N.Y. Comp. Codes R. & Regs. tit. 20 § 122.1

Current through Register Vol. 46, No. 45, November 2, 2024

Section 122.1 - New York State minimum taxable income of residents

Tax Law, § 622(a)

(a)General.

The New York State minimum taxable income of a resident individual or of a resident estate or trust is the total of the New York items of tax preference reduced, but not below zero, by the aggregate of the following:

(1) the specific deduction described in section 122.7 of this Part;

(2) the New York State personal income tax described in paragraph (b)(2) of this section; and

(3) any net operating loss for the taxable year available as a carryover to a succeeding taxable year (see subdivision [c] of this section).

(b)Definitions.

(1) The New York items of tax preference of a resident individual, estate or trust are the Federal items of tax preference as defined in the laws of the United States (see section 57 of the Internal Revenue Code), modified in accordance with the provisions of sections 122.3 and 122.6 of this Part and increased by any net operating loss used to reduce the sum of the New York items of tax preference in a previous year (see paragraph [c][2] of this section). The New York items of tax preference of a resident estate or trust include only those items of tax preference which are properly apportioned to such estate or trust in accordance with the laws of the United States.

(2) For purposes of this Part, the New York State personal income tax is the ordinary tax (see section 101.1 of this Title), reduced by the following credits:

(i) the investment credit and the retail enterprise credit (see section 106.1 of this Title);

(ii) the credit for household and dependent care services necessary for gainful employment (see section 106.3 of this Title);

(iii) the credit for sales or compensating use taxes paid upon the purchase of any catalytic, purifying or bleaching chemical agent (see section 106.4 of this Title);

(iv) the real property tax circuit breaker credit (see section 106.5 of this Title);

(v) the mortgage recording tax credit (see section 106.6 of this Title);

(vi) the credit against ordinary tax allowed certain residents for income taxes imposed by another state of the United States, a political subdivision of such state or by the District of Columbia (see sections 120.1 through 120.4 of this Title); and

(vii) the accumulation distribution credit allowable to certain resident beneficiaries of a trust (see Part 121 of this Title).

(c)Net operating losses.

(1) Net operating loss reduction.

The amount of net operating loss, as determined for Federal income tax purposes, for the taxable year which is available as a carry-over to a succeeding taxable year, is to be subtracted from the amount by which the sum of the New York items of tax preference exceed the total of the applicable specific deduction and the New York State personal income tax for the year.

(2) Net operating loss restoration.

(i) General. The amount of the net operating loss used in a prior year to reduce the sum of the New York items of tax preference of a resident taxpayer must be treated as a New York item of tax preference and added to the total Federal items of tax preference in the next succeeding taxable year or years, in order of time, in which such net operating loss carryover reduces Federal taxable income.

(ii) Priority of reduction. If a portion of a net operating loss was used in a prior taxable year to reduce the sum of the New York items of tax preference of a resident taxpayer, such portion is deemed to reduce Federal taxable income in succeeding taxable years only after the portion of such net operating loss not so used in the prior taxable year is first used to reduce Federal taxable income in such succeeding taxable year.

Example:

Year 1
Total New York items of tax preference	$50,000
Federal net operating loss available for carryover to future years	$100,000
Based on the above information, there is no New York State minimum taxable income for Year 1 because of the following computation:
Total New York items of tax preference	$50,000
Less specific deduction	5,000
Balance	$45,000
Less portion of the Federal net operating loss carryover used to reduce New York items of tax preference in accordance with paragraph (1) of this subdivision	$45,000
New York State minimum taxable income	-0-
Of the $100,000 Federal net operating loss carried over to Year 2, $45,000 has been used to reduce New York items of tax preference, and $55,000 has not been used to reduce New York items of tax preference.
Year 2
New York adjusted gross income (before the application of the Year 1 net operating loss)	$80,000
After applying $80,000 of the $100,000 available as a carryover to Year 2, the first $55,000 of the $80,000 is not used to reduce New York Items of tax preference in a prior year, and the remaining $25,000 of the $80,000 is used to reduce New York items of tax preference in a prior year. Therefore, $25,000 must be treated as a New York item of tax preference in Year 2, and must be added to total Federal items of tax preference in computing total New York items of tax preference.
Year 3
New York adjusted gross income (before the application of the Year 1 net operating loss)	$35,000
The remaining portion of the Year 1 net operating loss carryover ($20,000) is used to reduce the Year 3 New York adjusted gross income. Therefore, the full $20,000 must be treated as a New York item of tax preference in Year 3, and must be added to total Federal items of tax preference in computing total New York items of tax preference.
The remaining portion of the Year 1 net operating loss carryover ($20,000) is used to reduce the Year 3 New York adjusted gross income. Therefore, the full $20,000 must be treated as a New York item of tax preference in Year 3, and must be added to total Federal items of tax preference in computing total New York items of tax preference.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 122.1