093_SB1634ham002











                                     LRB093 02897 RCE 17262 a

 1                    AMENDMENT TO SENATE BILL 1634

 2        AMENDMENT NO.     .  Amend Senate Bill 1634 by  replacing
 3    the title with the following:
 4        "AN ACT concerning taxes."; and

 5    by  replacing  everything  after the enacting clause with the
 6    following:

 7        "Section 5.  The Illinois Income Tax Act  is  amended  by
 8    changing Sections 201, 204, and 207 as follows:

 9        (35 ILCS 5/201) (from Ch. 120, par. 2-201)
10        Sec. 201.  Tax Imposed.
11        (a)  In  general.  A tax measured by net income is hereby
12    imposed on every individual, corporation,  trust  and  estate
13    for  each  taxable  year  ending  after  July 31, 1969 on the
14    privilege of earning or receiving income in or as a  resident
15    of  this  State.  Such  tax shall be in addition to all other
16    occupation or privilege taxes imposed by this State or by any
17    municipal corporation or political subdivision thereof.
18        (b)  Rates.  The tax imposed by subsection  (a)  of  this
19    Section shall be determined as follows, except as adjusted by
20    subsection (d-1):
21             (1)  In  the case of an individual, trust or estate,
 
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 1        for taxable years ending prior to July 1, 1989, an amount
 2        equal to 2 1/2% of the  taxpayer's  net  income  for  the
 3        taxable year.
 4             (2)  In  the case of an individual, trust or estate,
 5        for taxable years beginning prior to  July  1,  1989  and
 6        ending after June 30, 1989, an amount equal to the sum of
 7        (i)  2  1/2%  of the taxpayer's net income for the period
 8        prior to July 1, 1989, as calculated under Section 202.3,
 9        and (ii) 3% of the taxpayer's net income for  the  period
10        after June 30, 1989, as calculated under Section 202.3.
11             (3)  In  the case of an individual, trust or estate,
12        for taxable years  beginning  after  June  30,  1989,  an
13        amount  equal  to 3% of the taxpayer's net income for the
14        taxable year.
15             (4)  (Blank).
16             (5)  (Blank).
17             (6)  In the case of a corporation, for taxable years
18        ending prior to July 1, 1989, an amount equal  to  4%  of
19        the taxpayer's net income for the taxable year.
20             (7)  In the case of a corporation, for taxable years
21        beginning prior to July 1, 1989 and ending after June 30,
22        1989,  an  amount  equal  to  the  sum  of  (i) 4% of the
23        taxpayer's net income for the period  prior  to  July  1,
24        1989, as calculated under Section 202.3, and (ii) 4.8% of
25        the  taxpayer's  net income for the period after June 30,
26        1989, as calculated under Section 202.3.
27             (8)  In the case of a corporation, for taxable years
28        beginning after June 30, 1989, an amount equal to 4.8% of
29        the taxpayer's net income for the taxable year.
30        (c)  Personal  Property  Tax  Replacement   Income   Tax.
31    Beginning on July 1, 1979 and thereafter, in addition to such
32    income  tax,  there  is  also  hereby  imposed  the  Personal
33    Property Tax Replacement Income Tax measured by net income on
34    every  corporation  (including  Subchapter  S  corporations),
 
                            -3-      LRB093 02897 RCE 17262 a
 1    partnership  and  trust,  for  each taxable year ending after
 2    June 30, 1979.  Such taxes are imposed on  the  privilege  of
 3    earning  or  receiving  income  in  or  as a resident of this
 4    State.  The Personal  Property  Tax  Replacement  Income  Tax
 5    shall be in addition to the income tax imposed by subsections
 6    (a)  and  (b)  of  this  Section and in addition to all other
 7    occupation or privilege taxes imposed by this State or by any
 8    municipal corporation or political subdivision thereof.
 9        (d)  Additional Personal Property Tax Replacement  Income
10    Tax  Rates.  The personal property tax replacement income tax
11    imposed by this subsection and subsection (c) of this Section
12    in the case of a  corporation,  other  than  a  Subchapter  S
13    corporation and except as adjusted by subsection (d-1), shall
14    be an additional amount equal to 2.85% of such taxpayer's net
15    income for the taxable year, except that beginning on January
16    1,  1981, and thereafter, the rate of 2.85% specified in this
17    subsection shall be reduced to 2.5%, and in  the  case  of  a
18    partnership,  trust or a Subchapter S corporation shall be an
19    additional amount equal to 1.5% of such taxpayer's net income
20    for the taxable year.
21        (d-1)  Rate reduction for certain foreign  insurers.   In
22    the case of a foreign insurer, as defined by Section 35A-5 of
23    the  Illinois  Insurance  Code,  whose  state  or  country of
24    domicile  imposes  on  insurers  domiciled  in   Illinois   a
25    retaliatory  tax  (excluding  any insurer whose premiums from
26    reinsurance assumed are 50% or more of  its  total  insurance
27    premiums  as determined under paragraph (2) of subsection (b)
28    of  Section  304,  except   that   for   purposes   of   this
29    determination   premiums  from  reinsurance  do  not  include
30    premiums  from  inter-affiliate  reinsurance   arrangements),
31    beginning  with taxable years ending on or after December 31,
32    1999, the sum of the rates of tax imposed by subsections  (b)
33    and  (d)  shall be reduced (but not increased) to the rate at
34    which the total amount of tax imposed under this Act, net  of
 
                            -4-      LRB093 02897 RCE 17262 a
 1    all credits allowed under this Act, shall equal (i) the total
 2    amount  of tax that would be imposed on the foreign insurer's
 3    net income allocable to Illinois for the taxable year by such
 4    foreign insurer's state or country of domicile  if  that  net
 5    income were subject to all income taxes and taxes measured by
 6    net income imposed by such foreign insurer's state or country
 7    of  domicile,  net  of  all credits allowed or (ii) a rate of
 8    zero if no such tax is imposed on such income by the  foreign
 9    insurer's  state  of  domicile.  For  the  purposes  of  this
10    subsection   (d-1),  an  inter-affiliate  includes  a  mutual
11    insurer under common management.
12             (1)  For the purposes of  subsection  (d-1),  in  no
13        event  shall  the  sum  of  the  rates  of tax imposed by
14        subsections (b) and (d) be  reduced  below  the  rate  at
15        which the sum of:
16                  (A)  the  total  amount  of tax imposed on such
17             foreign insurer under this Act for a  taxable  year,
18             net of all credits allowed under this Act, plus
19                  (B)  the  privilege  tax imposed by Section 409
20             of the Illinois Insurance Code, the  fire  insurance
21             company  tax  imposed  by  Section  12  of  the Fire
22             Investigation Act, and  the  fire  department  taxes
23             imposed   under  Section  11-10-1  of  the  Illinois
24             Municipal Code,
25        equals 1.25% for taxable years ending prior  to  December
26        31,  2003,  or 1.75% for taxable years ending on or after
27        December 31, 2003, of the net  taxable  premiums  written
28        for  the  taxable year, as described by subsection (1) of
29        Section  409  of  the  Illinois  Insurance   Code.   This
30        paragraph  will  in  no  event increase the rates imposed
31        under subsections (b) and (d).
32             (2)  Any reduction in the rates of  tax  imposed  by
33        this  subsection shall be applied first against the rates
34        imposed by subsection (b) and only after the tax  imposed
 
                            -5-      LRB093 02897 RCE 17262 a
 1        by  subsection  (a) net of all credits allowed under this
 2        Section other than the credit  allowed  under  subsection
 3        (i)  has  been reduced to zero, against the rates imposed
 4        by subsection (d).
 5        This subsection (d-1) is exempt from  the  provisions  of
 6    Section 250.
 7        (e)  Investment  credit.   A  taxpayer shall be allowed a
 8    credit against the Personal Property Tax  Replacement  Income
 9    Tax for investment in qualified property.
10             (1)  A  taxpayer  shall be allowed a credit equal to
11        .5% of the basis of qualified property placed in  service
12        during the taxable year, provided such property is placed
13        in  service  on  or  after  July 1, 1984.  There shall be
14        allowed an additional credit equal to .5% of the basis of
15        qualified property placed in service during  the  taxable
16        year,  provided  such property is placed in service on or
17        after July 1, 1986, and the  taxpayer's  base  employment
18        within  Illinois  has  increased  by  1% or more over the
19        preceding year as determined by the taxpayer's employment
20        records filed with the Illinois Department of  Employment
21        Security.   Taxpayers  who  are  new to Illinois shall be
22        deemed to have met the 1% growth in base  employment  for
23        the first year in which they file employment records with
24        the  Illinois  Department  of  Employment  Security.  The
25        provisions added to this Section by  Public  Act  85-1200
26        (and restored by Public Act 87-895) shall be construed as
27        declaratory  of  existing law and not as a new enactment.
28        If, in any year, the increase in base  employment  within
29        Illinois  over  the  preceding  year is less than 1%, the
30        additional credit shall be  limited  to  that  percentage
31        times  a  fraction, the numerator of which is .5% and the
32        denominator of which is 1%, but  shall  not  exceed  .5%.
33        The  investment credit shall not be allowed to the extent
34        that it would reduce a taxpayer's liability  in  any  tax
 
                            -6-      LRB093 02897 RCE 17262 a
 1        year  below  zero,  nor  may  any  credit  for  qualified
 2        property  be  allowed for any year other than the year in
 3        which the property was placed in service in Illinois. For
 4        tax years ending on or after December 31, 1987, and on or
 5        before December 31, 1988, the credit shall be allowed for
 6        the tax year in which the property is placed in  service,
 7        or, if the amount of the credit exceeds the tax liability
 8        for  that year, whether it exceeds the original liability
 9        or the liability as later amended,  such  excess  may  be
10        carried forward and applied to the tax liability of the 5
11        taxable  years  following  the excess credit years if the
12        taxpayer (i) makes investments which cause  the  creation
13        of  a  minimum  of  2,000  full-time  equivalent  jobs in
14        Illinois,  (ii)  is  located  in   an   enterprise   zone
15        established  pursuant to the Illinois Enterprise Zone Act
16        and (iii) is certified by the Department of Commerce  and
17        Community  Affairs  as  complying  with  the requirements
18        specified in clause (i) and (ii) by July  1,  1986.   The
19        Department of Commerce and Community Affairs shall notify
20        the  Department  of  Revenue  of  all such certifications
21        immediately. For tax  years  ending  after  December  31,
22        1988,  the  credit  shall  be allowed for the tax year in
23        which the property is  placed  in  service,  or,  if  the
24        amount  of  the credit exceeds the tax liability for that
25        year, whether it exceeds the original  liability  or  the
26        liability  as  later  amended, such excess may be carried
27        forward and applied to the tax liability of the 5 taxable
28        years following the excess credit years. The credit shall
29        be applied to the earliest year  for  which  there  is  a
30        liability. If there is credit from more than one tax year
31        that  is  available to offset a liability, earlier credit
32        shall be applied first.
33             (2)  The term "qualified  property"  means  property
34        which:
 
                            -7-      LRB093 02897 RCE 17262 a
 1                  (A)  is   tangible,   whether   new   or  used,
 2             including buildings  and  structural  components  of
 3             buildings  and signs that are real property, but not
 4             including land or improvements to real property that
 5             are not a structural component of a building such as
 6             landscaping,  sewer  lines,  local   access   roads,
 7             fencing, parking lots, and other appurtenances;
 8                  (B)  is  depreciable pursuant to Section 167 of
 9             the  Internal  Revenue  Code,  except  that  "3-year
10             property" as defined in Section 168(c)(2)(A) of that
11             Code is not eligible for the credit provided by this
12             subsection (e);
13                  (C)  is acquired  by  purchase  as  defined  in
14             Section 179(d) of the Internal Revenue Code;
15                  (D)  is  used  in Illinois by a taxpayer who is
16             primarily engaged in  manufacturing,  or  in  mining
17             coal or fluorite, or in retailing; and
18                  (E)  has  not  previously been used in Illinois
19             in such a manner and  by  such  a  person  as  would
20             qualify  for  the credit provided by this subsection
21             (e) or subsection (f).
22             (3)  For   purposes   of   this   subsection    (e),
23        "manufacturing" means the material staging and production
24        of  tangible  personal  property  by  procedures commonly
25        regarded as manufacturing,  processing,  fabrication,  or
26        assembling  which changes some existing material into new
27        shapes, new qualities, or new combinations.  For purposes
28        of this subsection (e) the term "mining" shall  have  the
29        same  meaning  as  the term "mining" in Section 613(c) of
30        the  Internal  Revenue  Code.   For  purposes   of   this
31        subsection  (e),  the  term "retailing" means the sale of
32        tangible  personal  property  or  services  rendered   in
33        conjunction  with  the sale of tangible consumer goods or
34        commodities.
 
                            -8-      LRB093 02897 RCE 17262 a
 1             (4)  The basis of qualified property  shall  be  the
 2        basis  used  to  compute  the  depreciation deduction for
 3        federal income tax purposes.
 4             (5)  If the basis of the property for federal income
 5        tax depreciation purposes is increased after it has  been
 6        placed in service in Illinois by the taxpayer, the amount
 7        of  such  increase  shall  be  deemed  property placed in
 8        service on the date of such increase in basis.
 9             (6)  The term "placed in  service"  shall  have  the
10        same  meaning as under Section 46 of the Internal Revenue
11        Code.
12             (7)  If during any taxable year, any property ceases
13        to be qualified property in the  hands  of  the  taxpayer
14        within  48  months  after being placed in service, or the
15        situs of any qualified property is moved outside Illinois
16        within 48 months  after  being  placed  in  service,  the
17        Personal  Property  Tax  Replacement  Income Tax for such
18        taxable year shall be increased.  Such increase shall  be
19        determined by (i) recomputing the investment credit which
20        would  have been allowed for the year in which credit for
21        such property was originally allowed by eliminating  such
22        property from such computation and, (ii) subtracting such
23        recomputed  credit  from  the amount of credit previously
24        allowed. For  the  purposes  of  this  paragraph  (7),  a
25        reduction  of  the  basis of qualified property resulting
26        from a redetermination of the  purchase  price  shall  be
27        deemed  a disposition of qualified property to the extent
28        of such reduction.
29             (8)  Unless the investment  credit  is  extended  by
30        law,  the  basis  of qualified property shall not include
31        costs incurred after December 31, 2003, except for  costs
32        incurred  pursuant  to a binding contract entered into on
33        or before December 31, 2003.
34             (9)  Each taxable year ending  before  December  31,
 
                            -9-      LRB093 02897 RCE 17262 a
 1        2000,  a  partnership  may  elect  to pass through to its
 2        partners the credits to which the partnership is entitled
 3        under this  subsection  (e)  for  the  taxable  year.   A
 4        partner  may use the credit allocated to him or her under
 5        this  paragraph  only  against   the   tax   imposed   in
 6        subsections   (c)  and  (d)  of  this  Section.   If  the
 7        partnership makes that election, those credits  shall  be
 8        allocated  among  the  partners  in  the  partnership  in
 9        accordance  with the rules set forth in Section 704(b) of
10        the Internal Revenue  Code,  and  the  rules  promulgated
11        under  that  Section,  and  the  allocated  amount of the
12        credits shall be allowed to the partners for that taxable
13        year.  The partnership shall make this  election  on  its
14        Personal  Property  Tax Replacement Income Tax return for
15        that taxable year.  The  election  to  pass  through  the
16        credits shall be irrevocable.
17             For  taxable  years  ending on or after December 31,
18        2000, a partner that  qualifies  its  partnership  for  a
19        subtraction  under  subparagraph  (I) of paragraph (2) of
20        subsection (d) of  Section  203  or  a  shareholder  that
21        qualifies  a  Subchapter  S corporation for a subtraction
22        under subparagraph (S) of paragraph (2) of subsection (b)
23        of Section 203 shall  be  allowed  a  credit  under  this
24        subsection  (e)  equal  to its share of the credit earned
25        under this subsection (e) during the taxable year by  the
26        partnership  or  Subchapter  S corporation, determined in
27        accordance  with  the   determination   of   income   and
28        distributive  share  of income under Sections 702 and 704
29        and Subchapter S of  the  Internal  Revenue  Code.   This
30        paragraph is exempt from the provisions of Section 250.
31          (f)  Investment credit; Enterprise Zone.
32             (1)  A  taxpayer  shall  be allowed a credit against
33        the tax imposed  by  subsections  (a)  and  (b)  of  this
34        Section  for  investment  in  qualified property which is
 
                            -10-     LRB093 02897 RCE 17262 a
 1        placed in service in an Enterprise Zone created  pursuant
 2        to  the  Illinois  Enterprise  Zone  Act.   For partners,
 3        shareholders of Subchapter S corporations, and owners  of
 4        limited  liability companies, if the liability company is
 5        treated as a partnership  for  purposes  of  federal  and
 6        State  income  taxation,  there shall be allowed a credit
 7        under this subsection (f) to be determined in  accordance
 8        with  the  determination of income and distributive share
 9        of income under Sections 702 and 704 and Subchapter S  of
10        the  Internal  Revenue  Code.  The credit shall be .5% of
11        the  basis  for  such  property.   The  credit  shall  be
12        available only in the taxable year in which the  property
13        is placed in service in the Enterprise Zone and shall not
14        be   allowed  to  the  extent  that  it  would  reduce  a
15        taxpayer's liability for the tax imposed  by  subsections
16        (a) and (b) of this Section to below zero.  For tax years
17        ending on or after December 31, 1985, the credit shall be
18        allowed  for the tax year in which the property is placed
19        in service, or, if the amount of the credit  exceeds  the
20        tax  liability  for  that  year,  whether  it exceeds the
21        original liability or the  liability  as  later  amended,
22        such excess may be carried forward and applied to the tax
23        liability  of  the  5  taxable years following the excess
24        credit year.  The credit shall be applied to the earliest
25        year for which there is a liability.  If there is  credit
26        from more than one tax year that is available to offset a
27        liability,  the  credit  accruing  first in time shall be
28        applied first.
29             (2)  The  term  qualified  property  means  property
30        which:
31                  (A)  is  tangible,   whether   new   or   used,
32             including  buildings  and  structural  components of
33             buildings;
34                  (B)  is depreciable pursuant to Section 167  of
 
                            -11-     LRB093 02897 RCE 17262 a
 1             the  Internal  Revenue  Code,  except  that  "3-year
 2             property" as defined in Section 168(c)(2)(A) of that
 3             Code is not eligible for the credit provided by this
 4             subsection (f);
 5                  (C)  is  acquired  by  purchase  as  defined in
 6             Section 179(d) of the Internal Revenue Code;
 7                  (D)  is used in  the  Enterprise  Zone  by  the
 8             taxpayer; and
 9                  (E)  has  not  been previously used in Illinois
10             in such a manner and  by  such  a  person  as  would
11             qualify  for  the credit provided by this subsection
12             (f) or subsection (e).
13             (3)  The basis of qualified property  shall  be  the
14        basis  used  to  compute  the  depreciation deduction for
15        federal income tax purposes.
16             (4)  If the basis of the property for federal income
17        tax depreciation purposes is increased after it has  been
18        placed in service in the Enterprise Zone by the taxpayer,
19        the  amount  of  such  increase  shall be deemed property
20        placed in service on the date of such increase in basis.
21             (5)  The term "placed in  service"  shall  have  the
22        same  meaning as under Section 46 of the Internal Revenue
23        Code.
24             (6)  If during any taxable year, any property ceases
25        to be qualified property in the  hands  of  the  taxpayer
26        within  48  months  after being placed in service, or the
27        situs of any qualified  property  is  moved  outside  the
28        Enterprise  Zone  within  48 months after being placed in
29        service, the tax imposed under subsections (a) and (b) of
30        this Section for such taxable year  shall  be  increased.
31        Such  increase shall be determined by (i) recomputing the
32        investment credit which would have been allowed  for  the
33        year  in  which  credit  for such property was originally
34        allowed  by   eliminating   such   property   from   such
 
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 1        computation,  and (ii) subtracting such recomputed credit
 2        from the amount of credit previously  allowed.   For  the
 3        purposes  of this paragraph (6), a reduction of the basis
 4        of qualified property resulting from a redetermination of
 5        the purchase price  shall  be  deemed  a  disposition  of
 6        qualified property to the extent of such reduction.
 7          (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
 8    Zone or Sub-Zone.
 9             (1)  A taxpayer conducting a trade or business in an
10        enterprise  zone  or a High Impact Business designated by
11        the  Department  of  Commerce   and   Community   Affairs
12        conducting  a trade or business in a federally designated
13        Foreign Trade Zone or Sub-Zone shall be allowed a  credit
14        against  the  tax  imposed  by subsections (a) and (b) of
15        this Section in the amount of $500 per eligible  employee
16        hired to work in the zone during the taxable year.
17             (2)  To qualify for the credit:
18                  (A)  the  taxpayer must hire 5 or more eligible
19             employees to work in an enterprise zone or federally
20             designated Foreign Trade Zone or Sub-Zone during the
21             taxable year;
22                  (B)  the taxpayer's total employment within the
23             enterprise  zone  or  federally  designated  Foreign
24             Trade Zone or Sub-Zone must increase by  5  or  more
25             full-time  employees  beyond  the  total employed in
26             that zone at the end of the previous  tax  year  for
27             which  a  jobs  tax  credit  under  this Section was
28             taken, or beyond the total employed by the  taxpayer
29             as of December 31, 1985, whichever is later; and
30                  (C)  the  eligible  employees  must be employed
31             180 consecutive days in order to be deemed hired for
32             purposes of this subsection.
33             (3)  An "eligible employee" means  an  employee  who
34        is:
 
                            -13-     LRB093 02897 RCE 17262 a
 1                  (A)  Certified  by  the  Department of Commerce
 2             and Community Affairs  as  "eligible  for  services"
 3             pursuant  to  regulations  promulgated in accordance
 4             with Title II of the Job Training  Partnership  Act,
 5             Training Services for the Disadvantaged or Title III
 6             of  the Job Training Partnership Act, Employment and
 7             Training Assistance for Dislocated Workers Program.
 8                  (B)  Hired  after  the   enterprise   zone   or
 9             federally  designated Foreign Trade Zone or Sub-Zone
10             was designated or the trade or business was  located
11             in that zone, whichever is later.
12                  (C)  Employed in the enterprise zone or Foreign
13             Trade  Zone  or Sub-Zone. An employee is employed in
14             an enterprise zone or federally  designated  Foreign
15             Trade  Zone or Sub-Zone if his services are rendered
16             there or it  is  the  base  of  operations  for  the
17             services performed.
18                  (D)  A  full-time  employee  working 30 or more
19             hours per week.
20             (4)  For tax years ending on or after  December  31,
21        1985  and prior to December 31, 1988, the credit shall be
22        allowed for the tax year in which the eligible  employees
23        are hired.  For tax years ending on or after December 31,
24        1988,  the  credit  shall  be  allowed  for  the tax year
25        immediately following the tax year in which the  eligible
26        employees are hired.  If the amount of the credit exceeds
27        the  tax  liability for that year, whether it exceeds the
28        original liability or the  liability  as  later  amended,
29        such excess may be carried forward and applied to the tax
30        liability  of  the  5  taxable years following the excess
31        credit year.  The credit shall be applied to the earliest
32        year for which there is a liability. If there  is  credit
33        from more than one tax year that is available to offset a
34        liability, earlier credit shall be applied first.
 
                            -14-     LRB093 02897 RCE 17262 a
 1             (5)  The Department of Revenue shall promulgate such
 2        rules and regulations as may be deemed necessary to carry
 3        out the purposes of this subsection (g).
 4             (6)  The  credit  shall  be  available  for eligible
 5        employees hired on or after January 1, 1986.
 6        (h)  Investment credit; High Impact Business.
 7             (1)  Subject to subsections (b) and (b-5) of Section
 8        5.5 of the Illinois Enterprise Zone Act, a taxpayer shall
 9        be  allowed  a  credit  against  the   tax   imposed   by
10        subsections (a) and (b) of this Section for investment in
11        qualified  property  which  is  placed  in  service  by a
12        Department of Commerce and Community  Affairs  designated
13        High  Impact  Business.   The  credit shall be .5% of the
14        basis  for  such  property.   The  credit  shall  not  be
15        available (i) until the minimum investments in  qualified
16        property  set  forth  in subdivision (a)(3)(A) of Section
17        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
18        satisfied or (ii) until the time authorized in subsection
19        (b-5) of the Illinois Enterprise Zone  Act  for  entities
20        designated  as  High Impact Businesses under subdivisions
21        (a)(3)(B), (a)(3)(C), and (a)(3)(D) of Section 5.5 of the
22        Illinois Enterprise Zone Act, and shall not be allowed to
23        the extent that it would reduce  a  taxpayer's  liability
24        for  the  tax  imposed by subsections (a) and (b) of this
25        Section to below zero.  The  credit  applicable  to  such
26        investments  shall  be taken in the taxable year in which
27        such investments have been  completed.   The  credit  for
28        additional investments beyond the minimum investment by a
29        designated   high   impact   business   authorized  under
30        subdivision (a)(3)(A) of  Section  5.5  of  the  Illinois
31        Enterprise  Zone  Act  shall  be  available  only  in the
32        taxable year in which the property is placed  in  service
33        and  shall  not  be  allowed  to the extent that it would
34        reduce a taxpayer's liability  for  the  tax  imposed  by
 
                            -15-     LRB093 02897 RCE 17262 a
 1        subsections  (a)  and  (b) of this Section to below zero.
 2        For tax years ending on or after December 31,  1987,  the
 3        credit  shall  be  allowed  for the tax year in which the
 4        property is placed in service, or, if the amount  of  the
 5        credit  exceeds  the tax liability for that year, whether
 6        it exceeds the original liability  or  the  liability  as
 7        later  amended,  such  excess  may be carried forward and
 8        applied to the tax  liability  of  the  5  taxable  years
 9        following  the  excess  credit year.  The credit shall be
10        applied to  the  earliest  year  for  which  there  is  a
11        liability.   If  there  is  credit from more than one tax
12        year that is available to offset a liability, the  credit
13        accruing first in time shall be applied first.
14             Changes  made  in  this subdivision (h)(1) by Public
15        Act 88-670 restore changes made by Public Act 85-1182 and
16        reflect existing law.
17             (2)  The  term  qualified  property  means  property
18        which:
19                  (A)  is  tangible,   whether   new   or   used,
20             including  buildings  and  structural  components of
21             buildings;
22                  (B)  is depreciable pursuant to Section 167  of
23             the  Internal  Revenue  Code,  except  that  "3-year
24             property" as defined in Section 168(c)(2)(A) of that
25             Code is not eligible for the credit provided by this
26             subsection (h);
27                  (C)  is  acquired  by  purchase  as  defined in
28             Section 179(d) of the Internal Revenue Code; and
29                  (D)  is not eligible for  the  Enterprise  Zone
30             Investment Credit provided by subsection (f) of this
31             Section.
32             (3)  The  basis  of  qualified property shall be the
33        basis used to  compute  the  depreciation  deduction  for
34        federal income tax purposes.
 
                            -16-     LRB093 02897 RCE 17262 a
 1             (4)  If the basis of the property for federal income
 2        tax  depreciation purposes is increased after it has been
 3        placed in service in a federally designated Foreign Trade
 4        Zone or Sub-Zone located in Illinois by the taxpayer, the
 5        amount of such increase shall be deemed  property  placed
 6        in service on the date of such increase in basis.
 7             (5)  The  term  "placed  in  service" shall have the
 8        same meaning as under Section 46 of the Internal  Revenue
 9        Code.
10             (6)  If  during any taxable year ending on or before
11        December 31, 1996, any property ceases  to  be  qualified
12        property  in  the  hands of the taxpayer within 48 months
13        after being placed  in  service,  or  the  situs  of  any
14        qualified  property  is  moved outside Illinois within 48
15        months after being placed in  service,  the  tax  imposed
16        under  subsections  (a)  and (b) of this Section for such
17        taxable year shall be increased.  Such increase shall  be
18        determined by (i) recomputing the investment credit which
19        would  have been allowed for the year in which credit for
20        such property was originally allowed by eliminating  such
21        property from such computation, and (ii) subtracting such
22        recomputed  credit  from  the amount of credit previously
23        allowed.  For the  purposes  of  this  paragraph  (6),  a
24        reduction  of  the  basis of qualified property resulting
25        from a redetermination of the  purchase  price  shall  be
26        deemed  a disposition of qualified property to the extent
27        of such reduction.
28             (7)  Beginning with tax years ending after  December
29        31,  1996,  if  a taxpayer qualifies for the credit under
30        this  subsection  (h)  and  thereby  is  granted  a   tax
31        abatement  and the taxpayer relocates its entire facility
32        in violation of the explicit  terms  and  length  of  the
33        contract  under  Section 18-183 of the Property Tax Code,
34        the tax imposed under subsections (a)  and  (b)  of  this
 
                            -17-     LRB093 02897 RCE 17262 a
 1        Section  shall be increased for the taxable year in which
 2        the taxpayer relocated its facility by an amount equal to
 3        the amount of credit received by the taxpayer under  this
 4        subsection (h).
 5        (i)  Credit  for Personal Property Tax Replacement Income
 6    Tax.  For tax years ending prior  to  December  31,  2003,  a
 7    credit   shall   be   allowed  against  the  tax  imposed  by
 8    subsections (a) and (b) of this Section for the  tax  imposed
 9    by  subsections  (c)  and  (d)  of this Section.  This credit
10    shall  be  computed  by  multiplying  the  tax   imposed   by
11    subsections  (c)  and  (d) of this Section by a fraction, the
12    numerator of which is base income allocable to  Illinois  and
13    the denominator of which is Illinois base income, and further
14    multiplying   the   product   by  the  tax  rate  imposed  by
15    subsections (a) and (b) of this Section.
16        Any credit earned on or after  December  31,  1986  under
17    this  subsection  which  is  unused in the year the credit is
18    computed because it exceeds  the  tax  liability  imposed  by
19    subsections (a) and (b) for that year (whether it exceeds the
20    original  liability or the liability as later amended) may be
21    carried forward and applied to the tax liability  imposed  by
22    subsections  (a) and (b) of the 5 taxable years following the
23    excess credit year, provided that no credit  may  be  carried
24    forward  to  any  year  ending on or after December 31, 2003.
25    This credit shall be applied first to the earliest  year  for
26    which  there is a liability.  If there is a credit under this
27    subsection from more than one tax year that is  available  to
28    offset  a  liability  the  earliest credit arising under this
29    subsection shall be applied first.
30        If, during any taxable year ending on or  after  December
31    31,  1986, the tax imposed by subsections (c) and (d) of this
32    Section for which a taxpayer has claimed a credit under  this
33    subsection  (i) is reduced, the amount of credit for such tax
34    shall also be reduced.  Such reduction shall be determined by
 
                            -18-     LRB093 02897 RCE 17262 a
 1    recomputing the credit to take into account the  reduced  tax
 2    imposed  by  subsections  (c) and (d).  If any portion of the
 3    reduced amount of credit has  been  carried  to  a  different
 4    taxable  year,  an  amended  return  shall  be filed for such
 5    taxable year to reduce the amount of credit claimed.
 6        (j)  Training expense credit.  Beginning with  tax  years
 7    ending  on  or  after December 31, 1986 and prior to December
 8    31, 2003, a taxpayer shall be allowed a  credit  against  the
 9    tax imposed by subsections (a) and (b) under this Section for
10    all  amounts  paid  or  accrued,  on  behalf  of  all persons
11    employed by the taxpayer in Illinois  or  Illinois  residents
12    employed  outside  of Illinois by a taxpayer, for educational
13    or vocational training in semi-technical or technical  fields
14    or  semi-skilled  or skilled fields, which were deducted from
15    gross income in  the  computation  of  taxable  income.   The
16    credit  against  the  tax  imposed by subsections (a) and (b)
17    shall be 1.6%  of  such  training  expenses.   For  partners,
18    shareholders  of  subchapter  S  corporations,  and owners of
19    limited liability companies,  if  the  liability  company  is
20    treated  as  a  partnership for purposes of federal and State
21    income taxation, there shall be allowed a credit  under  this
22    subsection  (j)  to  be  determined  in  accordance  with the
23    determination of income  and  distributive  share  of  income
24    under  Sections  702 and 704 and subchapter S of the Internal
25    Revenue Code.
26        Any credit allowed under this subsection which is  unused
27    in  the  year  the credit is earned may be carried forward to
28    each of the 5 taxable years following the year for which  the
29    credit is first computed until it is used.  This credit shall
30    be  applied  first  to the earliest year for which there is a
31    liability.  If there is a credit under this  subsection  from
32    more  than  one  tax  year  that  is  available  to  offset a
33    liability the earliest credit arising under  this  subsection
34    shall  be  applied  first.   No  carryforward  credit  may be
 
                            -19-     LRB093 02897 RCE 17262 a
 1    claimed in any tax year ending on or after December 31, 2003.
 2        (k)  Research and development credit.
 3        For Beginning with tax years ending after  July  1,  1990
 4    and prior to December 31, 2003, a taxpayer shall be allowed a
 5    credit  against the tax imposed by subsections (a) and (b) of
 6    this Section  for  increasing  research  activities  in  this
 7    State.   The  credit  allowed  against  the  tax  imposed  by
 8    subsections  (a)  and  (b)  shall  be  equal to 6 1/2% of the
 9    qualifying expenditures for increasing research activities in
10    this State.   For  partners,  shareholders  of  subchapter  S
11    corporations,  and  owners of limited liability companies, if
12    the  liability  company  is  treated  as  a  partnership  for
13    purposes of federal and State income taxation, there shall be
14    allowed a credit under this subsection to  be  determined  in
15    accordance  with the determination of income and distributive
16    share of income under Sections 702 and 704 and  subchapter  S
17    of the Internal Revenue Code.
18        For    purposes    of    this   subsection,   "qualifying
19    expenditures" means the qualifying  expenditures  as  defined
20    for  the  federal  credit  for increasing research activities
21    which would be allowable under Section  41  of  the  Internal
22    Revenue   Code   and  which  are  conducted  in  this  State,
23    "qualifying expenditures for increasing  research  activities
24    in  this  State"  means the excess of qualifying expenditures
25    for the  taxable  year  in  which  incurred  over  qualifying
26    expenditures  for  the  base period, "qualifying expenditures
27    for the base period" means  the  average  of  the  qualifying
28    expenditures  for  each  year  in  the base period, and "base
29    period" means the 3 taxable years immediately  preceding  the
30    taxable year for which the determination is being made.
31        Any credit in excess of the tax liability for the taxable
32    year may be carried forward. A taxpayer may elect to have the
33    unused  credit  shown  on  its final completed return carried
34    over as a credit against the tax liability for the  following
 
                            -20-     LRB093 02897 RCE 17262 a
 1    5  taxable  years  or until it has been fully used, whichever
 2    occurs first; provided that no credit may be carried  forward
 3    to any year ending on or after December 31, 2003.
 4        If  an  unused  credit is carried forward to a given year
 5    from 2 or more earlier years,  that  credit  arising  in  the
 6    earliest year will be applied first against the tax liability
 7    for  the  given  year.  If a tax liability for the given year
 8    still remains, the credit from the next  earliest  year  will
 9    then  be applied, and so on, until all credits have been used
10    or  no  tax  liability  for  the  given  year  remains.   Any
11    remaining unused credit  or  credits  then  will  be  carried
12    forward  to  the next following year in which a tax liability
13    is incurred, except that no credit can be carried forward  to
14    a year which is more than 5 years after the year in which the
15    expense for which the credit is given was incurred.
16        Unless  extended  by  law,  the  credit shall not include
17    costs incurred after December  31,  2004,  except  for  costs
18    incurred  pursuant  to  a binding contract entered into on or
19    before December 31, 2004.
20        No inference shall be drawn from this amendatory  Act  of
21    the  91st  General  Assembly  in  construing this Section for
22    taxable years beginning before January 1, 1999.
23        (l)  Environmental Remediation Tax Credit.
24             (i)  For tax  years ending after December  31,  1997
25        and  on  or before December 31, 2001, a taxpayer shall be
26        allowed a credit against the tax imposed  by  subsections
27        (a)  and (b) of this Section for certain amounts paid for
28        unreimbursed eligible remediation costs, as specified  in
29        this   subsection.      For  purposes  of  this  Section,
30        "unreimbursed eligible  remediation  costs"  means  costs
31        approved  by the Illinois Environmental Protection Agency
32        ("Agency")  under  Section  58.14  of  the  Environmental
33        Protection Act that were paid in performing environmental
34        remediation at a site for which a No Further  Remediation
 
                            -21-     LRB093 02897 RCE 17262 a
 1        Letter  was  issued  by  the  Agency  and  recorded under
 2        Section 58.10 of the Environmental Protection  Act.   The
 3        credit  must  be  claimed  for  the taxable year in which
 4        Agency approval of  the  eligible  remediation  costs  is
 5        granted.   The credit is not available to any taxpayer if
 6        the taxpayer or any related party caused  or  contributed
 7        to,  in  any  material  respect,  a  release of regulated
 8        substances on, in, or under the site that was  identified
 9        and addressed by the remedial action pursuant to the Site
10        Remediation  Program of the Environmental Protection Act.
11        After the  Pollution  Control  Board  rules  are  adopted
12        pursuant to the Illinois Administrative Procedure Act for
13        the administration and enforcement of Section 58.9 of the
14        Environmental Protection Act, determinations as to credit
15        availability  for  purposes of this Section shall be made
16        consistent  with  those  rules.   For  purposes  of  this
17        Section,  "taxpayer"  includes   a   person   whose   tax
18        attributes  the  taxpayer  has succeeded to under Section
19        381 of the Internal  Revenue  Code  and  "related  party"
20        includes the persons disallowed a deduction for losses by
21        paragraphs  (b),  (c),  and  (f)(1) of Section 267 of the
22        Internal Revenue  Code  by  virtue  of  being  a  related
23        taxpayer,  as  well  as  any of its partners.  The credit
24        allowed against the tax imposed by  subsections  (a)  and
25        (b)  shall  be  equal to 25% of the unreimbursed eligible
26        remediation costs in excess of $100,000 per site,  except
27        that  the  $100,000 threshold shall not apply to any site
28        contained in an enterprise  zone  as  determined  by  the
29        Department  of Commerce and Community Affairs.  The total
30        credit allowed shall not exceed $40,000 per year  with  a
31        maximum  total  of  $150,000  per site.  For partners and
32        shareholders of subchapter S corporations, there shall be
33        allowed a credit under this subsection to  be  determined
34        in  accordance  with  the  determination  of  income  and
 
                            -22-     LRB093 02897 RCE 17262 a
 1        distributive  share  of income under Sections 702 and 704
 2        and subchapter S of the Internal Revenue Code.
 3             (ii)  A credit allowed under this subsection that is
 4        unused in the year the credit is earned  may  be  carried
 5        forward to each of the 5 taxable years following the year
 6        for  which  the  credit is first earned until it is used.
 7        The term "unused credit" does not include any amounts  of
 8        unreimbursed  eligible remediation costs in excess of the
 9        maximum credit per site authorized under  paragraph  (i).
10        This  credit  shall be applied first to the earliest year
11        for which there is a liability.  If  there  is  a  credit
12        under this subsection from more than one tax year that is
13        available  to  offset  a  liability,  the earliest credit
14        arising under this subsection shall be applied first.   A
15        credit  allowed  under  this  subsection may be sold to a
16        buyer as part of a sale of all or part of the remediation
17        site for which the credit was granted.  The purchaser  of
18        a  remediation  site  and the tax credit shall succeed to
19        the unused credit and remaining carry-forward  period  of
20        the  seller.  To perfect the transfer, the assignor shall
21        record the transfer in the chain of title  for  the  site
22        and  provide  written  notice  to  the  Director  of  the
23        Illinois  Department  of Revenue of the assignor's intent
24        to sell the remediation site and the amount  of  the  tax
25        credit to be transferred as a portion of the sale.  In no
26        event  may a credit be transferred to any taxpayer if the
27        taxpayer or a related party would not be  eligible  under
28        the provisions of subsection (i).
29             (iii)  For purposes of this Section, the term "site"
30        shall  have the same meaning as under Section 58.2 of the
31        Environmental Protection Act.
32        (m)  Education expense credit.  Beginning with tax  years
33    ending  after  December  31,  1999,  a  taxpayer  who  is the
34    custodian of one or more qualifying pupils shall be allowed a
 
                            -23-     LRB093 02897 RCE 17262 a
 1    credit against the tax imposed by subsections (a) and (b)  of
 2    this  Section  for  qualified  education expenses incurred on
 3    behalf of the qualifying pupils.  The credit shall  be  equal
 4    to  25%  of qualified education expenses, but in no event may
 5    the total credit under this subsection claimed  by  a  family
 6    that  is  the custodian of qualifying pupils exceed $500.  In
 7    no event shall a credit  under  this  subsection  reduce  the
 8    taxpayer's  liability under this Act to less than zero.  This
 9    subsection is exempt from the provisions of  Section  250  of
10    this Act.
11        For purposes of this subsection:
12        "Qualifying   pupils"   means  individuals  who  (i)  are
13    residents of the State of Illinois, (ii) are under the age of
14    21 at the close of the school year  for  which  a  credit  is
15    sought,  and  (iii) during the school year for which a credit
16    is sought were full-time pupils enrolled  in  a  kindergarten
17    through  twelfth  grade  education  program at any school, as
18    defined in this subsection.
19        "Qualified education expense" means the  amount  incurred
20    on  behalf  of  a  qualifying  pupil  in  excess  of $250 for
21    tuition, book fees, and lab fees at the school in  which  the
22    pupil is enrolled during the regular school year.
23        "School"  means  any  public  or  nonpublic elementary or
24    secondary school in Illinois that is in compliance with Title
25    VI of the Civil Rights Act of 1964 and  attendance  at  which
26    satisfies  the  requirements  of  Section  26-1 of the School
27    Code, except that nothing shall be  construed  to  require  a
28    child  to attend any particular public or nonpublic school to
29    qualify for the credit under this Section.
30        "Custodian" means, with respect to qualifying pupils,  an
31    Illinois  resident  who  is  a  parent,  the parents, a legal
32    guardian, or the legal guardians of the qualifying pupils.
33    (Source:  P.A.  91-9,  eff.  1-1-00;  91-357,  eff.  7-29-99;
34    91-643, eff. 8-20-99;  91-644,  eff.  8-20-99;  91-860,  eff.
 
                            -24-     LRB093 02897 RCE 17262 a
 1    6-22-00; 91-913, eff. 1-1-01; 92-12, eff. 7-1-01; 92-16, eff.
 2    6-28-01; 92-651, eff. 7-11-02; 92-846, eff. 8-23-02.)

 3        (35 ILCS 5/204) (from Ch. 120, par. 2-204)
 4        Sec. 204.  Standard Exemption.
 5        (a)  Allowance  of  exemption.  In  computing  net income
 6    under this Act, there shall be allowed as  an  exemption  the
 7    sum  of the amounts determined under subsections (b), (c) and
 8    (d), multiplied by a fraction the numerator of which  is  the
 9    amount  of the taxpayer's base income allocable to this State
10    for the taxable year and the  denominator  of  which  is  the
11    taxpayer's total base income for the taxable year.
12        (b)  Basic  amount.  For the purpose of subsection (a) of
13    this Section, except as provided by subsection (a) of Section
14    205 and in this subsection, each taxpayer shall be allowed  a
15    basic amount of $1000, except that for corporations the basic
16    amount  shall  be  zero  for  tax  years  ending  on or after
17    December 31, 2003, and for individuals the basic amount shall
18    be:
19             (1)  for taxable years ending on or  after  December
20        31, 1998 and prior to December 31, 1999, $1,300;
21             (2)  for  taxable  years ending on or after December
22        31, 1999 and prior to December 31, 2000, $1,650;
23             (3)  for taxable years ending on or  after  December
24        31, 2000, $2,000.
25    For  taxable  years  ending  on or after December 31, 1992, a
26    taxpayer whose Illinois base income exceeds the basic  amount
27    and  who  is  claimed  as a dependent on another person's tax
28    return under the Internal Revenue Code of 1986 shall  not  be
29    allowed any basic amount under this subsection.
30        (c)  Additional amount for individuals. In the case of an
31    individual  taxpayer,  there shall be allowed for the purpose
32    of subsection (a), in addition to the basic  amount  provided
33    by subsection (b), an additional exemption equal to the basic
 
                            -25-     LRB093 02897 RCE 17262 a
 1    amount  for each exemption in excess of one allowable to such
 2    individual taxpayer for the taxable year under Section 151 of
 3    the Internal Revenue Code.
 4        (d)  Additional exemptions for an individual taxpayer and
 5    his or her spouse.  In the case of an individual taxpayer and
 6    his or her spouse, he or she shall each be allowed additional
 7    exemptions as follows:
 8             (1)  Additional exemption for taxpayer or spouse  65
 9        years of age or older.
10                  (A)  For  taxpayer.  An additional exemption of
11             $1,000 for the taxpayer if he or  she  has  attained
12             the age of 65 before the end of the taxable year.
13                  (B)  For  spouse  when  a  joint  return is not
14             filed.  An additional exemption of  $1,000  for  the
15             spouse of the taxpayer if a joint return is not made
16             by  the  taxpayer  and his spouse, and if the spouse
17             has attained the age of 65 before the  end  of  such
18             taxable  year,  and,  for the calendar year in which
19             the taxable year of  the  taxpayer  begins,  has  no
20             gross  income  and  is  not the dependent of another
21             taxpayer.
22             (2)  Additional exemption for blindness of  taxpayer
23        or spouse.
24                  (A)  For  taxpayer.  An additional exemption of
25             $1,000 for the taxpayer if he or she is blind at the
26             end of the taxable year.
27                  (B)  For spouse when  a  joint  return  is  not
28             filed.   An  additional  exemption of $1,000 for the
29             spouse of the taxpayer if a separate return is  made
30             by the taxpayer, and if the spouse is blind and, for
31             the  calendar  year in which the taxable year of the
32             taxpayer begins, has no gross income and is not  the
33             dependent  of another taxpayer. For purposes of this
34             paragraph, the determination of whether  the  spouse
 
                            -26-     LRB093 02897 RCE 17262 a
 1             is  blind shall be made as of the end of the taxable
 2             year of the taxpayer; except that if the spouse dies
 3             during such taxable year such determination shall be
 4             made as of the time of such death.
 5                  (C)  Blindness defined.  For purposes  of  this
 6             subsection,  an  individual  is blind only if his or
 7             her central visual acuity does not exceed 20/200  in
 8             the  better eye with correcting lenses, or if his or
 9             her visual acuity is  greater  than  20/200  but  is
10             accompanied  by a limitation in the fields of vision
11             such that the widest diameter of the  visual  fields
12             subtends an angle no greater than 20 degrees.
13        (e)  Cross  reference.  See  Article  3 for the manner of
14    determining base income allocable to this State.
15        (f)  Application of Section 250.  Section  250  does  not
16    apply  to  the  amendments to this Section made by Public Act
17    90-613.
18    (Source: P.A. 90-613, eff. 7-9-98; 91-357, eff. 7-29-99.)

19        (35 ILCS 5/207) (from Ch. 120, par. 2-207)
20        Sec. 207.  Net Losses.
21        (a) If after applying all of the  modifications  provided
22    for  in  paragraph  (2)  of  Section 203(b), paragraph (2) of
23    Section 203(c) and paragraph (2) of Section  203(d)  and  the
24    allocation  and apportionment provisions of Article 3 of this
25    Act, the taxpayer's net income results in a loss;
26             (1)  for any taxable year ending prior  to  December
27        31,  1999,  such  loss shall be allowed as a carryover or
28        carryback deduction in the manner allowed  under  Section
29        172 of the Internal Revenue Code; and
30             (2)  for   any  taxable  year  ending  on  or  after
31        December 31, 1999 and prior to December  31,  2003,  such
32        loss  shall  be  allowed  as a carryback to each of the 2
33        taxable years preceding the taxable year of such loss and
 
                            -27-     LRB093 02897 RCE 17262 a
 1        shall be a net operating carryover  to  each  of  the  20
 2        taxable  years  following  the taxable year of such loss;
 3        and
 4             (3)  for  any  taxable  year  ending  on  or   after
 5        December  31,  2003,  such loss shall be allowed as a net
 6        operating carryover to  each  of  the  12  taxable  years
 7        following the taxable year of such loss.
 8        (a-5)  Election  to  relinquish  carryback  and  order of
 9    application of losses.
10                  (A)  For losses incurred in  tax  years  ending
11             prior  to  December 31, 2003, the taxpayer may elect
12             to  relinquish  the  entire  carryback  period  with
13             respect to such loss.  Such election shall  be  made
14             in  the form and manner prescribed by the Department
15             and  shall  be  made  by  the  due  date  (including
16             extensions of time) for filing the taxpayer's return
17             for the taxable year in which such loss is incurred,
18             and such election, once made, shall be irrevocable.
19                  (B)  The entire amount of such  loss  shall  be
20             carried  to  the earliest taxable year to which such
21             loss may be carried.  The amount of such loss  which
22             shall  be carried to each of the other taxable years
23             shall be the excess, if any, of the amount  of  such
24             loss over the sum of the deductions for carryback or
25             carryover  of  such  loss  allowable for each of the
26             prior taxable  years  to  which  such  loss  may  be
27             carried.
28        (b)  Any  loss  determined  under  subsection (a) of this
29    Section must be carried back or carried forward in  the  same
30    manner for purposes of subsections (a) and (b) of Section 201
31    of  this  Act  as  for purposes of subsections (c) and (d) of
32    Section 201 of this Act.
33    (Source: P.A. 91-541, eff. 8-13-99.)
 
                            -28-     LRB093 02897 RCE 17262 a
 1        Section 10.  The Illinois Insurance Code  is  amended  by
 2    changing Sections 445 and 531.13 as follows:

 3        (215 ILCS 5/445) (from Ch. 73, par. 1057)
 4        Sec. 445.  Surplus line.
 5        (1)  Surplus   line   defined;   surplus   line   insurer
 6    requirements.   Surplus  line  insurance  is  insurance on an
 7    Illinois risk of the kinds specified in Classes 2  and  3  of
 8    Section  4 of this Code procured from an unauthorized insurer
 9    or a domestic surplus line insurer as defined in Section 445a
10    after the insurance producer representing the insured or  the
11    surplus  line  producer  is unable, after diligent effort, to
12    procure said insurance from insurers which are authorized  to
13    transact  business  in this State other than domestic surplus
14    line insurers as defined in Section 445a.
15        Insurance producers may procure  surplus  line  insurance
16    only  if  licensed  as  a  surplus  line  producer under this
17    Section  and  may  procure  that  insurance  only   from   an
18    unauthorized  insurer or from a domestic surplus line insurer
19    as defined in Section 445a:
20             (a)  that based upon information  available  to  the
21        surplus  line producer has a policyholders surplus of not
22        less  than  $15,000,000  determined  in  accordance  with
23        accounting  rules  that  are  applicable  to   authorized
24        insurers; and
25             (b)  that  has  standards of solvency and management
26        that are adequate for the  protection  of  policyholders;
27        and
28             (c)  where an unauthorized insurer does not meet the
29        standards  set forth in (a) and (b) above, a surplus line
30        producer may, if necessary, procure insurance  from  that
31        insurer  only  if  prior  written warning of such fact or
32        condition is  given  to  the  insured  by  the  insurance
33        producer or surplus line producer.
 
                            -29-     LRB093 02897 RCE 17262 a
 1        (2)  Surplus   line   producer;  license.   Any  licensed
 2    producer who is a resident of this State, or any  nonresident
 3    who  qualifies  under  Section  500-40,  may be licensed as a
 4    surplus line producer upon:
 5             (a)  completing a prelicensing course of study.  The
 6        course provided for by this Section  shall  be  conducted
 7        under  rules  and regulations prescribed by the Director.
 8        The Director  may  administer  the  course  or  may  make
 9        arrangements,   including  contracting  with  an  outside
10        educational service, for  administering  the  course  and
11        collecting  the  non-refundable  application fee provided
12        for in this subsection.   Any  charges  assessed  by  the
13        Director or the educational service for administering the
14        course   shall   be   paid  directly  by  the  individual
15        applicants.  Each applicant required to take  the  course
16        shall  enclose  with the application a non-refundable $10
17        application fee payable to the Director plus  a  separate
18        course  administration  fee.    An applicant who fails to
19        appear for the course as scheduled, or appears but  fails
20        to  complete  the  course,  shall  not be entitled to any
21        refund, and shall be required to submit a new request  to
22        attend  the  course  together with all the requisite fees
23        before being rescheduled for another course  at  a  later
24        date; and
25             (b)  payment of an annual license fee of $200; and
26             (c)  procurement  of  the  surety  bond  required in
27        subsection (4) of this Section.
28        A surplus line producer so licensed shall keep a separate
29    account of the business transacted thereunder which shall  be
30    open  at  all  times to the inspection of the Director or his
31    representative.
32        The prelicensing course of study requirement in (a) above
33    shall not apply to  insurance  producers  who  were  licensed
34    under  the  Illinois  surplus  line  law  on  or  before  the
 
                            -30-     LRB093 02897 RCE 17262 a
 1    effective  date  of  this  amendatory Act of the 92nd General
 2    Assembly.
 3        (3)  Taxes and reports.
 4             (a)  Surplus line tax and penalty for late payment.
 5             A surplus line producer shall file with the Director
 6        on or before February 1 and  August  1  of  each  year  a
 7        report  in  the  form  prescribed  by the Director on all
 8        surplus  line  insurance   procured   from   unauthorized
 9        insurers  during  the  preceding  6  month  period ending
10        December 31 or June 30 respectively, and on the filing of
11        such report shall pay to the Director  for  the  use  and
12        benefit  of the State a sum equal to 3.5% 3% of the gross
13        premiums less returned premiums  upon  all  surplus  line
14        insurance  procured  or  cancelled during the preceding 6
15        months.
16             Any surplus line producer who fails to pay the  full
17        amount  due  under this subsection is liable, in addition
18        to the amount due, for such penalty and interest  charges
19        as  are provided for under Section 412 of this Code.  The
20        Director, through the Attorney General, may institute  an
21        action  in  the  name  of  the  People  of  the  State of
22        Illinois, in any court of competent jurisdiction, for the
23        recovery of the amount of such taxes and  penalties  due,
24        and  prosecute  the same to final judgment, and take such
25        steps as are necessary to collect the same.
26             (b)  Fire Marshal Tax.
27             Each surplus  line  producer  shall  file  with  the
28        Director  on  or before March 31 of each year a report in
29        the form prescribed by the Director on all fire insurance
30        procured from unauthorized insurers subject to tax  under
31        Section 12 of the Fire Investigation Act and shall pay to
32        the Director the fire marshal tax required thereunder.
33             (c)  Taxes  and  fees charged to insured.  The taxes
34        imposed under this subsection and the countersigning fees
 
                            -31-     LRB093 02897 RCE 17262 a
 1        charged by the Surplus Line Association of  Illinois  may
 2        be charged to and collected from surplus line insureds.
 3        (4)  Bond.  Each surplus line producer, as a condition to
 4    receiving  a  surplus  line producer's license, shall execute
 5    and deliver to the Director a surety bond to  the  People  of
 6    the State in the penal sum of $20,000, with a surety which is
 7    authorized  to  transact  business in this State, conditioned
 8    that the surplus line producer will pay to the  Director  the
 9    tax,  interest  and  penalties levied under subsection (3) of
10    this Section.
11        (5)  Submission of documents to Surplus Line  Association
12    of  Illinois.  A  surplus  line  producer  shall submit every
13    insurance contract issued under his or  her  license  to  the
14    Surplus  Line  Association  of  Illinois  for  recording  and
15    countersignature.  The submission and countersignature may be
16    effected  through electronic means.  The submission shall set
17    forth:
18             (a)  the name of the insured;
19             (b)  the description and  location  of  the  insured
20        property or risk;
21             (c)  the amount insured;
22             (d)  the gross premiums charged or returned;
23             (e)  the   name   of  the  unauthorized  insurer  or
24        domestic surplus line insurer as defined in Section  445a
25        from whom coverage has been procured;
26             (f)  the kind or kinds of insurance procured; and
27             (g)  amount  of  premium  subject to tax required by
28        Section 12 of the Fire Investigation Act.
29             Proposals, endorsements, and other  documents  which
30        are  incidental  to the insurance but which do not affect
31        the  premium  charged  are  exempted  from   filing   and
32        countersignature.
33             The  submission of insuring contracts to the Surplus
34        Line Association of Illinois constitutes a  certification
 
                            -32-     LRB093 02897 RCE 17262 a
 1        by the surplus line producer or by the insurance producer
 2        who  presented  the risk to the surplus line producer for
 3        placement as a surplus  line  risk  that  after  diligent
 4        effort  the required insurance could not be procured from
 5        insurers which are authorized  to  transact  business  in
 6        this  State  other than domestic surplus line insurers as
 7        defined in Section 445a and  that  such  procurement  was
 8        otherwise in accordance with the surplus line law.
 9        (6)  Countersignature required.  It shall be unlawful for
10    an  insurance  producer  to  deliver any unauthorized insurer
11    contract or domestic surplus  line  insurer  contract  unless
12    such  insurance contract is countersigned by the Surplus Line
13    Association of Illinois.
14        (7)  Inspection of  records.   A  surplus  line  producer
15    shall  maintain  separate  records of the business transacted
16    under his  or  her  license,  including  complete  copies  of
17    surplus  line  insurance  contracts maintained on paper or by
18    electronic means, which records shall be open  at  all  times
19    for  inspection  by  the  Director  and  by  the Surplus Line
20    Association of Illinois.
21        (8)  Violations and penalties.  The Director may  suspend
22    or  revoke or refuse to renew a surplus line producer license
23    for any violation of this Code. In addition to or in lieu  of
24    suspension  or revocation, the Director may subject a surplus
25    line producer to a civil penalty of up  to  $1,000  for  each
26    cause   for   suspension  or  revocation.   Such  penalty  is
27    enforceable under subsection (5)  of  Section  403A  of  this
28    Code.
29        (9)  Director  may  declare  insurer  ineligible.  If the
30    Director determines that  the  further  assumption  of  risks
31    might  be  hazardous  to the policyholders of an unauthorized
32    insurer, the Director may order the Surplus Line  Association
33    of Illinois not to countersign insurance contracts evidencing
34    insurance in such insurer and order surplus line producers to
 
                            -33-     LRB093 02897 RCE 17262 a
 1    cease procuring insurance from such insurer.
 2        (10)  Service   of   process  upon  Director.   Insurance
 3    contracts delivered  under  this  Section  from  unauthorized
 4    insurers  shall  contain a provision designating the Director
 5    and his successors in office the true and lawful attorney  of
 6    the insurer upon whom may be served all lawful process in any
 7    action,  suit  or  proceeding  arising out of such insurance.
 8    Service of  process  made  upon  the  Director  to  be  valid
 9    hereunder must state the name of the insured, the name of the
10    unauthorized  insurer and identify the contract of insurance.
11    The Director at his option is authorized to forward a copy of
12    the process to the Surplus Line Association of  Illinois  for
13    delivery  to  the  unauthorized  insurer  or the Director may
14    deliver the process to  the  unauthorized  insurer  by  other
15    means which he considers to be reasonably prompt and certain.
16        (11)  The  Illinois  Surplus  Line  law does not apply to
17    insurance of property and operations of railroads or aircraft
18    engaged in  interstate  or  foreign  commerce,  insurance  of
19    vessels,  crafts  or  hulls, cargoes, marine builder's risks,
20    marine protection and indemnity,  or  other  risks  including
21    strikes and war risks insured under ocean or wet marine forms
22    of policies.
23        (12)  Surplus line insurance procured under this Section,
24    including  insurance  procured  from  a domestic surplus line
25    insurer, is not subject to the  provisions  of  the  Illinois
26    Insurance  Code  other  than Sections 123, 123.1, 401, 401.1,
27    402, 403, 403A, 408, 412, 445, 445.1,  445.2,  445.3,  445.4,
28    and  all of the provisions of Article XXXI to the extent that
29    the provisions of Article XXXI are not inconsistent with  the
30    terms of this Act.
31    (Source: P.A. 92-386, eff. 1-1-02.)

32        (215 ILCS 5/531.13) (from Ch. 73, par. 1065.80-13)
33        Sec.  531.13.  Tax  offset.  In  the  event the aggregate
 
                            -34-     LRB093 02897 RCE 17262 a
 1    Class A, B and C assessments for all member insurers  do  not
 2    exceed $3,000,000 in any one calendar year, no member insurer
 3    shall  receive  a  tax offset.  However, for any one calendar
 4    year before 1998 in  which  the  total  of  such  assessments
 5    exceeds  $3,000,000, the amount in excess of $3,000,000 shall
 6    be subject to a tax offset to the extent of 20% of the amount
 7    of such assessment for each of the 5 calendar years following
 8    the year in which such assessment was paid, and ending  prior
 9    to  January  1,  2003, and each member insurer may offset the
10    proportionate amount of  such  excess  paid  by  the  insurer
11    against  its  liabilities  for the tax imposed by subsections
12    (a) and (b) of Section 201 of the Illinois  Income  Tax  Act.
13    The  provisions  of this Section shall expire and be given no
14    effect for any tax period commencing on and after January  1,
15    2003.
16    (Source: P.A. 90-583, eff. 5-29-98.)

17        Section  15.  The  Health Maintenance Organization Act is
18    amended by changing Section 6-13 as follows:

19        (215 ILCS 125/6-13) (from Ch. 111 1/2, par. 1418.13)
20        Sec. 6-13.  Tax offset. In the event the aggregate  Class
21    A  and  B  assessments  for  all  member organizations do not
22    exceed  $3,000,000  in  any  one  calendar  year,  no  member
23    organization shall receive a tax offset.  However, in any one
24    calendar year in which the total of such assessments  exceeds
25    $3,000,000,  the  amount  in  excess  of  $3,000,000 shall be
26    subject to a tax offset to the extent of 20% of the amount of
27    such assessment for each of the five calendar years following
28    the year in which such assessment was paid, and ending  prior
29    to  January  1, 2003, and each member organization may offset
30    the  proportionate  amount  of  such  excess  paid   by   the
31    organization  against  its liabilities for the tax imposed by
32    subsections (a) and (b) of Section 201 of the Illinois Income
 
                            -35-     LRB093 02897 RCE 17262 a
 1    Tax Act.  The provisions of this Section shall expire and  be
 2    given no effect on and after January 1, 2004.
 3    (Source: P.A. 85-20.)

 4        Section  99.  Effective date.  This Act takes effect upon
 5    becoming law.".