The Questionable Legality of New York City's Proposed UBT Audit Position

Cara Griffith (Tax Analysts), The Questionable Legality of New York City's Proposed UBT Audit Position, 63 State Tax Notes 713 (Feb. 27, 2012):

The New York City Department of Finance is facing a conundrum. It wants to subject carried interest to tax in one form or another. But doing so requires a legislative change, and making that sort of change has proven difficult (at the local, state, and federal levels). The proposed new UBT audit position may be the department’s solution to gleaning some additional revenue from private investment funds without needing a legislative change. Nonetheless, although the department can make changes to its audit positions without any public fanfare, taxpayers should closely examine what the department asserts as its legal basis for the change. Taxpayers should also challenge the department if it appears to have overstepped its bounds. Taxpayers can and should force the department to go through the appropriate legislative channels to make any significant changes to its enforcement of the city’s administrative tax code.

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