Rep. Kenneth Dunkin

Filed: 3/10/2005

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 1749

2     AMENDMENT NO. ______. Amend House Bill 1749 by replacing
3 everything after the enacting clause with the following:
 
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

 

 

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1         the computation of adjusted gross income for the
2         taxable year;
3             (C) An amount equal to the amount received during
4         the taxable year as a recovery or refund of real
5         property taxes paid with respect to the taxpayer's
6         principal residence under the Revenue Act of 1939 and
7         for which a deduction was previously taken under
8         subparagraph (L) of this paragraph (2) prior to July 1,
9         1991, the retrospective application date of Article 4
10         of Public Act 87-17. In the case of multi-unit or
11         multi-use structures and farm dwellings, the taxes on
12         the taxpayer's principal residence shall be that
13         portion of the total taxes for the entire property
14         which is attributable to such principal residence;
15             (D) 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 adjusted gross income;
19             (D-5) An amount, to the extent not included in
20         adjusted gross income, equal to the amount of money
21         withdrawn by the taxpayer in the taxable year from a
22         medical care savings account and the interest earned on
23         the account in the taxable year of a withdrawal
24         pursuant to subsection (b) of Section 20 of the Medical
25         Care Savings Account Act or subsection (b) of Section
26         20 of the Medical Care Savings Account Act of 2000;
27             (D-10) For taxable years ending after December 31,
28         1997, an amount equal to any eligible remediation costs
29         that the individual deducted in computing adjusted
30         gross income and for which the individual claims a
31         credit under subsection (l) of Section 201;
32             (D-15) For taxable years 2001 and thereafter, an
33         amount equal to the bonus depreciation deduction (30%
34         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-16) 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-15), then an amount equal to the
10         aggregate amount of the deductions taken in all taxable
11         years under subparagraph (Z) 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-17) For taxable years ending on or after
17         December 31, 2004, an amount equal to the amount
18         otherwise allowed as a deduction in computing base
19         income for interest paid, accrued, or incurred,
20         directly or indirectly, to a foreign person who would
21         be a member of the same unitary business group but for
22         the fact that foreign person's business activity
23         outside the United States is 80% or more of the foreign
24         person's total business activity. The addition
25         modification required by this subparagraph shall be
26         reduced to the extent that dividends were included in
27         base income of the unitary group for the same taxable
28         year and received by the taxpayer or by a member of the
29         taxpayer's unitary business group (including amounts
30         included in gross income under Sections 951 through 964
31         of the Internal Revenue Code and amounts included in
32         gross income under Section 78 of the Internal Revenue
33         Code) with respect to the stock of the same person to
34         whom the interest was paid, accrued, or incurred.

 

 

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

 

 

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1             agree in writing to the application or use of an
2             alternative method of apportionment under Section
3             304(f).
4                 Nothing in this subsection shall preclude the
5             Director from making any other adjustment
6             otherwise allowed under Section 404 of this Act for
7             any tax year beginning after the effective date of
8             this amendment provided such adjustment is made
9             pursuant to regulation adopted by the Department
10             and such regulations provide methods and standards
11             by which the Department will utilize its authority
12             under Section 404 of this Act;
13             (D-18) For taxable years ending on or after
14         December 31, 2004, an amount equal to the amount of
15         intangible expenses and costs otherwise allowed as a
16         deduction in computing base income, and that were paid,
17         accrued, or incurred, directly or indirectly, to a
18         foreign person who would be a member of the same
19         unitary business group but for the fact that the
20         foreign person's business activity outside the United
21         States is 80% or more of that person's total business
22         activity. The addition modification required by this
23         subparagraph shall be reduced to the extent that
24         dividends were included in base income of the unitary
25         group for the same taxable year and received by the
26         taxpayer or by a member of the taxpayer's unitary
27         business group (including amounts included in gross
28         income under Sections 951 through 964 of the Internal
29         Revenue Code and amounts included in gross income under
30         Section 78 of the Internal Revenue Code) with respect
31         to the stock of the same person to whom the intangible
32         expenses and costs were directly or indirectly paid,
33         incurred, or accrued. The preceding sentence does not
34         apply to the extent that the same dividends caused a

 

 

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

 

 

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1                 intangible expense or cost between the
2                 taxpayer and the foreign person did not have as
3                 a principal purpose the avoidance of Illinois
4                 income tax, and is paid pursuant to a contract
5                 or agreement that reflects arm's-length terms;
6                 or
7                 (iii) any item of intangible expense or cost
8             paid, accrued, or incurred, directly or
9             indirectly, from a transaction with a foreign
10             person if the taxpayer establishes by clear and
11             convincing evidence, that the adjustments are
12             unreasonable; or if the taxpayer and the Director
13             agree in writing to the application or use of an
14             alternative method of apportionment under Section
15             304(f);
16                 Nothing in this subsection shall preclude the
17             Director from making any other adjustment
18             otherwise allowed under Section 404 of this Act for
19             any tax year beginning after the effective date of
20             this amendment provided such adjustment is made
21             pursuant to regulation adopted by the Department
22             and such regulations provide methods and standards
23             by which the Department will utilize its authority
24             under Section 404 of this Act;
25             (D-20) For taxable years beginning on or after
26         January 1, 2002, in the case of a distribution from a
27         qualified tuition program under Section 529 of the
28         Internal Revenue Code, other than (i) a distribution
29         from a College Savings Pool created under Section 16.5
30         of the State Treasurer Act or (ii) a distribution from
31         the Illinois Prepaid Tuition Trust Fund, an amount
32         equal to the amount excluded from gross income under
33         Section 529(c)(3)(B);
34             (D-25) For taxable years ending on or after

 

 

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1         December 31, 2005, an amount equal to the expense
2         deduction under Section 179 of the Internal Revenue
3         Code for a sport utility vehicle taken on the
4         taxpayer's federal income tax return for the taxable
5         year less the amount of the depreciation deduction
6         limitation under Section 280F of the Internal Revenue
7         Code for the first taxable year of the recovery period.
8         For Illinois tax purposes, the adjusted basis of the
9         sport utility vehicle under this paragraph shall equal
10         the federal adjusted basis of the vehicle. For the
11         purpose of this paragraph, "sport utility vehicle"
12         means a four-wheeled vehicle manufactured primarily
13         for use on public streets, roads, and highways that:
14                 (1) is rated between 6,000 and 14,000 pounds
15             gross vehicle weight;
16                 (2) is designed to seat 9 or fewer individuals;
17             and
18                 (3) is not equipped with an open cargo area
19             with an interior length of 72 or more inches that
20             is separate from the passenger compartment;
21     and by deducting from the total so obtained the sum of the
22     following amounts:
23             (E) For taxable years ending before December 31,
24         2001, any amount included in such total in respect of
25         any compensation (including but not limited to any
26         compensation paid or accrued to a serviceman while a
27         prisoner of war or missing in action) paid to a
28         resident by reason of being on active duty in the Armed
29         Forces of the United States and in respect of any
30         compensation paid or accrued to a resident who as a
31         governmental employee was a prisoner of war or missing
32         in action, and in respect of any compensation paid to a
33         resident in 1971 or thereafter for annual training
34         performed pursuant to Sections 502 and 503, Title 32,

 

 

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1         United States Code as a member of the Illinois National
2         Guard. For taxable years ending on or after December
3         31, 2001, any amount included in such total in respect
4         of any compensation (including but not limited to any
5         compensation paid or accrued to a serviceman while a
6         prisoner of war or missing in action) paid to a
7         resident by reason of being a member of any component
8         of the Armed Forces of the United States and in respect
9         of any compensation paid or accrued to a resident who
10         as a governmental employee was a prisoner of war or
11         missing in action, and in respect of any compensation
12         paid to a resident in 2001 or thereafter by reason of
13         being a member of the Illinois National Guard. The
14         provisions of this amendatory Act of the 92nd General
15         Assembly are exempt from the provisions of Section 250;
16             (F) An amount equal to all amounts included in such
17         total pursuant to the provisions of Sections 402(a),
18         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
19         Internal Revenue Code, or included in such total as
20         distributions under the provisions of any retirement
21         or disability plan for employees of any governmental
22         agency or unit, or retirement payments to retired
23         partners, which payments are excluded in computing net
24         earnings from self employment by Section 1402 of the
25         Internal Revenue Code and regulations adopted pursuant
26         thereto;
27             (G) The valuation limitation amount;
28             (H) An amount equal to the amount of any tax
29         imposed by this Act which was refunded to the taxpayer
30         and included in such total for the taxable year;
31             (I) An amount equal to all amounts included in such
32         total pursuant to the provisions of Section 111 of the
33         Internal Revenue Code as a recovery of items previously
34         deducted from adjusted gross income in the computation

 

 

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

 

 

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1             (N) An amount equal to all amounts included in such
2         total which are exempt from taxation by this State
3         either by reason of its statutes or Constitution or by
4         reason of the Constitution, treaties or statutes of the
5         United States; provided that, in the case of any
6         statute of this State that exempts income derived from
7         bonds or other obligations from the tax imposed under
8         this Act, the amount exempted shall be the interest net
9         of bond premium amortization;
10             (O) An amount equal to any contribution made to a
11         job training project established pursuant to the Tax
12         Increment Allocation Redevelopment Act;
13             (P) An amount equal to the amount of the deduction
14         used to compute the federal income tax credit for
15         restoration of substantial amounts held under claim of
16         right for the taxable year pursuant to Section 1341 of
17         the Internal Revenue Code of 1986;
18             (Q) An amount equal to any amounts included in such
19         total, received by the taxpayer as an acceleration in
20         the payment of life, endowment or annuity benefits in
21         advance of the time they would otherwise be payable as
22         an indemnity for a terminal illness;
23             (R) An amount equal to the amount of any federal or
24         State bonus paid to veterans of the Persian Gulf War;
25             (S) An amount, to the extent included in adjusted
26         gross income, equal to the amount of a contribution
27         made in the taxable year on behalf of the taxpayer to a
28         medical care savings account established under the
29         Medical Care Savings Account Act or the Medical Care
30         Savings Account Act of 2000 to the extent the
31         contribution is accepted by the account administrator
32         as provided in that Act;
33             (T) An amount, to the extent included in adjusted
34         gross income, equal to the amount of interest earned in

 

 

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1         the taxable year on a medical care savings account
2         established under the Medical Care Savings Account Act
3         or the Medical Care Savings Account Act of 2000 on
4         behalf of the taxpayer, other than interest added
5         pursuant to item (D-5) of this paragraph (2);
6             (U) For one taxable year beginning on or after
7         January 1, 1994, an amount equal to the total amount of
8         tax imposed and paid under subsections (a) and (b) of
9         Section 201 of this Act on grant amounts received by
10         the taxpayer under the Nursing Home Grant Assistance
11         Act during the taxpayer's taxable years 1992 and 1993;
12             (V) Beginning with tax years ending on or after
13         December 31, 1995 and ending with tax years ending on
14         or before December 31, 2004, an amount equal to the
15         amount paid by a taxpayer who is a self-employed
16         taxpayer, a partner of a partnership, or a shareholder
17         in a Subchapter S corporation for health insurance or
18         long-term care insurance for that taxpayer or that
19         taxpayer's spouse or dependents, to the extent that the
20         amount paid for that health insurance or long-term care
21         insurance may be deducted under Section 213 of the
22         Internal Revenue Code of 1986, has not been deducted on
23         the federal income tax return of the taxpayer, and does
24         not exceed the taxable income attributable to that
25         taxpayer's income, self-employment income, or
26         Subchapter S corporation income; except that no
27         deduction shall be allowed under this item (V) if the
28         taxpayer is eligible to participate in any health
29         insurance or long-term care insurance plan of an
30         employer of the taxpayer or the taxpayer's spouse. The
31         amount of the health insurance and long-term care
32         insurance subtracted under this item (V) shall be
33         determined by multiplying total health insurance and
34         long-term care insurance premiums paid by the taxpayer

 

 

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1         times a number that represents the fractional
2         percentage of eligible medical expenses under Section
3         213 of the Internal Revenue Code of 1986 not actually
4         deducted on the taxpayer's federal income tax return;
5             (W) For taxable years beginning on or after January
6         1, 1998, all amounts included in the taxpayer's federal
7         gross income in the taxable year from amounts converted
8         from a regular IRA to a Roth IRA. This paragraph is
9         exempt from the provisions of Section 250;
10             (X) For taxable year 1999 and thereafter, an amount
11         equal to the amount of any (i) distributions, to the
12         extent includible in gross income for federal income
13         tax purposes, made to the taxpayer because of his or
14         her status as a victim of persecution for racial or
15         religious reasons by Nazi Germany or any other Axis
16         regime or as an heir of the victim and (ii) items of
17         income, to the extent includible in gross income for
18         federal income tax purposes, attributable to, derived
19         from or in any way related to assets stolen from,
20         hidden from, or otherwise lost to a victim of
21         persecution for racial or religious reasons by Nazi
22         Germany or any other Axis regime immediately prior to,
23         during, and immediately after World War II, including,
24         but not limited to, interest on the proceeds receivable
25         as insurance under policies issued to a victim of
26         persecution for racial or religious reasons by Nazi
27         Germany or any other Axis regime by European insurance
28         companies immediately prior to and during World War II;
29         provided, however, this subtraction from federal
30         adjusted gross income does not apply to assets acquired
31         with such assets or with the proceeds from the sale of
32         such assets; provided, further, this paragraph shall
33         only apply to a taxpayer who was the first recipient of
34         such assets after their recovery and who is a victim of

 

 

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1         persecution for racial or religious reasons by Nazi
2         Germany or any other Axis regime or as an heir of the
3         victim. The amount of and the eligibility for any
4         public assistance, benefit, or similar entitlement is
5         not affected by the inclusion of items (i) and (ii) of
6         this paragraph in gross income for federal income tax
7         purposes. This paragraph is exempt from the provisions
8         of Section 250;
9             (Y) For taxable years beginning on or after January
10         1, 2002 and ending on or before December 31, 2004,
11         moneys contributed in the taxable year to a College
12         Savings Pool account under Section 16.5 of the State
13         Treasurer Act, except that amounts excluded from gross
14         income under Section 529(c)(3)(C)(i) of the Internal
15         Revenue Code shall not be considered moneys
16         contributed under this subparagraph (Y). For taxable
17         years beginning on or after January 1, 2005, a maximum
18         of $10,000 contributed in the taxable year to (i) a
19         College Savings Pool account under Section 16.5 of the
20         State Treasurer Act or (ii) the Illinois Prepaid
21         Tuition Trust Fund, except that amounts excluded from
22         gross income under Section 529(c)(3)(C)(i) of the
23         Internal Revenue Code shall not be considered moneys
24         contributed under this subparagraph (Y). This
25         subparagraph (Y) is exempt from the provisions of
26         Section 250;
27             (Z) For taxable years 2001 and thereafter, for the
28         taxable year in which the bonus depreciation deduction
29         (30% of the adjusted basis of the qualified property)
30         is taken on the taxpayer's federal income tax return
31         under subsection (k) of Section 168 of the Internal
32         Revenue Code and for each applicable taxable year
33         thereafter, an amount equal to "x", where:
34                 (1) "y" equals the amount of the depreciation

 

 

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

 

 

09400HB1749ham001 - 16 - LRB094 03234 BDD 42984 a

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

 

 

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1         incurred, directly or indirectly, to the same foreign
2         person.
 
3     (b) Corporations.
4         (1) In general. In the case of a corporation, base
5     income means an amount equal to the taxpayer's taxable
6     income for the taxable year as modified by paragraph (2).
7         (2) Modifications. The taxable income referred to in
8     paragraph (1) shall be modified by adding thereto the sum
9     of the following amounts:
10             (A) An amount equal to all amounts paid or accrued
11         to the taxpayer as interest and all distributions
12         received from regulated investment companies during
13         the taxable year to the extent excluded from gross
14         income in the computation of taxable income;
15             (B) An amount equal to the amount of tax imposed by
16         this Act to the extent deducted from gross income in
17         the computation of taxable income for the taxable year;
18             (C) In the case of a regulated investment company,
19         an amount equal to the excess of (i) the net long-term
20         capital gain for the taxable year, over (ii) the amount
21         of the capital gain dividends designated as such in
22         accordance with Section 852(b)(3)(C) of the Internal
23         Revenue Code and any amount designated under Section
24         852(b)(3)(D) of the Internal Revenue Code,
25         attributable to the taxable year (this amendatory Act
26         of 1995 (Public Act 89-89) is declarative of existing
27         law and is not a new enactment);
28             (D) The amount of any net operating loss deduction
29         taken in arriving at taxable income, other than a net
30         operating loss carried forward from a taxable year
31         ending prior to December 31, 1986;
32             (E) For taxable years in which a net operating loss
33         carryback or carryforward from a taxable year ending

 

 

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1         prior to December 31, 1986 is an element of taxable
2         income under paragraph (1) of subsection (e) or
3         subparagraph (E) of paragraph (2) of subsection (e),
4         the amount by which addition modifications other than
5         those provided by this subparagraph (E) exceeded
6         subtraction modifications in such earlier taxable
7         year, with the following limitations applied in the
8         order that they are listed:
9                 (i) the addition modification relating to the
10             net operating loss carried back or forward to the
11             taxable year from any taxable year ending prior to
12             December 31, 1986 shall be reduced by the amount of
13             addition modification under this subparagraph (E)
14             which related to that net operating loss and which
15             was taken into account in calculating the base
16             income of an earlier taxable year, and
17                 (ii) the addition modification relating to the
18             net operating loss carried back or forward to the
19             taxable year from any taxable year ending prior to
20             December 31, 1986 shall not exceed the amount of
21             such carryback or carryforward;
22             For taxable years in which there is a net operating
23         loss carryback or carryforward from more than one other
24         taxable year ending prior to December 31, 1986, the
25         addition modification provided in this subparagraph
26         (E) shall be the sum of the amounts computed
27         independently under the preceding provisions of this
28         subparagraph (E) for each such taxable year;
29             (E-5) For taxable years ending after December 31,
30         1997, an amount equal to any eligible remediation costs
31         that the corporation deducted in computing adjusted
32         gross income and for which the corporation claims a
33         credit under subsection (l) of Section 201;
34             (E-10) For taxable years 2001 and thereafter, an

 

 

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1         amount equal to the bonus depreciation deduction (30%
2         of the adjusted basis of the qualified property) taken
3         on the taxpayer's federal income tax return for the
4         taxable year under subsection (k) of Section 168 of the
5         Internal Revenue Code; and
6             (E-11) If the taxpayer reports a capital gain or
7         loss on the taxpayer's federal income tax return for
8         the taxable year based on a sale or transfer of
9         property for which the taxpayer was required in any
10         taxable year to make an addition modification under
11         subparagraph (E-10), then an amount equal to the
12         aggregate amount of the deductions taken in all taxable
13         years under subparagraph (T) with respect to that
14         property.
15             The taxpayer is required to make the addition
16         modification under this subparagraph only once with
17         respect to any one piece of property;
18             (E-12) For taxable years ending on or after
19         December 31, 2004, an amount equal to the amount
20         otherwise allowed as a deduction in computing base
21         income for interest paid, accrued, or incurred,
22         directly or indirectly, to a foreign person who would
23         be a member of the same unitary business group but for
24         the fact the foreign person's business activity
25         outside the United States is 80% or more of the foreign
26         person's total business activity. The addition
27         modification required by this subparagraph shall be
28         reduced to the extent that dividends were included in
29         base income of the unitary group for the same taxable
30         year and received by the taxpayer or by a member of the
31         taxpayer's unitary business group (including amounts
32         included in gross income pursuant to Sections 951
33         through 964 of the Internal Revenue Code and amounts
34         included in gross income under Section 78 of the

 

 

09400HB1749ham001 - 20 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 21 - LRB094 03234 BDD 42984 a

1             person if the taxpayer establishes by clear and
2             convincing evidence that the adjustments are
3             unreasonable; or if the taxpayer and the Director
4             agree in writing to the application or use of an
5             alternative method of apportionment under Section
6             304(f).
7                 Nothing in this subsection shall preclude the
8             Director from making any other adjustment
9             otherwise allowed under Section 404 of this Act for
10             any tax year beginning after the effective date of
11             this amendment provided such adjustment is made
12             pursuant to regulation adopted by the Department
13             and such regulations provide methods and standards
14             by which the Department will utilize its authority
15             under Section 404 of this Act;
16             (E-13) For taxable years ending on or after
17         December 31, 2004, an amount equal to the amount of
18         intangible expenses and costs otherwise allowed as a
19         deduction in computing base income, and that were paid,
20         accrued, or incurred, directly or indirectly, to a
21         foreign person who would be a member of the same
22         unitary business group but for the fact that the
23         foreign person's business activity outside the United
24         States is 80% or more of that person's total business
25         activity. The addition modification required by this
26         subparagraph shall be reduced to the extent that
27         dividends were included in base income of the unitary
28         group for the same taxable year and received by the
29         taxpayer or by a member of the taxpayer's unitary
30         business group (including amounts included in gross
31         income pursuant to Sections 951 through 964 of the
32         Internal Revenue Code and amounts included in gross
33         income under Section 78 of the Internal Revenue Code)
34         with respect to the stock of the same person to whom

 

 

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

 

 

09400HB1749ham001 - 23 - LRB094 03234 BDD 42984 a

1                 intangible expense or cost to a person that is
2                 not a related member, and
3                     (b) the transaction giving rise to the
4                 intangible expense or cost between the
5                 taxpayer and the foreign person did not have as
6                 a principal purpose the avoidance of Illinois
7                 income tax, and is paid pursuant to a contract
8                 or agreement that reflects arm's-length terms;
9                 or
10                 (iii) any item of intangible expense or cost
11             paid, accrued, or incurred, directly or
12             indirectly, from a transaction with a foreign
13             person if the taxpayer establishes by clear and
14             convincing evidence, that the adjustments are
15             unreasonable; or if the taxpayer and the Director
16             agree in writing to the application or use of an
17             alternative method of apportionment under Section
18             304(f);
19                 Nothing in this subsection shall preclude the
20             Director from making any other adjustment
21             otherwise allowed under Section 404 of this Act for
22             any tax year beginning after the effective date of
23             this amendment provided such adjustment is made
24             pursuant to regulation adopted by the Department
25             and such regulations provide methods and standards
26             by which the Department will utilize its authority
27             under Section 404 of this Act;
28             (E-15) For taxable years ending on or after
29         December 31, 2005, an amount equal to the expense
30         deduction under Section 179 of the Internal Revenue
31         Code for a sport utility vehicle taken on the
32         taxpayer's federal income tax return for the taxable
33         year less the amount of the depreciation deduction
34         limitation under Section 280F of the Internal Revenue

 

 

09400HB1749ham001 - 24 - LRB094 03234 BDD 42984 a

1         Code for the first taxable year of the recovery period.
2         For Illinois tax purposes, the adjusted basis of the
3         sport utility vehicle under this paragraph shall equal
4         the federal adjusted basis of the vehicle. For the
5         purpose of this paragraph, "sport utility vehicle"
6         means a four-wheeled vehicle manufactured primarily
7         for use on public streets, roads, and highways that:
8                 (1) is rated between 6,000 and 14,000 pounds
9             gross vehicle weight;
10                 (2) is designed to seat 9 or fewer individuals;
11             and
12                 (3) is not equipped with an open cargo area
13             with an interior length of 72 or more inches that
14             is separate from the passenger compartment;
15     and by deducting from the total so obtained the sum of the
16     following amounts:
17             (F) An amount equal to the amount of any tax
18         imposed by this Act which was refunded to the taxpayer
19         and included in such total for the taxable year;
20             (G) An amount equal to any amount included in such
21         total under Section 78 of the Internal Revenue Code;
22             (H) In the case of a regulated investment company,
23         an amount equal to the amount of exempt interest
24         dividends as defined in subsection (b) (5) of Section
25         852 of the Internal Revenue Code, paid to shareholders
26         for the taxable year;
27             (I) With the exception of any amounts subtracted
28         under subparagraph (J), an amount equal to the sum of
29         all amounts disallowed as deductions by (i) Sections
30         171(a) (2), and 265(a)(2) and amounts disallowed as
31         interest expense by Section 291(a)(3) of the Internal
32         Revenue Code, as now or hereafter amended, and all
33         amounts of expenses allocable to interest and
34         disallowed as deductions by Section 265(a)(1) of the

 

 

09400HB1749ham001 - 25 - LRB094 03234 BDD 42984 a

1         Internal Revenue Code, as now or hereafter amended; and
2         (ii) for taxable years ending on or after August 13,
3         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
4         832(b)(5)(B)(i) of the Internal Revenue Code; the
5         provisions of this subparagraph are exempt from the
6         provisions of Section 250;
7             (J) An amount equal to all amounts included in such
8         total which are exempt from taxation by this State
9         either by reason of its statutes or Constitution or by
10         reason of the Constitution, treaties or statutes of the
11         United States; provided that, in the case of any
12         statute of this State that exempts income derived from
13         bonds or other obligations from the tax imposed under
14         this Act, the amount exempted shall be the interest net
15         of bond premium amortization;
16             (K) An amount equal to those dividends included in
17         such total which were paid by a corporation which
18         conducts business operations in an Enterprise Zone or
19         zones created under the Illinois Enterprise Zone Act
20         and conducts substantially all of its operations in an
21         Enterprise Zone or zones;
22             (L) 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 (K) of paragraph 2 of this subsection
29         shall not be eligible for the deduction provided under
30         this subparagraph (L);
31             (M) For any taxpayer that is a financial
32         organization within the meaning of Section 304(c) of
33         this Act, an amount included in such total as interest
34         income from a loan or loans made by such taxpayer to a

 

 

09400HB1749ham001 - 26 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 27 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 28 - LRB094 03234 BDD 42984 a

1         paid under Sections 951 through 964 of the Internal
2         Revenue Code, from any such corporation specified in
3         clause (i) that would but for the provisions of Section
4         1504 (b) (3) of the Internal Revenue Code be treated as
5         a member of the affiliated group which includes the
6         dividend recipient, exceed the amount of the
7         modification provided under subparagraph (G) of
8         paragraph (2) of this subsection (b) which is related
9         to such dividends;
10             (P) An amount equal to any contribution made to a
11         job training project established pursuant to the Tax
12         Increment Allocation Redevelopment Act;
13             (Q) An amount equal to the amount of the deduction
14         used to compute the federal income tax credit for
15         restoration of substantial amounts held under claim of
16         right for the taxable year pursuant to Section 1341 of
17         the Internal Revenue Code of 1986;
18             (R) In the case of an attorney-in-fact with respect
19         to whom an interinsurer or a reciprocal insurer has
20         made the election under Section 835 of the Internal
21         Revenue Code, 26 U.S.C. 835, an amount equal to the
22         excess, if any, of the amounts paid or incurred by that
23         interinsurer or reciprocal insurer in the taxable year
24         to the attorney-in-fact over the deduction allowed to
25         that interinsurer or reciprocal insurer with respect
26         to the attorney-in-fact under Section 835(b) of the
27         Internal Revenue Code for the taxable year;
28             (S) For taxable years ending on or after December
29         31, 1997, in the case of a Subchapter S corporation, an
30         amount equal to all amounts of income allocable to a
31         shareholder subject to the Personal Property Tax
32         Replacement Income Tax imposed by subsections (c) and
33         (d) of Section 201 of this Act, including amounts
34         allocable to organizations exempt from federal income

 

 

09400HB1749ham001 - 29 - LRB094 03234 BDD 42984 a

1         tax by reason of Section 501(a) of the Internal Revenue
2         Code. This subparagraph (S) is exempt from the
3         provisions of Section 250;
4             (T) For taxable years 2001 and thereafter, for the
5         taxable year in which the bonus depreciation deduction
6         (30% of the adjusted basis of the qualified property)
7         is taken on the taxpayer's federal income tax return
8         under subsection (k) of Section 168 of the Internal
9         Revenue Code and for each applicable taxable year
10         thereafter, an amount equal to "x", where:
11                 (1) "y" equals the amount of the depreciation
12             deduction taken for the taxable year on the
13             taxpayer's federal income tax return on property
14             for which the bonus depreciation deduction (30% of
15             the adjusted basis of the qualified property) was
16             taken in any year under subsection (k) of Section
17             168 of the Internal Revenue Code, but not including
18             the bonus depreciation deduction; and
19                 (2) "x" equals "y" multiplied by 30 and then
20             divided by 70 (or "y" multiplied by 0.429).
21             The aggregate amount deducted under this
22         subparagraph in all taxable years for any one piece of
23         property may not exceed the amount of the bonus
24         depreciation deduction (30% of the adjusted basis of
25         the qualified property) taken on that property on the
26         taxpayer's federal income tax return under subsection
27         (k) of Section 168 of the Internal Revenue Code;
28             (U) If the taxpayer reports a capital gain or loss
29         on the taxpayer's federal income tax return for the
30         taxable year based on a sale or transfer of property
31         for which the taxpayer was required in any taxable year
32         to make an addition modification under subparagraph
33         (E-10), then an amount equal to that addition
34         modification.

 

 

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

 

 

09400HB1749ham001 - 31 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 32 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 33 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 34 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 35 - LRB094 03234 BDD 42984 a

1                 taxable year, paid, accrued, or incurred, the
2                 interest to a person that is not a related
3                 member, and
4                     (b) the transaction giving rise to the
5                 interest expense between the taxpayer and the
6                 foreign person did not have as a principal
7                 purpose the avoidance of Illinois income tax,
8                 and is paid pursuant to a contract or agreement
9                 that reflects an arm's-length interest rate
10                 and terms; or
11                 (iii) the taxpayer can establish, based on
12             clear and convincing evidence, that the interest
13             paid, accrued, or incurred relates to a contract or
14             agreement entered into at arm's-length rates and
15             terms and the principal purpose for the payment is
16             not federal or Illinois tax avoidance; or
17                 (iv) an item of interest paid, accrued, or
18             incurred, directly or indirectly, to 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             (G-13) For taxable years ending on or after

 

 

09400HB1749ham001 - 36 - LRB094 03234 BDD 42984 a

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"

 

 

09400HB1749ham001 - 37 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 38 - LRB094 03234 BDD 42984 a

1             alternative method of apportionment under Section
2             304(f);
3                 Nothing in this subsection shall preclude the
4             Director from making any other adjustment
5             otherwise allowed under Section 404 of this Act for
6             any tax year beginning after the effective date of
7             this amendment provided such adjustment is made
8             pursuant to regulation adopted by the Department
9             and such regulations provide methods and standards
10             by which the Department will utilize its authority
11             under Section 404 of this Act;
12             (G-15) For taxable years ending on or after
13         December 31, 2005, an amount equal to the expense
14         deduction under Section 179 of the Internal Revenue
15         Code for a sport utility vehicle taken on the
16         taxpayer's federal income tax return for the taxable
17         year less the amount of the depreciation deduction
18         limitation under Section 280F of the Internal Revenue
19         Code for the first taxable year of the recovery period.
20         For Illinois tax purposes, the adjusted basis of the
21         sport utility vehicle under this paragraph shall equal
22         the federal adjusted basis of the vehicle. For the
23         purpose of this paragraph, "sport utility vehicle"
24         means a four-wheeled vehicle manufactured primarily
25         for use on public streets, roads, and highways that:
26                 (1) is rated between 6,000 and 14,000 pounds
27             gross vehicle weight;
28                 (2) is designed to seat 9 or fewer individuals;
29             and
30                 (3) is not equipped with an open cargo area
31             with an interior length of 72 or more inches that
32             is separate from the passenger compartment;
33     and by deducting from the total so obtained the sum of the
34     following amounts:

 

 

09400HB1749ham001 - 39 - LRB094 03234 BDD 42984 a

1             (H) An amount equal to all amounts included in such
2         total pursuant to the provisions of Sections 402(a),
3         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
4         Internal Revenue Code or included in such total as
5         distributions under the provisions of any retirement
6         or disability plan for employees of any governmental
7         agency or unit, or retirement payments to retired
8         partners, which payments are excluded in computing net
9         earnings from self employment by Section 1402 of the
10         Internal Revenue Code and regulations adopted pursuant
11         thereto;
12             (I) The valuation limitation amount;
13             (J) An amount equal to the amount of any tax
14         imposed by this Act which was refunded to the taxpayer
15         and included in such total for the taxable year;
16             (K) An amount equal to all amounts included in
17         taxable income as modified by subparagraphs (A), (B),
18         (C), (D), (E), (F) and (G) which are exempt from
19         taxation by this State either by reason of its statutes
20         or Constitution or by reason of the Constitution,
21         treaties or statutes of the United States; provided
22         that, in the case of any statute of this State that
23         exempts income derived from bonds or other obligations
24         from the tax imposed under this Act, the amount
25         exempted shall be the interest net of bond premium
26         amortization;
27             (L) With the exception of any amounts subtracted
28         under subparagraph (K), an amount equal to the sum of
29         all amounts disallowed as deductions by (i) Sections
30         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
31         as now or hereafter amended, and all amounts of
32         expenses allocable to interest and disallowed as
33         deductions by Section 265(1) of the Internal Revenue
34         Code of 1954, as now or hereafter amended; and (ii) for

 

 

09400HB1749ham001 - 40 - LRB094 03234 BDD 42984 a

1         taxable years ending on or after August 13, 1999,
2         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
3         the Internal Revenue Code; the provisions of this
4         subparagraph are exempt from the provisions of Section
5         250;
6             (M) An amount equal to those dividends included in
7         such total which were paid by a corporation which
8         conducts business operations in an Enterprise Zone or
9         zones created under the Illinois Enterprise Zone Act
10         and conducts substantially all of its operations in an
11         Enterprise Zone or Zones;
12             (N) An amount equal to any contribution made to a
13         job training project established pursuant to the Tax
14         Increment Allocation Redevelopment Act;
15             (O) An amount equal to those dividends included in
16         such total that were paid by a corporation that
17         conducts business operations in a federally designated
18         Foreign Trade Zone or Sub-Zone and that is designated a
19         High Impact Business located in Illinois; provided
20         that dividends eligible for the deduction provided in
21         subparagraph (M) of paragraph (2) of this subsection
22         shall not be eligible for the deduction provided under
23         this subparagraph (O);
24             (P) 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             (Q) For taxable year 1999 and thereafter, an amount
30         equal to the amount of any (i) distributions, to the
31         extent includible in gross income for federal income
32         tax purposes, made to the taxpayer because of his or
33         her status as a victim of persecution for racial or
34         religious reasons by Nazi Germany or any other Axis

 

 

09400HB1749ham001 - 41 - LRB094 03234 BDD 42984 a

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             (R) For taxable years 2001 and thereafter, for the
29         taxable year in which the bonus depreciation deduction
30         (30% of the adjusted basis of the qualified property)
31         is taken on the taxpayer's federal income tax return
32         under subsection (k) of Section 168 of the Internal
33         Revenue Code and for each applicable taxable year
34         thereafter, an amount equal to "x", where:

 

 

09400HB1749ham001 - 42 - LRB094 03234 BDD 42984 a

1                 (1) "y" equals the amount of the depreciation
2             deduction taken for the taxable year on the
3             taxpayer's federal income tax return on property
4             for which the bonus depreciation deduction (30% of
5             the adjusted basis of the qualified property) was
6             taken in any year under subsection (k) of Section
7             168 of the Internal Revenue Code, but not including
8             the bonus depreciation deduction; and
9                 (2) "x" equals "y" multiplied by 30 and then
10             divided by 70 (or "y" multiplied by 0.429).
11             The aggregate amount deducted under this
12         subparagraph in all taxable years for any one piece of
13         property may not exceed the amount of the bonus
14         depreciation deduction (30% of the adjusted basis of
15         the qualified property) taken on that property on the
16         taxpayer's federal income tax return under subsection
17         (k) of Section 168 of the Internal Revenue Code;
18             (S) If the taxpayer reports a capital gain or loss
19         on the taxpayer's federal income tax return for the
20         taxable year based on a sale or transfer of property
21         for which the taxpayer was required in any taxable year
22         to make an addition modification under subparagraph
23         (G-10), then an amount equal to that addition
24         modification.
25             The taxpayer is allowed to take the deduction under
26         this subparagraph only once with respect to any one
27         piece of property;
28             (T) The amount of (i) any interest income (net of
29         the deductions allocable thereto) taken into account
30         for the taxable year with respect to a transaction with
31         a taxpayer that is required to make an addition
32         modification with respect to such transaction under
33         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
34         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

 

 

09400HB1749ham001 - 43 - LRB094 03234 BDD 42984 a

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

 

 

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1         (3) Limitation. The amount of any modification
2     otherwise required under this subsection shall, under
3     regulations prescribed by the Department, be adjusted by
4     any amounts included therein which were properly paid,
5     credited, or required to be distributed, or permanently set
6     aside for charitable purposes pursuant to Internal Revenue
7     Code Section 642(c) during the taxable year.
 
8     (d) Partnerships.
9         (1) In general. In the case of a partnership, base
10     income means an amount equal to the taxpayer's taxable
11     income for the taxable year as modified by paragraph (2).
12         (2) Modifications. The taxable income referred to in
13     paragraph (1) shall be modified by adding thereto the sum
14     of the following amounts:
15             (A) An amount equal to all amounts paid or accrued
16         to the taxpayer as interest or dividends during the
17         taxable year to the extent excluded from gross income
18         in the computation of taxable income;
19             (B) An amount equal to the amount of tax imposed by
20         this Act to the extent deducted from gross income for
21         the taxable year;
22             (C) The amount of deductions allowed to the
23         partnership pursuant to Section 707 (c) of the Internal
24         Revenue Code in calculating its taxable income;
25             (D) An amount equal to the amount of the capital
26         gain deduction allowable under the Internal Revenue
27         Code, to the extent deducted from gross income in the
28         computation of taxable income;
29             (D-5) For taxable years 2001 and thereafter, an
30         amount equal to the bonus depreciation deduction (30%
31         of the adjusted basis of the qualified property) taken
32         on the taxpayer's federal income tax return for the
33         taxable year under subsection (k) of Section 168 of the

 

 

09400HB1749ham001 - 45 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 46 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 47 - LRB094 03234 BDD 42984 a

1             304(f).
2                 Nothing in this subsection shall preclude the
3             Director from making any other adjustment
4             otherwise allowed under Section 404 of this Act for
5             any tax year beginning after the effective date of
6             this amendment provided such adjustment is made
7             pursuant to regulation adopted by the Department
8             and such regulations provide methods and standards
9             by which the Department will utilize its authority
10             under Section 404 of this Act; and
11             (D-8) For taxable years ending on or after December
12         31, 2004, an amount equal to the amount of intangible
13         expenses and costs otherwise allowed as a deduction in
14         computing base income, and that were paid, accrued, or
15         incurred, directly or indirectly, to a foreign person
16         who would be a member of the same unitary business
17         group but for the fact that the foreign person's
18         business activity outside the United States is 80% or
19         more of that person's total business activity. The
20         addition modification required by this subparagraph
21         shall be reduced to the extent that dividends were
22         included in base income of the unitary group for the
23         same taxable year and received by the taxpayer or by a
24         member of the taxpayer's unitary business group
25         (including amounts included in gross income pursuant
26         to Sections 951 through 964 of the Internal Revenue
27         Code and amounts included in gross income under Section
28         78 of the Internal Revenue Code) with respect to the
29         stock of the same person to whom the intangible
30         expenses and costs were directly or indirectly paid,
31         incurred or accrued. The preceding sentence shall not
32         apply to the extent that the same dividends caused a
33         reduction to the addition modification required under
34         Section 203(d)(2)(D-7) of this Act. As used in this

 

 

09400HB1749ham001 - 48 - LRB094 03234 BDD 42984 a

1         subparagraph, the term "intangible expenses and costs"
2         includes (1) expenses, losses, and costs for, or
3         related to, the direct or indirect acquisition, use,
4         maintenance or management, ownership, sale, exchange,
5         or any other disposition of intangible property; (2)
6         losses incurred, directly or indirectly, from
7         factoring transactions or discounting transactions;
8         (3) royalty, patent, technical, and copyright fees;
9         (4) licensing fees; and (5) other similar expenses and
10         costs. For purposes of this subparagraph, "intangible
11         property" includes patents, patent applications, trade
12         names, trademarks, service marks, copyrights, mask
13         works, trade secrets, and similar types of intangible
14         assets;
15             This paragraph shall not apply to the following:
16                 (i) any item of intangible expenses or costs
17             paid, accrued, or incurred, directly or
18             indirectly, from a transaction with 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 item; or
23                 (ii) any item of intangible expense or cost
24             paid, accrued, or incurred, directly or
25             indirectly, if the taxpayer can establish, based
26             on a 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                 intangible expense or cost to a person that is
31                 not a related member, and
32                     (b) the transaction giving rise to the
33                 intangible expense or cost between the
34                 taxpayer and the foreign person did not have as

 

 

09400HB1749ham001 - 49 - LRB094 03234 BDD 42984 a

1                 a principal purpose the avoidance of Illinois
2                 income tax, and is paid pursuant to a contract
3                 or agreement that reflects arm's-length terms;
4                 or
5                 (iii) any item of intangible expense or cost
6             paid, accrued, or incurred, directly or
7             indirectly, from a transaction with a foreign
8             person if the taxpayer establishes by clear and
9             convincing evidence, that the adjustments are
10             unreasonable; or if the taxpayer and the Director
11             agree in writing to the application or use of an
12             alternative method of apportionment under Section
13             304(f);
14                 Nothing in this subsection shall preclude the
15             Director from making any other adjustment
16             otherwise allowed under Section 404 of this Act for
17             any tax year beginning after the effective date of
18             this amendment provided such adjustment is made
19             pursuant to regulation adopted by the Department
20             and such regulations provide methods and standards
21             by which the Department will utilize its authority
22             under Section 404 of this Act;
23             (D-10) For taxable years ending on or after
24         December 31, 2005, an amount equal to the expense
25         deduction under Section 179 of the Internal Revenue
26         Code for a sport utility vehicle taken on the
27         taxpayer's federal income tax return for the taxable
28         year less the amount of the depreciation deduction
29         limitation under Section 280F of the Internal Revenue
30         Code for the first taxable year of the recovery period.
31         For Illinois tax purposes, the adjusted basis of the
32         sport utility vehicle under this paragraph shall equal
33         the federal adjusted basis of the vehicle. For the
34         purpose of this paragraph, "sport utility vehicle"

 

 

09400HB1749ham001 - 50 - LRB094 03234 BDD 42984 a

1         means a four-wheeled vehicle manufactured primarily
2         for use on public streets, roads, and highways that:
3                 (1) is rated between 6,000 and 14,000 pounds
4             gross vehicle weight;
5                 (2) is designed to seat 9 or fewer individuals;
6             and
7                 (3) is not equipped with an open cargo area
8             with an interior length of 72 or more inches that
9             is separate from the passenger compartment;
10     and by deducting from the total so obtained the following
11     amounts:
12             (E) The valuation limitation amount;
13             (F) An amount equal to the amount of any tax
14         imposed by this Act which was refunded to the taxpayer
15         and included in such total for the taxable year;
16             (G) An amount equal to all amounts included in
17         taxable income as modified by subparagraphs (A), (B),
18         (C) and (D) which are exempt from taxation by this
19         State either by reason of its statutes or Constitution
20         or by reason of the Constitution, treaties or statutes
21         of the United States; provided that, in the case of any
22         statute of this State that exempts income derived from
23         bonds or other obligations from the tax imposed under
24         this Act, the amount exempted shall be the interest net
25         of bond premium amortization;
26             (H) Any income of the partnership which
27         constitutes personal service income as defined in
28         Section 1348 (b) (1) of the Internal Revenue Code (as
29         in effect December 31, 1981) or a reasonable allowance
30         for compensation paid or accrued for services rendered
31         by partners to the partnership, whichever is greater;
32             (I) An amount equal to all amounts of income
33         distributable to an entity subject to the Personal
34         Property Tax Replacement Income Tax imposed by

 

 

09400HB1749ham001 - 51 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 52 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 53 - LRB094 03234 BDD 42984 a

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

 

 

09400HB1749ham001 - 54 - LRB094 03234 BDD 42984 a

1         the same foreign person; and
2             (S) An amount equal to the income from intangible
3         property taken into account for the taxable year (net
4         of the deductions allocable thereto) with respect to
5         transactions with a foreign person who would be a
6         member of the taxpayer's unitary business group but for
7         the fact that the foreign person's business activity
8         outside the United States is 80% or more of that
9         person's total business activity, but not to exceed the
10         addition modification required to be made for the same
11         taxable year under Section 203(d)(2)(D-8) for
12         intangible expenses and costs paid, accrued, or
13         incurred, directly or indirectly, to the same foreign
14         person.
 
15     (e) Gross income; adjusted gross income; taxable income.
16         (1) In general. Subject to the provisions of paragraph
17     (2) and subsection (b) (3), for purposes of this Section
18     and Section 803(e), a taxpayer's gross income, adjusted
19     gross income, or taxable income for the taxable year shall
20     mean the amount of gross income, adjusted gross income or
21     taxable income properly reportable for federal income tax
22     purposes for the taxable year under the provisions of the
23     Internal Revenue Code. Taxable income may be less than
24     zero. However, for taxable years ending on or after
25     December 31, 1986, net operating loss carryforwards from
26     taxable years ending prior to December 31, 1986, may not
27     exceed the sum of federal taxable income for the taxable
28     year before net operating loss deduction, plus the excess
29     of addition modifications over subtraction modifications
30     for the taxable year. For taxable years ending prior to
31     December 31, 1986, taxable income may never be an amount in
32     excess of the net operating loss for the taxable year as
33     defined in subsections (c) and (d) of Section 172 of the

 

 

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

 

 

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1         Subchapter S rules as in effect on July 1, 1982; and
2             (H) Partnerships. In the case of a partnership,
3         taxable income determined in accordance with Section
4         703 of the Internal Revenue Code, except that taxable
5         income shall take into account those items which are
6         required by Section 703(a)(1) to be separately stated
7         but which would be taken into account by an individual
8         in calculating his taxable income.
9         (3) Recapture of business expenses on disposition of
10     asset or business. Notwithstanding any other law to the
11     contrary, if in prior years income from an asset or
12     business has been classified as business income and in a
13     later year is demonstrated to be non-business income, then
14     all expenses, without limitation, deducted in such later
15     year and in the 2 immediately preceding taxable years
16     related to that asset or business that generated the
17     non-business income shall be added back and recaptured as
18     business income in the year of the disposition of the asset
19     or business. Such amount shall be apportioned to Illinois
20     using the greater of the apportionment fraction computed
21     for the business under Section 304 of this Act for the
22     taxable year or the average of the apportionment fractions
23     computed for the business under Section 304 of this Act for
24     the taxable year and for the 2 immediately preceding
25     taxable years.
26     (f) Valuation limitation amount.
27         (1) In general. The valuation limitation amount
28     referred to in subsections (a) (2) (G), (c) (2) (I) and
29     (d)(2) (E) is an amount equal to:
30             (A) The sum of the pre-August 1, 1969 appreciation
31         amounts (to the extent consisting of gain reportable
32         under the provisions of Section 1245 or 1250 of the
33         Internal Revenue Code) for all property in respect of
34         which such gain was reported for the taxable year; plus

 

 

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1             (B) The lesser of (i) the sum of the pre-August 1,
2         1969 appreciation amounts (to the extent consisting of
3         capital gain) for all property in respect of which such
4         gain was reported for federal income tax purposes for
5         the taxable year, or (ii) the net capital gain for the
6         taxable year, reduced in either case by any amount of
7         such gain included in the amount determined under
8         subsection (a) (2) (F) or (c) (2) (H).
9         (2) Pre-August 1, 1969 appreciation amount.
10             (A) If the fair market value of property referred
11         to in paragraph (1) was readily ascertainable on August
12         1, 1969, the pre-August 1, 1969 appreciation amount for
13         such property is the lesser of (i) the excess of such
14         fair market value over the taxpayer's basis (for
15         determining gain) for such property on that date
16         (determined under the Internal Revenue Code as in
17         effect on that date), or (ii) the total gain realized
18         and reportable for federal income tax purposes in
19         respect of the sale, exchange or other disposition of
20         such property.
21             (B) If the fair market value of property referred
22         to in paragraph (1) was not readily ascertainable on
23         August 1, 1969, the pre-August 1, 1969 appreciation
24         amount for such property is that amount which bears the
25         same ratio to the total gain reported in respect of the
26         property for federal income tax purposes for the
27         taxable year, as the number of full calendar months in
28         that part of the taxpayer's holding period for the
29         property ending July 31, 1969 bears to the number of
30         full calendar months in the taxpayer's entire holding
31         period for the property.
32             (C) The Department shall prescribe such
33         regulations as may be necessary to carry out the
34         purposes of this paragraph.
 

 

 

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1     (g) Double deductions. Unless specifically provided
2 otherwise, nothing in this Section shall permit the same item
3 to be deducted more than once.
 
4     (h) Legislative intention. Except as expressly provided by
5 this Section there shall be no modifications or limitations on
6 the amounts of income, gain, loss or deduction taken into
7 account in determining gross income, adjusted gross income or
8 taxable income for federal income tax purposes for the taxable
9 year, or in the amount of such items entering into the
10 computation of base income and net income under this Act for
11 such taxable year, whether in respect of property values as of
12 August 1, 1969 or otherwise.
13 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
14 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
15 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
16 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)".