§ 11-1712 City adjusted gross income of a city resident individual.
(a) General. The city adjusted gross income of a city resident individual means his or her federal adjusted gross income as defined in the laws of the United States for the taxable year, with the modifications specified in this section.
(b) Modifications increasing federal adjusted gross income. There shall be added to federal adjusted gross income:
(1) Interest income on obligations of any state other than this state, or of a political subdivision of any other such state unless created by compact or agreement to which this state is a party, to the extent not properly includible in federal adjusted gross income;
(2) Interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States, which the laws of the United States exempt from federal income tax but not from state income taxes;
(3) Income taxes.
(A) General. Income taxes imposed by this state or any other taxing jurisdiction, to the extent deductible in determining federal adjusted gross income and not credited against federal income tax.
(B) Shareholders of S corporations. In the case of a shareholder of an S corporation, with respect to taxes imposed upon or payable by the corporation, the term "income taxes" in subparagraph (A) of this paragraph shall also include the taxes imposed under articles nine-A and thirty-two of the tax law, regardless of the measure of such tax, but shall not otherwise include taxes imposed by this or any other state of the United States, or any political subdivision of this or any other state, or the District of Columbia.
(4) Interest on indebtedness incurred or continued to purchase or carry obligations or securities the interest on which is exempt from tax under this chapter, to the extent deductible in determining federal adjusted gross income.
(5) Expenses paid or incurred during the taxable year for:
(i) the production or collection of income which is exempt from tax under this chapter, or
(ii) the management, conservation or maintenance of property held for the production of such income, and the amortizable bond premium for the taxable year on any bond the interest on which is exempt from tax under this chapter, to the extent that such expenses and premiums are deductible in determining federal adjusted gross income.
(6) In the case of a taxpayer who has exercised the election permitted by subdivision (g) or (h) of this section, the amount or amounts required by said subdivisions to be added to federal adjusted gross income.
(7) In the case of a taxpayer who is a shareholder of a corporation organized under article fifteen or authorized to do business in this state under article fifteen-A of the business corporation law, for the taxpayer's taxable years beginning before nineteen hundred eighty-eight, the amount which is deductible by such corporation under paragraph one, two or three of subsection (a) of section four hundred four of the internal revenue code for its taxable year ending in or with such taxpayer's taxable year for contributions paid on behalf of such taxpayer minus the lesser of fifteen thousand dollars or fifteen percent of the earned income derived by such taxpayers from such corporation during such taxpayer's taxable year. In the case of a taxpayer on whose behalf contributions are paid under more than one plan to which this paragraph applies or under a plan, contributions to which on his behalf are subject to the limitations provided in section four hundred four (e) of the internal revenue code, this paragraph shall apply with respect to the aggregate of the contributions paid on his behalf under all such plans.
(8) [Repealed.]
(9) [Repealed.]
(10) The amount required to be added to federal adjusted gross income pursuant to subdivision (i) of this section.
(11) [Repealed.]
(12) [Reserved.]
(13) [Repealed.]
(14) [Repealed.]
(15) The amount allowed as an exclusion or deduction for the special additional mortgage recording taxes imposed by subdivision one-a of section two hundred fifty-three of the tax law in determining federal adjusted gross income for such taxable year.
(16) Unless the credit allowed pursuant to subsection (f) of section six hundred six of the tax law is reflected in the computation of the gain or loss so as to result in an increase in such gain or decrease in such loss, for federal income tax purposes, from the sale or other disposition of the property with respect to which the special additional mortgage recording tax imposed pursuant to subdivision one-a of section two hundred fifty-three of such law was paid, the amount of the special additional mortgage recording tax imposed by subdivision one-a of section two hundred fifty-three of such law which was paid and which is reflected in the computation of the basis of the property so as to result in a decrease in such gain or increase in such loss for federal income tax purposes from the sale or other disposition of the property with respect to which such tax was paid.
(17) The amount required to be added to federal adjusted gross income pursuant to subdivision (r) of this section.
(18) In the case of a shareholder of an S corporation:
(A) where the election provided for in subsection (a) of section six hundred sixty of the tax law is in effect with respect to such corporation, an amount equal to his pro rata share of the corporation's reductions for taxes described in paragraphs two and three of subsection (f) of section thirteen hundred sixty-six of the internal revenue code, and
(B) in the case of a New York S termination year, subparagraph (A) of this paragraph shall apply to the amount of reductions for taxes determined under subdivision (s) of this section.
(19) In the case of a shareholder of an S corporation:
(A) where the election provided for in subsection (a) of section six hundred sixty of the tax law has not been made with respect to such corporation, any item of loss or deduction of the corporation included in federal gross income pursuant to section thirteen hundred sixty-six of the internal revenue code, and
(B) in the case of a New York S termination year, subparagraph (A) of this paragraph shall apply to the amounts of loss or deduction determined under subdivision (s) of this section.
(20) S corporation distributions to the extent not included in federal gross income for the taxable year because of the application of section thirteen hundred sixty-eight, subsection (e) of section thirteen hundred seventy-one or subsection (c) of section thirteen hundred seventy-nine of the internal revenue code which represent income not previously subject to tax under this chapter because the election provided for in subsection (a) of section six hundred sixty of the tax law had not been made. Any such distribution treated in the manner described in paragraph two of subsection (b) of section thirteen hundred sixty-eight of the internal revenue code for federal income tax purposes shall be treated as ordinary income for purposes of this chapter.
(21) In relation to the disposition of stock or indebtedness of a corporation which elected under subchapter s of chapter one of the internal revenue code for any taxable year of such corporation beginning, in the case of a corporation taxable under article nine-A of the tax law, after December thirty-first, nineteen hundred eighty, and in the case of a corporation taxable under article thirty-two of the tax law, after December thirty-first, nineteen hundred ninety-six, the amount required to be added to federal adjusted gross income pursuant to subdivision (n) of this section.
(22) The amounts required to be added to federal adjusted gross income pursuant to subdivision (q) of this section.
(23) For taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which the taxpayer claimed as a deduction in computing its federal adjusted gross income solely as a result of an election made pursuant to the provisions of such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four;
(24) For taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which the taxpayer would have been required to include in the computation of its federal adjusted gross income had it not made the election permitted pursuant to such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four;
(25) In the case of property placed in service in taxable years beginning before nineteen hundred ninety-four, for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property subject to the provisions of section two hundred eighty-F of the internal revenue code and property subject to the provisions of section one hundred sixty-eight of the internal revenue code which is placed in service in this state in taxable years beginning after December thirty-first, nineteen hundred eighty-four, the amount allowable as a deduction determined under section one hundred sixty-eight of the internal revenue code.
(26)* The amount of member or employee contributions to a retirement system or pension fund picked up or paid by the employer pursuant to subdivision f of section five hundred seventeen or subdivision d of section six hundred thirteen of the retirement and social security law or section 13-225.1, 13-327.1, 13-125.1, 13-125.2 or 13-521.1 of title thirteen of the code or subdivision nineteen of section twenty-five hundred seventy-five of the education law.
* Editor's note: see 1988 N.Y. Laws Chapters 782 and 783 for provisions regarding the expiration of certain amendments to this division.
(26-a) The amount of member or employee contributions to a retirement system or pension fund picked up or paid by the employer for members of the Manhattan and Bronx surface transportation authority pension plan and treated as employer contributions in determining income tax treatment under section 414(h) of the Internal Revenue Code.
(27) Upon the disposition of property to which paragraph twenty-six of subdivision (c) of this section applies, the amount, if any, by which the aggregate of the modifications described in such paragraph twenty-six attributable to such property exceeds the aggregate of the modifications described in paragraph twenty-five of this subdivision attributable to such property.
(28) [Repealed.]
(29) When gain from the sale or other disposition of property is included in federal gross income, the amount of reduction in the basis of such property attributable to credit for solar and wind energy systems pursuant to paragraph nine of subsection (g) of section six hundred six of the tax law; but for taxable years beginning before nineteen hundred eighty-seven, if such gain affects the determination of a net capital gain for federal income tax purposes, forty percent of such amount.
(30) [Repealed.]
(31)* The amount deducted or deferred from an employee's salary under a flexible benefits program established pursuant to section twenty-three of the general municipal law or section one thousand two hundred ten-a of the public authorities law.
* Editor's note: see 1988 N.Y. Laws ch. 782 for provisions regarding the expiration of this division.
(32) The amount by which an employee's salary is reduced pursuant to the provisions of subdivision b of section 12-126.1 and subdivision b of section 12-126.2 of the code.
(33) Real property taxes paid on qualified agricultural property and deducted in determining federal adjusted gross income, to the extent of the amount of the agricultural property tax credit allowed under subsection (n) or (i) of section six hundred six of the tax law.
(34) The amount of any deduction allowed pursuant to section one hundred ninety-nine of the internal revenue code.
(35) The amount of any federal deduction for taxes imposed under article twenty-three of the tax law.
(36) in the case of a beneficiary of a trust that, in any tax year after its creation including its first tax year, was not subject to tax pursuant to subparagraph (D) of paragraph three of subsection (b) of section 11-1705 of this chapter (except for an incomplete gift non-grantor trust, as defined by paragraph thirty-seven of this subdivision), the amount described in the first sentence of section six hundred sixty-seven of the internal revenue code for the tax year to the extent not already included in federal gross income for the tax year, except that, in computing the amount to be added under this paragraph, such beneficiary shall disregard (i) subsection (c) of section six hundred sixty-five of the internal revenue code; (ii) the income earned by such trust in any tax year in which the trust was subject to tax under this article; and (iii) the income earned by such trust in a taxable year prior to when the beneficiary first became a resident of the city or in any taxable year starting before January first, two thousand fourteen. Except as otherwise provided in this paragraph, all of the provisions of the internal revenue code that are relevant to computing the amount described in the first sentence of subsection (a) of section six hundred sixty-seven of the internal revenue code shall apply to the provisions of this paragraph with the same force and effect as if the language of those internal revenue code provisions had been incorporated in full into this paragraph, except to the extent that any such provision is either inconsistent with or not relevant to this paragraph.
(37) In the case of a taxpayer who transferred property to an incomplete gift non-grantor trust, the income of the trust, less any deductions of such trust, to the extent such income and deductions of such trust would be taken into account in computing the taxpayer's federal taxable income if such trust in its entirety were treated as a grantor trust for federal tax purposes. For purposes of this paragraph, an "incomplete gift non-grantor trust" means a resident trust that meets the following conditions:
(i) the trust does not qualify as a grantor trust under section six hundred seventy-one through six hundred seventy-nine of the internal revenue code, and
(2) the grantor's transfer of assets to the trust is treated as an incomplete gift under section twenty five hundred eleven of the internal revenue code, and the regulations thereunder.
(38) The amount contributed to any or all of the following accounts within the charitable gifts trust fund set forth in section ninety-two-gg of the state finance law, to the extent the amount is claimed as an itemized deduction pursuant to section six hundred fifteen of the tax law: the health charitable account established by paragraph a of subdivision four of section ninety-two-gg of the state finance law, or the elementary and secondary education charitable account established by paragraph b of subdivision four of section ninety-two-gg of the state finance law.
(39) 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) Modifications reducing federal adjusted gross income. There shall be subtracted from federal adjusted gross income:
(1) Interest income on obligations of the United States and its possessions to the extent includible in gross income for federal income tax purposes; such interest income shall include the amount received as dividends from a regulated investment company, as defined in section eight hundred fifty-one of the internal revenue code, which has been designated as the amount of such interest income in a written notice to shareholders not later than sixty days following the close of its taxable year; provided that, at the close of each quarter of the taxable year of such regulated investment company, at least fifty percent of the value of its total assets, as defined in subsection (c) of section eight hundred fifty-one of the internal revenue code, consists of obligations of the United States and its possessions. The aggregate amount so designated by the regulated investment company for its taxable year shall not exceed the amount determined by multiplying the total distributions paid by such regulated investment company to its shareholders with respect to that taxable year (attributable to income earned in that year), including any such distributions paid after the close of the taxable year, as described in section eight hundred fifty-five of the internal revenue code, by the ratio that the interest income received in that taxable year on obligations of the United States and its possessions, after reduction for the deductions and expenses directly or indirectly attributable thereto, bears to the investment company taxable income of such regulated investment company for such taxable year, determined without regard to subparagraph (D) of paragraph two of subsection (b) of section eight hundred fifty-two of the internal revenue code;
(2) Interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States to the extent includible in gross income for federal income tax purposes but exempt from state income taxes under the laws of the United States;
(3) (i) Pensions to officers and employees of this state, its subdivisions and agencies, to the extent includible in gross income for federal income tax purposes;
(ii)* Pensions to officers and employees of the United States of America, any territory or possession or political subdivision of such territory or possession, the District of Columbia, or any agency or instrumentality of any one of the foregoing, to the extent includible in gross income for federal income tax purposes;
* Editor's note: see underlying legislation for provisions regarding the conditional expiration of this division.
(3-a) Pensions and annuities received by an individual who has attained the age of fifty-nine and one-half, not otherwise excluded pursuant to paragraph three of this subdivision, to the extent includible in gross income for federal income tax purposes, but not in excess of twenty thousand dollars, which are periodic payments attributable to personal services performed by such individual prior to his or her retirement from employment, which arise: (i) from an employer-employee relationship or (ii) from contributions to a retirement plan which are deductible for federal income tax purposes. However, the term "pensions and annuities" shall also include distributions received by an individual who has attained the age of fifty-nine and one-half from an individual retirement account or an individual retirement annuity, as defined in section four hundred eight of the internal revenue code, and distributions received by an individual who has attained the age of fifty-nine and one-half from self-employed individual and owner-employee retirement plans which qualify under section four hundred one of the internal revenue code, whether or not the payments are periodic in nature. Nevertheless, the term "pensions and annuities" shall not include any lump sum distribution, as defined in subparagraph (A) of paragraph four of subsection (e) of section four hundred two of the internal revenue code and taxed under section six hundred three of the tax law. Where a husband and wife file a joint city personal income tax return, the modification provided for in this paragraph shall be computed as if they were filing separate city personal income tax returns. Where a payment would otherwise come within the meaning of the term "pensions and annuities" as set forth in this paragraph except that such individual is deceased, such payment shall, nevertheless, be treated as a pension or annuity for purposes of this paragraph if such payment is received by such individual's beneficiary.
(3-b) (i) Disability income included in federal gross income, to the extent that such disability income would have been excluded from federal gross income pursuant to the provisions of subsection (d) of section one hundred five of the internal revenue code of nineteen hundred fifty-four had such provisions continued in effect for taxable years commencing after December thirty-first, nineteen hundred eighty-three as they were in effect immediately prior to the repeal of such subsection. Notwithstanding the foregoing, the sum of disability income excluded pursuant to this paragraph, and pension and annuity income excluded pursuant to paragraph three-a of this subdivision, shall not exceed twenty thousand dollars.
(ii) Notwithstanding subdivision (f) of this section, if a husband and wife determine their federal income tax on a joint return but are required to determine their city income taxes separately, the amounts of exclusion allowed under subparagraph (i) of this paragraph shall be determined in the same joint manner as such amounts would have been determined under the provisions of paragraph five of subsection (d) of section one hundred five of the internal revenue code as such provisions were in effect immediately prior to the repeal of such subsection, but shall be attributed for city income tax purposes to the spouse who would have been required to report any such amount as income if the spouses had determined their federal income taxes separately.
(iii) Where a husband and wife file a joint city income tax return, the twenty thousand dollar limitation provided in subparagraph (i) of this paragraph shall be applied as if they were filing separate city income tax returns.
(3-c) Social security benefits to the extent includible in gross income for federal income tax purposes pursuant to section eighty-six of the internal revenue code.
(4) The portion of any gain, from the sale or other disposition of property having a higher adjusted basis for New York state income tax purposes than for federal income tax purposes on the last day of the last taxable year for which article sixteen of the tax law imposes tax, that does not exceed such difference in basis.
(5) The amount necessary to prevent the taxation under this chapter of any annuity or other amount of income or gain which was properly included in income or gain and was taxable under article sixteen of the tax law to the taxpayer, or to a decedent by reason of whose death the taxpayer acquired the right to receive the income or gain, or to a trust or estate from which the taxpayer received the income or gain;
(6) Interest or dividend income on obligations or securities to the extent exempt from income tax under the laws of this state authorizing the issuance of such obligations on securities but includible in gross income for federal income tax purposes; and
(7) The amount of any refund or credit for overpayment of income taxes imposed by this city, any other taxing jurisdiction, or any taxes imposed by article twenty-three of the tax law to the extent properly included in gross income for federal income tax purposes.
(8) Compensation received for active service in the armed forces of the United States on or after October first, nineteen hundred sixty-one, and prior to September first, nineteen hundred sixty-two; provided, however, that the amount of such compensation to be deducted shall not exceed one hundred dollars for each month of the taxable year, subsequent to September, nineteen hundred sixty-one, during any part of which month the taxpayer was engaged in such service. For the purposes of this paragraph, the words "active service in the armed forces of the United States" shall mean active duty (other than for training) in the army, navy (including the marine corps), air force or coast guard of the United States as defined in Title 10 of the United States Code.
(8-a) Compensation and bonuses received for active service in the armed forces of the United States while a prisoner of war or missing in action during the hostilities in Vietnam, to the extent includible in gross income for federal income tax purposes.
(9) Interest on indebtedness incurred or continued to purchase or carry obligations or securities the interest on which is subject to tax under this chapter but exempt from federal income tax, to the extent that such interest on indebtedness is not deductible in determining federal adjusted gross income and is attributable to a trade or business carried on by the taxpayer.
(10) Ordinary and necessary expenses paid or incurred during the taxable year for: (i) the production or collection of income which is subject to tax under this chapter but exempt from federal income tax, or (ii) the management, conservation or maintenance of property held for the production of such income, and the amortizable bond premium for the taxable year on any bond the interest on which is subject to tax under this chapter but exempt from federal income tax, to the extent that such expenses and premiums are not deductible in determining federal adjusted gross income and are attributable to a trade or business carried on by the taxpayer.
(11) In the case of a taxpayer who has exercised the election permitted by subdivision (g) or (h) of this section, the amount or amounts required by said subdivisions to be subtracted from federal adjusted gross income.
(12) The amount necessary to prevent the taxation of amounts properly included in New York adjusted gross income in prior taxable years in accordance with paragraph seven of subdivision (b) of this section.
(13) The amount required to be subtracted from federal adjusted gross income pursuant to subdivision (i) of this section.
(14) The amount that may be subtracted from federal adjusted gross income pursuant to subdivision (j) of this section.
(15) That portion of wages or salaries paid or incurred for the taxable year for which a deduction is not allowed pursuant to the provisions of section two hundred eighty-C of the internal revenue code.
(16) [Repealed.]
(17) [Repealed.]
(18) [Repealed.]
(19) The amount which may be subtracted from federal adjusted gross income pursuant to subdivision (r) of this section.
(20) The amounts which may be subtracted from federal adjusted gross income pursuant to subdivision (o) of this section.
(21) In relation to the disposition of stock or indebtedness of a corporation which elected under subchapter s of chapter one of the internal revenue code for any taxable year of such corporation beginning, in the case of a corporation taxable under article nine-A of the tax law, after December thirty-first, nineteen hundred eighty, and in the case of a corporation taxable under article thirty-two of the tax law, after December thirty-first, nineteen hundred ninety-six, the amounts required to be subtracted from federal adjusted gross income pursuant to subdivision (n) of this section.
(22) In the case of a shareholder of an S corporation:
(A) where the election provided for in subsection (a) of section six hundred sixty of the tax law has not been made with respect to such corporation, any item of income of the corporation included in federal gross income pursuant to section thirteen hundred sixty-six of the internal revenue code, and
(B) in the case of a New York S termination year, subparagraph (A) of this paragraph shall apply to the amounts of income determined under subdivision (s) of this section.
(23) The amounts which may be subtracted from federal adjusted gross income pursuant to subdivision (p) of this section.
(24) For taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which is included in the taxpayer's federal adjusted gross income solely as a result of an election made pursuant to the provisions of such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four;
(25) For taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles), any amount which the taxpayer could have excluded from federal adjusted gross income had it not made the election provided for in such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four;
(26) In the case of property placed in service in taxable years beginning before nineteen hundred ninety-four, for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property subject to the provisions of section two hundred eighty-F of the internal revenue code and property subject to the provisions of section one hundred sixty-eight of the internal revenue code which is placed in service in this state in taxable years beginning after December thirty-first, nineteen hundred eighty-four, an amount with respect to property which is subject to the provisions of section one hundred sixty-eight of the internal revenue code equal to the amount allowable as the depreciation deduction under section one hundred sixty-seven of the internal revenue code as such section would have applied to property placed in service on December thirty-first, nineteen hundred eighty.
(27) [Reserved.]
(28) Upon the disposition of property to which paragraph twenty-six of this subdivision applies, the amount, if any, by which the aggregate of the modifications described in paragraph twenty-five of subdivision (b) of this section attributable to such property exceeds the aggregate of the modifications described in paragraph twenty-six of this subdivision attributable to such property.
(29) Deduction for two-earner married couples.
(A) For the taxable year beginning in nineteen hundred eighty-seven, in the case of a husband and wife who each have qualified earned income and who have filed a joint return under subdivision (b) of section 11-1751 for the taxable year, an amount equal to ten percent of the lesser of:
(i) thirty thousand dollars or
(ii) the qualified earned income of the spouse with the lower qualified earned income for such taxable year.
(B) For purposes of this paragraph, eligibility for the deduction provided for herein and the term qualified earned income shall be determined in the manner such eligibility and such qualified earned income would have been determined pursuant to the provisions of section two hundred twenty-one of the internal revenue code of nineteen hundred fifty-four had such provisions continued in effect for taxable years commencing after December thirty-first, nineteen hundred eighty-six as they were in effect immediately prior to the repeal of such section. Provided, however, the determination of such qualified earned income shall be made with regard only to the items therein included in city adjusted gross income, with such adjusted gross income determined without regard to this paragraph, and only with regard to the deductions and exclusions which are of the type properly allowable to or chargeable against such qualified earned income in such taxable year.
(30) The amount received by any person as an accelerated payment or payments of part or all of the death benefit or special surrender value under a life insurance policy as a result of any of the diagnoses specified in subparagraph (A) or (B) of paragraph one of subsection (a) of section one thousand one hundred thirteen of the insurance law, and the amount received by any person as a viatical settlement pursuant to the provisions of article seventy-eight of the insurance law, to the extent includible in gross income for federal income tax purposes.
(31) [Repealed.]
(32) The portion of the fees paid during the taxable year by a taxpayer who is a resident of a continuing care retirement community, issued a certificate of authority pursuant to article forty-six of the public health law, attributable to the cost of providing long term care benefits pursuant to a continuing care contract. The portion of the fees so attributable shall be determined in accordance with regulations promulgated by the superintendent of insurance. The deduction may not exceed the limitation that would be applicable to the taxpayer for the taxable year, with respect to eligible long term care premiums, determined under paragraph (10) of subsection (d) of section 213 of the internal revenue code.
(33) Distributions, to the extent includible in adjusted gross income for federal income tax purposes, made to the taxpayer because of his or her status as a victim of Nazi persecution, as defined in P.L. 103-286, or as a spouse or a descendant in need of such victim.
(34) Items of income, to the extent includible in gross income for federal income tax purposes, attributable to, derived from or in any way related to assets stolen from, hidden from or otherwise lost to a victim of Nazi persecution, as defined in P.L. 103-286, immediately prior to, during and immediately after World War II, including, but not limited to interest on the proceeds receivable as insurance under policies issued to a victim of Nazi persecution, as defined in P.L. 103-286, by European insurance companies immediately prior to and during World War II. Provided, however, this subtraction from federal adjusted income does not apply to assets acquired with such assets or with the proceeds from the sale of such assets. Provided, further, this paragraph is only applicable to a taxpayer who was the first recipient of such assets after their recovery and who is a victim of Nazi persecution, as defined in P.L. 103-286, or a spouse or a descendant of such victim.
(35)* as provided in section thirty-eight of the tax law, any income or gain, to the extent it is included in federal adjusted gross income of an individual who is the sole proprietor of a qualified entity or a member of a limited liability company, a partner in a partnership or a shareholder in a New York subchapter S corporation that is a qualified entity as defined in section sixteen-v of the New York state urban development corporation act attributable to the operations of such qualified entity at its location in or as part of a New York state innovation hot spot, as defined in paragraph (a) of subdivision one of section sixteen-v of the New York state urban development corporation act.
* Editor's note: there are two divisions designated (c)(35) in this section.
(35)* (A) In the case of a taxpayer who is a small business or a taxpayer who is a member, partner, or shareholder of a limited liability company, partnership, or New York S corporation, respectively, that is a small business, who or which has business income and/or farm income as defined in the laws of the United States, an amount equal to fifteen percent of the net items of income, gain, loss and deduction attributable to such business or farm entering into federal adjusted gross income, but not less than zero.
* Editor's note: there are two divisions designated (c)(35) in this section.
(B) (i) For the purposes of this paragraph, the term small business shall mean:
(I) a sole proprietor who employs one or more persons during the taxable year and who has net business income or net farm income of greater than zero but less than two hundred fifty thousand dollars;
(II) a limited liability company, partnership, or New York S corporation that during the taxable year employs one or more persons and has net farm income that is greater than zero but less than two hundred fifty thousand dollars; or
(III) a limited liability company, partnership, or New York S corporation that during the taxable year employs one or more persons and has New York gross business income attributable to a non-farm business that is greater than zero but less than one million five hundred thousand dollars.
(ii) For purposes of this paragraph, the term New York gross business income shall mean:
(I) in the case of a limited liability company or a partnership, New York source gross income as defined in subparagraph (b) or paragraph three of subsection (c) of section six hundred fifty-eight of the tax law, and,
(II) in the case of a New York S corporation, New York receipts included in the numerator of the apportionment factor determined under section two hundred ten-A of the tax law for the taxable year.
(C) To qualify for this modification in relation to a non-farm small business that is a limited liability company, partnership, or New York S corporation, the taxpayer's income attributable to the net business income from its ownership interests in non-farm limited liability companies, partnerships, or New York S corporations must be less than two hundred fifty thousand dollars.
(36) Any wages received by an individual as an employee of a business located within a tax-free NY area during the first five years of such business's ten year taxable period specified in subdivision (a) of section thirty-nine of the tax law to the extent included in federal adjusted gross income and allowed under section thirty-nine of the tax law. During the second five years of such business's ten year taxable period, the first two hundred thousand dollars of such wages in the case of a taxpayer filing as a single individual, the first two hundred fifty thousand dollars of such wages in the case of a taxpayer filing as a head of household, and three hundred thousand dollars of such wages in the case of a taxpayer filing a joint return, to the extent included in federal adjusted gross income and allowed under section thirty-nine of the tax law.
(37) The amount of any award paid to a volunteer firefighter or volunteer ambulance worker from a length of service defined contribution plan or defined benefit plan as provided for in articles eleven-A, eleven-AA, eleven-AAA and eleven-AAAA of the general municipal law, to the extent that such award is includable in gross income for federal income tax purposes; provided, however, that such award is not distributed in the form of a lump sum distribution, as defined in subparagraph (D) of paragraph four of subsection (e) of section four hundred two of the internal revenue code and taxed under section six hundred three of the tax law; and provided, further, that such award is not distributed to a taxpayer who has not attained the age of fifty-nine and one-half years.
(38) The amount of any gain added back to federal adjusted gross income in a previous taxable year pursuant to paragraph thirty-nine of subdivision (b) of this section that is included in federal gross income for the taxable year.
(d) Modification for city fiduciary adjustment. There shall be added to or subtracted from federal adjusted gross income (as the case may be) the taxpayer's share, as beneficiary of an estate or trust, of the city fiduciary adjustment determined under section 11-1719.
(e) Modifications of partners and shareholders of S corporations.
(1) Partners and shareholders of S corporations which are not New York C corporations. The amounts of modifications required to be made under this section by a partner or by a shareholder of an S corporation (other than an S corporation which is a New York C corporation), which relate to partnership or S corporation items of income, gain, loss or deduction shall be determined under section 11-1717 and, in the case of a partner of a partnership doing an insurance business as members of the New York insurance exchange described in section six thousand two hundred one of the insurance law, under section 11-1717.1 of this chapter.
(2) Shareholders of S corporations which are New York C corporations. In the case of a shareholder of an S corporation which is a New York C corporation, the modifications under this section which relate to the corporation's items of income, loss and deduction shall not apply, except for the modifications provided under paragraph nineteen of subdivision (b) and paragraph twenty-two of subdivision (c) of this section.
(3) New York S termination year. In the case of a New York S termination year, the amounts of the modifications required under this section which relate to the S corporation's items of income, loss, deduction and reductions for taxes (as described in paragraphs two and three of subsection (f) of section thirteen hundred sixty-six of the internal revenue code) shall be adjusted in the same manner that the S corporation's items are adjusted under subdivision (s) of this section.
(f) Husband and wife. If husband and wife determine their federal income tax on a joint return but are required to determine their city income taxes separately, they shall determine their city adjusted gross incomes separately as if their federal adjusted gross incomes had been determined separately.
(g) Optional modifications. Subject to the conditions provided in paragraphs three and four of this subdivision, at the election of the taxpayer there shall also be subtracted from federal adjusted gross income either or both of the items set forth in paragraphs one and two of this subdivision, except that only one of such items shall be subtracted with respect to any one item of property, and except that a subtraction of the item set forth in such paragraph two may not be taken with respect to taxable years commencing on or after January first, nineteen hundred eighty-nine.
(1) Depreciation with respect to any property such as described in paragraph three or four of this subdivision, and subject to the conditions provided therein, not exceeding twice the depreciation allowed with respect to the same property for federal income tax purposes. Such modification shall be allowed only upon condition that any depreciation or amortization allowed with respect to the same property in determining federal adjusted gross income shall be added to federal adjusted gross income pursuant to paragraph six of subdivision (b) of this section. The total of all deductions allowed pursuant to this paragraph in any taxable year or years with respect to any property described in paragraph three of this subdivision shall not exceed its cost or other basis and, with respect to property described in paragraph four of this subdivision, which is used in a business carried on both within and without the state shall not exceed its cost or other basis multiplied by a percentage of the excess of the taxpayer's business income over its business deductions allocated to this state for the first year such depreciation is deducted. Such percentage shall be determined by apportionment and allocation under regulations of the tax commission.
(2) Expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or acquisition of any property such as described in paragraph three or four of this subdivision, and subject to the conditions provided therein, which is used or to be used for purposes of research and development in the experimental or laboratory sense. Such purposes shall not be deemed to include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions or research in connection with literary, historical or similar projects. Such modification shall be allowed only on condition that, with respect to property described in paragraph four of this subdivision, which is used in a business carried on both within and without the state the deduction shall not exceed the expenditures multiplied by a percentage of the excess of the taxpayer's business income over its business deductions allocated to this state for the first year such expenditures are deducted. Such percentage shall be determined by apportionment and allocation under regulations of the tax commission, and for the taxable year and all succeeding taxable years, any deductions allowed for federal income tax purposes on account of such expenditures or on account of depreciation of the same property, except to the extent that its basis may be attributable to factors other than such expenditures, shall be added to federal adjusted gross income pursuant to paragraph six of subdivision (b) of this section, or in case a modification is allowable pursuant to this paragraph for only a part of such expenditures, on condition that a proportionate part of any such deductions allowed for federal income tax purposes be added to federal adjusted gross income. With respect to property which is used or to be used for research and development only in part, or during only part of its useful life, the modification allowable pursuant to this paragraph shall be limited to a proportionate part of the expenditures relating thereto. If a modification shall have been allowed pursuant to this paragraph for all or part of such expenditures with respect to any property, and such property is used for purposes other than research and development to a greater extent than originally reported, the taxpayer shall report such use in his or her return for the first taxable year during which it occurs, and the tax commission may recompute the tax for the year or years for which such deduction was allowed, and may assess any additional tax resulting from such recomputation within the time fixed by subdivision (c) of section 11-1783.
(3) For purposes of this paragraph, such modifications shall be allowed only with respect to tangible property which is depreciable pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in this state and used in the taxpayer's trade or business: (A) constructed, reconstructed or erected after December thirty-first, nineteen hundred sixty-three, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer or, property, the physical construction, reconstruction or erection of which began on or before December thirty-first, nineteen hundred sixty-seven or which began after such date pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-seven, and then only with respect to that portion of the basis thereof or the expenditures relating thereto which is properly attributable to such construction, reconstruction or erection after December thirty-first, nineteen hundred sixty-three, or (B) acquired after December thirty-first, nineteen hundred sixty-three, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer or pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-seven, by purchase as defined in section one hundred seventy-nine (d) of the internal revenue code, if the original use of such property commenced with the taxpayer, commenced in this state and commenced after December thirty-first, nineteen hundred sixty-three, or (C) acquired, constructed, reconstructed, or erected subsequent to December thirty-first, nineteen hundred sixty-seven, if such acquisition, construction, reconstruction or erection is pursuant to a plan of the taxpayer which was in existence December thirty-first, nineteen hundred sixty-seven and not thereafter substantially modified, and such acquisition, construction, reconstruction or erection would qualify under the rules in paragraph four, five or six of subdivision (h) of section forty-eight of the internal revenue code provided all references in such paragraphs four, five and six to the dates October nine, nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six, shall be read as December thirty-first, nineteen hundred sixty-seven. A taxpayer shall be allowed a deduction under clause (A), (B) or (C) of this paragraph only if the tangible property shall be delivered or the construction, reconstruction or erection shall be completed on or before December thirty-first, nineteen hundred sixty-nine, except in the case of tangible property which is acquired, constructed, reconstructed or erected pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer. However, for any taxable year beginning on or after January first, nineteen hundred sixty-eight, a taxpayer shall not be allowed a modification under paragraph one of this subdivision with respect to tangible personal property leased to any other person or corporation. For purposes of the preceding sentence, any contract or agreement to lease or rent or for a license to use such property shall be considered a lease. With respect to property which a taxpayer uses for purposes other than leasing for part of a taxable year and leases for a part of a taxable year, a modification under paragraph one of this subdivision shall be allowed in proportion to the part of the year such property is used by the taxpayer.
(4) For purposes of this paragraph, such modifications shall be allowed only with respect to tangible property which is depreciable pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in this state and used in the taxpayer's trade or business. The modifications provided for in paragraph one of this subdivision shall be allowed only with respect to tangible property which is: (A) constructed, reconstructed or erected after December thirty-first, nineteen hundred sixty-seven, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-eight, and at all times thereafter, binding on the taxpayer or, property, the physical construction, reconstruction or erection of which began on or before December thirty-first, nineteen hundred sixty-eight or which began after such date pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-eight, and then only with respect to that portion of the basis thereof or the expenditures relating thereto which is properly attributable to such construction, reconstruction or erection after December thirty-first, nineteen hundred sixty-three, or (B) acquired after December thirty-first, nineteen hundred sixty-seven, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-eight, and at all times thereafter, binding on the taxpayer or pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-eight, by purchase as defined in section one hundred seventy-nine (d) of the internal revenue code, if the original use of such property commenced with the taxpayer, commenced in this state and commenced after December thirty-first, nineteen hundred sixty-seven, or (C) acquired, constructed, reconstructed, or erected subsequent to December thirty-first, nineteen hundred sixty-eight, if such acquisition, construction, reconstruction or erection is pursuant to a plan of the taxpayer which was in existence December thirty-first, nineteen hundred sixty-eight, and not thereafter substantially modified, and such acquisition, construction, reconstruction or erection would qualify under the rules in paragraph four, five or six of subdivision (h) of section forty-eight of the internal revenue code provided all references in such paragraphs four, five and six to the dates October nine, nineteen hundred sixty-six, and October ten, nineteen hundred sixty-six, shall be read as December thirty-first, nineteen hundred sixty-eight. A taxpayer shall be allowed a deduction under clause (A), (B) or (C) of the preceding sentence of this paragraph only if the tangible property shall be delivered or the construction, reconstruction or erection shall be completed on or before December thirty-first, nineteen hundred seventy, except in the case of tangible property which is acquired, constructed, reconstructed or erected pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-eight, and at all times thereafter binding on the taxpayer. The modification provided for in paragraph two of this subdivision shall be allowed only with respect to tangible property: (A) the construction, reconstruction or erection of which is completed after December thirty-first, nineteen hundred sixty-seven, and then only with respect to that portion of the basis thereof or the expenditures relating thereto which is properly attributable to such construction, reconstruction or erection after December thirty-first, nineteen hundred sixty-three, or (B) acquired after December thirty-first, nineteen hundred sixty-seven, by purchase as defined in section one hundred seventy-nine (d) of the internal revenue code, if the original use of such property commenced with the taxpayer, commenced in this state and commenced after December thirty-first, nineteen hundred sixty-three. Provided, however, a modification under paragraph one of this subdivision shall be allowed with respect to property described in this paragraph only on condition that such property shall be principally used by the taxpayer in the production of goods by manufacturing; processing; assembling; refining; mining; extracting; farming; agriculture; horticulture; floriculture; viticulture; or commercial fishing. For purposes of the preceding sentence, manufacturing shall mean the process of working raw materials into wares suitable for use or which gives new shapes, new qualities or new combinations to matter which already has gone through some artificial process by the use of machinery, tools, appliances and other similar equipment. Property used in the production of goods shall include machinery, equipment or other tangible property which is principally used in the repair and service of other machinery, equipment or other tangible property used principally in the production of goods and shall include all facilities used in the manufacturing operation, including storage of material to be used in manufacturing and of the products that are manufactured. At the option of the taxpayer, air and water pollution control facilities which qualify for elective deductions under subdivision (h) of this section may be treated, for purposes of this paragraph, as tangible property principally used in the production of goods by manufacturing; processing; assembling; refining; mining; extracting; farming; agriculture; horticulture; floriculture; viticulture; or commercial fishing, in which event, a deduction shall not be allowed under such subdivision (h). However, for any taxable year beginning on or after January first, nineteen hundred sixty-eight, a taxpayer shall not be allowed a modification under paragraph one of this subdivision with respect to tangible personal property leased to any other person or corporation. For purposes of the preceding sentence, any contract or agreement to lease or rent or for a license to use such property shall be considered a lease. With respect to property which a taxpayer uses for purposes other than leasing for part of a taxable year and leases for a part of a taxable year, a modification under paragraph one of this subdivision shall be allowed in proportion to the part of the year such property is used by the taxpayer.
(5) If the modifications allowable for any taxable year pursuant to this subdivision exceed the taxpayer's city adjusted gross income, determined without the allowance of such modifications, the excess may be carried over to the following taxable year or years and may be subtracted from federal adjusted gross income for such year or years.
(6) In any taxable year when property is sold or otherwise disposed of, with respect to which a modification has been allowed pursuant to paragraph one or two of this subdivision, the basis of such property shall be adjusted to reflect the modifications so allowed, and if the basis as so adjusted is lower than the adjusted basis of the same property for federal income tax purposes, there shall be added to federal adjusted gross income the amount of the difference between such adjusted bases.
(h) Optional modification for waste treatment facility expenditures. For taxable years commencing prior to January first, nineteen hundred eighty-nine, at the election of the taxpayer, there shall also be subtracted from federal adjusted gross income expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or improvement of industrial waste treatment facilities and air pollution control facilities.
(1) (A) The term "industrial waste treatment facilities" shall mean facilities for the treatment, neutralization, or stabilization of industrial waste (as the term "industrial waste" is defined in section 17-0105 of the environmental conservation law) from a point immediately preceding the point of such treatment, neutralization or stabilization to the point of disposal, including the necessary pumping and transmitting facilities, but excluding such facilities installed for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable.
(B) The term "air pollution control facilities" shall mean facilities which remove, reduce, or render less noxious air contaminants emitted from an air contamination source (as the terms "air contaminant" and "air contamination source" are defined in section 19-0107 of the environmental conservation law) from a point immediately preceding the point of such removal, reduction or rendering to the point of discharge of air, meeting emission standards as established by the air pollution control board, but excluding such facilities installed for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable and excluding those facilities which rely for their efficacy on dilution, dispersion or assimilation of air contaminants in the ambient air after emission.
(2) Such modifications shall be allowed only:
(A) with respect to tangible property which is depreciable, pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in this state and used in the taxpayer's trade or business, the construction, reconstruction, erection or improvement of which, in the case of industrial waste treatment facilities, is initiated on or after January first, nineteen hundred sixty-five, or which, in the case of air pollution control facilities, is initiated on or after January first, nineteen hundred sixty-six, and
(B) on condition that such facilities have been certified by the commissioner of environmental conservation or his or her designated representative, in the same manner as provided for in section 17-0707 or 19-0309 of the environmental conservation law, as applicable, as complying with the provisions of such environmental conservation law, the state sanitary code and regulations, permits or orders promulgated pursuant thereto, and
(C) on condition that for the taxable year and all succeeding taxable years, any deductions allowed for federal income tax purposes for such expenditures or for depreciation or amortization of the same property, except to the extent that its basis may be attributable to factors other than such expenditures, be added to federal adjusted gross income pursuant to paragraph five of subdivision (b) of this section, or in case a modification is allowable pursuant to this paragraph for only a part of such expenditures, on condition that a proportionate amount of any such deductions allowed for federal income tax purposes be added to federal adjusted gross income, and
(D) where the election provided for in subdivision (g) of this section has not been exercised in respect to the same property.
(3) (A) If expenditures in respect to an industrial waste treatment facility or an air pollution control facility have been allowed as a modification as provided herein and if within ten years from the end of the taxable year in which such modification was allowed such property or any part thereof is used for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable, the taxpayer shall report such change of use in its return for the first taxable year during which it occurs, and the tax commission may recompute the tax for the year or years for which such modification was allowed, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph eight of subdivision (c) of section 11-1783.
(B) If a modification is allowed as herein provided for expenditures paid or incurred during any taxable year on the basis of a temporary certificate of compliance issued pursuant to the environmental conservation law, and if the taxpayer fails to obtain a permanent certificate of compliance upon completion of the facilities with respect to which such temporary certificate was issued, the taxpayer shall report such failure in its report for the taxable year during which such facilities are completed, and the tax commission may recompute the tax for the year or years for which such modification was allowed, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph eight of subdivision (c) of section 11-1783.
(C) If a modification is allowed as herein provided for expenditures paid or incurred during any taxable year in respect to an air pollution control facility on the basis of a certificate of compliance issued pursuant to the environmental conservation law and the certificate is revoked pursuant to section 19-0309 of the environmental conservation law, the tax commission may recompute the tax for the year or years for which the facility is not or was not in compliance with the applicable provisions of the environmental conservation law, the state sanitary code or codes, rules, regulations, permits or orders issued pursuant thereto, and for which a modification was allowed, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph eight of subdivision (c) of section 11-1783.
(4) In any taxable year when property is sold or otherwise disposed of, with respect to which a modification has been allowed pursuant to this paragraph, such modification shall be disregarded in computing gain or loss, and the gain or loss on the sale or other disposition of such property shall be the gain or loss entering into the computation of federal adjusted gross income for such taxable year.
(i) In the case of mines, oil and gas wells and other natural deposits, any allowance for percentage depletion pursuant to section six hundred thirteen or section six hundred thirteen A of the internal revenue code shall be added to federal adjusted gross income. However, with respect to the property as to which such addition to federal adjusted gross income is required, an allowance for depletion shall be subtracted from federal adjusted gross income in the amount that would be deductible under section six hundred eleven of such code if the deduction for an allowance for depletion were computed without reference to such section six hundred thirteen or section six hundred thirteen A. With respect to the computation of depletion pursuant to this subdivision, the basis for such computation shall be the basis for state income tax purposes provided for in subsection (i) of section six hundred twelve of the tax law. The portion of any gain from the sale or other disposition of such property having a higher adjusted basis for city income tax purposes than for federal income tax purposes, that does not exceed such difference in basis, shall be subtracted from federal adjusted gross income.
(j) Modification for nonpublic school tuition.
(1) General. An individual shall be entitled to subtract from his or her federal adjusted gross income an amount shown in the table set forth in this paragraph for his or her city adjusted gross income for the taxable year, computed without the benefit of this modification, multiplied by the number of his or her dependents, not exceeding three, attending a nonpublic school on a full-time basis for at least four months during the regular school year for the education of such dependent in grades one through twelve, provided such individual is allowed an exemption under section 11-1716 for such dependent. Provided, further, that the modification under this paragraph may be taken only if such individual has paid at least fifty dollars for each such dependent in tuition to such nonpublic school for such education of such dependent. No taxpayer shall be entitled to the modification provided for in this paragraph if he or she claims a tuition reimbursement payment pursuant to article twelve-A of the education law.
If city adjusted gross income is: The amount allowable for each dependent is:
Less than $9,000 $1,000
9,000 - 10,999 850
11,000 - 12,999 700
13,000 - 14,999 550
15,000 - 16,999 400
17,000 - 18,999 250
19,000 - 20,999 150
21,000 - 22,999 125
23,000 - 24,999 100
25,000 and over 0
(2) Husband and wife. In determining the applicable city adjusted gross income of a husband and wife for purposes of the table set forth in paragraph one of this subdivision, the city adjusted gross income of a husband and wife shall be the aggregate of their city adjusted gross incomes for the taxable year, determined without the benefit of the modification provided for in this subdivision, and the number of dependents with respect to which this modification may be claimed shall be no more than three in the aggregate.
(3) Definitions.
(A) "Tuition," as used in this subdivision, shall mean the amount actually paid during the taxable year by the taxpayer for the enrollment of a dependent during the regular school year at a nonpublic school.
(B) "Nonpublic school," as used in this subdivision, shall mean any non-profit elementary or secondary school in the state of New York, other than a public school, which: (i) is providing instruction in accordance with article seventeen and section thirty-two hundred four of the education law, (ii) has not been found to be in violation of title VI of the civil rights act of nineteen hundred sixty-four, 78 Stat. 252, 42 U.S.C. § 2000(d) and (iii) which is entitled to a tax exemption under sections five hundred one (a) and five hundred one (c) (3) of the federal internal revenue code of nineteen hundred fifty-four, as amended. The commissioner of education shall furnish to the tax commission by February first of each year, a certified list of nonpublic schools which comply with clause (i) of this subparagraph for the preceding calendar year and shall provide such other assistance with respect to whether nonpublic schools come within clause (i) as the tax commission may require.
(C) "Regular school year," as used in this subdivision, shall mean the months of the taxable year exclusive of July and August.
(4) Additional information. Any claim for a modification under this subdivision shall be accompanied by such information as the tax commission may require.
(k) [Repealed.]
(l) [Repealed.]
(m) [Reserved.]
(n) Where gain or loss is recognized for federal income tax purposes upon the disposition of stock or indebtedness of a corporation electing under subchapter s of chapter one of the internal revenue code:
(1) There shall be added to federal adjusted gross income the amount of increase in basis with respect to such stock or indebtedness pursuant to subsection (a) of section thirteen hundred seventy-six of the internal revenue code as such section was in effect for taxable years beginning before January first, nineteen hundred eighty-three and subparagraphs (A) and (B) of paragraph one of subsection (a) of section thirteen hundred sixty-seven of such code, for each taxable year of the corporation beginning, in the case of a corporation taxable under article nine-A of the tax law, after December thirty-first, nineteen hundred eighty, and in the case of a corporation taxable under article thirty-two of the tax law, after December thirty-first, nineteen hundred ninety-six, for which the election provided for in subsection (a) of section six hundred sixty of the tax law was not in effect, and
(2) There shall be subtracted from federal adjusted gross income:
(A) the amount of reduction in basis with respect to such stock or indebtedness pursuant to subsection (b) of section thirteen hundred seventy-six of the internal revenue code as such section was in effect for taxable years beginning before January first, nineteen hundred eighty-three and subparagraphs (B) and (C) of paragraph two of subsection (a) of section thirteen hundred sixty-seven of such code, for each taxable year of the corporation beginning, in the case of a corporation taxable under article nine-A of the tax law, after December thirty-first, nineteen hundred eighty, and in the case of a corporation taxable under article thirty-two of the tax law, after December thirty-first, nineteen hundred ninety-six, for which the election provided for in subsection (a) of section six hundred sixty of the tax law was not in effect and
(B) the amount of any modifications to federal gross income with respect to such stock pursuant to paragraph twenty-one of subdivision (b) of this section.
(o) Modifications for new business investment gains and certain new business investments.
1. For purposes of this subdivision, the following definitions shall apply:
(A) "New business investment gain" means gain from the sale of a new business investment issued to the taxpayer before January first, nineteen hundred eighty-eight, if:
(i) such new business investment is, in the hands of the person selling the same (whether or not the taxpayer), a capital asset as defined in section twelve hundred twenty-one of the internal revenue code of nineteen hundred fifty-four, as amended, and
(ii) such new business investment was held by such person for the period specified in paragraph two of this subdivision.
(B) "New business" means a corporation or partnership organized or formed under the laws of any state which:
(i) adopts a plan on or after July first, nineteen hundred eighty-one and before January first, nineteen hundred eighty-eight, to conduct a new business within the meaning and intent of this section and to issue new business investments, as defined in this subdivision, and
(ii) is, at the date of adoption of such plan, subject to taxation (whether or not any amount is owing) under section one hundred eighty-three, one hundred eighty-four or one hundred eighty-six of article nine of the tax law, or under article nine-a of the tax law or article twenty-three of the tax law, or would have been subject to tax under article twenty-three of such law (as such article was in effect on January first, nineteen hundred eighty) if such article were still in effect, and the first taxable period for which such new business became subject to such taxation commenced on or after July first, nineteen hundred eighty-one and before January first, nineteen hundred eighty-eight, and such first taxable period includes the date of adoption of such plan; if not so subject to taxation, the new business must be subject to taxation under such sections or articles for the first time within one year from the date of adoption of such plan, and
(iii) is conducted (or will be conducted, as evidenced by such plan) whereby at least ninety percent of the assets (valued at original cost) are located and employed in this state and eighty percent of the employees (as ascertained within the meaning and intent of subparagraph three of paragraph (a) of subdivision three of section two hundred ten of the tax law and, in addition, in the case of a partnership, excluding partners) are principally employed in this state during each taxable period, or part thereof, as required by clause (iv) of this subparagraph, and
(iv) within ninety days after adoption of such plan, or, if a return is required, as part of such return, under such article nine, article nine-a or article twenty-three, whichever is sooner, shall file a new business certificate with the tax commission attesting to whether it meets, if subject to taxation under such articles, or intends to meet, if not so subject, all of the conditions stated in clauses (i), (ii) and (iii) of this subparagraph within the time set forth therein. Thereafter, during the first four taxable years of such new business, along with, and as part of, any return required under such articles, such new business shall make and file a new business certificate for the period covered by such return attesting to whether it has met the conditions specified in this subparagraph during the taxable period covered by such return. If no return is required under such articles, such certificate shall be filed annually on or before the fifteenth day of March which shall cover the twelve consecutive calendar month period ending on the last day of December immediately preceding such March fifteenth. If such new business fails to meet such conditions specified in this subparagraph, it shall, in addition, give notice of this fact, within the time prescribed by the tax commission, to the holders of its "new business investments." The tax commission shall prescribe the form and content of such new business certification and may require a new business to file such certificate for periods (even if no return is filed or required, but for this section) covering up to eight years from the date of adoption of such plan, as in its discretion, it deems the same necessary for the enforcement of this section, and
(v) Special rules:
(1) For any taxable period, in order to constitute a new business, a business enterprise must have derived more than sixty percent of its aggregate gross receipts from sources other than royalties, rents, dividends, interest, annuities and sales or exchanges of stock or securities.
(2) A new business does not include:
(i) any new business of which twenty-five percent or more of the number of shares of stock that entitle the holders thereof to vote for the election of directors or trustees is owned, directly or indirectly, by a taxpayer subject to tax under section one hundred eighty-three, one hundred eighty-four, former section one hundred eighty-five or former section one hundred eighty-six of article nine of the tax law, or under article nine-A, thirty-two or thirty-three of the tax law or
(ii) any new business substantially similar in operation and in ownership, directly or indirectly, to a business entity (or entities) taxable, or previously taxable, under such section, such article, article twenty-three of the tax law or which would have been subject to tax under such article twenty-three (as such article was in effect on January first, nineteen hundred eighty) or the income (or losses) of which is (or was) includible under article twenty-two of such tax law whereby the intent and purpose of this section would be evaded.
(C) "New business investment" means and includes the following investments issued before January first, nineteen hundred eighty-eight by a new business pursuant to a plan described in clause (i) of subparagraph (B) of this paragraph for money or other property (other than stock or securities) on or before the expiration of the third taxable year of such new business (excluding any short period immediately preceding such taxable year because the new business was not in existence for an entire taxable year) or forty-two months from the adoption of such plan, whichever is sooner: (i) original issuance capital stock as part of a new issue, (ii) other original issuance securities of a new issue of a like nature as stocks which are designed as a means of investment and issued for the purpose of financing corporate enterprises and providing for a distribution of rights in such enterprises, (iii) debt obligations such as bonds and debentures for a term of at least one year, whether secured or unsecured, and (iv) certificates and other instruments representing proprietary interests, whether limited or otherwise, in and assumption of general liabilities, whether limited or otherwise, of a partnership enterprise.
2. A taxpayer may subtract from his federal adjusted gross income a portion of an amount constituting a new business investment gain, as follows:
If new business investment held for: The modification is equal to the following proportion of the gain includible in federal adjusted gross income:
At least four years, but less than five years twenty-five percent
At least five years, but less than six years fifty percent
At least six years one hundred percent
3. Where, within six months of the realization of a new business investment gain allowable as the basis of a modification under paragraph two of this subdivision, such modification is equal to less than one hundred percent of the portion of the gain includible in federal adjusted gross income and the taxpayer purchases a new business investment which is then held for a period of at least six months, the taxpayer may subtract from his or her federal adjusted gross income ten percent (but not an amount that will reduce the portion of such gain included in his or her New York income below zero) of the amount of such gain where the purchase price of the new business investment is equal to or greater than the proceeds of the sale giving rise to such gain. Where the purchase price of the new business investment is less than an amount equal to the proceeds of such sale, the modification allowable under this paragraph shall be equal to ten percent of an amount equal to the product of: (A) the amount of the gain and (B) a fraction the numerator of which is the purchase price of the new investment and the denominator of which is an amount equal to the proceeds of such sale. The modification allowable under this paragraph may be utilized, at the option of the taxpayer, with respect to the taxable year in which the new business investment gain is realized or the year containing the last day of the six-month retention period described in this paragraph.
4. The tax commission may prescribe such rules and regulations as may be necessary to carry out the purposes of this subdivision.
(p) New business investment deferral. For taxable years beginning before January first, nineteen hundred eighty-eight, at the option of the taxpayer, there may be subtracted from federal adjusted gross income a reinvested amount of long-term capital gain realized in a taxable year from the sale of a capital asset, as such term is defined in section twelve hundred twenty-one of the internal revenue code, which is not a new business investment. A reinvested amount of long-term capital gain shall mean an amount which bears the same ratio to the long-term capital gain realized from the sale of a capital asset which was includible in New York adjusted gross income as that portion of the sale proceeds which is reinvested, within one year from date of sale, in a New York new business bears to the total sale proceeds. For the purposes of this subdivision, a New York new business is a business enterprise which:
(1) has been a taxpayer under article nine-A, twenty-two, thirty-two or thirty-three of the tax law for no more than three taxable years (including short taxable years),
(2) over fifty percent of the number of shares of stock that entitle the holders thereof to vote for the election of directors or trustees is not owned, directly or indirectly, by a taxpayer subject to tax under section one hundred eighty-three, one hundred eighty-four, one hundred eighty-five or one hundred eighty-six of article nine of the tax law, or under article nine-A, thirty-two or thirty-three of the tax law,
(3) is not substantially similar in operation or ownership, directly or indirectly, to a business entity (or entities) taxable, or previously taxable, under such sections, such articles, article twenty-three of the tax law or which would have been subject to tax under article twenty-three (as such article was in effect on January first, nineteen hundred eighty) or the income (or losses) of which is (or was) includible under article twenty-two of the tax law whereby the intent and purpose of this subdivision would be evaded,
(4) locates and employs at least ninety percent of its assets in the state.
(5) employs principally in the state eighty percent of its employees (as ascertained within the meaning and intent of subparagraph three of paragraph (a) of subdivision three of section two hundred ten of the tax law and, in addition, in the case of a partnership, excluding partners), and
(6) derives less than forty percent of its gross income from dividends, interest, royalties (other than mineral, oil, or gas royalties or copyright royalties), annuities and
(7) reports at least twenty-five hundred dollars in gross income in any taxable year. The reinvested amount must qualify as a capital asset as defined pursuant to section twelve hundred twenty-one of the internal revenue code and must be retained by the taxpayer for at least twelve months. The modification allowable under this subdivision shall be utilized with respect to the taxable year in which the twelve month retention period ends.
(q) An amount deferred under subdivision (p) hereof shall be added to federal adjusted gross income when the reinvestment in the New York new business which qualified a taxpayer for such deferral is sold.
(r) In the case of a sale or other disposition of property acquired from a decedent and valued by the executor of the estate of such decedent for the purposes of the tax under article twenty-six of the tax law (i) pursuant to paragraph two of subsection (b) of section nine hundred fifty-four of the tax law, or (ii) pursuant to section nine hundred fifty-four-a of the tax law, where such estate was insufficient to require the filing of a federal estate tax return, the amount necessary to properly reflect the gain or loss from such sale or other disposition which would have been realized under this chapter, had, in the case of clause (i) of this subdivision, a federal estate tax return been filed similarly valuing such property pursuant to section two thousand thirty-two of the internal revenue code, or in the case of clause (ii) of this subdivision, pursuant to section two thousand thirty-two-A of such code.
(s) New York S termination year.
(1) General. In the case of a New York S termination year, the amount of any item of S corporation income, loss and deduction included in the shareholder's federal adjusted gross income and any reductions for taxes (as described in paragraphs two and three of subsection (f) of section thirteen hundred sixty-six of the internal revenue code) shall be adjusted in accordance with the treatment provided in paragraph two or three of this subdivision.
(2) Pro rata allocation. Unless paragraph three of this subdivision applies, an equal portion of each S corporation item shall be assigned to each day of the S corporation's taxable year for federal income tax purposes. The portion of each such item thereby assigned to the S short year shall be treated as an item of a New York S corporation, and the portion of each such item thereby assigned to the C short year shall be treated as an item of an S corporation which is a New York C corporation.
(3) Normal tax accounting. The portion of each S corporation item assigned to the S short year and the C short year shall be determined using normal tax accounting rules if:
(A) there is a sale or exchange of fifty percent or more of the stock in such corporation during the New York S termination year or
(B) the corporation so elects, as provided in subparagraph (B) of paragraph two of subsection (s) of section six hundred twelve of the tax law.
(t) 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 city, the maximum statutory rate of tax imposed by the city 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 city is zero where the related member's net income tax liability in said city 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 city 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 city, the maximum statutory rate of tax imposed by said city 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 state commissioner of taxation and finance, and include amounts allowable as interest deductions under section one hundred sixty-three of the internal revenue code to the extent such amounts are directly or indirectly for, related to or in connection with the acquisition, use, maintenance or management, ownership, sale, exchange or disposition of such intangible assets.
(D) Valid business purpose. A valid business purpose is one or more business purposes, other than the avoidance or reduction of taxation, which alone or in combination constitute the primary motivation for some business activity or transaction, which activity or transaction changes in a meaningful way, apart from tax effects, the economic position of the taxpayer. The economic position of the taxpayer includes an increase in the market share of the taxpayer, or the entry by the taxpayer into new business markets.
(2) Royalty expense add backs.
(A) For the purpose of computing city adjusted gross income, a taxpayer must add back royalty payments directly or indirectly paid, accrued, or incurred in connection with one or more direct or indirect transactions with one or more related members during the taxable year to the extent deductible in calculating federal taxable income.
(B) Exceptions.
(i) The adjustment required in this subdivision 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 of finance, meets all of the following requirements:
(I) the related member was subject to tax in this city or another city within 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 subdivision shall not apply if the taxpayer establishes, by clear and convincing evidence of the type and in the form specified by the commissioner of finance, that:
(I) the related member was subject to tax on or measured by its net income in this city or another city within 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 11-1701 of this chapter for the taxable year.
(iii) The adjustment required in this subdivision shall not apply if the taxpayer establishes, by clear and convincing evidence of the type and in the form specified by the commissioner of finance, 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 city; 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 subdivision shall not apply if the taxpayer and the commissioner of finance agree in writing to the application or use of alternative adjustments or computations. The commissioner of finance 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.
(u) Alimony modifications.
(1) In the case of applicable alimony or separate maintenance payments, the following modifications shall apply:
(A) There shall be subtracted from federal adjusted gross income any applicable alimony or separate maintenance payments made by the taxpayer during the taxable year.
(B) There shall be added to federal adjusted gross income any applicable alimony or separate maintenance payments received by the taxpayer during the taxable year.
(2) (A) The term "alimony or separate maintenance payments" means payments as defined under section seventy-one of the internal revenue code in effect immediately prior to the enactment of Public Law 115-97.
(B) The term "applicable alimony or separate maintenance payments" means payments made under an alimony or separation instrument (as defined in section seventy-one of the internal revenue code in effect immediately prior to the enactment of Public Law 115-97) that was executed after December thirty-first, two thousand eighteen, and any divorce or separation instrument executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.
(v) Qualified moving expense reimbursement and moving expenses.
(1) In the case of applicable qualified moving expense reimbursement and moving expenses, the following modifications shall apply:
(A) There shall be subtracted from federal adjusted gross income any applicable qualified moving expense reimbursement received by the taxpayer during the taxable year.
(B) There shall be subtracted from federal adjusted gross income any applicable moving expenses paid by the taxpayer during the taxable year.
(2) Applicable qualified moving expense reimbursement and moving expenses are those deductions as allowed by paragraph (g) of section one hundred thirty-two and section two hundred seventeen, respectfully, of the internal revenue code immediately prior to the enactment of Public Law 115-97.
(Am. 2018 N.Y. Laws Ch. 59, 4/12/2018, eff. 4/12/2018; Am. 2021 N.Y. Laws Ch. 59, 4/19/2021, eff. 4/19/2021; Am. 2022 N.Y. Laws Ch. 59, 4/9/2022, eff. 4/9/2022)
Editor's note: For related unconsolidated provisions, see Appendix A at L.L. 1987/037.
