New York State personal income tax liability attributable to substantial understatement must exceed specified percentage of innocent spouse New York adjusted gross income.

(i) Except as provided in subparagraph (iii) of this paragraph, the provisions of this subdivision shall apply:

(a) if the innocent spouse's New York adjusted gross income for the most recent taxable year ending before the date the deficiency notice is mailed is $20,000 or less, only if the liability for New York State personal income tax described in paragraph (1) of this subdivision (including interest, penalties and other amounts) attributable to the substantial understatement is greater than 10 percent of such New York adjusted gross income;

(b) if the innocent spouse's New York adjusted gross income for the most recent taxable year ending before the date the deficiency notice is mailed is more than $20,000, only if the liability for New York State personal income tax described in paragraph (1) of this subdivision (including interest, penalties and other amounts) attributable to the substantial understatement is greater than 25 percent of such New York adjusted gross income.

(ii) For purposes of this paragraph, if the innocent spouse is married to another spouse at the close of such year, the spouse's New York adjusted gross income must include the New York adjusted gross income of the new spouse, whether or not they file a joint New York State personal income tax return.

(iii) Exception. The requirement contained in this paragraph that New York State personal income tax liability (including interest, penalties and other amounts) attributable to substantial understatement must exceed either 10 percent of the innocent spouse's New York State adjusted gross income if such spouse's adjusted gross income for the most recent taxable year ending before the deficiency notice is mailed is $20,000 or less; or 25 percent of the innocent spouse's New York State adjusted gross income if such spouse's adjusted gross income for the most recent taxable year ending before the deficiency notice is mailed is more than $20,000, shall not apply to a substantial understatement attributable to an omission from New York adjusted gross income. Therefore, these relief of spouse provisions will be available without the need to meet the applicable percentage limitation specified in this paragraph where there is a substantial understatement attributable to an omission from New York adjusted gross income.