N.Y. GCM Law § 106 — New York Code / Act GCM / Section 106
Unincorporated business deductions
Status: in_force

§ 106. Unincorporated business deductions. The unincorporated business\ndeductions of an unincorporated business means the items of loss and\ndeduction directly connected with or incurred in the conduct of the\nbusiness, which are allowable for federal income tax purposes for the\ntaxable year (including losses and deductions connected with any\nproperty employed in the business), with the following modifications:\n  (1) A deduction shall be allowed for charitable contributions of the\nunincorporated business, to the extent that such contributions would be\ndeductible for federal income tax purposes if made by a corporation, but\nnot in excess of five per centum of the amount by which the\nunincorporated business gross income exceeds the unincorporated business\ndeductions computed without the benefit of any deduction for charitable\ncontributions.\n  (2) A deduction shall be allowed for net operating losses incurred by\nthe unincorporated business in an amount computed in the same manner as\nthe net operating loss deduction which would be allowable for the\ntaxable year for federal income tax purposes if the unincorporated\nbusiness were an individual taxpayer (but determined solely by reference\nto the unincorporated business gross income and unincorporated business\ndeductions, allocated to the city, of the unincorporated business). Such\ndeduction shall not include any net operating loss sustained during any\ntaxable year ending prior to January first, nineteen hundred sixty-six\nand for the purposes of this paragraph net operating losses shall be\ndetermined without regard to any deductions allowed pursuant to\nsubsection (b) of section one hundred eight and any net operating loss\nfor a taxable year beginning in nineteen hundred eighty-one shall be\ncomputed without regard to the deduction allowed with respect to\nrecovery property under section one hundred sixty-eight of the internal\nrevenue code; in lieu of such deduction, a taxpayer shall be allowed for\nsuch taxable year with respect to such property the depreciation\ndeduction allowable under section one hundred sixty-seven of such code\nas such section was in full force and effect on December thirty-first,\nnineteen hundred eighty.\n  (3) No deduction shall be allowed (except as provided in section one\nhundred eight) for amounts paid or incurred to a proprietor or partner\nfor services or for use of capital.\n  (4) No deduction shall be allowed for income taxes imposed by the\ncity, this state or any other taxing jurisdiction.\n  (5) No deduction shall be allowed for (A) interest on indebtedness\nincurred or continued to purchase or carry obligations or securities the\nincome from which is exempt from tax under this title; (B) expenses paid\nor incurred for the production or collection of such income or the\nmanagement, conservation or maintenance of property held for the\nproduction of such income; or (C) the amortizable bond premium on any\nbond the interest income from which is so exempt.\n  (6) No deduction shall be allowed in respect of the excess of net\nlong-term capital gain over net short-term capital loss, but capital\nlosses incurred in the unincorporated business shall be treated as\nordinary losses and shall be allowed in full.\n  (7) In the case of a taxpayer who has exercised the election permitted\nby subdivision (b) of section one hundred eight, no deduction shall be\nallowed for expenditures with reference to the property to which such\nelection relates, or for depreciation of such property, except as\npermitted by said subdivision.\n  (8) A deduction shall be allowed for (A) interest on indebtedness\nincurred or continued to purchase or carry obligations or securities the\nincome from which is subject to tax under this title but exempt from\nfederal income tax; (B) ordinary and necessary expenses paid or incurred\nduring the taxable year for the production or collection of such income\nor the management, conservation or maintenance of property held for the\nproduction of such income; and (C) the amortizable bond premium for the\ntaxable year on any bond the interest on which is subject to tax under\nthis title but exempt from federal income tax.\n  (9) At the election of the taxpayer, a deduction shall be allowed for\nexpenditures paid or incurred during the taxable year for the\nconstruction, reconstruction, erection or improvement of industrial\nwaste treatment facilities and air pollution control facilities.\n  (A) (i) The term "industrial waste treatment facilities" shall mean\nfacilities for the treatment, neutralization or stabilization of\nindustrial waste (as the term "industrial waste" is defined in section\ntwelve hundred two of the state public health law) from a point\nimmediately preceding the point of such treatment, neutralization or\nstabilization to the point of disposal, including the necessary pumping\nand transmitting facilities, but excluding such facilities installed for\nthe primary purpose of salvaging materials which are usable in the\nmanufacturing process or are marketable.\n  (ii) The term "air pollution control facilities" shall mean facilities\nwhich remove, reduce, or render less noxious air contaminants emitted\nfrom an air contamination source (as the terms "air contaminant" and\n"air contamination source" are defined in section twelve hundred\nsixty-seven of the state public health law) from a point immediately\npreceding the point of such removal, reduction or rendering to the point\nof discharge of air, meeting emission standards as established by the\nair pollution control board, but excluding such facilities installed for\nthe primary purpose of salvaging materials which are usable in the\nmanufacturing process or are marketable and excluding those facilities\nwhich rely for their efficacy on dilution, dispersion or assimilation of\nair contaminants in the ambient air after emission.\n  (B) However, such deduction shall be allowed only\n  (i) with respect to tangible property which is depreciable, pursuant\nto section one hundred sixty-seven of the internal revenue code, having\na situs in the city and used in the taxpayer's trade or business, the\nconstruction, reconstruction, erection or improvement of which, in the\ncase of industrial waste treatment facilities, is initiated on or after\nJanuary first, nineteen hundred sixty-six, and only for expenditures\npaid or incurred prior to January first, nineteen hundred seventy-two,\nor which; in the case of air pollution control facilities, is initiated\non or after January first, nineteen hundred sixty-six, and\n  (ii) on condition that such facilities have been certified by the\nstate commissioner of health or his designated representative, pursuant\nto the state public health law, as complying with the provisions of the\nstate public health law, the state sanitary code and regulations,\npermits or orders promulgated pursuant thereto, and\n  (iii) on condition that for the taxable year and all succeeding\ntaxable years, no deduction for such expenditures or for depreciation of\nthe same property allowed for federal income tax purposes shall be\nallowed under this title, except to the extent that the basis of the\nproperty may be attributable to factors other than such expenditures, or\nin case a deduction is allowable pursuant to this paragraph nine, for\nonly a part of such expenditures, on condition that any deduction\nallowed for federal income tax purposes for such expenditures or for\ndepreciation of the same property be proportionately reduced in\ncomputing unincorporated business deductions for the taxable year and\nall succeeding taxable years, and\n  (iv) where the election provided for in subdivision (b) of section one\nhundred eight has not been exercised in respect to the same property.\n  (C) (i) If expenditures in respect to an industrial waste treatment\nfacility or an air pollution control facility have been deducted as\nprovided herein and if within ten years from the end of the taxable year\nin which such deduction was allowed such property or any part thereof is\nused for the primary purpose of salvaging materials which are usable in\nthe manufacturing process or are marketable, the taxpayer shall report\nsuch change of use in its return for the first taxable year during which\nit occurs, and the director of finance may recompute the tax for the\nyear or years for which such deduction was allowed and any carryback or\ncarryover year, and may assess any additional tax resulting from such\nrecomputation within the time fixed by paragraph eight of subdivision\n(c) of section one hundred thirty-one.\n  (ii) If a deduction is allowed as herein provided for expenditures\npaid or incurred during any taxable year on the basis of a temporary\ncertificate of compliance issued pursuant to the state public health\nlaw, and if the taxpayer fails to obtain a permanent certificate of\ncompliance upon completion of the facilities with respect to which such\ntemporary certificate was issued, the taxpayer shall report such failure\nin its report for the taxable year during which such facilities are\ncompleted, and the director of finance may recompute the tax for the\nyear or years for which such deduction was allowed and any carryback or\ncarryover year, and may assess any additional tax resulting from such\nrecomputation within the time fixed by paragraph eight of subdivision\n(c) of section one hundred thirty-one.\n  (D) In any taxable year when property is sold or otherwise disposed\nof, with respect to which a deduction has been allowed pursuant to this\nparagraph nine, such deduction shall be disregarded in computing gain or\nloss, and the gain or loss on the sale or other disposition of such\nproperty shall be the gain or loss allowable for federal income tax\npurposes for such taxable year.\n  (10) For taxable years beginning after December thirty-first, nineteen\nhundred eighty-one, except with respect to property which is a qualified\nmass commuting vehicle described in subparagraph (D) of paragraph eight\nof subsection (f) of section one hundred sixty-eight of the internal\nrevenue code (relating to qualified mass commuting vehicles), a\ndeduction shall be allowed for any amount which the taxpayer could have\nexcluded for purposes of this title had it not made the election\nprovided for in such paragraph eight as it was in effect for agreements\nentered into prior to January first, nineteen hundred eighty-four.\n  (11) For taxable years beginning after December thirty-first, nineteen\nhundred eighty-one, except with respect to property which is a qualified\nmass commuting vehicle described in subparagraph (D) of paragraph eight\nof subsection (f) of section one hundred sixty-eight of the internal\nrevenue code (relating to qualified mass commuting vehicles), no\ndeduction shall be allowed for any amount deductible for federal income\ntax purposes solely as a result of an election made pursuant to the\nprovisions of such paragraph eight as it was in effect for agreements\nentered into prior to January first, nineteen hundred eighty-four.\n  (12) For taxable years beginning after December thirty-first, nineteen\nhundred eighty-one, except with respect to recovery property subject to\nthe provisions of section two hundred eighty-F of the internal revenue\ncode and recovery property placed in service in this state in taxable\nyears beginning after December thirty-first, nineteen hundred\neighty-four, no deduction shall be allowed for the amount allowable as a\ndeduction under section one hundred sixty-eight of the internal revenue\ncode.\n  (13) For taxable years beginning after December thirty-first, nineteen\nhundred eighty-one, except with respect to recovery property subject to\nthe provisions of section two hundred eighty-F of the internal revenue\ncode and recovery property placed in service in this state in taxable\nyears beginning after December thirty-first, nineteen hundred\neighty-four, and provided a deduction has not been disallowed pursuant\nto subdivision eleven of this section, a taxpayer shall be allowed with\nrespect to recovery property the depreciation deduction allowable under\nsection one hundred sixty-seven of the internal revenue code as such\nsection would have applied to property placed in service on December\nthirty-first, nineteen hundred eighty.\n  (14) For taxable years ending after September 10, 2001, in the case of\nqualified property described in paragraph 2 of subsection k of section\n168 of the internal revenue code, other than qualified resurgence zone\nproperty described in subdivision 16 of this section, and other than\nqualified New York Liberty Zone property described in paragraph 2 of\nsubsection b of section 1400L of the internal revenue code (without\nregard to clause (i) of subparagraph (C) of such paragraph), no\ndeduction shall be allowed for the amount allowable as a deduction under\nsection 167 of the internal revenue code.\n  (15) For taxable years ending after September 10, 2001, in the case of\nqualified property described in paragraph 2 of subsection k of section\n168 of the internal revenue code, other than qualified resurgence zone\nproperty described in subdivision 16 of this section, and other than\nqualified New York Liberty Zone property described in paragraph 2 of\nsubsection b of section 1400L of the internal revenue code (without\nregard to clause (i) of subparagraph (C) of such paragraph), a deduction\nshall be allowed with respect to such property equal to the depreciation\ndeduction allowable under section 167 of the internal revenue code as\nsuch section would have applied to such property had it been acquired by\nthe taxpayer on September 10, 2001.\n  (16) For purposes of subdivisions 14 and 15 of this section, qualified\nresurgence zone property shall mean qualified property described in\nparagraph 2 of subsection k of section 168 of the internal revenue code\nsubstantially all of the use of which is in the resurgence zone, as\ndefined below, and is in the active conduct of a trade or business by\nthe taxpayer in such zone, and the original use of which in the\nresurgence zone commences with the taxpayer after September 10, 2001.\nThe resurgence zone shall mean the area of New York county bounded on\nthe south by a line running from the intersection of the Hudson River\nwith the Holland Tunnel, and running thence east to Canal Street, then\nrunning along the centerline of Canal Street to the intersection of the\nBowery and Canal Street, running thence in a southeasterly direction\ndiagonally across Manhattan Bridge Plaza, to the Manhattan Bridge and\nthence along the centerline of the Manhattan Bridge to the point where\nthe centerline of the Manhattan Bridge would intersect with the easterly\nbank of the East River, and bounded on the north by a line running from\nthe intersection of the Hudson River with the Holland Tunnel and running\nthence north along West Avenue to the intersection of Clarkson Street\nthen running east along the centerline of Clarkson Street to the\nintersection of Washington Avenue, then running south along the\ncenterline of Washington Avenue to the intersection of West Houston\nStreet, then east along the centerline of West Houston Street, then at\nthe intersection of the Avenue of the Americas continuing east along the\ncenterline of East Houston Street to the easterly bank of the East\nRiver.\n