(1) Maine taxable income is not reduced below zero;

(2) The taxable year is either within 2 years prior to the year in which the loss arose or within the allowable federal period for carry-over of net operating losses; and

(3) The amount has not been previously used as a modification pursuant to this subsection; and

M. For tax years beginning in 2003, 2004 or, 2005 or 2006, any amount equal to 1/3 of any amount added back to federal taxable income by the taxpayer for the 2002 tax year pursuant to subsection 1, paragraph N, except with respect to 3-year property, in which case this paragraph does not apply to 2005 or 2006 tax years and the amount to be subtracted pursuant to this paragraph in the 2004 tax year is an amount equal to 2/3 of the amount added back pursuant to subsection 1, paragraph N.;

Sec. AA-7. 36 MRSA §5200-A, sub-§2, ¶¶N and O are enacted to read:

N.__For tax years beginning in 2005, 2006 or 2007, an amount equal to 1/3 of any amount added back to federal taxable income by the taxpayer for the 2003 tax year pursuant to subsection 1, paragraph N, except with respect to 3-year property, in which case this paragraph does not apply to 2006 or 2007 tax years and the amount to be subtracted pursuant to this paragraph in the 2005 tax year is an amount equal to the amount added back pursuant to subsection 1, paragraph N; and

O.__For tax years beginning in 2006, 2007 or 2008, an amount equal to 1/3 of any amount added back to federal taxable income by the taxpayer for the 2004 tax year pursuant to subsection 1, paragraph N, except with respect to 3-year property, in which case this paragraph does not apply to 2007 or 2008 tax years and the amount to be subtracted pursuant to this paragraph in the 2006 tax year is an amount equal to the amount added back pursuant to subsection 1, paragraph N.

PART BB