§ 2. Definitions. When used in this part:

1. "Corporation" includes a joint-stock company or association and any
business conducted by a trustee or trustees wherein interest or
ownership is evidenced by certificate or other written instrument;

2. "Subsidiary" means a corporation of which over fifty per centum of
the number of shares of stock entitling the holders thereof to vote for
the election of directors or trustees is owned by the taxpayer;

3. "Subsidiary capital" means investments in the stock of subsidiaries
and any indebtedness from subsidiaries, whether or not evidenced by
written instrument, on which interest is not claimed and deducted by the
subsidiary for purposes of taxation under this part or part three of
this title, provided, however, that, in the discretion of the director
of finance, there shall be deducted from subsidiary capital any
liabilities payable by their terms on demand or within one year from the
date incurred, other than loans or advances outstanding for more than a
year as of any date during the year covered by the report, which are
attributable to subsidiary capital;

4. "Investment capital" means investments in stocks, bonds and other
securities, corporate and governmental, not held for sale to customers
in the regular course of business, exclusive of subsidiary capital and
stock issued by the taxpayer, provided, however, that, in the discretion
of the director of finance there shall be deducted from investment
capital any liabilities payable by their terms on demand or within one
year from the date incurred, other than loans or advances outstanding
for more than a year as of any date during the year covered by the
report, which are attributable to investment capital;

5. "Investment income" means income, including capital gains in excess
of capital losses, from investment capital, to the extent included in
computing entire net income, less, (a) in the discretion of the director
of finance, any deductions allowable in computing entire net income
which are attributable to investment capital or investment income, and
(b) such portion of any net operating loss deduction allowable in
computing entire net income, as the investment income, before such
deduction, bears to entire net income, before such deduction, provided,
however, that in no case shall investment income exceed entire net
income;

6. "Business capital" means all assets, other than subsidiary capital,
investment capital and stock issued by the taxpayer, less liabilities
not deducted from subsidiary or investment capital which are payable by
their terms on demand or within one year from the date incurred, other
than loans or advances outstanding for more than a year as of any date
during the year covered by the report, except that, subject to the
provisions of subdivision six of section four of this part, cash on hand
and on deposit shall be treated as investment capital or as business
capital as the taxpayer may elect;

7. "Business income" means entire net income minus investment income;

8. "Entire net income" means total net income from all sources which
shall be the same as the taxpayer's entire federal taxable income
computed without regard to any election under subchapter s of chapter
one of the internal revenue code, except as hereinafter provided, and
subject to any modification required by paragraph (d) of subdivision
three of section four of this part.

(a) Entire net income shall not include:

(1) income, gains and losses from subsidiary capital which do not
include the amount of a recovery in respect of any war loss;

(2) fifty per centum of dividends other than from subsidiaries;

(3) bona fide gifts;

(4) income and deductions with respect to amounts received from school
districts and from corporations and associations, organized and operated
exclusively for religious, charitable or educational purposes, no part
of the net earnings of which inures to the benefit of any private
shareholder or individual, for the operation of school buses; and

(5) any refund or credit of a tax imposed under this part, or imposed
by article nine or article nine-A of the tax law, for which tax no
exclusion or deduction was allowed in determining the taxpayer's entire
net income under this part for any prior year;

(6) in the case of a taxpayer who is separately or as a partner of a
partnership doing an insurance business as a member of the New York
insurance exchange described in paragraph (a) of subdivision one of
section four hundred twenty-five-a of the insurance law, any item of
income, gain, loss or deduction of such business which is the taxpayer's
distributive or pro rata share for federal income tax purposes or which
the taxpayer is required to take into account separately for federal
income tax purposes.

(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 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;

(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 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;

(9) the amount deductible pursuant to paragraph (j) of this
subdivision; and

(10) upon the disposition of recovery property to which paragraph (j)
of this subdivision applies, the amount, if any, by which the aggregate
of the amounts described in subparagraph eleven of paragraph (b) of this
subdivision attributable to such property exceeds the aggregate of the
amounts described in paragraph (j) of this subdivision attributable to
such property.

(11) for taxable years ending after September 10, 2001, the amount
deductible pursuant to paragraph (1) of this subdivision.

(b) Entire net income shall be determined without the exclusion,
deduction or credit of:

(1) the amount of any specific exemption or credit allowed in any law
of the United States imposing any tax on or measured by the income of
corporations,

(2) any part of any income from dividends or interest on any kind of
stock, securities or indebtedness, except as provided in clauses one and
two of paragraph (a) hereof,

(3) taxes paid or accrued to the United States on or measured by
profits or income or to the state under article nine or nine-a of the
tax law,

(4) taxes imposed under this part,

(4-a) (A) the entire amount allowable as an exclusion or deduction for
stock transfer taxes imposed by article twelve of the tax law in
determining the entire taxable income which the taxpayer is required to
report to the United States treasury department but only to the extent
that such taxes are incurred and paid in market making transactions and
(B) the amount allowed as an exclusion or deduction for sales and use
taxes imposed by section eleven hundred seven of the tax law in
determining the entire taxable income which the taxpayer is required to
report to the United States treasury department but only such portion of
such exclusion or deduction which is not in excess of the amount of the
credit allowed pursuant to section four-b of this part.

(4-b) the amount allowed as an exclusion or deduction imposed by the
tax law in determining the entire taxable income which the taxpayer is
required to report to the United States treasury department but only
such portion of such exclusion or deduction which is not in excess of
the amount of the credit or part thereof allowed pursuant to section
four-c of this part with respect to a taxable year.

(4-c) the amount allowed as an exclusion or deduction imposed by the
tax law in determining the entire taxable income which the taxpayer is
required to report to the United States treasury department but only
such portion of such exclusion or deduction which is not in excess of
the amount of the credit allowed pursuant to section four-d of this
part.

(4-d) The amount allowed as an exclusion or deduction for sales and
use taxes imposed by section eleven hundred seven of the tax law in
determining the entire taxable income which the taxpayer is required to
report to the United States Treasury Department but only such portion of
such exclusion or deduction which is not in excess of the amount of the
credit allowed pursuant to section four-e of this part.

(4-e) the amount allowed as an exclusion or deduction for sales and
use taxes imposed by section eleven hundred seven of the tax law in
determining the entire taxable income which the taxpayer is required to
report to the United States treasury department, but only such portion
of such exclusion or deduction which is not in excess of the amount of
the credit allowed pursuant to section four-f of this part.

(5) ninety per centum of interest on indebtedness directly or
indirectly owed to any stockholder or shareholder (including
subsidiaries of a corporate stockholder or shareholder), or members of
the immediate family of an individual stockholder or shareholder, owning
in the aggregate in excess of five per centum of the issued capital
stock of the taxpayer, except that such interest may, in any event, be
deducted

(A) up to an amount not exceeding one thousand dollars,

(B) in full to the extent that it relates to bonds or other evidences
of indebtedness issued, with stock, pursuant to a bona fide plan of
reorganization, to persons, who, prior to such reorganization, were bona
fide creditors of the corporation or its predecessors, but were not
stockholders or shareholders thereof,

(C) in full where the investment allocation percentage is applied to
entire net income, and

(D) in full to the extent that it is paid to a federally licensed
small business investment company;

(6) in the discretion of the director of finance, any amount of
interest directly or indirectly and any other amount directly
attributable as a carrying charge or otherwise to subsidiary capital or
to income, gains or losses from subsidiary capital; and

(7) any amount by reason of the granting, issuing or assuming of a
restricted stock option, as defined in the internal revenue code of
nineteen hundred fifty-four, or by reason of the transfer of the share
of stock upon the exercise of the option, unless such share is disposed
of by the grantee of the option within two years from the date of the
granting of the option or within six months after the transfer of such
share to him;

(8) in the case of a taxpayer who is separately or as a partner of a
partnership doing an insurance business as a member of the New York
insurance exchange described in paragraph (a) of subdivision one of
section four hundred twenty-five-a of the insurance law, such taxpayer's
distributive or pro rata share of the allocated entire net income of
such business as determined under sections fifteen hundred three and
fifteen hundred four of the tax law, provided however, in the event such
allocated entire net income is a loss, such taxpayer's distributive or
pro rata share of such loss shall not be subtracted from federal taxable
income in computing entire net income under this subdivision.

(9) 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;

(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), 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;

(11) 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 the amount allowable as a deduction under section one
hundred sixty-eight of the internal revenue code;

(12) upon the disposition of recovery property to which paragraph (j)
of this subdivision applies, the amount, if any, by which the aggregate
of the amounts described in such paragraph (j) attributable to such
property exceeds the aggregate of the amounts described in subparagraph
eleven of this paragraph attributable to such property.

(13) 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 paragraph (n) of this subdivision, 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), the amount
allowable as a deduction under section 167 of the internal revenue code.

(c) Entire net income shall include income within and without the
United States;

(d) The director of finance may, whenever necessary in order properly
to reflect the entire net income of any taxpayer, determine the year or
period in which any item of income or deduction shall be included,
without regard to the method of accounting employed by the taxpayer;

(e) The entire net income of any bridge commission created by act of
congress to construct a bridge across an international boundary means
its gross income less the expense of maintaining and operating its
properties, the annual interest upon its bonds and other obligations,
and the annual charge for the retirement of such bonds or obligations at
maturity;

(f) A net operating loss deduction shall be allowed which shall be the
same as the net operating loss deduction allowed under section one
hundred seventy-two of the internal revenue code or which would have
been allowed if the taxpayer had not made an election under subchapter s
of chapter one of the internal revenue code, except that (1) any net
operating loss included in determining such deduction shall be adjusted
to reflect the inclusions and exclusions from entire net income pursuant
to paragraphs (a), (b), (g) and (h) hereof, (2) such deductions shall
not include any net operating loss sustained during any taxable year in
which the taxpayer was not subject to the tax imposed by this part, (3)
such deduction shall not exceed the deduction for the taxable year
allowable under section one hundred seventy-two of the internal revenue
code, or the deduction for the taxable year which would have been
allowable if the taxpayer had not made an election under subchapter s of
chapter one of the internal revenue code, and (4) 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;

(g) 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.

(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 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 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.

(2) However, such deduction 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
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

(B) on condition that such facilities have been certified by the state
commissioner of health or his designated representative, pursuant to the
public health law, as complying with applicable provisions of the public
health law, the state sanitary code and regulations, permits or orders
issued pursuant thereto, and

(C) on condition that entire net income for the taxable year and all
succeeding taxable years be computed without any deductions for such
expenditures or for depreciation of the same property other than the
deductions allowed by this paragraph (g) 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 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 entire net income for the taxable year and all succeeding
taxable years, and

(D) where the election provided for in paragraph (d) of subdivision
three of section four of this part 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 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 report 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 (h) of subdivision
three of section seventy-four.

(B) 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 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 (h) of subdivision
three of section seventy-four.

(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
paragraph, 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 entering into the computation of
entire taxable income which the taxpayer is required to report to the
United States treasury department for such taxable year;

(h) With respect to gain derived from the sale or other disposition of
any property acquired prior to January first, nineteen hundred
sixty-six, which had a federal adjusted basis on such date (or on the
date of its sale or other disposition prior to January first, nineteen
hundred sixty-six) lower than its fair market value on January first,
nineteen hundred sixty-six or the date of its sale or other disposition
prior thereto, 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 taxable income, and

(b) the amount of the taxpayer's federal taxable income (if smaller
than the amount described in (a)) computed as if the federal adjusted
basis of each 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 January first, nineteen
hundred sixty-six or the date of its sale or other disposition prior to
January 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 January 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 paragraph (h) shall not exceed the amount of the
taxpayer's net gain from the sale or other disposition of all such
property.

(i) If the period covered by a report under this part is other than
the period covered by the report to the United States treasury
department, entire net income shall be determined by multiplying the
federal taxable income (as adjusted pursuant to the provisions of this
part) by the number of calendar months or major parts thereof covered by
the report under this part and dividing by the number of calendar months
or major parts thereof covered by the report to such department. If it
shall appear that such method of determining entire net income does not
properly reflect the taxpayer's income during the period covered by the
report under this part, the director of finance shall be authorized in
his discretion to determine such entire net income solely on the basis
of the taxpayer's income during the period covered by its report under
this part.

(j) 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 excluded from entire
net income pursuant to subparagraph nine of paragraph (b) of this
subdivision, 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.

(l) 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 paragraph (n) of this subdivision, 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 taxpayer
shall be allowed with respect to such property the depreciation
deduction allowable under section 167 of the internal revenue code as
such section would have applied to such property had it been acquired by
the taxpayer on September 10, 2001.

(m) for taxable years ending after September 10, 2001, upon the
disposition of property to which paragraph (l) of this subdivision
applies, the amount of any gain or loss includible in entire net income
shall be adjusted to reflect the inclusions and exclusions from entire
net income pursuant to subparagraph 11 of paragraph (a) and subparagraph
13 of paragraph (b) of this subdivision attributable to such property.

(n) for purposes of paragraphs (l) and (m) of this subdivision,
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.

9. (a) The term "calendar year" means a period of twelve calendar
months (or any shorter period beginning on the date the taxpayer becomes
subject to the tax imposed by this part) ending on the thirty-first day
of December, provided the taxpayer keeps its books on the basis of such
period or on the basis of any period ending on any day other than the
last day of a calendar month, or provided the taxpayer does not keep
books, and includes, in case the taxpayer changes the period on the
basis of which it keeps its books from a fiscal year to a calendar year,
the period from the close of its last old fiscal year up to and
including the following December thirty-first.

(b) The term "fiscal year" means a period of twelve calendar months
(or any shorter period beginning on the date the taxpayer becomes
subject to the tax imposed by this part) ending on the last day of any
month other than December, provided the taxpayer keeps its books on the
basis of such period, and includes, in case the taxpayer changes the
period on the basis of which it keeps its books from a calendar year to
a fiscal year or from one fiscal year to another fiscal year, the period
from the close of its last old calendar or fiscal year up to the date
designated as the close of its new fiscal year.

10. The term "tangible personal property" means corporeal personal
property, such as machinery, tools, implements, goods, wares and
merchandise, and does not mean money, deposits in banks, shares of
stock, bonds, notes, credits or evidences of an interest in property and
evidences of debt.