New York State Department of Taxation and Finance        TSB-M-08(6)I 
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 Office of Tax Policy Analysis 
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 Taxpayer Guidance Division                               TSB-M-08(4)R 
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                                                          September 3, 2008 
 
                  Voluntary Disclosure and Compliance Program 
 
General 
 
  To encourage taxpayers to voluntarily correct overdue tax liabilities and comply with the 
Tax Law in the future, Chapter 57 of the Laws of 2008 added section 1700 of Article 36 to the 
Tax Law which establishes the Voluntary Disclosure and Compliance (VDC) program. This 
program is designed to encourage eligible taxpayers who owe back taxes, regardless of the 
reason, to voluntarily disclose tax liabilities that are not currently known to the Tax Department. 
The significant incentives provided by the VDC program to eligible taxpayers who participate in 
the program and comply with its requirements include protection from possible criminal tax 
prosecution and the avoidance of civil penalties. 
 
  Taxpayers who participate in the VDC program will be required to sign a compliance 
agreement in which they will promise to correct their past behavior, comply with the Tax Law in 
the future, and pay their past due tax obligations. 
 
  Eligible taxpayers can participate even if their tax liability is the result of fraudulent or 
criminal conduct. 
 
   Taxpayer disclosures made under the program are confidential. The law prohibits the 
Tax Department from using the taxpayer’s disclosure (including all information or returns 
submitted by the taxpayer under the program) as evidence against the taxpayer or sharing them 
with another agency unless the taxpayer intentionally fails to comply with the compliance 
agreement made under the VDC program. 
  
Definitions 
 
  The following definitions apply to the VDC program. 
 
  An eligible taxpayer is an individual or entity subject to an eligible tax who meets all of 
the following criteria: 
 
  • The taxpayer is not currently under audit by the Tax Department for any tax. 
 
  • The taxpayer is voluntarily disclosing a New York tax liability that the Tax Department 
  has not determined, calculated, researched or identified at the time of the disclosure. 
 
  • The taxpayer is not currently a party to any criminal investigation being conducted by 
  any agency or political subdivision of New York State. 
 
W A Harriman Campus, Albany NY 12227                      www.nystax.gov  

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 • The taxpayer is not seeking to disclose participation in a tax avoidance transaction that 
 is a federal or New York State reportable or listed transaction. These transactions are 
 commonly referred to as tax shelters. 
 
 The term taxpayer includes any person required to pay or collect any of the taxes covered 
by the program. A taxpayer can be an individual, partnership, estate, trust, corporation, limited 
liability company, joint stock company, or any other company, trustee, receiver, assignee, 
referee, society, association, business or any other person subject to tax, or any other law 
imposing administrative tax responsibilities on the Commissioner of Taxation and Finance (the 
commissioner). 
 
 Eligible tax is any tax type, currently or previously imposed, under the Tax Law or any 
other law administered by the commissioner. 
 
 Criminal tax prosecution is the prosecution for criminal conduct related to a tax liability 
with New York State. 
 
Application process 
 
 To obtain relief under the VDC program, an eligible taxpayer must submit an application. 
The application requires the taxpayer to provide identifying information; complete a disclosure 
statement describing the nature of the tax liability and the tax periods covered by the application; 
and provide any other information that the commissioner may require. 
 
 Upon receipt of the application, the Tax Department will determine whether the taxpayer 
is eligible for the program. The department may, if necessary, seek additional information from 
the taxpayer to determine eligibility. No application will be denied solely because the taxpayer 
has admitted that the tax liability is the result of willful or fraudulent conduct. 
 
 To submit an online application go to the Tax Department Web site at www.nystax.gov. 
 
   If the taxpayer submits an application and a disclosure statement but then chooses not to 
use the VDC program, or if it is determined by the department that the taxpayer is not eligible for 
the program, the department cannot use the disclosure against the taxpayer in any proceeding or 
share the information with any other agency.

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Compliance agreement 
 
    Terms of compliance agreement. To participate in the VDC program, the taxpayer must 
enter into a compliance agreement with the Tax Department. The compliance agreement will be 
in a form established by the department and will include those terms the department may 
reasonably require to satisfy the taxpayer’s disclosed tax obligations and to comply with the Tax 
Law in the future. Generally, the agreement will set a specific future period during which the 
taxpayer will be required to comply with the terms of the agreement. 
 
    The compliance agreement will provide that if the taxpayer complies with the terms of 
the agreement, the taxpayer will not be subject to any criminal tax prosecution in 
New York State for the conduct disclosed. In addition, it will provide that as long as the taxpayer 
complies with the terms of the compliance agreement, the department will not use the taxpayer’s 
disclosure as evidence in any proceeding brought against the taxpayer or reveal the contents of 
the disclosure to any other agency .
 
    As part of the compliance agreement, the Tax Department may agree to limit the scope of 
its review to a specific period of time (the “limited look-back clause”). An eligible taxpayer who 
owes more than three years of taxes may in certain circumstances only be required to pay the 
taxes owed for a limited look-back period. Taxpayers seeking a compliance agreement with a 
limited look-back clause must request it during the application process and must nonetheless 
make a full and complete statement describing their entire tax liability. The limited look-back 
clause will provide that the department will limit its review to the look-back period and will not 
look back prior to that period to audit or assess the taxpayer for anything related to the tax matter 
being disclosed. In addition, taxpayers will not be required to file returns for the years prior to 
the look-back period. The length of the look-back period will depend upon the circumstances of 
each case. Under this type of compliance agreement, the taxpayer will not be granted protection 
from criminal prosecution brought by other agencies or prosecutors for the periods prior to the 
look-back period. However, the department will agree not to refer the taxpayer for criminal 
prosecution and, as detailed in the “Confidentiality of Disclosures” section, the department is 
prohibited from disclosing this information to other agencies, including law enforcement 
agencies. For more information on a compliance agreement with a limited look-back clause, visit 
the Tax Department Web site at www.nystax.gov. 
 
    Once a compliance agreement is executed, the Tax Department will waive any applicable 
penalties for the following: (1) failure to pay the disclosed tax liability; (2) failure to file a return 
or report with respect to the disclosed tax liability; and (3) failure to pay estimated tax. In 
addition, the department will not assess any other civil penalties related to the tax liability 
disclosed. 
 

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 The taxpayer must pay any tax and interest for the period(s) included in the compliance 
agreement when it is executed or within the time stated on a bill issued to the taxpayer by the 
Tax Department. If the department is satisfied that the taxpayer cannot make immediate full 
payment of the disclosed tax liability, the department may enter into an installment payment 
agreement with the taxpayer. The taxpayer may be required to provide information concerning 
the taxpayer’s financial condition and resources before entering into an installment payment 
agreement. 
 
 The compliance agreement will not preclude the Tax Department from auditing any 
returns filed to determine if the returns are accurate and were completed in accordance with 
pertinent law and regulations. The department retains the right to examine and audit the 
information and returns provided by the taxpayer as part of the VDC program process, and it 
may require the taxpayer to provide additional information concerning the disclosed tax liability. 
 
 Unless the Tax Department redetermines the amount of tax and interest due on its own 
motion, no refund or credit will be allowed for any tax and interest paid under this program. 
 
 Scope of compliance agreement. Taxpayers participating in the VDC program only 
receive protection from criminal tax prosecution and relief from penalties with respect to the 
specific tax liabilities that are the subject of their disclosure and compliance agreement. The 
taxpayer’s disclosure will determine the scope of the protection from criminal prosecution and 
penalty waiver provided by the compliance agreement. The compliance agreement will include 
and cover only the specific tax liabilities disclosed and only for the periods specified by the 
taxpayer. Accordingly, the protection from criminal tax prosecution and the waiver of penalties 
under the compliance agreement will only be as extensive as the taxpayer’s disclosure. 
Therefore, taxpayers who want to obtain the broadest possible protection from criminal sanctions 
and penalties should include all known tax liabilities and conduct related to those liabilities in 
their application to participate in the program. 
 
Noncompliance 
 
 A taxpayer can cause the compliance agreement to be rescinded and, therefore, lose the 
benefits of the VDC program, in three ways: 
 
 • If the taxpayer intentionally provides false material information or omits material 
 information in his or her application to participate in the program or in any submission 
 to the Tax Department as part of the taxpayer’s participation in the program, the 
 compliance agreement will be deemed rescinded. 
 
 • If the taxpayer attempts to intentionally defeat or evade a tax subject to the agreement, 
 the compliance agreement will be deemed rescinded. 

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 • If the taxpayer intentionally fails to comply with any of the terms of the compliance 
 agreement,including by intentionally failing to pay all of the back taxes and interest 
 owed or by failing to comply with all tax laws as set forth in the agreement, the 
 compliance agreement will be deemed rescinded. 
 
 If a compliance agreement is deemed rescinded, the Tax Department will be free to use 
the taxpayer’s disclosures against the taxpayer and to pursue any civil or criminal penalty that 
might apply to the misconduct disclosed by the taxpayer as part of the VDC program process. 
 
Confidentiality of Disclosures 
 
 The VDC law and the Tax Department’s policies are intended to encourage taxpayers to 
make full, honest, and complete disclosures without fear that those disclosures may later be used 
against them. Under the VDC law, taxpayer disclosures (including all information and returns 
submitted by the taxpayer under the program) are confidential. They cannot be used by the 
department against the taxpayer or shared with any other agency except where the taxpayer 
intentionally violates a compliance agreement under the VDC program. 
 
 Absent such a violation by the taxpayer, the department will not use the disclosures 
against the taxpayer or share them with department personnel outside the VDC program. The 
department may, however, audit and examine the returns filed by the taxpayer as part of the 
VDC program. 
 
 If a taxpayer applies but does not enter the VDC program, the information provided by 
the taxpayer cannot be used by the department for any purpose and will not be shared with any 
other agency. 
 
 Because the VDC law and the Tax Department’s policies provide taxpayers with strong 
guarantees that their communications and disclosures will only be used in the VDC program and 
not for any other purpose (unless the taxpayer intentionally violates the compliance agreement), 
the department will not accept anonymous applications for participation into the VDC program. 
 
Voluntary disclosures outside the VDC program 
 
 The Tax Department has the power to specifically grant protection from criminal tax 
prosecution only to eligible taxpayers who participate in the VDC program. However, taxpayers 
who do not or are not eligible to participate in the VDC program are encouraged to voluntarily 
disclose and resolve past liabilities that are unknown to the department. Even if the VDC 
program is not available or utilized, a taxpayer who voluntarily self-discloses prior liabilities and 
who cooperates with the department will be viewed more favorably than one whose tax 

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obligations are revealed only after an audit or investigation. Taxpayers who want to resolve their 
past liabilities in this manner should contact, or have their representative contact, the Voluntary 
Disclosure Unit at (518) 457-4448. 
 
 NOTE:  A TSB-M is an informational statement of existing department policies or of 
 changes to the law, regulations, or department policies.  It is accurate on the date 
 issued.  Subsequent changes in the law or regulations, judicial decisions, Tax 
 Appeals Tribunal decisions, or changes in department policies could affect the 
 validity of the information presented in a TSB-M.