95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
HB0376

 

Introduced 1/26/2007, by Rep. Jack D. Franks

 

SYNOPSIS AS INTRODUCED:
 
15 ILCS 505/16.5
35 ILCS 5/203   from Ch. 120, par. 2-203

    Amends the State Treasurer Act. Removes the requirement that the State Treasurer adjust each account at least annually to ensure compliance with the requirements of the College Savings Pool. Provides that the Treasurer shall limit the contributions that may be made on behalf of a designated College Savings Pool beneficiary based on the limitations established by the Internal Revenue Service (now, based on an actuarial estimate of what is required to pay tuition, fees, and room and board for 5 undergraduate years at the highest cost eligible educational institution). Amends the Illinois Income Tax Act. Provides that for taxable years beginning on or after January 1, 2007, distributions from certain qualified tuition programs under the Internal Revenue Code that are administered by other states are exempt from the requirement that a distribution from an Internal Revenue Code qualified tuition program be included when determining adjusted gross income for purposes of determining base income. Requires taxpayers to add to their base income an amount equal to the amount previously deducted for deposits into a qualified tuition program if the moneys are transferred from a qualified tuition program that is administered by the State to an out-of-state program. Makes other changes. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning State government.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The State Treasurer Act is amended by changing
5 Section 16.5 as follows:
 
6     (15 ILCS 505/16.5)
7     Sec. 16.5. College Savings Pool. The State Treasurer may
8 establish and administer a College Savings Pool to supplement
9 and enhance the investment opportunities otherwise available
10 to persons seeking to finance the costs of higher education.
11 The State Treasurer, in administering the College Savings Pool,
12 may receive moneys paid into the pool by a participant and may
13 serve as the fiscal agent of that participant for the purpose
14 of holding and investing those moneys.
15     "Participant", as used in this Section, means any person
16 who makes investments in the pool. "Designated beneficiary", as
17 used in this Section, means any person on whose behalf an
18 account is established in the College Savings Pool by a
19 participant. Both in-state and out-of-state persons may be
20 participants and designated beneficiaries in the College
21 Savings Pool.
22     New accounts in the College Savings Pool may shall be
23 processed through participating financial institutions.

 

 

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1 "Participating financial institution", as used in this
2 Section, means any financial institution insured by the Federal
3 Deposit Insurance Corporation and lawfully doing business in
4 the State of Illinois and any credit union approved by the
5 State Treasurer and lawfully doing business in the State of
6 Illinois that agrees to process new accounts in the College
7 Savings Pool. Participating financial institutions may charge
8 a processing fee to participants to open an account in the pool
9 that shall not exceed $30 until the year 2001. Beginning in
10 2001 and every year thereafter, the maximum fee limit shall be
11 adjusted by the Treasurer based on the Consumer Price Index for
12 the North Central Region as published by the United States
13 Department of Labor, Bureau of Labor Statistics for the
14 immediately preceding calendar year. Every contribution
15 received by a financial institution for investment in the
16 College Savings Pool shall be transferred from the financial
17 institution to a location selected by the State Treasurer
18 within one business day following the day that the funds must
19 be made available in accordance with federal law. All
20 communications from the State Treasurer to participants shall
21 reference the participating financial institution at which the
22 account was processed.
23     The Treasurer may invest the moneys in the College Savings
24 Pool in the same manner, in the same types of investments, and
25 subject to the same limitations provided for the investment of
26 moneys by the Illinois State Board of Investment. To enhance

 

 

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1 the safety and liquidity of the College Savings Pool, to ensure
2 the diversification of the investment portfolio of the pool,
3 and in an effort to keep investment dollars in the State of
4 Illinois, the State Treasurer may shall make a percentage of
5 each account available for investment in participating
6 financial institutions doing business in the State. The State
7 Treasurer may shall deposit with the participating financial
8 institution at which the account was processed the following
9 percentage of each account at a prevailing rate offered by the
10 institution, provided that the deposit is federally insured or
11 fully collateralized and the institution accepts the deposit:
12 10% of the total amount of each account for which the current
13 age of the beneficiary is less than 7 years of age, 20% of the
14 total amount of each account for which the beneficiary is at
15 least 7 years of age and less than 12 years of age, and 50% of
16 the total amount of each account for which the current age of
17 the beneficiary is at least 12 years of age. The State
18 Treasurer shall adjust each account at least annually to ensure
19 compliance with this Section. The Treasurer shall develop,
20 publish, and implement an investment policy covering the
21 investment of the moneys in the College Savings Pool. The
22 policy shall be published (i) at least once each year in at
23 least one newspaper of general circulation in both Springfield
24 and Chicago and (ii) each year as part of the audit of the
25 College Savings Pool by the Auditor General, which shall be
26 distributed to all participants. The Treasurer shall notify all

 

 

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1 participants in writing, and the Treasurer shall publish in a
2 newspaper of general circulation in both Chicago and
3 Springfield, any changes to the previously published
4 investment policy at least 30 calendar days before implementing
5 the policy. Any investment policy adopted by the Treasurer
6 shall be reviewed and updated if necessary within 90 days
7 following the date that the State Treasurer takes office.
8     Participants shall be required to use moneys distributed
9 from the College Savings Pool for qualified expenses at
10 eligible educational institutions. "Qualified expenses", as
11 used in this Section, means the following: (i) tuition, fees,
12 and the costs of books, supplies, and equipment required for
13 enrollment or attendance at an eligible educational
14 institution and (ii) certain room and board expenses incurred
15 while attending an eligible educational institution at least
16 half-time. "Eligible educational institutions", as used in
17 this Section, means public and private colleges, junior
18 colleges, graduate schools, and certain vocational
19 institutions that are described in Section 481 of the Higher
20 Education Act of 1965 (20 U.S.C. 1088) and that are eligible to
21 participate in Department of Education student aid programs. A
22 student shall be considered to be enrolled at least half-time
23 if the student is enrolled for at least half the full-time
24 academic work load for the course of study the student is
25 pursuing as determined under the standards of the institution
26 at which the student is enrolled. Distributions made from the

 

 

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1 pool for qualified expenses shall be made directly to the
2 eligible educational institution, directly to a vendor, or in
3 the form of a check payable to both the beneficiary and the
4 institution or vendor. Any moneys that are distributed in any
5 other manner or that are used for expenses other than qualified
6 expenses at an eligible educational institution shall be
7 subject to a penalty of 10% of the earnings unless the
8 beneficiary dies, becomes disabled, or receives a scholarship
9 that equals or exceeds the distribution. Penalties shall be
10 withheld at the time the distribution is made.
11     The Treasurer shall limit the contributions that may be
12 made on behalf of a designated beneficiary based on the
13 limitations established by the Internal Revenue Service. an
14 actuarial estimate of what is required to pay tuition, fees,
15 and room and board for 5 undergraduate years at the highest
16 cost eligible educational institution. The contributions made
17 on behalf of a beneficiary who is also a beneficiary under the
18 Illinois Prepaid Tuition Program shall be further restricted to
19 ensure that the contributions in both programs combined do not
20 exceed the limit established for the College Savings Pool. The
21 Treasurer shall provide the Illinois Student Assistance
22 Commission each year at a time designated by the Commission, an
23 electronic report of all participant accounts in the
24 Treasurer's College Savings Pool, listing total contributions
25 and disbursements from each individual account during the
26 previous calendar year. As soon thereafter as is possible

 

 

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1 following receipt of the Treasurer's report, the Illinois
2 Student Assistance Commission shall, in turn, provide the
3 Treasurer with an electronic report listing those College
4 Savings Pool participants who also participate in the State's
5 prepaid tuition program, administered by the Commission. The
6 Commission shall be responsible for filing any combined tax
7 reports regarding State qualified savings programs required by
8 the United States Internal Revenue Service. The Treasurer shall
9 work with the Illinois Student Assistance Commission to
10 coordinate the marketing of the College Savings Pool and the
11 Illinois Prepaid Tuition Program when considered beneficial by
12 the Treasurer and the Director of the Illinois Student
13 Assistance Commission. The Treasurer's office shall not
14 publicize or otherwise market the College Savings Pool or
15 accept any moneys into the College Savings Pool prior to March
16 1, 2000. The Treasurer shall provide a separate accounting for
17 each designated beneficiary to each participant, the Illinois
18 Student Assistance Commission, and the participating financial
19 institution at which the account was processed. No interest in
20 the program may be pledged as security for a loan.
21     The assets of the College Savings Pool and its income and
22 operation shall be exempt from all taxation by the State of
23 Illinois and any of its subdivisions. The accrued earnings on
24 investments in the Pool once disbursed on behalf of a
25 designated beneficiary shall be similarly exempt from all
26 taxation by the State of Illinois and its subdivisions, so long

 

 

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1 as they are used for qualified expenses. Contributions to a
2 College Savings Pool account during the taxable year may be
3 deducted from adjusted gross income as provided in Section 203
4 of the Illinois Income Tax Act. The provisions of this
5 paragraph are exempt from Section 250 of the Illinois Income
6 Tax Act.
7     The Treasurer shall adopt rules he or she considers
8 necessary for the efficient administration of the College
9 Savings Pool. The rules shall provide whatever additional
10 parameters and restrictions are necessary to ensure that the
11 College Savings Pool meets all of the requirements for a
12 qualified state tuition program under Section 529 of the
13 Internal Revenue Code (26 U.S.C. 529). The rules shall provide
14 for the administration expenses of the pool to be paid from its
15 earnings and for the investment earnings in excess of the
16 expenses and all moneys collected as penalties to be credited
17 or paid monthly to the several participants in the pool in a
18 manner which equitably reflects the differing amounts of their
19 respective investments in the pool and the differing periods of
20 time for which those amounts were in the custody of the pool.
21 Also, the rules shall require the maintenance of records that
22 enable the Treasurer's office to produce a report for each
23 account in the pool at least annually that documents the
24 account balance and investment earnings. Notice of any proposed
25 amendments to the rules and regulations shall be provided to
26 all participants prior to adoption. Amendments to rules and

 

 

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1 regulations shall apply only to contributions made after the
2 adoption of the amendment.
3     Upon creating the College Savings Pool, the State Treasurer
4 shall give bond with 2 or more sufficient sureties, payable to
5 and for the benefit of the participants in the College Savings
6 Pool, in the penal sum of $1,000,000, conditioned upon the
7 faithful discharge of his or her duties in relation to the
8 College Savings Pool.
9 (Source: P.A. 92-16, eff. 6-28-01; 92-439, eff. 8-17-01;
10 92-626, eff. 7-11-02; 93-812, eff. 1-1-05.)
 
11     Section 10. The Illinois Income Tax Act is amended by
12 changing Section 203 as follows:
 
13     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
14     Sec. 203. Base income defined.
15     (a) Individuals.
16         (1) In general. In the case of an individual, base
17     income means an amount equal to the taxpayer's adjusted
18     gross income for the taxable year as modified by paragraph
19     (2).
20         (2) Modifications. The adjusted gross income referred
21     to in paragraph (1) shall be modified by adding thereto the
22     sum of the following amounts:
23             (A) An amount equal to all amounts paid or accrued
24         to the taxpayer as interest or dividends during the

 

 

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1         taxable year to the extent excluded from gross income
2         in the computation of adjusted gross income, except
3         stock dividends of qualified public utilities
4         described in Section 305(e) of the Internal Revenue
5         Code;
6             (B) An amount equal to the amount of tax imposed by
7         this Act to the extent deducted from gross income in
8         the computation of adjusted gross income for the
9         taxable year;
10             (C) An amount equal to the amount received during
11         the taxable year as a recovery or refund of real
12         property taxes paid with respect to the taxpayer's
13         principal residence under the Revenue Act of 1939 and
14         for which a deduction was previously taken under
15         subparagraph (L) of this paragraph (2) prior to July 1,
16         1991, the retrospective application date of Article 4
17         of Public Act 87-17. In the case of multi-unit or
18         multi-use structures and farm dwellings, the taxes on
19         the taxpayer's principal residence shall be that
20         portion of the total taxes for the entire property
21         which is attributable to such principal residence;
22             (D) An amount equal to the amount of the capital
23         gain deduction allowable under the Internal Revenue
24         Code, to the extent deducted from gross income in the
25         computation of adjusted gross income;
26             (D-5) An amount, to the extent not included in

 

 

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1         adjusted gross income, equal to the amount of money
2         withdrawn by the taxpayer in the taxable year from a
3         medical care savings account and the interest earned on
4         the account in the taxable year of a withdrawal
5         pursuant to subsection (b) of Section 20 of the Medical
6         Care Savings Account Act or subsection (b) of Section
7         20 of the Medical Care Savings Account Act of 2000;
8             (D-10) For taxable years ending after December 31,
9         1997, an amount equal to any eligible remediation costs
10         that the individual deducted in computing adjusted
11         gross income and for which the individual claims a
12         credit under subsection (l) of Section 201;
13             (D-15) For taxable years 2001 and thereafter, an
14         amount equal to the bonus depreciation deduction taken
15         on the taxpayer's federal income tax return for the
16         taxable year under subsection (k) of Section 168 of the
17         Internal Revenue Code;
18             (D-16) If the taxpayer sells, transfers, abandons,
19         or otherwise disposes of property for which the
20         taxpayer was required in any taxable year to make an
21         addition modification under subparagraph (D-15), then
22         an amount equal to the aggregate amount of the
23         deductions taken in all taxable years under
24         subparagraph (Z) with respect to that property.
25             If the taxpayer continues to own property through
26         the last day of the last tax year for which the

 

 

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1         taxpayer may claim a depreciation deduction for
2         federal income tax purposes and for which the taxpayer
3         was allowed in any taxable year to make a subtraction
4         modification under subparagraph (Z), then an amount
5         equal to that subtraction modification.
6             The taxpayer is required to make the addition
7         modification under this subparagraph only once with
8         respect to any one piece of property;
9             (D-17) For taxable years ending on or after
10         December 31, 2004, an amount equal to the amount
11         otherwise allowed as a deduction in computing base
12         income for interest paid, accrued, or incurred,
13         directly or indirectly, to a foreign person who would
14         be a member of the same unitary business group but for
15         the fact that foreign person's business activity
16         outside the United States is 80% or more of the foreign
17         person's total business activity. The addition
18         modification required by this subparagraph shall be
19         reduced to the extent that dividends were included in
20         base income of the unitary group for the same taxable
21         year and received by the taxpayer or by a member of the
22         taxpayer's unitary business group (including amounts
23         included in gross income under Sections 951 through 964
24         of the Internal Revenue Code and amounts included in
25         gross income under Section 78 of the Internal Revenue
26         Code) with respect to the stock of the same person to

 

 

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1         whom the interest was paid, accrued, or incurred.
2             This paragraph shall not apply to the following:
3                 (i) an item of interest paid, accrued, or
4             incurred, directly or indirectly, to a foreign
5             person who is subject in a foreign country or
6             state, other than a state which requires mandatory
7             unitary reporting, to a tax on or measured by net
8             income with respect to such interest; or
9                 (ii) an item of interest paid, accrued, or
10             incurred, directly or indirectly, to a foreign
11             person if the taxpayer can establish, based on a
12             preponderance of the evidence, both of the
13             following:
14                     (a) the foreign person, during the same
15                 taxable year, paid, accrued, or incurred, the
16                 interest to a person that is not a related
17                 member, and
18                     (b) the transaction giving rise to the
19                 interest expense between the taxpayer and the
20                 foreign person did not have as a principal
21                 purpose the avoidance of Illinois income tax,
22                 and is paid pursuant to a contract or agreement
23                 that reflects an arm's-length interest rate
24                 and terms; or
25                 (iii) the taxpayer can establish, based on
26             clear and convincing evidence, that the interest

 

 

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1             paid, accrued, or incurred relates to a contract or
2             agreement entered into at arm's-length rates and
3             terms and the principal purpose for the payment is
4             not federal or Illinois tax avoidance; or
5                 (iv) an item of interest paid, accrued, or
6             incurred, directly or indirectly, to a foreign
7             person if the taxpayer establishes by clear and
8             convincing evidence that the adjustments are
9             unreasonable; or if the taxpayer and the Director
10             agree in writing to the application or use of an
11             alternative method of apportionment under Section
12             304(f).
13                 Nothing in this subsection shall preclude the
14             Director from making any other adjustment
15             otherwise allowed under Section 404 of this Act for
16             any tax year beginning after the effective date of
17             this amendment provided such adjustment is made
18             pursuant to regulation adopted by the Department
19             and such regulations provide methods and standards
20             by which the Department will utilize its authority
21             under Section 404 of this Act;
22             (D-18) For taxable years ending on or after
23         December 31, 2004, an amount equal to the amount of
24         intangible expenses and costs otherwise allowed as a
25         deduction in computing base income, and that were paid,
26         accrued, or incurred, directly or indirectly, to a

 

 

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1         foreign person who would be a member of the same
2         unitary business group but for the fact that the
3         foreign person's business activity outside the United
4         States is 80% or more of that person's total business
5         activity. The addition modification required by this
6         subparagraph shall be reduced to the extent that
7         dividends were included in base income of the unitary
8         group for the same taxable year and received by the
9         taxpayer or by a member of the taxpayer's unitary
10         business group (including amounts included in gross
11         income under Sections 951 through 964 of the Internal
12         Revenue Code and amounts included in gross income under
13         Section 78 of the Internal Revenue Code) with respect
14         to the stock of the same person to whom the intangible
15         expenses and costs were directly or indirectly paid,
16         incurred, or accrued. The preceding sentence does not
17         apply to the extent that the same dividends caused a
18         reduction to the addition modification required under
19         Section 203(a)(2)(D-17) of this Act. As used in this
20         subparagraph, the term "intangible expenses and costs"
21         includes (1) expenses, losses, and costs for, or
22         related to, the direct or indirect acquisition, use,
23         maintenance or management, ownership, sale, exchange,
24         or any other disposition of intangible property; (2)
25         losses incurred, directly or indirectly, from
26         factoring transactions or discounting transactions;

 

 

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1         (3) royalty, patent, technical, and copyright fees;
2         (4) licensing fees; and (5) other similar expenses and
3         costs. For purposes of this subparagraph, "intangible
4         property" includes patents, patent applications, trade
5         names, trademarks, service marks, copyrights, mask
6         works, trade secrets, and similar types of intangible
7         assets.
8             This paragraph shall not apply to the following:
9                 (i) any item of intangible expenses or costs
10             paid, accrued, or incurred, directly or
11             indirectly, from a transaction with a foreign
12             person who is subject in a foreign country or
13             state, other than a state which requires mandatory
14             unitary reporting, to a tax on or measured by net
15             income with respect to such item; or
16                 (ii) any item of intangible expense or cost
17             paid, accrued, or incurred, directly or
18             indirectly, if the taxpayer can establish, based
19             on a preponderance of the evidence, both of the
20             following:
21                     (a) the foreign person during the same
22                 taxable year paid, accrued, or incurred, the
23                 intangible expense or cost to a person that is
24                 not a related member, and
25                     (b) the transaction giving rise to the
26                 intangible expense or cost between the

 

 

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1                 taxpayer and the foreign person did not have as
2                 a principal purpose the avoidance of Illinois
3                 income tax, and is paid pursuant to a contract
4                 or agreement that reflects arm's-length terms;
5                 or
6                 (iii) any item of intangible expense or cost
7             paid, accrued, or incurred, directly or
8             indirectly, from a transaction with a foreign
9             person if the taxpayer establishes by clear and
10             convincing evidence, that the adjustments are
11             unreasonable; or if the taxpayer and the Director
12             agree in writing to the application or use of an
13             alternative method of apportionment under Section
14             304(f);
15                 Nothing in this subsection shall preclude the
16             Director from making any other adjustment
17             otherwise allowed under Section 404 of this Act for
18             any tax year beginning after the effective date of
19             this amendment provided such adjustment is made
20             pursuant to regulation adopted by the Department
21             and such regulations provide methods and standards
22             by which the Department will utilize its authority
23             under Section 404 of this Act;
24             (D-20) For taxable years beginning on or after
25         January 1, 2002 and ending on or before December 31,
26         2006, in the case of a distribution from a qualified

 

 

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1         tuition program under Section 529 of the Internal
2         Revenue Code, other than (i) a distribution from a
3         College Savings Pool created under Section 16.5 of the
4         State Treasurer Act or (ii) a distribution from the
5         Illinois Prepaid Tuition Trust Fund, an amount equal to
6         the amount excluded from gross income under Section
7         529(c)(3)(B). For taxable years beginning on or after
8         January 1, 2007, in the case of a distribution from a
9         qualified tuition program under Section 529 of the
10         Internal Revenue Code, other than (i) a distribution
11         from a College Savings Pool created under Section 16.5
12         of the State Treasurer Act, (ii) a distribution from
13         the Illinois Prepaid Tuition Trust Fund, or (iii) a
14         distribution from a qualified tuition program under
15         Section 529 of the Internal Revenue Code that (I)
16         adopts and determines that its offering materials
17         comply with the College Savings Plans Network's
18         disclosure principles and (II) has made reasonable
19         efforts to inform in-state residents of the existence
20         of in-state qualified tuition programs by informing
21         Illinois residents directly and, where applicable, to
22         inform financial intermediaries distributing the
23         program to inform in-state residents of the existence
24         of in-state qualified tuition programs at least
25         annually, an amount equal to the amount excluded from
26         gross income under Section 529(c)(3)(B).

 

 

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1             For the purposes of this subparagraph (D-20), a
2         qualified tuition program has made reasonable efforts
3         if it makes disclosures (which may use the term
4         "in-state program" or "in-state plan" and need not
5         specifically refer to Illinois or its qualified
6         programs by name) (i) directly to prospective
7         participants in its offering materials or makes a
8         public disclosure, such as a website posting; and (ii)
9         where applicable, to intermediaries selling the
10         out-of-state program in the same manner that the
11         out-of-state program distributes its offering
12         materials ;
13                 (D-21) For taxable years beginning on or after
14         January 1, 2007, in the case of transfer of moneys from
15         a qualified tuition program under Section 529 of the
16         Internal Revenue Code that is administered by the State
17         to an out-of-state program, an amount equal to the
18         amount of moneys previously deducted from base income
19         under subsection (a)(2)(Y) of this Section.
20     and by deducting from the total so obtained the sum of the
21     following amounts:
22             (E) For taxable years ending before December 31,
23         2001, any amount included in such total in respect of
24         any compensation (including but not limited to any
25         compensation paid or accrued to a serviceman while a
26         prisoner of war or missing in action) paid to a

 

 

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1         resident by reason of being on active duty in the Armed
2         Forces of the United States and in respect of any
3         compensation paid or accrued to a resident who as a
4         governmental employee was a prisoner of war or missing
5         in action, and in respect of any compensation paid to a
6         resident in 1971 or thereafter for annual training
7         performed pursuant to Sections 502 and 503, Title 32,
8         United States Code as a member of the Illinois National
9         Guard. For taxable years ending on or after December
10         31, 2001, any amount included in such total in respect
11         of any compensation (including but not limited to any
12         compensation paid or accrued to a serviceman while a
13         prisoner of war or missing in action) paid to a
14         resident by reason of being a member of any component
15         of the Armed Forces of the United States and in respect
16         of any compensation paid or accrued to a resident who
17         as a governmental employee was a prisoner of war or
18         missing in action, and in respect of any compensation
19         paid to a resident in 2001 or thereafter by reason of
20         being a member of the Illinois National Guard. The
21         provisions of this amendatory Act of the 92nd General
22         Assembly are exempt from the provisions of Section 250;
23             (F) An amount equal to all amounts included in such
24         total pursuant to the provisions of Sections 402(a),
25         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
26         Internal Revenue Code, or included in such total as

 

 

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1         distributions under the provisions of any retirement
2         or disability plan for employees of any governmental
3         agency or unit, or retirement payments to retired
4         partners, which payments are excluded in computing net
5         earnings from self employment by Section 1402 of the
6         Internal Revenue Code and regulations adopted pursuant
7         thereto;
8             (G) The valuation limitation amount;
9             (H) An amount equal to the amount of any tax
10         imposed by this Act which was refunded to the taxpayer
11         and included in such total for the taxable year;
12             (I) An amount equal to all amounts included in such
13         total pursuant to the provisions of Section 111 of the
14         Internal Revenue Code as a recovery of items previously
15         deducted from adjusted gross income in the computation
16         of taxable income;
17             (J) An amount equal to those dividends included in
18         such total which were paid by a corporation which
19         conducts business operations in an Enterprise Zone or
20         zones created under the Illinois Enterprise Zone Act or
21         a River Edge Redevelopment Zone or zones created under
22         the River Edge Redevelopment Zone Act, and conducts
23         substantially all of its operations in an Enterprise
24         Zone or zones or a River Edge Redevelopment Zone or
25         zones. This subparagraph (J) is exempt from the
26         provisions of Section 250;

 

 

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1             (K) An amount equal to those dividends included in
2         such total that were paid by a corporation that
3         conducts business operations in a federally designated
4         Foreign Trade Zone or Sub-Zone and that is designated a
5         High Impact Business located in Illinois; provided
6         that dividends eligible for the deduction provided in
7         subparagraph (J) of paragraph (2) of this subsection
8         shall not be eligible for the deduction provided under
9         this subparagraph (K);
10             (L) For taxable years ending after December 31,
11         1983, an amount equal to all social security benefits
12         and railroad retirement benefits included in such
13         total pursuant to Sections 72(r) and 86 of the Internal
14         Revenue Code;
15             (M) With the exception of any amounts subtracted
16         under subparagraph (N), an amount equal to the sum of
17         all amounts disallowed as deductions by (i) Sections
18         171(a) (2), and 265(2) of the Internal Revenue Code of
19         1954, as now or hereafter amended, and all amounts of
20         expenses allocable to interest and disallowed as
21         deductions by Section 265(1) of the Internal Revenue
22         Code of 1954, as now or hereafter amended; and (ii) for
23         taxable years ending on or after August 13, 1999,
24         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
25         the Internal Revenue Code; the provisions of this
26         subparagraph are exempt from the provisions of Section

 

 

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1         250;
2             (N) An amount equal to all amounts included in such
3         total which are exempt from taxation by this State
4         either by reason of its statutes or Constitution or by
5         reason of the Constitution, treaties or statutes of the
6         United States; provided that, in the case of any
7         statute of this State that exempts income derived from
8         bonds or other obligations from the tax imposed under
9         this Act, the amount exempted shall be the interest net
10         of bond premium amortization;
11             (O) An amount equal to any contribution made to a
12         job training project established pursuant to the Tax
13         Increment Allocation Redevelopment Act;
14             (P) An amount equal to the amount of the deduction
15         used to compute the federal income tax credit for
16         restoration of substantial amounts held under claim of
17         right for the taxable year pursuant to Section 1341 of
18         the Internal Revenue Code of 1986;
19             (Q) An amount equal to any amounts included in such
20         total, received by the taxpayer as an acceleration in
21         the payment of life, endowment or annuity benefits in
22         advance of the time they would otherwise be payable as
23         an indemnity for a terminal illness;
24             (R) An amount equal to the amount of any federal or
25         State bonus paid to veterans of the Persian Gulf War;
26             (S) An amount, to the extent included in adjusted

 

 

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1         gross income, equal to the amount of a contribution
2         made in the taxable year on behalf of the taxpayer to a
3         medical care savings account established under the
4         Medical Care Savings Account Act or the Medical Care
5         Savings Account Act of 2000 to the extent the
6         contribution is accepted by the account administrator
7         as provided in that Act;
8             (T) An amount, to the extent included in adjusted
9         gross income, equal to the amount of interest earned in
10         the taxable year on a medical care savings account
11         established under the Medical Care Savings Account Act
12         or the Medical Care Savings Account Act of 2000 on
13         behalf of the taxpayer, other than interest added
14         pursuant to item (D-5) of this paragraph (2);
15             (U) For one taxable year beginning on or after
16         January 1, 1994, an amount equal to the total amount of
17         tax imposed and paid under subsections (a) and (b) of
18         Section 201 of this Act on grant amounts received by
19         the taxpayer under the Nursing Home Grant Assistance
20         Act during the taxpayer's taxable years 1992 and 1993;
21             (V) Beginning with tax years ending on or after
22         December 31, 1995 and ending with tax years ending on
23         or before December 31, 2004, an amount equal to the
24         amount paid by a taxpayer who is a self-employed
25         taxpayer, a partner of a partnership, or a shareholder
26         in a Subchapter S corporation for health insurance or

 

 

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1         long-term care insurance for that taxpayer or that
2         taxpayer's spouse or dependents, to the extent that the
3         amount paid for that health insurance or long-term care
4         insurance may be deducted under Section 213 of the
5         Internal Revenue Code of 1986, has not been deducted on
6         the federal income tax return of the taxpayer, and does
7         not exceed the taxable income attributable to that
8         taxpayer's income, self-employment income, or
9         Subchapter S corporation income; except that no
10         deduction shall be allowed under this item (V) if the
11         taxpayer is eligible to participate in any health
12         insurance or long-term care insurance plan of an
13         employer of the taxpayer or the taxpayer's spouse. The
14         amount of the health insurance and long-term care
15         insurance subtracted under this item (V) shall be
16         determined by multiplying total health insurance and
17         long-term care insurance premiums paid by the taxpayer
18         times a number that represents the fractional
19         percentage of eligible medical expenses under Section
20         213 of the Internal Revenue Code of 1986 not actually
21         deducted on the taxpayer's federal income tax return;
22             (W) For taxable years beginning on or after January
23         1, 1998, all amounts included in the taxpayer's federal
24         gross income in the taxable year from amounts converted
25         from a regular IRA to a Roth IRA. This paragraph is
26         exempt from the provisions of Section 250;

 

 

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1             (X) For taxable year 1999 and thereafter, an amount
2         equal to the amount of any (i) distributions, to the
3         extent includible in gross income for federal income
4         tax purposes, made to the taxpayer because of his or
5         her status as a victim of persecution for racial or
6         religious reasons by Nazi Germany or any other Axis
7         regime or as an heir of the victim and (ii) items of
8         income, to the extent includible in gross income for
9         federal income tax purposes, attributable to, derived
10         from or in any way related to assets stolen from,
11         hidden from, or otherwise lost to a victim of
12         persecution for racial or religious reasons by Nazi
13         Germany or any other Axis regime immediately prior to,
14         during, and immediately after World War II, including,
15         but not limited to, interest on the proceeds receivable
16         as insurance under policies issued to a victim of
17         persecution for racial or religious reasons by Nazi
18         Germany or any other Axis regime by European insurance
19         companies immediately prior to and during World War II;
20         provided, however, this subtraction from federal
21         adjusted gross income does not apply to assets acquired
22         with such assets or with the proceeds from the sale of
23         such assets; provided, further, this paragraph shall
24         only apply to a taxpayer who was the first recipient of
25         such assets after their recovery and who is a victim of
26         persecution for racial or religious reasons by Nazi

 

 

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1         Germany or any other Axis regime or as an heir of the
2         victim. The amount of and the eligibility for any
3         public assistance, benefit, or similar entitlement is
4         not affected by the inclusion of items (i) and (ii) of
5         this paragraph in gross income for federal income tax
6         purposes. This paragraph is exempt from the provisions
7         of Section 250;
8             (Y) For taxable years beginning on or after January
9         1, 2002 and ending on or before December 31, 2004,
10         moneys contributed in the taxable year to a College
11         Savings Pool account under Section 16.5 of the State
12         Treasurer Act, except that amounts excluded from gross
13         income under Section 529(c)(3)(C)(i) of the Internal
14         Revenue Code shall not be considered moneys
15         contributed under this subparagraph (Y). For taxable
16         years beginning on or after January 1, 2005, a maximum
17         of $10,000 contributed in the taxable year to (i) a
18         College Savings Pool account under Section 16.5 of the
19         State Treasurer Act or (ii) the Illinois Prepaid
20         Tuition Trust Fund, except that amounts excluded from
21         gross income under Section 529(c)(3)(C)(i) of the
22         Internal Revenue Code shall not be considered moneys
23         contributed under this subparagraph (Y). This
24         subparagraph (Y) is exempt from the provisions of
25         Section 250;
26             (Z) For taxable years 2001 and thereafter, for the

 

 

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1         taxable year in which the bonus depreciation deduction
2         is taken on the taxpayer's federal income tax return
3         under subsection (k) of Section 168 of the Internal
4         Revenue Code and for each applicable taxable year
5         thereafter, an amount equal to "x", where:
6                 (1) "y" equals the amount of the depreciation
7             deduction taken for the taxable year on the
8             taxpayer's federal income tax return on property
9             for which the bonus depreciation deduction was
10             taken in any year under subsection (k) of Section
11             168 of the Internal Revenue Code, but not including
12             the bonus depreciation deduction;
13                 (2) for taxable years ending on or before
14             December 31, 2005, "x" equals "y" multiplied by 30
15             and then divided by 70 (or "y" multiplied by
16             0.429); and
17                 (3) for taxable years ending after December
18             31, 2005:
19                     (i) for property on which a bonus
20                 depreciation deduction of 30% of the adjusted
21                 basis was taken, "x" equals "y" multiplied by
22                 30 and then divided by 70 (or "y" multiplied by
23                 0.429); and
24                     (ii) for property on which a bonus
25                 depreciation deduction of 50% of the adjusted
26                 basis was taken, "x" equals "y" multiplied by

 

 

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1                 1.0.
2             The aggregate amount deducted under this
3         subparagraph in all taxable years for any one piece of
4         property may not exceed the amount of the bonus
5         depreciation deduction taken on that property on the
6         taxpayer's federal income tax return under subsection
7         (k) of Section 168 of the Internal Revenue Code. This
8         subparagraph (Z) is exempt from the provisions of
9         Section 250;
10             (AA) If the taxpayer sells, transfers, abandons,
11         or otherwise disposes of property for which the
12         taxpayer was required in any taxable year to make an
13         addition modification under subparagraph (D-15), then
14         an amount equal to that addition modification.
15             If the taxpayer continues to own property through
16         the last day of the last tax year for which the
17         taxpayer may claim a depreciation deduction for
18         federal income tax purposes and for which the taxpayer
19         was required in any taxable year to make an addition
20         modification under subparagraph (D-15), then an amount
21         equal to that addition modification.
22             The taxpayer is allowed to take the deduction under
23         this subparagraph only once with respect to any one
24         piece of property.
25             This subparagraph (AA) is exempt from the
26         provisions of Section 250;

 

 

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1             (BB) Any amount included in adjusted gross income,
2         other than salary, received by a driver in a
3         ridesharing arrangement using a motor vehicle;
4             (CC) The amount of (i) any interest income (net of
5         the deductions allocable thereto) taken into account
6         for the taxable year with respect to a transaction with
7         a taxpayer that is required to make an addition
8         modification with respect to such transaction under
9         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
10         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
11         the amount of that addition modification, and (ii) any
12         income from intangible property (net of the deductions
13         allocable thereto) taken into account for the taxable
14         year with respect to a transaction with a taxpayer that
15         is required to make an addition modification with
16         respect to such transaction under Section
17         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
18         203(d)(2)(D-8), but not to exceed the amount of that
19         addition modification;
20             (DD) An amount equal to the interest income taken
21         into account for the taxable year (net of the
22         deductions allocable thereto) with respect to
23         transactions with a foreign person who would be a
24         member of the taxpayer's unitary business group but for
25         the fact that the foreign person's business activity
26         outside the United States is 80% or more of that

 

 

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1         person's total business activity, but not to exceed the
2         addition modification required to be made for the same
3         taxable year under Section 203(a)(2)(D-17) for
4         interest paid, accrued, or incurred, directly or
5         indirectly, to the same foreign person; and
6             (EE) An amount equal to the income from intangible
7         property taken into account for the taxable year (net
8         of the deductions allocable thereto) with respect to
9         transactions with a foreign person who would be a
10         member of the taxpayer's unitary business group but for
11         the fact that the foreign person's business activity
12         outside the United States is 80% or more of that
13         person's total business activity, but not to exceed the
14         addition modification required to be made for the same
15         taxable year under Section 203(a)(2)(D-18) for
16         intangible expenses and costs paid, accrued, or
17         incurred, directly or indirectly, to the same foreign
18         person.
 
19     (b) Corporations.
20         (1) In general. In the case of a corporation, base
21     income means an amount equal to the taxpayer's taxable
22     income for the taxable year as modified by paragraph (2).
23         (2) Modifications. The taxable income referred to in
24     paragraph (1) shall be modified by adding thereto the sum
25     of the following amounts:

 

 

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1             (A) An amount equal to all amounts paid or accrued
2         to the taxpayer as interest and all distributions
3         received from regulated investment companies during
4         the taxable year to the extent excluded from gross
5         income in the computation of taxable income;
6             (B) An amount equal to the amount of tax imposed by
7         this Act to the extent deducted from gross income in
8         the computation of taxable income for the taxable year;
9             (C) In the case of a regulated investment company,
10         an amount equal to the excess of (i) the net long-term
11         capital gain for the taxable year, over (ii) the amount
12         of the capital gain dividends designated as such in
13         accordance with Section 852(b)(3)(C) of the Internal
14         Revenue Code and any amount designated under Section
15         852(b)(3)(D) of the Internal Revenue Code,
16         attributable to the taxable year (this amendatory Act
17         of 1995 (Public Act 89-89) is declarative of existing
18         law and is not a new enactment);
19             (D) The amount of any net operating loss deduction
20         taken in arriving at taxable income, other than a net
21         operating loss carried forward from a taxable year
22         ending prior to December 31, 1986;
23             (E) For taxable years in which a net operating loss
24         carryback or carryforward from a taxable year ending
25         prior to December 31, 1986 is an element of taxable
26         income under paragraph (1) of subsection (e) or

 

 

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1         subparagraph (E) of paragraph (2) of subsection (e),
2         the amount by which addition modifications other than
3         those provided by this subparagraph (E) exceeded
4         subtraction modifications in such earlier taxable
5         year, with the following limitations applied in the
6         order that they are listed:
7                 (i) the addition modification relating to the
8             net operating loss carried back or forward to the
9             taxable year from any taxable year ending prior to
10             December 31, 1986 shall be reduced by the amount of
11             addition modification under this subparagraph (E)
12             which related to that net operating loss and which
13             was taken into account in calculating the base
14             income of an earlier taxable year, and
15                 (ii) the addition modification relating to the
16             net operating loss carried back or forward to the
17             taxable year from any taxable year ending prior to
18             December 31, 1986 shall not exceed the amount of
19             such carryback or carryforward;
20             For taxable years in which there is a net operating
21         loss carryback or carryforward from more than one other
22         taxable year ending prior to December 31, 1986, the
23         addition modification provided in this subparagraph
24         (E) shall be the sum of the amounts computed
25         independently under the preceding provisions of this
26         subparagraph (E) for each such taxable year;

 

 

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1             (E-5) For taxable years ending after December 31,
2         1997, an amount equal to any eligible remediation costs
3         that the corporation deducted in computing adjusted
4         gross income and for which the corporation claims a
5         credit under subsection (l) of Section 201;
6             (E-10) For taxable years 2001 and thereafter, an
7         amount equal to the bonus depreciation deduction taken
8         on the taxpayer's federal income tax return for the
9         taxable year under subsection (k) of Section 168 of the
10         Internal Revenue Code; and
11             (E-11) If the taxpayer sells, transfers, abandons,
12         or otherwise disposes of property for which the
13         taxpayer was required in any taxable year to make an
14         addition modification under subparagraph (E-10), then
15         an amount equal to the aggregate amount of the
16         deductions taken in all taxable years under
17         subparagraph (T) with respect to that property.
18             If the taxpayer continues to own property through
19         the last day of the last tax year for which the
20         taxpayer may claim a depreciation deduction for
21         federal income tax purposes and for which the taxpayer
22         was allowed in any taxable year to make a subtraction
23         modification under subparagraph (T), then an amount
24         equal to that subtraction modification.
25             The taxpayer is required to make the addition
26         modification under this subparagraph only once with

 

 

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1         respect to any one piece of property;
2             (E-12) For taxable years ending on or after
3         December 31, 2004, an amount equal to the amount
4         otherwise allowed as a deduction in computing base
5         income for interest paid, accrued, or incurred,
6         directly or indirectly, to a foreign person who would
7         be a member of the same unitary business group but for
8         the fact the foreign person's business activity
9         outside the United States is 80% or more of the foreign
10         person's total business activity. The addition
11         modification required by this subparagraph shall be
12         reduced to the extent that dividends were included in
13         base income of the unitary group for the same taxable
14         year and received by the taxpayer or by a member of the
15         taxpayer's unitary business group (including amounts
16         included in gross income pursuant to Sections 951
17         through 964 of the Internal Revenue Code and amounts
18         included in gross income under Section 78 of the
19         Internal Revenue Code) with respect to the stock of the
20         same person to whom the interest was paid, accrued, or
21         incurred.
22             This paragraph shall not apply to the following:
23                 (i) an item of interest paid, accrued, or
24             incurred, directly or indirectly, to a foreign
25             person who is subject in a foreign country or
26             state, other than a state which requires mandatory

 

 

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1             unitary reporting, to a tax on or measured by net
2             income with respect to such interest; or
3                 (ii) an item of interest paid, accrued, or
4             incurred, directly or indirectly, to a foreign
5             person if the taxpayer can establish, based on a
6             preponderance of the evidence, both of the
7             following:
8                     (a) the foreign person, during the same
9                 taxable year, paid, accrued, or incurred, the
10                 interest to a person that is not a related
11                 member, and
12                     (b) the transaction giving rise to the
13                 interest expense between the taxpayer and the
14                 foreign person did not have as a principal
15                 purpose the avoidance of Illinois income tax,
16                 and is paid pursuant to a contract or agreement
17                 that reflects an arm's-length interest rate
18                 and terms; or
19                 (iii) the taxpayer can establish, based on
20             clear and convincing evidence, that the interest
21             paid, accrued, or incurred relates to a contract or
22             agreement entered into at arm's-length rates and
23             terms and the principal purpose for the payment is
24             not federal or Illinois tax avoidance; or
25                 (iv) an item of interest paid, accrued, or
26             incurred, directly or indirectly, to a foreign

 

 

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1             person if the taxpayer establishes by clear and
2             convincing evidence that the adjustments are
3             unreasonable; or if the taxpayer and the Director
4             agree in writing to the application or use of an
5             alternative method of apportionment under Section
6             304(f).
7                 Nothing in this subsection shall preclude the
8             Director from making any other adjustment
9             otherwise allowed under Section 404 of this Act for
10             any tax year beginning after the effective date of
11             this amendment provided such adjustment is made
12             pursuant to regulation adopted by the Department
13             and such regulations provide methods and standards
14             by which the Department will utilize its authority
15             under Section 404 of this Act;
16             (E-13) For taxable years ending on or after
17         December 31, 2004, an amount equal to the amount of
18         intangible expenses and costs otherwise allowed as a
19         deduction in computing base income, and that were paid,
20         accrued, or incurred, directly or indirectly, to a
21         foreign person who would be a member of the same
22         unitary business group but for the fact that the
23         foreign person's business activity outside the United
24         States is 80% or more of that person's total business
25         activity. The addition modification required by this
26         subparagraph shall be reduced to the extent that

 

 

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1         dividends were included in base income of the unitary
2         group for the same taxable year and received by the
3         taxpayer or by a member of the taxpayer's unitary
4         business group (including amounts included in gross
5         income pursuant to Sections 951 through 964 of the
6         Internal Revenue Code and amounts included in gross
7         income under Section 78 of the Internal Revenue Code)
8         with respect to the stock of the same person to whom
9         the intangible expenses and costs were directly or
10         indirectly paid, incurred, or accrued. The preceding
11         sentence shall not apply to the extent that the same
12         dividends caused a reduction to the addition
13         modification required under Section 203(b)(2)(E-12) of
14         this Act. As used in this subparagraph, the term
15         "intangible expenses and costs" includes (1) expenses,
16         losses, and costs for, or related to, the direct or
17         indirect acquisition, use, maintenance or management,
18         ownership, sale, exchange, or any other disposition of
19         intangible property; (2) losses incurred, directly or
20         indirectly, from factoring transactions or discounting
21         transactions; (3) royalty, patent, technical, and
22         copyright fees; (4) licensing fees; and (5) other
23         similar expenses and costs. For purposes of this
24         subparagraph, "intangible property" includes patents,
25         patent applications, trade names, trademarks, service
26         marks, copyrights, mask works, trade secrets, and

 

 

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1         similar types of intangible assets.
2             This paragraph shall not apply to the following:
3                 (i) any item of intangible expenses or costs
4             paid, accrued, or incurred, directly or
5             indirectly, from a transaction with a foreign
6             person who is subject in a foreign country or
7             state, other than a state which requires mandatory
8             unitary reporting, to a tax on or measured by net
9             income with respect to such item; or
10                 (ii) any item of intangible expense or cost
11             paid, accrued, or incurred, directly or
12             indirectly, if the taxpayer can establish, based
13             on a preponderance of the evidence, both of the
14             following:
15                     (a) the foreign person during the same
16                 taxable year paid, accrued, or incurred, the
17                 intangible expense or cost to a person that is
18                 not a related member, and
19                     (b) the transaction giving rise to the
20                 intangible expense or cost between the
21                 taxpayer and the foreign person did not have as
22                 a principal purpose the avoidance of Illinois
23                 income tax, and is paid pursuant to a contract
24                 or agreement that reflects arm's-length terms;
25                 or
26                 (iii) any item of intangible expense or cost

 

 

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1             paid, accrued, or incurred, directly or
2             indirectly, from a transaction with a foreign
3             person if the taxpayer establishes by clear and
4             convincing evidence, that the adjustments are
5             unreasonable; or if the taxpayer and the Director
6             agree in writing to the application or use of an
7             alternative method of apportionment under Section
8             304(f);
9                 Nothing in this subsection shall preclude the
10             Director from making any other adjustment
11             otherwise allowed under Section 404 of this Act for
12             any tax year beginning after the effective date of
13             this amendment provided such adjustment is made
14             pursuant to regulation adopted by the Department
15             and such regulations provide methods and standards
16             by which the Department will utilize its authority
17             under Section 404 of this Act;
18     and by deducting from the total so obtained the sum of the
19     following amounts:
20             (F) An amount equal to the amount of any tax
21         imposed by this Act which was refunded to the taxpayer
22         and included in such total for the taxable year;
23             (G) An amount equal to any amount included in such
24         total under Section 78 of the Internal Revenue Code;
25             (H) In the case of a regulated investment company,
26         an amount equal to the amount of exempt interest

 

 

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1         dividends as defined in subsection (b) (5) of Section
2         852 of the Internal Revenue Code, paid to shareholders
3         for the taxable year;
4             (I) With the exception of any amounts subtracted
5         under subparagraph (J), an amount equal to the sum of
6         all amounts disallowed as deductions by (i) Sections
7         171(a) (2), and 265(a)(2) and amounts disallowed as
8         interest expense by Section 291(a)(3) of the Internal
9         Revenue Code, as now or hereafter amended, and all
10         amounts of expenses allocable to interest and
11         disallowed as deductions by Section 265(a)(1) of the
12         Internal Revenue Code, as now or hereafter amended; and
13         (ii) for taxable years ending on or after August 13,
14         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
15         832(b)(5)(B)(i) of the Internal Revenue Code; the
16         provisions of this subparagraph are exempt from the
17         provisions of Section 250;
18             (J) An amount equal to all amounts included in such
19         total which are exempt from taxation by this State
20         either by reason of its statutes or Constitution or by
21         reason of the Constitution, treaties or statutes of the
22         United States; provided that, in the case of any
23         statute of this State that exempts income derived from
24         bonds or other obligations from the tax imposed under
25         this Act, the amount exempted shall be the interest net
26         of bond premium amortization;

 

 

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1             (K) An amount equal to those dividends included in
2         such total which were paid by a corporation which
3         conducts business operations in an Enterprise Zone or
4         zones created under the Illinois Enterprise Zone Act or
5         a River Edge Redevelopment Zone or zones created under
6         the River Edge Redevelopment Zone Act and conducts
7         substantially all of its operations in an Enterprise
8         Zone or zones or a River Edge Redevelopment Zone or
9         zones. This subparagraph (K) is exempt from the
10         provisions of Section 250;
11             (L) An amount equal to those dividends included in
12         such total that were paid by a corporation that
13         conducts business operations in a federally designated
14         Foreign Trade Zone or Sub-Zone and that is designated a
15         High Impact Business located in Illinois; provided
16         that dividends eligible for the deduction provided in
17         subparagraph (K) of paragraph 2 of this subsection
18         shall not be eligible for the deduction provided under
19         this subparagraph (L);
20             (M) For any taxpayer that is a financial
21         organization within the meaning of Section 304(c) of
22         this Act, an amount included in such total as interest
23         income from a loan or loans made by such taxpayer to a
24         borrower, to the extent that such a loan is secured by
25         property which is eligible for the Enterprise Zone
26         Investment Credit or the River Edge Redevelopment Zone

 

 

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1         Investment Credit. To determine the portion of a loan
2         or loans that is secured by property eligible for a
3         Section 201(f) investment credit to the borrower, the
4         entire principal amount of the loan or loans between
5         the taxpayer and the borrower should be divided into
6         the basis of the Section 201(f) investment credit
7         property which secures the loan or loans, using for
8         this purpose the original basis of such property on the
9         date that it was placed in service in the Enterprise
10         Zone or the River Edge Redevelopment Zone. The
11         subtraction modification available to taxpayer in any
12         year under this subsection shall be that portion of the
13         total interest paid by the borrower with respect to
14         such loan attributable to the eligible property as
15         calculated under the previous sentence. This
16         subparagraph (M) is exempt from the provisions of
17         Section 250;
18             (M-1) For any taxpayer that is a financial
19         organization within the meaning of Section 304(c) of
20         this Act, an amount included in such total as interest
21         income from a loan or loans made by such taxpayer to a
22         borrower, to the extent that such a loan is secured by
23         property which is eligible for the High Impact Business
24         Investment Credit. To determine the portion of a loan
25         or loans that is secured by property eligible for a
26         Section 201(h) investment credit to the borrower, the

 

 

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1         entire principal amount of the loan or loans between
2         the taxpayer and the borrower should be divided into
3         the basis of the Section 201(h) investment credit
4         property which secures the loan or loans, using for
5         this purpose the original basis of such property on the
6         date that it was placed in service in a federally
7         designated Foreign Trade Zone or Sub-Zone located in
8         Illinois. No taxpayer that is eligible for the
9         deduction provided in subparagraph (M) of paragraph
10         (2) of this subsection shall be eligible for the
11         deduction provided under this subparagraph (M-1). The
12         subtraction modification available to taxpayers in any
13         year under this subsection shall be that portion of the
14         total interest paid by the borrower with respect to
15         such loan attributable to the eligible property as
16         calculated under the previous sentence;
17             (N) Two times any contribution made during the
18         taxable year to a designated zone organization to the
19         extent that the contribution (i) qualifies as a
20         charitable contribution under subsection (c) of
21         Section 170 of the Internal Revenue Code and (ii) must,
22         by its terms, be used for a project approved by the
23         Department of Commerce and Economic Opportunity under
24         Section 11 of the Illinois Enterprise Zone Act or under
25         Section 10-10 of the Illinois River Edge Redevelopment
26         Zone Act. This subparagraph (N) is exempt from the

 

 

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1         provisions of Section 250;
2             (O) An amount equal to: (i) 85% for taxable years
3         ending on or before December 31, 1992, or, a percentage
4         equal to the percentage allowable under Section
5         243(a)(1) of the Internal Revenue Code of 1986 for
6         taxable years ending after December 31, 1992, of the
7         amount by which dividends included in taxable income
8         and received from a corporation that is not created or
9         organized under the laws of the United States or any
10         state or political subdivision thereof, including, for
11         taxable years ending on or after December 31, 1988,
12         dividends received or deemed received or paid or deemed
13         paid under Sections 951 through 964 of the Internal
14         Revenue Code, exceed the amount of the modification
15         provided under subparagraph (G) of paragraph (2) of
16         this subsection (b) which is related to such dividends;
17         plus (ii) 100% of the amount by which dividends,
18         included in taxable income and received, including,
19         for taxable years ending on or after December 31, 1988,
20         dividends received or deemed received or paid or deemed
21         paid under Sections 951 through 964 of the Internal
22         Revenue Code, from any such corporation specified in
23         clause (i) that would but for the provisions of Section
24         1504 (b) (3) of the Internal Revenue Code be treated as
25         a member of the affiliated group which includes the
26         dividend recipient, exceed the amount of the

 

 

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1         modification provided under subparagraph (G) of
2         paragraph (2) of this subsection (b) which is related
3         to such dividends;
4             (P) An amount equal to any contribution made to a
5         job training project established pursuant to the Tax
6         Increment Allocation Redevelopment Act;
7             (Q) An amount equal to the amount of the deduction
8         used to compute the federal income tax credit for
9         restoration of substantial amounts held under claim of
10         right for the taxable year pursuant to Section 1341 of
11         the Internal Revenue Code of 1986;
12             (R) On and after July 20, 1999, in the case of an
13         attorney-in-fact with respect to whom an interinsurer
14         or a reciprocal insurer has made the election under
15         Section 835 of the Internal Revenue Code, 26 U.S.C.
16         835, an amount equal to the excess, if any, of the
17         amounts paid or incurred by that interinsurer or
18         reciprocal insurer in the taxable year to the
19         attorney-in-fact over the deduction allowed to that
20         interinsurer or reciprocal insurer with respect to the
21         attorney-in-fact under Section 835(b) of the Internal
22         Revenue Code for the taxable year; the provisions of
23         this subparagraph are exempt from the provisions of
24         Section 250;
25             (S) For taxable years ending on or after December
26         31, 1997, in the case of a Subchapter S corporation, an

 

 

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1         amount equal to all amounts of income allocable to a
2         shareholder subject to the Personal Property Tax
3         Replacement Income Tax imposed by subsections (c) and
4         (d) of Section 201 of this Act, including amounts
5         allocable to organizations exempt from federal income
6         tax by reason of Section 501(a) of the Internal Revenue
7         Code. This subparagraph (S) is exempt from the
8         provisions of Section 250;
9             (T) For taxable years 2001 and thereafter, for the
10         taxable year in which the bonus depreciation deduction
11         is taken on the taxpayer's federal income tax return
12         under subsection (k) of Section 168 of the Internal
13         Revenue Code and for each applicable taxable year
14         thereafter, an amount equal to "x", where:
15                 (1) "y" equals the amount of the depreciation
16             deduction taken for the taxable year on the
17             taxpayer's federal income tax return on property
18             for which the bonus depreciation deduction was
19             taken in any year under subsection (k) of Section
20             168 of the Internal Revenue Code, but not including
21             the bonus depreciation deduction;
22                 (2) for taxable years ending on or before
23             December 31, 2005, "x" equals "y" multiplied by 30
24             and then divided by 70 (or "y" multiplied by
25             0.429); and
26                 (3) for taxable years ending after December

 

 

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1             31, 2005:
2                     (i) for property on which a bonus
3                 depreciation deduction of 30% of the adjusted
4                 basis was taken, "x" equals "y" multiplied by
5                 30 and then divided by 70 (or "y" multiplied by
6                 0.429); and
7                     (ii) for property on which a bonus
8                 depreciation deduction of 50% of the adjusted
9                 basis was taken, "x" equals "y" multiplied by
10                 1.0.
11             The aggregate amount deducted under this
12         subparagraph in all taxable years for any one piece of
13         property may not exceed the amount of the bonus
14         depreciation deduction taken on that property on the
15         taxpayer's federal income tax return under subsection
16         (k) of Section 168 of the Internal Revenue Code. This
17         subparagraph (T) is exempt from the provisions of
18         Section 250;
19             (U) If the taxpayer sells, transfers, abandons, or
20         otherwise disposes of property for which the taxpayer
21         was required in any taxable year to make an addition
22         modification under subparagraph (E-10), then an amount
23         equal to that addition modification.
24             If the taxpayer continues to own property through
25         the last day of the last tax year for which the
26         taxpayer may claim a depreciation deduction for

 

 

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1         federal income tax purposes and for which the taxpayer
2         was required in any taxable year to make an addition
3         modification under subparagraph (E-10), then an amount
4         equal to that addition modification.
5             The taxpayer is allowed to take the deduction under
6         this subparagraph only once with respect to any one
7         piece of property.
8             This subparagraph (U) is exempt from the
9         provisions of Section 250;
10             (V) The amount of: (i) any interest income (net of
11         the deductions allocable thereto) taken into account
12         for the taxable year with respect to a transaction with
13         a taxpayer that is required to make an addition
14         modification with respect to such transaction under
15         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
16         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
17         the amount of such addition modification and (ii) any
18         income from intangible property (net of the deductions
19         allocable thereto) taken into account for the taxable
20         year with respect to a transaction with a taxpayer that
21         is required to make an addition modification with
22         respect to such transaction under Section
23         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
24         203(d)(2)(D-8), but not to exceed the amount of such
25         addition modification;
26             (W) An amount equal to the interest income taken

 

 

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1         into account for the taxable year (net of the
2         deductions allocable thereto) with respect to
3         transactions with a foreign person who would be a
4         member of the taxpayer's unitary business group but for
5         the fact that the foreign person's business activity
6         outside the United States is 80% or more of that
7         person's total business activity, but not to exceed the
8         addition modification required to be made for the same
9         taxable year under Section 203(b)(2)(E-12) for
10         interest paid, accrued, or incurred, directly or
11         indirectly, to the same foreign person; and
12             (X) An amount equal to the income from intangible
13         property taken into account for the taxable year (net
14         of the deductions allocable thereto) with respect to
15         transactions with a foreign person who would be a
16         member of the taxpayer's unitary business group but for
17         the fact that the foreign person's business activity
18         outside the United States is 80% or more of that
19         person's total business activity, but not to exceed the
20         addition modification required to be made for the same
21         taxable year under Section 203(b)(2)(E-13) for
22         intangible expenses and costs paid, accrued, or
23         incurred, directly or indirectly, to the same foreign
24         person.
25         (3) Special rule. For purposes of paragraph (2) (A),
26     "gross income" in the case of a life insurance company, for

 

 

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1     tax years ending on and after December 31, 1994, shall mean
2     the gross investment income for the taxable year.
 
3     (c) Trusts and estates.
4         (1) In general. In the case of a trust or estate, base
5     income means an amount equal to the taxpayer's taxable
6     income for the taxable year as modified by paragraph (2).
7         (2) Modifications. Subject to the provisions of
8     paragraph (3), the taxable income referred to in paragraph
9     (1) shall be modified by adding thereto the sum of the
10     following amounts:
11             (A) An amount equal to all amounts paid or accrued
12         to the taxpayer as interest or dividends during the
13         taxable year to the extent excluded from gross income
14         in the computation of taxable income;
15             (B) In the case of (i) an estate, $600; (ii) a
16         trust which, under its governing instrument, is
17         required to distribute all of its income currently,
18         $300; and (iii) any other trust, $100, but in each such
19         case, only to the extent such amount was deducted in
20         the computation of taxable income;
21             (C) An amount equal to the amount of tax imposed by
22         this Act to the extent deducted from gross income in
23         the computation of taxable income for the taxable year;
24             (D) The amount of any net operating loss deduction
25         taken in arriving at taxable income, other than a net

 

 

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1         operating loss carried forward from a taxable year
2         ending prior to December 31, 1986;
3             (E) For taxable years in which a net operating loss
4         carryback or carryforward from a taxable year ending
5         prior to December 31, 1986 is an element of taxable
6         income under paragraph (1) of subsection (e) or
7         subparagraph (E) of paragraph (2) of subsection (e),
8         the amount by which addition modifications other than
9         those provided by this subparagraph (E) exceeded
10         subtraction modifications in such taxable year, with
11         the following limitations applied in the order that
12         they are listed:
13                 (i) the addition modification relating to the
14             net operating loss carried back or forward to the
15             taxable year from any taxable year ending prior to
16             December 31, 1986 shall be reduced by the amount of
17             addition modification under this subparagraph (E)
18             which related to that net operating loss and which
19             was taken into account in calculating the base
20             income of an earlier taxable year, and
21                 (ii) the addition modification relating to the
22             net operating loss carried back or forward to the
23             taxable year from any taxable year ending prior to
24             December 31, 1986 shall not exceed the amount of
25             such carryback or carryforward;
26             For taxable years in which there is a net operating

 

 

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1         loss carryback or carryforward from more than one other
2         taxable year ending prior to December 31, 1986, the
3         addition modification provided in this subparagraph
4         (E) shall be the sum of the amounts computed
5         independently under the preceding provisions of this
6         subparagraph (E) for each such taxable year;
7             (F) For taxable years ending on or after January 1,
8         1989, an amount equal to the tax deducted pursuant to
9         Section 164 of the Internal Revenue Code if the trust
10         or estate is claiming the same tax for purposes of the
11         Illinois foreign tax credit under Section 601 of this
12         Act;
13             (G) An amount equal to the amount of the capital
14         gain deduction allowable under the Internal Revenue
15         Code, to the extent deducted from gross income in the
16         computation of taxable income;
17             (G-5) For taxable years ending after December 31,
18         1997, an amount equal to any eligible remediation costs
19         that the trust or estate deducted in computing adjusted
20         gross income and for which the trust or estate claims a
21         credit under subsection (l) of Section 201;
22             (G-10) For taxable years 2001 and thereafter, an
23         amount equal to the bonus depreciation deduction taken
24         on the taxpayer's federal income tax return for the
25         taxable year under subsection (k) of Section 168 of the
26         Internal Revenue Code; and

 

 

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1             (G-11) If the taxpayer sells, transfers, abandons,
2         or otherwise disposes of property for which the
3         taxpayer was required in any taxable year to make an
4         addition modification under subparagraph (G-10), then
5         an amount equal to the aggregate amount of the
6         deductions taken in all taxable years under
7         subparagraph (R) with respect to that property.
8             If the taxpayer continues to own property through
9         the last day of the last tax year for which the
10         taxpayer may claim a depreciation deduction for
11         federal income tax purposes and for which the taxpayer
12         was allowed in any taxable year to make a subtraction
13         modification under subparagraph (R), then an amount
14         equal to that subtraction modification.
15             The taxpayer is required to make the addition
16         modification under this subparagraph only once with
17         respect to any one piece of property;
18             (G-12) For taxable years ending on or after
19         December 31, 2004, an amount equal to the amount
20         otherwise allowed as a deduction in computing base
21         income for interest paid, accrued, or incurred,
22         directly or indirectly, to a foreign person who would
23         be a member of the same unitary business group but for
24         the fact that the foreign person's business activity
25         outside the United States is 80% or more of the foreign
26         person's total business activity. The addition

 

 

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1         modification required by this subparagraph shall be
2         reduced to the extent that dividends were included in
3         base income of the unitary group for the same taxable
4         year and received by the taxpayer or by a member of the
5         taxpayer's unitary business group (including amounts
6         included in gross income pursuant to Sections 951
7         through 964 of the Internal Revenue Code and amounts
8         included in gross income under Section 78 of the
9         Internal Revenue Code) with respect to the stock of the
10         same person to whom the interest was paid, accrued, or
11         incurred.
12             This paragraph shall not apply to the following:
13                 (i) an item of interest paid, accrued, or
14             incurred, directly or indirectly, to a foreign
15             person who is subject in a foreign country or
16             state, other than a state which requires mandatory
17             unitary reporting, to a tax on or measured by net
18             income with respect to such interest; or
19                 (ii) an item of interest paid, accrued, or
20             incurred, directly or indirectly, to a foreign
21             person if the taxpayer can establish, based on a
22             preponderance of the evidence, both of the
23             following:
24                     (a) the foreign person, during the same
25                 taxable year, paid, accrued, or incurred, the
26                 interest to a person that is not a related

 

 

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1                 member, and
2                     (b) the transaction giving rise to the
3                 interest expense between the taxpayer and the
4                 foreign person did not have as a principal
5                 purpose the avoidance of Illinois income tax,
6                 and is paid pursuant to a contract or agreement
7                 that reflects an arm's-length interest rate
8                 and terms; or
9                 (iii) the taxpayer can establish, based on
10             clear and convincing evidence, that the interest
11             paid, accrued, or incurred relates to a contract or
12             agreement entered into at arm's-length rates and
13             terms and the principal purpose for the payment is
14             not federal or Illinois tax avoidance; or
15                 (iv) an item of interest paid, accrued, or
16             incurred, directly or indirectly, to a foreign
17             person if the taxpayer establishes by clear and
18             convincing evidence that the adjustments are
19             unreasonable; or if the taxpayer and the Director
20             agree in writing to the application or use of an
21             alternative method of apportionment under Section
22             304(f).
23                 Nothing in this subsection shall preclude the
24             Director from making any other adjustment
25             otherwise allowed under Section 404 of this Act for
26             any tax year beginning after the effective date of

 

 

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1             this amendment provided such adjustment is made
2             pursuant to regulation adopted by the Department
3             and such regulations provide methods and standards
4             by which the Department will utilize its authority
5             under Section 404 of this Act;
6             (G-13) For taxable years ending on or after
7         December 31, 2004, an amount equal to the amount of
8         intangible expenses and costs otherwise allowed as a
9         deduction in computing base income, and that were paid,
10         accrued, or incurred, directly or indirectly, to a
11         foreign person who would be a member of the same
12         unitary business group but for the fact that the
13         foreign person's business activity outside the United
14         States is 80% or more of that person's total business
15         activity. The addition modification required by this
16         subparagraph shall be reduced to the extent that
17         dividends were included in base income of the unitary
18         group for the same taxable year and received by the
19         taxpayer or by a member of the taxpayer's unitary
20         business group (including amounts included in gross
21         income pursuant to Sections 951 through 964 of the
22         Internal Revenue Code and amounts included in gross
23         income under Section 78 of the Internal Revenue Code)
24         with respect to the stock of the same person to whom
25         the intangible expenses and costs were directly or
26         indirectly paid, incurred, or accrued. The preceding

 

 

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1         sentence shall not apply to the extent that the same
2         dividends caused a reduction to the addition
3         modification required under Section 203(c)(2)(G-12) of
4         this Act. As used in this subparagraph, the term
5         "intangible expenses and costs" includes: (1)
6         expenses, losses, and costs for or related to the
7         direct or indirect acquisition, use, maintenance or
8         management, ownership, sale, exchange, or any other
9         disposition of intangible property; (2) losses
10         incurred, directly or indirectly, from factoring
11         transactions or discounting transactions; (3) royalty,
12         patent, technical, and copyright fees; (4) licensing
13         fees; and (5) other similar expenses and costs. For
14         purposes of this subparagraph, "intangible property"
15         includes patents, patent applications, trade names,
16         trademarks, service marks, copyrights, mask works,
17         trade secrets, and similar types of intangible assets.
18             This paragraph shall not apply to the following:
19                 (i) any item of intangible expenses or costs
20             paid, accrued, or incurred, directly or
21             indirectly, from a transaction with a foreign
22             person who is subject in a foreign country or
23             state, other than a state which requires mandatory
24             unitary reporting, to a tax on or measured by net
25             income with respect to such item; or
26                 (ii) any item of intangible expense or cost

 

 

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1             paid, accrued, or incurred, directly or
2             indirectly, if the taxpayer can establish, based
3             on a preponderance of the evidence, both of the
4             following:
5                     (a) the foreign person during the same
6                 taxable year paid, accrued, or incurred, the
7                 intangible expense or cost to a person that is
8                 not a related member, and
9                     (b) the transaction giving rise to the
10                 intangible expense or cost between the
11                 taxpayer and the foreign person did not have as
12                 a principal purpose the avoidance of Illinois
13                 income tax, and is paid pursuant to a contract
14                 or agreement that reflects arm's-length terms;
15                 or
16                 (iii) any item of intangible expense or cost
17             paid, accrued, or incurred, directly or
18             indirectly, from a transaction with a foreign
19             person if the taxpayer establishes by clear and
20             convincing evidence, that the adjustments are
21             unreasonable; or if the taxpayer and the Director
22             agree in writing to the application or use of an
23             alternative method of apportionment under Section
24             304(f);
25                 Nothing in this subsection shall preclude the
26             Director from making any other adjustment

 

 

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1             otherwise allowed under Section 404 of this Act for
2             any tax year beginning after the effective date of
3             this amendment provided such adjustment is made
4             pursuant to regulation adopted by the Department
5             and such regulations provide methods and standards
6             by which the Department will utilize its authority
7             under Section 404 of this Act;
8     and by deducting from the total so obtained the sum of the
9     following amounts:
10             (H) An amount equal to all amounts included in such
11         total pursuant to the provisions of Sections 402(a),
12         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
13         Internal Revenue Code or included in such total as
14         distributions under the provisions of any retirement
15         or disability plan for employees of any governmental
16         agency or unit, or retirement payments to retired
17         partners, which payments are excluded in computing net
18         earnings from self employment by Section 1402 of the
19         Internal Revenue Code and regulations adopted pursuant
20         thereto;
21             (I) The valuation limitation amount;
22             (J) An amount equal to the amount of any tax
23         imposed by this Act which was refunded to the taxpayer
24         and included in such total for the taxable year;
25             (K) An amount equal to all amounts included in
26         taxable income as modified by subparagraphs (A), (B),

 

 

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1         (C), (D), (E), (F) and (G) which are exempt from
2         taxation by this State either by reason of its statutes
3         or Constitution or by reason of the Constitution,
4         treaties or statutes of the United States; provided
5         that, in the case of any statute of this State that
6         exempts income derived from bonds or other obligations
7         from the tax imposed under this Act, the amount
8         exempted shall be the interest net of bond premium
9         amortization;
10             (L) With the exception of any amounts subtracted
11         under subparagraph (K), an amount equal to the sum of
12         all amounts disallowed as deductions by (i) Sections
13         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
14         as now or hereafter amended, and all amounts of
15         expenses allocable to interest and disallowed as
16         deductions by Section 265(1) of the Internal Revenue
17         Code of 1954, as now or hereafter amended; and (ii) for
18         taxable years ending on or after August 13, 1999,
19         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
20         the Internal Revenue Code; the provisions of this
21         subparagraph are exempt from the provisions of Section
22         250;
23             (M) An amount equal to those dividends included in
24         such total which were paid by a corporation which
25         conducts business operations in an Enterprise Zone or
26         zones created under the Illinois Enterprise Zone Act or

 

 

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1         a River Edge Redevelopment Zone or zones created under
2         the River Edge Redevelopment Zone Act and conducts
3         substantially all of its operations in an Enterprise
4         Zone or Zones or a River Edge Redevelopment Zone or
5         zones. This subparagraph (M) is exempt from the
6         provisions of Section 250;
7             (N) An amount equal to any contribution made to a
8         job training project established pursuant to the Tax
9         Increment Allocation Redevelopment Act;
10             (O) An amount equal to those dividends included in
11         such total that were paid by a corporation that
12         conducts business operations in a federally designated
13         Foreign Trade Zone or Sub-Zone and that is designated a
14         High Impact Business located in Illinois; provided
15         that dividends eligible for the deduction provided in
16         subparagraph (M) of paragraph (2) of this subsection
17         shall not be eligible for the deduction provided under
18         this subparagraph (O);
19             (P) An amount equal to the amount of the deduction
20         used to compute the federal income tax credit for
21         restoration of substantial amounts held under claim of
22         right for the taxable year pursuant to Section 1341 of
23         the Internal Revenue Code of 1986;
24             (Q) For taxable year 1999 and thereafter, an amount
25         equal to the amount of any (i) distributions, to the
26         extent includible in gross income for federal income

 

 

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1         tax purposes, made to the taxpayer because of his or
2         her status as a victim of persecution for racial or
3         religious reasons by Nazi Germany or any other Axis
4         regime or as an heir of the victim and (ii) items of
5         income, to the extent includible in gross income for
6         federal income tax purposes, attributable to, derived
7         from or in any way related to assets stolen from,
8         hidden from, or otherwise lost to a victim of
9         persecution for racial or religious reasons by Nazi
10         Germany or any other Axis regime immediately prior to,
11         during, and immediately after World War II, including,
12         but not limited to, interest on the proceeds receivable
13         as insurance under policies issued to a victim of
14         persecution for racial or religious reasons by Nazi
15         Germany or any other Axis regime by European insurance
16         companies immediately prior to and during World War II;
17         provided, however, this subtraction from federal
18         adjusted gross income does not apply to assets acquired
19         with such assets or with the proceeds from the sale of
20         such assets; provided, further, this paragraph shall
21         only apply to a taxpayer who was the first recipient of
22         such assets after their recovery and who is a victim of
23         persecution for racial or religious reasons by Nazi
24         Germany or any other Axis regime or as an heir of the
25         victim. The amount of and the eligibility for any
26         public assistance, benefit, or similar entitlement is

 

 

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1         not affected by the inclusion of items (i) and (ii) of
2         this paragraph in gross income for federal income tax
3         purposes. This paragraph is exempt from the provisions
4         of Section 250;
5             (R) For taxable years 2001 and thereafter, for the
6         taxable year in which the bonus depreciation deduction
7         is taken on the taxpayer's federal income tax return
8         under subsection (k) of Section 168 of the Internal
9         Revenue Code and for each applicable taxable year
10         thereafter, an amount equal to "x", where:
11                 (1) "y" equals the amount of the depreciation
12             deduction taken for the taxable year on the
13             taxpayer's federal income tax return on property
14             for which the bonus depreciation deduction was
15             taken in any year under subsection (k) of Section
16             168 of the Internal Revenue Code, but not including
17             the bonus depreciation deduction;
18                 (2) for taxable years ending on or before
19             December 31, 2005, "x" equals "y" multiplied by 30
20             and then divided by 70 (or "y" multiplied by
21             0.429); and
22                 (3) for taxable years ending after December
23             31, 2005:
24                     (i) for property on which a bonus
25                 depreciation deduction of 30% of the adjusted
26                 basis was taken, "x" equals "y" multiplied by

 

 

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1                 30 and then divided by 70 (or "y" multiplied by
2                 0.429); and
3                     (ii) for property on which a bonus
4                 depreciation deduction of 50% of the adjusted
5                 basis was taken, "x" equals "y" multiplied by
6                 1.0.
7             The aggregate amount deducted under this
8         subparagraph in all taxable years for any one piece of
9         property may not exceed the amount of the bonus
10         depreciation deduction taken on that property on the
11         taxpayer's federal income tax return under subsection
12         (k) of Section 168 of the Internal Revenue Code. This
13         subparagraph (R) is exempt from the provisions of
14         Section 250;
15             (S) If the taxpayer sells, transfers, abandons, or
16         otherwise disposes of property for which the taxpayer
17         was required in any taxable year to make an addition
18         modification under subparagraph (G-10), then an amount
19         equal to that addition modification.
20             If the taxpayer continues to own property through
21         the last day of the last tax year for which the
22         taxpayer may claim a depreciation deduction for
23         federal income tax purposes and for which the taxpayer
24         was required in any taxable year to make an addition
25         modification under subparagraph (G-10), then an amount
26         equal to that addition modification.

 

 

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1             The taxpayer is allowed to take the deduction under
2         this subparagraph only once with respect to any one
3         piece of property.
4             This subparagraph (S) is exempt from the
5         provisions of Section 250;
6             (T) The amount of (i) any interest income (net of
7         the deductions allocable thereto) taken into account
8         for the taxable year with respect to a transaction with
9         a taxpayer that is required to make an addition
10         modification with respect to such transaction under
11         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
12         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
13         the amount of such addition modification and (ii) any
14         income from intangible property (net of the deductions
15         allocable thereto) taken into account for the taxable
16         year with respect to a transaction with a taxpayer that
17         is required to make an addition modification with
18         respect to such transaction under Section
19         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
20         203(d)(2)(D-8), but not to exceed the amount of such
21         addition modification;
22             (U) An amount equal to the interest income taken
23         into account for the taxable year (net of the
24         deductions allocable thereto) with respect to
25         transactions with a foreign person who would be a
26         member of the taxpayer's unitary business group but for

 

 

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1         the fact the foreign person's business activity
2         outside the United States is 80% or more of that
3         person's total business activity, but not to exceed the
4         addition modification required to be made for the same
5         taxable year under Section 203(c)(2)(G-12) for
6         interest paid, accrued, or incurred, directly or
7         indirectly, to the same foreign person; and
8             (V) An amount equal to the income from intangible
9         property taken into account for the taxable year (net
10         of the deductions allocable thereto) with respect to
11         transactions with a foreign person who would be a
12         member of the taxpayer's unitary business group but for
13         the fact that the foreign person's business activity
14         outside the United States is 80% or more of that
15         person's total business activity, but not to exceed the
16         addition modification required to be made for the same
17         taxable year under Section 203(c)(2)(G-13) for
18         intangible expenses and costs paid, accrued, or
19         incurred, directly or indirectly, to the same foreign
20         person.
21         (3) Limitation. The amount of any modification
22     otherwise required under this subsection shall, under
23     regulations prescribed by the Department, be adjusted by
24     any amounts included therein which were properly paid,
25     credited, or required to be distributed, or permanently set
26     aside for charitable purposes pursuant to Internal Revenue

 

 

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1     Code Section 642(c) during the taxable year.
 
2     (d) Partnerships.
3         (1) In general. In the case of a partnership, base
4     income means an amount equal to the taxpayer's taxable
5     income for the taxable year as modified by paragraph (2).
6         (2) Modifications. The taxable income referred to in
7     paragraph (1) shall be modified by adding thereto the sum
8     of the following amounts:
9             (A) An amount equal to all amounts paid or accrued
10         to the taxpayer as interest or dividends during the
11         taxable year to the extent excluded from gross income
12         in the computation of taxable income;
13             (B) An amount equal to the amount of tax imposed by
14         this Act to the extent deducted from gross income for
15         the taxable year;
16             (C) The amount of deductions allowed to the
17         partnership pursuant to Section 707 (c) of the Internal
18         Revenue Code in calculating its taxable income;
19             (D) An amount equal to the amount of the capital
20         gain deduction allowable under the Internal Revenue
21         Code, to the extent deducted from gross income in the
22         computation of taxable income;
23             (D-5) For taxable years 2001 and thereafter, an
24         amount equal to the bonus depreciation deduction taken
25         on the taxpayer's federal income tax return for the

 

 

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1         taxable year under subsection (k) of Section 168 of the
2         Internal Revenue Code;
3             (D-6) If the taxpayer sells, transfers, abandons,
4         or otherwise disposes of property for which the
5         taxpayer was required in any taxable year to make an
6         addition modification under subparagraph (D-5), then
7         an amount equal to the aggregate amount of the
8         deductions taken in all taxable years under
9         subparagraph (O) with respect to that property.
10             If the taxpayer continues to own property through
11         the last day of the last tax year for which the
12         taxpayer may claim a depreciation deduction for
13         federal income tax purposes and for which the taxpayer
14         was allowed in any taxable year to make a subtraction
15         modification under subparagraph (O), then an amount
16         equal to that subtraction modification.
17             The taxpayer is required to make the addition
18         modification under this subparagraph only once with
19         respect to any one piece of property;
20             (D-7) For taxable years ending on or after December
21         31, 2004, an amount equal to the amount otherwise
22         allowed as a deduction in computing base income for
23         interest paid, accrued, or incurred, directly or
24         indirectly, to a foreign person who would be a member
25         of the same unitary business group but for the fact the
26         foreign person's business activity outside the United

 

 

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1         States is 80% or more of the foreign person's total
2         business activity. The addition modification required
3         by this subparagraph shall be reduced to the extent
4         that dividends were included in base income of the
5         unitary group for the same taxable year and received by
6         the taxpayer or by a member of the taxpayer's unitary
7         business group (including amounts included in gross
8         income pursuant to Sections 951 through 964 of the
9         Internal Revenue Code and amounts included in gross
10         income under Section 78 of the Internal Revenue Code)
11         with respect to the stock of the same person to whom
12         the interest was paid, accrued, or incurred.
13             This paragraph shall not apply to the following:
14                 (i) an item of interest paid, accrued, or
15             incurred, directly or indirectly, to a foreign
16             person who is subject in a foreign country or
17             state, other than a state which requires mandatory
18             unitary reporting, to a tax on or measured by net
19             income with respect to such interest; or
20                 (ii) an item of interest paid, accrued, or
21             incurred, directly or indirectly, to a foreign
22             person if the taxpayer can establish, based on a
23             preponderance of the evidence, both of the
24             following:
25                     (a) the foreign person, during the same
26                 taxable year, paid, accrued, or incurred, the

 

 

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1                 interest to a person that is not a related
2                 member, and
3                     (b) the transaction giving rise to the
4                 interest expense between the taxpayer and the
5                 foreign person did not have as a principal
6                 purpose the avoidance of Illinois income tax,
7                 and is paid pursuant to a contract or agreement
8                 that reflects an arm's-length interest rate
9                 and terms; or
10                 (iii) the taxpayer can establish, based on
11             clear and convincing evidence, that the interest
12             paid, accrued, or incurred relates to a contract or
13             agreement entered into at arm's-length rates and
14             terms and the principal purpose for the payment is
15             not federal or Illinois tax avoidance; or
16                 (iv) an item of interest paid, accrued, or
17             incurred, directly or indirectly, to a foreign
18             person if the taxpayer establishes by clear and
19             convincing evidence that the adjustments are
20             unreasonable; or if the taxpayer and the Director
21             agree in writing to the application or use of an
22             alternative method of apportionment under Section
23             304(f).
24                 Nothing in this subsection shall preclude the
25             Director from making any other adjustment
26             otherwise allowed under Section 404 of this Act for

 

 

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1             any tax year beginning after the effective date of
2             this amendment provided such adjustment is made
3             pursuant to regulation adopted by the Department
4             and such regulations provide methods and standards
5             by which the Department will utilize its authority
6             under Section 404 of this Act; and
7             (D-8) For taxable years ending on or after December
8         31, 2004, an amount equal to the amount of intangible
9         expenses and costs otherwise allowed as a deduction in
10         computing base income, and that were paid, accrued, or
11         incurred, directly or indirectly, to a foreign person
12         who would be a member of the same unitary business
13         group but for the fact that the foreign person's
14         business activity outside the United States is 80% or
15         more of that person's total business activity. The
16         addition modification required by this subparagraph
17         shall be reduced to the extent that dividends were
18         included in base income of the unitary group for the
19         same taxable year and received by the taxpayer or by a
20         member of the taxpayer's unitary business group
21         (including amounts included in gross income pursuant
22         to Sections 951 through 964 of the Internal Revenue
23         Code and amounts included in gross income under Section
24         78 of the Internal Revenue Code) with respect to the
25         stock of the same person to whom the intangible
26         expenses and costs were directly or indirectly paid,

 

 

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1         incurred or accrued. The preceding sentence shall not
2         apply to the extent that the same dividends caused a
3         reduction to the addition modification required under
4         Section 203(d)(2)(D-7) of this Act. As used in this
5         subparagraph, the term "intangible expenses and costs"
6         includes (1) expenses, losses, and costs for, or
7         related to, the direct or indirect acquisition, use,
8         maintenance or management, ownership, sale, exchange,
9         or any other disposition of intangible property; (2)
10         losses incurred, directly or indirectly, from
11         factoring transactions or discounting transactions;
12         (3) royalty, patent, technical, and copyright fees;
13         (4) licensing fees; and (5) other similar expenses and
14         costs. For purposes of this subparagraph, "intangible
15         property" includes patents, patent applications, trade
16         names, trademarks, service marks, copyrights, mask
17         works, trade secrets, and similar types of intangible
18         assets;
19             This paragraph shall not apply to the following:
20                 (i) any item of intangible expenses or costs
21             paid, accrued, or incurred, directly or
22             indirectly, from a transaction with a foreign
23             person who is subject in a foreign country or
24             state, other than a state which requires mandatory
25             unitary reporting, to a tax on or measured by net
26             income with respect to such item; or

 

 

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1                 (ii) any item of intangible expense or cost
2             paid, accrued, or incurred, directly or
3             indirectly, if the taxpayer can establish, based
4             on a preponderance of the evidence, both of the
5             following:
6                     (a) the foreign person during the same
7                 taxable year paid, accrued, or incurred, the
8                 intangible expense or cost to a person that is
9                 not a related member, and
10                     (b) the transaction giving rise to the
11                 intangible expense or cost between the
12                 taxpayer and the foreign person did not have as
13                 a principal purpose the avoidance of Illinois
14                 income tax, and is paid pursuant to a contract
15                 or agreement that reflects arm's-length terms;
16                 or
17                 (iii) any item of intangible expense or cost
18             paid, accrued, or incurred, directly or
19             indirectly, from a transaction with a foreign
20             person if the taxpayer establishes by clear and
21             convincing evidence, that the adjustments are
22             unreasonable; or if the taxpayer and the Director
23             agree in writing to the application or use of an
24             alternative method of apportionment under Section
25             304(f);
26                 Nothing in this subsection shall preclude the

 

 

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1             Director from making any other adjustment
2             otherwise allowed under Section 404 of this Act for
3             any tax year beginning after the effective date of
4             this amendment provided such adjustment is made
5             pursuant to regulation adopted by the Department
6             and such regulations provide methods and standards
7             by which the Department will utilize its authority
8             under Section 404 of this Act;
9     and by deducting from the total so obtained the following
10     amounts:
11             (E) The valuation limitation amount;
12             (F) An amount equal to the amount of any tax
13         imposed by this Act which was refunded to the taxpayer
14         and included in such total for the taxable year;
15             (G) An amount equal to all amounts included in
16         taxable income as modified by subparagraphs (A), (B),
17         (C) and (D) which are exempt from taxation by this
18         State either by reason of its statutes or Constitution
19         or by reason of the Constitution, treaties or statutes
20         of the United States; provided that, in the case of any
21         statute of this State that exempts income derived from
22         bonds or other obligations from the tax imposed under
23         this Act, the amount exempted shall be the interest net
24         of bond premium amortization;
25             (H) Any income of the partnership which
26         constitutes personal service income as defined in

 

 

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1         Section 1348 (b) (1) of the Internal Revenue Code (as
2         in effect December 31, 1981) or a reasonable allowance
3         for compensation paid or accrued for services rendered
4         by partners to the partnership, whichever is greater;
5             (I) An amount equal to all amounts of income
6         distributable to an entity subject to the Personal
7         Property Tax Replacement Income Tax imposed by
8         subsections (c) and (d) of Section 201 of this Act
9         including amounts distributable to organizations
10         exempt from federal income tax by reason of Section
11         501(a) of the Internal Revenue Code;
12             (J) With the exception of any amounts subtracted
13         under subparagraph (G), an amount equal to the sum of
14         all amounts disallowed as deductions by (i) Sections
15         171(a) (2), and 265(2) of the Internal Revenue Code of
16         1954, as now or hereafter amended, and all amounts of
17         expenses allocable to interest and disallowed as
18         deductions by Section 265(1) of the Internal Revenue
19         Code, as now or hereafter amended; and (ii) for taxable
20         years ending on or after August 13, 1999, Sections
21         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
22         Internal Revenue Code; the provisions of this
23         subparagraph are exempt from the provisions of Section
24         250;
25             (K) An amount equal to those dividends included in
26         such total which were paid by a corporation which

 

 

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1         conducts business operations in an Enterprise Zone or
2         zones created under the Illinois Enterprise Zone Act,
3         enacted by the 82nd General Assembly, or a River Edge
4         Redevelopment Zone or zones created under the River
5         Edge Redevelopment Zone Act and conducts substantially
6         all of its operations in an Enterprise Zone or Zones or
7         from a River Edge Redevelopment Zone or zones. This
8         subparagraph (K) is exempt from the provisions of
9         Section 250;
10             (L) An amount equal to any contribution made to a
11         job training project established pursuant to the Real
12         Property Tax Increment Allocation Redevelopment Act;
13             (M) An amount equal to those dividends included in
14         such total that were paid by a corporation that
15         conducts business operations in a federally designated
16         Foreign Trade Zone or Sub-Zone and that is designated a
17         High Impact Business located in Illinois; provided
18         that dividends eligible for the deduction provided in
19         subparagraph (K) of paragraph (2) of this subsection
20         shall not be eligible for the deduction provided under
21         this subparagraph (M);
22             (N) An amount equal to the amount of the deduction
23         used to compute the federal income tax credit for
24         restoration of substantial amounts held under claim of
25         right for the taxable year pursuant to Section 1341 of
26         the Internal Revenue Code of 1986;

 

 

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1             (O) For taxable years 2001 and thereafter, for the
2         taxable year in which the bonus depreciation deduction
3         is taken on the taxpayer's federal income tax return
4         under subsection (k) of Section 168 of the Internal
5         Revenue Code and for each applicable taxable year
6         thereafter, an amount equal to "x", where:
7                 (1) "y" equals the amount of the depreciation
8             deduction taken for the taxable year on the
9             taxpayer's federal income tax return on property
10             for which the bonus depreciation deduction was
11             taken in any year under subsection (k) of Section
12             168 of the Internal Revenue Code, but not including
13             the bonus depreciation deduction;
14                 (2) for taxable years ending on or before
15             December 31, 2005, "x" equals "y" multiplied by 30
16             and then divided by 70 (or "y" multiplied by
17             0.429); and
18                 (3) for taxable years ending after December
19             31, 2005:
20                     (i) for property on which a bonus
21                 depreciation deduction of 30% of the adjusted
22                 basis was taken, "x" equals "y" multiplied by
23                 30 and then divided by 70 (or "y" multiplied by
24                 0.429); and
25                     (ii) for property on which a bonus
26                 depreciation deduction of 50% of the adjusted

 

 

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1                 basis was taken, "x" equals "y" multiplied by
2                 1.0.
3             The aggregate amount deducted under this
4         subparagraph in all taxable years for any one piece of
5         property may not exceed the amount of the bonus
6         depreciation deduction taken on that property on the
7         taxpayer's federal income tax return under subsection
8         (k) of Section 168 of the Internal Revenue Code. This
9         subparagraph (O) is exempt from the provisions of
10         Section 250;
11             (P) If the taxpayer sells, transfers, abandons, or
12         otherwise disposes of property for which the taxpayer
13         was required in any taxable year to make an addition
14         modification under subparagraph (D-5), then an amount
15         equal to that addition modification.
16             If the taxpayer continues to own property through
17         the last day of the last tax year for which the
18         taxpayer may claim a depreciation deduction for
19         federal income tax purposes and for which the taxpayer
20         was required in any taxable year to make an addition
21         modification under subparagraph (D-5), then an amount
22         equal to that addition modification.
23             The taxpayer is allowed to take the deduction under
24         this subparagraph only once with respect to any one
25         piece of property.
26             This subparagraph (P) is exempt from the

 

 

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1         provisions of Section 250;
2             (Q) The amount of (i) any interest income (net of
3         the deductions allocable thereto) taken into account
4         for the taxable year with respect to a transaction with
5         a taxpayer that is required to make an addition
6         modification with respect to such transaction under
7         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
8         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
9         the amount of such addition modification and (ii) any
10         income from intangible property (net of the deductions
11         allocable thereto) taken into account for the taxable
12         year with respect to a transaction with a taxpayer that
13         is required to make an addition modification with
14         respect to such transaction under Section
15         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
16         203(d)(2)(D-8), but not to exceed the amount of such
17         addition modification;
18             (R) An amount equal to the interest income taken
19         into account for the taxable year (net of the
20         deductions allocable thereto) with respect to
21         transactions with a foreign person who would be a
22         member of the taxpayer's unitary business group but for
23         the fact that the foreign person's business activity
24         outside the United States is 80% or more of that
25         person's total business activity, but not to exceed the
26         addition modification required to be made for the same

 

 

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1         taxable year under Section 203(d)(2)(D-7) for interest
2         paid, accrued, or incurred, directly or indirectly, to
3         the same foreign person; and
4             (S) An amount equal to the income from intangible
5         property taken into account for the taxable year (net
6         of the deductions allocable thereto) with respect to
7         transactions with a foreign person who would be a
8         member of the taxpayer's unitary business group but for
9         the fact that the foreign person's business activity
10         outside the United States is 80% or more of that
11         person's total business activity, but not to exceed the
12         addition modification required to be made for the same
13         taxable year under Section 203(d)(2)(D-8) for
14         intangible expenses and costs paid, accrued, or
15         incurred, directly or indirectly, to the same foreign
16         person.
 
17     (e) Gross income; adjusted gross income; taxable income.
18         (1) In general. Subject to the provisions of paragraph
19     (2) and subsection (b) (3), for purposes of this Section
20     and Section 803(e), a taxpayer's gross income, adjusted
21     gross income, or taxable income for the taxable year shall
22     mean the amount of gross income, adjusted gross income or
23     taxable income properly reportable for federal income tax
24     purposes for the taxable year under the provisions of the
25     Internal Revenue Code. Taxable income may be less than

 

 

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1     zero. However, for taxable years ending on or after
2     December 31, 1986, net operating loss carryforwards from
3     taxable years ending prior to December 31, 1986, may not
4     exceed the sum of federal taxable income for the taxable
5     year before net operating loss deduction, plus the excess
6     of addition modifications over subtraction modifications
7     for the taxable year. For taxable years ending prior to
8     December 31, 1986, taxable income may never be an amount in
9     excess of the net operating loss for the taxable year as
10     defined in subsections (c) and (d) of Section 172 of the
11     Internal Revenue Code, provided that when taxable income of
12     a corporation (other than a Subchapter S corporation),
13     trust, or estate is less than zero and addition
14     modifications, other than those provided by subparagraph
15     (E) of paragraph (2) of subsection (b) for corporations or
16     subparagraph (E) of paragraph (2) of subsection (c) for
17     trusts and estates, exceed subtraction modifications, an
18     addition modification must be made under those
19     subparagraphs for any other taxable year to which the
20     taxable income less than zero (net operating loss) is
21     applied under Section 172 of the Internal Revenue Code or
22     under subparagraph (E) of paragraph (2) of this subsection
23     (e) applied in conjunction with Section 172 of the Internal
24     Revenue Code.
25         (2) Special rule. For purposes of paragraph (1) of this
26     subsection, the taxable income properly reportable for

 

 

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1     federal income tax purposes shall mean:
2             (A) Certain life insurance companies. In the case
3         of a life insurance company subject to the tax imposed
4         by Section 801 of the Internal Revenue Code, life
5         insurance company taxable income, plus the amount of
6         distribution from pre-1984 policyholder surplus
7         accounts as calculated under Section 815a of the
8         Internal Revenue Code;
9             (B) Certain other insurance companies. In the case
10         of mutual insurance companies subject to the tax
11         imposed by Section 831 of the Internal Revenue Code,
12         insurance company taxable income;
13             (C) Regulated investment companies. In the case of
14         a regulated investment company subject to the tax
15         imposed by Section 852 of the Internal Revenue Code,
16         investment company taxable income;
17             (D) Real estate investment trusts. In the case of a
18         real estate investment trust subject to the tax imposed
19         by Section 857 of the Internal Revenue Code, real
20         estate investment trust taxable income;
21             (E) Consolidated corporations. In the case of a
22         corporation which is a member of an affiliated group of
23         corporations filing a consolidated income tax return
24         for the taxable year for federal income tax purposes,
25         taxable income determined as if such corporation had
26         filed a separate return for federal income tax purposes

 

 

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1         for the taxable year and each preceding taxable year
2         for which it was a member of an affiliated group. For
3         purposes of this subparagraph, the taxpayer's separate
4         taxable income shall be determined as if the election
5         provided by Section 243(b) (2) of the Internal Revenue
6         Code had been in effect for all such years;
7             (F) Cooperatives. In the case of a cooperative
8         corporation or association, the taxable income of such
9         organization determined in accordance with the
10         provisions of Section 1381 through 1388 of the Internal
11         Revenue Code;
12             (G) Subchapter S corporations. In the case of: (i)
13         a Subchapter S corporation for which there is in effect
14         an election for the taxable year under Section 1362 of
15         the Internal Revenue Code, the taxable income of such
16         corporation determined in accordance with Section
17         1363(b) of the Internal Revenue Code, except that
18         taxable income shall take into account those items
19         which are required by Section 1363(b)(1) of the
20         Internal Revenue Code to be separately stated; and (ii)
21         a Subchapter S corporation for which there is in effect
22         a federal election to opt out of the provisions of the
23         Subchapter S Revision Act of 1982 and have applied
24         instead the prior federal Subchapter S rules as in
25         effect on July 1, 1982, the taxable income of such
26         corporation determined in accordance with the federal

 

 

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1         Subchapter S rules as in effect on July 1, 1982; and
2             (H) Partnerships. In the case of a partnership,
3         taxable income determined in accordance with Section
4         703 of the Internal Revenue Code, except that taxable
5         income shall take into account those items which are
6         required by Section 703(a)(1) to be separately stated
7         but which would be taken into account by an individual
8         in calculating his taxable income.
9         (3) Recapture of business expenses on disposition of
10     asset or business. Notwithstanding any other law to the
11     contrary, if in prior years income from an asset or
12     business has been classified as business income and in a
13     later year is demonstrated to be non-business income, then
14     all expenses, without limitation, deducted in such later
15     year and in the 2 immediately preceding taxable years
16     related to that asset or business that generated the
17     non-business income shall be added back and recaptured as
18     business income in the year of the disposition of the asset
19     or business. Such amount shall be apportioned to Illinois
20     using the greater of the apportionment fraction computed
21     for the business under Section 304 of this Act for the
22     taxable year or the average of the apportionment fractions
23     computed for the business under Section 304 of this Act for
24     the taxable year and for the 2 immediately preceding
25     taxable years.
26     (f) Valuation limitation amount.

 

 

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1         (1) In general. The valuation limitation amount
2     referred to in subsections (a) (2) (G), (c) (2) (I) and
3     (d)(2) (E) is an amount equal to:
4             (A) The sum of the pre-August 1, 1969 appreciation
5         amounts (to the extent consisting of gain reportable
6         under the provisions of Section 1245 or 1250 of the
7         Internal Revenue Code) for all property in respect of
8         which such gain was reported for the taxable year; plus
9             (B) The lesser of (i) the sum of the pre-August 1,
10         1969 appreciation amounts (to the extent consisting of
11         capital gain) for all property in respect of which such
12         gain was reported for federal income tax purposes for
13         the taxable year, or (ii) the net capital gain for the
14         taxable year, reduced in either case by any amount of
15         such gain included in the amount determined under
16         subsection (a) (2) (F) or (c) (2) (H).
17         (2) Pre-August 1, 1969 appreciation amount.
18             (A) If the fair market value of property referred
19         to in paragraph (1) was readily ascertainable on August
20         1, 1969, the pre-August 1, 1969 appreciation amount for
21         such property is the lesser of (i) the excess of such
22         fair market value over the taxpayer's basis (for
23         determining gain) for such property on that date
24         (determined under the Internal Revenue Code as in
25         effect on that date), or (ii) the total gain realized
26         and reportable for federal income tax purposes in

 

 

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1         respect of the sale, exchange or other disposition of
2         such property.
3             (B) If the fair market value of property referred
4         to in paragraph (1) was not readily ascertainable on
5         August 1, 1969, the pre-August 1, 1969 appreciation
6         amount for such property is that amount which bears the
7         same ratio to the total gain reported in respect of the
8         property for federal income tax purposes for the
9         taxable year, as the number of full calendar months in
10         that part of the taxpayer's holding period for the
11         property ending July 31, 1969 bears to the number of
12         full calendar months in the taxpayer's entire holding
13         period for the property.
14             (C) The Department shall prescribe such
15         regulations as may be necessary to carry out the
16         purposes of this paragraph.
 
17     (g) Double deductions. Unless specifically provided
18 otherwise, nothing in this Section shall permit the same item
19 to be deducted more than once.
 
20     (h) Legislative intention. Except as expressly provided by
21 this Section there shall be no modifications or limitations on
22 the amounts of income, gain, loss or deduction taken into
23 account in determining gross income, adjusted gross income or
24 taxable income for federal income tax purposes for the taxable

 

 

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1 year, or in the amount of such items entering into the
2 computation of base income and net income under this Act for
3 such taxable year, whether in respect of property values as of
4 August 1, 1969 or otherwise.
5 (Source: P.A. 93-812, eff. 7-26-04; 93-840, eff. 7-30-04;
6 94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 94-1021, eff.
7 7-12-06; 94-1074, eff. 12-26-06; revised 1-2-07.)
 
8     Section 99. Effective date. This Act takes effect upon
9 becoming law.