§ 106. Unincorporated business deductions. The unincorporated business
deductions of an unincorporated business means the items of loss and
deduction directly connected with or incurred in the conduct of the
business, which are allowable for federal income tax purposes for the
taxable year (including losses and deductions connected with any
property employed in the business), with the following modifications:

(1) A deduction shall be allowed for charitable contributions of the
unincorporated business, to the extent that such contributions would be
deductible for federal income tax purposes if made by a corporation, but
not in excess of five per centum of the amount by which the
unincorporated business gross income exceeds the unincorporated business
deductions computed without the benefit of any deduction for charitable
contributions.

(2) A deduction shall be allowed for net operating losses incurred by
the unincorporated business in an amount computed in the same manner as
the net operating loss deduction which would be allowable for the
taxable year for federal income tax purposes if the unincorporated
business were an individual taxpayer (but determined solely by reference
to the unincorporated business gross income and unincorporated business
deductions, allocated to the city, of the unincorporated business). Such
deduction shall not include any net operating loss sustained during any
taxable year ending prior to January first, nineteen hundred sixty-six
and for the purposes of this paragraph net operating losses shall be
determined without regard to any deductions allowed pursuant to
subsection (b) of section one hundred eight and any net operating loss
for a taxable year beginning in nineteen hundred eighty-one shall be
computed without regard to the deduction allowed with respect to
recovery property under section one hundred sixty-eight of the internal
revenue code; in lieu of such deduction, a taxpayer shall be allowed for
such taxable year with respect to such property the depreciation
deduction allowable under section one hundred sixty-seven of such code
as such section was in full force and effect on December thirty-first,
nineteen hundred eighty.

(3) No deduction shall be allowed (except as provided in section one
hundred eight) for amounts paid or incurred to a proprietor or partner
for services or for use of capital.

(4) No deduction shall be allowed for income taxes imposed by the
city, this state or any other taxing jurisdiction.

(5) No deduction shall be allowed for (A) interest on indebtedness
incurred or continued to purchase or carry obligations or securities the
income from which is exempt from tax under this title; (B) expenses paid
or incurred for the production or collection of such income or the
management, conservation or maintenance of property held for the
production of such income; or (C) the amortizable bond premium on any
bond the interest income from which is so exempt.

(6) No deduction shall be allowed in respect of the excess of net
long-term capital gain over net short-term capital loss, but capital
losses incurred in the unincorporated business shall be treated as
ordinary losses and shall be allowed in full.

(7) In the case of a taxpayer who has exercised the election permitted
by subdivision (b) of section one hundred eight, no deduction shall be
allowed for expenditures with reference to the property to which such
election relates, or for depreciation of such property, except as
permitted by said subdivision.

(8) A deduction shall be allowed for (A) interest on indebtedness
incurred or continued to purchase or carry obligations or securities the
income from which is subject to tax under this title but exempt from
federal income tax; (B) ordinary and necessary expenses paid or incurred
during the taxable year for the production or collection of such income
or the management, conservation or maintenance of property held for the
production of such income; and (C) the amortizable bond premium for the
taxable year on any bond the interest on which is subject to tax under
this title but exempt from federal income tax.

(9) At the election of the taxpayer, a deduction shall be allowed for
expenditures paid or incurred during the taxable year for the
construction, reconstruction, erection or improvement of industrial
waste treatment facilities and air pollution control facilities.

(A) (i) The term "industrial waste treatment facilities" shall mean
facilities for the treatment, neutralization or stabilization of
industrial waste (as the term "industrial waste" is defined in section
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.

(ii) The term "air pollution control facilities" shall mean facilities
which remove, reduce, or render less noxious air contaminants emitted
from an air contamination source (as the terms "air contaminant" and
"air contamination source" are defined in section twelve hundred
sixty-seven of the state public health law) from a point immediately
preceding the point of such removal, reduction or rendering to the point
of discharge of air, meeting emission standards as established by the
air pollution control board, but excluding such facilities installed for
the primary purpose of salvaging materials which are usable in the
manufacturing process or are marketable and excluding those facilities
which rely for their efficacy on dilution, dispersion or assimilation of
air contaminants in the ambient air after emission.

(B) However, such deduction shall be allowed only

(i) with respect to tangible property which is depreciable, pursuant
to section one hundred sixty-seven of the internal revenue code, having
a situs in the city and used in the taxpayer's trade or business, the
construction, reconstruction, erection or improvement of which, in the
case of industrial waste treatment facilities, is initiated on or after
January first, nineteen hundred sixty-six, and only for expenditures
paid or incurred prior to January first, nineteen hundred seventy-two,
or which; in the case of air pollution control facilities, is initiated
on or after January first, nineteen hundred sixty-six, and

(ii) on condition that such facilities have been certified by the
state commissioner of 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

(iii) on condition that for the taxable year and all succeeding
taxable years, no deduction for such expenditures or for depreciation of
the same property allowed for federal income tax purposes shall be
allowed under this title, except to the extent that the basis of the
property may be attributable to factors other than such expenditures, or
in case a deduction is allowable pursuant to this paragraph nine, for
only a part of such expenditures, on condition that any deduction
allowed for federal income tax purposes for such expenditures or for
depreciation of the same property be proportionately reduced in
computing unincorporated business deductions for the taxable year and
all succeeding taxable years, and

(iv) where the election provided for in subdivision (b) of section one
hundred eight has not been exercised in respect to the same property.

(C) (i) If expenditures in respect to an industrial waste treatment
facility or an air pollution control facility have been deducted as
provided herein and if within ten years from the end of the taxable year
in which such deduction was allowed such property or any part thereof is
used for the primary purpose of salvaging materials which are usable in
the manufacturing process or are marketable, the taxpayer shall report
such change of use in its return for the first taxable year during which
it occurs, and the director of finance may recompute the tax for the
year or years for which such deduction was allowed and any carryback or
carryover year, and may assess any additional tax resulting from such
recomputation within the time fixed by paragraph eight of subdivision
(c) of section one hundred thirty-one.

(ii) If a deduction is allowed as herein provided for expenditures
paid or incurred during any taxable year on the basis of a temporary
certificate of compliance issued pursuant to the 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 director of finance may recompute the tax for the
year or years for which such deduction was allowed and any carryback or
carryover year, and may assess any additional tax resulting from such
recomputation within the time fixed by paragraph eight of subdivision
(c) of section one hundred thirty-one.

(D) In any taxable year when property is sold or otherwise disposed
of, with respect to which a deduction has been allowed pursuant to this
paragraph nine, such deduction shall be disregarded in computing gain or
loss, and the gain or loss on the sale or other disposition of such
property shall be the gain or loss allowable for federal income tax
purposes for such taxable year.

(10) 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), a
deduction shall be allowed for any amount which the taxpayer could have
excluded for purposes of this title 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.

(11) 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), no
deduction shall be allowed for any amount deductible for federal income
tax purposes 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.

(12) For taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to recovery property subject to
the provisions of section two hundred eighty-F of the internal revenue
code and recovery property placed in service in this state in taxable
years beginning after December thirty-first, nineteen hundred
eighty-four, no deduction shall be allowed for the amount allowable as a
deduction under section one hundred sixty-eight of the internal revenue
code.

(13) For taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to recovery property subject to
the provisions of section two hundred eighty-F of the internal revenue
code and recovery property 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 disallowed pursuant
to subdivision eleven of this section, a taxpayer shall be allowed with
respect to recovery property the depreciation deduction allowable under
section one hundred sixty-seven of the internal revenue code as such
section would have applied to property placed in service on December
thirty-first, nineteen hundred eighty.

(14) For taxable years ending after September 10, 2001, in the case of
qualified property described in paragraph 2 of subsection k of section
168 of the internal revenue code, other than qualified resurgence zone
property described in subdivision 16 of this section, and other than
qualified New York Liberty Zone property described in paragraph 2 of
subsection b of section 1400L of the internal revenue code (without
regard to clause (i) of subparagraph (C) of such paragraph), no
deduction shall be allowed for the amount allowable as a deduction under
section 167 of the internal revenue code.

(15) For taxable years ending after September 10, 2001, in the case of
qualified property described in paragraph 2 of subsection k of section
168 of the internal revenue code, other than qualified resurgence zone
property described in subdivision 16 of this section, and other than
qualified New York Liberty Zone property described in paragraph 2 of
subsection b of section 1400L of the internal revenue code (without
regard to clause (i) of subparagraph (C) of such paragraph), a deduction
shall be allowed with respect to such property equal to 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 10, 2001.

(16) For purposes of subdivisions 14 and 15 of this section, qualified
resurgence zone property shall mean qualified property described in
paragraph 2 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 September 10, 2001.
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.