BILL NUMBER: S700
SPONSOR: KRUEGER
 
TITLE OF BILL:
An act to amend the tax law, in relation to the enforcement of delin-
quent tax liabilities by means of the suspension of licenses to operate
a motor vehicle
 
PURPOSE OF BILL:
To amend section 171-v of the tax law to provide for an additional hard-
ship exemption from New York's driver's license suspension program as it
relates to the non-payment of income taxes.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 amends section 171-v of the tax law to add an inflation
adjustment to the exclusion from driver's license suspension provisions
for tax debts under 10,000; amends notice provisions to exclude those
not subject to license suspension and increases information regarding
requests for waivers of suspension; and adds an exception to suspension
provisions for taxpayers who make less than 250 percent of the poverty
level.
Section 2 provides for rulemaking by the commissioner.
Section 3 is the effective date.
 
JUSTIFICATION:
Chapter 59 of the laws of 2013 law gave the New York State Department of
Taxation and Finance a new and powerful enforcement tool for collection
of delinquent New York State tax liabilities by authorizing the suspen-
sion of a tax debtor's driver's license if arrangements are not made by
the tax debtor to pay delinquent taxes. Any individual whose tax liabil-
ity (inclusive of interest and penalties) is $10,000 or greater became
subject to revocation of his or her driver's license, regardless of the
financial condition of the taxpayer. These sanctions have been effective
in getting tax debtors to pay delinquent taxes.
However, these laws also have been widely criticized as being too harsh
and punitive.
In 2016, the Tax Section of the New York State Bar Association published
Report No. 1344 on "New York State's Driver's License Suspension
Program" (the "2016 Report").
That Report concluded that the driver's license suspension law is in
conflict with longstanding debtor protection laws when applied to
taxpayers who will experience financial hardship if required to enter
into a payment agreement with the Department for the payment of their
tax debts.
For example, some tax debtors may have so little income or assets that
they are not financially able to enter into an installment payment
agreement or an Offer in Compromise to pay their tax liabilities without
compromising their ability to pay basic living expenses. Nonetheless,
the program can be used to force payments of tax debt from an indigent
individual under threat of loss of his or her driver's license even
though there are, in many cases, federal and state laws in place that
would protect that individual from any direct tax levy on income and
assets. The limited financial hardship exemptions make the New York law
uniquely punitive when applied to this type of tax debtor since, unlike
federal tax law, New York lacks many relief programs such as (1) the
ability to place a tax debtor in "uncollectible" status if he/she can't
afford to begin a payment plan or submit an Offer in Compromise without
compromising his/her ability to pay basic living expenses or (2) the
ability to enter into what are known as "partial payment" Installment
Payment Agreements which set up a monthly payment plan that takes into
account an allowance for the tax debtor's reasonable basic living
expenses even though the plan may not ultimately fully pay the tax
liability.
The 2016 Report recommended that the law be amended (1) to include a
financial hardship exemption; (2) to increase the threshold amount of
tax debt (plus interest and penalties) that triggers application of the
law; (3) to apply the law to any tax debtor, regardless of the amount of
tax debt owed, if the tax debtor has engaged in egregious conduct to
avoid collection, such as by hiding assets; and (4) to give more
discretion to the Department of Taxation and Finance to waive license
suspension based on the equities of a particular case.
The 2016 report has proved to be a major catalyst for a broad scale
effort to amend the law, particularly among groups representing indigent
and financially compromised taxpayers.
In 2017, the New York State Bar Association issued a follow-up report
(Report No. 1380), to provide greater specificity with respect to the
recommendations made in the 2016 Report, as well as to provide the stat-
utory language necessary for the recommended amendments to the law.
The 2017 Report made the following recommendations, inter alia:
*An automatic exemption for low-income tax debtors who receive public
assistance or supplemental security income or who have income below 135%
of the level specified by the Federal Poverty Income Guidelines
(currently $16,281 per year for a household of one). This conforms to
the driver's license suspension hardship exemption provided under the
New York State child support laws. A hardship exemption for any tax
debtor who can demonstrate that payment of his or her past due tax
liabilities will leave insufficient income to cover necessary basic
living expenses.
*A tax debtor's driver's license should be subject to suspension,
regardless of the amount of tax debt owed, if the Department determines
that the tax debtor has taken affirmative steps to evade or avoid the
collection of tax, such as by hiding assets.
*The Department should be granted discretionary authority to waive
license suspension based on the equities of the case. This bill contains
all of the above-stated recommendations of the Bar's 2017 report, with
slight modification, e.g. the exemption for low-income debtors is
expanded to persons who have income below 1250% of federal guidelines,
plus the $10,000 floor is expanded by a cost of living adjustment.
Particularly in upstate communities which are not well-served by public
transportation, it is hoped that this bill will permit tax debtors to be
able to drive to their places of employment and not risk punitive and
counterproductive sanctions which leave them unable to remain gainfully
employed and unable thus unable to satisfy their tax delinquencies.
The 2019 budget amended this section of law by making some of the NY Bar
recommendations and removed individuals on public assistance or receiv-
ing SSI payments from being targeted by this collection program, and
allowing for challenges to a suspension based on these new criteria.
Additionally, the law was amended to say that a suspension could be
challenged if it created an undue hardship.
 
LEGISLATIVE HISTORY:
2023-24: S.1147A/A5885A - Passed Senate
2021-22: S.936/No Same As - Passed Senate
2019-20: S.3836A/A.5633B (Weinstein)- Passed Senate 2018 A.9596-A (Wein-
stein)- Referred to Ways and Means
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
To be determined. By allowing citizens to continue to use their vehicles
in order to get to and from work, it is hoped that this will result in
increased income tax collections to the State.
 
EFFECTIVE DATE:
April 1 next succeeding the date on which it shall have become a law.