103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB3205

 

Introduced 2/17/2023, by Rep. Tony M. McCombie

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/207  from Ch. 120, par. 2-207
805 ILCS 5/15.35  from Ch. 32, par. 15.35
805 ILCS 5/15.65  from Ch. 32, par. 15.65

    Amends the Illinois Income Tax Act. Makes changes concerning the federal depreciation deduction and net operating losses to restore provisions that were in effect prior to Public Act 102-16. Amends the Business Corporation Act of 1983. Provides that no franchise tax shall be imposed on foreign or domestic corporations on or after January 1, 2024, and repeals those provisions on January 1, 2025. Effective immediately.


LRB103 28541 HLH 54922 b

 

 

A BILL FOR

 

HB3205LRB103 28541 HLH 54922 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 207 as follows:
 
6    (35 ILCS 5/207)  (from Ch. 120, par. 2-207)
7    Sec. 207. Net Losses.
8    (a) If after applying all of the (i) modifications
9provided for in paragraph (2) of Section 203(b), paragraph (2)
10of Section 203(c) and paragraph (2) of Section 203(d) and (ii)
11the allocation and apportionment provisions of Article 3 of
12this Act and subsection (c) of this Section, the taxpayer's
13net income results in a loss;
14        (1) for any taxable year ending prior to December 31,
15    1999, such loss shall be allowed as a carryover or
16    carryback deduction in the manner allowed under Section
17    172 of the Internal Revenue Code;
18        (2) for any taxable year ending on or after December
19    31, 1999 and prior to December 31, 2003, such loss shall be
20    allowed as a carryback to each of the 2 taxable years
21    preceding the taxable year of such loss and shall be a net
22    operating loss carryover to each of the 20 taxable years
23    following the taxable year of such loss;

 

 

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1        (3) for any taxable year ending on or after December
2    31, 2003 and prior to December 31, 2021, such loss shall be
3    allowed as a net operating loss carryover to each of the 12
4    taxable years following the taxable year of such loss,
5    except as provided in subsection (d); and
6        (4) for any taxable year ending on or after December
7    31, 2021, and for any net loss incurred in a taxable year
8    prior to a taxable year ending on or after December 31,
9    2021 for which the statute of limitation for utilization
10    of such net loss has not expired, such loss shall be
11    allowed as a net operating loss carryover to each of the 20
12    taxable years following the taxable year of such loss,
13    except as provided in subsection (d).
14    (a-5) Election to relinquish carryback and order of
15application of losses.
16            (A) For losses incurred in tax years ending prior
17        to December 31, 2003, the taxpayer may elect to
18        relinquish the entire carryback period with respect to
19        such loss. Such election shall be made in the form and
20        manner prescribed by the Department and shall be made
21        by the due date (including extensions of time) for
22        filing the taxpayer's return for the taxable year in
23        which such loss is incurred, and such election, once
24        made, shall be irrevocable.
25            (B) The entire amount of such loss shall be
26        carried to the earliest taxable year to which such

 

 

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1        loss may be carried. The amount of such loss which
2        shall be carried to each of the other taxable years
3        shall be the excess, if any, of the amount of such loss
4        over the sum of the deductions for carryback or
5        carryover of such loss allowable for each of the prior
6        taxable years to which such loss may be carried.
7    (b) Any loss determined under subsection (a) of this
8Section must be carried back or carried forward in the same
9manner for purposes of subsections (a) and (b) of Section 201
10of this Act as for purposes of subsections (c) and (d) of
11Section 201 of this Act.
12    (c) Notwithstanding any other provision of this Act, for
13each taxable year ending on or after December 31, 2008, for
14purposes of computing the loss for the taxable year under
15subsection (a) of this Section and the deduction taken into
16account for the taxable year for a net operating loss
17carryover under paragraphs (1), (2), and (3) of subsection (a)
18of this Section, the loss and net operating loss carryover
19shall be reduced in an amount equal to the reduction to the net
20operating loss and net operating loss carryover to the taxable
21year, respectively, required under Section 108(b)(2)(A) of the
22Internal Revenue Code, multiplied by a fraction, the numerator
23of which is the amount of discharge of indebtedness income
24that is excluded from gross income for the taxable year (but
25only if the taxable year ends on or after December 31, 2008)
26under Section 108(a) of the Internal Revenue Code and that

 

 

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1would have been allocated and apportioned to this State under
2Article 3 of this Act but for that exclusion, and the
3denominator of which is the total amount of discharge of
4indebtedness income excluded from gross income under Section
5108(a) of the Internal Revenue Code for the taxable year. The
6reduction required under this subsection (c) shall be made
7after the determination of Illinois net income for the taxable
8year in which the indebtedness is discharged.
9    (d) In the case of a corporation (other than a Subchapter S
10corporation), no carryover deduction shall be allowed under
11this Section for any taxable year ending after December 31,
122010 and prior to December 31, 2012, and no carryover
13deduction shall exceed $100,000 for any taxable year ending on
14or after December 31, 2012 and prior to December 31, 2014 and
15for any taxable year ending on or after December 31, 2021 and
16before December 31, 2023 prior to December 31, 2024; provided
17that, for purposes of determining the taxable years to which a
18net loss may be carried under subsection (a) of this Section,
19no taxable year for which a deduction is disallowed under this
20subsection, or for which the deduction would exceed $100,000
21if not for this subsection, shall be counted.
22    (e) In the case of a residual interest holder in a real
23estate mortgage investment conduit subject to Section 860E of
24the Internal Revenue Code, the net loss in subsection (a)
25shall be equal to:
26        (1) the amount computed under subsection (a), without

 

 

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1    regard to this subsection (e), or if that amount is
2    positive, zero;
3        (2) minus an amount equal to the amount computed under
4    subsection (a), without regard to this subsection (e),
5    minus the amount that would be computed under subsection
6    (a) if the taxpayer's federal taxable income were computed
7    without regard to Section 860E of the Internal Revenue
8    Code and without regard to this subsection (e).
9    The modification in this subsection (e) is exempt from the
10provisions of Section 250.
11(Source: P.A. 102-16, eff. 6-17-21; 102-669, eff. 11-16-21.)
 
12    Section 10. The Business Corporation Act of 1983 is
13amended by changing Sections 15.35 and 15.65 as follows:
 
14    (805 ILCS 5/15.35)  (from Ch. 32, par. 15.35)
15    (Text of Section from P.A. 102-16)
16    Sec. 15.35. Franchise taxes payable by domestic
17corporations. For the privilege of exercising its franchises
18in this State, each domestic corporation shall pay to the
19Secretary of State the following franchise taxes, computed on
20the basis, at the rates and for the periods prescribed in this
21Act:
22        (a) An initial franchise tax at the time of filing its
23    first report of issuance of shares.
24        (b) An additional franchise tax at the time of filing

 

 

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1    (1) a report of the issuance of additional shares, or (2) a
2    report of an increase in paid-in capital without the
3    issuance of shares, or (3) an amendment to the articles of
4    incorporation or a report of cumulative changes in paid-in
5    capital, whenever any amendment or such report discloses
6    an increase in its paid-in capital over the amount thereof
7    last reported in any document, other than an annual
8    report, interim annual report or final transition annual
9    report required by this Act to be filed in the office of
10    the Secretary of State.
11        (c) An additional franchise tax at the time of filing
12    a report of paid-in capital following a statutory merger
13    or consolidation, which discloses that the paid-in capital
14    of the surviving or new corporation immediately after the
15    merger or consolidation is greater than the sum of the
16    paid-in capital of all of the merged or consolidated
17    corporations as last reported by them in any documents,
18    other than annual reports, required by this Act to be
19    filed in the office of the Secretary of State; and in
20    addition, the surviving or new corporation shall be liable
21    for a further additional franchise tax on the paid-in
22    capital of each of the merged or consolidated corporations
23    as last reported by them in any document, other than an
24    annual report, required by this Act to be filed with the
25    Secretary of State from their taxable year end to the next
26    succeeding anniversary month or, in the case of a

 

 

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1    corporation which has established an extended filing
2    month, the extended filing month of the surviving or new
3    corporation; however if the taxable year ends within the
4    2-month period immediately preceding the anniversary month
5    or, in the case of a corporation which has established an
6    extended filing month, the extended filing month of the
7    surviving or new corporation the tax will be computed to
8    the anniversary month or, in the case of a corporation
9    which has established an extended filing month, the
10    extended filing month of the surviving or new corporation
11    in the next succeeding calendar year.
12        (d) An annual franchise tax payable each year with the
13    annual report which the corporation is required by this
14    Act to file.
15    On or after January 1, 2020 and prior to January 1, 2021,
16the first $30 in liability is exempt from the tax imposed under
17this Section. On or after January 1, 2021 and prior to January
181, 2024, the first $1,000 in liability is exempt from the tax
19imposed under this Section. The provisions of this Section
20shall not require the payment of any franchise tax that would
21otherwise have been due and payable on or after January 1,
222024. There shall be no refunds or proration of franchise tax
23for any taxes due and payable on or after January 1, 2024 on
24the basis that a portion of the corporation's taxable year
25extends beyond January 1, 2024. Public Act 101-9 shall not
26affect any right accrued or established, or any liability or

 

 

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1penalty incurred, prior to January 1, 2024.
2    This Section is repealed on January 1, 2025.
3(Source: P.A. 101-9, eff. 6-5-19; 102-16, eff. 6-17-21.)
 
4    (Text of Section from P.A. 102-282)
5    Sec. 15.35. Franchise taxes payable by domestic
6corporations. For the privilege of exercising its franchises
7in this State, each domestic corporation shall pay to the
8Secretary of State the following franchise taxes, computed on
9the basis, at the rates and for the periods prescribed in this
10Act:
11        (a) An initial franchise tax at the time of filing its
12    first report of issuance of shares.
13        (b) An additional franchise tax at the time of filing
14    (1) a report of the issuance of additional shares, or (2) a
15    report of an increase in paid-in capital without the
16    issuance of shares, or (3) an amendment to the articles of
17    incorporation or a report of cumulative changes in paid-in
18    capital, whenever any amendment or such report discloses
19    an increase in its paid-in capital over the amount thereof
20    last reported in any document, other than an annual
21    report, interim annual report or final transition annual
22    report required by this Act to be filed in the office of
23    the Secretary of State.
24        (c) An additional franchise tax at the time of filing
25    a report of paid-in capital following a statutory merger

 

 

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1    or consolidation, which discloses that the paid-in capital
2    of the surviving or new corporation immediately after the
3    merger or consolidation is greater than the sum of the
4    paid-in capital of all of the merged or consolidated
5    corporations as last reported by them in any documents,
6    other than annual reports, required by this Act to be
7    filed in the office of the Secretary of State; and in
8    addition, the surviving or new corporation shall be liable
9    for a further additional franchise tax on the paid-in
10    capital of each of the merged or consolidated corporations
11    as last reported by them in any document, other than an
12    annual report, required by this Act to be filed with the
13    Secretary of State from their taxable year end to the next
14    succeeding anniversary month or, in the case of a
15    corporation which has established an extended filing
16    month, the extended filing month of the surviving or new
17    corporation; however if the taxable year ends within the
18    2-month period immediately preceding the anniversary month
19    or, in the case of a corporation which has established an
20    extended filing month, the extended filing month of the
21    surviving or new corporation the tax will be computed to
22    the anniversary month or, in the case of a corporation
23    which has established an extended filing month, the
24    extended filing month of the surviving or new corporation
25    in the next succeeding calendar year.
26        (d) An annual franchise tax payable each year with the

 

 

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1    annual report which the corporation is required by this
2    Act to file.
3    On or after January 1, 2020 and prior to January 1, 2021,
4the first $30 in liability is exempt from the tax imposed under
5this Section. On or after January 1, 2021 and prior to January
61, 2022, the first $1,000 in liability is exempt from the tax
7imposed under this Section. On or after January 1, 2022 and
8prior to January 1, 2023, the first $10,000 in liability is
9exempt from the tax imposed under this Section. On or after
10January 1, 2023 and prior to January 1, 2024, the first
11$100,000 in liability is exempt from the tax imposed under
12this Section. The provisions of this Section shall not require
13the payment of any franchise tax that would otherwise have
14been due and payable on or after January 1, 2024. There shall
15be no refunds or proration of franchise tax for any taxes due
16and payable on or after January 1, 2024 on the basis that a
17portion of the corporation's taxable year extends beyond
18January 1, 2024. Public Act 101-9 shall not affect any right
19accrued or established, or any liability or penalty incurred
20prior to January 1, 2024.
21    This Section is repealed on January 1, 2025 December 31,
222024.
23(Source: P.A. 101-9, eff. 6-5-19; 102-282, eff. 1-1-22.)
 
24    (Text of Section from P.A. 102-558)
25    Sec. 15.35. Franchise taxes payable by domestic

 

 

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1corporations. For the privilege of exercising its franchises
2in this State, each domestic corporation shall pay to the
3Secretary of State the following franchise taxes, computed on
4the basis, at the rates and for the periods prescribed in this
5Act:
6        (a) An initial franchise tax at the time of filing its
7    first report of issuance of shares.
8        (b) An additional franchise tax at the time of filing
9    (1) a report of the issuance of additional shares, or (2) a
10    report of an increase in paid-in capital without the
11    issuance of shares, or (3) an amendment to the articles of
12    incorporation or a report of cumulative changes in paid-in
13    capital, whenever any amendment or such report discloses
14    an increase in its paid-in capital over the amount thereof
15    last reported in any document, other than an annual
16    report, interim annual report or final transition annual
17    report required by this Act to be filed in the office of
18    the Secretary of State.
19        (c) An additional franchise tax at the time of filing
20    a report of paid-in capital following a statutory merger
21    or consolidation, which discloses that the paid-in capital
22    of the surviving or new corporation immediately after the
23    merger or consolidation is greater than the sum of the
24    paid-in capital of all of the merged or consolidated
25    corporations as last reported by them in any documents,
26    other than annual reports, required by this Act to be

 

 

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1    filed in the office of the Secretary of State; and in
2    addition, the surviving or new corporation shall be liable
3    for a further additional franchise tax on the paid-in
4    capital of each of the merged or consolidated corporations
5    as last reported by them in any document, other than an
6    annual report, required by this Act to be filed with the
7    Secretary of State from their taxable year end to the next
8    succeeding anniversary month or, in the case of a
9    corporation which has established an extended filing
10    month, the extended filing month of the surviving or new
11    corporation; however if the taxable year ends within the
12    2-month period immediately preceding the anniversary month
13    or, in the case of a corporation which has established an
14    extended filing month, the extended filing month of the
15    surviving or new corporation the tax will be computed to
16    the anniversary month or, in the case of a corporation
17    which has established an extended filing month, the
18    extended filing month of the surviving or new corporation
19    in the next succeeding calendar year.
20        (d) An annual franchise tax payable each year with the
21    annual report which the corporation is required by this
22    Act to file.
23    On or after January 1, 2020 and prior to January 1, 2021,
24the first $30 in liability is exempt from the tax imposed under
25this Section. On or after January 1, 2021 and prior to January
261, 2022, the first $1,000 in liability is exempt from the tax

 

 

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1imposed under this Section. On or after January 1, 2022 and
2prior to January 1, 2023, the first $10,000 in liability is
3exempt from the tax imposed under this Section. On or after
4January 1, 2023 and prior to January 1, 2024, the first
5$100,000 in liability is exempt from the tax imposed under
6this Section. The provisions of this Section shall not require
7the payment of any franchise tax that would otherwise have
8been due and payable on or after January 1, 2024. There shall
9be no refunds or proration of franchise tax for any taxes due
10and payable on or after January 1, 2024 on the basis that a
11portion of the corporation's taxable year extends beyond
12January 1, 2024. Public Act 101-9 shall not affect any right
13accrued or established, or any liability or penalty incurred
14prior to January 1, 2024.
15    This Section is repealed on January 1, 2025 December 31,
162025.
17(Source: P.A. 101-9, eff. 6-5-19; 102-558, eff. 8-20-21.)
 
18    (805 ILCS 5/15.65)  (from Ch. 32, par. 15.65)
19    Sec. 15.65. Franchise taxes payable by foreign
20corporations. For the privilege of exercising its authority to
21transact such business in this State as set out in its
22application therefor or any amendment thereto, each foreign
23corporation shall pay to the Secretary of State the following
24franchise taxes, computed on the basis, at the rates and for
25the periods prescribed in this Act:

 

 

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1        (a) An initial franchise tax at the time of filing its
2    application for authority to transact business in this
3    State.
4        (b) An additional franchise tax at the time of filing
5    (1) a report of the issuance of additional shares, or (2) a
6    report of an increase in paid-in capital without the
7    issuance of shares, or (3) a report of cumulative changes
8    in paid-in capital or a report of an exchange or
9    reclassification of shares, whenever any such report
10    discloses an increase in its paid-in capital over the
11    amount thereof last reported in any document, other than
12    an annual report, interim annual report or final
13    transition annual report, required by this Act to be filed
14    in the office of the Secretary of State.
15        (c) Whenever the corporation shall be a party to a
16    statutory merger and shall be the surviving corporation,
17    an additional franchise tax at the time of filing its
18    report following merger, if such report discloses that the
19    amount represented in this State of its paid-in capital
20    immediately after the merger is greater than the aggregate
21    of the amounts represented in this State of the paid-in
22    capital of such of the merged corporations as were
23    authorized to transact business in this State at the time
24    of the merger, as last reported by them in any documents,
25    other than annual reports, required by this Act to be
26    filed in the office of the Secretary of State; and in

 

 

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1    addition, the surviving corporation shall be liable for a
2    further additional franchise tax on the paid-in capital of
3    each of the merged corporations as last reported by them
4    in any document, other than an annual report, required by
5    this Act to be filed with the Secretary of State, from
6    their taxable year end to the next succeeding anniversary
7    month or, in the case of a corporation which has
8    established an extended filing month, the extended filing
9    month of the surviving corporation; however if the taxable
10    year ends within the 2-month period immediately preceding
11    the anniversary month or the extended filing month of the
12    surviving corporation, the tax will be computed to the
13    anniversary or, extended filing month of the surviving
14    corporation in the next succeeding calendar year.
15        (d) An annual franchise tax payable each year with any
16    annual report which the corporation is required by this
17    Act to file.
18    On or after January 1, 2020 and prior to January 1, 2021,
19the first $30 in liability is exempt from the tax imposed under
20this Section. On or after January 1, 2021 and prior to January
211, 2024, the first $1,000 in liability is exempt from the tax
22imposed under this Section. The provisions of this Section
23shall not require the payment of any franchise tax that would
24otherwise have been due and payable on or after January 1,
252024. There shall be no refunds or proration of franchise tax
26for any taxes due and payable on or after January 1, 2024 on

 

 

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1the basis that a portion of the corporation's taxable year
2extends beyond January 1, 2024. Public Act 101-9 shall not
3affect any right accrued or established, or any liability or
4penalty incurred, prior to January 1, 2024.
5    This Section is repealed on January 1, 2025.
6(Source: P.A. 101-9, eff. 6-5-19; 102-16, eff. 6-17-21;
7102-558, eff. 8-20-21; 102-813, eff. 5-13-22.)
 
8    Section 99. Effective date. This Act takes effect upon
9becoming law.