94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB2579

 

Introduced 02/18/05, by Rep. Carolyn H. Krause

 

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

    Amends the Illinois Income Tax Act. Provides income tax deductions for contributions to and interest on a health savings account, established under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing Section 203 as follows:
 
6     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7     Sec. 203. Base income defined.
8     (a) Individuals.
9         (1) In general. In the case of an individual, base
10     income means an amount equal to the taxpayer's adjusted
11     gross income for the taxable year as modified by paragraph
12     (2).
13         (2) Modifications. The adjusted gross income referred
14     to in paragraph (1) shall be modified by adding thereto the
15     sum of the following amounts:
16             (A) An amount equal to all amounts paid or accrued
17         to the taxpayer as interest or dividends during the
18         taxable year to the extent excluded from gross income
19         in the computation of adjusted gross income, except
20         stock dividends of qualified public utilities
21         described in Section 305(e) of the Internal Revenue
22         Code;
23             (B) An amount equal to the amount of tax imposed by
24         this Act to the extent deducted from gross income in
25         the computation of adjusted gross income for the
26         taxable year;
27             (C) An amount equal to the amount received during
28         the taxable year as a recovery or refund of real
29         property taxes paid with respect to the taxpayer's
30         principal residence under the Revenue Act of 1939 and
31         for which a deduction was previously taken under
32         subparagraph (L) of this paragraph (2) prior to July 1,

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         Increment Allocation Redevelopment Act;
2             (P) An amount equal to the amount of the deduction
3         used to compute the federal income tax credit for
4         restoration of substantial amounts held under claim of
5         right for the taxable year pursuant to Section 1341 of
6         the Internal Revenue Code of 1986;
7             (Q) An amount equal to any amounts included in such
8         total, received by the taxpayer as an acceleration in
9         the payment of life, endowment or annuity benefits in
10         advance of the time they would otherwise be payable as
11         an indemnity for a terminal illness;
12             (R) An amount equal to the amount of any federal or
13         State bonus paid to veterans of the Persian Gulf War;
14             (S) An amount, to the extent included in adjusted
15         gross income, equal to the amount of a contribution
16         made in the taxable year on behalf of the taxpayer to a
17         medical care savings account established under the
18         Medical Care Savings Account Act or the Medical Care
19         Savings Account Act of 2000 and, beginning in taxable
20         year 2005, to a health savings account, as defined in
21         the Medicare Prescription Drug, Improvement and
22         Modernization Act of 2003, to the extent the
23         contribution is accepted by the account administrator
24         as provided in that Act;
25             (T) An amount, to the extent included in adjusted
26         gross income, equal to the amount of interest earned in
27         the taxable year on a medical care savings account
28         established under the Medical Care Savings Account Act
29         or the Medical Care Savings Account Act of 2000 and,
30         beginning in taxable year 2005, on a health savings
31         account, established under the Medicare Prescription
32         Drug, Improvement and Modernization Act of 2003 on
33         behalf of the taxpayer, other than interest added
34         pursuant to item (D-5) of this paragraph (2);
35             (U) For one taxable year beginning on or after
36         January 1, 1994, an amount equal to the total amount of

 

 

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1         tax imposed and paid under subsections (a) and (b) of
2         Section 201 of this Act on grant amounts received by
3         the taxpayer under the Nursing Home Grant Assistance
4         Act during the taxpayer's taxable years 1992 and 1993;
5             (V) Beginning with tax years ending on or after
6         December 31, 1995 and ending with tax years ending on
7         or before December 31, 2004, an amount equal to the
8         amount paid by a taxpayer who is a self-employed
9         taxpayer, a partner of a partnership, or a shareholder
10         in a Subchapter S corporation for health insurance or
11         long-term care insurance for that taxpayer or that
12         taxpayer's spouse or dependents, to the extent that the
13         amount paid for that health insurance or long-term care
14         insurance may be deducted under Section 213 of the
15         Internal Revenue Code of 1986, has not been deducted on
16         the federal income tax return of the taxpayer, and does
17         not exceed the taxable income attributable to that
18         taxpayer's income, self-employment income, or
19         Subchapter S corporation income; except that no
20         deduction shall be allowed under this item (V) if the
21         taxpayer is eligible to participate in any health
22         insurance or long-term care insurance plan of an
23         employer of the taxpayer or the taxpayer's spouse. The
24         amount of the health insurance and long-term care
25         insurance subtracted under this item (V) shall be
26         determined by multiplying total health insurance and
27         long-term care insurance premiums paid by the taxpayer
28         times a number that represents the fractional
29         percentage of eligible medical expenses under Section
30         213 of the Internal Revenue Code of 1986 not actually
31         deducted on the taxpayer's federal income tax return;
32             (W) For taxable years beginning on or after January
33         1, 1998, all amounts included in the taxpayer's federal
34         gross income in the taxable year from amounts converted
35         from a regular IRA to a Roth IRA. This paragraph is
36         exempt from the provisions of Section 250;

 

 

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1             (X) For taxable year 1999 and thereafter, an amount
2         equal to the amount of any (i) distributions, to the
3         extent includible in gross income for federal income
4         tax purposes, made to the taxpayer because of his or
5         her status as a victim of persecution for racial or
6         religious reasons by Nazi Germany or any other Axis
7         regime or as an heir of the victim and (ii) items of
8         income, to the extent includible in gross income for
9         federal income tax purposes, attributable to, derived
10         from or in any way related to assets stolen from,
11         hidden from, or otherwise lost to a victim of
12         persecution for racial or religious reasons by Nazi
13         Germany or any other Axis regime immediately prior to,
14         during, and immediately after World War II, including,
15         but not limited to, interest on the proceeds receivable
16         as insurance under policies issued to a victim of
17         persecution for racial or religious reasons by Nazi
18         Germany or any other Axis regime by European insurance
19         companies immediately prior to and during World War II;
20         provided, however, this subtraction from federal
21         adjusted gross income does not apply to assets acquired
22         with such assets or with the proceeds from the sale of
23         such assets; provided, further, this paragraph shall
24         only apply to a taxpayer who was the first recipient of
25         such assets after their recovery and who is a victim of
26         persecution for racial or religious reasons by Nazi
27         Germany or any other Axis regime or as an heir of the
28         victim. The amount of and the eligibility for any
29         public assistance, benefit, or similar entitlement is
30         not affected by the inclusion of items (i) and (ii) of
31         this paragraph in gross income for federal income tax
32         purposes. This paragraph is exempt from the provisions
33         of Section 250;
34             (Y) For taxable years beginning on or after January
35         1, 2002 and ending on or before December 31, 2004,
36         moneys contributed in the taxable year to a College

 

 

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1         Savings Pool account under Section 16.5 of the State
2         Treasurer Act, except that amounts excluded from gross
3         income under Section 529(c)(3)(C)(i) of the Internal
4         Revenue Code shall not be considered moneys
5         contributed under this subparagraph (Y). For taxable
6         years beginning on or after January 1, 2005, a maximum
7         of $10,000 contributed in the taxable year to (i) a
8         College Savings Pool account under Section 16.5 of the
9         State Treasurer Act or (ii) the Illinois Prepaid
10         Tuition Trust Fund, except that amounts excluded from
11         gross income under Section 529(c)(3)(C)(i) of the
12         Internal Revenue Code shall not be considered moneys
13         contributed under this subparagraph (Y). This
14         subparagraph (Y) is exempt from the provisions of
15         Section 250;
16             (Z) For taxable years 2001 and thereafter, for the
17         taxable year in which the bonus depreciation deduction
18         (30% of the adjusted basis of the qualified property)
19         is taken on the taxpayer's federal income tax return
20         under subsection (k) of Section 168 of the Internal
21         Revenue Code and for each applicable taxable year
22         thereafter, an amount equal to "x", where:
23                 (1) "y" equals the amount of the depreciation
24             deduction taken for the taxable year on the
25             taxpayer's federal income tax return on property
26             for which the bonus depreciation deduction (30% of
27             the adjusted basis of the qualified property) was
28             taken in any year under subsection (k) of Section
29             168 of the Internal Revenue Code, but not including
30             the bonus depreciation deduction; and
31                 (2) "x" equals "y" multiplied by 30 and then
32             divided by 70 (or "y" multiplied by 0.429).
33             The aggregate amount deducted under this
34         subparagraph in all taxable years for any one piece of
35         property may not exceed the amount of the bonus
36         depreciation deduction (30% of the adjusted basis of

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             (F) An amount equal to the amount of any tax
2         imposed by this Act which was refunded to the taxpayer
3         and included in such total for the taxable year;
4             (G) An amount equal to any amount included in such
5         total under Section 78 of the Internal Revenue Code;
6             (H) In the case of a regulated investment company,
7         an amount equal to the amount of exempt interest
8         dividends as defined in subsection (b) (5) of Section
9         852 of the Internal Revenue Code, paid to shareholders
10         for the taxable year;
11             (I) With the exception of any amounts subtracted
12         under subparagraph (J), an amount equal to the sum of
13         all amounts disallowed as deductions by (i) Sections
14         171(a) (2), and 265(a)(2) and amounts disallowed as
15         interest expense by Section 291(a)(3) of the Internal
16         Revenue Code, as now or hereafter amended, and all
17         amounts of expenses allocable to interest and
18         disallowed as deductions by Section 265(a)(1) of the
19         Internal Revenue Code, as now or hereafter amended; and
20         (ii) for taxable years ending on or after August 13,
21         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
22         832(b)(5)(B)(i) of the Internal Revenue Code; the
23         provisions of this subparagraph are exempt from the
24         provisions of Section 250;
25             (J) An amount equal to all amounts included in such
26         total which are exempt from taxation by this State
27         either by reason of its statutes or Constitution or by
28         reason of the Constitution, treaties or statutes of the
29         United States; provided that, in the case of any
30         statute of this State that exempts income derived from
31         bonds or other obligations from the tax imposed under
32         this Act, the amount exempted shall be the interest net
33         of bond premium amortization;
34             (K) An amount equal to those dividends included in
35         such total which were paid by a corporation which
36         conducts business operations in an Enterprise Zone or

 

 

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

 

 

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

 

 

HB2579 - 25 - LRB094 10011 BDD 40269 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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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
35                 taxable year, paid, accrued, or incurred, the
36                 interest to a person that is not a related

 

 

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

 

 

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

 

 

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

 

 

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1             and such regulations provide methods and standards
2             by which the Department will utilize its authority
3             under Section 404 of this Act;
4     and by deducting from the total so obtained the sum of the
5     following amounts:
6             (H) An amount equal to all amounts included in such
7         total pursuant to the provisions of Sections 402(a),
8         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
9         Internal Revenue Code or included in such total as
10         distributions under the provisions of any retirement
11         or disability plan for employees of any governmental
12         agency or unit, or retirement payments to retired
13         partners, which payments are excluded in computing net
14         earnings from self employment by Section 1402 of the
15         Internal Revenue Code and regulations adopted pursuant
16         thereto;
17             (I) The valuation limitation amount;
18             (J) An amount equal to the amount of any tax
19         imposed by this Act which was refunded to the taxpayer
20         and included in such total for the taxable year;
21             (K) An amount equal to all amounts included in
22         taxable income as modified by subparagraphs (A), (B),
23         (C), (D), (E), (F) and (G) which are exempt from
24         taxation by this State either by reason of its statutes
25         or Constitution or by reason of the Constitution,
26         treaties or statutes of the United States; provided
27         that, in the case of any statute of this State that
28         exempts income derived from bonds or other obligations
29         from the tax imposed under this Act, the amount
30         exempted shall be the interest net of bond premium
31         amortization;
32             (L) With the exception of any amounts subtracted
33         under subparagraph (K), an amount equal to the sum of
34         all amounts disallowed as deductions by (i) Sections
35         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
36         as now or hereafter amended, and all amounts of

 

 

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

 

 

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1         religious reasons by Nazi Germany or any other Axis
2         regime or as an heir of the victim and (ii) items of
3         income, to the extent includible in gross income for
4         federal income tax purposes, attributable to, derived
5         from or in any way related to assets stolen from,
6         hidden from, or otherwise lost to a victim of
7         persecution for racial or religious reasons by Nazi
8         Germany or any other Axis regime immediately prior to,
9         during, and immediately after World War II, including,
10         but not limited to, interest on the proceeds receivable
11         as insurance under policies issued to a victim of
12         persecution for racial or religious reasons by Nazi
13         Germany or any other Axis regime by European insurance
14         companies immediately prior to and during World War II;
15         provided, however, this subtraction from federal
16         adjusted gross income does not apply to assets acquired
17         with such assets or with the proceeds from the sale of
18         such assets; provided, further, this paragraph shall
19         only apply to a taxpayer who was the first recipient of
20         such assets after their recovery and who is a victim of
21         persecution for racial or religious reasons by Nazi
22         Germany or any other Axis regime or as an heir of the
23         victim. The amount of and the eligibility for any
24         public assistance, benefit, or similar entitlement is
25         not affected by the inclusion of items (i) and (ii) of
26         this paragraph in gross income for federal income tax
27         purposes. This paragraph is exempt from the provisions
28         of Section 250;
29             (R) For taxable years 2001 and thereafter, for the
30         taxable year in which the bonus depreciation deduction
31         (30% of the adjusted basis of the qualified property)
32         is taken on the taxpayer's federal income tax return
33         under subsection (k) of Section 168 of the Internal
34         Revenue Code and for each applicable taxable year
35         thereafter, an amount equal to "x", where:
36                 (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             (S) 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         (G-10), 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             (T) The amount of (i) any interest income (net of
28         the deductions allocable thereto) taken into account
29         for the taxable year with respect to a transaction with
30         a taxpayer that is required to make an addition
31         modification with respect to such transaction under
32         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
33         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
34         the amount of such addition modification and (ii) any
35         income from intangible property (net of the deductions
36         allocable thereto) taken into account for the taxable

 

 

HB2579 - 39 - LRB094 10011 BDD 40269 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             otherwise allowed under Section 404 of this Act for
2             any tax year beginning after the effective date of
3             this amendment provided such adjustment is made
4             pursuant to regulation adopted by the Department
5             and such regulations provide methods and standards
6             by which the Department will utilize its authority
7             under Section 404 of this Act;
8     and by deducting from the total so obtained the following
9     amounts:
10             (E) The valuation limitation amount;
11             (F) An amount equal to the amount of any tax
12         imposed by this Act which was refunded to the taxpayer
13         and included in such total for the taxable year;
14             (G) An amount equal to all amounts included in
15         taxable income as modified by subparagraphs (A), (B),
16         (C) and (D) which are exempt from taxation by this
17         State either by reason of its statutes or Constitution
18         or by reason of the Constitution, treaties or statutes
19         of the United States; provided that, in the case of any
20         statute of this State that exempts income derived from
21         bonds or other obligations from the tax imposed under
22         this Act, the amount exempted shall be the interest net
23         of bond premium amortization;
24             (H) Any income of the partnership which
25         constitutes personal service income as defined in
26         Section 1348 (b) (1) of the Internal Revenue Code (as
27         in effect December 31, 1981) or a reasonable allowance
28         for compensation paid or accrued for services rendered
29         by partners to the partnership, whichever is greater;
30             (I) An amount equal to all amounts of income
31         distributable to an entity subject to the Personal
32         Property Tax Replacement Income Tax imposed by
33         subsections (c) and (d) of Section 201 of this Act
34         including amounts distributable to organizations
35         exempt from federal income tax by reason of Section
36         501(a) of the Internal Revenue Code;

 

 

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1             (J) With the exception of any amounts subtracted
2         under subparagraph (G), an amount equal to the sum of
3         all amounts disallowed as deductions by (i) Sections
4         171(a) (2), and 265(2) of the Internal Revenue Code of
5         1954, as now or hereafter amended, and all amounts of
6         expenses allocable to interest and disallowed as
7         deductions by Section 265(1) of the Internal Revenue
8         Code, as now or hereafter amended; and (ii) for taxable
9         years ending on or after August 13, 1999, Sections
10         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
11         Internal Revenue Code; the provisions of this
12         subparagraph are exempt from the provisions of Section
13         250;
14             (K) An amount equal to those dividends included in
15         such total which were paid by a corporation which
16         conducts business operations in an Enterprise Zone or
17         zones created under the Illinois Enterprise Zone Act,
18         enacted by the 82nd General Assembly, and conducts
19         substantially all of its operations in an Enterprise
20         Zone or Zones;
21             (L) An amount equal to any contribution made to a
22         job training project established pursuant to the Real
23         Property Tax Increment Allocation Redevelopment Act;
24             (M) An amount equal to those dividends included in
25         such total that were paid by a corporation that
26         conducts business operations in a federally designated
27         Foreign Trade Zone or Sub-Zone and that is designated a
28         High Impact Business located in Illinois; provided
29         that dividends eligible for the deduction provided in
30         subparagraph (K) of paragraph (2) of this subsection
31         shall not be eligible for the deduction provided under
32         this subparagraph (M);
33             (N) An amount equal to the amount of the deduction
34         used to compute the federal income tax credit for
35         restoration of substantial amounts held under claim of
36         right for the taxable year pursuant to Section 1341 of

 

 

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1         the Internal Revenue Code of 1986;
2             (O) For taxable years 2001 and thereafter, for the
3         taxable year in which the bonus depreciation deduction
4         (30% of the adjusted basis of the qualified property)
5         is taken on the taxpayer's federal income tax return
6         under subsection (k) of Section 168 of the Internal
7         Revenue Code and for each applicable taxable year
8         thereafter, an amount equal to "x", where:
9                 (1) "y" equals the amount of the depreciation
10             deduction taken for the taxable year on the
11             taxpayer's federal income tax return on property
12             for which the bonus depreciation deduction (30% of
13             the adjusted basis of the qualified property) was
14             taken in any year under subsection (k) of Section
15             168 of the Internal Revenue Code, but not including
16             the bonus depreciation deduction; and
17                 (2) "x" equals "y" multiplied by 30 and then
18             divided by 70 (or "y" multiplied by 0.429).
19             The aggregate amount deducted under this
20         subparagraph in all taxable years for any one piece of
21         property may not exceed the amount of the bonus
22         depreciation deduction (30% of the adjusted basis of
23         the qualified property) taken on that property on the
24         taxpayer's federal income tax return under subsection
25         (k) of Section 168 of the Internal Revenue Code;
26             (P) If the taxpayer reports a capital gain or loss
27         on the taxpayer's federal income tax return for the
28         taxable year based on a sale or transfer of property
29         for which the taxpayer was required in any taxable year
30         to make an addition modification under subparagraph
31         (D-5), then an amount equal to that addition
32         modification.
33             The taxpayer is allowed to take the deduction under
34         this subparagraph only once with respect to any one
35         piece of property;
36             (Q) The amount of (i) any interest income (net of

 

 

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

 

 

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1         taxable year under Section 203(d)(2)(D-8) for
2         intangible expenses and costs paid, accrued, or
3         incurred, directly or indirectly, to the same foreign
4         person.
 
5     (e) Gross income; adjusted gross income; taxable income.
6         (1) In general. Subject to the provisions of paragraph
7     (2) and subsection (b) (3), for purposes of this Section
8     and Section 803(e), a taxpayer's gross income, adjusted
9     gross income, or taxable income for the taxable year shall
10     mean the amount of gross income, adjusted gross income or
11     taxable income properly reportable for federal income tax
12     purposes for the taxable year under the provisions of the
13     Internal Revenue Code. Taxable income may be less than
14     zero. However, for taxable years ending on or after
15     December 31, 1986, net operating loss carryforwards from
16     taxable years ending prior to December 31, 1986, may not
17     exceed the sum of federal taxable income for the taxable
18     year before net operating loss deduction, plus the excess
19     of addition modifications over subtraction modifications
20     for the taxable year. For taxable years ending prior to
21     December 31, 1986, taxable income may never be an amount in
22     excess of the net operating loss for the taxable year as
23     defined in subsections (c) and (d) of Section 172 of the
24     Internal Revenue Code, provided that when taxable income of
25     a corporation (other than a Subchapter S corporation),
26     trust, or estate is less than zero and addition
27     modifications, other than those provided by subparagraph
28     (E) of paragraph (2) of subsection (b) for corporations or
29     subparagraph (E) of paragraph (2) of subsection (c) for
30     trusts and estates, exceed subtraction modifications, an
31     addition modification must be made under those
32     subparagraphs for any other taxable year to which the
33     taxable income less than zero (net operating loss) is
34     applied under Section 172 of the Internal Revenue Code or
35     under subparagraph (E) of paragraph (2) of this subsection

 

 

HB2579 - 50 - LRB094 10011 BDD 40269 b

1     (e) applied in conjunction with Section 172 of the Internal
2     Revenue Code.
3         (2) Special rule. For purposes of paragraph (1) of this
4     subsection, the taxable income properly reportable for
5     federal income tax purposes shall mean:
6             (A) Certain life insurance companies. In the case
7         of a life insurance company subject to the tax imposed
8         by Section 801 of the Internal Revenue Code, life
9         insurance company taxable income, plus the amount of
10         distribution from pre-1984 policyholder surplus
11         accounts as calculated under Section 815a of the
12         Internal Revenue Code;
13             (B) Certain other insurance companies. In the case
14         of mutual insurance companies subject to the tax
15         imposed by Section 831 of the Internal Revenue Code,
16         insurance company taxable income;
17             (C) Regulated investment companies. In the case of
18         a regulated investment company subject to the tax
19         imposed by Section 852 of the Internal Revenue Code,
20         investment company taxable income;
21             (D) Real estate investment trusts. In the case of a
22         real estate investment trust subject to the tax imposed
23         by Section 857 of the Internal Revenue Code, real
24         estate investment trust taxable income;
25             (E) Consolidated corporations. In the case of a
26         corporation which is a member of an affiliated group of
27         corporations filing a consolidated income tax return
28         for the taxable year for federal income tax purposes,
29         taxable income determined as if such corporation had
30         filed a separate return for federal income tax purposes
31         for the taxable year and each preceding taxable year
32         for which it was a member of an affiliated group. For
33         purposes of this subparagraph, the taxpayer's separate
34         taxable income shall be determined as if the election
35         provided by Section 243(b) (2) of the Internal Revenue
36         Code had been in effect for all such years;

 

 

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1             (F) Cooperatives. In the case of a cooperative
2         corporation or association, the taxable income of such
3         organization determined in accordance with the
4         provisions of Section 1381 through 1388 of the Internal
5         Revenue Code;
6             (G) Subchapter S corporations. In the case of: (i)
7         a Subchapter S corporation for which there is in effect
8         an election for the taxable year under Section 1362 of
9         the Internal Revenue Code, the taxable income of such
10         corporation determined in accordance with Section
11         1363(b) of the Internal Revenue Code, except that
12         taxable income shall take into account those items
13         which are required by Section 1363(b)(1) of the
14         Internal Revenue Code to be separately stated; and (ii)
15         a Subchapter S corporation for which there is in effect
16         a federal election to opt out of the provisions of the
17         Subchapter S Revision Act of 1982 and have applied
18         instead the prior federal Subchapter S rules as in
19         effect on July 1, 1982, the taxable income of such
20         corporation determined in accordance with the federal
21         Subchapter S rules as in effect on July 1, 1982; and
22             (H) Partnerships. In the case of a partnership,
23         taxable income determined in accordance with Section
24         703 of the Internal Revenue Code, except that taxable
25         income shall take into account those items which are
26         required by Section 703(a)(1) to be separately stated
27         but which would be taken into account by an individual
28         in calculating his taxable income.
29         (3) Recapture of business expenses on disposition of
30     asset or business. Notwithstanding any other law to the
31     contrary, if in prior years income from an asset or
32     business has been classified as business income and in a
33     later year is demonstrated to be non-business income, then
34     all expenses, without limitation, deducted in such later
35     year and in the 2 immediately preceding taxable years
36     related to that asset or business that generated the

 

 

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1     non-business income shall be added back and recaptured as
2     business income in the year of the disposition of the asset
3     or business. Such amount shall be apportioned to Illinois
4     using the greater of the apportionment fraction computed
5     for the business under Section 304 of this Act for the
6     taxable year or the average of the apportionment fractions
7     computed for the business under Section 304 of this Act for
8     the taxable year and for the 2 immediately preceding
9     taxable years.
10     (f) Valuation limitation amount.
11         (1) In general. The valuation limitation amount
12     referred to in subsections (a) (2) (G), (c) (2) (I) and
13     (d)(2) (E) is an amount equal to:
14             (A) The sum of the pre-August 1, 1969 appreciation
15         amounts (to the extent consisting of gain reportable
16         under the provisions of Section 1245 or 1250 of the
17         Internal Revenue Code) for all property in respect of
18         which such gain was reported for the taxable year; plus
19             (B) The lesser of (i) the sum of the pre-August 1,
20         1969 appreciation amounts (to the extent consisting of
21         capital gain) for all property in respect of which such
22         gain was reported for federal income tax purposes for
23         the taxable year, or (ii) the net capital gain for the
24         taxable year, reduced in either case by any amount of
25         such gain included in the amount determined under
26         subsection (a) (2) (F) or (c) (2) (H).
27         (2) Pre-August 1, 1969 appreciation amount.
28             (A) If the fair market value of property referred
29         to in paragraph (1) was readily ascertainable on August
30         1, 1969, the pre-August 1, 1969 appreciation amount for
31         such property is the lesser of (i) the excess of such
32         fair market value over the taxpayer's basis (for
33         determining gain) for such property on that date
34         (determined under the Internal Revenue Code as in
35         effect on that date), or (ii) the total gain realized
36         and reportable for federal income tax purposes in

 

 

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1         respect of the sale, exchange or other disposition of
2         such property.
3             (B) If the fair market value of property referred
4         to in paragraph (1) was not readily ascertainable on
5         August 1, 1969, the pre-August 1, 1969 appreciation
6         amount for such property is that amount which bears the
7         same ratio to the total gain reported in respect of the
8         property for federal income tax purposes for the
9         taxable year, as the number of full calendar months in
10         that part of the taxpayer's holding period for the
11         property ending July 31, 1969 bears to the number of
12         full calendar months in the taxpayer's entire holding
13         period for the property.
14             (C) The Department shall prescribe such
15         regulations as may be necessary to carry out the
16         purposes of this paragraph.
 
17     (g) Double deductions. Unless specifically provided
18 otherwise, nothing in this Section shall permit the same item
19 to be deducted more than once.
 
20     (h) Legislative intention. Except as expressly provided by
21 this Section there shall be no modifications or limitations on
22 the amounts of income, gain, loss or deduction taken into
23 account in determining gross income, adjusted gross income or
24 taxable income for federal income tax purposes for the taxable
25 year, or in the amount of such items entering into the
26 computation of base income and net income under this Act for
27 such taxable year, whether in respect of property values as of
28 August 1, 1969 or otherwise.
29 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
30 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
31 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
32 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
33     Section 99. Effective date. This Act takes effect upon

 

 

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1 becoming law.