Section 1453. Computations of entire net income

(a) Entire net income means
  total  net income from all sources which shall be the same as the entire
  taxable income (but not alternative minimum taxable income)
    (1) which the taxpayer is required to  report  to  the  United  States
  treasury department, or
    (2)  which  the taxpayer, in the case of a corporation which is exempt
  from federal income tax  (other  than  the  tax  on  unrelated  business
  taxable  income  imposed under section 511 of the internal revenue code)
  but is subject to tax under this article, would have  been  required  to
  report  to the United States treasury department but for such exemption,
  or
    (3) which, in the case of a corporation organized under the laws of  a
  country  other than the United States, is effectively connected with the
  conduct of a trade or business within the United  States  as  determined
  under   section  882  of  the  internal  revenue  code  subject  to  the
  modifications and adjustments hereinafter provided, or
    (4) which the taxpayer would have  been  required  to  report  to  the
  United  States treasury department if it had not made the election under
  subchapter s of chapter one of the internal revenue code.
    (b) Entire net income shall  be  computed  without  the  deduction  or
  exclusion of:
    (1)  (A)  in  the  case of a corporation organized under the laws of a
  country other than the United States, (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  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; (B) in the case
  of any other corporation, any part  of  any  income  from  dividends  or
  interest  on  any  kind of stock, securities or indebtedness; (C) except
  that for purposes of subparagraphs (A) and  (B)  above  there  shall  be
  excluded   any   amounts   treated  as  dividends  pursuant  to  section
  seventy-eight of the internal revenue code and any amounts described  in
  paragraphs eleven and twelve of subsection (e) of this section;
    (2)  taxes  on or measured by income or profits paid or accrued within
  the taxable year to the United States, or any of its possessions  or  to
  any foreign country;
    (3)  premiums paid for environmental remediation insurance, as defined
  in section twenty-three of this chapter,  and  deducted  in  determining
  federal taxable income, to the extent of the amount of the environmental
  remediation insurance credit allowed under such section twenty-three and
  subsection (s) of section fourteen hundred fifty-six of this article;
    (4)   taxes   imposed   under   this  article,  sections  one  hundred
  eighty-three, one hundred eighty-four, and  one  hundred  eighty-six  of
  article nine and article nine-A of this chapter;
    (5)  in  those  instances  where  a  credit for the special additional
  mortgage recording tax is allowed under paragraph one of subsection  (c)
  of  section  fourteen  hundred  fifty-six  of  this  article, the amount
  allowed as an exclusion or deduction for the special additional mortgage
  recording tax imposed  by  subdivision  one-a  of  section  two  hundred
  fifty-three  of  this  chapter  in determining the entire taxable income

  which the taxpayer is required to report to the United  States  treasury
  department for such taxable year; and
    (6)  Unless  the  credit allowed pursuant to subsection (c) of section
  fourteen  hundred  fifty-six  of  this  article  is  reflected  in   the
  computation  of  the gain or loss so as to result in an increase in such
  gain or decrease of such loss, for federal income tax purposes, from the
  sale or other disposition of the property  with  respect  to  which  the
  special   additional   mortgage   recording   tax  imposed  pursuant  to
  subdivision one-a of section two hundred fifty-three of this chapter was
  paid, the amount  of  the  special  additional  mortgage  recording  tax
  imposed  by subdivision one-a of section two hundred fifty-three of this
  chapter which was paid and which is reflected in the computation of  the
  basis  of  the  property  so  as to result in a decrease in such gain or
  increase in such loss for federal income tax purposes from the  sale  or
  other  disposition  of  the  property with respect to which such tax was
  paid.
    (7) for taxable years beginning after December thirty-first,  nineteen
  hundred eighty-one, except with respect to property which is a qualified
  mass  commuting vehicle described in subparagraph (D) of paragraph eight
  of subsection (f) of section one hundred  sixty-eight  of  the  internal
  revenue code (relating to qualified mass commuting vehicles), any amount
  which  the  taxpayer  claimed  as  a  deduction in computing its federal
  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;
    (8) for taxable years beginning after December thirty-first,  nineteen
  hundred eighty-one, except with respect to property which is a qualified
  mass  commuting vehicle described in subparagraph (D) of paragraph eight
  of subsection (f) of section one hundred  sixty-eight  of  the  internal
  revenue code (relating to qualified mass commuting vehicles), 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;
    (9)  in  the  case  of  property  placed  in  service in taxable years
  beginning  before  nineteen  hundred  ninety-four,  for  taxable   years
  beginning  after  December  thirty-first,  nineteen  hundred eighty-one,
  except with respect to property subject to the provisions of section two
  hundred eighty-F of the internal revenue code and  property  subject  to
  the  provisions  of  section  one  hundred  sixty-eight  of the internal
  revenue code which is placed in service in this state in  taxable  years
  beginning after December thirty-first, nineteen hundred eighty-four, the
  amount  allowable  as  a  deduction determined under section one hundred
  sixty-eight of the internal revenue code;
    (10) upon the disposition of property  to  which  paragraph  seven  of
  subsection (e) of this section applies, the amount, if any, by which the
  aggregate  of the amounts described in such paragraph seven attributable
  to such property exceeds the  aggregate  of  the  amounts  described  in
  paragraph nine of this subsection attributable to such property,
    (11)  in  the  case of a taxpayer subject to the provisions of section
  585(c) of the internal revenue code, the amount allowed as  a  deduction
  pursuant to section 166 of such code, and
    (12) for taxpayers subject to the provisions of subsection (i) of this
  section,  twenty  percent  of  the  excess  of (A) the amount determined
  pursuant to such subsection (i) over (B) the  amount  which  would  have
  been  allowable had such institution maintained its bad debt reserve for
  all taxable years on the basis of actual experience.

    (13) for taxable years  beginning  after  December  thirty-first,  two
  thousand  two,  in the case of qualified property described in paragraph
  two of subsection k of section 168 of the internal revenue  code,  other
  than  qualified  resurgence zone property described in subsection (t) of
  this  section,  and  other than qualified New York Liberty Zone property
  described in paragraph two of subsection  b  of  section  1400L  of  the
  internal  revenue code (without regard to clause (i) of subparagraph (C)
  of such paragraph), which was placed in service on or after June  first,
  two  thousand  three,  the amount allowable as a deduction under section
  167 of the internal revenue code.
    (14) The amount of any  deduction  allowed  pursuant  to  section  one
  hundred ninety-nine of the internal revenue code.
    (15)  The  amount  of  any  federal  deduction for taxes imposed under
  article twenty-three of this chapter.
    (c) (1) Except as otherwise provided in paragraphs two, three and four
  hereof, in the case of the sale or exchange of property  by  a  taxpayer
  which  has  been subject to article nine-B or nine-C of this chapter (as
  such articles  were  in  effect  on  or  before  December  thirty-first,
  nineteen  hundred  seventy-two) where the property has a higher adjusted
  basis for New York tax purposes than for  federal  tax  purposes,  there
  shall  be  allowed as a deduction from entire net income, the portion of
  any gain or loss on such sale which equals the difference in such basis.
    (2) In case of property of a taxpayer, other than a savings bank or  a
  savings  and loan association, acquired prior to January first, nineteen
  hundred twenty-six, and  disposed  of  thereafter,  the  computation  of
  entire net income shall be modified as follows:
    (i) no gain shall be deemed to have been derived if either the cost or
  the  fair  market  price  or  value  on  January first, nineteen hundred
  twenty-six, exceeds the value realized;
    (ii) no loss shall be deemed to have been sustained if either the cost
  or the fair market price or value on  January  first,  nineteen  hundred
  twenty-six, is less than the value realized;
    (iii)  where  both  the  cost  and  the  fair market price or value on
  January first, nineteen hundred twenty-six,  are  less  than  the  value
  realized,  the  basis  for  computing gain shall be the cost or the fair
  market price or value on such date, whichever is higher;
    (iv) where both the cost and the fair market price or value on January
  first, nineteen hundred twenty-six, are in excess of the value realized,
  the basis for computing loss shall be the cost or the fair market  price
  or value on such date, whichever is lower.
    (3)  In  case  of property of a savings bank acquired prior to January
  first, nineteen hundred  forty-four,  and  disposed  of  thereafter,  in
  computing  entire  net  income  the  basis of such property shall be the
  value as of December thirty-first, nineteen hundred forty-three, as  set
  forth in such bank's report of surplus and undivided earnings filed with
  the tax commission as of that date.
    (4)  In  case  of property of a savings and loan association, acquired
  prior to January first, nineteen hundred fifty-three,  and  disposed  of
  thereafter,  the  computation  of entire net income shall be modified as
  follows:
    (i) no gain shall be deemed to have been derived if either the cost or
  the fair market price  or  value  on  January  first,  nineteen  hundred
  fifty-three, exceeds the value realized;
    (ii) no loss shall be deemed to have been sustained if either the cost
  or  the  fair  market  price or value on January first, nineteen hundred
  fifty-three, is less than the value realized;
    (iii) where both the cost and  the  fair  market  price  or  value  on
  January  first,  nineteen  hundred  fifty-three, are less than the value

  realized, the basis for computing gain shall be the  cost  or  the  fair
  market price or value on such date, whichever is higher;
    (iv) where both the cost and the fair market price or value on January
  first,  nineteen  hundred  fifty-three,  are  in  excess  of  the  value
  realized, the basis for computing loss shall be the  cost  or  the  fair
  market price or value on such date, whichever is lower.
    (d)  Entire net income shall not include any refund or credit of a tax
  for which no exclusion or  deduction  was  allowed  in  determining  the
  taxpayer's  entire  net  income under this article or articles nine-A or
  twenty-three of this chapter for any prior year.
    (e) There shall be allowed as a deduction in  determining  entire  net
  income,  to  the  extent  not  deductible in determining federal taxable
  income:
    (1) interest on indebtedness incurred  or  continued  to  purchase  or
  carry  obligations or securities the income from which is subject to tax
  under this article but exempt from federal income tax,
    (2) ordinary and  necessary  expenses  paid  or  incurred  during  the
  taxable  year  attributable to income which is subject to tax under this
  article but exempt from federal income tax,
    (3) the amortizable bond premium for the taxable year on any bond  the
  interest  on  which is subject to tax under this article but exempt from
  federal income tax,
    (4) that portion of wages or salaries paid or incurred for the taxable
  year for which a deduction is not allowed pursuant to the provisions  of
  section two hundred eighty-C of the internal revenue code,
    (5)  for taxable years beginning after December thirty-first, nineteen
  hundred eighty-one, except with respect to property which is a qualified
  mass commuting vehicle described in subparagraph (D) of paragraph  eight
  of  subsection  (f)  of  section one hundred sixty-eight of the internal
  revenue code (relating to qualified mass commuting vehicles), any amount
  which is included in the taxpayer's federal 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,
    (6)  for taxable years beginning after December thirty-first, nineteen
  hundred eighty-one, except with respect to property which is a qualified
  mass commuting vehicle described in subparagraph (D) of paragraph  eight
  of  subsection  (f)  of  section one hundred sixty-eight of the internal
  revenue code (relating to qualified mass commuting vehicles), any amount
  which the taxpayer could have excluded from federal 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,
    (7)  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 paragraph seven of subsection (b) of this section, an amount
  with respect to property which is subject to the provisions  of  section
  one hundred sixty-eight of the internal revenue code equal to the amount
  allowable  as  the  depreciation  deduction  under  section  one hundred
  sixty-seven of the internal revenue code  as  such  section  would  have

  applied to property placed in service on December thirty-first, nineteen
  hundred eighty,
    (8)  upon the disposition of property to which paragraph seven of this
  subsection applies, the amount, if any, by which the  aggregate  of  the
  amounts  described  in  paragraph nine of subsection (b) of this section
  attributable to such property  exceeds  the  aggregate  of  the  amounts
  described  in  paragraph  seven  of this subsection attributable to such
  property,
    (9) any amount of money or other property received  from  the  federal
  deposit  insurance  corporation  pursuant  to  subsection (c) of section
  thirteen of the federal deposit insurance act, as amended, regardless of
  whether any note or other instrument is issued in exchange therefor,
    (10) any amount of money or other property received from  the  federal
  savings  and  loan insurance corporation pursuant to paragraph one, two,
  three or four of subsection (f) of  section  four  hundred  six  of  the
  federal national housing act, as amended, regardless of whether any note
  or other instrument is issued in exchange therefor,
    (11) (i) seventeen percent of interest income from subsidiary capital,
  and
    * (ii) sixty percent of dividend income from subsidiary capital except
  as provided in paragraph eighteen of this subsection, and
    * NB Effective until January 1, 2011
    * (ii)  sixty percent of dividend income from subsidiary capital which
  does not include fifty percent  of  disallowed  investment  proceeds  as
  described  in subsection (u) of this section for taxable years beginning
  on or after January first, two thousand seven and before January  first,
  two   thousand   nine,  and  seventy-five  percent  of  such  disallowed
  investment proceeds for taxable years  beginning  on  or  after  January
  first,  two thousand nine and before January first, two thousand eleven,
  and one hundred percent  of  such  disallowed  investment  proceeds  for
  taxable  years beginning on or after January first, two thousand eleven,
  and
    * NB Effective January 1, 2011
    * (iii) sixty percent of the amount by  which  gains  from  subsidiary
  capital  exceed losses from subsidiary capital, to the extent such gains
  and losses were taken into account in  determining  the  entire  taxable
  income referred to in subsection (a) of this section,
    * NB Effective until January 1, 2011
    * (iii)  sixty  percent  of  the amount by which gains from subsidiary
  capital exceed losses from subsidiary capital, to the extent such  gains
  and  losses  were  taken  into account in determining the entire taxable
  income referred to in subsection (a) of this section, except that  fifty
  percent  of  gains  or  losses  from  disallowed  investment proceeds as
  described in subsection (u) of this section for taxable years  beginning
  on  or after January first, two thousand seven and before January first,
  two thousand nine, and seventy-five percent of gains or losses from such
  disallowed investment proceeds for taxable years beginning on  or  after
  January  first, two thousand nine and before January first, two thousand
  eleven, and one hundred percent of gains or losses from such  disallowed
  investment  proceeds  for  taxable  years  beginning on or after January
  first, two thousand eleven shall not be considered in  determining  such
  amount,
    * NB Effective January 1, 2011
    (12) twenty-two and one-half percent of interest income on obligations
  of  New  York  state, or of any political subdivision thereof, or of the
  United States, other than obligations held for resale in connection with
  regular trading activities,

    (13) in the case of a taxpayer which recaptures  its  balance  of  the
  reserve  for losses on loans for federal income tax purposes pursuant to
  section 585(c) of  the  internal  revenue  code,  any  amount  which  is
  included  in  federal  taxable income pursuant to section 585(c) of such
  code,
    (14)  in  the  case of a taxpayer subject to the provisions of section
  585(c) of the internal revenue code, any amount  which  is  included  in
  federal taxable income as a result of a recovery of a loan.
    (15)  in  the  case of a taxpayer which is currently or has previously
  been subject to subsection (h) of this  section,  any  amount  which  is
  included  in federal taxable income pursuant to section 593(e)(2) of the
  internal revenue code, and any other amount so included as a result of a
  recovery of or termination from the use of a bad debt reserve as defined
  in section 593 of such code as in existence  on  December  thirty-first,
  nineteen  hundred ninety-five as a result of federal legislation enacted
  after December thirty-first, nineteen hundred ninety-five.
    (16) The amount deductible pursuant to subsection (p) of this section.
    (17) for taxable years  beginning  after  December  thirty-first,  two
  thousand  two,  the amount deductible pursuant to subsection (r) of this
  section.
    * (18) one hundred percent of dividend income from subsidiary  capital
  received  during  the  taxable  year if that dividend income is directly
  attributable to a dividend from a captive REIT or captive RIC for  which
  the  captive  REIT  or  captive  RIC  claimed  a  federal dividends paid
  deduction and that captive REIT or captive RIC is included in a combined
  report or return under article nine-A,  article  thirty-two  or  article
  thirty-three of this chapter.
    * NB Repealed January 1, 2011
    (f)  Provided  the  taxpayer  has  not  made  an  election pursuant to
  paragraph two of subsection (b) of section fourteen  hundred  fifty-four
  of  this  article,  there shall be allowed as a deduction in determining
  entire net income, to the extent not deductible in  determining  federal
  taxable  income,  the  adjusted  eligible net income of an international
  banking facility determined as follows:
    (1) The eligible net income of an international banking facility shall
  be the amount remaining after subtracting from the eligible gross income
  the applicable expenses.
    (2) Eligible gross income shall be the  gross  income  derived  by  an
  international banking facility from:
    (A)  making,  arranging  for,  placing  or  servicing loans to foreign
  persons, provided, however, that in the case of a foreign  person  which
  is an individual, or which is a foreign branch of a domestic corporation
  (other  than  a  bank),  or  which  is  a foreign corporation or foreign
  partnership which is eighty per centum  or  more  owned  or  controlled,
  either  directly  or  indirectly,  by  one or more domestic corporations
  (other than  banks),  domestic  partnerships  or  resident  individuals,
  substantially  all  the  proceeds of the loan are for use outside of the
  United States;
    (B) making or placing deposits with foreign persons which are banks or
  foreign branches of banks (including  foreign  subsidiaries  or  foreign
  branches   of   the   taxpayer)  or  with  other  international  banking
  facilities; or
    (C) entering into foreign exchange  trading  or  hedging  transactions
  related to any of the transactions described in this paragraph.
    (3)  Applicable  expenses  shall  be  any expenses or other deductions
  attributable, directly or  indirectly,  to  the  eligible  gross  income
  described in paragraph two of this subsection.

    (4)  Adjusted  eligible  net income shall be determined by subtracting
  from  eligible  net  income  the  ineligible  funding  amount,  and   by
  subtracting from the amount then remaining the floor amount.
    (5)  The  ineligible  funding  amount  shall  be  the  amount, if any,
  determined by  multiplying  eligible  net  income  by  a  fraction,  the
  numerator  of which is the average aggregate amount for the taxable year
  of all liabilities, including deposits, and other sources  of  funds  of
  the  international  banking  facility which were not owed to or received
  from foreign persons, and  the  denominator  of  which  is  the  average
  aggregate  amount  for  the  taxable  year of all liabilities, including
  deposits and  other  sources  of  funds  of  the  international  banking
  facility.
    (6)  The  floor  amount  shall  be  the  amount, if any, determined by
  multiplying  the  amount  remaining  after  subtracting  the  ineligible
  funding  amount  from the eligible net income by a fraction, not greater
  than one, which is determined as follows:
    (A) The numerator shall be
    (i)  the  percentage,  as  set  forth  in  subparagraph  (C)  of  this
  paragraph,  of  the  average aggregate amount of the taxpayer's loans to
  foreign persons and deposits with foreign persons  which  are  banks  or
  foreign  branches  of  banks  (including foreign subsidiaries or foreign
  branches of the taxpayer), which loans and deposits were recorded in the
  financial accounts of  the  taxpayer  for  its  branches,  agencies  and
  offices   within   the   state   for   taxable  years  nineteen  hundred
  seventy-five,  nineteen  hundred  seventy-six   and   nineteen   hundred
  seventy-seven, minus
    (ii)  the average aggregate amount of such loans and such deposits for
  the taxable year of the taxpayer (other than such loans and deposits  of
  an  international  banking facility), provided, however, that in no case
  shall the amount determined in this clause exceed the amount  determined
  in clause (i) of this subparagraph; and
    (B) The denominator shall be the average aggregate amount of the loans
  to  foreign persons and deposits with foreign persons which are banks or
  foreign branches of banks (including  foreign  subsidiaries  or  foreign
  branches of the taxpayer), which loans and deposits were recorded in the
  financial  accounts of the taxpayer's international banking facility for
  the taxable year.
    (C) The percentage shall be one hundred percent for the first  taxable
  year in which the taxpayer establishes an international banking facility
  and  for the next succeeding four taxable years. The percentage shall be
  eighty percent for the fifth, sixty percent for the sixth, forty percent
  for the seventh, and twenty percent for the  eighth  taxable  year  next
  succeeding the year such taxpayer establishes such international banking
  facility, and zero in the ninth succeeding year and thereafter.
    (7) In the event adjusted eligible net income is a loss, the amount of
  such loss shall be added to entire net income.
    (8)  For  the  purposes  of  this subsection the term "foreign person"
  means
    (A) an individual who is not a resident of the United States,
    (B) a foreign corporation, a foreign partnership or a  foreign  trust,
  as  defined in section seventy-seven hundred one of the internal revenue
  code, other than a domestic branch thereof,
    (C)  a  foreign  branch  of  a  domestic  corporation  (including  the
  taxpayer),
    (D) a foreign government or an international organization or an agency
  of either, or
    (E) an international banking facility.

    For  purposes  of  this  paragraph, the terms "foreign" and "domestic"
  shall have the same  meaning  as  set  forth  in  section  seventy-seven
  hundred one of the internal revenue code.
    (g)  Entire  net  income  shall  be  computed  without  regard  to the
  reduction in the basis of property that is  required  by  section  three
  hundred sixty-two of the internal revenue code, because of any amount of
  money  or  other  property  received  from the federal deposit insurance
  corporation pursuant to  subsection  (c)  of  section  thirteen  of  the
  federal  deposit  insurance act, as amended, or from the federal savings
  and loan insurance corporation pursuant to paragraph one, two, three  or
  four  of  subsection  (f)  of  section  four  hundred six of the federal
  national housing act, as amended.
    (h) (1) For purposes of this subsection, a "thrift institution"  is  a
  banking  corporation  which  satisfies the requirements of subparagraphs
  (A) and (B) of this paragraph.
    (A) Such banking corporation must be  (i)  a  banking  corporation  as
  defined  in  paragraph one of subsection (a) of section fourteen hundred
  fifty-two of this article created or authorized  to  do  business  under
  article  six  or  ten  of the banking law, (ii) a banking corporation as
  defined in paragraph two or seven of subsection (a) of section  fourteen
  hundred   fifty-two   of   this   article  which  is  doing  a  business
  substantially similar to the business which a corporation or association
  may be created to do under article six or ten of the banking law or  any
  business  which  a  corporation  or  association  is  authorized by such
  article to do, or (iii) a banking corporation as  defined  in  paragraph
  four  or five of subsection (a) of section fourteen hundred fifty-two of
  this article.
    (B) At least sixty percent of the amount of the total assets  (at  the
  close  of  the taxable year) of such banking corporation must consist of
  (i) cash; (ii) obligations of  the  United  States  or  of  a  state  or
  political subdivision thereof, and stock or obligations of a corporation
  which  is  an  instrumentality  of  the  United  States or of a state or
  political  subdivision  thereof,  but  not  including  obligations   the
  interest  on  which is excludable from gross income under section 103 of
  the internal revenue code; (iii) loans secured by a deposit or share  of
  a  member;  (iv)  loans secured by an interest in real property which is
  (or from the  proceeds  of  the  loan,  will  become)  residential  real
  property or real property used primarily for church purposes, loans made
  for  the  improvement of residential real property or real property used
  primarily for church  purposes,  provided  that  for  purposes  of  this
  clause,  residential  real  property shall include single or multifamily
  dwellings, facilities in residential developments  dedicated  to  public
  use  or  property  used  on  a nonprofit basis for residents, and mobile
  homes not used on a transient basis; (v) property acquired  through  the
  liquidation  of  defaulted  loans  described  in  clause  (iv)  of  this
  subparagraph; (vi) any regular or residual interest in a REMIC, as  such
  term  is  defined  in  section 860D of the internal revenue code and any
  regular interest in a FASIT, as such term is defined in section 860L  of
  the  internal  revenue code, but only in the proportion which the assets
  of such REMIC or FASIT consist of  property  described  in  any  of  the
  preceding  clauses  of  this  subparagraph,  except  that if ninety-five
  percent or more of  the  assets  of  such  REMIC  or  FASIT  are  assets
  described  in  clauses  (i) through (v) of this subparagraph, the entire
  interest in the REMIC or FASIT shall qualify; (vii) any  mortgage-backed
  security  which  represents ownership of a fractional undivided interest
  in a trust, the assets of which consist  primarily  of  mortgage  loans,
  provided  that  the real property which serves as security for the loans
  is (or from the proceeds of the loan, will become) the type of  property

  described  in  clause  (iv)  of this subparagraph and any collateralized
  mortgage obligation,  the  security  for  which  consists  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 clause (iv) of this  subparagraph;  (viii)
  certificates  of  deposit in, or obligations of, a corporation organized
  under a state law which  specifically  authorizes  such  corporation  to
  insure the deposits or share accounts of member associations; (ix) loans
  secured by an interest in real property located within any urban renewal
  area  to  be  developed for predominantly residential use under an urban
  renewal plan approved by the Secretary of Housing and Urban  Development
  under  part  A  or  part  B  of  title  I of the Housing Act of 1949, as
  amended, or located within any area covered by a  program  eligible  for
  assistance   under   section   103   of  the  Demonstration  Cities  and
  Metropolitan Development Act of 1966, as amended, and loans made for the
  improvement of any such real property; (x) loans secured by an  interest
  in educational, health, or welfare institutions or facilities, including
  structures  designed  or  used  primarily  for  residential purposes for
  students, residents, and persons under care, employees,  or  members  of
  the  staff  of  such institutions or facilities; (xi) loans made for the
  payment of expenses of college or  university  education  or  vocational
  training; (xii) property used by the taxpayer in the conduct of business
  which  consists  principally  of acquiring the savings of the public and
  investing in loans; (xiii) loans for which the taxpayer is the  creditor
  and  which  are wholly secured by loans described in clause (iv) of this
  subparagraph, but excluding loans for which the taxpayer is the creditor
  to any banking corporation described in paragraphs one through seven  of
  subsection  (a) of section fourteen hundred fifty-two of this article or
  a real estate investment trust, as such term is defined in  section  856
  of  the  internal revenue code, and excluding loans which are treated by
  the taxpayer as  subsidiary  capital  for  purposes  of  the  deductions
  provided  by  paragraph  eleven of subsection (e) of this section; (xiv)
  small business loans or  small  farm  loans  located  in  low-income  or
  moderate-income census tracts or block numbering areas delineated by the
  United  States bureau of the census in the most recent decennial census;
  and  (xv)  community  development   loans   or   community   development
  investments.  For  purposes  of  clause  (xv)  of  this  subparagraph, a
  "community development loan" is a loan  that  (I)  has  as  its  primary
  purpose  community  development, (II) has not been reported or collected
  by  the  taxpayer  for  consideration  in   the   taxpayer's   community
  reinvestment   act   evaluation   pursuant   to  the  federal  community
  reinvestment act of 1977, as amended, or section twenty-eight-b  of  the
  banking  law  as  a  mortgage  loan  described  in  clause  (iv) of this
  subparagraph or a small business loan,  small  farm  loan,  or  consumer
  loan,  (III)  benefits  the  taxpayer's  assessment  area  or  areas for
  purposes of the federal community reinvestment act of 1977,  as  amended
  or  section  twenty-eight-b of the banking law or a broader statewide or
  regional area that includes the taxpayer's assessment area, and (IV)  is
  identified   in   the  taxpayer's  books  and  records  as  a  community
  development  loan  for  purposes  of  its  community  reinvestment   act
  evaluation  pursuant  to the federal community reinvestment act of 1977,
  as amended or section twenty-eight-b of the banking law. For purposes of
  clause (xv) of this subparagraph, a "community  development  investment"
  is  an  investment  in  a  security  which  has  as  its primary purpose
  community development and which is identified in  the  taxpayer's  books
  and  records  as  a  qualified  investment for purposes of its community
  reinvestment  act  evaluation  pursuant   to   the   federal   community
  reinvestment  act  of  1977, as amended or section twenty-eight-b of the

  banking law. For purposes of the  two  preceding  sentences,  "community
  development"  means (I) affordable housing (including multifamily rental
  housing for low-income or moderate-income individuals);  (II)  community
  services  targeted  to  low-income or moderate-income individuals; (III)
  activities that promote economic development by financing businesses  or
  farms  that  meet  the  size eligibility standards of the small business
  administration's  development  company  or  small  business   investment
  company programs or have gross annual revenues of one million dollars or
  less;  (IV)  activities  that  revitalize  or  stabilize  low-income  or
  moderate-income census tracts or block numbering areas delineated by the
  United States bureau of the census in the most recent decennial  census;
  or  (V)  activities that seek to prevent defaults and/or foreclosures in
  loans included in items (I) and (III) of this sentence.
    (C) At the election of  the  taxpayer,  the  percentage  specified  in
  subparagraph  (B) of this paragraph shall be applied on the basis of the
  average assets outstanding during the taxable year, in lieu of the close
  of the taxable year. For purposes of clause (iv) of subparagraph (B)  of
  this  paragraph,  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 (determined as of the  time
  the loan is made). Also, for purposes of clause (iv) of subparagraph (B)
  of  this paragraph, 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  clause  (vi)  of
  subparagraph  (B)  of  this  paragraph,  any regular interest in another
  REMIC held by such REMIC shall be treated  as  a  loan  described  in  a
  preceding  clause  under  principles  similar  to  the principle of such
  clause (vi); except that if such REMICS are part of a tiered  structure,
  they shall be treated as one REMIC for purposes of such clause (vi).
    (2)  A  thrift  institution  must  exclude from the computation of its
  entire net income any amount allowed as a deduction for  federal  income
  tax  purposes  pursuant  to  sections  166,  585  or 593 of the internal
  revenue code.
    (3) A thrift institution shall be allowed as a deduction in  computing
  entire net income the amount of a reasonable addition to its reserve for
  bad debts. This amount shall be equal to the sum of
    (A)  the  amount determined to be a reasonable addition to the reserve
  for losses on nonqualifying loans, computed in the  same  manner  as  is
  provided  with  respect to additions to the reserves for losses on loans
  of banks under paragraph one of subsection (i) of this section, plus
    (B) the amount determined by the taxpayer to be a reasonable  addition
  to  the  reserve  for losses on qualifying real property loans, but such
  amount shall not exceed the amount determined under  paragraph  four  or
  five  of  this  subsection,  whichever  is  the  larger,  but the amount
  determined under this subparagraph shall in no case be greater than  the
  larger of
    (i) the amount determined under such paragraph five, or
    (ii)  the  amount  which,  when  added  to the amount determined under
  subparagraph (A) of this paragraph, equals the amount  by  which  twelve
  percent  of the total deposits or withdrawable accounts of depositors of
  the taxpayer at the close of such year exceeds the sum of  its  surplus,
  undivided  profits  and  reserves  at the beginning of such year (taking

  into account any portion thereof attributable to the period  before  the
  first  taxable  year  beginning  after  December  thirty-first, nineteen
  hundred fifty-one).
    The  taxpayer  must  include  in  its  tax  return  for  each  year  a
  computation of the amount of  the  addition  to  the  bad  debt  reserve
  determined  under this subsection. The use of a particular method in the
  return for a taxable year is not a binding election by the taxpayer.
    (4) (A) Subject to subparagraphs (B) and (C) of  this  paragraph,  the
  amount  determined under this paragraph for the taxable year shall be an
  amount equal to thirty-two percent of the entire  net  income  for  such
  year.
    (B)  The  amount  determined  under subparagraph (A) of this paragraph
  shall be reduced (but not  below  0)  by  the  amount  determined  under
  subparagraph (A) of paragraph three of this subsection.
    (C)  The  amount  determined under this paragraph shall not exceed the
  amount necessary to increase the balance at the  close  of  the  taxable
  year  of the reserve for losses on qualifying real property loans to six
  percent of such loans outstanding at such time.
    (D) For purposes  of  this  paragraph,  entire  net  income  shall  be
  computed
    (i)  by excluding from income any amount included therein by reason of
  subparagraph (B) of paragraph eight of this subsection,
    (ii) without regard to any deduction allowable for any addition to the
  reserve for bad debts, and
    (iii) by excluding from income an amount equal to the net gain for the
  taxable year arising from the sale or exchange of stock of a corporation
  or of obligations the interest on which is excludable from gross  income
  under section 103 of the internal revenue code.
    (iv)  Whenever  a  thrift  institution  is  properly  includable  in a
  combined return, entire net income,  for  purposes  of  this  paragraph,
  shall  not  exceed  the  lesser  of  the thrift institution's separately
  computed entire net income as adjusted pursuant to clauses  (i)  through
  (iii)  of this subparagraph or the combined group's entire net income as
  adjusted pursuant to clauses (i) through (iii) of this subparagraph.
    (5) The amount determined under this paragraph for  the  taxable  year
  shall  be computed in the same manner as is provided under paragraph one
  of subsection (i) of this section with respect to additions to  reserves
  for  losses  on  loans of banks. Provided, however, that for any taxable
  year beginning after nineteen hundred ninety-five, for purposes of  such
  computation,  the  base  year shall be the later of (A) the last taxable
  year beginning in nineteen hundred ninety-five or (B) the  last  taxable
  year  before  the  current year in which the amount determined under the
  provisions of subparagraph (B) of paragraph  three  of  this  subsection
  exceeded the amount allowable under this subparagraph.
    (6)  (A)  (i)  Each  taxpayer  described  in  paragraph  one  of  this
  subsection shall establish and maintain a New York reserve for losses on
  qualifying real property  loans,  a  New  York  reserve  for  losses  on
  nonqualifying loans and a supplemental reserve for losses on loans. Such
  reserves  shall be maintained for all subsequent taxable years that this
  subsection  applies  to  the  taxpayer. (ii)  For   purposes   of   this
  subsection,  such  reserves  shall be treated as reserves for bad debts,
  but no deduction shall be allowed for any addition to  the  supplemental
  reserve  for  losses on loans. (iii) Except as noted below, the balances
  of each such reserve at the beginning of the  first  day  of  the  first
  taxable  year  beginning  after  December thirty-first, nineteen hundred
  ninety-five shall be the same as the  balances  maintained  for  federal
  income tax purposes in accordance with section 593(c)(1) of the internal
  revenue  code as in existence on December thirty-first, nineteen hundred

  ninety-five for the last day of  the  last  tax  year  beginning  before
  January  first, nineteen hundred ninety-six. A taxpayer which maintained
  a New York reserve for loan losses on qualifying real property loans  in
  the  last  tax  year  beginning  before  January first, nineteen hundred
  ninety-six shall have a continuation of such New York reserve balance in
  lieu of  the  amount  determined  under  the  preceding  sentence.  (iv)
  Notwithstanding  clause  (ii) of this subparagraph, any amount allocated
  to the reserve for losses on qualifying real property loans pursuant  to
  section  593  (c)  (5)  of  the  internal  revenue  code  as  in  effect
  immediately prior to the enactment of the Tax Reform Act of  1976  shall
  not  be  treated  as  a reserve for bad debts for any purpose other than
  determining the amount referred to  in  subparagraph  (B)  of  paragraph
  three  of  this  subsection,  and  for such purpose such amount shall be
  treated as remaining in such reserve.
    (B) Any debt becoming worthless or partially worthless in respect of a
  qualifying real property loan shall be charged to the reserve for losses
  on such loans and any debt becoming worthless or partially worthless  in
  respect  of  a  nonqualifying  loan  shall be charged to the reserve for
  losses on nonqualifying loans, except that any such  debt  may,  at  the
  election  of  the  taxpayer,  be  charged  in  whole  or  in part to the
  supplemental reserve for losses on loans.
    (C) The New York reserve for losses on qualifying real property  loans
  shall  be  increased  by the amount determined under subparagraph (B) of
  paragraph three of this subsection and the New York reserve  for  losses
  on nonqualifying loans shall be increased by the amount determined under
  subparagraph (A) of paragraph three of this subsection.
    (7)  (A)  For  purposes  of this subsection, the term "qualifying real
  property loan" shall mean any loan secured by an  interest  in  improved
  real  property or secured by an interest in real property which is to be
  improved out of the proceeds of the loan. Such term  shall  include  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 clauses (i) through  (v)  of  subparagraph
  (B)  of  paragraph one of this subdivision. However, such term shall not
  include: (i) any loan evidenced by a security  (as  defined  in  section
  165(g)  (2) (C) of the internal revenue code); (ii) any loan, whether or
  not evidenced by a security (as defined in such section 165(g) (2) (C)),
  the  primary  obligor  of  which  is  (I)  a  government  or   political
  subdivision  or  instrumentality thereof, (II) a banking corporation, or
  (III) any corporation sixty-five percent or more of whose  voting  stock
  is  owned or controlled, directly or indirectly, by the taxpayer or by a
  banking corporation or bank  holding  company  that  owns  or  controls,
  directly  or  indirectly, sixty-five percent or more of the voting stock
  of the taxpayer; (iii) any loan, to the extent secured by a  deposit  in
  or  share  of  the  taxpayer; or (iv) any loan which, within a sixty-day
  period beginning in one taxable year of the creditor and ending  in  its
  next  taxable  year, is made or acquired and then repaid or disposed of,
  unless the transactions by which such loan was made or acquired and then
  repaid or disposed of are established  to  be  for  bona  fide  business
  purposes.
    (B)  For  purposes  of  this subsection, the term "nonqualifying loan"
  shall mean any loan which is not a qualifying real property loan.
    (C) For purposes of this subsection, the term "loan" shall mean  debt,
  as the term "debt" is used in section 166 of the internal revenue code.
    (D) A regular or residual interest in a REMIC, as such term is defined
  in  section  860D  of  the  internal revenue code, shall be treated as a

  qualifying real property loan, except that,  if  less  than  ninety-five
  percent  of  the assets of such REMIC are qualifying real property loans
  (determined as if the taxpayer held  the  assets  of  the  REMIC),  such
  interest  shall be so treated only in the proportion which the assets of
  such REMIC consist of such loans. For purposes  of  determining  whether
  any  interest  in  a  REMIC  qualifies under the preceding sentence, any
  interest in another REMIC held by such  REMIC  shall  be  treated  as  a
  qualifying real property loan under principles similar to the principles
  of  the  preceding  sentence,  except  that if such REMICS are part of a
  tiered structure, they shall be treated as one  REMIC  for  purposes  of
  this paragraph.
    (8)(A)  Any  distribution of property (as defined in section 317(a) of
  the internal revenue code) by a thrift institution to a shareholder with
  respect to its stock,  if  such  distribution  is  not  allowable  as  a
  deduction under section 591 of such code, shall be treated as made
    (i)  first  out  of  its  New York earnings and profits accumulated in
  taxable years beginning after December  thirty-first,  nineteen  hundred
  fifty-one, to the extent thereof,
    (ii)  then  out  of the New York reserve for losses on qualifying real
  property loans, to the extent  additions  to  such  reserve  exceed  the
  additions  which  would  have  been allowed under paragraph five of this
  subsection,
    (iii) then out of the supplemental reserve for losses on loans, to the
  extent thereof,
    (iv) then out of such other accounts as may be proper.
  This subparagraph shall  apply  in  the  case  of  any  distribution  in
  redemption  of  stock  or in partial or complete liquidation of a thrift
  institution, except that any such distribution shall be treated as  made
  first  out  of  the amount referred to in clause (ii) of this paragraph,
  second out of the amount referred to in clause (iii) of this  paragraph,
  third  out of the amount referred to in clause (i) of this paragraph and
  then out of such other accounts as  may  be  proper.  This  subparagraph
  shall  not  apply  to  any transaction to which section 381 of such code
  (relating to carryovers and certain corporate acquisitions) applies,  or
  to   any   distribution  to  the  federal  savings  and  loan  insurance
  corporation or the federal deposit insurance corporation  in  redemption
  of  an  interest  in an association or institution, if such interest was
  originally  received  by  the  federal  savings   and   loan   insurance
  corporation or the federal deposit insurance corporation in exchange for
  financial  assistance pursuant to section 406(f) of the federal national
  housing act or pursuant to subsection (c) of  section  thirteen  of  the
  federal deposit insurance act.
    (B)  If  any  distribution  is  treated under subparagraph (A) of this
  paragraph as having been made out of the reserves described  in  clauses
  (ii)  and  (iii)  of  such subparagraph, the amount charged against such
  reserve shall be the amount which, when reduced by  the  amount  of  tax
  imposed  under  the  internal  revenue  code  and  attributable  to  the
  inclusion of such amount in gross income, is equal to the amount of such
  distribution; and the amount so charged against such  reserve  shall  be
  included in the entire net income of the taxpayer.
    (C)  (i)  For  purposes  of  clause  (ii)  of subparagraph (A) of this
  paragraph, additions to the New York reserve for  losses  on  qualifying
  real  property  loans  for  the  taxable  year in which the distribution
  occurs shall be taken into account.
    (ii) For purposes of computing under this subsection the amount  of  a
  reasonable  addition  to  the  New York reserve for losses on qualifying
  real property loans for any taxable year, the amount charged during  any

  year  to  such reserve pursuant to the provisions of subparagraph (B) of
  this paragraph shall not be taken into account.
    (9)  A  taxpayer  which  maintains  a  New  York reserve for losses on
  qualifying real property loans and which ceases to meet  the  definition
  of  a thrift institution as defined in paragraph one of this subsection,
  must include in its entire net income for the  last  taxable  year  such
  paragraph  applied  the  excess  of  its  New York reserve for losses on
  qualifying real property loans over the greater of (A) its  reserve  for
  losses  on qualifying real property loans as of the last day of the last
  taxable year such reserve is maintained for federal income tax  purposes
  or (B) the balance of the New York reserve for losses on qualifying real
  property  loans  which  would  be allowable to the taxpayer for the last
  taxable year such taxpayer met such definition of a  thrift  institution
  if  the taxpayer had computed its reserve balance pursuant to the method
  described in subparagraph (A) of paragraph one of subsection (i) of this
  section.
    (i) (1) A taxpayer subject to the provisions of section 585(c) of  the
  internal  revenue code and not subject to subsection (h) of this section
  may, in computing entire net income, deduct an amount equal to  or  less
  than  the  amount  determined  pursuant  to  subparagraph  (A)  of  this
  paragraph or subparagraph (B) of this paragraph, whichever  is  greater.
  Provided,  however,  in  no  event  shall the deduction be less than the
  amount determined pursuant to such subparagraph (A).
    (A) The amount determined pursuant to this subparagraph shall  be  the
  amount  necessary  to  increase  the balance of its New York reserve for
  losses on loans (at the close of the taxable year) to the  amount  which
  bears  the  same  ratio to loans outstanding at the close of the taxable
  year as (i) the total bad debts sustained during the  taxable  year  and
  the  five  preceding  taxable  years  (or,  with  the  approval  of  the
  commissioner of taxation and finance, a shorter  period),  adjusted  for
  recoveries of bad debts during such period, bears to (ii) the sum of the
  loans outstanding at the close of such six or fewer taxable years.
    (B)  (i)  The amount determined pursuant to this subparagraph shall be
  the amount necessary to increase the balance of its New York reserve for
  losses on loans (at the close of the taxable year) to the lower of --
    (I) the balance of the reserve at the close of the base year, or
    (II) if the amount of loans outstanding at the close  of  the  taxable
  year  is  less  than the amount of loans outstanding at the close of the
  base year, the amount which bears the same ratio to loans outstanding at
  the close of the taxable year as the balance of the reserve at the close
  of the base year bears to the amount of loans outstanding at  the  close
  of the base year.
    (ii)  For  purposes  of this paragraph, the base year shall be (I) for
  taxable years beginning  in  nineteen  hundred  eighty-seven,  the  last
  taxable  year  before  the most recent adoption of the experience method
  for federal income  tax  purposes  or  for  purposes  of  this  article,
  whichever  is  earlier,  and  (II)  for  taxable  years  beginning after
  nineteen hundred eighty-seven, the last taxable  year  beginning  before
  nineteen hundred eighty-eight.
    (2)  (A)  Each  taxpayer described in paragraph one of this subsection
  shall establish and maintain a New York reserve  for  losses  on  loans.
  Such  reserve  shall be maintained for all subsequent taxable years. The
  balance of the New York reserve for losses on loans at the beginning  of
  the  first day of the first taxable year the taxpayer becomes subject to
  this subsection shall be the same as the balance  at  the  beginning  of
  such  day  of  the  reserve  for  losses on loans maintained for federal
  income tax purposes. The New York reserve for losses on loans  shall  be
  reduced  by  an amount equal to the deduction allowed, but not more than

  the amount  allowable,  for  worthless  debts  for  federal  income  tax
  purposes  pursuant  to section 166 of the internal revenue code plus the
  amount, if any, charged against its reserve for losses on loans pursuant
  to section 585(c)(4) of such code.
    (B)  For  purposes  of  subparagraph (A) of this paragraph, a taxpayer
  which had previously been subject to the provisions of subsection (h) of
  this section shall establish a New York  reserve  for  losses  on  loans
  equal  to  the  sum of (i) the greater of (I) the balance of its federal
  reserve for losses on qualifying real property loans as of the first day
  of the first taxable year the taxpayer becomes subject to the provisions
  of this subsection or (II) the greater of the amounts  determined  under
  subparagraphs  (A)  and  (B) of paragraph nine of subsection (h) of this
  section in the year such paragraph applied to  the  taxpayer,  (ii)  the
  greater  of  (I)  the  balance  in  its  federal  reserve  for losses on
  nonqualifying loans as of the first day of the first  taxable  year  the
  taxpayer  becomes  subject to this subsection or (II) the balance in its
  New York reserve for losses on nonqualifying loans as of the  last  date
  the  taxpayer  was  subject  to the provisions of subsection (h) of this
  section and (iii) the balance in its supplemental reserve for losses  on
  loans  as of the last date the taxpayer was subject to the provisions of
  subsection (h) of this section.
    (3) The determination and treatment of the New York  reserve  balance,
  including  any  additions  thereto, subtractions therefrom, or recapture
  thereof, for
    (A) any banking corporation which  was  subject  to  tax  for  federal
  income  tax purposes but not subject to tax under this article for prior
  taxable years,
    (B) any taxpayer which ceases to be subject to tax under this article,
  or
    (C) any other unusual circumstances
  shall be  determined  by  the  commissioner  of  taxation  and  finance.
  Provided,  however, any banking corporation which was subject to tax for
  federal income tax purposes but not subject to tax  under  this  article
  for  prior  taxable years shall have as its opening New York reserve for
  losses on loans the amount determined  by  applying  the  provisions  of
  subparagraph   (A)   of  paragraph  one  of  this  subsection  to  loans
  outstanding at the close of its last taxable year for federal income tax
  purposes ending prior to the first taxable year for which  the  taxpayer
  is  subject  to  tax  under this article and provided, further, that the
  provisions of subparagraph (B) of paragraph one of this subsection shall
  not apply.
    (j) (1) In the case of property placed in  service  prior  to  January
  first,  nineteen  hundred seventy-three, for which the taxpayer properly
  adopted a different method of computing depreciation under  section  two
  hundred  nineteen-z  or  section two hundred nineteen-xx of this chapter
  (as such sections were in effect on  or  before  December  thirty-first,
  nineteen  hundred  seventy-two)  than was adopted for federal income tax
  purposes with respect to such property, entire  net  income  under  this
  article  shall  be  computed without regard to the amount allowable as a
  deduction for depreciation of such property in computing federal taxable
  income for the taxable year but, in lieu thereof, shall be  computed  as
  if  such deduction were determined by the method of depreciation adopted
  with respect to such property under sections two hundred  nineteen-z  or
  two hundred nineteen-xx of this chapter (as such sections were in effect
  on or before December thirty-first, nineteen hundred seventy-two).
    (2)  In  computing  entire  net  income,  the  amount  allowable  as a
  deduction for charitable contributions for federal income  tax  purposes
  shall  be  decreased  by  any  amount allowed as a deduction for federal

  income tax purposes for the  taxable  year  under  section  one  hundred
  seventy   of  the  internal  revenue  code  as  a  carryover  of  excess
  contributions which are not made in such taxable  year  and  which  were
  deductible  in  computing  the tax due under article nine-B or nine-C of
  this chapter (as such articles were in  effect  on  or  before  December
  thirty-first, nineteen hundred seventy-two).
    (3)  There shall be excluded from the computation of entire net income
  any amount allowed as a deduction for federal income  tax  purposes  for
  the  taxable  year  under  section twelve hundred twelve of the internal
  revenue code as a capital loss carryforward to the taxable  year,  which
  was  deductible  as a loss in computing the tax due under article nine-B
  or nine-C of this chapter (as such articles were in effect  on  December
  thirty-first, nineteen hundred seventy-two).
    (4)  There shall be excluded from the computation of entire net income
  the amount of any income or gain from  the  sale  of  real  or  personal
  property  which  is includible in determining federal taxable income for
  the taxable year pursuant to the installment method under  section  four
  hundred  fifty-three  of  the  internal revenue code, to the extent that
  such income or gain was includible in the computation  of  the  tax  due
  under article nine-B or nine-C of this chapter (as such articles were in
  effect on December thirty-first, nineteen hundred seventy-two).
    (5)  To the extent not otherwise provided in this article, there shall
  be excluded from entire net income the amount necessary to  prevent  the
  taxation  under this article of any other amount of income or gain which
  was properly included in income or gain and was  taxable  under  article
  nine-B  or nine-C of this chapter (as such articles were in effect on or
  before December thirty-first, nineteen hundred  seventy-two)  and  there
  shall  be  disallowed  as a deduction in computing entire net income any
  amount which was allowable as a deduction in computing the tax due under
  such  articles  (as  they  were  in  effect  on   or   before   December
  thirty-first, nineteen hundred seventy-two).
    (k)  (1) At the election of the taxpayer, there shall be deducted from
  the portion of  its  entire  net  income  allocated  within  the  state,
  depreciation with respect to any property such as described in paragraph
  two  of  this  subsection,  not exceeding twice the depreciation allowed
  with respect to the same property for federal income tax purposes.  Such
  deduction shall be allowed only upon condition that entire net income be
  computed  without  any deduction for depreciation or amortization of the
  same property, and the total of all  deductions  allowed  under  article
  nine-B  or nine-C of this chapter (as such articles were in effect on or
  before December thirty-first, nineteen  hundred  seventy-two)  and  this
  article in any taxable year or years with respect to the depreciation of
  any such property shall not exceed its cost or other basis.
    (2)  Such  deduction  shall  be  allowed only with respect to tangible
  property  which  is  depreciable  pursuant  to   section   one   hundred
  sixty-seven  of  the internal revenue code, having a situs in this state
  and used in the taxpayer's business, (i) constructed,  reconstructed  or
  erected  after  December  thirty-first,  nineteen  hundred  sixty-three,
  pursuant to a contract which was, on or  before  December  thirty-first,
  nineteen  hundred  sixty-seven,  and at all times thereafter, binding on
  the taxpayer or, property, the physical construction, reconstruction  or
  erection  of  which  began  on or before December thirty-first, nineteen
  hundred sixty-seven or which began after such date pursuant to an  order
  placed on or before December thirty-first, nineteen hundred sixty-seven,
  and then only with respect to that portion of the basis thereof which is
  properly  attributable  to such construction, reconstruction or erection
  after December  thirty-first,  nineteen  hundred  sixty-three,  or  (ii)
  acquired  after  December  thirty-first,  nineteen  hundred sixty-three,

  pursuant to a contract which was, on or  before  December  thirty-first,
  nineteen  hundred  sixty-seven,  and at all times thereafter, binding on
  the taxpayer or pursuant to  an  order  placed  on  or  before  December
  thirty-first,  nineteen  hundred  sixty-seven, by purchase as defined in
  section one hundred seventy-nine (d) of the internal  revenue  code,  if
  the original use of such property commenced with the taxpayer, commenced
  in  this  state  and  commenced  after  December  thirty-first, nineteen
  hundred sixty-three, or (iii) acquired, constructed,  reconstructed,  or
  erected   subsequent   to   December   thirty-first   nineteen   hundred
  sixty-seven,  if  such  acquisition,  construction,  reconstruction   or
  erection  is  pursuant  to a plan of the taxpayer which was in existence
  December thirty-first, nineteen hundred sixty-seven and  not  thereafter
  substantially    modified,    and    such   acquisition,   construction,
  reconstruction or erection would qualify under the rules  in  paragraphs
  four,  five  or  six  of  subsection  (h)  of section forty-eight of the
  internal revenue code provided all references in such  paragraphs  four,
  five  and six to the dates October nine, nineteen hundred sixty-six, and
  October ten, nineteen hundred  sixty-six,  shall  be  read  as  December
  thirty-first,  nineteen hundred sixty-seven. A taxpayer shall be allowed
  a deduction under clauses (i), (ii) or (iii) of this paragraph  only  if
  the   tangible   property   shall  be  delivered  or  the  construction,
  reconstruction or erection shall be  completed  on  or  before  December
  thirty-first,  nineteen  hundred  sixty-nine,  except  in  the  case  of
  tangible property  which  is  acquired,  constructed,  reconstructed  or
  erected  pursuant  to  a  contract  which  was,  on  or  before December
  thirty-first, nineteen hundred sixty-seven, and at all times thereafter,
  binding on  the  taxpayer.  Provided,  however,  for  any  taxable  year
  beginning  on  or  after  January first, nineteen hundred sixty-eight, a
  taxpayer shall not be allowed a deduction  under  paragraph  (1)  hereof
  with  respect  to  tangible  personal property leased by it to any other
  person or corporation. For  purposes  of  the  preceding  sentence,  any
  contract  or  agreement  to  lease  or rent or for a license to use such
  property shall be considered a lease. With respect to property which the
  taxpayer uses itself for purposes other  than  leasing  for  part  of  a
  taxable year and leases for a part of a taxable year, the taxpayer shall
  be  allowed a deduction under paragraph (1) in proportion to the part of
  the year it uses such property.
    (3) If the deduction allowable for any taxable year pursuant  to  this
  subsection  exceeds  the  portion  of  the  taxpayer's entire net income
  allocated to this state for such year, the excess may be carried over to
  the following taxable year or years and may be deducted from the portion
  of the taxpayer's entire net income allocated to  this  state  for  such
  year or years.
    (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
  subsection,  subdivision  twelve  of  section  two hundred nineteen-z or
  subdivision ten of section two hundred nineteen-xx of this  chapter  (as
  such  subdivisions  were  in  effect on or before December thirty-first,
  nineteen hundred seventy-two),  the  gain  or  loss  entering  into  the
  computation  of federal taxable income shall be disregarded in computing
  entire net income, and there shall  be  added  or  subtracted  from  the
  portion of entire net income allocated within the state the gain or loss
  upon  such sale or other disposition. In computing such gain or loss the
  basis of the property sold or disposed of shall be adjusted  to  reflect
  the  deduction  allowed  with  respect  to  such  property  pursuant  to
  paragraph one of this subsection. Provided however, that no  loss  shall
  be  recognized for the purposes of this paragraph with respect to a sale
  or other disposition of property to a person whose  acquisition  thereof

  is  not a purchase as defined in section one hundred seventy-nine (d) of
  the internal revenue code.
    (k-1)  A  net operating loss deduction shall be allowed which shall be
  presumably the same as the net operating loss  deduction  allowed  under
  section  one  hundred  seventy-two  of the internal revenue code, except
  that in every instance  where  such  deduction  is  allowed  under  this
  article:
    (1)  any  net  operating  loss  included in determining such deduction
  shall be adjusted to reflect the inclusions and exclusions  from  entire
  net income required by the other provisions of this section,
    (2)  such deduction shall not include any net operating loss sustained
  during any taxable year beginning prior to January first,  two  thousand
  one, or during any taxable year in which the taxpayer was not subject to
  the tax imposed by this article,
    (3) such deduction shall not exceed the deduction for the taxable year
  allowed  under  section  one hundred seventy-two of the internal revenue
  code augmented by the excess  of  the  amount  allowed  as  a  deduction
  pursuant  to  subsection  (h)  or  (i)  of  this  section,  whichever is
  applicable, over the amount allowed as a deduction pursuant  to  section
  166  or 585 of the internal revenue code, for each taxable year in which
  the taxpayer had a net operating loss which is carried  to  the  taxable
  year of the deduction under this provision, in the aggregate, (except to
  the  extent  such excess was previously deducted in computing entire net
  income), and
    (4) the net operating loss deduction allowed under section one hundred
  seventy-two of the internal revenue code  shall  for  purposes  of  this
  subsection  be  determined  as  if  the  taxpayer had elected under such
  section to relinquish the entire carryback period with  respect  to  net
  operating losses.
    (l)  In the case of a savings and insurance bank which conducts a life
  insurance  business  through  a  life  insurance  department  under  the
  authority  of  article six-a of the banking law, entire net income means
  the federal taxable income which such bank is required to report to  the
  United  States treasury department under paragraph one of subsection (a)
  of section five hundred ninety-four of the internal revenue code and the
  modifications required by this section in computing  entire  net  income
  shall only be made with respect to such federal taxable income.
    (m) If the period covered by a return under this article is other than
  the  period  covered  by  the  return  to  the  United  States  treasury
  department,
    (1) except as provided in paragraph two of this subsection, entire net
  income  and  alternative  entire  net  income  shall  be  determined  by
  multiplying  the taxable income reported to such department (as adjusted
  pursuant to the provisions of this article) by the  number  of  calendar
  months  or  major parts thereof covered by the return under this article
  and dividing by the number of calendar months  or  major  parts  thereof
  covered  by  the return to such department. If it shall appear that such
  method of determining entire net income or alternative entire net income
  does not properly  reflect  the  taxpayer's  income  during  the  period
  covered  by  the  return  under  this article, the commissioner shall be
  authorized in his or her discretion to determine such entire net  income
  or  alternative  entire net income solely on the basis of the taxpayer's
  income during the period covered by its return under this article.
    (2) in the case of a New York S termination year, an equal portion  of
  entire  net  income  shall  be  assigned  to  each day of such year. The
  portion of such entire net income thereby assigned to the S  short  year
  and the C short year shall be included in the respective returns for the
  S  short  year  and  the C short year under this article. However, where

  paragraph three of subsection (s) of section six hundred twelve of  this
  chapter applies, the portion of such entire net income assigned to the S
  short  year  and  the  C  short  year  shall  be determined under normal
  accounting rules.
    (n)  The  tax  commission 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.
    (o) QSSS. (1) New York S corporation. In the case  of  a  New  York  S
  corporation  which  is the parent of a qualified subchapter S subsidiary
  (QSSS) with respect to a taxable year:
    (A) where the QSSS is not an excluded corporation,
    (i) in determining the entire net income of such  parent  corporation,
  all  assets,  liabilities,  income  and  deductions of the QSSS shall be
  treated as assets, liabilities, income  and  deductions  of  the  parent
  corporation, and
    (ii)  the QSSS shall be exempt from all taxes imposed by this article,
  and
    (B) where the QSSS is an excluded corporation, the entire  net  income
  of  the  parent  corporation  shall be determined as if the federal QSSS
  election had not been made.
    (2) New York C corporation. In the case of a New  York  C  corporation
  which is the parent of a QSSS with respect to a taxable year:
    (A) where the QSSS is a taxpayer,
    (i)  in  determining the entire net income of such parent corporation,
  all assets, liabilities, income and deductions  of  the  QSSS  shall  be
  treated  as  assets,  liabilities,  income  and deductions of the parent
  corporation, and
    (ii) the QSSS shall be exempt from all taxes imposed by this  article,
  and
    (B) where the QSSS is not a taxpayer,
    (i) if the QSSS is not an excluded corporation, the parent corporation
  may  make  a QSSS inclusion election to include all assets, liabilities,
  income and deductions of the QSSS as  assets,  liabilities,  income  and
  deductions of the parent corporation, and
    (ii) in the absence of such election, or where the QSSS is an excluded
  corporation,  the  entire  net income of the parent corporation shall be
  determined as if the federal QSSS election had not been made.
    (3) Non-New York S corporation not excluded.  In  the  case  of  an  S
  corporation which is not a taxpayer and not an excluded corporation, and
  which  is  the parent of a QSSS which is a taxpayer, the shareholders of
  the parent corporation shall be entitled to make the New York S election
  under subsection (a) of section six hundred sixty of this chapter.
    (A) For any taxable year for which such election  is  in  effect,  the
  parent  corporation  shall be subject to tax under this article as a New
  York S corporation, and the provisions of subparagraph (A) of  paragraph
  one of this subsection shall apply.
    (B) For any taxable year for which such election is not in effect, the
  QSSS shall be a New York C corporation, and the entire net income of the
  QSSS  shall  be  determined as if the federal QSSS election had not been
  made. For purposes of such determination, the taxable year of the parent
  corporation shall constitute the taxable year of  the  QSSS,  excluding,
  however,  any  portion  of  such  year  during  which  the QSSS is not a
  taxpayer.
    (4) S corporation excluded. In the case of an S corporation  which  is
  an  excluded  corporation  and  which is the parent of a QSSS which is a
  taxpayer, the QSSS shall be a New York C corporation and the  provisions
  of subparagraph (B) of paragraph three of this subsection shall apply.

    (5)  Excluded  corporation.  The  term  "excluded corporation" means a
  corporation subject to  tax  under  sections  one  hundred  eighty-three
  through  one  hundred  eighty-six of this chapter, inclusive, or article
  nine-A or thirty-three of this chapter, or  a  foreign  corporation  not
  taxable by this state which, if it were taxable, would be subject to tax
  under any of such sections or articles.
    (6)  Taxpayer.  For  purposes  of  this paragraph, the term "taxpayer"
  means a parent corporation or QSSS subject to tax  under  this  article,
  determined without regard to the provisions of this paragraph.
    (7)  QSSS  inclusion  election.  The  election  under  clause  (i)  of
  subparagraph (B) of paragraph two of this subsection shall be  effective
  for the taxable year for which made and for all succeeding taxable years
  of  the  corporation  until  such election is terminated. An election or
  termination shall be made on  such  form  and  in  such  manner  as  the
  commissioner may prescribe by regulation or instruction.
    (p)  Emerging  technology investment deferral. In the case of any sale
  of a qualified emerging  technologies  investment  held  for  more  than
  thirty-six  months  and  with  respect  to which the taxpayer elects the
  application of this subsection, gain from such sale shall be  recognized
  only  to  the  extent  that the amount realized on such sale exceeds the
  cost of any qualified emerging technologies investment purchased by  the
  taxpayer during the three hundred sixty-five-day period beginning on the
  date  of such sale, reduced by any portion of such cost previously taken
  into account under this subsection. For purposes of this subsection  the
  following shall apply:
    (1)  A  qualified investment is stock of a corporation or an interest,
  other than as a creditor, in a partnership or limited liability  company
  that was acquired by the taxpayer as provided in Internal Revenue Code §
  1202(c)(1)(B),  except  that  the  reference to the term "stock" in such
  section shall be read as "investment," or by the taxpayer from a  person
  who had acquired such stock or interest in such a manner.
    (2)   A  qualified  emerging  technology  investment  is  a  qualified
  investment, that was held  by  the  taxpayer  for  at  least  thirty-six
  months,  in  a  company  defined  in paragraph (c) of subdivision one of
  section thirty-one hundred two-e of the public  authorities  law  or  an
  investment  in  a partnership or limited liability company that is taxed
  as a  partnership  to  the  extent  that  such  partnership  or  limited
  liability company invests in qualified emerging technology companies.
    (3)  For  purposes  of  determining whether the nonrecognition of gain
  under this subsection  applies  to  a  qualified  emerging  technologies
  investment  that  is  sold,  the  taxpayer's  holding  period  for  such
  investment and the qualified emerging technologies  investment  that  is
  purchased  shall be determined without regard to Internal Revenue Code §
  1223.
    (q) Amounts deferred. The amount deferred under subsection (p) of this
  section shall be added to entire net income when the reinvestment in the
  New  York  qualified  emerging  technology  company  which  qualified  a
  taxpayer for such deferral is sold.
    * (r)  For  taxable  years  beginning after December thirty-first, two
  thousand two, in the case of qualified property described  in  paragraph
  two  of  subsection k of section 168 of the internal revenue code, other
  than qualified resurgence zone property described in subsection  (t)  of
  this  section,  and  other than qualified New York Liberty Zone property
  described in paragraph two of subsection  b  of  section  1400L  of  the
  internal  revenue code (without regard to clause (i) of subparagraph (C)
  of such paragraph), which was placed in service on or after June  first,
  two  thouand  three,  a  taxpayer  shall be allowed with respect to such
  property the depreciation deduction allowable under section 167  of  the

  internal  revenue  code  as  such  section  would  have  applied to such
  property had it been acquired by the taxpayer on  September  tenth,  two
  thousand one.
    * NB There are 2 subsection (r)'s
    * (r) Related members expense add back and income exclusion.
    (1)  Definitions.  (A) Related member or members. For purposes of this
  subsection,  the  term  related  member  or  members  means  a   person,
  corporation,  or  other entity, including an entity that is treated as a
  partnership or  other  pass-through  vehicle  for  purposes  of  federal
  taxation,  whether  such  person, corporation or entity is a taxpayer or
  not, where one such person, corporation, or entity, or  set  of  related
  persons,  corporations  or  entities,  directly  or  indirectly  owns or
  controls a controlling  interest  in  another  entity.  Such  entity  or
  entities may include all taxpayers under article nine, nine-A, thirteen,
  twenty-two, thirty-two, thirty-three or thirty-three-A of this chapter.
    (B) Controlling interest. A controlling interest shall mean (i) in the
  case  of  a  corporation,  either  thirty  percent  or more of the total
  combined voting power of all classes of stock of  such  corporation,  or
  thirty percent or more of the capital, profits or beneficial interest in
  such  voting  stock  of  such  corporation,  and  (ii)  in the case of a
  partnership, association, trust or other entity, thirty percent or  more
  of  the  capital,  profits  or  beneficial interest in such partnership,
  association, trust or other entity.
    (C) Royalty payments. Royalty payments are payments directly connected
  to the acquisition, use, maintenance  or  management,  ownership,  sale,
  exchange,  or any other disposition of licenses, trademarks, copyrights,
  trade names, trade dress, service  marks,  mask  works,  trade  secrets,
  patents  and  any other similar types of intangible assets as determined
  by  the  commissioner,  and  includes  amounts  allowable  as   interest
  deductions under section one hundred sixty-three of the internal revenue
  code  to the extent such amounts are directly or indirectly for, related
  to  or  in  connection  with  the  acquisition,  use,   maintenance   or
  management,  ownership, sale, exchange or disposition of such intangible
  assets.
    (D) Valid business purpose. A valid business purpose is  one  or  more
  business  purposes,  other  than the avoidance or reduction of taxation,
  which alone or in combination constitute the primary motivation for some
  business activity or transaction, which activity or transaction  changes
  in  a  meaningful  way, apart from tax effects, the economic position of
  the taxpayer. The economic position of the taxpayer includes an increase
  in the market share of the taxpayer, or the entry by the  taxpayer  into
  new business markets.
    (2) Royalty expense add backs. (A) Except where a taxpayer is included
  in a combined return with a related member pursuant to subsection (f) of
  section  fourteen  hundred sixty-two of this article, for the purpose of
  computing entire net income, a taxpayer must add back  royalty  payments
  to  a related member during the taxable year to the extent deductible in
  calculating federal taxable income.
    (B) The add back of royalty payments shall not be required if  and  to
  the extent that such payments meet either of the following conditions:
    (i)  the  related  member  during  the  same  taxable year directly or
  indirectly paid or incurred the amount to a person or entity that is not
  a related member, and such transaction was done for a valid business and
  the payments are made at arm's length;
    (ii) the royalty payments are paid or incurred  to  a  related  member
  organized  under the laws of a country other than the United States, are
  subject to a comprehensive income tax treaty between  such  country  and

  the  United States, and are taxed in such country at a tax rate at least
  equal to that imposed by this state.
    (3) Royalty income exclusions. For the purpose of computing entire net
  income,  a taxpayer shall be allowed to deduct royalty payments directly
  or indirectly received from a related member during the taxable year  to
  the extent included in the taxpayer's federal taxable income unless such
  royalty  payments would not be required to be added back under paragraph
  two of this subsection or other similar provision in this chapter.
    * NB Applicable to taxable years beginning on or after January 1, 2003
    * NB There are 2 subsection (r)'s
    (s) For taxable  years  beginning  after  December  thirty-first,  two
  thousand  two,  upon the disposition of property to which subsection (r)
  of this section 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  paragraph  seventeen  of
  subsection  (e) and paragraph thirteen of subsection (b) of this section
  attributable to such property.
    (t) For purposes of subsections (r) and (s) of this section, qualified
  resurgence zone property shall  mean  qualified  property  described  in
  paragraph  two  of  subsection  k of section 168 of the internal revenue
  code substantially all of the use of which is in the resurgence zone, as
  defined below, and is in the active conduct of a trade  or  business  by
  the  taxpayer  in  such  zone,  and  the  original  use  of which in the
  resurgence zone commences with the taxpayer after December thirty-first,
  two thousand two. The resurgence zone shall mean the area  of  New  York
  county  bounded  on the south by a line running from the intersection of
  the Hudson River with the Holland Tunnel, and  running  thence  east  to
  Canal  Street,  then running along the centerline of Canal Street to the
  intersection of the  Bowery  and  Canal  Street,  running  thence  in  a
  southeasterly direction diagonally across Manhattan Bridge Plaza, to the
  Manhattan Bridge and thence along the centerline of the Manhattan Bridge
  to  the  point  where  the  centerline  of  the  Manhattan  Bridge would
  intersect with the easterly bank of the East River, and bounded  on  the
  north  by  a line running from the intersection of the Hudson River with
  the Holland Tunnel and running thence north along  West  Avenue  to  the
  intersection  of  Clarkson Street then running east along the centerline
  of Clarkson Street  to  the  intersection  of  Washington  Avenue,  then
  running   south  along  the  centerline  of  Washington  Avenue  to  the
  intersection of West Houston Street, then east along the  centerline  of
  West  Houston  Street,  then  at  the  intersection of the Avenue of the
  Americas continuing east along the centerline of East Houston Street  to
  the easterly bank of the East River.