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New York Tax - Part 4 - § 660 Election by Shareholders of S Corporations

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    §  660. Election by shareholders of S corporations. (a) Election. If a
  corporation is an  eligible  S  corporation,  the  shareholders  of  the
  corporation  may elect in the manner set forth in subsection (b) of this
  section to take into account, to the extent provided for in this article
  (or in article thirteen of this chapter, in the case  of  a  shareholder
  which  is  a  taxpayer  under  such article), the S corporation items of
  income, loss, deduction and reductions for taxes described in paragraphs
  two and three of subsection (f) of section thirteen hundred sixty-six of
  the internal revenue code which  are  taken  into  account  for  federal
  income  tax  purposes  for  the  taxable  year.  No  election under this
  subsection shall be effective unless all shareholders of the corporation
  have so elected. An eligible S corporation is (i) an S corporation which
  is subject to tax under article nine-A or thirty-two  of  this  chapter,
  (ii)  an  S  corporation which is the parent of a qualified subchapter S
  subsidiary subject to tax under article nine-A, where  the  shareholders
  of  such parent corporation are entitled to make the election under this
  subsection  by  reason  of  subparagraph  three  of  paragraph  (k)   of
  subdivision  nine of section two hundred eight of this chapter; or (iii)
  an S corporation which  is  the  parent  of  a  qualified  subchapter  S
  corporation   subject   to  tax  under  article  thirty-two,  where  the
  shareholders of such parent are entitled to make the election under this
  subsection by reason of paragraph three of  subsection  (o)  of  section
  fourteen hundred fifty-three of this chapter.
    (b) Requirements of election. An election under subsection (a) of this
  section  shall  be  made  on  such  form  and  in such manner as the tax
  commission may prescribe by regulation or instruction.
    (1) When made. An election under subsection (a) of this section may be
  made at any time during the preceding taxable year of the corporation or
  at any time during the taxable year of the corporation and on or  before
  the fifteenth day of the third month of such taxable year.
    (2) Certain elections made during first two and one-half months. If an
  election  made  under  subsection  (a)  of  this section is made for any
  taxable year of the corporation during such year and on  or  before  the
  fifteenth  day  of  the third month of such year, such election shall be
  treated as made for the following taxable year if
    (A) on one or more days in such taxable year before the day  on  which
  the  election  was made the corporation did not meet the requirements of
  subsection (b) of section thirteen hundred  sixty-one  of  the  internal
  revenue code or
    (B)  one or more of the shareholders who held stock in the corporation
  during such taxable year and  before  the  election  was  made  did  not
  consent to the election.
    (3) Elections made after first two and one-half months. If an election
  under subsection (a) of this section is made for any taxable year of the
  corporation  and  such  election  is made after the fifteenth day of the
  third month of such taxable year and on or before the fifteenth  day  of
  the  third  month  of the following taxable year, such election shall be
  treated as made for the following taxable year.
    (4) Taxable years of two and one-half months or less. For purposes  of
  this  subsection, an election for a taxable year made not later than two
  months and fifteen days after the first day of the taxable year shall be
  treated as timely made during such year.
    (5) Authority to treat late elections, etc.,  as  timely.  If  (A)  an
  election  under  subsection  (a) of this section is made for any taxable
  year (determined without regard to paragraph three of  this  subsection)
  after  the  date  prescribed by this subsection for making such election
  for such taxable year, or if no such election is made  for  any  taxable
  year, and

    (B)  the  commissioner  determines that there was reasonable cause for
  failure to timely make such election, then
    (C)  the  commissioner  may  treat such an election as timely made for
  such taxable year (and paragraph three  of  this  subsection  shall  not
  apply).
    (6)  Years  for  which  effective. An election under subsection (a) of
  this section shall be effective for the taxable year of the  corporation
  for  which  it  is  made  and  for  all  succeeding taxable years of the
  corporation until such election is terminated under  subsection  (c)  of
  this section.
    (c)  Termination.  An  election  under  subsection (a) of this section
  shall cease to be effective
    (1) on the day an election  to  be  an  S  corporation  ceases  to  be
  effective  for federal income tax purposes pursuant to subsection (d) of
  section thirteen hundred sixty-two of the internal revenue code, or
    (2) if shareholders holding more than one-half of the shares of  stock
  of  the  corporation  on  the day on which the revocation is made revoke
  such election  in  the  manner  the  tax  commission  may  prescribe  by
  regulation,
    (A)  on  the  first day of the taxable year of the corporation, if the
  revocation is made during  such  taxable  year  and  on  or  before  the
  fifteenth day of the third month thereof, or
    (B) on the first day of the following taxable year of the corporation,
  if  the  revocation  is  made  during  the  taxable  year  but after the
  fifteenth day of the third month thereof, or
    (C) on and after the date so specified, if the revocation specifies  a
  date for revocation which is on or after the day on which the revocation
  is made, or
    (3)  if any person who was not a shareholder of the corporation on the
  day on  which  the  election  is  made  becomes  a  shareholder  in  the
  corporation and affirmatively refuses to consent to such election in the
  manner  the  tax commission may prescribe by regulation, on the day such
  person becomes a shareholder.
    (d) New York S  termination  year.  In  the  case  of  a  New  York  S
  termination  year,  the amount of any item of S corporation income, loss
  and deduction and reductions for taxes (as described in  paragraphs  two
  and three of subsection (f) of section thirteen hundred sixty-six of the
  internal  revenue  code)  required  to  be  taken  account of under this
  article shall be adjusted in the same manner that  the  S  corporation's
  items  which  are  included  in the shareholder's federal adjusted gross
  income are adjusted under subsection (s) of section six hundred twelve.
    (e) Inadvertent invalid elections. If (1) an election under subsection
  (a) of this section was not effective for the  taxable  year  for  which
  made  (determined  without  regard to paragraph two of subsection (b) of
  this section) by reason of a failure to obtain shareholder consents,
    (2) the commissioner determines that the  circumstances  resulting  in
  such ineffectiveness were inadvertent,
    (3)  no  later than a reasonable period of time after discovery of the
  circumstances resulting in such ineffectiveness,  steps  were  taken  to
  acquire the required shareholder consents, and
    (4)  the  corporation,  and  each  person who was a shareholder in the
  corporation at any time during the period  specified  pursuant  to  this
  subsection,  agrees  to  make  such  adjustments  (consistent  with  the
  treatment of the corporation as a New York  S  corporation)  as  may  be
  required by the commissioner with respect to such period,
    (5)   then,   notwithstanding  the  circumstances  resulting  in  such
  ineffectiveness, such corporation shall be  treated  as  a  New  York  S
  corporation during the period specified by the commissioner.

    (f)  Validated  federal elections. If (1) an election under subsection
  (a) of this  section  was  made  for  a  taxable  year  or  years  of  a
  corporation,  which  years occur with or within the period for which the
  federal S election of such corporation has been  validated  pursuant  to
  the  provisions  of subsection (f) of section thirteen hundred sixty-two
  of the internal revenue code, and
    (2) the corporation, and each person who  was  a  shareholder  in  the
  corporation at any time during such taxable year or years agrees to make
  such  adjustments (consistent with the treatment of the corporation as a
  New York S corporation) as may be  required  by  the  commissioner  with
  respect to such year or years,
    (3) then such corporation shall be treated as a New York S corporation
  during such year or years.
    (g)  Transitional  rule.  Any  election made under this section (as in
  effect for  taxable  years  beginning  before  January  first,  nineteen
  hundred  eighty-three)  shall  be  treated  as  an  election  made under
  subsection (a) of this section.
    (h) Cross reference. For definitions relating to S  corporations,  see
  subdivision  one-A  of section two hundred eight and subsections (f) and
  (g) of section fourteen hundred fifty of this chapter.
    (i) Mandated New York S corporation election. (1) Notwithstanding  the
  provisions in subsection (a) of this section, in the case of an eligible
  S  corporation  for  which  the  election  under  subsection (a) of this
  section is not in effect for the current taxable year, the  shareholders
  of  an  eligible  S  corporation  are  deemed to have made that election
  effective for the eligible S corporation's entire current taxable  year,
  if  the  eligible  S  corporation's  investment  income  for the current
  taxable year is more than fifty percent of its federal gross income  for
  such year provided that this subsection shall not apply to an eligible S
  corporation  that  is  subject  to  tax under article thirty-two of this
  chapter.
    (2) For  the  purposes  of  this  subsection,  the  term  "eligible  S
  corporation"  has  the  same  definition  as  in  subsection (a) of this
  section.
    (3) For the purposes of this subsection, the term "investment  income"
  means the sum of an eligible S corporation's gross income from interest,
  dividends,  royalties,  annuities, rents and gains derived from dealings
  in property, including the corporation's share  of  such  items  from  a
  partnership,  estate  or  trust,  to  the  extent  such  items  would be
  includable in federal gross income for the taxable year.
    (4)  Estimated  tax  payments.  When  making  estimated  tax  payments
  required  to  be  made  under  this chapter in the current tax year, the
  eligible S corporation and its shareholders may rely on the  eligible  S
  corporation's  filing  status  for  the  prior  year.  If the eligible S
  corporation's  filing  status  changes  from  the  prior  tax  year  the
  corporation  or  the  shareholders,  as  the case may be, which made the
  payments shall be entitled to a refund of such estimated  tax  payments.
  No  additions  to  tax  with  respect  to  any  required declarations or
  payments of estimated tax imposed under this chapter shall be imposed on
  the corporation or shareholders,  whichever  is  the  taxpayer  for  the
  current  taxable  year, if the corporation or the shareholders file such
  declarations and make such estimated tax payments by  January  fifteenth
  of the following calendar year, regardless of whether the taxpayer's tax
  year is a calendar or a fiscal year.
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Last modified: February 16, 2014