§ 1081. Notice of deficiency.– (a) General.– If upon examination of a taxpayer's return under article nine, nine-a, nine-b or nine-c, the tax commission determines that there is a deficiency of tax, it may mail a notice of deficiency to the taxpayer. If a taxpayer fails to file a tax return required under article nine, nine-a, nine-b or nine-c, the tax commission is authorized to estimate the taxpayer's New York tax liability from any information in its possession, and to mail a notice of deficiency to the taxpayer. A notice of deficiency shall be mailed by certified or registered mail to the taxpayer at its last known address in or out of this state. If the taxpayer has terminated its existence, a notice of deficiency may be mailed to its last known address in or out of this state, unless the tax commission has received notice of the existence of a fiduciary relationship with respect to the taxpayer.

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(b) Notice of deficiency as assessment.–After ninety days from the mailing of a notice of deficiency, such notice shall be an assessment of the amount of tax specified in such notice, together with the interest, additions to tax and penalties stated in such notice, except only for any such tax or other amounts as to which the taxpayer has within such ninety day period filed with the tax commission a petition under section one thousand eighty-nine. If the notice of deficiency is addressed to a taxpayer whose last known address is outside of the United States, such period shall be one hundred fifty days instead of ninety days.

(c) Restrictions on assessment and levy.–No assessment of a deficiency in tax and no levy or proceeding in court for its collection shall be made, begun or prosecuted, except as otherwise provided in section one thousand ninety-four, until a notice of deficiency has been mailed to the taxpayer, nor until the expiration of the time for filing a petition contesting such notice, nor, if a petition with respect to the taxable year has been filed with the tax commission, until the decision of the tax commission has become final. For exception in the case of judicial review of the decision of the tax commission, see subsection (c) of section one thousand ninety.

(d) Exceptions for mathematical or clerical errors.–If a mathematical or clerical error appears on a return (including an overstatement of the amount paid as estimated tax), the commissioner shall notify the taxpayer that an amount of tax in excess of that shown upon the return is due, and that such excess has been assessed. Such notice shall not be considered as a notice of deficiency for the purposes of this section, subsection (f) of section one thousand eighty-seven (limiting credits or refunds after petition to the division of tax appeals), subsection (b) of section one thousand eighty-nine (authorizing the filing of a petition with the division of tax appeals based on a notice of deficiency), or article forty of this chapter, nor shall such assessment or collection be prohibited by the provisions of subsection (c).

(e) Exception where change in federal taxable income is not reported.–

(1) If the taxpayer fails to comply with subdivision three of section two hundred eleven or with section two hundred nineteen-bb or with section two hundred nineteen-zz in not reporting a change or correction or renegotiation, or computation or recomputation of tax, increasing or decreasing its federal taxable income or federal alternative minimum taxable income as reported on its federal income tax return or in not reporting a change or correction or renegotiation, or computation or recomputation of tax, which is treated in the same manner as if it were a deficiency for federal income tax purposes or in not filing an amended return, instead of the mode and time of assessment provided for in subsection (b) of this section, the tax commission may assess a deficiency based upon such increased or decreased federal taxable income or federal alternative minimum taxable income by mailing to the taxpayer a notice of additional tax due specifying the amount of the deficiency, and such deficiency, together with the interest, additions to tax and penalties stated in such notice, shall be deemed assessed on the date such notice is mailed unless within thirty days after the mailing of such notice a report of the federal change or correction or renegotiation, or computation or recomputation of tax, or an amended return, where such return was required by subdivision three of section two hundred eleven or by section two hundred nineteen-bb or by section two hundred nineteen-zz, is filed accompanied by a statement showing wherein such federal determination and such notice of additional tax due are erroneous.

(2) Such notice shall not be considered as a notice of deficiency for the purposes of this section, subsection (f) of section one thousand eighty-seven (limiting credits or refunds after petition to the tax commission), or subsection (b) of section one thousand eighty-nine (authorizing the filing of a petition with the tax commission based on a notice of deficiency), nor shall such assessment or the collection thereof be prohibited by the provisions of subsection (c).

(3) If the taxpayer has terminated its existence, a notice of additional tax due may be mailed to its last known address in or out of this state, unless the tax commission has received notice of the existence of a fiduciary relationship with respect to the taxpayer.

(f) Waiver of restrictions.– The taxpayer shall at any time (whether or not a notice of deficiency has been issued) have the right to waive the restrictions on assessment and collection of the whole or any part of the deficiency by a signed notice in writing filed with the tax commission.

(g) Two or more corporations.–In the case of a combined return under article nine-a or a consolidated return under article nine-b or nine-c of two or more corporations, the tax commission may determine a deficiency of tax under article nine-a, nine-b or nine-c with respect to the entire tax due upon such return against any taxpayer included therein. In the case of a taxpayer which might have been included in such a return under article nine-a, nine-b or nine-c when the tax under such articles was originally reported, the tax commission may determine a deficiency of tax under article nine-a, nine-b or nine-c against such taxpayer and against any other taxpayers which might have been included in such a return.

(h) Deficiency defined.–For purposes of this article, a deficiency means the amount of the tax imposed by article nine, nine-a, nine-b or nine-c, less (i) the amount shown as the tax upon the taxpayer's return (whether the return was made or the tax computed by it or by the tax commission), and less (ii) the amounts previously assessed (or collected without assessment) as a deficiency and plus (iii) the amount of any rebates. For the purpose of this definition, the tax imposed by article nine-a, nine-b or nine-c and the tax shown on the return shall both be determined without regard to any payment of estimated tax; and a rebate means so much of an abatement, credit, refund or other repayment (whether or not erroneous) as was made on the ground that the amounts entering into the definition of a deficiency showed a balance in favor of the taxpayer.

(i) Exception for final determination of refund or credit of retaliatory taxes.–

(1) If the taxpayer files the report required under paragraph (2) of subdivision (e) of section fifteen hundred fifteen of this chapter within the time prescribed by such paragraph, in respect of a final determination of a refund or credit of retaliatory taxes or other charges, the amount of the refund or credit of such taxes or charges paid for which the taxpayer has been allowed a credit pursuant to subdivision (c) of section fifteen hundred eleven of this chapter and in respect to which the taxpayer filed such report shall be deemed assessed on the date of filing such report. If payment of such amount does not accompany the report, the tax commission shall issue a notice and demand for the unpaid amount, together with any interest, additions to tax and penalties, pursuant to subsection (b) of section one thousand ninety-two.

(2) If the taxpayer fails to file the report required under paragraph (2) of subdivision (e) of section fifteen hundred fifteen of this chapter within the time prescribed by such paragraph, in respect of a final determination of a refund or credit of retaliatory taxes or other charges, the amount of the refund or credit of such taxes or charges paid for which the taxpayer has been allowed a credit pursuant to subdivision (c) of section fifteen hundred eleven of this chapter and in respect to which the taxpayer was required to file such report shall be deemed assessed on the last date prescribed for the filing of such report. The tax commission shall issue a notice and demand for the unpaid amount, together with any interest, additions to tax and penalties, pursuant to subsection (b) of section one thousand ninety-two.

(3) The assessments provided for in paragraphs (1) and (2) of this subsection or collection thereof shall not be prohibited by the provisions of subsection (c).