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        withdrawn by the taxpayer in the taxable year from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.)