1453 - Computations of entire net income.
§ 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 incomewhich 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) for taxable years beginning before January first, two thousand ten, 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 taxable years beginning before January first, two thousand ten, 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 havebeen 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 hundredsixty-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 (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, (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) for taxable years beginning before January first, two thousand ten, 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) for taxable years beginning before January first, two thousand ten, 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) for taxable years beginning before January first, two thousand ten, 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 combinedreport or return under article nine-A, article thirty-two or article thirty-three of this chapter. (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 ofsubsection (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 shallnot 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) For taxable years beginning before January first, two thousand ten, 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) For taxable years beginning before January first, two thousand ten, 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 losseson 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) For taxable years beginning before January first, two thousand ten, 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) For taxable years beginning before January first, two thousand ten, 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