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SECTION 612
New York adjusted gross income of a resident individual
Tax (TAX) CHAPTER 60, ARTICLE 22, PART 2
§ 612. New York adjusted gross income of a resident individual. (a)
General. The New York adjusted gross income of a resident individual
means his federal adjusted gross income as defined in the laws of the
United States for the taxable year, with the modifications specified in
this section.

(b) Modifications increasing federal adjusted gross income. There
shall be added to federal adjusted gross income:

(1) Interest income on obligations of any state other than this state,
or of a political subdivision of any such other state unless created by
compact or agreement to which this state is a party, to the extent not
properly includible in federal adjusted gross income;

(2) Interest or dividend income on obligations or securities of any
authority, commission, or instrumentality of the United States, which
the laws of the United States exempt from federal income tax but not
from state income taxes;

(3) Income taxes. (A) General. Income taxes imposed by this state or
any other taxing jurisdiction, to the extent deductible in determining
federal adjusted gross income and not credited against federal income
tax.

(B) Shareholders of S corporations. In the case of a shareholder of an
S corporation, with respect to taxes imposed upon or payable by the
corporation, the term "income taxes" in subparagraph (A) of this
paragraph shall also include the taxes imposed under article nine-A of
this chapter, regardless of the measure of such tax, 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.

(4) Interest on indebtedness incurred or continued to purchase or
carry obligations or securities the interest on which is exempt from tax
under this article, to the extent deductible in determining federal
adjusted gross income.

(5) Expenses paid or incurred during the taxable year for (i) the
production or collection of income which is exempt from tax under this
article, or (ii) the management, conservation or maintenance of property
held for the production of such income, and the amortizable bond premium
for the taxable year on any bond the interest on which is exempt from
tax under this article, to the extent that such expenses and premiums
are deductible in determining federal adjusted gross income.

(6) In the case of a taxpayer who has exercised the election permitted
by subsection (g) or (h) of this section, the amount or amounts required
by said subsections to be added to federal adjusted gross income.

(7) In the case of a taxpayer who is a shareholder of a corporation
organized under article fifteen or authorized to do business in this
state under article fifteen-a of the business corporation law, for the
taxpayer's taxable years beginning before nineteen hundred eighty-eight,
the amount which is deductible by such corporation under paragraph one,
two or three of subsection (a) of section four hundred four of the
internal revenue code for its taxable year ending in or with such
taxpayer's taxable year for contributions paid on behalf of such
taxpayer minus the lesser of fifteen thousand dollars or fifteen percent
of the earned income derived by such taxpayer from such corporation
during such taxpayer's taxable year. In the case of a taxpayer on whose
behalf contributions are paid under more than one plan to which this
paragraph applies or under a plan, contributions to which on his behalf
are subject to the limitations provided in section four hundred four (e)
of the internal revenue code, this paragraph shall apply with respect to
the aggregate of the contributions paid on his behalf under all such
plans.

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

(10) The amount required to be added to federal adjusted gross income
pursuant to subsection (i) of this section.

(15) In those instances where a credit for the special additional
mortgage recording tax is allowed under paragraph one of subsection (f)
or paragraph one of subsection (i) of section six hundred six of this
article, the amount allowed as an exclusion or deduction for the special
additional mortgage recording taxes imposed by subdivision one-a of
section two hundred fifty-three of this chapter in determining federal
adjusted gross income.

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

(17) The amount required to be added to federal adjusted gross income
pursuant to subsection (r) of this section.

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

(A) where the election provided for in subsection (a) of section six
hundred sixty is in effect with respect to such corporation, an amount
equal to his pro rata share of the corporation's reductions for taxes
described in paragraphs two and three of subsection (f) of section
thirteen hundred sixty-six of the internal revenue code, and

(B) in the case of a New York S termination year, subparagraph (A) of
this paragraph shall apply to the amount of reductions for taxes
determined under subsection (s) of this section.

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

(A) where the election provided for in subsection (a) of section six
hundred sixty has not been made with respect to such corporation, any
item of loss or deduction of the corporation included in federal gross
income pursuant to section thirteen hundred sixty-six of the internal
revenue code, and

(B) in the case of a New York S termination year, subparagraph (A) of
this paragraph shall apply to the amounts of loss or deduction
determined under subsection (s) of this section.

(20) S corporation distributions to the extent not included in federal
gross income for the taxable year because of the application of section
thirteen hundred sixty-eight, subsection (e) of section thirteen hundred
seventy-one or subsection (c) of section thirteen hundred seventy-nine
of the internal revenue code which represent income not previously
subject to tax under this article because the election provided for in
subsection (a) of section six hundred sixty had not been made. Any such
distribution treated in the manner described in paragraph two of
subsection (b) of section thirteen hundred sixty-eight of the internal
revenue code for federal income tax purposes shall be treated as
ordinary income for purposes of this article.

(21) In relation to the disposition of stock or indebtedness of a
corporation which elected under subchapter s of chapter one of the
internal revenue code for any taxable year of such corporation
beginning, in the case of a corporation taxable under article nine-A of
this chapter, after December thirty-first, nineteen hundred eighty, the
amount required to be added to federal adjusted gross income pursuant to
subsection (n) of this section.

(22) The amounts required to be added to federal adjusted gross income
pursuant to subsection (q) of this section.

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

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

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

* (26) The amount of member or employee contributions to a retirement
system or pension fund picked up or paid by the employer pursuant to
subdivision f of section five hundred seventeen or subdivision d of
section six hundred thirteen of the retirement and social security law
or section 13-225.1, 13-327.1, 13-125.1, 13-125.2 or 13-521.1 of the
administrative code of the city of New York or subdivision nineteen of
section twenty-five hundred seventy-five of the education law.

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

* (26) The amount of member or employee contributions to a retirement
system or pension fund picked up or paid by the employer pursuant to
subdivision f of section five hundred seventeen, subdivision d of
section six hundred thirteen or section twelve hundred four-a of the
retirement and social security law or section 13-225.1, 13-327.1,
13-125.1, 13-125.2 or 13-521.1 of the administrative code of the city of
New York or subdivision nineteen of section twenty-five hundred
seventy-five of the education law.

* NB See ch 525/2011 § 7 for effectiveness

* (26) The amount of member or employee contributions to a retirement
system or pension fund picked up or paid by the employer pursuant to
subdivision f of section five hundred seventeen or subdivision d of
section six hundred thirteen of the retirement and social security law
or section 13-225.1, 13-327.1 or 13-125.1 of the administrative code of
the city of New York.

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

(26-a) The amount of member or employee contributions to a retirement
system or pension fund picked up or paid by the employer for members of
the Manhattan and Bronx surface transportation authority pension plan
and treated as employer contributions in determining income tax
treatment under section 414(h) of the Internal Revenue Code.

(27) Upon the disposition of property to which paragraph twenty-six of
subsection (c) of this section applies, the amount, if any, by which the
aggregate of the modifications described in such paragraph twenty-six
attributable to such property exceeds the aggregate of the modifications
described in paragraph twenty-five of this subsection attributable to
such property.

(29) When gain from the sale or other disposition of property is
included in federal gross income, the amount of reduction in the basis
of such property attributable to credit for solar and wind energy
systems pursuant to paragraph nine of subsection (g) of section six
hundred six; but for taxable years beginning before nineteen hundred
eighty-seven, if such gain affects the determination of a net capital
gain for federal income tax purposes, forty percent of such amount.

(31) The amount deducted or deferred from an employee's salary under a
flexible benefits program established pursuant to section twenty-three
of the general municipal law or section one thousand two hundred ten-a
of the public authorities law.

(32) The amount by which an employee's salary is reduced pursuant to
the provisions of subdivision b of section 12-126.1 and subdivision b of
section 12-126.2 of the administrative code of the city of New York.

(33) Real property taxes paid on qualified agricultural property and
deducted in determining federal adjusted gross income, to the extent of
the amount of the agricultural property tax credit allowed under
subsection (n) or (i) of section six hundred six of this article.

(34) (A) Excess distributions received during the taxable year by a
distributee of a family tuition account established under the New York
state college choice tuition savings program provided for under article
fourteen-A of the education law, to the extent such excess distributions
are deemed attributable to deductible contributions under paragraph
thirty-two of subsection (c) of this section.

(B) (i) The term "excess distributions" means distributions which are
not

(I) qualified withdrawals within the meaning of subdivision nine of
section six hundred ninety-five-b of the education law;

(II) withdrawals made as a result of the death or disability of the
designated beneficiary within the meaning of subdivision ten of section
six hundred ninety-five-b of such law; or

(III) transfers described in paragraph b of subdivision six of section
six hundred ninety-five-e of such law.

(ii) Excess distributions shall be deemed attributable to deductible
contributions to the extent the amount of any such excess distribution,
when added to all previous excess distributions from the account,
exceeds the aggregate of all nondeductible contributions to the account.

(35) The amounts required to be added to federal adjusted gross income
pursuant to subsection (v) of this section.

(36) In the case of a taxpayer who is not an eligible farmer as
defined in subsection (n) of section six hundred six of this article,
the amount of any deduction claimed pursuant to section 179 of the
internal revenue code with respect to a sport utility vehicle which is
not a passenger automobile as defined in paragraph 5 of subsection (d)
of section 280F of the internal revenue code.

(37) Premiums paid for environmental remediation insurance, as defined
in section twenty-three of this chapter, and deducted in determining
federal taxable income, to the extent of the amount of the environmental
remediation insurance credit allowed under such section twenty-three and
subsection (ff) of section six hundred six of this article.

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

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

(39-a) The amount of any federal deduction for the excise tax on
telecommunication services to the extent such taxes are used as the
basis of the calculation of tax-free NY area excise tax on
telecommunication services credit allowed under subsection (yy) of
section six hundred six of this article.

* (40) in the case of a beneficiary of a trust that, in any tax year
after its creation including its first tax year, was not subject to tax
pursuant to subparagraph (D) of paragraph three of subsection (b) of
section six hundred five of this article (except for an incomplete gift
non-grantor trust, as defined by paragraph forty-one of this
subsection), the amount described in the first sentence of section six
hundred sixty-seven of the internal revenue code for the tax year to the
extent not already included in federal gross income for the tax year,
except that, in computing the amount to be added under this paragraph,
such beneficiary shall disregard (i) subsection (c) of section six
hundred sixty-five of the internal revenue code; (ii) the income earned
by such trust in any tax year in which the trust was subject to tax
under this article; and (iii) the income earned by such trust in a
taxable year prior to when the beneficiary first became a resident of
the state or in any taxable year starting before January first, two
thousand fourteen. Except as otherwise provided in this paragraph, all
of the provisions of the internal revenue code that are relevant to
computing the amount described in the first sentence of subsection (a)
of section six hundred sixty-seven of the internal revenue code shall
apply to the provisions of this paragraph with the same force and effect
as if the language of those internal revenue code provisions had been
incorporated in full into this paragraph, except to the extent that any
such provision is either inconsistent with or not relevant to this
paragraph.

* NB There are 2 par (40)'s

* (40) The amount of any federal deduction for real property taxes to
the extent such taxes are used as the basis of the calculation of the
real property tax credit for manufacturers allowed under subsection (xx)
of section six hundred six of this article.

* NB There are 2 par (40)'s

(41) In the case of a taxpayer who transferred property to an
incomplete gift non-grantor trust, the income of the trust, less any
deductions of the trust, to the extent such income and deductions of
such trust would be taken into account in computing the taxpayer's
federal taxable income if such trust in its entirety were treated as a
grantor trust for federal tax purposes. For purposes of this paragraph,
an "incomplete gift non-grantor trust" means a resident trust that meets
the following conditions: (i) the trust does not qualify as a grantor
trust under section six hundred seventy-one through six hundred
seventy-nine of the internal revenue code, and (2) the grantor's
transfer of assets to the trust is treated as an incomplete gift under
section twenty-five hundred eleven of the internal revenue code, and the
regulations thereunder.

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

(c) Modifications reducing federal adjusted gross income. There shall
be subtracted from federal adjusted gross income:

(1) Interest income on obligations of the United States and its
possessions to the extent includible in gross income for federal income
tax purposes; such interest income shall include the amount received as
dividends from a regulated investment company, as defined in section
eight hundred fifty-one of the internal revenue code, which has been
designated as the amount of such interest income in a written notice to
shareholders not later than sixty days following the close of its
taxable year; provided that, at the close of each quarter of the taxable
year of such regulated investment company, at least fifty percent of the
value of its total assets, as defined in subsection (c) of section eight
hundred fifty-one of the internal revenue code, consists of obligations
of the United States and its possessions. The aggregate amount so
designated by the regulated investment company for its taxable year
shall not exceed the amount determined by multiplying the total
distributions paid by such regulated investment company to its
shareholders with respect to that taxable year (attributable to income
earned in that year), including any such distributions paid after the
close of the taxable year, as described in section eight hundred
fifty-five of the internal revenue code, by the ratio that the interest
income received in that taxable year on obligations of the United States
and its possessions, after reduction for the deductions and expenses
directly or indirectly attributable thereto, bears to the investment
company taxable income of such regulated investment company for such
taxable year, determined without regard to subparagraph (D) of paragraph
two of subsection (b) of section eight hundred fifty-two of the internal
revenue code;

(2) Interest or dividend income on obligations or securities of any
authority, commission or instrumentality of the United States to the
extent includible in gross income for federal income tax purposes but
exempt from state income taxes under the laws of the United States;

(3) (i) Pensions to officers and employees of this state, its
subdivisions and agencies, to the extent includible in gross income for
federal income tax purposes;

(ii) Pensions to officers and employees of the United States of
America, any territory or possession or political subdivision of such
territory or possession, the District of Columbia, or any agency or
instrumentality of any one of the foregoing, to the extent includible in
gross income for federal income tax purposes;

(3-a) Pensions and annuities received by an individual who has
attained the age of fifty-nine and one-half, not otherwise excluded
pursuant to paragraph three of this subsection, to the extent includible
in gross income for federal income tax purposes, but not in excess of
twenty thousand dollars, which are periodic payments attributable to
personal services performed by such individual prior to his retirement
from employment, which arise (i) from an employer-employee relationship
or (ii) from contributions to a retirement plan which are deductible for
federal income tax purposes. However, the term "pensions and annuities"
shall also include distributions received by an individual who has
attained the age of fifty-nine and one-half from an individual
retirement account or an individual retirement annuity, as defined in
section four hundred eight of the internal revenue code, and
distributions received by an individual who has attained the age of
fifty-nine and one-half from self-employed individual and owner-employee
retirement plans which qualify under section four hundred one of the
internal revenue code, whether or not the payments are periodic in
nature. Nevertheless, the term "pensions and annuities" shall not
include any lump sum distribution, as defined in subparagraph (D) of
paragraph four of subsection (e) of section four hundred two of the
internal revenue code and taxed under section six hundred three of this
article. Where a husband and wife file a joint state personal income tax
return, the modification provided for in this paragraph shall be
computed as if they were filing separate state personal income tax
returns. Where a payment would otherwise come within the meaning of the
term "pensions and annuities" as set forth in this paragraph, except
that such individual is deceased, such payment shall, nevertheless, be
treated as a pension or annuity for purposes of this paragraph if such
payment is received by such individual's beneficiary.

(3-b) (i) Disability income included in federal gross income, to the
extent that such disability income would have been excluded from federal
gross income pursuant to the provisions of subsection (d) of section one
hundred five of the internal revenue code of nineteen hundred fifty-four
had such provisions continued in effect for taxable years commencing
after December thirty-first, nineteen hundred eighty-three as they were
in effect immediately prior to the repeal of such subsection.
Notwithstanding the foregoing, the sum of disability income excluded
pursuant to this paragraph, and pension and annuity income excluded
pursuant to paragraph three-a of this subsection, shall not exceed
twenty thousand dollars.

(ii) Notwithstanding subsection (f) of this section, if a husband and
wife determine their federal income tax on a joint return but are
required to determine their New York income taxes separately, the
amounts of exclusion allowed under subparagraph (i) of this paragraph
shall be determined in the same joint manner as such amounts would have
been determined under the provisions of paragraph five of subsection (d)
of section one hundred five of the internal revenue code as such
provisions were in effect immediately prior to the repeal of such
subsection, but shall be attributed for New York income tax purposes to
the spouse who would have been required to report any such amount as
income if the spouses had determined their federal income taxes
separately.

(iii) Where a husband and wife file a joint state income tax return,
the twenty thousand dollar limitation provided in subparagraph (i) of
this paragraph shall be applied as if they were filing separate state
income tax returns.

(3-c) Social security benefits to the extent includible in gross
income for federal income tax purposes pursuant to section eighty-six of
the internal revenue code.

(4) The portion of any gain, from the sale or other disposition of
property having a higher adjusted basis for New York income tax purposes
than for federal income tax purposes on the last day of the last taxable
year for which article sixteen imposes tax, as such article was in
effect on such date, that does not exceed such difference in basis.

(5) The amount necessary to prevent the taxation under this article of
any annuity or other amount of income or gain which was properly
included in income or gain and was taxable under article sixteen (as
such article was in effect on December thirtieth, nineteen hundred
sixty) to the taxpayer, or to a decedent by reason of whose death the
taxpayer acquired the right to receive the income or gain, or to a trust
or estate from which the taxpayer received the income or gain;

(6) Interest or dividend income on obligations or securities to the
extent exempt from income tax under the laws of this state authorizing
the issuance of such obligations or securities but includible in gross
income for federal income tax purposes; and

(7) The amount of any refund or credit for overpayment of income taxes
imposed by this state, or any other taxing jurisdiction, and any taxes
imposed by article twenty-three of this chapter, to the extent properly
included in gross income for federal income tax purposes.

(8) Compensation received for active service in the armed forces of
the United States on or after October first, nineteen hundred sixty-one,
and prior to September first, nineteen hundred sixty-two; provided,
however, that the amount of such compensation to be deducted shall not
exceed one hundred dollars for each month of the taxable year,
subsequent to September, nineteen hundred sixty-one, during any part of
which month the taxpayer was engaged in such service. For the purposes
of this paragraph, the words "active service in the armed forces of the
United States" shall mean active duty (other than for training) in the
army, navy (including the marine corps), air force or coast guard of the
United States as defined in title ten of the United States code.

(8-a) Compensation and bonuses received for active service in the
armed forces of the United States while a prisoner of war or missing in
action during the hostilities in Vietnam, to the extent includable in
gross income for federal income tax purposes.

(8-b) Income received by an individual who is a member of the New York
state organized militia, as such term is defined in subdivision one of
section two of the military law, as compensation for performing active
service within the state pursuant to either (i) state active duty orders
issued in accordance with subdivision one of section six of the military
law or (ii) active service of the United States pursuant to federal
active duty orders, for service other than training, issued in
accordance with title 10 of the United States code.

(8-c) Compensation received for active service in the armed services
of the United States in an area designated by the president of the
United States by executive order as a "combat zone" at any time during
the period designated by the president by executive order as the period
of combatant activities in such zone to the extent includable in gross
income for federal income tax purposes.

(9) Interest on indebtedness incurred or continued to purchase or
carry obligations or securities the interest on which is subject to tax
under this article but exempt from federal income tax, to the extent
that such interest on indebtedness is not deductible in determining
federal adjusted gross income and is attributable to a trade or business
carried on by the taxpayer.

(10) Ordinary and necessary expenses paid or incurred during the
taxable year for (i) the production or collection of income which is
subject to tax under this article but exempt from federal income tax, or
(ii) the management, conservation or maintenance of property held for
the production of such income, and the amortizable bond premium for the
taxable year on any bond the interest on which is subject to tax under
this article but exempt from federal income tax, to the extent that such
expenses and premiums are not deductible in determining federal adjusted
gross income and are attributable to a trade or business carried on by
the taxpayer.

(11) In the case of a taxpayer who has exercised the election
permitted by subsection (g) or (h) of this section, the amount or
amounts required by said subsections to be subtracted from federal
adjusted gross income.

(12) The amount necessary to prevent the taxation of amounts properly
included in New York adjusted gross income in prior taxable years in
accordance with paragraph seven of subsection (b).

(13) The amount required to be subtracted from federal adjusted gross
income pursuant to subsection (i) of this section.

(14) The amount that may be subtracted from federal adjusted gross
income pursuant to subsection (j) of this section.

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

(16) for taxable years beginning after December thirty-first, two
thousand two, the amount deductible pursuant to subsection (k) of this
section.

(20) The amounts which may be subtracted from federal adjusted gross
income pursuant to subsection (o) of this section.

(21) In relation to the disposition of stock or indebtedness of a
corporation which elected under subchapter s of chapter one of the
internal revenue code for any taxable year of such corporation
beginning, in the case of a corporation taxable under article nine-A of
this chapter, after December thirty-first, nineteen hundred eighty, the
amounts required to be subtracted from federal adjusted gross income
pursuant to subsection (n) of this section.

(22) In the case of a shareholder of an S corporation (A) where the
election provided for in subsection (a) of section six hundred sixty has
not been made with respect to such corporation, any item of income of
the corporation included in federal gross income pursuant to section
thirteen hundred sixty-six of the internal revenue code, and

(B) in the case of a New York S termination year, subparagraph (A) of
this paragraph shall apply to the amounts of income determined under
subsection (s) of this section.

(23) The amounts which may be subtracted from federal adjusted gross
income pursuant to subsection (p) of this section.

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

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

(26) In the case of property placed in service in taxable years
beginning before nineteen hundred ninety-four, for taxable years
beginning after December thirty-first, nineteen hundred eighty-one,
except with respect to property subject to the provisions of section two
hundred eighty-F of the internal revenue code and property subject to
the provisions of section one hundred sixty-eight of the internal
revenue code which is placed in service in this state in taxable years
beginning after December thirty-first, nineteen hundred eighty-four, an
amount with respect to property which is subject to the provisions of
section one hundred sixty-eight of the internal revenue code equal to
the amount allowable as the depreciation deduction under section one
hundred sixty-seven of the internal revenue code as such section would
have applied to property placed in service on December thirty-first,
nineteen hundred eighty.

(28) Upon the disposition of property to which paragraph twenty-six of
this subsection applies, the amount, if any, by which the aggregate of
the modifications described in paragraph twenty-five of subsection (b)
of this section attributable to such property exceeds the aggregate of
the modifications described in paragraph twenty-six of this subsection
attributable to such property.

(29) Deduction for two-earner married couples. (A) For the taxable
year beginning in nineteen hundred eighty-seven, in the case of a
husband and wife who each have qualified earned income and who file a
joint return under subsection (b) of section six hundred fifty-one for
the taxable year, an amount equal to ten percent of the lesser of:

(i) thirty thousand dollars or

(ii) the qualified earned income of the spouse with the lower
qualified earned income for such taxable year.

(B) For purposes of this paragraph, eligibility for the deduction
provided for herein and the term qualified earned income shall be
determined in the manner such eligibility and such qualified earned
income would have been determined pursuant to the provisions of section
two hundred twenty-one of the internal revenue code of nineteen hundred
fifty-four had such provisions continued in effect for taxable years
commencing after December thirty-first, nineteen hundred eighty-six as
they were in effect immediately prior to the repeal of such section.
Provided, however, the determination of such qualified earned income
shall be made with regard only to the items therein included in New York
adjusted gross income, with such adjusted gross income determined
without regard to this paragraph, and only with regard to the deductions
and exclusions which are of the type properly allowable to or chargeable
against such qualified earned income in such taxable year.

(30) The amount received by any person as an accelerated payment or
payments of part or all of the death benefit or special surrender value
under a life insurance policy as a result of any of the diagnoses
specified in subparagraph (A) or (B) of paragraph one of subsection (a)
of section one thousand one hundred thirteen of the insurance law, and
the amount received by any person as a viatical settlement pursuant to
the provisions of article seventy-eight of the insurance law, to the
extent includible in gross income for federal income tax purposes.

(32) Contributions made during the taxable year by an account owner to
one or more family tuition accounts established under the New York state
college choice tuition savings program provided for under article
fourteen-A of the education law, to the extent not deductible or
eligible for credit for federal income tax purposes, provided, however,
the exclusion provided for in this paragraph shall not exceed five
thousand dollars for an individual or head of household, and for married
couples who file joint tax returns, shall not exceed ten thousand
dollars; provided, further, that such exclusion shall be available only
to the account owner and not to any other person.

(33) Distributions from a family tuition account established under the
New York state college choice tuition savings program provided for under
article fourteen-A of the education law, to the extent includible in
gross income for federal income tax purposes.

* (34) The portion of the fees paid during the taxable year by a
taxpayer who is a resident of a continuing care retirement community,
issued a certificate of authority pursuant to article forty-six of the
public health law, attributable to the cost of providing long term care
benefits pursuant to a continuing care contract. The portion of the fees
so attributable shall be determined in accordance with regulations
promulgated by the superintendent of financial services. The deduction
may not exceed the limitation that would be applicable to the taxpayer
for the taxable year, with respect to eligible long term care premiums,
determined under paragraph (10) of subsection (d) of section 213 of the
internal revenue code.

* NB There are 2 ¶(34)'s

* (34) The amounts which may be subtracted from federal adjusted gross
income pursuant to subsection (u) of this section.

* NB There are 2 ¶(34)'s

(35) Distributions, to the extent includible in gross income for
federal income tax purposes, made to the taxpayer because of his or her
status as a victim of Nazi persecution, as defined in P.L. 103-286, or
as a spouse or a descendant in need of such victim.

(36) Items of income, to the extent includible in gross income for
federal income tax purposes, attributable to, derived from or in any way
related to assets stolen from, hidden from or otherwise lost to a victim
of Nazi persecution, as defined in P.L. 103-286, immediately prior to,
during and immediately after World War II, including, but not limited
to, interest on the proceeds receivable as insurance under policies
issued to a victim of Nazi persecution, as defined in P.L. 103-286, by
European insurance companies immediately prior to and during World War
II. Provided, however, this subtraction from federal adjusted income
does not apply to assets acquired with such assets or with the proceeds
from the sale of such assets. Provided, further, this paragraph shall
only apply to a taxpayer who was the first recipient of such assets
after their recovery and who is a victim of Nazi persecution, as defined
in P.L. 103-286, or a spouse or a descendant of such victim.

(37) In the case of a taxpayer subject to the modification provided by
paragraph thirty-six of subsection (b) of this section, the amount
required to be recaptured pursuant to subsection (d) of section 179 of
the internal revenue code with respect to property upon which such
modification was based.

(38) An amount of up to ten thousand dollars if a taxpayer, while
living, donates one or more of his or her human organs to another human
being for human organ transplantation. For purposes of this paragraph,
"human organ" means all or part of a liver, pancreas, kidney, intestine,
lung, or bone marrow. A subtract modification allowed under this
paragraph shall be claimed in the taxable year in which the human organ
transplantation occurs.

(A) A taxpayer shall claim the subtract modification allowed under
this paragraph only once and such subtract modification shall be claimed
for only the following unreimbursed expenses which are incurred by the
taxpayer and related to the taxpayer's organ donation:

(i) travel expenses;

(ii) lodging expenses; and

(iii) lost wages.

(B) The subtract modification allowed under this paragraph shall not
be claimed by a part-year resident or a non-resident of this state.

* (39) Any income or gain, to the extent it is included in federal
adjusted gross income of an individual who is the sole proprietor of a
qualified entity or a member of a limited liability company, a partner
in a partnership or a shareholder in a New York subchapter S corporation
that is a qualified entity, attributable to the operations of a
qualified entity at its location in or as part of a New York state
innovation hot spot, as provided in section thirty-eight of this
chapter.

* NB There are 2 par (39)'s

* (39) In the case of a taxpayer who is a small business who has
business income and/or farm income as defined in the laws of the United
States, an amount equal to three percent of the net items of income,
gain, loss and deduction attributable to such business or farm entering
into federal adjusted gross income, but not less than zero, for taxable
years beginning after two thousand thirteen, an amount equal to three
and three-quarters percent of the net items of income, gain, loss and
deduction attributable to such business or farm entering into federal
adjusted gross income, but not less than zero, for taxable years
beginning after two thousand fourteen, and an amount equal to five
percent of the net items of income, gain, loss and deduction
attributable to such business or farm entering into federal adjusted
gross income, but not less than zero, for taxable years beginning after
two thousand fifteen. For the purposes of this paragraph, the term small
business shall mean a sole proprietor or a farm business who employs one
or more persons during the taxable year and who has net business income
or net farm income of less than two hundred fifty thousand dollars.

* NB There are 2 par (39)'s

(40) Any wages received by an individual as an employee of a business
located within a tax-free NY area during the first five years of such
business's ten year taxable period specified in subdivision (a) of
section thirty-nine of this chapter, to the extent included in federal
adjusted gross income and allowed under section thirty-nine of this
chapter. During the second five years of such business's ten year
taxable period, the first two hundred thousand dollars of such wages in
the case of a taxpayer filing as a single individual, the first two
hundred fifty thousand dollars of such wages in the case of a taxpayer
filing as a head of household, and three hundred thousand dollars of
such wages in the case of a taxpayer filing a joint return, to the
extent included in federal adjusted gross income and allowed under
section thirty-nine of this chapter.

(41) The amount of any award paid to a volunteer firefighter or
volunteer ambulance worker from a length of service defined contribution
plan or defined benefit plan as provided for in articles eleven-A,
eleven-AA, eleven-AAA and eleven-AAAA of the general municipal law, to
the extent that such award is includable in gross income for federal
income tax purposes; provided, however, that such award is not
distributed in the form of a lump sum distribution, as defined in
subparagraph (D) of paragraph four of subsection (e) of section four
hundred two of the internal revenue code and taxed under section six
hundred three of this article; and provided, further, that such award is
not distributed to a taxpayer who has not attained the age of fifty-nine
and one-half years.

* (42) Distributions from an eligible retirement plan, as such term is
defined in subparagraph (B) of paragraph (8) of subsection (c) of
section four hundred two of the Internal Revenue Code, made on or after
April first, two thousand seventeen and before April second, two
thousand twenty-two. In order for such distributions to be eligible to
be subtracted from federal adjusted gross income under this paragraph,
the following conditions must be satisfied: (A) the taxpayer's primary
residence was located in the area affected by the disaster declared
pursuant to executive order one hundred sixty-five of two thousand
seventeen, declaring a state of emergency, dated May third, two thousand
seventeen; (B) such primary residence must have incurred damage due to
coastal flooding, widespread erosion and water damage caused by such
disaster; (C) such damage must qualify for the casualty deduction under
section one hundred sixty-five of the internal revenue code (determined
without regard to whether the loss exceeds ten percent of adjusted gross
income); and (D) the taxpayer during the taxable year must use the
entire amount of the distributions to pay for repairs needed as a result
of such damage. Provided, however, that the amount of the distributions
that otherwise may be subtracted under this paragraph must be reduced by
any deduction claimed by the taxpayer for such damage pursuant to
section one hundred sixty-five of the internal revenue code. Provided,
further, that the taxpayer shall not claim a subtraction modification
under paragraph three-a of this subsection for such distribution.

* NB There are 3 par (42)'s

* (42) Insurance payments received by an eligible volunteer
firefighter for the cancer disability benefits in section two hundred
five-cc of the general municipal law to the extent includable in gross
income for federal income tax purposes.

* NB There are 3 par (42)'s

* (42) (A) The amount of any student loan that is discharged, whether
in whole or in part, if such discharge was:

(i) pursuant to subsection (a) or (d) of section 437 of the Higher
Education Act of 1965 or the parallel benefit provided pursuant to part
D of title IV of such act;

(ii) pursuant to section 464(c)(1)(F) of the Higher Education Act of
1965; or

(iii) otherwise discharged on account of the death or total and
permanent disability of the person on whose behalf the indebtedness was
incurred.

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

(i) a student loan as defined in section 108(f)(2) of the Internal
Revenue Code of 1986; or

(ii) a private education loan, as defined in section 140(7) of the
Consumer Credit Protection Act.

* NB There are 3 par (42)'s

* (43) Pass-through entity tax deduction addback. (A) In the case of a
taxpayer who claims a credit under subsection (kkk) of section six
hundred six of this article, an amount equal to the amount of such
credit; and (B) in the case of a taxpayer who claims a credit under
subsection (b) of section six hundred twenty of this article, an amount
equal to the amount of such credit as calculated without regard to the
limitation under subsection (c) of section six hundred twenty of this
article.

* NB There are 2 par (43)'s

* (43) The amount of any gain added back to federal adjusted gross
income in a previous taxable year pursuant to paragraph forty-two of
subdivision (b) of this section that is included in federal gross income
for the taxable year.

* NB There are 2 par (43)'s

(44) Any death benefit, to the extent includible in federal adjusted
gross income, paid to the taxpayer in a lump sum pursuant to the
COVID-19 family death benefit program established by the metropolitan
transportation authority in two thousand twenty; provided, however, this
subtraction shall not exceed five hundred thousand dollars and shall not
apply to any benefit payable under such program other than a lump sum
death benefit.

* (45) (A) The amount of an item that was included in New York
adjusted gross income for a prior taxable year (or years) because it
appeared that the taxpayer had an unrestricted right to such item but
was repaid by the taxpayer during the taxable year because it was
established after the close of such prior taxable year (or years) that
the taxpayer did not have an unrestricted right to such item or to a
portion of such item.

(B) No subtraction shall be allowed under this paragraph if the
repayment amount is included in the deduction allowed under section six
hundred fifteen or any other provision of this article, or if the
repayment amount is the basis for a credit claimed by the taxpayer
pursuant to section six hundred sixty-two of this article.

* NB There are 2 par (45)'s

* (45) Grants received pursuant to the COVID-19 pandemic small
business recovery grant program, established in section 16-ff of the New
York state urban development corporation act, to the extent includable
in federal adjusted gross income.

* NB There are 2 par (45)'s

(d) Modification for New York fiduciary adjustment. There shall be
added to or subtracted from federal adjusted gross income (as the case
may be) the taxpayer's share, as beneficiary of an estate or trust, of
the New York fiduciary adjustment determined under section six hundred
nineteen.

(e) Modifications of partners and shareholders of S corporations. (1)
Partners and shareholders of S corporations which are not New York C
corporations. The amounts of modifications required to be made under
this section by a partner or by a shareholder of an S corporation (other
than an S corporation which is a New York C corporation), which relate
to partnership or S corporation items of income, gain, loss or deduction
shall be determined under section six hundred seventeen and, in the case
of a partner of a partnership doing an insurance business as a member of
the New York insurance exchange described in section six thousand two
hundred one of the insurance law, under section six hundred seventeen-a
of this article.

(2) Shareholders of S corporations which are New York C corporations.
In the case of a shareholder of an S corporation which is a New York C
corporation, the modifications under this section which relate to the
corporation's items of income, loss and deduction shall not apply,
except for the modifications provided under paragraph nineteen of
subsection (b) and paragraph twenty-two of subsection (c) of this
section.

(3) New York S termination year. In the case of a New York S
termination year, the amounts of the modifications required under this
section which relate to the S corporation's items of income, loss,
deduction and reductions for taxes (as described in paragraphs two and
three of subsection (f) of section thirteen hundred sixty-six of the
internal revenue code) shall be adjusted in the same manner that the S
corporation's items are adjusted under subsection (s) of section six
hundred twelve.

(f) Husband and wife. If husband and wife determine their federal
income tax on a joint return but are required to determine their New
York income taxes separately, they shall determine their New York
adjusted gross incomes separately as if their federal adjusted gross
incomes had been determined separately.

(g) Optional modifications. Subject to the conditions provided in
paragraphs three and four of this subsection, at the election of the
taxpayer there shall also be subtracted from federal adjusted gross
income either or both of the items set forth in paragraphs one and two
of this subsection, except that only one of such items shall be
subtracted with respect to any one item of property, and except that a
subtraction of the item set forth in such paragraph two may not be taken
with respect to taxable years commencing on or after January first,
nineteen hundred eighty-seven.

(1) Depreciation with respect to any property such as described in
paragraphs three or four of this subsection, and subject to the
conditions provided therein, not exceeding twice the depreciation
allowed with respect to the same property for federal income tax
purposes. Such modification shall be allowed only upon condition that
any depreciation or amortization allowed with respect to the same
property in determining federal adjusted gross income shall be added to
federal adjusted gross income pursuant to paragraph six of subsection
(b) of this section. The total of all deductions allowed pursuant to
this paragraph in any taxable year or years with respect to any property
described in paragraph three shall not exceed its cost or other basis
and, with respect to property described in paragraph four, which is used
in a business carried on both within and without the state shall not
exceed its cost or other basis multiplied by a percentage of the excess
of the taxpayer's business income over its business deductions allocated
to this state for the first year such depreciation is deducted. Such
percentage shall be determined by apportionment and allocation under
regulations of the tax commission.

(2) Expenditures paid or incurred during the taxable year for the
construction, reconstruction, erection or acquisition of any property
such as described in paragraphs three or four of this subsection, and
subject to the conditions provided therein, which is used or to be used
for purposes of research and development in the experimental or
laboratory sense. Such purposes shall not be deemed to include the
ordinary testing or inspection of materials or products for quality
control, efficiency surveys, management studies, consumer surveys,
advertising, promotions or research in connection with literary,
historical or similar projects. Such modification shall be allowed only
on condition that, with respect to property described in paragraph four,
which is used in a business carried on both within and without the state
the deduction shall not exceed the expenditures multiplied by a
percentage of the excess of the taxpayer's business income over its
business deductions allocated to this state for the first year such
expenditures are deducted. Such percentage shall be determined by
apportionment and allocation under regulations of the tax commission,
and for the taxable year and all succeeding taxable years, any
deductions allowed for federal income tax purposes on account of such
expenditures or on account of depreciation of the same property except
to the extent that its basis may be attributable to factors other than
such expenditures, shall be added to federal adjusted gross income
pursuant to paragraph six of subsection (b) of this section, or in case
a modification is allowable pursuant to this paragraph for only a part
of such expenditures, on condition that a proportionate part of any such
deductions allowed for federal income tax purposes be added to federal
adjusted gross income. With respect to property which is used or to be
used for research and development only in part, or during only part of
its useful life, the modification allowable pursuant to this paragraph
shall be limited to a proportionate part of the expenditures relating
thereto. If a modification shall have been allowed pursuant to this
paragraph for all or part of such expenditures with respect to any
property, and such property is used for purposes other than research and
development to a greater extent than originally reported, the taxpayer
shall report such use in his return for the first taxable year during
which it occurs, and the tax commission may recompute the tax for the
year or years for which such deduction was allowed, and may assess any
additional tax resulting from such recomputation within the time fixed
by subsection (c) of section six hundred eighty-three of this article.

(3) For purposes of this paragraph, such modifications shall be
allowed only with respect to tangible property which is depreciable
pursuant to section one hundred sixty-seven of the internal revenue
code, having a situs in this state and used in the taxpayer's trade or
business, (A) constructed, reconstructed or erected after December
thirty-first, nineteen hundred sixty-three, pursuant to a contract which
was, on or before December thirty-first, nineteen hundred sixty-seven,
and at all times thereafter, binding on the taxpayer, or, property, the
physical construction, reconstruction or erection of which began on or
before December thirty-first, nineteen hundred sixty-seven or which
began after such date pursuant to an order placed on or before December
thirty-first, nineteen hundred sixty-seven, and then only with respect
to that portion of the basis thereof or the expenditures relating
thereto which is properly attributable to such construction,
reconstruction or erection after December thirty-first, nineteen hundred
sixty-three, or (B) acquired after December thirty-first, nineteen
hundred sixty-three, pursuant to a contract which was, on or before
December thirty-first, nineteen hundred sixty-seven, and at all times
thereafter, binding on the taxpayer or pursuant to an order placed on or
before December thirty-first, nineteen hundred sixty-seven, by purchase
as defined in section one hundred seventy-nine (d) of the internal
revenue code, if the original use of such property commenced with the
taxpayer, commenced in this state and commenced after December
thirty-first, nineteen hundred sixty-three, or (C) acquired,
constructed, reconstructed, or erected subsequent to December
thirty-first, nineteen hundred sixty-seven, if such acquisition,
construction, reconstruction or erection is pursuant to a plan of the
taxpayer which was in existence December thirty-first, nineteen hundred
sixty-seven and not thereafter substantially modified, and such
acquisition, construction, reconstruction or erection would qualify
under the rules in paragraphs four, five or six of subsection (h) of
section forty-eight of the internal revenue code provided all references
in such paragraphs four, five and six to the dates October nine,
nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six,
shall be read as December thirty-first, nineteen hundred sixty-seven. A
taxpayer shall be allowed a deduction under clauses (A), (B) or (C) of
this paragraph only if the tangible property shall be delivered or the
construction, reconstruction or erection shall be completed on or before
December thirty-first, nineteen hundred sixty-nine, except in the case
of tangible property which is acquired, constructed, reconstructed or
erected pursuant to a contract which was, on or before December
thirty-first, nineteen hundred sixty-seven, and at all times thereafter,
binding on the taxpayer. However, for any taxable year beginning on or
after January first, nineteen hundred sixty-eight, a taxpayer shall not
be allowed a modification under paragraph one of this subsection with
respect to tangible personal property leased to any other person or
corporation. For purposes of the preceding sentence, any contract or
agreement to lease or rent or for a license to use such property shall
be considered a lease. With respect to property which a taxpayer uses
for purposes other than leasing for part of a taxable year and leases
for a part of a taxable year, a modification under paragraph one shall
be allowed in proportion to the part of the year such property is used
by the taxpayer.

(4) For purposes of this paragraph, such modifications shall be
allowed only with respect to tangible property which is depreciable
pursuant to section one hundred sixty-seven of the internal revenue
code, having a situs in this state and used in the taxpayer's trade or
business. The modifications provided for in paragraph one of this
subsection shall be allowed only with respect to tangible property which
is (A) constructed, reconstructed or erected after December
thirty-first, nineteen hundred sixty-seven, pursuant to a contract which
was, on or before December thirty-first, nineteen hundred sixty-eight,
and at all times thereafter, binding on the taxpayer or, property, the
physical construction, reconstruction or erection of which began on or
before December thirty-first, nineteen hundred sixty-eight or which
began after such date pursuant to an order placed on or before December
thirty-first, nineteen hundred sixty-eight, and then only with respect
to that portion of the basis thereof or the expenditures relating
thereto which is properly attributable to such construction,
reconstruction or erection after December thirty-first, nineteen hundred
sixty-three, or (B) acquired after December thirty-first, nineteen
hundred sixty-seven, pursuant to a contract which was, on or before
December thirty-first, nineteen hundred sixty-eight, and at all times
thereafter, binding on the taxpayer or pursuant to an order placed on or
before December thirty-first, nineteen hundred sixty-eight, by purchase
as defined in section one hundred seventy-nine (d) of the internal
revenue code, if the original use of such property commenced with the
taxpayer, commenced in this state and commenced after December
thirty-first, nineteen hundred sixty-seven, or (C) acquired,
constructed, reconstructed, or erected subsequent to December
thirty-first, nineteen hundred sixty-eight, if such acquisition,
construction, reconstruction or erection is pursuant to a plan of the
taxpayer which was in existence December thirty-first, nineteen hundred
sixty-eight, and not thereafter substantially modified, and such
acquisition, construction, reconstruction or erection would qualify
under the rules in paragraphs four, five or six of subsection (h) of
section forty-eight of the internal revenue code provided all references
in such paragraphs four, five and six to the dates October nine,
nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six,
shall be read as December thirty-first, nineteen hundred sixty-eight. A
taxpayer shall be allowed a deduction under clauses (A), (B) or (C) of
the preceding sentence of this paragraph only if the tangible property
shall be delivered or the construction, reconstruction or erection shall
be completed on or before December thirty-first, nineteen hundred
seventy, except in the case of tangible property which is acquired,
constructed, reconstructed or erected pursuant to a contract which was,
on or before December thirty-first, nineteen hundred sixty-eight, and at
all times thereafter binding on the taxpayer. The modification provided
for in paragraph two of this subsection shall be allowed only with
respect to tangible property, (A) the construction, reconstruction or
erection of which is completed after December thirty-first, nineteen
hundred sixty-seven, and then only with respect to that portion of the
basis thereof or the expenditures relating thereto which is properly
attributable to such construction, reconstruction or erection after
December thirty-first, nineteen hundred sixty-three, or (B) acquired
after December thirty-first, nineteen hundred sixty-seven, by purchase
as defined in section one hundred seventy-nine (d) of the internal
revenue code, if the original use of such property commenced with the
taxpayer, commenced in this state and commenced after December
thirty-first, nineteen hundred sixty-three. Provided, however, a
modification under paragraph one of this subsection shall be allowed
with respect to property described in this paragraph only on condition
that such property shall be principally used by the taxpayer in the
production of goods by manufacturing; processing; assembling; refining;
mining; extracting; farming; agriculture; horticulture; floriculture;
viticulture; or commercial fishing. For purposes of the preceding
sentence, manufacturing shall mean the process of working raw materials
into wares suitable for use or which gives new shapes, new qualities or
new combinations to matter which already has gone through some
artificial process by the use of machinery, tools, appliances and other
similar equipment. Property used in the production of goods shall
include machinery, equipment or other tangible property which is
principally used in the repair and service of other machinery, equipment
or other tangible property used principally in the production of goods
and shall include all facilities used in the manufacturing operation,
including storage of material to be used in manufacturing and of the
products that are manufactured. At the option of the taxpayer, air and
water pollution control facilities which qualify for elective deductions
under subsection (h) of section six hundred twelve may be treated, for
purposes of this paragraph, as tangible property principally used in the
production of goods by manufacturing; processing; assembling; refining;
mining; extracting; farming; agriculture; horticulture; floriculture;
viticulture; or commercial fishing, in which event, a deduction shall
not be allowed under such subsection (h). However, for any taxable year
beginning on or after January first, nineteen hundred sixty-eight, a
taxpayer shall not be allowed a modification under paragraph one of this
subsection with respect to tangible personal property leased to any
other person or corporation. For purposes of the preceding sentence, any
contract or agreement to lease or rent or for a license to use such
property shall be considered a lease. With respect to property which a
taxpayer uses for purposes other than leasing for part of a taxable year
and leases for a part of a taxable year, a modification under paragraph
one shall be allowed in proportion to the part of the year such property
is used by the taxpayer.

(5) If the modifications allowable for any taxable year pursuant to
this subsection exceed the taxpayer's New York adjusted gross income,
determined without the allowance of such modifications, the excess may
be carried over to the following taxable year or years and may be
subtracted from federal adjusted gross income for such year or years
provided, however, that in no event shall such excess, insofar as it
reflects subtractions taken with respect to items set forth in paragraph
two of this subsection, be carried over to taxable years commencing on
or after January first, nineteen hundred ninety-four.

(6) In any taxable year when property is sold or otherwise disposed
of, with respect to which a modification has been allowed pursuant to
paragraph one or two of this subsection, the basis of such property
shall be adjusted to reflect the modifications so allowed, and if the
basis as so adjusted is lower than the adjusted basis of the same
property for federal income tax purposes, there shall be added to
federal adjusted gross income the amount of the difference between such
adjusted bases.

(h) Optional modification for waste treatment facility expenditures.
For taxable years commencing prior to January first, nineteen hundred
eighty-seven, at the election of the taxpayer, there shall also be
subtracted from federal adjusted gross income expenditures paid or
incurred during the taxable year for the construction, reconstruction,
erection or improvement of industrial waste treatment facilities and air
pollution control facilities.

(1) (A) The term "industrial waste treatment facilities" shall mean
facilities for the treatment, neutralization, or stabilization of
industrial waste and other wastes (as the terms "industrial waste" and
"other wastes" are defined in section 17-0105 of the environmental
conservation law) from a point immediately preceding the point of such
treatment, neutralization or stabilization to the point of disposal,
including the necessary pumping and transmitting facilities.

(B) The term "air pollution control facilities" shall mean facilities
which remove, reduce, or render less noxious air contaminants emitted
from an air contamination source (as the terms "air contaminant" and
"air contamination source" are defined in section 19-0107 of the
environmental conservation law) from a point immediately preceding the
point of such removal, reduction or rendering to the point of discharge
of air, meeting emission standards as established by the department of
environmental conservation but excluding such facilities installed for
the primary purpose of salvaging materials which are usable in the
manufacturing process or are marketable and excluding those facilities
which rely for their efficacy on dilution, dispersion or assimilation of
air contaminants in the ambient air after emission. Such term shall
further include flue gas desulfurization equipment and attendant sludge
disposal facilities, fluidized bed boilers, precombustion coal cleaning
facilities or other facilities that conform with this subdivision and
which comply with the provisions of the state acid deposition control
act set forth in title nine of article nineteen of the environmental
conservation law.

(2) Such modifications shall be allowed only

(A) with respect to tangible property which is depreciable, pursuant
to section one hundred sixty-seven of the internal revenue code, having
a situs in this state and used in the taxpayer's trade or business, the
construction, reconstruction, erection or improvement of which, in the
case of industrial waste treatment facilities, is initiated on or after
January first, nineteen hundred sixty-five, or which, in the case of air
pollution control facilities, is initiated on or after January first,
nineteen hundred sixty-six, and

(B) on condition that such facilities have been certified by the state
commissioner of environmental conservation or his designated
representative, pursuant to section 19-0309 of the environmental
conservation law, as complying with the applicable provisions of the
environmental conservation law, the public health law, the state
sanitary code and codes, rules, regulations, permits or orders
promulgated pursuant thereto, and

(C) on condition that for the taxable year and all succeeding taxable
years, any deductions allowed for federal income tax purposes for such
expenditures or for depreciation or amortization of the same property,
except to the extent that its basis may be attributable to factors other
than such expenditures, be added to federal adjusted gross income
pursuant to paragraph five of subsection (b) of this section, or in case
a modification is allowable pursuant to this paragraph for only a part
of such expenditures, on condition that a proportionate amount of any
such deductions allowed for federal income tax purposes be added to
federal adjusted gross income, and

(D) where the election provided for in subsection (g) of section six
hundred twelve has not been exercised in respect to the same property.

(3) (A) If expenditures in respect to an industrial waste treatment
facility or an air pollution control facility have been allowed as a
modification as provided herein and if within ten years from the end of
the taxable year in which such modification was allowed such property or
any part thereof is used for the primary purpose of salvaging materials
which are usable in the manufacturing process or are marketable, the
taxpayer shall report such change of use in its return for the first
taxable year during which it occurs, and the tax commission may
recompute the tax for the year or years for which such modification was
allowed, and may assess any additional tax resulting from such
recomputation within the time fixed by paragraph eight of subsection (c)
of section six hundred eighty-three.

(B) If a modification is allowed as herein provided for expenditures
paid or incurred during any taxable year on the basis of a temporary
certificate of compliance issued pursuant to the environmental
conservation law, and if the taxpayer fails to obtain a permanent
certificate of compliance upon completion of the facilities with respect
to which such temporary certificate was issued, the taxpayer shall
report such failure in its report for the taxable year during which such
facilities are completed, and the tax commission may recompute the tax
for the year or years for which such modification was allowed, and may
assess any additional tax resulting from such recomputation within the
time fixed by paragraph eight of subsection (c) of section six hundred
eighty-three.

(C) If a modification is allowed as herein provided for expenditures
paid or incurred during any taxable year in respect to an air pollution
control facility on the basis of a certificate of compliance issued
pursuant to the environmental conservation law and the certificate is
revoked pursuant to subdivision three of section 19-0309 of the
environmental conservation law, the tax commission may recompute the tax
for the year or years for which the facility is not or was not in
compliance with the applicable provisions of the environmental
conservation law, the state sanitary code or codes, rules, regulations,
permits or orders issued pursuant thereto, and for which a modification
was allowed, and may assess any additional tax resulting from such
recomputation within the time fixed by paragraph eight of subsection (c)
of section six hundred eighty-three.

(4) In any taxable year when property is sold or otherwise disposed
of, with respect to which a modification has been allowed pursuant to
this paragraph, such modification shall be disregarded in computing gain
or loss, and the gain or loss on the sale or other disposition of such
property shall be the gain or loss entering into the computation of
federal adjusted gross income for such taxable year.

(i) In the case of mines, oil and gas wells and other natural
deposits, any allowance for percentage depletion pursuant to section six
hundred thirteen or section six hundred thirteen A of the internal
revenue code shall be added to federal adjusted gross income. However,
with respect to the property as to which such addition to federal
adjusted gross income is required, an allowance for depletion shall be
subtracted from federal adjusted gross income in the amount that would
be deductible under section six hundred eleven of such code if the
deduction for an allowance for depletion were computed without reference
to such section six hundred thirteen or section six hundred thirteen A.
With respect to the computation of depletion pursuant to this
subsection, the basis for such computation for taxable years beginning
in nineteen hundred seventy-two shall be the federal basis. For
subsequent taxable years, the basis for such computation shall be
reduced only by the deduction for the allowance for depletion deductible
pursuant to this subsection. The portion of any gain from the sale or
other disposition of such property having a higher adjusted basis for
New York income tax purposes than for federal income tax purposes, that
does not exceed such difference in basis, shall be subtracted from
federal adjusted gross income.

(j) Modification for nonpublic school tuition. (1) General. An
individual shall be entitled to subtract from his federal adjusted gross
income an amount shown in the table set forth in this paragraph for his
New York adjusted gross income for the taxable year, computed without
the benefit of this modification, multiplied by the number of his
dependents, not exceeding three, attending a nonpublic school on a
full-time basis for at least four months during the regular school year
for the education of such dependent in grades one through twelve,
provided such individual is allowed an exemption under section six
hundred sixteen for such dependent. Provided, further, that the
modification under this paragraph may be taken only if such individual
has paid at least fifty dollars for each such dependent in tuition to
such nonpublic school for such education of such dependent. No taxpayer
shall be entitled to the modification provided for in this paragraph if
he claims a tuition reimbursement payment pursuant to article twelve-A
of the education law.

If New York The amount
adjusted gross allowable for each

income is: dependent is:
Less than $9,000 $1,000
9,000--10,999 850
11,000--12,999 700
13,000--14,999 550
15,000--16,999 400
17,000--18,999 250
19,000--20,999 150
21,000--22,999 125
23,000--24,999 100
25,000 and over --0--

(2) Husband and wife. In determining the applicable New York adjusted
gross income of a husband and wife for purposes of the table set forth
in paragraph one of this subsection, the New York adjusted gross income
of a husband and wife shall be the aggregate of their New York adjusted
gross incomes for the taxable year, determined without the benefit of
the modification provided for in this subsection, and the number of
dependents with respect to which this modification may be claimed shall
be no more than three in the aggregate.

(3) Definitions. (A) "Tuition", as used in this subsection, shall mean
the amount actually paid during the taxable year by the taxpayer for the
enrollment of a dependent during the regular school year at a nonpublic
school.

(B) "Nonpublic school", as used in this subsection, shall mean any
non-profit elementary or secondary school in the state of New York,
other than a public school, which (i) is providing instruction in
accordance with article seventeen and section thirty-two hundred four of
the education law, (ii) has not been found to be in violation of Title
VI of the Civil Rights Act of nineteen hundred sixty-four, 78 Stat. 252,
42 U.S.C. § 2000 (d) and (iii) which is entitled to a tax exemption
under sections five hundred one (a) and five hundred one (c) (3) of the
Federal Internal Revenue Code of nineteen hundred fifty-four, as
amended. The commissioner of education shall furnish to the state tax
commission by February first of each year, a certified list of nonpublic
schools which comply with clause (i) of this subparagraph for the
preceding calendar year and shall provide such other assistance with
respect to whether nonpublic schools come within clause (i) as the state
tax commission may require.

(C) "Regular school year", as used in this subsection, shall mean the
months of the taxable year exclusive of July and August.

(4) Additional information. Any claim for a modification under this
subsection shall be accompanied by such information as the tax
commission may require.

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

(l) For taxable years beginning after December thirty-first, two
thousand two, upon the disposition of property to which subsection (k)
of this section applies, the amount of any gain or loss includible in
federal adjusted income shall be adjusted to reflect the inclusions and
exclusions from federal adjusted income pursuant to paragraph eight of
subsection (b) and paragraph sixteen of subsection (c) of this section
attributable to such property.

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

(n) Where gain or loss is recognized for federal income tax purposes
upon the disposition of stock or indebtedness of a corporation electing
under subchapter s of chapter one of the internal revenue code

(1) There shall be added to federal adjusted gross income the amount
of increase in basis with respect to such stock or indebtedness pursuant
to subsection (a) of section thirteen hundred seventy-six of the
internal revenue code as such section was in effect for taxable years
beginning before January first, nineteen hundred eighty-three and
subparagraphs (A) and (B) of paragraph one of subsection (a) of section
thirteen hundred sixty-seven of such code, for each taxable year of the
corporation beginning, in the case of a corporation taxable under
article nine-A of this chapter, after December thirty-first, nineteen
hundred eighty, and in the case of a corporation taxable under article
thirty-two of this chapter, after December thirty-first, nineteen
hundred ninety-six, for which the election provided for in subsection
(a) of section six hundred sixty of this article was not in effect, and

(2) There shall be subtracted from federal adjusted gross income

(A) the amount of reduction in basis with respect to such stock or
indebtedness pursuant to subsection (b) of section thirteen hundred
seventy-six of the internal revenue code as such section was in effect
for taxable years beginning before January first, nineteen hundred
eighty-three and subparagraphs (B) and (C) of paragraph two of
subsection (a) of section thirteen hundred sixty-seven of such code, for
each taxable year of the corporation beginning, in the case of a
corporation taxable under article nine-A of this chapter, after December
thirty-first, nineteen hundred eighty, and in the case of a corporation
taxable under article thirty-two of this chapter, after December
thirty-first, nineteen hundred ninety-six, for which the election
provided for in subsection (a) of section six hundred sixty of this
article was not in effect and

(B) the amount of any modifications to federal gross income with
respect to such stock pursuant to paragraph twenty of subsection (b) of
this section.

(o) Modifications for new business investment gains and certain new
business investments.

1. For purposes of this subsection, the following definitions shall
apply:

(A) "New business investment gain" means gain from the sale of a new
business investment issued to the taxpayer before January first,
nineteen hundred eighty-eight, if:

(i) such new business investment is, in the hands of the person
selling the same (whether or not the taxpayer), a capital asset as
defined in section 1221 of the internal revenue code of nineteen hundred
fifty-four, as amended, and

(ii) such new business investment was held by such person for the
period specified in paragraph two of this subsection.

(B) "New business" means a corporation or partnership organized or
formed under the laws of any state which:

(i) adopts a plan on or after July first, nineteen hundred eighty-one
and before January first, nineteen hundred eighty-eight, to conduct a
new business within the meaning and intent of this section and to issue
new business investments, as defined in this subsection, and

(ii) is, at the date of adoption of such plan, subject to taxation
(whether or not any amount is owing) under section one hundred
eighty-three, one hundred eighty-four or one hundred eighty-six of
article nine of this chapter, or under article nine-a of this chapter or
article twenty-three of this chapter, or would have been subject to tax
under article twenty-three (as such article was in effect on January
first, nineteen hundred eighty) if such article were still in effect,
and the first taxable period for which such new business became subject
to such taxation commenced on or after July first, nineteen hundred
eighty-one and before January first, nineteen hundred eighty-eight, and
such first taxable period includes the date of adoption of such plan; if
not so subject to taxation, the new business must be subject to taxation
under such sections or articles for the first time within one year from
the date of adoption of such plan, and

(iii) is conducted (or will be conducted, as evidenced by such plan)
whereby at least ninety percent of the assets (valued at original cost)
are located and employed in this state and eighty percent of the
employees (as ascertained within the meaning and intent of subparagraph
three of paragraph (a) of subdivision three of section two hundred ten
of this chapter and, in addition, in the case of a partnership,
excluding partners) are principally employed in this state during each
taxable period, or part thereof, as required by clause (iv) of this
subparagraph, and

(iv) within ninety days after the adoption of such plan, or, if a
return is required, as part of such return, under such article nine,
article nine-A or article twenty-three (as such article was in effect on
or before December thirtieth, nineteen hundred eighty-two), whichever is
sooner, shall file a new business certificate with the state tax
commission attesting to whether it meets, if subject to taxation under
such articles, or intends to meet, if not so subject, all of the
conditions stated in clauses (i), (ii) and (iii) of this subparagraph
within the time set forth therein. Thereafter, during the first four
taxable years of such new business, along with, and as part of, any
return required under such articles, such new business shall make and
file a new business certificate for the period covered by such return
attesting to whether it has met the conditions specified in this
subparagraph during the taxable period covered by such return. If no
return is required under such articles, such certificate shall be filed
annually on or before the fifteenth day of March which shall cover the
twelve consecutive calendar month period ending on the last day of
December immediately preceding such March fifteenth. If such new
business fails to meet such conditions specified in this subparagraph,
it shall, in addition, give notice of this fact, within the time
prescribed by the state tax commission, to the holders of its "new
business investments." The state tax commission shall prescribe the form
and content of such new business certification and may require a new
business to file such certificate for periods (even if no return is
filed or required, but for this section) covering up to eight years from
the date of adoption of such plan, as in its discretion, it deems the
same necessary for the enforcement of this subparagraph, and

(v) Special rules:

(1) For any taxable period, in order to constitute a new business, a
business enterprise must have derived more than sixty percent of its
aggregate gross receipts from sources other than royalties, rents,
dividends, interest, annuities and sales or exchanges of stock or
securities.

(2) A new business does not include (i) any new business of which
twenty-five percent or more of the number of shares of stock that
entitle the holders thereof to vote for the election of directors or
trustees is owned, directly or indirectly, by a taxpayer subject to tax
under section one hundred eighty-three, one hundred eighty-four, one
hundred eighty-five or one hundred eighty-six of article nine of this
chapter, or under article nine-A, thirty-two or thirty-three of this
chapter or (ii) any new business substantially similar in operation and
in ownership, directly or indirectly, to a business entity (or entities)
taxable, or previously taxable, under such sections, such articles,
article twenty-three or which would have been subject to tax under
article twenty-three (as such article was in effect on January first,
nineteen hundred eighty) or the income (or losses) of which is (or was)
includable under article twenty-two whereby the intent and purpose of
this subsection would be evaded.

(C) "New business investment" means and includes the following
investments issued before January first, nineteen hundred eighty-eight
by a new business pursuant to a plan described in clause (i) of
subparagraph (B) of this paragraph for money or other property (other
than stock or securities) on or before the expiration of the third
taxable year of such new business (excluding any short period
immediately preceding such taxable year because the new business was not
in existence for an entire taxable year) or forty-two months from the
adoption of such plan, whichever is sooner: (i) original issuance
capital stock as part of a new issue, (ii) other original issuance
securities of a new issue of a like nature as stocks which are designed
as a means of investment and issued for the purpose of financing
corporate enterprises and providing for a distribution of rights in such
enterprises, (iii) debt obligations such as bonds and debentures for a
term of at least one year, whether secured or unsecured, and (iv)
certificates and other instruments representing proprietary interests,
whether limited or otherwise, in and assumption of general liabilities,
whether limited or otherwise, of a partnership enterprise.

2. A taxpayer may subtract from his federal adjusted gross income a
portion of an amount constituting a new business investment gain, as
follows:

If new business The modification is equal to the

investment held for: following proportion of the gain

includable in federal adjusted

gross income:

At least four years, but

less than five years twenty-five percent

At least five years, but

less than six years fifty percent

At least six years one hundred percent

3. Where, within six months of the realization of a new business
investment gain allowable as the basis of a modification under paragraph
two of this subsection, such modification is equal to less than one
hundred percent of the portion of the gain includable in federal
adjusted gross income and the taxpayer purchases a new business
investment which is then held for a period of at least six months, the
taxpayer may subtract from his federal adjusted gross income ten percent
(but not an amount that will reduce the portion of such gain included in
his New York income below zero) of the amount of such gain where the
purchase price of the new business investment is equal to or greater
than the proceeds of the sale giving rise to such gain. Where the
purchase price of the new business investment is less than an amount
equal to the proceeds of such sale, the modification allowable under
this paragraph shall be equal to ten percent of an amount equal to the
product of (A) the amount of the gain and (B) a fraction the numerator
of which is the purchase price of the new investment and the denominator
of which is an amount equal to the proceeds of such sale. The
modification allowable under this paragraph may be utilized, at the
option of the taxpayer, with respect to the taxable year in which the
new business investment gain is realized or the year containing the last
day of the six-month retention period described in this paragraph.

4. The state tax commission may prescribe such rules and regulations
as may be necessary to carry out the purposes of this subdivision.

(p) New business investment deferral. For taxable years beginning
before January first, nineteen hundred eighty-eight, at the option of
the taxpayer, there may be subtracted from federal adjusted gross income
a reinvested amount of long-term capital gain realized in a taxable year
from the sale of a capital asset, as such term is defined in section
1221 of the internal revenue code, which is not a new business
investment. A reinvested amount of long-term capital gain shall mean an
amount which bears the same ratio to the long-term capital gain realized
from the sale of a capital asset which was includable in New York
adjusted gross income as that portion of the sale proceeds which is
reinvested, within one year from date of sale, in a New York new
business bears to the total sale proceeds. For the purposes of this
subsection, a New York new business is a business enterprise which (1)
has been a taxpayer under this article for no more than three taxable
years (including short taxable years), (2) over fifty percent of the
number of shares of stock that entitle the holders thereof to vote for
the election of directors or trustees is not owned, directly or
indirectly, by a taxpayer subject to tax under section one hundred
eighty-three, one hundred eighty-four, one hundred eighty-five or one
hundred eighty-six of article nine of this chapter, or under article
nine-A, thirty-two or thirty-three of this chapter, (3) is not
substantially similar in operation or ownership, directly or indirectly,
to a business entity (or entities) taxable, or previously taxable, under
such sections, such articles, article twenty-three or which would have
been subject to tax under article twenty-three (as such article was in
effect on January first, nineteen hundred eighty) or the income (or
losses) of which is (or was) includable under article twenty-two whereby
the intent and purpose of this subsection would be evaded, (4) locates
and employs at least ninety percent of its assets in the state, (5)
employs principally in the state eighty percent of its employees (as
ascertained within the meaning and intent of subparagraph three of
paragraph (a) of subdivision three of section two hundred ten of this
chapter and, in addition, in the case of a partnership, excluding
partners), (6) derives less than forty percent of its gross income from
dividends, interest, royalties (other than mineral, oil, or gas
royalties or copyright royalties), and annuities and (7) reports at
least twenty-five hundred dollars in gross income in any taxable year.
The reinvested amount must qualify as a capital asset as defined in
section 1221 of the internal revenue code and must be retained by the
taxpayer for at least twelve months. The modification allowable under
this subsection shall be utilized with respect to the taxable year in
which the twelve month retention period ends. The commissioner of
taxation and finance may require annual information reports on the
investments in new businesses made pursuant to this subsection, and such
other reports as he may require to ensure against the evasion of the
intent and purposes of this subsection.

(q) An amount deferred under subsection (p) hereof shall be added to
federal adjusted gross income when the reinvestment in the New York new
business which qualified a taxpayer for such deferral is sold.

(r) Related members expense add back. (1) Definitions. (A) Related
member. "Related member" means a related person as defined in
subparagraph (c) of paragraph three of subsection (b) of section four
hundred sixty-five of the internal revenue code, except that "fifty
percent" shall be substituted for "ten percent".

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

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

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

(2) Royalty expense add backs. (A) For the purpose of computing New
York adjusted gross income, a taxpayer must add back royalty payments
directly or indirectly paid, accrued, or incurred in connection with one
or more direct or indirect transactions with one or more related members
during the taxable year to the extent deductible in calculating federal
taxable income.

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

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

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

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

(s) New York S termination year. (1) General. In the case of a New
York S termination year, the amount of any item of S corporation income,
loss and deduction included in the shareholder's federal adjusted gross
income and any reductions for taxes (as described in paragraphs two and
three of subsection (f) of section thirteen hundred sixty-six of the
internal revenue code) shall be adjusted in accordance with the
treatment provided in paragraph two or three of this subsection.

(2) Pro rata allocation. Unless paragraph three of this subsection
applies, an equal portion of each S corporation item shall be assigned
to each day of the S corporation's taxable year for federal income tax
purposes. The portion of each such item thereby assigned to the S short
year shall be treated as an item of a New York S corporation, and the
portion of each such item thereby assigned to the C short year shall be
treated as an item of an S corporation which is a New York C
corporation.

(3) Normal tax accounting. The portion of each S corporation item
assigned to the S short year and the C short year shall be determined
using normal tax accounting rules if:

(A) there is a sale or exchange of fifty percent or more of the stock
in such corporation during the New York S termination year; or

(B) the corporation so elects, in the manner the commissioner may
provide. No election under this subparagraph shall be effective unless
all persons who are shareholders during the S short year and all persons
who are shareholders on the first day of the C short year consent to
such election.

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

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

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

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

(v) Amounts deferred. The amount deferred under subsection (u) of this
section shall be added to federal adjusted gross income when the
reinvestment in the New York qualified emerging technology company which
qualified a taxpayer for such deferral is sold.

(w) Alimony modifications. (1) In the case of applicable alimony or
separate maintenance payments, the following modifications shall apply:

(A) There shall be subtracted from federal adjusted gross income any
applicable alimony or separate maintenance payments made by the taxpayer
during the taxable year.

(B) There shall be added to federal adjusted gross income any
applicable alimony or separate maintenance payments received by the
taxpayer during the taxable year.

(2) (A) The term "alimony or separate maintenance payments" means
payments as defined under section seventy-one of the internal revenue
code in effect immediately prior to the enactment of Public Law 115-97.

(B) The term "applicable alimony or separate maintenance payments"
means payments made under an alimony or separation instrument (as
defined in section seventy-one of the internal revenue code in effect
immediately prior to the enactment of Public Law 115-97) that was
executed after December thirty-first, two thousand eighteen, and any
divorce or separation instrument executed on or before such date and
modified after such date if the modification expressly provides that the
amendments made by this section apply to such modification.

(x) Qualified moving expense reimbursement and moving expenses. (1) In
the case of applicable qualified moving expense reimbursement and moving
expenses, the following modifications shall apply:

(A) There shall be subtracted from federal adjusted gross income any
applicable qualified moving expense reimbursement received by the
taxpayer during the taxable year.

(B) There shall be subtracted from federal adjusted gross income any
applicable moving expenses paid by the taxpayer during the taxable year.

(2) Applicable qualified moving expense reimbursement and moving
expenses are those deductions as allowed by paragraph (g) of sections
one hundred thirty-two and section two hundred seventeen, respectfully,
of the internal revenue code immediately prior to the enactment of
Public Law 115-97.