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| | 103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024 HB2237 Introduced 2/8/2023, by Rep. Kelly M. Burke SYNOPSIS AS INTRODUCED: |
| 35 ILCS 5/1501 | from Ch. 120, par. 15-1501 |
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Amends the Illinois Income Tax Act. Makes changes to the definition of investment partnership to provide that a dealer in qualifying investment securities may be considered an investment partnership. Allows a partnership interest to be considered a qualified security if the interest qualifies as a security within the meaning of the federal Securities Act of 1933. In provisions requiring that no less than 90% of the investment partnership's gross income shall consist of interest, dividends, and gains from the sale or exchange of qualifying investment securities, provides that that includes the distributive share of partnership income from lower-tier partnership interests and does not include income from partnerships that are operating at a federal taxable loss. Effective immediately.
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| | A BILL FOR |
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1 | | AN ACT concerning revenue.
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2 | | Be it enacted by the People of the State of Illinois,
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3 | | represented in the General Assembly:
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4 | | Section 5. The Illinois Income Tax Act is amended by |
5 | | changing Section 1501 as follows:
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6 | | (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
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7 | | Sec. 1501. Definitions.
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8 | | (a) In general. When used in this Act, where not
otherwise |
9 | | distinctly expressed or manifestly incompatible with the |
10 | | intent
thereof:
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11 | | (1) Business income. The term "business income" means |
12 | | all income that may be treated as apportionable business |
13 | | income under the Constitution of the United States. |
14 | | Business income is net of the deductions allocable |
15 | | thereto. Such term does not include compensation
or the |
16 | | deductions allocable thereto.
For each taxable year |
17 | | beginning on or after January 1, 2003, a taxpayer may
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18 | | elect to treat all income other than compensation as |
19 | | business income. This
election shall be made in accordance |
20 | | with rules adopted by the Department and,
once made, shall |
21 | | be irrevocable.
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22 | | (1.5) Captive real estate investment trust:
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23 | | (A) The term "captive real estate investment |
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1 | | trust" means a corporation, trust, or association:
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2 | | (i) that is considered a real estate |
3 | | investment trust for the taxable year under |
4 | | Section 856 of the Internal Revenue Code;
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5 | | (ii) the certificates of beneficial interest |
6 | | or shares of which are not regularly traded on an |
7 | | established securities market; and |
8 | | (iii) of which more than 50% of the voting |
9 | | power or value of the beneficial interest or |
10 | | shares, at any time during the last half of the |
11 | | taxable year, is owned or controlled, directly, |
12 | | indirectly, or constructively, by a single |
13 | | corporation. |
14 | | (B) The term "captive real estate investment |
15 | | trust" does not include: |
16 | | (i) a real estate investment trust of which |
17 | | more than 50% of the voting power or value of the |
18 | | beneficial interest or shares is owned or |
19 | | controlled, directly, indirectly, or |
20 | | constructively, by: |
21 | | (a) a real estate investment trust, other |
22 | | than a captive real estate investment trust; |
23 | | (b) a person who is exempt from taxation |
24 | | under Section 501 of the Internal Revenue |
25 | | Code, and who is not required to treat income |
26 | | received from the real estate investment trust |
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1 | | as unrelated business taxable income under |
2 | | Section 512 of the Internal Revenue Code; |
3 | | (c) a listed Australian property trust, if |
4 | | no more than 50% of the voting power or value |
5 | | of the beneficial interest or shares of that |
6 | | trust, at any time during the last half of the |
7 | | taxable year, is owned or controlled, directly |
8 | | or indirectly, by a single person; |
9 | | (d) an entity organized as a trust, |
10 | | provided a listed Australian property trust |
11 | | described in subparagraph (c) owns or |
12 | | controls, directly or indirectly, or |
13 | | constructively, 75% or more of the voting |
14 | | power or value of the beneficial interests or |
15 | | shares of such entity; or |
16 | | (e) an entity that is organized outside of |
17 | | the laws of the United States and that |
18 | | satisfies all of the following criteria: |
19 | | (1) at least 75% of the entity's total |
20 | | asset value at the close of its taxable |
21 | | year is represented by real estate assets |
22 | | (as defined in Section 856(c)(5)(B) of the |
23 | | Internal Revenue Code, thereby including |
24 | | shares or certificates of beneficial |
25 | | interest in any real estate investment |
26 | | trust), cash and cash equivalents, and |
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1 | | U.S. Government securities; |
2 | | (2) the entity is not subject to tax |
3 | | on amounts that are distributed to its |
4 | | beneficial owners or is exempt from |
5 | | entity-level taxation; |
6 | | (3) the entity distributes at least |
7 | | 85% of its taxable income (as computed in |
8 | | the jurisdiction in which it is organized) |
9 | | to the holders of its shares or |
10 | | certificates of beneficial interest on an |
11 | | annual basis; |
12 | | (4) either (i) the shares or |
13 | | beneficial interests of the entity are |
14 | | regularly traded on an established |
15 | | securities market or (ii) not more than |
16 | | 10% of the voting power or value in the |
17 | | entity is held, directly, indirectly, or |
18 | | constructively, by a single entity or |
19 | | individual; and |
20 | | (5) the entity is organized in a |
21 | | country that has entered into a tax treaty |
22 | | with the United States; or |
23 | | (ii) during its first taxable year for which |
24 | | it elects to be treated as a real estate |
25 | | investment trust under Section 856(c)(1) of the |
26 | | Internal Revenue Code, a real estate investment |
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1 | | trust the certificates of beneficial interest or |
2 | | shares of which are not regularly traded on an |
3 | | established securities market, but only if the |
4 | | certificates of beneficial interest or shares of |
5 | | the real estate investment trust are regularly |
6 | | traded on an established securities market prior |
7 | | to the earlier of the due date (including |
8 | | extensions) for filing its return under this Act |
9 | | for that first taxable year or the date it |
10 | | actually files that return. |
11 | | (C) For the purposes of this subsection (1.5), the |
12 | | constructive ownership rules prescribed under Section |
13 | | 318(a) of the Internal Revenue Code, as modified by |
14 | | Section 856(d)(5) of the Internal Revenue Code, apply |
15 | | in determining the ownership of stock, assets, or net |
16 | | profits of any person.
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17 | | (D) For the purposes of this item (1.5), for |
18 | | taxable years ending on or after August 16, 2007, the |
19 | | voting power or value of the beneficial interest or |
20 | | shares of a real estate investment trust does not |
21 | | include any voting power or value of beneficial |
22 | | interest or shares in a real estate investment trust |
23 | | held directly or indirectly in a segregated asset |
24 | | account by a life insurance company (as described in |
25 | | Section 817 of the Internal Revenue Code) to the |
26 | | extent such voting power or value is for the benefit of |
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1 | | entities or persons who are either immune from |
2 | | taxation or exempt from taxation under subtitle A of |
3 | | the Internal Revenue Code. |
4 | | (2) Commercial domicile. The term "commercial |
5 | | domicile" means the
principal
place from which the trade |
6 | | or business of the taxpayer is directed or managed.
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7 | | (3) Compensation. The term "compensation" means wages, |
8 | | salaries,
commissions
and any other form of remuneration |
9 | | paid to employees for personal services.
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10 | | (4) Corporation. The term "corporation" includes |
11 | | associations, joint-stock
companies, insurance companies |
12 | | and cooperatives. Any entity, including a
limited |
13 | | liability company formed under the Illinois Limited |
14 | | Liability Company
Act, shall be treated as a corporation |
15 | | if it is so classified for federal
income tax purposes.
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16 | | (5) Department. The term "Department" means the |
17 | | Department of Revenue of
this State.
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18 | | (6) Director. The term "Director" means the Director |
19 | | of Revenue of this
State.
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20 | | (7) Fiduciary. The term "fiduciary" means a guardian, |
21 | | trustee, executor,
administrator, receiver, or any person |
22 | | acting in any fiduciary capacity for any
person.
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23 | | (8) Financial organization.
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24 | | (A) The term "financial organization" means
any
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25 | | bank, bank holding company, trust company, savings |
26 | | bank, industrial bank,
land bank, safe deposit |
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1 | | company, private banker, savings and loan association,
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2 | | building and loan association, credit union, currency |
3 | | exchange, cooperative
bank, small loan company, sales |
4 | | finance company, investment company, or any
person |
5 | | which is owned by a bank or bank holding company. For |
6 | | the purpose of
this Section a "person" will include |
7 | | only those persons which a bank holding
company may |
8 | | acquire and hold an interest in, directly or |
9 | | indirectly, under the
provisions of the Bank Holding |
10 | | Company Act of 1956 (12 U.S.C. 1841, et seq.),
except |
11 | | where interests in any person must be disposed of |
12 | | within certain
required time limits under the Bank |
13 | | Holding Company Act of 1956.
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14 | | (B) For purposes of subparagraph (A) of this |
15 | | paragraph, the term
"bank" includes (i) any entity |
16 | | that is regulated by the Comptroller of the
Currency |
17 | | under the National Bank Act, or by the Federal Reserve |
18 | | Board, or by
the
Federal Deposit Insurance Corporation |
19 | | and (ii) any federally or State chartered
bank
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20 | | operating as a credit card bank.
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21 | | (C) For purposes of subparagraph (A) of this |
22 | | paragraph, the term
"sales finance company" has the |
23 | | meaning provided in the following item (i) or
(ii):
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24 | | (i) A person primarily engaged in one or more |
25 | | of the following
businesses: the business of |
26 | | purchasing customer receivables, the business
of |
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1 | | making loans upon the security of customer |
2 | | receivables, the
business of making loans for the |
3 | | express purpose of funding purchases of
tangible |
4 | | personal property or services by the borrower, or |
5 | | the business of
finance leasing. For purposes of |
6 | | this item (i), "customer receivable"
means:
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7 | | (a) a retail installment contract or |
8 | | retail charge agreement within
the
meaning
of |
9 | | the Sales Finance Agency Act, the Retail |
10 | | Installment Sales Act, or the
Motor Vehicle |
11 | | Retail Installment Sales Act;
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12 | | (b) an installment, charge, credit, or |
13 | | similar contract or agreement
arising from
the |
14 | | sale of tangible personal property or services |
15 | | in a transaction involving
a deferred payment |
16 | | price payable in one or more installments |
17 | | subsequent
to the sale; or
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18 | | (c) the outstanding balance of a contract |
19 | | or agreement described in
provisions
(a) or |
20 | | (b) of this item (i).
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21 | | A customer receivable need not provide for |
22 | | payment of interest on
deferred
payments. A sales |
23 | | finance company may purchase a customer receivable |
24 | | from, or
make a loan secured by a customer |
25 | | receivable to, the seller in the original
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26 | | transaction or to a person who purchased the |
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1 | | customer receivable directly or
indirectly from |
2 | | that seller.
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3 | | (ii) A corporation meeting each of the |
4 | | following criteria:
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5 | | (a) the corporation must be a member of an |
6 | | "affiliated group" within
the
meaning of |
7 | | Section 1504(a) of the Internal Revenue Code, |
8 | | determined
without regard to Section 1504(b) |
9 | | of the Internal Revenue Code;
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10 | | (b) more than 50% of the gross income of |
11 | | the corporation for the
taxable
year
must be |
12 | | interest income derived from qualifying loans. |
13 | | A "qualifying
loan" is a loan made to a member |
14 | | of the corporation's affiliated group that
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15 | | originates customer receivables (within the |
16 | | meaning of item (i)) or to whom
customer |
17 | | receivables originated by a member of the |
18 | | affiliated group have been
transferred, to
the |
19 | | extent the average outstanding balance of |
20 | | loans from that corporation
to members of its |
21 | | affiliated group during the taxable year do |
22 | | not exceed
the limitation amount for that |
23 | | corporation. The "limitation amount" for a
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24 | | corporation is the average outstanding |
25 | | balances during the taxable year of
customer |
26 | | receivables (within the meaning of item (i)) |
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1 | | originated by
all members of the affiliated |
2 | | group.
If the average outstanding balances of |
3 | | the
loans made by a corporation to members of |
4 | | its affiliated group exceed the
limitation |
5 | | amount, the interest income of that |
6 | | corporation from qualifying
loans shall be |
7 | | equal to its interest income from loans to |
8 | | members of its
affiliated groups times a |
9 | | fraction equal to the limitation amount |
10 | | divided by
the average outstanding balances of |
11 | | the loans made by that corporation to
members |
12 | | of its affiliated group;
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13 | | (c) the total of all shareholder's equity |
14 | | (including, without
limitation,
paid-in
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15 | | capital on common and preferred stock and |
16 | | retained earnings) of the
corporation plus the |
17 | | total of all of its loans, advances, and other
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18 | | obligations payable or owed to members of its |
19 | | affiliated group may not
exceed 20% of the |
20 | | total assets of the corporation at any time |
21 | | during the tax
year; and
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22 | | (d) more than 50% of all interest-bearing |
23 | | obligations of the
affiliated group payable to |
24 | | persons outside the group determined in |
25 | | accordance
with generally accepted accounting |
26 | | principles must be obligations of the
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1 | | corporation.
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2 | | This amendatory Act of the 91st General Assembly |
3 | | is declaratory of
existing
law.
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4 | | (D) Subparagraphs
(B) and (C) of this paragraph |
5 | | are declaratory of
existing law and apply |
6 | | retroactively, for all tax years beginning on or |
7 | | before
December 31, 1996,
to all original returns, to |
8 | | all amended returns filed no later than 30
days after |
9 | | the effective date of this amendatory Act of 1996, and |
10 | | to all
notices issued on or before the effective date |
11 | | of this amendatory Act of 1996
under subsection (a) of |
12 | | Section 903, subsection (a) of Section 904,
subsection |
13 | | (e) of Section 909, or Section 912.
A taxpayer that is |
14 | | a "financial organization" that engages in any |
15 | | transaction
with an affiliate shall be a "financial |
16 | | organization" for all purposes of this
Act.
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17 | | (E) For all tax years beginning on or
before |
18 | | December 31, 1996, a taxpayer that falls within the |
19 | | definition
of a
"financial organization" under |
20 | | subparagraphs (B) or (C) of this paragraph, but
who |
21 | | does
not fall within the definition of a "financial |
22 | | organization" under the Proposed
Regulations issued by |
23 | | the Department of Revenue on July 19, 1996, may
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24 | | irrevocably elect to apply the Proposed Regulations |
25 | | for all of those years as
though the Proposed |
26 | | Regulations had been lawfully promulgated, adopted, |
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1 | | and in
effect for all of those years. For purposes of |
2 | | applying subparagraphs (B) or
(C) of
this
paragraph to |
3 | | all of those years, the election allowed by this |
4 | | subparagraph
applies only to the taxpayer making the |
5 | | election and to those members of the
taxpayer's |
6 | | unitary business group who are ordinarily required to |
7 | | apportion
business income under the same subsection of |
8 | | Section 304 of this Act as the
taxpayer making the |
9 | | election. No election allowed by this subparagraph |
10 | | shall
be made under a claim
filed under subsection (d) |
11 | | of Section 909 more than 30 days after the
effective |
12 | | date of this amendatory Act of 1996.
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13 | | (F) Finance Leases. For purposes of this |
14 | | subsection, a finance lease
shall be treated as a loan |
15 | | or other extension of credit, rather than as a
lease,
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16 | | regardless of how the transaction is characterized for |
17 | | any other purpose,
including the purposes of any |
18 | | regulatory agency to which the lessor is subject.
A |
19 | | finance lease is any transaction in the form of a lease |
20 | | in which the lessee
is treated as the owner of the |
21 | | leased asset entitled to any deduction for
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22 | | depreciation allowed under Section 167 of the Internal |
23 | | Revenue Code.
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24 | | (9) Fiscal year. The term "fiscal year" means an |
25 | | accounting period of
12 months ending on the last day of |
26 | | any month other than December.
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1 | | (9.5) Fixed place of business. The term "fixed place |
2 | | of business" has the same meaning as that term is given in |
3 | | Section 864 of the Internal Revenue Code and the related |
4 | | Treasury regulations. |
5 | | (10) Includes and including. The terms "includes" and |
6 | | "including" when
used in a definition contained in this |
7 | | Act shall not be deemed to exclude
other things otherwise |
8 | | within the meaning of the term defined.
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9 | | (11) Internal Revenue Code. The term "Internal Revenue |
10 | | Code" means the
United States Internal Revenue Code of |
11 | | 1954 or any successor law or laws
relating to federal |
12 | | income taxes in effect for the taxable year.
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13 | | (11.5) Investment partnership. |
14 | | (A) For tax years ending before January 1, 2023, |
15 | | the The term "investment partnership" means any entity |
16 | | that is treated as a partnership for federal income |
17 | | tax purposes that meets the following requirements: |
18 | | (i) no less than 90% of the partnership's cost |
19 | | of its total assets consists of qualifying |
20 | | investment securities, deposits at banks or other |
21 | | financial institutions, and office space and |
22 | | equipment reasonably necessary to carry on its |
23 | | activities as an investment partnership; |
24 | | (ii) no less than 90% of its gross income |
25 | | consists of interest, dividends, and gains from |
26 | | the sale or exchange of qualifying investment |
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1 | | securities; and
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2 | | (iii) the partnership is not a dealer in |
3 | | qualifying investment securities. |
4 | | (A-5) For tax years ending on or after January 1, |
5 | | 2023, the term "investment partnership" means any |
6 | | entity that is treated as a partnership for federal |
7 | | income tax purposes that meets the following |
8 | | requirements: |
9 | | (i) no less than 90% of the partnership's cost |
10 | | of its total assets consists of qualifying |
11 | | investment securities, deposits at banks or other |
12 | | financial institutions, and office space and |
13 | | equipment reasonably necessary to carry on its |
14 | | activities as an investment partnership; and |
15 | | (ii) no less than 90% of its gross income |
16 | | consists of interest, dividends, gains from the |
17 | | sale or exchange of qualifying investment |
18 | | securities, and the distributive share of |
19 | | partnership income from lower-tier partnership |
20 | | interests meeting the definition of qualifying |
21 | | investment security under subparagraph (B)(xiii); |
22 | | gross income does not include income from |
23 | | partnerships that are operating at a federal |
24 | | taxable loss. |
25 | | (B) For purposes of this paragraph (11.5), the |
26 | | term "qualifying investment securities" (other than, |
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1 | | for tax years ending on or after January 1, 2022, |
2 | | securities with respect to which the taxpayer is |
3 | | required to apply the rules of Internal Revenue Code |
4 | | Section 475(a)) includes all of the following:
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5 | | (i) common stock, including preferred or debt |
6 | | securities convertible into common stock, and |
7 | | preferred stock; |
8 | | (ii) bonds, debentures, and other debt |
9 | | securities; |
10 | | (iii) foreign and domestic currency deposits |
11 | | secured by federal, state, or local governmental |
12 | | agencies; |
13 | | (iv) mortgage or asset-backed securities |
14 | | secured by federal, state, or local governmental |
15 | | agencies; |
16 | | (v) repurchase agreements and loan |
17 | | participations; |
18 | | (vi) foreign currency exchange contracts and |
19 | | forward and futures contracts on foreign |
20 | | currencies; |
21 | | (vii) stock and bond index securities and |
22 | | futures contracts and other similar financial |
23 | | securities and futures contracts on those |
24 | | securities;
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25 | | (viii) options for the purchase or sale of any |
26 | | of the securities, currencies, contracts, or |
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1 | | financial instruments described in items (i) to |
2 | | (vii), inclusive;
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3 | | (ix) regulated futures contracts;
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4 | | (x) commodities (not described in Section |
5 | | 1221(a)(1) of the Internal Revenue Code) or |
6 | | futures, forwards, and options with respect to |
7 | | such commodities, provided, however, that any item |
8 | | of a physical commodity to which title is actually |
9 | | acquired in the partnership's capacity as a dealer |
10 | | in such commodity shall not be a qualifying |
11 | | investment security;
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12 | | (xi) derivatives; and
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13 | | (xii) a partnership interest in another |
14 | | partnership that is an investment partnership ; and |
15 | | .
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16 | | (xiii) for tax years ending on or after |
17 | | January 1, 2023, a partnership interest which, in |
18 | | the hands of the partnership, qualifies as a |
19 | | security within the meaning of subsection (a)(1) |
20 | | of Subchapter 77b of Chapter 2A of Title 15 of the |
21 | | United States Code. |
22 | | (12) Mathematical error. The term "mathematical error" |
23 | | includes the
following types of errors, omissions, or |
24 | | defects in a return filed by a
taxpayer which prevents |
25 | | acceptance of the return as filed for processing:
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26 | | (A) arithmetic errors or incorrect computations on |
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1 | | the return or
supporting schedules;
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2 | | (B) entries on the wrong lines;
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3 | | (C) omission of required supporting forms or |
4 | | schedules or the omission
of the information in whole |
5 | | or in part called for thereon; and
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6 | | (D) an attempt to claim, exclude, deduct, or |
7 | | improperly report, in a
manner
directly contrary to |
8 | | the provisions of the Act and regulations thereunder
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9 | | any item of income, exemption, deduction, or credit.
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10 | | (13) Nonbusiness income. The term "nonbusiness income" |
11 | | means all income
other than business income or |
12 | | compensation.
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13 | | (14) Nonresident. The term "nonresident" means a |
14 | | person who is not a
resident.
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15 | | (15) Paid, incurred and accrued. The terms "paid", |
16 | | "incurred" and
"accrued"
shall be construed according to |
17 | | the method of accounting upon the basis
of which the |
18 | | person's base income is computed under this Act.
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19 | | (16) Partnership and partner. The term "partnership" |
20 | | includes a syndicate,
group, pool, joint venture or other |
21 | | unincorporated organization, through
or by means of which |
22 | | any business, financial operation, or venture is carried
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23 | | on, and which is not, within the meaning of this Act, a |
24 | | trust or estate
or a corporation; and the term "partner" |
25 | | includes a member in such syndicate,
group, pool, joint |
26 | | venture or organization.
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1 | | The term "partnership" includes any entity, including |
2 | | a limited
liability company formed under the Illinois
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3 | | Limited Liability Company Act, classified as a partnership |
4 | | for federal income tax purposes.
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5 | | The term "partnership" does not include a syndicate, |
6 | | group, pool,
joint venture, or other unincorporated |
7 | | organization established for the
sole purpose of playing |
8 | | the Illinois State Lottery.
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9 | | (17) Part-year resident. The term "part-year resident" |
10 | | means an individual
who became a resident during the |
11 | | taxable year or ceased to be a resident
during the taxable |
12 | | year. Under Section 1501(a)(20)(A)(i) residence
commences |
13 | | with presence in this State for other than a temporary or |
14 | | transitory
purpose and ceases with absence from this State |
15 | | for other than a temporary or
transitory purpose. Under |
16 | | Section 1501(a)(20)(A)(ii) residence commences
with the |
17 | | establishment of domicile in this State and ceases with |
18 | | the
establishment of domicile in another State.
|
19 | | (18) Person. The term "person" shall be construed to |
20 | | mean and include
an individual, a trust, estate, |
21 | | partnership, association, firm, company,
corporation, |
22 | | limited liability company, or fiduciary. For purposes of |
23 | | Section
1301 and 1302 of this Act, a "person" means (i) an |
24 | | individual, (ii) a
corporation, (iii) an officer, agent, |
25 | | or employee of a
corporation, (iv) a member, agent or |
26 | | employee of a partnership, or (v)
a member,
manager, |
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1 | | employee, officer, director, or agent of a limited |
2 | | liability company
who in such capacity commits an offense |
3 | | specified in Section 1301 and 1302.
|
4 | | (18A) Records. The term "records" includes all data |
5 | | maintained by the
taxpayer, whether on paper, microfilm, |
6 | | microfiche, or any type of
machine-sensible data |
7 | | compilation.
|
8 | | (19) Regulations. The term "regulations" includes |
9 | | rules promulgated and
forms prescribed by the Department.
|
10 | | (20) Resident. The term "resident" means:
|
11 | | (A) an individual (i) who is
in this State for |
12 | | other than a temporary or transitory purpose during |
13 | | the
taxable year; or (ii) who is domiciled in this |
14 | | State but is absent from
the State for a temporary or |
15 | | transitory purpose during the taxable year;
|
16 | | (B) The estate of a decedent who at his or her |
17 | | death was domiciled in
this
State;
|
18 | | (C) A trust created by a will of a decedent who at |
19 | | his death was
domiciled
in this State; and
|
20 | | (D) An irrevocable trust, the grantor of which was |
21 | | domiciled in this
State
at the time such trust became |
22 | | irrevocable. For purpose of this subparagraph,
a trust |
23 | | shall be considered irrevocable to the extent that the |
24 | | grantor is
not treated as the owner thereof under |
25 | | Sections 671 through 678 of the Internal
Revenue Code.
|
26 | | (21) Sales. The term "sales" means all gross receipts |
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1 | | of the taxpayer
not allocated under Sections 301, 302 and |
2 | | 303.
|
3 | | (22) State. The term "state" when applied to a |
4 | | jurisdiction other than
this State means any state of the |
5 | | United States, the District of Columbia,
the Commonwealth |
6 | | of Puerto Rico, any Territory or Possession of the United
|
7 | | States, and any foreign country, or any political |
8 | | subdivision of any of the
foregoing. For purposes of the |
9 | | foreign tax credit under Section 601, the
term "state" |
10 | | means any state of the United States, the District of |
11 | | Columbia,
the Commonwealth of Puerto Rico, and any |
12 | | territory or possession of the
United States, or any |
13 | | political subdivision of any of the foregoing,
effective |
14 | | for tax years ending on or after December 31, 1989.
|
15 | | (23) Taxable year. The term "taxable year" means the |
16 | | calendar year, or
the fiscal year ending during such |
17 | | calendar year, upon the basis of which
the base income is |
18 | | computed under this Act. "Taxable year" means, in the
case |
19 | | of a return made for a fractional part of a year under the |
20 | | provisions
of this Act, the period for which such return |
21 | | is made.
|
22 | | (24) Taxpayer. The term "taxpayer" means any person |
23 | | subject to the tax
imposed by this Act.
|
24 | | (25) International banking facility. The term |
25 | | international banking
facility shall have the same meaning |
26 | | as is set forth in the Illinois Banking
Act or as is set |
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1 | | forth in the laws of the United States or regulations of
|
2 | | the Board of Governors of the Federal Reserve System.
|
3 | | (26) Income Tax Return Preparer.
|
4 | | (A) The term "income tax return preparer"
means |
5 | | any person who prepares for compensation, or who |
6 | | employs one or more
persons to prepare for |
7 | | compensation, any return of tax imposed by this Act
or |
8 | | any claim for refund of tax imposed by this Act. The |
9 | | preparation of a
substantial portion of a return or |
10 | | claim for refund shall be treated as
the preparation |
11 | | of that return or claim for refund.
|
12 | | (B) A person is not an income tax return preparer |
13 | | if all he or she does
is
|
14 | | (i) furnish typing, reproducing, or other |
15 | | mechanical assistance;
|
16 | | (ii) prepare returns or claims for refunds for |
17 | | the employer by whom he
or she is regularly and |
18 | | continuously employed;
|
19 | | (iii) prepare as a fiduciary returns or claims |
20 | | for refunds for any
person; or
|
21 | | (iv) prepare claims for refunds for a taxpayer |
22 | | in response to any
notice
of deficiency issued to |
23 | | that taxpayer or in response to any waiver of
|
24 | | restriction after the commencement of an audit of |
25 | | that taxpayer or of another
taxpayer if a |
26 | | determination in the audit of the other taxpayer |
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1 | | directly or
indirectly affects the tax liability |
2 | | of the taxpayer whose claims he or she is
|
3 | | preparing.
|
4 | | (27) Unitary business group. |
5 | | (A) The term "unitary business group" means
a |
6 | | group of persons related through common ownership |
7 | | whose business activities
are integrated with, |
8 | | dependent upon and contribute to each other. The group
|
9 | | will not include those members whose business activity |
10 | | outside the United
States is 80% or more of any such |
11 | | member's total business activity; for
purposes of this |
12 | | paragraph and clause (a)(3)(B)(ii) of Section 304,
|
13 | | business
activity within the United States shall be |
14 | | measured by means of the factors
ordinarily applicable |
15 | | under subsections (a), (b), (c), (d), or (h)
of |
16 | | Section
304 except that, in the case of members |
17 | | ordinarily required to apportion
business income by |
18 | | means of the 3 factor formula of property, payroll and |
19 | | sales
specified in subsection (a) of Section 304, |
20 | | including the
formula as weighted in subsection (h) of |
21 | | Section 304, such members shall
not use the sales |
22 | | factor in the computation and the results of the |
23 | | property
and payroll factor computations of subsection |
24 | | (a) of Section 304 shall be
divided by 2 (by one if |
25 | | either
the property or payroll factor has a |
26 | | denominator of zero). The computation
required by the |
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1 | | preceding sentence shall, in each case, involve the |
2 | | division of
the member's property, payroll, or revenue |
3 | | miles in the United States,
insurance premiums on |
4 | | property or risk in the United States, or financial
|
5 | | organization business income from sources within the |
6 | | United States, as the
case may be, by the respective |
7 | | worldwide figures for such items. Common
ownership in |
8 | | the case of corporations is the direct or indirect |
9 | | control or
ownership of more than 50% of the |
10 | | outstanding voting stock of the persons
carrying on |
11 | | unitary business activity. Unitary business activity |
12 | | can
ordinarily be illustrated where the activities of |
13 | | the members are: (1) in the
same general line (such as |
14 | | manufacturing, wholesaling, retailing of tangible
|
15 | | personal property, insurance, transportation or |
16 | | finance); or (2) are steps in a
vertically structured |
17 | | enterprise or process (such as the steps involved in |
18 | | the
production of natural resources, which might |
19 | | include exploration, mining,
refining, and marketing); |
20 | | and, in either instance, the members are functionally
|
21 | | integrated through the exercise of strong centralized |
22 | | management (where, for
example, authority over such |
23 | | matters as purchasing, financing, tax compliance,
|
24 | | product line, personnel, marketing and capital |
25 | | investment is not left to each
member).
|
26 | | (B) In no event, for taxable years ending prior to |
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1 | | December 31, 2017, shall any
unitary business group |
2 | | include members
which are ordinarily required to |
3 | | apportion business income under different
subsections |
4 | | of Section 304 except that for tax years ending on or |
5 | | after
December 31, 1987 this prohibition shall not |
6 | | apply to a holding company that would otherwise be a |
7 | | member of a unitary business group with taxpayers that |
8 | | apportion business income under any of subsections |
9 | | (b), (c), (c-1), or (d) of Section 304. If a unitary |
10 | | business
group would, but for the preceding sentence, |
11 | | include members that are
ordinarily required to |
12 | | apportion business income under different subsections |
13 | | of
Section 304, then for each subsection of Section |
14 | | 304 for which there are two or
more members, there |
15 | | shall be a separate unitary business group composed of |
16 | | such
members. For purposes of the preceding two |
17 | | sentences, a member is "ordinarily
required to |
18 | | apportion business income" under a particular |
19 | | subsection of Section
304 if it would be required to |
20 | | use the apportionment method prescribed by such
|
21 | | subsection except for the fact that it derives |
22 | | business income solely from
Illinois. As used in this |
23 | | paragraph, for taxable years ending before December |
24 | | 31, 2017, the phrase "United States" means only the 50 |
25 | | states and the District of Columbia, but does not |
26 | | include any territory or possession of the United |
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1 | | States or any area over which the United States has |
2 | | asserted jurisdiction or claimed exclusive rights with |
3 | | respect to the exploration for or exploitation of |
4 | | natural resources.
For taxable years ending on or |
5 | | after December 31, 2017, the phrase "United States", |
6 | | as used in this paragraph, means only the 50 states, |
7 | | the District of Columbia, and any area over which the |
8 | | United States has asserted jurisdiction or claimed |
9 | | exclusive rights with respect to the exploration for |
10 | | or exploitation of natural resources, but does not |
11 | | include any territory or possession of the United |
12 | | States. |
13 | | (C) Holding companies. |
14 | | (i) For purposes of this subparagraph, a |
15 | | "holding company" is a corporation (other than a |
16 | | corporation that is a financial organization under |
17 | | paragraph (8) of this subsection (a) of Section |
18 | | 1501 because it is a bank holding company under |
19 | | the provisions of the Bank Holding Company Act of |
20 | | 1956 (12 U.S.C. 1841, et seq.) or because it is |
21 | | owned by a bank or a bank holding company) that |
22 | | owns a controlling interest in one or more other |
23 | | taxpayers ("controlled taxpayers"); that, during |
24 | | the period that includes the taxable year and the |
25 | | 2 immediately preceding taxable years or, if the |
26 | | corporation was formed during the current or |
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1 | | immediately preceding taxable year, the taxable |
2 | | years in which the corporation has been in |
3 | | existence, derived substantially all its gross |
4 | | income from dividends, interest, rents, royalties, |
5 | | fees or other charges received from controlled |
6 | | taxpayers for the provision of services, and gains |
7 | | on the sale or other disposition of interests in |
8 | | controlled taxpayers or in property leased or |
9 | | licensed to controlled taxpayers or used by the |
10 | | taxpayer in providing services to controlled |
11 | | taxpayers; and that incurs no substantial expenses |
12 | | other than expenses (including interest and other |
13 | | costs of borrowing) incurred in connection with |
14 | | the acquisition and holding of interests in |
15 | | controlled taxpayers and in the provision of |
16 | | services to controlled taxpayers or in the leasing |
17 | | or licensing of property to controlled taxpayers. |
18 | | (ii) The income of a holding company which is |
19 | | a member of more than one unitary business group |
20 | | shall be included in each unitary business group |
21 | | of which it is a member on a pro rata basis, by |
22 | | including in each unitary business group that |
23 | | portion of the base income of the holding company |
24 | | that bears the same proportion to the total base |
25 | | income of the holding company as the gross |
26 | | receipts of the unitary business group bears to |
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1 | | the combined gross receipts of all unitary |
2 | | business groups (in both cases without regard to |
3 | | the holding company) or on any other reasonable |
4 | | basis, consistently applied. |
5 | | (iii) A holding company shall apportion its |
6 | | business income under the subsection of Section |
7 | | 304 used by the other members of its unitary |
8 | | business group. The apportionment factors of a |
9 | | holding company which would be a member of more |
10 | | than one unitary business group shall be included |
11 | | with the apportionment factors of each unitary |
12 | | business group of which it is a member on a pro |
13 | | rata basis using the same method used in clause |
14 | | (ii). |
15 | | (iv) The provisions of this subparagraph (C) |
16 | | are intended to clarify existing law. |
17 | | (D) If including the base income and factors of a |
18 | | holding company in more than one unitary business |
19 | | group under subparagraph (C) does not fairly reflect |
20 | | the degree of integration between the holding company |
21 | | and one or more of the unitary business groups, the |
22 | | dependence of the holding company and one or more of |
23 | | the unitary business groups upon each other, or the |
24 | | contributions between the holding company and one or |
25 | | more of the unitary business groups, the holding |
26 | | company may petition the Director, under the |
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1 | | procedures provided under Section 304(f), for |
2 | | permission to include all base income and factors of |
3 | | the holding company only with members of a unitary |
4 | | business group apportioning their business income |
5 | | under one subsection of subsections (a), (b), (c), or |
6 | | (d) of Section 304. If the petition is granted, the |
7 | | holding company shall be included in a unitary |
8 | | business group only with persons apportioning their |
9 | | business income under the selected subsection of |
10 | | Section 304 until the Director grants a petition of |
11 | | the holding company either to be included in more than |
12 | | one unitary business group under subparagraph (C) or |
13 | | to include its base income and factors only with |
14 | | members of a unitary business group apportioning their |
15 | | business income under a different subsection of |
16 | | Section 304. |
17 | | (E) If the unitary business group members' |
18 | | accounting periods differ,
the common parent's |
19 | | accounting period or, if there is no common parent, |
20 | | the
accounting period of the member that is expected |
21 | | to have, on a recurring basis,
the greatest Illinois |
22 | | income tax liability must be used to determine whether |
23 | | to
use the apportionment method provided in subsection |
24 | | (a) or subsection (h) of
Section 304. The
prohibition |
25 | | against membership in a unitary business group for |
26 | | taxpayers
ordinarily required to apportion income |
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1 | | under different subsections of Section
304 does not |
2 | | apply to taxpayers required to apportion income under |
3 | | subsection
(a) and subsection (h) of Section
304. The |
4 | | provisions of this amendatory Act of 1998 apply to tax
|
5 | | years ending on or after December 31, 1998.
|
6 | | (28) Subchapter S corporation. The term "Subchapter S |
7 | | corporation"
means a corporation for which there is in |
8 | | effect an election under Section
1362 of the Internal |
9 | | Revenue Code, or for which there is a federal election
to |
10 | | opt out of the provisions of the Subchapter S Revision Act |
11 | | of 1982 and
have applied instead the prior federal |
12 | | Subchapter S rules as in effect on July
1, 1982.
|
13 | | (30) Foreign person. The term "foreign person" means |
14 | | any person who is a nonresident individual who is a |
15 | | national or citizen of a country other than the United |
16 | | States and any nonindividual entity, regardless of where |
17 | | created or organized, whose business activity outside the |
18 | | United States is 80% or more of the entity's total |
19 | | business activity.
|
20 | | (b) Other definitions.
|
21 | | (1) Words denoting number, gender, and so forth,
when |
22 | | used in this Act, where not otherwise distinctly expressed |
23 | | or manifestly
incompatible with the intent thereof:
|
24 | | (A) Words importing the singular include and apply |
25 | | to several persons,
parties or things;
|
26 | | (B) Words importing the plural include the |
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1 | | singular; and
|
2 | | (C) Words importing the masculine gender include |
3 | | the feminine as well.
|
4 | | (2) "Company" or "association" as including successors |
5 | | and assigns. The
word "company" or "association", when |
6 | | used in reference to a corporation,
shall be deemed to |
7 | | embrace the words "successors and assigns of such company
|
8 | | or association", and in like manner as if these last-named |
9 | | words, or words
of similar import, were expressed.
|
10 | | (3) Other terms. Any term used in any Section of this |
11 | | Act with respect
to the application of, or in connection |
12 | | with, the provisions of any other
Section of this Act |
13 | | shall have the same meaning as in such other Section.
|
14 | | (Source: P.A. 102-1030, eff. 5-27-22.)
|
15 | | Section 99. Effective date. This Act takes effect upon |
16 | | becoming law.
|