1322                             LAWS OF MARYLAND                         CH. 656

and in effect for the corresponding taxable year, with the modifica-
tions and less the deductions and personal exemptions provided in
this subtitle.

(b)    There shall be added to federal adjusted gross income: (1)
interest or dividends, (LESS RELATED EXPENSES), on obliga-
tions or securities of any state or of a political subdivision or author-
ity thereof (other than this State and its political subdivisions and
authorities); (2) salaries and wages and interest or dividends on
obligations of any authority, commission, instrumentality, territory
or possession of the United States or of any foreign government,
which by the laws or treaties of the United States are exempt from
federal income tax but not from State Income taxes; (3) the net
operating loss [carry-overs] deduction as defined in Section 172 of
the Internal Revenue Code, AS AMENDED FROM TIME TO TIME;
(4) dividends received by individuals excluded from federal ad-
justed gross income pursuant to Section 116 of the Internal Revenue
Code; and (5) [distributions not previously taxed in Maryland to
individuals and losses claimed during the taxable year by individuals
from electing small business corporations, as defined in Section 1371
of the Internal Revenue Code, which have complied with the pro-
visions of subchapter "S" of the Internal Revenue Code] distribu-
tions of corporate prior years' earnings not previously taxed in
Maryland to individuals and current year losses of corporations
claimed for the taxable year by individuals, resulting from an elec-
tion of a small business corporation, as defined by Section 1371 of
the Internal Revenue Code as amended from time to time, to be
taxed in accordance with the provisions of subchapter "S" of the
Internal Revenue Code.

(c)    There shall be subtracted from federal adjusted gross in-
come: (1) interest or dividends on obligations of the United States
and its territories and possessions or of any authority, commission
or instrumentality of the United States to the extent includable in
gross income for federal income tax purposes but exempt from
State income taxes under the laws of the United States; (2) di-
vidends received upon stock of national banks located within or
without the State and also domestic corporations the shares of which
are subject to ordinary taxes; (3) [undistributed income received
by individuals from electing small business corporations, as defined
in Section 1371 of the Internal Revenue Code, which have complied
with the provisions of subchapter "S" of the Internal Revenue
Code] to the extent included, undistributed corporate income at-
tributed to individuals from small business corporations, as defined
by Section 1371 of the Internal Revenue Code, as amended from
time to time, which elected to be taxed in accordance with the
provisions of subchapter "S" of the Internal Revenue Code; [and]
(4) payments received by policemen and firemen from pension sys-
tems for injuries or disabilities arising out of and in the course of
their employment as policemen or firemen; and (5) to the extent
included, the amount of any refunds of income taxes paid to the
State of Maryland, any other state, the District of Columbia, and
any political subdivision of the State of Maryland and of any other
state,; AND (6) FOR TAXABLE YEARS BEGINNING AFTER
DECEMBER 31, 1968, THE AMOUNT OF CAPITAL GAINS
INCLUDED THEREIN WHICH WAS REALIZED FROM THE
SALE, EXCHANGE OR OTHER DISPOSITION OF PROPERTY