§ 660 — Election by shareholders of S corporations

New York § 660

• Jurisdiction: New York
• Law TAX: Tax
• Part 4: Returns and Payment of Tax
• Art. 22: Personal Income Tax

Text

§ 660. Election by shareholders of S corporations. (a) Election. If a\ncorporation is an eligible S corporation, the shareholders of the\ncorporation may elect in the manner set forth in subsection (b) of this\nsection to take into account, to the extent provided for in this article\n(or in article thirteen of this chapter, in the case of a shareholder\nwhich is a taxpayer under such article), the S corporation items of\nincome, loss, deduction and reductions for taxes described in paragraphs\ntwo and three of subsection (f) of section thirteen hundred sixty-six of\nthe internal revenue code which are taken into account for federal\nincome tax purposes for the taxable year. No election under this\nsubsection shall be effective unless all shareholders of the corporation\nhave so elected. An eligible S corporation is (i) an S corporation which\nis subject to tax under article nine-A of this chapter, or (ii) an S\ncorporation which is the parent of a qualified subchapter S subsidiary\nsubject to tax under article nine-A, where the shareholders of such\nparent corporation are entitled to make the election under this\nsubsection by reason of subparagraph three of paragraph (k) of\nsubdivision nine of section two hundred eight of this chapter.\n (b) Requirements of election. An election under subsection (a) of this\nsection shall be made on such form and in such manner as the tax\ncommission may prescribe by regulation or instruction.\n (1) When made. An election under subsection (a) of this section may be\nmade at any time during the preceding taxable year of the corporation or\nat any time during the taxable year of the corporation and on or before\nthe fifteenth day of the third month of such taxable year.\n (2) Certain elections made during first two and one-half months. If an\nelection made under subsection (a) of this section is made for any\ntaxable year of the corporation during such year and on or before the\nfifteenth day of the third month of such year, such election shall be\ntreated as made for the following taxable year if\n (A) on one or more days in such taxable year before the day on which\nthe election was made the corporation did not meet the requirements of\nsubsection (b) of section thirteen hundred sixty-one of the internal\nrevenue code or\n (B) one or more of the shareholders who held stock in the corporation\nduring such taxable year and before the election was made did not\nconsent to the election.\n (3) Elections made after first two and one-half months. If an election\nunder subsection (a) of this section is made for any taxable year of the\ncorporation and such election is made after the fifteenth day of the\nthird month of such taxable year and on or before the fifteenth day of\nthe third month of the following taxable year, such election shall be\ntreated as made for the following taxable year.\n (4) Taxable years of two and one-half months or less. For purposes of\nthis subsection, an election for a taxable year made not later than two\nmonths and fifteen days after the first day of the taxable year shall be\ntreated as timely made during such year.\n (5) Authority to treat late elections, etc., as timely. If (A) an\nelection under subsection (a) of this section is made for any taxable\nyear (determined without regard to paragraph three of this subsection)\nafter the date prescribed by this subsection for making such election\nfor such taxable year, or if no such election is made for any taxable\nyear, and\n (B) the commissioner determines that there was reasonable cause for\nfailure to timely make such election, then\n (C) the commissioner may treat such an election as timely made for\nsuch taxable year (and paragraph three of this subsection shall not\napply).\n (6) Years for which effective. An election under subsection (a) of\nthis section shall be effective for the taxable year of the corporation\nfor which it is made and for all succeeding taxable years of the\ncorporation until such election is terminated under subsection (c) of\nthis section.\n (c) Termination. An election under subsection (a) of this section\nshall cease to be effective\n (1) on the day an election to be an S corporation ceases to be\neffective for federal income tax purposes pursuant to subsection (d) of\nsection thirteen hundred sixty-two of the internal revenue code, or\n (2) if shareholders holding more than one-half of the shares of stock\nof the corporation on the day on which the revocation is made revoke\nsuch election in the manner the tax commission may prescribe by\nregulation,\n (A) on the first day of the taxable year of the corporation, if the\nrevocation is made during such taxable year and on or before the\nfifteenth day of the third month thereof, or\n (B) on the first day of the following taxable year of the corporation,\nif the revocation is made during the taxable year but after the\nfifteenth day of the third month thereof, or\n (C) on and after the date so specified, if the revocation specifies a\ndate for revocation which is on or after the day on which the revocation\nis made, or\n (3) if any person who was not a shareholder of the corporation on the\nday on which the election is made becomes a shareholder in the\ncorporation and affirmatively refuses to consent to such election in the\nmanner the tax commission may prescribe by regulation, on the day such\nperson becomes a shareholder.\n (d) New York S termination year. In the case of a New York S\ntermination year, the amount of any item of S corporation income, loss\nand deduction and reductions for taxes (as described in paragraphs two\nand three of subsection (f) of section thirteen hundred sixty-six of the\ninternal revenue code) required to be taken account of under this\narticle shall be adjusted in the same manner that the S corporation's\nitems which are included in the shareholder's federal adjusted gross\nincome are adjusted under subsection (s) of section six hundred twelve.\n (e) Inadvertent invalid elections. If (1) an election under subsection\n(a) of this section was not effective for the taxable year for which\nmade (determined without regard to paragraph two of subsection (b) of\nthis section) by reason of a failure to obtain shareholder consents,\n (2) the commissioner determines that the circumstances resulting in\nsuch ineffectiveness were inadvertent,\n (3) no later than a reasonable period of time after discovery of the\ncircumstances resulting in such ineffectiveness, steps were taken to\nacquire the required shareholder consents, and\n (4) the corporation, and each person who was a shareholder in the\ncorporation at any time during the period specified pursuant to this\nsubsection, agrees to make such adjustments (consistent with the\ntreatment of the corporation as a New York S corporation) as may be\nrequired by the commissioner with respect to such period,\n (5) then, notwithstanding the circumstances resulting in such\nineffectiveness, such corporation shall be treated as a New York S\ncorporation during the period specified by the commissioner.\n (f) Validated federal elections. If (1) an election under subsection\n(a) of this section was made for a taxable year or years of a\ncorporation, which years occur with or within the period for which the\nfederal S election of such corporation has been validated pursuant to\nthe provisions of subsection (f) of section thirteen hundred sixty-two\nof the internal revenue code, and\n (2) the corporation, and each person who was a shareholder in the\ncorporation at any time during such taxable year or years agrees to make\nsuch adjustments (consistent with the treatment of the corporation as a\nNew York S corporation) as may be required by the commissioner with\nrespect to such year or years,\n (3) then such corporation shall be treated as a New York S corporation\nduring such year or years.\n (g) Transitional rule. Any election made under this section (as in\neffect for taxable years beginning before January first, nineteen\nhundred eighty-three) shall be treated as an election made under\nsubsection (a) of this section.\n (h) Cross reference. For definitions relating to S corporations, see\nsubdivision one-A of section two hundred eight of this chapter.\n (i) Mandated New York S corporation election. (1) Notwithstanding the\nprovisions in subsection (a) of this section, in the case of an eligible\nS corporation for which the election under subsection (a) of this\nsection is not in effect for the current taxable year, the shareholders\nof an eligible S corporation are deemed to have made that election\neffective for the eligible S corporation's entire current taxable year,\nif the eligible S corporation's investment income for the current\ntaxable year is more than fifty percent of its federal gross income for\nsuch year. In determining whether an eligible S corporation is deemed to\nhave made that election, the income of a qualified subchapter S\nsubsidiary owned directly or indirectly by the eligible S corporation\nshall be included with the income of the eligible S corporation.\n (2) For the purposes of this subsection, the term "eligible S\ncorporation" has the same definition as in subsection (a) of this\nsection.\n (3) For the purposes of this subsection, the term "investment income"\nmeans the sum of an eligible S corporation's gross income from interest,\ndividends, royalties, annuities, rents and gains derived from dealings\nin property, including the corporation's share of such items from a\npartnership, estate or trust, to the extent such items would be\nincludable in federal gross income for the taxable year.\n (4) Estimated tax payments. When making estimated tax payments\nrequired to be made under this chapter in the current tax year, the\neligible S corporation and its shareholders may rely on the eligible S\ncorporation's filing status for the prior year. If the eligible S\ncorporation's filing status changes from the prior tax year the\ncorporation or the shareholders, as the case may be, which made the\npayments shall be entitled to a refund of such estimated tax payments.\nNo additions to tax with respect to any required declarations or\npayments of estimated tax imposed under this chapter shall be imposed on\nthe corporation or shareholders, whichever is the taxpayer for the\ncurrent taxable year, if the corporation or the shareholders file such\ndeclarations and make such estimated tax payments by January fifteenth\nof the following calendar year, regardless of whether the taxpayer's tax\nyear is a calendar or a fiscal year.\n