(dissenting). In its determination, dated July 15, 1977, respondents found that petitioners were not entitled to net capital loss carry-over for the years in dispute, concluding that a carry-over was not permitted by section 612 (subd *306[a]) of the Tax Law. Respondents further found that for the years 1963, 1964 and 1965, petitioners reported gains on their Federal returns, and that no net capital loss carry-over was established for the period in question on petitioners’ Federal returns. Since no capital loss carry-overs were used in arriving at the Federal adjusted gross income on their Federal returns for these years, the petitioners were not allowed to use capital loss carry-overs on their State returns.
Section 612 (subd [a]) of the Tax Law provides: "The New York adjusted gross income of a resident individual means his federal adjusted gross income as defined in the laws of the United States for the taxable year, with the modifications specified in this section.”
Accordingly, the starting point in determining a taxpayer’s State tax liability for each tax year is the taxpayer’s Federal adjusted gross income for that year. Modifications to Federal adjusted gross income may be made only as permitted by statute (Matter of Kuser v Gallman, 48 AD2d 970). The petitioners concede that their Federal adjusted gross income for each year in dispute did not include any adjustment for a capital loss carry-over, and that none was available to them on their Federal tax returns.
Section 654 (subd [c], pars 2, 3) of the Tax Law is the only statute cited by petitioners permitting the modification they seek to make to their adjusted gross income, and an examination of its provisions reveals that its purpose is to exclude income from non-New York sources accrued by a resident taxpayer while he was a nonresident. Petitioners received the full benefit of this section, and were permitted to exclude the income they received from the installment payments received as a result of the 1955 sale of their stock while nonresidents. Petitioners never were required to pay any New York State income tax on the proceeds of the installment sales.
Section 612 of the Tax Law, which conformed the New York adjusted gross income to the Federal adjusted gross income, embodied important public policy considerations when it was enacted in 1960. Federal conformity was an important step in the efficient administration and enforcement of the State income tax laws. Deviation from the Federal adjusted gross income may only be permitted in those limited instances provided by the Legislature in the applicable statute. Petitioners’ situation does not come within any of the exceptions provided by the statute.
*307In Matter of Long Is. Light Co. v State Tax Comm. (45 NY2d 529, 535), the court stated: "It first should be recognized that, subject to constitutional inhibitions, the Legislature has very nearly unconstrained authority in the design of taxing impositions. From another perspective, fairness and equity are not the principal criteria against which the validity of tax statutes is to be determined. Similarly, when equal protection claims are to be weighed the rule is elementary that in taxation, even more than in other fields, Legislatures possess the greatest freedom in classification (Shapiro v City of New York, 32 NY2d 96, 103). Accordingly, it seldom suffices, and is often immaterial, in the resolution of tax controversies to demonstrate that in application a particular statute or regulation works even a flagrant unevenness. (Cf. Matter of Grace v New York State Tax Comm., 37 NY2d 193.)”
For the years in question, petitioners were not entitled to include capital loss carry-overs in computing Federal adjusted income. Tax deductions and exemptions depend upon clear statutory provisions therefore, and the burden is upon the taxpayer to establish a right to them (Matter of Grace v New York State Tax Comm., 37 NY2d 193; Matter of Central Office Alarm Co. v State Tax Comm., 58 AD2d 162). The petitioners have failed to carry this burden. Moreover, the interpretation of a statute by the agency charged with the statute’s enforcement is entitled to great weight (Matter of Howard v Wyman, 28 NY2d 434).
It cannot be stated that the determination of the respondents in this case was arbitrary, unreasonable or otherwise invalid.
The judgment should be affirmed.
Greenblott and Sweeney, JJ., concur with Mahoney, P. J.; Staley, Jr., and Herlihy, JJ., dissent and vote to affirm in an opinion by Staley, Jr., J.
Judgment reversed, on the law and the facts, and petition granted, without costs.