N.Y. Tax Law § 612: New York adjusted gross income of a resident individual

§ 612. New York adjusted gross income of a resident individual. (a)

General. The New York adjusted gross income of a resident individual

means his federal adjusted gross income as defined in the laws of the

United States for the taxable year, with the modifications specified in

this section.

(b) Modifications increasing federal adjusted gross income. There

shall be added to federal adjusted gross income:

(1) Interest income on obligations of any state other than this state,

or of a political subdivision of any such other state unless created by

compact or agreement to which this state is a party, to the extent not

properly includible in federal adjusted gross income;

(2) Interest or dividend income on obligations or securities of any

authority, commission, or instrumentality of the United States, which

the laws of the United States exempt from federal income tax but not

from state income taxes;

(3) Income taxes. (A) General. Income taxes imposed by this state or

any other taxing jurisdiction, to the extent deductible in determining

federal adjusted gross income and not credited against federal income

tax.

(B) Shareholders of S corporations. In the case of a shareholder of an

S corporation, with respect to taxes imposed upon or payable by the

corporation, the term "income taxes" in subparagraph (A) of this

paragraph shall also include the taxes imposed under article nine-A of

this chapter, regardless of the measure of such tax.

(C) Pass-through entity tax deduction. (i) In the case of a partner,

member or shareholder of an electing partnership or electing S

corporation, the term "income taxes" in subparagraph (A) of this

paragraph shall not include the taxes imposed under article

twenty-four-A of this chapter to the extent such taxes are added to

federal adjusted gross income under subparagraph (A) of paragraph

forty-three of this subsection or the taxes imposed under article

twenty-four-B of this chapter to the extent such taxes are added to the

federal adjusted gross income under paragraph forty-three-a of this

subsection.

(ii) In the case of a partner, member or shareholder of a partnership

or S corporation, the term "income taxes" in subparagraph (A) of this

paragraph shall not include pass-through entity taxes substantially

similar to the tax imposed pursuant to article twenty-four-A of this

chapter imposed by another state of the United States, a political

subdivision of such state, or the District of Columbia upon income both

derived therefrom and subject to tax under this article to the extent

such taxes are added to federal adjusted gross income under subparagraph

(B) of paragraph forty-three of this subsection.

(4) Interest on indebtedness incurred or continued to purchase or

carry obligations or securities the interest on which is exempt from tax

under this article, to the extent deductible in determining federal

adjusted gross income.

(5) Expenses paid or incurred during the taxable year for (i) the

production or collection of income which is exempt from tax under this

article, or (ii) the management, conservation or maintenance of property

held for the production of such income, and the amortizable bond premium

for the taxable year on any bond the interest on which is exempt from

tax under this article, to the extent that such expenses and premiums

are deductible in determining federal adjusted gross income.

(6) In the case of a taxpayer who has exercised the election permitted

by subsection (g) or (h) of this section, the amount or amounts required

by said subsections to be added to federal adjusted gross income.

(7) In the case of a taxpayer who is a shareholder of a corporation

organized under article fifteen or authorized to do business in this

state under article fifteen-a of the business corporation law, for the

taxpayer's taxable years beginning before nineteen hundred eighty-eight,

the amount which is deductible by such corporation under paragraph one,

two or three of subsection (a) of section four hundred four of the

internal revenue code for its taxable year ending in or with such

taxpayer's taxable year for contributions paid on behalf of such

taxpayer minus the lesser of fifteen thousand dollars or fifteen percent

of the earned income derived by such taxpayer from such corporation

during such taxpayer's taxable year. In the case of a taxpayer on whose

behalf contributions are paid under more than one plan to which this

paragraph applies or under a plan, contributions to which on his behalf

are subject to the limitations provided in section four hundred four (e)

of the internal revenue code, this paragraph shall apply with respect to

the aggregate of the contributions paid on his behalf under all such

plans.

(8) 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 subsection (m) of

this section, 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.

(10) The amount required to be added to federal adjusted gross income

pursuant to subsection (i) of this section.

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

mortgage recording tax is allowed under paragraph one of subsection (f)

or paragraph one of subsection (i) of section six hundred six of this

article, the amount allowed as an exclusion or deduction for the special

additional mortgage recording taxes imposed by subdivision one-a of

section two hundred fifty-three of this chapter in determining federal

adjusted gross income.

(16) Unless the credit allowed pursuant to subsection (f) of section

six hundred six 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.

(17) The amount required to be added to federal adjusted gross income

pursuant to subsection (r) of this section.

(18) In the case of a shareholder of an S corporation

(A) where the election provided for in subsection (a) of section six

hundred sixty is in effect with respect to such corporation, an amount

equal to his pro rata share of the corporation's reductions for taxes

described in paragraphs two and three of subsection (f) of section

thirteen hundred sixty-six of the internal revenue code, and

(B) in the case of a New York S termination year, subparagraph (A) of

this paragraph shall apply to the amount of reductions for taxes

determined under subsection (s) of this section.

(19) In the case of a shareholder of an S corporation

(A) where the election provided for in subsection (a) of section six

hundred sixty has not been made with respect to such corporation, any

item of loss or deduction of the corporation included in federal gross

income pursuant to section thirteen hundred sixty-six of the internal

revenue code, and

(B) in the case of a New York S termination year, subparagraph (A) of

this paragraph shall apply to the amounts of loss or deduction

determined under subsection (s) of this section.

(20) S corporation distributions to the extent not included in federal

gross income for the taxable year because of the application of section

thirteen hundred sixty-eight, subsection (e) of section thirteen hundred

seventy-one or subsection (c) of section thirteen hundred seventy-nine

of the internal revenue code which represent income not previously

subject to tax under this article because the election provided for in

subsection (a) of section six hundred sixty had not been made. Any such

distribution treated in the manner described in paragraph two of

subsection (b) of section thirteen hundred sixty-eight of the internal

revenue code for federal income tax purposes shall be treated as

ordinary income for purposes of this article.

(21) In relation to the disposition of stock or indebtedness of a

corporation which elected under subchapter s of chapter one of the

internal revenue code for any taxable year of such corporation

beginning, in the case of a corporation taxable under article nine-A of

this chapter, after December thirty-first, nineteen hundred eighty, the

amount required to be added to federal adjusted gross income pursuant to

subsection (n) of this section.

(22) The amounts required to be added to federal adjusted gross income

pursuant to subsection (q) of this section.

(23) 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 in computing its federal

adjusted gross income 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.

(24) 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 federal adjusted gross income 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.

(25) 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.

* (26) The amount of member or employee contributions to a retirement

system or pension fund picked up or paid by the employer pursuant to

subdivision f of section five hundred seventeen or subdivision d of

section six hundred thirteen of the retirement and social security law

or section 13-225.1, 13-327.1, 13-125.1, 13-125.2 or 13-521.1 of the

administrative code of the city of New York or subdivision nineteen of

section twenty-five hundred seventy-five of the education law.

* NB Effective until ch 525/2011 § 3 takes effect

* (26) The amount of member or employee contributions to a retirement

system or pension fund picked up or paid by the employer pursuant to

subdivision f of section five hundred seventeen, subdivision d of

section six hundred thirteen or section twelve hundred four-a of the

retirement and social security law or section 13-225.1, 13-327.1,

13-125.1, 13-125.2 or 13-521.1 of the administrative code of the city of

New York or subdivision nineteen of section twenty-five hundred

seventy-five of the education law.

* NB See ch 525/2011 § 7 for effectiveness

* (26) The amount of member or employee contributions to a retirement

system or pension fund picked up or paid by the employer pursuant to

subdivision f of section five hundred seventeen or subdivision d of

section six hundred thirteen of the retirement and social security law

or section 13-225.1, 13-327.1 or 13-125.1 of the administrative code of

the city of New York.

* NB Effective upon the expiration of ch 525/2011 § 3

(26-a) The amount of member or employee contributions to a retirement

system or pension fund picked up or paid by the employer for members of

the Manhattan and Bronx surface transportation authority pension plan

and treated as employer contributions in determining income tax

treatment under section 414(h) of the Internal Revenue Code.

(27) Upon the disposition of property to which paragraph twenty-six of

subsection (c) of this section applies, the amount, if any, by which the

aggregate of the modifications described in such paragraph twenty-six

attributable to such property exceeds the aggregate of the modifications

described in paragraph twenty-five of this subsection attributable to

such property.

(29) When gain from the sale or other disposition of property is

included in federal gross income, the amount of reduction in the basis

of such property attributable to credit for solar and wind energy

systems pursuant to paragraph nine of subsection (g) of section six

hundred six; but for taxable years beginning before nineteen hundred

eighty-seven, if such gain affects the determination of a net capital

gain for federal income tax purposes, forty percent of such amount.

(31) The amount deducted or deferred from an employee's salary under a

flexible benefits program established pursuant to section twenty-three

of the general municipal law or section one thousand two hundred ten-a

of the public authorities law.

(32) The amount by which an employee's salary is reduced pursuant to

the provisions of subdivision b of section 12-126.1 and subdivision b of

section 12-126.2 of the administrative code of the city of New York.

(33) Real property taxes paid on qualified agricultural property and

deducted in determining federal adjusted gross income, to the extent of

the amount of the agricultural property tax credit allowed under

subsection (n) or (i) of section six hundred six of this article.

(34) (A) Excess distributions received during the taxable year by a

distributee of a family tuition account established under the New York

state college choice tuition savings program provided for under article

fourteen-A of the education law, to the extent such excess distributions

are deemed attributable to deductible contributions under paragraph

thirty-two of subsection (c) of this section.

(B) (i) The term "excess distributions" means distributions which are

not

(I) qualified withdrawals within the meaning of subdivision nine of

section six hundred ninety-five-b of the education law;

(II) withdrawals made as a result of the death or disability of the

designated beneficiary within the meaning of subdivision ten of section

six hundred ninety-five-b of such law; or

(III) transfers described in paragraph b of subdivision six of section

six hundred ninety-five-e of such law.

(ii) Excess distributions shall be deemed attributable to deductible

contributions to the extent the amount of any such excess distribution,

when added to all previous excess distributions from the account,

exceeds the aggregate of all nondeductible contributions to the account.

(35) The amounts required to be added to federal adjusted gross income

pursuant to subsection (v) of this section.

(36) In the case of a taxpayer who is not an eligible farmer as

defined in subsection (n) of section six hundred six of this article,

the amount of any deduction claimed pursuant to section 179 of the

internal revenue code with respect to a sport utility vehicle which is

not a passenger automobile as defined in paragraph 5 of subsection (d)

of section 280F of the internal revenue code.

(37) 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

subsection (ff) of section six hundred six of this article.

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

hundred ninety-nine of the internal revenue code.

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

article twenty-three of this chapter.

(39-a) The amount of any federal deduction for the excise tax on

telecommunication services to the extent such taxes are used as the

basis of the calculation of tax-free NY area excise tax on

telecommunication services credit allowed under subsection (yy) of

section six hundred six of this article.

* (40) in the case of a beneficiary of a trust that, in any tax year

after its creation including its first tax year, was not subject to tax

pursuant to subparagraph (D) of paragraph three of subsection (b) of

section six hundred five of this article (except for an incomplete gift

non-grantor trust, as defined by paragraph forty-one of this

subsection), the amount described in the first sentence of section six

hundred sixty-seven of the internal revenue code for the tax year to the

extent not already included in federal gross income for the tax year,

except that, in computing the amount to be added under this paragraph,

such beneficiary shall disregard (i) subsection (c) of section six

hundred sixty-five of the internal revenue code; (ii) the income earned

by such trust in any tax year in which the trust was subject to tax

under this article; and (iii) the income earned by such trust in a

taxable year prior to when the beneficiary first became a resident of

the state or in any taxable year starting before January first, two

thousand fourteen. Except as otherwise provided in this paragraph, all

of the provisions of the internal revenue code that are relevant to

computing the amount described in the first sentence of subsection (a)

of section six hundred sixty-seven of the internal revenue code shall

apply to the provisions of this paragraph with the same force and effect

as if the language of those internal revenue code provisions had been

incorporated in full into this paragraph, except to the extent that any

such provision is either inconsistent with or not relevant to this

paragraph.

* NB There are 2 par (40)'s

* (40) The amount of any federal deduction for real property taxes to

the extent such taxes are used as the basis of the calculation of the

real property tax credit for manufacturers allowed under subsection (xx)

of section six hundred six of this article.

* NB There are 2 par (40)'s

(41) In the case of a taxpayer who transferred property to an

incomplete gift non-grantor trust, the income of the trust, less any

deductions of the trust, to the extent such income and deductions of

such trust would be taken into account in computing the taxpayer's

federal taxable income if such trust in its entirety were treated as a

grantor trust for federal tax purposes. For purposes of this paragraph,

an "incomplete gift non-grantor trust" means a resident trust that meets

the following conditions: (i) the trust does not qualify as a grantor

trust under section six hundred seventy-one through six hundred

seventy-nine of the internal revenue code, and (2) the grantor's

transfer of assets to the trust is treated as an incomplete gift under

section twenty-five hundred eleven of the internal revenue code, and the

regulations thereunder.

(42) 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.

(43) Pass-through entity tax deduction addback. (A) In the case of a

taxpayer who claims a credit under subsection (kkk) of section six

hundred six of this article, an amount equal to the amount of such

credit; and (B) in the case of a taxpayer who claims a credit under

subsection (b) of section six hundred twenty of this article, an amount

equal to the amount of such credit as calculated without regard to the

limitation under subsection (c) of section six hundred twenty of this

article.

(43-a) City pass-through entity tax deduction addback. In the case of

a taxpayer who claims a credit allowed under subsection (g) of section

thirteen hundred ten of this chapter, an amount equal to the amount of

such credit.

(44) 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.

(45) 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.

(c) Modifications reducing federal adjusted gross income. There shall

be subtracted from federal adjusted gross income:

(1) Interest income on obligations of the United States and its

possessions to the extent includible in gross income for federal income

tax purposes; such interest income shall include the amount received as

dividends from a regulated investment company, as defined in section

eight hundred fifty-one of the internal revenue code, which has been

designated as the amount of such interest income in a written notice to

shareholders not later than sixty days following the close of its

taxable year; provided that, at the close of each quarter of the taxable

year of such regulated investment company, at least fifty percent of the

value of its total assets, as defined in subsection (c) of section eight

hundred fifty-one of the internal revenue code, consists of obligations

of the United States and its possessions. The aggregate amount so

designated by the regulated investment company for its taxable year

shall not exceed the amount determined by multiplying the total

distributions paid by such regulated investment company to its

shareholders with respect to that taxable year (attributable to income

earned in that year), including any such distributions paid after the

close of the taxable year, as described in section eight hundred

fifty-five of the internal revenue code, by the ratio that the interest

income received in that taxable year on obligations of the United States

and its possessions, after reduction for the deductions and expenses

directly or indirectly attributable thereto, bears to the investment

company taxable income of such regulated investment company for such

taxable year, determined without regard to subparagraph (D) of paragraph

two of subsection (b) of section eight hundred fifty-two of the internal

revenue code;

(2) Interest or dividend income on obligations or securities of any

authority, commission or instrumentality of the United States to the

extent includible in gross income for federal income tax purposes but

exempt from state income taxes under the laws of the United States;

(3) (i) Pensions to officers and employees of this state, its

subdivisions and agencies, to the extent includible in gross income for

federal income tax purposes;

(ii) Pensions to officers and employees of the United States of

America, any territory or possession or political subdivision of such

territory or possession, the District of Columbia, or any agency or

instrumentality of any one of the foregoing, to the extent includible in

gross income for federal income tax purposes;

(3-a) Pensions and annuities received by an individual who has

attained the age of fifty-nine and one-half, not otherwise excluded

pursuant to paragraph three of this subsection, to the extent includible

in gross income for federal income tax purposes, but not in excess of

twenty thousand dollars, which are periodic payments attributable to

personal services performed by such individual prior to his retirement

from employment, which arise (i) from an employer-employee relationship

or (ii) from contributions to a retirement plan which are deductible for

federal income tax purposes. However, the term "pensions and annuities"

shall also include distributions received by an individual who has

attained the age of fifty-nine and one-half from an individual

retirement account or an individual retirement annuity, as defined in

section four hundred eight of the internal revenue code, and

distributions received by an individual who has attained the age of

fifty-nine and one-half from self-employed individual and owner-employee

retirement plans which qualify under section four hundred one of the

internal revenue code, whether or not the payments are periodic in

nature. Nevertheless, the term "pensions and annuities" shall not

include any lump sum distribution, as defined in subparagraph (D) of

paragraph four of subsection (e) of section four hundred two of the

internal revenue code and taxed under section six hundred three of this

article. Where a husband and wife file a joint state personal income tax

return, the modification provided for in this paragraph shall be

computed as if they were filing separate state personal income tax

returns. Where a payment would otherwise come within the meaning of the

term "pensions and annuities" as set forth in this paragraph, except

that such individual is deceased, such payment shall, nevertheless, be

treated as a pension or annuity for purposes of this paragraph if such

payment is received by such individual's beneficiary.

(3-b) (i) Disability income included in federal gross income, to the

extent that such disability income would have been excluded from federal

gross income pursuant to the provisions of subsection (d) of section one

hundred five of the internal revenue code of nineteen hundred fifty-four

had such provisions continued in effect for taxable years commencing

after December thirty-first, nineteen hundred eighty-three as they were

in effect immediately prior to the repeal of such subsection.

Notwithstanding the foregoing, the sum of disability income excluded

pursuant to this paragraph, and pension and annuity income excluded

pursuant to paragraph three-a of this subsection, shall not exceed

twenty thousand dollars.

(ii) Notwithstanding subsection (f) of this section, if a husband and

wife determine their federal income tax on a joint return but are

required to determine their New York income taxes separately, the

amounts of exclusion allowed under subparagraph (i) of this paragraph

shall be determined in the same joint manner as such amounts would have

been determined under the provisions of paragraph five of subsection (d)

of section one hundred five of the internal revenue code as such

provisions were in effect immediately prior to the repeal of such

subsection, but shall be attributed for New York income tax purposes to

the spouse who would have been required to report any such amount as

income if the spouses had determined their federal income taxes

separately.

(iii) Where a husband and wife file a joint state income tax return,

the twenty thousand dollar limitation provided in subparagraph (i) of

this paragraph shall be applied as if they were filing separate state

income tax returns.

(3-c) Social security benefits to the extent includible in gross

income for federal income tax purposes pursuant to section eighty-six of

the internal revenue code.

(4) The portion of any gain, from the sale or other disposition of

property having a higher adjusted basis for New York income tax purposes

than for federal income tax purposes on the last day of the last taxable

year for which article sixteen imposes tax, as such article was in

effect on such date, that does not exceed such difference in basis.

(5) The amount necessary to prevent the taxation under this article of

any annuity or other amount of income or gain which was properly

included in income or gain and was taxable under article sixteen (as

such article was in effect on December thirtieth, nineteen hundred

sixty) to the taxpayer, or to a decedent by reason of whose death the

taxpayer acquired the right to receive the income or gain, or to a trust

or estate from which the taxpayer received the income or gain;

(6) Interest or dividend income on obligations or securities to the

extent exempt from income tax under the laws of this state authorizing

the issuance of such obligations or securities but includible in gross

income for federal income tax purposes; and

(7) The amount of any refund or credit for overpayment of income taxes

imposed by this state, or any other taxing jurisdiction, and any taxes

imposed by article twenty-three of this chapter, to the extent properly

included in gross income for federal income tax purposes.

(8) Compensation received for active service in the armed forces of

the United States on or after October first, nineteen hundred sixty-one,

and prior to September first, nineteen hundred sixty-two; provided,

however, that the amount of such compensation to be deducted shall not

exceed one hundred dollars for each month of the taxable year,

subsequent to September, nineteen hundred sixty-one, during any part of

which month the taxpayer was engaged in such service. For the purposes

of this paragraph, the words "active service in the armed forces of the

United States" shall mean active duty (other than for training) in the

army, navy (including the marine corps), air force or coast guard of the

United States as defined in title ten of the United States code.

(8-a) Compensation and bonuses received for active service in the

armed forces of the United States while a prisoner of war or missing in

action during the hostilities in Vietnam, to the extent includable in

gross income for federal income tax purposes.

(8-b) Income received by an individual who is a member of the New York

state organized militia, as such term is defined in subdivision one of

section two of the military law, as compensation for performing active

service within the state pursuant to either (i) state active duty orders

issued in accordance with subdivision one of section six of the military

law or (ii) active service of the United States pursuant to federal

active duty orders, for service other than training, issued in

accordance with title 10 of the United States code.

(8-c) Compensation received for active service in the armed services

of the United States in an area designated by the president of the

United States by executive order as a "combat zone" at any time during

the period designated by the president by executive order as the period

of combatant activities in such zone to the extent includable in gross

income for federal income tax purposes.

(9) Interest on indebtedness incurred or continued to purchase or

carry obligations or securities the interest on which is subject to tax

under this article but exempt from federal income tax, to the extent

that such interest on indebtedness is not deductible in determining

federal adjusted gross income and is attributable to a trade or business

carried on by the taxpayer.

(10) Ordinary and necessary expenses paid or incurred during the

taxable year for (i) the production or collection of income which is

subject to tax under this article but exempt from federal income tax, or

(ii) the management, conservation or maintenance of property held for

the production of such income, and 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, to the extent that such

expenses and premiums are not deductible in determining federal adjusted

gross income and are attributable to a trade or business carried on by

the taxpayer.

(11) In the case of a taxpayer who has exercised the election

permitted by subsection (g) or (h) of this section, the amount or

amounts required by said subsections to be subtracted from federal

adjusted gross income.

(12) The amount necessary to prevent the taxation of amounts properly

included in New York adjusted gross income in prior taxable years in

accordance with paragraph seven of subsection (b).

(13) The amount required to be subtracted from federal adjusted gross

income pursuant to subsection (i) of this section.

(14) The amount that may be subtracted from federal adjusted gross

income pursuant to subsection (j) of this section.

(15) That portion of wages and 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.

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

thousand two, the amount deductible pursuant to subsection (k) of this

section.

(20) The amounts which may be subtracted from federal adjusted gross

income pursuant to subsection (o) of this section.

(21) In relation to the disposition of stock or indebtedness of a

corporation which elected under subchapter s of chapter one of the

internal revenue code for any taxable year of such corporation

beginning, in the case of a corporation taxable under article nine-A of

this chapter, after December thirty-first, nineteen hundred eighty, the

amounts required to be subtracted from federal adjusted gross income

pursuant to subsection (n) of this section.

(22) In the case of a shareholder of an S corporation (A) where the

election provided for in subsection (a) of section six hundred sixty has

not been made with respect to such corporation, any item of income of

the corporation included in federal gross income pursuant to section

thirteen hundred sixty-six of the internal revenue code, and

(B) in the case of a New York S termination year, subparagraph (A) of

this paragraph shall apply to the amounts of income determined under

subsection (s) of this section.

(23) The amounts which may be subtracted from federal adjusted gross

income pursuant to subsection (p) of this section.

(24) 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 federal adjusted gross income 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.

(25) 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 federal adjusted gross

income 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.

(26) 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, an

amount with respect to property which is subject to the provisions of

section one hundred sixty-eight of the internal revenue code equal to

the amount allowable as the depreciation deduction 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.

(28) Upon the disposition of property to which paragraph twenty-six of

this subsection applies, the amount, if any, by which the aggregate of

the modifications described in paragraph twenty-five of subsection (b)

of this section attributable to such property exceeds the aggregate of

the modifications described in paragraph twenty-six of this subsection

attributable to such property.

(29) Deduction for two-earner married couples. (A) For the taxable

year beginning in nineteen hundred eighty-seven, in the case of a

husband and wife who each have qualified earned income and who file a

joint return under subsection (b) of section six hundred fifty-one for

the taxable year, an amount equal to ten percent of the lesser of:

(i) thirty thousand dollars or

(ii) the qualified earned income of the spouse with the lower

qualified earned income for such taxable year.

(B) For purposes of this paragraph, eligibility for the deduction

provided for herein and the term qualified earned income shall be

determined in the manner such eligibility and such qualified earned

income would have been determined pursuant to the provisions of section

two hundred twenty-one of the internal revenue code of nineteen hundred

fifty-four had such provisions continued in effect for taxable years

commencing after December thirty-first, nineteen hundred eighty-six as

they were in effect immediately prior to the repeal of such section.

Provided, however, the determination of such qualified earned income

shall be made with regard only to the items therein included in New York

adjusted gross income, with such adjusted gross income determined

without regard to this paragraph, and only with regard to the deductions

and exclusions which are of the type properly allowable to or chargeable

against such qualified earned income in such taxable year.

(30) The amount received by any person as an accelerated payment or

payments of part or all of the death benefit or special surrender value

under a life insurance policy as a result of any of the diagnoses

specified in subparagraph (A) or (B) of paragraph one of subsection (a)

of section one thousand one hundred thirteen of the insurance law, and

the amount received by any person as a viatical settlement pursuant to

the provisions of article seventy-eight of the insurance law, to the

extent includible in gross income for federal income tax purposes.

(32) Contributions made during the taxable year by an account owner to

one or more family tuition accounts established under the New York state

college choice tuition savings program provided for under article

fourteen-A of the education law, to the extent not deductible or

eligible for credit for federal income tax purposes, provided, however,

the exclusion provided for in this paragraph shall not exceed five

thousand dollars for an individual or head of household, and for married

couples who file joint tax returns, shall not exceed ten thousand

dollars; provided, further, that such exclusion shall be available only

to the account owner and not to any other person.

(33) Distributions from a family tuition account established under the

New York state college choice tuition savings program provided for under

article fourteen-A of the education law, to the extent includible in

gross income for federal income tax purposes.

* (34) The portion of the fees paid during the taxable year by a

taxpayer who is a resident of a continuing care retirement community,

issued a certificate of authority pursuant to article forty-six of the

public health law, attributable to the cost of providing long term care

benefits pursuant to a continuing care contract. The portion of the fees

so attributable shall be determined in accordance with regulations

promulgated by the superintendent of financial services. The deduction

may not exceed the limitation that would be applicable to the taxpayer

for the taxable year, with respect to eligible long term care premiums,

determined under paragraph (10) of subsection (d) of section 213 of the

internal revenue code.

* NB There are 2 ¶(34)'s

* (34) The amounts which may be subtracted from federal adjusted gross

income pursuant to subsection (u) of this section.

* NB There are 2 ¶(34)'s

(35) Distributions, to the extent includible in gross income for

federal income tax purposes, made to the taxpayer because of his or her

status as a victim of Nazi persecution, as defined in P.L. 103-286, or

as a spouse or a descendant in need of such victim.

(36) Items of income, to the extent includible in gross income for

federal income tax purposes, attributable to, derived from or in any way

related to assets stolen from, hidden from or otherwise lost to a victim

of Nazi persecution, as defined in P.L. 103-286, immediately prior to,

during and immediately after World War II, including, but not limited

to, interest on the proceeds receivable as insurance under policies

issued to a victim of Nazi persecution, as defined in P.L. 103-286, by

European insurance companies immediately prior to and during World War

II. Provided, however, this subtraction from federal adjusted income

does not apply to assets acquired with such assets or with the proceeds

from the sale of such assets. Provided, further, this paragraph shall

only apply to a taxpayer who was the first recipient of such assets

after their recovery and who is a victim of Nazi persecution, as defined

in P.L. 103-286, or a spouse or a descendant of such victim.

(37) In the case of a taxpayer subject to the modification provided by

paragraph thirty-six of subsection (b) of this section, the amount

required to be recaptured pursuant to subsection (d) of section 179 of

the internal revenue code with respect to property upon which such

modification was based.

(38) For taxable years beginning before January first, two thousand

twenty-five, an amount of up to ten thousand dollars if a taxpayer,

while living, donates one or more of the taxpayer's human organs to

another human being for human organ transplantation. For purposes of

this paragraph, "human organ" means all or part of a liver, pancreas,

kidney, intestine, lung, or bone marrow. A subtract modification allowed

under this paragraph shall be claimed in the taxable year in which the

human organ transplantation occurs. Provided, however, that this

deduction shall not apply to any donation for which the taxpayer has

received benefits under section forty-three hundred seventy-one of the

public health law.

(A) A taxpayer shall claim the subtract modification allowed under

this paragraph only once and such subtract modification shall be claimed

for only the following unreimbursed expenses which are incurred by the

taxpayer and related to the taxpayer's organ donation:

(i) travel expenses;

(ii) lodging expenses; and

(iii) lost wages.

(B) The subtract modification allowed under this paragraph shall not

be claimed by a part-year resident or a non-resident of this state.

* (39) Any income or gain, to the extent it is included in federal

adjusted gross income of an individual who is the sole proprietor of a

qualified entity or a member of a limited liability company, a partner

in a partnership or a shareholder in a New York subchapter S corporation

that is a qualified entity, attributable to the operations of a

qualified entity at its location in or as part of a New York state

innovation hot spot, as provided in section thirty-eight of this

chapter.

* NB There are 2 par (39)'s

* (39) (A) In the case of a taxpayer who is a small business or a

taxpayer who is a member, partner, or shareholder of a limited liability

company, partnership, or New York S corporation, respectively, that is a

small business, who or which has business income and/or farm income as

defined in the laws of the United States, an amount equal to fifteen

percent of the net items of income, gain, loss and deduction

attributable to such business or farm entering into federal adjusted

gross income, but not less than zero.

(B) (i) For the purposes of this paragraph, the term small business

shall mean: (I) a sole proprietor who employs one or more persons during

the taxable year and who has net business income or net farm income of

greater than zero but less than two hundred fifty thousand dollars;

(II) a limited liability company, partnership, or New York S

corporation that during the taxable year employs one or more persons and

has net farm income attributable to a farm business that is greater than

zero but less than two hundred fifty thousand dollars; or

(III) a limited liability company, partnership, or New York S

corporation that during the taxable year employs one or more persons and

has New York gross business income attributable to a non-farm business

that is greater than zero but less than one million five hundred

thousand dollars.

(ii) For purposes of this paragraph, the term New York gross business

income shall mean: (I) in the case of a limited liability company or a

partnership, New York source gross income as defined in subparagraph (B)

of paragraph three of subsection (c) of section six hundred fifty-eight

of this article; and (II) in the case of a New York S corporation, New

York receipts included in the numerator of the apportionment factor

determined under section two hundred ten-A of this chapter for the

taxable year.

(C) To qualify for this modification in relation to a non-farm small

business that is a limited liability company, partnership, or New York S

corporation, the taxpayer's income attributable to the net business

income from its ownership interests in non-farm limited liability

companies, partnerships, or New York S corporations must be less than

two hundred fifty thousand dollars.

* NB There are 2 par (39)'s

(40) Any wages received by an individual as an employee of a business

located within a tax-free NY area during the first five years of such

business's ten year taxable period specified in subdivision (a) of

section thirty-nine of this chapter, to the extent included in federal

adjusted gross income and allowed under section thirty-nine of this

chapter. During the second five years of such business's ten year

taxable period, the first two hundred thousand dollars of such wages in

the case of a taxpayer filing as a single individual, the first two

hundred fifty thousand dollars of such wages in the case of a taxpayer

filing as a head of household, and three hundred thousand dollars of

such wages in the case of a taxpayer filing a joint return, to the

extent included in federal adjusted gross income and allowed under

section thirty-nine of this chapter.

(41) The amount of any award paid to a volunteer firefighter or

volunteer ambulance worker from a length of service defined contribution

plan or defined benefit plan as provided for in articles eleven-A,

eleven-AA, eleven-AAA and eleven-AAAA of the general municipal law, to

the extent that such award is includable in gross income for federal

income tax purposes; provided, however, that such award is not

distributed in the form of a lump sum distribution, as defined in

subparagraph (D) of paragraph four of subsection (e) of section four

hundred two of the internal revenue code and taxed under section six

hundred three of this article; and provided, further, that such award is

not distributed to a taxpayer who has not attained the age of fifty-nine

and one-half years.

* (42) Distributions from an eligible retirement plan, as such term is

defined in subparagraph (B) of paragraph (8) of subsection (c) of

section four hundred two of the Internal Revenue Code, made on or after

April first, two thousand seventeen and before April second, two

thousand twenty-two. In order for such distributions to be eligible to

be subtracted from federal adjusted gross income under this paragraph,

the following conditions must be satisfied: (A) the taxpayer's primary

residence was located in the area affected by the disaster declared

pursuant to executive order one hundred sixty-five of two thousand

seventeen, declaring a state of emergency, dated May third, two thousand

seventeen; (B) such primary residence must have incurred damage due to

coastal flooding, widespread erosion and water damage caused by such

disaster; (C) such damage must qualify for the casualty deduction under

section one hundred sixty-five of the internal revenue code (determined

without regard to whether the loss exceeds ten percent of adjusted gross

income); and (D) the taxpayer during the taxable year must use the

entire amount of the distributions to pay for repairs needed as a result

of such damage. Provided, however, that the amount of the distributions

that otherwise may be subtracted under this paragraph must be reduced by

any deduction claimed by the taxpayer for such damage pursuant to

section one hundred sixty-five of the internal revenue code. Provided,

further, that the taxpayer shall not claim a subtraction modification

under paragraph three-a of this subsection for such distribution.

* NB There are 3 par (42)'s

* (42) Insurance payments received by an eligible volunteer

firefighter for the cancer disability benefits in section two hundred

five-cc of the general municipal law to the extent includable in gross

income for federal income tax purposes.

* NB There are 3 par (42)'s

* (42) (A) The amount of any student loan that is discharged, whether

in whole or in part, if such discharge was:

(i) pursuant to subsection (a) or (d) of section 437 of the Higher

Education Act of 1965 or the parallel benefit provided pursuant to part

D of title IV of such act;

(ii) pursuant to section 464(c)(1)(F) of the Higher Education Act of

1965; or

(iii) otherwise discharged on account of the death or total and

permanent disability of the person on whose behalf the indebtedness was

incurred.

(B) For the purposes of this paragraph, "student loan" means:

(i) a student loan as defined in section 108(f)(2) of the Internal

Revenue Code of 1986; or

(ii) a private education loan, as defined in section 140(7) of the

Consumer Credit Protection Act.

* NB There are 3 par (42)'s

(43) The amount of any gain added back to federal adjusted gross

income in a previous taxable year pursuant to paragraph forty-two of

subdivision (b) of this section that is included in federal gross income

for the taxable year.

(44) Any death benefit, to the extent includible in federal adjusted

gross income, paid to the taxpayer in a lump sum pursuant to the

COVID-19 family death benefit program established by the metropolitan

transportation authority in two thousand twenty; provided, however, this

subtraction shall not exceed five hundred thousand dollars and shall not

apply to any benefit payable under such program other than a lump sum

death benefit.

* (45) (A) The amount of an item that was included in New York

adjusted gross income for a prior taxable year (or years) because it

appeared that the taxpayer had an unrestricted right to such item but

was repaid by the taxpayer during the taxable year because it was

established after the close of such prior taxable year (or years) that

the taxpayer did not have an unrestricted right to such item or to a

portion of such item.

(B) No subtraction shall be allowed under this paragraph if the

repayment amount is included in the deduction allowed under section six

hundred fifteen or any other provision of this article, or if the

repayment amount is the basis for a credit claimed by the taxpayer

pursuant to section six hundred sixty-two of this article.

* NB There are 2 par (45)'s

* (45) Grants received pursuant to the COVID-19 pandemic small

business recovery grant program, established in section 16-ff of the New

York state urban development corporation act, to the extent includable

in federal adjusted gross income.

* NB There are 2 par (45)'s

* (46) The amount of any student loan forgiveness award made by the

state, including any awards made pursuant to a program established under

article fourteen of the education law to the extent included in federal

adjusted gross income.

* NB There are 2 par (46)'s

* (46) The amount of any federal deduction disallowed pursuant to

section 280E of the internal revenue code related to the production and

distribution of adult-use cannabis products, as defined by article

twenty-C of this chapter, not used as the basis for any other tax

deduction, exemption, or credit and not otherwise required to be added

back by subsection (b) of this section in computing New York adjusted

gross income.

* NB There are 2 par (46)'s

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

thousand twenty-three, the amount of any student loan discharged or

forgiven by the secretary of education pursuant to any federally

authorized program, to the extent included in federal adjusted gross

income.

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

thousand twenty-six, an amount of up to twenty-five thousand dollars to

the extent allowed as a federal deduction pursuant to section two

hundred twenty-four of the internal revenue code.

* NB There are 3 par (48)'s

* (48) 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.

* NB There are 3 par (48)'s

* (48) The amount of any distribution included in federal adjusted

gross income pursuant to subsection (d) of section nine hundred

sixty-two of the internal revenue code.

* NB There are 3 par (48)'s

(49) 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.

(50) 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.

(d) Modification for New York fiduciary adjustment. There shall be

added to or subtracted from federal adjusted gross income (as the case

may be) the taxpayer's share, as beneficiary of an estate or trust, of

the New York fiduciary adjustment determined under section six hundred

nineteen.

(e) Modifications of partners and shareholders of S corporations. (1)

Partners and shareholders of S corporations which are not New York C

corporations. The amounts of modifications required to be made under

this section by a partner or by a shareholder of an S corporation (other

than an S corporation which is a New York C corporation), which relate

to partnership or S corporation items of income, gain, loss or deduction

shall be determined under section six hundred seventeen and, in the case

of 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, under section six hundred seventeen-a

of this article.

(2) Shareholders of S corporations which are New York C corporations.

In the case of a shareholder of an S corporation which is a New York C

corporation, the modifications under this section which relate to the

corporation's items of income, loss and deduction shall not apply,

except for the modifications provided under paragraph nineteen of

subsection (b) and paragraph twenty-two of subsection (c) of this

section.

(3) New York S termination year. In the case of a New York S

termination year, the amounts of the modifications required under this

section which relate to the S corporation's items of income, loss,

deduction and reductions for taxes (as described in paragraphs two and

three of subsection (f) of section thirteen hundred sixty-six of the

internal revenue code) shall be adjusted in the same manner that the S

corporation's items are adjusted under subsection (s) of section six

hundred twelve.

(f) Husband and wife. If husband and wife determine their federal

income tax on a joint return but are required to determine their New

York income taxes separately, they shall determine their New York

adjusted gross incomes separately as if their federal adjusted gross

incomes had been determined separately.

(g) Optional modifications. Subject to the conditions provided in

paragraphs three and four of this subsection, at the election of the

taxpayer there shall also be subtracted from federal adjusted gross

income either or both of the items set forth in paragraphs one and two

of this subsection, except that only one of such items shall be

subtracted with respect to any one item of property, and except that a

subtraction of the item set forth in such paragraph two may not be taken

with respect to taxable years commencing on or after January first,

nineteen hundred eighty-seven.

(1) Depreciation with respect to any property such as described in

paragraphs three or four of this subsection, and subject to the

conditions provided therein, not exceeding twice the depreciation

allowed with respect to the same property for federal income tax

purposes. Such modification shall be allowed only upon condition that

any depreciation or amortization allowed with respect to the same

property in determining federal adjusted gross income shall be added to

federal adjusted gross income pursuant to paragraph six of subsection

(b) of this section. The total of all deductions allowed pursuant to

this paragraph in any taxable year or years with respect to any property

described in paragraph three shall not exceed its cost or other basis

and, with respect to property described in paragraph four, which is used

in a business carried on both within and without the state shall not

exceed its cost or other basis multiplied by a percentage of the excess

of the taxpayer's business income over its business deductions allocated

to this state for the first year such depreciation is deducted. Such

percentage shall be determined by apportionment and allocation under

regulations of the tax commission.

(2) Expenditures paid or incurred during the taxable year for the

construction, reconstruction, erection or acquisition of any property

such as described in paragraphs three or four of this subsection, and

subject to the conditions provided therein, which is used or to be used

for purposes of research and development in the experimental or

laboratory sense. Such purposes shall not be deemed to include the

ordinary testing or inspection of materials or products for quality

control, efficiency surveys, management studies, consumer surveys,

advertising, promotions or research in connection with literary,

historical or similar projects. Such modification shall be allowed only

on condition that, with respect to property described in paragraph four,

which is used in a business carried on both within and without the state

the deduction shall not exceed the expenditures multiplied by a

percentage of the excess of the taxpayer's business income over its

business deductions allocated to this state for the first year such

expenditures are deducted. Such percentage shall be determined by

apportionment and allocation under regulations of the tax commission,

and for the taxable year and all succeeding taxable years, any

deductions allowed for federal income tax purposes on account of such

expenditures or on account of depreciation of the same property except

to the extent that its basis may be attributable to factors other than

such expenditures, shall be added to federal adjusted gross income

pursuant to paragraph six of subsection (b) of this section, or in case

a modification is allowable pursuant to this paragraph for only a part

of such expenditures, on condition that a proportionate part of any such

deductions allowed for federal income tax purposes be added to federal

adjusted gross income. With respect to property which is used or to be

used for research and development only in part, or during only part of

its useful life, the modification allowable pursuant to this paragraph

shall be limited to a proportionate part of the expenditures relating

thereto. If a modification shall have been allowed pursuant to this

paragraph for all or part of such expenditures with respect to any

property, and such property is used for purposes other than research and

development to a greater extent than originally reported, the taxpayer

shall report such use in his return for the first taxable year during

which it occurs, and the tax commission may recompute the tax for the

year or years for which such deduction was allowed, and may assess any

additional tax resulting from such recomputation within the time fixed

by subsection (c) of section six hundred eighty-three of this article.

(3) For purposes of this paragraph, such modifications shall be

allowed only with respect to tangible property which is depreciable

pursuant to section one hundred sixty-seven of the internal revenue

code, having a situs in this state and used in the taxpayer's trade or

business, (A) constructed, reconstructed or erected after December

thirty-first, nineteen hundred sixty-three, pursuant to a contract which

was, on or before December thirty-first, nineteen hundred sixty-seven,

and at all times thereafter, binding on the taxpayer, or, property, the

physical construction, reconstruction or erection of which began on or

before December thirty-first, nineteen hundred sixty-seven or which

began after such date pursuant to an order placed on or before December

thirty-first, nineteen hundred sixty-seven, and then only with respect

to that portion of the basis thereof or the expenditures relating

thereto which is properly attributable to such construction,

reconstruction or erection after December thirty-first, nineteen hundred

sixty-three, or (B) acquired after December thirty-first, nineteen

hundred sixty-three, pursuant to a contract which was, on or before

December thirty-first, nineteen hundred sixty-seven, and at all times

thereafter, binding on the taxpayer or pursuant to an order placed on or

before December thirty-first, nineteen hundred sixty-seven, by purchase

as defined in section one hundred seventy-nine (d) of the internal

revenue code, if the original use of such property commenced with the

taxpayer, commenced in this state and commenced after December

thirty-first, nineteen hundred sixty-three, or (C) acquired,

constructed, reconstructed, or erected subsequent to December

thirty-first, nineteen hundred sixty-seven, if such acquisition,

construction, reconstruction or erection is pursuant to a plan of the

taxpayer which was in existence December thirty-first, nineteen hundred

sixty-seven and not thereafter substantially modified, and such

acquisition, construction, reconstruction or erection would qualify

under the rules in paragraphs four, five or six of subsection (h) of

section forty-eight of the internal revenue code provided all references

in such paragraphs four, five and six to the dates October nine,

nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six,

shall be read as December thirty-first, nineteen hundred sixty-seven. A

taxpayer shall be allowed a deduction under clauses (A), (B) or (C) of

this paragraph only if the tangible property shall be delivered or the

construction, reconstruction or erection shall be completed on or before

December thirty-first, nineteen hundred sixty-nine, except in the case

of tangible property which is acquired, constructed, reconstructed or

erected pursuant to a contract which was, on or before December

thirty-first, nineteen hundred sixty-seven, and at all times thereafter,

binding on the taxpayer. However, for any taxable year beginning on or

after January first, nineteen hundred sixty-eight, a taxpayer shall not

be allowed a modification under paragraph one of this subsection with

respect to tangible personal property leased to any other person or

corporation. For purposes of the preceding sentence, any contract or

agreement to lease or rent or for a license to use such property shall

be considered a lease. With respect to property which a taxpayer uses

for purposes other than leasing for part of a taxable year and leases

for a part of a taxable year, a modification under paragraph one shall

be allowed in proportion to the part of the year such property is used

by the taxpayer.

(4) For purposes of this paragraph, such modifications shall be

allowed only with respect to tangible property which is depreciable

pursuant to section one hundred sixty-seven of the internal revenue

code, having a situs in this state and used in the taxpayer's trade or

business. The modifications provided for in paragraph one of this

subsection shall be allowed only with respect to tangible property which

is (A) constructed, reconstructed or erected after December

thirty-first, nineteen hundred sixty-seven, pursuant to a contract which

was, on or before December thirty-first, nineteen hundred sixty-eight,

and at all times thereafter, binding on the taxpayer or, property, the

physical construction, reconstruction or erection of which began on or

before December thirty-first, nineteen hundred sixty-eight or which

began after such date pursuant to an order placed on or before December

thirty-first, nineteen hundred sixty-eight, and then only with respect

to that portion of the basis thereof or the expenditures relating

thereto which is properly attributable to such construction,

reconstruction or erection after December thirty-first, nineteen hundred

sixty-three, or (B) acquired after December thirty-first, nineteen

hundred sixty-seven, pursuant to a contract which was, on or before

December thirty-first, nineteen hundred sixty-eight, and at all times

thereafter, binding on the taxpayer or pursuant to an order placed on or

before December thirty-first, nineteen hundred sixty-eight, by purchase

as defined in section one hundred seventy-nine (d) of the internal

revenue code, if the original use of such property commenced with the

taxpayer, commenced in this state and commenced after December

thirty-first, nineteen hundred sixty-seven, or (C) acquired,

constructed, reconstructed, or erected subsequent to December

thirty-first, nineteen hundred sixty-eight, if such acquisition,

construction, reconstruction or erection is pursuant to a plan of the

taxpayer which was in existence December thirty-first, nineteen hundred

sixty-eight, and not thereafter substantially modified, and such

acquisition, construction, reconstruction or erection would qualify

under the rules in paragraphs four, five or six of subsection (h) of

section forty-eight of the internal revenue code provided all references

in such paragraphs four, five and six to the dates October nine,

nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six,

shall be read as December thirty-first, nineteen hundred sixty-eight. A

taxpayer shall be allowed a deduction under clauses (A), (B) or (C) of

the preceding sentence of this paragraph only if the tangible property

shall be delivered or the construction, reconstruction or erection shall

be completed on or before December thirty-first, nineteen hundred

seventy, except in the case of tangible property which is acquired,

constructed, reconstructed or erected pursuant to a contract which was,

on or before December thirty-first, nineteen hundred sixty-eight, and at

all times thereafter binding on the taxpayer. The modification provided

for in paragraph two of this subsection shall be allowed only with

respect to tangible property, (A) the construction, reconstruction or

erection of which is completed after December thirty-first, nineteen

hundred sixty-seven, and then only with respect to that portion of the

basis thereof or the expenditures relating thereto which is properly

attributable to such construction, reconstruction or erection after

December thirty-first, nineteen hundred sixty-three, or (B) acquired

after December thirty-first, nineteen hundred sixty-seven, by purchase

as defined in section one hundred seventy-nine (d) of the internal

revenue code, if the original use of such property commenced with the

taxpayer, commenced in this state and commenced after December

thirty-first, nineteen hundred sixty-three. Provided, however, a

modification under paragraph one of this subsection shall be allowed

with respect to property described in this paragraph only on condition

that such property shall be principally used by the taxpayer in the

production of goods by manufacturing; processing; assembling; refining;

mining; extracting; farming; agriculture; horticulture; floriculture;

viticulture; or commercial fishing. For purposes of the preceding

sentence, manufacturing shall mean the process of working raw materials

into wares suitable for use or which gives new shapes, new qualities or

new combinations to matter which already has gone through some

artificial process by the use of machinery, tools, appliances and other

similar equipment. Property used in the production of goods shall

include machinery, equipment or other tangible property which is

principally used in the repair and service of other machinery, equipment

or other tangible property used principally in the production of goods

and shall include all facilities used in the manufacturing operation,

including storage of material to be used in manufacturing and of the

products that are manufactured. At the option of the taxpayer, air and

water pollution control facilities which qualify for elective deductions

under subsection (h) of section six hundred twelve may be treated, for

purposes of this paragraph, as tangible property principally used in the

production of goods by manufacturing; processing; assembling; refining;

mining; extracting; farming; agriculture; horticulture; floriculture;

viticulture; or commercial fishing, in which event, a deduction shall

not be allowed under such subsection (h). However, for any taxable year

beginning on or after January first, nineteen hundred sixty-eight, a

taxpayer shall not be allowed a modification under paragraph one of this

subsection with respect to tangible personal property leased to any

other person or corporation. For purposes of the preceding sentence, any

contract or agreement to lease or rent or for a license to use such

property shall be considered a lease. With respect to property which a

taxpayer uses for purposes other than leasing for part of a taxable year

and leases for a part of a taxable year, a modification under paragraph

one shall be allowed in proportion to the part of the year such property

is used by the taxpayer.

(5) If the modifications allowable for any taxable year pursuant to

this subsection exceed the taxpayer's New York adjusted gross income,

determined without the allowance of such modifications, the excess may

be carried over to the following taxable year or years and may be

subtracted from federal adjusted gross income for such year or years

provided, however, that in no event shall such excess, insofar as it

reflects subtractions taken with respect to items set forth in paragraph

two of this subsection, be carried over to taxable years commencing on

or after January first, nineteen hundred ninety-four.

(6) In any taxable year when property is sold or otherwise disposed

of, with respect to which a modification has been allowed pursuant to

paragraph one or two of this subsection, the basis of such property

shall be adjusted to reflect the modifications so allowed, and if the

basis as so adjusted is lower than the adjusted basis of the same

property for federal income tax purposes, there shall be added to

federal adjusted gross income the amount of the difference between such

adjusted bases.

(h) Optional modification for waste treatment facility expenditures.

For taxable years commencing prior to January first, nineteen hundred

eighty-seven, at the election of the taxpayer, there shall also be

subtracted from federal adjusted gross income expenditures paid or

incurred during the taxable year for the construction, reconstruction,

erection or improvement of industrial waste treatment facilities and air

pollution control facilities.

(1) (A) The term "industrial waste treatment facilities" shall mean

facilities for the treatment, neutralization, or stabilization of

industrial waste and other wastes (as the terms "industrial waste" and

"other wastes" are defined in section 17-0105 of the environmental

conservation law) from a point immediately preceding the point of such

treatment, neutralization or stabilization to the point of disposal,

including the necessary pumping and transmitting facilities.

(B) The term "air pollution control facilities" shall mean facilities

which remove, reduce, or render less noxious air contaminants emitted

from an air contamination source (as the terms "air contaminant" and

"air contamination source" are defined in section 19-0107 of the

environmental conservation law) from a point immediately preceding the

point of such removal, reduction or rendering to the point of discharge

of air, meeting emission standards as established by the department of

environmental conservation but excluding such facilities installed for

the primary purpose of salvaging materials which are usable in the

manufacturing process or are marketable and excluding those facilities

which rely for their efficacy on dilution, dispersion or assimilation of

air contaminants in the ambient air after emission. Such term shall

further include flue gas desulfurization equipment and attendant sludge

disposal facilities, fluidized bed boilers, precombustion coal cleaning

facilities or other facilities that conform with this subdivision and

which comply with the provisions of the state acid deposition control

act set forth in title nine of article nineteen of the environmental

conservation law.

(2) Such modifications shall be allowed only

(A) with respect to tangible property which is depreciable, pursuant

to section one hundred sixty-seven of the internal revenue code, having

a situs in this state and used in the taxpayer's trade or business, the

construction, reconstruction, erection or improvement of which, in the

case of industrial waste treatment facilities, is initiated on or after

January first, nineteen hundred sixty-five, or which, in the case of air

pollution control facilities, is initiated on or after January first,

nineteen hundred sixty-six, and

(B) on condition that such facilities have been certified by the state

commissioner of environmental conservation or his designated

representative, pursuant to section 19-0309 of the environmental

conservation law, as complying with the applicable provisions of the

environmental conservation law, the public health law, the state

sanitary code and codes, rules, regulations, permits or orders

promulgated pursuant thereto, and

(C) on condition that for the taxable year and all succeeding taxable

years, any deductions allowed for federal income tax purposes for such

expenditures or for depreciation or amortization of the same property,

except to the extent that its basis may be attributable to factors other

than such expenditures, be added to federal adjusted gross income

pursuant to paragraph five of subsection (b) of this section, or in case

a modification is allowable pursuant to this paragraph for only a part

of such expenditures, on condition that a proportionate amount of any

such deductions allowed for federal income tax purposes be added to

federal adjusted gross income, and

(D) where the election provided for in subsection (g) of section six

hundred twelve has not been exercised in respect to the same property.

(3) (A) If expenditures in respect to an industrial waste treatment

facility or an air pollution control facility have been allowed as a

modification as provided herein and if within ten years from the end of

the taxable year in which such modification was allowed such property or

any part thereof is used for the primary purpose of salvaging materials

which are usable in the manufacturing process or are marketable, the

taxpayer shall report such change of use in its return for the first

taxable year during which it occurs, and the tax commission may

recompute the tax for the year or years for which such modification was

allowed, and may assess any additional tax resulting from such

recomputation within the time fixed by paragraph eight of subsection (c)

of section six hundred eighty-three.

(B) If a modification is allowed as herein provided for expenditures

paid or incurred during any taxable year on the basis of a temporary

certificate of compliance issued pursuant to the environmental

conservation law, and if the taxpayer fails to obtain a permanent

certificate of compliance upon completion of the facilities with respect

to which such temporary certificate was issued, the taxpayer shall

report such failure in its report for the taxable year during which such

facilities are completed, and the tax commission may recompute the tax

for the year or years for which such modification was allowed, and may

assess any additional tax resulting from such recomputation within the

time fixed by paragraph eight of subsection (c) of section six hundred

eighty-three.

(C) If a modification is allowed as herein provided for expenditures

paid or incurred during any taxable year in respect to an air pollution

control facility on the basis of a certificate of compliance issued

pursuant to the environmental conservation law and the certificate is

revoked pursuant to subdivision three of section 19-0309 of the

environmental conservation law, the tax commission may recompute the tax

for the year or years for which the facility is not or was not in

compliance with the applicable provisions of the environmental

conservation law, the state sanitary code or codes, rules, regulations,

permits or orders issued pursuant thereto, and for which a modification

was allowed, and may assess any additional tax resulting from such

recomputation within the time fixed by paragraph eight of subsection (c)

of section six hundred eighty-three.

(4) In any taxable year when property is sold or otherwise disposed

of, with respect to which a modification has been allowed pursuant to

this paragraph, such modification shall be disregarded in computing gain

or loss, and the gain or loss on the sale or other disposition of such

property shall be the gain or loss entering into the computation of

federal adjusted gross income for such taxable year.

(i) In the case of mines, oil and gas wells and other natural

deposits, any allowance for percentage depletion pursuant to section six

hundred thirteen or section six hundred thirteen A of the internal

revenue code shall be added to federal adjusted gross income. However,

with respect to the property as to which such addition to federal

adjusted gross income is required, an allowance for depletion shall be

subtracted from federal adjusted gross income in the amount that would

be deductible under section six hundred eleven of such code if the

deduction for an allowance for depletion were computed without reference

to such section six hundred thirteen or section six hundred thirteen A.

With respect to the computation of depletion pursuant to this

subsection, the basis for such computation for taxable years beginning

in nineteen hundred seventy-two shall be the federal basis. For

subsequent taxable years, the basis for such computation shall be

reduced only by the deduction for the allowance for depletion deductible

pursuant to this subsection. The portion of any gain from the sale or

other disposition of such property having a higher adjusted basis for

New York income tax purposes than for federal income tax purposes, that

does not exceed such difference in basis, shall be subtracted from

federal adjusted gross income.

(j) Modification for nonpublic school tuition. (1) General. An

individual shall be entitled to subtract from his federal adjusted gross

income an amount shown in the table set forth in this paragraph for his

New York adjusted gross income for the taxable year, computed without

the benefit of this modification, multiplied by the number of his

dependents, not exceeding three, attending a nonpublic school on a

full-time basis for at least four months during the regular school year

for the education of such dependent in grades one through twelve,

provided such individual is allowed an exemption under section six

hundred sixteen for such dependent. Provided, further, that the

modification under this paragraph may be taken only if such individual

has paid at least fifty dollars for each such dependent in tuition to

such nonpublic school for such education of such dependent. No taxpayer

shall be entitled to the modification provided for in this paragraph if

he claims a tuition reimbursement payment pursuant to article twelve-A

of the education law.

If New York The amount

adjusted gross allowable for each

income is: dependent is:

Less than $9,000 $1,000

9,000--10,999 850

11,000--12,999 700

13,000--14,999 550

15,000--16,999 400

17,000--18,999 250

19,000--20,999 150

21,000--22,999 125

23,000--24,999 100

25,000 and over --0--

(2) Husband and wife. In determining the applicable New York adjusted

gross income of a husband and wife for purposes of the table set forth

in paragraph one of this subsection, the New York adjusted gross income

of a husband and wife shall be the aggregate of their New York adjusted

gross incomes for the taxable year, determined without the benefit of

the modification provided for in this subsection, and the number of

dependents with respect to which this modification may be claimed shall

be no more than three in the aggregate.

(3) Definitions. (A) "Tuition", as used in this subsection, shall mean

the amount actually paid during the taxable year by the taxpayer for the

enrollment of a dependent during the regular school year at a nonpublic

school.

(B) "Nonpublic school", as used in this subsection, shall mean any

non-profit elementary or secondary school in the state of New York,

other than a public school, which (i) is providing instruction in

accordance with article seventeen and section thirty-two hundred four of

the education law, (ii) has not been found to be in violation of Title

VI of the Civil Rights Act of nineteen hundred sixty-four, 78 Stat. 252,

42 U.S.C. § 2000 (d) and (iii) which is entitled to a tax exemption

under sections five hundred one (a) and five hundred one (c) (3) of the

Federal Internal Revenue Code of nineteen hundred fifty-four, as

amended. The commissioner of education shall furnish to the state tax

commission by February first of each year, a certified list of nonpublic

schools which comply with clause (i) of this subparagraph for the

preceding calendar year and shall provide such other assistance with

respect to whether nonpublic schools come within clause (i) as the state

tax commission may require.

(C) "Regular school year", as used in this subsection, shall mean the

months of the taxable year exclusive of July and August.

(4) Additional information. Any claim for a modification under this

subsection shall be accompanied by such information as the tax

commission may require.

(k) 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 subsection (m) of

this section, 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.

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

thousand two, upon the disposition of property to which subsection (k)

of this section applies, the amount of any gain or loss includible in

federal adjusted income shall be adjusted to reflect the inclusions and

exclusions from federal adjusted income pursuant to paragraph eight of

subsection (b) and paragraph sixteen of subsection (c) of this section

attributable to such property.

(m) For purposes of subsections (k) and (l) of this section, 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.

(n) Where gain or loss is recognized for federal income tax purposes

upon the disposition of stock or indebtedness of a corporation electing

under subchapter s of chapter one of the internal revenue code

(1) There shall be added to federal adjusted gross income the amount

of increase in basis with respect to such stock or indebtedness pursuant

to subsection (a) of section thirteen hundred seventy-six of the

internal revenue code as such section was in effect for taxable years

beginning before January first, nineteen hundred eighty-three and

subparagraphs (A) and (B) of paragraph one of subsection (a) of section

thirteen hundred sixty-seven of such code, for each taxable year of the

corporation beginning, in the case of a corporation taxable under

article nine-A of this chapter, after December thirty-first, nineteen

hundred eighty, and in the case of a corporation taxable under article

thirty-two of this chapter, after December thirty-first, nineteen

hundred ninety-six, for which the election provided for in subsection

(a) of section six hundred sixty of this article was not in effect, and

(2) There shall be subtracted from federal adjusted gross income

(A) the amount of reduction in basis with respect to such stock or

indebtedness pursuant to subsection (b) of section thirteen hundred

seventy-six of the internal revenue code as such section was in effect

for taxable years beginning before January first, nineteen hundred

eighty-three and subparagraphs (B) and (C) of paragraph two of

subsection (a) of section thirteen hundred sixty-seven of such code, for

each taxable year of the corporation beginning, in the case of a

corporation taxable under article nine-A of this chapter, after December

thirty-first, nineteen hundred eighty, and in the case of a corporation

taxable under article thirty-two of this chapter, after December

thirty-first, nineteen hundred ninety-six, for which the election

provided for in subsection (a) of section six hundred sixty of this

article was not in effect and

(B) the amount of any modifications to federal gross income with

respect to such stock pursuant to paragraph twenty of subsection (b) of

this section.

(o) Modifications for new business investment gains and certain new

business investments.

1. For purposes of this subsection, the following definitions shall

apply:

(A) "New business investment gain" means gain from the sale of a new

business investment issued to the taxpayer before January first,

nineteen hundred eighty-eight, if:

(i) such new business investment is, in the hands of the person

selling the same (whether or not the taxpayer), a capital asset as

defined in section 1221 of the internal revenue code of nineteen hundred

fifty-four, as amended, and

(ii) such new business investment was held by such person for the

period specified in paragraph two of this subsection.

(B) "New business" means a corporation or partnership organized or

formed under the laws of any state which:

(i) adopts a plan on or after July first, nineteen hundred eighty-one

and before January first, nineteen hundred eighty-eight, to conduct a

new business within the meaning and intent of this section and to issue

new business investments, as defined in this subsection, and

(ii) is, at the date of adoption of such plan, subject to taxation

(whether or not any amount is owing) under section one hundred

eighty-three, one hundred eighty-four or one hundred eighty-six of

article nine of this chapter, or under article nine-a of this chapter or

article twenty-three of this chapter, or would have been subject to tax

under article twenty-three (as such article was in effect on January

first, nineteen hundred eighty) if such article were still in effect,

and the first taxable period for which such new business became subject

to such taxation commenced on or after July first, nineteen hundred

eighty-one and before January first, nineteen hundred eighty-eight, and

such first taxable period includes the date of adoption of such plan; if

not so subject to taxation, the new business must be subject to taxation

under such sections or articles for the first time within one year from

the date of adoption of such plan, and

(iii) is conducted (or will be conducted, as evidenced by such plan)

whereby at least ninety percent of the assets (valued at original cost)

are located and employed in this state and eighty percent of the

employees (as ascertained within the meaning and intent of subparagraph

three of paragraph (a) of subdivision three of section two hundred ten

of this chapter and, in addition, in the case of a partnership,

excluding partners) are principally employed in this state during each

taxable period, or part thereof, as required by clause (iv) of this

subparagraph, and

(iv) within ninety days after the adoption of such plan, or, if a

return is required, as part of such return, under such article nine,

article nine-A or article twenty-three (as such article was in effect on

or before December thirtieth, nineteen hundred eighty-two), whichever is

sooner, shall file a new business certificate with the state tax

commission attesting to whether it meets, if subject to taxation under

such articles, or intends to meet, if not so subject, all of the

conditions stated in clauses (i), (ii) and (iii) of this subparagraph

within the time set forth therein. Thereafter, during the first four

taxable years of such new business, along with, and as part of, any

return required under such articles, such new business shall make and

file a new business certificate for the period covered by such return

attesting to whether it has met the conditions specified in this

subparagraph during the taxable period covered by such return. If no

return is required under such articles, such certificate shall be filed

annually on or before the fifteenth day of March which shall cover the

twelve consecutive calendar month period ending on the last day of

December immediately preceding such March fifteenth. If such new

business fails to meet such conditions specified in this subparagraph,

it shall, in addition, give notice of this fact, within the time

prescribed by the state tax commission, to the holders of its "new

business investments." The state tax commission shall prescribe the form

and content of such new business certification and may require a new

business to file such certificate for periods (even if no return is

filed or required, but for this section) covering up to eight years from

the date of adoption of such plan, as in its discretion, it deems the

same necessary for the enforcement of this subparagraph, and

(v) Special rules:

(1) For any taxable period, in order to constitute a new business, a

business enterprise must have derived more than sixty percent of its

aggregate gross receipts from sources other than royalties, rents,

dividends, interest, annuities and sales or exchanges of stock or

securities.

(2) A new business does not include (i) any new business of which

twenty-five percent or more of the number of shares of stock that

entitle the holders thereof to vote for the election of directors or

trustees is owned, directly or indirectly, by a taxpayer subject to tax

under section one hundred eighty-three, one hundred eighty-four, one

hundred eighty-five or one hundred eighty-six of article nine of this

chapter, or under article nine-A, thirty-two or thirty-three of this

chapter or (ii) any new business substantially similar in operation and

in ownership, directly or indirectly, to a business entity (or entities)

taxable, or previously taxable, under such sections, such articles,

article twenty-three or which would have been subject to tax under

article twenty-three (as such article was in effect on January first,

nineteen hundred eighty) or the income (or losses) of which is (or was)

includable under article twenty-two whereby the intent and purpose of

this subsection would be evaded.

(C) "New business investment" means and includes the following

investments issued before January first, nineteen hundred eighty-eight

by a new business pursuant to a plan described in clause (i) of

subparagraph (B) of this paragraph for money or other property (other

than stock or securities) on or before the expiration of the third

taxable year of such new business (excluding any short period

immediately preceding such taxable year because the new business was not

in existence for an entire taxable year) or forty-two months from the

adoption of such plan, whichever is sooner: (i) original issuance

capital stock as part of a new issue, (ii) other original issuance

securities of a new issue of a like nature as stocks which are designed

as a means of investment and issued for the purpose of financing

corporate enterprises and providing for a distribution of rights in such

enterprises, (iii) debt obligations such as bonds and debentures for a

term of at least one year, whether secured or unsecured, and (iv)

certificates and other instruments representing proprietary interests,

whether limited or otherwise, in and assumption of general liabilities,

whether limited or otherwise, of a partnership enterprise.

2. A taxpayer may subtract from his federal adjusted gross income a

portion of an amount constituting a new business investment gain, as

follows:

If new business The modification is equal to the

investment held for: following proportion of the gain

includable in federal adjusted

gross income:

At least four years, but

less than five years twenty-five percent

At least five years, but

less than six years fifty percent

At least six years one hundred percent

3. Where, within six months of the realization of a new business

investment gain allowable as the basis of a modification under paragraph

two of this subsection, such modification is equal to less than one

hundred percent of the portion of the gain includable in federal

adjusted gross income and the taxpayer purchases a new business

investment which is then held for a period of at least six months, the

taxpayer may subtract from his federal adjusted gross income ten percent

(but not an amount that will reduce the portion of such gain included in

his New York income below zero) of the amount of such gain where the

purchase price of the new business investment is equal to or greater

than the proceeds of the sale giving rise to such gain. Where the

purchase price of the new business investment is less than an amount

equal to the proceeds of such sale, the modification allowable under

this paragraph shall be equal to ten percent of an amount equal to the

product of (A) the amount of the gain and (B) a fraction the numerator

of which is the purchase price of the new investment and the denominator

of which is an amount equal to the proceeds of such sale. The

modification allowable under this paragraph may be utilized, at the

option of the taxpayer, with respect to the taxable year in which the

new business investment gain is realized or the year containing the last

day of the six-month retention period described in this paragraph.

4. The state tax commission may prescribe such rules and regulations

as may be necessary to carry out the purposes of this subsection.

(p) New business investment deferral. For taxable years beginning

before January first, nineteen hundred eighty-eight, at the option of

the taxpayer, there may be subtracted from federal adjusted gross income

a reinvested amount of long-term capital gain realized in a taxable year

from the sale of a capital asset, as such term is defined in section

1221 of the internal revenue code, which is not a new business

investment. A reinvested amount of long-term capital gain shall mean an

amount which bears the same ratio to the long-term capital gain realized

from the sale of a capital asset which was includable in New York

adjusted gross income as that portion of the sale proceeds which is

reinvested, within one year from date of sale, in a New York new

business bears to the total sale proceeds. For the purposes of this

subsection, a New York new business is a business enterprise which (1)

has been a taxpayer under this article for no more than three taxable

years (including short taxable years), (2) over fifty percent of the

number of shares of stock that entitle the holders thereof to vote for

the election of directors or trustees is not owned, directly or

indirectly, by a taxpayer subject to tax under section one hundred

eighty-three, one hundred eighty-four, one hundred eighty-five or one

hundred eighty-six of article nine of this chapter, or under article

nine-A, thirty-two or thirty-three of this chapter, (3) is not

substantially similar in operation or ownership, directly or indirectly,

to a business entity (or entities) taxable, or previously taxable, under

such sections, such articles, article twenty-three or which would have

been subject to tax under article twenty-three (as such article was in

effect on January first, nineteen hundred eighty) or the income (or

losses) of which is (or was) includable under article twenty-two whereby

the intent and purpose of this subsection would be evaded, (4) locates

and employs at least ninety percent of its assets in the state, (5)

employs principally in the state eighty percent of its employees (as

ascertained within the meaning and intent of subparagraph three of

paragraph (a) of subdivision three of section two hundred ten of this

chapter and, in addition, in the case of a partnership, excluding

partners), (6) derives less than forty percent of its gross income from

dividends, interest, royalties (other than mineral, oil, or gas

royalties or copyright royalties), and annuities and (7) reports at

least twenty-five hundred dollars in gross income in any taxable year.

The reinvested amount must qualify as a capital asset as defined in

section 1221 of the internal revenue code and must be retained by the

taxpayer for at least twelve months. The modification allowable under

this subsection shall be utilized with respect to the taxable year in

which the twelve month retention period ends. The commissioner of

taxation and finance may require annual information reports on the

investments in new businesses made pursuant to this subsection, and such

other reports as he may require to ensure against the evasion of the

intent and purposes of this subsection.

(q) An amount deferred under subsection (p) hereof shall be added to

federal adjusted gross income when the reinvestment in the New York new

business which qualified a taxpayer for such deferral is sold.

(r) Related members expense add back. (1) Definitions. (A) 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".

(B) 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.

(C) 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.

(D) 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.

(2) Royalty expense add backs. (A) For the purpose of computing New

York adjusted gross 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.

(B) Exceptions. (i) The adjustment required in this subsection 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: (I) 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; (II) 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

(III) 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 subsection shall not apply if the

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

in the form specified by the commissioner, that: (I) 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; (II) the tax base for said tax included the royalty payment

paid, accrued or incurred by the taxpayer; and (III) 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 six hundred one of this

article for the taxable year.

(iii) The adjustment required in this subsection shall not apply if

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

and in the form specified by the commissioner, that: (I) the royalty

payment was paid, accrued or incurred to a related member organized

under the laws of a country other than the United States; (II) the

related member's income from the transaction was subject to a

comprehensive income tax treaty between such country and the United

States; (III) 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; (IV) the related member's income from the

transaction was taxed in such country at an effective tax rate at least

equal to that imposed by this state; and (V) 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 subsection 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.

(s) New York S termination year. (1) General. In the case of a New

York S termination year, the amount of any item of S corporation income,

loss and deduction included in the shareholder's federal adjusted gross

income and any reductions for taxes (as described in paragraphs two and

three of subsection (f) of section thirteen hundred sixty-six of the

internal revenue code) shall be adjusted in accordance with the

treatment provided in paragraph two or three of this subsection.

(2) Pro rata allocation. Unless paragraph three of this subsection

applies, an equal portion of each S corporation item shall be assigned

to each day of the S corporation's taxable year for federal income tax

purposes. The portion of each such item thereby assigned to the S short

year shall be treated as an item of a New York S corporation, and the

portion of each such item thereby assigned to the C short year shall be

treated as an item of an S corporation which is a New York C

corporation.

(3) Normal tax accounting. The portion of each S corporation item

assigned to the S short year and the C short year shall be determined

using normal tax accounting rules if:

(A) there is a sale or exchange of fifty percent or more of the stock

in such corporation during the New York S termination year; or

(B) the corporation so elects, in the manner the commissioner may

provide. No election under this subparagraph shall be effective unless

all persons who are shareholders during the S short year and all persons

who are shareholders on the first day of the C short year consent to

such election.

(u) 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 subsection. For purposes of this subsection 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.

(v) Amounts deferred. The amount deferred under subsection (u) of this

section shall be added to federal adjusted gross income when the

reinvestment in the New York qualified emerging technology company which

qualified a taxpayer for such deferral is sold.

(w) Alimony modifications. (1) In the case of applicable alimony or

separate maintenance payments, the following modifications shall apply:

(A) There shall be subtracted from federal adjusted gross income any

applicable alimony or separate maintenance payments made by the taxpayer

during the taxable year.

(B) There shall be added to federal adjusted gross income any

applicable alimony or separate maintenance payments received by the

taxpayer during the taxable year.

(2) (A) The term "alimony or separate maintenance payments" means

payments as defined under section seventy-one of the internal revenue

code in effect immediately prior to the enactment of Public Law 115-97.

(B) The term "applicable alimony or separate maintenance payments"

means payments made under an alimony or separation instrument (as

defined in section seventy-one of the internal revenue code in effect

immediately prior to the enactment of Public Law 115-97) that was

executed after December thirty-first, two thousand eighteen, and any

divorce or separation instrument executed on or before such date and

modified after such date if the modification expressly provides that the

amendments made by this section apply to such modification.

(x) Qualified moving expense reimbursement and moving expenses. (1) In

the case of applicable qualified moving expense reimbursement and moving

expenses, the following modifications shall apply:

(A) There shall be subtracted from federal adjusted gross income any

applicable qualified moving expense reimbursement received by the

taxpayer during the taxable year.

(B) There shall be subtracted from federal adjusted gross income any

applicable moving expenses paid by the taxpayer during the taxable year.

(2) Applicable qualified moving expense reimbursement and moving

expenses are those deductions as allowed by paragraph (g) of sections

one hundred thirty-two and section two hundred seventeen, respectfully,

of the internal revenue code immediately prior to the enactment of

Public Law 115-97.

(y) Depreciation and interest adjustments for covered properties owned

by an institutional real estate investor. (1) Notwithstanding any other

provision of this section, in the case of a taxpayer that is a 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, New York adjusted gross income shall

be computed with adjustments for depreciation and interest related to

covered properties as set forth in this subsection.

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

deduction for depreciation allowed under the internal revenue code or

this section shall be allowed.

(3) 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 New York

adjusted gross 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

paragraph, 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.