The New York Department of Taxation and Finance has issued a memorandum explaining recently enacted legislation (TAXDAY, 2011/08/22, S.12) that revised the department's offer in compromise program.

Under the new law, eligibility to participate in the program has been expanded to include individual taxpayers who can prove that collection in full of any liability administered by the department will cause the taxpayer undue economic hardship. This expanded eligibility is in addition to the existing criteria that allow participation if a taxpayer has been discharged in a bankruptcy proceeding or is proven to be insolvent. As under the statute prior to this change, approval by a justice of the New York State Supreme Court is required for fixed and final liabilities if the amount to be compromised is over $100,000, exclusive of penalties and interest. With respect to liabilities that are not fixed and final, the new law modernizes the language of these provisions and raises the threshold for requiring an opinion of counsel before an offer can be finalized to $50,000 or more, including penalty and interest.

The new law requires the Commissioner of Taxation and Finance to issue regulations specifying what constitutes undue economic hardship. The department is currently in the process of developing those regulations.