New York Codes, Rules and Regulations › Title 20 - DEPARTMENT OF TAXATION AND FINANCE › Chapter II - Income Taxes and Estate Taxes › Subchapter A - New York State Personal Income Tax Under Article 22 Of The Tax Law › Article 2 - Residents › Part 112 - New York Adjusted Gross Income Of A Resident Individual › Section 112.3 - Modifications reducing Federal adjusted gross income

Current through Register Vol. 46, No. 28, July 10, 2024
Tax Law, §§ 612(c), 617-a
The following items are to be subtracted from Federal adjusted gross income in determining the New York adjusted gross income of a resident individual:
(a)
(1) General. Interest income on obligations of the United States and its possessions, to the extent includible in gross income for Federal income tax purposes, including certain amounts received as dividends from a regulated investment company (as defined in section  851 of the Internal Revenue Code). (See section 612[c][1] of the Tax Law.)
(2) For purposes of paragraph (1) of this subdivision, certain amounts received as dividends from a regulated investment company are that portion of a distribution received by a shareholder that are derived from obligations of the United States and its possessions provided, the regulated investment company:
(i) has at least 50 percent of the value of its total assets invested in obligations of the United States and its possessions at the close of each quarter of its taxable year; and
(ii) issues a written notice to the shareholders of the regulated investment company within 60 days after the close of the company's taxable year indicating the amount of dividends that qualify for the New York subtraction modification referred to in this subdivision.
(a) Where 100 percent of the income of the regulated investment company is derived from interest on obligations of the United States and its possessions, the written notice should indicate that 100 percent of the income received by the shareholders may be subtracted.
(b) Where less than 100 percent of the income of the regulated investment company is derived from interest on obligations of the United States and its possessions, the written notice should indicate that portion of the shareholder's distribution attributable to such interest that may be subtracted, determined by multiplying the shareholder's distribution by a fraction, the numerator of which is the regulated investment company's interest income on Federal obligations for the taxable year less expenses attributable to such interest income for such year, and the denominator of which is the regulated investment company's taxable income for such year determined in accordance with section  852(b)(2) of the Internal Revenue Code, but without regard to subparagraph (D) of such paragraph (2).
(3) Examples. The following examples illustrate the provisions of this subdivision:
Example 1:
Interest income on United States savings bonds is subject to Federal income tax but not to New York State personal income tax. Therefore, the amount of such interest income is subtracted from Federal adjusted gross income to the extent it is includible in gross income for Federal income tax purposes in determining New York adjusted gross income.
Example 2:
Assume a regulated investment company meets the 50 percent requirement of section 612 (c)(1)  of the Tax Law and such regulated investment company's taxable income is $80,000, which included interest income of $70,000 from obligations of the United States and $10,000 of expenses directly related to the interest income from such obligations of the United States.
Also assume that the regulated investment company distributed the entire $80,000 to its shareholders. Therefore, the percentage of this distribution that may qualify for the New York subtraction modification is 75 percent, determined as follows:
Step 1:
Determine the net interest income from Federal obligations ($60,000) by subtracting the expenses directly related to the interest income on such obligations ($10,000) from the interest income from such Federal obligations ($70,000).
$70,000 interest income from Federal obligations
-
$10,000 expenses directly related to interest income on Federal obligations
=
$60,000 net interest income from Federal obligations
Step 2:
Determine the percentage of regulated investment company's dividends that qualify for the New York subtraction modification (75 percent) by dividing the net interest income from Federal obligations ($60,000) as determined in Step 1 by the regulated investment company's taxable income ($80,000).
$60,000 net interest income from Federal obligations
/
$80,000 regulated investment company's taxable income
=
75% percentage of regulated investment company's dividends that qualify for the New York subtraction modification
Assuming shareholder A received dividend distributions of $2,000 from the above regulated investment company, such investment company must issue a written notice to shareholder A, indicating that $1,500 of the $2,000 distribution qualifies for the New York subtraction modification, determined as follows:
$2,000 A's dividend distribution
×
75 percent percentage of investment company's dividends that qualify for the New York State subtraction modification
=
$1,500 A's portion of dividend distribution which qualifies for the New York State subtraction modification