Section 685. Additions to tax and civil penalties

--(a) (1) Failure to file
  tax return.--
    (A) In case of failure to file a tax return under this article  on  or
  before  the  prescribed date (determined with regard to any extension of
  time for filing), unless it  is  shown  that  such  failure  is  due  to
  reasonable cause and not due to willful neglect, there shall be added to
  the  amount  required  to be shown as tax on such return five percent of
  the amount of such tax if the failure is for not more  than  one  month,
  with  an  additional  five percent for each additional month or fraction
  thereof during which such failure continues, not  exceeding  twenty-five
  percent in the aggregate.
    (B) In the case of a failure to file a return of tax within sixty days
  of the date prescribed for filing of such return (determined with regard
  to  any  extension  of  time  for  filing), unless it is shown that such
  failure is due to reasonable cause and not due to willful  neglect,  the
  addition  to  tax  under subparagraph (A) of this paragraph shall not be
  less than the lesser of one hundred dollars or one  hundred  percent  of
  the amount required to be shown as tax on such return.
    (C)  For  purposes of this paragraph, the amount of tax required to be
  shown on the return shall be reduced by the amount of any  part  of  the
  tax  which  is  paid on or before the date prescribed for payment of the
  tax and by the amount of any credit against the tax which may be claimed
  upon the return.
    (2) Failure to pay tax shown on return.--In case of failure to pay the
  amounts shown as tax on any return  required  to  be  filed  under  this
  article  on or before the prescribed date (determined with regard to any
  extension of time for payment), unless it is shown that such failure  is
  due  to  reasonable cause and not due to willful neglect, there shall be
  added to the amount shown as tax on such return one-half of one per cent
  of the amount of such tax if the failure is not for more than one month,
  with an additional one-half of one per cent for each additional month or
  fraction thereof during which  such  failure  continues,  not  exceeding
  twenty-five  per cent in the aggregate. For the purpose of computing the
  addition for any month, the amount of tax shown on the return  shall  be
  reduced  by the amount of any part of the tax which is paid on or before
  the beginning of such month and by the amount of any credit against  the
  tax  which may be claimed upon the return. If the amount of tax required
  to be shown on a return is less than the amount shown  as  tax  on  such
  return,  this  paragraph  shall  be  applied  by substituting such lower
  amount.
    (3) Failure to pay tax required to be shown  on  return.--In  case  of
  failure  to pay any amount in respect of any tax required to be shown on
  a return required to be filed under this article which is not  so  shown
  (including  an assessment made pursuant to subsection (a) of section six
  hundred eighty-two of this article) within twenty-one calendar  days  of
  the  date  of  a  notice  and  demand therefor (ten business days if the
  amount for which such notice and demand is made equals  or  exceeds  one
  hundred  thousand  dollars), unless it is shown that such failure is due
  to reasonable cause and not due to willful neglect, there shall be added
  to the amount of tax stated in such notice and demand  one-half  of  one
  percent  of such tax if the failure is not for more than one month, with
  an additional one-half of one  percent  for  each  additional  month  or
  fraction  thereof  during  which  such  failure continues, not exceeding
  twenty-five percent in the aggregate. For the purpose of  computing  the
  addition  for  any  month,  the  amount  of tax stated in the notice and
  demand shall be reduced by the amount of any part of the  tax  which  is
  paid before the beginning of such month.
    (4) Limitations on additions.--

    (A)  With  respect  to  any  return,  the amount of the addition under
  paragraph one of this subsection shall be reduced by the amount  of  the
  addition  under  paragraph two of this subsection for any month to which
  an addition applies under both paragraphs  one  and  two.  In  any  case
  described  in  subparagraph (B) of such paragraph one, the amount of the
  addition under such paragraph one shall not be reduced below the  amount
  provided in such subparagraph.
    (B)  With  respect  to  any return, the maximum amount of the addition
  permitted under paragraph three of this subsection shall be  reduced  by
  the  amount  of  the  addition  under  paragraph  one of this subsection
  (determined without regard to subparagraph (B) of such paragraph)  which
  is  attributable  to the tax for which the notice and demand is made and
  which is not paid within ten days of such notice and demand.
    (b) Deficiency due to negligence.--
    (1) If any part of a deficiency is due to  negligence  or  intentional
  disregard of this article or rules or regulations hereunder (but without
  intent  to  defraud), there shall be added to the tax an amount equal to
  five percent of the deficiency.
    (2) There shall be added  to  the  tax  (in  addition  to  the  amount
  determined  under  paragraph  one of this subsection) an amount equal to
  fifty  percent  of  the  interest  payable  under  section  six  hundred
  eighty-four with respect to the portion of the underpayment described in
  such   paragraph   one  which  is  attributable  to  the  negligence  or
  intentional disregard referred to in such paragraph one, for the  period
  beginning  on  the  last  date  prescribed  by  law  for payment of such
  underpayment (determined without regard to any extension) and ending  on
  the  date  of the assessment of the tax (or, if earlier, the date of the
  payment of the tax).
    (3) If any payment is shown on a return made by a payor  with  respect
  to  dividends,  patronage dividends and interest under subsection (a) of
  section six thousand forty-two, subsection (a) of section  six  thousand
  forty-four  or  subsection (a) of section six thousand forty-nine of the
  internal revenue code, respectively, and the payee fails to include  any
  portion  of  such payment in New York adjusted gross income, any portion
  of an underpayment attributable to such failure shall  be  treated,  for
  purposes  of  this  subsection,  as  due to negligence in the absence of
  clear and convincing evidence to the contrary. If any penalty is imposed
  under this subsection by reason of the preceding sentence, the amount of
  the penalty imposed by paragraph one of this subsection  shall  be  five
  percent  of the portion of the underpayment which is attributable to the
  failure described in the preceding sentence.
    (c) Failure by individual to pay estimated income tax.-- (1)  Addition
  to  the  tax.--Except  as  otherwise  provided  in  this  subsection and
  subsection (d) of this section, in  the  case  of  any  underpayment  of
  estimated  tax  by  an individual, there shall be added to the tax under
  this article for the taxable year an amount determined by  applying  the
  underpayment  rate  established  under  subsection  (j)  of  section six
  hundred ninety-seven of this part, or if no rate is set, at the rate  of
  seven  and one-half percent per annum, to the amount of the underpayment
  for the period of the underpayment. Such period shall run from  the  due
  date for the required installment to the earlier of the fifteenth day of
  the  fourth  month  following  the  close  of  the taxable year or, with
  respect to any portion of the  underpayment,  the  date  on  which  such
  portion  is  paid.  For  purposes of determining such date, a payment of
  estimated tax shall be credited against unpaid required installments  in
  the  order  in  which  such  installments are required to be paid. There
  shall be four required installments for each taxable year, due on  April

  fifteenth,  June  fifteenth and September fifteenth of such taxable year
  and on January fifteenth of the following taxable year.
    (2) Amount of underpayment.--For purposes of paragraph one, the amount
  of the underpayment shall be the excess of the required installment over
  the  amount,  if  any, of the installment paid on or before the due date
  for the installment.
    (3) Required installment. (A) Except as provided in paragraph four  of
  this  subsection,  the  amount  of  any  required  installment  shall be
  twenty-five percent of the required annual payment.
    (B) The required annual payment is the lesser of
    (i) ninety percent of the tax shown on the return for the taxable year
  (or, if no return is filed, ninety percent of the tax for such year), or
    (ii) one hundred percent of  the  tax  shown  on  the  return  of  the
  individual  for  the  preceding taxable year. Provided, however, the tax
  shown on such return for taxable years beginning  in  two  thousand  two
  shall  be  the  tax  calculated  as  if such years began in two thousand
  three. Provided further, however, that the tax shown on such return  for
  taxable  years beginning in two thousand eight shall be calculated as if
  paragraph three of subsection (f) of section six hundred fifteen of this
  article has been in effect for taxable years beginning in  two  thousand
  eight.  Further  provided  that the tax shown on such return for taxable
  years beginning in two thousand eight shall be the tax calculated as  if
  such years began in two thousand nine.
    Clause  (ii)  of  this  subparagraph  shall not apply if the preceding
  taxable year was  not  a  taxable  year  of  twelve  months  or  if  the
  individual did not file a return for such preceding taxable year.
    (C) Limitation on use of preceding year's tax.
    (i) General. If the New York adjusted gross income shown on the return
  of  the  individual  for  the preceding taxable year exceeds one hundred
  fifty  thousand  dollars,  clause  (ii)  of  subparagraph  (B)  of  this
  paragraph shall be applied by substituting "one hundred ten percent" for
  "one hundred percent".
    (ii)  Separate  returns.  In  the  case of a husband and wife who file
  separate returns pursuant to  subsection  (b)  of  section  six  hundred
  fifty-one  for  the taxable year for which the amount of the installment
  is being determined, clause (i) of this subparagraph shall be applied by
  substituting "seventy-five thousand  dollars"  for  "one  hundred  fifty
  thousand dollars".
    (4)  Annualized  income  installment.--(A) In general.--In the case of
  any  required  installment,  if  the  individual  establishes  that  the
  annualized  income installment determined under subparagraph (B) of this
  paragraph is less than the amount determined under paragraph three,  the
  annualized  income  installment  shall  be the required installment. Any
  reduction in a required installment resulting from  the  application  of
  this  subparagraph  shall  be recaptured by increasing the amount of the
  next required installment determined under paragraph three by the amount
  of such reduction, and by increasing successive required installments as
  necessary to effect full recapture.
    (B) Determination of annualized income installment.--In  the  case  of
  any  required  installment,  the  annualized  income  installment is the
  excess, if any, of an amount equal to the applicable percentage  of  the
  tax  for the taxable year computed by placing on an annualized basis the
  taxable income and minimum taxable income for months in the taxable year
  ending before the due date  for  the  installment,  over  the  aggregate
  amount  of  any  prior  required  installments for the taxable year. The
  applicable percentage of  the  tax  shall  be  twenty-two  and  one-half
  percent  in the case of the first installment, forty-five percent in the
  case of the second installment, sixty-seven and one-half percent in  the

  case  of  the  third  installment  and ninety percent in the case of the
  fourth installment, and shall be computed without regard to any increase
  in the rates applicable to the taxable year  unless  such  increase  was
  enacted at least thirty days prior to the due date of the installment.
    (5) Definitions and special rules.--(A) Definition of the term tax and
  application of credits against tax.--For purposes of this subsection and
  subsection  (d), the term "tax" means the tax imposed under this article
  minus the credits against tax allowed under this article, other than the
  credit under section six hundred seventy-three, relating to tax withheld
  on wages. The credit allowed under section six hundred seventy-three for
  the taxable year shall be deemed a payment  of  estimated  tax,  and  an
  equal  part  of such amount shall be deemed paid on each installment due
  date for such taxable year, unless the taxpayer establishes the dates on
  which all amounts were actually withheld, in which case the  amounts  so
  withheld shall be deemed payments of estimated tax on the dates on which
  such amounts were actually withheld.
    (B)   Special   rule   where   return   filed  on  or  before  January
  thirty-first.--If, on or before January thirty-first  of  the  following
  taxable  year, the taxpayer files a return for the taxable year and pays
  in full the amount computed on the return as payable, then  no  addition
  to  tax  shall  be  imposed  under  paragraph  one  with  respect to any
  underpayment of the fourth required installment for the taxable year.
    (C) Special rules for farmers and  fishermen.--For  purposes  of  this
  subsection,  if  an  individual is a farmer or fisherman for any taxable
  year there shall be only one required installment for the taxable  year,
  due  on  January  fifteenth  of  the following taxable year in an amount
  equal to the required annual payment determined under paragraph three by
  substituting sixty-six and two-thirds percent  for  ninety  percent  and
  without   regard   to  subparagraph  (C)  of  paragraph  three  of  this
  subsection. Subparagraph (B) of  this  paragraph  shall  be  applied  by
  substituting  March  first  for January thirty-first and by treating the
  required installment under this  subparagraph  as  the  fourth  required
  installment. An individual is a farmer or fisherman for any taxable year
  if  the  individual's  federal  gross  income  from  farming  or fishing
  (including oyster farming) for the taxable year is at  least  two-thirds
  of  the total federal gross income from all sources for the taxable year
  or if such individual's federal gross income  from  farming  or  fishing
  (including oyster farming) shown on the return of the individual for the
  preceding taxable year is at least two-thirds of the total federal gross
  income from all sources shown on such return.
    (D)  Fiscal  years.--In  applying  this  subsection  to a taxable year
  beginning  on  any  date  other  than  January  first,  there  shall  be
  substituted,  for  the  months  specified in this subsection, the months
  which correspond thereto.
    (E) Short taxable year.--This subsection shall be applied  to  taxable
  years  of  less  than  twelve  months  in  accordance  with  regulations
  prescribed by the tax commission.
    (F) Joint estimated tax of husband and wife.--A husband and  wife  may
  make  the required annual payment determined under paragraph three as if
  they were one taxpayer, in which case the liability under paragraph  one
  with  respect  to  the estimated tax shall be joint and several. No such
  joint payment may be made if husband and  wife  are  separated  under  a
  decree  of  divorce  or  separate maintenance, or if they have different
  taxable years. If a joint payment is made but husband and wife determine
  their taxes under this article separately, the estimated  tax  for  such
  year  may  be treated as the estimated tax of either husband or wife, or
  may be divided between them, as they may elect.

    (6) Trusts and certain estates. (A)  General.  This  subsection  shall
  apply to any trust or estate except as provided in subparagraphs (B) and
  (C) of this paragraph.
    (B)  Exception  for  estates and certain trusts. This subsection shall
  not apply with respect to any taxable year ending before  the  date  two
  years  after  the date of the decedent's death to (i) the estate of such
  decedent or (ii) any trust all of which was treated (under subpart E  of
  part  I  of subchapter J of chapter one of the internal revenue code) as
  owned by the decedent and to which the residue of the decedent's  estate
  will  pass  under his will (or, if no will is admitted to probate, which
  is the trust primarily responsible for paying debts, taxes and  expenses
  of administration).
    (C)  Special  rule  for  annualizations.  In the case of any estate or
  trust, subparagraph (B) of paragraph four of this  subsection  shall  be
  applied by substituting "ending before the date one month before the due
  date  for  the  installment"  for  "ending  before  the due date for the
  installment".
    (D) In the case of a trust, the trustee may elect to treat any portion
  of a payment of estimated tax made by such trust for any taxable year of
  the trust as a payment made by a beneficiary of such trust.  Any  amount
  so  treated  shall  be treated as paid or credited to the beneficiary on
  the last day of such taxable year, and for purposes of this  subsection,
  the amount so treated shall not be treated as a payment of estimated tax
  made  by  the  trust, but shall be treated as a payment of estimated tax
  made by such beneficiary on the January fifteenth following the  end  of
  the trust's taxable year.
    (E) An election under subparagraph (D) of this paragraph shall be made
  on or before the sixty-fifth day after the close of the taxable year and
  in  such  manner  as  the  commissioner  of  taxation  and  finance  may
  prescribe.
    (F) Extension to last year of estate.--In the case of a  taxable  year
  reasonably  expected  to  be  the  last  taxable  year of an estate, any
  reference in subparagraph (D) of this paragraph  to  a  trust  shall  be
  treated  as including a reference to an estate, and the fiduciary of the
  estate shall be treated as the trustee.
    (d) Exceptions to addition to tax for failure to pay estimated  income
  tax.--
    (1)  Where  tax  is small amount.--No addition to tax shall be imposed
  under subsection (c) for any taxable year if the tax shown on the return
  for such taxable year (or, if no return is filed, the tax),  reduced  by
  the  credit  allowable  under section six hundred seventy-three, is less
  than three hundred dollars.
    (2) Where no tax liability for preceding taxable year.--No addition to
  tax shall be imposed under subsection (c) for any taxable  year  if  the
  preceding  taxable  year  was  a  taxable  year  of  twelve  months, the
  individual did not have any liability for tax under this article for the
  preceding taxable year and throughout the  preceding  taxable  year  the
  individual  was  a  resident of this state or a nonresident or part-year
  resident who had New York source income.
    (3) Installment due on or after individual's  death.--No  addition  to
  tax   shall  be  imposed  under  subsection  (c)  with  respect  to  any
  installment due on or after the individual's death.
    (4) Waiver in certain cases.--(A)  In  general.--No  addition  to  tax
  shall  be  imposed under subsection (c) with respect to any underpayment
  to the extent the tax commission determines that by reason of  casualty,
  disaster  or other unusual circumstances the imposition of such addition
  to tax would be against equity and good conscience.

    (B) Newly retired or disabled individuals.--No addition to  tax  shall
  be  imposed under subsection (c) with respect to any underpayment if the
  tax commission determines that in the taxable year for  which  estimated
  payments  were required to be made or in the taxable year preceding such
  taxable year the taxpayer retired after having attained age sixty-two or
  became  disabled, and that such underpayment was due to reasonable cause
  and not to willful neglect.
    (e) Deficiency due to fraud.--(1) If any part of a deficiency  is  due
  to  fraud,  there shall be added to the tax an amount equal to two times
  the deficiency.
    (2) The addition to tax under this subsection shall be in lieu of  any
  other addition to tax imposed by subsection (a) or (b).
    (3) In the case of a joint return under section six hundred fifty-one,
  this  subsection  shall  not  apply  with respect to the tax of a spouse
  unless some part of the underpayment is due to the fraud of such spouse.
    (f) Non-willful failure to pay withholding  tax.--  If  any  employer,
  without intent to evade or defeat any tax imposed by this article or the
  payment  thereof,  shall fail to make a return and pay a tax withheld by
  him at the time required by or  under  the  provisions  of  section  six
  hundred  seventy-four,  such  employer  shall be liable for such tax and
  shall pay the same together with interest thereon and  the  addition  to
  tax  provided  in  subsection (a), and such interest and addition to tax
  shall not be charged to or collected from the employee by the  employer.
  The  tax  commission  shall  have  the  same  rights  and powers for the
  collection of such tax,  interest  and  addition  to  tax  against  such
  employer as are now prescribed by this article for the collection of tax
  against an individual taxpayer.
    (g) Willful failure to collect and pay over tax.-- Any person required
  to collect, truthfully account for, and pay over the tax imposed by this
  article  who  willfully  fails to collect such tax or truthfully account
  for and pay over such tax or willfully attempts in any manner  to  evade
  or  defeat  the  tax or the payment thereof, shall, in addition to other
  penalties provided by law, be liable to a penalty equal to  the  sum  of
  (i)  the  total  amount  of  the  tax  evaded,  or not collected, or not
  accounted for and paid over, and (ii) the interest that has  accrued  on
  the total amount of tax evaded on the date this penalty is first imposed
  until  this  penalty  is  paid with interest thereon. No addition to tax
  under subsections (b) or (e) of this section shall be  imposed  for  any
  offense  to which this subsection applies. The tax commission shall have
  the power, in its discretion, to waive, reduce or compromise any penalty
  under this subsection.
    (h) Failure to file  certain  information  returns.--  (1)  Except  as
  otherwise  provided in this paragraph, in case of each failure to file a
  statement of a payment to another person, required  under  authority  of
  subsection   (d)   of  section  six  hundred  fifty-eight  (relating  to
  information at source) on the date prescribed therefor (determined  with
  regard  to  any  extension  of time for filing), unless it is shown that
  such failure is due to reasonable cause  and  not  to  willful  neglect,
  there  shall, upon notice and demand by the commissioner and in the same
  manner as tax, be paid by the person so failing to file the statement, a
  penalty of fifty dollars for each statement not so filed, but the  total
  amount imposed on the delinquent person for all such failures during any
  calendar year shall not exceed ten thousand dollars.
    (2)  If  any partnership or S corporation required to file a return or
  report under subsection (c) of section six hundred fifty-eight or  under
  section  six  hundred fifty-nine for any taxable year fails to file such
  return or report at the time prescribed therefor (determined with regard
  to any extension of time for filing), or files a return or report  which

  fails  to  show  the  information  required under such subsection (c) or
  section six hundred fifty-nine, unless it is shown that such failure  is
  due  to  reasonable  cause  and not due to willful neglect, there shall,
  upon  notice  and  demand  by the commissioner and in the same manner as
  tax, be paid by the partnership or S  corporation  a  penalty  for  each
  month (or fraction thereof) during which such failure continues (but not
  to  exceed five months). The amount of such penalty for any month is the
  product of fifty dollars, multiplied by the number of  partners  in  the
  partnership  or shareholders in the S corporation during any part of the
  taxable year who were subject to tax under this article during any  part
  of such taxable year.
    (i)  Additional  penalty.--Any person who with fraudulent intent shall
  fail to pay, or to deduct or withhold and pay,  any  tax,  or  to  make,
  render,  sign or certify any return, or to supply any information within
  the time required by or under this article, shall be liable  to  penalty
  of  not more than one thousand dollars, in addition to any other amounts
  required under this article, to be imposed, assessed  and  collected  by
  the  tax  commission.  The  tax  commission shall have the power, in its
  discretion, to waive,  reduce  or  compromise  any  penalty  under  this
  subsection.
    (j)  Fraudulent statement or failure to furnish statement to employee.
  -- In addition to any criminal penalties provided  by  law,  any  person
  required  under  the  provisions  of  section six hundred seventy-two to
  furnish a statement to an employee, who wilfully furnishes  a  false  or
  fraudulent  statement,  or  who wilfully fails to furnish a statement in
  the manner, at the time, and  showing  the  information  required  under
  section  six  hundred seventy-two, or regulations prescribed thereunder,
  shall for each such failure be subject to a penalty under  this  article
  of fifty dollars.
    (k)  Failure  to  supply  identifying numbers. -- If any person who is
  required by regulations prescribed under subsection (b) of  section  six
  hundred fifty-eight
    (1)  to  include  his  identifying number in any return, statement, or
  other document;
    (2) to furnish his identifying number to another person; or
    (3) to include in any return, statement or other  document  made  with
  respect  to  another person the identifying number of such other person,
  fails to comply with such requirement at the  time  prescribed  by  such
  regulations,  such person shall, unless it is shown that such failure is
  due to reasonable cause and not due to willful neglect, pay a penalty of
  five dollars for each such failure described in paragraph  one  of  this
  subsection  and  fifty  dollars  for  each  such  failure  described  in
  paragraphs two and three of  this  subsection,  except  that  the  total
  amount  imposed on such person for all such failures during any calendar
  year shall not exceed ten thousand dollars; except that for  failure  to
  include  his own identification number in any return, statement or other
  document, such penalty shall not be imposed  unless  such  person  shall
  have  failed  to  supply his identification number to the tax commission
  within thirty days after demand therefor.
    (l) Additions treated as tax. -- The additions to  tax  and  penalties
  provided  by this section shall be paid upon notice and demand and shall
  be assessed, collected and paid in the same manner  as  taxes,  and  any
  reference  in this article to income tax or tax imposed by this article,
  shall be deemed also to refer to the  additions  to  tax  and  penalties
  provided   by   this  section.  For  purposes  of  section  six  hundred
  eighty-one, this subsection shall not apply to --
    (1) any addition to tax under subsection (a) except as to that portion
  attributable to a deficiency;

    (2) any addition to tax under subsection (c);
    (3)  any penalty under subsection (h) and any additional penalty under
  subsection (i); and
    (4) any penalties under subsections (j), (k), (q), (r), (s), (u),  (v)
  and (w).
    (m)  Determination  of  deficiency. -- For purposes of subsections (b)
  and (e), the amount shown as the tax by the  taxpayer  upon  his  return
  shall  be taken into account in determining the amount of the deficiency
  only if such return was filed on or before the last day  prescribed  for
  the  filing  of  such return, determined with regard to any extension of
  time for such filing.
    (n) Person defined. For purposes of subsections (g), (i), (o), (q) and
  (r), the term person includes an individual, corporation, partnership or
  limited liability company or an officer or employee of  any  corporation
  (including  a  dissolved  corporation),  or  a member or employee of any
  partnership, or a member, manager or employee  of  a  limited  liability
  company,  who  as  such  officer, employee, manager or member is under a
  duty to perform the act in respect of which the violation occurs.
    (o) Failure to make deposits of taxes. -- In case of  failure  by  any
  person required by this article, or by regulations of the tax commission
  under  this  article,  to  deposit  on  the date prescribed therefor any
  amount of tax  imposed  by  this  article  in  a  depository  authorized
  pursuant  to  subsection  (a)  of section six hundred ninety-two of this
  article to receive such deposits, unless it is shown that  such  failure
  is  due  to reasonable cause and not due to willful neglect, there shall
  be imposed on such person a penalty of five per cent of  the  amount  of
  the   underpayment.   For   purposes   of   this   subsection  the  term
  "underpayment" means the excess of the amount of the tax required to  be
  so  deposited  over  the amount, if any, thereof, deposited on or before
  the date prescribed therefor.
    * (p) Substantial understatement of liability.-- (1)  If  there  is  a
  substantial  understatement  of  income  tax for any taxable year, there
  shall be added to the tax an amount equal to ten percent of  the  amount
  of any underpayment attributable to such understatement. For purposes of
  this subsection, there is a substantial understatement of income tax for
  any  taxable  year  if  the amount of the understatement for the taxable
  year exceeds the greater of ten percent of the tax required to be  shown
  on  the  return  for  the  taxable  year,  or  two thousand dollars. For
  purposes of the preceding sentence, the term "understatement" means  the
  excess  of  the amount of the tax required to be shown on the return for
  the taxable year, over the amount of tax imposed which is shown  on  the
  return  reduced  by  any rebate (within the meaning of subsection (g) of
  section six hundred eighty-one). The excess under the preceding sentence
  shall be determined without regard to items to which subsection (p-1) of
  this section applies. The commissioner may waive all or any part of  the
  addition to tax provided by this subsection on a showing by the taxpayer
  that there was reasonable cause for the understatement, or part thereof,
  and that the taxpayer acted in good faith.
    (2)  The  amount  of  the  understatement under paragraph (1) shall be
  reduced by that portion of the understatement which is  attributable  to
  (A)  the  tax  treatment  of any item by the taxpayer if there is or was
  substantial authority for  such  treatment,  or  (B)  any  item  if  the
  relevant  facts  affecting  the  item's  tax  treatment  are  adequately
  disclosed in the return or in a statement attached to the return.
    (3)(A) Subparagraph (B) of paragraph two of this subsection shall  not
  apply to any item attributable to a tax shelter.
    (B) For purposes of this paragraph, the term "tax shelter" means
    (i) a partnership or other entity,

    (ii) any investment plan or arrangement, or
    (iii) any other plan or arrangement,
  if   a  significant  purpose  of  such  partnership,  entity,  plan,  or
  arrangement is the avoidance or evasion of tax.
    * NB Effective until July 1, 2011
    * (p)  Substantial  understatement  of  liability.--If  there   is   a
  substantial  understatement  of  income  tax for any taxable year, there
  shall be added to the tax an amount equal to ten percent of  the  amount
  of any underpayment attributable to such understatement. For purposes of
  this subsection, there is a substantial understatement of income tax for
  any  taxable  year  if  the amount of the understatement for the taxable
  year exceeds the greater of ten percent of the tax required to be  shown
  on  the  return  for  the  taxable  year,  or  two thousand dollars. For
  purposes of the preceding sentence, the term "understatement" means  the
  excess  of  the amount of the tax required to be shown on the return for
  the taxable year, over the amount of tax imposed which is shown  on  the
  return  reduced  by  any rebate (within the meaning of subsection (g) of
  section six hundred eighty-one). The amount of such understatement shall
  be reduced by that portion of the understatement which  is  attributable
  to  the  tax  treatment  of  any item by the taxpayer if there is or was
  substantial authority for such treatment, or any item  with  respect  to
  which  the  relevant  facts  affecting  the  item's  tax  treatment  are
  adequately disclosed in the return or in a  statement  attached  to  the
  return.  The tax commission may waive all or any part of the addition to
  tax provided by this subsection on a showing by the taxpayer that  there
  was  reasonable  cause for the understatement, or part thereof, and that
  the taxpayer acted in good faith.
    * NB Effective July 1, 2011
    * (p-1) Reportable transaction understatement.-- (1) If a taxpayer has
  a reportable transaction understatement  for  any  taxable  year,  there
  shall  be  added  to  the  tax  an amount equal to twenty percent of the
  amount of such understatement.
    (2) For purposes of this section,  the  term  "reportable  transaction
  understatement" means the sum of:
    (A) the product of--
    (i)  the  amount  of  the increase (if any) in the applicable tax base
  which results from a difference between the proper tax treatment  of  an
  item  to which this section applies and the taxpayer's treatment of such
  item (as shown on the taxpayer's return of tax), and
    (ii) the highest rate of tax imposed by this article, and
    (B) the amount of the decrease (if any) in  the  aggregate  amount  of
  credits  determined  under  this article which results from a difference
  between the taxpayer's treatment  of  an  item  to  which  this  section
  applies  (as  shown  on the taxpayer's return of tax) and the proper tax
  treatment of such item.
    For purposes of subparagraph (A) of this paragraph, any  reduction  of
  the  excess of deductions allowed for the taxable year over gross income
  for such year, and any reduction in the amount of capital  losses  which
  would  (without regard to section one thousand two hundred eleven of the
  internal revenue code) be allowed for such year, shall be treated as  an
  increase in the applicable tax base.
    (3) This subsection shall apply to any item which is attributable to--
    (A) any listed transaction, and
    (B)  any reportable transaction (other than a listed transaction) if a
  significant purpose of such transaction is the avoidance or  evasion  of
  tax.
    (4)  Paragraph one of this subsection shall be applied by substituting
  "thirty percent" for "twenty percent" with respect to the portion of any

  reportable  transaction  understatement  with  respect  to   which   the
  requirement  of  clause (i) of subparagraph (B) of paragraph ten of this
  subsection is not met.
    (5)   For   purposes   of   this  subsection,  the  terms  "reportable
  transaction" and "listed transaction" have the meanings  given  to  such
  terms  by  section  twenty-five  of  this  chapter, the term "reportable
  transaction" shall  include  a  "New  York  reportable  transaction"  as
  defined  in  such section twenty-five, and the term "listed transaction"
  shall include any transaction designated as a tax avoidance  transaction
  pursuant to such section twenty-five.
    (6)  In the case of an understatement (as defined in subsection (p) of
  this section):
    (A) the amount of such understatement (determined  without  regard  to
  this paragraph) shall be increased by the aggregate amount of reportable
  transaction  understatements  for  purposes  of determining whether such
  understatement is a substantial understatement under subsection  (p)  of
  this  section,  and (B) the addition to tax under subsection (p) of this
  section shall apply only to the excess of the amount of the  substantial
  understatement  (if any) after the application of this subparagraph over
  the aggregate amount of reportable transaction understatements.
    (7) References to an understatement (or a  deficiency)  in  subsection
  (e)  of  this  section  shall  be  treated  as including references to a
  reportable transaction understatement.
    (8)  This  subsection  shall  not  apply  to  any   portion   of   any
  understatement  on  which  a  penalty is imposed under subsection (e) of
  this section.
    (9) Except as provided in regulations prescribed by the  commissioner,
  in  no  event  shall  any  tax  treatment  included with an amendment or
  supplement to a return of tax be taken into account in  determining  the
  amount  of any reportable transaction understatement if the amendment or
  supplement is filed after the earlier of the date the taxpayer is  first
  contacted by the commissioner regarding the examination of the return or
  such other date as is specified by the commissioner.
    (10)(A) No penalty shall be imposed under this subsection with respect
  to any portion of a reportable transaction understatement if it is shown
  that there was a reasonable cause for such portion and that the taxpayer
  acted in good faith with respect to such portion.
    (B)  Subparagraph  (A)  of  this  paragraph  shall  not  apply  to any
  reportable transaction understatement unless
    (i) the relevant facts affecting the tax treatment  of  the  item  are
  adequately  disclosed  in  accordance  with  section twenty-five of this
  chapter,
    (ii) there is or was substantial authority for such treatment, and
    (iii) the taxpayer reasonably believed that such  treatment  was  more
  likely than not the proper treatment.
  A  taxpayer  failing  to  adequately disclose in accordance with section
  twenty-five of this chapter shall be treated as meeting the requirements
  of clause (i) of this subparagraph if the penalty for such  failure  was
  rescinded under subsection (x) of this section.
    (11)(A) A taxpayer shall be treated as having a reasonable belief with
  respect to the tax treatment of an item only if such belief
    (i)  is  based  on the facts and law that exist at the time the return
  which includes such tax treatment is filed, and
    (ii) relates solely to the taxpayer's chances of success on the merits
  of such treatment and does not take into account the possibility that  a
  return  will not be audited, such treatment will not be raised on audit,
  or such treatment will be resolved through settlement if it is raised.

    (B)(i) An opinion of a tax advisor may not be relied upon to establish
  the reasonable belief of a taxpayer if
    (I)  the tax advisor is described in clause (ii) of this subparagraph,
  or
    (II) the opinion is described in clause (iii) of this subparagraph.
    (ii) A tax advisor is described in this clause if the tax advisor
    (I) is a material advisor (within the meaning of section six  thousand
  one  hundred  eleven of the internal revenue code or within such meaning
  as it also applies to a New York reportable transaction  as  defined  in
  section   twenty-five   of   this   chapter)  and  participates  in  the
  organization, management, promotion, or sale of the  transaction  or  is
  related  (within  the  meaning  of subsection (b) of section two hundred
  sixty-seven of the internal revenue code or subsection  (b)  of  section
  seven  hundred  seven of the internal revenue code) to any person who so
  participates,
    (II) is compensated directly or indirectly by a material advisor  with
  respect to the transaction,
    (III)  has  a fee arrangement with respect to the transaction which is
  contingent on all  or  part  of  the  intended  tax  benefits  from  the
  transaction being sustained, or
    (IV)  has  a  disqualifying  financial  interest  with  respect to the
  transaction.
    (iii) For purposes of clause (i) of this subparagraph, an  opinion  is
  disqualified if the opinion
    (I)  is  based on unreasonable factual or legal assumptions (including
  assumptions as to future events),
    (II) unreasonably relies on representations, statements, findings,  or
  agreements of the taxpayer or any other person,
    (III) does not identify and consider all relevant facts, or
    (IV)  fails  to  meet  any  other  requirement as the commissioner may
  prescribe.
    * NB Repealed July 1, 2011
    (p-2) No penalty will be imposed pursuant to subsection (c) or (p)  of
  this section for a taxable year beginning on or after January first, two
  thousand  eight  and  before  January first, two thousand nine resulting
  from the denial of an empire zone tax credit  claimed  by  the  taxpayer
  because  an empire zone retention certificate was not issued pursuant to
  subdivision (w) of  section  nine  hundred  fifty-nine  of  the  general
  municipal  law  to the empire zone enterprise which is the basis for the
  tax credit or credits claimed on the return.
    (q) Frivolous tax returns and specified frivolous  submissions.--  (1)
  If  any individual files what purports to be a return of any tax imposed
  by this article but which does not  contain  information  on  which  the
  substantial  correctness  of  the  self-assessment  may  be  judged,  or
  contains information that on its face indicates that the self-assessment
  is substantially incorrect; and such conduct is due to a position  which
  is  frivolous,  including  a  position  identified  as  frivolous  under
  paragraph three of this subsection, or an intent to delay or impede  the
  administration of this article, then such individual shall pay a penalty
  not  exceeding  five thousand dollars. This penalty shall be in addition
  to any other penalty provided by law.
    (2) Penalty for specified frivolous submissions. (A)  Any  person  who
  submits  a  specified  frivolous  submission shall pay a penalty of five
  thousand dollars. This penalty shall be in addition to any other penalty
  provided by law.
    (B) The  term  "specified  frivolous  submission"  means  a  specified
  submission  if any portion of that submission (i) is based on a position
  that the commissioner has identified as frivolous under paragraph  three

  of  this  subdivision,  or (ii) reflects a desire to delay or impede the
  administration of this chapter.
    (C)  The  term "specified submission" means a request for conciliation
  conference, a petition to the division of tax  appeals,  an  application
  for an installment payment agreement, or an offer in compromise.
    (D)  If  the  commissioner  provides  an individual with notice that a
  submission is a specified frivolous submission and that person withdraws
  the submission within thirty days after such notice, the penalty imposed
  under this paragraph will not apply with respect to that submission.
    (3) Listing of frivolous positions. The  commissioner  will  prescribe
  (and  periodically revise) a list of positions that the commissioner has
  identified as frivolous for purposes of this subsection.
    (4) Reduction of penalty. The commissioner may reduce  the  amount  of
  any  penalty  imposed  under this section if the commissioner determines
  that such a reduction would promote compliance with  and  administration
  of this chapter.
    (r)  Aiding or assisting in the giving of fraudulent returns, reports,
  statements or other documents.--(1) Any person who, with the intent that
  tax be evaded, shall, for a fee or other compensation or as an  incident
  to  the  performance  of  other  services for which such person receives
  compensation, aid or assist in,  or  procure,  counsel,  or  advise  the
  preparation  or  presentation  under,  or  in connection with any matter
  arising under this article of any return, report, declaration, statement
  or other document which is  fraudulent  or  false  as  to  any  material
  matter,  or  supply  any false or fraudulent information, whether or not
  such falsity or fraud is with the knowledge or  consent  of  the  person
  authorized  or  required  to  present  such return, report, declaration,
  statement or other document shall  pay  a  penalty  not  exceeding  five
  thousand dollars.
    (2)  For  purposes  of  paragraph  one  of  this  subsection, the term
  "procures" includes ordering (or otherwise causing) a subordinate to  do
  an  act, and knowing of, and not attempting to prevent, participation by
  a subordinate in an act. The term "subordinate" means any  other  person
  (whether  or not a director, officer, employee, or agent of the taxpayer
  involved) over whose activities the person has  direction,  supervision,
  or control.
    (3)  For  purposes  of  paragraph  one  of  this  subsection, a person
  furnishing typing, reproducing,  or  other  mechanical  assistance  with
  respect  to  a document shall not be treated as having aided or assisted
  in the preparation of such document by reason of such assistance.
    (4) The penalty imposed by this subsection shall be in addition to any
  other penalty provided by law.
    (s) False information with respect to withholding.--In addition to any
  criminal penalty provided by law, if any individual  makes  a  statement
  under section six hundred seventy-one which results in a decrease in the
  amounts deducted and withheld under part five of this article, and as of
  the time such statement was made, there was no reasonable basis for such
  statement,  such  individual shall pay a penalty of five hundred dollars
  for such statement. The tax commission shall waive the  penalty  imposed
  under  this  subsection  if  the  taxes  imposed  with  respect  to  the
  individual under this article for the taxable year are equal to or  less
  than  the sum of the credits against such taxes allowed by this article,
  and the payments of estimated  tax  which  are  considered  payments  on
  account of such taxes.
    (t)  Unwarranted  reduction  in  utility  costs  in an empire zone. If
  during a taxable year a taxpayer has received a reduction  in  the  rate
  charged  for gas, electric, steam or water sold, or gas, electric, steam
  or water service rendered, pursuant to subdivision eight of section  one

  hundred  eighty-six-a  of this chapter, based upon a certification as to
  the claiming of a credit under subsection (k) of section six hundred six
  of this article, and it is finally determined that such taxpayer is  not
  entitled  to such credit in any part, such taxpayer shall be liable to a
  penalty in an amount equal to such reduction in cost, with interest from
  the last day of such year, at the rate applicable  to  underpayments  of
  tax  pursuant  to this article. The tax commission shall have the power,
  in its discretion, to waive, reduce or compromise such penalty.
    (u)  Failure  of  tax  return   preparer   to   conform   to   certain
  requirements.--(3)  Failure  to furnish copy to taxpayer. Any person who
  is a tax return preparer with respect to any return or claim for refund,
  who is required under paragraph three of subsection (g) of  section  six
  hundred  fifty-eight of this article to furnish a copy of such return or
  claim for refund to the taxpayer, and who  fails  to  comply  with  such
  provision  with  respect  to  such  return or claim for refund, shall be
  subject to a penalty of fifty dollars for each such failure,  unless  it
  is  shown  that  such  failure is due to reasonable cause and not due to
  willful neglect. The maximum penalty imposed under this paragraph on any
  person with respect to returns or claims for  refund  filed  during  any
  calendar year shall not exceed twenty-five thousand dollars.
    (4)  Failure  to  retain  copy or list. Any person who is a tax return
  preparer with respect to any return or claim for refund, who is required
  under  paragraph  four  of  subsection  (g)  of  section   six   hundred
  fifty-eight  of  this  article  to:  (i) retain a copy of such return or
  claim for refund or retain on a list the name and  taxpayer  identifying
  number  of  the  taxpayer  for  whom such return or claim for refund was
  prepared and (ii) make such copy or list available for  inspection  upon
  request  by the commissioner, and who fails to comply with the retention
  requirement or who complies with the retention requirement but fails  to
  comply  with  such  request  by  the commissioner, shall be subject to a
  penalty of fifty dollars for each such failure, unless it is shown  that
  such  failure is due to reasonable cause and not due to willful neglect.
  The maximum penalty imposed under this  paragraph  on  any  person  with
  respect  to  any  calendar  year  shall  not exceed twenty-five thousand
  dollars.
    (5) Failure to electronically  file.  If  a  tax  return  preparer  is
  required  to  file  returns  electronically pursuant to paragraph ten of
  subsection (g) of section six hundred fifty-eight of this  article,  and
  such  preparer fails to file one or more of such returns electronically,
  then such preparer shall be subject to a penalty of  fifty  dollars  for
  each  such  failure  to electronically file a return, unless it is shown
  that such failure is due to reasonable cause  and  not  due  to  willful
  neglect.    For  purposes  of  this  paragraph,  reasonable  cause shall
  include,  but  not  be  limited  to,  a  taxpayer's  election   not   to
  electronically file his or her return.
    (v)  Failure  to  perform  certain  acts with respect to the quarterly
  combined withholding, wage reporting and unemployment insurance  return.
  (1)  Failure to file. (A) Delinquency. (i) General. If an employer fails
  to  file  a  quarterly  combined   withholding,   wage   reporting   and
  unemployment  insurance  return,  or any portion thereof, as required by
  paragraph four of subsection (a) of section six hundred seventy-four  of
  this  article,  then  such  employer shall, unless it is shown that such
  failure is due to reasonable cause and not due to willful neglect, pay a
  penalty equal to the greater of one thousand dollars or the  product  of
  fifty  dollars  multiplied  by the number of employees shown on the last
  quarterly  combined  withholding,  wage   reporting   and   unemployment
  insurance  return  filed by such employer, or if no such return has been
  filed, the number of employees may be estimated by the commissioner from

  any information in the commissioner's possession. The  total  amount  of
  the  penalty  imposed by this clause on an employer for any such failure
  shall not exceed ten thousand dollars.
    (ii)  Coordination  of delinquency penalty with other additions to tax
  and penalties for failure to  file.  Except  as  otherwise  provided  in
  subparagraph  (C)  of  this  paragraph,  an employer failing to file the
  quarterly  combined  withholding,  wage   reporting   and   unemployment
  insurance  return,  or any portion thereof, shall only be liable for the
  penalty prescribed by this subparagraph;  such  employer  shall  not  be
  liable for the addition to tax prescribed by paragraph one of subsection
  (a)  of  this  section or for the penalty prescribed by paragraph (b) of
  subdivision two of section five hundred eighty-one of the labor law.
    (B) Late filing. (i) Within thirty days  of  notice.  If  an  employer
  fails  to  file  a  quarterly  combined  withholding, wage reporting and
  unemployment insurance return, or any portion thereof, by the  due  date
  prescribed  by  paragraph  four of subsection (a) of section six hundred
  seventy-four of this article, but files such return or any such  portion
  thereof within thirty days after the date the department sends notice of
  such  failure  to  such  employer  by  certified  mail, then the penalty
  prescribed by subparagraph (A) of this paragraph  shall  be  abated.  In
  addition,  such  employer  shall  not  be liable for the addition to tax
  prescribed by paragraph one of subsection (a) of this  section  and  the
  penalty  prescribed  by paragraph (b) of subdivision two of section five
  hundred eighty-one of the labor law. Provided,  however,  such  employer
  shall  remain  liable  for  the  other  additions  to  tax prescribed by
  subsection (a) of this section, if applicable. Provided,  further,  that
  where  such  employer  fails  to  file  such  return or any such portion
  thereof by the due date prescribed by paragraph four of  subsection  (a)
  of  section  six  hundred seventy-four of this article but is not liable
  for the penalty prescribed by subparagraph (A)  of  this  paragraph  for
  such  failure because such employer complied with the provisions of this
  clause or clause (iii) of  this  subparagraph,  and  where  within  four
  successive  calendar  quarters  of  such  initial failure to file by the
  prescribed due date, such employer again fails to file  such  return  or
  portion  thereof  by  such  due date, then the provisions of this clause
  relating to abatement and non-imposition of other additions to  tax  and
  penalties for failure to file shall not apply to any such failure within
  such four successive calendar quarters. In such a case, if such employer
  files  such  return or portion thereof within thirty days after the date
  the department sends notice of such second failure  by  certified  mail,
  such  employer  shall be liable for a penalty equal to the lesser of the
  product of fifty dollars multiplied by the number of employees  actually
  shown on such employer's late filed quarterly combined withholding, wage
  reporting  and  unemployment  insurance  return,  but  not less than one
  thousand dollars nor more than ten thousand dollars, or the sum  of  the
  addition  to  tax  prescribed by paragraph one of subsection (a) of this
  section and the penalty prescribed by paragraph (b) of  subdivision  two
  of section five hundred eighty-one of the labor law.
    (ii)  After  thirty  days  of  notice.  If an employer fails to file a
  quarterly  combined  withholding,  wage   reporting   and   unemployment
  insurance  return, or any portion thereof, by the due date prescribed by
  paragraph four of subsection (a) of section six hundred seventy-four  of
  this  article,  but  files  such return or any such portion thereof more
  than thirty days after the date the  department  sends  notice  of  such
  failure  to  file to such employer by certified mail, then such employer
  shall be liable for a penalty equal to the greater  of  the  product  of
  fifty  dollars  multiplied  by the number of employees actually shown on
  such  employer's  late  filed  quarterly  combined   withholding,   wage

  reporting  and  unemployment  insurance  return,  but  not less than one
  thousand dollars nor more than ten thousand dollars, or the sum  of  the
  addition  to  tax  prescribed by paragraph one of subsection (a) of this
  section  and  the penalty prescribed by paragraph (b) of subdivision two
  of section five hundred eighty-one of the labor law.
    (iii) Late filing prior to notice. If an  employer  fails  to  file  a
  quarterly   combined   withholding,   wage  reporting  and  unemployment
  insurance return, or portion thereof, by  the  due  date  prescribed  by
  paragraph  four of subsection (a) of section six hundred seventy-four of
  this article but files such return or any such  portion  thereof  before
  the  department  sends notice of such failure to file by certified mail,
  then the penalty prescribed by subparagraph (A) of this paragraph  shall
  not  be  imposed. In addition, such employer shall not be liable for the
  addition to tax prescribed by paragraph one of subsection  (a)  of  this
  section  and  the penalty prescribed by paragraph (b) of subdivision two
  of section five hundred eighty-one of the labor law. Provided,  however,
  such  employer  shall  remain  liable  for  the  other  additions to tax
  prescribed by subsection (a) of this section, if  applicable.  Provided,
  further,  that where such employer fails to file such return or any such
  portion thereof  by  the  due  date  prescribed  by  paragraph  four  of
  subsection  (a)  of section six hundred seventy-four of this article but
  is not liable for the penalty prescribed by  subparagraph  (A)  of  this
  paragraph  for  such  failure  because  such  employer complied with the
  provisions of this clause or clause (i) of this subparagraph, and  where
  within four successive calendar quarters of such initial failure to file
  by  the  prescribed  due  date,  such  employer again fails to file such
  return or any such portion thereof by such due date, then the provisions
  of this  clause  relating  to  non-imposition  of  penalties  and  other
  additions to tax for failure to file shall not apply to any such failure
  within  such  four successive calendar quarters. In such a case, if such
  employer files such return or  portion  thereof  before  the  department
  sends  notice  of such failure by certified mail, such employer shall be
  liable for a penalty equal to the lesser of the product of fifty dollars
  multiplied by the number of employees actually shown on such  employer's
  late   filed   quarterly   combined   withholding,  wage  reporting  and
  unemployment insurance return, but not less than  one  thousand  dollars
  nor  more  than  ten thousand dollars, or the sum of the addition to tax
  prescribed by paragraph one of subsection (a) of this  section  and  the
  penalty  prescribed  by paragraph (b) of subdivision two of section five
  hundred eighty-one of the labor law.
    (C) Audit following failure to file. If an employer fails  to  file  a
  quarterly   combined   withholding,   wage  reporting  and  unemployment
  insurance return and an audit is subsequently commenced with respect  to
  such  employer  by the department, the department of labor or both, such
  employer shall, in addition to the penalty  prescribed  by  subparagraph
  (A)  of  this paragraph, be liable for the addition to tax prescribed by
  paragraph one of subsection (a) of this section, the penalty  prescribed
  by  paragraph  (b) of subdivision two of section five hundred eighty-one
  of the labor law, or both, as applicable.
    (D) Protests and collection. The department of labor shall  adjudicate
  all  disputes regarding the imposition of the penalty prescribed by this
  paragraph (whether alone or in conjunction  with  the  addition  to  tax
  prescribed  by  paragraph  one of subsection (a) of this section and the
  penalty prescribed by paragraph (b) of subdivision two of  section  five
  hundred  eighty-one of the labor law), in accordance with the provisions
  contained in article eighteen of the labor law; provided, however,  that
  the   department  shall  adjudicate  disputes  in  accordance  with  the
  procedures prescribed by this chapter where (i) an employer  only  fails

  to  file the portion of a quarterly combined withholding, wage reporting
  and unemployment insurance return relating to withholding reconciliation
  information, (ii) the penalty prescribed by clause (iii) of subparagraph
  (B)  of  this  paragraph is imposed, or (iii) the department conducts an
  audit described in subparagraph (C) of this paragraph  with  respect  to
  withholding tax liability. Once the penalty prescribed by this paragraph
  is  finally  determined  and  no  longer  subject  to  administrative or
  judicial review, the amount thereof shall be deemed to be an  obligation
  owed  jointly  to the department and the department of labor, and either
  of such departments may collect  such  amount  in  accordance  with  the
  procedures  prescribed  by this chapter or the labor law, as applicable.
  Any penalty amount so collected shall, if  necessary,  be  allocated  as
  between  the  withholding  tax  program  and  the unemployment insurance
  program, and shall be  deposited  and  disposed  of  by  the  respective
  department in accordance with applicable law.
    (3)  Failure  to  provide  complete  and  correct employee withholding
  reconciliation information. In the case of a failure by an  employer  to
  provide  complete and correct annual withholding information relating to
  individual employees on a quarterly combined withholding, wage reporting
  and unemployment insurance return covering the last calendar quarter  of
  a year, such employer shall, unless it is shown that such failure is due
  to  reasonable cause and not due to willful neglect, pay a penalty equal
  to the product of fifty dollars multiplied by the  number  of  employees
  for whom such information is incomplete or incorrect; provided, however,
  that  if  the  number  of  such  employees cannot be determined from the
  quarterly  combined  withholding,  wage   reporting   and   unemployment
  insurance  return,  the  commissioner may utilize any information in the
  commissioner's possession in making such determination. The total amount
  of the penalty imposed pursuant to this paragraph on an employer for any
  such failure for the last calendar quarter of a year  shall  not  exceed
  ten thousand dollars.
    (4)  Failure  to  provide  complete  and correct quarterly withholding
  information not relating to individual  employees.  In  the  case  of  a
  failure  by  an  employer  to  provide  complete  and  correct quarterly
  withholding information  not  relating  to  individual  employees  on  a
  quarterly   combined   withholding,   wage  reporting  and  unemployment
  insurance return, such employer shall, unless  it  is  shown  that  such
  failure is due to reasonable cause and not due to willful neglect, pay a
  penalty equal to five percent of the quarterly withholding tax liability
  required  to  be  shown by such employer for the quarter covered by such
  return, or if such liability required to be shown by such  employer  for
  the  quarter  cannot  be ascertained, the commissioner may estimate such
  liability from any information in the commissioner's possession. If such
  employer provides complete and correct quarterly withholding information
  not relating to  individual  employees  within  thirty  days  after  the
  department  sends  notice  of  such failure to the employer by certified
  mail, then such penalty shall be abated. No penalty under this paragraph
  shall be imposed if the  department  is  able  to  properly  verify  and
  reconcile   withholding   and   wage  reporting  information  using  the
  information furnished by the employer. The total amount of  the  penalty
  imposed  pursuant  to this paragraph on an employer for any such failure
  shall not exceed ten thousand dollars.
    (5) Failure to file using prescribed format. In the case of a  failure
  by  an employer to file a quarterly combined withholding, wage reporting
  and unemployment insurance return using the  format  prescribed  by  the
  department  pursuant to the authority of paragraph two of subsection (d)
  of section six hundred  fifty-eight  of  this  article  and  regulations
  promulgated  thereunder,  such  employer  shall, unless it is shown that

  such failure is due to reasonable cause and not due to willful  neglect,
  pay  a  penalty  equal to the product of fifty dollars multiplied by the
  number of employees required  to  be  shown  on  such  return.  If  such
  employer  files  such  return  using the prescribed format within thirty
  days after the department sends notice of such failure to  the  employer
  by  certified  mail, then such penalty shall be abated. The total amount
  of the penalty imposed pursuant to this paragraph on an employer for any
  such failure shall not exceed ten thousand dollars.
    (6) Except as otherwise provided in this subsection,  and  except  for
  the  penalties  prescribed  by  paragraph  one  of  subsection  (h)  and
  subsection (k)  of  this  section,  the  penalties  prescribed  by  this
  subsection  shall be in addition to any other penalty or addition to tax
  provided by law.
    (w)  Failure  to  file  report  regarding  newly  hired  or   re-hired
  employees.    If  any  employer  required  to  file a report pursuant to
  section one hundred seventy-one-h of this chapter  fails  to  file  such
  report at the time prescribed therefor, or files a report which fails to
  show  the  information  required  pursuant  to  such section one hundred
  seventy-one-h, unless it is shown that such failure is due to reasonable
  cause and not due to willful  neglect,  there  shall,  upon  notice  and
  demand by the commissioner and in the same manner as tax, be paid by the
  employer a penalty equal to the product of twenty dollars, multiplied by
  the  number  of  employees  the employer failed to report, but the total
  amount imposed on the employer for all such failures during any calendar
  year shall not exceed ten thousand dollars. If the failure is  a  result
  of  a conspiracy between the employer and the employee to not supply the
  required report or to supply a false or incomplete report,  the  penalty
  shall  be  equal to the product of four hundred fifty dollars multiplied
  by the number of employees the employer failed to report.
    * (x)  Failure  to  disclose   or   provide   reportable   transaction
  information.-- (1) Any person who fails to file, disclose or provide any
  statement,  return or other document which is required under subdivision
  (a) of section twenty-five of this chapter shall pay a  penalty  in  the
  amount determined under paragraph two of this subsection.
    (2)(A)  Except  as provided in subparagraph (B) of this paragraph, the
  amount of the penalty under paragraph one of this  subsection  shall  be
  ten thousand dollars.
    (B)  The  amount of the penalty under paragraph one of this subsection
  with respect to a  listed  transaction  shall  be  twenty-five  thousand
  dollars.
    (3)   For   purposes   of   this  subsection,  the  terms  "reportable
  transaction" and "listed transaction" shall have the  same  meanings  as
  used  in  section  twenty-five of this chapter, and the term "reportable
  transaction" shall  include  a  "New  York  reportable  transaction"  as
  defined  in  such section twenty-five, and the term "listed transaction"
  shall include any transaction designated as a tax avoidance  transaction
  pursuant to such section twenty-five.
    (4)  The  commissioner  may  rescind all or any portion of any penalty
  imposed by this subsection with respect to any violation if
    (A) the violation is with respect to a  reportable  transaction  other
  than a listed transaction, and
    (B)   rescinding   the  penalty  would  promote  compliance  with  the
  requirements of this chapter and effective tax administration.
    (5) The penalty imposed by this section shall be in  addition  to  any
  other penalty imposed by this chapter.
    * NB Repealed July 1, 2011
    * (y)  Failure to disclose or provide reportable transaction return.--
  (1) Any person who fails to file, disclose  or  provide  any  statement,

  return  or  other  document  which  is required under subdivision (b) of
  section twenty-five of this chapter shall pay a penalty  in  the  amount
  determined under paragraph two of this subsection.
    (2)(A)  Except  as provided in subparagraph (B) of this paragraph, the
  amount of the penalty under paragraph one of this  subsection  shall  be
  twenty thousand dollars.
    (B)  The  amount of the penalty under paragraph one of this subsection
  with respect to a listed transaction shall be the greater of
    (i) fifty thousand dollars or,
    (ii) fifty percent of the gross income that the organizer or  material
  advisor  derived  with respect to activities that were the basis for the
  requirement to file, disclose or provide information pursuant to section
  six thousand eleven of the internal revenue code,  to  the  extent  such
  gross  income  is attributable to the avoidance of any tax imposed under
  this article.
    (C) Clause (ii) of subparagraph (B) of this paragraph shall be applied
  by substituting "seventy-five percent" for "fifty percent" in  the  case
  of  an  intentional  failure  or  act described in paragraph one of this
  subsection.
    (3)  For  purposes  of  this   subsection,   the   terms   "reportable
  transaction"  and  "listed  transaction" shall have the same meanings as
  used in section  twenty-five  of  this  chapter,  the  term  "reportable
  transaction"  shall  include  a  "New  York  reportable  transaction" as
  defined in such section twenty-five, and the term  "listed  transaction"
  shall  include any transaction designated as a tax avoidance transaction
  pursuant to such section twenty-five.
    (4) The commissioner may rescind all or any  portion  of  any  penalty
  imposed by this subsection with respect to any violation if
    (A)  the  violation  is with respect to a reportable transaction other
  than a listed transaction, and
    (B)  rescinding  the  penalty  would  promote  compliance   with   the
  requirements of this chapter and effective tax administration.
    (5) The penalty imposed by this subsection shall be in addition to any
  other  penalty  imposed by this chapter, except that no penalty shall be
  imposed under subparagraph (A) or clause  (i)  of  subparagraph  (B)  of
  paragraph  two  of subsection (q) of section one thousand eighty-five of
  this chapter for the same failure that is the basis for a penalty  under
  this subsection. Nothing in this paragraph shall preclude the imposition
  of  a  penalty under clause (ii) of subparagraph (B) of paragraph two of
  subsection (q) of section one thousand eighty-five of this  chapter  for
  the  same  failure  that is the basis for a penalty under clause (ii) of
  subparagraph (B) of paragraph two of this subsection.
    * NB Repealed July 1, 2011
    * (z) Failure to maintain list of advisees.-- (1) If any person who is
  required to maintain a list under subdivision (c) of section twenty-five
  of this chapter fails to make a duplicate of such list  available,  upon
  written  request  by the commissioner in accordance with such subsection
  within twenty business days after the date of the request,  such  person
  shall pay a penalty of ten thousand dollars for each day of such failure
  after such twentieth day.
    (2)  No  penalty  shall be imposed by paragraph one of this subsection
  with respect to the failure on  any  day  if  such  failure  is  due  to
  reasonable cause.
    * NB Repealed July 1, 2011
    * (aa) Tax preparer penalty.-- (1) If:
    (A)  any  part  of any understatement of liability with respect to any
  return or claim for refund is due to a position for which there was  not

  a  reasonable  belief  that  the tax treatment in that position was more
  likely than not the proper treatment,
    (B)  any  person  who is an income tax return preparer with respect to
  such return or claim knew (or reasonably  should  have  known)  of  such
  position, and
    (C)  such  position was not disclosed as provided in subsection (p) of
  this section or there was no reasonable basis for the tax  treatment  of
  that position,
  such  person  shall  pay  a  penalty  of up to one thousand dollars with
  respect to such return or  claim  unless  it  is  shown  that  there  is
  reasonable  cause  for  the understatement and such person acted in good
  faith.
    (2) If any part of any understatement of liability with respect to any
  return or claim for refund is due:
    (A) to a willful attempt in any manner to understate the liability for
  tax by a person who is a tax return preparer with respect to such return
  or claim, or
    (B) to any reckless or intentional disregard of rules  or  regulations
  by any such person,
  such  person  shall  pay  a  penalty of up to five thousand dollars with
  respect to such return or claim. With respect to any  return  or  claim,
  the  amount  of  the  penalty  payable  by  any person by reason of this
  paragraph shall be reduced by the amount of the  penalty  paid  by  such
  person by reason of paragraph one of this subsection.
    (3)  For  purposes  of  this  subsection,  the term "understatement of
  liability" means any understatement  of  the  net  amount  payable  with
  respect  to  any  tax imposed under this article or any overstatement of
  the net amount creditable or refundable with respect to any such tax.
    (4) This subsection shall not apply if the  penalty  under  subsection
  (r)  of  this section is imposed on the tax return preparer with respect
  to such understatement.
    * NB Repealed July 1, 2011
    * (bb) Promoting abusive tax shelters.-- (1) Any person who
    (A)(i) organizes (or assists in the organization of)
    (I) a partnership or other entity,
    (II) any investment plan or arrangement, or
    (III) any other plan or arrangement, or
    (ii) participates (directly or indirectly) in the sale of any interest
  in an entity or plan or arrangement referred to in clause  (i)  of  this
  subparagraph, and
    (B) makes or furnishes or causes another person to make or furnish (in
  connection with such organization or sale)
    (i)  a  statement with respect to the allowability of any deduction or
  credit, the excludability of any income, or the securing  of  any  other
  tax  benefit  by  reason  of  holding  an  interest  in  the  entity  or
  participating in the plan or arrangement which the person knows  or  has
  reason to know is false or fraudulent as to any material matter, or
    (ii) a gross valuation overstatement as to any material matter, and
    (C) satisfies any of the following conditions
    (i) the person is organized in this state,
    (ii) the person is doing business in this state,
    (iii) the person is deriving income in this state, or
    (iv)   the   person  conducts  any  of  the  activities  described  in
  subparagraph (A) or (B) of this paragraph within the state of New  York,
  shall  pay,  with respect to each activity described in subparagraph (A)
  of this paragraph, a penalty equal to one thousand dollars  or,  if  the
  person  establishes  that it is lesser, one hundred percent of the gross
  income derived (or to be derived) by such person from such  activity  to

  the extent such gross income is attributable to the avoidance of any tax
  imposed  under this article; provided, however, that if an activity with
  respect to which a penalty imposed  under  this  subsection  involves  a
  statement  described  in clause (i) of subparagraph (B) of paragraph one
  of this subsection, the penalty shall be equal to fifty percent  of  the
  gross  income  derived  (or to be derived) from that activity within the
  state by the person on which the penalty is imposed. For purposes of the
  preceding sentence, activities described in clause (i)  of  subparagraph
  (A)  of  this paragraph with respect to each entity or arrangement shall
  be treated as  a  separate  activity  and  participation  in  each  sale
  described  in clause (ii) of subparagraph (A) of this paragraph shall be
  so treated.
    (2)(A) For purposes of this  subsection,  the  term  "gross  valuation
  overstatement"  means  any  statement as to the value of any property or
  services if
    (i) the value so stated exceeds two  hundred  percent  of  the  amount
  determined to be the correct valuation, and
    (ii) the value of such property or services is directly related to the
  amount  of  any  deduction or credit allowable under this chapter to any
  participant.
    (B) The commissioner may waive all or any part of the penalty provided
  by paragraph one of this subsection with respect to any gross  valuation
  overstatement  on  a  showing  that there was a reasonable basis for the
  valuation and that such valuation was made in good faith.
    (3) The penalty imposed by this subsection shall be in addition to any
  other penalty provided by law.
    * NB Repealed July 1, 2011
    (cc) False or fraudulent document penalty. Any taxpayer that submits a
  false or fraudulent document to the department  will  be  subject  to  a
  penalty  of  one hundred dollars per document submitted, or five hundred
  dollars per tax return submitted. This penalty will be  in  addition  to
  any other penalty or addition provided by law.