1. (a) The term "corporation" includes (1) an association within the meaning of paragraph three of subsection (a) of section seventy-seven hundred one of the internal revenue code (including, when applicable, a limited liability company), (2) a joint-stock company or association, (3) a publicly traded partnership treated as a corporation for purposes of the internal revenue code pursuant to section seventy-seven hundred four thereof and (4) any business conducted by a trustee or trustees wherein interest or ownership is evidenced by certificate or other written instrument;
(b) (1) Notwithstanding paragraph (a) of this subdivision, an unincorporated organization that (i) is described in subparagraph one or three of paragraph (a) of this subdivision, (ii) was subject to the provisions of chapter five of this title for its taxable year beginning in nineteen hundred ninety-five, and (iii) made a one-time election not to be treated as a corporation and, instead, to continue to be subject to the provisions of chapter five of this title for its taxable years beginning in nineteen hundred ninety-six and thereafter, shall continue to be subject to the provisions of chapter five of this title for its taxable years beginning in nineteen hundred ninety-six.
(2) An election under this paragraph shall continue to be in effect until revoked by the unincorporated organization. An election under this paragraph shall be revoked by the filing of a return under this subchapter for the first taxable year with respect to which such revocation is to be effective. Such return shall be filed on or before the due date (determined with regard to extensions) for filing such return. In no event shall such election or revocation be for a part of a taxable year.
(c) Notwithstanding paragraph (a) of this subdivision, a corporation shall not include an entity classified as a partnership for federal income tax purposes.
2. The term "subsidiary" means a corporation of which over fifty per centum of the number of shares of stock entitling the holders thereof to vote for the election of directors or trustees is owned by the taxpayer.
2-a The term "taxpayer" means any corporation subject to tax under this subchapter.
3. Intentionally omitted.
3-a. The term "stock" means an interest in a corporation that is treated as equity for federal income tax purposes.
4. (a) The term "investment capital" means investments in stocks that: (i) satisfy the definition of a capital asset under section 1221 of the internal revenue code at all times the taxpayer owned such stocks during the taxable year; (ii) are held by the taxpayer for investment for more than one year; (iii) the dispositions of which are, or would be, treated by the taxpayer as generating long-term capital gains or losses under the internal revenue code; (iv) for stocks acquired on or after January first, two thousand fifteen, at any time after the close of the day in which they are acquired, have never been held for sale to customers in the regular course of business; and (v) before the close of the day on which the stock was acquired, are clearly identified in the taxpayer's records as stock held for investment in the same manner as required under section 1236(a)(1) of the internal revenue code for the stock of a dealer in securities to be eligible for capital gain treatment (whether or not the taxpayer is a dealer of securities subject to section 1236), provided, however, that for stock acquired prior to October first, two thousand fifteen that was not subject to section 1236(a) of the internal revenue code, such identification in the taxpayer's records must occur before October first, two thousand fifteen. Stock in a corporation that is conducting a unitary business with the taxpayer, stock in a corporation that is included in a combined report with the taxpayer pursuant to the commonly owned group election in subdivision three of section 11-654.3 of this subchapter, and stock issued by the taxpayer shall not constitute investment capital. For purposes of this subdivision, if the taxpayer owns or controls, directly or indirectly, less than twenty percent of the voting power of the stock of a corporation, that corporation will be presumed to be conducting a business that is not unitary with the business of the taxpayer.
(b) There shall be deducted from investment capital any liabilities which are directly or indirectly attributable to investment capital. If the amount of those liabilities exceeds the amount of investment capital, the amount of investment capital shall be zero.
(c) Investment capital shall not include any such investments the income from which is excluded from entire net income pursuant to the provisions of paragraph (c-1) of subdivision eight of this section, and that investment capital shall be computed without regard to liabilities directly or indirectly attributable to such investments, but only if air carriers organized in the United States and operating in the foreign country or countries in which the taxpayer has its major base of operations and in which it is organized, resident or headquartered (if not in the same country as its major base of operations) are not subject to any tax based on or measured by capital imposed by such foreign country or countries or any political subdivision thereof, or if taxed, are provided an exemption, equivalent to that provided for herein, from any tax based on or measured by capital imposed by such foreign country or countries and from any such tax imposed by any political subdivision thereof.
(d) If a taxpayer acquires stock that is a capital asset under section 1221 of the internal revenue code during the taxable year and owns that stock on the last day of the taxable year, it will be presumed, solely for the purposes of determining whether that stock should be classified as investment capital after it is acquired, that the taxpayer held that stock for more than one year. However, if the taxpayer does not in fact own that stock at the time it actually files its original report for the taxable year in which it acquired the stock, then the presumption in the preceding sentence shall not apply and the actual period of time during which the taxpayer owned the stock shall be used to determine whether the stock should be classified as investment capital after it is acquired. If the taxpayer relies on the presumption in the first sentence of this paragraph but does not own the stock for more than one year, the taxpayer must increase its total business capital in the immediately succeeding taxable year by the amount included in investment capital for that stock, net of any liabilities attributable to that stock computed as provided in paragraph (b) of this subdivision and must increase its business income in the immediately succeeding taxable year by the amount of income and net gains (but not less than zero) from that stock included in investment income, less any interest deductions directly or indirectly attributable to that stock, as provided in subdivision five of this section.
(e) When income or gain from a debt obligation or other security cannot be allocated to the city using the business allocation percentage as a result of the United States constitutional principles, the debt obligation or other security will be included in investment capital.
5. (a) (i) The term "investment income" means income, including capital gains in excess of capital losses, from investment capital, to the extent included in computing entire net income, less, in the discretion of the commissioner of finance, any interest deductions allowable in computing entire net income which are directly or indirectly attributable to investment capital or investment income, provided, however, that in no case shall investment income exceed entire net income.
(ii) If the amount of interest deductions subtracted under subparagraph (i) of this paragraph exceeds investment income, the excess of such amount over investment income must be added back to entire net income.
(iii) If the taxpayer's investment income determined without regard to the interest deductions subtracted under subparagraph (i) of this paragraph comprises more than eight percent of the taxpayer's entire net income, investment income determined without regard to such interest deductions cannot exceed eight percent of the taxpayer's entire net income.
(b) In lieu of subtracting from investment income the amount of those interest deductions, the taxpayer may make a revocable election to reduce its total investment income, determined after applying the limitation in subparagraph (iii) of paragraph (a) of this subdivision, by forty percent. If the taxpayer makes this election, the taxpayer must also make the elections provided for in paragraphs (b) and (c) of subdivision five-a of this section. If the taxpayer subsequently revokes this election, the taxpayer must revoke the elections provided for in paragraphs (b) and (c) of subdivision five-a of this section. A taxpayer that does not make this election because it has no investment capital will not be precluded from making those other elections.
(c) Investment income shall not include any amount treated as dividends pursuant to section seventy-eight of the internal revenue code.
5-a. (a) The term "other exempt income" means the sum of exempt CFC income and exempt unitary corporation dividends.
(b) "Exempt CFC income" means (i) except to the extent described in subparagraph (ii) of this paragraph, the income required to be included in the taxpayer's federal gross income pursuant to subsection (a) of section 951 of the internal revenue code, received from a corporation that is conducting a unitary business with the taxpayer but is not included in a combined report with the taxpayer, and (ii) such income required to be included in the taxpayer's federal gross income pursuant to subsection (a) of such section 951 of the internal revenue code by reason of subsection (a) of section 965 of the internal revenue code, as adjusted by subsection (b) of section 965 of the internal revenue code, and without regard to subsection (c) of such section, received from a corporation that is not included in a combined report with the taxpayer, less, (iii) in the discretion of the commissioner of finance, any interest deductions directly or indirectly attributable to that income. In lieu of subtracting from its exempt CFC income the amount of those interest deductions, the taxpayer may make a revocable election to reduce its total exempt CFC income by forty percent. If the taxpayer makes this election, the taxpayer must also make the elections provided for in paragraph (b) of subdivision five of this section and paragraph (c) of this subdivision. If the taxpayer subsequently revokes this election, the taxpayer must revoke the elections provided for in paragraph (b) of subdivision five of this section and paragraph (c) of this subdivision. A taxpayer which does not make this election because it has no exempt CFC income will not be precluded from making those other elections. The income described in subparagraph (ii) of this paragraph shall not constitute investment income.
(c) "Exempt unitary corporate dividends" means those dividends from a corporation that is conducting a unitary business with the taxpayer but is not included in a combined report with the taxpayer, less, in the discretion of the commissioner of finance, any interest deductions directly or indirectly attributable to such income. Other than dividend income received from corporations that are taxable under chapter eleven of this title (except for vendors of utility services that are also taxable under this subchapter) or would be taxable under chapter eleven of this title (except for vendors of utility services that are also taxable under this subchapter) if subject to tax and corporations that would have been taxable as insurance corporations under former part IV, title R, chapter forty-six of the administrative code of the city of New York as in effect on June thirtieth, nineteen hundred seventy-four, in lieu of subtracting from this dividend income those interest deductions, the taxpayer may make a revocable election to reduce the total amount of this dividend income by forty percent. If the taxpayer makes this election, the taxpayer must also make the elections provided for in paragraph (b) of subdivision five of this section and paragraph (b) of this subdivision. If the taxpayer subsequently revokes this election, the taxpayer must revoke the elections provided for in paragraph (b) of subdivision five of this section and paragraph (b) of this subdivision. A taxpayer that does not make this election because it has not received any exempt unitary corporation dividends or is precluded from making this election for dividends received from corporations that are taxable under chapter eleven of this title (except for vendors of utility services that are also taxable under this subchapter) or would be taxable under chapter eleven of this title if subject to tax (except for vendors of utility services that are also taxable under this subchapter) shall not be precluded from making those other elections.
(d) If the taxpayer attributes interest deductions to other exempt income and the amount deducted exceeds other exempt income, the excess of the interest deductions over other exempt income must be added back to entire net income. In no case shall other exempt income exceed entire net income.
(e) Other exempt income shall not include any amount treated as dividends pursuant to section seventy-eight of the internal revenue code.
6. (a) The term "business capital" means all assets, other than investment capital and stock issued by the taxpayer, less liabilities not deducted from investment capital; provided, however, business capital shall include only those assets the income, loss or expense of which are properly reflected (or would have been properly reflected if not fully depreciated or expensed or depreciated or expensed to a nominal amount) in the computation of entire net income for the taxable year.
(b) Provided, further, "business capital" shall not include assets to the extent employed for the purpose of generating income which is excluded from entire net income pursuant to the provisions of paragraph (c-1) of subdivision eight of this section and shall be computed without regard to liabilities directly or indirectly attributable to such assets, but only if air carriers organized in the United States and operating in the foreign country or countries in which the taxpayer has its major base of operations and in which it is organized, resident or headquartered (if not in the same country as its major base of operations) are not subject to any tax based on or measured by capital imposed by such foreign country or countries or any political subdivision thereof, or if taxed, are provided an exemption, equivalent to that provided for herein, from any tax based on or measured by capital imposed by such foreign country or countries and from any such tax imposed by any political subdivision thereof.
7. The term "business income" means entire net income minus investment income and other exempt income. In no event shall the sum of investment income and other exempt income exceed entire net income. If the taxpayer makes the election provided for in subparagraph one of paragraph (a) of subdivision five of section 11-654.2 of this subchapter, then all income from qualified financial instruments shall constitute business income.
8. The term "entire net income" means total net income from all sources, which shall be presumably the same as the entire taxable income, which, except as hereafter provided in this subdivision, (i) the taxpayer is required to report to the United States treasury department, or (ii) the taxpayer, in the case of a corporation that is exempt from federal income tax (other than the tax on unrelated business taxable income imposed under section five hundred eleven of the internal revenue code) but which is subject to tax under this subchapter, would have been required to report to the United States treasury department but for such exemption, or (iii) in the case of an alien corporation that under any provision of the internal revenue code is not treated as a "domestic corporation" as defined in section seven thousand seven hundred one of such code, is effectively connected with the conduct of a trade or business within the United States as determined under section eight hundred eighty-two of the internal revenue code.
(a) Entire net income shall not include:
(1) Intentionally omitted;
(2) Intentionally omitted;
(2-a) any amounts treated as dividends pursuant to section seventyeight of the internal revenue code;
(3) bona fide gifts;
(4) income and deductions with respect to amounts received from school districts and from corporations and associations, organized and operated exclusively for religious, charitable or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual, for the operation of school buses;
(5) any refund or credit of a tax imposed under this chapter, or imposed by article nine, nine-A, twenty-three, or former article thirty-two of the tax law, for which tax no exclusion or deduction was allowed in determining the taxpayer's entire net income under this subchapter, subchapter two, or subchapter three of this chapter for any prior year;
(6) Intentionally omitted;
(7) that portion of wages and salaries paid or incurred for the taxable year for which a deduction is not allowed pursuant to the provisions of section two hundred eighty C of the internal revenue code;
(8) except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles) and property of a taxpayer principally engaged in the conduct of an aviation, steamboat, ferry or navigation business, or two or more of such businesses, which is placed in service before taxable years beginning in nineteen hundred eighty-nine, any amount which is included in the taxpayer's federal taxable income solely as a result of an election made pursuant to the provisions of such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four;
(9) except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles) and property of a taxpayer principally engaged in the conduct of an aviation, steamboat, ferry or navigation business, or two or more of such businesses, which is placed in service before taxable years beginning in nineteen hundred eighty-nine, any amount which the taxpayer could have excluded from federal taxable income had it not made the election provided for in such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four;
(10) the amount deductible pursuant to paragraph (j) of this subdivision;
(11) upon the disposition of property to which paragraph (j) of this subdivision applies, the amount, if any, by which the aggregate of the amounts described in subparagraph eleven of paragraph (b) of this subdivision attributable to such property exceeds the aggregate of the amounts described in paragraph (j) of this subdivision attributable to such property;
(12) the amount deductible pursuant to paragraph (k) of this subdivision;
(13) the amount deductible pursuant to paragraph (o) of this subdivision;
(14) the amount computed pursuant to paragraph (q), (r) or (s) of this subdivision, but only the amount determined pursuant to one of such paragraphs; and
(15) the amount computed pursuant to paragraph (t) of this subdivision.
(17) the amount of any grant received through either the COVID-19 pandemic small business recovery grant program, pursuant to section sixteen-ff of the New York state urban development corporation act, or the small business resilience grant program administered by the department of small business services, to the extent the amount of either such grant is included in federal taxable income.
(18) for taxpayers authorized pursuant to the cannabis law to engage in the sale, production, or distribution of (i) adult-use cannabis products, as defined in article twenty-six-C of the tax law, or (ii) medical cannabis, as defined in section three of the cannabis law, the amount of any federal deduction disallowed pursuant to section two hundred eighty-E of the internal revenue code related to the sale, production, or distribution of such adult-use cannabis products or such medical cannabis not used as the basis for any other tax deduction, exemption, or credit and not otherwise required to be added back by paragraph (b) of this subdivision in computing entire net income.
(a-1) Notwithstanding any other provision of this subchapter, in the case of a taxpayer that is a partner in a partnership subject to the tax imposed by chapter eleven of this title as a utility, as defined in subdivision six of section 11-1101 of such chapter, entire net income shall not include the taxpayer's distributive or pro rata share for federal income tax purposes of any item of income, gain, loss or deduction of such partnership, or any item of income, gain, loss or deduction of such partnership that the taxpayer is required to take into account separately for federal income tax purposes.
(b) Entire net income shall be determined without the exclusion, deduction or credit of:
(1) in the case of an alien corporation that under any provision of the internal revenue code is not treated as a "domestic corporation" as defined in section seven thousand seven hundred one of such code, (i) any part of any income from dividends or interest on any kind of stock, securities or indebtedness, but only if such income is treated as effectively connected with the conduct of a trade or business in the United States pursuant to section eight hundred sixty-four of the internal revenue code, (ii) any income exempt from federal taxable income under any treaty obligation of the United States, but only if such income would be treated as effectively connected in the absence of such exemption provided that such treaty obligation does not preclude the taxation of such income by a state, or (iii) any income which would be treated as effectively connected if such income were not excluded from gross income pursuant to subsection (a) of section one hundred three of the internal revenue code;
(2) any part of any income from dividends or interest of any kind of stock, securities, or indebtedness;
(2-a) any amounts treated as dividends pursuant to section seventy-eight of the internal revenue code to the extent such dividends are not deducted under section 250 of such code;
(3) taxes on or measured by profits or income paid or accrued to the United States, any of its possessions, territories or commonwealths, including taxes in lieu of any of the foregoing taxes otherwise generally imposed by any possession, territory or commonwealth of the United States, or taxes on or measured by profits or income paid or accrued to the state or any subdivision thereof, including taxes paid or accrued under article nine, nine-A, thirteen-A, twenty-four-A, twenty-four-B of the tax law or under article thirty-two of the tax law as in effect on December thirty-first, two thousand fourteen;
(3-a) taxes on or measured by profits or income, or which include profits or income as a measure, paid or accrued to any other state of the United States, or any political subdivision thereof, or to the District of Columbia, including taxes expressly in lieu of any of the foregoing taxes otherwise generally imposed by any other state of the United States, or any political subdivision thereof, or the District of Columbia;
(4) taxes imposed under this chapter;
(4-a) Intentionally omitted;
(4-b) the amount allowed as an exclusion or a deduction imposed by the tax law in determining the entire taxable income for a relocation described in subdivision thirteen of section 11-654 of this subchapter which the taxpayer is required to report to the United States treasury department but only such portion of such exclusion or deduction which is not in excess of the amount of the credit allowed pursuant to subdivision thirteen of section 11-654 of this subchapter;
(4-c) the amount allowed as an exclusion or a deduction imposed by the tax law for a relocation described in subdivision fourteen of section 11-654 of this subchapter in determining the entire taxable income which the taxpayer is required to report to the United States treasury department but only such portion of such exclusion or deduction which is not in excess of the amount of the credit allowed pursuant to subdivision fourteen of section 11-654 of this subchapter;
(4-d) Intentionally omitted;
(4-e) Intentionally omitted;
(5) Intentionally omitted;
(6) any amount allowed as a deduction for the taxable year under section one hundred seventy-two of the internal revenue code, including carryovers of deductions from prior taxable years;
(7) any amount by reason of the granting, issuing or assuming of a restricted stock option, as defined in the internal revenue code of nineteen hundred fifty-four, or by reason of the transfer of the share of stock upon the exercise of the option, unless such share is disposed of by the grantee of the option within two years from the date of the granting of the option or within six months after the transfer of such share to the grantee;
(8) Intentionally omitted;
(9) except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles) and property of a taxpayer principally engaged in the conduct of an aviation, steamboat, ferry or navigation business, or two or more of such businesses, which is placed in service before taxable years beginning in nineteen hundred eighty-nine, any amount which the taxpayer claimed as a deduction in computing its federal taxable income solely as a result of an election made pursuant to the provisions of such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four;
(10) except with respect to property which is a qualified mass commuting vehicle described in subparagraph (D) of paragraph eight of subsection (f) of section one hundred sixty-eight of the internal revenue code (relating to qualified mass commuting vehicles) and property of a taxpayer principally engaged in the conduct of an aviation, steamboat, ferry or navigation business, or two or more of such businesses, which is placed in service before taxable years beginning in nineteen hundred eighty-nine, any amount which the taxpayer would have been required to include in the computation of its federal taxable income had it not made the election permitted pursuant to such paragraph eight as it was in effect for agreements entered into prior to January first, nineteen hundred eighty-four; (11) in the case of property placed in service in taxable years beginning before nineteen hundred ninety-four, for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property subject to the provisions of section two hundred eighty F of the internal revenue code, property subject to the provisions of section one hundred sixty-eight of the internal revenue code which is placed in service in this state in taxable years beginning after December thirty-first, nineteen hundred eighty-four and property of a taxpayer principally engaged in the conduct of an aviation, steamboat, ferry or navigation business, or two or more of such businesses, which is placed in service before taxable years beginning in nineteen hundred eighty-nine, the amount allowable as a deduction determined under section one hundred sixty-eight of the internal revenue code;
(12) upon the disposition of property to which paragraph (j) of this subdivision applies, the amount, if any, by which the aggregate of the amounts described in such paragraph (j) attributable to such property exceeds the aggregate of the amounts described in subparagraph eleven of this paragraph attributable to such property;
(13) Intentionally omitted;
(14) Intentionally omitted;
(15) Intentionally omitted;
(16) in the case of qualified property described in paragraph two of subsection (k) of section one hundred sixty-eight of the internal revenue code, other than qualified resurgence zone property described in paragraph (m) of this subdivision, and other than qualified New York Liberty Zone property described in paragraph two of subsection (b) of section fourteen hundred L of the internal revenue code (without regard to clause (i) of subparagraph (C) of such paragraph), the amount allowable as a deduction under section one hundred sixty-seven of the internal revenue code;
(17) in the case of a taxpayer that is not an eligible farmer as defined in subsection (n) of section six hundred six of the tax law, the amount allowable as a deduction under sections one hundred seventy-nine, one hundred sixty-seven and one hundred sixty-eight of the internal revenue code with respect to a sport utility vehicle that is not a passenger automobile as defined in paragraph five of subsection (d) of section two hundred eighty F of the internal revenue code;
(18) the amount of any deduction allowed pursuant to section one hundred ninety-nine of the internal revenue code;
(19) the amount of any federal deduction for taxes imposed under article twenty-three of the tax law;
(20) the amount of any federal deduction allowed pursuant to subsection (c) of section 965 of the internal revenue code;
(21) the amount of any federal deduction allowed pursuant to section 250(a)(1)(A) of the internal revenue code.
(22) For taxable years beginning in two thousand nineteen and two thousand twenty, the amount of the increase in the federal interest deduction allowed pursuant to section 163(j)(10) of the internal revenue code.
(c) Intentionally omitted.
(c-1) (1) Notwithstanding any other provision of this subchapter, in the case of a taxpayer which is a foreign air carrier holding a foreign air carrier permit issued by the United States department of transportation pursuant to section four hundred two of the federal aviation act of nineteen hundred fifty-eight, as amended, and which is qualified under subparagraph two of this paragraph, entire net income shall not include, and shall be computed without the deduction of, amounts directly or indirectly attributable to, (i) any income derived from the international operation of aircraft as described in and subject to the provisions of section eight hundred eighty-three of the internal revenue code, (ii) income without the United States which is derived from the operation of aircraft, and (iii) income without the United States which is of a type described in subdivision (a) of section eight hundred eighty-one of the internal revenue code except that it is derived from sources without the United States. Entire net income shall include income described in clauses (i), (ii) and (iii) of this subparagraph in the case of taxpayers not described in the previous sentence;
(2) A taxpayer is qualified under this subparagraph if air carriers organized in the United States and operating in the foreign country or countries in which the taxpayer has its major base of operations and in which it is organized, resident or headquartered (if not in the same country as its major base of operations) are not subject to any income tax or other tax based on or measured by income or receipts imposed by such foreign country or countries or any political subdivision thereof, or if so subject to such tax, are provided an exemption from such tax equivalent to that provided for herein.
(d) The commissioner of finance may, whenever necessary in order properly to reflect the entire net income of any taxpayer, determine the year or period in which any item of income or deduction shall be included, without regard to the method of accounting employed by the taxpayer.
(e) The entire net income of any bridge commission created by act of congress to construct a bridge across an international boundary means its gross income less the expense of maintaining and operating its properties, the annual interest upon its bonds and other obligations, and the annual charge for the retirement of such bonds or obligations at maturity.
(f) Intentionally omitted.
(g) At the election of the taxpayer, a deduction shall be allowed for 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) (i) 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.
(ii) 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) However, such deduction shall be allowed only
(i) with respect to tangible property which is depreciable, pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in the city 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-six, and only for expenditures paid or incurred prior to January first, nineteen hundred seventy-two, or which, in the case of air pollution control facilities, is initiated on or after January first, nineteen hundred sixty-six, and
(ii) on condition that such facilities have been certified by the state commissioner of environmental conservation or the state commissioner's 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 applicable provisions of the environmental conservation law, the state sanitary code and regulations, permits or orders issued pursuant thereto, and
(iii) on condition that entire net income for the taxable year and all succeeding taxable years be computed without any deductions for such expenditures or for depreciation of the same property other than the deductions allowed by this paragraph except to the extent that the basis of the property may be attributable to factors other than such expenditures, or in case a deduction is allowable pursuant to this paragraph for only a part of such expenditures, on condition that any deduction allowed for federal income tax purposes for such expenditures or for depreciation of the same property be proportionately reduced in computing entire net income for the taxable year and all succeeding taxable years, and
(3) (i) If expenditures in respect to an industrial waste treatment facility or an air pollution control facility have been deducted as provided herein and if within ten years from the end of the taxable year in which such deduction 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 report for the first taxable year during which it occurs, and the commissioner of finance may recompute the tax for the year or years for which such deduction was allowed and any carryback or carryover year, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph (h) of subdivision three of section 11-674 of this chapter.
(ii) If a deduction 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 commissioner of finance may recompute the tax for the year or years for which such deduction was allowed and any carryback or carryover year, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph (h) of subdivision three of section 11-674 of this chapter.
(4) In any taxable year when property is sold or otherwise disposed of, with respect to which a deduction has been allowed pursuant to this paragraph, such deduction 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 entire taxable income which the taxpayer is required to report to the United States treasury for such taxable year;
(h) With respect to gain derived from the sale or other disposition of any property acquired prior to January first, nineteen hundred sixtysix; which had a federal adjusted basis on such date (or on the date of its sale or other disposition prior to January first, nineteen hundred sixty-six) lower than its fair market value on January first, nineteen hundred sixty-six or the date of its sale or other disposition prior thereto, except property described in subsections one and four of section twelve hundred twenty-one of the internal revenue code, there shall be deducted from entire net income, the difference between (1) the amount of the taxpayer's federal taxable income, and (2) the amount of the taxpayer's federal taxable income (if smaller than the amount described in subparagraph one of this paragraph) computed as if the federal adjusted basis of each such property (on the sale or other disposition of which gain was derived) on the date of the sale or other disposition had been equal to either (i) its fair market value on January first, nineteen hundred sixty-six or the date of its sale or other disposition prior to January first, nineteen hundred sixty-six, plus or minus all adjustments to basis made with respect to such property for federal income tax purposes for periods on and after January first, nineteen hundred sixty-six or (ii) the amount realized from its sale or disposition, whichever is lower; provided, however, that the total modification provided by this paragraph shall not exceed the amount of the taxpayer's net gain from the sale or other disposition of all such property.
(i) If the period covered by a report under this subchapter is other than the period covered by the report of the United States treasury department, entire net income shall be determined by multiplying the federal taxable income (as adjusted pursuant to the provisions of this subchapter) by the number of calendar months or major parts thereof covered by the report under this subchapter and dividing by the number of calendar months or major parts thereof covered by the report to such department. If it shall appear that such method of determining entire net income does not properly reflect the taxpayer's income during the period covered by the report under this subchapter, the commissioner of finance shall be authorized in his or her discretion to determine such entire net income solely on the basis of the taxpayer's income during the period covered by its report under this subchapter.
(j) In the case of property placed in service in taxable years beginning before nineteen hundred ninety-four, for taxable years beginning after December thirty-first, nineteen hundred eighty-one, except with respect to property subject to the provisions of section two hundred eighty F of the internal revenue code and property subject to the provisions of section one hundred sixty-eight of the internal revenue code which is placed in service in this state in taxable years beginning after December thirty-first, nineteen hundred eighty-four, and provided a deduction has not been excluded from entire net income pursuant to subparagraph nine of paragraph (b) of this subdivision, a taxpayer shall be allowed with respect to property which is subject to the provisions of section one hundred sixty-eight of the internal revenue code the depreciation deduction allowable under section one hundred sixty-seven of the internal revenue code as such section would have applied to property placed in service on December thirty-first, nineteen hundred eighty. This paragraph shall not apply to property of a taxpayer principally engaged in the conduct of an aviation, steamboat, ferry or navigation business, or two or more of such businesses, which is placed in service before taxable years beginning in nineteen hundred eighty-nine.
(k) In the case of qualified property described in paragraph two of subsection (k) of section one hundred sixty-eight of the internal revenue code, other than qualified resurgence zone property described in paragraph (m) of this subdivision, and other than qualified New York Liberty Zone property described in paragraph two of subsection (b) of section fourteen hundred L of the internal revenue code (without regard to clause (i) of subparagraph (C) of such paragraph), the depreciation deduction allowable under section one hundred sixty-seven as such section would have applied to such property had it been acquired by the taxpayer on September tenth, two thousand one, provided, however, that for taxable years beginning on or after January first, two thousand four, in the case of a passenger motor vehicle or a sport utility vehicle subject to the provisions of paragraph (o) of this subdivision, the limitation under clause (i) of subparagraph (A) of paragraph one of subdivision (a) of section two hundred eighty F of the internal revenue code applicable to the amount allowed as a deduction under this paragraph shall be determined as of the date such vehicle was placed in service and not as of September tenth, two thousand one.
(l) Upon the disposition of property to which paragraph (k) of this subdivision applies, the amount of any gain or loss includible in entire net income shall be adjusted to reflect the inclusions and exclusions from entire net income pursuant to subparagraph twelve of paragraph (a) and subparagraph sixteen of paragraph (b) of this subdivision attributable to such property.
(m) For purposes of this paragraph and paragraph (l) of this subdivision, qualified resurgence zone property shall mean qualified property described in paragraph two of subsection (k) of section one hundred sixty-eight of the internal revenue code substantially all of the use of which is in the resurgence zone, as defined below, and is in the active conduct of a trade or business by the taxpayer in such zone, and the original use of which in the resurgence zone commences with the taxpayer after September tenth, two thousand one. The resurgence zone shall mean the area of New York county bounded on the south by a line running from the intersection of the Hudson River with the Holland Tunnel, and running thence east to Canal Street, then running along the centerline of Canal Street to the intersection of the Bowery and Canal Street, running thence in a southeasterly direction diagonally across Manhattan Bridge Plaza, to the Manhattan Bridge, and thence along the centerline of the Manhattan Bridge to the point where the centerline of the Manhattan Bridge would intersect with the easterly bank of the East River, and bounded on the north by a line running from the intersection of the Hudson River with the Holland Tunnel and running thence north along West Avenue to the intersection of Clarkson Street then running east along the centerline of Clarkson Street to the intersection of Washington Avenue, then running south along the centerline of Washington Avenue to the intersection of West Houston Street, then east along the centerline of West Houston Street, then at the intersection of the Avenue of the Americas continuing east along the centerline of East Houston Street to the easterly bank of the East River.
(n) Related members expense add back.
(1) For purposes of this paragraph:
(i) "Related member" means a related person as defined in subparagraph (c) of paragraph three of subsection (b) of section four hundred sixty-five of the internal revenue code, except that "fifty percent" shall be substituted for "ten percent".
(ii) "Effective rate of tax" 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 allocation 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.
(iii) Royalty payments are payments directly connected to the acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of licenses, trademarks, copyrights, trade names, trade dress, service marks, mask works, trade secrets, patents and any other similar types of intangible assets as determined by the commissioner of 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.
(iv) 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.
(i) Except where a taxpayer is included in a combined report pursuant to section 11-654.3 of this subchapter with the applicable related member, for the purpose of computing entire net income or other applicable taxable basis, a taxpayer must add back royalty payments directly or indirectly paid, accrued, or incurred in connection with one or more direct or indirect transactions with one or more related members during the taxable year to the extent deductible in calculating federal taxable income.
(ii) Exceptions.
(A) The adjustment required in this paragraph shall not apply to the portion of the royalty payment that the taxpayer establishes, by clear and convincing evidence of the type and in the form specified by the commissioner 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.
(B) The adjustment required in this paragraph shall not apply if the taxpayer establishes, by clear and convincing evidence of the type and in the form specified by the commissioner 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 11-604 of this chapter for the taxable year.
(C) The adjustment required in this paragraph shall not apply if the taxpayer establishes, by clear and convincing evidence of the type and in the form specified by the commissioner 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.
(D) The adjustment required in this paragraph 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.
(o) In the case of a taxpayer that is not an eligible farmer as defined in subsection (n) of section six hundred six of the tax law, the deductions allowable under sections one hundred seventy-nine, one hundred sixty-seven and one hundred sixty-eight of the internal revenue code with respect to a sport utility vehicle that is not a passenger automobile as defined in paragraph five of subsection (d) of section two hundred eighty F of the internal revenue code, determined as if such sport utility vehicle were a passenger automobile as defined in such paragraph five. For purposes of subparagraph sixteen of paragraph (b) and paragraph (k) of this subdivision, the terms qualified resurgence zone property and qualified New York Liberty Zone property described in paragraph two of subsection b of section fourteen hundred L of the internal revenue code shall not include any sport utility vehicle that is not a passenger automobile as defined in paragraph five of subsection (d) of section two hundred eighty F of the internal revenue code.
(p) Upon the disposition of property to which paragraph (o) of this subdivision applies, the amount of any gain or loss includible in entire net income shall be adjusted to reflect the inclusions and exclusions from entire net income pursuant to subparagraph thirteen of paragraph (a) and subparagraph seventeen of paragraph (b) of this subdivision attributable to such property.
(q) Subtraction modification for community banks and small thrifts.
(1) A taxpayer that is a qualified community bank as defined in subparagraph two of this paragraph or a small thrift institution as defined in subparagraph two-a of this paragraph shall be allowed a deduction in computing entire net income equal to the amount computed under subparagraph three of this paragraph.
(2) To be a qualified community bank, a taxpayer must satisfy the following conditions:
(i) It is a bank or trust company organized under or subject to the provisions of article three of the banking law or a comparable provision of the laws of another state, or a national banking association.
(ii) The average value during the taxable year of the assets of the taxpayer, or, if the taxpayer is included in a combined report, the assets of the combined reporting group of the taxpayer under section 11-654.3 of this subchapter, must not exceed eight billion dollars.
(2-a) To be a small thrift institution, a taxpayer must satisfy the following conditions:
(i) It is a savings bank, a savings and loan association, or other savings institution chartered and supervised as such under federal or state law.
(ii) The average value during the taxable year of the assets of the taxpayer, or, if the taxpayer is included in a combined report, the assets of the combined reporting group of the taxpayer under section 11-654.3 of this subchapter, must not exceed eight billion dollars.
(3) (i) The subtraction modification shall be computed as follows:
(A) Multiply the taxpayer's net interest income from loans during the taxable year by a fraction, the numerator of which is the gross interest income during the taxable year from qualifying loans and the denominator of which is the gross interest income during the taxable year from all loans.
(B) Multiply the amount determined in subclause (A) of this clause by fifty percent. This product is the amount of the deduction allowed under this paragraph.
(ii) (A) Net interest income from loans shall mean gross interest income from loans less gross interest expense from loans. Gross interest expense from loans is determined by multiplying gross interest expense by a fraction, the numerator of which is the average total value of loans owned by the thrift institution or community bank during the taxable year and the denominator of which is the average total assets of the thrift institution or community bank during the taxable year.
(B) Measurement of assets. For purposes of this clause:
(I) Total assets are those assets that are properly reflected on a balance sheet, computed in the same manner as is required by the banking regulator of the taxpayers included in the combined return. In addition, total assets includes leased real property that is not properly reflected on a balance sheet.
(II) Assets will only be included if the income or expenses of which are properly reflected (or would have been properly reflected if not fully depreciated or expensed, or depreciated or expensed to a nominal amount) in the computation of the taxpayer's entire net income for the taxable year. Assets will not include deferred tax assets and intangible assets identified as "goodwill".
(III) Tangible real and personal property, such as buildings, land, machinery, and equipment, shall be valued at cost. Leased real property that is not properly reflected on the balance sheet will be valued at the annual lease payment multiplied by eight. Intangible property, such as loans and investments, shall be valued at book value exclusive of reserves.
(IV) Average assets are computed using the assets measured on the first day of the taxable year, and on the last day of each subsequent quarter of the taxable year or month or day during the taxable year.
(iii) A qualifying loan is a loan that meets the conditions specified in subclause (A) of this clause and subclause (B) of this clause.
(A) The loan is originated by the qualified community bank or small thrift institution or purchased by the qualified community bank or small thrift institution immediately after its origination in connection with a commitment to purchase made by the bank or thrift institution prior to the loan's origination.
(B) The loan is a small business loan or a residential mortgage loan, the principal amount of which loan is five million dollars or less, and either the borrower is located in this city as determined under section 11-654.2 of this subchapter and the loan is not secured by real property, or the loan is secured by real property located in the city.
(C) A loan that meets the definition of a qualifying loan in a prior taxable year (including years prior to the effective date of this paragraph) remains a qualifying loan in taxable years during and after which such loan is acquired by another corporation in the taxpayer's combined reporting group under section 11-654.3 of this subchapter.
(r) A small thrift institution or a qualified community bank, as defined in paragraph (q) of this subdivision, that maintained a captive REIT on April first, two thousand fourteen shall utilize a REIT subtraction equal to one hundred sixty percent of the dividends paid deductions allowed to that captive REIT for the taxable year for federal income tax purposes and shall not be allowed to utilize the subtraction modification for community banks and small thrifts under paragraph (q) of this subdivision or the subtraction modification for qualified residential loan portfolios under paragraph (s) of this subdivision in any tax year in which such thrift institution or community bank maintains that captive REIT.
(s) Subtraction modification for qualified residential loan portfolios.
(1) (i) A taxpayer that is either a thrift institution as defined in subparagraph three of this paragraph or a qualified community bank as defined in subparagraph two of paragraph (q) of this subdivision and maintains a qualified residential loan portfolio as defined in subparagraph two of this paragraph shall be allowed as a deduction in computing entire net income the amount, if any, by which (A) thirty-two percent of its entire net income determined without regard to this paragraph exceeds (B) the amounts deducted by the taxpayer pursuant to sections one hundred sixty-six and five hundred eighty-five of the internal revenue code less any amounts included in federal taxable income as a result of a recovery of a loan.
(ii) (A) If the taxpayer is in a combined report under section 11-654.3 of this subchapter, this deduction will be computed on a combined basis. In that instance, the entire net income of the combined reporting group for purposes of this paragraph shall be multiplied by a fraction, the numerator of which is the average total assets of all the thrift institutions and qualified community banks included in the combined report and the denominator of which is the average total assets of all the corporations included in the combined report.
(B) Measurement of assets. For purposes of this paragraph:
(I) Total assets are those assets that are properly reflected on a balance sheet, computed in the same manner as is required by the banking regulator of the taxpayers included in the combined return. In addition, total assets includes leased real property that is not properly reflected on a balance sheet.
(II) Assets will only be included if the income or expenses of which are properly reflected (or would have been properly reflected if not fully depreciated or expensed, or depreciated or expensed to a nominal amount) in the computation of the combined group's entire net income for the taxable year. Assets will not include deferred tax assets and intangible assets identified as "goodwill".
(III) Tangible real and personal property, such as buildings, land, machinery, and equipment shall be valued at cost. Leased real property that is not properly reflected on a balance sheet will be valued at the annual lease payment multiplied by eight. Intangible property, such as loans and investments, shall be valued at book value exclusive of reserves.
(IV) Intercorporate stockholdings and bills, notes and accounts receivable, and other intercorporate indebtedness between the corporations included in the combined report shall be eliminated.
(V) Average assets are computed using the assets measured on the first day of the taxable year, and on the last day of each subsequent quarter of the taxable year or month or day during the taxable year.
(2) Qualified residential loan portfolio.
(i) A taxpayer maintains a qualified residential loan portfolio if at least sixty percent of the amount of the total assets at the close of the taxable year of the thrift institution or qualified community bank consists of the assets described in subclauses (A) through (L) of this clause, with the application of the rule in the last undesignated subclause of this clause. If the taxpayer is a member of a combined group, the determination of whether there is a qualified residential loan portfolio will be made by aggregating the assets of the thrift institutions and qualified community banks that are members of the combined group. Assets:
(A) cash, which includes cash and cash equivalents including cash items in the process of collection, deposits with other financial institutions, including corporate credit unions, balances with federal reserve banks and federal home loan banks, federal funds sold, and cash and cash equivalents on hand. Cash shall not include any balances serving as collateral for securities lending transactions;
(B) obligations of the United States or of a state or political subdivision thereof, and stock or obligations of a corporation which is an instrumentality or a government sponsored enterprise of the United States or of a state or political subdivision thereof;
(C) loans secured by a deposit or share of a member;
(D) loans secured by an interest in real property which is (or, from the proceeds of the loan, will become) residential real property or real property used primarily for church purposes, loans made for the improvement of residential real property or real property used primarily for church purposes, provided that for purposes of this subclause, residential real property shall include single or multi-family dwellings, facilities in residential developments dedicated to public use or property used on a nonprofit basis for residents, and mobile homes not used on a transient basis;
(E) property acquired through the liquidation of defaulted loans described in subclause (D) of this clause;
(F) any regular or residual interest in a REMIC, as such term is defined in section 860D of the internal revenue code, but only CHAP. in the proportion which the assets of such REMIC consist of property described in any of the preceding subclauses of this clause, except that if ninety-five percent or more of the assets of such REMIC are assets described in subclauses (A) through (E) of this clause, the entire interest in the REMIC shall qualify;
(G) any mortgage-backed security which represents ownership of a fractional undivided interest in a trust, the assets of which consist primarily of mortgage loans, provided that the real property which serves as security for the loans is (or from the proceeds of the loan, will become) the type of property described in subclause (D) of this clause and any collateralized mortgage obligation, the security for which consists primarily of mortgage loans that maintain as security the type of property described in subclause (D) of this clause;
(H) certificates of deposit in, or obligations of, a corporation organized under a state law which specifically authorizes such corporation to insure the deposits or share accounts of member associations;
(I) loans secured by an interest in educational, health, or welfare institutions or facilities, including structures designed or used primarily for residential purposes for students, residents, and persons undercare, employees, or members of the staff of such institutions or facilities;
(J) loans made for the payment of expenses of college or university education or vocational training;
(K) property used by the taxpayer in support of business which consists principally of acquiring the savings of the public and investing in loans; and
(L) loans for which the taxpayer is the creditor and which are wholly secured by loans described in subclause (D) of this clause. The value of accrued interest receivable and any loss-sharing commitment or other loan guaranty by a governmental agency will be considered part of the basis in the loans to which the accrued interest or loss protection applies.
(ii) At the election of the taxpayer, the percentage specified in clause (i) of this subparagraph shall be applied on the basis of the average assets outstanding during the taxable year, in lieu of the close of the taxable year. The taxpayer can elect to compute an average using the assets measured on the first day of the taxable year and on the last day of each subsequent quarter, or month or day during the taxable year. This election may be made annually.
(iii) For purposes of subclause (D) of clause (i) of this subparagraph, if a multifamily structure securing a loan is used in part for nonresidential use purposes, the entire loan is deemed a residential real property loan if the planned residential use exceeds eighty percent of the property's planned use (measured, at the taxpayer's election, by using square footage or gross rental revenue, and determined as of the time the loan is made).
(iv) For purposes of subclause (D) of clause (i) of this subparagraph, loans made to finance the acquisition or development of land shall be deemed to be loans secured by an interest in residential real property if there is a reasonable assurance that the property will become residential real property within a period of three years from the date of acquisition of such land; but this sentence shall not apply for any taxable year unless, within such three year period, such land becomes residential real property. For purposes of determining whether any interest in a REMIC qualifies under subclause (F) of clause (i) of this subparagraph, any regular interest in another REMIC held by such REMIC shall be treated as a loan described in a preceding subclause under principles similar to the principle of such subclause (F), except that if such REMICs are part of a tiered structure, they shall be treated as one REMIC for purposes of such subclause (F).
(3) For purposes of this paragraph, a "thrift institution" is a savings bank, a savings and loan association, or other savings institution chartered and supervised as such under federal or state law.
(t) Subtraction modification for qualified affordable housing and low income community loans.
(1) A taxpayer that owns a qualifying loan within the meaning of clause (iii) of subparagraph two of this paragraph shall be allowed a deduction in computing entire net income equal to the amount computed under subparagraph two of this paragraph.
(2) (i) The deduction allowed in subparagraph one of this paragraph shall be equal to:
(A) if the total average value during the taxable year of the assets of the taxpayer, or if the taxpayer is included in a combined report, the assets of the combined reporting group of the taxpayer under section 11-654.3 of this subchapter, does not exceed one hundred billion dollars, the taxpayer's net interest income from qualifying loans, or
(B) if the total average value during the taxable year of the assets of the taxpayer, or if the taxpayer is included in a combined report, the assets of the combined reporting group of the taxpayer under section 11-654.3 of this subchapter, exceeds one hundred billion dollars but is less than one hundred fifty billion dollars, the taxpayer's net interest income from qualifying loans multiplied by a fraction, the numerator of which is one hundred fifty billion dollars minus the total average value during the taxable year of the assets of the taxpayer, or if the taxpayer is included in a combined report, the assets of the combined reporting group of the taxpayer under section 11-654.3 of this subchapter, and the denominator of which is fifty billion dollars.
(ii) (A) Net interest income from qualifying loans shall mean the taxpayer's net interest income from loans during the taxable year multiplied by a fraction, the numerator of which is the gross interest income during the taxable year from qualifying loans and the denominator of which is the gross interest income from all loans.
(B) Net interest income from loans shall mean gross interest income during the taxable year from loans less gross interest expense from loans. Gross interest expense from loans is determined by multiplying gross interest expense by a fraction, the numerator of which is the average total value of loans owned by the taxpayer during the taxable year and the denominator of which is the average total assets of the taxpayer for the year.
(C) Measurement of assets. For purposes of this paragraph:
(I) Total assets are those assets that are properly reflected on a balance sheet, computed in the same manner as is required by the banking regulator, if applicable, of the taxpayers included in the combined return. In addition, total assets includes leased real property that is not properly reflected on a balance sheet.
(II) Assets will only be included if the income or expenses of which are properly reflected (or would have been properly reflected if not fully depreciated or expensed, or depreciated or expensed to a nominal amount) in the computation of the taxpayer's entire net income for the taxable year. Assets will not include deferred tax assets and intangible assets identified as "goodwill".
(III) Tangible real and personal property, such as buildings, land, machinery, and equipment, shall be valued at cost. Leased real property that is not properly reflected on a balance sheet will be valued at the annual lease payment multiplied by eight. Intangible property, such as loans and investments, shall be valued at book value exclusive of reserves.
(IV) Average assets are computed using the assets measured on the first day of the taxable year, and on the last day of each subsequent quarter of the taxable year or month or day during the taxable year.
(iii) A qualifying loan is a loan that meets the conditions specified in subclause (A) through subclause (E) of this clause.
(A) The loan is originated by the taxpayer lender or purchased by the taxpayer immediately after its origination in connection with a commitment to purchase made by the taxpayer prior to the loan's origination.
(B) Satisfies conditions of item (I) or (II) or this subclause.
(I) The loan is secured by a housing accommodation located within the city, where there are rental units in such housing accommodation that are qualifying units, which for purposes of this subclause, means units subject to rent control, rent stabilization or to a regulatory agreement, provided that, each such loan will be considered a qualifying loan for purposes of this paragraph only in proportion to a percentage equal to the number of qualifying units divided by the total number of all residential and commercial units located on the site of the real property securing the loan, as determined as of the date the loan is made.
(II) To the extent not included in item (I) of this subclause, loans secured by residential real property located in a low-income community. For purposes of this paragraph, low-income community areas are census tracts within the city in which the poverty rate for such tract is at least twenty percent and the median family income for such tract does not exceed eighty percent of metropolitan area median family income. This determination will be made by reference to the poverty and median family income census data for application of section 45D of the internal revenue code of 1986, as in effect on the effective date of the chapter of the laws of two thousand fifteen that added this subchapter.
(C) The loan is not treated as a qualifying loan in the computation of a subtraction from entire net income pursuant to paragraph (q) of this subdivision.
(D) If the taxpayer applies a subtraction pursuant to paragraph (r) of this subdivision, the interest or net gains from the loan are not recognized by a captive REIT as defined in section 11-601 of this chapter.
(E) A loan that meets the definition of a qualifying loan in a prior taxable year (including years prior to the effective date of this paragraph) remains a qualifying loan in taxable years during and after which such loan is acquired by another corporation in the taxpayer's combined reporting group under section 11-654.3 of this subchapter.
(iv) For purposes of this paragraph, the following terms shall mean:
(A) "Housing accommodations" shall mean a multiple dwelling that contains at least five dwelling units together with the land on which such structure is situated.
(B) "Regulatory agreement" shall mean a written agreement with or approved by any local, municipal, state, federal or other government agency that requires the provision of housing accommodations for families and persons of low or moderate income, and binds the owner of such real property and its successors and assigns. A regulatory agreement may include such other terms and conditions as the locality, municipality, state, or federal government shall determine.
(C) "Rent stabilization" shall mean, collectively, the rent stabilization law of nineteen hundred sixty-nine, the rent stabilization code, and the emergency tenant protection act of nineteen seventy-four, all as in effect as of the effective date of the chapter of the laws of two thousand fifteen that added this subchapter or as amended thereafter, together with any successor statutes or regulations addressing substantially the same subject matter.
9. (a) The term "calendar year" means a period of twelve calendar months (or any shorter period beginning on the date the taxpayer becomes subject to the tax imposed by this subchapter) ending on the thirty-first day of December, provided the taxpayer keeps its books on the basis of such period or on the basis of any period ending on any day other than the last day of a calendar month, or provided the taxpayer does not keep books, and includes, in case the taxpayer changes the period on the basis of which it keeps its books from a fiscal year to a calendar year, the period from the close of its last old fiscal year up to and including the following December thirty-first.
(b) The term "fiscal year" means a period of twelve calendar months (or any shorter period beginning on the date the taxpayer becomes subject to the tax imposed by this subchapter) ending on the last day of any month other than December, provided the taxpayer keeps its books on the basis of such period, and includes, in case the taxpayer changes the period on the basis of which it keeps its books from a calendar year to a fiscal year or from one fiscal year to another fiscal year, the period from the close of its last old calendar or fiscal year up to the date designated as the close of its new fiscal year.
10. The term "tangible personal property" means corporeal personal property, such as machinery, tools, implements, goods, wares and merchandise, and does not mean money, deposits in banks, shares of stock, bonds, notes, credits or evidences of an interest property and evidences of debt.
11. The term "internal revenue code" means, unless otherwise specifically stated in this subchapter, the internal revenue code of 1986, as amended.
12. The term "combinable captive insurance company" means an entity that is treated as an association taxable as a corporation under the internal revenue code:
(a) more than fifty percent of the voting stock of which is owned or controlled, directly or indirectly, by a single entity that is treated as an association taxable as a corporation under the internal revenue code and not exempt from federal income tax;
(b) that is licensed as a captive insurance company under the laws of this state or another jurisdiction;
(c) whose business includes providing, directly and indirectly, insurance or reinsurance covering the risks of its parent and/or members of its affiliated group; and
(d) fifty percent or less of whose gross receipts for the taxable year consist of premiums from arrangements that constitute insurance for federal income tax purposes.
For purposes of this subdivision, "affiliated group" has the same meaning as that term is given in section fifteen hundred four of the internal revenue code, except that the term "common parent corporation" in that section is deemed to mean any person, as defined in section seven thousand seven hundred one of the internal revenue code and references to "at least eighty percent" in section fifteen hundred four of the internal revenue code are to be read as "fifty percent or more;" section fifteen hundred four of the internal revenue code is to be read without regard to the exclusions provided for in subsection (b) of that section; "premiums" has the same meaning as that term is given in paragraph one of subdivision (c) of section fifteen hundred ten of the tax law, except that it includes consideration for annuity contracts and excludes any part of the consideration for insurance, reinsurance or annuity contracts that do not provide bona fide insurance, reinsurance or annuity benefits; and "gross receipts" includes the amounts included in gross receipts for purposes of paragraph fifteen of subsection (c) of section five hundred one of the internal revenue code, except that those amounts also include all premiums as defined in this subdivision.
13. The term "partnership" includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not a corporation as defined in subdivision one of this section, or a trust or estate that is separate from its owner under part one of subchapter J of chapter one of subtitle A of the internal revenue code; and the term "partner" includes a member in such syndicate, group, pool, joint venture, or organization.
(Am. 2016 N.Y. Laws Ch. 60, 4/13/2016, eff. 4/13/2016; Am. 2018 N.Y. Laws Ch. 59, 4/12/2018, eff. 4/12/2018; Am. 2020 N.Y. Laws Ch. 58, 4/3/2020, eff. 4/3/2020; Am. 2020 N.Y. Laws Ch. 121, 6/17/2020, eff. 6/17/2020; Am. 2022 N.Y. Laws Ch. 555, 8/31/2022, retro. eff. 1/1/2021 and eff. 8/31/2022; Am. 2023 N.Y. Laws Ch. 671, 11/17/2023, retro. eff. 1/1/2022)