2023 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.