New York State tax law now provides the New York State Department of Taxation and Finance (DTF) with a new enforcement tool to assist in collecting delinquent New York State tax liabilities. The law authorizes the suspension of a tax debtor’s driver’s license if arrangements are not made by the debtor to pay the delinquent taxes. This article will address the New York’s Driver’s License Suspension Program and provide pertinent information for practitioners in handling such matters.
Effective March 28, 2013, New York Tax Law section 171-v requires the DTF and the Department of Motor Vehicles (DMV) to cooperate to develop procedures to enforce the collection of delinquent NYS tax liabilities through the suspension of a taxpayer’s driver’s license. The DTF has set forth the following criteria:
- The taxpayer must have an outstanding cumulative balance of tax, penalty, and interest of $10,000 or more;
- The date of the assessments used to determine the cumulative total must be less than 20 years from the notice and demand issue date;
- All cases in formal or informal protests or in bankruptcy status are eliminated;
- All cases where taxpayers have active, approved payment plans covering the relevant tax debts are excluded; and
- Any taxpayers with a “taxpayer deceased” record on their collection case are excluded.
Once the DTF determines that the taxpayer meets these criteria and has a qualifying driver’s license, that taxpayer is put into the Driver’s License Suspension Program. At this point, the DTF will issue a 60-day notice of proposed driver’s license suspension to the taxpayer via regular mail. The notice informs the taxpayer that he can avoid a referral to the DMV by paying the debt or entering into a payment agreement acceptable to the DTF and that he can protest the suspension by filing, within 60 days from the date of the notice, either a request for a conciliation conference with the Bureau of Conciliation and Meditation Services or a petition with the Division of Tax Appeals. The notice further informs the taxpayer that any challenge to the suspension is limited to the following six grounds:
- The individual to whom the notice was provided is not the taxpayer at issue;
- The past due tax liabilities were satisfied;
- The taxpayer’s wages are being garnished by the DTF for payment of the past due liabilities at issue or for past due child support or combined child and spousal support arrears;
- The taxpayer’s wages are being garnished or combined child and spousal support arrears are subject to an income execution issued under New York law;
- The taxpayer’s driver’s license is a commercial driver’s license, as defined under the New York Vehicle and Traffic Law; or
- The DTF incorrectly determined that the taxpayer failed to comply with the terms of a payment arrangement more than once within a 12-month period.
Interestingly, there is no ground to challenge based on financial hardship. There have been several appeals brought on this basis against suspensions pursuant to this process [e.g., Petition of Benjamin Soleimani (Feb. 18, 2016)]. However, no taxpayer has yet succeeded in such an appeal, and almost all of the appeals have been dismissed because of the restrictions on challenges to the suspension noted above.
Procedurally, after 75 days with no response from the taxpayer, the DTF electronically refers the case to the DMV for license suspension. At that point, the DMV sends a 15-day letter to the taxpayer, advising of the impending suspension. If the taxpayer does not respond within the 15-day period and the DMV does not receive a cancellation record from the DTF, the taxpayer’s license will be marked as suspended in the DMV database. The suspension will remain in effect until the liabilities are paid or a satisfactory deferred payment arrangement has been entered into. Under DMV rules, any taxpayer who drives while her license is suspended may be subject to arrest and penalties. A taxpayer may apply for a restricted license, but such license permits an individual to travel only to and from work, school, medical appointments, the DMV, and child care related to employment or education. In all cases, the taxpayer must return directly home.
The Driver’s License Suspension Program has been highly successful in raising revenue.
Once the tax debtor has received notice from the DMV regarding the pending suspension of his driver’s license or that the driver’s license has been suspended, the only remedies available are applying for a restricted-use license or contacting the DTF to satisfy the debt or arrange for a deferred payment plan.
Effect of the Program
The Driver’s License Suspension Program has been highly successful in raising revenue. In fact, the DTF recently reported that revenue collections under the program are almost $290 million. As a result, Governor Cuomo recently proposed two expansions to the program: 1) lowering the tax liability threshold from $10,000 to $5,000 and 2) applying the program to the denial or suspension of professional licenses. Neither of these proposals has yet been enacted.
Not surprisingly, the program has come under scrutiny due to its lack of a financial hardship exception, as well as the constitutionality of the driver’s license suspension procedures. The New York State Bar Association is preparing a white paper on the program in which it proposes a financial hardship exception as a key recommendation. Nevertheless, CPAs should be cognizant of the DTF’s collection enforcement tools when advising taxpayers with outstanding tax liabilities about the implications in the event tax debts are not satisfied or otherwise timely addressed.