NY Tax L § 1503 (2021)
2021 New York Laws TAX - Tax Article 33 - Franchise Taxes on Insurance Corporations 1503 - Computation of Entire Net Income.

§  1503.  Computation of entire net income.  (a) The entire net income of a taxpayer shall be its total net income from all sources which shall be presumably the same as the  life  insurance  company  taxable  income (which shall include, in the case of a stock life insurance company that has  a  balance,  as  determined  as of the close of such company's last taxable year beginning before January first, two thousand  eighteen,  in an  existing  policyholders  surplus account, as such term is defined in section 815 of the internal revenue code as such section was  in  effect for taxable years beginning before January first, two thousand eighteen, the  amount  of  one-eighth  of  such  balance),  taxable  income  of  a partnership or taxable  income,  but  not  alternative  minimum  taxable income,  as the case may be, which the taxpayer is required to report to the United States treasury department, for the taxable year or,  in  the case of a corporation exempt from federal income tax (other than the tax on  unrelated  business  taxable income imposed under section 511 of the internal revenue code) but not exempt from  tax  under  section  fifteen hundred  one,  the  taxable  income  which such taxpayer would have been required to  report  but  for  such  exemption,  except  as  hereinafter provided.  (b)  Modifications.  In  computing  entire  net  income, the following modifications shall be made:  (1) Entire net income shall not include:  (A) income, gains and losses from  subsidiary  capital  which  do  not include the amount of a recovery in respect of any war loss, except that this   modification   shall   not  apply  to  the  amount  described  in subparagraph (S) of this paragraph;  (B) fifty percent of dividends other than  from  subsidiaries,  except that  this  modification  shall  not  apply  to  the amount described in subparagraph (S) of this paragraph, and except that, in the  case  of  a life  insurance company, such modification shall apply only with respect to the  company's  share  of  such  dividends,  which  share  means  the percentage  determined  under paragraph one of subsection (a) of section eight hundred twelve of the internal revenue code;  (C) any refund or credit of  a  tax  imposed  under  this  article  or section  one  hundred  eighty-seven,  or  article  twenty-three  of this chapter heretofore in effect to the extent properly included  as  income for federal income tax purposes, for which no exclusion or deduction was allowed  in  determining  the  taxpayer's  entire  net income under this article for any prior year;  (D) that portion of wages or salaries paid or incurred for the taxable year for which a deduction is not allowed pursuant to the provisions  of section two hundred eighty-C of the internal revenue code;  (E)  in  the case of a taxpayer who is separately or as a partner of a partnership doing an insurance business as a  member  of  the  New  York insurance  exchange described in section six thousand two hundred one of the insurance law, any item of income, gain, loss or deduction  of  such business  which  is  the  taxpayer's  distributive or pro rata share for federal income tax purposes or which the taxpayer is  required  to  take into account separately for federal income tax purposes;  (F)  for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph  eight of  subsection  (f)  of  section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which is included in the taxpayer's taxable income  for  federal  income tax  purposes  solely  as  a  result of an election made pursuant to the provisions of such paragraph eight as it was in  effect  for  agreements entered into prior to January first, nineteen hundred eighty-four;  (G)  for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph  eight of  subsection  (f)  of  section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which  the  taxpayer  could  have  excluded  from its taxable income for federal income tax purposes had it not made the election provided for in such paragraph eight as it was in effect  for  agreements  entered  into prior to January first, nineteen hundred eighty-four;  (H)   the   amount  deductible  pursuant  to  paragraph  ten  of  this subdivision;  (I) upon the disposition of property to which paragraph  ten  of  this subdivision  applies,  the amount, if any, by which the aggregate of the amounts  described  in  subparagraph  (M)  of  paragraph  two  of   this subdivision  attributable  to such property exceeds the aggregate of the amounts described in paragraph ten of this subdivision  attributable  to such property;  (J) the amount of unearned premiums on outstanding business at the end of  the  taxable  year  included  in  premiums  earned  pursuant  to the provisions of section 832(b)(4)(B) of the internal revenue code;  (K) the amount of unearned premiums on outstanding business at the end of the  taxable  year  included  in  premiums  earned  pursuant  to  the provisions of section 832(b)(7)(B)(i) of the internal revenue code;  (L)  the amount included in premiums earned pursuant to the provisions of section 832(b)(8)(A)(i) of the internal revenue  code  which  is  the difference  between  the  amount  of  discounted  unearned  premiums  on outstanding business at the end of the taxable year and  the  amount  of unearned  premiums  on  outstanding  business  at the end of the taxable year;  (M) for taxable years beginning after December thirty-first,  nineteen hundred   eighty-six   and   before   January  first,  nineteen  hundred ninety-two, the amount of  unearned  premiums  on  outstanding  business included  in  premiums  earned  pursuant  to  the provisions of sections 832(b)(4)(C) and 832(b)(7)(B)(ii) of the internal revenue code;  (N)  the  amount  which  is  the  difference  between  the  amount  of discounted  unpaid  losses  at  the  end of the taxable year used in the computation of losses incurred pursuant to section 832(b)(5)(A)  of  the internal  revenue  code,  and  the amount of unpaid losses that would be used in such computation for the taxable year if such  losses  were  not discounted  pursuant to the provisions of section 846(a) of the internal revenue code;  (O) the  amount  by  which  losses  incurred  as  defined  in  section 832(b)(5)(A) of the internal revenue code are reduced in accordance with section 832(b)(5)(B) of such code; and  (P)  the  amount included in federal gross income pursuant to sections 847(5) and 847(6) of the internal revenue code.  (Q) The  amount  deductible  pursuant  to  paragraph  twelve  of  this subsection.  (R)  for  taxable  years  beginning  after  December thirty-first, two thousand two, the amount deductible pursuant to  paragraph  fourteen  of this subdivision.  (S) The income required to be included in the taxpayer's federal gross income pursuant to subsection (a) of section 951 of the internal revenue code by reason of subsection (a) of section 965 of such code as adjusted by  subsection  (b) of such section but without regard to subsection (c) of such section to the extent such income is received from a corporation that is not included in a combined return with the taxpayer.  (T) Any amount excepted, for purposes of subsection (a) of section one hundred  eighteen  of  the  internal  revenue  code,   from   the   term "contribution  to  the  capital  of  the  taxpayer"  by paragraph two of subsection (b) of section one hundred eighteen of the  internal  revenue code.  (U)  To  the  extent not excluded from income pursuant to subparagraph (A) of this paragraph, ninety-five percent of the income required to  be included  in  the taxpayer's federal gross income pursuant to subsection (a) of section 951A of the internal revenue code, without regard to  the deduction  under  section  250  of  the  internal  revenue code, that is generated by a corporation that is not included  in  a  combined  report with the taxpayer.  (V)  To  the  extent not excluded from income pursuant to subparagraph (A) or (B) of this paragraph, any amount treated as a dividend  received by  the  taxpayer  under section 78 of the internal revenue code that is attributable to the income required to be  included  in  the  taxpayer's federal  gross income pursuant to subsection (a) of section 951A of such code.  (W) The amount of any gain added back to determine entire  net  income in a previous taxable year pursuant to subparagraph (Z) of paragraph two of  this  subdivision  that  is included in federal gross income for the taxable year.  (2) Entire net income  shall  be  determined  without  the  exclusion, deduction or credit of:  (A)  the amount of any specific exemption or credit allowed in any law of the United States imposing any tax on or measured by  the  income  of corporations;  (B)  any  part of any income from dividends or interest on any kind of stock, securities or indebtedness, except as provided  in  subparagraphs (A), (B) and (S) of paragraph one hereof;  (C)  taxes  paid  or  accrued  to  the United States on or measured by income or premiums;  (D) taxes imposed under this article;  (E) In those instances where  a  credit  for  the  special  additional mortgage recording tax is allowed under paragraph one of subdivision (e) of section fifteen hundred eleven of this article, the amount allowed as an  exclusion or deduction for the special additional mortgage recording tax imposed by subdivision one-a of section two hundred  fifty-three  of this  chapter in determining the entire net income which the taxpayer is required to report to the United States  treasury  department  for  such taxable year;  (F)  unless  the credit allowed pursuant to subdivision (e) of section fifteen hundred eleven of this article is reflected in  the  computation of  the  gain  or  loss  so  as to result in an increase in such gain or decrease in such loss, for federal income tax purposes, from the sale or other disposition of the property with  respect  to  which  the  special additional  mortgage recording tax imposed pursuant to subdivision one-a of section two hundred fifty-three of this chapter was paid, the  amount of  the special additional mortgage recording tax imposed by subdivision one-a of section two hundred fifty-three of this chapter which was  paid and  which  is reflected in the computation of the basis of the property so as to result in a decrease in such gain or increase in such loss  for federal  income  tax  purposes from the sale or other disposition of the property with respect to which such tax was paid;  (G) ninety percent of interest on indebtedness directly or  indirectly owed  to  any  stockholder  or  shareholder (including subsidiaries of a corporate stockholder or  shareholder),  or  members  of  the  immediate family  of  an  individual  stockholder  or  shareholder,  owning in the  aggregate in excess of five per centum of the issued  capital  stock  of the taxpayer, except that such interest may, in any event, be deducted  (i) up to an amount not exceeding one thousand dollars,  (ii) in full to the extent that it relates to bonds or other evidences of  indebtedness  issued,  with  stock,  pursuant to a bona fide plan of reorganization, to persons, who, prior to such reorganization, were bona fide creditors of the corporation or  its  predecessors,  but  were  not stockholders or shareholders thereof,  (iii)  in  full  to the extent that it is paid to a federally licensed small business investment company;  (H) in the discretion of the  commissioner,  any  amount  of  interest directly  or  indirectly and any other amount directly attributable as a carrying charge or otherwise to subsidiary capital or to  income,  gains or  losses  from  subsidiary  capital,  or  to  the  income described in subparagraphs (S), (U) and (V) of paragraph one of this subdivision;  (I) in the case  of  a  life  insurance  company,  the  provisions  of subparagraph (B) of this paragraph shall not apply to the policyholders' share  of the items described in such subparagraph. For purposes of this subparagraph, the policyholders' share means the  percentage  determined under paragraph two of subsection (a) of section eight hundred twelve of the internal revenue code.  (J)  in  the case of a taxpayer who is separately or as a partner of a partnership doing an insurance business as a  member  of  the  New  York insurance  exchange described in section six thousand two hundred one of the insurance law, such taxpayer's distributive or pro rata share of the allocated entire net income of such business as  determined  under  this section  and  section  fifteen  hundred  four  of this article, provided however, in the event such allocated entire net income is a  loss,  such taxpayer's  distributive  or  pro  rata  share of such loss shall not be subtracted from federal taxable income in computing  entire  net  income under this section.  (K)  for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph  eight of  subsection  (f)  of  section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which the taxpayer  claimed  as  a  deduction  for  federal  income  tax purposes  solely  as  a  result  of  an  election  made  pursuant to the provisions of such paragraph eight as it was in  effect  for  agreements entered into prior to January first, nineteen hundred eighty-four;  (L)  for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph  eight of  subsection  (f)  of  section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which  the  taxpayer  would  have  been  required  to  include  in   the computation of its taxable income for federal income tax purposes had it not  made  the election permitted pursuant to such paragraph eight as it was in effect for  agreements  entered  into  prior  to  January  first, nineteen hundred eighty-four;  (M)  in  the  case  of  property  placed  in  service in taxable years beginning  before  nineteen  hundred  ninety-four,  for  taxable   years beginning  after  December  thirty-first,  nineteen  hundred eighty-one, except with respect to property subject to the provisions of section two hundred eighty-F of the internal revenue code and  property  subject  to the  provisions  of  section  one  hundred  sixty-eight  of the internal revenue code which is placed in service in this state in  taxable  years beginning after December thirty-first, nineteen hundred eighty-four, the  amount  allowable  as  a  deduction determined under section one hundred sixty-eight of the internal revenue code;  (N)  upon  the  disposition of property to which paragraph ten of this subdivision applies, the amount, if any, by which the aggregate  of  the amounts  described  in  such paragraph ten attributable to such property exceeds the aggregate of the amounts described in  subparagraph  (M)  of this paragraph attributable to such property;  (N-1)  premiums  paid  for  environmental  remediation  insurance,  as defined in  section  twenty-three  of  this  chapter,  and  deducted  in determining  federal  taxable income, to the extent of the amount of the environmental remediation insurance credit allowed  under  such  section twenty-three  and  subdivision  (w) of section fifteen hundred eleven of this article;  (O) the amount of unearned premiums on outstanding business at the end of the preceding taxable year excluded from premiums earned pursuant  to the provisions of section 832(b)(4)(B) of the internal revenue code;  (P) the amount of unearned premiums on outstanding business at the end of  the  preceding  year  excluded  from premiums earned pursuant to the provisions of section 832(b)(7)(B)(i) of the internal revenue code;  (Q)  the  amount  excluded  from  premiums  earned  pursuant  to   the provisions of section 832(b)(8)(A)(i) of the internal revenue code which is  the difference between the amount of discounted unearned premiums on outstanding business at the end of the preceding taxable  year  and  the amount  of  unearned  premiums on outstanding business at the end of the preceding taxable year;  (R)  the  amount  which  is  the  difference  between  the  amount  of discounted  unpaid  losses  at  the end of the preceding federal taxable year used in the computation of losses incurred  for  the  taxable  year pursuant  to  section 832(b)(5)(A) of the internal revenue code, and the amount of unpaid losses at the end of the preceding federal taxable year that would have been used in such computation for the  taxable  year  if such  losses  were  not discounted pursuant to the provisions of section 846(a) of the internal revenue code; and  (S) the amount of the deduction claimed by the  taxpayer  pursuant  to the provisions of section 847(1) of the internal revenue code.  (T)  for  taxable  years  beginning  after  December thirty-first, two thousand two, in the case of qualified property described  in  paragraph two  of  subsection k of section 168 of the internal revenue code, other than qualified resurgence zone property described in  paragraph  sixteen of  this  subdivision,  and  other  than qualified New York Liberty Zone property described in paragraph two of subsection b of section 1400L  of the  internal revenue code (without regard to clause (i) of subparagraph (C) of such paragraph), which was placed in service  on  or  after  June first,  two  thousand  three,  the amount allowable as a deduction under section 167 of the internal revenue code.  (U) The amount of  any  deduction  allowed  pursuant  to  section  one hundred ninety-nine of the internal revenue code.  (V)  The  amount  of  any  federal  deduction  for taxes imposed under article twenty-three of this chapter.  (W) The amount of any federal deduction allowed pursuant to subsection (c) of section 965 of the internal revenue code.  (X) The amount of any federal deduction allowed  pursuant  to  section 250(a)(1)(A) of the internal revenue code.  (Y)  The  amount  of the federal deduction allowed pursuant to section 250(a)(1)(B) of the internal revenue code.  (Z) The amount of any gain excluded from federal gross income for  the taxable  year  by subparagraph (A) of paragraph (1) of subsection (a) of section 1400Z-2 of the internal revenue code.  (3) In determining entire net income, there shall  be  subtracted,  to the extent not deductible in determining federal taxable income:  (A)  interest  on  indebtedness  incurred  or continued to purchase or carry obligations or securities the income from which is subject to  tax under this article but exempt from federal income tax;  (B)  ordinary  and  necessary  expenses  paid  or  incurred during the taxable year attributable to income which is subject to tax  under  this article but exempt from federal income tax; and  (C)  the amortizable bond premium for the taxable year on any bond the interest on which is subject to tax under this article but  exempt  from federal income tax.  (4)  Any "net operating loss deduction" or "operations loss deduction" allowable under sections one hundred seventy-two or eight hundred ten of the internal revenue code,  respectively,  which  is  allowable  to  the taxpayer for federal income tax purposes:  (A)  shall  be  adjusted  to reflect the modifications required by the other paragraphs of this subdivision;  (B) shall not, however, exceed any such  deduction  allowable  to  the taxpayer for the taxable year for federal income tax purposes; and  (C)  shall  not  include  any  such  loss  incurred  in a taxable year beginning prior to  January  first,  nineteen  hundred  seventy-four  or during any taxable year in which the taxpayer was not subject to the tax imposed under section fifteen hundred one.  (5) In case of property of a taxpayer acquired prior to January first, nineteen   hundred   seventy-four,   and  disposed  of  thereafter,  the computation of entire net income shall be modified as follows:  (A) no gain shall be deemed to have been derived if either the cost or the fair market price  or  value  on  January  first,  nineteen  hundred seventy-four, exceeds the value realized;  (B)  no loss shall be deemed to have been sustained if either the cost or the fair market price or value on  January  first,  nineteen  hundred seventy-four, is less than the value realized;  (C)  where both the cost and the fair market price or value on January first, nineteen hundred seventy-four, are less than the value  realized, the  basis for computing gain shall be the cost or the fair market price or value on such date, whichever is higher;  (D) where both the cost and the fair market price or value on  January first,  nineteen  hundred  seventy-four,  are  in  excess  of  the value realized, the basis for computing loss shall be the  cost  or  the  fair market price or value on such date, whichever is lower.  (6)  There shall be excluded from the computation of entire net income any amount allowed as a deduction for federal income  tax  purposes  for the  taxable  year  under  section twelve hundred twelve of the internal revenue code as a capital loss carryforward to the  taxable  year  which resulted  from a capital loss occurring in any taxable year in which the taxpayer was not subject to tax under section fifteen hundred one.  (7) There shall be excluded from the computation of entire net  income the  amount  of  any  income  or  gain from the sale of real or personal property which is includible in determining federal taxable  income  for the  taxable  year pursuant to the installment method under section four hundred fifty-three of the internal revenue  code  to  the  extent  such income  or  gain  is  from  a  sale of such property which occurred in a taxable year when the taxpayer was not  subject  to  tax  under  section fifteen hundred one.  (8)  Entire  net income shall be computed without regard to subsection (b) of section eight hundred thirty-one of the internal revenue code.  (9) In computing the entire net income of a taxpayer  (A) which is a fire or life insurance company organized and  operated, without profit to any private shareholder or individual, exclusively for the   purpose   of   aiding  and  strengthening  charitable,  religious, missionary,  educational  or  philanthropic  institutions,  by   issuing insurance  and  annuity  contracts  only  to  or for the benefit of such institutions,  to  individuals  engaged  in   the   services   of   such institutions   and   to  members  of  the  immediate  families  of  such individuals, or  (B) which is a life insurance company which has been organized for the purpose of establishing a  non-profit  voluntary  employees  beneficiary association  to  provide  life,  sick,  accident  or  other  benefits to eligible employees or their beneficiaries, and is  operated  exclusively for said purposes and without profit, direct or indirect, to any private shareholder  or  individual,  and  is  duly  exempt from income taxation pursuant to the United States internal revenue code, the life  insurance company taxable income (which shall include, in the case of a stock life insurance  company  which has an existing policyholders surplus account, the amount of direct and indirect distributions during the taxable  year to  shareholders  from  such account) or taxable income, as the case may be, of such taxpayer for the taxable  year  shall  be  computed  without regard  to  any  income, gains, losses, deductions, reserves, surplus or any other item, derived from, or attributable or allocable to, contracts described in subsection (a) of section eight  hundred  eighteen  of  the internal revenue code.  (10)  In  the  case  of  property  placed  in service in taxable years beginning  before  nineteen  hundred  ninety-four,  for  taxable   years beginning  after  December  thirty-first,  nineteen  hundred eighty-one, except with respect to property subject to the provisions of section two hundred eighty-F of the internal revenue code and  property  subject  to the  provisions  of  section  one  hundred  sixty-eight  of the internal revenue code which is placed in service in this state in  taxable  years beginning after December thirty-first, nineteen hundred eighty-four, and provided  a  deduction  has  not been excluded from the determination of entire net income pursuant to subparagraph (K) of paragraph two of  this subdivision,  a taxpayer shall be allowed with respect to property which is subject to the provisions of section one hundred sixty-eight  of  the internal revenue code the depreciation deduction allowable under section one  hundred  sixty-seven  of  the internal revenue code as such section would  have  applied  to  property  placed  in   service   on   December thirty-first, nineteen hundred eighty.  (11)(A)   Notwithstanding   the  provisions  of  subparagraph  (P)  of paragraph one of this subdivision, for  taxable  years  beginning  after December  thirty-first,  nineteen  hundred  ninety-two and ending before December thirty-first, nineteen hundred ninety-six,  entire  net  income shall  include  the  amount  determined  under  subparagraph (B) of this paragraph.  This amount shall be included in entire net income  only  if the taxpayer claimed the deduction allowed by subdivision one of section eight  hundred  forty-seven  of the internal revenue code in any taxable year   beginning   after   December   thirty-first,   nineteen   hundred eighty-seven   and   ending   before  January  first,  nineteen  hundred ninety-three.  (B) The amount  to  be  included  in  entire  net  income  under  this paragraph  shall  be determined as follows. The taxpayer shall calculate the total amount that will be required to be included in  federal  gross income  pursuant  to  the  provisions  of  subdivisions  five and six of section eight hundred forty-seven  of  the  internal  revenue  code  for federal  taxable  years  beginning after December thirty-first, nineteen hundred ninety-two as a result of the deduction claimed by the  taxpayer  in federal taxable years beginning after December thirty-first, nineteen hundred   eighty-seven   and  before  January  first,  nineteen  hundred ninety-three pursuant to the provisions of subdivision  one  of  section eight  hundred  forty-seven  of  the internal revenue code. The taxpayer shall divide such  total  amount  by  three.  An  amount  equal  to  the resulting quotient shall be included in entire net income in each of the taxpayer's  first three taxable years beginning on or after January one, nineteen hundred ninety-three.   12. Emerging technology investment deferral. In the case of  any  sale of  a  qualified  emerging  technologies  investment  held for more than thirty-six months and with respect to  which  the  taxpayer  elects  the application  of this subsection, gain from such sale shall be recognized only to the extent that the amount realized on  such  sale  exceeds  the cost  of any qualified emerging technologies investment purchased by the taxpayer during the three hundred sixty-five-day period beginning on the date of such sale, reduced by any portion of such cost previously  taken into  account  under  this paragraph. For purposes of this paragraph the following shall apply:  (1) A qualified investment is stock of a corporation or  an  interest, other  than as a creditor, in a partnership or limited liability company that was acquired by the taxpayer as provided in Internal Revenue Code § 1202(c)(1)(B), except that the reference to the  term  "stock"  in  such section  shall be read as "investment," or by the taxpayer from a person who had acquired such stock or interest in such a manner.  (2)  A  qualified  emerging  technology  investment  is  a   qualified investment,  that  was  held  by  the  taxpayer  for at least thirty-six months, in a company defined in paragraph  (c)  of  subdivision  one  of section  thirty-one  hundred  two-e  of the public authorities law or an investment in a partnership or limited liability company that  is  taxed as  a  partnership  to  the  extent  that  such  partnership  or limited liability company invests in qualified emerging technology companies.  (3) For purposes of determining whether  the  nonrecognition  of  gain under  this  subsection  applies  to  a  qualified emerging technologies investment  that  is  sold,  the  taxpayer's  holding  period  for  such investment  and  the  qualified emerging technologies investment that is purchased shall be determined without regard to Internal Revenue Code  § 1223.   13.  Amounts  deferred.  The amount deferred under paragraph twelve of this  subdivision  shall  be  added  to  entire  net  income  when   the reinvestment in the New York qualified emerging technology company which qualified a taxpayer for such deferral is sold.   * (14)  For  taxable  years beginning after December thirty-first, two thousand two, in the case of qualified property described  in  paragraph two  of  subsection k of section 168 of the internal revenue code, other than qualified resurgence zone property described in  paragraph  sixteen of  this  subdivision,  and  other  than qualified New York Liberty Zone property described in paragraph two of subsection b of section 1400L  of the  internal revenue code (without regard to clause (i) of subparagraph (C) of such paragraph), which was placed in service  on  or  after  June first,  two  thousand three, a taxpayer shall be allowed with respect to such property the depreciation deduction allowable under section 167  of the  internal  revenue  code  as such section would have applied to such property had it been acquired by the taxpayer on  September  tenth,  two thousand one.   * NB There are 2 par (14)'s   * (14)  Related members expense add back. (A) Definitions. (i) Related member.  "Related  member"  means  a  related  person  as   defined   in subparagraph  (c)  of  paragraph three of subsection (b) of section four  hundred sixty-five of the internal  revenue  code,  except  that  "fifty percent" shall be substituted for "ten percent".  (ii)  Effective  rate of tax. "Effective rate of tax" means, as to any state or U.S. possession, the maximum statutory rate of tax  imposed  by the  state or possession on or measured by a related member's net income multiplied by the apportionment percentage, if any,  applicable  to  the related member under the laws of said jurisdiction. For purposes of this definition, the effective rate of tax as to any state or U.S. possession is  zero  where  the  related  member's net income tax liability in said jurisdiction is reported on a combined or consolidated return  including both the taxpayer and the related member where the reported transactions between  the  taxpayer  and the related member are eliminated or offset. Also, for purposes of this definition, when computing the effective rate of tax for a jurisdiction in which a  related  member's  net  income  is eliminated or offset by a credit or similar adjustment that is dependent upon  the  related  member  either  maintaining  or  managing intangible property or collecting interest income in that jurisdiction, the maximum statutory rate of tax imposed by said jurisdiction shall be decreased to reflect the statutory rate of tax that applies to the related member  as effectively reduced by such credit or similar adjustment.  (iii)   Royalty  payments.  Royalty  payments  are  payments  directly connected to the acquisition, use, maintenance or management, ownership, sale, exchange,  or  any  other  disposition  of  licenses,  trademarks, copyrights,  trade  names, trade dress, service marks, mask works, trade secrets, patents and any other similar types  of  intangible  assets  as determined  by  the  commissioner,  and  include  amounts  allowable  as interest  deductions  under  section  one  hundred  sixty-three  of  the internal  revenue  code  to  the  extent  such  amounts  are directly or indirectly for, related to or in connection with the  acquisition,  use, maintenance  or  management, ownership, sale, exchange or disposition of such intangible assets.  (iv) Valid business purpose. A valid business purpose is one  or  more business  purposes,  other  than the avoidance or reduction of taxation, which alone or in combination constitute the primary motivation for some business activity or transaction, which activity or transaction  changes in  a  meaningful  way, apart from tax effects, the economic position of the taxpayer. The economic position of the taxpayer includes an increase in the market share of the taxpayer, or the entry by the  taxpayer  into new business markets.  (B) Royalty expense add backs. (i) Except where a taxpayer is included in  a  combined return with a related member pursuant to subdivision (f) of section fifteen hundred fifteen of this article, for the  purpose  of computing  entire  net income, a taxpayer must add back royalty payments directly or indirectly paid, accrued, or incurred in connection with one or more direct or indirect transactions with one or more related members during the taxable year to the extent deductible in calculating  federal taxable income.  (ii)  Exceptions.  (I) The adjustment required in this paragraph shall not apply to the portion  of  the  royalty  payment  that  the  taxpayer establishes,  by  clear  and  convincing evidence of the type and in the form  specified  by  the  commissioner,  meets  all  of  the   following requirements: (a) the related member was subject to tax in this state or another  state or possession of the United States or a foreign nation or some combination thereof on a tax base that included the royalty payment paid, accrued or incurred by the taxpayer; (b) the related member during the same taxable year directly or indirectly paid, accrued  or  incurred such  portion  to  a  person  that  is not a related member; and (c) the  transaction giving rise to the royalty payment between the taxpayer  and the related member was undertaken for a valid business purpose.  (II)  The adjustment required in this paragraph shall not apply if the taxpayer establishes, by clear and convincing evidence of the  type  and in  the form specified by the commissioner, that: (a) the related member was subject to tax on or measured by its net income  in  this  state  or another  state  or  possession  of the United States or some combination thereof; (b) the tax base for said  tax  included  the  royalty  payment paid,  accrued  or  incurred  by  the  taxpayer;  and  (c) the aggregate effective  rate  of  tax  applied  to  the  related  member   in   those jurisdictions  is  no  less than eighty percent of the statutory rate of tax that applied to the taxpayer  under  section  fifteen  hundred  two, fifteen  hundred two-a, or fifteen hundred two-b of this article for the taxable year.  (III) The adjustment required in this paragraph shall not apply if the taxpayer establishes, by clear and convincing evidence of the  type  and in the form specified by the commissioner, that: (a) the royalty payment was  paid,  accrued  or incurred to a related member organized under the laws of a country other than the United States; (b) the related member's income from the transaction was subject to a  comprehensive  income  tax treaty  between  such  country  and  the  United States; (c) the related member was subject to tax in  a  foreign  nation  on  a  tax  base  that included  the royalty payment paid, accrued or incurred by the taxpayer; (d) the related member's income from the transaction was taxed  in  such country  at  an  effective rate of tax at least equal to that imposed by this state; and (e) the royalty payment was paid,  accrued  or  incurred pursuant  to  a  transaction  that  was  undertaken for a valid business purpose and using terms that reflect an arm's length relationship.  (IV) The adjustment required in this paragraph shall not apply if  the taxpayer and the commissioner agree in writing to the application or use of alternative adjustments or computations. The commissioner may, in his or  her  discretion,  agree  to  the  application  or use of alternative adjustments or computations when he or she concludes that in the absence of such agreement the income of  the  taxpayer  would  not  be  properly reflected.   * NB There are 2 par (14)'s  (15)  For  taxable  years  beginning  after December thirty-first, two thousand two, upon  the  disposition  of  property  to  which  paragraph fourteen  of  this  subdivision  applies, the amount of any gain or loss includible in entire  net  income  shall  be  adjusted  to  reflect  the inclusions   and   exclusions   from   entire  net  income  pursuant  to subparagraph (R) of paragraph one and subparagraph (T) of paragraph  two of this subdivision attributable to such property.  (16)   For  purposes  of  paragraphs  fourteen  and  fifteen  of  this subdivision, qualified resurgence zone  property  shall  mean  qualified property  described  in  paragraph two of subsection k of section 168 of the internal revenue code substantially all of the use of  which  is  in the resurgence zone, as defined below, and is in the active conduct of a trade  or business by the taxpayer in such zone, and the original use of which in the resurgence zone commences with the taxpayer after  December thirty-first,  two thousand two. The resurgence zone shall mean the area of New York county bounded on the south  by  a  line  running  from  the intersection  of  the  Hudson River with the Holland Tunnel, and running thence east to Canal Street, then running along the centerline of  Canal Street  to  the  intersection  of  the  Bowery and Canal Street, running thence in a southeasterly direction diagonally across  Manhattan  Bridge Plaza,  to  the  Manhattan Bridge and thence along the centerline of the Manhattan Bridge to the point where  the  centerline  of  the  Manhattan  Bridge  would  intersect  with  the easterly bank of the East River, and bounded on the north by a line running  from  the  intersection  of  the Hudson River with the Holland Tunnel and running thence north along West Avenue  to  the  intersection of Clarkson Street then running east along the centerline of Clarkson Street  to  the  intersection  of  Washington Avenue,  then running south along the centerline of Washington Avenue to the intersection of West Houston Street, then east along the  centerline of  West  Houston  Street, then at the intersection of the Avenue of the Americas continuing east along the centerline of East Houston Street  to the easterly bank of the East River.  (c)  Attribution  of  income  to  different  taxable  years.  The  tax commission may, whenever necessary in  order  to  properly  reflect  the entire net income of any taxpayer, determine the year or period in which any item of income or deduction shall be included, without regard to the method of accounting employed by the taxpayer.