FS Codes and Automatic Adjustments

The New York return begins with federal taxable income before net operating loss and special deductions. Federal taxable income carries automatically from the federal return. As a result, FS and state codes on the federal worksheets do not apply and are ignored in computing federal taxable income on the New York return.

FS and state codes are used only for certain "automatic adjustments" to federal income (listed below) to arrive at New York entire net income - any other additions and subtractions are entered in the New York worksheets.

Automatic Adjustments: The following items from the federal return carry automatically to the New York return and do not require additional entries on New York State worksheets:

Net Operating Loss Deduction

Enter New York net operating loss carryovers on Federal NOL Carryover worksheet based on one of the following situations.

When NOL amounts are the same for New York state, city and federal, enter all of the amounts on one NOL Carryover worksheet, along with NYC for the city code (while leaving the FS and State codes blank). When using the 1120S System, enter an additional Interview Form A-5 with "FDS" in the state code (while leaving the FS and city codes blank).

When NOL amounts for New York state, city and federal all differ, enter one NOL Carryover worksheet with an "F" for FS (for the 1120S System, leave FS blank and enter "FDS" in the state code instead), enter a second Interview Form A-5 with an "S" for FS and "NY" for state code (for New York State only), and then enter a third NOL Carryover worksheet with an "S" for FS, "FC" for state code, and "NYC" for city code (for New York City only).

When NOL amounts for New York and federal differ, but are the same for New York state and city, enter one NOL Carryover worksheet with an "F" for FS (for the 1120S System, leave FS blank and enter "FDS" in the state code instead), and then enter a second NOL Carryover worksheet with an "S" for FS, "NY" for state code, and "NYC" for city code.

The NOL is limited to the federal NOL unless you indicate NOT to limit on Option section of New York General worksheet. If applicable, the NY NOL is allocated to investment income in accordance with New York Instructions. NOL overrides are available on Subtractions section of New York Income/Deductions worksheet and Subtractions section of New York City Income/Deductions worksheet.

Interest on U.S. Obligations

Interest on obligations of the United States is automatically included in the federal taxable income and "ENI" of the corporate franchise tax return. For S corporations, the amount is also reported as a subtraction in the "Shareholder Information" section of the return, and on the New York Schedule K-1 Equivalents.

Municipal Bond Interest

Included in New York net income is municipal bond interest from sources outside the state. Interest on municipal bonds and tax-exempt private activity bonds from states other than New York is carried to Form CT-3S or CT3/4 as an addition to federal income. To override the federal amounts, enter your amount on New York's Income and Deductions worksheet, Additions to Entire Net Income section, Interest income NOT in federal income - override field.

Be sure to indicate the source of municipal bond interest. Enter the source of interest in the Interest worksheet, Interest section, state use code field.

50% of Dividends from Non-Subsidiary Capital

Fifty percent of dividends entered on Income and Deductions worksheet, Dividends section carry to the state return as a subtraction from federal taxable income except those dividends entered in which a "9" is entered in the "State Use" field, or those using the following "Category" codes:

The program recognizes FS entries when computing the adjustment. In addition, an override is available on Income and Deductions worksheet, Deductions for Entire Net Income section, 50% of dividends from non-subsidiary capital - override field.

Federal Employment Credit Wage Reduction

Wages and salaries eligible for the federal employment credit, and excluded from federal wages, are deducted for New York purposes.

Depreciation

For assets placed in service on or after June 1, 2003, the special bonus depreciation allowance created by the JCWA of 2002 and enhanced for the JGTRRA of 2003 is not allowed unless those assets were placed in service in either the "Resurgence Zone" or the "Liberty Zone". Designate such property by entering the appropriate code in the JCWA/JGTRRA accelerated depreciation option field on the Depreciation and Amortization worksheet

If detail depreciation was Not used to enter depreciation information, you may use the Depreciation section of the Income/Deductions worksheet to enter information to complete Form CT-399.

To compute the adjustment for ACRS/MACRS assets on CT- 399, use federal a federal depreciation section to enter the state information.

Leave the state use field blank to indicate a New York ACRS/MACRS asset placed in service before 1982 and after 1984.

Remember, when entering state if different depreciation, based on the state code, the state depreciation will carry to the particular state return indicated. For example, if an asset has been entered on with a "State" code of "CA" to carry to the California return, then enter the property again with a "State" code of "NY" in order to carry to the New York return.

If the return being processed is a banking return (Form CT-32), the following entries in the "state use" code field carries assets to Schedule E. Enter "5" to carry the asset to Schedule E, Part I. Enter "6" to carry the asset to Schedule E, Part II.