SB2207ham002 93RD GENERAL ASSEMBLY

Rep. Tom Cross

Filed: 7/24/2004

09300SB2207ham002 LRB093 15831 BDD 52995 a

AMENDMENT TO SENATE BILL 2207

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

"ARTICLE 1

6		Section 1-1. Short title. This Act may be cited as the
7		FY2005 Budget Implementation (Revenue) Act.

8		Section 1-5. Purpose. It is the purpose of this Act to
9		make changes in State programs that are necessary to implement
10		the Governor's FY2005 budget recommendations concerning
11		revenue.

ARTICLE 5

13		Section 5-5. The Illinois Insurance Code is amended by
14		changing Section 416 as follows:
15		(215 ILCS 5/416)
16		Sec. 416. Industrial Commission Operations Fund Surcharge.
17		(a) As of the effective date of this amendatory Act of 2004
18		the 93rd General Assembly, every company licensed or authorized
19		by the Illinois Department of Insurance and insuring employers'
20		liabilities arising under the Workers' Compensation Act or the

1		Workers' Occupational Diseases Act shall remit to the Director
2		a surcharge based upon the annual direct written premium, as
3		reported under Section 136 of this Act, of the company in the
4		manner provided in this Section. Such proceeds shall be
5		deposited into the Industrial Commission Operations Fund as
6		established in the Workers' Compensation Act. If a company
7		survives or was formed by a merger, consolidation,
8		reorganization, or reincorporation, the direct written
9		premiums of all companies party to the merger, consolidation,
10		reorganization, or reincorporation shall, for purposes of
11		determining the amount of the fee imposed by this Section, be
12		regarded as those of the surviving or new company.
13		(b)(1) Except as provided in subsection (b)(2) of this
14		Section, beginning on the effective date of this amendatory Act
15		of 2004 and on July 1 of July 1, 2004 and each year thereafter,
16		the Director shall charge an annual Industrial Commission
17		Operations Fund Surcharge from every company subject to
18		subsection (a) of this Section equal to 1.01% 1.5% of its
19		direct written premium for insuring employers' liabilities
20		arising under the Workers' Compensation Act or Workers'
21		Occupational Diseases Act as reported in each company's annual
22		statement filed for the previous year as required by Section
23		136. The Industrial Commission Operations Fund Surcharge shall
24		be collected by companies subject to subsection (a) of this
25		Section as a separately stated surcharge on insured employers
26		at the rate of 1.01% 1.5% of direct written premium. The
27		Industrial Commission Operations Fund Surcharge shall not be
28		collected by companies subject to subsection (a) of this
29		Section from any employer that self-insures its liabilities
30		arising under the Workers' Compensation Act or Workers'
31		Occupational Diseases Act, provided that the employer has paid
32		the Industrial Commission Operations Fund Fee pursuant to
33		Section 4d of the Workers' Compensation Act. All sums collected
34		by the Department of Insurance under the provisions of this

1		Section shall be paid promptly after the receipt of the same,
2		accompanied by a detailed statement thereof, into the
3		Industrial Commission Operations Fund in the State treasury.
4		(b)(2) The surcharge due pursuant to this amendatory Act of
5		2004 shall be collected instead of the surcharge due on July 1,
6		2004 under Public Act 93-32. Payment of the surcharge due under
7		this amendatory Act of 2004 shall discharge the employer's
8		obligations due on July 1, 2004. Prior to July 1, 2004, the
9		Director shall charge and collect the surcharge set forth in
10		subparagraph (b)(1) of this Section on or before September 1,
11		2003, December 1, 2003, March 1, 2004 and June 1, 2004. For
12		purposes of this subsection (b)(2), the company shall remit the
13		amounts to the Director based on estimated direct premium for
14		each quarter beginning on July 1, 2003, together with a sworn
15		statement attesting to the reasonableness of the estimate, and
16		the estimated amount of direct premium written forming the
17		bases of the remittance.
18		(c) In addition to the authority specifically granted under
19		Article XXV of this Code, the Director shall have such
20		authority to adopt rules or establish forms as may be
21		reasonably necessary for purposes of enforcing this Section.
22		The Director shall also have authority to defer, waive, or
23		abate the surcharge or any penalties imposed by this Section if
24		in the Director's opinion the company's solvency and ability to
25		meet its insured obligations would be immediately threatened by
26		payment of the surcharge due.
27		(d) When a company fails to pay the full amount of any
28		annual Industrial Commission Operations Fund Surcharge of $100
29		or more due under this Section, there shall be added to the
30		amount due as a penalty the greater of $1,000 or an amount
31		equal to 5% of the deficiency for each month or part of a month
32		that the deficiency remains unpaid.
33		(e) The Department of Insurance may enforce the collection
34		of any delinquent payment, penalty, or portion thereof by legal

1		action or in any other manner by which the collection of debts
2		due the State of Illinois may be enforced under the laws of
3		this State.
4		(f) Whenever it appears to the satisfaction of the Director
5		that a company has paid pursuant to this Act an Industrial
6		Commission Operations Fund Surcharge in an amount in excess of
7		the amount legally collectable from the company, the Director
8		shall issue a credit memorandum for an amount equal to the
9		amount of such overpayment. A credit memorandum may be applied
10		for the 2-year period from the date of issuance, against the
11		payment of any amount due during that period under the
12		surcharge imposed by this Section or, subject to reasonable
13		rule of the Department of Insurance including requirement of
14		notification, may be assigned to any other company subject to
15		regulation under this Act. Any application of credit memoranda
16		after the period provided for in this Section is void.
17		(g) Annually, the Governor may direct a transfer of up to
18		2% of all moneys collected under this Section to the Insurance
19		Financial Regulation Fund.
20		(Source: P.A. 93-32, eff. 6-20-03.)

21		Section 5-10. The Workers' Compensation Act is amended by
22		changing Section 4d as follows:
23		(820 ILCS 305/4d)
24		Sec. 4d. Industrial Commission Operations Fund Fee.
25		(a) As of the effective date of this amendatory Act of the
26		93rd General Assembly, each employer that self-insures its
27		liabilities arising under this Act or Workers' Occupational
28		Diseases Act shall pay a fee measured by the annual actual
29		wages paid in this State of such an employer in the manner
30		provided in this Section. Such proceeds shall be deposited in
31		the Industrial Commission Operations Fund. If an employer
32		survives or was formed by a merger, consolidation,

1		reorganization, or reincorporation, the actual wages paid in
2		this State of all employers party to the merger, consolidation,
3		reorganization, or reincorporation shall, for purposes of
4		determining the amount of the fee imposed by this Section, be
5		regarded as those of the surviving or new employer.
6		(b) Beginning on the effective date of this amendatory Act
7		of 2004 the 93rd General Assembly and on July 1 of each year
8		thereafter, the Chairman shall charge and collect an annual
9		Industrial Commission Operations Fund Fee from every employer
10		subject to subsection (a) of this Section equal to 0.0075%
11		0.045% of its annual actual wages paid in this State as
12		reported in each employer's annual self-insurance renewal
13		filed for the previous year as required by Section 4 of this
14		Act and Section 4 of the Workers' Occupational Diseases Act.
15		All sums collected by the Commission under the provisions of
16		this Section shall be paid promptly after the receipt of the
17		same, accompanied by a detailed statement thereof, into the
18		Industrial Commission Operations Fund. The fee due pursuant to
19		this amendatory Act of 2004 shall be collected instead of the
20		fee due on July 1, 2004 under Public Act 93-32. Payment of the
21		fee due under this amendatory Act of 2004 shall discharge the
22		employer's obligations due on July 1, 2004.
23		(c) In addition to the authority specifically granted under
24		Section 16, the Chairman shall have such authority to adopt
25		rules or establish forms as may be reasonably necessary for
26		purposes of enforcing this Section. The Commission shall have
27		authority to defer, waive, or abate the fee or any penalties
28		imposed by this Section if in the Commission's opinion the
29		employer's solvency and ability to meet its obligations to pay
30		workers' compensation benefits would be immediately threatened
31		by payment of the fee due.
32		(d) When an employer fails to pay the full amount of any
33		annual Industrial Commission Operations Fund Fee of $100 or
34		more due under this Section, there shall be added to the amount

1		due as a penalty the greater of $1,000 or an amount equal to 5%
2		of the deficiency for each month or part of a month that the
3		deficiency remains unpaid.
4		(e) The Commission may enforce the collection of any
5		delinquent payment, penalty or portion thereof by legal action
6		or in any other manner by which the collection of debts due the
7		State of Illinois may be enforced under the laws of this State.
8		(f) Whenever it appears to the satisfaction of the Chairman
9		that an employer has paid pursuant to this Act an Industrial
10		Commission Operations Fund Fee in an amount in excess of the
11		amount legally collectable from the employer, the Chairman
12		shall issue a credit memorandum for an amount equal to the
13		amount of such overpayment. A credit memorandum may be applied
14		for the 2-year period from the date of issuance against the
15		payment of any amount due during that period under the fee
16		imposed by this Section or, subject to reasonable rule of the
17		Commission including requirement of notification, may be
18		assigned to any other employer subject to regulation under this
19		Act. Any application of credit memoranda after the period
20		provided for in this Section is void.
21		(Source: P.A. 93-32, eff. 6-20-03.)

ARTICLE 10

23		Section 10-5. The Illinois Identification Card Act is
24		amended by changing Sections 2 and 12 as follows:
25		(15 ILCS 335/2) (from Ch. 124, par. 22)
26		Sec. 2. Administration and powers and duties of the
27		Administrator. (a) The Secretary of State is the Administrator
28		of this Act, and he is charged with the duty of observing,
29		administering and enforcing the provisions of this Act.
30		(b) The Secretary is vested with the powers and duties for
31		the proper administration of this Act as follows:

1		1. He shall organize the administration of this Act as he
2		may deem necessary and appoint such subordinate officers,
3		clerks and other employees as may be necessary.
4		2. From time to time, he may make, amend or rescind rules
5		and regulations as may be in the public interest to implement
6		the Act.
7		3. He may prescribe or provide suitable forms as necessary,
8		including such forms as are necessary to establish that an
9		applicant for an Illinois Disabled Person Identification Card
10		is a "disabled person" as defined in Section 4A of this Act.
11		4. He may prepare under the seal of the Secretary of State
12		certified copies of any records utilized under this Act and any
13		such certified copy shall be admissible in any proceeding in
14		any court in like manner as the original thereof.
15		5. Records compiled under this Act shall be maintained for
16		6 years, but the Secretary may destroy such records with the
17		prior approval of the State Records Commission.
18		6. He shall examine and determine the genuineness,
19		regularity and legality of every application filed with him
20		under this Act, and he may in all cases investigate the same,
21		require additional information or proof or documentation from
22		any applicant.
23		7. He shall require the payment of all fees prescribed in
24		this Act, and all such fees received by him shall be placed in
25		the Road Fund of the State treasury except as otherwise
26		provided in Section 12 of this Act.
27		(Source: P.A. 83-1421.)
28		(15 ILCS 335/12) (from Ch. 124, par. 32)
29		Sec. 12. Fees concerning Standard Illinois Identification
30		Cards. The fees required under this Act for standard Illinois
31		Identification Cards must accompany any application provided
32		for in this Act, and the Secretary shall collect such fees as
33		follows:

23		All fees collected under this Act shall be paid into the
24		Road Fund of the State treasury, except that the following
25		amounts shall be paid into the General Revenue Fund: (i) $16 of
26		the $20 fee for an original, renewal, or duplicate Illinois
27		Identification Card issued on or after January 1, 2005; and
28		(ii) $8 of the $10 fee for a corrected Illinois Identification
29		Card issued on or after January 1, 2005.
30		Any disabled person making an application for a standard
31		Illinois Identification Card for no fee must, along with the
32		application, submit an affirmation by the applicant on a form
33		to be provided by the Secretary of State, attesting that such
34		person is a disabled person as defined in Section 4A of this

1		Act.
2		An individual, who resides in a veterans home or veterans
3		hospital operated by the state or federal government, who makes
4		an application for an Illinois Identification Card to be issued
5		at no fee, must submit, along with the application, an
6		affirmation by the applicant on a form provided by the
7		Secretary of State, that such person resides in a veterans home
8		or veterans hospital operated by the state or federal
9		government.
10		(Source: P.A. 83-1528.)

11		Section 10-10. The Illinois Lottery Law is amended by
12		changing Section 10.2 as follows:
13		(20 ILCS 1605/10.2) (from Ch. 120, par. 1160.2)
14		Sec. 10.2. Application and other fees. Each application
15		for a new lottery license must be accompanied by a one-time
16		application fee of $50; the Department, however, may waive the
17		fee for licenses of limited duration as provided by Department
18		rule. Each application for renewal of a lottery license must be
19		accompanied by a renewal fee of $25. Each lottery licensee
20		granted on-line status pursuant to the Department's rules must
21		pay a fee of $10 per week as partial reimbursement for
22		telecommunications charges incurred by the Department in
23		providing access to the lottery's on-line gaming system. The
24		Department, by rule, may increase or decrease the amount of
25		these fees. The Department may charge an application fee except
26		that such fee shall not exceed $10.00 per annum.
27		(Source: P.A. 81-477.)

ARTICLE 15

29		Section 15-1. Short title. This Article may be cited as the
30		Watercraft Use Tax Law, and references in this Article to "this

1		Law" mean this Article.

2		Section 15-5. Definitions. For the purposes of this Law:
3		"Department" means the Department of Revenue.
4		"Purchase price" means the reasonable consideration paid
5		for a watercraft whether received in money or otherwise,
6		including, but not limited to, cash, credits, property, and
7		services, and including the value of any motor sold with, or in
8		conjunction with, the watercraft. Except in the case of
9		transfers between immediate family members, reasonable
10		consideration ordinarily means the fair market value on the
11		date the watercraft or the share of the watercraft was acquired
12		or the date the watercraft was brought into this State,
13		whichever is later, unless the taxpayer can demonstrate that a
14		different value is reasonable. In the case of transfers between
15		immediate family members, reasonable consideration ordinarily
16		means the consideration actually paid, unless it appears from
17		the facts and circumstances that the primary motivation of the
18		transfer was the avoidance of tax.
19		"Watercraft" means:
20		(1) Class 2, Class 3, and Class 4 watercraft, as
21		defined in Section 3-2 of the Boat Registration and Safety
22		Act; or
23		(2) personal watercraft, as defined in Section 1-2 of
24		the Boat Registration and Safety Act.

25		Section 15-10. Tax imposed. A tax is hereby imposed on the
26		privilege of using, in this State, any watercraft acquired by
27		gift, transfer, or purchase after September 1, 2004. This tax
28		does not apply if: (i) the use of the watercraft is otherwise
29		taxed under the Use Tax Act; (ii) the watercraft is bought and
30		used by a governmental agency or a society, association,
31		foundation, or institution organized and operated exclusively
32		for charitable, religious, or educational purposes and that

1		entity has been issued an exemption identification number under
2		Section 1g of the Retailers' Occupation Tax Act; (iii) the use
3		of the watercraft is not subject to the Use Tax Act by reason
4		of subsection (a), (b), (c), (d), or (e) of Section 3-55 of
5		that Act dealing with the prevention of actual or likely
6		multi-state taxation; (iv) the transfer is a gift to a
7		beneficiary in the administration of an estate and the
8		beneficiary is a surviving spouse; or (v) the watercraft is
9		exempted from the numbering provisions of Section 3-12 of the
10		Boat Registration and Safety Act. However, the exemption from
11		tax provided by item (v) shall not apply to a watercraft
12		exempted under paragraphs A, B, C, F, and G of Section 3-12 of
13		the Boat Registration and Safety Act if such watercraft are
14		used upon the waters of this State for more than 30 days in any
15		calendar year.

16		Section 15-15. Rate of tax.
17		The rate of tax is 6.25% of the purchase price for each
18		purchase of watercraft that is subject to tax under this Law.
19		When an ownership share of a watercraft is acquired, the tax is
20		imposed on the purchase price of that share. All owners are
21		jointly and severally liable for any tax due as a result of the
22		purchase, gift, or transfer of an ownership share of the
23		watercraft.

24		Section 15-20. Returns.
25		(a) The purchaser, transferee, or donee shall file with the
26		Department a return signed by the purchaser, transferee, or
27		donee on a form prescribed by the Department. The return shall
28		contain a verification in substantially the following form and
29		such other information as the Department may reasonably
30		require:
31		VERIFICATION
32		I declare that I have examined this return and, to the best

1		of my knowledge, it is true, correct, and complete. I
2		understand that the penalty for willfully filing a false
3		return is a fine not to exceed $1,000 or imprisonment in a
4		penal institution other than the penitentiary not to exceed
5		one year, or both a fine and imprisonment.
6		(b) The return and payment from the purchaser, transferee,
7		or donee shall be submitted to the Department within 30 days
8		after the date of purchase, donation, or other transfer or the
9		date the watercraft is brought into this State, whichever is
10		later. Payment of tax is a condition to securing certificate of
11		title for the watercraft from the Department of Natural
12		Resources. When a purchaser, transferee, or donee pays the tax
13		imposed by Section 5-10 of this Law, the Department (upon
14		request therefor from the purchaser, transferee, or donee)
15		shall issue an appropriate receipt to the purchaser,
16		transferee, or donee showing that he or she has paid the tax to
17		the Department. The receipt shall be sufficient to relieve the
18		purchaser, transferee, or donee from further liability for the
19		tax to which the receipt may refer.

20		Section 15-25. Filing false or incomplete return. Any
21		person required to file a return under this Law who willfully
22		files a false or incomplete return is guilty of a Class A
23		misdemeanor.

24		Section 15-30. Determining purchase price. For the purpose
25		of assisting in determining the validity of the purchase price
26		reported on returns filed with the Department, the Department
27		may furnish the following information to persons with whom the
28		Department has contracted for service related to making that
29		determination: (i) the purchase price stated on the return;
30		(ii) the watercraft identification number; (iii) the year, the
31		make, and the model name or number of the watercraft; (iv) the
32		purchase date; and (v) the hours of operation.

1		Section 15-35. Powers of Department. The Department has
2		full power to: (i) administer and enforce this Law; (ii)
3		collect all taxes, penalties, and interest due under this Law;
4		(iii) dispose of taxes, penalties, and interest so collected in
5		the manner set forth in this Law; and (iv) determine all rights
6		to credit memoranda or refunds arising on account of the
7		erroneous payment of tax, penalty, or interest under this Law.
8		In the administration of, and compliance with, this Law, the
9		Department and persons who are subject to this Law have the
10		same rights, remedies, privileges, immunities, powers, and
11		duties, and are subject to the same conditions, restrictions,
12		limitations, penalties, and definitions of terms, and employ
13		the same modes of procedure, as are prescribed in the Use Tax
14		Act (except for the provisions of Section 3-70), that are not
15		inconsistent with this Law, as fully as if the provisions of
16		the Use Tax Act were set forth in this Law. In addition to any
17		other penalties imposed under law, any person convicted of
18		violating the provisions of this Law shall be assessed a fine
19		of $1,000.

20		Section 15-40. Payments to State and Local Sales Tax Reform
21		Fund and General Revenue Fund. The Department shall each month,
22		upon collecting any taxes as provided in this Law, pay 20% of
23		the money collected into the State and Local Sales Tax Reform
24		Fund, a special fund in the State treasury, and 80% into the
25		General Revenue Fund.

26		Section 15-45. Rules. The Department has the authority to
27		adopt such rules as are reasonable and necessary to implement
28		the provisions of this Law.

29		Section 15-990. The Retailers' Occupation Tax Act is
30		amended by changing Section 1c as follows:

1		(35 ILCS 120/1c) (from Ch. 120, par. 440c)
2		Sec. 1c. A person who is engaged in the business of leasing
3		or renting motor vehicles or, beginning July 1, 2003, aircraft
4		or, beginning September 1, 2004, watercraft to others and who,
5		in connection with such business sells any used motor vehicle,
6		or aircraft, or watercraft to a purchaser for his use and not
7		for the purpose of resale, is a retailer engaged in the
8		business of selling tangible personal property at retail under
9		this Act to the extent of the value of the motor vehicle, or
10		aircraft, or watercraft sold. For the purpose of this Section
11		"motor vehicle" has the meaning prescribed in Section 1-157 of
12		the Illinois Vehicle Code, as now or hereafter amended. For the
13		purpose of this Section "aircraft" has the meaning prescribed
14		in Section 3 of the Illinois Aeronautics Act. For the purpose
15		of this Section, "watercraft" has the meaning prescribed in
16		Section 5-5 of the Watercraft Use Tax Law. (Nothing provided
17		herein shall affect liability incurred under this Act because
18		of the sale at retail of such motor vehicles, or aircraft, or
19		watercraft to a lessor.)
20		(Source: P.A. 93-24, eff. 6-20-03.)

21		Section 15-995. The Boat Registration and Safety Act is
22		amended by changing Section 3A-5 as follows:
23		(625 ILCS 45/3A-5) (from Ch. 95 1/2, par. 313A-5)
24		Sec. 3A-5. Certificate of title - Issuance - Records.
25		(a) The Department of Natural Resources shall file each
26		application received and, when satisfied as to its genuineness
27		and regularity, and that no tax imposed by the "Use Tax Act" or
28		the Watercraft Use Tax Law is owed as evidenced by the receipt
29		for payment or determination of exemption from the Department
30		of Revenue provided for in Section 3A-3 of this Article, and
31		that the applicant is entitled to the issuance of a certificate

1		of title, shall issue a certificate of title.
2		(b) The Department of Natural Resources shall maintain a
3		record of all certificates of title issued under a distinctive
4		title number assigned to the watercraft and, in the discretion
5		of the Department, in any other method determined.
6		(Source: P.A. 89-445, eff. 2-7-96.)

ARTICLE 20

8		Section 20-10. The Use Tax Act is amended by changing
9		Sections 3-5 and 3-85 as follows:
10		(35 ILCS 105/3-5) (from Ch. 120, par. 439.3-5)
11		Sec. 3-5. Exemptions. Use of the following tangible
12		personal property is exempt from the tax imposed by this Act:
13		(1) Personal property purchased from a corporation,
14		society, association, foundation, institution, or
15		organization, other than a limited liability company, that is
16		organized and operated as a not-for-profit service enterprise
17		for the benefit of persons 65 years of age or older if the
18		personal property was not purchased by the enterprise for the
19		purpose of resale by the enterprise.
20		(2) Personal property purchased by a not-for-profit
21		Illinois county fair association for use in conducting,
22		operating, or promoting the county fair.
23		(3) Personal property purchased by a not-for-profit arts or
24		cultural organization that establishes, by proof required by
25		the Department by rule, that it has received an exemption under
26		Section 501(c)(3) of the Internal Revenue Code and that is
27		organized and operated primarily for the presentation or
28		support of arts or cultural programming, activities, or
29		services. These organizations include, but are not limited to,
30		music and dramatic arts organizations such as symphony
31		orchestras and theatrical groups, arts and cultural service

1		organizations, local arts councils, visual arts organizations,
2		and media arts organizations. On and after the effective date
3		of this amendatory Act of the 92nd General Assembly, however,
4		an entity otherwise eligible for this exemption shall not make
5		tax-free purchases unless it has an active identification
6		number issued by the Department.
7		(4) Personal property purchased by a governmental body, by
8		a corporation, society, association, foundation, or
9		institution organized and operated exclusively for charitable,
10		religious, or educational purposes, or by a not-for-profit
11		corporation, society, association, foundation, institution, or
12		organization that has no compensated officers or employees and
13		that is organized and operated primarily for the recreation of
14		persons 55 years of age or older. A limited liability company
15		may qualify for the exemption under this paragraph only if the
16		limited liability company is organized and operated
17		exclusively for educational purposes. On and after July 1,
18		1987, however, no entity otherwise eligible for this exemption
19		shall make tax-free purchases unless it has an active exemption
20		identification number issued by the Department.
21		(5) Until July 1, 2003, a passenger car that is a
22		replacement vehicle to the extent that the purchase price of
23		the car is subject to the Replacement Vehicle Tax.
24		(6) Until July 1, 2003 and beginning again on September 1,
25		2004, graphic arts machinery and equipment, including repair
26		and replacement parts, both new and used, and including that
27		manufactured on special order, certified by the purchaser to be
28		used primarily for graphic arts production, and including
29		machinery and equipment purchased for lease. Equipment
30		includes chemicals or chemicals acting as catalysts but only if
31		the chemicals or chemicals acting as catalysts effect a direct
32		and immediate change upon a graphic arts product.
33		(7) Farm chemicals.
34		(8) Legal tender, currency, medallions, or gold or silver

1		coinage issued by the State of Illinois, the government of the
2		United States of America, or the government of any foreign
3		country, and bullion.
4		(9) Personal property purchased from a teacher-sponsored
5		student organization affiliated with an elementary or
6		secondary school located in Illinois.
7		(10) A motor vehicle of the first division, a motor vehicle
8		of the second division that is a self-contained motor vehicle
9		designed or permanently converted to provide living quarters
10		for recreational, camping, or travel use, with direct walk
11		through to the living quarters from the driver's seat, or a
12		motor vehicle of the second division that is of the van
13		configuration designed for the transportation of not less than
14		7 nor more than 16 passengers, as defined in Section 1-146 of
15		the Illinois Vehicle Code, that is used for automobile renting,
16		as defined in the Automobile Renting Occupation and Use Tax
17		Act.
18		(11) Farm machinery and equipment, both new and used,
19		including that manufactured on special order, certified by the
20		purchaser to be used primarily for production agriculture or
21		State or federal agricultural programs, including individual
22		replacement parts for the machinery and equipment, including
23		machinery and equipment purchased for lease, and including
24		implements of husbandry defined in Section 1-130 of the
25		Illinois Vehicle Code, farm machinery and agricultural
26		chemical and fertilizer spreaders, and nurse wagons required to
27		be registered under Section 3-809 of the Illinois Vehicle Code,
28		but excluding other motor vehicles required to be registered
29		under the Illinois Vehicle Code. Horticultural polyhouses or
30		hoop houses used for propagating, growing, or overwintering
31		plants shall be considered farm machinery and equipment under
32		this item (11). Agricultural chemical tender tanks and dry
33		boxes shall include units sold separately from a motor vehicle
34		required to be licensed and units sold mounted on a motor

1		vehicle required to be licensed if the selling price of the
2		tender is separately stated.
3		Farm machinery and equipment shall include precision
4		farming equipment that is installed or purchased to be
5		installed on farm machinery and equipment including, but not
6		limited to, tractors, harvesters, sprayers, planters, seeders,
7		or spreaders. Precision farming equipment includes, but is not
8		limited to, soil testing sensors, computers, monitors,
9		software, global positioning and mapping systems, and other
10		such equipment.
11		Farm machinery and equipment also includes computers,
12		sensors, software, and related equipment used primarily in the
13		computer-assisted operation of production agriculture
14		facilities, equipment, and activities such as, but not limited
15		to, the collection, monitoring, and correlation of animal and
16		crop data for the purpose of formulating animal diets and
17		agricultural chemicals. This item (11) is exempt from the
18		provisions of Section 3-90.
19		(12) Fuel and petroleum products sold to or used by an air
20		common carrier, certified by the carrier to be used for
21		consumption, shipment, or storage in the conduct of its
22		business as an air common carrier, for a flight destined for or
23		returning from a location or locations outside the United
24		States without regard to previous or subsequent domestic
25		stopovers.
26		(13) Proceeds of mandatory service charges separately
27		stated on customers' bills for the purchase and consumption of
28		food and beverages purchased at retail from a retailer, to the
29		extent that the proceeds of the service charge are in fact
30		turned over as tips or as a substitute for tips to the
31		employees who participate directly in preparing, serving,
32		hosting or cleaning up the food or beverage function with
33		respect to which the service charge is imposed.
34		(14) Until July 1, 2003, oil field exploration, drilling,

1		and production equipment, including (i) rigs and parts of rigs,
2		rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
3		tubular goods, including casing and drill strings, (iii) pumps
4		and pump-jack units, (iv) storage tanks and flow lines, (v) any
5		individual replacement part for oil field exploration,
6		drilling, and production equipment, and (vi) machinery and
7		equipment purchased for lease; but excluding motor vehicles
8		required to be registered under the Illinois Vehicle Code.
9		(15) Photoprocessing machinery and equipment, including
10		repair and replacement parts, both new and used, including that
11		manufactured on special order, certified by the purchaser to be
12		used primarily for photoprocessing, and including
13		photoprocessing machinery and equipment purchased for lease.
14		(16) Until July 1, 2003, coal exploration, mining,
15		offhighway hauling, processing, maintenance, and reclamation
16		equipment, including replacement parts and equipment, and
17		including equipment purchased for lease, but excluding motor
18		vehicles required to be registered under the Illinois Vehicle
19		Code.
20		(17) Until July 1, 2003, distillation machinery and
21		equipment, sold as a unit or kit, assembled or installed by the
22		retailer, certified by the user to be used only for the
23		production of ethyl alcohol that will be used for consumption
24		as motor fuel or as a component of motor fuel for the personal
25		use of the user, and not subject to sale or resale.
26		(18) Manufacturing and assembling machinery and equipment
27		used primarily in the process of manufacturing or assembling
28		tangible personal property for wholesale or retail sale or
29		lease, whether that sale or lease is made directly by the
30		manufacturer or by some other person, whether the materials
31		used in the process are owned by the manufacturer or some other
32		person, or whether that sale or lease is made apart from or as
33		an incident to the seller's engaging in the service occupation
34		of producing machines, tools, dies, jigs, patterns, gauges, or

1		other similar items of no commercial value on special order for
2		a particular purchaser.
3		(19) Personal property delivered to a purchaser or
4		purchaser's donee inside Illinois when the purchase order for
5		that personal property was received by a florist located
6		outside Illinois who has a florist located inside Illinois
7		deliver the personal property.
8		(20) Semen used for artificial insemination of livestock
9		for direct agricultural production.
10		(21) Horses, or interests in horses, registered with and
11		meeting the requirements of any of the Arabian Horse Club
12		Registry of America, Appaloosa Horse Club, American Quarter
13		Horse Association, United States Trotting Association, or
14		Jockey Club, as appropriate, used for purposes of breeding or
15		racing for prizes.
16		(22) Computers and communications equipment utilized for
17		any hospital purpose and equipment used in the diagnosis,
18		analysis, or treatment of hospital patients purchased by a
19		lessor who leases the equipment, under a lease of one year or
20		longer executed or in effect at the time the lessor would
21		otherwise be subject to the tax imposed by this Act, to a
22		hospital that has been issued an active tax exemption
23		identification number by the Department under Section 1g of the
24		Retailers' Occupation Tax Act. If the equipment is leased in a
25		manner that does not qualify for this exemption or is used in
26		any other non-exempt manner, the lessor shall be liable for the
27		tax imposed under this Act or the Service Use Tax Act, as the
28		case may be, based on the fair market value of the property at
29		the time the non-qualifying use occurs. No lessor shall collect
30		or attempt to collect an amount (however designated) that
31		purports to reimburse that lessor for the tax imposed by this
32		Act or the Service Use Tax Act, as the case may be, if the tax
33		has not been paid by the lessor. If a lessor improperly
34		collects any such amount from the lessee, the lessee shall have

1		a legal right to claim a refund of that amount from the lessor.
2		If, however, that amount is not refunded to the lessee for any
3		reason, the lessor is liable to pay that amount to the
4		Department.
5		(23) Personal property purchased by a lessor who leases the
6		property, under a lease of one year or longer executed or in
7		effect at the time the lessor would otherwise be subject to the
8		tax imposed by this Act, to a governmental body that has been
9		issued an active sales tax exemption identification number by
10		the Department under Section 1g of the Retailers' Occupation
11		Tax Act. If the property is leased in a manner that does not
12		qualify for this exemption or used in any other non-exempt
13		manner, the lessor shall be liable for the tax imposed under
14		this Act or the Service Use Tax Act, as the case may be, based
15		on the fair market value of the property at the time the
16		non-qualifying use occurs. No lessor shall collect or attempt
17		to collect an amount (however designated) that purports to
18		reimburse that lessor for the tax imposed by this Act or the
19		Service Use Tax Act, as the case may be, if the tax has not been
20		paid by the lessor. If a lessor improperly collects any such
21		amount from the lessee, the lessee shall have a legal right to
22		claim a refund of that amount from the lessor. If, however,
23		that amount is not refunded to the lessee for any reason, the
24		lessor is liable to pay that amount to the Department.
25		(24) Beginning with taxable years ending on or after
26		December 31, 1995 and ending with taxable years ending on or
27		before December 31, 2004, personal property that is donated for
28		disaster relief to be used in a State or federally declared
29		disaster area in Illinois or bordering Illinois by a
30		manufacturer or retailer that is registered in this State to a
31		corporation, society, association, foundation, or institution
32		that has been issued a sales tax exemption identification
33		number by the Department that assists victims of the disaster
34		who reside within the declared disaster area.

1		(25) Beginning with taxable years ending on or after
2		December 31, 1995 and ending with taxable years ending on or
3		before December 31, 2004, personal property that is used in the
4		performance of infrastructure repairs in this State, including
5		but not limited to municipal roads and streets, access roads,
6		bridges, sidewalks, waste disposal systems, water and sewer
7		line extensions, water distribution and purification
8		facilities, storm water drainage and retention facilities, and
9		sewage treatment facilities, resulting from a State or
10		federally declared disaster in Illinois or bordering Illinois
11		when such repairs are initiated on facilities located in the
12		declared disaster area within 6 months after the disaster.
13		(26) Beginning July 1, 1999, game or game birds purchased
14		at a "game breeding and hunting preserve area" or an "exotic
15		game hunting area" as those terms are used in the Wildlife Code
16		or at a hunting enclosure approved through rules adopted by the
17		Department of Natural Resources. This paragraph is exempt from
18		the provisions of Section 3-90.
19		(27) A motor vehicle, as that term is defined in Section
20		1-146 of the Illinois Vehicle Code, that is donated to a
21		corporation, limited liability company, society, association,
22		foundation, or institution that is determined by the Department
23		to be organized and operated exclusively for educational
24		purposes. For purposes of this exemption, "a corporation,
25		limited liability company, society, association, foundation,
26		or institution organized and operated exclusively for
27		educational purposes" means all tax-supported public schools,
28		private schools that offer systematic instruction in useful
29		branches of learning by methods common to public schools and
30		that compare favorably in their scope and intensity with the
31		course of study presented in tax-supported schools, and
32		vocational or technical schools or institutes organized and
33		operated exclusively to provide a course of study of not less
34		than 6 weeks duration and designed to prepare individuals to

1		follow a trade or to pursue a manual, technical, mechanical,
2		industrial, business, or commercial occupation.
3		(28) Beginning January 1, 2000, personal property,
4		including food, purchased through fundraising events for the
5		benefit of a public or private elementary or secondary school,
6		a group of those schools, or one or more school districts if
7		the events are sponsored by an entity recognized by the school
8		district that consists primarily of volunteers and includes
9		parents and teachers of the school children. This paragraph
10		does not apply to fundraising events (i) for the benefit of
11		private home instruction or (ii) for which the fundraising
12		entity purchases the personal property sold at the events from
13		another individual or entity that sold the property for the
14		purpose of resale by the fundraising entity and that profits
15		from the sale to the fundraising entity. This paragraph is
16		exempt from the provisions of Section 3-90.
17		(29) Beginning January 1, 2000 and through December 31,
18		2001, new or used automatic vending machines that prepare and
19		serve hot food and beverages, including coffee, soup, and other
20		items, and replacement parts for these machines. Beginning
21		January 1, 2002 and through June 30, 2003, machines and parts
22		for machines used in commercial, coin-operated amusement and
23		vending business if a use or occupation tax is paid on the
24		gross receipts derived from the use of the commercial,
25		coin-operated amusement and vending machines. This paragraph
26		is exempt from the provisions of Section 3-90.
27		(30) Food for human consumption that is to be consumed off
28		the premises where it is sold (other than alcoholic beverages,
29		soft drinks, and food that has been prepared for immediate
30		consumption) and prescription and nonprescription medicines,
31		drugs, medical appliances, and insulin, urine testing
32		materials, syringes, and needles used by diabetics, for human
33		use, when purchased for use by a person receiving medical
34		assistance under Article 5 of the Illinois Public Aid Code who

1		resides in a licensed long-term care facility, as defined in
2		the Nursing Home Care Act.
3		(31) Beginning on the effective date of this amendatory Act
4		of the 92nd General Assembly, computers and communications
5		equipment utilized for any hospital purpose and equipment used
6		in the diagnosis, analysis, or treatment of hospital patients
7		purchased by a lessor who leases the equipment, under a lease
8		of one year or longer executed or in effect at the time the
9		lessor would otherwise be subject to the tax imposed by this
10		Act, to a hospital that has been issued an active tax exemption
11		identification number by the Department under Section 1g of the
12		Retailers' Occupation Tax Act. If the equipment is leased in a
13		manner that does not qualify for this exemption or is used in
14		any other nonexempt manner, the lessor shall be liable for the
15		tax imposed under this Act or the Service Use Tax Act, as the
16		case may be, based on the fair market value of the property at
17		the time the nonqualifying use occurs. No lessor shall collect
18		or attempt to collect an amount (however designated) that
19		purports to reimburse that lessor for the tax imposed by this
20		Act or the Service Use Tax Act, as the case may be, if the tax
21		has not been paid by the lessor. If a lessor improperly
22		collects any such amount from the lessee, the lessee shall have
23		a legal right to claim a refund of that amount from the lessor.
24		If, however, that amount is not refunded to the lessee for any
25		reason, the lessor is liable to pay that amount to the
26		Department. This paragraph is exempt from the provisions of
27		Section 3-90.
28		(32) Beginning on the effective date of this amendatory Act
29		of the 92nd General Assembly, personal property purchased by a
30		lessor who leases the property, under a lease of one year or
31		longer executed or in effect at the time the lessor would
32		otherwise be subject to the tax imposed by this Act, to a
33		governmental body that has been issued an active sales tax
34		exemption identification number by the Department under

1		Section 1g of the Retailers' Occupation Tax Act. If the
2		property is leased in a manner that does not qualify for this
3		exemption or used in any other nonexempt manner, the lessor
4		shall be liable for the tax imposed under this Act or the
5		Service Use Tax Act, as the case may be, based on the fair
6		market value of the property at the time the nonqualifying use
7		occurs. No lessor shall collect or attempt to collect an amount
8		(however designated) that purports to reimburse that lessor for
9		the tax imposed by this Act or the Service Use Tax Act, as the
10		case may be, if the tax has not been paid by the lessor. If a
11		lessor improperly collects any such amount from the lessee, the
12		lessee shall have a legal right to claim a refund of that
13		amount from the lessor. If, however, that amount is not
14		refunded to the lessee for any reason, the lessor is liable to
15		pay that amount to the Department. This paragraph is exempt
16		from the provisions of Section 3-90.
17		(33) On and after July 1, 2003, the use in this State of
18		motor vehicles of the second division with a gross vehicle
19		weight in excess of 8,000 pounds and that are subject to the
20		commercial distribution fee imposed under Section 3-815.1 of
21		the Illinois Vehicle Code. This exemption applies to repair and
22		replacement parts added after the initial purchase of such a
23		motor vehicle if that motor vehicle is used in a manner that
24		would qualify for the rolling stock exemption otherwise
25		provided for in this Act.
26		(Source: P.A. 92-35, eff. 7-1-01; 92-227, eff. 8-2-01; 92-337,
27		eff. 8-10-01; 92-484, eff. 8-23-01; 92-651, eff. 7-11-02;
28		93-23, eff. 6-20-03; 93-24, eff. 6-20-03; revised 9-11-03.)
29		(35 ILCS 105/3-85)
30		Sec. 3-85. Manufacturer's Purchase Credit. For purchases
31		of machinery and equipment made on and after January 1, 1995
32		and through June 30, 2003, and on and after September 1, 2004,
33		a purchaser of manufacturing machinery and equipment that

1		qualifies for the exemption provided by paragraph (18) of
2		Section 3-5 of this Act earns a credit in an amount equal to a
3		fixed percentage of the tax which would have been incurred
4		under this Act on those purchases. For purchases of graphic
5		arts machinery and equipment made on or after July 1, 1996 and
6		through June 30, 2003, and on and after September 1, 2004, a
7		purchaser of graphic arts machinery and equipment that
8		qualifies for the exemption provided by paragraph (6) of
9		Section 3-5 of this Act earns a credit in an amount equal to a
10		fixed percentage of the tax that would have been incurred under
11		this Act on those purchases. The credit earned for purchases of
12		manufacturing machinery and equipment or graphic arts
13		machinery and equipment shall be referred to as the
14		Manufacturer's Purchase Credit. A graphic arts producer is a
15		person engaged in graphic arts production as defined in Section
16		2-30 of the Retailers' Occupation Tax Act. Beginning July 1,
17		1996, all references in this Section to manufacturers or
18		manufacturing shall also be deemed to refer to graphic arts
19		producers or graphic arts production.
20		The amount of credit shall be a percentage of the tax that
21		would have been incurred on the purchase of manufacturing
22		machinery and equipment or graphic arts machinery and equipment
23		if the exemptions provided by paragraph (6) or paragraph (18)
24		of Section 3-5 of this Act had not been applicable. The
25		percentage shall be as follows:
26		(1) 15% for purchases made on or before June 30, 1995.
27		(2) 25% for purchases made after June 30, 1995, and on
28		or before June 30, 1996.
29		(3) 40% for purchases made after June 30, 1996, and on
30		or before June 30, 1997.
31		(4) 50% for purchases made on or after July 1, 1997.
32		(a) Manufacturer's Purchase Credit earned prior to July 1,
33		2003. This subsection (a) applies to Manufacturer's Purchase
34		Credit earned prior to July 1, 2003. A purchaser of production

1		related tangible personal property desiring to use the
2		Manufacturer's Purchase Credit shall certify to the seller
3		prior to October 1, 2003 that the purchaser is satisfying all
4		or part of the liability under the Use Tax Act or the Service
5		Use Tax Act that is due on the purchase of the production
6		related tangible personal property by use of Manufacturer's
7		Purchase Credit. The Manufacturer's Purchase Credit
8		certification must be dated and shall include the name and
9		address of the purchaser, the purchaser's registration number,
10		if registered, the credit being applied, and a statement that
11		the State Use Tax or Service Use Tax liability is being
12		satisfied with the manufacturer's or graphic arts producer's
13		accumulated purchase credit. Certification may be incorporated
14		into the manufacturer's or graphic arts producer's purchase
15		order. Manufacturer's Purchase Credit certification provided
16		by the manufacturer or graphic arts producer prior to October
17		1, 2003 may be used to satisfy the retailer's or serviceman's
18		liability under the Retailers' Occupation Tax Act or Service
19		Occupation Tax Act for the credit claimed, not to exceed 6.25%
20		of the receipts subject to tax from a qualifying purchase, but
21		only if the retailer or serviceman reports the Manufacturer's
22		Purchase Credit claimed as required by the Department. A
23		Manufacturer's Purchase Credit reported on any original or
24		amended return filed under this Act after October 20, 2003
25		shall be disallowed. The Manufacturer's Purchase Credit earned
26		by purchase of exempt manufacturing machinery and equipment or
27		graphic arts machinery and equipment is a non-transferable
28		credit. A manufacturer or graphic arts producer that enters
29		into a contract involving the installation of tangible personal
30		property into real estate within a manufacturing or graphic
31		arts production facility may, prior to October 1, 2003,
32		authorize a construction contractor to utilize credit
33		accumulated by the manufacturer or graphic arts producer to
34		purchase the tangible personal property. A manufacturer or

1		graphic arts producer intending to use accumulated credit to
2		purchase such tangible personal property shall execute a
3		written contract authorizing the contractor to utilize a
4		specified dollar amount of credit. The contractor shall
5		furnish, prior to October 1, 2003, the supplier with the
6		manufacturer's or graphic arts producer's name, registration
7		or resale number, and a statement that a specific amount of the
8		Use Tax or Service Use Tax liability, not to exceed 6.25% of
9		the selling price, is being satisfied with the credit. The
10		manufacturer or graphic arts producer shall remain liable to
11		timely report all information required by the annual Report of
12		Manufacturer's Purchase Credit Used for all credit utilized by
13		a construction contractor.
14		No Manufacturer's Purchase Credit earned prior to July 1,
15		2003 may be used after October 1, 2003. The Manufacturer's
16		Purchase Credit may be used to satisfy liability under the Use
17		Tax Act or the Service Use Tax Act due on the purchase of
18		production related tangible personal property (including
19		purchases by a manufacturer, by a graphic arts producer, or by
20		a lessor who rents or leases the use of the property to a
21		manufacturer or graphic arts producer) that does not otherwise
22		qualify for the manufacturing machinery and equipment
23		exemption or the graphic arts machinery and equipment
24		exemption. "Production related tangible personal property"
25		means (i) all tangible personal property used or consumed by
26		the purchaser in a manufacturing facility in which a
27		manufacturing process described in Section 2-45 of the
28		Retailers' Occupation Tax Act takes place, including tangible
29		personal property purchased for incorporation into real estate
30		within a manufacturing facility and including, but not limited
31		to, tangible personal property used or consumed in activities
32		such as preproduction material handling, receiving, quality
33		control, inventory control, storage, staging, and packaging
34		for shipping and transportation purposes; (ii) all tangible

1		personal property used or consumed by the purchaser in a
2		graphic arts facility in which graphic arts production as
3		described in Section 2-30 of the Retailers' Occupation Tax Act
4		takes place, including tangible personal property purchased
5		for incorporation into real estate within a graphic arts
6		facility and including, but not limited to, all tangible
7		personal property used or consumed in activities such as
8		graphic arts preliminary or pre-press production,
9		pre-production material handling, receiving, quality control,
10		inventory control, storage, staging, sorting, labeling,
11		mailing, tying, wrapping, and packaging; and (iii) all tangible
12		personal property used or consumed by the purchaser for
13		research and development. "Production related tangible
14		personal property" does not include (i) tangible personal
15		property used, within or without a manufacturing facility, in
16		sales, purchasing, accounting, fiscal management, marketing,
17		personnel recruitment or selection, or landscaping or (ii)
18		tangible personal property required to be titled or registered
19		with a department, agency, or unit of federal, state, or local
20		government. The Manufacturer's Purchase Credit may be used,
21		prior to October 1, 2003, to satisfy the tax arising either
22		from the purchase of machinery and equipment on or after
23		January 1, 1995 for which the exemption provided by paragraph
24		(18) of Section 3-5 of this Act was erroneously claimed, or the
25		purchase of machinery and equipment on or after July 1, 1996
26		for which the exemption provided by paragraph (6) of Section
27		3-5 of this Act was erroneously claimed, but not in
28		satisfaction of penalty, if any, and interest for failure to
29		pay the tax when due. A purchaser of production related
30		tangible personal property who is required to pay Illinois Use
31		Tax or Service Use Tax on the purchase directly to the
32		Department may, prior to October 1, 2003, utilize the
33		Manufacturer's Purchase Credit in satisfaction of the tax
34		arising from that purchase, but not in satisfaction of penalty

1		and interest. A purchaser who uses the Manufacturer's Purchase
2		Credit to purchase property which is later determined not to be
3		production related tangible personal property may be liable for
4		tax, penalty, and interest on the purchase of that property as
5		of the date of purchase but shall be entitled to use the
6		disallowed Manufacturer's Purchase Credit, so long as it has
7		not expired and is used prior to October 1, 2003, on qualifying
8		purchases of production related tangible personal property not
9		previously subject to credit usage. The Manufacturer's
10		Purchase Credit earned by a manufacturer or graphic arts
11		producer expires the last day of the second calendar year
12		following the calendar year in which the credit arose. No
13		Manufacturer's Purchase Credit may be used after September 30,
14		2003 regardless of when that credit was earned.
15		A purchaser earning Manufacturer's Purchase Credit shall
16		sign and file an annual Report of Manufacturer's Purchase
17		Credit Earned for each calendar year no later than the last day
18		of the sixth month following the calendar year in which a
19		Manufacturer's Purchase Credit is earned. A Report of
20		Manufacturer's Purchase Credit Earned shall be filed on forms
21		as prescribed or approved by the Department and shall state,
22		for each month of the calendar year: (i) the total purchase
23		price of all purchases of exempt manufacturing or graphic arts
24		machinery on which the credit was earned; (ii) the total State
25		Use Tax or Service Use Tax which would have been due on those
26		items; (iii) the percentage used to calculate the amount of
27		credit earned; (iv) the amount of credit earned; and (v) such
28		other information as the Department may reasonably require. A
29		purchaser earning Manufacturer's Purchase Credit shall
30		maintain records which identify, as to each purchase of
31		manufacturing or graphic arts machinery and equipment on which
32		the purchaser earned Manufacturer's Purchase Credit, the
33		vendor (including, if applicable, either the vendor's
34		registration number or Federal Employer Identification

1		Number), the purchase price, and the amount of Manufacturer's
2		Purchase Credit earned on each purchase.
3		A purchaser using Manufacturer's Purchase Credit shall
4		sign and file an annual Report of Manufacturer's Purchase
5		Credit Used for each calendar year no later than the last day
6		of the sixth month following the calendar year in which a
7		Manufacturer's Purchase Credit is used. A Report of
8		Manufacturer's Purchase Credit Used shall be filed on forms as
9		prescribed or approved by the Department and shall state, for
10		each month of the calendar year: (i) the total purchase price
11		of production related tangible personal property purchased
12		from Illinois suppliers; (ii) the total purchase price of
13		production related tangible personal property purchased from
14		out-of-state suppliers; (iii) the total amount of credit used
15		during such month; and (iv) such other information as the
16		Department may reasonably require. A purchaser using
17		Manufacturer's Purchase Credit shall maintain records that
18		identify, as to each purchase of production related tangible
19		personal property on which the purchaser used Manufacturer's
20		Purchase Credit, the vendor (including, if applicable, either
21		the vendor's registration number or Federal Employer
22		Identification Number), the purchase price, and the amount of
23		Manufacturer's Purchase Credit used on each purchase.
24		No annual report shall be filed before May 1, 1996 or after
25		June 30, 2004. A purchaser that fails to file an annual Report
26		of Manufacturer's Purchase Credit Earned or an annual Report of
27		Manufacturer's Purchase Credit Used by the last day of the
28		sixth month following the end of the calendar year shall
29		forfeit all Manufacturer's Purchase Credit for that calendar
30		year unless it establishes that its failure to file was due to
31		reasonable cause. Manufacturer's Purchase Credit reports may
32		be amended to report and claim credit on qualifying purchases
33		not previously reported at any time before the credit would
34		have expired, unless both the Department and the purchaser have

1		agreed to an extension of the statute of limitations for the
2		issuance of a notice of tax liability as provided in Section 4
3		of the Retailers' Occupation Tax Act. If the time for
4		assessment or refund has been extended, then amended reports
5		for a calendar year may be filed at any time prior to the date
6		to which the statute of limitations for the calendar year or
7		portion thereof has been extended. No Manufacturer's Purchase
8		Credit report filed with the Department for periods prior to
9		January 1, 1995 shall be approved. Manufacturer's Purchase
10		Credit claimed on an amended report may be used, until October
11		1, 2003, to satisfy tax liability under the Use Tax Act or the
12		Service Use Tax Act (i) on qualifying purchases of production
13		related tangible personal property made after the date the
14		amended report is filed or (ii) assessed by the Department on
15		qualifying purchases of production related tangible personal
16		property made in the case of manufacturers on or after January
17		1, 1995, or in the case of graphic arts producers on or after
18		July 1, 1996.
19		If the purchaser is not the manufacturer or a graphic arts
20		producer, but rents or leases the use of the property to a
21		manufacturer or graphic arts producer, the purchaser may earn,
22		report, and use Manufacturer's Purchase Credit in the same
23		manner as a manufacturer or graphic arts producer.
24		A purchaser shall not be entitled to any Manufacturer's
25		Purchase Credit for a purchase that is required to be reported
26		and is not timely reported as provided in this Section. A
27		purchaser remains liable for (i) any tax that was satisfied by
28		use of a Manufacturer's Purchase Credit, as of the date of
29		purchase, if that use is not timely reported as required in
30		this Section and (ii) for any applicable penalties and interest
31		for failing to pay the tax when due. No Manufacturer's Purchase
32		Credit may be used after September 30, 2003 to satisfy any tax
33		liability imposed under this Act, including any audit
34		liability.

1		(b) Manufacturer's Purchase Credit earned on and after
2		September 1, 2004. This subsection (b) applies to
3		Manufacturer's Purchase Credit earned on and after September 1,
4		2004. Manufacturer's Purchase Credit earned on or after
5		September 1, 2004 may only be used to satisfy the Use Tax or
6		Service Use Tax liability incurred on production related
7		tangible personal property purchased on or after September 1,
8		2004. A purchaser of production related tangible personal
9		property desiring to use the Manufacturer's Purchase Credit
10		shall certify to the seller that the purchaser is satisfying
11		all or part of the liability under the Use Tax Act or the
12		Service Use Tax Act that is due on the purchase of the
13		production related tangible personal property by use of
14		Manufacturer's Purchase Credit. The Manufacturer's Purchase
15		Credit certification must be dated and shall include the name
16		and address of the purchaser, the purchaser's registration
17		number, if registered, the credit being applied, and a
18		statement that the State Use Tax or Service Use Tax liability
19		is being satisfied with the manufacturer's or graphic arts
20		producer's accumulated purchase credit. Certification may be
21		incorporated into the manufacturer's or graphic arts
22		producer's purchase order. Manufacturer's Purchase Credit
23		certification provided by the manufacturer or graphic arts
24		producer may be used to satisfy the retailer's or serviceman's
25		liability under the Retailers' Occupation Tax Act or Service
26		Occupation Tax Act for the credit claimed, not to exceed 6.25%
27		of the receipts subject to tax from a qualifying purchase, but
28		only if the retailer or serviceman reports the Manufacturer's
29		Purchase Credit claimed as required by the Department. The
30		Manufacturer's Purchase Credit earned by purchase of exempt
31		manufacturing machinery and equipment or graphic arts
32		machinery and equipment is a non-transferable credit. A
33		manufacturer or graphic arts producer that enters into a
34		contract involving the installation of tangible personal

1		property into real estate within a manufacturing or graphic
2		arts production facility may, on or after September 1, 2004,
3		authorize a construction contractor to utilize credit
4		accumulated by the manufacturer or graphic arts producer to
5		purchase the tangible personal property. A manufacturer or
6		graphic arts producer intending to use accumulated credit to
7		purchase such tangible personal property shall execute a
8		written contract authorizing the contractor to utilize a
9		specified dollar amount of credit. The contractor shall furnish
10		the supplier with the manufacturer's or graphic arts producer's
11		name, registration or resale number, and a statement that a
12		specific amount of the Use Tax or Service Use Tax liability,
13		not to exceed 6.25% of the selling price, is being satisfied
14		with the credit. The manufacturer or graphic arts producer
15		shall remain liable to timely report all information required
16		by the annual Report of Manufacturer's Purchase Credit Used for
17		all credit utilized by a construction contractor.
18		The Manufacturer's Purchase Credit may be used to satisfy
19		liability under the Use Tax Act or the Service Use Tax Act due
20		on the purchase, made on or after September 1, 2004, of
21		production related tangible personal property (including
22		purchases by a manufacturer, by a graphic arts producer, or by
23		a lessor who rents or leases the use of the property to a
24		manufacturer or graphic arts producer) that does not otherwise
25		qualify for the manufacturing machinery and equipment
26		exemption or the graphic arts machinery and equipment
27		exemption. "Production related tangible personal property"
28		means (i) all tangible personal property used or consumed by
29		the purchaser in a manufacturing facility in which a
30		manufacturing process described in Section 2-45 of the
31		Retailers' Occupation Tax Act takes place, including tangible
32		personal property purchased for incorporation into real estate
33		within a manufacturing facility and including, but not limited
34		to, tangible personal property used or consumed in activities

1		such as preproduction material handling, receiving, quality
2		control, inventory control, storage, staging, and packaging
3		for shipping and transportation purposes; (ii) all tangible
4		personal property used or consumed by the purchaser in a
5		graphic arts facility in which graphic arts production as
6		described in Section 2-30 of the Retailers' Occupation Tax Act
7		takes place, including tangible personal property purchased
8		for incorporation into real estate within a graphic arts
9		facility and including, but not limited to, all tangible
10		personal property used or consumed in activities such as
11		graphic arts preliminary or pre-press production,
12		pre-production material handling, receiving, quality control,
13		inventory control, storage, staging, sorting, labeling,
14		mailing, tying, wrapping, and packaging; and (iii) all tangible
15		personal property used or consumed by the purchaser for
16		research and development. "Production related tangible
17		personal property" does not include (i) tangible personal
18		property used, within or without a manufacturing facility, in
19		sales, purchasing, accounting, fiscal management, marketing,
20		personnel recruitment or selection, or landscaping or (ii)
21		tangible personal property required to be titled or registered
22		with a department, agency, or unit of federal, state, or local
23		government. The Manufacturer's Purchase Credit may be used to
24		satisfy the tax arising either from the purchase of machinery
25		and equipment on or after September 1, 2004 for which the
26		exemption provided by paragraph (18) of Section 3-5 of this Act
27		was erroneously claimed, or the purchase of machinery and
28		equipment on or after September 1, 2004 for which the exemption
29		provided by paragraph (6) of Section 3-5 of this Act was
30		erroneously claimed, but not in satisfaction of penalty, if
31		any, and interest for failure to pay the tax when due. A
32		purchaser of production related tangible personal property
33		that is purchased on or after September 1, 2004 who is required
34		to pay Illinois Use Tax or Service Use Tax on the purchase

1		directly to the Department may utilize the Manufacturer's
2		Purchase Credit in satisfaction of the tax arising from that
3		purchase, but not in satisfaction of penalty and interest. A
4		purchaser who uses the Manufacturer's Purchase Credit to
5		purchase property on and after September 1, 2004 which is later
6		determined not to be production related tangible personal
7		property may be liable for tax, penalty, and interest on the
8		purchase of that property as of the date of purchase but shall
9		be entitled to use the disallowed Manufacturer's Purchase
10		Credit, so long as it has not expired and is used on qualifying
11		purchases of production related tangible personal property not
12		previously subject to credit usage. The Manufacturer's
13		Purchase Credit earned by a manufacturer or graphic arts
14		producer expires the last day of the second calendar year
15		following the calendar year in which the credit arose. A
16		purchaser earning Manufacturer's Purchase Credit shall sign
17		and file an annual Report of Manufacturer's Purchase Credit
18		Earned for each calendar year no later than the last day of the
19		sixth month following the calendar year in which a
20		Manufacturer's Purchase Credit is earned. A Report of
21		Manufacturer's Purchase Credit Earned shall be filed on forms
22		as prescribed or approved by the Department and shall state,
23		for each month of the calendar year: (i) the total purchase
24		price of all purchases of exempt manufacturing or graphic arts
25		machinery on which the credit was earned; (ii) the total State
26		Use Tax or Service Use Tax which would have been due on those
27		items; (iii) the percentage used to calculate the amount of
28		credit earned; (iv) the amount of credit earned; and (v) such
29		other information as the Department may reasonably require. A
30		purchaser earning Manufacturer's Purchase Credit shall
31		maintain records which identify, as to each purchase of
32		manufacturing or graphic arts machinery and equipment on which
33		the purchaser earned Manufacturer's Purchase Credit, the
34		vendor (including, if applicable, either the vendor's

1		registration number or Federal Employer Identification
2		Number), the purchase price, and the amount of Manufacturer's
3		Purchase Credit earned on each purchase. A purchaser using
4		Manufacturer's Purchase Credit shall sign and file an annual
5		Report of Manufacturer's Purchase Credit Used for each calendar
6		year no later than the last day of the sixth month following
7		the calendar year in which a Manufacturer's Purchase Credit is
8		used. A Report of Manufacturer's Purchase Credit Used shall be
9		filed on forms as prescribed or approved by the Department and
10		shall state, for each month of the calendar year: (i) the total
11		purchase price of production related tangible personal
12		property purchased from Illinois suppliers; (ii) the total
13		purchase price of production related tangible personal
14		property purchased from out-of-state suppliers; (iii) the
15		total amount of credit used during such month; and (iv) such
16		other information as the Department may reasonably require. A
17		purchaser using Manufacturer's Purchase Credit shall maintain
18		records that identify, as to each purchase of production
19		related tangible personal property on which the purchaser used
20		Manufacturer's Purchase Credit, the vendor (including, if
21		applicable, either the vendor's registration number or Federal
22		Employer Identification Number), the purchase price, and the
23		amount of Manufacturer's Purchase Credit used on each purchase.
24		A purchaser that fails to file an annual Report of
25		Manufacturer's Purchase Credit Earned or an annual Report of
26		Manufacturer's Purchase Credit Used by the last day of the
27		sixth month following the end of the calendar year shall
28		forfeit all Manufacturer's Purchase Credit for that calendar
29		year unless it establishes that its failure to file was due to
30		reasonable cause. Manufacturer's Purchase Credit reports may
31		be amended to report and claim credit on qualifying purchases
32		not previously reported at any time before the credit would
33		have expired, unless both the Department and the purchaser have
34		agreed to an extension of the statute of limitations for the

1		issuance of a notice of tax liability as provided in Section 4
2		of the Retailers' Occupation Tax Act. If the time for
3		assessment or refund has been extended, then amended reports
4		for a calendar year may be filed at any time prior to the date
5		to which the statute of limitations for the calendar year or
6		portion thereof has been extended. Manufacturer's Purchase
7		Credit claimed on an amended report may be used to satisfy tax
8		liability under the Use Tax Act or the Service Use Tax Act (i)
9		on qualifying purchases of production related tangible
10		personal property made after the date the amended report is
11		filed or (ii) assessed by the Department on qualifying
12		production related tangible personal property purchased on or
13		after September 1, 2004. If the purchaser is not the
14		manufacturer or a graphic arts producer, but rents or leases
15		the use of the property to a manufacturer or graphic arts
16		producer, the purchaser may earn, report, and use
17		Manufacturer's Purchase Credit in the same manner as a
18		manufacturer or graphic arts producer. A purchaser shall not be
19		entitled to any Manufacturer's Purchase Credit for a purchase
20		that is required to be reported and is not timely reported as
21		provided in this Section. A purchaser remains liable for (i)
22		any tax that was satisfied by use of a Manufacturer's Purchase
23		Credit, as of the date of purchase, if that use is not timely
24		reported as required in this Section and (ii) for any
25		applicable penalties and interest for failing to pay the tax
26		when due.
27		(Source: P.A. 93-24, eff. 6-20-03.)

28		Section 20-15. The Service Use Tax Act is amended by
29		changing Sections 3-5 and 3-70 as follows:
30		(35 ILCS 110/3-5) (from Ch. 120, par. 439.33-5)
31		Sec. 3-5. Exemptions. Use of the following tangible
32		personal property is exempt from the tax imposed by this Act:

1		(1) Personal property purchased from a corporation,
2		society, association, foundation, institution, or
3		organization, other than a limited liability company, that is
4		organized and operated as a not-for-profit service enterprise
5		for the benefit of persons 65 years of age or older if the
6		personal property was not purchased by the enterprise for the
7		purpose of resale by the enterprise.
8		(2) Personal property purchased by a non-profit Illinois
9		county fair association for use in conducting, operating, or
10		promoting the county fair.
11		(3) Personal property purchased by a not-for-profit arts or
12		cultural organization that establishes, by proof required by
13		the Department by rule, that it has received an exemption under
14		Section 501(c)(3) of the Internal Revenue Code and that is
15		organized and operated primarily for the presentation or
16		support of arts or cultural programming, activities, or
17		services. These organizations include, but are not limited to,
18		music and dramatic arts organizations such as symphony
19		orchestras and theatrical groups, arts and cultural service
20		organizations, local arts councils, visual arts organizations,
21		and media arts organizations. On and after the effective date
22		of this amendatory Act of the 92nd General Assembly, however,
23		an entity otherwise eligible for this exemption shall not make
24		tax-free purchases unless it has an active identification
25		number issued by the Department.
26		(4) Legal tender, currency, medallions, or gold or silver
27		coinage issued by the State of Illinois, the government of the
28		United States of America, or the government of any foreign
29		country, and bullion.
30		(5) Until July 1, 2003 and beginning again on September 1,
31		2004, graphic arts machinery and equipment, including repair
32		and replacement parts, both new and used, and including that
33		manufactured on special order or purchased for lease, certified
34		by the purchaser to be used primarily for graphic arts

1		production. Equipment includes chemicals or chemicals acting
2		as catalysts but only if the chemicals or chemicals acting as
3		catalysts effect a direct and immediate change upon a graphic
4		arts product.
5		(6) Personal property purchased from a teacher-sponsored
6		student organization affiliated with an elementary or
7		secondary school located in Illinois.
8		(7) Farm machinery and equipment, both new and used,
9		including that manufactured on special order, certified by the
10		purchaser to be used primarily for production agriculture or
11		State or federal agricultural programs, including individual
12		replacement parts for the machinery and equipment, including
13		machinery and equipment purchased for lease, and including
14		implements of husbandry defined in Section 1-130 of the
15		Illinois Vehicle Code, farm machinery and agricultural
16		chemical and fertilizer spreaders, and nurse wagons required to
17		be registered under Section 3-809 of the Illinois Vehicle Code,
18		but excluding other motor vehicles required to be registered
19		under the Illinois Vehicle Code. Horticultural polyhouses or
20		hoop houses used for propagating, growing, or overwintering
21		plants shall be considered farm machinery and equipment under
22		this item (7). Agricultural chemical tender tanks and dry boxes
23		shall include units sold separately from a motor vehicle
24		required to be licensed and units sold mounted on a motor
25		vehicle required to be licensed if the selling price of the
26		tender is separately stated.
27		Farm machinery and equipment shall include precision
28		farming equipment that is installed or purchased to be
29		installed on farm machinery and equipment including, but not
30		limited to, tractors, harvesters, sprayers, planters, seeders,
31		or spreaders. Precision farming equipment includes, but is not
32		limited to, soil testing sensors, computers, monitors,
33		software, global positioning and mapping systems, and other
34		such equipment.

1		Farm machinery and equipment also includes computers,
2		sensors, software, and related equipment used primarily in the
3		computer-assisted operation of production agriculture
4		facilities, equipment, and activities such as, but not limited
5		to, the collection, monitoring, and correlation of animal and
6		crop data for the purpose of formulating animal diets and
7		agricultural chemicals. This item (7) is exempt from the
8		provisions of Section 3-75.
9		(8) Fuel and petroleum products sold to or used by an air
10		common carrier, certified by the carrier to be used for
11		consumption, shipment, or storage in the conduct of its
12		business as an air common carrier, for a flight destined for or
13		returning from a location or locations outside the United
14		States without regard to previous or subsequent domestic
15		stopovers.
16		(9) Proceeds of mandatory service charges separately
17		stated on customers' bills for the purchase and consumption of
18		food and beverages acquired as an incident to the purchase of a
19		service from a serviceman, to the extent that the proceeds of
20		the service charge are in fact turned over as tips or as a
21		substitute for tips to the employees who participate directly
22		in preparing, serving, hosting or cleaning up the food or
23		beverage function with respect to which the service charge is
24		imposed.
25		(10) Until July 1, 2003, oil field exploration, drilling,
26		and production equipment, including (i) rigs and parts of rigs,
27		rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
28		tubular goods, including casing and drill strings, (iii) pumps
29		and pump-jack units, (iv) storage tanks and flow lines, (v) any
30		individual replacement part for oil field exploration,
31		drilling, and production equipment, and (vi) machinery and
32		equipment purchased for lease; but excluding motor vehicles
33		required to be registered under the Illinois Vehicle Code.
34		(11) Proceeds from the sale of photoprocessing machinery

1		and equipment, including repair and replacement parts, both new
2		and used, including that manufactured on special order,
3		certified by the purchaser to be used primarily for
4		photoprocessing, and including photoprocessing machinery and
5		equipment purchased for lease.
6		(12) Until July 1, 2003, coal exploration, mining,
7		offhighway hauling, processing, maintenance, and reclamation
8		equipment, including replacement parts and equipment, and
9		including equipment purchased for lease, but excluding motor
10		vehicles required to be registered under the Illinois Vehicle
11		Code.
12		(13) Semen used for artificial insemination of livestock
13		for direct agricultural production.
14		(14) Horses, or interests in horses, registered with and
15		meeting the requirements of any of the Arabian Horse Club
16		Registry of America, Appaloosa Horse Club, American Quarter
17		Horse Association, United States Trotting Association, or
18		Jockey Club, as appropriate, used for purposes of breeding or
19		racing for prizes.
20		(15) Computers and communications equipment utilized for
21		any hospital purpose and equipment used in the diagnosis,
22		analysis, or treatment of hospital patients purchased by a
23		lessor who leases the equipment, under a lease of one year or
24		longer executed or in effect at the time the lessor would
25		otherwise be subject to the tax imposed by this Act, to a
26		hospital that has been issued an active tax exemption
27		identification number by the Department under Section 1g of the
28		Retailers' Occupation Tax Act. If the equipment is leased in a
29		manner that does not qualify for this exemption or is used in
30		any other non-exempt manner, the lessor shall be liable for the
31		tax imposed under this Act or the Use Tax Act, as the case may
32		be, based on the fair market value of the property at the time
33		the non-qualifying use occurs. No lessor shall collect or
34		attempt to collect an amount (however designated) that purports

1		to reimburse that lessor for the tax imposed by this Act or the
2		Use Tax Act, as the case may be, if the tax has not been paid by
3		the lessor. If a lessor improperly collects any such amount
4		from the lessee, the lessee shall have a legal right to claim a
5		refund of that amount from the lessor. If, however, that amount
6		is not refunded to the lessee for any reason, the lessor is
7		liable to pay that amount to the Department.
8		(16) Personal property purchased by a lessor who leases the
9		property, under a lease of one year or longer executed or in
10		effect at the time the lessor would otherwise be subject to the
11		tax imposed by this Act, to a governmental body that has been
12		issued an active tax exemption identification number by the
13		Department under Section 1g of the Retailers' Occupation Tax
14		Act. If the property is leased in a manner that does not
15		qualify for this exemption or is used in any other non-exempt
16		manner, the lessor shall be liable for the tax imposed under
17		this Act or the Use Tax Act, as the case may be, based on the
18		fair market value of the property at the time the
19		non-qualifying use occurs. No lessor shall collect or attempt
20		to collect an amount (however designated) that purports to
21		reimburse that lessor for the tax imposed by this Act or the
22		Use Tax Act, as the case may be, if the tax has not been paid by
23		the lessor. If a lessor improperly collects any such amount
24		from the lessee, the lessee shall have a legal right to claim a
25		refund of that amount from the lessor. If, however, that amount
26		is not refunded to the lessee for any reason, the lessor is
27		liable to pay that amount to the Department.
28		(17) Beginning with taxable years ending on or after
29		December 31, 1995 and ending with taxable years ending on or
30		before December 31, 2004, personal property that is donated for
31		disaster relief to be used in a State or federally declared
32		disaster area in Illinois or bordering Illinois by a
33		manufacturer or retailer that is registered in this State to a
34		corporation, society, association, foundation, or institution

1		that has been issued a sales tax exemption identification
2		number by the Department that assists victims of the disaster
3		who reside within the declared disaster area.
4		(18) Beginning with taxable years ending on or after
5		December 31, 1995 and ending with taxable years ending on or
6		before December 31, 2004, personal property that is used in the
7		performance of infrastructure repairs in this State, including
8		but not limited to municipal roads and streets, access roads,
9		bridges, sidewalks, waste disposal systems, water and sewer
10		line extensions, water distribution and purification
11		facilities, storm water drainage and retention facilities, and
12		sewage treatment facilities, resulting from a State or
13		federally declared disaster in Illinois or bordering Illinois
14		when such repairs are initiated on facilities located in the
15		declared disaster area within 6 months after the disaster.
16		(19) Beginning July 1, 1999, game or game birds purchased
17		at a "game breeding and hunting preserve area" or an "exotic
18		game hunting area" as those terms are used in the Wildlife Code
19		or at a hunting enclosure approved through rules adopted by the
20		Department of Natural Resources. This paragraph is exempt from
21		the provisions of Section 3-75.
22		(20) A motor vehicle, as that term is defined in Section
23		1-146 of the Illinois Vehicle Code, that is donated to a
24		corporation, limited liability company, society, association,
25		foundation, or institution that is determined by the Department
26		to be organized and operated exclusively for educational
27		purposes. For purposes of this exemption, "a corporation,
28		limited liability company, society, association, foundation,
29		or institution organized and operated exclusively for
30		educational purposes" means all tax-supported public schools,
31		private schools that offer systematic instruction in useful
32		branches of learning by methods common to public schools and
33		that compare favorably in their scope and intensity with the
34		course of study presented in tax-supported schools, and

1		vocational or technical schools or institutes organized and
2		operated exclusively to provide a course of study of not less
3		than 6 weeks duration and designed to prepare individuals to
4		follow a trade or to pursue a manual, technical, mechanical,
5		industrial, business, or commercial occupation.
6		(21) Beginning January 1, 2000, personal property,
7		including food, purchased through fundraising events for the
8		benefit of a public or private elementary or secondary school,
9		a group of those schools, or one or more school districts if
10		the events are sponsored by an entity recognized by the school
11		district that consists primarily of volunteers and includes
12		parents and teachers of the school children. This paragraph
13		does not apply to fundraising events (i) for the benefit of
14		private home instruction or (ii) for which the fundraising
15		entity purchases the personal property sold at the events from
16		another individual or entity that sold the property for the
17		purpose of resale by the fundraising entity and that profits
18		from the sale to the fundraising entity. This paragraph is
19		exempt from the provisions of Section 3-75.
20		(22) Beginning January 1, 2000 and through December 31,
21		2001, new or used automatic vending machines that prepare and
22		serve hot food and beverages, including coffee, soup, and other
23		items, and replacement parts for these machines. Beginning
24		January 1, 2002 and through June 30, 2003, machines and parts
25		for machines used in commercial, coin-operated amusement and
26		vending business if a use or occupation tax is paid on the
27		gross receipts derived from the use of the commercial,
28		coin-operated amusement and vending machines. This paragraph
29		is exempt from the provisions of Section 3-75.
30		(23) Food for human consumption that is to be consumed off
31		the premises where it is sold (other than alcoholic beverages,
32		soft drinks, and food that has been prepared for immediate
33		consumption) and prescription and nonprescription medicines,
34		drugs, medical appliances, and insulin, urine testing

1		materials, syringes, and needles used by diabetics, for human
2		use, when purchased for use by a person receiving medical
3		assistance under Article 5 of the Illinois Public Aid Code who
4		resides in a licensed long-term care facility, as defined in
5		the Nursing Home Care Act.
6		(24) Beginning on the effective date of this amendatory Act
7		of the 92nd General Assembly, computers and communications
8		equipment utilized for any hospital purpose and equipment used
9		in the diagnosis, analysis, or treatment of hospital patients
10		purchased by a lessor who leases the equipment, under a lease
11		of one year or longer executed or in effect at the time the
12		lessor would otherwise be subject to the tax imposed by this
13		Act, to a hospital that has been issued an active tax exemption
14		identification number by the Department under Section 1g of the
15		Retailers' Occupation Tax Act. If the equipment is leased in a
16		manner that does not qualify for this exemption or is used in
17		any other nonexempt manner, the lessor shall be liable for the
18		tax imposed under this Act or the Use Tax Act, as the case may
19		be, based on the fair market value of the property at the time
20		the nonqualifying use occurs. No lessor shall collect or
21		attempt to collect an amount (however designated) that purports
22		to reimburse that lessor for the tax imposed by this Act or the
23		Use Tax Act, as the case may be, if the tax has not been paid by
24		the lessor. If a lessor improperly collects any such amount
25		from the lessee, the lessee shall have a legal right to claim a
26		refund of that amount from the lessor. If, however, that amount
27		is not refunded to the lessee for any reason, the lessor is
28		liable to pay that amount to the Department. This paragraph is
29		exempt from the provisions of Section 3-75.
30		(25) Beginning on the effective date of this amendatory Act
31		of the 92nd General Assembly, personal property purchased by a
32		lessor who leases the property, under a lease of one year or
33		longer executed or in effect at the time the lessor would
34		otherwise be subject to the tax imposed by this Act, to a

1		governmental body that has been issued an active tax exemption
2		identification number by the Department under Section 1g of the
3		Retailers' Occupation Tax Act. If the property is leased in a
4		manner that does not qualify for this exemption or is used in
5		any other nonexempt manner, the lessor shall be liable for the
6		tax imposed under this Act or the Use Tax Act, as the case may
7		be, based on the fair market value of the property at the time
8		the nonqualifying use occurs. No lessor shall collect or
9		attempt to collect an amount (however designated) that purports
10		to reimburse that lessor for the tax imposed by this Act or the
11		Use Tax Act, as the case may be, if the tax has not been paid by
12		the lessor. If a lessor improperly collects any such amount
13		from the lessee, the lessee shall have a legal right to claim a
14		refund of that amount from the lessor. If, however, that amount
15		is not refunded to the lessee for any reason, the lessor is
16		liable to pay that amount to the Department. This paragraph is
17		exempt from the provisions of Section 3-75.
18		(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
19		eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
20		92-651, eff. 7-11-02; 93-24, eff. 6-20-03.)
21		(35 ILCS 110/3-70)
22		Sec. 3-70. Manufacturer's Purchase Credit. For purchases
23		of machinery and equipment made on and after January 1, 1995
24		and through June 30, 2003, and on and after September 1, 2004,
25		a purchaser of manufacturing machinery and equipment that
26		qualifies for the exemption provided by Section 2 of this Act
27		earns a credit in an amount equal to a fixed percentage of the
28		tax which would have been incurred under this Act on those
29		purchases. For purchases of graphic arts machinery and
30		equipment made on or after July 1, 1996 and through June 30,
31		2003, and on and after September 1, 2004, a purchase of graphic
32		arts machinery and equipment that qualifies for the exemption
33		provided by paragraph (5) of Section 3-5 of this Act earns a

1		credit in an amount equal to a fixed percentage of the tax that
2		would have been incurred under this Act on those purchases. The
3		credit earned for the purchase of manufacturing machinery and
4		equipment and graphic arts machinery and equipment shall be
5		referred to as the Manufacturer's Purchase Credit. A graphic
6		arts producer is a person engaged in graphic arts production as
7		defined in Section 3-30 of the Service Occupation Tax Act.
8		Beginning July 1, 1996, all references in this Section to
9		manufacturers or manufacturing shall also refer to graphic arts
10		producers or graphic arts production.
11		The amount of credit shall be a percentage of the tax that
12		would have been incurred on the purchase of the manufacturing
13		machinery and equipment or graphic arts machinery and equipment
14		if the exemptions provided by Section 2 or paragraph (5) of
15		Section 3-5 of this Act had not been applicable.
16		All purchases prior to October 1, 2003 of manufacturing
17		machinery and equipment and graphic arts machinery and
18		equipment that qualify for the exemptions provided by paragraph
19		(5) of Section 2 or paragraph (5) of Section 3-5 of this Act
20		qualify for the credit without regard to whether the serviceman
21		elected, or could have elected, under paragraph (7) of Section
22		2 of this Act to exclude the transaction from this Act. If the
23		serviceman's billing to the service customer separately states
24		a selling price for the exempt manufacturing machinery or
25		equipment or the exempt graphic arts machinery and equipment,
26		the credit shall be calculated, as otherwise provided herein,
27		based on that selling price. If the serviceman's billing does
28		not separately state a selling price for the exempt
29		manufacturing machinery and equipment or the exempt graphic
30		arts machinery and equipment, the credit shall be calculated,
31		as otherwise provided herein, based on 50% of the entire
32		billing. If the serviceman contracts to design, develop, and
33		produce special order manufacturing machinery and equipment or
34		special order graphic arts machinery and equipment, and the

1		billing does not separately state a selling price for such
2		special order machinery and equipment, the credit shall be
3		calculated, as otherwise provided herein, based on 50% of the
4		entire billing. The provisions of this paragraph are effective
5		for purchases made on or after January 1, 1995.
6		The percentage shall be as follows:
7		(1) 15% for purchases made on or before June 30, 1995.
8		(2) 25% for purchases made after June 30, 1995, and on
9		or before June 30, 1996.
10		(3) 40% for purchases made after June 30, 1996, and on
11		or before June 30, 1997.
12		(4) 50% for purchases made on or after July 1, 1997.
13		(a) Manufacturer's Purchase Credit earned prior to July 1,
14		2003. This subsection (a) applies to Manufacturer's Purchase
15		Credit earned prior to July 1, 2003. A purchaser of production
16		related tangible personal property desiring to use the
17		Manufacturer's Purchase Credit shall certify to the seller
18		prior to October 1, 2003 that the purchaser is satisfying all
19		or part of the liability under the Use Tax Act or the Service
20		Use Tax Act that is due on the purchase of the production
21		related tangible personal property by use of a Manufacturer's
22		Purchase Credit. The Manufacturer's Purchase Credit
23		certification must be dated and shall include the name and
24		address of the purchaser, the purchaser's registration number,
25		if registered, the credit being applied, and a statement that
26		the State Use Tax or Service Use Tax liability is being
27		satisfied with the manufacturer's or graphic arts producer's
28		accumulated purchase credit. Certification may be incorporated
29		into the manufacturer's or graphic arts producer's purchase
30		order. Manufacturer's Purchase Credit certification provided
31		by the manufacturer or graphic arts producer prior to October
32		1, 2003 may be used to satisfy the retailer's or serviceman's
33		liability under the Retailers' Occupation Tax Act or Service
34		Occupation Tax Act for the credit claimed, not to exceed 6.25%

1		of the receipts subject to tax from a qualifying purchase, but
2		only if the retailer or serviceman reports the Manufacturer's
3		Purchase Credit claimed as required by the Department. A
4		Manufacturer's Purchase Credit reported on any original or
5		amended return filed under this Act after October 20, 2003
6		shall be disallowed. The Manufacturer's Purchase Credit earned
7		by purchase of exempt manufacturing machinery and equipment or
8		graphic arts machinery and equipment is a non-transferable
9		credit. A manufacturer or graphic arts producer that enters
10		into a contract involving the installation of tangible personal
11		property into real estate within a manufacturing or graphic
12		arts production facility, prior to October 1, 2003, may
13		authorize a construction contractor to utilize credit
14		accumulated by the manufacturer or graphic arts producer to
15		purchase the tangible personal property. A manufacturer or
16		graphic arts producer intending to use accumulated credit to
17		purchase such tangible personal property shall execute a
18		written contract authorizing the contractor to utilize a
19		specified dollar amount of credit. The contractor shall
20		furnish, prior to October 1, 2003, the supplier with the
21		manufacturer's or graphic arts producer's name, registration
22		or resale number, and a statement that a specific amount of the
23		Use Tax or Service Use Tax liability, not to exceed 6.25% of
24		the selling price, is being satisfied with the credit. The
25		manufacturer or graphic arts producer shall remain liable to
26		timely report all information required by the annual Report of
27		Manufacturer's Purchase Credit Used for credit utilized by a
28		construction contractor.
29		No Manufacturer's Purchase Credit earned prior to July 1,
30		2003 may be used after October 1, 2003. The Manufacturer's
31		Purchase Credit may be used to satisfy liability under the Use
32		Tax Act or the Service Use Tax Act due on the purchase of
33		production related tangible personal property (including
34		purchases by a manufacturer, by a graphic arts producer, or a

1		lessor who rents or leases the use of the property to a
2		manufacturer or graphic arts producer) that does not otherwise
3		qualify for the manufacturing machinery and equipment
4		exemption or the graphic arts machinery and equipment
5		exemption. "Production related tangible personal property"
6		means (i) all tangible personal property used or consumed by
7		the purchaser in a manufacturing facility in which a
8		manufacturing process described in Section 2-45 of the
9		Retailers' Occupation Tax Act takes place, including tangible
10		personal property purchased for incorporation into real estate
11		within a manufacturing facility and including, but not limited
12		to, tangible personal property used or consumed in activities
13		such as pre-production material handling, receiving, quality
14		control, inventory control, storage, staging, and packaging
15		for shipping and transportation purposes; (ii) all tangible
16		personal property used or consumed by the purchaser in a
17		graphic arts facility in which graphic arts production as
18		described in Section 2-30 of the Retailers' Occupation Tax Act
19		takes place, including tangible personal property purchased
20		for incorporation into real estate within a graphic arts
21		facility and including, but not limited to, all tangible
22		personal property used or consumed in activities such as
23		graphic arts preliminary or pre-press production,
24		pre-production material handling, receiving, quality control,
25		inventory control, storage, staging, sorting, labeling,
26		mailing, tying, wrapping, and packaging; and (iii) all tangible
27		personal property used or consumed by the purchaser for
28		research and development. "Production related tangible
29		personal property" does not include (i) tangible personal
30		property used, within or without a manufacturing or graphic
31		arts facility, in sales, purchasing, accounting, fiscal
32		management, marketing, personnel recruitment or selection, or
33		landscaping or (ii) tangible personal property required to be
34		titled or registered with a department, agency, or unit of

1		federal, state, or local government. The Manufacturer's
2		Purchase Credit may be used, prior to October 1, 2003, to
3		satisfy the tax arising either from the purchase of machinery
4		and equipment on or after January 1, 1995 for which the
5		manufacturing machinery and equipment exemption provided by
6		Section 2 of this Act was erroneously claimed, or the purchase
7		of machinery and equipment on or after July 1, 1996 for which
8		the exemption provided by paragraph (5) of Section 3-5 of this
9		Act was erroneously claimed, but not in satisfaction of
10		penalty, if any, and interest for failure to pay the tax when
11		due. A purchaser of production related tangible personal
12		property who is required to pay Illinois Use Tax or Service Use
13		Tax on the purchase directly to the Department may, prior to
14		October 1, 2003, utilize the Manufacturer's Purchase Credit in
15		satisfaction of the tax arising from that purchase, but not in
16		satisfaction of penalty and interest. A purchaser who uses the
17		Manufacturer's Purchase Credit to purchase property which is
18		later determined not to be production related tangible personal
19		property may be liable for tax, penalty, and interest on the
20		purchase of that property as of the date of purchase but shall
21		be entitled to use the disallowed Manufacturer's Purchase
22		Credit, so long as it has not expired and is used prior to
23		October 1, 2003, on qualifying purchases of production related
24		tangible personal property not previously subject to credit
25		usage. The Manufacturer's Purchase Credit earned by a
26		manufacturer or graphic arts producer expires the last day of
27		the second calendar year following the calendar year in which
28		the credit arose. No Manufacturer's Purchase Credit may be used
29		after September 30, 2003 regardless of when that credit was
30		earned.
31		A purchaser earning Manufacturer's Purchase Credit shall
32		sign and file an annual Report of Manufacturer's Purchase
33		Credit Earned for each calendar year no later than the last day
34		of the sixth month following the calendar year in which a

1		Manufacturer's Purchase Credit is earned. A Report of
2		Manufacturer's Purchase Credit Earned shall be filed on forms
3		as prescribed or approved by the Department and shall state,
4		for each month of the calendar year: (i) the total purchase
5		price of all purchases of exempt manufacturing or graphic arts
6		machinery on which the credit was earned; (ii) the total State
7		Use Tax or Service Use Tax which would have been due on those
8		items; (iii) the percentage used to calculate the amount of
9		credit earned; (iv) the amount of credit earned; and (v) such
10		other information as the Department may reasonably require. A
11		purchaser earning Manufacturer's Purchase Credit shall
12		maintain records which identify, as to each purchase of
13		manufacturing or graphic arts machinery and equipment on which
14		the purchaser earned Manufacturer's Purchase Credit, the
15		vendor (including, if applicable, either the vendor's
16		registration number or Federal Employer Identification
17		Number), the purchase price, and the amount of Manufacturer's
18		Purchase Credit earned on each purchase.
19		A purchaser using Manufacturer's Purchase Credit shall
20		sign and file an annual Report of Manufacturer's Purchase
21		Credit Used for each calendar year no later than the last day
22		of the sixth month following the calendar year in which a
23		Manufacturer's Purchase Credit is used. A Report of
24		Manufacturer's Purchase Credit Used shall be filed on forms as
25		prescribed or approved by the Department and shall state, for
26		each month of the calendar year: (i) the total purchase price
27		of production related tangible personal property purchased
28		from Illinois suppliers; (ii) the total purchase price of
29		production related tangible personal property purchased from
30		out-of-state suppliers; (iii) the total amount of credit used
31		during such month; and (iv) such other information as the
32		Department may reasonably require. A purchaser using
33		Manufacturer's Purchase Credit shall maintain records that
34		identify, as to each purchase of production related tangible

1		personal property on which the purchaser used Manufacturer's
2		Purchase Credit, the vendor (including, if applicable, either
3		the vendor's registration number or Federal Employer
4		Identification Number), the purchase price, and the amount of
5		Manufacturer's Purchase Credit used on each purchase.
6		No annual report shall be filed before May 1, 1996 or after
7		June 30, 2004. A purchaser that fails to file an annual Report
8		of Manufacturer's Purchase Credit Earned or an annual Report of
9		Manufacturer's Purchase Credit Used by the last day of the
10		sixth month following the end of the calendar year shall
11		forfeit all Manufacturer's Purchase Credit for that calendar
12		year unless it establishes that its failure to file was due to
13		reasonable cause. Manufacturer's Purchase Credit reports may
14		be amended to report and claim credit on qualifying purchases
15		not previously reported at any time before the credit would
16		have expired, unless both the Department and the purchaser have
17		agreed to an extension of the statute of limitations for the
18		issuance of a notice of tax liability as provided in Section 4
19		of the Retailers' Occupation Tax Act. If the time for
20		assessment or refund has been extended, then amended reports
21		for a calendar year may be filed at any time prior to the date
22		to which the statute of limitations for the calendar year or
23		portion thereof has been extended. No Manufacturer's Purchase
24		Credit report filed with the Department for periods prior to
25		January 1, 1995 shall be approved. Manufacturer's Purchase
26		Credit claimed on an amended report may be used, prior to
27		October 1, 2003, to satisfy tax liability under the Use Tax Act
28		or the Service Use Tax Act (i) on qualifying purchases of
29		production related tangible personal property made after the
30		date the amended report is filed or (ii) assessed by the
31		Department on qualifying purchases of production related
32		tangible personal property made in the case of manufacturers on
33		or after January 1, 1995, or in the case of graphic arts
34		producers on or after July 1, 1996.

1		If the purchaser is not the manufacturer or a graphic arts
2		producer, but rents or leases the use of the property to a
3		manufacturer or a graphic arts producer, the purchaser may
4		earn, report, and use Manufacturer's Purchase Credit in the
5		same manner as a manufacturer or graphic arts producer.
6		A purchaser shall not be entitled to any Manufacturer's
7		Purchase Credit for a purchase that is required to be reported
8		and is not timely reported as provided in this Section. A
9		purchaser remains liable for (i) any tax that was satisfied by
10		use of a Manufacturer's Purchase Credit, as of the date of
11		purchase, if that use is not timely reported as required in
12		this Section and (ii) for any applicable penalties and interest
13		for failing to pay the tax when due. No Manufacturer's Purchase
14		Credit may be used after September 30, 2003 to satisfy any tax
15		liability imposed under this Act, including any audit
16		liability.
17		(b) Manufacturer's Purchase Credit earned on and after
18		September 1, 2004. This subsection (b) applies to
19		Manufacturer's Purchase Credit earned on or after September 1,
20		2004. Manufacturer's Purchase Credit earned on or after
21		September 1, 2004 may only be used to satisfy the Use Tax or
22		Service Use Tax liability incurred on production related
23		tangible personal property purchased on or after September 1,
24		2004. A purchaser of production related tangible personal
25		property desiring to use the Manufacturer's Purchase Credit
26		shall certify to the seller that the purchaser is satisfying
27		all or part of the liability under the Use Tax Act or the
28		Service Use Tax Act that is due on the purchase of the
29		production related tangible personal property by use of a
30		Manufacturer's Purchase Credit. The Manufacturer's Purchase
31		Credit certification must be dated and shall include the name
32		and address of the purchaser, the purchaser's registration
33		number, if registered, the credit being applied, and a
34		statement that the State Use Tax or Service Use Tax liability

1		is being satisfied with the manufacturer's or graphic arts
2		producer's accumulated purchase credit. Certification may be
3		incorporated into the manufacturer's or graphic arts
4		producer's purchase order. Manufacturer's Purchase Credit
5		certification provided by the manufacturer or graphic arts
6		producer may be used to satisfy the retailer's or serviceman's
7		liability under the Retailers' Occupation Tax Act or Service
8		Occupation Tax Act for the credit claimed, not to exceed 6.25%
9		of the receipts subject to tax from a qualifying purchase, but
10		only if the retailer or serviceman reports the Manufacturer's
11		Purchase Credit claimed as required by the Department. The
12		Manufacturer's Purchase Credit earned by purchase of exempt
13		manufacturing machinery and equipment or graphic arts
14		machinery and equipment is a non-transferable credit. A
15		manufacturer or graphic arts producer that enters into a
16		contract involving the installation of tangible personal
17		property into real estate within a manufacturing or graphic
18		arts production facility may, on or after September 1, 2004,
19		authorize a construction contractor to utilize credit
20		accumulated by the manufacturer or graphic arts producer to
21		purchase the tangible personal property. A manufacturer or
22		graphic arts producer intending to use accumulated credit to
23		purchase such tangible personal property shall execute a
24		written contract authorizing the contractor to utilize a
25		specified dollar amount of credit. The contractor shall furnish
26		the supplier with the manufacturer's or graphic arts producer's
27		name, registration or resale number, and a statement that a
28		specific amount of the Use Tax or Service Use Tax liability,
29		not to exceed 6.25% of the selling price, is being satisfied
30		with the credit. The manufacturer or graphic arts producer
31		shall remain liable to timely report all information required
32		by the annual Report of Manufacturer's Purchase Credit Used for
33		credit utilized by a construction contractor.
34		The Manufacturer's Purchase Credit may be used to satisfy

1		liability under the Use Tax Act or the Service Use Tax Act due
2		on the purchase, made on or after September 1, 2004, of
3		production related tangible personal property (including
4		purchases by a manufacturer, by a graphic arts producer, or a
5		lessor who rents or leases the use of the property to a
6		manufacturer or graphic arts producer) that does not otherwise
7		qualify for the manufacturing machinery and equipment
8		exemption or the graphic arts machinery and equipment
9		exemption. "Production related tangible personal property"
10		means (i) all tangible personal property used or consumed by
11		the purchaser in a manufacturing facility in which a
12		manufacturing process described in Section 2-45 of the
13		Retailers' Occupation Tax Act takes place, including tangible
14		personal property purchased for incorporation into real estate
15		within a manufacturing facility and including, but not limited
16		to, tangible personal property used or consumed in activities
17		such as pre-production material handling, receiving, quality
18		control, inventory control, storage, staging, and packaging
19		for shipping and transportation purposes; (ii) all tangible
20		personal property used or consumed by the purchaser in a
21		graphic arts facility in which graphic arts production as
22		described in Section 2-30 of the Retailers' Occupation Tax Act
23		takes place, including tangible personal property purchased
24		for incorporation into real estate within a graphic arts
25		facility and including, but not limited to, all tangible
26		personal property used or consumed in activities such as
27		graphic arts preliminary or pre-press production,
28		pre-production material handling, receiving, quality control,
29		inventory control, storage, staging, sorting, labeling,
30		mailing, tying, wrapping, and packaging; and (iii) all tangible
31		personal property used or consumed by the purchaser for
32		research and development. "Production related tangible
33		personal property" does not include (i) tangible personal
34		property used, within or without a manufacturing or graphic

1		arts facility, in sales, purchasing, accounting, fiscal
2		management, marketing, personnel recruitment or selection, or
3		landscaping or (ii) tangible personal property required to be
4		titled or registered with a department, agency, or unit of
5		federal, state, or local government. The Manufacturer's
6		Purchase Credit may be used to satisfy the tax arising either
7		from the purchase of machinery and equipment on or after
8		September 1, 2004 for which the manufacturing machinery and
9		equipment exemption provided by Section 2 of this Act was
10		erroneously claimed, or the purchase of machinery and equipment
11		on or after September 1, 2004 for which the exemption provided
12		by paragraph (5) of Section 3-5 of this Act was erroneously
13		claimed, but not in satisfaction of penalty, if any, and
14		interest for failure to pay the tax when due. A purchaser of
15		production related tangible personal property that is
16		purchased on or after September 1, 2004 who is required to pay
17		Illinois Use Tax or Service Use Tax on the purchase directly to
18		the Department may utilize the Manufacturer's Purchase Credit
19		in satisfaction of the tax arising from that purchase, but not
20		in satisfaction of penalty and interest. A purchaser who uses
21		the Manufacturer's Purchase Credit to purchase property on and
22		after September 1, 2004 which is later determined not to be
23		production related tangible personal property may be liable for
24		tax, penalty, and interest on the purchase of that property as
25		of the date of purchase but shall be entitled to use the
26		disallowed Manufacturer's Purchase Credit, so long as it has
27		not expired, on qualifying purchases of production related
28		tangible personal property not previously subject to credit
29		usage. The Manufacturer's Purchase Credit earned by a
30		manufacturer or graphic arts producer expires the last day of
31		the second calendar year following the calendar year in which
32		the credit arose.
33		A purchaser earning Manufacturer's Purchase Credit shall
34		sign and file an annual Report of Manufacturer's Purchase

1		Credit Earned for each calendar year no later than the last day
2		of the sixth month following the calendar year in which a
3		Manufacturer's Purchase Credit is earned. A Report of
4		Manufacturer's Purchase Credit Earned shall be filed on forms
5		as prescribed or approved by the Department and shall state,
6		for each month of the calendar year: (i) the total purchase
7		price of all purchases of exempt manufacturing or graphic arts
8		machinery on which the credit was earned; (ii) the total State
9		Use Tax or Service Use Tax which would have been due on those
10		items; (iii) the percentage used to calculate the amount of
11		credit earned; (iv) the amount of credit earned; and (v) such
12		other information as the Department may reasonably require. A
13		purchaser earning Manufacturer's Purchase Credit shall
14		maintain records which identify, as to each purchase of
15		manufacturing or graphic arts machinery and equipment on which
16		the purchaser earned Manufacturer's Purchase Credit, the
17		vendor (including, if applicable, either the vendor's
18		registration number or Federal Employer Identification
19		Number), the purchase price, and the amount of Manufacturer's
20		Purchase Credit earned on each purchase.
21		A purchaser using Manufacturer's Purchase Credit shall
22		sign and file an annual Report of Manufacturer's Purchase
23		Credit Used for each calendar year no later than the last day
24		of the sixth month following the calendar year in which a
25		Manufacturer's Purchase Credit is used. A Report of
26		Manufacturer's Purchase Credit Used shall be filed on forms as
27		prescribed or approved by the Department and shall state, for
28		each month of the calendar year: (i) the total purchase price
29		of production related tangible personal property purchased
30		from Illinois suppliers; (ii) the total purchase price of
31		production related tangible personal property purchased from
32		out-of-state suppliers; (iii) the total amount of credit used
33		during such month; and (iv) such other information as the
34		Department may reasonably require. A purchaser using

1		Manufacturer's Purchase Credit shall maintain records that
2		identify, as to each purchase of production related tangible
3		personal property on which the purchaser used Manufacturer's
4		Purchase Credit, the vendor (including, if applicable, either
5		the vendor's registration number or Federal Employer
6		Identification Number), the purchase price, and the amount of
7		Manufacturer's Purchase Credit used on each purchase.
8		A purchaser that fails to file an annual Report of
9		Manufacturer's Purchase Credit Earned or an annual Report of
10		Manufacturer's Purchase Credit Used by the last day of the
11		sixth month following the end of the calendar year shall
12		forfeit all Manufacturer's Purchase Credit for that calendar
13		year unless it establishes that its failure to file was due to
14		reasonable cause. Manufacturer's Purchase Credit reports may
15		be amended to report and claim credit on qualifying purchases
16		not previously reported at any time before the credit would
17		have expired, unless both the Department and the purchaser have
18		agreed to an extension of the statute of limitations for the
19		issuance of a notice of tax liability as provided in Section 4
20		of the Retailers' Occupation Tax Act. If the time for
21		assessment or refund has been extended, then amended reports
22		for a calendar year may be filed at any time prior to the date
23		to which the statute of limitations for the calendar year or
24		portion thereof has been extended. Manufacturer's Purchase
25		Credit claimed on an amended report may be used to satisfy tax
26		liability under the Use Tax Act or the Service Use Tax Act (i)
27		on qualifying purchases of production related tangible
28		personal property made after the date the amended report is
29		filed or (ii) assessed by the Department on qualifying
30		production related tangible personal property purchased on or
31		after September 1, 2004.
32		If the purchaser is not the manufacturer or a graphic arts
33		producer, but rents or leases the use of the property to a
34		manufacturer or a graphic arts producer, the purchaser may

1		earn, report, and use Manufacturer's Purchase Credit in the
2		same manner as a manufacturer or graphic arts producer. A
3		purchaser shall not be entitled to any Manufacturer's Purchase
4		Credit for a purchase that is required to be reported and is
5		not timely reported as provided in this Section. A purchaser
6		remains liable for (i) any tax that was satisfied by use of a
7		Manufacturer's Purchase Credit, as of the date of purchase, if
8		that use is not timely reported as required in this Section and
9		(ii) for any applicable penalties and interest for failing to
10		pay the tax when due.
11		(Source: P.A. 93-24, eff. 6-20-03.)

12		Section 20-20. The Service Occupation Tax Act is amended by
13		changing Sections 3-5 and 9 as follows:
14		(35 ILCS 115/3-5) (from Ch. 120, par. 439.103-5)
15		Sec. 3-5. Exemptions. The following tangible personal
16		property is exempt from the tax imposed by this Act:
17		(1) Personal property sold by a corporation, society,
18		association, foundation, institution, or organization, other
19		than a limited liability company, that is organized and
20		operated as a not-for-profit service enterprise for the benefit
21		of persons 65 years of age or older if the personal property
22		was not purchased by the enterprise for the purpose of resale
23		by the enterprise.
24		(2) Personal property purchased by a not-for-profit
25		Illinois county fair association for use in conducting,
26		operating, or promoting the county fair.
27		(3) Personal property purchased by any not-for-profit arts
28		or cultural organization that establishes, by proof required by
29		the Department by rule, that it has received an exemption under
30		Section 501(c)(3) of the Internal Revenue Code and that is
31		organized and operated primarily for the presentation or
32		support of arts or cultural programming, activities, or

1		services. These organizations include, but are not limited to,
2		music and dramatic arts organizations such as symphony
3		orchestras and theatrical groups, arts and cultural service
4		organizations, local arts councils, visual arts organizations,
5		and media arts organizations. On and after the effective date
6		of this amendatory Act of the 92nd General Assembly, however,
7		an entity otherwise eligible for this exemption shall not make
8		tax-free purchases unless it has an active identification
9		number issued by the Department.
10		(4) Legal tender, currency, medallions, or gold or silver
11		coinage issued by the State of Illinois, the government of the
12		United States of America, or the government of any foreign
13		country, and bullion.
14		(5) Until July 1, 2003 and beginning again on September 1,
15		2004, graphic arts machinery and equipment, including repair
16		and replacement parts, both new and used, and including that
17		manufactured on special order or purchased for lease, certified
18		by the purchaser to be used primarily for graphic arts
19		production. Equipment includes chemicals or chemicals acting
20		as catalysts but only if the chemicals or chemicals acting as
21		catalysts effect a direct and immediate change upon a graphic
22		arts product.
23		(6) Personal property sold by a teacher-sponsored student
24		organization affiliated with an elementary or secondary school
25		located in Illinois.
26		(7) Farm machinery and equipment, both new and used,
27		including that manufactured on special order, certified by the
28		purchaser to be used primarily for production agriculture or
29		State or federal agricultural programs, including individual
30		replacement parts for the machinery and equipment, including
31		machinery and equipment purchased for lease, and including
32		implements of husbandry defined in Section 1-130 of the
33		Illinois Vehicle Code, farm machinery and agricultural
34		chemical and fertilizer spreaders, and nurse wagons required to

1		be registered under Section 3-809 of the Illinois Vehicle Code,
2		but excluding other motor vehicles required to be registered
3		under the Illinois Vehicle Code. Horticultural polyhouses or
4		hoop houses used for propagating, growing, or overwintering
5		plants shall be considered farm machinery and equipment under
6		this item (7). Agricultural chemical tender tanks and dry boxes
7		shall include units sold separately from a motor vehicle
8		required to be licensed and units sold mounted on a motor
9		vehicle required to be licensed if the selling price of the
10		tender is separately stated.
11		Farm machinery and equipment shall include precision
12		farming equipment that is installed or purchased to be
13		installed on farm machinery and equipment including, but not
14		limited to, tractors, harvesters, sprayers, planters, seeders,
15		or spreaders. Precision farming equipment includes, but is not
16		limited to, soil testing sensors, computers, monitors,
17		software, global positioning and mapping systems, and other
18		such equipment.
19		Farm machinery and equipment also includes computers,
20		sensors, software, and related equipment used primarily in the
21		computer-assisted operation of production agriculture
22		facilities, equipment, and activities such as, but not limited
23		to, the collection, monitoring, and correlation of animal and
24		crop data for the purpose of formulating animal diets and
25		agricultural chemicals. This item (7) is exempt from the
26		provisions of Section 3-55.
27		(8) Fuel and petroleum products sold to or used by an air
28		common carrier, certified by the carrier to be used for
29		consumption, shipment, or storage in the conduct of its
30		business as an air common carrier, for a flight destined for or
31		returning from a location or locations outside the United
32		States without regard to previous or subsequent domestic
33		stopovers.
34		(9) Proceeds of mandatory service charges separately

1		stated on customers' bills for the purchase and consumption of
2		food and beverages, to the extent that the proceeds of the
3		service charge are in fact turned over as tips or as a
4		substitute for tips to the employees who participate directly
5		in preparing, serving, hosting or cleaning up the food or
6		beverage function with respect to which the service charge is
7		imposed.
8		(10) Until July 1, 2003, oil field exploration, drilling,
9		and production equipment, including (i) rigs and parts of rigs,
10		rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
11		tubular goods, including casing and drill strings, (iii) pumps
12		and pump-jack units, (iv) storage tanks and flow lines, (v) any
13		individual replacement part for oil field exploration,
14		drilling, and production equipment, and (vi) machinery and
15		equipment purchased for lease; but excluding motor vehicles
16		required to be registered under the Illinois Vehicle Code.
17		(11) Photoprocessing machinery and equipment, including
18		repair and replacement parts, both new and used, including that
19		manufactured on special order, certified by the purchaser to be
20		used primarily for photoprocessing, and including
21		photoprocessing machinery and equipment purchased for lease.
22		(12) Until July 1, 2003, coal exploration, mining,
23		offhighway hauling, processing, maintenance, and reclamation
24		equipment, including replacement parts and equipment, and
25		including equipment purchased for lease, but excluding motor
26		vehicles required to be registered under the Illinois Vehicle
27		Code.
28		(13) Food for human consumption that is to be consumed off
29		the premises where it is sold (other than alcoholic beverages,
30		soft drinks and food that has been prepared for immediate
31		consumption) and prescription and non-prescription medicines,
32		drugs, medical appliances, and insulin, urine testing
33		materials, syringes, and needles used by diabetics, for human
34		use, when purchased for use by a person receiving medical

1		assistance under Article 5 of the Illinois Public Aid Code who
2		resides in a licensed long-term care facility, as defined in
3		the Nursing Home Care Act.
4		(14) Semen used for artificial insemination of livestock
5		for direct agricultural production.
6		(15) Horses, or interests in horses, registered with and
7		meeting the requirements of any of the Arabian Horse Club
8		Registry of America, Appaloosa Horse Club, American Quarter
9		Horse Association, United States Trotting Association, or
10		Jockey Club, as appropriate, used for purposes of breeding or
11		racing for prizes.
12		(16) Computers and communications equipment utilized for
13		any hospital purpose and equipment used in the diagnosis,
14		analysis, or treatment of hospital patients sold to a lessor
15		who leases the equipment, under a lease of one year or longer
16		executed or in effect at the time of the purchase, to a
17		hospital that has been issued an active tax exemption
18		identification number by the Department under Section 1g of the
19		Retailers' Occupation Tax Act.
20		(17) Personal property sold to a lessor who leases the
21		property, under a lease of one year or longer executed or in
22		effect at the time of the purchase, to a governmental body that
23		has been issued an active tax exemption identification number
24		by the Department under Section 1g of the Retailers' Occupation
25		Tax Act.
26		(18) Beginning with taxable years ending on or after
27		December 31, 1995 and ending with taxable years ending on or
28		before December 31, 2004, personal property that is donated for
29		disaster relief to be used in a State or federally declared
30		disaster area in Illinois or bordering Illinois by a
31		manufacturer or retailer that is registered in this State to a
32		corporation, society, association, foundation, or institution
33		that has been issued a sales tax exemption identification
34		number by the Department that assists victims of the disaster

1		who reside within the declared disaster area.
2		(19) Beginning with taxable years ending on or after
3		December 31, 1995 and ending with taxable years ending on or
4		before December 31, 2004, personal property that is used in the
5		performance of infrastructure repairs in this State, including
6		but not limited to municipal roads and streets, access roads,
7		bridges, sidewalks, waste disposal systems, water and sewer
8		line extensions, water distribution and purification
9		facilities, storm water drainage and retention facilities, and
10		sewage treatment facilities, resulting from a State or
11		federally declared disaster in Illinois or bordering Illinois
12		when such repairs are initiated on facilities located in the
13		declared disaster area within 6 months after the disaster.
14		(20) Beginning July 1, 1999, game or game birds sold at a
15		"game breeding and hunting preserve area" or an "exotic game
16		hunting area" as those terms are used in the Wildlife Code or
17		at a hunting enclosure approved through rules adopted by the
18		Department of Natural Resources. This paragraph is exempt from
19		the provisions of Section 3-55.
20		(21) A motor vehicle, as that term is defined in Section
21		1-146 of the Illinois Vehicle Code, that is donated to a
22		corporation, limited liability company, society, association,
23		foundation, or institution that is determined by the Department
24		to be organized and operated exclusively for educational
25		purposes. For purposes of this exemption, "a corporation,
26		limited liability company, society, association, foundation,
27		or institution organized and operated exclusively for
28		educational purposes" means all tax-supported public schools,
29		private schools that offer systematic instruction in useful
30		branches of learning by methods common to public schools and
31		that compare favorably in their scope and intensity with the
32		course of study presented in tax-supported schools, and
33		vocational or technical schools or institutes organized and
34		operated exclusively to provide a course of study of not less

1		than 6 weeks duration and designed to prepare individuals to
2		follow a trade or to pursue a manual, technical, mechanical,
3		industrial, business, or commercial occupation.
4		(22) Beginning January 1, 2000, personal property,
5		including food, purchased through fundraising events for the
6		benefit of a public or private elementary or secondary school,
7		a group of those schools, or one or more school districts if
8		the events are sponsored by an entity recognized by the school
9		district that consists primarily of volunteers and includes
10		parents and teachers of the school children. This paragraph
11		does not apply to fundraising events (i) for the benefit of
12		private home instruction or (ii) for which the fundraising
13		entity purchases the personal property sold at the events from
14		another individual or entity that sold the property for the
15		purpose of resale by the fundraising entity and that profits
16		from the sale to the fundraising entity. This paragraph is
17		exempt from the provisions of Section 3-55.
18		(23) Beginning January 1, 2000 and through December 31,
19		2001, new or used automatic vending machines that prepare and
20		serve hot food and beverages, including coffee, soup, and other
21		items, and replacement parts for these machines. Beginning
22		January 1, 2002 and through June 30, 2003, machines and parts
23		for machines used in commercial, coin-operated amusement and
24		vending business if a use or occupation tax is paid on the
25		gross receipts derived from the use of the commercial,
26		coin-operated amusement and vending machines. This paragraph
27		is exempt from the provisions of Section 3-55.
28		(24) Beginning on the effective date of this amendatory Act
29		of the 92nd General Assembly, computers and communications
30		equipment utilized for any hospital purpose and equipment used
31		in the diagnosis, analysis, or treatment of hospital patients
32		sold to a lessor who leases the equipment, under a lease of one
33		year or longer executed or in effect at the time of the
34		purchase, to a hospital that has been issued an active tax

1		exemption identification number by the Department under
2		Section 1g of the Retailers' Occupation Tax Act. This paragraph
3		is exempt from the provisions of Section 3-55.
4		(25) Beginning on the effective date of this amendatory Act
5		of the 92nd General Assembly, personal property sold to a
6		lessor who leases the property, under a lease of one year or
7		longer executed or in effect at the time of the purchase, to a
8		governmental body that has been issued an active tax exemption
9		identification number by the Department under Section 1g of the
10		Retailers' Occupation Tax Act. This paragraph is exempt from
11		the provisions of Section 3-55.
12		(26) Beginning on January 1, 2002, tangible personal
13		property purchased from an Illinois retailer by a taxpayer
14		engaged in centralized purchasing activities in Illinois who
15		will, upon receipt of the property in Illinois, temporarily
16		store the property in Illinois (i) for the purpose of
17		subsequently transporting it outside this State for use or
18		consumption thereafter solely outside this State or (ii) for
19		the purpose of being processed, fabricated, or manufactured
20		into, attached to, or incorporated into other tangible personal
21		property to be transported outside this State and thereafter
22		used or consumed solely outside this State. The Director of
23		Revenue shall, pursuant to rules adopted in accordance with the
24		Illinois Administrative Procedure Act, issue a permit to any
25		taxpayer in good standing with the Department who is eligible
26		for the exemption under this paragraph (26). The permit issued
27		under this paragraph (26) shall authorize the holder, to the
28		extent and in the manner specified in the rules adopted under
29		this Act, to purchase tangible personal property from a
30		retailer exempt from the taxes imposed by this Act. Taxpayers
31		shall maintain all necessary books and records to substantiate
32		the use and consumption of all such tangible personal property
33		outside of the State of Illinois.
34		(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,

1		eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
2		92-488, eff. 8-23-01; 92-651, eff. 7-11-02; 93-24, eff.
3		6-20-03.)
4		(35 ILCS 115/9) (from Ch. 120, par. 439.109)
5		Sec. 9. Each serviceman required or authorized to collect
6		the tax herein imposed shall pay to the Department the amount
7		of such tax at the time when he is required to file his return
8		for the period during which such tax was collectible, less a
9		discount of 2.1% prior to January 1, 1990, and 1.75% on and
10		after January 1, 1990, or $5 per calendar year, whichever is
11		greater, which is allowed to reimburse the serviceman for
12		expenses incurred in collecting the tax, keeping records,
13		preparing and filing returns, remitting the tax and supplying
14		data to the Department on request.
15		Where such tangible personal property is sold under a
16		conditional sales contract, or under any other form of sale
17		wherein the payment of the principal sum, or a part thereof, is
18		extended beyond the close of the period for which the return is
19		filed, the serviceman, in collecting the tax may collect, for
20		each tax return period, only the tax applicable to the part of
21		the selling price actually received during such tax return
22		period.
23		Except as provided hereinafter in this Section, on or
24		before the twentieth day of each calendar month, such
25		serviceman shall file a return for the preceding calendar month
26		in accordance with reasonable rules and regulations to be
27		promulgated by the Department of Revenue. Such return shall be
28		filed on a form prescribed by the Department and shall contain
29		such information as the Department may reasonably require.
30		The Department may require returns to be filed on a
31		quarterly basis. If so required, a return for each calendar
32		quarter shall be filed on or before the twentieth day of the
33		calendar month following the end of such calendar quarter. The

1		taxpayer shall also file a return with the Department for each
2		of the first two months of each calendar quarter, on or before
3		the twentieth day of the following calendar month, stating:
4		1. The name of the seller;
5		2. The address of the principal place of business from
6		which he engages in business as a serviceman in this State;
7		3. The total amount of taxable receipts received by him
8		during the preceding calendar month, including receipts
9		from charge and time sales, but less all deductions allowed
10		by law;
11		4. The amount of credit provided in Section 2d of this
12		Act;
13		5. The amount of tax due;
14		5-5. The signature of the taxpayer; and
15		6. Such other reasonable information as the Department
16		may require.
17		If a taxpayer fails to sign a return within 30 days after
18		the proper notice and demand for signature by the Department,
19		the return shall be considered valid and any amount shown to be
20		due on the return shall be deemed assessed.
21		Prior to October 1, 2003, and on and after September 1,
22		2004 a serviceman may accept a Manufacturer's Purchase Credit
23		certification from a purchaser in satisfaction of Service Use
24		Tax as provided in Section 3-70 of the Service Use Tax Act if
25		the purchaser provides the appropriate documentation as
26		required by Section 3-70 of the Service Use Tax Act. A
27		Manufacturer's Purchase Credit certification, accepted prior
28		to October 1, 2003 or on or after September 1, 2004 by a
29		serviceman as provided in Section 3-70 of the Service Use Tax
30		Act, may be used by that serviceman to satisfy Service
31		Occupation Tax liability in the amount claimed in the
32		certification, not to exceed 6.25% of the receipts subject to
33		tax from a qualifying purchase. A Manufacturer's Purchase
34		Credit reported on any original or amended return filed under

1		this Act after October 20, 2003 for reporting periods prior to
2		September 1, 2004 shall be disallowed. Manufacturer's Purchase
3		Credit reported on annual returns due on or after January 1,
4		2005 will be disallowed for periods prior to September 1, 2004.
5		No Manufacturer's Purchase Credit may be used after September
6		30, 2003 through August 31, 2004 to satisfy any tax liability
7		imposed under this Act, including any audit liability.
8		If the serviceman's average monthly tax liability to the
9		Department does not exceed $200, the Department may authorize
10		his returns to be filed on a quarter annual basis, with the
11		return for January, February and March of a given year being
12		due by April 20 of such year; with the return for April, May
13		and June of a given year being due by July 20 of such year; with
14		the return for July, August and September of a given year being
15		due by October 20 of such year, and with the return for
16		October, November and December of a given year being due by
17		January 20 of the following year.
18		If the serviceman's average monthly tax liability to the
19		Department does not exceed $50, the Department may authorize
20		his returns to be filed on an annual basis, with the return for
21		a given year being due by January 20 of the following year.
22		Such quarter annual and annual returns, as to form and
23		substance, shall be subject to the same requirements as monthly
24		returns.
25		Notwithstanding any other provision in this Act concerning
26		the time within which a serviceman may file his return, in the
27		case of any serviceman who ceases to engage in a kind of
28		business which makes him responsible for filing returns under
29		this Act, such serviceman shall file a final return under this
30		Act with the Department not more than 1 month after
31		discontinuing such business.
32		Beginning October 1, 1993, a taxpayer who has an average
33		monthly tax liability of $150,000 or more shall make all
34		payments required by rules of the Department by electronic

1		funds transfer. Beginning October 1, 1994, a taxpayer who has
2		an average monthly tax liability of $100,000 or more shall make
3		all payments required by rules of the Department by electronic
4		funds transfer. Beginning October 1, 1995, a taxpayer who has
5		an average monthly tax liability of $50,000 or more shall make
6		all payments required by rules of the Department by electronic
7		funds transfer. Beginning October 1, 2000, a taxpayer who has
8		an annual tax liability of $200,000 or more shall make all
9		payments required by rules of the Department by electronic
10		funds transfer. The term "annual tax liability" shall be the
11		sum of the taxpayer's liabilities under this Act, and under all
12		other State and local occupation and use tax laws administered
13		by the Department, for the immediately preceding calendar year.
14		The term "average monthly tax liability" means the sum of the
15		taxpayer's liabilities under this Act, and under all other
16		State and local occupation and use tax laws administered by the
17		Department, for the immediately preceding calendar year
18		divided by 12. Beginning on October 1, 2002, a taxpayer who has
19		a tax liability in the amount set forth in subsection (b) of
20		Section 2505-210 of the Department of Revenue Law shall make
21		all payments required by rules of the Department by electronic
22		funds transfer.
23		Before August 1 of each year beginning in 1993, the
24		Department shall notify all taxpayers required to make payments
25		by electronic funds transfer. All taxpayers required to make
26		payments by electronic funds transfer shall make those payments
27		for a minimum of one year beginning on October 1.
28		Any taxpayer not required to make payments by electronic
29		funds transfer may make payments by electronic funds transfer
30		with the permission of the Department.
31		All taxpayers required to make payment by electronic funds
32		transfer and any taxpayers authorized to voluntarily make
33		payments by electronic funds transfer shall make those payments
34		in the manner authorized by the Department.

1		The Department shall adopt such rules as are necessary to
2		effectuate a program of electronic funds transfer and the
3		requirements of this Section.
4		Where a serviceman collects the tax with respect to the
5		selling price of tangible personal property which he sells and
6		the purchaser thereafter returns such tangible personal
7		property and the serviceman refunds the selling price thereof
8		to the purchaser, such serviceman shall also refund, to the
9		purchaser, the tax so collected from the purchaser. When filing
10		his return for the period in which he refunds such tax to the
11		purchaser, the serviceman may deduct the amount of the tax so
12		refunded by him to the purchaser from any other Service
13		Occupation Tax, Service Use Tax, Retailers' Occupation Tax or
14		Use Tax which such serviceman may be required to pay or remit
15		to the Department, as shown by such return, provided that the
16		amount of the tax to be deducted shall previously have been
17		remitted to the Department by such serviceman. If the
18		serviceman shall not previously have remitted the amount of
19		such tax to the Department, he shall be entitled to no
20		deduction hereunder upon refunding such tax to the purchaser.
21		If experience indicates such action to be practicable, the
22		Department may prescribe and furnish a combination or joint
23		return which will enable servicemen, who are required to file
24		returns hereunder and also under the Retailers' Occupation Tax
25		Act, the Use Tax Act or the Service Use Tax Act, to furnish all
26		the return information required by all said Acts on the one
27		form.
28		Where the serviceman has more than one business registered
29		with the Department under separate registrations hereunder,
30		such serviceman shall file separate returns for each registered
31		business.
32		Beginning January 1, 1990, each month the Department shall
33		pay into the Local Government Tax Fund the revenue realized for
34		the preceding month from the 1% tax on sales of food for human

1		consumption which is to be consumed off the premises where it
2		is sold (other than alcoholic beverages, soft drinks and food
3		which has been prepared for immediate consumption) and
4		prescription and nonprescription medicines, drugs, medical
5		appliances and insulin, urine testing materials, syringes and
6		needles used by diabetics.
7		Beginning January 1, 1990, each month the Department shall
8		pay into the County and Mass Transit District Fund 4% of the
9		revenue realized for the preceding month from the 6.25% general
10		rate.
11		Beginning August 1, 2000, each month the Department shall
12		pay into the County and Mass Transit District Fund 20% of the
13		net revenue realized for the preceding month from the 1.25%
14		rate on the selling price of motor fuel and gasohol.
15		Beginning January 1, 1990, each month the Department shall
16		pay into the Local Government Tax Fund 16% of the revenue
17		realized for the preceding month from the 6.25% general rate on
18		transfers of tangible personal property.
19		Beginning August 1, 2000, each month the Department shall
20		pay into the Local Government Tax Fund 80% of the net revenue
21		realized for the preceding month from the 1.25% rate on the
22		selling price of motor fuel and gasohol.
23		Of the remainder of the moneys received by the Department
24		pursuant to this Act, (a) 1.75% thereof shall be paid into the
25		Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on
26		and after July 1, 1989, 3.8% thereof shall be paid into the
27		Build Illinois Fund; provided, however, that if in any fiscal
28		year the sum of (1) the aggregate of 2.2% or 3.8%, as the case
29		may be, of the moneys received by the Department and required
30		to be paid into the Build Illinois Fund pursuant to Section 3
31		of the Retailers' Occupation Tax Act, Section 9 of the Use Tax
32		Act, Section 9 of the Service Use Tax Act, and Section 9 of the
33		Service Occupation Tax Act, such Acts being hereinafter called
34		the "Tax Acts" and such aggregate of 2.2% or 3.8%, as the case

1		may be, of moneys being hereinafter called the "Tax Act
2		Amount", and (2) the amount transferred to the Build Illinois
3		Fund from the State and Local Sales Tax Reform Fund shall be
4		less than the Annual Specified Amount (as defined in Section 3
5		of the Retailers' Occupation Tax Act), an amount equal to the
6		difference shall be immediately paid into the Build Illinois
7		Fund from other moneys received by the Department pursuant to
8		the Tax Acts; and further provided, that if on the last
9		business day of any month the sum of (1) the Tax Act Amount
10		required to be deposited into the Build Illinois Account in the
11		Build Illinois Fund during such month and (2) the amount
12		transferred during such month to the Build Illinois Fund from
13		the State and Local Sales Tax Reform Fund shall have been less
14		than 1/12 of the Annual Specified Amount, an amount equal to
15		the difference shall be immediately paid into the Build
16		Illinois Fund from other moneys received by the Department
17		pursuant to the Tax Acts; and, further provided, that in no
18		event shall the payments required under the preceding proviso
19		result in aggregate payments into the Build Illinois Fund
20		pursuant to this clause (b) for any fiscal year in excess of
21		the greater of (i) the Tax Act Amount or (ii) the Annual
22		Specified Amount for such fiscal year; and, further provided,
23		that the amounts payable into the Build Illinois Fund under
24		this clause (b) shall be payable only until such time as the
25		aggregate amount on deposit under each trust indenture securing
26		Bonds issued and outstanding pursuant to the Build Illinois
27		Bond Act is sufficient, taking into account any future
28		investment income, to fully provide, in accordance with such
29		indenture, for the defeasance of or the payment of the
30		principal of, premium, if any, and interest on the Bonds
31		secured by such indenture and on any Bonds expected to be
32		issued thereafter and all fees and costs payable with respect
33		thereto, all as certified by the Director of the Bureau of the
34		Budget (now Governor's Office of Management and Budget). If on

1		the last business day of any month in which Bonds are
2		outstanding pursuant to the Build Illinois Bond Act, the
3		aggregate of the moneys deposited in the Build Illinois Bond
4		Account in the Build Illinois Fund in such month shall be less
5		than the amount required to be transferred in such month from
6		the Build Illinois Bond Account to the Build Illinois Bond
7		Retirement and Interest Fund pursuant to Section 13 of the
8		Build Illinois Bond Act, an amount equal to such deficiency
9		shall be immediately paid from other moneys received by the
10		Department pursuant to the Tax Acts to the Build Illinois Fund;
11		provided, however, that any amounts paid to the Build Illinois
12		Fund in any fiscal year pursuant to this sentence shall be
13		deemed to constitute payments pursuant to clause (b) of the
14		preceding sentence and shall reduce the amount otherwise
15		payable for such fiscal year pursuant to clause (b) of the
16		preceding sentence. The moneys received by the Department
17		pursuant to this Act and required to be deposited into the
18		Build Illinois Fund are subject to the pledge, claim and charge
19		set forth in Section 12 of the Build Illinois Bond Act.
20		Subject to payment of amounts into the Build Illinois Fund
21		as provided in the preceding paragraph or in any amendment
22		thereto hereafter enacted, the following specified monthly
23		installment of the amount requested in the certificate of the
24		Chairman of the Metropolitan Pier and Exposition Authority
25		provided under Section 8.25f of the State Finance Act, but not
26		in excess of the sums designated as "Total Deposit", shall be
27		deposited in the aggregate from collections under Section 9 of
28		the Use Tax Act, Section 9 of the Service Use Tax Act, Section
29		9 of the Service Occupation Tax Act, and Section 3 of the
30		Retailers' Occupation Tax Act into the McCormick Place
31		Expansion Project Fund in the specified fiscal years.

4		Beginning July 20, 1993 and in each month of each fiscal
5		year thereafter, one-eighth of the amount requested in the
6		certificate of the Chairman of the Metropolitan Pier and
7		Exposition Authority for that fiscal year, less the amount
8		deposited into the McCormick Place Expansion Project Fund by
9		the State Treasurer in the respective month under subsection
10		(g) of Section 13 of the Metropolitan Pier and Exposition
11		Authority Act, plus cumulative deficiencies in the deposits
12		required under this Section for previous months and years,
13		shall be deposited into the McCormick Place Expansion Project
14		Fund, until the full amount requested for the fiscal year, but
15		not in excess of the amount specified above as "Total Deposit",
16		has been deposited.
17		Subject to payment of amounts into the Build Illinois Fund
18		and the McCormick Place Expansion Project Fund pursuant to the
19		preceding paragraphs or in any amendments thereto hereafter
20		enacted, beginning July 1, 1993, the Department shall each
21		month pay into the Illinois Tax Increment Fund 0.27% of 80% of
22		the net revenue realized for the preceding month from the 6.25%
23		general rate on the selling price of tangible personal
24		property.
25		Subject to payment of amounts into the Build Illinois Fund
26		and the McCormick Place Expansion Project Fund pursuant to the
27		preceding paragraphs or in any amendments thereto hereafter
28		enacted, beginning with the receipt of the first report of
29		taxes paid by an eligible business and continuing for a 25-year
30		period, the Department shall each month pay into the Energy
31		Infrastructure Fund 80% of the net revenue realized from the
32		6.25% general rate on the selling price of Illinois-mined coal
33		that was sold to an eligible business. For purposes of this
34		paragraph, the term "eligible business" means a new electric

1		generating facility certified pursuant to Section 605-332 of
2		the Department of Commerce and Economic Opportunity Community
3		Affairs Law of the Civil Administrative Code of Illinois.
4		Remaining moneys received by the Department pursuant to
5		this Act shall be paid into the General Revenue Fund of the
6		State Treasury.
7		The Department may, upon separate written notice to a
8		taxpayer, require the taxpayer to prepare and file with the
9		Department on a form prescribed by the Department within not
10		less than 60 days after receipt of the notice an annual
11		information return for the tax year specified in the notice.
12		Such annual return to the Department shall include a statement
13		of gross receipts as shown by the taxpayer's last Federal
14		income tax return. If the total receipts of the business as
15		reported in the Federal income tax return do not agree with the
16		gross receipts reported to the Department of Revenue for the
17		same period, the taxpayer shall attach to his annual return a
18		schedule showing a reconciliation of the 2 amounts and the
19		reasons for the difference. The taxpayer's annual return to the
20		Department shall also disclose the cost of goods sold by the
21		taxpayer during the year covered by such return, opening and
22		closing inventories of such goods for such year, cost of goods
23		used from stock or taken from stock and given away by the
24		taxpayer during such year, pay roll information of the
25		taxpayer's business during such year and any additional
26		reasonable information which the Department deems would be
27		helpful in determining the accuracy of the monthly, quarterly
28		or annual returns filed by such taxpayer as hereinbefore
29		provided for in this Section.
30		If the annual information return required by this Section
31		is not filed when and as required, the taxpayer shall be liable
32		as follows:
33		(i) Until January 1, 1994, the taxpayer shall be liable
34		for a penalty equal to 1/6 of 1% of the tax due from such

1		taxpayer under this Act during the period to be covered by
2		the annual return for each month or fraction of a month
3		until such return is filed as required, the penalty to be
4		assessed and collected in the same manner as any other
5		penalty provided for in this Act.
6		(ii) On and after January 1, 1994, the taxpayer shall
7		be liable for a penalty as described in Section 3-4 of the
8		Uniform Penalty and Interest Act.
9		The chief executive officer, proprietor, owner or highest
10		ranking manager shall sign the annual return to certify the
11		accuracy of the information contained therein. Any person who
12		willfully signs the annual return containing false or
13		inaccurate information shall be guilty of perjury and punished
14		accordingly. The annual return form prescribed by the
15		Department shall include a warning that the person signing the
16		return may be liable for perjury.
17		The foregoing portion of this Section concerning the filing
18		of an annual information return shall not apply to a serviceman
19		who is not required to file an income tax return with the
20		United States Government.
21		As soon as possible after the first day of each month, upon
22		certification of the Department of Revenue, the Comptroller
23		shall order transferred and the Treasurer shall transfer from
24		the General Revenue Fund to the Motor Fuel Tax Fund an amount
25		equal to 1.7% of 80% of the net revenue realized under this Act
26		for the second preceding month. Beginning April 1, 2000, this
27		transfer is no longer required and shall not be made.
28		Net revenue realized for a month shall be the revenue
29		collected by the State pursuant to this Act, less the amount
30		paid out during that month as refunds to taxpayers for
31		overpayment of liability.
32		For greater simplicity of administration, it shall be
33		permissible for manufacturers, importers and wholesalers whose
34		products are sold by numerous servicemen in Illinois, and who

1		wish to do so, to assume the responsibility for accounting and
2		paying to the Department all tax accruing under this Act with
3		respect to such sales, if the servicemen who are affected do
4		not make written objection to the Department to this
5		arrangement.
6		(Source: P.A. 92-12, eff. 7-1-01; 92-208, eff. 8-2-01; 92-492,
7		eff. 1-1-02; 92-600, eff. 6-28-02; 92-651, eff. 7-11-02; 93-24,
8		eff. 6-20-03; revised 10-15-03.)

9		Section 20-25. The Retailers' Occupation Tax Act is amended
10		by changing Sections 2-5 and 3 as follows:
11		(35 ILCS 120/2-5) (from Ch. 120, par. 441-5)
12		Sec. 2-5. Exemptions. Gross receipts from proceeds from the
13		sale of the following tangible personal property are exempt
14		from the tax imposed by this Act:
15		(1) Farm chemicals.
16		(2) Farm machinery and equipment, both new and used,
17		including that manufactured on special order, certified by the
18		purchaser to be used primarily for production agriculture or
19		State or federal agricultural programs, including individual
20		replacement parts for the machinery and equipment, including
21		machinery and equipment purchased for lease, and including
22		implements of husbandry defined in Section 1-130 of the
23		Illinois Vehicle Code, farm machinery and agricultural
24		chemical and fertilizer spreaders, and nurse wagons required to
25		be registered under Section 3-809 of the Illinois Vehicle Code,
26		but excluding other motor vehicles required to be registered
27		under the Illinois Vehicle Code. Horticultural polyhouses or
28		hoop houses used for propagating, growing, or overwintering
29		plants shall be considered farm machinery and equipment under
30		this item (2). Agricultural chemical tender tanks and dry boxes
31		shall include units sold separately from a motor vehicle
32		required to be licensed and units sold mounted on a motor

1		vehicle required to be licensed, if the selling price of the
2		tender is separately stated.
3		Farm machinery and equipment shall include precision
4		farming equipment that is installed or purchased to be
5		installed on farm machinery and equipment including, but not
6		limited to, tractors, harvesters, sprayers, planters, seeders,
7		or spreaders. Precision farming equipment includes, but is not
8		limited to, soil testing sensors, computers, monitors,
9		software, global positioning and mapping systems, and other
10		such equipment.
11		Farm machinery and equipment also includes computers,
12		sensors, software, and related equipment used primarily in the
13		computer-assisted operation of production agriculture
14		facilities, equipment, and activities such as, but not limited
15		to, the collection, monitoring, and correlation of animal and
16		crop data for the purpose of formulating animal diets and
17		agricultural chemicals. This item (7) is exempt from the
18		provisions of Section 2-70.
19		(3) Until July 1, 2003, distillation machinery and
20		equipment, sold as a unit or kit, assembled or installed by the
21		retailer, certified by the user to be used only for the
22		production of ethyl alcohol that will be used for consumption
23		as motor fuel or as a component of motor fuel for the personal
24		use of the user, and not subject to sale or resale.
25		(4) Until July 1, 2003 and beginning again September 1,
26		2004, graphic arts machinery and equipment, including repair
27		and replacement parts, both new and used, and including that
28		manufactured on special order or purchased for lease, certified
29		by the purchaser to be used primarily for graphic arts
30		production. Equipment includes chemicals or chemicals acting
31		as catalysts but only if the chemicals or chemicals acting as
32		catalysts effect a direct and immediate change upon a graphic
33		arts product.
34		(5) A motor vehicle of the first division, a motor vehicle

1		of the second division that is a self-contained motor vehicle
2		designed or permanently converted to provide living quarters
3		for recreational, camping, or travel use, with direct walk
4		through access to the living quarters from the driver's seat,
5		or a motor vehicle of the second division that is of the van
6		configuration designed for the transportation of not less than
7		7 nor more than 16 passengers, as defined in Section 1-146 of
8		the Illinois Vehicle Code, that is used for automobile renting,
9		as defined in the Automobile Renting Occupation and Use Tax
10		Act.
11		(6) Personal property sold by a teacher-sponsored student
12		organization affiliated with an elementary or secondary school
13		located in Illinois.
14		(7) Until July 1, 2003, proceeds of that portion of the
15		selling price of a passenger car the sale of which is subject
16		to the Replacement Vehicle Tax.
17		(8) Personal property sold to an Illinois county fair
18		association for use in conducting, operating, or promoting the
19		county fair.
20		(9) Personal property sold to a not-for-profit arts or
21		cultural organization that establishes, by proof required by
22		the Department by rule, that it has received an exemption under
23		Section 501(c)(3) of the Internal Revenue Code and that is
24		organized and operated primarily for the presentation or
25		support of arts or cultural programming, activities, or
26		services. These organizations include, but are not limited to,
27		music and dramatic arts organizations such as symphony
28		orchestras and theatrical groups, arts and cultural service
29		organizations, local arts councils, visual arts organizations,
30		and media arts organizations. On and after the effective date
31		of this amendatory Act of the 92nd General Assembly, however,
32		an entity otherwise eligible for this exemption shall not make
33		tax-free purchases unless it has an active identification
34		number issued by the Department.

1		(10) Personal property sold by a corporation, society,
2		association, foundation, institution, or organization, other
3		than a limited liability company, that is organized and
4		operated as a not-for-profit service enterprise for the benefit
5		of persons 65 years of age or older if the personal property
6		was not purchased by the enterprise for the purpose of resale
7		by the enterprise.
8		(11) Personal property sold to a governmental body, to a
9		corporation, society, association, foundation, or institution
10		organized and operated exclusively for charitable, religious,
11		or educational purposes, or to a not-for-profit corporation,
12		society, association, foundation, institution, or organization
13		that has no compensated officers or employees and that is
14		organized and operated primarily for the recreation of persons
15		55 years of age or older. A limited liability company may
16		qualify for the exemption under this paragraph only if the
17		limited liability company is organized and operated
18		exclusively for educational purposes. On and after July 1,
19		1987, however, no entity otherwise eligible for this exemption
20		shall make tax-free purchases unless it has an active
21		identification number issued by the Department.
22		(12) Tangible personal property sold to interstate
23		carriers for hire for use as rolling stock moving in interstate
24		commerce or to lessors under leases of one year or longer
25		executed or in effect at the time of purchase by interstate
26		carriers for hire for use as rolling stock moving in interstate
27		commerce and equipment operated by a telecommunications
28		provider, licensed as a common carrier by the Federal
29		Communications Commission, which is permanently installed in
30		or affixed to aircraft moving in interstate commerce.
31		(12-5) On and after July 1, 2003, motor vehicles of the
32		second division with a gross vehicle weight in excess of 8,000
33		pounds that are subject to the commercial distribution fee
34		imposed under Section 3-815.1 of the Illinois Vehicle Code.

1		This exemption applies to repair and replacement parts added
2		after the initial purchase of such a motor vehicle if that
3		motor vehicle is used in a manner that would qualify for the
4		rolling stock exemption otherwise provided for in this Act.
5		(13) Proceeds from sales to owners, lessors, or shippers of
6		tangible personal property that is utilized by interstate
7		carriers for hire for use as rolling stock moving in interstate
8		commerce and equipment operated by a telecommunications
9		provider, licensed as a common carrier by the Federal
10		Communications Commission, which is permanently installed in
11		or affixed to aircraft moving in interstate commerce.
12		(14) Machinery and equipment that will be used by the
13		purchaser, or a lessee of the purchaser, primarily in the
14		process of manufacturing or assembling tangible personal
15		property for wholesale or retail sale or lease, whether the
16		sale or lease is made directly by the manufacturer or by some
17		other person, whether the materials used in the process are
18		owned by the manufacturer or some other person, or whether the
19		sale or lease is made apart from or as an incident to the
20		seller's engaging in the service occupation of producing
21		machines, tools, dies, jigs, patterns, gauges, or other similar
22		items of no commercial value on special order for a particular
23		purchaser.
24		(15) Proceeds of mandatory service charges separately
25		stated on customers' bills for purchase and consumption of food
26		and beverages, to the extent that the proceeds of the service
27		charge are in fact turned over as tips or as a substitute for
28		tips to the employees who participate directly in preparing,
29		serving, hosting or cleaning up the food or beverage function
30		with respect to which the service charge is imposed.
31		(16) Petroleum products sold to a purchaser if the seller
32		is prohibited by federal law from charging tax to the
33		purchaser.
34		(17) Tangible personal property sold to a common carrier by

1		rail or motor that receives the physical possession of the
2		property in Illinois and that transports the property, or
3		shares with another common carrier in the transportation of the
4		property, out of Illinois on a standard uniform bill of lading
5		showing the seller of the property as the shipper or consignor
6		of the property to a destination outside Illinois, for use
7		outside Illinois.
8		(18) Legal tender, currency, medallions, or gold or silver
9		coinage issued by the State of Illinois, the government of the
10		United States of America, or the government of any foreign
11		country, and bullion.
12		(19) Until July 1 2003, oil field exploration, drilling,
13		and production equipment, including (i) rigs and parts of rigs,
14		rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
15		tubular goods, including casing and drill strings, (iii) pumps
16		and pump-jack units, (iv) storage tanks and flow lines, (v) any
17		individual replacement part for oil field exploration,
18		drilling, and production equipment, and (vi) machinery and
19		equipment purchased for lease; but excluding motor vehicles
20		required to be registered under the Illinois Vehicle Code.
21		(20) Photoprocessing machinery and equipment, including
22		repair and replacement parts, both new and used, including that
23		manufactured on special order, certified by the purchaser to be
24		used primarily for photoprocessing, and including
25		photoprocessing machinery and equipment purchased for lease.
26		(21) Until July 1, 2003, coal exploration, mining,
27		offhighway hauling, processing, maintenance, and reclamation
28		equipment, including replacement parts and equipment, and
29		including equipment purchased for lease, but excluding motor
30		vehicles required to be registered under the Illinois Vehicle
31		Code.
32		(22) Fuel and petroleum products sold to or used by an air
33		carrier, certified by the carrier to be used for consumption,
34		shipment, or storage in the conduct of its business as an air

1		common carrier, for a flight destined for or returning from a
2		location or locations outside the United States without regard
3		to previous or subsequent domestic stopovers.
4		(23) A transaction in which the purchase order is received
5		by a florist who is located outside Illinois, but who has a
6		florist located in Illinois deliver the property to the
7		purchaser or the purchaser's donee in Illinois.
8		(24) Fuel consumed or used in the operation of ships,
9		barges, or vessels that are used primarily in or for the
10		transportation of property or the conveyance of persons for
11		hire on rivers bordering on this State if the fuel is delivered
12		by the seller to the purchaser's barge, ship, or vessel while
13		it is afloat upon that bordering river.
14		(25) A motor vehicle sold in this State to a nonresident
15		even though the motor vehicle is delivered to the nonresident
16		in this State, if the motor vehicle is not to be titled in this
17		State, and if a drive-away permit is issued to the motor
18		vehicle as provided in Section 3-603 of the Illinois Vehicle
19		Code or if the nonresident purchaser has vehicle registration
20		plates to transfer to the motor vehicle upon returning to his
21		or her home state. The issuance of the drive-away permit or
22		having the out-of-state registration plates to be transferred
23		is prima facie evidence that the motor vehicle will not be
24		titled in this State.
25		(26) Semen used for artificial insemination of livestock
26		for direct agricultural production.
27		(27) Horses, or interests in horses, registered with and
28		meeting the requirements of any of the Arabian Horse Club
29		Registry of America, Appaloosa Horse Club, American Quarter
30		Horse Association, United States Trotting Association, or
31		Jockey Club, as appropriate, used for purposes of breeding or
32		racing for prizes.
33		(28) Computers and communications equipment utilized for
34		any hospital purpose and equipment used in the diagnosis,

1		analysis, or treatment of hospital patients sold to a lessor
2		who leases the equipment, under a lease of one year or longer
3		executed or in effect at the time of the purchase, to a
4		hospital that has been issued an active tax exemption
5		identification number by the Department under Section 1g of
6		this Act.
7		(29) Personal property sold to a lessor who leases the
8		property, under a lease of one year or longer executed or in
9		effect at the time of the purchase, to a governmental body that
10		has been issued an active tax exemption identification number
11		by the Department under Section 1g of this Act.
12		(30) Beginning with taxable years ending on or after
13		December 31, 1995 and ending with taxable years ending on or
14		before December 31, 2004, personal property that is donated for
15		disaster relief to be used in a State or federally declared
16		disaster area in Illinois or bordering Illinois by a
17		manufacturer or retailer that is registered in this State to a
18		corporation, society, association, foundation, or institution
19		that has been issued a sales tax exemption identification
20		number by the Department that assists victims of the disaster
21		who reside within the declared disaster area.
22		(31) Beginning with taxable years ending on or after
23		December 31, 1995 and ending with taxable years ending on or
24		before December 31, 2004, personal property that is used in the
25		performance of infrastructure repairs in this State, including
26		but not limited to municipal roads and streets, access roads,
27		bridges, sidewalks, waste disposal systems, water and sewer
28		line extensions, water distribution and purification
29		facilities, storm water drainage and retention facilities, and
30		sewage treatment facilities, resulting from a State or
31		federally declared disaster in Illinois or bordering Illinois
32		when such repairs are initiated on facilities located in the
33		declared disaster area within 6 months after the disaster.
34		(32) Beginning July 1, 1999, game or game birds sold at a

1		"game breeding and hunting preserve area" or an "exotic game
2		hunting area" as those terms are used in the Wildlife Code or
3		at a hunting enclosure approved through rules adopted by the
4		Department of Natural Resources. This paragraph is exempt from
5		the provisions of Section 2-70.
6		(33) A motor vehicle, as that term is defined in Section
7		1-146 of the Illinois Vehicle Code, that is donated to a
8		corporation, limited liability company, society, association,
9		foundation, or institution that is determined by the Department
10		to be organized and operated exclusively for educational
11		purposes. For purposes of this exemption, "a corporation,
12		limited liability company, society, association, foundation,
13		or institution organized and operated exclusively for
14		educational purposes" means all tax-supported public schools,
15		private schools that offer systematic instruction in useful
16		branches of learning by methods common to public schools and
17		that compare favorably in their scope and intensity with the
18		course of study presented in tax-supported schools, and
19		vocational or technical schools or institutes organized and
20		operated exclusively to provide a course of study of not less
21		than 6 weeks duration and designed to prepare individuals to
22		follow a trade or to pursue a manual, technical, mechanical,
23		industrial, business, or commercial occupation.
24		(34) Beginning January 1, 2000, personal property,
25		including food, purchased through fundraising events for the
26		benefit of a public or private elementary or secondary school,
27		a group of those schools, or one or more school districts if
28		the events are sponsored by an entity recognized by the school
29		district that consists primarily of volunteers and includes
30		parents and teachers of the school children. This paragraph
31		does not apply to fundraising events (i) for the benefit of
32		private home instruction or (ii) for which the fundraising
33		entity purchases the personal property sold at the events from
34		another individual or entity that sold the property for the

1		purpose of resale by the fundraising entity and that profits
2		from the sale to the fundraising entity. This paragraph is
3		exempt from the provisions of Section 2-70.
4		(35) Beginning January 1, 2000 and through December 31,
5		2001, new or used automatic vending machines that prepare and
6		serve hot food and beverages, including coffee, soup, and other
7		items, and replacement parts for these machines. Beginning
8		January 1, 2002 and through June 30, 2003, machines and parts
9		for machines used in commercial, coin-operated amusement and
10		vending business if a use or occupation tax is paid on the
11		gross receipts derived from the use of the commercial,
12		coin-operated amusement and vending machines. This paragraph
13		is exempt from the provisions of Section 2-70.
14		(35-5) Food for human consumption that is to be consumed
15		off the premises where it is sold (other than alcoholic
16		beverages, soft drinks, and food that has been prepared for
17		immediate consumption) and prescription and nonprescription
18		medicines, drugs, medical appliances, and insulin, urine
19		testing materials, syringes, and needles used by diabetics, for
20		human use, when purchased for use by a person receiving medical
21		assistance under Article 5 of the Illinois Public Aid Code who
22		resides in a licensed long-term care facility, as defined in
23		the Nursing Home Care Act.
24		(36) Beginning August 2, 2001, computers and
25		communications equipment utilized for any hospital purpose and
26		equipment used in the diagnosis, analysis, or treatment of
27		hospital patients sold to a lessor who leases the equipment,
28		under a lease of one year or longer executed or in effect at
29		the time of the purchase, to a hospital that has been issued an
30		active tax exemption identification number by the Department
31		under Section 1g of this Act. This paragraph is exempt from the
32		provisions of Section 2-70.
33		(37) Beginning August 2, 2001, personal property sold to a
34		lessor who leases the property, under a lease of one year or

1		longer executed or in effect at the time of the purchase, to a
2		governmental body that has been issued an active tax exemption
3		identification number by the Department under Section 1g of
4		this Act. This paragraph is exempt from the provisions of
5		Section 2-70.
6		(38) Beginning on January 1, 2002, tangible personal
7		property purchased from an Illinois retailer by a taxpayer
8		engaged in centralized purchasing activities in Illinois who
9		will, upon receipt of the property in Illinois, temporarily
10		store the property in Illinois (i) for the purpose of
11		subsequently transporting it outside this State for use or
12		consumption thereafter solely outside this State or (ii) for
13		the purpose of being processed, fabricated, or manufactured
14		into, attached to, or incorporated into other tangible personal
15		property to be transported outside this State and thereafter
16		used or consumed solely outside this State. The Director of
17		Revenue shall, pursuant to rules adopted in accordance with the
18		Illinois Administrative Procedure Act, issue a permit to any
19		taxpayer in good standing with the Department who is eligible
20		for the exemption under this paragraph (38). The permit issued
21		under this paragraph (38) shall authorize the holder, to the
22		extent and in the manner specified in the rules adopted under
23		this Act, to purchase tangible personal property from a
24		retailer exempt from the taxes imposed by this Act. Taxpayers
25		shall maintain all necessary books and records to substantiate
26		the use and consumption of all such tangible personal property
27		outside of the State of Illinois.
28		(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
29		eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
30		92-488, eff. 8-23-01; 92-651, eff. 7-11-02; 92-680, eff.
31		7-16-02; 93-23, eff. 6-20-03; 93-24, eff. 6-20-03; revised
32		9-11-03.)
33		(35 ILCS 120/3) (from Ch. 120, par. 442)

1		Sec. 3. Except as provided in this Section, on or before
2		the twentieth day of each calendar month, every person engaged
3		in the business of selling tangible personal property at retail
4		in this State during the preceding calendar month shall file a
5		return with the Department, stating:
6		1. The name of the seller;
7		2. His residence address and the address of his
8		principal place of business and the address of the
9		principal place of business (if that is a different
10		address) from which he engages in the business of selling
11		tangible personal property at retail in this State;
12		3. Total amount of receipts received by him during the
13		preceding calendar month or quarter, as the case may be,
14		from sales of tangible personal property, and from services
15		furnished, by him during such preceding calendar month or
16		quarter;
17		4. Total amount received by him during the preceding
18		calendar month or quarter on charge and time sales of
19		tangible personal property, and from services furnished,
20		by him prior to the month or quarter for which the return
21		is filed;
22		5. Deductions allowed by law;
23		6. Gross receipts which were received by him during the
24		preceding calendar month or quarter and upon the basis of
25		which the tax is imposed;
26		7. The amount of credit provided in Section 2d of this
27		Act;
28		8. The amount of tax due;
29		9. The signature of the taxpayer; and
30		10. Such other reasonable information as the
31		Department may require.
32		If a taxpayer fails to sign a return within 30 days after
33		the proper notice and demand for signature by the Department,
34		the return shall be considered valid and any amount shown to be

1		due on the return shall be deemed assessed.
2		Each return shall be accompanied by the statement of
3		prepaid tax issued pursuant to Section 2e for which credit is
4		claimed.
5		Prior to October 1, 2003, and on and after September 1,
6		2004 a retailer may accept a Manufacturer's Purchase Credit
7		certification from a purchaser in satisfaction of Use Tax as
8		provided in Section 3-85 of the Use Tax Act if the purchaser
9		provides the appropriate documentation as required by Section
10		3-85 of the Use Tax Act. A Manufacturer's Purchase Credit
11		certification, accepted by a retailer prior to October 1, 2003
12		and on and after September 1, 2004 as provided in Section 3-85
13		of the Use Tax Act, may be used by that retailer to satisfy
14		Retailers' Occupation Tax liability in the amount claimed in
15		the certification, not to exceed 6.25% of the receipts subject
16		to tax from a qualifying purchase. A Manufacturer's Purchase
17		Credit reported on any original or amended return filed under
18		this Act after October 20, 2003 for reporting periods prior to
19		September 1, 2004 shall be disallowed. Manufacturer's
20		Purchaser Credit reported on annual returns due on or after
21		January 1, 2005 will be disallowed for periods prior to
22		September 1, 2004. No Manufacturer's Purchase Credit may be
23		used after September 30, 2003 through August 31, 2004 to
24		satisfy any tax liability imposed under this Act, including any
25		audit liability.
26		The Department may require returns to be filed on a
27		quarterly basis. If so required, a return for each calendar
28		quarter shall be filed on or before the twentieth day of the
29		calendar month following the end of such calendar quarter. The
30		taxpayer shall also file a return with the Department for each
31		of the first two months of each calendar quarter, on or before
32		the twentieth day of the following calendar month, stating:
33		1. The name of the seller;
34		2. The address of the principal place of business from

1		which he engages in the business of selling tangible
2		personal property at retail in this State;
3		3. The total amount of taxable receipts received by him
4		during the preceding calendar month from sales of tangible
5		personal property by him during such preceding calendar
6		month, including receipts from charge and time sales, but
7		less all deductions allowed by law;
8		4. The amount of credit provided in Section 2d of this
9		Act;
10		5. The amount of tax due; and
11		6. Such other reasonable information as the Department
12		may require.
13		Beginning on October 1, 2003, any person who is not a
14		licensed distributor, importing distributor, or manufacturer,
15		as defined in the Liquor Control Act of 1934, but is engaged in
16		the business of selling, at retail, alcoholic liquor shall file
17		a statement with the Department of Revenue, in a format and at
18		a time prescribed by the Department, showing the total amount
19		paid for alcoholic liquor purchased during the preceding month
20		and such other information as is reasonably required by the
21		Department. The Department may adopt rules to require that this
22		statement be filed in an electronic or telephonic format. Such
23		rules may provide for exceptions from the filing requirements
24		of this paragraph. For the purposes of this paragraph, the term
25		"alcoholic liquor" shall have the meaning prescribed in the
26		Liquor Control Act of 1934.
27		Beginning on October 1, 2003, every distributor, importing
28		distributor, and manufacturer of alcoholic liquor as defined in
29		the Liquor Control Act of 1934, shall file a statement with the
30		Department of Revenue, no later than the 10th day of the month
31		for the preceding month during which transactions occurred, by
32		electronic means, showing the total amount of gross receipts
33		from the sale of alcoholic liquor sold or distributed during
34		the preceding month to purchasers; identifying the purchaser to

1		whom it was sold or distributed; the purchaser's tax
2		registration number; and such other information reasonably
3		required by the Department. A copy of the monthly statement
4		shall be sent to the retailer no later than the 10th day of the
5		month for the preceding month during which transactions
6		occurred.
7		If a total amount of less than $1 is payable, refundable or
8		creditable, such amount shall be disregarded if it is less than
9		50 cents and shall be increased to $1 if it is 50 cents or more.
10		Beginning October 1, 1993, a taxpayer who has an average
11		monthly tax liability of $150,000 or more shall make all
12		payments required by rules of the Department by electronic
13		funds transfer. Beginning October 1, 1994, a taxpayer who has
14		an average monthly tax liability of $100,000 or more shall make
15		all payments required by rules of the Department by electronic
16		funds transfer. Beginning October 1, 1995, a taxpayer who has
17		an average monthly tax liability of $50,000 or more shall make
18		all payments required by rules of the Department by electronic
19		funds transfer. Beginning October 1, 2000, a taxpayer who has
20		an annual tax liability of $200,000 or more shall make all
21		payments required by rules of the Department by electronic
22		funds transfer. The term "annual tax liability" shall be the
23		sum of the taxpayer's liabilities under this Act, and under all
24		other State and local occupation and use tax laws administered
25		by the Department, for the immediately preceding calendar year.
26		The term "average monthly tax liability" shall be the sum of
27		the taxpayer's liabilities under this Act, and under all other
28		State and local occupation and use tax laws administered by the
29		Department, for the immediately preceding calendar year
30		divided by 12. Beginning on October 1, 2002, a taxpayer who has
31		a tax liability in the amount set forth in subsection (b) of
32		Section 2505-210 of the Department of Revenue Law shall make
33		all payments required by rules of the Department by electronic
34		funds transfer.

1		Before August 1 of each year beginning in 1993, the
2		Department shall notify all taxpayers required to make payments
3		by electronic funds transfer. All taxpayers required to make
4		payments by electronic funds transfer shall make those payments
5		for a minimum of one year beginning on October 1.
6		Any taxpayer not required to make payments by electronic
7		funds transfer may make payments by electronic funds transfer
8		with the permission of the Department.
9		All taxpayers required to make payment by electronic funds
10		transfer and any taxpayers authorized to voluntarily make
11		payments by electronic funds transfer shall make those payments
12		in the manner authorized by the Department.
13		The Department shall adopt such rules as are necessary to
14		effectuate a program of electronic funds transfer and the
15		requirements of this Section.
16		Any amount which is required to be shown or reported on any
17		return or other document under this Act shall, if such amount
18		is not a whole-dollar amount, be increased to the nearest
19		whole-dollar amount in any case where the fractional part of a
20		dollar is 50 cents or more, and decreased to the nearest
21		whole-dollar amount where the fractional part of a dollar is
22		less than 50 cents.
23		If the retailer is otherwise required to file a monthly
24		return and if the retailer's average monthly tax liability to
25		the Department does not exceed $200, the Department may
26		authorize his returns to be filed on a quarter annual basis,
27		with the return for January, February and March of a given year
28		being due by April 20 of such year; with the return for April,
29		May and June of a given year being due by July 20 of such year;
30		with the return for July, August and September of a given year
31		being due by October 20 of such year, and with the return for
32		October, November and December of a given year being due by
33		January 20 of the following year.
34		If the retailer is otherwise required to file a monthly or

1		quarterly return and if the retailer's average monthly tax
2		liability with the Department does not exceed $50, the
3		Department may authorize his returns to be filed on an annual
4		basis, with the return for a given year being due by January 20
5		of the following year.
6		Such quarter annual and annual returns, as to form and
7		substance, shall be subject to the same requirements as monthly
8		returns.
9		Notwithstanding any other provision in this Act concerning
10		the time within which a retailer may file his return, in the
11		case of any retailer who ceases to engage in a kind of business
12		which makes him responsible for filing returns under this Act,
13		such retailer shall file a final return under this Act with the
14		Department not more than one month after discontinuing such
15		business.
16		Where the same person has more than one business registered
17		with the Department under separate registrations under this
18		Act, such person may not file each return that is due as a
19		single return covering all such registered businesses, but
20		shall file separate returns for each such registered business.
21		In addition, with respect to motor vehicles, watercraft,
22		aircraft, and trailers that are required to be registered with
23		an agency of this State, every retailer selling this kind of
24		tangible personal property shall file, with the Department,
25		upon a form to be prescribed and supplied by the Department, a
26		separate return for each such item of tangible personal
27		property which the retailer sells, except that if, in the same
28		transaction, (i) a retailer of aircraft, watercraft, motor
29		vehicles or trailers transfers more than one aircraft,
30		watercraft, motor vehicle or trailer to another aircraft,
31		watercraft, motor vehicle retailer or trailer retailer for the
32		purpose of resale or (ii) a retailer of aircraft, watercraft,
33		motor vehicles, or trailers transfers more than one aircraft,
34		watercraft, motor vehicle, or trailer to a purchaser for use as

1		a qualifying rolling stock as provided in Section 2-5 of this
2		Act, then that seller may report the transfer of all aircraft,
3		watercraft, motor vehicles or trailers involved in that
4		transaction to the Department on the same uniform
5		invoice-transaction reporting return form. For purposes of
6		this Section, "watercraft" means a Class 2, Class 3, or Class 4
7		watercraft as defined in Section 3-2 of the Boat Registration
8		and Safety Act, a personal watercraft, or any boat equipped
9		with an inboard motor.
10		Any retailer who sells only motor vehicles, watercraft,
11		aircraft, or trailers that are required to be registered with
12		an agency of this State, so that all retailers' occupation tax
13		liability is required to be reported, and is reported, on such
14		transaction reporting returns and who is not otherwise required
15		to file monthly or quarterly returns, need not file monthly or
16		quarterly returns. However, those retailers shall be required
17		to file returns on an annual basis.
18		The transaction reporting return, in the case of motor
19		vehicles or trailers that are required to be registered with an
20		agency of this State, shall be the same document as the Uniform
21		Invoice referred to in Section 5-402 of The Illinois Vehicle
22		Code and must show the name and address of the seller; the name
23		and address of the purchaser; the amount of the selling price
24		including the amount allowed by the retailer for traded-in
25		property, if any; the amount allowed by the retailer for the
26		traded-in tangible personal property, if any, to the extent to
27		which Section 1 of this Act allows an exemption for the value
28		of traded-in property; the balance payable after deducting such
29		trade-in allowance from the total selling price; the amount of
30		tax due from the retailer with respect to such transaction; the
31		amount of tax collected from the purchaser by the retailer on
32		such transaction (or satisfactory evidence that such tax is not
33		due in that particular instance, if that is claimed to be the
34		fact); the place and date of the sale; a sufficient

1		identification of the property sold; such other information as
2		is required in Section 5-402 of The Illinois Vehicle Code, and
3		such other information as the Department may reasonably
4		require.
5		The transaction reporting return in the case of watercraft
6		or aircraft must show the name and address of the seller; the
7		name and address of the purchaser; the amount of the selling
8		price including the amount allowed by the retailer for
9		traded-in property, if any; the amount allowed by the retailer
10		for the traded-in tangible personal property, if any, to the
11		extent to which Section 1 of this Act allows an exemption for
12		the value of traded-in property; the balance payable after
13		deducting such trade-in allowance from the total selling price;
14		the amount of tax due from the retailer with respect to such
15		transaction; the amount of tax collected from the purchaser by
16		the retailer on such transaction (or satisfactory evidence that
17		such tax is not due in that particular instance, if that is
18		claimed to be the fact); the place and date of the sale, a
19		sufficient identification of the property sold, and such other
20		information as the Department may reasonably require.
21		Such transaction reporting return shall be filed not later
22		than 20 days after the day of delivery of the item that is
23		being sold, but may be filed by the retailer at any time sooner
24		than that if he chooses to do so. The transaction reporting
25		return and tax remittance or proof of exemption from the
26		Illinois use tax may be transmitted to the Department by way of
27		the State agency with which, or State officer with whom the
28		tangible personal property must be titled or registered (if
29		titling or registration is required) if the Department and such
30		agency or State officer determine that this procedure will
31		expedite the processing of applications for title or
32		registration.
33		With each such transaction reporting return, the retailer
34		shall remit the proper amount of tax due (or shall submit

1		satisfactory evidence that the sale is not taxable if that is
2		the case), to the Department or its agents, whereupon the
3		Department shall issue, in the purchaser's name, a use tax
4		receipt (or a certificate of exemption if the Department is
5		satisfied that the particular sale is tax exempt) which such
6		purchaser may submit to the agency with which, or State officer
7		with whom, he must title or register the tangible personal
8		property that is involved (if titling or registration is
9		required) in support of such purchaser's application for an
10		Illinois certificate or other evidence of title or registration
11		to such tangible personal property.
12		No retailer's failure or refusal to remit tax under this
13		Act precludes a user, who has paid the proper tax to the
14		retailer, from obtaining his certificate of title or other
15		evidence of title or registration (if titling or registration
16		is required) upon satisfying the Department that such user has
17		paid the proper tax (if tax is due) to the retailer. The
18		Department shall adopt appropriate rules to carry out the
19		mandate of this paragraph.
20		If the user who would otherwise pay tax to the retailer
21		wants the transaction reporting return filed and the payment of
22		the tax or proof of exemption made to the Department before the
23		retailer is willing to take these actions and such user has not
24		paid the tax to the retailer, such user may certify to the fact
25		of such delay by the retailer and may (upon the Department
26		being satisfied of the truth of such certification) transmit
27		the information required by the transaction reporting return
28		and the remittance for tax or proof of exemption directly to
29		the Department and obtain his tax receipt or exemption
30		determination, in which event the transaction reporting return
31		and tax remittance (if a tax payment was required) shall be
32		credited by the Department to the proper retailer's account
33		with the Department, but without the 2.1% or 1.75% discount
34		provided for in this Section being allowed. When the user pays

1		the tax directly to the Department, he shall pay the tax in the
2		same amount and in the same form in which it would be remitted
3		if the tax had been remitted to the Department by the retailer.
4		Refunds made by the seller during the preceding return
5		period to purchasers, on account of tangible personal property
6		returned to the seller, shall be allowed as a deduction under
7		subdivision 5 of his monthly or quarterly return, as the case
8		may be, in case the seller had theretofore included the
9		receipts from the sale of such tangible personal property in a
10		return filed by him and had paid the tax imposed by this Act
11		with respect to such receipts.
12		Where the seller is a corporation, the return filed on
13		behalf of such corporation shall be signed by the president,
14		vice-president, secretary or treasurer or by the properly
15		accredited agent of such corporation.
16		Where the seller is a limited liability company, the return
17		filed on behalf of the limited liability company shall be
18		signed by a manager, member, or properly accredited agent of
19		the limited liability company.
20		Except as provided in this Section, the retailer filing the
21		return under this Section shall, at the time of filing such
22		return, pay to the Department the amount of tax imposed by this
23		Act less a discount of 2.1% prior to January 1, 1990 and 1.75%
24		on and after January 1, 1990, or $5 per calendar year,
25		whichever is greater, which is allowed to reimburse the
26		retailer for the expenses incurred in keeping records,
27		preparing and filing returns, remitting the tax and supplying
28		data to the Department on request. Any prepayment made pursuant
29		to Section 2d of this Act shall be included in the amount on
30		which such 2.1% or 1.75% discount is computed. In the case of
31		retailers who report and pay the tax on a transaction by
32		transaction basis, as provided in this Section, such discount
33		shall be taken with each such tax remittance instead of when
34		such retailer files his periodic return.

1		Before October 1, 2000, if the taxpayer's average monthly
2		tax liability to the Department under this Act, the Use Tax
3		Act, the Service Occupation Tax Act, and the Service Use Tax
4		Act, excluding any liability for prepaid sales tax to be
5		remitted in accordance with Section 2d of this Act, was $10,000
6		or more during the preceding 4 complete calendar quarters, he
7		shall file a return with the Department each month by the 20th
8		day of the month next following the month during which such tax
9		liability is incurred and shall make payments to the Department
10		on or before the 7th, 15th, 22nd and last day of the month
11		during which such liability is incurred. On and after October
12		1, 2000, if the taxpayer's average monthly tax liability to the
13		Department under this Act, the Use Tax Act, the Service
14		Occupation Tax Act, and the Service Use Tax Act, excluding any
15		liability for prepaid sales tax to be remitted in accordance
16		with Section 2d of this Act, was $20,000 or more during the
17		preceding 4 complete calendar quarters, he shall file a return
18		with the Department each month by the 20th day of the month
19		next following the month during which such tax liability is
20		incurred and shall make payment to the Department on or before
21		the 7th, 15th, 22nd and last day of the month during which such
22		liability is incurred. If the month during which such tax
23		liability is incurred began prior to January 1, 1985, each
24		payment shall be in an amount equal to 1/4 of the taxpayer's
25		actual liability for the month or an amount set by the
26		Department not to exceed 1/4 of the average monthly liability
27		of the taxpayer to the Department for the preceding 4 complete
28		calendar quarters (excluding the month of highest liability and
29		the month of lowest liability in such 4 quarter period). If the
30		month during which such tax liability is incurred begins on or
31		after January 1, 1985 and prior to January 1, 1987, each
32		payment shall be in an amount equal to 22.5% of the taxpayer's
33		actual liability for the month or 27.5% of the taxpayer's
34		liability for the same calendar month of the preceding year. If

1		the month during which such tax liability is incurred begins on
2		or after January 1, 1987 and prior to January 1, 1988, each
3		payment shall be in an amount equal to 22.5% of the taxpayer's
4		actual liability for the month or 26.25% of the taxpayer's
5		liability for the same calendar month of the preceding year. If
6		the month during which such tax liability is incurred begins on
7		or after January 1, 1988, and prior to January 1, 1989, or
8		begins on or after January 1, 1996, each payment shall be in an
9		amount equal to 22.5% of the taxpayer's actual liability for
10		the month or 25% of the taxpayer's liability for the same
11		calendar month of the preceding year. If the month during which
12		such tax liability is incurred begins on or after January 1,
13		1989, and prior to January 1, 1996, each payment shall be in an
14		amount equal to 22.5% of the taxpayer's actual liability for
15		the month or 25% of the taxpayer's liability for the same
16		calendar month of the preceding year or 100% of the taxpayer's
17		actual liability for the quarter monthly reporting period. The
18		amount of such quarter monthly payments shall be credited
19		against the final tax liability of the taxpayer's return for
20		that month. Before October 1, 2000, once applicable, the
21		requirement of the making of quarter monthly payments to the
22		Department by taxpayers having an average monthly tax liability
23		of $10,000 or more as determined in the manner provided above
24		shall continue until such taxpayer's average monthly liability
25		to the Department during the preceding 4 complete calendar
26		quarters (excluding the month of highest liability and the
27		month of lowest liability) is less than $9,000, or until such
28		taxpayer's average monthly liability to the Department as
29		computed for each calendar quarter of the 4 preceding complete
30		calendar quarter period is less than $10,000. However, if a
31		taxpayer can show the Department that a substantial change in
32		the taxpayer's business has occurred which causes the taxpayer
33		to anticipate that his average monthly tax liability for the
34		reasonably foreseeable future will fall below the $10,000

1		threshold stated above, then such taxpayer may petition the
2		Department for a change in such taxpayer's reporting status. On
3		and after October 1, 2000, once applicable, the requirement of
4		the making of quarter monthly payments to the Department by
5		taxpayers having an average monthly tax liability of $20,000 or
6		more as determined in the manner provided above shall continue
7		until such taxpayer's average monthly liability to the
8		Department during the preceding 4 complete calendar quarters
9		(excluding the month of highest liability and the month of
10		lowest liability) is less than $19,000 or until such taxpayer's
11		average monthly liability to the Department as computed for
12		each calendar quarter of the 4 preceding complete calendar
13		quarter period is less than $20,000. However, if a taxpayer can
14		show the Department that a substantial change in the taxpayer's
15		business has occurred which causes the taxpayer to anticipate
16		that his average monthly tax liability for the reasonably
17		foreseeable future will fall below the $20,000 threshold stated
18		above, then such taxpayer may petition the Department for a
19		change in such taxpayer's reporting status. The Department
20		shall change such taxpayer's reporting status unless it finds
21		that such change is seasonal in nature and not likely to be
22		long term. If any such quarter monthly payment is not paid at
23		the time or in the amount required by this Section, then the
24		taxpayer shall be liable for penalties and interest on the
25		difference between the minimum amount due as a payment and the
26		amount of such quarter monthly payment actually and timely
27		paid, except insofar as the taxpayer has previously made
28		payments for that month to the Department in excess of the
29		minimum payments previously due as provided in this Section.
30		The Department shall make reasonable rules and regulations to
31		govern the quarter monthly payment amount and quarter monthly
32		payment dates for taxpayers who file on other than a calendar
33		monthly basis.
34		The provisions of this paragraph apply before October 1,

1		2001. Without regard to whether a taxpayer is required to make
2		quarter monthly payments as specified above, any taxpayer who
3		is required by Section 2d of this Act to collect and remit
4		prepaid taxes and has collected prepaid taxes which average in
5		excess of $25,000 per month during the preceding 2 complete
6		calendar quarters, shall file a return with the Department as
7		required by Section 2f and shall make payments to the
8		Department on or before the 7th, 15th, 22nd and last day of the
9		month during which such liability is incurred. If the month
10		during which such tax liability is incurred began prior to the
11		effective date of this amendatory Act of 1985, each payment
12		shall be in an amount not less than 22.5% of the taxpayer's
13		actual liability under Section 2d. If the month during which
14		such tax liability is incurred begins on or after January 1,
15		1986, each payment shall be in an amount equal to 22.5% of the
16		taxpayer's actual liability for the month or 27.5% of the
17		taxpayer's liability for the same calendar month of the
18		preceding calendar year. If the month during which such tax
19		liability is incurred begins on or after January 1, 1987, each
20		payment shall be in an amount equal to 22.5% of the taxpayer's
21		actual liability for the month or 26.25% of the taxpayer's
22		liability for the same calendar month of the preceding year.
23		The amount of such quarter monthly payments shall be credited
24		against the final tax liability of the taxpayer's return for
25		that month filed under this Section or Section 2f, as the case
26		may be. Once applicable, the requirement of the making of
27		quarter monthly payments to the Department pursuant to this
28		paragraph shall continue until such taxpayer's average monthly
29		prepaid tax collections during the preceding 2 complete
30		calendar quarters is $25,000 or less. If any such quarter
31		monthly payment is not paid at the time or in the amount
32		required, the taxpayer shall be liable for penalties and
33		interest on such difference, except insofar as the taxpayer has
34		previously made payments for that month in excess of the

1		minimum payments previously due.
2		The provisions of this paragraph apply on and after October
3		1, 2001. Without regard to whether a taxpayer is required to
4		make quarter monthly payments as specified above, any taxpayer
5		who is required by Section 2d of this Act to collect and remit
6		prepaid taxes and has collected prepaid taxes that average in
7		excess of $20,000 per month during the preceding 4 complete
8		calendar quarters shall file a return with the Department as
9		required by Section 2f and shall make payments to the
10		Department on or before the 7th, 15th, 22nd and last day of the
11		month during which the liability is incurred. Each payment
12		shall be in an amount equal to 22.5% of the taxpayer's actual
13		liability for the month or 25% of the taxpayer's liability for
14		the same calendar month of the preceding year. The amount of
15		the quarter monthly payments shall be credited against the
16		final tax liability of the taxpayer's return for that month
17		filed under this Section or Section 2f, as the case may be.
18		Once applicable, the requirement of the making of quarter
19		monthly payments to the Department pursuant to this paragraph
20		shall continue until the taxpayer's average monthly prepaid tax
21		collections during the preceding 4 complete calendar quarters
22		(excluding the month of highest liability and the month of
23		lowest liability) is less than $19,000 or until such taxpayer's
24		average monthly liability to the Department as computed for
25		each calendar quarter of the 4 preceding complete calendar
26		quarters is less than $20,000. If any such quarter monthly
27		payment is not paid at the time or in the amount required, the
28		taxpayer shall be liable for penalties and interest on such
29		difference, except insofar as the taxpayer has previously made
30		payments for that month in excess of the minimum payments
31		previously due.
32		If any payment provided for in this Section exceeds the
33		taxpayer's liabilities under this Act, the Use Tax Act, the
34		Service Occupation Tax Act and the Service Use Tax Act, as

1		shown on an original monthly return, the Department shall, if
2		requested by the taxpayer, issue to the taxpayer a credit
3		memorandum no later than 30 days after the date of payment. The
4		credit evidenced by such credit memorandum may be assigned by
5		the taxpayer to a similar taxpayer under this Act, the Use Tax
6		Act, the Service Occupation Tax Act or the Service Use Tax Act,
7		in accordance with reasonable rules and regulations to be
8		prescribed by the Department. If no such request is made, the
9		taxpayer may credit such excess payment against tax liability
10		subsequently to be remitted to the Department under this Act,
11		the Use Tax Act, the Service Occupation Tax Act or the Service
12		Use Tax Act, in accordance with reasonable rules and
13		regulations prescribed by the Department. If the Department
14		subsequently determined that all or any part of the credit
15		taken was not actually due to the taxpayer, the taxpayer's 2.1%
16		and 1.75% vendor's discount shall be reduced by 2.1% or 1.75%
17		of the difference between the credit taken and that actually
18		due, and that taxpayer shall be liable for penalties and
19		interest on such difference.
20		If a retailer of motor fuel is entitled to a credit under
21		Section 2d of this Act which exceeds the taxpayer's liability
22		to the Department under this Act for the month which the
23		taxpayer is filing a return, the Department shall issue the
24		taxpayer a credit memorandum for the excess.
25		Beginning January 1, 1990, each month the Department shall
26		pay into the Local Government Tax Fund, a special fund in the
27		State treasury which is hereby created, the net revenue
28		realized for the preceding month from the 1% tax on sales of
29		food for human consumption which is to be consumed off the
30		premises where it is sold (other than alcoholic beverages, soft
31		drinks and food which has been prepared for immediate
32		consumption) and prescription and nonprescription medicines,
33		drugs, medical appliances and insulin, urine testing
34		materials, syringes and needles used by diabetics.

1		Beginning January 1, 1990, each month the Department shall
2		pay into the County and Mass Transit District Fund, a special
3		fund in the State treasury which is hereby created, 4% of the
4		net revenue realized for the preceding month from the 6.25%
5		general rate.
6		Beginning August 1, 2000, each month the Department shall
7		pay into the County and Mass Transit District Fund 20% of the
8		net revenue realized for the preceding month from the 1.25%
9		rate on the selling price of motor fuel and gasohol.
10		Beginning January 1, 1990, each month the Department shall
11		pay into the Local Government Tax Fund 16% of the net revenue
12		realized for the preceding month from the 6.25% general rate on
13		the selling price of tangible personal property.
14		Beginning August 1, 2000, each month the Department shall
15		pay into the Local Government Tax Fund 80% of the net revenue
16		realized for the preceding month from the 1.25% rate on the
17		selling price of motor fuel and gasohol.
18		Of the remainder of the moneys received by the Department
19		pursuant to this Act, (a) 1.75% thereof shall be paid into the
20		Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on
21		and after July 1, 1989, 3.8% thereof shall be paid into the
22		Build Illinois Fund; provided, however, that if in any fiscal
23		year the sum of (1) the aggregate of 2.2% or 3.8%, as the case
24		may be, of the moneys received by the Department and required
25		to be paid into the Build Illinois Fund pursuant to this Act,
26		Section 9 of the Use Tax Act, Section 9 of the Service Use Tax
27		Act, and Section 9 of the Service Occupation Tax Act, such Acts
28		being hereinafter called the "Tax Acts" and such aggregate of
29		2.2% or 3.8%, as the case may be, of moneys being hereinafter
30		called the "Tax Act Amount", and (2) the amount transferred to
31		the Build Illinois Fund from the State and Local Sales Tax
32		Reform Fund shall be less than the Annual Specified Amount (as
33		hereinafter defined), an amount equal to the difference shall
34		be immediately paid into the Build Illinois Fund from other

1		moneys received by the Department pursuant to the Tax Acts; the
2		"Annual Specified Amount" means the amounts specified below for
3		fiscal years 1986 through 1993:
13		and means the Certified Annual Debt Service Requirement (as
14		defined in Section 13 of the Build Illinois Bond Act) or the
15		Tax Act Amount, whichever is greater, for fiscal year 1994 and
16		each fiscal year thereafter; and further provided, that if on
17		the last business day of any month the sum of (1) the Tax Act
18		Amount required to be deposited into the Build Illinois Bond
19		Account in the Build Illinois Fund during such month and (2)
20		the amount transferred to the Build Illinois Fund from the
21		State and Local Sales Tax Reform Fund shall have been less than
22		1/12 of the Annual Specified Amount, an amount equal to the
23		difference shall be immediately paid into the Build Illinois
24		Fund from other moneys received by the Department pursuant to
25		the Tax Acts; and, further provided, that in no event shall the
26		payments required under the preceding proviso result in
27		aggregate payments into the Build Illinois Fund pursuant to
28		this clause (b) for any fiscal year in excess of the greater of
29		(i) the Tax Act Amount or (ii) the Annual Specified Amount for
30		such fiscal year. The amounts payable into the Build Illinois
31		Fund under clause (b) of the first sentence in this paragraph
32		shall be payable only until such time as the aggregate amount
33		on deposit under each trust indenture securing Bonds issued and
34		outstanding pursuant to the Build Illinois Bond Act is

1		sufficient, taking into account any future investment income,
2		to fully provide, in accordance with such indenture, for the
3		defeasance of or the payment of the principal of, premium, if
4		any, and interest on the Bonds secured by such indenture and on
5		any Bonds expected to be issued thereafter and all fees and
6		costs payable with respect thereto, all as certified by the
7		Director of the Bureau of the Budget (now Governor's Office of
8		Management and Budget). If on the last business day of any
9		month in which Bonds are outstanding pursuant to the Build
10		Illinois Bond Act, the aggregate of moneys deposited in the
11		Build Illinois Bond Account in the Build Illinois Fund in such
12		month shall be less than the amount required to be transferred
13		in such month from the Build Illinois Bond Account to the Build
14		Illinois Bond Retirement and Interest Fund pursuant to Section
15		13 of the Build Illinois Bond Act, an amount equal to such
16		deficiency shall be immediately paid from other moneys received
17		by the Department pursuant to the Tax Acts to the Build
18		Illinois Fund; provided, however, that any amounts paid to the
19		Build Illinois Fund in any fiscal year pursuant to this
20		sentence shall be deemed to constitute payments pursuant to
21		clause (b) of the first sentence of this paragraph and shall
22		reduce the amount otherwise payable for such fiscal year
23		pursuant to that clause (b). The moneys received by the
24		Department pursuant to this Act and required to be deposited
25		into the Build Illinois Fund are subject to the pledge, claim
26		and charge set forth in Section 12 of the Build Illinois Bond
27		Act.
28		Subject to payment of amounts into the Build Illinois Fund
29		as provided in the preceding paragraph or in any amendment
30		thereto hereafter enacted, the following specified monthly
31		installment of the amount requested in the certificate of the
32		Chairman of the Metropolitan Pier and Exposition Authority
33		provided under Section 8.25f of the State Finance Act, but not
34		in excess of sums designated as "Total Deposit", shall be

1		deposited in the aggregate from collections under Section 9 of
2		the Use Tax Act, Section 9 of the Service Use Tax Act, Section
3		9 of the Service Occupation Tax Act, and Section 3 of the
4		Retailers' Occupation Tax Act into the McCormick Place
5		Expansion Project Fund in the specified fiscal years.

12		Beginning July 20, 1993 and in each month of each fiscal
13		year thereafter, one-eighth of the amount requested in the
14		certificate of the Chairman of the Metropolitan Pier and
15		Exposition Authority for that fiscal year, less the amount
16		deposited into the McCormick Place Expansion Project Fund by
17		the State Treasurer in the respective month under subsection
18		(g) of Section 13 of the Metropolitan Pier and Exposition
19		Authority Act, plus cumulative deficiencies in the deposits
20		required under this Section for previous months and years,
21		shall be deposited into the McCormick Place Expansion Project
22		Fund, until the full amount requested for the fiscal year, but
23		not in excess of the amount specified above as "Total Deposit",
24		has been deposited.
25		Subject to payment of amounts into the Build Illinois Fund
26		and the McCormick Place Expansion Project Fund pursuant to the
27		preceding paragraphs or in any amendments thereto hereafter
28		enacted, beginning July 1, 1993, the Department shall each
29		month pay into the Illinois Tax Increment Fund 0.27% of 80% of
30		the net revenue realized for the preceding month from the 6.25%
31		general rate on the selling price of tangible personal
32		property.
33		Subject to payment of amounts into the Build Illinois Fund
34		and the McCormick Place Expansion Project Fund pursuant to the

1		preceding paragraphs or in any amendments thereto hereafter
2		enacted, beginning with the receipt of the first report of
3		taxes paid by an eligible business and continuing for a 25-year
4		period, the Department shall each month pay into the Energy
5		Infrastructure Fund 80% of the net revenue realized from the
6		6.25% general rate on the selling price of Illinois-mined coal
7		that was sold to an eligible business. For purposes of this
8		paragraph, the term "eligible business" means a new electric
9		generating facility certified pursuant to Section 605-332 of
10		the Department of Commerce and Economic Opportunity Community
11		Affairs Law of the Civil Administrative Code of Illinois.
12		Of the remainder of the moneys received by the Department
13		pursuant to this Act, 75% thereof shall be paid into the State
14		Treasury and 25% shall be reserved in a special account and
15		used only for the transfer to the Common School Fund as part of
16		the monthly transfer from the General Revenue Fund in
17		accordance with Section 8a of the State Finance Act.
18		The Department may, upon separate written notice to a
19		taxpayer, require the taxpayer to prepare and file with the
20		Department on a form prescribed by the Department within not
21		less than 60 days after receipt of the notice an annual
22		information return for the tax year specified in the notice.
23		Such annual return to the Department shall include a statement
24		of gross receipts as shown by the retailer's last Federal
25		income tax return. If the total receipts of the business as
26		reported in the Federal income tax return do not agree with the
27		gross receipts reported to the Department of Revenue for the
28		same period, the retailer shall attach to his annual return a
29		schedule showing a reconciliation of the 2 amounts and the
30		reasons for the difference. The retailer's annual return to the
31		Department shall also disclose the cost of goods sold by the
32		retailer during the year covered by such return, opening and
33		closing inventories of such goods for such year, costs of goods
34		used from stock or taken from stock and given away by the

1		retailer during such year, payroll information of the
2		retailer's business during such year and any additional
3		reasonable information which the Department deems would be
4		helpful in determining the accuracy of the monthly, quarterly
5		or annual returns filed by such retailer as provided for in
6		this Section.
7		If the annual information return required by this Section
8		is not filed when and as required, the taxpayer shall be liable
9		as follows:
10		(i) Until January 1, 1994, the taxpayer shall be liable
11		for a penalty equal to 1/6 of 1% of the tax due from such
12		taxpayer under this Act during the period to be covered by
13		the annual return for each month or fraction of a month
14		until such return is filed as required, the penalty to be
15		assessed and collected in the same manner as any other
16		penalty provided for in this Act.
17		(ii) On and after January 1, 1994, the taxpayer shall
18		be liable for a penalty as described in Section 3-4 of the
19		Uniform Penalty and Interest Act.
20		The chief executive officer, proprietor, owner or highest
21		ranking manager shall sign the annual return to certify the
22		accuracy of the information contained therein. Any person who
23		willfully signs the annual return containing false or
24		inaccurate information shall be guilty of perjury and punished
25		accordingly. The annual return form prescribed by the
26		Department shall include a warning that the person signing the
27		return may be liable for perjury.
28		The provisions of this Section concerning the filing of an
29		annual information return do not apply to a retailer who is not
30		required to file an income tax return with the United States
31		Government.
32		As soon as possible after the first day of each month, upon
33		certification of the Department of Revenue, the Comptroller
34		shall order transferred and the Treasurer shall transfer from

1		the General Revenue Fund to the Motor Fuel Tax Fund an amount
2		equal to 1.7% of 80% of the net revenue realized under this Act
3		for the second preceding month. Beginning April 1, 2000, this
4		transfer is no longer required and shall not be made.
5		Net revenue realized for a month shall be the revenue
6		collected by the State pursuant to this Act, less the amount
7		paid out during that month as refunds to taxpayers for
8		overpayment of liability.
9		For greater simplicity of administration, manufacturers,
10		importers and wholesalers whose products are sold at retail in
11		Illinois by numerous retailers, and who wish to do so, may
12		assume the responsibility for accounting and paying to the
13		Department all tax accruing under this Act with respect to such
14		sales, if the retailers who are affected do not make written
15		objection to the Department to this arrangement.
16		Any person who promotes, organizes, provides retail
17		selling space for concessionaires or other types of sellers at
18		the Illinois State Fair, DuQuoin State Fair, county fairs,
19		local fairs, art shows, flea markets and similar exhibitions or
20		events, including any transient merchant as defined by Section
21		2 of the Transient Merchant Act of 1987, is required to file a
22		report with the Department providing the name of the merchant's
23		business, the name of the person or persons engaged in
24		merchant's business, the permanent address and Illinois
25		Retailers Occupation Tax Registration Number of the merchant,
26		the dates and location of the event and other reasonable
27		information that the Department may require. The report must be
28		filed not later than the 20th day of the month next following
29		the month during which the event with retail sales was held.
30		Any person who fails to file a report required by this Section
31		commits a business offense and is subject to a fine not to
32		exceed $250.
33		Any person engaged in the business of selling tangible
34		personal property at retail as a concessionaire or other type

1		of seller at the Illinois State Fair, county fairs, art shows,
2		flea markets and similar exhibitions or events, or any
3		transient merchants, as defined by Section 2 of the Transient
4		Merchant Act of 1987, may be required to make a daily report of
5		the amount of such sales to the Department and to make a daily
6		payment of the full amount of tax due. The Department shall
7		impose this requirement when it finds that there is a
8		significant risk of loss of revenue to the State at such an
9		exhibition or event. Such a finding shall be based on evidence
10		that a substantial number of concessionaires or other sellers
11		who are not residents of Illinois will be engaging in the
12		business of selling tangible personal property at retail at the
13		exhibition or event, or other evidence of a significant risk of
14		loss of revenue to the State. The Department shall notify
15		concessionaires and other sellers affected by the imposition of
16		this requirement. In the absence of notification by the
17		Department, the concessionaires and other sellers shall file
18		their returns as otherwise required in this Section.
19		(Source: P.A. 92-12, eff. 7-1-01; 92-16, eff. 6-28-01; 92-208,
20		eff. 8-2-01; 92-484, eff. 8-23-01; 92-492, eff. 1-1-02; 92-600,
21		eff. 6-28-02; 92-651, eff. 7-11-02; 93-22, eff. 6-20-03; 93-24,
22		eff. 6-20-03; revised 10-15-03.)

ARTICLE 25

24		Section 25-5. The Illinois Income Tax Act is amended by
25		changing Sections 203, 205, 305, and 1501 as follows:
26		(35 ILCS 5/203) (from Ch. 120, par. 2-203)
27		Sec. 203. Base income defined.
28		(a) Individuals.
29		(1) In general. In the case of an individual, base
30		income means an amount equal to the taxpayer's adjusted
31		gross income for the taxable year as modified by paragraph

1		(2).
2		(2) Modifications. The adjusted gross income referred
3		to in paragraph (1) shall be modified by adding thereto the
4		sum of the following amounts:
5		(A) An amount equal to all amounts paid or accrued
6		to the taxpayer as interest or dividends during the
7		taxable year to the extent excluded from gross income
8		in the computation of adjusted gross income, except
9		stock dividends of qualified public utilities
10		described in Section 305(e) of the Internal Revenue
11		Code;
12		(B) An amount equal to the amount of tax imposed by
13		this Act to the extent deducted from gross income in
14		the computation of adjusted gross income for the
15		taxable year;
16		(C) An amount equal to the amount received during
17		the taxable year as a recovery or refund of real
18		property taxes paid with respect to the taxpayer's
19		principal residence under the Revenue Act of 1939 and
20		for which a deduction was previously taken under
21		subparagraph (L) of this paragraph (2) prior to July 1,
22		1991, the retrospective application date of Article 4
23		of Public Act 87-17. In the case of multi-unit or
24		multi-use structures and farm dwellings, the taxes on
25		the taxpayer's principal residence shall be that
26		portion of the total taxes for the entire property
27		which is attributable to such principal residence;
28		(D) 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 adjusted gross income;
32		(D-5) An amount, to the extent not included in
33		adjusted gross income, equal to the amount of money
34		withdrawn by the taxpayer in the taxable year from a

1		medical care savings account and the interest earned on
2		the account in the taxable year of a withdrawal
3		pursuant to subsection (b) of Section 20 of the Medical
4		Care Savings Account Act or subsection (b) of Section
5		20 of the Medical Care Savings Account Act of 2000;
6		(D-10) For taxable years ending after December 31,
7		1997, an amount equal to any eligible remediation costs
8		that the individual deducted in computing adjusted
9		gross income and for which the individual claims a
10		credit under subsection (l) of Section 201;
11		(D-15) 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-16) 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-15), then an amount equal to the
23		aggregate amount of the deductions taken in all taxable
24		years under subparagraph (Z) 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; . and
29		(D-17) For taxable years ending on or after
30		December 31, 2004, an amount equal to the amount
31		otherwise allowed as a deduction in computing base
32		income for interest paid, accrued, or incurred,
33		directly or indirectly, to a foreign person who would
34		be a member of the same unitary business group but for

1		the fact that foreign person's business activity
2		outside the United States is 80% or more of the foreign
3		person's total business activity. The addition
4		modification required by this subparagraph shall be
5		reduced to the extent that dividends were included in
6		base income of the unitary group for the same taxable
7		year and received by the taxpayer or by a member of the
8		taxpayer's unitary business group (including amounts
9		included in gross income under Sections 951 through 964
10		of the Internal Revenue Code and amounts included in
11		gross income under Section 78 of the Internal Revenue
12		Code) with respect to the stock of the same person to
13		whom the interest was paid, accrued, or incurred.
14		This paragraph shall not apply to the following:
15		(i) an item of interest paid, accrued, or
16		incurred, directly or indirectly, to a foreign
17		person who is subject in a foreign country or
18		state, other than a state which requires mandatory
19		unitary reporting, to a tax on or measured by net
20		income with respect to such interest; or
21		(ii) an item of interest paid, accrued, or
22		incurred, directly or indirectly, to a foreign
23		person if the taxpayer can establish, based on a
24		preponderance of the evidence, both of the
25		following:
26		(a) the foreign person, during the same
27		taxable year, paid, accrued, or incurred, the
28		interest to a person that is not a related
29		member, and
30		(b) the transaction giving rise to the
31		interest expense between the taxpayer and the
32		foreign person did not have as a principal
33		purpose the avoidance of Illinois income tax,
34		and is paid pursuant to a contract or agreement

1		that reflects an arms-length interest rate and
2		terms; or
3		(iii) the taxpayer can establish, based on
4		clear and convincing evidence, that the interest
5		paid, accrued, or incurred relates to a contract or
6		agreement entered into at arm's length rates and
7		terms and the principal purpose for the payment is
8		not federal or Illinois tax avoidance; or
9		(iv) an item of interest paid, accrued, or
10		incurred, directly or indirectly, to a foreign
11		person if the taxpayer establishes by clear and
12		convincing evidence that the adjustments are
13		unreasonable; or if the taxpayer and the Director
14		agree in writing to the application or use of an
15		alternative method of apportionment under Section
16		304(f).
17		Nothing in this subsection shall preclude the
18		Director from making any other adjustment
19		otherwise allowed under Section 404 of this Act for
20		any tax year beginning after the effective date of
21		this amendment provided such adjustment is made
22		pursuant to regulation adopted by the Department
23		and such regulations provide methods and standards
24		by which the Department will utilize its authority
25		under Section 404 of this Act;
26		(D-18) For taxable years ending on or after
27		December 31, 2004, an amount equal to the amount of
28		intangible expenses and costs otherwise allowed as a
29		deduction in computing base income, and that were paid,
30		accrued, or incurred, directly or indirectly, to a
31		foreign person who would be a member of the same
32		unitary business group but for the fact that the
33		foreign person's business activity outside the United
34		States is 80% or more of that person's total business

1		activity. The addition modification required by this
2		subparagraph shall be reduced to the extent that
3		dividends were included in base income of the unitary
4		group for the same taxable year and received by the
5		taxpayer or by a member of the taxpayer's unitary
6		business group (including amounts included in gross
7		income under Sections 951 through 964 of the Internal
8		Revenue Code and amounts included in gross income under
9		Section 78 of the Internal Revenue Code) with respect
10		to the stock of the same person to whom the intangible
11		expenses and costs were directly or indirectly paid,
12		incurred, or accrued. The preceding sentence does not
13		apply to the extent that the same dividends caused a
14		reduction to the addition modification required under
15		Section 203(a)(2)(D-17) of this Act. As used in this
16		subparagraph, the term "intangible expenses and costs"
17		includes (1) expenses, losses, and costs for, or
18		related to, the direct or indirect acquisition, use,
19		maintenance or management, ownership, sale, exchange,
20		or any other disposition of intangible property; (2)
21		losses incurred, directly or indirectly, from
22		factoring transactions or discounting transactions;
23		(3) royalty, patent, technical, and copyright fees;
24		(4) licensing fees; and (5) other similar expenses and
25		costs. For purposes of this subparagraph, "intangible
26		property" includes patents, patent applications, trade
27		names, trademarks, service marks, copyrights, mask
28		works, trade secrets, and similar types of intangible
29		assets.
30		This paragraph shall not apply to the following:
31		(i) any item of intangible expenses or costs
32		paid, accrued, or incurred, directly or
33		indirectly, from a transaction with a foreign
34		person who is subject in a foreign country or

1		state, other than a state which requires mandatory
2		unitary reporting, to a tax on or measured by net
3		income with respect to such item; or
4		(ii) any item of intangible expense or cost
5		paid, accrued, or incurred, directly or
6		indirectly, if the taxpayer can establish, based
7		on a preponderance of the evidence, both of the
8		following:
9		(a) the foreign person during the same
10		taxable year paid, accrued, or incurred, the
11		intangible expense or cost to a person that is
12		not a related member, and
13		(b) the transaction giving rise to the
14		intangible expense or cost between the
15		taxpayer and the foreign person did not have as
16		a principal purpose the avoidance of Illinois
17		income tax, and is paid pursuant to a contract
18		or agreement that reflects arms length terms;
19		or
20		(iii) any item of intangible expense or cost
21		paid, accrued, or incurred, directly or
22		indirectly, from a transaction with a foreign
23		person if the taxpayer establishes by clear and
24		convincing evidence, that the adjustments are
25		unreasonable; or if the taxpayer and the Director
26		agree in writing to the application or use of an
27		alternative method of apportionment under section
28		304(f);
29		Nothing in this subsection shall preclude the
30		Director from making any other adjustment
31		otherwise allowed under Section 404 of this Act for
32		any tax year beginning after the effective date of
33		this amendment provided such adjustment is made
34		pursuant to regulation adopted by the Department

1		and such regulations provide methods and standards
2		by which the Department will utilize its authority
3		under Section 404 of this Act;
4		(D-20) (D-15) For taxable years beginning on or
5		after January 1, 2002, in the case of a distribution
6		from a qualified tuition program under Section 529 of
7		the Internal Revenue Code, other than (i) a
8		distribution from a College Savings Pool created under
9		Section 16.5 of the State Treasurer Act or (ii) a
10		distribution from the Illinois Prepaid Tuition Trust
11		Fund, an amount equal to the amount excluded from gross
12		income under Section 529(c)(3)(B);
13		and by deducting from the total so obtained the sum of the
14		following amounts:
15		(E) For taxable years ending before December 31,
16		2001, any amount included in such total in respect of
17		any compensation (including but not limited to any
18		compensation paid or accrued to a serviceman while a
19		prisoner of war or missing in action) paid to a
20		resident by reason of being on active duty in the Armed
21		Forces of the United States and in respect of any
22		compensation paid or accrued to a resident who as a
23		governmental employee was a prisoner of war or missing
24		in action, and in respect of any compensation paid to a
25		resident in 1971 or thereafter for annual training
26		performed pursuant to Sections 502 and 503, Title 32,
27		United States Code as a member of the Illinois National
28		Guard. For taxable years ending on or after December
29		31, 2001, any amount included in such total in respect
30		of any compensation (including but not limited to any
31		compensation paid or accrued to a serviceman while a
32		prisoner of war or missing in action) paid to a
33		resident by reason of being a member of any component
34		of the Armed Forces of the United States and in respect

1		of any compensation paid or accrued to a resident who
2		as a governmental employee was a prisoner of war or
3		missing in action, and in respect of any compensation
4		paid to a resident in 2001 or thereafter by reason of
5		being a member of the Illinois National Guard. The
6		provisions of this amendatory Act of the 92nd General
7		Assembly are exempt from the provisions of Section 250;
8		(F) An amount equal to all amounts included in such
9		total pursuant to the provisions of Sections 402(a),
10		402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
11		Internal Revenue Code, or included in such total as
12		distributions under the provisions of any retirement
13		or disability plan for employees of any governmental
14		agency or unit, or retirement payments to retired
15		partners, which payments are excluded in computing net
16		earnings from self employment by Section 1402 of the
17		Internal Revenue Code and regulations adopted pursuant
18		thereto;
19		(G) The valuation limitation amount;
20		(H) An amount equal to the amount of any tax
21		imposed by this Act which was refunded to the taxpayer
22		and included in such total for the taxable year;
23		(I) An amount equal to all amounts included in such
24		total pursuant to the provisions of Section 111 of the
25		Internal Revenue Code as a recovery of items previously
26		deducted from adjusted gross income in the computation
27		of taxable income;
28		(J) 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		(K) An amount equal to those dividends included in

1		such total that were paid by a corporation that
2		conducts business operations in a federally designated
3		Foreign Trade Zone or Sub-Zone and that is designated a
4		High Impact Business located in Illinois; provided
5		that dividends eligible for the deduction provided in
6		subparagraph (J) of paragraph (2) of this subsection
7		shall not be eligible for the deduction provided under
8		this subparagraph (K);
9		(L) For taxable years ending after December 31,
10		1983, an amount equal to all social security benefits
11		and railroad retirement benefits included in such
12		total pursuant to Sections 72(r) and 86 of the Internal
13		Revenue Code;
14		(M) With the exception of any amounts subtracted
15		under subparagraph (N), an amount equal to the sum of
16		all amounts disallowed as deductions by (i) Sections
17		171(a) (2), and 265(2) of the Internal Revenue Code of
18		1954, as now or hereafter amended, and all amounts of
19		expenses allocable to interest and disallowed as
20		deductions by Section 265(1) of the Internal Revenue
21		Code of 1954, as now or hereafter amended; and (ii) for
22		taxable years ending on or after August 13, 1999,
23		Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
24		the Internal Revenue Code; the provisions of this
25		subparagraph are exempt from the provisions of Section
26		250;
27		(N) An amount equal to all amounts included in such
28		total which are exempt from taxation by this State
29		either by reason of its statutes or Constitution or by
30		reason of the Constitution, treaties or statutes of the
31		United States; provided that, in the case of any
32		statute of this State that exempts income derived from
33		bonds or other obligations from the tax imposed under
34		this Act, the amount exempted shall be the interest net

1		of bond premium amortization;
2		(O) An amount equal to any contribution made to a
3		job training project established pursuant to the Tax
4		Increment Allocation Redevelopment Act;
5		(P) 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		(Q) An amount equal to any amounts included in such
11		total, received by the taxpayer as an acceleration in
12		the payment of life, endowment or annuity benefits in
13		advance of the time they would otherwise be payable as
14		an indemnity for a terminal illness;
15		(R) An amount equal to the amount of any federal or
16		State bonus paid to veterans of the Persian Gulf War;
17		(S) An amount, to the extent included in adjusted
18		gross income, equal to the amount of a contribution
19		made in the taxable year on behalf of the taxpayer to a
20		medical care savings account established under the
21		Medical Care Savings Account Act or the Medical Care
22		Savings Account Act of 2000 to the extent the
23		contribution is accepted by the account administrator
24		as provided in that Act;
25		(T) An amount, to the extent included in adjusted
26		gross income, equal to the amount of interest earned in
27		the taxable year on a medical care savings account
28		established under the Medical Care Savings Account Act
29		or the Medical Care Savings Account Act of 2000 on
30		behalf of the taxpayer, other than interest added
31		pursuant to item (D-5) of this paragraph (2);
32		(U) For one taxable year beginning on or after
33		January 1, 1994, an amount equal to the total amount of
34		tax imposed and paid under subsections (a) and (b) of

1		Section 201 of this Act on grant amounts received by
2		the taxpayer under the Nursing Home Grant Assistance
3		Act during the taxpayer's taxable years 1992 and 1993;
4		(V) Beginning with tax years ending on or after
5		December 31, 1995 and ending with tax years ending on
6		or before December 31, 2004, an amount equal to the
7		amount paid by a taxpayer who is a self-employed
8		taxpayer, a partner of a partnership, or a shareholder
9		in a Subchapter S corporation for health insurance or
10		long-term care insurance for that taxpayer or that
11		taxpayer's spouse or dependents, to the extent that the
12		amount paid for that health insurance or long-term care
13		insurance may be deducted under Section 213 of the
14		Internal Revenue Code of 1986, has not been deducted on
15		the federal income tax return of the taxpayer, and does
16		not exceed the taxable income attributable to that
17		taxpayer's income, self-employment income, or
18		Subchapter S corporation income; except that no
19		deduction shall be allowed under this item (V) if the
20		taxpayer is eligible to participate in any health
21		insurance or long-term care insurance plan of an
22		employer of the taxpayer or the taxpayer's spouse. The
23		amount of the health insurance and long-term care
24		insurance subtracted under this item (V) shall be
25		determined by multiplying total health insurance and
26		long-term care insurance premiums paid by the taxpayer
27		times a number that represents the fractional
28		percentage of eligible medical expenses under Section
29		213 of the Internal Revenue Code of 1986 not actually
30		deducted on the taxpayer's federal income tax return;
31		(W) For taxable years beginning on or after January
32		1, 1998, all amounts included in the taxpayer's federal
33		gross income in the taxable year from amounts converted
34		from a regular IRA to a Roth IRA. This paragraph is

1		exempt from the provisions of Section 250;
2		(X) For taxable year 1999 and thereafter, an amount
3		equal to the amount of any (i) distributions, to the
4		extent includible in gross income for federal income
5		tax purposes, made to the taxpayer because of his or
6		her status as a victim of persecution for racial or
7		religious reasons by Nazi Germany or any other Axis
8		regime or as an heir of the victim and (ii) items of
9		income, to the extent includible in gross income for
10		federal income tax purposes, attributable to, derived
11		from or in any way related to assets stolen from,
12		hidden from, or otherwise lost to a victim of
13		persecution for racial or religious reasons by Nazi
14		Germany or any other Axis regime immediately prior to,
15		during, and immediately after World War II, including,
16		but not limited to, interest on the proceeds receivable
17		as insurance under policies issued to a victim of
18		persecution for racial or religious reasons by Nazi
19		Germany or any other Axis regime by European insurance
20		companies immediately prior to and during World War II;
21		provided, however, this subtraction from federal
22		adjusted gross income does not apply to assets acquired
23		with such assets or with the proceeds from the sale of
24		such assets; provided, further, this paragraph shall
25		only apply to a taxpayer who was the first recipient of
26		such assets after their recovery and who is a victim of
27		persecution for racial or religious reasons by Nazi
28		Germany or any other Axis regime or as an heir of the
29		victim. The amount of and the eligibility for any
30		public assistance, benefit, or similar entitlement is
31		not affected by the inclusion of items (i) and (ii) of
32		this paragraph in gross income for federal income tax
33		purposes. This paragraph is exempt from the provisions
34		of Section 250;

1		(Y) For taxable years beginning on or after January
2		1, 2002, moneys contributed in the taxable year to a
3		College Savings Pool account under Section 16.5 of the
4		State Treasurer Act, except that amounts excluded from
5		gross income under Section 529(c)(3)(C)(i) of the
6		Internal Revenue Code shall not be considered moneys
7		contributed under this subparagraph (Y). This
8		subparagraph (Y) is exempt from the provisions of
9		Section 250;
10		(Z) For taxable years 2001 and thereafter, for the
11		taxable year in which the bonus depreciation deduction
12		(30% of the adjusted basis of the qualified property)
13		is taken on the taxpayer's federal income tax return
14		under subsection (k) of Section 168 of the Internal
15		Revenue Code and for each applicable taxable year
16		thereafter, an amount equal to "x", where:
17		(1) "y" equals the amount of the depreciation
18		deduction taken for the taxable year on the
19		taxpayer's federal income tax return on property
20		for which the bonus depreciation deduction (30% of
21		the adjusted basis of the qualified property) was
22		taken in any year under subsection (k) of Section
23		168 of the Internal Revenue Code, but not including
24		the bonus depreciation deduction; and
25		(2) "x" equals "y" multiplied by 30 and then
26		divided by 70 (or "y" multiplied by 0.429).
27		The aggregate amount deducted under this
28		subparagraph in all taxable years for any one piece of
29		property may not exceed the amount of the bonus
30		depreciation deduction (30% of the adjusted basis of
31		the qualified property) taken on that property on the
32		taxpayer's federal income tax return under subsection
33		(k) of Section 168 of the Internal Revenue Code; and
34		(AA) If the taxpayer reports a capital gain or loss

1		on the taxpayer's federal income tax return for the
2		taxable year based on a sale or transfer of property
3		for which the taxpayer was required in any taxable year
4		to make an addition modification under subparagraph
5		(D-15), then an amount equal to that addition
6		modification.
7		The taxpayer is allowed to take the deduction under
8		this subparagraph only once with respect to any one
9		piece of property; and
10		(BB) (Z) Any amount included in adjusted gross
11		income, other than salary, received by a driver in a
12		ridesharing arrangement using a motor vehicle; .
13		(CC) The amount of (i) any interest income (net of
14		the deductions allocable thereto) taken into account
15		for the taxable year with respect to a transaction with
16		a taxpayer that is required to make an addition
17		modification with respect to such transaction under
18		Section 203(a)(2)(D-17), 203(b)(2)(E-13),
19		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
20		the amount of that addition modification, and (ii) any
21		income from intangible property (net of the deductions
22		allocable thereto) taken into account for the taxable
23		year with respect to a transaction with a taxpayer that
24		is required to make an addition modification with
25		respect to such transaction under Section
26		203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
27		203(d)(2)(D-8), but not to exceed the amount of that
28		addition modification;
29		(DD) An amount equal to the interest income taken
30		into account for the taxable year (net of the
31		deductions allocable thereto) with respect to
32		transactions with a foreign person who would be a
33		member of the taxpayer's unitary business group but for
34		the fact that the foreign person's business activity

1		outside the United States is 80% or more of that
2		person's total business activity, but not to exceed the
3		addition modification required to be made for the same
4		taxable year under Section 203(a)(2)(D-17) for
5		interest paid, accrued, or incurred, directly or
6		indirectly, to the same foreign person; and
7		(EE) An amount equal to the income from intangible
8		property taken into account for the taxable year (net
9		of the deductions allocable thereto) with respect to
10		transactions with a foreign person who would be a
11		member of the taxpayer's unitary business group but for
12		the fact that the foreign person's business activity
13		outside the United States is 80% or more of that
14		person's total business activity, but not to exceed the
15		addition modification required to be made for the same
16		taxable year under Section 203(a)(2)(D-18) for
17		intangible expenses and costs paid, accrued, or
18		incurred, directly or indirectly, to the same foreign
19		person.
20		(b) Corporations.
21		(1) In general. In the case of a corporation, base
22		income means an amount equal to the taxpayer's taxable
23		income for the taxable year as modified by paragraph (2).
24		(2) Modifications. The taxable income referred to in
25		paragraph (1) shall be modified by adding thereto the sum
26		of the following amounts:
27		(A) An amount equal to all amounts paid or accrued
28		to the taxpayer as interest and all distributions
29		received from regulated investment companies during
30		the taxable year to the extent excluded from gross
31		income in the computation of taxable income;
32		(B) An amount equal to the amount of tax imposed by
33		this Act to the extent deducted from gross income in

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

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

1		(E-12) For taxable years ending on or after
2		December 31, 2004, an amount equal to the amount
3		otherwise allowed as a deduction in computing base
4		income for interest paid, accrued, or incurred,
5		directly or indirectly, to a foreign person who would
6		be a member of the same unitary business group but for
7		the fact the foreign person's business activity
8		outside the United States is 80% or more of the foreign
9		person's total business activity. The addition
10		modification required by this subparagraph shall be
11		reduced to the extent that dividends were included in
12		base income of the unitary group for the same taxable
13		year and received by the taxpayer or by a member of the
14		taxpayer's unitary business group (including amounts
15		included in gross income pursuant to Sections 951
16		through 964 of the Internal Revenue Code and amounts
17		included in gross income under Section 78 of the
18		Internal Revenue Code) with respect to the stock of the
19		same person to whom the interest was paid, accrued, or
20		incurred.
21		This paragraph shall not apply to the following:
22		(i) an item of interest paid, accrued, or
23		incurred, directly or indirectly, to a foreign
24		person who is subject in a foreign country or
25		state, other than a state which requires mandatory
26		unitary reporting, to a tax on or measured by net
27		income with respect to such interest; or
28		(ii) an item of interest paid, accrued, or
29		incurred, directly or indirectly, to a foreign
30		person if the taxpayer can establish, based on a
31		preponderance of the evidence, both of the
32		following:
33		(a) the foreign person, during the same
34		taxable year, paid, accrued, or incurred, the

1		interest to a person that is not a related
2		member, and
3		(b) the transaction giving rise to the
4		interest expense between the taxpayer and the
5		foreign person did not have as a principal
6		purpose the avoidance of Illinois income tax,
7		and is paid pursuant to a contract or agreement
8		that reflects an arms-length interest rate and
9		terms; or
10		(iii) the taxpayer can establish, based on
11		clear and convincing evidence, that the interest
12		paid, accrued, or incurred relates to a contract or
13		agreement entered into at arm's length rates and
14		terms and the principal purpose for the payment is
15		not federal or Illinois tax avoidance; or
16		(iv) an item of interest paid, accrued, or
17		incurred, directly or indirectly, to a foreign
18		person if the taxpayer establishes by clear and
19		convincing evidence that the adjustments are
20		unreasonable; or if the taxpayer and the Director
21		agree in writing to the application or use of an
22		alternative method of apportionment under Section
23		304(f).
24		Nothing in this subsection shall preclude the
25		Director from making any other adjustment
26		otherwise allowed under Section 404 of this Act for
27		any tax year beginning after the effective date of
28		this amendment provided such adjustment is made
29		pursuant to regulation adopted by the Department
30		and such regulations provide methods and standards
31		by which the Department will utilize its authority
32		under Section 404 of this Act;
33		(E-13) For taxable years ending on or after
34		December 31, 2004, an amount equal to the amount of

1		intangible expenses and costs otherwise allowed as a
2		deduction in computing base income, and that were paid,
3		accrued, or incurred, directly or indirectly, to a
4		foreign person who would be a member of the same
5		unitary business group but for the fact that the
6		foreign person's business activity outside the United
7		States is 80% or more of that person's total business
8		activity. The addition modification required by this
9		subparagraph shall be reduced to the extent that
10		dividends were included in base income of the unitary
11		group for the same taxable year and received by the
12		taxpayer or by a member of the taxpayer's unitary
13		business group (including amounts included in gross
14		income pursuant to Sections 951 through 964 of the
15		Internal Revenue Code and amounts included in gross
16		income under Section 78 of the Internal Revenue Code)
17		with respect to the stock of the same person to whom
18		the intangible expenses and costs were directly or
19		indirectly paid, incurred, or accrued. The preceding
20		sentence shall not apply to the extent that the same
21		dividends caused a reduction to the addition
22		modification required under Section 203(b)(2)(E-12) of
23		this Act. As used in this subparagraph, the term
24		"intangible expenses and costs" includes (1) expenses,
25		losses, and costs for, or related to, the direct or
26		indirect acquisition, use, maintenance or management,
27		ownership, sale, exchange, or any other disposition of
28		intangible property; (2) losses incurred, directly or
29		indirectly, from factoring transactions or discounting
30		transactions; (3) royalty, patent, technical, and
31		copyright fees; (4) licensing fees; and (5) other
32		similar expenses and costs. For purposes of this
33		subparagraph, "intangible property" includes patents,
34		patent applications, trade names, trademarks, service

1		marks, copyrights, mask works, trade secrets, and
2		similar types of intangible assets.
3		This paragraph shall not apply to the following:
4		(i) any item of intangible expenses or costs paid,
5		accrued, or incurred, directly or indirectly, from
6		a transaction with a foreign person who is subject
7		in a foreign country or state, other than a state
8		which requires mandatory unitary reporting, to a
9		tax on or measured by net income with respect to
10		such item; or
11		(ii) any item of intangible expense or cost paid,
12		accrued, or incurred, directly or indirectly, if
13		the taxpayer can establish, based on a
14		preponderance of the evidence, both of the
15		following:
16		(a) the foreign person during the same taxable
17		year paid, accrued, or incurred, the
18		intangible expense or cost to a person that is
19		not a related member, and
20		(b) the transaction giving rise to the
21		intangible expense or cost between the
22		taxpayer and the foreign person did not have as
23		a principal purpose the avoidance of Illinois
24		income tax, and is paid pursuant to a contract
25		or agreement that reflects arms length terms;
26		or
27		(iii) any item of intangible expense or
28		cost paid, accrued, or incurred, directly or
29		indirectly, from a transaction with a foreign
30		person if the taxpayer establishes by clear and
31		convincing evidence, that the adjustments are
32		unreasonable; or if the taxpayer and the Director
33		agree in writing to the application or use of an
34		alternative method of apportionment under section

1		304(f);
2		Nothing in this subsection shall preclude the
3		Director from making any other adjustment
4		otherwise allowed under Section 404 of this Act for
5		any tax year beginning after the effective date of
6		this amendment provided such adjustment is made
7		pursuant to regulation adopted by the Department
8		and such regulations provide methods and standards
9		by which the Department will utilize its authority
10		under Section 404 of this Act;
11		and by deducting from the total so obtained the sum of the
12		following amounts:
13		(F) An amount equal to the amount of any tax
14		imposed by this Act which was refunded to the taxpayer
15		and included in such total for the taxable year;
16		(G) An amount equal to any amount included in such
17		total under Section 78 of the Internal Revenue Code;
18		(H) In the case of a regulated investment company,
19		an amount equal to the amount of exempt interest
20		dividends as defined in subsection (b) (5) of Section
21		852 of the Internal Revenue Code, paid to shareholders
22		for the taxable year;
23		(I) With the exception of any amounts subtracted
24		under subparagraph (J), an amount equal to the sum of
25		all amounts disallowed as deductions by (i) Sections
26		171(a) (2), and 265(a)(2) and amounts disallowed as
27		interest expense by Section 291(a)(3) of the Internal
28		Revenue Code, as now or hereafter amended, and all
29		amounts of expenses allocable to interest and
30		disallowed as deductions by Section 265(a)(1) of the
31		Internal Revenue Code, as now or hereafter amended; and
32		(ii) for taxable years ending on or after August 13,
33		1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
34		832(b)(5)(B)(i) of the Internal Revenue Code; the

1		provisions of this subparagraph are exempt from the
2		provisions of Section 250;
3		(J) An amount equal to all amounts included in such
4		total which are exempt from taxation by this State
5		either by reason of its statutes or Constitution or by
6		reason of the Constitution, treaties or statutes of the
7		United States; provided that, in the case of any
8		statute of this State that exempts income derived from
9		bonds or other obligations from the tax imposed under
10		this Act, the amount exempted shall be the interest net
11		of bond premium amortization;
12		(K) An amount equal to those dividends included in
13		such total which were paid by a corporation which
14		conducts business operations in an Enterprise Zone or
15		zones created under the Illinois Enterprise Zone Act
16		and conducts substantially all of its operations in an
17		Enterprise Zone or zones;
18		(L) An amount equal to those dividends included in
19		such total that were paid by a corporation that
20		conducts business operations in a federally designated
21		Foreign Trade Zone or Sub-Zone and that is designated a
22		High Impact Business located in Illinois; provided
23		that dividends eligible for the deduction provided in
24		subparagraph (K) of paragraph 2 of this subsection
25		shall not be eligible for the deduction provided under
26		this subparagraph (L);
27		(M) For any taxpayer that is a financial
28		organization within the meaning of Section 304(c) of
29		this Act, an amount included in such total as interest
30		income from a loan or loans made by such taxpayer to a
31		borrower, to the extent that such a loan is secured by
32		property which is eligible for the Enterprise Zone
33		Investment Credit. To determine the portion of a loan
34		or loans that is secured by property eligible for a

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

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

1		1504 (b) (3) of the Internal Revenue Code be treated as
2		a member of the affiliated group which includes the
3		dividend recipient, exceed the amount of the
4		modification provided under subparagraph (G) of
5		paragraph (2) of this subsection (b) which is related
6		to such dividends;
7		(P) An amount equal to any contribution made to a
8		job training project established pursuant to the Tax
9		Increment Allocation Redevelopment Act;
10		(Q) An amount equal to the amount of the deduction
11		used to compute the federal income tax credit for
12		restoration of substantial amounts held under claim of
13		right for the taxable year pursuant to Section 1341 of
14		the Internal Revenue Code of 1986;
15		(R) In the case of an attorney-in-fact with respect
16		to whom an interinsurer or a reciprocal insurer has
17		made the election under Section 835 of the Internal
18		Revenue Code, 26 U.S.C. 835, an amount equal to the
19		excess, if any, of the amounts paid or incurred by that
20		interinsurer or reciprocal insurer in the taxable year
21		to the attorney-in-fact over the deduction allowed to
22		that interinsurer or reciprocal insurer with respect
23		to the attorney-in-fact under Section 835(b) of the
24		Internal Revenue Code for the taxable year;
25		(S) For taxable years ending on or after December
26		31, 1997, in the case of a Subchapter S corporation, an
27		amount equal to all amounts of income allocable to a
28		shareholder subject to the Personal Property Tax
29		Replacement Income Tax imposed by subsections (c) and
30		(d) of Section 201 of this Act, including amounts
31		allocable to organizations exempt from federal income
32		tax by reason of Section 501(a) of the Internal Revenue
33		Code. This subparagraph (S) is exempt from the
34		provisions of Section 250;

1		(T) For taxable years 2001 and thereafter, for the
2		taxable year in which the bonus depreciation deduction
3		(30% of the adjusted basis of the qualified property)
4		is taken on the taxpayer's federal income tax return
5		under subsection (k) of Section 168 of the Internal
6		Revenue Code and for each applicable taxable year
7		thereafter, an amount equal to "x", where:
8		(1) "y" equals the amount of the depreciation
9		deduction taken for the taxable year on the
10		taxpayer's federal income tax return on property
11		for which the bonus depreciation deduction (30% of
12		the adjusted basis of the qualified property) was
13		taken in any year under subsection (k) of Section
14		168 of the Internal Revenue Code, but not including
15		the bonus depreciation deduction; and
16		(2) "x" equals "y" multiplied by 30 and then
17		divided by 70 (or "y" multiplied by 0.429).
18		The aggregate amount deducted under this
19		subparagraph in all taxable years for any one piece of
20		property may not exceed the amount of the bonus
21		depreciation deduction (30% of the adjusted basis of
22		the qualified property) taken on that property on the
23		taxpayer's federal income tax return under subsection
24		(k) of Section 168 of the Internal Revenue Code; and
25		(U) If the taxpayer reports a capital gain or loss
26		on the taxpayer's federal income tax return for the
27		taxable year based on a sale or transfer of property
28		for which the taxpayer was required in any taxable year
29		to make an addition modification under subparagraph
30		(E-10), then an amount equal to that addition
31		modification.
32		The taxpayer is allowed to take the deduction under
33		this subparagraph only once with respect to any one
34		piece of property; .

1		(V) The amount of: (i) any interest income (net of
2		the deductions allocable thereto) taken into account
3		for the taxable year with respect to a transaction with
4		a taxpayer that is required to make an addition
5		modification with respect to such transaction under
6		Section 203(a)(2)(D-17), 203(b)(2)(E-12),
7		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
8		the amount of such addition modification and (ii) any
9		income from intangible property (net of the deductions
10		allocable thereto) taken into account for the taxable
11		year with respect to a transaction with a taxpayer that
12		is required to make an addition modification with
13		respect to such transaction under Section
14		203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
15		203(d)(2)(D-8), but not to exceed the amount of such
16		addition modification;
17		(W) An amount equal to the interest income taken
18		into account for the taxable year (net of the
19		deductions allocable thereto) with respect to
20		transactions with a foreign person who would be a
21		member of the taxpayer's unitary business group but for
22		the fact that the foreign person's business activity
23		outside the United States is 80% or more of that
24		person's total business activity, but not to exceed the
25		addition modification required to be made for the same
26		taxable year under Section 203(b)(2)(E-12) for
27		interest paid, accrued, or incurred, directly or
28		indirectly, to the same foreign person; and
29		(X) An amount equal to the income from intangible
30		property taken into account for the taxable year (net
31		of the deductions allocable thereto) with respect to
32		transactions with a foreign person who would be a
33		member of the taxpayer's unitary business group but for
34		the fact that the foreign person's business activity

1		outside the United States is 80% or more of that
2		person's total business activity, but not to exceed the
3		addition modification required to be made for the same
4		taxable year under Section 203(b)(2)(E-13) for
5		intangible expenses and costs paid, accrued, or
6		incurred, directly or indirectly, to the same foreign
7		person.
8		(3) Special rule. For purposes of paragraph (2) (A),
9		"gross income" in the case of a life insurance company, for
10		tax years ending on and after December 31, 1994, shall mean
11		the gross investment income for the taxable year.
12		(c) Trusts and estates.
13		(1) In general. In the case of a trust or estate, base
14		income means an amount equal to the taxpayer's taxable
15		income for the taxable year as modified by paragraph (2).
16		(2) Modifications. Subject to the provisions of
17		paragraph (3), the taxable income referred to in paragraph
18		(1) shall be modified by adding thereto the sum of the
19		following amounts:
20		(A) An amount equal to all amounts paid or accrued
21		to the taxpayer as interest or dividends during the
22		taxable year to the extent excluded from gross income
23		in the computation of taxable income;
24		(B) In the case of (i) an estate, $600; (ii) a
25		trust which, under its governing instrument, is
26		required to distribute all of its income currently,
27		$300; and (iii) any other trust, $100, but in each such
28		case, only to the extent such amount was deducted in
29		the computation of taxable income;
30		(C) An amount equal to the amount of tax imposed by
31		this Act to the extent deducted from gross income in
32		the computation of taxable income for the taxable year;
33		(D) The amount of any net operating loss deduction

1		taken in arriving at taxable income, other than a net
2		operating loss carried forward from a taxable year
3		ending prior to December 31, 1986;
4		(E) For taxable years in which a net operating loss
5		carryback or carryforward from a taxable year ending
6		prior to December 31, 1986 is an element of taxable
7		income under paragraph (1) of subsection (e) or
8		subparagraph (E) of paragraph (2) of subsection (e),
9		the amount by which addition modifications other than
10		those provided by this subparagraph (E) exceeded
11		subtraction modifications in such taxable year, with
12		the following limitations applied in the order that
13		they are listed:
14		(i) the addition modification relating to the
15		net operating loss carried back or forward to the
16		taxable year from any taxable year ending prior to
17		December 31, 1986 shall be reduced by the amount of
18		addition modification under this subparagraph (E)
19		which related to that net operating loss and which
20		was taken into account in calculating the base
21		income of an earlier taxable year, and
22		(ii) the addition modification relating to the
23		net operating loss carried back or forward to the
24		taxable year from any taxable year ending prior to
25		December 31, 1986 shall not exceed the amount of
26		such carryback or carryforward;
27		For taxable years in which there is a net operating
28		loss carryback or carryforward from more than one other
29		taxable year ending prior to December 31, 1986, the
30		addition modification provided in this subparagraph
31		(E) shall be the sum of the amounts computed
32		independently under the preceding provisions of this
33		subparagraph (E) for each such taxable year;
34		(F) For taxable years ending on or after January 1,

1		1989, an amount equal to the tax deducted pursuant to
2		Section 164 of the Internal Revenue Code if the trust
3		or estate is claiming the same tax for purposes of the
4		Illinois foreign tax credit under Section 601 of this
5		Act;
6		(G) An amount equal to the amount of the capital
7		gain deduction allowable under the Internal Revenue
8		Code, to the extent deducted from gross income in the
9		computation of taxable income;
10		(G-5) For taxable years ending after December 31,
11		1997, an amount equal to any eligible remediation costs
12		that the trust or estate deducted in computing adjusted
13		gross income and for which the trust or estate claims a
14		credit under subsection (l) of Section 201;
15		(G-10) For taxable years 2001 and thereafter, an
16		amount equal to the bonus depreciation deduction (30%
17		of the adjusted basis of the qualified property) taken
18		on the taxpayer's federal income tax return for the
19		taxable year under subsection (k) of Section 168 of the
20		Internal Revenue Code; and
21		(G-11) If the taxpayer reports a capital gain or
22		loss on the taxpayer's federal income tax return for
23		the taxable year based on a sale or transfer of
24		property for which the taxpayer was required in any
25		taxable year to make an addition modification under
26		subparagraph (G-10), then an amount equal to the
27		aggregate amount of the deductions taken in all taxable
28		years under subparagraph (R) with respect to that
29		property;
30		The taxpayer is required to make the addition
31		modification under this subparagraph only once with
32		respect to any one piece of property;
33		(G-12) For taxable years ending on or after
34		December 31, 2004, an amount equal to the amount

1		otherwise allowed as a deduction in computing base
2		income for interest paid, accrued, or incurred,
3		directly or indirectly, to a foreign person who would
4		be a member of the same unitary business group but for
5		the fact that the foreign person's business activity
6		outside the United States is 80% or more of the foreign
7		person's total business activity. The addition
8		modification required by this subparagraph shall be
9		reduced to the extent that dividends were included in
10		base income of the unitary group for the same taxable
11		year and received by the taxpayer or by a member of the
12		taxpayer's unitary business group (including amounts
13		included in gross income pursuant to Sections 951
14		through 964 of the Internal Revenue Code and amounts
15		included in gross income under Section 78 of the
16		Internal Revenue Code) with respect to the stock of the
17		same person to whom the interest was paid, accrued, or
18		incurred.
19		This paragraph shall not apply to the following:
20		(i) an item of interest paid, accrued, or
21		incurred, directly or indirectly, to a foreign
22		person who is subject in a foreign country or
23		state, other than a state which requires mandatory
24		unitary reporting, to a tax on or measured by net
25		income with respect to such interest; or
26		(ii) an item of interest paid, accrued, or
27		incurred, directly or indirectly, to a foreign
28		person if the taxpayer can establish, based on a
29		preponderance of the evidence, both of the
30		following:
31		(a) the foreign person, during the same
32		taxable year, paid, accrued, or incurred, the
33		interest to a person that is not a related
34		member, and

1		(b) the transaction giving rise to the
2		interest expense between the taxpayer and the
3		foreign person did not have as a principal
4		purpose the avoidance of Illinois income tax,
5		and is paid pursuant to a contract or agreement
6		that reflects an arms-length interest rate and
7		terms; or
8		(iii) the taxpayer can establish, based on
9		clear and convincing evidence, that the interest
10		paid, accrued, or incurred relates to a contract or
11		agreement entered into at arm's length rates and
12		terms and the principal purpose for the payment is
13		not federal or Illinois tax avoidance; or
14		(iv) an item of interest paid, accrued, or
15		incurred, directly or indirectly, to a foreign
16		person if the taxpayer establishes by clear and
17		convincing evidence that the adjustments are
18		unreasonable; or if the taxpayer and the Director
19		agree in writing to the application or use of an
20		alternative method of apportionment under Section
21		304(f).
22		Nothing in this subsection shall preclude the
23		Director from making any other adjustment
24		otherwise allowed under Section 404 of this Act for
25		any tax year beginning after the effective date of
26		this amendment provided such adjustment is made
27		pursuant to regulation adopted by the Department
28		and such regulations provide methods and standards
29		by which the Department will utilize its authority
30		under Section 404 of this Act;
31		(G-13) For taxable years ending on or after
32		December 31, 2004, an amount equal to the amount of
33		intangible expenses and costs otherwise allowed as a
34		deduction in computing base income, and that were paid,

1		accrued, or incurred, directly or indirectly, to a
2		foreign person who would be a member of the same
3		unitary business group but for the fact that the
4		foreign person's business activity outside the United
5		States is 80% or more of that person's total business
6		activity. The addition modification required by this
7		subparagraph shall be reduced to the extent that
8		dividends were included in base income of the unitary
9		group for the same taxable year and received by the
10		taxpayer or by a member of the taxpayer's unitary
11		business group (including amounts included in gross
12		income pursuant to Sections 951 through 964 of the
13		Internal Revenue Code and amounts included in gross
14		income under Section 78 of the Internal Revenue Code)
15		with respect to the stock of the same person to whom
16		the intangible expenses and costs were directly or
17		indirectly paid, incurred, or accrued. The preceding
18		sentence shall not apply to the extent that the same
19		dividends caused a reduction to the addition
20		modification required under Section 203(c)(2)(G-12) of
21		this Act. As used in this subparagraph, the term
22		"intangible expenses and costs" includes: (1)
23		expenses, losses, and costs for or related to the
24		direct or indirect acquisition, use, maintenance or
25		management, ownership, sale, exchange, or any other
26		disposition of intangible property; (2) losses
27		incurred, directly or indirectly, from factoring
28		transactions or discounting transactions; (3) royalty,
29		patent, technical, and copyright fees; (4) licensing
30		fees; and (5) other similar expenses and costs. For
31		purposes of this subparagraph, "intangible property"
32		includes patents, patent applications, trade names,
33		trademarks, service marks, copyrights, mask works,
34		trade secrets, and similar types of intangible assets.

1		This paragraph shall not apply to the following:
2		(i) any item of intangible expenses or costs paid,
3		accrued, or incurred, directly or indirectly, from
4		a transaction with a foreign person who is subject
5		in a foreign country or state, other than a state
6		which requires mandatory unitary reporting, to a
7		tax on or measured by net income with respect to
8		such item; or
9		(ii) any item of intangible expense or cost paid,
10		accrued, or incurred, directly or indirectly, if
11		the taxpayer can establish, based on a
12		preponderance of the evidence, both of the
13		following:
14		(a) the foreign person during the same taxable
15		year paid, accrued, or incurred, the
16		intangible expense or cost to a person that is
17		not a related member, and
18		(b) the transaction giving rise to the
19		intangible expense or cost between the
20		taxpayer and the foreign person did not have as
21		a principal purpose the avoidance of Illinois
22		income tax, and is paid pursuant to a contract
23		or agreement that reflects arms length terms;
24		or
25		(iii) any item of intangible expense or
26		cost paid, accrued, or incurred, directly or
27		indirectly, from a transaction with a foreign
28		person if the taxpayer establishes by clear and
29		convincing evidence, that the adjustments are
30		unreasonable; or if the taxpayer and the Director
31		agree in writing to the application or use of an
32		alternative method of apportionment under section
33		304(f);
34		Nothing in this subsection shall preclude the

1		Director from making any other adjustment
2		otherwise allowed under Section 404 of this Act for
3		any tax year beginning after the effective date of
4		this amendment provided such adjustment is made
5		pursuant to regulation adopted by the Department
6		and such regulations provide methods and standards
7		by which the Department will utilize its authority
8		under Section 404 of this Act;
9		and by deducting from the total so obtained the sum of the
10		following amounts:
11		(H) An amount equal to all amounts included in such
12		total pursuant to the provisions of Sections 402(a),
13		402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
14		Internal Revenue Code or included in such total as
15		distributions under the provisions of any retirement
16		or disability plan for employees of any governmental
17		agency or unit, or retirement payments to retired
18		partners, which payments are excluded in computing net
19		earnings from self employment by Section 1402 of the
20		Internal Revenue Code and regulations adopted pursuant
21		thereto;
22		(I) The valuation limitation amount;
23		(J) An amount equal to the amount of any tax
24		imposed by this Act which was refunded to the taxpayer
25		and included in such total for the taxable year;
26		(K) An amount equal to all amounts included in
27		taxable income as modified by subparagraphs (A), (B),
28		(C), (D), (E), (F) and (G) which are exempt from
29		taxation by this State either by reason of its statutes
30		or Constitution or by reason of the Constitution,
31		treaties or statutes of the United States; provided
32		that, in the case of any statute of this State that
33		exempts income derived from bonds or other obligations
34		from the tax imposed under this Act, the amount

1		exempted shall be the interest net of bond premium
2		amortization;
3		(L) With the exception of any amounts subtracted
4		under subparagraph (K), an amount equal to the sum of
5		all amounts disallowed as deductions by (i) Sections
6		171(a) (2) and 265(a)(2) of the Internal Revenue Code,
7		as now or hereafter amended, and all amounts of
8		expenses allocable to interest and disallowed as
9		deductions by Section 265(1) of the Internal Revenue
10		Code of 1954, as now or hereafter amended; and (ii) for
11		taxable years ending on or after August 13, 1999,
12		Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
13		the Internal Revenue Code; the provisions of this
14		subparagraph are exempt from the provisions of Section
15		250;
16		(M) An amount equal to those dividends included in
17		such total which were paid by a corporation which
18		conducts business operations in an Enterprise Zone or
19		zones created under the Illinois Enterprise Zone Act
20		and conducts substantially all of its operations in an
21		Enterprise Zone or Zones;
22		(N) An amount equal to any contribution made to a
23		job training project established pursuant to the Tax
24		Increment Allocation Redevelopment Act;
25		(O) An amount equal to those dividends included in
26		such total that were paid by a corporation that
27		conducts business operations in a federally designated
28		Foreign Trade Zone or Sub-Zone and that is designated a
29		High Impact Business located in Illinois; provided
30		that dividends eligible for the deduction provided in
31		subparagraph (M) of paragraph (2) of this subsection
32		shall not be eligible for the deduction provided under
33		this subparagraph (O);
34		(P) An amount equal to the amount of the deduction

1		used to compute the federal income tax credit for
2		restoration of substantial amounts held under claim of
3		right for the taxable year pursuant to Section 1341 of
4		the Internal Revenue Code of 1986;
5		(Q) For taxable year 1999 and thereafter, an amount
6		equal to the amount of any (i) distributions, to the
7		extent includible in gross income for federal income
8		tax purposes, made to the taxpayer because of his or
9		her status as a victim of persecution for racial or
10		religious reasons by Nazi Germany or any other Axis
11		regime or as an heir of the victim and (ii) items of
12		income, to the extent includible in gross income for
13		federal income tax purposes, attributable to, derived
14		from or in any way related to assets stolen from,
15		hidden from, or otherwise lost to a victim of
16		persecution for racial or religious reasons by Nazi
17		Germany or any other Axis regime immediately prior to,
18		during, and immediately after World War II, including,
19		but not limited to, interest on the proceeds receivable
20		as insurance under policies issued to a victim of
21		persecution for racial or religious reasons by Nazi
22		Germany or any other Axis regime by European insurance
23		companies immediately prior to and during World War II;
24		provided, however, this subtraction from federal
25		adjusted gross income does not apply to assets acquired
26		with such assets or with the proceeds from the sale of
27		such assets; provided, further, this paragraph shall
28		only apply to a taxpayer who was the first recipient of
29		such assets after their recovery and who is a victim of
30		persecution for racial or religious reasons by Nazi
31		Germany or any other Axis regime or as an heir of the
32		victim. The amount of and the eligibility for any
33		public assistance, benefit, or similar entitlement is
34		not affected by the inclusion of items (i) and (ii) of

1		this paragraph in gross income for federal income tax
2		purposes. This paragraph is exempt from the provisions
3		of Section 250;
4		(R) For taxable years 2001 and thereafter, for the
5		taxable year in which the bonus depreciation deduction
6		(30% of the adjusted basis of the qualified property)
7		is taken on the taxpayer's federal income tax return
8		under subsection (k) of Section 168 of the Internal
9		Revenue Code and for each applicable taxable year
10		thereafter, an amount equal to "x", where:
11		(1) "y" equals the amount of the depreciation
12		deduction taken for the taxable year on the
13		taxpayer's federal income tax return on property
14		for which the bonus depreciation deduction (30% of
15		the adjusted basis of the qualified property) was
16		taken in any year under subsection (k) of Section
17		168 of the Internal Revenue Code, but not including
18		the bonus depreciation deduction; and
19		(2) "x" equals "y" multiplied by 30 and then
20		divided by 70 (or "y" multiplied by 0.429).
21		The aggregate amount deducted under this
22		subparagraph in all taxable years for any one piece of
23		property may not exceed the amount of the bonus
24		depreciation deduction (30% of the adjusted basis of
25		the qualified property) taken on that property on the
26		taxpayer's federal income tax return under subsection
27		(k) of Section 168 of the Internal Revenue Code; and
28		(S) If the taxpayer reports a capital gain or loss
29		on the taxpayer's federal income tax return for the
30		taxable year based on a sale or transfer of property
31		for which the taxpayer was required in any taxable year
32		to make an addition modification under subparagraph
33		(G-10), then an amount equal to that addition
34		modification.

1		The taxpayer is allowed to take the deduction under
2		this subparagraph only once with respect to any one
3		piece of property; .
4		(T) The amount of (i) any interest income (net of
5		the deductions allocable thereto) taken into account
6		for the taxable year with respect to a transaction with
7		a taxpayer that is required to make an addition
8		modification with respect to such transaction under
9		Section 203(a)(2)(D-17), 203(b)(2)(E-12),
10		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
11		the amount of such addition modification and (ii) any
12		income from intangible property (net of the deductions
13		allocable thereto) taken into account for the taxable
14		year with respect to a transaction with a taxpayer that
15		is required to make an addition modification with
16		respect to such transaction under Section
17		203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
18		203(d)(2)(D-8), but not to exceed the amount of such
19		addition modification;
20		(U) An amount equal to the interest income taken
21		into account for the taxable year (net of the
22		deductions allocable thereto) with respect to
23		transactions with a foreign person who would be a
24		member of the taxpayer's unitary business group but for
25		the fact the foreign person's business activity
26		outside the United States is 80% or more of that
27		person's total business activity, but not to exceed the
28		addition modification required to be made for the same
29		taxable year under Section 203(c)(2)(G-12) for
30		interest paid, accrued, or incurred, directly or
31		indirectly, to the same foreign person; and
32		(V) An amount equal to the income from intangible
33		property taken into account for the taxable year (net
34		of the deductions allocable thereto) with respect to

1		transactions with a foreign person who would be a
2		member of the taxpayer's unitary business group but for
3		the fact that the foreign person's business activity
4		outside the United States is 80% or more of that
5		person's total business activity, but not to exceed the
6		addition modification required to be made for the same
7		taxable year under Section 203(c)(2)(G-13) for
8		intangible expenses and costs paid, accrued, or
9		incurred, directly or indirectly, to the same foreign
10		person.
11		(3) Limitation. The amount of any modification
12		otherwise required under this subsection shall, under
13		regulations prescribed by the Department, be adjusted by
14		any amounts included therein which were properly paid,
15		credited, or required to be distributed, or permanently set
16		aside for charitable purposes pursuant to Internal Revenue
17		Code Section 642(c) during the taxable year.
18		(d) Partnerships.
19		(1) In general. In the case of a partnership, base
20		income means an amount equal to the taxpayer's taxable
21		income for the taxable year as modified by paragraph (2).
22		(2) Modifications. The taxable income referred to in
23		paragraph (1) shall be modified by adding thereto the sum
24		of the following amounts:
25		(A) An amount equal to all amounts paid or accrued
26		to the taxpayer as interest or dividends during the
27		taxable year to the extent excluded from gross income
28		in the computation of taxable income;
29		(B) An amount equal to the amount of tax imposed by
30		this Act to the extent deducted from gross income for
31		the taxable year;
32		(C) The amount of deductions allowed to the
33		partnership pursuant to Section 707 (c) of the Internal

1		Revenue Code in calculating its taxable income;
2		(D) An amount equal to the amount of the capital
3		gain deduction allowable under the Internal Revenue
4		Code, to the extent deducted from gross income in the
5		computation of taxable income;
6		(D-5) For taxable years 2001 and thereafter, an
7		amount equal to the bonus depreciation deduction (30%
8		of the adjusted basis of the qualified property) taken
9		on the taxpayer's federal income tax return for the
10		taxable year under subsection (k) of Section 168 of the
11		Internal Revenue Code; and
12		(D-6) If the taxpayer reports a capital gain or
13		loss on the taxpayer's federal income tax return for
14		the taxable year based on a sale or transfer of
15		property for which the taxpayer was required in any
16		taxable year to make an addition modification under
17		subparagraph (D-5), then an amount equal to the
18		aggregate amount of the deductions taken in all taxable
19		years under subparagraph (O) with respect to that
20		property;
21		The taxpayer is required to make the addition
22		modification under this subparagraph only once with
23		respect to any one piece of property;
24		(D-7) For taxable years ending on or after December
25		31, 2004, an amount equal to the amount otherwise
26		allowed as a deduction in computing base income for
27		interest paid, accrued, or incurred, directly or
28		indirectly, to a foreign person who would be a member
29		of the same unitary business group but for the fact the
30		foreign person's business activity outside the United
31		States is 80% or more of the foreign person's total
32		business activity. The addition modification required
33		by this subparagraph shall be reduced to the extent
34		that dividends were included in base income of the

1		unitary group for the same taxable year and received by
2		the taxpayer or by a member of the taxpayer's unitary
3		business group (including amounts included in gross
4		income pursuant to Sections 951 through 964 of the
5		Internal Revenue Code and amounts included in gross
6		income under Section 78 of the Internal Revenue Code)
7		with respect to the stock of the same person to whom
8		the interest was paid, accrued, or incurred.
9		This paragraph shall not apply to the following:
10		(i) an item of interest paid, accrued, or
11		incurred, directly or indirectly, to a foreign
12		person who is subject in a foreign country or
13		state, other than a state which requires mandatory
14		unitary reporting, to a tax on or measured by net
15		income with respect to such interest; or
16		(ii) an item of interest paid, accrued, or
17		incurred, directly or indirectly, to a foreign
18		person if the taxpayer can establish, based on a
19		preponderance of the evidence, both of the
20		following:
21		(a) the foreign person, during the same
22		taxable year, paid, accrued, or incurred, the
23		interest to a person that is not a related
24		member, and
25		(b) the transaction giving rise to the
26		interest expense between the taxpayer and the
27		foreign person did not have as a principal
28		purpose the avoidance of Illinois income tax,
29		and is paid pursuant to a contract or agreement
30		that reflects an arms-length interest rate and
31		terms; or
32		(iii) the taxpayer can establish, based on
33		clear and convincing evidence, that the interest
34		paid, accrued, or incurred relates to a contract or

1		agreement entered into at arm's length rates and
2		terms and the principal purpose for the payment is
3		not federal or Illinois tax avoidance; or
4		(iv) an item of interest paid, accrued, or
5		incurred, directly or indirectly, to a foreign
6		person if the taxpayer establishes by clear and
7		convincing evidence that the adjustments are
8		unreasonable; or if the taxpayer and the Director
9		agree in writing to the application or use of an
10		alternative method of apportionment under Section
11		304(f).
12		Nothing in this subsection shall preclude the
13		Director from making any other adjustment
14		otherwise allowed under Section 404 of this Act for
15		any tax year beginning after the effective date of
16		this amendment provided such adjustment is made
17		pursuant to regulation adopted by the Department
18		and such regulations provide methods and standards
19		by which the Department will utilize its authority
20		under Section 404 of this Act; and
21		(D-8) For taxable years ending on or after December
22		31, 2004, an amount equal to the amount of intangible
23		expenses and costs otherwise allowed as a deduction in
24		computing base income, and that were paid, accrued, or
25		incurred, directly or indirectly, to a foreign person
26		who would be a member of the same unitary business
27		group but for the fact that the foreign person's
28		business activity outside the United States is 80% or
29		more of that person's total business activity. The
30		addition modification required by this subparagraph
31		shall be reduced to the extent that dividends were
32		included in base income of the unitary group for the
33		same taxable year and received by the taxpayer or by a
34		member of the taxpayer's unitary business group

1		(including amounts included in gross income pursuant
2		to Sections 951 through 964 of the Internal Revenue
3		Code and amounts included in gross income under Section
4		78 of the Internal Revenue Code) with respect to the
5		stock of the same person to whom the intangible
6		expenses and costs were directly or indirectly paid,
7		incurred or accrued. The preceding sentence shall not
8		apply to the extent that the same dividends caused a
9		reduction to the addition modification required under
10		Section 203(d)(2)(D-7) of this Act. As used in this
11		subparagraph, the term "intangible expenses and costs"
12		includes (1) expenses, losses, and costs for, or
13		related to, the direct or indirect acquisition, use,
14		maintenance or management, ownership, sale, exchange,
15		or any other disposition of intangible property; (2)
16		losses incurred, directly or indirectly, from
17		factoring transactions or discounting transactions;
18		(3) royalty, patent, technical, and copyright fees;
19		(4) licensing fees; and (5) other similar expenses and
20		costs. For purposes of this subparagraph, "intangible
21		property" includes patents, patent applications, trade
22		names, trademarks, service marks, copyrights, mask
23		works, trade secrets, and similar types of intangible
24		assets;
25		This paragraph shall not apply to the following:
26		(i) any item of intangible expenses or costs paid,
27		accrued, or incurred, directly or indirectly, from
28		a transaction with a foreign person who is subject
29		in a foreign country or state, other than a state
30		which requires mandatory unitary reporting, to a
31		tax on or measured by net income with respect to
32		such item; or
33		(ii) any item of intangible expense or cost paid,
34		accrued, or incurred, directly or indirectly, if

1		the taxpayer can establish, based on a
2		preponderance of the evidence, both of the
3		following:
4		(a) the foreign person during the same taxable
5		year paid, accrued, or incurred, the
6		intangible expense or cost to a person that is
7		not a related member, and
8		(b) the transaction giving rise to the
9		intangible expense or cost between the
10		taxpayer and the foreign person did not have as
11		a principal purpose the avoidance of Illinois
12		income tax, and is paid pursuant to a contract
13		or agreement that reflects arms length terms;
14		or
15		(iii) any item of intangible expense or
16		cost paid, accrued, or incurred, directly or
17		indirectly, from a transaction with a foreign
18		person if the taxpayer establishes by clear and
19		convincing evidence, that the adjustments are
20		unreasonable; or if the taxpayer and the Director
21		agree in writing to the application or use of an
22		alternative method of apportionment under section
23		304(f);
24		Nothing in this subsection shall preclude the
25		Director from making any other adjustment
26		otherwise allowed under Section 404 of this Act for
27		any tax year beginning after the effective date of
28		this amendment provided such adjustment is made
29		pursuant to regulation adopted by the Department
30		and such regulations provide methods and standards
31		by which the Department will utilize its authority
32		under Section 404 of this Act;
33		and by deducting from the total so obtained the following
34		amounts:

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

1		Code, as now or hereafter amended; and (ii) for taxable
2		years ending on or after August 13, 1999, Sections
3		171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
4		Internal Revenue Code; the provisions of this
5		subparagraph are exempt from the provisions of Section
6		250;
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		enacted by the 82nd General Assembly, and conducts
12		substantially all of its operations in an Enterprise
13		Zone or Zones;
14		(L) An amount equal to any contribution made to a
15		job training project established pursuant to the Real
16		Property Tax Increment Allocation Redevelopment Act;
17		(M) An amount equal to those dividends included in
18		such total that were paid by a corporation that
19		conducts business operations in a federally designated
20		Foreign Trade Zone or Sub-Zone and that is designated a
21		High Impact Business located in Illinois; provided
22		that dividends eligible for the deduction provided in
23		subparagraph (K) of paragraph (2) of this subsection
24		shall not be eligible for the deduction provided under
25		this subparagraph (M);
26		(N) An amount equal to the amount of the deduction
27		used to compute the federal income tax credit for
28		restoration of substantial amounts held under claim of
29		right for the taxable year pursuant to Section 1341 of
30		the Internal Revenue Code of 1986;
31		(O) For taxable years 2001 and thereafter, for the
32		taxable year in which the bonus depreciation deduction
33		(30% of the adjusted basis of the qualified property)
34		is taken on the taxpayer's federal income tax return

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

1		modification with respect to such transaction under
2		Section 203(a)(2)(D-17), 203(b)(2)(E-12),
3		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
4		the amount of such addition modification and (ii) any
5		income from intangible property (net of the deductions
6		allocable thereto) taken into account for the taxable
7		year with respect to a transaction with a taxpayer that
8		is required to make an addition modification with
9		respect to such transaction under Section
10		203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
11		203(d)(2)(D-8), but not to exceed the amount of such
12		addition modification;
13		(R) An amount equal to the interest income taken
14		into account for the taxable year (net of the
15		deductions allocable thereto) with respect to
16		transactions with a foreign person who would be a
17		member of the taxpayer's unitary business group but for
18		the fact that the foreign person's business activity
19		outside the United States is 80% or more of that
20		person's total business activity, but not to exceed the
21		addition modification required to be made for the same
22		taxable year under Section 203(d)(2)(D-7) for interest
23		paid, accrued, or incurred, directly or indirectly, to
24		the same foreign person; and
25		(S) An amount equal to the income from intangible
26		property taken into account for the taxable year (net
27		of the deductions allocable thereto) with respect to
28		transactions with a foreign person who would be a
29		member of the taxpayer's unitary business group but for
30		the fact that the foreign person's business activity
31		outside the United States is 80% or more of that
32		person's total business activity, but not to exceed the
33		addition modification required to be made for the same
34		taxable year under Section 203(d)(2)(D-8) for

1		intangible expenses and costs paid, accrued, or
2		incurred, directly or indirectly, to the same foreign
3		person.
4		(e) Gross income; adjusted gross income; taxable income.
5		(1) In general. Subject to the provisions of paragraph
6		(2) and subsection (b) (3), for purposes of this Section
7		and Section 803(e), a taxpayer's gross income, adjusted
8		gross income, or taxable income for the taxable year shall
9		mean the amount of gross income, adjusted gross income or
10		taxable income properly reportable for federal income tax
11		purposes for the taxable year under the provisions of the
12		Internal Revenue Code. Taxable income may be less than
13		zero. However, for taxable years ending on or after
14		December 31, 1986, net operating loss carryforwards from
15		taxable years ending prior to December 31, 1986, may not
16		exceed the sum of federal taxable income for the taxable
17		year before net operating loss deduction, plus the excess
18		of addition modifications over subtraction modifications
19		for the taxable year. For taxable years ending prior to
20		December 31, 1986, taxable income may never be an amount in
21		excess of the net operating loss for the taxable year as
22		defined in subsections (c) and (d) of Section 172 of the
23		Internal Revenue Code, provided that when taxable income of
24		a corporation (other than a Subchapter S corporation),
25		trust, or estate is less than zero and addition
26		modifications, other than those provided by subparagraph
27		(E) of paragraph (2) of subsection (b) for corporations or
28		subparagraph (E) of paragraph (2) of subsection (c) for
29		trusts and estates, exceed subtraction modifications, an
30		addition modification must be made under those
31		subparagraphs for any other taxable year to which the
32		taxable income less than zero (net operating loss) is
33		applied under Section 172 of the Internal Revenue Code or

1		under subparagraph (E) of paragraph (2) of this subsection
2		(e) applied in conjunction with Section 172 of the Internal
3		Revenue Code.
4		(2) Special rule. For purposes of paragraph (1) of this
5		subsection, the taxable income properly reportable for
6		federal income tax purposes shall mean:
7		(A) Certain life insurance companies. In the case
8		of a life insurance company subject to the tax imposed
9		by Section 801 of the Internal Revenue Code, life
10		insurance company taxable income, plus the amount of
11		distribution from pre-1984 policyholder surplus
12		accounts as calculated under Section 815a of the
13		Internal Revenue Code;
14		(B) Certain other insurance companies. In the case
15		of mutual insurance companies subject to the tax
16		imposed by Section 831 of the Internal Revenue Code,
17		insurance company taxable income;
18		(C) Regulated investment companies. In the case of
19		a regulated investment company subject to the tax
20		imposed by Section 852 of the Internal Revenue Code,
21		investment company taxable income;
22		(D) Real estate investment trusts. In the case of a
23		real estate investment trust subject to the tax imposed
24		by Section 857 of the Internal Revenue Code, real
25		estate investment trust taxable income;
26		(E) Consolidated corporations. In the case of a
27		corporation which is a member of an affiliated group of
28		corporations filing a consolidated income tax return
29		for the taxable year for federal income tax purposes,
30		taxable income determined as if such corporation had
31		filed a separate return for federal income tax purposes
32		for the taxable year and each preceding taxable year
33		for which it was a member of an affiliated group. For
34		purposes of this subparagraph, the taxpayer's separate

1		taxable income shall be determined as if the election
2		provided by Section 243(b) (2) of the Internal Revenue
3		Code had been in effect for all such years;
4		(F) Cooperatives. In the case of a cooperative
5		corporation or association, the taxable income of such
6		organization determined in accordance with the
7		provisions of Section 1381 through 1388 of the Internal
8		Revenue Code;
9		(G) Subchapter S corporations. In the case of: (i)
10		a Subchapter S corporation for which there is in effect
11		an election for the taxable year under Section 1362 of
12		the Internal Revenue Code, the taxable income of such
13		corporation determined in accordance with Section
14		1363(b) of the Internal Revenue Code, except that
15		taxable income shall take into account those items
16		which are required by Section 1363(b)(1) of the
17		Internal Revenue Code to be separately stated; and (ii)
18		a Subchapter S corporation for which there is in effect
19		a federal election to opt out of the provisions of the
20		Subchapter S Revision Act of 1982 and have applied
21		instead the prior federal Subchapter S rules as in
22		effect on July 1, 1982, the taxable income of such
23		corporation determined in accordance with the federal
24		Subchapter S rules as in effect on July 1, 1982; and
25		(H) Partnerships. In the case of a partnership,
26		taxable income determined in accordance with Section
27		703 of the Internal Revenue Code, except that taxable
28		income shall take into account those items which are
29		required by Section 703(a)(1) to be separately stated
30		but which would be taken into account by an individual
31		in calculating his taxable income.
32		(3) Recapture of business expenses on disposition of
33		asset or business. Notwithstanding any other law to the
34		contrary, if in prior years income from an asset or

1		business has been classified as business income and in a
2		later year is demonstrated to be non-business income, then
3		all expenses, without limitation, deducted in such later
4		year and in the 2 immediately-preceding taxable years
5		related to that asset or business that generated the
6		non-business income shall be added back and recaptured as
7		business income in the year of the disposition of the asset
8		or business. Such amount shall be apportioned to Illinois
9		using the greater of the apportionment fraction computed
10		for the business under Section 304 of this Act for the
11		taxable year or the average of the apportionment fractions
12		computed for the business under Section 304 of this Act for
13		the taxable year and for the 2 immediately preceding
14		taxable years.
15		(f) Valuation limitation amount.
16		(1) In general. The valuation limitation amount
17		referred to in subsections (a) (2) (G), (c) (2) (I) and
18		(d)(2) (E) is an amount equal to:
19		(A) The sum of the pre-August 1, 1969 appreciation
20		amounts (to the extent consisting of gain reportable
21		under the provisions of Section 1245 or 1250 of the
22		Internal Revenue Code) for all property in respect of
23		which such gain was reported for the taxable year; plus
24		(B) The lesser of (i) the sum of the pre-August 1,
25		1969 appreciation amounts (to the extent consisting of
26		capital gain) for all property in respect of which such
27		gain was reported for federal income tax purposes for
28		the taxable year, or (ii) the net capital gain for the
29		taxable year, reduced in either case by any amount of
30		such gain included in the amount determined under
31		subsection (a) (2) (F) or (c) (2) (H).
32		(2) Pre-August 1, 1969 appreciation amount.
33		(A) If the fair market value of property referred
34		to in paragraph (1) was readily ascertainable on August

1		1, 1969, the pre-August 1, 1969 appreciation amount for
2		such property is the lesser of (i) the excess of such
3		fair market value over the taxpayer's basis (for
4		determining gain) for such property on that date
5		(determined under the Internal Revenue Code as in
6		effect on that date), or (ii) the total gain realized
7		and reportable for federal income tax purposes in
8		respect of the sale, exchange or other disposition of
9		such property.
10		(B) If the fair market value of property referred
11		to in paragraph (1) was not readily ascertainable on
12		August 1, 1969, the pre-August 1, 1969 appreciation
13		amount for such property is that amount which bears the
14		same ratio to the total gain reported in respect of the
15		property for federal income tax purposes for the
16		taxable year, as the number of full calendar months in
17		that part of the taxpayer's holding period for the
18		property ending July 31, 1969 bears to the number of
19		full calendar months in the taxpayer's entire holding
20		period for the property.
21		(C) The Department shall prescribe such
22		regulations as may be necessary to carry out the
23		purposes of this paragraph.
24		(g) Double deductions. Unless specifically provided
25		otherwise, nothing in this Section shall permit the same item
26		to be deducted more than once.
27		(h) Legislative intention. Except as expressly provided by
28		this Section there shall be no modifications or limitations on
29		the amounts of income, gain, loss or deduction taken into
30		account in determining gross income, adjusted gross income or
31		taxable income for federal income tax purposes for the taxable
32		year, or in the amount of such items entering into the

1		computation of base income and net income under this Act for
2		such taxable year, whether in respect of property values as of
3		August 1, 1969 or otherwise.
4		(Source: P.A. 91-192, eff. 7-20-99; 91-205, eff. 7-20-99;
5		91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, eff.
6		12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 92-16,
7		eff. 6-28-01; 92-244, eff. 8-3-01; 92-439, eff. 8-17-01;
8		92-603, eff. 6-28-02; 92-626, eff. 7-11-02; 92-651, eff.
9		7-11-02; 92-846, eff. 8-23-02; revised 10-15-03.)
10		(35 ILCS 5/205) (from Ch. 120, par. 2-205)
11		Sec. 205. Exempt organizations.
12		(a) Charitable, etc. organizations. The base income of an
13		organization which is exempt from the federal income tax by
14		reason of Section 501(a) of the Internal Revenue Code shall not
15		be determined under section 203 of this Act, but shall be its
16		unrelated business taxable income as determined under section
17		512 of the Internal Revenue Code, without any deduction for the
18		tax imposed by this Act. The standard exemption provided by
19		section 204 of this Act shall not be allowed in determining the
20		net income of an organization to which this subsection applies.
21		(b) Partnerships. A partnership as such shall not be
22		subject to the tax imposed by subsection 201 (a) and (b) of
23		this Act, but shall be subject to the replacement tax imposed
24		by subsection 201 (c) and (d) of this Act and shall compute its
25		base income as described in subsection (d) of Section 203 of
26		this Act. For taxable years ending on or after December 31,
27		2004, an investment partnership, as defined in Section
28		1501(a)(11.5) of this Act, shall not be subject to the tax
29		imposed by subsections (c) and (d) of Section 201 of this Act.
30		A partnership shall file such returns and other information at
31		such time and in such manner as may be required under Article 5
32		of this Act. The partners in a partnership shall be liable for
33		the replacement tax imposed by subsection 201 (c) and (d) of

1		this Act on such partnership, to the extent such tax is not
2		paid by the partnership, as provided under the laws of Illinois
3		governing the liability of partners for the obligations of a
4		partnership. Persons carrying on business as partners shall be
5		liable for the tax imposed by subsection 201 (a) and (b) of
6		this Act only in their separate or individual capacities.
7		(c) Subchapter S corporations. A Subchapter S corporation
8		shall not be subject to the tax imposed by subsection 201 (a)
9		and (b) of this Act but shall be subject to the replacement tax
10		imposed by subsection 201 (c) and (d) of this Act and shall
11		file such returns and other information at such time and in
12		such manner as may be required under Article 5 of this Act.
13		(d) Combat zone death. An individual relieved from the
14		federal income tax for any taxable year by reason of section
15		692 of the Internal Revenue Code shall not be subject to the
16		tax imposed by this Act for such taxable year.
17		(e) Certain trusts. A common trust fund described in
18		Section 584 of the Internal Revenue Code, and any other trust
19		to the extent that the grantor is treated as the owner thereof
20		under sections 671 through 678 of the Internal Revenue Code
21		shall not be subject to the tax imposed by this Act.
22		(f) Certain business activities. A person not otherwise
23		subject to the tax imposed by this Act shall not become subject
24		to the tax imposed by this Act by reason of:
25		(1) that person's ownership of tangible personal
26		property located at the premises of a printer in this State
27		with which the person has contracted for printing, or
28		(2) activities of the person's employees or agents
29		located solely at the premises of a printer and related to
30		quality control, distribution, or printing services
31		performed by a printer in the State with which the person
32		has contracted for printing.
33		(Source: P.A. 88-361.)

1		(35 ILCS 5/305) (from Ch. 120, par. 3-305)
2		Sec. 305. Allocation of Partnership Income by partnerships
3		and partners other than residents. (a) Allocation of
4		partnership business income by partners other than residents.
5		The respective shares of partners other than residents in so
6		much of the business income of the partnership as is allocated
7		or apportioned to this State in the possession of the
8		partnership shall be taken into account by such partners pro
9		rata in accordance with their respective distributive shares of
10		such partnership income for the partnership's taxable year and
11		allocated to this State.
12		(b) Allocation of partnership nonbusiness income by
13		partners other than residents. The respective shares of
14		partners other than residents in the items of partnership
15		income and deduction not taken into account in computing the
16		business income of a partnership shall be taken into account by
17		such partners pro rata in accordance with their respective
18		distributive shares of such partnership income for the
19		partnership's taxable year, and allocated as if such items had
20		been paid, incurred or accrued directly to such partners in
21		their separate capacities.
22		(c) Allocation or apportionment of base income by
23		partnership. Base income of a partnership shall be allocated or
24		apportioned to this State pursuant to Article 3, in the same
25		manner as it is allocated or apportioned for any other
26		nonresident.
27		(c-5) Taxable income of an investment partnership, as
28		defined in Section 1501(a)(11.5) of this Act, that is
29		distributable to a nonresident partner shall be treated as
30		nonbusiness income and shall be allocated to the partner's
31		state of residence (in the case of an individual) or commercial
32		domicile (in the case of any other person). However, any income
33		distributable to a nonresident partner shall be treated as
34		business income and apportioned as if such income had been

1		received directly by the partner if the partner has made an
2		election under Section 1501(a)(1) of this Act to treat all
3		income as business income or if such income is from investment
4		activity:
5		(1) that is directly or integrally related to any other
6		business activity conducted in this State by the
7		nonresident partner (or any member of that partner's
8		unitary business group);
9		(2) that serves an operational function to any other
10		business activity of the nonresident partner (or any member
11		of that partner's unitary business group) in this State; or
12		(3) where assets of the investment partnership were
13		acquired with working capital from a trade or business
14		activity conducted in this State in which the nonresident
15		partner (or any member of that partner's unitary business
16		group) owns an interest.
17		(d) Cross reference. For allocation of partnership income
18		or deductions by residents, see Section 301(a).
19		(Source: P.A. 84-550.)
20		(35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
21		Sec. 1501. Definitions.
22		(a) In general. When used in this Act, where not otherwise
23		distinctly expressed or manifestly incompatible with the
24		intent thereof:
25		(1) Business income. The term "business income" means
26		all income that may be treated as apportionable business
27		income under the Constitution of the United States.
28		Business income is net of the deductions allocable thereto
29		income arising from transactions and activity in the
30		regular course of the taxpayer's trade or business, net of
31		the deductions allocable thereto, and includes income from
32		tangible and intangible property if the acquisition,
33		management, and disposition of the property constitute

1		integral parts of the taxpayer's regular trade or business
2		operations. Such term does not include compensation or the
3		deductions allocable thereto. For each taxable year
4		beginning on or after January 1, 2003, a taxpayer may elect
5		to treat all income other than compensation as business
6		income. This election shall be made in accordance with
7		rules adopted by the Department and, once made, shall be
8		irrevocable.
9		(2) Commercial domicile. The term "commercial
10		domicile" means the principal place from which the trade or
11		business of the taxpayer is directed or managed.
12		(3) Compensation. The term "compensation" means wages,
13		salaries, commissions and any other form of remuneration
14		paid to employees for personal services.
15		(4) Corporation. The term "corporation" includes
16		associations, joint-stock companies, insurance companies
17		and cooperatives. Any entity, including a limited
18		liability company formed under the Illinois Limited
19		Liability Company Act, shall be treated as a corporation if
20		it is so classified for federal income tax purposes.
21		(5) Department. The term "Department" means the
22		Department of Revenue of this State.
23		(6) Director. The term "Director" means the Director of
24		Revenue of this State.
25		(7) Fiduciary. The term "fiduciary" means a guardian,
26		trustee, executor, administrator, receiver, or any person
27		acting in any fiduciary capacity for any person.
28		(8) Financial organization.
29		(A) The term "financial organization" means any
30		bank, bank holding company, trust company, savings
31		bank, industrial bank, land bank, safe deposit
32		company, private banker, savings and loan association,
33		building and loan association, credit union, currency
34		exchange, cooperative bank, small loan company, sales

1		finance company, investment company, or any person
2		which is owned by a bank or bank holding company. For
3		the purpose of this Section a "person" will include
4		only those persons which a bank holding company may
5		acquire and hold an interest in, directly or
6		indirectly, under the provisions of the Bank Holding
7		Company Act of 1956 (12 U.S.C. 1841, et seq.), except
8		where interests in any person must be disposed of
9		within certain required time limits under the Bank
10		Holding Company Act of 1956.
11		(B) For purposes of subparagraph (A) of this
12		paragraph, the term "bank" includes (i) any entity that
13		is regulated by the Comptroller of the Currency under
14		the National Bank Act, or by the Federal Reserve Board,
15		or by the Federal Deposit Insurance Corporation and
16		(ii) any federally or State chartered bank operating as
17		a credit card bank.
18		(C) For purposes of subparagraph (A) of this
19		paragraph, the term "sales finance company" has the
20		meaning provided in the following item (i) or (ii):
21		(i) A person primarily engaged in one or more
22		of the following businesses: the business of
23		purchasing customer receivables, the business of
24		making loans upon the security of customer
25		receivables, the business of making loans for the
26		express purpose of funding purchases of tangible
27		personal property or services by the borrower, or
28		the business of finance leasing. For purposes of
29		this item (i), "customer receivable" means:
30		(a) a retail installment contract or
31		retail charge agreement within the meaning of
32		the Sales Finance Agency Act, the Retail
33		Installment Sales Act, or the Motor Vehicle
34		Retail Installment Sales Act;

1		(b) an installment, charge, credit, or
2		similar contract or agreement arising from the
3		sale of tangible personal property or services
4		in a transaction involving a deferred payment
5		price payable in one or more installments
6		subsequent to the sale; or
7		(c) the outstanding balance of a contract
8		or agreement described in provisions (a) or (b)
9		of this item (i).
10		A customer receivable need not provide for
11		payment of interest on deferred payments. A sales
12		finance company may purchase a customer receivable
13		from, or make a loan secured by a customer
14		receivable to, the seller in the original
15		transaction or to a person who purchased the
16		customer receivable directly or indirectly from
17		that seller.
18		(ii) A corporation meeting each of the
19		following criteria:
20		(a) the corporation must be a member of an
21		"affiliated group" within the meaning of
22		Section 1504(a) of the Internal Revenue Code,
23		determined without regard to Section 1504(b)
24		of the Internal Revenue Code;
25		(b) more than 50% of the gross income of
26		the corporation for the taxable year must be
27		interest income derived from qualifying loans.
28		A "qualifying loan" is a loan made to a member
29		of the corporation's affiliated group that
30		originates customer receivables (within the
31		meaning of item (i)) or to whom customer
32		receivables originated by a member of the
33		affiliated group have been transferred, to the
34		extent the average outstanding balance of

1		loans from that corporation to members of its
2		affiliated group during the taxable year do not
3		exceed the limitation amount for that
4		corporation. The "limitation amount" for a
5		corporation is the average outstanding
6		balances during the taxable year of customer
7		receivables (within the meaning of item (i))
8		originated by all members of the affiliated
9		group. If the average outstanding balances of
10		the loans made by a corporation to members of
11		its affiliated group exceed the limitation
12		amount, the interest income of that
13		corporation from qualifying loans shall be
14		equal to its interest income from loans to
15		members of its affiliated groups times a
16		fraction equal to the limitation amount
17		divided by the average outstanding balances of
18		the loans made by that corporation to members
19		of its affiliated group;
20		(c) the total of all shareholder's equity
21		(including, without limitation, paid-in
22		capital on common and preferred stock and
23		retained earnings) of the corporation plus the
24		total of all of its loans, advances, and other
25		obligations payable or owed to members of its
26		affiliated group may not exceed 20% of the
27		total assets of the corporation at any time
28		during the tax year; and
29		(d) more than 50% of all interest-bearing
30		obligations of the affiliated group payable to
31		persons outside the group determined in
32		accordance with generally accepted accounting
33		principles must be obligations of the
34		corporation.

1		This amendatory Act of the 91st General Assembly is
2		declaratory of existing law.
3		(D) Subparagraphs (B) and (C) of this paragraph are
4		declaratory of existing law and apply retroactively,
5		for all tax years beginning on or before December 31,
6		1996, to all original returns, to all amended returns
7		filed no later than 30 days after the effective date of
8		this amendatory Act of 1996, and to all notices issued
9		on or before the effective date of this amendatory Act
10		of 1996 under subsection (a) of Section 903, subsection
11		(a) of Section 904, subsection (e) of Section 909, or
12		Section 912. A taxpayer that is a "financial
13		organization" that engages in any transaction with an
14		affiliate shall be a "financial organization" for all
15		purposes of this Act.
16		(E) For all tax years beginning on or before
17		December 31, 1996, a taxpayer that falls within the
18		definition of a "financial organization" under
19		subparagraphs (B) or (C) of this paragraph, but who
20		does not fall within the definition of a "financial
21		organization" under the Proposed Regulations issued by
22		the Department of Revenue on July 19, 1996, may
23		irrevocably elect to apply the Proposed Regulations
24		for all of those years as though the Proposed
25		Regulations had been lawfully promulgated, adopted,
26		and in effect for all of those years. For purposes of
27		applying subparagraphs (B) or (C) of this paragraph to
28		all of those years, the election allowed by this
29		subparagraph applies only to the taxpayer making the
30		election and to those members of the taxpayer's unitary
31		business group who are ordinarily required to
32		apportion business income under the same subsection of
33		Section 304 of this Act as the taxpayer making the
34		election. No election allowed by this subparagraph

1		shall be made under a claim filed under subsection (d)
2		of Section 909 more than 30 days after the effective
3		date of this amendatory Act of 1996.
4		(F) Finance Leases. For purposes of this
5		subsection, a finance lease shall be treated as a loan
6		or other extension of credit, rather than as a lease,
7		regardless of how the transaction is characterized for
8		any other purpose, including the purposes of any
9		regulatory agency to which the lessor is subject. A
10		finance lease is any transaction in the form of a lease
11		in which the lessee is treated as the owner of the
12		leased asset entitled to any deduction for
13		depreciation allowed under Section 167 of the Internal
14		Revenue Code.
15		(9) Fiscal year. The term "fiscal year" means an
16		accounting period of 12 months ending on the last day of
17		any month other than December.
18		(10) Includes and including. The terms "includes" and
19		"including" when used in a definition contained in this Act
20		shall not be deemed to exclude other things otherwise
21		within the meaning of the term defined.
22		(11) Internal Revenue Code. The term "Internal Revenue
23		Code" means the United States Internal Revenue Code of 1954
24		or any successor law or laws relating to federal income
25		taxes in effect for the taxable year.
26		(11.5) Investment partnership.
27		(A) The term "investment partnership" means any
28		entity that is treated as a partnership for federal
29		income tax purposes that meets the following
30		requirements:
31		(i) no less than 90% of the partnership's cost
32		of its total assets consists of qualifying
33		investment securities, deposits at banks or other
34		financial institutions, and office space and

1		equipment reasonably necessary to carry on its
2		activities as an investment partnership;
3		(ii) no less than 90% of its gross income
4		consists of interest, dividends, and gains from
5		the sale or exchange of qualifying investment
6		securities; and
7		(iii) the partnership is not a dealer in
8		qualifying investment securities.
9		(B) For purposes of this paragraph (11.5), the term
10		"qualifying investment securities" includes all of the
11		following:
12		(i) common stock, including preferred or debt
13		securities convertible into common stock, and
14		preferred stock;
15		(ii) bonds, debentures, and other debt
16		securities;
17		(iii) foreign and domestic currency deposits
18		secured by federal, state, or local governmental
19		agencies;
20		(iv) mortgage or asset-backed securities
21		secured by federal, state, or local governmental
22		agencies;
23		(v) repurchase agreements and loan
24		participations;
25		(vi) foreign currency exchange contracts and
26		forward and futures contracts on foreign
27		currencies;
28		(vii) stock and bond index securities and
29		futures contracts and other similar financial
30		securities and futures contracts on those
31		securities;
32		(viii) options for the purchase or sale of any
33		of the securities, currencies, contracts, or
34		financial instruments described in items (i) to

1		(vii), inclusive;
2		(ix) regulated futures contracts;
3		(x) commodities (not described in Section
4		1221(a)(1) of the Internal Revenue Code) or
5		futures, forwards, and options with respect to
6		such commodities, provided, however, that any item
7		of a physical commodity to which title is actually
8		acquired in the partnership's capacity as a dealer
9		in such commodity shall not be a qualifying
10		investment security;
11		(xi) derivatives; and
12		(xii) a partnership interest in another
13		partnership that is an investment partnership.
14		(12) Mathematical error. The term "mathematical error"
15		includes the following types of errors, omissions, or
16		defects in a return filed by a taxpayer which prevents
17		acceptance of the return as filed for processing:
18		(A) arithmetic errors or incorrect computations on
19		the return or supporting schedules;
20		(B) entries on the wrong lines;
21		(C) omission of required supporting forms or
22		schedules or the omission of the information in whole
23		or in part called for thereon; and
24		(D) an attempt to claim, exclude, deduct, or
25		improperly report, in a manner directly contrary to the
26		provisions of the Act and regulations thereunder any
27		item of income, exemption, deduction, or credit.
28		(13) Nonbusiness income. The term "nonbusiness income"
29		means all income other than business income or
30		compensation.
31		(14) Nonresident. The term "nonresident" means a
32		person who is not a resident.
33		(15) Paid, incurred and accrued. The terms "paid",
34		"incurred" and "accrued" shall be construed according to

1		the method of accounting upon the basis of which the
2		person's base income is computed under this Act.
3		(16) Partnership and partner. The term "partnership"
4		includes a syndicate, group, pool, joint venture or other
5		unincorporated organization, through or by means of which
6		any business, financial operation, or venture is carried
7		on, and which is not, within the meaning of this Act, a
8		trust or estate or a corporation; and the term "partner"
9		includes a member in such syndicate, group, pool, joint
10		venture or organization.
11		The term "partnership" includes any entity, including
12		a limited liability company formed under the Illinois
13		Limited Liability Company Act, classified as a partnership
14		for federal income tax purposes.
15		The term "partnership" does not include a syndicate,
16		group, pool, joint venture, or other unincorporated
17		organization established for the sole purpose of playing
18		the Illinois State Lottery.
19		(17) Part-year resident. The term "part-year resident"
20		means an individual who became a resident during the
21		taxable year or ceased to be a resident during the taxable
22		year. Under Section 1501(a)(20)(A)(i) residence commences
23		with presence in this State for other than a temporary or
24		transitory purpose and ceases with absence from this State
25		for other than a temporary or transitory purpose. Under
26		Section 1501(a)(20)(A)(ii) residence commences with the
27		establishment of domicile in this State and ceases with the
28		establishment of domicile in another State.
29		(18) Person. The term "person" shall be construed to
30		mean and include an individual, a trust, estate,
31		partnership, association, firm, company, corporation,
32		limited liability company, or fiduciary. For purposes of
33		Section 1301 and 1302 of this Act, a "person" means (i) an
34		individual, (ii) a corporation, (iii) an officer, agent, or

1		employee of a corporation, (iv) a member, agent or employee
2		of a partnership, or (v) a member, manager, employee,
3		officer, director, or agent of a limited liability company
4		who in such capacity commits an offense specified in
5		Section 1301 and 1302.
6		(18A) Records. The term "records" includes all data
7		maintained by the taxpayer, whether on paper, microfilm,
8		microfiche, or any type of machine-sensible data
9		compilation.
10		(19) Regulations. The term "regulations" includes
11		rules promulgated and forms prescribed by the Department.
12		(20) Resident. The term "resident" means:
13		(A) an individual (i) who is in this State for
14		other than a temporary or transitory purpose during the
15		taxable year; or (ii) who is domiciled in this State
16		but is absent from the State for a temporary or
17		transitory purpose during the taxable year;
18		(B) The estate of a decedent who at his or her
19		death was domiciled in this State;
20		(C) A trust created by a will of a decedent who at
21		his death was domiciled in this State; and
22		(D) An irrevocable trust, the grantor of which was
23		domiciled in this State at the time such trust became
24		irrevocable. For purpose of this subparagraph, a trust
25		shall be considered irrevocable to the extent that the
26		grantor is not treated as the owner thereof under
27		Sections 671 through 678 of the Internal Revenue Code.
28		(21) Sales. The term "sales" means all gross receipts
29		of the taxpayer not allocated under Sections 301, 302 and
30		303.
31		(22) State. The term "state" when applied to a
32		jurisdiction other than this State means any state of the
33		United States, the District of Columbia, the Commonwealth
34		of Puerto Rico, any Territory or Possession of the United

1		States, and any foreign country, or any political
2		subdivision of any of the foregoing. For purposes of the
3		foreign tax credit under Section 601, the term "state"
4		means any state of the United States, the District of
5		Columbia, the Commonwealth of Puerto Rico, and any
6		territory or possession of the United States, or any
7		political subdivision of any of the foregoing, effective
8		for tax years ending on or after December 31, 1989.
9		(23) Taxable year. The term "taxable year" means the
10		calendar year, or the fiscal year ending during such
11		calendar year, upon the basis of which the base income is
12		computed under this Act. "Taxable year" means, in the case
13		of a return made for a fractional part of a year under the
14		provisions of this Act, the period for which such return is
15		made.
16		(24) Taxpayer. The term "taxpayer" means any person
17		subject to the tax imposed by this Act.
18		(25) International banking facility. The term
19		international banking facility shall have the same meaning
20		as is set forth in the Illinois Banking Act or as is set
21		forth in the laws of the United States or regulations of
22		the Board of Governors of the Federal Reserve System.
23		(26) Income Tax Return Preparer.
24		(A) The term "income tax return preparer" means any
25		person who prepares for compensation, or who employs
26		one or more persons to prepare for compensation, any
27		return of tax imposed by this Act or any claim for
28		refund of tax imposed by this Act. The preparation of a
29		substantial portion of a return or claim for refund
30		shall be treated as the preparation of that return or
31		claim for refund.
32		(B) A person is not an income tax return preparer
33		if all he or she does is
34		(i) furnish typing, reproducing, or other

1		mechanical assistance;
2		(ii) prepare returns or claims for refunds for
3		the employer by whom he or she is regularly and
4		continuously employed;
5		(iii) prepare as a fiduciary returns or claims
6		for refunds for any person; or
7		(iv) prepare claims for refunds for a taxpayer
8		in response to any notice of deficiency issued to
9		that taxpayer or in response to any waiver of
10		restriction after the commencement of an audit of
11		that taxpayer or of another taxpayer if a
12		determination in the audit of the other taxpayer
13		directly or indirectly affects the tax liability
14		of the taxpayer whose claims he or she is
15		preparing.
16		(27) Unitary business group. The term "unitary
17		business group" means a group of persons related through
18		common ownership whose business activities are integrated
19		with, dependent upon and contribute to each other. The
20		group will not include those members whose business
21		activity outside the United States is 80% or more of any
22		such member's total business activity; for purposes of this
23		paragraph and clause (a)(3)(B)(ii) of Section 304,
24		business activity within the United States shall be
25		measured by means of the factors ordinarily applicable
26		under subsections (a), (b), (c), (d), or (h) of Section 304
27		except that, in the case of members ordinarily required to
28		apportion business income by means of the 3 factor formula
29		of property, payroll and sales specified in subsection (a)
30		of Section 304, including the formula as weighted in
31		subsection (h) of Section 304, such members shall not use
32		the sales factor in the computation and the results of the
33		property and payroll factor computations of subsection (a)
34		of Section 304 shall be divided by 2 (by one if either the

1		property or payroll factor has a denominator of zero). The
2		computation required by the preceding sentence shall, in
3		each case, involve the division of the member's property,
4		payroll, or revenue miles in the United States, insurance
5		premiums on property or risk in the United States, or
6		financial organization business income from sources within
7		the United States, as the case may be, by the respective
8		worldwide figures for such items. Common ownership in the
9		case of corporations is the direct or indirect control or
10		ownership of more than 50% of the outstanding voting stock
11		of the persons carrying on unitary business activity.
12		Unitary business activity can ordinarily be illustrated
13		where the activities of the members are: (1) in the same
14		general line (such as manufacturing, wholesaling,
15		retailing of tangible personal property, insurance,
16		transportation or finance); or (2) are steps in a
17		vertically structured enterprise or process (such as the
18		steps involved in the production of natural resources,
19		which might include exploration, mining, refining, and
20		marketing); and, in either instance, the members are
21		functionally integrated through the exercise of strong
22		centralized management (where, for example, authority over
23		such matters as purchasing, financing, tax compliance,
24		product line, personnel, marketing and capital investment
25		is not left to each member). In no event, however, will any
26		unitary business group include members which are
27		ordinarily required to apportion business income under
28		different subsections of Section 304 except that for tax
29		years ending on or after December 31, 1987 this prohibition
30		shall not apply to a unitary business group composed of one
31		or more taxpayers all of which apportion business income
32		pursuant to subsection (b) of Section 304, or all of which
33		apportion business income pursuant to subsection (d) of
34		Section 304, and a holding company of such single-factor

1		taxpayers (see definition of "financial organization" for
2		rule regarding holding companies of financial
3		organizations). If a unitary business group would, but for
4		the preceding sentence, include members that are
5		ordinarily required to apportion business income under
6		different subsections of Section 304, then for each
7		subsection of Section 304 for which there are two or more
8		members, there shall be a separate unitary business group
9		composed of such members. For purposes of the preceding two
10		sentences, a member is "ordinarily required to apportion
11		business income" under a particular subsection of Section
12		304 if it would be required to use the apportionment method
13		prescribed by such subsection except for the fact that it
14		derives business income solely from Illinois. As used in
15		this paragraph, the phrase "United States" means only the
16		50 states and the District of Columbia, but does not
17		include any territory or possession of the United States or
18		any area over which the United States has asserted
19		jurisdiction or claimed exclusive rights with respect to
20		the exploration for or exploitation of natural resources.
21		If the unitary business group members' accounting
22		periods differ, the common parent's accounting period or,
23		if there is no common parent, the accounting period of the
24		member that is expected to have, on a recurring basis, the
25		greatest Illinois income tax liability must be used to
26		determine whether to use the apportionment method provided
27		in subsection (a) or subsection (h) of Section 304. The
28		prohibition against membership in a unitary business group
29		for taxpayers ordinarily required to apportion income
30		under different subsections of Section 304 does not apply
31		to taxpayers required to apportion income under subsection
32		(a) and subsection (h) of Section 304. The provisions of
33		this amendatory Act of 1998 apply to tax years ending on or
34		after December 31, 1998.

1		(28) Subchapter S corporation. The term "Subchapter S
2		corporation" means a corporation for which there is in
3		effect an election under Section 1362 of the Internal
4		Revenue Code, or for which there is a federal election to
5		opt out of the provisions of the Subchapter S Revision Act
6		of 1982 and have applied instead the prior federal
7		Subchapter S rules as in effect on July 1, 1982.
8		(30) Foreign person. The term "foreign person" means
9		any person who is a nonresident alien individual and any
10		nonindividual entity, regardless of where created or
11		organized, whose business activity outside the United
12		States is 80% or more of the entity's total business
13		activity.
14		(b) Other definitions.
15		(1) Words denoting number, gender, and so forth, when
16		used in this Act, where not otherwise distinctly expressed
17		or manifestly incompatible with the intent thereof:
18		(A) Words importing the singular include and apply
19		to several persons, parties or things;
20		(B) Words importing the plural include the
21		singular; and
22		(C) Words importing the masculine gender include
23		the feminine as well.
24		(2) "Company" or "association" as including successors
25		and assigns. The word "company" or "association", when used
26		in reference to a corporation, shall be deemed to embrace
27		the words "successors and assigns of such company or
28		association", and in like manner as if these last-named
29		words, or words of similar import, were expressed.
30		(3) Other terms. Any term used in any Section of this
31		Act with respect to the application of, or in connection
32		with, the provisions of any other Section of this Act shall
33		have the same meaning as in such other Section.

1		(Source: P.A. 91-535, eff. 1-1-00; 91-913, eff. 1-1-01; 92-846,
2		eff. 8-23-02.)

ARTICLE 30

4		Section 30-5. The Illinois Vehicle Code is amended by
5		changing Sections 2-119, 3-820, 3-821, and 11-501 and by adding
6		Section 3-821.2 as follows:
7		(625 ILCS 5/2-119) (from Ch. 95 1/2, par. 2-119)
8		Sec. 2-119. Disposition of fees and taxes.
9		(a) All moneys received from Salvage Certificates shall be
10		deposited in the Common School Fund in the State Treasury.
11		(b) Beginning January 1, 1990 and concluding December 31,
12		1994, of the money collected for each certificate of title,
13		duplicate certificate of title and corrected certificate of
14		title, $0.50 shall be deposited into the Used Tire Management
15		Fund. Beginning January 1, 1990 and concluding December 31,
16		1994, of the money collected for each certificate of title,
17		duplicate certificate of title and corrected certificate of
18		title, $1.50 shall be deposited in the Park and Conservation
19		Fund.
20		Beginning January 1, 1995, of the money collected for each
21		certificate of title, duplicate certificate of title and
22		corrected certificate of title, $2 shall be deposited in the
23		Park and Conservation Fund. The moneys deposited in the Park
24		and Conservation Fund pursuant to this Section shall be used
25		for the acquisition and development of bike paths as provided
26		for in Section 805-420 of the Department of Natural Resources
27		(Conservation) Law (20 ILCS 805/805-420).
28		Beginning January 1, 2000, of the moneys collected for each
29		certificate of title, duplicate certificate of title, and
30		corrected certificate of title, $48 shall be deposited into the
31		Road Fund and $4 shall be deposited into the Motor Vehicle

1		License Plate Fund, except that if the balance in the Motor
2		Vehicle License Plate Fund exceeds $40,000,000 on the last day
3		of a calendar month, then during the next calendar month the $4
4		shall instead be deposited into the Road Fund.
5		Beginning January 1, 2005, of the moneys collected for each
6		delinquent vehicle registration renewal fee, $20 shall be
7		deposited into the General Revenue Fund.
8		Except as otherwise provided in this Code, all remaining
9		moneys collected for certificates of title, and all moneys
10		collected for filing of security interests, shall be placed in
11		the General Revenue Fund in the State Treasury.
12		(c) All moneys collected for that portion of a driver's
13		license fee designated for driver education under Section 6-118
14		shall be placed in the Driver Education Fund in the State
15		Treasury.
16		(d) Beginning January 1, 1999, of the monies collected as a
17		registration fee for each motorcycle, motor driven cycle and
18		motorized pedalcycle, 27% of each annual registration fee for
19		such vehicle and 27% of each semiannual registration fee for
20		such vehicle is deposited in the Cycle Rider Safety Training
21		Fund.
22		(e) Of the monies received by the Secretary of State as
23		registration fees or taxes or as payment of any other fee, as
24		provided in this Act, except fees received by the Secretary
25		under paragraph (7) of subsection (b) of Section 5-101 and
26		Section 5-109 of this Code, 37% shall be deposited into the
27		State Construction Fund.
28		(f) Of the total money collected for a CDL instruction
29		permit or original or renewal issuance of a commercial driver's
30		license (CDL) pursuant to the Uniform Commercial Driver's
31		License Act (UCDLA): (i) $6 of the total fee for an original or
32		renewal CDL, and $6 of the total CDL instruction permit fee
33		when such permit is issued to any person holding a valid
34		Illinois driver's license, shall be paid into the

1		CDLIS/AAMVAnet Trust Fund (Commercial Driver's License
2		Information System/American Association of Motor Vehicle
3		Administrators network Trust Fund) and shall be used for the
4		purposes provided in Section 6z-23 of the State Finance Act and
5		(ii) $20 of the total fee for an original or renewal CDL or
6		commercial driver instruction permit shall be paid into the
7		Motor Carrier Safety Inspection Fund, which is hereby created
8		as a special fund in the State Treasury, to be used by the
9		Department of State Police, subject to appropriation, to hire
10		additional officers to conduct motor carrier safety
11		inspections pursuant to Chapter 18b of this Code.
12		(g) All remaining moneys received by the Secretary of State
13		as registration fees or taxes or as payment of any other fee,
14		as provided in this Act, except fees received by the Secretary
15		under paragraph (7)(A) of subsection (b) of Section 5-101 and
16		Section 5-109 of this Code, shall be deposited in the Road Fund
17		in the State Treasury. Moneys in the Road Fund shall be used
18		for the purposes provided in Section 8.3 of the State Finance
19		Act.
20		(h) (Blank).
21		(i) (Blank).
22		(j) (Blank).
23		(k) There is created in the State Treasury a special fund
24		to be known as the Secretary of State Special License Plate
25		Fund. Money deposited into the Fund shall, subject to
26		appropriation, be used by the Office of the Secretary of State
27		(i) to help defray plate manufacturing and plate processing
28		costs for the issuance and, when applicable, renewal of any new
29		or existing registration plates authorized under this Code and
30		(ii) for grants made by the Secretary of State to benefit
31		Illinois Veterans Home libraries.
32		On or before October 1, 1995, the Secretary of State shall
33		direct the State Comptroller and State Treasurer to transfer
34		any unexpended balance in the Special Environmental License

1		Plate Fund, the Special Korean War Veteran License Plate Fund,
2		and the Retired Congressional License Plate Fund to the
3		Secretary of State Special License Plate Fund.
4		(l) The Motor Vehicle Review Board Fund is created as a
5		special fund in the State Treasury. Moneys deposited into the
6		Fund under paragraph (7) of subsection (b) of Section 5-101 and
7		Section 5-109 shall, subject to appropriation, be used by the
8		Office of the Secretary of State to administer the Motor
9		Vehicle Review Board, including without limitation payment of
10		compensation and all necessary expenses incurred in
11		administering the Motor Vehicle Review Board under the Motor
12		Vehicle Franchise Act.
13		(m) Effective July 1, 1996, there is created in the State
14		Treasury a special fund to be known as the Family
15		Responsibility Fund. Moneys deposited into the Fund shall,
16		subject to appropriation, be used by the Office of the
17		Secretary of State for the purpose of enforcing the Family
18		Financial Responsibility Law.
19		(n) The Illinois Fire Fighters' Memorial Fund is created as
20		a special fund in the State Treasury. Moneys deposited into the
21		Fund shall, subject to appropriation, be used by the Office of
22		the State Fire Marshal for construction of the Illinois Fire
23		Fighters' Memorial to be located at the State Capitol grounds
24		in Springfield, Illinois. Upon the completion of the Memorial,
25		moneys in the Fund shall be used in accordance with Section
26		3-634.
27		(o) Of the money collected for each certificate of title
28		for all-terrain vehicles and off-highway motorcycles, $17
29		shall be deposited into the Off-Highway Vehicle Trails Fund.
30		(p) For audits conducted on or after July 1, 2003 pursuant
31		to Section 2-124(d) of this Code, 50% of the money collected as
32		audit fees shall be deposited into the General Revenue Fund.
33		(Source: P.A. 92-16, eff. 6-28-01; 93-32, eff. 7-1-03.)

1		(625 ILCS 5/3-820) (from Ch. 95 1/2, par. 3-820)
2		Sec. 3-820. Duplicate Number Plates. Upon filing in the
3		Office of the Secretary of State an affidavit to the effect
4		that an original number plate for a vehicle is lost, stolen or
5		destroyed, a duplicate number plate shall be furnished upon
6		payment of a fee of $6 for each duplicate plate and a fee of $9
7		for a pair of duplicate plates.
8		Upon filing in the Office of the Secretary of State an
9		affidavit to the effect that an original registration sticker
10		for a vehicle is lost, stolen or destroyed, a new registration
11		sticker shall be furnished upon payment of a fee of $5.
12		The Secretary of State may, in his discretion, assign a new
13		number plate or plates in lieu of a duplicate of the plate or
14		plates so lost, stolen or destroyed, but such assignment of a
15		new plate or plates shall not affect the right of the owner to
16		secure a reassignment of his original registration number in
17		the manner provided in this Act. The fee for one new number
18		plate shall be $6, and for a pair of new number plates, $9.
19		For the administration of this Section, the Secretary shall
20		consider the loss of a registration plate or plates with
21		properly affixed registration stickers as requiring the
22		payment of: either
23		(i) $11 for each duplicate; or
24		(ii) $14 for a pair of duplicate plates; or
25		(iii) $39 for a pair of duplicate plates on or after
26		January 1, 2005, which includes a fee of $20 for the
27		replacement sticker or $19 for a pair of duplicate plates
28		if stickers are required on both front and rear
29		registration plates.
30		(Source: P.A. 91-37, eff. 7-1-99.)
31		(625 ILCS 5/3-821) (from Ch. 95 1/2, par. 3-821)
32		Sec. 3-821. Miscellaneous Registration and Title Fees.
33		(a) The fee to be paid to the Secretary of State for the

1		following certificates, registrations or evidences of proper
2		registration, or for corrected or duplicate documents shall be
3		in accordance with the following schedule:
24		There shall be no fee paid for a Junking Certificate.
25		(b) The Secretary may prescribe the maximum service charge
26		to be imposed upon an applicant for renewal of a registration
27		by any person authorized by law to receive and remit or
28		transmit to the Secretary such renewal application and fees
29		therewith.
30		(c) If a check is delivered to the Office of the Secretary
31		of State as payment of any fee or tax under this Code, and such
32		check is not honored by the bank on which it is drawn for any
33		reason, the registrant or other person tendering the check
34		remains liable for the payment of such fee or tax. The

1		Secretary of State may assess a service charge of $19 in
2		addition to the fee or tax due and owing for all dishonored
3		checks.
4		If the total amount then due and owing exceeds the sum of
5		$50 and has not been paid in full within 60 days from the date
6		such fee or tax became due to the Secretary of State, the
7		Secretary of State shall assess a penalty of 25% of such amount
8		remaining unpaid.
9		All amounts payable under this Section shall be computed to
10		the nearest dollar.
11		(d) The minimum fee and tax to be paid by any applicant for
12		apportionment of a fleet of vehicles under this Code shall be
13		$15 if the application was filed on or before the date
14		specified by the Secretary together with fees and taxes due. If
15		an application and the fees or taxes due are filed after the
16		date specified by the Secretary, the Secretary may prescribe
17		the payment of interest at the rate of 1/2 of 1% per month or
18		fraction thereof after such due date and a minimum of $8.
19		(e) Trucks, truck tractors, truck tractors with loads, and
20		motor buses, any one of which having a combined total weight in
21		excess of 12,000 lbs. shall file an application for a Fleet
22		Reciprocity Permit issued by the Secretary of State. This
23		permit shall be in the possession of any driver operating a
24		vehicle on Illinois highways. Any foreign licensed vehicle of
25		the second division operating at any time in Illinois without a
26		Fleet Reciprocity Permit or other proper Illinois
27		registration, shall subject the operator to the penalties
28		provided in Section 3-834 of this Code. For the purposes of
29		this Code, "Fleet Reciprocity Permit" means any second division
30		motor vehicle with a foreign license and used only in
31		interstate transportation of goods. The fee for such permit
32		shall be $15 per fleet which shall include all vehicles of the
33		fleet being registered.
34		(f) For purposes of this Section, "all-terrain vehicle or

1		off-highway motorcycle used for production agriculture" means
2		any all-terrain vehicle or off-highway motorcycle used in the
3		raising of or the propagation of livestock, crops for sale for
4		human consumption, crops for livestock consumption, and
5		production seed stock grown for the propagation of feed grains
6		and the husbandry of animals or for the purpose of providing a
7		food product, including the husbandry of blood stock as a main
8		source of providing a food product. "All-terrain vehicle or
9		off-highway motorcycle used in production agriculture" also
10		means any all-terrain vehicle or off-highway motorcycle used in
11		animal husbandry, floriculture, aquaculture, horticulture, and
12		viticulture.
13		(Source: P.A. 91-37, eff. 7-1-99; 91-441, eff. 1-1-00; 92-16,
14		eff. 6-28-01.)
15		(625 ILCS 5/3-821.2 new)
16		Sec. 3-821.2. Delinquent Registration Renewal Fee. For
17		registration renewal periods beginning on or after January 1,
18		2005, the Secretary of State may impose a delinquent
19		registration renewal fee of $20 for the registration renewal of
20		all passenger vehicles of the first division and motor vehicles
21		of the second division weighing not more than 8,000 pounds if
22		the application for registration renewal is received by the
23		Secretary more than one month after the expiration of the most
24		recent period during which the vehicle was registered. If a
25		delinquent registration renewal fee is imposed, the Secretary
26		shall not renew the registration of such a vehicle until the
27		delinquent registration renewal fee has been paid, in addition
28		to any other registration fees owed for the vehicle. Active
29		duty military personnel stationed outside of Illinois shall not
30		be required to pay the delinquent registration renewal fee. If
31		a delinquent registration renewal fee is imposed, the Secretary
32		shall adopt rules for the implementation of this Section.

1		(625 ILCS 5/11-501) (from Ch. 95 1/2, par. 11-501)
2		Sec. 11-501. Driving while under the influence of alcohol,
3		other drug or drugs, intoxicating compound or compounds or any
4		combination thereof.
5		(a) A person shall not drive or be in actual physical
6		control of any vehicle within this State while:
7		(1) the alcohol concentration in the person's blood or
8		breath is 0.08 or more based on the definition of blood and
9		breath units in Section 11-501.2;
10		(2) under the influence of alcohol;
11		(3) under the influence of any intoxicating compound or
12		combination of intoxicating compounds to a degree that
13		renders the person incapable of driving safely;
14		(4) under the influence of any other drug or
15		combination of drugs to a degree that renders the person
16		incapable of safely driving;
17		(5) under the combined influence of alcohol, other drug
18		or drugs, or intoxicating compound or compounds to a degree
19		that renders the person incapable of safely driving; or
20		(6) there is any amount of a drug, substance, or
21		compound in the person's breath, blood, or urine resulting
22		from the unlawful use or consumption of cannabis listed in
23		the Cannabis Control Act, a controlled substance listed in
24		the Illinois Controlled Substances Act, or an intoxicating
25		compound listed in the Use of Intoxicating Compounds Act.
26		(b) The fact that any person charged with violating this
27		Section is or has been legally entitled to use alcohol, other
28		drug or drugs, or intoxicating compound or compounds, or any
29		combination thereof, shall not constitute a defense against any
30		charge of violating this Section.
31		(c) Except as provided under paragraphs (c-3), (c-4), and
32		(d) of this Section, every person convicted of violating this
33		Section or a similar provision of a local ordinance, shall be
34		guilty of a Class A misdemeanor and, in addition to any other

1		criminal or administrative action, for any second conviction of
2		violating this Section or a similar provision of a law of
3		another state or local ordinance committed within 5 years of a
4		previous violation of this Section or a similar provision of a
5		local ordinance shall be mandatorily sentenced to a minimum of
6		5 days of imprisonment or assigned to a minimum of 30 days of
7		community service as may be determined by the court. Every
8		person convicted of violating this Section or a similar
9		provision of a local ordinance shall be subject to an
10		additional mandatory minimum fine of $500 and an additional
11		mandatory 5 days of community service in a program benefiting
12		children if the person committed a violation of paragraph (a)
13		or a similar provision of a local ordinance while transporting
14		a person under age 16. Every person convicted a second time for
15		violating this Section or a similar provision of a local
16		ordinance within 5 years of a previous violation of this
17		Section or a similar provision of a law of another state or
18		local ordinance shall be subject to an additional mandatory
19		minimum fine of $500 and an additional 10 days of mandatory
20		community service in a program benefiting children if the
21		current offense was committed while transporting a person under
22		age 16. The imprisonment or assignment under this subsection
23		shall not be subject to suspension nor shall the person be
24		eligible for probation in order to reduce the sentence or
25		assignment.
26		(c-1) (1) A person who violates this Section during a
27		period in which his or her driving privileges are revoked
28		or suspended, where the revocation or suspension was for a
29		violation of this Section, Section 11-501.1, paragraph (b)
30		of Section 11-401, or Section 9-3 of the Criminal Code of
31		1961 is guilty of a Class 4 felony.
32		(2) A person who violates this Section a third time
33		during a period in which his or her driving privileges are
34		revoked or suspended where the revocation or suspension was

1		for a violation of this Section, Section 11-501.1,
2		paragraph (b) of Section 11-401, or Section 9-3 of the
3		Criminal Code of 1961 is guilty of a Class 3 felony.
4		(3) A person who violates this Section a fourth or
5		subsequent time during a period in which his or her driving
6		privileges are revoked or suspended where the revocation or
7		suspension was for a violation of this Section, Section
8		11-501.1, paragraph (b) of Section 11-401, or Section 9-3
9		of the Criminal Code of 1961 is guilty of a Class 2 felony.
10		(c-2) (Blank).
11		(c-3) Every person convicted of violating this Section or a
12		similar provision of a local ordinance who had a child under
13		age 16 in the vehicle at the time of the offense shall have his
14		or her punishment under this Act enhanced by 2 days of
15		imprisonment for a first offense, 10 days of imprisonment for a
16		second offense, 30 days of imprisonment for a third offense,
17		and 90 days of imprisonment for a fourth or subsequent offense,
18		in addition to the fine and community service required under
19		subsection (c) and the possible imprisonment required under
20		subsection (d). The imprisonment or assignment under this
21		subsection shall not be subject to suspension nor shall the
22		person be eligible for probation in order to reduce the
23		sentence or assignment.
24		(c-4) When a person is convicted of violating Section
25		11-501 of this Code or a similar provision of a local
26		ordinance, the following penalties apply when his or her blood,
27		breath, or urine was .16 or more based on the definition of
28		blood, breath, or urine units in Section 11-501.2 or when that
29		person is convicted of violating this Section while
30		transporting a child under the age of 16:
31		(1) A person who is convicted of violating subsection
32		(a) of Section 11-501 of this Code a first time, in
33		addition to any other penalty that may be imposed under
34		subsection (c), is subject to a mandatory minimum of 100

1		hours of community service and a minimum fine of $500.
2		(2) A person who is convicted of violating subsection
3		(a) of Section 11-501 of this Code a second time within 10
4		years, in addition to any other penalty that may be imposed
5		under subsection (c), is subject to a mandatory minimum of
6		2 days of imprisonment and a minimum fine of $1,250.
7		(3) A person who is convicted of violating subsection
8		(a) of Section 11-501 of this Code a third time within 20
9		years is guilty of a Class 4 felony and, in addition to any
10		other penalty that may be imposed under subsection (c), is
11		subject to a mandatory minimum of 90 days of imprisonment
12		and a minimum fine of $2,500.
13		(4) A person who is convicted of violating this
14		subsection (c-4) a fourth or subsequent time is guilty of a
15		Class 2 felony and, in addition to any other penalty that
16		may be imposed under subsection (c), is not eligible for a
17		sentence of probation or conditional discharge and is
18		subject to a minimum fine of $2,500.
19		(d) (1) Every person convicted of committing a violation of
20		this Section shall be guilty of aggravated driving under
21		the influence of alcohol, other drug or drugs, or
22		intoxicating compound or compounds, or any combination
23		thereof if:
24		(A) the person committed a violation of this
25		Section, or a similar provision of a law of another
26		state or a local ordinance when the cause of action is
27		the same as or substantially similar to this Section,
28		for the third or subsequent time;
29		(B) the person committed a violation of paragraph
30		(a) while driving a school bus with children on board;
31		(C) the person in committing a violation of
32		paragraph (a) was involved in a motor vehicle accident
33		that resulted in great bodily harm or permanent
34		disability or disfigurement to another, when the

1		violation was a proximate cause of the injuries;
2		(D) the person committed a violation of paragraph
3		(a) for a second time and has been previously convicted
4		of violating Section 9-3 of the Criminal Code of 1961
5		relating to reckless homicide in which the person was
6		determined to have been under the influence of alcohol,
7		other drug or drugs, or intoxicating compound or
8		compounds as an element of the offense or the person
9		has previously been convicted under subparagraph (C)
10		or subparagraph (F) of this paragraph (1);
11		(E) the person, in committing a violation of
12		paragraph (a) while driving at any speed in a school
13		speed zone at a time when a speed limit of 20 miles per
14		hour was in effect under subsection (a) of Section
15		11-605 of this Code, was involved in a motor vehicle
16		accident that resulted in bodily harm, other than great
17		bodily harm or permanent disability or disfigurement,
18		to another person, when the violation of paragraph (a)
19		was a proximate cause of the bodily harm; or
20		(F) the person, in committing a violation of
21		paragraph (a), was involved in a motor vehicle,
22		snowmobile, all-terrain vehicle, or watercraft
23		accident that resulted in the death of another person,
24		when the violation of paragraph (a) was a proximate
25		cause of the death.
26		(2) Except as provided in this paragraph (2),
27		aggravated driving under the influence of alcohol, other
28		drug or drugs, or intoxicating compound or compounds, or
29		any combination thereof is a Class 4 felony. For a
30		violation of subparagraph (C) of paragraph (1) of this
31		subsection (d), the defendant, if sentenced to a term of
32		imprisonment, shall be sentenced to not less than one year
33		nor more than 12 years. Aggravated driving under the
34		influence of alcohol, other drug or drugs, or intoxicating

1		compound or compounds, or any combination thereof as
2		defined in subparagraph (F) of paragraph (1) of this
3		subsection (d) is a Class 2 felony, for which the
4		defendant, if sentenced to a term of imprisonment, shall be
5		sentenced to: (A) a term of imprisonment of not less than 3
6		years and not more than 14 years if the violation resulted
7		in the death of one person; or (B) a term of imprisonment
8		of not less than 6 years and not more than 28 years if the
9		violation resulted in the deaths of 2 or more persons. For
10		any prosecution under this subsection (d), a certified copy
11		of the driving abstract of the defendant shall be admitted
12		as proof of any prior conviction.
13		(e) After a finding of guilt and prior to any final
14		sentencing, or an order for supervision, for an offense based
15		upon an arrest for a violation of this Section or a similar
16		provision of a local ordinance, individuals shall be required
17		to undergo a professional evaluation to determine if an
18		alcohol, drug, or intoxicating compound abuse problem exists
19		and the extent of the problem, and undergo the imposition of
20		treatment as appropriate. Programs conducting these
21		evaluations shall be licensed by the Department of Human
22		Services. The cost of any professional evaluation shall be paid
23		for by the individual required to undergo the professional
24		evaluation.
25		(e-1) Any person who is found guilty of or pleads guilty to
26		violating this Section, including any person receiving a
27		disposition of court supervision for violating this Section,
28		may be required by the Court to attend a victim impact panel
29		offered by, or under contract with, a County State's Attorney's
30		office, a probation and court services department, Mothers
31		Against Drunk Driving, or the Alliance Against Intoxicated
32		Motorists. All costs generated by the victim impact panel shall
33		be paid from fees collected from the offender or as may be
34		determined by the court.

1		(f) Every person found guilty of violating this Section,
2		whose operation of a motor vehicle while in violation of this
3		Section proximately caused any incident resulting in an
4		appropriate emergency response, shall be liable for the expense
5		of an emergency response as provided under Section 5-5-3 of the
6		Unified Code of Corrections.
7		(g) The Secretary of State shall revoke the driving
8		privileges of any person convicted under this Section or a
9		similar provision of a local ordinance.
10		(h) Every person sentenced under paragraph (2) or (3) of
11		subsection (c-1) of this Section or subsection (d) of this
12		Section and who receives a term of probation or conditional
13		discharge shall be required to serve a minimum term of either
14		60 days community service or 10 days of imprisonment as a
15		condition of the probation or conditional discharge. This
16		mandatory minimum term of imprisonment or assignment of
17		community service shall not be suspended and shall not be
18		subject to reduction by the court.
19		(i) The Secretary of State shall require the use of
20		ignition interlock devices on all vehicles owned by an
21		individual who has been convicted of a second or subsequent
22		offense of this Section or a similar provision of a local
23		ordinance. The Secretary shall establish by rule and regulation
24		the procedures for certification and use of the interlock
25		system.
26		(j) In addition to any other penalties and liabilities, a
27		person who is found guilty of or pleads guilty to violating
28		this Section, including any person placed on court supervision
29		for violating this Section, shall be fined $500 $100, payable
30		to the circuit clerk, who shall distribute the money as
31		follows: 20% to the law enforcement agency that made the arrest
32		and 80% shall be forwarded to the State Treasurer for deposit
33		into the General Revenue Fund. If the person has been
34		previously convicted of violating this Section or a similar

1		provision of a local ordinance, the fine shall be $1,000 $200.
2		In the event that more than one agency is responsible for the
3		arrest, the amount payable to law enforcement agencies $100 or
4		$200 shall be shared equally. Any moneys received by a law
5		enforcement agency under this subsection (j) shall be used to
6		purchase law enforcement equipment that will assist in the
7		prevention of alcohol related criminal violence throughout the
8		State. This shall include, but is not limited to, in-car video
9		cameras, radar and laser speed detection devices, and alcohol
10		breath testers. Any moneys received by the Department of State
11		Police under this subsection (j) shall be deposited into the
12		State Police DUI Fund and shall be used to purchase law
13		enforcement equipment that will assist in the prevention of
14		alcohol related criminal violence throughout the State.
15		(k) The Secretary of State Police DUI Fund is created as a
16		special fund in the State treasury. All moneys received by the
17		Secretary of State Police under subsection (j) of this Section
18		shall be deposited into the Secretary of State Police DUI Fund
19		and, subject to appropriation, shall be used to purchase law
20		enforcement equipment to assist in the prevention of alcohol
21		related criminal violence throughout the State.
22		(Source: P.A. 92-248, eff. 8-3-01; 92-418, eff. 8-17-01;
23		92-420, eff. 8-17-01; 92-429, eff. 1-1-02; 92-431, eff. 1-1-02;
24		92-651, eff. 7-11-02; 93-156, eff. 1-1-04; 93-213, eff.
25		7-18-03; 93-584, eff. 8-22-03; revised 8-27-03.)

ARTICLE 35

27		Section 35-1. Short title. This Article may be cited as the
28		Tax Shelter Voluntary Compliance Law, and references in this
29		Article to "this Law" mean this Article.

30		Section 35-5. Tax Shelter Voluntary Compliance Program.
31		(a) In general. The Department of Revenue shall establish

1		and administer a tax shelter voluntary compliance program as
2		provided in this Section for eligible taxpayers subject to tax
3		under the Illinois Income Tax Act. The tax shelter voluntary
4		compliance program shall be conducted from October 15, 2004 to
5		January 31, 2005 and shall apply to tax liabilities under
6		Section 201 of the Illinois Income Tax Act attributable to the
7		use of tax avoidance transactions for taxable years beginning
8		before January 1, 2004. The Department shall adopt rules, issue
9		forms and instructions, and take such other actions as it deems
10		necessary to implement the provisions of this Law. Any
11		correspondence mailed by the Department to a taxpayer at the
12		taxpayer's last known address outlining the tax shelter
13		voluntary compliance program constitutes a "contact" within
14		the meaning of Sections 1005(b)(6) and 1005(c) of the Illinois
15		Income Tax Act.
16		(b) Election. An eligible taxpayer that meets the
17		requirements of subsection (c) of this Section with respect to
18		any taxable year to which this Law applies may elect to
19		participate in the tax shelter voluntary compliance program
20		under either method for any particular tax avoidance
21		transaction period. Such election shall be made separately for
22		each taxable year and in the form and manner prescribed by the
23		Department, and once made shall be irrevocable.
24		(1) Voluntary compliance without appeal. If an
25		eligible taxpayer elects to participate under this
26		paragraph, then: (i) the Department shall abate and not
27		seek to collect any penalty that may be applicable to the
28		underreporting or underpayment of Illinois income tax
29		attributable to the use of tax avoidance transactions for
30		such taxable year, (ii) except as otherwise provided in
31		this Law, the Department shall not seek civil or criminal
32		prosecution against the taxpayer for such taxable year with
33		respect to tax avoidance transactions, and (iii) the
34		taxpayer may not file a claim for credit or refund with

1		respect to the tax avoidance transaction for such taxable
2		year. Nothing in this subsection shall preclude a taxpayer
3		from filing a claim for credit or refund for the same
4		taxable year in which a tax avoidance transaction was
5		reported if such credit or refund is not attributable to
6		the tax avoidance transaction. No penalty may be waived or
7		abated under this Law if the penalty imposed related to an
8		amount of Illinois income tax assessed prior to October 15,
9		2004.
10		(2) Voluntary compliance with appeal. If an eligible
11		taxpayer elects to participate under this paragraph, then:
12		(i) the Department shall abate and not seek to collect the
13		penalties imposed under Sections 1005(b) and 1005(c) of the
14		Illinois Income Tax Act with respect to such taxable year,
15		(ii) except as otherwise provided in this Act, the
16		Department shall not seek civil or criminal prosecution
17		against the taxpayer for such taxable year with respect to
18		tax avoidance transactions, and (iii) the taxpayer may file
19		a claim for credit or refund as provided in the Illinois
20		Income Tax Act with respect to such taxable year.
21		Notwithstanding Section 909(e) of the Illinois Income Tax
22		Act, the taxpayer may not file a written protest until
23		after either of the following: (i) the Department issues a
24		notice of denial, or (ii) the earlier of (1) the date which
25		is 180 days after the date of a final determination by the
26		Internal Revenue Service with respect to the transactions
27		at issue, or (2) the date that is 3 years after the date
28		the claim for refund was filed or one year after full
29		payment of all tax, including penalty and interest. No
30		penalty may be waived or abated under this Act if the
31		penalty imposed relates to an amount of Illinois income tax
32		assessed prior to October 15, 2004.
33		(c) Eligible taxpayer. The tax shelter voluntary
34		compliance program applies to any taxpayer who, during the

1		period from October 15, 2004 to January 31, 2005, does both of
2		the following:
3		(1) Files an amended return for the taxable year for
4		which the taxpayer used a tax avoidance transaction to
5		under report the taxpayer's Illinois income tax liability,
6		reporting the total Illinois net income and tax for such
7		taxable year computed without regard to any tax avoidance
8		transactions;
9		(2) Makes full payment of the additional Illinois
10		income tax and interest due for such taxable year that is
11		attributable to the use of the tax avoidance transaction
12		(not including a payment made under protest as provided in
13		Section 2a.1 of the State Officers and Employees Money
14		Disposition Act (30 ILCS 230/2a.1));
15		For purposes of this subsection (c), if the Department
16		subsequently determines that the correct amount of Illinois
17		income tax was not paid for the taxable year, then the penalty
18		relief under this Section shall not apply to any portion of the
19		underpayment attributable to a tax avoidance transaction not
20		paid to the State.

21		Section 35-10. "Tax avoidance transaction" defined. For
22		purposes of this Law, the term "tax avoidance transaction"
23		means a plan or arrangement devised for the principal purpose
24		of avoiding federal income tax. Tax avoidance transactions
25		include, but are not limited to, "listed transactions" as
26		defined in Treasury Regulations Section 1.6011-4(b)(2).

27		Section 35-15. Use of evidence of participation in the
28		program. The fact of a taxpayer's participation in the tax
29		shelter voluntary compliance program shall not be considered
30		evidence that the taxpayer in fact engaged in a tax avoidance
31		transaction.

1		Section 35-90. The Illinois Income Tax Act is amended by
2		changing Sections 501, 905, 1001, 1002, and 1005 and by adding
3		Sections 1007, 1008, 1405.5, and 1405.6 as follows:
4		(35 ILCS 5/501) (from Ch. 120, par. 5-501)
5		Sec. 501. Notice or Regulations Requiring Records,
6		Statements and Special Returns.
7		(a) In general. Every person liable for any tax imposed by
8		this Act shall keep such records, render such statements, make
9		such returns and notices, and comply with such rules and
10		regulations as the Department may from time to time prescribe.
11		Whenever in the judgment of the Director it is necessary, he
12		may require any person, by notice served upon such person or by
13		regulations, to make such returns and notices, render such
14		statements, or keep such records, as the Director deems
15		sufficient to show whether or not such person is liable for tax
16		under this Act.
17		(b) Reportable transactions. For each taxable year in which
18		a taxpayer is required to make a disclosure statement under
19		Treasury Regulations Section 1.6011-4 (26 CFR 1.6011-4)
20		(including any taxpayer that is a member of a consolidated
21		group required to make such disclosure) with respect to a
22		reportable transaction (including a listed transaction) in
23		which the taxpayer participated in a taxable year for which a
24		return is required under Section 502 of this Act, such taxpayer
25		shall file a copy of such disclosure with the Department.
26		Disclosure under this subsection is required to be made by any
27		taxpayer that is a member of a unitary business group that
28		includes any person required to make a disclosure statement
29		under Treasury Regulations Section 1.6011-4. Disclosure under
30		this subsection is required with respect to any transaction
31		entered into after February 28, 2000 that becomes a listed
32		transaction at any time, and shall be made in the manner
33		prescribed by the Department. With respect to transactions in

1		which the taxpayer participated for taxable years ending before
2		December 31, 2004, disclosure shall be made by the due date
3		(including extensions) of the first return required under
4		Section 502 of this Act due after the effective date of this
5		amendatory Act of the 93rd General Assembly. With respect to
6		transactions in which the taxpayer participated for taxable
7		years ending on and after December 31, 2004, disclosure shall
8		be made in the time and manner prescribed in Treasury
9		Regulations Section 1.6011-4(e). Notwithstanding the above, no
10		disclosure is required for transactions entered into after
11		February 28, 2000 and before January 1, 2005 (i) if the
12		taxpayer has filed an amended Illinois income tax return which
13		reverses the tax benefits of the potential tax avoidance
14		transaction, or (ii) as a result of a federal audit the
15		Internal Revenue Service has determined the tax treatment of
16		the transaction and an Illinois amended return has been filed
17		to reflect the federal treatment.
18		(Source: P.A. 76-261.)
19		(35 ILCS 5/905) (from Ch. 120, par. 9-905)
20		Sec. 905. Limitations on Notices of Deficiency.
21		(a) In general. Except as otherwise provided in this Act:
22		(1) A notice of deficiency shall be issued not later
23		than 3 years after the date the return was filed, and
24		(2) No deficiency shall be assessed or collected with
25		respect to the year for which the return was filed unless
26		such notice is issued within such period.
27		(b) Substantial omission of items.
28		(1) Omission of more than 25% of income. If the
29		taxpayer omits from base income an amount properly
30		includible therein which is in excess of 25% of the amount
31		of base income stated in the return, a notice of deficiency
32		may be issued not later than 6 years after the return was
33		filed. For purposes of this paragraph, there shall not be

1		taken into account any amount which is omitted in the
2		return if such amount is disclosed in the return, or in a
3		statement attached to the return, in a manner adequate to
4		apprise the Department of the nature and the amount of such
5		item.
6		(2) Reportable transactions. If a taxpayer fails to
7		include on any return or statement for any taxable year any
8		information with respect to a reportable transaction, as
9		required under Section 501(b) of this Act, a notice of
10		deficiency may be issued not later than 6 years after the
11		return is filed with respect to the taxable year in which
12		the taxpayer participated in the reportable transaction
13		and said deficiency is limited to the non-disclosed item.
14		(c) No return or fraudulent return. If no return is filed
15		or a false and fraudulent return is filed with intent to evade
16		the tax imposed by this Act, a notice of deficiency may be
17		issued at any time.
18		(d) Failure to report federal change. If a taxpayer fails
19		to notify the Department in any case where notification is
20		required by Section 304(c) or 506(b), or fails to report a
21		change or correction which is treated in the same manner as if
22		it were a deficiency for federal income tax purposes, a notice
23		of deficiency may be issued (i) at any time or (ii) on or after
24		August 13, 1999, at any time for the taxable year for which the
25		notification is required or for any taxable year to which the
26		taxpayer may carry an Article 2 credit, or a Section 207 loss,
27		earned, incurred, or used in the year for which the
28		notification is required; provided, however, that the amount of
29		any proposed assessment set forth in the notice shall be
30		limited to the amount of any deficiency resulting under this
31		Act from the recomputation of the taxpayer's net income,
32		Article 2 credits, or Section 207 loss earned, incurred, or
33		used in the taxable year for which the notification is required
34		after giving effect to the item or items required to be

1		reported.
2		(e) Report of federal change.
3		(1) Before August 13, 1999, in any case where
4		notification of an alteration is given as required by
5		Section 506(b), a notice of deficiency may be issued at any
6		time within 2 years after the date such notification is
7		given, provided, however, that the amount of any proposed
8		assessment set forth in such notice shall be limited to the
9		amount of any deficiency resulting under this Act from
10		recomputation of the taxpayer's net income, net loss, or
11		Article 2 credits for the taxable year after giving effect
12		to the item or items reflected in the reported alteration.
13		(2) On and after August 13, 1999, in any case where
14		notification of an alteration is given as required by
15		Section 506(b), a notice of deficiency may be issued at any
16		time within 2 years after the date such notification is
17		given for the taxable year for which the notification is
18		given or for any taxable year to which the taxpayer may
19		carry an Article 2 credit, or a Section 207 loss, earned,
20		incurred, or used in the year for which the notification is
21		given, provided, however, that the amount of any proposed
22		assessment set forth in such notice shall be limited to the
23		amount of any deficiency resulting under this Act from
24		recomputation of the taxpayer's net income, Article 2
25		credits, or Section 207 loss earned, incurred, or used in
26		the taxable year for which the notification is given after
27		giving effect to the item or items reflected in the
28		reported alteration.
29		(f) Extension by agreement. Where, before the expiration of
30		the time prescribed in this Section for the issuance of a
31		notice of deficiency, both the Department and the taxpayer
32		shall have consented in writing to its issuance after such
33		time, such notice may be issued at any time prior to the
34		expiration of the period agreed upon. In the case of a taxpayer

1		who is a partnership, Subchapter S corporation, or trust and
2		who enters into an agreement with the Department pursuant to
3		this subsection on or after January 1, 2003, a notice of
4		deficiency may be issued to the partners, shareholders, or
5		beneficiaries of the taxpayer at any time prior to the
6		expiration of the period agreed upon. Any proposed assessment
7		set forth in the notice, however, shall be limited to the
8		amount of any deficiency resulting under this Act from
9		recomputation of items of income, deduction, credits, or other
10		amounts of the taxpayer that are taken into account by the
11		partner, shareholder, or beneficiary in computing its
12		liability under this Act. The period so agreed upon may be
13		extended by subsequent agreements in writing made before the
14		expiration of the period previously agreed upon.
15		(g) Erroneous refunds. In any case in which there has been
16		an erroneous refund of tax payable under this Act, a notice of
17		deficiency may be issued at any time within 2 years from the
18		making of such refund, or within 5 years from the making of
19		such refund if it appears that any part of the refund was
20		induced by fraud or the misrepresentation of a material fact,
21		provided, however, that the amount of any proposed assessment
22		set forth in such notice shall be limited to the amount of such
23		erroneous refund.
24		Beginning July 1, 1993, in any case in which there has been
25		a refund of tax payable under this Act attributable to a net
26		loss carryback as provided for in Section 207, and that refund
27		is subsequently determined to be an erroneous refund due to a
28		reduction in the amount of the net loss which was originally
29		carried back, a notice of deficiency for the erroneous refund
30		amount may be issued at any time during the same time period in
31		which a notice of deficiency can be issued on the loss year
32		creating the carryback amount and subsequent erroneous refund.
33		The amount of any proposed assessment set forth in the notice
34		shall be limited to the amount of such erroneous refund.

1		(h) Time return deemed filed. For purposes of this Section
2		a tax return filed before the last day prescribed by law
3		(including any extension thereof) shall be deemed to have been
4		filed on such last day.
5		(i) Request for prompt determination of liability. For
6		purposes of subsection (a)(1), in the case of a tax return
7		required under this Act in respect of a decedent, or by his
8		estate during the period of administration, or by a
9		corporation, the period referred to in such Subsection shall be
10		18 months after a written request for prompt determination of
11		liability is filed with the Department (at such time and in
12		such form and manner as the Department shall by regulations
13		prescribe) by the executor, administrator, or other fiduciary
14		representing the estate of such decedent, or by such
15		corporation, but not more than 3 years after the date the
16		return was filed. This subsection shall not apply in the case
17		of a corporation unless:
18		(1) (A) such written request notifies the Department
19		that the corporation contemplates dissolution at or before
20		the expiration of such 18-month period, (B) the dissolution
21		is begun in good faith before the expiration of such
22		18-month period, and (C) the dissolution is completed;
23		(2) (A) such written request notifies the Department
24		that a dissolution has in good faith been begun, and (B)
25		the dissolution is completed; or
26		(3) a dissolution has been completed at the time such
27		written request is made.
28		(j) Withholding tax. In the case of returns required under
29		Article 7 of this Act (with respect to any amounts withheld as
30		tax or any amounts required to have been withheld as tax) a
31		notice of deficiency shall be issued not later than 3 years
32		after the 15th day of the 4th month following the close of the
33		calendar year in which such withholding was required.
34		(k) Penalties for failure to make information reports. A

1		notice of deficiency for the penalties provided by Subsection
2		1405.1(c) of this Act may not be issued more than 3 years after
3		the due date of the reports with respect to which the penalties
4		are asserted.
5		(l) Penalty for failure to file withholding returns. A
6		notice of deficiency for penalties provided by Section 1004 of
7		this Act for taxpayer's failure to file withholding returns may
8		not be issued more than three years after the 15th day of the
9		4th month following the close of the calendar year in which the
10		withholding giving rise to taxpayer's obligation to file those
11		returns occurred.
12		(m) Transferee liability. A notice of deficiency may be
13		issued to a transferee relative to a liability asserted under
14		Section 1405 during time periods defined as follows:
15		1) Initial Transferee. In the case of the liability of
16		an initial transferee, up to 2 years after the expiration
17		of the period of limitation for assessment against the
18		transferor, except that if a court proceeding for review of
19		the assessment against the transferor has begun, then up to
20		2 years after the return of the certified copy of the
21		judgment in the court proceeding.
22		2) Transferee of Transferee. In the case of the
23		liability of a transferee, up to 2 years after the
24		expiration of the period of limitation for assessment
25		against the preceding transferee, but not more than 3 years
26		after the expiration of the period of limitation for
27		assessment against the initial transferor; except that if,
28		before the expiration of the period of limitation for the
29		assessment of the liability of the transferee, a court
30		proceeding for the collection of the tax or liability in
31		respect thereof has been begun against the initial
32		transferor or the last preceding transferee, as the case
33		may be, then the period of limitation for assessment of the
34		liability of the transferee shall expire 2 years after the

1		return of the certified copy of the judgment in the court
2		proceeding.
3		(n) Notice of decrease in net loss. On and after the
4		effective date of this amendatory Act of the 92nd General
5		Assembly, no notice of deficiency shall be issued as the result
6		of a decrease determined by the Department in the net loss
7		incurred by a taxpayer under Section 207 of this Act unless the
8		Department has notified the taxpayer of the proposed decrease
9		within 3 years after the return reporting the loss was filed or
10		within one year after an amended return reporting an increase
11		in the loss was filed, provided that in the case of an amended
12		return, a decrease proposed by the Department more than 3 years
13		after the original return was filed may not exceed the increase
14		claimed by the taxpayer on the original return.
15		(Source: P.A. 91-541, eff. 8-13-99; 92-846, eff. 8-23-02.)
16		(35 ILCS 5/1001) (from Ch. 120, par. 10-1001)
17		Sec. 1001. Failure to File Tax Returns.
18		(a) Failure to file tax return. In case of failure to file
19		any tax return required under this Act on the date prescribed
20		therefor, (determined with regard to any extensions of time for
21		filing) there shall be added as a penalty the amount prescribed
22		by Section 3-3 of the Uniform Penalty and Interest Act.
23		(b) Failure to disclose reportable transaction. Any
24		taxpayer who fails to comply with the requirements of Section
25		501(b) of this Act shall pay a penalty in the amount determined
26		under this subsection. Such penalty shall be deemed assessed
27		upon the date of filing of the return for the taxable year in
28		which the taxpayer participates in the reportable transaction.
29		A taxpayer shall not be considered to have complied with the
30		requirements of Section 501(b) of this Act unless the
31		disclosure statement filed with the Department includes all of
32		the information required to be disclosed with respect to a
33		reportable transaction pursuant to Treasury Regulations

1		Section 1.6011-4 (26 CFR 1.6011-4) and regulations promulgated
2		by the Department under Section 501(b) of this Act.
3		(1) Amount of penalty. Except as provided in paragraph (2),
4		the amount of the penalty under this subsection shall be
5		$15,000 for each failure to comply with the requirements of
6		Section 501(b).
7		(2) Increase in penalty for listed transactions. In the
8		case of a failure to comply with the requirements of Section
9		501(b) with respect to a "listed transaction", the penalty
10		under this subsection shall be $30,000 for each failure.
11		(3) Authority to rescind penalty. The Department may
12		rescind all or any portion of any penalty imposed by this
13		subsection with respect to any violation, if any of the
14		following apply:
15		(A) It is determined that failure to comply did not
16		jeopardize the best interests of the State and is not due
17		to any willful neglect or any intent not to comply;
18		(B) The person on whom the penalty is imposed has a
19		history of complying with the requirements of this Act;
20		(C) It is shown that the violation is due to an
21		unintentional mistake of fact;
22		(D) Imposing the penalty would be against equity and
23		good conscience;
24		(E) Rescinding the penalty would promote compliance
25		with the requirements of this Act and effective tax
26		administration; or
27		(F) The taxpayer can show that there was a reasonable
28		cause for the failure to disclose and that the taxpayer
29		acted in good faith.
30		A determination made under this subparagraph (3) may be
31		reviewed in any administrative or judicial proceeding.
32		(4) Coordination with other penalties. The penalty imposed
33		by this subsection is in addition to any penalty imposed by
34		this Act or the Uniform Penalty and Interest Act. The doubling

1		of penalties and interest authorized by the Illinois Tax
2		Delinquency Amnesty Act (P.A. 93-26) are not applicable to the
3		reportable penalties under subsection (b).
4		(c) The total penalty imposed under subsection (b) of this
5		Section with respect to any taxable year shall not exceed 10%
6		of the increase in net income (or reduction in Illinois net
7		loss under Section 207 of this Act) that would result had the
8		taxpayer not participated in any reportable transaction
9		affecting its net income for such taxable year.
10		(Source: P.A. 87-205.)
11		(35 ILCS 5/1002) (from Ch. 120, par. 10-1002)
12		Sec. 1002. Failure to Pay Tax.
13		(a) Negligence. If any part of a deficiency is due to
14		negligence or intentional disregard of rules and regulations
15		(but without intent to defraud) there shall be added to the tax
16		as a penalty the amount prescribed by Section 3-5 of the
17		Uniform Penalty and Interest Act.
18		(b) Fraud. If any part of a deficiency is due to fraud,
19		there shall be added to the tax as a penalty the amount
20		prescribed by Section 3-6 of the Uniform Penalty and Interest
21		Act.
22		(c) Nonwillful failure to pay withholding tax. If any
23		employer, without intent to evade or defeat any tax imposed by
24		this Act or the payment thereof, shall fail to make a return
25		and pay a tax withheld by him at the time required by or under
26		the provisions of this Act, such employer shall be liable for
27		such taxes and shall pay the same together with the interest
28		and the penalty provided by Sections 3-2 and 3-3, respectively,
29		of the Uniform Penalty and Interest Act and such interest and
30		penalty shall not be charged to or collected from the employee
31		by the employer.
32		(d) Willful failure to collect and pay over tax. Any person
33		required to collect, truthfully account for, and pay over the

1		tax imposed by this Act who willfully fails to collect such tax
2		or truthfully account for and pay over such tax or willfully
3		attempts in any manner to evade or defeat the tax or the
4		payment thereof, shall, in addition to other penalties provided
5		by law, be liable for the penalty imposed by Section 3-7 of the
6		Uniform Penalty and Interest Act.
7		(e) Penalties assessable.
8		(1) In general. Except as otherwise provided in this
9		Act provided in paragraphs (2), (3) and (4), the penalties
10		provided by this Act shall be paid upon notice and demand
11		and shall be assessed, collected, and paid in the same
12		manner as taxes and any reference in this Act to the tax
13		imposed by this Act shall be deemed also to refer to
14		penalties provided by this Act.
15		(2) Procedure for assessing certain penalties. For the
16		purposes of Article 9 any penalty under Section 804(a) or
17		Section 1001 shall be deemed assessed upon the filing of
18		the return for the taxable year.
19		(3) Procedure for assessing the penalty for failure to
20		file withholding returns or annual transmittal forms for
21		wage and tax statements. The penalty imposed by Section
22		1004 will be asserted by the Department's issuance of a
23		notice of deficiency. If taxpayer files a timely protest,
24		the procedures of Section 908 will be followed. If taxpayer
25		does not file a timely protest, the notice of deficiency
26		will constitute an assessment pursuant to subsection (c) of
27		Section 904.
28		(4) Assessment of penalty under Section 1005(b). The
29		penalty imposed under Section 1005(b) shall be deemed
30		assessed upon the assessment of the tax to which such
31		penalty relates and shall be collected and paid on notice
32		and demand in the same manner as the tax.
33		(f) Determination of deficiency. For purposes of
34		subsections (a) and (b), the amount shown as the tax by the

1		taxpayer upon his return shall be taken into account in
2		determining the amount of the deficiency only if such return
3		was filed on or before the last day prescribed by law for the
4		filing of such return, including any extensions of the time for
5		such filing.
6		(Source: P.A. 89-379, eff. 1-1-96.)
7		(35 ILCS 5/1005) (from Ch. 120, par. 10-1005)
8		Sec. 1005. Penalty for Underpayment of Tax.
9		(a) In general. If any amount of tax required to be shown
10		on a return prescribed by this Act is not paid on or before the
11		date required for filing such return (determined without regard
12		to any extension of time to file), a penalty shall be imposed
13		in the manner and at the rate prescribed by the Uniform Penalty
14		and Interest Act.
15		(b) Reportable transaction penalty. If a taxpayer has a
16		reportable transaction understatement for any taxable year,
17		there shall be added to the tax an amount equal to 20% of the
18		amount of that understatement. This penalty shall be deemed
19		assessed upon the assessment of the tax to which such penalty
20		relates and shall be collected and paid on notice and demand in
21		the same manner as the tax.
22		(1) Reportable transaction understatement. For
23		purposes of this Section, the term "reportable transaction
24		understatement" means the sum of subparagraphs (A) and (B):
25		(A) The product of (i) the amount of the increase
26		(if any) in Illinois net income, as determined by
27		reference to the amount of post-apportioned income
28		that results from a difference between the proper tax
29		treatment of an item to which this subsection applies
30		and the taxpayer's treatment of that item (as shown on
31		the taxpayer's return of tax), including an amended
32		return filed prior to the date the taxpayer is first
33		contacted by the Department regarding the examination

1		of the return, and (ii) the applicable tax rates under
2		Section 201 of this Act.
3		(B) Special rules in the case of carrybacks and
4		carryovers. The penalty for an understatement of
5		income attributable to a reportable transaction
6		applies to any portion of an understatement for a year
7		to which a loss, deduction, or credit is carried that
8		is attributable to a reportable transaction for that
9		year in which the carryback or carryover of the loss,
10		deduction, or credit arises (the "loss or credit
11		year").
12		(2) Items to which subsection applies. This subsection
13		shall apply to any item which is attributable to either of
14		the following: (i) any listed transaction as defined in
15		Treasury Regulations Section 1.6011-4, and (ii) any
16		reportable transaction as defined in Treasury Regulations
17		Section 1.6011-4 (other than a listed transaction) if a
18		significant purpose of the transaction is the avoidance or
19		evasion of federal income tax.
20		(3) Subsection (b) shall be applied by substituting
21		"30%" for "20%" with respect to the portion of any
22		reportable transaction understatement with respect to
23		which the requirements of (4)(B)(i) of this subsection are
24		not met.
25		(4) Reasonable cause exception.
26		(A) In general. No penalty shall be imposed under
27		this subsection with respect to any portion of a
28		reportable transaction understatement if it is shown
29		that there was a reasonable cause for such portion and
30		that the taxpayer acted in good faith with respect to
31		such portion.
32		(B) Special rules. Subparagraph (A) does not apply
33		to any reportable transaction (including listed
34		transaction) unless all of the following requirements

1		are met:
2		(i) The relevant facts affecting the tax
3		treatment of the item are adequately disclosed in
4		accordance with Section 501(b) of this Act. A
5		taxpayer failing to adequately disclose in
6		accordance with Section 501(b) shall be treated as
7		meeting the requirements of this subparagraph (i)
8		if the penalty for that failure was rescinded under
9		Section 1001(b)(3) of this Act;
10		(ii) There is or was substantial authority for
11		such treatment; and
12		(iii) The taxpayer reasonably believed that
13		such treatment was more likely than not the proper
14		treatment.
15		(C) Rules relating to reasonable belief. For
16		purposes of subparagraph (B), a taxpayer shall be
17		treated as having a reasonable belief with respect to
18		the tax treatment of an item only if such belief meets
19		the requirements of this subparagraph (C):
20		(i) Such belief must be based on the facts and
21		law that exist at the time the return of tax that
22		includes that tax treatment is filed;
23		(ii) Such belief must relate solely to the
24		taxpayer's chances of success on the merits of that
25		treatment and does not take into account the
26		possibility that the return will not be audited,
27		that the treatment will not be raised on audit, or
28		that the treatment will be resolved through
29		settlement if it is raised; and
30		(iii) Such belief is not solely based on the
31		opinion of a disqualified tax advisor or on a
32		disqualified opinion.
33		(5) Definitions.
34		(A) Disqualified tax advisor. The term

1		"disqualified tax advisor" is a tax advisor that meets
2		any of the following conditions:
3		(I) Is a material advisor who participates in
4		the organization, management, promotion, or sale
5		of the transaction or who is related (within the
6		meaning of Sections 267(b) or 707(b)(1) of the
7		Internal Revenue Code) to any person who so
8		participates;
9		(II) Is compensated directly or indirectly by
10		a material advisor with respect to the
11		transaction;
12		(III) Has a fee arrangement with respect to the
13		transaction that is contingent on all or part of
14		the intended tax benefits from the transaction
15		being sustained; or
16		(IV) As determined under regulations
17		prescribed by either the Secretary of the Treasury
18		for federal income tax purposes or the Department,
19		has a continuing financial interest with respect
20		to the transaction.
21		(B) Disqualified opinion. The term "disqualified
22		opinion" means an opinion that meets any of the
23		following conditions:
24		(I) Is based on unreasonable factual or legal
25		assumptions (including assumptions as to future
26		events);
27		(II) Unreasonably relies on representations,
28		statements, findings, or agreements of the
29		taxpayer or any other person;
30		(III) Does not identify and consider all
31		relevant facts; or
32		(IV) Fails to meet any other requirement as
33		either the Secretary of the Treasury for federal
34		income tax purposes or the Department may

1		prescribe.
2		(C) Material Advisor. The term "material advisor"
3		shall have substantially the same meaning as the same
4		term is defined under Treasury Regulations Section
5		301.6112-1, (26 CFR 301.6112-1) and shall include any
6		person that is a material advisor for federal income
7		tax purposes under such regulation.
8		(6) Effective date. This subsection shall apply to
9		taxable years ending on and after December 31, 2004, except
10		that a reportable transaction understatement shall include
11		an understatement (as determined under paragraph (1)) with
12		respect to any taxable year for which the limitations
13		period on assessment has not expired as of January 1, 2005
14		that is attributable to a transaction which the taxpayer
15		has entered into after February 28, 2000 and before
16		December 31, 2004 that becomes a listed transaction (as
17		defined in Treasury Regulations Section 1.6011-4(b)(2) at
18		any time.
19		(c) 100% interest penalty. If a taxpayer has been contacted
20		by the Internal Revenue Service or the Department regarding the
21		use of a potential tax avoidance transaction with respect to a
22		taxable year and has a deficiency with respect to such taxable
23		year or years, there shall be added to the tax attributable to
24		the potential tax avoidance transaction (determined as
25		described in subsection (b)(1) of Section 1005) an amount equal
26		to 100% of the interest assessed under the Uniform Penalty and
27		Interest Act (determined without regard to subsection (f) of
28		Section 3-2 of such Act) for the period beginning on the last
29		date prescribed by law for the payment of such tax and ending
30		on the date of the notice of deficiency. Such penalty shall be
31		deemed assessed upon the assessment of the interest to which
32		such penalty relates and shall be collected and paid in the
33		same manner as such interest. The penalty imposed by this
34		subsection is in addition to any penalty imposed by this Act or

1		the Uniform Penalty and Interest Act. For purposes of this
2		subsection and subsection (d) of this Section, the term
3		"potential tax avoidance transaction" means any tax shelter as
4		defined in Section 6111 of the Internal Revenue Code. This
5		subsection shall apply to taxable years ending on and after
6		December 31, 2004, except that the penalty may also be imposed
7		with respect to any taxable year for which the limitations
8		period on assessment has not expired as of January 1, 2005 that
9		is attributable to a transaction in which the taxpayer has
10		entered into after February 28, 2000 and before December 31,
11		2004, which transaction becomes a listed transaction (as
12		defined in Treasury Regulations Section 1.6011-4(b)(2)) at any
13		time.
14		(d) 150% interest rate. For taxable years ending on and
15		after July 1, 2002, for any notice of deficiency issued before
16		the taxpayer is contacted by the Internal Revenue Service or
17		the Department regarding a potential tax avoidance
18		transaction, the taxpayer is subject to interest as provided
19		under Section 3-2 of the Uniform Penalty and Interest Act, but
20		with respect to any deficiency attributable to a potential tax
21		avoidance transaction, the taxpayer is subject to interest at a
22		rate of 150% of the otherwise applicable rate.
23		(e) Coordination with other penalties. Except as provided
24		in regulations, the penalties imposed by this Section are in
25		addition to any other penalty imposed by this Act or the
26		Uniform Penalty and Interest Act. The doubling of penalties and
27		interest authorized by the Illinois Tax Delinquency Amnesty Act
28		(P.A. 93-26), are not applicable to the reportable transaction
29		penalties and interest under subsections (b), (c), and (d).
30		The provisions of this Section shall apply to all taxable
31		years ending on or after January 1, 1986.
32		(Source: P.A. 87-205.)
33		(35 ILCS 5/1007 new)

1		Sec. 1007. Failure to register tax shelter or maintain
2		list.
3		(a) Penalty Imposed. Any person that fails to comply with
4		the requirements of Section 1405.5 or Section 1405.6 shall
5		incur a penalty as provided in this Section. A person shall not
6		be in compliance with the requirements of Section 1405.5 unless
7		and until the required registration has been filed and contains
8		all of the information required to be included with such
9		registration under Section 6111 of the Internal Revenue Code or
10		such Section 1405.5. A person shall not be in compliance with
11		the requirements of Section 1405.6 unless, at the time the
12		required list is made available to the Department, such list
13		contains all of the information required to be maintained under
14		Section 6112 of the Internal Revenue Code or such Section
15		1405.6.
16		(b) Amount of Penalty. The following penalties apply:
17		(1) In the case of each failure to comply with the
18		requirements of subsection (a), subsection (b), or
19		subsection (e) of Section 1405.5, the penalty shall be
20		$15,000.
21		(2) If the failure is with respect to a listed
22		transaction under subsection (c) of Section 1405.5, the
23		penalty shall be $100,000.
24		(3) In the case of each failure to comply with the
25		requirements of subsection (a) or subsection (b) of Section
26		1405.6, the penalty shall be $15,000.
27		(4) If the failure is with respect to a listed
28		transaction under subsection (c) of Section 1405.6, the
29		penalty shall be $100,000.
30		(c) Authority to rescind penalty. The Director of the Board
31		of Appeals may rescind all or any portion of any penalty
32		imposed by this Section with respect to any violation, if any
33		of the following apply:
34		(1) It is determined that failure to comply did not

1		jeopardize the best interests of the State and is not due
2		to any willful neglect or any intent not to comply;
3		(2) The person on whom the penalty is imposed has a
4		history of complying with the requirements of this Act;
5		(3) It is shown that the violation is due to an
6		unintentional mistake of fact;
7		(4) Imposing the penalty would be against equity and
8		good conscience;
9		(5) Rescinding the penalty would promote compliance
10		with the requirements of this Act and effective tax
11		administration; or
12		(6) The taxpayer can show that there was reasonable
13		cause for the failure to disclose and that the taxpayer
14		acted in good faith.
15		(d) Coordination with other penalties. The penalty imposed
16		by this Section is in addition to any penalty imposed by this
17		Act or the Uniform Penalty and Interest Act.
18		(35 ILCS 5/1008 new)
19		Sec. 1008. Promoting tax shelters. Except as herein
20		provided, the provisions of Section 6700 of the Internal
21		Revenue Code shall apply for purposes of this Act as if such
22		Section applied to an Illinois deduction, credit, exclusion
23		from income, allocation or apportionment rule, or other
24		Illinois tax benefit. Notwithstanding Section 6700(a) of the
25		Internal Revenue Code, if an activity with respect to which a
26		penalty imposed under Section 6700(a) of the Internal Revenue
27		Code, as applied for purposes of this Act, involves a statement
28		described in Section 6700(a)(2)(A) of the Internal Revenue
29		Code, as applied for purposes of this Act, the amount of the
30		penalty imposed under this Section shall be the greater of
31		$10,000 or 50% of the gross income received (or to be received)
32		from any person to whom such statement is furnished that is
33		required to file a return under Section 502 of this Act.

1		(35 ILCS 5/1405.5 new)
2		Sec. 1405.5. Registration of tax shelters.
3		(a) Federal tax shelter. Any tax shelter organizer required
4		to register a tax shelter under Section 6111 of the Internal
5		Revenue Code shall send a duplicate of the federal registration
6		information to the Department not later than the day on which
7		registration is required under federal law. Any person required
8		to register under Section 6111 of the Internal Revenue Code who
9		receives a tax registration number from the Secretary of the
10		Treasury shall, within 30 days after request by the Department,
11		file a statement of that registration number.
12		(b) Additional requirements for listed transactions. In
13		addition to the requirements of subsection (a), for any
14		transactions entered into on or after February 28, 2000 that
15		become listed transactions (as defined under Treasury
16		Regulations Section 1.6011-4) at any time, those transactions
17		shall be registered with the Department (in the form and manner
18		prescribed by the Department) by the later of (i) 60 days after
19		entering into the transaction, (ii) 60 days after the
20		transaction becomes a listed transaction, or (iii) December 31,
21		2004.
22		(c) Tax shelters subject to this Section. The provisions of
23		this Section apply to any tax shelter herein described that
24		additionally satisfies any of the following conditions: (1) is
25		organized in this State; (2) is doing business in this State;
26		or (3) is deriving income from sources in this State.
27		(d) Tax shelter identification number. Any person required
28		to file a return under this Act and required to include on the
29		person's federal tax return a tax shelter identification number
30		pursuant to Section 6111 of the Internal Revenue Code shall
31		furnish such number upon filing of the person's Illinois
32		return.

1		(35 ILCS 5/1405.6 new)
2		Sec. 1405.6. Investor lists.
3		(a) Federal abusive tax shelter. Any person required to
4		maintain a list under Section 6112 of the Internal Revenue Code
5		and Treasury Regulations Section 301.6112-1 with respect to a
6		potentially abusive tax shelter shall furnish such list to the
7		Department not later than the time such list is required to be
8		furnished to the Internal Revenue Service under federal income
9		tax law.
10		The list required under this Section shall include the same
11		information required with respect to a potentially abusive tax
12		shelter under Treasury Regulations Section 301.6112-1 and any
13		other information as the Department may require.
14		(b) Additional requirements for listed transactions. For
15		transactions entered into on or after February 28, 2000 that
16		become listed transactions (as defined under Treasury
17		Regulations Section 1.6011-4) at any time, the list shall be
18		furnished to the Department by the later of (i) 60 days after
19		entering into the transaction, (ii) 60 days after the
20		transaction becomes a listed transaction, or (iii) December 31,
21		2004.
22		(d) Tax Shelters subject to this Section. The provisions of
23		this Section apply to any tax shelter herein described that
24		additionally satisfies any of the following conditions:
25		(1) Organized in this State;
26		(2) Doing Business in this State; or
27		(3) Deriving income from sources in this State.

ARTICLE 40

29		Section 40-5. The Illinois Income Tax Act is amended by
30		changing Section 201 as follows:
31		(35 ILCS 5/201) (from Ch. 120, par. 2-201)

1		Sec. 201. Tax Imposed.
2		(a) In general. A tax measured by net income is hereby
3		imposed on every individual, corporation, trust and estate for
4		each taxable year ending after July 31, 1969 on the privilege
5		of earning or receiving income in or as a resident of this
6		State. Such tax shall be in addition to all other occupation or
7		privilege taxes imposed by this State or by any municipal
8		corporation or political subdivision thereof.
9		(b) Rates. The tax imposed by subsection (a) of this
10		Section shall be determined as follows, except as adjusted by
11		subsection (d-1):
12		(1) In the case of an individual, trust or estate, for
13		taxable years ending prior to July 1, 1989, an amount equal
14		to 2 1/2% of the taxpayer's net income for the taxable
15		year.
16		(2) In the case of an individual, trust or estate, for
17		taxable years beginning prior to July 1, 1989 and ending
18		after June 30, 1989, an amount equal to the sum of (i) 2
19		1/2% of the taxpayer's net income for the period prior to
20		July 1, 1989, as calculated under Section 202.3, and (ii)
21		3% of the taxpayer's net income for the period after June
22		30, 1989, as calculated under Section 202.3.
23		(3) In the case of an individual, trust or estate, for
24		taxable years beginning after June 30, 1989, an amount
25		equal to 3% of the taxpayer's net income for the taxable
26		year.
27		(4) (Blank).
28		(5) (Blank).
29		(6) In the case of a corporation, for taxable years
30		ending prior to July 1, 1989, an amount equal to 4% of the
31		taxpayer's net income for the taxable year.
32		(7) In the case of a corporation, for taxable years
33		beginning prior to July 1, 1989 and ending after June 30,
34		1989, an amount equal to the sum of (i) 4% of the

1		taxpayer's net income for the period prior to July 1, 1989,
2		as calculated under Section 202.3, and (ii) 4.8% of the
3		taxpayer's net income for the period after June 30, 1989,
4		as calculated under Section 202.3.
5		(8) In the case of a corporation, for taxable years
6		beginning after June 30, 1989, an amount equal to 4.8% of
7		the taxpayer's net income for the taxable year.
8		(c) Personal Property Tax Replacement Income Tax.
9		Beginning on July 1, 1979 and thereafter, in addition to such
10		income tax, there is also hereby imposed the Personal Property
11		Tax Replacement Income Tax measured by net income on every
12		corporation (including Subchapter S corporations), partnership
13		and trust, for each taxable year ending after June 30, 1979.
14		Such taxes are imposed on the privilege of earning or receiving
15		income in or as a resident of this State. The Personal Property
16		Tax Replacement Income Tax shall be in addition to the income
17		tax imposed by subsections (a) and (b) of this Section and in
18		addition to all other occupation or privilege taxes imposed by
19		this State or by any municipal corporation or political
20		subdivision thereof.
21		(d) Additional Personal Property Tax Replacement Income
22		Tax Rates. The personal property tax replacement income tax
23		imposed by this subsection and subsection (c) of this Section
24		in the case of a corporation, other than a Subchapter S
25		corporation and except as adjusted by subsection (d-1), shall
26		be an additional amount equal to 2.85% of such taxpayer's net
27		income for the taxable year, except that beginning on January
28		1, 1981, and thereafter, the rate of 2.85% specified in this
29		subsection shall be reduced to 2.5%, and in the case of a
30		partnership, trust or a Subchapter S corporation shall be an
31		additional amount equal to 1.5% of such taxpayer's net income
32		for the taxable year.
33		(d-1) Rate reduction for certain foreign insurers. In the
34		case of a foreign insurer, as defined by Section 35A-5 of the

1		Illinois Insurance Code, whose state or country of domicile
2		imposes on insurers domiciled in Illinois a retaliatory tax
3		(excluding any insurer whose premiums from reinsurance assumed
4		are 50% or more of its total insurance premiums as determined
5		under paragraph (2) of subsection (b) of Section 304, except
6		that for purposes of this determination premiums from
7		reinsurance do not include premiums from inter-affiliate
8		reinsurance arrangements), beginning with taxable years ending
9		on or after December 31, 1999, the sum of the rates of tax
10		imposed by subsections (b) and (d) shall be reduced (but not
11		increased) to the rate at which the total amount of tax imposed
12		under this Act, net of all credits allowed under this Act,
13		shall equal (i) the total amount of tax that would be imposed
14		on the foreign insurer's net income allocable to Illinois for
15		the taxable year by such foreign insurer's state or country of
16		domicile if that net income were subject to all income taxes
17		and taxes measured by net income imposed by such foreign
18		insurer's state or country of domicile, net of all credits
19		allowed or (ii) a rate of zero if no such tax is imposed on such
20		income by the foreign insurer's state of domicile. For the
21		purposes of this subsection (d-1), an inter-affiliate includes
22		a mutual insurer under common management.
23		(1) For the purposes of subsection (d-1), in no event
24		shall the sum of the rates of tax imposed by subsections
25		(b) and (d) be reduced below the rate at which the sum of:
26		(A) the total amount of tax imposed on such foreign
27		insurer under this Act for a taxable year, net of all
28		credits allowed under this Act, plus
29		(B) the privilege tax imposed by Section 409 of the
30		Illinois Insurance Code, the fire insurance company
31		tax imposed by Section 12 of the Fire Investigation
32		Act, and the fire department taxes imposed under
33		Section 11-10-1 of the Illinois Municipal Code,
34		equals 1.25% for taxable years ending prior to December 31,

1		2003, or 1.75% for taxable years ending on or after
2		December 31, 2003, of the net taxable premiums written for
3		the taxable year, as described by subsection (1) of Section
4		409 of the Illinois Insurance Code. This paragraph will in
5		no event increase the rates imposed under subsections (b)
6		and (d).
7		(2) Any reduction in the rates of tax imposed by this
8		subsection shall be applied first against the rates imposed
9		by subsection (b) and only after the tax imposed by
10		subsection (a) net of all credits allowed under this
11		Section other than the credit allowed under subsection (i)
12		has been reduced to zero, against the rates imposed by
13		subsection (d).
14		This subsection (d-1) is exempt from the provisions of
15		Section 250.
16		(e) Investment credit. A taxpayer shall be allowed a credit
17		against the Personal Property Tax Replacement Income Tax for
18		investment in qualified property.
19		(1) A taxpayer shall be allowed a credit equal to .5%
20		of the basis of qualified property placed in service during
21		the taxable year, provided such property is placed in
22		service on or after July 1, 1984. There shall be allowed an
23		additional credit equal to .5% of the basis of qualified
24		property placed in service during the taxable year,
25		provided such property is placed in service on or after
26		July 1, 1986, and the taxpayer's base employment within
27		Illinois has increased by 1% or more over the preceding
28		year as determined by the taxpayer's employment records
29		filed with the Illinois Department of Employment Security.
30		Taxpayers who are new to Illinois shall be deemed to have
31		met the 1% growth in base employment for the first year in
32		which they file employment records with the Illinois
33		Department of Employment Security. The provisions added to
34		this Section by Public Act 85-1200 (and restored by Public

1		Act 87-895) shall be construed as declaratory of existing
2		law and not as a new enactment. If, in any year, the
3		increase in base employment within Illinois over the
4		preceding year is less than 1%, the additional credit shall
5		be limited to that percentage times a fraction, the
6		numerator of which is .5% and the denominator of which is
7		1%, but shall not exceed .5%. The investment credit shall
8		not be allowed to the extent that it would reduce a
9		taxpayer's liability in any tax year below zero, nor may
10		any credit for qualified property be allowed for any year
11		other than the year in which the property was placed in
12		service in Illinois. For tax years ending on or after
13		December 31, 1987, and on or before December 31, 1988, the
14		credit shall be allowed for the tax year in which the
15		property is placed in service, or, if the amount of the
16		credit exceeds the tax liability for that year, whether it
17		exceeds the original liability or the liability as later
18		amended, such excess may be carried forward and applied to
19		the tax liability of the 5 taxable years following the
20		excess credit years if the taxpayer (i) makes investments
21		which cause the creation of a minimum of 2,000 full-time
22		equivalent jobs in Illinois, (ii) is located in an
23		enterprise zone established pursuant to the Illinois
24		Enterprise Zone Act and (iii) is certified by the
25		Department of Commerce and Community Affairs (now
26		Department of Commerce and Economic Opportunity) as
27		complying with the requirements specified in clause (i) and
28		(ii) by July 1, 1986. The Department of Commerce and
29		Community Affairs (now Department of Commerce and Economic
30		Opportunity) shall notify the Department of Revenue of all
31		such certifications immediately. For tax years ending
32		after December 31, 1988, the credit shall be allowed for
33		the tax year in which the property is placed in service,
34		or, if the amount of the credit exceeds the tax liability

1		for that year, whether it exceeds the original liability or
2		the liability as later amended, such excess may be carried
3		forward and applied to the tax liability of the 5 taxable
4		years following the excess credit years. The credit shall
5		be applied to the earliest year for which there is a
6		liability. If there is credit from more than one tax year
7		that is available to offset a liability, earlier credit
8		shall be applied first.
9		(2) The term "qualified property" means property
10		which:
11		(A) is tangible, whether new or used, including
12		buildings and structural components of buildings and
13		signs that are real property, but not including land or
14		improvements to real property that are not a structural
15		component of a building such as landscaping, sewer
16		lines, local access roads, fencing, parking lots, and
17		other appurtenances;
18		(B) is depreciable pursuant to Section 167 of the
19		Internal Revenue Code, except that "3-year property"
20		as defined in Section 168(c)(2)(A) of that Code is not
21		eligible for the credit provided by this subsection
22		(e);
23		(C) is acquired by purchase as defined in Section
24		179(d) of the Internal Revenue Code;
25		(D) is used in Illinois by a taxpayer who is
26		primarily engaged in manufacturing, or in mining coal
27		or fluorite, or in retailing; and
28		(E) has not previously been used in Illinois in
29		such a manner and by such a person as would qualify for
30		the credit provided by this subsection (e) or
31		subsection (f).
32		(3) For purposes of this subsection (e),
33		"manufacturing" means the material staging and production
34		of tangible personal property by procedures commonly

1		regarded as manufacturing, processing, fabrication, or
2		assembling which changes some existing material into new
3		shapes, new qualities, or new combinations. For purposes of
4		this subsection (e) the term "mining" shall have the same
5		meaning as the term "mining" in Section 613(c) of the
6		Internal Revenue Code. For purposes of this subsection (e),
7		the term "retailing" means the sale of tangible personal
8		property or services rendered in conjunction with the sale
9		of tangible consumer goods or commodities.
10		(4) The basis of qualified property shall be the basis
11		used to compute the depreciation deduction for federal
12		income tax purposes.
13		(5) If the basis of the property for federal income tax
14		depreciation purposes is increased after it has been placed
15		in service in Illinois by the taxpayer, the amount of such
16		increase shall be deemed property placed in service on the
17		date of such increase in basis.
18		(6) The term "placed in service" shall have the same
19		meaning as under Section 46 of the Internal Revenue Code.
20		(7) If during any taxable year, any property ceases to
21		be qualified property in the hands of the taxpayer within
22		48 months after being placed in service, or the situs of
23		any qualified property is moved outside Illinois within 48
24		months after being placed in service, the Personal Property
25		Tax Replacement Income Tax for such taxable year shall be
26		increased. Such increase shall be determined by (i)
27		recomputing the investment credit which would have been
28		allowed for the year in which credit for such property was
29		originally allowed by eliminating such property from such
30		computation and, (ii) subtracting such recomputed credit
31		from the amount of credit previously allowed. For the
32		purposes of this paragraph (7), a reduction of the basis of
33		qualified property resulting from a redetermination of the
34		purchase price shall be deemed a disposition of qualified

1		property to the extent of such reduction.
2		(8) Unless the investment credit is extended by law,
3		the basis of qualified property shall not include costs
4		incurred after December 31, 2003, except for costs incurred
5		pursuant to a binding contract entered into on or before
6		December 31, 2003.
7		(9) Each taxable year ending before December 31, 2000,
8		a partnership may elect to pass through to its partners the
9		credits to which the partnership is entitled under this
10		subsection (e) for the taxable year. A partner may use the
11		credit allocated to him or her under this paragraph only
12		against the tax imposed in subsections (c) and (d) of this
13		Section. If the partnership makes that election, those
14		credits shall be allocated among the partners in the
15		partnership in accordance with the rules set forth in
16		Section 704(b) of the Internal Revenue Code, and the rules
17		promulgated under that Section, and the allocated amount of
18		the credits shall be allowed to the partners for that
19		taxable year. The partnership shall make this election on
20		its Personal Property Tax Replacement Income Tax return for
21		that taxable year. The election to pass through the credits
22		shall be irrevocable.
23		For taxable years ending on or after December 31, 2000,
24		a partner that qualifies its partnership for a subtraction
25		under subparagraph (I) of paragraph (2) of subsection (d)
26		of Section 203 or a shareholder that qualifies a Subchapter
27		S corporation for a subtraction under subparagraph (S) of
28		paragraph (2) of subsection (b) of Section 203 shall be
29		allowed a credit under this subsection (e) equal to its
30		share of the credit earned under this subsection (e) during
31		the taxable year by the partnership or Subchapter S
32		corporation, determined in accordance with the
33		determination of income and distributive share of income
34		under Sections 702 and 704 and Subchapter S of the Internal

1		Revenue Code. This paragraph is exempt from the provisions
2		of Section 250.
3		(f) Investment credit; Enterprise Zone.
4		(1) A taxpayer shall be allowed a credit against the
5		tax imposed by subsections (a) and (b) of this Section for
6		investment in qualified property which is placed in service
7		in an Enterprise Zone created pursuant to the Illinois
8		Enterprise Zone Act. For partners, shareholders of
9		Subchapter S corporations, and owners of limited liability
10		companies, if the liability company is treated as a
11		partnership for purposes of federal and State income
12		taxation, there shall be allowed a credit under this
13		subsection (f) to be determined in accordance with the
14		determination of income and distributive share of income
15		under Sections 702 and 704 and Subchapter S of the Internal
16		Revenue Code. The credit shall be .5% of the basis for such
17		property. The credit shall be available only in the taxable
18		year in which the property is placed in service in the
19		Enterprise Zone and shall not be allowed to the extent that
20		it would reduce a taxpayer's liability for the tax imposed
21		by subsections (a) and (b) of this Section to below zero.
22		For tax years ending on or after December 31, 1985, the
23		credit shall be allowed for the tax year in which the
24		property is placed in service, or, if the amount of the
25		credit exceeds the tax liability for that year, whether it
26		exceeds the original liability or the liability as later
27		amended, such excess may be carried forward and applied to
28		the tax liability of the 5 taxable years following the
29		excess credit year. The credit shall be applied to the
30		earliest year for which there is a liability. If there is
31		credit from more than one tax year that is available to
32		offset a liability, the credit accruing first in time shall
33		be applied first.
34		(2) The term qualified property means property which:

1		(A) is tangible, whether new or used, including
2		buildings and structural components of buildings;
3		(B) is depreciable pursuant to Section 167 of the
4		Internal Revenue Code, except that "3-year property"
5		as defined in Section 168(c)(2)(A) of that Code is not
6		eligible for the credit provided by this subsection
7		(f);
8		(C) is acquired by purchase as defined in Section
9		179(d) of the Internal Revenue Code;
10		(D) is used in the Enterprise Zone by the taxpayer;
11		and
12		(E) has not been previously used in Illinois in
13		such a manner and by such a person as would qualify for
14		the credit provided by this subsection (f) or
15		subsection (e).
16		(3) The basis of qualified property shall be the basis
17		used to compute the depreciation deduction for federal
18		income tax purposes.
19		(4) If the basis of the property for federal income tax
20		depreciation purposes is increased after it has been placed
21		in service in the Enterprise Zone by the taxpayer, the
22		amount of such increase shall be deemed property placed in
23		service on the date of such increase in basis.
24		(5) The term "placed in service" shall have the same
25		meaning as under Section 46 of the Internal Revenue Code.
26		(6) If during any taxable year, any property ceases to
27		be qualified property in the hands of the taxpayer within
28		48 months after being placed in service, or the situs of
29		any qualified property is moved outside the Enterprise Zone
30		within 48 months after being placed in service, the tax
31		imposed under subsections (a) and (b) of this Section for
32		such taxable year shall be increased. Such increase shall
33		be determined by (i) recomputing the investment credit
34		which would have been allowed for the year in which credit

1		for such property was originally allowed by eliminating
2		such property from such computation, and (ii) subtracting
3		such recomputed credit from the amount of credit previously
4		allowed. For the purposes of this paragraph (6), a
5		reduction of the basis of qualified property resulting from
6		a redetermination of the purchase price shall be deemed a
7		disposition of qualified property to the extent of such
8		reduction.
9		(g) Jobs Tax Credit; Enterprise Zone and Foreign Trade
10		Zone or Sub-Zone.
11		(1) A taxpayer conducting a trade or business in an
12		enterprise zone or a High Impact Business designated by the
13		Department of Commerce and Economic Opportunity Community
14		Affairs conducting a trade or business in a federally
15		designated Foreign Trade Zone or Sub-Zone shall be allowed
16		a credit against the tax imposed by subsections (a) and (b)
17		of this Section in the amount of $500 per eligible employee
18		hired to work in the zone during the taxable year.
19		(2) To qualify for the credit:
20		(A) the taxpayer must hire 5 or more eligible
21		employees to work in an enterprise zone or federally
22		designated Foreign Trade Zone or Sub-Zone during the
23		taxable year;
24		(B) the taxpayer's total employment within the
25		enterprise zone or federally designated Foreign Trade
26		Zone or Sub-Zone must increase by 5 or more full-time
27		employees beyond the total employed in that zone at the
28		end of the previous tax year for which a jobs tax
29		credit under this Section was taken, or beyond the
30		total employed by the taxpayer as of December 31, 1985,
31		whichever is later; and
32		(C) the eligible employees must be employed 180
33		consecutive days in order to be deemed hired for
34		purposes of this subsection.

1		(3) An "eligible employee" means an employee who is:
2		(A) Certified by the Department of Commerce and
3		Economic Opportunity Community Affairs as "eligible
4		for services" pursuant to regulations promulgated in
5		accordance with Title II of the Job Training
6		Partnership Act, Training Services for the
7		Disadvantaged or Title III of the Job Training
8		Partnership Act, Employment and Training Assistance
9		for Dislocated Workers Program.
10		(B) Hired after the enterprise zone or federally
11		designated Foreign Trade Zone or Sub-Zone was
12		designated or the trade or business was located in that
13		zone, whichever is later.
14		(C) Employed in the enterprise zone or Foreign
15		Trade Zone or Sub-Zone. An employee is employed in an
16		enterprise zone or federally designated Foreign Trade
17		Zone or Sub-Zone if his services are rendered there or
18		it is the base of operations for the services
19		performed.
20		(D) A full-time employee working 30 or more hours
21		per week.
22		(4) For tax years ending on or after December 31, 1985
23		and prior to December 31, 1988, the credit shall be allowed
24		for the tax year in which the eligible employees are hired.
25		For tax years ending on or after December 31, 1988, the
26		credit shall be allowed for the tax year immediately
27		following the tax year in which the eligible employees are
28		hired. If the amount of the credit exceeds the tax
29		liability for that year, whether it exceeds the original
30		liability or the liability as later amended, such excess
31		may be carried forward and applied to the tax liability of
32		the 5 taxable years following the excess credit year. The
33		credit shall be applied to the earliest year for which
34		there is a liability. If there is credit from more than one

1		tax year that is available to offset a liability, earlier
2		credit shall be applied first.
3		(5) The Department of Revenue shall promulgate such
4		rules and regulations as may be deemed necessary to carry
5		out the purposes of this subsection (g).
6		(6) The credit shall be available for eligible
7		employees hired on or after January 1, 1986.
8		(h) Investment credit; High Impact Business.
9		(1) Subject to subsections (b) and (b-5) of Section 5.5
10		of the Illinois Enterprise Zone Act, a taxpayer shall be
11		allowed a credit against the tax imposed by subsections (a)
12		and (b) of this Section for investment in qualified
13		property which is placed in service by a Department of
14		Commerce and Economic Opportunity Community Affairs
15		designated High Impact Business. The credit shall be .5% of
16		the basis for such property. The credit shall not be
17		available (i) until the minimum investments in qualified
18		property set forth in subdivision (a)(3)(A) of Section 5.5
19		of the Illinois Enterprise Zone Act have been satisfied or
20		(ii) until the time authorized in subsection (b-5) of the
21		Illinois Enterprise Zone Act for entities designated as
22		High Impact Businesses under subdivisions (a)(3)(B),
23		(a)(3)(C), and (a)(3)(D) of Section 5.5 of the Illinois
24		Enterprise Zone Act, and shall not be allowed to the extent
25		that it would reduce a taxpayer's liability for the tax
26		imposed by subsections (a) and (b) of this Section to below
27		zero. The credit applicable to such investments shall be
28		taken in the taxable year in which such investments have
29		been completed. The credit for additional investments
30		beyond the minimum investment by a designated high impact
31		business authorized under subdivision (a)(3)(A) of Section
32		5.5 of the Illinois Enterprise Zone Act shall be available
33		only in the taxable year in which the property is placed in
34		service and shall not be allowed to the extent that it

1		would reduce a taxpayer's liability for the tax imposed by
2		subsections (a) and (b) of this Section to below zero. For
3		tax years ending on or after December 31, 1987, the credit
4		shall be allowed for the tax year in which the property is
5		placed in service, or, if the amount of the credit exceeds
6		the tax liability for that year, whether it exceeds the
7		original liability or the liability as later amended, such
8		excess may be carried forward and applied to the tax
9		liability of the 5 taxable years following the excess
10		credit year. The credit shall be applied to the earliest
11		year for which there is a liability. If there is credit
12		from more than one tax year that is available to offset a
13		liability, the credit accruing first in time shall be
14		applied first.
15		Changes made in this subdivision (h)(1) by Public Act
16		88-670 restore changes made by Public Act 85-1182 and
17		reflect existing law.
18		(2) The term qualified property means property which:
19		(A) is tangible, whether new or used, including
20		buildings and structural components of buildings;
21		(B) is depreciable pursuant to Section 167 of the
22		Internal Revenue Code, except that "3-year property"
23		as defined in Section 168(c)(2)(A) of that Code is not
24		eligible for the credit provided by this subsection
25		(h);
26		(C) is acquired by purchase as defined in Section
27		179(d) of the Internal Revenue Code; and
28		(D) is not eligible for the Enterprise Zone
29		Investment Credit provided by subsection (f) of this
30		Section.
31		(3) The basis of qualified property shall be the basis
32		used to compute the depreciation deduction for federal
33		income tax purposes.
34		(4) If the basis of the property for federal income tax

1		depreciation purposes is increased after it has been placed
2		in service in a federally designated Foreign Trade Zone or
3		Sub-Zone located in Illinois by the taxpayer, the amount of
4		such increase shall be deemed property placed in service on
5		the date of such increase in basis.
6		(5) The term "placed in service" shall have the same
7		meaning as under Section 46 of the Internal Revenue Code.
8		(6) If during any taxable year ending on or before
9		December 31, 1996, any property ceases to be qualified
10		property in the hands of the taxpayer within 48 months
11		after being placed in service, or the situs of any
12		qualified property is moved outside Illinois within 48
13		months after being placed in service, the tax imposed under
14		subsections (a) and (b) of this Section for such taxable
15		year shall be increased. Such increase shall be determined
16		by (i) recomputing the investment credit which would have
17		been allowed for the year in which credit for such property
18		was originally allowed by eliminating such property from
19		such computation, and (ii) subtracting such recomputed
20		credit from the amount of credit previously allowed. For
21		the purposes of this paragraph (6), a reduction of the
22		basis of qualified property resulting from a
23		redetermination of the purchase price shall be deemed a
24		disposition of qualified property to the extent of such
25		reduction.
26		(7) Beginning with tax years ending after December 31,
27		1996, if a taxpayer qualifies for the credit under this
28		subsection (h) and thereby is granted a tax abatement and
29		the taxpayer relocates its entire facility in violation of
30		the explicit terms and length of the contract under Section
31		18-183 of the Property Tax Code, the tax imposed under
32		subsections (a) and (b) of this Section shall be increased
33		for the taxable year in which the taxpayer relocated its
34		facility by an amount equal to the amount of credit

1		received by the taxpayer under this subsection (h).
2		(i) Credit for Personal Property Tax Replacement Income
3		Tax. For tax years ending prior to December 31, 2003, a credit
4		shall be allowed against the tax imposed by subsections (a) and
5		(b) of this Section for the tax imposed by subsections (c) and
6		(d) of this Section. This credit shall be computed by
7		multiplying the tax imposed by subsections (c) and (d) of this
8		Section by a fraction, the numerator of which is base income
9		allocable to Illinois and the denominator of which is Illinois
10		base income, and further multiplying the product by the tax
11		rate imposed by subsections (a) and (b) of this Section.
12		Any credit earned on or after December 31, 1986 under this
13		subsection which is unused in the year the credit is computed
14		because it exceeds the tax liability imposed by subsections (a)
15		and (b) for that year (whether it exceeds the original
16		liability or the liability as later amended) may be carried
17		forward and applied to the tax liability imposed by subsections
18		(a) and (b) of the 5 taxable years following the excess credit
19		year, provided that no credit may be carried forward to any
20		year ending on or after December 31, 2003. This credit shall be
21		applied first to the earliest year for which there is a
22		liability. If there is a credit under this subsection from more
23		than one tax year that is available to offset a liability the
24		earliest credit arising under this subsection shall be applied
25		first.
26		If, during any taxable year ending on or after December 31,
27		1986, the tax imposed by subsections (c) and (d) of this
28		Section for which a taxpayer has claimed a credit under this
29		subsection (i) is reduced, the amount of credit for such tax
30		shall also be reduced. Such reduction shall be determined by
31		recomputing the credit to take into account the reduced tax
32		imposed by subsections (c) and (d). If any portion of the
33		reduced amount of credit has been carried to a different
34		taxable year, an amended return shall be filed for such taxable

1		year to reduce the amount of credit claimed.
2		(j) Training expense credit. Beginning with tax years
3		ending on or after December 31, 1986 and prior to December 31,
4		2003, a taxpayer shall be allowed a credit against the tax
5		imposed by subsections (a) and (b) under this Section for all
6		amounts paid or accrued, on behalf of all persons employed by
7		the taxpayer in Illinois or Illinois residents employed outside
8		of Illinois by a taxpayer, for educational or vocational
9		training in semi-technical or technical fields or semi-skilled
10		or skilled fields, which were deducted from gross income in the
11		computation of taxable income. The credit against the tax
12		imposed by subsections (a) and (b) shall be 1.6% of such
13		training expenses. For partners, shareholders of subchapter S
14		corporations, and owners of limited liability companies, if the
15		liability company is treated as a partnership for purposes of
16		federal and State income taxation, there shall be allowed a
17		credit under this subsection (j) to be determined in accordance
18		with the determination of income and distributive share of
19		income under Sections 702 and 704 and subchapter S of the
20		Internal Revenue Code.
21		Any credit allowed under this subsection which is unused in
22		the year the credit is earned may be carried forward to each of
23		the 5 taxable years following the year for which the credit is
24		first computed until it is used. This credit shall be applied
25		first to the earliest year for which there is a liability. If
26		there is a credit under this subsection from more than one tax
27		year that is available to offset a liability the earliest
28		credit arising under this subsection shall be applied first. No
29		carryforward credit may be claimed in any tax year ending on or
30		after December 31, 2003.
31		(k) Research and development credit.
32		For tax years ending after July 1, 1990 and prior to
33		December 31, 2003, and beginning again for tax years ending on
34		or after December 31, 2004, a taxpayer shall be allowed a

1		credit against the tax imposed by subsections (a) and (b) of
2		this Section for increasing research activities in this State.
3		The credit allowed against the tax imposed by subsections (a)
4		and (b) shall be equal to 6 1/2% of the qualifying expenditures
5		for increasing research activities in this State. For partners,
6		shareholders of subchapter S corporations, and owners of
7		limited liability companies, if the liability company is
8		treated as a partnership for purposes of federal and State
9		income taxation, there shall be allowed a credit under this
10		subsection to be determined in accordance with the
11		determination of income and distributive share of income under
12		Sections 702 and 704 and subchapter S of the Internal Revenue
13		Code.
14		For purposes of this subsection, "qualifying expenditures"
15		means the qualifying expenditures as defined for the federal
16		credit for increasing research activities which would be
17		allowable under Section 41 of the Internal Revenue Code and
18		which are conducted in this State, "qualifying expenditures for
19		increasing research activities in this State" means the excess
20		of qualifying expenditures for the taxable year in which
21		incurred over qualifying expenditures for the base period,
22		"qualifying expenditures for the base period" means the average
23		of the qualifying expenditures for each year in the base
24		period, and "base period" means the 3 taxable years immediately
25		preceding the taxable year for which the determination is being
26		made.
27		Any credit in excess of the tax liability for the taxable
28		year may be carried forward. A taxpayer may elect to have the
29		unused credit shown on its final completed return carried over
30		as a credit against the tax liability for the following 5
31		taxable years or until it has been fully used, whichever occurs
32		first; provided that no credit earned in a tax year ending
33		prior to December 31, 2003 may be carried forward to any year
34		ending on or after December 31, 2003. ; provided that no credit

1		may be carried forward to any year ending on or after December
2		31, 2003.
3		If an unused credit is carried forward to a given year from
4		2 or more earlier years, that credit arising in the earliest
5		year will be applied first against the tax liability for the
6		given year. If a tax liability for the given year still
7		remains, the credit from the next earliest year will then be
8		applied, and so on, until all credits have been used or no tax
9		liability for the given year remains. Any remaining unused
10		credit or credits then will be carried forward to the next
11		following year in which a tax liability is incurred, except
12		that no credit can be carried forward to a year which is more
13		than 5 years after the year in which the expense for which the
14		credit is given was incurred.
15		No inference shall be drawn from this amendatory Act of the
16		91st General Assembly in construing this Section for taxable
17		years beginning before January 1, 1999.
18		(l) Environmental Remediation Tax Credit.
19		(i) For tax years ending after December 31, 1997 and on
20		or before December 31, 2001, a taxpayer shall be allowed a
21		credit against the tax imposed by subsections (a) and (b)
22		of this Section for certain amounts paid for unreimbursed
23		eligible remediation costs, as specified in this
24		subsection. For purposes of this Section, "unreimbursed
25		eligible remediation costs" means costs approved by the
26		Illinois Environmental Protection Agency ("Agency") under
27		Section 58.14 of the Environmental Protection Act that were
28		paid in performing environmental remediation at a site for
29		which a No Further Remediation Letter was issued by the
30		Agency and recorded under Section 58.10 of the
31		Environmental Protection Act. The credit must be claimed
32		for the taxable year in which Agency approval of the
33		eligible remediation costs is granted. The credit is not
34		available to any taxpayer if the taxpayer or any related

1		party caused or contributed to, in any material respect, a
2		release of regulated substances on, in, or under the site
3		that was identified and addressed by the remedial action
4		pursuant to the Site Remediation Program of the
5		Environmental Protection Act. After the Pollution Control
6		Board rules are adopted pursuant to the Illinois
7		Administrative Procedure Act for the administration and
8		enforcement of Section 58.9 of the Environmental
9		Protection Act, determinations as to credit availability
10		for purposes of this Section shall be made consistent with
11		those rules. For purposes of this Section, "taxpayer"
12		includes a person whose tax attributes the taxpayer has
13		succeeded to under Section 381 of the Internal Revenue Code
14		and "related party" includes the persons disallowed a
15		deduction for losses by paragraphs (b), (c), and (f)(1) of
16		Section 267 of the Internal Revenue Code by virtue of being
17		a related taxpayer, as well as any of its partners. The
18		credit allowed against the tax imposed by subsections (a)
19		and (b) shall be equal to 25% of the unreimbursed eligible
20		remediation costs in excess of $100,000 per site, except
21		that the $100,000 threshold shall not apply to any site
22		contained in an enterprise zone as determined by the
23		Department of Commerce and Community Affairs (now
24		Department of Commerce and Economic Opportunity). The
25		total credit allowed shall not exceed $40,000 per year with
26		a maximum total of $150,000 per site. For partners and
27		shareholders of subchapter S corporations, there shall be
28		allowed a credit under this subsection to be determined in
29		accordance with the determination of income and
30		distributive share of income under Sections 702 and 704 and
31		subchapter S of the Internal Revenue Code.
32		(ii) A credit allowed under this subsection that is
33		unused in the year the credit is earned may be carried
34		forward to each of the 5 taxable years following the year

1		for which the credit is first earned until it is used. The
2		term "unused credit" does not include any amounts of
3		unreimbursed eligible remediation costs in excess of the
4		maximum credit per site authorized under paragraph (i).
5		This credit shall be applied first to the earliest year for
6		which there is a liability. If there is a credit under this
7		subsection from more than one tax year that is available to
8		offset a liability, the earliest credit arising under this
9		subsection shall be applied first. A credit allowed under
10		this subsection may be sold to a buyer as part of a sale of
11		all or part of the remediation site for which the credit
12		was granted. The purchaser of a remediation site and the
13		tax credit shall succeed to the unused credit and remaining
14		carry-forward period of the seller. To perfect the
15		transfer, the assignor shall record the transfer in the
16		chain of title for the site and provide written notice to
17		the Director of the Illinois Department of Revenue of the
18		assignor's intent to sell the remediation site and the
19		amount of the tax credit to be transferred as a portion of
20		the sale. In no event may a credit be transferred to any
21		taxpayer if the taxpayer or a related party would not be
22		eligible under the provisions of subsection (i).
23		(iii) For purposes of this Section, the term "site"
24		shall have the same meaning as under Section 58.2 of the
25		Environmental Protection Act.
26		(m) Education expense credit. Beginning with tax years
27		ending after December 31, 1999, a taxpayer who is the custodian
28		of one or more qualifying pupils shall be allowed a credit
29		against the tax imposed by subsections (a) and (b) of this
30		Section for qualified education expenses incurred on behalf of
31		the qualifying pupils. The credit shall be equal to 25% of
32		qualified education expenses, but in no event may the total
33		credit under this subsection claimed by a family that is the
34		custodian of qualifying pupils exceed $500. In no event shall a

1		credit under this subsection reduce the taxpayer's liability
2		under this Act to less than zero. This subsection is exempt
3		from the provisions of Section 250 of this Act.
4		For purposes of this subsection:
5		"Qualifying pupils" means individuals who (i) are
6		residents of the State of Illinois, (ii) are under the age of
7		21 at the close of the school year for which a credit is
8		sought, and (iii) during the school year for which a credit is
9		sought were full-time pupils enrolled in a kindergarten through
10		twelfth grade education program at any school, as defined in
11		this subsection.
12		"Qualified education expense" means the amount incurred on
13		behalf of a qualifying pupil in excess of $250 for tuition,
14		book fees, and lab fees at the school in which the pupil is
15		enrolled during the regular school year.
16		"School" means any public or nonpublic elementary or
17		secondary school in Illinois that is in compliance with Title
18		VI of the Civil Rights Act of 1964 and attendance at which
19		satisfies the requirements of Section 26-1 of the School Code,
20		except that nothing shall be construed to require a child to
21		attend any particular public or nonpublic school to qualify for
22		the credit under this Section.
23		"Custodian" means, with respect to qualifying pupils, an
24		Illinois resident who is a parent, the parents, a legal
25		guardian, or the legal guardians of the qualifying pupils.
26		(Source: P.A. 92-12, eff. 7-1-01; 92-16, eff. 6-28-01; 92-651,
27		eff. 7-11-02; 92-846, eff. 8-23-02; 93-29, eff. 6-20-03;
28		revised 12-6-03.)

ARTICLE 45

Section 45-5. The Environmental Protection Act is amended by changing Sections 12.5 as follows:

1		(415 ILCS 5/12.5)
2		Sec. 12.5. NPDES discharge fees; sludge permit fees.
3		(a) Beginning July 1, 2003, the Agency shall assess and
4		collect annual fees (i) in the amounts set forth in subsection
5		(e) for all discharges that require an NPDES permit under
6		subsection (f) of Section 12, from each person holding an NPDES
7		permit authorizing those discharges (including a person who
8		continues to discharge under an expired permit pending
9		renewal), and (ii) in the amounts set forth in subsection (f)
10		of this Section for all activities that require a permit under
11		subsection (b) of Section 12, from each person holding a
12		domestic sewage sludge generator or user permit.
13		Each person subject to this Section must remit the
14		applicable annual fee to the Agency in accordance with the
15		requirements set forth in this Section and any rules adopted
16		pursuant to this Section.
17		(b) Within 30 days after the effective date of this
18		Section, and by May 31 of each year thereafter, the Agency
19		shall send a fee notice by mail to each existing permittee
20		subject to a fee under this Section at his or her address of
21		record. The notice shall state the amount of the applicable
22		annual fee and the date by which payment is required.
23		Except as provided in subsection (c) with respect to
24		initial fees under new permits and certain modifications of
25		existing permits, fees payable under this Section for the 12
26		months beginning July 1, 2003 are due by the date specified in
27		the fee notice, which shall be no less than 30 days after the
28		date the fee notice is mailed by the Agency, and fees payable
29		under this Section for subsequent years shall be due on July 1
30		or as otherwise required in any rules that may be adopted
31		pursuant to this Section.
32		(c) The initial annual fee for discharges under a new
33		individual NPDES permit or for activity under a new individual
34		sludge generator or sludge user permit must be remitted to the

1		Agency prior to the issuance of the permit. The Agency shall
2		provide notice of the amount of the fee to the applicant during
3		its review of the application. In the case of a new individual
4		NPDES or sludge permit issued during the months of January
5		through June, the Agency may prorate the initial annual fee
6		payable under this Section.
7		The initial annual fee for discharges or other activity
8		under a general NPDES permit must be remitted to the Agency as
9		part of the application for coverage under that general permit.
10		If a requested modification to an existing NPDES permit
11		causes a change in the applicable fee categories under
12		subsection (e) that results in an increase in the required fee,
13		the permittee must pay to the Agency the amount of the
14		increase, prorated for the number of months remaining before
15		the next July 1, before the modification is granted.
16		(d) Failure to submit the fee required under this Section
17		by the due date constitutes a violation of this Section. Late
18		payments shall incur an interest penalty, calculated at the
19		rate in effect from time to time for tax delinquencies under
20		subsection (a) of Section 1003 of the Illinois Income Tax Act,
21		from the date the fee is due until the date the fee payment is
22		received by the Agency.
23		(e) The annual fees applicable to discharges under NPDES
24		permits are as follows:
25		(1) For NPDES permits for publicly owned treatment
26		works, other facilities for which the wastewater being
27		treated and discharged is primarily domestic sewage, and
28		wastewater discharges from the operation of public water
29		supply treatment facilities, the fee is:
30		(i) $1,500 for the 12 months beginning July 1, 2003
31		and $500 for each subsequent year, for facilities with
32		a Design Average Flow rate of less than 100,000 gallons
33		per day;
34		(ii) $5,000 for the 12 months beginning July 1,

1		2003 and $2,500 for each subsequent year, for
2		facilities with a Design Average Flow rate of at least
3		100,000 gallons per day but less than 500,000 gallons
4		per day;
5		(iii) $7,500 for facilities with a Design Average
6		Flow rate of at least 500,000 gallons per day but less
7		than 1,000,000 gallons per day;
8		(iv) $15,000 for facilities with a Design Average
9		Flow rate of at least 1,000,000 gallons per day but
10		less than 5,000,000 gallons per day;
11		(v) $30,000 for facilities with a Design Average
12		Flow rate of at least 5,000,000 gallons per day but
13		less than 10,000,000 gallons per day; and
14		(vi) $50,000 for facilities with a Design Average
15		Flow rate of 10,000,000 gallons per day or more.
16		(2) For NPDES permits for treatment works or sewer
17		collection systems that include combined sewer overflow
18		outfalls, the fee is:
19		(i) $1,000 for systems serving a tributary
20		population of 10,000 or less;
21		(ii) $5,000 for systems serving a tributary
22		population that is greater than 10,000 but not more
23		than 25,000; and
24		(iii) $20,000 for systems serving a tributary
25		population that is greater than 25,000.
26		The fee amounts in this subdivision (e)(2) are in
27		addition to the fees stated in subdivision (e)(1) when the
28		combined sewer overflow outfall is contained within a
29		permit subject to subsection (e)(1) fees.
30		(3) For NPDES permits for mines producing coal, the fee
31		is $5,000.
32		(4) For NPDES permits for mines other than mines
33		producing coal, the fee is $5,000.
34		(5) For NPDES permits for industrial activity where

1		toxic substances are not regulated, other than permits
2		covered under subdivision (e)(3) or (e)(4), the fee is:
3		(i) $1,000 for a facility with a Design Average
4		Flow rate that is not more than 10,000 gallons per day;
5		(ii) $2,500 for a facility with a Design Average
6		Flow rate that is more than 10,000 gallons per day but
7		not more than 100,000 gallons per day; and
8		(iii) $10,000 for a facility with a Design Average
9		Flow rate that is more than 100,000 gallons per day.
10		(6) For NPDES permits for industrial activity where
11		toxic substances are regulated, other than permits covered
12		under subdivision (e)(3) or (e)(4), the fee is:
13		(i) $15,000 for a facility with a Design Average
14		Flow rate that is not more than 250,000 gallons per
15		day; and
16		(ii) $20,000 for a facility with a Design Average
17		Flow rate that is more than 250,000 gallons per day.
18		(7) For NPDES permits for industrial activity
19		classified by USEPA as a major discharge, other than
20		permits covered under subdivision (e)(3) or (e)(4), the fee
21		is:
22		(i) $30,000 for a facility where toxic substances
23		are not regulated; and
24		(ii) $50,000 for a facility where toxic substances
25		are regulated.
26		(8) For NPDES permits for municipal separate storm
27		sewer systems, the fee is $1,000.
28		(9) For NPDES permits for construction site or
29		industrial storm water, the fee is $500.
30		(f) The annual fee for activities under a permit that
31		authorizes applying sludge on land is $2,500 for a sludge
32		generator permit and $5,000 for a sludge user permit.
33		(g) More than one of the annual fees specified in
34		subsections (e) and (f) may be applicable to a permit holder.

1		These fees are in addition to any other fees required under
2		this Act.
3		(h) The fees imposed under this Section do not apply to the
4		State or any department or agency of the State, nor to any
5		school district, or to any private sewage disposal system as
6		defined in the Private Sewage Disposal Licensing Act (225 ILCS
7		225/).
8		(i) The Agency may adopt rules to administer the fee
9		program established in this Section. The Agency may include
10		provisions pertaining to invoices, notice of late payment, and
11		disputes concerning the amount or timeliness of payment. The
12		Agency may set forth procedures and criteria for the acceptance
13		of payments. The absence of such rules does not affect the duty
14		of the Agency to immediately begin the assessment and
15		collection of fees under this Section.
16		(j) All fees and interest penalties collected by the Agency
17		under this Section shall be deposited into the Illinois Clean
18		Water Fund, which is hereby created as a special fund in the
19		State treasury. Gifts, supplemental environmental project
20		funds, and grants may be deposited into the Fund. Investment
21		earnings on moneys held in the Fund shall be credited to the
22		Fund.
23		Subject to appropriation, the moneys in the Fund shall be
24		used by the Agency to carry out the Agency's clean water
25		activities.
26		(k) Except as provided in subsection (l), fees Fees paid to
27		the Agency under this Section are not refundable.
28		(l) The Agency may refund the difference between (a) the
29		amount paid by any person under subsection (e)(1)(i) or
30		(e)(1)(ii) of this Section for the 12 months beginning July 1,
31		2004 and (b) the amount due under subsection (e)(1)(i) or
32		(e)(1)(ii) as established by this amendatory Act of the 93rd
33		General Assembly.
34		(Source: P.A. 93-32, eff. 7-1-03.)

ARTICLE 50

2		Section 50-5. The Film Production Services Tax Credit Act
3		is amended by changing Section 90 as follows:
4		(35 ILCS 15/90)
5		(Section scheduled to be repealed on January 1, 2005)
6		Sec. 90. Repeal. This Act is repealed 2 years 1 year after
7		its effective date.
8		(Source: P.A. 93-543, eff. 1-1-04.)

ARTICLE 99

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