New York · Through 2026-09-11

N.Y. Tax Law § 1503: Computation of entire net income

§ 1503. Computation of entire net income.  (a) The entire net income
of a taxpayer shall be its total net income from all sources which shall
be presumably the same as the life insurance company taxable income
(which shall include, in the case of a stock life insurance company that
has a balance, as determined as of the close of such company's last
taxable year beginning before January first, two thousand eighteen, in
an existing policyholders surplus account, as such term is defined in
section 815 of the internal revenue code as such section was in effect
for taxable years beginning before January first, two thousand eighteen,
the amount of one-eighth of such balance), taxable income of a
partnership or taxable income, but not alternative minimum taxable
income, as the case may be, which the taxpayer is required to report to
the United States treasury department, for the taxable year or, in the
case of a corporation exempt from federal income tax (other than the tax
on unrelated business taxable income imposed under section 511 of the
internal revenue code) but not exempt from tax under section fifteen
hundred one, the taxable income which such taxpayer would have been
required to report but for such exemption, except as hereinafter
provided.
  (b) Modifications. In computing entire net income, the following
modifications shall be made:
  (1) Entire net income shall not include:
  (A) income, gains and losses from subsidiary capital which do not
include the amount of a recovery in respect of any war loss, except that
this modification shall not apply to the amount described in
subparagraph (S) of this paragraph;
  (B) fifty percent of dividends other than from subsidiaries, except
that this modification shall not apply to the amount described in
subparagraph (S) of this paragraph, and except that, in the case of a
life insurance company, such modification shall apply only with respect
to the company's share of such dividends, which share means the
percentage determined under paragraph one of subsection (a) of section
eight hundred twelve of the internal revenue code;
  (C) any refund or credit of a tax imposed under this article or
section one hundred eighty-seven, or article twenty-three of this
chapter heretofore in effect to the extent properly included as income
for federal income tax purposes, for which no exclusion or deduction was
allowed in determining the taxpayer's entire net income under this
article for any prior year;
  (D) that portion of wages or salaries paid or incurred for the taxable
year for which a deduction is not allowed pursuant to the provisions of
section two hundred eighty-C of the internal revenue code;
  (E) in the case of a taxpayer who is separately or as a partner of a
partnership doing an insurance business as a member of the New York
insurance exchange described in section six thousand two hundred one of
the insurance law, any item of income, gain, loss or deduction of such
business which is the taxpayer's distributive or pro rata share for
federal income tax purposes or which the taxpayer is required to take
into account separately for federal income tax purposes;
  (F) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which is included in the taxpayer's taxable income for federal income
tax purposes solely as a result of an election made pursuant to the
provisions of such paragraph eight as it was in effect for agreements
entered into prior to January first, nineteen hundred eighty-four;
  (G) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which the taxpayer could have excluded from its taxable income for
federal income tax purposes had it not made the election provided for in
such paragraph eight as it was in effect for agreements entered into
prior to January first, nineteen hundred eighty-four;
  (H) the amount deductible pursuant to paragraph ten of this
subdivision;
  (I) upon the disposition of property to which paragraph ten of this
subdivision applies, the amount, if any, by which the aggregate of the
amounts described in subparagraph (M) of paragraph two of this
subdivision attributable to such property exceeds the aggregate of the
amounts described in paragraph ten of this subdivision attributable to
such property;
  (J) the amount of unearned premiums on outstanding business at the end
of the taxable year included in premiums earned pursuant to the
provisions of section 832(b)(4)(B) of the internal revenue code;
  (K) the amount of unearned premiums on outstanding business at the end
of the taxable year included in premiums earned pursuant to the
provisions of section 832(b)(7)(B)(i) of the internal revenue code;
  (L) the amount included in premiums earned pursuant to the provisions
of section 832(b)(8)(A)(i) of the internal revenue code which is the
difference between the amount of discounted unearned premiums on
outstanding business at the end of the taxable year and the amount of
unearned premiums on outstanding business at the end of the taxable
year;
  (M) for taxable years beginning after December thirty-first, nineteen
hundred eighty-six and before January first, nineteen hundred
ninety-two, the amount of unearned premiums on outstanding business
included in premiums earned pursuant to the provisions of sections
832(b)(4)(C) and 832(b)(7)(B)(ii) of the internal revenue code;
  (N) the amount which is the difference between the amount of
discounted unpaid losses at the end of the taxable year used in the
computation of losses incurred pursuant to section 832(b)(5)(A) of the
internal revenue code, and the amount of unpaid losses that would be
used in such computation for the taxable year if such losses were not
discounted pursuant to the provisions of section 846(a) of the internal
revenue code;
  (O) the amount by which losses incurred as defined in section
832(b)(5)(A) of the internal revenue code are reduced in accordance with
section 832(b)(5)(B) of such code; and
  (P) the amount included in federal gross income pursuant to sections
847(5) and 847(6) of the internal revenue code.
  (Q) The amount deductible pursuant to paragraph twelve of this
subsection.
  (R) for taxable years beginning after December thirty-first, two
thousand two, the amount deductible pursuant to paragraph fourteen of
this subdivision.
  (S) The income required to be included in the taxpayer's federal gross
income pursuant to subsection (a) of section 951 of the internal revenue
code by reason of subsection (a) of section 965 of such code as adjusted
by subsection (b) of such section but without regard to subsection (c)
of such section to the extent such income is received from a corporation
that is not included in a combined return with the taxpayer.
  (T) Any amount excepted, for purposes of subsection (a) of section one
hundred eighteen of the internal revenue code, from the term
"contribution to the capital of the taxpayer" by paragraph two of
subsection (b) of section one hundred eighteen of the internal revenue
code.
  (U) To the extent not excluded from income pursuant to subparagraph
(A) of this paragraph, ninety-five percent of the income required to be
included in the taxpayer's federal gross income pursuant to subsection
(a) of section 951A of the internal revenue code, without regard to the
deduction under section 250 of the internal revenue code, that is
generated by a corporation that is not included in a combined report
with the taxpayer.
  (V) To the extent not excluded from income pursuant to subparagraph
(A) or (B) of this paragraph, any amount treated as a dividend received
by the taxpayer under section 78 of the internal revenue code that is
attributable to the income required to be included in the taxpayer's
federal gross income pursuant to subsection (a) of section 951A of such
code.
  (W) The amount of any gain added back to determine entire net income
in a previous taxable year pursuant to subparagraph (Z) of paragraph two
of this subdivision that is included in federal gross income for the
taxable year.
  (X) For taxable years beginning on or after January first, two
thousand twenty-five, in the case of qualified production property
described in paragraph two of subsection (n) of section one hundred
sixty-eight of the internal revenue code, the amount of any deduction
allowed pursuant to subsection (a) of section one hundred sixty-seven of
the internal revenue code as if the taxpayer has not made an election
pursuant to subsection (n) of section one hundred sixty-eight of the
internal revenue code.
  (Y) For taxable years beginning on or after January first, two
thousand twenty-five, the amount of any foreign and domestic research or
experimental expenditures, as defined in sections one hundred
seventy-four and 174A of the internal revenue code, paid or incurred in
each taxable year on and after January first, two thousand twenty-five,
amortized over a sixty-month period as if the election in subsection (c)
of section 174A of the internal revenue code applied to such foreign and
domestic research or experimental expenditures.
  (Z) For taxable years beginning on or after January first, two
thousand twenty-five, the remaining amount of any foreign and domestic
research or experimental expenditures, as defined in sections one
hundred seventy-four and 174A of the internal revenue code, paid or
incurred prior to January first, two thousand twenty-five, determined as
if section one hundred seventy-four of the internal revenue code in
effect as of January first, two thousand twenty-two, applied to such
expenditures.
  (2) Entire net income shall be determined without the exclusion,
deduction or credit of:
  (A) the amount of any specific exemption or credit allowed in any law
of the United States imposing any tax on or measured by the income of
corporations;
  (B) any part of any income from dividends or interest on any kind of
stock, securities or indebtedness, except as provided in subparagraphs
(A), (B) and (S) of paragraph one hereof;
  (C) taxes paid or accrued to the United States on or measured by
income or premiums;
  (D) taxes imposed under this article;
  (E) In those instances where a credit for the special additional
mortgage recording tax is allowed under paragraph one of subdivision (e)
of section fifteen hundred eleven of this article, the amount allowed as
an exclusion or deduction for the special additional mortgage recording
tax imposed by subdivision one-a of section two hundred fifty-three of
this chapter in determining the entire net income which the taxpayer is
required to report to the United States treasury department for such
taxable year;
  (F) unless the credit allowed pursuant to subdivision (e) of section
fifteen hundred eleven of this article is reflected in the computation
of the gain or loss so as to result in an increase in such gain or
decrease in such loss, for federal income tax purposes, from the sale or
other disposition of the property with respect to which the special
additional mortgage recording tax imposed pursuant to subdivision one-a
of section two hundred fifty-three of this chapter was paid, the amount
of the special additional mortgage recording tax imposed by subdivision
one-a of section two hundred fifty-three of this chapter which was paid
and which is reflected in the computation of the basis of the property
so as to result in a decrease in such gain or increase in such loss for
federal income tax purposes from the sale or other disposition of the
property with respect to which such tax was paid;
  (G) ninety percent of interest on indebtedness directly or indirectly
owed to any stockholder or shareholder (including subsidiaries of a
corporate stockholder or shareholder), or members of the immediate
family of an individual stockholder or shareholder, owning in the
aggregate in excess of five per centum of the issued capital stock of
the taxpayer, except that such interest may, in any event, be deducted
  (i) up to an amount not exceeding one thousand dollars,
  (ii) in full to the extent that it relates to bonds or other evidences
of indebtedness issued, with stock, pursuant to a bona fide plan of
reorganization, to persons, who, prior to such reorganization, were bona
fide creditors of the corporation or its predecessors, but were not
stockholders or shareholders thereof,
  (iii) in full to the extent that it is paid to a federally licensed
small business investment company;
  (H) in the discretion of the commissioner, any amount of interest
directly or indirectly and any other amount directly attributable as a
carrying charge or otherwise to subsidiary capital or to income, gains
or losses from subsidiary capital, or to the income described in
subparagraphs (S), (U) and (V) of paragraph one of this subdivision;
  (I) in the case of a life insurance company, the provisions of
subparagraph (B) of this paragraph shall not apply to the policyholders'
share of the items described in such subparagraph. For purposes of this
subparagraph, the policyholders' share means the percentage determined
under paragraph two of subsection (a) of section eight hundred twelve of
the internal revenue code.
  (J) in the case of a taxpayer who is separately or as a partner of a
partnership doing an insurance business as a member of the New York
insurance exchange described in section six thousand two hundred one of
the insurance law, such taxpayer's distributive or pro rata share of the
allocated entire net income of such business as determined under this
section and section fifteen hundred four of this article, provided
however, in the event such allocated entire net income is a loss, such
taxpayer's distributive or pro rata share of such loss shall not be
subtracted from federal taxable income in computing entire net income
under this section.
  (K) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which the taxpayer claimed as a deduction for federal income tax
purposes solely as a result of an election made pursuant to the
provisions of such paragraph eight as it was in effect for agreements
entered into prior to January first, nineteen hundred eighty-four;
  (L) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which the taxpayer would have been required to include in the
computation of its taxable income for federal income tax purposes had it
not made the election permitted pursuant to such paragraph eight as it
was in effect for agreements entered into prior to January first,
nineteen hundred eighty-four;
  (M) in the case of property placed in service in taxable years
beginning before nineteen hundred ninety-four, for taxable years
beginning after December thirty-first, nineteen hundred eighty-one,
except with respect to property subject to the provisions of section two
hundred eighty-F of the internal revenue code and property subject to
the provisions of section one hundred sixty-eight of the internal
revenue code which is placed in service in this state in taxable years
beginning after December thirty-first, nineteen hundred eighty-four, the
amount allowable as a deduction determined under section one hundred
sixty-eight of the internal revenue code;
  (N) upon the disposition of property to which paragraph ten of this
subdivision applies, the amount, if any, by which the aggregate of the
amounts described in such paragraph ten attributable to such property
exceeds the aggregate of the amounts described in subparagraph (M) of
this paragraph attributable to such property;
  (N-1) premiums paid for environmental remediation insurance, as
defined in section twenty-three of this chapter, and deducted in
determining federal taxable income, to the extent of the amount of the
environmental remediation insurance credit allowed under such section
twenty-three and subdivision (w) of section fifteen hundred eleven of
this article;
  (O) the amount of unearned premiums on outstanding business at the end
of the preceding taxable year excluded from premiums earned pursuant to
the provisions of section 832(b)(4)(B) of the internal revenue code;
  (P) the amount of unearned premiums on outstanding business at the end
of the preceding year excluded from premiums earned pursuant to the
provisions of section 832(b)(7)(B)(i) of the internal revenue code;
  (Q) the amount excluded from premiums earned pursuant to the
provisions of section 832(b)(8)(A)(i) of the internal revenue code which
is the difference between the amount of discounted unearned premiums on
outstanding business at the end of the preceding taxable year and the
amount of unearned premiums on outstanding business at the end of the
preceding taxable year;
  (R) the amount which is the difference between the amount of
discounted unpaid losses at the end of the preceding federal taxable
year used in the computation of losses incurred for the taxable year
pursuant to section 832(b)(5)(A) of the internal revenue code, and the
amount of unpaid losses at the end of the preceding federal taxable year
that would have been used in such computation for the taxable year if
such losses were not discounted pursuant to the provisions of section
846(a) of the internal revenue code; and
  (S) the amount of the deduction claimed by the taxpayer pursuant to
the provisions of section 847(1) of the internal revenue code.
  (T) for taxable years beginning after December thirty-first, two
thousand two, in the case of qualified property described in paragraph
two of subsection k of section 168 of the internal revenue code, other
than qualified resurgence zone property described in paragraph sixteen
of this subdivision, and other than qualified New York Liberty Zone
property described in paragraph two of subsection b of section 1400L of
the internal revenue code (without regard to clause (i) of subparagraph
(C) of such paragraph), which was placed in service on or after June
first, two thousand three, the amount allowable as a deduction under
section 167 of the internal revenue code.
  (U) The amount of any deduction allowed pursuant to section one
hundred ninety-nine of the internal revenue code.
  (V) The amount of any federal deduction for taxes imposed under
article twenty-three of this chapter.
  (W) The amount of any federal deduction allowed pursuant to subsection
(c) of section 965 of the internal revenue code.
  (X) The amount of any federal deduction allowed pursuant to section
250(a)(1)(A) of the internal revenue code.
  (Y) The amount of the federal deduction allowed pursuant to section
250(a)(1)(B) of the internal revenue code.
  (Z) The amount of any gain excluded from federal gross income for the
taxable year by subparagraph (A) of paragraph (1) of subsection (a) of
section 1400Z-2 of the internal revenue code.
  (AA) For taxable years beginning on or after January first, two
thousand twenty-five, in the case of qualified production property
described in paragraph two of subsection (n) of section one hundred
sixty-eight of the internal revenue code, any amount which the taxpayer
claimed as a deduction under subsection (a) of section one hundred
sixty-seven of the internal revenue code that included an allowance
solely as a result of an election made pursuant to subsection (n) of
section one hundred sixty-eight of the internal revenue code.
  (BB) For taxable years beginning on or after January first, two
thousand twenty-five, any amount claimed as a deduction under sections
one hundred seventy-four and 174A of the internal revenue code in effect
as of January first, two thousand twenty-five, and any amount claimed as
a deduction pursuant to federal Public Law 119-21, title VII, section
70302(f)(2)(a), for foreign and domestic research or experimental
expenditures, as defined in sections one hundred seventy-four and 174A
of the internal revenue code.
  (3) In determining entire net income, there shall be subtracted, to
the extent not deductible in determining federal taxable income:
  (A) interest on indebtedness incurred or continued to purchase or
carry obligations or securities the income from which is subject to tax
under this article but exempt from federal income tax;
  (B) ordinary and necessary expenses paid or incurred during the
taxable year attributable to income which is subject to tax under this
article but exempt from federal income tax; and
  (C) the amortizable bond premium for the taxable year on any bond the
interest on which is subject to tax under this article but exempt from
federal income tax.
  (4) Any "net operating loss deduction" or "operations loss deduction"
allowable under sections one hundred seventy-two or eight hundred ten of
the internal revenue code, respectively, which is allowable to the
taxpayer for federal income tax purposes:
  (A) shall be adjusted to reflect the modifications required by the
other paragraphs of this subdivision;
  (B) shall not, however, exceed any such deduction allowable to the
taxpayer for the taxable year for federal income tax purposes; and
  (C) shall not include any such loss incurred in a taxable year
beginning prior to January first, nineteen hundred seventy-four or
during any taxable year in which the taxpayer was not subject to the tax
imposed under section fifteen hundred one.
  (5) In case of property of a taxpayer acquired prior to January first,
nineteen hundred seventy-four, and disposed of thereafter, the
computation of entire net income shall be modified as follows:
  (A) no gain shall be deemed to have been derived if either the cost or
the fair market price or value on January first, nineteen hundred
seventy-four, exceeds the value realized;
  (B) no loss shall be deemed to have been sustained if either the cost
or the fair market price or value on January first, nineteen hundred
seventy-four, is less than the value realized;
  (C) where both the cost and the fair market price or value on January
first, nineteen hundred seventy-four, are less than the value realized,
the basis for computing gain shall be the cost or the fair market price
or value on such date, whichever is higher;
  (D) where both the cost and the fair market price or value on January
first, nineteen hundred seventy-four, are in excess of the value
realized, the basis for computing loss shall be the cost or the fair
market price or value on such date, whichever is lower.
  (6) There shall be excluded from the computation of entire net income
any amount allowed as a deduction for federal income tax purposes for
the taxable year under section twelve hundred twelve of the internal
revenue code as a capital loss carryforward to the taxable year which
resulted from a capital loss occurring in any taxable year in which the
taxpayer was not subject to tax under section fifteen hundred one.
  (7) There shall be excluded from the computation of entire net income
the amount of any income or gain from the sale of real or personal
property which is includible in determining federal taxable income for
the taxable year pursuant to the installment method under section four
hundred fifty-three of the internal revenue code to the extent such
income or gain is from a sale of such property which occurred in a
taxable year when the taxpayer was not subject to tax under section
fifteen hundred one.
  (8) Entire net income shall be computed without regard to subsection
(b) of section eight hundred thirty-one of the internal revenue code.
  (9) In computing the entire net income of a taxpayer
  (A) which is a fire or life insurance company organized and operated,
without profit to any private shareholder or individual, exclusively for
the purpose of aiding and strengthening charitable, religious,
missionary, educational or philanthropic institutions, by issuing
insurance and annuity contracts only to or for the benefit of such
institutions, to individuals engaged in the services of such
institutions and to members of the immediate families of such
individuals, or
  (B) which is a life insurance company which has been organized for the
purpose of establishing a non-profit voluntary employees beneficiary
association to provide life, sick, accident or other benefits to
eligible employees or their beneficiaries, and is operated exclusively
for said purposes and without profit, direct or indirect, to any private
shareholder or individual, and is duly exempt from income taxation
pursuant to the United States internal revenue code, the life insurance
company taxable income (which shall include, in the case of a stock life
insurance company which has an existing policyholders surplus account,
the amount of direct and indirect distributions during the taxable year
to shareholders from such account) or taxable income, as the case may
be, of such taxpayer for the taxable year shall be computed without
regard to any income, gains, losses, deductions, reserves, surplus or
any other item, derived from, or attributable or allocable to, contracts
described in subsection (a) of section eight hundred eighteen of the
internal revenue code.
  (10) In the case of property placed in service in taxable years
beginning before nineteen hundred ninety-four, for taxable years
beginning after December thirty-first, nineteen hundred eighty-one,
except with respect to property subject to the provisions of section two
hundred eighty-F of the internal revenue code and property subject to
the provisions of section one hundred sixty-eight of the internal
revenue code which is placed in service in this state in taxable years
beginning after December thirty-first, nineteen hundred eighty-four, and
provided a deduction has not been excluded from the determination of
entire net income pursuant to subparagraph (K) of paragraph two of this
subdivision, a taxpayer shall be allowed with respect to property which
is subject to the provisions of section one hundred sixty-eight of the
internal revenue code the depreciation deduction allowable under section
one hundred sixty-seven of the internal revenue code as such section
would have applied to property placed in service on December
thirty-first, nineteen hundred eighty.
  (11)(A) Notwithstanding the provisions of subparagraph (P) of
paragraph one of this subdivision, for taxable years beginning after
December thirty-first, nineteen hundred ninety-two and ending before
December thirty-first, nineteen hundred ninety-six, entire net income
shall include the amount determined under subparagraph (B) of this
paragraph.  This amount shall be included in entire net income only if
the taxpayer claimed the deduction allowed by subdivision one of section
eight hundred forty-seven of the internal revenue code in any taxable
year beginning after December thirty-first, nineteen hundred
eighty-seven and ending before January first, nineteen hundred
ninety-three.
  (B) The amount to be included in entire net income under this
paragraph shall be determined as follows. The taxpayer shall calculate
the total amount that will be required to be included in federal gross
income pursuant to the provisions of subdivisions five and six of
section eight hundred forty-seven of the internal revenue code for
federal taxable years beginning after December thirty-first, nineteen
hundred ninety-two as a result of the deduction claimed by the taxpayer
in federal taxable years beginning after December thirty-first, nineteen
hundred eighty-seven and before January first, nineteen hundred
ninety-three pursuant to the provisions of subdivision one of section
eight hundred forty-seven of the internal revenue code. The taxpayer
shall divide such total amount by three. An amount equal to the
resulting quotient shall be included in entire net income in each of the
taxpayer's first three taxable years beginning on or after January one,
nineteen hundred ninety-three.
  12. Emerging technology investment deferral. In the case of any sale
of a qualified emerging technologies investment held for more than
thirty-six months and with respect to which the taxpayer elects the
application of this subsection, gain from such sale shall be recognized
only to the extent that the amount realized on such sale exceeds the
cost of any qualified emerging technologies investment purchased by the
taxpayer during the three hundred sixty-five-day period beginning on the
date of such sale, reduced by any portion of such cost previously taken
into account under this paragraph. For purposes of this paragraph the
following shall apply:
  (1) A qualified investment is stock of a corporation or an interest,
other than as a creditor, in a partnership or limited liability company
that was acquired by the taxpayer as provided in Internal Revenue Code §
1202(c)(1)(B), except that the reference to the term "stock" in such
section shall be read as "investment," or by the taxpayer from a person
who had acquired such stock or interest in such a manner.
  (2) A qualified emerging technology investment is a qualified
investment, that was held by the taxpayer for at least thirty-six
months, in a company defined in paragraph (c) of subdivision one of
section thirty-one hundred two-e of the public authorities law or an
investment in a partnership or limited liability company that is taxed
as a partnership to the extent that such partnership or limited
liability company invests in qualified emerging technology companies.
  (3) For purposes of determining whether the nonrecognition of gain
under this subsection applies to a qualified emerging technologies
investment that is sold, the taxpayer's holding period for such
investment and the qualified emerging technologies investment that is
purchased shall be determined without regard to Internal Revenue Code §
1223.
  13. Amounts deferred. The amount deferred under paragraph twelve of
this subdivision shall be added to entire net income when the
reinvestment in the New York qualified emerging technology company which
qualified a taxpayer for such deferral is sold.
  * (14) For taxable years beginning after December thirty-first, two
thousand two, in the case of qualified property described in paragraph
two of subsection k of section 168 of the internal revenue code, other
than qualified resurgence zone property described in paragraph sixteen
of this subdivision, and other than qualified New York Liberty Zone
property described in paragraph two of subsection b of section 1400L of
the internal revenue code (without regard to clause (i) of subparagraph
(C) of such paragraph), which was placed in service on or after June
first, two thousand three, a taxpayer shall be allowed with respect to
such property the depreciation deduction allowable under section 167 of
the internal revenue code as such section would have applied to such
property had it been acquired by the taxpayer on September tenth, two
thousand one.
  * NB There are 2 par (14)'s
  * (14) Related members expense add back. (A) Definitions. (i) Related
member. "Related member" means a related person as defined in
subparagraph (c) of paragraph three of subsection (b) of section four
hundred sixty-five of the internal revenue code, except that "fifty
percent" shall be substituted for "ten percent".
  (ii) Effective rate of tax. "Effective rate of tax" means, as to any
state or U.S. possession, the maximum statutory rate of tax imposed by
the state or possession on or measured by a related member's net income
multiplied by the apportionment percentage, if any, applicable to the
related member under the laws of said jurisdiction. For purposes of this
definition, the effective rate of tax as to any state or U.S. possession
is zero where the related member's net income tax liability in said
jurisdiction is reported on a combined or consolidated return including
both the taxpayer and the related member where the reported transactions
between the taxpayer and the related member are eliminated or offset.
Also, for purposes of this definition, when computing the effective rate
of tax for a jurisdiction in which a related member's net income is
eliminated or offset by a credit or similar adjustment that is dependent
upon the related member either maintaining or managing intangible
property or collecting interest income in that jurisdiction, the maximum
statutory rate of tax imposed by said jurisdiction shall be decreased to
reflect the statutory rate of tax that applies to the related member as
effectively reduced by such credit or similar adjustment.
  (iii) Royalty payments. Royalty payments are payments directly
connected to the acquisition, use, maintenance or management, ownership,
sale, exchange, or any other disposition of licenses, trademarks,
copyrights, trade names, trade dress, service marks, mask works, trade
secrets, patents and any other similar types of intangible assets as
determined by the commissioner, and include amounts allowable as
interest deductions under section one hundred sixty-three of the
internal revenue code to the extent such amounts are directly or
indirectly for, related to or in connection with the acquisition, use,
maintenance or management, ownership, sale, exchange or disposition of
such intangible assets.
  (iv) Valid business purpose. A valid business purpose is one or more
business purposes, other than the avoidance or reduction of taxation,
which alone or in combination constitute the primary motivation for some
business activity or transaction, which activity or transaction changes
in a meaningful way, apart from tax effects, the economic position of
the taxpayer. The economic position of the taxpayer includes an increase
in the market share of the taxpayer, or the entry by the taxpayer into
new business markets.
  (B) Royalty expense add backs. (i) Except where a taxpayer is included
in a combined return with a related member pursuant to subdivision (f)
of section fifteen hundred fifteen of this article, for the purpose of
computing entire net income, a taxpayer must add back royalty payments
directly or indirectly paid, accrued, or incurred in connection with one
or more direct or indirect transactions with one or more related members
during the taxable year to the extent deductible in calculating federal
taxable income.
  (ii) Exceptions. (I) The adjustment required in this paragraph shall
not apply to the portion of the royalty payment that the taxpayer
establishes, by clear and convincing evidence of the type and in the
form specified by the commissioner, meets all of the following
requirements: (a) the related member was subject to tax in this state or
another state or possession of the United States or a foreign nation or
some combination thereof on a tax base that included the royalty payment
paid, accrued or incurred by the taxpayer; (b) the related member during
the same taxable year directly or indirectly paid, accrued or incurred
such portion to a person that is not a related member; and (c) the
transaction giving rise to the royalty payment between the taxpayer and
the related member was undertaken for a valid business purpose.
  (II) The adjustment required in this paragraph shall not apply if the
taxpayer establishes, by clear and convincing evidence of the type and
in the form specified by the commissioner, that: (a) the related member
was subject to tax on or measured by its net income in this state or
another state or possession of the United States or some combination
thereof; (b) the tax base for said tax included the royalty payment
paid, accrued or incurred by the taxpayer; and (c) the aggregate
effective rate of tax applied to the related member in those
jurisdictions is no less than eighty percent of the statutory rate of
tax that applied to the taxpayer under section fifteen hundred two,
fifteen hundred two-a, or fifteen hundred two-b of this article for the
taxable year.
  (III) The adjustment required in this paragraph shall not apply if the
taxpayer establishes, by clear and convincing evidence of the type and
in the form specified by the commissioner, that: (a) the royalty payment
was paid, accrued or incurred to a related member organized under the
laws of a country other than the United States; (b) the related member's
income from the transaction was subject to a comprehensive income tax
treaty between such country and the United States; (c) the related
member was subject to tax in a foreign nation on a tax base that
included the royalty payment paid, accrued or incurred by the taxpayer;
(d) the related member's income from the transaction was taxed in such
country at an effective rate of tax at least equal to that imposed by
this state; and (e) the royalty payment was paid, accrued or incurred
pursuant to a transaction that was undertaken for a valid business
purpose and using terms that reflect an arm's length relationship.
  (IV) The adjustment required in this paragraph shall not apply if the
taxpayer and the commissioner agree in writing to the application or use
of alternative adjustments or computations. The commissioner may, in his
or her discretion, agree to the application or use of alternative
adjustments or computations when he or she concludes that in the absence
of such agreement the income of the taxpayer would not be properly
reflected.
  * NB There are 2 par (14)'s
  (15) For taxable years beginning after December thirty-first, two
thousand two, upon the disposition of property to which paragraph
fourteen of this subdivision applies, the amount of any gain or loss
includible in entire net income shall be adjusted to reflect the
inclusions and exclusions from entire net income pursuant to
subparagraph (R) of paragraph one and subparagraph (T) of paragraph two
of this subdivision attributable to such property.
  (16) For purposes of paragraphs fourteen and fifteen of this
subdivision, qualified resurgence zone property shall mean qualified
property described in paragraph two of subsection k of section 168 of
the internal revenue code substantially all of the use of which is in
the resurgence zone, as defined below, and is in the active conduct of a
trade or business by the taxpayer in such zone, and the original use of
which in the resurgence zone commences with the taxpayer after December
thirty-first, two thousand two. The resurgence zone shall mean the area
of New York county bounded on the south by a line running from the
intersection of the Hudson River with the Holland Tunnel, and running
thence east to Canal Street, then running along the centerline of Canal
Street to the intersection of the Bowery and Canal Street, running
thence in a southeasterly direction diagonally across Manhattan Bridge
Plaza, to the Manhattan Bridge and thence along the centerline of the
Manhattan Bridge to the point where the centerline of the Manhattan
Bridge would intersect with the easterly bank of the East River, and
bounded on the north by a line running from the intersection of the
Hudson River with the Holland Tunnel and running thence north along West
Avenue to the intersection of Clarkson Street then running east along
the centerline of Clarkson Street to the intersection of Washington
Avenue, then running south along the centerline of Washington Avenue to
the intersection of West Houston Street, then east along the centerline
of West Houston Street, then at the intersection of the Avenue of the
Americas continuing east along the centerline of East Houston Street to
the easterly bank of the East River.
  (17) Depreciation and interest adjustments for covered properties
owned by an institutional real estate investor. (A) Notwithstanding any
other provision of this section, in the case of a taxpayer that is an
institutional real estate investor or partner, member or shareholder of
an entity that is an institutional real estate investor as defined in
paragraph (c-4) of subdivision nine of section two hundred eight of this
chapter, entire net income shall be computed with adjustments for
depreciation and interest related to covered properties as set forth in
this paragraph.
  (B) Depreciation deductions. With respect to covered properties, no
deduction for depreciation allowed under the internal revenue code or
this section shall be allowed.
  (C) Federal interest deductions. With respect to covered properties,
the interest deduction for federal income tax purposes allowed under
section one hundred sixty-three of the internal revenue code shall not
be allowed and must be added back in the computation of entire net
income, except with respect to interest paid or accrued in the taxable
year when such covered property is sold to an individual for use as the
principal residence of such individual or sold to a nonprofit
organization that has as its principal purpose the creation,
development, or preservation of affordable housing. For purposes of this
subparagraph, any amount of interest that would have been allowed under
section one hundred sixty-three of the internal revenue code in
connection with a covered property but for an election to treat such
interest as chargeable to capital account shall be treated as an amount
allowed under section one hundred sixty-three of the internal revenue
code.
  (c) Attribution of income to different taxable years. The tax
commission may, whenever necessary in order to properly reflect the
entire net income of any taxpayer, determine the year or period in which
any item of income or deduction shall be included, without regard to the
method of accounting employed by the taxpayer.

Where this section sits in the code

Tax Law
Article 33. Franchise Taxes On Insurance Corporations

§ 1503. Computation of entire net income. (a) The entire net income

of a taxpayer shall be its total net income from all sources which shall

be presumably the same as the life insurance company taxable income

(which shall include, in the case of a stock life insurance company that

has a balance, as determined as of the close of such company's last

taxable year beginning before January first, two thousand eighteen, in

an existing policyholders surplus account, as such term is defined in

section 815 of the internal revenue code as such section was in effect

for taxable years beginning before January first, two thousand eighteen,

the amount of one-eighth of such balance), taxable income of a

partnership or taxable income, but not alternative minimum taxable

income, as the case may be, which the taxpayer is required to report to

the United States treasury department, for the taxable year or, in the

case of a corporation exempt from federal income tax (other than the tax

on unrelated business taxable income imposed under section 511 of the

internal revenue code) but not exempt from tax under section fifteen

hundred one, the taxable income which such taxpayer would have been

required to report but for such exemption, except as hereinafter

provided.

(b) Modifications. In computing entire net income, the following

modifications shall be made:

(1) Entire net income shall not include:

(A) income, gains and losses from subsidiary capital which do not

include the amount of a recovery in respect of any war loss, except that

this modification shall not apply to the amount described in

subparagraph (S) of this paragraph;

(B) fifty percent of dividends other than from subsidiaries, except

that this modification shall not apply to the amount described in

subparagraph (S) of this paragraph, and except that, in the case of a

life insurance company, such modification shall apply only with respect

to the company's share of such dividends, which share means the

percentage determined under paragraph one of subsection (a) of section

eight hundred twelve of the internal revenue code;

section one hundred eighty-seven, or article twenty-three of this

chapter heretofore in effect to the extent properly included as income

for federal income tax purposes, for which no exclusion or deduction was

allowed in determining the taxpayer's entire net income under this

article for any prior year;

(D) that portion of wages or salaries paid or incurred for the taxable

year for which a deduction is not allowed pursuant to the provisions of

section two hundred eighty-C of the internal revenue code;

(E) in the case of a taxpayer who is separately or as a partner of a

partnership doing an insurance business as a member of the New York

insurance exchange described in section six thousand two hundred one of

the insurance law, any item of income, gain, loss or deduction of such

business which is the taxpayer's distributive or pro rata share for

federal income tax purposes or which the taxpayer is required to take

into account separately for federal income tax purposes;

(F) for taxable years beginning after December thirty-first, nineteen

hundred eighty-one, except with respect to property which is a qualified

mass commuting vehicle described in subparagraph (D) of paragraph eight

of subsection (f) of section one hundred sixty-eight of the internal

revenue code (relating to qualified mass commuting vehicles), any amount

which is included in the taxpayer's taxable income for federal income

tax purposes solely as a result of an election made pursuant to the

provisions of such paragraph eight as it was in effect for agreements

entered into prior to January first, nineteen hundred eighty-four;

(G) for taxable years beginning after December thirty-first, nineteen

hundred eighty-one, except with respect to property which is a qualified

mass commuting vehicle described in subparagraph (D) of paragraph eight

of subsection (f) of section one hundred sixty-eight of the internal

revenue code (relating to qualified mass commuting vehicles), any amount

which the taxpayer could have excluded from its taxable income for

federal income tax purposes had it not made the election provided for in

such paragraph eight as it was in effect for agreements entered into

prior to January first, nineteen hundred eighty-four;

(H) the amount deductible pursuant to paragraph ten of this

subdivision;

(I) upon the disposition of property to which paragraph ten of this

subdivision applies, the amount, if any, by which the aggregate of the

amounts described in subparagraph (M) of paragraph two of this

subdivision attributable to such property exceeds the aggregate of the

amounts described in paragraph ten of this subdivision attributable to

such property;

(J) the amount of unearned premiums on outstanding business at the end

of the taxable year included in premiums earned pursuant to the

provisions of section 832(b)(4)(B) of the internal revenue code;

(K) the amount of unearned premiums on outstanding business at the end

of the taxable year included in premiums earned pursuant to the

provisions of section 832(b)(7)(B)(i) of the internal revenue code;

(L) the amount included in premiums earned pursuant to the provisions

of section 832(b)(8)(A)(i) of the internal revenue code which is the

difference between the amount of discounted unearned premiums on

outstanding business at the end of the taxable year and the amount of

unearned premiums on outstanding business at the end of the taxable

year;

(M) for taxable years beginning after December thirty-first, nineteen

hundred eighty-six and before January first, nineteen hundred

ninety-two, the amount of unearned premiums on outstanding business

included in premiums earned pursuant to the provisions of sections

832(b)(4)(C) and 832(b)(7)(B)(ii) of the internal revenue code;

(N) the amount which is the difference between the amount of

discounted unpaid losses at the end of the taxable year used in the

computation of losses incurred pursuant to section 832(b)(5)(A) of the

internal revenue code, and the amount of unpaid losses that would be

used in such computation for the taxable year if such losses were not

discounted pursuant to the provisions of section 846(a) of the internal

revenue code;

(O) the amount by which losses incurred as defined in section

832(b)(5)(A) of the internal revenue code are reduced in accordance with

section 832(b)(5)(B) of such code; and

(P) the amount included in federal gross income pursuant to sections

847(5) and 847(6) of the internal revenue code.

(Q) The amount deductible pursuant to paragraph twelve of this

subsection.

(R) for taxable years beginning after December thirty-first, two

thousand two, the amount deductible pursuant to paragraph fourteen of

this subdivision.

(S) The income required to be included in the taxpayer's federal gross

income pursuant to subsection (a) of section 951 of the internal revenue

code by reason of subsection (a) of section 965 of such code as adjusted

by subsection (b) of such section but without regard to subsection (c)

of such section to the extent such income is received from a corporation

that is not included in a combined return with the taxpayer.

(T) Any amount excepted, for purposes of subsection (a) of section one

hundred eighteen of the internal revenue code, from the term

"contribution to the capital of the taxpayer" by paragraph two of

subsection (b) of section one hundred eighteen of the internal revenue

code.

(U) To the extent not excluded from income pursuant to subparagraph

(A) of this paragraph, ninety-five percent of the income required to be

included in the taxpayer's federal gross income pursuant to subsection

(a) of section 951A of the internal revenue code, without regard to the

deduction under section 250 of the internal revenue code, that is

generated by a corporation that is not included in a combined report

with the taxpayer.

(V) To the extent not excluded from income pursuant to subparagraph

(A) or (B) of this paragraph, any amount treated as a dividend received

by the taxpayer under section 78 of the internal revenue code that is

attributable to the income required to be included in the taxpayer's

federal gross income pursuant to subsection (a) of section 951A of such

code.

(W) The amount of any gain added back to determine entire net income

in a previous taxable year pursuant to subparagraph (Z) of paragraph two

of this subdivision that is included in federal gross income for the

taxable year.

(X) For taxable years beginning on or after January first, two

thousand twenty-five, in the case of qualified production property

described in paragraph two of subsection (n) of section one hundred

sixty-eight of the internal revenue code, the amount of any deduction

allowed pursuant to subsection (a) of section one hundred sixty-seven of

the internal revenue code as if the taxpayer has not made an election

pursuant to subsection (n) of section one hundred sixty-eight of the

internal revenue code.

(Y) For taxable years beginning on or after January first, two

thousand twenty-five, the amount of any foreign and domestic research or

experimental expenditures, as defined in sections one hundred

seventy-four and 174A of the internal revenue code, paid or incurred in

each taxable year on and after January first, two thousand twenty-five,

amortized over a sixty-month period as if the election in subsection (c)

of section 174A of the internal revenue code applied to such foreign and

domestic research or experimental expenditures.

(Z) For taxable years beginning on or after January first, two

thousand twenty-five, the remaining amount of any foreign and domestic

research or experimental expenditures, as defined in sections one

hundred seventy-four and 174A of the internal revenue code, paid or

incurred prior to January first, two thousand twenty-five, determined as

if section one hundred seventy-four of the internal revenue code in

effect as of January first, two thousand twenty-two, applied to such

expenditures.

(2) Entire net income shall be determined without the exclusion,

deduction or credit of:

(A) the amount of any specific exemption or credit allowed in any law

of the United States imposing any tax on or measured by the income of

corporations;

(B) any part of any income from dividends or interest on any kind of

stock, securities or indebtedness, except as provided in subparagraphs

(A), (B) and (S) of paragraph one hereof;

income or premiums;

(D) taxes imposed under this article;

(E) In those instances where a credit for the special additional

mortgage recording tax is allowed under paragraph one of subdivision (e)

of section fifteen hundred eleven of this article, the amount allowed as

an exclusion or deduction for the special additional mortgage recording

tax imposed by subdivision one-a of section two hundred fifty-three of

this chapter in determining the entire net income which the taxpayer is

required to report to the United States treasury department for such

taxable year;

(F) unless the credit allowed pursuant to subdivision (e) of section

fifteen hundred eleven of this article is reflected in the computation

of the gain or loss so as to result in an increase in such gain or

decrease in such loss, for federal income tax purposes, from the sale or

other disposition of the property with respect to which the special

additional mortgage recording tax imposed pursuant to subdivision one-a

of section two hundred fifty-three of this chapter was paid, the amount

of the special additional mortgage recording tax imposed by subdivision

one-a of section two hundred fifty-three of this chapter which was paid

and which is reflected in the computation of the basis of the property

so as to result in a decrease in such gain or increase in such loss for

federal income tax purposes from the sale or other disposition of the

property with respect to which such tax was paid;

(G) ninety percent of interest on indebtedness directly or indirectly

owed to any stockholder or shareholder (including subsidiaries of a

corporate stockholder or shareholder), or members of the immediate

family of an individual stockholder or shareholder, owning in the

aggregate in excess of five per centum of the issued capital stock of

the taxpayer, except that such interest may, in any event, be deducted

(i) up to an amount not exceeding one thousand dollars,

(ii) in full to the extent that it relates to bonds or other evidences

of indebtedness issued, with stock, pursuant to a bona fide plan of

reorganization, to persons, who, prior to such reorganization, were bona

fide creditors of the corporation or its predecessors, but were not

stockholders or shareholders thereof,

(iii) in full to the extent that it is paid to a federally licensed

small business investment company;

(H) in the discretion of the commissioner, any amount of interest

directly or indirectly and any other amount directly attributable as a

carrying charge or otherwise to subsidiary capital or to income, gains

or losses from subsidiary capital, or to the income described in

subparagraphs (S), (U) and (V) of paragraph one of this subdivision;

(I) in the case of a life insurance company, the provisions of

subparagraph (B) of this paragraph shall not apply to the policyholders'

share of the items described in such subparagraph. For purposes of this

subparagraph, the policyholders' share means the percentage determined

under paragraph two of subsection (a) of section eight hundred twelve of

the internal revenue code.

(J) in the case of a taxpayer who is separately or as a partner of a

partnership doing an insurance business as a member of the New York

insurance exchange described in section six thousand two hundred one of

the insurance law, such taxpayer's distributive or pro rata share of the

allocated entire net income of such business as determined under this

section and section fifteen hundred four of this article, provided

however, in the event such allocated entire net income is a loss, such

taxpayer's distributive or pro rata share of such loss shall not be

subtracted from federal taxable income in computing entire net income

under this section.

(K) for taxable years beginning after December thirty-first, nineteen

hundred eighty-one, except with respect to property which is a qualified

mass commuting vehicle described in subparagraph (D) of paragraph eight

of subsection (f) of section one hundred sixty-eight of the internal

revenue code (relating to qualified mass commuting vehicles), any amount

which the taxpayer claimed as a deduction for federal income tax

purposes solely as a result of an election made pursuant to the

provisions of such paragraph eight as it was in effect for agreements

entered into prior to January first, nineteen hundred eighty-four;

(L) for taxable years beginning after December thirty-first, nineteen

hundred eighty-one, except with respect to property which is a qualified

mass commuting vehicle described in subparagraph (D) of paragraph eight

of subsection (f) of section one hundred sixty-eight of the internal

revenue code (relating to qualified mass commuting vehicles), any amount

which the taxpayer would have been required to include in the

computation of its taxable income for federal income tax purposes had it

not made the election permitted pursuant to such paragraph eight as it

was in effect for agreements entered into prior to January first,

nineteen hundred eighty-four;

(M) in the case of property placed in service in taxable years

beginning before nineteen hundred ninety-four, for taxable years

beginning after December thirty-first, nineteen hundred eighty-one,

except with respect to property subject to the provisions of section two

hundred eighty-F of the internal revenue code and property subject to

the provisions of section one hundred sixty-eight of the internal

revenue code which is placed in service in this state in taxable years

beginning after December thirty-first, nineteen hundred eighty-four, the

amount allowable as a deduction determined under section one hundred

sixty-eight of the internal revenue code;

(N) upon the disposition of property to which paragraph ten of this

subdivision applies, the amount, if any, by which the aggregate of the

amounts described in such paragraph ten attributable to such property

exceeds the aggregate of the amounts described in subparagraph (M) of

this paragraph attributable to such property;

(N-1) premiums paid for environmental remediation insurance, as

defined in section twenty-three of this chapter, and deducted in

determining federal taxable income, to the extent of the amount of the

environmental remediation insurance credit allowed under such section

twenty-three and subdivision (w) of section fifteen hundred eleven of

this article;

(O) the amount of unearned premiums on outstanding business at the end

of the preceding taxable year excluded from premiums earned pursuant to

the provisions of section 832(b)(4)(B) of the internal revenue code;

(P) the amount of unearned premiums on outstanding business at the end

of the preceding year excluded from premiums earned pursuant to the

provisions of section 832(b)(7)(B)(i) of the internal revenue code;

(Q) the amount excluded from premiums earned pursuant to the

provisions of section 832(b)(8)(A)(i) of the internal revenue code which

is the difference between the amount of discounted unearned premiums on

outstanding business at the end of the preceding taxable year and the

amount of unearned premiums on outstanding business at the end of the

preceding taxable year;

(R) the amount which is the difference between the amount of

discounted unpaid losses at the end of the preceding federal taxable

year used in the computation of losses incurred for the taxable year

pursuant to section 832(b)(5)(A) of the internal revenue code, and the

amount of unpaid losses at the end of the preceding federal taxable year

that would have been used in such computation for the taxable year if

such losses were not discounted pursuant to the provisions of section

846(a) of the internal revenue code; and

(S) the amount of the deduction claimed by the taxpayer pursuant to

the provisions of section 847(1) of the internal revenue code.

(T) for taxable years beginning after December thirty-first, two

thousand two, in the case of qualified property described in paragraph

two of subsection k of section 168 of the internal revenue code, other

than qualified resurgence zone property described in paragraph sixteen

of this subdivision, and other than qualified New York Liberty Zone

property described in paragraph two of subsection b of section 1400L of

the internal revenue code (without regard to clause (i) of subparagraph

first, two thousand three, the amount allowable as a deduction under

section 167 of the internal revenue code.

(U) The amount of any deduction allowed pursuant to section one

hundred ninety-nine of the internal revenue code.

(V) The amount of any federal deduction for taxes imposed under

article twenty-three of this chapter.

(W) The amount of any federal deduction allowed pursuant to subsection

(X) The amount of any federal deduction allowed pursuant to section

250(a)(1)(A) of the internal revenue code.

(Y) The amount of the federal deduction allowed pursuant to section

250(a)(1)(B) of the internal revenue code.

(Z) The amount of any gain excluded from federal gross income for the

taxable year by subparagraph (A) of paragraph (1) of subsection (a) of

section 1400Z-2 of the internal revenue code.

(AA) For taxable years beginning on or after January first, two

thousand twenty-five, in the case of qualified production property

described in paragraph two of subsection (n) of section one hundred

sixty-eight of the internal revenue code, any amount which the taxpayer

claimed as a deduction under subsection (a) of section one hundred

sixty-seven of the internal revenue code that included an allowance

solely as a result of an election made pursuant to subsection (n) of

section one hundred sixty-eight of the internal revenue code.

(BB) For taxable years beginning on or after January first, two

thousand twenty-five, any amount claimed as a deduction under sections

one hundred seventy-four and 174A of the internal revenue code in effect

as of January first, two thousand twenty-five, and any amount claimed as

a deduction pursuant to federal Public Law 119-21, title VII, section

70302(f)(2)(a), for foreign and domestic research or experimental

expenditures, as defined in sections one hundred seventy-four and 174A

of the internal revenue code.

(3) In determining entire net income, there shall be subtracted, to

the extent not deductible in determining federal taxable income:

(A) interest on indebtedness incurred or continued to purchase or

carry obligations or securities the income from which is subject to tax

under this article but exempt from federal income tax;

(B) ordinary and necessary expenses paid or incurred during the

taxable year attributable to income which is subject to tax under this

article but exempt from federal income tax; and

interest on which is subject to tax under this article but exempt from

federal income tax.

(4) Any "net operating loss deduction" or "operations loss deduction"

allowable under sections one hundred seventy-two or eight hundred ten of

the internal revenue code, respectively, which is allowable to the

taxpayer for federal income tax purposes:

(A) shall be adjusted to reflect the modifications required by the

other paragraphs of this subdivision;

(B) shall not, however, exceed any such deduction allowable to the

taxpayer for the taxable year for federal income tax purposes; and

beginning prior to January first, nineteen hundred seventy-four or

during any taxable year in which the taxpayer was not subject to the tax

imposed under section fifteen hundred one.

(5) In case of property of a taxpayer acquired prior to January first,

nineteen hundred seventy-four, and disposed of thereafter, the

computation of entire net income shall be modified as follows:

(A) no gain shall be deemed to have been derived if either the cost or

the fair market price or value on January first, nineteen hundred

seventy-four, exceeds the value realized;

(B) no loss shall be deemed to have been sustained if either the cost

or the fair market price or value on January first, nineteen hundred

seventy-four, is less than the value realized;

first, nineteen hundred seventy-four, are less than the value realized,

the basis for computing gain shall be the cost or the fair market price

or value on such date, whichever is higher;

(D) where both the cost and the fair market price or value on January

first, nineteen hundred seventy-four, are in excess of the value

realized, the basis for computing loss shall be the cost or the fair

market price or value on such date, whichever is lower.

(6) There shall be excluded from the computation of entire net income

any amount allowed as a deduction for federal income tax purposes for

the taxable year under section twelve hundred twelve of the internal

revenue code as a capital loss carryforward to the taxable year which

resulted from a capital loss occurring in any taxable year in which the

taxpayer was not subject to tax under section fifteen hundred one.

(7) There shall be excluded from the computation of entire net income

the amount of any income or gain from the sale of real or personal

property which is includible in determining federal taxable income for

the taxable year pursuant to the installment method under section four

hundred fifty-three of the internal revenue code to the extent such

income or gain is from a sale of such property which occurred in a

taxable year when the taxpayer was not subject to tax under section

fifteen hundred one.

(8) Entire net income shall be computed without regard to subsection

(b) of section eight hundred thirty-one of the internal revenue code.

(9) In computing the entire net income of a taxpayer

(A) which is a fire or life insurance company organized and operated,

without profit to any private shareholder or individual, exclusively for

the purpose of aiding and strengthening charitable, religious,

missionary, educational or philanthropic institutions, by issuing

insurance and annuity contracts only to or for the benefit of such

institutions, to individuals engaged in the services of such

institutions and to members of the immediate families of such

individuals, or

(B) which is a life insurance company which has been organized for the

purpose of establishing a non-profit voluntary employees beneficiary

association to provide life, sick, accident or other benefits to

eligible employees or their beneficiaries, and is operated exclusively

for said purposes and without profit, direct or indirect, to any private

shareholder or individual, and is duly exempt from income taxation

pursuant to the United States internal revenue code, the life insurance

company taxable income (which shall include, in the case of a stock life

insurance company which has an existing policyholders surplus account,

the amount of direct and indirect distributions during the taxable year

to shareholders from such account) or taxable income, as the case may

be, of such taxpayer for the taxable year shall be computed without

regard to any income, gains, losses, deductions, reserves, surplus or

any other item, derived from, or attributable or allocable to, contracts

described in subsection (a) of section eight hundred eighteen of the

internal revenue code.

(10) In the case of property placed in service in taxable years

beginning before nineteen hundred ninety-four, for taxable years

beginning after December thirty-first, nineteen hundred eighty-one,

except with respect to property subject to the provisions of section two

hundred eighty-F of the internal revenue code and property subject to

the provisions of section one hundred sixty-eight of the internal

revenue code which is placed in service in this state in taxable years

beginning after December thirty-first, nineteen hundred eighty-four, and

provided a deduction has not been excluded from the determination of

entire net income pursuant to subparagraph (K) of paragraph two of this

subdivision, a taxpayer shall be allowed with respect to property which

is subject to the provisions of section one hundred sixty-eight of the

internal revenue code the depreciation deduction allowable under section

one hundred sixty-seven of the internal revenue code as such section

would have applied to property placed in service on December

thirty-first, nineteen hundred eighty.

(11)(A) Notwithstanding the provisions of subparagraph (P) of

paragraph one of this subdivision, for taxable years beginning after

December thirty-first, nineteen hundred ninety-two and ending before

December thirty-first, nineteen hundred ninety-six, entire net income

shall include the amount determined under subparagraph (B) of this

paragraph. This amount shall be included in entire net income only if

the taxpayer claimed the deduction allowed by subdivision one of section

eight hundred forty-seven of the internal revenue code in any taxable

year beginning after December thirty-first, nineteen hundred

eighty-seven and ending before January first, nineteen hundred

ninety-three.

(B) The amount to be included in entire net income under this

paragraph shall be determined as follows. The taxpayer shall calculate

the total amount that will be required to be included in federal gross

income pursuant to the provisions of subdivisions five and six of

section eight hundred forty-seven of the internal revenue code for

federal taxable years beginning after December thirty-first, nineteen

hundred ninety-two as a result of the deduction claimed by the taxpayer

in federal taxable years beginning after December thirty-first, nineteen

hundred eighty-seven and before January first, nineteen hundred

ninety-three pursuant to the provisions of subdivision one of section

eight hundred forty-seven of the internal revenue code. The taxpayer

shall divide such total amount by three. An amount equal to the

resulting quotient shall be included in entire net income in each of the

taxpayer's first three taxable years beginning on or after January one,

nineteen hundred ninety-three.

12. Emerging technology investment deferral. In the case of any sale

of a qualified emerging technologies investment held for more than

thirty-six months and with respect to which the taxpayer elects the

application of this subsection, gain from such sale shall be recognized

only to the extent that the amount realized on such sale exceeds the

cost of any qualified emerging technologies investment purchased by the

taxpayer during the three hundred sixty-five-day period beginning on the

date of such sale, reduced by any portion of such cost previously taken

into account under this paragraph. For purposes of this paragraph the

following shall apply:

(1) A qualified investment is stock of a corporation or an interest,

other than as a creditor, in a partnership or limited liability company

that was acquired by the taxpayer as provided in Internal Revenue Code §

1202(c)(1)(B), except that the reference to the term "stock" in such

section shall be read as "investment," or by the taxpayer from a person

who had acquired such stock or interest in such a manner.

(2) A qualified emerging technology investment is a qualified

investment, that was held by the taxpayer for at least thirty-six

months, in a company defined in paragraph (c) of subdivision one of

section thirty-one hundred two-e of the public authorities law or an

investment in a partnership or limited liability company that is taxed

as a partnership to the extent that such partnership or limited

liability company invests in qualified emerging technology companies.

(3) For purposes of determining whether the nonrecognition of gain

under this subsection applies to a qualified emerging technologies

investment that is sold, the taxpayer's holding period for such

investment and the qualified emerging technologies investment that is

purchased shall be determined without regard to Internal Revenue Code §

1223.

13. Amounts deferred. The amount deferred under paragraph twelve of

this subdivision shall be added to entire net income when the

reinvestment in the New York qualified emerging technology company which

qualified a taxpayer for such deferral is sold.

* (14) For taxable years beginning after December thirty-first, two

thousand two, in the case of qualified property described in paragraph

two of subsection k of section 168 of the internal revenue code, other

than qualified resurgence zone property described in paragraph sixteen

of this subdivision, and other than qualified New York Liberty Zone

property described in paragraph two of subsection b of section 1400L of

the internal revenue code (without regard to clause (i) of subparagraph

first, two thousand three, a taxpayer shall be allowed with respect to

such property the depreciation deduction allowable under section 167 of

the internal revenue code as such section would have applied to such

property had it been acquired by the taxpayer on September tenth, two

thousand one.

* NB There are 2 par (14)'s

* (14) Related members expense add back. (A) Definitions. (i) Related

member. "Related member" means a related person as defined in

subparagraph (c) of paragraph three of subsection (b) of section four

hundred sixty-five of the internal revenue code, except that "fifty

percent" shall be substituted for "ten percent".

(ii) Effective rate of tax. "Effective rate of tax" means, as to any

state or U.S. possession, the maximum statutory rate of tax imposed by

the state or possession on or measured by a related member's net income

multiplied by the apportionment percentage, if any, applicable to the

related member under the laws of said jurisdiction. For purposes of this

definition, the effective rate of tax as to any state or U.S. possession

is zero where the related member's net income tax liability in said

jurisdiction is reported on a combined or consolidated return including

both the taxpayer and the related member where the reported transactions

between the taxpayer and the related member are eliminated or offset.

Also, for purposes of this definition, when computing the effective rate

of tax for a jurisdiction in which a related member's net income is

eliminated or offset by a credit or similar adjustment that is dependent

upon the related member either maintaining or managing intangible

property or collecting interest income in that jurisdiction, the maximum

statutory rate of tax imposed by said jurisdiction shall be decreased to

reflect the statutory rate of tax that applies to the related member as

effectively reduced by such credit or similar adjustment.

(iii) Royalty payments. Royalty payments are payments directly

connected to the acquisition, use, maintenance or management, ownership,

sale, exchange, or any other disposition of licenses, trademarks,

copyrights, trade names, trade dress, service marks, mask works, trade

secrets, patents and any other similar types of intangible assets as

determined by the commissioner, and include amounts allowable as

interest deductions under section one hundred sixty-three of the

internal revenue code to the extent such amounts are directly or

indirectly for, related to or in connection with the acquisition, use,

maintenance or management, ownership, sale, exchange or disposition of

such intangible assets.

(iv) Valid business purpose. A valid business purpose is one or more

business purposes, other than the avoidance or reduction of taxation,

which alone or in combination constitute the primary motivation for some

business activity or transaction, which activity or transaction changes

in a meaningful way, apart from tax effects, the economic position of

the taxpayer. The economic position of the taxpayer includes an increase

in the market share of the taxpayer, or the entry by the taxpayer into

new business markets.

(B) Royalty expense add backs. (i) Except where a taxpayer is included

in a combined return with a related member pursuant to subdivision (f)

of section fifteen hundred fifteen of this article, for the purpose of

computing entire net income, a taxpayer must add back royalty payments

directly or indirectly paid, accrued, or incurred in connection with one

or more direct or indirect transactions with one or more related members

during the taxable year to the extent deductible in calculating federal

taxable income.

(ii) Exceptions. (I) The adjustment required in this paragraph shall

not apply to the portion of the royalty payment that the taxpayer

establishes, by clear and convincing evidence of the type and in the

form specified by the commissioner, meets all of the following

requirements: (a) the related member was subject to tax in this state or

another state or possession of the United States or a foreign nation or

some combination thereof on a tax base that included the royalty payment

paid, accrued or incurred by the taxpayer; (b) the related member during

the same taxable year directly or indirectly paid, accrued or incurred

such portion to a person that is not a related member; and (c) the

transaction giving rise to the royalty payment between the taxpayer and

the related member was undertaken for a valid business purpose.

(II) The adjustment required in this paragraph shall not apply if the

taxpayer establishes, by clear and convincing evidence of the type and

in the form specified by the commissioner, that: (a) the related member

was subject to tax on or measured by its net income in this state or

another state or possession of the United States or some combination

thereof; (b) the tax base for said tax included the royalty payment

paid, accrued or incurred by the taxpayer; and (c) the aggregate

effective rate of tax applied to the related member in those

jurisdictions is no less than eighty percent of the statutory rate of

tax that applied to the taxpayer under section fifteen hundred two,

fifteen hundred two-a, or fifteen hundred two-b of this article for the

taxable year.

(III) The adjustment required in this paragraph shall not apply if the

taxpayer establishes, by clear and convincing evidence of the type and

in the form specified by the commissioner, that: (a) the royalty payment

was paid, accrued or incurred to a related member organized under the

laws of a country other than the United States; (b) the related member's

income from the transaction was subject to a comprehensive income tax

treaty between such country and the United States; (c) the related

member was subject to tax in a foreign nation on a tax base that

included the royalty payment paid, accrued or incurred by the taxpayer;

(d) the related member's income from the transaction was taxed in such

country at an effective rate of tax at least equal to that imposed by

this state; and (e) the royalty payment was paid, accrued or incurred

pursuant to a transaction that was undertaken for a valid business

purpose and using terms that reflect an arm's length relationship.

(IV) The adjustment required in this paragraph shall not apply if the

taxpayer and the commissioner agree in writing to the application or use

of alternative adjustments or computations. The commissioner may, in his

or her discretion, agree to the application or use of alternative

adjustments or computations when he or she concludes that in the absence

of such agreement the income of the taxpayer would not be properly

reflected.

* NB There are 2 par (14)'s

(15) For taxable years beginning after December thirty-first, two

thousand two, upon the disposition of property to which paragraph

fourteen of this subdivision applies, the amount of any gain or loss

includible in entire net income shall be adjusted to reflect the

inclusions and exclusions from entire net income pursuant to

subparagraph (R) of paragraph one and subparagraph (T) of paragraph two

of this subdivision attributable to such property.

(16) For purposes of paragraphs fourteen and fifteen of this

subdivision, qualified resurgence zone property shall mean qualified

property described in paragraph two of subsection k of section 168 of

the internal revenue code substantially all of the use of which is in

the resurgence zone, as defined below, and is in the active conduct of a

trade or business by the taxpayer in such zone, and the original use of

which in the resurgence zone commences with the taxpayer after December

thirty-first, two thousand two. The resurgence zone shall mean the area

of New York county bounded on the south by a line running from the

intersection of the Hudson River with the Holland Tunnel, and running

thence east to Canal Street, then running along the centerline of Canal

Street to the intersection of the Bowery and Canal Street, running

thence in a southeasterly direction diagonally across Manhattan Bridge

Plaza, to the Manhattan Bridge and thence along the centerline of the

Manhattan Bridge to the point where the centerline of the Manhattan

Bridge would intersect with the easterly bank of the East River, and

bounded on the north by a line running from the intersection of the

Hudson River with the Holland Tunnel and running thence north along West

Avenue to the intersection of Clarkson Street then running east along

the centerline of Clarkson Street to the intersection of Washington

Avenue, then running south along the centerline of Washington Avenue to

the intersection of West Houston Street, then east along the centerline

of West Houston Street, then at the intersection of the Avenue of the

Americas continuing east along the centerline of East Houston Street to

the easterly bank of the East River.

(17) Depreciation and interest adjustments for covered properties

owned by an institutional real estate investor. (A) Notwithstanding any

other provision of this section, in the case of a taxpayer that is an

institutional real estate investor or partner, member or shareholder of

an entity that is an institutional real estate investor as defined in

paragraph (c-4) of subdivision nine of section two hundred eight of this

chapter, entire net income shall be computed with adjustments for

depreciation and interest related to covered properties as set forth in

this paragraph.

(B) Depreciation deductions. With respect to covered properties, no

deduction for depreciation allowed under the internal revenue code or

this section shall be allowed.

the interest deduction for federal income tax purposes allowed under

section one hundred sixty-three of the internal revenue code shall not

be allowed and must be added back in the computation of entire net

income, except with respect to interest paid or accrued in the taxable

year when such covered property is sold to an individual for use as the

principal residence of such individual or sold to a nonprofit

organization that has as its principal purpose the creation,

development, or preservation of affordable housing. For purposes of this

subparagraph, any amount of interest that would have been allowed under

section one hundred sixty-three of the internal revenue code in

connection with a covered property but for an election to treat such

interest as chargeable to capital account shall be treated as an amount

allowed under section one hundred sixty-three of the internal revenue

code.

commission may, whenever necessary in order to properly reflect the

entire net income of any taxpayer, determine the year or period in which

any item of income or deduction shall be included, without regard to the

method of accounting employed by the taxpayer.

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