Public Act 095-0233
 		





SB1544 Enrolled
LRB095 10647 BDD 30874 b






    AN ACT concerning revenue.

 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:


 
ARTICLE 1.  SHORT TITLE; PURPOSE

 
    Section 1-1. Short Title. This Act may be cited as the 
FY2008 Budget Implementation (Revenue) Act.
 
    Section 1-5. Purpose.  It is the purpose of this Act to make 
changes in State programs concerning revenue that are necessary 
to implement the FY2008 Budget.
 
ARTICLE 5.  FRANCHISE TAX AND LICENSE FEE AMNESTY ACT OF 2007

 
    Section 5-1. Short title.  This Article may be cited as the 
Franchise Tax and License Fee Amnesty Act of 2007. References 
in this Article to "this Act" mean this Article.
 
    Section 5-5. Definitions.  As used in this Act:
    "Secretary" means the Illinois Secretary of State.
    "Rules" means any rules adopted or forms prescribed by the 
Secretary.
    "Taxable period" means any period of time for which any 
franchise tax is imposed by and owed to the State of Illinois 
by any domestic corporation or any license fee is imposed by 
and owed to the State of Illinois by any foreign corporation.
    "Taxpayer" means any domestic or foreign corporation, 
subject to franchise tax or license fee imposed by Article XV 
of the Business Corporation Act of 1983.
 
    Section 5-10. Amnesty program. The Secretary shall 
establish an amnesty program for all taxpayers owing any 
franchise tax or license fee imposed by Article XV of the 
Business Corporation Act of 1983. The amnesty program shall  be 
for a period from February 1, 2008 through March 15, 2008. The 
amnesty program shall provide that, upon payment by a taxpayer 
of all franchise taxes and license fees due from that taxpayer 
to the State of Illinois for any taxable period, the Secretary 
shall abate and not seek to collect any interest or penalties  
that may be applicable, and the Secretary shall not seek civil 
or criminal prosecution for any taxpayer for the period of time 
for which amnesty has been granted to the taxpayer. Failure to 
pay all taxes due to the State for a taxable period shall not 
invalidate any amnesty granted under this Act with respect to 
the taxes paid pursuant to the amnesty program. Amnesty shall 
be granted only if all amnesty conditions are satisfied by the 
taxpayer. Amnesty shall not be granted to taxpayers who are a 
party to any criminal investigation or to any civil or criminal 
litigation that is pending in any circuit court or appellate 
court or the Supreme Court of this State for nonpayment, 
delinquency, or fraud in relation to any franchise tax or 
license fee imposed by Article XV of the Business Corporation 
Act of 1983. Voluntary payments made under this Act shall be 
made by cash, check, guaranteed remittance, or ACH debit. The 
Secretary shall adopt rules as necessary to implement the 
provisions of this Act. Except as otherwise provided in this 
Section, all money collected under this Act that would 
otherwise be deposited into the General Revenue Fund shall be 
deposited into the General Revenue Fund. Two percent of all 
money collected under this Act shall be deposited by the State 
Treasurer into the Department of Business Services Special 
Operations Fund and, subject to appropriation, shall be used by 
the Secretary to cover costs associated with the administration 
of this Act.

 
    Section 5-90. The Business Corporation Act of 1983 is 
amended  by changing Sections 15.90 and 16.05  as follows:
 



    (805 ILCS 5/15.90)  (from Ch. 32, par. 15.90)



    Sec. 15.90. Statute of limitations. 

    (a) Except as otherwise provided
in this Section and 
notwithstanding anything to the contrary contained in
any other 
Section of this Act, no domestic corporation or foreign

corporation shall be obligated to pay any annual franchise tax, 
fee,
or penalty or interest thereon imposed under this Act, nor 
shall any
administrative or judicial sanction
(including 
dissolution) be imposed or enforced nor access to the courts of

this State be denied based upon nonpayment thereof more than 7 
years
after the date of filing the annual report with respect 
to the period
during which the obligation for the tax, fee, 
penalty or
interest arose, unless (1) within that 7 year period 
the Secretary of State
sends a written notice to the 
corporation to the effect that (A)
administrative or judicial 
action to dissolve the corporation or revoke its
certificate of 
authority for nonpayment of a tax, fee, penalty or interest
has 
been commenced; or (B) the corporation has submitted a report

but has
failed to pay a tax, fee, penalty or interest required 
to be paid
therewith; or (C) a report with respect to an event 
or action giving rise
to an obligation to pay a tax, fee, 
penalty or interest is required but has
not been filed, or has 
been filed and is in error or incomplete; or (2)
the annual 
report by the corporation was filed with fraudulent
intent to 
evade taxes payable under this Act.  A corporation
nonetheless 
shall be required to pay all taxes
that would have been payable 
during the most recent 7 year period due to a
previously 
unreported increase in paid-in capital that occurred prior to

that 7 year period and interest and penalties thereon for that 
period, except that with respect to any corporation that 
participates in the Franchise Tax and License Fee Amnesty Act 
of 2007, the corporation shall be only required to pay all 
taxes that would have been payable during the most recent 4 
year period due to a previously unreported increase in paid-in 
capital that occurred prior to that 7 year period.

    (b) If within 2 years following a change in control of a 
corporation the
corporation voluntarily pays in good faith all 
known obligations of
the corporation imposed by this Article 15 
with respect to reports that
were required to have been filed 
since the beginning of the 7 year period
ending on the 
effective date of the change in control, no action shall be

taken to enforce or collect obligations of that corporation 
imposed by this
Article 15 with respect to reports that were 
required to have been filed
prior to that 7 year period 
regardless of whether the limitation period set
forth in 
subsection (a) is otherwise applicable.  For purposes of this

subsection (b), a change in control means a transaction, or a 
series of
transactions consummated within a period of 180 
consecutive days, as a
result of which a person which owned 
less than 10% of the shares having the
power to elect directors 
of the corporation acquires shares such that the
person becomes 
the holder of 80% or more of the shares having such power.
For 
purposes of this subsection (b) a person means any natural 
person,
corporation, partnership, trust or other entity 
together with all other
persons controlled by, controlling or 
under common control with such person.

    (c) Except as otherwise provided in this Section and 
notwithstanding
anything to the contrary contained in any other 
Section of this Act, no foreign
corporation that has not 
previously obtained a certificate of authority under
this Act 
shall, upon voluntary application for a certificate of 
authority filed
with the Secretary of State prior to January 1, 
2001, be obligated to pay any
tax, fee, penalty, or interest 
imposed under this Act, nor shall any
administrative or 
judicial sanction be imposed or enforced based upon
nonpayment 
thereof with respect to a period during which the obligation 
arose
that is prior to January 1, 1993 unless (1) prior to 
receipt of the application
for a certificate of authority the 
Secretary of State had sent written notice
to
the corporation 
regarding its failure to obtain a certificate of authority, (2)

the corporation had submitted an application for a certificate 
of authority
previously but had failed to pay any tax, fee, 
penalty or interest to be paid
therewith, or (3) the 
application for a certificate of authority was submitted
by
the 
corporation with fraudulent intent to evade taxes payable under 
this Act.
A
corporation nonetheless shall be required to pay 
all taxes and fees due under
this Act that would have been 
payable since January 1, 1993  as a result of
commencing the 
transaction of its business in this State and interest thereon

for that period.

(Source: P.A. 90-421, eff. 1-1-98.)


 



    (805 ILCS 5/16.05)  (from Ch. 32, par. 16.05)



    Sec. 16.05. Penalties and interest imposed upon 
corporations. 

    (a) Each
corporation, domestic or foreign, that fails or 
refuses to file any annual
report or report of cumulative 
changes in paid-in capital and pay any
franchise tax due 
pursuant to the report prior to the first day of its

anniversary month
or, in the case of a corporation which has 
established an extended filing
month, the extended filing month 
of the corporation
shall pay a penalty of 10% of the amount of 
any
delinquent franchise tax due for the report. No penalty 
shall be imposed with respect to any amount of delinquent 
franchise tax paid pursuant to the Franchise Tax and License 
Fee Amnesty Act of 2007.


    (b) Each corporation, domestic or foreign, that fails or 
refuses to file
a report of issuance of shares or increase in 
paid-in capital within the
time prescribed by this Act is 
subject to a penalty on any obligation
occurring prior to 
January 1, 1991, and interest on those obligations on or
after 
January 1, 1991, for each calendar month or part of month that 
it is
delinquent in the amount of 1% of the amount of license 
fees and franchise
taxes provided by this Act to be paid on 
account of the issuance of shares
or increase in paid-in 
capital. No penalty shall be imposed, or interest charged, with 
respect to any amount of delinquent license fees and franchise 
taxes paid pursuant to the Franchise Tax and License Fee 
Amnesty Act of 2007.


    (c) Each corporation, domestic or foreign, that fails or 
refuses to file
a
report of cumulative changes in paid-in 
capital or report following merger
within the time prescribed 
by this Act is subject to interest on or after
January 1, 1992, 
for each calendar month or part of month that it is
delinquent, 
in the amount of 1% of the amount of franchise taxes provided

by this Act to be paid on account of the issuance of shares or 
increase in
paid-in capital disclosed on the report of 
cumulative changes in paid-in
capital or report following 
merger, or $1, whichever is greater. No interest shall be 
charged with respect to any amount of delinquent franchise tax 
paid pursuant to the Franchise Tax and License Fee Amnesty Act 
of 2007.


    (d) If the annual franchise tax, or the supplemental annual 
franchise
tax
for any 12-month period commencing July 1, 1968, 
or July 1 of any
subsequent year through June 30, 1983, 
assessed in accordance with this
Act, is not paid by July 31, 
it is delinquent, and there is added a penalty
prior to January 
1, 1991, and interest on and after January 1, 1991, of 1%
for 
each month or part of month that it is delinquent commencing 
with the
month of August, or $1, whichever is greater. No 
penalty shall be imposed, or interest charged, with respect to 
any amount of delinquent franchise taxes paid pursuant to the 
Franchise Tax and License Fee Amnesty Act of 2007.


    (e) If the supplemental annual franchise tax assessed in 
accordance with
the provisions of this Act for the 12-month 
period commencing July 1,
1967, is not paid by September 30, 
1967, it is delinquent, and there is
added a penalty prior to 
January 1, 1991, and interest on and after
January 1, 1991, of 
1% for each month or part of month that it is
delinquent 
commencing with the month of October, 1967. No penalty shall be 
imposed, or interest charged, with respect to any amount of 
delinquent franchise taxes paid pursuant to the Franchise Tax 
and License Fee Amnesty Act of 2007.


    (f) If any annual franchise tax for any period beginning on 
or after
July 1,
1983, is not paid by the time period herein 
prescribed, it is delinquent
and there is added a penalty prior 
to January 1, 1991, and interest on
and after January 1, 1991, 
of 1% for each month or part of a month that
it is delinquent 
commencing with the anniversary month or in the case of
a 
corporation that has established an extended filing month, the 
extended
filing month, or $1, whichever is greater. No penalty 
shall be imposed, or interest charged, with respect to any 
amount of delinquent franchise taxes paid pursuant to the 
Franchise Tax and License Fee Amnesty Act of 2007.


    (g) Any corporation, domestic or foreign, failing to pay 
the prescribed
fee for assumed corporate name renewal when due 
and payable shall be given
notice of nonpayment by the 
Secretary of State by regular mail; and if
the fee together 
with a penalty fee of $5 is not paid within
90 days after the 
notice is mailed, the right to use the assumed
name shall 
cease.

    (h) Any corporation which (i) puts forth any sign or

advertisement, assuming
any name other than that by which it is 
incorporated or otherwise
authorized by law to act or (ii) 
violates Section 3.25, shall be guilty of
a Class C misdemeanor 
and
shall be deemed guilty of an additional offense for each 
day it shall
continue to so offend.

    (i) Each corporation, domestic or foreign, that fails or 
refuses (1) to
file in the office of the recorder within the 
time prescribed
by this Act any document required by this Act 
to be so filed, or (2) to
answer truthfully and fully within 
the time prescribed by this Act
interrogatories propounded by 
the Secretary of State in accordance with
this Act, or (3) to 
perform any other act required by this Act to be
performed by 
the corporation, is guilty of a Class C misdemeanor.

    (j) Each corporation that fails or refuses to file articles 
of
revocation
of dissolution within the time prescribed by this 
Act is subject to a
penalty for each calendar month or part of 
the month that it is delinquent
in the amount of $50.

(Source: P.A. 91-464, eff. 1-1-00; 91-906, eff. 1-1-01.)


 
ARTICLE 10.  AMENDATORY PROVISIONS

 
    Section 10-5. The Illinois Income Tax Act is amended  by 
changing Sections 203, 205, 207, 304, 502, 711, 712, 713, 804, 
911, and 1501 and  by adding Section 709.5 as follows:
 



    (35 ILCS 5/203)  (from Ch. 120, par. 2-203)



    Sec. 203. Base income defined. 

    (a) Individuals.


        (1) In general.  In the case of an individual, base 
    income means an
amount equal to the taxpayer's adjusted 
    gross income for the taxable
year as modified by paragraph 
    (2).


        (2) Modifications.  The adjusted gross income referred 
    to in
paragraph (1) shall be modified by adding thereto the 
    sum of the
following amounts:


            (A) An amount equal to all amounts paid or accrued 
        to the taxpayer
as interest or dividends during the 
        taxable year to the extent excluded
from gross income 
        in the computation of adjusted gross income, except 
        stock
dividends of qualified public utilities 
        described in Section 305(e) of the
Internal Revenue 
        Code;


            (B) An amount equal to the amount of tax imposed by 
        this Act to the
extent deducted from gross income in 
        the computation of adjusted gross
income for the 
        taxable year;


            (C) An amount equal to the amount received during 
        the taxable year
as a recovery or refund of real 
        property taxes paid with respect to the
taxpayer's 
        principal residence under the Revenue Act of
1939 and 
        for which a deduction was previously taken under 
        subparagraph (L) of
this paragraph (2) prior to July 1, 
        1991, the retrospective application date of
Article 4 
        of Public Act 87-17.  In the case of multi-unit or 
        multi-use
structures and farm dwellings, the taxes on 
        the taxpayer's principal residence
shall be that 
        portion of the total taxes for the entire property 
        which is
attributable to such principal residence;


            (D) An amount equal to the amount of the capital 
        gain deduction
allowable under the Internal Revenue 
        Code, to the extent deducted from gross
income in the 
        computation of adjusted gross income;


            (D-5) An amount, to the extent not included in 
        adjusted gross income,
equal to the amount of money 
        withdrawn by the taxpayer in the taxable year from
a 
        medical care savings account and the interest earned on 
        the account in the
taxable year of a withdrawal 
        pursuant to subsection (b) of Section 20 of the
Medical 
        Care Savings Account Act or subsection (b) of Section 
        20 of the
Medical Care Savings Account Act of 2000;


            (D-10) For taxable years ending after December 31, 
        1997, an
amount equal to any eligible remediation costs 
        that the individual
deducted in computing adjusted 
        gross income and for which the
individual claims a 
        credit under subsection (l) of Section 201;


            (D-15) For taxable years 2001 and thereafter, an 
        amount equal to the
bonus depreciation deduction taken 
        on the taxpayer's federal income tax return for the 
        taxable
year under subsection (k) of Section 168 of the 
        Internal Revenue Code;


            (D-16) If the taxpayer sells, transfers, abandons, 
        or otherwise disposes of property for which the 
        taxpayer was required in any taxable year to
make an 
        addition modification under subparagraph (D-15), then 
        an amount equal
to the aggregate amount of the 
        deductions taken in all taxable
years under 
        subparagraph (Z) with respect to that property.

            If the taxpayer continues to own property through 
        the last day of the last tax year for which the 
        taxpayer may claim a depreciation deduction for 
        federal income tax purposes and for which the taxpayer 
        was allowed in any taxable year to make a subtraction 
        modification under subparagraph (Z), then an amount 
        equal to that subtraction modification.


            The taxpayer is required to make the addition 
        modification under this
subparagraph
only once with 
        respect to any one piece of property;

            (D-17) An
For taxable years ending on or after 
        December 31, 2004, an amount equal to the amount 
        otherwise allowed as a deduction in computing base 
        income for interest paid, accrued, or incurred, 
        directly or indirectly, (i) for taxable years ending on 
        or after December 31, 2004, to a foreign person who 
        would be a member of the same unitary business group 
        but for the fact that foreign person's business 
        activity outside the United States is 80% or more of 
        the foreign person's total business activity and (ii) 
        for taxable years ending on or after December 31, 2008, 
        to a person who would be a member of the same unitary 
        business group but for the fact that the person is 
        prohibited under Section 1501(a)(27) from being 
        included in the unitary business group because he or 
        she is ordinarily required to apportion business 
        income under different subsections of Section 304. The 
        addition modification required by this subparagraph 
        shall be reduced to the extent that dividends were 
        included in base income of the unitary group for the 
        same taxable year and received by the taxpayer or by a 
        member of the taxpayer's unitary business group 
        (including amounts included in gross income under 
        Sections 951 through 964 of the Internal Revenue Code 
        and amounts included in gross income under Section 78 
        of the Internal Revenue Code) with respect to the stock 
        of the same person to whom the interest was paid, 
        accrued, or incurred.
            This paragraph shall not apply to the following:

                (i) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person who is subject in a foreign country or 
            state, other than a state which requires mandatory 
            unitary reporting, to a tax on or measured by net 
            income with respect to such interest; or
                (ii) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person if the taxpayer can establish, based on a 
            preponderance of the evidence, both of the 
            following:
                    (a) the foreign person, during the same 
                taxable year, paid, accrued, or incurred, the 
                interest to a person that is not a related 
                member, and
                    (b) the transaction giving rise to the 
                interest expense between the taxpayer and the 
                foreign person did not have as a principal 
                purpose the avoidance of Illinois income tax, 
                and is paid pursuant to a contract or agreement 
                that reflects an arm's-length interest rate 
                and terms; or

                (iii) the taxpayer can establish, based on 
            clear and convincing evidence, that the interest 
            paid, accrued, or incurred relates to a contract or 
            agreement entered into at arm's-length rates and 
            terms and the principal purpose for the payment is 
            not federal or Illinois tax avoidance; or

                (iv) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person if the taxpayer establishes by clear and 
            convincing evidence that the adjustments are 
            unreasonable; or if the taxpayer and the Director 
            agree in writing to the application or use of an 
            alternative method of apportionment under Section 
            304(f).

                Nothing in this subsection shall preclude the 
            Director from making any other adjustment 
            otherwise allowed under Section 404 of this Act for 
            any tax year beginning after the effective date of 
            this amendment provided such adjustment is made 
            pursuant to regulation adopted by the Department 
            and such regulations provide methods and standards 
            by which the Department will utilize its authority 
            under Section 404 of this Act;

            (D-18) An
For taxable years ending on or after 
        December 31, 2004, an amount equal to the amount of 
        intangible expenses and costs otherwise allowed as a 
        deduction in computing base income, and that were paid, 
        accrued, or incurred, directly or indirectly, (i) for 
        taxable years ending on or after December 31, 2004, to 
        a foreign person who would be a member of the same 
        unitary business group but for the fact that the 
        foreign person's business activity outside the United 
        States is 80% or more of that person's total business 
        activity and (ii) for taxable years ending on or after 
        December 31, 2008, to a person who would be a member of 
        the same unitary business group but for the fact that 
        the person is prohibited under Section 1501(a)(27) 
        from being included in the unitary business group 
        because he or she is ordinarily required to apportion 
        business income under different subsections of Section 
        304. The addition modification required by this 
        subparagraph shall be reduced to the extent that 
        dividends were included in base income of the unitary 
        group for the same taxable year and received by the 
        taxpayer or by a member of the taxpayer's unitary 
        business group (including amounts included in gross 
        income under Sections 951 through 964 of the Internal 
        Revenue Code and amounts included in gross income under 
        Section 78 of the Internal Revenue Code) with respect 
        to the stock of the same person to whom the intangible 
        expenses and costs were directly or indirectly paid, 
        incurred, or accrued. The preceding sentence does not 
        apply to the extent that the same dividends caused a 
        reduction to the addition modification required under 
        Section 203(a)(2)(D-17) of this Act. As used in this 
        subparagraph, the term "intangible expenses and costs" 
        includes (1) expenses, losses, and costs for, or 
        related to, the direct or indirect acquisition, use, 
        maintenance or management, ownership, sale, exchange, 
        or any other disposition of intangible property; (2) 
        losses incurred, directly or indirectly, from 
        factoring transactions or discounting transactions; 
        (3) royalty, patent, technical, and copyright fees; 
        (4) licensing fees; and (5) other similar expenses and 
        costs.
For purposes of this subparagraph, "intangible 
        property" includes patents, patent applications, trade 
        names, trademarks, service marks, copyrights, mask 
        works, trade secrets, and similar types of intangible 
        assets.
            This paragraph shall not apply to the following:
                (i)         any item of intangible expenses or costs 
            paid, accrued, or incurred, directly or 
            indirectly, from a transaction with a foreign 
            person who is subject in a foreign country or 
            state, other than a state which requires mandatory 
            unitary reporting, to a tax on or measured by net 
            income with respect to such item; or
                (ii)        any item of intangible expense or cost 
            paid, accrued, or incurred, directly or 
            indirectly, if the taxpayer can establish, based 
            on a preponderance of the evidence, both of the 
            following:
                    (a) the foreign person during the same 
                taxable year paid, accrued, or incurred, the 
                intangible expense or cost to a person that is 
                not a related member, and
                    (b) the transaction giving rise to the 
                intangible expense or cost between the 
                taxpayer and the foreign person did not have as 
                a principal purpose the avoidance of Illinois 
                income tax, and is paid pursuant to a contract 
                or agreement that reflects arm's-length terms; 
                or
                (iii)       any item of intangible expense or cost 
            paid, accrued, or incurred, directly or 
            indirectly, from a transaction with a foreign 
            person if the taxpayer establishes by clear and 
            convincing evidence, that the adjustments are 
            unreasonable; or if the taxpayer and the Director 
            agree in writing to the application or use of an 
            alternative method of apportionment under Section 
            304(f);

                Nothing in this subsection shall preclude the 
            Director from making any other adjustment 
            otherwise allowed under Section 404 of this Act for 
            any tax year beginning after the effective date of 
            this amendment provided such adjustment is made 
            pursuant to regulation adopted by the Department 
            and such regulations provide methods and standards 
            by which the Department will utilize its authority 
            under Section 404 of this Act;

            (D-19) For taxable years ending on or after 
        December 31, 2008, an amount equal to the amount of 
        insurance premium expenses and costs otherwise allowed 
        as a deduction in computing base income, and that were 
        paid, accrued, or incurred, directly or indirectly, to 
        a person who would be a member of the same unitary 
        business group but for the fact that the person is 
        prohibited under Section 1501(a)(27) from being 
        included in the unitary business group because he or 
        she is ordinarily required to apportion business 
        income under different subsections of Section 304.  The 
        addition modification required by this subparagraph 
        shall be reduced to the extent that dividends were 
        included in base income of the unitary group for the 
        same taxable year and received by the taxpayer or by a 
        member of the taxpayer's unitary business group 
        (including amounts included in gross income under 
        Sections 951 through 964 of the Internal Revenue Code 
        and amounts included in gross income under Section 78 
        of the Internal Revenue Code) with respect to the stock 
        of the same person to whom the intangible expenses and 
        costs were directly or indirectly paid, incurred, or 
        accrued. The preceding sentence does not apply to the 
        extent that the same dividends caused a reduction to 
        the addition modification required under Section 
        203(a)(2)(D-17) of this Act.


            (D-20) For taxable years beginning on or after 
        January 1,
2002, in
the
case of a distribution from a 
        qualified tuition program under Section 529 of
the 
        Internal Revenue Code, other than (i) a distribution 
        from a College Savings
Pool created under Section 16.5 
        of the State Treasurer Act or (ii) a
distribution from 
        the Illinois Prepaid Tuition Trust Fund, an amount 
        equal to
the amount excluded from gross income under 
        Section 529(c)(3)(B);


    and by deducting from the total so obtained the
sum of the 
    following amounts:


            (E) For taxable years ending before December 31, 
        2001,
any amount included in such total in respect of 
        any compensation
(including but not limited to any 
        compensation paid or accrued to a
serviceman while a 
        prisoner of war or missing in action) paid to a 
        resident
by reason of being on active duty in the Armed 
        Forces of the United States
and in respect of any 
        compensation paid or accrued to a resident who as a

        governmental employee was a prisoner of war or missing 
        in action, and in
respect of any compensation paid to a 
        resident in 1971 or thereafter for
annual training 
        performed pursuant to Sections 502 and 503, Title 32,

        United States Code as a member of the Illinois National 
        Guard.
For taxable years ending on or after December 
        31, 2001, any amount included in
such total in respect 
        of any compensation (including but not limited to any

        compensation paid or accrued to a serviceman while a 
        prisoner of war or missing
in action) paid to a 
        resident by reason of being a member of any component 
        of
the Armed Forces of the United States and in respect 
        of any compensation paid
or accrued to a resident who 
        as a governmental employee was a prisoner of war
or 
        missing in action, and in respect of any compensation 
        paid to a resident in
2001 or thereafter by reason of 
        being a member of the Illinois National Guard.
The 
        provisions of this amendatory Act of the 92nd General 
        Assembly are exempt
from the provisions of Section 250;


            (F) An amount equal to all amounts included in such 
        total pursuant
to the provisions of Sections 402(a), 
        402(c), 403(a), 403(b), 406(a), 407(a),
and 408 of the 
        Internal Revenue Code, or included in such total as

        distributions under the provisions of any retirement 
        or disability plan for
employees of any governmental 
        agency or unit, or retirement payments to
retired 
        partners, which payments are excluded in computing net 
        earnings
from self employment by Section 1402 of the 
        Internal Revenue Code and
regulations adopted pursuant 
        thereto;


            (G) The valuation limitation amount;


            (H) An amount equal to the amount of any tax 
        imposed by this Act
which was refunded to the taxpayer 
        and included in such total for the
taxable year;


            (I) An amount equal to all amounts included in such 
        total pursuant
to the provisions of Section 111 of the 
        Internal Revenue Code as a
recovery of items previously 
        deducted from adjusted gross income in the
computation 
        of taxable income;


            (J) An amount equal to those dividends included in 
        such total which were
paid by a corporation which 
        conducts business operations in an Enterprise
Zone or 
        zones created under the Illinois Enterprise Zone Act or 
        a River Edge Redevelopment Zone or zones created under 
        the River Edge Redevelopment Zone Act, and conducts

        substantially all of its operations in an Enterprise 
        Zone or zones or a River Edge Redevelopment Zone or 
        zones. This subparagraph (J) is exempt from the 
        provisions of Section 250;


            (K) An amount equal to those dividends included in 
        such total that
were paid by a corporation that 
        conducts business operations in a federally
designated 
        Foreign Trade Zone or Sub-Zone and that is designated a 
        High Impact
Business located in Illinois; provided 
        that dividends eligible for the
deduction provided in 
        subparagraph (J) of paragraph (2) of this subsection

        shall not be eligible for the deduction provided under 
        this subparagraph
(K);


            (L) For taxable years ending after December 31, 
        1983, an amount equal to
all social security benefits 
        and railroad retirement benefits included in
such 
        total pursuant to Sections 72(r) and 86 of the Internal 
        Revenue Code;


            (M) With the exception of any amounts subtracted 
        under subparagraph
(N), an amount equal to the sum of 
        all amounts disallowed as
deductions by (i) Sections 
        171(a) (2), and 265(2) of the Internal Revenue Code
of 
        1954, as now or hereafter amended, and all amounts of 
        expenses allocable
to interest and  disallowed as 
        deductions by Section 265(1) of the Internal
Revenue 
        Code of 1954, as now or hereafter amended;
and (ii) for 
        taxable years
ending on or after August 13, 1999, 
        Sections 171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of 
        the Internal Revenue Code; the provisions of this

        subparagraph are exempt from the provisions of Section 
        250;


            (N) An amount equal to all amounts included in such 
        total which are
exempt from taxation by this State 
        either by reason of its statutes or
Constitution
or by 
        reason of the Constitution, treaties or statutes of the 
        United States;
provided that, in the case of any 
        statute of this State or, for taxable years ending on 
        or after December 31, 2008, of the United States, any 
        treaty of the United States, the Illinois 
        Constitution, or the United States Constitution that 
        exempts income
derived from bonds or other obligations 
        from the tax imposed under this Act,
the amount 
        exempted shall be the income
interest net of bond 
        premium amortization, and, for taxable years ending on 
        or after December 31, 2008, interest expense incurred 
        on indebtedness to carry the bond or other obligation, 
        expenses incurred in producing the income to be 
        deducted, and all other related expenses. The amount of 
        expenses to be taken into account under this provision 
        may not exceed the amount of income that is exempted;


            (O) An amount equal to any contribution made to a 
        job training
project established pursuant to the Tax 
        Increment Allocation Redevelopment Act;


            (P) An amount equal to the amount of the deduction 
        used to compute the
federal income tax credit for 
        restoration of substantial amounts held under
claim of 
        right for the taxable year pursuant to Section 1341 of 
        the
Internal Revenue Code of 1986;


            (Q) An amount equal to any amounts included in such 
        total, received by
the taxpayer as an acceleration in 
        the payment of life, endowment or annuity
benefits in 
        advance of the time they would otherwise be payable as 
        an indemnity
for a terminal illness;


            (R) An amount equal to the amount of any federal or 
        State bonus paid
to veterans of the Persian Gulf War;


            (S) An amount, to the extent included in adjusted 
        gross income, equal
to the amount of a contribution 
        made in the taxable year on behalf of the
taxpayer to a 
        medical care savings account established under the 
        Medical Care
Savings Account Act or the Medical Care 
        Savings Account Act of 2000 to the
extent the 
        contribution is accepted by the account
administrator 
        as provided in that Act;


            (T) An amount, to the extent included in adjusted 
        gross income, equal to
the amount of interest earned in 
        the taxable year on a medical care savings
account 
        established under the Medical Care Savings Account Act 
        or the Medical
Care Savings Account Act of 2000 on 
        behalf of the
taxpayer, other than interest added 
        pursuant to item (D-5) of this paragraph
(2);


            (U) For one taxable year beginning on or after 
        January 1,
1994, an
amount equal to the total amount of 
        tax imposed and paid under subsections (a)
and (b) of 
        Section 201 of this Act on grant amounts received by 
        the taxpayer
under the Nursing Home Grant Assistance 
        Act during the taxpayer's taxable years
1992 and 1993;


            (V) Beginning with tax years ending on or after 
        December 31, 1995 and
ending with tax years ending on 
        or before December 31, 2004, an amount equal to
the 
        amount paid by a taxpayer who is a
self-employed 
        taxpayer, a partner of a partnership, or a
shareholder 
        in a Subchapter S corporation for health insurance or 
        long-term
care insurance for that taxpayer or that 
        taxpayer's spouse or dependents, to
the extent that the 
        amount paid for that health insurance or long-term care

        insurance may be deducted under Section 213 of the 
        Internal Revenue Code of
1986, has not been deducted on 
        the federal income tax return of the taxpayer,
and does 
        not exceed the taxable income attributable to that 
        taxpayer's income,
self-employment income, or 
        Subchapter S corporation income; except that no

        deduction shall be allowed under this item (V) if the 
        taxpayer is eligible to
participate in any health 
        insurance or long-term care insurance plan of an

        employer of the taxpayer or the taxpayer's
spouse.  The 
        amount of the health insurance and long-term care 
        insurance
subtracted under this item (V) shall be 
        determined by multiplying total
health insurance and 
        long-term care insurance premiums paid by the taxpayer

        times a number that represents the fractional 
        percentage of eligible medical
expenses under Section 
        213 of the Internal Revenue Code of 1986 not actually

        deducted on the taxpayer's federal income tax return;


            (W) For taxable years beginning on or after January 
        1, 1998,
all amounts included in the taxpayer's federal 
        gross income
in the taxable year from amounts converted 
        from a regular IRA to a Roth IRA.
This paragraph is 
        exempt from the provisions of Section
250;


            (X) For taxable year 1999 and thereafter, an amount 
        equal to the
amount of any (i) distributions, to the 
        extent includible in gross income for
federal income 
        tax purposes, made to the taxpayer because of his or 
        her status
as a victim of persecution for racial or 
        religious reasons by Nazi Germany or
any other Axis 
        regime or as an heir of the victim and (ii) items
of 
        income, to the extent
includible in gross income for 
        federal income tax purposes, attributable to,
derived 
        from or in any way related to assets stolen from, 
        hidden from, or
otherwise lost to a victim of

        persecution for racial or religious reasons by Nazi 
        Germany or any other Axis
regime immediately prior to, 
        during, and immediately after World War II,
including, 
        but
not limited to, interest on the proceeds receivable 
        as insurance
under policies issued to a victim of 
        persecution for racial or religious
reasons
by Nazi 
        Germany or any other Axis regime by European insurance 
        companies
immediately prior to and during World War II;

        provided, however, this subtraction from federal 
        adjusted gross income does not
apply to assets acquired 
        with such assets or with the proceeds from the sale of

        such assets; provided, further, this paragraph shall 
        only apply to a taxpayer
who was the first recipient of 
        such assets after their recovery and who is a
victim of 
        persecution for racial or religious reasons
by Nazi 
        Germany or any other Axis regime or as an heir of the 
        victim.  The
amount of and the eligibility for any 
        public assistance, benefit, or
similar entitlement is 
        not affected by the inclusion of items (i) and (ii) of

        this paragraph in gross income for federal income tax 
        purposes.
This paragraph is exempt from the provisions 
        of Section 250;


            (Y) For taxable years beginning on or after January 
        1, 2002
and ending
on or before December 31, 2004, 
        moneys contributed in the taxable year to a College 
        Savings Pool account under
Section 16.5 of the State 
        Treasurer Act, except that amounts excluded from
gross 
        income under Section 529(c)(3)(C)(i) of the Internal 
        Revenue Code
shall not be considered moneys 
        contributed under this subparagraph (Y).  For taxable 
        years beginning on or after January 1, 2005, a maximum 
        of $10,000
contributed
in the
taxable year to (i) a 
        College Savings Pool account under Section 16.5 of the

        State
Treasurer Act or (ii) the Illinois Prepaid 
        Tuition Trust Fund,
except that
amounts excluded from 
        gross income under Section 529(c)(3)(C)(i) of the

        Internal
Revenue Code shall not be considered moneys 
        contributed under this subparagraph
(Y). This

        subparagraph (Y) is exempt from the provisions of 
        Section 250;


            (Z) For taxable years 2001 and thereafter, for the 
        taxable year in
which the bonus depreciation deduction

        is taken on the taxpayer's federal income tax return 
        under
subsection (k) of Section 168 of the Internal 
        Revenue Code and for each
applicable taxable year 
        thereafter, an amount equal to "x", where:


                (1) "y" equals the amount of the depreciation 
            deduction taken for the
taxable year
on the 
            taxpayer's federal income tax return on property 
            for which the bonus
depreciation deduction
was 
            taken in any year under subsection (k) of Section 
            168 of the Internal
Revenue Code, but not including 
            the bonus depreciation deduction;


                (2) for taxable years ending on or before 
            December 31, 2005, "x" equals "y" multiplied by 30 
            and then divided by 70 (or "y"
multiplied by 
            0.429); and
                (3) for taxable years ending after December 
            31, 2005:
                    (i) for property on which a bonus 
                depreciation deduction of 30% of the adjusted 
                basis was taken, "x" equals "y" multiplied by 
                30 and then divided by 70 (or "y"
multiplied by 
                0.429); and
                    (ii) for property on which a bonus 
                depreciation deduction of 50% of the adjusted 
                basis was taken, "x" equals "y" multiplied by 
                1.0.


            The aggregate amount deducted under this 
        subparagraph in all taxable
years for any one piece of 
        property may not exceed the amount of the bonus

        depreciation deduction
taken on that property on the 
        taxpayer's federal income tax return under
subsection 
        (k) of Section 168 of the Internal Revenue Code. This 
        subparagraph (Z) is exempt from the provisions of 
        Section 250;


            (AA) If the taxpayer sells, transfers, abandons, 
        or otherwise disposes of

property for which the 
        taxpayer was required in any taxable year to make an

        addition modification under subparagraph (D-15), then 
        an amount equal to that
addition modification.


            If the taxpayer continues to own property through 
        the last day of the last tax year for which the 
        taxpayer may claim a depreciation deduction for 
        federal income tax purposes and for which the taxpayer 
        was required in any taxable year to make an addition 
        modification under subparagraph (D-15), then an amount 
        equal to that addition modification.


            The taxpayer is allowed to take the deduction under 
        this subparagraph
only once with respect to any one 
        piece of property.
            This subparagraph (AA) is exempt from the 
        provisions of Section 250;


            (BB) Any amount included in adjusted gross income, 
        other
than
salary,
received by a driver in a 
        ridesharing arrangement using a motor vehicle;

            (CC) The amount of (i) any interest income (net of 
        the deductions allocable thereto) taken into account 
        for the taxable year with respect to a transaction with 
        a taxpayer that is required to make an addition 
        modification with respect to such transaction under 
        Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
        the amount of that addition modification, and

(ii) any 
        income from intangible property (net of the deductions 
        allocable thereto) taken into account for the taxable 
        year with respect to a transaction with a taxpayer that 
        is required to make an addition modification with 
        respect to such transaction under Section 
        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
        203(d)(2)(D-8), but not to exceed the amount of that 
        addition modification;
            (DD) An amount equal to the interest income taken 
        into account for the taxable year (net of the 
        deductions allocable thereto) with respect to 
        transactions with (i) a foreign person who would be a 
        member of the taxpayer's unitary business group but for 
        the fact that the foreign person's business activity 
        outside the United States is 80% or more of that 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304, but not to exceed the 
        addition modification required to be made for the same 
        taxable year under Section 203(a)(2)(D-17) for 
        interest paid, accrued, or incurred, directly or 
        indirectly, to the same foreign person; and
            (EE) An amount equal to the income from intangible 
        property taken into account for the taxable year (net 
        of the deductions allocable thereto) with respect to 
        transactions with (i) a foreign person who would be a 
        member of the taxpayer's unitary business group but for 
        the fact that the foreign person's business activity 
        outside the United States is 80% or more of that 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304, but not to exceed the 
        addition modification required to be made for the same 
        taxable year under Section 203(a)(2)(D-18) for 
        intangible expenses and costs paid, accrued, or 
        incurred, directly or indirectly, to the same foreign 
        person; and .

            (FF) An amount equal to the income from insurance 
        premiums taken into account for the taxable year (net 
        of the deductions allocable thereto) with respect to 
        transactions with a person who would be a member of the 
        same unitary business group but for the fact that the 
        person is prohibited under Section 1501(a)(27) from 
        being included in the unitary business group because he 
        or she is ordinarily required to apportion business 
        income under different subsections of Section 304, but 
        not to exceed the addition modification required to be 
        made for the same taxable year under Section 
        203(a)(2)(D-18) for intangible expenses and costs 
        paid, accrued, or incurred, directly or indirectly, to 
        the same person.

 

    (b) Corporations.


        (1) In general.  In the case of a corporation, base 
    income means an
amount equal to the taxpayer's taxable 
    income for the taxable year as
modified by paragraph (2).


        (2) Modifications.  The taxable income referred to in 
    paragraph (1)
shall be modified by adding thereto the sum 
    of the following amounts:


            (A) An amount equal to all amounts paid or accrued 
        to the taxpayer
as interest and all distributions 
        received from regulated investment
companies during 
        the taxable year to the extent excluded from gross

        income in the computation of taxable income;


            (B) An amount equal to the amount of tax imposed by 
        this Act to the
extent deducted from gross income in 
        the computation of taxable income
for the taxable year;


            (C) In the case of a regulated investment company, 
        an amount equal to
the excess of (i) the net long-term 
        capital gain for the taxable year, over
(ii) the amount 
        of the capital gain dividends designated as such in 
        accordance
with Section 852(b)(3)(C) of the Internal 
        Revenue Code and any amount
designated under Section 
        852(b)(3)(D) of the Internal Revenue Code,

        attributable to the taxable year (this amendatory Act 
        of 1995
(Public Act 89-89) is declarative of existing 
        law and is not a new
enactment);


            (D) The amount of any net operating loss deduction 
        taken in arriving
at taxable income, other than a net 
        operating loss carried forward from a
taxable year 
        ending prior to December 31, 1986;


            (E) For taxable years in which a net operating loss 
        carryback or
carryforward from a taxable year ending 
        prior to December 31, 1986 is an
element of taxable 
        income under paragraph (1) of subsection (e) or

        subparagraph (E) of paragraph (2) of subsection (e), 
        the amount by which
addition modifications other than 
        those provided by this subparagraph (E)
exceeded 
        subtraction modifications in such earlier taxable 
        year, with the
following limitations applied in the 
        order that they are listed:


                (i) the addition modification relating to the 
            net operating loss
carried back or forward to the 
            taxable year from any taxable year ending
prior to 
            December 31, 1986 shall be reduced by the amount of 
            addition
modification under this subparagraph (E) 
            which related to that net operating
loss and which 
            was taken into account in calculating the base 
            income of an
earlier taxable year, and


                (ii) the addition modification relating to the 
            net operating loss
carried back or forward to the 
            taxable year from any taxable year ending
prior to 
            December 31, 1986 shall not exceed the amount of 
            such carryback or
carryforward;


            For taxable years in which there is a net operating 
        loss carryback or
carryforward from more than one other 
        taxable year ending prior to December
31, 1986, the 
        addition modification provided in this subparagraph 
        (E) shall
be the sum of the amounts computed 
        independently under the preceding
provisions of this 
        subparagraph (E) for each such taxable year;


            (E-5) For taxable years ending after December 31, 
        1997, an
amount equal to any eligible remediation costs 
        that the corporation
deducted in computing adjusted 
        gross income and for which the
corporation claims a 
        credit under subsection (l) of Section 201;


            (E-10) For taxable years 2001 and thereafter, an 
        amount equal to the
bonus depreciation deduction taken 
        on the taxpayer's federal income tax return for the 
        taxable
year under subsection (k) of Section 168 of the 
        Internal Revenue Code; and


            (E-11) If the taxpayer sells, transfers, abandons, 
        or otherwise disposes of property for which the 
        taxpayer was required in any taxable year to
make an 
        addition modification under subparagraph (E-10), then 
        an amount equal
to the aggregate amount of the 
        deductions taken in all taxable
years under 
        subparagraph (T) with respect to that property.

            If the taxpayer continues to own property through 
        the last day of the last tax year for which the 
        taxpayer may claim a depreciation deduction for 
        federal income tax purposes and for which the taxpayer 
        was allowed in any taxable year to make a subtraction 
        modification under subparagraph (T), then an amount 
        equal to that subtraction modification.


            The taxpayer is required to make the addition 
        modification under this
subparagraph
only once with 
        respect to any one piece of property;

            (E-12) An
For taxable years ending on or after 
        December 31, 2004, an amount equal to the amount 
        otherwise allowed as a deduction in computing base 
        income for interest paid, accrued, or incurred, 
        directly or indirectly, (i) for taxable years ending on 
        or after December 31, 2004, to a foreign person who 
        would be a member of the same unitary business group 
        but for the fact the foreign person's business activity 
        outside the United States is 80% or more of the foreign 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304. The addition modification 
        required by this subparagraph shall be reduced to the 
        extent that dividends were included in base income of 
        the unitary group for the same taxable year and 
        received by the taxpayer or by a member of the 
        taxpayer's unitary business group (including amounts 
        included in gross income pursuant to Sections 951 
        through 964 of the Internal Revenue Code and amounts 
        included in gross income under Section 78 of the 
        Internal Revenue Code) with respect to the stock of the 
        same person to whom the interest was paid, accrued, or 
        incurred.

            This paragraph shall not apply to the following:

                (i) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person who is subject in a foreign country or 
            state, other than a state which requires mandatory 
            unitary reporting, to a tax on or measured by net 
            income with respect to such interest; or
                (ii) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person if the taxpayer can establish, based on a 
            preponderance of the evidence, both of the 
            following:
                    (a) the foreign person, during the same 
                taxable year, paid, accrued, or incurred, the 
                interest to a person that is not a related 
                member, and
                    (b) the transaction giving rise to the 
                interest expense between the taxpayer and the 
                foreign person did not have as a principal 
                purpose the avoidance of Illinois income tax, 
                and is paid pursuant to a contract or agreement 
                that reflects an arm's-length interest rate 
                and terms; or

                (iii) the taxpayer can establish, based on 
            clear and convincing evidence, that the interest 
            paid, accrued, or incurred relates to a contract or 
            agreement entered into at arm's-length rates and 
            terms and the principal purpose for the payment is 
            not federal or Illinois tax avoidance; or

                (iv) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person if the taxpayer establishes by clear and 
            convincing evidence that the adjustments are 
            unreasonable; or if the taxpayer and the Director 
            agree in writing to the application or use of an 
            alternative method of apportionment under Section 
            304(f).

                Nothing in this subsection shall preclude the 
            Director from making any other adjustment 
            otherwise allowed under Section 404 of this Act for 
            any tax year beginning after the effective date of 
            this amendment provided such adjustment is made 
            pursuant to regulation adopted by the Department 
            and such regulations provide methods and standards 
            by which the Department will utilize its authority 
            under Section 404 of this Act;

            (E-13) An
For taxable years ending on or after 
        December 31, 2004, an amount equal to the amount of 
        intangible expenses and costs otherwise allowed as a 
        deduction in computing base income, and that were paid, 
        accrued, or incurred, directly or indirectly, (i) for 
        taxable years ending on or after December 31, 2004, to 
        a foreign person who would be a member of the same 
        unitary business group but for the fact that the 
        foreign person's business activity outside the United 
        States is 80% or more of that person's total business 
        activity and (ii) for taxable years ending on or after 
        December 31, 2008, to a person who would be a member of 
        the same unitary business group but for the fact that 
        the person is prohibited under Section 1501(a)(27) 
        from being included in the unitary business group 
        because he or she is ordinarily required to apportion 
        business income under different subsections of Section 
        304. The addition modification required by this 
        subparagraph shall be reduced to the extent that 
        dividends were included in base income of the unitary 
        group for the same taxable year and received by the 
        taxpayer or by a member of the taxpayer's unitary 
        business group (including amounts included in gross 
        income pursuant to Sections 951 through 964 of the 
        Internal Revenue Code and amounts included in gross 
        income under Section 78 of the Internal Revenue Code) 
        with respect to the stock of the same person to whom 
        the intangible expenses and costs were directly or 
        indirectly paid, incurred, or accrued. The preceding 
        sentence shall not apply to the extent that the same 
        dividends caused a reduction to the addition 
        modification required under Section 203(b)(2)(E-12) of 
        this Act.
As used in this subparagraph, the term 
        "intangible expenses and costs" includes (1) expenses, 
        losses, and costs for, or related to, the direct or 
        indirect acquisition, use, maintenance or management, 
        ownership, sale, exchange, or any other disposition of 
        intangible property; (2) losses incurred, directly or 
        indirectly, from factoring transactions or discounting 
        transactions; (3) royalty, patent, technical, and 
        copyright fees; (4) licensing fees; and (5) other 
        similar expenses and costs.
For purposes of this 
        subparagraph, "intangible property" includes patents, 
        patent applications, trade names, trademarks, service 
        marks, copyrights, mask works, trade secrets, and 
        similar types of intangible assets.
            This paragraph shall not apply to the following:
                (i)         any item of intangible expenses or costs 
            paid, accrued, or incurred, directly or 
            indirectly, from a transaction with a foreign 
            person who is subject in a foreign country or 
            state, other than a state which requires mandatory 
            unitary reporting, to a tax on or measured by net 
            income with respect to such item; or
                (ii)        any item of intangible expense or cost 
            paid, accrued, or incurred, directly or 
            indirectly, if the taxpayer can establish, based 
            on a preponderance of the evidence, both of the 
            following:
                    (a) the foreign person during the same 
                taxable year paid, accrued, or incurred, the 
                intangible expense or cost to a person that is 
                not a related member, and
                    (b) the transaction giving rise to the 
                intangible expense or cost between the 
                taxpayer and the foreign person did not have as 
                a principal purpose the avoidance of Illinois 
                income tax, and is paid pursuant to a contract 
                or agreement that reflects arm's-length terms; 
                or
                (iii)       any item of intangible expense or cost 
            paid, accrued, or incurred, directly or 
            indirectly, from a transaction with a foreign 
            person if the taxpayer establishes by clear and 
            convincing evidence, that the adjustments are 
            unreasonable; or if the taxpayer and the Director 
            agree in writing to the application or use of an 
            alternative method of apportionment under Section 
            304(f);

                Nothing in this subsection shall preclude the 
            Director from making any other adjustment 
            otherwise allowed under Section 404 of this Act for 
            any tax year beginning after the effective date of 
            this amendment provided such adjustment is made 
            pursuant to regulation adopted by the Department 
            and such regulations provide methods and standards 
            by which the Department will utilize its authority 
            under Section 404 of this Act;

            (E-14) For taxable years ending on or after 
        December 31, 2008, an amount equal to the amount of 
        insurance premium expenses and costs otherwise allowed 
        as a deduction in computing base income, and that were 
        paid, accrued, or incurred, directly or indirectly, to 
        a person who would be a member of the same unitary 
        business group but for the fact that the person is 
        prohibited under Section 1501(a)(27) from being 
        included in the unitary business group because he or 
        she is ordinarily required to apportion business 
        income under different subsections of Section 304.  The 
        addition modification required by this subparagraph 
        shall be reduced to the extent that dividends were 
        included in base income of the unitary group for the 
        same taxable year and received by the taxpayer or by a 
        member of the taxpayer's unitary business group 
        (including amounts included in gross income under 
        Sections 951 through 964 of the Internal Revenue Code 
        and amounts included in gross income under Section 78 
        of the Internal Revenue Code) with respect to the stock 
        of the same person to whom the intangible expenses and 
        costs were directly or indirectly paid, incurred, or 
        accrued. The preceding sentence does not apply to the 
        extent that the same dividends caused a reduction to 
        the addition modification required under Section 
        203(a)(2)(D-17) of this Act;

            (E-15) For taxable years beginning after December 
        31, 2008, any deduction for dividends paid to a 
        corporation by a captive real estate trust that is 
        allowed to a real estate investment trust under Section 
        857(b)(2)(B) of the Internal Revenue Code for 
        dividends paid;


    and by deducting from the total so obtained the sum of the 
    following
amounts:


            (F) An amount equal to the amount of any tax 
        imposed by this Act
which was refunded to the taxpayer 
        and included in such total for the
taxable year;


            (G) An amount equal to any amount included in such 
        total under
Section 78 of the Internal Revenue Code;


            (H) In the case of a regulated investment company, 
        an amount equal
to the amount of exempt interest 
        dividends as defined in subsection (b)
(5) of Section 
        852 of the Internal Revenue Code, paid to shareholders

        for the taxable year;


            (I) With the exception of any amounts subtracted 
        under subparagraph
(J),
an amount equal to the sum of 
        all amounts disallowed as
deductions by (i) Sections 
        171(a) (2), and 265(a)(2) and amounts disallowed as

        interest expense by Section 291(a)(3) of the Internal 
        Revenue Code, as now
or hereafter amended, and all 
        amounts of expenses allocable to interest and

        disallowed as deductions by Section 265(a)(1) of the 
        Internal Revenue Code,
as now or hereafter amended;
and 
        (ii) for taxable years
ending on or after August 13, 
        1999, Sections
171(a)(2), 265,
280C, 291(a)(3), and 
        832(b)(5)(B)(i) of the Internal Revenue Code; the

        provisions of this
subparagraph are exempt from the 
        provisions of Section 250;


            (J) An amount equal to all amounts included in such 
        total which are
exempt from taxation by this State 
        either by reason of its statutes or
Constitution
or by 
        reason of the Constitution, treaties or statutes of the 
        United States;
provided that, in the case of any 
        statute of this State or, for taxable years ending on 
        or after December 31, 2008, of the United States, any 
        treaty of the United States, the Illinois 
        Constitution, or the United States Constitution that 
        exempts income
derived from bonds or other obligations 
        from the tax imposed under this Act,
the amount 
        exempted shall be the income
interest net of bond 
        premium amortization, and, for taxable years ending on 
        or after December 31, 2008, interest expense incurred 
        on indebtedness to carry the bond or other obligation, 
        expenses incurred in producing the income to be 
        deducted, and all other related expenses. The amount of 
        expenses to be taken into account under this provision 
        may not exceed the amount of income that is exempted;


            (K) An amount equal to those dividends included in 
        such total
which were paid by a corporation which 
        conducts
business operations in an Enterprise Zone or 
        zones created under
the Illinois Enterprise Zone Act or 
        a River Edge Redevelopment Zone or zones created under 
        the River Edge Redevelopment Zone Act and conducts 
        substantially all of its
operations in an Enterprise 
        Zone or zones or a River Edge Redevelopment Zone or 
        zones. This subparagraph (K) is exempt from the 
        provisions of Section 250;


            (L) An amount equal to those dividends included in 
        such total that
were paid by a corporation that 
        conducts business operations in a federally
designated 
        Foreign Trade Zone or Sub-Zone and that is designated a 
        High Impact
Business located in Illinois; provided 
        that dividends eligible for the
deduction provided in 
        subparagraph (K) of paragraph 2 of this subsection

        shall not be eligible for the deduction provided under 
        this subparagraph
(L);


            (M) For any taxpayer that is a financial 
        organization within the meaning
of Section 304(c) of 
        this Act, an amount included in such total as interest

        income from a loan or loans made by such taxpayer to a 
        borrower, to the extent
that such a loan is secured by 
        property which is eligible for the Enterprise
Zone 
        Investment Credit or the River Edge Redevelopment Zone 
        Investment Credit.   To determine the portion of a loan 
        or loans that is
secured by property eligible for a 
        Section 201(f) investment
credit to the borrower, the 
        entire principal amount of the loan or loans
between 
        the taxpayer and the borrower should be divided into 
        the basis of the
Section 201(f) investment credit 
        property which secures the
loan or loans, using for 
        this purpose the original basis of such property on
the 
        date that it was placed in service in the
Enterprise 
        Zone or the River Edge Redevelopment Zone.  The 
        subtraction modification available to taxpayer in any

        year under this subsection shall be that portion of the 
        total interest paid
by the borrower with respect to 
        such loan attributable to the eligible
property as 
        calculated under the previous sentence. This 
        subparagraph (M) is exempt from the provisions of 
        Section 250;


            (M-1) For any taxpayer that is a financial 
        organization within the
meaning of Section 304(c) of 
        this Act, an amount included in such total as
interest 
        income from a loan or loans made by such taxpayer to a 
        borrower,
to the extent that such a loan is secured by 
        property which is eligible for
the High Impact Business 
        Investment Credit.  To determine the portion of a
loan 
        or loans that is secured by property eligible for a 
        Section 201(h) investment credit to the borrower, the 
        entire principal amount of
the loan or loans between 
        the taxpayer and the borrower should be divided into

        the basis of the Section 201(h) investment credit 
        property which
secures the loan or loans, using for 
        this purpose the original basis of such
property on the 
        date that it was placed in service in a federally 
        designated
Foreign Trade Zone or Sub-Zone located in 
        Illinois.  No taxpayer that is
eligible for the 
        deduction provided in subparagraph (M) of paragraph 
        (2) of
this subsection shall be eligible for the 
        deduction provided under this
subparagraph (M-1).  The 
        subtraction modification available to taxpayers in
any 
        year under this subsection shall be that portion of the 
        total interest
paid by the borrower with respect to 
        such loan attributable to the eligible
property as 
        calculated under the previous sentence;


            (N) Two times any contribution made during the 
        taxable year to a
designated zone organization to the 
        extent that the contribution (i)
qualifies as a 
        charitable contribution under subsection (c) of 
        Section 170
of the Internal Revenue Code and (ii) must, 
        by its terms, be used for a
project approved by the 
        Department of Commerce and Economic Opportunity under 
        Section 11 of the Illinois Enterprise Zone Act or under 
        Section 10-10 of the Illinois River Edge Redevelopment 
        Zone Act.  This subparagraph (N) is exempt from the 
        provisions of Section 250;


            (O) An amount equal to: (i) 85% for taxable years 
        ending on or before
December 31, 1992, or, a percentage 
        equal to the percentage allowable under
Section 
        243(a)(1) of the Internal Revenue Code of 1986 for 
        taxable years ending
after December 31, 1992, of the 
        amount by which dividends included in taxable
income 
        and received from a corporation that is not created or 
        organized under
the laws of the United States or any 
        state or political subdivision thereof,
including, for 
        taxable years ending on or after December 31, 1988, 
        dividends
received or deemed received or paid or deemed 
        paid under Sections 951 through
964 of the Internal 
        Revenue Code, exceed the amount of the modification

        provided under subparagraph (G) of paragraph (2) of 
        this subsection (b) which
is related to such dividends, 
        and including, for taxable years ending on or after 
        December 31, 2008, dividends received from a real 
        estate investment trust; plus (ii) 100% of the amount 
        by which dividends,
included in taxable income and 
        received, including, for taxable years ending on
or 
        after December 31, 1988, dividends received or deemed 
        received or paid or
deemed paid under Sections 951 
        through 964 of the Internal Revenue Code and including, 
        for taxable years ending on or after December 31, 2008, 
        dividends received from a real estate investment 
        trust, from
any such corporation specified in clause 
        (i) that would but for the provisions
of Section 1504 
        (b) (3) of the Internal Revenue Code be treated as a 
        member of
the affiliated group which includes the 
        dividend recipient, exceed the amount
of the 
        modification provided under subparagraph (G) of 
        paragraph (2) of this
subsection (b) which is related 
        to such dividends;


            (P) An amount equal to any contribution made to a 
        job training project
established pursuant to the Tax 
        Increment Allocation Redevelopment Act;


            (Q) An amount equal to the amount of the deduction 
        used to compute the
federal income tax credit for 
        restoration of substantial amounts held under
claim of 
        right for the taxable year pursuant to Section 1341 of 
        the
Internal Revenue Code of 1986;


            (R) On and after July 20, 1999, in the case of an 
        attorney-in-fact with respect to whom an
interinsurer 
        or a reciprocal insurer has made the election under 
        Section 835 of
the Internal Revenue Code, 26 U.S.C. 
        835, an amount equal to the excess, if
any, of the 
        amounts paid or incurred by that interinsurer or 
        reciprocal insurer
in the taxable year to the 
        attorney-in-fact over the deduction allowed to that

        interinsurer or reciprocal insurer with respect to the 
        attorney-in-fact under
Section 835(b) of the Internal 
        Revenue Code for the taxable year; the provisions of 
        this subparagraph are exempt from the provisions of 
        Section 250;


            (S) For taxable years ending on or after December 
        31, 1997, in the
case of a Subchapter
S corporation, an 
        amount equal to all amounts of income allocable to a

        shareholder subject to the Personal Property Tax 
        Replacement Income Tax imposed
by subsections (c) and 
        (d) of Section 201 of this Act, including amounts

        allocable to organizations exempt from federal income 
        tax by reason of Section
501(a) of the Internal Revenue 
        Code.  This subparagraph (S) is exempt from
the 
        provisions of Section 250;


            (T) For taxable years 2001 and thereafter, for the 
        taxable year in
which the bonus depreciation deduction

        is taken on the taxpayer's federal income tax return 
        under
subsection (k) of Section 168 of the Internal 
        Revenue Code and for each
applicable taxable year 
        thereafter, an amount equal to "x", where:


                (1) "y" equals the amount of the depreciation 
            deduction taken for the
taxable year
on the 
            taxpayer's federal income tax return on property 
            for which the bonus
depreciation deduction
was 
            taken in any year under subsection (k) of Section 
            168 of the Internal
Revenue Code, but not including 
            the bonus depreciation deduction;


                (2) for taxable years ending on or before 
            December 31, 2005, "x" equals "y" multiplied by 30 
            and then divided by 70 (or "y"
multiplied by 
            0.429); and
                (3) for taxable years ending after December 
            31, 2005:
                    (i) for property on which a bonus 
                depreciation deduction of 30% of the adjusted 
                basis was taken, "x" equals "y" multiplied by 
                30 and then divided by 70 (or "y"
multiplied by 
                0.429); and
                    (ii) for property on which a bonus 
                depreciation deduction of 50% of the adjusted 
                basis was taken, "x" equals "y" multiplied by 
                1.0.


            The aggregate amount deducted under this 
        subparagraph in all taxable
years for any one piece of 
        property may not exceed the amount of the bonus

        depreciation deduction
taken on that property on the 
        taxpayer's federal income tax return under
subsection 
        (k) of Section 168 of the Internal Revenue Code. This 
        subparagraph (T) is exempt from the provisions of 
        Section 250;


            (U) If the taxpayer sells, transfers, abandons, or 
        otherwise disposes of

property for which the taxpayer 
        was required in any taxable year to make an
addition 
        modification under subparagraph (E-10), then an amount 
        equal to that
addition modification.

            If the taxpayer continues to own property through 
        the last day of the last tax year for which the 
        taxpayer may claim a depreciation deduction for 
        federal income tax purposes and for which the taxpayer 
        was required in any taxable year to make an addition 
        modification under subparagraph (E-10), then an amount 
        equal to that addition modification.


            The taxpayer is allowed to take the deduction under 
        this subparagraph
only once with respect to any one 
        piece of property.
            This subparagraph (U) is exempt from the 
        provisions of Section 250;

            (V) The amount of: (i) any interest income (net of 
        the deductions allocable thereto) taken into account 
        for the taxable year with respect to a transaction with 
        a taxpayer that is required to make an addition 
        modification with respect to such transaction under 
        Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
        the amount of such addition modification and

(ii) any 
        income from intangible property (net of the deductions 
        allocable thereto) taken into account for the taxable 
        year with respect to a transaction with a taxpayer that 
        is required to make an addition modification with 
        respect to such transaction under Section 
        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
        203(d)(2)(D-8), but not to exceed the amount of such 
        addition modification;

            (W) An amount equal to the interest income taken 
        into account for the taxable year (net of the 
        deductions allocable thereto) with respect to 
        transactions with (i) a foreign person who would be a 
        member of the taxpayer's unitary business group but for 
        the fact that the foreign person's business activity 
        outside the United States is 80% or more of that 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304, but not to exceed the 
        addition modification required to be made for the same 
        taxable year under Section 203(b)(2)(E-12) for 
        interest paid, accrued, or incurred, directly or 
        indirectly, to the same foreign person; and

            (X) An amount equal to the income from intangible 
        property taken into account for the taxable year (net 
        of the deductions allocable thereto) with respect to 
        transactions with (i) a foreign person who would be a 
        member of the taxpayer's unitary business group but for 
        the fact that the foreign person's business activity 
        outside the United States is 80% or more of that 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304, but not to exceed the 
        addition modification required to be made for the same 
        taxable year under Section 203(b)(2)(E-13) for 
        intangible expenses and costs paid, accrued, or 
        incurred, directly or indirectly, to the same foreign 
        person; and .

            (FF) An amount equal to the income from insurance 
        premiums taken into account for the taxable year (net 
        of the deductions allocable thereto) with respect to 
        transactions with a person who would be a member of the 
        same unitary business group but for the fact that the 
        person is prohibited under Section 1501(a)(27) from 
        being included in the unitary business group because he 
        or she is ordinarily required to apportion business 
        income under different subsections of Section 304, but 
        not to exceed the addition modification required to be 
        made for the same taxable year under Section 
        203(a)(2)(D-18) for intangible expenses and costs 
        paid, accrued, or incurred, directly or indirectly, to 
        the same person.


        (3) Special rule.  For purposes of paragraph (2) (A), 
    "gross income"
in the case of a life insurance company, for 
    tax years ending on and after
December 31, 1994,
shall mean 
    the gross investment income for the taxable year.

 

    (c) Trusts and estates.


        (1) In general.  In the case of a trust or estate, base 
    income means
an amount equal to the taxpayer's taxable 
    income for the taxable year as
modified by paragraph (2).


        (2) Modifications.  Subject to the provisions of 
    paragraph (3), the
taxable income referred to in paragraph 
    (1) shall be modified by adding
thereto the sum of the 
    following amounts:


            (A) An amount equal to all amounts paid or accrued 
        to the taxpayer
as interest or dividends during the 
        taxable year to the extent excluded
from gross income 
        in the computation of taxable income;


            (B) In the case of (i) an estate, $600; (ii) a 
        trust which, under
its governing instrument, is 
        required to distribute all of its income
currently, 
        $300; and (iii) any other trust, $100, but in each such 
        case,
only to the extent such amount was deducted in 
        the computation of
taxable income;


            (C) An amount equal to the amount of tax imposed by 
        this Act to the
extent deducted from gross income in 
        the computation of taxable income
for the taxable year;


            (D) The amount of any net operating loss deduction 
        taken in arriving at
taxable income, other than a net 
        operating loss carried forward from a
taxable year 
        ending prior to December 31, 1986;


            (E) For taxable years in which a net operating loss 
        carryback or
carryforward from a taxable year ending 
        prior to December 31, 1986 is an
element of taxable 
        income under paragraph (1) of subsection (e) or 
        subparagraph
(E) of paragraph (2) of subsection (e), 
        the amount by which addition
modifications other than 
        those provided by this subparagraph (E) exceeded

        subtraction modifications in such taxable year, with 
        the following limitations
applied in the order that 
        they are listed:


                (i) the addition modification relating to the 
            net operating loss
carried back or forward to the 
            taxable year from any taxable year ending
prior to 
            December 31, 1986 shall be reduced by the amount of 
            addition
modification under this subparagraph (E) 
            which related to that net
operating loss and which 
            was taken into account in calculating the base

            income of an earlier taxable year, and


                (ii) the addition modification relating to the 
            net operating loss
carried back or forward to the 
            taxable year from any taxable year ending
prior to 
            December 31, 1986 shall not exceed the amount of 
            such carryback or
carryforward;


            For taxable years in which there is a net operating 
        loss carryback or
carryforward from more than one other 
        taxable year ending prior to December
31, 1986, the 
        addition modification provided in this subparagraph 
        (E) shall
be the sum of the amounts computed 
        independently under the preceding
provisions of this 
        subparagraph (E) for each such taxable year;


            (F) For taxable years ending on or after January 1, 
        1989, an amount
equal to the tax deducted pursuant to 
        Section 164 of the Internal Revenue
Code if the trust 
        or estate is claiming the same tax for purposes of the

        Illinois foreign tax credit under Section 601 of this 
        Act;


            (G) An amount equal to the amount of the capital 
        gain deduction
allowable under the Internal Revenue 
        Code, to the extent deducted from
gross income in the 
        computation of taxable income;


            (G-5) For taxable years ending after December 31, 
        1997, an
amount equal to any eligible remediation costs 
        that the trust or estate
deducted in computing adjusted 
        gross income and for which the trust
or estate claims a 
        credit under subsection (l) of Section 201;


            (G-10) For taxable years 2001 and thereafter, an 
        amount equal to the
bonus depreciation deduction taken 
        on the taxpayer's federal income tax return for the 
        taxable
year under subsection (k) of Section 168 of the 
        Internal Revenue Code; and


            (G-11) If the taxpayer sells, transfers, abandons, 
        or otherwise disposes of property for which the 
        taxpayer was required in any taxable year to
make an 
        addition modification under subparagraph (G-10), then 
        an amount equal
to the aggregate amount of the 
        deductions taken in all taxable
years under 
        subparagraph (R) with respect to that property.

            If the taxpayer continues to own property through 
        the last day of the last tax year for which the 
        taxpayer may claim a depreciation deduction for 
        federal income tax purposes and for which the taxpayer 
        was allowed in any taxable year to make a subtraction 
        modification under subparagraph (R), then an amount 
        equal to that subtraction modification.


            The taxpayer is required to make the addition 
        modification under this
subparagraph
only once with 
        respect to any one piece of property;

            (G-12) An
For taxable years ending on or after 
        December 31, 2004, an amount equal to the amount 
        otherwise allowed as a deduction in computing base 
        income for interest paid, accrued, or incurred, 
        directly or indirectly, (i) for taxable years ending on 
        or after December 31, 2004, to a foreign person who 
        would be a member of the same unitary business group 
        but for the fact that the foreign person's business 
        activity outside the United States is 80% or more of 
        the foreign person's total business activity and (ii) 
        for taxable years ending on or after December 31, 2008, 
        to a person who would be a member of the same unitary 
        business group but for the fact that the person is 
        prohibited under Section 1501(a)(27) from being 
        included in the unitary business group because he or 
        she is ordinarily required to apportion business 
        income under different subsections of Section 304. The 
        addition modification required by this subparagraph 
        shall be reduced to the extent that dividends were 
        included in base income of the unitary group for the 
        same taxable year and received by the taxpayer or by a 
        member of the taxpayer's unitary business group 
        (including amounts included in gross income pursuant 
        to Sections 951 through 964 of the Internal Revenue 
        Code and amounts included in gross income under Section 
        78 of the Internal Revenue Code) with respect to the 
        stock of the same person to whom the interest was paid, 
        accrued, or incurred.

            This paragraph shall not apply to the following:

                (i) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person who is subject in a foreign country or 
            state, other than a state which requires mandatory 
            unitary reporting, to a tax on or measured by net 
            income with respect to such interest; or
                (ii) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person if the taxpayer can establish, based on a 
            preponderance of the evidence, both of the 
            following:
                    (a) the foreign person, during the same 
                taxable year, paid, accrued, or incurred, the 
                interest to a person that is not a related 
                member, and
                    (b) the transaction giving rise to the 
                interest expense between the taxpayer and the 
                foreign person did not have as a principal 
                purpose the avoidance of Illinois income tax, 
                and is paid pursuant to a contract or agreement 
                that reflects an arm's-length interest rate 
                and terms; or

                (iii) the taxpayer can establish, based on 
            clear and convincing evidence, that the interest 
            paid, accrued, or incurred relates to a contract or 
            agreement entered into at arm's-length rates and 
            terms and the principal purpose for the payment is 
            not federal or Illinois tax avoidance; or

                (iv) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person if the taxpayer establishes by clear and 
            convincing evidence that the adjustments are 
            unreasonable; or if the taxpayer and the Director 
            agree in writing to the application or use of an 
            alternative method of apportionment under Section 
            304(f).

                Nothing in this subsection shall preclude the 
            Director from making any other adjustment 
            otherwise allowed under Section 404 of this Act for 
            any tax year beginning after the effective date of 
            this amendment provided such adjustment is made 
            pursuant to regulation adopted by the Department 
            and such regulations provide methods and standards 
            by which the Department will utilize its authority 
            under Section 404 of this Act;

            (G-13) An
For taxable years ending on or after 
        December 31, 2004, an amount equal to the amount of 
        intangible expenses and costs otherwise allowed as a 
        deduction in computing base income, and that were paid, 
        accrued, or incurred, directly or indirectly, (i) for 
        taxable years ending on or after December 31, 2004, to 
        a foreign person who would be a member of the same 
        unitary business group but for the fact that the 
        foreign person's business activity outside the United 
        States is 80% or more of that person's total business 
        activity and (ii) for taxable years ending on or after 
        December 31, 2008, to a person who would be a member of 
        the same unitary business group but for the fact that 
        the person is prohibited under Section 1501(a)(27) 
        from being included in the unitary business group 
        because he or she is ordinarily required to apportion 
        business income under different subsections of Section 
        304. The addition modification required by this 
        subparagraph shall be reduced to the extent that 
        dividends were included in base income of the unitary 
        group for the same taxable year and received by the 
        taxpayer or by a member of the taxpayer's unitary 
        business group (including amounts included in gross 
        income pursuant to Sections 951 through 964 of the 
        Internal Revenue Code and amounts included in gross 
        income under Section 78 of the Internal Revenue Code) 
        with respect to the stock of the same person to whom 
        the intangible expenses and costs were directly or 
        indirectly paid, incurred, or accrued. The preceding 
        sentence shall not apply to the extent that the same 
        dividends caused a reduction to the addition 
        modification required under Section 203(c)(2)(G-12) of 
        this Act. As used in this subparagraph, the term 
        "intangible expenses and costs" includes: (1) 
        expenses, losses, and costs for or related to the 
        direct or indirect acquisition, use, maintenance or 
        management, ownership, sale, exchange, or any other 
        disposition of intangible property; (2) losses 
        incurred, directly or indirectly, from factoring 
        transactions or discounting transactions; (3) royalty, 
        patent, technical, and copyright fees; (4) licensing 
        fees; and (5) other similar expenses and costs. For 
        purposes of this subparagraph, "intangible property" 
        includes patents, patent applications, trade names, 
        trademarks, service marks, copyrights, mask works, 
        trade secrets, and similar types of intangible assets.
            This paragraph shall not apply to the following:
                (i)         any item of intangible expenses or costs 
            paid, accrued, or incurred, directly or 
            indirectly, from a transaction with a foreign 
            person who is subject in a foreign country or 
            state, other than a state which requires mandatory 
            unitary reporting, to a tax on or measured by net 
            income with respect to such item; or
                (ii)        any item of intangible expense or cost 
            paid, accrued, or incurred, directly or 
            indirectly, if the taxpayer can establish, based 
            on a preponderance of the evidence, both of the 
            following:
                    (a) the foreign person during the same 
                taxable year paid, accrued, or incurred, the 
                intangible expense or cost to a person that is 
                not a related member, and
                    (b) the transaction giving rise to the 
                intangible expense or cost between the 
                taxpayer and the foreign person did not have as 
                a principal purpose the avoidance of Illinois 
                income tax, and is paid pursuant to a contract 
                or agreement that reflects arm's-length terms; 
                or
                (iii)       any item of intangible expense or cost 
            paid, accrued, or incurred, directly or 
            indirectly, from a transaction with a foreign 
            person if the taxpayer establishes by clear and 
            convincing evidence, that the adjustments are 
            unreasonable; or if the taxpayer and the Director 
            agree in writing to the application or use of an 
            alternative method of apportionment under Section 
            304(f);

                Nothing in this subsection shall preclude the 
            Director from making any other adjustment 
            otherwise allowed under Section 404 of this Act for 
            any tax year beginning after the effective date of 
            this amendment provided such adjustment is made 
            pursuant to regulation adopted by the Department 
            and such regulations provide methods and standards 
            by which the Department will utilize its authority 
            under Section 404 of this Act;

            (G-14) For taxable years ending on or after 
        December 31, 2008, an amount equal to the amount of 
        insurance premium expenses and costs otherwise allowed 
        as a deduction in computing base income, and that were 
        paid, accrued, or incurred, directly or indirectly, to 
        a person who would be a member of the same unitary 
        business group but for the fact that the person is 
        prohibited under Section 1501(a)(27) from being 
        included in the unitary business group because he or 
        she is ordinarily required to apportion business 
        income under different subsections of Section 304.  The 
        addition modification required by this subparagraph 
        shall be reduced to the extent that dividends were 
        included in base income of the unitary group for the 
        same taxable year and received by the taxpayer or by a 
        member of the taxpayer's unitary business group 
        (including amounts included in gross income under 
        Sections 951 through 964 of the Internal Revenue Code 
        and amounts included in gross income under Section 78 
        of the Internal Revenue Code) with respect to the stock 
        of the same person to whom the intangible expenses and 
        costs were directly or indirectly paid, incurred, or 
        accrued. The preceding sentence does not apply to the 
        extent that the same dividends caused a reduction to 
        the addition modification required under Section 
        203(a)(2)(D-17) of this Act.


    and by deducting from the total so obtained the sum of the 
    following
amounts:


            (H) An amount equal to all amounts included in such 
        total pursuant
to the provisions of Sections 402(a), 
        402(c), 403(a), 403(b), 406(a), 407(a)
and 408 of the 
        Internal Revenue Code or included in such total as

        distributions under the provisions of any retirement 
        or disability plan for
employees of any governmental 
        agency or unit, or retirement payments to
retired 
        partners, which payments are excluded in computing net 
        earnings
from self employment by Section 1402 of the 
        Internal Revenue Code and
regulations adopted pursuant 
        thereto;


            (I) The valuation limitation amount;


            (J) An amount equal to the amount of any tax 
        imposed by this Act
which was refunded to the taxpayer 
        and included in such total for the
taxable year;


            (K) An amount equal to all amounts included in 
        taxable income as
modified by subparagraphs (A), (B), 
        (C), (D), (E), (F) and (G) which
are exempt from 
        taxation by this State either by reason of its statutes 
        or
Constitution
or by reason of the Constitution, 
        treaties or statutes of the United States;
provided 
        that, in the case of any statute of this State or, for 
        taxable years ending on or after December 31, 2008, of 
        the United States, any treaty of the United States, the 
        Illinois Constitution, or the United States 
        Constitution that exempts income
derived from bonds or 
        other obligations from the tax imposed under this Act,

        the amount exempted shall be the income
interest net of 
        bond premium amortization, and, for taxable years 
        ending on or after December 31, 2008, interest expense 
        incurred on indebtedness to carry the bond or other 
        obligation, expenses incurred in producing the income 
        to be deducted, and all other related expenses. The 
        amount of expenses to be taken into account under this 
        provision may not exceed the amount of income that is 
        exempted;


            (L) With the exception of any amounts subtracted 
        under subparagraph
(K),
an amount equal to the sum of 
        all amounts disallowed as
deductions by (i) Sections 
        171(a) (2) and 265(a)(2) of the Internal Revenue
Code, 
        as now or hereafter amended, and all amounts of 
        expenses allocable
to interest and disallowed as 
        deductions by Section 265(1) of the Internal
Revenue 
        Code of 1954, as now or hereafter amended;
and (ii) for 
        taxable years
ending on or after August 13, 1999, 
        Sections
171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of 
        the Internal Revenue Code; the provisions of this

        subparagraph are exempt from the provisions of Section 
        250;


            (M) An amount equal to those dividends included in 
        such total
which were paid by a corporation which 
        conducts business operations in an
Enterprise Zone or 
        zones created under the Illinois Enterprise Zone Act or 
        a River Edge Redevelopment Zone or zones created under 
        the River Edge Redevelopment Zone Act and
conducts 
        substantially all of its operations in an Enterprise 
        Zone or Zones or a River Edge Redevelopment Zone or 
        zones. This subparagraph (M) is exempt from the 
        provisions of Section 250;


            (N) An amount equal to any contribution made to a 
        job training
project established pursuant to the Tax 
        Increment Allocation
Redevelopment Act;


            (O) An amount equal to those dividends included in 
        such total
that were paid by a corporation that 
        conducts business operations in a
federally designated 
        Foreign Trade Zone or Sub-Zone and that is designated
a 
        High Impact Business located in Illinois; provided 
        that dividends eligible
for the deduction provided in 
        subparagraph (M) of paragraph (2) of this
subsection 
        shall not be eligible for the deduction provided under 
        this
subparagraph (O);


            (P) An amount equal to the amount of the deduction 
        used to compute the
federal income tax credit for 
        restoration of substantial amounts held under
claim of 
        right for the taxable year pursuant to Section 1341 of 
        the
Internal Revenue Code of 1986;


            (Q) For taxable year 1999 and thereafter, an amount 
        equal to the
amount of any
(i) distributions, to the 
        extent includible in gross income for
federal income 
        tax purposes, made to the taxpayer because of
his or 
        her status as a victim of
persecution for racial or 
        religious reasons by Nazi Germany or any other Axis

        regime or as an heir of the victim and (ii) items
of 
        income, to the extent
includible in gross income for 
        federal income tax purposes, attributable to,
derived 
        from or in any way related to assets stolen from, 
        hidden from, or
otherwise lost to a victim of

        persecution for racial or religious reasons by Nazi

        Germany or any other Axis regime
immediately prior to, 
        during, and immediately after World War II, including,

        but
not limited to, interest on the proceeds receivable 
        as insurance
under policies issued to a victim of 
        persecution for racial or religious
reasons by Nazi 
        Germany or any other Axis regime by European insurance

        companies
immediately prior to and during World War II;

        provided, however, this subtraction from federal 
        adjusted gross income does not
apply to assets acquired 
        with such assets or with the proceeds from the sale of

        such assets; provided, further, this paragraph shall 
        only apply to a taxpayer
who was the first recipient of 
        such assets after their recovery and who is a
victim of

        persecution for racial or religious reasons
by Nazi 
        Germany or any other Axis regime or as an heir of the 
        victim.  The
amount of and the eligibility for any 
        public assistance, benefit, or
similar entitlement is 
        not affected by the inclusion of items (i) and (ii) of

        this paragraph in gross income for federal income tax 
        purposes.
This paragraph is exempt from the provisions 
        of Section 250;


            (R) For taxable years 2001 and thereafter, for the 
        taxable year in
which the bonus depreciation deduction

        is taken on the taxpayer's federal income tax return 
        under
subsection (k) of Section 168 of the Internal 
        Revenue Code and for each
applicable taxable year 
        thereafter, an amount equal to "x", where:


                (1) "y" equals the amount of the depreciation 
            deduction taken for the
taxable year
on the 
            taxpayer's federal income tax return on property 
            for which the bonus
depreciation deduction
was 
            taken in any year under subsection (k) of Section 
            168 of the Internal
Revenue Code, but not including 
            the bonus depreciation deduction;


                (2) for taxable years ending on or before 
            December 31, 2005, "x" equals "y" multiplied by 30 
            and then divided by 70 (or "y"
multiplied by 
            0.429); and
                (3) for taxable years ending after December 
            31, 2005:
                    (i) for property on which a bonus 
                depreciation deduction of 30% of the adjusted 
                basis was taken, "x" equals "y" multiplied by 
                30 and then divided by 70 (or "y"
multiplied by 
                0.429); and
                    (ii) for property on which a bonus 
                depreciation deduction of 50% of the adjusted 
                basis was taken, "x" equals "y" multiplied by 
                1.0.


            The aggregate amount deducted under this 
        subparagraph in all taxable
years for any one piece of 
        property may not exceed the amount of the bonus

        depreciation deduction
taken on that property on the 
        taxpayer's federal income tax return under
subsection 
        (k) of Section 168 of the Internal Revenue Code. This 
        subparagraph (R) is exempt from the provisions of 
        Section 250;


            (S) If the taxpayer sells, transfers, abandons, or 
        otherwise disposes of

property for which the taxpayer 
        was required in any taxable year to make an
addition 
        modification under subparagraph (G-10), then an amount 
        equal to that
addition modification.

            If the taxpayer continues to own property through 
        the last day of the last tax year for which the 
        taxpayer may claim a depreciation deduction for 
        federal income tax purposes and for which the taxpayer 
        was required in any taxable year to make an addition 
        modification under subparagraph (G-10), then an amount 
        equal to that addition modification.


            The taxpayer is allowed to take the deduction under 
        this subparagraph
only once with respect to any one 
        piece of property.
            This subparagraph (S) is exempt from the 
        provisions of Section 250;

            (T) The amount of (i) any interest income (net of 
        the deductions allocable thereto) taken into account 
        for the taxable year with respect to a transaction with 
        a taxpayer that is required to make an addition 
        modification with respect to such transaction under 
        Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
        the amount of such addition modification and

(ii) any 
        income from intangible property (net of the deductions 
        allocable thereto) taken into account for the taxable 
        year with respect to a transaction with a taxpayer that 
        is required to make an addition modification with 
        respect to such transaction under Section 
        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
        203(d)(2)(D-8), but not to exceed the amount of such 
        addition modification;

            (U) An amount equal to the interest income taken 
        into account for the taxable year (net of the 
        deductions allocable thereto) with respect to 
        transactions with (i) a foreign person who would be a 
        member of the taxpayer's unitary business group but for 
        the fact the foreign person's business activity 
        outside the United States is 80% or more of that 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304, but not to exceed the 
        addition modification required to be made for the same 
        taxable year under Section 203(c)(2)(G-12) for 
        interest paid, accrued, or incurred, directly or 
        indirectly, to the same foreign person; and

            (V) An amount equal to the income from intangible 
        property taken into account for the taxable year (net 
        of the deductions allocable thereto) with respect to 
        transactions with a foreign person who would be a 
        member of the taxpayer's unitary business group but for 
        the fact that the foreign person's business activity 
        outside the United States is 80% or more of that 
        person's total business activity, but not to exceed the 
        addition modification required to be made for the same 
        taxable year under Section 203(c)(2)(G-13) for 
        intangible expenses and costs paid, accrued, or 
        incurred, directly or indirectly, to the same foreign 
        person; and .

            (FF) An amount equal to the income from insurance 
        premiums taken into account for the taxable year (net 
        of the deductions allocable thereto) with respect to 
        transactions with a person who would be a member of the 
        same unitary business group but for the fact that the 
        person is prohibited under Section 1501(a)(27) from 
        being included in the unitary business group because he 
        or she is ordinarily required to apportion business 
        income under different subsections of Section 304, but 
        not to exceed the addition modification required to be 
        made for the same taxable year under Section 
        203(a)(2)(D-18) for intangible expenses and costs 
        paid, accrued, or incurred, directly or indirectly, to 
        the same person.


        (3) Limitation.  The amount of any modification 
    otherwise required
under this subsection shall, under 
    regulations prescribed by the
Department, be adjusted by 
    any amounts included therein which were
properly paid, 
    credited, or required to be distributed, or permanently set

    aside for charitable purposes pursuant  to Internal Revenue 
    Code Section
642(c) during the taxable year.

 

    (d) Partnerships.


        (1) In general. In the case of a partnership, base 
    income means an
amount equal to the taxpayer's taxable 
    income for the taxable year as
modified by paragraph (2).


        (2) Modifications. The taxable income referred to in 
    paragraph (1)
shall be modified by adding thereto the sum 
    of the following amounts:


            (A) An amount equal to all amounts paid or accrued 
        to the taxpayer as
interest or dividends during the 
        taxable year to the extent excluded from
gross income 
        in the computation of taxable income;


            (B) An amount equal to the amount of tax imposed by 
        this Act to the
extent deducted from gross income for 
        the taxable year;


            (C) The amount of deductions allowed to the 
        partnership pursuant to
Section 707 (c) of the Internal 
        Revenue Code in calculating its taxable income;


            (D) An amount equal to the amount of the capital 
        gain deduction
allowable under the Internal Revenue 
        Code, to the extent deducted from
gross income in the 
        computation of taxable income;


            (D-5) For taxable years 2001 and thereafter, an 
        amount equal to the
bonus depreciation deduction taken 
        on the taxpayer's federal income tax return for the 
        taxable
year under subsection (k) of Section 168 of the 
        Internal Revenue Code;


            (D-6) If the taxpayer sells, transfers, abandons, 
        or otherwise disposes of

property for which the 
        taxpayer was required in any taxable year to make an

        addition modification under subparagraph (D-5), then 
        an amount equal to the
aggregate amount of the 
        deductions taken in all taxable years
under 
        subparagraph (O) with respect to that property.

            If the taxpayer continues to own property through 
        the last day of the last tax year for which the 
        taxpayer may claim a depreciation deduction for 
        federal income tax purposes and for which the taxpayer 
        was allowed in any taxable year to make a subtraction 
        modification under subparagraph (O), then an amount 
        equal to that subtraction modification.


            The taxpayer is required to make the addition 
        modification under this
subparagraph
only once with 
        respect to any one piece of property;

            (D-7) An
For taxable years ending on or after 
        December 31, 2004, an amount equal to the amount 
        otherwise allowed as a deduction in computing base 
        income for interest paid, accrued, or incurred, 
        directly or indirectly, (i) for taxable years ending on 
        or after December 31, 2004, to a foreign person who 
        would be a member of the same unitary business group 
        but for the fact the foreign person's business activity 
        outside the United States is 80% or more of the foreign 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304. The addition modification 
        required by this subparagraph shall be reduced to the 
        extent that dividends were included in base income of 
        the unitary group for the same taxable year and 
        received by the taxpayer or by a member of the 
        taxpayer's unitary business group (including amounts 
        included in gross income pursuant to Sections 951 
        through 964 of the Internal Revenue Code and amounts 
        included in gross income under Section 78 of the 
        Internal Revenue Code) with respect to the stock of the 
        same person to whom the interest was paid, accrued, or 
        incurred.

            This paragraph shall not apply to the following:

                (i) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person who is subject in a foreign country or 
            state, other than a state which requires mandatory 
            unitary reporting, to a tax on or measured by net 
            income with respect to such interest; or
                (ii) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person if the taxpayer can establish, based on a 
            preponderance of the evidence, both of the 
            following:
                    (a) the foreign person, during the same 
                taxable year, paid, accrued, or incurred, the 
                interest to a person that is not a related 
                member, and
                    (b) the transaction giving rise to the 
                interest expense between the taxpayer and the 
                foreign person did not have as a principal 
                purpose the avoidance of Illinois income tax, 
                and is paid pursuant to a contract or agreement 
                that reflects an arm's-length interest rate 
                and terms; or

                (iii) the taxpayer can establish, based on 
            clear and convincing evidence, that the interest 
            paid, accrued, or incurred relates to a contract or 
            agreement entered into at arm's-length rates and 
            terms and the principal purpose for the payment is 
            not federal or Illinois tax avoidance; or

                (iv) an item of interest paid, accrued, or 
            incurred, directly or indirectly, to a foreign 
            person if the taxpayer establishes by clear and 
            convincing evidence that the adjustments are 
            unreasonable; or if the taxpayer and the Director 
            agree in writing to the application or use of an 
            alternative method of apportionment under Section 
            304(f).

                Nothing in this subsection shall preclude the 
            Director from making any other adjustment 
            otherwise allowed under Section 404 of this Act for 
            any tax year beginning after the effective date of 
            this amendment provided such adjustment is made 
            pursuant to regulation adopted by the Department 
            and such regulations provide methods and standards 
            by which the Department will utilize its authority 
            under Section 404 of this Act; and

            (D-8) An
For taxable years ending on or after 
        December 31, 2004, an amount equal to the amount of 
        intangible expenses and costs otherwise allowed as a 
        deduction in computing base income, and that were paid, 
        accrued, or incurred, directly or indirectly, (i) for 
        taxable years ending on or after December 31, 2004, to 
        a foreign person who would be a member of the same 
        unitary business group but for the fact that the 
        foreign person's business activity outside the United 
        States is 80% or more of that person's total business 
        activity and (ii) for taxable years ending on or after 
        December 31, 2008, to a person who would be a member of 
        the same unitary business group but for the fact that 
        the person is prohibited under Section 1501(a)(27) 
        from being included in the unitary business group 
        because he or she is ordinarily required to apportion 
        business income under different subsections of Section 
        304. The addition modification required by this 
        subparagraph shall be reduced to the extent that 
        dividends were included in base income of the unitary 
        group for the same taxable year and received by the 
        taxpayer or by a member of the taxpayer's unitary 
        business group (including amounts included in gross 
        income pursuant to Sections 951 through 964 of the 
        Internal Revenue Code and amounts included in gross 
        income under Section 78 of the Internal Revenue Code) 
        with respect to the stock of the same person to whom 
        the intangible expenses and costs were directly or 
        indirectly paid, incurred or accrued. The preceding 
        sentence shall not apply to the extent that the same 
        dividends caused a reduction to the addition 
        modification required under Section 203(d)(2)(D-7) of 
        this Act. As used in this subparagraph, the term 
        "intangible expenses and costs" includes (1) expenses, 
        losses, and costs for, or related to, the direct or 
        indirect acquisition, use, maintenance or management, 
        ownership, sale, exchange, or any other disposition of 
        intangible property; (2) losses incurred, directly or 
        indirectly, from factoring transactions or discounting 
        transactions; (3) royalty, patent, technical, and 
        copyright fees; (4) licensing fees; and (5) other 
        similar expenses and costs. For purposes of this 
        subparagraph, "intangible property" includes patents, 
        patent applications, trade names, trademarks, service 
        marks, copyrights, mask works, trade secrets, and 
        similar types of intangible assets;
            This paragraph shall not apply to the following:
                (i)         any item of intangible expenses or costs 
            paid, accrued, or incurred, directly or 
            indirectly, from a transaction with a foreign 
            person who is subject in a foreign country or 
            state, other than a state which requires mandatory 
            unitary reporting, to a tax on or measured by net 
            income with respect to such item; or
                (ii)        any item of intangible expense or cost 
            paid, accrued, or incurred, directly or 
            indirectly, if the taxpayer can establish, based 
            on a preponderance of the evidence, both of the 
            following:
                    (a) the foreign person during the same 
                taxable year paid, accrued, or incurred, the 
                intangible expense or cost to a person that is 
                not a related member, and
                    (b) the transaction giving rise to the 
                intangible expense or cost between the 
                taxpayer and the foreign person did not have as 
                a principal purpose the avoidance of Illinois 
                income tax, and is paid pursuant to a contract 
                or agreement that reflects arm's-length terms; 
                or
                (iii)       any item of intangible expense or cost 
            paid, accrued, or incurred, directly or 
            indirectly, from a transaction with a foreign 
            person if the taxpayer establishes by clear and 
            convincing evidence, that the adjustments are 
            unreasonable; or if the taxpayer and the Director 
            agree in writing to the application or use of an 
            alternative method of apportionment under Section 
            304(f);

                Nothing in this subsection shall preclude the 
            Director from making any other adjustment 
            otherwise allowed under Section 404 of this Act for 
            any tax year beginning after the effective date of 
            this amendment provided such adjustment is made 
            pursuant to regulation adopted by the Department 
            and such regulations provide methods and standards 
            by which the Department will utilize its authority 
            under Section 404 of this Act;

            (D-9) For taxable years ending on or after December 
        31, 2008, an amount equal to the amount of insurance 
        premium expenses and costs otherwise allowed as a 
        deduction in computing base income, and that were paid, 
        accrued, or incurred, directly or indirectly, to a 
        person who would be a member of the same unitary 
        business group but for the fact that the person is 
        prohibited under Section 1501(a)(27) from being 
        included in the unitary business group because he or 
        she is ordinarily required to apportion business 
        income under different subsections of Section 304.  The 
        addition modification required by this subparagraph 
        shall be reduced to the extent that dividends were 
        included in base income of the unitary group for the 
        same taxable year and received by the taxpayer or by a 
        member of the taxpayer's unitary business group 
        (including amounts included in gross income under 
        Sections 951 through 964 of the Internal Revenue Code 
        and amounts included in gross income under Section 78 
        of the Internal Revenue Code) with respect to the stock 
        of the same person to whom the intangible expenses and 
        costs were directly or indirectly paid, incurred, or 
        accrued. The preceding sentence does not apply to the 
        extent that the same dividends caused a reduction to 
        the addition modification required under Section 
        203(a)(2)(D-17) of this Act.


    and by deducting from the total so obtained the following 
    amounts:


            (E) The valuation limitation amount;


            (F) An amount equal to the amount of any tax 
        imposed by this Act which
was refunded to the taxpayer 
        and included in such total for the taxable year;


            (G) An amount equal to all amounts included in 
        taxable income as
modified by subparagraphs (A), (B), 
        (C) and (D) which are exempt from
taxation by this 
        State either by reason of its statutes or Constitution 
        or
by reason of
the Constitution, treaties or statutes 
        of the United States;
provided that, in the case of any 
        statute of this State or, for taxable years ending on 
        or after December 31, 2008, of the United States, any 
        treaty of the United States, the Illinois 
        Constitution, or the United States Constitution that 
        exempts income
derived from bonds or other obligations 
        from the tax imposed under this Act,
the amount 
        exempted shall be the income
interest net of bond 
        premium amortization, and, for taxable years ending on 
        or after December 31, 2008, interest expense incurred 
        on indebtedness to carry the bond or other obligation, 
        expenses incurred in producing the income to be 
        deducted, and all other related expenses. The amount of 
        expenses to be taken into account under this provision 
        may not exceed the amount of income that is exempted;


            (H) Any income of the partnership which 
        constitutes personal service
income as defined in 
        Section 1348 (b) (1) of the Internal Revenue Code (as

        in effect December 31, 1981) or a reasonable allowance 
        for compensation
paid or accrued for services rendered 
        by partners to the partnership,
whichever is greater;


            (I) An amount equal to all amounts of income 
        distributable to an entity
subject to the Personal 
        Property Tax Replacement Income Tax imposed by

        subsections (c) and (d) of Section 201 of this Act 
        including amounts
distributable to organizations 
        exempt from federal income tax by reason of
Section 
        501(a) of the Internal Revenue Code;


            (J) With the exception of any amounts subtracted 
        under subparagraph
(G),
an amount equal to the sum of 
        all amounts disallowed as deductions
by (i) Sections 
        171(a) (2), and 265(2) of the Internal Revenue Code of 
        1954,
as now or hereafter amended, and all amounts of 
        expenses allocable to
interest and disallowed as 
        deductions by Section 265(1) of the Internal
Revenue 
        Code, as now or hereafter amended;
and (ii) for taxable 
        years
ending on or after August 13, 1999, Sections

        171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of the 
        Internal Revenue Code; the provisions of this

        subparagraph are exempt from the provisions of Section 
        250;


            (K) An amount equal to those dividends included in 
        such total which were
paid by a corporation which 
        conducts business operations in an Enterprise
Zone or 
        zones created under the Illinois Enterprise Zone Act, 
        enacted by
the 82nd General Assembly, or a River Edge 
        Redevelopment Zone or zones created under the River 
        Edge Redevelopment Zone Act and
conducts substantially 
        all of its operations
in an Enterprise Zone or Zones or 
        from a River Edge Redevelopment Zone or zones.  This 
        subparagraph (K) is exempt from the provisions of 
        Section 250;


            (L) An amount equal to any contribution made to a 
        job training project
established pursuant to the Real 
        Property Tax Increment Allocation
Redevelopment Act;


            (M) An amount equal to those dividends included in 
        such total
that were paid by a corporation that 
        conducts business operations in a
federally designated 
        Foreign Trade Zone or Sub-Zone and that is designated a

        High Impact Business located in Illinois; provided 
        that dividends eligible
for the deduction provided in 
        subparagraph (K) of paragraph (2) of this
subsection 
        shall not be eligible for the deduction provided under 
        this
subparagraph (M);


            (N) An amount equal to the amount of the deduction 
        used to compute the
federal income tax credit for 
        restoration of substantial amounts held under
claim of 
        right for the taxable year pursuant to Section 1341 of 
        the
Internal Revenue Code of 1986;


            (O) For taxable years 2001 and thereafter, for the 
        taxable year in
which the bonus depreciation deduction

        is taken on the taxpayer's federal income tax return 
        under
subsection (k) of Section 168 of the Internal 
        Revenue Code and for each
applicable taxable year 
        thereafter, an amount equal to "x", where:


                (1) "y" equals the amount of the depreciation 
            deduction taken for the
taxable year
on the 
            taxpayer's federal income tax return on property 
            for which the bonus
depreciation deduction
was 
            taken in any year under subsection (k) of Section 
            168 of the Internal
Revenue Code, but not including 
            the bonus depreciation deduction;


                (2) for taxable years ending on or before 
            December 31, 2005, "x" equals "y" multiplied by 30 
            and then divided by 70 (or "y"
multiplied by 
            0.429); and
                (3) for taxable years ending after December 
            31, 2005:
                    (i) for property on which a bonus 
                depreciation deduction of 30% of the adjusted 
                basis was taken, "x" equals "y" multiplied by 
                30 and then divided by 70 (or "y"
multiplied by 
                0.429); and
                    (ii) for property on which a bonus 
                depreciation deduction of 50% of the adjusted 
                basis was taken, "x" equals "y" multiplied by 
                1.0.


            The aggregate amount deducted under this 
        subparagraph in all taxable
years for any one piece of 
        property may not exceed the amount of the bonus

        depreciation deduction
taken on that property on the 
        taxpayer's federal income tax return under
subsection 
        (k) of Section 168 of the Internal Revenue Code. This 
        subparagraph (O) is exempt from the provisions of 
        Section 250;


            (P) If the taxpayer sells, transfers, abandons, or 
        otherwise disposes of

property for which the taxpayer 
        was required in any taxable year to make an
addition 
        modification under subparagraph (D-5), then an amount 
        equal to that
addition modification.

            If the taxpayer continues to own property through 
        the last day of the last tax year for which the 
        taxpayer may claim a depreciation deduction for 
        federal income tax purposes and for which the taxpayer 
        was required in any taxable year to make an addition 
        modification under subparagraph (D-5), then an amount 
        equal to that addition modification.


            The taxpayer is allowed to take the deduction under 
        this subparagraph
only once with respect to any one 
        piece of property.
            This subparagraph (P) is exempt from the 
        provisions of Section 250;

            (Q) The amount of (i) any interest income (net of 
        the deductions allocable thereto) taken into account 
        for the taxable year with respect to a transaction with 
        a taxpayer that is required to make an addition 
        modification with respect to such transaction under 
        Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
        the amount of such addition modification and

(ii) any 
        income from intangible property (net of the deductions 
        allocable thereto) taken into account for the taxable 
        year with respect to a transaction with a taxpayer that 
        is required to make an addition modification with 
        respect to such transaction under Section 
        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
        203(d)(2)(D-8), but not to exceed the amount of such 
        addition modification;

            (R) An amount equal to the interest income taken 
        into account for the taxable year (net of the 
        deductions allocable thereto) with respect to 
        transactions with (i) a foreign person who would be a 
        member of the taxpayer's unitary business group but for 
        the fact that the foreign person's business activity 
        outside the United States is 80% or more of that 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304, but not to exceed the 
        addition modification required to be made for the same 
        taxable year under Section 203(d)(2)(D-7) for interest 
        paid, accrued, or incurred, directly or indirectly, to 
        the same foreign person; and

            (S) An amount equal to the income from intangible 
        property taken into account for the taxable year (net 
        of the deductions allocable thereto) with respect to 
        transactions with (i) a foreign person who would be a 
        member of the taxpayer's unitary business group but for 
        the fact that the foreign person's business activity 
        outside the United States is 80% or more of that 
        person's total business activity and (ii) for taxable 
        years ending on or after December 31, 2008, to a person 
        who would be a member of the same unitary business 
        group but for the fact that the person is prohibited 
        under Section 1501(a)(27) from being included in the 
        unitary business group because he or she is ordinarily 
        required to apportion business income under different 
        subsections of Section 304, but not to exceed the 
        addition modification required to be made for the same 
        taxable year under Section 203(d)(2)(D-8) for 
        intangible expenses and costs paid, accrued, or 
        incurred, directly or indirectly, to the same foreign 
        person; and .

            (FF) An amount equal to the income from insurance 
        premiums taken into account for the taxable year (net 
        of the deductions allocable thereto) with respect to 
        transactions with a person who would be a member of the 
        same unitary business group but for the fact that the 
        person is prohibited under Section 1501(a)(27) from 
        being included in the unitary business group because he 
        or she is ordinarily required to apportion business 
        income under different subsections of Section 304, but 
        not to exceed the addition modification required to be 
        made for the same taxable year under Section 
        203(a)(2)(D-18) for intangible expenses and costs 
        paid, accrued, or incurred, directly or indirectly, to 
        the same person.

 

    (e) Gross income; adjusted gross income; taxable income.


        (1) In general.  Subject to the provisions of paragraph 
    (2) and
subsection (b) (3), for purposes of this Section 
    and Section 803(e), a
taxpayer's gross income, adjusted 
    gross income, or taxable income for
the taxable year shall 
    mean the amount of gross income, adjusted gross
income or 
    taxable income properly reportable for federal income tax

    purposes for the taxable year under the provisions of the 
    Internal
Revenue Code. Taxable income may be less than 
    zero. However, for taxable
years ending on or after 
    December 31, 1986, net operating loss
carryforwards from 
    taxable years ending prior to December 31, 1986, may not

    exceed the sum of federal taxable income for the taxable 
    year before net
operating loss deduction, plus the excess 
    of addition modifications over
subtraction modifications 
    for the taxable year.  For taxable years ending
prior to 
    December 31, 1986, taxable income may never be an amount in 
    excess
of the net operating loss for the taxable year as 
    defined in subsections
(c) and (d) of Section 172 of the 
    Internal Revenue Code, provided that when
taxable income of 
    a corporation (other than a Subchapter S corporation),

    trust, or estate is less than zero and addition 
    modifications, other than
those provided by subparagraph 
    (E) of paragraph (2) of subsection (b) for
corporations or 
    subparagraph (E) of paragraph (2) of subsection (c) for

    trusts and estates, exceed subtraction modifications, an 
    addition
modification must be made under those 
    subparagraphs for any other taxable
year to which the 
    taxable income less than zero (net operating loss) is

    applied under Section 172 of the Internal Revenue Code or 
    under
subparagraph (E) of paragraph (2) of this subsection 
    (e) applied in
conjunction with Section 172 of the Internal 
    Revenue Code.


        (2) Special rule.  For purposes of paragraph (1) of this 
    subsection,
the taxable income properly reportable for 
    federal income tax purposes
shall mean:


            (A) Certain life insurance companies.  In the case 
        of a life
insurance company subject to the tax imposed 
        by Section 801 of the
Internal Revenue Code, life 
        insurance company taxable income, plus the
amount of 
        distribution from pre-1984 policyholder surplus 
        accounts as
calculated under Section 815a of the 
        Internal Revenue Code;


            (B) Certain other insurance companies.  In the case 
        of mutual
insurance companies subject to the tax 
        imposed by Section 831 of the
Internal Revenue Code, 
        insurance company taxable income;


            (C) Regulated investment companies.  In the case of 
        a regulated
investment company subject to the tax 
        imposed by Section 852 of the
Internal Revenue Code, 
        investment company taxable income;


            (D) Real estate investment trusts.  In the case of a 
        real estate
investment trust subject to the tax imposed 
        by Section 857 of the
Internal Revenue Code, real 
        estate investment trust taxable income;


            (E) Consolidated corporations.  In the case of a 
        corporation which
is a member of an affiliated group of 
        corporations filing a consolidated
income tax return 
        for the taxable year for federal income tax purposes,

        taxable income determined as if such corporation had 
        filed a separate
return for federal income tax purposes 
        for the taxable year and each
preceding taxable year 
        for which it was a member of an affiliated group.
For 
        purposes of this subparagraph, the taxpayer's separate 
        taxable
income shall be determined as if the election 
        provided by Section
243(b) (2) of the Internal Revenue 
        Code had been in effect for all such years;


            (F) Cooperatives.  In the case of a cooperative 
        corporation or
association, the taxable income of such 
        organization determined in
accordance with the 
        provisions of Section 1381 through 1388 of the
Internal 
        Revenue Code;


            (G) Subchapter S corporations.  In the case of: (i) 
        a Subchapter S
corporation for which there is in effect 
        an election for the taxable year
under Section 1362 of 
        the Internal Revenue Code, the taxable income of such

        corporation determined in accordance with Section 
        1363(b) of the Internal
Revenue Code, except that 
        taxable income shall take into
account those items 
        which are required by Section 1363(b)(1) of the

        Internal Revenue Code to be separately stated; and (ii) 
        a Subchapter
S corporation for which there is in effect 
        a federal election to opt out of
the provisions of the 
        Subchapter S Revision Act of 1982 and have applied

        instead the prior federal Subchapter S rules as in 
        effect on July 1, 1982,
the taxable income of such 
        corporation determined in accordance with the
federal 
        Subchapter S rules as in effect on July 1, 1982; and


            (H) Partnerships.  In the case of a partnership, 
        taxable income
determined in accordance with Section 
        703 of the Internal Revenue Code,
except that taxable 
        income shall take into account those items which are

        required by Section 703(a)(1) to be separately stated 
        but which would be
taken into account by an individual 
        in calculating his taxable income.

        (3) Recapture of business expenses on disposition of 
    asset or business. Notwithstanding any other law to the 
    contrary, if in prior years income from an asset or 
    business has been classified as business income and in a 
    later year is demonstrated to be non-business income, then 
    all expenses, without limitation, deducted in such later 
    year and in the 2 immediately preceding taxable years 
    related to that asset or business that generated the 
    non-business income shall be added back and recaptured as 
    business income in the year of the disposition of the asset 
    or business. Such amount shall be apportioned to Illinois 
    using the greater of the apportionment fraction computed 
    for the business under Section 304 of this Act for the 
    taxable year or the average of the apportionment fractions 
    computed for the business under Section 304 of this Act for 
    the taxable year and for the 2 immediately preceding 
    taxable years.


    (f) Valuation limitation amount.


        (1) In general.  The valuation limitation amount 
    referred to in
subsections (a) (2) (G), (c) (2) (I) and 
    (d)(2) (E) is an amount equal to:


            (A) The sum of the pre-August 1, 1969 appreciation 
        amounts (to the
extent consisting of gain reportable 
        under the provisions of Section
1245 or 1250 of the 
        Internal Revenue Code) for all property in respect
of 
        which such gain was reported for the taxable year; plus


            (B) The lesser of (i) the sum of the pre-August 1, 
        1969 appreciation
amounts (to the extent consisting of 
        capital gain) for all property in
respect of which such 
        gain was reported for federal income tax purposes
for 
        the taxable year, or (ii) the net capital gain for the 
        taxable year,
reduced in either case by any amount of 
        such gain included in the amount
determined under 
        subsection (a) (2) (F) or (c) (2) (H).


        (2) Pre-August 1, 1969 appreciation amount.


            (A) If the fair market value of property referred 
        to in paragraph
(1) was readily ascertainable on August 
        1, 1969, the pre-August 1, 1969
appreciation amount for 
        such property is the lesser of (i) the excess of
such 
        fair market value over the taxpayer's basis (for 
        determining gain)
for such property on that date 
        (determined under the Internal Revenue
Code as in 
        effect on that date), or (ii) the total gain realized 
        and
reportable for federal income tax purposes in 
        respect of the sale,
exchange or other disposition of 
        such property.


            (B) If the fair market value of property referred 
        to in paragraph
(1) was not readily ascertainable on 
        August 1, 1969, the pre-August 1,
1969 appreciation 
        amount for such property is that amount which bears
the 
        same ratio to the total gain reported in respect of the 
        property for
federal income tax purposes for the 
        taxable year, as the number of full
calendar months in 
        that part of the taxpayer's holding period for the

        property ending July 31, 1969 bears to the number of 
        full calendar
months in the taxpayer's entire holding 
        period for the
property.


            (C) The Department shall prescribe such 
        regulations as may be
necessary to carry out the 
        purposes of this paragraph.

 

    (g) Double deductions.  Unless specifically provided 
otherwise, nothing
in this Section shall permit the same item 
to be deducted more than once.

 

    (h) Legislative intention.  Except as expressly provided by 
this
Section there shall be no modifications or limitations on 
the amounts
of income, gain, loss or deduction taken into 
account in determining
gross income, adjusted gross income or 
taxable income for federal income
tax purposes for the taxable 
year, or in the amount of such items
entering into the 
computation of base income and net income under this
Act for 
such taxable year, whether in respect of property values as of

August 1, 1969 or otherwise.

(Source: P.A. 93-812, eff. 7-26-04; 93-840, eff. 7-30-04; 
94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 94-1021, eff. 
7-12-06; 94-1074, eff. 12-26-06; revised 1-2-07.)

 



    (35 ILCS 5/205)  (from Ch. 120, par. 2-205)


    Sec. 205. Exempt organizations. 

    (a) Charitable, etc. organizations. The base income of an

organization which is exempt from the federal income tax by 
reason of
Section 501(a) of the Internal Revenue Code shall not 
be determined
under section 203 of this Act, but shall be its 
unrelated business
taxable income as determined under section 
512 of the Internal Revenue
Code, without any deduction for the 
tax imposed by this Act. The
standard exemption provided by 
section 204 of this Act shall not be
allowed in determining the 
net income of an organization to which this
subsection applies.

    (b) Partnerships.  A partnership as such shall not be 
subject to
the tax imposed by subsection 201 (a) and (b) of 
this Act, but shall be
subject to the replacement tax imposed 
by subsection 201 (c) and (d) of
this Act and shall compute its 
base income as described in subsection (d)
of Section 203 of 
this Act.  For taxable years ending on or after December 31, 
2004, an investment partnership, as defined in Section 
1501(a)(11.5) of this Act, shall not be subject to the tax 
imposed by subsections (c) and (d) of Section 201 of this Act.

A partnership shall file such returns and other
information at 
such
time and in such manner as may be required under Article 5 
of this Act.
The partners in a partnership shall be liable for 
the replacement tax imposed
by subsection 201 (c) and (d) of 
this Act on such partnership, to the extent
such tax is not 
paid by the partnership, as provided under the laws of Illinois

governing the liability of partners for the obligations of a 
partnership.
Persons carrying on business as partners shall be 
liable for the tax
imposed by subsection 201 (a) and (b) of 
this Act only in their separate
or individual capacities.

    (c) Subchapter S corporations. A Subchapter S corporation 
shall not
be subject to the tax imposed by subsection 201 (a) 
and
(b) of this Act but shall be subject to the replacement tax 
imposed by subsection
201 (c) and (d) of this Act and shall 
file such returns
and other information
at such time and in 
such manner as may be required under Article 5 of this Act. 

    (d) Combat zone death. An individual relieved from the 
federal
income tax for any taxable year by reason of section 
692 of the Internal
Revenue Code shall not be subject to the 
tax imposed by this Act for
such taxable year.

    (e) Certain trusts. A common trust fund described in 
Section 584
of the Internal Revenue Code, and any other trust 
to the extent that the
grantor is treated as the owner thereof 
under sections 671 through 678
of the Internal Revenue Code 
shall not be subject to the tax imposed by
this Act.

    (f) Certain business activities. A person not otherwise 
subject to the tax
imposed by this Act shall not become subject 
to the tax imposed by this Act by
reason of:


        (1) that person's ownership of tangible personal 
    property located at the
premises of
a printer in this State 
    with which the person has contracted for printing, or


        (2) activities of the person's employees or agents 
    located solely at the
premises of a printer and related to 
    quality control, distribution, or printing
services 
    performed by a printer in the State with which the person 
    has
contracted for printing.

    (g) A nonprofit risk organization that holds a certificate 
of authority under Article VIID of the Illinois Insurance Code 
is exempt from the tax imposed under this Act with respect to 
its activities or operations in furtherance of the powers 
conferred upon it under that Article VIID of the Illinois 
Insurance Code.

(Source: P.A. 93-840, eff. 7-30-04; 93-918, eff. 1-1-05; 
revised 10-25-04.)

 



    (35 ILCS 5/207)  (from Ch. 120, par. 2-207)



    Sec. 207. Net Losses. 

    (a) If after applying all of the (i) modifications
provided 
for in paragraph (2) of Section 203(b), paragraph (2) of 
Section
203(c) and paragraph (2) of Section 203(d) and (ii) the 
allocation and
apportionment provisions of Article 3 of this

Act and subsection (c) of this Section, the taxpayer's net 
income results in a loss;


        (1) for any taxable year ending prior to December 31, 
    1999, such loss
shall be allowed
as a carryover or 
    carryback deduction in the manner allowed under Section
172 
    of the Internal Revenue Code;


        (2) for any taxable year ending on or after December 
    31, 1999 and prior
to December 31, 2003, such loss
shall be 
    allowed as a carryback to each of the 2 taxable years 
    preceding the
taxable year of such loss and shall be a net 
    operating loss carryover to each of the
20 taxable years 
    following the taxable year of such loss; and


        (3) for any taxable year ending on or after December 
    31, 2003, such loss
shall be allowed as a net operating 
    loss carryover to each of the 12 taxable years
following 
    the taxable year of such loss.

    (a-5) Election to relinquish carryback and order of 
application of
losses.


            (A) For losses incurred in tax years ending prior 
        to December 31,
2003, the taxpayer may elect to 
        relinquish the entire carryback period
with respect to 
        such loss.  Such election shall be made in the form and 
        manner
prescribed by the Department and shall be made 
        by the due date (including
extensions of time) for 
        filing the taxpayer's return for the taxable year in

        which such loss is incurred, and such election, once 
        made, shall be
irrevocable.


            (B) The entire amount of such loss shall be carried 
        to the earliest
taxable year to which such loss may be 
        carried.  The amount of such loss which
shall be carried 
        to each of the other taxable years shall be the excess, 
        if
any, of the amount of such loss over the sum of the 
        deductions for carryback or
carryover of such loss 
        allowable for each of the prior taxable years to which

        such loss may be carried.

    (b) Any loss determined under subsection (a) of this 
Section must be carried
back or carried forward in the same 
manner for purposes of subsections (a)
and (b) of Section 201 
of this Act as for purposes of subsections (c) and
(d) of 
Section 201 of this Act.

    (c) Notwithstanding any other provision of this Act, for 
each taxable year ending on or after December 31, 2008, for 
purposes of computing the loss for the taxable year under 
subsection (a) of this Section and the deduction taken into 
account for the taxable year for a net operating loss carryover 
under paragraphs (1), (2), and (3) of subsection (a) of this 
Section, the loss and net operating loss carryover shall be 
reduced in an amount equal to the reduction to the net 
operating loss and net operating loss carryover to the taxable 
year, respectively, required under Section 108(b)(2)(A) of the 
Internal Revenue Code, multiplied by a fraction, the numerator 
of which is the amount of discharge of indebtedness income that 
is excluded from gross income for the taxable year (but only if 
the taxable year ends on or after December 31, 2008) under 
Section 108(a) of the Internal Revenue Code and that would have 
been allocated and apportioned to this State under Article 3 of 
this Act but for that exclusion, and the denominator of which 
is the total amount of discharge of indebtedness income 
excluded from gross income under Section 108(a) of the Internal 
Revenue Code for the taxable year. The reduction required under 
this subsection (c) shall be made after the determination of 
Illinois net income for the taxable year in which the 
indebtedness is discharged.

(Source: P.A. 93-29, eff. 6-20-03.)

 



    (35 ILCS 5/304)  (from Ch. 120, par. 3-304)



    Sec. 304. Business income of persons other than residents. 

    (a) In general. The business income of a person other than 
a
resident shall be allocated to this State if such person's 
business
income is derived solely from this State. If a person 
other than a
resident derives business income from this State 
and one or more other
states, then, for tax years ending on or 
before December 30, 1998, and
except as otherwise provided by 
this Section, such
person's business income shall be 
apportioned to this State by
multiplying the income by a 
fraction, the numerator of which is the sum
of the property 
factor (if any), the payroll factor (if any) and 200% of the

sales factor (if any), and the denominator of which is 4 
reduced by the
number of factors other than the sales factor 
which have a denominator
of zero and by an additional 2 if the 
sales factor has a denominator of zero.
For tax years ending on 
or after December 31, 1998, and except as otherwise
provided by 
this Section, persons other than
residents who derive business 
income from this State and one or more other
states shall 
compute their apportionment factor by weighting their 
property,
payroll, and sales factors as provided in
subsection 
(h) of this Section.

    (1) Property factor.


        (A) The property factor is a fraction, the numerator of 
    which is the
average value of the person's real and 
    tangible personal property owned
or rented and used in the 
    trade or business in this State during the
taxable year and 
    the denominator of which is the average value of all
the 
    person's real and tangible personal property owned or 
    rented and
used in the trade or business during the taxable 
    year.


        (B) Property owned by the person is valued at its 
    original cost.
Property rented by the person is valued at 8 
    times the net annual rental
rate. Net annual rental rate is 
    the annual rental rate paid by the
person less any annual 
    rental rate received by the person from
sub-rentals.


        (C) The average value of property shall be determined 
    by averaging
the values at the beginning and ending of the 
    taxable year but the
Director may require the averaging of 
    monthly values during the taxable
year if reasonably 
    required to reflect properly the average value of the

    person's property.

    (2) Payroll factor.


        (A) The payroll factor is a fraction, the numerator of 
    which is the
total amount paid in this State during the 
    taxable year by the person
for compensation, and the 
    denominator of which is the total compensation
paid 
    everywhere during the taxable year.


        (B) Compensation is paid in this State if:


            (i) The individual's service is performed entirely 
        within this
State;


            (ii) The individual's service is performed both 
        within and without
this State, but the service 
        performed without this State is incidental
to the 
        individual's service performed within this State; or


            (iii) Some of the service is performed within this 
        State and either
the base of operations, or if there is 
        no base of operations, the place
from which the service 
        is directed or controlled is within this State,
or the 
        base of operations or the place from which the service 
        is
directed or controlled is not in any state in which 
        some part of the
service is performed, but the 
        individual's residence is in this State.

            (iv) Compensation paid to nonresident professional 
        athletes.
            (a)  General.  The Illinois source income of a 
        nonresident individual who is a member of a 
        professional athletic team includes the portion of the 
        individual's total compensation for services performed 
        as a member of a professional athletic team during the 
        taxable year which the number of duty days spent within 
        this State performing services for the team in any 
        manner during the taxable year bears to the total 
        number of duty days spent both within and without this 
        State during the taxable year.
            (b) Travel days.  Travel days that do not involve 
        either a game, practice, team meeting, or other similar 
        team event are not considered duty days spent in this 
        State.  However, such travel days are considered in the 
        total duty days spent both within and without this 
        State.
            (c) Definitions.  For purposes of this subpart 
        (iv):
                (1) The term "professional athletic team" 
            includes, but is not limited to, any professional 
            baseball, basketball, football, soccer, or hockey 
            team.
                (2) The term "member of a professional 
            athletic team" includes those employees who are 
            active players, players on the disabled list, and 
            any other persons required to travel and who travel 
            with and perform services on behalf of a 
            professional athletic team on a regular basis.  
            This includes, but is not limited to, coaches, 
            managers, and trainers.
                (3) Except as provided in items (C) and (D) of 
            this subpart (3), the term "duty days" means all 
            days during the taxable year from the beginning of 
            the professional athletic team's official 
            pre-season training period through the last game 
            in which the team competes or is scheduled to 
            compete.  Duty days shall be counted for the year in 
            which they occur, including where a team's 
            official pre-season training period through the 
            last game in which the team competes or is 
            scheduled to compete, occurs during more than one 
            tax year.
                    (A) Duty days shall also include days on 
                which a member of a professional athletic team 
                performs service for a team on a date that does 
                not fall within the foregoing period (e.g., 
                participation in instructional leagues, the 
                "All Star Game", or promotional "caravans").  
                Performing a service for a professional 
                athletic team includes conducting training and 
                rehabilitation activities, when such 
                activities are conducted at team facilities.
                    (B) Also included in duty days are game 
                days, practice days, days spent at team 
                meetings, promotional caravans, preseason 
                training camps, and days served with the team 
                through all post-season games in which the team 
                competes or is scheduled to compete.
                    (C) Duty days for any person who joins a 
                team during the period from the beginning of 
                the professional athletic team's official 
                pre-season training period through the last 
                game in which the team competes, or is 
                scheduled to compete, shall begin on the day 
                that person joins the team. Conversely, duty 
                days for any person who leaves a team during 
                this period shall end on the day that person 
                leaves the team. Where a person switches teams 
                during a taxable year, a separate duty-day 
                calculation shall be made for the period the 
                person was with each team.
                    (D) Days for which a member of a 
                professional athletic team is not compensated 
                and is not performing services for the team in 
                any manner, including days when such member of 
                a professional athletic team has been 
                suspended without pay and prohibited from 
                performing any services for the team, shall not 
                be treated as duty days.
                    (E) Days for which a member of a 
                professional athletic team is on the disabled 
                list and does not conduct rehabilitation 
                activities at facilities of the team, and is 
                not otherwise performing services for the team 
                in Illinois, shall not be considered duty days 
                spent in this State. All days on the disabled 
                list, however, are considered to be included in 
                total duty days spent both within and without 
                this State.
                (4) The term "total compensation for services 
            performed as a member of a professional athletic 
            team" means the total compensation received during 
            the taxable year for services performed:
                    (A) from the beginning of the official 
                pre-season training period through the last 
                game in which the team competes or is scheduled 
                to compete during that taxable year; and
                    (B) during the taxable year on a date which 
                does not fall within the foregoing period 
                (e.g., participation in instructional leagues, 
                the "All Star Game", or promotional caravans).
                This compensation shall include, but is not 
            limited to, salaries, wages, bonuses as described 
            in this subpart, and any other type of compensation 
            paid during the taxable year to a member of a 
            professional athletic team for services performed 
            in that year.  This compensation does not include 
            strike benefits, severance pay, termination pay, 
            contract or option year buy-out payments, 
            expansion or relocation payments, or any other 
            payments not related to services performed for the 
            team.
                For purposes of this subparagraph, "bonuses" 
            included in "total compensation for services 
            performed as a member of a professional athletic 
            team" subject to the allocation described in 
            Section 302(c)(1) are: bonuses earned as a result 
            of play (i.e., performance bonuses) during the 
            season, including bonuses paid for championship, 
            playoff or "bowl" games played by a team, or for 
            selection to all-star league or other honorary 
            positions; and bonuses paid for signing a 
            contract, unless the payment of the signing bonus 
            is not conditional upon the signee playing any 
            games for the team or performing any subsequent 
            services for the team or even making the team, the 
            signing bonus is payable separately from the 
            salary and any other compensation, and the signing 
            bonus is nonrefundable.


    (3) Sales factor.


        (A) The sales factor is a fraction, the numerator of 
    which is the
total sales of the person in this State during 
    the taxable year, and the
denominator of which is the total 
    sales of the person everywhere during
the taxable year.


        (B) Sales of tangible personal property are in this 
    State if:


            (i) The property is delivered or shipped to a 
        purchaser, other than
the United States government, 
        within this State regardless of the f. o.
b. point or 
        other conditions of the sale; or


            (ii) The property is shipped from an office, store, 
        warehouse,
factory or other place of storage in this 
        State and either the purchaser
is the United States 
        government or the person is not taxable in the
state of 
        the purchaser; provided, however, that premises owned 
        or leased
by a person who has independently contracted 
        with the seller for the printing
of newspapers, 
        periodicals or books shall not be deemed to be an 
        office,
store, warehouse, factory or other place of 
        storage for purposes of this
Section.
Sales of tangible 
        personal property are not in this State if the
seller 
        and purchaser would be members of the same unitary 
        business group
but for the fact that either the seller 
        or purchaser is a person with 80%
or more of total 
        business activity outside of the United States and the

        property is purchased for resale.


        (B-1) Patents, copyrights, trademarks, and similar 
    items of intangible
personal property.


            (i) Gross receipts from the licensing, sale, or 
        other disposition of a
patent, copyright, trademark, 
        or similar item of intangible personal property
are in 
        this State to the extent the item is utilized in this 
        State during the
year the gross receipts are included 
        in gross income.


            (ii) Place of utilization.


                (I) A patent is utilized in a state to the 
            extent that it is employed
in production, 
            fabrication, manufacturing, or other processing in 
            the state or
to the extent that a patented product 
            is produced in the state.  If a patent is
utilized 
            in
more than one state, the extent to which it is 
            utilized in any one state shall
be a fraction equal 
            to the gross receipts of the licensee or purchaser 
            from
sales or leases of items produced, 
            fabricated, manufactured, or processed
within that 
            state using the patent and of patented items 
            produced within that
state, divided by the total of 
            such gross receipts for all states in which the

            patent is utilized.


                (II) A copyright is utilized in a state to the 
            extent that printing or
other publication 
            originates in the state.  If a copyright is utilized 
            in more
than one state, the extent to which it is 
            utilized in any one state shall be a
fraction equal 
            to the gross receipts from sales or licenses of 
            materials
printed or published in that state 
            divided by the total of such gross receipts
for all 
            states in which the copyright is utilized.


                (III) Trademarks and other items of intangible 
            personal property
governed by this paragraph (B-1) 
            are utilized in the state in which the
commercial 
            domicile of the licensee or purchaser is located.


            (iii) If the state of utilization of an item of 
        property governed by
this paragraph (B-1) cannot be 
        determined from the taxpayer's books and
records or 
        from the books and records of any person related to the 
        taxpayer
within the meaning of Section 267(b) of the 
        Internal Revenue Code, 26 U.S.C.
267, the gross

        receipts attributable to that item shall be excluded 
        from both the numerator
and the denominator of the 
        sales factor.


        (B-2) Gross receipts from the license, sale, or other 
    disposition of
patents, copyrights, trademarks, and 
    similar items of intangible personal
property may be 
    included in the numerator or denominator of the sales 
    factor
only if gross receipts from licenses, sales, or 
    other disposition of such items
comprise more than 50% of 
    the taxpayer's total gross receipts included in gross

    income during the tax year and during each of the 2 
    immediately preceding tax
years; provided that, when a 
    taxpayer is a member of a unitary business group,
such 
    determination shall be made on the basis of the gross 
    receipts of the
entire unitary business group.


        (C) For taxable years ending before December 31, 2008, 
    sales
Sales, other than sales governed by paragraphs (B),

    and (B-1), and (B-2), are in
this State if:


            (i) The income-producing activity is performed in 
        this State; or


            (ii) The income-producing activity is performed 
        both within and
without this State and a greater 
        proportion of the income-producing
activity is 
        performed within this State than without this State, 
        based
on performance costs.

        (C-5) For taxable years ending on or after December 31, 
    2008, sales, other than sales governed by paragraphs (B), 
    (B-1), and (B-2), are in this State if the purchaser is in 
    this State or the sale is otherwise attributable to this 
    State's marketplace. The following examples are 
    illustrative:
            (i) Sales from the sale or lease of real property 
        are in this State if the property is located in this 
        State.
            (ii) Sales from the lease or rental of tangible 
        personal property are in this State if the property is 
        located in this State during the rental period. Sales 
        from the lease or rental of tangible personal property 
        that is characteristically moving property, including, 
        but not limited to, motor vehicles, rolling stock, 
        aircraft, vessels, or mobile equipment are in this 
        State to the extent that the property is used in this 
        State.
            (iii) Sales of intangible personal property are in 
        this State if the purchaser realizes benefit from the 
        property in this State.  If the purchaser realizes 
        benefit from the property  both within and without this 
        State, the gross receipts from the sale shall be 
        divided among those states in which the taxpayer is 
        taxable in proportion to the benefit  in each state.  If 
        the proportionate benefit in this State cannot be 
        determined, the sale shall be excluded from both the 
        numerator and the denominator of the sales factor.
            (iv) Sales of services are in this State if the 
        benefit of the service is realized in this State.  If 
        the benefit of the service is realized both within and 
        without this State, the gross receipts from the sale 
        shall be divided among those states in which the 
        taxpayer is taxable in proportion to the benefit of 
        service realized in each state.  If the proportionate 
        benefit in this State cannot be determined, the sale 
        shall be excluded from both the numerator and the 
        denominator of the sales factor. The Department may 
        adopt rules prescribing where the benefit of  specific 
        types of service, including, but not limited to, 
        telecommunications, broadcast, cable,  advertising, 
        publishing, and utility service, is realized.


        (D) For taxable years ending on or after December 31, 
    1995, the following
items of income shall not be included 
    in the numerator or denominator of the
sales factor: 
    dividends; amounts included under Section 78 of the 
    Internal
Revenue Code; and Subpart F income as defined in 
    Section 952 of the Internal
Revenue Code.
No inference 
    shall be drawn from the enactment of this paragraph (D) in

    construing this Section for taxable years ending before 
    December 31, 1995.


        (E) Paragraphs (B-1) and (B-2) shall apply to tax years 
    ending on or
after December 31, 1999, provided that a 
    taxpayer may elect to apply the
provisions of these 
    paragraphs to prior tax years.  Such election shall be made

    in the form and manner prescribed by the Department, shall 
    be irrevocable, and
shall apply to all tax years; provided 
    that, if a taxpayer's Illinois income
tax liability for any 
    tax year, as assessed under Section 903 prior to January
1, 
    1999, was computed in a manner contrary to the provisions 
    of paragraphs
(B-1) or (B-2), no refund shall be payable to 
    the taxpayer for that tax year to
the extent such refund is 
    the result of applying the provisions of paragraph
(B-1) or 
    (B-2) retroactively.  In the case of a unitary business 
    group, such
election shall apply to all members of such 
    group for every tax year such group
is in existence, but 
    shall not apply to any taxpayer for any period during
which 
    that taxpayer is not a member of such group.

    (b) Insurance companies.


        (1) In general. Except as otherwise
provided by 
    paragraph (2), business income of an insurance company for 
    a
taxable year shall be apportioned to this State by 
    multiplying such
income by a fraction, the numerator of 
    which is the direct premiums
written for insurance upon 
    property or risk in this State, and the
denominator of 
    which is the direct premiums written for insurance upon

    property or risk everywhere. For purposes of this 
    subsection, the term
"direct premiums written" means the 
    total amount of direct premiums
written, assessments and 
    annuity considerations as reported for the
taxable year on 
    the annual statement filed by the company with the
Illinois 
    Director of Insurance in the form approved by the National

    Convention of Insurance Commissioners
or such other form as 
    may be
prescribed in lieu thereof.


        (2) Reinsurance. If the principal source of premiums 
    written by an
insurance company consists of premiums for 
    reinsurance accepted by it,
the business income of such 
    company shall be apportioned to this State
by multiplying 
    such income by a fraction, the numerator of which is the

    sum of (i) direct premiums written for insurance upon 
    property or risk
in this State, plus (ii) premiums written 
    for reinsurance accepted in
respect of property or risk in 
    this State, and the denominator of which
is the sum of 
    (iii) direct premiums written for insurance upon property

    or risk everywhere, plus (iv) premiums written for 
    reinsurance accepted
in respect of property or risk 
    everywhere. For taxable years ending before December 31, 
    2008, for purposes of this
paragraph, premiums written for 
    reinsurance accepted in respect of
property or risk in this 
    State, whether or not otherwise determinable,
may, at the 
    election of the company, be determined on the basis of the

    proportion which premiums written for reinsurance accepted 
    from
companies commercially domiciled in Illinois bears to 
    premiums written
for reinsurance accepted from all 
    sources, or, alternatively, in the
proportion which the sum 
    of the direct premiums written for insurance
upon property 
    or risk in this State by each ceding company from which

    reinsurance is accepted bears to the sum of the total 
    direct premiums
written by each such ceding company for the 
    taxable year.

    (c) Financial organizations.


        (1) In general. For taxable years ending before 
    December 31, 2008, business
Business income of a financial

    organization shall be apportioned to this State by 
    multiplying such
income by a fraction, the numerator of 
    which is its business income from
sources within this 
    State, and the denominator of which is its business
income 
    from all sources. For the purposes of this subsection, the

    business income of a financial organization from sources 
    within this
State is the sum of the amounts referred to in 
    subparagraphs (A) through
(E) following, but excluding the 
    adjusted income of an international banking
facility as 
    determined in paragraph (2):


            (A) Fees, commissions or other compensation for 
        financial services
rendered within this State;


            (B) Gross profits from trading in stocks, bonds or 
        other securities
managed within this State;


            (C) Dividends, and interest from Illinois 
        customers, which are received
within this State;


            (D) Interest charged to customers at places of 
        business maintained
within this State for carrying 
        debit balances of margin accounts,
without deduction 
        of any costs incurred in carrying such accounts; and


            (E) Any other gross income resulting from the 
        operation as a
financial organization within this 
        State. In computing the amounts
referred to in 
        paragraphs (A) through (E) of this subsection, any 
        amount
received by a member of an affiliated group 
        (determined under Section
1504(a) of the Internal 
        Revenue Code but without reference to whether
any such 
        corporation is an "includible corporation" under 
        Section
1504(b) of the Internal Revenue Code) from 
        another member of such group
shall be included only to 
        the extent such amount exceeds expenses of the

        recipient directly related thereto.


        (2) International Banking Facility. For taxable years 
    ending before December 31, 2008:


            (A) Adjusted Income.  The adjusted income of an 
        international banking
facility is its income reduced 
        by the amount of the floor amount.


            (B) Floor Amount.  The floor amount shall be the 
        amount, if any,
determined
by multiplying the income of 
        the international banking facility by a fraction,
not 
        greater than one, which is determined as follows:


                (i) The numerator shall be:


                The average aggregate, determined on a 
            quarterly basis, of the
financial
organization's 
            loans to banks in foreign countries, to foreign 
            domiciled
borrowers (except where secured 
            primarily by real estate) and to foreign

            governments and other foreign official 
            institutions, as reported for its
branches, 
            agencies and offices within the state on its 
            "Consolidated Report
of Condition", Schedule A, 
            Lines 2.c., 5.b., and 7.a., which was filed with

            the Federal Deposit Insurance Corporation and 
            other regulatory authorities,
for the year 1980, 
            minus


                The average aggregate, determined on a 
            quarterly basis, of such loans
(other
than loans of 
            an international banking facility), as reported by 
            the financial
institution for its branches, 
            agencies and offices within the state, on
the 
            corresponding Schedule and lines of the 
            Consolidated Report of Condition
for the current 
            taxable year, provided, however, that in no case 
            shall the
amount determined in this clause (the 
            subtrahend) exceed the amount determined
in the 
            preceding clause (the minuend); and


                (ii) the denominator shall be the average 
            aggregate, determined on a
quarterly basis, of the 
            international banking facility's loans to banks in

            foreign countries, to foreign domiciled borrowers 
            (except where secured
primarily by real estate) 
            and to foreign governments and other foreign

            official institutions, which were recorded in its 
            financial accounts for
the current taxable year.


            (C) Change to Consolidated Report of Condition and 
        in Qualification.
In the event the Consolidated Report 
        of Condition which is filed with the
Federal Deposit 
        Insurance Corporation and other regulatory authorities 
        is
altered so that the information required for 
        determining the floor amount
is not found on Schedule 
        A, lines 2.c., 5.b. and 7.a., the financial
institution 
        shall notify the Department and the Department may, by

        regulations or otherwise, prescribe or authorize the 
        use of an alternative
source for such information. The 
        financial institution shall also notify
the Department 
        should its international banking facility fail to 
        qualify as
such, in whole or in part, or should there 
        be any amendment or change to
the Consolidated Report 
        of Condition, as originally filed, to the extent
such 
        amendment or change alters the information used in 
        determining the floor
amount.

        (3) For taxable years ending on or after December 31, 
    2008, the business income of a financial organization shall 
    be apportioned to this State by multiplying such income by 
    a fraction, the numerator of which is its gross receipts 
    from sources in this State or otherwise attributable to 
    this State's marketplace and the denominator of which is 
    its gross receipts everywhere during the taxable year. 
    "Gross receipts" for purposes of this subparagraph (3) 
    means gross income, including net taxable gain on 
    disposition of assets, including securities and money 
    market instruments, when derived from transactions and 
    activities in the regular course of the financial 
    organization's trade or business. If a person derives 
    business income from activities in addition to the 
    provision of financial services, this subparagraph (3) 
    shall apply only to its business income from financial 
    services, and its  other business income shall be 
    apportioned to this State under the applicable provisions 
    of this Section. The following examples are illustrative:

            (i) Receipts from the lease or rental of real or 
        tangible personal property are in this State if the 
        property is located in this State during the rental 
        period.  Receipts from the lease or rental of tangible 
        personal property that is characteristically moving 
        property, including, but not limited to, motor 
        vehicles, rolling stock, aircraft, vessels, or mobile 
        equipment are from sources in this State to the extent 
        that the property is used in this State.
            (ii) Interest income, commissions, fees, gains on 
        disposition, and other receipts from assets in the 
        nature of loans that are secured primarily by real 
        estate or tangible personal property are from sources 
        in this State  if the security is located in this State.
            (iii) Interest income, commissions, fees, gains on 
        disposition, and other receipts from consumer loans 
        that are not secured by real or tangible personal 
        property are from sources in this State if the debtor 
        is a resident of this State.
            (iv) Interest income, commissions, fees, gains on 
        disposition, and other receipts from commercial loans 
        and installment obligations that are not secured by 
        real or tangible personal property are from sources in 
        this State if the proceeds of the loan are to be 
        applied in this State. If it cannot be determined where 
        the funds are to be applied, the income and receipts 
        are from sources in this State if the office of the 
        borrower from which the loan was negotiated in the 
        regular course of business is located in this State. If 
        the location of this office cannot be determined, the 
        income and receipts shall be excluded from the 
        numerator and denominator of the sales factor.

            (v) Interest income, fees, gains on disposition, 
        service charges, merchant discount income, and other 
        receipts from credit card receivables are from sources 
        in this State if the card charges are regularly billed 
        to a customer in this State.
            (vi) Receipts from the performance of services, 
        including, but not limited to, fiduciary, advisory, 
        and brokerage services,  are in this State if the 
        benefit of the service is realized in this State. If 
        the benefit of the service is realized both within and 
        without this State, the gross receipts from the sale 
        shall be divided among those states in which the 
        taxpayer is taxable in proportion to the benefit of 
        service realized in each state.  If the proportionate 
        benefit in this State cannot be determined, the sale 
        shall be excluded from both the numerator and the 
        denominator of the gross receipts factor.
            (vii) Receipts from the issuance of travelers 
        checks and money orders are from sources in this State 
        if the checks and money orders are issued from a 
        location within this State.
            (viii) In the case of a financial organization that 
        accepts deposits, receipts from investments and from 
        money market instruments are apportioned to this State 
        based on the ratio that the total deposits of the 
        financial organization (including all members of the 
        financial organization's unitary group) from this 
        State, its residents, (including businesses with an 
        office or other place of business in this State), and 
        its political subdivisions, agencies, and 
        instrumentalities bear to total deposits everywhere.  
        For purposes of this subdivision, deposits  must be 
        attributed to this State under the preceding sentence, 
        whether or not the deposits are accepted or maintained 
        by the financial organization at locations within this 
        State.  In the case of a financial organization that 
        does not accept deposits, receipts from investments in 
        securities and  from money market instruments shall be 
        excluded from the numerator and the denominator of the 
        gross receipts factor.

        (4) As used in subparagraph (3),  "deposit" includes but 
    is not limited to:
            (i) the unpaid balance of money or its equivalent 
        received or held by a financial institution in the 
        usual course of business and for which it has given or 
        is obligated to give credit, either conditionally or 
        unconditionally, to a commercial, checking, savings, 
        time, or thrift account whether or not advance notice 
        is required to withdraw the credited funds, or which is 
        evidenced by its certificate of deposit, thrift 
        certificate, investment certificate, or certificate of 
        indebtedness, or other similar name, or a check or 
        draft drawn against a deposit account and certified by 
        the financial organization, or a letter of credit or a 
        traveler's check on which the financial organization 
        is primarily liable. However, without limiting the 
        generality of the term "money or its equivalent", any 
        such account or instrument must be regarded as 
        evidencing the receipt of the equivalent of money when 
        credited or issued in exchange for checks or drafts or 
        for a promissory note upon which the person obtaining 
        the credit or instrument is primarily or secondarily 
        liable, or for a charge against a deposit account, or 
        in settlement of checks, drafts, or other instruments 
        forwarded to the bank for collection;
            (ii) trust funds received or held by the financial 
        organization, whether held in the trust department or 
        held or deposited in any other department of the 
        financial  organization;
            (iii) money received or held by a financial 
        organization, or the credit given for money or its 
        equivalent received or held by a financial 
        organization, in the usual course of business for a 
        special or specific purpose, regardless of the legal 
        relationship so established. Under this paragraph, 
        "deposit" includes, but is not limited to, escrow 
        funds, funds held as security for an obligation due to 
        the financial organization or others, including funds 
        held as dealers reserves, or for securities loaned by 
        the financial organization, funds deposited by a 
        debtor to meet maturing obligations, funds deposited 
        as advance payment on subscriptions to United States 
        government securities, funds held for distribution or 
        purchase of securities, funds held to meet its 
        acceptances or letters of credit, and withheld taxes. 
        It does not include funds received by the financial 
        organization for immediate application to the 
        reduction of an indebtedness to the receiving 
        financial organization, or under condition that the 
        receipt of the funds immediately reduces or 
        extinguishes the indebtedness;
            (iv) outstanding drafts, including advice of 
        another financial organization, cashier's checks, 
        money orders, or other officer's checks issued in the 
        usual course of business for any purpose, but not 
        including those issued in payment for services, 
        dividends, or purchases or other costs or expenses of 
        the financial organization itself; and
            (v) money or its equivalent held as a credit 
        balance by a financial organization on behalf of its 
        customer if the entity is engaged in soliciting and 
        holding such balances in the regular course of its 
        business.

        (5)  As used in subparagraph (3), "money market 
    instruments" includes but is not limited to:
            (i) Interest-bearing deposits, federal funds sold 
        and securities purchased under agreements to resell, 
        commercial paper, banker's acceptances, and purchased 
        certificates of deposit and similar instruments to the 
        extent that the instruments are reflected as assets 
        under generally accepted accounting principles.
            "Securities" means  corporate stock, bonds, and 
        other securities (including, for purposes of taxation 
        of gains on securities and for purchases under 
        agreements to resell, United States Treasury 
        securities, obligations of United States government 
        agencies and corporations, obligations of state and 
        political subdivisions, the interest on which is 
        exempt from Illinois income tax), participations in 
        securities backed by mortgages held by United States or 
        state government agencies, loan-backed securities, and 
        similar investments to the extent the investments are 
        reflected as assets under generally accepted 
        accounting principles.
            (ii)  For purposes of subparagraph (3), "money 
        market instruments" shall include investments in 
        investment partnerships, trusts, pools, funds, 
        investment companies, or any similar entity in 
        proportion to the investment of the entity in money 
        market instruments, and "securities" shall include 
        investments in investment partnerships, trusts, pools, 
        funds, investment companies, or any similar entity in 
        proportion to the investment of the entity in 
        securities.

    (d) Transportation services. For taxable years ending 
before December 31, 2008, business
Business income derived from 
furnishing
transportation services shall be apportioned to 
this State in accordance
with paragraphs (1) and (2):


        (1) Such business income (other than that derived from

    transportation by pipeline) shall be apportioned to this 
    State by
multiplying such income by a fraction, the 
    numerator of which is the
revenue miles of the person in 
    this State, and the denominator of which
is the revenue 
    miles of the person everywhere. For purposes of this

    paragraph, a revenue mile is the transportation of 1 
    passenger or 1 net
ton of freight the distance of 1 mile 
    for a consideration. Where a
person is engaged in the 
    transportation of both passengers and freight,
the 
    fraction above referred to shall be determined by means of 
    an
average of the passenger revenue mile fraction and the 
    freight revenue
mile fraction, weighted to reflect the 
    person's


            (A) relative railway operating income from total 
        passenger and total
freight service, as reported to the 
        Interstate Commerce Commission, in
the case of 
        transportation by railroad, and


            (B) relative gross receipts from passenger and 
        freight
transportation, in case of transportation 
        other than by railroad.


        (2) Such business income derived from transportation 
    by pipeline
shall be apportioned to this State by 
    multiplying such income by a
fraction, the numerator of 
    which is the revenue miles of the person in
this State, and 
    the denominator of which is the revenue miles of the
person 
    everywhere. For the purposes of this paragraph, a revenue 
    mile is
the transportation by pipeline of 1 barrel of oil, 
    1,000 cubic feet of
gas, or of any specified quantity of 
    any other substance, the distance
of 1 mile for a 
    consideration.

        (3) For taxable years ending on or after December 31, 
    2008, business income derived from providing 
    transportation services other than airline services shall 
    be apportioned to this State by using a fraction, (a) the 
    numerator of which shall be (i) all receipts from any 
    movement or shipment of people, goods, mail, oil, gas, or 
    any other substance (other than by airline) that both 
    originates and terminates in this State, plus (ii) that 
    portion of the person's gross receipts from movements or 
    shipments of people, goods, mail, oil, gas, or any other 
    substance (other than by airline) passing through, into, or 
    out of this State, that is determined by the ratio that the 
    miles traveled in this State bears to total miles from 
    point of origin to point of destination and (b) the 
    denominator of which shall be all revenue derived from the 
    movement or shipment of people, goods, mail, oil, gas, or 
    any other substance (other than by airline).   If a person 
    derives business income from activities in addition to the 
    provision of transportation services (other than by 
    airline), this subsection shall apply only to its business 
    income from transportation services and its other business 
    income shall be apportioned to this State according to the 
    applicable provisions of this Section.

        (4) For taxable years ending on or after December 31, 
    2008, business income derived from providing airline 
    services shall be apportioned to this State by using a 
    fraction, (a) the numerator of which shall be arrivals  of 
    aircraft to and departures from this State weighted as to 
    cost of aircraft by type and (b) the denominator of which 
    shall be total arrivals and departures of aircraft weighted 
    as to cost of aircraft by type.  If a person derives 
    business income from activities in addition to the 
    provision of airline services, this subsection shall apply 
    only to its business income from airline services and its 
    other business income shall be apportioned to this State 
    under the applicable provisions of this Section.

    (e) Combined apportionment.  Where 2 or more persons are 
engaged in
a unitary business as described in subsection 
(a)(27) of
Section 1501,
a part of which is conducted in this 
State by one or more members of the
group, the business income 
attributable to this State by any such member
or members shall 
be apportioned by means of the combined apportionment method.

    (f) Alternative allocation. If the allocation and 
apportionment
provisions of subsections (a) through (e) and of 
subsection (h) do not
fairly represent the
extent of a person's 
business activity in this State, the person may
petition for, 
or the Director may, without a petition, permit or require, in 
respect of all or any part
of the person's business activity, 
if reasonable:


        (1) Separate accounting;


        (2) The exclusion of any one or more factors;


        (3) The inclusion of one or more additional factors 
    which will
fairly represent the person's business 
    activities in this State; or


        (4) The employment of any other method to effectuate an 
    equitable
allocation and apportionment of the person's 
    business income.

    (g) Cross reference. For allocation of business income by 
residents,
see Section 301(a).

    (h) For tax years ending on or after December 31, 1998, the 
apportionment
factor of persons who apportion their business 
income to this State under
subsection (a) shall be equal to:


        (1) for tax years ending on or after December 31, 1998 
    and before December
31, 1999, 16 2/3% of the property 
    factor plus 16 2/3% of the payroll factor
plus
66 2/3% of 
    the sales factor;


        (2) for tax years ending on or after December 31, 1999 
    and before December
31,
2000, 8 1/3% of the property factor 
    plus 8 1/3% of the payroll factor plus 83
1/3%
of the sales 
    factor;


        (3) for tax years ending on or after December 31, 2000, 
    the sales factor.

If, in any tax year ending on or after December 31, 1998 and 
before December
31, 2000, the denominator of the payroll, 
property, or sales factor is zero,
the apportionment
factor 
computed in paragraph (1) or (2) of this subsection for that 
year shall
be divided by an amount equal to 100% minus the 
percentage weight given to each
factor whose denominator is 
equal to zero.

(Source: P.A. 94-247, eff. 1-1-06.)

 



    (35 ILCS 5/502)  (from Ch. 120, par. 5-502)



    Sec. 502. Returns and notices. 

    (a) In general. A return with respect to the taxes imposed 
by this
Act shall be made by every person for any taxable year:


        (1) for which such person is liable for a tax imposed 
    by this Act,
or


        (2) in the case of a resident or in the case of a 
    corporation which
is qualified to do business in this 
    State, for which such person is
required to make a federal 
    income tax return, regardless of whether such
person is 
    liable for a tax imposed by this Act.  However, this 
    paragraph
shall not require a resident to make a return if 
    such person has
an
Illinois base income of the basic amount 
    in Section 204(b) or
less and is either claimed as a 
    dependent on
another person's tax return under the Internal 
    Revenue Code of 1986, or is
claimed as a dependent on 
    another person's tax return under this Act.

    Notwithstanding the provisions of paragraph (1), a 
nonresident whose Illinois income tax liability under 
subsections (a), (b), (c), and (d) of Section 201 of this Act 
is paid in full after taking into account the credits allowed 
under subsection (f) of this Section or allowed under Section 
709.5 of this Act shall not be required to file a return under 
this subsection (a).

    (b) Fiduciaries and receivers.


        (1) Decedents. If an individual is deceased, any return 
    or notice
required of such individual under this Act shall 
    be made by his
executor, administrator, or other person 
    charged with the property of
such decedent.


        (2) Individuals under a disability. If an individual is 
    unable
to make a return or notice required under this Act, 
    the return or notice
required of such individual shall be 
    made by his duly authorized agent,
guardian, fiduciary or 
    other person charged with the care
of the person or 
    property of such individual.


        (3) Estates and trusts. Returns or notices required of 
    an estate
or a trust shall be made by the fiduciary 
    thereof.


        (4) Receivers, trustees and assignees for 
    corporations. In a
case where a receiver, trustee in 
    bankruptcy, or assignee, by order of a
court of competent 
    jurisdiction, by operation of law, or otherwise, has

    possession of or holds title to all or substantially all 
    the property or
business of a corporation, whether or not 
    such property or business is
being operated, such receiver, 
    trustee, or assignee shall make the
returns and notices 
    required of such corporation in the same manner and
form as 
    corporations are required to make such returns and notices.

    (c) Joint returns by husband and wife.


        (1) Except as provided in paragraph (3), if a husband 
    and wife file a
joint federal income tax return for a 
    taxable year they shall file a joint
return under this Act 
    for such taxable year and their liabilities shall be
joint 
    and several, but if the federal income tax liability of 
    either spouse is
determined on a separate federal income 
    tax return, they shall file separate
returns under this 
    Act.


        (2) If neither spouse is required to file a federal 
    income tax
return and either or both are required to file a 
    return under this Act,
they may elect to file separate or 
    joint returns and pursuant to such
election their 
    liabilities shall be separate or joint and several.


        (3) If either husband or wife is a resident and the 
    other is a
nonresident, they shall file separate returns in 
    this State on such
forms as may be required by the 
    Department in which event their tax
liabilities shall be 
    separate; but they may elect to determine their
joint net 
    income and file a joint return as if both were residents 
    and
in such case, their liabilities shall be joint and 
    several.


        (4) Innocent spouses.


            (A) However, for tax liabilities arising and paid 
        prior to August 13,
1999, an innocent spouse shall be 
        relieved of
liability for tax
(including interest and 
        penalties) for any taxable year for which a joint

        return has been made, upon submission of proof that the 
        Internal Revenue
Service has made a determination 
        under Section 6013(e) of the Internal
Revenue Code, for 
        the same taxable year, which determination relieved 
        the
spouse from liability for federal income taxes.
If 
        there is no federal income tax liability at issue for 
        the
same taxable year, the Department shall rely on the 
        provisions of Section
6013(e) to determine whether the 
        person requesting innocent spouse abatement of
tax, 
        penalty, and interest is entitled to that relief.


            (B) For tax liabilities arising on and after August 
        13, 1999 or which arose prior to that date, but remain 
        unpaid as of that date, if
an individual
who filed a 
        joint return for any taxable year has made an election 
        under this
paragraph, the individual's liability for 
        any tax shown on the joint return
shall not exceed the 
        individual's separate return amount and the 
        individual's
liability for any deficiency assessed for 
        that taxable year shall not exceed
the portion of the 
        deficiency properly allocable to the individual.  For

        purposes of this paragraph:


                (i) An election properly made pursuant to 
            Section 6015 of the Internal
Revenue Code shall 
            constitute an election under this paragraph, 
            provided that
the election shall not be effective 
            until the individual has notified the
Department 
            of the election in the form and manner prescribed 
            by the Department.


                (ii) If no election has been made under Section 
            6015, the individual
may make an election under 
            this paragraph in the form and manner prescribed by

            the Department, provided that no election may be 
            made if the Department finds
that assets were 
            transferred
between individuals filing a joint 
            return as part of a scheme by such
individuals to 
            avoid payment of Illinois income tax and the 
            election shall not
eliminate the individual's 
            liability for any portion of a deficiency

            attributable to an error on the return of which the 
            individual had actual
knowledge as of the date of 
            filing.


                (iii) In determining the separate return 
            amount or portion of any
deficiency attributable 
            to an individual, the Department shall follow the

            provisions in subsections (c) and (d) of Section 
            6015 of the Internal Revenue Code.


                (iv) In determining the validity of an 
            individual's election under
subparagraph (ii) and 
            in determining an electing individual's separate 
            return
amount or portion of any deficiency under 
            subparagraph (iii), any determination
made by the 
            Secretary of the Treasury, by the United States Tax 
            Court on
petition for review of a determination by 
            the Secretary of the Treasury, or on
appeal from 
            the United States Tax Court under Section 6015 of

            the Internal
Revenue Code regarding criteria for 
            eligibility or under subsection (d) of
Section 
            6015
of the Internal Revenue Code regarding the 
            allocation of any item of income,
deduction, 
            payment, or credit between an individual making 
            the federal election
and that individual's spouse 
            shall be conclusively presumed to be correct.
With 
            respect to any item that is not the subject of a 
            determination by the
Secretary of the Treasury or 
            the federal courts, in any proceeding
involving 
            this subsection, the
individual making the 
            election shall have the burden of proof with 
            respect to
any item except that the Department 
            shall have the burden of proof with respect
to 
            items in subdivision (ii).


                (v) Any election made by an individual under 
            this subsection shall
apply to all years for which 
            that individual and the spouse named in the

            election have filed a joint return.


                (vi) After receiving a notice that the federal 
            election has been made
or after receiving an 
            election under subdivision (ii), the Department 
            shall
take no collection action against the 
            electing individual for any liability
arising from 
            a joint return covered by the election until the 
            Department has
notified the electing individual in 
            writing that the election is invalid or of
the 
            portion of the liability the Department has 
            allocated to the electing
individual.  Within 60 
            days (150 days if the individual is outside the 
            United
States) after the issuance of such 
            notification, the individual may file a
written 
            protest of the denial of the election or of the 
            Department's
determination of the liability 
            allocated to him or her and shall be granted a

            hearing within the Department under the provisions 
            of Section 908.  If a
protest is filed, the 
            Department shall take no collection action against 
            the
electing individual until the decision 
            regarding the protest has become final
under 
            subsection (d) of Section 908 or, if 
            administrative review of the
Department's decision

            is requested under Section 1201, until the 
            decision of the court becomes
final.

    (d) Partnerships. Every partnership having any base income

allocable to this State in accordance with section 305(c) shall 
retain
information concerning all items of income, gain, loss 
and
deduction; the names and addresses of all of the partners, 
or names and
addresses of members of a limited liability 
company, or other
persons who would be entitled to share in the 
base income of the
partnership if distributed; the amount of 
the distributive share of
each; and such other pertinent 
information as the Department may by
forms or regulations 
prescribe. The partnership shall make that information

available to the Department when requested by the Department.

    (e) For taxable years ending on or after December 31, 1985, 
and before
December 31, 1993, taxpayers
that are corporations 
(other than Subchapter S corporations) having the
same taxable 
year and that are members of the same unitary business group

may elect to be treated as one taxpayer for purposes of any 
original return,
amended return which includes the same 
taxpayers of the unitary group which
joined in the election to 
file the original return, extension, claim for
refund, 
assessment, collection and payment and determination of the

group's tax liability under this Act. This subsection (e) does 
not permit the
election to be made for some, but not all, of 
the purposes enumerated above.
For taxable years ending on or 
after December 31, 1987, corporate members
(other than 
Subchapter S corporations) of the same unitary business group

making this subsection (e) election are not required to have 
the same taxable
year.

    For taxable years ending on or after December 31, 1993, 
taxpayers that are
corporations (other than Subchapter S 
corporations) and that are members  of
the same unitary business 
group shall be treated as one taxpayer for purposes
of any 
original return, amended return which includes the same 
taxpayers of the
unitary group which joined in filing the 
original return, extension, claim for
refund, assessment, 
collection and payment and determination of the group's tax

liability under this Act.

    (f) The Department may promulgate regulations to permit 
nonresident
individual partners of the same partnership, 
nonresident Subchapter S
corporation shareholders of the same 
Subchapter S corporation, and
nonresident individuals 
transacting an insurance business in Illinois under
a Lloyds 
plan of operation, and nonresident individual members of the 
same
limited liability company that is treated as a partnership 
under Section 1501
(a)(16) of this Act, to file composite 
individual income tax returns
reflecting the composite income 
of such individuals allocable to Illinois
and to make composite 
individual income tax payments.  The Department may
by 
regulation also permit such composite returns to include the 
income tax
owed by Illinois residents attributable to their 
income from partnerships,
Subchapter S corporations, insurance 
businesses organized under a Lloyds
plan of operation, or 
limited liability companies that are treated as
partnership 
under Section 1501(a)(16) of this Act, in which case such

Illinois residents will be permitted to claim credits on their 
individual
returns for their shares of the composite tax 
payments.  This paragraph of
subsection (f) applies to taxable 
years ending on or after December 31, 1987.

    For taxable years ending on or after December 31, 1999, the 
Department may,
by regulation, also permit any persons 
transacting an insurance business
organized under a Lloyds plan 
of operation to file composite returns reflecting
the income of 
such persons allocable to Illinois and the tax rates applicable

to such persons under Section 201 and to make composite tax 
payments and shall,
by regulation, also provide that the income 
and apportionment factors
attributable to the transaction of an 
insurance business organized under a
Lloyds plan of operation 
by any person joining in the filing of a composite
return 
shall, for purposes of allocating and apportioning income under 
Article
3 of this Act and computing net income under Section 
202 of this Act, be
excluded from any other income and 
apportionment factors of that person or of
any unitary business 
group, as defined in subdivision (a)(27) of Section 1501,
to 
which that person may belong.

    For taxable years ending on or after December 31, 2008, 
every nonresident shall be allowed a credit against his or her 
liability under subsections (a) and (b) of Section 201 for any 
amount of tax reported on a composite return and paid on his or 
her behalf under this subsection (f).  Residents (other than 
persons transacting an insurance business organized under a 
Lloyds plan of operation) may claim a credit for taxes reported 
on a composite return and paid on their behalf under this 
subsection (f) only as permitted by the Department by rule.

    (f-5) For taxable years ending on or after December 31, 
2008, the Department may adopt rules to provide that, when a 
partnership or Subchapter S corporation has made an error in 
determining the amount of any item of income, deduction, 
addition, subtraction, or credit required to be reported on its 
return that affects the liability imposed under this Act on a 
partner or shareholder, the partnership or Subchapter S 
corporation may report the changes in liabilities of its 
partners or shareholders and claim a refund of the resulting 
overpayments, or pay the resulting underpayments, on behalf of 
its partners and shareholders.

    (g) The Department may adopt rules to authorize the 
electronic filing of
any return required to be filed under this 
Section.

(Source: P.A. 94-1074, eff. 12-26-06.)

 
    (35 ILCS 5/709.5 new)

    Sec. 709.5. Withholding by partnerships, Subchapter S 
corporations, and trusts.
    (a) In general. For each taxable year ending on or after 
December 31, 2008, every partnership (other than a publicly 
traded partnership under Section 7704 of the Internal Revenue 
Code), Subchapter S corporation, and trust must withhold from 
each nonresident partner, shareholder, or beneficiary (other 
than a partner, shareholder, or beneficiary included on a 
composite return filed by the partnership or Subchapter S 
corporation for the taxable year under subsection (f) of  
Section 502 of this Act) an amount equal to the distributable 
share of the business income of the partnership, Subchapter S 
corporation, or trust apportionable to Illinois of that 
partner, shareholder, or beneficiary under Sections 702 and 704 
and Subchapter S of the Internal Revenue Code, whether or not 
distributed, multiplied by the applicable rates of tax for that 
partner or shareholder under subsections (a) through (d) of 
Section 201 of this Act.
    (b) Credit for taxes withheld. Any amount withheld under 
subsection (a) of this Section and paid to the Department shall 
be treated as a payment of the estimated tax liability or of 
the liability for withholding under this Section of the 
partner, shareholder, or beneficiary to whom the income is 
distributable for the taxable year in which that person 
incurred a liability under this Act with respect to that 
income.

 



    (35 ILCS 5/711)  (from Ch. 120, par. 7-711)



    Sec. 711. Payor's Return and Payment of Tax Withheld. (a) 
In general.  Every
payor required to deduct and withhold tax 
under Section 710 (and until
January 1, 1989, Sections 708 and 
709)
shall be subject to the same reporting requirements 
regarding taxes
withheld and the same monthly and quarter 
monthly (weekly) payment requirements as
an employer subject to 
the provisions of Section 701.  For purposes of
monthly and 
quarter monthly (weekly) payments, the total tax withheld
under 
Sections 701, 708, 709 and 710 shall be considered in the

aggregate. 

    (a-5) Every partnership, Subchapter S corporation, or 
trust required to withhold tax under Section 709.5 shall report 
the amounts withheld and the partners, shareholders, or 
beneficiaries from whom the amounts were withheld, and pay over 
the amount withheld, no later than the due date (without regard 
to extensions) of the tax return of the partnership, Subchapter 
S corporation, or trust for the taxable year.

    (b) Information statement.  Every payor required to deduct 
and withhold
tax under Section 710 (and until January 1, 1989, 
Sections 708 and 709)
shall furnish in
duplicate to each party

entitled to the credit for such withholding under subsection 
(b) of Section 709.5
(c) of
Section 708, subsection (c) of 
Section 709, and subsection (b) of Section
710, respectively, 
on or before January 31 of the succeeding calendar
year for 
amounts withheld under Section 710 or the due date (without 
regard to extensions) of the return of the partnership, 
Subchapter S corporation, or trust for the taxable year for 
amounts withheld under Section 709.5 for the taxable year, a 
written statement
in such form as the Department may by 
regulation prescribe showing the amount
of the payments, the 
amount deducted and withheld as tax, and such other
information 
as the
Department may prescribe.  A copy of such statement shall 
be filed by the
party entitled to the credit for the 
withholding under subsection (b) of Section 709.5
(c) of

Section 708, subsection (c) of Section 709, or subsection (b) 
of Section
710 with his return for the taxable year to which it 
relates.

(Source: P.A. 85-299; 85-982.)

 



    (35 ILCS 5/712)  (from Ch. 120, par. 7-712)


    Sec. 712. Payor's Liability For Withheld Taxes. Every payor 
who deducts
and withholds or is required to deduct and withhold 
tax under Sections 709.5 or
Section
710 (and until January 1, 
1989, Sections 708 and 709) is liable for such
tax.  For 
purposes of assessment and
collection, any amount withheld or 
required to be withheld and paid
over to the Department, and 
any penalties and interest
with respect thereto, shall be 
considered the tax of the payor.  Any amount
of tax actually 
deducted and withheld under Sections 709.5 or
Section 710 (and 
until
January 1, 1989, Sections 708 and 709) shall
be held to 
be a special fund in trust for the Department.  No payee shall 
have
any right of action against his payor in respect of any 
money deducted and
withheld and paid over to the Department in 
compliance or in intended compliance
with Sections 709.5 or

Section 710 (and until January 1, 1989, Sections 708 and 709).

(Source: P.A. 85-299; 85-982.)

 



    (35 ILCS 5/713)  (from Ch. 120, par. 7-713)


    Sec. 713. Payor's Failure To Withhold. If a payor fails to 
deduct and
withhold any amount of tax as required under 
Sections 709.5 or
Section 710 (and until
January 1, 1989, 
Sections 708 and 709) and
thereafter the tax on account of 
which such amount was required to be deducted and
withheld is 
paid, such amount of tax shall not be collected from the payor,

but the payor shall not be relieved from liability for 
penalties or interest
otherwise applicable in respect of such 
failure to deduct and withhold.
For purposes of this Section, 
the tax on account of which an amount is required
to be 
deducted and withheld is the tax of the individual or 
individuals
who are entitled to a credit under subsection (b) 
of Section 709.5
(c) of Section 708,
subsection (c) of Section 
709, or subsection (b) of Section 710 for the withheld tax.

(Source: P.A. 85-299; 85-982.)

 



    (35 ILCS 5/804)  (from Ch. 120, par. 8-804)


    Sec. 804. Failure to Pay Estimated Tax. 

    (a) In general. In case of any underpayment of estimated 
tax by a
taxpayer, except as provided in subsection (d) or (e), 
the taxpayer shall
be liable to a penalty in an amount 
determined at the rate prescribed by
Section 3-3 of the Uniform 
Penalty and Interest Act upon the amount of the
underpayment 
(determined under subsection (b)) for each required 
installment.

    (b) Amount of underpayment. For purposes of subsection (a), 
the
amount of the underpayment shall be the excess of:


        (1) the amount of the installment which would be 
    required to be paid
under subsection (c), over


        (2) the amount, if any, of the installment paid on or 
    before the
last date prescribed for payment.

    (c) Amount of Required Installments.


        (1) Amount.


            (A) In General.  Except as provided in paragraph 
        (2), the amount of any
required installment shall be 
        25% of the required annual payment.


            (B) Required Annual Payment.  For purposes of 
        subparagraph (A),
the term "required annual payment" 
        means the lesser of


                (i) 90% of the tax shown on the return for the 
            taxable year, or
if no return is filed, 90% of the 
            tax for such year, or


                (ii) 100% of the tax shown on the return of the 
            taxpayer for the
preceding taxable year if a return 
            showing a liability for tax was filed by
the 
            taxpayer for the preceding taxable year and such 
            preceding year was a
taxable year of 12 months.


        (2) Lower Required Installment where Annualized Income 
    Installment is Less
Than Amount Determined Under Paragraph 
    (1).


            (A) In General.  In the case of any required 
        installment if a taxpayer
establishes that the 
        annualized income installment is less than the amount

        determined under paragraph (1),


                (i) the amount of such required installment 
            shall be the annualized
income installment, and


                (ii) any reduction in a required installment 
            resulting from the
application of this 
            subparagraph shall be recaptured by increasing the

            amount of the next required installment determined 
            under paragraph (1) by
the amount of such 
            reduction, and by increasing subsequent required

            installments to the extent that the reduction has 
            not previously been
recaptured under this clause.


            (B) Determination of Annualized Income 
        Installment.  In the case of
any required installment, 
        the annualized income installment is the
excess, if 
        any, of


                (i) an amount equal to the applicable 
            percentage of the tax for the
taxable year computed 
            by placing on an annualized basis the net income 
            for
months in the taxable year ending before the 



            due date for the installment, over


                (ii) the aggregate amount of any prior 
            required installments for
the taxable year.


            (C) Applicable Percentage.


































        In the case of the followingThe applicable
        required installments:percentage is:
        1st ..............................22.5%
        2nd ...............................45%
        3rd ...............................67.5%
        4th ...............................90%
            (D) Annualized Net Income; Individuals.  For 
        individuals, net
income shall be placed on an 
        annualized basis by:


                (i) multiplying by 12, or in the case of a 
            taxable year of
less than 12 months, by the number 
            of months in the taxable year, the
net income 
            computed without regard to the standard exemption 
            for the months
in the taxable
year ending before 
            the month in which the installment is required to 
            be paid;


                (ii) dividing the resulting amount by the 
            number of months in the
taxable year ending before 
            the month in which such installment date falls; and


                (iii) deducting from such amount the standard 
            exemption allowable for
the taxable year, such 
            standard exemption being determined as of the last

            date prescribed for payment of the installment.


            (E) Annualized Net Income; Corporations.  For 
        corporations,
net income shall be placed on an 
        annualized basis by multiplying
by 12 the taxable 
        income 


                (i) for the first 3 months of the taxable year, 
            in the case of the
installment required to be paid 
            in the 4th month,


                (ii) for the first 3 months or for the first 5 
            months of the taxable
year, in the case of the 
            installment required to be paid in the 6th month,


                (iii) for the first 6 months or for the first 8 
            months of the taxable
year, in the case of the 
            installment required to be paid in the 9th month, 
            and


                (iv) for the first 9 months or for the first 11 
            months of the taxable
year, in the case of the 
            installment required to be paid in the 12th month

            of the taxable year,


        then dividing the resulting amount by the number of 
        months in the taxable
year (3, 5, 6, 8, 9, or 11 as the 
        case may be).

    (d) Exceptions. Notwithstanding the provisions of the 
preceding
subsections, the penalty imposed by subsection (a) 
shall not
be imposed if the taxpayer was not required to file 
an Illinois income
tax return for the preceding taxable year, 
or, for individuals, if the
taxpayer had no tax liability for 
the preceding taxable year and such year
was a taxable year of 
12 months.
The penalty imposed by subsection (a) shall
also not 
be imposed on any underpayments of estimated tax due before the

effective date of this amendatory Act of 1998 which 
underpayments are solely
attributable to the change in 
apportionment from subsection (a) to subsection
(h) of Section 
304.  The provisions of this amendatory Act of 1998 apply to tax

years ending on or after December 31, 1998.

    (e) The penalty imposed for underpayment of estimated tax 
by subsection
(a) of this Section shall not be imposed to the 
extent that the Director
Department
or his or her designate 
determines, pursuant to Section 3-8 of the Uniform Penalty
and 
Interest Act that the penalty should not be imposed.

    (f) Definition of tax. For purposes of subsections (b) and 
(c),
the term "tax" means the excess of the tax imposed under 
Article 2 of
this Act, over the amounts credited against such 
tax under Sections
601(b) (3) and (4).

    (g) Application of Section in case of tax withheld under 
Article 7
on compensation.
For purposes of applying this 
Section:

        (1) in the case of an individual, tax
withheld from 
    compensation
under Article 7 for the taxable year shall be 
    deemed a payment
of estimated tax, and an equal part of 
    such amount shall be deemed paid
on each installment date 
    for such taxable year, unless the taxpayer
establishes the 
    dates on which all amounts were actually withheld, in
which 
    case the amounts so withheld shall be deemed payments of 
    estimated
tax on the dates on which such amounts were 
    actually withheld;
.

        (2) amounts timely paid by a partnership, Subchapter S 
    corporation, or trust on behalf of a partner, shareholder, 
    or beneficiary pursuant to subsection (f) of Section 502 or 
    Section 709.5 and claimed as a payment of estimated tax 
    shall be deemed a payment of estimated tax made on the last 
    day of the taxable year of the partnership, Subchapter S 
    corporation, or trust for which the income from the 
    withholding is made was computed; and
        (3) all other amounts pursuant to Article 7 shall be 
    deemed a payment of estimated tax on the date the payment 
    is made to the taxpayer of the amount from which the tax is 
    withheld.

    (g-5) Amounts withheld under the State Salary and Annuity 
Withholding
Act.  An individual who has amounts withheld under 
paragraph (10) of Section 4
of the State Salary and Annuity 
Withholding Act may elect to have those amounts
treated as 
payments of estimated tax made on the dates on which those 
amounts
are actually withheld.

    (i) Short taxable year.  The application of this Section to

taxable years of less than 12 months shall be in accordance 
with
regulations prescribed by the Department.

    The changes in this Section made by Public Act 84-127 shall 
apply to
taxable years ending on or after January 1, 1986.

(Source: P.A. 90-448, eff. 8-16-97; 90-613, eff. 7-9-98.)

 



    (35 ILCS 5/911)  (from Ch. 120, par. 9-911)


    Sec. 911. Limitations on Claims for Refund. 

    (a) In general. Except
as otherwise provided in this Act:


        (1) A claim for refund shall be filed not later than 3 
    years after
the date the return was filed (in the case of 
    returns required under
Article 7 of this Act respecting any 
    amounts withheld as tax, not later
than 3 years after the 
    15th day of the 4th month following the close of
the 
    calendar year in which such withholding was made), or one 
    year after
the date the tax was paid, whichever is the 
    later; and


        (2) No credit or refund shall be allowed or made with 
    respect to the
year for which the claim was filed unless 
    such claim is filed within
such period.

    (b) Federal changes.


        (1) In general.  In any case where
notification of an 
    alteration is required by Section 506(b), a claim
for 
    refund may be filed within 2 years after the date on which 
    such
notification was due (regardless of whether such 
    notice was given), but
the amount recoverable pursuant to a 
    claim filed under this Section
shall be limited to the 
    amount of any overpayment resulting under this
Act from 
    recomputation of the taxpayer's net income, net loss, or 
    Article 2
credits for the taxable
year after giving effect 
    to the item or items reflected in the
alteration required 
    to be reported.


        (2) Tentative carryback adjustments paid before 
    January 1, 1974.
If, as the result of the payment before 
    January 1, 1974 of a federal
tentative carryback 
    adjustment, a notification of an alteration is
required 
    under Section 506(b), a claim for refund may be filed at 
    any
time before January 1, 1976, but the amount recoverable 
    pursuant to a
claim filed under this Section shall be 
    limited to the amount of any
overpayment resulting under 
    this Act from recomputation of the
taxpayer's base income 
    for the taxable year after giving effect to the
federal 
    alteration resulting from the tentative carryback 
    adjustment
irrespective of any limitation imposed in 
    paragraph (l) of this
subsection.

    (c) Extension by agreement.  Where, before the expiration of 
the
time prescribed in this section for the filing of a claim 
for refund,
both the Department and the claimant shall have 
consented in writing to
its filing after such time, such claim 
may be filed at any time prior to
the expiration of the period 
agreed upon.  The period so agreed upon may
be extended by 
subsequent agreements in writing made before the
expiration of 
the period previously agreed upon.
In the case of a taxpayer 
who is a partnership, Subchapter S corporation, or
trust and 
who enters into an agreement with the Department pursuant to 
this
subsection on or after January 1, 2003, a claim for refund 
may be issued to the
partners, shareholders, or beneficiaries 
of the taxpayer at any time prior to
the expiration of the 
period agreed upon. Any refund
allowed pursuant to the claim, 
however, shall be limited to the amount of any
overpayment
of 
tax due under this Act that results from recomputation of items 
of income,
deduction, credits, or other amounts of the taxpayer 
that are taken into
account by the partner, shareholder, or 
beneficiary in computing its liability
under this Act.

    (d) Limit on amount of credit or refund.


        (1) Limit where claim filed within 3-year period.  If 
    the claim was
filed by the claimant during the 3-year 
    period prescribed in subsection
(a), the amount of the 
    credit or refund shall not exceed the portion of
the tax 
    paid within the period, immediately preceding the filing of 
    the
claim, equal to 3 years plus the period of any 
    extension of time for
filing the return.


        (2) Limit where claim not filed within 3-year period.  
    If the claim
was not filed within such 3-year period, the 
    amount of the credit or
refund shall not exceed the portion 
    of the tax paid during the one year
immediately preceding 
    the filing of the claim.

    (e) Time return deemed filed.  For purposes of this section 
a tax
return filed before the last day prescribed by law for 
the filing of
such return (including any extensions thereof) 
shall be deemed to have
been filed on such last day.

    (f) No claim for refund based on the taxpayer's taking a 
credit for
estimated tax payments as provided by Section 
601(b)(2) or for any amount
paid by a taxpayer pursuant to 
Section 602(a) or for any amount of credit for
tax withheld 
pursuant to Article 7
Section 701 may be filed more than 3

years after the due date, as provided by Section 505, of the 
return which
was required to be filed relative to the taxable 
year for which the
payments were made or for which the tax was 
withheld. The changes in
this subsection (f) made by this

amendatory Act of 1987 shall apply to all taxable years ending 
on or after
December 31, 1969.

    (g) Special Period of Limitation with Respect to Net Loss 
Carrybacks.
If the claim for refund relates to an overpayment 
attributable to a net
loss carryback as provided by Section 
207, in lieu of the 3 year period of
limitation prescribed in 
subsection (a), the period shall be that period
which ends 3 
years after the time prescribed by law for filing the return

(including extensions thereof) for the taxable year of the net 
loss which
results in such carryback (or, on and after August 
13, 1999, with respect to a change in the
carryover of
an 
Article 2 credit to a taxable year resulting from the carryback 
of a Section
207 loss incurred in a taxable year beginning on 
or after January 1, 2000, the
period shall be that period
that 
ends 3 years after the time prescribed by law for filing the 
return
(including extensions of that time) for that subsequent 
taxable year),
or the period prescribed in subsection (c) in

respect of such taxable year, whichever expires later.  In the 
case of such
a claim, the amount of the refund may exceed the 
portion of the tax paid
within the period provided in 
subsection (d) to the extent of the amount of
the overpayment 
attributable to such carryback.
On and after August 13, 1999, 
if the claim for refund relates to an overpayment attributable 
to
the
carryover
of an Article 2 credit, or of a Section 207 
loss, earned, incurred (in a
taxable year beginning on or after 
January 1, 2000), or used in
a
year for which a notification of 
a change affecting federal taxable income must
be filed under 
subsection (b) of Section 506, the claim may be filed within 
the
period
prescribed in paragraph (1) of subsection (b) in 
respect of the year for which
the
notification is required.  In 
the case of such a claim, the amount of the
refund may exceed 
the portion of the tax paid within the period provided in

subsection (d) to the extent of the amount of the overpayment 
attributable to
the recomputation of the taxpayer's Article 2 
credits, or Section 207 loss,
earned, incurred, or used in the 
taxable year for which the notification is
given.

    (h) Claim for refund based on net loss.  On and after August 
23, 2002, no claim for refund shall
be allowed to the extent 
the refund is the result of an amount of net loss
incurred in 
any taxable year ending prior to December 31, 2002
under 
Section 207 of this Act that was not reported to the Department

within 3 years of the due date (including extensions) of the 
return for the
loss year on either the original return filed by 
the taxpayer or on amended
return or to the extent that the 
refund is the result of an amount of net loss incurred in any 
taxable year under Section 207 for which no return was filed 
within 3 years of the due date (including extensions) of the 
return for the loss year.

(Source: P.A. 94-836, eff. 6-6-06.)

 



    (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)



    Sec. 1501. Definitions. 

    (a) In general. When used in this Act, where not
otherwise 
distinctly expressed or manifestly incompatible with the 
intent
thereof:


        (1) Business income. The term "business income" means 
    all income that may be treated as apportionable business 
    income under the Constitution of the United States.    
    Business income is net of the deductions allocable thereto. 
    Such term does not include compensation
or the deductions 
    allocable thereto.
For each taxable year beginning on or 
    after January 1, 2003, a taxpayer may
elect to treat all 
    income other than compensation as business income.  This

    election shall be made in accordance with rules adopted by 
    the Department and,
once made, shall be irrevocable.

        (1.5) Captive real estate investment trust:

        (A) The term "captive real estate investment trust" 
    means a corporation, trust, or association:

            (i) that is considered a real estate investment 
        trust for the taxable year under Section 856 of the 
        Internal Revenue Code;

            (ii) that is not regularly traded on an established 
        securities market; and
            (iii) of which more than 50% of the voting power or 
        value of the beneficial interest or shares, at any time 
        during the last half of the taxable year, is owned or 
        controlled, directly or indirectly, by a single entity 
        that is subject to the provisions of Subchapter C of 
        Chapter 1 of the Internal Revenue Code.
        (B) The term "captive real estate investment trust" 
    does not include:
            (i) a corporation, trust, or association of which 
        more than 50% of the voting power or value of the 
        beneficial interest or shares is owned or controlled, 
        at any time during which the corporation, trust, or 
        association satisfies item (A)(iii) of this subsection 
        (1.5), by:
                (a) a real estate investment trust, other than 
            a real estate investment trust described in item 
            (A) of this subsection;
                (b) a person who is exempt from taxation under 
            Section 501 of the Internal Revenue Code;
                (c) a listed Australian property trust; or
                (d) a real estate investment trust that, 
            subject to rules of the Secretary of State, is 
            intended to become regularly traded on an 
            established securities market and that satisfies 
            the requirements of Sections 856(A)(5) and 
            856(A)(6) of the Internal Revenue Code by reason of 
            Section 856(H)(2) of the Internal Revenue Code.
        (C) For the purposes of this subsection (1.5), the 
    constructive ownership rules prescribed under Section 
    318(A) of the Internal Revenue Code, as modified by Section 
    856(D)(5) of the Internal Revenue Code, apply in 
    determining the ownership of stock, assets, or net profits 
    of any person.


        (2) Commercial domicile. The term "commercial 
    domicile" means the
principal
place from which the trade or 
    business of the taxpayer is directed or managed.


        (3) Compensation. The term "compensation" means wages, 
    salaries,
commissions
and any other form of remuneration 
    paid to employees for personal services.


        (4) Corporation. The term "corporation" includes 
    associations, joint-stock
companies, insurance companies 
    and cooperatives. Any entity, including a
limited 
    liability company formed under the Illinois Limited 
    Liability Company
Act, shall be treated as a corporation if 
    it is so classified for federal
income tax purposes.



        (5) Department. The term "Department" means the 
    Department of Revenue of
this State.


        (6) Director. The term "Director" means the Director of 
    Revenue of this
State.


        (7) Fiduciary. The term "fiduciary" means a guardian, 
    trustee, executor,
administrator, receiver, or any person 
    acting in any fiduciary capacity for any
person.


        (8) Financial organization.


            (A) The term "financial organization" means
any

        bank, bank holding company, trust company, savings 
        bank, industrial bank,
land bank, safe deposit 
        company, private banker, savings and loan association,

        building and loan association, credit union, currency 
        exchange, cooperative
bank, small loan company, sales 
        finance company, investment company, or any
person 
        which is owned by a bank or bank holding company.  For 
        the purpose of
this Section a "person" will include 
        only those persons which a bank holding
company may 
        acquire and hold an interest in, directly or 
        indirectly, under the
provisions of the Bank Holding 
        Company Act of 1956 (12 U.S.C. 1841, et seq.),
except 
        where interests in any person must be disposed of 
        within certain
required time limits under the Bank 
        Holding Company Act of 1956.


            (B) For purposes of subparagraph (A) of this 
        paragraph, the term
"bank" includes (i) any entity that 
        is regulated by the Comptroller of the
Currency under 
        the National Bank Act, or by the Federal Reserve Board, 
        or by
the
Federal Deposit Insurance Corporation and 
        (ii) any federally or State chartered
bank
operating as 
        a credit card bank.


            (C) For purposes of subparagraph (A) of this 
        paragraph, the term
"sales finance company" has the 
        meaning provided in the following item (i) or
(ii):


                (i) A person primarily engaged in one or more 
            of the following
businesses:  the business of 
            purchasing customer receivables, the business
of 
            making loans upon the security of customer 
            receivables, the
business of making loans for the 
            express purpose of funding purchases of
tangible 
            personal property or services by the borrower, or 
            the business of
finance leasing.  For purposes of 
            this item (i), "customer receivable"
means:


                    (a) a retail installment contract or 
                retail charge agreement within
the
meaning
of 
                the Sales Finance Agency Act, the Retail 
                Installment Sales Act, or the
Motor Vehicle 
                Retail Installment Sales Act;


                    (b) an installment, charge, credit, or 
                similar contract or agreement
arising from
the 
                sale of tangible personal property or services 
                in a transaction involving
a deferred payment 
                price payable in one or more installments 
                subsequent
to the sale; or


                    (c) the outstanding balance of a contract 
                or agreement described in
provisions
(a) or (b) 
                of this item (i).


                A customer receivable need not provide for 
            payment of interest on
deferred
payments.  A sales 
            finance company may purchase a customer receivable 
            from, or
make a loan secured by a customer 
            receivable to, the seller in the original

            transaction or to a person who purchased the 
            customer receivable directly or
indirectly from 
            that seller.


                (ii) A corporation meeting each of the 
            following criteria:


                    (a) the corporation must be a member of an 
                "affiliated group" within
the
meaning of 
                Section 1504(a) of the Internal Revenue Code, 
                determined
without regard to Section 1504(b) 
                of the Internal Revenue Code;


                    (b) more than 50% of the gross income of 
                the corporation for the
taxable
year
must be 
                interest income derived from qualifying loans.  
                A "qualifying
loan" is a loan made to a member 
                of the corporation's affiliated group that

                originates customer receivables (within the 
                meaning of item (i)) or to whom
customer 
                receivables originated by a member of the 
                affiliated group have been
transferred, to
the 
                extent the average outstanding balance of 
                loans from that corporation
to members of its 
                affiliated group during the taxable year do not 
                exceed
the limitation amount for that 
                corporation.  The "limitation amount" for a

                corporation is the average outstanding 
                balances during the taxable year of
customer 
                receivables (within the meaning of item (i)) 
                originated by
all members of the affiliated 
                group.
 If the average outstanding balances of 
                the
loans made by a corporation to members of 
                its affiliated group exceed the
limitation 
                amount, the interest income of that 
                corporation from qualifying
loans shall be 
                equal to its interest income from loans to 
                members of its
affiliated groups times a 
                fraction equal to the limitation amount 
                divided by
the average outstanding balances of 
                the loans made by that corporation to
members 
                of its affiliated group;


                    (c) the total of all shareholder's equity 
                (including, without
limitation,
paid-in

                capital on common and preferred stock and 
                retained earnings) of the
corporation plus the 
                total of all of its loans, advances, and other

                obligations payable or owed to members of its 
                affiliated group may not
exceed 20% of the 
                total assets of the corporation at any time 
                during the tax
year; and


                    (d) more than 50% of all interest-bearing 
                obligations of the
affiliated group payable to 
                persons outside the group determined in 
                accordance
with generally accepted accounting 
                principles must be obligations of the

                corporation.


            This amendatory Act of the 91st General Assembly is 
        declaratory of
existing
law.


            (D) Subparagraphs
(B) and (C) of this paragraph are 
        declaratory of
existing law and apply retroactively, 
        for all tax years beginning on or before
December 31, 
        1996,
 to all original returns, to all amended returns 
        filed no later than 30
days after the effective date of 
        this amendatory Act of 1996, and to all
notices issued 
        on or before the effective date of this amendatory Act 
        of 1996
under subsection (a) of Section 903, subsection 
        (a) of Section 904,
subsection (e) of Section 909, or 
        Section 912.
A taxpayer that is a "financial 
        organization" that engages in any transaction
with an 
        affiliate shall be a "financial organization" for all 
        purposes of this
Act.


            (E) For all tax years beginning on or
before 
        December 31, 1996, a taxpayer that falls within the 
        definition
of a
"financial organization" under 
        subparagraphs (B) or (C) of this paragraph, but
who 
        does
not fall within the definition of a "financial 
        organization" under the Proposed
Regulations issued by 
        the Department of Revenue on July 19, 1996, may

        irrevocably elect to apply the Proposed Regulations 
        for all of those years as
though the Proposed 
        Regulations had been lawfully promulgated, adopted, 
        and in
effect for all of those years.  For purposes of 
        applying subparagraphs (B) or
(C) of
this
paragraph to 
        all of those years, the election allowed by this 
        subparagraph
applies only to the taxpayer making the 
        election and to those members of the
taxpayer's unitary 
        business group who are ordinarily required to 
        apportion
business income under the same subsection of 
        Section 304 of this Act as the
taxpayer making the 
        election.  No election allowed by this subparagraph 
        shall
be made under a claim
filed under subsection (d) 
        of Section 909 more than 30 days after the
effective 
        date of this amendatory Act of 1996.


            (F) Finance Leases.  For purposes of this 
        subsection, a finance lease
shall be treated as a loan 
        or other extension of credit, rather than as a
lease,

        regardless of how the transaction is characterized for 
        any other purpose,
including the purposes of any 
        regulatory agency to which the lessor is subject.
 A 
        finance lease is any transaction in the form of a lease 
        in which the lessee
is treated as the owner of the 
        leased asset entitled to any deduction for

        depreciation allowed under Section 167 of the Internal 
        Revenue Code.


        (9) Fiscal year. The term "fiscal year" means an 
    accounting period of
12 months ending on the last day of 
    any month other than December.


        (10) Includes and including. The terms "includes" and 
    "including" when
used in a definition contained in this Act 
    shall not be deemed to exclude
other things otherwise 
    within the meaning of the term defined.


        (11) Internal Revenue Code. The term "Internal Revenue 
    Code" means the
United States Internal Revenue Code of 1954 
    or any successor law or laws
relating to federal income 
    taxes in effect for the taxable year.

        (11.5) Investment partnership.
            (A) The term "investment partnership" means any 
        entity that is treated as a partnership for federal 
        income tax purposes that meets the following 
        requirements:
                (i) no less than 90% of the partnership's cost 
            of its total assets consists of qualifying 
            investment securities, deposits at banks or other 
            financial institutions, and office space and 
            equipment reasonably necessary to carry on its 
            activities as an investment partnership;
                (ii)        no less than 90% of its gross income 
            consists of interest, dividends, and gains from 
            the sale or exchange of qualifying investment 
            securities; and

                (iii) the partnership is not a dealer in 
            qualifying investment securities.
            (B)       For purposes of this paragraph (11.5), the term 
        "qualifying investment securities" includes all of the 
        following:

                (i) common stock, including preferred or debt 
            securities convertible into common stock, and 
            preferred stock;
                (ii) bonds, debentures, and other debt 
            securities;
                (iii) foreign and domestic currency deposits 
            secured by federal, state, or local governmental 
            agencies;
                (iv) mortgage or asset-backed securities 
            secured by federal, state, or local governmental 
            agencies;
                (v) repurchase agreements and loan 
            participations;
                (vi) foreign currency exchange contracts and 
            forward and futures contracts on foreign 
            currencies;
                (vii) stock and bond index securities and 
            futures contracts and other similar financial 
            securities and futures contracts on those 
            securities;

                (viii) options for the purchase or sale of any 
            of the securities, currencies, contracts, or 
            financial instruments described in items (i) to 
            (vii), inclusive;

                (ix)       regulated futures contracts;

                (x) commodities (not described in Section 
            1221(a)(1) of the Internal Revenue Code) or 
            futures, forwards, and options with respect to 
            such commodities, provided, however, that any item 
            of a physical commodity to which title is actually 
            acquired in the partnership's capacity as a dealer 
            in such commodity shall not be a qualifying 
            investment security;


                (xi) derivatives; and

                (xii) a partnership interest in another 
            partnership that is an investment partnership.


        (12) Mathematical error. The term "mathematical error" 
    includes the
following types of errors, omissions, or 
    defects in a return filed by a
taxpayer which prevents 
    acceptance of the return as filed for processing:


            (A) arithmetic errors or incorrect computations on 
        the return or
supporting schedules;


            (B) entries on the wrong lines;


            (C) omission of required supporting forms or 
        schedules or the omission
of the information in whole 
        or in part called for thereon; and


            (D) an attempt to claim, exclude, deduct, or 
        improperly report, in a
manner
directly contrary to the 
        provisions of the Act and regulations thereunder
any 
        item of income, exemption, deduction, or credit.


        (13) Nonbusiness income. The term "nonbusiness income" 
    means all income
other than business income or 
    compensation.


        (14) Nonresident. The term "nonresident" means a 
    person who is not a
resident.


        (15) Paid, incurred and accrued. The terms "paid", 
    "incurred" and
"accrued"
shall be construed according to 
    the method of accounting upon the basis
of which the 
    person's base income is computed under this Act.


        (16) Partnership and partner. The term "partnership" 
    includes a syndicate,
group, pool, joint venture or other 
    unincorporated organization, through
or by means of which 
    any business, financial operation, or venture is carried

    on, and which is not, within the meaning of this Act, a 
    trust or estate
or a corporation; and the term "partner" 
    includes a member in such syndicate,
group, pool, joint 
    venture or organization.


        The term "partnership" includes any entity, including 
    a limited
liability company formed under the Illinois

    Limited Liability Company Act, classified as a partnership 
    for federal income tax purposes.


        The term "partnership" does not include a syndicate, 
    group, pool,
joint venture, or other unincorporated 
    organization established for the
sole purpose of playing 
    the Illinois State Lottery.


        (17) Part-year resident. The term "part-year resident" 
    means an individual
who became a resident during the 
    taxable year or ceased to be a resident
during the taxable 
    year. Under Section 1501(a)(20)(A)(i) residence
commences 
    with presence in this State for other than a temporary or 
    transitory
purpose and ceases with absence from this State 
    for other than a temporary or
transitory purpose. Under 
    Section 1501(a)(20)(A)(ii) residence commences
with the 
    establishment of domicile in this State and ceases with the

    establishment of domicile in another State.


        (18) Person. The term "person" shall be construed to 
    mean and include
an individual, a trust, estate, 
    partnership, association, firm, company,
corporation, 
    limited liability company, or fiduciary. For purposes of 
    Section
1301 and 1302 of this Act, a "person" means (i) an 
    individual, (ii) a
corporation, (iii) an officer, agent, or 
    employee of a
corporation, (iv) a member, agent or employee 
    of a partnership, or (v)
a member,
manager, employee, 
    officer, director, or agent of a limited liability company

    who in such capacity commits an offense specified in 
    Section 1301 and 1302.


        (18A) Records.  The term "records" includes all data 
    maintained by the
taxpayer, whether on paper, microfilm, 
    microfiche, or any type of
machine-sensible data 
    compilation.


        (19) Regulations. The term "regulations" includes 
    rules promulgated and
forms prescribed by the Department.


        (20) Resident. The term "resident" means:


            (A) an individual (i) who is
in this State for 
        other than a temporary or transitory purpose during the

        taxable year; or (ii) who is domiciled in this State 
        but is absent from
the State for a temporary or 
        transitory purpose during the taxable year;


            (B) The estate of a decedent who at his or her 
        death was domiciled in
this
State;


            (C) A trust created by a will of a decedent who at 
        his death was
domiciled
in this State; and


            (D) An irrevocable trust, the grantor of which was 
        domiciled in this
State
at the time such trust became 
        irrevocable. For purpose of this subparagraph,
a trust 
        shall be considered irrevocable to the extent that the 
        grantor is
not treated as the owner thereof under 
        Sections 671 through 678 of the Internal
Revenue Code.


        (21) Sales. The term "sales" means all gross receipts 
    of the taxpayer
not allocated under Sections 301, 302 and 
    303.


        (22) State. The term "state" when applied to a 
    jurisdiction other than
this State means any state of the 
    United States, the District of Columbia,
the Commonwealth 
    of Puerto Rico, any Territory or Possession of the United

    States, and any foreign country, or any political 
    subdivision of any of the
foregoing.  For purposes of the 
    foreign tax credit under Section 601, the
term "state" 
    means any state of the United States, the District of 
    Columbia,
the Commonwealth of Puerto Rico, and any 
    territory or possession of the
United States, or any 
    political subdivision of any of the foregoing,
effective 
    for tax years ending on or after December 31, 1989.


        (23) Taxable year. The term "taxable year" means the 
    calendar year, or
the fiscal year ending during such 
    calendar year, upon the basis of which
the base income is 
    computed under this Act. "Taxable year" means, in the
case 
    of a return made for a fractional part of a year under the 
    provisions
of this Act, the period for which such return is 
    made.


        (24) Taxpayer. The term "taxpayer" means any person 
    subject to the tax
imposed by this Act.


        (25) International banking facility.  The term 
    international banking
facility shall have the same meaning 
    as is set forth in the Illinois Banking
Act or as is set 
    forth in the laws of the United States or regulations of

    the Board of Governors of the Federal Reserve System.


        (26) Income Tax Return Preparer.


            (A) The term "income tax return preparer"
means any 
        person who prepares for compensation, or who employs 
        one or more
persons to prepare for compensation, any 
        return of tax imposed by this Act
or any claim for 
        refund of tax imposed by this Act.  The preparation of a

        substantial portion of a return or claim for refund 
        shall be treated as
the preparation of that return or 
        claim for refund.


            (B) A person is not an income tax return preparer 
        if all he or she does
is


                (i) furnish typing, reproducing, or other 
            mechanical assistance;


                (ii) prepare returns or claims for refunds for 
            the employer by whom he
or she is regularly and 
            continuously employed;


                (iii) prepare as a fiduciary returns or claims 
            for refunds for any
person; or


                (iv) prepare claims for refunds for a taxpayer 
            in response to any
notice
of deficiency issued to 
            that taxpayer or in response to any waiver of

            restriction after the commencement of an audit of 
            that taxpayer or of another
taxpayer if a 
            determination in the audit of the other taxpayer 
            directly or
indirectly affects the tax liability 
            of the taxpayer whose claims he or she is

            preparing.


        (27) Unitary business group.  The term "unitary 
    business group" means
a group of persons related through 
    common ownership whose business activities
are integrated 
    with, dependent upon and contribute to each other.  The 
    group
will not include those members whose business 
    activity outside the United
States is 80% or more of any 
    such member's total business activity; for
purposes of this 
    paragraph and clause (a)(3)(B)(ii) of Section 304,

    business
activity within the United States shall be 
    measured by means of the factors
ordinarily applicable 
    under subsections (a), (b), (c), (d), or (h)
of Section
304 
    except that, in the case of members ordinarily required to 
    apportion
business income by means of the 3 factor formula 
    of property, payroll and sales
specified in subsection (a) 
    of Section 304, including the
formula as weighted in 
    subsection (h) of Section 304, such members shall
not use 
    the sales factor in the computation and the results of the 
    property
and payroll factor computations of subsection (a) 
    of Section 304 shall be
divided by 2 (by one if either
the 
    property or payroll factor has a denominator of zero). The 
    computation
required by the preceding sentence shall, in 
    each case, involve the division of
the member's property, 
    payroll, or revenue miles in the United States,
insurance 
    premiums on property or risk in the United States, or 
    financial
organization business income from sources within 
    the United States, as the
case may be, by the respective 
    worldwide figures for such items.  Common
ownership in the 
    case of corporations is the direct or indirect control or

    ownership of more than 50% of the outstanding voting stock 
    of the persons
carrying on unitary business activity.  
    Unitary business activity can
ordinarily be illustrated 
    where the activities of the members are:  (1) in the
same 
    general line (such as manufacturing, wholesaling, 
    retailing of tangible
personal property, insurance, 
    transportation or finance); or (2) are steps in a

    vertically structured enterprise or process (such as the 
    steps involved in the
production of natural resources, 
    which might include exploration, mining,
refining, and 
    marketing); and, in either instance, the members are 
    functionally
integrated through the exercise of strong 
    centralized management (where, for
example, authority over 
    such matters as purchasing, financing, tax compliance,

    product line, personnel, marketing and capital investment 
    is not left to each
member).
In no event, however, will any

    unitary business group include members
which are 
    ordinarily required to apportion business income under 
    different
subsections of Section 304 except that for tax 
    years ending on or after
December 31, 1987 this prohibition 
    shall not apply to a unitary business group
composed of one 
    or more taxpayers all of which apportion business income

    pursuant to subsection (b) of Section 304, or all of which 
    apportion business
income pursuant to subsection (d) of 
    Section 304, and a holding company of such
single-factor 
    taxpayers (see definition of "financial organization" for 
    rule
regarding holding companies of financial 
    organizations).  If a unitary business
group would, but for 
    the preceding sentence, include members that are

    ordinarily required to apportion business income under 
    different subsections of
Section 304, then for each 
    subsection of Section 304 for which there are two or
more 
    members, there shall be a separate unitary business group 
    composed of such
members.  For purposes of the preceding two 
    sentences, a member is "ordinarily
required to apportion 
    business income" under a particular subsection of Section

    304 if it would be required to use the apportionment method 
    prescribed by such
subsection except for the fact that it 
    derives business income solely from
Illinois.  As used in 
    this paragraph, the phrase "United States" means only the 
    50 states and the District of Columbia, but does not 
    include any territory or possession of the United States or 
    any area over which the United States has asserted 
    jurisdiction or claimed exclusive rights with respect to 
    the exploration for or exploitation of natural resources.

        If the unitary business group members' accounting 
    periods differ,
the common parent's accounting period or, 
    if there is no common parent, the
accounting period of the 
    member that is expected to have, on a recurring basis,
the 
    greatest Illinois income tax liability must be used to 
    determine whether to
use the apportionment method provided 
    in subsection (a) or subsection (h) of
Section 304.  The

    prohibition against membership in a unitary business group 
    for taxpayers
ordinarily required to apportion income 
    under different subsections of Section
304 does not apply 
    to taxpayers required to apportion income under subsection

    (a) and subsection (h) of Section
304.  The provisions of 
    this amendatory Act of 1998 apply to tax
years ending on or 
    after December 31, 1998.


        (28) Subchapter S corporation.  The term "Subchapter S 
    corporation"
means a corporation for which there is in 
    effect an election under Section
1362 of the Internal 
    Revenue Code, or for which there is a federal election
to 
    opt out of the provisions of the Subchapter S Revision Act 
    of 1982 and
have applied instead the prior federal 
    Subchapter S rules as in effect on July
1, 1982.

        (30) Foreign person. The term "foreign person" means 
    any person who is a nonresident alien individual and any 
    nonindividual entity, regardless of where created or 
    organized, whose business activity outside the United 
    States is 80% or more of the entity's total business 
    activity.

 

    (b) Other definitions.


        (1) Words denoting number, gender, and so forth,
when 
    used in this Act, where not otherwise distinctly expressed 
    or manifestly
incompatible with the intent thereof:


            (A) Words importing the singular include and apply 
        to several persons,
parties or things;


            (B) Words importing the plural include the 
        singular; and


            (C) Words importing the masculine gender include 
        the feminine as well.


        (2) "Company" or "association" as including successors 
    and assigns. The
word "company" or "association", when used 
    in reference to a corporation,
shall be deemed to embrace 
    the words "successors and assigns of such company
or 
    association", and in like manner as if these last-named 
    words, or words
of similar import, were expressed.


        (3) Other terms. Any term used in any Section of this 
    Act with respect
to the application of, or in connection 
    with, the provisions of any other
Section of this Act shall 
    have the same meaning as in such other Section.

(Source: P.A. 92-846, eff. 8-23-02; 93-840, eff. 7-30-04.)


 
    Section 10-10. The Retailers' Occupation Tax Act is amended  
by changing Section 2-5 as follows:
 



    (35 ILCS 120/2-5)  (from Ch. 120, par. 441-5)


    Sec. 2-5. Exemptions. Gross receipts from proceeds from the 
sale of
the following tangible personal property are exempt 
from the tax imposed
by this Act:

    (1) Farm chemicals.

    (2) Farm machinery and equipment, both new and used, 
including that
manufactured on special order, certified by the 
purchaser to be used
primarily for production agriculture or 
State or federal agricultural
programs, including individual 
replacement parts for the machinery and
equipment, including 
machinery and equipment purchased for lease,
and including 
implements of husbandry defined in Section 1-130 of
the 
Illinois Vehicle Code, farm machinery and agricultural 
chemical and
fertilizer spreaders, and nurse wagons required to 
be registered
under Section 3-809 of the Illinois Vehicle Code,

but
excluding other motor vehicles required to be registered 
under the Illinois
Vehicle Code.
Horticultural polyhouses or 
hoop houses used for propagating, growing, or
overwintering 
plants shall be considered farm machinery and equipment under

this item (2).
Agricultural chemical tender tanks and dry boxes 
shall include units sold
separately from a motor vehicle 
required to be licensed and units sold mounted
on a motor 
vehicle required to be licensed, if the selling price of the 
tender
is separately stated.

    Farm machinery and equipment shall include precision 
farming equipment
that is
installed or purchased to be 
installed on farm machinery and equipment
including, but not 
limited to, tractors, harvesters, sprayers, planters,
seeders, 
or spreaders.
Precision farming equipment includes, but is not 
limited to,
soil testing sensors, computers, monitors, 
software, global positioning
and mapping systems, and other 
such equipment.

    Farm machinery and equipment also includes computers, 
sensors, software, and
related equipment used primarily in the

computer-assisted operation of production agriculture 
facilities, equipment,
and activities such as, but
not limited 
to,
the collection, monitoring, and correlation of
animal and 
crop data for the purpose of
formulating animal diets and 
agricultural chemicals.  This item (7) is exempt
from the 
provisions of
Section 2-70.

    (3) Until July 1, 2003, distillation machinery and 
equipment, sold as a
unit or kit,
assembled or installed by the 
retailer, certified by the user to be used
only for the 
production of ethyl alcohol that will be used for consumption

as motor fuel or as a component of motor fuel for the personal 
use of the
user, and not subject to sale or resale.

    (4) Until July 1, 2003 and beginning again September 1, 
2004, graphic arts machinery and equipment, including
repair 
and
replacement parts, both new and used, and including that 
manufactured on
special order or purchased for lease, certified 
by the purchaser to be used
primarily for graphic arts 
production.
Equipment includes chemicals or
chemicals acting 
as catalysts but only if
the chemicals or chemicals acting as 
catalysts effect a direct and immediate
change upon a
graphic 
arts product.

    (5) (Blank).
A motor vehicle of the first division, a motor 
vehicle of the second
division that is a self-contained motor 
vehicle designed or permanently
converted to provide living 
quarters for recreational, camping, or travel
use, with direct 
walk through access to the living quarters from the
driver's 
seat, or a motor vehicle of the second division that is of the 
van
configuration designed for the transportation of not less 
than 7 nor more
than 16 passengers, as defined in Section 1-146 
of the Illinois Vehicle
Code, that is used for automobile 
renting, as defined in the Automobile
Renting Occupation and 
Use Tax Act.

    (6) Personal property sold by a teacher-sponsored student 
organization
affiliated with an elementary or secondary school 
located in Illinois.

    (7) Until July 1, 2003, proceeds of that portion of the 
selling price of
a passenger car the
sale of which is subject 
to the Replacement Vehicle Tax.

    (8) Personal property sold to an Illinois county fair 
association for
use in conducting, operating, or promoting the 
county fair.

    (9) Personal property sold to a not-for-profit arts
or 
cultural organization that establishes, by proof required by 
the Department
by
rule, that it has received an exemption under 
Section 501(c)(3) of the
Internal Revenue Code and that is 
organized and operated primarily for the
presentation
or 
support of arts or cultural programming, activities, or 
services.  These
organizations include, but are not limited to, 
music and dramatic arts
organizations such as symphony 
orchestras and theatrical groups, arts and
cultural service 
organizations, local arts councils, visual arts organizations,

and media arts organizations.
On and after the effective date 
of this amendatory Act of the 92nd General
Assembly, however, 
an entity otherwise eligible for this exemption shall not
make 
tax-free purchases unless it has an active identification 
number issued by
the Department.

    (10) Personal property sold by a corporation, society, 
association,
foundation, institution, or organization, other 
than a limited liability
company, that is organized and 
operated as a not-for-profit service enterprise
for the benefit 
of persons 65 years of age or older if the personal property

was not purchased by the enterprise for the purpose of resale 
by the
enterprise.

    (11) Personal property sold to a governmental body, to a 
corporation,
society, association, foundation, or institution 
organized and operated
exclusively for charitable, religious, 
or educational purposes, or to a
not-for-profit corporation, 
society, association, foundation, institution,
or organization 
that has no compensated officers or employees and that is

organized and operated primarily for the recreation of persons 
55 years of
age or older. A limited liability company may 
qualify for the exemption under
this paragraph only if the 
limited liability company is organized and operated

exclusively for educational purposes. On and after July 1, 
1987, however, no
entity otherwise eligible for this exemption 
shall make tax-free purchases
unless it has an active 
identification number issued by the Department.

    (12) Tangible personal property sold to
interstate 
carriers
for hire for use as
rolling stock moving in interstate 
commerce or to lessors under leases of
one year or longer 
executed or in effect at the time of purchase by
interstate 
carriers for hire for use as rolling stock moving in interstate

commerce and equipment operated by a telecommunications 
provider, licensed as a
common carrier by the Federal 
Communications Commission, which is permanently
installed in 
or affixed to aircraft moving in interstate commerce.

    (12-5) On and after July 1, 2003 and through June 30, 2004, 
motor vehicles of the second division
with a gross vehicle 
weight in excess of 8,000 pounds
that
are
subject to the 
commercial distribution fee imposed under Section 3-815.1 of

the Illinois
Vehicle Code. Beginning on July 1, 2004 and 
through June 30, 2005, the use in this State of motor vehicles 
of the second division: (i) with a gross vehicle weight rating 
in excess of 8,000 pounds; (ii) that are subject to the 
commercial distribution fee imposed under Section 3-815.1 of 
the Illinois Vehicle Code; and (iii) that are primarily used 
for commercial purposes. Through June 30, 2005, this

exemption 
applies to repair and replacement parts added
after the
initial 
purchase of such a motor vehicle if that motor vehicle is used 
in a
manner that
would qualify for the rolling stock exemption 
otherwise provided for in this
Act. For purposes of this 
paragraph, "used for commercial purposes" means the 
transportation of persons or property in furtherance of any 
commercial or industrial enterprise whether for-hire or not.


    (13) Proceeds from sales to owners, lessors, or
shippers of

tangible personal property that is utilized by interstate 
carriers for
hire for use as rolling stock moving in interstate 
commerce
and equipment operated by a telecommunications 
provider, licensed as a
common carrier by the Federal 
Communications Commission, which is
permanently installed in 
or affixed to aircraft moving in interstate commerce.

    (14) Machinery and equipment that will be used by the 
purchaser, or a
lessee of the purchaser, primarily in the 
process of manufacturing or
assembling tangible personal 
property for wholesale or retail sale or
lease, whether the 
sale or lease is made directly by the manufacturer or by
some 
other person, whether the materials used in the process are 
owned by
the manufacturer or some other person, or whether the 
sale or lease is made
apart from or as an incident to the 
seller's engaging in the service
occupation of producing 
machines, tools, dies, jigs, patterns, gauges, or
other similar 
items of no commercial value on special order for a particular

purchaser.

    (15) Proceeds of mandatory service charges separately 
stated on
customers' bills for purchase and consumption of food 
and beverages, to the
extent that the proceeds of the service 
charge are in fact turned over as
tips or as a substitute for 
tips to the employees who participate directly
in preparing, 
serving, hosting or cleaning up the food or beverage function

with respect to which the service charge is imposed.

    (16) Petroleum products sold to a purchaser if the seller

is prohibited by federal law from charging tax to the 
purchaser.

    (17) Tangible personal property sold to a common carrier by 
rail or
motor that
receives the physical possession of the 
property in Illinois and that
transports the property, or 
shares with another common carrier in the
transportation of the 
property, out of Illinois on a standard uniform bill
of lading 
showing the seller of the property as the shipper or consignor 
of
the property to a destination outside Illinois, for use 
outside Illinois.

    (18) Legal tender, currency, medallions, or gold or silver 
coinage
issued by the State of Illinois, the government of the 
United States of
America, or the government of any foreign 
country, and bullion.

    (19) Until July 1 2003, oil field exploration, drilling, 
and production
equipment, including
(i) rigs and parts of rigs, 
rotary rigs, cable tool
rigs, and workover rigs, (ii) pipe and 
tubular goods, including casing and
drill strings, (iii) pumps 
and pump-jack units, (iv) storage tanks and flow
lines, (v) any 
individual replacement part for oil field exploration,

drilling, and production equipment, and (vi) machinery and 
equipment purchased
for lease; but
excluding motor vehicles 
required to be registered under the Illinois
Vehicle Code.

    (20) Photoprocessing machinery and equipment, including 
repair and
replacement parts, both new and used, including that 
manufactured on
special order, certified by the purchaser to be 
used primarily for
photoprocessing, and including 
photoprocessing machinery and equipment
purchased for lease.

    (21) Until July 1, 2003, coal exploration, mining, 
offhighway hauling,
processing,
maintenance, and reclamation 
equipment, including
replacement parts and equipment, and 
including
equipment purchased for lease, but excluding motor 
vehicles required to be
registered under the Illinois Vehicle 
Code.

    (22) Fuel and petroleum products sold to or used by an air 
carrier,
certified by the carrier to be used for consumption, 
shipment, or storage
in the conduct of its business as an air 
common carrier, for a flight
destined for or returning from a 
location or locations
outside the United States without regard 
to previous or subsequent domestic
stopovers.

    (23) A transaction in which the purchase order is received 
by a florist
who is located outside Illinois, but who has a 
florist located in Illinois
deliver the property to the 
purchaser or the purchaser's donee in Illinois.

    (24) Fuel consumed or used in the operation of ships, 
barges, or vessels
that are used primarily in or for the 
transportation of property or the
conveyance of persons for 
hire on rivers bordering on this State if the
fuel is delivered 
by the seller to the purchaser's barge, ship, or vessel
while 
it is afloat upon that bordering river.

    (25) Except as provided in item (25-5) of this Section, a


motor vehicle sold in this State to a nonresident even though 
the
motor vehicle is delivered to the nonresident in this 
State, if the motor
vehicle is not to be titled in this State, 
and if a drive-away permit
is issued to the motor vehicle as 
provided in Section 3-603 of the Illinois
Vehicle Code or if 
the nonresident purchaser has vehicle registration
plates to 
transfer to the motor vehicle upon returning to his or her home

state.  The issuance of the drive-away permit or having
the

out-of-state registration plates to be transferred is prima 
facie evidence
that the motor vehicle will not be titled in 
this State.

    (25-5) The exemption under item (25) does not apply if the 
state in which the motor vehicle will be titled does not allow 
a reciprocal exemption for a motor vehicle sold and delivered 
in that state to an Illinois resident but titled in Illinois.  
The tax collected under this Act on the sale of a motor vehicle 
in this State to a resident of another state that does not 
allow a reciprocal exemption shall be imposed at a rate equal 
to the state's rate of tax on taxable property in the state in 
which the purchaser is a resident, except that the tax shall 
not exceed the tax that would otherwise be imposed under this 
Act.  At the time of the sale, the purchaser shall execute a 
statement, signed under penalty of perjury, of his or her 
intent to title the vehicle in the state in which the purchaser 
is a resident within 30 days after the sale and of the fact of 
the payment to the State of Illinois of tax in an amount 
equivalent to the state's rate of tax on taxable property in 
his or her state of residence and shall submit the statement to 
the appropriate tax collection agency in his or her state of 
residence.  In addition, the retailer must retain a signed copy 
of the statement in his or her records. Nothing in this item 
shall be construed to require the removal of the vehicle from 
this state following the filing of an intent to title the 
vehicle in the purchaser's state of residence if the purchaser 
titles the vehicle in his or her state of residence within 30 
days after the date of sale.  The tax collected under this Act 
in accordance with this item (25-5) shall be proportionately 
distributed as if the tax were collected at the 6.25% general 
rate imposed under this Act.

    (26) Semen used for artificial insemination of livestock 
for direct
agricultural production.

    (27) Horses, or interests in horses, registered with and 
meeting the
requirements of any of the
Arabian Horse Club 
Registry of America, Appaloosa Horse Club, American Quarter

Horse Association, United States
Trotting Association, or 
Jockey Club, as appropriate, used for
purposes of breeding or 
racing for prizes.

    (28) Computers and communications equipment utilized for 
any
hospital
purpose
and equipment used in the diagnosis,

analysis, or treatment of hospital patients sold to a lessor 
who leases the
equipment, under a lease of one year or longer 
executed or in effect at the
time of the purchase, to a

hospital
that has been issued an active tax exemption 
identification number by the
Department under Section 1g of 
this Act.

    (29) Personal property sold to a lessor who leases the

property, under a
lease of one year or longer executed or in 
effect at the time of the purchase,
to a governmental body
that 
has been issued an active tax exemption identification number 
by the
Department under Section 1g of this Act.

    (30) Beginning with taxable years ending on or after 
December
31, 1995
and
ending with taxable years ending on or 
before December 31, 2004,
personal property that is
donated for 
disaster relief to be used in a State or federally declared

disaster area in Illinois or bordering Illinois by a 
manufacturer or retailer
that is registered in this State to a 
corporation, society, association,
foundation, or institution 
that has been issued a sales tax exemption
identification 
number by the Department that assists victims of the disaster

who reside within the declared disaster area.

    (31) Beginning with taxable years ending on or after 
December
31, 1995 and
ending with taxable years ending on or 
before December 31, 2004, personal
property that is used in the 
performance of infrastructure repairs in this
State, including 
but not limited to municipal roads and streets, access roads,

bridges, sidewalks, waste disposal systems, water and sewer 
line extensions,
water distribution and purification 
facilities, storm water drainage and
retention facilities, and 
sewage treatment facilities, resulting from a State
or 
federally declared disaster in Illinois or bordering Illinois 
when such
repairs are initiated on facilities located in the 
declared disaster area
within 6 months after the disaster.

    (32) Beginning July 1, 1999, game or game birds sold at a 
"game breeding
and
hunting preserve area" or an "exotic game 
hunting area" as those terms are used
in the
Wildlife Code or 
at a hunting enclosure approved through rules adopted by the

Department of Natural Resources.  This paragraph is exempt from 
the provisions
of
Section 2-70.

    (33) A motor vehicle, as that term is defined in Section 
1-146
of the
Illinois Vehicle Code, that is donated to a 
corporation, limited liability
company, society, association, 
foundation, or institution that is determined by
the Department 
to be organized and operated exclusively for educational

purposes.  For purposes of this exemption, "a corporation, 
limited liability
company, society, association, foundation, 
or institution organized and
operated
exclusively for 
educational purposes" means all tax-supported public schools,

private schools that offer systematic instruction in useful 
branches of
learning by methods common to public schools and 
that compare favorably in
their scope and intensity with the 
course of study presented in tax-supported
schools, and 
vocational or technical schools or institutes organized and

operated exclusively to provide a course of study of not less 
than 6 weeks
duration and designed to prepare individuals to 
follow a trade or to pursue a
manual, technical, mechanical, 
industrial, business, or commercial
occupation.

    (34) Beginning January 1, 2000, personal property, 
including food, purchased
through fundraising events for the 
benefit of a public or private elementary or
secondary school, 
a group of those schools, or one or more school districts if

the events are sponsored by an entity recognized by the school 
district that
consists primarily of volunteers and includes 
parents and teachers of the
school children.  This paragraph 
does not apply to fundraising events (i) for
the benefit of 
private home instruction or (ii) for which the fundraising

entity purchases the personal property sold at the events from 
another
individual or entity that sold the property for the 
purpose of resale by the
fundraising entity and that profits 
from the sale to the fundraising entity.
This paragraph is 
exempt from the provisions of Section 2-70.

    (35) Beginning January 1, 2000 and through December 31, 
2001, new or used
automatic vending machines that prepare and 
serve hot food and beverages,
including coffee, soup, and other 
items, and replacement parts for these
machines.  Beginning 
January 1, 2002 and through June 30, 2003, machines
and parts 
for machines used in
commercial, coin-operated amusement and 
vending business if a use or occupation
tax is paid on the 
gross receipts derived from the use of the commercial,

coin-operated amusement and vending machines.  This paragraph 
is exempt from
the provisions of Section 2-70.

    (35-5) Beginning August 23, 2001 and through June 30, 2011, 
food for human consumption that is to be consumed off
the 
premises where it is sold (other than alcoholic beverages, soft 
drinks,
and food that has been prepared for immediate 
consumption) and prescription
and nonprescription medicines, 
drugs, medical appliances, and insulin, urine
testing 
materials, syringes, and needles used by diabetics, for human 
use, when
purchased for use by a person receiving medical 
assistance under Article 5 of
the Illinois Public Aid Code who 
resides in a licensed long-term care facility,
as defined in 
the Nursing Home Care Act.

    (36) Beginning August 2, 2001, computers and 
communications equipment
utilized for any hospital purpose and 
equipment used in the diagnosis,
analysis, or treatment of 
hospital patients sold to a lessor who leases the
equipment, 
under a lease of one year or longer executed or in effect at 
the
time of the purchase, to a hospital that has been issued an 
active tax
exemption identification number by the Department 
under Section 1g of this Act.
 This paragraph is exempt from the 
provisions of Section 2-70.

    (37) Beginning August 2, 2001, personal property sold to a 
lessor who
leases the property, under a lease of one year or 
longer executed or in effect
at the time of the purchase, to a 
governmental body that has been issued an
active tax exemption 
identification number by the Department under Section 1g
of 
this Act.  This paragraph is exempt from the provisions of 
Section 2-70.

    (38) Beginning on January 1, 2002 and through June 30, 
2011, tangible personal property purchased
from an Illinois 
retailer by a taxpayer engaged in centralized purchasing

activities in Illinois who will, upon receipt of the property 
in Illinois,
temporarily store the property in Illinois (i) for 
the purpose of subsequently
transporting it outside this State 
for use or consumption thereafter solely
outside this State or 
(ii) for the purpose of being processed, fabricated, or

manufactured into, attached to, or incorporated into other 
tangible personal
property to be transported outside this State 
and thereafter used or consumed
solely outside this State.  The 
Director of Revenue shall, pursuant to rules
adopted in 
accordance with the Illinois Administrative Procedure Act, 
issue a
permit to any taxpayer in good standing with the 
Department who is eligible for
the exemption under this 
paragraph (38).  The permit issued under
this paragraph (38) 
shall authorize the holder, to the extent and
in the manner 
specified in the rules adopted under this Act, to purchase

tangible personal property from a retailer exempt from the 
taxes imposed by
this Act.  Taxpayers shall maintain all 
necessary books and records to
substantiate the use and 
consumption of all such tangible personal property
outside of 
the State of Illinois.

(Source: P.A. 93-23, eff. 6-20-03; 93-24, eff. 6-20-03; 93-840, 
eff. 7-30-04; 93-1033, eff. 9-3-04; 93-1068, eff. 1-15-05; 
94-1002, eff. 7-3-06.)

 
ARTICLE 99.  EFFECTIVE DATE

 

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