DOTAX Adopts Temporary Rule Granting Automatic Extensions

On January 3, 2018, the Department of Taxation issued Temporary Administrative Rules, effective January 10, 2018, making extensions for net income tax returns automatic for corporations, partnerships, estates, trusts, and other business entities.  Specifically, under the temporary rules (which are effective for this filing season) it is not necessary to submit electronic or paper extensions in order to get the benefit of the extended due date.  The rules conform treatment of these entities to the treatment of individuals, who were allowed automatic extensions in 2007.

Extensions are conditioned on a “properly estimated” amount of tax being paid by the unextended due date.  As explained in Department of Taxation Announcement 2007-20, the Department will typically invalidate any extensions where the amount of tax paid prior to the unextended due date is less than 90% of the tax as shown on the return. If the extension is invalidated, penalties (typically, a 25% failure to file penalty) and interest will be charged from the unextended due date.  If the taxpayer then demonstrates that the amount paid by the original due date was 100% of the properly estimated tax liability, the penalties and interest will be reversed.

The new rules make it unnecessary to file Form N-100 or N-301 unless an extension payment is being made.

The full text of the new rules (with changes from the old rules indicated) is below.