§ 660. Election by shareholders of S corporations. (a) Election. If a
corporation is an eligible S corporation, the shareholders of the
corporation may elect in the manner set forth in subsection (b) of this
section to take into account, to the extent provided for in this article
(or in article thirteen of this chapter, in the case of a shareholder
which is a taxpayer under such article), the S corporation items of
income, loss, deduction and reductions for taxes described in paragraphs
two and three of subsection (f) of section thirteen hundred sixty-six of
the internal revenue code which are taken into account for federal
income tax purposes for the taxable year. No election under this
subsection shall be effective unless all shareholders of the corporation
have so elected. An eligible S corporation is (i) an S corporation which
is subject to tax under article nine-A of this chapter, or (ii) an S
corporation which is the parent of a qualified subchapter S subsidiary
subject to tax under article nine-A, where the shareholders of such
parent corporation are entitled to make the election under this
subsection by reason of subparagraph three of paragraph (k) of
subdivision nine of section two hundred eight of this chapter.

(b) Requirements of election. An election under subsection (a) of this
section shall be made on such form and in such manner as the tax
commission may prescribe by regulation or instruction.

(1) When made. An election under subsection (a) of this section may be
made at any time during the preceding taxable year of the corporation or
at any time during the taxable year of the corporation and on or before
the fifteenth day of the third month of such taxable year.

(2) Certain elections made during first two and one-half months. If an
election made under subsection (a) of this section is made for any
taxable year of the corporation during such year and on or before the
fifteenth day of the third month of such year, such election shall be
treated as made for the following taxable year if

(A) on one or more days in such taxable year before the day on which
the election was made the corporation did not meet the requirements of
subsection (b) of section thirteen hundred sixty-one of the internal
revenue code or

(B) one or more of the shareholders who held stock in the corporation
during such taxable year and before the election was made did not
consent to the election.

(3) Elections made after first two and one-half months. If an election
under subsection (a) of this section is made for any taxable year of the
corporation and such election is made after the fifteenth day of the
third month of such taxable year and on or before the fifteenth day of
the third month of the following taxable year, such election shall be
treated as made for the following taxable year.

(4) Taxable years of two and one-half months or less. For purposes of
this subsection, an election for a taxable year made not later than two
months and fifteen days after the first day of the taxable year shall be
treated as timely made during such year.

(5) Authority to treat late elections, etc., as timely. If (A) an
election under subsection (a) of this section is made for any taxable
year (determined without regard to paragraph three of this subsection)
after the date prescribed by this subsection for making such election
for such taxable year, or if no such election is made for any taxable
year, and

(B) the commissioner determines that there was reasonable cause for
failure to timely make such election, then

(C) the commissioner may treat such an election as timely made for
such taxable year (and paragraph three of this subsection shall not
apply).

(6) Years for which effective. An election under subsection (a) of
this section shall be effective for the taxable year of the corporation
for which it is made and for all succeeding taxable years of the
corporation until such election is terminated under subsection (c) of
this section.

(c) Termination. An election under subsection (a) of this section
shall cease to be effective

(1) on the day an election to be an S corporation ceases to be
effective for federal income tax purposes pursuant to subsection (d) of
section thirteen hundred sixty-two of the internal revenue code, or

(2) if shareholders holding more than one-half of the shares of stock
of the corporation on the day on which the revocation is made revoke
such election in the manner the tax commission may prescribe by
regulation,

(A) on the first day of the taxable year of the corporation, if the
revocation is made during such taxable year and on or before the
fifteenth day of the third month thereof, or

(B) on the first day of the following taxable year of the corporation,
if the revocation is made during the taxable year but after the
fifteenth day of the third month thereof, or

(C) on and after the date so specified, if the revocation specifies a
date for revocation which is on or after the day on which the revocation
is made, or

(3) if any person who was not a shareholder of the corporation on the
day on which the election is made becomes a shareholder in the
corporation and affirmatively refuses to consent to such election in the
manner the tax commission may prescribe by regulation, on the day such
person becomes a shareholder.

(d) New York S termination year. In the case of a New York S
termination year, the amount of any item of S corporation income, loss
and deduction and reductions for taxes (as described in paragraphs two
and three of subsection (f) of section thirteen hundred sixty-six of the
internal revenue code) required to be taken account of under this
article shall be adjusted in the same manner that the S corporation's
items which are included in the shareholder's federal adjusted gross
income are adjusted under subsection (s) of section six hundred twelve.

(e) Inadvertent invalid elections. If (1) an election under subsection
(a) of this section was not effective for the taxable year for which
made (determined without regard to paragraph two of subsection (b) of
this section) by reason of a failure to obtain shareholder consents,

(2) the commissioner determines that the circumstances resulting in
such ineffectiveness were inadvertent,

(3) no later than a reasonable period of time after discovery of the
circumstances resulting in such ineffectiveness, steps were taken to
acquire the required shareholder consents, and

(4) the corporation, and each person who was a shareholder in the
corporation at any time during the period specified pursuant to this
subsection, agrees to make such adjustments (consistent with the
treatment of the corporation as a New York S corporation) as may be
required by the commissioner with respect to such period,

(5) then, notwithstanding the circumstances resulting in such
ineffectiveness, such corporation shall be treated as a New York S
corporation during the period specified by the commissioner.

(f) Validated federal elections. If (1) an election under subsection
(a) of this section was made for a taxable year or years of a
corporation, which years occur with or within the period for which the
federal S election of such corporation has been validated pursuant to
the provisions of subsection (f) of section thirteen hundred sixty-two
of the internal revenue code, and

(2) the corporation, and each person who was a shareholder in the
corporation at any time during such taxable year or years agrees to make
such adjustments (consistent with the treatment of the corporation as a
New York S corporation) as may be required by the commissioner with
respect to such year or years,

(3) then such corporation shall be treated as a New York S corporation
during such year or years.

(g) Transitional rule. Any election made under this section (as in
effect for taxable years beginning before January first, nineteen
hundred eighty-three) shall be treated as an election made under
subsection (a) of this section.

(h) Cross reference. For definitions relating to S corporations, see
subdivision one-A of section two hundred eight of this chapter.

(i) Mandated New York S corporation election. (1) Notwithstanding the
provisions in subsection (a) of this section, in the case of an eligible
S corporation for which the election under subsection (a) of this
section is not in effect for the current taxable year, the shareholders
of an eligible S corporation are deemed to have made that election
effective for the eligible S corporation's entire current taxable year,
if the eligible S corporation's investment income for the current
taxable year is more than fifty percent of its federal gross income for
such year. In determining whether an eligible S corporation is deemed to
have made that election, the income of a qualified subchapter S
subsidiary owned directly or indirectly by the eligible S corporation
shall be included with the income of the eligible S corporation.

(2) For the purposes of this subsection, the term "eligible S
corporation" has the same definition as in subsection (a) of this
section.

(3) For the purposes of this subsection, the term "investment income"
means the sum of an eligible S corporation's gross income from interest,
dividends, royalties, annuities, rents and gains derived from dealings
in property, including the corporation's share of such items from a
partnership, estate or trust, to the extent such items would be
includable in federal gross income for the taxable year.

(4) Estimated tax payments. When making estimated tax payments
required to be made under this chapter in the current tax year, the
eligible S corporation and its shareholders may rely on the eligible S
corporation's filing status for the prior year. If the eligible S
corporation's filing status changes from the prior tax year the
corporation or the shareholders, as the case may be, which made the
payments shall be entitled to a refund of such estimated tax payments.
No additions to tax with respect to any required declarations or
payments of estimated tax imposed under this chapter shall be imposed on
the corporation or shareholders, whichever is the taxpayer for the
current taxable year, if the corporation or the shareholders file such
declarations and make such estimated tax payments by January fifteenth
of the following calendar year, regardless of whether the taxpayer's tax
year is a calendar or a fiscal year.