SB2207ham001 93RD GENERAL ASSEMBLY

Revenue Committee

Adopted in House Comm. on May 13, 2004

09300SB2207ham001 LRB093 15831 BDD 50831 a

AMENDMENT TO SENATE BILL 2207

AMENDMENT NO. ______. Amend Senate Bill 2207 by replacing everything after the enacting clause with the following:

4		"Section 5. The Illinois Income Tax Act is amended by
5		changing Sections 203, 205, 305, and 1501 as follows:
6		(35 ILCS 5/203) (from Ch. 120, par. 2-203)
7		Sec. 203. Base income defined.
8		(a) Individuals.
9		(1) In general. In the case of an individual, base
10		income means an amount equal to the taxpayer's adjusted
11		gross income for the taxable year as modified by paragraph
12		(2).
13		(2) Modifications. The adjusted gross income referred
14		to in paragraph (1) shall be modified by adding thereto the
15		sum of the following amounts:
16		(A) An amount equal to all amounts paid or accrued
17		to the taxpayer as interest or dividends during the
18		taxable year to the extent excluded from gross income
19		in the computation of adjusted gross income, except
20		stock dividends of qualified public utilities
21		described in Section 305(e) of the Internal Revenue
22		Code;
23		(B) An amount equal to the amount of tax imposed by
24		this Act to the extent deducted from gross income in

1		the computation of adjusted gross income for the
2		taxable year;
3		(C) An amount equal to the amount received during
4		the taxable year as a recovery or refund of real
5		property taxes paid with respect to the taxpayer's
6		principal residence under the Revenue Act of 1939 and
7		for which a deduction was previously taken under
8		subparagraph (L) of this paragraph (2) prior to July 1,
9		1991, the retrospective application date of Article 4
10		of Public Act 87-17. In the case of multi-unit or
11		multi-use structures and farm dwellings, the taxes on
12		the taxpayer's principal residence shall be that
13		portion of the total taxes for the entire property
14		which is attributable to such principal residence;
15		(D) An amount equal to the amount of the capital
16		gain deduction allowable under the Internal Revenue
17		Code, to the extent deducted from gross income in the
18		computation of adjusted gross income;
19		(D-5) An amount, to the extent not included in
20		adjusted gross income, equal to the amount of money
21		withdrawn by the taxpayer in the taxable year from a
22		medical care savings account and the interest earned on
23		the account in the taxable year of a withdrawal
24		pursuant to subsection (b) of Section 20 of the Medical
25		Care Savings Account Act or subsection (b) of Section
26		20 of the Medical Care Savings Account Act of 2000;
27		(D-10) For taxable years ending after December 31,
28		1997, an amount equal to any eligible remediation costs
29		that the individual deducted in computing adjusted
30		gross income and for which the individual claims a
31		credit under subsection (l) of Section 201;
32		(D-15) For taxable years 2001 and thereafter, an
33		amount equal to the bonus depreciation deduction (30%
34		of the adjusted basis of the qualified property) taken

1		on the taxpayer's federal income tax return for the
2		taxable year under subsection (k) of Section 168 of the
3		Internal Revenue Code; and
4		(D-16) If the taxpayer reports a capital gain or
5		loss on the taxpayer's federal income tax return for
6		the taxable year based on a sale or transfer of
7		property for which the taxpayer was required in any
8		taxable year to make an addition modification under
9		subparagraph (D-15), then an amount equal to the
10		aggregate amount of the deductions taken in all taxable
11		years under subparagraph (Z) with respect to that
12		property. ;
13		The taxpayer is required to make the addition
14		modification under this subparagraph only once with
15		respect to any one piece of property; . and
16		(D-20) (D-15) For taxable years beginning on or
17		after January 1, 2002, in the case of a distribution
18		from a qualified tuition program under Section 529 of
19		the Internal Revenue Code, other than (i) a
20		distribution from a College Savings Pool created under
21		Section 16.5 of the State Treasurer Act or (ii) a
22		distribution from the Illinois Prepaid Tuition Trust
23		Fund, an amount equal to the amount excluded from gross
24		income under Section 529(c)(3)(B);
25		and by deducting from the total so obtained the sum of the
26		following amounts:
27		(E) For taxable years ending before December 31,
28		2001, any amount included in such total in respect of
29		any compensation (including but not limited to any
30		compensation paid or accrued to a serviceman while a
31		prisoner of war or missing in action) paid to a
32		resident by reason of being on active duty in the Armed
33		Forces of the United States and in respect of any
34		compensation paid or accrued to a resident who as a

1		governmental employee was a prisoner of war or missing
2		in action, and in respect of any compensation paid to a
3		resident in 1971 or thereafter for annual training
4		performed pursuant to Sections 502 and 503, Title 32,
5		United States Code as a member of the Illinois National
6		Guard. For taxable years ending on or after December
7		31, 2001, any amount included in such total in respect
8		of any compensation (including but not limited to any
9		compensation paid or accrued to a serviceman while a
10		prisoner of war or missing in action) paid to a
11		resident by reason of being a member of any component
12		of the Armed Forces of the United States and in respect
13		of any compensation paid or accrued to a resident who
14		as a governmental employee was a prisoner of war or
15		missing in action, and in respect of any compensation
16		paid to a resident in 2001 or thereafter by reason of
17		being a member of the Illinois National Guard. The
18		provisions of this amendatory Act of the 92nd General
19		Assembly are exempt from the provisions of Section 250;
20		(F) An amount equal to all amounts included in such
21		total pursuant to the provisions of Sections 402(a),
22		402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
23		Internal Revenue Code, or included in such total as
24		distributions under the provisions of any retirement
25		or disability plan for employees of any governmental
26		agency or unit, or retirement payments to retired
27		partners, which payments are excluded in computing net
28		earnings from self employment by Section 1402 of the
29		Internal Revenue Code and regulations adopted pursuant
30		thereto;
31		(G) The valuation limitation amount;
32		(H) An amount equal to the amount of any tax
33		imposed by this Act which was refunded to the taxpayer
34		and included in such total for the taxable year;

1		(I) An amount equal to all amounts included in such
2		total pursuant to the provisions of Section 111 of the
3		Internal Revenue Code as a recovery of items previously
4		deducted from adjusted gross income in the computation
5		of taxable income;
6		(J) An amount equal to those dividends included in
7		such total which were paid by a corporation which
8		conducts business operations in an Enterprise Zone or
9		zones created under the Illinois Enterprise Zone Act,
10		and conducts substantially all of its operations in an
11		Enterprise Zone or zones;
12		(K) An amount equal to those dividends included in
13		such total that were paid by a corporation that
14		conducts business operations in a federally designated
15		Foreign Trade Zone or Sub-Zone and that is designated a
16		High Impact Business located in Illinois; provided
17		that dividends eligible for the deduction provided in
18		subparagraph (J) of paragraph (2) of this subsection
19		shall not be eligible for the deduction provided under
20		this subparagraph (K);
21		(L) For taxable years ending after December 31,
22		1983, an amount equal to all social security benefits
23		and railroad retirement benefits included in such
24		total pursuant to Sections 72(r) and 86 of the Internal
25		Revenue Code;
26		(M) With the exception of any amounts subtracted
27		under subparagraph (N), an amount equal to the sum of
28		all amounts disallowed as deductions by (i) Sections
29		171(a) (2), and 265(2) of the Internal Revenue Code of
30		1954, as now or hereafter amended, and all amounts of
31		expenses allocable to interest and disallowed as
32		deductions by Section 265(1) of the Internal Revenue
33		Code of 1954, as now or hereafter amended; and (ii) for
34		taxable years ending on or after August 13, 1999,

1		Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
2		the Internal Revenue Code; the provisions of this
3		subparagraph are exempt from the provisions of Section
4		250;
5		(N) An amount equal to all amounts included in such
6		total which are exempt from taxation by this State
7		either by reason of its statutes or Constitution or by
8		reason of the Constitution, treaties or statutes of the
9		United States; provided that, in the case of any
10		statute of this State that exempts income derived from
11		bonds or other obligations from the tax imposed under
12		this Act, the amount exempted shall be the interest net
13		of bond premium amortization;
14		(O) An amount equal to any contribution made to a
15		job training project established pursuant to the Tax
16		Increment Allocation Redevelopment Act;
17		(P) An amount equal to the amount of the deduction
18		used to compute the federal income tax credit for
19		restoration of substantial amounts held under claim of
20		right for the taxable year pursuant to Section 1341 of
21		the Internal Revenue Code of 1986;
22		(Q) An amount equal to any amounts included in such
23		total, received by the taxpayer as an acceleration in
24		the payment of life, endowment or annuity benefits in
25		advance of the time they would otherwise be payable as
26		an indemnity for a terminal illness;
27		(R) An amount equal to the amount of any federal or
28		State bonus paid to veterans of the Persian Gulf War;
29		(S) An amount, to the extent included in adjusted
30		gross income, equal to the amount of a contribution
31		made in the taxable year on behalf of the taxpayer to a
32		medical care savings account established under the
33		Medical Care Savings Account Act or the Medical Care
34		Savings Account Act of 2000 to the extent the

1		contribution is accepted by the account administrator
2		as provided in that Act;
3		(T) An amount, to the extent included in adjusted
4		gross income, equal to the amount of interest earned in
5		the taxable year on a medical care savings account
6		established under the Medical Care Savings Account Act
7		or the Medical Care Savings Account Act of 2000 on
8		behalf of the taxpayer, other than interest added
9		pursuant to item (D-5) of this paragraph (2);
10		(U) For one taxable year beginning on or after
11		January 1, 1994, an amount equal to the total amount of
12		tax imposed and paid under subsections (a) and (b) of
13		Section 201 of this Act on grant amounts received by
14		the taxpayer under the Nursing Home Grant Assistance
15		Act during the taxpayer's taxable years 1992 and 1993;
16		(V) Beginning with tax years ending on or after
17		December 31, 1995 and ending with tax years ending on
18		or before December 31, 2004, an amount equal to the
19		amount paid by a taxpayer who is a self-employed
20		taxpayer, a partner of a partnership, or a shareholder
21		in a Subchapter S corporation for health insurance or
22		long-term care insurance for that taxpayer or that
23		taxpayer's spouse or dependents, to the extent that the
24		amount paid for that health insurance or long-term care
25		insurance may be deducted under Section 213 of the
26		Internal Revenue Code of 1986, has not been deducted on
27		the federal income tax return of the taxpayer, and does
28		not exceed the taxable income attributable to that
29		taxpayer's income, self-employment income, or
30		Subchapter S corporation income; except that no
31		deduction shall be allowed under this item (V) if the
32		taxpayer is eligible to participate in any health
33		insurance or long-term care insurance plan of an
34		employer of the taxpayer or the taxpayer's spouse. The

1		amount of the health insurance and long-term care
2		insurance subtracted under this item (V) shall be
3		determined by multiplying total health insurance and
4		long-term care insurance premiums paid by the taxpayer
5		times a number that represents the fractional
6		percentage of eligible medical expenses under Section
7		213 of the Internal Revenue Code of 1986 not actually
8		deducted on the taxpayer's federal income tax return;
9		(W) For taxable years beginning on or after January
10		1, 1998, all amounts included in the taxpayer's federal
11		gross income in the taxable year from amounts converted
12		from a regular IRA to a Roth IRA. This paragraph is
13		exempt from the provisions of Section 250;
14		(X) For taxable year 1999 and thereafter, an amount
15		equal to the amount of any (i) distributions, to the
16		extent includible in gross income for federal income
17		tax purposes, made to the taxpayer because of his or
18		her status as a victim of persecution for racial or
19		religious reasons by Nazi Germany or any other Axis
20		regime or as an heir of the victim and (ii) items of
21		income, to the extent includible in gross income for
22		federal income tax purposes, attributable to, derived
23		from or in any way related to assets stolen from,
24		hidden from, or otherwise lost to a victim of
25		persecution for racial or religious reasons by Nazi
26		Germany or any other Axis regime immediately prior to,
27		during, and immediately after World War II, including,
28		but not limited to, interest on the proceeds receivable
29		as insurance under policies issued to a victim of
30		persecution for racial or religious reasons by Nazi
31		Germany or any other Axis regime by European insurance
32		companies immediately prior to and during World War II;
33		provided, however, this subtraction from federal
34		adjusted gross income does not apply to assets acquired

1		with such assets or with the proceeds from the sale of
2		such assets; provided, further, this paragraph shall
3		only apply to a taxpayer who was the first recipient of
4		such assets after their recovery and who is a victim of
5		persecution for racial or religious reasons by Nazi
6		Germany or any other Axis regime or as an heir of the
7		victim. The amount of and the eligibility for any
8		public assistance, benefit, or similar entitlement is
9		not affected by the inclusion of items (i) and (ii) of
10		this paragraph in gross income for federal income tax
11		purposes. This paragraph is exempt from the provisions
12		of Section 250;
13		(Y) For taxable years beginning on or after January
14		1, 2002, moneys contributed in the taxable year to a
15		College Savings Pool account under Section 16.5 of the
16		State Treasurer Act, except that amounts excluded from
17		gross income under Section 529(c)(3)(C)(i) of the
18		Internal Revenue Code shall not be considered moneys
19		contributed under this subparagraph (Y). This
20		subparagraph (Y) is exempt from the provisions of
21		Section 250;
22		(Z) For taxable years 2001 and thereafter, for the
23		taxable year in which the bonus depreciation deduction
24		(30% of the adjusted basis of the qualified property)
25		is taken on the taxpayer's federal income tax return
26		under subsection (k) of Section 168 of the Internal
27		Revenue Code and for each applicable taxable year
28		thereafter, an amount equal to "x", where:
29		(1) "y" equals the amount of the depreciation
30		deduction taken for the taxable year on the
31		taxpayer's federal income tax return on property
32		for which the bonus depreciation deduction (30% of
33		the adjusted basis of the qualified property) was
34		taken in any year under subsection (k) of Section

1		168 of the Internal Revenue Code, but not including
2		the bonus depreciation deduction; and
3		(2) "x" equals "y" multiplied by 30 and then
4		divided by 70 (or "y" multiplied by 0.429).
5		The aggregate amount deducted under this
6		subparagraph in all taxable years for any one piece of
7		property may not exceed the amount of the bonus
8		depreciation deduction (30% of the adjusted basis of
9		the qualified property) taken on that property on the
10		taxpayer's federal income tax return under subsection
11		(k) of Section 168 of the Internal Revenue Code; and
12		(AA) If the taxpayer reports a capital gain or loss
13		on the taxpayer's federal income tax return for the
14		taxable year based on a sale or transfer of property
15		for which the taxpayer was required in any taxable year
16		to make an addition modification under subparagraph
17		(D-15), then an amount equal to that addition
18		modification.
19		The taxpayer is allowed to take the deduction under
20		this subparagraph only once with respect to any one
21		piece of property; and
22		(BB) (Z) Any amount included in adjusted gross
23		income, other than salary, received by a driver in a
24		ridesharing arrangement using a motor vehicle.
25		(b) Corporations.
26		(1) In general. In the case of a corporation, base
27		income means an amount equal to the taxpayer's taxable
28		income for the taxable year as modified by paragraph (2).
29		(2) Modifications. The taxable income referred to in
30		paragraph (1) shall be modified by adding thereto the sum
31		of the following amounts:
32		(A) An amount equal to all amounts paid or accrued
33		to the taxpayer as interest and all distributions

1		received from regulated investment companies during
2		the taxable year to the extent excluded from gross
3		income in the computation of taxable income;
4		(B) An amount equal to the amount of tax imposed by
5		this Act to the extent deducted from gross income in
6		the computation of taxable income for the taxable year;
7		(C) In the case of a regulated investment company,
8		an amount equal to the excess of (i) the net long-term
9		capital gain for the taxable year, over (ii) the amount
10		of the capital gain dividends designated as such in
11		accordance with Section 852(b)(3)(C) of the Internal
12		Revenue Code and any amount designated under Section
13		852(b)(3)(D) of the Internal Revenue Code,
14		attributable to the taxable year (this amendatory Act
15		of 1995 (Public Act 89-89) is declarative of existing
16		law and is not a new enactment);
17		(D) The amount of any net operating loss deduction
18		taken in arriving at taxable income, other than a net
19		operating loss carried forward from a taxable year
20		ending prior to December 31, 1986;
21		(E) For taxable years in which a net operating loss
22		carryback or carryforward from a taxable year ending
23		prior to December 31, 1986 is an element of taxable
24		income under paragraph (1) of subsection (e) or
25		subparagraph (E) of paragraph (2) of subsection (e),
26		the amount by which addition modifications other than
27		those provided by this subparagraph (E) exceeded
28		subtraction modifications in such earlier taxable
29		year, with the following limitations applied in the
30		order that they are listed:
31		(i) the addition modification relating to the
32		net operating loss carried back or forward to the
33		taxable year from any taxable year ending prior to
34		December 31, 1986 shall be reduced by the amount of

1		addition modification under this subparagraph (E)
2		which related to that net operating loss and which
3		was taken into account in calculating the base
4		income of an earlier taxable year, and
5		(ii) the addition modification relating to the
6		net operating loss carried back or forward to the
7		taxable year from any taxable year ending prior to
8		December 31, 1986 shall not exceed the amount of
9		such carryback or carryforward;
10		For taxable years in which there is a net operating
11		loss carryback or carryforward from more than one other
12		taxable year ending prior to December 31, 1986, the
13		addition modification provided in this subparagraph
14		(E) shall be the sum of the amounts computed
15		independently under the preceding provisions of this
16		subparagraph (E) for each such taxable year;
17		(E-5) For taxable years ending after December 31,
18		1997, an amount equal to any eligible remediation costs
19		that the corporation deducted in computing adjusted
20		gross income and for which the corporation claims a
21		credit under subsection (l) of Section 201;
22		(E-10) For taxable years 2001 and thereafter, an
23		amount equal to the bonus depreciation deduction (30%
24		of the adjusted basis of the qualified property) taken
25		on the taxpayer's federal income tax return for the
26		taxable year under subsection (k) of Section 168 of the
27		Internal Revenue Code; and
28		(E-11) If the taxpayer reports a capital gain or
29		loss on the taxpayer's federal income tax return for
30		the taxable year based on a sale or transfer of
31		property for which the taxpayer was required in any
32		taxable year to make an addition modification under
33		subparagraph (E-10), then an amount equal to the
34		aggregate amount of the deductions taken in all taxable

1		years under subparagraph (T) with respect to that
2		property. ;
3		The taxpayer is required to make the addition
4		modification under this subparagraph only once with
5		respect to any one piece of property;
6		and by deducting from the total so obtained the sum of the
7		following amounts:
8		(F) An amount equal to the amount of any tax
9		imposed by this Act which was refunded to the taxpayer
10		and included in such total for the taxable year;
11		(G) An amount equal to any amount included in such
12		total under Section 78 of the Internal Revenue Code;
13		(H) In the case of a regulated investment company,
14		an amount equal to the amount of exempt interest
15		dividends as defined in subsection (b) (5) of Section
16		852 of the Internal Revenue Code, paid to shareholders
17		for the taxable year;
18		(I) With the exception of any amounts subtracted
19		under subparagraph (J), an amount equal to the sum of
20		all amounts disallowed as deductions by (i) Sections
21		171(a) (2), and 265(a)(2) and amounts disallowed as
22		interest expense by Section 291(a)(3) of the Internal
23		Revenue Code, as now or hereafter amended, and all
24		amounts of expenses allocable to interest and
25		disallowed as deductions by Section 265(a)(1) of the
26		Internal Revenue Code, as now or hereafter amended; and
27		(ii) for taxable years ending on or after August 13,
28		1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
29		832(b)(5)(B)(i) of the Internal Revenue Code; the
30		provisions of this subparagraph are exempt from the
31		provisions of Section 250;
32		(J) An amount equal to all amounts included in such
33		total which are exempt from taxation by this State
34		either by reason of its statutes or Constitution or by

1		reason of the Constitution, treaties or statutes of the
2		United States; provided that, in the case of any
3		statute of this State that exempts income derived from
4		bonds or other obligations from the tax imposed under
5		this Act, the amount exempted shall be the interest net
6		of bond premium amortization;
7		(K) An amount equal to those dividends included in
8		such total which were paid by a corporation which
9		conducts business operations in an Enterprise Zone or
10		zones created under the Illinois Enterprise Zone Act
11		and conducts substantially all of its operations in an
12		Enterprise Zone or zones;
13		(L) An amount equal to those dividends included in
14		such total that were paid by a corporation that
15		conducts business operations in a federally designated
16		Foreign Trade Zone or Sub-Zone and that is designated a
17		High Impact Business located in Illinois; provided
18		that dividends eligible for the deduction provided in
19		subparagraph (K) of paragraph 2 of this subsection
20		shall not be eligible for the deduction provided under
21		this subparagraph (L);
22		(M) For any taxpayer that is a financial
23		organization within the meaning of Section 304(c) of
24		this Act, an amount included in such total as interest
25		income from a loan or loans made by such taxpayer to a
26		borrower, to the extent that such a loan is secured by
27		property which is eligible for the Enterprise Zone
28		Investment Credit. To determine the portion of a loan
29		or loans that is secured by property eligible for a
30		Section 201(f) investment credit to the borrower, the
31		entire principal amount of the loan or loans between
32		the taxpayer and the borrower should be divided into
33		the basis of the Section 201(f) investment credit
34		property which secures the loan or loans, using for

1		this purpose the original basis of such property on the
2		date that it was placed in service in the Enterprise
3		Zone. The subtraction modification available to
4		taxpayer in any year under this subsection shall be
5		that portion of the total interest paid by the borrower
6		with respect to such loan attributable to the eligible
7		property as calculated under the previous sentence;
8		(M-1) For any taxpayer that is a financial
9		organization within the meaning of Section 304(c) of
10		this Act, an amount included in such total as interest
11		income from a loan or loans made by such taxpayer to a
12		borrower, to the extent that such a loan is secured by
13		property which is eligible for the High Impact Business
14		Investment Credit. To determine the portion of a loan
15		or loans that is secured by property eligible for a
16		Section 201(h) investment credit to the borrower, the
17		entire principal amount of the loan or loans between
18		the taxpayer and the borrower should be divided into
19		the basis of the Section 201(h) investment credit
20		property which secures the loan or loans, using for
21		this purpose the original basis of such property on the
22		date that it was placed in service in a federally
23		designated Foreign Trade Zone or Sub-Zone located in
24		Illinois. No taxpayer that is eligible for the
25		deduction provided in subparagraph (M) of paragraph
26		(2) of this subsection shall be eligible for the
27		deduction provided under this subparagraph (M-1). The
28		subtraction modification available to taxpayers in any
29		year under this subsection shall be that portion of the
30		total interest paid by the borrower with respect to
31		such loan attributable to the eligible property as
32		calculated under the previous sentence;
33		(N) Two times any contribution made during the
34		taxable year to a designated zone organization to the

1		extent that the contribution (i) qualifies as a
2		charitable contribution under subsection (c) of
3		Section 170 of the Internal Revenue Code and (ii) must,
4		by its terms, be used for a project approved by the
5		Department of Commerce and Economic Opportunity
6		Community Affairs under Section 11 of the Illinois
7		Enterprise Zone Act;
8		(O) An amount equal to: (i) 85% for taxable years
9		ending on or before December 31, 1992, or, a percentage
10		equal to the percentage allowable under Section
11		243(a)(1) of the Internal Revenue Code of 1986 for
12		taxable years ending after December 31, 1992, of the
13		amount by which dividends included in taxable income
14		and received from a corporation that is not created or
15		organized under the laws of the United States or any
16		state or political subdivision thereof, including, for
17		taxable years ending on or after December 31, 1988,
18		dividends received or deemed received or paid or deemed
19		paid under Sections 951 through 964 of the Internal
20		Revenue Code, exceed the amount of the modification
21		provided under subparagraph (G) of paragraph (2) of
22		this subsection (b) which is related to such dividends;
23		plus (ii) 100% of the amount by which dividends,
24		included in taxable income and received, including,
25		for taxable years ending on or after December 31, 1988,
26		dividends received or deemed received or paid or deemed
27		paid under Sections 951 through 964 of the Internal
28		Revenue Code, from any such corporation specified in
29		clause (i) that would but for the provisions of Section
30		1504 (b) (3) of the Internal Revenue Code be treated as
31		a member of the affiliated group which includes the
32		dividend recipient, exceed the amount of the
33		modification provided under subparagraph (G) of
34		paragraph (2) of this subsection (b) which is related

1		to such dividends;
2		(P) An amount equal to any contribution made to a
3		job training project established pursuant to the Tax
4		Increment Allocation Redevelopment Act;
5		(Q) An amount equal to the amount of the deduction
6		used to compute the federal income tax credit for
7		restoration of substantial amounts held under claim of
8		right for the taxable year pursuant to Section 1341 of
9		the Internal Revenue Code of 1986;
10		(R) In the case of an attorney-in-fact with respect
11		to whom an interinsurer or a reciprocal insurer has
12		made the election under Section 835 of the Internal
13		Revenue Code, 26 U.S.C. 835, an amount equal to the
14		excess, if any, of the amounts paid or incurred by that
15		interinsurer or reciprocal insurer in the taxable year
16		to the attorney-in-fact over the deduction allowed to
17		that interinsurer or reciprocal insurer with respect
18		to the attorney-in-fact under Section 835(b) of the
19		Internal Revenue Code for the taxable year;
20		(S) For taxable years ending on or after December
21		31, 1997, in the case of a Subchapter S corporation, an
22		amount equal to all amounts of income allocable to a
23		shareholder subject to the Personal Property Tax
24		Replacement Income Tax imposed by subsections (c) and
25		(d) of Section 201 of this Act, including amounts
26		allocable to organizations exempt from federal income
27		tax by reason of Section 501(a) of the Internal Revenue
28		Code. This subparagraph (S) is exempt from the
29		provisions of Section 250;
30		(T) For taxable years 2001 and thereafter, for the
31		taxable year in which the bonus depreciation deduction
32		(30% of the adjusted basis of the qualified property)
33		is taken on the taxpayer's federal income tax return
34		under subsection (k) of Section 168 of the Internal

1		Revenue Code and for each applicable taxable year
2		thereafter, an amount equal to "x", where:
3		(1) "y" equals the amount of the depreciation
4		deduction taken for the taxable year on the
5		taxpayer's federal income tax return on property
6		for which the bonus depreciation deduction (30% of
7		the adjusted basis of the qualified property) was
8		taken in any year under subsection (k) of Section
9		168 of the Internal Revenue Code, but not including
10		the bonus depreciation deduction; and
11		(2) "x" equals "y" multiplied by 30 and then
12		divided by 70 (or "y" multiplied by 0.429).
13		The aggregate amount deducted under this
14		subparagraph in all taxable years for any one piece of
15		property may not exceed the amount of the bonus
16		depreciation deduction (30% of the adjusted basis of
17		the qualified property) taken on that property on the
18		taxpayer's federal income tax return under subsection
19		(k) of Section 168 of the Internal Revenue Code; and
20		(U) If the taxpayer reports a capital gain or loss
21		on the taxpayer's federal income tax return for the
22		taxable year based on a sale or transfer of property
23		for which the taxpayer was required in any taxable year
24		to make an addition modification under subparagraph
25		(E-10), then an amount equal to that addition
26		modification.
27		The taxpayer is allowed to take the deduction under
28		this subparagraph only once with respect to any one
29		piece of property.
30		(3) Special rule. For purposes of paragraph (2) (A),
31		"gross income" in the case of a life insurance company, for
32		tax years ending on and after December 31, 1994, shall mean
33		the gross investment income for the taxable year.

1		(c) Trusts and estates.
2		(1) In general. In the case of a trust or estate, base
3		income means an amount equal to the taxpayer's taxable
4		income for the taxable year as modified by paragraph (2).
5		(2) Modifications. Subject to the provisions of
6		paragraph (3), the taxable income referred to in paragraph
7		(1) shall be modified by adding thereto the sum of the
8		following amounts:
9		(A) An amount equal to all amounts paid or accrued
10		to the taxpayer as interest or dividends during the
11		taxable year to the extent excluded from gross income
12		in the computation of taxable income;
13		(B) In the case of (i) an estate, $600; (ii) a
14		trust which, under its governing instrument, is
15		required to distribute all of its income currently,
16		$300; and (iii) any other trust, $100, but in each such
17		case, only to the extent such amount was deducted in
18		the computation of taxable income;
19		(C) An amount equal to the amount of tax imposed by
20		this Act to the extent deducted from gross income in
21		the computation of taxable income for the taxable year;
22		(D) The amount of any net operating loss deduction
23		taken in arriving at taxable income, other than a net
24		operating loss carried forward from a taxable year
25		ending prior to December 31, 1986;
26		(E) For taxable years in which a net operating loss
27		carryback or carryforward from a taxable year ending
28		prior to December 31, 1986 is an element of taxable
29		income under paragraph (1) of subsection (e) or
30		subparagraph (E) of paragraph (2) of subsection (e),
31		the amount by which addition modifications other than
32		those provided by this subparagraph (E) exceeded
33		subtraction modifications in such taxable year, with
34		the following limitations applied in the order that

1		they are listed:
2		(i) the addition modification relating to the
3		net operating loss carried back or forward to the
4		taxable year from any taxable year ending prior to
5		December 31, 1986 shall be reduced by the amount of
6		addition modification under this subparagraph (E)
7		which related to that net operating loss and which
8		was taken into account in calculating the base
9		income of an earlier taxable year, and
10		(ii) the addition modification relating to the
11		net operating loss carried back or forward to the
12		taxable year from any taxable year ending prior to
13		December 31, 1986 shall not exceed the amount of
14		such carryback or carryforward;
15		For taxable years in which there is a net operating
16		loss carryback or carryforward from more than one other
17		taxable year ending prior to December 31, 1986, the
18		addition modification provided in this subparagraph
19		(E) shall be the sum of the amounts computed
20		independently under the preceding provisions of this
21		subparagraph (E) for each such taxable year;
22		(F) For taxable years ending on or after January 1,
23		1989, an amount equal to the tax deducted pursuant to
24		Section 164 of the Internal Revenue Code if the trust
25		or estate is claiming the same tax for purposes of the
26		Illinois foreign tax credit under Section 601 of this
27		Act;
28		(G) An amount equal to the amount of the capital
29		gain deduction allowable under the Internal Revenue
30		Code, to the extent deducted from gross income in the
31		computation of taxable income;
32		(G-5) For taxable years ending after December 31,
33		1997, an amount equal to any eligible remediation costs
34		that the trust or estate deducted in computing adjusted

1		gross income and for which the trust or estate claims a
2		credit under subsection (l) of Section 201;
3		(G-10) For taxable years 2001 and thereafter, an
4		amount equal to the bonus depreciation deduction (30%
5		of the adjusted basis of the qualified property) taken
6		on the taxpayer's federal income tax return for the
7		taxable year under subsection (k) of Section 168 of the
8		Internal Revenue Code; and
9		(G-11) If the taxpayer reports a capital gain or
10		loss on the taxpayer's federal income tax return for
11		the taxable year based on a sale or transfer of
12		property for which the taxpayer was required in any
13		taxable year to make an addition modification under
14		subparagraph (G-10), then an amount equal to the
15		aggregate amount of the deductions taken in all taxable
16		years under subparagraph (R) with respect to that
17		property. ;
18		The taxpayer is required to make the addition
19		modification under this subparagraph only once with
20		respect to any one piece of property;
21		and by deducting from the total so obtained the sum of the
22		following amounts:
23		(H) An amount equal to all amounts included in such
24		total pursuant to the provisions of Sections 402(a),
25		402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
26		Internal Revenue Code or included in such total as
27		distributions under the provisions of any retirement
28		or disability plan for employees of any governmental
29		agency or unit, or retirement payments to retired
30		partners, which payments are excluded in computing net
31		earnings from self employment by Section 1402 of the
32		Internal Revenue Code and regulations adopted pursuant
33		thereto;
34		(I) The valuation limitation amount;

1		(J) An amount equal to the amount of any tax
2		imposed by this Act which was refunded to the taxpayer
3		and included in such total for the taxable year;
4		(K) An amount equal to all amounts included in
5		taxable income as modified by subparagraphs (A), (B),
6		(C), (D), (E), (F) and (G) which are exempt from
7		taxation by this State either by reason of its statutes
8		or Constitution or by reason of the Constitution,
9		treaties or statutes of the United States; provided
10		that, in the case of any statute of this State that
11		exempts income derived from bonds or other obligations
12		from the tax imposed under this Act, the amount
13		exempted shall be the interest net of bond premium
14		amortization;
15		(L) With the exception of any amounts subtracted
16		under subparagraph (K), an amount equal to the sum of
17		all amounts disallowed as deductions by (i) Sections
18		171(a) (2) and 265(a)(2) of the Internal Revenue Code,
19		as now or hereafter amended, and all amounts of
20		expenses allocable to interest and disallowed as
21		deductions by Section 265(1) of the Internal Revenue
22		Code of 1954, as now or hereafter amended; and (ii) for
23		taxable years ending on or after August 13, 1999,
24		Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
25		the Internal Revenue Code; the provisions of this
26		subparagraph are exempt from the provisions of Section
27		250;
28		(M) An amount equal to those dividends included in
29		such total which were paid by a corporation which
30		conducts business operations in an Enterprise Zone or
31		zones created under the Illinois Enterprise Zone Act
32		and conducts substantially all of its operations in an
33		Enterprise Zone or Zones;
34		(N) An amount equal to any contribution made to a

1		job training project established pursuant to the Tax
2		Increment Allocation Redevelopment Act;
3		(O) An amount equal to those dividends included in
4		such total that were paid by a corporation that
5		conducts business operations in a federally designated
6		Foreign Trade Zone or Sub-Zone and that is designated a
7		High Impact Business located in Illinois; provided
8		that dividends eligible for the deduction provided in
9		subparagraph (M) of paragraph (2) of this subsection
10		shall not be eligible for the deduction provided under
11		this subparagraph (O);
12		(P) An amount equal to the amount of the deduction
13		used to compute the federal income tax credit for
14		restoration of substantial amounts held under claim of
15		right for the taxable year pursuant to Section 1341 of
16		the Internal Revenue Code of 1986;
17		(Q) For taxable year 1999 and thereafter, an amount
18		equal to the amount of any (i) distributions, to the
19		extent includible in gross income for federal income
20		tax purposes, made to the taxpayer because of his or
21		her status as a victim of persecution for racial or
22		religious reasons by Nazi Germany or any other Axis
23		regime or as an heir of the victim and (ii) items of
24		income, to the extent includible in gross income for
25		federal income tax purposes, attributable to, derived
26		from or in any way related to assets stolen from,
27		hidden from, or otherwise lost to a victim of
28		persecution for racial or religious reasons by Nazi
29		Germany or any other Axis regime immediately prior to,
30		during, and immediately after World War II, including,
31		but not limited to, interest on the proceeds receivable
32		as insurance under policies issued to a victim of
33		persecution for racial or religious reasons by Nazi
34		Germany or any other Axis regime by European insurance

1		companies immediately prior to and during World War II;
2		provided, however, this subtraction from federal
3		adjusted gross income does not apply to assets acquired
4		with such assets or with the proceeds from the sale of
5		such assets; provided, further, this paragraph shall
6		only apply to a taxpayer who was the first recipient of
7		such assets after their recovery and who is a victim of
8		persecution for racial or religious reasons by Nazi
9		Germany or any other Axis regime or as an heir of the
10		victim. The amount of and the eligibility for any
11		public assistance, benefit, or similar entitlement is
12		not affected by the inclusion of items (i) and (ii) of
13		this paragraph in gross income for federal income tax
14		purposes. This paragraph is exempt from the provisions
15		of Section 250;
16		(R) For taxable years 2001 and thereafter, for the
17		taxable year in which the bonus depreciation deduction
18		(30% of the adjusted basis of the qualified property)
19		is taken on the taxpayer's federal income tax return
20		under subsection (k) of Section 168 of the Internal
21		Revenue Code and for each applicable taxable year
22		thereafter, an amount equal to "x", where:
23		(1) "y" equals the amount of the depreciation
24		deduction taken for the taxable year on the
25		taxpayer's federal income tax return on property
26		for which the bonus depreciation deduction (30% of
27		the adjusted basis of the qualified property) was
28		taken in any year under subsection (k) of Section
29		168 of the Internal Revenue Code, but not including
30		the bonus depreciation deduction; and
31		(2) "x" equals "y" multiplied by 30 and then
32		divided by 70 (or "y" multiplied by 0.429).
33		The aggregate amount deducted under this
34		subparagraph in all taxable years for any one piece of

1		property may not exceed the amount of the bonus
2		depreciation deduction (30% of the adjusted basis of
3		the qualified property) taken on that property on the
4		taxpayer's federal income tax return under subsection
5		(k) of Section 168 of the Internal Revenue Code; and
6		(S) If the taxpayer reports a capital gain or loss
7		on the taxpayer's federal income tax return for the
8		taxable year based on a sale or transfer of property
9		for which the taxpayer was required in any taxable year
10		to make an addition modification under subparagraph
11		(G-10), then an amount equal to that addition
12		modification.
13		The taxpayer is allowed to take the deduction under
14		this subparagraph only once with respect to any one
15		piece of property.
16		(3) Limitation. The amount of any modification
17		otherwise required under this subsection shall, under
18		regulations prescribed by the Department, be adjusted by
19		any amounts included therein which were properly paid,
20		credited, or required to be distributed, or permanently set
21		aside for charitable purposes pursuant to Internal Revenue
22		Code Section 642(c) during the taxable year.
23		(d) Partnerships.
24		(1) In general. In the case of a partnership, base
25		income means an amount equal to the taxpayer's taxable
26		income for the taxable year as modified by paragraph (2).
27		(2) Modifications. The taxable income referred to in
28		paragraph (1) shall be modified by adding thereto the sum
29		of the following amounts:
30		(A) An amount equal to all amounts paid or accrued
31		to the taxpayer as interest or dividends during the
32		taxable year to the extent excluded from gross income
33		in the computation of taxable income;

1		(B) An amount equal to the amount of tax imposed by
2		this Act to the extent deducted from gross income for
3		the taxable year;
4		(C) The amount of deductions allowed to the
5		partnership pursuant to Section 707 (c) of the Internal
6		Revenue Code in calculating its taxable income;
7		(D) An amount equal to the amount of the capital
8		gain deduction allowable under the Internal Revenue
9		Code, to the extent deducted from gross income in the
10		computation of taxable income;
11		(D-5) For taxable years 2001 and thereafter, an
12		amount equal to the bonus depreciation deduction (30%
13		of the adjusted basis of the qualified property) taken
14		on the taxpayer's federal income tax return for the
15		taxable year under subsection (k) of Section 168 of the
16		Internal Revenue Code; and
17		(D-6) If the taxpayer reports a capital gain or
18		loss on the taxpayer's federal income tax return for
19		the taxable year based on a sale or transfer of
20		property for which the taxpayer was required in any
21		taxable year to make an addition modification under
22		subparagraph (D-5), then an amount equal to the
23		aggregate amount of the deductions taken in all taxable
24		years under subparagraph (O) with respect to that
25		property. ;
26		The taxpayer is required to make the addition
27		modification under this subparagraph only once with
28		respect to any one piece of property;
29		and by deducting from the total so obtained the following
30		amounts:
31		(E) The valuation limitation amount;
32		(F) An amount equal to the amount of any tax
33		imposed by this Act which was refunded to the taxpayer
34		and included in such total for the taxable year;

1		(G) An amount equal to all amounts included in
2		taxable income as modified by subparagraphs (A), (B),
3		(C) and (D) which are exempt from taxation by this
4		State either by reason of its statutes or Constitution
5		or by reason of the Constitution, treaties or statutes
6		of the United States; provided that, in the case of any
7		statute of this State that exempts income derived from
8		bonds or other obligations from the tax imposed under
9		this Act, the amount exempted shall be the interest net
10		of bond premium amortization;
11		(H) Any income of the partnership which
12		constitutes personal service income as defined in
13		Section 1348 (b) (1) of the Internal Revenue Code (as
14		in effect December 31, 1981) or a reasonable allowance
15		for compensation paid or accrued for services rendered
16		by partners to the partnership, whichever is greater;
17		(I) An amount equal to all amounts of income
18		distributable to an entity subject to the Personal
19		Property Tax Replacement Income Tax imposed by
20		subsections (c) and (d) of Section 201 of this Act
21		including amounts distributable to organizations
22		exempt from federal income tax by reason of Section
23		501(a) of the Internal Revenue Code;
24		(J) With the exception of any amounts subtracted
25		under subparagraph (G), an amount equal to the sum of
26		all amounts disallowed as deductions by (i) Sections
27		171(a) (2), and 265(2) of the Internal Revenue Code of
28		1954, as now or hereafter amended, and all amounts of
29		expenses allocable to interest and disallowed as
30		deductions by Section 265(1) of the Internal Revenue
31		Code, as now or hereafter amended; and (ii) for taxable
32		years ending on or after August 13, 1999, Sections
33		171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
34		Internal Revenue Code; the provisions of this

1		subparagraph are exempt from the provisions of Section
2		250;
3		(K) An amount equal to those dividends included in
4		such total which were paid by a corporation which
5		conducts business operations in an Enterprise Zone or
6		zones created under the Illinois Enterprise Zone Act,
7		enacted by the 82nd General Assembly, and conducts
8		substantially all of its operations in an Enterprise
9		Zone or Zones;
10		(L) An amount equal to any contribution made to a
11		job training project established pursuant to the Real
12		Property Tax Increment Allocation Redevelopment Act;
13		(M) An amount equal to those dividends included in
14		such total that were paid by a corporation that
15		conducts business operations in a federally designated
16		Foreign Trade Zone or Sub-Zone and that is designated a
17		High Impact Business located in Illinois; provided
18		that dividends eligible for the deduction provided in
19		subparagraph (K) of paragraph (2) of this subsection
20		shall not be eligible for the deduction provided under
21		this subparagraph (M);
22		(N) An amount equal to the amount of the deduction
23		used to compute the federal income tax credit for
24		restoration of substantial amounts held under claim of
25		right for the taxable year pursuant to Section 1341 of
26		the Internal Revenue Code of 1986;
27		(O) For taxable years 2001 and thereafter, for the
28		taxable year in which the bonus depreciation deduction
29		(30% of the adjusted basis of the qualified property)
30		is taken on the taxpayer's federal income tax return
31		under subsection (k) of Section 168 of the Internal
32		Revenue Code and for each applicable taxable year
33		thereafter, an amount equal to "x", where:
34		(1) "y" equals the amount of the depreciation

1		deduction taken for the taxable year on the
2		taxpayer's federal income tax return on property
3		for which the bonus depreciation deduction (30% of
4		the adjusted basis of the qualified property) was
5		taken in any year under subsection (k) of Section
6		168 of the Internal Revenue Code, but not including
7		the bonus depreciation deduction; and
8		(2) "x" equals "y" multiplied by 30 and then
9		divided by 70 (or "y" multiplied by 0.429).
10		The aggregate amount deducted under this
11		subparagraph in all taxable years for any one piece of
12		property may not exceed the amount of the bonus
13		depreciation deduction (30% of the adjusted basis of
14		the qualified property) taken on that property on the
15		taxpayer's federal income tax return under subsection
16		(k) of Section 168 of the Internal Revenue Code; and
17		(P) If the taxpayer reports a capital gain or loss
18		on the taxpayer's federal income tax return for the
19		taxable year based on a sale or transfer of property
20		for which the taxpayer was required in any taxable year
21		to make an addition modification under subparagraph
22		(D-5), then an amount equal to that addition
23		modification.
24		The taxpayer is allowed to take the deduction under
25		this subparagraph only once with respect to any one
26		piece of property.
27		(e) Gross income; adjusted gross income; taxable income.
28		(1) In general. Subject to the provisions of paragraph
29		(2) and subsection (b) (3), for purposes of this Section
30		and Section 803(e), a taxpayer's gross income, adjusted
31		gross income, or taxable income for the taxable year shall
32		mean the amount of gross income, adjusted gross income or
33		taxable income properly reportable for federal income tax

1		purposes for the taxable year under the provisions of the
2		Internal Revenue Code. Taxable income may be less than
3		zero. However, for taxable years ending on or after
4		December 31, 1986, net operating loss carryforwards from
5		taxable years ending prior to December 31, 1986, may not
6		exceed the sum of federal taxable income for the taxable
7		year before net operating loss deduction, plus the excess
8		of addition modifications over subtraction modifications
9		for the taxable year. For taxable years ending prior to
10		December 31, 1986, taxable income may never be an amount in
11		excess of the net operating loss for the taxable year as
12		defined in subsections (c) and (d) of Section 172 of the
13		Internal Revenue Code, provided that when taxable income of
14		a corporation (other than a Subchapter S corporation),
15		trust, or estate is less than zero and addition
16		modifications, other than those provided by subparagraph
17		(E) of paragraph (2) of subsection (b) for corporations or
18		subparagraph (E) of paragraph (2) of subsection (c) for
19		trusts and estates, exceed subtraction modifications, an
20		addition modification must be made under those
21		subparagraphs for any other taxable year to which the
22		taxable income less than zero (net operating loss) is
23		applied under Section 172 of the Internal Revenue Code or
24		under subparagraph (E) of paragraph (2) of this subsection
25		(e) applied in conjunction with Section 172 of the Internal
26		Revenue Code.
27		(2) Special rule. For purposes of paragraph (1) of this
28		subsection, the taxable income properly reportable for
29		federal income tax purposes shall mean:
30		(A) Certain life insurance companies. In the case
31		of a life insurance company subject to the tax imposed
32		by Section 801 of the Internal Revenue Code, life
33		insurance company taxable income, plus the amount of
34		distribution from pre-1984 policyholder surplus

1		accounts as calculated under Section 815a of the
2		Internal Revenue Code;
3		(B) Certain other insurance companies. In the case
4		of mutual insurance companies subject to the tax
5		imposed by Section 831 of the Internal Revenue Code,
6		insurance company taxable income;
7		(C) Regulated investment companies. In the case of
8		a regulated investment company subject to the tax
9		imposed by Section 852 of the Internal Revenue Code,
10		investment company taxable income;
11		(D) Real estate investment trusts. In the case of a
12		real estate investment trust subject to the tax imposed
13		by Section 857 of the Internal Revenue Code, real
14		estate investment trust taxable income;
15		(E) Consolidated corporations. In the case of a
16		corporation which is a member of an affiliated group of
17		corporations filing a consolidated income tax return
18		for the taxable year for federal income tax purposes,
19		taxable income determined as if such corporation had
20		filed a separate return for federal income tax purposes
21		for the taxable year and each preceding taxable year
22		for which it was a member of an affiliated group. For
23		purposes of this subparagraph, the taxpayer's separate
24		taxable income shall be determined as if the election
25		provided by Section 243(b) (2) of the Internal Revenue
26		Code had been in effect for all such years;
27		(F) Cooperatives. In the case of a cooperative
28		corporation or association, the taxable income of such
29		organization determined in accordance with the
30		provisions of Section 1381 through 1388 of the Internal
31		Revenue Code;
32		(G) Subchapter S corporations. In the case of: (i)
33		a Subchapter S corporation for which there is in effect
34		an election for the taxable year under Section 1362 of

1		the Internal Revenue Code, the taxable income of such
2		corporation determined in accordance with Section
3		1363(b) of the Internal Revenue Code, except that
4		taxable income shall take into account those items
5		which are required by Section 1363(b)(1) of the
6		Internal Revenue Code to be separately stated; and (ii)
7		a Subchapter S corporation for which there is in effect
8		a federal election to opt out of the provisions of the
9		Subchapter S Revision Act of 1982 and have applied
10		instead the prior federal Subchapter S rules as in
11		effect on July 1, 1982, the taxable income of such
12		corporation determined in accordance with the federal
13		Subchapter S rules as in effect on July 1, 1982; and
14		(H) Partnerships. In the case of a partnership,
15		taxable income determined in accordance with Section
16		703 of the Internal Revenue Code, except that taxable
17		income shall take into account those items which are
18		required by Section 703(a)(1) to be separately stated
19		but which would be taken into account by an individual
20		in calculating his taxable income.
21		(3) Recapture of business expenses on disposition of
22		non-business asset. Notwithstanding any other law to the
23		contrary, if in prior years income from an asset or
24		business has been classified as business income and in a
25		later year is demonstrated to be non-business income, then
26		all expenses, without limitation, deducted in prior years
27		related to that asset or business that generated the
28		non-business income shall be added back and recaptured as
29		business income in the year of the disposition of the
30		asset.
31		(f) Valuation limitation amount.
32		(1) In general. The valuation limitation amount
33		referred to in subsections (a) (2) (G), (c) (2) (I) and

1		(d)(2) (E) is an amount equal to:
2		(A) The sum of the pre-August 1, 1969 appreciation
3		amounts (to the extent consisting of gain reportable
4		under the provisions of Section 1245 or 1250 of the
5		Internal Revenue Code) for all property in respect of
6		which such gain was reported for the taxable year; plus
7		(B) The lesser of (i) the sum of the pre-August 1,
8		1969 appreciation amounts (to the extent consisting of
9		capital gain) for all property in respect of which such
10		gain was reported for federal income tax purposes for
11		the taxable year, or (ii) the net capital gain for the
12		taxable year, reduced in either case by any amount of
13		such gain included in the amount determined under
14		subsection (a) (2) (F) or (c) (2) (H).
15		(2) Pre-August 1, 1969 appreciation amount.
16		(A) If the fair market value of property referred
17		to in paragraph (1) was readily ascertainable on August
18		1, 1969, the pre-August 1, 1969 appreciation amount for
19		such property is the lesser of (i) the excess of such
20		fair market value over the taxpayer's basis (for
21		determining gain) for such property on that date
22		(determined under the Internal Revenue Code as in
23		effect on that date), or (ii) the total gain realized
24		and reportable for federal income tax purposes in
25		respect of the sale, exchange or other disposition of
26		such property.
27		(B) If the fair market value of property referred
28		to in paragraph (1) was not readily ascertainable on
29		August 1, 1969, the pre-August 1, 1969 appreciation
30		amount for such property is that amount which bears the
31		same ratio to the total gain reported in respect of the
32		property for federal income tax purposes for the
33		taxable year, as the number of full calendar months in
34		that part of the taxpayer's holding period for the

1		property ending July 31, 1969 bears to the number of
2		full calendar months in the taxpayer's entire holding
3		period for the property.
4		(C) The Department shall prescribe such
5		regulations as may be necessary to carry out the
6		purposes of this paragraph.
7		(g) Double deductions. Unless specifically provided
8		otherwise, nothing in this Section shall permit the same item
9		to be deducted more than once.
10		(h) Legislative intention. Except as expressly provided by
11		this Section there shall be no modifications or limitations on
12		the amounts of income, gain, loss or deduction taken into
13		account in determining gross income, adjusted gross income or
14		taxable income for federal income tax purposes for the taxable
15		year, or in the amount of such items entering into the
16		computation of base income and net income under this Act for
17		such taxable year, whether in respect of property values as of
18		August 1, 1969 or otherwise.
19		(Source: P.A. 91-192, eff. 7-20-99; 91-205, eff. 7-20-99;
20		91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, eff.
21		12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 92-16,
22		eff. 6-28-01; 92-244, eff. 8-3-01; 92-439, eff. 8-17-01;
23		92-603, eff. 6-28-02; 92-626, eff. 7-11-02; 92-651, eff.
24		7-11-02; 92-846, eff. 8-23-02; revised 10-15-03.)
25		(35 ILCS 5/205) (from Ch. 120, par. 2-205)
26		Sec. 205. Exempt organizations.
27		(a) Charitable, etc. organizations. The base income of an
28		organization which is exempt from the federal income tax by
29		reason of Section 501(a) of the Internal Revenue Code shall not
30		be determined under section 203 of this Act, but shall be its
31		unrelated business taxable income as determined under section

1		512 of the Internal Revenue Code, without any deduction for the
2		tax imposed by this Act. The standard exemption provided by
3		section 204 of this Act shall not be allowed in determining the
4		net income of an organization to which this subsection applies.
5		(b) Partnerships. A partnership as such shall not be
6		subject to the tax imposed by subsection 201 (a) and (b) of
7		this Act, but shall be subject to the replacement tax imposed
8		by subsection 201 (c) and (d) of this Act and shall compute its
9		base income as described in subsection (d) of Section 203 of
10		this Act. For taxable years ending on or after December 31,
11		2004, an investment partnership, as defined in Section
12		1501(a)(11.5) of this Act, shall not be subject to the tax
13		imposed by subsections (c) and (d) of Section 201 of this Act.
14		A partnership shall file such returns and other information at
15		such time and in such manner as may be required under Article 5
16		of this Act. The partners in a partnership shall be liable for
17		the replacement tax imposed by subsection 201 (c) and (d) of
18		this Act on such partnership, to the extent such tax is not
19		paid by the partnership, as provided under the laws of Illinois
20		governing the liability of partners for the obligations of a
21		partnership. Persons carrying on business as partners shall be
22		liable for the tax imposed by subsection 201 (a) and (b) of
23		this Act only in their separate or individual capacities.
24		(c) Subchapter S corporations. A Subchapter S corporation
25		shall not be subject to the tax imposed by subsection 201 (a)
26		and (b) of this Act but shall be subject to the replacement tax
27		imposed by subsection 201 (c) and (d) of this Act and shall
28		file such returns and other information at such time and in
29		such manner as may be required under Article 5 of this Act.
30		(d) Combat zone death. An individual relieved from the
31		federal income tax for any taxable year by reason of section
32		692 of the Internal Revenue Code shall not be subject to the
33		tax imposed by this Act for such taxable year.
34		(e) Certain trusts. A common trust fund described in

1		Section 584 of the Internal Revenue Code, and any other trust
2		to the extent that the grantor is treated as the owner thereof
3		under sections 671 through 678 of the Internal Revenue Code
4		shall not be subject to the tax imposed by this Act.
5		(f) Certain business activities. A person not otherwise
6		subject to the tax imposed by this Act shall not become subject
7		to the tax imposed by this Act by reason of:
8		(1) that person's ownership of tangible personal
9		property located at the premises of a printer in this State
10		with which the person has contracted for printing, or
11		(2) activities of the person's employees or agents
12		located solely at the premises of a printer and related to
13		quality control, distribution, or printing services
14		performed by a printer in the State with which the person
15		has contracted for printing.
16		(Source: P.A. 88-361.)
17		(35 ILCS 5/305) (from Ch. 120, par. 3-305)
18		Sec. 305. Allocation of Partnership Income by partnerships
19		and partners other than residents. (a) Allocation of
20		partnership business income by partners other than residents.
21		The respective shares of partners other than residents in so
22		much of the business income of the partnership as is allocated
23		or apportioned to this State in the possession of the
24		partnership shall be taken into account by such partners pro
25		rata in accordance with their respective distributive shares of
26		such partnership income for the partnership's taxable year and
27		allocated to this State.
28		(b) Allocation of partnership nonbusiness income by
29		partners other than residents. The respective shares of
30		partners other than residents in the items of partnership
31		income and deduction not taken into account in computing the
32		business income of a partnership shall be taken into account by
33		such partners pro rata in accordance with their respective

1		distributive shares of such partnership income for the
2		partnership's taxable year, and allocated as if such items had
3		been paid, incurred or accrued directly to such partners in
4		their separate capacities.
5		(c) Allocation or apportionment of base income by
6		partnership. Base income of a partnership shall be allocated or
7		apportioned to this State pursuant to Article 3, in the same
8		manner as it is allocated or apportioned for any other
9		nonresident.
10		(c-5) Taxable income of an investment partnership, as
11		defined in Section 1501(a)(11.5) of this Act, that is
12		distributable to a nonresident partner shall be treated as
13		nonbusiness income and shall be allocated to the partner's
14		state of residence (in the case of an individual) or commercial
15		domicile (in the case of any other person). However, any income
16		distributable to a nonresident partner shall be treated as
17		business income and apportioned as if such income had been
18		received directly by the partner if the partner has made an
19		election under Section 1501(a)(1) of this Act to treat all
20		income as business income or if such income is from investment
21		activity:
22		(1) that is directly or integrally related to any other
23		business activity conducted in this State by the
24		nonresident partner (or any member of that partner's
25		unitary business group);
26		(2) that serves an operational function to any other
27		business activity of the nonresident partner (or any member
28		of that partner's unitary business group) in this State; or
29		(3) where assets of the investment partnership were
30		acquired with working capital from a trade or business
31		activity conducted in this State in which the nonresident
32		partner (or any member of that partner's unitary business
33		group) owns an interest.
34		(d) Cross reference. For allocation of partnership income

1		or deductions by residents, see Section 301(a).
2		(Source: P.A. 84-550.)
3		(35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
4		Sec. 1501. Definitions.
5		(a) In general. When used in this Act, where not otherwise
6		distinctly expressed or manifestly incompatible with the
7		intent thereof:
8		(1) Business income. The term "business income" means
9		all income that may be treated as apportionable business
10		income under the Constitution of the United States.
11		Business income is net of the deductions allocable thereto
12		income arising from transactions and activity in the
13		regular course of the taxpayer's trade or business, net of
14		the deductions allocable thereto, and includes income from
15		tangible and intangible property if the acquisition,
16		management, and disposition of the property constitute
17		integral parts of the taxpayer's regular trade or business
18		operations. Such term does not include compensation or the
19		deductions allocable thereto. For each taxable year
20		beginning on or after January 1, 2003, a taxpayer may elect
21		to treat all income other than compensation as business
22		income. This election shall be made in accordance with
23		rules adopted by the Department and, once made, shall be
24		irrevocable.
25		(2) Commercial domicile. The term "commercial
26		domicile" means the principal place from which the trade or
27		business of the taxpayer is directed or managed.
28		(3) Compensation. The term "compensation" means wages,
29		salaries, commissions and any other form of remuneration
30		paid to employees for personal services.
31		(4) Corporation. The term "corporation" includes
32		associations, joint-stock companies, insurance companies
33		and cooperatives. Any entity, including a limited

1		liability company formed under the Illinois Limited
2		Liability Company Act, shall be treated as a corporation if
3		it is so classified for federal income tax purposes.
4		(5) Department. The term "Department" means the
5		Department of Revenue of this State.
6		(6) Director. The term "Director" means the Director of
7		Revenue of this State.
8		(7) Fiduciary. The term "fiduciary" means a guardian,
9		trustee, executor, administrator, receiver, or any person
10		acting in any fiduciary capacity for any person.
11		(8) Financial organization.
12		(A) The term "financial organization" means any
13		bank, bank holding company, trust company, savings
14		bank, industrial bank, land bank, safe deposit
15		company, private banker, savings and loan association,
16		building and loan association, credit union, currency
17		exchange, cooperative bank, small loan company, sales
18		finance company, investment company, or any person
19		which is owned by a bank or bank holding company. For
20		the purpose of this Section a "person" will include
21		only those persons which a bank holding company may
22		acquire and hold an interest in, directly or
23		indirectly, under the provisions of the Bank Holding
24		Company Act of 1956 (12 U.S.C. 1841, et seq.), except
25		where interests in any person must be disposed of
26		within certain required time limits under the Bank
27		Holding Company Act of 1956.
28		(B) For purposes of subparagraph (A) of this
29		paragraph, the term "bank" includes (i) any entity that
30		is regulated by the Comptroller of the Currency under
31		the National Bank Act, or by the Federal Reserve Board,
32		or by the Federal Deposit Insurance Corporation and
33		(ii) any federally or State chartered bank operating as
34		a credit card bank.

1		(C) For purposes of subparagraph (A) of this
2		paragraph, the term "sales finance company" has the
3		meaning provided in the following item (i) or (ii):
4		(i) A person primarily engaged in one or more
5		of the following businesses: the business of
6		purchasing customer receivables, the business of
7		making loans upon the security of customer
8		receivables, the business of making loans for the
9		express purpose of funding purchases of tangible
10		personal property or services by the borrower, or
11		the business of finance leasing. For purposes of
12		this item (i), "customer receivable" means:
13		(a) a retail installment contract or
14		retail charge agreement within the meaning of
15		the Sales Finance Agency Act, the Retail
16		Installment Sales Act, or the Motor Vehicle
17		Retail Installment Sales Act;
18		(b) an installment, charge, credit, or
19		similar contract or agreement arising from the
20		sale of tangible personal property or services
21		in a transaction involving a deferred payment
22		price payable in one or more installments
23		subsequent to the sale; or
24		(c) the outstanding balance of a contract
25		or agreement described in provisions (a) or (b)
26		of this item (i).
27		A customer receivable need not provide for
28		payment of interest on deferred payments. A sales
29		finance company may purchase a customer receivable
30		from, or make a loan secured by a customer
31		receivable to, the seller in the original
32		transaction or to a person who purchased the
33		customer receivable directly or indirectly from
34		that seller.

1		(ii) A corporation meeting each of the
2		following criteria:
3		(a) the corporation must be a member of an
4		"affiliated group" within the meaning of
5		Section 1504(a) of the Internal Revenue Code,
6		determined without regard to Section 1504(b)
7		of the Internal Revenue Code;
8		(b) more than 50% of the gross income of
9		the corporation for the taxable year must be
10		interest income derived from qualifying loans.
11		A "qualifying loan" is a loan made to a member
12		of the corporation's affiliated group that
13		originates customer receivables (within the
14		meaning of item (i)) or to whom customer
15		receivables originated by a member of the
16		affiliated group have been transferred, to the
17		extent the average outstanding balance of
18		loans from that corporation to members of its
19		affiliated group during the taxable year do not
20		exceed the limitation amount for that
21		corporation. The "limitation amount" for a
22		corporation is the average outstanding
23		balances during the taxable year of customer
24		receivables (within the meaning of item (i))
25		originated by all members of the affiliated
26		group. If the average outstanding balances of
27		the loans made by a corporation to members of
28		its affiliated group exceed the limitation
29		amount, the interest income of that
30		corporation from qualifying loans shall be
31		equal to its interest income from loans to
32		members of its affiliated groups times a
33		fraction equal to the limitation amount
34		divided by the average outstanding balances of

1		the loans made by that corporation to members
2		of its affiliated group;
3		(c) the total of all shareholder's equity
4		(including, without limitation, paid-in
5		capital on common and preferred stock and
6		retained earnings) of the corporation plus the
7		total of all of its loans, advances, and other
8		obligations payable or owed to members of its
9		affiliated group may not exceed 20% of the
10		total assets of the corporation at any time
11		during the tax year; and
12		(d) more than 50% of all interest-bearing
13		obligations of the affiliated group payable to
14		persons outside the group determined in
15		accordance with generally accepted accounting
16		principles must be obligations of the
17		corporation.
18		This amendatory Act of the 91st General Assembly is
19		declaratory of existing law.
20		(D) Subparagraphs (B) and (C) of this paragraph are
21		declaratory of existing law and apply retroactively,
22		for all tax years beginning on or before December 31,
23		1996, to all original returns, to all amended returns
24		filed no later than 30 days after the effective date of
25		this amendatory Act of 1996, and to all notices issued
26		on or before the effective date of this amendatory Act
27		of 1996 under subsection (a) of Section 903, subsection
28		(a) of Section 904, subsection (e) of Section 909, or
29		Section 912. A taxpayer that is a "financial
30		organization" that engages in any transaction with an
31		affiliate shall be a "financial organization" for all
32		purposes of this Act.
33		(E) For all tax years beginning on or before
34		December 31, 1996, a taxpayer that falls within the

1		definition of a "financial organization" under
2		subparagraphs (B) or (C) of this paragraph, but who
3		does not fall within the definition of a "financial
4		organization" under the Proposed Regulations issued by
5		the Department of Revenue on July 19, 1996, may
6		irrevocably elect to apply the Proposed Regulations
7		for all of those years as though the Proposed
8		Regulations had been lawfully promulgated, adopted,
9		and in effect for all of those years. For purposes of
10		applying subparagraphs (B) or (C) of this paragraph to
11		all of those years, the election allowed by this
12		subparagraph applies only to the taxpayer making the
13		election and to those members of the taxpayer's unitary
14		business group who are ordinarily required to
15		apportion business income under the same subsection of
16		Section 304 of this Act as the taxpayer making the
17		election. No election allowed by this subparagraph
18		shall be made under a claim filed under subsection (d)
19		of Section 909 more than 30 days after the effective
20		date of this amendatory Act of 1996.
21		(F) Finance Leases. For purposes of this
22		subsection, a finance lease shall be treated as a loan
23		or other extension of credit, rather than as a lease,
24		regardless of how the transaction is characterized for
25		any other purpose, including the purposes of any
26		regulatory agency to which the lessor is subject. A
27		finance lease is any transaction in the form of a lease
28		in which the lessee is treated as the owner of the
29		leased asset entitled to any deduction for
30		depreciation allowed under Section 167 of the Internal
31		Revenue Code.
32		(9) Fiscal year. The term "fiscal year" means an
33		accounting period of 12 months ending on the last day of
34		any month other than December.

1		(10) Includes and including. The terms "includes" and
2		"including" when used in a definition contained in this Act
3		shall not be deemed to exclude other things otherwise
4		within the meaning of the term defined.
5		(11) Internal Revenue Code. The term "Internal Revenue
6		Code" means the United States Internal Revenue Code of 1954
7		or any successor law or laws relating to federal income
8		taxes in effect for the taxable year.
9		(11.5) Investment partnership.
10		(A) The term "investment partnership" means any
11		entity that is treated as a partnership for federal
12		income tax purposes that meets the following
13		requirements:
14		(i) no less than 90% of the partnership's cost
15		of its total assets consists of qualifying
16		investment securities, deposits at banks or other
17		financial institutions, and office space and
18		equipment reasonably necessary to carry on its
19		activities as an investment partnership;
20		(ii) no less than 90% of its gross income
21		consists of interest, dividends, and gains from
22		the sale or exchange of qualifying investment
23		securities; and
24		(iii) the partnership is not a dealer in
25		qualifying investment securities.
26		(B) For purposes of this paragraph (11.5), the term
27		"qualifying investment securities" includes all of the
28		following:
29		(i) common stock, including preferred or debt
30		securities convertible into common stock, and
31		preferred stock;
32		(ii) bonds, debentures, and other debt
33		securities;
34		(iii) foreign and domestic currency deposits

1		secured by federal, state, or local governmental
2		agencies;
3		(iv) mortgage or asset-backed securities
4		secured by federal, state, or local governmental
5		agencies;
6		(v) repurchase agreements and loan
7		participations;
8		(vi) foreign currency exchange contracts and
9		forward and futures contracts on foreign
10		currencies;
11		(vii) stock and bond index securities and
12		futures contracts and other similar financial
13		securities and futures contracts on those
14		securities;
15		(viii) options for the purchase or sale of any
16		of the securities, currencies, contracts, or
17		financial instruments described in items (i) to
18		(vii), inclusive;
19		(ix) regulated futures contracts;
20		(x) commodities (not described in Section
21		1221(a)(1) of the Internal Revenue Code) or
22		futures, forwards, and options with respect to
23		such commodities, provided, however, that any item
24		of a physical commodity to which title is actually
25		acquired in the partnership's capacity as a dealer
26		in such commodity shall not be a qualifying
27		investment security;
28		(xi) derivatives; and
29		(xii) a partnership interest in another
30		partnership that is an investment partnership.
31		(12) Mathematical error. The term "mathematical error"
32		includes the following types of errors, omissions, or
33		defects in a return filed by a taxpayer which prevents
34		acceptance of the return as filed for processing:

1		(A) arithmetic errors or incorrect computations on
2		the return or supporting schedules;
3		(B) entries on the wrong lines;
4		(C) omission of required supporting forms or
5		schedules or the omission of the information in whole
6		or in part called for thereon; and
7		(D) an attempt to claim, exclude, deduct, or
8		improperly report, in a manner directly contrary to the
9		provisions of the Act and regulations thereunder any
10		item of income, exemption, deduction, or credit.
11		(13) Nonbusiness income. The term "nonbusiness income"
12		means all income other than business income or
13		compensation.
14		(14) Nonresident. The term "nonresident" means a
15		person who is not a resident.
16		(15) Paid, incurred and accrued. The terms "paid",
17		"incurred" and "accrued" shall be construed according to
18		the method of accounting upon the basis of which the
19		person's base income is computed under this Act.
20		(16) Partnership and partner. The term "partnership"
21		includes a syndicate, group, pool, joint venture or other
22		unincorporated organization, through or by means of which
23		any business, financial operation, or venture is carried
24		on, and which is not, within the meaning of this Act, a
25		trust or estate or a corporation; and the term "partner"
26		includes a member in such syndicate, group, pool, joint
27		venture or organization.
28		The term "partnership" includes any entity, including
29		a limited liability company formed under the Illinois
30		Limited Liability Company Act, classified as a partnership
31		for federal income tax purposes.
32		The term "partnership" does not include a syndicate,
33		group, pool, joint venture, or other unincorporated
34		organization established for the sole purpose of playing

1		the Illinois State Lottery.
2		(17) Part-year resident. The term "part-year resident"
3		means an individual who became a resident during the
4		taxable year or ceased to be a resident during the taxable
5		year. Under Section 1501(a)(20)(A)(i) residence commences
6		with presence in this State for other than a temporary or
7		transitory purpose and ceases with absence from this State
8		for other than a temporary or transitory purpose. Under
9		Section 1501(a)(20)(A)(ii) residence commences with the
10		establishment of domicile in this State and ceases with the
11		establishment of domicile in another State.
12		(18) Person. The term "person" shall be construed to
13		mean and include an individual, a trust, estate,
14		partnership, association, firm, company, corporation,
15		limited liability company, or fiduciary. For purposes of
16		Section 1301 and 1302 of this Act, a "person" means (i) an
17		individual, (ii) a corporation, (iii) an officer, agent, or
18		employee of a corporation, (iv) a member, agent or employee
19		of a partnership, or (v) a member, manager, employee,
20		officer, director, or agent of a limited liability company
21		who in such capacity commits an offense specified in
22		Section 1301 and 1302.
23		(18A) Records. The term "records" includes all data
24		maintained by the taxpayer, whether on paper, microfilm,
25		microfiche, or any type of machine-sensible data
26		compilation.
27		(19) Regulations. The term "regulations" includes
28		rules promulgated and forms prescribed by the Department.
29		(20) Resident. The term "resident" means:
30		(A) an individual (i) who is in this State for
31		other than a temporary or transitory purpose during the
32		taxable year; or (ii) who is domiciled in this State
33		but is absent from the State for a temporary or
34		transitory purpose during the taxable year;

1		(B) The estate of a decedent who at his or her
2		death was domiciled in this State;
3		(C) A trust created by a will of a decedent who at
4		his death was domiciled in this State; and
5		(D) An irrevocable trust, the grantor of which was
6		domiciled in this State at the time such trust became
7		irrevocable. For purpose of this subparagraph, a trust
8		shall be considered irrevocable to the extent that the
9		grantor is not treated as the owner thereof under
10		Sections 671 through 678 of the Internal Revenue Code.
11		(21) Sales. The term "sales" means all gross receipts
12		of the taxpayer not allocated under Sections 301, 302 and
13		303.
14		(22) State. The term "state" when applied to a
15		jurisdiction other than this State means any state of the
16		United States, the District of Columbia, the Commonwealth
17		of Puerto Rico, any Territory or Possession of the United
18		States, and any foreign country, or any political
19		subdivision of any of the foregoing. For purposes of the
20		foreign tax credit under Section 601, the term "state"
21		means any state of the United States, the District of
22		Columbia, the Commonwealth of Puerto Rico, and any
23		territory or possession of the United States, or any
24		political subdivision of any of the foregoing, effective
25		for tax years ending on or after December 31, 1989.
26		(23) Taxable year. The term "taxable year" means the
27		calendar year, or the fiscal year ending during such
28		calendar year, upon the basis of which the base income is
29		computed under this Act. "Taxable year" means, in the case
30		of a return made for a fractional part of a year under the
31		provisions of this Act, the period for which such return is
32		made.
33		(24) Taxpayer. The term "taxpayer" means any person
34		subject to the tax imposed by this Act.

1		(25) International banking facility. The term
2		international banking facility shall have the same meaning
3		as is set forth in the Illinois Banking Act or as is set
4		forth in the laws of the United States or regulations of
5		the Board of Governors of the Federal Reserve System.
6		(26) Income Tax Return Preparer.
7		(A) The term "income tax return preparer" means any
8		person who prepares for compensation, or who employs
9		one or more persons to prepare for compensation, any
10		return of tax imposed by this Act or any claim for
11		refund of tax imposed by this Act. The preparation of a
12		substantial portion of a return or claim for refund
13		shall be treated as the preparation of that return or
14		claim for refund.
15		(B) A person is not an income tax return preparer
16		if all he or she does is
17		(i) furnish typing, reproducing, or other
18		mechanical assistance;
19		(ii) prepare returns or claims for refunds for
20		the employer by whom he or she is regularly and
21		continuously employed;
22		(iii) prepare as a fiduciary returns or claims
23		for refunds for any person; or
24		(iv) prepare claims for refunds for a taxpayer
25		in response to any notice of deficiency issued to
26		that taxpayer or in response to any waiver of
27		restriction after the commencement of an audit of
28		that taxpayer or of another taxpayer if a
29		determination in the audit of the other taxpayer
30		directly or indirectly affects the tax liability
31		of the taxpayer whose claims he or she is
32		preparing.
33		(27) Unitary business group. The term "unitary
34		business group" means a group of persons related through

1		common ownership whose business activities are integrated
2		with, dependent upon and contribute to each other. The
3		group will not include those members whose business
4		activity outside the United States is 80% or more of any
5		such member's total business activity; for purposes of this
6		paragraph and clause (a)(3)(B)(ii) of Section 304,
7		business activity within the United States shall be
8		measured by means of the factors ordinarily applicable
9		under subsections (a), (b), (c), (d), or (h) of Section 304
10		except that, in the case of members ordinarily required to
11		apportion business income by means of the 3 factor formula
12		of property, payroll and sales specified in subsection (a)
13		of Section 304, including the formula as weighted in
14		subsection (h) of Section 304, such members shall not use
15		the sales factor in the computation and the results of the
16		property and payroll factor computations of subsection (a)
17		of Section 304 shall be divided by 2 (by one if either the
18		property or payroll factor has a denominator of zero). The
19		computation required by the preceding sentence shall, in
20		each case, involve the division of the member's property,
21		payroll, or revenue miles in the United States, insurance
22		premiums on property or risk in the United States, or
23		financial organization business income from sources within
24		the United States, as the case may be, by the respective
25		worldwide figures for such items. Common ownership in the
26		case of corporations is the direct or indirect control or
27		ownership of more than 50% of the outstanding voting stock
28		of the persons carrying on unitary business activity.
29		Unitary business activity can ordinarily be illustrated
30		where the activities of the members are: (1) in the same
31		general line (such as manufacturing, wholesaling,
32		retailing of tangible personal property, insurance,
33		transportation or finance); or (2) are steps in a
34		vertically structured enterprise or process (such as the

1		steps involved in the production of natural resources,
2		which might include exploration, mining, refining, and
3		marketing); and, in either instance, the members are
4		functionally integrated through the exercise of strong
5		centralized management (where, for example, authority over
6		such matters as purchasing, financing, tax compliance,
7		product line, personnel, marketing and capital investment
8		is not left to each member). In no event, however, will any
9		unitary business group include members which are
10		ordinarily required to apportion business income under
11		different subsections of Section 304 except that for tax
12		years ending on or after December 31, 1987 this prohibition
13		shall not apply to a unitary business group composed of one
14		or more taxpayers all of which apportion business income
15		pursuant to subsection (b) of Section 304, or all of which
16		apportion business income pursuant to subsection (d) of
17		Section 304, and a holding company of such single-factor
18		taxpayers (see definition of "financial organization" for
19		rule regarding holding companies of financial
20		organizations). If a unitary business group would, but for
21		the preceding sentence, include members that are
22		ordinarily required to apportion business income under
23		different subsections of Section 304, then for each
24		subsection of Section 304 for which there are two or more
25		members, there shall be a separate unitary business group
26		composed of such members. For purposes of the preceding two
27		sentences, a member is "ordinarily required to apportion
28		business income" under a particular subsection of Section
29		304 if it would be required to use the apportionment method
30		prescribed by such subsection except for the fact that it
31		derives business income solely from Illinois. If the
32		unitary business group members' accounting periods differ,
33		the common parent's accounting period or, if there is no
34		common parent, the accounting period of the member that is

1		expected to have, on a recurring basis, the greatest
2		Illinois income tax liability must be used to determine
3		whether to use the apportionment method provided in
4		subsection (a) or subsection (h) of Section 304. The
5		prohibition against membership in a unitary business group
6		for taxpayers ordinarily required to apportion income
7		under different subsections of Section 304 does not apply
8		to taxpayers required to apportion income under subsection
9		(a) and subsection (h) of Section 304. The provisions of
10		this amendatory Act of 1998 apply to tax years ending on or
11		after December 31, 1998.
12		(28) Subchapter S corporation. The term "Subchapter S
13		corporation" means a corporation for which there is in
14		effect an election under Section 1362 of the Internal
15		Revenue Code, or for which there is a federal election to
16		opt out of the provisions of the Subchapter S Revision Act
17		of 1982 and have applied instead the prior federal
18		Subchapter S rules as in effect on July 1, 1982.
19		(b) Other definitions.
20		(1) Words denoting number, gender, and so forth, when
21		used in this Act, where not otherwise distinctly expressed
22		or manifestly incompatible with the intent thereof:
23		(A) Words importing the singular include and apply
24		to several persons, parties or things;
25		(B) Words importing the plural include the
26		singular; and
27		(C) Words importing the masculine gender include
28		the feminine as well.
29		(2) "Company" or "association" as including successors
30		and assigns. The word "company" or "association", when used
31		in reference to a corporation, shall be deemed to embrace
32		the words "successors and assigns of such company or
33		association", and in like manner as if these last-named

1		words, or words of similar import, were expressed.
2		(3) Other terms. Any term used in any Section of this
3		Act with respect to the application of, or in connection
4		with, the provisions of any other Section of this Act shall
5		have the same meaning as in such other Section.
6		(Source: P.A. 91-535, eff. 1-1-00; 91-913, eff. 1-1-01; 92-846,
7		eff. 8-23-02.)".