94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0709

 

Introduced 02/01/05, by Rep. William B. Black

 

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

    Amends the Illinois Income Tax Act. Sets forth procedures for for calculating the deduction for the depreciation of property for which a bonus depreciation deduction was taken from the taxpayer's federal adjusted gross income. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing 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
24         this Act to the extent deducted from gross income in
25         the computation of adjusted gross income for the
26         taxable year;
27             (C) An amount equal to the amount received during
28         the taxable year as a recovery or refund of real
29         property taxes paid with respect to the taxpayer's
30         principal residence under the Revenue Act of 1939 and
31         for which a deduction was previously taken under
32         subparagraph (L) of this paragraph (2) prior to July 1,

 

 

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1         1991, the retrospective application date of Article 4
2         of Public Act 87-17. In the case of multi-unit or
3         multi-use structures and farm dwellings, the taxes on
4         the taxpayer's principal residence shall be that
5         portion of the total taxes for the entire property
6         which is attributable to such principal residence;
7             (D) An amount equal to the amount of the capital
8         gain deduction allowable under the Internal Revenue
9         Code, to the extent deducted from gross income in the
10         computation of adjusted gross income;
11             (D-5) An amount, to the extent not included in
12         adjusted gross income, equal to the amount of money
13         withdrawn by the taxpayer in the taxable year from a
14         medical care savings account and the interest earned on
15         the account in the taxable year of a withdrawal
16         pursuant to subsection (b) of Section 20 of the Medical
17         Care Savings Account Act or subsection (b) of Section
18         20 of the Medical Care Savings Account Act of 2000;
19             (D-10) For taxable years ending after December 31,
20         1997, an amount equal to any eligible remediation costs
21         that the individual deducted in computing adjusted
22         gross income and for which the individual claims a
23         credit under subsection (l) of Section 201;
24             (D-15) For taxable years 2001 and thereafter, an
25         amount equal to the bonus depreciation deduction (30%
26         of the adjusted basis of the qualified property) taken
27         on the taxpayer's federal income tax return for the
28         taxable year under subsection (k) of Section 168 of the
29         Internal Revenue Code;
30             (D-16) If the taxpayer reports a capital gain or
31         loss on the taxpayer's federal income tax return for
32         the taxable year based on a sale or transfer of
33         property for which the taxpayer was required in any
34         taxable year to make an addition modification under
35         subparagraph (D-15), then an amount equal to the
36         aggregate amount of the deductions taken in all taxable

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         Increment Allocation Redevelopment Act;
2             (P) 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 of 1986;
7             (Q) An amount equal to any amounts included in such
8         total, received by the taxpayer as an acceleration in
9         the payment of life, endowment or annuity benefits in
10         advance of the time they would otherwise be payable as
11         an indemnity for a terminal illness;
12             (R) An amount equal to the amount of any federal or
13         State bonus paid to veterans of the Persian Gulf War;
14             (S) An amount, to the extent included in adjusted
15         gross income, equal to the amount of a contribution
16         made in the taxable year on behalf of the taxpayer to a
17         medical care savings account established under the
18         Medical Care Savings Account Act or the Medical Care
19         Savings Account Act of 2000 to the extent the
20         contribution is accepted by the account administrator
21         as provided in that Act;
22             (T) An amount, to the extent included in adjusted
23         gross income, equal to the amount of interest earned in
24         the taxable year on a medical care savings account
25         established under the Medical Care Savings Account Act
26         or the Medical Care Savings Account Act of 2000 on
27         behalf of the taxpayer, other than interest added
28         pursuant to item (D-5) of this paragraph (2);
29             (U) For one taxable year beginning on or after
30         January 1, 1994, an amount equal to the total amount of
31         tax imposed and paid under subsections (a) and (b) of
32         Section 201 of this Act on grant amounts received by
33         the taxpayer under the Nursing Home Grant Assistance
34         Act during the taxpayer's taxable years 1992 and 1993;
35             (V) Beginning with tax years ending on or after
36         December 31, 1995 and ending with tax years ending on

 

 

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1         or before December 31, 2004, an amount equal to the
2         amount paid by a taxpayer who is a self-employed
3         taxpayer, a partner of a partnership, or a shareholder
4         in a Subchapter S corporation for health insurance or
5         long-term care insurance for that taxpayer or that
6         taxpayer's spouse or dependents, to the extent that the
7         amount paid for that health insurance or long-term care
8         insurance may be deducted under Section 213 of the
9         Internal Revenue Code of 1986, has not been deducted on
10         the federal income tax return of the taxpayer, and does
11         not exceed the taxable income attributable to that
12         taxpayer's income, self-employment income, or
13         Subchapter S corporation income; except that no
14         deduction shall be allowed under this item (V) if the
15         taxpayer is eligible to participate in any health
16         insurance or long-term care insurance plan of an
17         employer of the taxpayer or the taxpayer's spouse. The
18         amount of the health insurance and long-term care
19         insurance subtracted under this item (V) shall be
20         determined by multiplying total health insurance and
21         long-term care insurance premiums paid by the taxpayer
22         times a number that represents the fractional
23         percentage of eligible medical expenses under Section
24         213 of the Internal Revenue Code of 1986 not actually
25         deducted on the taxpayer's federal income tax return;
26             (W) For taxable years beginning on or after January
27         1, 1998, all amounts included in the taxpayer's federal
28         gross income in the taxable year from amounts converted
29         from a regular IRA to a Roth IRA. This paragraph is
30         exempt from the provisions of Section 250;
31             (X) For taxable year 1999 and thereafter, an amount
32         equal to the amount of any (i) distributions, to the
33         extent includible in gross income for federal income
34         tax purposes, made to the taxpayer because of his or
35         her status as a victim of persecution for racial or
36         religious reasons by Nazi Germany or any other Axis

 

 

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1         regime or as an heir of the victim and (ii) items of
2         income, to the extent includible in gross income for
3         federal income tax purposes, attributable to, derived
4         from or in any way related to assets stolen from,
5         hidden from, or otherwise lost to a victim of
6         persecution for racial or religious reasons by Nazi
7         Germany or any other Axis regime immediately prior to,
8         during, and immediately after World War II, including,
9         but not limited to, interest on the proceeds receivable
10         as insurance under policies issued to a victim of
11         persecution for racial or religious reasons by Nazi
12         Germany or any other Axis regime by European insurance
13         companies immediately prior to and during World War II;
14         provided, however, this subtraction from federal
15         adjusted gross income does not apply to assets acquired
16         with such assets or with the proceeds from the sale of
17         such assets; provided, further, this paragraph shall
18         only apply to a taxpayer who was the first recipient of
19         such assets after their recovery and who is a victim of
20         persecution for racial or religious reasons by Nazi
21         Germany or any other Axis regime or as an heir of the
22         victim. The amount of and the eligibility for any
23         public assistance, benefit, or similar entitlement is
24         not affected by the inclusion of items (i) and (ii) of
25         this paragraph in gross income for federal income tax
26         purposes. This paragraph is exempt from the provisions
27         of Section 250;
28             (Y) For taxable years beginning on or after January
29         1, 2002 and ending on or before December 31, 2004,
30         moneys contributed in the taxable year to a College
31         Savings Pool account under Section 16.5 of the State
32         Treasurer Act, except that amounts excluded from gross
33         income under Section 529(c)(3)(C)(i) of the Internal
34         Revenue Code shall not be considered moneys
35         contributed under this subparagraph (Y). For taxable
36         years beginning on or after January 1, 2005, a maximum

 

 

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1         of $10,000 contributed in the taxable year to (i) a
2         College Savings Pool account under Section 16.5 of the
3         State Treasurer Act or (ii) the Illinois Prepaid
4         Tuition Trust Fund, except that amounts excluded from
5         gross income under Section 529(c)(3)(C)(i) of the
6         Internal Revenue Code shall not be considered moneys
7         contributed under this subparagraph (Y). This
8         subparagraph (Y) is exempt from the provisions of
9         Section 250;
10             (Z) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         (30% of the adjusted basis of the qualified property)
13         is taken on the taxpayer's federal income tax return
14         under subsection (k) of Section 168 of the Internal
15         Revenue Code and for each applicable taxable year
16         thereafter, an amount equal to "x", where:
17                 (1) "y" equals the amount of the depreciation
18             deduction taken for the taxable year on the
19             taxpayer's federal income tax return on property
20             for which the bonus depreciation deduction (30% of
21             the adjusted basis of the qualified property) was
22             taken in any year under subsection (k) of Section
23             168 of the Internal Revenue Code, but not including
24             the bonus depreciation deduction; and
25                 (2) for property on which a bonus depreciation
26             deduction of 30% of the adjusted basis was taken,
27             "x" equals "y" multiplied by 30 and then divided by
28             70 (or "y" multiplied by 0.429), and for property
29             on which a bonus depreciation deduction of 50% of
30             the adjusted basis was taken, "x" equals "y"
31             multiplied by 1.0.
32             The aggregate amount deducted under this
33         subparagraph in all taxable years for any one piece of
34         property may not exceed the amount of the bonus
35         depreciation deduction (30% of the adjusted basis of
36         the qualified property) taken on that property on the

 

 

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1         taxpayer's federal income tax return under subsection
2         (k) of Section 168 of the Internal Revenue Code;
3             (AA) If the taxpayer reports a capital gain or loss
4         on the taxpayer's federal income tax return for the
5         taxable year based on a sale or transfer of property
6         for which the taxpayer was required in any taxable year
7         to make an addition modification under subparagraph
8         (D-15), then an amount equal to that addition
9         modification.
10             The taxpayer is allowed to take the deduction under
11         this subparagraph only once with respect to any one
12         piece of property;
13             (BB) Any amount included in adjusted gross income,
14         other than salary, received by a driver in a
15         ridesharing arrangement using a motor vehicle;
16             (CC) The amount of (i) any interest income (net of
17         the deductions allocable thereto) taken into account
18         for the taxable year with respect to a transaction with
19         a taxpayer that is required to make an addition
20         modification with respect to such transaction under
21         Section 203(a)(2)(D-17), 203(b)(2)(E-13),
22         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
23         the amount of that addition modification, and (ii) any
24         income from intangible property (net of the deductions
25         allocable thereto) taken into account for the taxable
26         year with respect to a transaction with a taxpayer that
27         is required to make an addition modification with
28         respect to such transaction under Section
29         203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
30         203(d)(2)(D-8), but not to exceed the amount of that
31         addition modification;
32             (DD) An amount equal to the interest income taken
33         into account for the taxable year (net of the
34         deductions allocable thereto) with respect to
35         transactions with a foreign person who would be a
36         member of the taxpayer's unitary business group but for

 

 

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

 

 

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

 

 

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1             such carryback or carryforward;
2             For taxable years in which there is a net operating
3         loss carryback or carryforward from more than one other
4         taxable year ending prior to December 31, 1986, the
5         addition modification provided in this subparagraph
6         (E) shall be the sum of the amounts computed
7         independently under the preceding provisions of this
8         subparagraph (E) for each such taxable year;
9             (E-5) For taxable years ending after December 31,
10         1997, an amount equal to any eligible remediation costs
11         that the corporation deducted in computing adjusted
12         gross income and for which the corporation claims a
13         credit under subsection (l) of Section 201;
14             (E-10) For taxable years 2001 and thereafter, an
15         amount equal to the bonus depreciation deduction (30%
16         of the adjusted basis of the qualified property) taken
17         on the taxpayer's federal income tax return for the
18         taxable year under subsection (k) of Section 168 of the
19         Internal Revenue Code; and
20             (E-11) If the taxpayer reports a capital gain or
21         loss on the taxpayer's federal income tax return for
22         the taxable year based on a sale or transfer of
23         property for which the taxpayer was required in any
24         taxable year to make an addition modification under
25         subparagraph (E-10), then an amount equal to the
26         aggregate amount of the deductions taken in all taxable
27         years under subparagraph (T) with respect to that
28         property.
29             The taxpayer is required to make the addition
30         modification under this subparagraph only once with
31         respect to any one piece of property;
32             (E-12) For taxable years ending on or after
33         December 31, 2004, an amount equal to the amount
34         otherwise allowed as a deduction in computing base
35         income for interest paid, accrued, or incurred,
36         directly or indirectly, to a foreign person who would

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         imposed by this Act which was refunded to the taxpayer
2         and included in such total for the taxable year;
3             (G) An amount equal to any amount included in such
4         total under Section 78 of the Internal Revenue Code;
5             (H) In the case of a regulated investment company,
6         an amount equal to the amount of exempt interest
7         dividends as defined in subsection (b) (5) of Section
8         852 of the Internal Revenue Code, paid to shareholders
9         for the taxable year;
10             (I) With the exception of any amounts subtracted
11         under subparagraph (J), an amount equal to the sum of
12         all amounts disallowed as deductions by (i) Sections
13         171(a) (2), and 265(a)(2) and amounts disallowed as
14         interest expense by Section 291(a)(3) of the Internal
15         Revenue Code, as now or hereafter amended, and all
16         amounts of expenses allocable to interest and
17         disallowed as deductions by Section 265(a)(1) of the
18         Internal Revenue Code, as now or hereafter amended; and
19         (ii) for taxable years ending on or after August 13,
20         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
21         832(b)(5)(B)(i) of the Internal Revenue Code; the
22         provisions of this subparagraph are exempt from the
23         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
27         reason of the Constitution, treaties or statutes of the
28         United States; provided that, in the case of any
29         statute of this State that exempts income derived from
30         bonds or other obligations from the tax imposed under
31         this Act, the amount exempted shall be the interest net
32         of bond premium amortization;
33             (K) An amount equal to those dividends included in
34         such total which were paid by a corporation which
35         conducts business operations in an Enterprise Zone or
36         zones created under the Illinois Enterprise Zone Act

 

 

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1         and conducts substantially all of its operations in an
2         Enterprise Zone or zones;
3             (L) An amount equal to those dividends included in
4         such total that were paid by a corporation that
5         conducts business operations in a federally designated
6         Foreign Trade Zone or Sub-Zone and that is designated a
7         High Impact Business located in Illinois; provided
8         that dividends eligible for the deduction provided in
9         subparagraph (K) of paragraph 2 of this subsection
10         shall not be eligible for the deduction provided under
11         this subparagraph (L);
12             (M) For any taxpayer that is a financial
13         organization within the meaning of Section 304(c) of
14         this Act, an amount included in such total as interest
15         income from a loan or loans made by such taxpayer to a
16         borrower, to the extent that such a loan is secured by
17         property which is eligible for the Enterprise Zone
18         Investment Credit. To determine the portion of a loan
19         or loans that is secured by property eligible for a
20         Section 201(f) investment credit to the borrower, the
21         entire principal amount of the loan or loans between
22         the taxpayer and the borrower should be divided into
23         the basis of the Section 201(f) investment credit
24         property which secures the loan or loans, using for
25         this purpose the original basis of such property on the
26         date that it was placed in service in the Enterprise
27         Zone. The subtraction modification available to
28         taxpayer in any year under this subsection shall be
29         that portion of the total interest paid by the borrower
30         with respect to such loan attributable to the eligible
31         property as calculated under the previous sentence;
32             (M-1) For any taxpayer that is a financial
33         organization within the meaning of Section 304(c) of
34         this Act, an amount included in such total as interest
35         income from a loan or loans made by such taxpayer to a
36         borrower, to the extent that such a loan is secured by

 

 

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1         property which is eligible for the High Impact Business
2         Investment Credit. To determine the portion of a loan
3         or loans that is secured by property eligible for a
4         Section 201(h) investment credit to the borrower, the
5         entire principal amount of the loan or loans between
6         the taxpayer and the borrower should be divided into
7         the basis of the Section 201(h) investment credit
8         property which secures the loan or loans, using for
9         this purpose the original basis of such property on the
10         date that it was placed in service in a federally
11         designated Foreign Trade Zone or Sub-Zone located in
12         Illinois. No taxpayer that is eligible for the
13         deduction provided in subparagraph (M) of paragraph
14         (2) of this subsection shall be eligible for the
15         deduction provided under this subparagraph (M-1). The
16         subtraction modification available to taxpayers in any
17         year under this subsection shall be that portion of the
18         total interest paid by the borrower with respect to
19         such loan attributable to the eligible property as
20         calculated under the previous sentence;
21             (N) Two times any contribution made during the
22         taxable year to a designated zone organization to the
23         extent that the contribution (i) qualifies as a
24         charitable contribution under subsection (c) of
25         Section 170 of the Internal Revenue Code and (ii) must,
26         by its terms, be used for a project approved by the
27         Department of Commerce and Economic Opportunity under
28         Section 11 of the Illinois Enterprise Zone Act;
29             (O) An amount equal to: (i) 85% for taxable years
30         ending on or before December 31, 1992, or, a percentage
31         equal to the percentage allowable under Section
32         243(a)(1) of the Internal Revenue Code of 1986 for
33         taxable years ending after December 31, 1992, of the
34         amount by which dividends included in taxable income
35         and received from a corporation that is not created or
36         organized under the laws of the United States or any

 

 

HB0709 - 25 - LRB094 08094 BDD 38278 b

1         state or political subdivision thereof, including, for
2         taxable years ending on or after December 31, 1988,
3         dividends received or deemed received or paid or deemed
4         paid under Sections 951 through 964 of the Internal
5         Revenue Code, exceed the amount of the modification
6         provided under subparagraph (G) of paragraph (2) of
7         this subsection (b) which is related to such dividends;
8         plus (ii) 100% of the amount by which dividends,
9         included in taxable income and received, including,
10         for taxable years ending on or after December 31, 1988,
11         dividends received or deemed received or paid or deemed
12         paid under Sections 951 through 964 of the Internal
13         Revenue Code, from any such corporation specified in
14         clause (i) that would but for the provisions of Section
15         1504 (b) (3) of the Internal Revenue Code be treated as
16         a member of the affiliated group which includes the
17         dividend recipient, exceed the amount of the
18         modification provided under subparagraph (G) of
19         paragraph (2) of this subsection (b) which is related
20         to such dividends;
21             (P) An amount equal to any contribution made to a
22         job training project established pursuant to the Tax
23         Increment Allocation Redevelopment Act;
24             (Q) An amount equal to the amount of the deduction
25         used to compute the federal income tax credit for
26         restoration of substantial amounts held under claim of
27         right for the taxable year pursuant to Section 1341 of
28         the Internal Revenue Code of 1986;
29             (R) In the case of an attorney-in-fact with respect
30         to whom an interinsurer or a reciprocal insurer has
31         made the election under Section 835 of the Internal
32         Revenue Code, 26 U.S.C. 835, an amount equal to the
33         excess, if any, of the amounts paid or incurred by that
34         interinsurer or reciprocal insurer in the taxable year
35         to the attorney-in-fact over the deduction allowed to
36         that interinsurer or reciprocal insurer with respect

 

 

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1         to the attorney-in-fact under Section 835(b) of the
2         Internal Revenue Code for the taxable year;
3             (S) For taxable years ending on or after December
4         31, 1997, in the case of a Subchapter S corporation, an
5         amount equal to all amounts of income allocable to a
6         shareholder subject to the Personal Property Tax
7         Replacement Income Tax imposed by subsections (c) and
8         (d) of Section 201 of this Act, including amounts
9         allocable to organizations exempt from federal income
10         tax by reason of Section 501(a) of the Internal Revenue
11         Code. This subparagraph (S) is exempt from the
12         provisions of Section 250;
13             (T) For taxable years 2001 and thereafter, for the
14         taxable year in which the bonus depreciation deduction
15         (30% of the adjusted basis of the qualified property)
16         is taken on the taxpayer's federal income tax return
17         under subsection (k) of Section 168 of the Internal
18         Revenue Code and for each applicable taxable year
19         thereafter, an amount equal to "x", where:
20                 (1) "y" equals the amount of the depreciation
21             deduction taken for the taxable year on the
22             taxpayer's federal income tax return on property
23             for which the bonus depreciation deduction (30% of
24             the adjusted basis of the qualified property) was
25             taken in any year under subsection (k) of Section
26             168 of the Internal Revenue Code, but not including
27             the bonus depreciation deduction; and
28                 (2) for property on which a bonus depreciation
29             deduction of 30% of the adjusted basis was taken,
30             "x" equals "y" multiplied by 30 and then divided by
31             70 (or "y" multiplied by 0.429), and for property
32             on which a bonus depreciation deduction of 50% of
33             the adjusted basis was taken, "x" equals "y"
34             multiplied by 1.0.
35             The aggregate amount deducted under this
36         subparagraph in all taxable years for any one piece of

 

 

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1         property may not exceed the amount of the bonus
2         depreciation deduction (30% of the adjusted basis of
3         the qualified property) taken on that property on the
4         taxpayer's federal income tax return under subsection
5         (k) of Section 168 of the Internal Revenue Code;
6             (U) If the taxpayer reports a capital gain or loss
7         on the taxpayer's federal income tax return for the
8         taxable year based on a sale or transfer of property
9         for which the taxpayer was required in any taxable year
10         to make an addition modification under subparagraph
11         (E-10), then an amount equal to that addition
12         modification.
13             The taxpayer is allowed to take the deduction under
14         this subparagraph only once with respect to any one
15         piece of property;
16             (V) The amount of: (i) any interest income (net of
17         the deductions allocable thereto) taken into account
18         for the taxable year with respect to a transaction with
19         a taxpayer that is required to make an addition
20         modification with respect to such transaction under
21         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
22         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
23         the amount of such addition modification and (ii) any
24         income from intangible property (net of the deductions
25         allocable thereto) taken into account for the taxable
26         year with respect to a transaction with a taxpayer that
27         is required to make an addition modification with
28         respect to such transaction under Section
29         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
30         203(d)(2)(D-8), but not to exceed the amount of such
31         addition modification;
32             (W) An amount equal to the interest income taken
33         into account for the taxable year (net of the
34         deductions allocable thereto) with respect to
35         transactions with a foreign person who would be a
36         member of the taxpayer's unitary business group but for

 

 

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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, but not to exceed the
4         addition modification required to be made for the same
5         taxable year under Section 203(b)(2)(E-12) for
6         interest paid, accrued, or incurred, directly or
7         indirectly, to the same foreign person; and
8             (X) An amount equal to the income from intangible
9         property taken into account for the taxable year (net
10         of the deductions allocable thereto) with respect to
11         transactions with a foreign person who would be a
12         member of the taxpayer's unitary business group but for
13         the fact that the foreign person's business activity
14         outside the United States is 80% or more of that
15         person's total business activity, but not to exceed the
16         addition modification required to be made for the same
17         taxable year under Section 203(b)(2)(E-13) for
18         intangible expenses and costs paid, accrued, or
19         incurred, directly or indirectly, to the same foreign
20         person.
21         (3) Special rule. For purposes of paragraph (2) (A),
22     "gross income" in the case of a life insurance company, for
23     tax years ending on and after December 31, 1994, shall mean
24     the gross investment income for the taxable year.
 
25     (c) Trusts and estates.
26         (1) In general. In the case of a trust or estate, base
27     income means an amount equal to the taxpayer's taxable
28     income for the taxable year as modified by paragraph (2).
29         (2) Modifications. Subject to the provisions of
30     paragraph (3), the taxable income referred to in paragraph
31     (1) shall be modified by adding thereto the sum of the
32     following amounts:
33             (A) An amount equal to all amounts paid or accrued
34         to the taxpayer as interest or dividends during the
35         taxable year to the extent excluded from gross income

 

 

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1         in the computation of taxable income;
2             (B) In the case of (i) an estate, $600; (ii) a
3         trust which, under its governing instrument, is
4         required to distribute all of its income currently,
5         $300; and (iii) any other trust, $100, but in each such
6         case, only to the extent such amount was deducted in
7         the computation of taxable income;
8             (C) An amount equal to the amount of tax imposed by
9         this Act to the extent deducted from gross income in
10         the computation of taxable income for the taxable year;
11             (D) The amount of any net operating loss deduction
12         taken in arriving at taxable income, other than a net
13         operating loss carried forward from a taxable year
14         ending prior to December 31, 1986;
15             (E) For taxable years in which a net operating loss
16         carryback or carryforward from a taxable year ending
17         prior to December 31, 1986 is an element of taxable
18         income under paragraph (1) of subsection (e) or
19         subparagraph (E) of paragraph (2) of subsection (e),
20         the amount by which addition modifications other than
21         those provided by this subparagraph (E) exceeded
22         subtraction modifications in such taxable year, with
23         the following limitations applied in the order that
24         they are listed:
25                 (i) the addition modification relating to the
26             net operating loss carried back or forward to the
27             taxable year from any taxable year ending prior to
28             December 31, 1986 shall be reduced by the amount of
29             addition modification under this subparagraph (E)
30             which related to that net operating loss and which
31             was taken into account in calculating the base
32             income of an earlier taxable year, and
33                 (ii) the addition modification relating to the
34             net operating loss carried back or forward to the
35             taxable year from any taxable year ending prior to
36             December 31, 1986 shall not exceed the amount of

 

 

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1             such carryback or carryforward;
2             For taxable years in which there is a net operating
3         loss carryback or carryforward from more than one other
4         taxable year ending prior to December 31, 1986, the
5         addition modification provided in this subparagraph
6         (E) shall be the sum of the amounts computed
7         independently under the preceding provisions of this
8         subparagraph (E) for each such taxable year;
9             (F) For taxable years ending on or after January 1,
10         1989, an amount equal to the tax deducted pursuant to
11         Section 164 of the Internal Revenue Code if the trust
12         or estate is claiming the same tax for purposes of the
13         Illinois foreign tax credit under Section 601 of this
14         Act;
15             (G) An amount equal to the amount of the capital
16         gain deduction allowable under the Internal Revenue
17         Code, to the extent deducted from gross income in the
18         computation of taxable income;
19             (G-5) For taxable years ending after December 31,
20         1997, an amount equal to any eligible remediation costs
21         that the trust or estate deducted in computing adjusted
22         gross income and for which the trust or estate claims a
23         credit under subsection (l) of Section 201;
24             (G-10) For taxable years 2001 and thereafter, an
25         amount equal to the bonus depreciation deduction (30%
26         of the adjusted basis of the qualified property) taken
27         on the taxpayer's federal income tax return for the
28         taxable year under subsection (k) of Section 168 of the
29         Internal Revenue Code; and
30             (G-11) If the taxpayer reports a capital gain or
31         loss on the taxpayer's federal income tax return for
32         the taxable year based on a sale or transfer of
33         property for which the taxpayer was required in any
34         taxable year to make an addition modification under
35         subparagraph (G-10), then an amount equal to the
36         aggregate amount of the deductions taken in all taxable

 

 

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

 

 

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

 

 

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1         December 31, 2004, an amount equal to the amount of
2         intangible expenses and costs otherwise allowed as a
3         deduction in computing base income, and that were paid,
4         accrued, or incurred, directly or indirectly, to a
5         foreign person who would be a member of the same
6         unitary business group but for the fact that the
7         foreign person's business activity outside the United
8         States is 80% or more of that person's total business
9         activity. The addition modification required by this
10         subparagraph shall be reduced to the extent that
11         dividends were included in base income of the unitary
12         group for the same taxable year and received by the
13         taxpayer or by a member of the taxpayer's unitary
14         business group (including amounts included in gross
15         income pursuant to Sections 951 through 964 of the
16         Internal Revenue Code and amounts included in gross
17         income under Section 78 of the Internal Revenue Code)
18         with respect to the stock of the same person to whom
19         the intangible expenses and costs were directly or
20         indirectly paid, incurred, or accrued. The preceding
21         sentence shall not apply to the extent that the same
22         dividends caused a reduction to the addition
23         modification required under Section 203(c)(2)(G-12) of
24         this Act. As used in this subparagraph, the term
25         "intangible expenses and costs" includes: (1)
26         expenses, losses, and costs for or related to the
27         direct or indirect acquisition, use, maintenance or
28         management, ownership, sale, exchange, or any other
29         disposition of intangible property; (2) losses
30         incurred, directly or indirectly, from factoring
31         transactions or discounting transactions; (3) royalty,
32         patent, technical, and copyright fees; (4) licensing
33         fees; and (5) other similar expenses and costs. For
34         purposes of this subparagraph, "intangible property"
35         includes patents, patent applications, trade names,
36         trademarks, service marks, copyrights, mask works,

 

 

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

 

 

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

 

 

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1         under subparagraph (K), an amount equal to the sum of
2         all amounts disallowed as deductions by (i) Sections
3         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
4         as now or hereafter amended, and all amounts of
5         expenses allocable to interest and disallowed as
6         deductions by Section 265(1) of the Internal Revenue
7         Code of 1954, as now or hereafter amended; and (ii) for
8         taxable years ending on or after August 13, 1999,
9         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
10         the Internal Revenue Code; the provisions of this
11         subparagraph are exempt from the provisions of Section
12         250;
13             (M) An amount equal to those dividends included in
14         such total which were paid by a corporation which
15         conducts business operations in an Enterprise Zone or
16         zones created under the Illinois Enterprise Zone Act
17         and conducts substantially all of its operations in an
18         Enterprise Zone or Zones;
19             (N) An amount equal to any contribution made to a
20         job training project established pursuant to the Tax
21         Increment Allocation Redevelopment Act;
22             (O) An amount equal to those dividends included in
23         such total that were paid by a corporation that
24         conducts business operations in a federally designated
25         Foreign Trade Zone or Sub-Zone and that is designated a
26         High Impact Business located in Illinois; provided
27         that dividends eligible for the deduction provided in
28         subparagraph (M) of paragraph (2) of this subsection
29         shall not be eligible for the deduction provided under
30         this subparagraph (O);
31             (P) An amount equal to the amount of the deduction
32         used to compute the federal income tax credit for
33         restoration of substantial amounts held under claim of
34         right for the taxable year pursuant to Section 1341 of
35         the Internal Revenue Code of 1986;
36             (Q) For taxable year 1999 and thereafter, an amount

 

 

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1         equal to the amount of any (i) distributions, to the
2         extent includible in gross income for federal income
3         tax purposes, made to the taxpayer because of his or
4         her status as a victim of persecution for racial or
5         religious reasons by Nazi Germany or any other Axis
6         regime or as an heir of the victim and (ii) items of
7         income, to the extent includible in gross income for
8         federal income tax purposes, attributable to, derived
9         from or in any way related to assets stolen from,
10         hidden from, or otherwise lost to a victim of
11         persecution for racial or religious reasons by Nazi
12         Germany or any other Axis regime immediately prior to,
13         during, and immediately after World War II, including,
14         but not limited to, interest on the proceeds receivable
15         as insurance under policies issued to a victim of
16         persecution for racial or religious reasons by Nazi
17         Germany or any other Axis regime by European insurance
18         companies immediately prior to and during World War II;
19         provided, however, this subtraction from federal
20         adjusted gross income does not apply to assets acquired
21         with such assets or with the proceeds from the sale of
22         such assets; provided, further, this paragraph shall
23         only apply to a taxpayer who was the first recipient of
24         such assets after their recovery and who is a victim of
25         persecution for racial or religious reasons by Nazi
26         Germany or any other Axis regime or as an heir of the
27         victim. The amount of and the eligibility for any
28         public assistance, benefit, or similar entitlement is
29         not affected by the inclusion of items (i) and (ii) of
30         this paragraph in gross income for federal income tax
31         purposes. This paragraph is exempt from the provisions
32         of Section 250;
33             (R) For taxable years 2001 and thereafter, for the
34         taxable year in which the bonus depreciation deduction
35         (30% of the adjusted basis of the qualified property)
36         is taken on the taxpayer's federal income tax return

 

 

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1         under subsection (k) of Section 168 of the Internal
2         Revenue Code and for each applicable taxable year
3         thereafter, an amount equal to "x", where:
4                 (1) "y" equals the amount of the depreciation
5             deduction taken for the taxable year on the
6             taxpayer's federal income tax return on property
7             for which the bonus depreciation deduction (30% of
8             the adjusted basis of the qualified property) was
9             taken in any year under subsection (k) of Section
10             168 of the Internal Revenue Code, but not including
11             the bonus depreciation deduction; and
12                 (2) for property on which a bonus depreciation
13             deduction of 30% of the adjusted basis was taken,
14             "x" equals "y" multiplied by 30 and then divided by
15             70 (or "y" multiplied by 0.429), and for property
16             on which a bonus depreciation deduction of 50% of
17             the adjusted basis was taken, "x" equals "y"
18             multiplied by 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 (30% of the adjusted basis of
23         the qualified property) taken on that property on the
24         taxpayer's federal income tax return under subsection
25         (k) of Section 168 of the Internal Revenue Code;
26             (S) If the taxpayer reports a capital gain or loss
27         on the taxpayer's federal income tax return for the
28         taxable year based on a sale or transfer of property
29         for which the taxpayer was required in any taxable year
30         to make an addition modification under subparagraph
31         (G-10), then an amount equal to that addition
32         modification.
33             The taxpayer is allowed to take the deduction under
34         this subparagraph only once with respect to any one
35         piece of property;
36             (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;
16             (U) An amount equal to the interest income taken
17         into account for the taxable year (net of the
18         deductions allocable thereto) with respect to
19         transactions with a foreign person who would be a
20         member of the taxpayer's unitary business group but for
21         the fact the foreign person's business activity
22         outside the United States is 80% or more of that
23         person's total business activity, but not to exceed the
24         addition modification required to be made for the same
25         taxable year under Section 203(c)(2)(G-12) for
26         interest paid, accrued, or incurred, directly or
27         indirectly, to the same foreign person; and
28             (V) An amount equal to the income from intangible
29         property taken into account for the taxable year (net
30         of the deductions allocable thereto) with respect to
31         transactions with a foreign person who would be a
32         member of the taxpayer's unitary business group but for
33         the fact that the foreign person's business activity
34         outside the United States is 80% or more of that
35         person's total business activity, but not to exceed the
36         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.
5         (3) Limitation. The amount of any modification
6     otherwise required under this subsection shall, under
7     regulations prescribed by the Department, be adjusted by
8     any amounts included therein which were properly paid,
9     credited, or required to be distributed, or permanently set
10     aside for charitable purposes pursuant to Internal Revenue
11     Code Section 642(c) during the taxable year.
 
12     (d) Partnerships.
13         (1) In general. In the case of a partnership, base
14     income means an amount equal to the taxpayer's taxable
15     income for the taxable year as modified by paragraph (2).
16         (2) Modifications. The taxable income referred to in
17     paragraph (1) shall be modified by adding thereto the sum
18     of the following amounts:
19             (A) An amount equal to all amounts paid or accrued
20         to the taxpayer as interest or dividends during the
21         taxable year to the extent excluded from gross income
22         in the computation of taxable income;
23             (B) An amount equal to the amount of tax imposed by
24         this Act to the extent deducted from gross income for
25         the taxable year;
26             (C) The amount of deductions allowed to the
27         partnership pursuant to Section 707 (c) of the Internal
28         Revenue Code in calculating its taxable income;
29             (D) An amount equal to the amount of the capital
30         gain deduction allowable under the Internal Revenue
31         Code, to the extent deducted from gross income in the
32         computation of taxable income;
33             (D-5) For taxable years 2001 and thereafter, an
34         amount equal to the bonus depreciation deduction (30%
35         of the adjusted basis of the qualified property) 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 reports a capital gain or
5         loss on the taxpayer's federal income tax return for
6         the taxable year based on a sale or transfer of
7         property for which the taxpayer was required in any
8         taxable year to make an addition modification under
9         subparagraph (D-5), then an amount equal to the
10         aggregate amount of the deductions taken in all taxable
11         years under subparagraph (O) with respect to that
12         property.
13             The taxpayer is required to make the addition
14         modification under this subparagraph only once with
15         respect to any one piece of property;
16             (D-7) For taxable years ending on or after December
17         31, 2004, an amount equal to the amount otherwise
18         allowed as a deduction in computing base income for
19         interest paid, accrued, or incurred, directly or
20         indirectly, to a foreign person who would be a member
21         of the same unitary business group but for the fact the
22         foreign person's business activity outside the United
23         States is 80% or more of the foreign person's total
24         business activity. The addition modification required
25         by this subparagraph shall be reduced to the extent
26         that dividends were included in base income of the
27         unitary group for the same taxable year and received by
28         the taxpayer or by a member of the taxpayer's unitary
29         business group (including amounts included in gross
30         income pursuant to Sections 951 through 964 of the
31         Internal Revenue Code and amounts included in gross
32         income under Section 78 of the Internal Revenue Code)
33         with respect to the stock of the same person to whom
34         the interest was paid, accrued, or incurred.
35             This paragraph shall not apply to the following:
36                 (i) an item of interest paid, accrued, or

 

 

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1             incurred, directly or indirectly, to a foreign
2             person who is subject in a foreign country or
3             state, other than a state which requires mandatory
4             unitary reporting, to a tax on or measured by net
5             income with respect to such interest; or
6                 (ii) an item of interest paid, accrued, or
7             incurred, directly or indirectly, to a foreign
8             person if the taxpayer can establish, based on a
9             preponderance of the evidence, both of the
10             following:
11                     (a) the foreign person, during the same
12                 taxable year, paid, accrued, or incurred, the
13                 interest to a person that is not a related
14                 member, and
15                     (b) the transaction giving rise to the
16                 interest expense between the taxpayer and the
17                 foreign person did not have as a principal
18                 purpose the avoidance of Illinois income tax,
19                 and is paid pursuant to a contract or agreement
20                 that reflects an arm's-length interest rate
21                 and terms; or
22                 (iii) the taxpayer can establish, based on
23             clear and convincing evidence, that the interest
24             paid, accrued, or incurred relates to a contract or
25             agreement entered into at arm's-length rates and
26             terms and the principal purpose for the payment is
27             not federal or Illinois tax avoidance; or
28                 (iv) an item of interest paid, accrued, or
29             incurred, directly or indirectly, to a foreign
30             person if the taxpayer establishes by clear and
31             convincing evidence that the adjustments are
32             unreasonable; or if the taxpayer and the Director
33             agree in writing to the application or use of an
34             alternative method of apportionment under Section
35             304(f).
36                 Nothing in this subsection shall preclude the

 

 

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1             Director from making any other adjustment
2             otherwise allowed under Section 404 of this Act for
3             any tax year beginning after the effective date of
4             this amendment provided such adjustment is made
5             pursuant to regulation adopted by the Department
6             and such regulations provide methods and standards
7             by which the Department will utilize its authority
8             under Section 404 of this Act; and
9             (D-8) For taxable years ending on or after December
10         31, 2004, an amount equal to the amount of intangible
11         expenses and costs otherwise allowed as a deduction in
12         computing base income, and that were paid, accrued, or
13         incurred, directly or indirectly, to a foreign person
14         who would be a member of the same unitary business
15         group but for the fact that the foreign person's
16         business activity outside the United States is 80% or
17         more of that person's total business activity. The
18         addition modification required by this subparagraph
19         shall be reduced to the extent that dividends were
20         included in base income of the unitary group for the
21         same taxable year and received by the taxpayer or by a
22         member of the taxpayer's unitary business group
23         (including amounts included in gross income pursuant
24         to Sections 951 through 964 of the Internal Revenue
25         Code and amounts included in gross income under Section
26         78 of the Internal Revenue Code) with respect to the
27         stock of the same person to whom the intangible
28         expenses and costs were directly or indirectly paid,
29         incurred or accrued. The preceding sentence shall not
30         apply to the extent that the same dividends caused a
31         reduction to the addition modification required under
32         Section 203(d)(2)(D-7) of this Act. As used in this
33         subparagraph, the term "intangible expenses and costs"
34         includes (1) expenses, losses, and costs for, or
35         related to, the direct or indirect acquisition, use,
36         maintenance or management, ownership, sale, exchange,

 

 

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

 

 

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1             indirectly, from a transaction with a foreign
2             person if the taxpayer establishes by clear and
3             convincing evidence, that the adjustments are
4             unreasonable; or if the taxpayer and the Director
5             agree in writing to the application or use of an
6             alternative method of apportionment under Section
7             304(f);
8                 Nothing in this subsection shall preclude the
9             Director from making any other adjustment
10             otherwise allowed under Section 404 of this Act for
11             any tax year beginning after the effective date of
12             this amendment provided such adjustment is made
13             pursuant to regulation adopted by the Department
14             and such regulations provide methods and standards
15             by which the Department will utilize its authority
16             under Section 404 of this Act;
17     and by deducting from the total so obtained the following
18     amounts:
19             (E) The valuation limitation amount;
20             (F) An amount equal to the amount of any tax
21         imposed by this Act which was refunded to the taxpayer
22         and included in such total for the taxable year;
23             (G) An amount equal to all amounts included in
24         taxable income as modified by subparagraphs (A), (B),
25         (C) and (D) which are exempt from taxation by this
26         State either by reason of its statutes or Constitution
27         or by reason of the Constitution, treaties or statutes
28         of the United States; provided that, in the case of any
29         statute of this State that exempts income derived from
30         bonds or other obligations from the tax imposed under
31         this Act, the amount exempted shall be the interest net
32         of bond premium amortization;
33             (H) Any income of the partnership which
34         constitutes personal service income as defined in
35         Section 1348 (b) (1) of the Internal Revenue Code (as
36         in effect December 31, 1981) or a reasonable allowance

 

 

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1         for compensation paid or accrued for services rendered
2         by partners to the partnership, whichever is greater;
3             (I) An amount equal to all amounts of income
4         distributable to an entity subject to the Personal
5         Property Tax Replacement Income Tax imposed by
6         subsections (c) and (d) of Section 201 of this Act
7         including amounts distributable to organizations
8         exempt from federal income tax by reason of Section
9         501(a) of the Internal Revenue Code;
10             (J) With the exception of any amounts subtracted
11         under subparagraph (G), an amount equal to the sum of
12         all amounts disallowed as deductions by (i) Sections
13         171(a) (2), and 265(2) of the Internal Revenue Code of
14         1954, as now or hereafter amended, and all amounts of
15         expenses allocable to interest and disallowed as
16         deductions by Section 265(1) of the Internal Revenue
17         Code, as now or hereafter amended; and (ii) for taxable
18         years ending on or after August 13, 1999, Sections
19         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
20         Internal Revenue Code; the provisions of this
21         subparagraph are exempt from the provisions of Section
22         250;
23             (K) An amount equal to those dividends included in
24         such total which were paid by a corporation which
25         conducts business operations in an Enterprise Zone or
26         zones created under the Illinois Enterprise Zone Act,
27         enacted by the 82nd General Assembly, and conducts
28         substantially all of its operations in an Enterprise
29         Zone or Zones;
30             (L) An amount equal to any contribution made to a
31         job training project established pursuant to the Real
32         Property Tax Increment Allocation Redevelopment Act;
33             (M) An amount equal to those dividends included in
34         such total that were paid by a corporation that
35         conducts business operations in a federally designated
36         Foreign Trade Zone or Sub-Zone and that is designated a

 

 

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1         High Impact Business located in Illinois; provided
2         that dividends eligible for the deduction provided in
3         subparagraph (K) of paragraph (2) of this subsection
4         shall not be eligible for the deduction provided under
5         this subparagraph (M);
6             (N) An amount equal to the amount of the deduction
7         used to compute the federal income tax credit for
8         restoration of substantial amounts held under claim of
9         right for the taxable year pursuant to Section 1341 of
10         the Internal Revenue Code of 1986;
11             (O) For taxable years 2001 and thereafter, for the
12         taxable year in which the bonus depreciation deduction
13         (30% of the adjusted basis of the qualified property)
14         is taken on the taxpayer's federal income tax return
15         under subsection (k) of Section 168 of the Internal
16         Revenue Code and for each applicable taxable year
17         thereafter, an amount equal to "x", where:
18                 (1) "y" equals the amount of the depreciation
19             deduction taken for the taxable year on the
20             taxpayer's federal income tax return on property
21             for which the bonus depreciation deduction (30% of
22             the adjusted basis of the qualified property) was
23             taken in any year under subsection (k) of Section
24             168 of the Internal Revenue Code, but not including
25             the bonus depreciation deduction; and
26                 (2) for property on which a bonus depreciation
27             deduction of 30% of the adjusted basis was taken,
28             "x" equals "y" multiplied by 30 and then divided by
29             70 (or "y" multiplied by 0.429), and for property
30             on which a bonus depreciation deduction of 50% of
31             the adjusted basis was taken, "x" equals "y"
32             multiplied by 1.0.
33             The aggregate amount deducted under this
34         subparagraph in all taxable years for any one piece of
35         property may not exceed the amount of the bonus
36         depreciation deduction (30% of the adjusted basis of

 

 

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1         the qualified property) taken on that property on the
2         taxpayer's federal income tax return under subsection
3         (k) of Section 168 of the Internal Revenue Code;
4             (P) If the taxpayer reports a capital gain or loss
5         on the taxpayer's federal income tax return for the
6         taxable year based on a sale or transfer of property
7         for which the taxpayer was required in any taxable year
8         to make an addition modification under subparagraph
9         (D-5), then an amount equal to that addition
10         modification.
11             The taxpayer is allowed to take the deduction under
12         this subparagraph only once with respect to any one
13         piece of property;
14             (Q) The amount of (i) any interest income (net of
15         the deductions allocable thereto) taken into account
16         for the taxable year with respect to a transaction with
17         a taxpayer that is required to make an addition
18         modification with respect to such transaction under
19         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
20         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
21         the amount of such addition modification and (ii) any
22         income from intangible property (net of the deductions
23         allocable thereto) taken into account for the taxable
24         year with respect to a transaction with a taxpayer that
25         is required to make an addition modification with
26         respect to such transaction under Section
27         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
28         203(d)(2)(D-8), but not to exceed the amount of such
29         addition modification;
30             (R) An amount equal to the interest income taken
31         into account for the taxable year (net of the
32         deductions allocable thereto) with respect to
33         transactions with a foreign person who would be a
34         member of the taxpayer's unitary business group but for
35         the fact that the foreign person's business activity
36         outside the United States is 80% or more of that

 

 

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1         person's total business activity, but not to exceed the
2         addition modification required to be made for the same
3         taxable year under Section 203(d)(2)(D-7) for interest
4         paid, accrued, or incurred, directly or indirectly, to
5         the same foreign person; and
6             (S) An amount equal to the income from intangible
7         property taken into account for the taxable year (net
8         of the deductions allocable thereto) with respect to
9         transactions with a foreign person who would be a
10         member of the taxpayer's unitary business group but for
11         the fact that the foreign person's business activity
12         outside the United States is 80% or more of that
13         person's total business activity, but not to exceed the
14         addition modification required to be made for the same
15         taxable year under Section 203(d)(2)(D-8) for
16         intangible expenses and costs paid, accrued, or
17         incurred, directly or indirectly, to the same foreign
18         person.
 
19     (e) Gross income; adjusted gross income; taxable income.
20         (1) In general. Subject to the provisions of paragraph
21     (2) and subsection (b) (3), for purposes of this Section
22     and Section 803(e), a taxpayer's gross income, adjusted
23     gross income, or taxable income for the taxable year shall
24     mean the amount of gross income, adjusted gross income or
25     taxable income properly reportable for federal income tax
26     purposes for the taxable year under the provisions of the
27     Internal Revenue Code. Taxable income may be less than
28     zero. However, for taxable years ending on or after
29     December 31, 1986, net operating loss carryforwards from
30     taxable years ending prior to December 31, 1986, may not
31     exceed the sum of federal taxable income for the taxable
32     year before net operating loss deduction, plus the excess
33     of addition modifications over subtraction modifications
34     for the taxable year. For taxable years ending prior to
35     December 31, 1986, taxable income may never be an amount in

 

 

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1     excess of the net operating loss for the taxable year as
2     defined in subsections (c) and (d) of Section 172 of the
3     Internal Revenue Code, provided that when taxable income of
4     a corporation (other than a Subchapter S corporation),
5     trust, or estate is less than zero and addition
6     modifications, other than those provided by subparagraph
7     (E) of paragraph (2) of subsection (b) for corporations or
8     subparagraph (E) of paragraph (2) of subsection (c) for
9     trusts and estates, exceed subtraction modifications, an
10     addition modification must be made under those
11     subparagraphs for any other taxable year to which the
12     taxable income less than zero (net operating loss) is
13     applied under Section 172 of the Internal Revenue Code or
14     under subparagraph (E) of paragraph (2) of this subsection
15     (e) applied in conjunction with Section 172 of the Internal
16     Revenue Code.
17         (2) Special rule. For purposes of paragraph (1) of this
18     subsection, the taxable income properly reportable for
19     federal income tax purposes shall mean:
20             (A) Certain life insurance companies. In the case
21         of a life insurance company subject to the tax imposed
22         by Section 801 of the Internal Revenue Code, life
23         insurance company taxable income, plus the amount of
24         distribution from pre-1984 policyholder surplus
25         accounts as calculated under Section 815a of the
26         Internal Revenue Code;
27             (B) Certain other insurance companies. In the case
28         of mutual insurance companies subject to the tax
29         imposed by Section 831 of the Internal Revenue Code,
30         insurance company taxable income;
31             (C) Regulated investment companies. In the case of
32         a regulated investment company subject to the tax
33         imposed by Section 852 of the Internal Revenue Code,
34         investment company taxable income;
35             (D) Real estate investment trusts. In the case of a
36         real estate investment trust subject to the tax imposed

 

 

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1         by Section 857 of the Internal Revenue Code, real
2         estate investment trust taxable income;
3             (E) Consolidated corporations. In the case of a
4         corporation which is a member of an affiliated group of
5         corporations filing a consolidated income tax return
6         for the taxable year for federal income tax purposes,
7         taxable income determined as if such corporation had
8         filed a separate return for federal income tax purposes
9         for the taxable year and each preceding taxable year
10         for which it was a member of an affiliated group. For
11         purposes of this subparagraph, the taxpayer's separate
12         taxable income shall be determined as if the election
13         provided by Section 243(b) (2) of the Internal Revenue
14         Code had been in effect for all such years;
15             (F) Cooperatives. In the case of a cooperative
16         corporation or association, the taxable income of such
17         organization determined in accordance with the
18         provisions of Section 1381 through 1388 of the Internal
19         Revenue Code;
20             (G) Subchapter S corporations. In the case of: (i)
21         a Subchapter S corporation for which there is in effect
22         an election for the taxable year under Section 1362 of
23         the Internal Revenue Code, the taxable income of such
24         corporation determined in accordance with Section
25         1363(b) of the Internal Revenue Code, except that
26         taxable income shall take into account those items
27         which are required by Section 1363(b)(1) of the
28         Internal Revenue Code to be separately stated; and (ii)
29         a Subchapter S corporation for which there is in effect
30         a federal election to opt out of the provisions of the
31         Subchapter S Revision Act of 1982 and have applied
32         instead the prior federal Subchapter S rules as in
33         effect on July 1, 1982, the taxable income of such
34         corporation determined in accordance with the federal
35         Subchapter S rules as in effect on July 1, 1982; and
36             (H) Partnerships. In the case of a partnership,

 

 

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1         taxable income determined in accordance with Section
2         703 of the Internal Revenue Code, except that taxable
3         income shall take into account those items which are
4         required by Section 703(a)(1) to be separately stated
5         but which would be taken into account by an individual
6         in calculating his taxable income.
7         (3) Recapture of business expenses on disposition of
8     asset or business. Notwithstanding any other law to the
9     contrary, if in prior years income from an asset or
10     business has been classified as business income and in a
11     later year is demonstrated to be non-business income, then
12     all expenses, without limitation, deducted in such later
13     year and in the 2 immediately preceding taxable years
14     related to that asset or business that generated the
15     non-business income shall be added back and recaptured as
16     business income in the year of the disposition of the asset
17     or business. Such amount shall be apportioned to Illinois
18     using the greater of the apportionment fraction computed
19     for the business under Section 304 of this Act for the
20     taxable year or the average of the apportionment fractions
21     computed for the business under Section 304 of this Act for
22     the taxable year and for the 2 immediately preceding
23     taxable years.
24     (f) Valuation limitation amount.
25         (1) In general. The valuation limitation amount
26     referred to in subsections (a) (2) (G), (c) (2) (I) and
27     (d)(2) (E) is an amount equal to:
28             (A) The sum of the pre-August 1, 1969 appreciation
29         amounts (to the extent consisting of gain reportable
30         under the provisions of Section 1245 or 1250 of the
31         Internal Revenue Code) for all property in respect of
32         which such gain was reported for the taxable year; plus
33             (B) The lesser of (i) the sum of the pre-August 1,
34         1969 appreciation amounts (to the extent consisting of
35         capital gain) for all property in respect of which such
36         gain was reported for federal income tax purposes for

 

 

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1         the taxable year, or (ii) the net capital gain for the
2         taxable year, reduced in either case by any amount of
3         such gain included in the amount determined under
4         subsection (a) (2) (F) or (c) (2) (H).
5         (2) Pre-August 1, 1969 appreciation amount.
6             (A) If the fair market value of property referred
7         to in paragraph (1) was readily ascertainable on August
8         1, 1969, the pre-August 1, 1969 appreciation amount for
9         such property is the lesser of (i) the excess of such
10         fair market value over the taxpayer's basis (for
11         determining gain) for such property on that date
12         (determined under the Internal Revenue Code as in
13         effect on that date), or (ii) the total gain realized
14         and reportable for federal income tax purposes in
15         respect of the sale, exchange or other disposition of
16         such property.
17             (B) If the fair market value of property referred
18         to in paragraph (1) was not readily ascertainable on
19         August 1, 1969, the pre-August 1, 1969 appreciation
20         amount for such property is that amount which bears the
21         same ratio to the total gain reported in respect of the
22         property for federal income tax purposes for the
23         taxable year, as the number of full calendar months in
24         that part of the taxpayer's holding period for the
25         property ending July 31, 1969 bears to the number of
26         full calendar months in the taxpayer's entire holding
27         period for the property.
28             (C) The Department shall prescribe such
29         regulations as may be necessary to carry out the
30         purposes of this paragraph.
 
31     (g) Double deductions. Unless specifically provided
32 otherwise, nothing in this Section shall permit the same item
33 to be deducted more than once.
 
34     (h) Legislative intention. Except as expressly provided by

 

 

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1 this Section there shall be no modifications or limitations on
2 the amounts of income, gain, loss or deduction taken into
3 account in determining gross income, adjusted gross income or
4 taxable income for federal income tax purposes for the taxable
5 year, or in the amount of such items entering into the
6 computation of base income and net income under this Act for
7 such taxable year, whether in respect of property values as of
8 August 1, 1969 or otherwise.
9 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
10 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
11 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
12 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
13     Section 99. Effective date. This Act takes effect upon
14 becoming law.