Appeal from a judgment of the Supreme Court at Special Term (Hughes, J.), entered March 28, 1986 in Albany County, which dismissed petitioner’s application, in a proceeding pursuant to CPLR article 78, to review a determination of respondent sustaining a corporation franchise tax assessment imposed under Tax Law article 33.
Petitioner is a New York insurance corporation. Prior to 1974, petitioner filed returns pursuant to Tax Law article 9A, the general corporation franchise tax statute. In 1974, the Legislature passed a franchise tax article dealing specifically with insurance companies (Tax Law art 33) which became effective for the taxable year beginning January 1, 1974. Since that time, petitioner has filed returns pursuant to this latter article. In 1973, 1974 and 1975, petitioner had net losses; in 1976 and 1977, it had income. On its 1977 tax return, petitioner included a "net operating loss” deduction of $374,604 based on the losses it incurred in 1974 and 1975. The Audit Division of the Department of Taxation and Finance determined that petitioner improperly calculated the net operating loss deduction and disallowed the deduction. A notice of deficiency was issued which petitioner protested. Respondent upheld the notice of deficiency, and petitioner commenced this CPLR article 78 proceeding challenging such decision. Special Term dismissed the petition and this appeal ensued.
Tax Law § 1503 (a) provides that the entire net income for a taxpayer such as petitioner shall be presumably the same as that reported on its Federal tax return. The Internal Revenue
For State tax purposes, it is petitioner’s burden to establish the validity of any deduction claimed (see, Matter of American Employer’s Ins. Co. v State Tax Commn., 114 AD2d 736). In the construction of tax statutes, a court will give deference to respondent, and to prevail, a petitioner must show that its interpretation is the only reasonable construction of the statute (see, Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459; Matter of Blue Spruce Farms v State Tax Commn., 99 AD2d 867). In the instant case, since Tax Law § 1503 (b) (4) refers to the "net operating loss deduction” pursuant to. the Internal Revenue Code, the case turns on whether, for Federal tax purposes, petitioner may utilize its 1974 and 1975 losses before it fully deducts its 1973 loss. We agree with respondent that it may not.
The Treasury Regulations promulgated pursuant to Internal Revenue Code § 172 (26 USC § 172) provide: "For the purpose of determining the taxable (or net) income for any such preceding taxable year, the various net operating loss carryovers and carrybacks to such taxable year are considered to be applied in reduction of the taxable (or net) income in the order of the taxable years from which such losses are carried
Judgment affirmed, without costs. Mahoney, P. J., Main, Mikoll, Yesawich, Jr., and Harvey, JJ., concur.
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It appears from petitioner’s brief that it had $69,000 of net income in 1976. Presumably it used the 1973 net operating loss carryover as a deduction against such income on its 1976 Federal return. In any event, there remains more than enough of the 1973 loss to offset petitioner’s gross income in 1977 for Federal income tax purposes.