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SECTION 1503
Computation of entire net income
Tax (TAX) CHAPTER 60, ARTICLE 33
§ 1503. Computation of entire net income. (a) The entire net income
of a taxpayer shall be its total net income from all sources which shall
be presumably the same as the life insurance company taxable income
(which shall include, in the case of a stock life insurance company that
has a balance, as determined as of the close of such company's last
taxable year beginning before January first, two thousand eighteen, in
an existing policyholders surplus account, as such term is defined in
section 815 of the internal revenue code as such section was in effect
for taxable years beginning before January first, two thousand eighteen,
the amount of one-eighth of such balance), taxable income of a
partnership or taxable income, but not alternative minimum taxable
income, as the case may be, which the taxpayer is required to report to
the United States treasury department, for the taxable year or, in the
case of a corporation exempt from federal income tax (other than the tax
on unrelated business taxable income imposed under section 511 of the
internal revenue code) but not exempt from tax under section fifteen
hundred one, the taxable income which such taxpayer would have been
required to report but for such exemption, except as hereinafter
provided.

(b) Modifications. In computing entire net income, the following
modifications shall be made:

(1) Entire net income shall not include:

(A) income, gains and losses from subsidiary capital which do not
include the amount of a recovery in respect of any war loss, except that
this modification shall not apply to the amount described in
subparagraph (S) of this paragraph;

(B) fifty percent of dividends other than from subsidiaries, except
that this modification shall not apply to the amount described in
subparagraph (S) of this paragraph, and except that, in the case of a
life insurance company, such modification shall apply only with respect
to the company's share of such dividends, which share means the
percentage determined under paragraph one of subsection (a) of section
eight hundred twelve of the internal revenue code;

(C) any refund or credit of a tax imposed under this article or
section one hundred eighty-seven, or article twenty-three of this
chapter heretofore in effect to the extent properly included as income
for federal income tax purposes, for which no exclusion or deduction was
allowed in determining the taxpayer's entire net income under this
article for any prior year;

(D) that portion of wages or salaries paid or incurred for the taxable
year for which a deduction is not allowed pursuant to the provisions of
section two hundred eighty-C of the internal revenue code;

(E) in the case of a taxpayer who is separately or as a partner of a
partnership doing an insurance business as a member of the New York
insurance exchange described in section six thousand two hundred one of
the insurance law, any item of income, gain, loss or deduction of such
business which is the taxpayer's distributive or pro rata share for
federal income tax purposes or which the taxpayer is required to take
into account separately for federal income tax purposes;

(F) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which is included in the taxpayer's taxable income for federal income
tax purposes solely as a result of an election made pursuant to the
provisions of such paragraph eight as it was in effect for agreements
entered into prior to January first, nineteen hundred eighty-four;

(G) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which the taxpayer could have excluded from its taxable income for
federal income tax purposes had it not made the election provided for in
such paragraph eight as it was in effect for agreements entered into
prior to January first, nineteen hundred eighty-four;

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

(I) upon the disposition of property to which paragraph ten of this
subdivision applies, the amount, if any, by which the aggregate of the
amounts described in subparagraph (M) of paragraph two of this
subdivision attributable to such property exceeds the aggregate of the
amounts described in paragraph ten of this subdivision attributable to
such property;

(J) the amount of unearned premiums on outstanding business at the end
of the taxable year included in premiums earned pursuant to the
provisions of section 832(b)(4)(B) of the internal revenue code;

(K) the amount of unearned premiums on outstanding business at the end
of the taxable year included in premiums earned pursuant to the
provisions of section 832(b)(7)(B)(i) of the internal revenue code;

(L) the amount included in premiums earned pursuant to the provisions
of section 832(b)(8)(A)(i) of the internal revenue code which is the
difference between the amount of discounted unearned premiums on
outstanding business at the end of the taxable year and the amount of
unearned premiums on outstanding business at the end of the taxable
year;

(M) for taxable years beginning after December thirty-first, nineteen
hundred eighty-six and before January first, nineteen hundred
ninety-two, the amount of unearned premiums on outstanding business
included in premiums earned pursuant to the provisions of sections
832(b)(4)(C) and 832(b)(7)(B)(ii) of the internal revenue code;

(N) the amount which is the difference between the amount of
discounted unpaid losses at the end of the taxable year used in the
computation of losses incurred pursuant to section 832(b)(5)(A) of the
internal revenue code, and the amount of unpaid losses that would be
used in such computation for the taxable year if such losses were not
discounted pursuant to the provisions of section 846(a) of the internal
revenue code;

(O) the amount by which losses incurred as defined in section
832(b)(5)(A) of the internal revenue code are reduced in accordance with
section 832(b)(5)(B) of such code; and

(P) the amount included in federal gross income pursuant to sections
847(5) and 847(6) of the internal revenue code.

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

(R) for taxable years beginning after December thirty-first, two
thousand two, the amount deductible pursuant to paragraph fourteen of
this subdivision.

(S) The income required to be included in the taxpayer's federal gross
income pursuant to subsection (a) of section 951 of the internal revenue
code by reason of subsection (a) of section 965 of such code as adjusted
by subsection (b) of such section but without regard to subsection (c)
of such section to the extent such income is received from a corporation
that is not included in a combined return with the taxpayer.

(T) Any amount excepted, for purposes of subsection (a) of section one
hundred eighteen of the internal revenue code, from the term
"contribution to the capital of the taxpayer" by paragraph two of
subsection (b) of section one hundred eighteen of the internal revenue
code.

(U) To the extent not excluded from income pursuant to subparagraph
(A) of this paragraph, ninety-five percent of the income required to be
included in the taxpayer's federal gross income pursuant to subsection
(a) of section 951A of the internal revenue code, without regard to the
deduction under section 250 of the internal revenue code, that is
generated by a corporation that is not included in a combined report
with the taxpayer.

(V) To the extent not excluded from income pursuant to subparagraph
(A) or (B) of this paragraph, any amount treated as a dividend received
by the taxpayer under section 78 of the internal revenue code that is
attributable to the income required to be included in the taxpayer's
federal gross income pursuant to subsection (a) of section 951A of such
code.

(W) The amount of any gain added back to determine entire net income
in a previous taxable year pursuant to subparagraph (Z) of paragraph two
of this subdivision that is included in federal gross income for the
taxable year.

(2) Entire net income shall be determined without the exclusion,
deduction or credit of:

(A) the amount of any specific exemption or credit allowed in any law
of the United States imposing any tax on or measured by the income of
corporations;

(B) any part of any income from dividends or interest on any kind of
stock, securities or indebtedness, except as provided in subparagraphs
(A), (B) and (S) of paragraph one hereof;

(C) taxes paid or accrued to the United States on or measured by
income or premiums;

(D) taxes imposed under this article;

(E) In those instances where a credit for the special additional
mortgage recording tax is allowed under paragraph one of subdivision (e)
of section fifteen hundred eleven of this article, the amount allowed as
an exclusion or deduction for the special additional mortgage recording
tax imposed by subdivision one-a of section two hundred fifty-three of
this chapter in determining the entire net income which the taxpayer is
required to report to the United States treasury department for such
taxable year;

(F) unless the credit allowed pursuant to subdivision (e) of section
fifteen hundred eleven of this article is reflected in the computation
of the gain or loss so as to result in an increase in such gain or
decrease in such loss, for federal income tax purposes, from the sale or
other disposition of the property with respect to which the special
additional mortgage recording tax imposed pursuant to subdivision one-a
of section two hundred fifty-three of this chapter was paid, the amount
of the special additional mortgage recording tax imposed by subdivision
one-a of section two hundred fifty-three of this chapter which was paid
and which is reflected in the computation of the basis of the property
so as to result in a decrease in such gain or increase in such loss for
federal income tax purposes from the sale or other disposition of the
property with respect to which such tax was paid;

(G) ninety percent of interest on indebtedness directly or indirectly
owed to any stockholder or shareholder (including subsidiaries of a
corporate stockholder or shareholder), or members of the immediate
family of an individual stockholder or shareholder, owning in the
aggregate in excess of five per centum of the issued capital stock of
the taxpayer, except that such interest may, in any event, be deducted

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

(ii) in full to the extent that it relates to bonds or other evidences
of indebtedness issued, with stock, pursuant to a bona fide plan of
reorganization, to persons, who, prior to such reorganization, were bona
fide creditors of the corporation or its predecessors, but were not
stockholders or shareholders thereof,

(iii) in full to the extent that it is paid to a federally licensed
small business investment company;

(H) in the discretion of the commissioner, any amount of interest
directly or indirectly and any other amount directly attributable as a
carrying charge or otherwise to subsidiary capital or to income, gains
or losses from subsidiary capital, or to the income described in
subparagraphs (S), (U) and (V) of paragraph one of this subdivision;

(I) in the case of a life insurance company, the provisions of
subparagraph (B) of this paragraph shall not apply to the policyholders'
share of the items described in such subparagraph. For purposes of this
subparagraph, the policyholders' share means the percentage determined
under paragraph two of subsection (a) of section eight hundred twelve of
the internal revenue code.

(J) in the case of a taxpayer who is separately or as a partner of a
partnership doing an insurance business as a member of the New York
insurance exchange described in section six thousand two hundred one of
the insurance law, such taxpayer's distributive or pro rata share of the
allocated entire net income of such business as determined under this
section and section fifteen hundred four of this article, provided
however, in the event such allocated entire net income is a loss, such
taxpayer's distributive or pro rata share of such loss shall not be
subtracted from federal taxable income in computing entire net income
under this section.

(K) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which the taxpayer claimed as a deduction for federal income tax
purposes solely as a result of an election made pursuant to the
provisions of such paragraph eight as it was in effect for agreements
entered into prior to January first, nineteen hundred eighty-four;

(L) for taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which the taxpayer would have been required to include in the
computation of its taxable income for federal income tax purposes had it
not made the election permitted pursuant to such paragraph eight as it
was in effect for agreements entered into prior to January first,
nineteen hundred eighty-four;

(M) in the case of property placed in service in taxable years
beginning before nineteen hundred ninety-four, for taxable years
beginning after December thirty-first, nineteen hundred eighty-one,
except with respect to property subject to the provisions of section two
hundred eighty-F of the internal revenue code and property subject to
the provisions of section one hundred sixty-eight of the internal
revenue code which is placed in service in this state in taxable years
beginning after December thirty-first, nineteen hundred eighty-four, the
amount allowable as a deduction determined under section one hundred
sixty-eight of the internal revenue code;

(N) upon the disposition of property to which paragraph ten of this
subdivision applies, the amount, if any, by which the aggregate of the
amounts described in such paragraph ten attributable to such property
exceeds the aggregate of the amounts described in subparagraph (M) of
this paragraph attributable to such property;

(N-1) premiums paid for environmental remediation insurance, as
defined in section twenty-three of this chapter, and deducted in
determining federal taxable income, to the extent of the amount of the
environmental remediation insurance credit allowed under such section
twenty-three and subdivision (w) of section fifteen hundred eleven of
this article;

(O) the amount of unearned premiums on outstanding business at the end
of the preceding taxable year excluded from premiums earned pursuant to
the provisions of section 832(b)(4)(B) of the internal revenue code;

(P) the amount of unearned premiums on outstanding business at the end
of the preceding year excluded from premiums earned pursuant to the
provisions of section 832(b)(7)(B)(i) of the internal revenue code;

(Q) the amount excluded from premiums earned pursuant to the
provisions of section 832(b)(8)(A)(i) of the internal revenue code which
is the difference between the amount of discounted unearned premiums on
outstanding business at the end of the preceding taxable year and the
amount of unearned premiums on outstanding business at the end of the
preceding taxable year;

(R) the amount which is the difference between the amount of
discounted unpaid losses at the end of the preceding federal taxable
year used in the computation of losses incurred for the taxable year
pursuant to section 832(b)(5)(A) of the internal revenue code, and the
amount of unpaid losses at the end of the preceding federal taxable year
that would have been used in such computation for the taxable year if
such losses were not discounted pursuant to the provisions of section
846(a) of the internal revenue code; and

(S) the amount of the deduction claimed by the taxpayer pursuant to
the provisions of section 847(1) of the internal revenue code.

(T) for taxable years beginning after December thirty-first, two
thousand two, in the case of qualified property described in paragraph
two of subsection k of section 168 of the internal revenue code, other
than qualified resurgence zone property described in paragraph sixteen
of this subdivision, and other than qualified New York Liberty Zone
property described in paragraph two of subsection b of section 1400L of
the internal revenue code (without regard to clause (i) of subparagraph
(C) of such paragraph), which was placed in service on or after June
first, two thousand three, the amount allowable as a deduction under
section 167 of the internal revenue code.

(U) The amount of any deduction allowed pursuant to section one
hundred ninety-nine of the internal revenue code.

(V) The amount of any federal deduction for taxes imposed under
article twenty-three of this chapter.

(W) The amount of any federal deduction allowed pursuant to subsection
(c) of section 965 of the internal revenue code.

(X) The amount of any federal deduction allowed pursuant to section
250(a)(1)(A) of the internal revenue code.

(Y) The amount of the federal deduction allowed pursuant to section
250(a)(1)(B) of the internal revenue code.

(Z) The amount of any gain excluded from federal gross income for the
taxable year by subparagraph (A) of paragraph (1) of subsection (a) of
section 1400Z-2 of the internal revenue code.

(3) In determining entire net income, there shall be subtracted, to
the extent not deductible in determining federal taxable income:

(A) interest on indebtedness incurred or continued to purchase or
carry obligations or securities the income from which is subject to tax
under this article but exempt from federal income tax;

(B) ordinary and necessary expenses paid or incurred during the
taxable year attributable to income which is subject to tax under this
article but exempt from federal income tax; and

(C) the amortizable bond premium for the taxable year on any bond the
interest on which is subject to tax under this article but exempt from
federal income tax.

(4) Any "net operating loss deduction" or "operations loss deduction"
allowable under sections one hundred seventy-two or eight hundred ten of
the internal revenue code, respectively, which is allowable to the
taxpayer for federal income tax purposes:

(A) shall be adjusted to reflect the modifications required by the
other paragraphs of this subdivision;

(B) shall not, however, exceed any such deduction allowable to the
taxpayer for the taxable year for federal income tax purposes; and

(C) shall not include any such loss incurred in a taxable year
beginning prior to January first, nineteen hundred seventy-four or
during any taxable year in which the taxpayer was not subject to the tax
imposed under section fifteen hundred one.

(5) In case of property of a taxpayer acquired prior to January first,
nineteen hundred seventy-four, and disposed of thereafter, the
computation of entire net income shall be modified as follows:

(A) no gain shall be deemed to have been derived if either the cost or
the fair market price or value on January first, nineteen hundred
seventy-four, exceeds the value realized;

(B) no loss shall be deemed to have been sustained if either the cost
or the fair market price or value on January first, nineteen hundred
seventy-four, is less than the value realized;

(C) where both the cost and the fair market price or value on January
first, nineteen hundred seventy-four, are less than the value realized,
the basis for computing gain shall be the cost or the fair market price
or value on such date, whichever is higher;

(D) where both the cost and the fair market price or value on January
first, nineteen hundred seventy-four, are in excess of the value
realized, the basis for computing loss shall be the cost or the fair
market price or value on such date, whichever is lower.

(6) There shall be excluded from the computation of entire net income
any amount allowed as a deduction for federal income tax purposes for
the taxable year under section twelve hundred twelve of the internal
revenue code as a capital loss carryforward to the taxable year which
resulted from a capital loss occurring in any taxable year in which the
taxpayer was not subject to tax under section fifteen hundred one.

(7) There shall be excluded from the computation of entire net income
the amount of any income or gain from the sale of real or personal
property which is includible in determining federal taxable income for
the taxable year pursuant to the installment method under section four
hundred fifty-three of the internal revenue code to the extent such
income or gain is from a sale of such property which occurred in a
taxable year when the taxpayer was not subject to tax under section
fifteen hundred one.

(8) Entire net income shall be computed without regard to subsection
(b) of section eight hundred thirty-one of the internal revenue code.

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

(A) which is a fire or life insurance company organized and operated,
without profit to any private shareholder or individual, exclusively for
the purpose of aiding and strengthening charitable, religious,
missionary, educational or philanthropic institutions, by issuing
insurance and annuity contracts only to or for the benefit of such
institutions, to individuals engaged in the services of such
institutions and to members of the immediate families of such
individuals, or

(B) which is a life insurance company which has been organized for the
purpose of establishing a non-profit voluntary employees beneficiary
association to provide life, sick, accident or other benefits to
eligible employees or their beneficiaries, and is operated exclusively
for said purposes and without profit, direct or indirect, to any private
shareholder or individual, and is duly exempt from income taxation
pursuant to the United States internal revenue code, the life insurance
company taxable income (which shall include, in the case of a stock life
insurance company which has an existing policyholders surplus account,
the amount of direct and indirect distributions during the taxable year
to shareholders from such account) or taxable income, as the case may
be, of such taxpayer for the taxable year shall be computed without
regard to any income, gains, losses, deductions, reserves, surplus or
any other item, derived from, or attributable or allocable to, contracts
described in subsection (a) of section eight hundred eighteen of the
internal revenue code.

(10) In the case of property placed in service in taxable years
beginning before nineteen hundred ninety-four, for taxable years
beginning after December thirty-first, nineteen hundred eighty-one,
except with respect to property subject to the provisions of section two
hundred eighty-F of the internal revenue code and property subject to
the provisions of section one hundred sixty-eight of the internal
revenue code which is placed in service in this state in taxable years
beginning after December thirty-first, nineteen hundred eighty-four, and
provided a deduction has not been excluded from the determination of
entire net income pursuant to subparagraph (K) of paragraph two of this
subdivision, a taxpayer shall be allowed with respect to property which
is subject to the provisions of section one hundred sixty-eight of the
internal revenue code the depreciation deduction allowable under section
one hundred sixty-seven of the internal revenue code as such section
would have applied to property placed in service on December
thirty-first, nineteen hundred eighty.

(11)(A) Notwithstanding the provisions of subparagraph (P) of
paragraph one of this subdivision, for taxable years beginning after
December thirty-first, nineteen hundred ninety-two and ending before
December thirty-first, nineteen hundred ninety-six, entire net income
shall include the amount determined under subparagraph (B) of this
paragraph. This amount shall be included in entire net income only if
the taxpayer claimed the deduction allowed by subdivision one of section
eight hundred forty-seven of the internal revenue code in any taxable
year beginning after December thirty-first, nineteen hundred
eighty-seven and ending before January first, nineteen hundred
ninety-three.

(B) The amount to be included in entire net income under this
paragraph shall be determined as follows. The taxpayer shall calculate
the total amount that will be required to be included in federal gross
income pursuant to the provisions of subdivisions five and six of
section eight hundred forty-seven of the internal revenue code for
federal taxable years beginning after December thirty-first, nineteen
hundred ninety-two as a result of the deduction claimed by the taxpayer
in federal taxable years beginning after December thirty-first, nineteen
hundred eighty-seven and before January first, nineteen hundred
ninety-three pursuant to the provisions of subdivision one of section
eight hundred forty-seven of the internal revenue code. The taxpayer
shall divide such total amount by three. An amount equal to the
resulting quotient shall be included in entire net income in each of the
taxpayer's first three taxable years beginning on or after January one,
nineteen hundred ninety-three.

12. Emerging technology investment deferral. In the case of any sale
of a qualified emerging technologies investment held for more than
thirty-six months and with respect to which the taxpayer elects the
application of this subsection, gain from such sale shall be recognized
only to the extent that the amount realized on such sale exceeds the
cost of any qualified emerging technologies investment purchased by the
taxpayer during the three hundred sixty-five-day period beginning on the
date of such sale, reduced by any portion of such cost previously taken
into account under this paragraph. For purposes of this paragraph the
following shall apply:

(1) A qualified investment is stock of a corporation or an interest,
other than as a creditor, in a partnership or limited liability company
that was acquired by the taxpayer as provided in Internal Revenue Code §
1202(c)(1)(B), except that the reference to the term "stock" in such
section shall be read as "investment," or by the taxpayer from a person
who had acquired such stock or interest in such a manner.

(2) A qualified emerging technology investment is a qualified
investment, that was held by the taxpayer for at least thirty-six
months, in a company defined in paragraph (c) of subdivision one of
section thirty-one hundred two-e of the public authorities law or an
investment in a partnership or limited liability company that is taxed
as a partnership to the extent that such partnership or limited
liability company invests in qualified emerging technology companies.

(3) For purposes of determining whether the nonrecognition of gain
under this subsection applies to a qualified emerging technologies
investment that is sold, the taxpayer's holding period for such
investment and the qualified emerging technologies investment that is
purchased shall be determined without regard to Internal Revenue Code §
1223.

13. Amounts deferred. The amount deferred under paragraph twelve of
this subdivision shall be added to entire net income when the
reinvestment in the New York qualified emerging technology company which
qualified a taxpayer for such deferral is sold.

* (14) For taxable years beginning after December thirty-first, two
thousand two, in the case of qualified property described in paragraph
two of subsection k of section 168 of the internal revenue code, other
than qualified resurgence zone property described in paragraph sixteen
of this subdivision, and other than qualified New York Liberty Zone
property described in paragraph two of subsection b of section 1400L of
the internal revenue code (without regard to clause (i) of subparagraph
(C) of such paragraph), which was placed in service on or after June
first, two thousand three, a taxpayer shall be allowed with respect to
such property the depreciation deduction allowable under section 167 of
the internal revenue code as such section would have applied to such
property had it been acquired by the taxpayer on September tenth, two
thousand one.

* NB There are 2 par (14)'s

* (14) Related members expense add back. (A) Definitions. (i) Related
member. "Related member" means a related person as defined in
subparagraph (c) of paragraph three of subsection (b) of section four
hundred sixty-five of the internal revenue code, except that "fifty
percent" shall be substituted for "ten percent".

(ii) Effective rate of tax. "Effective rate of tax" means, as to any
state or U.S. possession, the maximum statutory rate of tax imposed by
the state or possession on or measured by a related member's net income
multiplied by the apportionment percentage, if any, applicable to the
related member under the laws of said jurisdiction. For purposes of this
definition, the effective rate of tax as to any state or U.S. possession
is zero where the related member's net income tax liability in said
jurisdiction is reported on a combined or consolidated return including
both the taxpayer and the related member where the reported transactions
between the taxpayer and the related member are eliminated or offset.
Also, for purposes of this definition, when computing the effective rate
of tax for a jurisdiction in which a related member's net income is
eliminated or offset by a credit or similar adjustment that is dependent
upon the related member either maintaining or managing intangible
property or collecting interest income in that jurisdiction, the maximum
statutory rate of tax imposed by said jurisdiction shall be decreased to
reflect the statutory rate of tax that applies to the related member as
effectively reduced by such credit or similar adjustment.

(iii) Royalty payments. Royalty payments are payments directly
connected to the acquisition, use, maintenance or management, ownership,
sale, exchange, or any other disposition of licenses, trademarks,
copyrights, trade names, trade dress, service marks, mask works, trade
secrets, patents and any other similar types of intangible assets as
determined by the commissioner, and include amounts allowable as
interest deductions under section one hundred sixty-three of the
internal revenue code to the extent such amounts are directly or
indirectly for, related to or in connection with the acquisition, use,
maintenance or management, ownership, sale, exchange or disposition of
such intangible assets.

(iv) Valid business purpose. A valid business purpose is one or more
business purposes, other than the avoidance or reduction of taxation,
which alone or in combination constitute the primary motivation for some
business activity or transaction, which activity or transaction changes
in a meaningful way, apart from tax effects, the economic position of
the taxpayer. The economic position of the taxpayer includes an increase
in the market share of the taxpayer, or the entry by the taxpayer into
new business markets.

(B) Royalty expense add backs. (i) Except where a taxpayer is included
in a combined return with a related member pursuant to subdivision (f)
of section fifteen hundred fifteen of this article, for the purpose of
computing entire net income, a taxpayer must add back royalty payments
directly or indirectly paid, accrued, or incurred in connection with one
or more direct or indirect transactions with one or more related members
during the taxable year to the extent deductible in calculating federal
taxable income.

(ii) Exceptions. (I) The adjustment required in this paragraph shall
not apply to the portion of the royalty payment that the taxpayer
establishes, by clear and convincing evidence of the type and in the
form specified by the commissioner, meets all of the following
requirements: (a) the related member was subject to tax in this state or
another state or possession of the United States or a foreign nation or
some combination thereof on a tax base that included the royalty payment
paid, accrued or incurred by the taxpayer; (b) the related member during
the same taxable year directly or indirectly paid, accrued or incurred
such portion to a person that is not a related member; and (c) the
transaction giving rise to the royalty payment between the taxpayer and
the related member was undertaken for a valid business purpose.

(II) The adjustment required in this paragraph shall not apply if the
taxpayer establishes, by clear and convincing evidence of the type and
in the form specified by the commissioner, that: (a) the related member
was subject to tax on or measured by its net income in this state or
another state or possession of the United States or some combination
thereof; (b) the tax base for said tax included the royalty payment
paid, accrued or incurred by the taxpayer; and (c) the aggregate
effective rate of tax applied to the related member in those
jurisdictions is no less than eighty percent of the statutory rate of
tax that applied to the taxpayer under section fifteen hundred two,
fifteen hundred two-a, or fifteen hundred two-b of this article for the
taxable year.

(III) The adjustment required in this paragraph shall not apply if the
taxpayer establishes, by clear and convincing evidence of the type and
in the form specified by the commissioner, that: (a) the royalty payment
was paid, accrued or incurred to a related member organized under the
laws of a country other than the United States; (b) the related member's
income from the transaction was subject to a comprehensive income tax
treaty between such country and the United States; (c) the related
member was subject to tax in a foreign nation on a tax base that
included the royalty payment paid, accrued or incurred by the taxpayer;
(d) the related member's income from the transaction was taxed in such
country at an effective rate of tax at least equal to that imposed by
this state; and (e) the royalty payment was paid, accrued or incurred
pursuant to a transaction that was undertaken for a valid business
purpose and using terms that reflect an arm's length relationship.

(IV) The adjustment required in this paragraph shall not apply if the
taxpayer and the commissioner agree in writing to the application or use
of alternative adjustments or computations. The commissioner may, in his
or her discretion, agree to the application or use of alternative
adjustments or computations when he or she concludes that in the absence
of such agreement the income of the taxpayer would not be properly
reflected.

* NB There are 2 par (14)'s

(15) For taxable years beginning after December thirty-first, two
thousand two, upon the disposition of property to which paragraph
fourteen of this subdivision applies, the amount of any gain or loss
includible in entire net income shall be adjusted to reflect the
inclusions and exclusions from entire net income pursuant to
subparagraph (R) of paragraph one and subparagraph (T) of paragraph two
of this subdivision attributable to such property.

(16) For purposes of paragraphs fourteen and fifteen of this
subdivision, qualified resurgence zone property shall mean qualified
property described in paragraph two of subsection k of section 168 of
the internal revenue code substantially all of the use of which is in
the resurgence zone, as defined below, and is in the active conduct of a
trade or business by the taxpayer in such zone, and the original use of
which in the resurgence zone commences with the taxpayer after December
thirty-first, two thousand two. The resurgence zone shall mean the area
of New York county bounded on the south by a line running from the
intersection of the Hudson River with the Holland Tunnel, and running
thence east to Canal Street, then running along the centerline of Canal
Street to the intersection of the Bowery and Canal Street, running
thence in a southeasterly direction diagonally across Manhattan Bridge
Plaza, to the Manhattan Bridge and thence along the centerline of the
Manhattan Bridge to the point where the centerline of the Manhattan
Bridge would intersect with the easterly bank of the East River, and
bounded on the north by a line running from the intersection of the
Hudson River with the Holland Tunnel and running thence north along West
Avenue to the intersection of Clarkson Street then running east along
the centerline of Clarkson Street to the intersection of Washington
Avenue, then running south along the centerline of Washington Avenue to
the intersection of West Houston Street, then east along the centerline
of West Houston Street, then at the intersection of the Avenue of the
Americas continuing east along the centerline of East Houston Street to
the easterly bank of the East River.

(c) Attribution of income to different taxable years. The tax
commission may, whenever necessary in order to properly reflect the
entire net income of any taxpayer, determine the year or period in which
any item of income or deduction shall be included, without regard to the
method of accounting employed by the taxpayer.