12. City adjusted gross income of a resident individual.--(a) General.--The city adjusted gross income of a resident individual means his federal adjusted gross income as defined in the laws of the United States for the taxable year, with the modifications specified in this section.
(b) Modifications increasing federal adjusted gross income.--There shall be added to federal adjusted gross income:
(1) Interest income on obligations of any state other than this state or of a political subdivision of any such other state unless created by compact or agreement to which this state is a party;
(2) Interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States, which the laws of the United States exempt from federal income tax but not from state or local income taxes;
(3) Income taxes imposed by the city, this state or any other taxing jurisdiction, to the extent deductible in determining federal adjusted gross income and not credited against federal income tax;
(4) Interest on indebtedness incurred or continued to purchase or carry obligations or securities the income from which is exempt from tax under this local law, to the extent deductible in determining federal adjusted gross income;
(5) Expenses paid or incurred during the taxable year for (A) the production or collection of income which is exempt from tax under this local law, or (B) the management, conservation or maintenance of property held for the production of such income, and the amortizable bond premium for the taxable year on any bond the interest on which is exempt from tax under this local law, to the extent that such expenses and premiums are deductible in determining federal adjusted gross income; and
(6) In the case of a taxpayer who has exercised the election permitted by subdivisions (g) or (h) of this section, the amount or amounts required by said subdivisions to be added to federal adjusted gross income.
(c) Modifications reducing federal adjusted gross income.--There shall be subtracted from federal adjusted gross income:
(1) Interest income on obligations of the United States and its possessions to the extent includible in gross income for federal income tax purposes;
(2) Interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States to the extent includible in gross income for federal income tax purposes but exempt from state or local income taxes under the laws of the United States;
(3) Pensions to officers and employees of this state, its subdivisions and agencies, to the extent includible in gross income for federal income tax purposes;
(4) Interest or dividend income on obligations or securities to the extent exempt from income tax under the laws of this state authorizing the issuance of such obligations or securities but includible in gross income for federal income tax purposes;
(5) The amount of any refund or credit for overpayment of income taxes imposed by the city, the state, or any other taxing jurisdiction, to the extent properly included in gross income for federal income tax purposes;
(6) Interest on indebtedness incurred or continued to purchase or carry obligations or securities the income from which is subject to tax under this local law but exempt from federal income tax, to the extent that such interest is not deductible in determining federal adjusted gross income and is attributable to a trade or business carried on by the taxpayer;
(7) Ordinary and necessary expenses paid or incurred during the taxable year for (A) the production or collection of income which is subject to tax under this local law but exempt from federal income tax, or (B) the management, conservation or maintenance of property held for the production of such income, and the amortizable bond premium for the taxable year on any bond the interest on which is subject to tax under this local law but exempt from federal income tax, to the extent that such expenses and premiums are not deductible in determining federal adjusted gross income and are attributable to a trade or business carried on by the taxpayer;
(8) In the case of a taxpayer who has exercised the election permitted by subdivisions (g) or (h) of this section, the amount or amounts required by said subdivisions to be subtracted from federal adjusted gross income;
(9) With respect to gain derived from the sale or other disposition of any property acquired prior to July first, nineteen hundred sixty-six, except property described in subsections one and four of section twelve hundred twenty-one of the internal revenue code, the difference between--
(a) the amount of the taxpayer's federal adjusted gross income or, in the case of an estate or trust, the taxpayer's taxable income, and
(b) the amount of the taxpayer's federal adjusted gross income or, in the case of an estate or trust, the taxpayer's taxable income (if smaller than the amount described in (a)) computed as if the federal adjusted basis of such property (on the sale or other disposition of which gain was derived) on the date of the sale or other disposition had been equal to either (i) its fair market value on July first, nineteen hundred sixty-six or the date of its sale or other disposition prior to July first, nineteen hundred sixty-six, plus or minus all adjustments to basis made with respect to such property for federal income tax purposes for periods on and after July first, nineteen hundred sixty-six or (ii) the amount realized from its sale or disposition, whichever is lower; provided, however, that the total modification provided by this subparagraph shall not exceed the amount described in (i), (ii) or (iii)--
(i) if the taxpayer's federal adjusted gross income reflects a net gain from the sale or other disposition of property, except property described in subsections one and four of section twelve hundred twenty-one of the internal revenue code, the amount of such gain plus one thousand dollars,
(ii) if the taxpayer's federal adjusted gross income reflects a net loss from the sale or other disposition of property, except property described in subsections one and four of section twelve hundred twenty-one of the internal revenue code, the amount by which one thousand dollars exceeds such loss,
(iii) if the taxpayer's federal adjusted gross income reflects neither a net gain nor a net loss from the sale or other disposition of property, other than property described in subsections one and four of section twelve hundred twenty-one of the internal revenue code, one thousand dollars.
(d) Modification for city fiduciary adjustment.--There shall be added to or subtracted from federal adjusted gross income (as the case may be) the taxpayer's share, as beneficiary of an estate or trust, of the city fiduciary adjustment determined under section nineteen.
(e) Partners.--The amounts of modifications required to be made under this section by a partner, which relate to items of income, gain, loss or deduction of a partnership, shall be determined under section seventeen.
(f) Husband and wife.--If husband and wife determine their federal income tax on a joint return but determine their city income taxes separately, they shall determine their city adjusted gross incomes separately as if their federal adjusted gross incomes had been determined separately.
(g) Optional modifications.--At the election of the taxpayer there shall also be subtracted from federal adjusted gross income either or both of the items set forth in paragraphs one and two of this subdivision, except that only one of such items shall be subtracted with respect to any one item of property.
(1) Depreciation with respect to any property such as described in paragraph three of this subdivision, not exceeding twice the depreciation allowed with respect to the same property for federal income tax purposes. Such modification shall be allowed only upon condition that any depreciation allowed with respect to the same property in determining federal adjusted gross income shall be added to federal adjusted gross income pursuant to paragraph six of subdivision (b) of this section. The total of all deductions allowed pursuant to this paragraph in any taxable year or years with respect to any property shall not exceed its cost or other basis.
(2) Expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or acquisition of any property such as described in paragraph three of this subdivision which is used or to be used for purposes of research and development in the experimental or laboratory sense. Such purposes shall not be deemed to include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions or research in connection with literary, historical or similar projects. Such modification shall be allowed only on condition that, for the taxable years, and all succeeding years, any deductions allowed for federal income tax purposes on account of such expenditures or on account of depreciation of the same property, except to the extent that its basis may be attributable to factors other than such expenditures, shall be added to federal adjusted gross income pursuant to paragraph six of subdivision (b) of this section, or in case a modification is allowable pursuant to this paragraph for only a part of such expenditures, on condition that a proportionate part of any such deductions allowed for federal income tax purposes be added to federal adjusted gross income. With respect to property which is used or to be used for research and development only in part, or during only part of its useful life, the modification allowable pursuant to this paragraph shall be limited to a proportionate part of the expenditures relating thereto. If a modification shall have been allowed pursuant to this paragraph for all or part of such expenditures with respect to any property, and such property is used for purposes other than research and development to a greater extent than originally reported, the taxpayer shall report such use in his return for the first taxable year during which it occurs, and the administrator may recompute the tax for the year or years for which such deduction was allowed, and may assess any additional tax resulting from such recomputation within the time fixed by subdivision (c) of section sixty-three of this local law.
(3) Such modifications shall be allowed only with respect to tangible property which is depreciable pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in the city and used in the taxpayer's trade or business, (A) the construction, reconstruction or erection of which is completed after June thirtieth, nineteen hundred sixty-six, and then only with respect to that portion of the basis thereof or the expenditures relating thereto which is properly attributable to such construction, reconstruction or erection after June thirtieth, nineteen hundred sixty-six, or (B) acquired after June thirtieth, nineteen hundred sixty-six by purchase as defined in section one hundred seventy-nine (d) of the internal revenue code, if the original use of such property commenced with the taxpayer, commenced in the city and commenced after such date.
(4) If the modifications allowable for any taxable year pursuant to this subdivision exceed the taxpayer's city adjusted gross income, determined without the allowance of such modifications, the excess may be carried over to the following taxable year or years and may be subtracted from federal adjusted gross income for such year or years.
(5) In any taxable year when property is sold or otherwise disposed of, with respect to which a modification has been allowed pursuant to paragraph one or two of this subdivision, the basis of such property shall be adjusted to reflect the modifications so allowed, and if the basis as so adjusted is lower than the adjusted basis of the same property for federal income tax purposes, there shall be added to federal adjusted gross income the amount of the difference between such adjusted bases; but if such gain or loss is considered a long-term capital gain or loss for federal income tax purposes, the amount to be added shall be limited to fifty percent of the difference between such adjusted bases.
(h) Optional modification for waste treatment facility expenditures.--At the election of the taxpayer, there shall also be subtracted from federal adjusted gross income expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or improvement of industrial waste treatment facilities and air pollution control facilities.
(1) (A) The term "industrial waste treatment facilities" shall mean facilities for the treatment, neutralization, or stabilization of industrial waste (as the term "industrial waste" is defined in section twelve hundred two of the State public health law) from a point immediately preceding the point of such treatment, neutralization or stabilization to the point of disposal, including the necessary pumping and transmitting facilities, but excluding such facilities installed for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable.
(B) The term "air pollution control facilities" shall mean facilities which remove, reduce, or render less noxious air contaminants emitted from an air contamination source (as the terms "air contaminant" and "air contamination source" are defined in section twelve hundred sixty-seven of the state public health law) from a point immediately preceding the point of such removal, reduction or rendering the point of discharge of air, meeting emission standards as established by the air pollution control board, but excluding such facilities installed for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable and excluding those facilities which rely for their efficacy on dilution, dispersion or assimilation of air contaminants in the ambient air after emmission.
(2) Such modifications shall be allowed only
(A) with respect to tangible property which is depreciable, pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in the city and used in the taxpayer's trade or business, the construction, reconstruction, erection or improvement of which, in the case of industrial waste treatment facilities, is initiated on or after July first, nineteen hundred sixty-six, and only for expenditures paid or incurred prior to January first, nineteen hundred seventy-two, or which, in the case of air pollution control facilities, is initiated on or after July first, nineteen hundred sixty-six, and
(B) on condition that such facilities have been certified by the state commissioner of health or his designated representative, pursuant to the state public health law, as complying with the provisions of the state public health law, the state sanitary code and regulations, permits or orders promulgated pursuant thereto, and
(C) on condition that for the taxable year and all succeeding taxable years, any deductions allowed for federal income tax purposes for such expenditures or for depreciation of the same property, except to the extent that its basis may be attributable to factors other than such expenditures, be added to federal adjusted gross income pursuant to paragraph six of subdivision (b) of this section, or in case a modification is allowable pursuant to this paragraph for only a part of such expenditures, on condition that a proportionate amount of any such deductions allowed for federal income tax purposes be added to federal adjusted gross income, and
(D) where the election provided for in subdivision (g) of section twelve has not been exercised in respect to the same property.
(3) (A) If expenditures in respect to an industrial waste treatment facility or an air pollution control facility have been allowed as a modification as provided herein and if within ten years from the end of the taxable year in which such modification was allowed such property or any part thereof is used for the primary purpose of salvaging materials which are usable in the manufacturing process or are marketable, the taxpayer shall report such change of use in its return for the first taxable year during which it occurs, and the administrator may recompute the tax for the year or years for which such modification was allowed, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph eight of subdivision (c) of section sixty-three.
(B) If a modification is allowed as herein provided for expenditures paid or incurred during any taxable year on the basis of a temporary certificate of compliance issued pursuant to the state public health law, and if the taxpayer fails to obtain a permanent certificate of compliance upon completion of the facilities with respect to which such temporary certificate was issued, the taxpayer shall report such failure in its report for the taxable year during which such facilities are completed, and the administrator may recompute the tax for the year or years for which such modification was allowed, and may assess any additional tax resulting from such recomputation within the time fixed by paragraph eight of subdivision (c) of section sixty-three.
(4) In any taxable year when property is sold or otherwise disposed of, with respect to which a modification has been allowed pursuant to this paragraph, such modification shall be disregarded in computing gain or loss, and the gain or loss on the sale or other disposition of such property shall be the gain or loss entering into the computation of federal adjusted gross income for such taxable year.
Last modified: February 3, 2019