101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB4021

 

Introduced 1/8/2020, by Rep. Mike Murphy

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/203  from Ch. 120, par. 2-203
35 ILCS 735/3-3.5 new

    Amends the Illinois Income Tax Act. Creates an income tax deduction for an amount of up to $50,000 per tax year contributed to a small business asset purchase account and all interest earned on such accounts during the tax year. Provides that a "small business asset purchase account" means an account established by a taxpayer, the proceeds of which are used to purchase property used primarily in Illinois for which a federal income tax deduction is claimed under Section 179 of the Internal Revenue Code. Provides an addition modification for amounts withdrawn from a small business asset purchase account that are not used for qualified purchases. Amends the Uniform Penalty and Interest Act to establish a penalty for improper use of moneys in a small business asset purchase account. Effective immediately.


LRB101 14810 HLH 63777 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB4021LRB101 14810 HLH 63777 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 203 as follows:
 
6    (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7    Sec. 203. Base income defined.
8    (a) Individuals.
9        (1) In general. In the case of an individual, base
10    income means an amount equal to the taxpayer's adjusted
11    gross income for the taxable year as modified by paragraph
12    (2).
13        (2) Modifications. The adjusted gross income referred
14    to in paragraph (1) shall be modified by adding thereto the
15    sum of the following amounts:
16            (A) An amount equal to all amounts paid or accrued
17        to the taxpayer as interest or dividends during the
18        taxable year to the extent excluded from gross income
19        in the computation of adjusted gross income, except
20        stock dividends of qualified public utilities
21        described in Section 305(e) of the Internal Revenue
22        Code;
23            (B) An amount equal to the amount of tax imposed by

 

 

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

 

 

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1        20 of the Medical Care Savings Account Act of 2000;
2            (D-10) For taxable years ending after December 31,
3        1997, an amount equal to any eligible remediation costs
4        that the individual deducted in computing adjusted
5        gross income and for which the individual claims a
6        credit under subsection (l) of Section 201;
7            (D-15) For taxable years 2001 and thereafter, an
8        amount equal to the bonus depreciation deduction 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;
12            (D-16) If the taxpayer sells, transfers, abandons,
13        or otherwise disposes of property for which the
14        taxpayer was required in any taxable year to make an
15        addition modification under subparagraph (D-15), then
16        an amount equal to the aggregate amount of the
17        deductions taken in all taxable years under
18        subparagraph (Z) with respect to that property.
19            If the taxpayer continues to own property through
20        the last day of the last tax year for which the
21        taxpayer may claim a depreciation deduction for
22        federal income tax purposes and for which the taxpayer
23        was allowed in any taxable year to make a subtraction
24        modification under subparagraph (Z), then an amount
25        equal to that subtraction modification.
26            The taxpayer is required to make the addition

 

 

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1        modification under this subparagraph only once with
2        respect to any one piece of property;
3            (D-17) An amount equal to the amount otherwise
4        allowed as a deduction in computing base income for
5        interest paid, accrued, or incurred, directly or
6        indirectly, (i) for taxable years ending on or after
7        December 31, 2004, to a foreign person who would be a
8        member of the same unitary business group but for the
9        fact that foreign person's business activity outside
10        the United States is 80% or more of the foreign
11        person's total business activity and (ii) for taxable
12        years ending on or after December 31, 2008, to a person
13        who would be a member of the same unitary business
14        group but for the fact that the person is prohibited
15        under Section 1501(a)(27) from being included in the
16        unitary business group because he or she is ordinarily
17        required to apportion business income under different
18        subsections of Section 304. The addition modification
19        required by this subparagraph shall be reduced to the
20        extent that dividends were included in base income of
21        the unitary group for the same taxable year and
22        received by the taxpayer or by a member of the
23        taxpayer's unitary business group (including amounts
24        included in gross income under Sections 951 through 964
25        of the Internal Revenue Code and amounts included in
26        gross income under Section 78 of the Internal Revenue

 

 

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

 

 

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1            paid, accrued, or incurred relates to a contract or
2            agreement entered into at arm's-length rates and
3            terms and the principal purpose for the payment is
4            not federal or Illinois tax avoidance; or
5                (iv) an item of interest paid, accrued, or
6            incurred, directly or indirectly, to a person if
7            the taxpayer establishes by clear and convincing
8            evidence that the adjustments are unreasonable; or
9            if the taxpayer and the Director agree in writing
10            to the application or use of an alternative method
11            of apportionment under Section 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;
21            (D-18) An amount equal to the amount of intangible
22        expenses and costs otherwise allowed as a deduction in
23        computing base income, and that were paid, accrued, or
24        incurred, directly or indirectly, (i) for taxable
25        years ending on or after December 31, 2004, to a
26        foreign person who would be a member of the same

 

 

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1        unitary business group but for the fact that the
2        foreign person's business activity outside the United
3        States is 80% or more of that person's total business
4        activity and (ii) for taxable years ending on or after
5        December 31, 2008, to a person who would be a member of
6        the same unitary business group but for the fact that
7        the person is prohibited under Section 1501(a)(27)
8        from being included in the unitary business group
9        because he or she is ordinarily required to apportion
10        business income under different subsections of Section
11        304. The addition modification required by this
12        subparagraph shall be reduced to the extent that
13        dividends were included in base income of the unitary
14        group for the same taxable year and received by the
15        taxpayer or by a member of the taxpayer's unitary
16        business group (including amounts included in gross
17        income under Sections 951 through 964 of the Internal
18        Revenue Code and amounts included in gross income under
19        Section 78 of the Internal Revenue Code) with respect
20        to the stock of the same person to whom the intangible
21        expenses and costs were directly or indirectly paid,
22        incurred, or accrued. The preceding sentence does not
23        apply to the extent that the same dividends caused a
24        reduction to the addition modification required under
25        Section 203(a)(2)(D-17) of this Act. As used in this
26        subparagraph, the term "intangible expenses and costs"

 

 

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1        includes (1) expenses, losses, and costs for, or
2        related to, the direct or indirect acquisition, use,
3        maintenance or management, ownership, sale, exchange,
4        or any other disposition of intangible property; (2)
5        losses incurred, directly or indirectly, from
6        factoring transactions or discounting transactions;
7        (3) royalty, patent, technical, and copyright fees;
8        (4) licensing fees; and (5) other similar expenses and
9        costs. For purposes of this subparagraph, "intangible
10        property" includes patents, patent applications, trade
11        names, trademarks, service marks, copyrights, mask
12        works, trade secrets, and similar types of intangible
13        assets.
14            This paragraph shall not apply to the following:
15                (i) any item of intangible expenses or costs
16            paid, accrued, or incurred, directly or
17            indirectly, from a transaction with a person who is
18            subject in a foreign country or state, other than a
19            state which requires mandatory unitary reporting,
20            to a tax on or measured by net income with respect
21            to such item; or
22                (ii) any item of intangible expense or cost
23            paid, accrued, or incurred, directly or
24            indirectly, if the taxpayer can establish, based
25            on a preponderance of the evidence, both of the
26            following:

 

 

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1                    (a) the person during the same taxable
2                year paid, accrued, or incurred, the
3                intangible expense or cost to a person that is
4                not a related member, and
5                    (b) the transaction giving rise to the
6                intangible expense or cost between the
7                taxpayer and the person did not have as a
8                principal purpose the avoidance of Illinois
9                income tax, and is paid pursuant to a contract
10                or agreement that reflects arm's-length terms;
11                or
12                (iii) any item of intangible expense or cost
13            paid, accrued, or incurred, directly or
14            indirectly, from a transaction with a person if the
15            taxpayer establishes by clear and convincing
16            evidence, that the adjustments are unreasonable;
17            or if the taxpayer and the Director agree in
18            writing to the application or use of an alternative
19            method of apportionment under Section 304(f);
20                Nothing in this subsection shall preclude the
21            Director from making any other adjustment
22            otherwise allowed under Section 404 of this Act for
23            any tax year beginning after the effective date of
24            this amendment provided such adjustment is made
25            pursuant to regulation adopted by the Department
26            and such regulations provide methods and standards

 

 

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1            by which the Department will utilize its authority
2            under Section 404 of this Act;
3            (D-19) For taxable years ending on or after
4        December 31, 2008, an amount equal to the amount of
5        insurance premium expenses and costs otherwise allowed
6        as a deduction in computing base income, and that were
7        paid, accrued, or incurred, directly or indirectly, to
8        a person who would be a member of the same unitary
9        business group but for the fact that the person is
10        prohibited under Section 1501(a)(27) from being
11        included in the unitary business group because he or
12        she is ordinarily required to apportion business
13        income under different subsections of Section 304. The
14        addition modification required by this subparagraph
15        shall be reduced to the extent that dividends were
16        included in base income of the unitary group for the
17        same taxable year and received by the taxpayer or by a
18        member of the taxpayer's unitary business group
19        (including amounts included in gross income under
20        Sections 951 through 964 of the Internal Revenue Code
21        and amounts included in gross income under Section 78
22        of the Internal Revenue Code) with respect to the stock
23        of the same person to whom the premiums and costs were
24        directly or indirectly paid, incurred, or accrued. The
25        preceding sentence does not apply to the extent that
26        the same dividends caused a reduction to the addition

 

 

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1        modification required under Section 203(a)(2)(D-17) or
2        Section 203(a)(2)(D-18) of this Act; .
3            (D-20) For taxable years beginning on or after
4        January 1, 2002 and ending on or before December 31,
5        2006, in the case of a distribution from a qualified
6        tuition program under Section 529 of the Internal
7        Revenue Code, other than (i) a distribution from a
8        College Savings Pool created under Section 16.5 of the
9        State Treasurer Act or (ii) a distribution from the
10        Illinois Prepaid Tuition Trust Fund, an amount equal to
11        the amount excluded from gross income under Section
12        529(c)(3)(B). For taxable years beginning on or after
13        January 1, 2007, in the case of a distribution from a
14        qualified tuition program under Section 529 of the
15        Internal Revenue Code, other than (i) a distribution
16        from a College Savings Pool created under Section 16.5
17        of the State Treasurer Act, (ii) a distribution from
18        the Illinois Prepaid Tuition Trust Fund, or (iii) a
19        distribution from a qualified tuition program under
20        Section 529 of the Internal Revenue Code that (I)
21        adopts and determines that its offering materials
22        comply with the College Savings Plans Network's
23        disclosure principles and (II) has made reasonable
24        efforts to inform in-state residents of the existence
25        of in-state qualified tuition programs by informing
26        Illinois residents directly and, where applicable, to

 

 

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1        inform financial intermediaries distributing the
2        program to inform in-state residents of the existence
3        of in-state qualified tuition programs at least
4        annually, an amount equal to the amount excluded from
5        gross income under Section 529(c)(3)(B).
6            For the purposes of this subparagraph (D-20), a
7        qualified tuition program has made reasonable efforts
8        if it makes disclosures (which may use the term
9        "in-state program" or "in-state plan" and need not
10        specifically refer to Illinois or its qualified
11        programs by name) (i) directly to prospective
12        participants in its offering materials or makes a
13        public disclosure, such as a website posting; and (ii)
14        where applicable, to intermediaries selling the
15        out-of-state program in the same manner that the
16        out-of-state program distributes its offering
17        materials;
18            (D-20.5) For taxable years beginning on or after
19        January 1, 2018, in the case of a distribution from a
20        qualified ABLE program under Section 529A of the
21        Internal Revenue Code, other than a distribution from a
22        qualified ABLE program created under Section 16.6 of
23        the State Treasurer Act, an amount equal to the amount
24        excluded from gross income under Section 529A(c)(1)(B)
25        of the Internal Revenue Code;
26            (D-21) For taxable years beginning on or after

 

 

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1        January 1, 2007, in the case of transfer of moneys from
2        a qualified tuition program under Section 529 of the
3        Internal Revenue Code that is administered by the State
4        to an out-of-state program, an amount equal to the
5        amount of moneys previously deducted from base income
6        under subsection (a)(2)(Y) of this Section;
7            (D-21.5) For taxable years beginning on or after
8        January 1, 2018, in the case of the transfer of moneys
9        from a qualified tuition program under Section 529 or a
10        qualified ABLE program under Section 529A of the
11        Internal Revenue Code that is administered by this
12        State to an ABLE account established under an
13        out-of-state ABLE account program, an amount equal to
14        the contribution component of the transferred amount
15        that was previously deducted from base income under
16        subsection (a)(2)(Y) or subsection (a)(2)(HH) of this
17        Section;
18            (D-22) For taxable years beginning on or after
19        January 1, 2009, and prior to January 1, 2018, in the
20        case of a nonqualified withdrawal or refund of moneys
21        from a qualified tuition program under Section 529 of
22        the Internal Revenue Code administered by the State
23        that is not used for qualified expenses at an eligible
24        education institution, an amount equal to the
25        contribution component of the nonqualified withdrawal
26        or refund that was previously deducted from base income

 

 

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1        under subsection (a)(2)(y) of this Section, provided
2        that the withdrawal or refund did not result from the
3        beneficiary's death or disability. For taxable years
4        beginning on or after January 1, 2018: (1) in the case
5        of a nonqualified withdrawal or refund, as defined
6        under Section 16.5 of the State Treasurer Act, of
7        moneys from a qualified tuition program under Section
8        529 of the Internal Revenue Code administered by the
9        State, an amount equal to the contribution component of
10        the nonqualified withdrawal or refund that was
11        previously deducted from base income under subsection
12        (a)(2)(Y) of this Section, and (2) in the case of a
13        nonqualified withdrawal or refund from a qualified
14        ABLE program under Section 529A of the Internal Revenue
15        Code administered by the State that is not used for
16        qualified disability expenses, an amount equal to the
17        contribution component of the nonqualified withdrawal
18        or refund that was previously deducted from base income
19        under subsection (a)(2)(HH) of this Section;
20            (D-23) An amount equal to the credit allowable to
21        the taxpayer under Section 218(a) of this Act,
22        determined without regard to Section 218(c) of this
23        Act;
24            (D-24) For taxable years ending on or after
25        December 31, 2017, an amount equal to the deduction
26        allowed under Section 199 of the Internal Revenue Code

 

 

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1        for the taxable year;
2            (D-25) An amount withdrawn from a small business
3        asset purchase account that is not used for purchases
4        of property for which a deduction under Section 179 of
5        the Internal Revenue Code is claimed for the tax year
6        in which the amount is withdrawn and which property is
7        used predominantly in Illinois; such amounts are
8        subject to the 10% penalty for ineligible use under
9        Section 3-3.5 of the Uniform Penalty and Interest Act;
10    and by deducting from the total so obtained the sum of the
11    following amounts:
12            (E) For taxable years ending before December 31,
13        2001, any amount included in such total in respect of
14        any compensation (including but not limited to any
15        compensation paid or accrued to a serviceman while a
16        prisoner of war or missing in action) paid to a
17        resident by reason of being on active duty in the Armed
18        Forces of the United States and in respect of any
19        compensation paid or accrued to a resident who as a
20        governmental employee was a prisoner of war or missing
21        in action, and in respect of any compensation paid to a
22        resident in 1971 or thereafter for annual training
23        performed pursuant to Sections 502 and 503, Title 32,
24        United States Code as a member of the Illinois National
25        Guard or, beginning with taxable years ending on or
26        after December 31, 2007, the National Guard of any

 

 

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1        other state. For taxable years ending on or after
2        December 31, 2001, any amount included in such total in
3        respect of any compensation (including but not limited
4        to any compensation paid or accrued to a serviceman
5        while a prisoner of war or missing in action) paid to a
6        resident by reason of being a member of any component
7        of the Armed Forces of the United States and in respect
8        of any compensation paid or accrued to a resident who
9        as a governmental employee was a prisoner of war or
10        missing in action, and in respect of any compensation
11        paid to a resident in 2001 or thereafter by reason of
12        being a member of the Illinois National Guard or,
13        beginning with taxable years ending on or after
14        December 31, 2007, the National Guard of any other
15        state. The provisions of this subparagraph (E) are
16        exempt from the provisions of Section 250;
17            (F) An amount equal to all amounts included in such
18        total pursuant to the provisions of Sections 402(a),
19        402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
20        Internal Revenue Code, or included in such total as
21        distributions under the provisions of any retirement
22        or disability plan for employees of any governmental
23        agency or unit, or retirement payments to retired
24        partners, which payments are excluded in computing net
25        earnings from self employment by Section 1402 of the
26        Internal Revenue Code and regulations adopted pursuant

 

 

HB4021- 17 -LRB101 14810 HLH 63777 b

1        thereto;
2            (G) The valuation limitation amount;
3            (H) An amount equal to the amount of any tax
4        imposed by this Act which was refunded to the taxpayer
5        and included in such total for the taxable year;
6            (I) An amount equal to all amounts included in such
7        total pursuant to the provisions of Section 111 of the
8        Internal Revenue Code as a recovery of items previously
9        deducted from adjusted gross income in the computation
10        of taxable income;
11            (J) An amount equal to those dividends included in
12        such total which were paid by a corporation which
13        conducts business operations in a River Edge
14        Redevelopment Zone or zones created under the River
15        Edge Redevelopment Zone Act, and conducts
16        substantially all of its operations in a River Edge
17        Redevelopment Zone or zones. This subparagraph (J) is
18        exempt from the provisions of Section 250;
19            (K) An amount equal to those dividends included in
20        such total that were paid by a corporation that
21        conducts business operations in a federally designated
22        Foreign Trade Zone or Sub-Zone and that is designated a
23        High Impact Business located in Illinois; provided
24        that dividends eligible for the deduction provided in
25        subparagraph (J) of paragraph (2) of this subsection
26        shall not be eligible for the deduction provided under

 

 

HB4021- 18 -LRB101 14810 HLH 63777 b

1        this subparagraph (K);
2            (L) For taxable years ending after December 31,
3        1983, an amount equal to all social security benefits
4        and railroad retirement benefits included in such
5        total pursuant to Sections 72(r) and 86 of the Internal
6        Revenue Code;
7            (M) With the exception of any amounts subtracted
8        under subparagraph (N), an amount equal to the sum of
9        all amounts disallowed as deductions by (i) Sections
10        171(a)(2), and 265(a)(2) of the Internal Revenue Code,
11        and all amounts of expenses allocable to interest and
12        disallowed as deductions by Section 265(a)(1) of the
13        Internal Revenue Code; and (ii) for taxable years
14        ending on or after August 13, 1999, Sections 171(a)(2),
15        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue
16        Code, plus, for taxable years ending on or after
17        December 31, 2011, Section 45G(e)(3) of the Internal
18        Revenue Code and, for taxable years ending on or after
19        December 31, 2008, any amount included in gross income
20        under Section 87 of the Internal Revenue Code; the
21        provisions of this subparagraph are exempt from the
22        provisions of Section 250;
23            (N) An amount equal to all amounts included in such
24        total which are exempt from taxation by this State
25        either by reason of its statutes or Constitution or by
26        reason of the Constitution, treaties or statutes of the

 

 

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1        United States; provided that, in the case of any
2        statute of this State that exempts income derived from
3        bonds or other obligations from the tax imposed under
4        this Act, the amount exempted shall be the interest net
5        of bond premium amortization;
6            (O) An amount equal to any contribution made to a
7        job training project established pursuant to the Tax
8        Increment Allocation Redevelopment Act;
9            (P) An amount equal to the amount of the deduction
10        used to compute the federal income tax credit for
11        restoration of substantial amounts held under claim of
12        right for the taxable year pursuant to Section 1341 of
13        the Internal Revenue Code or of any itemized deduction
14        taken from adjusted gross income in the computation of
15        taxable income for restoration of substantial amounts
16        held under claim of right for the taxable year;
17            (Q) An amount equal to any amounts included in such
18        total, received by the taxpayer as an acceleration in
19        the payment of life, endowment or annuity benefits in
20        advance of the time they would otherwise be payable as
21        an indemnity for a terminal illness;
22            (R) An amount equal to the amount of any federal or
23        State bonus paid to veterans of the Persian Gulf War;
24            (S) An amount, to the extent included in adjusted
25        gross income, equal to the amount of a contribution
26        made in the taxable year on behalf of the taxpayer to a

 

 

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1        medical care savings account established under the
2        Medical Care Savings Account Act or the Medical Care
3        Savings Account Act of 2000 to the extent the
4        contribution is accepted by the account administrator
5        as provided in that Act;
6            (T) An amount, to the extent included in adjusted
7        gross income, equal to the amount of interest earned in
8        the taxable year on a medical care savings account
9        established under the Medical Care Savings Account Act
10        or the Medical Care Savings Account Act of 2000 on
11        behalf of the taxpayer, other than interest added
12        pursuant to item (D-5) of this paragraph (2);
13            (U) For one taxable year beginning on or after
14        January 1, 1994, an amount equal to the total amount of
15        tax imposed and paid under subsections (a) and (b) of
16        Section 201 of this Act on grant amounts received by
17        the taxpayer under the Nursing Home Grant Assistance
18        Act during the taxpayer's taxable years 1992 and 1993;
19            (V) Beginning with tax years ending on or after
20        December 31, 1995 and ending with tax years ending on
21        or before December 31, 2004, an amount equal to the
22        amount paid by a taxpayer who is a self-employed
23        taxpayer, a partner of a partnership, or a shareholder
24        in a Subchapter S corporation for health insurance or
25        long-term care insurance for that taxpayer or that
26        taxpayer's spouse or dependents, to the extent that the

 

 

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1        amount paid for that health insurance or long-term care
2        insurance may be deducted under Section 213 of the
3        Internal Revenue Code, has not been deducted on the
4        federal income tax return of the taxpayer, and does not
5        exceed the taxable income attributable to that
6        taxpayer's income, self-employment income, or
7        Subchapter S corporation income; except that no
8        deduction shall be allowed under this item (V) if the
9        taxpayer is eligible to participate in any health
10        insurance or long-term care insurance plan of an
11        employer of the taxpayer or the taxpayer's spouse. The
12        amount of the health insurance and long-term care
13        insurance subtracted under this item (V) shall be
14        determined by multiplying total health insurance and
15        long-term care insurance premiums paid by the taxpayer
16        times a number that represents the fractional
17        percentage of eligible medical expenses under Section
18        213 of the Internal Revenue Code of 1986 not actually
19        deducted on the taxpayer's federal income tax return;
20            (W) For taxable years beginning on or after January
21        1, 1998, all amounts included in the taxpayer's federal
22        gross income in the taxable year from amounts converted
23        from a regular IRA to a Roth IRA. This paragraph is
24        exempt from the provisions of Section 250;
25            (X) For taxable year 1999 and thereafter, an amount
26        equal to the amount of any (i) distributions, to the

 

 

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

 

 

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1        public assistance, benefit, or similar entitlement is
2        not affected by the inclusion of items (i) and (ii) of
3        this paragraph in gross income for federal income tax
4        purposes. This paragraph is exempt from the provisions
5        of Section 250;
6            (Y) For taxable years beginning on or after January
7        1, 2002 and ending on or before December 31, 2004,
8        moneys contributed in the taxable year to a College
9        Savings Pool account under Section 16.5 of the State
10        Treasurer Act, except that amounts excluded from gross
11        income under Section 529(c)(3)(C)(i) of the Internal
12        Revenue Code shall not be considered moneys
13        contributed under this subparagraph (Y). For taxable
14        years beginning on or after January 1, 2005, a maximum
15        of $10,000 contributed in the taxable year to (i) a
16        College Savings Pool account under Section 16.5 of the
17        State Treasurer Act or (ii) the Illinois Prepaid
18        Tuition Trust Fund, except that amounts excluded from
19        gross income under Section 529(c)(3)(C)(i) of the
20        Internal Revenue Code shall not be considered moneys
21        contributed under this subparagraph (Y). For purposes
22        of this subparagraph, contributions made by an
23        employer on behalf of an employee, or matching
24        contributions made by an employee, shall be treated as
25        made by the employee. This subparagraph (Y) is exempt
26        from the provisions of Section 250;

 

 

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1            (Z) For taxable years 2001 and thereafter, for the
2        taxable year in which the bonus depreciation deduction
3        is taken on the taxpayer's federal income tax return
4        under subsection (k) of Section 168 of the Internal
5        Revenue Code and for each applicable taxable year
6        thereafter, an amount equal to "x", where:
7                (1) "y" equals the amount of the depreciation
8            deduction taken for the taxable year on the
9            taxpayer's federal income tax return on property
10            for which the bonus depreciation deduction was
11            taken in any year under subsection (k) of Section
12            168 of the Internal Revenue Code, but not including
13            the bonus depreciation deduction;
14                (2) for taxable years ending on or before
15            December 31, 2005, "x" equals "y" multiplied by 30
16            and then divided by 70 (or "y" multiplied by
17            0.429); and
18                (3) for taxable years ending after December
19            31, 2005:
20                    (i) for property on which a bonus
21                depreciation deduction of 30% of the adjusted
22                basis was taken, "x" equals "y" multiplied by
23                30 and then divided by 70 (or "y" multiplied by
24                0.429); and
25                    (ii) for property on which a bonus
26                depreciation deduction of 50% of the adjusted

 

 

HB4021- 25 -LRB101 14810 HLH 63777 b

1                basis was taken, "x" equals "y" multiplied by
2                1.0.
3            The aggregate amount deducted under this
4        subparagraph in all taxable years for any one piece of
5        property may not exceed the amount of the bonus
6        depreciation deduction taken on that property on the
7        taxpayer's federal income tax return under subsection
8        (k) of Section 168 of the Internal Revenue Code. This
9        subparagraph (Z) is exempt from the provisions of
10        Section 250;
11            (AA) If the taxpayer sells, transfers, abandons,
12        or otherwise disposes of property for which the
13        taxpayer was required in any taxable year to make an
14        addition modification under subparagraph (D-15), then
15        an amount equal to that addition modification.
16            If the taxpayer continues to own property through
17        the last day of the last tax year for which the
18        taxpayer may claim a depreciation deduction for
19        federal income tax purposes and for which the taxpayer
20        was required in any taxable year to make an addition
21        modification under subparagraph (D-15), then an amount
22        equal to that addition modification.
23            The taxpayer is allowed to take the deduction under
24        this subparagraph only once with respect to any one
25        piece of property.
26            This subparagraph (AA) is exempt from the

 

 

HB4021- 26 -LRB101 14810 HLH 63777 b

1        provisions of Section 250;
2            (BB) Any amount included in adjusted gross income,
3        other than salary, received by a driver in a
4        ridesharing arrangement using a motor vehicle;
5            (CC) The amount of (i) any interest income (net of
6        the deductions allocable thereto) taken into account
7        for the taxable year with respect to a transaction with
8        a taxpayer that is required to make an addition
9        modification with respect to such transaction under
10        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
11        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
12        the amount of that addition modification, and (ii) any
13        income from intangible property (net of the deductions
14        allocable thereto) taken into account for the taxable
15        year with respect to a transaction with a taxpayer that
16        is required to make an addition modification with
17        respect to such transaction under Section
18        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
19        203(d)(2)(D-8), but not to exceed the amount of that
20        addition modification. This subparagraph (CC) is
21        exempt from the provisions of Section 250;
22            (DD) An amount equal to the interest income taken
23        into account for the taxable year (net of the
24        deductions allocable thereto) with respect to
25        transactions with (i) a foreign person who would be a
26        member of the taxpayer's unitary business group but for

 

 

HB4021- 27 -LRB101 14810 HLH 63777 b

1        the fact that the foreign person's business activity
2        outside the United States is 80% or more of that
3        person's total business activity and (ii) for taxable
4        years ending on or after December 31, 2008, to a person
5        who would be a member of the same unitary business
6        group but for the fact that the person is prohibited
7        under Section 1501(a)(27) from being included in the
8        unitary business group because he or she is ordinarily
9        required to apportion business income under different
10        subsections of Section 304, but not to exceed the
11        addition modification required to be made for the same
12        taxable year under Section 203(a)(2)(D-17) for
13        interest paid, accrued, or incurred, directly or
14        indirectly, to the same person. This subparagraph (DD)
15        is exempt from the provisions of Section 250;
16            (EE) An amount equal to the income from intangible
17        property taken into account for the taxable year (net
18        of the deductions allocable thereto) with respect to
19        transactions with (i) a foreign person who would be a
20        member of the taxpayer's unitary business group but for
21        the fact that the foreign person's business activity
22        outside the United States is 80% or more of that
23        person's total business activity and (ii) for taxable
24        years ending on or after December 31, 2008, to a person
25        who would be a member of the same unitary business
26        group but for the fact that the person is prohibited

 

 

HB4021- 28 -LRB101 14810 HLH 63777 b

1        under Section 1501(a)(27) from being included in the
2        unitary business group because he or she is ordinarily
3        required to apportion business income under different
4        subsections of Section 304, but not to exceed the
5        addition modification required to be made for the same
6        taxable year under Section 203(a)(2)(D-18) for
7        intangible expenses and costs paid, accrued, or
8        incurred, directly or indirectly, to the same foreign
9        person. This subparagraph (EE) is exempt from the
10        provisions of Section 250;
11            (FF) An amount equal to any amount awarded to the
12        taxpayer during the taxable year by the Court of Claims
13        under subsection (c) of Section 8 of the Court of
14        Claims Act for time unjustly served in a State prison.
15        This subparagraph (FF) is exempt from the provisions of
16        Section 250;
17            (GG) For taxable years ending on or after December
18        31, 2011, in the case of a taxpayer who was required to
19        add back any insurance premiums under Section
20        203(a)(2)(D-19), such taxpayer may elect to subtract
21        that part of a reimbursement received from the
22        insurance company equal to the amount of the expense or
23        loss (including expenses incurred by the insurance
24        company) that would have been taken into account as a
25        deduction for federal income tax purposes if the
26        expense or loss had been uninsured. If a taxpayer makes

 

 

HB4021- 29 -LRB101 14810 HLH 63777 b

1        the election provided for by this subparagraph (GG),
2        the insurer to which the premiums were paid must add
3        back to income the amount subtracted by the taxpayer
4        pursuant to this subparagraph (GG). This subparagraph
5        (GG) is exempt from the provisions of Section 250; and
6            (HH) For taxable years beginning on or after
7        January 1, 2018 and prior to January 1, 2023, a maximum
8        of $10,000 contributed in the taxable year to a
9        qualified ABLE account under Section 16.6 of the State
10        Treasurer Act, except that amounts excluded from gross
11        income under Section 529(c)(3)(C)(i) or Section
12        529A(c)(1)(C) of the Internal Revenue Code shall not be
13        considered moneys contributed under this subparagraph
14        (HH). For purposes of this subparagraph (HH),
15        contributions made by an employer on behalf of an
16        employee, or matching contributions made by an
17        employee, shall be treated as made by the employee; and
18        .
19            (II) For taxable years beginning on or after
20        January 1, 2021, an amount of up to $50,000 per tax
21        year contributed to a small business asset purchase
22        account during the tax year, plus all interest earned
23        on such accounts during the tax year; a "small business
24        asset purchase account" means an account established
25        by a taxpayer, the proceeds of which are used to
26        purchase property used primarily in Illinois for which

 

 

HB4021- 30 -LRB101 14810 HLH 63777 b

1        a federal income tax deduction is claimed under Section
2        179 of the Internal Revenue Code.
 
3    (b) Corporations.
4        (1) In general. In the case of a corporation, base
5    income means an amount equal to the taxpayer's taxable
6    income for the taxable year as modified by paragraph (2).
7        (2) Modifications. The taxable income referred to in
8    paragraph (1) shall be modified by adding thereto the sum
9    of the following amounts:
10            (A) An amount equal to all amounts paid or accrued
11        to the taxpayer as interest and all distributions
12        received from regulated investment companies during
13        the taxable year to the extent excluded from gross
14        income in the computation of taxable income;
15            (B) An amount equal to the amount of tax imposed by
16        this Act to the extent deducted from gross income in
17        the computation of taxable income for the taxable year;
18            (C) In the case of a regulated investment company,
19        an amount equal to the excess of (i) the net long-term
20        capital gain for the taxable year, over (ii) the amount
21        of the capital gain dividends designated as such in
22        accordance with Section 852(b)(3)(C) of the Internal
23        Revenue Code and any amount designated under Section
24        852(b)(3)(D) of the Internal Revenue Code,
25        attributable to the taxable year (this amendatory Act

 

 

HB4021- 31 -LRB101 14810 HLH 63777 b

1        of 1995 (Public Act 89-89) is declarative of existing
2        law and is not a new enactment);
3            (D) The amount of any net operating loss deduction
4        taken in arriving at taxable income, other than a net
5        operating loss carried forward from a taxable year
6        ending prior to December 31, 1986;
7            (E) For taxable years in which a net operating loss
8        carryback or carryforward from a taxable year ending
9        prior to December 31, 1986 is an element of taxable
10        income under paragraph (1) of subsection (e) or
11        subparagraph (E) of paragraph (2) of subsection (e),
12        the amount by which addition modifications other than
13        those provided by this subparagraph (E) exceeded
14        subtraction modifications in such earlier taxable
15        year, with the following limitations applied in the
16        order that they are listed:
17                (i) the addition modification relating to the
18            net operating loss carried back or forward to the
19            taxable year from any taxable year ending prior to
20            December 31, 1986 shall be reduced by the amount of
21            addition modification under this subparagraph (E)
22            which related to that net operating loss and which
23            was taken into account in calculating the base
24            income of an earlier taxable year, and
25                (ii) the addition modification relating to the
26            net operating loss carried back or forward to the

 

 

HB4021- 32 -LRB101 14810 HLH 63777 b

1            taxable year from any taxable year ending prior to
2            December 31, 1986 shall not exceed the amount of
3            such carryback or carryforward;
4            For taxable years in which there is a net operating
5        loss carryback or carryforward from more than one other
6        taxable year ending prior to December 31, 1986, the
7        addition modification provided in this subparagraph
8        (E) shall be the sum of the amounts computed
9        independently under the preceding provisions of this
10        subparagraph (E) for each such taxable year;
11            (E-5) For taxable years ending after December 31,
12        1997, an amount equal to any eligible remediation costs
13        that the corporation deducted in computing adjusted
14        gross income and for which the corporation claims a
15        credit under subsection (l) of Section 201;
16            (E-10) For taxable years 2001 and thereafter, an
17        amount equal to the bonus depreciation deduction 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;
21            (E-11) If the taxpayer sells, transfers, abandons,
22        or otherwise disposes of property for which the
23        taxpayer was required in any taxable year to make an
24        addition modification under subparagraph (E-10), then
25        an amount equal to the aggregate amount of the
26        deductions taken in all taxable years under

 

 

HB4021- 33 -LRB101 14810 HLH 63777 b

1        subparagraph (T) with respect to that property.
2            If the taxpayer continues to own property through
3        the last day of the last tax year for which the
4        taxpayer may claim a depreciation deduction for
5        federal income tax purposes and for which the taxpayer
6        was allowed in any taxable year to make a subtraction
7        modification under subparagraph (T), then an amount
8        equal to that subtraction modification.
9            The taxpayer is required to make the addition
10        modification under this subparagraph only once with
11        respect to any one piece of property;
12            (E-12) An amount equal to the amount otherwise
13        allowed as a deduction in computing base income for
14        interest paid, accrued, or incurred, directly or
15        indirectly, (i) for taxable years ending on or after
16        December 31, 2004, to a foreign person who would be a
17        member of the same unitary business group but for the
18        fact the foreign person's business activity outside
19        the United States is 80% or more of the foreign
20        person's total business activity and (ii) for taxable
21        years ending on or after December 31, 2008, to a person
22        who would be a member of the same unitary business
23        group but for the fact that the person is prohibited
24        under Section 1501(a)(27) from being included in the
25        unitary business group because he or she is ordinarily
26        required to apportion business income under different

 

 

HB4021- 34 -LRB101 14810 HLH 63777 b

1        subsections of Section 304. The addition modification
2        required by this subparagraph shall be reduced to the
3        extent that dividends were included in base income of
4        the unitary group for the same taxable year and
5        received by the taxpayer or by a member of the
6        taxpayer's unitary business group (including amounts
7        included in gross income pursuant to Sections 951
8        through 964 of the Internal Revenue Code and amounts
9        included in gross income under Section 78 of the
10        Internal Revenue Code) with respect to the stock of the
11        same person to whom the interest was paid, accrued, or
12        incurred.
13            This paragraph shall not apply to the following:
14                (i) an item of interest paid, accrued, or
15            incurred, directly or indirectly, to a person who
16            is subject in a foreign country or state, other
17            than a state which requires mandatory unitary
18            reporting, to a tax on or measured by net income
19            with respect to such interest; or
20                (ii) an item of interest paid, accrued, or
21            incurred, directly or indirectly, to a person if
22            the taxpayer can establish, based on a
23            preponderance of the evidence, both of the
24            following:
25                    (a) the person, during the same taxable
26                year, paid, accrued, or incurred, the interest

 

 

HB4021- 35 -LRB101 14810 HLH 63777 b

1                to a person that is not a related member, and
2                    (b) the transaction giving rise to the
3                interest expense between the taxpayer and the
4                person did not have as a principal purpose the
5                avoidance of Illinois income tax, and is paid
6                pursuant to a contract or agreement that
7                reflects an arm's-length interest rate and
8                terms; or
9                (iii) the taxpayer can establish, based on
10            clear and convincing evidence, that the interest
11            paid, accrued, or incurred relates to a contract or
12            agreement entered into at arm's-length rates and
13            terms and the principal purpose for the payment is
14            not federal or Illinois tax avoidance; or
15                (iv) an item of interest paid, accrued, or
16            incurred, directly or indirectly, to a person if
17            the taxpayer establishes by clear and convincing
18            evidence that the adjustments are unreasonable; or
19            if the taxpayer and the Director agree in writing
20            to the application or use of an alternative method
21            of apportionment under Section 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

 

 

HB4021- 36 -LRB101 14810 HLH 63777 b

1            pursuant to regulation adopted by the Department
2            and such regulations provide methods and standards
3            by which the Department will utilize its authority
4            under Section 404 of this Act;
5            (E-13) An amount equal to the amount of intangible
6        expenses and costs otherwise allowed as a deduction in
7        computing base income, and that were paid, accrued, or
8        incurred, directly or indirectly, (i) for taxable
9        years ending on or after December 31, 2004, to a
10        foreign person who would be a member of the same
11        unitary business group but for the fact that the
12        foreign person's business activity outside the United
13        States is 80% or more of that person's total business
14        activity and (ii) for taxable years ending on or after
15        December 31, 2008, to a person who would be a member of
16        the same unitary business group but for the fact that
17        the person is prohibited under Section 1501(a)(27)
18        from being included in the unitary business group
19        because he or she is ordinarily required to apportion
20        business income under different subsections of Section
21        304. The addition modification required by this
22        subparagraph shall be reduced to the extent that
23        dividends were included in base income of the unitary
24        group for the same taxable year and received by the
25        taxpayer or by a member of the taxpayer's unitary
26        business group (including amounts included in gross

 

 

HB4021- 37 -LRB101 14810 HLH 63777 b

1        income pursuant to Sections 951 through 964 of the
2        Internal Revenue Code and amounts included in gross
3        income under Section 78 of the Internal Revenue Code)
4        with respect to the stock of the same person to whom
5        the intangible expenses and costs were directly or
6        indirectly paid, incurred, or accrued. The preceding
7        sentence shall not apply to the extent that the same
8        dividends caused a reduction to the addition
9        modification required under Section 203(b)(2)(E-12) of
10        this Act. As used in this subparagraph, the term
11        "intangible expenses and costs" includes (1) expenses,
12        losses, and costs for, or related to, the direct or
13        indirect acquisition, use, maintenance or management,
14        ownership, sale, exchange, or any other disposition of
15        intangible property; (2) losses incurred, directly or
16        indirectly, from factoring transactions or discounting
17        transactions; (3) royalty, patent, technical, and
18        copyright fees; (4) licensing fees; and (5) other
19        similar expenses and costs. For purposes of this
20        subparagraph, "intangible property" includes patents,
21        patent applications, trade names, trademarks, service
22        marks, copyrights, mask works, trade secrets, and
23        similar types of intangible assets.
24            This paragraph shall not apply to the following:
25                (i) any item of intangible expenses or costs
26            paid, accrued, or incurred, directly or

 

 

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1            indirectly, from a transaction with a person who is
2            subject in a foreign country or state, other than a
3            state which requires mandatory unitary reporting,
4            to a tax on or measured by net income with respect
5            to such item; or
6                (ii) any item of intangible expense or cost
7            paid, accrued, or incurred, directly or
8            indirectly, if the taxpayer can establish, based
9            on a preponderance of the evidence, both of the
10            following:
11                    (a) the person during the same taxable
12                year paid, accrued, or incurred, the
13                intangible expense or cost to a person that is
14                not a related member, and
15                    (b) the transaction giving rise to the
16                intangible expense or cost between the
17                taxpayer and the person did not have as a
18                principal purpose the avoidance of Illinois
19                income tax, and is paid pursuant to a contract
20                or agreement that reflects arm's-length terms;
21                or
22                (iii) any item of intangible expense or cost
23            paid, accrued, or incurred, directly or
24            indirectly, from a transaction with a person if the
25            taxpayer establishes by clear and convincing
26            evidence, that the adjustments are unreasonable;

 

 

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1            or if the taxpayer and the Director agree in
2            writing to the application or use of an alternative
3            method of apportionment under Section 304(f);
4                Nothing in this subsection shall preclude the
5            Director from making any other adjustment
6            otherwise allowed under Section 404 of this Act for
7            any tax year beginning after the effective date of
8            this amendment provided such adjustment is made
9            pursuant to regulation adopted by the Department
10            and such regulations provide methods and standards
11            by which the Department will utilize its authority
12            under Section 404 of this Act;
13            (E-14) For taxable years ending on or after
14        December 31, 2008, an amount equal to the amount of
15        insurance premium expenses and costs otherwise allowed
16        as a deduction in computing base income, and that were
17        paid, accrued, or incurred, directly or indirectly, to
18        a person who would be a member of the same unitary
19        business group but for the fact that the person is
20        prohibited under Section 1501(a)(27) from being
21        included in the unitary business group because he or
22        she is ordinarily required to apportion business
23        income under different subsections of Section 304. The
24        addition modification required by this subparagraph
25        shall be reduced to the extent that dividends were
26        included in base income of the unitary group for the

 

 

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1        same taxable year and received by the taxpayer or by a
2        member of the taxpayer's unitary business group
3        (including amounts included in gross income under
4        Sections 951 through 964 of the Internal Revenue Code
5        and amounts included in gross income under Section 78
6        of the Internal Revenue Code) with respect to the stock
7        of the same person to whom the premiums and costs were
8        directly or indirectly paid, incurred, or accrued. The
9        preceding sentence does not apply to the extent that
10        the same dividends caused a reduction to the addition
11        modification required under Section 203(b)(2)(E-12) or
12        Section 203(b)(2)(E-13) of this Act;
13            (E-15) For taxable years beginning after December
14        31, 2008, any deduction for dividends paid by a captive
15        real estate investment trust that is allowed to a real
16        estate investment trust under Section 857(b)(2)(B) of
17        the Internal Revenue Code for dividends paid;
18            (E-16) An amount equal to the credit allowable to
19        the taxpayer under Section 218(a) of this Act,
20        determined without regard to Section 218(c) of this
21        Act;
22            (E-17) For taxable years ending on or after
23        December 31, 2017, an amount equal to the deduction
24        allowed under Section 199 of the Internal Revenue Code
25        for the taxable year;
26            (E-18) for taxable years beginning after December

 

 

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1        31, 2018, an amount equal to the deduction allowed
2        under Section 250(a)(1)(A) of the Internal Revenue
3        Code for the taxable year; .
4            (E-19) An amount withdrawn from a small business
5        asset purchase account that is not used for purchases
6        of property for which a deduction under Section 179 of
7        the Internal Revenue Code is claimed for the tax year
8        in which the amount is withdrawn and which property is
9        used predominantly in Illinois; such amounts are
10        subject to the 10% penalty for ineligible use under
11        Section 3-3.5 of the Uniform Penalty and Interest Act;
12    and by deducting from the total so obtained the sum of the
13    following amounts:
14            (F) An amount equal to the amount of any tax
15        imposed by this Act which was refunded to the taxpayer
16        and included in such total for the taxable year;
17            (G) An amount equal to any amount included in such
18        total under Section 78 of the Internal Revenue Code;
19            (H) In the case of a regulated investment company,
20        an amount equal to the amount of exempt interest
21        dividends as defined in subsection (b)(5) of Section
22        852 of the Internal Revenue Code, paid to shareholders
23        for the taxable year;
24            (I) With the exception of any amounts subtracted
25        under subparagraph (J), an amount equal to the sum of
26        all amounts disallowed as deductions by (i) Sections

 

 

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1        171(a)(2), and 265(a)(2) and amounts disallowed as
2        interest expense by Section 291(a)(3) of the Internal
3        Revenue Code, and all amounts of expenses allocable to
4        interest and disallowed as deductions by Section
5        265(a)(1) of the Internal Revenue Code; and (ii) for
6        taxable years ending on or after August 13, 1999,
7        Sections 171(a)(2), 265, 280C, 291(a)(3), and
8        832(b)(5)(B)(i) of the Internal Revenue Code, plus,
9        for tax years ending on or after December 31, 2011,
10        amounts disallowed as deductions by Section 45G(e)(3)
11        of the Internal Revenue Code and, for taxable years
12        ending on or after December 31, 2008, any amount
13        included in gross income under Section 87 of the
14        Internal Revenue Code and the policyholders' share of
15        tax-exempt interest of a life insurance company under
16        Section 807(a)(2)(B) of the Internal Revenue Code (in
17        the case of a life insurance company with gross income
18        from a decrease in reserves for the tax year) or
19        Section 807(b)(1)(B) of the Internal Revenue Code (in
20        the case of a life insurance company allowed a
21        deduction for an increase in reserves for the tax
22        year); the provisions of this subparagraph are exempt
23        from the provisions of Section 250;
24            (J) An amount equal to all amounts included in such
25        total which are exempt from taxation by this State
26        either by reason of its statutes or Constitution or by

 

 

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

 

 

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1        income from a loan or loans made by such taxpayer to a
2        borrower, to the extent that such a loan is secured by
3        property which is eligible for the River Edge
4        Redevelopment Zone Investment Credit. To determine the
5        portion of a loan or loans that is secured by property
6        eligible for a Section 201(f) investment credit to the
7        borrower, the entire principal amount of the loan or
8        loans between the taxpayer and the borrower should be
9        divided into the basis of the Section 201(f) investment
10        credit property which secures the loan or loans, using
11        for this purpose the original basis of such property on
12        the date that it was placed in service in the River
13        Edge Redevelopment Zone. The subtraction modification
14        available to the taxpayer in any year under this
15        subsection shall be that portion of the total interest
16        paid by the borrower with respect to such loan
17        attributable to the eligible property as calculated
18        under the previous sentence. This subparagraph (M) is
19        exempt from the provisions of Section 250;
20            (M-1) For any taxpayer that is a financial
21        organization within the meaning of Section 304(c) of
22        this Act, an amount included in such total as interest
23        income from a loan or loans made by such taxpayer to a
24        borrower, to the extent that such a loan is secured by
25        property which is eligible for the High Impact Business
26        Investment Credit. To determine the portion of a loan

 

 

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1        or loans that is secured by property eligible for a
2        Section 201(h) investment credit to the borrower, the
3        entire principal amount of the loan or loans between
4        the taxpayer and the borrower should be divided into
5        the basis of the Section 201(h) investment credit
6        property which secures the loan or loans, using for
7        this purpose the original basis of such property on the
8        date that it was placed in service in a federally
9        designated Foreign Trade Zone or Sub-Zone located in
10        Illinois. No taxpayer that is eligible for the
11        deduction provided in subparagraph (M) of paragraph
12        (2) of this subsection shall be eligible for the
13        deduction provided under this subparagraph (M-1). The
14        subtraction modification available to taxpayers in any
15        year under this subsection shall be that portion of the
16        total interest paid by the borrower with respect to
17        such loan attributable to the eligible property as
18        calculated under the previous sentence;
19            (N) Two times any contribution made during the
20        taxable year to a designated zone organization to the
21        extent that the contribution (i) qualifies as a
22        charitable contribution under subsection (c) of
23        Section 170 of the Internal Revenue Code and (ii) must,
24        by its terms, be used for a project approved by the
25        Department of Commerce and Economic Opportunity under
26        Section 11 of the Illinois Enterprise Zone Act or under

 

 

HB4021- 46 -LRB101 14810 HLH 63777 b

1        Section 10-10 of the River Edge Redevelopment Zone Act.
2        This subparagraph (N) is exempt from the provisions of
3        Section 250;
4            (O) An amount equal to: (i) 85% for taxable years
5        ending on or before December 31, 1992, or, a percentage
6        equal to the percentage allowable under Section
7        243(a)(1) of the Internal Revenue Code of 1986 for
8        taxable years ending after December 31, 1992, of the
9        amount by which dividends included in taxable income
10        and received from a corporation that is not created or
11        organized under the laws of the United States or any
12        state or political subdivision thereof, including, for
13        taxable years ending on or after December 31, 1988,
14        dividends received or deemed received or paid or deemed
15        paid under Sections 951 through 965 of the Internal
16        Revenue Code, exceed the amount of the modification
17        provided under subparagraph (G) of paragraph (2) of
18        this subsection (b) which is related to such dividends,
19        and including, for taxable years ending on or after
20        December 31, 2008, dividends received from a captive
21        real estate investment trust; plus (ii) 100% of the
22        amount by which dividends, included in taxable income
23        and received, including, for taxable years ending on or
24        after December 31, 1988, dividends received or deemed
25        received or paid or deemed paid under Sections 951
26        through 964 of the Internal Revenue Code and including,

 

 

HB4021- 47 -LRB101 14810 HLH 63777 b

1        for taxable years ending on or after December 31, 2008,
2        dividends received from a captive real estate
3        investment trust, from any such corporation specified
4        in clause (i) that would but for the provisions of
5        Section 1504(b)(3) of the Internal Revenue Code be
6        treated as a member of the affiliated group which
7        includes the dividend recipient, exceed the amount of
8        the modification provided under subparagraph (G) of
9        paragraph (2) of this subsection (b) which is related
10        to such dividends. This subparagraph (O) is exempt from
11        the provisions of Section 250 of this Act;
12            (P) An amount equal to any contribution made to a
13        job training project established pursuant to the Tax
14        Increment Allocation Redevelopment Act;
15            (Q) An amount equal to the amount of the deduction
16        used to compute the federal income tax credit for
17        restoration of substantial amounts held under claim of
18        right for the taxable year pursuant to Section 1341 of
19        the Internal Revenue Code;
20            (R) On and after July 20, 1999, in the case of an
21        attorney-in-fact with respect to whom an interinsurer
22        or a reciprocal insurer has made the election under
23        Section 835 of the Internal Revenue Code, 26 U.S.C.
24        835, an amount equal to the excess, if any, of the
25        amounts paid or incurred by that interinsurer or
26        reciprocal insurer in the taxable year to the

 

 

HB4021- 48 -LRB101 14810 HLH 63777 b

1        attorney-in-fact over the deduction allowed to that
2        interinsurer or reciprocal insurer with respect to the
3        attorney-in-fact under Section 835(b) of the Internal
4        Revenue Code for the taxable year; the provisions of
5        this subparagraph are exempt from the provisions of
6        Section 250;
7            (S) For taxable years ending on or after December
8        31, 1997, in the case of a Subchapter S corporation, an
9        amount equal to all amounts of income allocable to a
10        shareholder subject to the Personal Property Tax
11        Replacement Income Tax imposed by subsections (c) and
12        (d) of Section 201 of this Act, including amounts
13        allocable to organizations exempt from federal income
14        tax by reason of Section 501(a) of the Internal Revenue
15        Code. This subparagraph (S) is exempt from the
16        provisions of Section 250;
17            (T) For taxable years 2001 and thereafter, for the
18        taxable year in which the bonus depreciation deduction
19        is taken on the taxpayer's federal income tax return
20        under subsection (k) of Section 168 of the Internal
21        Revenue Code and for each applicable taxable year
22        thereafter, an amount equal to "x", where:
23                (1) "y" equals the amount of the depreciation
24            deduction taken for the taxable year on the
25            taxpayer's federal income tax return on property
26            for which the bonus depreciation deduction was

 

 

HB4021- 49 -LRB101 14810 HLH 63777 b

1            taken in any year under subsection (k) of Section
2            168 of the Internal Revenue Code, but not including
3            the bonus depreciation deduction;
4                (2) for taxable years ending on or before
5            December 31, 2005, "x" equals "y" multiplied by 30
6            and then divided by 70 (or "y" multiplied by
7            0.429); and
8                (3) for taxable years ending after December
9            31, 2005:
10                    (i) for property on which a bonus
11                depreciation deduction of 30% of the adjusted
12                basis was taken, "x" equals "y" multiplied by
13                30 and then divided by 70 (or "y" multiplied by
14                0.429); and
15                    (ii) for property on which a bonus
16                depreciation deduction of 50% of the adjusted
17                basis was taken, "x" equals "y" multiplied by
18                1.0.
19            The aggregate amount deducted under this
20        subparagraph in all taxable years for any one piece of
21        property may not exceed the amount of the bonus
22        depreciation deduction 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. This
25        subparagraph (T) is exempt from the provisions of
26        Section 250;

 

 

HB4021- 50 -LRB101 14810 HLH 63777 b

1            (U) If the taxpayer sells, transfers, abandons, or
2        otherwise disposes of property for which the taxpayer
3        was required in any taxable year to make an addition
4        modification under subparagraph (E-10), then an amount
5        equal to that addition modification.
6            If the taxpayer continues to own property through
7        the last day of the last tax year for which the
8        taxpayer may claim a depreciation deduction for
9        federal income tax purposes and for which the taxpayer
10        was required in any taxable year to make an addition
11        modification under subparagraph (E-10), then an amount
12        equal to that addition modification.
13            The taxpayer is allowed to take the deduction under
14        this subparagraph only once with respect to any one
15        piece of property.
16            This subparagraph (U) is exempt from the
17        provisions of Section 250;
18            (V) The amount of: (i) any interest income (net of
19        the deductions allocable thereto) taken into account
20        for the taxable year with respect to a transaction with
21        a taxpayer that is required to make an addition
22        modification with respect to such transaction under
23        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
24        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
25        the amount of such addition modification, (ii) any
26        income from intangible property (net of the deductions

 

 

HB4021- 51 -LRB101 14810 HLH 63777 b

1        allocable thereto) taken into account for the taxable
2        year with respect to a transaction with a taxpayer that
3        is required to make an addition modification with
4        respect to such transaction under Section
5        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
6        203(d)(2)(D-8), but not to exceed the amount of such
7        addition modification, and (iii) any insurance premium
8        income (net of deductions allocable thereto) taken
9        into account for the taxable year with respect to a
10        transaction with a taxpayer that is required to make an
11        addition modification with respect to such transaction
12        under Section 203(a)(2)(D-19), Section
13        203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section
14        203(d)(2)(D-9), but not to exceed the amount of that
15        addition modification. This subparagraph (V) is exempt
16        from the provisions of Section 250;
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 (i) 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 and (ii) for taxable
25        years ending on or after December 31, 2008, to a person
26        who would be a member of the same unitary business

 

 

HB4021- 52 -LRB101 14810 HLH 63777 b

1        group but for the fact that the person is prohibited
2        under Section 1501(a)(27) from being included in the
3        unitary business group because he or she is ordinarily
4        required to apportion business income under different
5        subsections of Section 304, but not to exceed the
6        addition modification required to be made for the same
7        taxable year under Section 203(b)(2)(E-12) for
8        interest paid, accrued, or incurred, directly or
9        indirectly, to the same person. This subparagraph (W)
10        is exempt from the provisions of Section 250;
11            (X) An amount equal to the income from intangible
12        property taken into account for the taxable year (net
13        of the deductions allocable thereto) with respect to
14        transactions with (i) a foreign person who would be a
15        member of the taxpayer's unitary business group but for
16        the fact that the foreign person's business activity
17        outside the United States is 80% or more of that
18        person's total business activity and (ii) for taxable
19        years ending on or after December 31, 2008, to a person
20        who would be a member of the same unitary business
21        group but for the fact that the person is prohibited
22        under Section 1501(a)(27) from being included in the
23        unitary business group because he or she is ordinarily
24        required to apportion business income under different
25        subsections of Section 304, but not to exceed the
26        addition modification required to be made for the same

 

 

HB4021- 53 -LRB101 14810 HLH 63777 b

1        taxable year under Section 203(b)(2)(E-13) for
2        intangible expenses and costs paid, accrued, or
3        incurred, directly or indirectly, to the same foreign
4        person. This subparagraph (X) is exempt from the
5        provisions of Section 250;
6            (Y) For taxable years ending on or after December
7        31, 2011, in the case of a taxpayer who was required to
8        add back any insurance premiums under Section
9        203(b)(2)(E-14), such taxpayer may elect to subtract
10        that part of a reimbursement received from the
11        insurance company equal to the amount of the expense or
12        loss (including expenses incurred by the insurance
13        company) that would have been taken into account as a
14        deduction for federal income tax purposes if the
15        expense or loss had been uninsured. If a taxpayer makes
16        the election provided for by this subparagraph (Y), the
17        insurer to which the premiums were paid must add back
18        to income the amount subtracted by the taxpayer
19        pursuant to this subparagraph (Y). This subparagraph
20        (Y) is exempt from the provisions of Section 250; and
21            (Z) The difference between the nondeductible
22        controlled foreign corporation dividends under Section
23        965(e)(3) of the Internal Revenue Code over the taxable
24        income of the taxpayer, computed without regard to
25        Section 965(e)(2)(A) of the Internal Revenue Code, and
26        without regard to any net operating loss deduction.

 

 

HB4021- 54 -LRB101 14810 HLH 63777 b

1        This subparagraph (Z) is exempt from the provisions of
2        Section 250; and .
3            (AA) For taxable years beginning on or after
4        January 1, 2021, an amount of up to $50,000 per tax
5        year contributed to a small business asset purchase
6        account during the tax year, plus all interest earned
7        on such accounts during the tax year; a "small business
8        asset purchase account" means an account established
9        by a taxpayer, the proceeds of which are used to
10        purchase property used primarily in Illinois for which
11        a federal income tax deduction is claimed under Section
12        179 of the Internal Revenue Code.
13        (3) Special rule. For purposes of paragraph (2)(A),
14    "gross income" in the case of a life insurance company, for
15    tax years ending on and after December 31, 1994, and prior
16    to December 31, 2011, shall mean the gross investment
17    income for the taxable year and, for tax years ending on or
18    after December 31, 2011, shall mean all amounts included in
19    life insurance gross income under Section 803(a)(3) of the
20    Internal Revenue Code.
 
21    (c) Trusts and estates.
22        (1) In general. In the case of a trust or estate, base
23    income means an amount equal to the taxpayer's taxable
24    income for the taxable year as modified by paragraph (2).
25        (2) Modifications. Subject to the provisions of

 

 

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

 

 

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1        those provided by this subparagraph (E) exceeded
2        subtraction modifications in such taxable year, with
3        the following limitations applied in the order that
4        they are listed:
5                (i) the addition modification relating to the
6            net operating loss carried back or forward to the
7            taxable year from any taxable year ending prior to
8            December 31, 1986 shall be reduced by the amount of
9            addition modification under this subparagraph (E)
10            which related to that net operating loss and which
11            was taken into account in calculating the base
12            income of an earlier taxable year, and
13                (ii) the addition modification relating to the
14            net operating loss carried back or forward to the
15            taxable year from any taxable year ending prior to
16            December 31, 1986 shall not exceed the amount of
17            such carryback or carryforward;
18            For taxable years in which there is a net operating
19        loss carryback or carryforward from more than one other
20        taxable year ending prior to December 31, 1986, the
21        addition modification provided in this subparagraph
22        (E) shall be the sum of the amounts computed
23        independently under the preceding provisions of this
24        subparagraph (E) for each such taxable year;
25            (F) For taxable years ending on or after January 1,
26        1989, an amount equal to the tax deducted pursuant to

 

 

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1        Section 164 of the Internal Revenue Code if the trust
2        or estate is claiming the same tax for purposes of the
3        Illinois foreign tax credit under Section 601 of this
4        Act;
5            (G) An amount equal to the amount of the capital
6        gain deduction allowable under the Internal Revenue
7        Code, to the extent deducted from gross income in the
8        computation of taxable income;
9            (G-5) For taxable years ending after December 31,
10        1997, an amount equal to any eligible remediation costs
11        that the trust or estate deducted in computing adjusted
12        gross income and for which the trust or estate claims a
13        credit under subsection (l) of Section 201;
14            (G-10) For taxable years 2001 and thereafter, an
15        amount equal to the bonus depreciation deduction taken
16        on the taxpayer's federal income tax return for the
17        taxable year under subsection (k) of Section 168 of the
18        Internal Revenue Code; and
19            (G-11) If the taxpayer sells, transfers, abandons,
20        or otherwise disposes of property for which the
21        taxpayer was required in any taxable year to make an
22        addition modification under subparagraph (G-10), then
23        an amount equal to the aggregate amount of the
24        deductions taken in all taxable years under
25        subparagraph (R) with respect to that property.
26            If the taxpayer continues to own property through

 

 

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1        the last day of the last tax year for which the
2        taxpayer may claim a depreciation deduction for
3        federal income tax purposes and for which the taxpayer
4        was allowed in any taxable year to make a subtraction
5        modification under subparagraph (R), then an amount
6        equal to that subtraction modification.
7            The taxpayer is required to make the addition
8        modification under this subparagraph only once with
9        respect to any one piece of property;
10            (G-12) An amount equal to the amount otherwise
11        allowed as a deduction in computing base income for
12        interest paid, accrued, or incurred, directly or
13        indirectly, (i) for taxable years ending on or after
14        December 31, 2004, to a foreign person who would be a
15        member of the same unitary business group but for the
16        fact that the foreign person's business activity
17        outside the United States is 80% or more of the foreign
18        person's total business activity and (ii) for taxable
19        years ending on or after December 31, 2008, to a person
20        who would be a member of the same unitary business
21        group but for the fact that the person is prohibited
22        under Section 1501(a)(27) from being included in the
23        unitary business group because he or she is ordinarily
24        required to apportion business income under different
25        subsections of Section 304. The addition modification
26        required by this subparagraph shall be reduced to the

 

 

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1        extent that dividends were included in base income of
2        the unitary group for the same taxable year and
3        received by the taxpayer or by a member of the
4        taxpayer's unitary business group (including amounts
5        included in gross income pursuant to Sections 951
6        through 964 of the Internal Revenue Code and amounts
7        included in gross income under Section 78 of the
8        Internal Revenue Code) with respect to the stock of the
9        same person to whom the interest was paid, accrued, or
10        incurred.
11            This paragraph shall not apply to the following:
12                (i) an item of interest paid, accrued, or
13            incurred, directly or indirectly, to a person who
14            is subject in a foreign country or state, other
15            than a state which requires mandatory unitary
16            reporting, to a tax on or measured by net income
17            with respect to such interest; or
18                (ii) an item of interest paid, accrued, or
19            incurred, directly or indirectly, to a person if
20            the taxpayer can establish, based on a
21            preponderance of the evidence, both of the
22            following:
23                    (a) the person, during the same taxable
24                year, paid, accrued, or incurred, the interest
25                to a person that is not a related member, and
26                    (b) the transaction giving rise to the

 

 

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

 

 

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1            by which the Department will utilize its authority
2            under Section 404 of this Act;
3            (G-13) An amount equal to the amount of intangible
4        expenses and costs otherwise allowed as a deduction in
5        computing base income, and that were paid, accrued, or
6        incurred, directly or indirectly, (i) for taxable
7        years ending on or after December 31, 2004, to a
8        foreign person who would be a member of the same
9        unitary business group but for the fact that the
10        foreign person's business activity outside the United
11        States is 80% or more of that person's total business
12        activity and (ii) for taxable years ending on or after
13        December 31, 2008, to a person who would be a member of
14        the same unitary business group but for the fact that
15        the person is prohibited under Section 1501(a)(27)
16        from being included in the unitary business group
17        because he or she is ordinarily required to apportion
18        business income under different subsections of Section
19        304. The addition modification required by this
20        subparagraph shall be reduced to the extent that
21        dividends were included in base income of the unitary
22        group for the same taxable year and received by the
23        taxpayer or by a member of the taxpayer's unitary
24        business group (including amounts included in gross
25        income pursuant to Sections 951 through 964 of the
26        Internal Revenue Code and amounts included in gross

 

 

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1        income under Section 78 of the Internal Revenue Code)
2        with respect to the stock of the same person to whom
3        the intangible expenses and costs were directly or
4        indirectly paid, incurred, or accrued. The preceding
5        sentence shall not apply to the extent that the same
6        dividends caused a reduction to the addition
7        modification required under Section 203(c)(2)(G-12) of
8        this Act. As used in this subparagraph, the term
9        "intangible expenses and costs" includes: (1)
10        expenses, losses, and costs for or related to the
11        direct or indirect acquisition, use, maintenance or
12        management, ownership, sale, exchange, or any other
13        disposition of intangible property; (2) losses
14        incurred, directly or indirectly, from factoring
15        transactions or discounting transactions; (3) royalty,
16        patent, technical, and copyright fees; (4) licensing
17        fees; and (5) other similar expenses and costs. For
18        purposes of this subparagraph, "intangible property"
19        includes patents, patent applications, trade names,
20        trademarks, service marks, copyrights, mask works,
21        trade secrets, and similar types of intangible assets.
22            This paragraph shall not apply to the following:
23                (i) any item of intangible expenses or costs
24            paid, accrued, or incurred, directly or
25            indirectly, from a transaction with a person who is
26            subject in a foreign country or state, other than a

 

 

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1            state which requires mandatory unitary reporting,
2            to a tax on or measured by net income with respect
3            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 person during the same taxable
10                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 person did not have as a
16                principal purpose the avoidance of Illinois
17                income tax, and is paid pursuant to a contract
18                or agreement that reflects arm's-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 person if the
23            taxpayer establishes by clear and convincing
24            evidence, that the adjustments are unreasonable;
25            or if the taxpayer and the Director agree in
26            writing to the application or use of an alternative

 

 

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1            method of apportionment under Section 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            (G-14) For taxable years ending on or after
12        December 31, 2008, an amount equal to the amount of
13        insurance premium expenses and costs otherwise allowed
14        as a deduction in computing base income, and that were
15        paid, accrued, or incurred, directly or indirectly, to
16        a person who would be a member of the same unitary
17        business group but for the fact that the person is
18        prohibited under Section 1501(a)(27) from being
19        included in the unitary business group because he or
20        she is ordinarily required to apportion business
21        income under different subsections of Section 304. The
22        addition modification required by this subparagraph
23        shall be reduced to the extent that dividends were
24        included in base income of the unitary group for the
25        same taxable year and received by the taxpayer or by a
26        member of the taxpayer's unitary business group

 

 

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1        (including amounts included in gross income under
2        Sections 951 through 964 of the Internal Revenue Code
3        and amounts included in gross income under Section 78
4        of the Internal Revenue Code) with respect to the stock
5        of the same person to whom the premiums and costs were
6        directly or indirectly paid, incurred, or accrued. The
7        preceding sentence does not apply to the extent that
8        the same dividends caused a reduction to the addition
9        modification required under Section 203(c)(2)(G-12) or
10        Section 203(c)(2)(G-13) of this Act;
11            (G-15) An amount equal to the credit allowable to
12        the taxpayer under Section 218(a) of this Act,
13        determined without regard to Section 218(c) of this
14        Act;
15            (G-16) For taxable years ending on or after
16        December 31, 2017, an amount equal to the deduction
17        allowed under Section 199 of the Internal Revenue Code
18        for the taxable year;
19            (G-17) An amount withdrawn from a small business
20        asset purchase account that is not used for purchases
21        of property for which a deduction under Section 179 of
22        the Internal Revenue Code is claimed for the tax year
23        in which the amount is withdrawn and which property is
24        used predominantly in Illinois; such amounts are
25        subject to the 10% penalty for ineligible use under
26        Section 3-3.5 of the Uniform Penalty and Interest Act;

 

 

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

 

 

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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        and all amounts of expenses allocable to interest and
8        disallowed as deductions by Section 265(a)(1) of the
9        Internal Revenue Code; and (ii) for taxable years
10        ending on or after August 13, 1999, Sections 171(a)(2),
11        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue
12        Code, plus, (iii) for taxable years ending on or after
13        December 31, 2011, Section 45G(e)(3) of the Internal
14        Revenue Code and, for taxable years ending on or after
15        December 31, 2008, any amount included in gross income
16        under Section 87 of the Internal Revenue Code; the
17        provisions of this subparagraph are exempt from the
18        provisions of Section 250;
19            (M) An amount equal to those dividends included in
20        such total which were paid by a corporation which
21        conducts business operations in a River Edge
22        Redevelopment Zone or zones created under the River
23        Edge Redevelopment Zone Act and conducts substantially
24        all of its operations in a River Edge Redevelopment
25        Zone or zones. This subparagraph (M) is exempt from the
26        provisions of Section 250;

 

 

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1            (N) An amount equal to any contribution made to a
2        job training project established pursuant to the Tax
3        Increment Allocation Redevelopment Act;
4            (O) An amount equal to those dividends included in
5        such total that were paid by a corporation that
6        conducts business operations in a federally designated
7        Foreign Trade Zone or Sub-Zone and that is designated a
8        High Impact Business located in Illinois; provided
9        that dividends eligible for the deduction provided in
10        subparagraph (M) of paragraph (2) of this subsection
11        shall not be eligible for the deduction provided under
12        this subparagraph (O);
13            (P) An amount equal to the amount of the deduction
14        used to compute the federal income tax credit for
15        restoration of substantial amounts held under claim of
16        right for the taxable year pursuant to Section 1341 of
17        the Internal Revenue Code;
18            (Q) For taxable year 1999 and thereafter, an amount
19        equal to the amount of any (i) distributions, to the
20        extent includible in gross income for federal income
21        tax purposes, made to the taxpayer because of his or
22        her status as a victim of persecution for racial or
23        religious reasons by Nazi Germany or any other Axis
24        regime or as an heir of the victim and (ii) items of
25        income, to the extent includible in gross income for
26        federal income tax purposes, attributable to, derived

 

 

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1        from or in any way related to assets stolen from,
2        hidden from, or otherwise lost to a victim of
3        persecution for racial or religious reasons by Nazi
4        Germany or any other Axis regime immediately prior to,
5        during, and immediately after World War II, including,
6        but not limited to, interest on the proceeds receivable
7        as insurance under policies issued to a victim of
8        persecution for racial or religious reasons by Nazi
9        Germany or any other Axis regime by European insurance
10        companies immediately prior to and during World War II;
11        provided, however, this subtraction from federal
12        adjusted gross income does not apply to assets acquired
13        with such assets or with the proceeds from the sale of
14        such assets; provided, further, this paragraph shall
15        only apply to a taxpayer who was the first recipient of
16        such assets after their recovery and who is a victim of
17        persecution for racial or religious reasons by Nazi
18        Germany or any other Axis regime or as an heir of the
19        victim. The amount of and the eligibility for any
20        public assistance, benefit, or similar entitlement is
21        not affected by the inclusion of items (i) and (ii) of
22        this paragraph in gross income for federal income tax
23        purposes. This paragraph is exempt from the provisions
24        of Section 250;
25            (R) For taxable years 2001 and thereafter, for the
26        taxable year in which the bonus depreciation deduction

 

 

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1        is taken on the taxpayer's federal income tax return
2        under subsection (k) of Section 168 of the Internal
3        Revenue Code and for each applicable taxable year
4        thereafter, an amount equal to "x", where:
5                (1) "y" equals the amount of the depreciation
6            deduction taken for the taxable year on the
7            taxpayer's federal income tax return on property
8            for which the bonus depreciation deduction 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;
12                (2) for taxable years ending on or before
13            December 31, 2005, "x" equals "y" multiplied by 30
14            and then divided by 70 (or "y" multiplied by
15            0.429); and
16                (3) for taxable years ending after December
17            31, 2005:
18                    (i) for property on which a bonus
19                depreciation deduction of 30% of the adjusted
20                basis was taken, "x" equals "y" multiplied by
21                30 and then divided by 70 (or "y" multiplied by
22                0.429); and
23                    (ii) for property on which a bonus
24                depreciation deduction of 50% of the adjusted
25                basis was taken, "x" equals "y" multiplied by
26                1.0.

 

 

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1            The aggregate amount deducted under this
2        subparagraph in all taxable years for any one piece of
3        property may not exceed the amount of the bonus
4        depreciation deduction taken on that property on the
5        taxpayer's federal income tax return under subsection
6        (k) of Section 168 of the Internal Revenue Code. This
7        subparagraph (R) is exempt from the provisions of
8        Section 250;
9            (S) If the taxpayer sells, transfers, abandons, or
10        otherwise disposes of property for which the taxpayer
11        was required in any taxable year to make an addition
12        modification under subparagraph (G-10), then an amount
13        equal to that addition modification.
14            If the taxpayer continues to own property through
15        the last day of the last tax year for which the
16        taxpayer may claim a depreciation deduction for
17        federal income tax purposes and for which the taxpayer
18        was required in any taxable year to make an addition
19        modification under subparagraph (G-10), then an amount
20        equal to that addition modification.
21            The taxpayer is allowed to take the deduction under
22        this subparagraph only once with respect to any one
23        piece of property.
24            This subparagraph (S) is exempt from the
25        provisions of Section 250;
26            (T) The amount of (i) any interest income (net of

 

 

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1        the deductions allocable thereto) taken into account
2        for the taxable year with respect to a transaction with
3        a taxpayer that is required to make an addition
4        modification with respect to such transaction under
5        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
6        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
7        the amount of such addition modification and (ii) any
8        income from intangible property (net of the deductions
9        allocable thereto) taken into account for the taxable
10        year with respect to a transaction with a taxpayer that
11        is required to make an addition modification with
12        respect to such transaction under Section
13        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
14        203(d)(2)(D-8), but not to exceed the amount of such
15        addition modification. This subparagraph (T) is exempt
16        from the provisions of Section 250;
17            (U) 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 (i) a foreign person who would be a
21        member of the taxpayer's unitary business group but for
22        the fact the foreign person's business activity
23        outside the United States is 80% or more of that
24        person's total business activity and (ii) for taxable
25        years ending on or after December 31, 2008, to a person
26        who would be a member of the same unitary business

 

 

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1        group but for the fact that the person is prohibited
2        under Section 1501(a)(27) from being included in the
3        unitary business group because he or she is ordinarily
4        required to apportion business income under different
5        subsections of Section 304, but not to exceed the
6        addition modification required to be made for the same
7        taxable year under Section 203(c)(2)(G-12) for
8        interest paid, accrued, or incurred, directly or
9        indirectly, to the same person. This subparagraph (U)
10        is exempt from the provisions of Section 250;
11            (V) An amount equal to the income from intangible
12        property taken into account for the taxable year (net
13        of the deductions allocable thereto) with respect to
14        transactions with (i) a foreign person who would be a
15        member of the taxpayer's unitary business group but for
16        the fact that the foreign person's business activity
17        outside the United States is 80% or more of that
18        person's total business activity and (ii) for taxable
19        years ending on or after December 31, 2008, to a person
20        who would be a member of the same unitary business
21        group but for the fact that the person is prohibited
22        under Section 1501(a)(27) from being included in the
23        unitary business group because he or she is ordinarily
24        required to apportion business income under different
25        subsections of Section 304, but not to exceed the
26        addition modification required to be made for the same

 

 

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1        taxable year under Section 203(c)(2)(G-13) for
2        intangible expenses and costs paid, accrued, or
3        incurred, directly or indirectly, to the same foreign
4        person. This subparagraph (V) is exempt from the
5        provisions of Section 250;
6            (W) in the case of an estate, an amount equal to
7        all amounts included in such total pursuant to the
8        provisions of Section 111 of the Internal Revenue Code
9        as a recovery of items previously deducted by the
10        decedent from adjusted gross income in the computation
11        of taxable income. This subparagraph (W) is exempt from
12        Section 250;
13            (X) an amount equal to the refund included in such
14        total of any tax deducted for federal income tax
15        purposes, to the extent that deduction was added back
16        under subparagraph (F). This subparagraph (X) is
17        exempt from the provisions of Section 250;
18            (Y) For taxable years ending on or after December
19        31, 2011, in the case of a taxpayer who was required to
20        add back any insurance premiums under Section
21        203(c)(2)(G-14), such taxpayer may elect to subtract
22        that part of a reimbursement received from the
23        insurance company equal to the amount of the expense or
24        loss (including expenses incurred by the insurance
25        company) that would have been taken into account as a
26        deduction for federal income tax purposes if the

 

 

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1        expense or loss had been uninsured. If a taxpayer makes
2        the election provided for by this subparagraph (Y), the
3        insurer to which the premiums were paid must add back
4        to income the amount subtracted by the taxpayer
5        pursuant to this subparagraph (Y). This subparagraph
6        (Y) is exempt from the provisions of Section 250; and
7            (Z) For taxable years beginning after December 31,
8        2018 and before January 1, 2026, the amount of excess
9        business loss of the taxpayer disallowed as a deduction
10        by Section 461(l)(1)(B) of the Internal Revenue Code;
11        and .
12            (AA) For taxable years beginning on or after
13        January 1, 2021, an amount of up to $50,000 per tax
14        year contributed to a small business asset purchase
15        account during the tax year, plus all interest earned
16        on such accounts during the tax year; a "small business
17        asset purchase account" means an account established
18        by a taxpayer, the proceeds of which are used to
19        purchase property used primarily in Illinois for which
20        a federal income tax deduction is claimed under Section
21        179 of the Internal Revenue Code.
22        (3) Limitation. The amount of any modification
23    otherwise required under this subsection shall, under
24    regulations prescribed by the Department, be adjusted by
25    any amounts included therein which were properly paid,
26    credited, or required to be distributed, or permanently set

 

 

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1    aside for charitable purposes pursuant to Internal Revenue
2    Code Section 642(c) during the taxable year.
 
3    (d) Partnerships.
4        (1) In general. In the case of a partnership, base
5    income means an amount equal to the taxpayer's taxable
6    income for the taxable year as modified by paragraph (2).
7        (2) Modifications. The taxable income referred to in
8    paragraph (1) shall be modified by adding thereto the sum
9    of the following amounts:
10            (A) An amount equal to all amounts paid or accrued
11        to the taxpayer as interest or dividends during the
12        taxable year to the extent excluded from gross income
13        in the computation of taxable income;
14            (B) An amount equal to the amount of tax imposed by
15        this Act to the extent deducted from gross income for
16        the taxable year;
17            (C) The amount of deductions allowed to the
18        partnership pursuant to Section 707 (c) of the Internal
19        Revenue Code in calculating its taxable income;
20            (D) An amount equal to the amount of the capital
21        gain deduction allowable under the Internal Revenue
22        Code, to the extent deducted from gross income in the
23        computation of taxable income;
24            (D-5) For taxable years 2001 and thereafter, an
25        amount equal to the bonus depreciation deduction taken

 

 

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1        on the taxpayer's federal income tax return for the
2        taxable year under subsection (k) of Section 168 of the
3        Internal Revenue Code;
4            (D-6) If the taxpayer sells, transfers, abandons,
5        or otherwise disposes of property for which the
6        taxpayer was required in any taxable year to make an
7        addition modification under subparagraph (D-5), then
8        an amount equal to the aggregate amount of the
9        deductions taken in all taxable years under
10        subparagraph (O) with respect to that property.
11            If the taxpayer continues to own property through
12        the last day of the last tax year for which the
13        taxpayer may claim a depreciation deduction for
14        federal income tax purposes and for which the taxpayer
15        was allowed in any taxable year to make a subtraction
16        modification under subparagraph (O), then an amount
17        equal to that subtraction modification.
18            The taxpayer is required to make the addition
19        modification under this subparagraph only once with
20        respect to any one piece of property;
21            (D-7) An amount equal to the amount otherwise
22        allowed as a deduction in computing base income for
23        interest paid, accrued, or incurred, directly or
24        indirectly, (i) for taxable years ending on or after
25        December 31, 2004, to a foreign person who would be a
26        member of the same unitary business group but for the

 

 

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1        fact the foreign person's business activity outside
2        the United States is 80% or more of the foreign
3        person's total business activity and (ii) for taxable
4        years ending on or after December 31, 2008, to a person
5        who would be a member of the same unitary business
6        group but for the fact that the person is prohibited
7        under Section 1501(a)(27) from being included in the
8        unitary business group because he or she is ordinarily
9        required to apportion business income under different
10        subsections of Section 304. The addition modification
11        required by this subparagraph shall be reduced to the
12        extent that dividends were included in base income of
13        the unitary group for the same taxable year and
14        received by the taxpayer or by a member of the
15        taxpayer's unitary business group (including amounts
16        included in gross income pursuant to Sections 951
17        through 964 of the Internal Revenue Code and amounts
18        included in gross income under Section 78 of the
19        Internal Revenue Code) with respect to the stock of the
20        same person to whom the interest was paid, accrued, or
21        incurred.
22            This paragraph shall not apply to the following:
23                (i) an item of interest paid, accrued, or
24            incurred, directly or indirectly, to a person who
25            is subject in a foreign country or state, other
26            than a state which requires mandatory unitary

 

 

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1            reporting, to a tax on or measured by net income
2            with respect to such interest; or
3                (ii) an item of interest paid, accrued, or
4            incurred, directly or indirectly, to a person if
5            the taxpayer can establish, based on a
6            preponderance of the evidence, both of the
7            following:
8                    (a) the person, during the same taxable
9                year, paid, accrued, or incurred, the interest
10                to a person that is not a related member, and
11                    (b) the transaction giving rise to the
12                interest expense between the taxpayer and the
13                person did not have as a principal purpose the
14                avoidance of Illinois income tax, and is paid
15                pursuant to a contract or agreement that
16                reflects an arm's-length interest rate and
17                terms; or
18                (iii) the taxpayer can establish, based on
19            clear and convincing evidence, that the interest
20            paid, accrued, or incurred relates to a contract or
21            agreement entered into at arm's-length rates and
22            terms and the principal purpose for the payment is
23            not federal or Illinois tax avoidance; or
24                (iv) an item of interest paid, accrued, or
25            incurred, directly or indirectly, to a person if
26            the taxpayer establishes by clear and convincing

 

 

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1            evidence that the adjustments are unreasonable; or
2            if the taxpayer and the Director agree in writing
3            to the application or use of an alternative method
4            of apportionment under Section 304(f).
5                Nothing in this subsection shall preclude the
6            Director from making any other adjustment
7            otherwise allowed under Section 404 of this Act for
8            any tax year beginning after the effective date of
9            this amendment provided such adjustment is made
10            pursuant to regulation adopted by the Department
11            and such regulations provide methods and standards
12            by which the Department will utilize its authority
13            under Section 404 of this Act; and
14            (D-8) An amount equal to the amount of intangible
15        expenses and costs otherwise allowed as a deduction in
16        computing base income, and that were paid, accrued, or
17        incurred, directly or indirectly, (i) for taxable
18        years ending on or after December 31, 2004, to a
19        foreign person who would be a member of the same
20        unitary business group but for the fact that the
21        foreign person's business activity outside the United
22        States is 80% or more of that person's total business
23        activity and (ii) for taxable years ending on or after
24        December 31, 2008, to a person who would be a member of
25        the same unitary business group but for the fact that
26        the person is prohibited under Section 1501(a)(27)

 

 

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1        from being included in the unitary business group
2        because he or she is ordinarily required to apportion
3        business income under different subsections of Section
4        304. The addition modification required by this
5        subparagraph shall be reduced to the extent that
6        dividends were included in base income of the unitary
7        group for the same taxable year and received by the
8        taxpayer or by a member of the taxpayer's unitary
9        business group (including amounts included in gross
10        income pursuant to Sections 951 through 964 of the
11        Internal Revenue Code and amounts included in gross
12        income under Section 78 of the Internal Revenue Code)
13        with respect to the stock of the same person to whom
14        the intangible expenses and costs were directly or
15        indirectly paid, incurred or accrued. The preceding
16        sentence shall not apply to the extent that the same
17        dividends caused a reduction to the addition
18        modification required under Section 203(d)(2)(D-7) of
19        this Act. As used in this subparagraph, the term
20        "intangible expenses and costs" includes (1) expenses,
21        losses, and costs for, or related to, the direct or
22        indirect acquisition, use, maintenance or management,
23        ownership, sale, exchange, or any other disposition of
24        intangible property; (2) losses incurred, directly or
25        indirectly, from factoring transactions or discounting
26        transactions; (3) royalty, patent, technical, and

 

 

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1        copyright fees; (4) licensing fees; and (5) other
2        similar expenses and costs. For purposes of this
3        subparagraph, "intangible property" includes patents,
4        patent applications, trade names, trademarks, service
5        marks, copyrights, mask works, trade secrets, and
6        similar types of intangible assets;
7            This paragraph shall not apply to the following:
8                (i) any item of intangible expenses or costs
9            paid, accrued, or incurred, directly or
10            indirectly, from a transaction with a person who is
11            subject in a foreign country or state, other than a
12            state which requires mandatory unitary reporting,
13            to a tax on or measured by net income with respect
14            to such item; or
15                (ii) any item of intangible expense or cost
16            paid, accrued, or incurred, directly or
17            indirectly, if the taxpayer can establish, based
18            on a preponderance of the evidence, both of the
19            following:
20                    (a) the person during the same taxable
21                year paid, accrued, or incurred, the
22                intangible expense or cost to a person that is
23                not a related member, and
24                    (b) the transaction giving rise to the
25                intangible expense or cost between the
26                taxpayer and the person did not have as a

 

 

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1                principal purpose the avoidance of Illinois
2                income tax, and is paid pursuant to a contract
3                or agreement that reflects arm's-length terms;
4                or
5                (iii) any item of intangible expense or cost
6            paid, accrued, or incurred, directly or
7            indirectly, from a transaction with a person if the
8            taxpayer establishes by clear and convincing
9            evidence, that the adjustments are unreasonable;
10            or if the taxpayer and the Director agree in
11            writing to the application or use of an alternative
12            method of apportionment under Section 304(f);
13                Nothing in this subsection shall preclude the
14            Director from making any other adjustment
15            otherwise allowed under Section 404 of this Act for
16            any tax year beginning after the effective date of
17            this amendment provided such adjustment is made
18            pursuant to regulation adopted by the Department
19            and such regulations provide methods and standards
20            by which the Department will utilize its authority
21            under Section 404 of this Act;
22            (D-9) For taxable years ending on or after December
23        31, 2008, an amount equal to the amount of insurance
24        premium expenses and costs otherwise allowed as a
25        deduction in computing base income, and that were paid,
26        accrued, or incurred, directly or indirectly, to a

 

 

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1        person who would be a member of the same unitary
2        business group but for the fact that the person is
3        prohibited under Section 1501(a)(27) from being
4        included in the unitary business group because he or
5        she is ordinarily required to apportion business
6        income under different subsections of Section 304. The
7        addition modification required by this subparagraph
8        shall be reduced to the extent that dividends were
9        included in base income of the unitary group for the
10        same taxable year and received by the taxpayer or by a
11        member of the taxpayer's unitary business group
12        (including amounts included in gross income under
13        Sections 951 through 964 of the Internal Revenue Code
14        and amounts included in gross income under Section 78
15        of the Internal Revenue Code) with respect to the stock
16        of the same person to whom the premiums and costs were
17        directly or indirectly paid, incurred, or accrued. The
18        preceding sentence does not apply to the extent that
19        the same dividends caused a reduction to the addition
20        modification required under Section 203(d)(2)(D-7) or
21        Section 203(d)(2)(D-8) of this Act;
22            (D-10) An amount equal to the credit allowable to
23        the taxpayer under Section 218(a) of this Act,
24        determined without regard to Section 218(c) of this
25        Act;
26            (D-11) For taxable years ending on or after

 

 

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1        December 31, 2017, an amount equal to the deduction
2        allowed under Section 199 of the Internal Revenue Code
3        for the taxable year;
4            (D-12) An amount withdrawn from a small business
5        asset purchase account that is not used for purchases
6        of property for which a deduction under Section 179 of
7        the Internal Revenue Code is claimed for the tax year
8        in which the amount is withdrawn and which property is
9        used predominantly in Illinois; such amounts are
10        subject to the 10% penalty for ineligible use under
11        Section 3-3.5 of the Uniform Penalty and Interest Act;
12    and by deducting from the total so obtained the following
13    amounts:
14            (E) The valuation limitation amount;
15            (F) An amount equal to the amount of any tax
16        imposed by this Act which was refunded to the taxpayer
17        and included in such total for the taxable year;
18            (G) An amount equal to all amounts included in
19        taxable income as modified by subparagraphs (A), (B),
20        (C) and (D) which are exempt from taxation by this
21        State either by reason of its statutes or Constitution
22        or by reason of the Constitution, treaties or statutes
23        of the United States; provided that, in the case of any
24        statute of this State that exempts income derived from
25        bonds or other obligations from the tax imposed under
26        this Act, the amount exempted shall be the interest net

 

 

HB4021- 86 -LRB101 14810 HLH 63777 b

1        of bond premium amortization;
2            (H) Any income of the partnership which
3        constitutes personal service income as defined in
4        Section 1348(b)(1) of the Internal Revenue Code (as in
5        effect December 31, 1981) or a reasonable allowance for
6        compensation paid or accrued for services rendered by
7        partners to the partnership, whichever is greater;
8        this subparagraph (H) is exempt from the provisions of
9        Section 250;
10            (I) An amount equal to all amounts of income
11        distributable to an entity subject to the Personal
12        Property Tax Replacement Income Tax imposed by
13        subsections (c) and (d) of Section 201 of this Act
14        including amounts distributable to organizations
15        exempt from federal income tax by reason of Section
16        501(a) of the Internal Revenue Code; this subparagraph
17        (I) is exempt from the provisions of Section 250;
18            (J) With the exception of any amounts subtracted
19        under subparagraph (G), an amount equal to the sum of
20        all amounts disallowed as deductions by (i) Sections
21        171(a)(2), and 265(a)(2) of the Internal Revenue Code,
22        and all amounts of expenses allocable to interest and
23        disallowed as deductions by Section 265(a)(1) of the
24        Internal Revenue Code; and (ii) for taxable years
25        ending on or after August 13, 1999, Sections 171(a)(2),
26        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue

 

 

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1        Code, plus, (iii) for taxable years ending on or after
2        December 31, 2011, Section 45G(e)(3) of the Internal
3        Revenue Code and, for taxable years ending on or after
4        December 31, 2008, any amount included in gross income
5        under Section 87 of the Internal Revenue Code; the
6        provisions of this subparagraph are exempt from the
7        provisions of Section 250;
8            (K) An amount equal to those dividends included in
9        such total which were paid by a corporation which
10        conducts business operations in a River Edge
11        Redevelopment Zone or zones created under the River
12        Edge Redevelopment Zone Act and conducts substantially
13        all of its operations from a River Edge Redevelopment
14        Zone or zones. This subparagraph (K) is exempt from the
15        provisions of Section 250;
16            (L) An amount equal to any contribution made to a
17        job training project established pursuant to the Real
18        Property Tax Increment Allocation Redevelopment Act;
19            (M) An amount equal to those dividends included in
20        such total that were paid by a corporation that
21        conducts business operations in a federally designated
22        Foreign Trade Zone or Sub-Zone and that is designated a
23        High Impact Business located in Illinois; provided
24        that dividends eligible for the deduction provided in
25        subparagraph (K) of paragraph (2) of this subsection
26        shall not be eligible for the deduction provided under

 

 

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1        this subparagraph (M);
2            (N) An amount equal to the amount of the deduction
3        used to compute the federal income tax credit for
4        restoration of substantial amounts held under claim of
5        right for the taxable year pursuant to Section 1341 of
6        the Internal Revenue Code;
7            (O) For taxable years 2001 and thereafter, for the
8        taxable year in which the bonus depreciation deduction
9        is taken on the taxpayer's federal income tax return
10        under subsection (k) of Section 168 of the Internal
11        Revenue Code and for each applicable taxable year
12        thereafter, an amount equal to "x", where:
13                (1) "y" equals the amount of the depreciation
14            deduction taken for the taxable year on the
15            taxpayer's federal income tax return on property
16            for which the bonus depreciation deduction was
17            taken in any year under subsection (k) of Section
18            168 of the Internal Revenue Code, but not including
19            the bonus depreciation deduction;
20                (2) for taxable years ending on or before
21            December 31, 2005, "x" equals "y" multiplied by 30
22            and then divided by 70 (or "y" multiplied by
23            0.429); and
24                (3) for taxable years ending after December
25            31, 2005:
26                    (i) for property on which a bonus

 

 

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1                depreciation deduction of 30% of the adjusted
2                basis was taken, "x" equals "y" multiplied by
3                30 and then divided by 70 (or "y" multiplied by
4                0.429); and
5                    (ii) for property on which a bonus
6                depreciation deduction of 50% of the adjusted
7                basis was taken, "x" equals "y" multiplied by
8                1.0.
9            The aggregate amount deducted under this
10        subparagraph in all taxable years for any one piece of
11        property may not exceed the amount of the bonus
12        depreciation deduction taken on that property on the
13        taxpayer's federal income tax return under subsection
14        (k) of Section 168 of the Internal Revenue Code. This
15        subparagraph (O) is exempt from the provisions of
16        Section 250;
17            (P) If the taxpayer sells, transfers, abandons, or
18        otherwise disposes of property for which the taxpayer
19        was required in any taxable year to make an addition
20        modification under subparagraph (D-5), then an amount
21        equal to that addition modification.
22            If the taxpayer continues to own property through
23        the last day of the last tax year for which the
24        taxpayer may claim a depreciation deduction for
25        federal income tax purposes and for which the taxpayer
26        was required in any taxable year to make an addition

 

 

HB4021- 90 -LRB101 14810 HLH 63777 b

1        modification under subparagraph (D-5), then an amount
2        equal to that addition modification.
3            The taxpayer is allowed to take the deduction under
4        this subparagraph only once with respect to any one
5        piece of property.
6            This subparagraph (P) is exempt from the
7        provisions of Section 250;
8            (Q) The amount of (i) any interest income (net of
9        the deductions allocable thereto) taken into account
10        for the taxable year with respect to a transaction with
11        a taxpayer that is required to make an addition
12        modification with respect to such transaction under
13        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
14        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
15        the amount of such addition modification and (ii) any
16        income from intangible property (net of the deductions
17        allocable thereto) taken into account for the taxable
18        year with respect to a transaction with a taxpayer that
19        is required to make an addition modification with
20        respect to such transaction under Section
21        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
22        203(d)(2)(D-8), but not to exceed the amount of such
23        addition modification. This subparagraph (Q) is exempt
24        from Section 250;
25            (R) An amount equal to the interest income taken
26        into account for the taxable year (net of the

 

 

HB4021- 91 -LRB101 14810 HLH 63777 b

1        deductions allocable thereto) with respect to
2        transactions with (i) a foreign person who would be a
3        member of the taxpayer's unitary business group but for
4        the fact that the foreign person's business activity
5        outside the United States is 80% or more of that
6        person's total business activity and (ii) for taxable
7        years ending on or after December 31, 2008, to a person
8        who would be a member of the same unitary business
9        group but for the fact that the person is prohibited
10        under Section 1501(a)(27) from being included in the
11        unitary business group because he or she is ordinarily
12        required to apportion business income under different
13        subsections of Section 304, but not to exceed the
14        addition modification required to be made for the same
15        taxable year under Section 203(d)(2)(D-7) for interest
16        paid, accrued, or incurred, directly or indirectly, to
17        the same person. This subparagraph (R) is exempt from
18        Section 250;
19            (S) An amount equal to the income from intangible
20        property taken into account for the taxable year (net
21        of the deductions allocable thereto) with respect to
22        transactions with (i) a foreign person who would be a
23        member of the taxpayer's unitary business group but for
24        the fact that the foreign person's business activity
25        outside the United States is 80% or more of that
26        person's total business activity and (ii) for taxable

 

 

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1        years ending on or after December 31, 2008, to a person
2        who would be a member of the same unitary business
3        group but for the fact that the person is prohibited
4        under Section 1501(a)(27) from being included in the
5        unitary business group because he or she is ordinarily
6        required to apportion business income under different
7        subsections of Section 304, but not to exceed the
8        addition modification required to be made for the same
9        taxable year under Section 203(d)(2)(D-8) for
10        intangible expenses and costs paid, accrued, or
11        incurred, directly or indirectly, to the same person.
12        This subparagraph (S) is exempt from Section 250; and
13            (T) For taxable years ending on or after December
14        31, 2011, in the case of a taxpayer who was required to
15        add back any insurance premiums under Section
16        203(d)(2)(D-9), such taxpayer may elect to subtract
17        that part of a reimbursement received from the
18        insurance company equal to the amount of the expense or
19        loss (including expenses incurred by the insurance
20        company) that would have been taken into account as a
21        deduction for federal income tax purposes if the
22        expense or loss had been uninsured. If a taxpayer makes
23        the election provided for by this subparagraph (T), the
24        insurer to which the premiums were paid must add back
25        to income the amount subtracted by the taxpayer
26        pursuant to this subparagraph (T). This subparagraph

 

 

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1        (T) is exempt from the provisions of Section 250; and .
2            (U) For taxable years beginning on or after January
3        1, 2021, an amount of up to $50,000 per tax year
4        contributed to a small business asset purchase account
5        during the tax year, plus all interest earned on such
6        accounts during the tax year; a "small business asset
7        purchase account" means an account established by a
8        taxpayer, the proceeds of which are used to purchase
9        property used primarily in Illinois for which a federal
10        income tax deduction is claimed under Section 179 of
11        the Internal Revenue Code.
 
12    (e) Gross income; adjusted gross income; taxable income.
13        (1) In general. Subject to the provisions of paragraph
14    (2) and subsection (b)(3), for purposes of this Section and
15    Section 803(e), a taxpayer's gross income, adjusted gross
16    income, or taxable income for the taxable year shall mean
17    the amount of gross income, adjusted gross income or
18    taxable income properly reportable for federal income tax
19    purposes for the taxable year under the provisions of the
20    Internal Revenue Code. Taxable income may be less than
21    zero. However, for taxable years ending on or after
22    December 31, 1986, net operating loss carryforwards from
23    taxable years ending prior to December 31, 1986, may not
24    exceed the sum of federal taxable income for the taxable
25    year before net operating loss deduction, plus the excess

 

 

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1    of addition modifications over subtraction modifications
2    for the taxable year. For taxable years ending prior to
3    December 31, 1986, taxable income may never be an amount in
4    excess of the net operating loss for the taxable year as
5    defined in subsections (c) and (d) of Section 172 of the
6    Internal Revenue Code, provided that when taxable income of
7    a corporation (other than a Subchapter S corporation),
8    trust, or estate is less than zero and addition
9    modifications, other than those provided by subparagraph
10    (E) of paragraph (2) of subsection (b) for corporations or
11    subparagraph (E) of paragraph (2) of subsection (c) for
12    trusts and estates, exceed subtraction modifications, an
13    addition modification must be made under those
14    subparagraphs for any other taxable year to which the
15    taxable income less than zero (net operating loss) is
16    applied under Section 172 of the Internal Revenue Code or
17    under subparagraph (E) of paragraph (2) of this subsection
18    (e) applied in conjunction with Section 172 of the Internal
19    Revenue Code.
20        (2) Special rule. For purposes of paragraph (1) of this
21    subsection, the taxable income properly reportable for
22    federal income tax purposes shall mean:
23            (A) Certain life insurance companies. In the case
24        of a life insurance company subject to the tax imposed
25        by Section 801 of the Internal Revenue Code, life
26        insurance company taxable income, plus the amount of

 

 

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1        distribution from pre-1984 policyholder surplus
2        accounts as calculated under Section 815a of the
3        Internal Revenue Code;
4            (B) Certain other insurance companies. In the case
5        of mutual insurance companies subject to the tax
6        imposed by Section 831 of the Internal Revenue Code,
7        insurance company taxable income;
8            (C) Regulated investment companies. In the case of
9        a regulated investment company subject to the tax
10        imposed by Section 852 of the Internal Revenue Code,
11        investment company taxable income;
12            (D) Real estate investment trusts. In the case of a
13        real estate investment trust subject to the tax imposed
14        by Section 857 of the Internal Revenue Code, real
15        estate investment trust taxable income;
16            (E) Consolidated corporations. In the case of a
17        corporation which is a member of an affiliated group of
18        corporations filing a consolidated income tax return
19        for the taxable year for federal income tax purposes,
20        taxable income determined as if such corporation had
21        filed a separate return for federal income tax purposes
22        for the taxable year and each preceding taxable year
23        for which it was a member of an affiliated group. For
24        purposes of this subparagraph, the taxpayer's separate
25        taxable income shall be determined as if the election
26        provided by Section 243(b)(2) of the Internal Revenue

 

 

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1        Code had been in effect for all such years;
2            (F) Cooperatives. In the case of a cooperative
3        corporation or association, the taxable income of such
4        organization determined in accordance with the
5        provisions of Section 1381 through 1388 of the Internal
6        Revenue Code, but without regard to the prohibition
7        against offsetting losses from patronage activities
8        against income from nonpatronage activities; except
9        that a cooperative corporation or association may make
10        an election to follow its federal income tax treatment
11        of patronage losses and nonpatronage losses. In the
12        event such election is made, such losses shall be
13        computed and carried over in a manner consistent with
14        subsection (a) of Section 207 of this Act and
15        apportioned by the apportionment factor reported by
16        the cooperative on its Illinois income tax return filed
17        for the taxable year in which the losses are incurred.
18        The election shall be effective for all taxable years
19        with original returns due on or after the date of the
20        election. In addition, the cooperative may file an
21        amended return or returns, as allowed under this Act,
22        to provide that the election shall be effective for
23        losses incurred or carried forward for taxable years
24        occurring prior to the date of the election. Once made,
25        the election may only be revoked upon approval of the
26        Director. The Department shall adopt rules setting

 

 

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1        forth requirements for documenting the elections and
2        any resulting Illinois net loss and the standards to be
3        used by the Director in evaluating requests to revoke
4        elections. Public Act 96-932 is declaratory of
5        existing law;
6            (G) Subchapter S corporations. In the case of: (i)
7        a Subchapter S corporation for which there is in effect
8        an election for the taxable year under Section 1362 of
9        the Internal Revenue Code, the taxable income of such
10        corporation determined in accordance with Section
11        1363(b) of the Internal Revenue Code, except that
12        taxable income shall take into account those items
13        which are required by Section 1363(b)(1) of the
14        Internal Revenue Code to be separately stated; and (ii)
15        a Subchapter S corporation for which there is in effect
16        a federal election to opt out of the provisions of the
17        Subchapter S Revision Act of 1982 and have applied
18        instead the prior federal Subchapter S rules as in
19        effect on July 1, 1982, the taxable income of such
20        corporation determined in accordance with the federal
21        Subchapter S rules as in effect on July 1, 1982; and
22            (H) Partnerships. In the case of a partnership,
23        taxable income determined in accordance with Section
24        703 of the Internal Revenue Code, except that taxable
25        income shall take into account those items which are
26        required by Section 703(a)(1) to be separately stated

 

 

HB4021- 98 -LRB101 14810 HLH 63777 b

1        but which would be taken into account by an individual
2        in calculating his taxable income.
3        (3) Recapture of business expenses on disposition of
4    asset or business. Notwithstanding any other law to the
5    contrary, if in prior years income from an asset or
6    business has been classified as business income and in a
7    later year is demonstrated to be non-business income, then
8    all expenses, without limitation, deducted in such later
9    year and in the 2 immediately preceding taxable years
10    related to that asset or business that generated the
11    non-business income shall be added back and recaptured as
12    business income in the year of the disposition of the asset
13    or business. Such amount shall be apportioned to Illinois
14    using the greater of the apportionment fraction computed
15    for the business under Section 304 of this Act for the
16    taxable year or the average of the apportionment fractions
17    computed for the business under Section 304 of this Act for
18    the taxable year and for the 2 immediately preceding
19    taxable years.
 
20    (f) Valuation limitation amount.
21        (1) In general. The valuation limitation amount
22    referred to in subsections (a)(2)(G), (c)(2)(I) and
23    (d)(2)(E) is an amount equal to:
24            (A) The sum of the pre-August 1, 1969 appreciation
25        amounts (to the extent consisting of gain reportable

 

 

HB4021- 99 -LRB101 14810 HLH 63777 b

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

 

 

HB4021- 100 -LRB101 14810 HLH 63777 b

1        amount for such property is that amount which bears the
2        same ratio to the total gain reported in respect of the
3        property for federal income tax purposes for the
4        taxable year, as the number of full calendar months in
5        that part of the taxpayer's holding period for the
6        property ending July 31, 1969 bears to the number of
7        full calendar months in the taxpayer's entire holding
8        period for the property.
9            (C) The Department shall prescribe such
10        regulations as may be necessary to carry out the
11        purposes of this paragraph.
 
12    (g) Double deductions. Unless specifically provided
13otherwise, nothing in this Section shall permit the same item
14to be deducted more than once.
 
15    (h) Legislative intention. Except as expressly provided by
16this Section there shall be no modifications or limitations on
17the amounts of income, gain, loss or deduction taken into
18account in determining gross income, adjusted gross income or
19taxable income for federal income tax purposes for the taxable
20year, or in the amount of such items entering into the
21computation of base income and net income under this Act for
22such taxable year, whether in respect of property values as of
23August 1, 1969 or otherwise.
24(Source: P.A. 100-22, eff. 7-6-17; 100-905, eff. 8-17-18;

 

 

HB4021- 101 -LRB101 14810 HLH 63777 b

1101-9, eff. 6-5-19; 101-81, eff. 7-12-19; revised 9-20-19.)
 
2    Section 10. The Uniform Penalty and Interest Act is amended
3by adding Section 3-3.5 as follows:
 
4    (35 ILCS 735/3-3.5 new)
5    Sec. 3-3.5. Penalty for improper use of proceeds of Small
6Business Asset Purchase Account. A penalty of 10% of the amount
7withdrawn from a small business asset purchase account, as
8defined in Section 203 of the Illinois Income Tax Act, during a
9tax year that is used for purchases of property for which a
10deduction under Section 179 of the Internal Revenue Code is not
11claimed for the tax year in which the amount is withdrawn, or
12purchases of property for which the deduction under Section 179
13of the Internal Revenue Code is claimed that is not used
14predominantly in Illinois.
 
15    Section 99. Effective date. This Act takes effect upon
16becoming law.