2023 New York Laws › TAX - Tax › Article 9-A - Franchise Tax on Business Corporations › 208 - Definitions.

§ 208. Definitions. As used in this article:
1.  The  term  "corporation"  includes  (a)  an association within the
meaning of paragraph three of subsection (a)  of  section  seventy-seven
hundred  one of the internal revenue code (including a limited liability
company), (b) a joint-stock  company  or  association,  (c)  a  publicly
traded partnership treated as a corporation for purposes of the internal
revenue  code pursuant to section seventy-seven hundred four thereof and
(d) any business conducted by a trustee or trustees wherein interest  or
ownership  is  evidenced  by  certificate  or  other written instrument.
"DISC"  and  "former  DISC"  mean  any  corporation  which   meets   the
requirements of subsection (a) of section nine hundred ninety-two of the
internal revenue code.
1-A.  The  term  "New  York  S corporation" means, with respect to any
taxable year, a corporation subject to tax under this article for  which
an  election  is  in  effect  pursuant  to subsection (a) of section six
hundred sixty of this chapter for such year,  any  such  year  shall  be
denominated  a "New York S year", and such election shall be denominated
a "New York S election". The term "New York C corporation"  means,  with
respect  to  any  taxable  year, a corporation subject to tax under this
article which is not a New York S corporation, and any such  year  shall
be  denominated  a  "New York C year". The term "termination year" means
any taxable year of a corporation during which the New York  S  election
terminates  on  a day other than the first day of such year. The portion
of the  taxable  year  ending  before  the  first  day  for  which  such
termination  is  effective  shall be denominated the "S short year", and
the  portion  of  such  year  beginning  on  such  first  day  shall  be
denominated  the  "C short year". The term "New York S termination year"
means any termination year which is not also an S termination  year  for
federal purposes.
1-B.  The  term  "QSSS"  means  a  corporation  which  is  a qualified
subchapter S subsidiary as defined  in  subparagraph  (B)  of  paragraph
three  of  subsection  (b)  of section thirteen hundred sixty-one of the
internal revenue code. The term "exempt QSSS" means a QSSS  exempt  from
tax  under this article as provided in paragraph (k) of subdivision nine
of this section, or a QSSS described in subclause (i) of clause  (B)  of
subparagraph  two  of paragraph (k) of subdivision nine of this section,
wherein the parent corporation of the QSSS is subject to tax under  this
article,  and the assets, liabilities, income and deductions of the QSSS
are treated as the assets, liabilities, income  and  deductions  of  the
parent  corporation.  Where  a  QSSS  is  an  exempt  QSSS, then for all
purposes under this article:
(a) the assets, liabilities, income,  deductions,  property,  payroll,
receipts, capital, credits, and all other tax attributes and elements of
economic  activity of the QSSS shall be deemed to be those of the parent
corporation,
(b) the  stocks,  bonds  and  other  securities  issued  by,  and  any
indebtedness  from, the QSSS shall not be investment or business capital
of the parent corporation,
(c)  transactions  between  the  parent  corporation  and  the   QSSS,
including the payment of interest and dividends, shall not be taken into
account, and
(d)  general  executive  officers  of  the  QSSS shall be deemed to be
general executive officers of the parent corporation.
2. The term "taxpayer" means any corporation subject to tax under this
article.
3. The term "subsidiary" means  a  corporation  of  which  over  fifty
percent  of  the number of shares of stock entitling the holders thereof

to vote for the election of  directors  or  trustees  is  owned  by  the
taxpayer.
4. The term "stock" means an interest in a corporation that is treated
as equity for federal income tax purposes.
5.  (a) The term "investment capital" means investments in stocks that
(i) satisfy the definition of a capital asset under section 1221 of  the
internal  revenue code at all times the taxpayer owned such stock during
the taxable year, (ii) are held by the taxpayer for investment for  more
than one year, (iii) the dispositions of which are, or would be, treated
by  the  taxpayer  as generating long-term capital gains or losses under
the internal revenue code, (iv) for stocks acquired on or after  January
first,  two  thousand fifteen, at any time after the close of the day in
which they are acquired, have never been held for sale to  customers  in
the  regular  course of business, and (v) before the close of the day on
which the stock was acquired, are clearly identified in  the  taxpayer's
records  as  stock  held  for  investment in the same manner as required
under section 1236(a)(1) of the internal revenue code for the stock of a
dealer in securities to be eligible for capital gain treatment  (whether
or  not the taxpayer is a dealer of securities subject to section 1236),
provided, however, that for stock acquired prior to October  first,  two
thousand fifteen that was not subject to section 1236(a) of the internal
revenue  code,  such identification in the taxpayer's records must occur
before October first, two thousand fifteen. Stock in a corporation  that
is  conducting  a  unitary  business  with  the  taxpayer,  stock  in  a
corporation that is included in a  combined  report  with  the  taxpayer
pursuant  to  the  commonly owned group election in subdivision three of
section two hundred ten-C of this  article,  and  stock  issued  by  the
taxpayer  shall  not constitute investment capital. For purposes of this
subdivision, if the taxpayer owns or controls, directly  or  indirectly,
less  than  twenty  percent  of  the  voting  power  of  the  stock of a
corporation, that corporation  will  be  presumed  to  be  conducting  a
business that is not unitary with the business of the taxpayer.
(b)  There  shall  be deducted from investment capital any liabilities
which are directly or indirectly attributable to investment capital.  If
the  amount  of  those  liabilities  exceeds  the  amount  of investment
capital, the amount of investment capital will be zero.
(c) Investment capital shall not  include  any  such  investments  the
income  from  which  is  excluded from entire net income pursuant to the
provisions of paragraph (c-1) of subdivision nine of this  section,  and
that  investment capital shall be computed without regard to liabilities
directly or indirectly attributable to such investments, but only if air
carriers organized in the United States and  operating  in  the  foreign
country  or  countries  in  which  the  taxpayer  has  its major base of
operations and in which it is organized, resident or  headquartered  (if
not in the same country as its major base of operations) are not subject
to  any  tax  based  on  or  measured by capital imposed by such foreign
country or countries or any political subdivision thereof, or if  taxed,
are  provided an exemption, equivalent to that provided for herein, from
any tax based on or measured by capital imposed by such foreign  country
or  countries and from any such tax imposed by any political subdivision
thereof.
(d) If a taxpayer acquires stock that is a capital asset under section
1221 of the internal revenue code during the taxable year and owns  that
stock  on  the last day of the taxable year, it will be presumed, solely
for purposes of determining whether that stock should be  classified  as
investment  capital  after  it  is acquired, that the taxpayer held that
stock for more than one year. However, if the taxpayer does not in  fact
own that stock at the time it actually files its original report for the

taxable year in which it acquired the stock, then the presumption in the
preceding  sentence shall not apply and the actual period of time during
which the taxpayer owned the stock shall be used  to  determine  whether
the  stock  should  be  classified  as  investment  capital  after it is
acquired. If the  taxpayer  relies  on  the  presumption  in  the  first
sentence  of this paragraph but does not own the stock for more than one
year, the taxpayer must increase  its  total  business  capital  in  the
immediately succeeding taxable year by the amount included in investment
capital  for  that  stock,  net  of any liabilities attributable to that
stock computed as provided in paragraph (b) of this subdivision and must
increase its business income in the immediately succeeding taxable  year
by the amount of income and net gains (but not less than zero) from that
stock  included  in  investment  income,  less  any  interest deductions
directly or indirectly  attributable  to  that  stock,  as  provided  in
subdivision six of this section.
(e)  When  income  or  gain  from  a debt obligation or other security
cannot be apportioned  to  the  state  using  the  apportionment  factor
determined  under  section two hundred ten-A of this article as a result
of United States constitutional principles, the debt obligation or other
security will be included in investment capital.
6. (a) (i)  The  term  "investment  income"  means  income,  including
capital  gains  in excess of capital losses, from investment capital, to
the extent included  in  computing  entire  net  income,  less,  in  the
discretion  of  the  commissioner,  any interest deductions allowable in
computing  entire  net  income  which   are   directly   or   indirectly
attributable  to  investment  capital  or  investment  income, provided,
however, that in no case  shall  investment  income  exceed  entire  net
income.  (ii)  If  the  amount  of  interest deductions subtracted under
subparagraph (i) of this paragraph exceeds investment income, the excess
of such amount over investment income must be added back to  entire  net
income.  (iii)  If  the  taxpayer's investment income determined without
regard to the interest deductions subtracted under subparagraph  (i)  of
this  paragraph  comprises  more  than  eight  percent of the taxpayer's
entire net income, investment income determined without regard  to  such
interest deductions cannot exceed eight percent of the taxpayer's entire
net income.
(b)  In lieu of subtracting from investment income the amount of those
interest deductions, the taxpayer  may  make  a  revocable  election  to
reduce  its  total  investment  income,  determined  after  applying the
limitation in subparagraph (iii) of paragraph (a) of  this  subdivision,
by forty percent. If the taxpayer makes this election, the taxpayer must
also  make  the  elections  provided  for  in  paragraphs (b) and (c) of
subdivision six-a of this section. If the taxpayer subsequently  revokes
this  election,  the  taxpayer must revoke the elections provided for in
paragraphs (b) and (c) of subdivision six-a of this section. A  taxpayer
that  does  not  make this election because it has no investment capital
will not be precluded from making those other elections.
(c)  Investment  income  shall  not  include  any  amount  treated  as
dividends  pursuant  to  section  seventy-eight  of the internal revenue
code.
6-a. (a) The term "other exempt income" means the sum  of  exempt  CFC
income and exempt unitary corporation dividends.
(b)  "Exempt  CFC  income" means (i) except to the extent described in
subparagraph (ii) of this paragraph, the income required to be  included
in  the  taxpayer's  federal  gross income pursuant to subsection (a) of
section 951 of the internal revenue code, received  from  a  corporation
that  is  conducting  a  unitary  business  with the taxpayer but is not
included in a combined  report  with  the  taxpayer,  (ii)  such  income

required  to be included in the taxpayer's federal gross income pursuant
to subsection (a) of such section 951 of the internal  revenue  code  by
reason of subsection (a) of section 965 of the internal revenue code, as
adjusted  by subsection (b) of section 965 of the internal revenue code,
and without regard to subsection (c) of such section,  received  from  a
corporation that is not included in a combined report with the taxpayer,
and  (iii)  ninety-five percent of the income required to be included in
the taxpayer's federal  gross  income  pursuant  to  subsection  (a)  of
section  951A  of  the  internal  revenue  code,  without  regard to the
deduction under section 250 of the internal revenue code, received  from
a  corporation  that  is  not  included  in  a  combined report with the
taxpayer, less, (iv) in the discretion of the commissioner, any interest
deductions directly or indirectly attributable to that income.  In  lieu
of  subtracting  from its exempt CFC income the amount of those interest
deductions, the taxpayer may make a revocable  election  to  reduce  its
total  exempt  CFC  income  by forty percent. If the taxpayer makes this
election, the taxpayer must also make  the  elections  provided  for  in
paragraph  (b)  of  subdivision six of this section and paragraph (c) of
this subdivision. If the taxpayer subsequently  revokes  this  election,
the  taxpayer must revoke the elections provided for in paragraph (b) of
subdivision six of this section and paragraph (c) of this subdivision. A
taxpayer which does not make this election because it has no exempt  CFC
income  will  not  be  precluded  from making those other elections. The
income described in subparagraphs (ii) and (iii) of this paragraph shall
not constitute investment income. The income described  in  subparagraph
(iii)  of this paragraph shall not constitute exempt unitary corporation
dividends.
(c) "Exempt unitary corporation dividends" means those dividends  from
a  corporation  that  is conducting a unitary business with the taxpayer
but is not included in a combined report with the taxpayer, less, in the
discretion of the commissioner,  any  interest  deductions  directly  or
indirectly  attributable  to  such  income.  Other  than dividend income
received from corporations  that  are  taxable  under  a  franchise  tax
imposed by article nine or article thirty-three of this chapter or would
be  taxable  under  a  franchise  tax imposed by article nine or article
thirty-three of this chapter if subject to tax, in lieu  of  subtracting
from  this  dividend  income those interest deductions, the taxpayer may
make a revocable election to reduce the total amount  of  this  dividend
income  by  forty  percent.  If  the  taxpayer  makes this election, the
taxpayer must also make the elections provided for in paragraph  (b)  of
subdivision  six  of this section and paragraph (b) of this subdivision.
If the taxpayer subsequently revokes this election,  the  taxpayer  must
also  revoke  the elections provided for in paragraph (b) of subdivision
six of this section and paragraph (b) of this  subdivision.  A  taxpayer
which does not make this election because it has not received any exempt
unitary  corporation dividends or is precluded from making this election
for dividends received from corporations taxable under a  franchise  tax
imposed by article nine or article thirty-three of this chapter or would
be  taxable  under  a  franchise  tax imposed by article nine or article
thirty-three of this chapter if subject to tax  will  not  be  precluded
from making those other elections.
(d)  If  the  taxpayer  attributes interest deductions to other exempt
income and the amount subtracted exceeds other exempt income, the excess
of the interest deductions over other exempt income must be  added  back
to entire net income. In no case shall other exempt income exceed entire
net income.
(e)  Other  exempt  income  shall  not  include  any amount treated as
dividends pursuant to section  seventy-eight  of  the  internal  revenue
code.
7.  (a)  The  term  "business  capital"  means  all assets, other than
investment capital and stock issued by the  taxpayer,  less  liabilities
not  deducted  from  investment  capital. Business capital shall include
only those assets the income, loss or  expense  of  which  are  properly
reflected   (or   would  have  been  properly  reflected  if  not  fully
depreciated or expensed or depreciated or expensed to a nominal  amount)
in the computation of entire net income for the taxable year.
(b)  Provided, however, "business capital" shall not include assets to
the extent employed for  the  purpose  of  generating  income  which  is
excluded  from entire net income pursuant to the provisions of paragraph
(c-1) of subdivision nine of this section and shall be computed  without
regard  to  liabilities  directly  or  indirectly  attributable  to such
assets, but only if air carriers organized  in  the  United  States  and
operating  in the foreign country or countries in which the taxpayer has
its major base of operations and in which it is organized,  resident  or
headquartered  (if  not  in  the  same  country  as  its  major  base of
operations) are not subject to any tax based on or measured  by  capital
imposed   by   such  foreign  country  or  countries  or  any  political
subdivision thereof, or if taxed, are provided an exemption,  equivalent
to  that  provided  for  herein,  from  any  tax based on or measured by
capital imposed by such foreign country or countries and from  any  such
tax imposed by any political subdivision thereof.
8. The term "business income" means entire net income minus investment
income  and other exempt income. In no event shall the sum of investment
income and other exempt income exceed entire net income. If the taxpayer
makes the election provided for in subparagraph one of paragraph (a)  of
subdivision  five of section two hundred ten-A of this article, then all
income from qualified financial instruments  shall  constitute  business
income.
8-A.  Provided, however, that with respect to a DISC or a former DISC,
the following provisions shall apply:
(a) investments in the stocks, bonds or other securities of a DISC  or
any  indebtedness from a DISC shall not be treated as investment capital
under subdivision five of this section,
(b) any amounts deemed distributed from a DISC or a former DISC  which
are  taxable  as  dividends  pursuant  to subsection (b) of section nine
hundred ninety-five of the internal revenue  code  of  nineteen  hundred
fifty-four  shall be treated as business income, except any such amounts
from a former DISC attributable to amounts includible  in  a  taxpayer's
entire  net  income  for  a prior taxable year under subparagraph (B) of
paragraph (i) of subdivision nine of this section shall be excluded from
entire net income,
(c) any gain  recognized  for  federal  income  tax  purposes  on  the
disposition  of  stock  in  a  DISC,  and  any  gain  recognized  on the
disposition of stock in a former DISC, includible in gross income  as  a
dividend  pursuant to subsection (c) of section nine hundred ninety-five
of the internal revenue code of nineteen hundred  fifty-four,  shall  be
treated as business income, and
(d)  except  as  provided in paragraph (i) of subdivision nine of this
section, any actual distribution from a DISC or a former DISC  shall  be
treated  as  business  income  except  an  actual distribution which for
federal income tax purposes is treated as made out  of  "other  earnings
and  profits"  under  section  nine  hundred  ninety-six of the internal
revenue code of nineteen hundred fifty-four, in which case  such  actual
distribution shall be treated as investment income under this article.
9.  The  term  "entire  net  income"  means  total net income from all
sources, which shall be  presumably  the  same  as  the  entire  taxable
income, which, except as hereinafter provided in this subdivision,
(i)  the  taxpayer is required to report to the United States treasury
department, or
(ii) the taxpayer would have been required to  report  to  the  United
States  treasury  department  if  it  had  not  made  an  election under
subchapter s of chapter one of the internal revenue code, or
(iii) the taxpayer, in the case of a corporation which is exempt  from
federal  income  tax  (other  than the tax on unrelated business taxable
income imposed under section 511 of the internal revenue code) but which
is subject to tax under this article, would have been required to report
to the United States treasury department but for such exemption, or
(iv) in the case of an alien corporation that under any  provision  of
the  internal revenue code is not treated as a "domestic corporation" as
defined in section seven thousand seven hundred  one  of  such  code  is
effectively connected with the conduct of a trade or business within the
United  States  as  determined under section 882 of the Internal Revenue
Code.
(a) Entire net income shall not include:
(3) bona fide gifts,
(4) income and deductions with respect to amounts received from school
districts and from corporations and associations, organized and operated
exclusively for religious, charitable or educational purposes,  no  part
of  the  net  earnings  of  which  inures  to the benefit of any private
shareholder or individual, for the operation of school buses,
(5) (i) any refund or credit of a  tax  imposed  under  this  article,
article  twenty-three, or former article thirty-two of this chapter, for
which tax no exclusion or  deduction  was  allowed  in  determining  the
taxpayer's  entire  net income under this article, article twenty-three,
or former article thirty-two of this chapter for any prior year, or (ii)
any refund or credit  of  a  tax  imposed  under  sections  one  hundred
eighty-three, one hundred eighty-three-a, one hundred eighty-four or one
hundred eighty-four-a of this chapter;
(6)  any amount treated as dividends pursuant to section seventy-eight
of the internal revenue code to the extent that such dividends  are  not
deducted under section two hundred fifty of such code;
(7)  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.
(9)  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)  and
property  of  a  taxpayer principally engaged in the conduct of aviation
(other than air freight forwarders acting as principal and like indirect
air carriers) which is placed in service before taxable years  beginning
in  nineteen  hundred  eighty-nine,  any amount which is included in the
taxpayer's federal taxable 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;
(10) 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)  and

property  of  a  taxpayer principally engaged in the conduct of aviation
(other than air freight forwarders acting as principal and like indirect
air carriers) which is placed in service before taxable years  beginning
in  nineteen  hundred  eighty-nine,  any amount which the taxpayer could
have excluded from federal taxable 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;
(11)  the  amount  deductible  pursuant  to  paragraph  (j)  of   this
subdivision; and
(12)  upon  the disposition of property to which paragraph (j) of this
subdivision applies, the amount, if any, by which the aggregate  of  the
amounts   described  in  subparagraph  ten  of  paragraph  (b)  of  this
subdivision attributable to such property exceeds the aggregate  of  the
amounts  described  in paragraph (j) of this subdivision attributable to
such property; and
(14)  The  amount  deductible  pursuant  to  paragraph  (l)  of   this
subdivision.
(16) In the case of a taxpayer subject to the modification provided by
subparagraph  sixteen  of  paragraph (b) of this subdivision, 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.
(17) for taxable years  beginning  after  December  thirty-first,  two
thousand  two, the amount deductible pursuant to paragraph (n-1) of this
subdivision.
(18) the amount of income or gain included in federal  taxable  income
of  a taxpayer that is a partner in a qualified entity or is a qualified
entity that is  located  both  within  and  without  a  New  York  state
innovation  hot  spot,  to  the  extent  that  the  income  or  gain  is
attributable to the operations of a qualified entity at or  as  part  of
the   New  York  state  innovation  hot  spot  as  provided  in  section
thirty-eight of this chapter.
(19) the amount computed pursuant to paragraph (r), (s) or (t) of this
subdivision, but only the amount determined  pursuant  to  one  of  such
paragraphs.
(20)  Any  amount  excepted, for purposes of subsection (a) of section
one hundred eighteen  of  the  internal  revenue  code,  from  the  term
"contribution  to  the  capital  of  the  taxpayer"  by paragraph two of
subsection (b) of section one hundred eighteen of the  internal  revenue
code.
(21)  The amount of any gain added back to determine entire net income
in a previous taxable year  pursuant  to  subparagraph  twenty-seven  of
paragraph  (b)  of  subdivision nine of this section that is included in
federal gross income for the taxable year.
(22) 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 taxable income.
(23)  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 paragraph (b)  of  this  subdivision  in  computing  entire  net
income.
(b)  Entire  net  income  shall  be  determined without the exclusion,
deduction or credit of:
(1) in the case of an alien corporation that under  any  provision  of
the  internal revenue code is not treated as a "domestic corporation" as
defined in section seven thousand seven hundred one of  such  code,  (i)
any  part of any income from dividends or interest on any kind of stock,
securities  or  indebtedness,  but  only  if  such  income is treated as
effectively connected with the conduct of a trade  or  business  in  the
United States pursuant to section 864 of the internal revenue code, (ii)
any   income  exempt  from  federal  taxable  income  under  any  treaty
obligation of the United States,  but  only  if  such  income  would  be
treated  as  effectively connected in absence of such exemption provided
that such treaty obligation does  not  preclude  the  taxation  of  such
income  by  a  state,  or  (iii)  any  income  which would be treated as
effectively connected if such income were not excluded from gross income
pursuant to subsection (a) of section 103 of the internal revenue code;
(2) any part of any income from dividends or interest on any  kind  of
stock, securities or indebtedness,
(3)  taxes  on or measured by profits or income paid or accrued to the
United States or any of its possessions, territories  or  commonwealths,
including  taxes  in  lieu  of  any  of  the  foregoing  taxes otherwise
generally imposed by any possession, territory or  commonwealth  of  the
United States,
(3-a)  taxes  on  or  measured  by profits or income, or which include
profits or income as a measure, paid or accrued to any  other  state  of
the  United  States,  or  any  political  subdivision thereof, or to the
District of Columbia, including taxes expressly in lieu of  any  of  the
foregoing  taxes  otherwise  generally imposed by any other state of the
United States, or any political subdivision thereof, or the District  of
Columbia;
(4)  taxes  imposed  under  this  article and article thirty-two as in
effect on December thirty-first, two thousand fourteen and sections  one
hundred   eighty-three,   one   hundred   eighty-three-a,   one  hundred
eighty-four and one hundred eighty-four-a of this chapter,
(4-a)(A) in those instances where a credit for the special  additional
mortgage  recording  tax  credit  is  allowed  under subdivision nine of
section two hundred ten-B of this article,  the  amount  allowed  as  an
exclusion or deduction for the special additional mortgage recording tax
imposed  by subdivision one-a of section two hundred fifty-three of this
chapter in determining the entire taxable income which the  taxpayer  is
required  to  report  to  the United States treasury department, and (B)
unless the credit allowed pursuant to subdivision nine  of  section  two
hundred  ten-B  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  of
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.
(6) any amount allowed as a  deduction  for  the  taxable  year  under
section  172  of  the  internal  revenue  code,  including carryovers of
deductions from prior taxable years.
(8) 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)  and
property of a taxpayer principally engaged in the  conduct  of  aviation
(other than air freight forwarders acting as principal and like indirect
air  carriers) which is placed in service before taxable years beginning
in nineteen hundred eighty-nine, any amount which the  taxpayer  claimed
as  a  deduction  in  computing  its  federal taxable 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;
(9) 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)  and
property of a taxpayer principally engaged in the  conduct  of  aviation
(other than air freight forwarders acting as principal and like indirect
air  carriers) which is placed in service before taxable years beginning
in nineteen hundred eighty-nine, any amount  which  the  taxpayer  would
have  been required to include in the computation of its federal taxable
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;
(10)  in  the  case  of  property  placed  in service in taxable years
beginning  before  nineteen  hundred  ninety-four,  for  taxable   years
beginning  after  December  thirty-first,  nineteen  hundred eighty-one,
except with respect to property subject to the provisions of section two
hundred eighty-F of the internal revenue code, property subject  to  the
provisions  of  section  one hundred sixty-eight of the internal revenue
code which is placed in service in this state in taxable years beginning
after December thirty-first, nineteen hundred eighty-four  and  property
of a taxpayer principally engaged in the conduct of aviation (other than
air  freight  forwarders  acting  as  principal  and  like  indirect air
carriers) which is placed in service before taxable years  beginning  in
nineteen  hundred  eighty-nine,  the  amount  allowable  as  a deduction
determined under section one hundred sixty-eight of the internal revenue
code;
(11) upon the disposition of property to which paragraph (j)  of  this
subdivision  applies,  the amount, if any, by which the aggregate of the
amounts described in such paragraph (j) attributable  to  such  property
exceeds  the  aggregate  of the amounts described in subparagraph ten of
this paragraph attributable to such property.
(15) Real property taxes paid on qualified agricultural  property  and
deducted  in  determining  federal  taxable income, to the extent of the
amount of the agricultural property tax credit allowed under subdivision
eleven of section two hundred ten-B of this article.
(16) In the case of a taxpayer which is  not  an  eligible  farmer  as
defined  in  paragraph  (b) of subdivision eleven of section two hundred
ten-B 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.
(17)  for  taxable  years  beginning  after December thirty-first, two
thousand two, in the case of qualified property described  in  paragraph
two  of  subsection k of section 168 of the internal revenue code, other
than qualified resurgence zone property described in  paragraph  (q)  of
this  subdivision,  and  other  than  qualified  New  York  Liberty Zone
property described in paragraph two of subsection b of section 1400L  of

the  internal revenue code (without regard to clause (i) of subparagraph
(C) of such paragraph), which was placed in service  on  or  after  June
first,  two  thousand  three,  the amount allowable as a deduction under
section 167 of the internal revenue code.
(18) Premiums paid for environmental remediation insurance, as defined
in  section  twenty-three  of  this chapter, and deducted in determining
federal taxable income, to the extent of the amount of the environmental
remediation insurance credit allowed under such section twenty-three and
subdivision nineteen of section two hundred ten-B of this article.
(19) The amount of any  deduction  allowed  pursuant  to  section  one
hundred ninety-nine of the internal revenue code.
(20)  The  amount  of  any  federal  deduction for taxes imposed under
article twenty-three of this chapter.
(20-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  the  tax-free  NY  area  excise  tax  on
telecommunication  services  credit allowed under subdivision forty-four
of section two hundred ten-B of this article.
(21) 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  subdivision
forty-three of section two hundred ten-B of this article.
(22)  the amount of any deduction for charitable contributions allowed
under section one hundred seventy of the internal revenue  code  to  the
extent  such  contributions  are used as the basis of the calculation of
the farm donations to food pantries credit under  subdivision  fifty-two
of section two hundred ten-B of this article.
(23)   The  amount  of  any  federal  deduction  allowed  pursuant  to
subsection (c) of section 965 of the internal revenue code.
(24) The amount of any federal deduction allowed pursuant  to  section
250(a)(1)(A) of the internal revenue code.
(25)  The  amount of any federal deduction allowed pursuant to section
250(a)(1)(B)(i) of the internal revenue code.
(26) For taxable years beginning in  two  thousand  nineteen  and  two
thousand  twenty,  the  amount  of  the increase in the federal interest
deduction allowed pursuant to section 163(j)(10)(A)(i) of  the  internal
revenue code.
(27) The amount of any gain excluded from federal gross income for the
taxable  year  by subparagraph (A) of paragraph (1) of subsection (a) of
section 1400Z-2 of the internal revenue code.
(c-1)(1) Notwithstanding any other provision of this article,  in  the
case  of a taxpayer which is a foreign air carrier holding a foreign air
carrier permit issued by the United States department of  transportation
pursuant  to  section  four  hundred  two of the federal aviation act of
nineteen hundred fifty-eight, as amended, and which is  qualified  under
subparagraph two of this paragraph, entire net income shall not include,
and  shall  be  computed  without  the deduction of, amounts directly or
indirectly  attributable  to,  (i)   any   income   derived   from   the
international  operation  of aircraft as described in and subject to the
provisions of section eight hundred eighty-three of the internal revenue
code, (ii) income without the United States which is  derived  from  the
operation  of aircraft, and (iii) income without the United States which
is of a type described in  subdivision  (a)  of  section  eight  hundred
eighty-one  of  the internal revenue code except that it is derived from
sources without the United  States.  Entire  net  income  shall  include
income  described in clauses (i), (ii) and (iii) of this subparagraph in
the case of taxpayers not described in the previous sentence.
(2) A taxpayer is qualified under this subparagraph  if  air  carriers
organized  in  the United States and operating in the foreign country or
countries in which the taxpayer has its major base of operations and  in
which  it  is  organized,  resident or headquartered (if not in the same
country  as  its major base of operations) are not subject to any income
tax or other tax based on or measured by income or receipts  imposed  by
such  foreign country or countries or any political subdivision thereof,
or if so subject to such tax, are provided an exemption  from  such  tax
equivalent to that provided for herein.
(c-2)  Adjustments by qualified public utilities. (1) In the case of a
taxpayer which is a qualified public utility, entire net income shall be
computed with the adjustments set forth in this paragraph.
(2) Definitions. (A) Qualified public  utility.  The  term  "qualified
public  utility"  means  a taxpayer which: (i) on December thirty-first,
nineteen hundred ninety-nine, was subject to the ratemaking  supervision
of  the state department of public service, and (ii) for the year ending
on December thirty-first, nineteen hundred ninety-nine, was  subject  to
tax under former section one hundred eighty-six of this chapter.
(B) Transition property. The term "transition property" means property
placed  in  service  by the taxpayer before January first, two thousand,
for which a depreciation deduction is allowed under section one  hundred
sixty-seven of the internal revenue code.
(3)  Federal  depreciation  disallowed.  With  respect  to  transition
property, the deduction for federal income tax purposes for depreciation
shall not be allowed.
(4) New York depreciation. With  respect  to  transition  property,  a
deduction  shall  be  allowed  for the depreciation expense shown on the
books and records of the taxpayer for the taxable year and determined in
accordance with generally accepted accounting principles.
(5) Regulatory assets.  A  deduction  shall  be  allowed  for  amounts
recognized  as  expense on the books and records of the taxpayer for the
taxable year, which amounts  were  recognized  as  expense  for  federal
income  tax  purposes  in  a  taxable  year ending on or before December
thirty-first, nineteen hundred  ninety-nine,  where:  (A)  such  amounts
represent  expenditures  which,  when  made,  were charged to a deferred
debit account or similar asset account on the books and records  of  the
taxpayer,  and  where  (B)  the  recognition of expense on the books and
records of the taxpayer is matched by revenue stemming from a  procedure
or  adjustment allowing the recovery of such expenditures, and where (C)
such revenue is recognized  for  federal  income  tax  purposes  in  the
taxable year.
(6)  Basis for gain or loss. (A) Recognition transactions. (i) General
rule - book basis. Except as provided in subclause (ii) of this  clause,
where  transition  property  is  sold  or  otherwise  disposed of in the
taxable year in a transaction of the type requiring recognition of  gain
or  loss  for federal income tax purposes, the basis for determining the
amount of such gain or loss under this article shall be the cost of  the
property less the accumulated depreciation on the property determined on
the  books  and  records  of  the  taxpayer in accordance with generally
accepted accounting principles.
(ii) Qualified gain - New York basis.  Where  a  sale  or  disposition
described in subclause (i) of this clause results in recognition of gain
for  federal  income tax purposes, and where either (I) such recognition
occurs in a taxable year ending after nineteen hundred  ninety-nine  and
before  two  thousand ten, or (II) such recognition is with respect to a
nuclear electric generating facility,  the  basis  for  determining  the
amount of such gain under this article shall be the cost of the property

less  the  aggregate  of  the  New  York  depreciation deductions on the
property determined under subparagraph four of this paragraph.
(iii)  No  conversion  of  gain  to  loss. In the event that the basis
determined under subclause (ii) of this clause results in  determination
of  a  loss  on the sale or disposition of the property, no gain or loss
shall be recognized under this article with  respect  to  such  sale  or
disposition.
(B)  Nonrecognition  transactions.  (i)  Carryover  basis.  (I)  where
transition  property  is  disposed  of  ("original  disposition")  in  a
transaction  of a type requiring deferral of recognition of gain or loss
for federal income tax purposes, and where (II) there  is  a  subsequent
recognition  of  gain or loss for federal income tax purposes ("clause B
gain or loss"), the amount of which is determined by reference, in whole
or in part, to  the  basis  of  such  transition  property  ("underlying
transition  property"),  then  (III) the amount of such clause B gain or
loss under this article shall be adjusted as provided in subclause  (ii)
or (iii) of this clause.
(ii)  General  rule  -  book  basis  adjustment. Except as provided in
subclause (iii) of this clause, the amount of clause  B  gain  shall  be
reduced,  or  the  amount  of  clause B loss increased, by the amount by
which the book basis of the underlying transition property on  the  date
of  original  disposition  (determined using the provisions of subclause
(i) of clause (A) of this subparagraph) exceeds the federal  income  tax
basis of such property on such date.
(iii)  Qualified gain - New York basis adjustment. Where clause B gain
either (I) occurs in  a  taxable  year  ending  after  nineteen  hundred
ninety-nine  and  before  two thousand ten, or (II) is with respect to a
nuclear electric generating facility, the amount of such gain under this
article shall be reduced, but not below zero, by the amount by which the
New York basis of the underlying transition  property  on  the  date  of
original  disposition (determined using the provisions of subclause (ii)
of clause (A) of this subparagraph) exceeds the federal income tax basis
of such property on such date.
(iv) Application to replacement  property  and  transferee  taxpayers.
This  clause  shall apply whether the clause B gain or loss: (I) is with
respect to either transition property or depreciable property the  basis
of  which  is determined by reference to transition property, or (II) is
recognized by either a qualified public utility or by a  taxpayer  which
is  a  transferee of transition property (whether or not such transferee
is a qualified public utility, notwithstanding subparagraph one of  this
paragraph).
(c-3)  Depreciation  adjustments  by  qualified  power  producers  and
pipeline companies. (1) In the case of a qualified taxpayer, entire  net
income  shall be computed with the depreciation adjustments set forth in
this paragraph.
(2) Definitions. (A) Qualified taxpayer. The term "qualified taxpayer"
means a qualified power producer or a qualified pipeline.
(B) Qualified power producer.  The  term  "qualified  power  producer"
means  a  taxpayer which: (i) on December thirty-first, nineteen hundred
ninety-nine, was not subject to the ratemaking supervision of the  state
department  of  public service, and (ii) for the year ending on December
thirty-first, nineteen hundred ninety-nine, was  subject  to  tax  under
former  section one hundred eighty-six of this chapter on account of its
being principally engaged in the business of supplying electricity.
(C) Qualified pipeline. The term "qualified pipeline" means a taxpayer
which: (i) on December thirty-first, nineteen hundred  ninety-nine,  was
subject  to  the  ratemaking  supervision  of  either the federal energy
regulatory commission or the state department  of  public  service,  and

(ii)  for  the  year  ending  on December thirty-first, nineteen hundred
ninety-nine, was subject to tax under sections one hundred  eighty-three
and  one  hundred  eighty-four  of  this chapter on account of its being
principally engaged in the business of pipeline transmission.
(D) Transition property. The term "transition property" means property
placed  in  service  by  a  qualified taxpayer before January first, two
thousand, for which a depreciation deduction is  allowed  under  section
one hundred sixty-seven of the internal revenue code.
(3)  Federal  depreciation  disallowed.  With  respect  to  transition
property, the deduction for federal income tax purposes for depreciation
shall not be allowed.
(4) New York depreciation. With  respect  to  transition  property,  a
deduction  shall  be  allowed  for  the depreciation expense computed as
provided in this subparagraph. (A) All transition property shown on  the
books  and  records of the taxpayer on January first, two thousand shall
be treated as a single asset placed in service on  such  date.  The  New
York  basis for purposes of computing the depreciation deduction on such
single asset shall be the net book value  of  such  transition  property
determined  on  the  first day of the federal taxable year ending in two
thousand (or on the date any such property  is  placed  in  service,  if
later) adjusted as provided in clause (B) of this subparagraph.
(B)  If  transition property is sold or otherwise disposed of, the New
York basis of the single asset shall be reduced on the date of such sale
or disposition by the amount of the adjusted federal tax basis  of  such
property on such date.
(C)  The  New York depreciation deduction allowed for any taxable year
with  respect  to  such  single  asset  shall  be  computed  using   the
straight-line method, a twenty-year life, and a salvage value of zero.
(D) For purposes of this subparagraph, the term "net book value" means
cost  reduced by accumulated depreciation shown on the books and records
of the taxpayer and  determined,  in  the  case  of  a  qualified  power
producer,  in  accordance with generally accepted accounting principles;
and in the  case  of  a  qualified  pipeline,  in  accordance  with  the
taxpayer's  regulatory  reports filed with the federal energy regulatory
commission or state department of public service.
(d) The commissioner may, whenever  necessary  in  order  properly  to
reflect  the  entire  net  income of any taxpayer, determine the year or
period in which any item of  income  or  deduction  shall  be  included,
without regard to the method of accounting employed by the taxpayer.
(e)  The  entire net income of any bridge commission created by act of
congress to construct a bridge across an  international  boundary  means
its  gross  income  less  the  expense  of maintaining and operating its
properties, the annual interest upon its bonds  and  other  obligations,
and the annual charge for the retirement of such bonds or obligations at
maturity.
(h) If the period covered by a report under this article is other than
the  period  covered  by  the  report  to  the  United  States  treasury
department,
(1) except as provided in subparagraph two hereof, entire  net  income
shall  be  determined by multiplying the taxable income reported to such
department (as adjusted pursuant to the provisions of this  article)  by
the  number  of  calendar  months  or major parts thereof covered by the
report under this article and dividing by the number of calendar  months
or  major  parts thereof covered by the report to such department. If it
shall appear that such method of determining entire net income does  not
properly  reflect the taxpayer's income during the period covered by the
report under this article, the commissioner shall be authorized  in  its
discretion  to  determine  such entire net income solely on the basis of

the taxpayer's income during the period covered by its report under this
article.
(2)  In the case of a New York S termination year, an equal portion of
entire net income shall be assigned  to  each  day  of  such  year.  The
portion  of  such entire net income thereby assigned to the S short year
and the C short year shall be included in the respective reports for the
S short year and the C short year under  this  article.  However,  where
paragraph  three of subsection (s) of section six hundred twelve of this
chapter applies, the portion of such entire net income assigned to the S
short year and the C short year shall be  determined  under  normal  tax
accounting rules.
(i)  With respect to a DISC which during any taxable year or reporting
year (1) received more than five percent of its  gross  sales  from  the
sale  of  inventory  or  other  property  which  it  purchased  from its
stockholders, (2) received more than five percent of its  gross  rentals
from  the  rental  of  property  which  it  purchased or rented from its
stockholders or (3)  received  more  than  five  percent  of  its  total
receipts  other  than  sales  and  rentals  from  its  stockholders, the
following provisions shall apply.
(A) For any taxable year in which sub-paragraph (B) of this  paragraph
is  in  effect  and  not rendered invalid, a DISC meeting the above test
shall be exempt from all taxes imposed by this article.
(B) Supplemental to the provisions of subdivision five of section  two
hundred  eleven  of this article, any taxpayer required to compute a tax
under this article, which during the taxable year being reported  was  a
stockholder  in  any DISC meeting the test prescribed in this paragraph,
shall for any taxable year ending after December thirty-first,  nineteen
hundred  seventy-one  adjust each item of its receipts, expenses, assets
and liabilities, as otherwise computed under  this  article,  by  adding
thereto  its  attributable share of each such DISC's receipts, expenses,
assets and liabilities as reportable by each such  DISC  to  the  United
States Treasury Department for its annual reporting period ending during
the  current  taxable year of such taxpayer; provided, however, (1) that
all transactions between the  taxpayer  and  each  such  DISC  shall  be
eliminated  from  the taxpayer's adjusted receipts, expenses, assets and
liabilities; (2) that the taxpayer's  entire  net  income  as  otherwise
computed  under this section, shall be reduced by subtracting the amount
of the deemed distribution of current income, if  any,  from  each  such
DISC  already  included  in  the  entire  net income of such taxpayer by
virtue of having been included in its entire  taxable  income  for  that
taxable  year  as reported to the United States Treasury Department; and
(3) that in the event this paragraph should  be  rendered  invalid,  all
DISC's  and  their stockholders taxable hereunder shall be taxed instead
under the remaining portions of this article.
(j) in the case  of  property  placed  in  service  in  taxable  years
beginning   before  nineteen  hundred  ninety-four,  for  taxable  years
beginning after  December  thirty-first,  nineteen  hundred  eighty-one,
except with respect to property subject to the provisions of section two
hundred  eighty-F  of  the internal revenue code and property subject to
the provisions of  section  one  hundred  sixty-eight  of  the  internal
revenue  code  which is placed in service in this state in taxable years
beginning after December thirty-first, nineteen hundred eighty-four, and
provided a deduction has  not  been  excluded  from  entire  net  income
pursuant  to  subparagraph eight of paragraph (b) of this subdivision, a
taxpayer shall be allowed with respect to property which is  subject  to
the  provisions  of  section  one  hundred  sixty-eight  of the internal
revenue code the depreciation  deduction  allowable  under  section  one
hundred  sixty-seven  of the internal revenue code as such section would

have applied to property placed in  service  on  December  thirty-first,
nineteen hundred eighty. This paragraph shall not apply to property of a
taxpayer  principally engaged in the conduct of aviation (other than air
freight  forwarders  acting as principal and like indirect air carriers)
which is placed in service before taxable years  beginning  in  nineteen
hundred eighty-nine.
(k)  QSSS.  (1)  New  York  S corporation. In the case of a New York S
corporation which is the parent of a qualified subchapter  S  subsidiary
(QSSS) with respect to a taxable year:
(A) where the QSSS is not an excluded corporation,
(i)  in  determining the entire net income of such parent corporation,
all assets, liabilities, income and deductions  of  the  QSSS  shall  be
treated  as  assets,  liabilities,  income  and deductions of the parent
corporation, and
(ii) the QSSS shall be exempt from all taxes imposed by this  article,
and
(B)  where  the QSSS is an excluded corporation, the entire net income
of the parent corporation shall be determined as  if  the  federal  QSSS
election had not been made.
(2)  New  York  C corporation. In the case of a New York C corporation
which is the parent of a QSSS with respect to a taxable year:
(A) where the QSSS is a taxpayer,
(i) in determining the entire net income of such  parent  corporation,
all  assets,  liabilities,  income  and  deductions of the QSSS shall be
treated as assets, liabilities, income  and  deductions  of  the  parent
corporation, and
(ii)  the QSSS shall be exempt from all taxes imposed by this article,
and
(B) where the QSSS is not a taxpayer,
(i) if the QSSS is not an excluded corporation, the parent corporation
may make a QSSS inclusion election to include all  assets,  liabilities,
income  and  deductions  of  the QSSS as assets, liabilities, income and
deductions of the parent corporation, and
(ii) in the absence of such election, or where the QSSS is an excluded
corporation, the entire net income of the parent  corporation  shall  be
determined as if the federal QSSS election had not been made.
(3)  Non-New  York  S  corporation  not  excluded. In the case of an S
corporation which is not a taxpayer and not an excluded corporation, and
which is the parent of a QSSS which is a taxpayer, the  shareholders  of
the parent corporation shall be entitled to make the New York S election
under subsection (a) of section six hundred sixty of this chapter.
(A)  For  any  taxable  year for which such election is in effect, the
parent corporation shall be subject to tax under this article as  a  New
York S corporation, and the provisions of clause (A) of subparagraph one
of this paragraph shall apply.
(B) For any taxable year for which such election is not in effect, the
QSSS shall be a New York C corporation, and the entire net income of the
QSSS  shall  be  determined as if the federal QSSS election had not been
made. For purposes of such determination, the taxable year of the parent
corporation shall constitute the taxable year of  the  QSSS,  excluding,
however,  any  portion  of  such  year  during  which  the QSSS is not a
taxpayer.
(4) S corporation excluded. In the case of an S corporation  which  is
an  excluded  corporation  and  which is the parent of a QSSS which is a
taxpayer, the QSSS shall be a New York C corporation and the  provisions
of clause (B) of subparagraph three of this paragraph shall apply.
(5)  Excluded  corporation.  The  term  "excluded corporation" means a
corporation subject to  tax  under  sections  one  hundred  eighty-three

through  one  hundred  eighty-six, inclusive, or article thirty-three of
this chapter, or a foreign corporation not taxable by this state  which,
if  it  were taxable, would be subject to tax under any of such sections
or article.
(6)  Taxpayer.  For  purposes  of  this paragraph, the term "taxpayer"
means a parent corporation or QSSS subject to tax  under  this  article,
determined without regard to the provisions of this paragraph.
(7)  QSSS  inclusion  election.  The  election  under subclause (i) of
clause (B) of subparagraph two of this paragraph shall be effective  for
the  taxable year for which made and for all succeeding taxable years of
the corporation until  such  election  is  terminated.  An  election  or
termination  shall  be  made  on  such  form  and  in such manner as the
commissioner may prescribe by regulation or instruction.
(l) 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 paragraph, gain from such sale shall be recognized
only to the extent that the amount realized on  such  sale  exceeds  the
cost  of any qualified emerging technologies investment purchased by the
taxpayer during the three hundred sixty-five-day period beginning on the
date of such sale, reduced by any portion of such cost previously  taken
into  account  under  this paragraph. For purposes of this paragraph the
following shall apply:
(1) A qualified investment is stock of a corporation or  an  interest,
other  than as a creditor, in a partnership or limited liability company
that was acquired by the taxpayer as provided in Internal Revenue Code §
1202(c)(1)(B), except that the reference to the  term  "stock"  in  such
section  shall be read as "investment," or by the taxpayer from a person
who had acquired such stock or interest in such a manner.
(2)  A  qualified  emerging  technology  investment  is  a   qualified
investment,  that  was  held  by  the  taxpayer  for at least thirty-six
months, in a company defined in paragraph  (c)  of  subdivision  one  of
section  thirty-one  hundred  two-e  of the public authorities law or an
investment in a partnership or limited liability company that  is  taxed
as  a  partnership  to  the  extent  that  such  partnership  or limited
liability company invests in qualified emerging technology companies.
(3) For purposes of determining whether  the  nonrecognition  of  gain
under  this  subsection  applies  to  a  qualified emerging technologies
investment  that  is  sold,  the  taxpayer's  holding  period  for  such
investment  and  the  qualified emerging technologies investment that is
purchased shall be determined without regard to Internal Revenue Code  §
1223.
(m)  Amounts deferred. The amount deferred under paragraph (l) of this
subdivision shall be added to entire net income when the reinvestment in
the New York qualified emerging technology  company  which  qualified  a
taxpayer for such deferral is sold.
(n-1)  For  taxable  years  beginning after December thirty-first, two
thousand two, in the case of qualified property described  in  paragraph
two  of  subsection k of section 168 of the internal revenue code, other
than qualified resurgence zone property described in  paragraph  (q)  of
this  subdivision,  and  other  than  qualified  New  York  Liberty Zone
property described in paragraph two of subsection b of section 1400L  of
the  internal revenue code (without regard to clause (i) of subparagraph
(C) of such paragraph), which was placed in service  on  or  after  June
first,  two  thousand three, a taxpayer shall be allowed with respect to
such property the depreciation deduction allowable under section 167  of
the  internal  revenue  code  as such section would have applied to such

property had it been acquired by the taxpayer on  September  tenth,  two
thousand one.
(o)  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) Except where a taxpayer is included
in a combined report with a  related  member  pursuant  to  section  two
hundred  ten-C  of this article, for the purpose of computing entire net
income or other applicable taxable  basis,  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 paragraph shall
not apply to the portion  of  the  royalty  payment  that  the  taxpayer
establishes,  by  clear  and  convincing evidence of the type and in the
form  specified  by  the  commissioner,  meets  all  of  the   following
requirements: (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 paragraph shall not apply if  the
taxpayer  establishes,  by clear and convincing evidence of the type and
in the form specified by the commissioner, that: (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 two hundred ten of this
article for the taxable year.
(iii) The adjustment required in this paragraph shall not apply if the
taxpayer establishes, by clear and convincing evidence of the  type  and
in the form specified by the commissioner, that: (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 rate of tax 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 paragraph shall not apply if  the
taxpayer and the commissioner agree in writing to the application or use
of alternative adjustments or computations. The commissioner may, in his
or  her  discretion,  agree  to  the  application  or use of alternative
adjustments or computations when he or she concludes that in the absence
of such agreement the income of  the  taxpayer  would  not  be  properly
reflected.
(p)  For  taxable  years  beginning  after  December thirty-first, two
thousand two, upon the disposition of property to which paragraph  (n-1)
of  this  subdivision applies, the amount of any gain or loss includible
in entire net income shall be adjusted to  reflect  the  inclusions  and
exclusions  from entire net income pursuant to subparagraph seventeen of
paragraph (a) and  subparagraph  seventeen  of  paragraph  (b)  of  this
subdivision attributable to such property.
(q)  For  purposes  of  paragraphs  (n-1) and (p) of this subdivision,
qualified  resurgence  zone  property  shall  mean  qualified   property
described  in  paragraph  two  of  subsection  k  of  section 168 of the
internal revenue code substantially all of the use of which  is  in  the
resurgence  zone,  as  defined  below, and is in the active conduct of a
trade or business by the taxpayer in such zone, and the original use  of
which  in the resurgence zone commences with the taxpayer after December
thirty-first, two thousand two. The resurgence zone shall mean the  area
of  New  York  county  bounded  on  the south by a line running from the
intersection of the Hudson River with the Holland  Tunnel,  and  running
thence  east to Canal Street, then running along the centerline of Canal
Street to the intersection of  the  Bowery  and  Canal  Street,  running

thence  in  a southeasterly direction diagonally across Manhattan Bridge
Plaza, to the Manhattan Bridge and thence along the  centerline  of  the
Manhattan  Bridge  to  the  point  where the centerline of the Manhattan
Bridge  would  intersect  with  the easterly bank of the East River, and
bounded on the north by a line running  from  the  intersection  of  the
Hudson River with the Holland Tunnel and running thence north along West
Avenue  to  the  intersection of Clarkson Street then running east along
the centerline of Clarkson Street  to  the  intersection  of  Washington
Avenue,  then running south along the centerline of Washington Avenue to
the intersection of West Houston Street, then east along the  centerline
of  West  Houston  Street, then at the intersection of the Avenue of the
Americas continuing east along the centerline of East Houston Street  to
the easterly bank of the East River.
(r)   Subtraction   modification   for   qualified   residential  loan
portfolios.  (1)(A) A taxpayer that is either a  thrift  institution  as
defined in subparagraph three of this paragraph or a qualified community
bank as defined in subparagraph two of paragraph (s) of this subdivision
and  maintains  a  qualified  residential  loan  portfolio as defined in
subparagraph two of this paragraph shall be allowed as  a  deduction  in
computing  entire net income the amount, if any, by which (i) thirty-two
percent of its entire net  income  determined  without  regard  to  this
paragraph  exceeds (ii) the amounts deducted by the taxpayer pursuant to
sections 166 and 585 of the  Internal  Revenue  Code  less  any  amounts
included in federal taxable income as a result of a recovery of a loan.
(B)(i)  If  the  taxpayer  is  in  a combined report under section two
hundred ten-C of this article, this deduction  will  be  computed  on  a
combined  basis. In that instance, the entire net income of the combined
reporting group for purposes of this paragraph shall be multiplied by  a
fraction,  the numerator of which is the average total assets of all the
thrift institutions  and  qualified  community  banks  included  in  the
combined report and the denominator of which is the average total assets
of all the corporations included in the combined report.
(ii)  Measurement of assets. For purposes of this paragraph: (I) Total
assets are those assets that are properly reflected on a balance  sheet,
computed  in  the same manner as is required by the banking regulator of
the taxpayers included in the combined return. In addition, total assets
includes leased real property  that  is  not  properly  reflected  on  a
balance sheet.
(II)  Assets  will only be included if the income or expenses of which
are properly reflected (or would have been  properly  reflected  if  not
fully  depreciated  or expensed, or depreciated or expensed to a nominal
amount) in the computation of the combined group's entire net income for
the taxable year. Assets  will  not  include  deferred  tax  assets  and
intangible assets identified as "goodwill".
(III)  Tangible  real  and personal property, such as buildings, land,
machinery, and equipment shall be valued at cost. Leased  real  property
that  is not properly reflected on a balance sheet will be valued at the
annual lease payment multiplied by eight. Intangible property,  such  as
loans  and  investments,  shall  be  valued  at  book value exclusive of
reserves.
(IV)  Intercorporate  stockholdings  and  bills,  notes  and  accounts
receivable,   and   other   intercorporate   indebtedness   between  the
corporations included in the combined report shall be eliminated.
(V) Average assets are computed using the assets measured on the first
day of the taxable year, and on the last day of each subsequent  quarter
of the taxable year or month or day during the taxable year.
(2)  Qualified  residential loan portfolio. (A) A taxpayer maintains a
qualified residential loan portfolio if at least sixty  percent  of  the

amount  of  the  total  assets  at  the close of the taxable year of the
thrift institution or qualified community bank consists  of  the  assets
described   in  items  (i)  through  (xii)  of  this  clause,  with  the
application of the rule in item (xiii). If the taxpayer is a member of a
combined  group,  the  determination  of  whether  there  is a qualified
residential loan portfolio will be made by aggregating the assets of the
thrift institutions and qualified community banks that  are  members  of
the combined group.
Assets:
(i)  cash,  which  includes  cash  and cash equivalents including cash
items in  the  process  of  collection,  deposit  with  other  financial
institutions,  including  corporate credit unions, balances with federal
reserve banks and federal home loan banks, federal funds sold, and  cash
and  cash  equivalents  on  hand.  Cash  shall  not include any balances
serving as collateral for securities lending transactions;
(ii) obligations of the United States  or  of  a  state  or  political
subdivision  thereof, and stock or obligations of a corporation which is
an instrumentality or a government sponsored enterprise  of  the  United
States or of a state or political subdivision thereof;
(iii) loans secured by a deposit or share of a member;
(iv)  loans  secured by an interest in real property which is (or from
the proceeds of the loan, will become) residential real property or real
property  used  primarily  for  church  purposes,  loans  made  for  the
improvement of residential real property or real property used primarily
for   church   purposes,  provided  that  for  purposes  of  this  item,
residential  real  property  shall  include   single   or   multi-family
dwellings,  facilities  in  residential developments dedicated to public
use or property used on a nonprofit  basis  for  residents,  and  mobile
homes not used on a transient basis;
(v)  property  acquired  through  the  liquidation  of defaulted loans
described in item (iv) of this clause;
(vi) any regular or residual interest in a  REMIC,  as  such  term  is
defined  in  section  860D of the internal revenue code, but only in the
proportion which the assets of such REMIC consist of property  described
in any of the preceding items of this clause, except that if ninety-five
percent  or  more  of  the  assets of such REMIC are assets described in
items (i) through (v) of this clause, the entire interest in  the  REMIC
shall qualify;
(vii)  any  mortgage-backed  security  which represents ownership of a
fractional undivided interest in a trust, the assets  of  which  consist
primarily  of  mortgage  loans,  provided  that  the real property which
serves as security for the loans is (or from the proceeds of  the  loan,
will  become) the type of property described in item (iv) of this clause
and any collateralized  mortgage  obligation,  the  security  for  which
consists  primarily of mortgage loans that maintain as security the type
of property described in item (iv) of this clause;
(viii) certificates of deposit in, or obligations  of,  a  corporation
organized   under   a  state  law  which  specifically  authorizes  such
corporation  to  insure  the  deposits  or  share  accounts  of   member
associations;
(ix)  loans  secured by an interest in educational, health, or welfare
institutions  or  facilities,  including  structures  designed  or  used
primarily  for residential purposes for students, residents, and persons
under care, employees, or members of the staff of such  institutions  or
facilities;
(x)  loans  made  for the payment of expenses of college or university
education or vocational training;
(xi) property used by  the  taxpayer  in  support  of  business  which
consists  principally  of  acquiring  the  savings  of  the  public  and
investing in loans; and
(xii)  loans  for  which  the  taxpayer  is the creditor and which are
wholly secured by loans described in item (iv) of this clause.
(xiii) The value of accrued interest receivable and  any  loss-sharing
commitment  or  other  loan  guaranty  by  a governmental agency will be
considered part of the basis in the loans to which the accrued  interest
or loss protection applies.
(B)  At  the  election  of  the  taxpayer, the percentage specified in
clause (A) of this subparagraph shall be applied on  the  basis  of  the
average assets outstanding during the taxable year, in lieu of the close
of  the taxable year. The taxpayer can elect to compute an average using
the assets measured on the first day of the taxable year and on the last
day of each subsequent quarter, or month or day during the taxable year.
This election may be made annually.
(C) For purposes of item (iv) of clause (A) of this subparagraph, if a
multifamily structure securing a loan is used in part for nonresidential
use purposes, the entire loan is deemed a residential real property loan
if the planned residential use exceeds eighty percent of the  property's
planned  use  (measured,  at  the  taxpayer's  election, by using square
footage or gross rental revenue, and determined as of the time the  loan
is made).
(D)  For  purposes  of  item  (iv) of clause (A) of this subparagraph,
loans made to finance the acquisition or development of  land  shall  be
deemed  to  be loans secured by an interest in residential real property
if there is  a  reasonable  assurance  that  the  property  will  become
residential  real  property within a period of three years from the date
of acquisition of such land; but this sentence shall not apply  for  any
taxable  year  unless,  within such three year period, such land becomes
residential real property.  For  purposes  of  determining  whether  any
interest  in  a  REMIC  qualifies  under item (vi) of clause (A) of this
subparagraph, any regular interest in another REMIC held by  such  REMIC
shall  be  treated  as  a  loan  described  in  a  preceding  item under
principles similar to the principle of such item (vi),  except  that  is
such REMICs are part of a tiered structure, they shall be treated as one
REMIC for purposes of such item (vi).
(3)  For  purposes  of  this  paragraph,  a  "thrift institution" is a
savings  bank,  a  savings  and  loan  association,  or  other   savings
institution chartered and supervised as such under federal or state law.
(s)  Subtraction  modification  for community banks and small thrifts.
(1) A taxpayer  that  is  a  qualified  community  bank  as  defined  in
subparagraph  two  of  this  paragraph  or a small thrift institution as
defined in subparagraph two-a of  this  paragraph  shall  be  allowed  a
deduction  in  computing  entire net income equal to the amount computed
under subparagraph three of this paragraph.
(2) To be a qualified community bank,  a  taxpayer  must  satisfy  the
following conditions.
(A)  It  is  a bank or trust company organized under or subject to the
provisions of article three of the banking law or a comparable provision
of the laws of another state, or a national banking association.
(B) The average value during the taxable year of  the  assets  of  the
taxpayer,  or,  if  the  taxpayer  is included in a combined report, the
assets of the combined reporting group of the taxpayer under section two
hundred ten-C of this article, must not exceed eight billion dollars.
(2-a) To be a small thrift institution, a taxpayer  must  satisfy  the
following conditions.
(A)  It  is  a  savings bank, a savings and loan association, or other
savings institution chartered and supervised as such  under  federal  or
state law.
(B)  The  average  value  during the taxable year of the assets of the
taxpayer, or, if the taxpayer is included  in  a  combined  report,  the
assets of the combined reporting group of the taxpayer under section two
hundred ten-C of this article, must not exceed eight billion dollars.
(3)(A) The subtraction modification shall be computed as follows:
(i)  Multiply the taxpayer's net interest income from loans during the
taxable year by a fraction, the numerator of which is the gross interest
income during the taxable year from qualifying loans and the denominator
of which is the gross interest income during the taxable year  from  all
loans.
(ii)  Multiply  the  amount determined in clause (i) by fifty percent.
This  product  is  the  amount  of  the  deduction  allowed  under  this
paragraph.
(B)(i) Net interest income from loans shall mean gross interest income
from  loans  less  gross  interest  expense  from  loans. Gross interest
expense from loans is determined by multiplying gross  interest  expense
by  a  fraction,  the  numerator  of which is the average total value of
loans owned by the thrift  institution  or  community  bank  during  the
taxable year and the denominator of which is the average total assets of
the thrift institution or community bank during the taxable year.
(ii) Measurement of assets. (I) Total assets are those assets that are
properly reflected on a balance sheet, computed in the same manner as is
required  by  the  banking  regulator  of  the taxpayers included in the
combined return. In addition, total assets includes leased real property
that is not properly reflected on a balance sheet.
(II) Assets will only be included if the income or expenses  of  which
are  properly  reflected  (or  would have been properly reflected if not
fully depreciated or expensed, or depreciated or expensed to  a  nominal
amount)  in  the computation of the taxpayer's entire net income for the
taxable year. Assets will not include deferred tax assets and intangible
assets identified as "goodwill".
(III) Tangible real and personal property, such  as  buildings,  land,
machinery,  and  equipment shall be valued at cost. Leased real property
that is not properly reflected on that balance sheet will be  valued  at
the  annual lease payment multiplied by eight. Intangible property, such
as loans and investments, shall be valued at  book  value  exclusive  of
reserves.
(IV)  Average  assets  are  computed  using the assets measured on the
first day of the taxable year, and on the last day  of  each  subsequent
quarter of the taxable year or month or day during the taxable year.
(C) A qualifying loan is a loan that meets the conditions specified in
subclause (i) of this clause and subclause (ii) of this clause.
(i)  The  loan  is originated by the qualified community bank or small
thrift institution or purchased by the qualified community bank or small
thrift institution immediately after its origination in connection  with
a commitment to purchase made by the bank or thrift institution prior to
the loan's origination.
(ii) The loan is a small business loan or a residential mortgage loan,
the  principal amount of which loan is five million dollars or less, and
either the borrower is located in this state as determined under section
two hundred ten-A of this article and the loan is not  secured  by  real
property, or the loan is secured by real property located in New York.
(iii) A loan that meets the definition of a qualifying loan in a prior
taxable  year  (including  years  prior  to  the  effective date of this
paragraph) remains a qualifying loan in taxable years during  and  after

which  such  loan  is  acquired by another corporation in the taxpayer's
combined reporting  group  under  section  two  hundred  ten-C  of  this
article.
(t)  A  small  thrift  institution  or  a qualified community bank, as
defined in paragraph (s) of this subdivision, that maintained a  captive
REIT  on  April  first,  two  thousand  fourteen  shall  utilize  a REIT
subtraction equal to one hundred sixty percent  of  the  dividends  paid
deductions allowed to that captive REIT for the taxable year for federal
income  tax purposes and shall not be allowed to utilize the subtraction
modification for qualified residential loan portfolios  under  paragraph
(r)  of  this  subdivision or the subtraction modification for community
banks and small thrifts under paragraph (s) of this subdivision  in  any
tax  year  in  which such thrift institution or community bank maintains
that captive REIT.
10. The term "calendar year" means a period of twelve calendar  months
(or  any  shorter  period  beginning  on  the  date the taxpayer becomes
subject to the tax imposed by this article) ending on  the  thirty-first
day  of  December, provided the taxpayer keeps its books on the basis of
such period or on the basis of any period ending on any day  other  than
the last day of a calendar month, or provided the taxpayer does not keep
books,  and  includes,  in  case  the taxpayer changes the period on the
basis of which it keeps its books from a fiscal year to a calendar year,
the period from the close  of  its  last  old  fiscal  year  up  to  and
including  the  following  December thirty-first. The term "fiscal year"
means a  period  of  twelve  calendar  months  (or  any  shorter  period
beginning on the date the taxpayer becomes subject to the tax imposed by
this  article)  ending on the last day of any month other than December,
provided the taxpayer keeps its books on the basis of such  period,  and
includes,  in case the taxpayer changes the period on the basis of which
it keeps it books from a calendar year to a  fiscal  year  or  from  one
fiscal  year  to  another  fiscal year, the period from the close of its
last old calendar or fiscal year up to the date designated as the  close
of its new fiscal year.
11.  The  term  "tangible  personal property" means corporeal personal
property,  such  as  machinery,  tools,  implements,  goods,  wares  and
merchandise,  and  does  not  mean  money,  deposits in banks, shares of
stock, bonds, notes, credits or evidences of an interest in property and
evidences of debt.
12. The term elected or appointed officer shall include the  chairman,
president,  vice-president,  secretary,  assistant secretary, treasurer,
assistant  treasurer,  comptroller,  and   also   any   other   officer,
irrespective  of  his title, who is charged with and performs any of the
regular functions of any such officer, unless the total compensation  of
such  officer  is derived exclusively from the receipt of commissions. A
director shall be considered an elected or appointed officer only if  he
performs duties ordinarily performed by an officer.