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)\nGeneral. The New York adjusted gross income of a resident individual\nmeans his federal adjusted gross income as defined in the laws of the\nUnited States for the taxable year, with the modifications specified in\nthis section.\n (b) Modifications increasing federal adjusted gross income. There\nshall be added to federal adjusted gross income:\n (1) Interest income on obligations of any state other than this state,\nor of a political subdivision of any such other state unless created by\ncompact or agreement to which this state is a party, to the extent not\nproperly includible in federal adjusted gross income;\n (2) Interest or dividend income on obligations or securities of any\nauthority, commission, or instrumentality of the United States, which\nthe laws of the United States exempt from federal income tax but not\nfrom state income taxes;\n (3) Income taxes. (A) General. Income taxes imposed by this state or\nany other taxing jurisdiction, to the extent deductible in determining\nfederal adjusted gross income and not credited against federal income\ntax.\n (B) Shareholders of S corporations. In the case of a shareholder of an\nS corporation, with respect to taxes imposed upon or payable by the\ncorporation, the term "income taxes" in subparagraph (A) of this\nparagraph shall also include the taxes imposed under article nine-A of\nthis chapter, regardless of the measure of such tax.\n (C) Pass-through entity tax deduction. (i) In the case of a partner,\nmember or shareholder of an electing partnership or electing S\ncorporation, the term "income taxes" in subparagraph (A) of this\nparagraph shall not include the taxes imposed under article\ntwenty-four-A of this chapter to the extent such taxes are added to\nfederal adjusted gross income under subparagraph (A) of paragraph\nforty-three of this subsection or the taxes imposed under article\ntwenty-four-B of this chapter to the extent such taxes are added to the\nfederal adjusted gross income under paragraph forty-three-a of this\nsubsection.\n (ii) In the case of a partner, member or shareholder of a partnership\nor S corporation, the term "income taxes" in subparagraph (A) of this\nparagraph shall not include pass-through entity taxes substantially\nsimilar to the tax imposed pursuant to article twenty-four-A of this\nchapter imposed by another state of the United States, a political\nsubdivision of such state, or the District of Columbia upon income both\nderived therefrom and subject to tax under this article to the extent\nsuch taxes are added to federal adjusted gross income under subparagraph\n(B) of paragraph forty-three of this subsection.\n (4) Interest on indebtedness incurred or continued to purchase or\ncarry obligations or securities the interest on which is exempt from tax\nunder this article, to the extent deductible in determining federal\nadjusted gross income.\n (5) Expenses paid or incurred during the taxable year for (i) the\nproduction or collection of income which is exempt from tax under this\narticle, or (ii) the management, conservation or maintenance of property\nheld for the production of such income, and the amortizable bond premium\nfor the taxable year on any bond the interest on which is exempt from\ntax under this article, to the extent that such expenses and premiums\nare deductible in determining federal adjusted gross income.\n (6) In the case of a taxpayer who has exercised the election permitted\nby subsection (g) or (h) of this section, the amount or amounts required\nby said subsections to be added to federal adjusted gross income.\n (7) In the case of a taxpayer who is a shareholder of a corporation\norganized under article fifteen or authorized to do business in this\nstate under article fifteen-a of the business corporation law, for the\ntaxpayer's taxable years beginning before nineteen hundred eighty-eight,\nthe amount which is deductible by such corporation under paragraph one,\ntwo or three of subsection (a) of section four hundred four of the\ninternal revenue code for its taxable year ending in or with such\ntaxpayer's taxable year for contributions paid on behalf of such\ntaxpayer minus the lesser of fifteen thousand dollars or fifteen percent\nof the earned income derived by such taxpayer from such corporation\nduring such taxpayer's taxable year. In the case of a taxpayer on whose\nbehalf contributions are paid under more than one plan to which this\nparagraph applies or under a plan, contributions to which on his behalf\nare subject to the limitations provided in section four hundred four (e)\nof the internal revenue code, this paragraph shall apply with respect to\nthe aggregate of the contributions paid on his behalf under all such\nplans.\n (8) for taxable years beginning after December thirty-first, two\nthousand two, in the case of qualified property described in paragraph\ntwo of subsection k of section 168 of the internal revenue code, other\nthan qualified resurgence zone property described in subsection (m) of\nthis section, and other than qualified New York Liberty Zone property\ndescribed in paragraph two of subsection b of section 1400L of the\ninternal revenue code (without regard to clause (i) of subparagraph (C)\nof such paragraph), which was placed in service on or after June first,\ntwo thousand three, the amount allowable as a deduction under section\n167 of the internal revenue code.\n (10) The amount required to be added to federal adjusted gross income\npursuant to subsection (i) of this section.\n (15) In those instances where a credit for the special additional\nmortgage recording tax is allowed under paragraph one of subsection (f)\nor paragraph one of subsection (i) of section six hundred six of this\narticle, the amount allowed as an exclusion or deduction for the special\nadditional mortgage recording taxes imposed by subdivision one-a of\nsection two hundred fifty-three of this chapter in determining federal\nadjusted gross income.\n (16) Unless the credit allowed pursuant to subsection (f) of section\nsix hundred six of this article is reflected in the computation of the\ngain or loss so as to result in an increase in such gain or decrease in\nsuch loss, for federal income tax purposes, from the sale or other\ndisposition of the property with respect to which the special additional\nmortgage recording tax imposed pursuant to subdivision one-a of section\ntwo hundred fifty-three of this chapter was paid, the amount of the\nspecial additional mortgage recording tax imposed by subdivision one-a\nof section two hundred fifty-three of this chapter which was paid and\nwhich is reflected in the computation of the basis of the property so as\nto result in a decrease in such gain or increase in such loss for\nfederal income tax purposes from the sale or other disposition of the\nproperty with respect to which such tax was paid.\n (17) The amount required to be added to federal adjusted gross income\npursuant to subsection (r) of this section.\n (18) In the case of a shareholder of an S corporation\n (A) where the election provided for in subsection (a) of section six\nhundred sixty is in effect with respect to such corporation, an amount\nequal to his pro rata share of the corporation's reductions for taxes\ndescribed in paragraphs two and three of subsection (f) of section\nthirteen hundred sixty-six of the internal revenue code, and\n (B) in the case of a New York S termination year, subparagraph (A) of\nthis paragraph shall apply to the amount of reductions for taxes\ndetermined under subsection (s) of this section.\n (19) In the case of a shareholder of an S corporation\n (A) where the election provided for in subsection (a) of section six\nhundred sixty has not been made with respect to such corporation, any\nitem of loss or deduction of the corporation included in federal gross\nincome pursuant to section thirteen hundred sixty-six of the internal\nrevenue code, and\n (B) in the case of a New York S termination year, subparagraph (A) of\nthis paragraph shall apply to the amounts of loss or deduction\ndetermined under subsection (s) of this section.\n (20) S corporation distributions to the extent not included in federal\ngross income for the taxable year because of the application of section\nthirteen hundred sixty-eight, subsection (e) of section thirteen hundred\nseventy-one or subsection (c) of section thirteen hundred seventy-nine\nof the internal revenue code which represent income not previously\nsubject to tax under this article because the election provided for in\nsubsection (a) of section six hundred sixty had not been made. Any such\ndistribution treated in the manner described in paragraph two of\nsubsection (b) of section thirteen hundred sixty-eight of the internal\nrevenue code for federal income tax purposes shall be treated as\nordinary income for purposes of this article.\n (21) In relation to the disposition of stock or indebtedness of a\ncorporation which elected under subchapter s of chapter one of the\ninternal revenue code for any taxable year of such corporation\nbeginning, in the case of a corporation taxable under article nine-A of\nthis chapter, after December thirty-first, nineteen hundred eighty, the\namount required to be added to federal adjusted gross income pursuant to\nsubsection (n) of this section.\n (22) The amounts required to be added to federal adjusted gross income\npursuant to subsection (q) of this section.\n (23) For taxable years beginning after December thirty-first, nineteen\nhundred eighty-one, except with respect to property which is a qualified\nmass commuting vehicle described in subparagraph (D) of paragraph eight\nof subsection (f) of section one hundred sixty-eight of the internal\nrevenue code (relating to qualified mass commuting vehicles), any amount\nwhich the taxpayer claimed as a deduction in computing its federal\nadjusted gross income solely as a result of an election made pursuant to\nthe provisions of such paragraph eight as it was in effect for\nagreements entered into prior to January first, nineteen hundred\neighty-four.\n (24) For taxable years beginning after December thirty-first, nineteen\nhundred eighty-one, except with respect to property which is a qualified\nmass commuting vehicle described in subparagraph (D) of paragraph eight\nof subsection (f) of section one hundred sixty-eight of the internal\nrevenue code (relating to qualified mass commuting vehicles), any amount\nwhich the taxpayer would have been required to include in the\ncomputation of its federal adjusted gross income had it not made the\nelection permitted pursuant to such paragraph eight as it was in effect\nfor agreements entered into prior to January first, nineteen hundred\neighty-four.\n (25) In the case of property placed in service in taxable years\nbeginning before nineteen hundred ninety-four, for taxable years\nbeginning after December thirty-first, nineteen hundred eighty-one,\nexcept with respect to property subject to the provisions of section two\nhundred eighty-F of the internal revenue code and property subject to\nthe provisions of section one hundred sixty-eight of the internal\nrevenue code which is placed in service in this state in taxable years\nbeginning after December thirty-first, nineteen hundred eighty-four, the\namount allowable as a deduction determined under section one hundred\nsixty-eight of the internal revenue code.\n * (26) The amount of member or employee contributions to a retirement\nsystem or pension fund picked up or paid by the employer pursuant to\nsubdivision f of section five hundred seventeen or subdivision d of\nsection six hundred thirteen of the retirement and social security law\nor section 13-225.1, 13-327.1, 13-125.1, 13-125.2 or 13-521.1 of the\nadministrative code of the city of New York or subdivision nineteen of\nsection twenty-five hundred seventy-five of the education law.\n * NB Effective until ch 525/2011 § 3 takes effect\n * (26) The amount of member or employee contributions to a retirement\nsystem or pension fund picked up or paid by the employer pursuant to\nsubdivision f of section five hundred seventeen, subdivision d of\nsection six hundred thirteen or section twelve hundred four-a of the\nretirement and social security law or section 13-225.1, 13-327.1,\n13-125.1, 13-125.2 or 13-521.1 of the administrative code of the city of\nNew York or subdivision nineteen of section twenty-five hundred\nseventy-five of the education law.\n * NB See ch 525/2011 § 7 for effectiveness\n * (26) The amount of member or employee contributions to a retirement\nsystem or pension fund picked up or paid by the employer pursuant to\nsubdivision f of section five hundred seventeen or subdivision d of\nsection six hundred thirteen of the retirement and social security law\nor section 13-225.1, 13-327.1 or 13-125.1 of the administrative code of\nthe city of New York.\n * NB Effective upon the expiration of ch 525/2011 § 3\n (26-a) The amount of member or employee contributions to a retirement\nsystem or pension fund picked up or paid by the employer for members of\nthe Manhattan and Bronx surface transportation authority pension plan\nand treated as employer contributions in determining income tax\ntreatment under section 414(h) of the Internal Revenue Code.\n (27) Upon the disposition of property to which paragraph twenty-six of\nsubsection (c) of this section applies, the amount, if any, by which the\naggregate of the modifications described in such paragraph twenty-six\nattributable to such property exceeds the aggregate of the modifications\ndescribed in paragraph twenty-five of this subsection attributable to\nsuch property.\n (29) When gain from the sale or other disposition of property is\nincluded in federal gross income, the amount of reduction in the basis\nof such property attributable to credit for solar and wind energy\nsystems pursuant to paragraph nine of subsection (g) of section six\nhundred six; but for taxable years beginning before nineteen hundred\neighty-seven, if such gain affects the determination of a net capital\ngain for federal income tax purposes, forty percent of such amount.\n (31) The amount deducted or deferred from an employee's salary under a\nflexible benefits program established pursuant to section twenty-three\nof the general municipal law or section one thousand two hundred ten-a\nof the public authorities law.\n (32) The amount by which an employee's salary is reduced pursuant to\nthe provisions of subdivision b of section 12-126.1 and subdivision b of\nsection 12-126.2 of the administrative code of the city of New York.\n (33) Real property taxes paid on qualified agricultural property and\ndeducted in determining federal adjusted gross income, to the extent of\nthe amount of the agricultural property tax credit allowed under\nsubsection (n) or (i) of section six hundred six of this article.\n (34) (A) Excess distributions received during the taxable year by a\ndistributee of a family tuition account established under the New York\nstate college choice tuition savings program provided for under article\nfourteen-A of the education law, to the extent such excess distributions\nare deemed attributable to deductible contributions under paragraph\nthirty-two of subsection (c) of this section.\n (B) (i) The term "excess distributions" means distributions which are\nnot\n (I) qualified withdrawals within the meaning of subdivision nine of\nsection six hundred ninety-five-b of the education law;\n (II) withdrawals made as a result of the death or disability of the\ndesignated beneficiary within the meaning of subdivision ten of section\nsix hundred ninety-five-b of such law; or\n (III) transfers described in paragraph b of subdivision six of section\nsix hundred ninety-five-e of such law.\n (ii) Excess distributions shall be deemed attributable to deductible\ncontributions to the extent the amount of any such excess distribution,\nwhen added to all previous excess distributions from the account,\nexceeds the aggregate of all nondeductible contributions to the account.\n (35) The amounts required to be added to federal adjusted gross income\npursuant to subsection (v) of this section.\n (36) In the case of a taxpayer who is not an eligible farmer as\ndefined in subsection (n) of section six hundred six of this article,\nthe amount of any deduction claimed pursuant to section 179 of the\ninternal revenue code with respect to a sport utility vehicle which is\nnot a passenger automobile as defined in paragraph 5 of subsection (d)\nof section 280F of the internal revenue code.\n (37) Premiums paid for environmental remediation insurance, as defined\nin section twenty-three of this chapter, and deducted in determining\nfederal taxable income, to the extent of the amount of the environmental\nremediation insurance credit allowed under such section twenty-three and\nsubsection (ff) of section six hundred six of this article.\n (38) The amount of any deduction allowed pursuant to section one\nhundred ninety-nine of the internal revenue code.\n (39) The amount of any federal deduction for taxes imposed under\narticle twenty-three of this chapter.\n (39-a) The amount of any federal deduction for the excise tax on\ntelecommunication services to the extent such taxes are used as the\nbasis of the calculation of tax-free NY area excise tax on\ntelecommunication services credit allowed under subsection (yy) of\nsection six hundred six of this article.\n * (40) in the case of a beneficiary of a trust that, in any tax year\nafter its creation including its first tax year, was not subject to tax\npursuant to subparagraph (D) of paragraph three of subsection (b) of\nsection six hundred five of this article (except for an incomplete gift\nnon-grantor trust, as defined by paragraph forty-one of this\nsubsection), the amount described in the first sentence of section six\nhundred sixty-seven of the internal revenue code for the tax year to the\nextent not already included in federal gross income for the tax year,\nexcept that, in computing the amount to be added under this paragraph,\nsuch beneficiary shall disregard (i) subsection (c) of section six\nhundred sixty-five of the internal revenue code; (ii) the income earned\nby such trust in any tax year in which the trust was subject to tax\nunder this article; and (iii) the income earned by such trust in a\ntaxable year prior to when the beneficiary first became a resident of\nthe state or in any taxable year starting before January first, two\nthousand fourteen. Except as otherwise provided in this paragraph, all\nof the provisions of the internal revenue code that are relevant to\ncomputing the amount described in the first sentence of subsection (a)\nof section six hundred sixty-seven of the internal revenue code shall\napply to the provisions of this paragraph with the same force and effect\nas if the language of those internal revenue code provisions had been\nincorporated in full into this paragraph, except to the extent that any\nsuch provision is either inconsistent with or not relevant to this\nparagraph.\n * NB There are 2 par (40)'s\n * (40) The amount of any federal deduction for real property taxes to\nthe extent such taxes are used as the basis of the calculation of the\nreal property tax credit for manufacturers allowed under subsection (xx)\nof section six hundred six of this article.\n * NB There are 2 par (40)'s\n (41) In the case of a taxpayer who transferred property to an\nincomplete gift non-grantor trust, the income of the trust, less any\ndeductions of the trust, to the extent such income and deductions of\nsuch trust would be taken into account in computing the taxpayer's\nfederal taxable income if such trust in its entirety were treated as a\ngrantor trust for federal tax purposes. For purposes of this paragraph,\nan "incomplete gift non-grantor trust" means a resident trust that meets\nthe following conditions: (i) the trust does not qualify as a grantor\ntrust under section six hundred seventy-one through six hundred\nseventy-nine of the internal revenue code, and (2) the grantor's\ntransfer of assets to the trust is treated as an incomplete gift under\nsection twenty-five hundred eleven of the internal revenue code, and the\nregulations thereunder.\n (42) The amount of any gain excluded from federal gross income for the\ntaxable year by subparagraph (A) of paragraph (1) of subsection (a) of\nsection 1400Z-2 of the internal revenue code.\n (43) Pass-through entity tax deduction addback. (A) In the case of a\ntaxpayer who claims a credit under subsection (kkk) of section six\nhundred six of this article, an amount equal to the amount of such\ncredit; and (B) in the case of a taxpayer who claims a credit under\nsubsection (b) of section six hundred twenty of this article, an amount\nequal to the amount of such credit as calculated without regard to the\nlimitation under subsection (c) of section six hundred twenty of this\narticle.\n (43-a) City pass-through entity tax deduction addback. In the case of\na taxpayer who claims a credit allowed under subsection (g) of section\nthirteen hundred ten of this chapter, an amount equal to the amount of\nsuch credit.\n (c) Modifications reducing federal adjusted gross income. There shall\nbe subtracted from federal adjusted gross income:\n (1) Interest income on obligations of the United States and its\npossessions to the extent includible in gross income for federal income\ntax purposes; such interest income shall include the amount received as\ndividends from a regulated investment company, as defined in section\neight hundred fifty-one of the internal revenue code, which has been\ndesignated as the amount of such interest income in a written notice to\nshareholders not later than sixty days following the close of its\ntaxable year; provided that, at the close of each quarter of the taxable\nyear of such regulated investment company, at least fifty percent of the\nvalue of its total assets, as defined in subsection (c) of section eight\nhundred fifty-one of the internal revenue code, consists of obligations\nof the United States and its possessions. The aggregate amount so\ndesignated by the regulated investment company for its taxable year\nshall not exceed the amount determined by multiplying the total\ndistributions paid by such regulated investment company to its\nshareholders with respect to that taxable year (attributable to income\nearned in that year), including any such distributions paid after the\nclose of the taxable year, as described in section eight hundred\nfifty-five of the internal revenue code, by the ratio that the interest\nincome received in that taxable year on obligations of the United States\nand its possessions, after reduction for the deductions and expenses\ndirectly or indirectly attributable thereto, bears to the investment\ncompany taxable income of such regulated investment company for such\ntaxable year, determined without regard to subparagraph (D) of paragraph\ntwo of subsection (b) of section eight hundred fifty-two of the internal\nrevenue code;\n (2) Interest or dividend income on obligations or securities of any\nauthority, commission or instrumentality of the United States to the\nextent includible in gross income for federal income tax purposes but\nexempt from state income taxes under the laws of the United States;\n (3) (i) Pensions to officers and employees of this state, its\nsubdivisions and agencies, to the extent includible in gross income for\nfederal income tax purposes;\n (ii) Pensions to officers and employees of the United States of\nAmerica, any territory or possession or political subdivision of such\nterritory or possession, the District of Columbia, or any agency or\ninstrumentality of any one of the foregoing, to the extent includible in\ngross income for federal income tax purposes;\n (3-a) Pensions and annuities received by an individual who has\nattained the age of fifty-nine and one-half, not otherwise excluded\npursuant to paragraph three of this subsection, to the extent includible\nin gross income for federal income tax purposes, but not in excess of\ntwenty thousand dollars, which are periodic payments attributable to\npersonal services performed by such individual prior to his retirement\nfrom employment, which arise (i) from an employer-employee relationship\nor (ii) from contributions to a retirement plan which are deductible for\nfederal income tax purposes. However, the term "pensions and annuities"\nshall also include distributions received by an individual who has\nattained the age of fifty-nine and one-half from an individual\nretirement account or an individual retirement annuity, as defined in\nsection four hundred eight of the internal revenue code, and\ndistributions received by an individual who has attained the age of\nfifty-nine and one-half from self-employed individual and owner-employee\nretirement plans which qualify under section four hundred one of the\ninternal revenue code, whether or not the payments are periodic in\nnature. Nevertheless, the term "pensions and annuities" shall not\ninclude any lump sum distribution, as defined in subparagraph (D) of\nparagraph four of subsection (e) of section four hundred two of the\ninternal revenue code and taxed under section six hundred three of this\narticle. Where a husband and wife file a joint state personal income tax\nreturn, the modification provided for in this paragraph shall be\ncomputed as if they were filing separate state personal income tax\nreturns. Where a payment would otherwise come within the meaning of the\nterm "pensions and annuities" as set forth in this paragraph, except\nthat such individual is deceased, such payment shall, nevertheless, be\ntreated as a pension or annuity for purposes of this paragraph if such\npayment is received by such individual's beneficiary.\n (3-b) (i) Disability income included in federal gross income, to the\nextent that such disability income would have been excluded from federal\ngross income pursuant to the provisions of subsection (d) of section one\nhundred five of the internal revenue code of nineteen hundred fifty-four\nhad such provisions continued in effect for taxable years commencing\nafter December thirty-first, nineteen hundred eighty-three as they were\nin effect immediately prior to the repeal of such subsection.\nNotwithstanding the foregoing, the sum of disability income excluded\npursuant to this paragraph, and pension and annuity income excluded\npursuant to paragraph three-a of this subsection, shall not exceed\ntwenty thousand dollars.\n (ii) Notwithstanding subsection (f) of this section, if a husband and\nwife determine their federal income tax on a joint return but are\nrequired to determine their New York income taxes separately, the\namounts of exclusion allowed under subparagraph (i) of this paragraph\nshall be determined in the same joint manner as such amounts would have\nbeen determined under the provisions of paragraph five of subsection (d)\nof section one hundred five of the internal revenue code as such\nprovisions were in effect immediately prior to the repeal of such\nsubsection, but shall be attributed for New York income tax purposes to\nthe spouse who would have been required to report any such amount as\nincome if the spouses had determined their federal income taxes\nseparately.\n (iii) Where a husband and wife file a joint state income tax return,\nthe twenty thousand dollar limitation provided in subparagraph (i) of\nthis paragraph shall be applied as if they were filing separate state\nincome tax returns.\n (3-c) Social security benefits to the extent includible in gross\nincome for federal income tax purposes pursuant to section eighty-six of\nthe internal revenue code.\n (4) The portion of any gain, from the sale or other disposition of\nproperty having a higher adjusted basis for New York income tax purposes\nthan for federal income tax purposes on the last day of the last taxable\nyear for which article sixteen imposes tax, as such article was in\neffect on such date, that does not exceed such difference in basis.\n (5) The amount necessary to prevent the taxation under this article of\nany annuity or other amount of income or gain which was properly\nincluded in income or gain and was taxable under article sixteen (as\nsuch article was in effect on December thirtieth, nineteen hundred\nsixty) to the taxpayer, or to a decedent by reason of whose death the\ntaxpayer acquired the right to receive the income or gain, or to a trust\nor estate from which the taxpayer received the income or gain;\n (6) Interest or dividend income on obligations or securities to the\nextent exempt from income tax under the laws of this state authorizing\nthe issuance of such obligations or securities but includible in gross\nincome for federal income tax purposes; and\n (7) The amount of any refund or credit for overpayment of income taxes\nimposed by this state, or any other taxing jurisdiction, and any taxes\nimposed by article twenty-three of this chapter, to the extent properly\nincluded in gross income for federal income tax purposes.\n (8) Compensation received for active service in the armed forces of\nthe United States on or after October first, nineteen hundred sixty-one,\nand prior to September first, nineteen hundred sixty-two; provided,\nhowever, that the amount of such compensation to be deducted shall not\nexceed one hundred dollars for each month of the taxable year,\nsubsequent to September, nineteen hundred sixty-one, during any part of\nwhich month the taxpayer was engaged in such service. For the purposes\nof this paragraph, the words "active service in the armed forces of the\nUnited States" shall mean active duty (other than for training) in the\narmy, navy (including the marine corps), air force or coast guard of the\nUnited States as defined in title ten of the United States code.\n (8-a) Compensation and bonuses received for active service in the\narmed forces of the United States while a prisoner of war or missing in\naction during the hostilities in Vietnam, to the extent includable in\ngross income for federal income tax purposes.\n (8-b) Income received by an individual who is a member of the New York\nstate organized militia, as such term is defined in subdivision one of\nsection two of the military law, as compensation for performing active\nservice within the state pursuant to either (i) state active duty orders\nissued in accordance with subdivision one of section six of the military\nlaw or (ii) active service of the United States pursuant to federal\nactive duty orders, for service other than training, issued in\naccordance with title 10 of the United States code.\n (8-c) Compensation received for active service in the armed services\nof the United States in an area designated by the president of the\nUnited States by executive order as a "combat zone" at any time during\nthe period designated by the president by executive order as the period\nof combatant activities in such zone to the extent includable in gross\nincome for federal income tax purposes.\n (9) Interest on indebtedness incurred or continued to purchase or\ncarry obligations or securities the interest on which is subject to tax\nunder this article but exempt from federal income tax, to the extent\nthat such interest on indebtedness is not deductible in determining\nfederal adjusted gross income and is attributable to a trade or business\ncarried on by the taxpayer.\n (10) Ordinary and necessary expenses paid or incurred during the\ntaxable year for (i) the production or collection of income which is\nsubject to tax under this article but exempt from federal income tax, or\n(ii) the management, conservation or maintenance of property held for\nthe production of such income, and the amortizable bond premium for the\ntaxable year on any bond the interest on which is subject to tax under\nthis article but exempt from federal income tax, to the extent that such\nexpenses and premiums are not deductible in determining federal adjusted\ngross income and are attributable to a trade or business carried on by\nthe taxpayer.\n (11) In the case of a taxpayer who has exercised the election\npermitted by subsection (g) or (h) of this section, the amount or\namounts required by said subsections to be subtracted from federal\nadjusted gross income.\n (12) The amount necessary to prevent the taxation of amounts properly\nincluded in New York adjusted gross income in prior taxable years in\naccordance with paragraph seven of subsection (b).\n (13) The amount required to be subtracted from federal adjusted gross\nincome pursuant to subsection (i) of this section.\n (14) The amount that may be subtracted from federal adjusted gross\nincome pursuant to subsection (j) of this section.\n (15) That portion of wages and salaries paid or incurred for the\ntaxable year for which a deduction is not allowed pursuant to the\nprovisions of section two hundred eighty-C of the internal revenue code.\n (16) for taxable years beginning after December thirty-first, two\nthousand two, the amount deductible pursuant to subsection (k) of this\nsection.\n (20) The amounts which may be subtracted from federal adjusted gross\nincome pursuant to subsection (o) of this section.\n (21) In relation to the disposition of stock or indebtedness of a\ncorporation which elected under subchapter s of chapter one of the\ninternal revenue code for any taxable year of such corporation\nbeginning, in the case of a corporation taxable under article nine-A of\nthis chapter, after December thirty-first, nineteen hundred eighty, the\namounts required to be subtracted from federal adjusted gross income\npursuant to subsection (n) of this section.\n (22) In the case of a shareholder of an S corporation (A) where the\nelection provided for in subsection (a) of section six hundred sixty has\nnot been made with respect to such corporation, any item of income of\nthe corporation included in federal gross income pursuant to section\nthirteen hundred sixty-six of the internal revenue code, and\n (B) in the case of a New York S termination year, subparagraph (A) of\nthis paragraph shall apply to the amounts of income determined under\nsubsection (s) of this section.\n (23) The amounts which may be subtracted from federal adjusted gross\nincome pursuant to subsection (p) of this section.\n (24) For taxable years beginning after December thirty-first, nineteen\nhundred eighty-one, except with respect to property which is a qualified\nmass commuting vehicle described in subparagraph (D) of paragraph eight\nof subsection (f) of section one hundred sixty-eight of the internal\nrevenue code (relating to qualified mass commuting vehicles), any amount\nwhich is included in the taxpayer's federal adjusted gross income solely\nas a result of an election made pursuant to the provisions of such\nparagraph eight as it was in effect for agreements entered into prior to\nJanuary first, nineteen hundred eighty-four.\n (25) For taxable years beginning after December thirty-first, nineteen\nhundred eighty-one, except with respect to property which is a qualified\nmass commuting vehicle described in subparagraph (D) of paragraph eight\nof subsection (f) of section one hundred sixty-eight of the internal\nrevenue code (relating to qualified mass commuting vehicles), any amount\nwhich the taxpayer could have excluded from federal adjusted gross\nincome had it not made the election provided for in such paragraph eight\nas it was in effect for agreements entered into prior to January first,\nnineteen hundred eighty-four.\n (26) In the case of property placed in service in taxable years\nbeginning before nineteen hundred ninety-four, for taxable years\nbeginning after December thirty-first, nineteen hundred eighty-one,\nexcept with respect to property subject to the provisions of section two\nhundred eighty-F of the internal revenue code and property subject to\nthe provisions of section one hundred sixty-eight of the internal\nrevenue code which is placed in service in this state in taxable years\nbeginning after December thirty-first, nineteen hundred eighty-four, an\namount with respect to property which is subject to the provisions of\nsection one hundred sixty-eight of the internal revenue code equal to\nthe amount allowable as the depreciation deduction under section one\nhundred sixty-seven of the internal revenue code as such section would\nhave applied to property placed in service on December thirty-first,\nnineteen hundred eighty.\n (28) Upon the disposition of property to which paragraph twenty-six of\nthis subsection applies, the amount, if any, by which the aggregate of\nthe modifications described in paragraph twenty-five of subsection (b)\nof this section attributable to such property exceeds the aggregate of\nthe modifications described in paragraph twenty-six of this subsection\nattributable to such property.\n (29) Deduction for two-earner married couples. (A) For the taxable\nyear beginning in nineteen hundred eighty-seven, in the case of a\nhusband and wife who each have qualified earned income and who file a\njoint return under subsection (b) of section six hundred fifty-one for\nthe taxable year, an amount equal to ten percent of the lesser of:\n (i) thirty thousand dollars or\n (ii) the qualified earned income of the spouse with the lower\nqualified earned income for such taxable year.\n (B) For purposes of this paragraph, eligibility for the deduction\nprovided for herein and the term qualified earned income shall be\ndetermined in the manner such eligibility and such qualified earned\nincome would have been determined pursuant to the provisions of section\ntwo hundred twenty-one of the internal revenue code of nineteen hundred\nfifty-four had such provisions continued in effect for taxable years\ncommencing after December thirty-first, nineteen hundred eighty-six as\nthey were in effect immediately prior to the repeal of such section.\nProvided, however, the determination of such qualified earned income\nshall be made with regard only to the items therein included in New York\nadjusted gross income, with such adjusted gross income determined\nwithout regard to this paragraph, and only with regard to the deductions\nand exclusions which are of the type properly allowable to or chargeable\nagainst such qualified earned income in such taxable year.\n (30) The amount received by any person as an accelerated payment or\npayments of part or all of the death benefit or special surrender value\nunder a life insurance policy as a result of any of the diagnoses\nspecified in subparagraph (A) or (B) of paragraph one of subsection (a)\nof section one thousand one hundred thirteen of the insurance law, and\nthe amount received by any person as a viatical settlement pursuant to\nthe provisions of article seventy-eight of the insurance law, to the\nextent includible in gross income for federal income tax purposes.\n (32) Contributions made during the taxable year by an account owner to\none or more family tuition accounts established under the New York state\ncollege choice tuition savings program provided for under article\nfourteen-A of the education law, to the extent not deductible or\neligible for credit for federal income tax purposes, provided, however,\nthe exclusion provided for in this paragraph shall not exceed five\nthousand dollars for an individual or head of household, and for married\ncouples who file joint tax returns, shall not exceed ten thousand\ndollars; provided, further, that such exclusion shall be available only\nto the account owner and not to any other person.\n (33) Distributions from a family tuition account established under the\nNew York state college choice tuition savings program provided for under\narticle fourteen-A of the education law, to the extent includible in\ngross income for federal income tax purposes.\n * (34) The portion of the fees paid during the taxable year by a\ntaxpayer who is a resident of a continuing care retirement community,\nissued a certificate of authority pursuant to article forty-six of the\npublic health law, attributable to the cost of providing long term care\nbenefits pursuant to a continuing care contract. The portion of the fees\nso attributable shall be determined in accordance with regulations\npromulgated by the superintendent of financial services. The deduction\nmay not exceed the limitation that would be applicable to the taxpayer\nfor the taxable year, with respect to eligible long term care premiums,\ndetermined under paragraph (10) of subsection (d) of section 213 of the\ninternal revenue code.\n * NB There are 2 ¶(34)'s\n * (34) The amounts which may be subtracted from federal adjusted gross\nincome pursuant to subsection (u) of this section.\n * NB There are 2 ¶(34)'s\n (35) Distributions, to the extent includible in gross income for\nfederal income tax purposes, made to the taxpayer because of his or her\nstatus as a victim of Nazi persecution, as defined in P.L. 103-286, or\nas a spouse or a descendant in need of such victim.\n (36) Items of income, to the extent includible in gross income for\nfederal income tax purposes, attributable to, derived from or in any way\nrelated to assets stolen from, hidden from or otherwise lost to a victim\nof Nazi persecution, as defined in P.L. 103-286, immediately prior to,\nduring and immediately after World War II, including, but not limited\nto, interest on the proceeds receivable as insurance under policies\nissued to a victim of Nazi persecution, as defined in P.L. 103-286, by\nEuropean insurance companies immediately prior to and during World War\nII. Provided, however, this subtraction from federal adjusted income\ndoes not apply to assets acquired with such assets or with the proceeds\nfrom the sale of such assets. Provided, further, this paragraph shall\nonly apply to a taxpayer who was the first recipient of such assets\nafter their recovery and who is a victim of Nazi persecution, as defined\nin P.L. 103-286, or a spouse or a descendant of such victim.\n (37) In the case of a taxpayer subject to the modification provided by\nparagraph thirty-six of subsection (b) of this section, the amount\nrequired to be recaptured pursuant to subsection (d) of section 179 of\nthe internal revenue code with respect to property upon which such\nmodification was based.\n (38) For taxable years beginning before January first, two thousand\ntwenty-five, an amount of up to ten thousand dollars if a taxpayer,\nwhile living, donates one or more of the taxpayer's human organs to\nanother human being for human organ transplantation. For purposes of\nthis paragraph, "human organ" means all or part of a liver, pancreas,\nkidney, intestine, lung, or bone marrow. A subtract modification allowed\nunder this paragraph shall be claimed in the taxable year in which the\nhuman organ transplantation occurs. Provided, however, that this\ndeduction shall not apply to any donation for which the taxpayer has\nreceived benefits under section forty-three hundred seventy-one of the\npublic health law.\n (A) A taxpayer shall claim the subtract modification allowed under\nthis paragraph only once and such subtract modification shall be claimed\nfor only the following unreimbursed expenses which are incurred by the\ntaxpayer and related to the taxpayer's organ donation:\n (i) travel expenses;\n (ii) lodging expenses; and\n (iii) lost wages.\n (B) The subtract modification allowed under this paragraph shall not\nbe claimed by a part-year resident or a non-resident of this state.\n * (39) Any income or gain, to the extent it is included in federal\nadjusted gross income of an individual who is the sole proprietor of a\nqualified entity or a member of a limited liability company, a partner\nin a partnership or a shareholder in a New York subchapter S corporation\nthat is a qualified entity, attributable to the operations of a\nqualified entity at its location in or as part of a New York state\ninnovation hot spot, as provided in section thirty-eight of this\nchapter.\n * NB There are 2 par (39)'s\n * (39) (A) In the case of a taxpayer who is a small business or a\ntaxpayer who is a member, partner, or shareholder of a limited liability\ncompany, partnership, or New York S corporation, respectively, that is a\nsmall business, who or which has business income and/or farm income as\ndefined in the laws of the United States, an amount equal to fifteen\npercent of the net items of income, gain, loss and deduction\nattributable to such business or farm entering into federal adjusted\ngross income, but not less than zero.\n (B) (i) For the purposes of this paragraph, the term small business\nshall mean: (I) a sole proprietor who employs one or more persons during\nthe taxable year and who has net business income or net farm income of\ngreater than zero but less than two hundred fifty thousand dollars;\n (II) a limited liability company, partnership, or New York S\ncorporation that during the taxable year employs one or more persons and\nhas net farm income attributable to a farm business that is greater than\nzero but less than two hundred fifty thousand dollars; or\n (III) a limited liability company, partnership, or New York S\ncorporation that during the taxable year employs one or more persons and\nhas New York gross business income attributable to a non-farm business\nthat is greater than zero but less than one million five hundred\nthousand dollars.\n (ii) For purposes of this paragraph, the term New York gross business\nincome shall mean: (I) in the case of a limited liability company or a\npartnership, New York source gross income as defined in subparagraph (B)\nof paragraph three of subsection (c) of section six hundred fifty-eight\nof this article; and (II) in the case of a New York S corporation, New\nYork receipts included in the numerator of the apportionment factor\ndetermined under section two hundred ten-A of this chapter for the\ntaxable year.\n (C) To qualify for this modification in relation to a non-farm small\nbusiness that is a limited liability company, partnership, or New York S\ncorporation, the taxpayer's income attributable to the net business\nincome from its ownership interests in non-farm limited liability\ncompanies, partnerships, or New York S corporations must be less than\ntwo hundred fifty thousand dollars.\n * NB There are 2 par (39)'s\n (40) Any wages received by an individual as an employee of a business\nlocated within a tax-free NY area during the first five years of such\nbusiness's ten year taxable period specified in subdivision (a) of\nsection thirty-nine of this chapter, to the extent included in federal\nadjusted gross income and allowed under section thirty-nine of this\nchapter. During the second five years of such business's ten year\ntaxable period, the first two hundred thousand dollars of such wages in\nthe case of a taxpayer filing as a single individual, the first two\nhundred fifty thousand dollars of such wages in the case of a taxpayer\nfiling as a head of household, and three hundred thousand dollars of\nsuch wages in the case of a taxpayer filing a joint return, to the\nextent included in federal adjusted gross income and allowed under\nsection thirty-nine of this chapter.\n (41) The amount of any award paid to a volunteer firefighter or\nvolunteer ambulance worker from a length of service defined contribution\nplan or defined benefit plan as provided for in articles eleven-A,\neleven-AA, eleven-AAA and eleven-AAAA of the general municipal law, to\nthe extent that such award is includable in gross income for federal\nincome tax purposes; provided, however, that such award is not\ndistributed in the form of a lump sum distribution, as defined in\nsubparagraph (D) of paragraph four of subsection (e) of section four\nhundred two of the internal revenue code and taxed under section six\nhundred three of this article; and provided, further, that such award is\nnot distributed to a taxpayer who has not attained the age of fifty-nine\nand one-half years.\n * (42) Distributions from an eligible retirement plan, as such term is\ndefined in subparagraph (B) of paragraph (8) of subsection (c) of\nsection four hundred two of the Internal Revenue Code, made on or after\nApril first, two thousand seventeen and before April second, two\nthousand twenty-two. In order for such distributions to be eligible to\nbe subtracted from federal adjusted gross income under this paragraph,\nthe following conditions must be satisfied: (A) the taxpayer's primary\nresidence was located in the area affected by the disaster declared\npursuant to executive order one hundred sixty-five of two thousand\nseventeen, declaring a state of emergency, dated May third, two thousand\nseventeen; (B) such primary residence must have incurred damage due to\ncoastal flooding, widespread erosion and water damage caused by such\ndisaster; (C) such damage must qualify for the casualty deduction under\nsection one hundred sixty-five of the internal revenue code (determined\nwithout regard to whether the loss exceeds ten percent of adjusted gross\nincome); and (D) the taxpayer during the taxable year must use the\nentire amount of the distributions to pay for repairs needed as a result\nof such damage. Provided, however, that the amount of the distributions\nthat otherwise may be subtracted under this paragraph must be reduced by\nany deduction claimed by the taxpayer for such damage pursuant to\nsection one hundred sixty-five of the internal revenue code. Provided,\nfurther, that the taxpayer shall not claim a subtraction modification\nunder paragraph three-a of this subsection for such distribution.\n * NB There are 3 par (42)'s\n * (42) Insurance payments received by an eligible volunteer\nfirefighter for the cancer disability benefits in section two hundred\nfive-cc of the general municipal law to the extent includable in gross\nincome for federal income tax purposes.\n * NB There are 3 par (42)'s\n * (42) (A) The amount of any student loan that is discharged, whether\nin whole or in part, if such discharge was:\n (i) pursuant to subsection (a) or (d) of section 437 of the Higher\nEducation Act of 1965 or the parallel benefit provided pursuant to part\nD of title IV of such act;\n (ii) pursuant to section 464(c)(1)(F) of the Higher Education Act of\n1965; or\n (iii) otherwise discharged on account of the death or total and\npermanent disability of the person on whose behalf the indebtedness was\nincurred.\n (B) For the purposes of this paragraph, "student loan" means:\n (i) a student loan as defined in section 108(f)(2) of the Internal\nRevenue Code of 1986; or\n (ii) a private education loan, as defined in section 140(7) of the\nConsumer Credit Protection Act.\n * NB There are 3 par (42)'s\n (43) The amount of any gain added back to federal adjusted gross\nincome in a previous taxable year pursuant to paragraph forty-two of\nsubdivision (b) of this section that is included in federal gross income\nfor the taxable year.\n (44) Any death benefit, to the extent includible in federal adjusted\ngross income, paid to the taxpayer in a lump sum pursuant to the\nCOVID-19 family death benefit program established by the metropolitan\ntransportation authority in two thousand twenty; provided, however, this\nsubtraction shall not exceed five hundred thousand dollars and shall not\napply to any benefit payable under such program other than a lump sum\ndeath benefit.\n * (45) (A) The amount of an item that was included in New York\nadjusted gross income for a prior taxable year (or years) because it\nappeared that the taxpayer had an unrestricted right to such item but\nwas repaid by the taxpayer during the taxable year because it was\nestablished after the close of such prior taxable year (or years) that\nthe taxpayer did not have an unrestricted right to such item or to a\nportion of such item.\n (B) No subtraction shall be allowed under this paragraph if the\nrepayment amount is included in the deduction allowed under section six\nhundred fifteen or any other provision of this article, or if the\nrepayment amount is the basis for a credit claimed by the taxpayer\npursuant to section six hundred sixty-two of this article.\n * NB There are 2 par (45)'s\n * (45) Grants received pursuant to the COVID-19 pandemic small\nbusiness recovery grant program, established in section 16-ff of the New\nYork state urban development corporation act, to the extent includable\nin federal adjusted gross income.\n * NB There are 2 par (45)'s\n * (46) The amount of any student loan forgiveness award made by the\nstate, including any awards made pursuant to a program established under\narticle fourteen of the education law to the extent included in federal\nadjusted gross income.\n * NB There are 2 par (46)'s\n * (46) The amount of any federal deduction disallowed pursuant to\nsection 280E of the internal revenue code related to the production and\ndistribution of adult-use cannabis products, as defined by article\ntwenty-C of this chapter, not used as the basis for any other tax\ndeduction, exemption, or credit and not otherwise required to be added\nback by subsection (b) of this section in computing New York adjusted\ngross income.\n * NB There are 2 par (46)'s\n (47) For taxable years beginning on or after January first, two\nthousand twenty-three, the amount of any student loan discharged or\nforgiven by the secretary of education pursuant to any federally\nauthorized program, to the extent included in federal adjusted gross\nincome.\n (d) Modification for New York fiduciary adjustment. There shall be\nadded to or subtracted from federal adjusted gross income (as the case\nmay be) the taxpayer's share, as beneficiary of an estate or trust, of\nthe New York fiduciary adjustment determined under section six hundred\nnineteen.\n (e) Modifications of partners and shareholders of S corporations. (1)\nPartners and shareholders of S corporations which are not New York C\ncorporations. The amounts of modifications required to be made under\nthis section by a partner or by a shareholder of an S corporation (other\nthan an S corporation which is a New York C corporation), which relate\nto partnership or S corporation items of income, gain, loss or deduction\nshall be determined under section six hundred seventeen and, in the case\nof a partner of a partnership doing an insurance business as a member of\nthe New York insurance exchange described in section six thousand two\nhundred one of the insurance law, under section six hundred seventeen-a\nof this article.\n (2) Shareholders of S corporations which are New York C corporations.\nIn the case of a shareholder of an S corporation which is a New York C\ncorporation, the modifications under this section which relate to the\ncorporation's items of income, loss and deduction shall not apply,\nexcept for the modifications provided under paragraph nineteen of\nsubsection (b) and paragraph twenty-two of subsection (c) of this\nsection.\n (3) New York S termination year. In the case of a New York S\ntermination year, the amounts of the modifications required under this\nsection which relate to the S corporation's items of income, loss,\ndeduction and reductions for taxes (as described in paragraphs two and\nthree of subsection (f) of section thirteen hundred sixty-six of the\ninternal revenue code) shall be adjusted in the same manner that the S\ncorporation's items are adjusted under subsection (s) of section six\nhundred twelve.\n (f) Husband and wife. If husband and wife determine their federal\nincome tax on a joint return but are required to determine their New\nYork income taxes separately, they shall determine their New York\nadjusted gross incomes separately as if their federal adjusted gross\nincomes had been determined separately.\n (g) Optional modifications. Subject to the conditions provided in\nparagraphs three and four of this subsection, at the election of the\ntaxpayer there shall also be subtracted from federal adjusted gross\nincome either or both of the items set forth in paragraphs one and two\nof this subsection, except that only one of such items shall be\nsubtracted with respect to any one item of property, and except that a\nsubtraction of the item set forth in such paragraph two may not be taken\nwith respect to taxable years commencing on or after January first,\nnineteen hundred eighty-seven.\n (1) Depreciation with respect to any property such as described in\nparagraphs three or four of this subsection, and subject to the\nconditions provided therein, not exceeding twice the depreciation\nallowed with respect to the same property for federal income tax\npurposes. Such modification shall be allowed only upon condition that\nany depreciation or amortization allowed with respect to the same\nproperty in determining federal adjusted gross income shall be added to\nfederal adjusted gross income pursuant to paragraph six of subsection\n(b) of this section. The total of all deductions allowed pursuant to\nthis paragraph in any taxable year or years with respect to any property\ndescribed in paragraph three shall not exceed its cost or other basis\nand, with respect to property described in paragraph four, which is used\nin a business carried on both within and without the state shall not\nexceed its cost or other basis multiplied by a percentage of the excess\nof the taxpayer's business income over its business deductions allocated\nto this state for the first year such depreciation is deducted. Such\npercentage shall be determined by apportionment and allocation under\nregulations of the tax commission.\n (2) Expenditures paid or incurred during the taxable year for the\nconstruction, reconstruction, erection or acquisition of any property\nsuch as described in paragraphs three or four of this subsection, and\nsubject to the conditions provided therein, which is used or to be used\nfor purposes of research and development in the experimental or\nlaboratory sense. Such purposes shall not be deemed to include the\nordinary testing or inspection of materials or products for quality\ncontrol, efficiency surveys, management studies, consumer surveys,\nadvertising, promotions or research in connection with literary,\nhistorical or similar projects. Such modification shall be allowed only\non condition that, with respect to property described in paragraph four,\nwhich is used in a business carried on both within and without the state\nthe deduction shall not exceed the expenditures multiplied by a\npercentage of the excess of the taxpayer's business income over its\nbusiness deductions allocated to this state for the first year such\nexpenditures are deducted. Such percentage shall be determined by\napportionment and allocation under regulations of the tax commission,\nand for the taxable year and all succeeding taxable years, any\ndeductions allowed for federal income tax purposes on account of such\nexpenditures or on account of depreciation of the same property except\nto the extent that its basis may be attributable to factors other than\nsuch expenditures, shall be added to federal adjusted gross income\npursuant to paragraph six of subsection (b) of this section, or in case\na modification is allowable pursuant to this paragraph for only a part\nof such expenditures, on condition that a proportionate part of any such\ndeductions allowed for federal income tax purposes be added to federal\nadjusted gross income. With respect to property which is used or to be\nused for research and development only in part, or during only part of\nits useful life, the modification allowable pursuant to this paragraph\nshall be limited to a proportionate part of the expenditures relating\nthereto. If a modification shall have been allowed pursuant to this\nparagraph for all or part of such expenditures with respect to any\nproperty, and such property is used for purposes other than research and\ndevelopment to a greater extent than originally reported, the taxpayer\nshall report such use in his return for the first taxable year during\nwhich it occurs, and the tax commission may recompute the tax for the\nyear or years for which such deduction was allowed, and may assess any\nadditional tax resulting from such recomputation within the time fixed\nby subsection (c) of section six hundred eighty-three of this article.\n (3) For purposes of this paragraph, such modifications shall be\nallowed only with respect to tangible property which is depreciable\npursuant to section one hundred sixty-seven of the internal revenue\ncode, having a situs in this state and used in the taxpayer's trade or\nbusiness, (A) constructed, reconstructed or erected after December\nthirty-first, nineteen hundred sixty-three, pursuant to a contract which\nwas, on or before December thirty-first, nineteen hundred sixty-seven,\nand at all times thereafter, binding on the taxpayer, or, property, the\nphysical construction, reconstruction or erection of which began on or\nbefore December thirty-first, nineteen hundred sixty-seven or which\nbegan after such date pursuant to an order placed on or before December\nthirty-first, nineteen hundred sixty-seven, and then only with respect\nto that portion of the basis thereof or the expenditures relating\nthereto which is properly attributable to such construction,\nreconstruction or erection after December thirty-first, nineteen hundred\nsixty-three, or (B) acquired after December thirty-first, nineteen\nhundred sixty-three, pursuant to a contract which was, on or before\nDecember thirty-first, nineteen hundred sixty-seven, and at all times\nthereafter, binding on the taxpayer or pursuant to an order placed on or\nbefore December thirty-first, nineteen hundred sixty-seven, by purchase\nas defined in section one hundred seventy-nine (d) of the internal\nrevenue code, if the original use of such property commenced with the\ntaxpayer, commenced in this state and commenced after December\nthirty-first, nineteen hundred sixty-three, or (C) acquired,\nconstructed, reconstructed, or erected subsequent to December\nthirty-first, nineteen hundred sixty-seven, if such acquisition,\nconstruction, reconstruction or erection is pursuant to a plan of the\ntaxpayer which was in existence December thirty-first, nineteen hundred\nsixty-seven and not thereafter substantially modified, and such\nacquisition, construction, reconstruction or erection would qualify\nunder the rules in paragraphs four, five or six of subsection (h) of\nsection forty-eight of the internal revenue code provided all references\nin such paragraphs four, five and six to the dates October nine,\nnineteen hundred sixty-six, and October ten, nineteen hundred sixty-six,\nshall be read as December thirty-first, nineteen hundred sixty-seven. A\ntaxpayer shall be allowed a deduction under clauses (A), (B) or (C) of\nthis paragraph only if the tangible property shall be delivered or the\nconstruction, reconstruction or erection shall be completed on or before\nDecember thirty-first, nineteen hundred sixty-nine, except in the case\nof tangible property which is acquired, constructed, reconstructed or\nerected pursuant to a contract which was, on or before December\nthirty-first, nineteen hundred sixty-seven, and at all times thereafter,\nbinding on the taxpayer. However, for any taxable year beginning on or\nafter January first, nineteen hundred sixty-eight, a taxpayer shall not\nbe allowed a modification under paragraph one of this subsection with\nrespect to tangible personal property leased to any other person or\ncorporation. For purposes of the preceding sentence, any contract or\nagreement to lease or rent or for a license to use such property shall\nbe considered a lease. With respect to property which a taxpayer uses\nfor purposes other than leasing for part of a taxable year and leases\nfor a part of a taxable year, a modification under paragraph one shall\nbe allowed in proportion to the part of the year such property is used\nby the taxpayer.\n (4) For purposes of this paragraph, such modifications shall be\nallowed only with respect to tangible property which is depreciable\npursuant to section one hundred sixty-seven of the internal revenue\ncode, having a situs in this state and used in the taxpayer's trade or\nbusiness. The modifications provided for in paragraph one of this\nsubsection shall be allowed only with respect to tangible property which\nis (A) constructed, reconstructed or erected after December\nthirty-first, nineteen hundred sixty-seven, pursuant to a contract which\nwas, on or before December thirty-first, nineteen hundred sixty-eight,\nand at all times thereafter, binding on the taxpayer or, property, the\nphysical construction, reconstruction or erection of which began on or\nbefore December thirty-first, nineteen hundred sixty-eight or which\nbegan after such date pursuant to an order placed on or before December\nthirty-first, nineteen hundred sixty-eight, and then only with respect\nto that portion of the basis thereof or the expenditures relating\nthereto which is properly attributable to such construction,\nreconstruction or erection after December thirty-first, nineteen hundred\nsixty-three, or (B) acquired after December thirty-first, nineteen\nhundred sixty-seven, pursuant to a contract which was, on or before\nDecember thirty-first, nineteen hundred sixty-eight, and at all times\nthereafter, binding on the taxpayer or pursuant to an order placed on or\nbefore December thirty-first, nineteen hundred sixty-eight, by purchase\nas defined in section one hundred seventy-nine (d) of the internal\nrevenue code, if the original use of such property commenced with the\ntaxpayer, commenced in this state and commenced after December\nthirty-first, nineteen hundred sixty-seven, or (C) acquired,\nconstructed, reconstructed, or erected subsequent to December\nthirty-first, nineteen hundred sixty-eight, if such acquisition,\nconstruction, reconstruction or erection is pursuant to a plan of the\ntaxpayer which was in existence December thirty-first, nineteen hundred\nsixty-eight, and not thereafter substantially modified, and such\nacquisition, construction, reconstruction or erection would qualify\nunder the rules in paragraphs four, five or six of subsection (h) of\nsection forty-eight of the internal revenue code provided all references\nin such paragraphs four, five and six to the dates October nine,\nnineteen hundred sixty-six, and October ten, nineteen hundred sixty-six,\nshall be read as December thirty-first, nineteen hundred sixty-eight. A\ntaxpayer shall be allowed a deduction under clauses (A), (B) or (C) of\nthe preceding sentence of this paragraph only if the tangible property\nshall be delivered or the construction, reconstruction or erection shall\nbe completed on or before December thirty-first, nineteen hundred\nseventy, except in the case of tangible property which is acquired,\nconstructed, reconstructed or erected pursuant to a contract which was,\non or before December thirty-first, nineteen hundred sixty-eight, and at\nall times thereafter binding on the taxpayer. The modification provided\nfor in paragraph two of this subsection shall be allowed only with\nrespect to tangible property, (A) the construction, reconstruction or\nerection of which is completed after December thirty-first, nineteen\nhundred sixty-seven, and then only with respect to that portion of the\nbasis thereof or the expenditures relating thereto which is properly\nattributable to such construction, reconstruction or erection after\nDecember thirty-first, nineteen hundred sixty-three, or (B) acquired\nafter December thirty-first, nineteen hundred sixty-seven, by purchase\nas defined in section one hundred seventy-nine (d) of the internal\nrevenue code, if the original use of such property commenced with the\ntaxpayer, commenced in this state and commenced after December\nthirty-first, nineteen hundred sixty-three. Provided, however, a\nmodification under paragraph one of this subsection shall be allowed\nwith respect to property described in this paragraph only on condition\nthat such property shall be principally used by the taxpayer in the\nproduction of goods by manufacturing; processing; assembling; refining;\nmining; extracting; farming; agriculture; horticulture; floriculture;\nviticulture; or commercial fishing. For purposes of the preceding\nsentence, manufacturing shall mean the process of working raw materials\ninto wares suitable for use or which gives new shapes, new qualities or\nnew combinations to matter which already has gone through some\nartificial process by the use of machinery, tools, appliances and other\nsimilar equipment. Property used in the production of goods shall\ninclude machinery, equipment or other tangible property which is\nprincipally used in the repair and service of other machinery, equipment\nor other tangible property used principally in the production of goods\nand shall include all facilities used in the manufacturing operation,\nincluding storage of material to be used in manufacturing and of the\nproducts that are manufactured. At the option of the taxpayer, air and\nwater pollution control facilities which qualify for elective deductions\nunder subsection (h) of section six hundred twelve may be treated, for\npurposes of this paragraph, as tangible property principally used in the\nproduction of goods by manufacturing; processing; assembling; refining;\nmining; extracting; farming; agriculture; horticulture; floriculture;\nviticulture; or commercial fishing, in which event, a deduction shall\nnot be allowed under such subsection (h). However, for any taxable year\nbeginning on or after January first, nineteen hundred sixty-eight, a\ntaxpayer shall not be allowed a modification under paragraph one of this\nsubsection with respect to tangible personal property leased to any\nother person or corporation. For purposes of the preceding sentence, any\ncontract or agreement to lease or rent or for a license to use such\nproperty shall be considered a lease. With respect to property which a\ntaxpayer uses for purposes other than leasing for part of a taxable year\nand leases for a part of a taxable year, a modification under paragraph\none shall be allowed in proportion to the part of the year such property\nis used by the taxpayer.\n (5) If the modifications allowable for any taxable year pursuant to\nthis subsection exceed the taxpayer's New York adjusted gross income,\ndetermined without the allowance of such modifications, the excess may\nbe carried over to the following taxable year or years and may be\nsubtracted from federal adjusted gross income for such year or years\nprovided, however, that in no event shall such excess, insofar as it\nreflects subtractions taken with respect to items set forth in paragraph\ntwo of this subsection, be carried over to taxable years commencing on\nor after January first, nineteen hundred ninety-four.\n (6) In any taxable year when property is sold or otherwise disposed\nof, with respect to which a modification has been allowed pursuant to\nparagraph one or two of this subsection, the basis of such property\nshall be adjusted to reflect the modifications so allowed, and if the\nbasis as so adjusted is lower than the adjusted basis of the same\nproperty for federal income tax purposes, there shall be added to\nfederal adjusted gross income the amount of the difference between such\nadjusted bases.\n (h) Optional modification for waste treatment facility expenditures.\nFor taxable years commencing prior to January first, nineteen hundred\neighty-seven, at the election of the taxpayer, there shall also be\nsubtracted from federal adjusted gross income expenditures paid or\nincurred during the taxable year for the construction, reconstruction,\nerection or improvement of industrial waste treatment facilities and air\npollution control facilities.\n (1) (A) The term "industrial waste treatment facilities" shall mean\nfacilities for the treatment, neutralization, or stabilization of\nindustrial waste and other wastes (as the terms "industrial waste" and\n"other wastes" are defined in section 17-0105 of the environmental\nconservation law) from a point immediately preceding the point of such\ntreatment, neutralization or stabilization to the point of disposal,\nincluding the necessary pumping and transmitting facilities.\n (B) The term "air pollution control facilities" shall mean facilities\nwhich remove, reduce, or render less noxious air contaminants emitted\nfrom an air contamination source (as the terms "air contaminant" and\n"air contamination source" are defined in section 19-0107 of the\nenvironmental conservation law) from a point immediately preceding the\npoint of such removal, reduction or rendering to the point of discharge\nof air, meeting emission standards as established by the department of\nenvironmental conservation but excluding such facilities installed for\nthe primary purpose of salvaging materials which are usable in the\nmanufacturing process or are marketable and excluding those facilities\nwhich rely for their efficacy on dilution, dispersion or assimilation of\nair contaminants in the ambient air after emission. Such term shall\nfurther include flue gas desulfurization equipment and attendant sludge\ndisposal facilities, fluidized bed boilers, precombustion coal cleaning\nfacilities or other facilities that conform with this subdivision and\nwhich comply with the provisions of the state acid deposition control\nact set forth in title nine of article nineteen of the environmental\nconservation law.\n (2) Such modifications shall be allowed only\n (A) with respect to tangible property which is depreciable, pursuant\nto section one hundred sixty-seven of the internal revenue code, having\na situs in this state and used in the taxpayer's trade or business, the\nconstruction, reconstruction, erection or improvement of which, in the\ncase of industrial waste treatment facilities, is initiated on or after\nJanuary first, nineteen hundred sixty-five, or which, in the case of air\npollution control facilities, is initiated on or after January first,\nnineteen hundred sixty-six, and\n (B) on condition that such facilities have been certified by the state\ncommissioner of environmental conservation or his designated\nrepresentative, pursuant to section 19-0309 of the environmental\nconservation law, as complying with the applicable provisions of the\nenvironmental conservation law, the public health law, the state\nsanitary code and codes, rules, regulations, permits or orders\npromulgated pursuant thereto, and\n (C) on condition that for the taxable year and all succeeding taxable\nyears, any deductions allowed for federal income tax purposes for such\nexpenditures or for depreciation or amortization of the same property,\nexcept to the extent that its basis may be attributable to factors other\nthan such expenditures, be added to federal adjusted gross income\npursuant to paragraph five of subsection (b) of this section, or in case\na modification is allowable pursuant to this paragraph for only a part\nof such expenditures, on condition that a proportionate amount of any\nsuch deductions allowed for federal income tax purposes be added to\nfederal adjusted gross income, and\n (D) where the election provided for in subsection (g) of section six\nhundred twelve has not been exercised in respect to the same property.\n (3) (A) If expenditures in respect to an industrial waste treatment\nfacility or an air pollution control facility have been allowed as a\nmodification as provided herein and if within ten years from the end of\nthe taxable year in which such modification was allowed such property or\nany part thereof is used for the primary purpose of salvaging materials\nwhich are usable in the manufacturing process or are marketable, the\ntaxpayer shall report such change of use in its return for the first\ntaxable year during which it occurs, and the tax commission may\nrecompute the tax for the year or years for which such modification was\nallowed, and may assess any additional tax resulting from such\nrecomputation within the time fixed by paragraph eight of subsection (c)\nof section six hundred eighty-three.\n (B) If a modification is allowed as herein provided for expenditures\npaid or incurred during any taxable year on the basis of a temporary\ncertificate of compliance issued pursuant to the environmental\nconservation law, and if the taxpayer fails to obtain a permanent\ncertificate of compliance upon completion of the facilities with respect\nto which such temporary certificate was issued, the taxpayer shall\nreport such failure in its report for the taxable year during which such\nfacilities are completed, and the tax commission may recompute the tax\nfor the year or years for which such modification was allowed, and may\nassess any additional tax resulting from such recomputation within the\ntime fixed by paragraph eight of subsection (c) of section six hundred\neighty-three.\n (C) If a modification is allowed as herein provided for expenditures\npaid or incurred during any taxable year in respect to an air pollution\ncontrol facility on the basis of a certificate of compliance issued\npursuant to the environmental conservation law and the certificate is\nrevoked pursuant to subdivision three of section 19-0309 of the\nenvironmental conservation law, the tax commission may recompute the tax\nfor the year or years for which the facility is not or was not in\ncompliance with the applicable provisions of the environmental\nconservation law, the state sanitary code or codes, rules, regulations,\npermits or orders issued pursuant thereto, and for which a modification\nwas allowed, and may assess any additional tax resulting from such\nrecomputation within the time fixed by paragraph eight of subsection (c)\nof section six hundred eighty-three.\n (4) In any taxable year when property is sold or otherwise disposed\nof, with respect to which a modification has been allowed pursuant to\nthis paragraph, such modification shall be disregarded in computing gain\nor loss, and the gain or loss on the sale or other disposition of such\nproperty shall be the gain or loss entering into the computation of\nfederal adjusted gross income for such taxable year.\n (i) In the case of mines, oil and gas wells and other natural\ndeposits, any allowance for percentage depletion pursuant to section six\nhundred thirteen or section six hundred thirteen A of the internal\nrevenue code shall be added to federal adjusted gross income. However,\nwith respect to the property as to which such addition to federal\nadjusted gross income is required, an allowance for depletion shall be\nsubtracted from federal adjusted gross income in the amount that would\nbe deductible under section six hundred eleven of such code if the\ndeduction for an allowance for depletion were computed without reference\nto such section six hundred thirteen or section six hundred thirteen A.\nWith respect to the computation of depletion pursuant to this\nsubsection, the basis for such computation for taxable years beginning\nin nineteen hundred seventy-two shall be the federal basis. For\nsubsequent taxable years, the basis for such computation shall be\nreduced only by the deduction for the allowance for depletion deductible\npursuant to this subsection. The portion of any gain from the sale or\nother disposition of such property having a higher adjusted basis for\nNew York income tax purposes than for federal income tax purposes, that\ndoes not exceed such difference in basis, shall be subtracted from\nfederal adjusted gross income.\n (j) Modification for nonpublic school tuition. (1) General. An\nindividual shall be entitled to subtract from his federal adjusted gross\nincome an amount shown in the table set forth in this paragraph for his\nNew York adjusted gross income for the taxable year, computed without\nthe benefit of this modification, multiplied by the number of his\ndependents, not exceeding three, attending a nonpublic school on a\nfull-time basis for at least four months during the regular school year\nfor the education of such dependent in grades one through twelve,\nprovided such individual is allowed an exemption under section six\nhundred sixteen for such dependent. Provided, further, that the\nmodification under this paragraph may be taken only if such individual\nhas paid at least fifty dollars for each such dependent in tuition to\nsuch nonpublic school for such education of such dependent. No taxpayer\nshall be entitled to the modification provided for in this paragraph if\nhe claims a tuition reimbursement payment pursuant to article twelve-A\nof the education law.\n If New York The amount\nadjusted gross allowable for each\n income is: dependent is:\nLess than $9,000 $1,000\n 9,000--10,999 850\n11,000--12,999 700\n13,000--14,999 550\n15,000--16,999 400\n17,000--18,999 250\n19,000--20,999 150\n21,000--22,999 125\n23,000--24,999 100\n25,000 and over --0--\n (2) Husband and wife. In determining the applicable New York adjusted\ngross income of a husband and wife for purposes of the table set forth\nin paragraph one of this subsection, the New York adjusted gross income\nof a husband and wife shall be the aggregate of their New York adjusted\ngross incomes for the taxable year, determined without the benefit of\nthe modification provided for in this subsection, and the number of\ndependents with respect to which this modification may be claimed shall\nbe no more than three in the aggregate.\n (3) Definitions. (A) "Tuition", as used in this subsection, shall mean\nthe amount actually paid during the taxable year by the taxpayer for the\nenrollment of a dependent during the regular school year at a nonpublic\nschool.\n (B) "Nonpublic school", as used in this subsection, shall mean any\nnon-profit elementary or secondary school in the state of New York,\nother than a public school, which (i) is providing instruction in\naccordance with article seventeen and section thirty-two hundred four of\nthe education law, (ii) has not been found to be in violation of Title\nVI of the Civil Rights Act of nineteen hundred sixty-four, 78 Stat. 252,\n42 U.S.C. § 2000 (d) and (iii) which is entitled to a tax exemption\nunder sections five hundred one (a) and five hundred one (c) (3) of the\nFederal Internal Revenue Code of nineteen hundred fifty-four, as\namended. The commissioner of education shall furnish to the state tax\ncommission by February first of each year, a certified list of nonpublic\nschools which comply with clause (i) of this subparagraph for the\npreceding calendar year and shall provide such other assistance with\nrespect to whether nonpublic schools come within clause (i) as the state\ntax commission may require.\n (C) "Regular school year", as used in this subsection, shall mean the\nmonths of the taxable year exclusive of July and August.\n (4) Additional information. Any claim for a modification under this\nsubsection shall be accompanied by such information as the tax\ncommission may require.\n (k) For taxable years beginning after December thirty-first, two\nthousand two, in the case of qualified property described in paragraph\ntwo of subsection k of section 168 of the internal revenue code, other\nthan qualified resurgence zone property described in subsection (m) of\nthis section, and other than qualified New York Liberty Zone property\ndescribed in paragraph two of subsection b of section 1400L of the\ninternal revenue code (without regard to clause (i) of subparagraph (C)\nof such paragraph), which was placed in service on or after June first,\ntwo thousand three, a taxpayer shall be allowed with respect to such\nproperty the depreciation deduction allowable under section 167 of the\ninternal revenue code as such section would have applied to such\nproperty had it been acquired by the taxpayer on September tenth, two\nthousand one.\n (l) For taxable years beginning after December thirty-first, two\nthousand two, upon the disposition of property to which subsection (k)\nof this section applies, the amount of any gain or loss includible in\nfederal adjusted income shall be adjusted to reflect the inclusions and\nexclusions from federal adjusted income pursuant to paragraph eight of\nsubsection (b) and paragraph sixteen of subsection (c) of this section\nattributable to such property.\n (m) For purposes of subsections (k) and (l) of this section, qualified\nresurgence zone property shall mean qualified property described in\nparagraph two of subsection k of section 168 of the internal revenue\ncode substantially all of the use of which is in the resurgence zone, as\ndefined below, and is in the active conduct of a trade or business by\nthe taxpayer in such zone, and the original use of which in the\nresurgence zone commences with the taxpayer after December thirty-first,\ntwo thousand two. The resurgence zone shall mean the area of New York\ncounty bounded on the south by a line running from the intersection of\nthe Hudson River with the Holland Tunnel, and running thence east to\nCanal Street, then running along the centerline of Canal Street to the\nintersection of the Bowery and Canal Street, running thence in a\nsoutheasterly direction diagonally across Manhattan Bridge Plaza, to the\nManhattan Bridge and thence along the centerline of the Manhattan Bridge\nto the point where the centerline of the Manhattan Bridge would\nintersect with the easterly bank of the East River, and bounded on the\nnorth by a line running from the intersection of the Hudson River with\nthe Holland Tunnel and running thence north along West Avenue to the\nintersection of Clarkson Street then running east along the centerline\nof Clarkson Street to the intersection of Washington Avenue, then\nrunning south along the centerline of Washington Avenue to the\nintersection of West Houston Street, then east along the centerline of\nWest Houston Street, then at the intersection of the Avenue of the\nAmericas continuing east along the centerline of East Houston Street to\nthe easterly bank of the East River.\n (n) Where gain or loss is recognized for federal income tax purposes\nupon the disposition of stock or indebtedness of a corporation electing\nunder subchapter s of chapter one of the internal revenue code\n (1) There shall be added to federal adjusted gross income the amount\nof increase in basis with respect to such stock or indebtedness pursuant\nto subsection (a) of section thirteen hundred seventy-six of the\ninternal revenue code as such section was in effect for taxable years\nbeginning before January first, nineteen hundred eighty-three and\nsubparagraphs (A) and (B) of paragraph one of subsection (a) of section\nthirteen hundred sixty-seven of such code, for each taxable year of the\ncorporation beginning, in the case of a corporation taxable under\narticle nine-A of this chapter, after December thirty-first, nineteen\nhundred eighty, and in the case of a corporation taxable under article\nthirty-two of this chapter, after December thirty-first, nineteen\nhundred ninety-six, for which the election provided for in subsection\n(a) of section six hundred sixty of this article was not in effect, and\n (2) There shall be subtracted from federal adjusted gross income\n (A) the amount of reduction in basis with respect to such stock or\nindebtedness pursuant to subsection (b) of section thirteen hundred\nseventy-six of the internal revenue code as such section was in effect\nfor taxable years beginning before January first, nineteen hundred\neighty-three and subparagraphs (B) and (C) of paragraph two of\nsubsection (a) of section thirteen hundred sixty-seven of such code, for\neach taxable year of the corporation beginning, in the case of a\ncorporation taxable under article nine-A of this chapter, after December\nthirty-first, nineteen hundred eighty, and in the case of a corporation\ntaxable under article thirty-two of this chapter, after December\nthirty-first, nineteen hundred ninety-six, for which the election\nprovided for in subsection (a) of section six hundred sixty of this\narticle was not in effect and\n (B) the amount of any modifications to federal gross income with\nrespect to such stock pursuant to paragraph twenty of subsection (b) of\nthis section.\n (o) Modifications for new business investment gains and certain new\nbusiness investments.\n 1. For purposes of this subsection, the following definitions shall\napply:\n (A) "New business investment gain" means gain from the sale of a new\nbusiness investment issued to the taxpayer before January first,\nnineteen hundred eighty-eight, if:\n (i) such new business investment is, in the hands of the person\nselling the same (whether or not the taxpayer), a capital asset as\ndefined in section 1221 of the internal revenue code of nineteen hundred\nfifty-four, as amended, and\n (ii) such new business investment was held by such person for the\nperiod specified in paragraph two of this subsection.\n (B) "New business" means a corporation or partnership organized or\nformed under the laws of any state which:\n (i) adopts a plan on or after July first, nineteen hundred eighty-one\nand before January first, nineteen hundred eighty-eight, to conduct a\nnew business within the meaning and intent of this section and to issue\nnew business investments, as defined in this subsection, and\n (ii) is, at the date of adoption of such plan, subject to taxation\n(whether or not any amount is owing) under section one hundred\neighty-three, one hundred eighty-four or one hundred eighty-six of\narticle nine of this chapter, or under article nine-a of this chapter or\narticle twenty-three of this chapter, or would have been subject to tax\nunder article twenty-three (as such article was in effect on January\nfirst, nineteen hundred eighty) if such article were still in effect,\nand the first taxable period for which such new business became subject\nto such taxation commenced on or after July first, nineteen hundred\neighty-one and before January first, nineteen hundred eighty-eight, and\nsuch first taxable period includes the date of adoption of such plan; if\nnot so subject to taxation, the new business must be subject to taxation\nunder such sections or articles for the first time within one year from\nthe date of adoption of such plan, and\n (iii) is conducted (or will be conducted, as evidenced by such plan)\nwhereby at least ninety percent of the assets (valued at original cost)\nare located and employed in this state and eighty percent of the\nemployees (as ascertained within the meaning and intent of subparagraph\nthree of paragraph (a) of subdivision three of section two hundred ten\nof this chapter and, in addition, in the case of a partnership,\nexcluding partners) are principally employed in this state during each\ntaxable period, or part thereof, as required by clause (iv) of this\nsubparagraph, and\n (iv) within ninety days after the adoption of such plan, or, if a\nreturn is required, as part of such return, under such article nine,\narticle nine-A or article twenty-three (as such article was in effect on\nor before December thirtieth, nineteen hundred eighty-two), whichever is\nsooner, shall file a new business certificate with the state tax\ncommission attesting to whether it meets, if subject to taxation under\nsuch articles, or intends to meet, if not so subject, all of the\nconditions stated in clauses (i), (ii) and (iii) of this subparagraph\nwithin the time set forth therein. Thereafter, during the first four\ntaxable years of such new business, along with, and as part of, any\nreturn required under such articles, such new business shall make and\nfile a new business certificate for the period covered by such return\nattesting to whether it has met the conditions specified in this\nsubparagraph during the taxable period covered by such return. If no\nreturn is required under such articles, such certificate shall be filed\nannually on or before the fifteenth day of March which shall cover the\ntwelve consecutive calendar month period ending on the last day of\nDecember immediately preceding such March fifteenth. If such new\nbusiness fails to meet such conditions specified in this subparagraph,\nit shall, in addition, give notice of this fact, within the time\nprescribed by the state tax commission, to the holders of its "new\nbusiness investments." The state tax commission shall prescribe the form\nand content of such new business certification and may require a new\nbusiness to file such certificate for periods (even if no return is\nfiled or required, but for this section) covering up to eight years from\nthe date of adoption of such plan, as in its discretion, it deems the\nsame necessary for the enforcement of this subparagraph, and\n (v) Special rules:\n (1) For any taxable period, in order to constitute a new business, a\nbusiness enterprise must have derived more than sixty percent of its\naggregate gross receipts from sources other than royalties, rents,\ndividends, interest, annuities and sales or exchanges of stock or\nsecurities.\n (2) A new business does not include (i) any new business of which\ntwenty-five percent or more of the number of shares of stock that\nentitle the holders thereof to vote for the election of directors or\ntrustees is owned, directly or indirectly, by a taxpayer subject to tax\nunder section one hundred eighty-three, one hundred eighty-four, one\nhundred eighty-five or one hundred eighty-six of article nine of this\nchapter, or under article nine-A, thirty-two or thirty-three of this\nchapter or (ii) any new business substantially similar in operation and\nin ownership, directly or indirectly, to a business entity (or entities)\ntaxable, or previously taxable, under such sections, such articles,\narticle twenty-three or which would have been subject to tax under\narticle twenty-three (as such article was in effect on January first,\nnineteen hundred eighty) or the income (or losses) of which is (or was)\nincludable under article twenty-two whereby the intent and purpose of\nthis subsection would be evaded.\n (C) "New business investment" means and includes the following\ninvestments issued before January first, nineteen hundred eighty-eight\nby a new business pursuant to a plan described in clause (i) of\nsubparagraph (B) of this paragraph for money or other property (other\nthan stock or securities) on or before the expiration of the third\ntaxable year of such new business (excluding any short period\nimmediately preceding such taxable year because the new business was not\nin existence for an entire taxable year) or forty-two months from the\nadoption of such plan, whichever is sooner: (i) original issuance\ncapital stock as part of a new issue, (ii) other original issuance\nsecurities of a new issue of a like nature as stocks which are designed\nas a means of investment and issued for the purpose of financing\ncorporate enterprises and providing for a distribution of rights in such\nenterprises, (iii) debt obligations such as bonds and debentures for a\nterm of at least one year, whether secured or unsecured, and (iv)\ncertificates and other instruments representing proprietary interests,\nwhether limited or otherwise, in and assumption of general liabilities,\nwhether limited or otherwise, of a partnership enterprise.\n 2. A taxpayer may subtract from his federal adjusted gross income a\nportion of an amount constituting a new business investment gain, as\nfollows:\n If new business The modification is equal to the\n investment held for: following proportion of the gain\n includable in federal adjusted\n gross income:\n At least four years, but\n less than five years twenty-five percent\n At least five years, but\n less than six years fifty percent\n At least six years one hundred percent\n 3. Where, within six months of the realization of a new business\ninvestment gain allowable as the basis of a modification under paragraph\ntwo of this subsection, such modification is equal to less than one\nhundred percent of the portion of the gain includable in federal\nadjusted gross income and the taxpayer purchases a new business\ninvestment which is then held for a period of at least six months, the\ntaxpayer may subtract from his federal adjusted gross income ten percent\n(but not an amount that will reduce the portion of such gain included in\nhis New York income below zero) of the amount of such gain where the\npurchase price of the new business investment is equal to or greater\nthan the proceeds of the sale giving rise to such gain. Where the\npurchase price of the new business investment is less than an amount\nequal to the proceeds of such sale, the modification allowable under\nthis paragraph shall be equal to ten percent of an amount equal to the\nproduct of (A) the amount of the gain and (B) a fraction the numerator\nof which is the purchase price of the new investment and the denominator\nof which is an amount equal to the proceeds of such sale. The\nmodification allowable under this paragraph may be utilized, at the\noption of the taxpayer, with respect to the taxable year in which the\nnew business investment gain is realized or the year containing the last\nday of the six-month retention period described in this paragraph.\n 4. The state tax commission may prescribe such rules and regulations\nas may be necessary to carry out the purposes of this subdivision.\n (p) New business investment deferral. For taxable years beginning\nbefore January first, nineteen hundred eighty-eight, at the option of\nthe taxpayer, there may be subtracted from federal adjusted gross income\na reinvested amount of long-term capital gain realized in a taxable year\nfrom the sale of a capital asset, as such term is defined in section\n1221 of the internal revenue code, which is not a new business\ninvestment. A reinvested amount of long-term capital gain shall mean an\namount which bears the same ratio to the long-term capital gain realized\nfrom the sale of a capital asset which was includable in New York\nadjusted gross income as that portion of the sale proceeds which is\nreinvested, within one year from date of sale, in a New York new\nbusiness bears to the total sale proceeds. For the purposes of this\nsubsection, a New York new business is a business enterprise which (1)\nhas been a taxpayer under this article for no more than three taxable\nyears (including short taxable years), (2) over fifty percent of the\nnumber of shares of stock that entitle the holders thereof to vote for\nthe election of directors or trustees is not owned, directly or\nindirectly, by a taxpayer subject to tax under section one hundred\neighty-three, one hundred eighty-four, one hundred eighty-five or one\nhundred eighty-six of article nine of this chapter, or under article\nnine-A, thirty-two or thirty-three of this chapter, (3) is not\nsubstantially similar in operation or ownership, directly or indirectly,\nto a business entity (or entities) taxable, or previously taxable, under\nsuch sections, such articles, article twenty-three or which would have\nbeen subject to tax under article twenty-three (as such article was in\neffect on January first, nineteen hundred eighty) or the income (or\nlosses) of which is (or was) includable under article twenty-two whereby\nthe intent and purpose of this subsection would be evaded, (4) locates\nand employs at least ninety percent of its assets in the state, (5)\nemploys principally in the state eighty percent of its employees (as\nascertained within the meaning and intent of subparagraph three of\nparagraph (a) of subdivision three of section two hundred ten of this\nchapter and, in addition, in the case of a partnership, excluding\npartners), (6) derives less than forty percent of its gross income from\ndividends, interest, royalties (other than mineral, oil, or gas\nroyalties or copyright royalties), and annuities and (7) reports at\nleast twenty-five hundred dollars in gross income in any taxable year.\nThe reinvested amount must qualify as a capital asset as defined in\nsection 1221 of the internal revenue code and must be retained by the\ntaxpayer for at least twelve months. The modification allowable under\nthis subsection shall be utilized with respect to the taxable year in\nwhich the twelve month retention period ends. The commissioner of\ntaxation and finance may require annual information reports on the\ninvestments in new businesses made pursuant to this subsection, and such\nother reports as he may require to ensure against the evasion of the\nintent and purposes of this subsection.\n (q) An amount deferred under subsection (p) hereof shall be added to\nfederal adjusted gross income when the reinvestment in the New York new\nbusiness which qualified a taxpayer for such deferral is sold.\n (r) Related members expense add back. (1) Definitions. (A) Related\nmember. "Related member" means a related person as defined in\nsubparagraph (c) of paragraph three of subsection (b) of section four\nhundred sixty-five of the internal revenue code, except that "fifty\npercent" shall be substituted for "ten percent".\n (B) Effective rate of tax. "Effective rate of tax" means, as to any\nstate or U.S. possession, the maximum statutory rate of tax imposed by\nthe state or possession on or measured by a related member's net income\nmultiplied by the apportionment percentage, if any, applicable to the\nrelated member under the laws of said jurisdiction. For purposes of this\ndefinition, the effective rate of tax as to any state or U.S. possession\nis zero where the related member's net income tax liability in said\njurisdiction is reported on a combined or consolidated return including\nboth the taxpayer and the related member where the reported transactions\nbetween the taxpayer and the related member are eliminated or offset.\nAlso, for purposes of this definition, when computing the effective rate\nof tax for a jurisdiction in which a related member's net income is\neliminated or offset by a credit or similar adjustment that is dependent\nupon the related member either maintaining or managing intangible\nproperty or collecting interest income in that jurisdiction, the maximum\nstatutory rate of tax imposed by said jurisdiction shall be decreased to\nreflect the statutory rate of tax that applies to the related member as\neffectively reduced by such credit or similar adjustment.\n (C) Royalty payments. Royalty payments are payments directly connected\nto the acquisition, use, maintenance or management, ownership, sale,\nexchange, or any other disposition of licenses, trademarks, copyrights,\ntrade names, trade dress, service marks, mask works, trade secrets,\npatents and any other similar types of intangible assets as determined\nby the commissioner, and include amounts allowable as interest\ndeductions under section one hundred sixty-three of the internal revenue\ncode to the extent such amounts are directly or indirectly for, related\nto or in connection with the acquisition, use, maintenance or\nmanagement, ownership, sale, exchange or disposition of such intangible\nassets.\n (D) Valid business purpose. A valid business purpose is one or more\nbusiness purposes, other than the avoidance or reduction of taxation,\nwhich alone or in combination constitute the primary motivation for some\nbusiness activity or transaction, which activity or transaction changes\nin a meaningful way, apart from tax effects, the economic position of\nthe taxpayer. The economic position of the taxpayer includes an increase\nin the market share of the taxpayer, or the entry by the taxpayer into\nnew business markets.\n (2) Royalty expense add backs. (A) For the purpose of computing New\nYork adjusted gross income, a taxpayer must add back royalty payments\ndirectly or indirectly paid, accrued, or incurred in connection with one\nor more direct or indirect transactions with one or more related members\nduring the taxable year to the extent deductible in calculating federal\ntaxable income.\n (B) Exceptions. (i) The adjustment required in this subsection shall\nnot apply to the portion of the royalty payment that the taxpayer\nestablishes, by clear and convincing evidence of the type and in the\nform specified by the commissioner, meets all of the following\nrequirements: (I) the related member was subject to tax in this state or\nanother state or possession of the United States or a foreign nation or\nsome combination thereof on a tax base that included the royalty payment\npaid, accrued or incurred by the taxpayer; (II) the related member\nduring the same taxable year directly or indirectly paid, accrued or\nincurred such portion to a person that is not a related member; and\n(III) the transaction giving rise to the royalty payment between the\ntaxpayer and the related member was undertaken for a valid business\npurpose.\n (ii) The adjustment required in this subsection shall not apply if the\ntaxpayer establishes, by clear and convincing evidence of the type and\nin the form specified by the commissioner, that: (I) the related member\nwas subject to tax on or measured by its net income in this state or\nanother state or possession of the United States or some combination\nthereof; (II) the tax base for said tax included the royalty payment\npaid, accrued or incurred by the taxpayer; and (III) the aggregate\neffective rate of tax applied to the related member in those\njurisdictions is no less than eighty percent of the statutory rate of\ntax that applied to the taxpayer under section six hundred one of this\narticle for the taxable year.\n (iii) The adjustment required in this subsection shall not apply if\nthe taxpayer establishes, by clear and convincing evidence of the type\nand in the form specified by the commissioner, that: (I) the royalty\npayment was paid, accrued or incurred to a related member organized\nunder the laws of a country other than the United States; (II) the\nrelated member's income from the transaction was subject to a\ncomprehensive income tax treaty between such country and the United\nStates; (III) the related member was subject to tax in a foreign nation\non a tax base that included the royalty payment paid, accrued or\nincurred by the taxpayer; (IV) the related member's income from the\ntransaction was taxed in such country at an effective tax rate at least\nequal to that imposed by this state; and (V) the royalty payment was\npaid, accrued or incurred pursuant to a transaction that was undertaken\nfor a valid business purpose and using terms that reflect an arm's\nlength relationship.\n (iv) The adjustment required in this subsection shall not apply if the\ntaxpayer and the commissioner agree in writing to the application or use\nof alternative adjustments or computations. The commissioner may, in his\nor her discretion, agree to the application or use of alternative\nadjustments or computations when he or she concludes that in the absence\nof such agreement the income of the taxpayer would not be properly\nreflected.\n (s) New York S termination year. (1) General. In the case of a New\nYork S termination year, the amount of any item of S corporation income,\nloss and deduction included in the shareholder's federal adjusted gross\nincome and any reductions for taxes (as described in paragraphs two and\nthree of subsection (f) of section thirteen hundred sixty-six of the\ninternal revenue code) shall be adjusted in accordance with the\ntreatment provided in paragraph two or three of this subsection.\n (2) Pro rata allocation. Unless paragraph three of this subsection\napplies, an equal portion of each S corporation item shall be assigned\nto each day of the S corporation's taxable year for federal income tax\npurposes. The portion of each such item thereby assigned to the S short\nyear shall be treated as an item of a New York S corporation, and the\nportion of each such item thereby assigned to the C short year shall be\ntreated as an item of an S corporation which is a New York C\ncorporation.\n (3) Normal tax accounting. The portion of each S corporation item\nassigned to the S short year and the C short year shall be determined\nusing normal tax accounting rules if:\n (A) there is a sale or exchange of fifty percent or more of the stock\nin such corporation during the New York S termination year; or\n (B) the corporation so elects, in the manner the commissioner may\nprovide. No election under this subparagraph shall be effective unless\nall persons who are shareholders during the S short year and all persons\nwho are shareholders on the first day of the C short year consent to\nsuch election.\n (u) Emerging technology investment deferral. In the case of any sale\nof a qualified emerging technologies investment held for more than\nthirty-six months and with respect to which the taxpayer elects the\napplication of this subsection, gain from such sale shall be recognized\nonly to the extent that the amount realized on such sale exceeds the\ncost of any qualified emerging technologies investment purchased by the\ntaxpayer during the three hundred sixty-five-day period beginning on the\ndate of such sale, reduced by any portion of such cost previously taken\ninto account under this subsection. For purposes of this subsection the\nfollowing shall apply:\n (1) A qualified investment is stock of a corporation or an interest,\nother than as a creditor, in a partnership or limited liability company\nthat was acquired by the taxpayer as provided in Internal Revenue Code §\n1202(c)(1)(B), except that the reference to the term "stock" in such\nsection shall be read as "investment," or by the taxpayer from a person\nwho had acquired such stock or interest in such a manner.\n (2) A qualified emerging technology investment is a qualified\ninvestment, that was held by the taxpayer for at least thirty-six\nmonths, in a company defined in paragraph (c) of subdivision one of\nsection thirty-one hundred two-e of the public authorities law or an\ninvestment in a partnership or limited liability company that is taxed\nas a partnership to the extent that such partnership or limited\nliability company invests in qualified emerging technology companies.\n (3) For purposes of determining whether the nonrecognition of gain\nunder this subsection applies to a qualified emerging technologies\ninvestment that is sold, the taxpayer's holding period for such\ninvestment and the qualified emerging technologies investment that is\npurchased shall be determined without regard to Internal Revenue Code §\n1223.\n (v) Amounts deferred. The amount deferred under subsection (u) of this\nsection shall be added to federal adjusted gross income when the\nreinvestment in the New York qualified emerging technology company which\nqualified a taxpayer for such deferral is sold.\n (w) Alimony modifications. (1) In the case of applicable alimony or\nseparate maintenance payments, the following modifications shall apply:\n (A) There shall be subtracted from federal adjusted gross income any\napplicable alimony or separate maintenance payments made by the taxpayer\nduring the taxable year.\n (B) There shall be added to federal adjusted gross income any\napplicable alimony or separate maintenance payments received by the\ntaxpayer during the taxable year.\n (2) (A) The term "alimony or separate maintenance payments" means\npayments as defined under section seventy-one of the internal revenue\ncode in effect immediately prior to the enactment of Public Law 115-97.\n (B) The term "applicable alimony or separate maintenance payments"\nmeans payments made under an alimony or separation instrument (as\ndefined in section seventy-one of the internal revenue code in effect\nimmediately prior to the enactment of Public Law 115-97) that was\nexecuted after December thirty-first, two thousand eighteen, and any\ndivorce or separation instrument executed on or before such date and\nmodified after such date if the modification expressly provides that the\namendments made by this section apply to such modification.\n (x) Qualified moving expense reimbursement and moving expenses. (1) In\nthe case of applicable qualified moving expense reimbursement and moving\nexpenses, the following modifications shall apply:\n (A) There shall be subtracted from federal adjusted gross income any\napplicable qualified moving expense reimbursement received by the\ntaxpayer during the taxable year.\n (B) There shall be subtracted from federal adjusted gross income any\napplicable moving expenses paid by the taxpayer during the taxable year.\n (2) Applicable qualified moving expense reimbursement and moving\nexpenses are those deductions as allowed by paragraph (g) of sections\none hundred thirty-two and section two hundred seventeen, respectfully,\nof the internal revenue code immediately prior to the enactment of\nPublic Law 115-97.\n (y) Depreciation and interest adjustments for covered properties owned\nby an institutional real estate investor. (1) Notwithstanding any other\nprovision of this section, in the case of a taxpayer that is a partner,\nmember or shareholder of an entity that is an institutional real estate\ninvestor as defined in paragraph (c-4) of subdivision nine of section\ntwo hundred eight of this chapter, New York adjusted gross income shall\nbe computed with adjustments for depreciation and interest related to\ncovered properties as set forth in this subsection.\n (2) Depreciation deductions. With respect to covered properties, no\ndeduction for depreciation allowed under the internal revenue code or\nthis section shall be allowed.\n (3) Federal interest deductions. With respect to covered properties,\nthe interest deduction for federal income tax purposes allowed under\nsection one hundred sixty-three of the internal revenue code shall not\nbe allowed and must be added back in the computation of New York\nadjusted gross income, except with respect to interest paid or accrued\nin the taxable year when such covered property is sold to an individual\nfor use as the principal residence of such individual or sold to a\nnonprofit organization that has as its principal purpose the creation,\ndevelopment, or preservation of affordable housing. For purposes of this\nparagraph, any amount of interest that would have been allowed under\nsection one hundred sixty-three of the internal revenue code in\nconnection with a covered property but for an election to treat such\ninterest as chargeable to capital account shall be treated as an amount\nallowed under section one hundred sixty-three of the internal revenue\ncode.\n