Public Act 096-0932
 
SB1826 Enrolled LRB096 09394 RCE 19551 b

    AN ACT concerning revenue.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Income Tax Act is amended by
changing Section 203 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        withdrawn by the taxpayer in the taxable year from a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 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 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 person if
            the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                    (a) the 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
                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 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 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 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 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 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 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 premiums 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) or
        Section 203(a)(2)(D-18) of this Act.
            (D-20) For taxable years beginning on or after
        January 1, 2002 and ending on or before December 31,
        2006, 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). For taxable years beginning on or after
        January 1, 2007, 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, (ii) a distribution from
        the Illinois Prepaid Tuition Trust Fund, or (iii) a
        distribution from a qualified tuition program under
        Section 529 of the Internal Revenue Code that (I)
        adopts and determines that its offering materials
        comply with the College Savings Plans Network's
        disclosure principles and (II) has made reasonable
        efforts to inform in-state residents of the existence
        of in-state qualified tuition programs by informing
        Illinois residents directly and, where applicable, to
        inform financial intermediaries distributing the
        program to inform in-state residents of the existence
        of in-state qualified tuition programs at least
        annually, an amount equal to the amount excluded from
        gross income under Section 529(c)(3)(B).
            For the purposes of this subparagraph (D-20), a
        qualified tuition program has made reasonable efforts
        if it makes disclosures (which may use the term
        "in-state program" or "in-state plan" and need not
        specifically refer to Illinois or its qualified
        programs by name) (i) directly to prospective
        participants in its offering materials or makes a
        public disclosure, such as a website posting; and (ii)
        where applicable, to intermediaries selling the
        out-of-state program in the same manner that the
        out-of-state program distributes its offering
        materials;
            (D-21) For taxable years beginning on or after
        January 1, 2007, in the case of transfer of moneys from
        a qualified tuition program under Section 529 of the
        Internal Revenue Code that is administered by the State
        to an out-of-state program, an amount equal to the
        amount of moneys previously deducted from base income
        under subsection (a)(2)(Y) of this Section;
            (D-22) For taxable years beginning on or after
        January 1, 2009, in the case of a nonqualified
        withdrawal or refund of moneys from a qualified tuition
        program under Section 529 of the Internal Revenue Code
        administered by the State that is not used for
        qualified expenses at an eligible education
        institution, an amount equal to the contribution
        component of the nonqualified withdrawal or refund
        that was previously deducted from base income under
        subsection (a)(2)(y) of this Section, provided that
        the withdrawal or refund did not result from the
        beneficiary's death or disability;
            (D-23) An amount equal to the credit allowable to
        the taxpayer under Section 218(a) of this Act,
        determined without regard to Section 218(c) of this
        Act;
    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 or, beginning with taxable years ending on or
        after December 31, 2007, the National Guard of any
        other state. 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 or,
        beginning with taxable years ending on or after
        December 31, 2007, the National Guard of any other
        state. 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 that exempts income derived from
        bonds or other obligations from the tax imposed under
        this Act, the amount exempted shall be the interest net
        of bond premium amortization;
            (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). For purposes
        of this subparagraph, contributions made by an
        employer on behalf of an employee, or matching
        contributions made by an employee, shall be treated as
        made by the employee. 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. This subparagraph (CC) is
        exempt from the provisions of Section 250;
            (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 person. This subparagraph (DD)
        is exempt from the provisions of Section 250; 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. This subparagraph (EE) is exempt from the
        provisions of Section 250.
 
    (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;
            (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 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 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 person if
            the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                    (a) the 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
                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 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 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 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 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 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 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 premiums 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(b)(2)(E-12) or
        Section 203(b)(2)(E-13) of this Act;
            (E-15) For taxable years beginning after December
        31, 2008, any deduction for dividends paid by a captive
        real estate investment trust that is allowed to a real
        estate investment trust under Section 857(b)(2)(B) of
        the Internal Revenue Code for dividends paid;
            (E-16) An amount equal to the credit allowable to
        the taxpayer under Section 218(a) of this Act,
        determined without regard to Section 218(c) of this
        Act;
    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 that exempts income derived from
        bonds or other obligations from the tax imposed under
        this Act, the amount exempted shall be the interest net
        of bond premium amortization;
            (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 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 captive
        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 captive 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. This subparagraph (O) is exempt from
        the provisions of Section 250 of this Act;
            (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, (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, and (iii) any insurance premium
        income (net of 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-19), Section
        203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section
        203(d)(2)(D-9), but not to exceed the amount of that
        addition modification. This subparagraph (V) is exempt
        from the provisions of Section 250;
            (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 person. This subparagraph (W)
        is exempt from the provisions of Section 250; 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. This subparagraph (X) is exempt from the
        provisions of Section 250.
        (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 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 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 person if
            the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                    (a) the 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
                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 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 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 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 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 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 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 premiums 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(c)(2)(G-12) or
        Section 203(c)(2)(G-13) of this Act;
            (G-15) An amount equal to the credit allowable to
        the taxpayer under Section 218(a) of this Act,
        determined without regard to Section 218(c) 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 that
        exempts income derived from bonds or other obligations
        from the tax imposed under this Act, the amount
        exempted shall be the interest net of bond premium
        amortization;
            (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. This subparagraph (T) is exempt
        from the provisions of Section 250;
            (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 person. This subparagraph (U)
        is exempt from the provisions of Section 250; 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 (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(c)(2)(G-13) for
        intangible expenses and costs paid, accrued, or
        incurred, directly or indirectly, to the same foreign
        person. This subparagraph (V) is exempt from the
        provisions of Section 250.
        (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 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 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 person if
            the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                    (a) the 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
                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 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 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 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 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 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 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 premiums 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(d)(2)(D-7) or
        Section 203(d)(2)(D-8) of this Act;
            (D-10) An amount equal to the credit allowable to
        the taxpayer under Section 218(a) of this Act,
        determined without regard to Section 218(c) 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 that exempts income derived from
        bonds or other obligations from the tax imposed under
        this Act, the amount exempted shall be the interest net
        of bond premium amortization;
            (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, provided that the
        deduction under this subparagraph (I) shall not be
        allowed to a publicly traded partnership under Section
        7704 of the Internal Revenue Code for any taxable year
        ending on or after December 31, 2009;
            (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. This subparagraph (Q) is exempt
        from Section 250;
            (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 person. This subparagraph (R) is exempt from
        Section 250; 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 person.
        This subparagraph (S) is exempt from Section 250.
 
    (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, but without regard to the prohibition
        against offsetting losses from patronage activities
        against income from nonpatronage activities; except
        that a cooperative corporation or association may make
        an election to follow its federal income tax treatment
        of patronage losses and nonpatronage losses. In the
        event such election is made, such losses shall be
        computed and carried over in a manner consistent with
        subsection (a) of Section 207 of this Act and
        apportioned by the apportionment factor reported by
        the cooperative on its Illinois income tax return filed
        for the taxable year in which the losses are incurred.
        The election shall be effective for all taxable years
        with original returns due on or after the date of the
        election. In addition, the cooperative may file an
        amended return or returns, as allowed under this Act,
        to provide that the election shall be effective for
        losses incurred or carried forward for taxable years
        occurring prior to the date of the election. Once made,
        the election may only be revoked upon approval of the
        Director. The Department shall adopt rules setting
        forth requirements for documenting the elections and
        any resulting Illinois net loss and the standards to be
        used by the Director in evaluating requests to revoke
        elections. This amendatory Act of the 96th General
        Assembly is declaratory of existing law;
            (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. 95-23, eff. 8-3-07; 95-233, eff. 8-16-07; 95-286,
eff. 8-20-07; 95-331, eff. 8-21-07; 95-707, eff. 1-11-08;
95-876, eff. 8-21-08; 96-45, eff. 7-15-09; 96-120, eff. 8-4-09;
96-198, eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff.
8-14-09; 96-835, eff. 12-16-09.)