State of Illinois
90th General Assembly
Legislation

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[ Engrossed ][ House Amendment 001 ]

90_HB1324

      35 ILCS 5/203             from Ch. 120, par. 2-203
      35 ILCS 5/215 new
          Amends the Illinois Income Tax  Act.   Allows  individual
      taxpayers  who  are 20 years of age or younger a deduction in
      an  amount,  not  to  exceed  $1,000,  equal  to  the  amount
      deposited in and the interest earned  on  a  college  savings
      plan account.  Provides that a taxpayer shall not be required
      to  deposit more than $500 into an account to begin a college
      savings plan.  Requires the moneys  deposited  into  and  the
      interest earned on an account designated as a college savings
      plan  to  be  used  only  by  the account holder and only for
      college or university expenses.  Provides that if a  taxpayer
      uses moneys deposited in the college savings plan account for
      a  purpose  other  than  college  or university expenses, the
      moneys shall be subject to taxation under this  Act  and  the
      account  holder  shall  incur  a penalty equal to 10% of that
      principal or income used for purposes other than  college  or
      university  expenses.   States that the Department of Revenue
      shall promulgate rules to implement and enforce this Section.
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                                               LRB9004848DNmb
 1        AN ACT to amend the Illinois Income Tax Act  by  changing
 2    Section 203 and adding Section 215.
 3        Be  it  enacted  by  the People of the State of Illinois,
 4    represented in the General Assembly:
 5        Section 5.  The Illinois Income Tax  Act  is  amended  by
 6    changing Section 203 and adding Section 215 as follows:
 7        (35 ILCS 5/203) (from Ch. 120, par. 2-203)
 8        Sec. 203.  Base income defined.
 9        (a)  Individuals.
10             (1)  In general.  In the case of an individual, base
11        income  means  an amount equal to the taxpayer's adjusted
12        gross  income  for  the  taxable  year  as  modified   by
13        paragraph (2).
14             (2)  Modifications.    The   adjusted  gross  income
15        referred to in paragraph (1) shall be modified by  adding
16        thereto the sum of the following amounts:
17                  (A)  An  amount  equal  to  all amounts paid or
18             accrued to the taxpayer  as  interest  or  dividends
19             during  the taxable year to the extent excluded from
20             gross income in the computation  of  adjusted  gross
21             income,  except  stock dividends of qualified public
22             utilities  described  in  Section  305(e)   of   the
23             Internal Revenue Code;
24                  (B)  An  amount  equal  to  the  amount  of tax
25             imposed by this Act  to  the  extent  deducted  from
26             gross  income  in  the computation of adjusted gross
27             income for the taxable year;
28                  (C)  An amount equal  to  the  amount  received
29             during  the  taxable year as a recovery or refund of
30             real  property  taxes  paid  with  respect  to   the
31             taxpayer's principal residence under the Revenue Act
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 1             of  1939  and  for  which a deduction was previously
 2             taken under subparagraph (L) of this  paragraph  (2)
 3             prior to July 1, 1991, the retrospective application
 4             date  of Article 4 of Public Act 87-17.  In the case
 5             of  multi-unit  or  multi-use  structures  and  farm
 6             dwellings, the taxes  on  the  taxpayer's  principal
 7             residence  shall  be that portion of the total taxes
 8             for the entire property  which  is  attributable  to
 9             such principal residence;
10                  (D)  An  amount  equal  to  the  amount  of the
11             capital gain deduction allowable under the  Internal
12             Revenue  Code,  to  the  extent  deducted from gross
13             income in the computation of adjusted gross  income;
14             and
15                  (D-5)  An amount, to the extent not included in
16             adjusted  gross income, equal to the amount of money
17             withdrawn by the taxpayer in the taxable year from a
18             medical care savings account and the interest earned
19             on the account in the taxable year of  a  withdrawal
20             pursuant  to  subsection  (b)  of  Section 20 of the
21             Medical Care Savings Account Act;
22        and by deducting from the total so obtained  the  sum  of
23        the following amounts:
24                  (E)  Any  amount  included  in  such  total  in
25             respect  of  any  compensation  (including  but  not
26             limited  to  any  compensation  paid or accrued to a
27             serviceman while a prisoner of  war  or  missing  in
28             action)  paid  to  a  resident by reason of being on
29             active duty in the Armed Forces of the United States
30             and in respect of any compensation paid  or  accrued
31             to  a  resident who as a governmental employee was a
32             prisoner of war or missing in action, and in respect
33             of any compensation paid to a resident  in  1971  or
34             thereafter for annual training performed pursuant to
                            -3-                LRB9004848DNmb
 1             Sections  502  and 503, Title 32, United States Code
 2             as a member of the Illinois National Guard;
 3                  (F)  An amount equal to all amounts included in
 4             such total pursuant to the  provisions  of  Sections
 5             402(a),  402(c), 403(a), 403(b), 406(a), 407(a), and
 6             408 of the Internal Revenue  Code,  or  included  in
 7             such  total as distributions under the provisions of
 8             any retirement or disability plan for  employees  of
 9             any  governmental  agency  or  unit,  or  retirement
10             payments  to  retired  partners,  which payments are
11             excluded  in  computing  net  earnings   from   self
12             employment  by  Section 1402 of the Internal Revenue
13             Code and regulations adopted pursuant thereto;
14                  (G)  The valuation limitation amount;
15                  (H)  An amount equal to the amount of  any  tax
16             imposed  by  this  Act  which  was  refunded  to the
17             taxpayer and included in such total for the  taxable
18             year;
19                  (I)  An amount equal to all amounts included in
20             such total pursuant to the provisions of Section 111
21             of  the Internal Revenue Code as a recovery of items
22             previously deducted from adjusted  gross  income  in
23             the computation of taxable income;
24                  (J)  An   amount   equal   to  those  dividends
25             included  in  such  total  which  were  paid  by   a
26             corporation which conducts business operations in an
27             Enterprise  Zone or zones created under the Illinois
28             Enterprise Zone Act, and conducts substantially  all
29             of its operations in an Enterprise Zone or zones;
30                  (K)  An   amount   equal   to  those  dividends
31             included  in  such  total  that  were  paid   by   a
32             corporation  that  conducts business operations in a
33             federally designated Foreign Trade Zone or  Sub-Zone
34             and  that  is  designated  a  High  Impact  Business
                            -4-                LRB9004848DNmb
 1             located   in   Illinois;   provided  that  dividends
 2             eligible for the deduction provided in  subparagraph
 3             (J) of paragraph (2) of this subsection shall not be
 4             eligible  for  the  deduction  provided  under  this
 5             subparagraph (K);
 6                  (L)  For  taxable  years  ending after December
 7             31, 1983, an amount equal  to  all  social  security
 8             benefits  and  railroad retirement benefits included
 9             in such total pursuant to Sections 72(r) and  86  of
10             the Internal Revenue Code;
11                  (M)  With   the   exception   of   any  amounts
12             subtracted under subparagraph (N), an  amount  equal
13             to  the  sum of all amounts disallowed as deductions
14             by Sections 171(a) (2), and 265(2) of  the  Internal
15             Revenue  Code  of 1954, as now or hereafter amended,
16             and all amounts of expenses  allocable  to  interest
17             and   disallowed  as deductions by Section 265(1) of
18             the  Internal  Revenue  Code  of  1954,  as  now  or
19             hereafter amended;
20                  (N)  An amount equal to all amounts included in
21             such total which are exempt from  taxation  by  this
22             State   either   by   reason   of  its  statutes  or
23             Constitution  or  by  reason  of  the  Constitution,
24             treaties or statutes of the United States;  provided
25             that,  in the case of any statute of this State that
26             exempts  income  derived   from   bonds   or   other
27             obligations from the tax imposed under this Act, the
28             amount  exempted  shall  be the interest net of bond
29             premium amortization;
30                  (O)  An amount equal to any  contribution  made
31             to  a  job  training project established pursuant to
32             the Tax Increment Allocation Redevelopment Act;
33                  (P)  An amount  equal  to  the  amount  of  the
34             deduction  used  to  compute  the federal income tax
                            -5-                LRB9004848DNmb
 1             credit for restoration of substantial  amounts  held
 2             under  claim  of right for the taxable year pursuant
 3             to Section 1341 of  the  Internal  Revenue  Code  of
 4             1986;
 5                  (Q)  An amount equal to any amounts included in
 6             such   total,   received   by  the  taxpayer  as  an
 7             acceleration in the payment of  life,  endowment  or
 8             annuity  benefits  in advance of the time they would
 9             otherwise be payable as an indemnity for a  terminal
10             illness;
11                  (R)  An  amount  equal  to  the  amount  of any
12             federal or State  bonus  paid  to  veterans  of  the
13             Persian Gulf War;
14                  (S)  An  amount,  to  the  extent  included  in
15             adjusted  gross  income,  equal  to  the amount of a
16             contribution made in the taxable year on  behalf  of
17             the  taxpayer  to  a  medical  care  savings account
18             established under the Medical Care  Savings  Account
19             Act  to  the  extent the contribution is accepted by
20             the account administrator as provided in that Act;
21                  (T)  An  amount,  to  the  extent  included  in
22             adjusted  gross  income,  equal  to  the  amount  of
23             interest earned in the taxable  year  on  a  medical
24             care  savings  account established under the Medical
25             Care Savings Account Act on behalf of the  taxpayer,
26             other  than interest added pursuant to item (D-5) of
27             this paragraph (2);
28                  (U)  For one taxable year beginning on or after
29             January 1, 1994, an amount equal to the total amount
30             of tax imposed and paid under  subsections  (a)  and
31             (b)  of  Section  201  of  this Act on grant amounts
32             received by the  taxpayer  under  the  Nursing  Home
33             Grant  Assistance  Act during the taxpayer's taxable
34             years 1992 and 1993; and
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 1                  (V)  Beginning with  tax  years  ending  on  or
 2             after  December  31,  1995 and ending with tax years
 3             ending on or before December  31,  1999,  an  amount
 4             equal  to  the  amount  paid  by a taxpayer who is a
 5             self-employed taxpayer, a partner of a  partnership,
 6             or  a  shareholder in a Subchapter S corporation for
 7             health insurance or  long-term  care  insurance  for
 8             that   taxpayer   or   that   taxpayer's  spouse  or
 9             dependents, to the extent that the amount  paid  for
10             that  health  insurance  or long-term care insurance
11             may be deducted under Section 213  of  the  Internal
12             Revenue  Code  of 1986, has not been deducted on the
13             federal income tax return of the taxpayer, and  does
14             not  exceed  the taxable income attributable to that
15             taxpayer's  income,   self-employment   income,   or
16             Subchapter  S  corporation  income;  except  that no
17             deduction shall be allowed under this  item  (V)  if
18             the  taxpayer  is  eligible  to  participate  in any
19             health insurance or long-term care insurance plan of
20             an  employer  of  the  taxpayer  or  the  taxpayer's
21             spouse.  The amount  of  the  health  insurance  and
22             long-term  care insurance subtracted under this item
23             (V) shall be determined by multiplying total  health
24             insurance and long-term care insurance premiums paid
25             by  the  taxpayer times a number that represents the
26             fractional percentage of eligible  medical  expenses
27             under  Section  213  of the Internal Revenue Code of
28             1986 not actually deducted on the taxpayer's federal
29             income tax return; and.
30                  (W)  Beginning with taxable years ending on  or
31             after  December  31,  1997  and  ending with taxable
32             years ending on or  before  December  31,  2001,  an
33             amount,  not  to  exceed $1,000, equal to the amount
34             deposited in and the interest earned  on  a  college
                            -7-                LRB9004848DNmb
 1             savings  plan,  by a taxpayer who is 20 years of age
 2             or  younger,  subject  to   the   restrictions   and
 3             penalties in Section 215.
 4        (b)  Corporations.
 5             (1)  In general.  In the case of a corporation, base
 6        income  means  an  amount equal to the taxpayer's taxable
 7        income for the taxable year as modified by paragraph (2).
 8             (2)  Modifications.  The taxable income referred  to
 9        in  paragraph (1) shall be modified by adding thereto the
10        sum of the following amounts:
11                  (A)  An amount equal to  all  amounts  paid  or
12             accrued   to   the  taxpayer  as  interest  and  all
13             distributions  received  from  regulated  investment
14             companies during the  taxable  year  to  the  extent
15             excluded  from  gross  income  in the computation of
16             taxable income;
17                  (B)  An amount  equal  to  the  amount  of  tax
18             imposed  by  this  Act  to  the extent deducted from
19             gross income in the computation  of  taxable  income
20             for the taxable year;
21                  (C)  In  the  case  of  a  regulated investment
22             company or real estate investment trust,  an  amount
23             equal to the excess of (i) the net long-term capital
24             gain  for  the taxable year, over (ii) the amount of
25             the capital gain dividends  designated  as  such  in
26             accordance  with  Section  852(b)(3)(C)  or  Section
27             857(b)(3)(C)  of  the  Internal Revenue Code and any
28             amount designated under Section 852(b)(3)(D) of  the
29             Internal  Revenue  Code, attributable to the taxable
30             year.
31        This amendatory Act of 1995 is  declarative  of  existing
32    law and is not a new enactment.
33                  (D)  The  amount  of  any  net  operating  loss
34             deduction taken in arriving at taxable income, other
                            -8-                LRB9004848DNmb
 1             than  a  net  operating  loss carried forward from a
 2             taxable year ending prior to December 31, 1986; and
 3                  (E)  For taxable years in which a net operating
 4             loss carryback or carryforward from a  taxable  year
 5             ending  prior  to December 31, 1986 is an element of
 6             taxable income under paragraph (1) of subsection (e)
 7             or subparagraph (E) of paragraph (2)  of  subsection
 8             (e),  the  amount  by  which  addition modifications
 9             other than those provided by this  subparagraph  (E)
10             exceeded  subtraction  modifications in such earlier
11             taxable year, with the following limitations applied
12             in the order that they are listed:
13                       (i)  the addition modification relating to
14                  the net operating loss carried back or  forward
15                  to  the  taxable  year  from  any  taxable year
16                  ending prior to  December  31,  1986  shall  be
17                  reduced  by the amount of addition modification
18                  under this subparagraph (E)  which  related  to
19                  that  net  operating  loss  and which was taken
20                  into account in calculating the base income  of
21                  an earlier taxable year, and
22                       (ii)  the  addition  modification relating
23                  to the  net  operating  loss  carried  back  or
24                  forward  to  the  taxable year from any taxable
25                  year ending prior to December  31,  1986  shall
26                  not  exceed  the  amount  of  such carryback or
27                  carryforward;
28                  For taxable years  in  which  there  is  a  net
29             operating  loss  carryback or carryforward from more
30             than one other taxable year ending prior to December
31             31, 1986, the addition modification provided in this
32             subparagraph (E) shall be the  sum  of  the  amounts
33             computed    independently    under   the   preceding
34             provisions of this subparagraph (E)  for  each  such
                            -9-                LRB9004848DNmb
 1             taxable year,
 2        and  by  deducting  from the total so obtained the sum of
 3        the following amounts:
 4                  (F)  An amount equal to the amount of  any  tax
 5             imposed  by  this  Act  which  was  refunded  to the
 6             taxpayer and included in such total for the  taxable
 7             year;
 8                  (G)  An  amount equal to any amount included in
 9             such total under Section 78 of the Internal  Revenue
10             Code;
11                  (H)  In  the  case  of  a  regulated investment
12             company, an amount equal to  the  amount  of  exempt
13             interest  dividends as defined in subsection (b) (5)
14             of Section 852 of the Internal Revenue Code, paid to
15             shareholders for the taxable year;
16                  (I)  With  the   exception   of   any   amounts
17             subtracted  under  subparagraph (J), an amount equal
18             to the sum of all amounts disallowed  as  deductions
19             by  Sections  171(a)  (2), and 265(a)(2) and amounts
20             disallowed as interest expense by Section  291(a)(3)
21             of  the  Internal  Revenue Code, as now or hereafter
22             amended, and all amounts of  expenses  allocable  to
23             interest  and  disallowed  as  deductions by Section
24             265(a)(1) of the Internal Revenue Code,  as  now  or
25             hereafter amended;
26                  (J)  An amount equal to all amounts included in
27             such  total  which  are exempt from taxation by this
28             State  either  by  reason   of   its   statutes   or
29             Constitution  or  by  reason  of  the  Constitution,
30             treaties  or statutes of the United States; provided
31             that, in the case of any statute of this State  that
32             exempts   income   derived   from   bonds  or  other
33             obligations from the tax imposed under this Act, the
34             amount exempted shall be the interest  net  of  bond
                            -10-               LRB9004848DNmb
 1             premium amortization;
 2                  (K)  An   amount   equal   to  those  dividends
 3             included  in  such  total  which  were  paid  by   a
 4             corporation which conducts business operations in an
 5             Enterprise  Zone or zones created under the Illinois
 6             Enterprise Zone Act and conducts  substantially  all
 7             of its operations in an Enterprise Zone or zones;
 8                  (L)  An   amount   equal   to  those  dividends
 9             included  in  such  total  that  were  paid   by   a
10             corporation  that  conducts business operations in a
11             federally designated Foreign Trade Zone or  Sub-Zone
12             and  that  is  designated  a  High  Impact  Business
13             located   in   Illinois;   provided  that  dividends
14             eligible for the deduction provided in  subparagraph
15             (K)  of  paragraph 2 of this subsection shall not be
16             eligible  for  the  deduction  provided  under  this
17             subparagraph (L);
18                  (M)  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
21             interest  income  from  a loan or loans made by such
22             taxpayer to a borrower, to the extent  that  such  a
23             loan  is  secured  by property which is eligible for
24             the Enterprise Zone Investment Credit. To  determine
25             the  portion  of  a loan or loans that is secured by
26             property eligible for a  Section  201(h)  investment
27             credit  to the borrower, the entire principal amount
28             of the loan or loans between the  taxpayer  and  the
29             borrower  should  be  divided  into the basis of the
30             Section  201(h)  investment  credit  property  which
31             secures the loan or loans, using  for  this  purpose
32             the original basis of such property on the date that
33             it  was  placed  in  service in the Enterprise Zone.
34             The subtraction modification available  to  taxpayer
                            -11-               LRB9004848DNmb
 1             in  any  year  under  this  subsection shall be that
 2             portion of the total interest paid by  the  borrower
 3             with  respect  to  such  loan  attributable  to  the
 4             eligible  property  as calculated under the previous
 5             sentence;
 6                  (M-1)  For any taxpayer  that  is  a  financial
 7             organization within the meaning of Section 304(c) of
 8             this  Act,  an  amount  included  in  such  total as
 9             interest income from a loan or loans  made  by  such
10             taxpayer  to  a  borrower, to the extent that such a
11             loan is secured by property which  is  eligible  for
12             the  High  Impact  Business  Investment  Credit.  To
13             determine the portion of a loan  or  loans  that  is
14             secured  by  property  eligible for a Section 201(i)
15             investment  credit  to  the  borrower,  the   entire
16             principal  amount  of  the loan or loans between the
17             taxpayer and the borrower should be divided into the
18             basis  of  the  Section  201(i)  investment   credit
19             property  which secures the loan or loans, using for
20             this purpose the original basis of such property  on
21             the  date  that  it  was  placed  in  service  in  a
22             federally  designated Foreign Trade Zone or Sub-Zone
23             located in Illinois.  No taxpayer that  is  eligible
24             for  the  deduction  provided in subparagraph (M) of
25             paragraph (2) of this subsection shall  be  eligible
26             for  the  deduction provided under this subparagraph
27             (M-1).  The subtraction  modification  available  to
28             taxpayers in any year under this subsection shall be
29             that  portion  of  the  total  interest  paid by the
30             borrower with respect to such loan  attributable  to
31             the   eligible  property  as  calculated  under  the
32             previous sentence;
33                  (N)  Two times any contribution made during the
34             taxable year to a designated  zone  organization  to
                            -12-               LRB9004848DNmb
 1             the  extent that the contribution (i) qualifies as a
 2             charitable  contribution  under  subsection  (c)  of
 3             Section 170 of the Internal Revenue  Code  and  (ii)
 4             must,  by  its terms, be used for a project approved
 5             by the Department of Commerce and Community  Affairs
 6             under  Section  11  of  the Illinois Enterprise Zone
 7             Act;
 8                  (O)  An amount equal to: (i)  85%  for  taxable
 9             years  ending  on or before December 31, 1992, or, a
10             percentage equal to the percentage  allowable  under
11             Section  243(a)(1)  of  the Internal Revenue Code of
12             1986 for taxable years  ending  after  December  31,
13             1992,  of  the amount by which dividends included in
14             taxable income and received from a corporation  that
15             is  not  created  or organized under the laws of the
16             United States or any state or political  subdivision
17             thereof,  including,  for taxable years ending on or
18             after  December  31,  1988,  dividends  received  or
19             deemed  received  or  paid  or  deemed  paid   under
20             Sections  951  through  964  of the Internal Revenue
21             Code, exceed the amount of the modification provided
22             under subparagraph (G)  of  paragraph  (2)  of  this
23             subsection  (b)  which is related to such dividends;
24             plus (ii) 100% of the  amount  by  which  dividends,
25             included  in taxable income and received, including,
26             for taxable years ending on or  after  December  31,
27             1988,  dividends received or deemed received or paid
28             or deemed paid under Sections 951 through 964 of the
29             Internal Revenue Code,  from  any  such  corporation
30             specified  in  clause  (i)  that  would  but for the
31             provisions of Section 1504 (b) (3) of  the  Internal
32             Revenue   Code   be  treated  as  a  member  of  the
33             affiliated  group  which   includes   the   dividend
34             recipient,  exceed  the  amount  of the modification
                            -13-               LRB9004848DNmb
 1             provided under subparagraph (G) of paragraph (2)  of
 2             this   subsection  (b)  which  is  related  to  such
 3             dividends;
 4                  (P)  An amount equal to any  contribution  made
 5             to  a  job  training project established pursuant to
 6             the Tax Increment Allocation Redevelopment Act; and
 7                  (Q)  An amount  equal  to  the  amount  of  the
 8             deduction  used  to  compute  the federal income tax
 9             credit for restoration of substantial  amounts  held
10             under  claim  of right for the taxable year pursuant
11             to Section 1341 of  the  Internal  Revenue  Code  of
12             1986.
13             (3)  Special  rule.   For  purposes of paragraph (2)
14        (A), "gross income" in  the  case  of  a  life  insurance
15        company,  for  tax years ending on and after December 31,
16        1994, shall mean the  gross  investment  income  for  the
17        taxable year.
18        (c)  Trusts and estates.
19             (1)  In  general.  In the case of a trust or estate,
20        base income means  an  amount  equal  to  the  taxpayer's
21        taxable  income  for  the  taxable  year  as  modified by
22        paragraph (2).
23             (2)  Modifications.  Subject to  the  provisions  of
24        paragraph   (3),   the  taxable  income  referred  to  in
25        paragraph (1) shall be modified by adding thereto the sum
26        of the following amounts:
27                  (A)  An amount equal to  all  amounts  paid  or
28             accrued  to  the  taxpayer  as interest or dividends
29             during the taxable year to the extent excluded  from
30             gross income in the computation of taxable income;
31                  (B)  In the case of (i) an estate, $600; (ii) a
32             trust  which,  under  its  governing  instrument, is
33             required to distribute all of its income  currently,
34             $300;  and  (iii) any other trust, $100, but in each
                            -14-               LRB9004848DNmb
 1             such case,  only  to  the  extent  such  amount  was
 2             deducted in the computation of taxable income;
 3                  (C)  An  amount  equal  to  the  amount  of tax
 4             imposed by this Act  to  the  extent  deducted  from
 5             gross  income  in  the computation of taxable income
 6             for the taxable year;
 7                  (D)  The  amount  of  any  net  operating  loss
 8             deduction taken in arriving at taxable income, other
 9             than a net operating loss  carried  forward  from  a
10             taxable year ending prior to December 31, 1986;
11                  (E)  For taxable years in which a net operating
12             loss  carryback  or carryforward from a taxable year
13             ending prior to December 31, 1986 is an  element  of
14             taxable income under paragraph (1) of subsection (e)
15             or  subparagraph  (E) of paragraph (2) of subsection
16             (e), the  amount  by  which  addition  modifications
17             other  than  those provided by this subparagraph (E)
18             exceeded subtraction modifications in  such  taxable
19             year,  with the following limitations applied in the
20             order that they are listed:
21                       (i)  the addition modification relating to
22                  the net operating loss carried back or  forward
23                  to  the  taxable  year  from  any  taxable year
24                  ending prior to  December  31,  1986  shall  be
25                  reduced  by the amount of addition modification
26                  under this subparagraph (E)  which  related  to
27                  that  net  operating  loss  and which was taken
28                  into account in calculating the base income  of
29                  an earlier taxable year, and
30                       (ii)  the  addition  modification relating
31                  to the  net  operating  loss  carried  back  or
32                  forward  to  the  taxable year from any taxable
33                  year ending prior to December  31,  1986  shall
34                  not  exceed  the  amount  of  such carryback or
                            -15-               LRB9004848DNmb
 1                  carryforward;
 2                  For taxable years  in  which  there  is  a  net
 3             operating  loss  carryback or carryforward from more
 4             than one other taxable year ending prior to December
 5             31, 1986, the addition modification provided in this
 6             subparagraph (E) shall be the  sum  of  the  amounts
 7             computed    independently    under   the   preceding
 8             provisions of this subparagraph (E)  for  each  such
 9             taxable year;
10                  (F)  For  taxable  years  ending  on  or  after
11             January 1, 1989, an amount equal to the tax deducted
12             pursuant to Section 164 of the Internal Revenue Code
13             if  the trust or estate is claiming the same tax for
14             purposes of the Illinois foreign  tax  credit  under
15             Section 601 of this Act; and
16                  (G)  An  amount  equal  to  the  amount  of the
17             capital gain deduction allowable under the  Internal
18             Revenue  Code,  to  the  extent  deducted from gross
19             income in the computation of taxable income;
20        and by deducting from the total so obtained  the  sum  of
21        the following amounts:
22                  (H)  An amount equal to all amounts included in
23             such  total  pursuant  to the provisions of Sections
24             402(a), 402(c), 403(a), 403(b), 406(a),  407(a)  and
25             408 of the Internal Revenue Code or included in such
26             total  as  distributions under the provisions of any
27             retirement or disability plan for employees  of  any
28             governmental  agency or unit, or retirement payments
29             to retired partners, which payments are excluded  in
30             computing  net  earnings  from  self  employment  by
31             Section  1402  of  the  Internal  Revenue  Code  and
32             regulations adopted pursuant thereto;
33                  (I)  The valuation limitation amount;
34                  (J)  An  amount  equal to the amount of any tax
                            -16-               LRB9004848DNmb
 1             imposed by  this  Act  which  was  refunded  to  the
 2             taxpayer  and included in such total for the taxable
 3             year;
 4                  (K)  An amount equal to all amounts included in
 5             taxable income as  modified  by  subparagraphs  (A),
 6             (B),  (C),  (D),  (E),  (F) and (G) which are exempt
 7             from taxation by this State either by reason of  its
 8             statutes   or  Constitution  or  by  reason  of  the
 9             Constitution, treaties or  statutes  of  the  United
10             States; provided that, in the case of any statute of
11             this State that exempts income derived from bonds or
12             other  obligations  from  the tax imposed under this
13             Act, the amount exempted shall be the  interest  net
14             of bond premium amortization;
15                  (L)  With   the   exception   of   any  amounts
16             subtracted under subparagraph (K), an  amount  equal
17             to  the  sum of all amounts disallowed as deductions
18             by Sections 171(a) (2) and 265(a)(2) of the Internal
19             Revenue Code, as now or hereafter amended,  and  all
20             amounts   of  expenses  allocable  to  interest  and
21             disallowed as deductions by Section  265(1)  of  the
22             Internal  Revenue  Code of 1954, as now or hereafter
23             amended;
24                  (M)  An  amount  equal   to   those   dividends
25             included   in  such  total  which  were  paid  by  a
26             corporation which conducts business operations in an
27             Enterprise Zone or zones created under the  Illinois
28             Enterprise  Zone  Act and conducts substantially all
29             of its operations in an Enterprise Zone or Zones;
30                  (N)  An amount equal to any  contribution  made
31             to  a  job  training project established pursuant to
32             the Tax Increment Allocation Redevelopment Act;
33                  (O)  An  amount  equal   to   those   dividends
34             included   in   such  total  that  were  paid  by  a
                            -17-               LRB9004848DNmb
 1             corporation that conducts business operations  in  a
 2             federally  designated Foreign Trade Zone or Sub-Zone
 3             and  that  is  designated  a  High  Impact  Business
 4             located  in  Illinois;   provided   that   dividends
 5             eligible  for the deduction provided in subparagraph
 6             (M) of paragraph (2) of this subsection shall not be
 7             eligible  for  the  deduction  provided  under  this
 8             subparagraph (O); and
 9                  (P)  An amount  equal  to  the  amount  of  the
10             deduction  used  to  compute  the federal income tax
11             credit for restoration of substantial  amounts  held
12             under  claim  of right for the taxable year pursuant
13             to Section 1341 of  the  Internal  Revenue  Code  of
14             1986.
15             (3)  Limitation.   The  amount  of  any modification
16        otherwise required under  this  subsection  shall,  under
17        regulations  prescribed by the Department, be adjusted by
18        any amounts included therein which  were  properly  paid,
19        credited,  or  required to be distributed, or permanently
20        set aside for charitable purposes pursuant   to  Internal
21        Revenue Code Section 642(c) during the taxable year.
22        (d)  Partnerships.
23             (1)  In  general. In the case of a partnership, base
24        income means an amount equal to  the  taxpayer's  taxable
25        income for the taxable year as modified by paragraph (2).
26             (2)  Modifications.  The  taxable income referred to
27        in paragraph (1) shall be modified by adding thereto  the
28        sum of the following amounts:
29                  (A)  An  amount  equal  to  all amounts paid or
30             accrued to the taxpayer  as  interest  or  dividends
31             during  the taxable year to the extent excluded from
32             gross income in the computation of taxable income;
33                  (B)  An amount  equal  to  the  amount  of  tax
34             imposed  by  this  Act  to  the extent deducted from
                            -18-               LRB9004848DNmb
 1             gross income for the taxable year; and
 2                  (C)  The amount of deductions  allowed  to  the
 3             partnership  pursuant  to  Section  707  (c)  of the
 4             Internal Revenue Code  in  calculating  its  taxable
 5             income;
 6                  (D)  An  amount  equal  to  the  amount  of the
 7             capital gain deduction allowable under the  Internal
 8             Revenue  Code,  to  the  extent  deducted from gross
 9             income in the computation of taxable income;
10        and by deducting from the total so obtained the following
11        amounts:
12                  (E)  The valuation limitation amount;
13                  (F)  An amount equal to the amount of  any  tax
14             imposed  by  this  Act  which  was  refunded  to the
15             taxpayer and included in such total for the  taxable
16             year;
17                  (G)  An amount equal to all amounts included in
18             taxable  income  as  modified  by subparagraphs (A),
19             (B), (C) and (D) which are exempt from  taxation  by
20             this  State  either  by  reason  of  its statutes or
21             Constitution  or  by  reason  of  the  Constitution,
22             treaties or statutes of the United States;  provided
23             that,  in the case of any statute of this State that
24             exempts  income  derived   from   bonds   or   other
25             obligations from the tax imposed under this Act, the
26             amount  exempted  shall  be the interest net of bond
27             premium amortization;
28                  (H)  Any  income  of  the   partnership   which
29             constitutes  personal  service  income as defined in
30             Section 1348 (b) (1) of the  Internal  Revenue  Code
31             (as  in  effect  December  31, 1981) or a reasonable
32             allowance  for  compensation  paid  or  accrued  for
33             services rendered by partners  to  the  partnership,
34             whichever is greater;
                            -19-               LRB9004848DNmb
 1                  (I)  An  amount  equal to all amounts of income
 2             distributable to an entity subject to  the  Personal
 3             Property  Tax  Replacement  Income  Tax  imposed  by
 4             subsections  (c)  and (d) of Section 201 of this Act
 5             including  amounts  distributable  to  organizations
 6             exempt from federal income tax by reason of  Section
 7             501(a) of the Internal Revenue Code;
 8                  (J)  With   the   exception   of   any  amounts
 9             subtracted under subparagraph (G), an  amount  equal
10             to  the  sum of all amounts disallowed as deductions
11             by Sections 171(a) (2), and 265(2) of  the  Internal
12             Revenue  Code  of 1954, as now or hereafter amended,
13             and all amounts of expenses  allocable  to  interest
14             and  disallowed  as  deductions by Section 265(1) of
15             the Internal  Revenue  Code,  as  now  or  hereafter
16             amended;
17                  (K)  An   amount   equal   to  those  dividends
18             included  in  such  total  which  were  paid  by   a
19             corporation which conducts business operations in an
20             Enterprise  Zone or zones created under the Illinois
21             Enterprise Zone Act, enacted  by  the  82nd  General
22             Assembly, and which does not conduct such operations
23             other than in an Enterprise Zone or Zones;
24                  (L)  An  amount  equal to any contribution made
25             to a job training project  established  pursuant  to
26             the   Real   Property   Tax   Increment   Allocation
27             Redevelopment Act;
28                  (M)  An   amount   equal   to  those  dividends
29             included  in  such  total  that  were  paid   by   a
30             corporation  that  conducts business operations in a
31             federally designated Foreign Trade Zone or  Sub-Zone
32             and  that  is  designated  a  High  Impact  Business
33             located   in   Illinois;   provided  that  dividends
34             eligible for the deduction provided in  subparagraph
                            -20-               LRB9004848DNmb
 1             (K) of paragraph (2) of this subsection shall not be
 2             eligible  for  the  deduction  provided  under  this
 3             subparagraph (M); and
 4                  (N)  An  amount  equal  to  the  amount  of the
 5             deduction used to compute  the  federal  income  tax
 6             credit  for  restoration of substantial amounts held
 7             under claim of right for the taxable  year  pursuant
 8             to  Section  1341  of  the  Internal Revenue Code of
 9             1986.
10        (e)  Gross income; adjusted gross income; taxable income.
11             (1)  In  general.   Subject  to  the  provisions  of
12        paragraph (2) and subsection (b)  (3),  for  purposes  of
13        this  Section  and  Section  803(e),  a  taxpayer's gross
14        income, adjusted gross income, or taxable income for  the
15        taxable  year  shall  mean  the  amount  of gross income,
16        adjusted  gross  income  or   taxable   income   properly
17        reportable  for  federal  income  tax  purposes  for  the
18        taxable year under the provisions of the Internal Revenue
19        Code.  Taxable income may be less than zero. However, for
20        taxable years ending on or after December 31,  1986,  net
21        operating  loss  carryforwards  from taxable years ending
22        prior to December 31, 1986, may not  exceed  the  sum  of
23        federal  taxable  income  for the taxable year before net
24        operating loss deduction, plus  the  excess  of  addition
25        modifications  over  subtraction  modifications  for  the
26        taxable year.  For taxable years ending prior to December
27        31, 1986, taxable income may never be an amount in excess
28        of the net operating loss for the taxable year as defined
29        in subsections (c) and (d) of Section 172 of the Internal
30        Revenue  Code,  provided  that  when  taxable income of a
31        corporation (other  than  a  Subchapter  S  corporation),
32        trust,   or   estate  is  less  than  zero  and  addition
33        modifications, other than those provided by  subparagraph
34        (E)  of  paragraph (2) of subsection (b) for corporations
                            -21-               LRB9004848DNmb
 1        or subparagraph (E) of paragraph (2)  of  subsection  (c)
 2        for trusts and estates, exceed subtraction modifications,
 3        an   addition  modification  must  be  made  under  those
 4        subparagraphs for any other taxable  year  to  which  the
 5        taxable  income  less  than  zero (net operating loss) is
 6        applied under Section 172 of the Internal Revenue Code or
 7        under  subparagraph  (E)  of  paragraph   (2)   of   this
 8        subsection (e) applied in conjunction with Section 172 of
 9        the Internal Revenue Code.
10             (2)  Special rule.  For purposes of paragraph (1) of
11        this  subsection,  the taxable income properly reportable
12        for federal income tax purposes shall mean:
13                  (A)  Certain life insurance companies.  In  the
14             case  of a life insurance company subject to the tax
15             imposed by Section 801 of the Internal Revenue Code,
16             life insurance  company  taxable  income,  plus  the
17             amount  of  distribution  from pre-1984 policyholder
18             surplus accounts as calculated under Section 815a of
19             the Internal Revenue Code;
20                  (B)  Certain other insurance companies.  In the
21             case of mutual insurance companies  subject  to  the
22             tax  imposed  by Section 831 of the Internal Revenue
23             Code, insurance company taxable income;
24                  (C)  Regulated investment  companies.   In  the
25             case  of  a  regulated investment company subject to
26             the tax imposed  by  Section  852  of  the  Internal
27             Revenue Code, investment company taxable income;
28                  (D)  Real  estate  investment  trusts.   In the
29             case of a real estate investment  trust  subject  to
30             the  tax  imposed  by  Section  857  of the Internal
31             Revenue Code, real estate investment  trust  taxable
32             income;
33                  (E)  Consolidated corporations.  In the case of
34             a  corporation  which  is  a member of an affiliated
                            -22-               LRB9004848DNmb
 1             group of corporations filing a  consolidated  income
 2             tax  return  for the taxable year for federal income
 3             tax purposes, taxable income determined as  if  such
 4             corporation  had filed a separate return for federal
 5             income tax purposes for the taxable  year  and  each
 6             preceding  taxable year for which it was a member of
 7             an  affiliated   group.   For   purposes   of   this
 8             subparagraph, the taxpayer's separate taxable income
 9             shall  be  determined as if the election provided by
10             Section 243(b) (2) of the Internal Revenue Code  had
11             been in effect for all such years;
12                  (F)  Cooperatives.     In   the   case   of   a
13             cooperative corporation or association, the  taxable
14             income of such organization determined in accordance
15             with  the provisions of Section 1381 through 1388 of
16             the Internal Revenue Code;
17                  (G)  Subchapter S corporations.   In  the  case
18             of:  (i)  a Subchapter S corporation for which there
19             is in effect an election for the taxable year  under
20             Section  1362  of  the  Internal  Revenue  Code, the
21             taxable income of  such  corporation  determined  in
22             accordance  with  Section  1363(b)  of  the Internal
23             Revenue Code, except that taxable income shall  take
24             into  account  those  items  which  are  required by
25             Section 1363(b)(1) of the Internal Revenue  Code  to
26             be  separately  stated;  and  (ii)  a  Subchapter  S
27             corporation  for  which there is in effect a federal
28             election  to  opt  out  of  the  provisions  of  the
29             Subchapter S Revision Act of 1982 and  have  applied
30             instead  the  prior federal Subchapter S rules as in
31             effect on July 1, 1982, the taxable income  of  such
32             corporation   determined   in  accordance  with  the
33             federal Subchapter S rules as in effect on  July  1,
34             1982; and
                            -23-               LRB9004848DNmb
 1                  (H)  Partnerships.     In   the   case   of   a
 2             partnership, taxable income determined in accordance
 3             with Section  703  of  the  Internal  Revenue  Code,
 4             except  that  taxable income shall take into account
 5             those items which are required by Section  703(a)(1)
 6             to  be  separately  stated  but which would be taken
 7             into account by an  individual  in  calculating  his
 8             taxable income.
 9        (f)  Valuation limitation amount.
10             (1)  In  general.   The  valuation limitation amount
11        referred to in subsections (a) (2) (G), (c) (2)  (I)  and
12        (d)(2) (E) is an amount equal to:
13                  (A)  The   sum   of   the  pre-August  1,  1969
14             appreciation amounts (to the  extent  consisting  of
15             gain reportable under the provisions of Section 1245
16             or  1250  of  the  Internal  Revenue  Code)  for all
17             property in respect of which such gain was  reported
18             for the taxable year; plus
19                  (B)  The   lesser   of   (i)  the  sum  of  the
20             pre-August 1,  1969  appreciation  amounts  (to  the
21             extent  consisting of capital gain) for all property
22             in respect of  which  such  gain  was  reported  for
23             federal income tax purposes for the taxable year, or
24             (ii)  the  net  capital  gain  for the taxable year,
25             reduced in either case by any amount  of  such  gain
26             included  in  the amount determined under subsection
27             (a) (2) (F) or (c) (2) (H).
28        (2)  Pre-August 1, 1969 appreciation amount.
29                  (A)  If  the  fair  market  value  of  property
30             referred   to   in   paragraph   (1)   was   readily
31             ascertainable on August 1, 1969, the  pre-August  1,
32             1969  appreciation  amount  for such property is the
33             lesser of (i) the excess of such fair  market  value
34             over the taxpayer's basis (for determining gain) for
                            -24-               LRB9004848DNmb
 1             such  property  on  that  date (determined under the
 2             Internal Revenue Code as in effect on that date), or
 3             (ii) the total  gain  realized  and  reportable  for
 4             federal  income tax purposes in respect of the sale,
 5             exchange or other disposition of such property.
 6                  (B)  If  the  fair  market  value  of  property
 7             referred  to  in  paragraph  (1)  was  not   readily
 8             ascertainable  on  August 1, 1969, the pre-August 1,
 9             1969 appreciation amount for such property  is  that
10             amount  which bears the same ratio to the total gain
11             reported in respect  of  the  property  for  federal
12             income  tax  purposes  for  the taxable year, as the
13             number of full calendar months in that part  of  the
14             taxpayer's  holding  period  for the property ending
15             July 31, 1969 bears to the number of  full  calendar
16             months  in  the taxpayer's entire holding period for
17             the property.
18                  (C)  The  Department   shall   prescribe   such
19             regulations  as  may  be  necessary to carry out the
20             purposes of this paragraph.
21        (g)  Double  deductions.   Unless  specifically  provided
22    otherwise, nothing in this Section shall permit the same item
23    to be deducted more than once.
24        (h)  Legislative intention.  Except as expressly provided
25    by  this  Section  there  shall  be   no   modifications   or
26    limitations on the amounts of income, gain, loss or deduction
27    taken  into  account  in  determining  gross income, adjusted
28    gross  income  or  taxable  income  for  federal  income  tax
29    purposes for the taxable year, or in the amount of such items
30    entering into the computation of base income and  net  income
31    under  this  Act for such taxable year, whether in respect of
32    property values as of August 1, 1969 or otherwise.
33    (Source: P.A. 88-195;  88-648,  eff.  9-16-94;  88-669,  eff.
34    11-29-94;  88-670, eff. 12-2-94; 89-89, eff. 6-30-95; 89-235,
                            -25-               LRB9004848DNmb
 1    eff. 8-4-95; 89-418, eff.  11-15-95;  89-460,  eff.  5-24-96;
 2    89-626, eff. 8-9-96.)
 3        (35 ILCS 5/215 new)
 4        Sec.  215.   College savings plan deduction; restrictions
 5    and penalties.
 6        (a)  For purposes of this Section:
 7        "College  or  university"  means  a  public  or   private
 8    institution  of higher learning, including community colleges
 9    and vocational schools.
10        "College or university expenses" means tuition and books.
11        "College savings plan" means a plan established  to  save
12    for  college  or  university  expenses.   The  Department may
13    further define "college savings plan" by rule.
14        (b)  A taxpayer shall not be  required  to  deposit  more
15    than  $500  into  an account to begin a college savings plan.
16    The moneys deposited into  and  the  interest  earned  on  an
17    account  designated  as  a college savings plan shall be used
18    only by the account holder and only for college or university
19    expenses.  If a taxpayer uses moneys deposited in the college
20    savings plan account for a  purpose  other  than  college  or
21    university  expenses,  that  principal  or  income  shall  be
22    subject  to taxation under this Act; in addition, the account
23    holder shall incur a penalty in an amount  equal  to  10%  of
24    that principal or income used for purposes other than college
25    or university expenses.
26        (c)  The  Department  shall promulgate rules necessary to
27    implement and enforce the provisions of this Section.

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