Section 12. City adjusted gross income of a resident individual

--(a)
  General.--The city adjusted gross income of a resident individual  means
  his  federal  adjusted gross income as defined in the laws of the United
  States for the taxable year, with the modifications  specified  in  this
  section.
    (b)  Modifications  increasing  federal  adjusted gross income.--There
  shall be added to federal adjusted gross income:
    (1) Interest income on obligations of any state other than this  state
  or  of a political subdivision of any such other state unless created by
  compact or agreement to which this state is a party;
    (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 or local income taxes;
    (3)  Income  taxes imposed by the city, this state or any other taxing
  jurisdiction, to the extent deductible in determining  federal  adjusted
  gross income and not credited against federal income tax;
    (4)  Interest  on  indebtedness  incurred  or continued to purchase or
  carry obligations or securities the income from which is exempt from tax
  under this local law, to the extent deductible  in  determining  federal
  adjusted gross income;
    (5)  Expenses  paid  or  incurred  during the taxable year for (A) the
  production or collection of income which is exempt from tax  under  this
  local  law,  or  (B)  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 local law, to the extent that  such  expenses
  and  premiums  are  deductible  in  determining  federal  adjusted gross
  income; and
    (6) In the case of a taxpayer who has exercised the election permitted
  by subdivisions (g) or (h)  of  this  section,  the  amount  or  amounts
  required  by  said  subdivisions  to  be added to federal adjusted gross
  income.
    (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;
    (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  or  local income taxes under the laws of the United
  States;
    (3) Pensions to officers and employees of this state, its subdivisions
  and agencies, to the extent  includible  in  gross  income  for  federal
  income tax purposes;
    (4)  Interest  or  dividend income on obligations or securities to the
  extent exempt from income tax under the laws of this  state  authorizing
  the  issuance  of such obligations or securities but includible in gross
  income for federal income tax purposes;
    (5) The amount of any refund or credit for overpayment of income taxes
  imposed by the city, the state, or any other taxing jurisdiction, to the
  extent  properly  included  in  gross  income  for  federal  income  tax
  purposes;
    (6)  Interest  on  indebtedness  incurred  or continued to purchase or
  carry obligations or securities the income from which is subject to  tax
  under  this  local law but exempt from federal income tax, to the extent
  that such interest is not deductible  in  determining  federal  adjusted

  gross  income  and  is attributable to a trade or business carried on by
  the taxpayer;
    (7)  Ordinary  and  necessary  expenses  paid  or  incurred during the
  taxable year for (A) the production or collection  of  income  which  is
  subject  to tax under this local law but exempt from federal income tax,
  or (B) 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  local  law  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;
    (8) In the case of a taxpayer who has exercised the election permitted
  by subdivisions (g) or (h)  of  this  section,  the  amount  or  amounts
  required  by  said  subdivisions  to be subtracted from federal adjusted
  gross income;
    (9) With respect to gain derived from the sale or other disposition of
  any property acquired prior to July first, nineteen  hundred  sixty-six,
  except  property described in subsections one and four of section twelve
  hundred  twenty-one  of  the  internal  revenue  code,  the   difference
  between--
    (a)  the amount of the taxpayer's federal adjusted gross income or, in
  the case of an estate or trust, the taxpayer's taxable income, and
    (b) the amount of the taxpayer's federal adjusted gross income or,  in
  the  case  of  an  estate  or  trust,  the taxpayer's taxable income (if
  smaller than the amount described in (a)) computed  as  if  the  federal
  adjusted  basis  of  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 July  first,  nineteen
  hundred  sixty-six or the date of its sale or other disposition prior to
  July 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 July 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
  subparagraph  shall  not  exceed  the  amount  described in (i), (ii) or
  (iii)--
    (i) if the taxpayer's federal adjusted gross  income  reflects  a  net
  gain  from  the  sale  or other disposition of property, except property
  described  in  subsections  one  and  four  of  section  twelve  hundred
  twenty-one  of  the  internal revenue code, the amount of such gain plus
  one thousand dollars,
    (ii) if the taxpayer's federal adjusted gross income  reflects  a  net
  loss  from  the  sale  or other disposition of property, except property
  described  in  subsections  one  and  four  of  section  twelve  hundred
  twenty-one  of  the  internal  revenue  code,  the  amount  by which one
  thousand dollars exceeds such loss,
    (iii) if the taxpayer's federal adjusted gross income reflects neither
  a net gain nor a  net  loss  from  the  sale  or  other  disposition  of
  property,  other  than property described in subsections one and four of
  section twelve hundred twenty-one of  the  internal  revenue  code,  one
  thousand dollars.
    (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 nineteen.
    (e)  Partners.--The amounts of modifications required to be made under
  this section by a partner, which relate to items of income,  gain,  loss

  or  deduction  of  a  partnership,  shall  be  determined  under section
  seventeen.
    (f)  Husband  and  wife.--If  husband and wife determine their federal
  income tax on a joint return  but  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.--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.
    (1) Depreciation with respect to any property  such  as  described  in
  paragraph   three   of   this   subdivision,  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  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
  shall not exceed its cost or other basis.
    (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 of this subdivision 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,  for  the  taxable  years,  and  all
  succeeding 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  return
  for the first taxable year during which it occurs, and the administrator
  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
  sixty-three of this local law.
    (3)  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 the city and
  used  in  the  taxpayer's  trade  or  business,  (A)  the  construction,

  reconstruction or erection of which is completed after  June  thirtieth,
  nineteen  hundred  sixty-six, 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 June thirtieth, nineteen hundred sixty-six, or (B) acquired  after
  June  thirtieth,  nineteen  hundred  sixty-six 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 the city and commenced after such date.
    (4)  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.
    (5)  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; but if such gain  or  loss  is  considered  a  long-term
  capital  gain  or loss for federal income tax purposes, the amount to be
  added shall be limited to fifty percent of the difference  between  such
  adjusted bases.
    (h)    Optional    modification    for    waste   treatment   facility
  expenditures.--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
  twelve hundred two  of  the  State  public  health  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  twelve  hundred
  sixty-seven of the state public health law)  from  a  point  immediately
  preceding the point of such removal, reduction or rendering 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 emmission.
    (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 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

  July  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 July first, nineteen hundred sixty-six, and
    (B) on condition that such facilities have been certified by the state
  commissioner of health or his designated representative, pursuant to the
  state  public  health law, as complying with the provisions of the state
  public health 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  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 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 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  section
  twelve has not been exercised in respect to the same property.
    (3)  (A)  If  expenditures in respect to an industrial waste treatment
  facility or an air pollution control facility have  been  allowed  as  a
  modification  as provided herein and if within ten years from the end of
  the taxable year in which such modification was allowed such property or
  any part thereof is used for the primary purpose of salvaging  materials
  which  are  usable  in  the manufacturing process or are marketable, the
  taxpayer shall report such change of use in its  return  for  the  first
  taxable year during which it occurs, and the administrator 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
  sixty-three.
    (B) If a modification is allowed as herein provided  for  expenditures
  paid  or  incurred  during  any taxable year on the basis of a temporary
  certificate of compliance issued pursuant to  the  state  public  health
  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 administrator 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 sixty-three.
    (4)  In  any  taxable year when property is sold or otherwise disposed
  of, with respect to which a modification has been  allowed  pursuant  to
  this paragraph, such modification shall be disregarded in computing gain
  or  loss,  and the gain or loss on the sale or other disposition of such
  property shall be the gain or loss  entering  into  the  computation  of
  federal adjusted gross income for such taxable year.