2023 New York Laws › TAX - Tax › Article 22 - Personal Income Tax › Part 2 - Residents › 612 - New York Adjusted Gross Income of a Resident Individual.

§  612.  New  York adjusted gross income of a resident individual. (a)
General. The New York adjusted gross income  of  a  resident  individual
means  his  federal  adjusted gross income as defined in the laws of the
United States for the taxable year, with the modifications specified  in
this section.
(b)  Modifications  increasing  federal  adjusted  gross income. There
shall be added to federal adjusted gross income:
(1) Interest income on obligations of any state other than this state,
or of a political subdivision of any such other state unless created  by
compact  or  agreement to which this state is a party, to the extent not
properly includible in federal adjusted gross income;
(2) Interest or dividend income on obligations or  securities  of  any
authority,  commission,  or  instrumentality of the United States, which
the laws of the United States exempt from federal  income  tax  but  not
from state income taxes;
(3)  Income  taxes. (A) General. Income taxes imposed by this state or
any other taxing jurisdiction, to the extent deductible  in  determining
federal  adjusted  gross  income and not credited against federal income
tax.
(B) Shareholders of S corporations. In the case of a shareholder of an
S corporation, with respect to taxes imposed  upon  or  payable  by  the
corporation,  the  term  "income  taxes"  in  subparagraph  (A)  of this
paragraph shall also include the taxes imposed under article  nine-A  of
this chapter, regardless of the measure of such tax.
(C)  Pass-through  entity tax deduction. (i) In the case of a partner,
member  or  shareholder  of  an  electing  partnership  or  electing   S
corporation,  the  term  "income  taxes"  in  subparagraph  (A)  of this
paragraph  shall  not  include   the   taxes   imposed   under   article
twenty-four-A  of  this  chapter  to  the extent such taxes are added to
federal adjusted  gross  income  under  subparagraph  (A)  of  paragraph
forty-three  of  this  subsection  or  the  taxes  imposed under article
twenty-four-B of this chapter to the extent such taxes are added to  the
federal  adjusted  gross  income  under  paragraph forty-three-a of this
subsection.
(ii) In the case of a partner, member or shareholder of a  partnership
or  S  corporation,  the term "income taxes" in subparagraph (A) of this
paragraph shall not  include  pass-through  entity  taxes  substantially
similar  to  the  tax  imposed pursuant to article twenty-four-A of this
chapter imposed by another state  of  the  United  States,  a  political
subdivision  of such state, or the District of Columbia upon income both
derived therefrom and subject to tax under this article  to  the  extent
such taxes are added to federal adjusted gross income under subparagraph
(B) of paragraph forty-three of this subsection.
(4)  Interest  on  indebtedness  incurred  or continued to purchase or
carry obligations or securities the interest on which is exempt from tax
under this article, to the  extent  deductible  in  determining  federal
adjusted gross income.
(5)  Expenses  paid  or  incurred  during the taxable year for (i) the
production or collection of income which is exempt from tax  under  this
article, or (ii) the management, conservation or maintenance of property
held for the production of such income, and the amortizable bond premium
for  the  taxable  year on any bond the interest on which is exempt from
tax under this article, to the extent that such  expenses  and  premiums
are deductible in determining federal adjusted gross income.
(6) In the case of a taxpayer who has exercised the election permitted
by subsection (g) or (h) of this section, the amount or amounts required
by said subsections to be added to federal adjusted gross income.
(7)  In  the  case of a taxpayer who is a shareholder of a corporation
organized under article fifteen or authorized to  do  business  in  this
state  under  article fifteen-a of the business corporation law, for the
taxpayer's taxable years beginning before nineteen hundred eighty-eight,
the  amount which is deductible by such corporation under paragraph one,
two or three of subsection (a) of  section  four  hundred  four  of  the
internal  revenue  code  for  its  taxable  year  ending in or with such
taxpayer's taxable  year  for  contributions  paid  on  behalf  of  such
taxpayer minus the lesser of fifteen thousand dollars or fifteen percent
of  the  earned  income  derived  by such taxpayer from such corporation
during such taxpayer's taxable year. In the case of a taxpayer on  whose
behalf  contributions  are  paid  under more than one plan to which this
paragraph applies or under a plan, contributions to which on his  behalf
are subject to the limitations provided in section four hundred four (e)
of the internal revenue code, this paragraph shall apply with respect to
the  aggregate  of  the  contributions paid on his behalf under all such
plans.
(8) for taxable  years  beginning  after  December  thirty-first,  two
thousand  two,  in the case of qualified property described in paragraph
two of subsection k of section 168 of the internal revenue  code,  other
than  qualified  resurgence zone property described in subsection (m) of
this section, and other than qualified New York  Liberty  Zone  property
described  in  paragraph  two  of  subsection  b of section 1400L of the
internal revenue code (without regard to clause (i) of subparagraph  (C)
of  such paragraph), which was placed in service on or after June first,
two thousand three, the amount allowable as a  deduction  under  section
167 of the internal revenue code.
(10)  The amount required to be added to federal adjusted gross income
pursuant to subsection (i) of this section.
(15) In those instances where a  credit  for  the  special  additional
mortgage  recording tax is allowed under paragraph one of subsection (f)
or paragraph one of subsection (i) of section six hundred  six  of  this
article, the amount allowed as an exclusion or deduction for the special
additional  mortgage  recording  taxes  imposed  by subdivision one-a of
section two hundred fifty-three of this chapter in  determining  federal
adjusted gross income.
(16)  Unless  the credit allowed pursuant to subsection (f) of section
six hundred six of this article is reflected in the computation  of  the
gain  or loss so as to result in an increase in such gain or decrease in
such loss, for federal income tax  purposes,  from  the  sale  or  other
disposition of the property with respect to which the special additional
mortgage  recording tax imposed pursuant to subdivision one-a of section
two hundred fifty-three of this chapter was  paid,  the  amount  of  the
special  additional  mortgage recording tax imposed by subdivision one-a
of section two hundred fifty-three of this chapter which  was  paid  and
which is reflected in the computation of the basis of the property so as
to  result  in  a  decrease  in  such  gain or increase in such loss for
federal income tax purposes from the sale or other  disposition  of  the
property with respect to which such tax was paid.
(17)  The amount required to be added to federal adjusted gross income
pursuant to subsection (r) of this section.
(18) In the case of a shareholder of an S corporation
(A) where the election provided for in subsection (a) of  section  six
hundred  sixty  is in effect with respect to such corporation, an amount
equal to his pro rata share of the corporation's  reductions  for  taxes
described  in  paragraphs  two  and  three  of subsection (f) of section
thirteen hundred sixty-six of the internal revenue code, and
(B) in the case of a New York S termination year, subparagraph (A)  of
this  paragraph  shall  apply  to  the  amount  of  reductions for taxes
determined under subsection (s) of this section.
(19) In the case of a shareholder of an S corporation
(A)  where  the election provided for in subsection (a) of section six
hundred sixty has not been made with respect to  such  corporation,  any
item  of  loss or deduction of the corporation included in federal gross
income pursuant to section thirteen hundred sixty-six  of  the  internal
revenue code, and
(B)  in the case of a New York S termination year, subparagraph (A) of
this  paragraph  shall  apply  to  the  amounts  of  loss  or  deduction
determined under subsection (s) of this section.
(20) S corporation distributions to the extent not included in federal
gross  income for the taxable year because of the application of section
thirteen hundred sixty-eight, subsection (e) of section thirteen hundred
seventy-one or subsection (c) of section thirteen  hundred  seventy-nine
of  the  internal  revenue  code  which  represent income not previously
subject to tax under this article because the election provided  for  in
subsection  (a) of section six hundred sixty had not been made. Any such
distribution treated  in  the  manner  described  in  paragraph  two  of
subsection  (b)  of section thirteen hundred sixty-eight of the internal
revenue code for  federal  income  tax  purposes  shall  be  treated  as
ordinary income for purposes of this article.
(21)  In  relation  to  the  disposition of stock or indebtedness of a
corporation which elected under subchapter  s  of  chapter  one  of  the
internal   revenue  code  for  any  taxable  year  of  such  corporation
beginning, in the case of a corporation taxable under article nine-A  of
this  chapter, after December thirty-first, nineteen hundred eighty, the
amount required to be added to federal adjusted gross income pursuant to
subsection (n) of this section.
(22) The amounts required to be added to federal adjusted gross income
pursuant to subsection (q) of this section.
(23) For taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph  eight
of  subsection  (f)  of  section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which the taxpayer claimed as  a  deduction  in  computing  its  federal
adjusted gross income solely as a result of an election made pursuant to
the  provisions  of  such  paragraph  eight  as  it  was  in  effect for
agreements  entered  into  prior  to  January  first,  nineteen  hundred
eighty-four.
(24) For taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass  commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred  sixty-eight  of  the  internal
revenue code (relating to qualified mass commuting vehicles), any amount
which   the  taxpayer  would  have  been  required  to  include  in  the
computation of its federal adjusted gross income had  it  not  made  the
election  permitted pursuant to such paragraph eight as it was in effect
for agreements entered into prior to  January  first,  nineteen  hundred
eighty-four.
(25)  In  the  case  of  property  placed  in service in taxable years
beginning  before  nineteen  hundred  ninety-four,  for  taxable   years
beginning  after  December  thirty-first,  nineteen  hundred eighty-one,
except with respect to property subject to the provisions of section two
hundred eighty-F of the internal revenue code and  property  subject  to
the  provisions  of  section  one  hundred  sixty-eight  of the internal

revenue code which is placed in service in this state in  taxable  years
beginning after December thirty-first, nineteen hundred eighty-four, the
amount  allowable  as  a  deduction determined under section one hundred
sixty-eight of the internal revenue code.
* (26)  The amount of member or employee contributions to a retirement
system or pension fund picked up or paid by  the  employer  pursuant  to
subdivision  f  of  section  five  hundred seventeen or subdivision d of
section six hundred thirteen of the retirement and social  security  law
or  section  13-225.1,  13-327.1,  13-125.1, 13-125.2 or 13-521.1 of the
administrative code of the city of New York or subdivision  nineteen  of
section twenty-five hundred seventy-five of the education law.
* NB Effective until ch 525/2011 § 3 takes effect
* (26)  The amount of member or employee contributions to a retirement
system or pension fund picked up or paid by  the  employer  pursuant  to
subdivision  f  of  section  five  hundred  seventeen,  subdivision d of
section six hundred thirteen or section twelve  hundred  four-a  of  the
retirement  and  social  security  law  or  section  13-225.1, 13-327.1,
13-125.1, 13-125.2 or 13-521.1 of the administrative code of the city of
New  York  or  subdivision  nineteen  of  section  twenty-five   hundred
seventy-five of the education law.
* NB See ch 525/2011 § 7 for effectiveness
* (26)  The amount of member or employee contributions to a retirement
system or pension fund picked up or paid by  the  employer  pursuant  to
subdivision  f  of  section  five  hundred seventeen or subdivision d of
section six hundred thirteen of the retirement and social  security  law
or  section 13-225.1, 13-327.1 or 13-125.1 of the administrative code of
the city of New York.
* NB Effective upon the expiration of ch 525/2011 § 3
(26-a) The amount of member or employee contributions to a  retirement
system  or pension fund picked up or paid by the employer for members of
the Manhattan and Bronx surface transportation  authority  pension  plan
and   treated  as  employer  contributions  in  determining  income  tax
treatment under section 414(h) of the Internal Revenue Code.
(27) Upon the disposition of property to which paragraph twenty-six of
subsection (c) of this section applies, the amount, if any, by which the
aggregate of the modifications described in  such  paragraph  twenty-six
attributable to such property exceeds the aggregate of the modifications
described  in  paragraph  twenty-five of this subsection attributable to
such property.
(29) When gain from the sale  or  other  disposition  of  property  is
included  in  federal gross income, the amount of reduction in the basis
of such property attributable  to  credit  for  solar  and  wind  energy
systems  pursuant  to  paragraph  nine  of subsection (g) of section six
hundred six; but for taxable years  beginning  before  nineteen  hundred
eighty-seven,  if  such  gain affects the determination of a net capital
gain for federal income tax purposes, forty percent of such amount.
(31) The amount deducted or deferred from an employee's salary under a
flexible benefits program established pursuant to  section  twenty-three
of  the  general municipal law or section one thousand two hundred ten-a
of the public authorities law.
(32) The amount by which an employee's salary is reduced  pursuant  to
the provisions of subdivision b of section 12-126.1 and subdivision b of
section 12-126.2 of the administrative code of the city of New York.
(33)  Real  property taxes paid on qualified agricultural property and
deducted in determining federal adjusted gross income, to the extent  of
the  amount  of  the  agricultural  property  tax  credit  allowed under
subsection (n) or (i) of section six hundred six of this article.
(34) (A) Excess distributions received during the taxable  year  by  a
distributee  of  a family tuition account established under the New York
state college choice tuition savings program provided for under  article
fourteen-A of the education law, to the extent such excess distributions
are  deemed  attributable  to  deductible  contributions under paragraph
thirty-two of subsection (c) of this section.
(B) (i) The term "excess distributions" means distributions which  are
not
(I)  qualified  withdrawals  within the meaning of subdivision nine of
section six hundred ninety-five-b of the education law;
(II) withdrawals made as a result of the death or  disability  of  the
designated  beneficiary within the meaning of subdivision ten of section
six hundred ninety-five-b of such law; or
(III) transfers described in paragraph b of subdivision six of section
six hundred ninety-five-e of such law.
(ii) Excess distributions shall be deemed attributable  to  deductible
contributions  to the extent the amount of any such excess distribution,
when added to  all  previous  excess  distributions  from  the  account,
exceeds the aggregate of all nondeductible contributions to the account.
(35) The amounts required to be added to federal adjusted gross income
pursuant to subsection (v) of this section.
(36)  In  the  case  of  a  taxpayer  who is not an eligible farmer as
defined in subsection (n) of section six hundred six  of  this  article,
the  amount  of  any  deduction  claimed  pursuant to section 179 of the
internal revenue code with respect to a sport utility vehicle  which  is
not  a  passenger automobile as defined in paragraph 5 of subsection (d)
of section 280F of the internal revenue code.
(37) Premiums paid for environmental remediation insurance, as defined
in section twenty-three of this chapter,  and  deducted  in  determining
federal taxable income, to the extent of the amount of the environmental
remediation insurance credit allowed under such section twenty-three and
subsection (ff) of section six hundred six of this article.
(38)  The  amount  of  any  deduction  allowed pursuant to section one
hundred ninety-nine of the internal revenue code.
(39) The amount of any  federal  deduction  for  taxes  imposed  under
article twenty-three of this chapter.
(39-a)  The  amount  of  any  federal  deduction for the excise tax on
telecommunication services to the extent such  taxes  are  used  as  the
basis   of   the   calculation   of  tax-free  NY  area  excise  tax  on
telecommunication services  credit  allowed  under  subsection  (yy)  of
section six hundred six of this article.
* (40)  in  the case of a beneficiary of a trust that, in any tax year
after its creation including its first tax year, was not subject to  tax
pursuant  to  subparagraph  (D)  of paragraph three of subsection (b) of
section six hundred five of this article (except for an incomplete  gift
non-grantor   trust,   as   defined   by  paragraph  forty-one  of  this
subsection), the amount described in the first sentence of  section  six
hundred sixty-seven of the internal revenue code for the tax year to the
extent  not  already  included in federal gross income for the tax year,
except that, in computing the amount to be added under  this  paragraph,
such  beneficiary  shall  disregard  (i)  subsection  (c) of section six
hundred sixty-five of the internal revenue code; (ii) the income  earned
by  such  trust  in  any  tax year in which the trust was subject to tax
under this article; and (iii) the income  earned  by  such  trust  in  a
taxable  year  prior  to when the beneficiary first became a resident of
the state or in any taxable year  starting  before  January  first,  two
thousand  fourteen.  Except as otherwise provided in this paragraph, all
of the provisions of the internal revenue  code  that  are  relevant  to

computing  the  amount described in the first sentence of subsection (a)
of section six hundred sixty-seven of the internal  revenue  code  shall
apply to the provisions of this paragraph with the same force and effect
as  if  the  language of those internal revenue code provisions had been
incorporated in full into this paragraph, except to the extent that  any
such  provision  is  either  inconsistent  with  or not relevant to this
paragraph.
* NB There are 2 par (40)'s
* (40) The amount of any federal deduction for real property taxes  to
the  extent  such  taxes are used as the basis of the calculation of the
real property tax credit for manufacturers allowed under subsection (xx)
of section six hundred six of this article.
* NB There are 2 par (40)'s
(41) In the  case  of  a  taxpayer  who  transferred  property  to  an
incomplete  gift  non-grantor  trust,  the income of the trust, less any
deductions of the trust, to the extent such  income  and  deductions  of
such  trust  would  be  taken  into  account in computing the taxpayer's
federal taxable income if such trust in its entirety were treated  as  a
grantor  trust for federal tax purposes. For purposes of this paragraph,
an "incomplete gift non-grantor trust" means a resident trust that meets
the following conditions: (i) the trust does not qualify  as  a  grantor
trust   under  section  six  hundred  seventy-one  through  six  hundred
seventy-nine of  the  internal  revenue  code,  and  (2)  the  grantor's
transfer  of  assets to the trust is treated as an incomplete gift under
section twenty-five hundred eleven of the internal revenue code, and the
regulations thereunder.
(42) The amount of any gain excluded from federal gross income for the
taxable year by subparagraph (A) of paragraph (1) of subsection  (a)  of
section 1400Z-2 of the internal revenue code.
(43)  Pass-through  entity tax deduction addback. (A) In the case of a
taxpayer who claims a credit  under  subsection  (kkk)  of  section  six
hundred  six  of  this  article,  an  amount equal to the amount of such
credit; and (B) in the case of a taxpayer  who  claims  a  credit  under
subsection  (b) of section six hundred twenty of this article, an amount
equal to the amount of such credit as calculated without regard  to  the
limitation  under  subsection  (c) of section six hundred twenty of this
article.
(43-a) City pass-through entity tax deduction addback. In the case  of
a  taxpayer  who claims a credit allowed under subsection (g) of section
thirteen hundred ten of this chapter, an amount equal to the  amount  of
such credit.
(c)  Modifications reducing federal adjusted gross income. There shall
be subtracted from federal adjusted gross income:
(1) Interest income on  obligations  of  the  United  States  and  its
possessions  to the extent includible in gross income for federal income
tax purposes; such interest income shall include the amount received  as
dividends  from  a  regulated  investment company, as defined in section
eight hundred fifty-one of the internal revenue  code,  which  has  been
designated  as the amount of such interest income in a written notice to
shareholders not later than  sixty  days  following  the  close  of  its
taxable year; provided that, at the close of each quarter of the taxable
year of such regulated investment company, at least fifty percent of the
value of its total assets, as defined in subsection (c) of section eight
hundred  fifty-one of the internal revenue code, consists of obligations
of the United States  and  its  possessions.  The  aggregate  amount  so
designated  by  the  regulated  investment  company for its taxable year
shall  not  exceed  the  amount  determined  by  multiplying  the  total
distributions   paid   by  such  regulated  investment  company  to  its

shareholders with respect to that taxable year (attributable  to  income
earned  in  that  year), including any such distributions paid after the
close of the  taxable  year,  as  described  in  section  eight  hundred
fifty-five  of the internal revenue code, by the ratio that the interest
income received in that taxable year on obligations of the United States
and its possessions, after reduction for  the  deductions  and  expenses
directly  or  indirectly  attributable  thereto, bears to the investment
company taxable income of such regulated  investment  company  for  such
taxable year, determined without regard to subparagraph (D) of paragraph
two of subsection (b) of section eight hundred fifty-two of the internal
revenue code;
(2)  Interest  or  dividend income on obligations or securities of any
authority, commission or instrumentality of the  United  States  to  the
extent  includible  in  gross income for federal income tax purposes but
exempt from state income taxes under the laws of the United States;
(3) (i)  Pensions  to  officers  and  employees  of  this  state,  its
subdivisions  and agencies, to the extent includible in gross income for
federal income tax purposes;
(ii) Pensions to officers  and  employees  of  the  United  States  of
America,  any  territory  or possession or political subdivision of such
territory or possession, the District of  Columbia,  or  any  agency  or
instrumentality of any one of the foregoing, to the extent includible in
gross income for federal income tax purposes;
(3-a)  Pensions  and  annuities  received  by  an  individual  who has
attained the age of fifty-nine  and  one-half,  not  otherwise  excluded
pursuant to paragraph three of this subsection, to the extent includible
in  gross  income  for federal income tax purposes, but not in excess of
twenty thousand dollars, which are  periodic  payments  attributable  to
personal  services  performed by such individual prior to his retirement
from employment, which arise (i) from an employer-employee  relationship
or (ii) from contributions to a retirement plan which are deductible for
federal  income tax purposes. However, the term "pensions and annuities"
shall also include distributions  received  by  an  individual  who  has
attained   the  age  of  fifty-nine  and  one-half  from  an  individual
retirement account or an individual retirement annuity,  as  defined  in
section   four   hundred   eight  of  the  internal  revenue  code,  and
distributions received by an individual who  has  attained  the  age  of
fifty-nine and one-half from self-employed individual and owner-employee
retirement  plans  which  qualify  under section four hundred one of the
internal revenue code, whether or  not  the  payments  are  periodic  in
nature.  Nevertheless,  the  term  "pensions  and  annuities"  shall not
include any lump sum distribution, as defined  in  subparagraph  (D)  of
paragraph  four  of  subsection  (e)  of section four hundred two of the
internal revenue code and taxed under section six hundred three of  this
article. Where a husband and wife file a joint state personal income tax
return,  the  modification  provided  for  in  this  paragraph  shall be
computed as if they were  filing  separate  state  personal  income  tax
returns.  Where a payment would otherwise come within the meaning of the
term "pensions and annuities" as set forth  in  this  paragraph,  except
that  such  individual is deceased, such payment shall, nevertheless, be
treated as a pension or annuity for purposes of this paragraph  if  such
payment is received by such individual's beneficiary.
(3-b)  (i)  Disability income included in federal gross income, to the
extent that such disability income would have been excluded from federal
gross income pursuant to the provisions of subsection (d) of section one
hundred five of the internal revenue code of nineteen hundred fifty-four
had such provisions continued in effect  for  taxable  years  commencing
after  December thirty-first, nineteen hundred eighty-three as they were

in  effect  immediately  prior  to  the  repeal  of   such   subsection.
Notwithstanding  the  foregoing,  the  sum of disability income excluded
pursuant to this paragraph, and  pension  and  annuity  income  excluded
pursuant  to  paragraph  three-a  of  this  subsection, shall not exceed
twenty thousand dollars.
(ii) Notwithstanding subsection (f) of this section, if a husband  and
wife  determine  their  federal  income  tax  on  a joint return but are
required to determine  their  New  York  income  taxes  separately,  the
amounts  of  exclusion  allowed under subparagraph (i) of this paragraph
shall be determined in the same joint manner as such amounts would  have
been determined under the provisions of paragraph five of subsection (d)
of  section  one  hundred  five  of  the  internal  revenue code as such
provisions were in effect  immediately  prior  to  the  repeal  of  such
subsection,  but shall be attributed for New York income tax purposes to
the spouse who would have been required to report  any  such  amount  as
income  if  the  spouses  had  determined  their  federal  income  taxes
separately.
(iii) Where a husband and wife file a joint state income  tax  return,
the  twenty  thousand  dollar limitation provided in subparagraph (i) of
this paragraph shall be applied as if they were  filing  separate  state
income tax returns.
(3-c)  Social  security  benefits  to  the  extent includible in gross
income for federal income tax purposes pursuant to section eighty-six of
the internal revenue code.
(4) The portion of any gain, from the sale  or  other  disposition  of
property having a higher adjusted basis for New York income tax purposes
than for federal income tax purposes on the last day of the last taxable
year  for  which  article  sixteen  imposes  tax, as such article was in
effect on such date, that does not exceed such difference in basis.
(5) The amount necessary to prevent the taxation under this article of
any annuity or other  amount  of  income  or  gain  which  was  properly
included  in  income  or  gain and was taxable under article sixteen (as
such article was in  effect  on  December  thirtieth,  nineteen  hundred
sixty)  to  the  taxpayer, or to a decedent by reason of whose death the
taxpayer acquired the right to receive the income or gain, or to a trust
or estate from which the taxpayer received the income or gain;
(6) Interest or dividend income on obligations or  securities  to  the
extent  exempt  from income tax under the laws of this state authorizing
the issuance of such obligations or securities but includible  in  gross
income for federal income tax purposes; and
(7) The amount of any refund or credit for overpayment of income taxes
imposed  by  this state, or any other taxing jurisdiction, and any taxes
imposed by article twenty-three of this chapter, to the extent  properly
included in gross income for federal income tax purposes.
(8)  Compensation  received  for active service in the armed forces of
the United States on or after October first, nineteen hundred sixty-one,
and prior to September  first,  nineteen  hundred  sixty-two;  provided,
however,  that  the amount of such compensation to be deducted shall not
exceed  one  hundred  dollars  for  each  month  of  the  taxable  year,
subsequent  to September, nineteen hundred sixty-one, during any part of
which month the taxpayer was engaged in such service. For  the  purposes
of  this paragraph, the words "active service in the armed forces of the
United States" shall mean active duty (other than for training)  in  the
army, navy (including the marine corps), air force or coast guard of the
United States as defined in title ten of the United States code.
(8-a)  Compensation  and  bonuses  received  for active service in the
armed forces of the United States while a prisoner of war or missing  in

action  during  the  hostilities in Vietnam, to the extent includable in
gross income for federal income tax purposes.
(8-b) Income received by an individual who is a member of the New York
state  organized  militia, as such term is defined in subdivision one of
section two of the military law, as compensation for  performing  active
service within the state pursuant to either (i) state active duty orders
issued in accordance with subdivision one of section six of the military
law  or  (ii)  active  service  of the United States pursuant to federal
active  duty  orders,  for  service  other  than  training,  issued   in
accordance with title 10 of the United States code.
(8-c)  Compensation  received for active service in the armed services
of the United States in an area  designated  by  the  president  of  the
United  States  by executive order as a "combat zone" at any time during
the period designated by the president by executive order as the  period
of  combatant  activities in such zone to the extent includable in gross
income for federal income tax purposes.
(9) Interest on indebtedness incurred  or  continued  to  purchase  or
carry  obligations or securities the interest on which is subject to tax
under this article but exempt from federal income  tax,  to  the  extent
that  such  interest  on  indebtedness  is not deductible in determining
federal adjusted gross income and is attributable to a trade or business
carried on by the taxpayer.
(10) Ordinary and necessary  expenses  paid  or  incurred  during  the
taxable  year  for  (i)  the production or collection of income which is
subject to tax under this article but exempt from federal income tax, or
(ii) the management, conservation or maintenance of  property  held  for
the  production of such income, and the amortizable bond premium for the
taxable year on any bond the interest on which is subject to  tax  under
this article but exempt from federal income tax, to the extent that such
expenses and premiums are not deductible in determining federal adjusted
gross  income  and are attributable to a trade or business carried on by
the taxpayer.
(11) In the  case  of  a  taxpayer  who  has  exercised  the  election
permitted  by  subsection  (g)  or  (h)  of  this section, the amount or
amounts required by said  subsections  to  be  subtracted  from  federal
adjusted gross income.
(12)  The amount necessary to prevent the taxation of amounts properly
included in New York adjusted gross income in  prior  taxable  years  in
accordance with paragraph seven of subsection (b).
(13)  The amount required to be subtracted from federal adjusted gross
income pursuant to subsection (i) of this section.
(14) The amount that may be subtracted  from  federal  adjusted  gross
income pursuant to subsection (j) of this section.
(15)  That  portion  of  wages  and  salaries paid or incurred for the
taxable year for which a  deduction  is  not  allowed  pursuant  to  the
provisions of section two hundred eighty-C of the internal revenue code.
(16)  for  taxable  years  beginning  after December thirty-first, two
thousand two, the amount deductible pursuant to subsection (k)  of  this
section.
(20)  The  amounts which may be subtracted from federal adjusted gross
income pursuant to subsection (o) of this section.
(21) In relation to the disposition of  stock  or  indebtedness  of  a
corporation  which  elected  under  subchapter  s  of chapter one of the
internal  revenue  code  for  any  taxable  year  of  such   corporation
beginning,  in the case of a corporation taxable under article nine-A of
this chapter, after December thirty-first, nineteen hundred eighty,  the
amounts  required  to  be  subtracted from federal adjusted gross income
pursuant to subsection (n) of this section.
(22) In the case of a shareholder of an S corporation  (A)  where  the
election provided for in subsection (a) of section six hundred sixty has
not  been  made  with respect to such corporation, any item of income of
the corporation included in federal gross  income  pursuant  to  section
thirteen hundred sixty-six of the internal revenue code, and
(B)  in the case of a New York S termination year, subparagraph (A) of
this paragraph shall apply to the amounts  of  income  determined  under
subsection (s) of this section.
(23)  The  amounts which may be subtracted from federal adjusted gross
income pursuant to subsection (p) of this section.
(24) For taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph  eight
of  subsection  (f)  of  section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which is included in the taxpayer's federal adjusted gross income solely
as a result of an election made  pursuant  to  the  provisions  of  such
paragraph eight as it was in effect for agreements entered into prior to
January first, nineteen hundred eighty-four.
(25) For taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass  commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred  sixty-eight  of  the  internal
revenue code (relating to qualified mass commuting vehicles), any amount
which  the  taxpayer  could  have  excluded  from federal adjusted gross
income had it not made the election provided for in such paragraph eight
as it was in effect for agreements entered into prior to January  first,
nineteen hundred eighty-four.
(26)  In  the  case  of  property  placed  in service in taxable years
beginning  before  nineteen  hundred  ninety-four,  for  taxable   years
beginning  after  December  thirty-first,  nineteen  hundred eighty-one,
except with respect to property subject to the provisions of section two
hundred eighty-F of the internal revenue code and  property  subject  to
the  provisions  of  section  one  hundred  sixty-eight  of the internal
revenue code which is placed in service in this state in  taxable  years
beginning  after December thirty-first, nineteen hundred eighty-four, an
amount with respect to property which is subject to  the  provisions  of
section  one  hundred  sixty-eight of the internal revenue code equal to
the amount allowable as the depreciation  deduction  under  section  one
hundred  sixty-seven  of the internal revenue code as such section would
have applied to property placed in  service  on  December  thirty-first,
nineteen hundred eighty.
(28) Upon the disposition of property to which paragraph twenty-six of
this  subsection  applies, the amount, if any, by which the aggregate of
the modifications described in paragraph twenty-five of  subsection  (b)
of  this  section attributable to such property exceeds the aggregate of
the modifications described in paragraph twenty-six of  this  subsection
attributable to such property.
(29)  Deduction  for  two-earner  married couples. (A) For the taxable
year beginning in nineteen  hundred  eighty-seven,  in  the  case  of  a
husband  and  wife  who each have qualified earned income and who file a
joint return under subsection (b) of section six hundred  fifty-one  for
the taxable year, an amount equal to ten percent of the lesser of:
(i) thirty thousand dollars or
(ii)  the  qualified  earned  income  of  the  spouse  with  the lower
qualified earned income for such taxable year.
(B) For purposes of this  paragraph,  eligibility  for  the  deduction
provided  for  herein  and  the  term  qualified  earned income shall be

determined in the manner such  eligibility  and  such  qualified  earned
income  would have been determined pursuant to the provisions of section
two hundred twenty-one of the internal revenue code of nineteen  hundred
fifty-four  had  such  provisions  continued in effect for taxable years
commencing after December thirty-first, nineteen hundred  eighty-six  as
they  were  in  effect  immediately prior to the repeal of such section.
Provided, however, the determination of  such  qualified  earned  income
shall be made with regard only to the items therein included in New York
adjusted  gross  income,  with  such  adjusted  gross  income determined
without regard to this paragraph, and only with regard to the deductions
and exclusions which are of the type properly allowable to or chargeable
against such qualified earned income in such taxable year.
(30) The amount received by any person as an  accelerated  payment  or
payments  of part or all of the death benefit or special surrender value
under a life insurance policy as  a  result  of  any  of  the  diagnoses
specified  in subparagraph (A) or (B) of paragraph one of subsection (a)
of section one thousand one hundred thirteen of the insurance  law,  and
the  amount  received by any person as a viatical settlement pursuant to
the provisions of article seventy-eight of the  insurance  law,  to  the
extent includible in gross income for federal income tax purposes.
(32) Contributions made during the taxable year by an account owner to
one or more family tuition accounts established under the New York state
college  choice  tuition  savings  program  provided  for  under article
fourteen-A of the  education  law,  to  the  extent  not  deductible  or
eligible  for credit for federal income tax purposes, provided, however,
the exclusion provided for in  this  paragraph  shall  not  exceed  five
thousand dollars for an individual or head of household, and for married
couples  who  file  joint  tax  returns,  shall  not exceed ten thousand
dollars; provided, further, that such exclusion shall be available  only
to the account owner and not to any other person.
(33) Distributions from a family tuition account established under the
New York state college choice tuition savings program provided for under
article  fourteen-A  of  the  education law, to the extent includible in
gross income for federal income tax purposes.
* (34) The portion of the fees paid  during  the  taxable  year  by  a
taxpayer  who  is  a resident of a continuing care retirement community,
issued a certificate of authority pursuant to article forty-six  of  the
public  health law, attributable to the cost of providing long term care
benefits pursuant to a continuing care contract. The portion of the fees
so attributable shall  be  determined  in  accordance  with  regulations
promulgated  by  the superintendent of financial services. The deduction
may not exceed the limitation that would be applicable to  the  taxpayer
for  the taxable year, with respect to eligible long term care premiums,
determined under paragraph (10) of subsection (d) of section 213 of  the
internal revenue code.
* NB There are 2 ù(34)'s
* (34) The amounts which may be subtracted from federal adjusted gross
income pursuant to subsection (u) of this section.
* NB There are 2 ù(34)'s
(35)  Distributions,  to  the  extent  includible  in gross income for
federal income tax purposes, made to the taxpayer because of his or  her
status  as  a victim of Nazi persecution, as defined in P.L. 103-286, or
as a spouse or a descendant in need of such victim.
(36) Items of income, to the extent includible  in  gross  income  for
federal income tax purposes, attributable to, derived from or in any way
related to assets stolen from, hidden from or otherwise lost to a victim
of  Nazi  persecution, as defined in P.L. 103-286, immediately prior to,
during and immediately after World War II, including,  but  not  limited

to,  interest  on  the  proceeds  receivable as insurance under policies
issued to a victim of Nazi persecution, as defined in P.L.  103-286,  by
European  insurance  companies immediately prior to and during World War
II.  Provided,  however,  this  subtraction from federal adjusted income
does not apply to assets acquired with such assets or with the  proceeds
from  the  sale  of such assets. Provided, further, this paragraph shall
only apply to a taxpayer who was the  first  recipient  of  such  assets
after their recovery and who is a victim of Nazi persecution, as defined
in P.L. 103-286, or a spouse or a descendant of such victim.
(37) In the case of a taxpayer subject to the modification provided by
paragraph  thirty-six  of  subsection  (b)  of  this section, the amount
required to be recaptured pursuant to subsection (d) of section  179  of
the  internal  revenue  code  with  respect  to property upon which such
modification was based.
(38) An amount of up to ten thousand  dollars  if  a  taxpayer,  while
living,  donates one or more of his or her human organs to another human
being for human organ transplantation. For purposes of  this  paragraph,
"human organ" means all or part of a liver, pancreas, kidney, intestine,
lung,  or  bone  marrow.  A  subtract  modification  allowed  under this
paragraph shall be claimed in the taxable year in which the human  organ
transplantation occurs. Provided, however, that this deduction shall not
apply to any donation for which the taxpayer has received benefits under
section forty-three hundred seventy-one of the public health law.
(A)  A  taxpayer  shall  claim the subtract modification allowed under
this paragraph only once and such subtract modification shall be claimed
for only the following unreimbursed expenses which are incurred  by  the
taxpayer and related to the taxpayer's organ donation:
(i) travel expenses;
(ii) lodging expenses; and
(iii) lost wages.
(B)  The  subtract modification allowed under this paragraph shall not
be claimed by a part-year resident or a non-resident of this state.
* (39) Any income or gain, to the extent it  is  included  in  federal
adjusted  gross  income of an individual who is the sole proprietor of a
qualified entity or a member of a limited liability company,  a  partner
in a partnership or a shareholder in a New York subchapter S corporation
that  is  a  qualified  entity,  attributable  to  the  operations  of a
qualified entity at its location in or as  part  of  a  New  York  state
innovation  hot  spot,  as  provided  in  section  thirty-eight  of this
chapter.
* NB There are 2 par (39)'s
* (39) (A) In the case of a taxpayer who is  a  small  business  or  a
taxpayer who is a member, partner, or shareholder of a limited liability
company, partnership, or New York S corporation, respectively, that is a
small  business,  who or which has business income and/or farm income as
defined in the laws of the United States, an  amount  equal  to  fifteen
percent   of   the  net  items  of  income,  gain,  loss  and  deduction
attributable to such business or farm  entering  into  federal  adjusted
gross income, but not less than zero.
(B)  (i)  For  the purposes of this paragraph, the term small business
shall mean: (I) a sole proprietor who employs one or more persons during
the taxable year and who has net business income or net farm  income  of
greater than zero but less than two hundred fifty thousand dollars;
(II)   a  limited  liability  company,  partnership,  or  New  York  S
corporation that during the taxable year employs one or more persons and
has net farm income attributable to a farm business that is greater than
zero but less than two hundred fifty thousand dollars; or
(III)  a  limited  liability  company,  partnership,  or  New  York  S
corporation that during the taxable year employs one or more persons and
has  New  York gross business income attributable to a non-farm business
that is greater than  zero  but  less  than  one  million  five  hundred
thousand dollars.
(ii)  For purposes of this paragraph, the term New York gross business
income shall mean: (I) in the case of a limited liability company  or  a
partnership, New York source gross income as defined in subparagraph (B)
of  paragraph three of subsection (c) of section six hundred fifty-eight
of this article; and (II) in the case of a New York S  corporation,  New
York  receipts  included  in  the  numerator of the apportionment factor
determined under section two hundred  ten-A  of  this  chapter  for  the
taxable year.
(C)  To  qualify for this modification in relation to a non-farm small
business that is a limited liability company, partnership, or New York S
corporation, the taxpayer's income  attributable  to  the  net  business
income  from  its  ownership  interests  in  non-farm  limited liability
companies, partnerships, or New York S corporations must  be  less  than
two hundred fifty thousand dollars.
* NB There are 2 par (39)'s
(40)  Any wages received by an individual as an employee of a business
located within a tax-free NY area during the first five  years  of  such
business's  ten  year  taxable  period  specified  in subdivision (a) of
section thirty-nine of this chapter, to the extent included  in  federal
adjusted  gross  income  and  allowed  under section thirty-nine of this
chapter. During the second  five  years  of  such  business's  ten  year
taxable  period, the first two hundred thousand dollars of such wages in
the case of a taxpayer filing as a  single  individual,  the  first  two
hundred  fifty  thousand dollars of such wages in the case of a taxpayer
filing as a head of household, and three  hundred  thousand  dollars  of
such  wages  in  the  case  of  a taxpayer filing a joint return, to the
extent included in federal  adjusted  gross  income  and  allowed  under
section thirty-nine of this chapter.
(41)  The  amount  of  any  award  paid  to a volunteer firefighter or
volunteer ambulance worker from a length of service defined contribution
plan or defined benefit plan  as  provided  for  in  articles  eleven-A,
eleven-AA,  eleven-AAA  and eleven-AAAA of the general municipal law, to
the extent that such award is includable in  gross  income  for  federal
income   tax  purposes;  provided,  however,  that  such  award  is  not
distributed in the form of  a  lump  sum  distribution,  as  defined  in
subparagraph  (D)  of  paragraph  four of subsection (e) of section four
hundred two of the internal revenue code and  taxed  under  section  six
hundred three of this article; and provided, further, that such award is
not distributed to a taxpayer who has not attained the age of fifty-nine
and one-half years.
* (42) Distributions from an eligible retirement plan, as such term is
defined  in  subparagraph  (B)  of  paragraph  (8)  of subsection (c) of
section four hundred two of the Internal Revenue Code, made on or  after
April  first,  two  thousand  seventeen  and  before  April  second, two
thousand twenty-two. In order for such distributions to be  eligible  to
be  subtracted  from federal adjusted gross income under this paragraph,
the following conditions must be satisfied: (A) the  taxpayer's  primary
residence  was  located  in  the  area affected by the disaster declared
pursuant to executive order  one  hundred  sixty-five  of  two  thousand
seventeen, declaring a state of emergency, dated May third, two thousand
seventeen;  (B)  such primary residence must have incurred damage due to
coastal flooding, widespread erosion and water  damage  caused  by  such
disaster;  (C) such damage must qualify for the casualty deduction under

section one hundred sixty-five of the internal revenue code  (determined
without regard to whether the loss exceeds ten percent of adjusted gross
income);  and  (D)  the  taxpayer  during  the taxable year must use the
entire amount of the distributions to pay for repairs needed as a result
of  such damage. Provided, however, that the amount of the distributions
that otherwise may be subtracted under this paragraph must be reduced by
any deduction claimed by  the  taxpayer  for  such  damage  pursuant  to
section  one  hundred sixty-five of the internal revenue code. Provided,
further, that the taxpayer shall not claim  a  subtraction  modification
under paragraph three-a of this subsection for such distribution.
* NB There are 3 par (42)'s
* (42)   Insurance   payments   received   by  an  eligible  volunteer
firefighter for the cancer disability benefits in  section  two  hundred
five-cc  of  the general municipal law to the extent includable in gross
income for federal income tax purposes.
* NB There are 3 par (42)'s
* (42) (A) The amount of any student loan that is discharged,  whether
in whole or in part, if such discharge was:
(i)  pursuant  to  subsection  (a) or (d) of section 437 of the Higher
Education Act of 1965 or the parallel benefit provided pursuant to  part
D of title IV of such act;
(ii)  pursuant  to section 464(c)(1)(F) of the Higher Education Act of
1965; or
(iii) otherwise discharged on  account  of  the  death  or  total  and
permanent  disability of the person on whose behalf the indebtedness was
incurred.
(B) For the purposes of this paragraph, "student loan" means:
(i) a student loan as defined in section  108(f)(2)  of  the  Internal
Revenue Code of 1986; or
(ii)  a  private  education  loan, as defined in section 140(7) of the
Consumer Credit Protection Act.
* NB There are 3 par (42)'s
(43) The amount of any gain  added  back  to  federal  adjusted  gross
income  in  a  previous  taxable year pursuant to paragraph forty-two of
subdivision (b) of this section that is included in federal gross income
for the taxable year.
(44) Any death benefit, to the extent includible in  federal  adjusted
gross  income,  paid  to  the  taxpayer  in  a  lump sum pursuant to the
COVID-19 family death benefit program established  by  the  metropolitan
transportation authority in two thousand twenty; provided, however, this
subtraction shall not exceed five hundred thousand dollars and shall not
apply  to  any  benefit payable under such program other than a lump sum
death benefit.
* (45) (A) The amount of  an  item  that  was  included  in  New  York
adjusted  gross  income  for  a prior taxable year (or years) because it
appeared that the taxpayer had an unrestricted right to  such  item  but
was  repaid  by  the  taxpayer  during  the  taxable year because it was
established after the close of such prior taxable year (or  years)  that
the  taxpayer  did  not  have an unrestricted right to such item or to a
portion of such item.
(B) No subtraction shall  be  allowed  under  this  paragraph  if  the
repayment  amount is included in the deduction allowed under section six
hundred fifteen or any other  provision  of  this  article,  or  if  the
repayment  amount  is  the  basis  for  a credit claimed by the taxpayer
pursuant to section six hundred sixty-two of this article.
* NB There are 2 par (45)'s
* (45)  Grants  received  pursuant  to  the  COVID-19  pandemic  small
business recovery grant program, established in section 16-ff of the New

York  state  urban development corporation act, to the extent includable
in federal adjusted gross income.
* NB There are 2 par (45)'s
* (46)  The  amount  of any student loan forgiveness award made by the
state, including any awards made pursuant to a program established under
article fourteen of the education law to the extent included in  federal
adjusted gross income.
* NB There are 2 par (46)'s
* (46)  The  amount  of  any  federal deduction disallowed pursuant to
section 280E of the internal revenue code related to the production  and
distribution  of  adult-use  cannabis  products,  as  defined by article
twenty-C of this chapter, not used  as  the  basis  for  any  other  tax
deduction,  exemption,  or credit and not otherwise required to be added
back by subsection (b) of this section in computing  New  York  adjusted
gross income.
* NB There are 2 par (46)'s
(47)  For  taxable  years  beginning  on  or  after January first, two
thousand twenty-three, the amount of  any  student  loan  discharged  or
forgiven  by  the  secretary  of  education  pursuant  to  any federally
authorized program, to the extent included  in  federal  adjusted  gross
income.
(d)  Modification  for  New  York fiduciary adjustment. There shall be
added to or subtracted from federal adjusted gross income (as  the  case
may  be)  the taxpayer's share, as beneficiary of an estate or trust, of
the New York fiduciary adjustment determined under section  six  hundred
nineteen.
(e)  Modifications of partners and shareholders of S corporations. (1)
Partners and shareholders of S corporations which are  not  New  York  C
corporations.  The  amounts  of  modifications required to be made under
this section by a partner or by a shareholder of an S corporation (other
than an S corporation which is a New York C corporation),  which  relate
to partnership or S corporation items of income, gain, loss or deduction
shall be determined under section six hundred seventeen and, in the case
of a partner of a partnership doing an insurance business as a member of
the  New  York  insurance exchange described in section six thousand two
hundred one of the insurance law, under section six hundred  seventeen-a
of this article.
(2)  Shareholders of S corporations which are New York C corporations.
In the case of a shareholder of an S corporation which is a New  York  C
corporation,  the  modifications  under this section which relate to the
corporation's items of income,  loss  and  deduction  shall  not  apply,
except  for  the  modifications  provided  under  paragraph  nineteen of
subsection (b) and  paragraph  twenty-two  of  subsection  (c)  of  this
section.
(3)  New  York  S  termination  year.  In  the  case  of  a New York S
termination year, the amounts of the modifications required  under  this
section  which  relate  to  the  S  corporation's items of income, loss,
deduction and reductions for taxes (as described in paragraphs  two  and
three  of  subsection  (f)  of section thirteen hundred sixty-six of the
internal revenue code) shall be adjusted in the same manner that  the  S
corporation's  items  are  adjusted  under subsection (s) of section six
hundred twelve.
(f) Husband and wife. If husband  and  wife  determine  their  federal
income  tax  on  a  joint return but are required to determine their New
York income taxes  separately,  they  shall  determine  their  New  York
adjusted  gross  incomes  separately  as if their federal adjusted gross
incomes had been determined separately.
(g) Optional modifications. Subject  to  the  conditions  provided  in
paragraphs  three  and  four  of this subsection, at the election of the
taxpayer there shall also be  subtracted  from  federal  adjusted  gross
income  either  or both of the items set forth in paragraphs one and two
of  this  subsection,  except  that  only  one  of  such  items shall be
subtracted with respect to any one item of property, and except  that  a
subtraction of the item set forth in such paragraph two may not be taken
with  respect  to  taxable  years  commencing on or after January first,
nineteen hundred eighty-seven.
(1) Depreciation with respect to any property  such  as  described  in
paragraphs  three  or  four  of  this  subsection,  and  subject  to the
conditions  provided  therein,  not  exceeding  twice  the  depreciation
allowed  with  respect  to  the  same  property  for  federal income tax
purposes. Such modification shall be allowed only  upon  condition  that
any  depreciation  or  amortization  allowed  with  respect  to the same
property in determining federal adjusted gross income shall be added  to
federal  adjusted  gross  income pursuant to paragraph six of subsection
(b) of this section. The total of all  deductions  allowed  pursuant  to
this paragraph in any taxable year or years with respect to any property
described  in  paragraph  three shall not exceed its cost or other basis
and, with respect to property described in paragraph four, which is used
in a business carried on both within and without  the  state  shall  not
exceed  its cost or other basis multiplied by a percentage of the excess
of the taxpayer's business income over its business deductions allocated
to this state for the first year such  depreciation  is  deducted.  Such
percentage  shall  be  determined  by apportionment and allocation under
regulations of the tax commission.
(2) Expenditures paid or incurred during  the  taxable  year  for  the
construction,  reconstruction,  erection  or acquisition of any property
such as described in paragraphs three or four of  this  subsection,  and
subject  to the conditions provided therein, which is used or to be used
for  purposes  of  research  and  development  in  the  experimental  or
laboratory  sense.  Such  purposes  shall  not  be deemed to include the
ordinary testing or inspection of  materials  or  products  for  quality
control,  efficiency  surveys,  management  studies,  consumer  surveys,
advertising,  promotions  or  research  in  connection  with   literary,
historical  or similar projects. Such modification shall be allowed only
on condition that, with respect to property described in paragraph four,
which is used in a business carried on both within and without the state
the  deduction  shall  not  exceed  the  expenditures  multiplied  by  a
percentage  of  the  excess  of  the taxpayer's business income over its
business deductions allocated to this state  for  the  first  year  such
expenditures  are  deducted.  Such  percentage  shall  be  determined by
apportionment and allocation under regulations of  the  tax  commission,
and  for  the  taxable  year  and  all  succeeding  taxable  years,  any
deductions allowed for federal income tax purposes on  account  of  such
expenditures  or  on account of depreciation of the same property except
to the extent that its basis may be attributable to factors  other  than
such  expenditures,  shall  be  added  to  federal adjusted gross income
pursuant to paragraph six of subsection (b) of this section, or in  case
a  modification  is allowable pursuant to this paragraph for only a part
of such expenditures, on condition that a proportionate part of any such
deductions allowed for federal income tax purposes be added  to  federal
adjusted  gross  income. With respect to property which is used or to be
used for research and development only in part, or during only  part  of
its  useful  life, the modification allowable pursuant to this paragraph
shall be limited to a proportionate part of  the  expenditures  relating
thereto.  If  a  modification  shall  have been allowed pursuant to this

paragraph for all or part of  such  expenditures  with  respect  to  any
property, and such property is used for purposes other than research and
development  to  a greater extent than originally reported, the taxpayer
shall  report  such  use in his return for the first taxable year during
which it occurs, and the tax commission may recompute the  tax  for  the
year  or  years for which such deduction was allowed, and may assess any
additional tax resulting from such recomputation within the  time  fixed
by subsection (c) of section six hundred eighty-three of this article.
(3)  For  purposes  of  this  paragraph,  such  modifications shall be
allowed only with respect to  tangible  property  which  is  depreciable
pursuant  to  section  one  hundred  sixty-seven of the internal revenue
code, having a situs in this state and used in the taxpayer's  trade  or
business,  (A)  constructed,  reconstructed  or  erected  after December
thirty-first, nineteen hundred sixty-three, pursuant to a contract which
was, on or before December thirty-first, nineteen  hundred  sixty-seven,
and  at all times thereafter, binding on the taxpayer, or, property, the
physical construction, reconstruction or erection of which began  on  or
before  December  thirty-first,  nineteen  hundred  sixty-seven or which
began after such date pursuant to an order placed on or before  December
thirty-first,  nineteen  hundred sixty-seven, and then only with respect
to that portion of  the  basis  thereof  or  the  expenditures  relating
thereto   which   is   properly   attributable   to  such  construction,
reconstruction or erection after December thirty-first, nineteen hundred
sixty-three, or  (B)  acquired  after  December  thirty-first,  nineteen
hundred  sixty-three,  pursuant  to  a  contract which was, on or before
December thirty-first, nineteen hundred sixty-seven, and  at  all  times
thereafter, binding on the taxpayer or pursuant to an order placed on or
before  December thirty-first, nineteen hundred sixty-seven, by purchase
as defined in section one  hundred  seventy-nine  (d)  of  the  internal
revenue  code,  if  the original use of such property commenced with the
taxpayer,  commenced  in  this  state  and  commenced   after   December
thirty-first,   nineteen   hundred   sixty-three,   or   (C)   acquired,
constructed,  reconstructed,   or   erected   subsequent   to   December
thirty-first,   nineteen   hundred  sixty-seven,  if  such  acquisition,
construction, reconstruction or erection is pursuant to a  plan  of  the
taxpayer  which was in existence December thirty-first, nineteen hundred
sixty-seven  and  not  thereafter  substantially  modified,   and   such
acquisition,  construction,  reconstruction  or  erection  would qualify
under the rules in paragraphs four, five or six  of  subsection  (h)  of
section forty-eight of the internal revenue code provided all references
in  such  paragraphs  four,  five  and  six  to  the dates October nine,
nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six,
shall be read as December thirty-first, nineteen hundred sixty-seven.  A
taxpayer  shall  be allowed a deduction under clauses (A), (B) or (C) of
this paragraph only if the tangible property shall be delivered  or  the
construction, reconstruction or erection shall be completed on or before
December  thirty-first,  nineteen hundred sixty-nine, except in the case
of tangible property which is acquired,  constructed,  reconstructed  or
erected  pursuant  to  a  contract  which  was,  on  or  before December
thirty-first, nineteen hundred sixty-seven, and at all times thereafter,
binding on the taxpayer. However, for any taxable year beginning  on  or
after  January first, nineteen hundred sixty-eight, a taxpayer shall not
be allowed a modification under paragraph one of  this  subsection  with
respect  to  tangible  personal  property  leased to any other person or
corporation. For purposes of the preceding  sentence,  any  contract  or
agreement  to  lease or rent or for a license to use such property shall
be considered a lease. With respect to property which  a  taxpayer  uses
for  purposes  other  than leasing for part of a taxable year and leases

for a part of a taxable year, a modification under paragraph  one  shall
be  allowed  in proportion to the part of the year such property is used
by the taxpayer.
(4)  For  purposes  of  this  paragraph,  such  modifications shall be
allowed only with respect to  tangible  property  which  is  depreciable
pursuant  to  section  one  hundred  sixty-seven of the internal revenue
code, having a situs in this state and used in the taxpayer's  trade  or
business.  The  modifications  provided  for  in  paragraph  one of this
subsection shall be allowed only with respect to tangible property which
is  (A)   constructed,   reconstructed   or   erected   after   December
thirty-first, nineteen hundred sixty-seven, pursuant to a contract which
was,  on  or before December thirty-first, nineteen hundred sixty-eight,
and at all times thereafter, binding on the taxpayer or,  property,  the
physical  construction,  reconstruction or erection of which began on or
before December thirty-first,  nineteen  hundred  sixty-eight  or  which
began  after such date pursuant to an order placed on or before December
thirty-first, nineteen hundred sixty-eight, and then only  with  respect
to  that  portion  of  the  basis  thereof  or the expenditures relating
thereto  which  is   properly   attributable   to   such   construction,
reconstruction or erection after December thirty-first, nineteen hundred
sixty-three,  or  (B)  acquired  after  December  thirty-first, nineteen
hundred sixty-seven, pursuant to a contract  which  was,  on  or  before
December  thirty-first,  nineteen  hundred sixty-eight, and at all times
thereafter, binding on the taxpayer or pursuant to an order placed on or
before December thirty-first, nineteen hundred sixty-eight, by  purchase
as  defined  in  section  one  hundred  seventy-nine (d) of the internal
revenue code, if the original use of such property  commenced  with  the
taxpayer,   commenced   in  this  state  and  commenced  after  December
thirty-first,   nineteen   hundred   sixty-seven,   or   (C)   acquired,
constructed,   reconstructed,   or   erected   subsequent   to  December
thirty-first,  nineteen  hundred  sixty-eight,  if   such   acquisition,
construction,  reconstruction  or  erection is pursuant to a plan of the
taxpayer which was in existence December thirty-first, nineteen  hundred
sixty-eight,   and  not  thereafter  substantially  modified,  and  such
acquisition, construction,  reconstruction  or  erection  would  qualify
under  the  rules  in  paragraphs four, five or six of subsection (h) of
section forty-eight of the internal revenue code provided all references
in such paragraphs four,  five  and  six  to  the  dates  October  nine,
nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six,
shall  be read as December thirty-first, nineteen hundred sixty-eight. A
taxpayer shall be allowed a deduction under clauses (A), (B) or  (C)  of
the  preceding  sentence of this paragraph only if the tangible property
shall be delivered or the construction, reconstruction or erection shall
be completed  on  or  before  December  thirty-first,  nineteen  hundred
seventy,  except  in  the  case  of tangible property which is acquired,
constructed, reconstructed or erected pursuant to a contract which  was,
on or before December thirty-first, nineteen hundred sixty-eight, and at
all  times thereafter binding on the taxpayer. The modification provided
for in paragraph two of this  subsection  shall  be  allowed  only  with
respect  to  tangible  property, (A) the construction, reconstruction or
erection of which is completed  after  December  thirty-first,  nineteen
hundred  sixty-seven,  and then only with respect to that portion of the
basis thereof or the expenditures relating  thereto  which  is  properly
attributable  to  such  construction,  reconstruction  or erection after
December thirty-first, nineteen hundred  sixty-three,  or  (B)  acquired
after  December  thirty-first, nineteen hundred sixty-seven, by purchase
as defined in section one  hundred  seventy-nine  (d)  of  the  internal
revenue  code,  if  the original use of such property commenced with the

taxpayer,  commenced  in  this  state  and  commenced   after   December
thirty-first,   nineteen   hundred  sixty-three.  Provided,  however,  a
modification under paragraph one of this  subsection  shall  be  allowed
with  respect  to property described in this paragraph only on condition
that such property shall be principally used  by  the  taxpayer  in  the
production  of goods by manufacturing; processing; assembling; refining;
mining; extracting; farming;  agriculture;  horticulture;  floriculture;
viticulture;  or  commercial  fishing.  For  purposes  of  the preceding
sentence, manufacturing shall mean the process of working raw  materials
into  wares suitable for use or which gives new shapes, new qualities or
new  combinations  to  matter  which  already  has  gone  through   some
artificial  process by the use of machinery, tools, appliances and other
similar equipment. Property  used  in  the  production  of  goods  shall
include  machinery,  equipment  or  other  tangible  property  which  is
principally used in the repair and service of other machinery, equipment
or other tangible property used principally in the production  of  goods
and  shall  include  all facilities used in the manufacturing operation,
including storage of material to be used in  manufacturing  and  of  the
products  that  are manufactured. At the option of the taxpayer, air and
water pollution control facilities which qualify for elective deductions
under subsection (h) of section six hundred twelve may be  treated,  for
purposes of this paragraph, as tangible property principally used in the
production  of goods by manufacturing; processing; assembling; refining;
mining; extracting; farming;  agriculture;  horticulture;  floriculture;
viticulture;  or  commercial  fishing, in which event, a deduction shall
not be allowed under such subsection (h). However, for any taxable  year
beginning  on  or  after  January first, nineteen hundred sixty-eight, a
taxpayer shall not be allowed a modification under paragraph one of this
subsection with respect to tangible  personal  property  leased  to  any
other person or corporation. For purposes of the preceding sentence, any
contract  or  agreement  to  lease  or rent or for a license to use such
property shall be considered a lease. With respect to property  which  a
taxpayer uses for purposes other than leasing for part of a taxable year
and  leases for a part of a taxable year, a modification under paragraph
one shall be allowed in proportion to the part of the year such property
is used by the taxpayer.
(5) If the modifications allowable for any taxable  year  pursuant  to
this  subsection  exceed  the taxpayer's New York adjusted gross income,
determined without the allowance of such modifications, the  excess  may
be  carried  over  to  the  following  taxable  year or years and may be
subtracted from federal adjusted gross income for  such  year  or  years
provided,  however,  that  in  no event shall such excess, insofar as it
reflects subtractions taken with respect to items set forth in paragraph
two of this subsection, be carried over to taxable years  commencing  on
or after January first, nineteen hundred ninety-four.
(6)  In  any  taxable year when property is sold or otherwise disposed
of, with respect to which a modification has been  allowed  pursuant  to
paragraph  one  or  two  of  this subsection, the basis of such property
shall be adjusted to reflect the modifications so allowed,  and  if  the
basis  as  so  adjusted  is  lower  than  the adjusted basis of the same
property for federal income  tax  purposes,  there  shall  be  added  to
federal  adjusted gross income the amount of the difference between such
adjusted bases.
(h) Optional modification for waste treatment  facility  expenditures.
For  taxable  years  commencing prior to January first, nineteen hundred
eighty-seven, at the election of  the  taxpayer,  there  shall  also  be
subtracted  from  federal  adjusted  gross  income  expenditures paid or
incurred during the taxable year for the  construction,  reconstruction,

erection or improvement of industrial waste treatment facilities and air
pollution control facilities.
(1)  (A)  The  term "industrial waste treatment facilities" shall mean
facilities  for  the  treatment,  neutralization,  or  stabilization  of
industrial  waste  and other wastes (as the terms "industrial waste" and
"other wastes" are defined  in  section  17-0105  of  the  environmental
conservation  law)  from a point immediately preceding the point of such
treatment, neutralization or stabilization to  the  point  of  disposal,
including the necessary pumping and transmitting facilities.
(B)  The term "air pollution control facilities" shall mean facilities
which remove, reduce, or render less noxious  air  contaminants  emitted
from  an  air  contamination  source (as the terms "air contaminant" and
"air contamination  source"  are  defined  in  section  19-0107  of  the
environmental  conservation  law) from a point immediately preceding the
point of such removal, reduction or rendering to the point of  discharge
of  air,  meeting emission standards as established by the department of
environmental conservation but excluding such facilities  installed  for
the  primary  purpose  of  salvaging  materials  which are usable in the
manufacturing process or are marketable and excluding  those  facilities
which rely for their efficacy on dilution, dispersion or assimilation of
air  contaminants  in  the  ambient  air after emission. Such term shall
further include flue gas desulfurization equipment and attendant  sludge
disposal  facilities, fluidized bed boilers, precombustion coal cleaning
facilities or other facilities that conform with  this  subdivision  and
which  comply  with  the provisions of the state acid deposition control
act set forth in title nine of article  nineteen  of  the  environmental
conservation law.
(2) Such modifications shall be allowed only
(A)  with  respect to tangible property which is depreciable, pursuant
to section one hundred sixty-seven of the internal revenue code,  having
a  situs in this state and used in the taxpayer's trade or business, the
construction, reconstruction, erection or improvement of which,  in  the
case  of industrial waste treatment facilities, is initiated on or after
January first, nineteen hundred sixty-five, or which, in the case of air
pollution control facilities, is initiated on or  after  January  first,
nineteen hundred sixty-six, and
(B) on condition that such facilities have been certified by the state
commissioner   of   environmental   conservation   or   his   designated
representative,  pursuant  to  section  19-0309  of  the   environmental
conservation  law,  as  complying  with the applicable provisions of the
environmental  conservation  law,  the  public  health  law,  the  state
sanitary   code   and  codes,  rules,  regulations,  permits  or  orders
promulgated pursuant thereto, and
(C) on condition that for the taxable year and all succeeding  taxable
years,  any  deductions allowed for federal income tax purposes for such
expenditures or for depreciation or amortization of the  same  property,
except to the extent that its basis may be attributable to factors other
than  such  expenditures,  be  added  to  federal  adjusted gross income
pursuant to paragraph five of subsection (b) of this section, or in case
a modification is allowable pursuant to this paragraph for only  a  part
of  such  expenditures,  on condition that a proportionate amount of any
such deductions allowed for federal income  tax  purposes  be  added  to
federal adjusted gross income, and
(D)  where  the election provided for in subsection (g) of section six
hundred twelve has not been exercised in respect to the same property.
(3) (A) If expenditures in respect to an  industrial  waste  treatment
facility  or  an  air  pollution control facility have been allowed as a
modification as provided herein and if within ten years from the end  of

the taxable year in which such modification was allowed such property or
any  part thereof is used for the primary purpose of salvaging materials
which are usable in the manufacturing process  or  are  marketable,  the
taxpayer  shall  report  such  change of use in its return for the first
taxable year  during  which  it  occurs,  and  the  tax  commission  may
recompute  the tax for the year or years for which such modification was
allowed,  and  may  assess  any  additional  tax  resulting  from   such
recomputation within the time fixed by paragraph eight of subsection (c)
of section six hundred eighty-three.
(B)  If  a modification is allowed as herein provided for expenditures
paid or incurred during any taxable year on the  basis  of  a  temporary
certificate   of   compliance   issued  pursuant  to  the  environmental
conservation law, and if  the  taxpayer  fails  to  obtain  a  permanent
certificate of compliance upon completion of the facilities with respect
to  which  such  temporary  certificate  was  issued, the taxpayer shall
report such failure in its report for the taxable year during which such
facilities are completed, and the tax commission may recompute  the  tax
for  the  year or years for which such modification was allowed, and may
assess any additional tax resulting from such recomputation  within  the
time  fixed  by paragraph eight of subsection (c) of section six hundred
eighty-three.
(C) If a modification is allowed as herein provided  for  expenditures
paid  or incurred during any taxable year in respect to an air pollution
control facility on the basis of  a  certificate  of  compliance  issued
pursuant  to  the  environmental conservation law and the certificate is
revoked  pursuant  to  subdivision  three  of  section  19-0309  of  the
environmental conservation law, the tax commission may recompute the tax
for  the  year  or  years  for  which  the facility is not or was not in
compliance  with  the  applicable  provisions   of   the   environmental
conservation  law, the state sanitary code or codes, rules, regulations,
permits or orders issued pursuant thereto, and for which a  modification
was  allowed,  and  may  assess  any  additional tax resulting from such
recomputation within the time fixed by paragraph eight of subsection (c)
of section six hundred eighty-three.
(4) In any taxable year when property is sold  or  otherwise  disposed
of,  with  respect  to which a modification has been allowed pursuant to
this paragraph, such modification shall be disregarded in computing gain
or loss, and the gain or loss on the sale or other disposition  of  such
property  shall  be  the  gain  or loss entering into the computation of
federal adjusted gross income for such taxable year.
(i) In the case  of  mines,  oil  and  gas  wells  and  other  natural
deposits, any allowance for percentage depletion pursuant to section six
hundred  thirteen  or  section  six  hundred  thirteen A of the internal
revenue code shall be added to federal adjusted gross  income.  However,
with  respect  to  the  property  as  to  which such addition to federal
adjusted gross income is required, an allowance for depletion  shall  be
subtracted  from  federal adjusted gross income in the amount that would
be deductible under section six hundred  eleven  of  such  code  if  the
deduction for an allowance for depletion were computed without reference
to  such section six hundred thirteen or section six hundred thirteen A.
With  respect  to  the  computation  of  depletion  pursuant   to   this
subsection,  the  basis for such computation for taxable years beginning
in  nineteen  hundred  seventy-two  shall  be  the  federal  basis.  For
subsequent  taxable  years,  the  basis  for  such  computation shall be
reduced only by the deduction for the allowance for depletion deductible
pursuant to this subsection. The portion of any gain from  the  sale  or
other  disposition  of  such property having a higher adjusted basis for
New York income tax purposes than for federal income tax purposes,  that

does  not  exceed  such  difference  in  basis, shall be subtracted from
federal adjusted gross income.
(j)  Modification  for  nonpublic  school  tuition.  (1)  General.  An
individual shall be entitled to subtract from his federal adjusted gross
income an amount shown in the table set forth in this paragraph for  his
New  York  adjusted  gross income for the taxable year, computed without
the benefit of this  modification,  multiplied  by  the  number  of  his
dependents,  not  exceeding  three,  attending  a  nonpublic school on a
full-time basis for at least four months during the regular school  year
for  the  education  of  such  dependent  in  grades one through twelve,
provided such individual is  allowed  an  exemption  under  section  six
hundred   sixteen  for  such  dependent.  Provided,  further,  that  the
modification under this paragraph may be taken only if  such  individual
has  paid  at  least fifty dollars for each such dependent in tuition to
such nonpublic school for such education of such dependent. No  taxpayer
shall  be entitled to the modification provided for in this paragraph if
he claims a tuition reimbursement payment pursuant to  article  twelve-A
of the education law.
If New York                                         The amount
adjusted gross                                   allowable for each
income is:                                       dependent is:
Less than $9,000                                      $1,000
 9,000--10,999                                          850
11,000--12,999                                          700
13,000--14,999                                          550
15,000--16,999                                          400
17,000--18,999                                          250
19,000--20,999                                          150
21,000--22,999                                          125
23,000--24,999                                          100
25,000 and over                                        --0--
(2)  Husband and wife. In determining the applicable New York adjusted
gross income of a husband and wife for purposes of the table  set  forth
in  paragraph one of this subsection, the New York adjusted gross income
of a husband and wife shall be the aggregate of their New York  adjusted
gross  incomes  for  the taxable year, determined without the benefit of
the modification provided for in this  subsection,  and  the  number  of
dependents  with respect to which this modification may be claimed shall
be no more than three in the aggregate.
(3) Definitions. (A) "Tuition", as used in this subsection, shall mean
the amount actually paid during the taxable year by the taxpayer for the
enrollment of a dependent during the regular school year at a  nonpublic
school.
(B)  "Nonpublic  school",  as  used in this subsection, shall mean any
non-profit elementary or secondary school in  the  state  of  New  York,
other  than  a  public  school,  which  (i)  is providing instruction in
accordance with article seventeen and section thirty-two hundred four of
the education law, (ii) has not been found to be in violation  of  Title
VI of the Civil Rights Act of nineteen hundred sixty-four, 78 Stat. 252,
42  U.S.C.  §  2000  (d)  and (iii) which is entitled to a tax exemption
under sections five hundred one (a) and five hundred one (c) (3) of  the
Federal  Internal  Revenue  Code  of  nineteen  hundred  fifty-four,  as
amended. The commissioner of education shall furnish to  the  state  tax
commission by February first of each year, a certified list of nonpublic
schools  which  comply  with  clause  (i)  of  this subparagraph for the
preceding calendar year and shall provide  such  other  assistance  with
respect to whether nonpublic schools come within clause (i) as the state
tax commission may require.
(C)  "Regular school year", as used in this subsection, shall mean the
months of the taxable year exclusive of July and August.
(4)  Additional  information.  Any claim for a modification under this
subsection  shall  be  accompanied  by  such  information  as  the   tax
commission may require.
(k)  For  taxable  years  beginning  after  December thirty-first, two
thousand two, in the case of qualified property described  in  paragraph
two  of  subsection k of section 168 of the internal revenue code, other
than qualified resurgence zone property described in subsection  (m)  of
this  section,  and  other than qualified New York Liberty Zone property
described in paragraph two of subsection  b  of  section  1400L  of  the
internal  revenue code (without regard to clause (i) of subparagraph (C)
of such paragraph), which was placed in service on or after June  first,
two  thousand  three,  a  taxpayer shall be allowed with respect to such
property the depreciation deduction allowable under section 167  of  the
internal  revenue  code  as  such  section  would  have  applied to such
property had it been acquired by the taxpayer on  September  tenth,  two
thousand one.
(l)  For  taxable  years  beginning  after  December thirty-first, two
thousand two, upon the disposition of property to which  subsection  (k)
of  this  section  applies, the amount of any gain or loss includible in
federal adjusted income shall be adjusted to reflect the inclusions  and
exclusions  from  federal adjusted income pursuant to paragraph eight of
subsection (b) and paragraph sixteen of subsection (c) of  this  section
attributable to such property.
(m) For purposes of subsections (k) and (l) of this section, qualified
resurgence  zone  property  shall  mean  qualified property described in
paragraph two of subsection k of section 168  of  the  internal  revenue
code substantially all of the use of which is in the resurgence zone, as
defined  below,  and  is in the active conduct of a trade or business by
the taxpayer in such  zone,  and  the  original  use  of  which  in  the
resurgence zone commences with the taxpayer after December thirty-first,
two  thousand  two.  The resurgence zone shall mean the area of New York
county bounded on the south by a line running from the  intersection  of
the  Hudson  River  with  the Holland Tunnel, and running thence east to
Canal Street, then running along the centerline of Canal Street  to  the
intersection  of  the  Bowery  and  Canal  Street,  running  thence in a
southeasterly direction diagonally across Manhattan Bridge Plaza, to the
Manhattan Bridge and thence along the centerline of the Manhattan Bridge
to the  point  where  the  centerline  of  the  Manhattan  Bridge  would
intersect  with  the easterly bank of the East River, and bounded on the
north by a line running from the intersection of the Hudson  River  with
the  Holland  Tunnel  and  running thence north along West Avenue to the
intersection of Clarkson Street then running east along  the  centerline
of  Clarkson  Street  to  the  intersection  of  Washington Avenue, then
running  south  along  the  centerline  of  Washington  Avenue  to   the
intersection  of  West Houston Street, then east along the centerline of
West Houston Street, then at the  intersection  of  the  Avenue  of  the
Americas  continuing east along the centerline of East Houston Street to
the easterly bank of the East River.
(n) Where gain or loss is recognized for federal income  tax  purposes
upon  the disposition of stock or indebtedness of a corporation electing
under subchapter s of chapter one of the internal revenue code
(1) There shall be added to federal adjusted gross income  the  amount
of increase in basis with respect to such stock or indebtedness pursuant
to  subsection  (a)  of  section  thirteen  hundred  seventy-six  of the
internal revenue code as such section was in effect  for  taxable  years
beginning  before  January  first,  nineteen  hundred  eighty-three  and

subparagraphs (A) and (B) of paragraph one of subsection (a) of  section
thirteen  hundred sixty-seven of such code, for each taxable year of the
corporation beginning, in  the  case  of  a  corporation  taxable  under
article  nine-A  of  this chapter, after December thirty-first, nineteen
hundred eighty, and in the case of a corporation taxable  under  article
thirty-two  of  this  chapter,  after  December  thirty-first,  nineteen
hundred ninety-six, for which the election provided  for  in  subsection
(a) of section six hundred sixty of this article was not in effect, and
(2) There shall be subtracted from federal adjusted gross income
(A)  the  amount  of  reduction in basis with respect to such stock or
indebtedness pursuant to subsection  (b)  of  section  thirteen  hundred
seventy-six  of  the internal revenue code as such section was in effect
for taxable years  beginning  before  January  first,  nineteen  hundred
eighty-three   and  subparagraphs  (B)  and  (C)  of  paragraph  two  of
subsection (a) of section thirteen hundred sixty-seven of such code, for
each taxable year of  the  corporation  beginning,  in  the  case  of  a
corporation taxable under article nine-A of this chapter, after December
thirty-first,  nineteen hundred eighty, and in the case of a corporation
taxable  under  article  thirty-two  of  this  chapter,  after  December
thirty-first,  nineteen  hundred  ninety-six,  for  which  the  election
provided for in subsection (a) of section  six  hundred  sixty  of  this
article was not in effect and
(B)  the  amount  of  any  modifications  to federal gross income with
respect to such stock pursuant to paragraph twenty of subsection (b)  of
this section.
(o)  Modifications  for  new business investment gains and certain new
business investments.
1. For purposes of this subsection, the  following  definitions  shall
apply:
(A)  "New  business investment gain" means gain from the sale of a new
business  investment  issued  to  the  taxpayer  before  January  first,
nineteen hundred eighty-eight, if:
(i)  such  new  business  investment  is,  in  the hands of the person
selling the same (whether or not  the  taxpayer),  a  capital  asset  as
defined in section 1221 of the internal revenue code of nineteen hundred
fifty-four, as amended, and
(ii)  such  new  business  investment  was held by such person for the
period specified in paragraph two of this subsection.
(B) "New business" means a corporation  or  partnership  organized  or
formed under the laws of any state which:
(i)  adopts a plan on or after July first, nineteen hundred eighty-one
and before January first, nineteen hundred eighty-eight,  to  conduct  a
new  business within the meaning and intent of this section and to issue
new business investments, as defined in this subsection, and
(ii) is, at the date of adoption of such  plan,  subject  to  taxation
(whether  or  not  any  amount  is  owing)  under  section  one  hundred
eighty-three, one hundred  eighty-four  or  one  hundred  eighty-six  of
article nine of this chapter, or under article nine-a of this chapter or
article  twenty-three of this chapter, or would have been subject to tax
under article twenty-three (as such article was  in  effect  on  January
first,  nineteen  hundred  eighty) if such article were still in effect,
and the first taxable period for which such new business became  subject
to  such  taxation  commenced  on  or after July first, nineteen hundred
eighty-one and before January first, nineteen hundred eighty-eight,  and
such first taxable period includes the date of adoption of such plan; if
not so subject to taxation, the new business must be subject to taxation
under  such sections or articles for the first time within one year from
the date of adoption of such plan, and
(iii) is conducted (or will be conducted, as evidenced by  such  plan)
whereby  at least ninety percent of the assets (valued at original cost)
are located and employed  in  this  state  and  eighty  percent  of  the
employees  (as ascertained within the meaning and intent of subparagraph
three  of  paragraph (a) of subdivision three of section two hundred ten
of this chapter  and,  in  addition,  in  the  case  of  a  partnership,
excluding  partners)  are principally employed in this state during each
taxable period, or part thereof, as required  by  clause  (iv)  of  this
subparagraph, and
(iv)  within  ninety  days  after  the adoption of such plan, or, if a
return is required, as part of such return,  under  such  article  nine,
article nine-A or article twenty-three (as such article was in effect on
or before December thirtieth, nineteen hundred eighty-two), whichever is
sooner,  shall  file  a  new  business  certificate  with  the state tax
commission attesting to whether it meets, if subject to  taxation  under
such  articles,  or  intends  to  meet,  if  not  so subject, all of the
conditions stated in clauses (i), (ii) and (iii)  of  this  subparagraph
within  the  time  set  forth therein. Thereafter, during the first four
taxable years of such new business, along with,  and  as  part  of,  any
return  required  under  such articles, such new business shall make and
file a new business certificate for the period covered  by  such  return
attesting  to  whether  it  has  met  the  conditions  specified in this
subparagraph during the taxable period covered by  such  return.  If  no
return  is required under such articles, such certificate shall be filed
annually on or before the fifteenth day of March which shall  cover  the
twelve  consecutive  calendar  month  period  ending  on the last day of
December  immediately  preceding  such  March  fifteenth.  If  such  new
business  fails  to meet such conditions specified in this subparagraph,
it shall, in addition,  give  notice  of  this  fact,  within  the  time
prescribed  by  the  state  tax  commission,  to the holders of its "new
business investments." The state tax commission shall prescribe the form
and content of such new business certification and  may  require  a  new
business  to  file  such  certificate  for periods (even if no return is
filed or required, but for this section) covering up to eight years from
the date of adoption of such plan, as in its discretion,  it  deems  the
same necessary for the enforcement of this subparagraph, and
(v) Special rules:
(1)  For  any taxable period, in order to constitute a new business, a
business enterprise must have derived more than  sixty  percent  of  its
aggregate  gross  receipts  from  sources  other  than royalties, rents,
dividends, interest, annuities  and  sales  or  exchanges  of  stock  or
securities.
(2)  A  new  business  does  not include (i) any new business of which
twenty-five percent or more of  the  number  of  shares  of  stock  that
entitle  the  holders  thereof  to vote for the election of directors or
trustees is owned, directly or indirectly, by a taxpayer subject to  tax
under  section  one  hundred  eighty-three, one hundred eighty-four, one
hundred eighty-five or one hundred eighty-six of article  nine  of  this
chapter,  or  under  article  nine-A, thirty-two or thirty-three of this
chapter or (ii) any new business substantially similar in operation  and
in ownership, directly or indirectly, to a business entity (or entities)
taxable,  or  previously  taxable,  under  such sections, such articles,
article twenty-three or which would  have  been  subject  to  tax  under
article  twenty-three  (as  such article was in effect on January first,
nineteen hundred eighty) or the income (or losses) of which is (or  was)
includable  under  article  twenty-two whereby the intent and purpose of
this subsection would be evaded.
(C)  "New  business  investment"  means  and  includes  the  following
investments  issued  before January first, nineteen hundred eighty-eight
by a new business  pursuant  to  a  plan  described  in  clause  (i)  of
subparagraph  (B)  of  this paragraph for money or other property (other
than  stock  or  securities)  on  or  before the expiration of the third
taxable  year  of  such  new  business  (excluding  any   short   period
immediately preceding such taxable year because the new business was not
in  existence  for  an entire taxable year) or forty-two months from the
adoption of such  plan,  whichever  is  sooner:  (i)  original  issuance
capital  stock  as  part  of  a  new issue, (ii) other original issuance
securities of a new issue of a like nature as stocks which are  designed
as  a  means  of  investment  and  issued  for  the purpose of financing
corporate enterprises and providing for a distribution of rights in such
enterprises, (iii) debt obligations such as bonds and debentures  for  a
term  of  at  least  one  year,  whether  secured or unsecured, and (iv)
certificates and other instruments representing  proprietary  interests,
whether  limited or otherwise, in and assumption of general liabilities,
whether limited or otherwise, of a partnership enterprise.
2. A taxpayer may subtract from his federal adjusted  gross  income  a
portion  of  an  amount  constituting a new business investment gain, as
follows:
If new business                    The modification is equal to the
investment held for:               following proportion of the gain
includable in federal adjusted
gross income:
At least four years, but
less than five years               twenty-five percent
At least five years, but
less than six years                fifty percent
At least six years                 one hundred percent
3. Where, within six months of  the  realization  of  a  new  business
investment gain allowable as the basis of a modification under paragraph
two  of  this  subsection,  such  modification is equal to less than one
hundred percent of  the  portion  of  the  gain  includable  in  federal
adjusted  gross  income  and  the  taxpayer  purchases  a  new  business
investment which is then held for a period of at least six  months,  the
taxpayer may subtract from his federal adjusted gross income ten percent
(but not an amount that will reduce the portion of such gain included in
his  New  York  income  below zero) of the amount of such gain where the
purchase price of the new business investment is  equal  to  or  greater
than  the  proceeds  of  the  sale  giving  rise to such gain. Where the
purchase price of the new business investment is  less  than  an  amount
equal  to  the  proceeds  of such sale, the modification allowable under
this paragraph shall be equal to ten percent of an amount equal  to  the
product  of  (A) the amount of the gain and (B) a fraction the numerator
of which is the purchase price of the new investment and the denominator
of which  is  an  amount  equal  to  the  proceeds  of  such  sale.  The
modification  allowable  under  this  paragraph  may be utilized, at the
option of the taxpayer, with respect to the taxable year  in  which  the
new business investment gain is realized or the year containing the last
day of the six-month retention period described in this paragraph.
4.  The  state tax commission may prescribe such rules and regulations
as may be necessary to carry out the purposes of this subdivision.
(p) New business investment  deferral.  For  taxable  years  beginning
before  January  first,  nineteen hundred eighty-eight, at the option of

the taxpayer, there may be subtracted from federal adjusted gross income
a reinvested amount of long-term capital gain realized in a taxable year
from the sale of a capital asset, as such term  is  defined  in  section
1221  of  the  internal  revenue  code,  which  is  not  a  new business
investment. A reinvested amount of long-term capital gain shall mean  an
amount which bears the same ratio to the long-term capital gain realized
from  the  sale  of  a  capital  asset  which was includable in New York
adjusted gross income as that portion of  the  sale  proceeds  which  is
reinvested,  within  one  year  from  date  of  sale,  in a New York new
business bears to the total sale proceeds.  For  the  purposes  of  this
subsection,  a  New York new business is a business enterprise which (1)
has been a taxpayer under this article for no more  than  three  taxable
years  (including  short  taxable  years), (2) over fifty percent of the
number of shares of stock that entitle the holders thereof to  vote  for
the  election  of  directors  or  trustees  is  not  owned,  directly or
indirectly, by a taxpayer subject  to  tax  under  section  one  hundred
eighty-three,  one  hundred  eighty-four, one hundred eighty-five or one
hundred eighty-six of article nine of this  chapter,  or  under  article
nine-A,   thirty-two  or  thirty-three  of  this  chapter,  (3)  is  not
substantially similar in operation or ownership, directly or indirectly,
to a business entity (or entities) taxable, or previously taxable, under
such sections, such articles, article twenty-three or which  would  have
been  subject  to tax under article twenty-three (as such article was in
effect on January first, nineteen hundred  eighty)  or  the  income  (or
losses) of which is (or was) includable under article twenty-two whereby
the  intent  and purpose of this subsection would be evaded, (4) locates
and employs at least ninety percent of its  assets  in  the  state,  (5)
employs  principally  in  the  state eighty percent of its employees (as
ascertained within the meaning  and  intent  of  subparagraph  three  of
paragraph  (a)  of  subdivision three of section two hundred ten of this
chapter and, in addition,  in  the  case  of  a  partnership,  excluding
partners),  (6) derives less than forty percent of its gross income from
dividends,  interest,  royalties  (other  than  mineral,  oil,  or   gas
royalties  or  copyright  royalties),  and  annuities and (7) reports at
least twenty-five hundred dollars in gross income in any  taxable  year.
The  reinvested  amount  must  qualify  as a capital asset as defined in
section 1221 of the internal revenue code and must be  retained  by  the
taxpayer  for  at  least twelve months. The modification allowable under
this subsection shall be utilized with respect to the  taxable  year  in
which  the  twelve  month  retention  period  ends.  The commissioner of
taxation and finance may  require  annual  information  reports  on  the
investments in new businesses made pursuant to this subsection, and such
other  reports  as  he  may require to ensure against the evasion of the
intent and purposes of this subsection.
(q) An amount deferred under subsection (p) hereof shall be  added  to
federal  adjusted gross income when the reinvestment in the New York new
business which qualified a taxpayer for such deferral is sold.
(r) Related members expense add back.  (1)  Definitions.  (A)  Related
member.   "Related   member"  means  a  related  person  as  defined  in
subparagraph (c) of paragraph three of subsection (b)  of  section  four
hundred  sixty-five  of  the  internal  revenue code, except that "fifty
percent" shall be substituted for "ten percent".
(B) Effective rate of tax. "Effective rate of tax" means,  as  to  any
state  or  U.S. possession, the maximum statutory rate of tax imposed by
the state or possession on or measured by a related member's net  income
multiplied  by  the  apportionment percentage, if any, applicable to the
related member under the laws of said jurisdiction. For purposes of this
definition, the effective rate of tax as to any state or U.S. possession

is zero where the related member's net  income  tax  liability  in  said
jurisdiction  is reported on a combined or consolidated return including
both the taxpayer and the related member where the reported transactions
between  the  taxpayer  and the related member are eliminated or offset.
Also, for purposes of this definition, when computing the effective rate
of tax for a jurisdiction in which a  related  member's  net  income  is
eliminated or offset by a credit or similar adjustment that is dependent
upon  the  related  member  either  maintaining  or  managing intangible
property or collecting interest income in that jurisdiction, the maximum
statutory rate of tax imposed by said jurisdiction shall be decreased to
reflect the statutory rate of tax that applies to the related member  as
effectively reduced by such credit or similar adjustment.
(C) Royalty payments. Royalty payments are payments directly connected
to  the  acquisition,  use,  maintenance or management, ownership, sale,
exchange, or any other disposition of licenses, trademarks,  copyrights,
trade  names,  trade  dress,  service  marks, mask works, trade secrets,
patents and any other similar types of intangible assets  as  determined
by   the   commissioner,  and  include  amounts  allowable  as  interest
deductions under section one hundred sixty-three of the internal revenue
code to the extent such amounts are directly or indirectly for,  related
to   or   in  connection  with  the  acquisition,  use,  maintenance  or
management, ownership, sale, exchange or disposition of such  intangible
assets.
(D)  Valid  business  purpose. A valid business purpose is one or more
business purposes, other than the avoidance or  reduction  of  taxation,
which alone or in combination constitute the primary motivation for some
business  activity or transaction, which activity or transaction changes
in a meaningful way, apart from tax effects, the  economic  position  of
the taxpayer. The economic position of the taxpayer includes an increase
in  the  market share of the taxpayer, or the entry by the taxpayer into
new business markets.
(2) Royalty expense add backs. (A) For the purpose  of  computing  New
York  adjusted  gross  income, a taxpayer must add back royalty payments
directly or indirectly paid, accrued, or incurred in connection with one
or more direct or indirect transactions with one or more related members
during the taxable year to the extent deductible in calculating  federal
taxable income.
(B)  Exceptions.  (i) The adjustment required in this subsection shall
not apply to the portion  of  the  royalty  payment  that  the  taxpayer
establishes,  by  clear  and  convincing evidence of the type and in the
form  specified  by  the  commissioner,  meets  all  of  the   following
requirements: (I) the related member was subject to tax in this state or
another  state or possession of the United States or a foreign nation or
some combination thereof on a tax base that included the royalty payment
paid, accrued or incurred by  the  taxpayer;  (II)  the  related  member
during  the  same  taxable  year directly or indirectly paid, accrued or
incurred such portion to a person that is  not  a  related  member;  and
(III)  the  transaction  giving  rise to the royalty payment between the
taxpayer and the related member was  undertaken  for  a  valid  business
purpose.
(ii) The adjustment required in this subsection shall not apply if the
taxpayer  establishes,  by clear and convincing evidence of the type and
in the form specified by the commissioner, that: (I) the related  member
was  subject  to  tax  on or measured by its net income in this state or
another state or possession of the United  States  or  some  combination
thereof;  (II)  the  tax  base for said tax included the royalty payment
paid, accrued or incurred by  the  taxpayer;  and  (III)  the  aggregate
effective   rate   of  tax  applied  to  the  related  member  in  those

jurisdictions is no less than eighty percent of the  statutory  rate  of
tax  that  applied to the taxpayer under section six hundred one of this
article for the taxable year.
(iii)  The  adjustment  required in this subsection shall not apply if
the taxpayer establishes, by clear and convincing evidence of  the  type
and  in  the  form  specified by the commissioner, that: (I) the royalty
payment was paid, accrued or incurred  to  a  related  member  organized
under  the  laws  of  a  country  other than the United States; (II) the
related  member's  income  from  the  transaction  was  subject   to   a
comprehensive  income  tax  treaty  between  such country and the United
States; (III) the related member was subject to tax in a foreign  nation
on  a  tax  base  that  included  the  royalty  payment paid, accrued or
incurred by the taxpayer; (IV) the  related  member's  income  from  the
transaction  was taxed in such country at an effective tax rate at least
equal to that imposed by this state; and (V)  the  royalty  payment  was
paid,  accrued or incurred pursuant to a transaction that was undertaken
for a valid business purpose and  using  terms  that  reflect  an  arm's
length relationship.
(iv) The adjustment required in this subsection shall not apply if the
taxpayer and the commissioner agree in writing to the application or use
of alternative adjustments or computations. The commissioner may, in his
or  her  discretion,  agree  to  the  application  or use of alternative
adjustments or computations when he or she concludes that in the absence
of such agreement the income of  the  taxpayer  would  not  be  properly
reflected.
(s)  New  York  S  termination year. (1) General. In the case of a New
York S termination year, the amount of any item of S corporation income,
loss and deduction included in the shareholder's federal adjusted  gross
income  and any reductions for taxes (as described in paragraphs two and
three of subsection (f) of section thirteen  hundred  sixty-six  of  the
internal  revenue  code)  shall  be  adjusted  in  accordance  with  the
treatment provided in paragraph two or three of this subsection.
(2) Pro rata allocation. Unless paragraph  three  of  this  subsection
applies,  an  equal portion of each S corporation item shall be assigned
to each day of the S corporation's taxable year for federal  income  tax
purposes.  The portion of each such item thereby assigned to the S short
year shall be treated as an item of a New York S  corporation,  and  the
portion  of each such item thereby assigned to the C short year shall be
treated as  an  item  of  an  S  corporation  which  is  a  New  York  C
corporation.
(3)  Normal  tax  accounting.  The  portion of each S corporation item
assigned to the S short year and the C short year  shall  be  determined
using normal tax accounting rules if:
(A)  there is a sale or exchange of fifty percent or more of the stock
in such corporation during the New York S termination year; or
(B) the corporation so elects, in  the  manner  the  commissioner  may
provide.  No  election under this subparagraph shall be effective unless
all persons who are shareholders during the S short year and all persons
who are shareholders on the first day of the C  short  year  consent  to
such election.
(u)  Emerging  technology investment deferral. In the case of any sale
of a qualified emerging  technologies  investment  held  for  more  than
thirty-six  months  and  with  respect  to which the taxpayer elects the
application of this subsection, gain from such sale shall be  recognized
only  to  the  extent  that the amount realized on such sale exceeds the
cost of any qualified emerging technologies investment purchased by  the
taxpayer during the three hundred sixty-five-day period beginning on the
date  of such sale, reduced by any portion of such cost previously taken

into account under this subsection. For purposes of this subsection  the
following shall apply:
(1)  A  qualified investment is stock of a corporation or an interest,
other than as a creditor, in a partnership or limited liability  company
that was acquired by the taxpayer as provided in Internal Revenue Code §
1202(c)(1)(B),  except  that  the  reference to the term "stock" in such
section shall be read as "investment," or by the taxpayer from a  person
who had acquired such stock or interest in such a manner.
(2)   A  qualified  emerging  technology  investment  is  a  qualified
investment, that was held  by  the  taxpayer  for  at  least  thirty-six
months,  in  a  company  defined  in paragraph (c) of subdivision one of
section thirty-one hundred two-e of the public  authorities  law  or  an
investment  in  a partnership or limited liability company that is taxed
as a  partnership  to  the  extent  that  such  partnership  or  limited
liability company invests in qualified emerging technology companies.
(3)  For  purposes  of  determining whether the nonrecognition of gain
under this subsection  applies  to  a  qualified  emerging  technologies
investment  that  is  sold,  the  taxpayer's  holding  period  for  such
investment and the qualified emerging technologies  investment  that  is
purchased  shall be determined without regard to Internal Revenue Code §
1223.
(v) Amounts deferred. The amount deferred under subsection (u) of this
section shall be  added  to  federal  adjusted  gross  income  when  the
reinvestment in the New York qualified emerging technology company which
qualified a taxpayer for such deferral is sold.
(w)  Alimony  modifications.  (1) In the case of applicable alimony or
separate maintenance payments, the following modifications shall apply:
(A) There shall be subtracted from federal adjusted gross  income  any
applicable alimony or separate maintenance payments made by the taxpayer
during the taxable year.
(B)  There  shall  be  added  to  federal  adjusted  gross  income any
applicable alimony or separate  maintenance  payments  received  by  the
taxpayer during the taxable year.
(2)  (A)  The  term  "alimony  or separate maintenance payments" means
payments as defined under section seventy-one of  the  internal  revenue
code in effect immediately prior to the enactment of Public Law 115-97.
(B)  The  term  "applicable  alimony or separate maintenance payments"
means payments made  under  an  alimony  or  separation  instrument  (as
defined  in  section  seventy-one of the internal revenue code in effect
immediately prior to the  enactment  of  Public  Law  115-97)  that  was
executed  after  December  thirty-first,  two thousand eighteen, and any
divorce or separation instrument executed on or  before  such  date  and
modified after such date if the modification expressly provides that the
amendments made by this section apply to such modification.
(x) Qualified moving expense reimbursement and moving expenses. (1) In
the case of applicable qualified moving expense reimbursement and moving
expenses, the following modifications shall apply:
(A)  There  shall be subtracted from federal adjusted gross income any
applicable  qualified  moving  expense  reimbursement  received  by  the
taxpayer during the taxable year.
(B)  There  shall be subtracted from federal adjusted gross income any
applicable moving expenses paid by the taxpayer during the taxable year.
(2) Applicable  qualified  moving  expense  reimbursement  and  moving
expenses  are  those  deductions as allowed by paragraph (g) of sections
one hundred thirty-two and section two hundred seventeen,  respectfully,
of  the  internal  revenue  code  immediately  prior to the enactment of
Public Law 115-97.