes original returns or reports, amended returns or reportsand applications for credit or refund of tax.

      (g) Tax treatment.

      The tax treatment of a transaction is thepurported or claimed New York State tax treatment of the transaction.

      (h) Tax structure.

      The tax structure of a transaction is anyfact that may be relevant to understanding the purported or claimedNew York State tax treatment of the transaction.

Tax Law, § 25(a)(2)

For purposes of this Part,the following terms are defined as follows:

(a) Taxpayer.