senate Bill S6359C

Signed by Governor Amended

Enacts into law major components of legislation necessary to implement the state fiscal plan for the 2014-2015 fiscal year

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed by Governor
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actions

  • 21 / Jan / 2014
    • REFERRED TO FINANCE
  • 12 / Feb / 2014
    • AMEND (T) AND RECOMMIT TO FINANCE
  • 12 / Feb / 2014
    • PRINT NUMBER 6359A
  • 21 / Feb / 2014
    • AMEND AND RECOMMIT TO FINANCE
  • 21 / Feb / 2014
    • PRINT NUMBER 6359B
  • 14 / Mar / 2014
    • AMEND AND RECOMMIT TO FINANCE
  • 14 / Mar / 2014
    • PRINT NUMBER 6359C
  • 28 / Mar / 2014
    • AMEND (T) AND RECOMMIT TO FINANCE
  • 28 / Mar / 2014
    • PRINT NUMBER 6359D
  • 31 / Mar / 2014
    • ORDERED TO THIRD READING CAL.376
  • 31 / Mar / 2014
    • PASSED SENATE
  • 31 / Mar / 2014
    • DELIVERED TO ASSEMBLY
  • 31 / Mar / 2014
    • REFERRED TO WAYS AND MEANS
  • 31 / Mar / 2014
    • SUBSTITUTED FOR A8559D
  • 31 / Mar / 2014
    • ORDERED TO THIRD READING RULES CAL.34
  • 31 / Mar / 2014
    • PASSED ASSEMBLY
  • 31 / Mar / 2014
    • RETURNED TO SENATE
  • 31 / Mar / 2014
    • DELIVERED TO GOVERNOR
  • 31 / Mar / 2014
    • SIGNED CHAP.59

Summary

Enacts into law major components of legislation necessary to implement the state fiscal plan for the 2014-2015 state fiscal year; relates to the reformation of the taxation on business corporations; allows direct payment of STAR savings; extends fees for the establishment of oil and gas unit of production value; modifies signature requirements on e-filed returns; extends the non-custodial parent earned income tax credit for two years; closes the resident trust loophole; repeals the additional minimum personal income tax; establishes an enhanced real property tax circuit breaker; modifies delivery of the family tax relief credit; extends the empire state commercial production tax credit; authorizes additional credits for the low income housing credit; establishes a twenty percent real property tax credit for manufacturers and eliminates the net income tax on upstate manufacturers; repeals the franchise tax on agriculture cooperatives; provides a refundable credit for telecommunications excise taxes on START-UP NY; enhances the youth works tax credit; extends the alternative fuels tax exemption; simplifies the distribution of motor vehicle fee receipts; relates to comprehensive estate tax reform; extends Monticello raceway video lottery terminal rates for one year; extends certain tax rates and certain simulcasting provisions; extends VLG vendors capital awards program; aligns mobility and personal income tax filings for the self-employed; relates to commercial gaming; provides a two-year property tax freeze through a refundable personal income tax credit; extends certain New York city tax exemptions; relates to a musical theatrical production credit; increases the sales tax exemption threshold amount for vending machines; increases film production credit benefits for films produced in certain counties; relates to the length of service awards; creates a third region for the prepayment of motor fuel taxes; establishes the workers with disabilities tax credit program; provides tax incentives to employers for employing individuals with developmental disabilities; allows a STAR lookback period for widows and widowers; relates to health insurance for jockeys.

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Bill Details

Versions:
S6359
S6359A
S6359B
S6359C
S6359D
Legislative Cycle:
2013-2014
Law Section:
Budget Bills
Laws Affected:
Amd Various Laws, generally
view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 6359--C

                            I N  S E N A T E

                            January 21, 2014
                               ___________

A  BUDGET  BILL,  submitted by the Governor pursuant to article seven of
  the Constitution -- read twice and ordered printed, and  when  printed
  to  be  committed to the Committee on Finance -- committee discharged,
  bill amended, ordered reprinted as amended  and  recommitted  to  said
  committee  -- committee discharged, bill amended, ordered reprinted as
  amended and recommitted to said  committee  --  committee  discharged,
  bill  amended,  ordered  reprinted  as amended and recommitted to said
  committee

AN ACT to amend the tax law, the general municipal law, the urban devel-
  opment corporation act, the business corporation law, and the  general
  associations law, in relation to reforming taxation of business corpo-
  rations;  to amend the administrative code of the city of New York, in
  relation to transitional provisions  relating  to  the  enactment  and
  implementation  of  the  federal Gramm-Leach-Bliley act; and to repeal
  various provisions of the tax law relating thereto (Part A); to  amend
  the  real  property  tax  law,  in  relation  to the STAR registration
  program (Part B); to amend chapter 540 of the laws of  1992,  amending
  the real property tax law relating to oil and gas charges, in relation
  to  the effective date of such chapter (Part C); intentionally omitted
  (Part D); to amend the tax law, in relation to modifying the signature
  requirement on e-filed returns prepared by tax professionals (Part E);
  intentionally omitted (Part F); to amend part I of chapter 58  of  the
  laws  of  2006, amending the tax law relating to providing an enhanced
  earned income tax credit, in relation  to  the  effectiveness  thereof
  (Part  G);  to  amend  the general obligations law and the tax law, in
  relation to authorizing electronic tax clearances for professional and
  business licenses (Part H); to amend the tax law and  the  administra-
  tive code of the city of New York, in relation to taxing residents who
  are  grantors  of  exempt  resident trusts that qualify as non-grantor
  incomplete gift trusts on the income from such trusts and taxing resi-
  dents who are beneficiaries of all other  exempt  resident  trusts  or
  nonresident  trusts  on  the  distributions of accumulated income that
  they receive from such trusts (Part I); to amend the tax law  and  the
  administrative  code of the city of New York, in relation to eliminat-
  ing the personal income tax add-on minimum tax; and to repeal  certain
  provisions of such laws relating thereto (Part J); intentionally omit-
  ted (Part K); intentionally omitted (Part L); to amend the tax law, in

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD12674-06-4

S. 6359--C                          2

  relation  to  the  family tax relief credit (Part M); to amend the tax
  law, in  relation  to  eliminating  the  personal  income  tax  filing
  requirement  for residents having no liability because income does not
  exceed  the  New York standard deduction if they do not file a federal
  income tax return (Part N); to amend  the  tax  law,  in  relation  to
  extending  the empire state commercial production tax credit (Part O);
  to amend the public housing law, in relation to extending  the  credit
  against  income  tax  for  persons or entities investing in low-income
  housing (Part P); to amend the environmental conservation law, the tax
  law, the economic development law and the general  municipal  law,  in
  relation  to  eligibility  for participation in the brownfield cleanup
  program, and assignment of the brownfield redevelopment  tax  credits;
  to amend part H of chapter 1 of the laws of 2003, amending the tax law
  relating  to  brownfield  redevelopment tax credits, remediated brown-
  field credit for real property taxes for qualified sites and  environ-
  mental  remediation  insurance credits, in relation to tax credits for
  certain  sites;  to  amend  the  environmental  conservation  law,  in
  relation  to  hazardous  waste  generator fees and taxes; to amend the
  environmental conservation law, the public  authorities  law  and  the
  state  finance  law,  in  relation  to  the  environmental restoration
  program; and to repeal certain provisions of the environmental conser-
  vation law and the tax law relating thereto (Subpart A); and to  amend
  the  navigation  law, in relation to responsible parties for petroleum
  contaminated sites and incentives to parties who are willing to  reme-
  diate  petroleum contaminated sites (Subpart B) (Part Q); to amend the
  tax law, in relation to providing a tax credit for real property taxes
  to New York manufacturers; and providing for  the  repeal  of  certain
  provisions  upon  expiration  thereof  (Part R); intentionally omitted
  (Part S); to amend the tax law, in relation to providing a credit  for
  excise  tax  on  telecommunication  services for businesses located in
  tax-free NY areas (Part T); to amend  the  tax  law,  in  relation  to
  reducing the number of hours of part-time work needed by employees for
  employer qualification for the New York youth works tax credit; and to
  amend the labor law, in relation to the New York youth works tax cred-
  it (Part U); to amend chapter 109 of the laws of 2006 amending the tax
  law  and  other  laws relating to providing exemptions, reimbursements
  and credits from various  taxes  for  certain  alternative  fuels,  in
  relation  to  extending  the  alternative fuels tax exemptions for two
  years (Part V); to amend chapter 63 of the laws of 2000, amending  the
  tax law and other laws relating to modifying the distribution of funds
  from  the  motor  vehicle  fuel excise tax and the vehicle and traffic
  law, in relation to simplifying the methodology  for  distribution  of
  motor  vehicle receipts (Part W); to amend the tax law, in relation to
  the estate tax; to repeal section 2 of chapter 1013  of  the  laws  of
  1962,  amending the tax law relating to imposing a tax on the transfer
  of estates of decedents  dying  on  or  after  April  first,  nineteen
  hundred  sixty-three,  relating  to an appendix of applicable internal
  revenue code provisions, and to repeal article 26-B of  the  tax  law,
  relating  to  the  generation  skipping  transfer tax (Part X); inten-
  tionally omitted (Part Y); to amend the tax law, in relation to vendor
  fees paid to vendor tracks (Part Z); to amend the racing,  pari-mutuel
  wagering  and  breeding  law,  in  relation  to licenses for simulcast
  facilities, sums relating to track  simulcast,  simulcast  of  out-of-
  state  thoroughbred  races,  simulcasting of races run by out-of-state
  harness tracks and distributions of wagers; to amend  chapter  281  of
  the  laws of 1994 amending the racing, pari-mutuel wagering and breed-

S. 6359--C                          3

  ing law and other laws relating to simulcasting and chapter 346 of the
  laws of 1990 amending the racing, pari-mutuel  wagering  and  breeding
  law  and  other  laws  relating  to simulcasting and the imposition of
  certain  taxes,  in  relation to extending certain provisions thereof;
  and to amend the racing, pari-mutuel wagering  and  breeding  law,  in
  relation  to  extending certain provisions thereof (Part AA); to amend
  the tax law, in relation to capital awards to vendor tracks (Part BB);
  to amend the tax law, the banking law, the public authorities law, and
  the administrative code of the city of New York, in  relation  to  the
  stock  transfer  tax, and to repeal certain provisions of the tax law,
  the state finance law and the administrative code of the city  of  New
  York  relating thereto (Part CC); to amend the tax law, in relation to
  conforming the due dates for the metropolitan commuter  transportation
  mobility  tax  for taxpayers with income from self-employment with the
  due dates for the personal income tax (Part DD); to  amend  the  state
  finance  law,  the upstate New York gaming economic development act of
  2013 and the tax law, in relation to  moneys  appropriated  or  trans-
  ferred  from  the  commercial  gaming  revenue  fund (Part EE); inten-
  tionally omitted (Part FF); to amend the tax law, in relation  to  the
  temporary  exemption  from  sales  and use taxes for premises used for
  commercial office space in lower Manhattan; and to  amend  part  C  of
  chapter  2  of  the  laws  of  2005  amending  the tax law relating to
  exemptions from sales and use taxes, in relation to the  effectiveness
  thereof (Subpart A); to amend the real property tax law and the admin-
  istrative  code  of  the  city of New York, in relation to extending a
  real property tax abatement program for certain commercial  properties
  in  cities  having a population of one million or more and in relation
  to extending a special reduction under the commercial rent tax in  the
  city  of  New York (Subpart B); to amend the real property tax law and
  the administrative code of the city of New York, in relation to appli-
  cations for tax abatements for industrial and commercial  construction
  work  on  properties in a city of one million or more persons (Subpart
  C); to amend the general city law and the administrative code  of  the
  city  of New York, in relation to extending the relocation and employ-
  ment assistance program and the Lower Manhattan relocation and employ-
  ment assistance program (Subpart D); to amend the general city law and
  the administrative code of the  city  of  New  York,  in  relation  to
  extending  the  special rebates and discounts provided pursuant to the
  energy cost savings program and the  Lower  Manhattan  energy  program
  (Subpart E); to amend the administrative code of the city of New York,
  in  relation  to  the amount of special reduction allowed (Subpart F);
  and to amend the real  property tax law, in relation to a real  estate
  tax  abatement program for certain commercial, industrial and manufac-
  turing properties in a city of one million or more persons (Subpart G)
  (Part GG); to amend the state finance law, in relation to establishing
  a spending cap and establishing a tax freedom fund (Part HH); to amend
  the tax law, in relation to simple personal income tax (Part  II);  to
  amend  the tax law, in relation to the cost of living adjustment (Part
  JJ); to amend the general municipal law and the tax law,  in  relation
  to  establishing  an  angel  tax  credit for investments made in small
  businesses (Part KK); to amend the tax law, in relation  to  exempting
  the  proceeds  from  service award programs for volunteer firefighters
  and ambulance workers from personal income taxes (Part LL);  to  amend
  the  tax  law,  in relation to establishing the public safety communi-
  cations surcharge  on  prepaid  wireless  telecommunications  services
  (Part  MM);  to  amend  the  tax law, in relation to the prepayment of

S. 6359--C                          4

  sales tax on motor fuel and diesel  motor  fuel  and  in  relation  to
  increasing  the  amount  of  tax  required to be prepaid on motor fuel
  (Part NN); to amend the tax law, in relation to the exemption of poli-
  tical  subdivisions  from  the imposition of the metropolitan commuter
  transportation mobility tax (Part  OO);  to  amend  the  tax  law,  in
  relation  to increasing the maximum award available under the historic
  preservation  tax  credit;  and  providing  for  the  repeal  of  such
  provisions upon expiration thereof (Part PP); to amend the civil prac-
  tice law and rules, in relation to the undertaking required during the
  pendency  of a stay of enforcement of a judgment against a participat-
  ing or non-participating  manufacturer  under  the  master  settlement
  agreement  (Part QQ); to amend the tax law, in relation to eliminating
  sales tax on transportation services; and to repeal certain provisions
  of such law relating thereto (Part RR);  to  amend  the  tax  law,  in
  relation  to  the  sale of food and beverages through vending machines
  (Part SS); to amend the tax law, in relation to establishing  business
  franchise  and  personal  income  tax  credits for certain musical and
  theatrical production expenses (Part TT); to amend  the  tax  law,  in
  relation to establishing a credit against income tax for the rehabili-
  tation of distressed commercial properties (Part UU); to amend chapter
  912 of the laws of 1920 relating to the regulation of boxing, sparring
  and  wrestling,  in  relation  to establishing protocols for combative
  sports and authorizing mixed martial arts events  in  this  state;  to
  amend the tax law, in relation to the imposition of a tax on the gross
  receipts  of  any  person  holding any professional or amateur boxing,
  sparring or wrestling match or exhibition, or  professional  combative
  sports  match  or  exhibition;  and  to  amend  the alcoholic beverage
  control law, in relation to allowing matches  or  exhibitions  on  the
  premises  of  certain  licensees  (Part  VV); to amend the tax law, in
  relation to providing an asbestos remediation tax credit (Part WW); to
  amend the tax law, in relation to exempting from sales and  compensat-
  ing use taxes the purchase of general aviation aircraft; and providing
  for  the  repeal  of  certain provisions upon expiration thereof (Part
  XX); to amend the tax law, in relation to  biofuel  production  credit
  for  production of cellulosic ethanol (Part YY); to amend the tax law,
  in relation to establishing a business franchise and  personal  income
  tax  credit  for natural resources improvement projects upon farmlands
  and forestlands (Part ZZ); to  amend  the  tax  law,  in  relation  to
  contributions  made to a farm reserve account (Part AAA); to amend the
  racing, pari-mutuel wagering and breeding  law,  in  relation  to  the
  simulcasting  of  races;  and repealing certain provisions of such law
  relating thereto (Part BBB); to amend the  tax  law,  in  relation  to
  video  lottery gaming (Part CCC); to amend the tax law, in relation to
  increasing the percentage New York  shall  receive  from  a  marketing
  allowance on the total revenue from vendor tracks (Part DDD); to amend
  the tax law, in relation to allowing vendor tracks to receive revenues
  when  located  within  certain development zone regions (Part EEE); to
  amend the tax law, in relation to the  disposition  of  revenues  from
  video  lottery  gaming  (Part  FFF);  to amend the racing, pari-mutuel
  wagering and breeding law, in relation to simulcasting of out-of-state
  thoroughbred races (Part GGG); to amend the tax law,  in  relation  to
  monetary  reporting  (Part  HHH); to amend the tax law, in relation to
  providing that the low income housing credit shall be  treated  as  an
  overpayment  of  taxes (Part III); to amend the tax law and the educa-
  tion law, in relation to enacting the "education investment incentives
  act" (Part JJJ); to amend the labor law and the tax law,  in  relation

S. 6359--C                          5

  to  the  creation  of the workers with disabilities tax credit program
  (Part KKK); to amend the tax law, in relation to authorizing advertis-
  ing during quick draw and authorizing the gaming  commission  to  sell
  advertising  space  on  lottery tickets (Part LLL); in relation to the
  definition of "equipment" when used in certain  circumstances  related
  to  empire  zones  (Part MMM); to amend the environmental conservation
  law, in relation to pre-installation review and certification of green
  roof materials; and to amend the tax law, in relation to  establishing
  a  green roof installation credit (Part NNN); to amend the tax law and
  the state finance law, in relation to establishing the study and  stay
  program  (Part OOO); to amend the tax law, in relation to establishing
  a gift for eliminating  the  stigma  relating  to  mental  illness  on
  personal  income  tax  returns;  to  amend  the  state finance law, in
  relation to establishing a mental illness  anti-stigma  fund;  and  to
  amend  the  mental hygiene law, in relation to directing the office of
  mental health to provide grants to organizations dedicated  to  elimi-
  nating  the  stigma attached to mental illness and persons with mental
  health needs (Part PPP); to amend the state finance law,  in  relation
  to requiring the department of health to submit certain reports to the
  legislature;  and  to  amend  the  tax  law,  in relation to gifts for
  prostate and testicular cancer research and education (Part  QQQ);  to
  amend the tax law, in relation to establishing tax credits for taxpay-
  ers  which  provide  their  employees with access to federal qualified
  transportation fringe benefits (Part RRR); to amend the  tax  law,  in
  relation  to  the  exemption  of  libraries from the imposition of the
  metropolitan commuter transportation mobility tax (Part SSS); to amend
  the tax law, in relation to providing a tax credit to farmers who sell
  or rent their agricultural land to a young farmer (Part TTT); to amend
  the tax law, in relation to  providing  a  tax  credit  for  allowable
  college  expenses  (Part  UUU);  to  amend the tax law, in relation to
  sales and compensating use taxes (Part VVV);  to  amend  the  economic
  development  law,  the  urban  development  corporation act, the state
  finance law and the tax law, in relation to establishing the New  York
  state  digital game development and incentive act (Part WWW); to amend
  the urban development corporation act, the  tax  law  and  the  public
  service  law,  in  relation  to New York state incubators and hotspots
  (Part XXX); and to amend the public housing law and the  tax  law,  in
  relation to providing certain tax credits for construction or rehabil-
  itation of middle-income housing (Part YYY)

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. This act enacts into law major  components  of  legislation
which are necessary to implement the state fiscal plan for the 2014-2015
state  fiscal  year.  Each  component  is wholly contained within a Part
identified as Parts A through YYY. The effective date for  each  partic-
ular  provision  contained  within  such  Part  is set forth in the last
section of such Part. Any provision in any section  contained  within  a
Part,  including the effective date of the Part, which makes a reference
to a section "of this act", when used in connection with that particular
component, shall be deemed  to  mean  and  refer  to  the  corresponding
section of the Part in which it is found. Section three of this act sets
forth the general effective date of this act.

S. 6359--C                          6

                                 PART A

  Section 1. Article 32 of the tax law is REPEALED.
  S 2. Section 180 of the tax law is REPEALED.
  S 3. Section 181 of the tax law is REPEALED.
  S  4.  Section 208 of the tax law, as added by chapter 415 of the laws
of 1944, subdivision 1 as amended by chapter 576 of the  laws  of  1994,
subdivision  1-A as amended by chapter 166 of the laws of 1991, subdivi-
sion 1-B as added by section 45 of part A and paragraph (k) of  subdivi-
sion  9  as  added by section 46 of part A of chapter 389 of the laws of
1997, subdivision 3, the opening paragraph, subparagraphs 6  and  11  of
paragraph (b), and the opening paragraph of paragraph (g) of subdivision
9  as  amended and subdivision 8-B and subparagraph 3-a of paragraph (b)
of subdivision 9 as added by chapter 817 of the laws of  1987,  subdivi-
sion  4  as  amended by section 1, subdivision 6 as amended by section 2
and subparagraph 2 of paragraph (a)  of  subdivision  9  as  amended  by
section  7  of part M of chapter 407 of the laws of 1999, subdivisions 5
and 7, paragraph (a) of subdivision 8-B, subparagraph  10  of  paragraph
(b)  and  paragraph  (j)  of  subdivision 9 as amended, paragraph (d) of
subdivision 8-B and paragraph (c-1) of subdivision 9 as added and  para-
graphs  (e)  and  (f) of subdivision 8-B as relettered by chapter 170 of
the laws of 1994, subdivisions 8 and 10 as amended by chapter 133 of the
laws of 1945, subdivision 8-A as added and subparagraph 1  of  paragraph
(a)  of  subdivision  9  as  amended by chapter 778 of the laws of 1972,
paragraph (b) of subdivision 8-A and paragraph (i) of subdivision  9  as
amended  by chapter 779 of the laws of 1972, subdivision 9 as amended by
chapter 713 of the laws of 1961,  paragraph  (a)  of  subdivision  9  as
amended by chapter 203 of the laws of 1962, subparagraphs 5, 9 and 10 of
paragraph  (a) and subparagraphs 8 and 9 of paragraph (b) of subdivision
9 as amended by chapter 61 of the laws of  1989  and  paragraph  (f)  of
subdivision  9  as separately amended by sections 278 and 347 of chapter
61 of the laws of 1989, clause (i) of subparagraph 5 of paragraph (a) of
subdivision 9 as amended by section 2 and subparagraph 20  of  paragraph
(b)  of  subdivision  9 as added by section 3 of part C of chapter 25 of
the laws of 2009, subparagraph 6 of paragraph (a) of  subdivision  9  as
added  by  chapter  895 of the laws of 1975 and as renumbered by chapter
613 of the laws of 1976, subparagraph 7 of paragraph (a) of  subdivision
9  as  added  by chapter 33 of the laws of 1978, subparagraph 8 of para-
graph (a) and subparagraph 7  of  paragraph  (b)  of  subdivision  9  as
amended by chapter 639 of the laws of 1986, subparagraph 11 of paragraph
(a) of subdivision 9 as added by chapter 15 of the laws of 1983, subpar-
agraph  12  of  paragraph  (a),  subparagraph  4-a  of paragraph (b) and
subparagraph 2 of paragraph (h) of subdivision 9 as amended and subpara-
graph 13 of paragraph (a) of subdivision 9 as added by  chapter  760  of
the  laws  of 1992, subparagraph 14 of paragraph (a) of subdivision 9 as
added by section 101 and paragraphs (l) and  (m)  of  subdivision  9  as
added  by  section  102  of  part  A  of chapter 56 of the laws of 1998,
subparagraph 15 of paragraph (a) of subdivision 9 as amended by  section
1 of part ZZ of chapter 63 of the laws of 2003, subparagraph 16 of para-
graph  (a)  of  subdivision 9 as added by section 1 of part K3, subpara-
graph 16 of paragraph (b) of subdivision 9 as added by section 2 of part
K3, subparagraph 17 of paragraph  (b)  of  subdivision  9  as  added  by
section  2  of part O3, and paragraphs (o), (p) and (q) of subdivision 9
as added by section 3 of part O3 of chapter 62  of  the  laws  of  2003,
subparagraph  18 of paragraph (a) of subdivision 9 as added by section 3
of part C and paragraph (o) of subdivision 9 as amended by section 2  of

S. 6359--C                          7

part  E  of  chapter 59 of the laws of 2013, subparagraph 3 of paragraph
(b) of subdivision 9 as amended by chapter 895  of  the  laws  of  1975,
subparagraph  4  of paragraph (b) and subparagraph 4 of paragraph (f) of
subdivision  9  as  amended by chapter 190 of the laws of 1990, subpara-
graph 15 of paragraph (b) of subdivision 9 as added by  chapter  309  of
the  laws  of 1996, subparagraph 18 of paragraph (b) of subdivision 9 as
added by section 21 of part H of chapter 1 of the laws of 2003, subpara-
graph 19 of paragraph (b) of subdivision 9 as added by section 1 of part
HH1 of chapter 57 of the laws of 2008, subparagraph  20-a  of  paragraph
(b)  of subdivision 9 as added by section 2-a of part T of this act, and
paragraphs (c-2) and (c-3) of subdivision 9 as added by  section  10  of
part Y of chapter 63 of the laws of 2000, paragraph (g) of subdivision 9
as  added by chapter 178 of the laws of 1965, subparagraph 1 and clauses
(B) and (C) of subparagraph 3 of  paragraph  (g)  of  subdivision  9  as
amended by chapter 613 of the laws of 1976, clause (A) of subparagraph 1
of  paragraph (g) of subdivision 9 as separately amended by chapters 675
and 836 of the laws of 1977, clause (B) of subparagraph 1, clause (A) of
subparagraph 2 and clause (A) of subparagraph  3  of  paragraph  (g)  of
subdivision  9  as amended by chapter 675 of the laws of 1977, item 1 of
clause (B) of subparagraph 1  of  paragraph  (g)  of  subdivision  9  as
amended by chapter 972 of the laws of 1984, clause (B) of subparagraph 2
of  paragraph (g) of subdivision 9 as amended by chapter 365 of the laws
of 1979, clause (C) of subparagraph 2 of paragraph (g) of subdivision  9
as  amended by chapter 1005 of the laws of 1970, paragraph (h) of subdi-
vision 9 as amended by chapter 606 of the laws of 1984, paragraph (n) of
subdivision 9 as added by section 1 of part O of chapter 85 of the  laws
of  2002,  subdivision  12  as added by chapter 828 of the laws of 1977,
subdivision 19 as added by chapter 681 of the laws of 1997,  is  amended
to read as follows:
  S 208. Definitions. As used in this article:
  1. The term "corporation" includes (a) an association within the mean-
ing  of  paragraph  three  of  subsection  (a)  of section seventy-seven
hundred one of the internal revenue code (including a limited  liability
company), (b) a joint-stock company or association, (c) a publicly trad-
ed  partnership  treated  as  a corporation for purposes of the internal
revenue code pursuant to section seventy-seven hundred four thereof  and
(d)  any business conducted by a trustee or trustees wherein interest or
ownership is evidenced  by  certificate  or  other  written  instrument.
"DISC"  and  "former DISC" mean any corporation which meets the require-
ments of subsection (a) of section nine hundred ninety-two of the inter-
nal revenue code[;].
  1-A. The term "New York S corporation"  means,  with  respect  to  any
taxable  year, a corporation subject to tax under this article for which
an election is in effect pursuant  to  subsection  (a)  of  section  six
hundred  sixty  of  this  chapter  for such year, any such year shall be
denominated a "New York S year", and such election shall be  denominated
a  "New  York S election". The term "New York C corporation" means, with
respect to any taxable year, a corporation subject  to  tax  under  this
article  which  is not a New York S corporation, and any such year shall
be denominated a "New York C year". The term  "termination  year"  means
any  taxable  year of a corporation during which the New York S election
terminates on a day other than the first day of such year.  The  portion
of  the  taxable  year ending before the first day for which such termi-
nation is effective shall be denominated the "S  short  year",  and  the
portion  of  such  year beginning on such first day shall be denominated
the "C short year". The term "New York S  termination  year"  means  any

S. 6359--C                          8

termination  year  which  is  not also an S termination year for federal
purposes.
  1-B. The term "QSSS" means a corporation which is a qualified subchap-
ter  S  subsidiary  as defined in subparagraph (B) of paragraph three of
subsection (b) of section thirteen hundred  sixty-one  of  the  internal
revenue  code. The term "exempt QSSS" means a QSSS exempt from tax under
this article as provided in paragraph (k) of subdivision  nine  of  this
section,  or a QSSS described in subclause (i) of clause (B) of subpara-
graph two of paragraph (k) of subdivision nine of this section,  wherein
the parent corporation of the QSSS is subject to tax under this article,
and  the  assets,  liabilities,  income  and  deductions of the QSSS are
treated as the assets, liabilities, income and deductions of the  parent
corporation. Where a QSSS is an exempt QSSS, then for all purposes under
this article:
  (a)  the  assets,  liabilities, income, deductions, property, payroll,
receipts, capital, credits, and all other tax attributes and elements of
economic activity of the QSSS shall be deemed to be those of the  parent
corporation,
  (b)  the stocks, bonds and other securities issued by, and any indebt-
edness from, the QSSS shall not be [subsidiary,] investment or  business
capital of the parent corporation,
  (c)  transactions between the parent corporation and the QSSS, includ-
ing the payment of interest and  dividends,  shall  not  be  taken  into
account, and
  (d)  general  executive  officers  of  the  QSSS shall be deemed to be
general executive officers of the parent corporation.
  2. The term "taxpayer" means any corporation subject to tax under this
article[;].
  3. The term "subsidiary" means  a  corporation  of  which  over  fifty
percent  of  the number of shares of stock entitling the holders thereof
to vote for the election of  directors  or  trustees  is  owned  by  the
taxpayer[;].
  4.  The  term  ["subsidiary capital" means investments in the stock of
subsidiaries  and  any  indebtedness  from  subsidiaries,  exclusive  of
accounts receivable acquired in the ordinary course of trade or business
for  services  rendered or for sales of property held primarily for sale
to customers, whether or not evidenced by written instrument,  on  which
interest  is  not claimed and deducted by the subsidiary for purposes of
taxation under article nine-A, thirty-two or thirty-three of this  chap-
ter,  provided,  however,  that,  in the discretion of the commissioner,
there shall be deducted from subsidiary capital  any  liabilities  which
are  directly  or indirectly attributable to subsidiary capital] "STOCK"
MEANS A DIRECT INTEREST IN A CORPORATION THAT IS TREATED AS  EQUITY  FOR
FEDERAL INCOME TAX PURPOSES.
  5.  (A)  The  term  "investment capital" means investments in stocks[,
bonds and other securities, corporate and governmental,] THAT  ARE  HELD
BY  THE  TAXPAYER  FOR MORE THAN SIX CONSECUTIVE MONTHS BUT ARE not held
for sale to customers in the regular course of business,  [exclusive  of
subsidiary  capital] OR, IF THE TAXPAYER MAKES THE ELECTION PROVIDED FOR
IN SUBPARAGRAPH ONE OF PARAGRAPH (A) OF SUBDIVISION THREE OF SECTION TWO
HUNDRED TEN-A OF THIS ARTICLE, ARE NOT QUALIFIED  FINANCIAL  INSTRUMENTS
AS  DESCRIBED  IN  SUBDIVISION FIVE OF SECTION TWO HUNDRED TEN-A OF THIS
ARTICLE. STOCK IN A CORPORATION THAT IS CONDUCTING  A  UNITARY  BUSINESS
WITH THE TAXPAYER, STOCK IN A CORPORATION THAT IS INCLUDED IN A COMBINED
REPORT  WITH  THE TAXPAYER PURSUANT TO THE COMMONLY OWNED GROUP ELECTION
IN SUBDIVISION FIVE OF SECTION TWO HUNDRED TEN-C OF  THIS  ARTICLE,  and

S. 6359--C                          9

stock   issued  by  the  taxpayer[,  provided,  however,  that,  in  the
discretion of the commissioner, there] SHALL NOT  CONSTITUTE  INVESTMENT
CAPITAL.  FOR  PURPOSES  OF  THIS  SUBDIVISION,  IF THE TAXPAYER OWNS OR
CONTROLS,  DIRECTLY OR INDIRECTLY, LESS THAN TWENTY PERCENT OF THE STOCK
OF A CORPORATION THAT ENTITLES THE  HOLDERS  THEREOF  TO  VOTE  FOR  THE
ELECTION OF TRUSTEES  OR DIRECTORS, THAT CORPORATION WILL BE PRESUMED TO
BE  CONDUCTING  A  BUSINESS THAT IS NOT UNITARY WITH THE BUSINESS OF THE
TAXPAYER.
  (B) THERE shall be deducted from investment  capital  any  liabilities
which  are  directly  or indirectly attributable to investment capital[;
and provided, further, that investment]. IF THE AMOUNT OF THOSE  LIABIL-
ITIES EXCEEDS THE AMOUNT OF INVESTMENT CAPITAL, THE AMOUNT OF INVESTMENT
CAPITAL WILL BE ZERO.
  (C)  INVESTMENT  capital  shall  not  include any such investments the
income from which is excluded from entire net  income  pursuant  to  the
provisions  of  paragraph (c-1) of subdivision nine of this section, and
that investment capital shall be computed without regard to  liabilities
directly or indirectly attributable to such investments, but only if air
carriers  organized  in  the  United States and operating in the foreign
country or countries in which the taxpayer has its major base  of  oper-
ations  and  in which it is organized, resident or headquartered (if not
in the same country as its major base of operations) are not subject  to
any  tax based on or measured by capital imposed by such foreign country
or countries or any political subdivision  thereof,  or  if  taxed,  are
provided  an exemption, equivalent to that provided for herein, from any
tax based on or measured by capital imposed by such foreign  country  or
countries  and  from  any  such tax imposed by any political subdivision
thereof[;].
  (D) IF A TAXPAYER ACQUIRES STOCK DURING THE SECOND HALF OF ITS TAXABLE
YEAR AND OWNS THAT STOCK ON THE LAST DAY OF THE TAXABLE YEAR, IT WILL BE
PRESUMED THAT THE TAXPAYER HELD THAT STOCK FOR MORE THAN SIX CONSECUTIVE
MONTHS DURING THE TAXABLE YEAR. HOWEVER, IF THE  TAXPAYER  DOES  NOT  IN
FACT  HOLD THAT STOCK FOR MORE THAN SIX CONSECUTIVE MONTHS, THE TAXPAYER
MUST INCREASE ITS TOTAL BUSINESS CAPITAL IN THE  IMMEDIATELY  SUCCEEDING
TAXABLE  YEAR  BY  THE  AMOUNT  INCLUDED  IN INVESTMENT CAPITAL FOR THAT
STOCK, NET OF ANY LIABILITIES ATTRIBUTABLE TO  THAT  STOCK  COMPUTED  AS
PROVIDED IN PARAGRAPH (B) OF THIS SUBDIVISION.
  (E)  WHEN  INCOME  OR  GAIN  FROM  A DEBT OBLIGATION OR OTHER SECURITY
CANNOT BE  APPORTIONED  TO  THE  STATE  USING  THE  BUSINESS  ALLOCATION
PERCENTAGE  AS  A RESULT OF UNITED STATES CONSTITUTIONAL PRINCIPLES, THE
DEBT OBLIGATION OR OTHER SECURITY WILL BE INCLUDED IN  INVESTMENT  CAPI-
TAL.
  6.  (A)  The  term "investment income" means income, including capital
gains in excess of capital  losses,  from  investment  capital,  to  the
extent  included  in  computing  entire  net  income, less, [(a)] in the
discretion of the commissioner, any  INTEREST  deductions  allowable  in
computing  entire  net income which are directly or indirectly attribut-
able to investment capital or investment income[, and (b)  such  portion
of  any  net  operating loss deduction allowable in computing entire net
income, as the investment income, before such deduction, bears to entire
net income, before such deduction,] provided, however, that in  no  case
shall  investment  income  exceed  entire net income[;]. IF THE TAXPAYER
ATTRIBUTES INTEREST DEDUCTIONS  TO  INVESTMENT  INCOME  AND  THE  AMOUNT
SUBTRACTED  EXCEEDS  INVESTMENT  INCOME,  THE  EXCESS  OF  THE  INTEREST
DEDUCTIONS OVER INVESTMENT INCOME MUST  BE  ADDED  BACK  TO  ENTIRE  NET
INCOME.

S. 6359--C                         10

  (B)  IN LIEU OF SUBTRACTING FROM INVESTMENT INCOME THE AMOUNT OF THOSE
INTEREST DEDUCTIONS, THE TAXPAYER MAY ELECT TO REDUCE ITS TOTAL  INVEST-
MENT  INCOME  BY FORTY PERCENT. IF THE TAXPAYER MAKES THIS ELECTION, THE
TAXPAYER MUST ALSO MAKE THE ELECTIONS PROVIDED FOR IN PARAGRAPHS (B) AND
(C) OF SUBDIVISION SIX-A OF THIS SECTION. A TAXPAYER WHICH DOES NOT MAKE
THIS ELECTION BECAUSE IT HAS NO INVESTMENT CAPITAL WILL NOT BE PRECLUDED
FROM MAKING THOSE OTHER ELECTIONS.
  (C)  INVESTMENT  INCOME  SHALL NOT INCLUDE ANY AMOUNT TREATED AS DIVI-
DENDS PURSUANT TO SECTION SEVENTY-EIGHT OF THE INTERNAL REVENUE CODE.
  6-A. (A) THE TERM "OTHER  EXEMPT  INCOME"  MEANS  THE  SUM  OF  EXEMPT
SUBPART F INCOME AND EXEMPT UNITARY CORPORATION DIVIDENDS.
  (B)  "EXEMPT SUBPART F INCOME" MEANS THE INCOME, AS DEFINED IN SECTION
952 OF THE INTERNAL REVENUE CODE, RECEIVED FROM A  CORPORATION  THAT  IS
CONDUCTING A UNITARY BUSINESS WITH THE TAXPAYER BUT IS NOT INCLUDED IN A
COMBINED  REPORT  WITH  THE  TAXPAYER,  LESS,  IN  THE DISCRETION OF THE
COMMISSIONER, ANY INTEREST DEDUCTIONS DIRECTLY OR  INDIRECTLY  ATTRIBUT-
ABLE  TO  THAT INCOME.  IN LIEU OF SUBTRACTING FROM ITS EXEMPT SUBPART F
INCOME THE AMOUNT OF THOSE INTEREST DEDUCTIONS, THE TAXPAYER  MAY  ELECT
TO  REDUCE  ITS  TOTAL  EXEMPT SUBPART F INCOME BY FORTY PERCENT. IF THE
TAXPAYER MAKES THIS ELECTION, THE TAXPAYER MUST ALSO MAKE THE  ELECTIONS
PROVIDED  FOR  IN  PARAGRAPH  (B) OF SUBDIVISION SIX OF THIS SECTION AND
PARAGRAPH (C) OF THIS SUBDIVISION.  A TAXPAYER WHICH DOES NOT MAKE  THIS
ELECTION BECAUSE IT HAS NO EXEMPT SUBPART F INCOME WILL NOT BE PRECLUDED
FROM MAKING THOSE OTHER ELECTIONS.
  (C)  "EXEMPT UNITARY CORPORATION DIVIDENDS" MEANS THOSE DIVIDENDS FROM
A CORPORATION THAT IS CONDUCTING A UNITARY BUSINESS  WITH  THE  TAXPAYER
BUT IS NOT INCLUDED IN A COMBINED REPORT WITH THE TAXPAYER, LESS, IN THE
DISCRETION  OF  THE  COMMISSIONER,  ANY  INTEREST DEDUCTIONS DIRECTLY OR
INDIRECTLY ATTRIBUTABLE TO SUCH INCOME.   IN LIEU  OF  SUBTRACTING  FROM
THIS DIVIDEND INCOME THOSE INTEREST DEDUCTIONS, THE TAXPAYER, OTHER THAN
TAXPAYERS  THAT  ARE OR WOULD BE TAXABLE IF DOING BUSINESS IN THIS STATE
UNDER ARTICLE NINE OR ARTICLE THIRTY-THREE OF THIS CHAPTER MAY ELECT  TO
REDUCE THE TOTAL AMOUNT OF THIS DIVIDEND INCOME BY FORTY PERCENT. IF THE
TAXPAYER  MAKES THIS ELECTION, THE TAXPAYER MUST ALSO MAKE THE ELECTIONS
PROVIDED FOR IN PARAGRAPH (B) OF SUBDIVISION SIX  OF  THIS  SECTION  AND
PARAGRAPH  (B)  OF THIS SUBDIVISION. A TAXPAYER WHICH DOES NOT MAKE THIS
ELECTION BECAUSE IT HAS NOT  RECEIVED  ANY  EXEMPT  UNITARY  CORPORATION
DIVIDENDS WILL NOT BE PRECLUDED FROM MAKING THOSE OTHER ELECTIONS.
  (D)  IF  THE  TAXPAYER  ATTRIBUTES INTEREST DEDUCTIONS TO OTHER EXEMPT
INCOME AND THE AMOUNT SUBTRACTED EXCEEDS OTHER EXEMPT INCOME, THE EXCESS
OF THE INTEREST DEDUCTIONS OVER OTHER EXEMPT INCOME MUST BE  ADDED  BACK
TO ENTIRE NET INCOME. IN NO CASE SHALL OTHER EXEMPT INCOME EXCEED ENTIRE
NET INCOME.
  (E)  OTHER EXEMPT INCOME SHALL NOT INCLUDE ANY AMOUNT TREATED AS DIVI-
DENDS PURSUANT TO SECTION SEVENTY-EIGHT OF THE INTERNAL REVENUE CODE.
  7. (a) The term  "business  capital"  means  all  assets,  other  than
[subsidiary capital,] investment capital and stock issued by the taxpay-
er,  less liabilities not deducted from [subsidiary or] investment capi-
tal [except that cash on hand and on deposit shall be treated as invest-
ment capital  or  as  business  capital  as  the  taxpayer  may  elect].
BUSINESS  CAPITAL  SHALL  INCLUDE  ONLY THOSE ASSETS THE INCOME, LOSS OR
EXPENSE OF WHICH ARE PROPERLY REFLECTED (OR  WOULD  HAVE  BEEN  PROPERLY
REFLECTED  IF  NOT  FULLY  DEPRECIATED  OR  EXPENSED  OR  DEPRECIATED OR
EXPENSED TO A NOMINAL AMOUNT) IN THE COMPUTATION OF  ENTIRE  NET  INCOME
FOR THE TAXABLE YEAR.

S. 6359--C                         11

  (b)  Provided, however, "business capital" shall not include assets to
the extent employed for  the  purpose  of  generating  income  which  is
excluded  from entire net income pursuant to the provisions of paragraph
(c-1) of subdivision nine of this section and shall be computed  without
regard  to  liabilities  directly  or  indirectly  attributable  to such
assets, but only if air carriers organized  in  the  United  States  and
operating  in the foreign country or countries in which the taxpayer has
its major base of operations and in which it is organized,  resident  or
headquartered  (if  not  in  the same country as its major base of oper-
ations) are not subject to any tax  based  on  or  measured  by  capital
imposed  by  such foreign country or countries or any political subdivi-
sion thereof, or if taxed, are provided an exemption, equivalent to that
provided for herein, from any  tax  based  on  or  measured  by  capital
imposed  by  such  foreign  country  or  countries and from any such tax
imposed by any political subdivision thereof[;].
  8. The term "business income" means entire net income minus investment
income[;] AND OTHER EXEMPT INCOME. IN NO EVENT SHALL THE SUM OF  INVEST-
MENT  INCOME  AND  OTHER  EXEMPT INCOME EXCEED ENTIRE NET INCOME. IF THE
TAXPAYER MAKES THE ELECTION PROVIDED FOR IN SUBPARAGRAPH  ONE  OF  PARA-
GRAPH (A) OF SUBDIVISION FIVE OF SECTION TWO HUNDRED TEN-A OF THIS ARTI-
CLE,  THEN ALL INCOME FROM QUALIFIED FINANCIAL INSTRUMENTS SHALL CONSTI-
TUTE BUSINESS INCOME.
  8-A. Provided, however, that with respect to a DISC or a former  DISC,
the following provisions shall apply:
  (a)  investments in the stocks, bonds or other securities of a DISC or
any indebtedness from a DISC shall not be treated as [either  subsidiary
capital  or] investment capital under [subdivisions four or] SUBDIVISION
five of this section,
  (b) any amounts deemed distributed from a DISC or a former DISC  which
are  taxable  as  dividends  pursuant  to subsection (b) of section nine
hundred ninety-five of the internal revenue  code  of  nineteen  hundred
fifty-four  shall be treated as business income, except any such amounts
from a former DISC attributable to amounts includible  in  a  taxpayer's
entire  net  income  for  a prior taxable year under subparagraph (B) of
paragraph (i) of subdivision nine of this section shall be excluded from
entire net income,
  (c) any gain recognized for federal income tax purposes on the  dispo-
sition of stock in a DISC, and any gain recognized on the disposition of
stock  in a former DISC, includible in gross income as a dividend pursu-
ant to subsection (c) of section nine hundred ninety-five of the  inter-
nal  revenue  code  of  nineteen hundred fifty-four, shall be treated as
business income, and
  (d) except as provided in paragraph (i) of subdivision  nine  of  this
section,  any  actual distribution from a DISC or a former DISC shall be
treated as business income  except  an  actual  distribution  which  for
federal  income  tax  purposes is treated as made out of "other earnings
and profits" under section  nine  hundred  ninety-six  of  the  internal
revenue  code  of nineteen hundred fifty-four, in which case such actual
distribution shall be treated as [either subsidiary income  or]  invest-
ment income under this article.
  [8-B.  (a) The term "minimum taxable income" shall mean the entire net
income of the taxpayer for the taxable year:
  (1) increased by the amount of the federal items of tax preference set
forth in section fifty-seven of the  internal  revenue  code  (with  the
modifications  set  forth  in  paragraph (b) of this subdivision), which
items of tax preference shall have the same meaning and be  computed  in

S. 6359--C                         12

the  same  manner  as  under section fifty-seven of the internal revenue
code,
  (2) determined with the federal adjustments described in paragraph (c)
of  this  subdivision, which adjustments shall have the same meaning and
be computed in the same manner as under sections  fifty-six  and  fifty-
eight of the internal revenue code,
  (3)  increased  by  the net operating loss deduction otherwise allowed
under paragraph (f) of subdivision nine of this section, and
  (4) reduced, for taxable years beginning after nineteen hundred  nine-
ty-three, by the alternative net operating loss deduction, as defined in
paragraph (d) of this subdivision.
  (b)  The federal items of tax preference referred to hereinabove shall
be modified by deducting "tax-exempt interest" and "accelerated depreci-
ation or amortization on certain property placed in service before Janu-
ary  1,  1987",  as  determined  under  paragraphs  five  and  seven  of
subsection (a) of section fifty-seven of the internal revenue code.
  (c) The adjustments referred to hereinabove shall be:
  (1) "Depreciation" as determined under paragraph one of subsection (a)
of  section fifty-six of the internal revenue code. For purposes of this
subparagraph, the depreciation item  of  adjustment  provided  for  here
shall  not include any amount attributable to property for which the tax
benefits of the accelerated cost recovery system are not available under
this article by reason of subparagraph ten of paragraph (b) of  subdivi-
sion nine of this section;
  (2)  "Mining  exploration  and  development costs" as determined under
paragraph two of subsection (a) of section  fifty-six  of  the  internal
revenue code;
  (3)  "Treatment  of  certain  long-term contracts" as determined under
paragraph three of subsection (a) of section fifty-six of  the  internal
revenue code;
  (4)  "Installment sales of certain property" as determined under para-
graph six of subsection (a) of section fifty-six of the internal revenue
code;
  (5) "Circulation expenditures of personal holding companies" as deter-
mined under subparagraph (C) of  paragraph  two  of  subsection  (b)  of
section fifty-six of the internal revenue code;
  (6)  "Merchant  marine capital construction funds" as determined under
paragraph two of subsection (c) of section  fifty-six  of  the  internal
revenue code;
  (7)  "Disallowance  of  passive  activity  loss"  as  determined under
subsection (b) of section fifty-eight of the internal revenue code; and
  (8) "Adjusted basis", as it appears in paragraph seven  of  subsection
(a)  of  section  fifty-six  of  the  internal revenue code, but without
taking  into  account  the  references  therein  to  paragraph  five  of
subsection (a) of section fifty-six of the internal revenue code.
  (d)  The term "alternative net operating loss deduction" means the net
operating loss deduction allowed for the taxable  year  under  paragraph
(f) of subdivision nine of this section, except as provided herein.
  (1)(A)  The  net  operating loss for any year beginning after nineteen
hundred eighty-nine which is  included  in  determining  such  deduction
shall be determined with the adjustments provided in subparagraph two of
paragraph  (a) of this subdivision, and shall be reduced by the items of
tax preference determined under subparagraph one  of  paragraph  (a)  of
this  subdivision,  attributable to such year. An item of tax preference
shall be taken into account only to the extent such item  increased  the

S. 6359--C                         13

amount  of  the  net operating loss for the taxable year under paragraph
(f) of subdivision nine of this section.
  (B)  In the case of loss years beginning before nineteen hundred nine-
ty, the amount of the net operating loss which may be  carried  over  to
taxable  years  beginning  after  nineteen  hundred eighty-nine shall be
equal to an amount which may be carried from the loss year to the  first
taxable  year  of  the taxpayer beginning after nineteen hundred eighty-
nine.
  (2) In determining the amount of such  deduction,  loss  carryforwards
and  carrybacks shall, subject to the provisions of subparagraph five of
paragraph (f) of subdivision nine of this section, be  computed  in  the
manner  set  forth  in  paragraph  two  of subsection (b) of section one
hundred seventy-two of the internal revenue code, except that,  for  the
reference  therein  to  taxable  income,  there shall be substituted the
phrase "ninety percent of  minimum  taxable  income  determined  without
regard to the alternative net operating loss deduction".
  (3)  The  amount  of such deduction shall not exceed ninety percent of
minimum taxable income determined  without  regard  to  such  deduction,
provided,  however,  the  term "ninety percent" shall be read as "forty-
five percent" with  respect  to  taxable  years  beginning  in  nineteen
hundred ninety-four.
  (e)  The  tax  commission may, whenever necessary in order to properly
reflect the minimum taxable income of any taxpayer, determine  the  year
or  period  in  which any item of income or deduction shall be included,
without regard to the method of accounting employed by the taxpayer.
  (f) If the period covered by a report under this article is other than
the period covered by the report to the United States  treasury  depart-
ment,  the minimum taxable income shall be appropriately modified pursu-
ant to regulations promulgated by the tax commission.]
  9. The term "entire net income" means total net income from all sourc-
es, which shall be presumably the same  as  the  entire  taxable  income
[(but not alternative minimum taxable income)], WHICH, EXCEPT AS HEREIN-
AFTER PROVIDED IN THIS SUBDIVISION,
  (i)  [which]  the  taxpayer is required to report to the United States
treasury department, or
  (ii) [which] the taxpayer would have been required to  report  to  the
United  States  treasury department if it had not made an election under
subchapter s of chapter one of the internal revenue code, or
  (iii) [which] the taxpayer, in the case  of  a  corporation  which  is
exempt from federal income tax (other than the tax on unrelated business
taxable  income  imposed under section 511 of the internal revenue code)
but which is subject to tax under this article, would have been required
to report  to  the  United  States  treasury  department  but  for  such
exemption, [except as hereinafter provided, and subject to any modifica-
tion  required by paragraphs (d) and (e) of subdivision three of section
two hundred ten of this article] OR
  (IV) IN THE CASE OF A CORPORATION ORGANIZED UNDER THE LAWS OF A  COUN-
TRY  OTHER  THAN  THE  UNITED  STATES, IS EFFECTIVELY CONNECTED WITH THE
CONDUCT OF A TRADE OR BUSINESS WITHIN THE UNITED  STATES  AS  DETERMINED
UNDER SECTION 882 OF THE INTERNAL REVENUE CODE,
  (a) Entire net income shall not include:
  [(1)  income,  gains  and  losses from subsidiary capital which do not
include the amount of a recovery in respect of any war loss  except  for
such  amounts  from  a  former DISC which are treated as business income
under subdivision eight-A of this section,

S. 6359--C                         14

  (2) fifty percent of dividends (A) other than from  subsidiaries,  and
(B)  other  than  amounts  treated  as business income under subdivision
eight-A of this section,  on  shares  of  stock  which  conform  to  the
requirements  of  subsection (c) of section two hundred forty-six of the
internal revenue code.]
  (3) bona fide gifts,
  (4) income and deductions with respect to amounts received from school
districts and from corporations and associations, organized and operated
exclusively  for  religious, charitable or educational purposes, no part
of the net earnings of which inures to the benefit of any private share-
holder or individual, for the operation of school buses,
  (5) (i) any refund or credit of a  tax  imposed  under  this  article,
article  twenty-three, or FORMER article thirty-two of this chapter, for
which tax no exclusion or  deduction  was  allowed  in  determining  the
taxpayer's  entire  net income under this article, article twenty-three,
or FORMER article thirty-two of this chapter for any prior year, (ii)  a
refund or credit of general corporation tax allowed by subdivision elev-
en of section 11-604 of the administrative code of the city of New York,
or  (iii)  any  refund  or  credit  of  a tax imposed under sections one
hundred eighty-three, one hundred eighty-three-a,  one  hundred  eighty-
four or one hundred eighty-four-a of this chapter, and
  (6)  any amount treated as dividends pursuant to section seventy-eight
of the internal revenue code [and not otherwise deductible under subpar-
agraphs one and two of this paragraph];
  (7) that portion of wages and salaries paid or incurred for the  taxa-
ble year for which a deduction is not allowed pursuant to the provisions
of section two hundred eighty-C of the internal revenue code.
  [(8)  in the case of a taxpayer who is separately or as a partner of a
partnership doing an insurance business as a  member  of  the  New  York
insurance  exchange described in section six thousand two hundred one of
the insurance law, any item of income, gain, loss or deduction  of  such
business  which  is  the  taxpayer's  distributive or pro rata share for
federal income tax purposes or which the taxpayer is  required  to  take
into account separately for federal income tax purposes.]
  (9)  for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph  eight
of  subsection  (f)  of  section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles) and proper-
ty of a taxpayer principally engaged in the conduct of  aviation  (other
than  air  freight  forwarders acting as principal and like indirect air
carriers) which is placed in service before taxable years  beginning  in
nineteen  hundred  eighty-nine,  any  amount  which  is  included in the
taxpayer's federal taxable income solely as a result of an election made
pursuant to the provisions of such paragraph eight as it was  in  effect
for  agreements  entered  into  prior to January first, nineteen hundred
eighty-four;
  (10) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph  eight
of  subsection  (f)  of  section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles) and proper-
ty of a taxpayer principally engaged in the conduct of  aviation  (other
than  air  freight  forwarders acting as principal and like indirect air
carriers) which is placed in service before taxable years  beginning  in
nineteen  hundred  eighty-nine, any amount which the taxpayer could have

S. 6359--C                         15

excluded from federal taxable  income  had  it  not  made  the  election
provided  for in such paragraph eight as it was in effect for agreements
entered into prior to January first, nineteen hundred eighty-four;
  (11)  the amount deductible pursuant to paragraph (j) of this subdivi-
sion; and
  (12) upon the disposition of property to which paragraph (j)  of  this
subdivision  applies,  the amount, if any, by which the aggregate of the
amounts described in subparagraph ten of paragraph (b) of this  subdivi-
sion  attributable to such property exceeds the aggregate of the amounts
described in paragraph (j) of  this  subdivision  attributable  to  such
property; and
  [(13)  if  the added tax provided for in either (i) former subdivision
two of section one hundred eighty-two of this chapter (relating to  real
estate  corporations)  or  (ii)  former subdivision one-a of section two
hundred nine of this chapter (relating to real estate corporations)  has
been  imposed  upon  the  taxpayer,  any  income  which has been used in
computing such tax.]
  (14) The amount deductible pursuant to paragraph  [(l)]  (I)  of  this
subsection.
  [(15)  In  the  case  of  an attorney-in-fact, with respect to which a
mutual insurance company, which  is  an  interinsurer  or  a  reciprocal
insurer  and  is subject to tax under subdivision (a) of section fifteen
hundred ten of this chapter, has made the election  provided  for  under
section  eight  hundred  thirty-five  of  the  Internal Revenue Code, an
amount equal to the excess, if any, of the amounts paid or  incurred  by
such  interinsurer  or  reciprocal  insurer  in  the taxable year to the
attorney-in-fact over the deduction  allowed  to  such  interinsurer  or
reciprocal insurer with respect to amounts paid or incurred in the taxa-
ble  year  to  the attorney-in-fact under subsection (b) of such section
eight hundred thirty-five of the Internal Revenue Code.]
  (16) In the case of a taxpayer subject to the modification provided by
subparagraph sixteen of paragraph (b) of this  subdivision,  the  amount
required  to  be recaptured pursuant to subsection (d) of section 179 of
the internal revenue code with  respect  to  property  upon  which  such
modification was based.
  (17)  FOR  TAXABLE  YEARS  BEGINNING  AFTER DECEMBER THIRTY-FIRST, TWO
THOUSAND TWO, THE AMOUNT DEDUCTIBLE PURSUANT TO PARAGRAPH (N-1) OF  THIS
SUBDIVISION.
  (18)  the  amount of income or gain included in federal taxable income
of a taxpayer that is a partner in a qualified entity or is a  qualified
entity  that  is  located both within and without a New York state inno-
vation hot spot, to the extent that the income or gain  is  attributable
to  the  operations  of a qualified entity at or as part of the New York
state innovation hot spot as provided in section  thirty-eight  of  this
chapter.
  (19)  THE  AMOUNT  COMPUTED  PURSUANT  TO PARAGRAPH (R) OR (S) OF THIS
SUBDIVISION, BUT NOT BOTH SUCH AMOUNTS.
  (b) Entire net income  shall  be  determined  without  the  exclusion,
deduction or credit of:
  (1) [the amount of any specific exemption or credit allowed in any law
of  the  United  States imposing any tax on or measured by the income of
corporations,] IN THE CASE OF A CORPORATION ORGANIZED UNDER THE LAW OF A
COUNTRY OTHER THAN THE UNITED STATES, EXCEPT AS TREATED AS OTHER  EXEMPT
INCOME  UNDER  SUBDIVISION  SIX-A  OF  THIS SECTION, (I) ANY PART OF ANY
INCOME FROM DIVIDENDS OR INTEREST ON ANY KIND OF  STOCK,  SECURITIES  OR
INDEBTEDNESS,  BUT  ONLY  IF  SUCH  INCOME  IS  TREATED  AS  EFFECTIVELY

S. 6359--C                         16

CONNECTED WITH THE CONDUCT OF A TRADE OR BUSINESS IN THE  UNITED  STATES
PURSUANT  TO  SECTION  864 OF THE INTERNAL REVENUE CODE, (II) ANY INCOME
EXEMPT FROM FEDERAL TAXABLE INCOME UNDER ANY TREATY  OBLIGATION  OF  THE
UNITED  STATES,  BUT ONLY IF SUCH INCOME WOULD BE TREATED AS EFFECTIVELY
CONNECTED IN ABSENCE OF SUCH EXEMPTION PROVIDED THAT SUCH  TREATY  OBLI-
GATION  DOES  NOT  PRECLUDE  THE  TAXATION OF SUCH INCOME BY A STATE, OR
(III) ANY INCOME WHICH WOULD BE TREATED AS EFFECTIVELY CONNECTED IF SUCH
INCOME WERE NOT EXCLUDED FROM GROSS INCOME PURSUANT TO SUBSECTION (A) OF
SECTION 103 OF THE INTERNAL REVENUE CODE;
  (2) any part of any income from dividends or interest on any  kind  of
stock,  securities  or  indebtedness, [except as provided in clauses (1)
and (2) of paragraph (a) hereof] TREATED AS OTHER  EXEMPT  INCOME  UNDER
SUBDIVISION SIX-A OF THIS SECTION,
  (3)  taxes  on or measured by profits or income paid or accrued to the
United States, any of its possessions or to any foreign country, includ-
ing taxes in lieu of any of  the  foregoing  taxes  otherwise  generally
imposed  by  any  foreign  country  or  by  any possession of the United
States,
  (3-a) taxes on or measured by profits  or  income,  or  which  include
profits  or  income  as a measure, paid or accrued to any other state of
the United States, or any  political  subdivision  thereof,  or  to  the
District  of  Columbia,  including taxes expressly in lieu of any of the
foregoing taxes otherwise generally imposed by any other  state  of  the
United  States, or any political subdivision thereof, or the District of
Columbia;
  (4) taxes imposed under this article  and  article  thirty-two  AS  IN
EFFECT  ON DECEMBER THIRTY-FIRST, TWO THOUSAND FOURTEEN and sections one
hundred eighty-three, one hundred eighty-three-a,  one  hundred  eighty-
four and one hundred eighty-four-a of this chapter,
  (4-a)(A) [the entire amount allowable as an exclusion or deduction for
stock transfer taxes imposed by article twelve of this chapter in deter-
mining  the  entire  taxable  income  which  the taxpayer is required to
report to the United States treasury department but only to  the  extent
that  such  taxes  are  incurred and paid in market making transactions,
(B)] in those instances where a credit for the special additional  mort-
gage  recording  tax credit is allowed under [paragraph (a) of] subdivi-
sion [seventeen] NINE of section two hundred [ten] TEN-B of  this  arti-
cle,  the  amount  allowed  as an exclusion or deduction for the special
additional mortgage  recording  tax  imposed  by  subdivision  one-a  of
section  two  hundred  fifty-three  of  this  chapter in determining the
entire taxable income which the taxpayer is required to  report  to  the
United  States  treasury  department,  and  [(C)]  (B) unless the credit
allowed pursuant to subdivision [seventeen] NINE of section two  hundred
[ten]  TEN-B of this article is reflected in the computation of the gain
or loss so as to result in an increase in such gain or decrease of  such
loss,  for  federal income tax purposes, from the sale or other disposi-
tion of the property with respect to which the special additional  mort-
gage  recording tax imposed pursuant to subdivision one-a of section two
hundred fifty-three of this chapter was paid, the amount of the  special
additional  mortgage  recording  tax  imposed  by  subdivision  one-a of
section two hundred fifty-three of this chapter which was paid and which
is reflected in the computation of the basis of the property  so  as  to
result  in  a decrease in such gain or increase in such loss for federal
income tax purposes from the sale or other disposition of  the  property
with respect to which such tax was paid.

S. 6359--C                         17

  (6)  [in  the discretion of the tax commission, any amount of interest
directly or indirectly and  any  other  amount  directly  or  indirectly
attributable  as a carrying charge or otherwise to subsidiary capital or
to income, gains or losses from subsidiary capital] ANY  AMOUNT  ALLOWED
AS  A  DEDUCTION  FOR THE TAXABLE YEAR UNDER SECTION 172 OF THE INTERNAL
REVENUE CODE, INCLUDING CARRYOVERS  OF  DEDUCTIONS  FROM  PRIOR  TAXABLE
YEARS.
  [(7)  in the case of a taxpayer who is separately or as a partner of a
partnership doing an insurance business as a  member  of  the  New  York
insurance  exchange described in section six thousand two hundred one of
the insurance law, such taxpayer's distributive or pro rata share of the
allocated entire  net  income  of  such  business  as  determined  under
sections fifteen hundred three and fifteen hundred four of this chapter,
provided  however,  in  the  event such allocated entire net income is a
loss, such taxpayer's distributive or pro rata share of such loss  shall
not  be  subtracted  from federal taxable income in computing entire net
income under this subdivision.]
  (8) for taxable years beginning after December thirty-first,  nineteen
hundred eighty-one, except with respect to property which is a qualified
mass  commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred  sixty-eight  of  the  internal
revenue code (relating to qualified mass commuting vehicles) and proper-
ty  of  a taxpayer principally engaged in the conduct of aviation (other
than air freight forwarders acting as principal and  like  indirect  air
carriers)  which  is placed in service before taxable years beginning in
nineteen hundred eighty-nine, any amount which the taxpayer claimed as a
deduction in computing its federal taxable income solely as a result  of
an  election  made pursuant to the provisions of such paragraph eight as
it was in effect for agreements entered into  prior  to  January  first,
nineteen hundred eighty-four;
  (9)  for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph  eight
of  subsection  (f)  of  section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles) and proper-
ty of a taxpayer principally engaged in the conduct of  aviation  (other
than  air  freight  forwarders acting as principal and like indirect air
carriers) which is placed in service before taxable years  beginning  in
nineteen  hundred  eighty-nine, any amount which the taxpayer would have
been required to include in  the  computation  of  its  federal  taxable
income had it not made the election permitted pursuant to such paragraph
eight  as  it was in effect for agreements entered into prior to January
first, nineteen hundred eighty-four;
  (10) in the case of property placed in service in taxable years begin-
ning before nineteen hundred ninety-four, for  taxable  years  beginning
after  December  thirty-first,  nineteen hundred eighty-one, except with
respect to property subject to the provisions  of  section  two  hundred
eighty-F   of  the  internal  revenue  code,  property  subject  to  the
provisions of section one hundred sixty-eight of  the  internal  revenue
code which is placed in service in this state in taxable years beginning
after  December  thirty-first, nineteen hundred eighty-four and property
of a taxpayer principally engaged in the conduct of aviation (other than
air freight forwarders acting as principal and like indirect air  carri-
ers)  which is placed in service before taxable years beginning in nine-
teen  hundred  [eight-nine]  EIGHTY-NINE,  the  amount  allowable  as  a

S. 6359--C                         18

deduction determined under section one hundred sixty-eight of the inter-
nal revenue code;
  (11)  upon  the disposition of property to which paragraph (j) of this
subdivision applies, the amount, if any, by which the aggregate  of  the
amounts  described  in  such paragraph (j) attributable to such property
exceeds the aggregate of the amounts described in  subparagraph  ten  of
this paragraph attributable to such property.
  (15)  Real  property taxes paid on qualified agricultural property and
deducted in determining federal taxable income, to  the  extent  of  the
amount of the agricultural property tax credit allowed under subdivision
[twenty-two] ELEVEN of section two hundred [ten] TEN-B of this article.
  (16)  In  the  case  of  a taxpayer which is not an eligible farmer as
defined in paragraph (b) of subdivision [twenty-two] ELEVEN  of  section
two  hundred  [ten]  TEN-B  of this article, the amount of any deduction
claimed pursuant to section  179  of  the  internal  revenue  code  with
respect  to  a sport utility vehicle which is not a passenger automobile
as defined in paragraph 5 of subsection  (d)  of  section  280F  of  the
internal revenue code.
  (17)  for  taxable  years  beginning  after December thirty-first, two
thousand two, in the case of qualified property described  in  paragraph
two  of  subsection k of section 168 of the internal revenue code, other
than qualified resurgence zone property described in  paragraph  (q)  of
this subdivision, and other than qualified New York Liberty Zone proper-
ty  described  in  paragraph two of subsection b of section 1400L of the
internal revenue code (without regard to clause (i) of subparagraph  (C)
of  such paragraph), which was placed in service on or after June first,
two thousand three, the amount allowable as a  deduction  under  section
167 of the internal revenue code.
  (18) Premiums paid for environmental remediation insurance, as defined
in  section  twenty-three  of  this chapter, and deducted in determining
federal taxable income, to the extent of the amount of the environmental
remediation insurance credit allowed under such section twenty-three and
subdivision [thirty-five] NINETEEN of section two hundred [ten] TEN-B of
this article.
  (19) The amount of any  deduction  allowed  pursuant  to  section  one
hundred ninety-nine of the internal revenue code.
  (20) The amount of any federal deduction for taxes imposed under arti-
cle twenty-three of this chapter.
  (20-a) The amount of any federal deduction for the excise tax on tele-
communication services to the extent such taxes are used as the basis of
the  calculation of the tax-free NY area excise tax on telecommunication
services credit allowed under subdivision [forty-eight]  FORTY-THREE  of
section two hundred [ten] TEN-B of this article.
  [(c)  Entire  net  income  shall include income within and without the
United States;] (21) THE AMOUNT OF ANY FEDERAL DEDUCTION FOR REAL  PROP-
ERTY  TAXES TO THE EXTENT SUCH TAXES ARE USED AS THE BASIS OF THE CALCU-
LATION OF THE REAL PROPERTY TAX CREDIT FOR MANUFACTURERS  ALLOWED  UNDER
SUBDIVISION FORTY-FOUR OF SECTION TWO HUNDRED TEN-B OF THIS ARTICLE.
  (c-1)(1)  Notwithstanding  any other provision of this article, in the
case of a taxpayer which is a foreign air carrier holding a foreign  air
carrier  permit issued by the United States department of transportation
pursuant to section four hundred two of  the  federal  aviation  act  of
nineteen  hundred  fifty-eight, as amended, and which is qualified under
subparagraph two of this paragraph, entire net income shall not include,
and shall be computed without the  deduction  of,  amounts  directly  or
indirectly  attributable  to,  (i)  any income derived from the interna-

S. 6359--C                         19

tional operation  of  aircraft  as  described  in  and  subject  to  the
provisions of section eight hundred eighty-three of the internal revenue
code,  (ii)  income  without the United States which is derived from the
operation  of aircraft, and (iii) income without the United States which
is of a type described in  subdivision  (a)  of  section  eight  hundred
eighty-one  of  the internal revenue code except that it is derived from
sources without the United  States.  Entire  net  income  shall  include
income  described in clauses (i), (ii) and (iii) of this subparagraph in
the case of taxpayers not described in the previous sentence.
  (2) A taxpayer is qualified under this subparagraph  if  air  carriers
organized  in  the United States and operating in the foreign country or
countries in which the taxpayer has its major base of operations and  in
which  it  is  organized,  resident or headquartered (if not in the same
country as its major base of operations) are not subject to  any  income
tax  or  other tax based on or measured by income or receipts imposed by
such foreign country or countries or any political subdivision  thereof,
or  if  so  subject to such tax, are provided an exemption from such tax
equivalent to that provided for herein.
  (c-2) Adjustments by qualified public utilities. (1) In the case of  a
taxpayer which is a qualified public utility, entire net income shall be
computed with the adjustments set forth in this paragraph.
  (2)  Definitions.  (A)  Qualified  public utility. The term "qualified
public utility" means a taxpayer which: (i)  on  December  thirty-first,
nineteen  hundred ninety-nine, was subject to the ratemaking supervision
of the state department of public service, and (ii) for the year  ending
on  December  thirty-first, nineteen hundred ninety-nine, was subject to
tax under former section one hundred eighty-six of this chapter.
  (B) Transition property. The term "transition property" means property
placed in service by the taxpayer before January  first,  two  thousand,
for  which a depreciation deduction is allowed under section one hundred
sixty-seven of the internal revenue code.
  (3) Federal depreciation disallowed. With respect to transition  prop-
erty,  the  deduction  for  federal income tax purposes for depreciation
shall not be allowed.
  (4) New York depreciation. With  respect  to  transition  property,  a
deduction  shall  be  allowed  for the depreciation expense shown on the
books and records of the taxpayer for the taxable year and determined in
accordance with generally accepted accounting principles.
  (5) Regulatory assets. A deduction shall be allowed for amounts recog-
nized as expense on the books and records of the taxpayer for the  taxa-
ble  year,  which  amounts were recognized as expense for federal income
tax purposes in a taxable year ending  on  or  before  December  thirty-
first,  nineteen  hundred ninety-nine, where: (A) such amounts represent
expenditures which, when made, were charged to a deferred debit  account
or  similar  asset account on the books and records of the taxpayer, and
where (B) the recognition of expense on the books  and  records  of  the
taxpayer  is  matched by revenue stemming from a procedure or adjustment
allowing the recovery of such expenditures, and where (C)  such  revenue
is recognized for federal income tax purposes in the taxable year.
  (6)  Basis for gain or loss. (A) Recognition transactions. (i) General
rule - book basis. Except as provided in subclause (ii) of this  clause,
where  transition property is sold or otherwise disposed of in the taxa-
ble year in a transaction of the type requiring recognition of  gain  or
loss  for  federal  income  tax  purposes, the basis for determining the
amount of such gain or loss under this article shall be the cost of  the
property less the accumulated depreciation on the property determined on

S. 6359--C                         20

the  books  and  records  of  the  taxpayer in accordance with generally
accepted accounting principles.
  (ii)  Qualified  gain  -  New  York basis. Where a sale or disposition
described in subclause (i) of this clause results in recognition of gain
for federal income tax purposes, and where either (I)  such  recognition
occurs  in  a taxable year ending after nineteen hundred ninety-nine and
before two thousand ten, or (II) such recognition is with respect  to  a
nuclear  electric  generating  facility,  the  basis for determining the
amount of such gain under this article shall be the cost of the property
less the aggregate of the New York depreciation deductions on the  prop-
erty determined under subparagraph four of this paragraph.
  (iii)  No  conversion  of  gain  to  loss. In the event that the basis
determined under subclause (ii) of this clause results in  determination
of  a  loss  on the sale or disposition of the property, no gain or loss
shall be recognized under this article with  respect  to  such  sale  or
disposition.
  (B)  Nonrecognition transactions. (i) Carryover basis. (I) where tran-
sition property is disposed of ("original disposition") in a transaction
of a type requiring deferral of recognition of gain or loss for  federal
income tax purposes, and where (II) there is a subsequent recognition of
gain  or loss for federal income tax purposes ("clause B gain or loss"),
the amount of which is determined by reference, in whole or in part,  to
the  basis  of  such transition property ("underlying transition proper-
ty"), then (III) the amount of such clause B gain  or  loss  under  this
article shall be adjusted as provided in subclause (ii) or (iii) of this
clause.
  (ii)  General  rule  -  book  basis  adjustment. Except as provided in
subclause (iii) of this clause, the amount of clause  B  gain  shall  be
reduced,  or  the  amount  of  clause B loss increased, by the amount by
which the book basis of the underlying transition property on  the  date
of  original  disposition  (determined using the provisions of subclause
(i) of clause (A) of this subparagraph) exceeds the federal  income  tax
basis of such property on such date.
  (iii)  Qualified gain - New York basis adjustment. Where clause B gain
either (I) occurs in a taxable year ending after nineteen hundred  nine-
ty-nine and before two thousand ten, or (II) is with respect to a nucle-
ar  electric  generating  facility,  the  amount of such gain under this
article shall be reduced, but not below zero, by the amount by which the
New York basis of the underlying transition  property  on  the  date  of
original  disposition (determined using the provisions of subclause (ii)
of clause (A) of this subparagraph) exceeds the federal income tax basis
of such property on such date.
  (iv) Application to replacement  property  and  transferee  taxpayers.
This  clause  shall apply whether the clause B gain or loss: (I) is with
respect to either transition property or depreciable property the  basis
of  which  is determined by reference to transition property, or (II) is
recognized by either a qualified public utility or by a  taxpayer  which
is  a  transferee of transition property (whether or not such transferee
is a qualified public utility, notwithstanding subparagraph one of  this
paragraph).
  (c-3)  Depreciation adjustments by qualified power producers and pipe-
line companies. (1) In the case of  a  qualified  taxpayer,  entire  net
income  shall be computed with the depreciation adjustments set forth in
this paragraph.
  (2) Definitions. (A) Qualified taxpayer. The term "qualified taxpayer"
means a qualified power producer or a qualified pipeline.

S. 6359--C                         21

  (B) Qualified power producer.  The  term  "qualified  power  producer"
means  a  taxpayer which: (i) on December thirty-first, nineteen hundred
ninety-nine, was not subject to the ratemaking supervision of the  state
department  of  public service, and (ii) for the year ending on December
thirty-first,  nineteen  hundred  ninety-nine,  was subject to tax under
former section one hundred eighty-six of this chapter on account of  its
being principally engaged in the business of supplying electricity.
  (C) Qualified pipeline. The term "qualified pipeline" means a taxpayer
which:  (i)  on December thirty-first, nineteen hundred ninety-nine, was
subject to the ratemaking supervision of either the federal energy regu-
latory commission or the state department of public  service,  and  (ii)
for  the  year ending on December thirty-first, nineteen hundred ninety-
nine, was subject to tax under sections one hundred eighty-three and one
hundred eighty-four of this chapter on account of its being  principally
engaged in the business of pipeline transmission.
  (D) Transition property. The term "transition property" means property
placed  in  service  by  a  qualified taxpayer before January first, two
thousand, for which a depreciation deduction is  allowed  under  section
one hundred sixty-seven of the internal revenue code.
  (3)  Federal depreciation disallowed. With respect to transition prop-
erty, the deduction for federal income  tax  purposes  for  depreciation
shall not be allowed.
  (4)  New  York  depreciation.  With  respect to transition property, a
deduction shall be allowed for  the  depreciation  expense  computed  as
provided  in this subparagraph. (A) All transition property shown on the
books and records of the taxpayer on January first, two  thousand  shall
be  treated  as  a  single asset placed in service on such date. The New
York basis for purposes of computing the depreciation deduction on  such
single  asset  shall  be  the net book value of such transition property
determined on the first day of the federal taxable year  ending  in  two
thousand  (or  on  the  date  any such property is placed in service, if
later) adjusted as provided in clause (B) of this subparagraph.
  (B) If transition property is sold or otherwise disposed of,  the  New
York basis of the single asset shall be reduced on the date of such sale
or  disposition  by the amount of the adjusted federal tax basis of such
property on such date.
  (C) The New York depreciation deduction allowed for any  taxable  year
with  respect to such single asset shall be computed using the straight-
line method, a twenty-year life, and a salvage value of zero.
  (D) For purposes of this subparagraph, the term "net book value" means
cost reduced by accumulated depreciation shown on the books and  records
of the taxpayer and determined, in the case of a qualified power produc-
er,  in accordance with generally accepted accounting principles; and in
the case of a qualified pipeline,  in  accordance  with  the  taxpayer's
regulatory  reports  filed with the federal energy regulatory commission
or state department of public service.
  (d) The [tax commission] COMMISSIONER may, whenever necessary in order
properly to reflect the entire net income of any taxpayer, determine the
year or period in which  any  item  of  income  or  deduction  shall  be
included,  without  regard  to  the method of accounting employed by the
taxpayer[;].
  (e) The entire net income of any bridge commission created by  act  of
congress  to  construct  a bridge across an international boundary means
its gross income less the expense of maintaining and operating its prop-
erties, the annual interest upon its bonds and  other  obligations,  and

S. 6359--C                         22

the  annual  charge  for  the retirement of such bonds or obligations at
maturity[;].
  [(f)  A  net  operating loss deduction shall be allowed which shall be
presumably the same as the net operating loss  deduction  allowed  under
section  one  hundred seventy-two of the internal revenue code, or which
would have been allowed if the taxpayer had not made an  election  under
subchapter s of chapter one of the internal revenue code, except that in
every instance where such deduction is allowed under this article:
  (1)  any  net  operating  loss  included in determining such deduction
shall be adjusted to reflect the inclusions and exclusions  from  entire
net income required by paragraphs (a), (b) and (g) hereof,
  (2)  such deduction shall not include any net operating loss sustained
during any taxable year  beginning  prior  to  January  first,  nineteen
hundred  sixty-one, or during any taxable year in which the taxpayer was
not subject to the tax imposed by this article,
  (3) such deduction shall not exceed the deduction for the taxable year
allowed under section one hundred seventy-two of  the  internal  revenue
code,  or  the  deduction  for  the  taxable  year which would have been
allowed if the taxpayer had not made an election under subchapter  s  of
chapter one of the internal revenue code,
  (4)  in the case of a New York S corporation, such deduction shall not
include any net operating loss sustained during a New  York  C  year  or
during a New York S year beginning prior to nineteen hundred ninety, and
in  the  case  of  a  New  York  C corporation, such deduction shall not
include any net operating loss sustained  during  a  New  York  S  year,
provided,  however, a New York S year shall be treated as a taxable year
for purposes of determining the number of taxable years to which  a  net
operating loss may be carried back or carried forward, and
  (5) the net operating loss deduction allowed under section one hundred
seventy-two  of  the  internal  revenue  code shall for purposes of this
paragraph be determined as  if  the  taxpayer  had  elected  under  such
section  to  relinquish  the entire carryback period with respect to net
operating losses, except with respect to the first ten thousand  dollars
of each of such losses, sustained during taxable years ending after June
thirtieth, nineteen hundred eighty-nine.
  (g)  For  taxable  years  commencing  prior to January first, nineteen
hundred eighty-seven, at the election of the taxpayer, a deduction shall
be allowed for expenditures paid or incurred during the taxable year for
the construction, reconstruction,  erection  or  improvement  of  either
industrial  waste  treatment facilities or air pollution control facili-
ties, or, with respect to taxable years beginning on  or  after  January
first, nineteen hundred seventy-seven and before January first, nineteen
hundred eighty-one, industrial waste treatment controlled process facil-
ities or air pollution controlled process facilities.
  (1)  (A)  (1)  The  term "industrial waste treatment facilities" shall
mean facilities for the treatment, neutralization  or  stabilization  of
industrial  waste  and other wastes (as the terms "industrial waste" and
"other wastes" are defined  in  section  17-0105  of  the  environmental
conservation  law)  from a point immediately preceding the point of such
treatment, neutralization or stabilization to  the  point  of  disposal,
including the necessary pumping and transmitting facilities.
  (2)  The term "industrial waste treatment controlled process facility"
shall mean such portion of the cost of an industrial production facility
designed for the purpose of obviating  the  need  for  industrial  waste
treatment  facilities  as  defined  in  item one of this clause as shall
exceed the cost of an industrial production facility of equal production

S. 6359--C                         23

capacity which if constructed would require industrial  waste  treatment
facilities  to meet emission standards in compliance with the provisions
of the environmental conservation law and the codes, rules, regulations,
permits  or orders issued pursuant thereto but only to the extent of the
cost of such industrial waste treatment facilities.
  (B) (1) The term "air pollution control facilities" shall mean facili-
ties which remove, reduce, or render less noxious air contaminants emit-
ted from an air contamination source (as the terms "air contaminant" and
"air contamination source" are defined in section 19-0107 of  the  envi-
ronmental conservation law) from a point immediately preceding the point
of  such  removal,  reduction  or rendering to the point of discharge of
air, meeting emission standards as  established  by  the  department  of
environmental  conservation, but excluding such facilities installed for
the primary purpose of salvaging materials which are usable in the manu-
facturing process or are marketable and excluding those facilities which
rely for their efficacy on dilution, dispersion or assimilation  of  air
contaminants  in the ambient air after emission. Such term shall further
include flue gas desulfurization equipment and attendant sludge disposal
facilities, fluidized bed boilers, precombustion coal  cleaning  facili-
ties  or  other  facilities that conform with this subdivision and which
comply with the provisions of the state acid deposition control act  set
forth  in  title nine of article nineteen of the environmental conserva-
tion law.
  (2) The term "air pollution controlled process  facility"  shall  mean
such  portion  of the cost of an industrial production facility designed
for the purpose of obviating the need for air pollution control  facili-
ties  as  defined in item one of this clause as shall exceed the cost of
an industrial production facility of equal productive capacity which  if
constructed  would  require  air  pollution  control facilities to inert
emission standards as established pursuant to  title  three  of  article
nineteen of the environmental conservation law but only to the extent of
the cost of such air pollution control facilities.
  (2) However, such deduction shall be allowed only
  (A)  with  respect to tangible property which is depreciable, pursuant
to section one hundred sixty-seven of the internal revenue code,  having
a  situs in this state and used in the taxpayer's trade or business, the
construction, reconstruction, erection or improvement of which,  in  the
case  of industrial waste treatment facilities, is initiated on or after
January first, nineteen hundred sixty-five or which, in the case of  air
pollution  control  facilities,  is initiated on or after January first,
nineteen hundred sixty-six, or which in the  case  of  industrial  waste
treatment  controlled  process  facilities  or  air pollution controlled
process facilities is initiated on and  after  January  first,  nineteen
hundred seventy-seven, and
  (B) on condition that such facilities have been certified by the state
commissioner  of  environmental conservation or his designated represen-
tative, pursuant to section 19-0309 of  the  environmental  conservation
law,  as  complying  with  applicable  provisions  of  the environmental
conservation law, the public health law, the  state  sanitary  code  and
codes,  rules,  regulations,  permits or orders issued pursuant thereto,
and
  (C) on condition that entire net income for the taxable year  and  all
succeeding  taxable  years  be  computed without any deductions for such
expenditures or for depreciation or amortization of  the  same  property
other  than  the deductions allowed by this paragraph (g), except to the
extent that the basis of the property may  be  attributable  to  factors

S. 6359--C                         24

other than such expenditures, or in case a deduction is allowable pursu-
ant to this paragraph for only a part of such expenditures, on condition
that  any  deduction  allowed  for  federal income tax purposes for such
expenditures or for depreciation or amortization of the same property be
proportionately  reduced  in computing entire net income for the taxable
year and all succeeding taxable years, and
  (D) where the election provided for in paragraph  (d)  of  subdivision
three  of section two hundred ten of this chapter has not been exercised
in respect to the same property.
  (3) (A) If expenditures in respect to an  industrial  waste  treatment
facility,  an air pollution control facility, an industrial waste treat-
ment controlled process facility or an air pollution controlled  process
facility  have  been deducted as provided herein and if within ten years
from the end of the taxable year in which  such  deduction  was  allowed
such  property  or  any  part thereof is used for the primary purpose of
salvaging materials which are usable in the manufacturing process or are
marketable, the taxpayer shall report such change of use in  its  report
for  the  first taxable year during which it occurs, and the tax commis-
sion may recompute the  tax  for  the  year  or  years  for  which  such
deduction  was  allowed  and  any  carryback  or carryover year, and may
assess any additional tax resulting from such recomputation  within  the
time  fixed  by  paragraph nine of subsection (c) of section ten hundred
eighty-three of this chapter.
  (B) If a deduction is allowed as herein provided for expenditures paid
or incurred during any taxable year on the basis of a temporary  certif-
icate  of  compliance  issued pursuant to the environmental conservation
law and if the taxpayer fails  to  obtain  a  permanent  certificate  of
compliance  upon completion of the facilities with respect to which such
temporary certificate was issued, the taxpayer shall report such failure
in its report for the taxable year  during  which  such  facilities  are
completed,  and the tax commission may recompute the tax for the year or
years for which such deduction was allowed and any carryback  or  carry-
over  year,  and  may  assess  any additional tax resulting from in such
recomputation within the time fixed by paragraph nine of subsection  (c)
of section ten hundred eighty-three.
  (C) If a deduction is allowed as herein provided for expenditures paid
or  incurred  during  any  taxable  year  in respect to an air pollution
control facility on the basis of  a  certificate  of  compliance  issued
pursuant  to  the  environmental conservation law and the certificate is
revoked pursuant to subdivision three of section 19-0309 of the environ-
mental conservation law, the tax commission may recompute  the  tax  for
the year or years for which the facility is not or was not in compliance
with  the  applicable  provisions of the environmental conservation law,
the state sanitary code or codes, rules, regulations, permits or  orders
promulgated  pursuant thereto, and for which a deduction was allowed, as
well as for any carryback or carryover year to which such deduction  was
carried,  and may assess any additional tax resulting from such recompu-
tation within the time fixed by paragraph  nine  of  subsection  (c)  of
section ten hundred eighty-three.
  (4)  In  any  taxable year when property is sold or otherwise disposed
of, with respect to which a deduction has been allowed pursuant to  this
paragraph,  such  deduction  shall  be  disregarded in computing gain or
loss, and the gain or loss on the sale  or  other  disposition  of  such
property  shall  be  the  gain  or loss entering into the computation of
entire taxable income which the taxpayer is required to  report  to  the
United States treasury department for such taxable year.]

S. 6359--C                         25

  (h) If the period covered by a report under this article is other than
the  period  covered by the report to the United States treasury depart-
ment,
  (1)  except  as provided in subparagraph two hereof, entire net income
shall be determined by multiplying the taxable income reported  to  such
department  (as  adjusted pursuant to the provisions of this article) by
the number of calendar months or major  parts  thereof  covered  by  the
report  under this article and dividing by the number of calendar months
or major parts thereof covered by the report to such department.  If  it
shall  appear that such method of determining entire net income does not
properly reflect the taxpayer's income during the period covered by  the
report  under  this  article, the [tax commission] COMMISSIONER shall be
authorized in its discretion to determine such entire net income  solely
on  the  basis of the taxpayer's income during the period covered by its
report under this article[;].
  (2) [in] IN the case of a  New  York  S  termination  year,  an  equal
portion of entire net income shall be assigned to each day of such year.
The  portion  of  such entire net income thereby assigned to the S short
year and the C short year shall be included in  the  respective  reports
for  the  S short year and the C short year under this article. However,
where paragraph three of subsection (s) of section six hundred twelve of
this chapter applies, the portion of such entire net income assigned  to
the  S  short year and the C short year shall be determined under normal
tax accounting rules.
  (i) With respect to a DISC which during any taxable year or  reporting
year  (1)  received  more  than five percent of its gross sales from the
sale of inventory or other property which it purchased from  its  stock-
holders,  (2)  received more than five percent of its gross rentals from
the rental of property which it purchased or rented from its  stockhold-
ers  or  (3) received more than five percent of its total receipts other
than sales and rentals from its stockholders, the  following  provisions
shall apply.
  (A)  For any taxable year in which sub-paragraph (B) of this paragraph
is in effect and not rendered invalid, a DISC  meeting  the  above  test
shall be exempt from all taxes imposed by this article.
  (B)  Supplemental to the provisions of subdivision five of section two
hundred eleven of this article, any taxpayer required to compute  a  tax
under  this  article, which during the taxable year being reported was a
stockholder in any DISC meeting the test prescribed in  this  paragraph,
shall  for any taxable year ending after December thirty-first, nineteen
hundred seventy-one adjust each item of its receipts,  expenses,  assets
and  liabilities,  as  otherwise  computed under this article, by adding
thereto its attributable share of each such DISC's  receipts,  expenses,
assets  and  liabilities  as  reportable by each such DISC to the United
States Treasury Department for its annual reporting period ending during
the current taxable year of such taxpayer; provided, however,  (1)  that
all transactions between the taxpayer and each such DISC shall be elimi-
nated  from  the  taxpayer's  adjusted  receipts,  expenses,  assets and
liabilities; (2) that the taxpayer's  entire  net  income  as  otherwise
computed  under this section, shall be reduced by subtracting the amount
of the deemed distribution of current income, if  any,  from  each  such
DISC  already  included  in  the  entire  net income of such taxpayer by
virtue of having been included in its entire  taxable  income  for  that
taxable  year  as reported to the United States Treasury Department; and
(3) that in the event this paragraph should  be  rendered  invalid,  all

S. 6359--C                         26

DISC's  and  their stockholders taxable hereunder shall be taxed instead
under the remaining portions of this article.
  (j)  in the case of property placed in service in taxable years begin-
ning before nineteen hundred ninety-four, for  taxable  years  beginning
after  December  thirty-first,  nineteen hundred eighty-one, except with
respect to property subject to the provisions  of  section  two  hundred
eighty-F  of  the  internal  revenue  code  and  property subject to the
provisions of section one hundred sixty-eight of  the  internal  revenue
code which is placed in service in this state in taxable years beginning
after  December thirty-first, nineteen hundred eighty-four, and provided
a deduction has not been excluded from entire  net  income  pursuant  to
subparagraph  eight  of  paragraph  (b)  of this subdivision, a taxpayer
shall be allowed with respect  to  property  which  is  subject  to  the
provisions  of  section  one hundred sixty-eight of the internal revenue
code the depreciation deduction  allowable  under  section  one  hundred
sixty-seven  of  the  internal  revenue  code as such section would have
applied to property placed in service on December thirty-first, nineteen
hundred eighty. This paragraph shall not apply to property of a taxpayer
principally engaged in the conduct of aviation (other than  air  freight
forwarders  acting as principal and like indirect air carriers) which is
placed in service before taxable years  beginning  in  nineteen  hundred
eighty-nine.
  (k)  QSSS.  (1)  New  York  S corporation. In the case of a New York S
corporation which is the parent of a qualified subchapter  S  subsidiary
(QSSS) with respect to a taxable year:
  (A) where the QSSS is not an excluded corporation,
  (i)  in  determining the entire net income of such parent corporation,
all assets, liabilities, income and deductions  of  the  QSSS  shall  be
treated  as  assets,  liabilities,  income  and deductions of the parent
corporation, and
  (ii) the QSSS shall be exempt from all taxes imposed by this  article,
and
  (B)  where  the QSSS is an excluded corporation, the entire net income
of the parent corporation shall be determined as  if  the  federal  QSSS
election had not been made.
  (2)  New  York  C corporation. In the case of a New York C corporation
which is the parent of a QSSS with respect to a taxable year:
  (A) where the QSSS is a taxpayer,
  (i) in determining the entire net income of such  parent  corporation,
all  assets,  liabilities,  income  and  deductions of the QSSS shall be
treated as assets, liabilities, income  and  deductions  of  the  parent
corporation, and
  (ii)  the QSSS shall be exempt from all taxes imposed by this article,
and
  (B) where the QSSS is not a taxpayer,
  (i) if the QSSS is not an excluded corporation, the parent corporation
may make a QSSS inclusion election to include all  assets,  liabilities,
income  and  deductions  of  the QSSS as assets, liabilities, income and
deductions of the parent corporation, and
  (ii) in the absence of such election, or where the QSSS is an excluded
corporation, the entire net income of the parent  corporation  shall  be
determined as if the federal QSSS election had not been made.
  (3)  Non-New  York  S  corporation  not  excluded. In the case of an S
corporation which is not a taxpayer and not an excluded corporation, and
which is the parent of a QSSS which is a taxpayer, the  shareholders  of

S. 6359--C                         27

the parent corporation shall be entitled to make the New York S election
under subsection (a) of section six hundred sixty of this chapter.
  (A)  For  any  taxable  year for which such election is in effect, the
parent corporation shall be subject to tax under this article as  a  New
York S corporation, and the provisions of clause (A) of subparagraph one
of this paragraph shall apply.
  (B) For any taxable year for which such election is not in effect, the
QSSS shall be a New York C corporation, and the entire net income of the
QSSS  shall  be  determined as if the federal QSSS election had not been
made. For purposes of such determination, the taxable year of the parent
corporation shall constitute the taxable year of  the  QSSS,  excluding,
however, any portion of such year during which the QSSS is not a taxpay-
er.
  (4)  S  corporation excluded. In the case of an S corporation which is
an excluded corporation and which is the parent of a  QSSS  which  is  a
taxpayer,  the QSSS shall be a New York C corporation and the provisions
of clause (B) of subparagraph three of this paragraph shall apply.
  (5) Excluded corporation. The  term  "excluded  corporation"  means  a
corporation  subject  to  tax  under  sections  one hundred eighty-three
through one hundred eighty-six, inclusive, or  article  [thirty-two  or]
thirty-three  of  this  chapter, or a foreign corporation not taxable by
this state which, if it were taxable, would be subject to tax under  any
of such sections or [articles] ARTICLE.
  (6)  Taxpayer.  For  purposes  of  this paragraph, the term "taxpayer"
means a parent corporation or QSSS subject to tax  under  this  article,
determined without regard to the provisions of this paragraph.
  (7)  QSSS  inclusion  election.  The  election  under subclause (i) of
clause (B) of subparagraph two of this paragraph shall be effective  for
the  taxable year for which made and for all succeeding taxable years of
the corporation until such election is terminated. An election or termi-
nation shall be made on such form and in such manner as the commissioner
may prescribe by regulation or instruction.
  (l) Emerging technology investment deferral. In the case of  any  sale
of a qualified emerging technologies investment held for more than thir-
ty-six months and with respect to which the taxpayer elects the applica-
tion  of this paragraph, gain from such sale shall be recognized only to
the extent that the amount realized on such sale exceeds the cost of any
qualified emerging technologies investment  purchased  by  the  taxpayer
during  the three hundred sixty-five-day period beginning on the date of
such sale, reduced by any portion of such  cost  previously  taken  into
account under this paragraph. For purposes of this paragraph the follow-
ing shall apply:
  (1)  A  qualified investment is stock of a corporation or an interest,
other than as a creditor, in a partnership or limited liability  company
that was acquired by the taxpayer as provided in Internal Revenue Code S
1202(c)(1)(B),  except  that  the  reference to the term "stock" in such
section shall be read as "investment," or by the taxpayer from a  person
who had acquired such stock or interest in such a manner.
  (2)  A qualified emerging technology investment is a qualified invest-
ment, that was held by the taxpayer for at least thirty-six months, in a
company defined in paragraph (c) of subdivision one of  section  thirty-
one  hundred  two-e  of the public authorities law or an investment in a
partnership or limited liability company that is taxed as a  partnership
to the extent that such partnership or limited liability company invests
in qualified emerging technology companies.

S. 6359--C                         28

  (3)  For  purposes  of  determining whether the nonrecognition of gain
under this subsection  applies  to  a  qualified  emerging  technologies
investment  that is sold, the taxpayer's holding period for such invest-
ment  and  the  qualified  emerging  technologies  investment  that   is
purchased  shall be determined without regard to Internal Revenue Code S
1223.
  (m) Amounts deferred. The amount deferred under paragraph (l) of  this
subdivision shall be added to entire net income when the reinvestment in
the  New  York  qualified  emerging technology company which qualified a
taxpayer for such deferral is sold.
  [(n) Qualified gas transportation contracts.
  (1) Any tax paid under this article allocable to receipts attributable
to a "qualified gas transportation contract" shall  be  deemed  to  have
been paid under article nine of this chapter for all purposes of law for
taxable  years  commencing  on  or  after  January  first, two thousand,
computed as hereinafter provided, if all of the following conditions are
met:
  (i) For periods ending prior  to  January  first,  two  thousand,  the
taxpayer  paid  the  franchise tax due under section one hundred eighty-
four of this chapter.
  (ii) For the taxable year, all  of  the  receipts  from  the  pipeline
transportation  of natural gas attributable to the taxpayer and included
in the taxpayer's entire net income (without regard to  this  paragraph)
are  solely from the transportation of natural gas for wholesale custom-
ers and commercial retail customers.
  (iii) The taxpayer's franchise tax liability under  this  article  for
the  taxable  year (computed without regard to this paragraph) is deter-
mined under paragraph (a) of subdivision one of section two hundred  ten
of  this  article,  and such tax liability (without regard to this para-
graph) is greater than the liability the taxpayer  would  have  incurred
under  sections  one hundred eighty-three and one hundred eighty-four of
this chapter (as such sections existed on December  thirty-first,  nine-
teen hundred ninety-nine) based on the same taxable period.
  (iv)  The  taxpayer  is  a  party  to  a "qualified gas transportation
contract," as defined herein.
  (2) The provisions of this paragraph shall apply only for the  taxable
years during which such qualified gas transportation contract is in full
force  and  effect, and shall apply only to the receipts of the taxpayer
less any expenses of the taxpayer (but not less than zero),  during  the
taxable  year,  to  the  extent included in entire net income, which are
attributable  to  any  such  qualified  gas  transportation   contracts.
Provided,  further,  in  any event, the characterization hereunder shall
expire and be of no further force and effect for taxable years  commenc-
ing on or after January first, two thousand fifteen.
  (3)  The  term  "qualified  gas  transportation contract" shall mean a
service agreement for the transportation of natural gas for an  end-user
which  is a qualified cogeneration facility with a rated capacity of one
thousand megawatts or more, which (i) was entered  into  before  January
first, two thousand, and was in full force and effect and binding on the
parties  thereto as of such date, (ii) as originally executed, was for a
term of at least twenty years, and (iii) the terms of which prohibit the
pass-through to such customer of the franchise tax  imposed  under  this
article,  while  allowing the recovery of the gross earnings tax imposed
under section one hundred eighty-four of this chapter. A contract  shall
not  qualify as a qualified gas transportation contract if there is: (i)
any renewal or extension of an otherwise  qualified  gas  transportation

S. 6359--C                         29

contract  occurring on or after January first, two thousand, or (ii) any
material amendment to, or supplementation of, an otherwise qualified gas
transportation contract on or after such date. Such renewal,  extension,
or  material  amendment or supplementation shall have the same force and
effect of terminating the characterization hereunder as if the  qualify-
ing contract had expired by its own terms.
  (o)]  (N-1)  For  taxable years beginning after December thirty-first,
two thousand two, in the case of qualified property described  in  para-
graph  two  of subsection k of section 168 of the internal revenue code,
other than qualified resurgence zone property described in paragraph (q)
of this subdivision, and other than  qualified  New  York  Liberty  Zone
property  described in paragraph two of subsection b of section 1400L of
the internal revenue code (without regard to clause (i) of  subparagraph
(C)  of  such  paragraph),  which was placed in service on or after June
first, two thousand three, a taxpayer shall be allowed with  respect  to
such  property the depreciation deduction allowable under section 167 of
the internal revenue code as such section would  have  applied  to  such
property  had  it  been acquired by the taxpayer on September tenth, two
thousand one.
  (o) Related members expense add back.  (1)  Definitions.  (A)  Related
member.  "Related  member" means a related person as defined in subpara-
graph (c) of paragraph three of subsection (b) of section  four  hundred
sixty-five  of  the  internal  revenue code, except that "fifty percent"
shall be substituted for "ten percent".
  (B) Effective rate of tax. "Effective rate of tax" means,  as  to  any
state  or  U.S. possession, the maximum statutory rate of tax imposed by
the state or possession on or measured by a related member's net  income
multiplied  by  the  apportionment percentage, if any, applicable to the
related member under the laws of said jurisdiction. For purposes of this
definition, the effective rate of tax as to any state or U.S. possession
is zero where the related member's net  income  tax  liability  in  said
jurisdiction  is reported on a combined or consolidated return including
both the taxpayer and the related member where the reported transactions
between the taxpayer and the related member are  eliminated  or  offset.
Also, for purposes of this definition, when computing the effective rate
of  tax  for  a  jurisdiction  in which a related member's net income is
eliminated or offset by a credit or similar adjustment that is dependent
upon the related member either maintaining or managing intangible  prop-
erty  or  collecting  interest  income in that jurisdiction, the maximum
statutory rate of tax imposed by said jurisdiction shall be decreased to
reflect the statutory rate of tax that applies to the related member  as
effectively reduced by such credit or similar adjustment.
  (C) Royalty payments. Royalty payments are payments directly connected
to  the  acquisition,  use,  maintenance or management, ownership, sale,
exchange, or any other disposition of licenses, trademarks,  copyrights,
trade  names,  trade  dress,  service  marks, mask works, trade secrets,
patents and any other similar types of intangible assets  as  determined
by   the   commissioner,  and  include  amounts  allowable  as  interest
deductions under section one hundred sixty-three of the internal revenue
code to the extent such amounts are directly or indirectly for,  related
to  or  in  connection with the acquisition, use, maintenance or manage-
ment, ownership,  sale,  exchange  or  disposition  of  such  intangible
assets.
  (D)  Valid  Business  Purpose. A valid business purpose is one or more
business purposes, other than the avoidance or  reduction  of  taxation,
which alone or in combination constitute the primary motivation for some

S. 6359--C                         30

business  activity or transaction, which activity or transaction changes
in a meaningful way, apart from tax effects, the  economic  position  of
the taxpayer. The economic position of the taxpayer includes an increase
in  the  market share of the taxpayer, or the entry by the taxpayer into
new business markets.
  (2) Royalty expense add backs. (A) Except where a taxpayer is included
in a combined report with a related member pursuant to [subdivision four
of] section two hundred [eleven] TEN-C of this article, for the  purpose
of  computing  entire  net  income  or other applicable taxable basis, a
taxpayer must add back royalty payments  directly  or  indirectly  paid,
accrued,  or  incurred in connection with one or more direct or indirect
transactions with one or more related members during the taxable year to
the extent deductible in calculating federal taxable income.
  (B) Exceptions. (i) The adjustment required in  this  paragraph  shall
not apply to the portion of the royalty payment that the taxpayer estab-
lishes,  by  clear  and  convincing evidence of the type and in the form
specified by the commissioner, meets all of the following  requirements:
(I) the related member was subject to tax in this state or another state
or  possession of the United States or a foreign nation or some combina-
tion thereof on a tax base  that  included  the  royalty  payment  paid,
accrued  or incurred by the taxpayer; (II) the related member during the
same taxable year directly or indirectly paid, accrued or incurred  such
portion  to  a person that is not a related member; and (III) the trans-
action giving rise to the royalty payment between the taxpayer  and  the
related member was undertaken for a valid business purpose.
  (ii)  The adjustment required in this paragraph shall not apply if the
taxpayer establishes, by clear and convincing evidence of the  type  and
in  the form specified by the commissioner, that: (I) the related member
was subject to tax on or measured by its net income  in  this  state  or
another  state  or  possession  of the United States or some combination
thereof; (II) the tax base for said tax  included  the  royalty  payment
paid,  accrued  or  incurred  by  the  taxpayer; and (III) the aggregate
effective rate of tax applied to the related member in  those  jurisdic-
tions  is  no less than eighty percent of the statutory rate of tax that
applied to the taxpayer under section two hundred ten  of  this  article
for the taxable year.
  (iii) The adjustment required in this paragraph shall not apply if the
taxpayer  establishes,  by clear and convincing evidence of the type and
in the form specified by the commissioner, that: (I) the royalty payment
was paid, accrued or incurred to a related member  organized  under  the
laws  of  a  country  other  than  the  United  States; (II) the related
member's income from the transaction  was  subject  to  a  comprehensive
income  tax treaty between such country and the United States; (III) the
related member was subject to tax in a foreign nation on a tax base that
included the royalty payment paid, accrued or incurred by the  taxpayer;
(IV)  the related member's income from the transaction was taxed in such
country at an effective rate of tax at least equal to  that  imposed  by
this  state;  and  (V) the royalty payment was paid, accrued or incurred
pursuant to a transaction that  was  undertaken  for  a  valid  business
purpose and using terms that reflect an arm's length relationship.
  (iv)  The adjustment required in this paragraph shall not apply if the
taxpayer and the commissioner agree in writing to the application or use
of alternative adjustments or computations. The commissioner may, in his
or her discretion, agree  to  the  application  or  use  of  alternative
adjustments or computations when he or she concludes that in the absence

S. 6359--C                         31

of  such  agreement  the  income  of  the taxpayer would not be properly
reflected.
  (p) For taxable years beginning after December thirty-first, two thou-
sand  two,  upon  the  disposition  of property to which paragraph [(o)]
(N-1) of this subdivision applies, the amount of any gain or loss inclu-
dible in entire net income shall be adjusted to reflect  the  inclusions
and exclusions from entire net income pursuant to subparagraph seventeen
of  paragraph  (a)  and  subparagraph seventeen of paragraph (b) of this
subdivision attributable to such property.
  (q) For purposes of paragraphs [(o)] (N-1) and (p)  of  this  subdivi-
sion,  qualified  resurgence zone property shall mean qualified property
described in paragraph two of subsection k of section 168 of the  inter-
nal  revenue code substantially all of the use of which is in the resur-
gence zone, as defined below, and is in the active conduct of a trade or
business by the taxpayer in such zone, and the original use of which  in
the  resurgence  zone commences with the taxpayer after December thirty-
first, two thousand two. The resurgence zone shall mean the area of  New
York county bounded on the south by a line running from the intersection
of  the Hudson River with the Holland Tunnel, and running thence east to
Canal Street, then running along the centerline of Canal Street  to  the
intersection  of the Bowery and Canal Street, running thence in a south-
easterly direction diagonally across  Manhattan  Bridge  Plaza,  to  the
Manhattan Bridge and thence along the centerline of the Manhattan Bridge
to  the  point where the centerline of the Manhattan Bridge would inter-
sect with the easterly bank of the East River, and bounded on the  north
by  a  line  running  from the intersection of the Hudson River with the
Holland Tunnel and running thence north along West Avenue to the  inter-
section  of  Clarkson  Street  then running east along the centerline of
Clarkson Street to the intersection of Washington Avenue,  then  running
south  along  the centerline of Washington Avenue to the intersection of
West Houston Street, then east along  the  centerline  of  West  Houston
Street,  then at the intersection of the Avenue of the Americas continu-
ing east along the centerline of East Houston  Street  to  the  easterly
bank of the East River.
  (R)  SUBTRACTION  MODIFICATION  FOR QUALIFIED RESIDENTIAL LOAN PORTFO-
LIOS. (1)(A) A TAXPAYER THAT IS EITHER A THRIFT INSTITUTION  AS  DEFINED
IN SUBPARAGRAPH THREE OF THIS PARAGRAPH OR A QUALIFIED COMMUNITY BANK AS
DEFINED  IN  SUBPARAGRAPH  TWO  OF PARAGRAPH (S) OF THIS SUBDIVISION AND
MAINTAINS A QUALIFIED RESIDENTIAL LOAN PORTFOLIO AS DEFINED IN  SUBPARA-
GRAPH TWO OF THIS PARAGRAPH SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING
ENTIRE NET INCOME THE AMOUNT, IF ANY, BY WHICH (I) THIRTY-TWO PERCENT OF
ITS  ENTIRE  NET  INCOME  DETERMINED  WITHOUT  REGARD  TO THIS PARAGRAPH
EXCEEDS (II) THE AMOUNTS DEDUCTED BY THE TAXPAYER PURSUANT  TO  SECTIONS
166  AND  585  OF THE INTERNAL REVENUE CODE LESS ANY AMOUNTS INCLUDED IN
FEDERAL TAXABLE INCOME AS A RESULT OF A RECOVERY OF A LOAN.
  (B)(I) IF THE TAXPAYER IS IN A COMBINED REPORT, THIS DEDUCTION WILL BE
COMPUTED ON A COMBINED BASIS. IN THAT INSTANCE, THE ENTIRE NET INCOME OF
THE COMBINED GROUP FOR PURPOSES OF THIS PARAGRAPH SHALL BE MULTIPLIED BY
A FRACTION, THE NUMERATOR OF WHICH IS THE AVERAGE TOTAL  ASSETS  OF  ALL
THE  THRIFT  INSTITUTIONS  OR  QUALIFIED COMMUNITY BANKS INCLUDED IN THE
COMBINED REPORT AND THE DENOMINATOR OF WHICH IS THE AVERAGE TOTAL ASSETS
OF ALL THE CORPORATIONS INCLUDED IN THE COMBINED REPORT.
  (II) MEASUREMENT OF ASSETS FOR PURPOSES  OF  THIS  CLAUSE.  (I)  TOTAL
ASSETS  ARE THOSE ASSETS THAT ARE PROPERLY REFLECTED ON A BALANCE SHEET,
COMPUTED IN THE SAME MANNER AS IS REQUIRED BY THE BANKING  REGULATOR  OF
THE TAXPAYERS INCLUDED IN THE COMBINED RETURN.

S. 6359--C                         32

  (II)  ASSETS  WILL ONLY BE INCLUDED IF THE INCOME OR EXPENSES OF WHICH
ARE PROPERLY REFLECTED (OR WOULD HAVE BEEN  PROPERLY  REFLECTED  IF  NOT
FULLY  DEPRECIATED  OR EXPENSED, OR DEPRECIATED OR EXPENSED TO A NOMINAL
AMOUNT) IN THE COMPUTATION OF THE COMBINED GROUP'S ENTIRE NET INCOME FOR
THE TAXABLE YEAR. ASSETS WILL NOT INCLUDE DEFERRED TAX ASSETS AND INTAN-
GIBLE ASSETS IDENTIFIED AS "GOODWILL".
  (III)  TANGIBLE  REAL  AND PERSONAL PROPERTY, SUCH AS BUILDINGS, LAND,
MACHINERY, AND EQUIPMENT SHALL BE VALUED AT COST. LEASED ASSETS WILL  BE
VALUED  AT  THE  ANNUAL  LEASE PAYMENT MULTIPLIED BY EIGHT.   INTANGIBLE
PROPERTY, SUCH AS LOANS AND INVESTMENTS, SHALL BE VALUED AT  BOOK  VALUE
EXCLUSIVE OF ANY RESERVES.
  (IV)  INTERCORPORATE  STOCKHOLDINGS  AND  BILLS,  NOTES  AND  ACCOUNTS
RECEIVABLE, AND OTHER INTERCORPORATE  INDEBTEDNESS  BETWEEN  THE  CORPO-
RATIONS INCLUDED IN THE COMBINED REPORT SHALL BE ELIMINATED.
  (V) AVERAGE ASSETS ARE COMPUTED USING THE ASSETS MEASURED ON THE FIRST
DAY  OF THE TAXABLE YEAR, AND ON THE LAST DAY OF EACH SUBSEQUENT QUARTER
OF THE TAXABLE YEAR.
  (2) QUALIFIED RESIDENTIAL LOAN PORTFOLIO. (A) A TAXPAYER  MAINTAINS  A
QUALIFIED  RESIDENTIAL  LOAN  PORTFOLIO IF AT LEAST SIXTY PERCENT OF THE
AMOUNT OF THE TOTAL ASSETS AT THE CLOSE  OF  THE  TAXABLE  YEAR  OF  THE
THRIFT  INSTITUTION  OR  QUALIFIED COMMUNITY BANK CONSISTS OF THE ASSETS
DESCRIBED IN ITEMS (I) THROUGH (XII) OF THIS CLAUSE, WITH  THE  APPLICA-
TION  OF  THE  RULE  IN  ITEM  (XIII).  IF THE TAXPAYER IS A MEMBER OF A
COMBINED GROUP, THE DETERMINATION OF WHETHER THERE IS A QUALIFIED  RESI-
DENTIAL  LOAN  PORTFOLIO  WILL  BE MADE BY AGGREGATING THE ASSETS OF THE
THRIFT INSTITUTIONS OR QUALIFIED COMMUNITY BANKS THAT ARE MEMBERS OF THE
COMBINED GROUP.
  ASSETS:
  (I) CASH; WHICH INCLUDES CASH  AND  CASH  EQUIVALENTS  INCLUDING  CASH
ITEMS  IN THE PROCESS OF COLLECTION, DEPOSIT WITH OTHER FINANCIAL INSTI-
TUTIONS,  INCLUDING  CORPORATE  CREDIT  UNIONS,  BALANCES  WITH  FEDERAL
RESERVE  BANKS AND FEDERAL HOME LOAN BANKS, FEDERAL FUNDS SOLD, AND CASH
AND CASH EQUIVALENTS ON HAND. CASH SHALL NOT INCLUDE ANY BALANCES  SERV-
ING AS COLLATERAL FOR SECURITIES LENDING TRANSACTIONS;
  (II)  OBLIGATIONS  OF  THE  UNITED  STATES  OR OF A STATE OR POLITICAL
SUBDIVISION THEREOF, AND STOCK OR OBLIGATIONS OF A CORPORATION WHICH  IS
AN  INSTRUMENTALITY  OR  A GOVERNMENT SPONSORED ENTERPRISE OF THE UNITED
STATES OR OF A STATE OR POLITICAL SUBDIVISION THEREOF;
  (III) LOANS SECURED BY A DEPOSIT OR SHARE OF A MEMBER;
  (IV) LOANS SECURED BY AN INTEREST IN REAL PROPERTY WHICH IS  (OR  FROM
THE PROCEEDS OF THE LOAN, WILL BECOME) RESIDENTIAL REAL PROPERTY OR REAL
PROPERTY USED PRIMARILY FOR CHURCH PURPOSES, LOANS MADE FOR THE IMPROVE-
MENT  OF  RESIDENTIAL  REAL PROPERTY OR REAL PROPERTY USED PRIMARILY FOR
CHURCH PURPOSES, PROVIDED THAT FOR PURPOSES OF  THIS  ITEM,  RESIDENTIAL
REAL PROPERTY SHALL INCLUDE SINGLE OR MULTI-FAMILY DWELLINGS, FACILITIES
IN  RESIDENTIAL DEVELOPMENTS DEDICATED TO PUBLIC USE OR PROPERTY USED ON
A NONPROFIT BASIS FOR RESIDENTS, AND MOBILE HOMES NOT USED  ON  A  TRAN-
SIENT BASIS;
  (V)  PROPERTY  ACQUIRED  THROUGH  THE  LIQUIDATION  OF DEFAULTED LOANS
DESCRIBED IN ITEM (IV) OF THIS CLAUSE;
  (VI) ANY REGULAR OR RESIDUAL INTEREST IN A  REMIC,  AS  SUCH  TERM  IS
DEFINED  IN  SECTION  860D OF THE INTERNAL REVENUE CODE, BUT ONLY IN THE
PROPORTION WHICH THE ASSETS OF SUCH REMIC CONSIST OF PROPERTY  DESCRIBED
IN ANY OF THE PRECEDING ITEMS OF THIS CLAUSE, EXCEPT THAT IF NINETY-FIVE
PERCENT  OR  MORE  OF  THE  ASSETS OF SUCH REMIC ARE ASSETS DESCRIBED IN

S. 6359--C                         33

ITEMS (I) THROUGH (V) OF THIS CLAUSE, THE ENTIRE INTEREST IN  THE  REMIC
SHALL QUALIFY;
  (VII)  ANY  MORTGAGE-BACKED  SECURITY  WHICH REPRESENTS OWNERSHIP OF A
FRACTIONAL UNDIVIDED INTEREST IN A TRUST, THE ASSETS  OF  WHICH  CONSIST
PRIMARILY  OF  MORTGAGE  LOANS,  PROVIDED  THAT  THE REAL PROPERTY WHICH
SERVES AS SECURITY FOR THE LOANS IS (OR FROM THE PROCEEDS OF  THE  LOAN,
WILL  BECOME) THE TYPE OF PROPERTY DESCRIBED IN ITEM (IV) OF THIS CLAUSE
AND ANY COLLATERALIZED  MORTGAGE  OBLIGATION,  THE  SECURITY  FOR  WHICH
CONSISTS  PRIMARILY OF MORTGAGE LOANS THAT MAINTAIN AS SECURITY THE TYPE
OF PROPERTY DESCRIBED IN ITEM (IV) OF THIS CLAUSE;
  (VIII) CERTIFICATES OF DEPOSIT IN, OR OBLIGATIONS  OF,  A  CORPORATION
ORGANIZED  UNDER  A  STATE LAW WHICH SPECIFICALLY AUTHORIZES SUCH CORPO-
RATION TO INSURE THE DEPOSITS OR SHARE ACCOUNTS OF MEMBER ASSOCIATIONS;
  (IX) LOANS SECURED BY AN INTEREST IN EDUCATIONAL, HEALTH,  OR  WELFARE
INSTITUTIONS OR FACILITIES, INCLUDING STRUCTURES DESIGNED OR USED PRIMA-
RILY FOR RESIDENTIAL PURPOSES FOR STUDENTS, RESIDENTS, AND PERSONS UNDER
CARE, EMPLOYEES, OR MEMBERS OF THE STAFF OF SUCH INSTITUTIONS OR FACILI-
TIES;
  (X)  LOANS  MADE  FOR THE PAYMENT OF EXPENSES OF COLLEGE OR UNIVERSITY
EDUCATION OR VOCATIONAL TRAINING;
  (XI) PROPERTY USED BY  THE  TAXPAYER  IN  SUPPORT  OF  BUSINESS  WHICH
CONSISTS  PRINCIPALLY OF ACQUIRING THE SAVINGS OF THE PUBLIC AND INVEST-
ING IN LOANS; AND
  (XII) LOANS FOR WHICH THE TAXPAYER IS THE CREDITOR AND WHICH ARE WHOL-
LY SECURED BY LOANS DESCRIBED IN ITEM (IV) OF THIS CLAUSE.
  (XIII) THE VALUE OF ACCRUED INTEREST RECEIVABLE AND  ANY  LOSS-SHARING
COMMITMENT  OR  OTHER  LOAN  GUARANTY  BY  A GOVERNMENTAL AGENCY WILL BE
CONSIDERED PART OF THE BASIS IN THE LOANS TO WHICH THE ACCRUED  INTEREST
OR LOSS PROTECTION APPLIES.
  (B)  AT  THE  ELECTION  OF  THE  TAXPAYER, THE PERCENTAGE SPECIFIED IN
CLAUSE (A) OF THIS SUBPARAGRAPH SHALL BE APPLIED ON  THE  BASIS  OF  THE
AVERAGE ASSETS OUTSTANDING DURING THE TAXABLE YEAR, IN LIEU OF THE CLOSE
OF  THE TAXABLE YEAR. THE TAXPAYER CAN ELECT TO COMPUTE AN AVERAGE USING
THE ASSETS MEASURED ON THE FIRST DAY OF THE TAXABLE YEAR AND ON THE LAST
DAY OF EACH SUBSEQUENT QUARTER, OR MONTH OR DAY DURING THE TAXABLE YEAR.
THIS ELECTION MAY BE MADE ANNUALLY.
  (C) FOR PURPOSES OF THIS COMPUTATION,  THE  DEFINITION  OF  ASSETS  IN
CLAUSE (B) OF SUBPARAGRAPH ONE OF THIS PARAGRAPH APPLIES.
  (D) FOR PURPOSES OF ITEM (IV) OF CLAUSE (A) OF THIS SUBPARAGRAPH, IF A
MULTIFAMILY STRUCTURE SECURING A LOAN IS USED IN PART FOR NONRESIDENTIAL
USE PURPOSES, THE ENTIRE LOAN IS DEEMED A RESIDENTIAL REAL PROPERTY LOAN
IF  THE PLANNED RESIDENTIAL USE EXCEEDS EIGHTY PERCENT OF THE PROPERTY'S
PLANNED USE (MEASURED, AT  THE  TAXPAYER'S  ELECTION,  BY  USING  SQUARE
FOOTAGE  OR GROSS RENTAL REVENUE, AND DETERMINED AS OF THE TIME THE LOAN
IS MADE).
  (E) FOR PURPOSES OF ITEM (IV) OF  CLAUSE  (A)  OF  THIS  SUBPARAGRAPH,
LOANS  MADE  TO  FINANCE THE ACQUISITION OR DEVELOPMENT OF LAND SHALL BE
DEEMED TO BE LOANS SECURED BY AN INTEREST IN RESIDENTIAL  REAL  PROPERTY
IF  THERE  IS A REASONABLE ASSURANCE THAT THE PROPERTY WILL BECOME RESI-
DENTIAL REAL PROPERTY WITHIN A PERIOD OF THREE YEARS FROM  THE  DATE  OF
ACQUISITION  OF  SUCH  LAND;  BUT  THIS SENTENCE SHALL NOT APPLY FOR ANY
TAXABLE YEAR UNLESS, WITHIN SUCH THREE YEAR PERIOD,  SUCH  LAND  BECOMES
RESIDENTIAL  REAL  PROPERTY.  FOR  PURPOSES  OF  DETERMINING WHETHER ANY
INTEREST IN A REMIC QUALIFIES UNDER ITEM (VI)  OF  CLAUSE  (A)  OF  THIS
SUBPARAGRAPH,  ANY  REGULAR INTEREST IN ANOTHER REMIC HELD BY SUCH REMIC
SHALL BE TREATED AS A LOAN DESCRIBED IN A PRECEDING ITEM  UNDER  PRINCI-

S. 6359--C                         34

PLES  SIMILAR  TO  THE  PRINCIPLE OF SUCH ITEM (VI), EXCEPT THAT IS SUCH
REMICS ARE PART OF A TIERED STRUCTURE, THEY  SHALL  BE  TREATED  AS  ONE
REMIC FOR PURPOSES OF SUCH ITEM (VI).
  (3)  FOR  PURPOSES  OF  THIS  PARAGRAPH,  A  "THRIFT INSTITUTION" IS A
SAVINGS BANK, A SAVINGS AND LOAN ASSOCIATION, OR OTHER SAVINGS  INSTITU-
TION CHARTERED AND SUPERVISED AS SUCH UNDER FEDERAL OR STATE LAW.
  (S)  SUBTRACTION  MODIFICATION  FOR COMMUNITY BANKS AND SMALL THRIFTS.
(1) A TAXPAYER THAT IS A QUALIFIED COMMUNITY BANK AS DEFINED IN SUBPARA-
GRAPH TWO OF THIS PARAGRAPH OR A SMALL THRIFT INSTITUTION AS DEFINED  IN
SUBPARAGRAPH  TWO-A  OF  THIS  PARAGRAPH SHALL BE ALLOWED A DEDUCTION IN
COMPUTING ENTIRE NET INCOME EQUAL TO THE AMOUNT COMPUTED UNDER  SUBPARA-
GRAPH THREE OF THIS PARAGRAPH.
  (2)  TO  BE  A  QUALIFIED  COMMUNITY BANK, A TAXPAYER MUST SATISFY THE
FOLLOWING CONDITIONS.
  (A) IT IS A BANK OR TRUST COMPANY ORGANIZED UNDER OR  SUBJECT  TO  THE
PROVISIONS OF ARTICLE THREE OF THE BANKING LAW OR A COMPARABLE PROVISION
OF THE LAWS OF ANOTHER STATE, OR A NATIONAL BANKING ASSOCIATION.
  (B)  THE  AVERAGE  VALUE  DURING THE TAXABLE YEAR OF THE ASSETS OF THE
TAXPAYER, OR THE ASSETS OF THE AFFILIATED GROUP OF  THE  TAXPAYER,  MUST
NOT  EXCEED  EIGHT  BILLION  DOLLARS.  FOR  PURPOSES OF THIS CLAUSE, THE
AFFILIATED GROUP OF THE TAXPAYER INCLUDES ANY CORPORATION THAT MEETS THE
OWNERSHIP REQUIREMENTS TO BE INCLUDED IN A COMBINED REPORT SPECIFIED  IN
PARAGRAPH  (A)  OF  SUBDIVISION TWO OF SECTION TWO HUNDRED TEN-C OF THIS
ARTICLE.
  (2-A) TO BE A SMALL THRIFT INSTITUTION, A TAXPAYER  MUST  SATISFY  THE
FOLLOWING CONDITIONS.
  (A)  IT  IS  A  SAVINGS BANK, A SAVINGS AND LOAN ASSOCIATION, OR OTHER
SAVINGS INSTITUTION CHARTERED AND SUPERVISED AS SUCH  UNDER  FEDERAL  OR
STATE LAW.
  (B)  THE  AVERAGE  VALUE  DURING THE TAXABLE YEAR OF THE ASSETS OF THE
TAXPAYER, OR THE ASSETS OF THE AFFILIATED GROUP OF  THE  TAXPAYER,  MUST
NOT  EXCEED  EIGHT  BILLION  DOLLARS.  FOR  PURPOSES OF THIS CLAUSE, THE
AFFILIATED GROUP OF THE TAXPAYER INCLUDES ANY CORPORATION THAT MEETS THE
OWNERSHIP REQUIREMENTS TO BE INCLUDED IN A COMBINED REPORT SPECIFIED  IN
PARAGRAPH  (A)  OF  SUBDIVISION TWO OF SECTION TWO HUNDRED TEN-C OF THIS
ARTICLE.
  (3)(A) THE SUBTRACTION MODIFICATION SHALL BE COMPUTED AS FOLLOWS:
  (I) MULTIPLY THE TAXPAYER'S NET INTEREST INCOME FROM LOANS DURING  THE
TAXABLE YEAR BY A FRACTION, THE NUMERATOR OF WHICH IS THE GROSS INTEREST
INCOME DURING THE TAXABLE YEAR FROM QUALIFYING LOANS AND THE DENOMINATOR
OF  WHICH  IS THE GROSS INTEREST INCOME DURING THE TAXABLE YEAR FROM ALL
LOANS.
  (II) MULTIPLY THE AMOUNT DETERMINED IN CLAUSE (I)  BY  FIFTY  PERCENT.
THIS  PRODUCT  IS  THE  AMOUNT OF THE DEDUCTION ALLOWED UNDER THIS PARA-
GRAPH.
  (B)(I) NET INTEREST INCOME FROM LOANS SHALL MEAN GROSS INTEREST INCOME
FROM LOANS LESS  GROSS  INTEREST  EXPENSE  FROM  LOANS.  GROSS  INTEREST
EXPENSE  FROM  LOANS IS DETERMINED BY MULTIPLYING GROSS INTEREST EXPENSE
BY A FRACTION, THE NUMERATOR OF WHICH IS  THE  AVERAGE  TOTAL  VALUE  OF
LOANS OWNED BY THE THRIFT INSTITUTION OR COMMUNITY BANK DURING THE TAXA-
BLE YEAR AND THE DENOMINATOR OF WHICH IS THE AVERAGE TOTAL ASSETS OF THE
THRIFT INSTITUTION OR COMMUNITY BANK DURING THE TAXABLE YEAR.
  (II)  MEASUREMENT  OF  ASSETS  FOR  PURPOSES OF THIS CLAUSE. (I) TOTAL
ASSETS ARE THOSE ASSETS THAT ARE PROPERLY REFLECTED ON A BALANCE  SHEET,
COMPUTED  IN  THE SAME MANNER AS IS REQUIRED BY THE BANKING REGULATOR OF
THE TAXPAYERS INCLUDED IN THE COMBINED RETURN.

S. 6359--C                         35

  (II) ASSETS WILL ONLY BE INCLUDED IF THE INCOME OR EXPENSES  OF  WHICH
ARE  PROPERLY  REFLECTED  (OR  WOULD HAVE BEEN PROPERLY REFLECTED IF NOT
FULLY DEPRECIATED OR EXPENSED, OR DEPRECIATED OR EXPENSED TO  A  NOMINAL
AMOUNT)  IN  THE COMPUTATION OF THE TAXPAYER'S ENTIRE NET INCOME FOR THE
TAXABLE YEAR. ASSETS WILL NOT INCLUDE DEFERRED TAX ASSETS AND INTANGIBLE
ASSETS IDENTIFIED AS "GOODWILL".
  (III)  TANGIBLE  REAL  AND PERSONAL PROPERTY, SUCH AS BUILDINGS, LAND,
MACHINERY, AND EQUIPMENT SHALL BE VALUED AT COST. LEASED ASSETS WILL  BE
VALUED AT THE ANNUAL LEASE PAYMENT MULTIPLIED BY EIGHT. INTANGIBLE PROP-
ERTY,  SUCH  AS  LOANS  AND  INVESTMENTS,  SHALL BE VALUED AT BOOK VALUE
EXCLUSIVE OF ANY RESERVES.
  (IV) AVERAGE ASSETS ARE COMPUTED USING  THE  ASSETS  MEASURED  ON  THE
FIRST  DAY  OF  THE TAXABLE YEAR, AND ON THE LAST DAY OF EACH SUBSEQUENT
QUARTER OF THE TAXABLE YEAR OR MONTH OR DAY DURING THE TAXABLE YEAR.
  (C) A QUALIFYING LOAN IS A LOAN THAT MEETS THE CONDITIONS SPECIFIED IN
SUBCLAUSE (I) OF THIS CLAUSE AND SUBCLAUSE (II) OF THIS CLAUSE.
  (I) THE LOAN IS ORIGINATED BY THE QUALIFIED COMMUNITY  BANK  OR  SMALL
THRIFT INSTITUTION OR PURCHASED BY THE QUALIFIED COMMUNITY BANK OR SMALL
THRIFT  INSTITUTION IMMEDIATELY AFTER ITS ORIGINATION IN CONNECTION WITH
A COMMITMENT TO PURCHASE MADE BY THE BANK OR THRIFT INSTITUTION PRIOR TO
THE LOAN'S ORIGINATION.
  (II) THE LOAN IS A SMALL BUSINESS LOAN OR A RESIDENTIAL MORTGAGE LOAN,
THE PRINCIPAL AMOUNT OF WHICH LOAN DOES NOT EXCEED THE MAXIMUM PRINCIPAL
AMOUNT ESTABLISHED BY THE UNITED STATES  SMALL  BUSINESS  ADMINISTRATION
FOR  THE  7(C)  GUARANTY LOAN PROGRAM AT THE TIME THE LOAN IS ORIGINATED
BUT NOT LESS THAN FIVE  MILLION  DOLLARS  AND  EITHER  THE  BORROWER  IS
LOCATED  IN  THIS STATE AS DETERMINED UNDER SECTION TWO HUNDRED TEN-A OF
THIS ARTICLE AND THE LOAN IS NOT SECURED BY REAL PROPERTY, OR  THE  LOAN
IS SECURED BY REAL PROPERTY LOCATED IN NEW YORK.
  (III)  A  LOAN  THAT  HAS BEEN DETERMINED TO BE A QUALIFYING LOAN IN A
PRIOR TAXABLE YEAR REMAINS A QUALIFYING LOAN IN TAXABLE YEARS DURING AND
AFTER WHICH SUCH LOAN IS ACQUIRED BY ANOTHER CORPORATION IN THE  TAXPAY-
ER'S COMBINED GROUP.
  (T)  NOTWITHSTANDING  ANY  OTHER  TREATMENT PROVIDED IN THIS ARTICLE A
SMALL THRIFT INSTITUTION OR A QUALIFIED COMMUNITY BANK THAT MAINTAINS  A
CAPTIVE  REIT  ON  THE  EFFECTIVE  DATE  OF THIS PARAGRAPH MAY CHOOSE TO
UTILIZE  THE  REIT  SUBTRACTION  AS  DESCRIBED  HEREIN  OR  EITHER   THE
SUBTRACTION FOR QUALIFIED RESIDENTIAL LOAN PORTFOLIOS OR THE SUBTRACTION
FOR THE NET INTEREST INCOME FROM SMALL BUSINESS AND RESIDENTIAL MORTGAGE
LOANS.  THE REIT SUBTRACTION WILL BE EQUAL TO SIXTY PERCENT OF THE DIVI-
DENDS PAID DEDUCTION ALLOWED TO THE CAPTIVE REIT FOR THE  TAX  YEAR  FOR
FEDERAL  INCOME  TAX  PURPOSES.  NOTWITHSTANDING  ANY  TREATMENT  TO THE
CONTRARY UNDER THIS ARTICLE, THE CAPTIVE REIT WILL BE ALLOWED  THE  SAME
DEDUCTION FOR DIVIDENDS PAID AS ALLOWED FOR FEDERAL INCOME TAX PURPOSES.
THE  TAX  BEFORE  CREDITS  FOR A SMALL THRIFT INSTITUTION OR A QUALIFIED
COMMUNITY BANK THAT UTILIZES THIS REIT SUBTRACTION MAY NOT BE LESS  THAN
THE  TAX  BEFORE  CREDITS FOR ITS TAX YEAR BEGINNING ON OR AFTER JANUARY
FIRST, TWO THOUSAND THIRTEEN.
  10. The term "calendar year" means a period of twelve calendar  months
(or  any  shorter  period  beginning  on  the  date the taxpayer becomes
subject to the tax imposed by this article) ending on  the  thirty-first
day  of  December, provided the taxpayer keeps its books on the basis of
such period or on the basis of any period ending on any day  other  than
the last day of a calendar month, or provided the taxpayer does not keep
books,  and  includes,  in  case  the taxpayer changes the period on the
basis of which it keeps its books from a fiscal year to a calendar year,

S. 6359--C                         36

the period from the close of its last old fiscal year up to and  includ-
ing  the following December thirty-first. The term "fiscal year" means a
period of twelve calendar months (or any shorter period beginning on the
date  the  taxpayer  becomes subject to the tax imposed by this article)
ending on the last day of any month other than  December,  provided  the
taxpayer  keeps  its books on the basis of such period, and includes, in
case the taxpayer changes the period on the basis of which it  keeps  it
books  from  a calendar year to a fiscal year or from one fiscal year to
another fiscal year, the period from the close of its last old  calendar
or  fiscal year up to the date designated as the close of its new fiscal
year.
  11. The term "tangible personal  property"  means  corporeal  personal
property,  such  as  machinery,  tools,  implements,  goods,  wares  and
merchandise, and does not mean  money,  deposits  in  banks,  shares  of
stock, bonds, notes, credits or evidences of an interest in property and
evidences of debt.
  12.  The term elected or appointed officer shall include the chairman,
president, vice-president, secretary,  assistant  secretary,  treasurer,
assistant  treasurer, comptroller, and also any other officer, irrespec-
tive of his title, who is charged with and performs any of  the  regular
functions  of  any  such  officer, unless the total compensation of such
officer is derived exclusively from the receipt of commissions. A direc-
tor shall be considered an elected  or  appointed  officer  only  if  he
performs duties ordinarily performed by an officer.
  [19.  The  term "fulfillment services" shall mean any of the following
services performed by an entity on its premises on behalf of a  purchas-
er:
  (a)  the  acceptance  of  orders electronically or by mail, telephone,
telefax or internet;
  (b) responses to consumer correspondence or  inquiries  electronically
or by mail, telephone, telefax or internet;
  (c) billing and collection activities; or
  (d)  the  shipment of orders from an inventory of products offered for
sale by the purchaser.]
  S 5. Subdivisions 1, 2, 2-a, 4, 5, 6, 7 and 8 of section  209  of  the
tax  law,  subdivisions 1 and 6 as amended by chapter 817 of the laws of
1987, subdivision 2 as amended by chapter 75 of the laws of 1998, subdi-
vision 2-a as added by chapter 340 of the laws of 1998, subdivision 4 as
amended by section 27 of part S of this act, subdivisions  5  and  7  as
amended by section 2 of part FF-1 of chapter 57 of the laws of 2008, and
subdivision  8 as added by section 1 of part O of chapter 61 of the laws
of 2006, are amended to read as follows:
  1. (A) For the privilege of exercising its corporate franchise, or  of
doing business, or of employing capital, or of owning or leasing proper-
ty in this state in a corporate or organized capacity, or of maintaining
an  office  in this state, OR OF DERIVING RECEIPTS FROM ACTIVITY IN THIS
STATE, for all or any part of each of  its  fiscal  or  calendar  years,
every  domestic or foreign corporation, except corporations specified in
subdivision four of this section, shall annually pay  a  franchise  tax,
upon  the  basis  of its [entire net] BUSINESS income base, or upon such
other basis as may be  applicable  as  hereinafter  provided,  for  such
fiscal  or  calendar  year  or  part thereof, on a report which shall be
filed, except as hereinafter provided, on or before the fifteenth day of
March next succeeding the close of each such year, or, in the case of  a
corporation  which reports on the basis of a fiscal year, within two and

S. 6359--C                         37

one-half months after the close of such fiscal year, and shall  be  paid
as hereinafter provided.
  (B)  A CORPORATION IS DERIVING RECEIPTS FROM ACTIVITY IN THIS STATE IF
IT HAS RECEIPTS WITHIN THIS STATE OF ONE MILLION DOLLARS OR MORE IN  THE
TAXABLE  YEAR.  FOR  PURPOSES OF THIS SECTION, THE TERM "RECEIPTS" MEANS
THE RECEIPTS THAT ARE SUBJECT TO THE APPORTIONMENT RULES  SET  FORTH  IN
SECTION TWO HUNDRED TEN-A OF THIS ARTICLE, AND THE TERM "RECEIPTS WITHIN
THIS  STATE"  MEANS THE RECEIPTS INCLUDED IN THE NUMERATOR OF THE APPOR-
TIONMENT FACTOR DETERMINED UNDER SECTION TWO HUNDRED TEN-A OF THIS ARTI-
CLE. FOR PURPOSES OF THIS PARAGRAPH,  RECEIPTS  FROM  PROCESSING  CREDIT
CARD  TRANSACTIONS FOR MERCHANTS INCLUDE MERCHANT DISCOUNT FEES RECEIVED
BY THE CORPORATION.
  (C) A CORPORATION IS DOING BUSINESS IN THIS STATE IF (I) IT HAS ISSUED
CREDIT CARDS TO ONE THOUSAND  OR  MORE  CUSTOMERS  WHO  HAVE  A  MAILING
ADDRESS  WITHIN  THIS STATE AS OF THE LAST DAY OF ITS TAXABLE YEAR, (II)
IT HAS MERCHANT CUSTOMER CONTRACTS WITH MERCHANTS AND THE  TOTAL  NUMBER
OF  LOCATIONS  COVERED  BY  THOSE  CONTRACTS EQUALS ONE THOUSAND OR MORE
LOCATIONS IN THIS STATE TO WHOM THE CORPORATION  REMITTED  PAYMENTS  FOR
CREDIT  CARD  TRANSACTIONS  DURING THE TAXABLE YEAR, OR (III) THE SUM OF
THE NUMBER OF CUSTOMERS DESCRIBED IN SUBPARAGRAPH (I) OF THIS  PARAGRAPH
PLUS  THE  NUMBER  OF  LOCATIONS  COVERED  BY ITS CONTRACTS DESCRIBED IN
SUBPARAGRAPH (II) OF THIS PARAGRAPH EQUALS ONE THOUSAND OR MORE. AS USED
IN THIS SUBDIVISION, THE TERM "CREDIT CARD" INCLUDES BANK, CREDIT, TRAV-
EL AND ENTERTAINMENT CARDS.
  (D)(I) A CORPORATION WITH LESS THAN ONE MILLION DOLLARS BUT  AT  LEAST
TEN  THOUSAND  DOLLARS  OF  RECEIPTS WITHIN THIS STATE IN A TAXABLE YEAR
THAT IS PART OF A COMBINED REPORTING GROUP  IS  DERIVING  RECEIPTS  FROM
ACTIVITY  IN THIS STATE IF THE RECEIPTS WITHIN THIS STATE OF THE MEMBERS
OF THE COMBINED REPORTING GROUP THAT HAVE AT LEAST TEN THOUSAND  DOLLARS
OF  RECEIPTS  WITHIN  THIS STATE IN THE AGGREGATE MEET THE THRESHOLD SET
FORTH IN PARAGRAPH (B) OF THIS SUBDIVISION.
  (II) A CORPORATION THAT DOES NOT MEET ANY OF THE THRESHOLDS SET  FORTH
IN  PARAGRAPH (C) OF THIS SUBDIVISION BUT HAS AT LEAST TEN CUSTOMERS, OR
LOCATIONS, OR CUSTOMERS AND LOCATIONS, AS DESCRIBED IN PARAGRAPH (C)  OF
THIS  SUBDIVISION,  AND  IS  PART  OF A COMBINED REPORTING GROUP THAT IS
DOING BUSINESS IN THIS STATE IF THE NUMBER OF CUSTOMERS,  LOCATIONS,  OR
CUSTOMERS  AND  LOCATIONS,  WITHIN  THIS  STATE  OF  THE  MEMBERS OF THE
COMBINED REPORTING GROUP THAT HAVE AT LEAST TEN CUSTOMERS, LOCATIONS, OR
CUSTOMERS AND LOCATIONS, WITHIN THIS STATE IN THE AGGREGATE MEETS ANY OF
THE THRESHOLDS SET FORTH IN PARAGRAPH (C) OF THIS SUBDIVISION.
  (E) AT THE END OF EACH YEAR, THE COMMISSIONER SHALL REVIEW THE CUMULA-
TIVE PERCENTAGE CHANGE IN THE CONSUMER  PRICE  INDEX.  THE  COMMISSIONER
SHALL ADJUST THE RECEIPT THRESHOLDS SET FORTH IN THIS SUBDIVISION IF THE
CONSUMER  PRICE  INDEX  HAS CHANGED BY TEN PERCENT OR MORE SINCE JANUARY
FIRST, TWO THOUSAND FIFTEEN, OR SINCE THE DATE THAT THE THRESHOLDS  WERE
LAST  ADJUSTED  UNDER THIS SUBDIVISION. THE THRESHOLDS SHALL BE ADJUSTED
TO REFLECT THAT CUMULATIVE  PERCENTAGE  CHANGE  IN  THE  CONSUMER  PRICE
INDEX. THE ADJUSTED THRESHOLDS SHALL BE ROUNDED TO THE NEAREST ONE THOU-
SAND  DOLLARS.  AS  USED IN THIS PARAGRAPH, "CONSUMER PRICE INDEX" MEANS
THE CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS (CPI-U) AVAILABLE  FORM
THE BUREAU OF LABOR STATISTICS OF THE UNITED STATES DEPARTMENT OF LABOR.
ANY  ADJUSTMENT  SHALL APPLY TO TAX PERIODS THAT BEGIN AFTER THE ADJUST-
MENT IS MADE.
  (F) IF A PARTNERSHIP IS DOING BUSINESS, EMPLOYING CAPITAL,  OWNING  OR
LEASING  PROPERTY  IN THIS STATE, MAINTAINING AN OFFICE IN THE STATE, OR
DERIVING RECEIPTS FROM ACTIVITY IN THIS STATE, ANY CORPORATION THAT IS A

S. 6359--C                         38

PARTNER IN SUCH PARTNERSHIP SHALL BE SUBJECT TO TAX UNDER  THIS  ARTICLE
AS DESCRIBED IN THE REGULATIONS OF THE COMMISSIONER.
  2.  A  foreign  corporation  shall not be deemed to be doing business,
employing capital, owning or leasing property, or maintaining an  office
in this state, OR DERIVING RECEIPTS FROM ACTIVITY IN THIS STATE, for the
purposes  of  this  article,  by  reason  of (a) the maintenance of cash
balances with banks or trust companies in this state, or (b) the  owner-
ship  of  shares of stock or securities kept in this state, if kept in a
safe deposit box,  safe,  vault  or  other  receptacle  rented  for  the
purpose,  or if pledged as collateral security, or if deposited with one
or more banks or trust companies, or brokers who are members of a recog-
nized security exchange, in safekeeping or custody accounts, or (c)  the
taking  of any action by any such bank or trust company or broker, which
is incidental to the rendering of safekeeping or  custodian  service  to
such  corporation,  or (d) the maintenance of an office in this state by
one or more officers or directors of the corporation who are not employ-
ees of the corporation if the corporation otherwise is not  doing  busi-
ness in this state, and does not employ capital or own or lease property
in  this  state, or (e) the keeping of books or records of a corporation
in this state if such books or records are not kept by employees of such
corporation and such corporation does not otherwise do business,  employ
capital,  own  or lease property or maintain an office in this state, or
(f) [the use of fulfillment services of a person other  than  an  affil-
iated  person  and  the  ownership of property stored on the premises of
such person in conjunction with such services, or (g)]  any  combination
of  the foregoing activities. [For purposes of this subdivision, persons
are affiliated persons with respect to each  other  where  one  of  such
persons  has  an  ownership  interest of more than five percent, whether
direct or indirect, in the other, or where an ownership interest of more
than five percent, whether direct or indirect, is held in each  of  such
persons  by  another  person  or  by  a group of other persons which are
affiliated persons with respect to each other. The term "person" in  the
preceding  sentence  and in paragraph (f) of this subdivision shall have
the meaning ascribed  thereto  by  subdivision  (a)  of  section  eleven
hundred one of this chapter.]
  2-a.  An  alien  corporation shall not be deemed to be doing business,
employing capital, owning or leasing property, or maintaining an  office
in  this  state,  for the purposes of this article, if its activities in
this state are limited solely to (a) investing or trading in stocks  and
securities  for  its  own  account  within the meaning of clause (ii) of
subparagraph (A) of paragraph (2) of subsection  (b)  of  section  eight
hundred  sixty-four  of  the  internal  revenue code or (b) investing or
trading in commodities for its own account within the meaning of  clause
(ii)  of  subparagraph (B) of paragraph (2) of subsection (b) of section
eight hundred sixty-four of the internal revenue code or (c) any  combi-
nation  of activities described in paragraphs (a) and (b) of this subdi-
vision.  AN ALIEN CORPORATION THAT HAS NO EFFECTIVELY  CONNECTED  INCOME
FOR THE TAXABLE YEAR PURSUANT TO CLAUSE (IV) OF THE OPENING PARAGRAPH OF
SUBDIVISION  NINE OF SECTION TWO HUNDRED EIGHT OF THIS ARTICLE SHALL NOT
BE SUBJECT TO TAX UNDER THIS ARTICLE FOR THAT TAXABLE YEAR. For purposes
of this subdivision, an alien corporation  is  a  corporation  organized
under the laws of a country, or any political subdivision thereof, other
than the United States.
  4.  Corporations liable to tax under sections one hundred eighty-three
to one hundred  eighty-four-a,  inclusive,  corporations  taxable  under
[articles  thirty-two  and]  ARTICLE  thirty-three  of this chapter, any

S. 6359--C                         39

trust company organized under a law of this state all of  the  stock  of
which  is  owned by not less than twenty savings banks organized under a
law of this state, [bank holding companies filing a combined  return  in
accordance  with subsection (f) of section fourteen hundred sixty-two of
this chapter,] a captive REIT or a captive RIC filing a combined  return
under  [either  subsection (f) of section fourteen hundred sixty-two or]
subdivision (f) of section fifteen hundred fifteen of this chapter,  and
housing  companies organized and operating pursuant to the provisions of
article two or article five of the private housing finance law and hous-
ing development fund companies organized pursuant to the  provisions  of
article  eleven  of the private housing finance law shall not be subject
to tax under this article.
  5. For any taxable year of a real estate investment trust  as  defined
in section eight hundred fifty-six of the internal revenue code in which
such  trust  is  subject  to federal income taxation under section eight
hundred fifty-seven of such code, such trust shall be subject to  a  tax
computed under either paragraph (a) [, (c)] or (d) of subdivision one of
section  two  hundred  ten  of  this  chapter,  whichever  is [greatest]
GREATER, and shall not be subject to any tax under  article  [thirty-two
or  article]  thirty-three  of  this  chapter  except for a captive REIT
required to file a combined return under  [subdivision  (f)  of  section
fourteen  hundred  sixty-two  or]  subdivision  (f)  of  section fifteen
hundred fifteen of this chapter. In the  case  of  such  a  real  estate
investment  trust, including a captive REIT as defined in section two of
this chapter, the term "entire net income" means "real estate investment
trust taxable income" as defined in paragraph two of subdivision (b)  of
section  eight hundred fifty-seven (as modified by section eight hundred
fifty-eight) of the internal revenue code plus the amount taxable  under
paragraph  three of subdivision (b) of section eight hundred fifty-seven
of such code, subject to the [modification]  MODIFICATIONS  required  by
subdivision  nine  of  section two hundred eight of this article [(other
than the modification required by  subparagraph  two  of  paragraph  (a)
thereof)  including the modifications required by paragraphs (d) and (e)
of subdivision three of section two hundred ten of this article].
  6. For any taxable year of a DISC, not exempt from tax under paragraph
(i) of subdivision nine of section two hundred eight  of  this  article,
the  taxes  imposed by subdivision one of this section shall be computed
only under either paragraph (b) or (d) of subdivision one of section two
hundred ten of this chapter, whichever is greater[, and paragraph (e) of
such subdivision].
  7. For any taxable year, beginning on or after January first, nineteen
hundred eighty of a regulated investment company, as defined in  section
eight  hundred  fifty-one  of  the  internal revenue code, in which such
company is subject  to  federal  income  taxation  under  section  eight
hundred  fifty-two  of such code, such company shall be subject to a tax
computed under either paragraph (a)[, (c)] or (d) of subdivision one  of
section  two  hundred  ten  of  this  chapter,  whichever  is [greatest]
GREATER, and shall not be subject to any tax under  article  [thirty-two
or  article]  thirty-three  of  this  chapter  except  for a captive RIC
required to file a combined return under  [subdivision  (f)  of  section
fourteen  hundred  sixty-two  or]  subdivision  (f)  of  section fifteen
hundred fifteen of this chapter. In the case of such a regulated invest-
ment company, including a captive RIC as defined in section two of  this
chapter,  the term "entire net income" means "investment company taxable
income" as defined in paragraph two of subdivision (b) of section  eight
hundred  fifty-two,  as modified by section eight hundred fifty-five, of

S. 6359--C                         40

the internal revenue code plus the amount taxable under paragraph  three
of  subdivision  (b)  of  section  eight  hundred fifty-two of such code
subject to the [modification] MODIFICATIONS required by subdivision nine
of  section two hundred eight of this chapter[, other than the modifica-
tion required by subparagraph two of paragraph (a) and by paragraph  (f)
thereof,  including  the modification required by paragraphs (d) and (e)
of subdivision three of section two hundred ten of this chapter].
  8. For any taxable year beginning on or after January first, two thou-
sand six, a corporation that is  no  longer  doing  business,  employing
capital, or owning or leasing property, OR DERIVING RECEIPTS FROM ACTIV-
ITY  in this state in a corporate or organized capacity that has filed a
final tax return with the department for the last tax year it was  doing
business  and has no outstanding tax liability for such final tax return
or any tax return for prior tax years shall be  exempt  from  all  taxes
imposed  by  paragraph (d) of subdivision one of section two hundred ten
of this article for tax years following the last year  such  corporation
was doing business.
  S 6. Section 209-A of the tax law is REPEALED.
  S 7. The section heading and subdivision 1 of section 209-B of the tax
law,  the  section  heading as amended by chapter 11 of the laws of 1983
and subdivision 1 as amended by section 4 of part A of chapter 59 of the
laws of 2013, are amended to read as follows:
  [Temporary  metropolitan]  METROPOLITAN  transportation  business  tax
surcharge.    1. (A) For the privilege of exercising its corporate fran-
chise, or of doing business, or of employing capital, or  of  owning  or
leasing property in a corporate or organized capacity, or of maintaining
an  office,  OR  OF  DERIVING RECEIPTS FROM ACTIVITY in the metropolitan
commuter transportation district, for all or any  part  of  its  taxable
year,  there  is  hereby  imposed on every corporation, other than a New
York S corporation, subject to tax under section  two  hundred  nine  of
this article, or any receiver, referee, trustee, assignee or other fidu-
ciary,  or any officer or agent appointed by any court, who conducts the
business of any such corporation, [for the taxable years  commencing  on
or  after  January  first, nineteen hundred eighty-two but ending before
December thirty-first, two thousand eighteen,] a tax surcharge, in addi-
tion to the tax imposed under section two hundred nine of this article[,
to be computed at the rate of eighteen]. SUCH  SURCHARGE  SHALL  BE  THE
PRODUCT  OF  SEVENTEEN percent of the tax imposed under such section two
hundred nine for such taxable years or any part of  such  taxable  years
[ending  before  December  thirty-first,  nineteen  hundred eighty-three
after the deduction of any credits otherwise allowable under this  arti-
cle,  and at the rate of seventeen percent of the tax imposed under such
section for such taxable years or any part of such taxable years  ending
on  or after December thirty-first, nineteen hundred eighty-three after]
BEFORE the deduction of any credits otherwise allowable under this arti-
cle; provided, however, that such [rates] RATE of tax surcharge shall be
applied only to that portion  of  the  tax  imposed  under  section  two
hundred nine of this article [after] BEFORE the deduction of any credits
otherwise  allowable  under  this  article  which is attributable to the
taxpayer's business activity carried on within the metropolitan commuter
transportation district; and provided, further, [that the tax  surcharge
imposed  by this section shall not be imposed upon any taxpayer for more
than four hundred thirty-two months. Provided however, that for  taxable
years  commencing on or after July first, nineteen hundred ninety-eight,
such surcharge shall be calculated as if the tax imposed  under  section
two hundred ten of this article were imposed under the law in effect for

S. 6359--C                         41

taxable  years commencing on or after July first, nineteen hundred nine-
ty-seven and before July first, nineteen hundred ninety-eight.  Provided
however,  that  for  taxable years commencing on or after January first,
two thousand seven, such surcharge shall be calculated using the highest
of  the tax bases imposed pursuant to paragraphs (a), (b), (c) or (d) of
subdivision one of section two hundred  ten  of  this  article  and  the
amount  imposed  under  paragraph (e) of subdivision one of such section
two hundred ten, for the taxable year; and, provided  further  that,  if
such  highest amount is the tax base imposed under paragraph (a), (b) or
(c) of such subdivision, then the surcharge shall be computed as if  the
tax  rates  and  limitations under such paragraph were the tax rates and
limitations under such paragraph in effect for taxable years  commencing
on  or  after  July first, nineteen hundred ninety-seven and before July
first, nineteen  hundred  ninety-eight]  THE  SURCHARGE  COMPUTED  ON  A
COMBINED  REPORT  SHALL  INCLUDE A SURCHARGE ON THE FIXED DOLLAR MINIMUM
TAX FOR EACH MEMBER OF THE COMBINED GROUP SUBJECT TO THE SURCHARGE UNDER
THIS SUBDIVISION. HOWEVER, IF  THE  TOTAL  LIABILITY  OF  THE  SURCHARGE
IMPOSED  BY  THIS  PARAGRAPH  FOR  THE TAXABLE YEAR BEGINNING ON JANUARY
FIRST, TWO THOUSAND FIFTEEN SHOULD BE MORE  THAN  THREE  AND  SIX-TENTHS
PERCENT  HIGHER  THAN  THE  SUM  OF THE TOTAL LIABILITY OF THE SURCHARGE
IMPOSED BY THIS PARAGRAPH AND  THE  TOTAL  LIABILITY  OF  THE  SURCHARGE
IMPOSED BY SECTION FOURTEEN HUNDRED FIFTY-FIVE-B OF THIS CHAPTER FOR THE
TAXABLE YEAR BEGINNING ON JANUARY FIRST, TWO THOUSAND FOURTEEN, THEN FOR
TAXABLE  YEARS BEGINNING ON OR AFTER JANUARY FIRST, TWO THOUSAND SIXTEEN
THE SURCHARGE PERCENTAGE SHALL BE REDUCED BY A PERCENTAGE EQUAL  TO  THE
DIFFERENCE  BETWEEN THE RATE OF GROWTH IN THE TOTAL LIABILITY FROM TAXA-
BLE YEAR TWO THOUSAND FOURTEEN TO TAXABLE YEAR TWO THOUSAND FIFTEEN  AND
THREE AND SIX-TENTHS PERCENT.
  (B)  A CORPORATION IS DERIVING RECEIPTS FROM ACTIVITY IN THE METROPOL-
ITAN COMMUTER TRANSPORTATION DISTRICT IF  IT  HAS  RECEIPTS  WITHIN  THE
METROPOLITAN  COMMUTER TRANSPORTATION DISTRICT OF ONE MILLION DOLLARS OR
MORE IN  A  TAXABLE  YEAR.  FOR  PURPOSES  OF  THIS  SECTION,  THE  TERM
"RECEIPTS"  MEANS  THE  RECEIPTS  THAT  ARE SUBJECT TO THE APPORTIONMENT
RULES SET FORTH IN SECTION TWO HUNDRED TEN-A OF THIS  ARTICLE,  AND  THE
TERM "RECEIPTS WITHIN THE METROPOLITAN COMMUTER TRANSPORTATION DISTRICT"
MEANS THE RECEIPTS INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FACTOR
DETERMINED  UNDER  SUBDIVISION TWO OF THIS SECTION. FOR PURPOSES OF THIS
PARAGRAPH,  RECEIPTS  FROM  PROCESSING  CREDIT  CARD  TRANSACTIONS   FOR
MERCHANTS INCLUDE MERCHANT DISCOUNT FEES RECEIVED BY THE CORPORATION.
  (C)  A  CORPORATION  IS  DOING  BUSINESS  IN THE METROPOLITAN COMMUTER
TRANSPORTATION DISTRICT IF (I) IT HAS ISSUED CREDIT CARDS TO  ONE  THOU-
SAND  OR  MORE CUSTOMERS WHO HAVE A MAILING ADDRESS WITHIN THE METROPOL-
ITAN COMMUTER TRANSPORTATION DISTRICT AS OF THE LAST DAY OF ITS  TAXABLE
YEAR,  (II)  IT  HAS  MERCHANT CUSTOMER CONTRACTS WITH MERCHANTS AND THE
TOTAL NUMBER OF LOCATIONS COVERED BY THOSE CONTRACTS EQUALS ONE THOUSAND
OR MORE LOCATIONS IN THE METROPOLITAN COMMUTER  TRANSPORTATION  DISTRICT
TO  WHOM  THE CORPORATION REMITTED PAYMENTS FOR CREDIT CARD TRANSACTIONS
DURING THE TAXABLE YEAR, OR (III) THE SUM OF  THE  NUMBER  OF  CUSTOMERS
DESCRIBED  IN  SUBPARAGRAPH  (I)  OF  THIS  PARAGRAPH PLUS THE NUMBER OF
LOCATIONS COVERED BY ITS CONTRACTS DESCRIBED  IN  SUBPARAGRAPH  (II)  OF
THIS  PARAGRAPH  EQUALS ONE THOUSAND OR MORE. AS USED IN THIS PARAGRAPH,
THE TERM "CREDIT CARD" INCLUDES BANK, CREDIT, TRAVEL  AND  ENTERTAINMENT
CARDS.
  (D)(I)  A  CORPORATION WITH LESS THAN ONE MILLION DOLLARS BUT AT LEAST
TEN THOUSAND DOLLARS OF RECEIPTS WITHIN THE METROPOLITAN COMMUTER TRANS-
PORTATION DISTRICT IN A TAXABLE YEAR THAT IS PART OF A COMBINED  REPORT-

S. 6359--C                         42

ING  GROUP IS DERIVING RECEIPTS FROM ACTIVITY IN THE METROPOLITAN COMMU-
TER TRANSPORTATION DISTRICT IF  THE  RECEIPTS  WITHIN  THE  METROPOLITAN
COMMUTER  TRANSPORTATION DISTRICT OF THE MEMBERS OF THE UNITARY BUSINESS
GROUP  THAT  HAVE  AT  LEAST TEN THOUSAND DOLLARS OF RECEIPTS WITHIN THE
METROPOLITAN COMMUTER TRANSPORTATION DISTRICT IN THE AGGREGATE MEET  THE
THRESHOLD SET FORTH IN PARAGRAPH (B) OF THIS SUBDIVISION.
  (II)  A CORPORATION THAT DOES NOT MEET ANY OF THE THRESHOLDS SET FORTH
IN PARAGRAPH (C) OF THIS SUBDIVISION BUT HAS AT LEAST TEN CUSTOMERS,  OR
LOCATIONS,  OR  CUSTOMERS  AND LOCATIONS, AS DESCRIBED IN PARAGRAPH (C),
AND IS PART OF A COMBINED REPORTING GROUP THAT IS DOING BUSINESS IN  THE
METROPOLITAN  COMMUTER  TRANSPORTATION DISTRICT IF THE NUMBER OF CUSTOM-
ERS, LOCATIONS, OR CUSTOMERS  AND  LOCATIONS,  WITHIN  THE  METROPOLITAN
COMMUTER  TRANSPORTATION DISTRICT OF THE MEMBERS OF THE UNITARY BUSINESS
GROUP THAT HAVE AT LEAST TEN  CUSTOMERS,  LOCATIONS,  OR  CUSTOMERS  AND
LOCATIONS,  WITHIN  THE METROPOLITAN COMMUTER TRANSPORTATION DISTRICT IN
THE AGGREGATE MEETS ANY OF THE THRESHOLDS SET FORTH IN PARAGRAPH (C)  OF
THIS SUBDIVISION.
  (E) AT THE END OF EACH YEAR, THE COMMISSIONER SHALL REVIEW THE CUMULA-
TIVE  PERCENTAGE  CHANGE  IN  THE CONSUMER PRICE INDEX. THE COMMISSIONER
SHALL ADJUST THE RECEIPT THRESHOLDS SET FORTH IN THIS SUBDIVISION IF THE
CONSUMER PRICE INDEX HAS CHANGED BY TEN PERCENT OR  MORE  SINCE  JANUARY
FIRST,  TWO THOUSAND FIFTEEN, OR SINCE THE DATE THAT THE THRESHOLDS WERE
LAST ADJUSTED UNDER THIS SUBDIVISION. THE THRESHOLDS SHALL  BE  ADJUSTED
TO  REFLECT  THAT  CUMULATIVE  PERCENTAGE  CHANGE  IN THE CONSUMER PRICE
INDEX. THE ADJUSTED THRESHOLDS SHALL BE ROUNDED TO THE NEAREST ONE THOU-
SAND DOLLARS. AS USED IN THIS PARAGRAPH, "CONSUMER  PRICE  INDEX"  MEANS
THE  CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS (CPI-U) AVAILABLE FROM
THE BUREAU OF LABOR STATISTICS OF THE UNITED STATES DEPARTMENT OF LABOR.
ANY ADJUSTMENT SHALL APPLY TO TAX PERIODS THAT BEGIN AFTER  THE  ADJUST-
MENT IS MADE.
  S  8.  Paragraph  (a)  and  the  opening paragraph of paragraph (b) of
subdivision 2 of section 209-B of the tax law, paragraph (a) as  amended
by  chapter  760 of the laws of 1992, and the opening paragraph of para-
graph (b) as amended by chapter 11 of the laws of 1983, are  amended  to
read as follows:
  (a) ascertaining the percentage which the average value of the taxpay-
er's real and tangible personal property, whether owned or rented to it,
within  the  metropolitan  commuter  transportation  district during the
period covered by its report bears to  the  average  value  of  all  the
taxpayer's  real and tangible personal property, whether owned or rented
to it, within the state during  such  period;  provided  that  the  term
"value  of  the  taxpayer's  real  and tangible personal property" shall
[have the same meaning as is ascribed to that term by  subparagraph  one
of  paragraph  (a) of subdivision three of section two hundred ten] MEAN
THE FAIR MARKET VALUE OF SUCH PROPERTIES FOR FEDERAL INCOME TAX PURPOSES
(EXCEPT THAT IN THE CASE OF RENTED PROPERTY SUCH VALUE  SHALL  MEAN  THE
PRODUCT  OF (I) EIGHT AND (II) THE GROSS RENTS PAYABLE FOR THE RENTAL OF
SUCH PROPERTY DURING THE TAXABLE YEAR);
  ascertaining the percentage which the receipts  of  the  taxpayer,  AS
DETERMINED  IN  SECTION  210-A  OF  THIS ARTICLE computed on the cash or
accrual basis according to the method of accounting used in the computa-
tion of its entire net income, arising during such period from:
  S 9. Intentionally omitted.
  S 10. Subdivisions 2-a and 2-b of section 209-B of  the  tax  law  are
REPEALED.

S. 6359--C                         43

  S  11.  Subdivisions 3 and 5 of section 209-B of the tax law, subdivi-
sion 3 as amended by chapter 11 of the laws of 1983 and subdivision 5 as
amended by chapter 166 of the laws of  1991,  are  amended  to  read  as
follows:
  3.  A  corporation shall not be deemed to be doing business, employing
capital, owning or leasing property, or maintaining an office, OR DERIV-
ING RECEIPTS FROM ACTIVITY in the metropolitan  commuter  transportation
district, for the purposes of this section, by reason of (a) the mainte-
nance of cash balances with banks or trust companies in the metropolitan
commuter  transportation  district,  or  (b)  the ownership of shares of
stock or securities kept in  the  metropolitan  commuter  transportation
district, if kept in a safe deposit box, safe, vault or other receptacle
rented  for  the  purpose,  or  if pledged as collateral security, or if
deposited with one or more banks or trust companies, or brokers who  are
members  of  a  recognized  security exchange, in safekeeping or custody
accounts, or (c) the taking of any action by  any  such  bank  or  trust
company  or  broker, which is incidental to the rendering of safekeeping
or custodian service to such corporation, or (d) the maintenance  of  an
office  in  the  metropolitan commuter transportation district by one or
more officers or directors of the corporation who are not  employees  of
the  corporation  if  the corporation otherwise is not doing business in
the metropolitan commuter transportation district, and does  not  employ
capital  or own or lease property in the metropolitan commuter transpor-
tation district, or (e) the keeping of books or records of a corporation
in the metropolitan commuter transportation district if  such  books  or
records  are  not  kept by employees of such corporation and such corpo-
ration does not otherwise do business,  employ  capital,  own  or  lease
property  or maintain an office in the metropolitan commuter transporta-
tion district, or (f) any combination of the foregoing activities.
  5. The provisions concerning  reports  under  [section]  SECTIONS  TWO
HUNDRED  TEN-C  AND  two  hundred  eleven  shall  be  applicable to this
section, except that for purposes of  an  automatic  extension  for  six
months  for  filing  a report covering the tax surcharge imposed by this
section, such automatic extension shall be allowed only  if  a  taxpayer
files with the commissioner an application for extension in such form as
said  commissioner may prescribe by regulation and pays on or before the
date of such filing in addition to any other amounts required under this
article, either ninety percent of the entire tax surcharge  required  to
be  paid  under this section for the applicable period, or not less than
the tax surcharge shown on the taxpayer's return for the preceding taxa-
ble year, if such preceding taxable year was a taxable  year  of  twelve
months;  provided,  however,  that in no event shall such amount be less
than the product of the following three amounts: (1) the  tax  surcharge
rate  in effect for the taxable year pursuant to subdivision one of this
section, (2) the fixed dollar minimum applicable  to  such  taxpayer  as
determined under paragraph (d) of subdivision one of section two hundred
ten  of this chapter for the taxable year, and (3) the percentage deter-
mined under subdivision two of this section for  the  preceding  taxable
year,  unless  the taxpayer was not subject to the tax surcharge imposed
pursuant to this section with respect to such year, in which  case  such
percentage  shall be deemed to be one hundred percent. The tax surcharge
imposed by this section shall be payable to the commissioner in full  at
the  time  the report is required to be filed, and such tax surcharge or
the balance thereof, imposed on any taxpayer which  ceases  to  exercise
its franchise or be subject to the tax surcharge imposed by this section
shall  be payable to the commissioner at the time the report is required

S. 6359--C                         44

to be filed, provided such tax surcharge of a domestic corporation which
continues to possess its franchise shall be subject to adjustment as the
circumstances may require; all other tax surcharges of any such  taxpay-
er,  which  pursuant  to  the foregoing provisions of this section would
otherwise be payable subsequent to the time such report is  required  to
be  filed,  shall  nevertheless  be  payable  at  such  time. All of the
provisions of this article presently applicable are  applicable  to  the
tax surcharge imposed by this section.
  S 12. Subdivision 1 of section 210 of the tax law, as added by chapter
817  of  the laws of 1987, the opening paragraph as amended by section 1
of part D and paragraph (g) as amended by section 2 of part A of chapter
63 of the laws of 2000, paragraph (a) as amended by  section 2 of part N
of chapter 60 of the laws of 2007, subparagraph 2 of  paragraph  (b)  as
amended  by  section  1  of part GG-1 of chapter 57 of the laws of 2008,
subparagraph 3 of paragraph (b) as added by section 2 of part Z of chap-
ter 59 of the laws of  2013,  subparagraph  (ii)  of  paragraph  (c)  as
amended  by  section  2 of part C and subparagraph 5 of paragraph (d) as
added by section 3 of part C of chapter 56 of the laws of 2011, subpara-
graph (vi) of paragraph (a) as amended by section 1 of part C of chapter
56 of the laws of 2011, subparagraph (vii) of paragraph (a) as added  by
section  1  of  part  Z  of chapter 59 of the laws of 2013, subparagraph
(iii) of paragraph (c) as added by section 3 of part Z of chapter 59  of
the  laws  of  2013,  and  subparagraph  6  of paragraph (d) as added by
section 4 of part Z of chapter 59 of the laws of 2013, paragraph (b)  as
amended  by  section  1  of part GG1, subparagraph 3 of paragraph (d) as
amended by section 3 of part AA1, subparagraph 4  of  paragraph  (d)  as
added  by  section  2 of part AA1 and subparagraph 1 of paragraph (g) as
amended by section 4 of part AA1 of chapter 57  of  the  laws  of  2008,
paragraph  (c)  as amended by section 10 of part A and subparagraph 1 of
paragraph (d) as amended by section 12 of part A of chapter  56  of  the
laws  of  1998,  paragraph  (d) as amended by chapter 760 of the laws of
1992, paragraph (e) as amended by section 1 of part P of chapter 407  of
the laws of 1999, and paragraph (f) as amended by section 2 of part E of
chapter 61 of the laws of 2005, is amended to read as follows:
  1.  The  tax imposed by subdivision one of section two hundred nine of
this chapter shall be: (A) in the case of each taxpayer other than a New
York S corporation or a qualified homeowners association,  the  [sum  of
(1) the] highest of the amounts prescribed in paragraphs (a), (b), [(c)]
and  (d) of this subdivision [and (2) the amount prescribed in paragraph
(e) of this subdivision], (B) in the case of  each  New  York  S  corpo-
ration,  the  amount  prescribed in paragraph [(g)] (D) of this subdivi-
sion, and (C) in the case of a  qualified  homeowners  association,  the
[sum  of (1) the] highest of the amounts prescribed in paragraphs (a)[,]
AND (b) [and (c)] of this subdivision [and (2) the amount prescribed  in
paragraph  (e) of this subdivision]. For purposes of this paragraph, the
term "qualified homeowners association" means a homeowners  association,
as  such term is defined in subsection (c) of section five hundred twen-
ty-eight of the internal revenue code without regard to subparagraph (E)
of paragraph one of such subsection (relating to elections to  be  taxed
pursuant  to  such section), which has no homeowners association taxable
income, as such term is defined  in  subsection  (d)  of  such  section.
Provided,  however, that in the case of a small business taxpayer (other
than a New York S corporation) as  defined  in  paragraph  (f)  of  this
subdivision, FOR TAXABLE YEARS BEGINNING BEFORE JANUARY FIRST, TWO THOU-
SAND  SIXTEEN,  if the amount prescribed in such paragraph (b) is higher
than the amount prescribed in such paragraph (a) solely by reason of the

S. 6359--C                         45

application of the rate applicable to  small  business  taxpayers,  then
with  respect  to  such  taxpayer  the  tax  referred to in the previous
sentence shall be [the sum of (1) the highest]  HIGHER  of  the  amounts
prescribed in paragraphs (a)[, (c)] and (d) of this subdivision [and (2)
the amount prescribed in paragraph (e) of this subdivision].
  (a)  [Entire  net]  BUSINESS income base. [For taxable years beginning
before July first, nineteen hundred ninety-nine, the  amount  prescribed
by  this  paragraph shall be computed at the rate of nine percent of the
taxpayer's entire net income base. For  taxable  years  beginning  after
June  thirtieth, nineteen hundred ninety-nine and before July first, two
thousand, the amount prescribed by this paragraph shall be  computed  at
the  rate  of  eight  and  one-half percent of the taxpayer's entire net
income base. For taxable years beginning after June thirtieth, two thou-
sand and before July first, two thousand one, the amount  prescribed  by
this  paragraph  shall  be  computed at the rate of eight percent of the
taxpayer's entire net income base. For  taxable  years  beginning  after
June  thirtieth, two thousand one and before January first, two thousand
seven, the amount prescribed by this paragraph shall be computed at  the
rate  of  seven and one-half percent of the taxpayer's entire net income
base.] For taxable years beginning [on or after] BEFORE  January  first,
two  thousand  [seven]  SIXTEEN, the amount prescribed by this paragraph
shall be computed at the rate of seven  and  one-tenth  percent  of  the
taxpayer's  [entire  net] BUSINESS income base. FOR TAXABLE YEARS BEGIN-
NING ON OR  AFTER  JANUARY  FIRST,  TWO  THOUSAND  SIXTEEN,  THE  AMOUNT
PRESCRIBED  BY  THIS  PARAGRAPH SHALL BE SIX AND ONE-HALF PERCENT OF THE
TAXPAYER'S BUSINESS INCOME BASE. The taxpayer's  [entire  net]  BUSINESS
income  base shall mean the portion of the taxpayer's [entire net] BUSI-
NESS income allocated within the state as hereinafter provided[, subject
to any modification required by paragraphs (d) and  (e)  of  subdivision
three of this section]. However, in the case of a small business taxpay-
er,  as  defined  in  paragraph  (f)  of  this  subdivision,  the amount
prescribed by this paragraph shall be computed pursuant to  subparagraph
(iv)  of this paragraph and in the case of a manufacturer, as defined in
subparagraph (vi) of this paragraph, the amount prescribed by this para-
graph shall be computed pursuant to subparagraph (vi) of this paragraph.
  [(i) if the entire net income base is not more than two hundred  thou-
sand  dollars,  (1) for taxable years beginning before July first, nine-
teen hundred ninety-nine, the amount  shall  be  eight  percent  of  the
entire net income base; (2) for taxable years beginning after June thir-
tieth,  nineteen hundred ninety-nine and before July first, two thousand
three, the amount shall be seven and one-half percent of the entire  net
income  base;  and (3) for taxable years beginning after June thirtieth,
two thousand three and before January  first,  two  thousand  five,  the
amount shall be 6.85 percent of the entire net income base;
  (ii)  if  the entire net income base is more than two hundred thousand
dollars but not over two hundred ninety thousand dollars, (1) for  taxa-
ble years beginning before July first, nineteen hundred ninety-nine, the
amount  shall  be  the  sum  of  (a)  sixteen thousand dollars, (b) nine
percent of the excess of the entire net income  base  over  two  hundred
thousand  dollars  and  (c) five percent of the excess of the entire net
income base over two hundred fifty thousand  dollars;  (2)  for  taxable
years  beginning  after June thirtieth, nineteen hundred ninety-nine and
before July first, two thousand, the amount shall  be  the  sum  of  (a)
fifteen  thousand  dollars, (b) eight and one-half percent of the excess
of the entire net income base over two hundred thousand dollars and  (c)
five  percent  of  the  excess  of  the  entire net income base over two

S. 6359--C                         46

hundred fifty thousand dollars; (3) for taxable  years  beginning  after
June  thirtieth,  two  thousand and before July first, two thousand one,
the amount shall be the sum of (a) fifteen thousand dollars,  (b)  eight
percent  of  the  excess  of the entire net income base over two hundred
thousand dollars and (c) two and one-half percent of the excess  of  the
entire  net income base over two hundred fifty thousand dollars; (4) for
taxable years beginning after  June  thirtieth,  two  thousand  one  and
before  July  first,  two  thousand three, the amount shall be seven and
one-half percent of the entire net income  base;  and  (5)  for  taxable
years  beginning  after  June  thirtieth,  two thousand three and before
January first, two thousand five, the amount shall be  the  sum  of  (a)
thirteen  thousand  seven hundred dollars, (b) 7.5 percent of the excess
of the entire net income base over two hundred thousand dollars and  (c)
3.25  percent  of  the  excess  of  the  entire net income base over two
hundred fifty thousand dollars;
  (iii) for taxable years beginning on or after January first, two thou-
sand five and ending before January first, two thousand  seven,  if  the
entire  net  income  base  is  not more than two hundred ninety thousand
dollars the amount shall be six and one-half percent of the  entire  net
income  base;  if  the  entire  net income base is more than two hundred
ninety thousand dollars but  not  over  three  hundred  ninety  thousand
dollars  the  amount  shall  be  the  sum of (1) eighteen thousand eight
hundred fifty dollars, (2) seven and one-half percent of the  excess  of
the  entire net income base over two hundred ninety thousand dollars but
not over three hundred ninety thousand dollars and (3)  seven  and  one-
quarter  percent  of the excess of the entire net income base over three
hundred fifty thousand dollars but not over three hundred  ninety  thou-
sand dollars;]
  (iv)  for  taxable years beginning [on or after] BEFORE January first,
two thousand [seven] SIXTEEN, if the [entire net] BUSINESS  income  base
is not more than two hundred ninety thousand dollars the amount shall be
six  and  one-half  percent of the [entire net] BUSINESS income base; if
the [entire net] BUSINESS income base is more than  two  hundred  ninety
thousand  dollars but not over three hundred ninety thousand dollars the
amount shall be the sum of (1) eighteen  thousand  eight  hundred  fifty
dollars,  (2)  seven  and one-tenth percent of the excess of the [entire
net] BUSINESS income base over two hundred ninety thousand  dollars  but
not  over three hundred ninety thousand dollars and (3) four and thirty-
five hundredths percent of the  excess  of  the  [entire  net]  BUSINESS
income base over three hundred fifty thousand dollars but not over three
hundred ninety thousand dollars;
  (v)  if  the  taxable period to which [subparagraphs (i), (ii), (iii),
and] SUBPARAGRAPH (iv) of this paragraph [apply] APPLIES  is  less  than
twelve months, the amount prescribed by this paragraph shall be computed
as follows:
  (A)  Multiply  the [entire net] BUSINESS income base for such taxpayer
by twelve;
  (B) Divide the result obtained in (A) by the number of months  in  the
taxable year;
  (C) Compute an amount pursuant to [subparagraphs (i) and (ii)] SUBPAR-
AGRAPH (IV) as if the result obtained in (B) were the taxpayer's [entire
net] BUSINESS income base;
  (D) Multiply the result obtained in (C) by the number of months in the
taxpayer's taxable year;
  (E) Divide the result obtained in (D) by twelve.

S. 6359--C                         47

  (vi) for taxable years beginning on or after January thirty-first, two
thousand  seven,  the amount prescribed by this paragraph for a taxpayer
which is a qualified New York manufacturer, shall  be  computed  at  the
rate  of  six  and one-half (6.5) percent of the taxpayer's [entire net]
BUSINESS  income  base. [For taxable years beginning on or after January
first, two thousand  twelve  and  before  January  first,  two  thousand
fifteen, the amount prescribed by this paragraph for a taxpayer which is
an  eligible  qualified  New  York manufacturer shall be computed at the
rate of three and one-quarter (3.25) percent of  the  taxpayer's  entire
net  income  base.]  The term "manufacturer" shall mean a taxpayer which
during the taxable year is principally  engaged  in  the  production  of
goods   by  manufacturing,  processing,  assembling,  refining,  mining,
extracting, farming, agriculture, horticulture,  floriculture,  viticul-
ture  or commercial fishing. However, the generation and distribution of
electricity, the distribution of natural  gas,  and  the  production  of
steam  associated with the generation of electricity shall not be quali-
fying activities for a manufacturer under this  subparagraph.  Moreover,
the  combined group shall be considered a "manufacturer" for purposes of
this subparagraph only if the combined group during the taxable year  is
principally  engaged  in  the activities set forth in this paragraph, or
any combination thereof. A taxpayer or a combined group shall be  "prin-
cipally  engaged"  in  activities described above if, during the taxable
year, more than fifty percent of the gross receipts of the  taxpayer  or
combined group, respectively, are derived from receipts from the sale of
goods produced by such activities. In computing a combined group's gross
receipts,  intercorporate receipts shall be eliminated. A "qualified New
York manufacturer" is a manufacturer which  has  property  in  New  York
which  is  described in [clause (A) of subparagraph (i) of paragraph (b)
of] subdivision [twelve of this section]  ONE  OF  SECTION  TWO  HUNDRED
TEN-B OF THIS ARTICLE and either (I) the adjusted basis of such property
for  federal  income tax purposes at the close of the taxable year is at
least one million dollars or (II) all of its real and personal  property
is located in New York. In addition, a "qualified New York manufacturer"
means  a  taxpayer  which  is defined as a qualified emerging technology
company under paragraph (c) of subdivision  one  of  section  thirty-one
hundred  two-e  of  the  public  authorities  law  regardless of the ten
million dollar limitation expressed in subparagraph one  of  such  para-
graph  (c).  [The  commissioner  shall establish guidelines and criteria
that specify requirements by which a manufacturer may be  classified  as
an  eligible  qualified  New York manufacturer. Criteria may include but
not be limited to factors such as regional  unemployment,  the  economic
impact  that  manufacturing has on the surrounding community, population
decline within the region and median income within the region  in  which
the manufacturer is located. In establishing these guidelines and crite-
ria,  the  commissioner shall endeavor that the total annual cost of the
lower rates shall not exceed twenty-five million  dollars.]  A  TAXPAYER
OR,  IN  THE  CASE OF A COMBINED REPORT, A COMBINED GROUP, THAT DOES NOT
SATISFY THE CRITERIA IN SUBDIVISION THIRTEEN OF THIS SECTION  MAY  BE  A
QUALIFIED  NEW  YORK  MANUFACTURER IF THE TAXPAYER OR THE COMBINED GROUP
EMPLOYS DURING THE TAXABLE YEAR  AT  LEAST  TWO  THOUSAND  FIVE  HUNDRED
EMPLOYEES  IN MANUFACTURING IN NEW YORK AND THE TAXPAYER OR THE COMBINED
GROUP HAS PROPERTY IN THE STATE  USED  IN  MANUFACTURING,  THE  ADJUSTED
BASIS OF WHICH FOR FEDERAL INCOME TAX PURPOSES AT THE CLOSE OF THE TAXA-
BLE YEAR IS AT LEAST ONE HUNDRED MILLION DOLLARS.
  (vii)  For  a  qualified New York manufacturer, as defined in subpara-
graph (vi) of this paragraph, the rate at which the tax is computed  [in

S. 6359--C                         48

effect  for taxable years beginning on or after January first, two thou-
sand thirteen and before January first, two thousand fourteen for quali-
fied New York manufacturers shall be  reduced  by  nine  and  two-tenths
percent  for  taxable  years  commencing  on or after January first, two
thousand fourteen and before January first, two thousand fifteen, twelve
and three-tenths percent for taxable years commencing on or after  Janu-
ary  first,  two thousand fifteen and before January first, two thousand
sixteen, fifteen and four-tenths percent for taxable years commencing on
or after January first, two thousand sixteen and before  January  first,
two  thousand eighteen, and twenty-five percent for taxable years begin-
ning on or after January first, two thousand  eighteen]  SHALL  BE  ZERO
PERCENT OF THE TAXPAYER'S BUSINESS INCOME  BASE.
  (VIII)  (A)  IN COMPUTING THE BUSINESS INCOME BASE, TAXPAYERS SHALL BE
ALLOWED BOTH A PRIOR NET OPERATING  LOSS  CONVERSION  SUBTRACTION  UNDER
THIS  SUBPARAGRAPH AND A NET OPERATING LOSS DEDUCTION UNDER SUBPARAGRAPH
(IX)  OF  THIS  PARAGRAPH.  THE  PRIOR  NET  OPERATING  LOSS  CONVERSION
SUBTRACTION  COMPUTED  UNDER  THIS SUBPARAGRAPH SHALL BE APPLIED AGAINST
THE BUSINESS  INCOME  BASE  BEFORE  THE  NET  OPERATING  LOSS  DEDUCTION
COMPUTED UNDER SUBPARAGRAPH (IX) OF THIS PARAGRAPH.
  (B) PRIOR NET OPERATING LOSS CONVERSION SUBTRACTION.
  (1) DEFINITIONS.
  (I)  "BASE  YEAR"  MEANS  THE  LAST TAXABLE YEAR BEGINNING ON OR AFTER
JANUARY FIRST, TWO THOUSAND FOURTEEN AND BEFORE JANUARY FIRST, TWO THOU-
SAND FIFTEEN.
  (II) "UNABSORBED NET OPERATING LOSS" MEANS THE UNABSORBED  PORTION  OF
NET OPERATING LOSS AS CALCULATED UNDER PARAGRAPH (F) OF SUBDIVISION NINE
OF  SECTION  TWO  HUNDRED  EIGHT  OF THIS ARTICLE OR SUBSECTION (K-1) OF
SECTION FOURTEEN HUNDRED FIFTY-THREE OF THIS CHAPTER  AS  SUCH  SECTIONS
WERE IN EFFECT ON DECEMBER THIRTY-FIRST, TWO THOUSAND FOURTEEN, THAT WAS
NOT  DEDUCTIBLE IN PREVIOUS TAXABLE YEARS AND WAS ELIGIBLE FOR CARRYOVER
ON THE LAST DAY OF THE BASE  YEAR,  INCLUDING  ANY  NET  OPERATING  LOSS
SUSTAINED BY THE TAXPAYER DURING THE BASE YEAR.
  (III)  "BASE  YEAR  BAP"  MEANS  THE  TAXPAYER'S  BUSINESS  ALLOCATION
PERCENTAGE AS CALCULATED UNDER PARAGRAPH (A)  OF  SUBDIVISION  THREE  OF
THIS  SECTION FOR THE BASE YEAR, OR THE TAXPAYER'S ALLOCATION PERCENTAGE
AS CALCULATED UNDER SECTION FOURTEEN HUNDRED FIFTY-FOUR OF THIS  CHAPTER
FOR PURPOSES OF CALCULATING ENTIRE NET INCOME FOR THE BASE YEAR, AS SUCH
SECTIONS WERE IN EFFECT ON DECEMBER THIRTY-FIRST, TWO THOUSAND FOURTEEN.
  (IV)  "BASE  YEAR TAX RATE" MEANS THE TAXPAYER'S TAX RATE FOR THE BASE
YEAR AS CALCULATED UNDER THIS PARAGRAPH OR  SUBSECTION  (A)  OF  SECTION
FOURTEEN  HUNDRED FIFTY-FIVE OF THIS CHAPTER, AS SUCH PROVISIONS WERE IN
EFFECT ON DECEMBER THIRTY-FIRST, TWO THOUSAND FOURTEEN.
  (2) THE PRIOR NET  OPERATING  LOSS  CONVERSION  SUBTRACTION  SHALL  BE
CALCULATED AS FOLLOWS:
  (I) THE TAXPAYER SHALL FIRST CALCULATE THE TAX VALUE OF ITS UNABSORBED
NET  OPERATING LOSS FOR THE BASE YEAR. THE VALUE IS EQUAL TO THE PRODUCT
OF (I) THE AMOUNT OF THE TAXPAYER'S UNABSORBED NET OPERATING LOSS,  (II)
THE  TAXPAYER'S  BASE  YEAR  BAP, AND (III) THE TAXPAYER'S BASE YEAR TAX
RATE.
  (II) THE PRODUCT DETERMINED UNDER ITEM (I) OF THIS SUBCLAUSE  IS  THEN
DIVIDED  BY  SIX AND ONE-HALF PERCENT, OR IN THE CASE OF A QUALIFIED NEW
YORK MANUFACTURER, FIVE AND  SEVEN-TENTHS  PERCENT.  THIS  RESULT  SHALL
EQUAL  THE  TAXPAYER'S  PRIOR  NET OPERATING LOSS CONVERSION SUBTRACTION
POOL.
  (III) THE TAXPAYER'S PRIOR NET OPERATING LOSS  CONVERSION  SUBTRACTION
FOR  THE  TAXABLE YEAR SHALL EQUAL ONE-HALF FOR NO MORE THAN TWO CONSEC-

S. 6359--C                         49

UTIVE TAX YEARS OR  ONE-TENTH  OF  ITS  NET  OPERATING  LOSS  CONVERSION
SUBTRACTION  POOL  PLUS  ANY  AMOUNT  OF UNUSED PRIOR NET OPERATING LOSS
CONVERSION SUBTRACTION FROM PRECEDING TAXABLE YEARS.  PROVIDED, HOWEVER,
THE  PRIOR NET OPERATING LOSS CONVERSION SUBTRACTION OF A SMALL BUSINESS
CORPORATION, AS DEFINED IN PARAGRAPH (F) OF THIS SUBDIVISION, AS OF  THE
LAST DAY OF THE BASE YEAR, SHALL NOT BE SUBJECT TO THE ONE-TENTH LIMITA-
TION IN THE PREVIOUS SENTENCE.
  (3)  COMBINED  GROUPS.  (I)  WHERE A TAXPAYER WAS PROPERLY INCLUDED OR
REQUIRED TO BE INCLUDED IN A COMBINED REPORT FOR THE BASE YEAR  PURSUANT
TO SECTION TWO HUNDRED ELEVEN OF THIS ARTICLE OR A COMBINED RETURN UNDER
SECTION  FOURTEEN  HUNDRED  SIXTY-TWO  OF THIS CHAPTER, AS SUCH SECTIONS
WERE IN EFFECT ON DECEMBER THIRTY-FIRST, TWO THOUSAND FOURTEEN, AND  THE
MEMBERS  OF  THE  COMBINED  GROUP  FOR THE BASE YEAR ARE THE SAME AS THE
MEMBERS OF THE COMBINED GROUP FOR THE TAXABLE YEAR IMMEDIATELY  SUCCEED-
ING  THE  BASE  YEAR,  THE  COMBINED GROUP SHALL CALCULATE ITS PRIOR NET
OPERATING LOSS CONVERSION SUBTRACTION POOL USING  THE  COMBINED  GROUP'S
TOTAL  UNABSORBED  NET  OPERATING LOSS, BASE YEAR BAP, AND BASE YEAR TAX
RATE.
  (II) IF A COMBINED GROUP INCLUDES ADDITIONAL MEMBERS  IN  THE  TAXABLE
YEAR  IMMEDIATELY SUCCEEDING THE BASE YEAR THAT WERE NOT INCLUDED IN THE
COMBINED GROUP DURING THE BASE YEAR, EACH BASE YEAR COMBINED  GROUP  AND
EACH  TAXPAYER THAT FILED SEPARATELY IN THE BASE YEAR BUT IS INCLUDED IN
THE COMBINED GROUP IN THE TAXABLE YEAR SUCCEEDING THE  BASE  YEAR  SHALL
CALCULATE  ITS PRIOR NET OPERATING LOSS CONVERSION SUBTRACTION POOL, AND
THE SUM OF THE POOLS SHALL BE THE  COMBINED  PRIOR  NET  OPERATING  LOSS
CONVERSION SUBTRACTION POOL OF THE COMBINED GROUP.
  (III) IF A TAXPAYER WAS PROPERLY INCLUDED IN A COMBINED REPORT FOR THE
BASE YEAR AND FILES A SEPARATE REPORT IN A SUBSEQUENT TAXABLE YEAR, THEN
THE  AMOUNT OF REMAINING PRIOR NET OPERATING LOSS CONVERSION SUBTRACTION
ALLOWED TO THE TAXPAYER FILING SUCH SEPARATE  REPORT  SHALL  BE  PROPOR-
TIONATE  TO  THE  AMOUNT THAT SUCH TAXPAYER CONTRIBUTED TO THE PRIOR NET
OPERATING LOSS CONVERSION SUBTRACTION POOL ON A COMBINED BASIS, AND  THE
REMAINING PRIOR NET OPERATING LOSS CONVERSION SUBTRACTION ALLOWED TO THE
REMAINING MEMBERS OF THE COMBINED GROUP SHALL BE REDUCED ACCORDINGLY.
  (4) THE PRIOR NET OPERATING LOSS CONVERSION SUBTRACTION MAY BE USED TO
REDUCE  THE TAXPAYER'S TAX ON ALLOCATED BUSINESS INCOME TO THE HIGHER OF
THE TAX ON THE CAPITAL BASE UNDER PARAGRAPH (B) OF THIS  SUBDIVISION  OR
THE  FIXED  DOLLAR  MINIMUM UNDER PARAGRAPH (D) OF THIS SUBDIVISION. ANY
AMOUNT OF UNUSED SUBTRACTION SHALL BE CARRIED FORWARD TO SUBSEQUENT  TAX
YEAR  OR  YEARS UNTIL TAX YEARS BEGINNING ON OR AFTER JANUARY FIRST, TWO
THOUSAND THIRTY-SIX, AND SHALL NOT BE SUBJECT TO THE  ONE-TENTH  LIMITA-
TION IN THE SUBSEQUENT TAX YEAR OR YEARS.
  (IX)  NET  OPERATING LOSS DEDUCTION.  IN COMPUTING THE BUSINESS INCOME
BASE, A NET OPERATING LOSS DEDUCTION SHALL BE ALLOWED. A  NET  OPERATING
LOSS DEDUCTION IS THE AMOUNT OF NET OPERATING LOSS OR LOSSES FROM ONE OR
MORE TAXABLE YEARS THAT ARE CARRIED FORWARD TO A PARTICULAR INCOME YEAR.
A  NET  OPERATING  LOSS  IS  THE AMOUNT OF A BUSINESS LOSS INCURRED IN A
PARTICULAR TAX YEAR MULTIPLIED BY THE APPORTIONMENT FACTOR FOR THAT YEAR
AS DETERMINED UNDER SECTION TWO HUNDRED TEN-A OF THIS ARTICLE. THE MAXI-
MUM NET OPERATING DEDUCTION THAT IS ALLOWED IN A  TAXABLE  YEAR  IS  THE
AMOUNT  THAT  REDUCES THE TAXPAYER'S TAX ON ALLOCATED BUSINESS INCOME TO
THE HIGHER OF THE TAX ON THE CAPITAL BASE OR THE FIXED  DOLLAR  MINIMUM.
SUCH DEDUCTION AND LOSS ARE DETERMINED IN ACCORDANCE WITH THE FOLLOWING:
  (1)  SUCH  NET  OPERATING  LOSS DEDUCTION IS NOT LIMITED TO THE AMOUNT
ALLOWED UNDER SECTION ONE HUNDRED SEVENTY-TWO OF  THE  INTERNAL  REVENUE
CODE  OR THE AMOUNT THAT WOULD HAVE BEEN ALLOWED IF THE TAXPAYER HAD NOT

S. 6359--C                         50

MADE AN ELECTION UNDER SUBCHAPTER S  OF  CHAPTER  ONE  OF  THE  INTERNAL
REVENUE CODE.
  (2)  SUCH NET OPERATING LOSS DEDUCTION SHALL NOT INCLUDE ANY NET OPER-
ATING LOSS INCURRED DURING ANY TAXABLE YEAR BEGINNING PRIOR  TO  JANUARY
FIRST,  TWO  THOUSAND  FIFTEEN,  OR DURING ANY TAXABLE YEAR IN WHICH THE
TAXPAYER WAS NOT SUBJECT TO THE TAX IMPOSED BY THIS ARTICLE.
  (3) A TAXPAYER THAT FILES AS PART OF A FEDERAL CONSOLIDATED RETURN BUT
ON A SEPARATE BASIS FOR  PURPOSES  OF  THIS  ARTICLE  MUST  COMPUTE  ITS
DEDUCTION  AND LOSS AS IF IT WERE FILING ON A SEPARATE BASIS FOR FEDERAL
INCOME TAX PURPOSES.
  (4) A NET OPERATING LOSS MUST BE CARRIED FORWARD TO EACH OF THE TWENTY
TAXABLE YEARS FOLLOWING THE TAXABLE YEAR OF THE LOSS.  NO  CARRYBACK  OF
THE  NET  OPERATING LOSS IS ALLOWED. A TAXPAYER MUST APPLY BOTH OF THESE
LIMITATIONS IN COMPUTING SUCH NET OPERATING LOSS DEDUCTION.
  (5) SUCH NET OPERATING LOSS DEDUCTION SHALL NOT INCLUDE ANY NET  OPER-
ATING  LOSS  INCURRED DURING A NEW YORK S YEAR; PROVIDED, HOWEVER, A NEW
YORK S YEAR MUST BE TREATED AS A TAXABLE YEAR FOR PURPOSES OF  DETERMIN-
ING  THE  NUMBER  OF  TAXABLE YEARS TO WHICH A NET OPERATING LOSS MAY BE
CARRIED FORWARD.
  (6) WHERE THERE ARE TWO OR MORE ALLOCATED  NET  OPERATING  LOSSES,  OR
PORTIONS  THEREOF,  CARRIED FORWARD TO BE DEDUCTED IN ONE PARTICULAR TAX
YEAR  FROM  ALLOCATED  BUSINESS  INCOME,  THE  EARLIEST  ALLOCATED  LOSS
INCURRED MUST BE APPLIED FIRST.
  (b)  Capital  base.  (1)  The [amount prescribed by this paragraph for
taxable years beginning before January first, two thousand  eight  shall
be  computed  at .178  percent  for  each dollar of the taxpayer's total
business and investment capital, or the portion thereof allocated within
the state as hereinafter provided. For taxable  years  beginning  on  or
after  January first, two thousand eight, the] amount prescribed by this
paragraph shall be computed  at .15  percent  for  each  dollar  of  the
taxpayer's total business [and investment] capital, or the portion ther-
eof  allocated within the state as hereinafter provided. However, in the
case of a cooperative housing corporation as  defined  in  the  internal
revenue  code,  the  applicable  rate shall be .04 percent.  In no event
shall the amount prescribed by this paragraph exceed three hundred fifty
thousand dollars for qualified New York manufacturers and for all  other
taxpayers  [ten] FIVE million dollars [for taxable years beginning on or
after January first, two thousand eight but before  January  first,  two
thousand  eleven  and one million dollars for taxable years beginning on
or after January first, two thousand eleven].
  (2) For purposes of subparagraph  one  of  this  paragraph,  the  term
"manufacturer"  shall  mean  a taxpayer which during the taxable year is
principally engaged in the production of goods by  manufacturing,  proc-
essing,  assembling, refining, mining, extracting, farming, agriculture,
horticulture, floriculture, viticulture or commercial fishing. Moreover,
for purposes of computing the capital base in  a  combined  report,  the
combined group shall be considered a "manufacturer" for purposes of this
subparagraph only if the combined group during the taxable year is prin-
cipally engaged in the activities set forth in this subparagraph, or any
combination thereof. A taxpayer or a combined group shall be "principal-
ly  engaged"  in activities described above if, during the taxable year,
more than fifty percent  of  the  gross  receipts  of  the  taxpayer  or
combined group, respectively, are derived from receipts from the sale of
goods produced by such activities. In computing a combined group's gross
receipts,  intercorporate receipts shall be eliminated. A "qualified New
York manufacturer" is a manufacturer that has property in New York  that

S. 6359--C                         51

is  described  in  [clause  (A) of subparagraph (i) of paragraph (b) of]
subdivision [twelve of this section] ONE OF SECTION TWO HUNDRED TEN-B OF
THIS ARTICLE and either (i) the adjusted  basis  of  that  property  for
federal income tax purposes at the close of the taxable year is at least
one  million  dollars  or  (ii) all of its real and personal property is
located in New York. In addition, a "qualified  New  York  manufacturer"
means  a  taxpayer  that  is  defined as a qualified emerging technology
company under paragraph (c) of subdivision  one  of  section  thirty-one
hundred  two-e  of  the  public  authorities  law  regardless of the ten
million dollar limitation expressed in subparagraph one  of  such  para-
graph.
  (3)  For a qualified New York manufacturer, as defined in subparagraph
two of this paragraph, the rate at which the tax is computed  in  effect
for  taxable  years  beginning  on  or after January first, two thousand
thirteen and before  January  first,  two  thousand  fourteen  shall  be
reduced  by  nine and two-tenths percent for taxable years commencing on
or after January first, two thousand fourteen and before January  first,
two  thousand fifteen, twelve and three-tenths percent for taxable years
commencing on or after January first, two thousand  fifteen  and  before
January first, two thousand sixteen, fifteen and four-tenths percent for
taxable years commencing on or after January first, two thousand sixteen
and before January first, two thousand eighteen, and twenty-five percent
for  taxable  years  beginning  on  or after January first, two thousand
eighteen.
  (c) [Minimum taxable income bases. (i)  For  taxable  years  beginning
after  nineteen  hundred  eighty-six and before nineteen hundred eighty-
nine, the amount prescribed by this paragraph shall be computed  at  the
rate  of  three  and  one-half  percent  of  the taxpayer's pre-nineteen
hundred ninety minimum taxable income base. For taxable years  beginning
in nineteen hundred eighty-nine, the amount prescribed by this paragraph
shall  be  computed  at  the rate of five percent of the taxpayer's pre-
nineteen hundred ninety minimum taxable income base. A "taxpayer's  pre-
nineteen  hundred  ninety  minimum  taxable  income base" shall mean the
portion of the taxpayer's entire net income allocated within  the  state
as  hereinafter  provided, subject to any modification required by para-
graphs (d) and (e) of subdivision three of this section;
  (ii) (A) For taxable years beginning on or after  January  first,  two
thousand  seven,  the  amount  prescribed  by  this  paragraph  shall be
computed at the rate of one and one-half percent of the taxpayer's mini-
mum taxable income base. The "taxpayer's minimum  taxable  income  base"
shall  mean  the  portion of the taxpayer's minimum taxable income allo-
cated within the state as hereinafter provided, subject to any modifica-
tions required by paragraphs (d) and (e) of subdivision  three  of  this
section.
  (B)  For  taxable years beginning on or after January first, two thou-
sand twelve and before January first, two thousand fifteen,  the  amount
prescribed by this paragraph for an eligible qualified New York manufac-
turer  shall  be  computed  at the rate of seventy-five hundredths (.75)
percent of the taxpayer's minimum taxable income base. For  purposes  of
this  clause,  the term "eligible qualified New York manufacturer" shall
have the same meaning as in subparagraph (vi) of paragraph (a)  of  this
subdivision.
  (iii)  For  a  qualified New York manufacturer, as defined in subpara-
graph (vi) of paragraph (a) of this subdivision, the rate at  which  the
tax  is computed in effect for taxable years beginning on or after Janu-
ary first, two thousand thirteen and before January first, two  thousand

S. 6359--C                         52

fourteen  for  qualified New York manufacturers shall be reduced by nine
and two-tenths percent for taxable years commencing on or after  January
first,  two  thousand  fourteen  and  before January first, two thousand
fifteen, twelve and three-tenths percent for taxable years commencing on
or  after  January first, two thousand fifteen and before January first,
two thousand sixteen, fifteen and four-tenths percent for taxable  years
commencing  on  or  after January first, two thousand sixteen and before
January first, two thousand eighteen, and twenty-five percent for  taxa-
ble years beginning on or after January first, two thousand eighteen.]
  (d) Fixed dollar minimum. (1) The [amount prescribed by this paragraph
shall be for a taxpayer which during the taxable year has:
  (A)  a gross payroll of six million two hundred fifty thousand dollars
or more, one thousand five hundred dollars;
  (B) a gross payroll of less than six million two hundred  fifty  thou-
sand dollars but more than one million dollars, four hundred twenty-five
dollars;
  (C)  a gross payroll of no more than one million dollars but more than
five hundred thousand dollars, three hundred twenty-five dollars;
  (D) a gross payroll of no more than five hundred thousand dollars  but
more  than  two  hundred fifty thousand dollars, two hundred twenty-five
dollars;
  (E) a gross payroll of two hundred  fifty  thousand  dollars  or  less
(except  as  prescribed in clause (F) of this subparagraph), one hundred
dollars;
  (F) a gross payroll of  one  thousand  dollars  or  less,  with  total
receipts  within and without this state of one thousand dollars or less,
and the average value of the assets of which are one thousand dollars or
less, eight hundred dollars.
  (2) For purposes of this paragraph:
  (A) gross payroll shall be the same as the total wages,  salaries  and
other  personal  service  compensation  of all the taxpayer's employees,
within and without this state, as defined in subparagraph three of para-
graph (a) of subdivision three of  this  section,  except  that  general
executive officers shall not be excluded.
  (B)  total  receipts  shall be the same as receipts within and without
this state as defined in subparagraph two of paragraph (a)  of  subdivi-
sion three of this section.
  (C)  average  value  of  the assets shall be the same as prescribed by
subdivision two of this section without reduction for liabilities.
  (3) If the taxable  year  is  less  than  twelve  months,  the  amount
prescribed  by this paragraph shall be reduced by twenty-five percent if
the period for which the taxpayer is subject to tax  is  more  than  six
months  but not more than nine months and by fifty percent if the period
for which the taxpayer is subject to tax is not more  than  six  months.
Provided,  however,  that in determining the amount of gross payroll and
total receipts for purposes of subparagraph one of this paragraph, where
the taxable year is less than twelve months, the amount of each shall be
determined by dividing the amount of each with respect  to  the  taxable
year  by  the  number of months in such taxable year and multiplying the
result by twelve. If the taxable year is less than  twelve  months,  the
amount  of  New  York receipts for purposes of subparagraph four of this
paragraph is determined by dividing the amount of the receipts  for  the
taxable year by the number of months in the taxable year and multiplying
the result by twelve.
  (4)  Notwithstanding  subparagraphs one and two of this paragraph, for
taxable years beginning on or after January first, two  thousand  eight,

S. 6359--C                         53

the]  amount  prescribed  by  this paragraph for New York S corporations
will be determined in accordance with the following table:

If New York receipts are:                The fixed dollar minimum tax is:
 not more than $100,000                               $   25
 more than $100,000 but not over $250,000             $   50
 more than $250,000 but not over $500,000             $  175
 more than $500,000 but not over $1,000,000           $  300
 more than $1,000,000 but not over $5,000,000         $1,000
 more than $5,000,000 but not over $25,000,000        $3,000
 Over $25,000,000                                     $4,500

[Otherwise the amount prescribed by this paragraph will be determined in
accordance with the following table:]
PROVIDED  FURTHER,  THE AMOUNT PRESCRIBED BY THIS PARAGRAPH FOR A QUALI-
FIED NEW YORK MANUFACTURER, AS DEFINED IN SUBPARAGRAPH (VI) OF PARAGRAPH
(A) OF THIS SUBDIVISION, WILL  BE  DETERMINED  IN  ACCORDANCE  WITH  THE
FOLLOWING TABLES:
FOR  TAX  YEARS BEGINNING ON OR AFTER JANUARY 1, 2014 AND BEFORE JANUARY
1, 2015:

IF NEW YORK RECEIPTS ARE:                THE FIXED DOLLAR MINIMUM TAX IS:
 NOT MORE THAN $100,000                               $   23
 MORE THAN $100,000 BUT NOT OVER $250,000             $   68
 MORE THAN $250,000 BUT NOT OVER $500,000             $  159
 MORE THAN $500,000 BUT NOT OVER $1,000,000           $  454
 MORE THAN $1,000,000 BUT NOT OVER $5,000,000         $1,362
 MORE THAN $5,000,000 BUT NOT OVER $25,000,000        $3,178
 OVER $25,000,000                                     $4,500

FOR TAX YEARS BEGINNING ON OR AFTER JANUARY 1, 2015 AND  BEFORE  JANUARY
1, 2016:

IF NEW YORK RECEIPTS ARE:                THE FIXED DOLLAR MINIMUM TAX IS:
 NOT MORE THAN $100,000                               $   22
 MORE THAN $100,000 BUT NOT OVER $250,000             $   66
 MORE THAN $250,000 BUT NOT OVER $500,000             $  153
 MORE THAN $500,000 BUT NOT OVER $1,000,000           $  439
 MORE THAN $1,000,000 BUT NOT OVER $5,000,000         $1,316
 MORE THAN $5,000,000 BUT NOT OVER $25,000,000        $3,070
 OVER $25,000,000                                     $4,385

FOR  TAX  YEARS BEGINNING ON OR AFTER JANUARY 1, 2016 AND BEFORE JANUARY
1, 2018:

IF NEW YORK RECEIPTS ARE:                THE FIXED DOLLAR MINIMUM TAX IS:
 NOT MORE THAN $100,000                               $   21
 MORE THAN $100,000 BUT NOT OVER $250,000             $   63
 MORE THAN $250,000 BUT NOT OVER $500,000             $  148
 MORE THAN $500,000 BUT NOT OVER $1,000,000           $  423
 MORE THAN $1,000,000 BUT NOT OVER $5,000,000         $1,269
 MORE THAN $5,000,000 BUT NOT OVER $25,000,000        $2,961
 OVER $25,000,000                                     $4,230

FOR TAX YEARS BEGINNING ON OR AFTER JANUARY 1, 2018:

S. 6359--C                         54

IF NEW YORK RECEIPTS ARE:                THE FIXED DOLLAR MINIMUM TAX IS:
 NOT MORE THAN $100,000                               $   19
 MORE THAN $100,000 BUT NOT OVER $250,000             $   56
 MORE THAN $250,000 BUT NOT OVER $500,000             $  131
 MORE THAN $500,000 BUT NOT OVER $1,000,000           $  375
 MORE THAN $1,000,000 BUT NOT OVER $5,000,000         $1,125
 MORE THAN $5,000,000 BUT NOT OVER $25,000,000        $2,625
 OVER $25,000,000                                     $3,750

OTHERWISE  THE AMOUNT PRESCRIBED BY THIS PARAGRAPH WILL BE DETERMINED IN
ACCORDANCE WITH THE FOLLOWING TABLE:

If New York receipts are:                The fixed dollar minimum tax is:
 not more than $100,000                               $   25
 more than $100,000 but not over $250,000             $   75
 more than $250,000 but not over $500,000             $  175
 more than $500,000 but not over $1,000,000           $  500
 more than $1,000,000 but not over $5,000,000         $1,500
 more than $5,000,000 but not over $25,000,000        $3,500
 Over $25,000,000                                     $5,000

For purposes of this paragraph,  New  York  receipts  are  the  receipts
[computed in accordance with subparagraph two of paragraph (a) of subdi-
vision  three  of  this]  INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT
FACTOR DETERMINED UNDER section TWO HUNDRED TEN-A for the taxable year.
  (2) IF THE TAXABLE YEAR IS LESS THAN TWELVE MONTHS, THE AMOUNT OF  NEW
YORK  RECEIPTS  IS DETERMINED BY DIVIDING THE AMOUNT OF THE RECEIPTS FOR
THE TAXABLE YEAR BY THE NUMBER OF MONTHS IN THE TAXABLE YEAR AND  MULTI-
PLYING  THE RESULT BY TWELVE. IN THE CASE OF A TERMINATION YEAR OF A NEW
YORK S CORPORATION, THE SUM OF THE TAX COMPUTED UNDER THIS PARAGRAPH FOR
THE S SHORT YEAR AND FOR THE C SHORT YEAR SHALL NOT  BE  LESS  THAN  THE
AMOUNT  COMPUTED  UNDER  THIS PARAGRAPH AS IF THE CORPORATION WERE A NEW
YORK C CORPORATION FOR THE ENTIRE TAXABLE YEAR.
  [(5) For taxable years beginning on or after January first, two  thou-
sand  twelve and before January first, two thousand fifteen, the amounts
prescribed in subparagraphs one and four of this paragraph as the  fixed
dollar minimum tax for an eligible qualified New York manufacturer shall
be  one-half  of the amounts stated in those subparagraphs. For purposes
of this subparagraph, the term "eligible qualified New York  manufactur-
er" shall have the same meaning as in subparagraph (vi) of paragraph (a)
of this subdivision.
  (6)  For a qualified New York manufacturer, as defined in subparagraph
(vi) of paragraph (a) of this subdivision,  the  amounts  prescribed  in
subparagraphs one and four of this paragraph in effect for taxable years
beginning  on  or  after January first, two thousand thirteen and before
January first, two thousand fourteen for qualified New York  manufactur-
ers  shall  be  reduced by nine and two-tenths percent for taxable years
commencing on or after January first, two thousand fourteen  and  before
January first, two thousand fifteen, twelve and three-tenths percent for
taxable years commencing on or after January first, two thousand fifteen
and  before January first, two thousand sixteen, fifteen and four-tenths
percent for taxable years commencing on  or  after  January  first,  two
thousand  sixteen  and  before January first, two thousand eighteen, and
twenty-five percent for taxable years  beginning  on  or  after  January
first, two thousand eighteen.]

S. 6359--C                         55

  (e)  [Subsidiary capital base. (1) The amount prescribed by this para-
graph shall be computed at the rate of nine-tenths of a  mill  for  each
dollar  of  the  portion  of the taxpayer's subsidiary capital allocated
within the state as hereinafter provided.
  (2)  For  purposes  of  this  paragraph, the amount of such subsidiary
capital, prior  to  allocation,  shall  be  reduced  by  the  applicable
percentage  of  the  taxpayer's (i) investments in the stock of, and any
indebtedness from, subsidiaries subject to tax under section one hundred
eighty-six of this chapter (but only to the extent such indebtedness  is
included  in  subsidiary capital), and (ii) investments in the stock of,
and any indebtedness from, subsidiaries subject  to  tax  under  article
thirty-two  or thirty-three of this chapter (but only to the extent such
indebtedness is included in subsidiary capital). For purposes of  clause
(i)  of  this  subparagraph,  the  applicable percentage shall be thirty
percent for taxable years beginning in two  thousand,  and  one  hundred
percent  for taxable years beginning after two thousand. For purposes of
clause (ii) of this subparagraph, the applicable percentage shall be one
hundred percent for taxable years beginning after nineteen hundred nine-
ty-nine.]
  (f) For purposes of this section, the term "small  business  taxpayer"
shall  mean  a  taxpayer  (i) which has an entire net income of not more
than three hundred ninety thousand dollars for the  taxable  year;  (ii)
[which  constitutes a small business as defined in section 1244(c)(3) of
internal revenue code (without regard to the second sentence of subpara-
graph (A) thereof) as of the last day of the taxable year] THE AGGREGATE
AMOUNT OF MONEY AND OTHER  PROPERTY  RECEIVED  BY  THE  CORPORATION  FOR
STOCK,  AS  A  CONTRIBUTION TO CAPITAL, AND AS PAID-IN SURPLUS, DOES NOT
EXCEED ONE MILLION DOLLARS; [and] (iii) which is not part of  an  affil-
iated  group,  as  defined in section 1504 of the internal revenue code,
unless such group, if it had filed a report  under  this  article  on  a
combined basis, would have itself qualified as a "small business taxpay-
er"  pursuant  to this subdivision; AND (IV) WHICH HAS AN AVERAGE NUMBER
OF INDIVIDUALS, EXCLUDING GENERAL EXECUTIVE OFFICERS, EMPLOYED FULL-TIME
IN THE STATE DURING THE TAXABLE YEAR OF ONE HUNDRED OR FEWER.    If  the
taxable  period  to  which subparagraph (i) of this paragraph applies is
less than twelve months, entire net income under such subparagraph shall
be placed on an annual basis by multiplying the  entire  net  income  by
twelve  and  dividing  the result by the number of months in the period.
FOR PURPOSES OF SUBPARAGRAPH (II) OF THIS PARAGRAPH,  THE  AMOUNT  TAKEN
INTO  ACCOUNT WITH RESPECT TO ANY PROPERTY OTHER THAN MONEY SHALL BE THE
AMOUNT EQUAL TO THE ADJUSTED BASIS TO THE CORPORATION OF  SUCH  PROPERTY
FOR DETERMINING GAIN, REDUCED BY ANY LIABILITY TO WHICH THE PROPERTY WAS
SUBJECT OR WHICH WAS ASSUMED BY THE CORPORATION. THE DETERMINATION UNDER
THE  PRECEDING  SENTENCE  SHALL  BE MADE AS OF THE TIME THE PROPERTY WAS
RECEIVED BY THE CORPORATION. FOR PURPOSES OF SUBPARAGRAPH (III) OF  THIS
SECTION,  "AVERAGE  NUMBER  OF  INDIVIDUALS, EXCLUDING GENERAL EXECUTIVE
OFFICERS, EMPLOYED FULL-TIME" SHALL  BE  COMPUTED  BY  ASCERTAINING  THE
NUMBER  OF SUCH INDIVIDUALS EMPLOYED BY THE TAXPAYER ON THE THIRTY-FIRST
DAY OF MARCH, THE THIRTIETH DAY OF JUNE, THE THIRTIETH DAY OF  SEPTEMBER
AND  THE  THIRTY-FIRST DAY OF DECEMBER DURING EACH TAXABLE YEAR OR OTHER
APPLICABLE PERIOD, BY ADDING TOGETHER THE  NUMBER  OF  SUCH  INDIVIDUALS
ASCERTAINED  ON  EACH  OF SUCH DATES AND DIVIDING THE SUM SO OBTAINED BY
THE NUMBER OF SUCH DATES OCCURRING WITHIN SUCH  TAXABLE  YEAR  OR  OTHER
APPLICABLE PERIOD. AN INDIVIDUAL EMPLOYED FULL-TIME MEANS AN EMPLOYEE IN
A  JOB CONSISTING OF AT LEAST THIRTY-FIVE HOURS PER WEEK, OR TWO OR MORE
EMPLOYEES WHO ARE IN JOBS THAT TOGETHER CONSTITUTE THE EQUIVALENT  OF  A

S. 6359--C                         56

JOB   AT  LEAST  THIRTY-FIVE  HOURS  PER  WEEK  (FULL-TIME  EQUIVALENT).
FULL-TIME EQUIVALENT EMPLOYEES IN THE STATE INCLUDES ALL EMPLOYEES REGU-
LARLY CONNECTED WITH OR WORKING OUT OF AN OFFICE OR PLACE OF BUSINESS OF
THE TAXPAYER WITHIN THE STATE.
  (g)  New  York S corporations.   (1) General. The amount prescribed by
this paragraph shall be, in the case of each  New  York  S  corporation,
[(i)  the  higher of the amounts prescribed in paragraphs (a) and (d) of
this subdivision (other than the amount prescribed in the  final  clause
of  subparagraph  one of that paragraph (d)) (ii) reduced by the article
twenty-two tax equivalent;  provided,  however,  that  the  amount  thus
determined  shall  not be less than the lowest of the amounts prescribed
in subparagraph one of that paragraph (d) (applying  the  provisions  of
subparagraph  three  of that paragraph as necessary). Provided, however,
notwithstanding any provision of this paragraph, in taxable years begin-
ning in two thousand three and before two  thousand  eight,  the  amount
prescribed  by this paragraph shall be the amount prescribed in subpara-
graph one of that paragraph (d) (applying the provisions of subparagraph
three of that paragraph as necessary) and applying  the  calculation  of
that  amount  in the case of a termination year as set forth in subpara-
graph four of this paragraph as necessary. In taxable years beginning in
two thousand eight and thereafter, the amount prescribed by  this  para-
graph  is]  the amount prescribed in subparagraph four of that paragraph
(d) [(applying the provisions of subparagraph three of that paragraph as
necessary)] and applying the calculation of that amount in the case of a
termination year as set forth in subparagraph four of this paragraph  as
necessary.
  (2)  [Article  twenty-two  tax equivalent. For taxable years beginning
before July first, nineteen hundred ninety-nine, the article  twenty-two
tax equivalent is the amount computed under paragraph (a) of this subdi-
vision  by  substituting for the rate therein the rate of 7.875 percent.
For taxable years beginning after June thirtieth, nineteen hundred nine-
ty-nine and before July first, two thousand, the article twenty-two  tax
equivalent  is  the amount computed under paragraph (a) of this subdivi-
sion by substituting for the rate therein the rate of 7.525 percent. For
taxable years beginning after June thirtieth, two  thousand  and  before
July  first,  two thousand one, the article twenty-two tax equivalent is
the amount computed under paragraph (a) of this subdivision  by  substi-
tuting for the rate therein the rate of 7.175 percent. For taxable years
beginning  after June thirtieth, two thousand one and before July first,
two thousand three, the article twenty-two tax equivalent is the  amount
computed under paragraph (a) of this subdivision by substituting for the
rate therein the rate of 6.85 percent. For taxable years beginning after
June  thirtieth,  two  thousand three, the article twenty-two tax equiv-
alent is the amount computed under paragraph (a) of this subdivision  by
substituting for the rate therein the rate of 7.1425 percent.
  (3)  Small  business  taxpayers.  Notwithstanding  the  provisions  of
subparagraphs one and two of this paragraph, in the case of a New York S
corporation which is a small business taxpayer, as defined in  paragraph
(f) of this subdivision, the following provisions shall apply:
  (A)  For  taxable  years beginning before July first, nineteen hundred
ninety-nine,  the  article  twenty-two  tax  equivalent  is  the  amount
computed under paragraph (a) of this subdivision by substituting for the
rate therein the rate of 7.875 percent.
  (B) For taxable years beginning after June thirtieth, nineteen hundred
ninety-nine  and  before  July  first,  two  thousand  three, the amount
computed under paragraph (a) of this  subdivision,  as  referred  to  in

S. 6359--C                         57

subparagraph  one  of  this paragraph, shall be computed by substituting
for the rate therein the rate of 7.5 percent, and the article twenty-two
tax equivalent under paragraph (a) of this subdivision shall be computed
as follows:
  (i)  if  the entire net income base is not more than two hundred thou-
sand dollars, the  article  twenty-two  tax  equivalent  is  the  amount
computed under paragraph (a) of this subdivision by substituting for the
rate therein the rate of 7.45 percent;
  (ii)  if  the entire net income base is more than two hundred thousand
dollars but not over two hundred ninety thousand  dollars,  the  article
twenty-two  tax  equivalent shall be computed as the sum of (I) fourteen
thousand nine hundred  dollars,  (II)  six  and  eighty-five  hundredths
percent  of the first fifty thousand dollars in excess of the entire net
income base over two hundred  thousand  dollars,  and  (III)  three  and
eighty-five  hundredths percent of the excess, if any, of the entire net
income base over two hundred fifty thousand dollars.
  (C) For taxable years beginning after  June  thirtieth,  two  thousand
three,  the  amount computed under paragraph (a) of this subdivision, as
referred to in subparagraph one of this paragraph, shall be computed  by
substituting for the rate therein the rate of 7.5 percent, and the arti-
cle  twenty-two  tax  equivalent under paragraph (a) of this subdivision
shall be computed as follows:
  (i) if the entire net income base is not more than two  hundred  thou-
sand  dollars,  the  article  twenty-two  tax  equivalent  is the amount
computed under paragraph (a) of this subdivision by substituting for the
rate therein the rate of 7.4725 percent;
  (ii) if the entire net income base is more than two  hundred  thousand
dollars  but  not  over two hundred ninety thousand dollars, the article
twenty-two tax equivalent shall be computed as the sum of  (I)  fourteen
thousand  nine  hundred  forty-five  dollars, (II) 7.1425 percent of the
first fifty thousand dollars in excess of the  entire  net  income  base
over  two  hundred  thousand  dollars,  and  (III) 5.4925 percent of the
excess, if any, of the entire net income base  over  two  hundred  fifty
thousand dollars.
  (4)] Termination year. In the case of a termination year, [the tax for
the  S  short year shall be computed under this paragraph without regard
to the fixed dollar minimum tax prescribed  in  paragraph  (d)  of  this
subdivision,  and  the  tax for the C short year shall be computed under
the opening paragraph of this subdivision without regard  to  the  fixed
dollar  minimum tax prescribed under such paragraph (d), but in no event
shall] the sum of the tax for the S short year and the  tax  for  the  C
short  year  SHALL  NOT  be less than the fixed dollar minimum tax under
paragraph (d) of this subdivision computed as if the corporation were  a
New York C corporation for the entire taxable year.
  S  13.  Subdivision  1-c  of section 210 of the tax law, as amended by
chapter 1043 of the laws of 1981, the opening  paragraph  and  paragraph
(a)  as amended by chapter 817 of the laws of 1987, and paragraph (b) as
amended by section 12 of part Y of chapter 63 of the laws  of  2000,  is
amended to read as follows:
  1-c. The computations specified in paragraph (b) of subdivision one of
this section shall not apply to the first two taxable years of a taxpay-
er  which,  for  one or both such years, is a small business [concern. A
small business concern:
  (a) is a taxpayer which is a small business corporation as defined  in
paragraph  three  of subsection (c) of section twelve hundred forty-four

S. 6359--C                         58

of the internal revenue code (without regard to the second  sentence  of
subparagraph (A) thereof) as of the last day of the taxable year,
  (b) is not a corporation over fifty percent of the number of shares of
stock of which entitling the holders thereof to vote for the election of
directors or trustees is owned by a taxpayer which (1) is subject to tax
under this article; section one hundred eighty-three, one hundred eight-
y-four or one hundred eighty-five of article nine; article thirty-two or
thirty-three  of this chapter, and (2) does not qualify as a small busi-
ness corporation as defined in paragraph  three  of  subsection  (c)  of
section  twelve hundred forty-four of the internal revenue code (without
regard to the second sentence of subparagraph (A)  thereof)  as  of  the
last  day  of its taxable year ending within or with the taxable year of
the taxpayer,
  (c) is not a corporation which is substantially similar  in  operation
and  in  ownership to a business entity (or entities) taxable, or previ-
ously taxable, under this article; section one hundred eighty-three, one
hundred eighty-four, one hundred eighty-five or one  hundred  eighty-six
of  article  nine;  article  thirty-two or thirty-three of this chapter;
article twenty-three of this chapter or which would have been subject to
tax under such article twenty-three (as such article was  in  effect  on
January  first,  nineteen  hundred  eighty) or the income (or losses) of
which is (or was) includable under article twenty-two of  this  chapter,
and
  (d)  at least ninety percent of the assets of such corporation (valued
at original cost) were located and employed in  this  state  during  the
taxable year and eighty percent of the employees of such corporation (as
ascertained within the meaning and intent of subparagraph three of para-
graph  (a)  of  subdivision  three  of  this  section)  were principally
employed in this state during the taxable year] TAXPAYER AS  DEFINED  IN
PARAGRAPH (F) OF SUBDIVISION ONE OF THIS SECTION.
  S 14. Subdivision 2 of section 210 of the tax law, as amended by chap-
ter 760 of the laws of 1992, is amended to read as follows:
  2. The amount of [subsidiary capital,] investment capital and business
capital  shall  each  be  determined  by taking the average value of the
assets included therein (less liabilities deductible therefrom  pursuant
to  the provisions of subdivisions [four,] five and seven of section two
hundred eight), and, if the period covered by the report is other than a
period of twelve calendar months,  by  multiplying  such  value  by  the
number  of calendar months or major parts thereof included in such peri-
od, and dividing the product thus obtained by twelve.  For  purposes  of
this  subdivision,  real  property  and  marketable  securities shall be
valued at fair market value and the value  of  personal  property  other
than marketable securities shall be the value thereof shown on the books
and  records  of  the  taxpayer  in  accordance  with generally accepted
accounting principles.
  S 15. Subdivisions 3, 3-a, 4, 5, 6, 7, 8, 9, 10, 11, 12,  12-A,  12-B,
12-C,  12-D, 12-E, 12-F, 12-G, 13, 14, 15, 16, 17, 18, 19, 20, 21, 21-a,
22, 23, 23-a, 24, 25, 25-a, 26, 26-a, 27, 28, 30, 31, 32,  33,  34,  35,
36,  37,  38,  39, 40, 41, 42, 43, 44, 45, 46, 47, and subdivision 48 as
added by section 3 of part T of this act of section 210 of the  tax  law
are REPEALED.
  S 15-a. Section 210 of the tax law is amended by adding a new subdivi-
sion 3 to read as follows:
  3.  A CORPORATION THAT IS A PARTNER IN A PARTNERSHIP SHALL COMPUTE TAX
UNDER THIS ARTICLE USING THE AGGREGATE METHOD AS DEFINED  IN  THE  REGU-
LATIONS  OF  THE  COMMISSIONER, UNLESS ANOTHER METHOD FOR COMPUTING SUCH

S. 6359--C                         59

TAX IS REQUIRED OR ALLOWED BY  SUCH  REGULATIONS.  UNDER  THE  AGGREGATE
METHOD,  A  CORPORATION  THAT IS A PARTNER IN A PARTNERSHIP IS VIEWED AS
HAVING AN UNDIVIDED INTEREST IN THE PARTNERSHIP'S  ASSETS,  LIABILITIES,
AND  ITEMS  OF  RECEIPTS,  INCOME,  GAIN,  LOSS AND DEDUCTION. UNDER THE
AGGREGATE METHOD, THE CORPORATION THAT IS A PARTNER IN A PARTNERSHIP  IS
TREATED  AS  PARTICIPATING  IN THE PARTNERSHIP'S TRANSACTIONS AND ACTIV-
ITIES.
  S 16. The tax law is amended by adding a new section 210-A to read  as
follows:
  S  210-A. APPORTIONMENT. 1. GENERAL. BUSINESS INCOME AND CAPITAL SHALL
BE APPORTIONED TO THE  STATE  BY  THE  APPORTIONMENT  FACTOR  DETERMINED
PURSUANT TO THIS SECTION. THE APPORTIONMENT FACTOR IS A FRACTION, DETER-
MINED BY INCLUDING ONLY THOSE RECEIPTS, NET INCOME, NET GAINS, AND OTHER
ITEMS  DESCRIBED IN THIS SECTION THAT ARE INCLUDED IN THE COMPUTATION OF
THE TAXPAYER'S BUSINESS INCOME FOR THE TAXABLE YEAR.   THE NUMERATOR  OF
THE  APPORTIONMENT FRACTION SHALL BE EQUAL TO THE SUM OF ALL THE AMOUNTS
REQUIRED TO BE INCLUDED IN THE NUMERATOR PURSUANT TO THE  PROVISIONS  OF
THIS  SECTION AND THE DENOMINATOR OF THE APPORTIONMENT FRACTION SHALL BE
EQUAL TO THE SUM OF ALL THE AMOUNTS  REQUIRED  TO  BE  INCLUDED  IN  THE
DENOMINATOR PURSUANT TO THE PROVISIONS OF THIS SECTION.
  2.  SALES  OF TANGIBLE PERSONAL PROPERTY AND ELECTRICITY. (A) RECEIPTS
FROM SALES OF TANGIBLE PERSONAL PROPERTY WHERE  SHIPMENTS  ARE  MADE  TO
POINTS WITHIN THE STATE OR THE DESTINATION OF THE PROPERTY IS A POINT IN
THE  STATE SHALL BE INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRAC-
TION. RECEIPTS FROM SALES OF TANGIBLE PERSONAL PROPERTY WHERE  SHIPMENTS
ARE  MADE  TO  POINTS WITHIN AND WITHOUT THE STATE OR THE DESTINATION IS
WITHIN AND WITHOUT THE STATE SHALL BE INCLUDED IN THE DENOMINATOR OF THE
APPORTIONMENT FRACTION.
  (B) RECEIPTS FROM SALES OF ELECTRICITY DELIVERED TO POINTS WITHIN  THE
STATE  SHALL BE INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRACTION.
RECEIPTS FROM SALES OF ELECTRICITY DELIVERED TO POINTS WITHIN AND  WITH-
OUT  THE STATE SHALL BE INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT
FRACTION.
  (C) RECEIPTS FROM SALES OF TANGIBLE PERSONAL PROPERTY AND  ELECTRICITY
THAT ARE TRADED AS COMMODITIES AS DESCRIBED IN SECTION 475 OF THE INTER-
NAL  REVENUE  CODE ARE INCLUDED IN THE APPORTIONMENT FRACTION IN ACCORD-
ANCE WITH CLAUSE (I) OF SUBPARAGRAPH TWO OF PARAGRAPH (A) OF SUBDIVISION
FIVE OF THIS SECTION.
  3. RENTALS AND ROYALTIES. (A) RECEIPTS FROM RENTALS OF REAL AND TANGI-
BLE PERSONAL PROPERTY LOCATED WITHIN  THE  STATE  ARE  INCLUDED  IN  THE
NUMERATOR  OF  THE APPORTIONMENT FRACTION. RECEIPTS FROM RENTALS OF REAL
AND TANGIBLE PERSONAL PROPERTY LOCATED  WITHIN  AND  WITHOUT  THE  STATE
SHALL BE INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.
  (B)  RECEIPTS OF ROYALTIES FROM THE USE OF PATENTS, COPYRIGHTS, TRADE-
MARKS, AND SIMILAR INTANGIBLE PERSONAL PROPERTY  WITHIN  THE  STATE  ARE
INCLUDED  IN  THE  NUMERATOR  OF THE APPORTIONMENT FRACTION. RECEIPTS OF
ROYALTIES FROM THE USE OF PATENTS, COPYRIGHTS,  TRADEMARKS  AND  SIMILAR
INTANGIBLES WITHIN AND WITHOUT THE STATE ARE INCLUDED IN THE DENOMINATOR
OF THE APPORTIONMENT FRACTION. A PATENT, COPYRIGHT, TRADEMARK OR SIMILAR
INTANGIBLE  PROPERTY  IS USED IN THE STATE TO THE EXTENT THAT THE ACTIV-
ITIES THEREUNDER ARE CARRIED ON IN THE STATE.
  (C) RECEIPTS FROM THE SALES OF RIGHTS  FOR  CLOSED-CIRCUIT  AND  CABLE
TELEVISION  TRANSMISSIONS  OF AN EVENT (OTHER THAN EVENTS OCCURRING ON A
REGULARLY SCHEDULED BASIS) TAKING PLACE WITHIN THE STATE AS A RESULT  OF
THE  RENDITION OF SERVICES BY EMPLOYEES OF THE CORPORATION, AS ATHLETES,
ENTERTAINERS OR PERFORMING ARTISTS ARE INCLUDED IN THE NUMERATOR OF  THE

S. 6359--C                         60

APPORTIONMENT FRACTION TO THE EXTENT THAT SUCH RECEIPTS ARE ATTRIBUTABLE
TO  SUCH  TRANSMISSIONS RECEIVED OR EXHIBITED WITHIN THE STATE. RECEIPTS
FROM ALL SALES OF RIGHTS FOR CLOSED-CIRCUIT AND CABLE TELEVISION  TRANS-
MISSIONS  OF  AN EVENT ARE INCLUDED IN THE DENOMINATOR OF THE APPORTION-
MENT FRACTION.
  4. DIGITAL PRODUCTS. (A) FOR PURPOSES OF DETERMINING THE APPORTIONMENT
FRACTION UNDER THIS SECTION, THE TERM "DIGITAL PRODUCT" MEANS ANY  PROP-
ERTY OR SERVICE, OR COMBINATION THEREOF, OF WHATEVER NATURE DELIVERED TO
THE PURCHASER THROUGH THE USE OF WIRE, CABLE, FIBER-OPTIC, LASER, MICRO-
WAVE,  RADIO WAVE, SATELLITE OR SIMILAR SUCCESSOR MEDIA, OR ANY COMBINA-
TION THEREOF. DIGITAL PRODUCT INCLUDES, BUT IS NOT LIMITED TO, AN  AUDIO
WORK,  AUDIOVISUAL  WORK,  VISUAL  WORK,  BOOK OR LITERARY WORK, GRAPHIC
WORK, GAME, INFORMATION OR ENTERTAINMENT  SERVICE,  STORAGE  OF  DIGITAL
PRODUCTS  AND  COMPUTER  SOFTWARE  BY WHATEVER MEANS DELIVERED. THE TERM
"DELIVERED TO" INCLUDES FURNISHED OR  PROVIDED  TO  OR  ACCESSED  BY.  A
DIGITAL  PRODUCT  DOES NOT INCLUDE LEGAL, MEDICAL, ACCOUNTING, ARCHITEC-
TURAL, RESEARCH, ANALYTICAL, ENGINEERING OR CONSULTING SERVICES PROVIDED
BY THE TAXPAYER.
  (B) RECEIPTS FROM THE SALE OF, LICENCE TO USE, OR GRANTING  OF  REMOTE
ACCESS TO DIGITAL PRODUCTS WITHIN THE STATE, DETERMINED ACCORDING TO THE
HIERARCHY  OF  METHODS  SET  FORTH  IN SUBPARAGRAPHS ONE THROUGH FOUR OF
PARAGRAPH (C) OF THIS SUBDIVISION, SHALL BE INCLUDED IN THE NUMERATOR OF
THE APPORTIONMENT FRACTION. RECEIPTS FROM THE SALE OF, LICENSE  TO  USE,
OR  GRANTING OF REMOTE ACCESS TO DIGITAL PRODUCTS WITHIN AND WITHOUT THE
STATE SHALL BE INCLUDED IN THE DENOMINATOR OF  THE  APPORTIONMENT  FRAC-
TION.  THE  TAXPAYER  MUST  EXERCISE  DUE  DILIGENCE  UNDER  EACH METHOD
DESCRIBED IN PARAGRAPH (C) OF THIS SUBDIVISION BEFORE REJECTING  IT  AND
PROCEEDING  TO  THE  NEXT  METHOD IN THE HIERARCHY. IF THE RECEIPT FOR A
DIGITAL PRODUCT IS COMPRISED OF A COMBINATION OF PROPERTY AND  SERVICES,
IT  CANNOT  BE  DIVIDED INTO SEPARATE COMPONENTS AND IS CONSIDERED TO BE
ONE RECEIPT REGARDLESS OF WHETHER IT IS SEPARATELY  STATED  FOR  BILLING
PURPOSES. THE ENTIRE RECEIPT MUST BE ALLOCATED BY THIS HIERARCHY.
  (C)  HIERARCHY  OF  SOURCING  METHODS. (1) DELIVERY DESTINATION OF THE
DIGITAL PRODUCT. A DIGITAL PRODUCT IS DEEMED DELIVERED WITHIN THE  STATE
IF THE LOCATION FROM WHICH THE PURCHASER OR ITS AUTHORIZED USER ACCESSES
OR  USES  THE DIGITAL PRODUCT IS IN THE STATE. DESTINATION MAY BE DEMON-
STRATED BY INTERNET PROTOCOL ADDRESS OR OTHER SIMILAR OR SUCCESSOR INDI-
CATOR, THE GEOGRAPHIC LOCATION OF THE EQUIPMENT  TO  WHICH  THE  DIGITAL
PRODUCT  IS  DELIVERED OR FROM WHICH THE DIGITAL PRODUCT IS ACCESSED, OR
THE DELIVERY DESTINATION INDICATED ON  A  BILL  OF  LADING  OR  PURCHASE
INVOICE.  A  DIGITAL  PRODUCT  ACCESSED  OR USED BY THE PURCHASER OR ITS
AUTHORIZED USER DURING THE TAXPAYER'S TAXABLE YEAR IN MULTIPLE LOCATIONS
IS DELIVERED WITHIN THE STATE TO THE EXTENT THAT THE DIGITAL PRODUCT  IS
ACCESSED OR USED IN THE STATE;
  (2) BILLING ADDRESS OF THE PURCHASER;
  (3)  ZIP  CODE  OR  OTHER  GEOGRAPHIC  INDICATOR  OF  THE  PURCHASER'S
LOCATION; OR
  (4) THE APPORTIONMENT FRACTION DETERMINED PURSUANT TO THIS SUBDIVISION
FOR THE PRECEDING TAXABLE YEAR, OR, IF THE TAXPAYER WAS NOT  SUBJECT  TO
TAX  IN  THE  PRECEDING TAXABLE YEAR, THEN THE APPORTIONMENT FRACTION IN
THE CURRENT TAXABLE YEAR FOR THOSE DIGITAL PRODUCTS THAT CAN BE  SOURCED
USING  THE  HIERARCHY  OF  SOURCING METHODS IN SUBPARAGRAPHS ONE THROUGH
THREE OF THIS SUBDIVISION.
  5. FINANCIAL TRANSACTIONS.  (A)  FINANCIAL  INSTRUMENTS.  A  FINANCIAL
INSTRUMENT  IS  A  "QUALIFIED  FINANCIAL  INSTRUMENT" IF IT IS MARKED TO
MARKET UNDER SECTION 475 OR SECTION 1256 OF THE INTERNAL  REVENUE  CODE,

S. 6359--C                         61

PROVIDED  THAT  LOANS  SECURED  BY  REAL PROPERTY SHALL NOT BE QUALIFIED
FINANCIAL INSTRUMENTS. A FINANCIAL INSTRUMENT IS A "NONQUALIFIED  FINAN-
CIAL INSTRUMENT" IF IT IS NOT A QUALIFIED FINANCIAL INSTRUMENT.
  (1)  FIXED  PERCENTAGE  METHOD FOR QUALIFIED FINANCIAL INSTRUMENTS. IN
DETERMINING THE INCLUSION OF  RECEIPTS  AND  NET  GAINS  FROM  QUALIFIED
FINANCIAL INSTRUMENTS IN THE APPORTIONMENT FRACTION, TAXPAYERS MAY ELECT
TO  USE  THE  FIXED PERCENTAGE METHOD DESCRIBED IN THIS SUBPARAGRAPH FOR
QUALIFIED FINANCIAL INSTRUMENTS. THE ELECTION IS IRREVOCABLE, APPLIES TO
ALL QUALIFIED FINANCIAL INSTRUMENTS, AND MUST BE MADE ON AN ANNUAL BASIS
ON THE TAXPAYER'S ORIGINAL, TIMELY FILED RETURN. IF THE TAXPAYER  ELECTS
THE  FIXED PERCENTAGE METHOD, THEN ALL INCOME, GAIN OR LOSS, FROM QUALI-
FIED FINANCIAL INSTRUMENTS CONSTITUTES BUSINESS INCOME, GAIN OR LOSS. IF
THE TAXPAYER DOES NOT ELECT TO USE THE  FIXED  PERCENTAGE  METHOD,  THEN
RECEIPTS  AND  NET  GAINS  ARE INCLUDED IN THE APPORTIONMENT FRACTION IN
ACCORDANCE WITH THE CUSTOMER SOURCING METHOD DESCRIBED  IN  SUBPARAGRAPH
TWO  OF THIS PARAGRAPH. UNDER THE FIXED PERCENTAGE METHOD, EIGHT PERCENT
OF ALL NET INCOME (NOT LESS THAN ZERO) FROM QUALIFIED FINANCIAL  INSTRU-
MENTS  IS  INCLUDED  IN THE NUMERATOR OF THE APPORTIONMENT FRACTION. ALL
NET INCOME (NOT LESS THAN ZERO) FROM QUALIFIED FINANCIAL INSTRUMENTS  IS
INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.
  (2)  CUSTOMER  SOURCING  METHOD. RECEIPTS AND NET GAINS FROM QUALIFIED
FINANCIAL INSTRUMENTS, IN CASES WHERE THE TAXPAYER DID NOT ELECT TO  USE
THE  FIXED PERCENTAGE METHOD DESCRIBED IN SUBPARAGRAPH ONE OF THIS PARA-
GRAPH, AND FROM NONQUALIFIED FINANCIAL INSTRUMENTS ARE INCLUDED  IN  THE
APPORTIONMENT   FRACTION  IN  ACCORDANCE  WITH  THIS  SUBPARAGRAPH.  FOR
PURPOSES OF THIS PARAGRAPH, AN INDIVIDUAL IS DEEMED TO BE LOCATED IN THE
STATE IF HIS OR HER BILLING ADDRESS IS IN THE STATE. A  BUSINESS  ENTITY
IS  DEEMED  TO  BE  LOCATED  IN  THE STATE IF ITS COMMERCIAL DOMICILE IS
LOCATED IN THE STATE.
  (A) LOANS. (I) RECEIPTS CONSTITUTING INTEREST FROM  LOANS  SECURED  BY
REAL  PROPERTY LOCATED WITHIN THE STATE SHALL BE INCLUDED IN THE NUMERA-
TOR OF THE APPORTIONMENT FRACTION. RECEIPTS CONSTITUTING  INTEREST  FROM
LOANS  SECURED  BY  REAL  PROPERTY  LOCATED WITHIN AND WITHOUT THE STATE
SHALL BE INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.
  (II) RECEIPTS CONSTITUTING INTEREST FROM LOANS  NOT  SECURED  BY  REAL
PROPERTY  SHALL  BE INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRAC-
TION IF THE BORROWER IS LOCATED  IN  THE  STATE.  RECEIPTS  CONSTITUTING
INTEREST  FROM  LOANS NOT SECURED BY REAL PROPERTY, WHETHER THE BORROWER
IS LOCATED WITHIN OR WITHOUT THE STATE, SHALL BE INCLUDED IN THE DENOMI-
NATOR OF THE APPORTIONMENT FRACTION.
  (III) NET GAINS (NOT LESS THAN ZERO) FROM SALES OF  LOANS  SECURED  BY
REAL  PROPERTY  ARE INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRAC-
TION AS PROVIDED IN THIS SUBCLAUSE. THE AMOUNT OF  NET  GAINS  FROM  THE
SALE  OF LOANS SECURED BY REAL PROPERTY INCLUDED IN THE NUMERATOR OF THE
APPORTIONMENT FRACTION IS DETERMINED BY MULTIPLYING THE NET GAINS  BY  A
FRACTION  THE  NUMERATOR  OF  WHICH IS THE AMOUNT OF GROSS PROCEEDS FROM
SALES OF LOANS SECURED BY REAL PROPERTY LOCATED WITHIN THE STATE AND THE
DENOMINATOR OF WHICH IS THE GROSS PROCEEDS FROM SALES OF  LOANS  SECURED
BY  REAL  PROPERTY WITHIN AND WITHOUT THE STATE. GROSS PROCEEDS SHALL BE
DETERMINED AFTER THE DEDUCTION OF ANY COST INCURRED TO ACQUIRE THE LOANS
BUT SHALL NOT BE LESS THAN ZERO. NET GAINS (NOT  LESS  THAN  ZERO)  FROM
SALES OF LOANS SECURED BY REAL PROPERTY WITHIN AND WITHOUT THE STATE ARE
INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.
  (IV) NET GAINS (NOT LESS THAN ZERO) FROM SALES OF LOANS NOT SECURED BY
REAL  PROPERTY  ARE INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRAC-
TION AS PROVIDED IN THIS SUBCLAUSE. THE AMOUNT OF  NET  GAINS  FROM  THE

S. 6359--C                         62

SALE  OF LOANS NOT SECURED BY REAL PROPERTY INCLUDED IN THE NUMERATOR OF
THE APPORTIONMENT FRACTION IS DETERMINED BY MULTIPLYING THE NET GAINS BY
A FRACTION, THE NUMERATOR OF WHICH IS THE AMOUNT OF GROSS PROCEEDS  FROM
SALES OF LOANS NOT SECURED BY REAL PROPERTY TO PURCHASERS LOCATED WITHIN
THE  STATE  AND THE DENOMINATOR OF WHICH IS THE AMOUNT OF GROSS RECEIPTS
FROM SALES OF LOANS NOT SECURED BY REAL PROPERTY TO  PURCHASERS  LOCATED
WITHIN  AND  WITHOUT THE STATE. GROSS PROCEEDS SHALL BE DETERMINED AFTER
THE DEDUCTION OF ANY COST INCURRED TO ACQUIRE THE LOANS BUT SHALL NOT BE
LESS THAN ZERO.  NET GAINS (NOT LESS THAN ZERO) FROM SALES OF LOANS  NOT
SECURED  BY  REAL PROPERTY ARE INCLUDED IN THE DENOMINATOR OF THE APPOR-
TIONMENT FRACTION.
  (B) FEDERAL, STATE, AND MUNICIPAL DEBT. RECEIPTS CONSTITUTING INTEREST
AND NET GAINS FROM SALES  OF  DEBT  INSTRUMENTS  ISSUED  BY  THE  UNITED
STATES,  ANY  STATE,  OR  POLITICAL  SUBDIVISION OF A STATE SHALL NOT BE
INCLUDED IN  THE  NUMERATOR  OF  THE  APPORTIONMENT  FRACTION.  RECEIPTS
CONSTITUTING  INTEREST  AND NET GAINS (NOT LESS THAN ZERO) FROM SALES OF
DEBT INSTRUMENTS ISSUED BY THE UNITED STATES AND THE STATE OF  NEW  YORK
OR  ITS  POLITICAL  SUBDIVISIONS SHALL BE INCLUDED IN THE DENOMINATOR OF
THE APPORTIONMENT FRACTION. FIFTY PERCENT OF THE  RECEIPTS  CONSTITUTING
INTEREST  AND  NET GAINS (NOT LESS THAN ZERO) FROM SALES OF DEBT INSTRU-
MENTS ISSUED BY OTHER STATES OR THEIR POLITICAL  SUBDIVISIONS  SHALL  BE
INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.
  (C)  ASSET  BACKED SECURITIES AND OTHER GOVERNMENT AGENCY DEBT.  EIGHT
PERCENT OF THE INTEREST INCOME FROM ASSET  BACKED  SECURITIES  OR  OTHER
SECURITIES  ISSUED  BY GOVERNMENT AGENCIES, INCLUDING BUT NOT LIMITED TO
SECURITIES  ISSUED  BY  THE  GOVERNMENT  NATIONAL  MORTGAGE  ASSOCIATION
(GNMA),  THE  FEDERAL  NATIONAL MORTGAGE ASSOCIATION (FNMA), THE FEDERAL
HOME LOAN MORTGAGE CORPORATION (FHLMC), OR THE SMALL  BUSINESS  ADMINIS-
TRATION  SHALL  BE  INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRAC-
TION. EIGHT PERCENT OF THE NET GAINS (NOT LESS THAN ZERO) FROM (I) SALES
OF ASSET BACKED SECURITIES OR  OTHER  SECURITIES  ISSUED  BY  GOVERNMENT
AGENCIES  ISSUED  BY  GNMA,  FNMA, OR FHLMC, THE SMALL BUSINESS ADMINIS-
TRATION OR OTHER GOVERNMENT AGENCY, OR (II) SALES OF OTHER ASSET  BACKED
SECURITIES THAT ARE SOLD THROUGH A REGISTERED SECURITIES BROKER OR DEAL-
ER OR THROUGH A LICENSED EXCHANGE, SHALL BE INCLUDED IN THE NUMERATOR OF
THE APPORTIONMENT FRACTION. THE AMOUNT OF NET GAINS (NOT LESS THAN ZERO)
FROM  SALES  OF  OTHER ASSET BACKED SECURITIES REFERENCED IN CLAUSE (II)
INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRACTION IS DETERMINED BY
MULTIPLYING SUCH NET GAINS BY A FRACTION, THE NUMERATOR OF WHICH IS  THE
AMOUNT  OF  GROSS  PROCEEDS FROM SUCH SALES TO PURCHASERS LOCATED IN THE
STATE AND THE DENOMINATOR OF WHICH IS THE AMOUNT OF GROSS PROCEEDS  FROM
SUCH  SALES TO PURCHASERS LOCATED WITHIN AND WITHOUT THE STATE. RECEIPTS
CONSTITUTING INTEREST FROM ASSET BACKED SECURITIES AND  NET  GAINS  (NOT
LESS  THAN  ZERO)  FROM SALES OF ASSET BACKED SECURITIES ARE INCLUDED IN
THE DENOMINATOR OF THE APPORTIONMENT FRACTION. GROSS PROCEEDS  SHALL  BE
DETERMINED AFTER THE DEDUCTION OF ANY COST TO ACQUIRE THE SECURITIES BUT
SHALL NOT BE LESS THAN ZERO.
  (D)  CORPORATE  BONDS.  RECEIPTS  CONSTITUTING INTEREST FROM CORPORATE
BONDS ARE INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRACTION IF THE
COMMERCIAL DOMICILE OF THE ISSUING CORPORATION IS IN THE STATE.    EIGHT
PERCENT  OF  THE  NET GAINS (NOT LESS THAN ZERO) FROM SALES OF CORPORATE
BONDS SOLD THROUGH A REGISTERED SECURITIES BROKER OR DEALER OR THROUGH A
LICENSED EXCHANGE IS INCLUDED IN  THE  NUMERATOR  OF  THE  APPORTIONMENT
FRACTION.  THE AMOUNT OF NET GAINS (NOT LESS THAN ZERO) FROM OTHER SALES
OF CORPORATE BONDS INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT  FRAC-
TION  IS  DETERMINED  BY  MULTIPLYING  SUCH NET GAINS BY A FRACTION, THE

S. 6359--C                         63

NUMERATOR OF WHICH IS THE AMOUNT OF GROSS PROCEEDS FROM  SUCH  SALES  TO
PURCHASERS  LOCATED  IN  THE  STATE  AND THE DENOMINATOR OF WHICH IS THE
AMOUNT OF GROSS PROCEEDS FROM SALES TO  PURCHASERS  LOCATED  WITHIN  AND
WITHOUT  THE STATE. RECEIPTS CONSTITUTING INTEREST FROM CORPORATE BONDS,
WHETHER THE ISSUING CORPORATION'S COMMERCIAL DOMICILE IS WITHIN OR WITH-
OUT THE STATE, AND NET GAINS (NOT LESS THAN ZERO) FROM SALES  OF  CORPO-
RATE  BONDS  TO  PURCHASERS WITHIN AND WITHOUT THE STATE ARE INCLUDED IN
THE DENOMINATOR OF THE APPORTIONMENT FRACTION. GROSS PROCEEDS  SHALL  BE
DETERMINED  AFTER  THE  DEDUCTION  OF  ANY COST TO ACQUIRE THE BONDS BUT
SHALL NOT BE LESS THAN ZERO.
  (E) REVERSE REPURCHASE AGREEMENTS AND SECURITIES BORROWING AGREEMENTS.
EIGHT PERCENT OF NET INTEREST INCOME (NOT LESS THAN ZERO)  FROM  REVERSE
REPURCHASE  AGREEMENTS  AND  SECURITIES  BORROWING  AGREEMENTS  SHALL BE
INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT  FRACTION.  NET  INTEREST
INCOME (NOT LESS THAN ZERO) FROM REVERSE REPURCHASE AGREEMENTS AND SECU-
RITIES BORROWING AGREEMENTS IS INCLUDED IN THE DENOMINATOR OF THE APPOR-
TIONMENT  FRACTION.  NET  INTEREST INCOME FROM REVERSE REPURCHASE AGREE-
MENTS AND SECURITIES BORROWING AGREEMENTS IS DETERMINED FOR PURPOSES  OF
THIS  SUBDIVISION  AFTER  THE DEDUCTION OF THE INTEREST EXPENSE FROM THE
TAXPAYER'S REPURCHASE AGREEMENTS AND SECURITIES LENDING  AGREEMENTS  BUT
CANNOT  BE  LESS  THAN  ZERO.  FOR  THIS CALCULATION, THE AMOUNT OF SUCH
INTEREST EXPENSE IS THE INTEREST EXPENSE ASSOCIATED WITH THE SUM OF  THE
VALUE   OF   THE  TAXPAYER'S  REPURCHASE  AGREEMENTS  WHERE  IT  IS  THE
SELLER/BORROWER PLUS THE VALUE  OF  THE  TAXPAYER'S  SECURITIES  LENDING
AGREEMENTS  WHERE  IT  IS  THE  SECURITIES  LENDER, PROVIDED SUCH SUM IS
LIMITED TO THE SUM OF THE VALUE OF  THE  TAXPAYER'S  REVERSE  REPURCHASE
AGREEMENTS  WHERE IT IS THE SELLER/BORROWER AND THE VALUE OF THE TAXPAY-
ER'S SECURITIES BORROWING AGREEMENTS.
  (F) FEDERAL FUNDS. EIGHT PERCENT OF THE NET INTEREST  (NOT  LESS  THAN
ZERO)  FROM FEDERAL FUNDS IS INCLUDED IN THE NUMERATOR OF THE APPORTION-
MENT FRACTION. THE NET INTEREST (NOT LESS THAN ZERO) FROM FEDERAL  FUNDS
IS INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION. NET INTER-
EST FROM FEDERAL FUNDS IS DETERMINED AFTER DEDUCTION OF INTEREST EXPENSE
FROM FEDERAL FUNDS.
  (G)  DIVIDENDS AND NET GAINS FROM SALES OF STOCK OR PARTNERSHIP INTER-
ESTS. DIVIDENDS FROM STOCK, NET GAINS (NOT LESS THAN ZERO) FROM SALES OF
STOCK AND NET GAINS (NOT LESS THAN ZERO) FROM THE  SALE  OF  PARTNERSHIP
INTERESTS ARE NOT INCLUDED IN EITHER THE NUMERATOR OR DENOMINATOR OF THE
APPORTIONMENT  FRACTION  UNLESS  THE COMMISSIONER DETERMINES PURSUANT TO
SUBDIVISION ELEVEN OF THIS SECTION THAT INCLUSION OF SUCH DIVIDENDS  AND
NET  GAINS  (NOT  LESS  THAN  ZERO) IS NECESSARY TO PROPERLY REFLECT THE
BUSINESS INCOME OR CAPITAL OF THE TAXPAYER.
  (H) OTHER FINANCIAL INSTRUMENTS. (I)  RECEIPTS  CONSTITUTING  INTEREST
FROM  OTHER  FINANCIAL INSTRUMENTS SHALL BE INCLUDED IN THE NUMERATOR OF
THE APPORTIONMENT FRACTION  IF  THE  PAYOR  IS  LOCATED  IN  THE  STATE.
RECEIPTS CONSTITUTING INTEREST FROM OTHER FINANCIAL INSTRUMENTS, WHETHER
THE  PAYOR IS WITHIN OR WITHOUT THE STATE, ARE INCLUDED IN THE DENOMINA-
TOR OF THE APPORTIONMENT FRACTION.
  (II) NET GAINS (NOT LESS THAN ZERO)  FROM  SALES  OF  OTHER  FINANCIAL
INSTRUMENTS  AND  OTHER INCOME (NOT LESS THAN ZERO) FROM OTHER FINANCIAL
INSTRUMENTS WHERE THE PURCHASER OR PAYOR IS LOCATED  IN  THE  STATE  ARE
INCLUDED  IN THE NUMERATOR OF THE APPORTIONMENT FRACTION, PROVIDED THAT,
IF THE PURCHASER OR PAYOR IS A REGISTERED SECURITIES BROKER OR DEALER OR
THE TRANSACTION IS MADE THROUGH A LICENSED EXCHANGE, THEN EIGHT  PERCENT
OF  THE  NET  GAINS  (NOT LESS THAN ZERO) OR OTHER INCOME (NOT LESS THAN
ZERO) IS INCLUDED IN THE NUMERATOR OF THE  APPORTIONMENT  FRACTION.  NET

S. 6359--C                         64

GAINS (NOT LESS THAN ZERO) FROM SALES OF OTHER FINANCIAL INSTRUMENTS AND
OTHER  INCOME  (NOT LESS THAN ZERO) FROM OTHER FINANCIAL INSTRUMENTS ARE
INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.
  (I)  PHYSICAL  COMMODITIES. NET INCOME (NOT LESS THAN ZERO) FROM SALES
OF PHYSICAL COMMODITIES ARE INCLUDED IN THE NUMERATOR OF THE  APPORTION-
MENT FRACTION AS PROVIDED IN THIS SUBPARAGRAPH. THE AMOUNT OF NET INCOME
FROM  SALES  OF  PHYSICAL  COMMODITIES  INCLUDED IN THE NUMERATOR OF THE
APPORTIONMENT FRACTION IS DETERMINED BY MULTIPLYING THE NET INCOME  FROM
SALES  OF  PHYSICAL COMMODITIES BY A FRACTION, THE NUMERATOR OF WHICH IS
THE AMOUNT OF RECEIPTS  FROM  SALES  OF  PHYSICAL  COMMODITIES  ACTUALLY
DELIVERED  TO POINTS WITHIN THE STATE OR, IF THERE IS NO ACTUAL DELIVERY
OF THE PHYSICAL COMMODITY, SOLD TO CUSTOMERS LOCATED IN THE  STATE,  AND
THE  DENOMINATOR  OF WHICH IS THE AMOUNT OF RECEIPTS FROM SALES OF PHYS-
ICAL COMMODITIES ACTUALLY DELIVERED TO POINTS  WITHIN  AND  WITHOUT  THE
STATE  OR  SOLD  TO  CUSTOMERS LOCATED WITHIN AND WITHOUT THE STATE. NET
INCOME (NOT LESS THAT  ZERO)  FROM  SALES  OF  PHYSICAL  COMMODITIES  IS
INCLUDED  IN  THE  DENOMINATOR OF THE APPORTIONMENT FRACTION. NET INCOME
(NOT LESS THAN ZERO) FROM SALES OF PHYSICAL  COMMODITIES  IS  DETERMINED
AFTER  THE  DEDUCTION  OF  THE  COST  TO ACQUIRE OR PRODUCE THE PHYSICAL
COMMODITIES.
  (B) OTHER RECEIPTS FROM BROKER OR DEALER  ACTIVITIES.  RECEIPTS  OF  A
REGISTERED  SECURITIES  BROKER  OR DEALER FROM SECURITIES OR COMMODITIES
BROKER OR DEALER ACTIVITIES DESCRIBED IN THIS PARAGRAPH SHALL BE  DEEMED
TO  BE  GENERATED  WITHIN  THE  STATE  AS DESCRIBED IN SUBPARAGRAPHS ONE
THROUGH EIGHT OF THIS PARAGRAPH. RECEIPTS FROM SUCH ACTIVITIES GENERATED
WITHIN THE STATE SHALL BE INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT
FRACTION. RECEIPTS FROM SUCH ACTIVITIES GENERATED WITHIN AND WITHOUT THE
STATE SHALL BE INCLUDED IN THE DENOMINATOR OF  THE  APPORTIONMENT  FRAC-
TION.  FOR  THE  PURPOSES OF THIS PARAGRAPH, THE TERM "SECURITIES" SHALL
HAVE THE SAME MEANING AS IN SECTION 475(C)(2) OF  THE  INTERNAL  REVENUE
CODE  AND  THE  TERM  "COMMODITIES"  SHALL  HAVE  THE SAME MEANING AS IN
SECTION 475(E)(2) OF THE INTERNAL REVENUE CODE.
  (1) RECEIPTS  CONSTITUTING  BROKERAGE  COMMISSIONS  DERIVED  FROM  THE
EXECUTION  OF SECURITIES OR COMMODITIES PURCHASE OR SALES ORDERS FOR THE
ACCOUNTS OF CUSTOMERS SHALL BE DEEMED TO BE GENERATED WITHIN  THE  STATE
IF  THE  MAILING  ADDRESS IN THE RECORDS OF THE TAXPAYER OF THE CUSTOMER
WHO IS RESPONSIBLE FOR PAYING SUCH COMMISSIONS IS WITHIN THE STATE.
  (2) RECEIPTS CONSTITUTING MARGIN INTEREST EARNED ON BEHALF OF  BROKER-
AGE  ACCOUNTS  SHALL  BE  DEEMED TO BE GENERATED WITHIN THE STATE IF THE
MAILING ADDRESS IN THE RECORDS OF THE TAXPAYER OF THE  CUSTOMER  WHO  IS
RESPONSIBLE FOR PAYING SUCH MARGIN INTEREST IS WITHIN THE STATE.
  (3)(A)  RECEIPTS CONSTITUTING FEES EARNED BY THE TAXPAYER FOR ADVISORY
SERVICES TO A CUSTOMER IN CONNECTION WITH THE UNDERWRITING OF SECURITIES
FOR SUCH CUSTOMER (SUCH CUSTOMER BEING THE ENTITY THAT IS  CONTEMPLATING
ISSUING  OR  IS  ISSUING  SECURITIES) OR FEES EARNED BY THE TAXPAYER FOR
MANAGING AN UNDERWRITING SHALL BE DEEMED  TO  BE  GENERATED  WITHIN  THE
STATE  IF  THE  MAILING  ADDRESS  IN THE RECORDS OF THE TAXPAYER OF SUCH
CUSTOMER WHO IS RESPONSIBLE FOR PAYING SUCH FEES IS WITHIN THE STATE.
  (B) RECEIPTS CONSTITUTING THE PRIMARY  SPREAD  OF  SELLING  CONCESSION
FROM  UNDERWRITTEN SECURITIES SHALL BE DEEMED TO BE GENERATED WITHIN THE
STATE TO THE EXTENT THE CUSTOMER IS LOCATED IN THE STATE.
  (C) THE TERM "PRIMARY SPREAD" MEANS THE DIFFERENCE BETWEEN  THE  PRICE
PAID  BY THE TAXPAYER TO THE ISSUER OF THE SECURITIES BEING MARKETED AND
THE PRICE RECEIVED FROM THE SUBSEQUENT SALE OF THE UNDERWRITTEN  SECURI-
TIES  AT  THE INITIAL PUBLIC OFFERING PRICE, LESS ANY SELLING CONCESSION
AND ANY FEES PAID TO THE TAXPAYER FOR ADVISORY SERVICES OR ANY MANAGER'S

S. 6359--C                         65

FEES, IF SUCH FEES ARE NOT PAID BY THE CUSTOMER TO  THE  TAXPAYER  SEPA-
RATELY.  THE TERM "PUBLIC OFFERING PRICE" MEANS THE PRICE AGREED UPON BY
THE TAXPAYER AND THE ISSUER AT WHICH THE SECURITIES ARE TO BE OFFERED TO
THE  PUBLIC.  THE TERM "SELLING CONCESSION" MEANS THE AMOUNT PAID TO THE
TAXPAYER FOR PARTICIPATING IN THE UNDERWRITING OF A SECURITY  WHERE  THE
TAXPAYER IS NOT THE LEAD UNDERWRITER.
  (4)  RECEIPTS CONSTITUTING ACCOUNT MAINTENANCE FEES SHALL BE DEEMED TO
BE GENERATED WITHIN THE STATE IF THE MAILING ADDRESS IN  THE  RECORD  OF
THE  TAXPAYER OF THE CUSTOMER WHO IS RESPONSIBLE FOR PAYING SUCH ACCOUNT
MAINTENANCE FEES IS WITHIN THE STATE.
  (5) RECEIPTS CONSTITUTING FEES FOR MANAGEMENT  OR  ADVISORY  SERVICES,
INCLUDING  FEES  FOR ADVISORY SERVICES IN RELATION TO MERGER OR ACQUISI-
TION ACTIVITIES, BUT EXCLUDING FEES PAID FOR SERVICES DESCRIBED IN PARA-
GRAPH (D) OF THIS SUBDIVISION, SHALL BE DEEMED TO  BE  GENERATED  WITHIN
THE  STATE  IF THE MAILING ADDRESS IN THE RECORDS OF THE TAXPAYER OF THE
CUSTOMER WHO IS RESPONSIBLE FOR PAYING SUCH FEES IS WITHIN THE STATE.
  (6) RECEIPTS CONSTITUTING INTEREST EARNED BY THE TAXPAYER ON LOANS AND
ADVANCES MADE BY THE TAXPAYER  TO  A  CORPORATION  AFFILIATED  WITH  THE
TAXPAYER  BUT  WITH  WHICH  THE TAXPAYER IS NOT PERMITTED OR REQUIRED TO
FILE A COMBINED REPORT PURSUANT TO SECTION TWO  HUNDRED  TEN-C  OF  THIS
ARTICLE  SHALL BE DEEMED TO ARISE FROM SERVICES PERFORMED AT THE PRINCI-
PAL PLACE OF BUSINESS OF SUCH AFFILIATED CORPORATION.
  (7) IF THE TAXPAYER RECEIVES ANY OF THE RECEIPTS ENUMERATED IN SUBPAR-
AGRAPHS ONE THROUGH FOUR OF THIS PARAGRAPH AS A RESULT OF  A  SECURITIES
CORRESPONDENT  RELATIONSHIP  SUCH  TAXPAYER  HAS  WITH ANOTHER BROKER OR
DEALER WITH THE TAXPAYER ACTING IN THIS  RELATIONSHIP  AS  THE  CLEARING
FIRM,  SUCH RECEIPTS SHALL BE DEEMED TO BE GENERATED WITHIN THE STATE TO
EXTENT SET FORTH IN EACH OF  SUCH  SUBPARAGRAPHS.  THE  AMOUNT  OF  SUCH
RECEIPTS SHALL EXCLUDE THE AMOUNT THE TAXPAYER IS REQUIRED TO PAY TO THE
CORRESPONDENT  FIRM FOR SUCH CORRESPONDENT RELATIONSHIP. IF THE TAXPAYER
RECEIVES ANY OF THE RECEIPTS ENUMERATED  IN  SUBPARAGRAPHS  ONE  THROUGH
FOUR  OF  THIS  PARAGRAPH  AS  AS  RESULT  OF A SECURITIES CORRESPONDENT
RELATIONSHIP SUCH TAXPAYER HAS WITH ANOTHER BROKER OR  DEALER  WITH  THE
TAXPAYER  ACTING  IN  THIS  RELATIONSHIP  AS  THE INTRODUCING FIRM, SUCH
RECEIPTS SHALL BE DEEMED TO BE GENERATED WITHIN THE STATE TO THE  EXTENT
SET FORTH IN EACH OF SUCH SUBPARAGRAPHS.
  (8) IF, FOR PURPOSES OF SUBPARAGRAPHS ONE, TWO, CLAUSE (A) OF SUBPARA-
GRAPH THREE, FOUR, OR FIVE OF THIS PARAGRAPH THE TAXPAYER IS UNABLE FROM
ITS  RECORDS  TO  DETERMINE  THE  MAILING ADDRESS OF THE CUSTOMER, EIGHT
PERCENT OF THE RECEIPTS IS INCLUDED IN THE NUMERATOR OF  THE  APPORTION-
MENT FRACTION.
  (C)  RECEIPTS FROM CREDIT CARD AND SIMILAR ACTIVITIES. RECEIPTS RELAT-
ING TO THE  BANK,  CREDIT,  TRAVEL  AND  ENTERTAINMENT  CARD  ACTIVITIES
DESCRIBED  IN  THIS PARAGRAPH SHALL BE DEEMED TO BE GENERATED WITHIN THE
STATE AS DESCRIBED IN SUBPARAGRAPHS ONE THROUGH THREE OF THIS PARAGRAPH.
RECEIPTS FROM SUCH  ACTIVITIES  GENERATED  WITHIN  THE  STATE  SHALL  BE
INCLUDED  IN THE NUMERATOR OF THE APPORTIONMENT FRACTION.  RECEIPTS FROM
SUCH ACTIVITIES GENERATED WITHIN AND WITHOUT THE STATE SHALL BE INCLUDED
IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.
  (1) RECEIPTS CONSTITUTING INTEREST, AND  FEES  AND  PENALTIES  IN  THE
NATURE  OF  INTEREST,  FROM  BANK, CREDIT, TRAVEL AND ENTERTAINMENT CARD
RECEIVABLES SHALL BE DEEMED TO BE GENERATED  WITHIN  THE  STATE  IF  THE
MAILING  ADDRESS OF THE CARD HOLDER IN THE RECORDS OF THE TAXPAYER IS IN
THE STATE;

S. 6359--C                         66

  (2) RECEIPTS FROM SERVICE CHARGES AND FEES FROM SUCH  CARDS  SHALL  BE
DEEMED  TO  BE  GENERATED WITHIN THE STATE IF THE MAILING ADDRESS OF THE
CARD HOLDER IN THE RECORDS OF THE TAXPAYER IS IN THE STATE; AND
  (3)  RECEIPTS  FROM MERCHANT DISCOUNTS SHALL BE DEEMED TO BE GENERATED
WITHIN THE STATE IF THE MERCHANT IS LOCATED WITHIN  THE  STATE.  IN  THE
CASE  OF  A  MERCHANT  WITH  LOCATIONS  BOTH WITHIN AND WITHOUT NEW YORK
STATE, ONLY RECEIPTS FROM MERCHANT DISCOUNTS ATTRIBUTABLE TO SALES  MADE
FROM LOCATIONS WITHIN NEW YORK STATE ARE ALLOCATED TO NEW YORK STATE. IT
SHALL  BE  PRESUMED  THAT THE LOCATION OF THE MERCHANT IS THE ADDRESS OF
THE MERCHANT SHOWN ON THE INVOICE  SUBMITTED  BY  THE  MERCHANT  TO  THE
TAXPAYER.
  (D)  RECEIPTS FROM CERTAIN SERVICES TO INVESTMENT COMPANIES.  RECEIPTS
RECEIVED FROM AN INVESTMENT COMPANY ARISING FROM THE SALE OF MANAGEMENT,
ADMINISTRATION OR DISTRIBUTION SERVICES TO SUCH INVESTMENT  COMPANY  ARE
INCLUDED  IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.  THE PORTION
OF SUCH RECEIPTS INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRACTION
(SUCH PORTION REFERRED TO HEREIN AS  THE  NEW  YORK  PORTION)  SHALL  BE
DETERMINED AS PROVIDED IN THIS PARAGRAPH.
  (1)  THE  NEW  YORK  PORTION SHALL BE THE PRODUCT OF THE TOTAL OF SUCH
RECEIPTS FROM THE SALE OF SUCH SERVICES AND A FRACTION. THE NUMERATOR OF
THAT FRACTION IS THE SUM OF THE MONTHLY PERCENTAGES (AS DEFINED  HEREIN-
AFTER)  DETERMINED  FOR  EACH  MONTH OF THE INVESTMENT COMPANY'S TAXABLE
YEAR FOR FEDERAL INCOME TAX PURPOSES WHICH TAXABLE YEAR ENDS WITHIN  THE
TAXABLE  YEAR  OF THE TAXPAYER (BUT EXCLUDING ANY MONTH DURING WHICH THE
INVESTMENT COMPANY HAD NO OUTSTANDING SHARES).  THE  MONTHLY  PERCENTAGE
FOR  EACH  SUCH  MONTH IS DETERMINED BY DIVIDING THE NUMBER OF SHARES IN
THE INVESTMENT COMPANY THAT ARE OWNED ON THE LAST DAY OF  THE  MONTH  BY
SHAREHOLDERS  THAT  ARE  DOMICILED  IN  THE STATE BY THE TOTAL NUMBER OF
SHARES IN THE INVESTMENT COMPANY OUTSTANDING ON THAT DATE.  THE  DENOMI-
NATOR OF THE FRACTION IS THE NUMBER OF SUCH MONTHLY PERCENTAGES.
  (2)(A)  FOR PURPOSES OF THIS PARAGRAPH, AN INDIVIDUAL, ESTATE OR TRUST
IS DEEMED TO BE LOCATED IN THE STATE IF HIS, HER OR ITS MAILING  ADDRESS
ON  THE  RECORDS  OF  THE INVESTMENT COMPANY IS IN THE STATE. A BUSINESS
ENTITY IS DEEMED TO BE LOCATED IN THE STATE IF ITS  COMMERCIAL  DOMICILE
IS LOCATED IN THE STATE.
  (B)  FOR  PURPOSES  OF  THIS  PARAGRAPH, THE TERM "INVESTMENT COMPANY"
MEANS A REGULATED INVESTMENT COMPANY, AS DEFINED IN SECTION 851  OF  THE
INTERNAL REVENUE CODE, AND A PARTNERSHIP TO WHICH SECTION 7704(A) OF THE
INTERNAL  REVENUE  CODE APPLIES (BY VIRTUE OF SECTION 7704(C)(3) OF SUCH
CODE) AND THAT MEETS THE REQUIREMENTS OF SECTION 851(B)  OF  SUCH  CODE.
THE  PRECEDING SENTENCE SHALL BE APPLIED TO THE TAXABLE YEAR FOR FEDERAL
INCOME TAX PURPOSES OF THE BUSINESS ENTITY THAT IS ASSERTED  TO  CONSTI-
TUTE  AN  INVESTMENT  COMPANY  THAT  ENDS WITHIN THE TAXABLE YEAR OF THE
TAXPAYER.
  (C) FOR PURPOSES OF THIS PARAGRAPH THE TERM "RECEIPTS FROM AN  INVEST-
MENT  COMPANY"  INCLUDES  AMOUNTS  RECEIVED  DIRECTLY FROM AN INVESTMENT
COMPANY AS WELL AS  AMOUNTS  RECEIVED  FROM  THE  SHAREHOLDERS  IN  SUCH
INVESTMENT COMPANY, IN THEIR CAPACITY AS SUCH.
  (D)  FOR  PURPOSES  OF  THIS PARAGRAPH, THE TERM "MANAGEMENT SERVICES"
MEANS THE RENDERING OF  INVESTMENT  ADVICE  TO  AN  INVESTMENT  COMPANY,
MAKING  DETERMINATIONS  AS TO WHEN SALES AND PURCHASES OF SECURITIES ARE
TO BE MADE ON BEHALF  OF  AN  INVESTMENT  COMPANY,  OR  THE  SELLING  OR
PURCHASING  OF  SECURITIES CONSTITUTING ASSETS OF AN INVESTMENT COMPANY,
AND RELATED ACTIVITIES, BUT ONLY WHERE SUCH ACTIVITY OR  ACTIVITIES  ARE
PERFORMED  PURSUANT  TO  A  CONTRACT WITH THE INVESTMENT COMPANY ENTERED

S. 6359--C                         67

INTO PURSUANT TO SECTION 15(A) OF THE FEDERAL INVESTMENT COMPANY ACT  OF
NINETEEN HUNDRED FORTY, AS AMENDED.
  (E)  FOR  PURPOSES OF THIS PARAGRAPH, THE TERM "DISTRIBUTION SERVICES"
MEANS THE SERVICES OF ADVERTISING, SERVICING INVESTOR ACCOUNTS  (INCLUD-
ING  REDEMPTIONS),  MARKETING  SHARES OR SELLING SHARES OF AN INVESTMENT
COMPANY, BUT, IN THE CASE OF ADVERTISING,  SERVICING  INVESTOR  ACCOUNTS
(INCLUDING  REDEMPTIONS) OR MARKETING SHARES, ONLY WHERE SUCH SERVICE IS
PERFORMED BY A PERSON WHO IS (OR WAS, IN THE CASE OF A CLOSED END COMPA-
NY) ALSO ENGAGED IN THE SERVICE OF SELLING SUCH SHARES. IN THE  CASE  OF
AN  OPEN  END  COMPANY, SUCH SERVICE OF SELLING SHARES MUST BE PERFORMED
PURSUANT TO A CONTRACT ENTERED INTO PURSUANT TO  SECTION  15(B)  OF  THE
FEDERAL INVESTMENT COMPANY ACT OF NINETEEN HUNDRED FORTY, AS AMENDED.
  (F) FOR PURPOSES OF THIS PARAGRAPH, THE TERM "ADMINISTRATION SERVICES"
INCLUDES  CLERICAL,  ACCOUNTING,  BOOKKEEPING, DATA PROCESSING, INTERNAL
AUDITING, LEGAL AND TAX SERVICES PERFORMED FOR AN INVESTMENT COMPANY BUT
ONLY IF THE PROVIDER OF SUCH SERVICE OR SERVICES DURING THE TAXABLE YEAR
IN WHICH SUCH SERVICE OR SERVICES ARE  SOLD  ALSO  SELLS  MANAGEMENT  OR
DISTRIBUTION SERVICES, AS DEFINED HEREINABOVE, TO SUCH INVESTMENT COMPA-
NY.
  (E) FOR PURPOSES OF THIS SUBDIVISION, A TAXPAYER SHALL USE THE FOLLOW-
ING HIERARCHY TO DETERMINE THE COMMERCIAL DOMICILE OF A BUSINESS ENTITY,
BASED ON THE INFORMATION KNOWN TO THE TAXPAYER OR INFORMATION THAT WOULD
BE KNOWN UPON REASONABLE INQUIRY: (I) THE LOCATION OF THE TREASURY FUNC-
TION  OF THE BUSINESS ENTITY; (II) THE SEAT OF MANAGEMENT AND CONTROL OF
THE BUSINESS ENTITY; AND (III) THE BILLING ADDRESS OF THE BUSINESS ENTI-
TY IN THE TAXPAYER'S RECORDS.  THE TAXPAYER MUST EXERCISE DUE  DILIGENCE
BEFORE  REJECTING  A METHOD IN THIS HIERARCHY AND PROCEEDING TO THE NEXT
METHOD.
  (F) FOR PURPOSES OF THIS SUBDIVISION, THE TERM "REGISTERED  SECURITIES
BROKER  OR  DEALER"  MEANS  A BROKER OR DEALER REGISTERED AS SUCH BY THE
SECURITIES AND EXCHANGE COMMISSION OR A BROKER OR DEALER  REGISTERED  AS
SUCH BY THE COMMODITIES FUTURES TRADING COMMISSION, AND SHALL INCLUDE AN
OTC  DERIVATIVES  DEALER  AS DEFINED UNDER REGULATIONS OF THE SECURITIES
AND EXCHANGE COMMISSION AT TITLE 17, PART 240, SECTION 3B-12 OF THE CODE
OF FEDERAL REGULATIONS (17 CFR 240.3B-12).
  6. RECEIPTS FROM RAILROAD AND TRUCKING  BUSINESS.  RECEIPTS  FROM  THE
CONDUCT  OF  A RAILROAD BUSINESS (INCLUDING SURFACE RAILROAD, WHETHER OR
NOT OPERATED BY STEAM, SUBWAY RAILROAD, ELEVATED RAILROAD, PALACE CAR OR
SLEEPING CAR BUSINESS) OR A TRUCKING BUSINESS ARE INCLUDED IN THE NUMER-
ATOR OF THE APPORTIONMENT FRACTION AS FOLLOWS. THE  AMOUNT  OF  RECEIPTS
FROM  THE CONDUCT OF A RAILROAD BUSINESS OR A TRUCKING BUSINESS INCLUDED
IN THE NUMERATOR OF THE APPORTIONMENT FRACTION IS DETERMINED  BY  MULTI-
PLYING  THE  AMOUNT  OF  RECEIPTS  FROM SUCH BUSINESS BY A FRACTION, THE
NUMERATOR OF WHICH IS THE MILES IN SUCH BUSINESS WITHIN THE STATE DURING
THE PERIOD COVERED BY THE TAXPAYER'S REPORT AND THE DENOMINATOR OF WHICH
IS THE MILES IN SUCH BUSINESS WITHIN AND WITHOUT THE STATE  DURING  SUCH
PERIOD.   RECEIPTS FROM THE CONDUCT OF THE RAILROAD BUSINESS OR A TRUCK-
ING BUSINESS ARE INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT  FRAC-
TION.
  7.  RECEIPTS  FROM  AVIATION  SERVICES.  (A)  AIR  FREIGHT FORWARDING.
RECEIPTS OF A TAXPAYER FROM  THE  ACTIVITY  OF  AIR  FREIGHT  FORWARDING
ACTING  AS PRINCIPAL AND LIKE INDIRECT AIR CARRIER RECEIPTS ARISING FROM
SUCH ACTIVITY SHALL BE INCLUDED IN THE NUMERATOR  OF  THE  APPORTIONMENT
FRACTION  AS  FOLLOWS:  ONE HUNDRED PERCENT OF SUCH RECEIPTS IF BOTH THE
PICKUP AND DELIVERY ASSOCIATED WITH SUCH RECEIPTS ARE MADE IN THE  STATE
AND  FIFTY  PERCENT  OF  SUCH  RECEIPTS IF EITHER THE PICKUP OR DELIVERY

S. 6359--C                         68

ASSOCIATED WITH SUCH RECEIPTS IS MADE IN THIS  STATE.    SUCH  RECEIPTS,
WHETHER THE PICKUP OR DELIVERY ASSOCIATED WITH THE RECEIPTS IS WITHIN OR
WITHOUT  THE  STATE,  SHALL BE INCLUDED IN THE DENOMINATOR OF THE APPOR-
TIONMENT FRACTION.
  (B)  OTHER  AVIATION  SERVICES.  (1)(A)  THE  PORTION OF RECEIPTS OF A
TAXPAYER FROM AVIATION SERVICES (OTHER THAN SERVICES DESCRIBED IN  PARA-
GRAPH  (A)  OF  THIS SUBDIVISION) TO BE INCLUDED IN THE NUMERATOR OF THE
APPORTIONMENT FRACTION SHALL BE DETERMINED BY MULTIPLYING  ITS  RECEIPTS
FROM SUCH AVIATION SERVICES BY A PERCENTAGE WHICH IS EQUAL TO THE ARITH-
METIC AVERAGE OF THE FOLLOWING THREE PERCENTAGES:
  (I)  THE  PERCENTAGE  DETERMINED  BY  DIVIDING  SIXTY  PERCENT  OF THE
AIRCRAFT ARRIVALS AND DEPARTURES  WITHIN  THIS  STATE  BY  THE  TAXPAYER
DURING  THE  PERIOD COVERED BY ITS REPORT BY THE TOTAL AIRCRAFT ARRIVALS
AND DEPARTURES  WITHIN  AND  WITHOUT  THIS  STATE  DURING  SUCH  PERIOD;
PROVIDED,  HOWEVER,  ARRIVALS  AND  DEPARTURES SOLELY FOR MAINTENANCE OR
REPAIR, REFUELING  (WHERE  NO  DEBARKATION  OR  EMBARKATION  OF  TRAFFIC
OCCURS), ARRIVALS AND DEPARTURES OF FERRY AND PERSONNEL TRAINING FLIGHTS
OR  ARRIVALS  AND  DEPARTURES IN THE EVENT OF EMERGENCY SITUATIONS SHALL
NOT BE INCLUDED IN COMPUTING  SUCH  ARRIVAL  AND  DEPARTURE  PERCENTAGE;
PROVIDED, FURTHER, THE COMMISSIONER MAY ALSO EXEMPT FROM SUCH PERCENTAGE
AIRCRAFT  ARRIVALS  AND  DEPARTURES OF ALL NON-REVENUE FLIGHTS INCLUDING
FLIGHTS INVOLVING THE TRANSPORTATION OF OFFICERS OR EMPLOYEES  RECEIVING
AIR  TRANSPORTATION  TO  PERFORM MAINTENANCE OR REPAIR SERVICES OR WHERE
SUCH OFFICERS OR EMPLOYEES ARE TRANSPORTED IN CONJUNCTION WITH AN  EMER-
GENCY SITUATION OR THE INVESTIGATION OF AN AIR DISASTER (OTHER THAN ON A
SCHEDULED  FLIGHT);  PROVIDED,  HOWEVER, THAT ARRIVALS AND DEPARTURES OF
FLIGHTS TRANSPORTING OFFICERS AND EMPLOYEES RECEIVING AIR TRANSPORTATION
FOR PURPOSES OTHER THAN SPECIFIED ABOVE (WITHOUT REGARD TO REMUNERATION)
SHALL BE INCLUDED IN COMPUTING SUCH ARRIVAL AND DEPARTURE PERCENTAGE;
  (II) THE PERCENTAGE DETERMINED BY DIVIDING SIXTY PERCENT OF THE REVEN-
UE TONS HANDLED BY THE TAXPAYER AT AIRPORTS  WITHIN  THIS  STATE  DURING
SUCH  PERIOD  BY THE TOTAL REVENUE TONS HANDLED BY IT AT AIRPORTS WITHIN
AND WITHOUT THIS STATE DURING SUCH PERIOD; AND
  (III) THE PERCENTAGE DETERMINED  BY  DIVIDING  SIXTY  PERCENT  OF  THE
TAXPAYER'S  ORIGINATING REVENUE WITHIN THIS STATE FOR SUCH PERIOD BY ITS
TOTAL ORIGINATING REVENUE WITHIN AND WITHOUT THIS STATE FOR SUCH PERIOD.
  (B) AS USED HEREIN THE TERM "AIRCRAFT ARRIVALS AND  DEPARTURES"  MEANS
THE  NUMBER OF LANDINGS AND TAKEOFFS OF THE AIRCRAFT OF THE TAXPAYER AND
THE NUMBER OF AIR PICKUPS AND DELIVERIES BY THE AIRCRAFT OF SUCH TAXPAY-
ER; THE TERM "ORIGINATING REVENUE" MEANS REVENUE TO  THE  TAXPAYER  FROM
THE  TRANSPORTATION  OR  REVENUE  PASSENGERS  AND REVENUE PROPERTY FIRST
RECEIVED BY THE TAXPAYER EITHER AS ORIGINATING OR CONNECTING TRAFFIC  AT
AIRPORTS;  AND  THE  TERM  "REVENUE  TONS  HANDLED"  BY  THE TAXPAYER AT
AIRPORTS MEANS THE WEIGHT IN TONS OF REVENUE PASSENGERS (AT TWO  HUNDRED
POUNDS  PER PASSENGER) AND REVENUE CARGO FIRST RECEIVED EITHER AS ORIGI-
NATING OR CONNECTING TRAFFIC OR FINALLY DISCHARGED BY  THE  TAXPAYER  AT
AIRPORTS;
  (2)  ALL  SUCH RECEIPTS OF A TAXPAYER FROM AVIATION SERVICES DESCRIBED
IN THIS PARAGRAPH ARE INCLUDED IN THE DENOMINATOR OF  THE  APPORTIONMENT
FRACTION.
  8. RECEIPTS FROM SALES OF ADVERTISING. (A) THE AMOUNT OF RECEIPTS FROM
SALES OF ADVERTISING IN NEWSPAPERS OR PERIODICALS INCLUDED IN THE NUMER-
ATOR  OF  THE  APPORTIONMENT  FRACTION  IS DETERMINED BY MULTIPLYING THE
TOTAL OF SUCH RECEIPTS BY A FRACTION, THE  NUMERATOR  OF  WHICH  IS  THE
NUMBER  OF  NEWSPAPERS  AND  PERIODICALS  DELIVERED TO POINTS WITHIN THE
STATE AND THE DENOMINATOR OF WHICH IS THE NUMBER OF NEWSPAPERS AND PERI-

S. 6359--C                         69

ODICALS DELIVERED TO POINTS WITHIN AND WITHOUT THE STATE. THE  TOTAL  OF
SUCH  RECEIPTS FROM SALES OF ADVERTISING IN NEWSPAPERS OR PERIODICALS IS
INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRACTION.
  (B)  THE AMOUNT OF RECEIPTS FROM SALES OF ADVERTISING ON TELEVISION OR
RADIO INCLUDED IN THE APPORTIONMENT FRACTION IS DETERMINED BY  MULTIPLY-
ING  THE TOTAL OF SUCH RECEIPTS BY A FRACTION, THE NUMERATOR OF WHICH IS
THE NUMBER OF VIEWERS OR LISTENERS WITHIN THE STATE AND THE  DENOMINATOR
OF  WHICH  IS  THE NUMBER OF VIEWERS OR LISTENERS WITHIN AND WITHOUT THE
STATE. THE TOTAL OF SUCH RECEIPTS FROM SALES  OF  ADVERTISING  ON  TELE-
VISION  AND  RADIO  IS  INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT
FRACTION.
  (C) THE AMOUNT OF RECEIPTS FROM SALES OF ADVERTISING NOT DESCRIBED  IN
PARAGRAPH  (A) OR (B) OF THIS SUBDIVISION THAT IS FURNISHED, PROVIDED OR
DELIVERED TO, OR ACCESSED BY THE VIEWER OR LISTENER THROUGH THE  USE  OF
WIRE,  CABLE,  FIBER-OPTIC,  LASER,  MICROWAVE, RADIO WAVE, SATELLITE OR
SIMILAR SUCCESSOR MEDIA OR ANY  COMBINATION  THEREOF,  INCLUDED  IN  THE
NUMERATOR OF THE APPORTIONMENT FRACTION IS DETERMINED BY MULTIPLYING THE
TOTAL  OF  SUCH  RECEIPTS  BY  A FRACTION, THE NUMERATOR OF WHICH IS THE
NUMBER OF VIEWERS OR LISTENERS WITHIN THE STATE AND THE  DENOMINATOR  OF
WHICH  IS  THE  NUMBER  OF  VIEWERS  OR LISTENERS WITHIN AND WITHOUT THE
STATE. THE TOTAL OF SUCH RECEIPTS FROM SALES OF ADVERTISING DESCRIBED IN
THIS PARAGRAPH IS INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT FRAC-
TION.
  9. RECEIPTS FROM TRANSPORTATION OR TRANSMISSION OF GAS THROUGH  PIPES.
RECEIPTS  FROM  THE  TRANSPORTATION OR TRANSMISSION OF GAS THROUGH PIPES
ARE INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRACTION AS  FOLLOWS.
THE  AMOUNT  OF  RECEIPTS FROM THE TRANSPORTATION OR TRANSMISSION OF GAS
THROUGH PIPES INCLUDED IN THE NUMERATOR OF THE APPORTIONMENT FRACTION IS
DETERMINED BY MULTIPLYING THE TOTAL AMOUNT OF SUCH RECEIPTS BY  A  FRAC-
TION,  THE  NUMERATOR  OF  WHICH  IS THE TAXPAYER'S TRANSPORTATION UNITS
WITHIN THE STATE AND THE DENOMINATOR OF WHICH IS THE  TAXPAYER'S  TRANS-
PORTATION  UNITS  WITHIN AND WITHOUT THE STATE. A TRANSPORTATION UNIT IS
THE TRANSPORTATION OF ONE CUBIC FOOT OF GAS OVER A DISTANCE OF ONE MILE.
THE TOTAL AMOUNT OF RECEIPTS FROM THE TRANSPORTATION OR TRANSMISSION  OF
GAS  THROUGH  PIPES  IS INCLUDED IN THE DENOMINATOR OF THE APPORTIONMENT
FRACTION.
  10. (A) RECEIPTS FROM OTHER  SERVICES  AND  OTHER  BUSINESS  RECEIPTS.
RECEIPTS FROM SERVICES NOT ADDRESSED IN SUBDIVISIONS ONE THROUGH NINE OF
THIS  SECTION AND OTHER BUSINESS RECEIPTS NOT ADDRESSED IN SUCH SUBDIVI-
SIONS SHALL BE INCLUDED IN THE NUMERATOR OF THE  APPORTIONMENT  FRACTION
IF  THE LOCATION OF THE CUSTOMER IS WITHIN THE STATE. SUCH RECEIPTS FROM
CUSTOMERS WITHIN AND WITHOUT THE STATE ARE INCLUDED IN  THE  DENOMINATOR
OF  THE APPORTIONMENT FRACTION. WHETHER THE RECEIPTS ARE INCLUDED IN THE
NUMERATOR OF THE APPORTIONMENT FRACTION IS DETERMINED ACCORDING  TO  THE
HIERARCHY  OF METHOD SET FORTH IN PARAGRAPH (B) OF THIS SUBDIVISION. THE
TAXPAYER MUST EXERCISE DUE DILIGENCE  UNDER  EACH  METHOD  DESCRIBED  IN
PARAGRAPH  (B)  BEFORE REJECTING IT AND PROCEEDING TO THE NEXT METHOD IN
THE HIERARCHY.
  (B) HIERARCHY OF  METHODS.  (1)  DELIVERY  DESTINATION.  RECEIPTS  FOR
SERVICES PERFORMED FOR A CUSTOMER'S PARTICULAR LOCATION, SUCH AS WHERE A
DELIVERY  IS  MADE  TO  THAT  LOCATION, AS MAY BE INDICATED ON A BILL OF
LADING OR PURCHASE INVOICE, ARE SOURCED TO THAT LOCATION.
  (2) BILLING ADDRESS OF THE CUSTOMER.
  (3) ZIP CODE OR OTHER GEOGRAPHIC INDICATOR OF THE CUSTOMER'S LOCATION.
  (4) PERCENTAGE OF THE TAXPAYER'S RECEIPTS WITHIN THE STATE  DETERMINED
PURSUANT  TO  THIS SUBDIVISION FOR THE PRECEDING TAXABLE YEAR OR, IF THE

S. 6359--C                         70

TAXPAYER WAS NOT SUBJECT TO TAX IN THE PRECEDING TAXABLE YEAR, THEN  THE
PERCENTAGE  OF  THE  TAXPAYER'S RECEIPTS WITHIN THE STATE IN THE CURRENT
TAXABLE YEAR DETERMINED PURSUANT TO THIS SUBDIVISION.
  11.  IF  IT  SHALL  APPEAR  TO THE COMMISSIONER THAT THE APPORTIONMENT
FRACTION DETERMINED PURSUANT TO THIS SECTION DOES NOT RESULT IN A PROPER
REFLECTION OF THE TAXPAYER'S  BUSINESS  INCOME  OR  CAPITAL  WITHIN  THE
STATE, THE COMMISSIONER IS AUTHORIZED IN HIS OR HER DISCRETION TO ADJUST
IT BY (A) EXCLUDING ONE OR MORE ITEMS IN SUCH DETERMINATION, (B) INCLUD-
ING  ONE  OR  MORE  OTHER  ITEMS IN SUCH DETERMINATION, OR (C) ANY OTHER
SIMILAR OR DIFFERENT METHOD CALCULATED  TO  EFFECT  A  FAIR  AND  PROPER
APPORTIONMENT  OF  THE BUSINESS INCOME AND CAPITAL REASONABLY ATTRIBUTED
TO THE STATE.
  S 17. The tax law is amended by adding a new section 210-B to read  as
follows:
  S  210-B.  CREDITS.  1.  INVESTMENT TAX CREDIT (ITC).   (A) A TAXPAYER
SHALL BE ALLOWED A CREDIT,  TO  BE  COMPUTED  AS  HEREINAFTER  PROVIDED,
AGAINST  THE TAX IMPOSED BY THIS ARTICLE. THE AMOUNT OF THE CREDIT SHALL
BE THE PERCENT PROVIDED FOR HEREINBELOW OF THE INVESTMENT  CREDIT  BASE.
THE INVESTMENT CREDIT BASE IS THE COST OR OTHER BASIS FOR FEDERAL INCOME
TAX  PURPOSES OF TANGIBLE PERSONAL PROPERTY AND OTHER TANGIBLE PROPERTY,
INCLUDING BUILDINGS AND STRUCTURAL COMPONENTS OF BUILDINGS, DESCRIBED IN
PARAGRAPH (B) OF THIS SUBDIVISION, LESS THE AMOUNT OF  THE  NONQUALIFIED
NONRECOURSE  FINANCING  WITH RESPECT TO SUCH PROPERTY TO THE EXTENT SUCH
FINANCING WOULD BE EXCLUDIBLE FROM THE CREDIT BASE PURSUANT  TO  SECTION
46(C)(8) OF THE INTERNAL REVENUE CODE (TREATING SUCH PROPERTY AS SECTION
THIRTY-EIGHT  PROPERTY IRRESPECTIVE OF WHETHER OR NOT IT IN FACT CONSTI-
TUTES SECTION THIRTY-EIGHT PROPERTY). IF, AT THE CLOSE OF A TAXABLE YEAR
FOLLOWING THE TAXABLE YEAR IN WHICH SUCH PROPERTY WAS PLACED IN SERVICE,
THERE IS A NET  DECREASE  IN  THE  AMOUNT  OF  NONQUALIFIED  NONRECOURSE
FINANCING  WITH  RESPECT  TO  SUCH  PROPERTY, SUCH NET DECREASE SHALL BE
TREATED AS IF IT WERE THE COST OR OTHER BASIS OF PROPERTY  DESCRIBED  IN
PARAGRAPH  (B)  OF THIS SUBDIVISION ACQUIRED, CONSTRUCTED, RECONSTRUCTED
OR ERECTED DURING THE YEAR OF THE DECREASE IN THE AMOUNT OF NONQUALIFIED
NONRECOURSE FINANCING. IN THE CASE OF A COMBINED REPORT THE TERM INVEST-
MENT CREDIT BASE SHALL MEAN THE SUM OF THE  INVESTMENT  CREDIT  BASE  OF
EACH  CORPORATION  INCLUDED ON SUCH REPORT. THE PERCENTAGE TO BE USED TO
COMPUTE THE CREDIT ALLOWED PURSUANT TO THIS SUBDIVISION  SHALL  BE  FIVE
PERCENT WITH RESPECT TO THE FIRST THREE HUNDRED FIFTY MILLION DOLLARS OF
THE INVESTMENT CREDIT BASE, AND FOUR PERCENT WITH RESPECT TO THE INVEST-
MENT  CREDIT  BASE  IN  EXCESS  OF  THREE HUNDRED FIFTY MILLION DOLLARS,
EXCEPT THAT IN THE CASE OF RESEARCH  AND  DEVELOPMENT  PROPERTY  AT  THE
OPTION OF THE TAXPAYER THE APPLICABLE PERCENTAGE SHALL BE NINE.
  (B)  (I) A CREDIT SHALL BE ALLOWED UNDER THIS SUBDIVISION WITH RESPECT
TO TANGIBLE PERSONAL PROPERTY AND  OTHER  TANGIBLE  PROPERTY,  INCLUDING
BUILDINGS AND STRUCTURAL COMPONENTS OF BUILDINGS, WHICH ARE: DEPRECIABLE
PURSUANT  TO  SECTION  ONE  HUNDRED  SIXTY-SEVEN OF THE INTERNAL REVENUE
CODE, HAVE A USEFUL LIFE OF FOUR YEARS OR MORE, ARE ACQUIRED BY PURCHASE
AS DEFINED IN SECTION ONE  HUNDRED  SEVENTY-NINE  (D)  OF  THE  INTERNAL
REVENUE CODE, HAVE A SITUS IN THIS STATE AND ARE (A) PRINCIPALLY USED BY
THE  TAXPAYER  IN  THE PRODUCTION OF GOODS BY MANUFACTURING, PROCESSING,
ASSEMBLING, REFINING, MINING, EXTRACTING, FARMING,  AGRICULTURE,  HORTI-
CULTURE, FLORICULTURE, VITICULTURE OR COMMERCIAL FISHING, (B) INDUSTRIAL
WASTE  TREATMENT FACILITIES OR AIR POLLUTION CONTROL FACILITIES, USED IN
THE TAXPAYER'S TRADE OR BUSINESS, (C) RESEARCH AND DEVELOPMENT PROPERTY,
OR (D) PRINCIPALLY USED AS A QUALIFIED FILM PRODUCTION FACILITY  INCLUD-
ING  QUALIFIED  FILM  PRODUCTION  FACILITIES HAVING A SITUS IN AN EMPIRE

S. 6359--C                         71

ZONE DESIGNATED AS SUCH PURSUANT TO ARTICLE EIGHTEEN-B  OF  THE  GENERAL
MUNICIPAL LAW, WHERE THE TAXPAYER IS PROVIDING THREE OR MORE SERVICES TO
ANY QUALIFIED FILM PRODUCTION COMPANY USING THE FACILITY, INCLUDING SUCH
SERVICES  AS A STUDIO LIGHTING GRID, LIGHTING AND GRIP EQUIPMENT, MULTI-
LINE PHONE SERVICE, BROADBAND INFORMATION TECHNOLOGY ACCESS,  INDUSTRIAL
SCALE  ELECTRICAL  CAPACITY, FOOD SERVICES, SECURITY SERVICES, AND HEAT-
ING, VENTILATION AND AIR CONDITIONING.   FOR PURPOSES OF  THIS  SUBDIVI-
SION, THE TERM "GOODS" SHALL NOT INCLUDE ELECTRICITY.
  (II)  FOR  PURPOSES OF THIS PARAGRAPH, THE FOLLOWING DEFINITIONS SHALL
APPLY--
  (A) MANUFACTURING SHALL MEAN THE PROCESS OF WORKING RAW MATERIALS INTO
WARES SUITABLE FOR USE OR WHICH GIVES NEW SHAPES,  NEW  QUALITY  OR  NEW
COMBINATIONS  TO  MATTER  WHICH ALREADY HAS GONE THROUGH SOME ARTIFICIAL
PROCESS BY THE USE OF MACHINERY, TOOLS,  APPLIANCES  AND  OTHER  SIMILAR
EQUIPMENT.  PROPERTY  USED  IN  THE  PRODUCTION  OF  GOODS SHALL INCLUDE
MACHINERY, EQUIPMENT OR OTHER TANGIBLE  PROPERTY  WHICH  IS  PRINCIPALLY
USED  IN  THE  REPAIR AND SERVICE OF OTHER MACHINERY, EQUIPMENT OR OTHER
TANGIBLE PROPERTY USED PRINCIPALLY IN THE PRODUCTION OF GOODS AND  SHALL
INCLUDE ALL FACILITIES USED IN THE PRODUCTION OPERATION, INCLUDING STOR-
AGE  OF  MATERIAL  TO BE USED IN PRODUCTION AND OF THE PRODUCTS THAT ARE
PRODUCED.
  (B) RESEARCH AND DEVELOPMENT PROPERTY SHALL  MEAN  PROPERTY  WHICH  IS
USED  FOR  PURPOSES  OF  RESEARCH AND DEVELOPMENT IN THE EXPERIMENTAL OR
LABORATORY SENSE. SUCH PURPOSES SHALL NOT BE DEEMED TO INCLUDE THE ORDI-
NARY TESTING OR INSPECTION OF MATERIALS OR PRODUCTS FOR QUALITY CONTROL,
EFFICIENCY SURVEYS, MANAGEMENT STUDIES, CONSUMER  SURVEYS,  ADVERTISING,
PROMOTIONS, OR RESEARCH IN CONNECTION WITH LITERARY, HISTORICAL OR SIMI-
LAR PROJECTS.
  (C)  INDUSTRIAL WASTE TREATMENT FACILITIES SHALL MEAN PROPERTY CONSTI-
TUTING FACILITIES FOR THE TREATMENT, NEUTRALIZATION OR STABILIZATION  OF
INDUSTRIAL  WASTE  AND OTHER WASTES (AS THE TERMS "INDUSTRIAL WASTE" AND
"OTHER WASTES" ARE DEFINED  IN  SECTION  17-0105  OF  THE  ENVIRONMENTAL
CONSERVATION  LAW)  FROM A POINT IMMEDIATELY PRECEDING THE POINT OF SUCH
TREATMENT, NEUTRALIZATION OR STABILIZATION TO  THE  POINT  OF  DISPOSAL,
INCLUDING THE NECESSARY PUMPING AND TRANSMITTING FACILITIES, BUT EXCLUD-
ING SUCH FACILITIES INSTALLED FOR THE PRIMARY PURPOSE OF SALVAGING MATE-
RIALS WHICH ARE USABLE IN THE MANUFACTURING PROCESS OR ARE MARKETABLE.
  (D)  AIR POLLUTION CONTROL FACILITIES SHALL MEAN PROPERTY CONSTITUTING
FACILITIES WHICH REMOVE, REDUCE, OR RENDER LESS NOXIOUS AIR CONTAMINANTS
EMITTED FROM AN AIR CONTAMINATION SOURCE (AS THE TERMS "AIR CONTAMINANT"
AND "AIR CONTAMINATION SOURCE" ARE DEFINED IN  SECTION  19-0107  OF  THE
ENVIRONMENTAL  CONSERVATION  LAW) FROM A POINT IMMEDIATELY PRECEDING THE
POINT OF SUCH REMOVAL, REDUCTION OR RENDERING TO THE POINT OF  DISCHARGE
OF  AIR,  MEETING EMISSION STANDARDS AS ESTABLISHED BY THE DEPARTMENT OF
ENVIRONMENTAL CONSERVATION, BUT EXCLUDING SUCH FACILITIES INSTALLED  FOR
THE PRIMARY PURPOSE OF SALVAGING MATERIALS WHICH ARE USABLE IN THE MANU-
FACTURING PROCESS OR ARE MARKETABLE AND EXCLUDING THOSE FACILITIES WHICH
RELY  FOR  THEIR EFFICACY ON DILUTION, DISPERSION OR ASSIMILATION OF AIR
CONTAMINANTS IN THE AMBIENT AIR AFTER EMISSION. SUCH TERM SHALL  FURTHER
INCLUDE FLUE GAS DESULFURIZATION EQUIPMENT AND ATTENDANT SLUDGE DISPOSAL
FACILITIES,  FLUIDIZED  BED BOILERS, PRECOMBUSTION COAL CLEANING FACILI-
TIES OR OTHER FACILITIES THAT CONFORM WITH THIS  SUBDIVISION  AND  WHICH
COMPLY  WITH THE PROVISIONS OF THE STATE ACID DEPOSITION CONTROL ACT SET
FORTH IN TITLE NINE OF ARTICLE NINETEEN OF THE  ENVIRONMENTAL  CONSERVA-
TION LAW.

S. 6359--C                         72

  (E) THE TERMS "QUALIFIED FILM PRODUCTION FACILITY" AND "QUALIFIED FILM
PRODUCTION   COMPANY"   SHALL  HAVE  THE  SAME  MEANING  AS  IN  SECTION
TWENTY-FOUR OF THIS CHAPTER.
  (III) HOWEVER, SUCH CREDIT SHALL BE ALLOWED WITH RESPECT TO INDUSTRIAL
WASTE  TREATMENT FACILITIES AND AIR POLLUTION CONTROL FACILITIES ONLY ON
CONDITION THAT SUCH FACILITIES HAVE BEEN CERTIFIED BY THE STATE  COMMIS-
SIONER  OF  ENVIRONMENTAL CONSERVATION OR HIS DESIGNATED REPRESENTATIVE,
PURSUANT TO SUBDIVISION ONE OF SECTION 17-0707  OR  SUBDIVISION  ONE  OF
SECTION 19-0309 OF THE ENVIRONMENTAL CONSERVATION LAW, AS COMPLYING WITH
APPLICABLE  PROVISIONS OF THE ENVIRONMENTAL CONSERVATION LAW, THE PUBLIC
HEALTH LAW, THE STATE  SANITARY  CODE  AND  CODES,  RULES,  REGULATIONS,
PERMITS OR ORDERS ISSUED PURSUANT THERETO.
  (C)
  (D)  A  TAXPAYER  SHALL NOT BE ALLOWED A CREDIT UNDER THIS SUBDIVISION
WITH RESPECT TO TANGIBLE PERSONAL PROPERTY AND OTHER TANGIBLE  PROPERTY,
INCLUDING  BUILDINGS  AND  STRUCTURAL  COMPONENTS OF BUILDINGS, WHICH IT
LEASES TO ANY OTHER PERSON OR CORPORATION.  FOR PURPOSES OF THE  PRECED-
ING  SENTENCE,  ANY  CONTRACT  OR  AGREEMENT  TO  LEASE OR RENT OR FOR A
LICENSE TO USE SUCH PROPERTY SHALL  BE  CONSIDERED  A  LEASE.  PROVIDED,
HOWEVER,  IN  DETERMINING  WHETHER  A TAXPAYER SHALL BE ALLOWED A CREDIT
UNDER THIS SUBDIVISION WITH RESPECT TO SUCH PROPERTY, ANY ELECTION  MADE
WITH  RESPECT  TO  SUCH PROPERTY PURSUANT TO THE PROVISIONS OF PARAGRAPH
EIGHT OF SUBSECTION (F) OF SECTION ONE HUNDRED SIXTY-EIGHT OF THE INTER-
NAL REVENUE CODE, AS SUCH PARAGRAPH WAS IN EFFECT FOR AGREEMENTS ENTERED
INTO PRIOR TO JANUARY FIRST,  NINETEEN  HUNDRED  EIGHTY-FOUR,  SHALL  BE
DISREGARDED. FOR PURPOSES OF THIS PARAGRAPH, THE USE OF A QUALIFIED FILM
PRODUCTION  FACILITY BY A QUALIFIED FILM PRODUCTION COMPANY SHALL NOT BE
CONSIDERED A LEASE OF SUCH FACILITY TO SUCH COMPANY.
  (E) EXCEPT AS OTHERWISE PROVIDED IN THIS PARAGRAPH, THE CREDIT ALLOWED
UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE
FOR SUCH YEAR TO LESS THAN THE HIGHER OF THE AMOUNTS PRESCRIBED IN PARA-
GRAPHS (C) AND (D) OF SUBDIVISION ONE OF THIS SECTION. HOWEVER,  IF  THE
AMOUNT  OF  CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR
REDUCES THE TAX TO SUCH AMOUNT, ANY AMOUNT OF CREDIT ALLOWED FOR A TAXA-
BLE YEAR COMMENCING PRIOR TO JANUARY FIRST, NINETEEN HUNDRED EIGHTY-SEV-
EN AND NOT DEDUCTIBLE IN SUCH TAXABLE YEAR MAY BE CARRIED  OVER  TO  THE
FOLLOWING  YEAR OR YEARS AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR
SUCH YEAR OR YEARS BUT IN NO EVENT SHALL SUCH CREDIT BE CARRIED OVER  TO
TAXABLE  YEARS  COMMENCING  ON OR AFTER JANUARY FIRST, TWO THOUSAND TWO,
AND ANY AMOUNT OF CREDIT ALLOWED FOR A TAXABLE  YEAR  COMMENCING  ON  OR
AFTER JANUARY FIRST, NINETEEN HUNDRED EIGHTY-SEVEN AND NOT DEDUCTIBLE IN
SUCH  YEAR MAY BE CARRIED OVER TO THE FIFTEEN TAXABLE YEARS NEXT FOLLOW-
ING SUCH TAXABLE YEAR AND MAY BE DEDUCTED FROM THE  TAXPAYER'S  TAX  FOR
SUCH  YEAR  OR YEARS. IN LIEU OF SUCH CARRYOVER, ANY SUCH TAXPAYER WHICH
QUALIFIES AS A NEW BUSINESS UNDER PARAGRAPH (J) OF THIS SUBDIVISION  MAY
ELECT  TO TREAT THE AMOUNT OF SUCH CARRYOVER AS AN OVERPAYMENT OF TAX TO
BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF SECTION TEN
HUNDRED EIGHTY-SIX OF THIS CHAPTER, PROVIDED, HOWEVER, THE PROVISIONS OF
SUBSECTION (C) OF SECTION  TEN  HUNDRED  EIGHTY-EIGHT  OF  THIS  CHAPTER
NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  (F)  AT  THE  OPTION OF THE TAXPAYER AN ELIGIBLE BUSINESS FACILITY FOR
WHICH A CREDIT IS ALLOWED UNDER SUBDIVISION ELEVEN OF THIS SECTION,  OR,
FOR  TAXABLE  YEARS  COMMENCING PRIOR TO JANUARY FIRST, NINETEEN HUNDRED
EIGHTY-SEVEN, AIR OR  WATER  POLLUTION  CONTROL  OR  CONTROLLED  PROCESS
FACILITIES  WHICH QUALIFY FOR ELECTIVE DEDUCTIONS UNDER PARAGRAPH (G) OF
SUBDIVISION NINE OF SECTION TWO HUNDRED EIGHT, MAY BE TREATED AS PROPER-

S. 6359--C                         73

TY PRINCIPALLY USED BY THE TAXPAYER IN THE PRODUCTION OF GOODS BY  MANU-
FACTURING,  PROCESSING,  ASSEMBLING, REFINING, MINING, EXTRACTING, FARM-
ING, AGRICULTURE, HORTICULTURE, FLORICULTURE, VITICULTURE OR  COMMERCIAL
FISHING,  PROVIDED  THE PROPERTY OTHERWISE QUALIFIES UNDER PARAGRAPH (B)
OF THIS SUBDIVISION, IN WHICH EVENT, A DEDUCTION SHALL  NOT  BE  ALLOWED
UNDER SUCH PARAGRAPH (G).
  (G)  (1)  WITH  RESPECT  TO  PROPERTY WHICH IS DEPRECIABLE PURSUANT TO
SECTION ONE HUNDRED SIXTY-SEVEN OF THE INTERNAL REVENUE CODE BUT IS  NOT
SUBJECT  TO  THE  PROVISIONS  OF SECTION ONE HUNDRED SIXTY-EIGHT OF SUCH
CODE AND WHICH IS DISPOSED OF OR CEASES TO BE IN QUALIFIED USE PRIOR  TO
THE  END  OF  THE  TAXABLE  YEAR IN WHICH THE CREDIT IS TO BE TAKEN, THE
AMOUNT OF THE CREDIT SHALL BE THAT PORTION OF THE CREDIT PROVIDED FOR IN
THIS SUBDIVISION WHICH REPRESENTS THE RATIO WHICH THE MONTHS  OF  QUALI-
FIED  USE BEAR TO THE MONTHS OF USEFUL LIFE. IF PROPERTY ON WHICH CREDIT
HAS BEEN TAKEN IS DISPOSED OF OR CEASES TO BE IN QUALIFIED USE PRIOR  TO
THE  END OF ITS USEFUL LIFE, THE DIFFERENCE BETWEEN THE CREDIT TAKEN AND
THE CREDIT ALLOWED FOR ACTUAL USE MUST BE ADDED  BACK  IN  THE  YEAR  OF
DISPOSITION. PROVIDED, HOWEVER, IF SUCH PROPERTY IS DISPOSED OF OR CEAS-
ES  TO  BE  IN QUALIFIED USE AFTER IT HAS BEEN IN QUALIFIED USE FOR MORE
THAN TWELVE CONSECUTIVE YEARS, IT SHALL NOT BE NECESSARY TO ADD BACK THE
CREDIT AS PROVIDED IN THIS SUBPARAGRAPH. THE AMOUNT  OF  CREDIT  ALLOWED
FOR ACTUAL USE SHALL BE DETERMINED BY MULTIPLYING THE ORIGINAL CREDIT BY
THE RATIO WHICH THE MONTHS OF QUALIFIED USE BEAR TO THE MONTHS OF USEFUL
LIFE.  FOR  PURPOSES OF THIS SUBPARAGRAPH, USEFUL LIFE OF PROPERTY SHALL
BE THE SAME AS THE TAXPAYER USES FOR DEPRECIATION PURPOSES WHEN  COMPUT-
ING HIS FEDERAL INCOME TAX LIABILITY.
  (2) EXCEPT WITH RESPECT TO THAT PROPERTY TO WHICH SUBPARAGRAPH FOUR OF
THIS  PARAGRAPH APPLIES, WITH RESPECT TO THREE-YEAR PROPERTY, AS DEFINED
IN SUBSECTION (E) OF SECTION ONE HUNDRED  SIXTY-EIGHT  OF  THE  INTERNAL
REVENUE  CODE,  WHICH  IS  DISPOSED  OF OR CEASES TO BE IN QUALIFIED USE
PRIOR TO THE END OF THE TAXABLE YEAR IN WHICH THE CREDIT IS TO BE TAKEN,
THE AMOUNT OF THE CREDIT SHALL BE THAT PORTION OF  THE  CREDIT  PROVIDED
FOR  IN  THIS SUBDIVISION WHICH REPRESENTS THE RATIO WHICH THE MONTHS OF
QUALIFIED USE BEAR TO THIRTY-SIX. IF PROPERTY ON WHICH CREDIT  HAS  BEEN
TAKEN  IS  DISPOSED OF OR CEASES TO BE IN QUALIFIED USE PRIOR TO THE END
OF THIRTY-SIX MONTHS, THE DIFFERENCE BETWEEN THE CREDIT  TAKEN  AND  THE
CREDIT ALLOWED FOR ACTUAL USE MUST BE ADDED BACK IN THE YEAR OF DISPOSI-
TION. THE AMOUNT OF CREDIT ALLOWED FOR ACTUAL USE SHALL BE DETERMINED BY
MULTIPLYING  THE ORIGINAL CREDIT BY THE RATIO WHICH THE MONTHS OF QUALI-
FIED USE BEAR TO THIRTY-SIX.
  (3) EXCEPT WITH RESPECT TO THAT PROPERTY TO WHICH SUBPARAGRAPH FOUR OF
THIS  PARAGRAPH  APPLIES,  WITH  RESPECT  TO  PROPERTY  SUBJECT  TO  THE
PROVISIONS  OF  SECTION  ONE HUNDRED SIXTY-EIGHT OF THE INTERNAL REVENUE
CODE, OTHER THAN THREE-YEAR PROPERTY AS DEFINED  IN  SUBSECTION  (E)  OF
SUCH  SECTION  ONE HUNDRED SIXTY-EIGHT WHICH IS DISPOSED OF OR CEASES TO
BE IN QUALIFIED USE PRIOR TO THE END OF THE TAXABLE YEAR  IN  WHICH  THE
CREDIT IS TO BE TAKEN, THE AMOUNT OF THE CREDIT SHALL BE THAT PORTION OF
THE  CREDIT  PROVIDED FOR IN THIS SUBDIVISION WHICH REPRESENTS THE RATIO
WHICH THE MONTHS OF QUALIFIED USE BEAR TO SIXTY. IF  PROPERTY  ON  WHICH
CREDIT  HAS  BEEN  TAKEN IS DISPOSED OF OR CEASES TO BE IN QUALIFIED USE
PRIOR TO THE END OF SIXTY MONTHS,  THE  DIFFERENCE  BETWEEN  THE  CREDIT
TAKEN  AND  THE  CREDIT ALLOWED FOR ACTUAL USE MUST BE ADDED BACK IN THE
YEAR OF DISPOSITION. THE AMOUNT OF CREDIT ALLOWED FOR ACTUAL  USE  SHALL
BE  DETERMINED BY MULTIPLYING THE ORIGINAL CREDIT BY THE RATIO WHICH THE
MONTHS OF QUALIFIED USE BEAR TO SIXTY.

S. 6359--C                         74

  (4) WITH  RESPECT  TO  ANY  PROPERTY  TO  WHICH  SECTION  ONE  HUNDRED
SIXTY-EIGHT OF THE INTERNAL REVENUE CODE APPLIES, WHICH IS A BUILDING OR
A  STRUCTURAL COMPONENT OF A BUILDING AND WHICH IS DISPOSED OF OR CEASES
TO BE IN QUALIFIED USE PRIOR TO THE END OF THE TAXABLE YEAR IN WHICH THE
CREDIT IS TO BE TAKEN, THE AMOUNT OF THE CREDIT SHALL BE THAT PORTION OF
THE  CREDIT  PROVIDED FOR IN THIS SUBDIVISION WHICH REPRESENTS THE RATIO
WHICH THE MONTHS OF QUALIFIED USE BEAR TO THE  TOTAL  NUMBER  OF  MONTHS
OVER  WHICH THE TAXPAYER CHOOSES TO DEDUCT THE PROPERTY UNDER THE INTER-
NAL REVENUE CODE. IF PROPERTY ON WHICH CREDIT HAS BEEN TAKEN IS DISPOSED
OF OR CEASES TO BE IN QUALIFIED USE PRIOR TO THE END OF THE PERIOD  OVER
WHICH  THE  TAXPAYER  CHOOSES  TO DEDUCT THE PROPERTY UNDER THE INTERNAL
REVENUE CODE, THE DIFFERENCE BETWEEN THE CREDIT  TAKEN  AND  THE  CREDIT
ALLOWED  FOR  ACTUAL  USE MUST BE ADDED BACK IN THE YEAR OF DISPOSITION.
PROVIDED, HOWEVER, IF SUCH PROPERTY IS DISPOSED OF OR CEASES  TO  BE  IN
QUALIFIED  USE  AFTER  IT HAS BEEN IN QUALIFIED USE FOR MORE THAN TWELVE
CONSECUTIVE YEARS, IT SHALL NOT BE NECESSARY TO ADD BACK THE  CREDIT  AS
PROVIDED  IN  THIS SUBPARAGRAPH. THE AMOUNT OF CREDIT ALLOWED FOR ACTUAL
USE SHALL BE DETERMINED BY MULTIPLYING THE ORIGINAL CREDIT BY THE  RATIO
WHICH  THE  MONTHS  OF  QUALIFIED USE BEAR TO THE TOTAL NUMBER OF MONTHS
OVER WHICH THE TAXPAYER CHOOSES TO DEDUCT THE PROPERTY UNDER THE  INTER-
NAL REVENUE CODE.
  (5) FOR PURPOSES OF THIS PARAGRAPH, PROPERTY (I) WHICH IS DESCRIBED IN
SUBPARAGRAPH  TWO,  THREE  OR  FOUR OF THIS PARAGRAPH, AND (II) WHICH IS
SUBJECT TO SUBPARAGRAPH ELEVEN OF PARAGRAPH (A) OF SUBDIVISION NINE  AND
SUBPARAGRAPH  TEN  OF  PARAGRAPH  (B) OF SUBDIVISION NINE OF SECTION TWO
HUNDRED EIGHT OF THIS CHAPTER, SHALL BE TREATED  AS  PROPERTY  WHICH  IS
DEPRECIABLE  PURSUANT TO SECTION ONE HUNDRED SIXTY-SEVEN OF THE INTERNAL
REVENUE CODE BUT IS NOT SUBJECT TO SECTION ONE  HUNDRED  SIXTY-EIGHT  OF
SUCH CODE.
  (6)  FOR  PURPOSES  OF  THIS PARAGRAPH, WHERE A CREDIT IS ALLOWED WITH
RESPECT TO AN AIR POLLUTION CONTROL FACILITY ON THE BASIS OF  A  CERTIF-
ICATE  OF  COMPLIANCE  ISSUED PURSUANT TO THE ENVIRONMENTAL CONSERVATION
LAW AND THE CERTIFICATE IS REVOKED  PURSUANT  TO  SUBDIVISION  THREE  OF
SECTION  19-0309  OF THE ENVIRONMENTAL CONSERVATION LAW, SUCH REVOCATION
SHALL CONSTITUTE A DISPOSAL OR CESSATION OF QUALIFIED USE,  UNLESS  SUCH
FACILITY IS DESCRIBED IN CLAUSE (A) OR (C) OF SUBPARAGRAPH (II) OF PARA-
GRAPH  (B)  OF THIS SUBDIVISION. ALSO FOR PURPOSES OF THIS SUBPARAGRAPH,
THE USE OF AN AIR POLLUTION CONTROL  FACILITY  OR  AN  INDUSTRIAL  WASTE
TREATMENT  FACILITY FOR THE PRIMARY PURPOSE OF SALVAGING MATERIALS WHICH
ARE USABLE IN THE MANUFACTURING PROCESS OR ARE MARKETABLE SHALL  CONSTI-
TUTE  A CESSATION OF QUALIFIED USE, UNLESS SUCH FACILITY IS DESCRIBED IN
CLAUSE (A) OR (C) OF SUBPARAGRAPH (II) OF PARAGRAPH (B) OF THIS SUBDIVI-
SION.
  (7) FOR TAXABLE YEARS COMMENCING ON OR AFTER JANUARY  FIRST,  NINETEEN
HUNDRED  EIGHTY-SEVEN,  THE AMOUNT REQUIRED TO BE ADDED BACK PURSUANT TO
THIS PARAGRAPH SHALL BE AUGMENTED BY AN AMOUNT EQUAL TO THE  PRODUCT  OF
SUCH  AMOUNT  AND  THE  UNDERPAYMENT RATE OF INTEREST (WITHOUT REGARD TO
COMPOUNDING), SET BY THE COMMISSIONER OF TAXATION AND  FINANCE  PURSUANT
TO  SUBSECTION  (E) OF SECTION ONE THOUSAND NINETY-SIX, IN EFFECT ON THE
LAST DAY OF THE TAXABLE YEAR.
  (8) IF, AS OF THE CLOSE OF THE TAXABLE YEAR, THERE IS A  NET  INCREASE
WITH  RESPECT  TO THE TAXPAYER IN THE AMOUNT OF NONQUALIFIED NONRECOURSE
FINANCING (WITHIN THE MEANING OF  SECTION  46(C)  (8)  OF  THE  INTERNAL
REVENUE  CODE)  WITH  RESPECT  TO ANY PROPERTY WITH RESPECT TO WHICH THE
CREDIT UNDER THIS SUBDIVISION WAS LIMITED BASED ON ATTRIBUTABLE NONQUAL-
IFIED NONRECOURSE FINANCING, THEN AN AMOUNT EQUAL  TO  THE  DECREASE  IN

S. 6359--C                         75

SUCH  CREDIT  WHICH  WOULD HAVE RESULTED FROM REDUCING, BY THE AMOUNT OF
SUCH NET INCREASE, THE COST OR  OTHER  BASIS  TAKEN  INTO  ACCOUNT  WITH
RESPECT  TO  SUCH  PROPERTY MUST BE ADDED BACK IN SUCH TAXABLE YEAR. THE
AMOUNT  OF  NONQUALIFIED  NONRECOURSE  FINANCING SHALL NOT BE TREATED AS
INCREASED BY REASON OF A TRANSFER OF  (OR  AGREEMENT  TO  TRANSFER)  ANY
EVIDENCE  OF  AN INDEBTEDNESS IF SUCH TRANSFER OCCURS (OR SUCH AGREEMENT
IS ENTERED INTO) MORE THAN ONE YEAR AFTER THE DATE SUCH INDEBTEDNESS WAS
INCURRED.
  (11) (A) WHERE PROPERTY WITH RESPECT TO WHICH CREDIT HAS BEEN  ALLOWED
UNDER  THIS  SUBDIVISION IS DISPOSED OF BY TRANSFER TO THE TAXPAYER IN A
QUALIFIED TRANSACTION, AND SUCH DISPOSITION REQUIRES, PURSUANT  TO  THIS
PARAGRAPH  (WITHOUT  REGARD  TO  THIS  SUBPARAGRAPH) THAT SUCH CREDIT BE
DECREASED (WHERE THE DISPOSITION OCCURS IN THE TAXABLE YEAR IN WHICH THE
PROPERTY IS PLACED IN SERVICE BY THE TRANSFEROR) OR THAT  A  PORTION  OF
SUCH  CREDIT  BE ADDED BACK BY THE TRANSFEROR, THEN CLAUSE (B) OR CLAUSE
(C) OF THIS SUBPARAGRAPH SHALL APPLY.
  (B) IF THE TAXPAYER AND THE TRANSFEROR JOINTLY ELECT, AT SUCH TIME AND
IN SUCH MANNER AS THE COMMISSIONER MAY PRESCRIBE,  THE  FOLLOWING  SHALL
APPLY:
  (I)  SUCH  PORTION  SHALL  NOT  BE  REQUIRED  TO  BE ADDED BACK BY THE
TRANSFEROR,
  (II) THE AMOUNT OF UNUSED CREDIT SHALL NOT BE DEDUCTED FROM TAX OTHER-
WISE DUE BY THE TRANSFEROR ON ANY RETURN (INCLUDING AN AMENDED  RETURN),
AND  SHALL  NOT  BE  SO  DEDUCTED AS PART OF ANY AUDIT ADJUSTMENT OR ANY
OTHER DETERMINATION, AND
  (III) THE AMOUNT OF UNUSED CREDIT SHALL BE TREATED  AS  AN  AMOUNT  OF
CREDIT  OF  THE  TAXPAYER  UNDER THIS SUBDIVISION CARRIED FORWARD BY THE
TAXPAYER TO ITS TAXABLE YEAR IN WHICH SUCH TRANSFER OCCURRED, AS IF  THE
CREDIT  ALLOWED  TO  THE  TRANSFEROR  WITH  RESPECT TO SUCH PROPERTY HAD
ORIGINALLY BEEN ALLOWED TO THE TAXPAYER BOTH AS TO AMOUNT AND FIRST DATE
OF QUALIFIED USE, AND AS IF THE PERIOD OF QUALIFIED USE BY THE  TRANSFE-
ROR PRIOR TO THE TRANSFER HAD BEEN A PERIOD OF SUCH USE BY THE TAXPAYER.
ANY  AMOUNT  OF  CREDIT  TREATED  AS CARRIED FORWARD TO THE TAXABLE YEAR
PURSUANT TO THIS SUBPARAGRAPH SHALL BE APPLIED AS PROVIDED IN CLAUSE (H)
OF THIS SUBPARAGRAPH.
  (C) IF THE TAXPAYER AND  THE  TRANSFEROR  DO  NOT  MAKE  THE  ELECTION
DESCRIBED  IN CLAUSE (B) OF THIS SUBPARAGRAPH, THEN THE AMOUNT OF CREDIT
REQUIRED PURSUANT TO THIS PARAGRAPH TO BE ADDED BACK BY  THE  TRANSFEROR
SHALL  BE  TREATED  AS  AN  AMOUNT  OF CREDIT OF THE TAXPAYER UNDER THIS
SUBDIVISION TO BE CARRIED FORWARD BY THE TAXPAYER TO ITS TAXABLE YEAR IN
WHICH SUCH TRANSFER OCCURRED, AS IF THE CREDIT ALLOWED TO THE TRANSFEROR
WITH RESPECT TO SUCH PROPERTY HAD ORIGINALLY BEEN ALLOWED TO THE TAXPAY-
ER BOTH AS TO AMOUNT AND FIRST DATE OF QUALIFIED  USE,  AND  AS  IF  THE
PERIOD OF QUALIFIED USE BY THE TRANSFEROR PRIOR TO THE TRANSFER HAD BEEN
A  PERIOD  OF  SUCH USE BY THE TAXPAYER. ANY AMOUNT OF CREDIT TREATED AS
CARRIED FORWARD TO THE TAXABLE YEAR PURSUANT TO THIS SUBPARAGRAPH  SHALL
BE APPLIED AS PROVIDED IN CLAUSE (H) OF THIS SUBPARAGRAPH.
  (D) THE TERM "QUALIFIED TRANSACTION" SHALL MEAN A TRANSACTION WHICH IS
A  REORGANIZATION  DESCRIBED  IN  SECTION  368(A)(1)(D)  OF THE INTERNAL
REVENUE CODE, WHEREIN  (I)  SUBSTANTIALLY  ALL  OF  THE  ASSETS  OF  THE
TRANSFEROR  NECESSARY  TO  CONTINUE THE OPERATION OF A DIVISION OR DIVI-
SIONS OF THE TRANSFEROR ARE TRANSFERRED TO THE TAXPAYER IN A TRANSACTION
TO WHICH SECTION 351 OF SUCH CODE APPLIES, AND (II) STOCK OR  SECURITIES
OF  THE  TAXPAYER  HELD  BY  THE  TRANSFEROR ARE DISTRIBUTED PURSUANT TO
SECTION 355 OF SUCH CODE.

S. 6359--C                         76

  (E) THE TERM "UNUSED CREDIT" SHALL MEAN THE AMOUNT OF CREDIT SHOWN  AS
CARRIED  FORWARD  TO THE TRANSACTION YEAR ON THE TRANSFEROR'S TAX RETURN
FOR ITS TAXABLE YEAR IMMEDIATELY PRECEDING  THE  TRANSACTION  YEAR  WITH
RESPECT TO THE PROPERTY DESCRIBED IN CLAUSE (A) OF THIS SUBPARAGRAPH.
  (F)  THE  TERM  "TRANSACTION YEAR" MEANS THE TAXABLE YEAR IN WHICH THE
QUALIFIED TRANSACTION OCCURS.
  (G) NOTWITHSTANDING ANY OTHER PROVISION OF LAW TO THE CONTRARY, IN THE
CASE OF ALLOWANCE OF CREDIT PURSUANT TO THIS SUBPARAGRAPH TO A  TAXPAYER
THE  COMMISSIONER SHALL HAVE THE AUTHORITY TO REVEAL TO THE TAXPAYER ANY
INFORMATION, WITH RESPECT TO THE CREDIT OF THE TRANSFEROR, WHICH IS  THE
BASIS  FOR  THE DENIAL IN WHOLE OR IN PART OF THE CREDIT CLAIMED BY SUCH
TAXPAYER.
  (H) WHERE A CREDIT IS ALLOWED TO A TAXPAYER PURSUANT TO THIS  SUBPARA-
GRAPH,  THE  TAXPAYER MAY TREAT THE AMOUNT OF SUCH CREDIT AS AN OVERPAY-
MENT OF TAX TO BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS
OF SECTION TEN HUNDRED EIGHTY-SIX OF THIS  CHAPTER,  PROVIDED,  HOWEVER,
THE  PROVISIONS OF SUBSECTION (C) OF SECTION TEN HUNDRED EIGHTY-EIGHT OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE  PAID  THEREON.  SUCH
CREDIT  SHALL  BE  ALLOWED  AGAINST THE TAX IMPOSED BY THIS ARTICLE WITH
RESPECT TO THE SECOND SUCCEEDING TAXABLE YEAR NEXT FOLLOWING THE  TRANS-
ACTION  YEAR,  PROVIDED  THAT  NOT MORE THAN ONE-FOURTH OF THE AMOUNT OF
SUCH CREDIT MAY BE APPLIED BY THE TAXPAYER, WHETHER TO REDUCE TAX OTHER-
WISE DUE OR TO BE TREATED AS AN OVERPAYMENT TO BE CREDITED OR  REFUNDED,
WITH RESPECT TO SUCH SECOND SUCCEEDING TAXABLE YEAR AND EACH OF THE NEXT
THREE TAXABLE YEARS FOLLOWING SUCH SECOND SUCCEEDING TAXABLE YEAR.
  (J)  FOR PURPOSES OF PARAGRAPH (E) OF THIS SUBDIVISION, A NEW BUSINESS
SHALL INCLUDE ANY CORPORATION, EXCEPT A CORPORATION WHICH:
  (1) OVER FIFTY PERCENT OF THE NUMBER OF SHARES OF STOCK ENTITLING  THE
HOLDERS  THEREOF  TO  VOTE  FOR THE ELECTION OF DIRECTORS OR TRUSTEES IS
OWNED OR CONTROLLED,  EITHER  DIRECTLY  OR  INDIRECTLY,  BY  A  TAXPAYER
SUBJECT TO TAX UNDER THIS ARTICLE; SECTION ONE HUNDRED EIGHTY-THREE, ONE
HUNDRED EIGHTY-FOUR OR ONE HUNDRED EIGHTY-FIVE OF ARTICLE NINE; OR ARTI-
CLE THIRTY-THREE OF THIS CHAPTER; OR
  (2)  IS SUBSTANTIALLY SIMILAR IN OPERATION AND IN OWNERSHIP TO A BUSI-
NESS ENTITY (OR ENTITIES) TAXABLE, OR  PREVIOUSLY  TAXABLE,  UNDER  THIS
ARTICLE;  SECTION  ONE  HUNDRED  EIGHTY-THREE,  ONE HUNDRED EIGHTY-FOUR,
FORMER SECTION ONE HUNDRED EIGHTY-FIVE OR  FORMER  SECTION  ONE  HUNDRED
EIGHTY-SIX  OF  ARTICLE NINE; ARTICLE THIRTY-TWO OF THIS CHAPTER AS SUCH
ARTICLE WAS IN EFFECT ON DECEMBER THIRTY-FIRST, TWO  THOUSAND  FOURTEEN;
ARTICLE THIRTY-THREE OF THIS CHAPTER; ARTICLE TWENTY-THREE OF THIS CHAP-
TER  OR  WHICH  WOULD  HAVE  BEEN  SUBJECT  TO  TAX  UNDER  SUCH ARTICLE
TWENTY-THREE (AS SUCH ARTICLE WAS IN EFFECT ON JANUARY  FIRST,  NINETEEN
HUNDRED  EIGHTY) OR THE INCOME (OR LOSSES) OF WHICH IS (OR WAS) INCLUDA-
BLE UNDER ARTICLE TWENTY-TWO OF THIS  CHAPTER  WHEREBY  THE  INTENT  AND
PURPOSE  OF  THIS  PARAGRAPH  AND PARAGRAPH (E) OF THIS SUBDIVISION WITH
RESPECT TO REFUNDING OF CREDIT TO NEW BUSINESS WOULD BE EVADED; OR
  (3) HAS BEEN SUBJECT TO TAX UNDER THIS ARTICLE OR FORMER ARTICLE THIR-
TY-TWO OF THIS CHAPTER FOR MORE THAN FIVE TAXABLE YEARS (EXCLUDING SHORT
TAXABLE YEARS).
  2. EMPLOYMENT INCENTIVE CREDIT (EIC). (A)(I)  APPLICATION  OF  CREDIT.
WHERE  A  TAXPAYER  IS  ALLOWED  A  CREDIT UNDER SUBDIVISION ONE OF THIS
SECTION, OTHER THAN AT THE OPTIONAL  RATE  APPLICABLE  TO  RESEARCH  AND
DEVELOPMENT PROPERTY, THE TAXPAYER SHALL BE ALLOWED A CREDIT FOR EACH OF
THE  TWO  YEARS  NEXT  SUCCEEDING  THE TAXABLE YEAR FOR WHICH THE CREDIT
UNDER SUCH SUBDIVISION ONE IS ALLOWED WITH  RESPECT  TO  SUCH  PROPERTY,
WHETHER  OR NOT DEDUCTIBLE IN SUCH TAXABLE YEAR OR IN SUBSEQUENT TAXABLE

S. 6359--C                         77

YEARS PURSUANT TO PARAGRAPH  (D)  OF  SUCH  SUBDIVISION  ONE.  PROVIDED,
HOWEVER,  THAT THE CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXA-
BLE YEAR SHALL BE ALLOWED ONLY IF THE AVERAGE NUMBER OF EMPLOYEES DURING
SUCH  TAXABLE  YEAR  IS  AT LEAST ONE HUNDRED ONE PERCENT OF THE AVERAGE
NUMBER OF EMPLOYEES DURING THE EMPLOYMENT BASE YEAR. THE EMPLOYMENT BASE
YEAR SHALL BE THE TAXABLE YEAR IMMEDIATELY PRECEDING  THE  TAXABLE  YEAR
FOR  WHICH  THE CREDIT UNDER SUCH SUBDIVISION ONE IS ALLOWED EXCEPT THAT
IF THE TAXPAYER WAS NOT SUBJECT TO TAX AND DID NOT HAVE A  TAXABLE  YEAR
IMMEDIATELY  PRECEDING  THE TAXABLE YEAR FOR WHICH THE CREDIT UNDER SUCH
SUBDIVISION ONE OF THIS SECTION IS ALLOWED,  THE  EMPLOYMENT  BASE  YEAR
SHALL BE THE TAXABLE YEAR IN WHICH THE CREDIT UNDER SUCH SUBDIVISION ONE
IS ALLOWED.
  (II)  AMOUNT  OF  CREDIT.  THE AMOUNT OF THE CREDIT ALLOWED UNDER THIS
SUBDIVISION SHALL BE AS SET FORTH IN THE FOLLOWING TABLE:
AVERAGE NUMBER OF EMPLOYEES DURING THE      CREDIT ALLOWED UNDER THIS
TAXABLE YEAR EXPRESSED AS A PERCENTAGE      SUBDIVISION EXPRESSED AS A
OF AVERAGE EMPLOYEES IN EMPLOYMENT          PERCENTAGE OF THE APPLICABLE
BASE YEARS                                  INVESTMENT CREDIT BASIS
LESS THAN 102%                              1.5%
AT LEAST 102% AND LESS THAN 103%            2%
AT LEAST 103%                               2.5%
  (B) AVERAGE NUMBER OF EMPLOYEES. THE AVERAGE NUMBER OF EMPLOYEES IN  A
TAXABLE  YEAR  SHALL BE COMPUTED BY ASCERTAINING THE NUMBER OF EMPLOYEES
WITHIN THE STATE, EXCEPT GENERAL EXECUTIVE  OFFICERS,  EMPLOYED  BY  THE
TAXPAYER  ON  THE  THIRTY-FIRST DAY OF MARCH, THE THIRTIETH DAY OF JUNE,
THE THIRTIETH DAY OF SEPTEMBER AND THE THIRTY-FIRST DAY OF  DECEMBER  IN
THE TAXABLE YEAR, BY ADDING TOGETHER THE NUMBER OF EMPLOYEES ASCERTAINED
ON  EACH OF SUCH DATES AND DIVIDING THE SUM SO OBTAINED BY THE NUMBER OF
SUCH ABOVE MENTIONED DATES OCCURRING WITHIN THE TAXABLE  YEAR.  HOWEVER,
WITH RESPECT TO THE EMPLOYMENT BASE YEAR, THERE SHALL BE EXCLUDED THERE-
FROM  ANY  EMPLOYEE  WITH  RESPECT  TO  WHOM A CREDIT PROVIDED FOR UNDER
SUBDIVISION SIX OF THIS SECTION IS CLAIMED, FOR THE TAXABLE YEAR,  BASED
ON  EMPLOYMENT WITHIN A ZONE EQUIVALENT AREA DESIGNATED AS SUCH PURSUANT
TO ARTICLE EIGHTEEN-B OF THE GENERAL MUNICIPAL LAW.
  (C) CARRYOVER. IN NO EVENT SHALL THE CREDIT  HEREIN  PROVIDED  FOR  BE
ALLOWED  IN AN AMOUNT WHICH WILL REDUCE THE TAX PAYABLE TO LESS THAN THE
FIXED DOLLAR MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D)  OF  SUBDIVISION
ONE  OF  SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT
OF CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR  REDUCES
THE  TAX  TO  SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON
THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE  IN
SUCH TAXABLE YEAR MAY BE CARRIED OVER TO THE FIFTEEN TAXABLE YEARS IMME-
DIATELY FOLLOWING SUCH TAXABLE YEAR AND MAY BE DEDUCTED FROM THE TAXPAY-
ER'S TAX FOR SUCH YEAR OR YEARS.
  3. EMPIRE ZONE INVESTMENT TAX CREDIT (EZ-ITC). (A) A TAXPAYER SHALL BE
ALLOWED  A  CREDIT,  TO  BE COMPUTED AS HEREIN PROVIDED, AGAINST THE TAX
IMPOSED BY THIS ARTICLE IF THE TAXPAYER HAS BEEN CERTIFIED  PURSUANT  TO
ARTICLE EIGHTEEN-B OF THE GENERAL MUNICIPAL LAW. THE AMOUNT OF THE CRED-
IT  SHALL  BE  TEN PERCENT OF THE COST OR OTHER BASIS FOR FEDERAL INCOME
TAX PURPOSES OF TANGIBLE PERSONAL PROPERTY AND OTHER TANGIBLE  PROPERTY,
INCLUDING BUILDINGS AND STRUCTURAL COMPONENTS OF BUILDINGS, DESCRIBED IN
PARAGRAPH  (B)  OF  THIS  SUBDIVISION, WHICH IS LOCATED WITHIN AN EMPIRE
ZONE DESIGNATED AS SUCH PURSUANT TO ARTICLE EIGHTEEN-B OF SUCH LAW,  BUT
ONLY  IF  THE  ACQUISITION,  CONSTRUCTION, RECONSTRUCTION OR ERECTION OF
SUCH PROPERTY OCCURRED OR WAS COMMENCED ON OR AFTER  THE  DATE  OF  SUCH
DESIGNATION AND PRIOR TO THE EXPIRATION THEREOF. PROVIDED, HOWEVER, THAT

S. 6359--C                         78

IN  THE CASE OF AN ACQUISITION, CONSTRUCTION, RECONSTRUCTION OR ERECTION
WHICH WAS COMMENCED DURING SUCH PERIOD AND CONTINUED OR COMPLETED SUBSE-
QUENTLY, SUCH CREDIT SHALL BE TEN PERCENT OF THE PORTION OF THE COST  OR
OTHER BASIS FOR FEDERAL INCOME TAX PURPOSES ATTRIBUTABLE TO SUCH PERIOD,
WHICH  PORTION SHALL BE ASCERTAINED BY MULTIPLYING SUCH COST OR BASIS BY
A FRACTION THE NUMERATOR OF WHICH SHALL  BE  THE  EXPENDITURES  PAID  OR
INCURRED  DURING  SUCH  PERIOD  FOR SUCH PURPOSES AND THE DENOMINATOR OF
WHICH SHALL BE THE TOTAL OF ALL EXPENDITURES PAID OR INCURRED  FOR  SUCH
ACQUISITION, CONSTRUCTION, RECONSTRUCTION OR ERECTION.
  (B)  QUALIFIED PROPERTY. A CREDIT SHALL BE ALLOWED UNDER THIS SUBDIVI-
SION WITH RESPECT TO TANGIBLE PERSONAL PROPERTY AND OTHER TANGIBLE PROP-
ERTY, INCLUDING BUILDINGS AND STRUCTURAL COMPONENTS OF BUILDINGS, WHICH
  (I) ARE DEPRECIABLE PURSUANT TO SECTION ONE HUNDRED SIXTY-SEVEN OF THE
INTERNAL REVENUE CODE,
  (II) HAVE A USEFUL LIFE OF FOUR YEARS OR MORE,
  (III) ARE ACQUIRED BY PURCHASE  AS  DEFINED  IN  SECTION  ONE  HUNDRED
SEVENTY-NINE (D) OF THE INTERNAL REVENUE CODE,
  (IV)  HAVE  A  SITUS  IN AN EMPIRE ZONE DESIGNATED AS SUCH PURSUANT TO
ARTICLE EIGHTEEN-B OF THE GENERAL MUNICIPAL LAW, AND
  (V) ARE (A) PRINCIPALLY USED BY THE  TAXPAYER  IN  THE  PRODUCTION  OF
GOODS   BY  MANUFACTURING,  PROCESSING,  ASSEMBLING,  REFINING,  MINING,
EXTRACTING, FARMING, AGRICULTURE, HORTICULTURE,  FLORICULTURE,  VITICUL-
TURE OR COMMERCIAL FISHING,
  (B)  INDUSTRIAL  WASTE  TREATMENT  FACILITIES OR AIR POLLUTION CONTROL
FACILITIES USED IN THE TAXPAYER'S TRADE OR BUSINESS,
  (C) RESEARCH AND DEVELOPMENT PROPERTY,
  (D) PRINCIPALLY USED IN THE ORDINARY COURSE OF THE TAXPAYER'S TRADE OR
BUSINESS AS A BROKER OR DEALER IN CONNECTION WITH THE PURCHASE  OR  SALE
(WHICH  SHALL INCLUDE BUT NOT BE LIMITED TO THE ISSUANCE, ENTERING INTO,
ASSUMPTION, OFFSET, ASSIGNMENT, TERMINATION,  OR  TRANSFER)  OF  STOCKS,
BONDS   OR   OTHER   SECURITIES  AS  DEFINED  IN  SECTION  FOUR  HUNDRED
SEVENTY-FIVE (C)(2) OF THE INTERNAL REVENUE CODE, OR OF  COMMODITIES  AS
DEFINED IN SECTION FOUR HUNDRED SEVENTY-FIVE (E) OF THE INTERNAL REVENUE
CODE,
  (E) PRINCIPALLY USED IN THE ORDINARY COURSE OF THE TAXPAYER'S TRADE OR
BUSINESS  OF  PROVIDING  INVESTMENT  ADVISORY  SERVICES  FOR A REGULATED
INVESTMENT COMPANY AS DEFINED IN SECTION EIGHT HUNDRED FIFTY-ONE OF  THE
INTERNAL REVENUE CODE, OR LENDING, LOAN ARRANGEMENT, OR LOAN ORIGINATION
SERVICES  TO  CUSTOMERS  IN  CONNECTION WITH THE PURCHASE OR SALE (WHICH
SHALL INCLUDE BUT NOT BE LIMITED TO THE ISSUANCE, ENTERING INTO, ASSUMP-
TION, OFFSET, ASSIGNMENT, TERMINATION  OR  TRANSFER)  OF  SECURITIES  AS
DEFINED  IN  SECTION  FOUR  HUNDRED  SEVENTY-FIVE (C)(2) OF THE INTERNAL
REVENUE CODE,
  (E-1) PRINCIPALLY USED IN THE ORDINARY COURSE OF THE TAXPAYER'S  TRADE
OR  BUSINESS OF PROVIDING INVESTMENT ADVISORY SERVICES OR THE SERVICE OF
MANAGING INVESTMENT PORTFOLIOS TO ACHIEVE SPECIFIC INVESTMENT OBJECTIVES
FOR ACCOUNTS OVER ONE MILLION DOLLARS OF ACCREDITED INVESTORS  (AS  THAT
TERM  IS  DEFINED  IN  RULE 501 OF REGULATION D OF THE SECURITIES ACT OF
1933), IF THE TAXPAYER SATISFIES THE FOLLOWING CRITERIA:
  (I) THE TAXPAYER IS A REGULATED BROKER OR DEALER OR AN AFFILIATE OF  A
REGULATED BROKER OR DEALER,
  (II) THE TAXPAYER IS REGISTERED AS AN INVESTMENT ADVISER UNDER SECTION
TWO  HUNDRED  THREE  OF THE INVESTMENT ADVISERS ACT OF 1940, AS AMENDED,
AND

S. 6359--C                         79

  (III) AT LEAST ONE CLIENT OF THE TAXPAYER IS  A  REGULATED  INVESTMENT
COMPANY  AS  DEFINED  IN SECTION EIGHT HUNDRED FIFTY-ONE OF THE INTERNAL
REVENUE CODE THAT HAS ASSETS OF ONE HUNDRED MILLION DOLLARS, OR
  (F) PRINCIPALLY USED IN THE ORDINARY COURSE OF THE TAXPAYER'S BUSINESS
AS  AN  EXCHANGE REGISTERED AS A NATIONAL SECURITIES EXCHANGE WITHIN THE
MEANING OF SECTIONS 3(A)(1) AND 6(A) OF THE SECURITIES EXCHANGE  ACT  OF
1934  OR A BOARD OF TRADE AS DEFINED IN SUBDIVISION ONE OF PARAGRAPH (A)
OF SECTION FOURTEEN HUNDRED TEN OF THE NOT-FOR-PROFIT CORPORATION LAW OR
AS AN ENTITY THAT IS WHOLLY OWNED BY ONE OR MORE SUCH  NATIONAL  SECURI-
TIES  EXCHANGES OR BOARDS OR TRADE AND THAT PROVIDES AUTOMATION OR TECH-
NICAL SERVICES THERETO.
  (VI) FOR PURPOSES OF CLAUSES (D), (E), (E-1) AND (F)  OF  SUBPARAGRAPH
(V)  OF THIS PARAGRAPH, PROPERTY PURCHASED BY A TAXPAYER AFFILIATED WITH
A REGULATED BROKER,  DEALER,  REGISTERED  INVESTMENT  ADVISER,  NATIONAL
SECURITIES  EXCHANGE  OR  BOARD  OF TRADE IS ALLOWED A CREDIT UNDER THIS
SUBDIVISION IF THE PROPERTY IS USED BY ITS AFFILIATED REGULATED  BROKER,
DEALER, REGISTERED INVESTMENT ADVISER OR NATIONAL SECURITIES EXCHANGE OR
BOARD  OF  TRADE  IN  ACCORDANCE  WITH THIS SUBDIVISION. FOR PURPOSES OF
DETERMINING IF THE PROPERTY IS PRINCIPALLY USED IN QUALIFYING USES,  THE
USES BY THE TAXPAYER DESCRIBED IN CLAUSES (D), (E) AND (E-1) OF SUBPARA-
GRAPH  (V) OF THIS PARAGRAPH MAY BE AGGREGATED. IN ADDITION, THE USES BY
THE TAXPAYER, ITS AFFILIATED REGULATED  BROKER,  DEALER  AND  REGISTERED
INVESTMENT  ADVISER  UNDER  ANY  OF  THOSE  CLAUSES  MAY  BE AGGREGATED.
PROVIDED, HOWEVER, A TAXPAYER SHALL NOT BE ALLOWED THE  CREDIT  PROVIDED
BY CLAUSES (D), (E), (E-1) AND (F) OF SUBPARAGRAPH (V) OF THIS PARAGRAPH
UNLESS
  (I) EIGHTY PERCENT OR MORE OF THE EMPLOYEES PERFORMING THE ADMINISTRA-
TIVE  AND  SUPPORT FUNCTIONS RESULTING FROM OR RELATED TO THE QUALIFYING
USES OF SUCH EQUIPMENT ARE LOCATED IN THIS STATE, OR
  (II) THE AVERAGE NUMBER OF EMPLOYEES THAT PERFORM  THE  ADMINISTRATIVE
AND  SUPPORT  FUNCTIONS RESULTING FROM OR RELATED TO THE QUALIFYING USES
OF SUCH EQUIPMENT AND ARE LOCATED IN THIS STATE DURING THE TAXABLE  YEAR
FOR  WHICH THE CREDIT IS CLAIMED IS EQUAL TO OR GREATER THAN NINETY-FIVE
PERCENT OF THE AVERAGE NUMBER OF EMPLOYEES THAT PERFORM THESE  FUNCTIONS
AND  ARE  LOCATED IN THIS STATE DURING THE THIRTY-SIX MONTHS IMMEDIATELY
PRECEDING THE YEAR FOR WHICH THE CREDIT IS CLAIMED, OR
  (III) THE NUMBER OF EMPLOYEES LOCATED IN THIS STATE DURING THE TAXABLE
YEAR FOR WHICH THE CREDIT IS CLAIMED IS EQUAL TO OR GREATER THAN  NINETY
PERCENT  OF  THE  NUMBER  OF EMPLOYEES LOCATED IN THIS STATE ON DECEMBER
THIRTY-FIRST, NINETEEN HUNDRED NINETY-EIGHT OR, IF THE TAXPAYER WAS  NOT
A  CALENDAR YEAR TAXPAYER IN NINETEEN HUNDRED NINETY-EIGHT, THE LAST DAY
OF ITS FIRST TAXABLE YEAR ENDING AFTER DECEMBER  THIRTY-FIRST,  NINETEEN
HUNDRED  NINETY-EIGHT.  IF  THE  TAXPAYER BECOMES SUBJECT TO TAX IN THIS
STATE AFTER THE TAXABLE YEAR BEGINNING IN NINETEEN HUNDRED NINETY-EIGHT,
THEN THE TAXPAYER  IS  NOT  REQUIRED  TO  SATISFY  THE  EMPLOYMENT  TEST
PROVIDED  IN  THE  PRECEDING SENTENCE OF THIS SUBPARAGRAPH FOR ITS FIRST
TAXABLE YEAR.
  (VII) FOR THE PURPOSES OF CLAUSE (III) OF SUBPARAGRAPH  (VI)  OF  THIS
PARAGRAPH  THE  EMPLOYMENT TEST WILL BE BASED ON THE NUMBER OF EMPLOYEES
LOCATED IN THIS STATE ON THE LAST DAY OF  THE  FIRST  TAXABLE  YEAR  THE
TAXPAYER  IS  SUBJECT  TO TAX IN THIS STATE. IF THE USES OF THE PROPERTY
MUST BE AGGREGATED TO DETERMINE WHETHER THE PROPERTY IS PRINCIPALLY USED
IN QUALIFYING USES, THEN EITHER EACH AFFILIATE USING THE  PROPERTY  MUST
SATISFY  THIS  EMPLOYMENT TEST OR THIS EMPLOYMENT TEST MUST BE SATISFIED
THROUGH THE AGGREGATION OF THE EMPLOYEES OF THE TAXPAYER, ITS AFFILIATED

S. 6359--C                         80

REGULATED BROKER, DEALER, AND REGISTERED INVESTMENT  ADVISER  USING  THE
PROPERTY.
  (VIII) FOR THE PURPOSE OF THIS SUBDIVISION, THE TERM "GOODS" SHALL NOT
INCLUDE ELECTRICITY.
  (IX)  FOR PURPOSES OF THIS SUBDIVISION, "MANUFACTURING" SHALL MEAN THE
PROCESS OF WORKING RAW MATERIALS INTO WARES SUITABLE FOR  USE  OR  WHICH
GIVES  NEW  SHAPES,  NEW  QUALITY  OR  NEW  COMBINATIONS TO MATTER WHICH
ALREADY HAS GONE THROUGH SOME ARTIFICIAL PROCESS BY THE USE  OF  MACHIN-
ERY, TOOLS, APPLIANCES AND OTHER SIMILAR EQUIPMENT. PROPERTY USED IN THE
PRODUCTION OF GOODS SHALL INCLUDE MACHINERY, EQUIPMENT OR OTHER TANGIBLE
PROPERTY  WHICH  IS  PRINCIPALLY USED IN THE REPAIR AND SERVICE OF OTHER
MACHINERY, EQUIPMENT OR OTHER TANGIBLE PROPERTY USED PRINCIPALLY IN  THE
PRODUCTION  OF  GOODS  AND  SHALL  INCLUDE  ALL  FACILITIES  USED IN THE
PRODUCTION OPERATION, INCLUDING  STORAGE  OF  MATERIAL  TO  BE  USED  IN
PRODUCTION  AND  OF THE PRODUCTS THAT ARE PRODUCED. FOR PURPOSES OF THIS
SUBDIVISION, THE TERMS "RESEARCH AND DEVELOPMENT PROPERTY",  "INDUSTRIAL
WASTE  TREATMENT  FACILITIES",  AND  "AIR  POLLUTION CONTROL FACILITIES"
SHALL HAVE THE MEANINGS ASCRIBED THERETO BY CLAUSES (B),  (C)  AND  (D),
RESPECTIVELY,  OF  SUBPARAGRAPH (IV) OF PARAGRAPH (B) OF SUBDIVISION ONE
OF THIS SECTION, AND THE PROVISIONS OF SUBPARAGRAPH (V)  OF  SUCH  PARA-
GRAPH (B) SHALL APPLY.
  (C)  NONQUALIFIED  PROPERTY.  A TAXPAYER SHALL NOT BE ALLOWED A CREDIT
UNDER THIS SUBDIVISION WITH RESPECT TO ANY  TANGIBLE  PERSONAL  PROPERTY
AND  OTHER  TANGIBLE PROPERTY, INCLUDING BUILDINGS AND STRUCTURAL COMPO-
NENTS OF BUILDINGS, WHICH IT LEASES TO ANY OTHER PERSON  OR  CORPORATION
EXCEPT  WHERE  A  TAXPAYER  LEASES  PROPERTY  TO AN AFFILIATED REGULATED
BROKER,  DEALER,  REGISTERED  INVESTMENT  ADVISER,  NATIONAL  SECURITIES
EXCHANGE  OR  BOARD  OF TRADE OR OTHER ENTITY DESCRIBED IN CLAUSE (F) OF
SUBPARAGRAPH (V) OF PARAGRAPH (B) OF THIS  SUBDIVISION  THAT  USES  SUCH
PROPERTY  IN  ACCORDANCE  WITH CLAUSE (D), (E), (E-1) OR (F) OF SUBPARA-
GRAPH (V) OF PARAGRAPH (B) OF THIS  SUBDIVISION.  FOR  PURPOSES  OF  THE
PRECEDING  SENTENCE, ANY CONTRACT OR AGREEMENT TO LEASE OR RENT OR FOR A
LICENSE TO USE SUCH PROPERTY SHALL BE CONSIDERED  A  LEASE.    PROVIDED,
HOWEVER,  IN  DETERMINING  WHETHER  A TAXPAYER SHALL BE ALLOWED A CREDIT
UNDER THIS SUBDIVISION WITH RESPECT TO SUCH PROPERTY, ANY ELECTION  MADE
WITH  RESPECT  TO  SUCH PROPERTY PURSUANT TO THE PROVISIONS OF PARAGRAPH
EIGHT OF SUBSECTION (F) OF SECTION ONE HUNDRED SIXTY-EIGHT OF THE INTER-
NAL REVENUE CODE, AS SUCH PARAGRAPH WAS IN EFFECT FOR AGREEMENTS ENTERED
INTO PRIOR TO JANUARY FIRST,  NINETEEN  HUNDRED  EIGHTY-FOUR,  SHALL  BE
DISREGARDED.
  (D) CARRYOVER. THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXA-
BLE  YEAR  SHALL  NOT  REDUCE THE TAX DUE FOR SUCH YEAR TO LESS THAN THE
FIXED DOLLAR MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D)  OF  SUBDIVISION
ONE  OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. PROVIDED, HOWEVER, THAT
IF THE AMOUNT OF CREDIT ALLOWED UNDER THIS SUBDIVISION FOR  ANY  TAXABLE
YEAR  REDUCES  THE  TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS
TAX BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF  CREDIT  NOT
DEDUCTIBLE  IN  SUCH  TAXABLE  YEAR MAY BE CARRIED OVER TO THE FOLLOWING
YEAR OR YEARS AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH  YEAR
OR  YEARS.  IN LIEU OF SUCH CARRYOVER, ANY SUCH TAXPAYER WHICH QUALIFIES
AS A NEW BUSINESS UNDER PARAGRAPH (F) OF SUBDIVISION ONE OF THIS SECTION
MAY ELECT, ON ITS REPORT FOR ITS TAXABLE YEAR WITH RESPECT TO WHICH SUCH
CREDIT IS ALLOWED, TO TREAT FIFTY PERCENT OF THE AMOUNT OF  SUCH  CARRY-
OVER  AS  AN OVERPAYMENT OF TAX TO BE CREDITED OR REFUNDED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION ONE THOUSAND EIGHTY-SIX OF THIS  CHAPTER.
IN  ADDITION, ANY TAXPAYER WHICH IS APPROVED AS THE OWNER OF A QUALIFIED

S. 6359--C                         81

INVESTMENT PROJECT OR A SIGNIFICANT CAPITAL INVESTMENT PROJECT  PURSUANT
TO  SUBDIVISION  (W)  OF  SECTION NINE HUNDRED FIFTY-NINE OF THE GENERAL
MUNICIPAL LAW, ON ITS REPORT FOR ITS TAXABLE YEAR WITH RESPECT TO  WHICH
SUCH  CREDIT  IS  ALLOWED, IN LIEU OF SUCH CARRYOVER, MAY ELECT TO TREAT
FIFTY PERCENT OF THE AMOUNT OF SUCH CARRYOVER WHICH IS  ATTRIBUTABLE  TO
THE  CREDIT ALLOWED UNDER THIS SUBDIVISION FOR PROPERTY WHICH IS PART OF
SUCH PROJECT AS AN OVERPAYMENT OF TAX TO  BE  CREDITED  OR  REFUNDED  IN
ACCORDANCE  WITH  THE  PROVISIONS  OF SECTION ONE THOUSAND EIGHTY-SIX OF
THIS CHAPTER. PROVIDED, HOWEVER, SUCH OWNER SHALL BE ALLOWED SUCH REFUND
FOR A MAXIMUM OF TEN  TAXABLE  YEARS  WITH  RESPECT  TO  SUCH  QUALIFIED
INVESTMENT  PROJECT  AND  EACH  SIGNIFICANT  CAPITAL INVESTMENT PROJECT,
STARTING WITH THE FIRST TAXABLE YEAR IN WHICH PROPERTY  COMPRISING  SUCH
PROJECT IS PLACED IN SERVICE. PROVIDED, FURTHER, HOWEVER, THE PROVISIONS
OF  SUBSECTION  (C) OF SECTION ONE THOUSAND EIGHTY-EIGHT OF THIS CHAPTER
NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  (D-1) ANY CARRYOVER OF A CREDIT FROM PRIOR TAXABLE YEARS WILL  NOT  BE
ALLOWED  IF  AN EMPIRE ZONE RETENTION CERTIFICATE IS NOT ISSUED PURSUANT
TO SUBDIVISION (W) OF SECTION NINE HUNDRED  FIFTY-NINE  OF  THE  GENERAL
MUNICIPAL  LAW  TO  THE EMPIRE ZONE ENTERPRISE WHICH IS THE BASIS OF THE
CREDIT.
  (E) AT THE OPTION OF THE TAXPAYER, THE TAXPAYER MAY  CHOOSE  TO  CLAIM
THE  CREDIT  DESCRIBED IN PARAGRAPH (A) OF THIS SUBDIVISION FOR PROPERTY
WHICH ALSO QUALIFIES FOR THE CREDIT PROVIDED UNDER  SUBDIVISION  ONE  OF
THIS SECTION. A TAXPAYER SHALL NOT BE ALLOWED A CREDIT UNDER THIS SUBDI-
VISION  WITH  RESPECT TO ANY PROPERTY DESCRIBED IN PARAGRAPH (A) OF THIS
SUBDIVISION IF A CREDIT IS TAKEN PURSUANT TO  SUBDIVISION  ONE  OF  THIS
SECTION.
  (F)  RECAPTURE.  (I)  WITH  RESPECT  TO  PROPERTY WHICH IS DEPRECIABLE
PURSUANT TO SECTION ONE HUNDRED SIXTY-SEVEN OF THE INTERNAL REVENUE CODE
BUT IS NOT SUBJECT TO THE PROVISIONS OF SECTION ONE HUNDRED  SIXTY-EIGHT
OF  SUCH  CODE AND WHICH IS DISPOSED OF OR CEASES TO BE IN QUALIFIED USE
PRIOR TO THE END OF THE TAXABLE YEAR IN WHICH THE CREDIT IS TO BE TAKEN,
THE AMOUNT OF THE CREDIT SHALL BE THAT PORTION OF  THE  CREDIT  PROVIDED
FOR  IN  THIS SUBDIVISION WHICH REPRESENTS THE RATIO WHICH THE MONTHS OF
QUALIFIED USE BEAR TO THE MONTHS OF USEFUL LIFE. IF  PROPERTY  ON  WHICH
CREDIT  HAS  BEEN  TAKEN IS DISPOSED OF OR CEASES TO BE IN QUALIFIED USE
PRIOR TO THE END OF ITS USEFUL LIFE, THE DIFFERENCE BETWEEN  THE  CREDIT
TAKEN  AND  THE  CREDIT ALLOWED FOR ACTUAL USE MUST BE ADDED BACK IN THE
YEAR OF DISPOSITION. PROVIDED, HOWEVER, IF SUCH PROPERTY IS DISPOSED  OF
OR  CEASES TO BE IN QUALIFIED USE AFTER IT HAS BEEN IN QUALIFIED USE FOR
MORE THAN TWELVE CONSECUTIVE YEARS, IT SHALL NOT  BE  NECESSARY  TO  ADD
BACK  THE  CREDIT AS PROVIDED IN THIS SUBPARAGRAPH. THE AMOUNT OF CREDIT
ALLOWED FOR ACTUAL USE SHALL BE DETERMINED BY MULTIPLYING  THE  ORIGINAL
CREDIT BY THE RATIO WHICH THE MONTHS OF QUALIFIED USE BEAR TO THE MONTHS
OF  USEFUL LIFE. FOR PURPOSES OF THIS SUBPARAGRAPH, USEFUL LIFE OF PROP-
ERTY SHALL BE THE SAME AS THE TAXPAYER USES  FOR  DEPRECIATION  PURPOSES
WHEN COMPUTING HIS FEDERAL INCOME TAX LIABILITY.
  (II)  EXCEPT  WITH RESPECT TO THAT PROPERTY TO WHICH SUBPARAGRAPH (IV)
OF THIS PARAGRAPH APPLIES,  WITH  RESPECT  TO  THREE-YEAR  PROPERTY,  AS
DEFINED  IN  SUBSECTION  (E)  OF  SECTION ONE HUNDRED SIXTY-EIGHT OF THE
INTERNAL REVENUE CODE, WHICH IS DISPOSED OF OR CEASES TO BE IN QUALIFIED
USE PRIOR TO THE END OF THE TAXABLE YEAR IN WHICH THE CREDIT  IS  TO  BE
TAKEN,  THE  AMOUNT  OF  THE  CREDIT SHALL BE THAT PORTION OF THE CREDIT
PROVIDED FOR IN THIS SUBDIVISION WHICH REPRESENTS THE  RATIO  WHICH  THE
MONTHS  OF QUALIFIED USE BEAR TO THIRTY-SIX. IF PROPERTY ON WHICH CREDIT
HAS BEEN TAKEN IS DISPOSED OF OR CEASES TO BE IN QUALIFIED USE PRIOR  TO

S. 6359--C                         82

THE  END  OF  THIRTY-SIX MONTHS, THE DIFFERENCE BETWEEN THE CREDIT TAKEN
AND THE CREDIT ALLOWED FOR ACTUAL USE MUST BE ADDED BACK IN THE YEAR  OF
DISPOSITION. THE AMOUNT OF CREDIT ALLOWED FOR ACTUAL USE SHALL BE DETER-
MINED  BY  MULTIPLYING THE ORIGINAL CREDIT BY THE RATIO WHICH THE MONTHS
OF QUALIFIED USE BEAR TO THIRTY-SIX.
  (III) EXCEPT WITH RESPECT TO THAT PROPERTY TO WHICH SUBPARAGRAPH  (IV)
OF  THIS  PARAGRAPH  APPLIES,  WITH  RESPECT  TO PROPERTY SUBJECT TO THE
PROVISIONS OF SECTION ONE HUNDRED SIXTY-EIGHT OF  THE  INTERNAL  REVENUE
CODE OTHER THAN THREE-YEAR PROPERTY AS DEFINED IN SUBSECTION (E) OF SUCH
SECTION  ONE HUNDRED SIXTY-EIGHT WHICH IS DISPOSED OF OR CEASES TO BE IN
QUALIFIED USE PRIOR TO THE END OF THE TAXABLE YEAR IN WHICH  THE  CREDIT
IS  TO  BE  TAKEN, THE AMOUNT OF THE CREDIT SHALL BE THAT PORTION OF THE
CREDIT PROVIDED FOR IN THIS SUBDIVISION WHICH REPRESENTS THE RATIO WHICH
THE MONTHS OF QUALIFIED USE BEAR TO SIXTY. IF PROPERTY ON  WHICH  CREDIT
HAS  BEEN TAKEN IS DISPOSED OF OR CEASES TO BE IN QUALIFIED USE PRIOR TO
THE END OF SIXTY MONTHS, THE DIFFERENCE BETWEEN THE CREDIT TAKEN AND THE
CREDIT ALLOWED FOR ACTUAL USE MUST BE ADDED BACK IN THE YEAR OF DISPOSI-
TION. THE AMOUNT OF CREDIT ALLOWED FOR ACTUAL USE SHALL BE DETERMINED BY
MULTIPLYING THE ORIGINAL CREDIT BY THE RATIO WHICH THE MONTHS OF  QUALI-
FIED USE BEAR TO SIXTY.
  (IV)  WITH RESPECT TO ANY PROPERTY TO WHICH SECTION ONE HUNDRED SIXTY-
EIGHT OF THE INTERNAL REVENUE CODE APPLIES, WHICH IS  A  BUILDING  OR  A
STRUCTURAL COMPONENT OF A BUILDING AND WHICH IS DISPOSED OF OR CEASES TO
BE  IN  QUALIFIED  USE PRIOR TO THE END OF THE TAXABLE YEAR IN WHICH THE
CREDIT IS TO BE TAKEN, THE AMOUNT OF THE CREDIT SHALL BE THAT PORTION OF
THE CREDIT PROVIDED FOR IN THIS SUBDIVISION WHICH REPRESENTS  THE  RATIO
WHICH  THE  MONTHS  OF  QUALIFIED USE BEAR TO THE TOTAL NUMBER OF MONTHS
OVER WHICH THE TAXPAYER CHOOSES TO DEDUCT THE PROPERTY UNDER THE  INTER-
NAL REVENUE CODE. IF PROPERTY ON WHICH CREDIT HAS BEEN TAKEN IS DISPOSED
OF  OR CEASES TO BE IN QUALIFIED USE PRIOR TO THE END OF THE PERIOD OVER
WHICH THE TAXPAYER CHOOSES TO DEDUCT THE  PROPERTY  UNDER  THE  INTERNAL
REVENUE  CODE,  THE  DIFFERENCE  BETWEEN THE CREDIT TAKEN AND THE CREDIT
ALLOWED FOR ACTUAL USE MUST BE ADDED BACK IN THE  YEAR  OF  DISPOSITION.
PROVIDED,  HOWEVER,  IF  SUCH PROPERTY IS DISPOSED OF OR CEASES TO BE IN
QUALIFIED USE AFTER IT HAS BEEN IN QUALIFIED USE FOR  MORE  THAN  TWELVE
CONSECUTIVE  YEARS,  IT SHALL NOT BE NECESSARY TO ADD BACK THE CREDIT AS
PROVIDED IN THIS SUBPARAGRAPH. THE AMOUNT OF CREDIT ALLOWED  FOR  ACTUAL
USE  SHALL BE DETERMINED BY MULTIPLYING THE ORIGINAL CREDIT BY THE RATIO
WHICH THE MONTHS OF QUALIFIED USE BEAR TO THE  TOTAL  NUMBER  OF  MONTHS
OVER  WHICH THE TAXPAYER CHOOSES TO DEDUCT THE PROPERTY UNDER THE INTER-
NAL REVENUE CODE.
  (V) FOR PURPOSES OF THIS PARAGRAPH, DISPOSAL OR CESSATION OF QUALIFIED
USE SHALL NOT BE DEEMED TO HAVE OCCURRED SOLELY BY REASON OF THE  TERMI-
NATION OR EXPIRATION OF AN EMPIRE ZONE'S DESIGNATION AS SUCH.
  (VI)(A) FOR PURPOSES OF THIS PARAGRAPH, THE DECERTIFICATION OF A BUSI-
NESS  ENTERPRISE  WITH  RESPECT  TO  AN  EMPIRE  ZONE SHALL CONSTITUTE A
DISPOSAL OR CESSATION OF QUALIFIED USE OF  THE  PROPERTY  ON  WHICH  THE
CREDIT  WAS  TAKEN  WHICH  IS LOCATED IN THE ZONE TO WHICH THE DECERTIF-
ICATION APPLIES, ON THE EFFECTIVE DATE OF SUCH DECERTIFICATION.
  (B) WHERE A BUSINESS ENTERPRISE HAS BEEN DECERTIFIED BASED ON A  FIND-
ING  PURSUANT  TO CLAUSE ONE, TWO, OR FIVE OF SUBDIVISION (A) OF SECTION
NINE HUNDRED  FIFTY-NINE  OF  THE  GENERAL  MUNICIPAL  LAW,  THE  AMOUNT
REQUIRED  TO  BE ADDED BACK BY REASON OF THIS PARAGRAPH SHALL BE (I) THE
AMOUNT OF CREDIT, WITH RESPECT TO THE PROPERTY WHICH IS DISPOSED  OF  OR
CEASES  TO  BE  IN QUALIFIED USE, WHICH WAS DEDUCTED FROM THE TAXPAYER'S
TAX OTHERWISE DUE UNDER  THIS  ARTICLE  FOR  ALL  PRIOR  TAXABLE  YEARS,

S. 6359--C                         83

REDUCED  (BUT NOT BELOW ZERO) BY (II) THE CREDIT ALLOWED FOR ACTUAL USE.
FOR PURPOSES OF THIS SUBPARAGRAPH, THE ATTRIBUTION TO SPECIFIC  PROPERTY
OF  CREDIT  AMOUNTS DEDUCTED FROM TAX SHALL BE ESTABLISHED IN ACCORDANCE
WITH  THE  DATE  OF  PLACEMENT IN SERVICE OF SUCH PROPERTY IN THE EMPIRE
ZONE.
  (C) IN NO EVENT SHALL THE AMOUNT OF THE  CREDIT  ALLOWED  PURSUANT  TO
THIS  SUBDIVISION  BE  RENDERED,  SOLELY BY REASON OF CLAUSE (A) OF THIS
SUBPARAGRAPH, LESS THAN THE AMOUNT OF THE CREDIT TO WHICH  THE  TAXPAYER
WOULD OTHERWISE BE ENTITLED UNDER SUBDIVISION ONE OF THIS SECTION.
  (D)  NOTWITHSTANDING  ANY  OTHER PROVISION OF THIS SUBDIVISION, IN THE
CASE OF A BUSINESS ENTERPRISE WHICH HAS BEEN DECERTIFIED, ANY AMOUNT  OF
CREDIT  ALLOWED WITH RESPECT TO THE PROPERTY OF SUCH BUSINESS ENTERPRISE
LOCATED IN THE ZONE  TO  WHICH  THE  DECERTIFICATION  APPLIES  WHICH  IS
CARRIED  OVER PURSUANT TO PARAGRAPH (D) OF THIS SUBDIVISION SHALL NOT BE
CARRIED OVER BEYOND THE SEVENTH TAXABLE YEAR NEXT FOLLOWING THE  TAXABLE
YEAR  WITH  RESPECT TO WHICH THE CREDIT PROVIDED FOR IN THIS SUBDIVISION
WAS ALLOWED.
  (VII) FOR PURPOSES OF THIS PARAGRAPH, WHERE A CREDIT IS  ALLOWED  WITH
RESPECT  TO  AN AIR POLLUTION CONTROL FACILITY ON THE BASIS OF A CERTIF-
ICATE OF COMPLIANCE ISSUED PURSUANT TO  THE  ENVIRONMENTAL  CONSERVATION
LAW  AND  THE  CERTIFICATE  IS  REVOKED PURSUANT TO SUBDIVISION THREE OF
SECTION 19-0309 OF THE ENVIRONMENTAL CONSERVATION LAW,  SUCH  REVOCATION
SHALL  CONSTITUTE  A DISPOSAL OR CESSATION OF QUALIFIED USE, EXCEPT WITH
RESPECT TO PROPERTY CONTAINED IN OR COMPRISING SUCH  FACILITY  WHICH  IS
DESCRIBED  IN  CLAUSE  (A), (B), OR (C) OF SUBPARAGRAPH (V) OF PARAGRAPH
(B) OF THIS SUBDIVISION OTHER THAN AS  PART  OF  OR  COMPRISING  AN  AIR
POLLUTION CONTROL FACILITY. ALSO FOR PURPOSES OF THIS PARAGRAPH, THE USE
OF  AN  AIR  POLLUTION CONTROL FACILITY OR AN INDUSTRIAL WASTE TREATMENT
FACILITY FOR THE PRIMARY PURPOSE OF SALVAGING MATERIALS WHICH ARE USABLE
IN THE MANUFACTURING PROCESS OR ARE MARKETABLE SHALL CONSTITUTE A CESSA-
TION OF QUALIFIED USE, EXCEPT WITH RESPECT TO PROPERTY CONTAINED  IN  OR
COMPRISING  SUCH  FACILITY  WHICH  IS  DESCRIBED IN CLAUSE (A) OR (C) OF
SUBPARAGRAPH (V) OF PARAGRAPH (B) OF THIS SUBDIVISION.
  (VIII) EXCEPT AS PROVIDED IN THIS SUBPARAGRAPH, THIS  PARAGRAPH  SHALL
NOT  APPLY TO A CREDIT ALLOWED BY THIS SUBDIVISION TO A TAXPAYER THAT IS
A PARTNER IN A  PARTNERSHIP  IN  THE  CASE  OF  MANUFACTURING  PROPERTY;
PROVIDED,  AT THE TIME SUCH PROPERTY WAS PLACED IN SERVICE BY SUCH PART-
NERSHIP IN AN EMPIRE ZONE THE BASIS FOR FEDERAL INCOME TAX PURPOSES  FOR
SUCH  PROPERTY  (OR  A  PROJECT  THAT INCLUDES SUCH PROPERTY) EQUALED OR
EXCEEDED THREE HUNDRED MILLION DOLLARS AND SUCH PARTNER OWNED ITS  PART-
NERSHIP  INTEREST  FOR  AT LEAST THREE YEARS FROM THE DATE SUCH PROPERTY
WAS PLACED IN SERVICE. IF SUCH PROPERTY CEASES TO BE  IN  QUALIFIED  USE
AFTER  IT IS PLACED IN SERVICE, THIS PARAGRAPH SHALL APPLY TO SUCH PART-
NER IN THE YEAR SUCH PROPERTY CEASES TO BE IN QUALIFYING USE.
  (IX) IF A TAXPAYER, WHICH IS APPROVED BY THE COMMISSIONER OF  ECONOMIC
DEVELOPMENT  AS THE OWNER OF A QUALIFIED INVESTMENT PROJECT OR A SIGNIF-
ICANT CAPITAL INVESTMENT PROJECT PURSUANT TO SUBDIVISION (W) OF  SECTION
NINE  HUNDRED  FIFTY-NINE  OF  THE  GENERAL  MUNICIPAL LAW, FAILS TO (A)
CREATE AT LEAST THE MINIMUM NUMBER OF JOBS AT SUCH PROJECT  AS  REQUIRED
BY  THE  PROVISIONS  OF  SUBDIVISION  (S) OR (T) OF SECTION NINE HUNDRED
FIFTY-SEVEN AND SUBDIVISION (W) OF SECTION NINE  HUNDRED  FIFTY-NINE  OF
THE  GENERAL  MUNICIPAL  LAW OR (B) PLACE IN SERVICE PROPERTY COMPRISING
SUCH QUALIFIED INVESTMENT  PROJECT  OR  SIGNIFICANT  CAPITAL  INVESTMENT
PROJECT WITH A BASIS FOR FEDERAL INCOME TAX PURPOSES EQUALING OR EXCEED-
ING  THE  APPLICABLE MINIMUM REQUIRED BASIS AS PROVIDED IN SUCH SUBDIVI-
SION (S) OR (T), WHICHEVER IS RELEVANT, BY THE LAST  DAY  OF  THE  FIFTH

S. 6359--C                         84

TAXABLE  YEAR  FOLLOWING  THE  TAXABLE  YEAR  IN WHICH A CREDIT IS FIRST
ALLOWED UNDER THIS SUBDIVISION FOR THE  PROPERTY  WHICH  COMPRISES  SUCH
QUALIFIED  INVESTMENT  PROJECT  OR  SUCH  SIGNIFICANT CAPITAL INVESTMENT
PROJECT,  THE  TOTAL AMOUNT OF THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ALL TAXABLE YEARS WITH RESPECT TO THE PROPERTY WHICH COMPRISES  SUCH
PROJECT  WHICH HAS BEEN REFUNDED TO SUCH TAXPAYER SHALL BE ADDED BACK IN
SUCH TAXABLE YEAR.
  (G) NOTWITHSTANDING THE EXPIRATION OF THE EMPIRE ZONES  PROGRAM  UNDER
ARTICLE  EIGHTEEN-B  OF  THE  GENERAL  MUNICIPAL LAW, A TAXPAYER THAT IS
CERTIFIED AS A QUALIFIED INVESTMENT PROJECT  PURSUANT  TO  SUCH  ARTICLE
EIGHT-B  ON  THE  DAY  IMMEDIATELY  PRECEDING  THE  DAY THE EMPIRE ZONES
PROGRAM EXPIRED SHALL CONTINUE TO BE DEEMED CERTIFIED UNDER SUCH ARTICLE
EIGHTEEN-B FOR PURPOSES OF THIS SUBDIVISION FOR  THE  REMAINDER  OF  THE
TAXABLE  YEAR IN WHICH THE EXPIRATION OCCURRED AND FOR THE NEXT SUCCEED-
ING NINE TAXABLE YEARS. IN ADDITION,  THE  AREAS  DESIGNATED  AS  EMPIRE
ZONES  IN  WHICH  THE  TAXPAYER  IS  CERTIFIED AS A QUALIFIED INVESTMENT
PROJECT ON THE DAY  IMMEDIATELY  PRECEDING  THE  DAY  THE  EMPIRE  ZONES
PROGRAM EXPIRED SHALL CONTINUE TO BE DEEMED EMPIRE ZONES FOR PURPOSES OF
THIS  SUBDIVISION  FOR  THE  REMAINDER  OF THE TAXABLE YEAR IN WHICH THE
EXPIRATION OCCURRED AND FOR THE NEXT SUCCEEDING NINE TAXABLE YEARS.
  (H) NOTWITHSTANDING THE EXPIRATION OF THE EMPIRE ZONES  PROGRAM  UNDER
ARTICLE  EIGHTEEN-B  OF THE GENERAL MUNICIPAL LAW AND EXCEPT AS PROVIDED
IN PARAGRAPH (G) OF THIS SUBDIVISION, A TAXPAYER THAT IS CERTIFIED AS AN
EMPIRE ZONE BUSINESS PURSUANT TO SUCH  ARTICLE  EIGHTEEN-B  ON  THE  DAY
IMMEDIATELY  PRECEDING  THE  DAY  THE  EMPIRE ZONE PROGRAM EXPIRED SHALL
CONTINUE TO BE  DEEMED  CERTIFIED  UNDER  SUCH  ARTICLE  EIGHTEEN-B  FOR
PURPOSES  OF  THIS SUBDIVISION UNTIL APRIL FIRST, TWO THOUSAND FOURTEEN.
IN ADDITION, THE AREAS DESIGNATED AS EMPIRE ZONES IN WHICH THE  TAXPAYER
IS CERTIFIED AS AN EMPIRE ZONE BUSINESS ON THE DAY IMMEDIATELY PRECEDING
THE  DAY  THE  EMPIRE  ZONES PROGRAM EXPIRED SHALL CONTINUE TO BE DEEMED
EMPIRE ZONES FOR PURPOSES OF THIS SUBDIVISIONS UNTIL  APRIL  FIRST,  TWO
THOUSAND FOURTEEN.
  4.  EMPIRE  ZONE EMPLOYMENT INCENTIVE CREDIT (EZ-EIC). (A) APPLICATION
OF CREDIT. WHERE A TAXPAYER IS ALLOWED A CREDIT UNDER SUBDIVISION  THREE
OF  THIS SECTION, THE TAXPAYER SHALL BE ALLOWED A CREDIT FOR EACH OF THE
THREE YEARS NEXT SUCCEEDING THE TAXABLE YEAR FOR WHICH THE CREDIT  UNDER
SUCH SUBDIVISION THREE IS ALLOWED, WITH RESPECT TO SUCH PROPERTY, WHETH-
ER OR NOT DEDUCTIBLE IN SUCH TAXABLE YEAR OR IN SUBSEQUENT TAXABLE YEARS
PURSUANT  TO  PARAGRAPH (D) OF SUCH SUBDIVISION THREE, OF THIRTY PERCENT
OF THE CREDIT ALLOWABLE UNDER SUCH SUBDIVISION THREE; PROVIDED, HOWEVER,
THAT THE CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR  ANY  TAXABLE  YEAR
SHALL ONLY BE ALLOWED IF THE AVERAGE NUMBER OF EMPLOYEES EMPLOYED BY THE
TAXPAYER  IN  THE EMPIRE ZONE, DESIGNATED PURSUANT TO ARTICLE EIGHTEEN-B
OF THE GENERAL MUNICIPAL LAW, IN WHICH SUCH PROPERTY IS  LOCATED  DURING
SUCH  TAXABLE  YEAR  IS  AT LEAST ONE HUNDRED ONE PERCENT OF THE AVERAGE
NUMBER OF EMPLOYEES EMPLOYED BY THE TAXPAYER IN SUCH EMPIRE ZONE, DURING
THE TAXABLE YEAR IMMEDIATELY PRECEDING THE TAXABLE YEAR  FOR  WHICH  THE
CREDIT  UNDER  SUCH  SUBDIVISION THREE IS ALLOWED AND PROVIDED, FURTHER,
THAT IF THE TAXPAYER WAS NOT SUBJECT TO TAX AND DID NOT HAVE  A  TAXABLE
YEAR  IMMEDIATELY  PRECEDING THE TAXABLE YEAR FOR WHICH THE CREDIT UNDER
SUBDIVISION THREE OF THIS SECTION IS ALLOWED, THE CREDIT ALLOWABLE UNDER
THIS SUBDIVISION FOR ANY TAXABLE YEAR SHALL BE ALLOWED  IF  THE  AVERAGE
NUMBER OF EMPLOYEES EMPLOYED IN SUCH EMPIRE ZONE IN SUCH TAXABLE YEAR IS
AT LEAST ONE HUNDRED ONE PERCENT OF THE AVERAGE NUMBER OF SUCH EMPLOYEES
DURING THE TAXABLE YEAR IN WHICH THE CREDIT UNDER SUCH SUBDIVISION THREE
IS ALLOWED.

S. 6359--C                         85

  (B)  AVERAGE  NUMBER  OF  EMPLOYEES.  THE  AVERAGE NUMBER OF EMPLOYEES
EMPLOYED IN AN EMPIRE ZONE IN A TAXABLE YEAR SHALL BE COMPUTED BY ASCER-
TAINING THE NUMBER OF SUCH EMPLOYEES WITHIN  SUCH  ZONE  EXCEPT  GENERAL
EXECUTIVE  OFFICERS, EMPLOYED BY THE TAXPAYER ON THE THIRTY-FIRST DAY OF
MARCH, THE THIRTIETH DAY OF JUNE, THE THIRTIETH DAY OF SEPTEMBER AND THE
THIRTY-FIRST DAY OF DECEMBER IN THE TAXABLE YEAR, BY ADDING TOGETHER THE
NUMBER  OF  EMPLOYEES ASCERTAINED ON EACH OF SUCH DATES AND DIVIDING THE
SUM SO OBTAINED BY THE NUMBER OF SUCH  ABOVE-MENTIONED  DATES  OCCURRING
WITHIN THE TAXABLE YEAR.
  (C)  CARRYOVER.  IN  NO  EVENT SHALL THE CREDIT HEREIN PROVIDED FOR BE
ALLOWED IN AN AMOUNT WHICH WILL REDUCE THE TAX PAYABLE TO LESS THAN  THE
FIXED  DOLLAR  MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION
ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. PROVIDED, HOWEVER,  THAT
IF THE AMOUNT OF CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXABLE
YEAR  REDUCES  THE  TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS
TAX BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF  CREDIT  NOT
DEDUCTIBLE  IN  SUCH  TAXABLE  YEAR MAY BE CARRIED OVER TO THE FOLLOWING
YEAR OR YEARS AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH  YEAR
OR  YEARS.  IN  LIEU  OF  SUCH  CARRYOVER,  ANY  SUCH TAXPAYER, WHICH IS
APPROVED AS THE OWNER OF A QUALIFIED INVESTMENT PROJECT OR A SIGNIFICANT
CAPITAL INVESTMENT PROJECT PURSUANT TO SUBDIVISION (V) OF  SECTION  NINE
HUNDRED  FIFTY-NINE  OF  THE  GENERAL  MUNICIPAL  LAW, MAY ELECT, ON ITS
REPORT FOR ITS TAXABLE  YEAR  WITH  RESPECT  TO  WHICH  SUCH  CREDIT  IS
ALLOWED,  TO  TREAT  FIFTY PERCENT OF THE AMOUNT OF SUCH CARRYOVER AS AN
OVERPAYMENT OF TAX TO BE CREDITED OR REFUNDED  IN  ACCORDANCE  WITH  THE
PROVISIONS OF SECTION ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED,
HOWEVER,  IN THE CASE OF SUCH OWNER OF A QUALIFIED INVESTMENT PROJECT OR
A SIGNIFICANT CAPITAL INVESTMENT PROJECT,  ONLY  FIFTY  PERCENT  OF  THE
AMOUNT  OF  SUCH  CARRYOVER  WHICH IS ATTRIBUTABLE TO THE CREDIT ALLOWED
UNDER THIS SUBDIVISION WITH RESPECT TO PROPERTY WHICH IS  PART  OF  SUCH
PROJECT SHALL BE ALLOWED TO BE CREDITED OR REFUNDED AND SUCH OWNER SHALL
BE  ALLOWED  SUCH CREDIT OR REFUND ONLY FOR THOSE TAXABLE YEARS IN WHICH
SUCH OWNER WOULD BE ALLOWED A  CREDIT  OR  REFUND  OF  THE  EMPIRE  ZONE
INVESTMENT  TAX CREDIT PURSUANT TO PARAGRAPH (D) OF SUBDIVISION THREE OF
THIS SECTION. PROVIDED, FURTHER, HOWEVER, THE PROVISIONS  OF  SUBSECTION
(C)  OF  SECTION ONE THOUSAND EIGHTY-EIGHT OF THIS CHAPTER NOTWITHSTAND-
ING, NO INTEREST SHALL BE PAID THEREON.
  (C-1) ANY CARRYOVER OF A CREDIT FROM PRIOR TAXABLE YEARS WILL  NOT  BE
ALLOWED  IF  AN EMPIRE ZONE RETENTION CERTIFICATE IS NOT ISSUED PURSUANT
TO SUBDIVISION (W) OF SECTION NINE HUNDRED  FIFTY-NINE  OF  THE  GENERAL
MUNICIPAL  LAW  TO  THE EMPIRE ZONE ENTERPRISE WHICH IS THE BASIS OF THE
CREDIT.
  (D) NOTWITHSTANDING THE EXPIRATION OF THE EMPIRE ZONES  PROGRAM  UNDER
ARTICLE  EIGHTEEN-B  OF  THE  GENERAL  MUNICIPAL LAW, A TAXPAYER THAT IS
CERTIFIED AS A QUALIFIED INVESTMENT PROJECT  PURSUANT  TO  SUCH  ARTICLE
EIGHTEEN-B  ON  THE  DAY  IMMEDIATELY PRECEDING THE DAY THE EMPIRE ZONES
PROGRAM EXPIRED SHALL CONTINUE TO BE DEEMED CERTIFIED UNDER SUCH ARTICLE
EIGHTEEN-B FOR PURPOSES OF THIS SUBDIVISION FOR  THE  REMAINDER  OF  THE
TAXABLE  YEAR IN WHICH THE EXPIRATION OCCURRED AND FOR THE NEXT SUCCEED-
ING NINE TAXABLE YEARS. IN ADDITION,  THE  AREAS  DESIGNATED  AS  EMPIRE
ZONES  IN  WHICH  THE  TAXPAYER  IS  CERTIFIED AS A QUALIFIED INVESTMENT
PROJECT ON THE DAY  IMMEDIATELY  PRECEDING  THE  DAY  THE  EMPIRE  ZONES
PROGRAM EXPIRED SHALL CONTINUE TO BE DEEMED EMPIRE ZONES FOR PURPOSES OF
THIS  SUBDIVISION  FOR  THE  REMAINDER  OF THE TAXABLE YEAR IN WHICH THE
EXPIRATION OCCURRED AND FOR THE NEXT SUCCEEDING NINE TAXABLE YEARS.

S. 6359--C                         86

  (E) NOTWITHSTANDING THE EXPIRATION OF THE EMPIRE ZONES  PROGRAM  UNDER
ARTICLE  EIGHTEEN-B  OF THE GENERAL MUNICIPAL LAW AND EXCEPT AS PROVIDED
IN PARAGRAPH (D) OF THIS SUBDIVISION, A TAXPAYER THAT IS CERTIFIED AS AN
EMPIRE ZONE BUSINESS PURSUANT TO SUCH  ARTICLE  EIGHTEEN-B  ON  THE  DAY
IMMEDIATELY  PRECEDING  THE  DAY  THE EMPIRE ZONES PROGRAM EXPIRED SHALL
CONTINUE TO BE DEEMED IN THE EMPIRE  ZONE  IN  WHICH  THE  TAXPAYER  WAS
CERTIFIED  AS  AN  EMPIRE ZONE BUSINESS ON THE DAY IMMEDIATELY PRECEDING
THE DAY THE EMPIRE ZONES PROGRAM EXPIRED FOR EACH  OF  THE  THREE  YEARS
NEXT  SUCCEEDING THE TAXABLE YEAR FOR WHICH THE CREDIT UNDER SUBDIVISION
THREE OF THIS SECTION IS ALLOWED.
  5. QEZE CREDIT FOR REAL PROPERTY TAXES. (A)  ALLOWANCE  OF  CREDIT.  A
TAXPAYER  WHICH IS A QUALIFIED EMPIRE ZONE ENTERPRISE SHALL BE ALLOWED A
CREDIT FOR ELIGIBLE REAL PROPERTY TAXES, TO BE COMPUTED AS  PROVIDED  IN
SECTION  FIFTEEN  OF THIS CHAPTER, AGAINST THE TAX IMPOSED BY THIS ARTI-
CLE.
  (B) APPLICATION OF CREDIT. THE CREDIT ALLOWED UNDER  THIS  SUBDIVISION
FOR  ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS
THAN THE FIXED DOLLAR MINIMUM AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D)  OF
SUBDIVISION  ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF
THE AMOUNT OF CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR
REDUCES THE TAX TO SUCH AMOUNT OR IF THE  TAXPAYER  OTHERWISE  PAYS  TAX
BASED  ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT
DEDUCTIBLE IN SUCH TAXABLE YEAR SHALL BE TREATED AS  AN  OVERPAYMENT  OF
TAX  TO  BE  CREDITED  OR  REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER,  THE
PROVISIONS  OF  SUBSECTION  (C)  OF SECTION ONE THOUSAND EIGHTY-EIGHT OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  6. QEZE TAX REDUCTION CREDIT. (A)  ALLOWANCE  OF  CREDIT.  A  TAXPAYER
WHICH  IS A QUALIFIED EMPIRE ZONE ENTERPRISE SHALL BE ALLOWED A QEZE TAX
REDUCTION CREDIT, TO BE COMPUTED AS PROVIDED IN SECTION SIXTEEN OF  THIS
CHAPTER, AGAINST THE TAX IMPOSED BY THIS ARTICLE.
  (B)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO  LESS
THAN  THE  FIXED  DOLLAR  MINIMUM  AMOUNT PRESCRIBED IN PARAGRAPH (D) OF
SUBDIVISION ONE OF SECTION TWO HUNDRED TEN OF  THIS  ARTICLE.  PROVIDED,
HOWEVER,  THIS PARAGRAPH SHALL NOT APPLY TO A TAXPAYER WITH A ZONE ALLO-
CATION FACTOR OF ONE HUNDRED PERCENT.
  7. QUALIFIED EMERGING TECHNOLOGY COMPANY EMPLOYMENT CREDIT. (A) APPLI-
CATION OF CREDIT. A TAXPAYER SHALL BE ALLOWED A CREDIT, TO  BE  COMPUTED
AS  HEREINAFTER  PROVIDED,  AGAINST  THE  TAX  IMPOSED  BY THIS ARTICLE,
PROVIDED:
  (I) THE TAXPAYER IS A QUALIFIED EMERGING TECHNOLOGY  COMPANY  PURSUANT
TO  THE  PROVISIONS  OF  SECTION  THIRTY-ONE HUNDRED TWO-E OF THE PUBLIC
AUTHORITIES LAW; AND
  (II) THE AVERAGE NUMBER OF  INDIVIDUALS  EMPLOYED  FULL  TIME  BY  THE
TAXPAYER  IN  NEW  YORK  STATE  DURING  THE TAXABLE YEAR IS AT LEAST ONE
HUNDRED ONE PERCENT OF THE TAXPAYER'S  BASE  YEAR  EMPLOYMENT.  FOR  THE
PURPOSES  OF  THIS SUBDIVISION, "BASE YEAR EMPLOYMENT" MEANS THE AVERAGE
NUMBER OF INDIVIDUALS EMPLOYED FULL-TIME BY THE TAXPAYER  IN  THE  STATE
DURING  THE  THREE TAXABLE YEARS IMMEDIATELY PRECEDING THE FIRST TAXABLE
YEAR IN WHICH  THE  CREDIT  IS  CLAIMED.  WHERE  THE  TAXPAYER  PROVIDED
FULL-TIME  EMPLOYMENT  WITHIN  THE  STATE  DURING ONLY A PORTION OF SUCH
THREE-YEAR PERIOD, THEN THE FIRST EFFECTIVE DATE FOR THE COMPANY TO TAKE
ADVANTAGE OF THIS CREDIT SHALL BE THE NEXT YEAR FOLLOWING THE FIRST FULL
TAXABLE YEAR THAT THE COMPANY  HAD  FULL-TIME  EMPLOYMENT  IN  NEW  YORK
STATE.  FOR  THE PURPOSES OF THIS PARAGRAPH THE TERM "THREE YEARS" SHALL

S. 6359--C                         87

BE DEEMED TO REFER INSTEAD TO  THE  PRIOR  YEAR'S  FULL-TIME  EMPLOYMENT
AFTER  THE  FIRST  YEAR  AND  THE AVERAGE OF THE FIRST EIGHT QUARTERS OF
EMPLOYMENT AFTER THE FIRST TWO TAXABLE YEARS IN NEW YORK STATE.
  (B)  CREDIT  LIMITATION. THE CREDIT SHALL BE ALLOWED ONLY IN THE FIRST
TAXABLE YEAR IN WHICH THE CREDIT IS CLAIMED AND IN EACH OF THE NEXT  TWO
TAXABLE  YEARS,  PROVIDED  THAT  THE CONDITIONS OF PARAGRAPH (A) OF THIS
SUBDIVISION ARE SATISFIED IN EACH TAXABLE YEAR.
  (C) AVERAGE NUMBER OF INDIVIDUALS EMPLOYED FULL-TIME. FOR THE PURPOSES
OF THIS SUBDIVISION, AVERAGE NUMBER OF  INDIVIDUALS  EMPLOYED  FULL-TIME
SHALL  BE  COMPUTED BY ADDING THE NUMBER OF SUCH INDIVIDUALS EMPLOYED BY
THE TAXPAYER AT THE END OF EACH QUARTER  DURING  EACH  TAXABLE  YEAR  OR
OTHER  APPLICABLE  PERIOD AND DIVIDING THE SUM SO OBTAINED BY THE NUMBER
OF SUCH QUARTERS OCCURRING WITHIN SUCH TAXABLE YEAR OR OTHER  APPLICABLE
PERIOD; PROVIDED HOWEVER, EXCEPT THAT IN COMPUTING BASE YEAR EMPLOYMENT,
THERE  SHALL  BE  EXCLUDED THEREFROM ANY EMPLOYEE WITH RESPECT TO WHOM A
CREDIT PROVIDED FOR UNDER SUBDIVISION SIX OF THIS SECTION IS CLAIMED FOR
THE TAXABLE YEAR.
  (D) AMOUNT OF CREDIT. THE AMOUNT OF THE CREDIT SHALL EQUAL THE PRODUCT
OF ONE  THOUSAND  DOLLARS  TIMES  THE  NUMBER  OF  INDIVIDUALS  EMPLOYED
FULL-TIME  BY THE TAXPAYER IN THE TAXABLE YEAR THAT ARE IN EXCESS OF ONE
HUNDRED PERCENT OF THE TAXPAYER'S BASE YEAR EMPLOYMENT.
  (E) CARRYOVER. THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXA-
BLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR  TO  LESS  THAN  THE
FIXED  DOLLAR  MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION
ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF  THE  AMOUNT
OF  CREDIT  ALLOWED  UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES
THE TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS  TAX  BASED  ON
THE  FIXED  DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCT-
IBLE IN SUCH TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT OF  TAX  TO
BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF SECTION ONE
THOUSAND  EIGHTY-SIX  OF THIS CHAPTER. PROVIDED, HOWEVER, THE PROVISIONS
OF SUBSECTION (C) OF SECTION ONE THOUSAND EIGHTY-EIGHT OF  THIS  CHAPTER
NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  8.  QUALIFIED  EMERGING  TECHNOLOGY  COMPANY  CAPITAL  TAX CREDIT. (A)
AMOUNT OF CREDIT. A TAXPAYER SHALL BE ALLOWED A CREDIT AGAINST  THE  TAX
IMPOSED  BY THIS ARTICLE. THE AMOUNT OF THE CREDIT SHALL BE EQUAL TO ONE
OF THE FOLLOWING PERCENTAGES, PER EACH QUALIFIED INVESTMENT IN A  QUALI-
FIED  EMERGING  TECHNOLOGY  COMPANY  AS  DEFINED  IN  SECTION THIRTY-ONE
HUNDRED TWO-E OF THE PUBLIC AUTHORITIES LAW,  MADE  DURING  THE  TAXABLE
YEAR, AND CERTIFIED BY THE COMMISSIONER, EITHER:
  (1)  TEN  PERCENT OF QUALIFIED INVESTMENTS IN QUALIFIED EMERGING TECH-
NOLOGY COMPANIES, EXCEPT FOR INVESTMENTS MADE BY  OR  ON  BEHALF  OF  AN
OWNER  OF  THE  BUSINESS,  INCLUDING, BUT NOT LIMITED TO, A STOCKHOLDER,
PARTNER OR SOLE PROPRIETOR, OR ANY RELATED PERSON, AS DEFINED IN SUBPAR-
AGRAPH (C) OF PARAGRAPH THREE OF SUBSECTION (B) OF SECTION FOUR  HUNDRED
SIXTY-FIVE OF THE INTERNAL REVENUE CODE, AND PROVIDED, HOWEVER, THAT THE
TAXPAYER  CERTIFIES  TO  THE  COMMISSIONER THAT THE QUALIFIED INVESTMENT
WILL NOT BE SOLD, TRANSFERRED, TRADED, OR DISPOSED OF  DURING  THE  FOUR
YEARS FOLLOWING THE YEAR IN WHICH THE CREDIT IS FIRST CLAIMED; OR
  (2)  TWENTY  PERCENT  OF  QUALIFIED  INVESTMENTS IN QUALIFIED EMERGING
TECHNOLOGY COMPANIES, EXCEPT FOR INVESTMENTS MADE BY OR ON BEHALF OF  AN
OWNER  OF  THE  BUSINESS,  INCLUDING, BUT NOT LIMITED TO, A STOCKHOLDER,
PARTNER OR SOLE PROPRIETOR, OR ANY RELATED PERSON, AS DEFINED IN SUBPAR-
AGRAPH (C) OF PARAGRAPH THREE OF SUBSECTION (B) OF SECTION FOUR  HUNDRED
SIXTY-FIVE OF THE INTERNAL REVENUE CODE, AND PROVIDED, HOWEVER, THAT THE
TAXPAYER  CERTIFIES  TO  THE  COMMISSIONER THAT THE QUALIFIED INVESTMENT

S. 6359--C                         88

WILL NOT BE SOLD, TRANSFERRED, TRADED, OR DISPOSED OF  DURING  THE  NINE
YEARS FOLLOWING THE YEAR IN WHICH THE CREDIT IS FIRST CLAIMED.
  (B)  QUALIFIED  INVESTMENT.  "QUALIFIED INVESTMENT" MEANS THE CONTRIB-
UTION OF PROPERTY TO A CORPORATION IN EXCHANGE FOR ORIGINAL ISSUE  CAPI-
TAL STOCK OR OTHER OWNERSHIP INTEREST, THE CONTRIBUTION OF PROPERTY TO A
PARTNERSHIP  IN EXCHANGE FOR AN INTEREST IN THE PARTNERSHIP, AND SIMILAR
CONTRIBUTIONS IN THE CASE OF A BUSINESS ENTITY NOT IN CORPORATE OR PART-
NERSHIP FORM IN EXCHANGE FOR AN OWNERSHIP INTEREST IN SUCH ENTITY.   THE
TOTAL  AMOUNT OF CREDIT ALLOWABLE TO A TAXPAYER UNDER THIS PROVISION FOR
ALL YEARS, TAKEN IN THE AGGREGATE, SHALL NOT EXCEED  ONE  HUNDRED  FIFTY
THOUSAND  DOLLARS  IN  THE CASE OF INVESTMENTS MADE PURSUANT TO SUBPARA-
GRAPH ONE OF PARAGRAPH (A) OF THIS  SUBDIVISION  AND  SHALL  NOT  EXCEED
THREE  HUNDRED THOUSAND DOLLARS IN THE CASE OF INVESTMENTS MADE PURSUANT
TO SUBPARAGRAPH TWO OF PARAGRAPH (A) OF THIS SUBDIVISION.
  (C) CARRYOVER. IN NO EVENT SHALL THE  CREDIT  AND  CARRYOVER  OF  SUCH
CREDIT  ALLOWED  UNDER  THIS  SUBDIVISION  FOR  ANY TAXABLE YEAR, IN THE
AGGREGATE, REDUCE THE TAX DUE FOR SUCH  YEAR  TO  LESS  THAN  THE  FIXED
DOLLAR  MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE OF
SECTION TWO HUNDRED TEN OF THIS CHAPTER. HOWEVER, IF THE AMOUNT OF CRED-
IT OR CARRYOVERS OF SUCH CREDIT, OR BOTH, ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR REDUCES THE TAX TO SUCH AMOUNT OR IF  THE  TAXPAYER
OTHERWISE  PAYS  TAX BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, OR IF ANY
PART OF THE CREDIT OR CARRYOVERS OF SUCH CREDIT MAY NOT BE DEDUCTED FROM
THE TAX OTHERWISE DUE BY REASON OF THE FINAL SENTENCE OF THIS PARAGRAPH,
ANY AMOUNT OF CREDIT OR CARRYOVERS OF SUCH CREDIT THUS NOT DEDUCTIBLE IN
SUCH TAXABLE YEAR MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND
MAY BE DEDUCTED FROM THE TAX FOR SUCH YEAR OR YEARS.  IN  ADDITION,  THE
AMOUNT  OF  SUCH  CREDIT,  AND  CARRYOVERS OF SUCH CREDIT TO THE TAXABLE
YEAR, DEDUCTED FROM THE TAX OTHERWISE DUE MAY  NOT,  IN  THE  AGGREGATE,
EXCEED  FIFTY  PERCENT OF THE TAX IMPOSED UNDER SECTION TWO HUNDRED NINE
OF THIS ARTICLE COMPUTED WITHOUT REGARD TO ANY CREDIT  PROVIDED  FOR  BY
THIS SECTION.
  (D)  RECAPTURE.  (1)  WHERE  A  TAXPAYER SELLS, TRANSFERS OR OTHERWISE
DISPOSES OF CORPORATE STOCK, A PARTNERSHIP INTEREST OR  OTHER  OWNERSHIP
INTEREST ARISING FROM THE MAKING OF A QUALIFIED INVESTMENT WHICH WAS THE
BASIS, IN WHOLE OR IN PART, FOR THE ALLOWANCE OF THE CREDIT PROVIDED FOR
UNDER SUBPARAGRAPH ONE OF PARAGRAPH (A) OF THIS SUBDIVISION, OR WHERE AN
INVESTMENT  WHICH  WAS  THE  BASIS FOR SUCH ALLOWANCE IS, IN WHOLE OR IN
PART, RECOVERED BY SUCH  TAXPAYER,  AND  SUCH  DISPOSITION  OR  RECOVERY
OCCURS  DURING  THE  TAXABLE  YEAR OR WITHIN FORTY-EIGHT MONTHS FROM THE
CLOSE OF THE TAXABLE YEAR WITH RESPECT TO WHICH SUCH CREDIT IS  ALLOWED,
THE  TAXPAYER  SHALL ADD BACK, WITH RESPECT TO THE TAXABLE YEAR IN WHICH
THE DISPOSITION OR  RECOVERY  DESCRIBED  ABOVE  OCCURRED,  THE  REQUIRED
PORTION OF THE CREDIT ORIGINALLY ALLOWED.
  (2)  WHERE A TAXPAYER SELLS, TRANSFERS OR OTHERWISE DISPOSES OF CORPO-
RATE STOCK, A PARTNERSHIP INTEREST OR OTHER OWNERSHIP  INTEREST  ARISING
FROM  THE MAKING OF A QUALIFIED INVESTMENT WHICH WAS THE BASIS, IN WHOLE
OR IN PART, FOR THE ALLOWANCE OF THE CREDIT PROVIDED FOR UNDER  SUBPARA-
GRAPH  TWO  OF PARAGRAPH (A) OF THIS SUBDIVISION, OR WHERE AN INVESTMENT
WHICH WAS THE BASIS FOR SUCH ALLOWANCE IS IN ANY MANNER, IN WHOLE OR  IN
PART,  RECOVERED  BY  SUCH  TAXPAYER,  AND  SUCH DISPOSITION OR RECOVERY
OCCURS DURING THE TAXABLE YEAR OR WITHIN ONE HUNDRED EIGHT  MONTHS  FROM
THE  CLOSE  OF  THE  TAXABLE  YEAR  WITH RESPECT TO WHICH SUCH CREDIT IS
ALLOWED, THE TAXPAYER SHALL ADD BACK, WITH RESPECT TO THE  TAXABLE  YEAR
IN  WHICH  THE  DISPOSITION OR RECOVERY DESCRIBED IN SUBPARAGRAPH ONE OF

S. 6359--C                         89

THIS PARAGRAPH OCCURRED THE REQUIRED PORTION OF  THE  CREDIT  ORIGINALLY
ALLOWED.
  (3) THE REQUIRED PORTION OF THE CREDIT ORIGINALLY ALLOWED SHALL BE THE
PRODUCT  OF  (A) THE PORTION OF SUCH CREDIT ATTRIBUTABLE TO THE PROPERTY
DISPOSED OF AND (B) THE APPLICABLE PERCENTAGE.
  (4) THE APPLICABLE PERCENTAGE SHALL BE:
  (A) FOR CREDITS ALLOWED PURSUANT TO SUBPARAGRAPH ONE OF PARAGRAPH  (A)
OF THIS SUBDIVISION:
  (I)  ONE HUNDRED PERCENT, IF THE DISPOSITION OR RECOVERY OCCURS WITHIN
THE TAXABLE YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED  OR  WITHIN
TWELVE MONTHS OF THE END OF SUCH TAXABLE YEAR,
  (II)  SEVENTY-FIVE PERCENT, IF THE DISPOSITION OR RECOVERY OCCURS MORE
THAN TWELVE BUT NOT MORE THAN TWENTY-FOUR MONTHS AFTER THE  END  OF  THE
TAXABLE YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED,
  (III)  FIFTY  PERCENT, IF THE DISPOSITION OR RECOVERY OCCURS MORE THAN
TWENTY-FOUR MONTHS BUT NOT MORE THAN THIRTY-SIX MONTHS AFTER THE END  OF
THE TAXABLE YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED, OR
  (IV)  TWENTY-FIVE  PERCENT, IF THE DISPOSITION OR RECOVERY OCCURS MORE
THAN THIRTY-SIX MONTHS BUT NOT MORE THAN FORTY-EIGHT  MONTHS  AFTER  THE
END OF THE TAXABLE YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED; OR
  (B)  FOR CREDITS ALLOWED PURSUANT TO SUBPARAGRAPH TWO OF PARAGRAPH (A)
OF THIS SUBDIVISION:
  (I) ONE HUNDRED PERCENT, IF THE DISPOSITION OR RECOVERY OCCURS  WITHIN
THE  TAXABLE  YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED OR WITHIN
TWELVE MONTHS OF THE END OF SUCH TAXABLE YEAR,
  (II) EIGHTY PERCENT, IF THE DISPOSITION OR RECOVERY OCCURS  MORE  THAN
TWELVE BUT NOT MORE THAN FORTY-EIGHT MONTHS AFTER THE END OF THE TAXABLE
YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED,
  (III)  SIXTY  PERCENT, IF THE DISPOSITION OR RECOVERY OCCURS MORE THAN
FORTY-EIGHT MONTHS BUT NOT MORE THAN SEVENTY-TWO MONTHS AFTER THE END OF
THE TAXABLE YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED,
  (IV) FORTY PERCENT, IF THE DISPOSITION OR RECOVERY  OCCURS  MORE  THAN
SEVENTY-TWO  MONTHS BUT NOT MORE THAN NINETY-SIX MONTHS AFTER THE END OF
THE TAXABLE YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED, OR
  (V) TWENTY PERCENT, IF THE DISPOSITION OR RECOVERY  OCCURS  MORE  THAN
NINETY-SIX  MONTHS  BUT NOT MORE THAN ONE HUNDRED EIGHT MONTHS AFTER THE
END OF THE TAXABLE YEAR WITH RESPECT TO WHICH THE CREDIT IS ALLOWED.
  9. CREDIT FOR THE  SPECIAL  ADDITIONAL  MORTGAGE  RECORDING  TAX.  (A)
APPLICATION OF CREDIT. A TAXPAYER SHALL BE ALLOWED A CREDIT, TO BE CRED-
ITED AGAINST THE TAX IMPOSED BY THIS ARTICLE, EQUAL TO THE AMOUNT OF THE
SPECIAL  ADDITIONAL MORTGAGE RECORDING TAX PAID BY THE TAXPAYER PURSUANT
TO  THE  PROVISIONS  OF  SUBDIVISION  ONE-A  OF  SECTION   TWO   HUNDRED
FIFTY-THREE OF THIS CHAPTER OR MORTGAGES RECORDED. PROVIDED, HOWEVER, NO
CREDIT  SHALL  BE  ALLOWED  WITH  RESPECT TO A MORTGAGE OF REAL PROPERTY
PRINCIPALLY IMPROVED OR  TO  BE  IMPROVED  BY  ONE  OR  MORE  STRUCTURES
CONTAINING  IN  THE  AGGREGATE  NOT  MORE  THAN SIX RESIDENTIAL DWELLING
UNITS, EACH DWELLING UNIT HAVING ITS OWN  SEPARATE  COOKING  FACILITIES,
WHERE  THE  REAL  PROPERTY  IS  LOCATED  IN  ONE OR MORE OF THE COUNTIES
COMPRISING  THE  METROPOLITAN  COMMUTER  TRANSPORTATION  AREA.  PROVIDED
FURTHER,  HOWEVER, NO CREDIT SHALL BE ALLOWED WITH RESPECT TO A MORTGAGE
OF REAL PROPERTY PRINCIPALLY IMPROVED OR TO BE IMPROVED BY ONE  OR  MORE
STRUCTURES  CONTAINING  IN  THE  AGGREGATE NOT MORE THAN SIX RESIDENTIAL
DWELLING UNITS, EACH DWELLING  UNIT  HAVING  ITS  OWN  SEPARATE  COOKING
FACILITIES, WHERE THE REAL PROPERTY IS LOCATED IN THE COUNTY OF ERIE.
  (B)  CARRYOVER.  IN  NO  EVENT SHALL THE CREDIT HEREIN PROVIDED FOR BE
ALLOWED IN AN AMOUNT WHICH WILL REDUCE THE TAX PAYABLE TO LESS THAN  THE

S. 6359--C                         90

FIXED  DOLLAR  MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION
ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. IF, HOWEVER, THE  AMOUNT
OF CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR, INCLUD-
ING  ANY  CREDIT CARRIED OVER FROM A PRIOR TAXABLE YEAR, REDUCES THE TAX
TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE  FIXED
DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN SUCH TAXA-
BLE  YEAR  MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY BE
DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
  10. CREDIT FOR SERVICING CERTAIN MORTGAGES. (A) GENERAL. EVERY TAXPAY-
ER MEETING THE REQUIREMENTS OF THE STATE OF  NEW  YORK  MORTGAGE  AGENCY
APPLICABLE  TO THE SERVICING OF MORTGAGES ACQUIRED BY SUCH AGENCY PURSU-
ANT TO THE STATE OF NEW YORK  MORTGAGE  AGENCY  ACT,  WHICH  SHALL  HAVE
ENTERED  INTO  A  CONTRACT WITH THE STATE OF NEW YORK MORTGAGE AGENCY TO
SERVICE MORTGAGES ACQUIRED BY SUCH AGENCY PURSUANT TO THE STATE  OF  NEW
YORK  MORTGAGE  AGENCY ACT, SHALL HAVE CREDITED TO IT ANNUALLY AN AMOUNT
EQUAL TO TWO AND NINETY-THREE ONE HUNDREDTHS PER  CENTUM  OF  THE  TOTAL
PRINCIPAL AND INTEREST COLLECTED BY THE TAXPAYER DURING ITS TAXABLE YEAR
ON  EACH  SUCH  MORTGAGE  SECURED BY A LIEN ON REAL ESTATE IMPROVED BY A
ONE-FAMILY TO FOUR-FAMILY RESIDENTIAL STRUCTURE AND AN AMOUNT  EQUAL  TO
THE  INTEREST  COLLECTED BY THE TAXPAYER DURING ITS TAXABLE YEAR ON EACH
SUCH MORTGAGE SECURED BY A LIEN ON REAL PROPERTY IMPROVED BY A STRUCTURE
OCCUPIED AS THE RESIDENCE OF FIVE OR MORE FAMILIES LIVING  INDEPENDENTLY
OF  EACH  OTHER, MULTIPLIED BY A FRACTION THE DENOMINATOR OF WHICH SHALL
BE THE INTEREST RATE PAYABLE ON THE MORTGAGE (COMPUTED TO  FIVE  DECIMAL
PLACES) AND THE NUMERATOR OF WHICH SHALL BE .00125 IN THE CASE OF SUCH A
MORTGAGE  ACQUIRED BY SUCH AGENCY FOR LESS THAN ONE MILLION DOLLARS, AND
.00100 IN THE CASE OF SUCH A MORTGAGE ACQUIRED BY SUCH  AGENCY  FOR  ONE
MILLION DOLLARS OR MORE. IN NO EVENT SHALL THE CREDIT ALLOWED UNDER THIS
SUBDIVISION  REDUCE THE TAX TO LESS THAN THE FIXED DOLLAR MINIMUM AMOUNT
PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE OF  SECTION  TWO  HUNDRED
TEN  OF  THIS ARTICLE. IN COMPUTING SUCH TAX CREDIT FOR THE SERVICING OF
MORTGAGES ON  ONE-FAMILY  TO  FOUR-FAMILY  RESIDENTIAL  STRUCTURES,  THE
TAXPAYER  SHALL NOT BE ENTITLED TO CREDIT FOR THE COLLECTION OF CURTAIL-
MENT OR PAYMENTS IN DISCHARGE OF ANY SUCH MORTGAGE. FOR THE PURPOSES  OF
THIS SUBDIVISION,
  (B)(I) A "CURTAILMENT" SHALL MEAN AMOUNTS PAID BY MORTGAGORS
  (A)  IN  EXCESS  OF  THE  MONTHLY  CONSTANT  DUE  DURING  THE MONTH OF
COLLECTION AND
  (B) IN REDUCTION OF THE UNPAID PRINCIPAL BALANCE OF THE  MORTGAGE;  IN
THE ABSENCE OF CLEAR EVIDENCE TO THE CONTRARY, AMOUNTS PAID IN EXCESS OF
THE  MONTHLY CONSTANT DUE DURING THE MONTH OF COLLECTION SHALL BE DEEMED
TO BE IN REDUCTION OF THE UNPAID PRINCIPAL BALANCE OF THE MORTGAGE; AND
  (II) "MONTHLY CONSTANT" SHALL MEAN THE AMOUNT OF PRINCIPAL AND  INTER-
EST WHICH IS DUE AND PAYABLE ACCORDING TO THE MORTGAGE DOCUMENTS ON EACH
PERIODIC PAYMENT DATE.
  11.  AGRICULTURAL  PROPERTY  TAX CREDIT. (A) GENERAL. IN THE CASE OF A
TAXPAYER WHICH IS AN ELIGIBLE FARMER OR AN ELIGIBLE FARMER WHO HAS  PAID
TAXES  PURSUANT  TO A LAND CONTRACT, THERE SHALL BE ALLOWED A CREDIT FOR
THE ALLOWABLE SCHOOL DISTRICT PROPERTY TAXES. THE TERM "ALLOWABLE SCHOOL
DISTRICT PROPERTY TAXES" MEANS THE SCHOOL DISTRICT PROPERTY  TAXES  PAID
DURING  THE  TAXABLE YEAR ON QUALIFIED AGRICULTURAL PROPERTY, SUBJECT TO
THE ACREAGE LIMITATION PROVIDED IN PARAGRAPH (E) OF THIS SUBDIVISION AND
THE INCOME LIMITATION PROVIDED IN PARAGRAPH (F) OF THIS SUBDIVISION.
  (B) ELIGIBLE FARMER.  FOR  PURPOSES  OF  THIS  SUBDIVISION,  THE  TERM
"ELIGIBLE FARMER" MEANS A TAXPAYER WHOSE FEDERAL GROSS INCOME FROM FARM-
ING  FOR THE TAXABLE YEAR IS AT LEAST TWO-THIRDS OF EXCESS FEDERAL GROSS

S. 6359--C                         91

INCOME. THE TERM "ELIGIBLE FARMER" ALSO  INCLUDES  A  CORPORATION  OTHER
THAN  THE  TAXPAYER  OF RECORD FOR QUALIFIED AGRICULTURAL LAND WHICH HAS
PAID THE SCHOOL DISTRICT PROPERTY TAXES  ON  SUCH  LAND  PURSUANT  TO  A
CONTRACT FOR THE FUTURE PURCHASE OF SUCH LAND; PROVIDED THAT SUCH CORPO-
RATION  HAS  A  FEDERAL  GROSS  INCOME FROM FARMING FOR THE TAXABLE YEAR
WHICH IS AT  LEAST  TWO-THIRDS  OF  EXCESS  FEDERAL  GROSS  INCOME;  AND
PROVIDED FURTHER THAT, IN DETERMINING SUCH INCOME ELIGIBILITY, A TAXPAY-
ER  MAY,  FOR  ANY  TAXABLE  YEAR, USE THE AVERAGE OF SUCH FEDERAL GROSS
INCOME FROM FARMING FOR THAT TAXABLE YEAR AND SUCH INCOME  FOR  THE  TWO
CONSECUTIVE  TAXABLE  YEARS  IMMEDIATELY  PRECEDING  SUCH  TAXABLE YEAR.
EXCESS FEDERAL GROSS INCOME MEANS THE AMOUNT  OF  FEDERAL  GROSS  INCOME
FROM  ALL  SOURCES  FOR  THE  TAXABLE  YEAR IN EXCESS OF THIRTY THOUSAND
DOLLARS. FOR THE PURPOSES OF THIS PARAGRAPH, PAYMENTS FROM  THE  STATE'S
FARMLAND  PROTECTION PROGRAM, ADMINISTERED BY THE DEPARTMENT OF AGRICUL-
TURE AND MARKETS, SHALL BE INCLUDED AS FEDERAL GROSS INCOME FROM FARMING
FOR OTHERWISE ELIGIBLE FARMERS.
  (C) SCHOOL DISTRICT PROPERTY TAXES. FOR PURPOSES OF THIS  SUBDIVISION,
THE  TERM  "SCHOOL  DISTRICT  PROPERTY  TAXES" MEANS ALL PROPERTY TAXES,
SPECIAL AD VALOREM LEVIES AND SPECIAL ASSESSMENTS, EXCLUSIVE  OF  PENAL-
TIES  AND INTEREST, LEVIED FOR SCHOOL DISTRICT PURPOSES ON THE QUALIFIED
AGRICULTURAL PROPERTY OWNED BY THE TAXPAYER.
  (D) QUALIFIED AGRICULTURAL PROPERTY. FOR PURPOSES OF THIS SUBDIVISION,
THE TERM "QUALIFIED AGRICULTURAL PROPERTY" MEANS LAND  LOCATED  IN  THIS
STATE  WHICH  IS USED IN AGRICULTURAL PRODUCTION, AND LAND IMPROVEMENTS,
STRUCTURES AND BUILDINGS (EXCLUDING BUILDINGS USED  FOR  THE  TAXPAYER'S
RESIDENTIAL  PURPOSE) LOCATED ON SUCH LAND WHICH ARE USED OR OCCUPIED TO
CARRY OUT SUCH PRODUCTION. QUALIFIED AGRICULTURAL PROPERTY ALSO INCLUDES
LAND SET ASIDE OR RETIRED UNDER A  FEDERAL  SUPPLY  MANAGEMENT  OR  SOIL
CONSERVATION  PROGRAM  OR  LAND THAT AT THE TIME IT BECOMES SUBJECT TO A
CONSERVATION EASEMENT MET THE REQUIREMENTS UNDER THIS PARAGRAPH.
  (E) ACREAGE LIMITATION. (I) ELIGIBLE TAXES.  IN  THE  EVENT  THAT  THE
QUALIFIED  AGRICULTURAL  PROPERTY OWNED BY THE TAXPAYER INCLUDES LAND IN
EXCESS OF THE BASE ACREAGE AS PROVIDED IN THIS PARAGRAPH, THE AMOUNT  OF
SCHOOL  DISTRICT  PROPERTY TAXES ELIGIBLE FOR CREDIT UNDER THIS SUBDIVI-
SION SHALL BE THAT PORTION OF THE SCHOOL DISTRICT PROPERTY  TAXES  WHICH
BEARS  THE  SAME  RATIO TO THE TOTAL SCHOOL DISTRICT PROPERTY TAXES PAID
DURING THE TAXABLE YEAR, AS THE ACREAGE ALLOWABLE UNDER  THIS  PARAGRAPH
BEARS TO THE ENTIRE ACREAGE OF SUCH LAND.
  (II)  ALLOWABLE  ACREAGE. THE ALLOWABLE ACREAGE IS THE SUM OF THE BASE
ACREAGE SET FORTH BELOW AND FIFTY PERCENT OF  THE  INCREMENTAL  ACREAGE.
THE INCREMENTAL ACREAGE IS THE EXCESS OF THE ENTIRE ACREAGE OF QUALIFIED
AGRICULTURAL LAND OWNED BY THE TAXPAYER OVER THE BASE ACREAGE. EXCEPT AS
PROVIDED  IN  SUBPARAGRAPH  (III) OF THIS PARAGRAPH, THE BASE ACREAGE IS
THREE HUNDRED FIFTY ACRES.
THE TOTAL BASE ACREAGE MAY BE  INCREASED  BY  ANY  ACREAGE  ENROLLED  OR
PARTICIPATING DURING THE TAXABLE YEAR IN A FEDERAL ENVIRONMENTAL CONSER-
VATION  ACREAGE  RESERVE  PROGRAM PURSUANT TO TITLE THREE OF THE FEDERAL
AGRICULTURE IMPROVEMENT AND REFORM ACT OF NINETEEN HUNDRED NINETY-SIX.
  (III) BASE ACREAGE OF RELATED PERSONS. WHERE THE TAXPAYER AND  ONE  OR
MORE  RELATED  PERSONS  EACH  OWN QUALIFIED AGRICULTURAL PROPERTY ON THE
FIRST DAY OF MARCH OF ANY YEAR, THE BASE ACREAGE UNDER SUBPARAGRAPH (II)
OF THIS PARAGRAPH SHALL  BE  DIVIDED  EQUALLY  AND  ALLOTTED  AMONG  THE
TAXPAYER  AND  SUCH RELATED PERSONS, AND THE TAXPAYER'S BASE ACREAGE FOR
THE TAXABLE YEAR WHICH INCLUDES SUCH MARCH FIRST SHALL BE LIMITED TO ITS
ALLOTTED SHARE. PROVIDED, HOWEVER, IF THE TAXPAYER AND ALL SUCH  RELATED
PERSONS CONSENT (AT SUCH TIME AND IN SUCH MANNER AS THE COMMISSIONER MAY

S. 6359--C                         92

PRESCRIBE)  TO AN UNEQUAL DIVISION, THE TAXPAYER'S BASE ACREAGE FOR SUCH
TAXABLE YEAR SHALL BE LIMITED TO ITS ALLOTTED SHARE UNDER  SUCH  UNEQUAL
DIVISION.
  (IV)  RELATED  PERSONS. (A) FOR PURPOSES OF SUBPARAGRAPH (III) OF THIS
PARAGRAPH, THE TERM "RELATED PERSON" MEANS:
  (I) A CORPORATION SUBJECT TO TAX UNDER THIS ARTICLE, WHERE THE TAXPAY-
ER AND THE CORPORATION ARE MEMBERS OF  THE  SAME  CONTROLLED  GROUP,  AS
DEFINED IN SECTION 267(F) OF THE INTERNAL REVENUE CODE;
  (II)  AN  INDIVIDUAL,  PARTNERSHIP,  ESTATE  OR TRUST, WHERE MORE THAN
FIFTY PERCENT IN VALUE OF THE  OUTSTANDING  STOCK  OF  THE  TAXPAYER  IS
OWNED,  DIRECTLY  OR INDIRECTLY, BY OR FOR SUCH INDIVIDUAL, PARTNERSHIP,
ESTATE OR TRUST OR BY OR FOR THE GRANTOR OF SUCH TRUST;
  (III) A CORPORATION SUBJECT TO TAX UNDER THIS ARTICLE, OR  A  PARTNER-
SHIP,  ESTATE  OR TRUST, IF THE SAME PERSON OWNS MORE THAN FIFTY PERCENT
IN VALUE OF THE OUTSTANDING STOCK OF THE TAXPAYER AND  MORE  THAN  FIFTY
PERCENT  IN  VALUE OF  THE OUTSTANDING STOCK OF THE CORPORATION, OR MORE
THAN FIFTY PERCENT OF THE CAPITAL OR PROFITS INTEREST  IN  THE  PARTNER-
SHIP,  OR  MORE  THAN  FIFTY  PERCENT  OF THE BENEFICIAL INTEREST IN THE
ESTATE OR TRUST;
  (IV) A PARTNERSHIP, ESTATE  OR  TRUST  OF  WHICH  THE  TAXPAYER  OWNS,
DIRECTLY  OR INDIRECTLY, MORE THAN FIFTY PERCENT OF THE CAPITAL, PROFITS
OR BENEFICIAL INTEREST.
  (B) IN DETERMINING WHETHER A PERSON IS A  RELATED  PERSON  WITHIN  THE
MEANING OF THIS SUBPARAGRAPH:
  (I)  STOCK  OWNED,  DIRECTLY  OR  INDIRECTLY, BY OR FOR A CORPORATION,
PARTNERSHIP, ESTATE OR TRUST SHALL BE CONSIDERED AS BEING OWNED  PROPOR-
TIONATELY BY OR FOR ITS SHAREHOLDERS, PARTNERS OR BENEFICIARIES;
  (II)  AN  INDIVIDUAL  SHALL  BE  CONSIDERED AS OWNING THE STOCK OWNED,
DIRECTLY OR INDIRECTLY, BY OR FOR HIS SPOUSE;
  (III) STOCK CONSTRUCTIVELY OWNED BY A PERSON BY REASON OF THE APPLICA-
TION OF ITEM (I) OF THIS CLAUSE SHALL, FOR THE PURPOSE OF APPLYING  ITEM
(I) OR (II) OF THIS CLAUSE, BE TREATED AS ACTUALLY OWNED BY SUCH PERSON.
  (F)  INCOME  LIMITATION. (I) IN THE EVENT THAT THE MODIFIED ENTIRE NET
INCOME OF THE TAXPAYER EXCEEDS TWO HUNDRED THOUSAND DOLLARS, THE  ALLOW-
ABLE SCHOOL DISTRICT PROPERTY TAXES UNDER PARAGRAPH (A) OF THIS SUBDIVI-
SION SHALL BE THE ELIGIBLE TAXES UNDER SUBPARAGRAPH (I) OF PARAGRAPH (E)
OF  THIS SUBDIVISION REDUCED BY THE PRODUCT OF THE AMOUNT OF SUCH ELIGI-
BLE TAXES AND A PERCENTAGE, SUCH PERCENTAGE TO BE DETERMINED  BY  MULTI-
PLYING  ONE HUNDRED PERCENT BY A FRACTION, THE NUMERATOR OF WHICH IS THE
LESSER OF ONE HUNDRED THOUSAND DOLLARS OR THE EXCESS OF  THE  TAXPAYER'S
MODIFIED  ENTIRE  NET  INCOME  OVER TWO HUNDRED THOUSAND DOLLARS AND THE
DENOMINATOR OF WHICH IS ONE HUNDRED THOUSAND DOLLARS.  FOR  PURPOSES  OF
THE  PRECEDING  SENTENCE,  THE  TERM "ELIGIBLE TAXES", WHERE THE ACREAGE
LIMITATION OF PARAGRAPH (E) OF THIS SUBDIVISION DOES  NOT  APPLY,  SHALL
MEAN  THE  TOTAL  SCHOOL DISTRICT PROPERTY TAXES PAID DURING THE TAXABLE
YEAR.
  (II) THE TERM "MODIFIED ENTIRE NET INCOME" MEANS THE ENTIRE NET INCOME
FOR THE TAXABLE YEAR REDUCED BY THE AMOUNT OF  PRINCIPAL  PAID  ON  FARM
INDEBTEDNESS DURING THE TAXABLE YEAR. THE TERM "FARM INDEBTEDNESS" MEANS
DEBT INCURRED OR REFINANCED WHICH IS SECURED BY FARM PROPERTY, WHERE THE
PROCEEDS  OF  THE  DEBT  ARE  DISBURSED FOR EXPENDITURES INCURRED IN THE
BUSINESS OF FARMING.
  (G) CARRYOVER. IN NO EVENT SHALL THE CREDIT PROVIDED HEREIN BE ALLOWED
IN AN AMOUNT WHICH WILL REDUCE THE TAX PAYABLE TO LESS  THAN  THE  FIXED
DOLLAR  MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE OF
SECTION TWO HUNDRED TEN OF THIS ARTICLE.  IF,  HOWEVER,  THE  AMOUNT  OF

S. 6359--C                         93

CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE
TAX  TO  SUCH  AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE
FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN SUCH
TAXABLE  YEAR MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY
BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR  OR  YEARS.  PROVIDED,
HOWEVER, IN LIEU OF CARRYING OVER THE UNUSED PORTION OF SUCH CREDIT, THE
TAXPAYER MAY ELECT TO TREAT SUCH UNUSED PORTION AS AN OVERPAYMENT OF TAX
TO  BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF SECTION
ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER EXCEPT THAT NO INTEREST SHALL BE
PAID ON SUCH OVERPAYMENT.
  (H) NONQUALIFIED USE. (I) NO CREDIT IN CONVERSION YEAR. IN  THE  EVENT
THAT  QUALIFIED  AGRICULTURAL  PROPERTY  IS CONVERTED BY THE TAXPAYER TO
NONQUALIFIED USE, CREDIT UNDER THIS SUBDIVISION  SHALL  NOT  BE  ALLOWED
WITH  RESPECT  TO  SUCH PROPERTY FOR THE TAXABLE YEAR OF CONVERSION (THE
CONVERSION YEAR).
  (II) CREDIT RECAPTURE. IF THE CONVERSION BY THE TAXPAYER OF  QUALIFIED
AGRICULTURAL  PROPERTY  TO  NONQUALIFIED USE OCCURS DURING THE PERIOD OF
THE TWO TAXABLE YEARS FOLLOWING THE TAXABLE YEAR FOR  WHICH  THE  CREDIT
UNDER  THIS SUBDIVISION WAS FIRST CLAIMED WITH RESPECT TO SUCH PROPERTY,
THE CREDIT ALLOWED WITH RESPECT TO SUCH PROPERTY FOR THE  TAXABLE  YEARS
PRIOR  TO THE CONVERSION YEAR MUST BE ADDED BACK IN THE CONVERSION YEAR.
WHERE THE PROPERTY CONVERTED INCLUDES LAND, AND WHERE THE CONVERSION  IS
OF  ONLY  A PORTION OF SUCH LAND, THE CREDIT ALLOWED WITH RESPECT TO THE
PROPERTY CONVERTED SHALL BE DETERMINED BY MULTIPLYING THE ENTIRE  CREDIT
UNDER  THIS  SUBDIVISION  FOR  THE TAXABLE YEARS PRIOR TO THE CONVERSION
YEAR BY A FRACTION, THE NUMERATOR OF WHICH IS THE ACREAGE CONVERTED  AND
THE DENOMINATOR OF WHICH IS THE ENTIRE ACREAGE OF SUCH LAND OWNED BY THE
TAXPAYER IMMEDIATELY PRIOR TO THE CONVERSION.
  (III)  EXCEPTION  TO  RECAPTURE.  SUBPARAGRAPH  (II) OF THIS PARAGRAPH
SHALL NOT APPLY TO THE CONVERSION OF PROPERTY WHERE THE CONVERSION IS BY
REASON OF INVOLUNTARY CONVERSION, WITHIN  THE  MEANING  OF  SECTION  ONE
THOUSAND THIRTY-THREE OF THE INTERNAL REVENUE CODE.
  (IV) CONVERSION TO NONQUALIFIED USE. FOR PURPOSES OF THIS PARAGRAPH, A
SALE OR OTHER DISPOSITION OF QUALIFIED AGRICULTURAL PROPERTY ALONE SHALL
NOT CONSTITUTE A CONVERSION TO A NONQUALIFIED USE.
  (I) SPECIAL RULES. FOR PURPOSES OF THIS SUBDIVISION, THE TERM "FEDERAL
GROSS   INCOME  FROM  FARMING"  SHALL  INCLUDE  GROSS  INCOME  FROM  THE
PRODUCTION OF MAPLE SYRUP, CIDER, CHRISTMAS TREES DERIVED FROM A MANAGED
CHRISTMAS TREE OPERATION WHETHER DUG FOR TRANSPLANTING OR CUT  FROM  THE
STUMP,  OR  FROM  A  COMMERCIAL  HORSE  BOARDING OPERATION AS DEFINED IN
SUBDIVISION THIRTEEN OF SECTION THREE HUNDRED ONE OF THE AGRICULTURE AND
MARKETS LAW, OR FROM THE SALE OF WINE FROM A  LICENSED  FARM  WINERY  AS
PROVIDED  FOR  IN  ARTICLE SIX OF THE ALCOHOLIC BEVERAGE CONTROL LAW, OR
FROM THE SALE OF CIDER FROM A LICENSED FARM CIDERY AS  PROVIDED  FOR  IN
SECTION FIFTY-EIGHT-C OF THE ALCOHOLIC BEVERAGE CONTROL LAW.
  (J)  ELECTION TO DEEM GROSS INCOME OF NEW YORK C CORPORATION TO SHARE-
HOLDERS. FOR PURPOSES OF THIS SUBDIVISION,  FEDERAL  GROSS  INCOME  FROM
FARMING  SHALL  BE ZERO FOR ANY TAXABLE YEAR OF A NEW YORK C CORPORATION
FOR WHICH THE ELECTION UNDER PARAGRAPH NINE OF SUBSECTION (N) OF SECTION
SIX HUNDRED SIX OF THIS CHAPTER IS IN EFFECT.
  12. CREDIT FOR EMPLOYMENT OF PERSONS WITH DISABILITIES. (A)  ALLOWANCE
OF CREDIT. A TAXPAYER SHALL BE ALLOWED A CREDIT, TO BE COMPUTED AS HERE-
INAFTER PROVIDED, AGAINST THE TAX IMPOSED BY THIS ARTICLE, FOR EMPLOYING
WITHIN THE STATE A QUALIFIED EMPLOYEE.
  (B) QUALIFIED EMPLOYEE. A QUALIFIED EMPLOYEE IS AN INDIVIDUAL:

S. 6359--C                         94

  (1) WHO IS CERTIFIED BY THE EDUCATION DEPARTMENT, OR IN THE CASE OF AN
INDIVIDUAL  WHO  IS  BLIND  OR VISUALLY HANDICAPPED, BY THE STATE AGENCY
RESPONSIBLE FOR PROVISION OF VOCATIONAL REHABILITATION SERVICES  TO  THE
BLIND  AND VISUALLY HANDICAPPED: (I) AS A PERSON WITH A DISABILITY WHICH
CONSTITUTES  OR RESULTS IN A SUBSTANTIAL HANDICAP TO EMPLOYMENT AND (II)
AS HAVING COMPLETED OR AS RECEIVING  SERVICES  UNDER  AN  INDIVIDUALIZED
WRITTEN  REHABILITATION  PLAN  APPROVED  BY  THE EDUCATION DEPARTMENT OR
OTHER STATE AGENCY RESPONSIBLE FOR PROVIDING  VOCATIONAL  REHABILITATION
SERVICES TO SUCH INDIVIDUAL; AND
  (2) WHO HAS WORKED ON A FULL-TIME BASIS FOR THE EMPLOYER WHO IS CLAIM-
ING  THE  CREDIT  FOR  AT  LEAST ONE HUNDRED EIGHTY DAYS OR FOUR HUNDRED
HOURS.
  (C) AMOUNT OF CREDIT. EXCEPT AS PROVIDED  IN  PARAGRAPH  (D)  OF  THIS
SUBDIVISION,  THE  AMOUNT  OF CREDIT SHALL BE THIRTY-FIVE PERCENT OF THE
FIRST SIX THOUSAND DOLLARS IN QUALIFIED FIRST-YEAR WAGES EARNED BY  EACH
QUALIFIED  EMPLOYEE.  "QUALIFIED  FIRST-YEAR  WAGES" MEANS WAGES PAID OR
INCURRED BY THE TAXPAYER DURING THE TAXABLE YEAR TO QUALIFIED  EMPLOYEES
WHICH  ARE  ATTRIBUTABLE, WITH RESPECT TO ANY SUCH EMPLOYEE, TO SERVICES
RENDERED DURING THE ONE-YEAR PERIOD BEGINNING WITH THE DAY THE  EMPLOYEE
BEGINS WORK FOR THE TAXPAYER.
  (D)  CREDIT  WHERE  FEDERAL  WORK OPPORTUNITY TAX CREDIT APPLIES. WITH
RESPECT TO ANY QUALIFIED EMPLOYEE WHOSE QUALIFIED FIRST-YEAR WAGES UNDER
PARAGRAPH (C) OF THIS SUBDIVISION ALSO CONSTITUTE  QUALIFIED  FIRST-YEAR
WAGES  FOR  PURPOSES  OF  THE WORK OPPORTUNITY TAX CREDIT FOR VOCATIONAL
REHABILITATION REFERRALS UNDER SECTION FIFTY-ONE OF THE INTERNAL REVENUE
CODE, THE AMOUNT OF CREDIT UNDER  THIS SUBDIVISION SHALL BE  THIRTY-FIVE
PERCENT OF THE FIRST SIX THOUSAND DOLLARS IN QUALIFIED SECOND-YEAR WAGES
EARNED  BY EACH SUCH EMPLOYEE. "QUALIFIED SECOND-YEAR WAGES" MEANS WAGES
PAID OR INCURRED BY THE TAXPAYER DURING THE TAXABLE  YEAR  TO  QUALIFIED
EMPLOYEES  WHICH ARE ATTRIBUTABLE, WITH RESPECT TO ANY SUCH EMPLOYEE, TO
SERVICES RENDERED DURING THE ONE-YEAR PERIOD BEGINNING  ONE  YEAR  AFTER
THE EMPLOYEE BEGINS WORK FOR THE TAXPAYER.
  (E) CARRYOVER. THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXA-
BLE  YEAR  SHALL  NOT  REDUCE THE TAX DUE FOR SUCH YEAR TO LESS THAN THE
FIXED DOLLAR MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D)  OF  SUBDIVISION
ONE  OF  SECTION TWO HUNDRED TEN OF THIS CHAPTER. HOWEVER, IF THE AMOUNT
OF CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR  REDUCES
THE  TAX  TO  SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON
THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE  IN
SUCH  TAXABLE  YEAR  MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS,
AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
  (F)  COORDINATION  WITH  FEDERAL  WORK  OPPORTUNITY  TAX  CREDIT.  THE
PROVISIONS  OF  SECTION  FIFTY-ONE AND FIFTY-TWO OF THE INTERNAL REVENUE
CODE, AS SUCH SECTIONS APPLIED ON OCTOBER FIRST, NINETEEN HUNDRED  NINE-
TY-SIX,  THAT APPLY TO THE FEDERAL WORK OPPORTUNITY TAX CREDIT FOR VOCA-
TIONAL REHABILITATION REFERRALS SHALL APPLY TO  THE  CREDIT  UNDER  THIS
SUBDIVISION  TO  THE  EXTENT  THAT SUCH SECTIONS ARE CONSISTENT WITH THE
SPECIFIC PROVISIONS OF THIS SUBDIVISION, PROVIDED THAT IN THE EVENT OF A
CONFLICT THE PROVISIONS OF THIS SUBDIVISION SHALL CONTROL.
  13. CREDIT FOR PURCHASE OF  AN  AUTOMATED  EXTERNAL  DEFIBRILLATOR.  A
TAXPAYER  SHALL  BE  ALLOWED  A  CREDIT,  TO  BE COMPUTED AS HEREINAFTER
PROVIDED, AGAINST THE TAX IMPOSED BY THIS  ARTICLE,  FOR  THE  PURCHASE,
OTHER  THAN  FOR RESALE, OF AN AUTOMATED EXTERNAL DEFIBRILLATOR, AS SUCH
TERM IS DEFINED IN SECTION THREE THOUSAND-B OF THE  PUBLIC  HEALTH  LAW.
THE  AMOUNT  OF  CREDIT  SHALL  BE THE COST TO THE TAXPAYER OF AUTOMATED
EXTERNAL DEFIBRILLATORS PURCHASED DURING THE TAXABLE YEAR,  SUCH  CREDIT

S. 6359--C                         95

NOT  TO EXCEED FIVE HUNDRED DOLLARS WITH RESPECT TO EACH UNIT PURCHASED.
THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR SHALL NOT
REDUCE THE TAX DUE FOR SUCH YEAR TO LESS THAN THE FIXED  DOLLAR  MINIMUM
AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D) OF SUBDIVISION ONE OF SECTION TWO
HUNDRED TEN OF THIS CHAPTER.
  14. CREDIT FOR PURCHASE OF LONG-TERM CARE INSURANCE.  (A)  GENERAL.  A
TAXPAYER SHALL BE ALLOWED A CREDIT AGAINST THE TAX IMPOSED BY THIS ARTI-
CLE  EQUAL TO TWENTY PERCENT OF THE PREMIUM PAID DURING THE TAXABLE YEAR
FOR LONG-TERM CARE INSURANCE. IN ORDER TO QUALIFY FOR SUCH  CREDIT,  THE
TAXPAYER'S PREMIUM PAYMENT MUST BE FOR THE PURCHASE OF OR FOR CONTINUING
COVERAGE UNDER A LONG-TERM CARE INSURANCE POLICY THAT QUALIFIES FOR SUCH
CREDIT  PURSUANT  TO  SECTION  ONE THOUSAND ONE HUNDRED SEVENTEEN OF THE
INSURANCE LAW.
  (B) CARRYOVER. THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY  YEAR
SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS THAN THE FIXED DOLLAR
MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE OF SECTION
TWO  HUNDRED  TEN  OF  THIS  ARTICLE.  IF, HOWEVER, THE AMOUNT OF CREDIT
ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE TAX TO
SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX  BASED  ON  THE  FIXED
DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN SUCH TAXA-
BLE  YEAR  MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY BE
DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
  15. LOW-INCOME HOUSING CREDIT. (A) ALLOWANCE  OF  CREDIT.  A  TAXPAYER
SHALL  BE  ALLOWED A CREDIT AGAINST THE TAX IMPOSED BY THIS ARTICLE WITH
RESPECT TO THE OWNERSHIP OF ELIGIBLE LOW-INCOME BUILDINGS,  COMPUTED  AS
PROVIDED IN SECTION EIGHTEEN OF THIS CHAPTER.
  (B)  APPLICATION  OF  CREDIT. THE CREDIT AND CARRYOVERS OF SUCH CREDIT
ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR SHALL  NOT,  IN  THE
AGGREGATE,  REDUCE  THE  TAX  DUE  FOR  SUCH YEAR TO LESS THAN THE FIXED
DOLLAR MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE  OF
SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF CRED-
IT OR CARRYOVERS OF SUCH CREDIT, OR BOTH, ALLOWED UNDER THIS SUBDIVISION
FOR  ANY  TAXABLE YEAR REDUCES THE TAX TO SUCH AMOUNT OR IF THE TAXPAYER
OTHERWISE PAYS TAX BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY  AMOUNT
OF CREDIT OR CARRYOVERS OF SUCH CREDIT THUS NOT DEDUCTIBLE IN SUCH TAXA-
BLE  YEAR  MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY BE
DEDUCTED FROM THE TAX FOR SUCH YEAR OR YEARS.
  (C) CREDIT RECAPTURE. FOR PROVISIONS REQUIRING  RECAPTURE  OF  CREDIT,
SEE SUBDIVISION (B) OF SECTION EIGHTEEN OF THIS CHAPTER.
  16.  GREEN  BUILDING CREDIT. (A) ALLOWANCE OF CREDIT. A TAXPAYER SHALL
BE ALLOWED A CREDIT, TO BE COMPUTED AS PROVIDED IN SECTION  NINETEEN  OF
THIS CHAPTER, AGAINST THE TAX IMPOSED BY THIS ARTICLE.
  (B) CARRYOVERS. THE CREDIT AND CARRYOVERS OF SUCH CREDIT ALLOWED UNDER
THIS  SUBDIVISION  FOR  ANY  TAXABLE  YEAR  SHALL NOT, IN THE AGGREGATE,
REDUCE THE TAX DUE FOR SUCH YEAR TO LESS THAN THE FIXED  DOLLAR  MINIMUM
AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D) OF SUBDIVISION ONE OF SECTION TWO
HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF CREDIT OR  CARRY-
OVERS  OF  SUCH  CREDIT, OR BOTH, ALLOWED UNDER THIS SUBDIVISION FOR ANY
TAXABLE YEAR REDUCES THE TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE
PAYS TAX BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF  CREDIT
OR  CARRYOVERS  OF  SUCH CREDIT THUS NOT DEDUCTIBLE IN SUCH TAXABLE YEAR
MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY  BE  DEDUCTED
FROM THE TAX FOR SUCH YEAR OR YEARS.
  17.  BROWNFIELD  REDEVELOPMENT  TAX CREDIT. (A) ALLOWANCE OF CREDIT. A
TAXPAYER SHALL BE ALLOWED A  CREDIT,  TO  BE  COMPUTED  AS  PROVIDED  IN

S. 6359--C                         96

SECTION  TWENTY-ONE  OF  THIS  CHAPTER,  AGAINST THE TAX IMPOSED BY THIS
ARTICLE.
  (B)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO  LESS
THAN  THE  FIXED  DOLLAR  MINIMUM  AMOUNT PRESCRIBED IN PARAGRAPH (D) OF
SUBDIVISION ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER,  IF
THE  AMOUNT  OF  CREDITS  ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE
YEAR REDUCES THE TAX TO SUCH AMOUNT OR IF THE  TAXPAYER  OTHERWISE  PAYS
TAX  BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS
NOT DEDUCTIBLE IN SUCH TAXABLE YEAR SHALL BE TREATED AS  AN  OVERPAYMENT
OF  TAX  TO BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER,  THE
PROVISIONS  OF  SUBSECTION  (C)  OF SECTION ONE THOUSAND EIGHTY-EIGHT OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  18. REMEDIATED BROWNFIELD CREDIT FOR REAL PROPERTY TAXES FOR QUALIFIED
SITES. (A) ALLOWANCE OF CREDIT. A TAXPAYER WHICH IS  A  DEVELOPER  OF  A
QUALIFIED  SITE  SHALL  BE  ALLOWED  A CREDIT FOR ELIGIBLE REAL PROPERTY
TAXES, TO BE COMPUTED AS PROVIDED IN SUBDIVISION (B) OF SECTION  TWENTY-
TWO  OF  THIS  CHAPTER,  AGAINST  THE  TAX  IMPOSED BY THIS ARTICLE. FOR
PURPOSES OF THIS SUBDIVISION, THE TERMS "QUALIFIED SITE" AND "DEVELOPER"
SHALL HAVE THE SAME MEANING AS SET FORTH IN PARAGRAPHS  TWO  AND  THREE,
RESPECTIVELY, OF SUBDIVISION (A) OF SECTION TWENTY-TWO OF THIS CHAPTER.
  (B)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO  LESS
THAN  THE  FIXED  DOLLAR  MINIMUM  AMOUNT PRESCRIBED IN PARAGRAPH (D) OF
SUBDIVISION ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER,  IF
THE AMOUNT OF CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR
REDUCES  THE  TAX  TO  SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX
BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS  NOT
DEDUCTIBLE  IN  SUCH  TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT OF
TAX TO BE CREDITED OR REFUNDED IN  ACCORDANCE  WITH  THE  PROVISIONS  OF
SECTION  ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER, THE
PROVISIONS OF SUBSECTION (C) OF SECTION  ONE  THOUSAND  EIGHTY-EIGHT  OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  19. ENVIRONMENTAL REMEDIATION INSURANCE CREDIT. (A) ALLOWANCE OF CRED-
IT.  A TAXPAYER SHALL BE ALLOWED A CREDIT, TO BE COMPUTED AS PROVIDED IN
SECTION  TWENTY-THREE  OF  THIS CHAPTER, AGAINST THE TAX IMPOSED BY THIS
ARTICLE.
  (B) APPLICATION OF CREDIT. THE CREDIT ALLOWED UNDER  THIS  SUBDIVISION
FOR  ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS
THAN THE FIXED DOLLAR MINIMUM AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D)  OF
SUBDIVISION  ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF
THE AMOUNT OF CREDITS ALLOWED UNDER THIS  SUBDIVISION  FOR  ANY  TAXABLE
YEAR  REDUCES  THE  TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS
TAX BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT  THUS
NOT  DEDUCTIBLE  IN SUCH TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT
OF TAX TO BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE  PROVISIONS  OF
SECTION  ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER, THE
PROVISIONS OF SUBSECTION (C) OF SECTION  ONE  THOUSAND  EIGHTY-EIGHT  OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  20.  EMPIRE  STATE  FILM PRODUCTION CREDIT. (A) ALLOWANCE OF CREDIT. A
TAXPAYER WHO IS ELIGIBLE PURSUANT TO SECTION TWENTY-FOUR OF THIS CHAPTER
SHALL BE ALLOWED A CREDIT TO BE COMPUTED AS  PROVIDED  IN  SUCH  SECTION
TWENTY-FOUR AGAINST THE TAX IMPOSED BY THIS ARTICLE.
  (B)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO  LESS

S. 6359--C                         97

THAN  THE  FIXED  DOLLAR  MINIMUM  AMOUNT PRESCRIBED IN PARAGRAPH (D) OF
SUBDIVISION ONE OF SECTION TWO HUNDRED TEN OF  THIS  ARTICLE.  PROVIDED,
HOWEVER,  THAT IF THE AMOUNT OF THE CREDIT ALLOWABLE UNDER THIS SUBDIVI-
SION  FOR  ANY  TAXABLE  YEAR  REDUCES  THE TAX TO SUCH AMOUNT OR IF THE
TAXPAYER OTHERWISE PAYS TAX BASED ON THE FIXED  DOLLAR  MINIMUM  AMOUNT,
THE  EXCESS  SHALL BE TREATED AS AN OVERPAYMENT OF TAX TO BE CREDITED OR
REFUNDED IN ACCORDANCE WITH  THE  PROVISIONS  OF  SECTION  ONE  THOUSAND
EIGHTY-SIX  OF  THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE  PROVISIONS  OF
SUBSECTION (C) OF SECTION ONE  THOUSAND  EIGHTY-EIGHT  OF  THIS  CHAPTER
NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  21.  SECURITY TRAINING TAX CREDIT. (A) ALLOWANCE OF CREDIT. A TAXPAYER
SHALL BE ALLOWED A CREDIT, TO BE COMPUTED AS PROVIDED IN  SECTION  TWEN-
TY-SIX OF THIS CHAPTER, AGAINST THE TAX IMPOSED BY THIS ARTICLE.
  (B)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO  LESS
THAN  THE  FIXED  DOLLAR  MINIMUM  AMOUNT PRESCRIBED IN PARAGRAPH (D) OF
SUBDIVISION ONE OF SECTION TWO HUNDRED TEN OF THIS CHAPTER. HOWEVER,  IF
THE  AMOUNT  OF  CREDITS  ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE
YEAR REDUCES THE TAX TO SUCH AMOUNT OR IF THE  TAXPAYER  OTHERWISE  PAYS
TAX  BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS
NOT DEDUCTIBLE IN SUCH TAXABLE YEAR SHALL BE TREATED AS  AN  OVERPAYMENT
OF  TAX  TO BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER,  THE
PROVISIONS  OF  SUBSECTION  (C)  OF SECTION ONE THOUSAND EIGHTY-EIGHT OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  22. CONSERVATION EASEMENT TAX CREDIT. (A) CREDIT ALLOWED. IN THE  CASE
OF  A  TAXPAYER WHO OWNS LAND THAT IS SUBJECT TO A CONSERVATION EASEMENT
HELD BY A PUBLIC OR PRIVATE CONSERVATION AGENCY, THERE SHALL BE  ALLOWED
A CREDIT FOR TWENTY-FIVE PERCENT OF THE ALLOWABLE SCHOOL DISTRICT, COUN-
TY  AND TOWN REAL PROPERTY TAXES ON SUCH LAND. IN NO SUCH CASE SHALL THE
CREDIT ALLOWED UNDER THIS SUBDIVISION  IN  COMBINATION  WITH  ANY  OTHER
CREDIT  FOR  SUCH  SCHOOL  DISTRICT, COUNTY AND TOWN REAL PROPERTY TAXES
UNDER THIS SECTION EXCEED SUCH TAXES.
  (B) CONSERVATION EASEMENT. FOR PURPOSES OF THIS SUBDIVISION, THE  TERM
"CONSERVATION  EASEMENT"  MEANS  A  PERPETUAL AND PERMANENT CONSERVATION
EASEMENT AS DEFINED IN ARTICLE FORTY-NINE OF THE ENVIRONMENTAL CONSERVA-
TION LAW THAT SERVES TO PROTECT OPEN SPACE, SCENIC,  NATURAL  RESOURCES,
BIODIVERSITY,   AGRICULTURAL,  WATERSHED  AND/OR  HISTORIC  PRESERVATION
RESOURCES. ANY CONSERVATION EASEMENT FOR WHICH A TAX CREDIT  IS  CLAIMED
UNDER  THIS  SUBDIVISION  SHALL BE FILED WITH THE DEPARTMENT OF ENVIRON-
MENTAL CONSERVATION, AS PROVIDED FOR IN ARTICLE FORTY-NINE OF THE  ENVI-
RONMENTAL  CONSERVATION  LAW AND SUCH CONSERVATION EASEMENT SHALL COMPLY
WITH THE PROVISIONS OF TITLE THREE OF SUCH ARTICLE, AND  THE  PROVISIONS
OF  SUBDIVISION  (H)  OF SECTION 170 OF THE INTERNAL REVENUE CODE. DEDI-
CATIONS OF LAND FOR OPEN SPACE THROUGH  THE  EXECUTION  OF  CONSERVATION
EASEMENTS  FOR  THE PURPOSE OF FULFILLING DENSITY REQUIREMENTS TO OBTAIN
SUBDIVISION OR BUILDING PERMITS SHALL NOT BE CONSIDERED  A  CONSERVATION
EASEMENT UNDER THIS SUBDIVISION.
  (C)  LAND.  FOR  PURPOSES OF THIS SUBDIVISION, THE TERM "LAND" MEANS A
FEE SIMPLE TITLE TO REAL PROPERTY LOCATED IN THIS STATE, WITH OR WITHOUT
IMPROVEMENTS THEREON; RIGHTS OF WAY; WATER AND  RIPARIAN  RIGHTS;  EASE-
MENTS;  PRIVILEGES  AND  ALL  OTHER  RIGHTS  OR INTERESTS OF ANY LAND OR
DESCRIPTION IN, RELATING TO OR CONNECTED WITH REAL  PROPERTY,  EXCLUDING
BUILDINGS, STRUCTURES, OR IMPROVEMENTS.
  (D) PUBLIC OR PRIVATE CONSERVATION AGENCY. FOR PURPOSES OF THIS SUBDI-
VISION,  THE  TERM  "PUBLIC  OR  PRIVATE  CONSERVATION AGENCY" MEANS ANY

S. 6359--C                         98

STATE, LOCAL, OR FEDERAL GOVERNMENTAL BODY; OR ANY PRIVATE  NOT-FOR-PRO-
FIT  CHARITABLE  CORPORATION OR TRUST WHICH IS AUTHORIZED TO DO BUSINESS
IN THE STATE OF NEW YORK, IS ORGANIZED AND OPERATED TO PROTECT LAND  FOR
NATURAL  RESOURCES,  CONSERVATION  OR HISTORIC PRESERVATION PURPOSES, IS
EXEMPT FROM FEDERAL INCOME  TAXATION  UNDER  SECTION  501(C)(3)  OF  THE
INTERNAL  REVENUE  CODE, AND HAS THE POWER TO ACQUIRE, HOLD AND MAINTAIN
LAND AND/OR INTERESTS IN LAND FOR SUCH PURPOSES.
  (E) CREDIT LIMITATION. THE AMOUNT OF THE CREDIT THAT MAY BE CLAIMED BY
A TAXPAYER PURSUANT TO THIS SUBSECTION SHALL NOT  EXCEED  FIVE  THOUSAND
DOLLARS IN ANY GIVEN YEAR.
  (F)  APPLICATION OF THE CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVI-
SION FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR  TO
LESS THAN THE FIXED DOLLAR MINIMUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF
SUBDIVISION  ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF
THE AMOUNT OF THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY  TAXABLE
YEAR  REDUCES  THE  TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS
TAX BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF  THE  CREDIT
THUS NOT DEDUCTIBLE IN SUCH TAXABLE YEAR SHALL BE TREATED AS AN OVERPAY-
MENT OF TAX TO BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS
OF  SUBSECTION (C) OF SECTION ONE THOUSAND EIGHTY-EIGHT OF THIS CHAPTER,
EXCEPT THAT, NO INTEREST SHALL BE PAID THEREON.
  23. EMPIRE STATE COMMERCIAL PRODUCTION CREDIT. (A) ALLOWANCE OF  CRED-
IT.  A TAXPAYER THAT IS ELIGIBLE PURSUANT TO PROVISIONS OF SECTION TWEN-
TY-EIGHT  OF  THIS  CHAPTER  SHALL BE ALLOWED A CREDIT TO BE COMPUTED AS
PROVIDED IN SUCH SECTION AGAINST THE TAX IMPOSED BY THIS ARTICLE.
  (B) APPLICATION OF CREDIT. THE CREDIT ALLOWED UNDER  THIS  SUBDIVISION
FOR  ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS
THAN THE FIXED DOLLAR MINIMUM AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D)  OF
SUBDIVISION  ONE  OF  SECTION TWO HUNDRED TEN OF THIS ARTICLE. PROVIDED,
HOWEVER, THAT IF THE AMOUNT OF THE CREDIT ALLOWABLE UNDER THIS  SUBDIVI-
SION  FOR  ANY  TAXABLE  YEAR  REDUCES  THE TAX TO SUCH AMOUNT OR IF THE
TAXPAYER OTHERWISE PAYS TAX BASED ON THE FIXED  DOLLAR  MINIMUM  AMOUNT,
FIFTY PERCENT OF THE EXCESS SHALL BE TREATED AS AN OVERPAYMENT OF TAX TO
BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF SECTION ONE
THOUSAND  EIGHTY-SIX  OF THIS CHAPTER. PROVIDED, HOWEVER, THE PROVISIONS
OF SUBSECTION (C) OF SECTION ONE THOUSAND EIGHTY-EIGHT OF  THIS  CHAPTER
NOTWITHSTANDING,  NO INTEREST SHALL BE PAID THEREON. THE BALANCE OF SUCH
CREDIT NOT CREDITED OR REFUNDED IN SUCH TAXABLE YEAR MAY BE CARRIED OVER
TO THE IMMEDIATELY SUCCEEDING TAXABLE YEAR AND MAY BE DEDUCTED FROM  THE
TAXPAYER'S TAX FOR SUCH YEAR. THE EXCESS, IF ANY, OF THE AMOUNT OF CRED-
IT OVER THE TAX FOR SUCH SUCCEEDING YEAR SHALL BE TREATED AS AN OVERPAY-
MENT OF TAX TO BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS
OF  SECTION  ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER,
THE PROVISIONS OF SUBSECTION (C) OF SECTION ONE THOUSAND EIGHTY-EIGHT OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  (C) EXPIRATION OF CREDIT. THE CREDIT ALLOWED  UNDER  THIS  SUBDIVISION
SHALL  NOT BE APPLICABLE TO TAXABLE YEARS BEGINNING ON OR AFTER DECEMBER
THIRTY-FIRST, TWO THOUSAND SEVENTEEN.
  24. BIOFUEL PRODUCTION  CREDIT.  (A)  GENERAL.  A  TAXPAYER  SHALL  BE
ALLOWED  A CREDIT, TO BE COMPUTED AS PROVIDED IN SECTION TWENTY-EIGHT OF
THIS CHAPTER ADDED AS PART X OF CHAPTER SIXTY-TWO OF  THE  LAWS  OF  TWO
THOUSAND  SIX,  AGAINST  THE  TAX  IMPOSED  BY  THIS ARTICLE. THE CREDIT
ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE
TAX DUE FOR SUCH YEAR TO LESS  THAN  THE  FIXED  DOLLAR  MINIMUM  AMOUNT
PRESCRIBED  IN  PARAGRAPH  (D) OF SUBDIVISION ONE OF SECTION TWO HUNDRED
TEN OF THIS ARTICLE.  HOWEVER, IF THE AMOUNT  OF  CREDIT  ALLOWED  UNDER

S. 6359--C                         99

THIS  SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE TAX TO SUCH AMOUNT OR
IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON  THE  FIXED  DOLLAR  MINIMUM
AMOUNT,  ANY  AMOUNT  OF CREDIT THUS NOT DEDUCTIBLE IN SUCH TAXABLE YEAR
SHALL  BE TREATED AS AN OVERPAYMENT OF TAX TO BE CREDITED OR REFUNDED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION  ONE  THOUSAND  EIGHTY-SIX  OF
THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE PROVISIONS OF SUBSECTION (C) OF
SECTION ONE THOUSAND EIGHTY-EIGHT OF THIS  CHAPTER  NOTWITHSTANDING,  NO
INTEREST  SHALL BE PAID THEREON. THE TAX CREDIT ALLOWED PURSUANT TO THIS
SECTION SHALL APPLY TO TAXABLE YEARS BEGINNING BEFORE JANUARY FIRST, TWO
THOUSAND TWENTY.
  25. CLEAN HEATING FUEL  CREDIT.  (A)  GENERAL.  A  TAXPAYER  SHALL  BE
ALLOWED  A  CREDIT AGAINST THE TAX IMPOSED BY THIS ARTICLE. SUCH CREDIT,
TO BE COMPUTED AS HEREINAFTER PROVIDED, SHALL BE  ALLOWED  FOR  BIOHEAT,
USED  FOR SPACE HEATING OR HOT WATER PRODUCTION FOR RESIDENTIAL PURPOSES
WITHIN THIS STATE PURCHASED BEFORE JANUARY FIRST,  TWO  THOUSAND  SEVEN-
TEEN.  SUCH CREDIT SHALL BE $0.01 PER PERCENT OF BIODIESEL PER GALLON OF
BIOHEAT, NOT TO EXCEED  TWENTY  CENTS  PER  GALLON,  PURCHASED  BY  SUCH
TAXPAYER.
  (B) DEFINITIONS. FOR PURPOSES OF THIS SUBDIVISION, THE FOLLOWING DEFI-
NITIONS SHALL APPLY:
  (I)  "BIODIESEL" SHALL MEAN A FUEL COMPRISED EXCLUSIVELY OF MONO-ALKYL
ESTERS OF LONG CHAIN FATTY ACIDS DERIVED FROM VEGETABLE OILS  OR  ANIMAL
FATS, DESIGNATED B100, WHICH MEETS THE SPECIFICATIONS OF AMERICAN SOCIE-
TY OF TESTING AND MATERIALS DESIGNATION D 6751.
  (II)  "BIOHEAT"  SHALL MEAN A FUEL COMPRISED OF BIODIESEL BLENDED WITH
CONVENTIONAL HOME HEATING OIL, WHICH MEETS  THE  SPECIFICATIONS  OF  THE
AMERICAN SOCIETY OF TESTING AND MATERIALS DESIGNATION D 396 OR D 975.
  (C)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO  LESS
THAN  THE  FIXED  DOLLAR  MINIMUM  AMOUNT PRESCRIBED IN PARAGRAPH (D) OF
SUBDIVISION ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER,  IF
THE AMOUNT OF CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR
REDUCES  THE  TAX  TO  SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX
BASED ON THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS  NOT
DEDUCTIBLE  IN  SUCH  TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT OF
TAX TO BE CREDITED OR REFUNDED IN  ACCORDANCE  WITH  THE  PROVISIONS  OF
SECTION  ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER, THE
PROVISIONS OF SUBSECTION (C) OF SECTION  ONE  THOUSAND  EIGHTY-EIGHT  OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  26.  CREDIT FOR REHABILITATION OF HISTORIC PROPERTIES. (A) APPLICATION
OF CREDIT. (I) FOR TAXABLE YEARS BEGINNING ON OR  AFTER  JANUARY  FIRST,
TWO  THOUSAND  TEN,  AND  BEFORE  JANUARY  FIRST, TWO THOUSAND TWENTY, A
TAXPAYER SHALL BE ALLOWED A CREDIT AS HEREINAFTER PROVIDED, AGAINST  THE
TAX  IMPOSED  BY THIS ARTICLE, IN AN AMOUNT EQUAL TO ONE HUNDRED PERCENT
OF THE AMOUNT OF CREDIT ALLOWED THE TAXPAYER FOR THE SAME  TAXABLE  YEAR
WITH  RESPECT  TO A CERTIFIED HISTORIC STRUCTURE UNDER SUBSECTION (C)(2)
OF SECTION 47 OF THE INTERNAL REVENUE CODE WITH RESPECT TO  A  CERTIFIED
HISTORIC  STRUCTURE  LOCATED  WITHIN  THE  STATE. PROVIDED, HOWEVER, THE
CREDIT SHALL NOT EXCEED FIVE MILLION DOLLARS.
  (II) FOR TAXABLE YEARS BEGINNING ON OR AFTER JANUARY FIRST, TWO  THOU-
SAND  TWENTY,  A  TAXPAYER  SHALL  BE  ALLOWED  A  CREDIT AS HEREINAFTER
PROVIDED, AGAINST THE TAX IMPOSED BY THIS ARTICLE, IN AN AMOUNT EQUAL TO
THIRTY PERCENT OF THE AMOUNT OF CREDIT ALLOWED THE TAXPAYER FOR THE SAME
TAXABLE YEAR WITH  RESPECT  TO  A  CERTIFIED  HISTORIC  STRUCTURE  UNDER
SUBSECTION  (C)(3)  OF  SECTION  47  OF  THE  INTERNAL REVENUE CODE WITH
RESPECT TO A CERTIFIED HISTORIC  STRUCTURE  LOCATED  WITHIN  THE  STATE.

S. 6359--C                         100

PROVIDED,  HOWEVER,  THE  CREDIT  SHALL  NOT EXCEED ONE HUNDRED THOUSAND
DOLLARS.
  (B)  IF THE TAXPAYER IS A PARTNER IN A PARTNERSHIP OR A SHAREHOLDER IN
A NEW YORK S CORPORATION, THEN THE CREDIT CAPS IMPOSED  IN  SUBPARAGRAPH
(A)  OF THIS PARAGRAPH SHALL BE APPLIED AT THE ENTITY LEVEL, SO THAT THE
AGGREGATE CREDIT ALLOWED TO ALL THE PARTNERS  OR  SHAREHOLDERS  OF  EACH
SUCH  ENTITY  IN THE TAXABLE YEAR DOES NOT EXCEED THE CREDIT CAP THAT IS
APPLICABLE IN THAT TAXABLE YEAR.
  (B) TAX CREDITS ALLOWED PURSUANT TO THIS SUBDIVISION SHALL BE  ALLOWED
IN  THE  TAXABLE  YEAR  THAT  THE  QUALIFIED REHABILITATION IS PLACED IN
SERVICE UNDER SECTION 167 OF THE FEDERAL INTERNAL REVENUE CODE.
  (C) IF THE CREDIT ALLOWED THE TAXPAYER PURSUANT TO SECTION 47  OF  THE
INTERNAL  REVENUE  CODE  WITH  RESPECT  TO A QUALIFIED REHABILITATION IS
RECAPTURED PURSUANT TO SUBSECTION (A) OF  SECTION  50  OF  THE  INTERNAL
REVENUE CODE, A PORTION OF THE CREDIT ALLOWED UNDER THIS SUBSECTION MUST
BE ADDED BACK IN THE SAME TAXABLE YEAR AND IN THE SAME PROPORTION AS THE
FEDERAL CREDIT.
  (D)  THE  CREDIT  ALLOWED  UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR
SHALL NOT REDUCE THE TAX DUE FOR SUCH  YEAR  TO  LESS  THAN  THE  AMOUNT
PRESCRIBED  IN  PARAGRAPH  (D) OF SUBDIVISION ONE OF SECTION TWO HUNDRED
TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF THE CREDIT ALLOWED  UNDER
THIS  SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE TAX TO SUCH AMOUNT OR
IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON  THE  FIXED  DOLLAR  MINIMUM
AMOUNT,  ANY  AMOUNT  OF CREDIT THUS NOT DEDUCTIBLE IN SUCH TAXABLE YEAR
SHALL BE TREATED AS AN OVERPAYMENT OF TAX TO BE RECREDITED  OR  REFUNDED
IN  ACCORDANCE WITH THE PROVISIONS OF SECTION ONE THOUSAND EIGHTY-SIX OF
THIS CHAPTER. PROVIDED, HOWEVER, THE PROVISIONS  OF  SUBSECTION  (C)  OF
SECTION  ONE  THOUSAND  EIGHTY-EIGHT OF THIS CHAPTER NOTWITHSTANDING, NO
INTEREST SHALL BE PAID THEREON.
  (E) TO BE ELIGIBLE FOR THE CREDIT ALLOWABLE  UNDER  THIS  SUBDIVISION,
THE REHABILITATION PROJECT SHALL BE IN WHOLE OR IN PART LOCATED WITHIN A
CENSUS  TRACT  WHICH  IS  IDENTIFIED  AS  BEING  AT OR BELOW ONE HUNDRED
PERCENT OF THE STATE MEDIAN FAMILY INCOME AS CALCULATED  AS  OF  JANUARY
FIRST  OF  EACH  YEAR  USING THE MOST RECENT FIVE YEAR ESTIMATE FROM THE
AMERICAN COMMUNITY SURVEY PUBLISHED BY THE UNITED STATES CENSUS BUREAU.
  27. CREDITS OF NEW YORK S CORPORATIONS. (A)  GENERAL.  NOTWITHSTANDING
THE  PROVISIONS  OF  THIS SECTION, NO CARRYOVER OF CREDIT ALLOWABLE IN A
NEW YORK C YEAR SHALL BE DEDUCTED FROM THE TAX OTHERWISE DUE UNDER  THIS
ARTICLE  IN  A  NEW YORK S YEAR, AND NO CREDIT ALLOWABLE IN A NEW YORK S
YEAR, OR CARRYOVER OF SUCH  CREDIT,  SHALL  BE  DEDUCTED  FROM  THE  TAX
IMPOSED BY THIS ARTICLE.  HOWEVER, A NEW YORK S YEAR SHALL BE TREATED AS
A  TAXABLE  YEAR FOR PURPOSES OF DETERMINING THE NUMBER OF TAXABLE YEARS
TO WHICH A CREDIT MAY BE CARRIED OVER UNDER THIS SECTION.  NOTWITHSTAND-
ING  THE FIRST SENTENCE OF THIS SUBDIVISION, HOWEVER, THE CREDIT FOR THE
SPECIAL ADDITIONAL MORTGAGE RECORDING TAX SHALL BE ALLOWED  AS  PROVIDED
IN  SUBDIVISION  FIFTEEN  OF THIS SECTION, AND THE CARRYOVER OF ANY SUCH
CREDIT SHALL BE DETERMINED WITHOUT  REGARD  TO  WHETHER  THE  CREDIT  IS
CARRIED FROM A NEW YORK C YEAR TO A NEW YORK S YEAR OR VICE-VERSA.
  29.  HIRE  A  VET  CREDIT.  (A) ALLOWANCE OF CREDIT. FOR TAXABLE YEARS
BEGINNING ON OR AFTER JANUARY FIRST, TWO  THOUSAND  FIFTEEN  AND  BEFORE
JANUARY  FIRST,  TWO  THOUSAND  SEVENTEEN, A TAXPAYER SHALL BE ALLOWED A
CREDIT, TO BE COMPUTED AS PROVIDED IN THIS SUBDIVISION, AGAINST THE  TAX
IMPOSED BY THIS ARTICLE, FOR HIRING AND EMPLOYING, FOR NOT LESS THAN ONE
YEAR  AND  FOR  NOT  LESS  THAN THIRTY-FIVE HOURS EACH WEEK, A QUALIFIED
VETERAN WITHIN THE STATE. THE TAXPAYER MAY CLAIM THE CREDIT IN THE  YEAR
IN  WHICH  THE QUALIFIED VETERAN COMPLETES ONE YEAR OF EMPLOYMENT BY THE

S. 6359--C                         101

TAXPAYER. IF THE TAXPAYER CLAIMS THE CREDIT ALLOWED UNDER THIS  SUBDIVI-
SION, THE TAXPAYER MAY NOT USE THE HIRING OF A QUALIFIED VETERAN THAT IS
THE BASIS FOR THIS CREDIT IN THE BASIS OF ANY OTHER CREDIT ALLOWED UNDER
THIS ARTICLE.
  (B) QUALIFIED VETERAN. A QUALIFIED VETERAN IS AN INDIVIDUAL:
  (1)  WHO  SERVED  ON  ACTIVE DUTY IN THE UNITED STATES ARMY, NAVY, AIR
FORCE, MARINE CORPS, COAST GUARD OR THE RESERVES THEREOF, OR WHO  SERVED
IN  ACTIVE MILITARY SERVICE OF THE UNITED STATES AS A MEMBER OF THE ARMY
NATIONAL GUARD, AIR NATIONAL GUARD, NEW YORK GUARD  OR  NEW  YORK  NAVAL
MILITIA;  WHO  WAS  RELEASED  FROM  ACTIVE  DUTY BY GENERAL OR HONORABLE
DISCHARGE AFTER SEPTEMBER ELEVENTH, TWO THOUSAND ONE;
  (2) WHO COMMENCES EMPLOYMENT BY THE QUALIFIED  TAXPAYER  ON  OR  AFTER
JANUARY  FIRST,  TWO  THOUSAND  FOURTEEN,  AND BEFORE JANUARY FIRST, TWO
THOUSAND SIXTEEN; AND
  (3) WHO CERTIFIES BY SIGNED AFFIDAVIT, UNDER PENALTY OF PERJURY,  THAT
HE OR SHE HAS NOT BEEN EMPLOYED FOR THIRTY-FIVE OR MORE HOURS DURING ANY
WEEK  IN  THE  ONE HUNDRED EIGHTY DAY PERIOD IMMEDIATELY PRIOR TO HIS OR
HER EMPLOYMENT BY THE TAXPAYER.
  (C) EMPLOYER PROHIBITION. AN EMPLOYER SHALL NOT DISCHARGE AN  EMPLOYEE
AND  HIRE  A QUALIFYING VETERAN SOLELY FOR THE PURPOSE OF QUALIFYING FOR
THIS CREDIT.
  (D) AMOUNT OF CREDIT. THE AMOUNT OF THE CREDIT SHALL BE TEN PERCENT OF
THE TOTAL AMOUNT OF WAGES PAID  TO  THE  QUALIFIED  VETERAN  DURING  THE
VETERAN'S FIRST FULL YEAR OF EMPLOYMENT. PROVIDED, HOWEVER, THAT, IF THE
QUALIFIED  VETERAN IS A DISABLED VETERAN, AS DEFINED IN PARAGRAPH (B) OF
SUBDIVISION ONE OF SECTION EIGHTY-FIVE OF THE  CIVIL  SERVICE  LAW,  THE
AMOUNT  OF  THE  CREDIT  SHALL BE FIFTEEN PERCENT OF THE TOTAL AMOUNT OF
WAGES PAID TO THE QUALIFIED VETERAN DURING THE VETERAN'S FIRST FULL YEAR
OF EMPLOYMENT. THE CREDIT ALLOWED PURSUANT TO THIS SUBDIVISION SHALL NOT
EXCEED IN ANY TAXABLE YEAR, FIVE  THOUSAND  DOLLARS  FOR  ANY  QUALIFIED
VETERAN  AND FIFTEEN THOUSAND DOLLARS FOR ANY QUALIFIED VETERAN WHO IS A
DISABLED VETERAN.
  (E) CARRYOVER. THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXA-
BLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR  TO  LESS  THAN  THE
AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D) OF SUBDIVISION ONE OF SECTION TWO
HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF CREDIT  ALLOWABLE
UNDER  THIS  SUBDIVISION  FOR  ANY  TAXABLE YEAR REDUCES THE TAX TO SUCH
AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE  FIXED  DOLLAR
MINIMUM AMOUNT, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN SUCH TAXABLE YEAR
MAY  BE  CARRIED  OVER  TO THE FOLLOWING THREE YEARS AND MAY BE DEDUCTED
FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
  30. ALTERNATIVE FUELS AND ELECTRIC VEHICLE RECHARGING PROPERTY CREDIT.
(A) GENERAL. A TAXPAYER SHALL BE ALLOWED A CREDIT,  TO  BE  COMPUTED  AS
HEREINAFTER PROVIDED, AGAINST THE TAX IMPOSED BY THIS ARTICLE FOR ALTER-
NATIVE  FUEL  VEHICLE REFUELING AND ELECTRIC VEHICLE RECHARGING PROPERTY
PLACED IN SERVICE DURING THE TAXABLE YEAR.
  (B) ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY AND  ELECTRIC  VEHICLE
RECHARGING  PROPERTY.  THE CREDIT UNDER THIS SUBDIVISION FOR ALTERNATIVE
FUEL VEHICLE REFUELING PROPERTY AND ELECTRIC VEHICLE RECHARGING PROPERTY
SHALL EQUAL FOR EACH INSTALLATION OF PROPERTY THE LESSER OF  FIVE  THOU-
SAND DOLLARS OR FIFTY PERCENT OF THE COST OF ANY SUCH PROPERTY:
  (I) WHICH IS LOCATED IN THIS STATE;
  (II)  WHICH CONSTITUTES ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY OR
ELECTRIC VEHICLE RECHARGING PROPERTY; AND

S. 6359--C                         102

  (III) FOR WHICH NONE OF THE COST HAS BEEN PAID FOR FROM  THE  PROCEEDS
OF  GRANTS, INCLUDING GRANTS FROM THE NEW YORK STATE ENERGY RESEARCH AND
DEVELOPMENT AUTHORITY OR THE NEW YORK POWER AUTHORITY.
  (C)  DEFINITIONS.  (I)  THE  TERM  "ALTERNATIVE FUEL VEHICLE REFUELING
PROPERTY" MEANS ALL OF THE EQUIPMENT NEEDED  TO  DISPENSE  ANY  FUEL  AT
LEAST EIGHTY-FIVE PERCENT OF THE VOLUME OF WHICH CONSISTS OF ONE OR MORE
OF THE FOLLOWING: NATURAL GAS, LIQUIFIED NATURAL GAS, LIQUIFIED PETROLE-
UM, OR HYDROGEN.
  (II)  THE TERM "ELECTRIC VEHICLE RECHARGING PROPERTY" MEANS ALL OF THE
EQUIPMENT NEEDED TO CONVEY ELECTRIC POWER  FROM  THE  ELECTRIC  GRID  OR
ANOTHER POWER SOURCE TO AN ONBOARD VEHICLE ENERGY STORAGE SYSTEM.
  (D) CARRYOVERS. IN NO EVENT SHALL THE CREDIT UNDER THIS SUBDIVISION BE
ALLOWED  IN AN AMOUNT WHICH WILL REDUCE THE TAX PAYABLE TO LESS THAN THE
AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION  ONE  OF  SECTION  TWO
HUNDRED  TEN  OF  THIS ARTICLE. PROVIDED, HOWEVER, THAT IF THE AMOUNT OF
CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE
TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX  BASED  ON  THE
FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN SUCH
TAXABLE  YEAR MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY
BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
  (E) CREDIT RECAPTURE. IF, AT ANY TIME BEFORE THE END OF  ITS  RECOVERY
PERIOD,  ALTERNATIVE FUEL VEHICLE REFUELING OR ELECTRIC VEHICLE RECHARG-
ING PROPERTY CEASES TO BE QUALIFIED, A RECAPTURE AMOUNT  MUST  BE  ADDED
BACK IN THE YEAR IN WHICH SUCH CESSATION OCCURS.
  (I)  ALTERNATIVE  FUEL  VEHICLE REFUELING PROPERTY OR ELECTRIC VEHICLE
RECHARGING PROPERTY CEASES TO BE QUALIFIED IF:
  (I) THE PROPERTY NO LONGER QUALIFIES AS ALTERNATIVE FUEL VEHICLE REFU-
ELING PROPERTY OR ELECTRIC VEHICLE RECHARGING PROPERTY; OR
  (II) FIFTY PERCENT OR MORE OF THE USE OF THE  PROPERTY  IN  A  TAXABLE
YEAR IS OTHER THAN IN A TRADE OR BUSINESS IN THIS STATE; OR
  (III)  THE  TAXPAYER RECEIVING THE CREDIT UNDER THIS SUBDIVISION SELLS
OR DISPOSES OF THE PROPERTY AND KNOWS OR HAS REASON  TO  KNOW  THAT  THE
PROPERTY  WILL  BE USED IN A MANNER DESCRIBED IN CLAUSES (I) AND (II) OF
THIS SUBPARAGRAPH.
  (II) RECAPTURE AMOUNT. THE RECAPTURE AMOUNT IS  EQUAL  TO  THE  CREDIT
ALLOWABLE UNDER THIS SUBDIVISION MULTIPLIED BY A FRACTION, THE NUMERATOR
OF  WHICH IS THE TOTAL RECOVERY PERIOD FOR THE PROPERTY MINUS THE NUMBER
OF RECOVERY YEARS PRIOR TO, BUT NOT INCLUDING, THE RECAPTURE  YEAR,  AND
THE DENOMINATOR OF WHICH IS THE TOTAL RECOVERY PERIOD.
  (F)  TERMINATION. THE CREDIT ALLOWED BY PARAGRAPH (B) OF THIS SUBDIVI-
SION  SHALL  NOT  APPLY  IN  TAXABLE  YEARS  BEGINNING  AFTER   DECEMBER
THIRTY-FIRST, TWO THOUSAND SEVENTEEN.
  31. EXCELSIOR JOBS PROGRAM CREDIT. (A) ALLOWANCE OF CREDIT. A TAXPAYER
WILL  BE ALLOWED A CREDIT, TO BE COMPUTED AS PROVIDED IN SECTION THIRTY-
ONE OF THIS CHAPTER, AGAINST THE TAX IMPOSED BY THIS ARTICLE.
  (B) APPLICATION OF CREDIT. THE CREDIT ALLOWED UNDER  THIS  SUBDIVISION
FOR  ANY  TAXABLE  YEAR MAY NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS
THAN THE AMOUNT PRESCRIBED  IN  PARAGRAPH  (D)  OF  SUBDIVISION  ONE  OF
SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF CRED-
IT  ALLOWED  UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE TAX
TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE  FIXED
DOLLAR  MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCTIBLE IN SUCH
TAXABLE YEAR WILL BE TREATED AS AN OVERPAYMENT OF TAX TO BE CREDITED  OR
REFUNDED  IN  ACCORDANCE  WITH  THE  PROVISIONS  OF SECTION ONE THOUSAND
EIGHTY-SIX  OF  THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE  PROVISIONS  OF

S. 6359--C                         103

SUBSECTION  (C)  OF  SECTION  ONE  THOUSAND EIGHTY-EIGHT OF THIS CHAPTER
NOTWITHSTANDING, NO INTEREST WILL BE PAID THEREON.
  32. EMPIRE STATE FILM POST PRODUCTION CREDIT. (A) ALLOWANCE OF CREDIT.
A  TAXPAYER WHO IS ELIGIBLE PURSUANT TO SECTION THIRTY-ONE OF THIS CHAP-
TER SHALL BE ALLOWED A CREDIT TO BE COMPUTED AS PROVIDED IN SUCH SECTION
THIRTY-ONE AGAINST THE TAX IMPOSED BY THIS ARTICLE.
  (B) APPLICATION OF CREDIT. THE CREDIT ALLOWED UNDER  THIS  SUBDIVISION
FOR  ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS
THAN THE AMOUNT PRESCRIBED  IN  PARAGRAPH  (D)  OF  SUBDIVISION  ONE  OF
SECTION  TWO HUNDRED TEN OF THIS ARTICLE. PROVIDED, HOWEVER, THAT IF THE
AMOUNT OF THE CREDIT ALLOWABLE UNDER THIS SUBDIVISION  FOR  ANY  TAXABLE
YEAR  REDUCES  THE  TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS
TAX BASED ON THE FIXED DOLLAR  MINIMUM  AMOUNT,  FIFTY  PERCENT  OF  THE
EXCESS  SHALL  BE  TREATED  AS  AN  OVERPAYMENT OF TAX TO BE CREDITED OR
REFUNDED IN ACCORDANCE WITH  THE  PROVISIONS  OF  SECTION  ONE  THOUSAND
EIGHTY-SIX  OF  THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE  PROVISIONS  OF
SUBSECTION (C) OF SECTION ONE  THOUSAND  EIGHTY-EIGHT  OF  THIS  CHAPTER
NOTWITHSTANDING,  NO INTEREST SHALL BE PAID THEREON. THE BALANCE OF SUCH
CREDIT NOT CREDITED OR REFUNDED IN SUCH TAXABLE YEAR MAY BE A  CARRYOVER
TO  THE IMMEDIATELY SUCCEEDING TAXABLE YEAR AND MAY BE DEDUCTED FROM THE
TAXPAYER'S TAX FOR SUCH YEAR. THE EXCESS, IF ANY, OF THE AMOUNT  OF  THE
CREDIT  OVER  THE  TAX  FOR  SUCH SUCCEEDING YEAR SHALL BE TREATED AS AN
OVERPAYMENT OF TAX TO BE CREDITED OR REFUNDED  IN  ACCORDANCE  WITH  THE
PROVISIONS OF SECTION ONE THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED,
HOWEVER, THE PROVISIONS OF SUBSECTION (C) OF SECTION ONE THOUSAND EIGHT-
Y-EIGHT OF THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THER-
EON.
  33.  TEMPORARY  DEFERRAL NONREFUNDABLE PAYOUT CREDIT. (A) ALLOWANCE OF
CREDIT. A TAXPAYER SHALL BE ALLOWED A CREDIT, TO BE COMPUTED AS PROVIDED
IN SUBDIVISION ONE OF SECTION THIRTY-FOUR OF THIS CHAPTER,  AGAINST  THE
TAX IMPOSED BY THIS ARTICLE.
  (B)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR THAT YEAR TO  LESS
THAN  THE  AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D)  OF SUBDIVISION ONE OF
SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF CRED-
IT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES  THE  TAX
TO  SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE FIXED
DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCTIBLE IN  SUCH
TAXABLE  YEAR MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY
BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
  34. TEMPORARY DEFERRAL REFUNDABLE  PAYOUT  CREDIT.  (A)  ALLOWANCE  OF
CREDIT. A TAXPAYER SHALL BE ALLOWED A CREDIT, TO BE COMPUTED AS PROVIDED
IN  SUBDIVISION  TWO OF SECTION THIRTY-FOUR OF THIS CHAPTER, AGAINST THE
TAX IMPOSED BY THIS ARTICLE.
  (B) APPLICATION OF CREDIT. IN NO EVENT SHALL  THE  CREDIT  UNDER  THIS
SUBDIVISION  BE  ALLOWED  IN AN AMOUNT WHICH WILL REDUCE THE TAX TO LESS
THAN THE AMOUNT PRESCRIBED  IN  PARAGRAPH  (D)  OF  SUBDIVISION  ONE  OF
SECTION  TWO  HUNDRED  TEN  OF  THIS ARTICLE. IF, HOWEVER, THE AMOUNT OF
CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR  REDUCES  THE
TAX  TO  SUCH  AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE
FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN SUCH
TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT OF TAX TO BE REFUNDED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION  ONE  THOUSAND  EIGHTY-SIX  OF
THIS CHAPTER, PROVIDED HOWEVER, THAT NO INTEREST SHALL BE PAID THEREON.
  35.  ECONOMIC  TRANSFORMATION  AND  FACILITY REDEVELOPMENT PROGRAM TAX
CREDIT. (A) ALLOWANCE OF CREDIT. A TAXPAYER SHALL BE ALLOWED  A  CREDIT,

S. 6359--C                         104

TO  BE  COMPUTED  AS  PROVIDED  IN  SECTION THIRTY-FIVE OF THIS CHAPTER,
AGAINST THE TAX IMPOSED BY THIS ARTICLE.
  (B)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR MAY NOT REDUCE THE TAX DUE FOR SUCH  YEAR  TO  LESS
THAN  THE  AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D)  OF SUBDIVISION ONE OF
SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF CRED-
IT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES  THE  TAX
TO  SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE FIXED
DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCTIBLE IN  SUCH
TAXABLE  YEAR WILL BE TREATED AS AN OVERPAYMENT OF TAX TO BE CREDITED OR
REFUNDED IN ACCORDANCE WITH  THE  PROVISIONS  OF  SECTION  ONE  THOUSAND
EIGHTY-SIX  OF  THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE  PROVISIONS  OF
SUBSECTION (C) OF SECTION ONE  THOUSAND  EIGHTY-EIGHT  OF  THIS  CHAPTER
NOTWITHSTANDING, NO INTEREST WILL BE PAID THEREON.
  36.  NEW  YORK  YOUTH  WORKS  TAX CREDIT. (A) A TAXPAYER THAT HAS BEEN
CERTIFIED BY THE COMMISSIONER OF LABOR AS A QUALIFIED EMPLOYER  PURSUANT
TO  SECTION  TWENTY-FIVE-A  OF  THE  LABOR LAW SHALL BE ALLOWED A CREDIT
AGAINST THE TAX IMPOSED BY  THIS  ARTICLE  EQUAL  TO  (I)  FIVE  HUNDRED
DOLLARS  PER  MONTH FOR UP TO SIX MONTHS FOR EACH QUALIFIED EMPLOYEE THE
EMPLOYER EMPLOYS IN A FULL-TIME JOB OR TWO  HUNDRED  FIFTY  DOLLARS  PER
MONTH  FOR  UP  TO  SIX  MONTHS FOR EACH QUALIFIED EMPLOYEE THE EMPLOYER
EMPLOYS IN A PART-TIME JOB OF AT LEAST TWENTY  HOURS  PER  WEEK  OR  TEN
HOURS  PER  WEEK  WHEN THE QUALIFIED EMPLOYEE IS ENROLLED IN HIGH SCHOOL
FULL-TIME, (II) ONE THOUSAND DOLLARS FOR EACH QUALIFIED EMPLOYEE WHO  IS
EMPLOYED FOR AT LEAST AN ADDITIONAL SIX MONTHS BY THE QUALIFIED EMPLOYER
IN  A  FULL-TIME JOB OR FIVE HUNDRED DOLLARS FOR EACH QUALIFIED EMPLOYEE
WHO IS EMPLOYED FOR AT LEAST AN ADDITIONAL SIX MONTHS BY  THE  QUALIFIED
EMPLOYER  IN  A  PART-TIME  JOB OF AT LEAST TWENTY HOURS PER WEEK OR TEN
HOURS PER WEEK WHEN THE QUALIFIED EMPLOYEE IS ENROLLED  IN  HIGH  SCHOOL
FULL-TIME,  AND (III) AN ADDITIONAL ONE THOUSAND DOLLARS FOR EACH QUALI-
FIED EMPLOYEE WHO IS EMPLOYED FOR AT LEAST AN ADDITIONAL YEAR AFTER  THE
FIRST  YEAR  OF THE EMPLOYEE'S EMPLOYMENT BY THE QUALIFIED EMPLOYER IN A
FULL-TIME JOB OR FIVE HUNDRED DOLLARS FOR EACH QUALIFIED EMPLOYEE WHO IS
EMPLOYED FOR AT LEAST AN ADDITIONAL YEAR AFTER THE  FIRST  YEAR  OF  THE
EMPLOYEE'S EMPLOYMENT BY THE QUALIFIED EMPLOYER IN A PART-TIME JOB OF AT
LEAST  TWENTY  HOURS  PER  WEEK OR TEN HOURS PER WEEK WHEN THE QUALIFIED
EMPLOYEE IS ENROLLED IN HIGH SCHOOL  FULL-TIME.  FOR  PURPOSES  OF  THIS
SUBDIVISION,  THE  TERM "QUALIFIED EMPLOYEE" SHALL HAVE THE SAME MEANING
AS SET FORTH IN SUBDIVISION (B) OF SECTION TWENTY-FIVE-A  OF  THE  LABOR
LAW.  THE  PORTION  OF  THE CREDIT DESCRIBED IN SUBPARAGRAPH (I) OF THIS
PARAGRAPH SHALL BE ALLOWED FOR THE TAXABLE YEAR IN WHICH THE  WAGES  ARE
PAID  TO THE QUALIFIED EMPLOYEE, AND THE PORTION OF THE CREDIT DESCRIBED
IN SUBPARAGRAPH (II) OF THIS PARAGRAPH SHALL BE ALLOWED IN  THE  TAXABLE
YEAR IN WHICH THE ADDITIONAL SIX MONTH PERIOD ENDS.
  (B) THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR MAY
NOT  REDUCE THE TAX DUE FOR THAT YEAR TO LESS THAN THE AMOUNT PRESCRIBED
IN PARAGRAPH (D) OF SUBDIVISION ONE OF SECTION TWO HUNDRED TEN  OF  THIS
ARTICLE.  HOWEVER, IF THE AMOUNT OF THE CREDIT ALLOWED UNDER THIS SUBDI-
VISION FOR ANY TAXABLE YEAR REDUCES THE TAX TO THAT  AMOUNT  OR  IF  THE
TAXPAYER  OTHERWISE  PAYS  TAX BASED ON THE FIXED DOLLAR MINIMUM AMOUNT,
ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN THAT TAXABLE YEAR WILL BE TREATED
AS AN OVERPAYMENT OF TAX TO BE CREDITED OR REFUNDED IN  ACCORDANCE  WITH
THE  PROVISIONS  OF  SECTION  ONE  THOUSAND  EIGHTY-SIX OF THIS CHAPTER.
PROVIDED, HOWEVER, NO INTEREST WILL BE PAID THEREON.
  (C) THE TAXPAYER MAY BE REQUIRED TO  ATTACH  TO  ITS  TAX  RETURN  ITS
CERTIFICATE  OF ELIGIBILITY ISSUED BY THE COMMISSIONER OF LABOR PURSUANT

S. 6359--C                         105

TO SECTION TWENTY-FIVE-A OF THE LABOR LAW. IN NO EVENT SHALL THE TAXPAY-
ER BE ALLOWED A CREDIT GREATER THAN THE AMOUNT OF THE CREDIT  LISTED  ON
THE  CERTIFICATE  OF  ELIGIBILITY. NOTWITHSTANDING ANY PROVISION OF THIS
CHAPTER  TO THE CONTRARY, THE COMMISSIONER AND THE COMMISSIONER'S DESIG-
NEES MAY RELEASE THE NAMES AND ADDRESSES OF ANY TAXPAYER  CLAIMING  THIS
CREDIT  AND  THE AMOUNT OF THE CREDIT EARNED BY THE TAXPAYER.  PROVIDED,
HOWEVER, IF A TAXPAYER CLAIMS THIS CREDIT BECAUSE IT IS A  MEMBER  OF  A
LIMITED LIABILITY COMPANY OR A PARTNER IN A PARTNERSHIP, ONLY THE AMOUNT
OF  CREDIT  EARNED BY THE ENTITY AND NOT THE AMOUNT OF CREDIT CLAIMED BY
THE TAXPAYER MAY BE RELEASED.
  37. EMPIRE STATE JOBS RETENTION PROGRAM CREDIT. (A) ALLOWANCE OF CRED-
IT.  A TAXPAYER WILL BE ALLOWED A CREDIT, TO BE COMPUTED AS PROVIDED  IN
SECTION  THIRTY-SIX  OF  THIS CHAPTER, AGAINST THE TAXES IMPOSED BY THIS
ARTICLE.
  (B) APPLICATION OF CREDIT. THE CREDIT ALLOWED UNDER  THIS  SUBDIVISION
FOR  ANY  TAXABLE YEAR WILL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS
THAN THE AMOUNT PRESCRIBED  IN  PARAGRAPH  (D)  OF  SUBDIVISION  ONE  OF
SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF CRED-
IT  ALLOWED  UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE TAX
TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE  FIXED
DOLLAR  MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCTIBLE IN SUCH
TAXABLE YEAR WILL BE TREATED AS AN OVERPAYMENT OF TAX TO BE CREDITED  OR
REFUNDED  IN  ACCORDANCE  WITH  THE  PROVISIONS  OF SECTION ONE THOUSAND
EIGHTY-SIX  OF  THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE  PROVISIONS  OF
SUBSECTION  (C)  OF  SECTION  ONE  THOUSAND EIGHTY-EIGHT OF THIS CHAPTER
NOTWITHSTANDING, NO INTEREST WILL BE PAID THEREON.
  38. CREDIT FOR COMPANIES WHO  PROVIDE  TRANSPORTATION  TO  INDIVIDUALS
WITH  DISABILITIES.  (A) ALLOWANCE AND AMOUNT OF CREDIT. A TAXPAYER, WHO
PROVIDES  A  TAXICAB  SERVICE  AS  DEFINED  IN   SECTION   ONE   HUNDRED
FORTY-EIGHT-A  OF  THE  VEHICLE  AND TRAFFIC LAW, OR A LIVERY SERVICE AS
DEFINED IN SECTION ONE HUNDRED TWENTY-ONE-E OF THE VEHICLE  AND  TRAFFIC
LAW,  SHALL  BE  ALLOWED  A  CREDIT,  TO BE COMPUTED AS PROVIDED IN THIS
SUBDIVISION, AGAINST THE TAX IMPOSED BY THIS ARTICLE. THE AMOUNT OF  THE
CREDIT  SHALL BE EQUAL TO THE INCREMENTAL COST ASSOCIATED WITH UPGRADING
A VEHICLE SO THAT IT IS ACCESSIBLE BY INDIVIDUALS WITH  DISABILITIES  AS
DEFINED  IN  PARAGRAPH  (B) OF THIS SUBDIVISION. PROVIDED, HOWEVER, THAT
SUCH CREDIT SHALL NOT EXCEED  TEN  THOUSAND  DOLLARS  PER  VEHICLE.  FOR
PURPOSES  OF  THIS  SUBDIVISION,  PURCHASES  OF  NEW  VEHICLES  THAT ARE
INITIALLY MANUFACTURED TO BE ACCESSIBLE FOR INDIVIDUALS  WITH  DISABILI-
TIES  AND  FOR WHICH THERE IS NO COMPARABLE MAKE AND MODEL THAT DOES NOT
INCLUDE THE EQUIPMENT NECESSARY TO PROVIDE ACCESSIBILITY TO  INDIVIDUALS
WITH DISABILITIES, THE CREDIT SHALL BE TEN THOUSAND DOLLARS PER VEHICLE.
  (B) DEFINITION. THE TERM "ACCESSIBLE BY INDIVIDUALS WITH DISABILITIES"
SHALL,  FOR  THE  PURPOSES  OF THIS SUBDIVISION, REFER TO A VEHICLE THAT
COMPLIES WITH FEDERAL REGULATIONS PROMULGATED PURSUANT TO THE  AMERICANS
WITH  DISABILITIES  ACT  APPLICABLE  TO  VANS  UNDER  TWENTY-TWO FEET IN
LENGTH, BY THE FEDERAL DEPARTMENT OF TRANSPORTATION, IN CODE OF  FEDERAL
REGULATIONS,  TITLE 49, PARTS 37 AND 38, AND BY THE FEDERAL ARCHITECTURE
AND TRANSPORTATION BARRIERS COMPLIANCE BOARD, IN CODE OF  FEDERAL  REGU-
LATIONS, TITLE 36, SECTION 1192.23, AND THE FEDERAL MOTOR VEHICLE SAFETY
STANDARDS, CODE OF FEDERAL REGULATIONS, TITLE 49, PART 57.
  (C)  APPLICATION OF CREDIT. IN NO EVENT SHALL THE CREDIT ALLOWED UNDER
THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCE THE TAX DUE FOR  SUCH  YEAR
TO  LESS  THAN THE AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE
OF SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF  THE  AMOUNT  OF
CREDIT  ALLOWED  UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE

S. 6359--C                         106

TAX TO SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX  BASED  ON  THE
FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCTIBLE IN
SUCH  TAXABLE YEAR SHALL BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS,
AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
  39.  BEER  PRODUCTION CREDIT. A TAXPAYER SHALL BE ALLOWED A CREDIT, TO
BE COMPUTED AS PROVIDED IN SECTION THIRTY-SEVEN OF THIS CHAPTER, AGAINST
THE TAX IMPOSED BY THIS ARTICLE. IN NO EVENT SHALL  THE  CREDIT  ALLOWED
UNDER  THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCE THE TAX DUE FOR SUCH
YEAR TO LESS THAN THE AMOUNT PRESCRIBED IN PARAGRAPH (D) OF  SUBDIVISION
ONE  OF  SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT
OF CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY  TAXABLE  YEAR  REDUCES
THE  TAX  TO  SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON
THE FIXED DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS  NOT  DEDUCT-
IBLE  IN  SUCH TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT OF TAX TO
BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF SECTION ONE
THOUSAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER,  THE  PROVISIONS
OF  SUBSECTION  (C) OF SECTION ONE THOUSAND EIGHTY-EIGHT OF THIS CHAPTER
NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  40. MINIMUM WAGE REIMBURSEMENT CREDIT.  (A)  ALLOWANCE  OF  CREDIT.  A
TAXPAYER  SHALL  BE  ALLOWED  A  CREDIT,  TO  BE COMPUTED AS PROVIDED IN
SECTION THIRTY-EIGHT OF THIS CHAPTER, AGAINST THE TAX  IMPOSED  BY  THIS
ARTICLE.
  (B)  APPLICATION  OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION
FOR ANY TAXABLE YEAR MAY NOT REDUCE THE TAX DUE FOR SUCH  YEAR  TO  LESS
THAN  THE  AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D)  OF SUBDIVISION ONE OF
SECTION TWO HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT OF CRED-
IT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES  THE  TAX
TO  SUCH AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE FIXED
DOLLAR MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCTIBLE IN  SUCH
TAXABLE  YEAR WILL BE TREATED AS AN OVERPAYMENT OF TAX TO BE CREDITED OR
REFUNDED IN ACCORDANCE WITH  THE  PROVISIONS  OF  SECTION  ONE  THOUSAND
EIGHTY-SIX  OF  THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE  PROVISIONS  OF
SUBSECTION (C) OF SECTION ONE  THOUSAND  EIGHTY-EIGHT  OF  THIS  CHAPTER
NOTWITHSTANDING, NO INTEREST WILL BE PAID THEREON.
  41.  THE  TAX-FREE NY AREA TAX ELIMINATION CREDIT. A TAXPAYER SHALL BE
ALLOWED A CREDIT TO BE COMPUTED AS PROVIDED IN  SECTION  FORTY  OF  THIS
CHAPTER,  AGAINST  THE  TAX IMPOSED BY THIS ARTICLE. UNLESS THE TAXPAYER
HAS A TAX-FREE NY AREA ALLOCATION FACTOR OF  ONE  HUNDRED  PERCENT,  THE
CREDIT  ALLOWED  UNDER  THIS  SUBDIVISION FOR ANY TAXABLE YEAR SHALL NOT
REDUCE THE TAX DUE FOR SUCH YEAR TO LESS THAN THE AMOUNT  PRESCRIBED  IN
PARAGRAPH  (D)  OF  SUBDIVISION  ONE  OF SECTION TWO HUNDRED TEN OF THIS
ARTICLE. HOWEVER, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE  IN  SUCH  TAXABLE
YEAR  SHALL  BE  TREATED  AS  AN  OVERPAYMENT  OF  TAX TO BE CREDITED OR
REFUNDED IN ACCORDANCE WITH  THE  PROVISIONS  OF  SECTION  ONE  THOUSAND
EIGHTY-SIX  OF  THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE  PROVISIONS  OF
SUBSECTION (C) OF SECTION ONE  THOUSAND  EIGHTY-EIGHT  OF  THIS  CHAPTER
NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  42.  ALTERNATIVE  BASE CREDIT. (A) IF THE TAX IMPOSED ON A TAXPAYER BY
SUBDIVISION ONE OF SECTION TWO HUNDRED  NINE  OF  THIS  ARTICLE  IS  THE
AMOUNT  PRESCRIBED  IN  PARAGRAPH  (B) OF SUBDIVISION ONE OF SECTION TWO
HUNDRED TEN OF THIS ARTICLE, THE TAXPAYER  SHALL  BE  ALLOWED  A  CREDIT
AGAINST  THE  TAX  IMPOSED UNDER THIS ARTICLE EQUAL TO THE AMOUNT OF TAX
PAID TO ANOTHER STATE COMPUTED ON A TAX BASE IDENTICAL TO THE  TAX  BASE
PRESCRIBED  IN  SUCH  PARAGRAPH (B). IF THE TAX IMPOSED ON A TAXPAYER BY
SUBDIVISION ONE OF SECTION TWO HUNDRED  NINE  OF  THIS  ARTICLE  IS  THE
AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D) OF SUBDIVISION ONE OF SECTION TWO

S. 6359--C                         107

HUNDRED TEN OF THIS ARTICLE, THE TAXPAYER  SHALL  BE  ALLOWED  A  CREDIT
AGAINST  THE  TAX  IMPOSED UNDER THIS ARTICLE EQUAL TO THE AMOUNT OF TAX
PAID TO ANOTHER STATE COMPUTED ON A TAX BASE IDENTICAL TO THE  TAX  BASE
PRESCRIBED IN SUCH PARAGRAPH (D).
  (B)  IN  NO  EVENT SHALL THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR
ANY TAXABLE YEAR REDUCE THE TAX DUE FOR  SUCH  YEAR  TO  LESS  THAN  THE
AMOUNT  PRESCRIBED  IN  PARAGRAPH  (D) OF SUBDIVISION ONE OF SECTION TWO
HUNDRED TEN OF THIS ARTICLE. HOWEVER, IF THE AMOUNT  OF  CREDIT  ALLOWED
UNDER  THIS  SUBDIVISION  FOR  ANY  TAXABLE YEAR REDUCES THE TAX TO SUCH
AMOUNT OR IF THE TAXPAYER OTHERWISE PAYS TAX BASED ON THE  FIXED  DOLLAR
MINIMUM AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCTIBLE IN SUCH TAXABLE
YEAR  SHALL  BE  CARRIED OVER TO THE FOLLOWING YEAR OR YEARS, AND MAY BE
DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
  43. THE TAX-FREE NY AREA  EXCISE  TAX  ON  TELECOMMUNICATION  SERVICES
CREDIT.  A  TAXPAYER  THAT  IS A BUSINESS OR OWNER OF A BUSINESS THAT IS
LOCATED IN A TAX-FREE NY AREA APPROVED PURSUANT TO ARTICLE TWENTY-ONE OF
THE ECONOMIC DEVELOPMENT LAW SHALL BE ALLOWED  A  CREDIT  EQUAL  TO  THE
EXCISE  TAX ON TELECOMMUNICATION SERVICES IMPOSED BY SECTION ONE HUNDRED
EIGHTY-SIX-E OF THIS CHAPTER AND PASSED THROUGH TO SUCH BUSINESS  DURING
THE  TAXABLE  YEAR  TO  THE  EXTENT  NOT OTHERWISE DEDUCTED IN COMPUTING
ENTIRE NET INCOME UNDER THIS ARTICLE. HOWEVER, ANY AMOUNT OF CREDIT  NOT
DEDUCTIBLE  IN  SUCH  TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT OF
TAX TO BE CREDITED OR REFUNDED IN  ACCORDANCE  WITH  THE  PROVISIONS  OF
SECTION  ONE  THOUSAND  EIGHTY-SIX  OF  THIS CHAPTER. THIS CREDIT MAY BE
CLAIMED  ONLY  WHERE  ANY  TAX  IMPOSED  BY  SUCH  SECTION  ONE  HUNDRED
EIGHTY-SIX-E  HAS  BEEN SEPARATELY STATED ON A BILL FROM THE PROVIDER OF
TELECOMMUNICATION SERVICES AND PAID BY SUCH  BUSINESS  WITH  RESPECT  TO
SUCH  SERVICES  RENDERED  WITHIN  A  TAX-FREE NY AREA DURING THE TAXABLE
YEAR. UNLESS THE TAXPAYER HAS A TAX-FREE NY AREA  ALLOCATION  FACTOR  OF
ONE  HUNDRED  PERCENT, THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY
TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS THAN THE
AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION  ONE  OF  SECTION  TWO
HUNDRED  TEN  OF  THIS  CHAPTER.  PROVIDED,  HOWEVER,  THE PROVISIONS OF
SUBSECTION (C) OF SECTION ONE  THOUSAND  EIGHTY-EIGHT  OF  THIS  CHAPTER
NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  44.  REAL  PROPERTY  TAX CREDIT FOR MANUFACTURERS. (A) A QUALIFIED NEW
YORK MANUFACTURER, AS DEFINED IN SUBPARAGRAPH (VI) OF PARAGRAPH  (A)  OF
SUBDIVISION  ONE  OF  SECTION  TWO  HUNDRED TEN OF THIS ARTICLE, WILL BE
ALLOWED A CREDIT EQUAL TO TWENTY PERCENT OF THE  REAL  PROPERTY  TAX  IT
PAID DURING THE TAXABLE YEAR FOR REAL PROPERTY OWNED BY SUCH MANUFACTUR-
ER  IN  NEW  YORK WHICH WAS PRINCIPALLY USED DURING THE TAXABLE YEAR FOR
MANUFACTURING TO THE EXTENT NOT DEDUCTED  IN  DETERMINING    ENTIRE  NET
INCOME.  THIS CREDIT WILL NOT BE ALLOWED IF THE REAL PROPERTY TAXES THAT
ARE THE BASIS FOR THIS CREDIT ARE INCLUDED IN THE CALCULATION OF ANOTHER
CREDIT CLAIMED BY THE TAXPAYER.
  (B) (1) FOR PURPOSES OF THIS SUBDIVISION, THE TERM REAL  PROPERTY  TAX
MEANS  A  CHARGE IMPOSED UPON REAL PROPERTY BY OR ON BEHALF OF A COUNTY,
CITY, TOWN, VILLAGE OR SCHOOL DISTRICT FOR MUNICIPAL OR SCHOOL  DISTRICT
PURPOSES,  PROVIDED  THAT  THE  CHARGE  IS LEVIED FOR THE GENERAL PUBLIC
WELFARE BY THE PROPER TAXING AUTHORITIES AT  A  LIKE  RATE  AGAINST  ALL
PROPERTY  OVER  WHICH  SUCH  AUTHORITIES HAVE JURISDICTION, AND PROVIDED
THAT WHERE TAXES ARE LEVIED PURSUANT TO ARTICLE EIGHTEEN OR NINETEEN  OF
THE REAL PROPERTY TAX LAW, THE PROPERTY MUST HAVE BEEN TAXED AT THE RATE
DETERMINED  FOR  THE CLASS IN WHICH IT IS CONTAINED, AS PROVIDED BY SUCH
ARTICLE EIGHTEEN OR NINETEEN, WHICHEVER IS  APPLICABLE.  THE  TERM  REAL
PROPERTY TAX DOES NOT INCLUDE A CHARGE FOR LOCAL BENEFITS, INCLUDING ANY

S. 6359--C                         108

PORTION OF THAT CHARGE THAT IS PROPERLY ALLOCATED TO THE COSTS ATTRIBUT-
ABLE  TO  MAINTENANCE  OR INTEREST, WHEN (I) THE PROPERTY SUBJECT TO THE
CHARGE IS LIMITED TO THE PROPERTY THAT BENEFITS FROM THE CHARGE, OR (II)
THE  AMOUNT  OF  THE CHARGE IS DETERMINED BY THE BENEFIT TO THE PROPERTY
ASSESSED, OR (III) THE IMPROVEMENT FOR  WHICH  THE  CHARGE  IS  ASSESSED
TENDS TO INCREASE THE PROPERTY VALUE.
  (2) IN ADDITION, THE TERM REAL PROPERTY TAX INCLUDES TAXES PAID BY THE
TAXPAYER  UPON REAL PROPERTY PRINCIPALLY USED DURING THE TAXABLE YEAR BY
THE TAXPAYER IN MANUFACTURING WHERE THE TAXPAYER LEASES SUCH REAL  PROP-
ERTY  FROM  AN  UNRELATED  THIRD  PARTY  IF THE FOLLOWING CONDITIONS ARE
SATISFIED: (I) THE TAX MUST BE PAID BY THE TAXPAYER AS  LESSEE  PURSUANT
TO  EXPLICIT  REQUIREMENTS  IN A WRITTEN LEASE, AND (II) THE TAXPAYER AS
LESSEE HAS PAID SUCH TAXES DIRECTLY TO  THE  TAXING  AUTHORITY  AND  HAS
RECEIVED A WRITTEN RECEIPT FOR PAYMENT OF TAXES FROM THE TAXING AUTHORI-
TY.  IN  THE  CASE  OF A COMBINED GROUP THAT CONSTITUTES A QUALIFIED NEW
YORK MANUFACTURER, THE CONDITIONS IN THE PRECEDING SENTENCE  ARE  SATIS-
FIED  IF ONE CORPORATION IN THE COMBINED GROUP IS THE LESSEE AND ANOTHER
CORPORATION IN THE COMBINED GROUP  MAKES  THE  PAYMENTS  TO  THE  TAXING
AUTHORITY.
  (3)  THE TERM REAL PROPERTY TAX DOES NOT INCLUDE A PAYMENT MADE BY THE
TAXPAYER IN CONNECTION WITH AN AGREEMENT FOR  THE  PAYMENT  IN  LIEU  OF
TAXES  ON  REAL  PROPERTY AS DEFINED IN SUBDIVISION SEVENTEEN OF SECTION
EIGHT HUNDRED FIFTY-FOUR OF THE  GENERAL  MUNICIPAL  LAW,  WHETHER  SUCH
PROPERTY  IS OWNED OR LEASED BY THE TAXPAYER, UNLESS THE PAYMENT IN LIEU
OF TAXES WAS MADE PURSUANT TO A PAYMENT IN LIEU OF  TAX  AGREEMENT  THAT
WAS  ENTERED INTO IN CONJUNCTION WITH THE SETTLEMENT OF A TAX CERTIORARI
PROCEEDING COMMENCED PURSUANT TO ARTICLE SEVEN OF THE REAL PROPERTY  TAX
LAW.
  (4)  THE  REAL PROPERTY TAXES MUST BE PAID BY THE TAXPAYER IN THE YEAR
SUCH TAXES BECOME A LIEN ON THE REAL PROPERTY.
  (C) CREDIT RECAPTURE. WHERE A QUALIFIED NEW YORK  MANUFACTURER'S  REAL
PROPERTY  TAXES  WHICH  WERE  THE  BASIS FOR THE ALLOWANCE OF THE CREDIT
PROVIDED FOR UNDER THIS SUBDIVISION ARE SUBSEQUENTLY REDUCED AS A RESULT
OF A FINAL ORDER IN ANY PROCEEDING UNDER ARTICLE SEVEN OF THE REAL PROP-
ERTY TAX LAW OR OTHER PROVISION OF LAW, THE TAXPAYER SHALL ADD BACK,  IN
THE  TAXABLE YEAR IN WHICH SUCH FINAL ORDER IS ISSUED, THE EXCESS OF (1)
THE AMOUNT OF CREDIT ORIGINALLY ALLOWED FOR A TAXABLE YEAR OVER (2)  THE
AMOUNT  OF CREDIT DETERMINED BASED UPON THE REDUCED REAL PROPERTY TAXES.
IF SUCH FINAL ORDER REDUCES REAL PROPERTY TAXES FOR MORE THAN ONE  YEAR,
THE  TAXPAYER  MUST DETERMINE HOW MUCH OF SUCH REDUCTION IS ATTRIBUTABLE
TO EACH YEAR COVERED BY SUCH FINAL ORDER AND  CALCULATE  THE  AMOUNT  OF
CREDIT  WHICH  IS REQUIRED BY THIS SUBDIVISION TO BE RECAPTURED FOR EACH
YEAR BASED ON SUCH REDUCTION.
  (D) THE CREDIT ALLOWED UNDER THIS SUBDIVISION  FOR  ANY  TAXABLE  YEAR
SHALL  NOT  REDUCE  THE  TAX  DUE  FOR SUCH YEAR TO LESS THAN THE AMOUNT
PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE OF  SECTION  TWO  HUNDRED
TEN  OF  THIS  CHAPTER.  HOWEVER, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN
SUCH TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT OF TAX TO BE  CRED-
ITED  OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF SECTION ONE THOU-
SAND EIGHTY-SIX OF THIS CHAPTER. PROVIDED, HOWEVER,  THE  PROVISIONS  OF
SUBSECTION  (C)  OF  SECTION  ONE  THOUSAND EIGHTY-EIGHT OF THIS CHAPTER
NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  45. ORDER OF CREDITS. (A) CREDITS ALLOWABLE UNDER THIS  ARTICLE  WHICH
CANNOT  BE  CARRIED  OVER AND WHICH ARE NOT REFUNDABLE SHALL BE DEDUCTED
FIRST. THE CREDIT ALLOWABLE UNDER SUBDIVISION SIX OF THIS SECTION  SHALL
BE  DEDUCTED  IMMEDIATELY  AFTER  THE DEDUCTION OF ALL CREDITS ALLOWABLE

S. 6359--C                         109

UNDER THIS ARTICLE WHICH CANNOT  BE  CARRIED  OVER  AND  WHICH  ARE  NOT
REFUNDABLE,  WHETHER  OR  NOT  A  PORTION  OF SUCH CREDIT IS REFUNDABLE.
CREDITS ALLOWABLE UNDER THIS ARTICLE WHICH  CAN  BE  CARRIED  OVER,  AND
CARRYOVERS  OF  SUCH CREDITS, SHALL BE DEDUCTED NEXT AFTER THE DEDUCTION
OF THE CREDIT ALLOWABLE UNDER SUBDIVISION SIX OF THIS SECTION, AND AMONG
SUCH CREDITS, THOSE WHOSE CARRYOVER IS  OF  LIMITED  DURATION  SHALL  BE
DEDUCTED  BEFORE THOSE WHOSE CARRYOVER IS OF UNLIMITED DURATION. CREDITS
ALLOWABLE UNDER THIS ARTICLE WHICH ARE REFUNDABLE (OTHER THAN THE CREDIT
ALLOWABLE UNDER SUBDIVISION SIX OF THIS SECTION) SHALL BE DEDUCTED LAST.
  46. NOTWITHSTANDING THE REPEAL OF THE CREDIT PROVISIONS  CONTAINED  IN
SECTION TWO HUNDRED TEN OF THIS ARTICLE OR IN ARTICLE THIRTY-TWO OF THIS
CHAPTER  AND  THE  ENACTMENT OF THIS SECTION BY A CHAPTER OF THE LAWS OF
TWO THOUSAND FOURTEEN:
  (A) A TAXPAYER SHALL BE ALLOWED TO UTILIZE ANY CARRYFORWARD AMOUNTS OF
CREDITS TO WHICH THE TAXPAYER WAS ENTITLED AS OF THE CLOSE OF THE  TAXA-
BLE  YEAR BEGINNING ON OR AFTER JANUARY FIRST, TWO THOUSAND FOURTEEN AND
BEFORE JANUARY FIRST, TWO THOUSAND FIFTEEN, OTHER THAN THE  CARRYFORWARD
AMOUNT  OF THE MINIMUM TAX CREDIT PROVIDED UNDER SUBDIVISION THIRTEEN OF
SECTION TWO HUNDRED TEN, AS THAT SUBDIVISION WAS IN EFFECT  ON  DECEMBER
THIRTY-FIRST, TWO THOUSAND FOURTEEN.
  (B)  A  TAXPAYER  SHALL  BE REQUIRED IN A TAXABLE YEAR BEGINNING ON OR
AFTER JANUARY FIRST, TWO THOUSAND FIFTEEN, TO RECAPTURE ALL OR A PORTION
OF A CREDIT ALLOWED UNDER A CREDIT PROVISION IN SECTION TWO HUNDRED  TEN
OR ARTICLE THIRTY-TWO OF THIS CHAPTER FOR A TAXABLE YEAR BEGINNING PRIOR
TO  JANUARY  FIRST,  TWO  THOUSAND  FIFTEEN IF RECAPTURE WOULD HAVE BEEN
REQUIRED UNDER SUCH CREDIT PROVISION.
  S 18. The tax law is amended by adding a new section 210-C to read  as
follows:
  S  210-C. COMBINED REPORTS. 1. TAX. THE TAX ON A COMBINED REPORT SHALL
BE THE HIGHEST OF THE PRODUCTS OF (I) THE COMBINED BUSINESS INCOME  BASE
MULTIPLIED BY THE TAX RATE SPECIFIED IN PARAGRAPH (A) OF SUBDIVISION ONE
OF  SECTION  TWO  HUNDRED TEN OF THIS ARTICLE; (II) THE COMBINED CAPITAL
BASE MULTIPLIED BY THE TAX RATE SPECIFIED IN PARAGRAPH (B)  OF  SUBDIVI-
SION  ONE  OF SECTION TWO HUNDRED TEN OF THIS ARTICLE, BUT NOT EXCEEDING
THE LIMITATION PROVIDED FOR IN THAT PARAGRAPH (B); OR  (III)  THE  FIXED
DOLLAR  MINIMUM  THAT  IS  ATTRIBUTABLE  TO  THE DESIGNATED AGENT OF THE
COMBINED GROUP. IN ADDITION, THE TAX ON A COMBINED REPORT SHALL  INCLUDE
THE  FIXED  DOLLAR MINIMUM TAX SPECIFIED IN PARAGRAPH (D) OF SUBDIVISION
ONE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE FOR EACH  MEMBER  OF  THE
COMBINED GROUP, OTHER THAN THE DESIGNATED AGENT, THAT IS A TAXPAYER.
  (B)  THE  COMBINED  BUSINESS INCOME BASE IS THE AMOUNT OF THE COMBINED
BUSINESS INCOME OF THE COMBINED GROUP THAT IS APPORTIONED TO THE  STATE,
REDUCED BY ANY NET OPERATING LOSS DEDUCTION FOR THE COMBINED GROUP.  THE
COMBINED  CAPITAL  BASE  IS  THE  AMOUNT  OF THE COMBINED CAPITAL OF THE
COMBINED GROUP THAT IS APPORTIONED TO THE STATE.
  2. COMBINED REPORTS REQUIRED. (A) EXCEPT AS PROVIDED IN PARAGRAPH  (C)
OF  THIS  SUBDIVISION,  ANY  TAXPAYER  (I) WHICH OWNS OR CONTROLS EITHER
DIRECTLY OR INDIRECTLY MORE THAN FIFTY PERCENT OF THE CAPITAL  STOCK  OF
ONE  OR  MORE OTHER CORPORATIONS, OR (II) MORE THAN FIFTY PERCENT OF THE
CAPITAL STOCK OF WHICH IS OWNED OR CONTROLLED EITHER DIRECTLY  OR  INDI-
RECTLY  BY  ONE  OR  MORE  OTHER  CORPORATIONS, OR (III) MORE THAN FIFTY
PERCENT OF THE CAPITAL STOCK OF WHICH AND THE CAPITAL STOCK  OF  ONE  OR
MORE OTHER CORPORATIONS, IS OWNED OR CONTROLLED, DIRECTLY OR INDIRECTLY,
BY  THE  SAME  INTERESTS, AND (IV) THAT IS ENGAGED IN A UNITARY BUSINESS
WITH THOSE CORPORATIONS, SHALL MAKE A COMBINED REPORT WITH  THOSE  OTHER
CORPORATIONS.

S. 6359--C                         110

  (B)  A CORPORATION REQUIRED TO MAKE A COMBINED REPORT WITHIN THE MEAN-
ING OF THIS SECTION SHALL ALSO INCLUDE (I) A CAPTIVE REIT AND A  CAPTIVE
RIC IF THE CAPTIVE REIT OR CAPTIVE RIC IS NOT REQUIRED TO BE INCLUDED IN
A  COMBINED  REPORT  UNDER ARTICLE THIRTY-THREE OF THIS CHAPTER; (II) AN
OVERCAPITALIZED  CAPTIVE  INSURANCE  COMPANY;  AND (III) AN ALIEN CORPO-
RATION THAT SATISFIES THE CONDITIONS IN PARAGRAPH (A) OF  THIS  SUBDIVI-
SION  IF  (I)  UNDER  ANY  PROVISION  OF THE INTERNAL REVENUE CODE, THAT
CORPORATION IS TREATED AS A "DOMESTIC CORPORATION" AS DEFINED IN SECTION
SEVEN THOUSAND SEVEN HUNDRED ONE OF THE INTERNAL REVENUE CODE,  OR  (II)
IT  HAS  EFFECTIVELY  CONNECTED  INCOME FOR THE TAXABLE YEAR PURSUANT TO
CLAUSE (IV) OF THE OPENING PARAGRAPH OF SUBDIVISION NINE OF SECTION  TWO
HUNDRED EIGHT OF THIS ARTICLE.
  (C)  A  CORPORATION  REQUIRED  OR  PERMITTED TO MAKE A COMBINED REPORT
UNDER THIS SECTION DOES NOT INCLUDE (I) A CORPORATION THAT IS SUBJECT TO
FRANCHISE TAX, OR WOULD BE IF DOING BUSINESS IN THIS STATE UNDER ARTICLE
NINE OR THIRTY-THREE OF THIS CHAPTER; (II) A REIT THAT IS NOT A  CAPTIVE
REIT,  AND  A  RIC  THAT IS NOT A CAPTIVE RIC; (III) A NEW YORK S CORPO-
RATION; (IV) A CORPORATION THAT IS SUBJECT TO  TAX  UNDER  THIS  ARTICLE
SOLELY  AS  A RESULT OF ITS OWNERSHIP OF A LIMITED PARTNER INTEREST IN A
LIMITED PARTNERSHIP THAT IS DOING BUSINESS, EMPLOYING CAPITAL, OWNING OR
LEASING PROPERTY, MAINTAINING AN  OFFICE  IN  THIS  STATE,  OR  DERIVING
RECEIPTS  FROM  ACTIVITY IN THIS STATE, PROVIDED THAT THE CORPORATION IS
NOT OTHERWISE REQUIRED TO  FILE  A  COMBINED  REPORT  PURSUANT  TO  THIS
SECTION;  OR  (V) AN ALIEN CORPORATION THAT HAS NO EFFECTIVELY CONNECTED
INCOME FOR THE TAXABLE YEAR PURSUANT TO CLAUSE (IV) OF THE OPENING PARA-
GRAPH OF SUBDIVISION NINE OF SECTION TWO HUNDRED EIGHT OF THIS ARTICLE.
  (D) A COMBINED REPORT SHALL BE FILED BY THE DESIGNATED  AGENT  OF  THE
COMBINED GROUP AS DETERMINED UNDER SUBDIVISION SEVEN OF THIS SECTION.
  3.  COMMONLY  OWNED  GROUP  ELECTION. (A) SUBJECT TO THE PROVISIONS OF
PARAGRAPH (C) OF SUBDIVISION TWO OF THIS SECTION, A TAXPAYER  MAY  ELECT
TO  TREAT AS ITS COMBINED GROUP ALL CORPORATIONS THAT MEET THE OWNERSHIP
REQUIREMENTS DESCRIBED IN PARAGRAPH  (A)  OF  SUBDIVISION  TWO  OF  THIS
SECTION  (SUCH CORPORATIONS COLLECTIVELY REFERRED TO IN THIS SUBDIVISION
AS THE "COMMONLY OWNED GROUP"). IF THAT ELECTION IS MADE,  THE  COMMONLY
OWNED GROUP SHALL CALCULATE THE COMBINED BUSINESS INCOME, COMBINED CAPI-
TAL,  AND  FIXED  DOLLAR  MINIMUM  BASES  OF ALL MEMBERS OF THE GROUP IN
ACCORDANCE WITH PARAGRAPH FOUR OF THIS SUBDIVISION, WHETHER OR NOT  THAT
BUSINESS INCOME OR BUSINESS CAPITAL IS FROM A SINGLE UNITARY BUSINESS.
  (B)  THE ELECTION UNDER THIS SUBDIVISION SHALL BE MADE ON AN ORIGINAL,
TIMELY FILED RETURN OF THE COMBINED GROUP. ANY  CORPORATION  ENTERING  A
COMMONLY  OWNED  GROUP  SUBSEQUENT  TO  THE  YEAR  OF  ELECTION SHALL BE
INCLUDED IN THE COMBINED GROUP AND IS  CONSIDERED  TO  HAVE  WAIVED  ANY
OBJECTION TO ITS INCLUSION IN THE COMBINED GROUP.
  (C)  THE ELECTION SHALL BE IRREVOCABLE, AND BINDING FOR AND APPLICABLE
TO THE TAXABLE YEAR FOR WHICH IT IS MADE AND FOR THE  NEXT  SIX  TAXABLE
YEARS.  THE  ELECTION  WILL  AUTOMATICALLY  BE RENEWED FOR ANOTHER SEVEN
TAXABLE YEARS AFTER IT HAS BEEN IN EFFECT FOR SEVEN TAXABLE YEARS UNLESS
IT IS  AFFIRMATIVELY  REVOKED.  THE  REVOCATION  SHALL  BE  MADE  ON  AN
ORIGINAL,  TIMELY  FILED  RETURN  FOR  THE  FIRST TAXABLE YEAR AFTER THE
COMPLETION OF A SEVEN YEAR PERIOD  FOR  WHICH  AN  ELECTION  UNDER  THIS
SUBDIVISION  WAS  IN  PLACE. IN THE CASE OF A REVOCATION, A NEW ELECTION
UNDER THIS SUBDIVISION SHALL NOT BE PERMITTED IN ANY OF THE  IMMEDIATELY
FOLLOWING  THREE  TAXABLE YEARS. IN DETERMINING THE SEVEN AND THREE YEAR
PERIODS DESCRIBED IN THIS PARAGRAPH, SHORT TAXABLE YEARS  SHALL  NOT  BE
CONSIDERED OR COUNTED.

S. 6359--C                         111

  (D)  NOTWITHSTANDING  PARAGRAPH  (A)  OF  THIS SUBDIVISION FOR TAXABLE
YEARS COMMENCING ON OR AFTER JANUARY FIRST, TWO  THOUSAND  FOURTEEN  BUT
ENDING  BEFORE  JANUARY  FIRST,  TWO  THOUSAND SEVENTEEN, A TAXPAYER MAY
ELECT TO TREAT AS ITS COMBINED GROUP ALL CORPORATIONS THAT ARE  INCLUDED
IN  A  TAXPAYERS  FEDERAL  TAX  RETURN  CONSOLIDATED GROUP AS ALLOWED BY
INTERNAL REVENUE CODE SECTION 1501 AND AS DEFINED  BY  INTERNAL  REVENUE
CODE SECTION 1504.
  4. COMPUTATION OF TAX BASES ON A COMBINED REPORT. (A) IN COMPUTING THE
TAX  BASES  FOR A COMBINED REPORT, THE COMBINED GROUP SHALL GENERALLY BE
TREATED AS A SINGLE  CORPORATION,  EXCEPT  AS  OTHERWISE  PROVIDED,  AND
SUBJECT TO ANY REGULATIONS OR GUIDANCE ISSUED BY THE COMMISSIONER OR THE
DEPARTMENT.
  (B)(I) IN COMPUTING COMBINED BUSINESS INCOME, ALL INTERCORPORATE DIVI-
DENDS  SHALL  BE  ELIMINATED,  AND ALL OTHER INTERCORPORATE TRANSACTIONS
SHALL BE DEFERRED IN A MANNER SIMILAR  TO  THE  UNITED  STATES  TREASURY
REGULATIONS  RELATING TO INTERCOMPANY TRANSACTIONS UNDER SECTION FIFTEEN
HUNDRED TWO OF THE INTERNAL REVENUE CODE.  AN INCOME,  DEDUCTION,  GAIN,
OR LOSS RECOGNITION OR CREDIT RECAPTURE EVENT THAT WOULD OTHERWISE OCCUR
PURSUANT  TO  SUCH  RULES WHEN A CORPORATION JOINS A CONSOLIDATED RETURN
GROUP SHALL BE DEEMED NOT TO OCCUR WHEN SUCH  RECOGNITION  OR  RECAPTURE
EVENT  RESULTS  FROM  A  CORPORATION FILING A COMBINED REPORT UNDER THIS
ARTICLE FOR ITS FIRST TAXABLE YEAR COMMENCING ON OR AFTER JANUARY FIRST,
TWO THOUSAND FIFTEEN, WITH  ANOTHER  CORPORATION  OR  CORPORATIONS  WITH
WHICH  IT  COULD NOT HAVE FILED COMBINED REPORTS FOR PRIOR TAXABLE YEARS
OR FROM A CORPORATION NOT FILING A COMBINED REPORT FOR ITS FIRST TAXABLE
YEAR COMMENCING ON OR AFTER JANUARY FIRST, TWO THOUSAND FIFTEEN, WITH  A
CORPORATION  OR  CORPORATIONS  WITH WHICH IT FILED A COMBINED REPORT FOR
THE IMMEDIATELY PRECEDING TAXABLE YEAR.
  (II) IN COMPUTING COMBINED CAPITAL, ALL INTERCORPORATE  STOCKHOLDINGS,
INTERCORPORATE  BILLS,  INTERCORPORATE  NOTES  RECEIVABLE  AND  PAYABLE,
INTERCORPORATE ACCOUNTS RECEIVABLE AND PAYABLE, AND OTHER INTERCORPORATE
INDEBTEDNESS, SHALL BE ELIMINATED.
  (C) QUALIFICATION FOR  CREDITS,  INCLUDING  ANY  LIMITATIONS  THEREON,
SHALL  BE  DETERMINED SEPARATELY FOR EACH OF THE MEMBERS OF THE COMBINED
GROUP, AND SHALL NOT BE DETERMINED ON A COMBINED GROUP BASIS, EXCEPT  AS
OTHERWISE  PROVIDED.  HOWEVER,  THE CREDITS SHALL BE APPLIED AGAINST THE
COMBINED TAX OF THE GROUP. TO THE EXTENT THAT A PROVISION OF SECTION TWO
HUNDRED TEN-B OF THIS ARTICLE LIMITS A CREDIT TO THE FIXED DOLLAR  MINI-
MUM AMOUNT PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE OF SECTION TWO
HUNDRED  TEN  OF THIS ARTICLE, SUCH FIXED DOLLAR MINIMUM AMOUNT SHALL BE
THE FIXED DOLLAR MINIMUM AMOUNT THAT IS ATTRIBUTABLE TO  THE  DESIGNATED
AGENT OF THE COMBINED GROUP.
  (D)(I)  A  NET  OPERATING  LOSS  DEDUCTION IS ALLOWED IN COMPUTING THE
COMBINED BUSINESS INCOME BASE. SUCH DEDUCTION MAY REDUCE THE TAX ON  THE
COMBINED  BUSINESS  INCOME BASE TO THE HIGHER OF THE TAX ON THE COMBINED
CAPITAL BASE OR THE FIXED DOLLAR MINIMUM. A COMBINED NET OPERATING  LOSS
DEDUCTION IS EQUAL TO THE AMOUNT OF COMBINED NET OPERATING LOSS OR LOSS-
ES  FROM ONE OR MORE TAXABLE YEARS THAT ARE CARRIED FORWARD TO A PARTIC-
ULAR INCOME YEAR. A COMBINED NET OPERATING LOSS IS THE COMBINED BUSINESS
LOSS INCURRED IN A PARTICULAR TAXABLE YEAR MULTIPLIED  BY  THE  COMBINED
APPORTIONMENT FACTOR FOR THAT YEAR DETERMINED AS PROVIDED IN SUBDIVISION
FIVE OF THIS SECTION.
  (II)  THE COMBINED NET OPERATING LOSS DEDUCTION AND COMBINED NET OPER-
ATING LOSS ARE ALSO SUBJECT TO THE PROVISIONS CONTAINED IN  CLAUSES  ONE
THROUGH  SIX  OF SUBPARAGRAPH (VIII) OF PARAGRAPH (A) OF SUBDIVISION ONE
OF SECTION TWO HUNDRED TEN OF THIS ARTICLE.

S. 6359--C                         112

  (III) IN THE CASE OF A  CORPORATION  THAT  FILES  A  COMBINED  REPORT,
EITHER  IN THE YEAR THE NET OPERATING LOSS IS INCURRED OR IN THE YEAR IN
WHICH A DEDUCTION IS CLAIMED ON ACCOUNT OF THE LOSS,  THE  COMBINED  NET
OPERATING  LOSS  DEDUCTION  IS  DETERMINED AS IF THE COMBINED GROUP IS A
SINGLE  CORPORATION  AND  IS  SUBJECT TO THE SAME LIMITATIONS THAT WOULD
APPLY FOR FEDERAL INCOME TAX PURPOSES UNDER THE  INTERNAL  REVENUE  CODE
AND THE CODE OF FEDERAL REGULATIONS AS IF SUCH CORPORATION HAD FILED FOR
SUCH TAXABLE YEAR A CONSOLIDATED FEDERAL INCOME TAX RETURN WITH THE SAME
CORPORATIONS  INCLUDED  IN THE COMBINED REPORT. IF A CORPORATION FILES A
COMBINED REPORT, REGARDLESS OF WHETHER IT FILED  A  SEPARATE  RETURN  OR
CONSOLIDATED  RETURN  FOR FEDERAL INCOME TAX PURPOSES, THE NET OPERATING
LOSS AND NET OPERATING LOSS DEDUCTION FOR THE  COMBINED  GROUP  MUST  BE
COMPUTED  AS  IF THE CORPORATION HAD FILED A CONSOLIDATED RETURN FOR THE
SAME CORPORATIONS FOR FEDERAL INCOME TAX PURPOSES.
  (IV) IN GENERAL, ANY NET OPERATING LOSS CARRYOVER FROM A YEAR IN WHICH
A COMBINED REPORT WAS FILED SHALL BE BASED ON THE COMBINED NET OPERATING
LOSS OF THE GROUP OF CORPORATIONS FILING SUCH REPORT. THE PORTION OF THE
COMBINED LOSS ATTRIBUTABLE TO ANY MEMBER OF THE GROUP THAT FILES A SEPA-
RATE REPORT FOR A SUCCEEDING TAXABLE YEAR WILL BE AN AMOUNT BEARING  THE
SAME  RELATION  TO  THE  COMBINED LOSS AS THE NET OPERATING LOSS OF SUCH
CORPORATION BEARS TO THE TOTAL NET OPERATING LOSS OF ALL MEMBERS OF  THE
GROUP  HAVING SUCH LOSSES TO THE EXTENT THAT THEY ARE TAKEN INTO ACCOUNT
IN COMPUTING THE COMBINED NET OPERATING LOSS.
  (E) ANY ELECTION MADE PURSUANT TO PARAGRAPH (B)  OF  SUBDIVISION  SIX,
AND  PARAGRAPHS  (B) AND (C) OF SUBDIVISION SIX-A OF SECTION TWO HUNDRED
EIGHT OF THIS ARTICLE SHALL APPLY TO ALL MEMBERS OF THE COMBINED GROUP.
  (F)(I) IN THE CASE OF A CAPTIVE REIT OR  CAPTIVE  RIC  REQUIRED  UNDER
THIS  SECTION  TO  BE  INCLUDED  IN A COMBINED REPORT, ENTIRE NET INCOME
SHALL BE COMPUTED AS REQUIRED UNDER SUBDIVISION FIVE (IN THE CASE  OF  A
CAPTIVE  REIT)  OR  SUBDIVISION  SEVEN (IN THE CASE OF A CAPTIVE RIC) OF
SECTION TWO HUNDRED NINE OF THIS ARTICLE. HOWEVER, THE  DEDUCTION  UNDER
THE  INTERNAL  REVENUE  CODE  FOR  DIVIDENDS PAID BY THE CAPTIVE REIT OR
CAPTIVE RIC TO ANY MEMBER OF THE  AFFILIATED  GROUP  THAT  INCLUDES  THE
CORPORATION  THAT  DIRECTLY OR INDIRECTLY OWNS OVER FIFTY PERCENT OF THE
VOTING STOCK OF THE CAPTIVE REIT OR CAPTIVE RIC SHALL  NOT  BE  ALLOWED.
FOR  PURPOSES  OF  THIS  SUBPARAGRAPH, THE TERM "AFFILIATED GROUP" MEANS
"AFFILIATED GROUP" AS DEFINED IN SECTION FIFTEEN  HUNDRED  FOUR  OF  THE
INTERNAL REVENUE CODE, BUT WITHOUT REGARD TO THE EXCEPTIONS PROVIDED FOR
IN SUBSECTION (B) OF THAT SECTION.
  (II)  IN  THE  CASE  OF  AN  OVERCAPITALIZED CAPTIVE INSURANCE COMPANY
REQUIRED UNDER THIS SECTION TO BE INCLUDED IN A COMBINED REPORT,  ENTIRE
NET  INCOME SHALL BE COMPUTED AS REQUIRED BY SUBDIVISION NINE OF SECTION
TWO HUNDRED EIGHT OF THIS ARTICLE.
  5. APPORTIONMENT ON A COMBINED REPORT. (A) IN DETERMINING  THE  APPOR-
TIONMENT  FACTOR  FOR  A  COMBINED REPORT, THE RECEIPTS, NET INCOME, NET
GAINS AND OTHER ITEMS OF ALL MEMBERS OF THE COMBINED GROUP,  WHETHER  OR
NOT  THEY  ARE  A  TAXPAYER,  ARE  INCLUDED AND INTERCORPORATE RECEIPTS,
INCOME AND GAINS ARE ELIMINATED. RECEIPTS, NET  INCOME,  NET  GAINS  AND
OTHER ITEMS ARE SOURCED AS PROVIDED IN SECTION TWO HUNDRED TEN-A OF THIS
ARTICLE.
  (B)  AN  ELECTION  MADE  TO APPORTION INCOME AND GAINS FROM QUALIFYING
FINANCIAL INSTRUMENTS PURSUANT TO SUBPARAGRAPH ONE OF PARAGRAPH  (A)  OF
SUBDIVISION  FIVE  OF  SECTION  TWO  HUNDRED TEN-A OF THIS ARTICLE SHALL
APPLY TO ALL MEMBERS OF THE COMBINED GROUP.

S. 6359--C                         113

  6. LIABILITY OF COMBINED GROUP MEMBERS. EVERY MEMBER OF  THE  COMBINED
GROUP  THAT  IS  SUBJECT  TO TAX UNDER THIS ARTICLE SHALL BE JOINTLY AND
SEVERALLY LIABLE FOR THE TAX DUE PURSUANT TO A COMBINED REPORT.
  7.  DESIGNATED  AGENT.  EACH  COMBINED GROUP SHALL HAVE ONE DESIGNATED
AGENT, WHICH SHALL BE A TAXPAYER. THE DESIGNATED  AGENT  IS  THE  PARENT
CORPORATION  OF  THE  COMBINED  GROUP. IF THERE IS NO SUCH PARENT CORPO-
RATION, OR THE PARENT CORPORATION IS NOT A TAXPAYER, THEN ANOTHER MEMBER
OF THE COMBINED GROUP THAT IS A TAXPAYER MAY BE APPOINTED AS THE  DESIG-
NATED  AGENT. ONLY THE DESIGNATED AGENT MAY ACT ON BEHALF OF THE MEMBERS
OF THE COMBINED GROUP FOR MATTERS RELATING TO THE COMBINED REPORT.
  S 19. Subdivisions 2-a, 3, 4 and 5 of section  211  of  the  tax  law,
subdivision  2-a as added and subdivision 5 as amended by chapter 817 of
the laws of 1987, subdivision 3 as amended by chapter 770 of the laws of
1992, subdivision 4 as amended by section 2 of part T of chapter 407  of
the  laws  of  1999,  the  opening paragraph and the second undesignated
paragraph of paragraph (a) of subdivision 4 as  amended  by  section  1,
subparagraph  4  of paragraph (a) of subdivision 4 as amended by section
2, and subparagraph 5 of paragraph (a) of subdivision 4  as  amended  by
section 3 of part J of chapter 60 of the laws of 2007, subparagraph 6 of
paragraph  (a)  of  subdivision  4  as added by section 3 of part FF1 of
chapter 57 of the laws of 2008,  subparagraph  7  of  paragraph  (a)  of
subdivision  4 as added by section 2 and subparagraph 1 of paragraph (b)
of subdivision 4 as amended by section 3 of part E1 of chapter 57 of the
laws of 2009, are amended to read as follows:
  2-a. The [tax commission] COMMISSIONER may prescribe  regulations  and
instructions  requiring  returns  of information to be made and filed in
conjunction with the reports required to be filed pursuant  to  [section
two  hundred  eleven]  THIS ARTICLE, relating to payments made to share-
holders owning, directly or indirectly, individually or  in  the  aggre-
gate, more than fifty percent of the issued capital stock of the taxpay-
er,  where  such  payments  are  treated  as payments of interest in the
computation of entire net income [or minimum taxable income] reported on
such reports.
  3. If the amount of taxable income  [or  alternative  minimum  taxable
income]  for  any year of any taxpayer (including any taxpayer which has
elected to be taxed under subchapter s of chapter one  of  the  internal
revenue  code),  as returned to the United States treasury department is
changed or corrected by the commissioner of internal  revenue  or  other
officer  of  the  United States or other competent authority, or where a
renegotiation of a  contract  or  subcontract  with  the  United  States
results  in  a  change in taxable income [or alternative minimum taxable
income], such taxpayer shall report such changed  or  corrected  taxable
income  [or  alternative minimum taxable income], or the results of such
renegotiation, within ninety days (or one hundred twenty  days,  in  the
case  of a taxpayer making a combined report under this article for such
year) after the final determination of  such  change  or  correction  or
renegotiation, or as required by the commissioner, and shall concede the
accuracy  of  such  determination  or state wherein it is erroneous. The
allowance of a tentative carryback adjustment based upon a net operating
loss carryback or net capital loss carryback pursuant to section  sixty-
four  hundred  eleven of the internal revenue code, as amended, shall be
treated as a final determination for purposes of this  subdivision.  Any
taxpayer  filing  an amended return with such department shall also file
within ninety days (OR ONE HUNDRED TWENTY DAYS, IN THE CASE OF A TAXPAY-
ER MAKING A COMBINED REPORT UNDER THIS ARTICLE FOR SUCH YEAR) thereafter
an amended report with the commissioner.

S. 6359--C                         114

  4. [(a) Combined reports permitted or required.  Any  taxpayer,  which
owns  or  controls  either  directly or indirectly substantially all the
capital stock of one or more other corporations,  or  substantially  all
the  capital  stock  of  which is owned or controlled either directly or
indirectly  by  one or more other corporations or by interests which own
or control either directly or indirectly substantially all  the  capital
stock  of  one  or  more other corporations, (hereinafter referred to in
this paragraph as "related corporations"), shall make a combined  report
covering  any  related corporations if there are substantial intercorpo-
rate transactions among the  related  corporations,  regardless  of  the
transfer price for such intercorporate transactions. It is not necessary
that  there  be  substantial intercorporate transactions between any one
corporation and every other related corporation. It is necessary, howev-
er, that there be substantial intercorporate  transactions  between  the
taxpayer  and  a  related  corporation  or collectively, a group of such
related corporations. The report shall set forth such information as the
commissioner may require, subject to the provisions of subparagraphs one
through five of this paragraph.
  In determining whether there  are  substantial  intercorporate  trans-
actions, the commissioner shall consider and evaluate all activities and
transactions  of  the  taxpayer and its related corporations. Activities
and transactions that will be considered include, but  are  not  limited
to:  (i)  manufacturing,  acquiring  goods  or  property,  or performing
services, for related corporations; (ii)  selling  goods  acquired  from
related  corporations;  (iii)  financing  sales of related corporations;
(iv) performing related customer services using  common  facilities  and
employees for related corporations; (v) incurring expenses that benefit,
directly  or  indirectly,  one  or  more  related corporations, and (vi)
transferring assets,  including  such  assets  as  accounts  receivable,
patents or trademarks from one or more related corporations.
  (1)  Any  corporation  which owns or controls either directly or indi-
rectly substantially all the capital stock of a DISC not exempt from tax
under paragraph (i) of subdivision nine of section two hundred eight  of
this  article  shall be allowed, at the election of such corporation, to
make a report on a combined basis covering such DISC, but the failure of
such corporation to make such election shall not  prohibit  the  commis-
sioner  from  requiring  a combined report covering such corporation and
such DISC.
  (2)(i) No taxpayer may be permitted to make a  report  on  a  combined
basis  covering  any  such other corporations where such taxpayer or any
such other corporation  allocates  in  accordance  with  clause  (A)  of
subparagraph  seven of paragraph (a) of subdivision three of section two
hundred ten of this article (relating to aviation corporations) and such
taxpayer or any such other corporation does not so allocate, unless such
taxpayer or such other corporation is a qualified air freight  forwarder
with  respect  to such other corporation or such taxpayer, respectively,
and all taxpayers included on such combined report elect, by filing such
combined report,  to  have  such  qualified  air  freight  forwarder  so
included.
  (ii)  A  corporation is a qualified air freight forwarder with respect
to another corporation:
  (A) if it owns or controls either directly or indirectly  all  of  the
capital  stock of such other corporation, or if all of its capital stock
is owned or controlled either  directly  or  indirectly  by  such  other
corporation,  or  if  all  of  the capital stock of both corporations is
owned or controlled either directly or indirectly by the same interests,

S. 6359--C                         115

  (B) if it is principally  engaged  in  the  business  of  air  freight
forwarding, and
  (C)  if  its air freight forwarding business is carried on principally
with the airline or airlines operated by such other corporation.
  (3) No taxpayer may be permitted to make a report on a combined  basis
covering  any  such  other  corporations where such taxpayer or any such
other corporation allocates in accordance  with  subparagraph  eight  of
paragraph  (a)  of  subdivision three of section two hundred ten of this
article (relating  to  railroad  and  trucking  corporations)  and  such
taxpayer or any such other corporation does not so allocate.
  (4)  Except  as  provided  in the first undesignated paragraph of this
paragraph, no combined report covering any corporation shall be required
unless the commissioner  deems  such  a  report  necessary,  because  of
inter-company transactions or some agreement, understanding, arrangement
or transaction referred to in subdivision five of this section, in order
properly to reflect the tax liability under this article.
  (5) A corporation organized under the laws of a country other than the
United  States  shall not be required or permitted to make a report on a
combined basis.
  (6) (i) For purposes of this subparagraph, the term "closest  control-
ling stockholder" means the corporation that indirectly owns or controls
over fifty percent of the voting stock of a captive REIT or captive RIC,
is subject to tax under this article, article thirty-two or thirty-three
of  this  chapter  or  otherwise  required  to be included in a combined
return or report under this article, article thirty-two or  thirty-three
of  this  chapter,  and  is the fewest tiers of corporations away in the
ownership structure from the captive REIT or captive RIC.   The  commis-
sioner  is  authorized  to prescribe by regulation or published guidance
the criteria for determining the closest controlling stockholder.
  (ii) A captive REIT or a captive RIC must be included  in  a  combined
report  with  the  corporation that directly owns or controls over fifty
percent of the voting stock of the captive REIT or captive RIC  if  that
corporation  is  subject to tax or required to be included in a combined
report under this article.
  (iii) If over fifty percent of the voting stock of a captive  REIT  or
captive RIC is not directly owned or controlled by a corporation that is
subject  to  tax  or  required to be included in a combined report under
this article, then the captive REIT or captive RIC must be included in a
combined return or report with  the  corporation  that  is  the  closest
controlling stockholder of the captive REIT or captive RIC. If the clos-
est  controlling  stockholder  of  the  captive  REIT  or captive RIC is
subject to tax or otherwise required to be included in a combined report
under this article, then  the  captive  REIT  or  captive  RIC  must  be
included in a combined report under this article.
  (iv)  If  the  corporation  that  directly owns or controls the voting
stock of the captive REIT or captive RIC is  described  in  subparagraph
two,  three  or five of this paragraph as a corporation not permitted to
make a combined report, then the provisions  in  clause  (iii)  of  this
subparagraph  must  be  applied  to  determine  the corporation in whose
combined return or report the captive REIT  or  captive  RIC  should  be
included.  If,  under clause (iii) of this subparagraph, the corporation
that is the closest controlling  stockholder  of  the  captive  REIT  or
captive  RIC  is  described  in  subparagraph two, three or five of this
paragraph as a corporation not permitted to make a combined return, then
that corporation is deemed to not be in the ownership structure  of  the

S. 6359--C                         116

captive  REIT  or  captive  RIC, and the closest controlling stockholder
will be determined without regard to that corporation.
  (v)  If  a  captive REIT owns the stock of a qualified REIT subsidiary
(as defined in paragraph two of subsection (i) of section eight  hundred
fifty-six of the internal revenue code), then the qualified REIT subsid-
iary must be included in a combined report with the captive REIT.
  (vi) If a captive REIT or a captive RIC is required under this subpar-
agraph to be included in a combined report with another corporation, and
that  other  corporation  is  also required to be included in a combined
report with another related corporation or corporations under this para-
graph, then the captive REIT or the captive RIC must be included in that
combined report with those corporations.
  (vii) If a captive REIT or  a  captive  RIC  is  not  required  to  be
included in a combined report with another corporation under clause (ii)
or  (iii)  of  this  subparagraph,  or  in  a  combined return under the
provisions of either subparagraph (v) of paragraph two of subsection (f)
of section fourteen hundred sixty-two or paragraph four  of  subdivision
(f) of section fifteen hundred fifteen of this chapter, then the captive
REIT  or  captive RIC is subject to the opening provisions of this para-
graph and the provisions of subparagraph four  of  this  paragraph.  The
captive  REIT or captive RIC must be included in a combined report under
this article with another corporation if either the  substantial  inter-
corporate  transactions  requirement  in  the opening provisions of this
paragraph or the inter-company transactions or agreement, understanding,
arrangement or transaction requirement  of  subparagraph  four  of  this
paragraph  is  satisfied and more than fifty percent of the voting stock
of the captive REIT or the captive RIC  and  substantially  all  of  the
capital  stock  of  that  other  corporation  are  owned and controlled,
directly or indirectly, by the same corporation.
  (7) (i) For purposes of this subparagraph, the term "closest  control-
ling stockholder" means the corporation that indirectly owns or controls
over  fifty  percent  of  the voting stock of an overcapitalized captive
insurance company; is subject to tax under this article or article thir-
ty-two of this chapter, or is otherwise required to  be  included  in  a
combined  return  or  report under this article or article thirty-two of
this chapter; and is the fewest tiers of corporations away in the owner-
ship structure from the overcapitalized captive insurance company.   The
commissioner is authorized to prescribe by regulation or published guid-
ance the criteria for determining the closest controlling stockholder.
  (ii)  An overcapitalized captive insurance company must be included in
a combined report with the corporation that directly  owns  or  controls
over  fifty  percent  of the voting stock of the overcapitalized captive
insurance company if that corporation is subject to tax or  required  to
be included in a combined report under this article.
  (iii)  If over fifty percent of the voting stock of an overcapitalized
captive insurance company is not  directly  owned  or  controlled  by  a
corporation  that  is  subject  to  tax  or required to be included in a
combined report under this article,  then  the  overcapitalized  captive
insurance  company  must be included in a combined return or report with
the corporation that is the closest controlling stockholder of the over-
capitalized captive insurance company. If the closest controlling stock-
holder of the overcapitalized captive insurance company  is  subject  to
tax or otherwise required to be included in a combined report under this
article,  then  the  overcapitalized  captive  insurance company must be
included in a combined report under this article.

S. 6359--C                         117

  (iv) If the corporation that directly  owns  or  controls  the  voting
stock  of  the overcapitalized captive insurance company is described in
subparagraph two, three, or five of this paragraph as a corporation  not
permitted to make a combined report, then the provisions in clause (iii)
of  this  subparagraph  must  be applied to determine the corporation in
whose combined return or report the  overcapitalized  captive  insurance
company should be included. If, under clause (iii) of this subparagraph,
the corporation that is the closest controlling stockholder of the over-
capitalized  captive insurance company is described in subparagraph two,
three or five of this paragraph as a corporation not permitted to make a
combined return, then that corporation is deemed not to be in the owner-
ship structure of the overcapitalized captive insurance company, and the
closest controlling stockholder will be  determined  without  regard  to
that corporation.
  (v)  If an overcapitalized captive insurance company is required under
this subparagraph to be included  in  a  combined  report  with  another
corporation,  and that other corporation is also required to be included
in a combined report with another related  corporation  or  corporations
under this paragraph, then the overcapitalized captive insurance company
must be included in that combined report with those corporations.
  (vi)  If  an overcapitalized captive insurance company is not required
to be included in a  combined  report  with  another  corporation  under
clause (ii) or (iii) of this subparagraph, or in a combined return under
the provisions of subparagraph (v) of paragraph two of subsection (f) of
section  fourteen  hundred sixty-two of this chapter, then the overcapi-
talized captive insurance company is subject to the  opening  provisions
of  this paragraph and the provisions of subparagraph four of this para-
graph. The overcapitalized captive insurance company must be included in
a combined report under this article with another corporation if  either
the  substantial  intercorporate transactions requirement in the opening
provisions of this paragraph or the inter-company transactions or agree-
ment, understanding, arrangement or transaction requirement of  subpara-
graph  four  of  this  paragraph  is satisfied, and both more than fifty
percent of the voting stock of  the  overcapitalized  captive  insurance
company  and substantially all of the capital stock of that other corpo-
ration are owned and controlled, directly or  indirectly,  by  the  same
corporation.
  (b) Computation. (1) Tax. (i) In the case of a combined report the tax
shall  be  measured  by the combined entire net income, combined minimum
taxable income, combined pre-nineteen  hundred  ninety  minimum  taxable
income  or  combined  capital,  of  all the corporations included in the
report, including any  captive  REIT,  captive  RIC  or  overcapitalized
captive  insurance company; provided, however, in no event shall the tax
measured by combined capital exceed the limitation provided for in para-
graph (b) of subdivision one of section two hundred ten of this article.
  (ii) In the case of a captive REIT or captive RIC required under  this
subdivision  to be included in a combined report, entire net income must
be computed as required under subdivision five (in the case of a captive
REIT) or subdivision seven (in the case of a captive RIC) of section two
hundred nine of this article. However, the deduction under the  internal
revenue  code  for  dividends paid by the captive REIT or captive RIC to
any member of the affiliated group that includes  the  corporation  that
directly  or  indirectly  owns over fifty percent of the voting stock of
the captive REIT or captive RIC shall not be allowed for  taxable  years
beginning  on  or  after  January  first,  two  thousand eight. The term
"affiliated group"  means  "affiliated  group"  as  defined  in  section

S. 6359--C                         118

fifteen hundred four of the internal revenue code, but without regard to
the exceptions provided for in subsection (b) of that section.
  (iii)  In  the  case  of  an overcapitalized captive insurance company
required under this subdivision to be included  in  a  combined  report,
entire  net  income  must be computed as required by subdivision nine of
section two hundred eight of this article.
  (2) Tax bases. In computing combined entire net income, combined mini-
mum taxable income or combined pre-nineteen hundred ninety minimum taxa-
ble income intercorporate dividends shall be  eliminated,  in  computing
combined  business  and  investment capital intercorporate stockholdings
and intercorporate bills, notes and accounts receivable and payable  and
other  intercorporate  indebtedness shall be eliminated and in computing
combined subsidiary capital intercorporate stockholdings shall be elimi-
nated, provided, however, that intercorporate dividends from a DISC or a
former DISC not exempt from tax under paragraph (i) of subdivision  nine
of  section two hundred eight of this article which are taxable as busi-
ness income under this article shall not be eliminated.
  (3) Air freight forwarders: allocation. Notwithstanding any  provision
of law to the contrary, where a combined report includes a qualified air
freight  forwarder  and a corporation described in subparagraph seven of
paragraph (a) of subdivision three of section two hundred  ten  of  this
chapter  (relating  to aviation corporations), in computing the combined
business allocation percentage such subparagraph seven shall be  applied
with  respect  to  such  qualified air freight forwarder] FOR PROVISIONS
RELATING TO COMBINED REPORTS, SEE SECTION  TWO  HUNDRED  TEN-C  OF  THIS
ARTICLE.
  5.  In  case it shall appear to the [tax commission] COMMISSIONER that
any agreement, understanding or arrangement exists between the  taxpayer
and  any  other corporation or any person or firm, whereby the activity,
business, income or capital of the taxpayer within the state is  improp-
erly  or  inaccurately  reflected,  the [tax commission] COMMISSIONER is
authorized and empowered, in [its] THE COMMISSIONER'S discretion and  in
such  manner  as [it] THE COMMISSIONER may determine, to adjust items of
income, deductions and capital, and to eliminate assets in computing any
[allocation] APPORTIONMENT percentage  provided  only  that  any  income
directly  traceable  thereto  be  also  excluded from entire net income,
[minimum taxable income or pre-nineteen hundred ninety  minimum  taxable
income,]  so  as  equitably to determine the tax. Where (a) any taxpayer
conducts its activity or business under any  agreement,  arrangement  or
understanding in such manner as either directly or indirectly to benefit
its  members  or  stockholders, or any of them, or any person or persons
directly or indirectly interested  in  such  activity  or  business,  by
entering  into  any transaction at more or less than a fair price which,
but for such agreement, arrangement or understanding,  might  have  been
paid or received therefor, or (b) any taxpayer, a substantial portion of
whose  capital  stock  is owned either directly or indirectly by another
corporation, enters into any transaction with such other corporation  on
such terms as to create an improper loss or net income, the [tax commis-
sion]  COMMISSIONER may include in the entire net income[, minimum taxa-
ble income or pre-nineteen hundred ninety minimum taxable income] of the
taxpayer the fair profits which, but for such agreement, arrangement  or
understanding,  the  taxpayer  might have derived from such transaction.
WHERE ANY TAXPAYER OWNS, DIRECTLY OR INDIRECTLY, MORE THAN FIFTY PERCENT
OF THE CAPITAL STOCK OF ANOTHER CORPORATION SUBJECT TO TAX UNDER SECTION
FIFTEEN HUNDRED TWO-A OF THIS CHAPTER AND FIFTY PERCENT OR LESS OF WHOSE
GROSS RECEIPTS FOR THE TAXABLE YEAR CONSIST OF PREMIUMS, THE COMMISSION-

S. 6359--C                         119

ER MAY INCLUDE IN THE ENTIRE NET INCOME OF THE  TAXPAYER,  AS  A  DEEMED
DISTRIBUTION, THE AMOUNT OF THE NET INCOME OF THE OTHER CORPORATION THAT
IS IN EXCESS OF ITS NET PREMIUM INCOME.
  S 19-a. Subdivision 13 of section 211 of the tax law is REPEALED.
  S 20.  Intentionally omitted.
  S 21.  Intentionally omitted.
  S 22.  Intentionally omitted.
  S  23.  Paragraph 4 of subdivision (f) of section 1515 of the tax law,
as amended by section 16 of part FF-1 of chapter 57 of the laws of 2008,
is amended to read as follows:
  (4)(i) For purposes of this paragraph, the term  "closest  controlling
stockholder" means the corporation that indirectly owns or controls over
fifty  percent  of the voting stock of a captive REIT or captive RIC, is
subject to tax under section fifteen hundred one of this  article[,]  OR
article nine-A [or article thirty-two] of this chapter or required to be
included in a combined return or report under this article[,] OR article
nine-A  [or article thirty-two] of this chapter, and is the fewest tiers
of corporations away in the ownership structure from the captive REIT or
captive RIC. The commissioner is authorized to prescribe  by  regulation
or  published guidance the criteria for determining the closest control-
ling stockholder.
  (ii) A captive REIT or a captive RIC must be included  in  a  combined
return  with  the  corporation that directly owns or controls over fifty
percent of the voting stock of the captive REIT or captive RIC  if  that
corporation  is  a  life  insurance corporation and is subject to tax or
required to be included in a combined return under this article.
  (iii) If over fifty percent of the voting stock of a captive  REIT  or
captive  RIC  is  not  directly  owned or controlled by a life insurance
corporation that is subject to tax or  required  to  be  included  in  a
combined  return  under  this article, [then the captive REIT or captive
RIC must be included in a combined report or return with the corporation
that is the closest controlling  stockholder  of  the  captive  REIT  or
captive  RIC. If] AND the closest controlling stockholder of the captive
REIT or captive RIC is a life insurance corporation that is  subject  to
tax  or required to be included in a combined return under this article,
then the captive REIT or captive RIC must  be  included  in  a  combined
return WITH THE CLOSEST CONTROLLING STOCKHOLDER under this article.
  (iv)  If  a captive REIT owns the stock of a qualified REIT subsidiary
(as defined in paragraph two of subsection (i) of section eight  hundred
fifty-six of the internal revenue code) AND THE CAPTIVE REIT IS REQUIRED
TO BE INCLUDED IN A COMBINED RETURN UNDER SUBPARAGRAPHS (II) OR (III) OF
THIS  PARAGRAPH,  then the qualified REIT subsidiary must be included in
any combined return required to be made by the captive  REIT  that  owns
the stock of the qualified REIT subsidiary.
  (v)  If  a  captive REIT or a captive RIC is required under this para-
graph to be included in a combined return with another corporation,  and
that  other  corporation is required to be included in a combined return
with another [related] corporation  under  this  subdivision,  then  the
captive REIT or the captive RIC must be included in that combined return
with the other [related] corporation.
  S  24.  Subdivisions (a), (b) and (c) of section 12 of the tax law, as
added by chapter 615 of the  laws  of  1998,  are  amended  to  read  as
follows:
  (a) For purposes of subdivision (b) of this section, the term "person"
shall  mean a corporation, joint stock company or association, insurance
corporation, or banking  corporation,  as  such  terms  are  defined  in

S. 6359--C                         120

section  one  hundred  eighty-three,  one  hundred  eighty-four,  or one
hundred eighty-six, or in article nine-A[, thirty-two]  or  thirty-three
of this chapter, imposing tax on such entities.
  (b)  No person shall be subject to the taxes imposed under section one
hundred eighty-three, one hundred eighty-four or one hundred eighty-six,
or article nine-A[, thirty-two] or thirty-three of this chapter,  solely
by  reason  of  (1)   having its advertising stored on a server or other
computer equipment located in this state (other than a server  or  other
computer  equipment  owned  or leased by such person), or (2) having its
advertising disseminated or displayed on the Internet by  an  individual
or  entity  subject  to  tax under section one hundred eighty-three, one
hundred eighty-four or one hundred eighty-six, or article nine-A,  twen-
ty-two[, thirty-two] or thirty-three of this chapter.
  (c)  A  person,  as such term is defined in subdivision (a) of section
eleven hundred one of this chapter, shall not be deemed to be a  vendor,
for  purposes  of article twenty-eight of this chapter, solely by reason
of (1)  having its advertising stored on  a  server  or  other  computer
equipment  located  in this state (other than a server or other computer
equipment owned or leased by such person), or (2) having its advertising
disseminated or displayed on the Internet by  an  individual  or  entity
subject  to  tax  under  section  one  hundred eighty-three, one hundred
eighty-four or one hundred eighty-six, or article  nine-A,  twenty-two[,
thirty-two] or thirty-three of this chapter.
  S  25. Paragraph 1 of subdivision (a) of section 14 of the tax law, as
amended by section 3 of part V1 of chapter 109 of the laws of  2006,  is
amended to read as follows:
  (1)  except as provided in paragraphs one-a and one-b of this subdivi-
sion, for purposes of section one hundred  eighty-seven-j  and  articles
nine-A,  twenty-two[,  thirty-two] and thirty-three of this chapter, for
each of the taxable years within  the  "business  tax  benefit  period,"
which  period  shall consist of (A) in the case of a business enterprise
with a test date occurring on or before December thirty-first, two thou-
sand one, the first fifteen taxable years beginning on or after  January
first, two thousand one, (B) in the case of a business enterprise with a
test  date  occurring  on  or after January first, two thousand two, but
prior to April first, two thousand five, the fifteen taxable years  next
following  the business enterprise's test year, and (C) in the case of a
business enterprise which is first certified under article eighteen-B of
the general municipal law on or after April first,  two  thousand  five,
the  ten taxable years starting with the taxable year in which the busi-
ness enterprise's first date of certification under  article  eighteen-B
of  the  general  municipal law occurs, but only with respect to each of
such business tax benefit period years for which the employment test  is
met,
  S  26.  Subdivision  (f)  of  section 14 of the tax law, as amended by
section 10 of part CC of chapter 85 of the laws of 2002, is  amended  to
read as follows:
  (f)  Taxable  year.  The term "taxable year" means the taxable year of
the business enterprise under  section  one  hundred  eighty-three,  one
hundred  eighty-four,  one  hundred  eighty-five  or  former section one
hundred eighty-six of article nine, or  under  article  nine-A,  twenty-
two[,  thirty-two] or thirty-three of this chapter. If a business enter-
prise does not have a taxable year because it is exempt from taxation or
otherwise not required to file a return under any of  such  sections  of
article  nine or under article nine-A, twenty-two[, thirty-two] or thir-
ty-three, then the term "taxable year" means  (i)  the  business  enter-

S. 6359--C                         121

prise's federal taxable year, or, (ii) if the enterprise does not have a
federal taxable year, the calendar year.
  S  27. Paragraph 1 of subdivision (i) of section 14 of the tax law, as
amended by section 5 of part A of chapter 63 of the  laws  of  2005,  is
amended to read as follows:
  (1)  for  purposes  of  section  one hundred eighty-seven-j of article
nine, and articles nine-A, twenty-two[, thirty-two] and thirty-three  of
this  chapter, on the first day of the taxable year during which revoca-
tion of its certification under article eighteen-B of the general munic-
ipal law occurs, and
  S 28. Paragraphs 1 and 2 of subdivision (j) of section 14 of  the  tax
law,  as  amended  by section 10 of part CC of chapter 85 of the laws of
2002, are amended to read as follows:
  (1) A new business shall include any corporation, except a corporation
which is substantially similar in operation and in ownership to a  busi-
ness  entity (or entities) taxable, or previously taxable, under section
one hundred eighty-three, one hundred eighty-four, one  hundred  eighty-
five or one hundred eighty-six of article nine; article nine-A[, article
thirty-two]  or  thirty-three  of  this chapter; article twenty-three of
this chapter or which would have been subject to tax under such  article
twenty-three  (as  such article was in effect on January first, nineteen
hundred eighty), ARTICLE THIRTY-TWO OF THIS CHAPTER OR WHICH WOULD  HAVE
BEEN  SUBJECT  TO TAX UNDER SUCH ARTICLE THIRTY-TWO (AS SUCH ARTICLE WAS
IN EFFECT ON DECEMBER THIRTY-FIRST, TWO THOUSAND FOURTEEN) or the income
(or losses) of which is (or was) includable under article twenty-two  of
this chapter.
  (2)  For purposes of article twenty-two of this chapter, an individual
who is either a sole proprietor or a member of a partnership shall qual-
ify as an owner of a new business unless the business of which the indi-
vidual is an owner is substantially similar in operation and  in  owner-
ship  to a business entity taxable, or previously taxable, under section
one hundred eighty-three, one hundred eighty-four, one  hundred  eighty-
five  or  one hundred eighty-six of article nine; article nine-A[, thir-
ty-two] or ARTICLE thirty-three of this chapter; article twenty-three of
this chapter or which would have been subject to tax under such  article
twenty-three  (as  such article was in effect on January first, nineteen
hundred eighty); ARTICLE THIRTY-TWO OF THIS CHAPTER OR WHICH WOULD  HAVE
BEEN SUBJECT TO TAX UNDER SUCH ARTICLE THIRTY-TWO AS SUCH ARTICLE WAS IN
EFFECT ON DECEMBER THIRTY-FIRST, TWO THOUSAND FOURTEEN or the income (or
losses) of which is (or was) includable under article twenty-two.
  S  29.  Clauses  (i)  and  (ii)  of subparagraph (A) of paragraph 4 of
subdivision (j) of section 14 of the tax law, as added by section  5  of
part  A  of  chapter  63  of  the  laws  of 2005, are amended to read as
follows:
  (i) Notwithstanding paragraphs one and two of this subdivision, a  new
business  shall  include any corporation which is identical in operation
and ownership to a business entity (or entities) taxable  under  section
one  hundred eighty-three, one hundred eighty-four or one hundred eight-
y-five of article nine; article nine-A[, article thirty-two] or  thirty-
three  of  this chapter or the income (or losses) of which is includable
under article twenty-two of this chapter, provided such corporation  and
such  business entity or entities are operating in different counties in
the state.
  (ii) Notwithstanding paragraphs one and two of  this  subdivision,  an
individual  who is either a sole proprietor or a member of a partnership
shall qualify as an owner of a new business if the business of which the

S. 6359--C                         122

individual is an owner is identical in operation and in ownership  to  a
business  entity (or entities) taxable under section one hundred eighty-
three, one hundred eighty-four or one  hundred  eighty-five  of  article
nine; article nine-A[, article thirty-two] or thirty-three of this chap-
ter or the income (or losses) of which is includable under article twen-
ty-two  of this chapter, provided such business and such business entity
or entities are operating in different counties in the state.
  S 30. Subparagraph (B) of paragraph 4 of subdivision (j) of section 14
of the tax law, as amended by chapter  161  of  the  laws  of  2005,  is
amended to read as follows:
  (B) Notwithstanding any provisions of this subdivision to the contrary
and  notwithstanding  subdivision  c  of  section eighteen of part CC of
chapter eighty-five of the laws of two thousand two,  a  corporation  or
partnership,  which  was first certified under article eighteen-B of the
general municipal law before August first, two thousand two, has a  base
period  of  zero  years  or  zero employment for its base period, and is
similar in operation and in ownership to a business entity  or  entities
taxable,  or  previously  taxable, under sections specified in paragraph
one or two of this subdivision or which would have been subject  to  tax
under  article  twenty-three  of  this  chapter  (as such article was in
effect on January first, nineteen hundred eighty) OR  WHICH  WOULD  HAVE
BEEN  SUBJECT  TO  TAX UNDER ARTICLE THIRTY-TWO OF THIS CHAPTER (AS SUCH
ARTICLE WAS IN EFFECT ON DECEMBER THIRTY-FIRST, TWO  THOUSAND  FOURTEEN)
or  the  income  or  losses  of which is or was includable under article
twenty-two of this chapter shall not be deemed a new business if it  was
not  formed  for  a  valid  business purpose, as such term is defined in
clause (D) of subparagraph one of paragraph (o) of subdivision  nine  of
section  two hundred eight of this chapter and was formed solely to gain
empire zone benefits.
  S 31. Subdivision (k) of section 14 of the  tax  law,  as  amended  by
section  5  of  part  A of chapter 63 of the laws of 2005, is amended to
read as follows:
  (k) If the designation of an area as an empire zone is  no  longer  in
effect  because section nine hundred sixty-nine of the general municipal
law was not amended to extend the effective date of such designation  so
that the designations of all empire zones pursuant to article eighteen-B
of  the  general  municipal law have expired, a business enterprise that
was certified pursuant to article eighteen-B of  the  general  municipal
law  on  the day immediately preceding the day on which such designation
expired shall be deemed to continue to be certified under  such  article
eighteen-B  for purposes of this section, and sections fifteen, sixteen,
section one hundred eighty-seven-j, subdivisions [twenty-seven] FIVE and
[twenty-eight] SIX of section two hundred [ten] TEN-B, subsections  (bb)
and  (cc)  of section six hundred six, subdivision (z) of section eleven
hundred fifteen[, subsections (o) and (p) of  section  fourteen  hundred
fifty-six,]  and  subdivisions  (r)  and  (s) of section fifteen hundred
eleven of this chapter. In addition, if the designation of an area as an
empire zone is no longer in effect because section nine  hundred  sixty-
nine  of  the general municipal law was not amended to extend the effec-
tive date of such designation so that the  designations  of  all  empire
zones  pursuant  to article eighteen-B of the general municipal law have
expired, all references to empire zones in the provisions of this  chap-
ter  listed  in  the  previous  sentence  shall be read as meaning areas
designated as empire zones on the day immediately preceding the  day  on
which such designation expired.

S. 6359--C                         123

  S  32.  Subdivisions  (a)  and  (h)  of  section 15 of the tax law, as
amended by section 5 of part A of chapter 63 of the laws  of  2005,  are
amended to read as follows:
  (a)  Allowance  of credit. A taxpayer which is a qualified empire zone
enterprise (QEZE), or which is a sole proprietor of a QEZE or  a  member
of  a  partnership  which  is  a QEZE, and which is subject to tax under
article nine-A, twenty-two[, thirty-two] or thirty-three of  this  chap-
ter,  shall  be  allowed  a  credit  against  such  tax, pursuant to the
provisions referenced in subdivision (h) of this section,  for  eligible
real property taxes.
  (h) Definitions and cross-references. For definitions of terms used in
this  section  see  section fourteen of this article. For application of
the credit provided for in this section, see the following provisions of
this chapter:
  (1) Article 9: Section 187-j.
  (2) Article 9-A: Section [210] 210-B: subdivision [27] 5.
  (3) Article 22: Section 606: subsections (i) and (bb).
  (4) [Article 32: Section 1456: subsection (o).
  (5)] Article 33: Section 1511: subdivision (r).
  S 33. Subdivision (a) of section 16  of  the  tax  law,  as  added  by
section  2  of  part GG of chapter 63 of the laws of 2000, is amended to
read as follows:
  (a) Allowance of credit. A taxpayer which is a qualified  empire  zone
enterprise  (QEZE),  or which is a sole proprietor of a QEZE or a member
of a partnership which is a QEZE, and which  is  subject  to  tax  under
article  nine-A,  twenty-two[, thirty-two] or thirty-three of this chap-
ter, shall be allowed  a  credit  against  such  tax,  pursuant  to  the
provisions referenced in subdivision (g) of this section, to be computed
as hereinafter provided.
  S 34. Paragraph 1, clause (ii) of subparagraph (B) of paragraph 2, and
subparagraph  (A) of paragraph 3 of subdivision (f) of section 16 of the
tax law, as amended by section 14 of part CC of chapter 85 of  the  laws
of 2002, are amended to read as follows:
  (1) General. The tax factor shall be, in the case of article nine-A of
this  chapter,  the [larger of the amounts] AMOUNT of tax determined for
the taxable year under [paragraphs] PARAGRAPH (a) [and (c)] of  subdivi-
sion  one  of  section  two  hundred ten of such article. The tax factor
shall be, in the case of article twenty-two of  this  chapter,  the  tax
determined  for  the  taxable  year under subsections (a) through (d) of
section six hundred one of such article. [The tax factor  shall  be,  in
the  case  of  article  thirty-two  of  this  chapter, the larger of the
amounts of tax determined for the taxable year under subsection (a)  and
paragraph  two  of subsection (b) of section fourteen hundred fifty-five
of such article.] The tax factor shall be, in the case of article  thir-
ty-three  of  this  chapter, the larger of the amounts of tax determined
for the taxable year under paragraphs one and three of  subdivision  (a)
of section fifteen hundred two of such article.
  (ii)  For  purposes of article nine-A[, thirty-two or thirty-three] of
this chapter, the term "partner's income  from  the  partnership"  means
partnership  items  of  income,  gain,  loss and deduction, and New York
modifications thereto, entering  into  [entire  net]  BUSINESS  income[,
minimum  taxable  income,  alternative  entire  net income or entire net
income plus compensation] and the term "partner's entire  income"  means
[entire  net]  BUSINESS  income[,  minimum  taxable  income, alternative
entire net income or entire net  income  plus  compensation,]  allocated
within the state.  FOR PURPOSES OF ARTICLE THIRTY-THREE OF THIS CHAPTER,

S. 6359--C                         124

THE TERM "PARTNER'S INCOME FROM THE PARTNERSHIP" MEANS PARTNERSHIP ITEMS
OF INCOME, GAIN, LOSS AND DEDUCTION, AND NEW YORK MODIFICATIONS THERETO,
ENTERING  INTO  ENTIRE NET INCOME OR ENTIRE NET INCOME PLUS COMPENSATION
AND  THE  TERM  "PARTNER'S  ENTIRE  INCOME"  MEANS ENTIRE NET INCOME, OR
ENTIRE NET INCOME PLUS COMPENSATION, ALLOCATED  WITHIN  THE  STATE.  For
purposes  of  article  twenty-two  of  this chapter, the term "partner's
income from the partnership" means partnership items  of  income,  gain,
loss  and  deduction,  and New York modifications thereto, entering into
New York adjusted gross income, and the term "partner's  entire  income"
means New York adjusted gross income.
  (A)  Where  the  taxpayer is a qualified empire zone enterprise and is
required or permitted to make a return or report  on  a  combined  basis
under article nine-A[, thirty-two] or ARTICLE thirty-three of this chap-
ter,  the  taxpayer's tax factor shall be the amount determined in para-
graph one of this subdivision which is attributable to the income of the
qualified empire zone enterprise.   Such attribution shall  be  made  in
accordance  with  the  ratio  of  the qualified empire zone enterprise's
income allocated within the state to the combined group's income, or  in
accordance  with such other methods as the commissioner may prescribe as
providing an apportionment which reasonably reflects the portion of  the
combined  group's tax attributable to the income of the qualified empire
zone enterprise. In no event may the ratio so determined exceed 1.0.
  S 35. Subdivision (g) of section 16  of  the  tax  law,  as  added  by
section  2  of  part GG of chapter 63 of the laws of 2000, is amended to
read as follows:
  (g) Definitions and cross-references. For definitions of terms used in
this section see sections fourteen and  fifteen  of  this  article.  For
application  of the credit provided for in this section, see the follow-
ing provisions of this chapter:
  (1) Article 9-A: Section [210] 210-B:  subdivision [28]6.
  (2) Article 22: Section 606: subsections (i) and (cc).
  (3) [Article 32: Section 1456: subsection (p).
  (4)] Article 33: Section 1511: subdivision (s).
  S 36. Paragraph 1 of subdivision (b) of section 17 of the tax law,  as
added  by  section  43  of part S1 of chapter 57 of the laws of 2009, is
amended to read as follows:
  (1) The empire zones tax benefits report must  contain  the  following
information  about  the  empire  zone tax credits claimed under articles
nine, nine-A, twenty-two[, thirty-two] and thirty-three of this  chapter
during the previous calendar year:
  (A) the name of each taxpayer claiming a credit; and
  (B) the amount of each credit earned by each taxpayer.
  S  37. Subdivisions (a) and (d) of section 18 of the tax law, as added
by section 2 of part CC of chapter 63 of the laws of 2000,  are  amended
to read as follows:
  (a)  Allowance  of  credit.  A  taxpayer  subject to tax under article
nine-A, twenty-two[, thirty-two] or thirty-three of this  chapter  shall
be  allowed a credit against such tax, pursuant to the provisions refer-
enced in subdivision (d) of this section, with respect to the  ownership
of  eligible low-income buildings for which an eligibility statement has
been issued by the commissioner of housing and  community  renewal.  The
amount  of  the credit shall be the credit amount for each such building
allocated by such commissioner as  provided  in  article  two-A  of  the
public  housing  law. The credit amount shall be allowed for each of the
ten taxable years in the credit period, and any reduction in  first-year

S. 6359--C                         125

credit  as provided in subdivision two of section twenty-two of such law
shall be allowed in the eleventh taxable year.
  (d)  Cross-references.  For  application of the credit provided for in
this section, see the following provisions of this chapter:
  (1) Article 9-A: Section [210] 210-B:  subdivision [30] 15,
  (2) Article 22: Section 606: subsections (i) and (x),
  (3) [Article 32: Section 1456: subsection (l),
  (4)] Article 33: Section 1511: subdivision (n).
  S 38. Subparagraph (A) of paragraph 1 of subdivision (a) and  subdivi-
sion  (f) of section 19 of the tax law, as added by section 2 of part II
of chapter 63 of the laws of 2000, are amended to read as follows:
  (A) Green building credit. A taxpayer subject  to  tax  under  article
nine,  nine-A,  twenty-two[, thirty-two] or thirty-three of this chapter
shall be allowed a green building credit against such tax,  pursuant  to
the  provisions referenced in subdivision (f) of this section. Provided,
however, no credit shall  be  allowed  under  this  section  unless  the
taxpayer  has complied with the applicable requirements of paragraph two
of subdivision (d) of this section (relating to  reports  to  DEC).  The
amount of the credit shall be the sum of the credit components specified
in  paragraphs two through seven of this subdivision. Provided, however,
the amount of each such credit component shall not exceed the limit  set
forth  in  the initial credit component certificate obtained pursuant to
subdivision (c) of this section. In the  determination  of  such  credit
components,  no cost paid or incurred by the taxpayer shall be the basis
for more than one such component.
  (f) Cross-references. For application of the credit  provided  for  in
this section, see the following provisions of this chapter:
  (1) Article nine: Section one hundred eighty-seven-d;
  (2)  Article  nine-A:  Subdivision [thirty-one] SIXTEEN of section two
hundred [ten] TEN-B;
  (3) Article twenty-two: Subsections (i) and (y) of section six hundred
six;
  (4) [Article thirty-two: Subsection (m) of  section  fourteen  hundred
fifty-six;
  (5)]  Article thirty-three: Subdivision (o) of section fifteen hundred
eleven.
  S 39. Paragraphs 1 and 5 of subdivision (a) of section 21 of  the  tax
law,  as  amended  by  section 1 of part H of chapter 577 of the laws of
2004, are amended to read as follows:
  (1) General. A taxpayer subject to tax  under  article  nine,  nine-A,
twenty-two[,  thirty-two]  or  thirty-three  of  this  chapter  shall be
allowed a credit against such tax, pursuant to the provisions referenced
in subdivision (f) of this section. Such credit shall  be  allowed  with
respect to a qualified site, as such term is defined in paragraph one of
subdivision  (b)  of this section. The amount of the credit in a taxable
year shall be the sum of the credit components specified  in  paragraphs
two, three and four of this subdivision applicable in such year.
  (5)  Applicable  percentage. For purposes of paragraphs two, three and
four of this subdivision, the  applicable  percentage  shall  be  twelve
percent  in  the  case  of  credits claimed under article nine, nine-A[,
thirty-two] or thirty-three of this chapter, and ten percent in the case
of credits claimed under article twenty-two of this chapter, except that
where at least fifty percent of the area of the qualified site  relating
to  the  credit  provided  for in this section is located in an environ-
mental zone as defined in paragraph  six  of  subdivision  (b)  of  this
section,  the  applicable percentage shall be increased by an additional

S. 6359--C                         126

eight percent. Provided, however, as afforded in section 27-1419 of  the
environmental  conservation  law, if the certificate of completion indi-
cates that the qualified site has been remediated to  Track  1  as  that
term is described in subdivision four of section 27-1415 of the environ-
mental  conservation  law,  the  applicable  percentage set forth in the
first sentence of this paragraph shall be increased by an additional two
percent.
  S 39-a. Subdivisions (c) and (f) of section 21  of  the  tax  law,  as
added  by  section  1  of  part  H of chapter 1 of the laws of 2003, are
amended to read as follows:
  (c) Qualifying property.  Property  which  qualifies  for  the  credit
provided  for  under this section and also for a credit provided for (1)
under either subdivision [twelve] ONE or subdivision [twelve-B] THREE of
section two hundred [ten]  TEN-B  of  this  chapter,  or  both,  OR  (2)
subsection  (a)  or  subsection  (j)  of section six hundred six of this
chapter, or both[, (3) the credit provided for under subsection  (i)  of
section  fourteen  hundred  fifty-six of this chapter, or (4) the credit
provided under subdivision (q) of section fifteen hundred eleven of this
chapter] may be the basis for either the credit provided for under  this
section  or  one  of the credits enumerated in paragraph one[,] OR two[,
three or four] of this subdivision, but not both.
  (f) Cross-references. For application of the credit  provided  for  in
this section, see the following provisions of this chapter:
  (1) Article 9: Section 187-g
  (2) Article 9-A: Section [210] 210-B, subdivision [33] 17
  (3) Article 22: Section 606, subsections (i) and (dd)
  (4) [Article 32: Section 1456, subsection (q)
  (5)] Article 33: Section 1511, subdivision (u).
  S  40. Paragraph 3 of subdivision (a) and paragraphs 1 and 9 of subdi-
vision (b) of section 22 of the tax law, as amended by section 4 of part
H of chapter 577 of the laws of 2004, are amended to read as follows:
  (3) Developer. (i) A "developer" is a  taxpayer  under  article  nine,
nine-A,  twenty-two[, thirty-two] or thirty-three of this chapter who or
which either (I) has  been  issued  a  certificate  of  completion  with
respect  to  a  qualified site or (II) has purchased or in any other way
has been conveyed all or any portion of a qualified site from a taxpayer
or any other party who  or  which  has  been  issued  a  certificate  of
completion  with respect to such site provided, such purchase or convey-
ance occurs within seven years of the effective date of the  certificate
of  completion  issued  with  respect to such qualified site.   Provided
further, that the taxpayer who or which is purchasing all or any portion
of a qualified site and the taxpayer or any other party who or which has
been issued a certificate of completion with respect to  such  site  may
not  be  related persons, as such term is defined in subparagraph (C) of
paragraph three of subsection (b) of section four hundred sixty-five  of
the internal revenue code.
  (ii)  Where  the  entity  to whom a certificate of completion has been
issued is a partnership, or where the entity which has purchased all  or
any  portion  of  a qualified site from a taxpayer who or which has been
issued a certificate of completion with respect to such site within  the
applicable  time limit is a partnership, any partner in such partnership
who or which is taxable under article nine, nine-A,  twenty-two[,  thir-
ty-two]  or thirty-three of this chapter shall be a developer under this
paragraph. Where the entity to whom a certificate of completion has been
issued is a New York S  corporation,  or  where  the  entity  which  has
purchased  all or any portion of a qualified site from a taxpayer who or

S. 6359--C                         127

which has been issued a certificate of completion with respect  to  such
site  within  the applicable time limit is a New York S corporation, any
shareholder in such New York S corporation shall be  a  developer  under
this paragraph.
  (1)  Allowance of credit. A developer of a qualified site who or which
is subject to tax under article nine, nine-A,  twenty-two[,  thirty-two]
or  thirty-three of this chapter, shall be allowed a credit against such
tax, pursuant to the provisions referenced in  paragraph  nine  of  this
subdivision, for eligible real property taxes imposed on such site.
  (9)  Cross-references.  For  application of the credit provided for in
this subdivision, see the following provisions of this chapter:
  (i) Article 9: Section 187-h.
  (ii) Article 9-A: Section [210] 210-B:  subdivision [34] 18.
  (iii) Article 22: Section 606: subsections (i) and (ee).
  (iv) [Article 32: Section 1456: subsection (r).
  (v)] Article 33: Section 1511: subdivision (v).
  S 41. Subdivision (a) of section 23 of the  tax  law,  as  amended  by
section 10 of part H chapter 577 of the laws of 2004, is amended to read
as follows:
  (a)  Allowance  of  credit.  General.  A taxpayer subject to tax under
article nine, nine-A, twenty-two[, thirty-two] or thirty-three  of  this
chapter  shall  be  allowed  a  credit against such tax, pursuant to the
provisions referenced in subdivision (e) of this section. The amount  of
such  credit  shall be equal to the lesser of thirty thousand dollars or
fifty percent of the premiums paid on or after the date  of  the  brown-
field site cleanup agreement executed by the taxpayer and the department
of  environmental  conservation pursuant to section 27-1409 of the envi-
ronmental conservation law by the taxpayer for environmental remediation
insurance issued with respect to a qualified site.
  S 42. Subdivision (e) of section 23  of  the  tax  law,  as  added  by
section  19  of  part  H of chapter 1 of the laws of 2003, is amended to
read as follows:
  (e) Cross-references. For application of the credit  provided  for  in
this section, see the following provisions of this chapter:
  (1) Article 9: Section 187-i
  (2) Article 9-A: Section [210] 210-B, subdivision [35] 19
  (3) Article 22: Section 606, subsections (i) and (ff)
  (4) [Article 32: Section 1456, subsection (s)
  (5)] Article 33: Section 1511, subdivision (w).
  S 43. Paragraphs 1 and 2 of subdivision (a) and clause (i) of subpara-
graph  (D)  of  paragraph  1 of subdivision (b) of section 25 of the tax
law, as added by section 1 of part N of chapter 61 of the laws of  2005,
are amended to read as follows:
  (1)  Every  taxpayer,  or  person as defined in section seven thousand
seven hundred one of the internal  revenue  code,  required  to  file  a
disclosure  statement  with  the  internal  revenue  service pursuant to
section six thousand eleven of the internal revenue code, or  the  regu-
lations promulgated thereunder, related to a reportable transaction or a
listed  transaction, as those terms are defined in such section or regu-
lations, must attach a duplicate of such  disclosure  statement  to  the
return or report required to be filed by such taxpayer or person for the
taxable  year  under  article  nine, nine-A, twenty-two[, thirty-two] or
thirty-three of this chapter, and provide such other information related
to such disclosure as prescribed by the  commissioner.  Such  disclosure
shall be made notwithstanding that one member of an affiliated group, as
defined  by  section  fifteen hundred four of the internal revenue code,

S. 6359--C                         128

may file such disclosure statement with the internal revenue service  on
behalf of its affiliates including such taxpayer or person.
  (2)  Every  taxpayer  or  such  person  who participates in a New York
reportable transaction for a taxable year  must  disclose  such  partic-
ipation  with  its  return  or report required to be filed under article
nine, nine-A, twenty-two[, thirty-two] or thirty-three of  this  chapter
for  the  taxable  year  in  a  form prescribed by the commissioner, and
provide such other information related to such transaction as prescribed
by the commissioner. A New York reportable transaction is a  transaction
that  has  the potential to be a tax avoidance transaction as determined
by the commissioner.
  (i) the list required to be maintained  by  such  person  pursuant  to
section  six  thousand  one  hundred twelve of the internal revenue code
identifies or is required to identify a taxpayer subject  to  tax  under
article  nine,  nine-A, twenty-two[, thirty-two] or thirty-three of this
chapter, and
  S 44. Subdivisions (a) and (f) of section 26 of the tax law, as  added
by chapter 537 of the laws of 2005, are amended to read as follows:
  (a)  Allowance  of  credit.  A taxpayer, which is subject to tax under
article nine, nine-A, twenty-two[, thirty-two] or thirty-three  of  this
chapter  and  which  is  a  qualified building owner, shall be allowed a
credit against such tax.  The amount of the credit  allowed  under  this
section shall equal the sum of the number of qualified security officers
providing  protection  to  a building or buildings owned by the taxpayer
multiplied by three thousand dollars. Provided,  however,  that  in  the
case  of  a worker not so employed for a full year, such amount shall be
prorated to reflect the length of such employment under  regulations  of
the commissioner.
  (f)  Cross-references.  For  application of the credit provided for in
this section, see the following provisions of this chapter:
  (1) article 9: section 187-n.
  (2) article 9-A: section [210] 210-B:  subdivision [37] 21.
  (3) article 22: section 606: subsection (ii).
  (4) [article 32: section 1456: subsection (t).
  (5)] article 33: section 1511: subdivision (x).
  S 45. Paragraph 3 of subdivision (a) and subdivision (c) of section 28
of the tax law, as added by section 2 of part V of  chapter  62  of  the
laws of 2006, are amended to read as follows:
  (3)  No  qualified  production  costs used by a taxpayer either as the
basis for the allowance of the credit provided for under this section or
used in the calculation of the credit provided for  under  this  section
shall  be used by such taxpayer to claim any other credit allowed pursu-
ant to this chapter.
  Notwithstanding any provisions of this  section  to  the  contrary,  a
corporation  or  partnership,  which  otherwise qualifies as a qualified
commercial production company, and is similar in operation and in owner-
ship to a business entity or entities taxable,  or  previously  taxable,
under  section  one hundred eighty-three, one hundred eighty-four or one
hundred eighty-five of article nine; article  nine-A[,  article  thirty-
two] or thirty-three of this chapter or which would have been subject to
tax  under  article twenty-three of this chapter (as such article was in
effect on January first, nineteen hundred eighty) OR  WHICH  WOULD  HAVE
BEEN  SUBJECT  TO  TAX UNDER ARTICLE THIRTY-TWO OF THIS CHAPTER (AS SUCH
ARTICLE WAS IN EFFECT ON DECEMBER THIRTY-FIRST, TWO  THOUSAND  FOURTEEN)
or  the  income  or  losses  of which is or was includable under article
twenty-two of this chapter shall not be deemed a new or  separate  busi-

S. 6359--C                         129

ness,  and  therefore  shall not be eligible for empire state commercial
production benefits, if it was not formed for a valid business  purpose,
as  such  term is defined in clause (D) of subparagraph one of paragraph
(o) of subdivision nine of section two hundred eight of this chapter and
was  formed  solely  to  gain  empire state commercial production credit
benefits.
  (c) Cross-references. For application of the credit  provided  for  in
this section, see the following provision of this chapter:
  (1) article 9-A: section [210] 210-B:  subdivision [38] 23.
  (2) article 22: section 606: subsection (jj).
  S  46.  Subdivision  (d)  of  section  28  of the tax law, as added by
section 1 of part X of chapter 62 of the laws of  2006,  is  amended  to
read as follows:
  (d)  Cross-references.  For  application of the credit provided for in
this section, see the following provisions of this chapter:
  (1) Article 9: Section 187-c.
  (2) Article 9-A: Section [210] 210-B, subdivision [38] 24.
  (3) Article 22: Section 606, subsections (i) and (jj).
  S 47. The opening paragraph of subdivision (a)  and  subdivisions  (c)
and  (g) of section 31 of the tax law, the opening paragraph of subdivi-
sion (a) and subdivision (g) as amended by section 7 of part G of  chap-
ter  61  of  the  laws of 2011, subdivision (c) as added by section 2 of
part MM of chapter 59 of the laws  of  2010,  are  amended  to  read  as
follows:
  General.  A  taxpayer subject to tax under section one hundred eighty-
five, article nine-A, twenty-two[, thirty-two] or thirty-three  of  this
chapter  shall  be  allowed  a  credit against such tax, pursuant to the
provisions referenced in subdivision (g) of this section. The amount  of
the  credit,  allowable  for up to ten consecutive taxable years, is the
sum of the following four credit components:
  (c) Election of credit. A taxpayer who or which is qualified to  claim
the  excelsior  investment tax credit component and is also qualified to
claim the investment tax credit provided for under subdivision  [twelve]
ONE of section two hundred [ten,] TEN-B OR subsection (a) of section six
hundred  six[,  or subsection (i) of section fourteen hundred fifty-six]
of this chapter, may claim either the excelsior  investment  tax  credit
component  or  the  investment tax credit, but not both with regard to a
particular piece of property. In addition, a taxpayer who  or  which  is
qualified  to claim the excelsior investment tax credit component and is
also qualified to claim the brownfield tangible property  credit  compo-
nent  under  section twenty-one of this article, as added by chapter one
of the laws of two  thousand  three,  may  claim  either  the  excelsior
investment  tax credit component or such tangible property credit compo-
nent, but not both with regard to a particular piece  of  property.  The
election  to  claim  the  excelsior investment tax credit component, the
investment tax credit or the brownfield tangible property credit  compo-
nent, with regard to the same property, is irrevocable.
  (g)  Cross-references.  For  application of the credit provided for in
this section, see the following provisions of this chapter:
  (1) article 9: section 187-q.
  (2) article 9-A: section [210] 210-B: subdivision [41] 31.
  (3) article 22: section 606: subsection (qq).
  (4) [article 32: section 1456: subsection (u).
  (5)] article 33: section 1511: subdivision (y).

S. 6359--C                         130

  S 48. Subdivision (d) of section 31  of  the  tax  law,  as  added  by
section  12  of  part Q of chapter 57 of the laws of 2010, is amended to
read as follows:
  (d)  Cross-references.  For  application of the credit provided for in
this section, see the following provisions of this chapter:
  (1) article 9-A: section [210] 210-B: subdivision [41] 32.
  (2) article 22: section 606: subsection (qq).
  S 49. Subdivision 3 of section 34 of the tax law, as added by  section
2  of  part  Y  of chapter 57 of the laws of 2010, is amended to read as
follows:
  3. (a) For application of the temporary deferral nonrefundable  payout
credit, see the following provisions of this chapter:
  (1) Article 9: section 187-0
  (2) Article 9-A: section [210(41)] 210-B(33)
  (3) Article 22: section 606(qq)
  (4) [Article 32: section 1456(v)
  (5)] Article 33: section 1511(y)
  (b)  For application of the temporary deferral refundable payout cred-
it, see the following provisions of this chapter:
  (1) Article 9: section 187-p
  (2) Article 9-A: section [210(42)] 210-B(34)
  (3) Article 22: section 606(rr)
  (4) [Article 32: section 1456(w)
  (5)] Article 33: section 1511(z)
  S 50. The opening paragraph of subdivision (a),  subparagraph  (C)  of
paragraph 2 of subdivision (e), and subdivision (f) of section 35 of the
tax  law,  as  added by section 3 of part V of chapter 61 of the laws of
2011, are amended to read as follows:
  A taxpayer which is a participant or the owner of a participant in the
economic transformation and facility redevelopment program under article
eighteen of the economic development law that is subject  to  tax  under
section  one  hundred  eighty-five  of  article nine, or article nine-A,
twenty-two[, thirty-two]  or  thirty-three  of  this  chapter  shall  be
allowed  the  sum  of following components against such tax, pursuant to
the provisions referenced in subdivision (f) of this section.
  (C) the business entity must not be substantially similar in ownership
and operation to another taxpayer taxable or  previously  taxable  under
section one hundred eighty-three, one hundred eighty-four or one hundred
eighty-five  of  article  nine, former section one hundred eighty-six of
this chapter or article nine-A, twenty-two[, thirty-two] or thirty-three
of this chapter OR FORMER ARTICLE THIRTY-TWO  OF  THIS  CHAPTER  or  the
income  or losses of which is or was includable under article twenty-two
of this chapter;
  (f) Cross-references. For application of the credits provided  for  in
this section, see the following provisions of this chapter:
  (1) section 185: section 187-r.
  (2) article 9-A: section [210(43)] 210-B(35).
  (3) article 22: section 606 (ss).
  (4) [article 32: section 1456(x).
  (5)] article 33: section 1511 (aa).
  S  51. Subdivisions (a) and (e) of section 36 of the tax law, as added
by section 2 of part E of chapter 56 of the laws of 2011, are amended to
read as follows:
  (a) Allowance of credit. A  taxpayer  subject  to  tax  under  article
nine-A,  twenty-two[,  thirty-two] or thirty-three of this chapter shall
be allowed a credit against such tax, pursuant to the provisions  refer-

S. 6359--C                         131

enced  in  subdivision  (e)  of  this section. The amount of the credit,
allowable for ten consecutive tax years, is equal to the  amount  deter-
mined  pursuant  to  section  four  hundred  twenty-five of the economic
development law.
  (e)  Cross-references.  For  application of the credit provided for in
this section, see the following provisions of this chapter:
  (1) article 9-A: section [210] 210-B, subdivision [44] 37;
  (2) article 22: section 606, subsection (tt);
  (3) [article 32: section 1456, subsection (y);
  (4)] article 33, section 1511, subdivision (bb).
  S 52. Subdivision (c) of section 37 of the tax law, as added by  chap-
ter 109 of the laws of 2012, is amended to read as follows:
  (c)  Cross-references.  For  application of the credit provided for in
this section, see the following provisions of this chapter:
  (1) Article 9-A: Section [210] 210-B, subdivision [45] 39.
  (2) Article 22: Section 606, subsections (i) and (uu).
  S 52-a. Subdivision (c) of section 39 of the tax law is REPEALED.
  S 53. Paragraphs 2, 3 and 4 of subdivision (k) of section  39  of  the
tax  law,  paragraphs 2 and 3 as added by section 2 of part A of chapter
68 of the laws of 2013, paragraph 4 as amended by section 2 of part T of
this act, are amended to read as follows:
  [(2) Article 9: section 180, subdivision 3.
  (3) Article 9: section 181, subdivision 3.]
  (4) Article 9-A: section [210] 210-B, subdivision [47] 41 and subdivi-
sion [48] 43.
  S 54. Subdivision 1 of section 171-a of the tax  law,  as  amended  by
section  1  of  part  R of chapter 60 of the laws of 2004, is amended to
read as follows:
  1. All taxes, interest, penalties and fees collected  or  received  by
the commissioner or the commissioner's duly authorized agent under arti-
cles nine (except section one hundred eighty-two-a thereof and except as
otherwise  provided  in  section  two  hundred  five  thereof),  nine-A,
twelve-A (except as otherwise provided in section  two  hundred  eighty-
four-d  thereof),  thirteen, thirteen-A (except as otherwise provided in
section  three  hundred  twelve  thereof),  eighteen,  nineteen,  twenty
(except  as otherwise provided in section four hundred eighty-two there-
of),  twenty-one,  twenty-two,  twenty-six,  twenty-six-B,  twenty-eight
(except  as  otherwise  provided in section eleven hundred two or eleven
hundred three thereof), twenty-eight-A, thirty-one (except as  otherwise
provided  in section fourteen hundred twenty-one thereof), [thirty-two,]
thirty-three and thirty-three-A of this chapter shall be deposited daily
in one account with such responsible  banks,  banking  houses  or  trust
companies  as may be designated by the comptroller, to the credit of the
comptroller. Such an account may be established in one or more  of  such
depositories.  Such  deposits  shall be kept separate and apart from all
other money in the possession of the comptroller. The comptroller  shall
require  adequate  security  from  all  such  depositories. Of the total
revenue collected or received under such articles of this  chapter,  the
comptroller  shall  retain in the comptroller's hands such amount as the
commissioner may determine to be necessary for refunds or reimbursements
under such articles of this chapter [and article  ten  thereof]  out  of
which  amount the comptroller shall pay any refunds or reimbursements to
which taxpayers shall be entitled under the provisions of such  articles
of  this  chapter  [and  article  ten thereof]. The commissioner and the
comptroller shall maintain a system of accounts showing  the  amount  of
revenue  collected  or  received  from each of the taxes imposed by such

S. 6359--C                         132

articles. The comptroller,  after  reserving  the  amount  to  pay  such
refunds  or  reimbursements,  shall,  on or before the tenth day of each
month, pay into the state treasury to the credit of the general fund all
revenue deposited under this section during the preceding calendar month
and  remaining  to  the  comptroller's  credit  on  the last day of such
preceding month, (i) except that the comptroller shall pay to the  state
department of social services that amount of overpayments of tax imposed
by  article  twenty-two  of this chapter and the interest on such amount
which is certified to the comptroller by the commissioner as the  amount
to  be  credited against past-due support pursuant to subdivision six of
section one hundred seventy-one-c of this [chapter]  ARTICLE,  (ii)  and
except  that  the  comptroller  shall  pay  to the New York state higher
education services corporation and the state university of New  York  or
the city university of New York respectively that amount of overpayments
of tax imposed by article twenty-two of this chapter and the interest on
such amount which is certified to the comptroller by the commissioner as
the amount to be credited against the amount of defaults in repayment of
guaranteed  student  loans and state university loans or city university
loans pursuant to subdivision five of section one hundred  seventy-one-d
and  subdivision six of section one hundred seventy-one-e of this [chap-
ter] ARTICLE, (iii) and except further that,  notwithstanding  any  law,
the  comptroller shall credit to the revenue arrearage account, pursuant
to section ninety-one-a of the state finance law, that amount  of  over-
payment  of  tax  imposed  by  article nine, nine-A, twenty-two, thirty,
thirty-A, thirty-B[, thirty-two] or thirty-three of  this  chapter,  and
any  interest  thereon,  which  is  certified  to the comptroller by the
commissioner as the amount to be credited  against  a  past-due  legally
enforceable  debt  owed  to  a state agency pursuant to paragraph (a) of
subdivision six of section one hundred seventy-one-f  of  this  article,
provided,  however,  he  shall  credit  to  the special offset fiduciary
account, pursuant to section ninety-one-c of the state finance law,  any
such  amount  creditable as a liability as set forth in paragraph (b) of
subdivision six of section one hundred seventy-one-f  of  this  article,
(iv)  and  except  further that the comptroller shall pay to the city of
New York that amount of overpayment of  tax  imposed  by  article  nine,
nine-A,  twenty-two,  thirty, thirty-A, thirty-B[, thirty-two,] or thir-
ty-three of this chapter and any interest thereon that is  certified  to
the comptroller by the commissioner as the amount to be credited against
city  of  New  York  tax  warrant  judgment debt pursuant to section one
hundred seventy-one-l of this article, (v) and except further  that  the
comptroller  shall pay to a non-obligated spouse that amount of overpay-
ment of tax imposed by article twenty-two of this chapter and the inter-
est on such amount which has  been  credited  pursuant  to  section  one
hundred  seventy-one-c,  one hundred seventy-one-d, one hundred seventy-
one-e, one hundred seventy-one-f or one hundred  seventy-one-l  of  this
article and which is certified to the comptroller by the commissioner as
the  amount  due  such non-obligated spouse pursuant to paragraph six of
subsection (b) of section six hundred fifty-one  of  this  chapter;  and
(vi)  the  comptroller  shall deduct a like amount which the comptroller
shall pay into the treasury to the  credit  of  the  general  fund  from
amounts  subsequently  payable to the department of social services, the
state university of New York, the city university of New  York,  or  the
higher  education services corporation, or the revenue arrearage account
or special offset fiduciary account pursuant to section ninety-one-a  or
ninety-one-c of the state finance law, as the case may be, whichever had
been  credited the amount originally withheld from such overpayment, and

S. 6359--C                         133

(vii) with respect to amounts originally withheld from such  overpayment
pursuant  to  section one hundred seventy-one-l of this article and paid
to the city of New York, the comptroller shall  collect  a  like  amount
from the city of New York.
  S  55.  Subdivision  2  of section 171-a of the tax law, as amended by
chapter 57 of the laws of 1993, is amended to read as follows:
  2. Notwithstanding subdivision  one  of  this  section  or  any  other
provision of law to the contrary, the taxes imposed pursuant to sections
one  hundred  eighty-three-a,  one  hundred  eighty-four-a, [one hundred
eighty-six-b,] one hundred eighty-six-c,  [one  hundred  eighty-nine-a,]
two  hundred nine-B[, fourteen hundred fifty-five-b] and fifteen hundred
five-a of this chapter, reduced by an amount for  administrative  costs,
shall be deposited to the credit of the metropolitan mass transportation
operating  assistance  account  in  the  mass  transportation  operating
assistance fund, created pursuant to section eighty-eight-a of the state
finance law, as such taxes are received. The amount  for  administrative
costs  shall  be  determined by the commissioner to represent reasonable
costs of the  department  of  taxation  and  finance  in  administering,
collecting, determining and distributing such taxes. Of the total reven-
ue  collected or received under such sections of this chapter, the comp-
troller shall retain in his hands such amount as  the  commissioner  may
determine  to  be  necessary  for  refunds  or reimbursements under such
sections of this chapter out of which amount the comptroller  shall  pay
any refunds or reimbursements to which taxpayers shall be entitled under
provisions  of  such  sections. The tax commissioner and the comptroller
shall maintain a system  of  accounts  showing  the  amount  of  revenue
collected or received from each of the taxes imposed by such sections.
  S  56. Paragraphs (b) and (c) of subdivision 1 of section 171-f of the
tax law, as amended by chapter 81 of the laws of 1995,  are  amended  to
read as follows:
  (b)  "taxpayer"  shall mean a corporation, association, company, part-
nership, estate, trust, liquidator, fiduciary or other entity  or  indi-
vidual who or which is liable for any tax or other imposition imposed by
or pursuant to article nine, nine-A, twenty-two, thirty, thirty-A, thir-
ty-B[,  thirty-two,] or thirty-three of this chapter or article two-E of
the general city law, which tax or other imposition is  administered  by
the  commissioner  of  taxation  and finance, or who or which is under a
duty to perform an act under or pursuant  to  such  tax  or  imposition,
excluding  a  state agency, a municipal corporation or a district corpo-
ration; and (c) "overpayment" shall mean an overpayment which  has  been
requested  or determined to be refunded, a refund or a reimbursement, of
a tax or other imposition  imposed  by  or  pursuant  to  article  nine,
nine-A,  twenty-two,  thirty, thirty-A, thirty-B[, thirty-two,] or thir-
ty-three of this chapter or article two-E of the general city law, which
is administered by the commissioner of taxation and finance.
  S 57. Subdivision 2 of section 171-f of the tax law, as added by chap-
ter 55 of the laws of 1992, is amended to read as follows:
  (2) The commissioner of taxation and finance, upon agreement with  the
state  comptroller  and  acting  as  an agent for the state comptroller,
shall set forth the  procedures  for  crediting  any  overpayment  by  a
taxpayer  of  any tax or other imposition imposed by or authorized to be
imposed pursuant to article nine, nine-A, twenty-two, thirty,  thirty-A,
thirty-B[, thirty-two,] or thirty-three of this chapter or article two-E
of  the  general  city law, which is administered by the commissioner of
taxation and finance, and the interest on any such overpayments, against
the amount of a past-due legally enforceable debt owed by such  taxpayer

S. 6359--C                         134

to  a  state  agency.  An  implementation plan shall be developed by the
division of the budget and the department of taxation and finance  which
shall  provide,  but not be limited to, guidance with respect to coordi-
nation of debt collection pursuant to this section and subdivision twen-
ty-seventh  of  section  one  hundred  seventy-one of this article. This
section shall not be deemed to abrogate or limit in any way  the  powers
and  authority  of the state comptroller to set off debts owed the state
against payments from the state, under the constitution of the state  or
any other law.
  S  58. Paragraphs (a) and (b) of subdivision 1 of section 171-l of the
tax law, as added by section 6 of part R of chapter 60 of  the  laws  of
2004, are amended to read as follows:
  (a)  "taxpayer"  shall mean a corporation, association, company, part-
nership, estate, trust, liquidator, fiduciary or other entity  or  indi-
vidual who or which is liable for any tax or other imposition imposed by
or pursuant to article nine, nine-A, twenty-two, thirty, thirty-A, thir-
ty-B[,  thirty-two,] or thirty-three of this chapter, which tax or other
imposition is administered by the commissioner of taxation and  finance,
or  who  or which is under a duty to perform an act under or pursuant to
such tax or imposition, excluding a state  agency,  a  municipal  corpo-
ration or a district corporation;
  (b)  "overpayment"  shall mean an overpayment which has been requested
or determined to be refunded, a refund or a reimbursement, of a  tax  or
other  imposition  imposed by or pursuant to article nine, nine-A, twen-
ty-two, thirty, thirty-A, thirty-B[,  thirty-two,]  or  thirty-three  of
this  chapter, which is administered by the commissioner of taxation and
finance; and
  S 59. Paragraph (b) of subdivision 1 of section 183 of the tax law, as
amended by section 1 of part Y of chapter 63 of the  laws  of  2000,  is
amended to read as follows:
  (b)  For  the  privilege  of exercising its corporate franchise, or of
doing business, or of employing capital, or of owning or leasing proper-
ty in this state in a corporate or organized capacity, or of maintaining
an office in this state, every domestic corporation, joint-stock company
or association formed for or  principally  engaged  in  the  conduct  of
canal, steamboat, ferry (except a ferry company operating between any of
the boroughs of the city of New York under a lease granted by the city),
express,  navigation,  pipe  line,  transfer,  baggage express, omnibus,
taxicab, telegraph, or telephone business, or formed for or  principally
engaged  in  the  conduct  of  two or more of such businesses, and every
domestic corporation, joint-stock company or association formed  for  or
principally  engaged  in the conduct of a railroad, palace car, sleeping
car or trucking business or formed for or  principally  engaged  in  the
conduct of two or more of such businesses and which has made an election
pursuant  to  subdivision  ten of this section, and every other domestic
corporation, joint-stock company or association principally  engaged  in
the  conduct  of  a  transportation  or  transmission business, except a
corporation, joint-stock company or association formed for or principal-
ly engaged in the conduct of a railroad, palace  car,  sleeping  car  or
trucking business or formed for or principally engaged in the conduct of
two  or  more  of  such  businesses  and which has not made the election
provided for in subdivision ten of this section,  and  except  a  corpo-
ration,  joint-stock  company  or association principally engaged in the
conduct of aviation (including air freight forwarders acting as  princi-
pal and like indirect air carriers) and except a corporation principally
engaged  in  providing  telecommunication  services between aircraft and

S. 6359--C                         135

dispatcher, aircraft and air  traffic  control  or  ground  station  and
ground  station  (or  any combination of the foregoing), at least ninety
percent of the voting stock of which corporation is owned,  directly  or
indirectly,  by  air carriers and which corporation's principal function
is to fulfill the requirements of  (i)  the  federal  aviation  adminis-
tration  (or  the  successor  thereto)  or  (ii) the international civil
aviation organization (or the successor thereto), relating to the exist-
ence of a communication system between aircraft and dispatcher, aircraft
and air traffic control or ground station and  ground  station  (or  any
combination of the foregoing) for the purposes of air safety and naviga-
tion  [and  except  a  corporation,  joint-stock  company or association
subject to taxation under article thirty-two  of  this  chapter,]  shall
pay,  in  advance,  an  annual  tax to be computed upon the basis of the
amount of its capital stock within this state during the preceding year,
and upon each dollar of such amount. Provided, however,  a  corporation,
joint-stock  company or association formed for or principally engaged in
the transportation, transmission or distribution of gas, electricity  or
steam  shall  not  be  subject  to tax under this section or section one
hundred eighty-four of this article.
  S 60. Subdivision 10 of section 183 of the tax law, as added by  chap-
ter 309 of the laws of 1996, is amended to read as follows:
  10.  Election. [With respect to taxable years beginning after nineteen
hundred ninety-seven, every] EVERY corporation, joint-stock  company  or
association  formed for or principally engaged in the conduct of a rail-
road (including surface railroad, whether  or  not  operated  by  steam,
subway  railroad  or  elevated  railroad),  palace  car, sleeping car or
trucking business or formed for or principally engaged in the conduct of
two or more of such businesses, which would be subject to article nine-A
[or thirty-two] of this chapter if the election provided for under  this
subdivision  were not made, may elect to be subject to the provisions of
this section and, as applicable, section one hundred eighty-four of this
article, rather than the provisions of such article nine-A  [or  thirty-
two]. [In the case of such a corporation, joint-stock company or associ-
ation  subject to the tax imposed under this section and, as applicable,
section one hundred eighty-four of this article, for  the  taxable  year
ending December thirty-first, nineteen hundred ninety-seven, such corpo-
ration, joint-stock company or association must make such election on or
before March fifteenth, nineteen hundred ninety-eight, and such election
shall  apply  to the taxable year ending on December thirty-first, nine-
teen  hundred  ninety-eight  and  to  succeeding  taxable  years,  until
revoked. In the case of such a corporation, joint-stock company or asso-
ciation  which is not subject to the tax imposed under this section and,
as applicable, section one hundred eighty-four of this article  for  the
taxable  year ending December thirty-first, nineteen hundred ninety-sev-
en, but thereafter would be subject to article nine-A or  thirty-two  of
this  chapter  if  the election provided for under this subdivision were
not made, such] SUCH corporation,  joint-stock  company  or  association
must  make  such  election  by  the first day on which such corporation,
joint-stock company or association would be required to file a return or
report (without regard to extensions) under this section or section  one
hundred  eighty-four  of  this  article,  or section one hundred eighty-
three-a or one  hundred[-]eighty-four-a  of  this  article,  or  article
nine-A  [or  thirty-two]  of  this chapter. An election made pursuant to
this subdivision shall continue to be in effect  until  revoked  by  the
taxpayer.  A  revocation  of  the election to be subject to this section
and, as applicable, section one hundred  eighty-four  of  this  article,

S. 6359--C                         136

shall  be irrevocable. Such election, and a revocation thereof, shall be
made in the manner prescribed by the commissioner, whether by regulation
or otherwise. Such revocation shall apply as of the first day of January
next  following  the  end  of  a  taxable year with respect to which the
taxpayer had been subject to this section and,  as  applicable,  section
one  hundred  eighty-four of this article, by reason of an election made
pursuant to this subdivision.
  S 61. The section heading and subdivisions 1 and 5 of section 183-a of
the tax law, the section heading as added by chapter 931 of the laws  of
1982,  subdivision  1 as amended by section 1 of part A of chapter 59 of
the laws of 2013 and subdivision 5 as amended by chapter 945 of the laws
of 1990, are amended to read as follows:
  [Temporary  metropolitan]  METROPOLITAN  transportation  business  tax
surcharge  on  transportation  and transmission corporations and associ-
ations.  1. The term "corporation" as used in this section shall include
an association, within the meaning of paragraph three of subsection  (a)
of  section  seventy-seven  hundred  one  of  the  internal revenue code
(including a limited liability company), a publicly  traded  partnership
treated  as  a  corporation  for  purposes  of the internal revenue code
pursuant to section seventy-seven hundred four thereof and any  business
conducted  by  a  trustee  or  trustees wherein interest or ownership is
evidenced by certificates or other  written  instruments.  Every  corpo-
ration,  joint-stock  company  or  association formed for or principally
engaged in the conduct of canal, steamboat, ferry (except a ferry compa-
ny operating between any of the boroughs of the city of New York under a
lease granted by the city), express, navigation,  pipe  line,  transfer,
baggage  express, omnibus, taxicab, telegraph, or telephone business, or
formed for or principally engaged in the conduct of  two  or  more  such
businesses,  and  every  corporation, joint-stock company or association
formed for or principally engaged in the conduct of a  railroad,  palace
car,  sleeping  car  or  trucking  business or formed for or principally
engaged in the conduct of two or more of such businesses and  which  has
made  an  election  pursuant  to  subdivision ten of section one hundred
eighty-three of this article, and every other  corporation,  joint-stock
company or association principally engaged in the conduct of a transpor-
tation  or  transmission  business,  except  a  corporation, joint-stock
company or association formed for or principally engaged in the  conduct
of  a  railroad, palace car, sleeping car or trucking business or formed
for or principally engaged in the conduct of two or more of  such  busi-
nesses  and  which has not made the election provided for in subdivision
ten of section one hundred eighty-three of this article,  and  except  a
corporation,  joint-stock  company or association principally engaged in
the conduct of aviation (including  air  freight  forwarders  acting  as
principal and like indirect air carriers) and except a corporation prin-
cipally engaged in providing telecommunication services between aircraft
and  dispatcher,  aircraft and air traffic control or ground station and
ground station (or any combination of the foregoing),  at  least  ninety
percent  of  the voting stock of which corporation is owned, directly or
indirectly, by air carriers and which corporation's  principal  function
is  to  fulfill  the  requirements  of (i) the federal aviation adminis-
tration (or the successor  thereto)  or  (ii)  the  international  civil
aviation organization (or the successor thereto), relating to the exist-
ence of a communication system between aircraft and dispatcher, aircraft
and  air  traffic  control  or ground station and ground station (or any
combination of the foregoing) for the purposes of air safety and naviga-
tion [and except a corporation, joint-stock company or association which

S. 6359--C                         137

is liable to taxation under article thirty-two of this  chapter],  shall
pay for the privilege of exercising its corporate franchise, or of doing
business,  or  of employing capital, or of owning or leasing property in
the  metropolitan  commuter transportation district in such corporate or
organized capacity, or of maintaining an office in such district, a  tax
surcharge [for all or any part of its years commencing on or after Janu-
ary  first, nineteen hundred eighty-two but ending before December thir-
ty-first, two thousand eighteen], which tax surcharge,  in  addition  to
the  tax  imposed  by  section one hundred eighty-three of this article,
shall be computed at the rate of [eighteen percent of  the  tax  imposed
under  such  section one hundred eighty-three for such years or any part
of such years ending  before  December  thirty-first,  nineteen  hundred
eighty-three  after  the  deduction  of  any credits otherwise allowable
under this article, and at the rate of] seventeen  percent  of  the  tax
imposed  under  such  section  for  such years or any part of such years
[ending on or after  December  thirty-first,  nineteen  hundred  eighty-
three] after the deduction of any credits otherwise allowable under this
article;  provided,  however,  that such rates of tax surcharge shall be
applied only to that portion  of  the  tax  imposed  under  section  one
hundred  eighty-three of this article after the deduction of any credits
otherwise allowable under this article  which  is  attributable  to  the
taxpayer's business activity carried on within the metropolitan commuter
transportation district as so determined in the manner prescribed by the
rules  and  regulations  promulgated by the commissioner[; and provided,
further, that the tax surcharge imposed by this  section  shall  not  be
imposed upon any taxpayer for more than four hundred thirty-two months].
  5.  [The  report  covering  the tax surcharge which must be calculated
pursuant to this section based upon the tax reportable on the report due
by March  fifteenth,  nineteen  hundred  eighty-two  under  section  one
hundred  eighty-three  of this article shall be filed on or before March
fifteenth, nineteen hundred eighty-three. The report  covering  the  tax
surcharge  which  must be calculated pursuant to this section based upon
the tax reportable on  the  report  due  by  March  fifteenth,  nineteen
hundred  eighty-three  under  section  one  hundred eighty-three of this
article shall be filed on or before March  fifteenth,  nineteen  hundred
eighty-four.  The report covering the tax surcharge which must be calcu-
lated pursuant to this section based upon  the  tax  reportable  on  the
report  due  by  March  fifteenth,  nineteen  hundred  eighty-four under
section one hundred eighty-three of this article shall be  filed  on  or
before  March fifteenth, nineteen hundred eighty-five. The report cover-
ing the tax surcharge which must be calculated pursuant to this  section
based  upon  the  tax  reportable  on the report due by March fifteenth,
nineteen hundred eighty-five under section one hundred  eighty-three  of
this  article  shall  be  filed  on  or before March fifteenth, nineteen
hundred eighty-six. The report covering the tax surcharge which must  be
calculated pursuant to this section based upon the tax reportable on the
report due by March fifteenth, nineteen hundred eighty-six under section
one  hundred  eighty-three  of  this article shall be filed on or before
March fifteenth, nineteen hundred eighty-seven. The report covering  the
tax  surcharge  which  must be calculated pursuant to this section based
upon the tax reportable on the report due by March  fifteenth,  nineteen
hundred  eighty-seven  under  section  one  hundred eighty-three of this
article shall be filed on or before March  fifteenth,  nineteen  hundred
eighty-eight. The report covering the tax surcharge which must be calcu-
lated  pursuant  to  this  section  based upon the tax reportable on the
report due by  March  fifteenth,  nineteen  hundred  eighty-eight  under

S. 6359--C                         138

section  one  hundred  eighty-three of this article shall be filed on or
before March fifteenth, nineteen hundred eighty-nine. The report  cover-
ing  the tax surcharge which must be calculated pursuant to this section
based  upon  the  tax  reportable  on the report due by March fifteenth,
nineteen hundred eighty-nine under section one hundred  eighty-three  of
this  article  shall  be  filed  on  or before March fifteenth, nineteen
hundred ninety.] The report covering the tax  surcharge  which  must  be
calculated pursuant to this section based upon the tax reportable on the
report  due  by  March  fifteenth  of  any  year [subsequent to nineteen
hundred eighty-nine] under section  one  hundred  eighty-three  of  this
article  shall  be  filed  on or before March fifteenth of the year next
succeeding such year. An extension pursuant to section one hundred nine-
ty-three OF THIS ARTICLE shall be allowed only if a taxpayer files  with
the  commissioner  an  application  for  extension  in such form as said
commissioner may prescribe by regulation and pays on or before the  date
of  such  filing  in  addition  to any other amounts required under this
article, either ninety percent of the entire tax surcharge  required  to
be  paid  under this section for the applicable period, or not less than
the tax surcharge shown on the taxpayer's report for the preceding year,
if such preceding year consisted of twelve  months.  The  tax  surcharge
imposed  by this section shall be payable to the commissioner in full at
the time the report is required to be filed, and such tax  surcharge  or
the  balance  thereof,  imposed on any taxpayer which ceases to exercise
its franchise or be subject to the tax surcharge imposed by this section
shall be payable to the commissioner at the time the report is  required
to be filed, provided such tax surcharge of a domestic corporation which
continues to possess its franchise shall be subject to adjustment as the
circumstances  may require; all other tax surcharges of any such taxpay-
er, which pursuant to the foregoing provisions  of  this  section  would
otherwise  be  payable subsequent to the time such report is required to
be filed, shall nevertheless  be  payable  at  such  time.  All  of  the
provisions  of  this article presently applicable to section one hundred
eighty-three of this article are applicable to the tax surcharge imposed
by this section except for section one hundred ninety-two of this  arti-
cle.
  S  62.  Subdivision  1  of  section  184 of the tax law, as amended by
section 2 of part Y of chapter 63 of the laws of  2000,  is  amended  to
read as follows:
  1.  The  term  "corporation"  as used in this section shall include an
association, within the meaning of paragraph three of subsection (a)  of
section  seventy-seven hundred one of the internal revenue code (includ-
ing a limited liability company), a publicly traded partnership  treated
as  a  corporation for purposes of the internal revenue code pursuant to
section seventy-seven hundred four thereof.
  Every corporation, joint-stock company or association  formed  for  or
principally  engaged in the conduct of canal, steamboat, ferry (except a
ferry company operating between any of the boroughs of the city  of  New
York under a lease granted by the city), express, navigation, pipe line,
transfer,  baggage  express,  omnibus, taxicab, telegraph or local tele-
phone business, or formed for or principally engaged in the  conduct  of
two  or  more  of  such  businesses,  and every corporation, joint-stock
company or association formed for or principally engaged in the  conduct
of  surface railroad, whether or not operated by steam, subway railroad,
elevated railroad, palace car, sleeping  car  or  trucking  business  or
formed  for  or  principally  engaged in the conduct of two or more such
businesses and which has made an election pursuant to subdivision ten of

S. 6359--C                         139

section one hundred eighty-three of this article, and every other corpo-
ration, joint-stock company or association  formed  for  or  principally
engaged  in  the  conduct  of  a transportation or transmission business
(other  than  a  telephone  business), except a corporation, joint-stock
company or association formed for or principally engaged in the  conduct
of  a  surface  railroad, whether or not operated by steam, subway rail-
road, elevated railroad, palace car, sleeping car or  trucking  business
or  formed  for  or principally engaged in the conduct of two or more of
such businesses and which has not made  the  election  provided  for  in
subdivision  ten  of  section  one hundred eighty-three of this article,
and, except a corporation, joint-stock company or association principal-
ly engaged in the conduct of aviation (including air freight  forwarders
acting  as principal and like indirect air carriers) and except a corpo-
ration  principally  engaged  in  providing  telecommunication  services
between  aircraft  and  dispatcher,  aircraft and air traffic control or
ground station and ground station (or any combination of the foregoing),
at least ninety percent of the voting  stock  of  which  corporation  is
owned,  directly  or indirectly, by air carriers and which corporation's
principal function is to fulfill the requirements  of  (i)  the  federal
aviation  administration (or the successor thereto) or (ii) the interna-
tional civil aviation organization (or the successor thereto),  relating
to  the  existence  of  a  communication  system  between  aircraft  and
dispatcher, aircraft and air  traffic  control  or  ground  station  and
ground station (or any combination of the foregoing) for the purposes of
air safety and navigation and [except a corporation, joint-stock company
or  association  which is liable to taxation under article thirty-two of
this chapter,] for the privilege of exercising its corporate  franchise,
or  of  doing business, or of employing capital, or of owning or leasing
property in this state in a corporate or organized  capacity,  or  main-
taining  an  office in this state, shall pay a franchise tax which shall
be equal to [(i) three-quarters of one percent for taxable years  ending
before  two thousand one, provided that for a taxable year ending in two
thousand the rate shall be  reduced  to  three-eighths  of  one  percent
effective  July first, two thousand with the result that for purposes of
implementation of such change in rate the applicable  rate  for  such  a
year shall be nine-sixteenths of one percent, and (ii)] three-eighths of
one  percent  for  taxable years commencing after two thousand, upon its
gross earnings from all sources within this  state;  except  that,  [for
taxable  years  commencing  on  or after January first, nineteen hundred
eighty-five and ending on  or  before  December  thirty-first,  nineteen
hundred  eighty-nine,  every corporation, joint-stock company or associ-
ation formed for or principally engaged in the conduct of  telephone  or
telegraph  business  shall  pay  a franchise tax which shall be equal to
three-tenths of one per centum upon its gross earnings from all  sources
within this state and,] for taxable years commencing on or after January
first,  nineteen  hundred ninety, every corporation, joint-stock company
or association formed for or principally engaged in the conduct of local
telephone business, or telegraph business  shall  pay  a  franchise  tax
which  shall  be equal to [(i) three-quarters of one percent for taxable
years ending before two thousand one, provided that for a  taxable  year
ending in two thousand the rate shall be reduced to three-eighths of one
percent  effective  July  first,  two  thousand with the result that for
purposes of implementation of such change in rate  the  applicable  rate
for  such  a  year  shall  be  nine-sixteenths of one percent, and (ii)]
three-eighths of one percent for  taxable  years  commencing  after  two
thousand,  upon  its  gross earnings from all sources within this state,

S. 6359--C                         140

except that a corporation, joint-stock company or association formed for
or principally engaged in the conduct  of  a  local  telephone  business
shall  exclude  the  following  earnings  (but not in any event earnings
derived  by such taxpayer from the provision of carrier access services)
derived by such taxpayer from sales for ultimate consumption of telecom-
munications service to its customers (i) thirty  percent  of  separately
charged  intra-LATA  toll  service (which shall also include interregion
regional calling plan service) and (ii) one hundred percent of separate-
ly charged inter-LATA, interstate  or  international  telecommunications
service; and except that [corporations, joint-stock companies or associ-
ations formed for or principally engaged in the conduct of surface rail-
road,  whether or not operated by steam, subway railroad, elevated rail-
road, palace car or sleeping car,  business  or  any  other  corporation
formed for or principally engaged in the conduct of a railroad business,
for  taxable  years  prior to nineteen hundred ninety-seven, and] corpo-
rations, joint-stock companies or associations formed for or principally
engaged in the conduct of canal, steamboat, ferry (except a ferry compa-
ny operating between any of the boroughs of the city of New York under a
lease granted by the city), navigation or any corporation formed for  or
principally  engaged  in the operation of vessels, shall pay a franchise
tax which shall be equal to three-quarters of one per  centum  upon  its
gross  earnings  from  all sources within this state, excluding earnings
derived from business of an interstate or foreign character; except that
for taxable years beginning in nineteen hundred ninety-seven  or  there-
after,  in the case of a corporation, joint-stock company or association
which, with respect to taxable years beginning  after  nineteen  hundred
ninety-seven,  has  made  an  election  pursuant  to  subdivision ten of
section one hundred eighty-three of this article and which is formed for
or principally engaged in the conduct of surface  railroad,  whether  or
not  operated  by steam, subway railroad, elevated railroad, palace car,
sleeping car or trucking business or formed for or  principally  engaged
in  the  conduct  of  two  or more of such businesses, such corporation,
joint-stock company or association shall pay a franchise tax which shall
be equal to [(i) six-tenths of one  percent  for  taxable  years  ending
before  two thousand one, provided that for a taxable year ending in two
thousand the rate shall be  reduced  to  three-eighths  of  one  percent
effective  July first, two thousand with the result that for purposes of
implementation of such change in rate the applicable  rate  for  such  a
year  shall  be  thirty-nine eightieths of one percent, and (ii)] three-
eighths of one percent for taxable years commencing after two  thousand,
upon  its  gross  earnings  from all sources within this state, provided
that in the case of a corporation, joint-stock  company  or  association
formed  for  or  principally engaged in the conduct of surface railroad,
whether or not operated by steam, subway  railroad,  elevated  railroad,
palace  car  or  sleeping  car  business,  or  formed for or principally
engaged in the conduct of two or more of  such  businesses,  such  gross
earnings  shall  not include earnings derived from business of an inter-
state or foreign character.
  Provided, however, with respect to railroad, elevated railroad, palace
car or sleeping car business or any  other  corporation  formed  for  or
principally  engaged  in  the  conduct of a railroad business and canal,
steamboat, ferry (except a ferry company operating between  any  of  the
boroughs  of  the  city  of New York under a lease granted by the city),
navigation or any corporation formed for or principally engaged  in  the
operation  of  vessels where the gross earnings from such transportation
business both originating and terminating within this state and travers-

S. 6359--C                         141

ing both this state and another state or  states  or  country  shall  be
subject  to the franchise tax imposed by this section (except where such
corporation, joint-stock company or association is formed for or princi-
pally  engaged in the conduct of a railroad (including surface railroad,
whether or not operated by steam, subway railroad or elevated railroad),
palace car or sleeping car business or formed for or principally engaged
in the conduct of two or more of such businesses, and has not  made  the
election  provided  for  under  subdivision  ten  of section one hundred
eighty-three of this article) and such earnings shall  be  allocated  to
this  state in the same ratio that the mileage within the state bears to
the total mileage of such business. Provided,  further,  a  corporation,
joint-stock  company or association formed for or principally engaged in
the transportation, transmission or distribution of gas, electricity  or
steam  shall  not  be  subject  to tax under this section or section one
hundred eighty-three of this article.
  The term "local telephone business" means the provision or  furnishing
of  telecommunication services for hire wherein the service furnished by
the provider thereof consists of carrier access service or  the  service
originates  and  terminates  within  the same local access and transport
area ("LATA"), a local access and transport area being  that  geographic
area as established and approved, and as so set and in existence on July
first,  nineteen  hundred  ninety-four,  pursuant to the modification of
final judgment in United  States  v.  Western  Electric  Company  (civil
action no. 82-0192) in the United States district court for the District
of Columbia or within the LATA-like Rochester non-associated independent
area.
  The  term "telecommunication services" shall have the meaning ascribed
to such term in section one hundred eighty-six-e of this article.
  S 63. The section heading and the opening paragraph of  subdivision  1
of section 184-a of the tax law, the section heading as added by chapter
931  of  the  laws of 1982 and the opening paragraph of subdivision 1 as
amended by section 2 of part A of chapter 59 of the laws  of  2013,  are
amended to read as follows:
  Additional   [temporary]   metropolitan  transportation  business  tax
surcharge on transportation and transmission  corporations  and  associ-
ations services.
  The  term "corporation" as used in this section shall include an asso-
ciation, within the meaning of paragraph  three  of  subsection  (a)  of
section  seventy-seven hundred one of the internal revenue code (includ-
ing a limited liability company),  and  a  publicly  traded  partnership
treated  as  a  corporation  for  purposes  of the internal revenue code
pursuant to section seventy-seven hundred four thereof.    Every  corpo-
ration,  joint-stock  company  or  association formed for or principally
engaged in the conduct of canal, steamboat, ferry (except a ferry compa-
ny operating between any of the boroughs of the city of New York under a
lease granted by the city), express, navigation,  pipe  line,  transfer,
baggage  express,  omnibus,  taxicab, telegraph or local telephone busi-
ness, or formed for or principally engaged in the conduct of two or more
such businesses, and every corporation, joint-stock company  or  associ-
ation  formed  for  or  principally  engaged in the conduct of a surface
railroad, whether or not operated by steam,  subway  railroad,  elevated
railroad,  palace  car, sleeping car or trucking business or principally
engaged in the conduct of two or more such businesses and which has made
an election pursuant to subdivision ten of section one  hundred  eighty-
three  of this article, and every other corporation, joint-stock company
or association formed for or principally engaged in  the  conduct  of  a

S. 6359--C                         142

transportation  or  transmission  business (other than a telephone busi-
ness) except a corporation, joint-stock company  or  association  formed
for or principally engaged in the conduct of a surface railroad, whether
or  not  operated  by  steam, subway railroad, elevated railroad, palace
car, sleeping car or trucking business or  principally  engaged  in  the
conduct  of  two  or  more  such  businesses  and which has not made the
election provided for in subdivision ten of section one hundred  eighty-
three  of this article, and except a corporation, joint-stock company or
association principally engaged in the conduct  of  aviation  (including
air  freight forwarders acting as principal and like indirect air carri-
ers) and except a corporation principally engaged in providing  telecom-
munication  services  between  aircraft and dispatcher, aircraft and air
traffic control or ground station and ground station (or any combination
of the foregoing), at least ninety percent of the voting stock of  which
corporation  is owned, directly or indirectly, by air carriers and which
corporation's principal function is to fulfill the requirements  of  (i)
the  federal  aviation administration (or the successor thereto) or (ii)
the international civil aviation organization (or the  successor  there-
to),  relating  to  the  existence  of  a  communication  system between
aircraft and dispatcher, aircraft and  air  traffic  control  or  ground
station and ground station (or any combination of the foregoing) for the
purposes  of air safety and navigation [and except a corporation, joint-
stock company or association which is liable to taxation  under  article
thirty-two  of  this chapter], shall pay for the privilege of exercising
its corporate franchise, or of doing business, or of employing  capital,
or  of owning or leasing property in the metropolitan commuter transpor-
tation district in such corporate or organized capacity, or of maintain-
ing an office in such district, a tax surcharge [for all or any part  of
its taxable years commencing on or after January first, nineteen hundred
eighty-two,  but ending before December thirty-first, two thousand eigh-
teen], which tax surcharge, in addition to the tax  imposed  by  section
one  hundred  eighty-four of this article, shall be computed at the rate
of [eighteen percent of the tax imposed under such section  one  hundred
eighty-four  for  such  taxable  years or any part of such taxable years
ending before December thirty-first, nineteen hundred eighty-three after
the deduction of any credits otherwise allowable under this article, and
at the rate of] seventeen percent of the tax imposed under such  section
for  such  taxable years or any part of such taxable years [ending on or
after December thirty-first, nineteen hundred  eighty-three]  after  the
deduction  of  any  credits  otherwise  allowable  under  this  article;
provided, however, that such rates of tax  surcharge  shall  be  applied
only to that portion of the tax imposed under section one hundred eight-
y-four  of  this  article  after  the deduction of any credits otherwise
allowable under this article which is  attributable  to  the  taxpayer's
business  activity carried on within the metropolitan commuter transpor-
tation district[; and provided, further, that the tax surcharge  imposed
by  this section on corporations, joint-stock companies and associations
formed for or principally engaged in the conduct of telephone  or  tele-
graph business shall be computed in accordance with this subdivision and
paragraph  (c)  of subdivision two of this section as if the three-quar-
ters of one percent rate of tax  provided  for  in  subdivision  one  of
section  one hundred eighty-four of this article were applicable to such
telephone and telegraph businesses for taxable years  commencing  on  or
after  January  first,  nineteen  hundred  eighty-five  and ending on or
before  December  thirty-first,  nineteen   hundred   eighty-nine;   and
provided,  further, that the tax surcharge imposed by this section shall

S. 6359--C                         143

not be imposed upon any taxpayer for more than four  hundred  thirty-two
months].    Provided,  however,  that for taxable years beginning in two
thousand and thereafter,  for  purposes  of  this  subdivision  the  tax
imposed  under  section one hundred eighty-four of this article shall be
deemed to have been  imposed  at  the  rate  of  three-quarters  of  one
percent,  except  that in the case of a corporation, joint-stock company
or association which has made an election pursuant to subdivision ten of
section one hundred eighty-three of this article, for purposes  of  this
subdivision  the  tax  imposed  under section one hundred eighty-four of
this article shall be deemed to have been imposed at the  rate  of  six-
tenths of one percent.
  S 64. Subdivision 8 of section 186-a of the tax law is REPEALED.
  S  65.   The section heading and subdivision 1 of section 186-c of the
tax law, the section heading as amended by chapter  2  of  the  laws  of
1995,  subdivision  1 as amended by section 3 of part II-1 of chapter 57
of the laws of 2008, subparagraph 1 of paragraph (a) of subdivision 1 as
amended by section 3 of part A of chapter 59 of the laws  of  2013,  are
amended to read as follows:
  [Temporary  metropolitan]  METROPOLITAN  transportation  business  tax
surcharge on utility services and excise tax  on  sale  of  telecommuni-
cation  services.  1. (a) (1) Every utility doing business in the metro-
politan commuter transportation district shall pay a tax  surcharge,  in
addition  to the tax imposed by section one hundred eighty-six-a of this
article[, for all or any parts of its taxable  years  commencing  on  or
after  January  first,  nineteen  hundred  eighty-two  but ending before
December thirty-first, two thousand eighteen], to be  computed  [at  the
rate  of  eighteen  percent of the tax imposed under section one hundred
eighty-six-a of this article for such taxable years or any part of  such
taxable  years  ending  before  December  thirty-first, nineteen hundred
eighty-three after the deduction  of  any  credits  otherwise  allowable
under  this  article,  and]  at the rate of seventeen percent of the tax
imposed under such section [for such taxable years or any part  of  such
taxable years ending on or after December thirty-first, nineteen hundred
eighty-three]  after  the deduction of credits otherwise allowable under
this article except any utility credit provided  for  by  article  thir-
teen-A  of  this  chapter;  provided,  however,  that  such rates of tax
surcharge shall be applied only to that portion of the tax imposed under
section one hundred eighty-six-a of this article after the deduction  of
credits otherwise allowable under this article, except any utility cred-
it  provided for by article thirteen-A of this chapter, which is attrib-
utable to the taxpayer's gross income or  gross  operating  income  from
business  activity carried on within the metropolitan commuter transpor-
tation district[; and provided, further, that the tax surcharge  imposed
by  this  section  shall  not be imposed upon any taxpayer for more than
four hundred thirty-two months].
  (2) Provided however, that [commencing January first,  two  thousand,]
in the case of the tax imposed under paragraph (a) of subdivision one of
section  one hundred eighty-six-a of this article (relating to providers
of telecommunications services) such tax surcharge shall  be  calculated
as  if  the  tax  imposed under section one hundred eighty-six-a of this
article were imposed at a rate of three and one-half percent.
  (b) In addition to the surcharge imposed  by  paragraph  (a)  of  this
subdivision,  there  is hereby imposed a surcharge on the gross receipts
from telecommunication services relating to  the  metropolitan  commuter
transportation  district  at  the rate of seventeen percent of the state
tax rate under section one hundred eighty-six-e of this article [for all

S. 6359--C                         144

or part of taxable years commencing on and after January first, nineteen
hundred ninety-five but ending before December thirty-first,  two  thou-
sand  thirteen]. All the definitions and other provisions of section one
hundred  eighty-six-e  of this article shall apply to the tax imposed by
this paragraph with such modification and limitation as may be necessary
(including substituting the words "metropolitan commuter  transportation
district"  for "state" where appropriate) in order to adapt the language
of such  section  one  hundred  eighty-six-e  of  this  article  to  the
surcharge  imposed  by  this paragraph within such metropolitan commuter
transportation district so as to include (1) any intra-district telecom-
munication services, except any  telecommunication  services  the  gross
receipts  from  which are subject to tax under subparagraph four of this
paragraph, (2) any inter-district telecommunication services which orig-
inate or terminate in such district and are charged to a service address
therein regardless of where the amounts charged for  such  services  are
billed  or  ultimately  paid, except any telecommunications services the
gross receipts from which are subject to tax under subparagraph four  of
this  paragraph, (3) as apportioned to such district, private telecommu-
nication services,  except  any  telecommunication  services  the  gross
receipts  from  which are subject to tax under subparagraph four of this
paragraph, and (4) mobile telecommunications service provided by a  home
service provider where the place of primary use is within such metropol-
itan  commuter  transportation  district.  Provided however, [commencing
October first, nineteen hundred ninety-eight] such tax  surcharge  shall
be  calculated  as  if the tax imposed under section one hundred eighty-
six-e of this article were imposed at  a  rate  of  three  and  one-half
percent.
  S  66.  Clause  (iii) of subparagraph (D) of paragraph 3 of subsection
(b) of section 605 of the tax law, as added by chapter 658 of  the  laws
of 2003, is amended to read as follows:
  (iii)  Provided  further,  that for the purposes of item (I) of clause
(i) of this subparagraph, a trustee which is a  banking  corporation  as
defined  in subsection (a) of section fourteen hundred fifty-two of this
chapter, AS SUCH SECTION WAS IN EFFECT  ON  DECEMBER  THIRTY-FIRST,  TWO
THOUSAND  FOURTEEN, and which is domiciled outside the state of New York
at the time it becomes a trustee of the trust shall be deemed to contin-
ue to be a trustee domiciled outside the state of New York notwithstand-
ing that it thereafter otherwise becomes  a  trustee  domiciled  in  the
state  of New York by virtue of being acquired by, or becoming an office
or branch of, a corporate trustee domiciled  within  the  state  of  New
York.
  S  67.  Subparagraph  (A) of paragraph 10 of subsection (a) of section
606 of the tax law, as amended by section 3 of part CC of chapter 85  of
the laws of 2002, is amended to read as follows:
  (A)  the business of which the individual is an owner is substantially
similar in operation and in ownership to a business entity  taxable,  or
previously  taxable, under section one hundred eighty-three, one hundred
eighty-four[,] OR one hundred eighty-five [or one hundred eighty-six] of
article nine; article nine-A[, thirty-two] or thirty-three of this chap-
ter; article twenty-three of this  chapter  or  which  would  have  been
subject  to  tax under such article twenty-three (as such article was in
effect on January first, nineteen hundred eighty), ARTICLE THIRTY-TWO OF
THIS CHAPTER OR WHICH WOULD HAVE BEEN SUBJECT TO TAX UNDER SUCH  ARTICLE
THIRTY-TWO  (AS SUCH ARTICLE WAS IN EFFECT ON DECEMBER THIRTY-FIRST, TWO
THOUSAND FOURTEEN) or the income  (or  losses)  of  which  is  (or  was)
includable  under  article twenty-two of this chapter whereby the intent

S. 6359--C                         145

and purpose of this paragraph and paragraph five of this subsection with
respect to refunding of credit to new business would be evaded; or
  S 68. Subparagraph (B) of paragraph 1 of subsection (i) of section 606
of the tax law, as amended by section 7 of part C-1 of chapter 57 of the
laws  of  2009, clause (ix) as amended by section 4 of part G of chapter
59 of the laws of 2013, clause (xxxi) as added by section 5 of  part  MM
of  chapter 59 of the laws of 2010, clause (xxxi) as added by section 14
of part Q of chapter 57 of the laws of 2010, clause (xxxii) as added  by
section  6  of part V of chapter 61 of the laws of 2011, clause (xxxiii)
as added by section 4 of part D of chapter  56  of  the  laws  of  2011,
clause  (xxxiii)  as  added  by section 5 of part E of chapter 56 of the
laws of 2011, clause (xxxiii) as added by chapter 604  of  the  laws  of
2011, clause (xxxiv) as added by chapter 109 of the laws of 2012, clause
(xxxv)  as  added  by  section 2 of part AA of chapter 59 of the laws of
2013, and clause (xxxvi) as added by section 8 of part A of  chapter  68
of the laws of 2013, and clause (xxxvii) as added by section 5 of part T
of this act, is amended to read as follows:
  (B)  shall  be  treated as the owner of a new business with respect to
such share if the corporation qualifies as a new  business  pursuant  to
paragraph  [(j)]  (F) of subdivision [twelve] ONE of section two hundred
[ten] TEN-B of this chapter.

With respect to the following        The corporation's credit base under
credit under this section:           section two hundred [ten or section
                                     fourteen hundred fifty-six] TEN-B
                                     of this chapter is:

(i) Investment tax credit under      Investment credit base or qualified
subsection (a)                       rehabilitation expenditures under
                                     subdivision [twelve] ONE of section
                                     two hundred [ten] TEN-B

(ii) Empire zone investment          Cost or other basis under
tax credit under subsection (j)      subdivision [twelve-B] THREE
                                     of section two hundred [ten] TEN-B

[(iii) Empire zone wage tax credit   Eligible wages under subdivision
under subsection (k)                 nineteen of section two hundred
                                     ten or subsection (e) of section
                                     fourteen hundred fifty-six

(iv) Empire zone capital tax         Qualified investments and
credit under subsection (l)          contributions under subdivision
                                     twenty of section two hundred ten
                                     or subsection (d) of section
                                     fourteen hundred fifty-six]

(v) Agricultural property tax        Allowable school district property
credit under subsection (n)          taxes under subdivision
                                     [twenty-two] ELEVEN of
                                     section two hundred [ten]
                                     TEN-B

(vi) Credit for employment of        Qualified first-year wages or
persons with disabilities            qualified second-year wages under
under subsection (o)                 subdivision [twenty-three] TWELVE

S. 6359--C                         146

                                     of section two hundred [ten or
                                     subsection (f) of section
                                     fourteen hundred fifty-six] TEN-B

(vii) Employment incentive credit    Applicable investment credit base
under subsection (a-1)               under subdivision [twelve-D] TWO
                                     of section two hundred [ten]
                                     TEN-B

(viii) Empire zone employment        Applicable investment credit
incentive credit under subsection    under subdivision [twelve-C]
(j-1)                                FOUR of section
                                     two hundred [ten] TEN-B

(ix) Alternative fuels               Amount of credit under subdivision
and electric vehicle                 [twenty-four] THIRTY of section
recharging property                  two hundred [ten] TEN-B
credit under subsection (p)

(x) Qualified emerging technology    Applicable credit base under
company employment credit under      subdivision [twelve-E] SEVEN
subsection (q)                       of section two hundred [ten] TEN-B

(xi) Qualified emerging technology   Qualified investments under
company capital tax credit under     subdivision [twelve-F] EIGHT
subsection (r)                       of section two hundred [ten] TEN-B

(xii) Credit for purchase of an      Cost of an automated external
automated external defibrillator     defibrillator under subdivision
under subsection (s)                 [twenty-five] THIRTEEN of section
                                     two hundred [ten or subsection
                                     (j) of section fourteen hundred
                                     fifty-six] TEN-B

(xiii) Low-income housing credit     Credit amount under subdivision
under subsection (x)                 [thirty] FIFTEEN of section
                                     two hundred [ten or subsection
                                     (l) of section fourteen
                                     hundred fifty-six] TEN-B

[(xiv) Credit for transportation     For taxable years beginning
improvement contributions under      before January first, two thousand
subsection (z)                       nine, amount of credit under
                                     subdivision thirty-two of
                                     section two hundred ten
                                     or subsection (n) of section
                                     fourteen hundred fifty-six]

(xv) QEZE credit for real property   Amount of credit under subdivision
taxes under subsection (bb)          [twenty-seven] FIVE of
                                     section two hundred [ten
                                     or subsection (o) of section
                                     fourteen hundred fifty-six]
                                     TEN-B

(xvi) QEZE tax reduction credit      Amount of benefit period factor,

S. 6359--C                         147

under subsection (cc)                employment increase factor and zone
                                     allocation factor (without regard
                                     to pro ration) under subdivision
                                     [twenty-eight] SIX of
                                     section two hundred [ten
                                     or subsection (p) of section
                                     fourteen hundred fifty-six]
                                     TEN-B and amount
                                     of tax factor as determined under
                                     subdivision (f) of section sixteen

(xvii) Green building credit under   Amount of green building credit
subsection (y)                       under subdivision [thirty-one]
                                     SIXTEEN of section two
                                     hundred [ten or subsection (m)
                                     of section fourteen hundred
                                     fifty-six] TEN-B

(xviii) Credit for long-term care    Qualified costs under subdivision
insurance premiums under subsection  [twenty-five-a] FOURTEEN
(aa)                                 of section two hundred [ten
                                     or subsection (k) of
                                     section fourteen hundred fifty-six]
                                     TEN-B

(xix) Brownfield redevelopment       Amount of credit under subdivision
credit under subsection (dd)         [thirty-three] SEVENTEEN
                                     of section two hundred
                                     [ten or subsection (q) of section
                                     fourteen hundred fifty-six]
                                     TEN-B

(xx) Remediated brownfield credit    Amount of credit under subdivision
for real property taxes for          [thirty-four] EIGHTEEN
qualified sites under subsection     of section two hundred
(ee)                                 [ten of subsection (r) of section
                                     fourteen hundred fifty-six]
                                     TEN-B

(xxi) Environmental remediation      Amount of credit under subdivision
insurance credit under subsection    [thirty-five] NINETEEN
(ff)                                 of section two hundred
                                     [ten or subsection (s) of section
                                     fourteen hundred fifty-six]
                                     TEN-B

(xxii) Empire state film             Amount of credit for qualified
production credit under              production costs in production of a
subsection (gg)                      qualified film under subdivision
                                     [thirty-six] TWENTY of
                                     section two hundred [ten] TEN-B

[(xxiii) Qualified emerging          Qualifying expenditures and
technology company facilities,       development activities under
operations and training credit       subdivision twelve-G of section two
under subsection (nn)                hundred ten]

S. 6359--C                         148

(xxiv) Security training tax credit  Amount of credit under subdivision
under subsection (ii)                [thirty-seven] TWENTY-ONE
                                     of section two hundred
                                     [ten or under subsection (t) of
                                     section fourteen hundred fifty-six]
                                     TEN-B

[(xxv) Credit for qualified fuel     For taxable years beginning before
cell electric generating             January first, two thousand nine,
equipment expenditures               amount of credit under subdivision
under subsection (g-2)               thirty-seven of section two hundred
                                     ten or subsection (t) of section
                                     fourteen hundred fifty-six]

(xxvi) Empire state commercial       Amount of credit for qualified
production credit under subsection   production costs in production of
(jj)                                 a qualified commercial under
                                     subdivision [thirty-eight]
                                     TWENTY-THREE of
                                     section two hundred [ten]
                                     TEN-B

(xxvii) Biofuel production tax       Amount of credit under subdivision
credit under subsection (jj)         [thirty-eight] TWENTY-FOUR
                                     of section two hundred [ten]
                                     TEN-B

(xxviii) Clean heating fuel credit   Amount of credit under subdivision
under subsection (mm)                [thirty-nine] TWENTY-FIVE of
                                     section two hundred [ten]
                                     TEN-B

(xxix) Credit for rehabilitation     Amount of credit under subdivision
of historic properties under         [forty] TWENTY-SIX of
subsection (oo)                      section two hundred [ten]
                                     TEN-B

 (xxxi) Excelsior jobs program tax   Amount of credit under subdivision
credit under subsection (qq)         [forty-one] THIRTY-ONE of
                                     section two hundred [ten
                                     or under subdivision (u) of
                                     section fourteen hundred fifty-six]
                                     TEN-B

(xxxi) Empire state film             Amount of credit for
post production credit under         qualified post production
subsection (qq)                      costs of a qualified film
                                     under subdivision [forty-one]
                                     THIRTY-TWO of section
                                     two hundred [ten] TEN-B

 (xxxii) Economic transformation     Amount of credit under subdivision
and facility redevelopment credit    [forty-three] THIRTY-FIVE
                                     of section [210 or under
                                     subsection (x) of section fourteen
                                     hundred fifty-six] TWO HUNDRED

S. 6359--C                         149

                                     TEN-B

 (xxxiii) New York youth works       Amount of credit under
tax credit                           subdivision [forty-four] THIRTY-SIX
                                     of section two hundred [ten]
                                     TEN-B

 (xxxiii) Empire state jobs          Amount of credit under
retention program credit             subdivision [forty-four]
                                     THIRTY-SEVEN of section
                                     two hundred [ten or under
                                     subsection (y) of section
                                     fourteen hundred fifty-six]
                                     TEN-B

(xxxiii) Credit for companies who    Amount of credit under
provide transportation to            subdivision [forty-four]
individuals with disabilities        THIRTY-EIGHT of section
under subsection (tt)                two hundred [ten] TEN-B

(xxxiv) Beer production credit       Amount of credit under
under subsection (uu)                [subdivision] subdivision
                                     [forty-five] THIRTY-NINE of
                                     section two hundred [ten]
                                     TEN-B

(xxxv) Hire a vet credit             Amount of credit under subdivision
under subsection (a-2)               [twenty-three-a] TWENTY-NINE
                                     of section two hundred [ten
                                     or subsection (e-1) of
                                     of section fourteen hundred
                                     fifty-six] TEN-B

(xxxv) Minimum wage reimbursement    Amount of credit under subdivision
credit under subsection (aaa)        [forty-six] FORTY
                                     of section two hundred
                                     [ten or subsection (z) of
                                     section fourteen hundred
                                     fifty-six] TEN-B

(xxxvi) Tax-free NY area tax         Amount of credit under
elimination credit                   subdivision [forty-seven] FORTY-ONE
                                     of section two hundred [ten]
                                     TEN-B

(xxxvii) Tax-free NY area            Amount of credit under
excise tax on                        subdivision [forty-eight]
telecommunications services          FORTY-THREE of section
credit under subsection (xx)         two hundred [ten] TEN-B

(XXXVIII) REAL PROPERTY TAX          AMOUNT OF CREDIT UNDER
CREDIT FOR MANUFACTURERS             SUBDIVISION FORTY-FOUR
UNDER SUBSECTION (YY)                OF SECTION
                                     TWO HUNDRED TEN-B

S. 6359--C                         150

  S  69.  Subparagraphs  (A) and (B) of paragraph 3 of subsection (i) of
section 606 of the tax law, as added by chapter 170 of the laws of 1994,
are amended to read as follows:
  (A)  Credit  carryover.  Any  excess  credit under subparagraph (A) of
paragraph one of this subsection, as it was in effect for taxable  years
beginning  before  nineteen  hundred ninety-four, may be carried over to
the shareholder's following year or years and may be deducted from  such
shareholder's  tax for such year or years, except that any excess credit
attributable to subdivision [twelve] ONE of section  two  hundred  [ten]
TEN-B  of  this chapter shall in no event be carried over beyond the ten
taxable years next following the taxable year of origin.
  (B) Credit recapture. Any redetermination of credit required  by  this
subsection  as it was in effect for taxable years beginning before nine-
teen hundred ninety-four, upon disposition or cessation of qualified use
of property pursuant to paragraph [(g)] (E) of subdivision [twelve] ONE,
OR paragraph (f) of subdivision [twelve-B or paragraph (f)  of  subdivi-
sion  eighteen] THREE of section two hundred [ten] TEN-B of this chapter
shall be attributed in pro rata shares  to  the  shareholders  who  were
allowed  credit under this subsection with respect to such property, and
the reduction of a shareholder's proportionate stock interest  shall  be
treated  as  a  disposition  of  property for which a redetermination of
credit under such paragraphs is required with respect to such sharehold-
er.
  S 69-a.  Intentionally omitted.
  S 70. Subparagraph (B) of paragraph 3 and paragraph 21  of  subsection
(b)  and  paragraph  21 of subsection (c) of section 612 of the tax law,
subparagraph (B) of paragraph 3 of subsection (b) as amended by  section
57,  paragraph  21  of subsection (b) as amended by section 59 and para-
graph 21 of subsection (c) as amended by section 60 of part A of chapter
389 of the laws of 1997, are amended to read as follows:
  (B) Shareholders of S corporations. In the case of a shareholder of an
S corporation, with respect to taxes imposed  upon  or  payable  by  the
corporation,  the  term "income taxes" in subparagraph (A) of this para-
graph shall also include the  taxes  imposed  under  [articles]  ARTICLE
nine-A  [and  thirty-two]  of this chapter, regardless of the measure of
such tax, but shall not otherwise include taxes imposed by this  or  any
other  state  of the United States, or any political subdivision of this
or any other state, or the District of Columbia.
  (21) In relation to the disposition of  stock  or  indebtedness  of  a
corporation  which  elected  under  subchapter  s  of chapter one of the
internal revenue code for any taxable year of  such  corporation  begin-
ning,  in the case of a corporation taxable under article nine-A of this
chapter, after December thirty-first, nineteen hundred eighty,  [and  in
the case of a corporation taxable under article thirty-two of this chap-
ter,  after  December  thirty-first,  nineteen  hundred ninety-six,] the
amount required to be added to federal adjusted gross income pursuant to
subsection (n) of this section.
  (21) In relation to the disposition of  stock  or  indebtedness  of  a
corporation  which  elected  under  subchapter  s  of chapter one of the
internal revenue code for any taxable year of  such  corporation  begin-
ning,  in the case of a corporation taxable under article nine-A of this
chapter, after December thirty-first, nineteen hundred eighty,  [and  in
the case of a corporation taxable under article thirty-two of this chap-
ter,  after  December  thirty-first,  nineteen  hundred ninety-six,] the
amounts required to be subtracted from  federal  adjusted  gross  income
pursuant to subsection (n) of this section.

S. 6359--C                         151

  S  71. Paragraph 2 of subsection (a) of section 632 of the tax law, as
amended by section 2 of part C of chapter 57 of the  laws  of  2010,  is
amended to read as follows:
  (2) In determining New York source income of a nonresident shareholder
of an S corporation where the election provided for in subsection (a) of
section  six  hundred sixty of this article is in effect, there shall be
included only the portion derived from or connected with New York sourc-
es of such shareholder's pro  rata  share  of  items  of  S  corporation
income,  loss  and  deduction  entering  into his federal adjusted gross
income, increased by reductions for taxes described  in  paragraphs  two
and three of subsection (f) of section thirteen hundred sixty-six of the
internal  revenue  code, as such portion shall be determined under regu-
lations of the commissioner consistent with the applicable  methods  and
rules  for allocation under article nine-A [or thirty-two] of this chap-
ter, regardless of whether or not such item or reduction is included  in
entire net income under article nine-A [or thirty-two] for the tax year.
If a nonresident is a shareholder in an S corporation where the election
provided  for  in  subsection  (a)  of section six hundred sixty of this
article is in effect, and the S corporation has distributed an  install-
ment obligation under section 453(h)(1)(A) of the Internal Revenue Code,
then any gain recognized on the receipt of payments from the installment
obligation  for  federal income tax purposes will be treated as New York
source income allocated in a manner consistent with the applicable meth-
ods and rules for allocation under article  nine-A  [or  thirty-two]  of
this  chapter in the year that the assets were sold. In addition, if the
shareholders of the S corporation have made an  election  under  section
338(h)(10) of the Internal Revenue Code, then any gain recognized on the
deemed asset sale for federal income tax purposes will be treated as New
York  source income allocated in a manner consistent with the applicable
methods and rules for allocation under article nine-A [or thirty-two] of
this  chapter  in  the  year  that  the  shareholder  made  the  section
338(h)(10) election. For purposes of a section 338(h)(10) election, when
a  nonresident  shareholder  exchanges his or her S corporation stock as
part of the deemed liquidation, any gain or  loss  recognized  shall  be
treated  as the disposition of an intangible asset and will not increase
or offset any gain recognized on the deemed assets sale as a  result  of
the section 338(h)(10) election.
  S 72. Subparagraph (A) of paragraph 4 of subsection (c) of section 658
of the tax law, as amended by section 1 of part DD of chapter 686 of the
laws of 2003, is amended to read as follows:
  (A) General. Every entity which is a partnership, other than a public-
ly traded partnership as defined in section 7704 of the federal Internal
Revenue Code, subchapter K limited liability company or an S corporation
for  which  the  election  provided for in subsection (a) of section six
hundred sixty of this [article] PART is in effect, which  has  partners,
members  or  shareholders  who  are  nonresident individuals, as defined
under subsection (b) of section six hundred five of this article,  or  C
corporations,  and  which  has any income derived from New York sources,
determined in accordance  with  the  applicable  rules  of  section  six
hundred thirty-one of this article as in the case of a nonresident indi-
vidual,  shall  pay estimated tax on such income on behalf of such part-
ners, members or shareholders in the manner and at the times  prescribed
by  subsection  (c)  of section six hundred eighty-five of this article.
For purposes of this paragraph, the term "estimated tax"  shall  mean  a
partner's,  member's  or  shareholder's  distributive  share or pro rata
share of the entity income derived from New York sources, multiplied  by

S. 6359--C                         152

the  highest  rate  of tax prescribed by section six hundred one of this
article for the taxable year of any partner, member or  shareholder  who
is  an  individual  taxpayer,  or  paragraph  (a)  of subdivision one of
section  two  hundred  ten  of  this chapter for the taxable year of any
partner, member or shareholder which is a C corporation, whether or  not
such  C corporation is subject to tax under article nine, nine-A[, thir-
ty-two,] or thirty-three of this chapter, and reduced by  the  distribu-
tive share or pro rata share of any credits determined under section one
hundred  eighty-seven,  one  hundred  eighty-seven-a,  six hundred six[,
fourteen hundred fifty-six] or fifteen hundred eleven of  this  chapter,
whichever is applicable, derived from the entity.
  S  73.  Subsections  (a)  and  (h)  of  section  660  of  the tax law,
subsection (a) as amended by section 50 and subsection (h) as amended by
section 66 of part A of chapter 389 of the laws of 1997, are amended  to
read as follows:
  (a)  Election.  If  a  corporation  is  an eligible S corporation, the
shareholders of the corporation may elect in the  manner  set  forth  in
subsection  (b)  of  this  section  to  take into account, to the extent
provided for in this article (or in article thirteen of this chapter, in
the case of a shareholder which is a taxpayer under such article), the S
corporation items of income, loss, deduction and  reductions  for  taxes
described in paragraphs two and three of subsection (f) of section thir-
teen hundred sixty-six of the internal revenue code which are taken into
account  for  federal  income  tax  purposes  for  the  taxable year. No
election under this subsection shall be effective unless all  sharehold-
ers of the corporation have so elected. An eligible S corporation is (i)
an  S corporation which is subject to tax under article nine-A [or thir-
ty-two] of this chapter, OR (ii) an S corporation which is the parent of
a qualified subchapter S subsidiary subject to tax under article nine-A,
where the shareholders of such parent corporation are entitled  to  make
the  election  under  this subsection by reason of subparagraph three of
paragraph (k) of subdivision nine of section two hundred eight  of  this
chapter[;  or  (iii) an S corporation which is the parent of a qualified
subchapter S corporation subject to tax under article thirty-two,  where
the  shareholders of such parent are entitled to make the election under
this subsection by reason  of  paragraph  three  of  subsection  (o)  of
section fourteen hundred fifty-three of this chapter].
  (h)  Cross  reference. For definitions relating to S corporations, see
subdivision one-A of section two hundred eight [and subsections (f)  and
(g) of section fourteen hundred fifty] of this chapter.
  S  74. Paragraph 1 of subsection (i) of section 660 of the tax law, as
added by section 1 of part L of chapter 60  of  the  laws  of  2007,  is
amended to read as follows:
  (1)  Notwithstanding the provisions in subsection (a) of this section,
in the case of an eligible S corporation for which  the  election  under
subsection  (a) of this section is not in effect for the current taxable
year, the shareholders of an eligible S corporation are deemed  to  have
made  that  election  effective  for the eligible S corporation's entire
current taxable year, if the eligible S corporation's investment  income
for  the  current taxable year is more than fifty percent of its federal
gross income for such year [provided  that  this  subsection  shall  not
apply  to an eligible S corporation that is subject to tax under article
thirty-two of this chapter]. IN DETERMINING AN ELIGIBLE S  CORPORATION'S
INVESTMENT  INCOME,  THE  INVESTMENT  INCOME OF A QUALIFIED SUBCHAPTER S
SUBSIDIARY OWNED DIRECTLY OR INDIRECTLY BY THE  ELIGIBLE  S  CORPORATION
SHALL BE INCLUDED.

S. 6359--C                         153

  S 75. Paragraph 3 of subsection (c) of section 1085 of the tax law, as
amended  by  section  15 of part Y of chapter 63 of the laws of 2000, is
amended to read as follows:
  (3)  The  provisions of this subsection and subsections (d) and (e) of
this section shall apply to the failure of a taxpayer to file a declara-
tion of estimated tax surcharge or the failure to pay all or any part of
an amount which is applied as an installment against such estimated  tax
surcharge  pursuant  to sections one hundred ninety-seven-a, one hundred
ninety-seven-b, two hundred thirteen-a, two hundred  thirteen-b,  [four-
teen  hundred  sixty, fourteen hundred sixty-one,] fifteen hundred thir-
teen and fifteen hundred fourteen  of  this  chapter.  For  purposes  of
applying this section and subsections (d) and (e) of this section to the
estimated  tax surcharge, where appropriate the term "tax" shall be read
to mean "tax surcharge," and the terms "amount  required  to  be  paid,"
"amount  which  would  be  required to be paid," and "amount which would
have been required to be paid" shall be computed as the product  of  (1)
such  amount computed without regard to the tax surcharges imposed under
sections  one  hundred  eighty-four-a,  one  hundred  eighty-six-c,  one
hundred  eighty-eight, two hundred nine-A, two hundred nine-B, [fourteen
hundred fifty-five-A, fourteen hundred  fifty-five-B,]  fifteen  hundred
five-a,  and  fifteen  hundred  twenty  of this chapter, and (2) the MTA
percentage. The term "MTA percentage" shall mean the product of (A)  the
tax rate applicable under such sections imposing such surcharges and (B)
the  percentage  utilized  in  determining the portion of the taxpayer's
business activity carried on within the metropolitan commuter  transpor-
tation district under such sections.
  S  76.  The  opening  paragraph  of subparagraph (A) of paragraph 3 of
subsection (d) of section 1085 of the tax law, as amended by chapter 170
of the laws of 1994, is amended to read as follows:
  An amount equal to ninety-one percent of the tax for the taxable  year
computed  on all items entering into the computation of the tax or taxes
of the taxpayer for the taxable year under article nine, nine-A[,  thir-
ty-two]  or  thirty-three of this chapter. For purposes of computing the
tax, all items of receipts, income and expenses shall be  placed  on  an
annualized basis--
  S  77. Clause (i) of subparagraph (A) of paragraph 4 of subsection (d)
of section 1085 of the tax law, as amended by chapter 57 of the laws  of
1993, is amended to read as follows:
  (i)  take  the items entering into the computation of the tax or taxes
of the taxpayer for the taxable year under article nine, nine-A[,  thir-
ty-two] or thirty-three of this chapter, for all months during the taxa-
ble year preceding the filing month,
  S 78. Paragraph 5 of subsection (d) of section 1085 of the tax law, as
added by chapter 61 of the laws of 1989, is amended to read as follows:
  (5)  In the case of any declaration installment, any reduction in such
installment resulting from the application of paragraph three or four of
this subsection shall be recaptured by increasing the amount of the next
installment determined under paragraph one or two of this subsection  or
paragraph  one  of  subsection (c) of this section by the amount of such
reduction (and by increasing subsequent installments to the extent  that
the  reduction has not previously been recaptured under this paragraph).
For purposes of the preceding sentence, a declaration installment  means
any installment of estimated tax other than the mandatory first install-
ment  required  under  paragraph  (a)  of subdivision one of section one
hundred ninety-seven-b, subdivision (a) of  section  two  hundred  thir-

S. 6359--C                         154

teen-b[, subsection (a) of section fourteen hundred sixty-one] or subdi-
vision (a) of section fifteen hundred fourteen of this chapter.
  S 79. Paragraph 1 of subsection (e) of section 1085 of the tax law, as
amended  by  section 28-p of part H-3 of chapter 62 of the laws of 2003,
is amended to read as follows:
  (1) Paragraphs (1) and (2) of subsection (d) of this section shall not
apply in the case of any corporation (or  any  predecessor  corporation)
which had [entire net] BUSINESS income, or the portion thereof allocated
within  the  state,  of one million dollars or more for any taxable year
during the three taxable years immediately preceding  the  taxable  year
involved;  provided,  however, that in the case of a corporation subject
to tax under section fifteen hundred two-a of this  chapter,  paragraphs
(1)  and  (2)  of subsection (d) of this section shall not apply if such
corporation had entire net income,  or  the  portion  thereof  allocated
within  the  state,  of one million dollars or more for any of the three
taxable years immediately preceding the taxable year involved, or if the
direct premiums subject to tax under section fifteen  hundred  two-a  of
this  chapter of the corporation for any of such three preceding taxable
years beginning on or after January first, two thousand three equals  or
exceeds three million seven hundred fifty thousand dollars.
  S  80.  Subsections  (m)  and  (o)  of section 1085 of the tax law are
REPEALED.
  S 81. Clause (ii) of subparagraph (B) of  paragraph  2  of  subsection
(q),  paragraph  3  of subsection (s) and the closing paragraph of para-
graph 1 of subsection (t) of section 1085 of the tax law,  as  added  by
section  10  of part N of chapter 61 of the laws of 2005, are amended to
read as follows:
  (ii) fifty percent of the gross income that the organizer or  material
advisor  derived  with respect to activities that were the basis for the
requirement to file, disclose or provide information pursuant to section
six thousand eleven of the internal revenue code,  to  the  extent  such
gross  income  is attributable to the avoidance of any tax imposed under
article nine, nine-A[, thirty-two,] or thirty-three of this chapter.
  (3) For purposes of  this  subsection,  the  term  "understatement  of
liability"  means  any  understatement  of  the  net amount payable with
respect to any tax imposed under article nine, nine-A[, thirty-two,]  or
thirty-three  of  this  chapter  or  any overstatement of the net amount
creditable or refundable with respect to any such tax.
shall pay, with respect to each activity described in  subparagraph  (A)
of  this  paragraph,  a penalty equal to one thousand dollars or, if the
person establishes that it is lesser, one hundred percent of  the  gross
income  derived  (or to be derived) by such person from such activity to
the extent such gross income is attributed to the avoidance of  any  tax
imposed  under  articles  nine,  nine-A[, thirty-two] or thirty-three of
this chapter; provided, however, that if an  activity  with  respect  to
which  a  penalty  imposed  under  this  subsection involves a statement
described in clause (i) of subparagraph (B) of  paragraph  one  of  this
subsection,  the  penalty  shall  be equal to fifty percent of the gross
income derived (or to be derived) from that activity within the state by
the person on which the penalty is imposed. For purposes of the  preced-
ing  sentence, activities described in clause (i) of subparagraph (A) of
this paragraph with respect to  each  entity  or  arrangement  shall  be
treated  as a separate activity and participation in each sale described
in clause (ii) of subparagraph (A) of this paragraph shall be so  treat-
ed.

S. 6359--C                         155

  S  82.  The opening paragraph of subsection (c) of section 1087 of the
tax law, as separately amended by chapters 760 and 770 of  the  laws  of
1992, is amended to read as follows:
  If  a taxpayer is required by subdivision three of section two hundred
eleven[, subsection (e) of section fourteen hundred sixty-two] or  para-
graph  one of subdivision (e) of section fifteen hundred fifteen OF THIS
CHAPTER, to file a report or amended return in respect of (i) a decrease
or increase in federal taxable income  or  federal  alternative  minimum
taxable income or federal tax, or (ii) a federal change or correction or
renegotiation,  or computation or recomputation of tax, which is treated
in the same manner as if it were an overpayment for federal  income  tax
purposes, claim for credit or refund of any resulting overpayment of tax
shall  be  filed  by  the  taxpayer  within two years from the time such
report or amended return was required to be filed with the  commissioner
[of  taxation  and finance]. If the report or amended return required by
any such provision of law is not filed within the period therein  speci-
fied,  no interest shall be payable on any claim for credit or refund of
the overpayment attributable to the federal change  or  correction.  The
amount of such credit or refund--
  S  83.  Subsection  (g)  of section 1088 of the tax law, as amended by
chapter 61 of the laws of 1989 and relettered by chapter 55 of the  laws
of 1992, is amended to read as follows:
  (g)  Cross-reference.--For  provision  with  respect to interest after
failure to file a report or amended return under  subdivision  three  of
section  two hundred eleven[, subsection (e) of section fourteen hundred
sixty-two] or paragraph  one  of  subdivision  (e)  of  section  fifteen
hundred  fifteen, see subsection (c) of section one thousand eighty-sev-
en.
  S 84. Paragraph 2 of subsection (b) of section 1096 of the tax law, as
amended by chapter 411 of the laws  of  1986,  is  amended  to  read  as
follows:
  (2)  The [tax commission] COMMISSIONER may take any action under para-
graph one of this subdivision to  inquire  into  the  commission  of  an
offense connected with the administration or enforcement of this article
or  article  nine,  [nine-a] NINE-A, thirteen, [thirteen-a, thirty-two,]
THIRTEEN-A or thirty-three of  this  chapter,  provided,  however,  that
notwithstanding  the  provisions  of section one hundred seventy-four of
this chapter no such action shall  be  taken  when  a  referral  by  the
department or the [tax commission] COMMISSIONER to the attorney general,
a  district  attorney  or  any  other prosecutorial agency is in effect.
Provided, however, the [tax commission] COMMISSIONER shall  have  power,
during  the  period  when  such  referral is in effect, to examine or to
cause to have examined, by any agent or representative designated by  it
for  that  purpose, any books, papers, records or memoranda bearing upon
the matters required to be included in the  return,  where  such  books,
papers, records or memoranda are in its possession, or where such books,
papers,  records  or  memoranda  are  in  the possession of the attorney
general, district attorney or other prosecutorial agency to  which  such
referral is made.
  S 85. Paragraph 1 of subsection (e) of section 1096 of the tax law, as
amended  by  section 8 of subpart D of part V1 of chapter 57 of the laws
of 2009, is amended to read as follows:
  (1) Authority to set interest rates.---The commissioner shall set  the
overpayment  and  underpayment  rates of interest to be paid pursuant to
sections two hundred  thirteen,  two  hundred  thirteen-b,  two  hundred
fifty-eight, two hundred sixty-three, two hundred ninety-four, one thou-

S. 6359--C                         156

sand  eighty-four,  one thousand eighty-five[,] AND one thousand eighty-
eight[, fourteen hundred sixty-one and fourteen hundred sixty-three]  of
this  chapter,  but  if  no such rate or rates of interest are set, such
overpayment  rate shall be deemed to be set at six percent per annum and
such underpayment rate shall be deemed to be set at seven  and  one-half
percent  per annum. Such overpayment and underpayment rates shall be the
rates prescribed in paragraph two of this subsection, but the  underpay-
ment  rate  shall not be less than seven and one-half percent per annum.
Any such rates set by the commissioner shall  apply  to  taxes,  or  any
portion  thereof, which remain or become due or overpaid on or after the
date on which such rates become effective  and  shall  apply  only  with
respect  to  interest  computed or computable for periods or portions of
periods occurring in the period during which such rates are in effect.
  S 86. Subdivision (b) of section 1201-a of the tax law, as amended  by
section  5  of  part  Y of chapter 62 of the laws of 2006, is amended to
read as follows:
  (b) Empire state film production credit. Any city in this state having
a population of one million or more, acting through its  local  legisla-
tive body, is hereby authorized to adopt and amend local laws to allow a
credit  against the general corporation tax and the unincorporated busi-
ness tax imposed pursuant to the  authority  of  chapter  seven  hundred
seventy-two  of  the  laws  of nineteen hundred sixty-six which shall be
substantially identical to the credit allowed under section  twenty-four
of  this chapter, except that (A) the percentage of qualified production
costs used to calculate such credit shall be five percent, (B)  whenever
such  section twenty-four references the state, such words shall be read
as referencing the city, (C) such credit shall  be  allowed  only  to  a
taxpayer  which  is  a  qualified  film  production company, and (D) the
effective date of such credit shall be July  first,  two  thousand  six.
Such  credit  shall  be  applied  in a manner consistent with the credit
allowed under subdivision [thirty-six] TWENTY  of  section  two  hundred
[ten]  TEN-B  of  this  chapter  except as may be necessary to take into
account differences between the general corporation tax and the unincor-
porated business tax.
  S 87. Subdivision (c) of section 1201-a of the tax law, as amended  by
chapter 300 of the laws of 2007, is amended to read as follows:
  (c)  Empire state commercial production credit. Any city in this state
having a population of one million or more,  acting  through  its  local
legislative  body, is hereby authorized to adopt and amend local laws to
allow a credit against the general corporation tax and the unincorporat-
ed business tax imposed pursuant  to  the  authority  of  chapter  seven
hundred  seventy-two  of  the  laws  of nineteen hundred sixty-six which
shall be  substantially  identical  to  the  credit  allowed  under  the
provisions  of section twenty-eight of this chapter, except that (A) the
percentage of qualified production costs used to calculate  such  credit
shall be five percent, (B) whenever such section twenty-eight references
the  state,  such  words shall be read as referencing the city, (C) such
credit shall be allowed only to a taxpayer that is a  qualified  commer-
cial production company, and (D) the effective date of such credit shall
be  as  provided in local laws. Such credit shall be applied in a manner
consistent with the  credit  allowed  under  subdivision  [thirty-eight]
TWENTY-THREE  of  section two hundred [ten] TEN-B of this chapter except
as may be necessary to take into account differences between the general
corporation tax and unincorporated business tax.
  S 88. The section heading and paragraphs 1 and 3 of subdivision (a) of
section 1505-a of the tax law, the section heading as added  by  chapter

S. 6359--C                         157

11  of  the  laws  of  1983 and paragraphs 1 and 3 of subdivision (a) as
amended by section 6 of part A of chapter 59 of the laws  of  2013,  are
amended to read as follows:
  [Temporary  metropolitan]  METROPOLITAN  transportation  business  tax
surcharge on insurance corporations.
  (1) Every domestic insurance corporation and every  foreign  or  alien
insurance corporation, and every life insurance corporation described in
subdivision  (b) of section fifteen hundred one of this article, for the
privilege of exercising its corporate franchise, or of  doing  business,
or  of employing capital, or of owning or leasing property in the metro-
politan commuter transportation district in  a  corporate  or  organized
capacity,  or  of  maintaining  an  office  in the metropolitan commuter
transportation district, [for all or  any  part  of  its  taxable  years
commencing  on  or after January first, nineteen hundred eighty-two, but
ending before December  thirty-first,  two  thousand  eighteen,]  except
corporations  specified  in  subdivision  (c) of section fifteen hundred
twelve of this article, shall annually pay, in  addition  to  the  taxes
otherwise  imposed by this article, a tax surcharge on the taxes imposed
under this article after the deduction of any credits  otherwise  allow-
able  under this article as allocated to such district. Such taxes shall
be allocated to  such  district  for  purposes  of  computing  such  tax
surcharge upon taxpayers subject to tax under subdivision (b) of section
fifteen  hundred ten of this article by applying the methodology, proce-
dures and computations set forth in subdivisions (a) and (b) of  section
fifteen  hundred  four  of this article, except that references to terms
denoting New York premiums, and total wages, salaries, personal  service
compensation  and  commissions within New York shall be read as denoting
within the  metropolitan  commuter  transportation  district  and  terms
denoting  total  premiums  and  total  wages, salaries, personal service
compensation and commissions shall be read as denoting within the state.
If it shall appear to the commissioner that the application of the meth-
odology, procedures and computations set forth in such subdivisions  (a)
and  (b) does not properly reflect the activity, business or income of a
taxpayer within the metropolitan commuter transportation district,  then
the  commissioner shall be authorized, in the commissioner's discretion,
to adjust such methodology, procedures and computations for the  purpose
of allocating such taxes by:
  (A) excluding one or more factors therein;
  (B)  including  one  or  more other factors therein, such as expenses,
purchases, receipts other  than  premiums,  real  property  or  tangible
personal property; or
  (C)  any  other similar or different method which allocates such taxes
by attributing a fair and proper portion of such taxes to the  metropol-
itan  commuter  transportation  district.  The commissioner from time to
time shall publish all rulings of general public interest  with  respect
to  any  application  of  the  provisions of the preceding sentence. The
commissioner may promulgate rules and regulations to  further  implement
the provisions of this section.
  (3)  Such  tax  surcharge  shall  be computed at the rate of [eighteen
percent of the taxes imposed under  sections  fifteen  hundred  one  and
fifteen  hundred  ten  of  this  article  as  limited by section fifteen
hundred five of this article, as allocated to such  district,  for  such
taxable  years  or any part of such taxable years ending before December
thirty-first, nineteen hundred eighty-three after the deduction  of  any
credits otherwise allowable under this article, at the rate of seventeen
percent  of  the taxes imposed under such sections as limited by section

S. 6359--C                         158

fifteen hundred five of this article, as allocated to such district, for
such taxable years or any part of such taxable years ending on or  after
December  thirty-first, nineteen hundred eighty-three and before January
first,  two  thousand three after the deduction of any credits otherwise
allowable under this article, and at the rate of] seventeen  percent  of
the  taxes  imposed  under sections fifteen hundred one, fifteen hundred
two-a, and fifteen hundred ten of this article, as limited or  otherwise
determined  by subdivision (a) or (b) of section fifteen hundred five of
this article, as allocated to such district, [for such taxable years  or
any  part  of such taxable years ending after December thirty-first, two
thousand two] after the deduction of  any  credits  otherwise  allowable
under  this  article[; provided, however, that the tax surcharge imposed
by this section shall not be imposed upon any  taxpayer  for  more  than
four  hundred  thirty-two  months].  Provided  however, that for taxable
years commencing on or after July first, two thousand, and in  the  case
of  taxpayers subject to tax under section fifteen hundred two-a of this
article, for taxable years of such taxpayers beginning on or after  July
first,  two  thousand and before January first, two thousand three, such
surcharge shall be calculated as if (i) the rate  of  the  tax  computed
under paragraph one of subdivision (a) of section fifteen hundred two of
this article was nine percent and (ii) the rate of the limitation on tax
set  forth in section fifteen hundred five of this article for domestic,
foreign and alien insurance corporations except  life  insurance  corpo-
rations was two and six-tenths percent.
  S  89.  Section 1825 of the tax law, as amended by section 2 of part E
of chapter 25 of the laws of 2009, is amended to read as follows:
  S 1825. Violation of secrecy provisions of the  tax  law.--Any  person
who  violates  the  provisions of subdivision (b) of section twenty-one,
subdivision one of section two hundred two, subdivision eight of section
two hundred eleven, subdivision (a) of section three  hundred  fourteen,
subdivision  one  or  two  of section four hundred thirty-seven, section
four hundred eighty-seven,  subdivision  one  or  two  of  section  five
hundred  fourteen,  subsection  (e) of section six hundred ninety-seven,
subsection (a) of section nine hundred ninety-four, subdivision  (a)  of
section  eleven  hundred forty-six, section twelve hundred eighty-seven,
subdivision (a) of section fourteen hundred eighteen, [subsection (a) of
section  fourteen  hundred  sixty-seven,]  subdivision  (a)  of  section
fifteen  hundred  eighteen,  subdivision  (a) of section fifteen hundred
fifty-five of this chapter, and subdivision (e) of  section  11-1797  of
the  administrative  code  of  the city of New York shall be guilty of a
misdemeanor.
  S 90. Subdivisions (s) and (t) of section 957 of the general municipal
law, as amended by section 1 of part S1 of chapter 57  of  the  laws  of
2009, are amended to read as follows:
  (s)  "Qualified  investment  project" shall mean a project (i) located
within an empire zone, (ii) at which five hundred or more jobs  will  be
created,  provided such jobs are new to the state and are in addition to
any other jobs previously created by the owner of such  project  in  the
state,  and  (iii)  which will consist of tangible personal property and
other tangible property, including buildings and  structural  components
of  buildings,  described  in  subparagraphs  (i), (ii), (iii), (iv) and
clause (A) or (C) of subparagraph (v) of paragraph  (b)  of  subdivision
[twelve-B]  THREE of section two hundred [ten] TEN-B of the tax law, the
basis of which for federal income tax  purposes  will  equal  or  exceed
seven hundred fifty million dollars. Provided however, the owner of such

S. 6359--C                         159

project  does  not  employ more than two hundred persons in the state at
the time such project is commenced.
  (t)  "Significant capital investment project" shall mean a project (i)
located within an empire  zone,  (ii)  which  will  be  either  a  newly
constructed  facility or a newly constructed addition to or expansion of
a qualified investment project, consisting of tangible personal property
and other tangible property, including buildings and  structural  compo-
nents  of  buildings,  described in subparagraphs (i), (ii), (iii), (iv)
and clause (A) or (C) of subparagraph (v) of paragraph (b)  of  subdivi-
sion [twelve-B] THREE of section two hundred [ten] TEN-B of the tax law,
the  basis of which for federal income tax purposes will equal or exceed
seven hundred fifty million dollars, (iii) which  is  constructed  after
the  basis  for  federal  income tax purposes of the property comprising
such qualified investment project equals or exceeds seven hundred  fifty
million  dollars,  and  (iv)  at which five hundred or more jobs will be
created, provided such jobs are new to the state and are in addition  to
any  other  jobs  previously created by the owner of such project in the
state.
  S 91. Intentionally omitted.
  S 92. Intentionally omitted.
  S 93. Intentionally omitted.
  S 94. Intentionally omitted.
  S 95. Intentionally omitted.
  S 96. Intentionally omitted.
  S 97. Intentionally omitted.
  S 98. Intentionally omitted.
  S 99. Notwithstanding any  provisions  of  law  to  the  contrary  and
notwithstanding  the  repeal of article 32 of the tax law by section one
of this act, the repeal of section 180 of the tax law by section two  of
this  act  and the repeal of section 181 of the tax law by section three
of this act, all provisions  of  such  article  and  such  sections,  in
respect to the imposition, exemption, assessment, payment, payment over,
determination,  collection,  and  credit  or refund of tax, interest and
penalty imposed thereunder, the filing of forms and returns, the preser-
vation of records for the purposes of such tax, the secrecy of  returns,
the disposition of revenues, and the civil and criminal penalties appli-
cable  to  the  violation  of the provisions of such article 32 and such
sections 180 and 181, shall continue  in  full  force  and  effect  with
respect to all such tax accrued for taxable years beginning before Janu-
ary  1,  2015;  and  all  actions  and  proceedings,  civil or criminal,
commenced or authorized to be  commenced  under  or  by  virtue  of  any
provision  of  such  article  32  or  by virtue of any provision of such
section 180 or 181 so repealed, and pending  or  able  to  be  commenced
immediately prior to the taking effect of such repeal, may be commenced,
prosecuted and defended to final effect in the same manner as they might
if such provisions were not so repealed.
  S  100.  Subdivision  1  of  section 187 of the tax law, as amended by
chapter 2 of the laws of 1995, is amended to read as follows:
  1. A taxpayer shall be allowed a credit, to be  credited  against  the
taxes  imposed by this article, other than the taxes and fees imposed by
sections [one hundred  eighty,  one  hundred  eighty-one,]  one  hundred
eighty-six-a and one hundred eighty-six-e of this chapter. The amount of
the  credit  shall  be  the  amount  of  the special additional mortgage
recording tax paid by the taxpayer pursuant to the provisions of  subdi-
vision one-a of section two hundred fifty-three of this chapter on mort-
gages  recorded  on  and  after January first, nineteen hundred seventy-

S. 6359--C                         160

nine. Provided, however,  that  the  amount  of  such  credit  allowable
against the tax imposed by section one hundred eighty-four of this chap-
ter  shall  be the excess of the amount of such special additional mort-
gage  recording  tax  paid over the amount of any credit allowed by this
section against the tax imposed by section one hundred  eighty-three  of
this chapter. Provided further, however, no credit shall be allowed with
respect  to  a  mortgage  of real property principally improved or to be
improved by one or more structures containing in the aggregate not  more
than  six  residential dwelling units, each dwelling unit having its own
separate cooking facilities, where the real property is located  in  one
or more of the counties comprising the metropolitan commuter transporta-
tion  district and where the mortgage is recorded on or after May first,
nineteen hundred eighty-seven.  Provided  further,  however,  no  credit
shall be allowed with respect to a mortgage of real property principally
improved  or  to be improved by one or more structures containing in the
aggregate not more than six residential dwelling  units,  each  dwelling
unit having its own separate cooking facilities, where the real property
is  located  in the county of Erie and where the mortgage is recorded on
or after May first, nineteen hundred eighty-seven.
  S 101. Subdivision 1 of section 187-a of the  tax  law,  as  added  by
chapter 142 of the laws of 1997, is amended to read as follows:
  1.    Allowance of credit. A taxpayer shall be allowed a credit, to be
computed as hereinafter provided, against  the  taxes  imposed  by  this
article,  other  than the taxes imposed by sections [one hundred eighty,
one hundred eighty-one,] one hundred eighty-six-a, one  hundred  eighty-
six-e  and one hundred eighty-nine of this article, for employing within
the state a qualified employee. Provided, however, the amount of  credit
allowed  by  this section against the tax imposed by section one hundred
eighty-four of this article shall be the excess of the  credit  computed
under  this  section  over  the amount of credit allowed by this section
against the tax imposed by section  one  hundred  eighty-three  of  this
article.
  S  102.  Subdivision  1  of  section 190 of the tax law, as amended by
section 17 of part B of chapter 58 of the laws of 2004,  is  amended  to
read as follows:
  1.  General.  A  taxpayer  shall  be  allowed a credit against the tax
imposed by this article[, other than  the  taxes  and  fees  imposed  by
sections one hundred eighty and one hundred eighty-one of this article,]
equal  to twenty percent of the premium paid during the taxable year for
long-term care insurance. In order  to  qualify  for  such  credit,  the
taxpayer's premium payment must be for the purchase of or for continuing
coverage under a long-term care insurance policy that qualifies for such
credit  pursuant  to  section  one thousand one hundred seventeen of the
insurance law.
  S 103. Subdivision 5 of section 192 of the tax law is REPEALED.
  S 104. Clauses 1 and 2 of subparagraph (A)  and  subparagraph  (B)  of
paragraph (iii) of subdivision 9 of section 16-v of section 1 of chapter
174  of  the laws of 1968 constituting the urban development corporation
act, as added by section 1 of part C of chapter 59 of the laws of  2013,
is amended to read as follows:
  (1)  over fifty percent of the number of shares of stock entitling the
holders thereof to vote for the election of  directors  or  trustees  is
owned  or  controlled,  either  directly  or  indirectly,  by a taxpayer
subject to tax under the following provisions of the  tax  law:  article
nine-A; section one hundred eighty-three, OR one hundred eighty-four [or

S. 6359--C                         161

one  hundred eighty-five] of article nine; [article thirty-two] or arti-
cle thirty-three; or
  (2)  is substantially similar in operation and in ownership to a busi-
ness entity (or  entities)  taxable  or  previously  taxable  under  the
following provisions of the tax law: article nine-A; section one hundred
eighty-three, one hundred eighty-four, FORMER SECTION one hundred eight-
y-five  or former section one hundred eighty-six of article nine; FORMER
article thirty-two; article thirty-three; article twenty-three, or would
have been subject to tax under such article twenty-three (as such  arti-
cle  was  in  effect  on  January first, nineteen hundred eighty) or the
income (or losses) of which is (or was) includable under  article  twen-
ty-two; or
  (B)  a  sole proprietorship, partnership, limited partnership, limited
liability company, or New York subchapter  S  corporation  that  is  not
substantially similar in operation and in ownership to a business entity
(or  entities)  taxable,  or previously taxable, under article nine-A of
the tax law, section one hundred eighty-three, one hundred  eighty-four,
FORMER  SECTION  one  hundred  eighty-five or former section one hundred
eighty-six of article nine of the tax law, FORMER article thirty-two  or
ARTICLE thirty-three of the tax law, article twenty-three of the tax law
or  which would have been subject to tax under such article twenty-three
(as such article was  in  effect  on  January  first,  nineteen  hundred
eighty)  or the income (or losses) of which is (or was) includable under
article twenty-two of the tax law; and
  S 105. Section 206 of the tax law, as added by chapter 69 of the  laws
of 1978, is amended to read as follows:
  S  206.    Deposit  and  disposition of revenue.   The [license fees,]
taxes, percentage, interest and other charges imposed  by  this  article
shall  be  collected  and  deposited and receipts therefor issued by the
[tax commission, except  that  such  license  fees,  taxes,  percentage,
interest and other charges imposed by section one hundred eighty of this
chapter shall be collected and deposited and receipts therefor issued by
the  proper  state officer in accordance with the provisions of subdivi-
sion two of section one hundred eighty of  this  chapter,]  COMMISSIONER
and  all  revenues  so  collected  or  received  shall  be deposited and
disposed of pursuant to the provisions of section one  hundred  seventy-
one-a of this chapter.
  S  106.  Subsection  (a)  of  section 1080 of the tax law, as added by
chapter 188 of the laws of 1964, is amended to read as follows:
  (a) General.--- The provisions of this  article  shall  apply  to  the
administration  of  and the procedures with respect to the taxes imposed
by articles nine [(except section one  hundred  eighty)],  AND  nine-a[,
nine-b  and  nine-c] of this chapter for taxable years or periods ending
on or after December thirty-first, nineteen hundred sixty-four.
  S 107. Subdivisions (a) and (c) of section 1809 of  the  tax  law,  as
added  by  section 1 of subpart A of part S of chapter 57 of the laws of
2010, are amended to read as follows:
  (a) Any person who, with intent to evade payment of  any  tax  imposed
under  article nine [(other than under section one hundred eighty or one
hundred eighty-one)], nine-A, thirteen,  [thirty-two,]  thirty-three  or
thirty-three-A  of  this  chapter,  fails to file a return or report for
three consecutive taxable years shall be guilty of  a  class  E  felony,
provided  that such person had an unpaid tax liability, in excess of the
threshold amount with respect to each of the three  consecutive  taxable
years.  The threshold amount in the case of a taxable year under article
nine-A of this chapter ending after  June  thirtieth,  nineteen  hundred

S. 6359--C                         162

eighty-nine  is  the  applicable  fixed  dollar minimum prescribed under
paragraph (d) of subdivision one of section  two  hundred  ten  of  this
chapter. In the event such fixed dollar minimum is less than two hundred
fifty  dollars, the threshold amount in the case of such taxable year is
two hundred fifty dollars. In all other cases the  threshold  amount  is
two hundred fifty dollars.
  (c)  As  used  in  this section, the terms "return" and "report" shall
mean a return or report required under section one  hundred  ninety-two,
two  hundred  eleven,  two hundred ninety-four, [fourteen hundred sixty-
two,] fifteen hundred fifteen or  fifteen  hundred  fifty-four  of  this
chapter.    It  shall  not  include  any return or report referred to in
section one hundred ninety-seven-a, two  hundred  thirteen-a,  [fourteen
hundred sixty] or fifteen hundred thirteen of this chapter.
  S  108.  Paragraphs (d), (e), (g), (h) and (q) of section 104-A of the
business corporation law, subdivisions (d), (e) and (q)  as  amended  by
chapter 166 of the laws of 1991, subdivision (g) as added by chapter 591
of  the  laws  of 1982, and subdivision (h) as amended by chapter 117 of
the laws of 1986, are amended to read as follows:
  (d) For filing a certificate of incorporation pursuant to section four
hundred two of this chapter, one hundred twenty-five dollars  [plus  the
tax on shares prescribed by section one hundred eighty of the tax law].
  (e)  For  filing  a certificate of amendment pursuant to section eight
hundred five of this chapter, sixty dollars  [plus  the  tax  on  shares
prescribed  by section one hundred eighty of the tax law if such certif-
icate shows a change of shares].
  (g) For filing a restated certificate  of  incorporation  pursuant  to
section eight hundred seven of this chapter, sixty dollars [plus the tax
on  shares  prescribed  by  section one hundred eighty of the tax law if
such certificate shows a change of shares].
  (h) For filing a certificate of merger or  consolidation  pursuant  to
section  nine hundred four of this chapter, or a certificate of exchange
pursuant to section nine hundred thirteen (other than paragraph  (g)  of
section  nine hundred thirteen) of this chapter, sixty dollars [plus the
tax on shares prescribed by section one hundred eighty of the tax law if
such certificate shows a change of shares].
  (q) For filing  a  certificate  of  incorporation  by  a  professional
service  corporation  pursuant  to section fifteen hundred three of this
chapter, one  hundred  twenty-five  dollars  [plus  the  tax  on  shares
prescribed by section one hundred eighty of the tax law].
  S  109.  Subdivision 8 of section 7-a of the general associations law,
as added by chapter 575 of the laws of  1964,  is  amended  to  read  as
follows:
  8. The provisions of section ninety-six of the executive law prescrib-
ing  the  fee  to  be  collected by the department of state for filing a
certificate of incorporation under the business  corporation  law  shall
apply  to  the certificate of incorporation to be filed pursuant to this
section[, and the organization tax payable  under  section  one  hundred
eighty of the tax law in respect of a corporation formed under the busi-
ness  corporation law shall be paid before the department of state shall
file such certificate of incorporation].
  S 110.  Paragraph 1 of subdivision (a) of section 1502 of the tax law,
as amended by section 4 of part N of chapter 60 of the laws of 2007,  is
amended to read as follows:
  (1)  for taxable years beginning before July first, two thousand, nine
percent of the taxpayer's entire net income, or  portion  thereof  allo-
cated  within  this state, for the taxable year, or part thereof, except

S. 6359--C                         163

that for taxable  years  beginning  prior  to  January  first,  nineteen
hundred  seventy-eight,  the rate shall be four and five-tenths percent;
for taxable years beginning  after  June  thirtieth,  two  thousand  and
before  July  first, two thousand one, eight and one-half percent of the
taxpayer's entire net income, or portion thereof allocated  within  this
state,  for  the taxable year, or part thereof; for taxable years begin-
ning after June thirtieth, two thousand one and before July  first,  two
thousand  two,  eight  percent  of  the taxpayer's entire net income, or
portion thereof allocated within this state, for the  taxable  year,  or
part  thereof;  for  taxable  years  beginning after June thirtieth, two
thousand two and before January first, two  thousand  seven,  seven  and
one-half percent of the taxpayer's entire net income, or portion thereof
allocated  within  this  state,  for  the taxable year, or part thereof;
[and] for taxable years beginning on or after January first,  two  thou-
sand seven AND BEFORE DECEMBER THIRTY-FIRST, TWO THOUSAND FIFTEEN, seven
and  one-tenth  percent  of the taxpayer's entire net income, or portion
thereof allocated within this state, for the taxable year, or part ther-
eof; AND FOR TAXABLE YEARS BEGINNING ON  OR  AFTER  JANUARY  FIRST,  TWO
THOUSAND  SIXTEEN, SIX AND ONE-HALF PERCENT OF THE TAXPAYER'S ENTIRE NET
INCOME, OR PORTION THEREOF ALLOCATED WITHIN THIS STATE, FOR THE  TAXABLE
YEAR, OR PART THEREOF; or
  S  111. Paragraphs 1 and 2 of subdivision (l) of section 11-640 of the
administrative code of the city of New York, as amended by section 3  of
part R of chapter 59 of the laws of 2012, is amended to read as follows:
  (1) Notwithstanding anything to the contrary contained in this section
other  than  subdivision  (m) of this section, a corporation that was in
existence before January first, two thousand [twelve] FOURTEEN  and  was
subject to tax under subchapter two of this chapter for its last taxable
year  beginning  before  January  first, two thousand [twelve] FOURTEEN,
shall continue to be taxable under such subchapter for all taxable years
beginning on or after January first, two thousand [twelve] FOURTEEN  and
before  January  first, two thousand [fifteen] SEVENTEEN.  The preceding
sentence shall not apply to any taxable year during  which  such  corpo-
ration  is  a  banking  corporation  described in paragraphs one through
eight of subdivision (a) of this section.   Notwithstanding anything  to
the  contrary  contained  in  this section other than subdivision (m) of
this section, a banking corporation or corporation that was in existence
before January first, two thousand [twelve] FOURTEEN and was subject  to
tax  under  this  subchapter  for its last taxable year beginning before
January first, two thousand [twelve]  FOURTEEN,  shall  continue  to  be
taxable  under  this  subchapter  for  all taxable years beginning on or
after January first, two thousand [twelve] FOURTEEN and  before  January
first,  two  thousand  [fifteen]  SEVENTEEN only if the corporation is a
banking corporation as defined in subdivision (a) of this section or the
corporation satisfies the requirements for a corporation to elect to  be
taxable  under  this  subchapter. Provided further, that nothing in this
subdivision shall prohibit a corporation that elected pursuant to subdi-
vision (d) of this section to be taxable under subchapter  two  of  this
chapter  from  revoking that election in accordance with subdivision (d)
of this section. For purposes of this paragraph, a corporation shall  be
considered to be subject to tax under subchapter two of this chapter for
a  taxable  year if such corporation was not a taxpayer but was properly
included in a combined report filed  pursuant  to  subdivision  four  of
section  11-605  of this chapter for such taxable year and a corporation
shall be considered to be subject to tax under  this  subchapter  for  a
taxable  year  if  such  corporation was not a taxpayer but was properly

S. 6359--C                         164

included in a combined report filed pursuant to subdivision (f)  or  (g)
of section 11-646 of this part for such taxable year. A corporation that
was  in  existence  before January first, two thousand [twelve] FOURTEEN
but  first  becomes  a  taxpayer in a taxable year beginning on or after
January first, two thousand [twelve] FOURTEEN and before January  first,
two  thousand  [fifteen]  SEVENTEEN, shall be considered for purposes of
this paragraph to have been subject to tax under subchapter two of  this
chapter  for  its  last taxable year beginning before January first, two
thousand [twelve] FOURTEEN if such corporation would have  been  subject
to  tax  under  such  subchapter  for such taxable year if it had been a
taxpayer during such taxable year. A corporation that was  in  existence
before January first, two thousand [twelve] FOURTEEN but first becomes a
taxpayer  in  a  taxable  year  beginning on or after January first, two
thousand [twelve]  FOURTEEN  and  before  January  first,  two  thousand
[fifteen]  SEVENTEEN, shall be considered for purposes of this paragraph
to have been subject to tax under this subchapter for its  last  taxable
year  beginning  before January first, two thousand [twelve] FOURTEEN if
such corporation would have been subject to tax  under  this  subchapter
for  such  taxable  year  if  it had been a taxpayer during such taxable
year.
  (2) Notwithstanding anything to the contrary contained in this section
other than subdivision (m) of this section, a corporation formed  on  or
after  January  first, two thousand [twelve] FOURTEEN and before January
first, two thousand [fifteen] SEVENTEEN may elect to be subject  to  tax
under  this  subchapter  or under subchapter two of this chapter for its
first taxable year beginning on or after  January  first,  two  thousand
[twelve]  FOURTEEN  and  before  January  first,  two thousand [fifteen]
SEVENTEEN in which either (i) sixty-five percent or more of  its  voting
stock  is  owned  or  controlled,  directly or indirectly by a financial
holding company, provided the corporation whose voting stock is so owned
or controlled is principally engaged in activities that are described in
section 4(k)(4) or 4(k)(5) of the federal bank holding  company  act  of
nineteen  hundred  fifty-six, as amended and the regulations promulgated
pursuant to the authority of such section or  (ii)  it  is  a  financial
subsidiary. An election under this paragraph may not be made by a corpo-
ration  described  in paragraphs one through eight of subdivision (a) of
this section or in subdivision (e) of  this  section.  In  addition,  an
election under this paragraph may not be made by a corporation that is a
party  to  a reorganization, as defined in subsection (a) of section 368
of the internal revenue code of  1986,  as  amended,  of  a  corporation
described in paragraph one of this subdivision if both corporations were
sixty-five  percent  or more owned or controlled, directly or indirectly
by the same interests at the time of the reorganization.
  An election under this paragraph must be made by the  taxpayer  on  or
before  the  due  date  for filing its return (determined with regard to
extensions of time for filing) for  the  applicable  taxable  year.  The
election  to be taxed under subchapter two of this chapter shall be made
by the taxpayer by filing the return required  pursuant  to  subdivision
one of section 11-605 of this chapter and the election to be taxed under
this  subchapter  shall  be  made  by  the taxpayer by filing the return
required pursuant to subdivision (a) of section 11-646 of this part. Any
election made pursuant to this paragraph shall be irrevocable and  shall
apply  to  each  subsequent  taxable  year beginning on or after January
first, two thousand [twelve] FOURTEEN  and  before  January  first,  two
thousand  [fifteen]  SEVENTEEN,  provided  that  the stock ownership and
activities requirements described in subparagraph (i) of this  paragraph

S. 6359--C                         165

are met or such corporation described in subparagraph (ii) of this para-
graph continues as a financial subsidiary.
  S  112. Subparagraph (iv) of paragraph 2 of subdivision (f) of section
11-646 of the administrative code of the city of New York, as amended by
section 4 of part R of chapter 59 of the laws of  2012,  is  amended  to
read as follows:
  (iv)  (A)  Notwithstanding  any  provision of this paragraph, any bank
holding company exercising its corporate franchise or doing business  in
the  city  may  make  a  return  on a combined basis without seeking the
permission of the commissioner with any banking  corporation  exercising
its  corporate franchise or doing business in the city in a corporate or
organized capacity sixty-five percent or more of whose voting  stock  is
owned or controlled, directly or indirectly, by such bank holding compa-
ny,  for the first taxable year beginning on or after January first, two
thousand and before January  first,  two  thousand  [fifteen]  SEVENTEEN
during  which  such  bank  holding  company registers for the first time
under the federal bank holding company act, as amended, and also  elects
to  be  a  financial  holding  company. In addition, for each subsequent
taxable year beginning after January  first,  two  thousand  and  before
January  first,  two thousand [fifteen] SEVENTEEN, any such bank holding
company may file on a combined basis without seeking the  permission  of
the  commissioner  with  any  banking corporation that is exercising its
corporate franchise or doing business in the city and sixty-five percent
or more of whose voting stock is owned or controlled, directly or  indi-
rectly,  by such bank holding company if either such banking corporation
is exercising its corporate franchise or doing business in the city in a
corporate or organized capacity for the first time  during  such  subse-
quent taxable year, or sixty-five percent or more of the voting stock of
such banking corporation is owned or controlled, directly or indirectly,
by  such  bank holding company for the first time during such subsequent
taxable year.  Provided however, for each subsequent taxable year begin-
ning after January first, two thousand and  before  January  first,  two
thousand  [fifteen] SEVENTEEN, a banking corporation described in either
of the two preceding sentences which filed on a combined basis with  any
such  bank  holding company in a previous taxable year, must continue to
file on a combined basis with such bank holding company if such  banking
corporation,  during such subsequent taxable year, continues to exercise
its corporate franchise or do business in the city  in  a  corporate  or
organized capacity and sixty-five percent or more of such banking corpo-
ration's  voting  stock continues to be owned or controlled, directly or
indirectly, by such bank holding company, unless the permission  of  the
commissioner  has  been  obtained  to  file on a separate basis for such
subsequent taxable year. Provided further, however, for each  subsequent
taxable  year  beginning  after  January  first, two thousand and before
January first, two thousand [fifteen] SEVENTEEN, a  banking  corporation
described  in either of the first two sentences of this clause which did
not file on a combined basis with any such bank  holding  company  in  a
previous  taxable  year, may not file on a combined basis with such bank
holding company during any  such  subsequent  taxable  year  unless  the
permission  of  the commissioner has been obtained to file on a combined
basis for such subsequent taxable year.
  (B) Notwithstanding any provision of this paragraph other than  clause
(A)  of this subparagraph, the commissioner may not require a bank hold-
ing company which, during a taxable year beginning on or  after  January
first,  two  thousand  and  before January first, two thousand [fifteen]
SEVENTEEN, registers for the first time during such taxable  year  under

S. 6359--C                         166

the  federal bank holding company act, as amended, and also elects to be
a financial holding company, to make a return on a  combined  basis  for
any  taxable  year beginning on or after January first, two thousand and
before  January  first,  two thousand [fifteen] SEVENTEEN with a banking
corporation sixty-five percent or more of whose voting stock is owned or
controlled, directly or indirectly, by such bank holding company.
  S 113.   Severability. If any provision of  this  act  shall  for  any
reason  be finally adjudged by any court of competent jurisdiction to be
invalid, such judgment shall  not  affect,  impair,  or  invalidate  the
remainder  of  this  act,  but shall be confined in its operation to the
provision directly involved in the controversy in  which  such  judgment
shall  have  been rendered. It is hereby declared to be in the intent of
the legislature that this act would  have  been  enacted  even  if  such
invalid  provision  had not been included in this act. Provided further,
if a court of final,  competent  jurisdiction  adjudges  the  tax  rates
imposed on qualified New York manufacturers to be invalid, qualified New
York  manufacturers  shall be subject to the same tax rates as all other
taxpayers subject to tax under article 9-A  of  the  tax  law.  Provided
further,  if  a court of final, competent jurisdiction adjudges that any
of the tax credits provided by this act to be invalid,  such  credit  or
credits  shall be deemed repealed and shall be of no force and effect as
to any taxpayers.
  S 114. This act shall take effect January 1, 2015 and shall  apply  to
taxable years commencing on or after such date; provided that the amend-
ments  to  section 25 of the tax law made by section forty-three of this
act shall not affect the repeal of such  section  and  shall  be  deemed
repealed  therewith; provided, further, that the amendments to the open-
ing paragraph of subdivision (a), subparagraph (C)  of  paragraph  2  of
subdivision (e) and subdivision (f) of section 35 of the tax law made by
section fifty of this act shall not affect the repeal of such provisions
and  shall  be  deemed  repealed  therewith; provided, further, that the
amendments to clause (xxxii) of  subparagraph  (B)  of  paragraph  1  of
subsection (i) of section 606 of the tax law made by section sixty-eight
of  this  act  shall  not  affect the repeal of such clause and shall be
deemed repealed therewith; provided, further,  that  the  amendments  to
clause  (xxxiii) of subparagraph (B) of paragraph 1 of subsection (i) of
section 606 of the tax law made by section sixty-eight of this act shall
not affect the repeal of such clause and shall be deemed repealed there-
with; and provided, further, that  the  amendments  to  clause  (ii)  of
subparagraph  (B)  of  paragraph  2  of  subsection  (q), paragraph 3 of
subsection (s) and the closing paragraph of paragraph  1  of  subsection
(t)  of  section  1085 of the tax law made by section eighty-one of this
act shall not affect the repeal of such provisions and shall  be  deemed
repealed therewith.

                                 PART B

  Section  1.  Subparagraph  (iii) of paragraph (a) of subdivision 14 of
section 425 of the real property tax law, as added by section 1 of  part
J of chapter 57 of the laws of 2013, is amended to read as follows:
  (iii)  An  owner who fails to register by the registration deadline so
established shall be permitted to file a petition with the  commissioner
requesting  that  the commissioner excuse such failure and accept a late
registration, provided that such petition shall explain why such failure
occurred and shall be filed no later than one year after such  deadline,
AND  PROVIDED  FURTHER THAT IF THE COMMISSIONER ACCEPTS A LATE REGISTRA-

S. 6359--C                         167

TION AFTER HAVING DIRECTED THE REMOVAL OF THE BASIC STAR EXEMPTION  FROM
THE PROPERTY TO WHICH THE REGISTRATION PERTAINS, THEN IN LIEU OF DIRECT-
ING  THE EXEMPTION TO BE RESTORED, THE COMMISSIONER IS AUTHORIZED IN HIS
OR  HER DISCRETION TO REMIT DIRECTLY TO THE PROPERTY OWNER OR OWNERS THE
TAX SAVINGS THAT THE EXEMPTION  WOULD  HAVE  YIELDED  HAD  IT  NOT  BEEN
REMOVED,  AND TO FURTHER DIRECT THE ASSESSOR TO RESTORE THE EXEMPTION ON
A PROSPECTIVE BASIS WITHOUT A NEW APPLICATION UNLESS  THE  ASSESSOR  HAS
REASON  TO  BELIEVE  THAT  THE  PROPERTY OWNER IS NO LONGER ELIGIBLE FOR
REASONS OTHER THAN A FAILURE TO REGISTER;
  S 2. This act shall take effect immediately and  shall  be  deemed  to
have been in full force and effect on and after April 1, 2014.

                                 PART C

  Section  1. Section 2 of chapter 540 of the laws of 1992, amending the
real property tax law relating to oil and gas  charges,  as  amended  by
section  1  of  part  A of chapter 59 of the laws of 2012, is amended to
read as follows:
  S 2. This act shall take effect immediately and  shall  be  deemed  to
have been in full force and effect on and after April 1, 1992; provided,
however that any charges imposed by section 593 of the real property tax
law  as  added  by section one of this act shall first be due for values
for assessment rolls with tentative completion dates after July 1, 1992,
and provided further, that this act  shall  remain  in  full  force  and
effect  until  March  31,  [2015] 2018, at which time section 593 of the
real property tax law as added by section  one  of  this  act  shall  be
repealed.
  S 2. This act shall take effect immediately.

                                 PART D

                          Intentionally Omitted

                                 PART E

  Section 1. Subsection (a) of section 653 of the tax law, as amended by
chapter 65 of the laws of 1985, is amended to read as follows:
  (a)  General.  (1) Any return, statement or other document required to
be made pursuant to this article shall  be  signed  in  accordance  with
regulations  or  instructions prescribed by the [tax commission] COMMIS-
SIONER.   The fact that an individual's name  is  signed  to  a  return,
statement,  or  other  document,  shall  be prima facie evidence for all
purposes that the return,  statement  or  other  document  was  actually
signed by him OR HER.
  (2)  IN  THE  CASE  OF  AN  ELECTRONICALLY FILED INDIVIDUAL'S PERSONAL
INCOME TAX RETURN PREPARED BY A TAX PREPARER, AN AUTHORIZATION  TO  FILE
ANY  RETURN, STATEMENT OR OTHER DOCUMENT REQUIRED TO BE MADE PURSUANT TO
THIS ARTICLE SIGNED BY THE TAXPAYER IN ACCORDANCE WITH  THE  REGULATIONS
OR  INSTRUCTIONS  PRESCRIBED  BY THE COMMISSIONER AND RECEIVED ELECTRON-
ICALLY BY THE TAX PREPARER  SHALL  SATISFY  THE  SIGNATURE  REQUIREMENTS
UNDER THIS ARTICLE.
  S 2. This act shall take effect immediately and shall apply to returns
filed for taxable years beginning on or after January 1, 2014.

                                 PART F

S. 6359--C                         168

                          Intentionally Omitted

                                 PART G

  Section  1.  Section  2  of  part I of chapter 58 of the laws of 2006,
relating to providing an enhanced earned income tax credit,  as  amended
by  section 1 of part L of chapter 59 of the laws of 2012, is amended to
read as follows:
  S 2. This act shall take effect immediately and shall apply to taxable
years beginning on or after January 1, 2006 and before January 1, [2015]
2017.
  S 2. This act shall take effect immediately.

                                 PART H

  Section 1. The general obligations law is  amended  by  adding  a  new
section 3-505 to read as follows:
  S  3-505. ENFORCEMENT OF DELINQUENT TAX LIABILITIES THROUGH ELECTRONIC
TAX CLEARANCES FOR OCCUPATIONAL, PROFESSIONAL AND BUSINESS LICENSES.
  1. AS USED IN THIS SECTION:
  A. "GOVERNMENT ENTITY" MEANS THE STATE OF NEW  YORK,  OR  ANY  OF  ITS
AGENCIES, POLITICAL SUBDIVISIONS, INSTRUMENTALITIES, PUBLIC CORPORATIONS
(INCLUDING A PUBLIC CORPORATION CREATED PURSUANT TO AGREEMENT OR COMPACT
WITH  ANOTHER  STATE OR CANADA), OR COMBINATION THEREOF, RESPONSIBLE FOR
DETERMINING WHETHER A LICENSE SHALL BE ISSUED OR RENEWED.
  B. "ELECTRONIC LICENSE APPLICATION" MEANS  ANY  ELECTRONIC  DATA  FORM
THAT  MUST BE COMPLETED BY AN APPLICANT TO OBTAIN OR RENEW A LICENSE, OR
AN ELECTRONIC DATA PROCESS WHICH IS USED BY A GOVERNMENT ENTITY TO PROC-
ESS DATA RECEIVED FROM AN  APPLICANT  SEEKING  TO  RECEIVE  OR  RENEW  A
LICENSE.
  C.  "ELECTRONIC  TAX CLEARANCE" MEANS AN ELECTRONIC COMMUNICATION FROM
THE DEPARTMENT OF TAXATION AND FINANCE INDICATING THAT AN APPLICANT  HAD
NO  PAST-DUE  TAX  LIABILITIES,  AS  THAT TERM IS DEFINED IN SECTION ONE
HUNDRED SEVENTY-ONE-W OF THE TAX LAW, OR THAT NO CONCLUSIVE MATCH  COULD
BE MADE.
  D.  "LICENSE"  MEANS  ANY  CERTIFICATE,  LICENSE,  PERMIT  OR GRANT OF
PERMISSION REQUIRED BY LAW OR AGENCY REGULATION AS A CONDITION  FOR  THE
LAWFUL  PRACTICE  OF  ANY OCCUPATION, EMPLOYMENT, TRADE, VOCATION, BUSI-
NESS, OR PROFESSION, INCLUDING ANY REGISTRATION REQUIRED BY LAW OR AGEN-
CY REGULATION AS A  CONDITION  FOR  SUCH  LAWFUL  PRACTICE.  THIS  SHALL
INCLUDE,  BUT IS NOT LIMITED TO, ANY LICENSE GRANTED TO AN INDIVIDUAL OR
ENTITY BY THE STATE EDUCATION DEPARTMENT, THE DEPARTMENT  OF  STATE,  OR
THE  OFFICE  OF COURT ADMINISTRATION.  PROVIDED, HOWEVER, THAT "LICENSE"
SHALL NOT, FOR THE PURPOSES OF THIS  SECTION,  INCLUDE  ANY  LICENSE  OR
PERMIT  TO  OWN, POSSESS, CARRY, OR FIRE ANY EXPLOSIVE, PISTOL, HANDGUN,
RIFLE, SHOTGUN, OTHER FIREARM OR AMMUNITION.
  2. NOTWITHSTANDING ANY OTHER PROVISION OF LAW, AND  WHEN  NOT  ALREADY
REQUIRED BY ANOTHER PROVISION OF LAW OR REGULATION, ANY GOVERNMENT ENTI-
TY  MAY  ELECT  TO CONDITION THE ISSUANCE OR RENEWAL OF A LICENSE ON THE
ABSENCE OF PAST-DUE TAX  LIABILITIES  AND  TO  MAKE  SUCH  DETERMINATION
THROUGH  THE  RECEIPT OF AN ELECTRONIC TAX CLEARANCE FROM THE DEPARTMENT
OF TAXATION AND FINANCE AS PROVIDED FOR IN SECTION ONE HUNDRED  SEVENTY-
ONE-W OF THE TAX LAW.
  3.  ANY  APPLICANT  FOR  A LICENSE SUBJECT TO ELECTRONIC TAX CLEARANCE
SHALL BE REQUIRED TO PROVIDE ANY INFORMATION  DEEMED  NECESSARY  BY  THE

S. 6359--C                         169

GOVERNMENT  ENTITY  AND  THE DEPARTMENT OF TAXATION AND FINANCE TO EFFI-
CIENTLY AND ACCURATELY PROVIDE AN  ELECTRONIC  TAX  CLEARANCE,  AND  THE
FAILURE  BY  THE  APPLICANT TO PROVIDE SUCH INFORMATION SHALL RENDER THE
APPLICATION INCOMPLETE.
  4.  THE APPLICATION FOR A LICENSE SUBJECT TO ELECTRONIC TAX CLEARANCE,
OR THE INSTRUCTIONS FOR  SUCH  APPLICATION,  SHALL  CLEARLY  INFORM  THE
APPLICANT  THAT  AN ELECTRONIC TAX CLEARANCE WILL BE PERFORMED AND THAT,
IF THE TAX CLEARANCE IS DENIED, THE APPLICANT MUST CONTACT  THE  DEPART-
MENT  OF  TAXATION  AND  FINANCE TO RESOLVE ANY PAST-DUE TAX LIABILITIES
BEFORE THE APPLICATION FOR A LICENSE OR RENEWAL MAY BE RESUBMITTED.
  5. IF AN ELECTRONIC TAX CLEARANCE IS DENIED BY THE DEPARTMENT OF TAXA-
TION AND FINANCE, THE GOVERNMENT ENTITY SHALL DENY ISSUANCE  OR  RENEWAL
OF  THE  REQUESTED LICENSE AND SHALL ELECTRONICALLY NOTIFY THE APPLICANT
TO CONTACT THE  DEPARTMENT  OF  TAXATION  AND  FINANCE  TO  RESOLVE  THE
PAST-DUE  TAX  LIABILITIES  AND THAT NO LICENSE MAY BE ISSUED OR RENEWED
UNTIL THE TAX LIABILITIES ARE RESOLVED.
  6. ANY TAX CLEARANCE OR RELATED  COMMUNICATIONS  SHALL  BE  BY  SECURE
ELECTRONIC  COMMUNICATION BETWEEN THE DEPARTMENT OF TAXATION AND FINANCE
AND THE REQUESTING GOVERNMENT ENTITY SUCH THAT PROCESSING OF  THE  ELEC-
TRONIC  APPLICATION  IS  NOT  DELAYED IF THE ELECTRONIC TAX CLEARANCE IS
RECEIVED.  NOTWITHSTANDING ANY OTHER LAW TO THE CONTRARY,  A  GOVERNMENT
ENTITY  SHALL  BE  AUTHORIZED TO SHARE ANY APPLICANT DATA OR INFORMATION
WITH THE DEPARTMENT OF TAXATION AND FINANCE THAT IS NECESSARY TO  ENSURE
THE  PROPER  MATCHING  OF THE APPLICANT TO THE TAX RECORDS MAINTAINED BY
THE DEPARTMENT OF TAXATION AND FINANCE.
  7. NO FEE SHALL BE CHARGED  TO  THE  APPLICANT  FOR  THE  PURPOSES  OF
RECEIVING AN ELECTRONIC TAX CLEARANCE.
  S  2.  The tax law is amended by adding a new section 171-w to read as
follows:
  S 171-W. ENFORCEMENT OF DELINQUENT TAX LIABILITIES THROUGH  ELECTRONIC
TAX CLEARANCES FOR OCCUPATIONAL, PROFESSIONAL AND BUSINESS LICENSES.  1.
IN  ACCORDANCE  WITH  SECTION  3-505 OF THE GENERAL OBLIGATIONS LAW, THE
COMMISSIONER SHALL COOPERATE WITH ANY GOVERNMENT ENTITY THAT  ELECTS  TO
REQUIRE  AN  ELECTRONIC TAX CLEARANCE AS A PART OF AN ELECTRONIC LICENSE
APPLICATION PROCESS FOR WHICH THE GOVERNMENT ENTITY IS RESPONSIBLE.  FOR
THE  PURPOSES OF THIS SECTION, THE TERM "TAX LIABILITIES" SHALL MEAN ANY
TAX, SURCHARGE, OR FEE ADMINISTERED BY THE COMMISSIONER, OR ANY  PENALTY
OR  INTEREST  OWED  BY  AN  INDIVIDUAL OR ENTITY. THE TERM "PAST-DUE TAX
LIABILITIES" MEANS ANY UNPAID TAX LIABILITIES EQUAL TO OR IN  EXCESS  OF
TEN  THOUSAND  DOLLARS  WHICH  HAVE BECOME FIXED AND FINAL SUCH THAT THE
TAXPAYER NO LONGER HAS ANY RIGHT TO ADMINISTRATIVE OR  JUDICIAL  REVIEW.
FOR  THE PURPOSES OF THIS SECTION, THE TERMS "GOVERNMENT ENTITY," "ELEC-
TRONIC LICENSE APPLICATION," AND "LICENSE" SHALL HAVE THE  SAME  MEANING
AS PROVIDED IN SECTION 3-505 OF THE GENERAL OBLIGATIONS LAW.
  2.  THE COMMISSIONER, OR HIS OR HER DESIGNEE, SHALL COOPERATE WITH ANY
GOVERNMENT ENTITY EXERCISING ITS AUTHORITY PURSUANT TO SECTION 3-505  OF
THE GENERAL OBLIGATIONS LAW TO ESTABLISH PROCEDURES BY WHICH THE DEPART-
MENT  SHALL  ELECTRONICALLY  RECEIVE A TAX CLEARANCE REQUEST AS AN ELEC-
TRONIC LICENSE APPLICATION IS  PROCESSED,  AND  ELECTRONICALLY  TRANSMIT
SUCH  TAX  CLEARANCE  TO  THE  GOVERNMENT ENTITY. THESE PROCEDURES SHALL
INCLUDE THE IDENTIFICATION OF OWNERS, OFFICERS  OR  RESPONSIBLE  PERSONS
SUBJECT  TO  ELECTRONIC TAX CLEARANCE IN CONJUNCTION WITH AN APPLICATION
BY AN ENTITY, AND ANY OTHER PROCEDURES DEEMED NECESSARY TO CARRY OUT THE
PROVISIONS OF THIS SECTION.
  3. IN ANY INSTANCE WHERE A LICENSE OR LICENSE RENEWAL PROVIDED BY  THE
GOVERNMENT  ENTITY IS OF A TYPE THAT MAY BE ISSUED ONLY TO AN INDIVIDUAL

S. 6359--C                         170

OR ENTITY THAT IS A PERSON REQUIRED TO REGISTER PURSUANT TO SECTION  ONE
THOUSAND  ONE  HUNDRED THIRTY-FOUR OF THIS CHAPTER, THE DEPARTMENT SHALL
ALSO VERIFY THAT THE APPLICANT IS REGISTERED PURSUANT TO  SUCH  SECTION,
AND  NO  ELECTRONIC  TAX CLEARANCE MAY BE ISSUED UNLESS THE APPLICANT IS
REGISTERED PURSUANT TO SUCH SECTION.
  4. IF A TAX CLEARANCE IS DENIED, THE GOVERNMENT ENTITY PROCESSING  THE
APPLICATION SHALL PROVIDE NOTICE TO THE APPLICANT TO CONTACT THE DEPART-
MENT.   WHEN THE APPLICANT CONTACTS THE DEPARTMENT, THE DEPARTMENT SHALL
INFORM THE APPLICANT (A) WHAT PAST-DUE TAX LIABILITIES ARE AT ISSUE; (B)
THAT AN ELECTRONIC TAX CLEARANCE MAY BE RECEIVED BY FULLY SATISFYING THE
PAST-DUE TAX LIABILITIES OR BY MAKING PAYMENT ARRANGEMENTS  SATISFACTORY
TO THE COMMISSIONER OR, IF THE APPLICANT NEEDS TO REGISTER FOR SALES TAX
PURPOSES,  BY  REGISTERING  PURSUANT TO SECTION ONE THOUSAND ONE HUNDRED
THIRTY-FOUR OF THIS CHAPTER; AND (C) THE  GROUNDS  FOR  CHALLENGING  THE
DENIAL OF AN ELECTRONIC TAX CLEARANCE LISTED IN SUBDIVISION FIVE OF THIS
SECTION.  THE  GOVERNMENT ENTITY SHALL ALSO INFORM THE APPLICANT THAT AN
APPLICATION MAY BE  RESUBMITTED  AFTER  PAYMENT  FOR  THE  PAST-DUE  TAX
LIABILITIES  HAS  CLEARED, OR, IF A PAYMENT PLAN IS AGREED TO, AFTER THE
FIRST PAYMENT PURSUANT TO SUCH PLAN HAS CLEARED.
  5. (A) NOTWITHSTANDING ANY OTHER  PROVISION  OF  LAW,  AND  EXCEPT  AS
SPECIFICALLY  PROVIDED  HEREIN,  AN  APPLICANT  DENIED AN ELECTRONIC TAX
CLEARANCE SHALL HAVE NO RIGHT TO COMMENCE A COURT ACTION  OR  PROCEEDING
OR  SEEK  ANY OTHER LEGAL RECOURSE AGAINST THE DEPARTMENT OR THE GOVERN-
MENT ENTITY RELATED TO THE DENIAL OF AN ELECTRONIC TAX CLEARANCE BY  THE
DEPARTMENT.  AN APPLICANT MAY CHALLENGE SUCH DENIAL OF AN ELECTRONIC TAX
CLEARANCE ONLY ON THE GROUNDS THAT:
  (I) THE INDIVIDUAL OR ENTITY DENIED THE ELECTRONIC  TAX  CLEARANCE  IS
NOT THE INDIVIDUAL OR ENTITY WITH THE PAST-DUE TAX LIABILITIES AT ISSUE;
(II)  THE PAST-DUE TAX LIABILITIES WERE SATISFIED; (III) THE APPLICANT'S
WAGES ARE BEING GARNISHED FOR THE PAYMENT OF CHILD SUPPORT  OR  COMBINED
CHILD  AND SPOUSAL SUPPORT PURSUANT TO AN INCOME EXECUTION ISSUED PURSU-
ANT TO SECTION FIVE THOUSAND TWO HUNDRED FORTY-ONE OR FIVE THOUSAND  TWO
HUNDRED FORTY-TWO OF THE CIVIL PRACTICE LAW AND RULES OR ANOTHER STATE'S
INCOME WITHHOLDING ORDER AS AUTHORIZED UNDER PART FIVE OF ARTICLE FIVE-B
OF  THE FAMILY COURT ACT, OR GARNISHED BY THE DEPARTMENT FOR THE PAYMENT
OF THE PAST-DUE TAX LIABILITIES AT ISSUE; (IV) THE APPLICANT  IS  MAKING
CHILD  SUPPORT  PAYMENTS  OR COMBINED CHILD AND SPOUSAL SUPPORT PAYMENTS
PURSUANT TO A SATISFACTORY PAYMENT ARRANGEMENT UNDER SECTION ONE HUNDRED
ELEVEN-B OF THE SOCIAL SERVICES LAW WITH A SUPPORT  COLLECTION  UNIT  OR
OTHERWISE  MAKING  PERIODIC  PAYMENTS  IN  ACCORDANCE  WITH SECTION FOUR
HUNDRED FORTY OF THE FAMILY COURT ACT; OR (V) IF THE ONLY BASIS FOR  THE
DENIAL  OF  AN  ELECTRONIC  TAX CLEARANCE WAS THE APPLICANT'S FAILURE TO
REGISTER PURSUANT TO SECTION ONE THOUSAND  ONE  HUNDRED  THIRTY-FOUR  OF
THIS  CHAPTER,  THAT  THE  APPLICANT WAS PROPERLY REGISTERED PURSUANT TO
SUCH SECTION ONE THOUSAND ONE HUNDRED THIRTY-FOUR.
  (B) AN APPLICANT SEEKING TO CHALLENGE THE DENIAL OF AN ELECTRONIC  TAX
CLEARANCE  MUST PROTEST TO THE DEPARTMENT OR THE DIVISION OF TAX APPEALS
NO LATER THAN SIXTY DAYS FROM THE DATE OF THE ELECTRONIC NOTIFICATION TO
THE APPLICANT, PURSUANT TO SUBDIVISION FOUR  OF  SECTION  3-505  OF  THE
GENERAL OBLIGATIONS LAW, THAT THE ELECTRONIC TAX CLEARANCE WAS DENIED.
  (C)  NOTHING  IN  THIS  SUBDIVISION IS INTENDED TO LIMIT ANY APPLICANT
FROM SEEKING RELIEF FROM JOINT AND SEVERAL LIABILITY PURSUANT TO SECTION
SIX HUNDRED FIFTY-FOUR OF THIS CHAPTER, TO THE EXTENT THAT HE OR SHE  IS
ELIGIBLE  PURSUANT  TO  THAT  SECTION, OR ESTABLISHING TO THE DEPARTMENT
THAT THE ENFORCEMENT OF THE UNDERLYING TAX LIABILITIES HAS  BEEN  STAYED

S. 6359--C                         171

BY  THE  FILING  OF  A  PETITION PURSUANT TO THE BANKRUPTCY CODE OF 1978
(TITLE ELEVEN OF THE UNITED STATES CODE).
  6.  NOTWITHSTANDING  ANY  OTHER  PROVISION  OF LAW, THE DEPARTMENT MAY
EXCHANGE WITH A GOVERNMENT ENTITY  ANY  DATA  OR  INFORMATION  NECESSARY
THAT, IN THE DISCRETION OF THE COMMISSIONER, IS NECESSARY FOR THE IMPLE-
MENTATION  OF ANY ELECTRONIC TAX CLEARANCE. HOWEVER, NO OTHER AGENCY MAY
RE-DISCLOSE THIS INFORMATION TO ANY OTHER ENTITY OR PERSON,  OTHER  THAN
FOR  THE  PURPOSE  OF INFORMING THE APPLICANT THAT THE APPLICATION FOR A
LICENSE OR THE RENEWAL OF SUCH LICENSE WILL NOT BE PROCESSED DUE TO  THE
LACK  OF  A  REQUIRED  TAX  CLEARANCE AUTHORIZED BY ANY PROVISION OF LAW
UNLESS OTHERWISE PERMITTED BY LAW.
  7. EXCEPT AS OTHERWISE PROVIDED IN THIS  SECTION,  THE  ACTIVITIES  TO
COLLECT  PAST-DUE  TAX LIABILITIES UNDERTAKEN BY THE DEPARTMENT PURSUANT
TO THIS SECTION SHALL NOT IN ANY  WAY  LIMIT,  RESTRICT  OR  IMPAIR  THE
DEPARTMENT FROM EXERCISING ANY OTHER AUTHORITY TO COLLECT OR ENFORCE TAX
LIABILITIES UNDER ANY OTHER APPLICABLE PROVISION OF LAW.
  8.  EXCEPT  AS  OTHERWISE  PROVIDED IN THIS SECTION, THE PROVISIONS OF
THIS SECTION ARE NOT APPLICABLE TO THE TAX CLEARANCE REQUIRED BY SECTION
ONE HUNDRED SEVENTY-ONE-V OF THIS CHAPTER.
  S 3. This act shall take effect June 1, 2014; provided, however,  that
the  department of taxation and finance and any government entity elect-
ing to receive an electronic tax clearance from the department of  taxa-
tion  and finance may work to execute the necessary procedures and tech-
nical changes  to  support  the  electronic  tax  clearance  process  as
described  in  sections  one  and  two  of  this  act  before that date;
provided, further, that this effective date will not impact the adminis-
tration of any electronic tax clearance program  authorized  by  another
provision of law.

                                 PART I

  Section  1. Subsection (b) of section 612 of the tax law is amended by
adding a new paragraph 40 to read as follows:
  (40) IN THE CASE OF A BENEFICIARY OF A TRUST NOT SUBJECT TO TAX PURSU-
ANT TO SUBPARAGRAPH (D) OF PARAGRAPH THREE OF SUBSECTION (B) OF  SECTION
SIX  HUNDRED  FIVE  OF  THIS  ARTICLE  (EXCEPT  FOR  AN  INCOMPLETE GIFT
NON-GRANTOR  TRUST,  AS  DEFINED  BY   PARAGRAPH   FORTY-ONE   OF   THIS
SUBSECTION), THE AMOUNT OF ANY ACCUMULATION DISTRIBUTION AS DESCRIBED IN
SUBSECTION (B) OF SECTION SIX HUNDRED SIXTY-FIVE OF THE INTERNAL REVENUE
CODE  FOR  THE  TAX  YEAR  NOT TO EXCEED THE UNDISTRIBUTED NET INCOME AS
DESCRIBED IN SUBSECTION (A) OF SECTION SIX  HUNDRED  SIXTY-FIVE  OF  THE
INTERNAL REVENUE CODE FOR APPLICABLE YEARS, SUCH AMOUNT TO BE DETERMINED
WITHOUT  REGARD  TO  SUBSECTION (C) OF SECTION SIX HUNDRED SIXTY-FIVE OF
THE INTERNAL REVENUE CODE, TO THE EXTENT NOT ALREADY INCLUDED IN FEDERAL
GROSS INCOME FOR THE TAX YEAR, EXCEPT THAT, IN COMPUTING THE  AMOUNT  TO
BE  ADDED  UNDER THIS PARAGRAPH, SUCH BENEFICIARY SHALL DISREGARD INCOME
EARNED BY A TRUST IN A TAXABLE YEAR STARTING BEFORE JANUARY  FIRST,  TWO
THOUSAND  FOURTEEN AND IN ANY TAXABLE YEAR IN WHICH ANY OF THE FOLLOWING
CONDITIONS EXIST: (I) SUCH BENEFICIARY WAS NOT A RESIDENT OF  THE  STATE
DURING  SUCH  TAXABLE YEAR; (II) THE INCOME ACCUMULATED BY THE TRUST WAS
ACCUMULATED PRIOR TO THE BIRTH OF THE BENEFICIARY; OR (III)  THE  INCOME
ACCUMULATED  BY  THE  TRUST  WAS  ACCUMULATED PRIOR TO THE BENEFICIARY'S
TWENTY-FIRST BIRTHDAY. FOR PURPOSES OF  THIS  PARAGRAPH,  A  BENEFICIARY
SHALL  BE DEFINED AS A NEW YORK RESIDENT WHO, BUT FOR THE EXCEPTIONS SET
FORTH ABOVE IN SUBPARAGRAPHS (I), (II) AND (III) OF THIS  PARAGRAPH,  IS

S. 6359--C                         172

ELIGIBLE  TO  RECEIVE  A  DISTRIBUTION  DURING THE TAX YEAR IN WHICH THE
DISTRIBUTION FIRST COULD HAVE BEEN MADE.
  S 2. Subsection (b) of section 612 of the tax law is amended by adding
a new paragraph 41 to read as follows:
  (41)  IN  THE CASE OF A TAXPAYER WHO TRANSFERRED PROPERTY TO AN INCOM-
PLETE GIFT  NON-GRANTOR  TRUST,  THE  INCOME  OF  THE  TRUST,  LESS  ANY
DEDUCTIONS  OF  THE  TRUST,  TO THE EXTENT SUCH INCOME AND DEDUCTIONS OF
SUCH TRUST WOULD BE TAKEN  INTO  ACCOUNT  IN  COMPUTING  THE  TAXPAYER'S
FEDERAL  TAXABLE  INCOME IF SUCH TRUST IN ITS ENTIRETY WERE TREATED AS A
GRANTOR TRUST FOR FEDERAL TAX PURPOSES. FOR PURPOSES OF THIS  PARAGRAPH,
AN "INCOMPLETE GIFT NON-GRANTOR TRUST" MEANS A RESIDENT TRUST THAT MEETS
THE  FOLLOWING  CONDITIONS:  (I) THE TRUST DOES NOT QUALIFY AS A GRANTOR
TRUST UNDER SECTION SIX HUNDRED SEVENTY-ONE THROUGH SIX  HUNDRED  SEVEN-
TY-NINE  OF THE INTERNAL REVENUE CODE, AND (2) THE GRANTOR'S TRANSFER OF
ASSETS TO THE TRUST IS TREATED AS AN INCOMPLETE GIFT UNDER SECTION TWEN-
TY-FIVE HUNDRED ELEVEN OF THE INTERNAL REVENUE CODE, AND THE REGULATIONS
THEREUNDER.
  S 3. Section 621 of the tax law, as added by chapter 272 of  the  laws
of  1963  and  subsection  (a)  as amended by chapter 267 of the laws of
1987, is amended to read as follows:
  S 621. [Credit] CREDITS to trust  beneficiary  receiving  accumulation
distribution.   (a) General. A resident beneficiary of a trust whose New
York adjusted gross income includes  all  or  part  of  an  accumulation
distribution by such trust, as defined in section six hundred sixty-five
of the internal revenue code, INCLUDING A BENEFICIARY WHO IS REQUIRED TO
MAKE  THE  MODIFICATION REQUIRED BY PARAGRAPH FORTY OF SUBSECTION (B) OF
SECTION SIX HUNDRED TWELVE OF THIS PART, shall be allowed (1)  a  credit
against  the  tax  otherwise due under this article for all or a propor-
tionate part of any tax paid by the trust under this  article  or  under
FORMER article sixteen of this chapter (as such article was in effect on
or before December thirtieth, nineteen hundred sixty), for any preceding
taxable  year which would not have been payable if the trust had in fact
made distributions to its beneficiaries at the times and in the  amounts
specified in section six hundred sixty-six of the internal revenue code;
AND (2) A CREDIT AGAINST THE TAXES IMPOSED BY THIS ARTICLE FOR THE TAXA-
BLE YEAR FOR ANY INCOME TAX IMPOSED ON THE TRUST FOR THE TAXABLE YEAR OR
ANY  PRIOR  TAXABLE  YEAR BY ANOTHER STATE OF THE UNITED STATES, A POLI-
TICAL SUBDIVISION THEREOF, OR THE DISTRICT OF COLUMBIA, UPON INCOME BOTH
DERIVED THEREFROM AND SUBJECT TO TAX UNDER THIS ARTICLE,  PROVIDED  THAT
THE  AMOUNT  OF  THE  CREDIT  SHALL NOT EXCEED THE PERCENTAGE OF THE TAX
OTHERWISE DUE UNDER THIS ARTICLE DETERMINED BY DIVIDING THE  PORTION  OF
THE  INCOME THAT IS BOTH TAXABLE TO THE TRUST IN SUCH OTHER JURISDICTION
AND TAXABLE TO THE BENEFICIARY UNDER THIS ARTICLE BY THE TOTAL AMOUNT OF
THE BENEFICIARY'S NEW YORK INCOME.
  (b) Limitation. The [credit] CREDITS  under  this  section  shall  not
reduce  the tax otherwise due from the beneficiary under this article to
an amount less than would have been due if the accumulation distribution
or his part thereof were excluded  from  his  New  York  adjusted  gross
income.
  S  4. Section 658 of the tax law is amended by adding a new subsection
(f) to read as follows:
   (F) (1) EVERY NONRESIDENT TRUST OR A TRUST DESCRIBED BY  SUBPARAGRAPH
(D)  OF PARAGRAPH THREE OF SUBSECTION (B) OF SECTION SIX HUNDRED FIVE OF
THIS ARTICLE SHALL MAKE A RETURN FOR ANY TAXABLE YEAR IN WHICH IT  MAKES
AN  ACCUMULATION  DISTRIBUTION  WITHIN THE MEANING OF SUBDIVISION (B) OF
SECTION SIX HUNDRED SIXTY-FIVE OF THE INTERNAL REVENUE CODE TO A BENEFI-

S. 6359--C                         173

CIARY WHO IS A RESIDENT, WHICH  RETURN  SHALL  INCLUDE  (I)  INFORMATION
IDENTIFYING SUCH RESIDENT, (II) THE AMOUNT OF SUCH ACCUMULATION DISTRIB-
UTION, AND (III) SUCH OTHER INFORMATION AS THE COMMISSIONER MAY REQUIRE.
  (2)  EVERY  RESIDENT  TRUST  THAT DOES NOT FILE THE RETURN REQUIRED BY
SECTION SIX HUNDRED FIFTY-ONE OF THIS PART ON THE GROUND THAT IT IS  NOT
SUBJECT  TO  TAX  PURSUANT  TO  SUBPARAGRAPH  (D)  OF PARAGRAPH THREE OF
SUBSECTION (B) OF SECTION SIX HUNDRED FIVE OF THIS ARTICLE FOR THE TAXA-
BLE YEAR SHALL MAKE A RETURN FOR SUCH TAXABLE  YEAR  SUBSTANTIATING  ITS
ENTITLEMENT  TO  THAT  EXEMPTION AND PROVIDING SUCH OTHER INFORMATION AS
THE COMMISSIONER MAY REQUIRE.
  (3) THE RETURNS REQUIRED BY THIS  SUBSECTION  SHALL  BE  FILED  ON  OR
BEFORE THE FIFTEENTH DAY OF THE FOURTH MONTH FOLLOWING THE CLOSE OF EACH
TAXABLE  YEAR.  FOR  PURPOSES  OF THIS PARAGRAPH, "TAXABLE YEAR" MEANS A
YEAR OR A PERIOD WHICH WOULD BE A TAXABLE YEAR OF THE TRUST IF  IT  WERE
SUBJECT TO TAX UNDER THIS ARTICLE.
  S  5.  Paragraph 2 of subsection (h) of section 685 of the tax law, as
amended by chapter 190 of the laws  of  1990,  is  amended  to  read  as
follows:
  (2)  If any partnership [or], S corporation, OR TRUST required to file
a return or report under subsection (c) OR SUBSECTION (F) of section six
hundred fifty-eight or under section  six  hundred  fifty-nine  OF  THIS
ARTICLE  for any taxable year fails to file such return or report at the
time prescribed therefor (determined with regard  to  any  extension  of
time  for  filing),  or files a return or report which fails to show the
information required under such subsection (c) or  section  six  hundred
fifty-nine  OF THIS ARTICLE, unless it is shown that such failure is due
to reasonable cause and not due to willful neglect,  there  shall,  upon
notice  and demand by the commissioner and in the same manner as tax, be
paid by the partnership or S corporation a penalty for  each  month  (or
fraction thereof) during which such failure continues (but not to exceed
five months). The amount of such penalty for any month is the product of
fifty  dollars,  multiplied by the number of partners in the partnership
or shareholders in the S corporation during any part of the taxable year
who were subject to tax under this article during any part of such taxa-
ble year, EXCEPT THAT, IN THE CASE OF A  TRUST,  THE  PENALTY  SHALL  BE
EQUAL  TO  ONE  HUNDRED FIFTY DOLLARS A MONTH UP TO A MAXIMUM OF FIFTEEN
HUNDRED DOLLARS PER TAXABLE YEAR.
  S 6. Subdivision (b) of section 11-1712 of the administrative code  of
the  city of New York is amended by adding a new paragraph 36 to read as
follows:
  (36) IN THE CASE OF A BENEFICIARY OF A TRUST NOT SUBJECT TO TAX PURSU-
ANT TO SUBPARAGRAPH (D) OF PARAGRAPH THREE OF SUBSECTION (B) OF  SECTION
11-1705  OF  THIS  CHAPTER  (EXCEPT  FOR  AN INCOMPLETE GIFT NON-GRANTOR
TRUST, AS DEFINED BY PARAGRAPH THIRTY-SEVEN OF  THIS  SUBDIVISION),  THE
AMOUNT  OF  ANY ACCUMULATION DISTRIBUTION AS DESCRIBED IN SUBSECTION (B)
OF SECTION SIX HUNDRED SIXTY-FIVE OF THE INTERNAL REVENUE CODE  FOR  THE
TAX  YEAR  NOT  TO  EXCEED  THE UNDISTRIBUTED NET INCOME AS DESCRIBED IN
SUBSECTION (A) OF SECTION SIX HUNDRED SIXTY-FIVE OF THE INTERNAL REVENUE
CODE FOR APPLICABLE YEARS, SUCH AMOUNT TO BE DETERMINED  WITHOUT  REGARD
TO  SUBSECTION  (C)  OF  SECTION  SIX HUNDRED SIXTY-FIVE OF THE INTERNAL
REVENUE CODE, TO THE EXTENT NOT ALREADY INCLUDED IN FEDERAL GROSS INCOME
FOR THE TAX YEAR, EXCEPT THAT, IN COMPUTING THE AMOUNT TO BE ADDED UNDER
THIS PARAGRAPH, SUCH BENEFICIARY SHALL  DISREGARD  INCOME  EARNED  BY  A
TRUST  IN  A  TAXABLE  YEAR  STARTING BEFORE JANUARY FIRST, TWO THOUSAND
FOURTEEN AND IN ANY TAXABLE YEAR IN WHICH ANY OF  THE  FOLLOWING  CONDI-
TIONS EXIST: (I) SUCH BENEFICIARY WAS NOT A RESIDENT OF THE STATE DURING

S. 6359--C                         174

SUCH  TAXABLE YEAR; (II) THE INCOME ACCUMULATED BY THE TRUST WAS ACCUMU-
LATED PRIOR TO THE BIRTH OF THE BENEFICIARY; OR (III) THE INCOME ACCUMU-
LATED  BY  THE  TRUST  WAS  ACCUMULATED  PRIOR  TO   THE   BENEFICIARY'S
TWENTY-FIRST  BIRTHDAY.  FOR  PURPOSES  OF THIS PARAGRAPH, A BENEFICIARY
SHALL BE DEFINED AS A NEW YORK RESIDENT WHO, BUT FOR THE EXCEPTIONS  SET
FORTH  ABOVE  IN SUBPARAGRAPHS (I), (II) AND (III) OF THIS PARAGRAPH, IS
ELIGIBLE TO RECEIVE A DISTRIBUTION DURING THE  TAX  YEAR  IN  WHICH  THE
DISTRIBUTION FIRST COULD HAVE BEEN MADE.
  S  7. Subdivision (b) of section 11-1712 of the administrative code of
the city of New York is amended by adding a new paragraph 37 to read  as
follows:
  (37)  IN  THE CASE OF A TAXPAYER WHO TRANSFERRED PROPERTY TO AN INCOM-
PLETE GIFT  NON-GRANTOR  TRUST,  THE  INCOME  OF  THE  TRUST,  LESS  ANY
DEDUCTIONS  OF  SUCH  TRUST, TO THE EXTENT SUCH INCOME AND DEDUCTIONS OF
SUCH TRUST WOULD BE TAKEN  INTO  ACCOUNT  IN  COMPUTING  THE  TAXPAYER'S
FEDERAL  TAXABLE  INCOME IF SUCH TRUST IN ITS ENTIRETY WERE TREATED AS A
GRANTOR TRUST FOR FEDERAL TAX PURPOSES. FOR PURPOSES OF THIS  PARAGRAPH,
AN "INCOMPLETE GIFT NON-GRANTOR TRUST" MEANS A RESIDENT TRUST THAT MEETS
THE  FOLLOWING  CONDITIONS:  (I) THE TRUST DOES NOT QUALIFY AS A GRANTOR
TRUST UNDER SECTION SIX HUNDRED SEVENTY-ONE THROUGH SIX  HUNDRED  SEVEN-
TY-NINE  OF THE INTERNAL REVENUE CODE, AND (2) THE GRANTOR'S TRANSFER OF
ASSETS TO THE TRUST IS TREATED AS AN INCOMPLETE GIFT UNDER SECTION TWEN-
TY FIVE HUNDRED ELEVEN OF THE INTERNAL REVENUE CODE, AND THE REGULATIONS
THEREUNDER.
  S 8. Section 11-1721 of the administrative code of  the  city  of  New
York, subdivisions (a) and (b) as amended by section 72 and such section
as  renumbered  by  section  43  of  chapter 639 of the laws of 1986, is
amended to read as follows:
  S 11-1721 [Credit] CREDITS to trust beneficiary receiving accumulation
distribution. (a) General. A city resident beneficiary of a trust  whose
city  adjusted  gross  income  includes  all  or part of an accumulation
distribution by such trust, as defined in section six hundred sixty-five
of the internal revenue code, INCLUDING A BENEFICIARY WHO IS REQUIRED TO
MAKE THE MODIFICATION REQUIRED BY PARAGRAPH  THIRTY-SIX  OF  SUBDIVISION
(B) OF SECTION 11-1712 OF THIS SUBCHAPTER, shall be allowed (1) a credit
against  the  tax  otherwise due under this chapter for all or a propor-
tionate part of any tax paid by the trust under this  chapter  or  under
FORMER  title  T  of chapter forty-six of this code, as it was in effect
prior to September first, nineteen hundred eighty-six, for any preceding
taxable year which would not have been payable if the trust had in  fact
made  distributions to its beneficiaries at the times and in the amounts
specified in section six hundred sixty-six of the internal revenue code;
AND (2) A CREDIT AGAINST THE TAXES IMPOSED BY THIS CHAPTER FOR THE TAXA-
BLE YEAR FOR ANY INCOME TAX IMPOSED FOR THE TAXABLE YEAR  OR  ANY  PRIOR
TAXABLE YEAR BY ANOTHER STATE OF THE UNITED STATES, A POLITICAL SUBDIVI-
SION  THEREOF,  OR  THE  DISTRICT  OF COLUMBIA, UPON INCOME BOTH DERIVED
THEREFROM AND SUBJECT TO TAX  UNDER  THIS  CHAPTER,  PROVIDED  THAT  THE
AMOUNT  OF  THE CREDIT SHALL NOT EXCEED THE PERCENTAGE OF THE TAX OTHER-
WISE DUE UNDER THIS CHAPTER DETERMINED BY DIVIDING THE  PORTION  OF  THE
INCOME  THAT IS BOTH TAXABLE TO THE TRUST IN SUCH OTHER JURISDICTION AND
TAXABLE TO THE BENEFICIARY UNDER THIS CHAPTER BY THE TOTAL AMOUNT OF THE
BENEFICIARY'S NEW YORK CITY INCOME.
  (b) Limitation. The [credit] CREDITS  under  this  section  shall  not
reduce  the tax otherwise due from the beneficiary under this chapter to
an amount less than would have been due if the accumulation distribution

S. 6359--C                         175

or his or her part thereof were excluded from his or her  city  adjusted
gross income.
  S 9. This act shall take effect immediately and shall apply to taxable
years  beginning on or after January 1, 2014, provided that sections one
and six of this act shall not apply to income of a nonresident trust  or
an  exempt resident trust paid to a beneficiary before June 1, 2014, and
sections two and seven of this act shall not  apply  to  income  from  a
trust that is liquidated before June 1, 2014.

                                 PART J

  Section 1. Section 602 of the tax law is REPEALED.
  S  2.  Paragraph 4 of subsection (c) and paragraph 4 of subsection (d)
of section 606 of the tax law, paragraph 4 of subsection (c) as added by
chapter 309 of the laws of 1996 and paragraph 4  of  subsection  (d)  as
amended  by  chapter  2  of  the  laws  of  1995, are amended to read as
follows:
  (4) Part-year residents. In the case of a part-year resident taxpayer,
the credit under this subsection shall be allowed against the tax deter-
mined under subsections (a) through  (d)  of  section  six  hundred  one
reduced  by  the  credit permitted under subsection (b) of this section,
and any excess credit after such application shall  be  allowed  against
the  [taxes]  TAX  imposed by [sections six hundred two and] SECTION six
hundred three. Any remaining excess, after such  application,  shall  be
refunded  as  provided  in paragraph two hereof, provided, however, that
any overpayment under such paragraph shall be limited to the  amount  of
the remaining excess multiplied by a fraction, the numerator of which is
federal  adjusted  gross income for the period of residence, computed as
if the taxable year for federal income tax purposes were limited to  the
period  of  residence,  and the denominator of which is federal adjusted
gross income for the taxable year.
  (4) Part-year residents. In the case of a part-year resident taxpayer,
the credit under this subsection shall be allowed against the tax deter-
mined under subsections (a) through  (d)  of  section  six  hundred  one
reduced  by  the credits permitted under subsections (b), (c) and (m) of
this section, and any excess credit  after  such  application  shall  be
allowed  against  the  [taxes]  TAX imposed by [sections six hundred two
and] SECTION six hundred three. Any remaining excess, after such  appli-
cation, shall be refunded as provided in paragraph two hereof, provided,
however,  that  any overpayment under such paragraph shall be limited to
the amount of the remaining excess multiplied by a fraction, the numera-
tor of which is federal adjusted gross income for the  period  of  resi-
dence,  computed  as if the taxable year for federal income tax purposes
were limited to the period of residence, and the denominator of which is
federal adjusted gross income for the taxable year.
  S 3. Section 622 of the tax law is REPEALED.
  S 4. Section 636 of the tax law is REPEALED.
  S 5. Subsections (a), (b) and (c) of section 639 of the  tax  law,  as
added  by  chapter  170  of  the  laws  of  1994, are amended to read as
follows:
  (a) If an individual changes status from resident  to  nonresident  he
shall,  regardless  of his method of accounting, accrue to the period of
residence any items of income, gain,  loss,  deduction,  [items  of  tax
preference] or ordinary income portion of a lump sum distribution accru-
ing prior to the change of status, with the applicable modifications and
adjustments  to federal adjusted gross income[,] AND itemized deductions

S. 6359--C                         176

[and items of tax preference] under sections six hundred  twelve[,]  AND
six hundred fifteen [and six hundred twenty-two], if not otherwise prop-
erly  includible  or allowable for New York income tax purposes for such
period or a prior taxable year under his method of accounting.
  (b)  If  an  individual changes status from nonresident to resident he
shall, regardless of his method of accounting, accrue to the  period  of
nonresidence any items of income, gain, loss or deduction, [items of tax
preference] or ordinary income portion of a lump sum distribution accru-
ing prior to the change of status, with the applicable modifications and
adjustments  to federal adjusted gross income[,] AND itemized deductions
[and items of tax preference] under sections six hundred  twelve[,]  AND
six  hundred  fifteen  [and  six  hundred  twenty-two], other than items
derived from or connected with New York sources, if not otherwise  prop-
erly  includible  or allowable for New York income tax purposes for such
period or for a prior taxable year under his method of accounting.
  (c) No item of income, gain, loss, deduction,  [item  of  tax  prefer-
ence,]  ordinary  income portion of a lump sum distribution or modifica-
tion or adjustment which is accrued under this section  shall  be  taken
into  account  in  determining the tax under this article for any subse-
quent taxable year.
  S 6. Paragraphs 1, 2, 3 and 4 of subsection (a) of section 651 of  the
tax  law,  paragraph  1  as  amended by chapter 333 of the laws of 1987,
paragraph 2 as amended by chapter 28 of the laws of 1987, and paragraphs
3 and 4 as amended by chapter 170 of the laws of 1994,  are  amended  to
read as follows:
  (1)  every  resident  individual (A) required to file a federal income
tax return for the taxable year, or (B) having  federal  adjusted  gross
income  for  the  taxable  year,  increased  by  the modifications under
subsection (b) of section six hundred twelve, in excess of four thousand
dollars, or in excess of his New York standard deduction, if  lower,  or
(C)  [subject  to  tax  under  section  six  hundred two, or (D)] having
received during the taxable year a lump sum distribution any portion  of
which is subject to tax under section six hundred three;
  (2)  every  resident estate or trust required to file a federal income
tax return for the taxable year, or having any New York  taxable  income
for the taxable year, determined under section six hundred eighteen, [or
subject to tax under section six hundred two,] or having received during
the taxable year a lump sum distribution any portion of which is subject
to tax under section six hundred three;
  (3) every nonresident or part-year resident individual having New York
source  income  for  the taxable year, determined under part III of this
article, and having New York adjusted gross income for the taxable year,
determined under part II of this article, in excess  of  the  taxpayer's
New  York  standard  deduction,  [or  subject  to  tax under section six
hundred two,] or having received during the  taxable  year  a  lump  sum
distribution  any  portion  of which is subject to tax under section six
hundred three; and
  (4) every nonresident estate or  trust  or  part-year  resident  trust
having  New  York  source  income for the taxable year, determined under
part III of this article, and having New York adjusted gross income  for
the  taxable  year, determined under paragraph four of subsection (e) of
section six hundred one, [or subject to tax under  section  six  hundred
two,] or having received during the taxable year a lump sum distribution
any portion of which is subject to tax under section six hundred three.

S. 6359--C                         177

  S  7.  Paragraph 6 of subsection (b) of section 654 of the tax law, as
added by section 5 of part Q of chapter 407 of  the  laws  of  1999,  is
amended to read as follows:
  (6) In subparagraph (B) of paragraph two of subsection (d), the phrase
"section  1  or  55"  shall  be read as "section six hundred one [or six
hundred two] of this article".
  S 8. Section 659 of the tax law, as amended by chapter 577 of the laws
of 1997, is amended to read as follows:
  S 659.  Report of federal changes, corrections or disallowances.    If
the amount of a taxpayer's federal taxable income, [federal items of tax
preference,]  total  taxable amount or ordinary income portion of a lump
sum distribution or includible gain of a trust reported on  his  federal
income  tax  return  for any taxable year, or the amount of a taxpayer's
earned income credit or credit for employment-related expenses set forth
on such return, or the amount of any federal foreign tax credit  affect-
ing  the  calculation  of the credit for Canadian provincial taxes under
section six hundred twenty or six hundred twenty-A of this  article,  or
the  amount of any claim of right adjustment, is changed or corrected by
the United States internal revenue service or other competent  authority
or  as  the  result of a renegotiation of a contract or subcontract with
the United States, or the amount an employer is required to  deduct  and
withhold  from  wages  for  federal  income  tax withholding purposes is
changed or corrected by such service or authority  or  if  a  taxpayer's
claim  for credit or refund of federal income tax is disallowed in whole
or in part, the  taxpayer  or  employer  shall  report  such  change  or
correction  or  disallowance within ninety days after the final determi-
nation of such change, correction, renegotiation or disallowance, or  as
otherwise  required  by the commissioner, and shall concede the accuracy
of such determination or state wherein it is erroneous.   The  allowance
of  a  tentative  carryback  adjustment  based upon a net operating loss
carryback pursuant to section sixty-four hundred eleven of the  internal
revenue  code  shall be treated as a final determination for purposes of
this section.  Any taxpayer filing an amended federal income tax  return
and any employer filing an amended federal return of income tax withheld
shall  also  file  within ninety days thereafter an amended return under
this article, and shall give such information as  the  commissioner  may
require.    The commissioner may by regulation prescribe such exceptions
to the requirements of this section as he or she deems appropriate.  For
purposes of this section, (i) the term "taxpayer" shall include a  part-
nership  having a resident partner or having any income derived from New
York sources, and a corporation with respect to which the  taxable  year
of  such  change,  correction,  disallowance or amendment is a year with
respect to which the election provided for in subsection (a) of  section
six  hundred  sixty  of  this  article  is  in effect, and (ii) the term
"federal income tax return" shall include the returns of income required
under sections six thousand thirty-one and six thousand thirty-seven  of
the  internal  revenue  code.    In the case of such a corporation, such
report shall  also  include  any  change  or  correction  of  the  taxes
described in paragraphs two and three of subsection (f) of section thir-
teen hundred sixty-six of the internal revenue code.  Reports made under
this  section by a partnership or corporation shall indicate the portion
of the change in each item of income, gain, loss or deduction  (and,  in
the case of a corporation, of each change in, or disallowance of a claim
for  credit  or  refund of, a tax referred to in the preceding sentence)
allocable to each partner or shareholder and shall set forth such  iden-

S. 6359--C                         178

tifying  information  with respect to such partner or shareholder as may
be prescribed by the commissioner.
  S 9. Subsection (d) of section 683 of the tax law, as amended by chap-
ter 170 of the laws of 1994, is amended to read as follows:
  (d) Omission of income, [item of tax preference,] total taxable amount
or  ordinary  income  portion of a lump sum distribution on return.--The
tax may be assessed at any time within six years after  the  return  was
filed if--
  (1)  an individual omits from his New York adjusted gross income, [the
sum of his items of tax preference,] or  the  total  taxable  amount  or
ordinary  income  portion  of a lump sum distribution an amount properly
includible therein which is in excess  of  twenty-five  percent  of  the
amount  of  New York adjusted gross income, [the sum of the items of tax
preference,] or the total taxable amount or ordinary income portion of a
lump sum distribution stated in the return, or
  (2) an estate or trust omits from its New York adjusted gross  income,
[the sum of its items of tax preference,] or the total taxable amount or
ordinary  income  portion  of a lump sum distribution an amount properly
includible therein which is in excess  of  twenty-five  percent  of  the
amount stated in the return of New York adjusted gross income determined
in  accordance  with  paragraph  four  of  subsection (e) of section six
hundred one, [or the sum of the items of tax preference,] or  the  total
taxable  amount  or  ordinary income portion of a lump sum distribution,
respectively. For purposes of this subsection there shall not  be  taken
into account any amount which is omitted in the return if such amount is
disclosed  in the return, or in a statement attached to the return, in a
manner adequate to apprise the commissioner of the nature and amount  of
the  item  of income, [tax preference,] total taxable amount or ordinary
income portion of a lump sum distribution.
  S 10. Subparagraph (B) of paragraph 4 of subsection (c) of section 685
of the tax law, as amended by chapter 28 of the laws of 1987, is amended
to read as follows:
  (B) Determination of annualized income installment.--In  the  case  of
any  required  installment,  the  annualized  income  installment is the
excess, if any, of an amount equal to the applicable percentage  of  the
tax  for the taxable year computed by placing on an annualized basis the
taxable income [and minimum taxable income] for months  in  the  taxable
year  ending before the due date for the installment, over the aggregate
amount of any prior required installments  for  the  taxable  year.  The
applicable  percentage  of  the  tax  shall  be  twenty-two and one-half
percent in the case of the first installment, forty-five percent in  the
case  of the second installment, sixty-seven and one-half percent in the
case of the third installment and ninety percent  in  the  case  of  the
fourth installment, and shall be computed without regard to any increase
in  the  rates  applicable  to the taxable year unless such increase was
enacted at least thirty days prior to the due date of the installment.
  S 11. Paragraphs 2 and 3 of subsection (a) of section 1301 of the  tax
law,  as amended by chapter 209 of the laws of 2011, are amended to read
as follows:
  (2) [for taxable years beginning before two thousand fifteen,  a  city
minimum income tax on such residents, and
  (3)] for taxable years beginning after nineteen hundred seventy-six, a
separate tax on the ordinary income portion of lump sum distributions of
such  residents,  at  the  rates  provided  for herein, such taxes to be
administered, collected and distributed by the commissioner as  provided
for in this article.

S. 6359--C                         179

  S 12. Section 1301-A of the tax law is REPEALED.
  S  13.  Subsection  (a)  of section 1302 of the tax law, as amended by
chapter 333 of the laws of 1987, is amended to read as follows:
  (a) Imposition of tax. The city personal income tax  (other  than  the
[city  minimum  income  tax  and  the] city separate tax on the ordinary
income portion of  lump  sum  distributions)  imposed  pursuant  to  the
authority  of this article shall be imposed for each taxable year on the
city taxable income of every city resident individual, estate and trust.
A taxpayer's taxable year for purposes of a tax imposed pursuant to  the
authority  of  this  article shall be the same as his taxable year under
article twenty-two of this chapter.
  S 14. The opening paragraph of subsection (a) of section 1304  of  the
tax  law, as amended by section 134 of part A of chapter 389 of the laws
of 1997, is amended to read as follows:
  A tax (other than the [city minimum income tax, the] city separate tax
relating to qualified higher education funds and the city  separate  tax
on the ordinary income portion of lump sum distributions) imposed pursu-
ant  to  the  authority  of section thirteen hundred one of this article
shall be determined as follows:
  S 15. Subsection (c) of section 1307 of the tax  law,  as  amended  by
chapter 712 of the laws of 2004, is amended to read as follows:
  (c)  When  an individual changes his status from city resident to city
nonresident, or from  city  nonresident  to  city  resident,  he  shall,
regardless  of  his  method  of  accounting, accrue any items of income,
gain, loss, deduction[, items of  tax  preference]  or  ordinary  income
portion  of  a  lump  sum  distribution  accruing prior to the change of
status, with the applicable modifications  and  adjustments  to  federal
adjusted gross income[,] AND itemized deductions [and items of tax pref-
erence]  under  sections  six  hundred twelve[,] AND six hundred fifteen
[and six hundred twenty-two], if not otherwise  properly  includible  or
allowable  for  New  York income tax purposes for such period or a prior
taxable year under his method of accounting. Such accruals shall be made
as provided in section six hundred thirty-nine of this chapter.
  S 16. Subsection (a) of section 1306 of the tax  law,  as  amended  by
chapter 333 of the laws of 1987, is amended to read as follows:
  (a)  General.  On  or  before  the  fifteenth  day of the fourth month
following the close of a taxable year, an income tax return under a city
tax imposed pursuant to the authority of this article shall be made  and
filed by or for every city resident individual, estate or trust required
to  file  a  New  York  state  personal income tax (including [a minimum
income tax and] a city separate tax on the ordinary  income  portion  of
lump sum distributions) return for the taxable year.
  S  17.  Section  11-1702 of the administrative code of the city of New
York is REPEALED.
  S 18. Subdivision (a) of section 11-1704 of the administrative code of
the city of New York, as amended by chapter 17 of the laws of  1997,  is
amended to read as follows:
  (a)  In  addition  to the taxes imposed by sections 11-1701[, 11-1702]
and 11-1703, there is hereby imposed for  each  taxable  year  beginning
after  nineteen  hundred eighty-nine but before nineteen hundred ninety-
nine, a tax surcharge on the city taxable income of every city  resident
individual, estate and trust.
  S 19. Subdivision (c) of section 11-1704 of the administrative code of
the  city of New York, as amended by chapter 271 of the laws of 1991, is
amended to read as follows:

S. 6359--C                         180

  (c) The tax surcharge imposed pursuant to this section shall be admin-
istered, collected and distributed by the commissioner of  taxation  and
finance  in  the  same  manner as the taxes imposed pursuant to sections
11-1701[, 11-1702] and 11-1703, and all of the provisions of this  chap-
ter, including sections 11-1706, 11-1721 and 11-1773, shall apply to the
tax surcharge imposed by this section.
  S  20.  Section  11-1722 of the administrative code of the city of New
York is REPEALED.
  S 21. Subdivision (a) of section 11-1751 of the administrative code of
the city of New York, as amended by chapter 333 of the laws of 1987,  is
amended to read as follows:
  (a)  General.  On  or  before  the  fifteenth  day of the fourth month
following the close of a taxable year, an income tax return  under  this
chapter  shall  be made and filed by or for every city resident individ-
ual, estate or trust required to file a New York state  personal  income
tax  (including  a [minimum income tax and] separate tax on the ordinary
income portion of lump sum distributions) return for the taxable year.
  S 22. Subdivision (b) of section 11-1754 of the administrative code of
the city of New York, as amended by chapter 712 of the laws of 2004,  is
amended to read as follows:
  (b)  City  taxable  income  [and  city minimum taxable income] as city
resident. The city taxable income [and city minimum taxable income]  for
the  portion of the year during which he or she is a city resident shall
be determined, except as provided in subdivision (c), as if his  or  her
taxable  year for federal income tax purposes were limited to the period
of his or her city resident status.
  S 23. Paragraph 6 of subdivision (b) of section 11-1755 of the  admin-
istrative code of the city of New York, as added by section 17 of part Q
of chapter 407 of the laws of 1999, is amended to read as follows:
  (6) In subparagraph (B) of paragraph two of subsection (d), the phrase
"section 1 or 55" shall be read as "section 11-1701 [or 11-1702] of this
chapter".
  S  24.  Section  11-1759 of the administrative code of the city of New
York, as amended by chapter 577 of the laws of 1997, is amended to  read
as follows:
  S  11-1759 Report of federal changes, corrections or disallowances. If
the amount of a taxpayer's federal taxable income, [federal items of tax
preference,] total taxable amount or ordinary income portion of  a  lump
sum  distribution  or includible gain of a trust reported on his federal
income tax return for any taxable year, or the amount of  any  claim  of
right  adjustment, is changed or corrected by the United States internal
revenue service or other competent authority, or  as  the  result  of  a
renegotiation of a contract or subcontract with the United States or the
amount  an  employer  is  required to deduct and withhold from wages for
federal income tax withholding purposes is changed or corrected by  such
service  or  authority  or if a taxpayer's claim for credit or refund of
federal income tax is disallowed in whole or in part,  the  taxpayer  or
employer  shall  report such change or correction or disallowance within
ninety days after the final determination of  such  change,  correction,
renegotiation,  or disallowance, or as otherwise required by the commis-
sioner, and shall concede the accuracy of such  determination  or  state
wherein  it is erroneous. The allowance of a tentative carryback adjust-
ment based upon a net  operating  loss  carryback  pursuant  to  section
sixty-four  hundred eleven of the internal revenue code shall be treated
as a final determination for purposes  of  this  section.  Any  taxpayer
filing  an  amended federal income tax return and any employer filing an

S. 6359--C                         181

amended federal return of income tax withheld  shall  also  file  within
ninety  days  thereafter an amended return under this chapter, and shall
give such information as the commissioner may require. The  commissioner
may  by regulation prescribe such exceptions to the requirements of this
section as he or she deems appropriate. For purposes  of  this  section,
(i)  the  term  "taxpayer" shall include a partnership having a resident
partner or having any income derived from New York sources, and a corpo-
ration  with  respect  to  which  the  taxable  year  of  such   change,
correction,  disallowance  or  amendment is a year with respect to which
the election provided for in subsection (a) of section six hundred sixty
of the tax law is in effect, and  (ii)  the  term  "federal  income  tax
return"  shall include the returns of income required under sections six
thousand thirty-one and six thousand thirty-seven of the internal reven-
ue code. In the case of such  a  corporation,  such  report  shall  also
include  any  change  or correction of the taxes described in paragraphs
two and three of subsection (f) of section thirteen hundred sixty-six of
the internal revenue code. Reports made under this section by a partner-
ship or corporation shall indicate the portion of  the  change  in  each
item  of  income,  gain, loss or deduction (and, in the case of a corpo-
ration, of each change in, or disallowance of  a  claim  for  credit  or
refund  of,  a  tax  referred to in the preceding sentence) allocable to
each partner or shareholder and shall set forth such identifying  infor-
mation  with respect to such partner or shareholder as may be prescribed
by the commissioner.
  S 25. Subdivision (d) of section 11-1783 of the administrative code of
the city of New York, as amended by chapter 170 of the laws of 1994,  is
amended to read as follows:
  (d) Omission of income, [item of tax preference,] total taxable amount
or ordinary income portion of a lump sum distribution on return. The tax
may  be assessed at any time within six years after the return was filed
if:
  (1) an individual omits from his city adjusted gross income[, the  sum
of his items of tax preference, or] the total taxable amount or ordinary
income  portion of a lump sum distribution an amount properly includible
therein which is in excess of twenty-five percent of the amount of  city
adjusted  gross  income[, the sum of the items of tax preference] or the
total taxable amount or ordinary income portion of a lump  sum  distrib-
ution stated in the return, or
  (2) an estate or trust omits from its city adjusted gross income, [the
sum  of  its  items  of  tax preference,] or the total taxable amount or
ordinary income portion of a lump sum distribution  an  amount  properly
includible  therein  which  is  in  excess of twenty-five percent of the
amount stated in the return of city adjusted gross income, [or  the  sum
of the items of tax preference,] or the total taxable amount or ordinary
income portion of a lump sum distribution, respectively. For purposes of
this paragraph, city adjusted gross income means New York adjusted gross
income  as  determined under paragraph four of subsection (e) of section
six hundred one of the tax law.
  For purposes of this subdivision there shall not be taken into account
any amount which is omitted in the return if such amount is disclosed in
the return, or in a statement  attached  to  the  return,  in  a  manner
adequate  to  apprise  the  commissioner of the nature and amount of the
item of income, [tax preference,] the total taxable amount  or  ordinary
income portion of a lump sum distribution.

S. 6359--C                         182

  S  26.  Subparagraph  (B) of paragraph 4 of subdivision (c) of section
11-1785 of the administrative code of the city of New York,  as  amended
by chapter 333 of the laws of 1987, is amended to read as follows:
  (B) Determination of annualized income installment. In the case of any
required  installment,  the annualized income installment is the excess,
if any, of an amount equal to the applicable percentage of the  tax  for
the  taxable year computed by placing on an annualized basis the taxable
income [and minimum taxable income]  for  months  in  the  taxable  year
ending  before  the  due  date  for  the installment, over the aggregate
amount of any prior required installments  for  the  taxable  year.  The
applicable  percentage  of  the  tax  shall  be  twenty-two and one-half
percent in the case of the first installment, forty-five percent in  the
case  of the second installment, sixty-seven and one-half percent in the
case of the third installment and ninety percent  in  the  case  of  the
fourth installment, and shall be computed without regard to any increase
in  the  rates  applicable  to the taxable year unless such increase was
enacted at least thirty days prior to the due date of the installment.
  S 27. This act shall take effect  immediately  and  apply  to  taxable
years beginning on or after January 1, 2014.

                                 PART K

                          Intentionally Omitted

                                 PART L

                          Intentionally Omitted

                                 PART M

  Section 1. Paragraphs 1 and 4 of subsection (vv) of section 606 of the
tax  law,  as added by section 1 of part CC of chapter 59 of the laws of
2013, are amended to read as follows:
  1. An individual taxpayer who meets the eligibility standards in para-
graph two of this subsection shall be allowed a credit against the taxes
imposed by this article of three hundred fifty dollars  per  return  for
tax  [years]  YEAR two thousand fourteen[, two thousand fifteen, and two
thousand sixteen].
  4. For [each] THE year this credit is allowed, on  or  before  October
fifteenth  of such year, the commissioner shall determine the taxpayer's
eligibility for this credit utilizing the information available  to  the
commissioner  on the taxpayer's personal income tax return filed for the
taxable year two years prior to the taxable year in which the credit  is
allowed. For those taxpayers whom the commissioner has determined eligi-
ble  for  this credit, the commissioner shall advance a payment of three
hundred fifty dollars. When a taxpayer files his or her return  for  the
taxable year, such taxpayer shall properly reconcile that payment on his
or her return.
  S 2. This act shall take effect immediately.

                                 PART N

S. 6359--C                         183

  Section  1.  Paragraph  1  of subsection (a) of section 651 of the tax
law, as amended by chapter 333 of the laws of 1987, is amended  to  read
as follows:
  (1)  every  resident  individual (A) required to file a federal income
tax return for the taxable year, or (B) having  federal  adjusted  gross
income  for  the  taxable  year,  increased  by  the modifications under
subsection (b) of section six hundred twelve OF THIS ARTICLE, in  excess
of [four thousand dollars, or in excess of] his OR HER New York standard
deduction,  [if  lower,] or (C) subject to tax under section six hundred
two OF THIS ARTICLE, or (D) having received during the  taxable  year  a
lump  sum  distribution  any  portion  of  which is subject to tax under
section six hundred three OF THIS ARTICLE;
  S 2. This act shall take effect immediately and apply to taxable years
beginning on or after January 1, 2014.

                                 PART O

  Section 1. Paragraph 1 of subdivision (a) of section  28  of  the  tax
law,  as  amended  by  section  1 of part I of chapter 59 of the laws of
2012, is amended to read as follows:
  (1) A taxpayer which is a qualified commercial production company,  or
which is a sole proprietor of a qualified commercial production company,
and  which  is subject to tax under article nine-A or twenty-two of this
chapter, shall be allowed a credit against such  tax,  pursuant  to  the
provisions referenced in subdivision (c) of this section, to be computed
as  provided in this section. Provided, however, to be eligible for such
credit, at least seventy-five percent of the production costs (excluding
post production costs) paid or incurred directly  and  predominantly  in
the  actual  filming  or  recording  of the qualified commercial must be
costs incurred in New York state. The tax  credit  allowed  pursuant  to
this  section  shall  apply  to  taxable  years beginning before January
first, two thousand [fifteen] SEVENTEEN.
  S 2.  Subparagraph (iii) of paragraph 2 of subdivision (a) of  section
28  of  the  tax law, as amended by section 2 of part I of chapter 59 of
the laws of 2012, is amended to read as follows:
  (iii) The state annually will disburse  three  million  of  the  total
seven  million  in  tax credits to all eligible production companies who
film or record a qualified commercial outside of the metropolitan commu-
ter transportation district as defined in section twelve hundred  sixty-
two  of  the  public  authorities law; provided, however, that if, after
JULY THIRTY-FIRST the  state  reviews  all  applications  from  eligible
production  companies  who film or record a qualified commercial outside
of the metropolitan commuter district for  a  given  year,  tax  credits
remain  unallocated  under  this  subparagraph,  those  credits shall be
allotted to the credits set forth in subparagraph (i) of this  paragraph
for use consistent with the purposes of such subparagraph. The amount of
the  credit  shall  be the product (or pro rata share of the product, in
the case of a member of a partnership) of five percent of the  qualified
production  costs  paid  or  incurred  in  the production of a qualified
commercial,  provided  that  the  qualified  production  costs  paid  or
incurred  are  attributable  to  the  use  of  tangible  property or the
performance of services within the state in the production of such qual-
ified commercial. To be eligible for said  credit  the  total  qualified
production  costs of a qualified production company must be greater than
[two] ONE hundred thousand dollars in the aggregate during the  calendar

S. 6359--C                         184

year.  Such credit will be applied to qualified production costs exceed-
ing [two] ONE hundred thousand dollars in a calendar year.
  S  3.   Paragraph (a) of subdivision 38 of section 210 of the tax law,
as amended by section 3 of part I of chapter 59 of the laws of 2012,  is
amended to read as follows:
  (a)  Allowance  of  credit.  A  taxpayer  that is eligible pursuant to
provisions of section twenty-eight of this chapter shall  be  allowed  a
credit  to  be  computed  as  provided  in  such section against the tax
imposed by this article. The tax credit allowed pursuant to this section
shall apply to taxable years beginning before January first,  two  thou-
sand [fifteen] SEVENTEEN.
  S  4. Paragraph 1 of subsection (jj) of section 606 of the tax law, as
amended by section 4 of part I of chapter 59 of the  laws  of  2012,  is
amended to read as follows:
  (1)  Allowance  of credit. A taxpayer that is eligible pursuant to the
provisions of section twenty-eight of this chapter shall  be  allowed  a
credit  to  be  computed  as  provided  in  such section against the tax
imposed by this article. The tax credit allowed pursuant to this section
shall apply to taxable years beginning before January first,  two  thou-
sand [fifteen] SEVENTEEN.
  S 5. This act shall take effect immediately.

                                 PART P

  Section  1.  Subdivision 4 of section 22 of the public housing law, as
amended by section 2 of part J of chapter 59 of the  laws  of  2012,  is
amended to read as follows:
  4.  Statewide  limitation. The aggregate dollar amount of credit which
the commissioner may allocate to  eligible  low-income  buildings  under
this article shall be [forty-eight] FIFTY-SIX million dollars. The limi-
tation  provided  by  this subdivision applies only to allocation of the
aggregate dollar amount of credit by  the  commissioner,  and  does  not
apply to allowance to a taxpayer of the credit with respect to an eligi-
ble low-income building for each year of the credit period.
  S 2. Subdivision 4 of section 22 of the public housing law, as amended
by section one of this act, is amended to read as follows:
  4.  Statewide  limitation. The aggregate dollar amount of credit which
the commissioner may allocate to  eligible  low-income  buildings  under
this  article shall be [fifty-six] SIXTY-FOUR million dollars. The limi-
tation provided by this subdivision applies only to  allocation  of  the
aggregate  dollar  amount  of  credit  by the commissioner, and does not
apply to allowance to a taxpayer of the credit with respect to an eligi-
ble low-income building for each year of the credit period.
  S 3. This act shall take effect immediately; provided,  however,  that
section two of this act shall take effect April 1, 2015.

                                 PART Q

  Section  1.  This  act enacts into law components of legislation which
are necessary to implement the provisions relating to brownfields.  Each
component  is wholly contained within a Subpart identified as Subparts A
through B. The effective date for each  particular  provision  contained
within  such  Subpart is set forth in the last section of such Part. Any
provision in any section  contained  within  a  Subpart,  including  the
effective  date of the Subpart, which makes a reference to a section "of
this act", when used in connection with that particular component, shall

S. 6359--C                         185

be deemed to mean and refer to the corresponding section of the  Subpart
in  which  it is found. Section three of this act sets forth the general
effective date of this act.

                                SUBPART A

  Section  1.  Subdivision  (b)  of section 27-1318 of the environmental
conservation law, as amended by section 2 of part E of  chapter  577  of
the laws of 2004, is amended to read as follows:
  (b)  Within  [sixty]  ONE  HUNDRED  EIGHTY days of commencement of the
remedial design, the owner of an inactive hazardous waste disposal site,
and/or any person responsible for implementing  a  remedial  program  at
such  site,  where  institutional  or  engineering controls are employed
pursuant to this title, shall execute an environmental easement pursuant
to title thirty-six of article seventy-one of this chapter.
  S 2. Subdivisions 2 and 7-a of section 27-1405  of  the  environmental
conservation  law, subdivision 2 as amended and subdivision 7-a as added
by section 2 of part A of chapter 577 of the laws of 2004,  are  amended
and  four new subdivisions 14-a, 14-b, 20-a, and 29 are added to read as
follows:
  2. "Brownfield site" or "site" shall  mean  any  real  property[,  the
redevelopment  or  reuse  of which may be complicated by the presence or
potential presence of] WHERE a contaminant OR CONTAMINANTS, DO NOT OVER-
WHELMINGLY CONSIST OF HISTORICAL FILL, AND EXCEED AT MORE  THAN  MINIMAL
LEVELS  THE  SOIL CLEANUP OBJECTIVES ESTABLISHED PURSUANT TO SUBDIVISION
SIX OF SECTION 27-1415 OF THIS TITLE OR OTHER HEALTH-BASED  OR  ENVIRON-
MENTAL STANDARDS PROMULGATED BY THE DEPARTMENT THAT ARE APPLICABLE BASED
ON  THE REASONABLY ANTICIPATED USE OF THE PROPERTY, AS DETERMINED BY THE
APPLICANT,  WHICH  CONTAMINATION  IS  DEMONSTRATED  BY  COMPLETION   AND
SUBMISSION  OF  AN  ASTM PHASE II ENVIRONMENTAL ASSESSMENT REPORT WITHIN
NINETY DAYS OF APPLICATION SUBMISSION, AND, IN ADDITION,  IS  CHARACTER-
IZED  BY ANY OR ALL OF THE FOLLOWING: (I) A CURRENT LEGACY OF VACANCY OR
ABANDONMENT FROM PREVIOUS  INDUSTRIAL  OR  COMMERCIAL  ACTIVITY  OR  TAX
DELINQUENCY  FOR  AT LEAST ONE YEAR PRIOR TO THE DATE OF APPLICATION; OR
(II) A CURRENT AND HISTORICAL LEGACY OF SEVERE  ECONOMIC  OR  FUNCTIONAL
UNDERUTILIZATION  INCLUDING  USE  OF  SUCH  SITE AS A HAZARDOUS WASTE OR
SOLID WASTE FACILITY; OR (III) IN  THE  CASE  OF  A  SITE  CHARACTERIZED
PRIMARILY  BY  FORMER  INDUSTRIAL  ACTIVITY, FUNCTIONAL OBSOLESCENCE; OR
(IV) THE PROJECTED COST OF THE INVESTIGATION AND  REMEDIATION  BASED  ON
THE  REASONABLY  ANTICIPATED  USE  OF  THE PROPERTY AS DETERMINED BY THE
APPLICANT EXCEEDS FIFTY PERCENT OF THE CERTIFIED APPRAISED VALUE OF  THE
PROPERTY ABSENT CONTAMINATION; OR (V) THE SITE HAS BEEN CERTIFIED BY THE
MUNICIPALITY  IN  WHICH THE SITE IS LOCATED AS MEETING ANY OF THE CONDI-
TIONS SET FORTH  IN  THIS  OPENING  PARAGRAPH.  [Such  term]  EXCEPT  AS
PROVIDED  IN  PARAGRAPH (F) OF THIS SUBDIVISION, BROWNFIELD SITE OR SITE
shall not include real property:
  (a) listed in the registry of inactive hazardous waste disposal  sites
under section 27-1305 of this article at the time of application to this
program  and  given a classification as described in subparagraph one or
two of paragraph b of subdivision two of section 27-1305 of  this  arti-
cle; [provided, however except until July first, two thousand five, real
property  listed  in  the  registry of inactive hazardous waste disposal
sites under subparagraph two  of  paragraph  b  of  subdivision  two  of
section  27-1305  of  this  article  prior to the effective date of this
article, where such real property is owned by a volunteer shall  not  be
deemed ineligible to participate and further provided that the status of

S. 6359--C                         186

any  such  site  as listed in the registry shall not be altered prior to
the issuance of a certificate of completion pursuant to section  27-1419
of  this  title].  THE DEPARTMENT'S ASSESSMENT OF ELIGIBILITY UNDER THIS
PARAGRAPH  SHALL  NOT  CONSTITUTE  A  FINDING  CONCERNING LIABILITY WITH
RESPECT TO THE PROPERTY;
  (b) listed on the national priorities list established under authority
of 42 U.S.C. section 9605;
  (c) subject to an enforcement action under title seven or nine of this
article, [except] OR PERMITTED  AS  a  treatment,  storage  or  disposal
facility  [subject to a permit]; provided, that nothing herein contained
shall be deemed otherwise to exclude from the scope of the term  "brown-
field  site"  a  hazardous waste treatment, storage or disposal facility
having interim  status  according  to  regulations  promulgated  by  the
commissioner;
  (d)  subject to an order for cleanup pursuant to article twelve of the
navigation law or pursuant to title ten of  article  seventeen  of  this
chapter  except  such  property  shall not be deemed ineligible if it is
subject to a stipulation agreement; or
  (e) subject to any  other  on-going  state  or  federal  environmental
enforcement action related to the contamination which is at or emanating
from the site subject to the present application.
  (F)  IF A VOLUNTEER SUBMITS A REQUEST FOR PARTICIPATION FOR REAL PROP-
ERTY THAT WOULD OTHERWISE BE DEEMED EXCLUDED FROM  CLASSIFICATION  AS  A
BROWNFIELD  SITE  PURSUANT  TO  PARAGRAPH  (A), (C), (D), OR (E) OF THIS
SUBDIVISION, SUCH REAL PROPERTY SHALL NOT BE EXCLUDED, REGARDLESS OF THE
STATUS OF ANY REMEDIAL PROGRAM AT THE SITE, EVEN IF THE PROPERTY  IS  IN
THE OPERATION, MAINTENANCE AND MONITORING PHASE, PROVIDED THERE IS STILL
CONTAMINATION  ON  THE  PROPERTY  TO REMEDIATE, AND FURTHER PROVIDED THE
VOLUNTEER ENTERS INTO A BROWNFIELD SITE CLEANUP AGREEMENT IN  ACCORDANCE
WITH  SECTION  27-1409 OF THIS TITLE REQUIRING THE VOLUNTEER TO COMPLETE
THE REQUIRED REMEDIATION TO IMPLEMENT A REDEVELOPMENT PROJECT. IF A SITE
IS ADMITTED INTO THE PROGRAM, THE RELEVANT STATUTES AND  REGULATIONS  OF
THE  PROGRAM  SHALL  SERVE AS THE PRIMARY GUIDANCE TO THE DEPARTMENT FOR
THE DEPARTMENT'S OVERSIGHT AND OTHER RESPONSIBILITIES  TOWARD  THE  SITE
AND THE SITE'S APPLICANTS. ANY ON-GOING STATE REMEDIAL PROGRAM, ENFORCE-
MENT  ACTION  OR  ORDER  WITH  REGARD TO THE SITE SHALL BE STAYED BY THE
BROWNFIELD SITE CLEANUP AGREEMENT, AND SHALL TERMINATE WHEN  THE  VOLUN-
TEER RECEIVES A CERTIFICATE OF COMPLETION PURSUANT TO SECTION 27-1419 OF
THIS  TITLE,  EXCEPT  TO THE EXTENT THE ON-GOING STATE REMEDIAL PROGRAM,
ENFORCEMENT ACTION OR ORDER IS SEEKING TO REQUIRE AN OWNER OF  THE  SITE
AT  THE  TIME  OF THE DISPOSAL, OR OTHER PERSON RESPONSIBLE ACCORDING TO
APPLICABLE PRINCIPLES OF STATUTORY OR COMMON LAW LIABILITY,  TO  ADDRESS
AN  IMMINENT  AND SUBSTANTIAL THREAT TO PUBLIC HEALTH OR THE ENVIRONMENT
OR PAY PENALTIES OR RESPONSE COSTS, IN WHICH  CASE  THE  DEPARTMENT  CAN
CONTINUE  TO  SEEK  ENFORCEMENT  AGAINST THE RESPONSIBLE PARTIES. IN THE
EVENT THE BROWNFIELD SITE CLEANUP AGREEMENT IS TERMINATED, OR THE VOLUN-
TEER OR SUBSEQUENT SITE OWNER OR OPERATOR FAIL TO COMPLY WITH THE  TERMS
OF  AN  ENVIRONMENTAL EASEMENT IF ONE HAS BEEN CREATED PURSUANT TO TITLE
THIRTY-SIX OF ARTICLE SEVENTY-ONE OF THIS CHAPTER,  ANY  STATE  REMEDIAL
PROGRAM,  ENFORCEMENT ACTION OR ORDER MAY RESUME OR BE RECOMMENCED AFTER
TIMELY NOTICE TO ALL CONCERNED PARTIES.  IF THE PROPERTY  IS  LISTED  IN
THE  REGISTRY  OF  INACTIVE HAZARDOUS WASTE DISPOSAL SITES UNDER SECTION
27-1305 OF THIS ARTICLE, IT SHALL CEASE TO BE CLASSIFIED IN THE REGISTRY
UPON ISSUANCE OF THE CERTIFICATE OF COMPLETION PERTAINING TO THE CURRENT
AND FUTURE STATUS OF THE PROPERTY, UNLESS SUCH  CERTIFICATE  IS  REVOKED
FOR GOOD CAUSE.

S. 6359--C                         187

  7-a. "Contaminant" shall mean hazardous waste, HISTORIC FILL MATERIAL,
and/or petroleum as such terms are defined in this section.
  14-A.  "SEVERE ECONOMIC OR FUNCTIONAL UNDERUTILIZATION" SHALL MEAN THE
BROWNFIELD SITE AND ANY IMPROVEMENTS: (A) ON WHICH A BUILDING OR  BUILD-
INGS CONTAINING NO MORE THAN FIFTY PERCENT OF THE PERMISSIBLE FLOOR AREA
UNDER  APPLICABLE  ZONING IS BEING UTILIZED; OR (B) HAS A VALUE OF EQUAL
TO OR LESS THAN SEVENTY PERCENT OF THE FLOOR AREA OF THE  AVERAGE  VALU-
ATION OF LAND IN THE COUNTY OR CITY IN WHICH THE LAND IS LOCATED, EXCEPT
IN  A  CITY HAVING A POPULATION OF ONE MILLION OR MORE INHABITANTS WHERE
THE AVERAGE VALUATION SHALL BE BASED ON THE COUNTY IN WHICH THE LAND  IS
LOCATED.
  14-B. "FUNCTIONAL OBSOLESCENCE" SHALL MEAN THE BROWNFIELD SITE AND ANY
IMPROVEMENTS  THEREON THAT: (A) CAN NO LONGER BE FUNCTIONALLY OR ECONOM-
ICALLY UTILIZED IN THE  CAPACITY  IN  WHICH  IT  WAS  FORMERLY  UTILIZED
BECAUSE  OF:  (I) THE CONFIGURATION OF THE BUILDING; OR (II) SUBSTANTIAL
STRUCTURAL DEFECTS NOT BROUGHT ABOUT BY DEFERRED  MAINTENANCE  PRACTICES
OR  INTENTIONAL CONDUCT; OR (B) THE ENTIRE SITE OR A SIGNIFICANT PORTION
THEREOF, WITH OR WITHOUT IMPROVEMENTS IS USED IRREGULARLY  OR  INTERMIT-
TENTLY; OR (C) THE FUNCTIONALITY OF THE EQUIPMENT INSIDE THE BUILDING OR
BUILDINGS  IS  OBSOLETE  FOR  A  MODERN DAY APPLICATION; OR (D) HAS BEEN
CERTIFIED BY THE MUNICIPALITY IN WHICH THE SITE IS LOCATED AS  UNDERUTI-
LIZED PURSUANT TO THE CRITERIA IN THIS SUBDIVISION.
  20-A. "MINIMALLY CONTAMINATED SITE" SHALL MEAN ANY REAL PROPERTY WHERE
A  CONTAMINANT  IS PRESENT AT LEVELS THAT ONLY MINIMALLY EXCEED THE SOIL
CLEANUP OBJECTIVES ESTABLISHED PURSUANT TO SUBDIVISION  SIX  OF  SECTION
27-1415  OF  THIS  TITLE OR OTHER APPLICABLE OR RELEVANT AND APPROPRIATE
REQUIREMENTS.
  29. "HISTORIC FILL MATERIAL" MEANS NON-INDIGENOUS MATERIAL,  DEPOSITED
OR  DISPOSED  OF  TO  RAISE  THE TOPOGRAPHIC ELEVATION OF REAL PROPERTY,
WHICH MATERIAL MAY HAVE BEEN CONTAMINATED PRIOR  TO  EMPLACEMENT,  WHICH
CONTAINS  CONTAMINANTS  SIGNIFICANTLY  ABOVE THE RESTRICTED SOIL CLEANUP
OBJECTIVES ESTABLISHED PURSUANT TO SUBDIVISION SIX OF SECTION 27-1415 OF
THIS TITLE BASED ON THE REASONABLY ANTICIPATED USE OF THE  PROPERTY,  AS
DETERMINED  BY THE APPLICANT, AND IS IN NO WAY CONNECTED WITH THE SUBSE-
QUENT OPERATIONS AT THE LOCATION OF THE EMPLACEMENT AND WHICH  INCLUDES,
WITHOUT  LIMITATION, CONSTRUCTION AND DEMOLITION DEBRIS INCLUDING UNCON-
TAMINATED SOLID  WASTE  RESULTING  FROM  THE  CONSTRUCTION,  REMODELING,
REPAIR AND DEMOLITION OF UTILITIES, STRUCTURES, LAND CLEARING AND ROADS.
HISTORIC  FILL  MATERIAL  MAY INCLUDE COAL, COAL ASH, COAL RESIDUE, WOOD
ASH, MUNICIPAL SOLID WASTE INCINERATOR ASH, CONSTRUCTION AND  DEMOLITION
DEBRIS,  DREDGED  SEDIMENTS,  RAILROAD  BALLAST,  REFUSE,  LAND CLEARING
DEBRIS, SOIL, SLAG, AND SOLID WASTE. IT MAY  ALSO  INCLUDE  SOLID  WASTE
RESULTING  FROM  DREDGE  SPOILS, INCINERATOR RESIDUE, DEMOLITION DEBRIS,
COAL ASH, FLY ASH, AND NONHAZARDOUS WASTE. HISTORIC FILL  MATERIAL  DOES
NOT  INCLUDE  ANY  MATERIAL  WHICH IS CHEMICAL PRODUCTION WASTE OR WASTE
FROM PROCESSING OF METAL OR MINERAL ORES, RESIDUES, SLAG OR TAILINGS. IN
ADDITION, HISTORIC FILL MATERIAL DOES NOT INCLUDE ANY MATERIAL CONNECTED
WITH  A  MUNICIPAL  SOLID  WASTE  SITE  BUILT  AFTER  NINETEEN   HUNDRED
SIXTY-TWO.
  S  3.  Subdivision  1  and  paragraph  (a) of subdivision 8 of section
27-1407 of the environmental conservation law, as amended by  section  3
of  part  A  of  chapter 577 of the laws of 2004, are amended to read as
follows:
  1. A person who seeks to participate in this program  shall  submit  a
request  to  the  department  on a form provided by the department. Such
form shall include information to be determined by the department suffi-

S. 6359--C                         188

cient to allow the department to determine eligibility and the  current,
intended and reasonably anticipated future land use of the site pursuant
to  section 27-1415 of this title.  ANY SUCH PERSON SHALL SUBMIT AN ASTM
PHASE  II ENVIRONMENTAL SITE INVESTIGATION REPORT WITH AN APPLICATION OR
WITHIN NINETY DAYS OF SUBMISSION OF THE APPLICATION TO DEMONSTRATE  THAT
THE  SITE  MEETS THE CONTAMINATION CRITERIA IN THE BROWNFIELD SITE DEFI-
NITION OF THIS TITLE.
  (a) the department determines that the request is  for  real  property
which  does not meet the requirements of a brownfield site as defined in
this title, BUT SUCH REJECTION, IN AND BY ITSELF, DOES NOT PROHIBIT  THE
SITE FROM QUALIFYING FOR THE NY RAPID PROGRAM IN SECTION 27-1437 OF THIS
TITLE; or
  S 4. Intentionally omitted.
  S  5.  Subdivision 6 of section 27-1407 of the environmental conserva-
tion law, as added by section 1 of part A of chapter 1 of  the  laws  of
2003, is amended to read as follows:
  6.  The  department shall use all best efforts to expeditiously notify
the applicant within forty-five days after receiving their  request  for
participation  WHETHER THE SITE MEETS THE BROWNFIELD SITE DEFINITION AND
that such request is either accepted or rejected.   FOR APPLICANTS  THAT
DO  NOT  SUBMIT  AN  ASTM PHASE II ENVIRONMENT SITE INVESTIGATION REPORT
WITH THEIR APPLICATION, THE FORTY-FIVE DAY ACCEPTANCE  OR  REJECTION  OF
THEIR  APPLICATION  IS DEFERRED UNTIL THE DATE PROOF OF CONTAMINATION IS
RECEIVED, WHICH SHALL BE  RECEIVED  NO  LATER  THAN  NINETY  DAYS  AFTER
SUBMISSION  OF  THE APPLICATION. FOR APPLICANTS THAT MEET THE BROWNFIELD
SITE DEFINITION CONTAMINATION CRITERIA  BUT  THE  DEPARTMENT  DETERMINES
HAVE  NOT DEMONSTRATED ONE OF THE OTHER BROWNFIELD SITE CHARACTERIZATION
CRITERIA, THE APPLICANT IS ENTITLED  TO  PARTICIPATE  IN  THE  NY  RAPID
PROGRAM  PURSUANT  TO  SECTION  27-1437  OF THIS TITLE. IF THE APPLICANT
CONTENDS THAT A PROPER DEMONSTRATION OF  THE  CHARACTERIZATION  CRITERIA
HAS  BEEN  MADE,  BUT THE DEPARTMENT HAS REJECTED THE DEMONSTRATION, THE
APPLICANT MAY ELECT TO COMMENCE THE DISPUTE RESOLUTION PROCESS  PURSUANT
TO SUBDIVISION THREE OF SECTION 27-1409 OF THIS TITLE.
  S  6.  Subdivision 9 of section 27-1407 of the environmental conserva-
tion law is amended by adding a new paragraph (g) to read as follows:
  (G) THE PERSON'S PARTICIPATION  IN  ANY  REMEDIAL  PROGRAM  UNDER  THE
DEPARTMENT'S  OVERSIGHT  WAS  TERMINATED BY THE DEPARTMENT OR BY A COURT
FOR FAILURE TO SUBSTANTIALLY COMPLY WITH AN AGREEMENT  OR  ORDER  WITHIN
THE LAST FORTY-TWO MONTHS.
  S  7.  Subdivisions 2, 3 and 7 of section 27-1409 of the environmental
conservation law, as amended by section 4 of part A of  chapter  577  of
the laws of 2004, are amended to read as follows:
  2.  One  requiring  (A)  the  [applicant] PARTICIPANT to pay for state
costs, INCLUDING THE RECOVERY OF STATE COSTS INCURRED BEFORE THE  EFFEC-
TIVE  DATE  OF SUCH AGREEMENT; provided, however, that SUCH COSTS MAY BE
BASED ON A REASONABLE FLAT-FEE FOR OVERSIGHT, WHICH  SHALL  REFLECT  THE
PROJECTED  FUTURE  STATE  COSTS  INCURRED  IN NEGOTIATING AND OVERSEEING
IMPLEMENTATION OF SUCH AGREEMENT; AND
  (B) with respect to a brownfield site which the department has  deter-
mined  constitutes a significant threat to the public health or environ-
ment the department may include a provision requiring the  applicant  to
provide  a  technical assistance grant, as described in subdivision four
of section 27-1417 of this title  and  under  the  conditions  described
therein,  to an eligible party in accordance with procedures established
under such program, with the cost of such a grant incurred by  a  volun-
teer  serving  as an offset against such state costs[.  Where the appli-

S. 6359--C                         189

cant is a participant, the department shall include provisions  relating
to  recovery  of  state costs incurred before the effective date of such
agreement];
  3. One setting forth a process for resolving disputes arising from the
DEMONSTRATION  OF  PROOF  SUBMITTED  TO  QUALIFY FOR THE BROWNFIELD SITE
DEFINITION, OR AN evaluation, analysis, and oversight of the implementa-
tion of the REPORT OR work plan as described;
  7. One stating that the [department]  STATE  shall  not  consider  the
applicant  an  operator  of  such  brownfield  site  based  solely  upon
execution or implementation of such brownfield  site  cleanup  agreement
for purposes of remediation liability;
  S 8. Intentionally omitted.
  S  9.  Subdivision 2 of section 27-1413 of the environmental conserva-
tion law, as amended by section 6 of part A of chapter 577 of  the  laws
of 2004, is amended to read as follows:
  2.  For  all [other] sites NOT ELIGIBLE TO PARTICIPATE IN THE NY RAPID
PROGRAM PURSUANT TO SECTION 27-1437 OF THIS TITLE, the  applicant  shall
develop  and  evaluate  at least two remedial alternatives, one of which
would  achieve  a  Track  1  cleanup.  The  department  shall  have  the
discretion  to  require  the  evaluation of additional alternatives at a
site that has been determined to pose a significant threat.  The  appli-
cant  shall  submit the alternatives analysis [as a part of the remedial
work plan] to the  department  for  review,  approval,  modification  or
rejection.
  S  10. Subdivision 4 of section 27-1415 of the environmental conserva-
tion law, as amended by section 7 of part A of chapter 577 of  the  laws
of 2004, is amended to read as follows:
  4.  Tracks. The commissioner, in consultation with the commissioner of
health, shall propose within twelve months and thereafter timely promul-
gate regulations which create a multi-track approach for the remediation
of contamination, and, commencing on the effective date  of  such  regu-
lations,  utilize  such  multi-track  approach.  Such  regulations shall
provide that groundwater  use  in  Tracks  2,  3  or  4  can  be  either
restricted or unrestricted. The tracks shall be as follows:
  Track  1: The remedial program shall achieve a cleanup level that will
allow the site to be used for any purpose without restriction and  with-
out reliance on the long-term employment of institutional or engineering
controls,  and shall achieve contaminant-specific remedial action objec-
tives for soil which conform with those contained in the  generic  table
of  contaminant-specific remedial action objectives for unrestricted use
developed pursuant to subdivision six of this section.  Provided, howev-
er, that volunteers whose proposed remedial program [for the remediation
of groundwater] (1)(I) may require the long-term employment of  institu-
tional  or engineering controls FOR THE REMEDIATION OF GROUNDWATER after
the bulk reduction of groundwater contamination to asymptotic levels has
been achieved OR  (II)  MAY  REQUIRE  AN  INSTITUTIONAL  OR  ENGINEERING
CONTROL  FOR MORE THAN FIVE YEARS SOLELY TO ADDRESS SOIL VAPOR INTRUSION
FROM THEIR OWN SITE OR LONGER TO ADDRESS  OFF-SITE  VAPOR  ENTERING  THE
SITE;  but  (2)  whose program would otherwise conform with the require-
ments necessary to qualify for Track 1, shall qualify for Track 1.
  Track 2: The remedial program may include restrictions on the  use  of
the  site  or reliance on the long-term employment of engineering and/or
institutional controls, but shall achieve contaminant-specific  remedial
action  objectives for soil which conform with those contained in one of
the generic tables developed pursuant to subdivision six of this section

S. 6359--C                         190

without the use of institutional or engineering controls to  reach  such
objectives.
  Track 3: The remedial program shall achieve contaminant-specific reme-
dial  action objectives for soil which conform with the criteria used to
develop the generic tables for such  objectives  developed  pursuant  to
subdivision six of this section but may use site specific data to deter-
mine such objectives.
  Track  4: The remedial program shall achieve a cleanup level that will
be protective for the site's current, intended or reasonably anticipated
residential, commercial, or industrial use with  restrictions  and  with
reliance  on  the  long-term  employment of institutional or engineering
controls  to  achieve  such  level.  The  regulations  shall  include  a
provision  requiring  that  a cleanup level which poses a risk in excee-
dance of an excess cancer risk of one in one  million  for  carcinogenic
end  points  and  a  hazard index of one for non-cancer end points for a
specific contaminant at a specific site may be approved by  the  depart-
ment  without requiring the use of institutional or engineering controls
to eliminate exposure only upon a site specific finding by  the  commis-
sioner, in consultation with the commissioner of health, that such level
shall be protective of public health and environment. Such finding shall
be  included  in  the  draft  remedial  work plan for the site and fully
described in the notice and fact sheet provided for such work plan.
  S 11. Intentionally omitted.
  S 12. Paragraph (h) of subdivision 3 of section 27-1417 of  the  envi-
ronmental  conservation  law  is  REPEALED,  paragraph (i) is relettered
paragraph (h) and paragraph (f), as amended by section 8 of  part  A  of
chapter 577 of the laws of 2004, is amended to read as follows:
  (f)  Before  the  department  [finalizes] SELECTS a proposed [remedial
work plan] REMEDY FROM THE ALTERNATIVES SET FORTH  IN  THE  ALTERNATIVES
ANALYSIS  AS  PRESCRIBED  BY  SECTION  27-1413  OF THIS TITLE or makes a
determination that site conditions meet the requirements of  this  title
without  the  necessity  for  remediation pursuant to section 27-1411 of
this title, the department, in consultation  with  the  applicant,  must
notify  individuals  on  the  brownfield  site contact list. Such notice
shall include a fact sheet  describing  such  plan  and  provide  for  a
forty-five  day  public  comment  period.  The commissioner shall hold a
public meeting if requested by the affected community  and  the  commis-
sioner  has  found that the site constitutes a significant threat to the
public health or the environment. Further, the  affected  community  may
request  a  public meeting at sites that do not constitute a significant
threat. (1) To the extent that the department has determined  that  site
conditions  do  not  pose  a  significant  threat  and the site is being
addressed by a volunteer, the notice shall state that the department has
determined that no remediation is required for the  off-site  areas  and
that  the  department's determination of a significant threat is subject
to this forty-five day comment period. (2) If the [remedial  work  plan]
REMEDY  includes  a Track 2, Track 3 or Track 4 remedy at a non-signifi-
cant threat site, such comment period shall apply both to  the  approval
of  the  alternatives analysis by the department, IF APPLICABLE, and the
proposed remedy selected by the applicant.
  S 13. Paragraph (a) of subdivision 2  and  subdivision  3  of  section
27-1419 of the environmental conservation law, paragraph (a) of subdivi-
sion  2 as added by section 1 of part A of chapter 1 of the laws of 2003
and subdivision 3 as amended by chapter 390 of the  laws  of  2008,  are
amended to read as follows:

S. 6359--C                         191

  (a)  a description of the remediation activities completed pursuant to
the remedial work plan AND ANY INTERIM REMEDIAL MEASURES for the  brown-
field site;
  3.  Upon receipt of the final engineering report, the department shall
review such report and the data submitted  pursuant  to  the  brownfield
site cleanup agreement as well as any other relevant information regard-
ing  the brownfield site. Upon satisfaction of the commissioner that the
remediation requirements set forth in this title have been  or  will  be
achieved  in  accordance with the timeframes, if any, established in the
remedial work plan, the commissioner shall issue a  written  certificate
of completion[, such]. THE certificate shall include such information as
determined  by the department of taxation and finance, including but not
limited to the brownfield site boundaries included in  the  final  engi-
neering  report,  the  date  of  the  brownfield  site CLEANUP agreement
[pursuant to section 27-1409 of this title,] and the applicable percent-
ages available AS OF THE DATE OF THE CERTIFICATE OF COMPLETION for  that
site  for  purposes  of  section  twenty-one  of the tax law[, with such
percentages to be determined as follows with respect to  such  qualified
site] for which the department has issued a notice to the taxpayer after
June twenty-third, two thousand eight that its request for participation
has  been  accepted  under  subdivision  six  of section 27-1407 of this
title[:
  For the purposes of calculating], THE APPLICABLE  PERCENTAGE  FOR  the
site  preparation credit component pursuant to paragraph two of subdivi-
sion (a) of section twenty-one of the tax law, and the on-site groundwa-
ter remediation credit component pursuant to paragraph four of  subdivi-
sion  (a)  of  section  twenty-one  of  the  tax  law[,  the  applicable
percentage] shall be based on the level of cleanup achieved pursuant  to
subdivision  four  of  section  27-1415  of  this title and the level of
cleanup of soils to contaminant-specific soil cleanup objectives promul-
gated pursuant to subdivision six of section 27-1415 of this  title,  up
to a maximum of fifty percent, as follows:
  (a)  soil  cleanup for unrestricted use, the protection of groundwater
or the protection of ecological  resources,  the  applicable  percentage
shall be fifty percent;
  (b)  soil cleanup for residential use, the applicable percentage shall
be forty percent,  except  for  Track  4  which  shall  be  twenty-eight
percent;
  (c)  soil  cleanup for commercial use, the applicable percentage shall
be thirty-three percent, except for Track 4 which shall  be  twenty-five
percent;
  (d)  soil  cleanup for industrial use, the applicable percentage shall
be twenty-seven percent, except for Track 4 which  shall  be  twenty-two
percent.
  NOTWITHSTANDING  ANY  OTHER PROVISION OF LAW TO THE CONTRARY, THE SITE
PREPARATION COMPONENT CREDIT AVAILABLE FOR ANY QUALIFIED  SITE  PURSUANT
TO THIS SUBDIVISION SHALL NOT EXCEED FIFTEEN MILLION DOLLARS.
  S  14. Subdivision 5 of section 27-1419 of the environmental conserva-
tion law, as amended by section 9 of part A of chapter 577 of  the  laws
of 2004, is amended to read as follows:
  5.  A certificate of completion issued pursuant to this section may be
transferred [to the applicant's successors or assigns upon  transfer  or
sale  of  the  brownfield site] BY THE APPLICANT OR SUBSEQUENT HOLDER OF
THE CERTIFICATE OF COMPLETION TO A SUCCESSOR TO A REAL  PROPERTY  INTER-
EST,  INCLUDING  LEGAL  TITLE, EQUITABLE TITLE OR LEASEHOLD, IN ALL OR A
PART OF THE BROWNFIELD SITE FOR WHICH THE CERTIFICATE OF COMPLETION  WAS

S. 6359--C                         192

ISSUED.  Further, a certificate of completion may be modified or revoked
by the commissioner upon a finding that:
  (a)  Either  the  applicant, or the applicant's successors or assigns,
has failed to comply with the terms and  conditions  of  the  brownfield
site cleanup agreement;
  (b)  The applicant made a misrepresentation of a material fact tending
to demonstrate that it was qualified as a volunteer;
  (c) Either the applicant, or the applicant's  successors  or  assigns,
made  a misrepresentation of a material fact tending to demonstrate that
the cleanup levels identified in the brownfield site  cleanup  agreement
were reached; [or]
  (d)  THE ENVIRONMENTAL EASEMENT CREATED AND RECORDED PURSUANT TO TITLE
THIRTY-SIX OF ARTICLE SEVENTY-ONE OF THIS CHAPTER NO LONGER PROVIDES  AN
EFFECTIVE  OR  ENFORCEABLE  MEANS OF ENSURING THE PERFORMANCE OF MAINTE-
NANCE, MONITORING OR OPERATING  REQUIREMENTS,  OR  THE  RESTRICTIONS  ON
FUTURE  USES,  INCLUDING  RESTRICTIONS  ON  DRILLING  FOR OR WITHDRAWING
GROUNDWATER; OR
  (E) There is good cause for such modification or revocation.
  S 15.  Section  27-1423  of  the  environmental  conservation  law  is
REPEALED.
  S  16.  Section  27-1429  of  the  environmental  conservation law, as
amended by section 13 of part A of chapter 577 of the laws of  2004,  is
amended to read as follows:
S 27-1429. Permit waivers.
  The  department[,  by  and through the commissioner,] shall be EXEMPT,
AND SHALL BE authorized to exempt  a  person  from  the  requirement  to
obtain any state or local permit or other authorization for any activity
needed  to  implement a program for the investigation and/or remediation
of contamination AT OR EMANATING FROM A BROWNFIELD SITE;  provided  that
the  activity  is  conducted in a manner which satisfies all substantive
technical requirements applicable to like activity conducted pursuant to
a permit.
  S 17. Subdivision 1 of section 27-1431 of the environmental  conserva-
tion law is amended by adding a new paragraph c to read as follows:
  C. TO INSPECT FOR COMPLIANCE WITH THE SITE MANAGEMENT PLAN APPROVED BY
THE  DEPARTMENT,  INCLUDING (I) INSPECTION OF THE PERFORMANCE OF MAINTE-
NANCE, MONITORING AND OPERATIONAL ACTIVITIES REQUIRED  AS  PART  OF  THE
REMEDIAL  PROGRAM  FOR  THE  SITE, AND (II) TAKING SAMPLES IN ACCORDANCE
WITH PARAGRAPH A OF THIS SUBDIVISION.
  S 17-a. Section 27-1435  of  the  environmental  conservation  law  is
REPEALED.
  S  18.  The  environmental conservation law is amended by adding a new
section 27-1437 to read as follows:
S 27-1437. NY RAPID PROGRAM.
  1. NOTWITHSTANDING THE PROVISIONS OF THIS TITLE OR ANY OTHER PROVISION
OF LAW, THE DEPARTMENT SHALL PROMULGATE REGULATIONS TO ESTABLISH THE NEW
YORK REMEDIATION  ACCELERATED  PERFORMANCE  INTERIM  DESIGN  (NY  RAPID)
PROGRAM THAT WILL OFFER AN EXPEDITED PROCESS AND GRANT A LIABILITY WAIV-
ER  TO  VOLUNTEERS  THAT  SUCCESSFULLY  REMEDIATE MINIMALLY CONTAMINATED
SITES OR A SITE WHERE CONTAMINATION IS OVERWHELMINGLY THE RESULT OF  THE
USE OR PLACEMENT OF HISTORIC FILL MATERIAL ON OR UNDER THE SITE.
  2.  VOLUNTEERS MAY APPLY AND BE ACCEPTED FOR ENTRANCE INTO NY RAPID IF
THE SITE MEETS THE FOLLOWING REQUIREMENTS:
  A. CONTAMINATION IS PRESENT BUT OTHERWISE  DOES  NOT  MEET  THE  DEFI-
NITIONS APPLICABLE TO SUBDIVISION TWO OF SECTION 27-1405 OF THIS TITLE.
  B. THE REDEVELOPMENT OF SUCH SITE IS COMPLICATED BY:

S. 6359--C                         193

  (I)  THE  PRESENCE  OF  HISTORIC  FILL  IS  THE OVERWHELMING SOURCE OF
CONTAMINATION; OR
  (II)  LEVELS  OF  CONTAMINATION  THAT ARE AT OR NEAR THE LEVELS ESTAB-
LISHED BY THE APPLICABLE SOIL CLEAN-UP OBJECTIVES PURSUANT  TO  SUBDIVI-
SION  SIX OF SECTION 27-1415 OF THIS TITLE; PROVIDED, HOWEVER, SUCH SITE
SHALL NOT INCLUDE REAL PROPERTY  WITH  LEVELS  OF  CONTAMINATION  FOR  A
SINGLE  OR  MULTIPLE  CONTAMINATES,  THE SOURCES OF SUCH LEVELS ARE FROM
HISTORICAL FILL, THAT ARE SIGNIFICANTLY GREATER THAN THE APPLICABLE SOIL
CLEAN-UP OBJECTIVES PURSUANT TO SUBDIVISION SIX OF  SECTION  27-1415  OF
THIS TITLE.
  3.  SITES  THAT  HAVE RECEIVED A NOTICE OF COMPLETION FROM THE CITY OF
NEW YORK UNDER THE LOCAL BROWNFIELD CLEANUP PROGRAM SHALL BE ELIGIBLE.
  4. THE APPLICANT SHALL WAIVE IN WRITING  ANY  CLAIM  FOR  TAX  CREDITS
PURSUANT  TO  SECTION  TWENTY-ONE OF THE TAX LAW ON A FORM PRESCRIBED BY
THE DEPARTMENT.
  5. THE DEPARTMENT SHALL EXEMPT A VOLUNTEER  FROM  PROCEDURAL  REQUIRE-
MENTS  OF THIS TITLE THAT THE DEPARTMENT MAY SPECIFY WHICH ARE OTHERWISE
APPLICABLE TO IMPLEMENTATION OF AN INVESTIGATION AND/OR  REMEDIATION  OF
CONTAMINATION, PROVIDED THAT THE ACTIVITY IS CONDUCTED IN A MANNER WHICH
SATISFIES  ALL  SUBSTANTIVE  TECHNICAL  REQUIREMENTS  APPLICABLE TO LIKE
ACTIVITY CONDUCTED PURSUANT TO THIS TITLE. THE APPROVED WORK PLAN FOR  A
BROWNFIELD SITE SHALL INCLUDE THE PROCEDURAL REQUIREMENTS THE DEPARTMENT
DETERMINES  ARE  APPROPRIATE  BASED  ON SITE SPECIFIC CONSIDERATIONS AND
CONSIDERATION OF SECTION 27-1417 OF THIS TITLE.
  6. A. UPON RECEIPT OF THE FINAL ENGINEERING REPORT PURSUANT TO  SUBDI-
VISION TWO OF SECTION 27-1419 OF THIS TITLE, THE DEPARTMENT SHALL REVIEW
SUCH  REPORT  AND THE DATA SUBMITTED PURSUANT TO A NY RAPID SITE CLEANUP
AGREEMENT AS WELL AS ANY OTHER RELEVANT  INFORMATION  REGARDING  THE  NY
RAPID  SITE.  UPON SATISFACTION OF THE COMMISSIONER THAT THE REMEDIATION
REQUIREMENTS SET FORTH IN THIS TITLE HAVE BEEN OR WILL  BE  ACHIEVED  IN
ACCORDANCE WITH THE TIMEFRAMES, IF ANY, ESTABLISHED IN THE REMEDIAL WORK
PLAN,  THE COMMISSIONER SHALL ISSUE A WRITTEN CERTIFICATE OF COMPLETION.
SUCH CERTIFICATE SHALL INCLUDE, BUT NOT BE LIMITED  TO,  THE  BROWNFIELD
SITE BOUNDARIES INCLUDED IN THE FINAL ENGINEERING REPORT.
  B.  PARAGRAPHS  FOUR,  FIVE, SIX, SEVEN, AND EIGHT OF SECTIONS 27-1419
AND 27-1421 OF THIS TITLE SHALL  APPLY  TO  CERTIFICATES  OF  COMPLETION
ISSUED TO NY RAPID PROGRAM PARTICIPANTS.
  S  19.  The  opening paragraph of subdivision 10 of section 71-3605 of
the environmental conservation law, as added by section 2 of part  A  of
chapter 1 of the laws of 2003, is amended to read as follows:
  An  environmental  easement  may  be  enforced in law or equity by its
grantor, by the state, or any affected local government  as  defined  in
section  71-3603 of this title. Such easement is enforceable against the
owner of the burdened property, any lessees, and any  person  using  the
land.  Enforcement  shall  not  be  defeated  because  of any subsequent
adverse possession, laches, estoppel, REVERSION or  waiver.  No  general
law  of the state which operates to defeat the enforcement of any inter-
est in real property shall operate to  defeat  the  enforcement  of  any
environmental  easement  unless  such  general  law expressly states the
intent to defeat the enforcement of such easement or  provides  for  the
exercise  of  the  power  of  eminent domain. It is not a defense in any
action to enforce an environmental easement that:
  S 20. Intentionally omitted.
  S 21. Paragraph 3 of subdivision (a) of section 21 of the tax law,  as
amended  by  chapter  390  of  the  laws  of 2008, is amended to read as
follows:

S. 6359--C                         194

  (3) Tangible property credit component. The tangible  property  credit
component  shall  be  equal  to the applicable percentage of the cost or
other basis for federal income tax purposes of tangible personal proper-
ty and other  tangible  property,  including  buildings  and  structural
components  of  buildings, which constitute qualified tangible property;
provided[, however,] that in determining the cost or other basis of such
property, the taxpayer shall exclude the acquisition cost of any item of
property with respect to which a credit under this section was allowable
to another taxpayer. The credit component amount so determined shall  be
allowed  for  the taxable year in which such qualified tangible property
is placed in service; PROVIDED, HOWEVER, THAT  SUCH  PROPERTY  SHALL  BE
PLACED IN SERVICE DURING THE ONE HUNDRED TWENTY MONTH PERIOD THAT BEGINS
WITH THE FIRST DAY OF THE FIRST TAXABLE YEAR IN WHICH QUALIFIED TANGIBLE
PROPERTY IS PLACED IN SERVICE on a qualified site [with respect to which
a  certificate  of  completion has been issued to the taxpayer for up to
ten taxable years after the date of the issuance of such certificate  of
completion].  The  tangible  property  credit component shall be allowed
with respect to property leased to a second party only  if  such  second
party  is either (i) not a party responsible for the disposal of hazard-
ous waste or the discharge of petroleum at the site according to  appli-
cable  principles  of statutory or common law liability, or (ii) a party
responsible according to applicable principles of  statutory  or  common
law  liability if such party's liability arises solely from operation of
the site subsequent to the disposal of hazardous waste or the  discharge
of  petroleum,  and is so certified by the commissioner of environmental
conservation at the request of the taxpayer, pursuant to section 27-1419
of  the  environmental  conservation  law.  Notwithstanding  any   other
provision  of  law  to  the contrary, in the case of allowance of credit
under this section to such a lessor, the  commissioner  shall  have  the
authority  to reveal to such lessor any information, with respect to the
issue of qualified use of property by the lessee, which is the basis for
the denial in whole or in part, or for  the  recapture,  of  the  credit
claimed  by  such  lessor.  For purposes of the tangible property credit
component allowed under this section the taxpayer to  whom  the  certif-
icate of completion is issued, as provided for under subdivision five of
section  27-1419 of the environmental conservation law, may transfer the
benefits and burdens of the certificate of completion,  which  run  with
the  land  and to the applicant's successors or assigns upon transfer or
sale of all or any portion of an interest or  estate  in  the  qualified
site.  However,  the taxpayer to whom certificate's benefits and burdens
are transferred shall not include the  cost  of  acquiring  all  or  any
portion of an interest or estate in the site and the amounts included in
the  cost  or  other  basis for federal income tax purposes of qualified
tangible property already claimed by the previous taxpayer  pursuant  to
this section.
  S  22. Subparagraph (A) of paragraph 3-a of subdivision (a) of section
21 of the tax law, as added by chapter 390  of  the  laws  of  2008,  is
amended to read as follows:
  (A)  Notwithstanding  any  other provision of law to the contrary, the
tangible property credit component  available  for  any  qualified  site
pursuant  to  paragraph three of this subdivision shall not exceed thir-
ty-five million dollars or three times the SUM OF THE costs included  in
the calculation of the site preparation credit component and the on-site
groundwater  remediation credit component under paragraphs two and four,
respectively, of this subdivision, AND THE COSTS THAT  WOULD  HAVE  BEEN
INCLUDED  IN  THE  CALCULATION  OF  SUCH COMPONENTS IF NOT TREATED AS AN

S. 6359--C                         195

EXPENSE AND DEDUCTED PURSUANT TO SECTION ONE HUNDRED NINETY-EIGHT OF THE
INTERNAL REVENUE CODE, whichever is less; provided, however,  that:  (1)
in  the  case of a qualified site to be used primarily for manufacturing
activities,  the  tangible  property  credit component available for any
qualified site pursuant to paragraph three of this subdivision shall not
exceed forty-five million dollars or six times  the  SUM  OF  THE  costs
included in the calculation of the site preparation credit component and
the  on-site  groundwater  remediation credit component under paragraphs
two and four, respectively, of this  subdivision,  AND  THE  COSTS  THAT
WOULD  HAVE  BEEN  INCLUDED IN THE CALCULATION OF SUCH COMPONENTS IF NOT
TREATED AS AN EXPENSE AND DEDUCTED PURSUANT TO SECTION ONE HUNDRED NINE-
TY-EIGHT OF THE INTERNAL REVENUE CODE, whichever is less;  and  (2)  the
provisions  of  this paragraph shall not apply to any qualified site for
which the department of environmental conservation has issued  a  notice
to  the  taxpayer  before June twenty-third, two thousand eight that its
request for participation has been accepted  under  subdivision  six  of
section 27-1407 of the environmental conservation law.
  S  23. Subparagraph (D) of paragraph 3-a of subdivision (a) of section
21 of the tax law, as added by chapter 390  of  the  laws  of  2008,  is
amended to read as follows:
  (D) If the qualifying site is located in a brownfield opportunity area
and  is  developed  in  conformance with the goals and priorities estab-
lished for that applicable brownfield  opportunity  area  as  designated
pursuant to section nine hundred seventy-r of the general municipal law,
the applicable percentage of the tangible property credit component will
be increased by [two] FOUR percent.
  S 24. Subdivision 2 of section 355 of the economic development law, as
amended  by  section  4  of part G of chapter 61 of the laws of 2011, is
amended to read as follows:
  2. Excelsior investment tax credit component.  A  participant  in  the
excelsior  jobs program shall be eligible to claim a credit on qualified
investments. The credit shall be equal to two percent  of  the  cost  or
other basis for federal income tax purposes of the qualified investment.
A  participant  may  not  claim both the excelsior investment tax credit
component and the investment tax credit set forth in subdivision  twelve
of  section  two hundred ten, subsection (a) of section six hundred six,
subsection (i) of section fourteen hundred fifty-six, or subdivision (q)
of section fifteen hundred eleven of the tax law for the  same  property
in  any  taxable  year,  except  that  a  participant may claim both the
excelsior investment tax credit component and the investment tax  credit
for  research  and development property. [In addition, a taxpayer who or
which is qualified to claim the excelsior investment tax  credit  compo-
nent  and  is  also  qualified to claim the brownfield tangible property
credit component under section twenty-one  of  the  tax  law  may  claim
either  the  excelsior  investment tax credit component or such tangible
property credit component, but not both  with  regard  to  a  particular
piece  of property.] A credit may not be claimed until a business enter-
prise has received a certificate of tax credit, provided that  qualified
investments  made  on or after the issuance of the certificate of eligi-
bility but before the issuance of the certificate of tax credit  to  the
business  enterprise, may be claimed in the first taxable year for which
the business  enterprise  is  allowed  to  claim  the  credit.  Expenses
incurred  prior to the date the certificate of eligibility is issued are
not eligible to be included in the calculation of the credit.

S. 6359--C                         196

  S 25. Paragraph 5 of subdivision (a) of section 21 of the tax law,  as
amended  by  section  1 of part H of chapter 577 of the laws of 2004, is
amended to read as follows:
  (5)  Applicable  percentage. For purposes of paragraphs two, three and
four of this subdivision, the  applicable  percentage  shall  be  twelve
percent  [in  the  case  of  credits claimed under article nine, nine-A,
thirty-two or thirty-three of this chapter, and ten percent in the  case
of  credits  claimed  under  article twenty-two of this chapter,] except
that where at least fifty percent of the  area  of  the  qualified  site
relating  to  the  credit  provided for in this section is located in an
environmental zone as defined in paragraph six  of  subdivision  (b)  of
this  section,  the applicable percentage shall be increased by an addi-
tional eight percent. Provided, however, as afforded in section  27-1419
of  the environmental conservation law, if the certificate of completion
indicates that the qualified site has been remediated to Track 1 as that
term is described in subdivision four of section 27-1415 of the environ-
mental conservation law, the applicable  percentage  set  forth  in  the
first sentence of this paragraph shall be increased by an additional two
percent.
  S 26. Section 22 of the tax law is REPEALED.
  S  27.  Paragraphs  2, 4 and 6 of subdivision (b) of section 21 of the
tax law, as amended by section 1 of part H of chapter 577 of the laws of
2004, subparagraph (B) and the  closing  paragraph  of  paragraph  6  as
amended  by  section  1 of part G of chapter 62 of the laws of 2006, are
amended to read as follows:
  (2) Site preparation costs. The term "site  preparation  costs"  shall
mean all amounts properly [chargeable] CHARGED to a capital account, (i)
which are paid or incurred in connection with a site's qualification for
a certificate of completion, AND WHICH MAY INCLUDE COSTS ATTRIBUTABLE TO
ACTIVITIES UNDERTAKEN UNDER THE OVERSIGHT OF THE DEPARTMENT OF HEALTH OR
THE  DEPARTMENT  OF  LABOR  TO  REMEDIATE  REGULATED MATERIALS INCLUDING
ASBESTOS, LEAD OR POLYCHLORINATED  BIPHENYLS  IN  BUILDINGS  WHICH  WILL
REMAIN  ON  THE  SITE, and (ii) all other site preparation costs paid or
incurred in connection with preparing a  site  for  the  erection  of  a
building  or a component of a building, or otherwise to establish a site
as usable for  its  industrial,  commercial  (including  the  commercial
development   of  residential  housing),  recreational  or  conservation
purposes. Site preparation costs shall include, but not be  limited  to,
the costs of excavation, temporary electric wiring, scaffolding, demoli-
tion costs, and the costs of fencing and security facilities. Site prep-
aration costs shall not include the cost of acquiring the site and shall
not  include  amounts  included  in  the cost or other basis for federal
income tax purposes of qualified  tangible  property,  as  described  in
paragraph three of this subdivision.
  (4) On-site groundwater remediation costs. The term "on-site groundwa-
ter  remediation  costs"  shall  mean  all amounts properly [chargeable]
CHARGED to a  capital  account,  (i)  which  are  paid  or  incurred  in
connection  with a site's qualification for a certificate of completion,
and (ii) include costs which are paid or incurred in connection with the
remediation of on-site groundwater contamination and PAID OR incurred to
implement a requirement of the remedial work plan or an interim remedial
measure work plan for a qualified site which  are  imposed  pursuant  to
subdivisions  two  and  three  of  section  27-1411 of the environmental
conservation law.
  (6) Environmental zones (EN-Zones). An "environmental zone" shall mean
an area designated as such by the commissioner of [economic development]

S. 6359--C                         197

LABOR.  Such areas so designated are areas which are census  tracts  and
block  numbering  areas  which,  as  of  the  [two thousand] MOST RECENT
census, satisfy either of the following criteria:
  (A) areas that have both:
  (i)  a  poverty  rate of at least twenty percent for the year to which
the data relate; and
  (ii) an unemployment rate of at least one and  one-quarter  times  the
statewide unemployment rate for the year to which the data relate, or;
  (B)  areas  that have a poverty rate of at least two times the poverty
rate for the county in which the areas are located for the year to which
the data relate [provided, however, that a qualified site shall only  be
deemed  to  be  located in an environmental zone under this subparagraph
(B) if such site was the subject of a brownfield site cleanup  agreement
pursuant  to  section 27-1409 of the environmental conservation law that
was entered into prior to September first, two thousand ten].
  Such designation shall be made and a list of  all  such  environmental
zones shall be established by the commissioner of [economic development]
LABOR  no later than [December thirty-first, two thousand four provided,
however, that a qualified site shall only be deemed to be located in  an
environmental zone under subparagraph (B) of this paragraph if such site
was  the  subject  of  a  brownfield  site cleanup agreement pursuant to
section 27-1409 of the environmental conservation law that  was  entered
into  prior  to September first, two thousand ten] NINETY DAYS FOLLOWING
THE OFFICIAL PUBLICATION OF THE MOST RECENT CENSUS.
  S 28. Subdivision (a) of section 23 of the  tax  law,  as  amended  by
section  10  of part H of chapter 577 of the laws of 2004, is amended to
read as follows:
  (a) Allowance of credit. General. A  taxpayer  subject  to  tax  under
article  nine,  nine-A,  twenty-two,  thirty-two or thirty-three of this
chapter shall be allowed a credit against  such  tax,  pursuant  to  the
provisions  referenced in subdivision (e) of this section. The amount of
such credit shall be equal to the lesser  of  [thirty]  NINETY  thousand
dollars  or  fifty  percent of the premiums paid on or after the date of
the brownfield site cleanup agreement executed by the taxpayer  and  the
department  of environmental conservation pursuant to section 27-1409 of
the environmental conservation law by  the  taxpayer  for  environmental
remediation insurance issued with respect to a qualified site.
  S 29. Section 171-r of the tax law is amended by adding a new subdivi-
sion (e) to read as follows:
  (E)  THE  COMMISSIONER, IN CONSULTATION WITH THE COMMISSIONER OF ENVI-
RONMENTAL CONSERVATION, SHALL PUBLISH BY JANUARY THIRTY-FIRST, TWO THOU-
SAND FIFTEEN A SUPPLEMENTAL  BROWNFIELD  CREDIT  REPORT  CONTAINING  THE
INFORMATION  REQUIRED  BY THIS SECTION ABOUT THE CREDITS CLAIMED FOR THE
YEARS TWO THOUSAND FIVE, TWO THOUSAND SIX, AND TWO THOUSAND SEVEN.
  S 30. Section 171-s of the tax law is REPEALED.
  S 31. Paragraph (d) of subdivision 7 of section 27-1415 of  the  envi-
ronmental conservation law, as added by section 1 of part A of chapter 1
of the laws of 2003, is amended to read as follows:
  (d)  The  commissioner  shall  create, update, and maintain a database
system for public information purposes and  to  monitor  and  track  all
brownfield  sites  subject  to  this  title. Data incorporated into such
system for each site for which information has been  collected  pursuant
to  this title shall include, but shall not be limited to, a site summa-
ry, name of site owner, location,  status  of  site  remedial  activity,
WHETHER  THE SITE IS LOCATED IN A BROWNFIELD OPPORTUNITY AREA AS DEFINED
IN SECTION NINE HUNDRED SEVENTY-R OF THE GENERAL MUNICIPAL LAW, and,  if

S. 6359--C                         198

one has been created pursuant to title thirty-six of article seventy-one
of  this  chapter,  a  copy of the environmental easement, and a contact
number to obtain additional information. Sites shall be  added  to  such
system  upon the execution of a brownfield site cleanup agreement pursu-
ant to section 27-1409 of this title. If and when an environmental ease-
ment is modified or extinguished, the copy of the environmental easement
contained in the database shall be updated  accordingly.  Such  database
shall  be  in  such a format that it can be readily searched by affected
local governments and the public for purposes including but not  limited
to determining whether an environmental easement has been recorded for a
site  pursuant  to title thirty-six of article seventy-one of this chap-
ter. The database shall be available electronically.   Information  from
this  database  shall  be  incorporated  into the geographic information
system created and maintained by  the  department  pursuant  to  section
3-0315 of this chapter.
  S  31-a.  Paragraph b of subdivision 2 of section 970-r of the general
municipal law, as added by section 1 of part F of chapter 1 of the  laws
of 2003, is amended to read as follows:
  b.  Activities  eligible to receive such assistance shall include, but
are not limited to, the assembly and development  of  basic  information
about:
  (1) the borders of the [proposed] brownfield opportunity area;
  (2) the number and size of brownfield sites;
  (3)  current  and anticipated uses of the properties in the [proposed]
BROWNFIELD OPPORTUNITY area;
  (4) current and anticipated future conditions of  groundwater  in  the
[proposed] BROWNFIELD OPPORTUNITY area;
  (5) known data about the environmental conditions of the properties in
the [proposed] BROWNFIELD OPPORTUNITY area;
  (6)  ownership of the properties in the [proposed] BROWNFIELD OPPORTU-
NITY area AND WHETHER THE OWNERS WOULD LIKE TO PARTICIPATE  DIRECTLY  IN
THE BROWNFIELD OPPORTUNITY PLANNING PROCESS; and
  (7) preliminary descriptions of possible remediation strategies, reuse
opportunities, necessary infrastructure improvements and other public or
private measures needed to stimulate investment, promote revitalization,
and enhance community health and environmental conditions.
  S  31-b.  Paragraph a of subdivision 3 of section 970-r of the general
municipal law, as amended by chapter 390 of the laws of 2008, is amended
to read as follows:
  a. Within the limits of  appropriations  therefor,  the  secretary  is
authorized  to  provide, on a competitive basis, financial assistance to
municipalities, to community based organizations, to  community  boards,
or to municipalities and community based organizations acting in cooper-
ation  to  prepare a nomination for designation of a brownfield opportu-
nity area. Such financial assistance shall not exceed ninety percent  of
the costs of such nomination for any such area.  A NOMINATION STUDY MUST
INCLUDE  SUFFICIENT  INFORMATION TO DESIGNATE THE BROWNFIELD OPPORTUNITY
AREA DISTRICT. THE CONTENTS OF THE NOMINATION STUDY SHALL  BE  DEVELOPED
BASED  ON  PRE-NOMINATION  STUDY  INFORMATION,  WHICH  SHALL PRINCIPALLY
CONSIST OF AN AREA-WIDE  ASTM  PHASE  I  ENVIRONMENTAL  SITE  ASSESSMENT
STUDY,  OR  A PRE-EXISTING AREA-WIDE ASTM PHASE I SITE ASSESSMENT STUDY,
DOCUMENTING THE HISTORIC BROWNFIELD USES IN THE DISTRICT.  A  NOMINATION
STUDY  IS NOT INTENDED TO BE EQUIVALENT TO OR TO SERVE AS A MASTER PLAN,
COMPREHENSIVE PLAN, OR OTHER EQUIVALENT LAND USE STUDY,  BUT  RATHER  IS
INTENDED  TO BE A BASIC PLAN FOR DESIGNATION OF THE AREA AS A BROWNFIELD
OPPORTUNITY DISTRICT BASED ON HISTORIC BROWNFIELD  USE  INFORMATION  AND

S. 6359--C                         199

THE  COMMUNITY  PARTICIPATION  REQUIRED  IN THIS SECTION. A MASTER PLAN,
COMPREHENSIVE PLAN OR EQUIVALENT LAND USE STUDY MAY BE SEPARATELY DEVEL-
OPED UNDER THIS PROGRAM AS AN  IMPLEMENTATION  STRATEGY  FOR  THE  FINAL
BROWNFIELD OPPORTUNITY AREA PLAN. SINCE A NOMINATION STUDY IS NOT EQUIV-
ALENT  TO A FINAL LAND USE PLAN, THE PREPARATION OF THE NOMINATION STUDY
DOES NOT REQUIRE REVIEW UNDER THE STATE ENVIRONMENTAL QUALITY REVIEW ACT
PURSUANT TO ARTICLE EIGHT OF THE ENVIRONMENTAL CONSERVATION LAW,  AND  A
BROWNFIELD  OPPORTUNITY  AREA  CAN  BE DESIGNATED BASED EXCLUSIVELY ON A
NOMINATION STUDY. IN THE EVENT THE MUNICIPALITY AND/OR  COMMUNITY  BASED
ORGANIZATION  ELECT  TO DEVELOP IMPLEMENTATION STRATEGIES, INCLUDING BUT
NOT LIMITED TO A MASTER PLAN, COMPREHENSIVE PLAN OR URBAN RENEWAL  PLAN,
REVIEW  UNDER  THE  STATE ENVIRONMENTAL QUALITY REVIEW ACT UNDER ARTICLE
EIGHT OF THE ENVIRONMENTAL CONSERVATION LAW IS REQUIRED. NO  SUCH  NOMI-
NATION  STUDY SHALL SUPERSEDE AN EXISTING MASTER PLAN OR EQUIVALENT LAND
USE STUDY.
  S 31-c. Subdivision 4 of section 970-r of the general  municipal  law,
as  amended  by  chapter  390 of the laws of 2008, is amended to read as
follows:
  4. Designation of brownfield opportunity area.   [Upon completion  of]
A.  WITHIN  THIRTY-SIX  MONTHS  OF  THE SUBMISSION OF AN APPLICATION FOR
STATE ASSISTANCE PURSUANT TO SUBDIVISION  THREE  OF  THIS  SECTION,  THE
APPLICANT  SHALL  COMPLETE  AND SUBMIT a nomination for designation of a
brownfield opportunity area[, it].   THE COMPLETED NOMINATION  shall  be
forwarded by the applicant to the secretary, who shall determine whether
it  is  consistent with the provisions of this section. If the secretary
determines that the nomination [is consistent] PLAN PROPERLY  DESIGNATES
THE  BROWNFIELD OPPORTUNITY AREA AND HAS COMPLIED with the provisions of
this section, the brownfield opportunity area shall be designated AND NO
FURTHER STUDIES OR PLANS ARE REQUIRED TO FINALIZE THE DESIGNATION OF THE
BROWNFIELD OPPORTUNITY AREA DISTRICT. THE SECRETARY SHALL MAKE A  DETER-
MINATION  OF  WHETHER  THE NOMINATED PLAN SHOULD BE FINALIZED AND DESIG-
NATED WITHIN NINETY DAYS OF RECEIPT OF SUCH NOMINATION. IF THE APPLICANT
HAS ELECTED TO PREPARE A FINAL BROWNFIELD  OPPORTUNITY  PLAN,  INCLUDING
IMPLEMENTATION STRATEGIES SUCH AS SPECIFIC FUNDING REQUESTS FROM CERTAIN
STATE AGENCIES TO ENHANCE DEVELOPMENT OF THE PLAN OR DEVELOPMENT OF MORE
FORMAL  LAND  USE PLANS SUCH AS A MASTER PLAN, COMPREHENSIVE PLAN AND/OR
URBAN RENEWAL PLAN, UPON RECEIPT OF ONE OR  MORE  OF  THESE  PLANS,  THE
SECRETARY, IN CONSULTATION WITH ANY OTHER INVOLVED AGENCIES AND/OR OTHER
AGENCY  FROM  WHICH  A  FUNDING REQUEST HAS BEEN MADE, SHALL REVIEW SUCH
PLAN OR PLANS, AND IF  REQUIRED,  THE  ASSOCIATED  ENVIRONMENTAL  IMPACT
REVIEW  ANALYSIS  PURSUANT TO THE STATE ENVIRONMENTAL QUALITY REVIEW ACT
UNDER ARTICLE EIGHT OF THE ENVIRONMENTAL CONSERVATION LAW. If the secre-
tary determines that the nomination [is not consistent] PLAN AND/OR  THE
FINAL BROWNFIELD OPPORTUNITY AREA PLAN DO NOT COMPLY with the provisions
of  this section, the secretary shall make recommendations in writing to
the applicant of the manner and nature in which the nomination  PLAN  OR
THE  FINAL  BROWNFIELD  OPPORTUNITY AREA PLAN should be amended TO BE IN
COMPLIANCE. THE APPLICANT SHALL HAVE THIRTY DAYS TO AMEND THE NOMINATION
TO BRING THE PLAN INTO COMPLIANCE. IF THE SECRETARY DETERMINES THAT  THE
AMENDED  NOMINATION  STILL  IS NOT IN COMPLIANCE, THE APPLICANT SHALL BE
INELIGIBLE FOR ANY ADDITIONAL STATE ASSISTANCE OFFERED UNDER THIS  ARTI-
CLE UNTIL SUCH NOMINATION IS DEEMED TO BE IN COMPLIANCE.
  (B)  THE  SECRETARY SHALL PROVIDE ASSISTANCE TO APPLICANTS WHO REQUEST
ASSISTANCE ON THE CONTENTS OF LAND USE PLANS, BUT  MUNICIPAL  APPLICANTS
HAVE  FINAL  AUTHORITY  ON  THE CONTENTS OF LAND USE PLANS PROVIDED SUCH
PLANS ARE CONSISTENT WITH THIS SECTION PURSUANT TO SECTION  TWO  HUNDRED

S. 6359--C                         200

SIXTY-ONE  OF  THE  TOWN LAW, SECTION SEVEN-SEVEN HUNDRED OF THE VILLAGE
LAW, SUBDIVISIONS TWENTY-FOUR AND TWENTY-FIVE OF SECTION TWENTY  OF  THE
GENERAL CITY LAW, SECTION TEN OF THE MUNICIPAL HOME RULE LAW AND SECTION
TEN OF THE STATUTE OF LOCAL GOVERNMENTS.
  S  32. Section 31 of part H of chapter 1 of the laws of 2003, amending
the tax law relating to brownfield redevelopment tax credits, remediated
brownfield credit for real property taxes for qualified sites and  envi-
ronmental  remediation  insurance  credits, as amended by chapter 474 of
the laws of 2012, is amended to read as follows:
  S 31. The tax credits allowed under section 21, 22 or 23  of  the  tax
law  and  the corresponding provisions in articles 9, 9-A, 22, 32 and 33
of the tax law, as added by the provisions of sections one through twen-
ty-nine of this act,  shall  not  be  applicable  if  the  [remediation]
certificate OF COMPLETION required to qualify for any of such credits is
issued after December 31, [2015] 2025.
  S 33. Intentionally omitted.
  S  34. Paragraph c of subdivision 3 of section 27-0923 of the environ-
mental conservation law, as amended by section 5 of part  I  of  chapter
577 of the laws of 2004, is amended to read as follows:
  c.  For  the  purpose  of  this section, generation of hazardous waste
shall not include retrieval or creation of hazardous waste which must be
disposed of under an order of or agreement with the department  pursuant
to  title thirteen or title fourteen of this article or under a contract
OR AGREEMENT with the department  pursuant  to  title  five  of  article
fifty-six  of  this  chapter  OR UNDER AN ORDER OF OR AGREEMENT WITH THE
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY OR AN ORDER OF A COURT  OF
COMPETENT  JURISDICTION, RELATED TO A FACILITY ADDRESSED PURSUANT TO THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT (42
U.S.C. 9601 ET SEQ.) OR UNDER A WRITTEN AGREEMENT  WITH  A  MUNICIPALITY
WHICH  IS  SUBJECT  TO  A  MEMORANDUM  OF  AGREEMENT WITH THE DEPARTMENT
RELATED TO THE REMEDIATION OF BROWNFIELD SITES.
  S 35. Subparagraphs (i) and (vi) of paragraph d of  subdivision  1  of
section  72-0402  of  the  environmental conservation law, as amended by
chapter 99 of the laws of 2010, are amended to read as follows:
  (i) under a contract with the department,  or  with  the  department's
written  approval  and  in  compliance  with  department regulations, or
pursuant to an order of the department, the United States  environmental
protection  agency  or a court OF COMPETENT JURISDICTION, related to the
cleanup or remediation of  a  hazardous  materials  or  hazardous  waste
spill, discharge, or surficial cleanup, pursuant to this chapter; or
  (vi)  under  a  brownfield  site cleanup agreement with the department
pursuant to section 27-1409 of this chapter  OR UNDER AN AGREEMENT  WITH
A  MUNICIPALITY  WHICH  IS SUBJECT TO A MEMORANDUM OF AGREEMENT WITH THE
DEPARTMENT RELATED TO THE REMEDIATION OF BROWNFIELD SITES; or
  S 36. Subdivision 1 of section 1285-q of the public  authorities  law,
as  added  by  section  6 of part I of chapter 1 of the laws of 2003, is
amended to read as follows:
  1. Subject to chapter fifty-nine of the  laws  of  two  thousand,  but
notwithstanding any other provisions of law to the contrary, in order to
assist the corporation in undertaking the administration and the financ-
ing  of  hazardous  waste  site  remediation projects for payment of the
state's share of the costs of the remediation of hazardous waste  sites,
in  accordance  with title thirteen of article twenty-seven of the envi-
ronmental conservation law  and  section  ninety-seven-b  of  the  state
finance  law, and for payment of state costs associated with the remedi-
ation of offsite contamination at significant threat sites  as  provided

S. 6359--C                         201

in  section 27-1411 of the environmental conservation law, AND FOR ENVI-
RONMENTAL RESTORATION PROJECTS PURSUANT TO TITLE FIVE OF ARTICLE  FIFTY-
SIX  OF THE ENVIRONMENTAL CONSERVATION LAW pursuant to capital appropri-
ations  made  to  the  department  of  environmental  conservation,  the
director of the division of budget and the corporation are each  author-
ized  to  enter  into one or more service contracts, none of which shall
exceed twenty years in duration, upon such terms and conditions  as  the
director and the corporation may agree, so as to annually provide to the
corporation  in  the  aggregate,  a  sum  not  to exceed the annual debt
service payments and related expenses required for any bonds  and  notes
authorized  pursuant to section twelve hundred ninety of this title. Any
service contract entered into pursuant to  this  section  shall  provide
that  the  obligation of the state to fund or to pay the amounts therein
provided for shall not constitute a debt of the state within the meaning
of any constitutional or statutory provision and shall be deemed  execu-
tory  only  to the extent of moneys available for such purposes, subject
to annual appropriation by the legislature. Any such service contract or
any payments made or to be made thereunder may be assigned  and  pledged
by  the  corporation  as security for its bonds and notes, as authorized
pursuant to section twelve hundred ninety of this title.
  S 37. Section 56-0501 of the environmental conservation law, as  added
by chapter 413 of the laws of 1996, is amended to read as follows:
S 56-0501. Allocation of moneys.
  1. Of the moneys received by the state from the sale of bonds pursuant
to  the  Clean  Water/Clean  Air  Bond  Act of 1996, two hundred million
dollars ($200,000,000) shall be available for disbursements for environ-
mental restoration projects.
  2. ENVIRONMENTAL RESTORATION PROJECTS MAY BE FUNDED USING THE PROCEEDS
OF BONDS ISSUED PURSUANT TO SECTION TWELVE HUNDRED EIGHTY-FIVE-Q OF  THE
PUBLIC AUTHORITIES LAW.
  S  38. Subdivision 6 of section 56-0502 of the environmental conserva-
tion law, as amended by section 2 of part D of chapter 577 of  the  laws
of 2004, is amended to read as follows:
  6.  "State  assistance", for purposes of this title, shall mean in the
case of a contract authorized by subdivision one of section  56-0503  of
this  title,  payments  made  to a municipality to reimburse the munici-
pality for the state share of the costs incurred by the municipality  to
undertake  an  environmental  restoration  project  OR IN THE CASE OF AN
AGREEMENT AUTHORIZED BY SUBDIVISION THREE OF  SECTION  56-0503  OF  THIS
TITLE,  COSTS INCURRED BY THE STATE TO UNDERTAKE AN ENVIRONMENTAL RESTO-
RATION PROJECT BUT NOT REIMBURSED BY A MUNICIPALITY.
  S 39. Paragraph (c) of subdivision 2 of section 56-0503 of  the  envi-
ronmental conservation law, as amended by section 4 of part D of chapter
1  of  the  laws of 2003, is amended and a new subdivision 3 is added to
read as follows:
  (c) A provision that THE MUNICIPALITY SHALL ASSIST  IN  IDENTIFYING  A
RESPONSIBLE  PARTY  BY  SEARCHING  LOCAL RECORDS, INCLUDING PROPERTY TAX
ROLLS, OR DOCUMENT REVIEWS, AND if,  in  accordance  with  the  required
departmental  approval  of  any settlement with a responsible party, any
responsible party payments become available to the municipality, before,
during or after the completion of an environmental restoration  project,
which  were not included when the state share was calculated pursuant to
this section, the state assistance share shall be recalculated, and  the
municipality  shall pay to the state, for deposit into the environmental
restoration project account of the hazardous waste remedial fund  estab-
lished  under  section  ninety-seven-b  of  the  state  finance law, the

S. 6359--C                         202

difference between the original state assistance payment and the  recal-
culated state share. Recalculation of the state share shall be done each
time a payment from a responsible party is received by the municipality;
  3.  THE  DEPARTMENT MAY UNDERTAKE AN ENVIRONMENTAL RESTORATION PROJECT
ON BEHALF OF A MUNICIPALITY UPON REQUEST. IF THE  DEPARTMENT  UNDERTAKES
THE PROJECT ON BEHALF OF THE MUNICIPALITY, THE STATE SHALL ENTER INTO AN
AGREEMENT  WITH  THE  MUNICIPALITY  AND  THE AGREEMENT SHALL REQUIRE THE
MUNICIPALITY TO PERIODICALLY PROVIDE ITS SHARE TO THE  STATE  FOR  COSTS
INCURRED  DURING  THE PROGRESS OF SUCH PROJECT. THE MUNICIPALITY'S SHARE
SHALL BE THE SAME AS WOULD BE REQUIRED UNDER  SUBDIVISION  ONE  OF  THIS
SECTION.  THE AGREEMENT SHALL INCLUDE ALL PROVISIONS SPECIFIED IN SUBDI-
VISION TWO OF THIS SECTION AS APPROPRIATE.   FOR  PURPOSES  OF  PROJECTS
SUBJECT   TO  AGREEMENTS  UNDER  THIS  SUBDIVISION,  ALL  REFERENCES  TO
CONTRACTS IN THIS TITLE SHALL ALSO APPLY TO AGREEMENTS UNDER THIS SUBDI-
VISION AS APPROPRIATE.
  S 40. Subdivision 4 of section 56-0505 of the environmental  conserva-
tion  law, as amended by section 5 of part D of chapter 1 of the laws of
2003, is amended to read as follows:
  4. After completion of such project,  the  municipality  may  use  the
property  for  public purposes or may dispose of it. If the municipality
shall dispose of such property by sale  to  a  responsible  party,  such
party  shall pay to such municipality, in addition to such other consid-
eration, an amount of money constituting the amount of state  assistance
provided  [to  the  municipality] under this title plus accrued interest
and transaction costs and the municipality shall deposit that money into
the environmental restoration project account  of  the  hazardous  waste
remedial  fund  established  under  section  ninety-seven-b of the state
finance law.
  S 41. Subdivisions 3 and 4 of section  56-0508  of  the  environmental
conservation  law,  as  added by section 7 of part D of chapter 1 of the
laws of 2003, are amended to read as follows:
  3. such temporary incidents of ownership by such taxing district shall
also qualify it as being the owner of such property [for the purposes of
obtaining] TO BE ELIGIBLE FOR funding from the state  of  New  York  for
such  environmental restoration investigation project under this article
or for such funding from any source pursuant to any other state,  feder-
al,  or  local  law, but such incidents of ownership shall not be suffi-
cient to qualify it as the owner of such property for  the  purposes  of
holding it wholly or partially liable for any damages, past, present, or
future from any release of any hazardous material, substance, or contam-
inant  into the air, ground, or water, unless such release was caused by
such taxing district.
  4. within thirty days of the completion of the environmental  restora-
tion investigation project and the receipt by the taxing jurisdiction of
the  final  report of such investigation, such taxing jurisdiction shall
file such report with the court on notice to the  court  and  all  other
parties  of  record,  and  the  stay  of the foreclosure shall be lifted
(unless lifted earlier by a prior court order),  and  all  incidents  of
temporary  ownership  of  the  taxing jurisdiction that was awarded such
taxing district, except any right [to receive funding] for the  environ-
mental  restoration  investigation  project TO BE FUNDED, shall cease to
exist, and nothing in this subdivision shall preclude the taxing  juris-
diction  that  conducted  the  environmental  restoration  investigation
project or  the  taxing  jurisdiction  that  commenced  the  foreclosure
action,  if it is a different taxing jurisdiction than the taxing juris-
diction which conducted the investigation, from withdrawing  the  parcel

S. 6359--C                         203

from  foreclosure pursuant to section eleven hundred thirty-eight of the
real property tax law.
  S 42. Subdivision 2 and paragraph (f) of subdivision 3 of section 97-b
of the state finance law, as amended by section 4 of part I of chapter 1
of the laws of 2003, are amended to read as follows:
  2. Such fund shall consist of all of the following:
  (a)  moneys appropriated for transfer to the fund's site investigation
and construction account; (b) all fines and other  sums  accumulated  in
the fund prior to April first, nineteen hundred eighty-eight pursuant to
section 71-2725 of the environmental conservation law for deposit in the
fund's  site  investigation  and  construction  account;  (c) all moneys
collected or received by the department of taxation and finance pursuant
to section 27-0923 of the environmental conservation law for deposit  in
the  fund's  industry fee transfer account; (d) all moneys paid into the
fund pursuant to section 72-0201 of the environmental  conservation  law
which  shall  be  deposited in the fund's industry fee transfer account;
(e) all moneys paid into the fund pursuant to section one hundred eight-
y-six of the navigation law which  shall  be  deposited  in  the  fund's
industry  fee  transfer  account;  (f) [all moneys paid into the fund by
municipalities for repayment of landfill closure loans made pursuant  to
title  five  of  article fifty-two of the environmental conservation law
for deposit in the fund's site investigation and  construction  account;
(g)] all monies recovered under sections 56-0503, 56-0505 and 56-0507 of
the  environmental conservation law into the fund's environmental resto-
ration project account; [(h) all] (G) fees paid into the  fund  pursuant
to section [72-0403] 72-0402 of the environmental conservation law which
shall  be  deposited  in the fund's industry fee transfer account; [(i)]
(H) payments received for all state costs incurred  in  negotiating  and
overseeing  the  implementation  of  brownfield  site cleanup agreements
pursuant to title fourteen OF ARTICLE TWENTY-SEVEN of the  environmental
conservation  law  shall be deposited in the hazardous waste remediation
oversight and assistance account; and [(j)] (I) other moneys credited or
transferred thereto from any other fund or source  for  deposit  in  the
fund's site investigation and construction account.
  (f)  to undertake such remedial measures as the department of environ-
mental conservation may determine necessary due to environmental  condi-
tions  related to the property subject to an agreement [to provide state
assistance] OR CONTRACT under title five of  article  fifty-six  of  the
environmental  conservation law [that were unknown to such department at
the time of its approval of such agreement which indicates  that  condi-
tions  on  such property are not sufficiently protective of human health
for its reasonably anticipated uses or due to information  received,  in
whole  or  in part, after such department's approval of such agreement's
final engineering report and certification], which indicates  that  such
agreement's remedial activities are not sufficiently protective of human
health for such property's reasonably anticipated uses; and, [respecting
the monies in the environmental restoration project account in excess of
ten million dollars,] shall provide state assistance under title five of
article fifty-six of the environmental conservation law;
  S  43.  Severability. If any clause, sentence, paragraph, subdivision,
section or part of this act shall be adjudged by any court of  competent
jurisdiction  to  be  invalid, such judgment shall not affect, impair or
invalidate the remainder thereof, but shall be confined in its operation
to the clause, sentence, paragraph, subdivision, section or part thereof
directly involved in the controversy in which such judgment  shall  have
been rendered. It is hereby declared to be the intent of the legislature

S. 6359--C                         204

that  this  act  would have been enacted even if such invalid provisions
had not been included herein.
  S  44. This act shall take effect immediately and shall apply to sites
that submit an application for acceptance into  the  brownfield  cleanup
program on or after July 1, 2014; provided, however, that the department
of  environmental conservation shall not charge volunteers in the brown-
field cleanup program for oversight costs for any sites in  the  program
incurred  on  or after July 1, 2014; and provided further, however, that
section twenty-four of this act shall apply to any site where a  certif-
icate of completion has been issued on or after June 30, 2008.

                                SUBPART B

  Section 1.  Paragraph (a) of subdivision 2 of section 176 of the navi-
gation law, as amended by chapter 584 of the laws of 1992, is amended to
read as follows:
  (a)  Upon  the  occurrence of a discharge of petroleum, the department
shall respond promptly and proceed to cleanup and remove  the  discharge
in  accordance  with environmental priorities or may, at its discretion,
direct the discharger to promptly cleanup and remove the discharge.   IF
A  PERSON THE DEPARTMENT DEEMS A DISCHARGER, AND THUS DIRECTS TO CLEANUP
AND REMOVE THE DISCHARGE PURSUANT TO THIS SECTION PRESENTS  THE  DEPART-
MENT  WITH  EVIDENCE  THAT  A  THIRD PARTY IS SOLELY RESPONSIBLE FOR THE
DISCHARGE AND REQUESTS THE DEPARTMENT TO DETERMINE WHETHER THE  EVIDENCE
ESTABLISHES  THE  THIRD PARTY IS IN FACT SOLELY RESPONSIBLE, THE DEPART-
MENT SHALL, WITHIN THIRTY DAYS OF RECEIPT OF SUCH REQUEST, DETERMINE  IN
WRITING EITHER THAT THE THIRD PARTY: (I) SHALL BE DEEMED A DISCHARGER BY
THE  DEPARTMENT,  AND  SHALL  BE  DIRECTED  TO UNDERTAKE THE CLEANUP AND
REMOVAL OF THE DISCHARGE; OR (II) WILL NOT BE DEEMED A DISCHARGER BY THE
DEPARTMENT BECAUSE THE INFORMATION  PRESENTED  DOES  NOT  ESTABLISH  THE
RESPONSIBILITY OF THE THIRD PARTY BY A PREPONDERANCE OF THE EVIDENCE. IF
THE DEPARTMENT DETERMINES THAT THE PERSON THE DEPARTMENT INITIALLY DEEMS
A  DISCHARGER  AND  THE THIRD PARTY ARE BOTH DISCHARGERS, THE DEPARTMENT
SHALL, WITHIN THIRTY DAYS OF SUCH REQUEST, ADVISE EACH  OF  THE  PARTIES
THAT  THEY  ARE DEEMED DISCHARGERS SUBJECT TO APPORTIONMENT OF LIABILITY
FOR THE DISCHARGE PURSUANT TO SUBDIVISIONS ONE AND TWO  OF  SECTION  ONE
HUNDRED  EIGHTY OF THIS ARTICLE. The department shall be responsible for
cleanup and removal or as the case may  be,  for  retaining  agents  and
contractors who shall operate under the direction of that department for
such  purposes.  Implementation  of cleanup and removal procedures after
each discharge shall  be  conducted  in  accordance  with  environmental
priorities and procedures established by the department.
  S  2.  Subdivision 8 of section 176 of the navigation law, as added by
chapter 712 of the laws of 1989, is amended and a new subdivision  9  is
added to read as follows:
  8. Notwithstanding any other provision of law to the contrary, includ-
ing  but not limited to SUBDIVISION (C) OF section 15-108 of the general
obligations law, every person providing cleanup, removal of discharge of
petroleum or relocation of persons pursuant to  this  section  shall  be
entitled to contribution from any other responsible party.
  9.  THE FOLLOWING SHALL NOT BE DEEMED A FINAL AGENCY ACTION SUBJECT TO
REVIEW PURSUANT TO ARTICLE SEVENTY-EIGHT OF THE CIVIL PRACTICE  LAW  AND
RULES,  AND  SHALL  NOT HAVE A BINDING EFFECT ON ANY PARTY IN PENDING OR
FUTURE PROCEEDINGS REGARDING  THE  DISCHARGE:  (A)  A  DETERMINATION  OR
ACTION  OF  THE DEPARTMENT PURSUANT TO SUBDIVISION ONE, TWO, OR THREE OF
THIS SECTION, INCLUDING BUT NOT  LIMITED  TO,  A  DETERMINATION  OF  THE

S. 6359--C                         205

REASONABLENESS  OF  ANY COSTS INCURRED; (B) A DETERMINATION OR ACTION OF
THE ADMINISTRATOR PURSUANT TO SECTION ONE HUNDRED  EIGHTY,  ONE  HUNDRED
EIGHTY-ONE-A, OR ONE HUNDRED EIGHTY-THREE OF THIS ARTICLE, INCLUDING THE
FILING OF AN ENVIRONMENTAL LIEN.
  S 3. Subdivisions 1 and 2 of section 180 of the navigation law, subdi-
vision  1  as added by chapter 845 of the laws of 1977 and subdivision 2
as amended by chapter 672 of the laws of 1991, are amended  to  read  as
follows:
  1.  To  represent the state in meetings with the alleged discharger OR
DISCHARGERS and claimants concerning liability  for  the  discharge  and
amount  of  the  claims,  AND, IF THERE IS MORE THAN ONE DISCHARGER IN A
MEETING, TO APPORTION LIABILITY FOR THE DISCHARGE;
  2. To determine if hearings are needed  to  settle  particular  claims
filed  by  injured  persons AND TO APPORTION LIABILITY BETWEEN AND AMONG
DISCHARGERS;
  S 4. Subdivision 1 of section 181 of the navigation law, as amended by
chapter 712 of the laws of 1989, is amended and a new subdivision  7  is
added to read as follows:
  1.  (A)  Any  person  who  has  discharged petroleum shall be strictly
liable, without regard to fault, for all cleanup and removal  costs  and
all direct and indirect damages, no matter by whom sustained, as defined
in  this  section,  UNLESS  THE  LIABILITY LIMITATION AS DESCRIBED UNDER
PARAGRAPH (B) OF THIS SUBDIVISION APPLIES.  In addition to  cleanup  and
removal  costs  and  damages,  any  such  person who is notified of such
release and who did not undertake relocation of persons residing in  the
area  of  the  discharge in accordance with paragraph (c) of subdivision
seven of section one hundred  seventy-six  of  this  article,  shall  be
liable  to  the  fund  for  an  amount equal to two times the actual and
necessary expense incurred by the fund for such relocation  pursuant  to
section one hundred seventy-seven-a of this article.
  (B) (I) ANY PERSON WHO AGREES TO REMEDIATE THE DISCHARGE TO THE SATIS-
FACTION  OF  THE DEPARTMENT, AND IN CONFORMANCE WITH THIS ARTICLE, SHALL
BE ENTITLED TO RECEIVE LIABILITY LIMITATION.  SUCH  AGREEMENT  SHALL  BE
CALLED  THE  LIABILITY  LIMITATION  AGREEMENT  AND  SHALL BE WRITTEN AND
EXECUTED BY BOTH THE DEPARTMENT AND SUCH PERSON. AFTER EXECUTION OF  THE
LIABILITY  LIMITATION  AGREEMENT, SUCH PERSON SHALL NOT BE LIABLE TO THE
STATE UPON ANY STATUTORY OR COMMON LAW CAUSE OF ACTION, ARISING  OUT  OF
THE  PRESENCE  OF  ANY  CONTAMINATION IN, ON, OR EMANATING FROM THE SITE
THAT WAS THE SUBJECT OF  THE  LIABILITY  LIMITATION,  EXCEPT  THAT  SUCH
PERSON SHALL NOT RECEIVE A RELEASE FOR NATURAL RESOURCE DAMAGES THAT MAY
BE  AVAILABLE  UNDER  LAW.   THE LIABILITY LIMITATION SHALL APPLY TO ALL
SUCCESSORS IN OWNERSHIP OF THE PROPERTY AND TO ALL PERSONS WHO LEASE THE
PROPERTY OR WHO ENGAGE IN OPERATIONS ON THE PROPERTY, PROVIDED THAT SUCH
PERSONS ACT WITH DUE CARE AND IN GOOD FAITH TO ADHERE  TO  THE  REQUIRE-
MENTS OF THE LIABILITY LIMITATION AGREEMENT.
  (II)  A  LIABILITY LIMITATION AGREEMENT AND THE PROTECTIONS IT AFFORDS
SHALL NOT APPLY TO ANY DISCHARGE THAT OCCURS SUBSEQUENT TO THE EXECUTION
OF THE LIABILITY LIMITATION AGREEMENT, NOR SHALL A LIABILITY  LIMITATION
AGREEMENT AND THE PROTECTIONS IT AFFORDS RELIEVE ANY PERSON OF THE OBLI-
GATIONS  TO  COMPLY  IN  THE FUTURE WITH LAWS AND REGULATIONS. THE STATE
NONETHELESS SHALL RESERVE ALL OF ITS RIGHTS CONCERNING, AND SUCH LIABIL-
ITY LIMITATION SHALL NOT EXTEND TO,  ANY  FURTHER  INVESTIGATION  AND/OR
REMEDIATION  THE  DEPARTMENT DEEMS NECESSARY DUE TO FRAUD, NONCOMPLIANCE
WITH THE TERMS THAT FORMED THE  LIABILITY  LIMITATION  AGREEMENT,  OR  A
WRITTEN  FINDING  BY  THE  DEPARTMENT  THAT A CHANGE IN AN ENVIRONMENTAL
STANDARD, FACTOR, OR  CRITERION  UPON  WHICH  THE  LIABILITY  LIMITATION

S. 6359--C                         206

AGREEMENT  WAS  BASED  WOULD  RENDER  REMEDIATION  ACTIVITIES  NO LONGER
PROTECTIVE OF PUBLIC HEALTH OR THE ENVIRONMENT. NOTHING IN THIS  SECTION
SHALL  AFFECT  THE LIABILITY OF THE PERSON RESPONSIBLE FOR SUCH PERSON'S
OWN ACTS OR OMISSIONS CAUSING WRONGFUL DEATH OR PERSONAL INJURY. NOTHING
IN THIS SECTION SHALL AFFECT THE LIABILITY OF ANY PERSON WITH RESPECT TO
ANY CIVIL ACTION BROUGHT BY A PARTY OTHER THAN THE STATE. THE PROVISIONS
OF THIS SECTION SHALL NOT AFFECT AN ACTION OR A CLAIM, INCLUDING A STAT-
UTORY OR COMMON LAW CLAIM FOR CONTRIBUTION OR INDEMNIFICATION, THAT SUCH
PERSON HAS OR MAY HAVE AGAINST A THIRD PARTY.
  7.  NOTWITHSTANDING  ANY  OTHER  PROVISION  OF  THIS SECTION, A PUBLIC
CORPORATION SHALL NOT BE LIABLE FOR THE DISCHARGE OF PETROLEUM AT A SITE
IF SUCH PUBLIC CORPORATION ACQUIRED SUCH SITE  INVOLUNTARILY,  AND  SUCH
PUBLIC  CORPORATION  RETAINED  SUCH  SITE  WITHOUT  PARTICIPATING IN THE
DEVELOPMENT OF SUCH SITE. THIS EXEMPTION SHALL NOT APPLY TO  ANY  PUBLIC
CORPORATION  THAT  HAS  (A)  CAUSED  OR  CONTRIBUTED TO THE DISCHARGE OF
PETROLEUM FROM OR AT THE SITE,  (B)  PURCHASED,  SOLD,  REFINED,  TRANS-
PORTED,  OR DISCHARGED PETROLEUM FROM OR AT SUCH SITE, OR (C) CAUSED THE
PURCHASE, SALE, REFINEMENT, TRANSPORTATION, OR  DISCHARGE  OF  PETROLEUM
FROM  OR AT SUCH SITE. THE TERMS "PARTICIPATION IN DEVELOPMENT," "PUBLIC
CORPORATION" AND "INVOLUNTARY ACQUISITION OF OWNERSHIP OR CONTROL" SHALL
HAVE THE SAME MEANING AS THOSE TERMS ARE DEFINED IN PARAGRAPHS (C),  (D)
AND  (E)  OF  SUBDIVISION  TWO  OF  SECTION 27-1323 OF THE ENVIRONMENTAL
CONSERVATION LAW. HOWEVER,  "PARTICIPATION  IN  DEVELOPMENT"  SHALL  NOT
INCLUDE  IMPROVEMENTS  WHICH  ARE  PART  OF  A  CLEANUP AND REMOVAL OF A
DISCHARGE OF PETROLEUM PURSUANT TO THIS ARTICLE.
  S 5. Section 183 of the navigation law, as added by chapter 845 of the
laws of 1977, is amended to read as follows:
  S 183. Settlements. The administrator shall  attempt  to  promote  and
arrange  a  settlement  between  the  claimant and the person OR PERSONS
responsible for the discharge. If the source of  the  discharge  can  be
determined  and  liability  is  conceded,  the  claimant and the alleged
discharger OR DISCHARGERS may agree to a settlement which shall be final
and binding upon the parties and which will waive all  recourse  against
the  fund.  TO THE EXTENT AN ALLEGED DISCHARGER PRESENTS EVIDENCE TO THE
ADMINISTRATOR THAT ANOTHER PARTY IS WHOLLY OR PARTIALLY RESPONSIBLE  FOR
THE  CLAIM,  AND  REQUESTS  THE  ADMINISTRATOR  TO CONSIDER WHETHER SUCH
INFORMATION PRESENTED ESTABLISHES BY A  PREPONDERANCE  OF  THE  EVIDENCE
THAT  THE  THIRD  PARTY  IS IN FACT WHOLLY OR PARTIALLY RESPONSIBLE, THE
ADMINISTRATOR WITHIN THIRTY DAYS OF RECEIPT OF SUCH REQUEST SHALL EITHER
DETERMINE: (1) IN WRITING, IF THE THIRD PARTY SHALL BE DEEMED  AN  ADDI-
TIONAL  DISCHARGER  TO  ANY  PENDING  OR  ANTICIPATED CLAIM OR (2) IF AN
ADMINISTRATIVE HEARING AS TO LIABILITY IS NECESSARY.
  S 6. This act shall take effect immediately.
  S 2. Severability clause. If any clause, sentence, paragraph, subdivi-
sion, section or part of this act shall be adjudged by a court of compe-
tent jurisdiction to be invalid, such judgment shall not affect,  impair
or invalidate the remainder thereof, but shall be confined in its opera-
tion  to  the  clause, sentence, paragraph, subdivision, section or part
thereof directly involved in the  controversy  in  which  such  judgment
shall  have been rendered. It is hereby declared to be the intent of the
legislature that this act would have been enacted even if  such  invalid
provisions had not been included herein.
  S  3.  This  act shall take effect immediately provided, however, that
the applicable effective date of Subparts A through B of this act  shall
be as specifically set forth in the last section of such Subparts.

S. 6359--C                         207

                                 PART R

  Section  1.  Section  210  of  the  tax law is amended by adding a new
subdivision 49 to read as follows:
  49. REAL PROPERTY TAX CREDIT FOR MANUFACTURERS. (A)  A  QUALIFIED  NEW
YORK  MANUFACTURER  AS  DEFINED IN SUBPARAGRAPH (VI) OF PARAGRAPH (A) OF
SUBDIVISION ONE OF THIS SECTION WILL BE ALLOWED A CREDIT EQUAL TO TWENTY
PERCENT OF THE REAL PROPERTY TAX IT PAID DURING  THE  TAXABLE  YEAR  FOR
REAL  PROPERTY  OWNED BY SUCH MANUFACTURER IN NEW YORK WHICH WAS PRINCI-
PALLY USED DURING THE TAXABLE YEAR FOR MANUFACTURING TO THE  EXTENT  NOT
DEDUCTED  IN  DETERMINING  ENTIRE  NET  INCOME.  THIS CREDIT WILL NOT BE
ALLOWED IF THE REAL PROPERTY TAXES THAT ARE THE BASIS  FOR  THIS  CREDIT
ARE INCLUDED IN THE CALCULATION OF ANOTHER CREDIT CLAIMED BY THE TAXPAY-
ER.
  (B)  (1)  FOR PURPOSES OF THIS SUBDIVISION, THE TERM REAL PROPERTY TAX
MEANS A CHARGE IMPOSED UPON REAL PROPERTY BY OR ON BEHALF OF  A  COUNTY,
CITY,  TOWN, VILLAGE OR SCHOOL DISTRICT FOR MUNICIPAL OR SCHOOL DISTRICT
PURPOSES, PROVIDED THAT THE CHARGE IS  LEVIED  FOR  THE  GENERAL  PUBLIC
WELFARE  BY  THE  PROPER  TAXING  AUTHORITIES AT A LIKE RATE AGAINST ALL
PROPERTY OVER WHICH SUCH AUTHORITIES  HAVE  JURISDICTION,  AND  PROVIDED
THAT  WHERE TAXES ARE LEVIED PURSUANT TO ARTICLE EIGHTEEN OR NINETEEN OF
THE REAL PROPERTY TAX LAW, THE PROPERTY MUST HAVE BEEN TAXED AT THE RATE
DETERMINED FOR THE CLASS IN WHICH IT IS CONTAINED, AS PROVIDED  BY  SUCH
ARTICLE  EIGHTEEN  OR  NINETEEN,  WHICHEVER IS APPLICABLE. THE TERM REAL
PROPERTY TAX DOES NOT INCLUDE A CHARGE FOR LOCAL BENEFITS, INCLUDING ANY
PORTION OF THAT CHARGE THAT IS PROPERLY ALLOCATED TO THE COSTS ATTRIBUT-
ABLE TO MAINTENANCE OR INTEREST, WHEN (I) THE PROPERTY  SUBJECT  TO  THE
CHARGE IS LIMITED TO THE PROPERTY THAT BENEFITS FROM THE CHARGE, OR (II)
THE  AMOUNT  OF  THE CHARGE IS DETERMINED BY THE BENEFIT TO THE PROPERTY
ASSESSED, OR (III) THE IMPROVEMENT FOR  WHICH  THE  CHARGE  IS  ASSESSED
TENDS TO INCREASE THE PROPERTY VALUE.
  (2) IN ADDITION, THE TERM REAL PROPERTY TAX INCLUDES TAXES PAID BY THE
TAXPAYER  UPON REAL PROPERTY PRINCIPALLY USED DURING THE TAXABLE YEAR BY
THE TAXPAYER IN MANUFACTURING WHERE THE TAXPAYER LEASES SUCH REAL  PROP-
ERTY  FROM  AN  UNRELATED  THIRD  PARTY  IF THE FOLLOWING CONDITIONS ARE
SATISFIED: (I) THE TAX MUST BE PAID BY THE TAXPAYER AS  LESSEE  PURSUANT
TO  EXPLICIT  REQUIREMENTS  IN A WRITTEN LEASE, AND (II) THE TAXPAYER AS
LESSEE HAS PAID SUCH TAXES DIRECTLY TO  THE  TAXING  AUTHORITY  AND  HAS
RECEIVED A WRITTEN RECEIPT FOR PAYMENT OF TAXES FROM THE TAXING AUTHORI-
TY.  IN  THE  CASE  OF A COMBINED GROUP THAT CONSTITUTES A QUALIFIED NEW
YORK MANUFACTURER, THE CONDITIONS IN THE PRECEDING SENTENCE  ARE  SATIS-
FIED  IF ONE CORPORATION IN THE COMBINED GROUP IS THE LESSEE AND ANOTHER
CORPORATION IN THE COMBINED GROUP  MAKES  THE  PAYMENTS  TO  THE  TAXING
AUTHORITY.
  (3)  THE TERM REAL PROPERTY TAX DOES NOT INCLUDE A PAYMENT MADE BY THE
TAXPAYER IN CONNECTION WITH AN AGREEMENT FOR  THE  PAYMENT  IN  LIEU  OF
TAXES  ON  REAL  PROPERTY AS DEFINED IN SUBDIVISION SEVENTEEN OF SECTION
EIGHT HUNDRED FIFTY-FOUR OF THE  GENERAL  MUNICIPAL  LAW,  WHETHER  SUCH
PROPERTY  IS OWNED OR LEASED BY THE TAXPAYER, UNLESS THE PAYMENT IN LIEU
OF TAXES WAS MADE PURSUANT TO A PAYMENT IN LIEU OF  TAX  AGREEMENT  THAT
WAS  ENTERED INTO IN CONJUNCTION WITH THE SETTLEMENT OF A TAX CERTIORARI
PROCEEDING COMMENCED PURSUANT TO ARTICLE SEVEN OF THE REAL PROPERTY  TAX
LAW.
  (4)  THE  REAL PROPERTY TAXES MUST BE PAID BY THE TAXPAYER IN THE YEAR
SUCH TAXES BECOME A LIEN ON THE REAL PROPERTY.

S. 6359--C                         208

  (C) CREDIT RECAPTURE. WHERE A QUALIFIED NEW YORK  MANUFACTURER'S  REAL
PROPERTY  TAXES  WHICH  WERE  THE  BASIS FOR THE ALLOWANCE OF THE CREDIT
PROVIDED FOR UNDER THIS SUBDIVISION ARE SUBSEQUENTLY REDUCED AS A RESULT
OF A FINAL ORDER IN ANY PROCEEDING UNDER ARTICLE SEVEN OF THE REAL PROP-
ERTY  TAX LAW OR OTHER PROVISION OF LAW, THE TAXPAYER SHALL ADD BACK, IN
THE TAXABLE YEAR IN WHICH SUCH FINAL ORDER IS ISSUED, THE EXCESS OF  (1)
THE  AMOUNT OF CREDIT ORIGINALLY ALLOWED FOR A TAXABLE YEAR OVER (2) THE
AMOUNT OF CREDIT DETERMINED BASED UPON THE REDUCED REAL PROPERTY  TAXES.
IF  SUCH FINAL ORDER REDUCES REAL PROPERTY TAXES FOR MORE THAN ONE YEAR,
THE TAXPAYER MUST DETERMINE HOW MUCH OF SUCH REDUCTION  IS  ATTRIBUTABLE
TO  EACH  YEAR  COVERED  BY SUCH FINAL ORDER AND CALCULATE THE AMOUNT OF
CREDIT WHICH IS REQUIRED BY THIS SUBDIVISION TO BE RECAPTURED  FOR  EACH
YEAR BASED ON SUCH REDUCTION.
  (D)  THE  CREDIT  ALLOWED  UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR
SHALL NOT REDUCE THE TAX DUE FOR SUCH  YEAR  TO  LESS  THAN  THE  AMOUNT
PRESCRIBED IN PARAGRAPH (D) OF SUBDIVISION ONE OF THIS SECTION. HOWEVER,
ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN SUCH TAXABLE YEAR SHALL BE TREAT-
ED  AS  AN  OVERPAYMENT  OF TAX TO BE CREDITED OR REFUNDED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION ONE THOUSAND EIGHTY-SIX OF THIS  CHAPTER.
PROVIDED, HOWEVER, THE PROVISIONS OF SUBSECTION (C) OF SECTION ONE THOU-
SAND  EIGHTY-EIGHT OF THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE
PAID THEREON.
  S 2. Paragraph (b) of subdivision 9 of section 208 of the tax  law  is
amended by adding a new subparagraph 21 to read as follows:
  (21)  THE  AMOUNT  OF ANY FEDERAL DEDUCTION FOR REAL PROPERTY TAXES TO
THE EXTENT SUCH TAXES ARE USED AS THE BASIS OF THE  CALCULATION  OF  THE
REAL  PROPERTY  TAX  CREDIT  FOR MANUFACTURERS ALLOWED UNDER SUBDIVISION
FORTY-NINE OF SECTION TWO HUNDRED TEN OF THIS ARTICLE.
  S 3. Subparagraph (B) of paragraph 1 of subsection (i) of section  606
of  the  tax  law is amended by adding a new clause (xxxviii) to read as
follows:

(XXXVIII) REAL PROPERTY TAX           AMOUNT OF CREDIT UNDER
CREDIT FOR MANUFACTURERS UNDER        SUBDIVISION FORTY-NINE OF
SUBSECTION (YY)                       SECTION TWO HUNDRED TEN

  S 4. Subsections (yy) and (zz) of section  606  of  the  tax  law,  as
relettered  by section 5 of part H of chapter 1 of the laws of 2003, are
relettered subsections (yyy) and (zzz) and  a  new  subsection  (yy)  is
added to read as follows:
  (YY)  REAL  PROPERTY TAX CREDIT FOR MANUFACTURERS. (1) A QUALIFIED NEW
YORK MANUFACTURER WILL BE ALLOWED A CREDIT EQUAL TO  TWENTY  PERCENT  OF
THE  REAL PROPERTY TAX IT PAID DURING THE TAXABLE YEAR FOR REAL PROPERTY
OWNED BY SUCH MANUFACTURER IN NEW YORK WHICH WAS PRINCIPALLY USED DURING
THE TAXABLE YEAR FOR MANUFACTURING TO THE EXTENT NOT DEDUCTED IN COMPUT-
ING FEDERAL ADJUSTED GROSS INCOME. THIS CREDIT WILL NOT  BE  ALLOWED  IF
THE  REAL PROPERTY TAXES THAT ARE THE BASIS FOR THIS CREDIT ARE INCLUDED
IN THE CALCULATION OF ANOTHER CREDIT CLAIMED BY THE TAXPAYER.
  (2)(A) THE TERM QUALIFIED NEW YORK MANUFACTURER HAS THE  SAME  MEANING
AS  UNDER  SUBPARAGRAPH  (VI)  OF  PARAGRAPH  (A)  OF SUBDIVISION ONE OF
SECTION TWO HUNDRED TEN OF THIS CHAPTER.
  (B) (I) THE TERM REAL PROPERTY TAX MEANS A CHARGE  IMPOSED  UPON  REAL
PROPERTY  BY  OR  ON  BEHALF  OF A COUNTY, CITY, TOWN, VILLAGE OR SCHOOL
DISTRICT FOR MUNICIPAL OR SCHOOL DISTRICT PURPOSES,  PROVIDED  THAT  THE
CHARGE  IS  LEVIED  FOR  THE GENERAL PUBLIC WELFARE BY THE PROPER TAXING
AUTHORITIES AT A LIKE RATE AGAINST ALL PROPERTY OVER WHICH SUCH AUTHORI-

S. 6359--C                         209

TIES HAVE JURISDICTION, AND PROVIDED THAT WHERE TAXES ARE LEVIED  PURSU-
ANT  TO  ARTICLE  EIGHTEEN OR NINETEEN OF THE REAL PROPERTY TAX LAW, THE
PROPERTY MUST HAVE BEEN TAXED AT THE RATE DETERMINED FOR  THE  CLASS  IN
WHICH IT IS CONTAINED, AS PROVIDED BY SUCH ARTICLE EIGHTEEN OR NINETEEN,
WHICHEVER  IS  APPLICABLE. THE TERM REAL PROPERTY TAX DOES NOT INCLUDE A
CHARGE FOR LOCAL BENEFITS, INCLUDING ANY PORTION OF THAT CHARGE THAT  IS
PROPERLY ALLOCATED TO THE COSTS ATTRIBUTABLE TO MAINTENANCE OR INTEREST,
WHEN  (I)  THE PROPERTY SUBJECT TO THE CHARGE IS LIMITED TO THE PROPERTY
THAT BENEFITS FROM THE CHARGE, OR (II)  THE  AMOUNT  OF  THE  CHARGE  IS
DETERMINED  BY  THE  BENEFIT  TO  THE  PROPERTY  ASSESSED,  OR (III) THE
IMPROVEMENT FOR WHICH THE CHARGE IS ASSESSED TENDS TO INCREASE THE PROP-
ERTY VALUE.
  (II) IN ADDITION, THE TERM REAL PROPERTY TAX INCLUDES  TAXES  PAID  BY
THE TAXPAYER UPON REAL PROPERTY PRINCIPALLY USED DURING THE TAXABLE YEAR
BY  THE  TAXPAYER  IN  MANUFACTURING WHERE THE TAXPAYER LEASES SUCH REAL
PROPERTY FROM AN UNRELATED THIRD PARTY IF THE FOLLOWING  CONDITIONS  ARE
SATISFIED:  (I)  THE TAX MUST BE PAID BY THE TAXPAYER AS LESSEE PURSUANT
TO EXPLICIT REQUIREMENTS IN A WRITTEN LEASE, AND (II)  THE  TAXPAYER  AS
LESSEE  HAS  PAID  SUCH  TAXES  DIRECTLY TO THE TAXING AUTHORITY AND HAS
RECEIVED A WRITTEN RECEIPT FOR PAYMENT OF TAXES FROM THE TAXING AUTHORI-
TY. IN THE CASE OF A COMBINED GROUP THAT  CONSTITUTES  A  QUALIFIED  NEW
YORK  MANUFACTURER,  THE CONDITIONS IN THE PRECEDING SENTENCE ARE SATIS-
FIED IF ONE CORPORATION IN THE COMBINED GROUP IS THE LESSEE AND  ANOTHER
CORPORATION  IN  THE  COMBINED  GROUP  MAKES  THE PAYMENTS TO THE TAXING
AUTHORITY.
  (III) THE TERM REAL PROPERTY TAX DOES NOT INCLUDE A  PAYMENT  MADE  BY
THE  TAXPAYER IN CONNECTION WITH AN AGREEMENT FOR THE PAYMENT IN LIEU OF
TAXES ON REAL PROPERTY AS DEFINED IN SUBDIVISION  SEVENTEEN  OF  SECTION
EIGHT  HUNDRED  FIFTY-FOUR  OF  THE  GENERAL MUNICIPAL LAW, WHETHER SUCH
PROPERTY IS OWNED OR LEASED BY THE TAXPAYER, UNLESS THE PAYMENT IN  LIEU
OF  TAXES  WAS  MADE PURSUANT TO A PAYMENT IN LIEU OF TAX AGREEMENT THAT
WAS ENTERED INTO IN CONJUNCTION WITH THE SETTLEMENT OF A TAX  CERTIORARI
PROCEEDING  COMMENCED PURSUANT TO ARTICLE SEVEN OF THE REAL PROPERTY TAX
LAW.
  (IV) THE REAL PROPERTY TAXES MUST BE PAID BY THE TAXPAYER IN THE  YEAR
SUCH TAXES BECOME A LIEN ON THE REAL PROPERTY.
  (3)  CREDIT  RECAPTURE. WHERE A QUALIFIED NEW YORK MANUFACTURER'S REAL
PROPERTY TAXES WHICH WERE THE BASIS FOR  THE  ALLOWANCE  OF  THE  CREDIT
PROVIDED FOR UNDER THIS SUBDIVISION ARE SUBSEQUENTLY REDUCED AS A RESULT
OF A FINAL ORDER IN ANY PROCEEDING UNDER ARTICLE SEVEN OF THE REAL PROP-
ERTY  TAX LAW OR OTHER PROVISION OF LAW, THE TAXPAYER SHALL ADD BACK, IN
THE TAXABLE YEAR IN WHICH SUCH FINAL ORDER IS ISSUED, THE EXCESS OF  (I)
THE AMOUNT OF CREDIT ORIGINALLY ALLOWED FOR A TAXABLE YEAR OVER (II) THE
AMOUNT  OF CREDIT DETERMINED BASED UPON THE REDUCED REAL PROPERTY TAXES.
IF SUCH FINAL ORDER REDUCES REAL PROPERTY TAXES FOR MORE THAN ONE  YEAR,
THE  TAXPAYER  MUST DETERMINE HOW MUCH OF SUCH REDUCTION IS ATTRIBUTABLE
TO EACH YEAR COVERED BY SUCH FINAL ORDER AND  CALCULATE  THE  AMOUNT  OF
CREDIT  WHICH  IS REQUIRED BY THIS SUBDIVISION TO BE RECAPTURED FOR EACH
YEAR BASED ON SUCH REDUCTION.
  (4) IF THE AMOUNT OF THE CREDIT ALLOWED UNDER THIS SUBSECTION FOR  ANY
TAXABLE  YEAR  EXCEEDS THE TAXPAYER'S TAX FOR SUCH YEAR, THE EXCESS WILL
BE TREATED AS AN OVERPAYMENT TO BE CREDITED OR  REFUNDED  IN  ACCORDANCE
WITH  THE  PROVISIONS OF SECTION SIX HUNDRED EIGHTY-SIX OF THIS ARTICLE,
PROVIDED HOWEVER, NO INTEREST WILL BE PAID THEREON.
  S 4-a. Subsection (b) of section 612 of the  tax  law  is  amended  by
adding a new paragraph 40 to read as follows:

S. 6359--C                         210

  (40)  THE  AMOUNT  OF ANY FEDERAL DEDUCTION FOR REAL PROPERTY TAXES TO
THE EXTENT SUCH TAXES ARE USED AS THE BASIS OF THE  CALCULATION  OF  THE
REAL PROPERTY TAX CREDIT FOR MANUFACTURERS ALLOWED UNDER SUBSECTION (YY)
OF SECTION SIX HUNDRED SIX OF THIS ARTICLE.
  S  5.  Subparagraph (vii) of paragraph (a) of subdivision 1 of section
210 of the tax law, as added by section 1 of part Z of chapter 59 of the
laws of 2013, is amended to read as follows:
  (vii) For a qualified New York manufacturer, as  defined  in  subpara-
graph  (vi) of this paragraph, the rate at which the tax is computed [in
effect for taxable years beginning on or after January first, two  thou-
sand thirteen and before January first, two thousand fourteen for quali-
fied  New  York  manufacturers  shall  be reduced by nine and two-tenths
percent for taxable years commencing on  or  after  January  first,  two
thousand fourteen and before January first, two thousand fifteen, twelve
and  three-tenths percent for taxable years commencing on or after Janu-
ary first, two thousand fifteen and before January first,  two  thousand
sixteen, fifteen and four-tenths percent for taxable years commencing on
or  after  January first, two thousand sixteen and before January first,
two thousand eighteen, and twenty-five percent for taxable years  begin-
ning  on  or  after  January first, two thousand eighteen] SHALL BE ZERO
PERCENT OF THE TAXPAYER'S BUSINESS INCOME BASE.
  S 6. This act shall take effect immediately and shall apply to taxable
years beginning on or after January 1, 2014; provided that sections one,
two, three and five of this act shall expire December 31, 2014 when upon
such date such provisions shall be deemed repealed.

                                 PART S

                          Intentionally Omitted

                                 PART T

  Section 1. Section 39 of the tax law is amended by adding a new subdi-
vision (c-1) to read as follows:
  (C-1) EXCISE TAX ON TELECOMMUNICATION SERVICES. SUCH BUSINESS OR OWNER
OF A BUSINESS SHALL BE ELIGIBLE FOR A CREDIT OF THE EXCISE TAX ON  TELE-
COMMUNICATION  SERVICES  IMPOSED  BY SECTION ONE HUNDRED EIGHTY-SIX-E OF
THIS CHAPTER THAT IS PASSED THROUGH TO SUCH BUSINESS,  PURSUANT  TO  THE
PROVISIONS REFERENCED IN SUBDIVISION (K) OF THIS SECTION.
  S  2.  Paragraphs  4 and 6 of subdivision (k) of section 39 of the tax
law, as added by section 2 of part A of chapter 68 of the laws of  2013,
are amended to read as follows:
  (4) Article 9-A: section 210, subdivision 47 AND SUBDIVISION 48.
  (6) Article 22: section 606, subsection (ww) AND SUBSECTION (XX).
  S 2-a. Paragraph (b) of subdivision 9 of section 208 of the tax law is
amended by adding a new subparagraph 20-a to read as follows:
  (20-A) THE AMOUNT OF ANY FEDERAL DEDUCTION FOR THE EXCISE TAX ON TELE-
COMMUNICATION SERVICES TO THE EXTENT SUCH TAXES ARE USED AS THE BASIS OF
THE  CALCULATION OF THE TAX-FREE NY AREA EXCISE TAX ON TELECOMMUNICATION
SERVICES CREDIT ALLOWED UNDER SUBDIVISION  FORTY-EIGHT  OF  SECTION  TWO
HUNDRED TEN OF THIS ARTICLE.
  S 3. Section 210 of the tax law is amended by adding a new subdivision
48 to read as follows:
  48.  THE  TAX-FREE  NY  AREA  EXCISE TAX ON TELECOMMUNICATION SERVICES
CREDIT. A TAXPAYER THAT IS A BUSINESS OR OWNER OF  A  BUSINESS  THAT  IS

S. 6359--C                         211

LOCATED IN A TAX-FREE NY AREA APPROVED PURSUANT TO ARTICLE TWENTY-ONE OF
THE  ECONOMIC  DEVELOPMENT  LAW  SHALL  BE ALLOWED A CREDIT EQUAL TO THE
EXCISE TAX ON TELECOMMUNICATION SERVICES IMPOSED BY SECTION ONE  HUNDRED
EIGHTY-SIX-E  OF THIS CHAPTER AND PASSED THROUGH TO SUCH BUSINESS DURING
THE TAXABLE YEAR TO THE  EXTENT  NOT  OTHERWISE  DEDUCTED  IN  COMPUTING
ENTIRE  NET INCOME. HOWEVER, ANY AMOUNT OF CREDIT NOT DEDUCTIBLE IN SUCH
TAXABLE YEAR SHALL BE TREATED AS AN OVERPAYMENT OF TAX TO BE CREDITED OR
REFUNDED IN ACCORDANCE WITH  THE  PROVISIONS  OF  SECTION  ONE  THOUSAND
EIGHTY-SIX  OF  THIS  CHAPTER. THIS CREDIT MAY BE CLAIMED ONLY WHERE ANY
TAX IMPOSED BY SUCH SECTION ONE HUNDRED EIGHTY-SIX-E HAS BEEN SEPARATELY
STATED ON A BILL FROM THE PROVIDER  OF  TELECOMMUNICATION  SERVICES  AND
PAID  BY  SUCH  BUSINESS WITH RESPECT TO SUCH SERVICES RENDERED WITHIN A
TAX-FREE NY AREA DURING THE TAXABLE YEAR.  UNLESS  THE  TAXPAYER  HAS  A
TAX-FREE  NY  AREA  ALLOCATION FACTOR OF ONE HUNDRED PERCENT, THE CREDIT
ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE
TAX DUE FOR SUCH YEAR TO LESS THAN THE AMOUNT  PRESCRIBED  IN  PARAGRAPH
(D)   OF  SUBDIVISION  ONE  OF  THIS  SECTION.  PROVIDED,  HOWEVER,  THE
PROVISIONS OF SUBSECTION (C) OF SECTION  ONE  THOUSAND  EIGHTY-EIGHT  OF
THIS CHAPTER NOTWITHSTANDING, NO INTEREST SHALL BE PAID THEREON.
  S  4. Section 606 of the tax law is amended by adding a new subsection
(xx) to read as follows:
  (XX) THE TAX-FREE NY AREA EXCISE  TAX  ON  TELECOMMUNICATION  SERVICES
CREDIT.  A  TAXPAYER  THAT  IS A BUSINESS OR OWNER OF A BUSINESS THAT IS
LOCATED IN A TAX-FREE NY AREA APPROVED PURSUANT TO ARTICLE TWENTY-ONE OF
THE ECONOMIC DEVELOPMENT LAW SHALL BE ALLOWED  A  CREDIT  EQUAL  TO  THE
EXCISE  TAX ON TELECOMMUNICATION SERVICES IMPOSED BY SECTION ONE HUNDRED
EIGHTY-SIX-E OF THIS CHAPTER AND PASSED THROUGH TO SUCH BUSINESS  DURING
THE  TAXABLE  YEAR  TO  THE  EXTENT  NOT OTHERWISE DEDUCTED IN COMPUTING
FEDERAL ADJUSTED GROSS INCOME.  THIS CREDIT MAY BE  CLAIMED  ONLY  WHERE
ANY  TAX IMPOSED BY SUCH SECTION ONE HUNDRED EIGHTY-SIX-E HAS BEEN SEPA-
RATELY STATED ON A BILL FROM THE PROVIDER OF TELECOMMUNICATION  SERVICES
AND  PAID BY SUCH TAXPAYER WITH RESPECT TO SUCH SERVICES RENDERED WITHIN
A TAX-FREE NY AREA DURING THE TAXABLE YEAR. IF THE AMOUNT OF THE  CREDIT
ALLOWED  UNDER  THIS SUBSECTION FOR ANY TAXABLE YEAR EXCEEDS THE TAXPAY-
ER'S TAX FOR SUCH YEAR, THE EXCESS WILL BE TREATED AS AN OVERPAYMENT  TO
BE CREDITED OR REFUNDED IN ACCORDANCE WITH THE PROVISIONS OF SECTION SIX
HUNDRED  EIGHTY-SIX OF THIS ARTICLE, PROVIDED, HOWEVER, THAT NO INTEREST
WILL BE PAID THEREON.
  S 5. Subparagraph (B) of paragraph 1 of subsection (i) of section  606
of  the  tax  law  is amended by adding a new clause (xxxvii) to read as
follows:
(XXXVII) TAX FREE NY AREA EXCISE        AMOUNT OF CREDIT UNDER
TAX ON TELECOMMUNICATION SERVICES       SUBDIVISION FORTY-EIGHT
CREDIT UNDER SUBSECTION (XX)            OF SECTION TWO HUNDRED TEN
  S 5-a. Subsection (b) of section 612 of the  tax  law  is  amended  by
adding a new paragraph 39-a to read as follows:
  (39-A) THE AMOUNT OF ANY FEDERAL DEDUCTION FOR THE EXCISE TAX ON TELE-
COMMUNICATION SERVICES TO THE EXTENT SUCH TAXES ARE USED AS THE BASIS OF
THE  CALCULATION  OF  TAX-FREE  NY  AREA EXCISE TAX ON TELECOMMUNICATION
SERVICES CREDIT ALLOWED UNDER SUBSECTION (XX) OF SECTION SIX HUNDRED SIX
OF THIS ARTICLE.
  S 6. This act shall take effect immediately and shall apply to taxable
years beginning on or after January 1, 2014.

                                 PART U

S. 6359--C                         212

  Section 1. Paragraph (a) of subdivision 44 of section 210 of  the  tax
law,  as  amended  by  section  2 of part T of chapter 59 of the laws of
2012, is amended to read as follows:
  (a) A taxpayer that has been certified by the commissioner of labor as
a  qualified employer pursuant to section twenty-five-a of the labor law
shall be allowed a credit against the tax imposed by this article  equal
to  (i)  five  hundred  dollars  per month for up to six months for each
qualified employee the employer  employs  in  a  full-time  job  or  two
hundred  fifty dollars per month for up to six months for each qualified
employee the employer employs in a part-time  job  of  at  least  twenty
hours  per  week  OR  TEN  HOURS PER WEEK WHEN THE QUALIFIED EMPLOYEE IS
ENROLLED IN HIGH SCHOOL FULL-TIME, and (ii)  one  thousand  dollars  for
each  qualified  employee who is employed for at least an additional six
months by the qualified employer in a  full-time  job  or  five  hundred
dollars  for  each  qualified  employee  who is employed for at least an
additional six months by the qualified employer in a part-time job of at
least twenty hours per week OR TEN HOURS PER  WEEK  WHEN  THE  QUALIFIED
EMPLOYEE  IS  ENROLLED IN HIGH SCHOOL FULL-TIME, AND (III) AN ADDITIONAL
ONE THOUSAND DOLLARS FOR EACH QUALIFIED EMPLOYEE WHO IS EMPLOYED FOR  AT
LEAST  AN ADDITIONAL YEAR AFTER THE FIRST YEAR OF THE EMPLOYEE'S EMPLOY-
MENT BY THE QUALIFIED EMPLOYER  IN  A  FULL-TIME  JOB  OR  FIVE  HUNDRED
DOLLARS  FOR  EACH  QUALIFIED  EMPLOYEE  WHO IS EMPLOYED FOR AT LEAST AN
ADDITIONAL YEAR AFTER THE FIRST YEAR OF THE EMPLOYEE'S EMPLOYMENT BY THE
QUALIFIED EMPLOYER IN A PART-TIME JOB OF AT LEAST TWENTY HOURS PER  WEEK
OR  TEN  HOURS  PER WEEK WHEN THE QUALIFIED EMPLOYEE IS ENROLLED IN HIGH
SCHOOL FULL-TIME.  For purposes of this subdivision, the term "qualified
employee" shall have the same meaning as set forth in subdivision (b) of
section twenty-five-a of the  labor  law.  The  portion  of  the  credit
described in subparagraph (i) of this paragraph shall be allowed for the
taxable  year in which the wages are paid to the qualified employee, and
the portion of the credit described in subparagraph (ii) of  this  para-
graph  shall  be allowed in the taxable year in which the additional six
month period ends.
  S 2. Paragraph 1 of subsection (tt) of section 606 of the tax law,  as
amended  by  section  3  of part T of chapter 59 of the laws of 2012, is
amended to read as follows:
  (1) A taxpayer that has been certified by the commissioner of labor as
a qualified employer pursuant to section twenty-five-a of the labor  law
shall  be allowed a credit against the tax imposed by this article equal
to (A) five hundred dollars per month for up  to  six  months  for  each
qualified  employee  the  employer  employs  in  a  full-time job or two
hundred fifty dollars per month for up to six months for each  qualified
employee  the  employer  employs  in  a part-time job of at least twenty
hours per week OR TEN HOURS PER WEEK  WHEN  THE  QUALIFIED  EMPLOYEE  IS
ENROLLED IN HIGH SCHOOL FULL-TIME, and (B) one thousand dollars for each
qualified employee who is employed for at least an additional six months
by the qualified employer in a full-time job or five hundred dollars for
each  qualified  employee who is employed for at least an additional six
months by the qualified employer in a part-time job of at  least  twenty
hours  per  week  OR  TEN  HOURS PER WEEK WHEN THE QUALIFIED EMPLOYEE IS
ENROLLED IN HIGH SCHOOL FULL-TIME, AND (C) AN  ADDITIONAL  ONE  THOUSAND
DOLLARS  FOR  EACH  QUALIFIED  EMPLOYEE  WHO IS EMPLOYED FOR AT LEAST AN
ADDITIONAL YEAR AFTER THE FIRST YEAR OF THE EMPLOYEE'S EMPLOYMENT BY THE
QUALIFIED EMPLOYER IN A FULL-TIME JOB OR FIVE HUNDRED DOLLARS  FOR  EACH
QUALIFIED EMPLOYEE WHO IS EMPLOYED FOR AT LEAST AN ADDITIONAL YEAR AFTER
THE FIRST YEAR OF THE EMPLOYEE'S EMPLOYMENT BY THE QUALIFIED EMPLOYER IN

S. 6359--C                         213

A  PART-TIME JOB OF AT LEAST TWENTY HOURS PER WEEK OR TEN HOURS PER WEEK
WHEN THE QUALIFIED EMPLOYEE IS ENROLLED IN HIGH  SCHOOL  FULL-TIME.    A
taxpayer that is a partner in a partnership, member of a limited liabil-
ity  company  or shareholder in an S corporation that has been certified
by the commissioner of labor as a qualified employer pursuant to section
twenty-five-a of the labor law shall be allowed its pro  rata  share  of
the  credit  earned  by  the partnership, limited liability company or S
corporation. For  purposes  of  this  subsection,  the  term  "qualified
employee" shall have the same meaning as set forth in subdivision (b) of
section  twenty-five-a  of  the  labor  law.  The  portion of the credit
described in subparagraph (A) of this paragraph shall be allowed for the
taxable year in which the wages are paid to the qualified employee,  and
the  portion  of  the credit described in subparagraph (B) of this para-
graph shall be allowed in the taxable year in which the  additional  six
month period ends.
  S  3.  Subdivision (a) of section 25-a of the labor law, as amended by
section 2 of part DD of chapter 59 of the laws of 2013,  is  amended  to
read as follows:
  (a) The commissioner is authorized to establish and administer the New
York youth works tax credit program to provide tax incentives to employ-
ers  for  employing  at risk youth in part-time and full-time positions.
There will be five distinct pools of tax incentives.  Program  one  will
cover  tax incentives allocated for two thousand twelve and two thousand
thirteen. Program two will cover tax incentives allocated in  two  thou-
sand  fourteen to be used in two thousand fourteen and fifteen.  Program
three will cover tax incentives allocated in two thousand fifteen to  be
used  in  two  thousand fifteen and sixteen. Program four will cover tax
incentives allocated in two thousand sixteen to be used in two  thousand
sixteen  and seventeen. Program five will cover tax incentives allocated
in two thousand seventeen to be used in two thousand seventeen and eigh-
teen. The commissioner is  authorized  to  allocate  up  to  twenty-five
million  dollars  of  tax  credits  under program one, [six] TEN million
dollars of tax credits under program two, [six] TEN million  dollars  of
tax  credits  under  program three, [and six] TEN million dollars of tax
credits under program four, and [six] TEN million dollars of tax credits
under program five.
  S 4. This act shall take effect immediately and apply to taxable years
beginning on or after January 1, 2014.

                                 PART V

  Section 1. Section 19 of Part W-1 of chapter 109 of the laws  of  2006
amending  the  tax  law and other laws relating to providing exemptions,
reimbursements and credits from various taxes  for  certain  alternative
fuels,  as  amended  by section 1 of part D of chapter 59 of the laws of
2012, is amended to read as follows:
  S 19. This act shall take effect immediately; provided, however,  that
sections one through thirteen of this act shall take effect September 1,
2006  and  shall be deemed repealed on September 1, [2014] 2016 and such
repeal shall  apply  in  accordance  with  the  applicable  transitional
provisions  of sections 1106 and 1217 of the tax law, and shall apply to
sales made, fuel compounded or manufactured, and uses  occurring  on  or
after  such  date,  and with respect to sections seven through eleven of
this act, in  accordance  with  applicable  transitional  provisions  of
sections  1106  and  1217  of  the  tax law; provided, however, that the
commissioner of taxation and finance shall be authorized  on  and  after

S. 6359--C                         214

the  date  this act shall have become a law to adopt and amend any rules
or regulations  and  to  take  any  steps  necessary  to  implement  the
provisions  of this act; provided further that sections fourteen through
sixteen  of  this  act  shall take effect immediately and shall apply to
taxable years beginning on or after January 1, 2006.
  S 2. This act shall take effect immediately.

                                 PART W

  Section 1. Section 11 of part EE of chapter 63 of the  laws  of  2000,
amending  the  tax law and other laws relating to modifying the distrib-
ution of funds from the motor vehicle fuel excise  tax,  as  amended  by
section  1  of  part  M of chapter 61 of the laws of 2011, is amended to
read as follows:
  S 11. Notwithstanding any other law, rule or regulation to the contra-
ry, the comptroller is hereby authorized  and  directed  to  deposit  in
equal  monthly installments and distribute pursuant to the provisions of
subdivision (d) of section 301-j of the tax law amounts listed below  to
the  credit of the dedicated highway and bridge trust fund and the dedi-
cated mass transportation trust fund from all motor vehicle receipts now
deposited into the general fund pursuant to provisions  of  the  vehicle
and  traffic  law:    twenty-eight million four hundred thousand dollars
from April 1, 2002 through March  31,  2003,  sixty-seven  million  nine
hundred  thousand dollars from April 1, 2003 through March 31, 2004, one
hundred seventy million one hundred thousand dollars from April 1,  2004
through  March  31,  2005,  and one hundred percent of all motor vehicle
receipts pursuant to provisions of the vehicle and traffic law that  are
not  otherwise directed to be deposited in a fund other than the general
fund from April 1, 2005 through March 31, 2006, and the same amount each
year thereafter UNTIL MARCH 31, 2014. FROM APRIL 1, 2014  THROUGH  MARCH
31, 2015, AND EACH YEAR THEREAFTER, THE COMPTROLLER SHALL, ON A QUARTER-
LY BASIS, CERTIFY AND TRANSFER SIXTEEN MILLION FOUR HUNDRED NINETY-EIGHT
THOUSAND  TWO  HUNDRED  FIFTY-FIVE  DOLLARS TO THE DEDICATED HIGHWAY AND
BRIDGE TRUST FUND AND FIFTEEN MILLION SIX  HUNDRED  SIXTY-FIVE  THOUSAND
TWO  HUNDRED  FORTY-FIVE  DOLLARS  TO  THE DEDICATED MASS TRANSPORTATION
TRUST FUND.
  S 2. Paragraph (f) of subdivision 4 of section 503 of the vehicle  and
traffic  law,  as added by section 1 of part W of chapter 59 of the laws
of 2006, is amended to read as follows:
  (f) Notwithstanding any  other  provision  of  law  to  the  contrary,
commencing  April first, two thousand six and ending March thirty-first,
two thousand [seven] FOURTEEN, IN EACH YEAR,  the  first  forty  million
seven hundred thousand dollars of fees collected pursuant to this subdi-
vision  and  section  eleven hundred ninety-nine of this chapter, in the
aggregate, shall be paid to the state comptroller who shall deposit such
money in the state treasury pursuant to section one  hundred  twenty-one
of  the  state  finance  law to the credit of the general fund. Any such
fees collected in excess of such amount shall be paid to the  credit  of
the  comptroller  on  account  of the dedicated highway and bridge trust
fund established pursuant to section eighty-nine-b of the state  finance
law.  [Commencing April first, two thousand seven and ending March thir-
ty-first, two thousand eight, and for each such fiscal year  thereafter,
the first forty million seven hundred thousand dollars of fees collected
pursuant  to  this subdivision and section eleven hundred ninety-nine of
this chapter, in the aggregate, shall be paid to the  state  comptroller
who  shall  deposit such money in the state treasury pursuant to section

S. 6359--C                         215

one hundred twenty-one of the state finance law to  the  credit  of  the
general  fund. Any such fees collected in excess of such amount for each
such state fiscal year, shall be paid to the credit of  the  comptroller
on  account  of  the dedicated highway and bridge trust fund established
pursuant to section eighty-nine-b of the state finance law.]  COMMENCING
APRIL  FIRST, TWO THOUSAND FOURTEEN AND FOR EACH SUCH FISCAL YEAR THERE-
AFTER, ANY SUCH FEES COLLECTED PURSUANT TO THIS SUBDIVISION AND  SECTION
ELEVEN  HUNDRED  NINETY-NINE OF THIS CHAPTER SHALL BE PAID TO THE CREDIT
OF THE COMPTROLLER ON ACCOUNT OF THE DEDICATED HIGHWAY AND BRIDGE  TRUST
FUND  ESTABLISHED PURSUANT TO SECTION EIGHTY-NINE-B OF THE STATE FINANCE
LAW.
  S 3. This act shall take effect immediately and  shall  be  deemed  to
have been in full force and effect on and after April 1, 2014.

                                 PART X

  Section 1. Section 951 of the tax law, as amended by chapter 67 of the
laws  of 1978, subsection (a) as amended by section 1 of part T of chap-
ter 57 of the laws of 2010, subsection (b) as amended by  section  5  of
part A of chapter 389 of the laws of 1997 and subsection (c) as added by
chapter 538 of the laws of 2013, is amended to read as follows:
  S  951.  Applicable  internal  revenue code provisions.-- (a) [Dates]
GENERAL.  For purposes of this article, any reference  to  the  internal
revenue code means the United States Internal Revenue Code of 1986, with
all  amendments  enacted  on  or  before  [July  twenty-second, nineteen
hundred ninety-eight,] JANUARY FIRST, TWO THOUSAND FOURTEEN and,  unless
specifically provided otherwise in this article, any reference to Decem-
ber  thirty-first,  nineteen hundred seventy-six or January first, nine-
teen hundred seventy-seven contained in  the  provisions  of  such  code
which  are  applicable  to  the determination of the tax imposed by this
article shall be read as a reference to June thirtieth, nineteen hundred
seventy-eight or July first, nineteen hundred seventy-eight, respective-
ly. [Notwithstanding the  foregoing,  the  unified  credit  against  the
estate  tax provided in section two thousand ten of the internal revenue
code shall, for purposes of this article, be the amount allowable as  if
the federal applicable exclusion amount were one million dollars.]
  (b)  [Applicable  generation-skipping  transfer tax provisions.--Where
any reference is made in this article  (or  in  the  provisions  of  the
internal  revenue  code  which  are  made  applicable by section two, as
amended, of chapter one  thousand  thirteen  of  the  laws  of  nineteen
hundred sixty-two, to the determination of the tax imposed by this arti-
cle  and  appended  thereto)  to provisions of the internal revenue code
contained in section one thousand  twenty-five  of  this  chapter,  such
internal  revenue code provisions contained in such section one thousand
twenty-five shall apply to the provisions of this article  in  the  same
manner  and  with  the  same force and effect as if the language of such
provisions of the internal revenue code had been  incorporated  in  full
into this article except to the extent that any such provision is either
inconsistent  with a provision of this article or is not relevant there-
to.
  (c)] Disposition to surviving spouse who is not a United States  citi-
zen.  In  the case of an estate where a federal estate tax return is not
required for federal estate tax purposes, a disposition to  a  surviving
spouse  that  would qualify for the federal estate tax marital deduction
under section 2056 of the internal revenue code if not for  the  limita-
tion  imposed  by subsection (d)(1) of such section shall nonetheless be

S. 6359--C                         216

treated as qualifying for the federal estate tax marital  deduction  for
purposes  of computing the tax imposed by section nine hundred fifty-two
of this part, without  requiring  that  such  disposition  pass  to  the
surviving  spouse  in a qualified domestic trust as required for federal
purposes by internal revenue code section 2056(d)(2).
  S 2. Section 952 of the tax law, as added by section 9 of  part  A  of
chapter  389 of the laws of 1997, subsection (b) as amended by section 3
of part I of chapter 60 of the laws of  2004,  is  amended  to  read  as
follows:
  S 952. Tax imposed. (a) A tax is hereby imposed on the transfer of the
New York estate by every deceased individual who at his or her death was
a  resident of New York state. [The tax imposed by this subsection shall
be an amount equal to the maximum amount allowable against  the  federal
estate  tax as a credit for state death taxes under section two thousand
eleven of the internal revenue code.]
  (b) [If the transfer of any part of the estate of a deceased  resident
includes  real  or  tangible  personal  property  having an actual situs
outside New York state, the  tax  imposed  by  subsection  (a)  of  this
section  shall  be  reduced  by  an amount determined by multiplying the
maximum amount of the federal credit for state death taxes  by  a  frac-
tion,  the  numerator  of  which  is the decedent's federal gross estate
reduced by his or her New York gross estate and the denominator of which
is his or her federal gross estate.] COMPUTATION OF TAX. THE TAX IMPOSED
BY THIS SECTION SHALL BE COMPUTED ON THE DECEASED  RESIDENT'S  NEW  YORK
TAXABLE ESTATE AS FOLLOWS:
IN  THE  CASE  OF  DECEDENTS  DYING ON OR AFTER APRIL 1, 2014 AND BEFORE
APRIL 1, 2015
IF THE NEW YORK TAXABLE ESTATE IS:      THE TAX IS:
NOT OVER $500,000                       3.06% OF TAXABLE ESTATE
OVER $500,000 BUT NOT OVER $1,000,000   $15,300 PLUS 5.0% OF EXCESS OVER
                                        $500,000
OVER $1,000,000 BUT NOT OVER $1,500,000 $40,300 PLUS 5.5% OF EXCESS OVER
                                        $1,000,000
OVER $1,500,000 BUT NOT OVER $2,100,000 $67,800 PLUS 6.5% OF EXCESS OVER
                                        $1,500,000
OVER $2,100,000 BUT NOT OVER $2,600,000 $106,800 PLUS 8.0% OF EXCESS
                                        OVER $2,100,000
OVER $2,600,000 BUT NOT OVER $3,100,000 $146,800 PLUS 8.8% OF EXCESS OVER
                                        $2,600,000
OVER $3,100,000 BUT NOT OVER $3,600,000 $190,800 PLUS 9.6% OF EXCESS OVER
                                        $3,100,000
OVER $3,600,000 BUT NOT OVER $4,100,000 $238,800 PLUS 10.4% OF EXCESS
                                        OVER $3,600,000
OVER $4,100,000 BUT NOT OVER $5,100,000 $290,800 PLUS 11.2% OF EXCESS
                                        OVER $4,100,000
OVER $5,100,000 BUT NOT OVER $6,100,000 $402,800 PLUS 12.0% OF EXCESS
                                        OVER $5,100,000
OVER $6,100,000 BUT NOT OVER $7,100,000 $522,800 PLUS 12.8% OF EXCESS
                                        OVER $6,100,000
OVER $7,100,000 BUT NOT OVER $8,100,000 $650,800 PLUS 13.6% OF EXCESS
                                        OVER $7,100,000
OVER $8,100,000 BUT NOT OVER $9,100,000 $786,800 PLUS 14.4% OF EXCESS
                                        OVER $8,100,000
OVER $9,100,000                         $930,800 PLUS 14.5% OF EXCESS OVER
                                        $9,100,000

S. 6359--C                         217

IN THE CASE OF DECEDENTS DYING ON OR AFTER APRIL 1, 2015 AND BEFORE
APRIL 1, 2016
IF THE NEW YORK TAXABLE ESTATE IS:      THE TAX IS:
NOT OVER $500,000                       3.06% OF TAXABLE ESTATE
OVER $500,000 BUT NOT OVER $1,000,000   $15,300 PLUS 5.0% OF EXCESS OVER
                                        $500,000
OVER $1,000,000 BUT NOT OVER $1,500,000 $40,300 PLUS 5.5% OF EXCESS OVER
                                        $1,000,000
OVER $1,500,000 BUT NOT OVER $2,100,000 $67,800 PLUS 6.5% OF EXCESS
                                        OVER $1,500,000
OVER $2,100,000 BUT NOT OVER $2,600,000 $106,800 PLUS 8.0% OF EXCESS
                                        OVER $2,100,000
OVER $2,600,000 BUT NOT OVER $3,100,000 $146,800 PLUS 8.8% OF EXCESS
                                        OVER $2,600,000
OVER $3,100,000 BUT NOT OVER $3,600,000 $190,800 PLUS 9.6% OF EXCESS
                                        OVER $3,100,000
OVER $3,600,000 BUT NOT OVER $4,100,000 $238,800 PLUS 10.4% OF EXCESS
                                        OVER $3,600,000
OVER $4,100,000 BUT NOT OVER $5,100,000 $290,800 PLUS 11.2% OF EXCESS
                                        OVER $4,100,000
OVER $5,100,000 BUT NOT OVER $6,100,000 $402,800 PLUS 12.0% OF EXCESS
                                        OVER $5,100,000
OVER $6,100,000 BUT NOT OVER $7,100,000 $522,800 PLUS 12.8% OF EXCESS
                                        OVER $6,100,000
OVER $7,100,000                         $650,800 PLUS 13.0% OF EXCESS
                                        OVER $7,100,000
IN THE CASE OF DECEDENTS DYING ON OR AFTER APRIL 1, 2016 AND BEFORE
APRIL 1, 2017
IF THE NEW YORK TAXABLE ESTATE IS:      THE TAX IS:
NOT OVER $500,000                       3.06% OF TAXABLE ESTATE
OVER $500,000 BUT NOT OVER $1,000,000   $15,300 PLUS 5.0% OF EXCESS OVER
                                        $500,000
OVER $1,000,000 BUT NOT OVER $1,500,000 $40,300 PLUS 5.5% OF EXCESS OVER
                                        $1,000,000
OVER $1,500,000 BUT NOT OVER $2,100,000 $67,800 PLUS 6.5% OF EXCESS
                                        OVER $1,500,000
OVER $2,100,000 BUT NOT OVER $2,600,000 $106,800 PLUS 8.0% OF EXCESS
                                        OVER $2,100,000
OVER $2,600,000 BUT NOT OVER $3,100,000 $146,800 PLUS 8.8% OF EXCESS
                                        OVER $2,600,000
OVER $3,100,000 BUT NOT OVER $3,600,000 $190,800 PLUS 9.6% OF EXCESS
                                        OVER $3,100,000
OVER $3,600,000 BUT NOT OVER $4,100,000 $238,800 PLUS 10.4% OF EXCESS
                                        OVER $3,600,000
OVER $4,100,000 BUT NOT OVER $5,100,000 $290,800 PLUS 11.2% OF EXCESS
                                        OVER $4,100,000
OVER $5,100,000                         $402,800 PLUS 11.5% OF EXCESS
                                        OVER $5,100,000
IN THE CASE OF DECEDENTS DYING ON OR AFTER APRIL 1, 2017
IF THE NEW YORK TAXABLE ESTATE IS:      THE TAX IS:
NOT OVER $500,000                       3.06% OF TAXABLE ESTATE
OVER $500,000 BUT NOT OVER $1,000,000   $15,300 PLUS 5.0% OF EXCESS OVER
                                        $500,000
OVER $1,000,000 BUT NOT OVER $1,500,000 $40,300 PLUS 5.5% OF EXCESS OVER
                                        $1,000,000
OVER $1,500,000 BUT NOT OVER $2,100,000 $67,800 PLUS 6.5% OF

S. 6359--C                         218

                                        EXCESS OVER $1,500,000
OVER $2,100,000 BUT NOT OVER $2,600,000 $106,800 PLUS 8.0% OF
                                        EXCESS OVER $2,100,000
OVER $2,600,000 BUT NOT OVER $3,100,000 $146,800 PLUS 8.8% OF
                                        EXCESS OVER $2,600,000
OVER $3,100,000 BUT NOT OVER $3,600,000 $190,800 PLUS 9.6% OF EXCESS
                                        OVER $3,100,000
OVER $3,600,000                         $238,800 PLUS 10.0% OF EXCESS
                                        OVER $3,600,000
  (C)  APPLICABLE  CREDIT  AMOUNT. (1) A CREDIT OF THE APPLICABLE CREDIT
AMOUNT SHALL BE ALLOWED AGAINST THE  TAX  IMPOSED  BY  THIS  SECTION  AS
PROVIDED  IN  THIS  SUBSECTION. IN THE CASE OF A DECEDENT WHOSE NEW YORK
TAXABLE ESTATE IS LESS THAN OR EQUAL TO THE BASIC EXCLUSION AMOUNT,  THE
APPLICABLE  CREDIT  AMOUNT  SHALL BE THE AMOUNT OF TAX THAT WOULD BE DUE
UNDER SUBSECTION (B) OF THIS SECTION ON SUCH DECEDENT'S NEW YORK TAXABLE
ESTATE. IN THE CASE OF A DECEDENT WHOSE NEW YORK TAXABLE ESTATE  EXCEEDS
THE  BASIC  EXCLUSION  AMOUNT BY AN AMOUNT THAT IS LESS THAN OR EQUAL TO
FIVE PERCENT OF SUCH AMOUNT, THE APPLICABLE CREDIT AMOUNT SHALL  BE  THE
AMOUNT  OF TAX THAT WOULD BE DUE UNDER SUBSECTION (B) OF THIS SECTION IF
THE AMOUNT ON WHICH THE TAX IS TO BE COMPUTED WERE EQUAL  TO  THE  BASIC
EXCLUSION  AMOUNT  MULTIPLIED  BY ONE MINUS A FRACTION, THE NUMERATOR OF
WHICH IS THE DECEDENT'S NEW YORK TAXABLE ESTATE MINUS THE  BASIC  EXCLU-
SION  AMOUNT,  AND THE DENOMINATOR OF WHICH IS FIVE PERCENT OF THE BASIC
EXCLUSION AMOUNT.  PROVIDED, HOWEVER, THAT THE CREDIT  ALLOWED  BY  THIS
SUBSECTION  SHALL  NOT  EXCEED  THE  TAX IMPOSED BY THIS SECTION, AND NO
CREDIT SHALL BE ALLOWED TO THE ESTATE OF ANY  DECEDENT  WHOSE  NEW  YORK
TAXABLE  ESTATE  EXCEEDS ONE HUNDRED FIVE PERCENT OF THE BASIC EXCLUSION
AMOUNT.
  (2) (A) FOR PURPOSES OF THIS SECTION, THE BASIC EXCLUSION AMOUNT SHALL
BE AS FOLLOWS:
IN THE CASE OF DECEDENTS DYING ON OR AFTER: THE BASIC  EXCLUSION  AMOUNT
IS:
APRIL 1, 2014 AND BEFORE APRIL 1, 2015       $ 2,062,500
APRIL 1, 2015 AND BEFORE APRIL 1, 2016       3,125,000
APRIL 1, 2016 AND BEFORE APRIL 1, 2017       4,187,500
APRIL 1, 2017 AND BEFORE JANUARY 1, 2019     5,250,000
  (B)  IN THE CASE OF ANY DECEDENT DYING IN A CALENDAR YEAR BEGINNING ON
OR AFTER JANUARY FIRST,  TWO  THOUSAND  NINETEEN,  THE  BASIC  EXCLUSION
AMOUNT  FOR DECEDENTS DYING ON OR AFTER APRIL FIRST, TWO THOUSAND SEVEN-
TEEN AND BEFORE JANUARY FIRST, TWO THOUSAND NINETEEN SHALL BE  INCREASED
BY AN AMOUNT EQUAL TO:
  (I) SUCH BASIC EXCLUSION AMOUNT, MULTIPLIED BY
  (II)  THE  COST-OF-LIVING ADJUSTMENT, WHICH SHALL BE THE PERCENTAGE BY
WHICH THE CONSUMER PRICE INDEX FOR THE PRECEDING CALENDAR  YEAR  EXCEEDS
THE CONSUMER PRICE INDEX FOR CALENDAR YEAR TWO THOUSAND TWELVE.
  (C)  (I)  FOR PURPOSES OF THIS PARAGRAPH, "CONSUMER PRICE INDEX" MEANS
THE MOST RECENT CONSUMER PRICE INDEX FOR ALL-URBAN  CONSUMERS  PUBLISHED
BY THE UNITED STATES DEPARTMENT OF LABOR.
  (II)  IF ANY AMOUNT ADJUSTED UNDER THIS PARAGRAPH IS NOT A MULTIPLE OF
TEN THOUSAND DOLLARS, SUCH AMOUNT SHALL BE ROUNDED TO THE NEAREST MULTI-
PLE OF TEN THOUSAND DOLLARS.
  S 3. Section 954 of the tax law, as amended by chapter 67 of the  laws
of  1978,  paragraph  1  of  subsection (a) as amended by section 10 and
subsection (b) as amended by section 11 of part A of chapter 389 of  the
laws  of  1997,  subsection (c) as amended by chapter 916 of the laws of
1982, paragraph 1 of subsection (c) as amended by section 3 of part A of

S. 6359--C                         219

chapter 407 of the laws of 1999 and such subsection (c) as relettered by
section 12 of part A of chapter 389 of the laws of 1997, is  amended  to
read as follows:
  S  954.  Resident's New York gross estate. (a) General.-- The New York
gross estate of a deceased resident  means  his  OR  HER  federal  gross
estate as defined in the internal revenue code (whether or not a federal
estate tax return is required to be filed) modified as follows:
  (1)  Reduced by the value of real or tangible personal property having
an actual situs outside New York state.
  (2) Increased by the amount  determined  under  section  nine  hundred
fifty-seven  OF  THIS  PART  (relating  to limited powers of appointment
created prior to September first, nineteen hundred thirty).
  (b) Valuation. -- (1) The New York gross estate shall be valued as  of
the  TIME  OF  THE DECEDENT'S DEATH, EXCEPT THAT IF A FEDERAL ESTATE TAX
RETURN IS FILED AND THE ALTERNATE VALUATION UNDER SECTION  2032  OF  THE
INTERNAL  REVENUE  CODE  IS ELECTED FOR FEDERAL ESTATE TAX PURPOSES, THE
NEW YORK GROSS ESTATE SHALL BE VALUED AS OF THE applicable federal valu-
ation date or dates. Any real property qualified under section two thou-
sand thirty-two-A of the internal revenue code shall have the same value
for purposes of the New York gross estate as it has for  federal  estate
tax purposes.
  (2)  IF  SUCH  ALTERNATE VALUATION COULD HAVE BEEN ELECTED PURSUANT TO
PARAGRAPH ONE OF THIS SUBSECTION, BUT  FOR  THE  ABSENCE  OF  AN  ESTATE
SUFFICIENT TO REQUIRE THE FILING OF A FEDERAL RETURN, THE NEW YORK GROSS
ESTATE  MAY,  UPON  THE  ELECTION  OF  THE EXECUTOR, BE VALUED AS OF THE
FEDERAL VALUATION DATE OR DATES WHICH WOULD HAVE APPLIED  IF  A  FEDERAL
RETURN HAD BEEN FILED. HOWEVER, NO ELECTION MAY BE MADE UNDER THIS PARA-
GRAPH UNLESS SUCH ELECTION WILL DECREASE THE VALUE OF THE NEW YORK GROSS
ESTATE AND THE AMOUNT OF TAX IMPOSED BY THIS ARTICLE (REDUCED BY CREDITS
ALLOWABLE  AGAINST  SUCH  TAX).  ANY  ELECTION MADE UNDER THIS PARAGRAPH
SHALL BE IRREVOCABLE. THE ELECTION ALLOWED BY THIS  PARAGRAPH  SHALL  BE
MADE  NO  LATER  THAN  THE  DATE PRESCRIBED FOR THE FILING OF THE RETURN
UNDER THIS ARTICLE (INCLUDING EXTENSIONS) OR ANY TIME THEREAFTER AS  THE
COMMISSIONER MAY PRESCRIBE.
  (c)  Cross  references.--  (1)  For provisions of the internal revenue
code defining the federal gross estate, see:
  Sec. 2031. Definition of gross estate.
  Sec. 2032. Alternate valuation.
  Sec. 2032A. Valuation of certain farm, etc., real property.
  Sec. 2033. Property in which the decedent had an interest.
  Sec. 2034. Dower or curtesy interest.
  Sec. 2035. Adjustments for gifts made within three years of decedent's
death.
  Sec. 2036. Transfers with retained life estate.
  Sec. 2037. Transfers taking effect at death.
  Sec. 2038. Revocable transfers.
  Sec. 2039. Annuities.
  Sec. 2040. Joint interests.
  Sec. 2041. Powers of appointment.
  Sec. 2042. Proceeds of life insurance.
  Sec. 2043. Transfers for insufficient consideration.
  Sec. 2044. Certain property for which marital deduction was previously
allowed.
  Sec. 2045. Prior interests.
  Sec. 2046. Disclaimers.

S. 6359--C                         220

  (2) FOR PROVISIONS OF THE INTERNAL REVENUE CODE WHICH, EXCEPT  TO  THE
EXTENT  THEY  ARE  INCONSISTENT WITH THE PROVISIONS OF THIS ARTICLE, ARE
PERTINENT TO THE COMPUTATION OF TAXABLE GIFTS AND  THE  TAX  UNDER  THIS
ARTICLE, SEE:
  SEC. 2503. TAXABLE GIFTS.
  SEC. 2511. TRANSFERS IN GENERAL.
  SEC. 2512. VALUATION OF GIFTS.
  SEC. 2513. GIFT BY HUSBAND OR WIFE TO THIRD PARTY.
  SEC. 2514. POWERS OF APPOINTMENT.
  SEC. 2516. CERTAIN PROPERTY SETTLEMENTS.
  SEC. 2518. DISCLAIMERS.
  SEC. 2519. DISPOSITIONS OF CERTAIN LIFE ESTATES.
  SEC. 2522. CHARITABLE AND SIMILAR GIFTS.
  SEC. 2523. GIFT TO SPOUSE.
  SEC. 2524. EXTENT OF DEDUCTIONS.
  SEC.  2701.  SPECIAL  VALUATION  RULES IN CASE OF TRANSFERS OF CERTAIN
INTERESTS IN CORPORATIONS OR PARTNERSHIPS.
  SEC. 2702. SPECIAL VALUATION RULES IN CASE OF TRANSFERS  OF  INTERESTS
IN TRUSTS.
  SEC. 2703. CERTAIN RIGHTS AND RESTRICTIONS DISREGARDED.
  SEC. 2704. TREATMENT OF CERTAIN LAPSING RIGHTS AND RESTRICTIONS.
  SEC. 7872. TREATMENT OF LOANS WITH BELOW-MARKET INTEREST RATES.
  (3)  For effect of federal estate tax determinations, see section nine
hundred sixty-one of this article.
  S 4. The tax law is amended by adding a new section  955  to  read  as
follows:
  S  955. RESIDENT'S NEW YORK TAXABLE ESTATE.  (A) GENERAL.--THE TAXABLE
ESTATE OF A NEW YORK RESIDENT SHALL BE HIS OR HER NEW YORK GROSS ESTATE,
MINUS THE DEDUCTIONS ALLOWABLE FOR DETERMINING HIS OR HER FEDERAL  TAXA-
BLE  ESTATE  UNDER  THE  INTERNAL REVENUE CODE (WHETHER OR NOT A FEDERAL
ESTATE TAX RETURN IS REQUIRED TO BE FILED), EXCEPT TO  THE  EXTENT  THAT
SUCH  DEDUCTIONS  RELATE  TO  REAL OR TANGIBLE PERSONAL PROPERTY SITUSED
OUTSIDE NEW YORK STATE.
  (B) WAIVER OF DEDUCTIONS.-- IF THE RIGHT TO  ANY  DEDUCTION  OTHERWISE
ALLOWABLE IS WAIVED FOR FEDERAL ESTATE TAX PURPOSES, IT SHALL BE CONSID-
ERED WAIVED FOR NEW YORK ESTATE TAX PURPOSES.
  (C)  QUALIFIED  TERMINABLE  INTEREST  PROPERTY  ELECTION.--  EXCEPT AS
OTHERWISE PROVIDED IN THIS SUBSECTION, THE ELECTION REFERRED TO IN PARA-
GRAPH (7) OF SUBSECTION (B) OF SECTION 2056 OF THE INTERNAL REVENUE CODE
SHALL NOT BE ALLOWED UNDER THIS ARTICLE UNLESS SUCH  ELECTION  WAS  MADE
WITH RESPECT TO THE FEDERAL ESTATE TAX RETURN REQUIRED TO BE FILED UNDER
THE PROVISIONS OF THE INTERNAL REVENUE CODE BECAUSE THE DECEDENT'S GROSS
ESTATE AND ADJUSTED TAXABLE GIFTS, UNDER PARAGRAPH (2) OF SUBSECTION (B)
OF SECTION 2001 OF THE INTERNAL REVENUE CODE, EXCEED THE BASIC EXCLUSION
AMOUNT,  UNDER  PARAGRAPH  3  OF  SUBSECTION  (C) OF SECTION 2010 OF THE
INTERNAL REVENUE CODE, THAT IS IN EFFECT AT THE DECEDENT'S DEATH.  WHERE
A FEDERAL ESTATE TAX RETURN IS ONLY REQUIRED TO BE FILED FOR PURPOSES OF
ELECTING THE DECEASED SPOUSAL UNUSED EXCLUSION AMOUNT  UNDER  PARAGRAPHS
(4)  AND  (5)  OF SUBSECTION (C) OF SECTION 2010 OF THE INTERNAL REVENUE
CODE, THE EXECUTOR MAY MAKE THE ELECTION REFERRED TO IN  SUCH  PARAGRAPH
(7) WITH RESPECT TO THE TAX IMPOSED BY THIS ARTICLE ON THE RETURN OF THE
TAX IMPOSED BY THIS ARTICLE, IRRESPECTIVE OF WHETHER SUCH FEDERAL RETURN
IS FILED. ANY ELECTION MADE UNDER THIS SUBSECTION SHALL BE IRREVOCABLE.
  (D)  CROSS  REFERENCES.--  FOR PROVISIONS OF THE INTERNAL REVENUE CODE
SPECIFYING THE DEDUCTIONS ALLOWABLE FOR  FEDERAL  ESTATE  TAX  PURPOSES,
SEE:

S. 6359--C                         221

  SEC.2032(B). ALTERNATE VALUATION--SPECIAL RULE FOR DEDUCTIONS.
  SEC.2046. DISCLAIMERS.
  SEC.2053. EXPENSES, INDEBTEDNESS, AND TAXES.
  SEC.2054. LOSSES.
  SEC.2055. TRANSFERS FOR PUBLIC, CHARITABLE, AND RELIGIOUS USES.
  SEC.2056. BEQUESTS, ETC., TO SURVIVING SPOUSE.
  S 5. Subsections (b) and (d) of section 960 of the tax law, subsection
(b)  as amended by section 4 of part I of chapter 60 of the laws of 2004
and subsection (d) as added by section 190  of  the  laws  of  1980  and
relettered  by  section 15 of part A of chapter 389 of the laws of 1997,
are amended to read as follows:
  (b) Computation of tax.--The tax imposed under subsection (a) shall be
the same as the tax that would be due, if the decedent had died a  resi-
dent,  under  subsection  (a)  of section nine hundred fifty-two, except
that for purposes of [allocating] COMPUTING the tax under subsection (b)
of section nine hundred fifty-two, "New York [gross]  TAXABLE  estate"[,
in  the  numerator in subsection (b) of section nine hundred fifty-two,]
shall not include the value of any intangible personal  property  other-
wise  includible in the deceased individual's New York gross estate, AND
SHALL NOT INCLUDE THE AMOUNT OF ANY GIFT UNLESS SUCH  GIFT  CONSISTS  OF
REAL  OR  TANGIBLE  PERSONAL PROPERTY HAVING AN ACTUAL SITUS IN NEW YORK
STATE OR INTANGIBLE PERSONAL PROPERTY EMPLOYED IN A BUSINESS,  TRADE  OR
PROFESSION CARRIED ON IN THIS STATE.
  (d)  Works  of art on loan for exhibition. Notwithstanding the forego-
ing, the tax imposed under subsection (a) OF THIS SECTION on the  trans-
fer,  from  any  deceased  individual  who at his OR HER death was not a
resident of the state of New York, of works  of  art  having  an  actual
situs  in  the state of New York and either (i) includible in his OR HER
federal gross estate or (ii) which would be includible in his OR HER New
York gross estate pursuant to section nine hundred fifty-seven (relating
to certain limited powers of appointment) if he OR SHE were  a  resident
of  the  state  of  New  York, shall [be an amount equal to the transfer
taxes or death taxes of every character in respect of personal  property
which  would  be  imposed  on  such transfer or such works of art if the
actual situs of such works of art were the state  or  territory  of  the
United States of residence of such individual] NOT BE SUBJECT TO THE TAX
IMPOSED  BY THIS SECTION if such works of art are [sited in the state of
New York solely for exhibition purposes,] loaned [for such] TO A  PUBLIC
GALLERY  LOCATED  WITHIN  THE  STATE  OF  NEW YORK SOLELY FOR EXHIBITION
purposes [to a public gallery or museum (] BUT ONLY IF no  part  of  the
net earnings of [which] SUCH PUBLIC GALLERY OR MUSEUM inure to the bene-
fit of any private stockholder or individual[)], and [(], at the time of
the  death  of such individual[)] SUCH WORKS OF ART ARE on exhibition or
en route to or from exhibition in  such  a  public  gallery  or  museum.
[Provided  however,  that if the state or territory of the United States
of residence of such individual imposes transfer taxes or death taxes on
such works of art which are sited in the  state  of  New  York  for  the
purposes  herein  specified, then such works of art shall not be subject
to the tax imposed by this section.]
  S 6. Subsection (a) of section 971 of the tax law, as added by section
17 of part A of chapter 389 of the laws of 1997, is amended to  read  as
follows:
  (a)  Returns  by executor. (1) Residents. In the case of the estate of
every individual dying on or after [February first, two thousand]  APRIL
FIRST,  TWO THOUSAND FOURTEEN, who at his or her death was a resident of
New York state, [if] his or her executor [is required to file  a  return

S. 6359--C                         222

with  respect to the federal estate tax (determined as if the limitation
contained in subsection (a) of section nine hundred  fifty-one  of  this
article were applicable in determining whether such executor is required
to  file  such  federal  return), the executor] shall make a return with
respect to the estate tax imposed by section nine hundred  fifty-two  of
this  article  IF  THE DECEDENT'S FEDERAL GROSS ESTATE, INCREASED BY THE
AMOUNT OF ANY GIFT INCLUDIBLE IN HIS  OR  HER  NEW  YORK  GROSS  ESTATE,
EXCEEDS  THE BASIC EXCLUSION AMOUNT APPLICABLE TO THE DECEDENT'S DATE OF
DEATH IN PARAGRAPH TWO OF SUBSECTION (C) OF SECTION NINE HUNDRED  FIFTY-
TWO OF THIS ARTICLE.
  (2)  Nonresidents. In the case of the estate of every individual DYING
ON OR AFTER APRIL FIRST, TWO THOUSAND FOURTEEN, who at his or her  death
was  not  a  resident  of  New  York  state,  [if his or her executor is
required to file a return with respect to the federal estate tax (deter-
mined as if the limitation contained in subsection (a) of  section  nine
hundred fifty-one of this article were applicable in determining whether
such  executor  is  required  to  file such federal return) and] if such
individual's federal gross estate includes  real  or  tangible  personal
property  having  an  actual situs in New York state, the executor shall
make a return with respect to the estate tax  imposed  by  section  nine
hundred  sixty  of  this article IF THE DECEDENT'S FEDERAL GROSS ESTATE,
INCREASED BY THE AMOUNT OF ANY GIFT INCLUDIBLE IN HIS OR  HER  NEW  YORK
GROSS  ESTATE,  EXCEEDS  THE  BASIC  EXCLUSION  AMOUNT APPLICABLE TO THE
DECEDENT'S DATE OF DEATH IN PARAGRAPH TWO OF SUBSECTION (C)  OF  SECTION
NINE HUNDRED FIFTY-TWO OF THIS ARTICLE.
  S  7.  Subsection  (a)  of  section  997 of the tax law, as amended by
section 27 of part A of chapter 389 of the laws of 1997, is  amended  to
read as follows:
  (a)  The  phrase  "adjusted  gross  estate" shall be read as "adjusted
federal gross estate determined  without  reference  to  paragraphs  (1)
[and], (2) AND (3) of subsection (a) of section nine hundred fifty-four"
of this article.
  S 8. Article 26-B of the tax law is REPEALED.
  S  9.  Section  2 of chapter 1013 of the laws of 1962 amending the tax
law relating to imposing a tax on the transfer of estates  of  decedents
dying on or after April first, nineteen hundred sixty-three is REPEALED.
  S  10. The tax law is amended by adding a new section 999-a to read as
follows:
  S 999-A. APPENDIX TO ARTICLE TWENTY-SIX.  THE FOLLOWING PROVISIONS  OF
THE  UNITED  STATES  INTERNAL  REVENUE CODE OF 1986, WITH ALL AMENDMENTS
ENACTED ON OR BEFORE JANUARY FIRST, TWO THOUSAND FOURTEEN,  SHALL  APPLY
TO  THE  TAX  IMPOSED  BY  THIS ARTICLE, TO THE EXTENT SPECIFIED IN THIS
ARTICLE.
  S 2031. DEFINITION OF GROSS ESTATE.
  (A) GENERAL.--THE VALUE OF THE GROSS ESTATE OF THE DECEDENT  SHALL  BE
DETERMINED  BY  INCLUDING  TO  THE EXTENT PROVIDED FOR IN THIS PART, THE
VALUE AT THE TIME OF HIS DEATH OF ALL PROPERTY, REAL OR PERSONAL, TANGI-
BLE OR INTANGIBLE, WHEREVER SITUATED.
  (B) VALUATION OF UNLISTED STOCK AND SECURITIES.--IN THE CASE OF  STOCK
AND  SECURITIES  OF A CORPORATION THE VALUE OF WHICH, BY REASON OF THEIR
NOT BEING LISTED ON AN EXCHANGE AND BY REASON OF THE  ABSENCE  OF  SALES
THEREOF,  CANNOT BE DETERMINED WITH REFERENCE TO BID AND ASKED PRICES OR
WITH REFERENCE TO SALES PRICES, THE VALUE THEREOF SHALL BE DETERMINED BY
TAKING INTO CONSIDERATION, IN ADDITION TO ALL OTHER FACTORS,  THE  VALUE
OF  STOCK OR SECURITIES OF CORPORATIONS ENGAGED IN THE SAME OR A SIMILAR
LINE OF BUSINESS WHICH ARE LISTED ON AN EXCHANGE.

S. 6359--C                         223

  (C) ESTATE TAX WITH RESPECT TO LAND SUBJECT TO A  QUALIFIED  CONSERVA-
TION EASEMENT.--
  (1) IN GENERAL.--IF THE EXECUTOR MAKES THE ELECTION DESCRIBED IN PARA-
GRAPH  (6), THEN, EXCEPT AS OTHERWISE PROVIDED IN THIS SUBSECTION, THERE
SHALL BE EXCLUDED FROM THE GROSS ESTATE THE LESSER OF--
  (A) THE APPLICABLE PERCENTAGE OF THE VALUE OF LAND SUBJECT TO A QUALI-
FIED CONSERVATION EASEMENT, REDUCED BY THE AMOUNT OF ANY DEDUCTION UNDER
SECTION 2055(F) WITH RESPECT TO SUCH LAND, OR
  (B) THE EXCLUSION LIMITATION.
  (2) APPLICABLE PERCENTAGE.--FOR PURPOSES OF PARAGRAPH  (1),  THE  TERM
"APPLICABLE PERCENTAGE" MEANS 40 PERCENT REDUCED (BUT NOT BELOW ZERO) BY
2  PERCENTAGE  POINTS FOR EACH PERCENTAGE POINT (OR FRACTION THEREOF) BY
WHICH THE VALUE OF THE QUALIFIED CONSERVATION EASEMENT IS LESS  THAN  30
PERCENT OF THE VALUE OF THE LAND (DETERMINED WITHOUT REGARD TO THE VALUE
OF  SUCH  EASEMENT  AND REDUCED BY THE VALUE OF ANY RETAINED DEVELOPMENT
RIGHT (AS DEFINED IN PARAGRAPH (5)). THE VALUES TAKEN INTO ACCOUNT UNDER
THE PRECEDING SENTENCE SHALL BE SUCH  VALUES  AS  OF  THE  DATE  OF  THE
CONTRIBUTION REFERRED TO IN PARAGRAPH (8)(B).
  (3)  EXCLUSION  LIMITATION.--FOR PURPOSES OF PARAGRAPH (1), THE EXCLU-
SION LIMITATION IS THE LIMITATION  DETERMINED  IN  ACCORDANCE  WITH  THE
FOLLOWING TABLE:
IN THE CASE OF ESTATES OF DECEDENTS DYING THE EXCLUSION LIMITATION
DURING:                                   IS:
1998..................................... 100,000
1999..................................... 200,000
2000..................................... 300,000
2001..................................... 400,000
2002 OR THEREAFTER....................... 500,000
  (4) TREATMENT OF CERTAIN INDEBTEDNESS.--
  (A)  IN  GENERAL.--THE  EXCLUSION  PROVIDED IN PARAGRAPH (1) SHALL NOT
APPLY TO THE EXTENT THAT THE LAND IS DEBT-FINANCED PROPERTY.
  (B) DEFINITIONS.--FOR PURPOSES OF THIS PARAGRAPH--
  (I) DEBT-FINANCED PROPERTY.--THE TERM "DEBT-FINANCED  PROPERTY"  MEANS
ANY  PROPERTY WITH RESPECT TO WHICH THERE IS AN ACQUISITION INDEBTEDNESS
(AS DEFINED IN CLAUSE (II)) ON THE DATE OF THE DECEDENT'S DEATH.
  (II) ACQUISITION INDEBTEDNESS.--THE  TERM  "ACQUISITION  INDEBTEDNESS"
MEANS, WITH RESPECT TO DEBT-FINANCED PROPERTY, THE UNPAID AMOUNT OF--
  (I) THE INDEBTEDNESS INCURRED BY THE DONOR IN ACQUIRING SUCH PROPERTY,
  (II) THE INDEBTEDNESS INCURRED BEFORE THE ACQUISITION OF SUCH PROPERTY
IF  SUCH INDEBTEDNESS WOULD NOT HAVE BEEN INCURRED BUT FOR SUCH ACQUISI-
TION,
  (III) THE INDEBTEDNESS INCURRED AFTER THE ACQUISITION OF SUCH PROPERTY
IF SUCH INDEBTEDNESS WOULD NOT HAVE BEEN INCURRED BUT FOR SUCH  ACQUISI-
TION  AND THE INCURRENCE OF SUCH INDEBTEDNESS WAS REASONABLY FORESEEABLE
AT THE TIME OF SUCH ACQUISITION, AND
  (IV) THE EXTENSION, RENEWAL, OR REFINANCING OF AN ACQUISITION  INDEBT-
EDNESS.
  (5) TREATMENT OF RETAINED DEVELOPMENT RIGHT.--
  (A)  IN  GENERAL.--PARAGRAPH  (1)  SHALL NOT APPLY TO THE VALUE OF ANY
DEVELOPMENT RIGHT RETAINED BY THE DONOR IN THE CONVEYANCE OF A QUALIFIED
CONSERVATION EASEMENT.
  (B) TERMINATION OF RETAINED DEVELOPMENT  RIGHT.--IF  EVERY  PERSON  IN
BEING  WHO  HAS  AN  INTEREST (WHETHER OR NOT IN POSSESSION) IN THE LAND
EXECUTES AN AGREEMENT TO EXTINGUISH  PERMANENTLY  SOME  OR  ALL  OF  ANY
DEVELOPMENT  RIGHTS  (AS  DEFINED  IN  SUBPARAGRAPH (D)) RETAINED BY THE
DONOR ON OR BEFORE THE DATE FOR FILING THE RETURN OF THE TAX IMPOSED  BY

S. 6359--C                         224

SECTION  2001,  THEN  ANY  TAX  IMPOSED BY SECTION 2001 SHALL BE REDUCED
ACCORDINGLY. SUCH AGREEMENT SHALL BE FILED WITH THE RETURN  OF  THE  TAX
IMPOSED  BY  SECTION  2001.  THE  AGREEMENT SHALL BE IN SUCH FORM AS THE
SECRETARY SHALL PRESCRIBE.
  (C)  ADDITIONAL TAX.--ANY FAILURE TO IMPLEMENT THE AGREEMENT DESCRIBED
IN SUBPARAGRAPH (B) NOT LATER THAN THE EARLIER OF--
  (I) THE DATE WHICH IS 2 YEARS AFTER THE DATE OF THE DECEDENT'S  DEATH,
OR
  (II)  THE  DATE  OF  THE  SALE  OF  SUCH LAND SUBJECT TO THE QUALIFIED
CONSERVATION EASEMENT,
  SHALL RESULT IN THE IMPOSITION OF AN ADDITIONAL TAX IN THE  AMOUNT  OF
THE  TAX  WHICH  WOULD  HAVE BEEN DUE ON THE RETAINED DEVELOPMENT RIGHTS
SUBJECT TO SUCH AGREEMENT. SUCH ADDITIONAL TAX SHALL BE DUE AND  PAYABLE
ON THE LAST DAY OF THE 6TH MONTH FOLLOWING SUCH DATE.
  (D)  DEVELOPMENT  RIGHT  DEFINED.--FOR PURPOSES OF THIS PARAGRAPH, THE
TERM "DEVELOPMENT RIGHT" MEANS ANY RIGHT TO USE THE LAND SUBJECT TO  THE
QUALIFIED  CONSERVATION EASEMENT IN WHICH SUCH RIGHT IS RETAINED FOR ANY
COMMERCIAL PURPOSE WHICH IS NOT SUBORDINATE TO AND  DIRECTLY  SUPPORTIVE
OF THE USE OF SUCH LAND AS A FARM FOR FARMING PURPOSES (WITHIN THE MEAN-
ING OF SECTION 2032A(E)(5)).
  (6)  ELECTION.--THE ELECTION UNDER THIS SUBSECTION SHALL BE MADE ON OR
BEFORE THE DUE DATE (INCLUDING EXTENSIONS) FOR FILING THE RETURN OF  TAX
IMPOSED  BY  SECTION  2001  AND  SHALL  BE  MADE ON SUCH RETURN. SUCH AN
ELECTION, ONCE MADE, SHALL BE IRREVOCABLE.
  (7) CALCULATION OF ESTATE TAX DUE.--AN EXECUTOR  MAKING  THE  ELECTION
DESCRIBED IN PARAGRAPH (6) SHALL, FOR PURPOSES OF CALCULATING THE AMOUNT
OF  TAX  IMPOSED  BY  SECTION 2001, INCLUDE THE VALUE OF ANY DEVELOPMENT
RIGHT (AS DEFINED IN PARAGRAPH (5)) RETAINED BY THE DONOR IN THE CONVEY-
ANCE OF SUCH QUALIFIED CONSERVATION EASEMENT. THE COMPUTATION OF TAX  ON
ANY  RETAINED  DEVELOPMENT  RIGHT  PRESCRIBED IN THIS PARAGRAPH SHALL BE
DONE IN SUCH MANNER AND ON SUCH FORMS AS THE SECRETARY SHALL PRESCRIBE.
  (8) DEFINITIONS.--FOR PURPOSES OF THIS SUBSECTION--
  (A) LAND SUBJECT TO A QUALIFIED CONSERVATION EASEMENT.--THE TERM "LAND
SUBJECT TO A QUALIFIED CONSERVATION EASEMENT" MEANS LAND--
  (I) WHICH IS LOCATED IN THE UNITED STATES OR  ANY  POSSESSION  OF  THE
UNITED STATES,
  (II)  WHICH  WAS  OWNED  BY THE DECEDENT OR A MEMBER OF THE DECEDENT'S
FAMILY AT ALL TIMES DURING THE 3-YEAR PERIOD ENDING ON THE DATE  OF  THE
DECEDENT'S DEATH, AND
  (III) WITH RESPECT TO WHICH A QUALIFIED CONSERVATION EASEMENT HAS BEEN
MADE  BY  AN INDIVIDUAL DESCRIBED IN SUBPARAGRAPH (C), AS OF THE DATE OF
THE ELECTION DESCRIBED IN PARAGRAPH (6).
  (B) QUALIFIED CONSERVATION EASEMENT.--THE TERM "QUALIFIED CONSERVATION
EASEMENT" MEANS A QUALIFIED CONSERVATION  CONTRIBUTION  (AS  DEFINED  IN
SECTION  170(H)(1)) OF A QUALIFIED REAL PROPERTY INTEREST (AS DEFINED IN
SECTION 170(H)(2)(C)), EXCEPT THAT CLAUSE (IV) OF  SECTION  170(H)(4)(A)
SHALL  NOT  APPLY,  AND  THE  RESTRICTION  ON  THE  USE OF SUCH INTEREST
DESCRIBED IN SECTION 170(H)(2)(C) SHALL INCLUDE A  PROHIBITION  ON  MORE
THAN A DE MINIMIS USE FOR A COMMERCIAL RECREATIONAL ACTIVITY.
  (C) INDIVIDUAL DESCRIBED.--AN INDIVIDUAL IS DESCRIBED IN THIS SUBPARA-
GRAPH IF SUCH INDIVIDUAL IS--
  (I) THE DECEDENT,
  (II) A MEMBER OF THE DECEDENT'S FAMILY,
  (III) THE EXECUTOR OF THE DECEDENT'S ESTATE, OR
  (IV)  THE  TRUSTEE OF A TRUST THE CORPUS OF WHICH INCLUDES THE LAND TO
BE SUBJECT TO THE QUALIFIED CONSERVATION EASEMENT.

S. 6359--C                         225

  (D) MEMBER OF FAMILY.--THE TERM  "MEMBER  OF  THE  DECEDENT'S  FAMILY"
MEANS  ANY  MEMBER  OF THE FAMILY (AS DEFINED IN SECTION 2032A(E)(2)) OF
THE DECEDENT.
  (9)  TREATMENT OF EASEMENTS GRANTED AFTER DEATH.--IN ANY CASE IN WHICH
THE QUALIFIED CONSERVATION EASEMENT IS GRANTED AFTER  THE  DATE  OF  THE
DECEDENT'S  DEATH  AND  ON OR BEFORE THE DUE DATE (INCLUDING EXTENSIONS)
FOR FILING THE RETURN OF TAX IMPOSED  BY  SECTION  2001,  THE  DEDUCTION
UNDER  SECTION 2055(F) WITH RESPECT TO SUCH EASEMENT SHALL BE ALLOWED TO
THE ESTATE BUT ONLY IF NO CHARITABLE DEDUCTION IS ALLOWED UNDER  CHAPTER
1 TO ANY PERSON WITH RESPECT TO THE GRANT OF SUCH EASEMENT.
  (10)  APPLICATION OF THIS SECTION TO INTERESTS IN PARTNERSHIPS, CORPO-
RATIONS, AND TRUSTS.--THIS SECTION SHALL APPLY TO AN INTEREST IN A PART-
NERSHIP, CORPORATION, OR TRUST IF AT LEAST 30 PERCENT OF THE  ENTITY  IS
OWNED  (DIRECTLY OR INDIRECTLY) BY THE DECEDENT, AS DETERMINED UNDER THE
RULES DESCRIBED IN SECTION 2057(E)(3).
  (D) CROSS REFERENCE.--
  FOR EXECUTOR'S RIGHT TO BE FURNISHED ON REQUEST A STATEMENT  REGARDING
ANY VALUATION MADE BY THE SECRETARY WITHIN THE GROSS ESTATE, SEE SECTION
7517.
  S 2032. ALTERNATE VALUATION.
  (A)  GENERAL.--THE VALUE OF THE GROSS ESTATE MAY BE DETERMINED, IF THE
EXECUTOR SO ELECTS, BY VALUING ALL THE PROPERTY INCLUDED  IN  THE  GROSS
ESTATE AS FOLLOWS:
  (1) IN THE CASE OF PROPERTY DISTRIBUTED, SOLD, EXCHANGED, OR OTHERWISE
DISPOSED  OF,  WITHIN  6 MONTHS AFTER THE DECEDENT'S DEATH SUCH PROPERTY
SHALL BE VALUED AS OF THE DATE OF DISTRIBUTION, SALE, EXCHANGE, OR OTHER
DISPOSITION.
  (2) IN THE CASE OF  PROPERTY  NOT  DISTRIBUTED,  SOLD,  EXCHANGED,  OR
OTHERWISE  DISPOSED  OF, WITHIN 6 MONTHS AFTER THE DECEDENT'S DEATH SUCH
PROPERTY SHALL BE VALUED AS OF THE DATE 6 MONTHS  AFTER  THE  DECEDENT'S
DEATH.
  (3)  ANY  INTEREST  OR  ESTATE WHICH IS AFFECTED BY MERE LAPSE OF TIME
SHALL BE INCLUDED AT ITS VALUE AS OF THE TIME OF DEATH (INSTEAD  OF  THE
LATER  DATE)  WITH  ADJUSTMENT FOR ANY DIFFERENCE IN ITS VALUE AS OF THE
LATER DATE NOT DUE TO MERE LAPSE OF TIME.
  (B) SPECIAL RULES.--NO DEDUCTION UNDER THIS CHAPTER OF ANY ITEM  SHALL
BE  ALLOWED IF ALLOWANCE FOR SUCH ITEMS IS IN EFFECT GIVEN BY THE ALTER-
NATE  VALUATION  PROVIDED  BY  THIS  SECTION.  WHEREVER  IN  ANY   OTHER
SUBSECTION  OR SECTION OF THIS CHAPTER REFERENCE IS MADE TO THE VALUE OF
PROPERTY AT THE TIME OF THE DECEDENT'S DEATH, SUCH  REFERENCE  SHALL  BE
DEEMED  TO  REFER  TO THE VALUE OF SUCH PROPERTY USED IN DETERMINING THE
VALUE OF THE GROSS ESTATE. IN CASE OF AN ELECTION MADE BY  THE  EXECUTOR
UNDER THIS SECTION, THEN--
  (1)  FOR  PURPOSES  OF  THE CHARITABLE DEDUCTION UNDER SECTION 2055 OR
2106(A)(2), ANY BEQUEST, LEGACY, DEVISE, OR TRANSFER ENUMERATED THEREIN,
AND
  (2) FOR THE PURPOSE OF THE MARITAL DEDUCTION UNDER SECTION  2056,  ANY
INTEREST IN PROPERTY PASSING TO THE SURVIVING SPOUSE,
  SHALL BE VALUED AS OF THE DATE OF THE DECEDENT'S DEATH WITH ADJUSTMENT
FOR ANY DIFFERENCE IN VALUE (NOT DUE TO MERE LAPSE OF TIME OR THE OCCUR-
RENCE  OR NONOCCURRENCE OF A CONTINGENCY) OF THE PROPERTY AS OF THE DATE
6 MONTHS AFTER THE DECEDENT'S DEATH (SUBSTITUTING, IN THE CASE OF  PROP-
ERTY  DISTRIBUTED  BY  THE  EXECUTOR  OR TRUSTEE, OR SOLD, EXCHANGED, OR
OTHERWISE DISPOSED OF, DURING SUCH 6-MONTH PERIOD, THE DATE THEREOF).

S. 6359--C                         226

  (C) ELECTION MUST DECREASE GROSS ESTATE AND ESTATE  TAX.--NO  ELECTION
MAY  BE  MADE  UNDER  THIS SECTION WITH RESPECT TO AN ESTATE UNLESS SUCH
ELECTION WILL DECREASE--
  (1) THE VALUE OF THE GROSS ESTATE, AND
  (2)  THE SUM OF THE TAX IMPOSED BY THIS CHAPTER AND THE TAX IMPOSED BY
CHAPTER 13 WITH RESPECT TO PROPERTY INCLUDIBLE IN THE  DECEDENT'S  GROSS
ESTATE (REDUCED BY CREDITS ALLOWABLE AGAINST SUCH TAXES).
  (D) ELECTION.--
  (1)  IN  GENERAL.--THE  ELECTION PROVIDED FOR IN THIS SECTION SHALL BE
MADE BY THE EXECUTOR ON THE RETURN OF THE TAX IMPOSED BY  THIS  CHAPTER.
SUCH ELECTION, ONCE MADE, SHALL BE IRREVOCABLE.
  (2)  EXCEPTION.--NO  ELECTION  MAY  BE MADE UNDER THIS SECTION IF SUCH
RETURN IS FILED MORE THAN 1  YEAR  AFTER  THE  TIME  PRESCRIBED  BY  LAW
(INCLUDING EXTENSIONS) FOR FILING SUCH RETURN.
  S 2032A. VALUATION OF CERTAIN FARM, ETC., REAL PROPERTY.
  (A) VALUE BASED ON USE UNDER WHICH PROPERTY QUALIFIES.--
  (1) GENERAL RULE.--IF--
  (A)  THE DECEDENT WAS (AT THE TIME OF HIS DEATH) A CITIZEN OR RESIDENT
OF THE UNITED STATES, AND
  (B) THE EXECUTOR ELECTS THE APPLICATION OF THIS SECTION AND FILES  THE
AGREEMENT REFERRED TO IN SUBSECTION (D)(2),
  THEN,  FOR PURPOSES OF THIS CHAPTER, THE VALUE OF QUALIFIED REAL PROP-
ERTY SHALL BE ITS VALUE FOR THE USE  UNDER  WHICH  IT  QUALIFIES,  UNDER
SUBSECTION (B), AS QUALIFIED REAL PROPERTY.
  (2)  LIMITATION  ON  AGGREGATE  REDUCTION  IN  FAIR MARKET VALUE.--THE
AGGREGATE DECREASE IN THE VALUE OF QUALIFIED REAL  PROPERTY  TAKEN  INTO
ACCOUNT  FOR PURPOSES OF THIS CHAPTER WHICH RESULTS FROM THE APPLICATION
OF PARAGRAPH (1) WITH RESPECT TO ANY DECEDENT SHALL NOT EXCEED $750,000.
  (3) INFLATION ADJUSTMENT.--IN THE CASE OF ESTATES OF  DECEDENTS  DYING
IN  A  CALENDAR  YEAR AFTER 1998, THE $750,000 AMOUNT CONTAINED IN PARA-
GRAPH (2) SHALL BE INCREASED BY AN AMOUNT EQUAL TO--
  (A) $750,000, MULTIPLIED BY
  (B) THE COST-OF-LIVING ADJUSTMENT DETERMINED UNDER SECTION 1(F)(3) FOR
SUCH CALENDAR YEAR BY SUBSTITUTING "CALENDAR YEAR  1997"  FOR  "CALENDAR
YEAR 1992" IN SUBPARAGRAPH (B) THEREOF.
  IF ANY AMOUNT AS ADJUSTED UNDER THE PRECEDING SENTENCE IS NOT A MULTI-
PLE OF $10,000, SUCH AMOUNT SHALL BE ROUNDED TO THE NEXT LOWEST MULTIPLE
OF $10,000.
  (B) QUALIFIED REAL PROPERTY.--
  (1)  IN  GENERAL.--FOR  PURPOSES  OF THIS SECTION, THE TERM "QUALIFIED
REAL PROPERTY" MEANS REAL PROPERTY LOCATED IN THE  UNITED  STATES  WHICH
WAS ACQUIRED FROM OR PASSED FROM THE DECEDENT TO A QUALIFIED HEIR OF THE
DECEDENT  AND WHICH, ON THE DATE OF THE DECEDENT'S DEATH, WAS BEING USED
FOR A QUALIFIED USE BY THE DECEDENT OR A MEMBER OF THE DECEDENT'S  FAMI-
LY, BUT ONLY IF--
  (A)  50  PERCENT  OR  MORE  OF  THE ADJUSTED VALUE OF THE GROSS ESTATE
CONSISTS OF THE ADJUSTED VALUE OF REAL OR PERSONAL PROPERTY WHICH--
  (I) ON THE DATE OF THE DECEDENT'S DEATH, WAS BEING USED FOR  A  QUALI-
FIED USE BY THE DECEDENT OR A MEMBER OF THE DECEDENT'S FAMILY, AND
  (II) WAS ACQUIRED FROM OR PASSED FROM THE DECEDENT TO A QUALIFIED HEIR
OF THE DECEDENT.
  (B)  25  PERCENT  OR  MORE  OF  THE ADJUSTED VALUE OF THE GROSS ESTATE
CONSISTS OF THE ADJUSTED VALUE OF REAL PROPERTY WHICH MEETS THE REQUIRE-
MENTS OF SUBPARAGRAPHS (A)(II) AND (C),
  (C) DURING THE 8-YEAR PERIOD ENDING ON  THE  DATE  OF  THE  DECEDENT'S
DEATH THERE HAVE BEEN PERIODS AGGREGATING 5 YEARS OR MORE DURING WHICH--

S. 6359--C                         227

  (I)  SUCH  REAL  PROPERTY WAS OWNED BY THE DECEDENT OR A MEMBER OF THE
DECEDENT'S FAMILY AND USED FOR A QUALIFIED USE  BY  THE  DECEDENT  OR  A
MEMBER OF THE DECEDENT'S FAMILY, AND
  (II)  THERE  WAS MATERIAL PARTICIPATION BY THE DECEDENT OR A MEMBER OF
THE DECEDENT'S FAMILY IN THE OPERATION OF THE FARM  OR  OTHER  BUSINESS,
AND
  (D)  SUCH  REAL PROPERTY IS DESIGNATED IN THE AGREEMENT REFERRED TO IN
SUBSECTION (D)(2).
  (2) QUALIFIED USE.--FOR PURPOSES OF THIS SECTION, THE TERM  "QUALIFIED
USE" MEANS THE DEVOTION OF THE PROPERTY TO ANY OF THE FOLLOWING:
  (A) USE AS A FARM FOR FARMING PURPOSES, OR
  (B)  USE  IN  A  TRADE OR BUSINESS OTHER THAN THE TRADE OR BUSINESS OF
FARMING.
  (3) ADJUSTED VALUE.--FOR PURPOSES OF PARAGRAPH (1), THE TERM "ADJUSTED
VALUE" MEANS--
  (A) IN THE CASE OF THE GROSS ESTATE, THE VALUE OF THE GROSS ESTATE FOR
PURPOSES OF THIS CHAPTER (DETERMINED WITHOUT REGARD  TO  THIS  SECTION),
REDUCED  BY  ANY AMOUNTS ALLOWABLE AS A DEDUCTION UNDER PARAGRAPH (4) OF
SECTION 2053(A), OR
  (B) IN THE CASE OF ANY REAL OR PERSONAL PROPERTY, THE  VALUE  OF  SUCH
PROPERTY FOR PURPOSES OF THIS CHAPTER (DETERMINED WITHOUT REGARD TO THIS
SECTION),  REDUCED BY ANY AMOUNTS ALLOWABLE AS A DEDUCTION IN RESPECT OF
SUCH PROPERTY UNDER PARAGRAPH (4) OF SECTION 2053(A).
  (4) DECEDENTS WHO ARE RETIRED OR DISABLED.--
  (A) IN GENERAL.--IF, ON THE DATE OF THE DECEDENT'S DEATH, THE REQUIRE-
MENTS OF PARAGRAPH (1)(C)(II) WITH RESPECT TO THE DECEDENT FOR ANY PROP-
ERTY ARE NOT MET, AND THE DECEDENT--
  (I) WAS RECEIVING OLD-AGE BENEFITS UNDER TITLE II OF THE SOCIAL  SECU-
RITY ACT FOR A CONTINUOUS PERIOD ENDING ON SUCH DATE, OR
  (II) WAS DISABLED FOR A CONTINUOUS PERIOD ENDING ON SUCH DATE,
  THEN  PARAGRAPH (1)(C)(II) SHALL BE APPLIED WITH RESPECT TO SUCH PROP-
ERTY BY SUBSTITUTING "THE DATE ON WHICH THE LONGER  OF  SUCH  CONTINUOUS
PERIODS  BEGAN"  FOR  "THE  DATE  OF  THE DECEDENT'S DEATH" IN PARAGRAPH
(1)(C).
  (B) DISABLED DEFINED.--FOR PURPOSES OF SUBPARAGRAPH (A), AN INDIVIDUAL
SHALL BE DISABLED IF SUCH INDIVIDUAL HAS A MENTAL OR PHYSICAL IMPAIRMENT
WHICH RENDERS HIM UNABLE TO MATERIALLY PARTICIPATE IN THE  OPERATION  OF
THE FARM OR OTHER BUSINESS.
  (C)   COORDINATION   WITH   RECAPTURE.--FOR   PURPOSES  OF  SUBSECTION
(C)(6)(B)(I), IF THE REQUIREMENTS OF PARAGRAPH (1)(C)(II) ARE  MET  WITH
RESPECT TO ANY DECEDENT BY REASON OF SUBPARAGRAPH (A), THE PERIOD ENDING
ON  THE  DATE  ON  WHICH  THE CONTINUOUS PERIOD TAKEN INTO ACCOUNT UNDER
SUBPARAGRAPH (A) BEGAN SHALL BE TREATED AS THE PERIOD IMMEDIATELY BEFORE
THE DECEDENT'S DEATH.
  (5) SPECIAL RULES FOR SURVIVING SPOUSES.--
  (A) IN GENERAL.--IF PROPERTY IS QUALIFIED REAL PROPERTY  WITH  RESPECT
TO  A  DECEDENT (HEREINAFTER IN THIS PARAGRAPH REFERRED TO AS THE "FIRST
DECEDENT") AND SUCH PROPERTY WAS ACQUIRED FROM OR PASSED FROM THE  FIRST
DECEDENT  TO THE SURVIVING SPOUSE OF THE FIRST DECEDENT, FOR PURPOSES OF
APPLYING THIS SUBSECTION AND SUBSECTION (C) IN THE CASE OF THE ESTATE OF
SUCH SURVIVING SPOUSE, ACTIVE MANAGEMENT OF THE FARM OR  OTHER  BUSINESS
BY  THE  SURVIVING  SPOUSE SHALL BE TREATED AS MATERIAL PARTICIPATION BY
SUCH SURVIVING SPOUSE IN THE OPERATION OF SUCH FARM OR BUSINESS.
  (B) SPECIAL RULE.--FOR THE PURPOSES OF SUBPARAGRAPH (A), THE  DETERMI-
NATION  OF  WHETHER  PROPERTY IS QUALIFIED REAL PROPERTY WITH RESPECT TO
THE FIRST DECEDENT SHALL BE MADE WITHOUT REGARD TO SUBPARAGRAPH  (D)  OF

S. 6359--C                         228

PARAGRAPH  (1)  AND  WITHOUT  REGARD  TO  WHETHER AN ELECTION UNDER THIS
SECTION WAS MADE.
  (C)  COORDINATION  WITH  PARAGRAPH (4).--IN ANY CASE IN WHICH TO DO SO
WILL ENABLE THE REQUIREMENTS OF PARAGRAPH  (1)(C)(II)  TO  BE  MET  WITH
RESPECT  TO  THE  SURVIVING  SPOUSE,  THIS SUBSECTION AND SUBSECTION (C)
SHALL BE APPLIED BY TAKING INTO ACCOUNT  ANY  APPLICATION  OF  PARAGRAPH
(4).
  (C)  TAX  TREATMENT  OF DISPOSITIONS AND FAILURES TO USE FOR QUALIFIED
USE.--
  (1) IMPOSITION OF ADDITIONAL ESTATE TAX.--IF, WITHIN  10  YEARS  AFTER
THE DECEDENT'S DEATH AND BEFORE THE DEATH OF THE QUALIFIED HEIR--
  (A)  THE  QUALIFIED  HEIR  DISPOSES  OF ANY INTEREST IN QUALIFIED REAL
PROPERTY (OTHER THAN BY A DISPOSITION TO A MEMBER OF HIS FAMILY), OR
  (B) THE QUALIFIED HEIR CEASES TO USE FOR THE QUALIFIED USE THE  QUALI-
FIED REAL PROPERTY WHICH WAS ACQUIRED (OR PASSED) FROM THE DECEDENT,
  THEN, THERE IS HEREBY IMPOSED AN ADDITIONAL ESTATE TAX.
  (2) AMOUNT OF ADDITIONAL TAX.--
  (A) IN GENERAL.--THE AMOUNT OF THE ADDITIONAL TAX IMPOSED BY PARAGRAPH
(1) WITH RESPECT TO ANY INTEREST SHALL BE THE AMOUNT EQUAL TO THE LESSER
OF--
  (I) THE ADJUSTED TAX DIFFERENCE ATTRIBUTABLE TO SUCH INTEREST, OR
  (II)  THE  EXCESS  OF THE AMOUNT REALIZED WITH RESPECT TO THE INTEREST
(OR, IN ANY CASE OTHER THAN A SALE OR EXCHANGE AT ARM'S LENGTH, THE FAIR
MARKET VALUE OF THE INTEREST) OVER THE VALUE OF THE INTEREST  DETERMINED
UNDER SUBSECTION (A).
  (B) ADJUSTED TAX DIFFERENCE ATTRIBUTABLE TO INTEREST.--FOR PURPOSES OF
SUBPARAGRAPH  (A), THE ADJUSTED TAX DIFFERENCE ATTRIBUTABLE TO AN INTER-
EST IS THE AMOUNT WHICH BEARS THE SAME RATIO TO THE ADJUSTED TAX DIFFER-
ENCE WITH RESPECT TO THE ESTATE (DETERMINED UNDER SUBPARAGRAPH (C)) AS--
  (I) THE EXCESS OF THE VALUE OF SUCH  INTEREST  FOR  PURPOSES  OF  THIS
CHAPTER  (DETERMINED WITHOUT REGARD TO SUBSECTION (A)) OVER THE VALUE OF
SUCH INTEREST DETERMINED UNDER SUBSECTION (A), BEARS TO
  (II) A SIMILAR EXCESS DETERMINED FOR ALL QUALIFIED REAL PROPERTY.
  (C) ADJUSTED TAX DIFFERENCE WITH RESPECT TO THE ESTATE.--FOR  PURPOSES
OF  SUBPARAGRAPH  (B), THE TERM "ADJUSTED TAX DIFFERENCE WITH RESPECT TO
THE ESTATE" MEANS THE EXCESS OF WHAT WOULD  HAVE  BEEN  THE  ESTATE  TAX
LIABILITY  BUT  FOR  SUBSECTION  (A)  OVER THE ESTATE TAX LIABILITY. FOR
PURPOSES OF THIS SUBPARAGRAPH, THE TERM "ESTATE TAX LIABILITY" MEANS THE
TAX IMPOSED BY SECTION 2001 REDUCED BY  THE  CREDITS  ALLOWABLE  AGAINST
SUCH TAX.
  (D)  PARTIAL  DISPOSITIONS.--FOR PURPOSES OF THIS PARAGRAPH, WHERE THE
QUALIFIED HEIR DISPOSES OF A PORTION OF THE  INTEREST  ACQUIRED  BY  (OR
PASSING  TO)  SUCH  HEIR (OR A PREDECESSOR QUALIFIED HEIR) OR THERE IS A
CESSATION OF USE OF SUCH A PORTION--
  (I) THE VALUE DETERMINED UNDER SUBSECTION (A) TAKEN INTO ACCOUNT UNDER
SUBPARAGRAPH (A)(II) WITH RESPECT TO SUCH PORTION SHALL BE ITS PRO  RATA
SHARE OF SUCH VALUE OF SUCH INTEREST, AND
  (II)  THE  ADJUSTED  TAX DIFFERENCE ATTRIBUTABLE TO THE INTEREST TAKEN
INTO ACCOUNT WITH RESPECT TO THE TRANSACTION INVOLVING THE SECOND OR ANY
SUCCEEDING PORTION SHALL BE REDUCED BY THE AMOUNT OF THE TAX IMPOSED  BY
THIS  SUBSECTION  WITH  RESPECT  TO  ALL  PRIOR  TRANSACTIONS  INVOLVING
PORTIONS OF SUCH INTEREST.
  (E) SPECIAL RULE FOR DISPOSITION OF TIMBER.--IN THE CASE OF  QUALIFIED
WOODLAND  TO  WHICH  AN ELECTION UNDER SUBSECTION (E)(13)(A) APPLIES, IF
THE QUALIFIED HEIR DISPOSES OF (OR SEVERS) ANY STANDING TIMBER  ON  SUCH
QUALIFIED WOODLAND--

S. 6359--C                         229

  (I)  SUCH DISPOSITION (OR SEVERANCE) SHALL BE TREATED AS A DISPOSITION
OF A PORTION OF THE INTEREST OF THE QUALIFIED HEIR IN SUCH PROPERTY, AND
  (II)  THE  AMOUNT  OF THE ADDITIONAL TAX IMPOSED BY PARAGRAPH (1) WITH
RESPECT TO SUCH DISPOSITION SHALL BE AN AMOUNT EQUAL TO THE LESSER OF--
  (I) THE AMOUNT REALIZED ON SUCH DISPOSITION (OR,  IN  ANY  CASE  OTHER
THAN  A  SALE  OR EXCHANGE AT ARM'S LENGTH, THE FAIR MARKET VALUE OF THE
PORTION OF THE INTEREST DISPOSED OR SEVERED), OR
  (II) THE AMOUNT OF ADDITIONAL  TAX  DETERMINED  UNDER  THIS  PARAGRAPH
(WITHOUT  REGARD  TO  THIS  SUBPARAGRAPH)  IF THE ENTIRE INTEREST OF THE
QUALIFIED HEIR IN THE QUALIFIED WOODLAND HAD BEEN DISPOSED OF, LESS  THE
SUM  OF  THE  AMOUNT  OF  THE ADDITIONAL TAX IMPOSED WITH RESPECT TO ALL
PRIOR TRANSACTIONS INVOLVING SUCH WOODLAND TO  WHICH  THIS  SUBPARAGRAPH
APPLIED.
  FOR  PURPOSES OF THE PRECEDING SENTENCE, THE DISPOSITION OF A RIGHT TO
SEVER SHALL BE TREATED AS THE DISPOSITION OF THE  STANDING  TIMBER.  THE
AMOUNT  OF  ADDITIONAL  TAX  IMPOSED  UNDER PARAGRAPH (1) IN ANY CASE IN
WHICH A QUALIFIED HEIR DISPOSES OF HIS ENTIRE INTEREST IN THE  QUALIFIED
WOODLAND  SHALL  BE REDUCED BY ANY AMOUNT DETERMINED UNDER THIS SUBPARA-
GRAPH WITH RESPECT TO SUCH WOODLAND.
  (3) ONLY 1 ADDITIONAL TAX IMPOSED WITH RESPECT TO ANY  1  PORTION.--IN
THE CASE OF AN INTEREST ACQUIRED FROM (OR PASSING FROM) ANY DECEDENT, IF
SUBPARAGRAPH  (A)  OR  (B) OF PARAGRAPH (1) APPLIES TO ANY PORTION OF AN
INTEREST, SUBPARAGRAPH (B) OR (A), AS THE CASE MAY BE, OF PARAGRAPH  (1)
SHALL NOT APPLY WITH RESPECT TO THE SAME PORTION OF SUCH INTEREST.
  (4)  DUE  DATE.--THE  ADDITIONAL  TAX IMPOSED BY THIS SUBSECTION SHALL
BECOME DUE AND PAYABLE ON THE DAY WHICH IS 6 MONTHS AFTER  THE  DATE  OF
THE DISPOSITION OR CESSATION REFERRED TO IN PARAGRAPH (1).
  (5)  LIABILITY  FOR TAX; FURNISHING OF BOND.--THE QUALIFIED HEIR SHALL
BE PERSONALLY LIABLE FOR THE ADDITIONAL TAX IMPOSED BY  THIS  SUBSECTION
WITH  RESPECT  TO  HIS INTEREST UNLESS THE HEIR HAS FURNISHED BOND WHICH
MEETS THE REQUIREMENTS OF SUBSECTION (E)(11).
  (6) CESSATION OF QUALIFIED USE.--FOR  PURPOSES  OF  PARAGRAPH  (1)(B),
REAL PROPERTY SHALL CEASE TO BE USED FOR THE QUALIFIED USE IF--
  (A) SUCH PROPERTY CEASES TO BE USED FOR THE QUALIFIED USE SET FORTH IN
SUBPARAGRAPH  (A)  OR  (B) OF SUBSECTION (B)(2) UNDER WHICH THE PROPERTY
QUALIFIED UNDER SUBSECTION (B), OR
  (B) DURING ANY PERIOD  OF  8  YEARS  ENDING  AFTER  THE  DATE  OF  THE
DECEDENT'S DEATH AND BEFORE THE DATE OF THE DEATH OF THE QUALIFIED HEIR,
THERE HAD BEEN PERIODS AGGREGATING MORE THAN 3 YEARS DURING WHICH--
  (I)  IN  THE CASE OF PERIODS DURING WHICH THE PROPERTY WAS HELD BY THE
DECEDENT, THERE WAS NO MATERIAL PARTICIPATION BY  THE  DECEDENT  OR  ANY
MEMBER OF HIS FAMILY IN THE OPERATION OF THE FARM OR OTHER BUSINESS, AND
  (II)  IN THE CASE OF PERIODS DURING WHICH THE PROPERTY WAS HELD BY ANY
QUALIFIED HEIR, THERE WAS NO MATERIAL PARTICIPATION  BY  SUCH  QUALIFIED
HEIR  OR  ANY MEMBER OF HIS FAMILY IN THE OPERATION OF THE FARM OR OTHER
BUSINESS.
  (7) SPECIAL RULES.--
  (A) NO TAX IF USE BEGINS WITHIN 2 YEARS.--IF THE  DATE  ON  WHICH  THE
QUALIFIED HEIR BEGINS TO USE THE QUALIFIED REAL PROPERTY (HEREINAFTER IN
THIS  SUBPARAGRAPH  REFERRED  TO AS THE COMMENCEMENT DATE) IS BEFORE THE
DATE 2 YEARS AFTER THE DECEDENT'S DEATH--
  (I) NO TAX SHALL BE IMPOSED UNDER PARAGRAPH (1) BY REASON OF THE FAIL-
URE BY THE QUALIFIED HEIR TO SO USE SUCH PROPERTY BEFORE  THE  COMMENCE-
MENT DATE, AND
  (II)  THE  10-YEAR PERIOD UNDER PARAGRAPH (1) SHALL BE EXTENDED BY THE
PERIOD AFTER THE DECEDENT'S DEATH AND BEFORE THE COMMENCEMENT DATE.

S. 6359--C                         230

  (B) ACTIVE MANAGEMENT BY ELIGIBLE QUALIFIED HEIR TREATED  AS  MATERIAL
PARTICIPATION.--FOR PURPOSES OF PARAGRAPH (6)(B)(II), THE ACTIVE MANAGE-
MENT OF A FARM OR OTHER BUSINESS BY--
  (I) AN ELIGIBLE QUALIFIED HEIR, OR
  (II)  A  FIDUCIARY  OF  AN ELIGIBLE QUALIFIED HEIR DESCRIBED IN CLAUSE
(II) OR (III) OF SUBPARAGRAPH (C),
  SHALL BE TREATED AS MATERIAL PARTICIPATION BY SUCH ELIGIBLE  QUALIFIED
HEIR IN THE OPERATION OF SUCH FARM OR BUSINESS. IN THE CASE OF AN ELIGI-
BLE  QUALIFIED HEIR DESCRIBED IN CLAUSE (II), (III), OR (IV) OF SUBPARA-
GRAPH (C), THE PRECEDING SENTENCE SHALL APPLY ONLY DURING PERIODS DURING
WHICH SUCH HEIR MEETS THE REQUIREMENTS OF SUCH CLAUSE.
  (C) ELIGIBLE QUALIFIED HEIR.--FOR PURPOSES OF THIS PARAGRAPH, THE TERM
"ELIGIBLE QUALIFIED HEIR" MEANS A QUALIFIED HEIR WHO--
  (I) IS THE SURVIVING SPOUSE OF THE DECEDENT,
  (II) HAS NOT ATTAINED THE AGE OF 21,
  (III) IS DISABLED (WITHIN THE MEANING OF SUBSECTION (B)(4)(B)), OR
  (IV) IS A STUDENT.
  (D) STUDENT.--FOR PURPOSES OF SUBPARAGRAPH (C), AN INDIVIDUAL SHALL BE
TREATED AS A STUDENT WITH RESPECT TO PERIODS DURING ANY CALENDAR YEAR IF
(AND ONLY IF) SUCH INDIVIDUAL  IS  A  STUDENT  (WITHIN  THE  MEANING  OF
SECTION 152(F)(2)) FOR SUCH CALENDAR YEAR.
  (E)  CERTAIN  RENTS  TREATED  AS  QUALIFIED USE.--FOR PURPOSES OF THIS
SUBSECTION, A SURVIVING SPOUSE OR  LINEAL  DESCENDANT  OF  THE  DECEDENT
SHALL  NOT  BE  TREATED  AS  FAILING TO USE QUALIFIED REAL PROPERTY IN A
QUALIFIED USE SOLELY BECAUSE SUCH SPOUSE OR DESCENDANT RENTS SUCH  PROP-
ERTY  TO  A  MEMBER  OF THE FAMILY OF SUCH SPOUSE OR DESCENDANT ON A NET
CASH BASIS. FOR PURPOSES OF THE PRECEDING SENTENCE,  A  LEGALLY  ADOPTED
CHILD  OF AN INDIVIDUAL SHALL BE TREATED AS THE CHILD OF SUCH INDIVIDUAL
BY BLOOD.
  (8) QUALIFIED CONSERVATION CONTRIBUTION IS NOT A DISPOSITION.--A QUAL-
IFIED CONSERVATION CONTRIBUTION (AS DEFINED IN SECTION 170(H))  BY  GIFT
OR  OTHERWISE  SHALL  NOT  BE  DEEMED  A  DISPOSITION  UNDER  SUBSECTION
(C)(1)(A).
  (D) ELECTION; AGREEMENT.--
  (1) ELECTION.--THE ELECTION UNDER THIS SECTION SHALL BE  MADE  ON  THE
RETURN  OF  THE TAX IMPOSED BY SECTION 2001. SUCH ELECTION SHALL BE MADE
IN SUCH MANNER AS THE SECRETARY SHALL BY REGULATIONS PRESCRIBE. SUCH  AN
ELECTION, ONCE MADE, SHALL BE IRREVOCABLE.
  (2) AGREEMENT.--THE AGREEMENT REFERRED TO IN THIS PARAGRAPH IS A WRIT-
TEN AGREEMENT SIGNED BY EACH PERSON IN BEING WHO HAS AN INTEREST (WHETH-
ER  OR  NOT  IN POSSESSION) IN ANY PROPERTY DESIGNATED IN SUCH AGREEMENT
CONSENTING TO THE APPLICATION OF SUBSECTION (C)  WITH  RESPECT  TO  SUCH
PROPERTY.
  (3)  MODIFICATION  OF  ELECTION  AND  AGREEMENT  TO BE PERMITTED.--THE
SECRETARY SHALL PRESCRIBE PROCEDURES WHICH PROVIDE THAT IN ANY  CASE  IN
WHICH  THE  EXECUTOR  MAKES AN ELECTION UNDER PARAGRAPH (1) (AND SUBMITS
THE AGREEMENT REFERRED TO IN PARAGRAPH (2)) WITHIN THE  TIME  PRESCRIBED
THEREFOR, BUT--
  (A)  THE  NOTICE  OF ELECTION, AS FILED, DOES NOT CONTAIN ALL REQUIRED
INFORMATION, OR
  (B) SIGNATURES OF 1 OR MORE PERSONS REQUIRED TO ENTER INTO THE  AGREE-
MENT  DESCRIBED  IN  PARAGRAPH  (2) ARE NOT INCLUDED ON THE AGREEMENT AS
FILED, OR THE AGREEMENT DOES NOT CONTAIN ALL REQUIRED INFORMATION,
  THE EXECUTOR WILL HAVE A REASONABLE PERIOD OF TIME (NOT  EXCEEDING  90
DAYS) AFTER NOTIFICATION OF SUCH FAILURES TO PROVIDE SUCH INFORMATION OR
SIGNATURES.

S. 6359--C                         231

  (E) DEFINITIONS; SPECIAL RULES.--FOR PURPOSES OF THIS SECTION--
  (1)  QUALIFIED HEIR.--THE TERM "QUALIFIED HEIR" MEANS, WITH RESPECT TO
ANY PROPERTY, A MEMBER OF THE DECEDENT'S FAMILY WHO ACQUIRED SUCH  PROP-
ERTY (OR TO WHOM SUCH PROPERTY PASSED) FROM THE DECEDENT. IF A QUALIFIED
HEIR  DISPOSES  OF ANY INTEREST IN QUALIFIED REAL PROPERTY TO ANY MEMBER
OF HIS FAMILY, SUCH MEMBER SHALL THEREAFTER BE TREATED AS THE  QUALIFIED
HEIR WITH RESPECT TO SUCH INTEREST.
  (2)  MEMBER  OF  FAMILY.--THE  TERM "MEMBER OF THE FAMILY" MEANS, WITH
RESPECT TO ANY INDIVIDUAL, ONLY--
  (A) AN ANCESTOR OF SUCH INDIVIDUAL,
  (B) THE SPOUSE OF SUCH INDIVIDUAL,
  (C) A LINEAL DESCENDANT  OF  SUCH  INDIVIDUAL,  OF  SUCH  INDIVIDUAL'S
SPOUSE, OR OF A PARENT OF SUCH INDIVIDUAL, OR
  (D) THE SPOUSE OF ANY LINEAL DESCENDANT DESCRIBED IN SUBPARAGRAPH (C).
  FOR  PURPOSES OF THE PRECEDING SENTENCE, A LEGALLY ADOPTED CHILD OF AN
INDIVIDUAL SHALL BE TREATED AS THE CHILD OF SUCH INDIVIDUAL BY BLOOD.
  (3) CERTAIN REAL PROPERTY INCLUDED.--IN  THE  CASE  OF  REAL  PROPERTY
WHICH  MEETS  THE REQUIREMENTS OF SUBPARAGRAPH (C) OF SUBSECTION (B)(1),
RESIDENTIAL BUILDINGS AND RELATED IMPROVEMENTS  ON  SUCH  REAL  PROPERTY
OCCUPIED ON A REGULAR BASIS BY THE OWNER OR LESSEE OF SUCH REAL PROPERTY
OR  BY PERSONS EMPLOYED BY SUCH OWNER OR LESSEE FOR THE PURPOSE OF OPER-
ATING OR MAINTAINING SUCH REAL PROPERTY, AND ROADS, BUILDINGS, AND OTHER
STRUCTURES AND IMPROVEMENTS FUNCTIONALLY RELATED TO  THE  QUALIFIED  USE
SHALL BE TREATED AS REAL PROPERTY DEVOTED TO THE QUALIFIED USE.
  (4)  FARM.--THE  TERM  "FARM"  INCLUDES  STOCK, DAIRY, POULTRY, FRUIT,
FURBEARING ANIMAL, AND TRUCK  FARMS,  PLANTATIONS,  RANCHES,  NURSERIES,
RANGES,  GREENHOUSES  OR OTHER SIMILAR STRUCTURES USED PRIMARILY FOR THE
RAISING OF AGRICULTURAL OR HORTICULTURAL COMMODITIES, AND  ORCHARDS  AND
WOODLANDS.
  (5) FARMING PURPOSES.--THE TERM "FARMING PURPOSES" MEANS-
  (A)  CULTIVATING THE SOIL OR RAISING OR HARVESTING ANY AGRICULTURAL OR
HORTICULTURAL  COMMODITY  (INCLUDING  THE  RAISING,  SHEARING,  FEEDING,
CARING FOR, TRAINING, AND MANAGEMENT OF ANIMALS) ON A FARM;
  (B) HANDLING, DRYING, PACKING, GRADING, OR STORING ON A FARM ANY AGRI-
CULTURAL  OR  HORTICULTURAL  COMMODITY  IN ITS UNMANUFACTURED STATE, BUT
ONLY IF THE OWNER, TENANT, OR OPERATOR OF THE  FARM  REGULARLY  PRODUCES
MORE THAN ONE-HALF OF THE COMMODITY SO TREATED; AND
  (C)(I) THE PLANTING, CULTIVATING, CARING FOR, OR CUTTING OF TREES, OR
  (II) THE PREPARATION (OTHER THAN MILLING) OF TREES FOR MARKET.
  (6)  MATERIAL  PARTICIPATION.--MATERIAL  PARTICIPATION SHALL BE DETER-
MINED IN A MANNER SIMILAR TO THE MANNER USED FOR PURPOSES  OF  PARAGRAPH
(1) OF SECTION 1402(A) (RELATING TO NET EARNINGS FROM SELF-EMPLOYMENT).
  (7) METHOD OF VALUING FARMS.--
  (A)  IN GENERAL.--EXCEPT AS PROVIDED IN SUBPARAGRAPH (B), THE VALUE OF
A FARM FOR FARMING PURPOSES SHALL BE DETERMINED BY DIVIDING--
  (I) THE EXCESS OF THE AVERAGE ANNUAL GROSS CASH RENTAL FOR  COMPARABLE
LAND  USED FOR FARMING PURPOSES AND LOCATED IN THE LOCALITY OF SUCH FARM
OVER THE AVERAGE ANNUAL STATE AND  LOCAL  REAL  ESTATE  TAXES  FOR  SUCH
COMPARABLE LAND, BY
  (II)  THE  AVERAGE  ANNUAL EFFECTIVE INTEREST RATE FOR ALL NEW FEDERAL
LAND BANK LOANS.
  FOR PURPOSES OF THE PRECEDING SENTENCE, EACH AVERAGE  ANNUAL  COMPUTA-
TION  SHALL  BE  MADE  ON  THE BASIS OF THE 5 MOST RECENT CALENDAR YEARS
ENDING BEFORE THE DATE OF THE DECEDENT'S DEATH.
  (B) VALUE BASED ON NET SHARE RENTAL IN CERTAIN CASES.--

S. 6359--C                         232

  (I) IN GENERAL.--IF THERE IS NO COMPARABLE LAND FROM WHICH THE AVERAGE
ANNUAL GROSS CASH RENTAL MAY BE DETERMINED BUT THERE IS COMPARABLE  LAND
FROM  WHICH THE AVERAGE NET SHARE RENTAL MAY BE DETERMINED, SUBPARAGRAPH
(A)(I) SHALL BE  APPLIED  BY  SUBSTITUTING  "AVERAGE  ANNUAL  NET  SHARE
RENTAL" FOR "AVERAGE ANNUAL GROSS CASH RENTAL".
  (II)  NET SHARE RENTAL.--FOR PURPOSES OF THIS PARAGRAPH, THE TERM "NET
SHARE RENTAL" MEANS THE EXCESS OF--
  (I) THE VALUE OF THE PRODUCE RECEIVED BY THE LESSOR  OF  THE  LAND  ON
WHICH SUCH PRODUCE IS GROWN, OVER
  (II)  THE CASH OPERATING EXPENSES OF GROWING SUCH PRODUCE WHICH, UNDER
THE LEASE, ARE PAID BY THE LESSOR.
  (C) EXCEPTION.--THE FORMULA PROVIDED BY SUBPARAGRAPH (A) SHALL NOT  BE
USED--
  (I)  WHERE  IT  IS  ESTABLISHED  THAT THERE IS NO COMPARABLE LAND FROM
WHICH THE AVERAGE ANNUAL GROSS CASH RENTAL MAY BE DETERMINED, OR
  (II) WHERE THE EXECUTOR ELECTS TO HAVE THE VALUE OF THE FARM FOR FARM-
ING PURPOSES DETERMINED AND THAT THERE IS NO COMPARABLE LAND FROM  WHICH
THE AVERAGE NET SHARE RENTAL MAY BE DETERMINED UNDER PARAGRAPH (8).
  (8)  METHOD  OF  VALUING CLOSELY HELD BUSINESS INTERESTS, ETC.--IN ANY
CASE TO WHICH PARAGRAPH (7)(A) DOES NOT  APPLY,  THE  FOLLOWING  FACTORS
SHALL APPLY IN DETERMINING THE VALUE OF ANY QUALIFIED REAL PROPERTY:
  (A) THE CAPITALIZATION OF INCOME WHICH THE PROPERTY CAN BE EXPECTED TO
YIELD  FOR  FARMING  OR CLOSELY HELD BUSINESS PURPOSES OVER A REASONABLE
PERIOD OF TIME  UNDER  PRUDENT  MANAGEMENT  USING  TRADITIONAL  CROPPING
PATTERNS  FOR  THE  AREA,  TAKING  INTO  ACCOUNT  SOIL CAPACITY, TERRAIN
CONFIGURATION, AND SIMILAR FACTORS,
  (B) THE CAPITALIZATION OF THE FAIR RENTAL VALUE OF THE LAND FOR  FARM-
LAND OR CLOSELY HELD BUSINESS PURPOSES,
  (C)  ASSESSED  LAND VALUES IN A STATE WHICH PROVIDES A DIFFERENTIAL OR
USE VALUE ASSESSMENT LAW FOR FARMLAND OR CLOSELY HELD BUSINESS,
  (D) COMPARABLE SALES OF OTHER FARM OR CLOSELY HELD  BUSINESS  LAND  IN
THE  SAME  GEOGRAPHICAL  AREA  FAR ENOUGH REMOVED FROM A METROPOLITAN OR
RESORT AREA SO THAT NONAGRICULTURAL USE IS NOT A SIGNIFICANT  FACTOR  IN
THE SALES PRICE, AND
  (E)  ANY  OTHER  FACTOR  WHICH  FAIRLY VALUES THE FARM OR CLOSELY HELD
BUSINESS VALUE OF THE PROPERTY.
  (9) PROPERTY ACQUIRED FROM DECEDENT.--PROPERTY SHALL BE CONSIDERED  TO
HAVE BEEN ACQUIRED FROM OR TO HAVE PASSED FROM THE DECEDENT IF--
  (A)  SUCH PROPERTY IS SO CONSIDERED UNDER SECTION 1014(B) (RELATING TO
BASIS OF PROPERTY ACQUIRED FROM A DECEDENT),
  (B) SUCH PROPERTY IS ACQUIRED BY ANY PERSON FROM THE ESTATE, OR
  (C) SUCH PROPERTY IS ACQUIRED BY ANY  PERSON  FROM  A  TRUST  (TO  THE
EXTENT SUCH PROPERTY IS INCLUDIBLE IN THE GROSS ESTATE OF THE DECEDENT).
  (10)  COMMUNITY PROPERTY.--IF THE DECEDENT AND HIS SURVIVING SPOUSE AT
ANY TIME HELD QUALIFIED REAL PROPERTY AS COMMUNITY PROPERTY, THE  INTER-
EST OF THE SURVIVING SPOUSE IN SUCH PROPERTY SHALL BE TAKEN INTO ACCOUNT
UNDER  THIS  SECTION  TO  THE EXTENT NECESSARY TO PROVIDE A RESULT UNDER
THIS SECTION WITH RESPECT TO SUCH PROPERTY WHICH IS CONSISTENT WITH  THE
RESULT WHICH WOULD HAVE OBTAINED UNDER THIS SECTION IF SUCH PROPERTY HAD
NOT BEEN COMMUNITY PROPERTY.
  (11)  BOND IN LIEU OF PERSONAL LIABILITY.--IF THE QUALIFIED HEIR MAKES
WRITTEN APPLICATION TO THE SECRETARY FOR DETERMINATION  OF  THE  MAXIMUM
AMOUNT OF THE ADDITIONAL TAX WHICH MAY BE IMPOSED BY SUBSECTION (C) WITH
RESPECT  TO  THE  QUALIFIED  HEIR'S  INTEREST, THE SECRETARY (AS SOON AS
POSSIBLE, AND IN ANY EVENT WITHIN 1 YEAR AFTER THE MAKING OF SUCH APPLI-
CATION) SHALL NOTIFY THE HEIR OF  SUCH  MAXIMUM  AMOUNT.  THE  QUALIFIED

S. 6359--C                         233

HEIR,  ON FURNISHING A BOND IN SUCH AMOUNT AND FOR SUCH PERIOD AS MAY BE
REQUIRED, SHALL BE DISCHARGED FROM PERSONAL LIABILITY FOR ANY ADDITIONAL
TAX IMPOSED BY SUBSECTION (C) AND SHALL BE  ENTITLED  TO  A  RECEIPT  OR
WRITING SHOWING SUCH DISCHARGE.
  (12) ACTIVE MANAGEMENT.--THE TERM "ACTIVE MANAGEMENT" MEANS THE MAKING
OF  THE MANAGEMENT DECISIONS OF A BUSINESS (OTHER THAN THE DAILY OPERAT-
ING DECISIONS).
  (13) SPECIAL RULES FOR WOODLANDS.--
  (A) IN GENERAL.--IN THE CASE OF ANY QUALIFIED WOODLAND WITH RESPECT TO
WHICH THE EXECUTOR ELECTS TO HAVE THIS SUBPARAGRAPH APPLY, TREES GROWING
ON SUCH WOODLAND SHALL NOT BE TREATED AS A CROP.
  (B) QUALIFIED WOODLAND.--THE TERM "QUALIFIED WOODLAND" MEANS ANY  REAL
PROPERTY WHICH--
  (I) IS USED IN TIMBER OPERATIONS, AND
  (II) IS AN IDENTIFIABLE AREA OF LAND SUCH AS AN ACRE OR OTHER AREA FOR
WHICH RECORDS ARE NORMALLY MAINTAINED IN CONDUCTING TIMBER OPERATIONS.
  (C) TIMBER OPERATIONS.--THE TERM "TIMBER OPERATIONS" MEANS--
  (I) THE PLANTING, CULTIVATING, CARING FOR, OR CUTTING OF TREES, OR
  (II) THE PREPARATION (OTHER THAN MILLING) OF TREES FOR MARKET.
  (D) ELECTION.--AN ELECTION UNDER SUBPARAGRAPH (A) SHALL BE MADE ON THE
RETURN  OF  THE TAX IMPOSED BY SECTION 2001. SUCH ELECTION SHALL BE MADE
IN SUCH MANNER AS THE SECRETARY SHALL BY REGULATIONS PRESCRIBE. SUCH  AN
ELECTION, ONCE MADE, SHALL BE IRREVOCABLE.
  (14)  TREATMENT  OF  REPLACEMENT  PROPERTY ACQUIRED IN SECTION 1031 OR
1033 TRANSACTIONS.--
  (A) IN GENERAL.--IN THE CASE OF ANY  QUALIFIED  REPLACEMENT  PROPERTY,
ANY  PERIOD DURING WHICH THERE WAS OWNERSHIP, QUALIFIED USE, OR MATERIAL
PARTICIPATION WITH RESPECT TO THE REPLACED PROPERTY BY THE  DECEDENT  OR
ANY MEMBER OF HIS FAMILY SHALL BE TREATED AS A PERIOD DURING WHICH THERE
WAS  SUCH OWNERSHIP, USE, OR MATERIAL PARTICIPATION (AS THE CASE MAY BE)
WITH RESPECT TO THE QUALIFIED REPLACEMENT PROPERTY.
  (B) LIMITATION.--SUBPARAGRAPH (A) SHALL NOT APPLY TO THE  EXTENT  THAT
THE  FAIR  MARKET VALUE OF THE QUALIFIED REPLACEMENT PROPERTY (AS OF THE
DATE OF ITS ACQUISITION) EXCEEDS THE FAIR MARKET VALUE OF  THE  REPLACED
PROPERTY (AS OF THE DATE OF ITS DISPOSITION).
  (C) DEFINITIONS.--FOR PURPOSES OF THIS PARAGRAPH--
  (I)  QUALIFIED  REPLACEMENT PROPERTY.--THE TERM "QUALIFIED REPLACEMENT
PROPERTY" MEANS ANY REAL PROPERTY WHICH IS--
  (I) ACQUIRED IN AN EXCHANGE WHICH QUALIFIES UNDER SECTION 1031, OR
  (II) THE ACQUISITION OF WHICH RESULTS IN THE  NONRECOGNITION  OF  GAIN
UNDER SECTION 1033.
  SUCH TERM SHALL ONLY INCLUDE PROPERTY WHICH IS USED FOR THE SAME QUAL-
IFIED USE AS THE REPLACED PROPERTY WAS BEING USED BEFORE THE EXCHANGE.
  (II) REPLACED PROPERTY.--THE TERM "REPLACED PROPERTY" MEANS--
  (I)  THE  PROPERTY  TRANSFERRED  IN THE EXCHANGE WHICH QUALIFIES UNDER
SECTION 1031, OR
  (II) THE PROPERTY COMPULSORILY OR INVOLUNTARILY CONVERTED (WITHIN  THE
MEANING OF SECTION 1033).
  (F) STATUTE OF LIMITATIONS.--IF QUALIFIED REAL PROPERTY IS DISPOSED OF
OR CEASES TO BE USED FOR A QUALIFIED USE, THEN--
  (1)  THE  STATUTORY  PERIOD  FOR  THE ASSESSMENT OF ANY ADDITIONAL TAX
UNDER SUBSECTION (C) ATTRIBUTABLE TO SUCH DISPOSITION OR CESSATION SHALL
NOT EXPIRE BEFORE THE EXPIRATION OF 3 YEARS FROM THE DATE THE  SECRETARY
IS  NOTIFIED  (IN  SUCH  MANNER  AS  THE  SECRETARY  MAY  BY REGULATIONS
PRESCRIBE) OF SUCH DISPOSITION OR CESSATION (OR IF LATER IN THE CASE  OF
AN  INVOLUNTARY  CONVERSION  OR  EXCHANGE TO WHICH SUBSECTION (H) OR (I)

S. 6359--C                         234

APPLIES, 3 YEARS FROM THE DATE THE SECRETARY IS NOTIFIED OF THE REPLACE-
MENT OF THE CONVERTED PROPERTY OR OF AN INTENTION NOT TO REPLACE  OR  OF
THE EXCHANGE OF PROPERTY), AND
  (2)  SUCH ADDITIONAL TAX MAY BE ASSESSED BEFORE THE EXPIRATION OF SUCH
3-YEAR PERIOD NOTWITHSTANDING THE PROVISIONS OF ANY OTHER LAW OR RULE OF
LAW WHICH WOULD OTHERWISE PREVENT SUCH ASSESSMENT.
  (G) APPLICATION OF THIS SECTION AND  SECTION  6324B  TO  INTERESTS  IN
PARTNERSHIPS,  CORPORATIONS,  AND TRUSTS.--THE SECRETARY SHALL PRESCRIBE
REGULATIONS SETTING FORTH THE APPLICATION OF THIS  SECTION  AND  SECTION
6324B IN THE CASE OF AN INTEREST IN A PARTNERSHIP, CORPORATION, OR TRUST
WHICH,  WITH  RESPECT  TO THE DECEDENT, IS AN INTEREST IN A CLOSELY HELD
BUSINESS (WITHIN THE MEANING OF PARAGRAPH (1) OF SECTION  6166(B)).  FOR
PURPOSES OF THE PRECEDING SENTENCE, AN INTEREST IN A DISCRETIONARY TRUST
ALL THE BENEFICIARIES OF WHICH ARE QUALIFIED HEIRS SHALL BE TREATED AS A
PRESENT INTEREST.
  (H)  SPECIAL RULES FOR INVOLUNTARY CONVERSIONS OF QUALIFIED REAL PROP-
ERTY.--
  (1) TREATMENT OF CONVERTED PROPERTY.--
  (A) IN GENERAL.--IF THERE IS AN INVOLUNTARY CONVERSION OF AN  INTEREST
IN QUALIFIED REAL PROPERTY--
  (I)  NO  TAX  SHALL BE IMPOSED BY SUBSECTION (C) ON SUCH CONVERSION IF
THE COST OF THE QUALIFIED REPLACEMENT PROPERTY  EQUALS  OR  EXCEEDS  THE
AMOUNT REALIZED ON SUCH CONVERSION, OR
  (II)  IF  CLAUSE  (I) DOES NOT APPLY, THE AMOUNT OF THE TAX IMPOSED BY
SUBSECTION (C) ON SUCH CONVERSION SHALL BE THE AMOUNT  DETERMINED  UNDER
SUBPARAGRAPH (B).
  (B)  AMOUNT  OF  TAX  WHERE  THERE  IS NOT COMPLETE REINVESTMENT.--THE
AMOUNT DETERMINED UNDER THIS SUBPARAGRAPH WITH RESPECT TO  ANY  INVOLUN-
TARY CONVERSION IS THE AMOUNT OF THE TAX WHICH (BUT FOR THIS SUBSECTION)
WOULD HAVE BEEN IMPOSED ON SUCH CONVERSION REDUCED BY AN AMOUNT WHICH--
  (I) BEARS THE SAME RATIO TO SUCH TAX, AS
  (II)  THE  COST  OF  THE  QUALIFIED  REPLACEMENT PROPERTY BEARS TO THE
AMOUNT REALIZED ON THE CONVERSION.
  (2) TREATMENT OF REPLACEMENT  PROPERTY.--FOR  PURPOSES  OF  SUBSECTION
(C)--
  (A)  ANY  QUALIFIED  REPLACEMENT PROPERTY SHALL BE TREATED IN THE SAME
MANNER AS IF IT WERE A PORTION OF THE INTEREST IN QUALIFIED REAL PROPER-
TY WHICH WAS INVOLUNTARILY CONVERTED; EXCEPT THAT WITH RESPECT  TO  SUCH
QUALIFIED REPLACEMENT PROPERTY THE 10-YEAR PERIOD UNDER PARAGRAPH (1) OF
SUBSECTION (C) SHALL BE EXTENDED BY ANY PERIOD, BEYOND THE 2-YEAR PERIOD
REFERRED TO IN SECTION 1033(A)(2)(B)(I), DURING WHICH THE QUALIFIED HEIR
WAS ALLOWED TO REPLACE THE QUALIFIED REAL PROPERTY,
  (B)  ANY  TAX  IMPOSED BY SUBSECTION (C) ON THE INVOLUNTARY CONVERSION
SHALL BE TREATED AS A TAX IMPOSED ON A PARTIAL DISPOSITION, AND
  (C) PARAGRAPH (6) OF SUBSECTION (C) SHALL BE APPLIED--
  (I) BY NOT TAKING INTO ACCOUNT PERIODS AFTER THE  INVOLUNTARY  CONVER-
SION  AND  BEFORE THE ACQUISITION OF THE QUALIFIED REPLACEMENT PROPERTY,
AND
  (II) BY TREATING MATERIAL PARTICIPATION WITH RESPECT TO THE  CONVERTED
PROPERTY  AS  MATERIAL  PARTICIPATION  WITH  RESPECT  TO  THE  QUALIFIED
REPLACEMENT PROPERTY.
  (3) DEFINITIONS AND SPECIAL RULES.--FOR PURPOSES OF THIS SUBSECTION--
  (A) INVOLUNTARY CONVERSION.--THE TERM "INVOLUNTARY CONVERSION" MEANS A
COMPULSORY OR INVOLUNTARY CONVERSION WITHIN THE MEANING OF SECTION 1033.
  (B) QUALIFIED REPLACEMENT PROPERTY.--THE TERM  "QUALIFIED  REPLACEMENT
PROPERTY" MEANS--

S. 6359--C                         235

  (I)  IN  THE  CASE  OF  AN INVOLUNTARY CONVERSION DESCRIBED IN SECTION
1033(A)(1), ANY REAL PROPERTY INTO WHICH THE QUALIFIED REAL PROPERTY  IS
CONVERTED, OR
  (II)  IN  THE  CASE  OF AN INVOLUNTARY CONVERSION DESCRIBED IN SECTION
1033(A)(2), ANY REAL PROPERTY PURCHASED BY THE QUALIFIED HEIR DURING THE
PERIOD SPECIFIED IN SECTION 1033(A)(2)(B) FOR PURPOSES OF REPLACING  THE
QUALIFIED REAL PROPERTY.
  SUCH TERM ONLY INCLUDES PROPERTY WHICH IS TO BE USED FOR THE QUALIFIED
USE  SET  FORTH  IN  SUBPARAGRAPH  (A) OR (B) OF SUBSECTION (B)(2) UNDER
WHICH THE QUALIFIED REAL PROPERTY QUALIFIED UNDER SUBSECTION (A).
  (4) CERTAIN RULES MADE APPLICABLE.--THE RULES OF THE LAST SENTENCE  OF
SECTION 1033(A)(2)(A) SHALL APPLY FOR PURPOSES OF PARAGRAPH (3)(B)(II).
  (I) EXCHANGES OF QUALIFIED REAL PROPERTY.--
  (1) TREATMENT OF PROPERTY EXCHANGED.--
  (A)  EXCHANGES SOLELY FOR QUALIFIED EXCHANGE PROPERTY.--IF AN INTEREST
IN QUALIFIED REAL PROPERTY IS EXCHANGED SOLELY FOR AN INTEREST IN QUALI-
FIED EXCHANGE PROPERTY IN A TRANSACTION WHICH  QUALIFIES  UNDER  SECTION
1031,  NO  TAX  SHALL  BE  IMPOSED  BY  SUBSECTION (C) BY REASON OF SUCH
EXCHANGE.
  (B) EXCHANGES WHERE OTHER PROPERTY RECEIVED.--IF AN INTEREST IN QUALI-
FIED REAL PROPERTY IS EXCHANGED FOR AN INTEREST  IN  QUALIFIED  EXCHANGE
PROPERTY  AND  OTHER  PROPERTY  IN  A  TRANSACTION WHICH QUALIFIES UNDER
SECTION 1031, THE AMOUNT OF THE TAX IMPOSED BY SUBSECTION (C) BY  REASON
OF SUCH EXCHANGE SHALL BE THE AMOUNT OF TAX WHICH (BUT FOR THIS SUBPARA-
GRAPH) WOULD HAVE BEEN IMPOSED ON SUCH EXCHANGE UNDER SUBSECTION (C)(1),
REDUCED BY AN AMOUNT WHICH--
  (I) BEARS THE SAME RATIO TO SUCH TAX, AS
  (II) THE FAIR MARKET VALUE OF THE QUALIFIED EXCHANGE PROPERTY BEARS TO
THE FAIR MARKET VALUE OF THE QUALIFIED REAL PROPERTY EXCHANGED.
  FOR  PURPOSES  OF  CLAUSE  (II) OF THE PRECEDING SENTENCE, FAIR MARKET
VALUE SHALL BE DETERMINED AS OF THE TIME OF THE EXCHANGE.
  (2)  TREATMENT  OF  QUALIFIED  EXCHANGE  PROPERTY.--FOR  PURPOSES   OF
SUBSECTION (C)--
  (A)  ANY  INTEREST  IN QUALIFIED EXCHANGE PROPERTY SHALL BE TREATED IN
THE SAME MANNER AS IF IT WERE A PORTION OF  THE  INTEREST  IN  QUALIFIED
REAL PROPERTY WHICH WAS EXCHANGED,
  (B)  ANY TAX IMPOSED BY SUBSECTION (C) BY REASON OF THE EXCHANGE SHALL
BE TREATED AS A TAX IMPOSED ON A PARTIAL DISPOSITION, AND
  (C) PARAGRAPH (6) OF SUBSECTION (C) SHALL BE APPLIED BY TREATING MATE-
RIAL PARTICIPATION WITH RESPECT TO THE EXCHANGED  PROPERTY  AS  MATERIAL
PARTICIPATION WITH RESPECT TO THE QUALIFIED EXCHANGE PROPERTY.
  (3) QUALIFIED EXCHANGE PROPERTY.--FOR PURPOSES OF THIS SUBSECTION, THE
TERM  "QUALIFIED  EXCHANGE  PROPERTY" MEANS REAL PROPERTY WHICH IS TO BE
USED FOR THE QUALIFIED USE SET FORTH  IN  SUBPARAGRAPH  (A)  OR  (B)  OF
SUBSECTION  (B)(2)  UNDER  WHICH  THE  REAL  PROPERTY EXCHANGED THEREFOR
ORIGINALLY QUALIFIED UNDER SUBSECTION (A).
  S 2033. PROPERTY IN WHICH THE DECEDENT HAD AN INTEREST. THE  VALUE  OF
THE  GROSS  ESTATE SHALL INCLUDE THE VALUE OF ALL PROPERTY TO THE EXTENT
OF THE INTEREST THEREIN OF THE DECEDENT AT THE TIME OF HIS DEATH.
  S 2034. DOWER OR CURTESY INTERESTS. THE  VALUE  OF  THE  GROSS  ESTATE
SHALL  INCLUDE  THE  VALUE OF ALL PROPERTY TO THE EXTENT OF ANY INTEREST
THEREIN OF THE SURVIVING SPOUSE, EXISTING AT THE TIME OF THE  DECEDENT'S
DEATH  AS DOWER OR CURTESY, OR BY VIRTUE OF A STATUTE CREATING AN ESTATE
IN LIEU OF DOWER OR CURTESY.

S. 6359--C                         236

  S 2035. ADJUSTMENTS FOR CERTAIN  GIFTS  MADE  WITHIN  THREE  YEARS  OF
DECEDENT'S   DEATH.   (A)   INCLUSION   OF  CERTAIN  PROPERTY  IN  GROSS
ESTATE.--IF--
  (1)  THE DECEDENT MADE A TRANSFER (BY TRUST OR OTHERWISE) OF AN INTER-
EST IN ANY PROPERTY, OR RELINQUISHED A POWER WITH RESPECT TO ANY PROPER-
TY, DURING THE 3-YEAR PERIOD ENDING ON THE DATE OF THE DECEDENT'S DEATH,
AND
  (2) THE VALUE OF SUCH PROPERTY (OR AN  INTEREST  THEREIN)  WOULD  HAVE
BEEN  INCLUDED  IN THE DECEDENT'S GROSS ESTATE UNDER SECTION 2036, 2037,
2038, OR 2042 IF SUCH TRANSFERRED INTEREST  OR  RELINQUISHED  POWER  HAD
BEEN RETAINED BY THE DECEDENT ON THE DATE OF HIS DEATH,
  THE  VALUE OF THE GROSS ESTATE SHALL INCLUDE THE VALUE OF ANY PROPERTY
(OR INTEREST THEREIN) WHICH WOULD HAVE BEEN SO INCLUDED.
  (B) INCLUSION OF  GIFT  TAX  ON  GIFTS  MADE  DURING  3  YEARS  BEFORE
DECEDENT'S  DEATH.--THE  AMOUNT  OF THE GROSS ESTATE (DETERMINED WITHOUT
REGARD TO THIS SUBSECTION) SHALL BE INCREASED BY THE AMOUNT OF  ANY  TAX
PAID  UNDER CHAPTER 12 BY THE DECEDENT OR HIS ESTATE ON ANY GIFT MADE BY
THE DECEDENT OR HIS SPOUSE DURING THE 3-YEAR PERIOD ENDING ON  THE  DATE
OF THE DECEDENT'S DEATH.
  (C) OTHER RULES RELATING TO TRANSFERS WITHIN 3 YEARS OF DEATH.--
  (1) IN GENERAL.--FOR PURPOSES OF--
  (A)  SECTION  303(B) (RELATING TO DISTRIBUTIONS IN REDEMPTION OF STOCK
TO PAY DEATH TAXES),
  (B) SECTION 2032A (RELATING TO SPECIAL  VALUATION  OF  CERTAIN  FARMS,
ETC., REAL PROPERTY), AND
  (C) SUBCHAPTER C OF CHAPTER 64 (RELATING TO LIEN FOR TAXES),
  THE  VALUE OF THE GROSS ESTATE SHALL INCLUDE THE VALUE OF ALL PROPERTY
TO THE EXTENT OF ANY INTEREST THEREIN OF WHICH THE DECEDENT HAS  AT  ANY
TIME  MADE  A  TRANSFER, BY TRUST OR OTHERWISE, DURING THE 3-YEAR PERIOD
ENDING ON THE DATE OF THE DECEDENT'S DEATH.
  (2) COORDINATION WITH SECTION 6166.--AN ESTATE  SHALL  BE  TREATED  AS
MEETING  THE  35 PERCENT OF ADJUSTED GROSS ESTATE REQUIREMENT OF SECTION
6166(A)(1) ONLY IF THE ESTATE MEETS SUCH REQUIREMENT BOTH WITH AND WITH-
OUT THE APPLICATION OF SUBSECTION (A).
  (3) MARITAL AND SMALL TRANSFERS.--PARAGRAPH (1) SHALL NOT APPLY TO ANY
TRANSFER (OTHER THAN A TRANSFER WITH RESPECT TO A LIFE INSURANCE POLICY)
MADE DURING A CALENDAR YEAR  TO  ANY  DONEE  IF  THE  DECEDENT  WAS  NOT
REQUIRED  BY  SECTION  6019 (OTHER THAN BY REASON OF SECTION 6019(2)) TO
FILE ANY GIFT TAX RETURN FOR SUCH YEAR WITH RESPECT TO TRANSFERS TO SUCH
DONEE.
  (D) EXCEPTION.--SUBSECTION (A) AND PARAGRAPH  (1)  OF  SUBSECTION  (C)
SHALL NOT APPLY TO ANY BONA FIDE SALE FOR AN ADEQUATE AND FULL CONSIDER-
ATION IN MONEY OR MONEY'S WORTH.
  (E)   TREATMENT  OF  CERTAIN  TRANSFERS  FROM  REVOCABLE  TRUSTS.--FOR
PURPOSES OF THIS SECTION AND SECTION 2038, ANY TRANSFER FROM ANY PORTION
OF A TRUST DURING ANY PERIOD THAT SUCH PORTION WAS TREATED UNDER SECTION
676 AS OWNED BY THE DECEDENT BY REASON OF A POWER IN THE GRANTOR (DETER-
MINED WITHOUT REGARD TO SECTION 672(E)) SHALL BE TREATED AS  A  TRANSFER
MADE DIRECTLY BY THE DECEDENT.
  S  2036.  TRANSFERS  WITH RETAINED LIFE ESTATE. (A) GENERAL RULE.--THE
VALUE OF THE GROSS ESTATE SHALL INCLUDE THE VALUE OF ALL PROPERTY TO THE
EXTENT OF ANY INTEREST THEREIN OF WHICH THE DECEDENT  HAS  AT  ANY  TIME
MADE  A TRANSFER (EXCEPT IN CASE OF A BONA FIDE SALE FOR AN ADEQUATE AND
FULL CONSIDERATION IN MONEY OR MONEY'S WORTH), BY  TRUST  OR  OTHERWISE,
UNDER  WHICH  HE  HAS RETAINED FOR HIS LIFE OR FOR ANY PERIOD NOT ASCER-

S. 6359--C                         237

TAINABLE WITHOUT REFERENCE TO HIS DEATH OR FOR ANY PERIOD WHICH DOES NOT
IN FACT END BEFORE HIS DEATH--
  (1)  THE  POSSESSION OR ENJOYMENT OF, OR THE RIGHT TO THE INCOME FROM,
THE PROPERTY, OR
  (2) THE RIGHT, EITHER ALONE OR IN  CONJUNCTION  WITH  ANY  PERSON,  TO
DESIGNATE  THE  PERSONS  WHO  SHALL POSSESS OR ENJOY THE PROPERTY OR THE
INCOME THEREFROM.
  (B) VOTING RIGHTS.--
  (1) IN GENERAL.--FOR PURPOSES OF SUBSECTION (A)(1), THE  RETENTION  OF
THE  RIGHT  TO  VOTE  (DIRECTLY  OR  INDIRECTLY)  SHARES  OF  STOCK OF A
CONTROLLED CORPORATION SHALL BE CONSIDERED TO  BE  A  RETENTION  OF  THE
ENJOYMENT OF TRANSFERRED PROPERTY.
  (2)  CONTROLLED  CORPORATION.--FOR PURPOSES OF PARAGRAPH (1), A CORPO-
RATION SHALL BE TREATED AS A CONTROLLED  CORPORATION  IF,  AT  ANY  TIME
AFTER  THE  TRANSFER OF THE PROPERTY AND DURING THE 3-YEAR PERIOD ENDING
ON THE DATE OF THE DECEDENT'S DEATH, THE DECEDENT OWNED (WITH THE APPLI-
CATION OF SECTION 318), OR HAD THE RIGHT (EITHER ALONE OR IN CONJUNCTION
WITH ANY PERSON) TO VOTE, STOCK POSSESSING AT LEAST 20  PERCENT  OF  THE
TOTAL COMBINED VOTING POWER OF ALL CLASSES OF STOCK.
  (3)  COORDINATION WITH SECTION 2035.--FOR PURPOSES OF APPLYING SECTION
2035 WITH RESPECT TO PARAGRAPH (1), THE RELINQUISHMENT OR  CESSATION  OF
VOTING  RIGHTS  SHALL  BE  TREATED AS A TRANSFER OF PROPERTY MADE BY THE
DECEDENT.
  (C) LIMITATION ON APPLICATION OF GENERAL RULE.--THIS SECTION SHALL NOT
APPLY TO A TRANSFER MADE BEFORE MARCH 4, 1931; NOR TO  A  TRANSFER  MADE
AFTER MARCH 3, 1931, AND BEFORE JUNE 7, 1932, UNLESS THE PROPERTY TRANS-
FERRED  WOULD  HAVE  BEEN  INCLUDIBLE  IN THE DECEDENT'S GROSS ESTATE BY
REASON OF THE AMENDATORY LANGUAGE OF THE JOINT RESOLUTION  OF  MARCH  3,
1931 (46 STAT. 1516).
  S 2037. TRANSFERS TAKING EFFECT AT DEATH. (A) GENERAL RULE.--THE VALUE
OF  THE  GROSS  ESTATE  SHALL  INCLUDE  THE VALUE OF ALL PROPERTY TO THE
EXTENT OF ANY INTEREST THEREIN OF WHICH THE DECEDENT  HAS  AT  ANY  TIME
AFTER  SEPTEMBER 7, 1916, MADE A TRANSFER (EXCEPT IN CASE OF A BONA FIDE
SALE FOR AN ADEQUATE AND FULL CONSIDERATION IN MONEY OR MONEY'S  WORTH),
BY TRUST OR OTHERWISE, IF--
  (1)  POSSESSION OR ENJOYMENT OF THE PROPERTY CAN, THROUGH OWNERSHIP OF
SUCH INTEREST, BE OBTAINED ONLY BY SURVIVING THE DECEDENT, AND
  (2) THE DECEDENT HAS RETAINED A REVERSIONARY INTEREST IN THE  PROPERTY
(BUT IN THE CASE OF A TRANSFER MADE BEFORE OCTOBER 8, 1949, ONLY IF SUCH
REVERSIONARY  INTEREST  AROSE  BY THE EXPRESS TERMS OF THE INSTRUMENT OF
TRANSFER), AND THE  VALUE  OF  SUCH  REVERSIONARY  INTEREST  IMMEDIATELY
BEFORE  THE DEATH OF THE DECEDENT EXCEEDS 5 PERCENT OF THE VALUE OF SUCH
PROPERTY.
  (B) SPECIAL RULES.--FOR PURPOSES OF THIS SECTION, THE TERM "REVERSION-
ARY INTEREST" INCLUDES A POSSIBILITY THAT PROPERTY  TRANSFERRED  BY  THE
DECEDENT--
  (1) MAY RETURN TO HIM OR HIS ESTATE, OR
  (2) MAY BE SUBJECT TO A POWER OF DISPOSITION BY HIM,
  BUT  SUCH  TERM  DOES  NOT INCLUDE A POSSIBILITY THAT THE INCOME ALONE
FROM SUCH PROPERTY MAY RETURN TO HIM OR BECOME SUBJECT  TO  A  POWER  OF
DISPOSITION  BY  HIM.  THE  VALUE OF A REVERSIONARY INTEREST IMMEDIATELY
BEFORE THE DEATH OF THE DECEDENT SHALL BE DETERMINED (WITHOUT REGARD  TO
THE FACT OF THE DECEDENT'S DEATH) BY USUAL METHODS OF VALUATION, INCLUD-
ING THE USE OF TABLES OF MORTALITY AND ACTUARIAL PRINCIPLES, UNDER REGU-
LATIONS  PRESCRIBED  BY  THE  SECRETARY.  IN  DETERMINING THE VALUE OF A
POSSIBILITY THAT PROPERTY MAY BE SUBJECT TO A POWER  OF  DISPOSITION  BY

S. 6359--C                         238

THE DECEDENT, SUCH POSSIBILITY SHALL BE VALUED AS IF IT WERE A POSSIBIL-
ITY  THAT  SUCH  PROPERTY  MAY  RETURN  TO  THE  DECEDENT OR HIS ESTATE.
NOTWITHSTANDING THE FOREGOING, AN INTEREST SO TRANSFERRED SHALL  NOT  BE
INCLUDED IN THE DECEDENT'S GROSS ESTATE UNDER THIS SECTION IF POSSESSION
OR ENJOYMENT OF THE PROPERTY COULD HAVE BEEN OBTAINED BY ANY BENEFICIARY
DURING  THE  DECEDENT'S  LIFE THROUGH THE EXERCISE OF A GENERAL POWER OF
APPOINTMENT (AS DEFINED IN SECTION 2041) WHICH IN FACT  WAS  EXERCISABLE
IMMEDIATELY BEFORE THE DECEDENT'S DEATH.
  S  2038.  REVOCABLE TRANSFERS. (A) IN GENERAL.--THE VALUE OF THE GROSS
ESTATE SHALL INCLUDE THE VALUE OF ALL PROPERTY--
  (1) TRANSFERS AFTER JUNE 22, 1936.--TO  THE  EXTENT  OF  ANY  INTEREST
THEREIN OF WHICH THE DECEDENT HAS AT ANY TIME MADE A TRANSFER (EXCEPT IN
CASE OF A BONA FIDE SALE FOR AN ADEQUATE AND FULL CONSIDERATION IN MONEY
OR  MONEY'S  WORTH),  BY TRUST OR OTHERWISE, WHERE THE ENJOYMENT THEREOF
WAS SUBJECT AT THE DATE OF HIS DEATH TO ANY CHANGE THROUGH THE  EXERCISE
OF  A  POWER (IN WHATEVER CAPACITY EXERCISABLE) BY THE DECEDENT ALONE OR
BY THE DECEDENT IN CONJUNCTION WITH ANY OTHER PERSON (WITHOUT REGARD  TO
WHEN  OR  FROM  WHAT SOURCE THE DECEDENT ACQUIRED SUCH POWER), TO ALTER,
AMEND, REVOKE, OR TERMINATE, OR WHERE ANY  SUCH  POWER  IS  RELINQUISHED
DURING THE 3-YEAR PERIOD ENDING ON THE DATE OF THE DECEDENT'S DEATH.
  (2) TRANSFERS ON OR BEFORE JUNE 22, 1936.--TO THE EXTENT OF ANY INTER-
EST  THEREIN  OF  WHICH  THE  DECEDENT  HAS  AT ANY TIME MADE A TRANSFER
(EXCEPT IN CASE OF A BONA FIDE SALE FOR AN ADEQUATE AND  FULL  CONSIDER-
ATION  IN  MONEY  OR  MONEY'S  WORTH),  BY TRUST OR OTHERWISE, WHERE THE
ENJOYMENT THEREOF WAS SUBJECT AT THE DATE OF HIS  DEATH  TO  ANY  CHANGE
THROUGH  THE  EXERCISE  OF  A  POWER, EITHER BY THE DECEDENT ALONE OR IN
CONJUNCTION WITH ANY PERSON, TO ALTER, AMEND, OR REVOKE,  OR  WHERE  THE
DECEDENT  RELINQUISHED ANY SUCH POWER DURING THE 3-YEAR PERIOD ENDING ON
THE DATE OF THE DECEDENT'S DEATH. EXCEPT IN THE CASE OF  TRANSFERS  MADE
AFTER  JUNE 22, 1936, NO INTEREST OF THE DECEDENT OF WHICH HE HAS MADE A
TRANSFER SHALL BE INCLUDED IN  THE  GROSS  ESTATE  UNDER  PARAGRAPH  (1)
UNLESS IT IS INCLUDIBLE UNDER THIS PARAGRAPH.
  (B)  DATE  OF  EXISTENCE  OF POWER.--FOR PURPOSES OF THIS SECTION, THE
POWER TO ALTER, AMEND, REVOKE, OR TERMINATE SHALL BE CONSIDERED TO EXIST
ON THE DATE OF THE DECEDENT'S DEATH EVEN  THOUGH  THE  EXERCISE  OF  THE
POWER  IS  SUBJECT  TO  A  PRECEDENT GIVING OF NOTICE OR EVEN THOUGH THE
ALTERATION, AMENDMENT, REVOCATION, OR TERMINATION TAKES EFFECT  ONLY  ON
THE  EXPIRATION  OF  A  STATED  PERIOD  AFTER THE EXERCISE OF THE POWER,
WHETHER OR NOT ON OR BEFORE THE DATE OF THE DECEDENT'S DEATH NOTICE  HAS
BEEN GIVEN OR THE POWER HAS BEEN EXERCISED. IN SUCH CASES PROPER ADJUST-
MENT  SHALL  BE  MADE  REPRESENTING  THE INTERESTS WHICH WOULD HAVE BEEN
EXCLUDED FROM THE POWER IF THE DECEDENT HAD LIVED, AND FOR SUCH PURPOSE,
IF THE NOTICE HAS NOT BEEN GIVEN OR THE POWER HAS NOT BEEN EXERCISED  ON
OR BEFORE THE DATE OF HIS DEATH, SUCH NOTICE SHALL BE CONSIDERED TO HAVE
BEEN GIVEN, OR THE POWER EXERCISED, ON THE DATE OF HIS DEATH.
  S  2039.  ANNUITIES.  (A) GENERAL.--THE GROSS ESTATE SHALL INCLUDE THE
VALUE OF AN ANNUITY OR OTHER PAYMENT RECEIVABLE BY  ANY  BENEFICIARY  BY
REASON OF SURVIVING THE DECEDENT UNDER ANY FORM OF CONTRACT OR AGREEMENT
ENTERED INTO AFTER MARCH 3, 1931 (OTHER THAN AS INSURANCE UNDER POLICIES
ON  THE  LIFE OF THE DECEDENT), IF, UNDER SUCH CONTRACT OR AGREEMENT, AN
ANNUITY OR OTHER PAYMENT WAS PAYABLE TO THE DECEDENT,  OR  THE  DECEDENT
POSSESSED  THE RIGHT TO RECEIVE SUCH ANNUITY OR PAYMENT, EITHER ALONE OR
IN CONJUNCTION WITH ANOTHER FOR HIS LIFE OR FOR ANY  PERIOD  NOT  ASCER-
TAINABLE WITHOUT REFERENCE TO HIS DEATH OR FOR ANY PERIOD WHICH DOES NOT
IN FACT END BEFORE HIS DEATH.

S. 6359--C                         239

  (B)  AMOUNT  INCLUDIBLE.--SUBSECTION (A) SHALL APPLY TO ONLY SUCH PART
OF THE VALUE OF THE ANNUITY  OR  OTHER  PAYMENT  RECEIVABLE  UNDER  SUCH
CONTRACT  OR  AGREEMENT AS IS PROPORTIONATE TO THAT PART OF THE PURCHASE
PRICE THEREFOR  CONTRIBUTED  BY  THE  DECEDENT.  FOR  PURPOSES  OF  THIS
SECTION,  ANY CONTRIBUTION BY THE DECEDENT'S EMPLOYER OR FORMER EMPLOYER
TO THE PURCHASE PRICE OF SUCH CONTRACT OR AGREEMENT (WHETHER OR  NOT  TO
AN  EMPLOYEE'S TRUST OR FUND FORMING PART OF A PENSION, ANNUITY, RETIRE-
MENT, BONUS OR PROFIT SHARING PLAN) SHALL BE CONSIDERED TO  BE  CONTRIB-
UTED BY THE DECEDENT IF MADE BY REASON OF HIS EMPLOYMENT.
  S  2040.  JOINT  INTERESTS.  (A) GENERAL RULE.--THE VALUE OF THE GROSS
ESTATE SHALL INCLUDE THE VALUE OF ALL PROPERTY  TO  THE  EXTENT  OF  THE
INTEREST THEREIN HELD AS JOINT TENANTS WITH RIGHT OF SURVIVORSHIP BY THE
DECEDENT  AND  ANY  OTHER  PERSON,  OR AS TENANTS BY THE ENTIRETY BY THE
DECEDENT AND SPOUSE, OR DEPOSITED, WITH ANY PERSON CARRYING ON THE BANK-
ING BUSINESS, IN THEIR JOINT NAMES AND PAYABLE TO EITHER OR  THE  SURVI-
VOR,  EXCEPT  SUCH  PART  THEREOF  AS  MAY  BE  SHOWN TO HAVE ORIGINALLY
BELONGED TO SUCH OTHER  PERSON  AND  NEVER  TO  HAVE  BEEN  RECEIVED  OR
ACQUIRED  BY  THE LATTER FROM THE DECEDENT FOR LESS THAN AN ADEQUATE AND
FULL CONSIDERATION IN MONEY OR MONEY'S WORTH: PROVIDED, THAT WHERE  SUCH
PROPERTY  OR  ANY  PART THEREOF, OR PART OF THE CONSIDERATION WITH WHICH
SUCH PROPERTY WAS ACQUIRED, IS SHOWN TO HAVE BEEN AT ANY  TIME  ACQUIRED
BY  SUCH  OTHER  PERSON  FROM THE DECEDENT FOR LESS THAN AN ADEQUATE AND
FULL CONSIDERATION IN MONEY OR MONEY'S WORTH, THERE  SHALL  BE  EXCEPTED
ONLY  SUCH PART OF THE VALUE OF SUCH PROPERTY AS IS PROPORTIONATE TO THE
CONSIDERATION FURNISHED BY SUCH OTHER  PERSON:  PROVIDED  FURTHER,  THAT
WHERE ANY PROPERTY HAS BEEN ACQUIRED BY GIFT, BEQUEST, DEVISE, OR INHER-
ITANCE, AS A TENANCY BY THE ENTIRETY BY THE DECEDENT AND SPOUSE, THEN TO
THE  EXTENT  OF  ONE-HALF OF THE VALUE THEREOF, OR, WHERE SO ACQUIRED BY
THE DECEDENT AND ANY OTHER PERSON AS JOINT TENANTS WITH RIGHT OF  SURVI-
VORSHIP AND THEIR INTERESTS ARE NOT OTHERWISE SPECIFIED OR FIXED BY LAW,
THEN TO THE EXTENT OF THE VALUE OF A FRACTIONAL PART TO BE DETERMINED BY
DIVIDING  THE  VALUE OF THE PROPERTY BY THE NUMBER OF JOINT TENANTS WITH
RIGHT OF SURVIVORSHIP.
  (B) CERTAIN JOINT INTERESTS OF HUSBAND AND WIFE.--
  (1) INTERESTS OF SPOUSE EXCLUDED FROM  GROSS  ESTATE.--NOTWITHSTANDING
SUBSECTION  (A),  IN THE CASE OF ANY QUALIFIED JOINT INTEREST, THE VALUE
INCLUDED IN THE GROSS ESTATE WITH RESPECT TO SUCH INTEREST BY REASON  OF
THIS SECTION IS ONE-HALF OF THE VALUE OF SUCH QUALIFIED JOINT INTEREST.
  (2)  QUALIFIED JOINT INTEREST DEFINED.--FOR PURPOSES OF PARAGRAPH (1),
THE TERM "QUALIFIED JOINT INTEREST" MEANS ANY INTEREST IN PROPERTY  HELD
BY THE DECEDENT AND THE DECEDENT'S SPOUSE AS--
  (A) TENANTS BY THE ENTIRETY, OR
  (B) JOINT TENANTS WITH RIGHT OF SURVIVORSHIP, BUT ONLY IF THE DECEDENT
AND THE SPOUSE OF THE DECEDENT ARE THE ONLY JOINT TENANTS.
  S 2041. POWERS OF APPOINTMENT. (A) IN GENERAL.--THE VALUE OF THE GROSS
ESTATE SHALL INCLUDE THE VALUE OF ALL PROPERTY--
  (1)  POWERS  OF APPOINTMENT CREATED ON OR BEFORE OCTOBER 21, 1942.--TO
THE EXTENT OF ANY PROPERTY WITH RESPECT TO  WHICH  A  GENERAL  POWER  OF
APPOINTMENT  CREATED  ON OR BEFORE OCTOBER 21, 1942, IS EXERCISED BY THE
DECEDENT--
  (A) BY WILL, OR
  (B) BY A DISPOSITION WHICH IS OF SUCH NATURE THAT IF IT WERE A  TRANS-
FER OF PROPERTY OWNED BY THE DECEDENT, SUCH PROPERTY WOULD BE INCLUDIBLE
IN THE DECEDENT'S GROSS ESTATE UNDER SECTIONS 2035 TO 2038, INCLUSIVE;
  BUT  THE  FAILURE  TO EXERCISE SUCH A POWER OR THE COMPLETE RELEASE OF
SUCH A POWER SHALL NOT BE DEEMED AN EXERCISE THEREOF. IF A GENERAL POWER

S. 6359--C                         240

OF APPOINTMENT CREATED ON OR BEFORE OCTOBER 21, 1942, HAS BEEN PARTIALLY
RELEASED SO THAT IT IS NO LONGER A GENERAL  POWER  OF  APPOINTMENT,  THE
EXERCISE  OF  SUCH  POWER  SHALL  NOT  BE DEEMED TO BE THE EXERCISE OF A
GENERAL POWER OF APPOINTMENT IF--
  (I) SUCH PARTIAL RELEASE OCCURRED BEFORE NOVEMBER 1, 1951, OR
  (II)  THE  DONEE OF SUCH POWER WAS UNDER A LEGAL DISABILITY TO RELEASE
SUCH POWER ON OCTOBER 21, 1942, AND SUCH PARTIAL  RELEASE  OCCURRED  NOT
LATER THAN 6 MONTHS AFTER THE TERMINATION OF SUCH LEGAL DISABILITY.
  (2) POWERS CREATED AFTER OCTOBER 21, 1942.--TO THE EXTENT OF ANY PROP-
ERTY  WITH  RESPECT TO WHICH THE DECEDENT HAS AT THE TIME OF HIS DEATH A
GENERAL POWER OF APPOINTMENT CREATED AFTER OCTOBER  21,  1942,  OR  WITH
RESPECT TO WHICH THE DECEDENT HAS AT ANY TIME EXERCISED OR RELEASED SUCH
A  POWER OF APPOINTMENT BY A DISPOSITION WHICH IS OF SUCH NATURE THAT IF
IT WERE A TRANSFER OF PROPERTY OWNED  BY  THE  DECEDENT,  SUCH  PROPERTY
WOULD  BE  INCLUDIBLE IN THE DECEDENT'S GROSS ESTATE UNDER SECTIONS 2035
TO 2038, INCLUSIVE. FOR PURPOSES OF THIS PARAGRAPH  (2),  THE  POWER  OF
APPOINTMENT  SHALL  BE CONSIDERED TO EXIST ON THE DATE OF THE DECEDENT'S
DEATH EVEN THOUGH THE EXERCISE OF THE POWER IS SUBJECT  TO  A  PRECEDENT
GIVING  OF  NOTICE OR EVEN THOUGH THE EXERCISE OF THE POWER TAKES EFFECT
ONLY ON THE EXPIRATION OF A STATED PERIOD AFTER ITS EXERCISE, WHETHER OR
NOT ON OR BEFORE THE DATE OF THE DECEDENT'S DEATH NOTICE HAS BEEN  GIVEN
OR THE POWER HAS BEEN EXERCISED.
  (3)  CREATION OF ANOTHER POWER IN CERTAIN CASES.--TO THE EXTENT OF ANY
PROPERTY WITH RESPECT TO WHICH THE DECEDENT--
  (A) BY WILL, OR
  (B) BY A DISPOSITION WHICH IS OF SUCH NATURE THAT IF IT WERE A  TRANS-
FER  OF PROPERTY OWNED BY THE DECEDENT SUCH PROPERTY WOULD BE INCLUDIBLE
IN THE DECEDENT'S GROSS ESTATE UNDER SECTION 2035, 2036, OR 2037,
  EXERCISES A POWER OF APPOINTMENT CREATED AFTER OCTOBER  21,  1942,  BY
CREATING  ANOTHER  POWER OF APPOINTMENT WHICH UNDER THE APPLICABLE LOCAL
LAW CAN BE VALIDLY EXERCISED SO AS TO POSTPONE THE VESTING OF ANY ESTATE
OR INTEREST IN SUCH PROPERTY, OR SUSPEND THE ABSOLUTE OWNERSHIP OR POWER
OF ALIENATION OF SUCH  PROPERTY,  FOR  A  PERIOD  ASCERTAINABLE  WITHOUT
REGARD TO THE DATE OF THE CREATION OF THE FIRST POWER.
  (B) DEFINITIONS.--FOR PURPOSES OF SUBSECTION (A)--
  (1) GENERAL POWER OF APPOINTMENT.--THE TERM "GENERAL POWER OF APPOINT-
MENT"  MEANS  A POWER WHICH IS EXERCISABLE IN FAVOR OF THE DECEDENT, HIS
ESTATE, HIS CREDITORS, OR THE CREDITORS OF HIS ESTATE; EXCEPT THAT--
  (A) A POWER TO CONSUME, INVADE, OR APPROPRIATE PROPERTY FOR THE  BENE-
FIT OF THE DECEDENT WHICH IS LIMITED BY AN ASCERTAINABLE STANDARD RELAT-
ING  TO  THE  HEALTH, EDUCATION, SUPPORT, OR MAINTENANCE OF THE DECEDENT
SHALL NOT BE DEEMED A GENERAL POWER OF APPOINTMENT.
  (B) A POWER OF APPOINTMENT CREATED ON  OR  BEFORE  OCTOBER  21,  1942,
WHICH  IS  EXERCISABLE  BY THE DECEDENT ONLY IN CONJUNCTION WITH ANOTHER
PERSON SHALL NOT BE DEEMED A GENERAL POWER OF APPOINTMENT.
  (C) IN THE CASE OF A POWER OF APPOINTMENT CREATED  AFTER  OCTOBER  21,
1942,  WHICH  IS  EXERCISABLE  BY  THE DECEDENT ONLY IN CONJUNCTION WITH
ANOTHER PERSON--
  (I) IF THE POWER IS NOT EXERCISABLE BY THE DECEDENT EXCEPT IN CONJUNC-
TION WITH THE CREATOR OF THE POWER--SUCH POWER SHALL  NOT  BE  DEEMED  A
GENERAL POWER OF APPOINTMENT.
  (II)  IF  THE  POWER  IS  NOT  EXERCISABLE  BY  THE DECEDENT EXCEPT IN
CONJUNCTION WITH A PERSON HAVING A SUBSTANTIAL INTEREST IN THE PROPERTY,
SUBJECT TO THE POWER, WHICH IS ADVERSE TO EXERCISE OF THE POWER IN FAVOR
OF THE DECEDENT--SUCH POWER SHALL NOT  BE  DEEMED  A  GENERAL  POWER  OF
APPOINTMENT.  FOR  THE  PURPOSES  OF THIS CLAUSE A PERSON WHO, AFTER THE

S. 6359--C                         241

DEATH OF THE DECEDENT, MAY BE POSSESSED OF A POWER OF APPOINTMENT  (WITH
RESPECT  TO  THE  PROPERTY SUBJECT TO THE DECEDENT'S POWER) WHICH HE MAY
EXERCISE IN HIS OWN FAVOR SHALL BE DEEMED AS HAVING AN INTEREST  IN  THE
PROPERTY  AND  SUCH INTEREST SHALL BE DEEMED ADVERSE TO SUCH EXERCISE OF
THE DECEDENT'S POWER.
  (III) IF (AFTER THE APPLICATION OF CLAUSES (I) AND (II)) THE POWER  IS
A GENERAL POWER OF APPOINTMENT AND IS EXERCISABLE IN FAVOR OF SUCH OTHER
PERSON--SUCH  POWER  SHALL BE DEEMED A GENERAL POWER OF APPOINTMENT ONLY
IN RESPECT OF A FRACTIONAL PART OF THE PROPERTY SUBJECT TO  SUCH  POWER,
SUCH PART TO BE DETERMINED BY DIVIDING THE VALUE OF SUCH PROPERTY BY THE
NUMBER  OF  SUCH  PERSONS (INCLUDING THE DECEDENT) IN FAVOR OF WHOM SUCH
POWER IS EXERCISABLE.
  FOR PURPOSES OF CLAUSES (II) AND (III), A POWER SHALL BE DEEMED TO  BE
EXERCISABLE  IN  FAVOR OF A PERSON IF IT IS EXERCISABLE IN FAVOR OF SUCH
PERSON, HIS ESTATE, HIS CREDITORS, OR THE CREDITORS OF HIS ESTATE.
  (2) LAPSE OF POWER.--THE LAPSE OF A POWER OF APPOINTMENT CREATED AFTER
OCTOBER 21, 1942, DURING THE LIFE OF THE INDIVIDUAL POSSESSING THE POWER
SHALL BE CONSIDERED A RELEASE OF  SUCH  POWER.  THE  PRECEDING  SENTENCE
SHALL APPLY WITH RESPECT TO THE LAPSE OF POWERS DURING ANY CALENDAR YEAR
ONLY TO THE EXTENT THAT THE PROPERTY, WHICH COULD HAVE BEEN APPOINTED BY
EXERCISE  OF  SUCH LAPSED POWERS, EXCEEDED IN VALUE, AT THE TIME OF SUCH
LAPSE, THE GREATER OF THE FOLLOWING AMOUNTS:
  (A) $5,000, OR
  (B) 5 PERCENT OF THE AGGREGATE VALUE, AT THE TIME OF  SUCH  LAPSE,  OF
THE  ASSETS  OUT OF WHICH, OR THE PROCEEDS OF WHICH, THE EXERCISE OF THE
LAPSED POWERS COULD HAVE BEEN SATISFIED.
  (3) DATE OF CREATION OF POWER.--FOR PURPOSES OF THIS SECTION, A  POWER
OF APPOINTMENT CREATED BY A WILL EXECUTED ON OR BEFORE OCTOBER 21, 1942,
SHALL BE CONSIDERED A POWER CREATED ON OR BEFORE SUCH DATE IF THE PERSON
EXECUTING SUCH WILL DIES BEFORE JULY 1, 1949, WITHOUT HAVING REPUBLISHED
SUCH WILL, BY CODICIL OR OTHERWISE, AFTER OCTOBER 21, 1942.
  S  2042.  PROCEEDS  OF  LIFE  INSURANCE. THE VALUE OF THE GROSS ESTATE
SHALL INCLUDE THE VALUE OF ALL PROPERTY--
  (1) RECEIVABLE BY THE EXECUTOR.--TO THE EXTENT OF THE  AMOUNT  RECEIV-
ABLE  BY  THE  EXECUTOR  AS  INSURANCE UNDER POLICIES ON THE LIFE OF THE
DECEDENT.
  (2) RECEIVABLE BY OTHER BENEFICIARIES.--TO THE EXTENT  OF  THE  AMOUNT
RECEIVABLE BY ALL OTHER BENEFICIARIES AS INSURANCE UNDER POLICIES ON THE
LIFE OF THE DECEDENT WITH RESPECT TO WHICH THE DECEDENT POSSESSED AT HIS
DEATH  ANY OF THE INCIDENTS OF OWNERSHIP, EXERCISABLE EITHER ALONE OR IN
CONJUNCTION WITH  ANY  OTHER  PERSON.  FOR  PURPOSES  OF  THE  PRECEDING
SENTENCE,  THE  TERM  "INCIDENT  OF  OWNERSHIP"  INCLUDES A REVERSIONARY
INTEREST (WHETHER ARISING BY THE EXPRESS TERMS OF THE  POLICY  OR  OTHER
INSTRUMENT  OR BY OPERATION OF LAW) ONLY IF THE VALUE OF SUCH REVERSION-
ARY INTEREST EXCEEDED 5 PERCENT OF THE VALUE OF THE  POLICY  IMMEDIATELY
BEFORE  THE  DEATH  OF THE DECEDENT. AS USED IN THIS PARAGRAPH, THE TERM
"REVERSIONARY INTEREST" INCLUDES A POSSIBILITY THAT THE POLICY,  OR  THE
PROCEEDS OF THE POLICY, MAY RETURN TO THE DECEDENT OR HIS ESTATE, OR MAY
BE SUBJECT TO A POWER OF DISPOSITION BY HIM. THE VALUE OF A REVERSIONARY
INTEREST  AT ANY TIME SHALL BE DETERMINED (WITHOUT REGARD TO THE FACT OF
THE DECEDENT'S DEATH) BY USUAL METHODS OF VALUATION, INCLUDING  THE  USE
OF TABLES OF MORTALITY AND ACTUARIAL PRINCIPLES, PURSUANT TO REGULATIONS
PRESCRIBED  BY  THE SECRETARY. IN DETERMINING THE VALUE OF A POSSIBILITY
THAT THE POLICY OR PROCEEDS THEREOF MAY BE SUBJECT TO A POWER OF  DISPO-
SITION BY THE DECEDENT, SUCH POSSIBILITY SHALL BE VALUED AS IF IT WERE A

S. 6359--C                         242

POSSIBILITY  THAT  SUCH POLICY OR PROCEEDS MAY RETURN TO THE DECEDENT OR
HIS ESTATE.
  S  2043. TRANSFERS FOR INSUFFICIENT CONSIDERATION. (A) IN GENERAL.--IF
ANY ONE OF THE TRANSFERS, TRUSTS, INTERESTS, RIGHTS, OR  POWERS  ENUMER-
ATED AND DESCRIBED IN SECTIONS 2035 TO 2038, INCLUSIVE, AND SECTION 2041
IS  MADE,  CREATED,  EXERCISED,  OR  RELINQUISHED FOR A CONSIDERATION IN
MONEY OR MONEY'S WORTH, BUT IS NOT A BONA FIDE SALE FOR AN ADEQUATE  AND
FULL CONSIDERATION IN MONEY OR MONEY'S WORTH, THERE SHALL BE INCLUDED IN
THE GROSS ESTATE ONLY THE EXCESS OF THE FAIR MARKET VALUE AT THE TIME OF
DEATH OF THE PROPERTY OTHERWISE TO BE INCLUDED ON ACCOUNT OF SUCH TRANS-
ACTION,  OVER  THE  VALUE  OF THE CONSIDERATION RECEIVED THEREFOR BY THE
DECEDENT.
  (B) MARITAL RIGHTS NOT TREATED AS CONSIDERATION.--
  (1) IN GENERAL.--FOR PURPOSES OF THIS  CHAPTER,  A  RELINQUISHMENT  OR
PROMISED  RELINQUISHMENT  OF  DOWER OR CURTESY, OR OF A STATUTORY ESTATE
CREATED IN LIEU OF DOWER OR CURTESY, OR OF OTHER MARITAL RIGHTS  IN  THE
DECEDENT'S  PROPERTY  OR ESTATE, SHALL NOT BE CONSIDERED TO ANY EXTENT A
CONSIDERATION "IN MONEY OR MONEY'S WORTH".
  (2) EXCEPTION.--FOR PURPOSES OF SECTION 2053  (RELATING  TO  EXPENSES,
INDEBTEDNESS,  AND  TAXES),  A  TRANSFER OF PROPERTY WHICH SATISFIES THE
REQUIREMENTS OF PARAGRAPH (1) OF SECTION 2516 (RELATING TO CERTAIN PROP-
ERTY SETTLEMENTS) SHALL BE CONSIDERED TO BE MADE  FOR  AN  ADEQUATE  AND
FULL CONSIDERATION IN MONEY OR MONEY'S WORTH.
  S  2044.  CERTAIN  PROPERTY FOR WHICH MARITAL DEDUCTION WAS PREVIOUSLY
ALLOWED. (A) GENERAL RULE.--THE VALUE OF THE GROSS ESTATE SHALL  INCLUDE
THE  VALUE  OF  ANY  PROPERTY TO WHICH THIS SECTION APPLIES IN WHICH THE
DECEDENT HAD A QUALIFYING INCOME INTEREST FOR LIFE.
  (B) PROPERTY TO WHICH THIS SECTION APPLIES.--THIS SECTION  APPLIES  TO
ANY PROPERTY IF--
  (1) A DEDUCTION WAS ALLOWED WITH RESPECT TO THE TRANSFER OF SUCH PROP-
ERTY TO THE DECEDENT--
  (A) UNDER SECTION 2056 BY REASON OF SUBSECTION (B)(7) THEREOF, OR
  (B) UNDER SECTION 2523 BY REASON OF SUBSECTION (F) THEREOF, AND
  (2)  SECTION  2519  (RELATING TO DISPOSITIONS OF CERTAIN LIFE ESTATES)
DID NOT APPLY WITH RESPECT TO A DISPOSITION BY THE DECEDENT OF  PART  OR
ALL OF SUCH PROPERTY.
  (C)  PROPERTY TREATED AS HAVING PASSED FROM DECEDENT.--FOR PURPOSES OF
THIS CHAPTER AND CHAPTER 13, PROPERTY INCLUDIBLE IN THE GROSS ESTATE  OF
THE  DECEDENT  UNDER SUBSECTION (A) SHALL BE TREATED AS PROPERTY PASSING
FROM THE DECEDENT.
  S 2045. PRIOR INTERESTS. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED  BY
LAW,  SECTIONS  2034  TO  2042, INCLUSIVE, SHALL APPLY TO THE TRANSFERS,
TRUSTS,  ESTATES,  INTERESTS,  RIGHTS,  POWERS,  AND  RELINQUISHMENT  OF
POWERS,  AS  SEVERALLY  ENUMERATED AND DESCRIBED THEREIN, WHENEVER MADE,
CREATED, ARISING, EXISTING, EXERCISED, OR RELINQUISHED.
  S 2046. DISCLAIMERS. FOR PROVISIONS RELATING TO THE EFFECT OF A QUALI-
FIED DISCLAIMER FOR PURPOSES OF THIS CHAPTER, SEE SECTION 2518.
  S 2053. EXPENSES, INDEBTEDNESS,  AND  TAXES.  (A)  GENERAL  RULE.--FOR
PURPOSES  OF  THE  TAX IMPOSED BY SECTION 2001, THE VALUE OF THE TAXABLE
ESTATE SHALL BE DETERMINED BY DEDUCTING FROM  THE  VALUE  OF  THE  GROSS
ESTATE SUCH AMOUNTS--
  (1) FOR FUNERAL EXPENSES,
  (2) FOR ADMINISTRATION EXPENSES,
  (3) FOR CLAIMS AGAINST THE ESTATE, AND
  (4)  FOR UNPAID MORTGAGES ON, OR ANY INDEBTEDNESS IN RESPECT OF, PROP-
ERTY WHERE THE VALUE OF THE DECEDENT'S INTEREST THEREIN, UNDIMINISHED BY

S. 6359--C                         243

SUCH MORTGAGE OR INDEBTEDNESS, IS INCLUDED IN THE  VALUE  OF  THE  GROSS
ESTATE,
  AS  ARE  ALLOWABLE  BY THE LAWS OF THE JURISDICTION, WHETHER WITHIN OR
WITHOUT THE UNITED STATES, UNDER WHICH THE ESTATE IS BEING ADMINISTERED.
  (B) OTHER ADMINISTRATION  EXPENSES.--SUBJECT  TO  THE  LIMITATIONS  IN
PARAGRAPH  (1) OF SUBSECTION (C), THERE SHALL BE DEDUCTED IN DETERMINING
THE TAXABLE ESTATE AMOUNTS REPRESENTING EXPENSES INCURRED IN ADMINISTER-
ING PROPERTY NOT SUBJECT TO CLAIMS WHICH IS INCLUDED IN THE GROSS ESTATE
TO THE SAME EXTENT SUCH AMOUNTS WOULD BE ALLOWABLE AS A DEDUCTION  UNDER
SUBSECTION (A) IF SUCH PROPERTY WERE SUBJECT TO CLAIMS, AND SUCH AMOUNTS
ARE  PAID  BEFORE THE EXPIRATION OF THE PERIOD OF LIMITATION FOR ASSESS-
MENT PROVIDED IN SECTION 6501.
  (C) LIMITATIONS.--
  (1) LIMITATIONS APPLICABLE TO SUBSECTIONS (A) AND (B).--
  (A) CONSIDERATION FOR CLAIMS.--THE DEDUCTION ALLOWED BY  THIS  SECTION
IN  THE  CASE  OF  CLAIMS  AGAINST  THE ESTATE, UNPAID MORTGAGES, OR ANY
INDEBTEDNESS SHALL, WHEN FOUNDED ON A PROMISE OR AGREEMENT,  BE  LIMITED
TO  THE  EXTENT  THAT THEY WERE CONTRACTED BONA FIDE AND FOR AN ADEQUATE
AND FULL CONSIDERATION IN MONEY OR MONEY'S WORTH;  EXCEPT  THAT  IN  ANY
CASE IN WHICH ANY SUCH CLAIM IS FOUNDED ON A PROMISE OR AGREEMENT OF THE
DECEDENT  TO  MAKE A CONTRIBUTION OR GIFT TO OR FOR THE USE OF ANY DONEE
DESCRIBED IN SECTION  2055  FOR  THE  PURPOSES  SPECIFIED  THEREIN,  THE
DEDUCTION  FOR SUCH CLAIMS SHALL NOT BE SO LIMITED, BUT SHALL BE LIMITED
TO THE EXTENT THAT IT WOULD BE ALLOWABLE AS A  DEDUCTION  UNDER  SECTION
2055 IF SUCH PROMISE OR AGREEMENT CONSTITUTED A BEQUEST.
  (B)  CERTAIN  TAXES.--ANY  INCOME  TAXES  ON INCOME RECEIVED AFTER THE
DEATH OF THE DECEDENT, OR PROPERTY TAXES NOT ACCRUED BEFORE  HIS  DEATH,
OR  ANY  ESTATE,  SUCCESSION, LEGACY, OR INHERITANCE TAXES, SHALL NOT BE
DEDUCTIBLE UNDER THIS SECTION.
  (C) CERTAIN CLAIMS BY REMAINDERMEN.--NO  DEDUCTION  SHALL  BE  ALLOWED
UNDER  THIS  SECTION  FOR  A  CLAIM AGAINST THE ESTATE BY A REMAINDERMAN
RELATING TO ANY PROPERTY DESCRIBED IN SECTION 2044.
  (D) SECTION 6166 INTEREST.--NO DEDUCTION SHALL BE ALLOWED  UNDER  THIS
SECTION  FOR  ANY  INTEREST  PAYABLE  UNDER  SECTION  6601 ON ANY UNPAID
PORTION OF THE TAX IMPOSED BY SECTION 2001 FOR THE PERIOD  DURING  WHICH
AN  EXTENSION OF TIME FOR PAYMENT OF SUCH TAX IS IN EFFECT UNDER SECTION
6166.
  (2) LIMITATIONS APPLICABLE ONLY TO SUBSECTION (A).--IN THE CASE OF THE
AMOUNTS DESCRIBED IN SUBSECTION  (A),  THERE  SHALL  BE  DISALLOWED  THE
AMOUNT  BY  WHICH  THE DEDUCTIONS SPECIFIED THEREIN EXCEED THE VALUE, AT
THE TIME OF THE DECEDENT'S DEATH, OF PROPERTY SUBJECT TO CLAIMS,  EXCEPT
TO  THE  EXTENT  THAT  SUCH DEDUCTIONS REPRESENT AMOUNTS PAID BEFORE THE
DATE PRESCRIBED FOR THE FILING OF THE ESTATE TAX RETURN. FOR PURPOSES OF
THIS SECTION, THE TERM  "PROPERTY  SUBJECT  TO  CLAIMS"  MEANS  PROPERTY
INCLUDIBLE  IN  THE GROSS ESTATE OF THE DECEDENT WHICH, OR THE AVAILS OF
WHICH, WOULD UNDER THE APPLICABLE LAW, BEAR THE BURDEN OF THE PAYMENT OF
SUCH DEDUCTIONS IN THE FINAL ADJUSTMENT AND SETTLEMENT  OF  THE  ESTATE,
EXCEPT  THAT THE VALUE OF THE PROPERTY SHALL BE REDUCED BY THE AMOUNT OF
THE DEDUCTION UNDER SECTION 2054 ATTRIBUTABLE TO SUCH PROPERTY.
  (D) CERTAIN FOREIGN DEATH TAXES.--
  (1)  IN  GENERAL.--NOTWITHSTANDING  THE   PROVISIONS   OF   SUBSECTION
(C)(1)(B), FOR PURPOSES OF THE TAX IMPOSED BY SECTION 2001, THE VALUE OF
THE  TAXABLE  ESTATE MAY BE DETERMINED, IF THE EXECUTOR SO ELECTS BEFORE
THE EXPIRATION OF THE PERIOD OF LIMITATION FOR  ASSESSMENT  PROVIDED  IN
SECTION 6501, BY DEDUCTING FROM THE VALUE OF THE GROSS ESTATE THE AMOUNT
(AS  DETERMINED  IN ACCORDANCE WITH REGULATIONS PRESCRIBED BY THE SECRE-

S. 6359--C                         244

TARY) OF ANY ESTATE, SUCCESSION, LEGACY, OR INHERITANCE TAX  IMPOSED  BY
AND  ACTUALLY  PAID  TO  ANY FOREIGN COUNTRY, IN RESPECT OF ANY PROPERTY
SITUATED WITHIN SUCH FOREIGN COUNTRY AND INCLUDED IN THE GROSS ESTATE OF
A CITIZEN OR RESIDENT OF THE UNITED STATES, UPON A TRANSFER BY THE DECE-
DENT  FOR  PUBLIC,  CHARITABLE,  OR  RELIGIOUS USES DESCRIBED IN SECTION
2055. THE DETERMINATION UNDER THIS PARAGRAPH OF THE COUNTRY WITHIN WHICH
PROPERTY IS SITUATED SHALL BE MADE IN ACCORDANCE WITH THE RULES APPLICA-
BLE UNDER SUBCHAPTER B (SEC. 2101 AND FOLLOWING) IN DETERMINING  WHETHER
PROPERTY  IS SITUATED WITHIN OR WITHOUT THE UNITED STATES.  ANY ELECTION
UNDER THIS PARAGRAPH SHALL BE EXERCISED IN ACCORDANCE  WITH  REGULATIONS
PRESCRIBED BY THE SECRETARY.
  (2)  CONDITION  FOR  ALLOWANCE  OF  DEDUCTION.--NO  DEDUCTION SHALL BE
ALLOWED UNDER PARAGRAPH (1) FOR A FOREIGN DEATH  TAX  SPECIFIED  THEREIN
UNLESS  THE  DECREASE  IN  THE TAX IMPOSED BY SECTION 2001 WHICH RESULTS
FROM THE DEDUCTION PROVIDED IN PARAGRAPH (1) WILL INURE SOLELY  FOR  THE
BENEFIT OF THE PUBLIC, CHARITABLE, OR RELIGIOUS TRANSFEREES DESCRIBED IN
SECTION  2055  OR SECTION 2106(A)(2).  IN ANY CASE WHERE THE TAX IMPOSED
BY SECTION 2001 IS EQUITABLY APPORTIONED AMONG ALL  THE  TRANSFEREES  OF
PROPERTY  INCLUDED  IN  THE  GROSS  ESTATE, INCLUDING THOSE DESCRIBED IN
SECTIONS 2055 AND 2106(A)(2) (TAKING INTO ACCOUNT ANY EXEMPTIONS,  CRED-
ITS,  OR  DEDUCTIONS  ALLOWED  BY  THIS  CHAPTER),  IN  DETERMINING SUCH
DECREASE, THERE SHALL BE DISREGARDED ANY DECREASE IN THE FEDERAL  ESTATE
TAX  WHICH  ANY  TRANSFEREES OTHER THAN THOSE DESCRIBED IN SECTIONS 2055
AND 2106(A)(2) ARE REQUIRED TO PAY.
  (3) EFFECT ON CREDIT FOR FOREIGN DEATH TAXES OF DEDUCTION  UNDER  THIS
SUBSECTION.--
  (A)  ELECTION.--AN  ELECTION  UNDER  THIS SUBSECTION SHALL BE DEEMED A
WAIVER OF THE RIGHT TO CLAIM A CREDIT, AGAINST THE FEDERAL  ESTATE  TAX,
UNDER  A  DEATH  TAX  CONVENTION WITH ANY FOREIGN COUNTRY FOR ANY TAX OR
PORTION THEREOF IN RESPECT OF WHICH A  DEDUCTION  IS  TAKEN  UNDER  THIS
SUBSECTION.
  (B) CROSS REFERENCE.--
  SEE  SECTION  2011(D)  FOR  THE EFFECT OF A DEDUCTION TAKEN UNDER THIS
PARAGRAPH ON THE CREDIT FOR FOREIGN DEATH TAXES.
  (E) MARITAL RIGHTS.--
  FOR PROVISIONS TREATING CERTAIN RELINQUISHMENTS OF MARITAL  RIGHTS  AS
CONSIDERATION IN MONEY OR MONEY'S WORTH, SEE SECTION 2043(B)(2).
  S  2054.  LOSSES. FOR PURPOSES OF THE TAX IMPOSED BY SECTION 2001, THE
VALUE OF THE TAXABLE ESTATE SHALL BE DETERMINED BY  DEDUCTING  FROM  THE
VALUE  OF  THE  GROSS  ESTATE  LOSSES  INCURRED DURING THE SETTLEMENT OF
ESTATES ARISING FROM FIRES, STORMS, SHIPWRECKS, OR OTHER CASUALTIES,  OR
FROM  THEFT,  WHEN  SUCH  LOSSES ARE NOT COMPENSATED FOR BY INSURANCE OR
OTHERWISE.
  S 2055. TRANSFERS FOR PUBLIC, CHARITABLE, AND RELIGIOUS USES.
  (A) IN GENERAL.--FOR PURPOSES OF THE TAX IMPOSED BY SECTION 2001,  THE
VALUE  OF  THE  TAXABLE ESTATE SHALL BE DETERMINED BY DEDUCTING FROM THE
VALUE OF THE GROSS ESTATE THE AMOUNT OF ALL BEQUESTS, LEGACIES, DEVISES,
OR TRANSFERS--
  (1) TO OR FOR THE USE OF THE UNITED STATES, ANY STATE,  ANY  POLITICAL
SUBDIVISION THEREOF, OR THE DISTRICT OF COLUMBIA, FOR EXCLUSIVELY PUBLIC
PURPOSES;
  (2) TO OR FOR THE USE OF ANY CORPORATION ORGANIZED AND OPERATED EXCLU-
SIVELY  FOR  RELIGIOUS, CHARITABLE, SCIENTIFIC, LITERARY, OR EDUCATIONAL
PURPOSES, INCLUDING THE ENCOURAGEMENT OF ART, OR TO FOSTER  NATIONAL  OR
INTERNATIONAL  AMATEUR  SPORTS  COMPETITION  (BUT ONLY IF NO PART OF ITS
ACTIVITIES INVOLVE THE PROVISION OF ATHLETIC FACILITIES  OR  EQUIPMENT),

S. 6359--C                         245

AND THE PREVENTION OF CRUELTY TO CHILDREN OR ANIMALS, NO PART OF THE NET
EARNINGS  OF  WHICH  INURES TO THE BENEFIT OF ANY PRIVATE STOCKHOLDER OR
INDIVIDUAL, WHICH IS NOT DISQUALIFIED FOR TAX  EXEMPTION  UNDER  SECTION
501(C)(3)  BY  REASON  OF ATTEMPTING TO INFLUENCE LEGISLATION, AND WHICH
DOES NOT PARTICIPATE IN, OR INTERVENE IN (INCLUDING  THE  PUBLISHING  OR
DISTRIBUTING  OF STATEMENTS), ANY POLITICAL CAMPAIGN ON BEHALF OF (OR IN
OPPOSITION TO) ANY CANDIDATE FOR PUBLIC OFFICE;
  (3) TO A TRUSTEE OR TRUSTEES, OR A FRATERNAL SOCIETY, ORDER, OR  ASSO-
CIATION OPERATING UNDER THE LODGE SYSTEM, BUT ONLY IF SUCH CONTRIBUTIONS
OR  GIFTS ARE TO BE USED BY SUCH TRUSTEE OR TRUSTEES, OR BY SUCH FRATER-
NAL SOCIETY, ORDER, OR ASSOCIATION, EXCLUSIVELY FOR RELIGIOUS,  CHARITA-
BLE,   SCIENTIFIC,   LITERARY,  OR  EDUCATIONAL  PURPOSES,  OR  FOR  THE
PREVENTION OF CRUELTY TO CHILDREN  OR  ANIMALS,  SUCH  TRUST,  FRATERNAL
SOCIETY,  ORDER,  OR  ASSOCIATION  WOULD  NOT  BE  DISQUALIFIED  FOR TAX
EXEMPTION UNDER SECTION 501(C)(3) BY REASON OF ATTEMPTING  TO  INFLUENCE
LEGISLATION,  AND  SUCH  TRUSTEE OR TRUSTEES, OR SUCH FRATERNAL SOCIETY,
ORDER, OR ASSOCIATION, DOES NOT PARTICIPATE IN, OR INTERVENE IN (INCLUD-
ING  THE  PUBLISHING  OR  DISTRIBUTING  OF  STATEMENTS),  ANY  POLITICAL
CAMPAIGN  ON  BEHALF  OF  (OR IN OPPOSITION TO) ANY CANDIDATE FOR PUBLIC
OFFICE;
  (4) TO OR FOR THE USE OF ANY VETERANS'  ORGANIZATION  INCORPORATED  BY
ACT  OF  CONGRESS,  OR OF ITS DEPARTMENTS OR LOCAL CHAPTERS OR POSTS, NO
PART OF THE NET EARNINGS OF WHICH INURES TO THE BENEFIT OF  ANY  PRIVATE
SHAREHOLDER OR INDIVIDUAL; OR
  (5)  TO AN EMPLOYEE STOCK OWNERSHIP PLAN IF SUCH TRANSFER QUALIFIES AS
A QUALIFIED GRATUITOUS TRANSFER OF QUALIFIED EMPLOYER SECURITIES  WITHIN
THE MEANING OF SECTION 664(G).
  FOR  PURPOSES  OF THIS SUBSECTION, THE COMPLETE TERMINATION BEFORE THE
DATE PRESCRIBED FOR THE FILING OF THE ESTATE TAX RETURN OF  A  POWER  TO
CONSUME,  INVADE, OR APPROPRIATE PROPERTY FOR THE BENEFIT OF AN INDIVID-
UAL BEFORE SUCH POWER HAS BEEN EXERCISED BY REASON OF THE DEATH OF  SUCH
INDIVIDUAL  OR FOR ANY OTHER REASON SHALL BE CONSIDERED AND DEEMED TO BE
A QUALIFIED DISCLAIMER WITH THE SAME FULL FORCE AND EFFECT AS THOUGH  HE
HAD  FILED  SUCH  QUALIFIED  DISCLAIMER.   RULES SIMILAR TO THE RULES OF
SECTION 501(J) SHALL APPLY FOR PURPOSES OF PARAGRAPH (2).
  (B) POWERS OF  APPOINTMENT.--PROPERTY  INCLUDIBLE  IN  THE  DECEDENT'S
GROSS  ESTATE  UNDER  SECTION  2041  (RELATING TO POWERS OF APPOINTMENT)
RECEIVED BY A DONEE DESCRIBED IN THIS SECTION  SHALL,  FOR  PURPOSES  OF
THIS SECTION, BE CONSIDERED A BEQUEST OF SUCH DECEDENT.
  (C)  DEATH  TAXES  PAYABLE  OUT  OF  BEQUESTS.--IF  THE TAX IMPOSED BY
SECTION 2001, OR ANY ESTATE, SUCCESSION, LEGACY, OR  INHERITANCE  TAXES,
ARE,  EITHER  BY  THE  TERMS OF THE WILL, BY THE LAW OF THE JURISDICTION
UNDER WHICH THE ESTATE IS ADMINISTERED, OR BY THE LAW OF  THE  JURISDIC-
TION IMPOSING THE PARTICULAR TAX, PAYABLE IN WHOLE OR IN PART OUT OF THE
BEQUESTS,  LEGACIES, OR DEVISES OTHERWISE DEDUCTIBLE UNDER THIS SECTION,
THEN THE AMOUNT DEDUCTIBLE UNDER THIS SECTION SHALL  BE  THE  AMOUNT  OF
SUCH BEQUESTS, LEGACIES, OR DEVISES REDUCED BY THE AMOUNT OF SUCH TAXES.
  (D)  LIMITATION  ON DEDUCTION.--THE AMOUNT OF THE DEDUCTION UNDER THIS
SECTION FOR ANY TRANSFER SHALL NOT EXCEED THE VALUE OF  THE  TRANSFERRED
PROPERTY REQUIRED TO BE INCLUDED IN THE GROSS ESTATE.
  (E) DISALLOWANCE OF DEDUCTIONS IN CERTAIN CASES.--
  (1) NO DEDUCTION SHALL BE ALLOWED UNDER THIS SECTION FOR A TRANSFER TO
OR  FOR  THE USE OF AN ORGANIZATION OR TRUST DESCRIBED IN SECTION 508(D)
OR 4948(C)(4) SUBJECT TO THE CONDITIONS SPECIFIED IN SUCH SECTIONS.
  (2) WHERE AN INTEREST IN PROPERTY (OTHER THAN AN INTEREST DESCRIBED IN
SECTION 170(F)(3)(B)) PASSES OR  HAS  PASSED  FROM  THE  DECEDENT  TO  A

S. 6359--C                         246

PERSON,  OR  FOR  A  USE,  DESCRIBED  IN SUBSECTION (A), AND AN INTEREST
(OTHER THAN AN INTEREST WHICH IS EXTINGUISHED UPON THE DECEDENT'S DEATH)
IN THE SAME PROPERTY PASSES OR HAS PASSED (FOR LESS THAN AN ADEQUATE AND
FULL  CONSIDERATION  IN  MONEY  OR MONEY'S WORTH) FROM THE DECEDENT TO A
PERSON, OR FOR A USE, NOT DESCRIBED  IN  SUBSECTION  (A),  NO  DEDUCTION
SHALL BE ALLOWED UNDER THIS SECTION FOR THE INTEREST WHICH PASSES OR HAS
PASSED  TO  THE  PERSON,  OR  FOR  THE  USE, DESCRIBED IN SUBSECTION (A)
UNLESS--
  (A) IN THE CASE OF A REMAINDER INTEREST, SUCH INTEREST IS IN  A  TRUST
WHICH  IS A CHARITABLE REMAINDER ANNUITY TRUST OR A CHARITABLE REMAINDER
UNITRUST (DESCRIBED IN SECTION 664) OR A POOLED INCOME  FUND  (DESCRIBED
IN SECTION 642(C)(5)), OR
  (B) IN THE CASE OF ANY OTHER INTEREST, SUCH INTEREST IS IN THE FORM OF
A  GUARANTEED ANNUITY OR IS A FIXED PERCENTAGE DISTRIBUTED YEARLY OF THE
FAIR MARKET VALUE OF THE PROPERTY (TO BE DETERMINED YEARLY).
  (3) REFORMATIONS TO COMPLY WITH PARAGRAPH (2).--
  (A) IN GENERAL.--A DEDUCTION SHALL BE ALLOWED UNDER SUBSECTION (A)  IN
RESPECT OF ANY QUALIFIED REFORMATION.
  (B)  QUALIFIED  REFORMATION.--FOR PURPOSES OF THIS PARAGRAPH, THE TERM
"QUALIFIED REFORMATION" MEANS A CHANGE  OF  A  GOVERNING  INSTRUMENT  BY
REFORMATION,  AMENDMENT,  CONSTRUCTION,  OR  OTHERWISE  WHICH  CHANGES A
REFORMABLE INTEREST INTO A QUALIFIED INTEREST BUT ONLY IF--
  (I) ANY DIFFERENCE BETWEEN--
  (I) THE ACTUARIAL VALUE (DETERMINED AS OF THE DATE OF  THE  DECEDENT'S
DEATH) OF THE QUALIFIED INTEREST, AND
  (II)  THE  ACTUARIAL VALUE (AS SO DETERMINED) OF THE REFORMABLE INTER-
EST,
  DOES NOT EXCEED 5 PERCENT OF THE ACTUARIAL VALUE (AS SO DETERMINED) OF
THE REFORMABLE INTEREST,
  (II) IN THE CASE OF--
  (I) A CHARITABLE REMAINDER INTEREST, THE NONREMAINDER INTEREST (BEFORE
AND AFTER THE QUALIFIED REFORMATION) TERMINATED AT THE SAME TIME, OR
  (II) ANY OTHER INTEREST, THE REFORMABLE  INTEREST  AND  THE  QUALIFIED
INTEREST ARE FOR THE SAME PERIOD, AND
  (III) SUCH CHANGE IS EFFECTIVE AS OF THE DATE OF THE DECEDENT'S DEATH.
  A  NONREMAINDER  INTEREST  (BEFORE REFORMATION) FOR A TERM OF YEARS IN
EXCESS OF 20 YEARS SHALL BE  TREATED  AS  SATISFYING  SUBCLAUSE  (I)  OF
CLAUSE  (II)  IF  SUCH  INTEREST (AFTER REFORMATION) IS FOR A TERM OF 20
YEARS.
  (C) REFORMABLE INTEREST.--FOR PURPOSES OF THIS PARAGRAPH--
  (I) IN GENERAL.--THE TERM "REFORMABLE INTEREST" MEANS ANY INTEREST FOR
WHICH A DEDUCTION WOULD BE ALLOWABLE UNDER SUBSECTION (A) AT THE TIME OF
THE DECEDENT'S DEATH BUT FOR PARAGRAPH (2).
  (II) BENEFICIARY'S  INTEREST  MUST  BE  FIXED.--THE  TERM  "REFORMABLE
INTEREST"  DOES  NOT  INCLUDE  ANY INTEREST UNLESS, BEFORE THE REMAINDER
VESTS IN POSSESSION, ALL PAYMENTS TO PERSONS OTHER THAN AN  ORGANIZATION
DESCRIBED  IN  SUBSECTION  (A)  ARE EXPRESSED EITHER IN SPECIFIED DOLLAR
AMOUNTS OR A FIXED PERCENTAGE OF THE FAIR MARKET VALUE OF THE  PROPERTY.
FOR PURPOSES OF DETERMINING WHETHER ALL SUCH PAYMENTS ARE EXPRESSED AS A
FIXED  PERCENTAGE  OF  THE  FAIR  MARKET  VALUE OF THE PROPERTY, SECTION
664(D)(3) SHALL BE TAKEN INTO ACCOUNT.
  (III) SPECIAL RULE WHERE TIMELY COMMENCEMENT  OF  REFORMATION.--CLAUSE
(II)  SHALL  NOT  APPLY  TO  ANY  INTEREST  IF  A JUDICIAL PROCEEDING IS
COMMENCED TO CHANGE SUCH INTEREST INTO A QUALIFIED  INTEREST  NOT  LATER
THAN THE 90TH DAY AFTER--
  (I) IF AN ESTATE TAX RETURN IS REQUIRED TO BE FILED, THE LAST DATE

S. 6359--C                         247

(INCLUDING EXTENSIONS) FOR FILING SUCH RETURN, OR
  (II)  IF  NO  ESTATE TAX RETURN IS REQUIRED TO BE FILED, THE LAST DATE
(INCLUDING EXTENSIONS) FOR FILING THE INCOME  TAX  RETURN  FOR  THE  1ST
TAXABLE  YEAR  FOR  WHICH  SUCH  A RETURN IS REQUIRED TO BE FILED BY THE
TRUST.
  (IV) SPECIAL RULE FOR WILL EXECUTED BEFORE JANUARY 1,  1979,  ETC.--IN
THE CASE OF ANY INTEREST PASSING UNDER A WILL EXECUTED BEFORE JANUARY 1,
1979,  OR  UNDER A TRUST CREATED BEFORE SUCH DATE, CLAUSE (II) SHALL NOT
APPLY.
  (D) QUALIFIED INTEREST.--FOR PURPOSES  OF  THIS  PARAGRAPH,  THE  TERM
"QUALIFIED  INTEREST"  MEANS AN INTEREST FOR WHICH A DEDUCTION IS ALLOW-
ABLE UNDER SUBSECTION (A).
  (E) LIMITATION.--THE DEDUCTION REFERRED TO IN SUBPARAGRAPH  (A)  SHALL
NOT  EXCEED  THE AMOUNT OF THE DEDUCTION WHICH WOULD HAVE BEEN ALLOWABLE
FOR THE REFORMABLE INTEREST BUT FOR PARAGRAPH (2).
  (F) SPECIAL RULE WHERE INCOME BENEFICIARY DIES.--IF (BY REASON OF  THE
DEATH OF ANY INDIVIDUAL, OR BY TERMINATION OR DISTRIBUTION OF A TRUST IN
ACCORDANCE  WITH  THE TERMS OF THE TRUST INSTRUMENT) BY THE DUE DATE FOR
FILING THE ESTATE TAX RETURN (INCLUDING ANY EXTENSION THEREOF) A REFORM-
ABLE INTEREST IS IN A WHOLLY CHARITABLE TRUST OR PASSES  DIRECTLY  TO  A
PERSON  OR  FOR  A USE DESCRIBED IN SUBSECTION (A), A DEDUCTION SHALL BE
ALLOWED FOR SUCH REFORMABLE INTEREST AS IF IT HAD MET  THE  REQUIREMENTS
OF  PARAGRAPH  (2)  ON THE DATE OF THE DECEDENT'S DEATH. FOR PURPOSES OF
THE PRECEDING SENTENCE, THE TERM "WHOLLY CHARITABLE TRUST" MEANS A CHAR-
ITABLE TRUST  WHICH,  UPON  THE  ALLOWANCE  OF  A  DEDUCTION,  WOULD  BE
DESCRIBED IN SECTION 4947(A)(1).
  (G)  STATUTE  OF LIMITATIONS.--THE PERIOD FOR ASSESSING ANY DEFICIENCY
OF ANY TAX ATTRIBUTABLE TO THE APPLICATION OF THIS PARAGRAPH  SHALL  NOT
EXPIRE  BEFORE  THE DATE 1 YEAR AFTER THE DATE ON WHICH THE SECRETARY IS
NOTIFIED THAT SUCH REFORMATION (OR OTHER PROCEEDING PURSUANT TO SUBPARA-
GRAPH (J)1 HAS OCCURRED.
  (H) REGULATIONS.--THE SECRETARY SHALL PRESCRIBE  SUCH  REGULATIONS  AS
MAY  BE NECESSARY TO CARRY OUT THE PURPOSES OF THIS PARAGRAPH, INCLUDING
REGULATIONS  PROVIDING  SUCH  ADJUSTMENTS  IN  THE  APPLICATION  OF  THE
PROVISIONS OF SECTION 508 (RELATING TO SPECIAL RULES RELATING TO SECTION
501(C)(3)  ORGANIZATIONS),  SUBCHAPTER  J  (RELATING TO ESTATES, TRUSTS,
BENEFICIARIES, AND DECEDENTS), AND CHAPTER 42 (RELATING TO PRIVATE FOUN-
DATIONS) AS MAY BE NECESSARY BY REASON OF THE QUALIFIED REFORMATION.
  (I) REFORMATIONS PERMITTED IN CASE OF REMAINDER INTERESTS IN RESIDENCE
OR FARM, POOLED INCOME FUNDS, ETC.--THE SECRETARY SHALL PRESCRIBE  REGU-
LATIONS  (CONSISTENT  WITH  THE PROVISIONS OF THIS PARAGRAPH) PERMITTING
REFORMATIONS IN THE CASE OF ANY FAILURE--
  (I) TO MEET THE REQUIREMENTS  OF  SECTION  170(F)(3)(B)  (RELATING  TO
REMAINDER INTERESTS IN PERSONAL RESIDENCE OR FARM, ETC.), OR
  (II) TO MEET THE REQUIREMENTS OF SECTION 642(C)(5).
  (J)  VOID  OR REFORMED TRUST IN CASES OF INSUFFICIENT REMAINDER INTER-
ESTS.--IN THE CASE OF A TRUST THAT WOULD QUALIFY (OR COULD  BE  REFORMED
TO  QUALIFY PURSUANT TO SUBPARAGRAPH (B)) BUT FOR FAILURE TO SATISFY THE
REQUIREMENT OF PARAGRAPH (1)(D) OR (2)(D) OF SECTION 664(D), SUCH  TRUST
MAY BE--
  (I) DECLARED NULL AND VOID AB INITIO, OR
  (II)  CHANGED  BY  REFORMATION,  AMENDMENT,  OR OTHERWISE TO MEET SUCH
REQUIREMENT BY REDUCING THE PAYOUT RATE OR THE DURATION (OR BOTH) OF ANY
NONCHARITABLE BENEFICIARY'S INTEREST TO THE EXTENT NECESSARY TO  SATISFY
SUCH REQUIREMENT,

S. 6359--C                         248

  PURSUANT  TO A PROCEEDING THAT IS COMMENCED WITHIN THE PERIOD REQUIRED
IN SUBPARAGRAPH  (C)(III).  IN  A  CASE  DESCRIBED  IN  CLAUSE  (I),  NO
DEDUCTION  SHALL  BE  ALLOWED  UNDER  THIS TITLE FOR ANY TRANSFER TO THE
TRUST AND ANY TRANSACTIONS ENTERED INTO BY  THE  TRUST  PRIOR  TO  BEING
DECLARED VOID SHALL BE TREATED AS ENTERED INTO BY THE TRANSFEROR.
  (4)  WORKS  OF ART AND THEIR COPYRIGHTS TREATED AS SEPARATE PROPERTIES
IN CERTAIN CASES.--
  (A) IN GENERAL.--IN THE CASE OF A QUALIFIED CONTRIBUTION OF A WORK  OF
ART,  THE  WORK  OF  ART  AND THE COPYRIGHT ON SUCH WORK OF ART SHALL BE
TREATED AS SEPARATE PROPERTIES FOR PURPOSES OF PARAGRAPH (2).
  (B) WORK OF ART DEFINED.--FOR PURPOSES OF  THIS  PARAGRAPH,  THE  TERM
"WORK OF ART" MEANS ANY TANGIBLE PERSONAL PROPERTY WITH RESPECT TO WHICH
THERE IS A COPYRIGHT UNDER FEDERAL LAW.
  (C)  QUALIFIED  CONTRIBUTION DEFINED.--FOR PURPOSES OF THIS PARAGRAPH,
THE TERM "QUALIFIED CONTRIBUTION" MEANS ANY TRANSFER OF  PROPERTY  TO  A
QUALIFIED ORGANIZATION IF THE USE OF THE PROPERTY BY THE ORGANIZATION IS
RELATED  TO  THE  PURPOSE  OR  FUNCTION  CONSTITUTING  THE BASIS FOR ITS
EXEMPTION UNDER SECTION 501.
  (D) QUALIFIED ORGANIZATION DEFINED.--FOR PURPOSES OF  THIS  PARAGRAPH,
THE  TERM  "QUALIFIED  ORGANIZATION" MEANS ANY ORGANIZATION DESCRIBED IN
SECTION 501(C)(3) OTHER THAN A PRIVATE FOUNDATION (AS DEFINED IN SECTION
509).  FOR PURPOSES OF THE PRECEDING SENTENCE, A PRIVATE OPERATING FOUN-
DATION (AS DEFINED IN SECTION 4942(J)(3)) SHALL  NOT  BE  TREATED  AS  A
PRIVATE FOUNDATION.
  (5)  CONTRIBUTIONS  TO  DONOR  ADVISED  FUNDS.--A  DEDUCTION OTHERWISE
ALLOWED UNDER SUBSECTION (A) FOR ANY CONTRIBUTION  TO  A  DONOR  ADVISED
FUND (AS DEFINED IN SECTION 4966(D)(2)) SHALL ONLY BE ALLOWED IF--
  (A)  THE  SPONSORING  ORGANIZATION  (AS DEFINED IN SECTION 4966(D)(1))
WITH RESPECT TO SUCH DONOR ADVISED FUND IS NOT--
  (I) DESCRIBED IN PARAGRAPH (3) OR (4) OF SUBSECTION (A), OR
  (II) A  TYPE  III  SUPPORTING  ORGANIZATION  (AS  DEFINED  IN  SECTION
4943(F)(5)(A))  WHICH IS NOT A FUNCTIONALLY INTEGRATED TYPE III SUPPORT-
ING ORGANIZATION (AS DEFINED IN SECTION 4943(F)(5)(B)), AND
  (B) THE TAXPAYER  OBTAINS  A  CONTEMPORANEOUS  WRITTEN  ACKNOWLEDGMENT
(DETERMINED  UNDER  RULES  SIMILAR TO THE RULES OF SECTION 170(F)(8)(C))
FROM THE SPONSORING ORGANIZATION (AS SO DEFINED) OF SUCH  DONOR  ADVISED
FUND  THAT SUCH ORGANIZATION HAS EXCLUSIVE LEGAL CONTROL OVER THE ASSETS
CONTRIBUTED.
  (F) SPECIAL RULE  FOR  IRREVOCABLE  TRANSFERS  OF  EASEMENTS  IN  REAL
PROPERTY.--A  DEDUCTION SHALL BE ALLOWED UNDER SUBSECTION (A) IN RESPECT
OF ANY TRANSFER OF A QUALIFIED REAL PROPERTY  INTEREST  (AS  DEFINED  IN
SECTION  170(H)(2)(C))  WHICH  MEETS  THE REQUIREMENTS OF SECTION 170(H)
(WITHOUT REGARD TO PARAGRAPH (4)(A) THEREOF).
  (G) CROSS REFERENCES.--
  (1) FOR OPTION AS TO TIME FOR VALUATION FOR PURPOSE OF DEDUCTION UNDER
THIS SECTION, SEE SECTION 2032.
  (2) FOR TREATMENT OF CERTAIN ORGANIZATIONS PROVIDING CHILD  CARE,  SEE
SECTION 501(K).
  (3)  FOR  EXEMPTION  OF  GIFTS  AND  BEQUESTS TO OR FOR THE BENEFIT OF
LIBRARY OF CONGRESS, SEE SECTION 5 OF THE  ACT  OF  MARCH  3,  1925,  AS
AMENDED (2 U.S.C. 161).
  (4)  FOR  TREATMENT OF GIFTS AND BEQUESTS FOR THE BENEFIT OF THE NAVAL
HISTORICAL CENTER AS GIFTS OR BEQUESTS TO OR FOR THE USE OF  THE  UNITED
STATES, SEE SECTION 7222 OF TITLE 10, UNITED STATES CODE.
  (5)  FOR  TREATMENT  OF  GIFTS  AND  BEQUESTS TO OR FOR THE BENEFIT OF
NATIONAL PARK FOUNDATION AS GIFTS OR BEQUESTS TO OR FOR THE USE  OF  THE

S. 6359--C                         249

UNITED  STATES, SEE SECTION 8 OF THE ACT OF DECEMBER 18, 1967 (16 U.S.C.
191).
  (6)  FOR  TREATMENT  OF  GIFTS,  DEVISES,  OR BEQUESTS ACCEPTED BY THE
SECRETARY OF STATE, THE  DIRECTOR  OF  THE  INTERNATIONAL  COMMUNICATION
AGENCY,  OR  THE DIRECTOR OF THE UNITED STATES INTERNATIONAL DEVELOPMENT
COOPERATION AGENCY AS GIFTS, DEVISES, OR BEQUESTS TO OR FOR THE  USE  OF
THE UNITED STATES, SEE SECTION 25 OF THE STATE DEPARTMENT BASIC AUTHORI-
TIES ACT OF 1956.
  (7) FOR TREATMENT OF GIFTS OR BEQUESTS OF MONEY ACCEPTED BY THE ATTOR-
NEY  GENERAL  FOR CREDIT TO "COMMISSARY FUNDS, FEDERAL PRISONS" AS GIFTS
OR BEQUESTS TO OR FOR THE USE OF THE UNITED STATES, SEE SECTION 4043  OF
TITLE 18, UNITED STATES CODE.
  (8)  FOR  PAYMENT  OF TAX ON GIFTS AND BEQUESTS OF UNITED STATES OBLI-
GATIONS TO THE UNITED STATES, SEE SECTION 3113(E) OF  TITLE  31,  UNITED
STATES CODE.
  (9) FOR TREATMENT OF GIFTS AND BEQUESTS FOR BENEFIT OF THE NAVAL ACAD-
EMY  AS  GIFTS  OR  BEQUESTS TO OR FOR THE USE OF THE UNITED STATES, SEE
SECTION 6973 OF TITLE 10, UNITED STATES CODE.
  (10) FOR TREATMENT OF GIFTS AND BEQUESTS  FOR  BENEFIT  OF  THE  NAVAL
ACADEMY  MUSEUM  AS  GIFTS  OR  BEQUESTS TO OR FOR THE USE OF THE UNITED
STATES, SEE SECTION 6974 OF TITLE 10, UNITED STATES CODE.
  (11) FOR EXEMPTION OF GIFTS AND BEQUESTS RECEIVED BY NATIONAL ARCHIVES
TRUST FUND BOARD, SEE SECTION 2308 OF TITLE 44, UNITED STATES CODE.
  (12) FOR TREATMENT OF GIFTS AND BEQUESTS TO OR FOR THE USE  OF  INDIAN
TRIBAL GOVERNMENTS (OR THEIR SUBDIVISIONS), SEE SECTION 7871.
  S  2056. BEQUESTS, ETC., TO SURVIVING SPOUSE. (A) ALLOWANCE OF MARITAL
DEDUCTION.--FOR PURPOSES OF THE TAX IMPOSED BY SECTION 2001,  THE  VALUE
OF  THE  TAXABLE  ESTATE  SHALL, EXCEPT AS LIMITED BY SUBSECTION (B), BE
DETERMINED BY DEDUCTING FROM THE VALUE OF THE  GROSS  ESTATE  AN  AMOUNT
EQUAL  TO  THE  VALUE  OF  ANY  INTEREST IN PROPERTY WHICH PASSES OR HAS
PASSED FROM THE DECEDENT TO HIS SURVIVING SPOUSE, BUT ONLY TO THE EXTENT
THAT SUCH INTEREST IS INCLUDED IN DETERMINING THE  VALUE  OF  THE  GROSS
ESTATE.
  (B)  LIMITATION  IN THE CASE OF LIFE ESTATE OR OTHER TERMINABLE INTER-
EST.--
  (1) GENERAL RULE.--WHERE, ON THE LAPSE OF TIME, ON THE  OCCURRENCE  OF
AN EVENT OR CONTINGENCY, OR ON THE FAILURE OF AN EVENT OR CONTINGENCY TO
OCCUR,  AN  INTEREST  PASSING  TO THE SURVIVING SPOUSE WILL TERMINATE OR
FAIL, NO DEDUCTION SHALL BE ALLOWED UNDER THIS SECTION WITH  RESPECT  TO
SUCH INTEREST--
  (A)  IF  AN  INTEREST  IN SUCH PROPERTY PASSES OR HAS PASSED (FOR LESS
THAN AN ADEQUATE AND FULL CONSIDERATION IN MONEY OR MONEY'S WORTH)  FROM
THE  DECEDENT  TO  ANY  PERSON  OTHER THAN SUCH SURVIVING SPOUSE (OR THE
ESTATE OF SUCH SPOUSE); AND
  (B) IF BY REASON OF SUCH PASSING SUCH PERSON (OR HIS HEIRS OR ASSIGNS)
MAY POSSESS OR ENJOY ANY PART OF SUCH PROPERTY AFTER SUCH TERMINATION OR
FAILURE OF THE INTEREST SO PASSING TO THE SURVIVING SPOUSE;
  AND NO DEDUCTION SHALL BE ALLOWED WITH RESPECT TO SUCH INTEREST  (EVEN
IF SUCH DEDUCTION IS NOT DISALLOWED UNDER SUBPARAGRAPHS (A) AND (B))--
  (C)  IF  SUCH  INTEREST  IS  TO  BE ACQUIRED FOR THE SURVIVING SPOUSE,
PURSUANT TO DIRECTIONS OF THE DECEDENT, BY HIS EXECUTOR OR BY THE  TRUS-
TEE OF A TRUST.
  FOR PURPOSES OF THIS PARAGRAPH, AN INTEREST SHALL NOT BE CONSIDERED AS
AN INTEREST WHICH WILL TERMINATE OR FAIL MERELY BECAUSE IT IS THE OWNER-
SHIP  OF  A BOND, NOTE, OR SIMILAR CONTRACTUAL OBLIGATION, THE DISCHARGE
OF WHICH WOULD NOT HAVE THE EFFECT OF AN ANNUITY FOR LIFE OR FOR A TERM.

S. 6359--C                         250

  (2) INTEREST IN UNIDENTIFIED ASSETS.--WHERE THE  ASSETS  (INCLUDED  IN
THE  DECEDENT'S GROSS ESTATE) OUT OF WHICH, OR THE PROCEEDS OF WHICH, AN
INTEREST PASSING TO THE SURVIVING SPOUSE  MAY  BE  SATISFIED  INCLUDE  A
PARTICULAR  ASSET  OR ASSETS WITH RESPECT TO WHICH NO DEDUCTION WOULD BE
ALLOWED IF SUCH ASSET OR ASSETS PASSED FROM THE DECEDENT TO SUCH SPOUSE,
THEN  THE  VALUE  OF  SUCH  INTEREST  PASSING  TO SUCH SPOUSE SHALL, FOR
PURPOSES OF SUBSECTION (A), BE REDUCED BY THE AGGREGATE  VALUE  OF  SUCH
PARTICULAR ASSETS.
  (3)   INTEREST   OF   SPOUSE   CONDITIONAL  ON  SURVIVAL  FOR  LIMITED
PERIOD.--FOR PURPOSES OF THIS SUBSECTION, AN  INTEREST  PASSING  TO  THE
SURVIVING  SPOUSE  SHALL  NOT  BE  CONSIDERED  AS AN INTEREST WHICH WILL
TERMINATE OR FAIL ON THE DEATH OF SUCH SPOUSE IF--
  (A) SUCH DEATH WILL CAUSE A TERMINATION OR FAILURE  OF  SUCH  INTEREST
ONLY  IF  IT  OCCURS  WITHIN  A  PERIOD NOT EXCEEDING 6 MONTHS AFTER THE
DECEDENT'S DEATH, OR ONLY IF IT OCCURS AS A RESULT OF A COMMON  DISASTER
RESULTING IN THE DEATH OF THE DECEDENT AND THE SURVIVING SPOUSE, OR ONLY
IF IT OCCURS IN THE CASE OF EITHER SUCH EVENT; AND
  (B) SUCH TERMINATION OR FAILURE DOES NOT IN FACT OCCUR.
  (4) VALUATION OF INTEREST PASSING TO SURVIVING SPOUSE.--IN DETERMINING
FOR  PURPOSES  OF  SUBSECTION  (A) THE VALUE OF ANY INTEREST IN PROPERTY
PASSING TO THE SURVIVING SPOUSE FOR WHICH A DEDUCTION IS ALLOWED BY THIS
SECTION--
  (A) THERE SHALL BE TAKEN INTO ACCOUNT THE EFFECT WHICH THE TAX IMPOSED
BY SECTION 2001, OR ANY ESTATE, SUCCESSION, LEGACY, OR INHERITANCE  TAX,
HAS ON THE NET VALUE TO THE SURVIVING SPOUSE OF SUCH INTEREST; AND
  (B)  WHERE  SUCH  INTEREST OR PROPERTY IS ENCUMBERED IN ANY MANNER, OR
WHERE THE SURVIVING SPOUSE INCURS ANY OBLIGATION IMPOSED BY THE DECEDENT
WITH RESPECT TO THE PASSING OF SUCH INTEREST, SUCH ENCUMBRANCE OR  OBLI-
GATION  SHALL  BE TAKEN INTO ACCOUNT IN THE SAME MANNER AS IF THE AMOUNT
OF A GIFT TO SUCH SPOUSE OF SUCH INTEREST WERE BEING DETERMINED.
  (5) LIFE ESTATE WITH POWER OF APPOINTMENT IN SURVIVING SPOUSE.--IN THE
CASE OF AN INTEREST IN  PROPERTY  PASSING  FROM  THE  DECEDENT,  IF  HIS
SURVIVING  SPOUSE IS ENTITLED FOR LIFE TO ALL THE INCOME FROM THE ENTIRE
INTEREST, OR ALL THE INCOME FROM A  SPECIFIC  PORTION  THEREOF,  PAYABLE
ANNUALLY  OR  AT  MORE  FREQUENT  INTERVALS, WITH POWER IN THE SURVIVING
SPOUSE TO APPOINT THE ENTIRE INTEREST, OR SUCH SPECIFIC  PORTION  (EXER-
CISABLE  IN  FAVOR  OF  SUCH  SURVIVING SPOUSE, OR OF THE ESTATE OF SUCH
SURVIVING SPOUSE, OR IN FAVOR OF EITHER, WHETHER OR NOT IN EACH CASE THE
POWER IS EXERCISABLE IN FAVOR OF OTHERS), AND WITH NO POWER IN ANY OTHER
PERSON TO APPOINT ANY PART OF THE INTEREST, OR SUCH SPECIFIC PORTION, TO
ANY PERSON OTHER THAN THE SURVIVING SPOUSE--
  (A) THE INTEREST  OR  SUCH  PORTION  THEREOF  SO  PASSING  SHALL,  FOR
PURPOSES  OF  SUBSECTION  (A), BE CONSIDERED AS PASSING TO THE SURVIVING
SPOUSE, AND
  (B) NO PART OF THE INTEREST SO PASSING SHALL, FOR  PURPOSES  OF  PARA-
GRAPH  (1)(A),  BE  CONSIDERED  AS  PASSING TO ANY PERSON OTHER THAN THE
SURVIVING SPOUSE.
  THIS PARAGRAPH SHALL APPLY ONLY IF SUCH POWER IN THE SURVIVING  SPOUSE
TO APPOINT THE ENTIRE INTEREST, OR SUCH SPECIFIC PORTION THEREOF, WHETH-
ER  EXERCISABLE  BY  WILL  OR DURING LIFE, IS EXERCISABLE BY SUCH SPOUSE
ALONE AND IN ALL EVENTS.
  (6) LIFE INSURANCE OR ANNUITY PAYMENTS WITH POWER  OF  APPOINTMENT  IN
SURVIVING  SPOUSE.--IN  THE CASE OF AN INTEREST IN PROPERTY PASSING FROM
THE DECEDENT CONSISTING OF PROCEEDS UNDER A LIFE  INSURANCE,  ENDOWMENT,
OR  ANNUITY  CONTRACT,  IF UNDER THE TERMS OF THE CONTRACT SUCH PROCEEDS
ARE PAYABLE IN INSTALLMENTS OR ARE HELD BY THE  INSURER  SUBJECT  TO  AN

S. 6359--C                         251

AGREEMENT  TO  PAY INTEREST THEREON (WHETHER THE PROCEEDS, ON THE TERMI-
NATION OF ANY INTEREST PAYMENTS, ARE PAYABLE IN A LUMP SUM OR IN  ANNUAL
OR  MORE  FREQUENT  INSTALLMENTS),  AND  SUCH  INSTALLMENT  OR  INTEREST
PAYMENTS  ARE PAYABLE ANNUALLY OR AT MORE FREQUENT INTERVALS, COMMENCING
NOT LATER THAN 13 MONTHS AFTER THE DECEDENT'S DEATH, AND ALL AMOUNTS, OR
A SPECIFIC PORTION OF ALL SUCH AMOUNTS, PAYABLE DURING THE LIFE  OF  THE
SURVIVING  SPOUSE  ARE  PAYABLE ONLY TO SUCH SPOUSE, AND SUCH SPOUSE HAS
THE POWER TO APPOINT ALL AMOUNTS,  OR  SUCH  SPECIFIC  PORTION,  PAYABLE
UNDER  SUCH  CONTRACT (EXERCISABLE IN FAVOR OF SUCH SURVIVING SPOUSE, OR
OF THE ESTATE OF SUCH SURVIVING SPOUSE, OR IN FAVOR OF  EITHER,  WHETHER
OR  NOT  IN EACH CASE THE POWER IS EXERCISABLE IN FAVOR OF OTHERS), WITH
NO POWER IN ANY OTHER PERSON TO APPOINT SUCH AMOUNTS TO ANY PERSON OTHER
THAN THE SURVIVING SPOUSE--
  (A) SUCH AMOUNTS SHALL, FOR PURPOSES OF SUBSECTION (A), BE  CONSIDERED
AS PASSING TO THE SURVIVING SPOUSE, AND
  (B)  NO  PART OF SUCH AMOUNTS SHALL, FOR PURPOSES OF PARAGRAPH (1)(A),
BE CONSIDERED AS PASSING TO ANY PERSON OTHER THAN THE SURVIVING SPOUSE.
  THIS PARAGRAPH SHALL APPLY ONLY IF, UNDER THE TERMS OF  THE  CONTRACT,
SUCH  POWER  IN  THE  SURVIVING  SPOUSE TO APPOINT SUCH AMOUNTS, WHETHER
EXERCISABLE BY WILL OR DURING LIFE, IS EXERCISABLE BY SUCH SPOUSE  ALONE
AND IN ALL EVENTS.
  (7) ELECTION WITH RESPECT TO LIFE ESTATE FOR SURVIVING SPOUSE.--
  (A)  IN GENERAL.--IN THE CASE OF QUALIFIED TERMINABLE INTEREST PROPER-
TY--
  (I) FOR PURPOSES OF SUBSECTION (A), SUCH PROPERTY SHALL BE TREATED  AS
PASSING TO THE SURVIVING SPOUSE, AND
  (II)  FOR PURPOSES OF PARAGRAPH (1)(A), NO PART OF SUCH PROPERTY SHALL
BE TREATED AS PASSING TO ANY PERSON OTHER THAN THE SURVIVING SPOUSE.
  (B) QUALIFIED TERMINABLE INTEREST PROPERTY DEFINED.--FOR  PURPOSES  OF
THIS PARAGRAPH--
  (I)  IN  GENERAL.--THE  TERM  "QUALIFIED TERMINABLE INTEREST PROPERTY"
MEANS PROPERTY--
  (I) WHICH PASSES FROM THE DECEDENT,
  (II) IN WHICH THE SURVIVING SPOUSE HAS A  QUALIFYING  INCOME  INTEREST
FOR LIFE, AND
  (III) TO WHICH AN ELECTION UNDER THIS PARAGRAPH APPLIES.
  (II)  QUALIFYING INCOME INTEREST FOR LIFE.--THE SURVIVING SPOUSE HAS A
QUALIFYING INCOME INTEREST FOR LIFE IF--
  (I) THE SURVIVING SPOUSE IS ENTITLED TO ALL THE INCOME FROM THE  PROP-
ERTY,  PAYABLE ANNUALLY OR AT MORE FREQUENT INTERVALS, OR HAS A USUFRUCT
INTEREST FOR LIFE IN THE PROPERTY, AND
  (II) NO PERSON HAS A POWER TO APPOINT ANY PART OF THE PROPERTY TO  ANY
PERSON OTHER THAN THE SURVIVING SPOUSE.
  SUBCLAUSE (II) SHALL NOT APPLY TO A POWER EXERCISABLE ONLY AT OR AFTER
THE  DEATH  OF  THE  SURVIVING  SPOUSE.  TO THE EXTENT PROVIDED IN REGU-
LATIONS, AN ANNUITY SHALL BE TREATED IN A MANNER SIMILAR  TO  AN  INCOME
INTEREST  IN PROPERTY (REGARDLESS OF WHETHER THE PROPERTY FROM WHICH THE
ANNUITY IS PAYABLE CAN BE SEPARATELY IDENTIFIED).
  (III)  PROPERTY  INCLUDES  INTEREST  THEREIN.--THE   TERM   "PROPERTY"
INCLUDES AN INTEREST IN PROPERTY.
  (IV)  SPECIFIC  PORTION  TREATED  AS  SEPARATE  PROPERTY.--A  SPECIFIC
PORTION OF PROPERTY SHALL BE TREATED AS SEPARATE PROPERTY.
  (V) ELECTION.--AN ELECTION UNDER THIS PARAGRAPH WITH  RESPECT  TO  ANY
PROPERTY  SHALL  BE MADE BY THE EXECUTOR ON THE RETURN OF TAX IMPOSED BY
SECTION 2001. SUCH AN ELECTION, ONCE MADE, SHALL BE IRREVOCABLE.

S. 6359--C                         252

  (C) TREATMENT OF  SURVIVOR  ANNUITIES.--IN  THE  CASE  OF  AN  ANNUITY
INCLUDED  IN THE GROSS ESTATE OF THE DECEDENT UNDER SECTION 2039 (OR, IN
THE CASE OF AN INTEREST IN AN ANNUITY ARISING UNDER THE COMMUNITY  PROP-
ERTY LAWS OF A STATE, INCLUDED IN THE GROSS ESTATE OF THE DECEDENT UNDER
SECTION  2033)  WHERE ONLY THE SURVIVING SPOUSE HAS THE RIGHT TO RECEIVE
PAYMENTS BEFORE THE DEATH OF SUCH SURVIVING SPOUSE--
  (I) THE INTEREST OF SUCH SURVIVING SPOUSE SHALL BE TREATED AS A QUALI-
FYING INCOME INTEREST FOR LIFE, AND
  (II) THE EXECUTOR SHALL BE TREATED AS HAVING MADE  AN  ELECTION  UNDER
THIS  SUBSECTION WITH RESPECT TO SUCH ANNUITY UNLESS THE EXECUTOR OTHER-
WISE ELECTS ON THE RETURN OF TAX IMPOSED BY SECTION 2001.
  AN ELECTION UNDER CLAUSE (II), ONCE MADE, SHALL BE IRREVOCABLE.
  (8) SPECIAL RULE FOR CHARITABLE REMAINDER TRUSTS.--
  (A) IN GENERAL.--IF THE SURVIVING SPOUSE OF THE DECEDENT IS  THE  ONLY
BENEFICIARY OF A QUALIFIED CHARITABLE REMAINDER TRUST WHO IS NOT A CHAR-
ITABLE  BENEFICIARY  NOR  AN  ESOP  BENEFICIARY, PARAGRAPH (1) SHALL NOT
APPLY TO ANY INTEREST IN SUCH TRUST WHICH PASSES OR HAS PASSED FROM  THE
DECEDENT TO SUCH SURVIVING SPOUSE.
  (B) DEFINITIONS.--FOR PURPOSES OF SUBPARAGRAPH (A)--
  (I)  CHARITABLE  BENEFICIARY.--THE TERM "CHARITABLE BENEFICIARY" MEANS
ANY BENEFICIARY WHICH IS AN ORGANIZATION DESCRIBED IN SECTION 170(C).
  (II) ESOP BENEFICIARY.--THE TERM "ESOP BENEFICIARY" MEANS ANY  BENEFI-
CIARY  WHICH  IS AN EMPLOYEE STOCK OWNERSHIP PLAN (AS DEFINED IN SECTION
4975(E)(7)) THAT HOLDS A REMAINDER INTEREST IN QUALIFIED EMPLOYER  SECU-
RITIES  (AS DEFINED IN SECTION 664(G)(4)) TO BE TRANSFERRED TO SUCH PLAN
IN A QUALIFIED GRATUITOUS TRANSFER (AS DEFINED IN SECTION 664(G)(1)).
  (III) QUALIFIED CHARITABLE REMAINDER TRUST.--THE TERM "QUALIFIED CHAR-
ITABLE REMAINDER TRUST" MEANS A CHARITABLE REMAINDER ANNUITY TRUST OR  A
CHARITABLE REMAINDER UNITRUST (DESCRIBED IN SECTION 664).
  (9)  DENIAL OF DOUBLE DEDUCTION.--NOTHING IN THIS SECTION OR ANY OTHER
PROVISION OF THIS CHAPTER SHALL ALLOW THE VALUE OF ANY INTEREST IN PROP-
ERTY TO BE DEDUCTED UNDER THIS CHAPTER MORE THAN ONCE  WITH  RESPECT  TO
THE SAME DECEDENT.
  (10)  SPECIFIC  PORTION.--FOR  PURPOSES  OF  PARAGRAPHS  (5), (6), AND
(7)(B)(IV), THE TERM "SPECIFIC PORTION" ONLY INCLUDES A  PORTION  DETER-
MINED ON A FRACTIONAL OR PERCENTAGE BASIS.
  (C) DEFINITION.--FOR PURPOSES OF THIS SECTION, AN INTEREST IN PROPERTY
SHALL  BE  CONSIDERED  AS PASSING FROM THE DECEDENT TO ANY PERSON IF AND
ONLY IF--
  (1) SUCH INTEREST IS BEQUEATHED OR DEVISED TO SUCH PERSON BY THE DECE-
DENT;
  (2) SUCH INTEREST IS INHERITED BY SUCH PERSON FROM THE DECEDENT;
  (3) SUCH INTEREST IS THE  DOWER  OR  CURTESY  INTEREST  (OR  STATUTORY
INTEREST  IN  LIEU  THEREOF)  OF  SUCH PERSON AS SURVIVING SPOUSE OF THE
DECEDENT;
  (4) SUCH INTEREST HAS BEEN TRANSFERRED TO SUCH PERSON BY THE  DECEDENT
AT ANY TIME;
  (5)  SUCH  INTEREST  WAS, AT THE TIME OF THE DECEDENT'S DEATH, HELD BY
SUCH PERSON AND THE DECEDENT (OR BY THEM AND ANY OTHER PERSON) IN  JOINT
OWNERSHIP WITH RIGHT OF SURVIVORSHIP;
  (6)  THE DECEDENT HAD A POWER (EITHER ALONE OR IN CONJUNCTION WITH ANY
PERSON) TO APPOINT SUCH INTEREST AND IF HE  APPOINTS  OR  HAS  APPOINTED
SUCH  INTEREST  TO SUCH PERSON, OR IF SUCH PERSON TAKES SUCH INTEREST IN
DEFAULT ON THE RELEASE OR NONEXERCISE OF SUCH POWER; OR
  (7) SUCH INTEREST CONSISTS OF PROCEEDS OF INSURANCE ON THE LIFE OF THE
DECEDENT RECEIVABLE BY SUCH PERSON.

S. 6359--C                         253

  EXCEPT AS PROVIDED IN PARAGRAPH (5) OR (6) OF SUBSECTION (B), WHERE AT
THE TIME OF THE DECEDENT'S DEATH IT IS NOT  POSSIBLE  TO  ASCERTAIN  THE
PARTICULAR  PERSON  OR  PERSONS TO WHOM AN INTEREST IN PROPERTY MAY PASS
FROM THE DECEDENT, SUCH INTEREST SHALL, FOR  PURPOSES  OF  SUBPARAGRAPHS
(A)  AND  (B)  OF  SUBSECTION  (B)(1), BE CONSIDERED AS PASSING FROM THE
DECEDENT TO A PERSON OTHER THAN THE SURVIVING SPOUSE.
  S 2103. DEFINITION OF GROSS ESTATE. FOR THE PURPOSE OF THE TAX IMPOSED
BY SECTION 2101, THE VALUE OF THE GROSS ESTATE OF EVERY DECEDENT NONRES-
IDENT NOT A CITIZEN OF THE UNITED STATES SHALL BE THAT PART OF HIS GROSS
ESTATE (DETERMINED AS PROVIDED IN SECTION 2031) WHICH AT THE TIME OF HIS
DEATH IS SITUATED IN THE UNITED STATES.
  S 2104. PROPERTY WITHIN THE  UNITED  STATES.  (A)  STOCK  IN  CORPORA-
TION.--FOR PURPOSES OF THIS SUBCHAPTER SHARES OF STOCK OWNED AND HELD BY
A NONRESIDENT NOT A CITIZEN OF THE UNITED STATES SHALL BE DEEMED PROPER-
TY WITHIN THE UNITED STATES ONLY IF ISSUED BY A DOMESTIC CORPORATION.
  (B)  REVOCABLE  TRANSFERS  AND TRANSFERS WITHIN 3 YEARS OF DEATH.--FOR
PURPOSES OF THIS SUBCHAPTER, ANY PROPERTY OF WHICH THE DECEDENT HAS MADE
A TRANSFER, BY TRUST OR OTHERWISE, WITHIN THE MEANING OF  SECTIONS  2035
TO 2038, INCLUSIVE, SHALL BE DEEMED TO BE SITUATED IN THE UNITED STATES,
IF  SO SITUATED EITHER AT THE TIME OF THE TRANSFER OR AT THE TIME OF THE
DECEDENT'S DEATH.
  (C) DEBT OBLIGATIONS.--FOR PURPOSES OF  THIS  SUBCHAPTER,  DEBT  OBLI-
GATIONS OF-
  (1) A UNITED STATES PERSON, OR
  (2)  THE  UNITED STATES, A STATE OR ANY POLITICAL SUBDIVISION THEREOF,
OR THE DISTRICT OF COLUMBIA,
  OWNED AND HELD BY A NONRESIDENT NOT A CITIZEN  OF  THE  UNITED  STATES
SHALL  BE  DEEMED  PROPERTY  WITHIN  THE  UNITED STATES. WITH RESPECT TO
ESTATES OF DECEDENTS DYING AFTER DECEMBER  31,  1969,  DEPOSITS  WITH  A
DOMESTIC  BRANCH  OF A FOREIGN CORPORATION, IF SUCH BRANCH IS ENGAGED IN
THE COMMERCIAL BANKING BUSINESS, SHALL, FOR PURPOSES OF THIS SUBCHAPTER,
BE DEEMED PROPERTY WITHIN THE UNITED STATES. THIS SUBSECTION  SHALL  NOT
APPLY TO A DEBT OBLIGATION TO WHICH SECTION 2105(B) APPLIES.
  S 2105. PROPERTY WITHOUT THE UNITED STATES. (A) PROCEEDS OF LIFE INSU-
RANCE.--FOR PURPOSES OF THIS SUBCHAPTER, THE AMOUNT RECEIVABLE AS INSUR-
ANCE  ON  THE  LIFE  OF A NONRESIDENT NOT A CITIZEN OF THE UNITED STATES
SHALL NOT BE DEEMED PROPERTY WITHIN THE UNITED STATES.
  (B) BANK DEPOSITS AND CERTAIN OTHER DEBT OBLIGATIONS.--FOR PURPOSES OF
THIS SUBCHAPTER, THE FOLLOWING SHALL NOT BE DEEMED PROPERTY  WITHIN  THE
UNITED STATES--
  (1)  AMOUNTS  DESCRIBED  IN SECTION 871(I)(3), IF ANY INTEREST THEREON
WOULD NOT BE SUBJECT TO TAX BY REASON OF  SECTION  871(I)(1)  WERE  SUCH
INTEREST RECEIVED BY THE DECEDENT AT THE TIME OF HIS DEATH,
  (2) DEPOSITS WITH A FOREIGN BRANCH OF A DOMESTIC CORPORATION OR DOMES-
TIC  PARTNERSHIP,  IF  SUCH  BRANCH IS ENGAGED IN THE COMMERCIAL BANKING
BUSINESS,
  (3) DEBT OBLIGATIONS, IF, WITHOUT REGARD TO WHETHER A STATEMENT  MEET-
ING  THE REQUIREMENTS OF SECTION 871(H)(5) HAS BEEN RECEIVED, ANY INTER-
EST THEREON WOULD BE ELIGIBLE FOR THE EXEMPTION FROM TAX  UNDER  SECTION
871(H)(1) WERE SUCH INTEREST RECEIVED BY THE DECEDENT AT THE TIME OF HIS
DEATH, AND
  (4)  OBLIGATIONS WHICH WOULD BE ORIGINAL ISSUE DISCOUNT OBLIGATIONS AS
DEFINED IN SECTION 871(G)(1) BUT FOR SUBPARAGRAPH (B)(I) THEREOF, IF ANY
INTEREST THEREON (WERE SUCH INTEREST RECEIVED BY  THE  DECEDENT  AT  THE
TIME  OF  HIS DEATH) WOULD NOT BE EFFECTIVELY CONNECTED WITH THE CONDUCT
OF A TRADE OR BUSINESS WITHIN THE UNITED STATES.

S. 6359--C                         254

  NOTWITHSTANDING THE PRECEDING SENTENCE, IF ANY PORTION OF THE INTEREST
ON AN OBLIGATION REFERRED TO IN PARAGRAPH (3) WOULD NOT BE ELIGIBLE  FOR
THE  EXEMPTION  REFERRED  TO  IN  PARAGRAPH  (3)  BY  REASON  OF SECTION
871(H)(4) IF THE INTEREST WERE RECEIVED BY THE DECEDENT AT THE  TIME  OF
HIS  DEATH,  THEN  AN  APPROPRIATE  PORTION  (AS  DETERMINED IN A MANNER
PRESCRIBED BY THE SECRETARY) OF THE VALUE (AS DETERMINED FOR PURPOSES OF
THIS CHAPTER) OF SUCH DEBT OBLIGATION SHALL BE  DEEMED  PROPERTY  WITHIN
THE UNITED STATES.
  (C)  WORKS  OF  ART  ON  LOAN  FOR  EXHIBITION.--FOR  PURPOSES OF THIS
SUBCHAPTER, WORKS OF ART OWNED BY A NONRESIDENT NOT  A  CITIZEN  OF  THE
UNITED  STATES  SHALL NOT BE DEEMED PROPERTY WITHIN THE UNITED STATES IF
SUCH WORKS OF ART ARE--
  (1) IMPORTED INTO THE UNITED STATES SOLELY FOR EXHIBITION PURPOSES,
  (2) LOANED FOR SUCH PURPOSES, TO A PUBLIC GALLERY OR MUSEUM,  NO  PART
OF THE NET EARNINGS OF WHICH INURES TO THE BENEFIT OF ANY PRIVATE STOCK-
HOLDER OR INDIVIDUAL, AND
  (3)  AT  THE TIME OF THE DEATH OF THE OWNER, ON EXHIBITION, OR ENROUTE
TO OR FROM EXHIBITION, IN SUCH A PUBLIC GALLERY OR MUSEUM.
  S 2503. (A) GENERAL DEFINITION - THE TERM "TAXABLE  GIFTS"  MEANS  THE
TOTAL  AMOUNT  OF  GIFTS  MADE DURING THE CALENDAR YEAR, LESS DEDUCTIONS
PROVIDED IN SUBCHAPTER C (SECTION 2522 AND FOLLOWING).
  (B) EXCLUSIONS FROM GIFTS. (1)  IN  GENERAL.--IN  THE  CASE  OF  GIFTS
(OTHER THAN GIFTS OF FUTURE INTERESTS IN PROPERTY) MADE TO ANY PERSON BY
THE  DONOR  DURING THE CALENDAR YEAR, THE FIRST $10,000 OF SUCH GIFTS TO
SUCH PERSON SHALL NOT, FOR PURPOSES OF SUBSECTION (A),  BE  INCLUDED  IN
THE  TOTAL AMOUNT OF GIFTS MADE DURING SUCH YEAR. WHERE THERE HAS BEEN A
TRANSFER TO ANY PERSON OF A PRESENT INTEREST IN PROPERTY, THE  POSSIBIL-
ITY  THAT  SUCH  INTEREST  MAY  BE DIMINISHED BY THE EXERCISE OF A POWER
SHALL BE DISREGARDED IN APPLYING THIS SUBSECTION, IF  NO  PART  OF  SUCH
INTEREST WILL AT ANY TIME PASS TO ANY OTHER PERSON.
  (2)  INFLATION  ADJUSTMENT.--IN  THE  CASE OF GIFTS MADE IN A CALENDAR
YEAR AFTER 1998, THE $10,000 AMOUNT CONTAINED IN PARAGRAPH (1) SHALL  BE
INCREASED BY AN AMOUNT EQUAL TO--
  (A) $10,000, MULTIPLIED BY
  (B) THE COST-OF-LIVING ADJUSTMENT DETERMINED UNDER SECTION 1(F)(3) FOR
SUCH  CALENDAR  YEAR  BY SUBSTITUTING "CALENDAR YEAR 1997" FOR "CALENDAR
YEAR 1992" IN SUBPARAGRAPH (B) THEREOF.
  IF ANY AMOUNT AS ADJUSTED UNDER THE PRECEDING SENTENCE IS NOT A MULTI-
PLE OF $1,000, SUCH AMOUNT SHALL BE ROUNDED TO THE NEXT LOWEST  MULTIPLE
OF $1,000.
  (C)  TRANSFER  FOR  THE  BENEFIT  OF MINOR. -- NO PART OF A GIFT TO AN
INDIVIDUAL WHO HAS NOT ATTAINED THE AGE OF 21 YEARS ON THE DATE OF  SUCH
TRANSFER SHALL BE CONSIDERED A GIFT OF A FUTURE INTEREST IN PROPERTY FOR
PURPOSES OF SUBSECTION (B) IF THE PROPERTY AND THE INCOME THEREFROM-
  (1)  MAY  BE  EXPENDED BY, OR FOR THE BENEFIT OF, THE DONEE BEFORE HIS
ATTAINING THE AGE OF 21 YEARS, AND
  (2) WILL TO THE EXTENT NOT SO EXPENDED-
  (A) PASS TO THE DONEE ON HIS ATTAINING THE AGE OF 21 YEARS, AND
  (B) IN THE EVENT THE DONEE DIES BEFORE ATTAINING THE AGE OF 21  YEARS,
BE  PAYABLE  TO  THE  ESTATE  OF  THE DONEE OR AS HE MAY APPOINT UNDER A
GENERAL POWER OF APPOINTMENT AS DEFINED IN SECTION 2514(C).
  {(D) REPEALED. PUB. L. 97-34, TITLE III, S 311(H)(5), AUG.  13,  1981,
95 STAT.  282}
  (E)  EXCLUSION  FOR  CERTAIN  TRANSFERS  FOR  EDUCATIONAL  EXPENSES OR
MEDICAL EXPENSES. (1) IN GENERAL. ANY QUALIFIED TRANSFER  SHALL  NOT  BE
TREATED AS A TRANSFER OF PROPERTY BY GIFT FOR PURPOSES OF THIS CHAPTER.

S. 6359--C                         255

  (2)  QUALIFIED  TRANSFER.  FOR  PURPOSES  OF THIS SUBSECTION, THE TERM
"QUALIFIED TRANSFER" MEANS ANY AMOUNT PAID ON BEHALF OF AN INDIVIDUAL-
  (A)  AS  TUITION  TO  AN EDUCATIONAL ORGANIZATION DESCRIBED IN SECTION
170(B)(1)(A)(II) FOR THE EDUCATION OR TRAINING OF SUCH INDIVIDUAL, OR
  (B) TO ANY PERSON WHO PROVIDES MEDICAL CARE  (AS  DEFINED  IN  SECTION
213(D))  WITH  RESPECT  TO  SUCH  INDIVIDUAL AS PAYMENT FOR SUCH MEDICAL
CARE.
  (F) WAIVER OF CERTAIN PENSION RIGHTS. IF ANY INDIVIDUAL WAIVES, BEFORE
THE DEATH OF A PARTICIPANT, ANY SURVIVOR BENEFIT, OR RIGHT TO SUCH BENE-
FIT, UNDER SECTION 401(A)(11) OR 417, SUCH WAIVER SHALL NOT  BE  TREATED
AS A TRANSFER OF PROPERTY BY GIFT FOR PURPOSES OF THIS CHAPTER.
  (G)  TREATMENT  OF  CERTAIN  LOANS  OF  ARTWORKS.  (1) IN GENERAL. FOR
PURPOSES OF THIS SUBTITLE, ANY LOAN OF A QUALIFIED WORK OF ART SHALL NOT
BE TREATED AS A TRANSFER (AND THE VALUE OF SUCH QUALIFIED  WORK  OF  ART
SHALL BE DETERMINED AS IF SUCH LOAN HAD NOT BEEN MADE) IF-
  (A) SUCH LOAN IS TO AN ORGANIZATION DESCRIBED IN SECTION 501(C)(3) AND
EXEMPT  FROM TAX UNDER SECTION 501(C) (OTHER THAN A PRIVATE FOUNDATION),
AND
  (B) THE USE OF SUCH WORK  BY  SUCH  ORGANIZATION  IS  RELATED  TO  THE
PURPOSE  OR  FUNCTION  CONSTITUTING  THE  BASIS  FOR ITS EXEMPTION UNDER
SECTION 501.
  (2) DEFINITIONS. FOR PURPOSES OF THIS SECTION-
  (A) QUALIFIED WORK OF ART. THE TERM "QUALIFIED WORK OF ART" MEANS  ANY
ARCHAEOLOGICAL, HISTORIC, OR CREATIVE TANGIBLE PERSONAL PROPERTY.
  (B)  PRIVATE FOUNDATION. THE TERM "PRIVATE FOUNDATION" HAS THE MEANING
GIVEN SUCH TERM BY SECTION 509, EXCEPT THAT SUCH TERM SHALL NOT  INCLUDE
ANY PRIVATE OPERATING FOUNDATION (AS DEFINED IN SECTION 4942(J)(3)).
  S  2511.  TRANSFERS  IN GENERAL. (A) SCOPE. SUBJECT TO THE LIMITATIONS
CONTAINED IN THIS CHAPTER, THE TAX IMPOSED BY SECTION 2501  SHALL  APPLY
WHETHER  THE  TRANSFER  IS  IN  TRUST  OR OTHERWISE, WHETHER THE GIFT IS
DIRECT OR INDIRECT, AND WHETHER THE PROPERTY IS REAL OR PERSONAL, TANGI-
BLE OR INTANGIBLE; BUT IN THE CASE OF A NONRESIDENT NOT A CITIZEN OF THE
UNITED STATES, SHALL APPLY TO A TRANSFER ONLY IF THE PROPERTY  IS  SITU-
ATED WITHIN THE UNITED STATES.
  (B)  INTANGIBLE PROPERTY. FOR PURPOSES OF THIS CHAPTER, IN THE CASE OF
A NONRESIDENT NOT A CITIZEN OF THE UNITED STATES WHO  IS  EXCEPTED  FROM
THE APPLICATION OF SECTION 2501(A)(2)-
  (1) SHARES OF STOCK ISSUED BY A DOMESTIC CORPORATION, AND
  (2) DEBT OBLIGATIONS OF-
--(A) A UNITED STATES PERSON, OR
--(B)  THE  UNITED STATES, A STATE OR ANY POLITICAL SUBDIVISION THEREOF,
OR THE DISTRICT OF COLUMBIA,
--WHICH ARE OWNED AND HELD BY SUCH NONRESIDENT SHALL  BE  DEEMED  TO  BE
PROPERTY SITUATED WITHIN THE UNITED STATES.
  S  2512.  VALUATION OF GIFTS. (A) IF THE GIFT IS MADE IN PROPERTY, THE
VALUE THEREOF AT THE DATE OF THE GIFT SHALL BE CONSIDERED THE AMOUNT  OF
THE GIFT.
  (B)  WHERE  PROPERTY IS TRANSFERRED FOR LESS THAN AN ADEQUATE AND FULL
CONSIDERATION IN MONEY OR MONEY'S WORTH, THEN THE AMOUNT  BY  WHICH  THE
VALUE  OF  THE PROPERTY EXCEEDED THE VALUE OF THE CONSIDERATION SHALL BE
DEEMED A GIFT, AND SHALL BE INCLUDED IN COMPUTING THE  AMOUNT  OF  GIFTS
MADE DURING THE CALENDAR YEAR.
  S 2513. GIFT BY HUSBAND OR WIFE TO THIRD PARTY. (A) CONSIDERED AS MADE
ONE-HALF  BY  EACH.  (1)  IN  GENERAL.  A GIFT MADE BY ONE SPOUSE TO ANY
PERSON OTHER THAN HIS SPOUSE SHALL, FOR THE PURPOSES OF THIS CHAPTER, BE
CONSIDERED AS MADE ONE-HALF BY HIM AND ONE-HALF BY HIS SPOUSE, BUT  ONLY

S. 6359--C                         256

IF  AT  THE TIME OF THE GIFT EACH SPOUSE IS A CITIZEN OR RESIDENT OF THE
UNITED STATES. THIS PARAGRAPH SHALL NOT APPLY WITH RESPECT TO A GIFT  BY
A SPOUSE OF AN INTEREST IN PROPERTY IF HE CREATES IN HIS SPOUSE A GENER-
AL POWER OF APPOINTMENT, AS DEFINED IN SECTION 2514(C), OVER SUCH INTER-
EST.  FOR PURPOSES OF THIS SECTION, AN INDIVIDUAL SHALL BE CONSIDERED AS
THE SPOUSE OF ANOTHER INDIVIDUAL ONLY IF HE IS MARRIED TO SUCH  INDIVID-
UAL AT THE TIME OF THE GIFT AND DOES NOT REMARRY DURING THE REMAINDER OF
THE CALENDAR YEAR.
  (2)  CONSENT  OF  BOTH SPOUSES. PARAGRAPH (1) SHALL APPLY ONLY IF BOTH
SPOUSES HAVE SIGNIFIED (UNDER THE REGULATIONS PROVIDED FOR IN SUBSECTION
(B)) THEIR CONSENT TO THE APPLICATION OF PARAGRAPH (1) IN  THE  CASE  OF
ALL  SUCH GIFTS MADE DURING THE CALENDAR YEAR BY EITHER WHILE MARRIED TO
THE OTHER.
  (B) MANNER AND TIME OF SIGNIFYING CONSENT. (1) MANNER. A CONSENT UNDER
THIS SECTION SHALL BE SIGNIFIED IN SUCH  MANNER  AS  IS  PROVIDED  UNDER
REGULATIONS PRESCRIBED BY THE SECRETARY.
  (2) TIME. SUCH CONSENT MAY BE SO SIGNIFIED AT ANY TIME AFTER THE CLOSE
OF  THE CALENDAR YEAR IN WHICH THE GIFT WAS MADE, SUBJECT TO THE FOLLOW-
ING LIMITATIONS-
--(A) THE CONSENT MAY NOT BE SIGNIFIED  AFTER  THE  15TH  DAY  OF  APRIL
FOLLOWING  THE CLOSE OF SUCH YEAR, UNLESS BEFORE SUCH 15TH DAY NO RETURN
HAS BEEN FILED FOR SUCH YEAR BY EITHER SPOUSE, IN WHICH CASE THE CONSENT
MAY NOT BE SIGNIFIED AFTER A RETURN FOR SUCH YEAR  IS  FILED  BY  EITHER
SPOUSE.
--(B) THE CONSENT MAY NOT BE SIGNIFIED AFTER A NOTICE OF DEFICIENCY WITH
RESPECT  TO  THE  TAX  FOR  SUCH  YEAR HAS BEEN SENT TO EITHER SPOUSE IN
ACCORDANCE WITH SECTION 6212(A).
  (C) REVOCATION OF CONSENT. REVOCATION OF A CONSENT  PREVIOUSLY  SIGNI-
FIED  SHALL  BE  MADE  IN  SUCH  MANNER AS IN PROVIDED UNDER REGULATIONS
PRESCRIBED BY THE SECRETARY, BUT THE RIGHT TO REVOKE A CONSENT PREVIOUS-
LY SIGNIFIED WITH RESPECT TO A CALENDAR YEAR-
  (1) SHALL NOT EXIST AFTER THE 15TH DAY OF APRIL FOLLOWING THE CLOSE OF
SUCH YEAR IF THE CONSENT WAS SIGNIFIED ON OR BEFORE SUCH 15TH DAY; AND
  (2) SHALL NOT EXIST IF THE CONSENT WAS NOT SIGNIFIED UNTIL AFTER  SUCH
15TH DAY.
  (D)  JOINT  AND  SEVERAL LIABILITY FOR TAX. IF THE CONSENT REQUIRED BY
SUBSECTION (A)(2) IS SIGNIFIED WITH RESPECT TO A GIFT MADE IN ANY CALEN-
DAR YEAR, THE LIABILITY WITH RESPECT TO THE ENTIRE TAX IMPOSED  BY  THIS
CHAPTER OF EACH SPOUSE FOR SUCH YEAR SHALL BE JOINT AND SEVERAL.
  S 2514. POWERS OF APPOINTMENT. (A) POWERS CREATED ON OR BEFORE OCTOBER
21,  1942.  AN  EXERCISE OF A GENERAL POWER OF APPOINTMENT CREATED ON OR
BEFORE OCTOBER 21, 1942, SHALL BE DEEMED A TRANSFER OF PROPERTY  BY  THE
INDIVIDUAL  POSSESSING  SUCH  POWER;  BUT THE FAILURE TO EXERCISE SUCH A
POWER OR THE COMPLETE RELEASE OF SUCH A POWER SHALL  NOT  BE  DEEMED  AN
EXERCISE THEREOF. IF A GENERAL POWER OF APPOINTMENT CREATED ON OR BEFORE
OCTOBER  21, 1942, HAS BEEN PARTIALLY RELEASED SO THAT IT IS NO LONGER A
GENERAL POWER OF APPOINTMENT, THE  SUBSEQUENT  EXERCISE  OF  SUCH  POWER
SHALL NOT BE DEEMED TO BE THE EXERCISE OF A GENERAL POWER OF APPOINTMENT
IF-
  (1) SUCH PARTIAL RELEASE OCCURRED BEFORE NOVEMBER 1, 1951, OR
  (2)  THE  DONEE  OF SUCH POWER WAS UNDER A LEGAL DISABILITY TO RELEASE
SUCH POWER ON OCTOBER 21, 1942, AND SUCH PARTIAL  RELEASE  OCCURRED  NOT
LATER THAN SIX MONTHS AFTER THE TERMINATION OF SUCH LEGAL DISABILITY.
  (B)  POWERS CREATED AFTER OCTOBER 21, 1942. THE EXERCISE OR RELEASE OF
A GENERAL POWER OF APPOINTMENT CREATED AFTER OCTOBER 21, 1942, SHALL  BE
DEEMED A TRANSFER OF PROPERTY BY THE INDIVIDUAL POSSESSING SUCH POWER.

S. 6359--C                         257

  (C)  DEFINITION  OF GENERAL POWER OF APPOINTMENT. FOR PURPOSES OF THIS
SECTION, THE TERM "GENERAL POWER OF APPOINTMENT" MEANS A POWER WHICH  IS
EXERCISABLE  IN  FAVOR OF THE INDIVIDUAL POSSESSING THE POWER (HEREAFTER
IN THIS SUBSECTION REFERRED TO AS  THE  "POSSESSOR"),  HIS  ESTATE,  HIS
CREDITORS, OR THE CREDITORS OF HIS ESTATE; EXCEPT THAT-
  (1)  A POWER TO CONSUME, INVADE, OR APPROPRIATE PROPERTY FOR THE BENE-
FIT OF THE POSSESSOR WHICH  IS  LIMITED  BY  AN  ASCERTAINABLE  STANDARD
RELATING  TO  THE  HEALTH,  EDUCATION,  SUPPORT,  OR  MAINTENANCE OF THE
POSSESSOR SHALL NOT BE DEEMED A GENERAL POWER OF APPOINTMENT.
  (2) A POWER OF APPOINTMENT CREATED ON  OR  BEFORE  OCTOBER  21,  1942,
WHICH  IS  EXERCISABLE BY THE POSSESSOR ONLY IN CONJUNCTION WITH ANOTHER
PERSON SHALL NOT BE DEEMED A GENERAL POWER OF APPOINTMENT.
  (3) IN THE CASE OF A POWER OF APPOINTMENT CREATED  AFTER  OCTOBER  21,
1942,  WHICH  IS  EXERCISABLE  BY THE POSSESSOR ONLY IN CONJUNCTION WITH
ANOTHER PERSON-
--(A) IF THE POWER  IS  NOT  EXERCISABLE  BY  THE  POSSESSOR  EXCEPT  IN
CONJUNCTION WITH THE CREATOR OF THE POWER-SUCH POWER SHALL NOT BE DEEMED
A GENERAL POWER OF APPOINTMENT;
--(B)  IF  THE  POWER  IS  NOT  EXERCISABLE  BY  THE POSSESSOR EXCEPT IN
CONJUNCTION WITH A PERSON HAVING A SUBSTANTIAL INTEREST, IN THE PROPERTY
SUBJECT TO THE POWER, WHICH IS ADVERSE TO EXERCISE OF THE POWER IN FAVOR
OF THE POSSESSOR-SUCH POWER SHALL NOT  BE  DEEMED  A  GENERAL  POWER  OF
APPOINTMENT.  FOR  THE PURPOSES OF THIS SUBPARAGRAPH A PERSON WHO, AFTER
THE DEATH OF THE POSSESSOR, MAY BE POSSESSED OF A POWER  OF  APPOINTMENT
(WITH RESPECT TO THE PROPERTY SUBJECT TO THE POSSESSOR'S POWER) WHICH HE
MAY  EXERCISE  IN HIS OWN FAVOR SHALL BE DEEMED AS HAVING AN INTEREST IN
THE PROPERTY AND SUCH INTEREST SHALL BE DEEMED ADVERSE TO SUCH  EXERCISE
OF THE POSSESSOR'S POWER;
--(C)  IF (AFTER THE APPLICATION OF SUBPARAGRAPHS (A) AND (B)) THE POWER
IS A GENERAL POWER OF APPOINTMENT AND IS EXERCISABLE IN  FAVOR  OF  SUCH
OTHER  PERSON-SUCH  POWER SHALL BE DEEMED A GENERAL POWER OF APPOINTMENT
ONLY IN RESPECT OF A FRACTIONAL PART OF THE  PROPERTY  SUBJECT  TO  SUCH
POWER, SUCH PART TO BE DETERMINED BY DIVIDING THE VALUE OF SUCH PROPERTY
BY THE NUMBER OF SUCH PERSONS (INCLUDING THE POSSESSOR) IN FAVOR OF WHOM
SUCH POWER IS EXERCISABLE.
--FOR  PURPOSES OF SUBPARAGRAPHS (B) AND (C), A POWER SHALL BE DEEMED TO
BE EXERCISABLE IN FAVOR OF A PERSON IF IT IS  EXERCISABLE  IN  FAVOR  OF
SUCH PERSON, HIS ESTATE, HIS CREDITORS, OR THE CREDITORS OF HIS ESTATE.
  (D) CREATION OF ANOTHER POWER IN CERTAIN CASES. IF A POWER OF APPOINT-
MENT  CREATED  AFTER  OCTOBER 21, 1942, IS EXERCISED BY CREATING ANOTHER
POWER OF APPOINTMENT WHICH, UNDER  THE  APPLICABLE  LOCAL  LAW,  CAN  BE
VALIDLY  EXERCISED SO AS TO POSTPONE THE VESTING OF ANY ESTATE OR INTER-
EST IN THE PROPERTY WHICH WAS SUBJECT TO THE FIRST POWER, OR SUSPEND THE
ABSOLUTE OWNERSHIP OR POWER OF ALIENATION OF SUCH PROPERTY, FOR A PERIOD
ASCERTAINABLE WITHOUT REGARD TO THE DATE OF THE CREATION  OF  THE  FIRST
POWER,  SUCH  EXERCISE  OF  THE  FIRST POWER SHALL, TO THE EXTENT OF THE
PROPERTY SUBJECT TO THE SECOND POWER, BE DEEMED A TRANSFER  OF  PROPERTY
BY THE INDIVIDUAL POSSESSING SUCH POWER.
  (E)  LAPSE OF POWER. THE LAPSE OF A POWER OF APPOINTMENT CREATED AFTER
OCTOBER 21, 1942, DURING THE LIFE OF THE INDIVIDUAL POSSESSING THE POWER
SHALL BE CONSIDERED A RELEASE OF SUCH POWER. THE RULE OF  THE  PRECEDING
SENTENCE  SHALL  APPLY  WITH  RESPECT  TO THE LAPSE OF POWERS DURING ANY
CALENDAR YEAR ONLY TO THE EXTENT THAT THE PROPERTY WHICH COULD HAVE BEEN
APPOINTED BY EXERCISE OF SUCH LAPSED POWERS EXCEEDS IN VALUE THE GREATER
OF THE FOLLOWING AMOUNTS:
  (1) $5,000, OR

S. 6359--C                         258

  (2) 5 PERCENT OF THE AGGREGATE VALUE OF THE ASSETS OUT  OF  WHICH,  OR
THE PROCEEDS OF WHICH, THE EXERCISE OF THE LAPSED POWERS COULD BE SATIS-
FIED.
  (F) DATE OF CREATION OF POWER. FOR PURPOSES OF THIS SECTION A POWER OF
APPOINTMENT  CREATED  BY  A WILL EXECUTED ON OR BEFORE OCTOBER 21, 1942,
SHALL BE CONSIDERED A POWER CREATED ON OR BEFORE SUCH DATE IF THE PERSON
EXECUTING SUCH WILL DIES BEFORE JULY 1, 1949, WITHOUT HAVING REPUBLISHED
SUCH WILL, BY CODICIL OR OTHERWISE, AFTER OCTOBER 21, 1942.
  S 2516. CERTAIN PROPERTY SETTLEMENTS. WHERE A HUSBAND AND  WIFE  ENTER
INTO  A  WRITTEN AGREEMENT RELATIVE TO THEIR MARITAL AND PROPERTY RIGHTS
AND DIVORCE OCCURS WITHIN THE 3-YEAR PERIOD BEGINNING ON THE DATE 1 YEAR
BEFORE SUCH AGREEMENT IS ENTERED INTO (WHETHER OR NOT SUCH AGREEMENT  IS
APPROVED  BY THE DIVORCE DECREE), ANY TRANSFERS OF PROPERTY OR INTERESTS
IN PROPERTY MADE PURSUANT TO SUCH AGREEMENT-
  (1) TO EITHER SPOUSE IN SETTLEMENT OF HIS OR HER MARITAL  OR  PROPERTY
RIGHTS, OR
  (2)  TO PROVIDE A REASONABLE ALLOWANCE FOR THE SUPPORT OF ISSUE OF THE
MARRIAGE DURING MINORITY,
  --SHALL BE DEEMED TO BE TRANSFERS MADE FOR A FULL AND ADEQUATE CONSID-
ERATION IN MONEY OR MONEY'S WORTH.
  S 2518. DISCLAIMERS. (A) GENERAL RULE. - FOR PURPOSES OF  THIS  SUBTI-
TLE, IF A PERSON MAKES A QUALIFIED DISCLAIMER WITH RESPECT TO ANY INTER-
EST IN PROPERTY, THIS SUBTITLE SHALL APPLY WITH RESPECT TO SUCH INTEREST
AS IF THE INTEREST HAD NEVER BEEN TRANSFERRED TO SUCH PERSON.
  (B)  QUALIFIED  DISCLAIMER  DEFINED. - FOR PURPOSES OF SUBSECTION (A),
THE TERM "QUALIFIED DISCLAIMER" MEANS  AN  IRREVOCABLE  AND  UNQUALIFIED
REFUSAL BY A PERSON TO ACCEPT AN INTEREST IN PROPERTY BUT ONLY IF -
  (1) SUCH REFUSAL IS IN WRITING,
  (2)  SUCH  WRITING  IS RECEIVED BY THE TRANSFEROR OF THE INTEREST, HIS
LEGAL REPRESENTATIVE, OR THE HOLDER OF THE LEGAL TITLE TO  THE  PROPERTY
TO  WHICH THE INTEREST RELATES NOT LATER THAN THE DATE WHICH IS 9 MONTHS
AFTER THE LATER OF -
  (A) THE DATE ON WHICH THE  TRANSFER  CREATING  THE  INTEREST  IN  SUCH
PERSON IS MADE, OR
  (B) THE DAY ON WHICH SUCH PERSON ATTAINS AGE 21,
  (3)  SUCH PERSON HAS NOT ACCEPTED THE INTEREST OR ANY OF ITS BENEFITS,
AND
  (4) AS A RESULT OF SUCH  REFUSAL,  THE  INTEREST  PASSES  WITHOUT  ANY
DIRECTION  ON  THE  PART  OF THE PERSON MAKING THE DISCLAIMER AND PASSES
EITHER -
  (A) TO THE SPOUSE OF THE DECEDENT, OR
  (B) TO A PERSON OTHER THAN THE PERSON MAKING THE DISCLAIMER.
  (C) OTHER RULES. FOR PURPOSES OF SUBSECTION (A)-
  (1) DISCLAIMER OF UNDIVIDED PORTION OF  INTEREST.  A  DISCLAIMER  WITH
RESPECT  TO AN UNDIVIDED PORTION OF AN INTEREST WHICH MEETS THE REQUIRE-
MENTS OF  THE  PRECEDING  SENTENCE  SHALL  BE  TREATED  AS  A  QUALIFIED
DISCLAIMER OF SUCH PORTION OF THE INTEREST.
  (2)  POWERS.  A  POWER WITH RESPECT TO PROPERTY SHALL BE TREATED AS AN
INTEREST IN SUCH PROPERTY.
  (3) CERTAIN TRANSFERS TREATED AS DISCLAIMERS. A  WRITTEN  TRANSFER  OF
THE TRANSFEROR'S ENTIRE INTEREST IN THE PROPERTY-
  (A) WHICH MEETS REQUIREMENTS SIMILAR TO THE REQUIREMENTS OF PARAGRAPHS
(2) AND (3) OF SUBSECTION (B), AND
  (B)  WHICH IS TO A PERSON OR PERSONS WHO WOULD HAVE RECEIVED THE PROP-
ERTY HAD THE TRANSFEROR MADE A QUALIFIED DISCLAIMER (WITHIN THE  MEANING
OF SUBSECTION (B)),

S. 6359--C                         259

  --SHALL BE TREATED AS A QUALIFIED DISCLAIMER.
  S 2519. DISPOSITIONS OF CERTAIN LIFE ESTATES. (A) GENERAL RULE
  --FOR  PURPOSES OF THIS CHAPTER AND CHAPTER 11, ANY DISPOSITION OF ALL
OR PART OF A QUALIFYING INCOME INTEREST FOR  LIFE  IN  ANY  PROPERTY  TO
WHICH  THIS SECTION APPLIES SHALL BE TREATED AS A TRANSFER OF ALL INTER-
ESTS IN SUCH PROPERTY OTHER THAN THE QUALIFYING INCOME INTEREST.
  (B) PROPERTY TO WHICH THIS SUBSECTION APPLIES. THIS SECTION APPLIES TO
ANY PROPERTY IF A DEDUCTION WAS ALLOWED WITH RESPECT TO THE TRANSFER  OF
SUCH PROPERTY TO THE DONOR-
  (1) UNDER SECTION 2056 BY REASON OF SUBSECTION (B)(7) THEREOF, OR
  (2) UNDER SECTION 2523 BY REASON OF SUBSECTION (F) THEREOF.
  (C) CROSS REFERENCE
--FOR  RIGHT OF RECOVERY FOR GIFT TAX IN THE CASE OF PROPERTY TREATED AS
TRANSFERRED UNDER THIS SECTION, SEE SECTION 2207A(B).
  S 2522. CHARITABLE AND SIMILAR GIFTS. (A) CITIZENS  OR  RESIDENTS.  IN
COMPUTING TAXABLE GIFTS FOR THE CALENDAR YEAR, THERE SHALL BE ALLOWED AS
A DEDUCTION IN THE CASE OF A CITIZEN OR RESIDENT THE AMOUNT OF ALL GIFTS
MADE DURING SUCH YEAR TO OR FOR THE USE OF-
  (1)  THE UNITED STATES, ANY STATE, OR ANY POLITICAL SUBDIVISION THERE-
OF, OR THE DISTRICT OF COLUMBIA, FOR EXCLUSIVELY PUBLIC PURPOSES;
  (2) A CORPORATION, OR TRUST, OR COMMUNITY CHEST, FUND, OR  FOUNDATION,
ORGANIZED  AND OPERATED EXCLUSIVELY FOR RELIGIOUS, CHARITABLE, SCIENTIF-
IC, LITERARY, OR EDUCATIONAL PURPOSES, OR TO FOSTER NATIONAL OR INTERNA-
TIONAL AMATEUR SPORTS COMPETITION (BUT ONLY IF NO PART OF ITS ACTIVITIES
INVOLVE THE PROVISION OF ATHLETIC FACILITIES  OR  EQUIPMENT),  INCLUDING
THE  ENCOURAGEMENT  OF  ART AND THE PREVENTION OF CRUELTY TO CHILDREN OR
ANIMALS, NO PART OF THE NET EARNINGS OF WHICH INURES TO THE  BENEFIT  OF
ANY PRIVATE SHAREHOLDER OR INDIVIDUAL, WHICH IS NOT DISQUALIFIED FOR TAX
EXEMPTION  UNDER  SECTION 501(C)(3) BY REASON OF ATTEMPTING TO INFLUENCE
LEGISLATION, AND WHICH DOES NOT PARTICIPATE IN, OR INTERVENE IN (INCLUD-
ING  THE  PUBLISHING  OR  DISTRIBUTING  OF  STATEMENTS),  ANY  POLITICAL
CAMPAIGN  ON  BEHALF  OF  (OR IN OPPOSITION TO) ANY CANDIDATE FOR PUBLIC
OFFICE;
  (3) A FRATERNAL SOCIETY, ORDER, OR ASSOCIATION,  OPERATING  UNDER  THE
LODGE  SYSTEM,  BUT  ONLY  IF  SUCH GIFTS ARE TO BE USED EXCLUSIVELY FOR
RELIGIOUS, CHARITABLE, SCIENTIFIC, LITERARY,  OR  EDUCATIONAL  PURPOSES,
INCLUDING  THE  ENCOURAGEMENT  OF  ART  AND THE PREVENTION OF CRUELTY TO
CHILDREN OR ANIMALS;
  (4) POSTS OR ORGANIZATIONS OF WAR  VETERANS,  OR  AUXILIARY  UNITS  OR
SOCIETIES  OF  ANY SUCH POSTS OR ORGANIZATIONS, IF SUCH POSTS, ORGANIZA-
TIONS, UNITS, OR SOCIETIES ARE ORGANIZED IN THE UNITED STATES OR ANY  OF
ITS  POSSESSIONS,  AND  IF  NO PART OF THEIR NET EARNINGS INSURES TO THE
BENEFIT OF ANY PRIVATE SHAREHOLDER OR INDIVIDUAL.
  RULES SIMILAR TO THE RULES OF SECTION 501(J) SHALL APPLY FOR  PURPOSES
OF PARAGRAPH (2).
  (B)  NONRESIDENTS.  IN  THE CASE OF A NONRESIDENT NOT A CITIZEN OF THE
UNITED STATES, THERE SHALL BE ALLOWED AS A DEDUCTION THE AMOUNT  OF  ALL
GIFTS MADE DURING SUCH YEAR TO OR FOR THE USE OF-
  (1)  THE UNITED STATES, ANY STATE, OR ANY POLITICAL SUBDIVISION THERE-
OF, OR THE DISTRICT OF COLUMBIA, FOR EXCLUSIVELY PUBLIC PURPOSES;
  (2) A DOMESTIC CORPORATION  ORGANIZED  AND  OPERATED  EXCLUSIVELY  FOR
RELIGIOUS,  CHARITABLE,  SCIENTIFIC,  LITERARY, OR EDUCATIONAL PURPOSES,
INCLUDING THE ENCOURAGEMENT OF ART AND  THE  PREVENTION  OF  CRUELTY  TO
CHILDREN  OR ANIMALS, NO PART OF THE NET EARNINGS OF WHICH INURES TO THE
BENEFIT OF ANY PRIVATE SHAREHOLDER OR INDIVIDUAL, WHICH IS NOT DISQUALI-
FIED FOR TAX EXEMPTION UNDER SECTION 501(C)(3) BY REASON  OF  ATTEMPTING

S. 6359--C                         260

TO  INFLUENCE  LEGISLATION, AND WHICH DOES NOT PARTICIPATE IN, OR INTER-
VENE IN (INCLUDING THE PUBLISHING OR DISTRIBUTING  OF  STATEMENTS),  ANY
POLITICAL  CAMPAIGN ON BEHALF OF (OR IN OPPOSITION TO) ANY CANDIDATE FOR
PUBLIC OFFICE;
  (3)  A  TRUST,  OR COMMUNITY CHEST, FUND, OR FOUNDATION, ORGANIZED AND
OPERATED EXCLUSIVELY FOR RELIGIOUS, CHARITABLE, SCIENTIFIC, LITERARY, OR
EDUCATIONAL  PURPOSES,  INCLUDING  THE  ENCOURAGEMENT  OF  ART  AND  THE
PREVENTION OF CRUELTY TO CHILDREN OR ANIMALS, NO SUBSTANTIAL PART OF THE
ACTIVITIES  OF WHICH IS CARRYING ON PROPAGANDA, OR OTHERWISE ATTEMPTING,
TO INFLUENCE LEGISLATION, AND WHICH DOES NOT PARTICIPATE IN,  OR  INTER-
VENE  IN  (INCLUDING  THE PUBLISHING OR DISTRIBUTING OF STATEMENTS), ANY
POLITICAL CAMPAIGN ON BEHALF OF (OR IN OPPOSITION TO) ANY CANDIDATE  FOR
PUBLIC  OFFICE;  BUT ONLY IF SUCH GIFTS ARE TO BE USED WITHIN THE UNITED
STATES EXCLUSIVELY FOR SUCH PURPOSES;
  (4) A FRATERNAL SOCIETY, ORDER, OR ASSOCIATION,  OPERATING  UNDER  THE
LODGE  SYSTEM,  BUT  ONLY IF SUCH GIFTS ARE TO BE USED WITHIN THE UNITED
STATES EXCLUSIVELY FOR RELIGIOUS, CHARITABLE, SCIENTIFIC,  LITERARY,  OR
EDUCATIONAL  PURPOSES,  INCLUDING  THE  ENCOURAGEMENT  OF  ART  AND  THE
PREVENTION OF CRUELTY TO CHILDREN OR ANIMALS;
  (5) POSTS OR ORGANIZATIONS OF WAR  VETERANS,  OR  AUXILIARY  UNITS  OR
SOCIETIES  OF  ANY SUCH POSTS OR ORGANIZATIONS, IF SUCH POSTS, ORGANIZA-
TIONS, UNITS, OR SOCIETIES ARE ORGANIZED IN THE UNITED STATES OR ANY  OF
ITS  POSSESSIONS,  AND  IF  NO  PART OF THEIR NET EARNINGS INURES TO THE
BENEFIT OF ANY PRIVATE SHAREHOLDER OR INDIVIDUAL.
  (C) DISALLOWANCE OF DEDUCTIONS IN  CERTAIN  CASES.  (1)  NO  DEDUCTION
SHALL BE ALLOWED UNDER THIS SECTION FOR A GIFT TO OF 1 FOR THE USE OF AN
ORGANIZATION  OR TRUST DESCRIBED IN SECTION 508(D) OR 4948(C)(4) SUBJECT
TO THE CONDITIONS SPECIFIED IN SUCH SECTIONS.
  (2) WHERE A DONOR TRANSFERS AN INTEREST IN  PROPERTY  (OTHER  THAN  AN
INTEREST  DESCRIBED  IN SECTION 170(F)(3)(B)) TO A PERSON, OR FOR A USE,
DESCRIBED IN SUBSECTION (A) OR (B) AND AN INTEREST IN THE SAME  PROPERTY
IS RETAINED BY THE DONOR, OR IS TRANSFERRED OR HAS BEEN TRANSFERRED (FOR
LESS  THAN AN ADEQUATE AND FULL CONSIDERATION IN MONEY OR MONEY'S WORTH)
FROM THE DONOR TO A PERSON, OR FOR A USE, NOT  DESCRIBED  IN  SUBSECTION
(A)  OR  (B),  NO  DEDUCTION SHALL BE ALLOWED UNDER THIS SECTION FOR THE
INTEREST WHICH IS, OR HAS BEEN TRANSFERRED TO THE  PERSON,  OR  FOR  THE
USE, DESCRIBED IN SUBSECTION (A) OR (B), UNLESS-
  (A)  IN  THE CASE OF A REMAINDER INTEREST, SUCH INTEREST IS IN A TRUST
WHICH IS A CHARITABLE REMAINDER ANNUITY TRUST OR A CHARITABLE  REMAINDER
UNITRUST  (DESCRIBED  IN SECTION 664) OR A POOLED INCOME FUND (DESCRIBED
IN SECTION 642(C)(5)), OR
  (B) IN THE CASE OF ANY OTHER INTEREST, SUCH INTEREST IS IN THE FORM OF
A GUARANTEED ANNUITY OR IS A FIXED PERCENTAGE DISTRIBUTED YEARLY OF  THE
FAIR MARKET VALUE OF THE PROPERTY (TO BE DETERMINED YEARLY).
  (3)  RULES  SIMILAR TO THE RULES OF SECTION 2055(E)(4) SHALL APPLY FOR
PURPOSES OF PARAGRAPH (2).
  (4) REFORMATIONS TO COMPLY WITH PARAGRAPH (2). (A)  IN  GENERAL  --  A
DEDUCTION SHALL BE ALLOWED UNDER SUBSECTION (A) IN RESPECT OF ANY QUALI-
FIED REFORMATION (WITHIN THE MEANING OF SECTION 2055(E)(3)(B)).
  (B)  RULES  SIMILAR  TO SECTION 2055(E)(3) TO APPLY -- FOR PURPOSES OF
THIS PARAGRAPH, RULES SIMILAR TO THE RULES OF SECTION  2055(E)(3)  SHALL
APPLY.
  (5)  CONTRIBUTIONS  TO  DONOR  ADVISED  FUNDS.  A  DEDUCTION OTHERWISE
ALLOWED UNDER SUBSECTION (A) FOR ANY CONTRIBUTION  TO  A  DONOR  ADVISED
FUND (AS DEFINED IN SECTION 4966(D)(2)) SHALL ONLY BE ALLOWED IF-

S. 6359--C                         261

--(A)  THE  SPONSORING  ORGANIZATION  (AS DEFINED IN SECTION 4966(D)(1))
WITH RESPECT TO SUCH DONOR ADVISED FUND IS NOT-
--(I) DESCRIBED IN PARAGRAPH (3) OR (4) OF SUBSECTION (A), OR
--(II)  A  TYPE  III  SUPPORTING  ORGANIZATION  (AS  DEFINED  IN SECTION
4943(F)(5)(A)) WHICH IS NOT A FUNCTIONALLY INTEGRATED TYPE III  SUPPORT-
ING ORGANIZATION (AS DEFINED IN SECTION 4943(F)(5)(B)), AND
--(B)  THE  TAXPAYER  OBTAINS  A  CONTEMPORANEOUS WRITTEN ACKNOWLEDGMENT
(DETERMINED UNDER RULES SIMILAR TO THE RULES  OF  SECTION  170(F)(8)(C))
FROM  THE  SPONSORING ORGANIZATION (AS SO DEFINED) OF SUCH DONOR ADVISED
FUND THAT SUCH ORGANIZATION HAS EXCLUSIVE LEGAL CONTROL OVER THE  ASSETS
CONTRIBUTED.
  (D)  SPECIAL RULE FOR IRREVOCABLE TRANSFERS OF EASEMENTS IN REAL PROP-
ERTY. A DEDUCTION SHALL BE ALLOWED UNDER SUBSECTION (A)  IN  RESPECT  OF
ANY  TRANSFER  OF  A  QUALIFIED  REAL  PROPERTY  INTEREST (AS DEFINED IN
SECTION 170(H)(2)(C)) WHICH MEETS THE  REQUIREMENTS  OF  SECTION  170(H)
(WITHOUT REGARD TO PARAGRAPH (4)(A) THEREOF).
  (E) SPECIAL RULES FOR FRACTIONAL GIFTS
  (1) DENIAL OF DEDUCTION IN CERTAIN CASES
  (A) IN GENERAL
--NO  DEDUCTION  SHALL  BE  ALLOWED  FOR  A CONTRIBUTION OF AN UNDIVIDED
PORTION OF A TAXPAYER'S ENTIRE INTEREST IN  TANGIBLE  PERSONAL  PROPERTY
UNLESS  ALL  INTERESTS  IN THE PROPERTY ARE HELD IMMEDIATELY BEFORE SUCH
CONTRIBUTION BY-
--(I) THE TAXPAYER, OR
--(II) THE TAXPAYER AND THE DONEE.
  (B) EXCEPTIONS
--THE SECRETARY MAY, BY REGULATION, PROVIDE FOR EXCEPTIONS  TO  SUBPARA-
GRAPH (A) IN CASES WHERE ALL PERSONS WHO HOLD AN INTEREST IN THE PROPER-
TY MAKE PROPORTIONAL CONTRIBUTIONS OF AN UNDIVIDED PORTION OF THE ENTIRE
INTEREST HELD BY SUCH PERSONS.
  (2) RECAPTURE OF DEDUCTION IN CERTAIN CASES; ADDITION TO TAX
  (A)  IN  GENERAL.  THE SECRETARY SHALL PROVIDE FOR THE RECAPTURE OF AN
AMOUNT EQUAL TO ANY DEDUCTION ALLOWED UNDER THIS SECTION (PLUS INTEREST)
WITH RESPECT TO ANY CONTRIBUTION OF AN UNDIVIDED PORTION OF A TAXPAYER'S
ENTIRE INTEREST IN TANGIBLE PERSONAL PROPERTY-
--(I) IN ANY CASE IN WHICH THE DONOR DOES  NOT  CONTRIBUTE  ALL  OF  THE
REMAINING  INTERESTS IN SUCH PROPERTY TO THE DONEE (OR, IF SUCH DONEE IS
NO LONGER IN EXISTENCE, TO ANY PERSON DESCRIBED IN SECTION 170(C)) ON OR
BEFORE THE EARLIER OF-
--(I) THE DATE THAT IS 10 YEARS AFTER THE DATE OF THE INITIAL FRACTIONAL
CONTRIBUTION, OR
--(II) THE DATE OF THE DEATH OF THE DONOR, AND
--(II) IN ANY CASE IN WHICH THE DONEE HAS NOT, DURING THE PERIOD  BEGIN-
NING  ON  THE  DATE OF THE INITIAL FRACTIONAL CONTRIBUTION AND ENDING ON
THE DATE DESCRIBED IN CLAUSE (I)-
--(I) HAD SUBSTANTIAL PHYSICAL POSSESSION OF THE PROPERTY, AND
--(II) USED THE PROPERTY IN A USE WHICH IS RELATED TO A PURPOSE OR FUNC-
TION CONSTITUTING THE  BASIS  FOR  THE  ORGANIZATIONS'  EXEMPTION  UNDER
SECTION 501.
  (B)  ADDITION TO TAX. THE TAX IMPOSED UNDER THIS CHAPTER FOR ANY TAXA-
BLE YEAR FOR WHICH THERE IS A RECAPTURE UNDER SUBPARAGRAPH (A) SHALL  BE
INCREASED BY 10 PERCENT OF THE AMOUNT SO RECAPTURED.
  (C)  INITIAL  FRACTIONAL CONTRIBUTION. FOR PURPOSES OF THIS PARAGRAPH,
THE TERM "INITIAL FRACTIONAL CONTRIBUTION" MEANS, WITH  RESPECT  TO  ANY
DONOR,  THE  FIRST  GIFT  OF  AN UNDIVIDED PORTION OF THE DONOR'S ENTIRE

S. 6359--C                         262

INTEREST IN ANY TANGIBLE PERSONAL PROPERTY  FOR  WHICH  A  DEDUCTION  IS
ALLOWED UNDER SUBSECTION (A) OR (B).
  (F) CROSS REFERENCES
--(1)  FOR  TREATMENT OF CERTAIN ORGANIZATIONS PROVIDING CHILD CARE, SEE
SECTION 501(K).
--(2) FOR EXEMPTION OF CERTAIN GIFTS TO OR FOR THE BENEFIT OF THE UNITED
STATES AND FOR RULES OF CONSTRUCTION WITH RESPECT TO  CERTAIN  BEQUESTS,
SEE SECTION 2055(F).
--(3)  FOR TREATMENT OF GIFTS TO OR FOR THE USE OF INDIAN TRIBAL GOVERN-
MENTS (OR THEIR SUBDIVISIONS), SEE SECTION 7871.
  S 2523. GIFT TO SPOUSE (A)  ALLOWANCE  OF  DEDUCTION.  WHERE  A  DONOR
TRANSFERS  DURING THE CALENDAR YEAR BY GIFT AN INTEREST IN PROPERTY TO A
DONEE WHO AT THE TIME OF THE GIFT IS THE DONOR'S SPOUSE, THERE SHALL  BE
ALLOWED  AS A DEDUCTION IN COMPUTING TAXABLE GIFTS FOR THE CALENDAR YEAR
AN AMOUNT WITH RESPECT TO SUCH INTEREST EQUAL TO ITS VALUE.
  (B) LIFE ESTATE OR OTHER TERMINABLE INTEREST. WHERE, ON THE  LAPSE  OF
TIME, ON THE OCCURRENCE OF AN EVENT OR CONTINGENCY, OR ON THE FAILURE OF
AN  EVENT  OR  CONTINGENCY  TO  OCCUR,  SUCH INTEREST TRANSFERRED TO THE
SPOUSE WILL TERMINATE OR  FAIL,  NO  DEDUCTION  SHALL  BE  ALLOWED  WITH
RESPECT TO SUCH INTEREST-
  (1)  IF  THE DONOR RETAINS IN HIMSELF, OR TRANSFERS OR HAS TRANSFERRED
(FOR LESS THAN AN ADEQUATE AND FULL CONSIDERATION IN  MONEY  OR  MONEY'S
WORTH) TO ANY PERSON OTHER THAN SUCH DONEE SPOUSE (OR THE ESTATE OF SUCH
SPOUSE),  AN  INTEREST  IN  SUCH  PROPERTY,  AND  IF  BY  REASON OF SUCH
RETENTION OR TRANSFER THE DONOR (OR HIS HEIRS OR ASSIGNS) OR SUCH PERSON
(OR HIS HEIRS OR ASSIGNS) MAY POSSESS OR ENJOY ANY PART OF SUCH PROPERTY
AFTER SUCH TERMINATION OR FAILURE OF THE  INTEREST  TRANSFERRED  TO  THE
DONEE SPOUSE; OR
  (2)  IF  THE  DONOR IMMEDIATELY AFTER THE TRANSFER TO THE DONEE SPOUSE
HAS A POWER TO APPOINT AN INTEREST IN SUCH PROPERTY WHICH HE  CAN  EXER-
CISE  (EITHER  ALONE  OR  IN CONJUNCTION WITH ANY PERSON) IN SUCH MANNER
THAT THE APPOINTEE MAY POSSESS OR ENJOY ANY PART OF SUCH PROPERTY  AFTER
SUCH  TERMINATION  OR  FAILURE  OF THE INTEREST TRANSFERRED TO THE DONEE
SPOUSE. FOR PURPOSES OF THIS PARAGRAPH, THE DONOR SHALL BE CONSIDERED AS
HAVING IMMEDIATELY AFTER THE TRANSFER TO THE DONEE SPOUSE SUCH POWER  TO
APPOINT EVEN THOUGH SUCH POWER CANNOT BE EXERCISED UNTIL AFTER THE LAPSE
OF TIME, UPON THE OCCURRENCE OF AN EVENT OR CONTINGENCY, OR ON THE FAIL-
URE OF AN EVENT OR CONTINGENCY TO OCCUR.
  AN  EXERCISE  OR  RELEASE AT ANY TIME BY THE DONOR, EITHER ALONE OR IN
CONJUNCTION WITH ANY PERSON, OF A POWER TO APPOINT AN INTEREST IN  PROP-
ERTY, EVEN THOUGH NOT OTHERWISE A TRANSFER, SHALL, FOR PURPOSES OF PARA-
GRAPH  (1),  BE  CONSIDERED  AS A TRANSFER BY HIM. EXCEPT AS PROVIDED IN
SUBSECTION (E), WHERE AT THE TIME OF THE TRANSFER IT  IS  IMPOSSIBLE  TO
ASCERTAIN  THE  PARTICULAR  PERSON  OR  PERSONS WHO MAY RECEIVE FROM THE
DONOR AN INTEREST IN PROPERTY  SO  TRANSFERRED  BY  HIM,  SUCH  INTEREST
SHALL,  FOR PURPOSES OF PARAGRAPH (1), BE CONSIDERED AS TRANSFERRED TO A
PERSON OTHER THAN THE DONEE SPOUSE.
  (C) INTEREST IN UNIDENTIFIED ASSETS. WHERE THE ASSETS OUT OF WHICH, OR
THE PROCEEDS OF WHICH, THE INTEREST TRANSFERRED TO THE DONEE SPOUSE  MAY
BE  SATISFIED INCLUDE A PARTICULAR ASSET OR ASSETS WITH RESPECT TO WHICH
NO DEDUCTION WOULD BE ALLOWED IF SUCH ASSET OR ASSETS  WERE  TRANSFERRED
FROM  THE  DONOR  TO  SUCH SPOUSE, THEN THE VALUE OF THE INTEREST TRANS-
FERRED TO SUCH SPOUSE SHALL, FOR PURPOSES OF SUBSECTION (A), BE  REDUCED
BY THE AGGREGATE VALUE OF SUCH PARTICULAR ASSETS.
  (D)  JOINT  INTERESTS.  IF  THE  INTEREST  IS TRANSFERRED TO THE DONEE
SPOUSE AS SOLE JOINT TENANT WITH THE DONOR OR AS TENANT BY THE ENTIRETY,

S. 6359--C                         263

THE INTEREST OF THE DONOR IN THE PROPERTY WHICH EXISTS SOLELY BY  REASON
OF  THE POSSIBILITY THAT THE DONOR MAY SURVIVE THE DONEE SPOUSE, OR THAT
THERE MAY OCCUR A SEVERANCE OF THE TENANCY, SHALL NOT BE CONSIDERED  FOR
PURPOSES  OF  SUBSECTION  (B)  AS  AN  INTEREST RETAINED BY THE DONOR IN
HIMSELF.
  (E) LIFE ESTATE WITH POWER OF APPOINTMENT IN DONEE SPOUSE.  WHERE  THE
DONOR  TRANSFERS AN INTEREST IN PROPERTY, IF BY SUCH TRANSFER HIS SPOUSE
IS ENTITLED FOR LIFE TO ALL OF THE INCOME FROM THE ENTIRE  INTEREST,  OR
ALL  THE  INCOME FROM A SPECIFIC PORTION THEREOF, PAYABLE ANNUALLY OR AT
MORE FREQUENT INTERVALS, WITH POWER IN THE DONEE SPOUSE TO  APPOINT  THE
ENTIRE  INTEREST, OR SUCH SPECIFIC PORTION (EXERCISABLE IN FAVOR OF SUCH
DONEE SPOUSE, OR OF THE ESTATE OF SUCH DONEE  SPOUSE,  OR  IN  FAVOR  OF
EITHER, WHETHER OR NOT IN EACH CASE THE POWER IS EXERCISABLE IN FAVOR OF
OTHERS),  AND  WITH  NO POWER IN ANY OTHER PERSON TO APPOINT ANY PART OF
SUCH INTEREST, OR SUCH PORTION, TO  ANY  PERSON  OTHER  THAN  THE  DONEE
SPOUSE-
  (1)  THE INTEREST, OR SUCH PORTION, SO TRANSFERRED SHALL, FOR PURPOSES
OF SUBSECTION (A) BE CONSIDERED AS TRANSFERRED TO THE DONEE SPOUSE, AND
  (2) NO PART OF THE INTEREST, OR SUCH PORTION,  SO  TRANSFERRED  SHALL,
FOR  PURPOSES  OF  SUBSECTION  (B)(1),  BE CONSIDERED AS RETAINED IN THE
DONOR OR TRANSFERRED TO ANY PERSON OTHER THAN THE DONEE SPOUSE.
  THIS SUBSECTION SHALL APPLY ONLY IF, BY SUCH TRANSFER, SUCH  POWER  IN
THE DONEE SPOUSE TO APPOINT THE INTEREST, OR SUCH PORTION, WHETHER EXER-
CISABLE  BY WILL OR DURING LIFE, IS EXERCISABLE BY SUCH SPOUSE ALONE AND
IN ALL EVENTS.   FOR PURPOSES OF THIS  SUBSECTION,  THE  TERM  "SPECIFIC
PORTION"  ONLY INCLUDES A PORTION DETERMINED ON A FRACTIONAL OR PERCENT-
AGE BASIS.
  (F) ELECTION WITH RESPECT TO LIFE ESTATE  FOR  DONEE  SPOUSE.  (1)  IN
GENERAL
  IN THE CASE OF QUALIFIED TERMINABLE INTEREST PROPERTY-
  (A)  FOR PURPOSES OF SUBSECTION (A), SUCH PROPERTY SHALL BE TREATED AS
TRANSFERRED TO THE DONEE SPOUSE, AND
  (B) FOR PURPOSES OF SUBSECTION (B)(1), NO PART OF SUCH PROPERTY  SHALL
BE  CONSIDERED  AS  RETAINED  IN  THE DONOR OR TRANSFERRED TO ANY PERSON
OTHER THAN THE DONEE SPOUSE.
  (2) QUALIFIED TERMINABLE  INTEREST  PROPERTY.  FOR  PURPOSES  OF  THIS
SUBSECTION,  THE TERM "QUALIFIED TERMINABLE INTEREST PROPERTY" MEANS ANY
PROPERTY-
  (A) WHICH IS TRANSFERRED BY THE DONOR SPOUSE,
  (B) IN WHICH THE DONEE SPOUSE HAS A  QUALIFYING  INCOME  INTEREST  FOR
LIFE, AND
  (C) TO WHICH AN ELECTION UNDER THIS SUBSECTION APPLIES.
  (3)  CERTAIN  RULES  MADE APPLICABLE. FOR PURPOSES OF THIS SUBSECTION,
RULES SIMILAR TO THE RULES OF CLAUSES (II), (III), AND (IV)  OF  SECTION
2056(B)(7)(B)  SHALL  APPLY  AND  THE RULES OF SECTION 2056(B)(10) SHALL
APPLY.
  (4) ELECTION. (A) TIME AND MANNER. AN ELECTION UNDER  THIS  SUBSECTION
WITH  RESPECT  TO  ANY  PROPERTY  SHALL  BE  MADE  ON OR BEFORE THE DATE
PRESCRIBED BY SECTION 6075(B) FOR FILING A GIFT TAX RETURN WITH  RESPECT
TO THE TRANSFER (DETERMINED WITHOUT REGARD TO SECTION 6019(2)) AND SHALL
BE MADE IN SUCH MANNER AS THE SECRETARY SHALL BY REGULATIONS PRESCRIBE.
  (B)  ELECTION  IRREVOCABLE.  AN  ELECTION  UNDER THIS SUBSECTION, ONCE
MADE, SHALL BE IRREVOCABLE.
  (5) TREATMENT OF INTEREST RETAINED BY DONOR SPOUSE. (A) IN GENERAL. IN
THE CASE OF ANY QUALIFIED TERMINABLE INTEREST PROPERTY-

S. 6359--C                         264

  (I) SUCH PROPERTY SHALL NOT BE INCLUDIBLE IN THE GROSS ESTATE  OF  THE
DONOR SPOUSE, AND
  (II)  ANY  SUBSEQUENT  TRANSFER  BY THE DONOR SPOUSE OF AN INTEREST IN
SUCH PROPERTY SHALL NOT BE TREATED AS A TRANSFER FOR  PURPOSES  OF  THIS
CHAPTER.
  (B)  SUBPARAGRAPH  (A)  NOT  TO  APPLY AFTER TRANSFER BY DONEE SPOUSE.
SUBPARAGRAPH (A) SHALL NOT APPLY WITH RESPECT TO ANY PROPERTY AFTER  THE
DONEE  SPOUSE  IS  TREATED  AS  HAVING  TRANSFERRED  SUCH PROPERTY UNDER
SECTION 2519, OR SUCH PROPERTY IS INCLUDIBLE IN THE DONEE SPOUSE'S GROSS
ESTATE UNDER SECTION 2044.
  (6) TREATMENT OF JOINT AND SURVIVOR ANNUITIES. IN THE CASE OF A  JOINT
AND  SURVIVOR  ANNUITY WHERE ONLY THE DONOR SPOUSE AND DONEE SPOUSE HAVE
THE RIGHT TO RECEIVE PAYMENTS BEFORE THE DEATH OF  THE  LAST  SPOUSE  TO
DIE-
--(A)  THE  DONEE  SPOUSE'S  INTEREST  SHALL  BE TREATED AS A QUALIFYING
INCOME INTEREST FOR LIFE,
--(B) THE DONOR SPOUSE SHALL BE TREATED AS HAVING MADE AN ELECTION UNDER
THIS SUBSECTION WITH RESPECT TO SUCH ANNUITY  UNLESS  THE  DONOR  SPOUSE
OTHERWISE ELECTS ON OR BEFORE THE DATE SPECIFIED IN PARAGRAPH (4)(A),
--(C)  PARAGRAPH  (5)  AND  SECTION  2519  SHALL  NOT APPLY TO THE DONOR
SPOUSE'S INTEREST IN THE ANNUITY, AND
--(D) IF THE DONEE SPOUSE DIES BEFORE THE DONOR SPOUSE, NO AMOUNT  SHALL
BE INCLUDIBLE IN THE GROSS ESTATE OF THE DONEE SPOUSE UNDER SECTION 2044
WITH RESPECT TO SUCH ANNUITY.
  AN ELECTION UNDER SUBPARAGRAPH (B), ONCE MADE, SHALL BE IRREVOCABLE.
  (G)  SPECIAL RULE FOR CHARITABLE REMAINDER TRUSTS. (1) IN GENERAL. IF,
AFTER THE TRANSFER, THE DONEE SPOUSE IS THE ONLY NONCHARITABLE BENEFICI-
ARY (OTHER THAN THE DONOR) OF A QUALIFIED  CHARITABLE  REMAINDER  TRUST,
SUBSECTION  (B)  SHALL  NOT APPLY TO THE INTEREST IN SUCH TRUST WHICH IS
TRANSFERRED TO THE DONEE SPOUSE.
  (2) DEFINITIONS. FOR PURPOSES OF PARAGRAPH (1), THE TERM  "NONCHARITA-
BLE  BENEFICIARY"  AND  "QUALIFIED  CHARITABLE REMAINDER TRUST" HAVE THE
MEANINGS GIVEN TO SUCH TERMS BY SECTION 2056(B)(8)(B).
  (H) DENIAL OF DOUBLE DEDUCTION. NOTHING IN THIS SECTION OR  ANY  OTHER
PROVISION OF THIS CHAPTER SHALL ALLOW THE VALUE OF ANY INTEREST IN PROP-
ERTY  TO  BE  DEDUCTED UNDER THIS CHAPTER MORE THAN ONCE WITH RESPECT TO
THE SAME DONOR.
  S 2524. EXTENT OF DEDUCTIONS. THE DEDUCTIONS PROVIDED IN SECTIONS 2522
AND 2523 SHALL BE ALLOWED ONLY TO THE  EXTENT  THAT  THE  GIFTS  THEREIN
SPECIFIED  ARE  INCLUDED  IN  THE  AMOUNT  OF  GIFTS  AGAINST WHICH SUCH
DEDUCTIONS ARE APPLIED.
  S 2701. SPECIAL VALUATION RULES IN CASE OF TRANSFERS OF CERTAIN INTER-
ESTS IN CORPORATIONS OR PARTNERSHIPS. (A) VALUATION RULES. (1) IN GENER-
AL.  SOLELY FOR PURPOSES OF DETERMINING WHETHER A TRANSFER OF AN  INTER-
EST  IN A CORPORATION OR PARTNERSHIP TO (OR FOR THE BENEFIT OF) A MEMBER
OF THE TRANSFEROR'S FAMILY IS A GIFT (AND THE VALUE OF  SUCH  TRANSFER),
THE VALUE OF ANY RIGHT-
--(A)  WHICH  IS  DESCRIBED  IN  SUBPARAGRAPH  (A)  OR (B) OF SUBSECTION
(B)(1), AND
--(B) WHICH IS WITH RESPECT TO ANY APPLICABLE RETAINED INTEREST THAT  IS
HELD  BY THE TRANSFEROR OR AN APPLICABLE FAMILY MEMBER IMMEDIATELY AFTER
THE TRANSFER,
  --SHALL BE DETERMINED UNDER PARAGRAPH (3). THIS  PARAGRAPH  SHALL  NOT
APPLY  TO  THE  TRANSFER OF ANY INTEREST FOR WHICH MARKET QUOTATIONS ARE
READILY AVAILABLE (AS OF THE DATE OF TRANSFER) ON AN ESTABLISHED SECURI-
TIES MARKET.

S. 6359--C                         265

  (2) EXCEPTIONS FOR MARKETABLE RETAINED INTERESTS, ETC.  PARAGRAPH  (1)
SHALL  NOT  APPLY  TO  ANY  RIGHT WITH RESPECT TO AN APPLICABLE RETAINED
INTEREST IF-
--(A)  MARKET  QUOTATIONS  ARE  READILY AVAILABLE (AS OF THE DATE OF THE
TRANSFER) FOR SUCH INTEREST ON AN ESTABLISHED SECURITIES MARKET,
--(B) SUCH INTEREST IS OF THE SAME CLASS AS THE TRANSFERRED INTEREST, OR
--(C) SUCH INTEREST IS PROPORTIONALLY THE SAME AS THE TRANSFERRED INTER-
EST, WITHOUT REGARD TO NONLAPSING DIFFERENCES IN VOTING POWER (OR, FOR A
PARTNERSHIP, NONLAPSING DIFFERENCES WITH RESPECT TO MANAGEMENT AND LIMI-
TATIONS ON LIABILITY).
--SUBPARAGRAPH (C) SHALL NOT APPLY TO ANY INTEREST IN A  PARTNERSHIP  IF
THE TRANSFEROR OR AN APPLICABLE FAMILY MEMBER HAS THE RIGHT TO ALTER THE
LIABILITY  OF  THE  TRANSFEREE  OF  THE  TRANSFERRED PROPERTY. EXCEPT AS
PROVIDED BY THE SECRETARY, ANY DIFFERENCE DESCRIBED IN SUBPARAGRAPH  (C)
WHICH LAPSES BY REASON OF ANY FEDERAL OR STATE LAW SHALL BE TREATED AS A
NONLAPSING DIFFERENCE FOR PURPOSES OF SUCH SUBPARAGRAPH.
  (3)  VALUATION OF RIGHTS TO WHICH PARAGRAPH (1) APPLIES. (A) IN GENER-
AL.  THE VALUE OF ANY RIGHT DESCRIBED IN PARAGRAPH  (1),  OTHER  THAN  A
DISTRIBUTION  RIGHT  WHICH  CONSISTS  OF  A RIGHT TO RECEIVE A QUALIFIED
PAYMENT, SHALL BE TREATED AS BEING ZERO.
  (B) VALUATION OF CERTAIN QUALIFIED PAYMENTS. IF-
--(I) ANY APPLICABLE RETAINED  INTEREST  CONFERS  A  DISTRIBUTION  RIGHT
WHICH CONSISTS OF THE RIGHT TO A QUALIFIED PAYMENT, AND
--(II)  THERE ARE 1 OR MORE LIQUIDATION, PUT, CALL, OR CONVERSION RIGHTS
WITH RESPECT TO SUCH INTEREST, THE VALUE OF ALL  SUCH  RIGHTS  SHALL  BE
DETERMINED  AS  IF EACH LIQUIDATION, PUT, CALL, OR CONVERSION RIGHT WERE
EXERCISED IN THE MANNER RESULTING IN THE LOWEST VALUE  BEING  DETERMINED
FOR ALL SUCH RIGHTS.
  (C)  VALUATION  OF  QUALIFIED  PAYMENTS  WHERE  NO  LIQUIDATION,  ETC.
RIGHTS. IN  THE  CASE  OF  AN  APPLICABLE  RETAINED  INTEREST  WHICH  IS
DESCRIBED IN SUBPARAGRAPH (B)(I) BUT NOT SUBPARAGRAPH (B)(II), THE VALUE
OF  THE  DISTRIBUTION  RIGHT  SHALL BE DETERMINED WITHOUT REGARD TO THIS
SECTION.
  (4) MINIMUM VALUATION OF JUNIOR EQUITY. (A) IN GENERAL. IN THE CASE OF
A TRANSFER DESCRIBED IN PARAGRAPH (1) OF A JUNIOR EQUITY INTEREST  IN  A
CORPORATION OR PARTNERSHIP, SUCH INTEREST SHALL IN NO EVENT BE VALUED AT
AN  AMOUNT  LESS  THAN  THE VALUE WHICH WOULD BE DETERMINED IF THE TOTAL
VALUE OF ALL OF THE JUNIOR EQUITY INTERESTS IN THE ENTITY WERE EQUAL  TO
10 PERCENT OF THE SUM OF-
--(I)  THE  TOTAL  VALUE  OF ALL OF THE EQUITY INTERESTS IN SUCH ENTITY,
PLUS
--(II) THE TOTAL AMOUNT OF INDEBTEDNESS OF SUCH ENTITY TO THE TRANSFEROR
(OR AN APPLICABLE FAMILY MEMBER).
  (B) DEFINITIONS. FOR PURPOSES OF THIS PARAGRAPH-
  (I) JUNIOR EQUITY INTEREST. THE TERM "JUNIOR  EQUITY  INTEREST"  MEANS
COMMON  STOCK OR, IN THE CASE OF A PARTNERSHIP, ANY PARTNERSHIP INTEREST
UNDER WHICH THE RIGHTS AS TO INCOME  AND  CAPITAL  (OR,  TO  THE  EXTENT
PROVIDED  IN REGULATIONS, THE RIGHTS AS TO EITHER INCOME OR CAPITAL) ARE
JUNIOR TO THE RIGHTS OF ALL OTHER CLASSES OF EQUITY INTERESTS.
  (II) EQUITY INTEREST. THE TERM "EQUITY INTEREST" MEANS  STOCK  OR  ANY
INTEREST AS A PARTNER, AS THE CASE MAY BE.
  (B) APPLICABLE RETAINED INTERESTS. FOR PURPOSES OF THIS SECTION-
  (1)  IN  GENERAL.  THE  TERM  "APPLICABLE RETAINED INTEREST" MEANS ANY
INTEREST IN AN ENTITY WITH RESPECT TO WHICH THERE IS-
--(A) A DISTRIBUTION RIGHT, BUT ONLY IF, IMMEDIATELY BEFORE THE TRANSFER
DESCRIBED IN SUBSECTION (A)(1), THE  TRANSFEROR  AND  APPLICABLE  FAMILY

S. 6359--C                         266

MEMBERS  HOLD  (AFTER  APPLICATION  OF SUBSECTION (E)(3)) CONTROL OF THE
ENTITY, OR
--(B) A LIQUIDATION, PUT, CALL, OR CONVERSION RIGHT.
  (2) CONTROL. FOR PURPOSES OF PARAGRAPH (1)-
  (A)  CORPORATIONS.  IN  THE  CASE OF A CORPORATION, THE TERM "CONTROL"
MEANS THE HOLDING OF AT LEAST 50 PERCENT (BY VOTE OR VALUE) OF THE STOCK
OF THE CORPORATION.
  (B) PARTNERSHIPS. IN THE CASE OF A  PARTNERSHIP,  THE  TERM  "CONTROL"
MEANS-
--(I)  THE  HOLDING  OF  AT  LEAST  50 PERCENT OF THE CAPITAL OR PROFITS
INTERESTS IN THE PARTNERSHIP, OR
--(II) IN THE CASE OF A LIMITED PARTNERSHIP, THE HOLDING OF ANY INTEREST
AS A GENERAL PARTNER.
  (C) APPLICABLE FAMILY MEMBER. FOR PURPOSES  OF  THIS  SUBSECTION,  THE
TERM  "APPLICABLE  FAMILY  MEMBER" INCLUDES ANY LINEAL DESCENDANT OF ANY
PARENT OF THE TRANSFEROR OR THE TRANSFEROR'S SPOUSE.
  (C) DISTRIBUTION AND OTHER RIGHTS; QUALIFIED PAYMENTS. FOR PURPOSES OF
THIS SECTION-
  (1) DISTRIBUTION RIGHT. (A) IN GENERAL. THE TERM "DISTRIBUTION  RIGHT"
MEANS-
--(I)  A  RIGHT  TO DISTRIBUTIONS FROM A CORPORATION WITH RESPECT TO ITS
STOCK, AND
--(II) A RIGHT TO DISTRIBUTIONS FROM A PARTNERSHIP  WITH  RESPECT  TO  A
PARTNER'S INTEREST IN THE PARTNERSHIP.
  (B) EXCEPTIONS. THE TERM "DISTRIBUTION RIGHT" DOES NOT INCLUDE-
--(I)  A  RIGHT  TO  DISTRIBUTIONS WITH RESPECT TO ANY INTEREST WHICH IS
JUNIOR TO THE RIGHTS OF THE TRANSFERRED INTEREST,
--(II) ANY LIQUIDATION, PUT, CALL, OR CONVERSION RIGHT, OR
--(III) ANY RIGHT TO RECEIVE ANY GUARANTEED PAYMENT DESCRIBED IN SECTION
707(C) OF A FIXED AMOUNT.
  (2) LIQUIDATION, ETC. RIGHTS. (A) IN GENERAL. THE  TERM  "LIQUIDATION,
PUT,  CALL,  OR  CONVERSION  RIGHT" MEANS ANY LIQUIDATION, PUT, CALL, OR
CONVERSION RIGHT, OR ANY SIMILAR RIGHT, THE EXERCISE OR  NONEXERCISE  OF
WHICH AFFECTS THE VALUE OF THE TRANSFERRED INTEREST.
  (B) EXCEPTION FOR FIXED RIGHTS. (I) IN GENERAL. THE TERM "LIQUIDATION,
PUT, CALL, OR CONVERSION RIGHT" DOES NOT INCLUDE ANY RIGHT WHICH MUST BE
EXERCISED AT A SPECIFIC TIME AND AT A SPECIFIC AMOUNT.
  (II)  TREATMENT  OF  CERTAIN RIGHTS. IF A RIGHT IS ASSUMED TO BE EXER-
CISED IN A PARTICULAR MANNER  UNDER  SUBSECTION  (A)(3)(B),  SUCH  RIGHT
SHALL BE TREATED AS SO EXERCISED FOR PURPOSES OF CLAUSE (I).
  (C)  EXCEPTION  FOR  CERTAIN RIGHTS TO CONVERT. THE TERM "LIQUIDATION,
PUT, CALL, OR CONVERSION RIGHT" DOES NOT INCLUDE ANY RIGHT WHICH-
--(I) IS A RIGHT TO CONVERT INTO A FIXED NUMBER (OR A FIXED  PERCENTAGE)
OF SHARES OF THE SAME CLASS OF STOCK IN A CORPORATION AS THE TRANSFERRED
STOCK  IN SUCH CORPORATION UNDER SUBSECTION (A)(1) (OR STOCK WHICH WOULD
BE OF THE SAME CLASS BUT FOR NONLAPSING DIFFERENCES IN VOTING POWER),
--(II) IS NONLAPSING,
--(III) IS SUBJECT TO PROPORTIONATE  ADJUSTMENTS  FOR  SPLITS,  COMBINA-
TIONS, RECLASSIFICATIONS, AND SIMILAR CHANGES IN THE CAPITAL STOCK, AND
--(IV)  IS  SUBJECT  TO  ADJUSTMENTS  SIMILAR  TO  THE ADJUSTMENTS UNDER
SUBSECTION (D) FOR ACCUMULATED BUT UNPAID DISTRIBUTIONS.
--A RULE SIMILAR TO THE RULE OF THE PRECEDING SENTENCE SHALL  APPLY  FOR
PARTNERSHIPS.
  (3) QUALIFIED PAYMENT. (A) IN GENERAL. EXCEPT AS OTHERWISE PROVIDED IN
THIS  PARAGRAPH, THE TERM "QUALIFIED PAYMENT" MEANS ANY DIVIDEND PAYABLE
ON A PERIODIC BASIS UNDER ANY CUMULATIVE PREFERRED STOCK (OR A  COMPARA-

S. 6359--C                         267

BLE  PAYMENT  UNDER  ANY  PARTNERSHIP  INTEREST) TO THE EXTENT THAT SUCH
DIVIDEND (OR COMPARABLE PAYMENT) IS DETERMINED AT A FIXED RATE.
  (B)  TREATMENT OF VARIABLE RATE PAYMENTS. FOR PURPOSES OF SUBPARAGRAPH
(A), A PAYMENT SHALL BE TREATED AS FIXED AS TO RATE IF SUCH  PAYMENT  IS
DETERMINED  AT  A  RATE  WHICH BEARS A FIXED RELATIONSHIP TO A SPECIFIED
MARKET INTEREST RATE.
  (C) ELECTIONS. (I) IN GENERAL. PAYMENTS UNDER ANY INTEREST HELD  BY  A
TRANSFEROR  WHICH  (WITHOUT  REGARD  TO THIS SUBPARAGRAPH) ARE QUALIFIED
PAYMENTS SHALL BE TREATED AS QUALIFIED PAYMENTS  UNLESS  THE  TRANSFEROR
ELECTS  NOT  TO  TREAT  SUCH  PAYMENTS  AS  QUALIFIED PAYMENTS. PAYMENTS
DESCRIBED IN THE PRECEDING SENTENCE WHICH  ARE  HELD  BY  AN  APPLICABLE
FAMILY MEMBER SHALL BE TREATED AS QUALIFIED PAYMENTS ONLY IF SUCH MEMBER
ELECTS TO TREAT SUCH PAYMENTS AS QUALIFIED PAYMENTS.
  (II)  ELECTION  TO  HAVE  INTEREST  TREATED  AS  QUALIFIED  PAYMENT. A
TRANSFEROR OR APPLICABLE FAMILY MEMBER HOLDING  ANY  DISTRIBUTION  RIGHT
WHICH  (WITHOUT  REGARD TO THIS SUBPARAGRAPH) IS NOT A QUALIFIED PAYMENT
MAY ELECT TO TREAT SUCH RIGHT AS A QUALIFIED PAYMENT, TO BE PAID IN  THE
AMOUNTS  AND  AT  THE  TIMES  SPECIFIED  IN SUCH ELECTION. THE PRECEDING
SENTENCE SHALL APPLY ONLY TO THE EXTENT THAT THE AMOUNTS  AND  TIMES  SO
SPECIFIED  ARE  NOT  INCONSISTENT  WITH  THE UNDERLYING LEGAL INSTRUMENT
GIVING RISE TO SUCH RIGHT.
  (III) ELECTIONS IRREVOCABLE. ANY ELECTION UNDER THIS SUBPARAGRAPH WITH
RESPECT TO AN INTEREST SHALL, ONCE MADE, BE IRREVOCABLE.
  (D) TRANSFER TAX TREATMENT OF CUMULATIVE BUT UNPAID DISTRIBUTIONS. (1)
IN GENERAL. IF A TAXABLE EVENT OCCURS WITH RESPECT TO  ANY  DISTRIBUTION
RIGHT  TO WHICH SUBSECTION (A)(3)(B) OR (C) APPLIED, THE FOLLOWING SHALL
BE INCREASED BY THE AMOUNT DETERMINED UNDER PARAGRAPH (2):
--(A) THE TAXABLE ESTATE OF THE TRANSFEROR IN  THE  CASE  OF  A  TAXABLE
EVENT DESCRIBED IN PARAGRAPH (3)(A)(I).
--(B) THE TAXABLE GIFTS OF THE TRANSFEROR FOR THE CALENDAR YEAR IN WHICH
THE  TAXABLE  EVENT  OCCURS  IN THE CASE OF A TAXABLE EVENT DESCRIBED IN
PARAGRAPH (3)(A)(II) OR (III).
  (2) AMOUNT OF INCREASE. (A) IN GENERAL. THE  AMOUNT  OF  THE  INCREASE
DETERMINED UNDER THIS PARAGRAPH SHALL BE THE EXCESS (IF ANY) OF-
--(I)  THE  VALUE  OF  THE  QUALIFIED PAYMENTS PAYABLE DURING THE PERIOD
BEGINNING ON THE DATE OF THE TRANSFER UNDER SUBSECTION (A)(1) AND ENDING
ON THE DATE OF THE TAXABLE EVENT DETERMINED AS IF-
--(I) ALL SUCH PAYMENTS WERE PAID ON THE DATE PAYMENT WAS DUE, AND
--(II) ALL SUCH PAYMENTS WERE REINVESTED BY THE  TRANSFEROR  AS  OF  THE
DATE  OF PAYMENT AT A YIELD EQUAL TO THE DISCOUNT RATE USED IN DETERMIN-
ING  THE  VALUE  OF  THE  APPLICABLE  RETAINED  INTEREST  DESCRIBED   IN
SUBSECTION (A)(1), OVER
  (II) THE VALUE OF SUCH PAYMENTS PAID DURING SUCH PERIOD COMPUTED UNDER
CLAUSE  (I)  ON  THE  BASIS OF THE TIME WHEN SUCH PAYMENTS WERE ACTUALLY
PAID.
  (B) LIMITATION ON AMOUNT OF INCREASE. (I) IN GENERAL.  THE  AMOUNT  OF
THE  INCREASE  UNDER  SUBPARAGRAPH  (A)  SHALL NOT EXCEED THE APPLICABLE
PERCENTAGE OF THE EXCESS (IF ANY) OF-
--(I) THE VALUE (DETERMINED AS OF THE DATE OF THE TAXABLE EVENT) OF  ALL
EQUITY  INTERESTS  IN  THE  ENTITY  WHICH  ARE  JUNIOR TO THE APPLICABLE
RETAINED INTEREST, OVER
--(II) THE VALUE OF SUCH INTERESTS (DETERMINED AS OF  THE  DATE  OF  THE
TRANSFER TO WHICH SUBSECTION (A)(1) APPLIED).
  (II) APPLICABLE PERCENTAGE. FOR PURPOSES OF CLAUSE (I), THE APPLICABLE
PERCENTAGE IS THE PERCENTAGE DETERMINED BY DIVIDING-

S. 6359--C                         268

--(I)  THE  NUMBER  OF SHARES IN THE CORPORATION HELD (AS OF THE DATE OF
THE TAXABLE EVENT) BY  THE  TRANSFEROR  WHICH  ARE  APPLICABLE  RETAINED
INTERESTS OF THE SAME CLASS, BY
--(II)  THE TOTAL NUMBER OF SHARES IN SUCH CORPORATION (AS OF SUCH DATE)
WHICH ARE OF THE SAME CLASS AS THE CLASS DESCRIBED IN SUBCLAUSE (I).
--A SIMILAR PERCENTAGE SHALL BE DETERMINED IN THE CASE OF INTERESTS IN A
PARTNERSHIP.
  (III) DEFINITION. FOR PURPOSES OF THIS SUBPARAGRAPH, THE TERM  "EQUITY
INTEREST" HAS THE MEANING GIVEN SUCH TERM BY SUBSECTION (A)(4)(B).
  (C) GRACE PERIOD. FOR PURPOSES OF SUBPARAGRAPH (A), ANY PAYMENT OF ANY
DISTRIBUTION DURING THE 4-YEAR PERIOD BEGINNING ON ITS DUE DATE SHALL BE
TREATED AS HAVING BEEN MADE ON SUCH DUE DATE.
  (3) TAXABLE EVENTS. FOR PURPOSES OF THIS SUBSECTION-
  (A) IN GENERAL. THE TERM "TAXABLE EVENT" MEANS ANY OF THE FOLLOWING:
--(I)  THE  DEATH  OF THE TRANSFEROR IF THE APPLICABLE RETAINED INTEREST
CONFERRING THE DISTRIBUTION RIGHT IS INCLUDIBLE IN  THE  ESTATE  OF  THE
TRANSFEROR.
--(II) THE TRANSFER OF SUCH APPLICABLE RETAINED INTEREST.
--(III)  AT  THE  ELECTION OF THE TAXPAYER, THE PAYMENT OF ANY QUALIFIED
PAYMENT AFTER THE PERIOD DESCRIBED IN PARAGRAPH (2)(C),  BUT  ONLY  WITH
RESPECT TO SUCH PAYMENT.
  (B) EXCEPTION WHERE SPOUSE IS TRANSFEREE. (I) DEATHTIME TRANSFERS
--SUBPARAGRAPH  (A)(I) SHALL NOT APPLY TO ANY INTEREST INCLUDIBLE IN THE
GROSS ESTATE OF THE TRANSFEROR IF  A  DEDUCTION  WITH  RESPECT  TO  SUCH
INTEREST IS ALLOWABLE UNDER SECTION 2056 OR 2106(A)(3).
  (II)  LIFETIME  TRANSFERS.  A TRANSFER TO THE SPOUSE OF THE TRANSFEROR
SHALL NOT BE TREATED AS A TAXABLE EVENT UNDER  SUBPARAGRAPH  (A)(II)  IF
SUCH TRANSFER DOES NOT RESULT IN A TAXABLE GIFT BY REASON OF-
--(I)  ANY  DEDUCTION ALLOWED UNDER SECTION 2523, OR THE EXCLUSION UNDER
SECTION 2503(B), OR
--(II) CONSIDERATION FOR THE TRANSFER PROVIDED BY THE SPOUSE.
  (III) SPOUSE SUCCEEDS TO TREATMENT OF TRANSFEROR. IF AN EVENT  IS  NOT
TREATED AS A TAXABLE EVENT BY REASON OF THIS SUBPARAGRAPH, THE TRANSFER-
EE  SPOUSE  OR SURVIVING SPOUSE (AS THE CASE MAY BE) SHALL BE TREATED IN
THE SAME MANNER AS THE  TRANSFEROR  IN  APPLYING  THIS  SUBSECTION  WITH
RESPECT TO THE INTEREST INVOLVED.
  (4)  SPECIAL  RULES  FOR  APPLICABLE FAMILY MEMBERS. (A) FAMILY MEMBER
TREATED IN SAME MANNER AS TRANSFEROR. FOR PURPOSES OF  THIS  SUBSECTION,
AN  APPLICABLE  FAMILY MEMBER SHALL BE TREATED IN THE SAME MANNER AS THE
TRANSFEROR WITH RESPECT TO ANY DISTRIBUTION RIGHT RETAINED BY SUCH FAMI-
LY MEMBER TO WHICH SUBSECTION (A)(3)(B) OR (C) APPLIED.
  (B) TRANSFER TO APPLICABLE FAMILY MEMBER. IN THE  CASE  OF  A  TAXABLE
EVENT  DESCRIBED  IN  PARAGRAPH  (3)(A)(II) INVOLVING THE TRANSFER OF AN
APPLICABLE RETAINED INTEREST TO AN APPLICABLE FAMILY MEMBER (OTHER  THAN
THE  SPOUSE  OF  THE  TRANSFEROR), THE APPLICABLE FAMILY MEMBER SHALL BE
TREATED IN THE SAME MANNER AS THE TRANSFEROR IN APPLYING THIS SUBSECTION
TO DISTRIBUTIONS ACCUMULATING WITH RESPECT TO SUCH INTEREST  AFTER  SUCH
TAXABLE EVENT.
  (C)  TRANSFER TO TRANSFERORS. IN THE CASE OF A TAXABLE EVENT DESCRIBED
IN PARAGRAPH (3)(A)(II) INVOLVING A TRANSFER OF AN  APPLICABLE  RETAINED
INTEREST  FROM  AN  APPLICABLE  FAMILY  MEMBER  TO  A  TRANSFEROR,  THIS
SUBSECTION SHALL CONTINUE TO APPLY TO THE TRANSFEROR DURING  ANY  PERIOD
THE TRANSFEROR HOLDS SUCH INTEREST.
  (5)  TRANSFER TO INCLUDE TERMINATION. FOR PURPOSES OF THIS SUBSECTION,
ANY TERMINATION OF AN INTEREST SHALL BE TREATED AS A TRANSFER.
  (E) OTHER DEFINITIONS AND RULES. FOR PURPOSES OF THIS SECTION-

S. 6359--C                         269

  (1) MEMBER OF THE FAMILY. THE TERM "MEMBER OF THE FAMILY" MEANS,  WITH
RESPECT TO ANY TRANSFEROR-
--(A) THE TRANSFEROR'S SPOUSE,
--(B)  A LINEAL DESCENDANT OF THE TRANSFEROR OR THE TRANSFEROR'S SPOUSE,
AND
--(C) THE SPOUSE OF ANY SUCH DESCENDANT.
  (2) APPLICABLE FAMILY MEMBER.  THE  TERM  "APPLICABLE  FAMILY  MEMBER"
MEANS, WITH RESPECT TO ANY TRANSFEROR-
--(A) THE TRANSFEROR'S SPOUSE,
--(B) AN ANCESTOR OF THE TRANSFEROR OR THE TRANSFEROR'S SPOUSE, AND
--(C) THE SPOUSE OF ANY SUCH ANCESTOR.
  (3)  ATTRIBUTION  OF  INDIRECT  HOLDINGS  AND TRANSFERS. AN INDIVIDUAL
SHALL BE TREATED AS HOLDING ANY INTEREST TO THE EXTENT SUCH INTEREST  IS
HELD  INDIRECTLY  BY SUCH INDIVIDUAL THROUGH A CORPORATION, PARTNERSHIP,
TRUST, OR OTHER ENTITY. IF ANY INDIVIDUAL  IS  TREATED  AS  HOLDING  ANY
INTEREST BY REASON OF THE PRECEDING SENTENCE, ANY TRANSFER WHICH RESULTS
IN  SUCH  INTEREST  BEING  TREATED  AS NO LONGER HELD BY SUCH INDIVIDUAL
SHALL BE TREATED AS A TRANSFER OF SUCH INTEREST.
  (4) EFFECT OF ADOPTION. A RELATIONSHIP  BY  LEGAL  ADOPTION  SHALL  BE
TREATED AS A RELATIONSHIP BY BLOOD.
  (5)  CERTAIN CHANGES TREATED AS TRANSFERS. EXCEPT AS PROVIDED IN REGU-
LATIONS, A CONTRIBUTION TO CAPITAL OR A REDEMPTION, RECAPITALIZATION, OR
OTHER CHANGE IN THE CAPITAL STRUCTURE OF A  CORPORATION  OR  PARTNERSHIP
SHALL  BE  TREATED  AS A TRANSFER OF AN INTEREST IN SUCH ENTITY TO WHICH
THIS SECTION APPLIES IF THE TAXPAYER OR AN APPLICABLE FAMILY MEMBER-
--(A) RECEIVES AN APPLICABLE RETAINED INTEREST IN SUCH  ENTITY  PURSUANT
TO SUCH TRANSACTION, OR
--(B)  UNDER REGULATIONS, OTHERWISE HOLDS, IMMEDIATELY AFTER SUCH TRANS-
ACTION, AN APPLICABLE RETAINED INTEREST IN SUCH ENTITY.
--THIS PARAGRAPH SHALL NOT  APPLY  TO  ANY  TRANSACTION  (OTHER  THAN  A
CONTRIBUTION  TO  CAPITAL)  IF  THE  INTERESTS IN THE ENTITY HELD BY THE
TRANSFEROR, APPLICABLE FAMILY MEMBERS, AND MEMBERS OF  THE  TRANSFEROR'S
FAMILY BEFORE AND AFTER THE TRANSACTION ARE SUBSTANTIALLY IDENTICAL.
  (6)  ADJUSTMENTS.  UNDER  REGULATIONS  PRESCRIBED BY THE SECRETARY, IF
THERE IS ANY SUBSEQUENT TRANSFER, OR INCLUSION IN THE GROSS  ESTATE,  OF
ANY  APPLICABLE  RETAINED  INTEREST  WHICH WAS VALUED UNDER THE RULES OF
SUBSECTION (A), APPROPRIATE ADJUSTMENTS SHALL BE MADE  FOR  PURPOSES  OF
CHAPTER 11, 12, OR 13 TO REFLECT THE INCREASE IN THE AMOUNT OF ANY PRIOR
TAXABLE  GIFT MADE BY THE TRANSFEROR OR DECEDENT BY REASON OF SUCH VALU-
ATION OR TO REFLECT THE APPLICATION OF SUBSECTION (D).
  (7) TREATMENT AS SEPARATE INTERESTS. THE SECRETARY MAY  BY  REGULATION
PROVIDE  THAT  ANY APPLICABLE RETAINED INTEREST SHALL BE TREATED AS 2 OR
MORE SEPARATE INTERESTS FOR PURPOSES OF THIS SECTION.
  S 2702. SPECIAL VALUATION RULES IN CASE OF TRANSFERS OF  INTERESTS  IN
TRUSTS.    (A)  VALUATION  RULES. (1) IN GENERAL. SOLELY FOR PURPOSES OF
DETERMINING WHETHER A TRANSFER OF AN INTEREST IN TRUST TO  (OR  FOR  THE
BENEFIT OF) A MEMBER OF THE TRANSFEROR'S FAMILY IS A GIFT (AND THE VALUE
OF  SUCH  TRANSFER), THE VALUE OF ANY INTEREST IN SUCH TRUST RETAINED BY
THE TRANSFEROR OR ANY APPLICABLE FAMILY MEMBER (AS  DEFINED  IN  SECTION
2701(E)(2)) SHALL BE DETERMINED AS PROVIDED IN PARAGRAPH (2).
  (2)  VALUATION OF RETAINED INTERESTS. (A) IN GENERAL. THE VALUE OF ANY
RETAINED INTEREST WHICH IS NOT A QUALIFIED INTEREST SHALL BE TREATED  AS
BEING ZERO.
  (B)  VALUATION OF QUALIFIED INTEREST. THE VALUE OF ANY RETAINED INTER-
EST WHICH IS A QUALIFIED INTEREST  SHALL  BE  DETERMINED  UNDER  SECTION
7520.

S. 6359--C                         270

  (3) EXCEPTIONS. (A) IN GENERAL. THIS SUBSECTION SHALL NOT APPLY TO ANY
TRANSFER-
--(I) IF SUCH TRANSFER IS AN INCOMPLETE GIFT,
--(II)  IF  SUCH  TRANSFER INVOLVES THE TRANSFER OF AN INTEREST IN TRUST
ALL THE PROPERTY IN WHICH CONSISTS OF  A  RESIDENCE  TO  BE  USED  AS  A
PERSONAL RESIDENCE BY PERSONS HOLDING TERM INTERESTS IN SUCH TRUST, OR
--(III) TO THE EXTENT THAT REGULATIONS PROVIDE THAT SUCH TRANSFER IS NOT
INCONSISTENT WITH THE PURPOSES OF THIS SECTION.
  (B)  INCOMPLETE  GIFT.  FOR  PURPOSES  OF  SUBPARAGRAPH  (A), THE TERM
"INCOMPLETE GIFT" MEANS ANY TRANSFER WHICH WOULD NOT  BE  TREATED  AS  A
GIFT WHETHER OR NOT CONSIDERATION WAS RECEIVED FOR SUCH TRANSFER.
  (B) QUALIFIED INTEREST. FOR PURPOSES OF THIS SECTION, THE TERM "QUALI-
FIED INTEREST" MEANS-
  (1)  ANY INTEREST WHICH CONSISTS OF THE RIGHT TO RECEIVE FIXED AMOUNTS
PAYABLE NOT LESS FREQUENTLY THAN ANNUALLY,
  (2) ANY INTEREST WHICH CONSISTS OF THE RIGHT TO RECEIVE AMOUNTS  WHICH
ARE PAYABLE NOT LESS FREQUENTLY THAN ANNUALLY AND ARE A FIXED PERCENTAGE
OF  THE FAIR MARKET VALUE OF THE PROPERTY IN THE TRUST (DETERMINED ANNU-
ALLY), AND
  (3) ANY NONCONTINGENT REMAINDER INTEREST IF ALL OF THE OTHER INTERESTS
IN THE TRUST CONSIST OF INTERESTS DESCRIBED IN PARAGRAPH (1) OR (2).
  (C) CERTAIN PROPERTY TREATED AS HELD IN TRUST. FOR  PURPOSES  OF  THIS
SECTION-  (1)  IN  GENERAL. THE TRANSFER OF AN INTEREST IN PROPERTY WITH
RESPECT TO WHICH THERE IS 1 OR MORE TERM INTERESTS SHALL BE TREATED AS A
TRANSFER OF AN INTEREST IN A TRUST.
  (2) JOINT PURCHASES. IF 2 OR MORE MEMBERS OF THE SAME  FAMILY  ACQUIRE
INTERESTS  IN ANY PROPERTY DESCRIBED IN PARAGRAPH (1) IN THE SAME TRANS-
ACTION (OR A SERIES OF RELATED TRANSACTIONS), THE  PERSON  (OR  PERSONS)
ACQUIRING THE TERM INTERESTS IN SUCH PROPERTY SHALL BE TREATED AS HAVING
ACQUIRED  THE  ENTIRE PROPERTY AND THEN TRANSFERRED TO THE OTHER PERSONS
THE INTERESTS ACQUIRED BY SUCH OTHER  PERSONS  IN  THE  TRANSACTION  (OR
SERIES  OF  TRANSACTIONS).  SUCH  TRANSFER  SHALL  BE TREATED AS MADE IN
EXCHANGE FOR THE CONSIDERATION (IF ANY) PROVIDED BY SUCH  OTHER  PERSONS
FOR THE ACQUISITION OF THEIR INTERESTS IN SUCH PROPERTY.
  (3) TERM INTEREST. THE TERM "TERM INTEREST" MEANS-
  (A) A LIFE INTEREST IN PROPERTY, OR
  (B) AN INTEREST IN PROPERTY FOR A TERM OF YEARS.
  (4)  VALUATION  RULE FOR CERTAIN TERM INTERESTS. IF THE NONEXERCISE OF
RIGHTS UNDER A TERM INTEREST IN  TANGIBLE  PROPERTY  WOULD  NOT  HAVE  A
SUBSTANTIAL  EFFECT  ON  THE VALUATION OF THE REMAINDER INTEREST IN SUCH
PROPERTY-
  (A) SUBPARAGRAPH (A) OF SUBSECTION (A)(2) SHALL NOT APPLY TO SUCH TERM
INTEREST, AND
  (B)  THE  VALUE  OF  SUCH  TERM  INTEREST  FOR  PURPOSES  OF  APPLYING
SUBSECTION  (A)(1)  SHALL  BE  THE  AMOUNT  WHICH THE HOLDER OF THE TERM
INTEREST ESTABLISHES AS THE AMOUNT FOR WHICH SUCH INTEREST COULD BE SOLD
TO AN UNRELATED THIRD PARTY.
  (D) TREATMENT OF TRANSFERS OF INTERESTS IN PORTION OF TRUST.   IN  THE
CASE  OF A TRANSFER OF AN INCOME OR REMAINDER INTEREST WITH RESPECT TO A
SPECIFIED PORTION OF THE PROPERTY IN A TRUST, ONLY SUCH PORTION SHALL BE
TAKEN INTO ACCOUNT IN APPLYING THIS SECTION TO SUCH TRANSFER.
  (E) MEMBER OF THE FAMILY. FOR  PURPOSES  OF  THIS  SECTION,  THE  TERM
"MEMBER OF THE FAMILY" SHALL HAVE THE MEANING GIVEN SUCH TERM BY SECTION
2704(C)(2).
  S 2703. CERTAIN RIGHTS AND RESTRICTIONS DISREGARDED

S. 6359--C                         271

  (A)  GENERAL  RULE.  FOR  PURPOSES  OF THIS SUBTITLE, THE VALUE OF ANY
PROPERTY SHALL BE DETERMINED WITHOUT REGARD TO-
  (1)  ANY OPTION, AGREEMENT, OR OTHER RIGHT TO ACQUIRE OR USE THE PROP-
ERTY AT A PRICE LESS THAN THE FAIR MARKET VALUE OF THE PROPERTY (WITHOUT
REGARD TO SUCH OPTION, AGREEMENT, OR RIGHT), OR
  (2) ANY RESTRICTION ON THE RIGHT TO SELL OR USE SUCH PROPERTY.
  (B) EXCEPTIONS. SUBSECTION (A) SHALL NOT APPLY TO ANY  OPTION,  AGREE-
MENT,  RIGHT,  OR RESTRICTION WHICH MEETS EACH OF THE FOLLOWING REQUIRE-
MENTS:
  (1) IT IS A BONA FIDE BUSINESS ARRANGEMENT.
  (2) IT IS NOT A DEVICE TO TRANSFER SUCH PROPERTY  TO  MEMBERS  OF  THE
DECEDENT'S FAMILY FOR LESS THAN FULL AND ADEQUATE CONSIDERATION IN MONEY
OR MONEY'S WORTH.
  (3)  ITS  TERMS ARE COMPARABLE TO SIMILAR ARRANGEMENTS ENTERED INTO BY
PERSONS IN AN ARMS' LENGTH TRANSACTION
  S 2704. TREATMENT OF CERTAIN LAPSING RIGHTS  AND  RESTRICTIONS.    (A)
TREATMENT  OF  LAPSED  VOTING OR LIQUIDATION RIGHTS. (1) IN GENERAL. FOR
PURPOSES OF THIS SUBTITLE, IF-
--(A) THERE IS A LAPSE OF ANY VOTING OR LIQUIDATION RIGHT  IN  A  CORPO-
RATION OR PARTNERSHIP, AND
--(B) THE INDIVIDUAL HOLDING SUCH RIGHT IMMEDIATELY BEFORE THE LAPSE AND
MEMBERS  OF  SUCH  INDIVIDUAL'S  FAMILY  HOLD, BOTH BEFORE AND AFTER THE
LAPSE, CONTROL OF THE ENTITY,
  SUCH LAPSE SHALL BE TREATED AS A TRANSFER BY SUCH INDIVIDUAL BY  GIFT,
OR  A  TRANSFER WHICH IS INCLUDIBLE IN THE GROSS ESTATE OF THE DECEDENT,
WHICHEVER IS APPLICABLE, IN THE AMOUNT DETERMINED UNDER PARAGRAPH (2).
  (2) AMOUNT OF TRANSFER. FOR PURPOSES  OF  PARAGRAPH  (1),  THE  AMOUNT
DETERMINED UNDER THIS PARAGRAPH IS THE EXCESS (IF ANY) OF-
--(A)  THE  VALUE  OF ALL INTERESTS IN THE ENTITY HELD BY THE INDIVIDUAL
DESCRIBED IN PARAGRAPH (1) IMMEDIATELY BEFORE THE LAPSE  (DETERMINED  AS
IF THE VOTING AND LIQUIDATION RIGHTS WERE NONLAPSING), OVER
--(B) THE VALUE OF SUCH INTERESTS IMMEDIATELY AFTER THE LAPSE.
  (3)  SIMILAR  RIGHTS.  THE  SECRETARY  MAY  BY  REGULATIONS APPLY THIS
SUBSECTION TO RIGHTS SIMILAR TO VOTING AND LIQUIDATION RIGHTS.
  (B) CERTAIN RESTRICTIONS ON LIQUIDATION DISREGARDED. (1)  IN  GENERAL.
FOR PURPOSES OF THIS SUBTITLE, IF-
--(A) THERE IS A TRANSFER OF AN INTEREST IN A CORPORATION OR PARTNERSHIP
TO (OR FOR THE BENEFIT OF) A MEMBER OF THE TRANSFEROR'S FAMILY, AND
--(B)  THE TRANSFEROR AND MEMBERS OF THE TRANSFEROR'S FAMILY HOLD, IMME-
DIATELY BEFORE THE TRANSFER, CONTROL OF THE ENTITY,
  --ANY APPLICABLE RESTRICTION SHALL BE DISREGARDED IN  DETERMINING  THE
VALUE OF THE TRANSFERRED INTEREST.
  (2)  APPLICABLE RESTRICTION. FOR PURPOSES OF THIS SUBSECTION, THE TERM
"APPLICABLE RESTRICTION" MEANS ANY RESTRICTION-
  (A) WHICH EFFECTIVELY LIMITS THE ABILITY OF THE CORPORATION  OR  PART-
NERSHIP TO LIQUIDATE, AND
  (B) WITH RESPECT TO WHICH EITHER OF THE FOLLOWING APPLIES:
--(I)  THE  RESTRICTION  LAPSES, IN WHOLE OR IN PART, AFTER THE TRANSFER
REFERRED TO IN PARAGRAPH (1).
--(II) THE TRANSFEROR OR ANY MEMBER OF THE TRANSFEROR'S  FAMILY,  EITHER
ALONE  OR  COLLECTIVELY, HAS THE RIGHT AFTER SUCH TRANSFER TO REMOVE, IN
WHOLE OR IN PART, THE RESTRICTION.
  (3) EXCEPTIONS. THE TERM "APPLICABLE RESTRICTION" SHALL NOT INCLUDE-
--(A) ANY COMMERCIALLY REASONABLE RESTRICTION WHICH ARISES  AS  PART  OF
ANY FINANCING BY THE CORPORATION OR PARTNERSHIP WITH A PERSON WHO IS NOT

S. 6359--C                         272

RELATED  TO  THE  TRANSFEROR OR TRANSFEREE, OR A MEMBER OF THE FAMILY OF
EITHER, OR
--(B) ANY RESTRICTION IMPOSED, OR REQUIRED TO BE IMPOSED, BY ANY FEDERAL
OR STATE LAW.