Technical Memorandum 
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                                                                           All Taxes 
                                                                           August 29, 2011 

                    Changes to the Offer In Compromise Program 

    This memorandum explains recently enacted legislation that reformed the Tax 
    Department’s Offer in Compromise Program by expanding the eligibility for 
    taxpayers to participate in the program and making certain other technical 
    changes.   

    The Tax Law was recently amended to expand the eligibility of taxpayers to participate in 
the Tax Department’s Offer In Compromise Program. These changes are effective 
August 17, 2011. 

    Under the new law, eligibility to participate in the Offer In Compromise Program has been 
expanded to include individual taxpayers who can prove that collection in full of any liability 
administered by the Tax Department will cause the taxpayer undue economic hardship. This 
expanded eligibility to participate in the Offer In Compromise Program is in addition to the 
existing criteria that allow a taxpayer to participate if the 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 where 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 
defining what constitutes undue economic hardship. The Tax Department is currently in the 
process of developing those regulations. Although the new law does not define the situations that 
qualify as undue economic hardship, it does specify that the inability to maintain an affluent or 
luxurious lifestyle does not constitute undue economic hardship.  Further information about these 
changes to the Offer in Compromise Program will be posted to the Tax Department’s Web site, at 
www.tax.ny.gov, when available. 

    The amendments also provide that no offer in compromise will be acceptable if it would 
undermine tax compliance by other taxpayers or be adverse to the best interests of the State. In 
addition, the new law eliminates the requirement that the amount payable through an offer in  

    W A Harriman Campus, Albany NY 12227                                   www.tax.ny.gov 

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                                                     All Taxes
                                                     August 29, 2011 
 
compromise must be at least the amount recoverable through legal proceedings. Under the 
amendments, the amount payable through an offer in compromise is an amount that reasonably 
reflects collection potential or is otherwise justified by proofs offered by the taxpayer. 
   
 (Chapter 469 of the Laws of 2011, Tax Law section 171(Fifteenth) and (Eighteenth-a)) 
 
 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.