20 CRR-NY 2402.2NY-CRR
20 CRR-NY 2402.2
20 CRR-NY 2402.2
2402.2 Electronicrecord retention.
(a) Definitions.
(1) Electronic means any technology having electrical, digital, magnetic, wireless,optical, electromagnetic, or similar capabilities.
(2)
(i) Electronic record means information evidencing any act, transaction, occurrence, event,or other activity that is produced or stored by electronic means andthat is capable of being accurately reproduced in a form that is perceptibleby human sensory capabilities.
(ii) For purposes ofthis Part:
(a) the term record or records pertain only to those matters that areunder the jurisdiction of the Commissioner of Taxation and Finance;and
(b) the term taxpayer includes every person under such jurisdiction that isrequired to retain records, whether or not the person is requiredto pay tax.
(b) General.
(1) Electronic recordsmeeting the requirements of this Part have the same force and effectas those taxpayer records that are produced or retained by nonelectronicmeans and will be treated by the Department of Taxation and Financewith the same degree of confidentiality as that accorded any otherrecords of the taxpayer.
(2) For purposes of theTax Law, any other matter under the jurisdiction of the commissioner,and this Title, any record that a taxpayer is required to retain inits original form or as a duplicate original, actual reproduction,exact copy, true copy, or the like, will be considered retained insuch form if the electronic version accurately reflects the requiredinformation and is accessible to the department, as provided in subdivision(c) of this section.
(c) Retaining electronicrecords.
(1) A taxpayer must retainelectronic records that accurately reflect the information that isrequired to be set forth in the records. The electronic records, eitheralone or in conjunction with the taxpayer's other records, mustcontain sufficient information in order to support and verify allof the entries that are made on the taxpayer's tax returns orinformational reports, and to determine the proper taxes or otheramounts that may be due. These records, either alone or together,must be reconcilable to the taxpayer's reporting periods andmust create an audit trail designed so that the details underlyingeach of the entries made on the taxpayer's returns or reportscan be identified and made available to the department upon its request.
(2) Electronic recordsmust be dated, legible (e.g., if the record is scanned), andmaintained and preserved in such a manner so as to disclose upon retrieval,in readily accessible and verifiable detail, the basis for and accuracyof the information reported (or required to be reported) to the department.The electronic records should also be maintained in a secure storageenvironment. Failure to maintain adequate records, or make them availableto the department for review, does not relieve a taxpayer of its obligationsunder the Tax Law, any other matter under the jurisdiction of thecommissioner, or this Title. Nor is the taxpayer relieved of theseobligations if it uses a third party to maintain its records, suchas a records management service. (See, however, section 2392.1[d][2]of this Title concerning reasonable cause for the cancellation ofpenalties and other additions to tax because of the destruction ofrecords by a fire or other documented casualty.)
(3) Electronic recordsshould be backed up regularly, and the backup records should be kept,if possible, at an off-site storage location. In addition, electronicrecords should be tested periodically to confirm their accuracy andintegrity.
(4) Electronic recordsmust be accessible to the department for the entire periods for whichthe records are required to be retained. Accordingly, a taxpayer thatelects to produce or store any information by electronic means thatevidences any act, transaction, occurrence, event, or other activity(or any portion thereof) must retain and make such electronic recordsavailable to the department. For example, if a taxpayer elects toeffect a transaction or capture information relating thereto by electronicmeans, the taxpayer must keep the electronic record and make it availableto the department upon its request. Generally, records must be retainedfor as long as their contents are material to any period open or extendedpursuant to statute, or in any action or proceeding pending beforethe Department of Taxation and Finance, or in any judicial actionor proceeding.
(5) The department willnot prescribe the specific technology or technical specificationsapplicable to retaining or otherwise managing electronic records.Nor will the department require the use of a particular type of hardwareor software. However, a taxpayer must provide the department uponits request with opportunity and, if necessary, the means to ensurethe accuracy and integrity of the taxpayer's electronic records.Such means may include, but are not limited to, suitable facilitiesand computer resources (e.g., appropriate hardware and software,terminal access, computer time, personnel, etc.) as may be necessaryfor the department to carry out its audit procedures. See article41 of the Tax Law (Taxpayers' Bill of Rights) concerning therights of a taxpayer and the obligations of the department duringan audit.
(d) Documentation.
(1) A taxpayer must maintain,and make available to the department if requested, documentation thatexplains:
(i) the specific technologies,technical specifications, and procedures that are used by the taxpayerto retain and otherwise manage its electronic records; and
(ii) how these technologies,specifications, and procedures ensure the accuracy and integrity ofthe taxpayer's electronic records, as well as satisfy the requirementsof this section that the electronic records contain sufficient informationto support and verify the entries made on the taxpayer's returnsand to determine the correct tax liabilities, if any. Provided however,the department will not request a taxpayer to furnish informationpertaining to the specifications or functions of any hardware or softwareunless such hardware or software was designed and developed by thetaxpayer, or to the requirements of the taxpayer, or unless the departmentis not otherwise familiar with the taxpayer's hardware or software.For example, a taxpayer who purchases a typical personal computerand who uses a commercially available software package to manage hisor her financial records, in support of personal income tax returns,would not be required to maintain documentation concerning the specificationsor functions of such hardware or software.
(2) Except as providedin paragraph (1) of this subdivision, the documentation must indicate:
(i) the functions beingperformed as they relate to retaining and otherwise managing the taxpayer'selectronic records (e.g., creating, storing, classifying, modifying,encrypting, authenticating, tracking, generating, communicating, disposing,etc.);
(ii) the proceduresemployed during each of these functions;
(iii) the internalcontrols used to ensure the accuracy and reliability of each of thesefunctions;
(iv) the internal controlsused to prevent the unauthorized access to the taxpayer's electronicrecords, including unauthorized additions to, alterations of, anddeletions of, such records;
(v) the internal controls(or other plans) used to protect against the loss of retained records,such as in the case of hardware failures, power interruptions, ornatural disasters;
(vi) the taxpayer'schart of accounts (for all periods requested by the department), includingdetailed account descriptions and file formats; and
(vii) any other taxpayerrecords that are retained electronically, including detailed descriptionsof the contents and file formats of such records.
(3) The documentationmust also include the nature of and reasons for any changes to thetaxpayer's electronic recordkeeping technology, technical specifications,or procedures; the dates that such changes were implemented; and,if applicable, the steps taken to ensure that the records were accuratelyduplicated.
20 CRR-NY 2402.2
Current through September 30, 2022
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