ishment and shall not impose any disability upon or affect or impair the credibility as a witness, or otherwise, of any person convicted thereof. For the purposes of conferring jurisdiction upon courts and judicial officers generally such violations shall be deemed misdemeanors and for such purpose only all provisions of law relating to misdemeanors shall apply to such violations, provided however, that courts of special sessions outside of the city of New York and city magistrates' courts in the city of New York, in the first instance, shall have exclusive jurisdiction to hear and determine charges of such violations.

2. Any person who files or causes to be filed any return, affidavit or statement required or permitted by this article which is wilfully false or fraudulent, or who wilfully fails to file a return with intent to evade the tax is guilty of a felony.

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3. (a) Any person failing to file a return or to pay any tax within the time required by or pursuant to this article (determined with regard any extension of time for filing or paying) shall be subject to a penalty of [five] ten per centum of the amount of tax determined to be due as provided in this article plus [interest of] one per centum of such amount for each month [of delay] or fraction thereof during which such failure continues after the expiration of the first month after such return was required to be filed or such tax became due. Any person filing a false or fraudulent return or wilfully failing to file a return with intent to evade the tax shall be subject to a penalty of one hundred per cent of the amount of tax due plus interest of one per centum of such amount for each month of delay or fraction thereof after the expiration of the first month after such return was required to be filed or such tax became due], not exceeding thirty per centum in the aggregate. Provided, however, that any person who fails to file any return required by this article [on or before the prescribed date] within sixty days of the date prescribed for filing of such return (determined with regard to any extension of time for filing) [or files a false or fraudulent return or wilfully fails to file a return with intent to evade the tax] shall be subject to a penalty [of not] which shall not be less than the lesser of one hundred dollars [for each such failure or false or fraudulent return] or one hundred per centum of the amount required to be shown as tax on such return. For the purpose of the preceding sentence, 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.

(b) If any amount of tax is not paid on or before the last date prescribed in this article for payment, interest on such amount at the rate set by the tax commission pursuant to subdivision twenty-sixth of section one hundred seventy-one of this chapter shall be paid for the period from such last date to the date paid, whether or not any extension of time for payment was granted. Interest under this paragraph shall not be paid if the amount thereof is less than one dollar.

(c) If the tax commission determines that such failure or delay was due to reasonable cause and not due to willful neglect, it shall remit all or part of such penalty. The tax commission shall promulgate rules and regulations as to what constitutes reasonable cause.

one

(d) If the failure to pay any tax within the time required by or pursuant to this article is due to fraud, in lieu of the penalties and interest provided for in paragraphs (a) and (b) of this subdivision, there shall be added to the tax (1) a penalty of fifty per centum of the amount of tax due, plus (ii) interest on such unpaid tax at the rate set by the tax commission pursuant to subdivision twenty-sixth of section hundred seventy-one of this chapter for the period beginning on the last day prescribed by this article for the payment of such tax (determined without regard to any extension of time for paying) and ending on the day on which such tax is paid, plus (iii) for the period beginning on the last day prescribed by this article for the payment of such tax (determined without regard to any extension of time for paying) and ending on the day the amount of tax due is finally determined or, if earlier, on the day on which such tax is paid, an amount equal to fifty per centum of the interest payable under subparagraph (ii) of this paragraph on that portion of the unpaid tax which is attributable to fraud.

EXPLANATION-Matter in italics is new; matter in brackets [ ] is old law

(e) The penalties and interest imposed by this subdivision shall be assessed, collected and paid in the same manner as the taxes imposed by this article. [The tax commission, in its discretion upon making a record of its reasons, may remit all or any part of such penalty or terest imposed under this subdivision.

in

4. The failure to do any act required by or under the provisions of this article shall be deemed an act committed in part at the office of the department of taxation and finance in Albany. The certificate of the tax commission to the effect that a tax has not been paid, that a return has not been filed, or that information has not been supplied as required by or under the provisions of this article, shall be prima facie evidence that such tax has not been paid, that such return has not been filed, or that such information has not been supplied. The term "person" as used in this section, shall include an officer, director, stockholder, or employee of a corporation, or a member of a partnership, who as such officer, director, stockholder, employee or member, is under the duty to perform the act in respect of which the violation occurs.

5. Upon the conviction of any person for a violation of any of the provisions of this article the trial court or the clerk thereof shall within forty-eight hours certify the facts of the case to the commission and such certificate shall be presumptive evidence of the facts recited therein. If any such conviction shall be reversed upon appeal therefrom the person whose conviction has been so reversed may serve upon the commission a certified copy of the order of reversal and the commission shall thereupon record the same.

6. Violations of this article may be prosecuted by the attorney general in the name of the people of the state, in which case the attorney general shall exercise all the powers and perform all the duties which the district attorney would otherwise be authorized to exercise or to perform therein] Interest under this subdivision shall be compounded daily.

2. For purposes of this chapter the failure to do any act required by or under the provisions of this article shall be deemed an act committed in part at the office of the department of taxation and finance in Albany. For purposes of this chapter, the certificate of the tax commission to the effect that a tax has not been paid, that a return has not been filed, or that information has not been supplied, as required by or under the provisions of this article, or that a claim for refund has been filed, shall be prima facie evidence that such tax has not been paid, that such return has not been filed, that such information has not been supplied, or that such claim has been filed.

3. Violations of this article may be prosecuted by the attorney general in the name of the people of the state, in which case the attorney general shall exercise all the powers and perform all the duties which the district attorney would otherwise be authorized to exercise or perform therein.

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4. Cross-reference: For criminal penalties and other offenses, see article thirty-seven of this chapter. $53. Section five hundred thirteen of such law, as amended by chapter four hundred fifty-five of the laws of nineteen hundred seventy-five, is amended to read as follows:

§ 513. Refunds. Whenever the tax commission shall determine that any monies received under the [provision] provisions of this article were paid in error it may cause the same to be refunded or credited, [without] with interest, in accordance with such rules and regulations as it may prescribe, except that no interest shall be allowed or paid if the amount thereof would be less than one dollar. Such interest shall be at the rate set by the tax commission pursuant to subdivision twentysixth of section one hundred seventy-one of this chapter, or if no rate is set, at the rate of six percent per annum, from the date when the tax, penalty or interest to be refunded or credited was paid to a date preceding the date of the refund check by not more than thirty days. Provided, however, that for the purposes of this section, any tax paid before the last day prescribed for its payment shall be deemed to have been paid on such last day. Such moneys received under the provisions of this article which the tax commission shall determine were paid in error, may be refunded or credited out of funds in the custody of the comptroller to the credit of such taxes provided an application therefor is filed with the tax commission within two years from the time the erroneous payment was made, except if an agreement under the provisions of section five hundred ten (extending the period for determination of tax imposed by this article) is made within the two-year period for the

the

filing of an application for refund provided for in this section, period for filing an application for refund shall not expire prior to six months after the expiration of the period within which a determination may be made pursuant to the agreement or any extension thereof.

§ 54. Paragraphs one and four of subsection (a) of section six hundred eighty-five of such law, as amended by chapter one thousand five of the laws of nineteen hundred seventy, are amended to read as follows: (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 [per cent] percent of the amount of such tax if the failure is for not more than one month, with an additional five [per cent] percent for each additional month or fraction thereof during which such failure continues, not exceeding twenty-five [per cent] percent in the aggregate. [For this purpose, 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. ]

percent of

(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 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.

(4 with respect

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Limitations on additions. 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.

§ 55. Subsection (b) of section six hundred eighty-five of such law as added by chapter one thousand eleven of the laws of nineteen hundred sixty-two, is amended to read as follows:

(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 [per cent] 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 of nineteen hundred fifty-four, respectively, and EXPLANATION-Matter in italics is new; matter in brackets [ ] is old law

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the payee fails to include any portion of such payment in New justed 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. ing 556. Subsection (e) of section six hundred eighty-five of such law as amended by chapter two hundred nine of the laws of nineteen hundred seventy-two, is amended to read as follows:

(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 fifty [per cent] percent of the deficiency. [This amount]

(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 fraud, for the period beginning on the last day 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) The addition to tax under this subsection shall be in lieu of any other addition to tax imposed by subsection (a) or (b).

(4) 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. § 57. Subsection (h) of section six hundred eighty-five of such law, as amended by chapter six hundred six of the laws of nineteen hundred eighty-four, is amended to read as follows:

(h) Failure to file certain information returns. -(1) [In] 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, including the duplicate statement of tax withheld on wages) 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 tax commission and in the same manner as tax, be paid by the person so failing to file the statement, a penalty [one dollar] 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 [one] ten thousand dollars.

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(2) If any partnership or S corporation required to file a return under subsection (c) of section six hundred fifty-eight for any taxable year fails to file such return at the time prescribed therefor (determined with regard to any extension of time for filing), or files a return which fails to show the information required under such subsection (c), 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 tax commission 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 [twenty] 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.

(3) If any professional corporation required to file a return of information under the authority of subsection (f) of section six hundred fifty-eight fails to file such return at the time prescribed therefor (determined with regard to any extension of time for filing), or files a return which fails to show the information required under the authority of such subsection (f), 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 tax commission and in the same manner as tax, be paid by the professional 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

one hundred dollars, multiplied by the number of such returns of information not so filed.

§ 58. Subsection (k) of section six hundred eighty-five of such law, as added by chapter one thousand twelve of the laws of nineteen hundred sixty-eight, is amended to read as follows:

(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[2 unless it is shown that such failure is due to reasonable cause] 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.

§ 59. Subsection (1) of section six hundred eighty-five of such law, as amended by chapter six hundred six of the laws of nineteen hundred eighty-four, is amended to read as follows:

(1) 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 hundred eightyone 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)

(s).

any penalty under subsection (h) and any additional penalty under subsection (i); and (4) any penalties under subsections (j) [and], (k), (q), (r) and $ 60. Subsection (n) of section six hundred eighty-five of such aw as amended by chapter one thousand five of the laws of nineteen hundred seventy, is amended to read as follows:

(a) and (e), the firm person Person defined. -For purposes of subsections (g), (i) [and], (0),

who

includes an individual, corporation or partnership or an officer or employee of any corporation (including a dissolved corporation), or a member or employee of any partnership, as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

§ 61. Section six hundred eighty-five of such law is amended by adding a new subsection (p) to read as follows:

(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. The amount of the understatement under the preceding sentence shall Le 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 EXPLANATION-Matter in italics is new; matter in brackets [ ] is old law