94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
SB0294

 

Introduced 2/3/2005, by Sen. Chris Lauzen

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/203   from Ch. 120, par. 2-203
605 ILCS 10/23.5 new

    Amends the Illinois Income Tax Act. Allows income tax deductions, for taxable years ending on or after December 31, 2005, for (i) amounts equal to the aggregate amount of all tolls documented as being paid during the taxable year that are collected under the Toll Highway Act and (ii) amounts equal to any amount paid during the taxable year to purchase, lease, or otherwise obtain a transponder or other electronic equipment for the electronic payment of tolls that are collected under the Toll Highway Act. Amends the Toll Highway Act. Requires the Illinois State Toll Highway Authority to send, no later than January 31 of each year, a written report to each person in the State who has paid a toll during the previous calendar year through the use of a transponder or other electronic equipment. Provides that the report must set forth all payments by the person through the use of the transponder or other electronic equipment. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning revenue.
 
2     WHEREAS, Under the provisions of the Motor Fuel Tax Law,
3 Illinois citizens must pay a tax for the purpose of the
4 construction, operation, and maintenance of roads and highways
5 throughout the State; and
 
6     WHEREAS, In those areas under the jurisdiction of the
7 Illinois State Toll Highway Authority, Illinois citizens must
8 pay tolls, which are also for the purpose of the construction,
9 operation, and maintenance of highways; and
 
10     WHEREAS, Under this system, when using a toll highway,
11 Illinois citizens must pay twice (once at the gas pump and once
12 at the toll both) for the privilege of traveling on one
13 highway; and
 
14     WHEREAS, It is the purpose of this legislation to alleviate
15 the effects of this double taxation; therefore,
 
16     Be it enacted by the People of the State of Illinois,
17 represented in the General Assembly:
 
18     Section 5. The Illinois Income Tax Act is amended by
19 changing Section 203 as follows:
 
20     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
21     Sec. 203. Base income defined.
22     (a) Individuals.
23         (1) In general. In the case of an individual, base
24     income means an amount equal to the taxpayer's adjusted
25     gross income for the taxable year as modified by paragraph
26     (2).
27         (2) Modifications. The adjusted gross income referred
28     to in paragraph (1) shall be modified by adding thereto the
29     sum of the following amounts:

 

 

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1             (A) An amount equal to all amounts paid or accrued
2         to the taxpayer as interest or dividends during the
3         taxable year to the extent excluded from gross income
4         in the computation of adjusted gross income, except
5         stock dividends of qualified public utilities
6         described in Section 305(e) of the Internal Revenue
7         Code;
8             (B) An amount equal to the amount of tax imposed by
9         this Act to the extent deducted from gross income in
10         the computation of adjusted gross income for the
11         taxable year;
12             (C) An amount equal to the amount received during
13         the taxable year as a recovery or refund of real
14         property taxes paid with respect to the taxpayer's
15         principal residence under the Revenue Act of 1939 and
16         for which a deduction was previously taken under
17         subparagraph (L) of this paragraph (2) prior to July 1,
18         1991, the retrospective application date of Article 4
19         of Public Act 87-17. In the case of multi-unit or
20         multi-use structures and farm dwellings, the taxes on
21         the taxpayer's principal residence shall be that
22         portion of the total taxes for the entire property
23         which is attributable to such principal residence;
24             (D) An amount equal to the amount of the capital
25         gain deduction allowable under the Internal Revenue
26         Code, to the extent deducted from gross income in the
27         computation of adjusted gross income;
28             (D-5) An amount, to the extent not included in
29         adjusted gross income, equal to the amount of money
30         withdrawn by the taxpayer in the taxable year from a
31         medical care savings account and the interest earned on
32         the account in the taxable year of a withdrawal
33         pursuant to subsection (b) of Section 20 of the Medical
34         Care Savings Account Act or subsection (b) of Section
35         20 of the Medical Care Savings Account Act of 2000;
36             (D-10) For taxable years ending after December 31,

 

 

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1         1997, an amount equal to any eligible remediation costs
2         that the individual deducted in computing adjusted
3         gross income and for which the individual claims a
4         credit under subsection (l) of Section 201;
5             (D-15) For taxable years 2001 and thereafter, an
6         amount equal to the bonus depreciation deduction (30%
7         of the adjusted basis of the qualified property) taken
8         on the taxpayer's federal income tax return for the
9         taxable year under subsection (k) of Section 168 of the
10         Internal Revenue Code;
11             (D-16) If the taxpayer reports a capital gain or
12         loss on the taxpayer's federal income tax return for
13         the taxable year based on a sale or transfer of
14         property for which the taxpayer was required in any
15         taxable year to make an addition modification under
16         subparagraph (D-15), then an amount equal to the
17         aggregate amount of the deductions taken in all taxable
18         years under subparagraph (Z) with respect to that
19         property.
20             The taxpayer is required to make the addition
21         modification under this subparagraph only once with
22         respect to any one piece of property;
23             (D-17) For taxable years ending on or after
24         December 31, 2004, an amount equal to the amount
25         otherwise allowed as a deduction in computing base
26         income for interest paid, accrued, or incurred,
27         directly or indirectly, to a foreign person who would
28         be a member of the same unitary business group but for
29         the fact that foreign person's business activity
30         outside the United States is 80% or more of the foreign
31         person's total business activity. The addition
32         modification required by this subparagraph shall be
33         reduced to the extent that dividends were included in
34         base income of the unitary group for the same taxable
35         year and received by the taxpayer or by a member of the
36         taxpayer's unitary business group (including amounts

 

 

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1         included in gross income under Sections 951 through 964
2         of the Internal Revenue Code and amounts included in
3         gross income under Section 78 of the Internal Revenue
4         Code) with respect to the stock of the same person to
5         whom the interest was paid, accrued, or incurred.
6             This paragraph shall not apply to the following:
7                 (i) an item of interest paid, accrued, or
8             incurred, directly or indirectly, to a foreign
9             person who is subject in a foreign country or
10             state, other than a state which requires mandatory
11             unitary reporting, to a tax on or measured by net
12             income with respect to such interest; or
13                 (ii) an item of interest paid, accrued, or
14             incurred, directly or indirectly, to a foreign
15             person if the taxpayer can establish, based on a
16             preponderance of the evidence, both of the
17             following:
18                     (a) the foreign person, during the same
19                 taxable year, paid, accrued, or incurred, the
20                 interest to a person that is not a related
21                 member, and
22                     (b) the transaction giving rise to the
23                 interest expense between the taxpayer and the
24                 foreign person did not have as a principal
25                 purpose the avoidance of Illinois income tax,
26                 and is paid pursuant to a contract or agreement
27                 that reflects an arm's-length interest rate
28                 and terms; or
29                 (iii) the taxpayer can establish, based on
30             clear and convincing evidence, that the interest
31             paid, accrued, or incurred relates to a contract or
32             agreement entered into at arm's-length rates and
33             terms and the principal purpose for the payment is
34             not federal or Illinois tax avoidance; or
35                 (iv) an item of interest paid, accrued, or
36             incurred, directly or indirectly, to a foreign

 

 

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

 

 

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

 

 

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1                 taxpayer and the foreign person did not have as
2                 a principal purpose the avoidance of Illinois
3                 income tax, and is paid pursuant to a contract
4                 or agreement that reflects arm's-length terms;
5                 or
6                 (iii) any item of intangible expense or cost
7             paid, accrued, or incurred, directly or
8             indirectly, from a transaction with a foreign
9             person if the taxpayer establishes by clear and
10             convincing evidence, that the adjustments are
11             unreasonable; or if the taxpayer and the Director
12             agree in writing to the application or use of an
13             alternative method of apportionment under Section
14             304(f);
15                 Nothing in this subsection shall preclude the
16             Director from making any other adjustment
17             otherwise allowed under Section 404 of this Act for
18             any tax year beginning after the effective date of
19             this amendment provided such adjustment is made
20             pursuant to regulation adopted by the Department
21             and such regulations provide methods and standards
22             by which the Department will utilize its authority
23             under Section 404 of this Act;
24             (D-20) For taxable years beginning on or after
25         January 1, 2002, in the case of a distribution from a
26         qualified tuition program under Section 529 of the
27         Internal Revenue Code, other than (i) a distribution
28         from a College Savings Pool created under Section 16.5
29         of the State Treasurer Act or (ii) a distribution from
30         the Illinois Prepaid Tuition Trust Fund, an amount
31         equal to the amount excluded from gross income under
32         Section 529(c)(3)(B);
33     and by deducting from the total so obtained the sum of the
34     following amounts:
35             (E) For taxable years ending before December 31,
36         2001, any amount included in such total in respect of

 

 

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1         any compensation (including but not limited to any
2         compensation paid or accrued to a serviceman while a
3         prisoner of war or missing in action) paid to a
4         resident by reason of being on active duty in the Armed
5         Forces of the United States and in respect of any
6         compensation paid or accrued to a resident who as a
7         governmental employee was a prisoner of war or missing
8         in action, and in respect of any compensation paid to a
9         resident in 1971 or thereafter for annual training
10         performed pursuant to Sections 502 and 503, Title 32,
11         United States Code as a member of the Illinois National
12         Guard. For taxable years ending on or after December
13         31, 2001, any amount included in such total in respect
14         of any compensation (including but not limited to any
15         compensation paid or accrued to a serviceman while a
16         prisoner of war or missing in action) paid to a
17         resident by reason of being a member of any component
18         of the Armed Forces of the United States and in respect
19         of any compensation paid or accrued to a resident who
20         as a governmental employee was a prisoner of war or
21         missing in action, and in respect of any compensation
22         paid to a resident in 2001 or thereafter by reason of
23         being a member of the Illinois National Guard. The
24         provisions of this amendatory Act of the 92nd General
25         Assembly are exempt from the provisions of Section 250;
26             (F) An amount equal to all amounts included in such
27         total pursuant to the provisions of Sections 402(a),
28         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
29         Internal Revenue Code, or included in such total as
30         distributions under the provisions of any retirement
31         or disability plan for employees of any governmental
32         agency or unit, or retirement payments to retired
33         partners, which payments are excluded in computing net
34         earnings from self employment by Section 1402 of the
35         Internal Revenue Code and regulations adopted pursuant
36         thereto;

 

 

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1             (G) The valuation limitation amount;
2             (H) An amount equal to the amount of any tax
3         imposed by this Act which was refunded to the taxpayer
4         and included in such total for the taxable year;
5             (I) An amount equal to all amounts included in such
6         total pursuant to the provisions of Section 111 of the
7         Internal Revenue Code as a recovery of items previously
8         deducted from adjusted gross income in the computation
9         of taxable income;
10             (J) An amount equal to those dividends included in
11         such total which were paid by a corporation which
12         conducts business operations in an Enterprise Zone or
13         zones created under the Illinois Enterprise Zone Act,
14         and conducts substantially all of its operations in an
15         Enterprise Zone or zones;
16             (K) An amount equal to those dividends included in
17         such total that were paid by a corporation that
18         conducts business operations in a federally designated
19         Foreign Trade Zone or Sub-Zone and that is designated a
20         High Impact Business located in Illinois; provided
21         that dividends eligible for the deduction provided in
22         subparagraph (J) of paragraph (2) of this subsection
23         shall not be eligible for the deduction provided under
24         this subparagraph (K);
25             (L) For taxable years ending after December 31,
26         1983, an amount equal to all social security benefits
27         and railroad retirement benefits included in such
28         total pursuant to Sections 72(r) and 86 of the Internal
29         Revenue Code;
30             (M) With the exception of any amounts subtracted
31         under subparagraph (N), an amount equal to the sum of
32         all amounts disallowed as deductions by (i) Sections
33         171(a) (2), and 265(2) of the Internal Revenue Code of
34         1954, as now or hereafter amended, and all amounts of
35         expenses allocable to interest and disallowed as
36         deductions by Section 265(1) of the Internal Revenue

 

 

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1         Code of 1954, as now or hereafter amended; and (ii) for
2         taxable years ending on or after August 13, 1999,
3         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
4         the Internal Revenue Code; the provisions of this
5         subparagraph are exempt from the provisions of Section
6         250;
7             (N) An amount equal to all amounts included in such
8         total which are exempt from taxation by this State
9         either by reason of its statutes or Constitution or by
10         reason of the Constitution, treaties or statutes of the
11         United States; provided that, in the case of any
12         statute of this State that exempts income derived from
13         bonds or other obligations from the tax imposed under
14         this Act, the amount exempted shall be the interest net
15         of bond premium amortization;
16             (O) An amount equal to any contribution made to a
17         job training project established pursuant to the Tax
18         Increment Allocation Redevelopment Act;
19             (P) An amount equal to the amount of the deduction
20         used to compute the federal income tax credit for
21         restoration of substantial amounts held under claim of
22         right for the taxable year pursuant to Section 1341 of
23         the Internal Revenue Code of 1986;
24             (Q) An amount equal to any amounts included in such
25         total, received by the taxpayer as an acceleration in
26         the payment of life, endowment or annuity benefits in
27         advance of the time they would otherwise be payable as
28         an indemnity for a terminal illness;
29             (R) An amount equal to the amount of any federal or
30         State bonus paid to veterans of the Persian Gulf War;
31             (S) An amount, to the extent included in adjusted
32         gross income, equal to the amount of a contribution
33         made in the taxable year on behalf of the taxpayer to a
34         medical care savings account established under the
35         Medical Care Savings Account Act or the Medical Care
36         Savings Account Act of 2000 to the extent the

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         allocable thereto) taken into account for the taxable
2         year with respect to a transaction with a taxpayer that
3         is required to make an addition modification with
4         respect to such transaction under Section
5         203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
6         203(d)(2)(D-8), but not to exceed the amount of that
7         addition modification;
8             (DD) An amount equal to the interest income taken
9         into account for the taxable year (net of the
10         deductions allocable thereto) with respect to
11         transactions with a foreign person who would be a
12         member of the taxpayer's unitary business group but for
13         the fact that the foreign person's business activity
14         outside the United States is 80% or more of that
15         person's total business activity, but not to exceed the
16         addition modification required to be made for the same
17         taxable year under Section 203(a)(2)(D-17) for
18         interest paid, accrued, or incurred, directly or
19         indirectly, to the same foreign person; and
20             (EE) An amount equal to the income from intangible
21         property taken into account for the taxable year (net
22         of the deductions allocable thereto) with respect to
23         transactions with a foreign person who would be a
24         member of the taxpayer's unitary business group but for
25         the fact that the foreign person's business activity
26         outside the United States is 80% or more of that
27         person's total business activity, but not to exceed the
28         addition modification required to be made for the same
29         taxable year under Section 203(a)(2)(D-18) for
30         intangible expenses and costs paid, accrued, or
31         incurred, directly or indirectly, to the same foreign
32         person; .
33             (FF) For taxable years ending on or after December
34         31, 2005, an amount, to the extent that it has not been
35         deducted in calculating the taxpayer's adjusted gross
36         income, equal to the aggregate amount of all tolls

 

 

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1         documented as being paid during the taxable year that
2         are collected under the Toll Highway Act; and
3             (GG) For taxable years ending on or after December
4         31, 2005, an amount, to the extent that it has not been
5         deducted in calculating the taxpayer's adjusted gross
6         income, equal to any amount paid during the taxable
7         year to purchase, lease, or otherwise obtain a
8         transponder or other electronic equipment for the
9         electronic payment of tolls that are collected under
10         the Toll Highway Act.
 
11     (b) Corporations.
12         (1) In general. In the case of a corporation, base
13     income means an amount equal to the taxpayer's taxable
14     income for the taxable year as modified by paragraph (2).
15         (2) Modifications. The taxable income referred to in
16     paragraph (1) shall be modified by adding thereto the sum
17     of the following amounts:
18             (A) An amount equal to all amounts paid or accrued
19         to the taxpayer as interest and all distributions
20         received from regulated investment companies during
21         the taxable year to the extent excluded from gross
22         income in the computation of taxable income;
23             (B) An amount equal to the amount of tax imposed by
24         this Act to the extent deducted from gross income in
25         the computation of taxable income for the taxable year;
26             (C) In the case of a regulated investment company,
27         an amount equal to the excess of (i) the net long-term
28         capital gain for the taxable year, over (ii) the amount
29         of the capital gain dividends designated as such in
30         accordance with Section 852(b)(3)(C) of the Internal
31         Revenue Code and any amount designated under Section
32         852(b)(3)(D) of the Internal Revenue Code,
33         attributable to the taxable year (this amendatory Act
34         of 1995 (Public Act 89-89) is declarative of existing
35         law and is not a new enactment);

 

 

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1             (D) The amount of any net operating loss deduction
2         taken in arriving at taxable income, other than a net
3         operating loss carried forward from a taxable year
4         ending prior to December 31, 1986;
5             (E) For taxable years in which a net operating loss
6         carryback or carryforward from a taxable year ending
7         prior to December 31, 1986 is an element of taxable
8         income under paragraph (1) of subsection (e) or
9         subparagraph (E) of paragraph (2) of subsection (e),
10         the amount by which addition modifications other than
11         those provided by this subparagraph (E) exceeded
12         subtraction modifications in such earlier taxable
13         year, with the following limitations applied in the
14         order that they are listed:
15                 (i) the addition modification relating to the
16             net operating loss carried back or forward to the
17             taxable year from any taxable year ending prior to
18             December 31, 1986 shall be reduced by the amount of
19             addition modification under this subparagraph (E)
20             which related to that net operating loss and which
21             was taken into account in calculating the base
22             income of an earlier taxable year, and
23                 (ii) the addition modification relating to the
24             net operating loss carried back or forward to the
25             taxable year from any taxable year ending prior to
26             December 31, 1986 shall not exceed the amount of
27             such carryback or carryforward;
28             For taxable years in which there is a net operating
29         loss carryback or carryforward from more than one other
30         taxable year ending prior to December 31, 1986, the
31         addition modification provided in this subparagraph
32         (E) shall be the sum of the amounts computed
33         independently under the preceding provisions of this
34         subparagraph (E) for each such taxable year;
35             (E-5) For taxable years ending after December 31,
36         1997, an amount equal to any eligible remediation costs

 

 

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1         that the corporation deducted in computing adjusted
2         gross income and for which the corporation claims a
3         credit under subsection (l) of Section 201;
4             (E-10) For taxable years 2001 and thereafter, an
5         amount equal to the bonus depreciation deduction (30%
6         of the adjusted basis of the qualified property) taken
7         on the taxpayer's federal income tax return for the
8         taxable year under subsection (k) of Section 168 of the
9         Internal Revenue Code; and
10             (E-11) If the taxpayer reports a capital gain or
11         loss on the taxpayer's federal income tax return for
12         the taxable year based on a sale or transfer of
13         property for which the taxpayer was required in any
14         taxable year to make an addition modification under
15         subparagraph (E-10), then an amount equal to the
16         aggregate amount of the deductions taken in all taxable
17         years under subparagraph (T) with respect to that
18         property.
19             The taxpayer is required to make the addition
20         modification under this subparagraph only once with
21         respect to any one piece of property;
22             (E-12) For taxable years ending on or after
23         December 31, 2004, an amount equal to the amount
24         otherwise allowed as a deduction in computing base
25         income for interest paid, accrued, or incurred,
26         directly or indirectly, to a foreign person who would
27         be a member of the same unitary business group but for
28         the fact the foreign person's business activity
29         outside the United States is 80% or more of the foreign
30         person's total business activity. The addition
31         modification required by this subparagraph shall be
32         reduced to the extent that dividends were included in
33         base income of the unitary group for the same taxable
34         year and received by the taxpayer or by a member of the
35         taxpayer's unitary business group (including amounts
36         included in gross income pursuant to Sections 951

 

 

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1         through 964 of the Internal Revenue Code and amounts
2         included in gross income under Section 78 of the
3         Internal Revenue Code) with respect to the stock of the
4         same person to whom the interest was paid, accrued, or
5         incurred.
6             This paragraph shall not apply to the following:
7                 (i) an item of interest paid, accrued, or
8             incurred, directly or indirectly, to a foreign
9             person who is subject in a foreign country or
10             state, other than a state which requires mandatory
11             unitary reporting, to a tax on or measured by net
12             income with respect to such interest; or
13                 (ii) an item of interest paid, accrued, or
14             incurred, directly or indirectly, to a foreign
15             person if the taxpayer can establish, based on a
16             preponderance of the evidence, both of the
17             following:
18                     (a) the foreign person, during the same
19                 taxable year, paid, accrued, or incurred, the
20                 interest to a person that is not a related
21                 member, and
22                     (b) the transaction giving rise to the
23                 interest expense between the taxpayer and the
24                 foreign person did not have as a principal
25                 purpose the avoidance of Illinois income tax,
26                 and is paid pursuant to a contract or agreement
27                 that reflects an arm's-length interest rate
28                 and terms; or
29                 (iii) the taxpayer can establish, based on
30             clear and convincing evidence, that the interest
31             paid, accrued, or incurred relates to a contract or
32             agreement entered into at arm's-length rates and
33             terms and the principal purpose for the payment is
34             not federal or Illinois tax avoidance; or
35                 (iv) an item of interest paid, accrued, or
36             incurred, directly or indirectly, to a foreign

 

 

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

 

 

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

 

 

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1                 taxpayer and the foreign person did not have as
2                 a principal purpose the avoidance of Illinois
3                 income tax, and is paid pursuant to a contract
4                 or agreement that reflects arm's-length terms;
5                 or
6                 (iii) any item of intangible expense or cost
7             paid, accrued, or incurred, directly or
8             indirectly, from a transaction with a foreign
9             person if the taxpayer establishes by clear and
10             convincing evidence, that the adjustments are
11             unreasonable; or if the taxpayer and the Director
12             agree in writing to the application or use of an
13             alternative method of apportionment under Section
14             304(f);
15                 Nothing in this subsection shall preclude the
16             Director from making any other adjustment
17             otherwise allowed under Section 404 of this Act for
18             any tax year beginning after the effective date of
19             this amendment provided such adjustment is made
20             pursuant to regulation adopted by the Department
21             and such regulations provide methods and standards
22             by which the Department will utilize its authority
23             under Section 404 of this Act;
24     and by deducting from the total so obtained the sum of the
25     following amounts:
26             (F) An amount equal to the amount of any tax
27         imposed by this Act which was refunded to the taxpayer
28         and included in such total for the taxable year;
29             (G) An amount equal to any amount included in such
30         total under Section 78 of the Internal Revenue Code;
31             (H) In the case of a regulated investment company,
32         an amount equal to the amount of exempt interest
33         dividends as defined in subsection (b) (5) of Section
34         852 of the Internal Revenue Code, paid to shareholders
35         for the taxable year;
36             (I) With the exception of any amounts subtracted

 

 

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1         under subparagraph (J), an amount equal to the sum of
2         all amounts disallowed as deductions by (i) Sections
3         171(a) (2), and 265(a)(2) and amounts disallowed as
4         interest expense by Section 291(a)(3) of the Internal
5         Revenue Code, as now or hereafter amended, and all
6         amounts of expenses allocable to interest and
7         disallowed as deductions by Section 265(a)(1) of the
8         Internal Revenue Code, as now or hereafter amended; and
9         (ii) for taxable years ending on or after August 13,
10         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
11         832(b)(5)(B)(i) of the Internal Revenue Code; the
12         provisions of this subparagraph are exempt from the
13         provisions of Section 250;
14             (J) An amount equal to all amounts included in such
15         total which are exempt from taxation by this State
16         either by reason of its statutes or Constitution or by
17         reason of the Constitution, treaties or statutes of the
18         United States; provided that, in the case of any
19         statute of this State that exempts income derived from
20         bonds or other obligations from the tax imposed under
21         this Act, the amount exempted shall be the interest net
22         of bond premium amortization;
23             (K) An amount equal to those dividends included in
24         such total which were paid by a corporation which
25         conducts business operations in an Enterprise Zone or
26         zones created under the Illinois Enterprise Zone Act
27         and conducts substantially all of its operations in an
28         Enterprise Zone or zones;
29             (L) An amount equal to those dividends included in
30         such total that were paid by a corporation that
31         conducts business operations in a federally designated
32         Foreign Trade Zone or Sub-Zone and that is designated a
33         High Impact Business located in Illinois; provided
34         that dividends eligible for the deduction provided in
35         subparagraph (K) of paragraph 2 of this subsection
36         shall not be eligible for the deduction provided under

 

 

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1         this subparagraph (L);
2             (M) For any taxpayer that is a financial
3         organization within the meaning of Section 304(c) of
4         this Act, an amount included in such total as interest
5         income from a loan or loans made by such taxpayer to a
6         borrower, to the extent that such a loan is secured by
7         property which is eligible for the Enterprise Zone
8         Investment Credit. To determine the portion of a loan
9         or loans that is secured by property eligible for a
10         Section 201(f) investment credit to the borrower, the
11         entire principal amount of the loan or loans between
12         the taxpayer and the borrower should be divided into
13         the basis of the Section 201(f) investment credit
14         property which secures the loan or loans, using for
15         this purpose the original basis of such property on the
16         date that it was placed in service in the Enterprise
17         Zone. The subtraction modification available to
18         taxpayer in any year under this subsection shall be
19         that portion of the total interest paid by the borrower
20         with respect to such loan attributable to the eligible
21         property as calculated under the previous sentence;
22             (M-1) For any taxpayer that is a financial
23         organization within the meaning of Section 304(c) of
24         this Act, an amount included in such total as interest
25         income from a loan or loans made by such taxpayer to a
26         borrower, to the extent that such a loan is secured by
27         property which is eligible for the High Impact Business
28         Investment Credit. To determine the portion of a loan
29         or loans that is secured by property eligible for a
30         Section 201(h) investment credit to the borrower, the
31         entire principal amount of the loan or loans between
32         the taxpayer and the borrower should be divided into
33         the basis of the Section 201(h) investment credit
34         property which secures the loan or loans, using for
35         this purpose the original basis of such property on the
36         date that it was placed in service in a federally

 

 

SB0294 - 25 - LRB094 06526 BDD 37184 b

1         designated Foreign Trade Zone or Sub-Zone located in
2         Illinois. No taxpayer that is eligible for the
3         deduction provided in subparagraph (M) of paragraph
4         (2) of this subsection shall be eligible for the
5         deduction provided under this subparagraph (M-1). The
6         subtraction modification available to taxpayers in any
7         year under this subsection shall be that portion of the
8         total interest paid by the borrower with respect to
9         such loan attributable to the eligible property as
10         calculated under the previous sentence;
11             (N) Two times any contribution made during the
12         taxable year to a designated zone organization to the
13         extent that the contribution (i) qualifies as a
14         charitable contribution under subsection (c) of
15         Section 170 of the Internal Revenue Code and (ii) must,
16         by its terms, be used for a project approved by the
17         Department of Commerce and Economic Opportunity under
18         Section 11 of the Illinois Enterprise Zone Act;
19             (O) An amount equal to: (i) 85% for taxable years
20         ending on or before December 31, 1992, or, a percentage
21         equal to the percentage allowable under Section
22         243(a)(1) of the Internal Revenue Code of 1986 for
23         taxable years ending after December 31, 1992, of the
24         amount by which dividends included in taxable income
25         and received from a corporation that is not created or
26         organized under the laws of the United States or any
27         state or political subdivision thereof, including, for
28         taxable years ending on or after December 31, 1988,
29         dividends received or deemed received or paid or deemed
30         paid under Sections 951 through 964 of the Internal
31         Revenue Code, exceed the amount of the modification
32         provided under subparagraph (G) of paragraph (2) of
33         this subsection (b) which is related to such dividends;
34         plus (ii) 100% of the amount by which dividends,
35         included in taxable income and received, including,
36         for taxable years ending on or after December 31, 1988,

 

 

SB0294 - 26 - LRB094 06526 BDD 37184 b

1         dividends received or deemed received or paid or deemed
2         paid under Sections 951 through 964 of the Internal
3         Revenue Code, from any such corporation specified in
4         clause (i) that would but for the provisions of Section
5         1504 (b) (3) of the Internal Revenue Code be treated as
6         a member of the affiliated group which includes the
7         dividend recipient, exceed the amount of the
8         modification provided under subparagraph (G) of
9         paragraph (2) of this subsection (b) which is related
10         to such dividends;
11             (P) An amount equal to any contribution made to a
12         job training project established pursuant to the Tax
13         Increment Allocation Redevelopment Act;
14             (Q) An amount equal to the amount of the deduction
15         used to compute the federal income tax credit for
16         restoration of substantial amounts held under claim of
17         right for the taxable year pursuant to Section 1341 of
18         the Internal Revenue Code of 1986;
19             (R) In the case of an attorney-in-fact with respect
20         to whom an interinsurer or a reciprocal insurer has
21         made the election under Section 835 of the Internal
22         Revenue Code, 26 U.S.C. 835, an amount equal to the
23         excess, if any, of the amounts paid or incurred by that
24         interinsurer or reciprocal insurer in the taxable year
25         to the attorney-in-fact over the deduction allowed to
26         that interinsurer or reciprocal insurer with respect
27         to the attorney-in-fact under Section 835(b) of the
28         Internal Revenue Code for the taxable year;
29             (S) For taxable years ending on or after December
30         31, 1997, in the case of a Subchapter S corporation, an
31         amount equal to all amounts of income allocable to a
32         shareholder subject to the Personal Property Tax
33         Replacement Income Tax imposed by subsections (c) and
34         (d) of Section 201 of this Act, including amounts
35         allocable to organizations exempt from federal income
36         tax by reason of Section 501(a) of the Internal Revenue

 

 

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

 

 

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

 

 

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1         addition modification required to be made for the same
2         taxable year under Section 203(b)(2)(E-13) for
3         intangible expenses and costs paid, accrued, or
4         incurred, directly or indirectly, to the same foreign
5         person; .
6             (Y) For taxable years ending on or after December
7         31, 2005, an amount, to the extent that it has not been
8         deducted in calculating the taxpayer's adjusted gross
9         income, equal to the aggregate amount of all tolls
10         documented as being paid during the taxable year that
11         are collected under the Toll Highway Act; and
12             (Z) For taxable years ending on or after December
13         31, 2005, an amount, to the extent that it has not been
14         deducted in calculating the taxpayer's adjusted gross
15         income, equal to any amount paid during the taxable
16         year to purchase, lease, or otherwise obtain a
17         transponder or other electronic equipment for the
18         electronic payment of tolls that are collected under
19         the Toll Highway Act.
20         (3) Special rule. For purposes of paragraph (2) (A),
21     "gross income" in the case of a life insurance company, for
22     tax years ending on and after December 31, 1994, shall mean
23     the gross investment income for the taxable year.
 
24     (c) Trusts and estates.
25         (1) In general. In the case of a trust or estate, base
26     income means an amount equal to the taxpayer's taxable
27     income for the taxable year as modified by paragraph (2).
28         (2) Modifications. Subject to the provisions of
29     paragraph (3), the taxable income referred to in paragraph
30     (1) shall be modified by adding thereto the sum of the
31     following amounts:
32             (A) An amount equal to all amounts paid or accrued
33         to the taxpayer as interest or dividends during the
34         taxable year to the extent excluded from gross income
35         in the computation of taxable income;

 

 

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

 

 

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

 

 

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1         property.
2             The taxpayer is required to make the addition
3         modification under this subparagraph only once with
4         respect to any one piece of property;
5             (G-12) For taxable years ending on or after
6         December 31, 2004, an amount equal to the amount
7         otherwise allowed as a deduction in computing base
8         income for interest paid, accrued, or incurred,
9         directly or indirectly, to a foreign person who would
10         be a member of the same unitary business group but for
11         the fact that the foreign person's business activity
12         outside the United States is 80% or more of the foreign
13         person's total business activity. The addition
14         modification required by this subparagraph shall be
15         reduced to the extent that dividends were included in
16         base income of the unitary group for the same taxable
17         year and received by the taxpayer or by a member of the
18         taxpayer's unitary business group (including amounts
19         included in gross income pursuant to Sections 951
20         through 964 of the Internal Revenue Code and amounts
21         included in gross income under Section 78 of the
22         Internal Revenue Code) with respect to the stock of the
23         same person to whom the interest was paid, accrued, or
24         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             (G-13) 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 pursuant to Sections 951 through 964 of the
15         Internal Revenue Code and amounts included in gross
16         income under Section 78 of the Internal Revenue Code)
17         with respect to the stock of the same person to whom
18         the intangible expenses and costs were directly or
19         indirectly paid, incurred, or accrued. The preceding
20         sentence shall not apply to the extent that the same
21         dividends caused a reduction to the addition
22         modification required under Section 203(c)(2)(G-12) of
23         this Act. As used in this subparagraph, the term
24         "intangible expenses and costs" includes: (1)
25         expenses, losses, and costs for or related to the
26         direct or indirect acquisition, use, maintenance or
27         management, ownership, sale, exchange, or any other
28         disposition of intangible property; (2) losses
29         incurred, directly or indirectly, from factoring
30         transactions or discounting transactions; (3) royalty,
31         patent, technical, and copyright fees; (4) licensing
32         fees; and (5) other similar expenses and costs. For
33         purposes of this subparagraph, "intangible property"
34         includes patents, patent applications, trade names,
35         trademarks, service marks, copyrights, mask works,
36         trade secrets, and similar types of intangible 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     and by deducting from the total so obtained the sum of the
8     following amounts:
9             (H) 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             (I) The valuation limitation amount;
21             (J) 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             (K) An amount equal to all amounts included in
25         taxable income as modified by subparagraphs (A), (B),
26         (C), (D), (E), (F) and (G) which are exempt from
27         taxation by this State either by reason of its statutes
28         or Constitution or by reason of the Constitution,
29         treaties or statutes of the United States; provided
30         that, in the case of any statute of this State that
31         exempts income derived from bonds or other obligations
32         from the tax imposed under this Act, the amount
33         exempted shall be the interest net of bond premium
34         amortization;
35             (L) With the exception of any amounts subtracted
36         under subparagraph (K), an amount equal to the sum of

 

 

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

 

 

SB0294 - 38 - LRB094 06526 BDD 37184 b

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

 

 

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1         Revenue Code and for each applicable taxable year
2         thereafter, an amount equal to "x", where:
3                 (1) "y" equals the amount of the depreciation
4             deduction taken for the taxable year on the
5             taxpayer's federal income tax return on property
6             for which the bonus depreciation deduction (30% of
7             the adjusted basis of the qualified property) was
8             taken in any year under subsection (k) of Section
9             168 of the Internal Revenue Code, but not including
10             the bonus depreciation deduction; and
11                 (2) "x" equals "y" multiplied by 30 and then
12             divided by 70 (or "y" multiplied by 0.429).
13             The aggregate amount deducted under this
14         subparagraph in all taxable years for any one piece of
15         property may not exceed the amount of the bonus
16         depreciation deduction (30% of the adjusted basis of
17         the qualified property) taken on that property on the
18         taxpayer's federal income tax return under subsection
19         (k) of Section 168 of the Internal Revenue Code;
20             (S) If the taxpayer reports a capital gain or loss
21         on the taxpayer's federal income tax return for the
22         taxable year based on a sale or transfer of property
23         for which the taxpayer was required in any taxable year
24         to make an addition modification under subparagraph
25         (G-10), then an amount equal to that addition
26         modification.
27             The taxpayer is allowed to take the deduction under
28         this subparagraph only once with respect to any one
29         piece of property;
30             (T) The amount of (i) any interest income (net of
31         the deductions allocable thereto) taken into account
32         for the taxable year with respect to a transaction with
33         a taxpayer that is required to make an addition
34         modification with respect to such transaction under
35         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
36         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

 

 

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1         the amount of such addition modification and (ii) any
2         income from intangible property (net of the deductions
3         allocable thereto) taken into account for the taxable
4         year with respect to a transaction with a taxpayer that
5         is required to make an addition modification with
6         respect to such transaction under Section
7         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
8         203(d)(2)(D-8), but not to exceed the amount of such
9         addition modification;
10             (U) An amount equal to the interest income taken
11         into account for the taxable year (net of the
12         deductions allocable thereto) with respect to
13         transactions with a foreign person who would be a
14         member of the taxpayer's unitary business group but for
15         the fact the foreign person's business activity
16         outside the United States is 80% or more of that
17         person's total business activity, but not to exceed the
18         addition modification required to be made for the same
19         taxable year under Section 203(c)(2)(G-12) for
20         interest paid, accrued, or incurred, directly or
21         indirectly, to the same foreign person; and
22             (V) An amount equal to the income from intangible
23         property taken into account for the taxable year (net
24         of the deductions allocable thereto) with respect to
25         transactions with a foreign person who would be a
26         member of the taxpayer's unitary business group but for
27         the fact that the foreign person's business activity
28         outside the United States is 80% or more of that
29         person's total business activity, but not to exceed the
30         addition modification required to be made for the same
31         taxable year under Section 203(c)(2)(G-13) for
32         intangible expenses and costs paid, accrued, or
33         incurred, directly or indirectly, to the same foreign
34         person; .
35             (W) For taxable years ending on or after December
36         31, 2005, to the extent that it has not been deducted

 

 

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1         in calculating the taxpayer's adjusted gross income,
2         equal to the aggregate amount of all tolls documented
3         as being paid during the taxable year that are
4         collected under the Toll Highway Act; and
5             (X) For taxable years ending on or after December
6         31, 2005, an amount, to the extent that it has not been
7         deducted in calculating the taxpayer's adjusted gross
8         income, equal to any amount paid during the taxable
9         year to purchase, lease, or otherwise obtain a
10         transponder or other electronic equipment for the
11         electronic payment of tolls that are collected under
12         the Toll Highway Act.
13         (3) Limitation. The amount of any modification
14     otherwise required under this subsection shall, under
15     regulations prescribed by the Department, be adjusted by
16     any amounts included therein which were properly paid,
17     credited, or required to be distributed, or permanently set
18     aside for charitable purposes pursuant to Internal Revenue
19     Code Section 642(c) during the taxable year.
 
20     (d) Partnerships.
21         (1) In general. In the case of a partnership, base
22     income means an amount equal to the taxpayer's taxable
23     income for the taxable year as modified by paragraph (2).
24         (2) Modifications. The taxable income referred to in
25     paragraph (1) shall be modified by adding thereto the sum
26     of the following amounts:
27             (A) An amount equal to all amounts paid or accrued
28         to the taxpayer as interest or dividends during the
29         taxable year to the extent excluded from gross income
30         in the computation of taxable income;
31             (B) An amount equal to the amount of tax imposed by
32         this Act to the extent deducted from gross income for
33         the taxable year;
34             (C) The amount of deductions allowed to the
35         partnership pursuant to Section 707 (c) of the Internal

 

 

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1         Revenue Code in calculating its taxable income;
2             (D) An amount equal to the amount of the capital
3         gain deduction allowable under the Internal Revenue
4         Code, to the extent deducted from gross income in the
5         computation of taxable income;
6             (D-5) For taxable years 2001 and thereafter, an
7         amount equal to the bonus depreciation deduction (30%
8         of the adjusted basis of the qualified property) taken
9         on the taxpayer's federal income tax return for the
10         taxable year under subsection (k) of Section 168 of the
11         Internal Revenue Code;
12             (D-6) If the taxpayer reports a capital gain or
13         loss on the taxpayer's federal income tax return for
14         the taxable year based on a sale or transfer of
15         property for which the taxpayer was required in any
16         taxable year to make an addition modification under
17         subparagraph (D-5), then an amount equal to the
18         aggregate amount of the deductions taken in all taxable
19         years under subparagraph (O) with respect to that
20         property.
21             The taxpayer is required to make the addition
22         modification under this subparagraph only once with
23         respect to any one piece of property;
24             (D-7) For taxable years ending on or after December
25         31, 2004, an amount equal to the amount otherwise
26         allowed as a deduction in computing base income for
27         interest paid, accrued, or incurred, directly or
28         indirectly, to a foreign person who would be a member
29         of the same unitary business group but for the fact the
30         foreign person's business activity outside the United
31         States is 80% or more of the foreign person's total
32         business activity. The addition modification required
33         by this subparagraph shall be reduced to the extent
34         that dividends were included in base income of the
35         unitary group for the same taxable year and received by
36         the taxpayer or by a member of the taxpayer's unitary

 

 

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1         business group (including amounts included in gross
2         income pursuant to Sections 951 through 964 of the
3         Internal Revenue Code and amounts included in gross
4         income under Section 78 of the Internal Revenue Code)
5         with respect to the stock of the same person to whom
6         the interest was paid, accrued, or incurred.
7             This paragraph shall not apply to the following:
8                 (i) an item of interest paid, accrued, or
9             incurred, directly or indirectly, to a foreign
10             person who is subject in a foreign country or
11             state, other than a state which requires mandatory
12             unitary reporting, to a tax on or measured by net
13             income with respect to such interest; or
14                 (ii) an item of interest paid, accrued, or
15             incurred, directly or indirectly, to a foreign
16             person if the taxpayer can establish, based on a
17             preponderance of the evidence, both of the
18             following:
19                     (a) the foreign person, during the same
20                 taxable year, paid, accrued, or incurred, the
21                 interest to a person that is not a related
22                 member, and
23                     (b) the transaction giving rise to the
24                 interest expense between the taxpayer and the
25                 foreign person did not have as a principal
26                 purpose the avoidance of Illinois income tax,
27                 and is paid pursuant to a contract or agreement
28                 that reflects an arm's-length interest rate
29                 and terms; or
30                 (iii) the taxpayer can establish, based on
31             clear and convincing evidence, that the interest
32             paid, accrued, or incurred relates to a contract or
33             agreement entered into at arm's-length rates and
34             terms and the principal purpose for the payment is
35             not federal or Illinois tax avoidance; or
36                 (iv) an item of interest paid, accrued, or

 

 

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

 

 

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

 

 

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1                 intangible expense or cost between the
2                 taxpayer and the foreign person did not have as
3                 a principal purpose the avoidance of Illinois
4                 income tax, and is paid pursuant to a contract
5                 or agreement that reflects arm's-length terms;
6                 or
7                 (iii) any item of intangible expense or cost
8             paid, accrued, or incurred, directly or
9             indirectly, from a transaction with a foreign
10             person if the taxpayer establishes by clear and
11             convincing evidence, that the adjustments are
12             unreasonable; or if the taxpayer and the Director
13             agree in writing to the application or use of an
14             alternative method of apportionment under Section
15             304(f);
16                 Nothing in this subsection shall preclude the
17             Director from making any other adjustment
18             otherwise allowed under Section 404 of this Act for
19             any tax year beginning after the effective date of
20             this amendment provided such adjustment is made
21             pursuant to regulation adopted by the Department
22             and such regulations provide methods and standards
23             by which the Department will utilize its authority
24             under Section 404 of this Act;
25     and by deducting from the total so obtained the following
26     amounts:
27             (E) The valuation limitation amount;
28             (F) An amount equal to the amount of any tax
29         imposed by this Act which was refunded to the taxpayer
30         and included in such total for the taxable year;
31             (G) An amount equal to all amounts included in
32         taxable income as modified by subparagraphs (A), (B),
33         (C) and (D) which are exempt from taxation by this
34         State either by reason of its statutes or Constitution
35         or by reason of the Constitution, treaties or statutes
36         of the United States; provided that, in the case of any

 

 

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1         statute of this State that exempts income derived from
2         bonds or other obligations from the tax imposed under
3         this Act, the amount exempted shall be the interest net
4         of bond premium amortization;
5             (H) Any income of the partnership which
6         constitutes personal service income as defined in
7         Section 1348 (b) (1) of the Internal Revenue Code (as
8         in effect December 31, 1981) or a reasonable allowance
9         for compensation paid or accrued for services rendered
10         by partners to the partnership, whichever is greater;
11             (I) An amount equal to all amounts of income
12         distributable to an entity subject to the Personal
13         Property Tax Replacement Income Tax imposed by
14         subsections (c) and (d) of Section 201 of this Act
15         including amounts distributable to organizations
16         exempt from federal income tax by reason of Section
17         501(a) of the Internal Revenue Code;
18             (J) With the exception of any amounts subtracted
19         under subparagraph (G), an amount equal to the sum of
20         all amounts disallowed as deductions by (i) Sections
21         171(a) (2), and 265(2) of the Internal Revenue Code of
22         1954, as now or hereafter amended, and all amounts of
23         expenses allocable to interest and disallowed as
24         deductions by Section 265(1) of the Internal Revenue
25         Code, as now or hereafter amended; and (ii) for taxable
26         years ending on or after August 13, 1999, Sections
27         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
28         Internal Revenue Code; the provisions of this
29         subparagraph are exempt from the provisions of Section
30         250;
31             (K) An amount equal to those dividends included in
32         such total which were paid by a corporation which
33         conducts business operations in an Enterprise Zone or
34         zones created under the Illinois Enterprise Zone Act,
35         enacted by the 82nd General Assembly, and conducts
36         substantially all of its operations in an Enterprise

 

 

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1         Zone or Zones;
2             (L) An amount equal to any contribution made to a
3         job training project established pursuant to the Real
4         Property Tax Increment Allocation Redevelopment Act;
5             (M) An amount equal to those dividends included in
6         such total that were paid by a corporation that
7         conducts business operations in a federally designated
8         Foreign Trade Zone or Sub-Zone and that is designated a
9         High Impact Business located in Illinois; provided
10         that dividends eligible for the deduction provided in
11         subparagraph (K) of paragraph (2) of this subsection
12         shall not be eligible for the deduction provided under
13         this subparagraph (M);
14             (N) An amount equal to the amount of the deduction
15         used to compute the federal income tax credit for
16         restoration of substantial amounts held under claim of
17         right for the taxable year pursuant to Section 1341 of
18         the Internal Revenue Code of 1986;
19             (O) For taxable years 2001 and thereafter, for the
20         taxable year in which the bonus depreciation deduction
21         (30% of the adjusted basis of the qualified property)
22         is taken on the taxpayer's federal income tax return
23         under subsection (k) of Section 168 of the Internal
24         Revenue Code and for each applicable taxable year
25         thereafter, an amount equal to "x", where:
26                 (1) "y" equals the amount of the depreciation
27             deduction taken for the taxable year on the
28             taxpayer's federal income tax return on property
29             for which the bonus depreciation deduction (30% of
30             the adjusted basis of the qualified property) was
31             taken in any year under subsection (k) of Section
32             168 of the Internal Revenue Code, but not including
33             the bonus depreciation deduction; and
34                 (2) "x" equals "y" multiplied by 30 and then
35             divided by 70 (or "y" multiplied by 0.429).
36             The aggregate amount deducted under this

 

 

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1         subparagraph in all taxable years for any one piece of
2         property may not exceed the amount of the bonus
3         depreciation deduction (30% of the adjusted basis of
4         the qualified property) taken on that property on the
5         taxpayer's federal income tax return under subsection
6         (k) of Section 168 of the Internal Revenue Code;
7             (P) If the taxpayer reports a capital gain or loss
8         on the taxpayer's federal income tax return for the
9         taxable year based on a sale or transfer of property
10         for which the taxpayer was required in any taxable year
11         to make an addition modification under subparagraph
12         (D-5), then an amount equal to that addition
13         modification.
14             The taxpayer is allowed to take the deduction under
15         this subparagraph only once with respect to any one
16         piece of property;
17             (Q) 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-12),
23         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
24         the amount of such 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-13), 203(c)(2)(G-13), or
31         203(d)(2)(D-8), but not to exceed the amount of such
32         addition modification;
33             (R) 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(d)(2)(D-7) for interest
7         paid, accrued, or incurred, directly or indirectly, to
8         the same foreign person; and
9             (S) 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(d)(2)(D-8) for
19         intangible expenses and costs paid, accrued, or
20         incurred, directly or indirectly, to the same foreign
21         person; .
22             (T) For taxable years ending on or after December
23         31, 2005, an amount, to the extent that it has not been
24         deducted in calculating the taxpayer's adjusted gross
25         income, equal to the aggregate amount of all tolls
26         documented as being paid paid during the taxable year
27         that are collected under the Toll Highway Act; and
28             (U) For taxable years ending on or after December
29         31, 2005, an amount, to the extent that it has not been
30         deducted in calculating the taxpayer's adjusted gross
31         income, equal to any amount paid during the taxable
32         year to purchase, lease, or otherwise obtain a
33         transponder or other electronic equipment for the
34         electronic payment of tolls that are collected under
35         the Toll Highway Act.
 

 

 

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

 

 

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1             (A) Certain life insurance companies. In the case
2         of a life insurance company subject to the tax imposed
3         by Section 801 of the Internal Revenue Code, life
4         insurance company taxable income, plus the amount of
5         distribution from pre-1984 policyholder surplus
6         accounts as calculated under Section 815a of the
7         Internal Revenue Code;
8             (B) Certain other insurance companies. In the case
9         of mutual insurance companies subject to the tax
10         imposed by Section 831 of the Internal Revenue Code,
11         insurance company taxable income;
12             (C) Regulated investment companies. In the case of
13         a regulated investment company subject to the tax
14         imposed by Section 852 of the Internal Revenue Code,
15         investment company taxable income;
16             (D) Real estate investment trusts. In the case of a
17         real estate investment trust subject to the tax imposed
18         by Section 857 of the Internal Revenue Code, real
19         estate investment trust taxable income;
20             (E) Consolidated corporations. In the case of a
21         corporation which is a member of an affiliated group of
22         corporations filing a consolidated income tax return
23         for the taxable year for federal income tax purposes,
24         taxable income determined as if such corporation had
25         filed a separate return for federal income tax purposes
26         for the taxable year and each preceding taxable year
27         for which it was a member of an affiliated group. For
28         purposes of this subparagraph, the taxpayer's separate
29         taxable income shall be determined as if the election
30         provided by Section 243(b) (2) of the Internal Revenue
31         Code had been in effect for all such years;
32             (F) Cooperatives. In the case of a cooperative
33         corporation or association, the taxable income of such
34         organization determined in accordance with the
35         provisions of Section 1381 through 1388 of the Internal
36         Revenue Code;

 

 

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1             (G) Subchapter S corporations. In the case of: (i)
2         a Subchapter S corporation for which there is in effect
3         an election for the taxable year under Section 1362 of
4         the Internal Revenue Code, the taxable income of such
5         corporation determined in accordance with Section
6         1363(b) of the Internal Revenue Code, except that
7         taxable income shall take into account those items
8         which are required by Section 1363(b)(1) of the
9         Internal Revenue Code to be separately stated; and (ii)
10         a Subchapter S corporation for which there is in effect
11         a federal election to opt out of the provisions of the
12         Subchapter S Revision Act of 1982 and have applied
13         instead the prior federal Subchapter S rules as in
14         effect on July 1, 1982, the taxable income of such
15         corporation determined in accordance with the federal
16         Subchapter S rules as in effect on July 1, 1982; and
17             (H) Partnerships. In the case of a partnership,
18         taxable income determined in accordance with Section
19         703 of the Internal Revenue Code, except that taxable
20         income shall take into account those items which are
21         required by Section 703(a)(1) to be separately stated
22         but which would be taken into account by an individual
23         in calculating his taxable income.
24         (3) Recapture of business expenses on disposition of
25     asset or business. Notwithstanding any other law to the
26     contrary, if in prior years income from an asset or
27     business has been classified as business income and in a
28     later year is demonstrated to be non-business income, then
29     all expenses, without limitation, deducted in such later
30     year and in the 2 immediately preceding taxable years
31     related to that asset or business that generated the
32     non-business income shall be added back and recaptured as
33     business income in the year of the disposition of the asset
34     or business. Such amount shall be apportioned to Illinois
35     using the greater of the apportionment fraction computed
36     for the business under Section 304 of this Act for the

 

 

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1     taxable year or the average of the apportionment fractions
2     computed for the business under Section 304 of this Act for
3     the taxable year and for the 2 immediately preceding
4     taxable years.
5     (f) Valuation limitation amount.
6         (1) In general. The valuation limitation amount
7     referred to in subsections (a) (2) (G), (c) (2) (I) and
8     (d)(2) (E) is an amount equal to:
9             (A) The sum of the pre-August 1, 1969 appreciation
10         amounts (to the extent consisting of gain reportable
11         under the provisions of Section 1245 or 1250 of the
12         Internal Revenue Code) for all property in respect of
13         which such gain was reported for the taxable year; plus
14             (B) The lesser of (i) the sum of the pre-August 1,
15         1969 appreciation amounts (to the extent consisting of
16         capital gain) for all property in respect of which such
17         gain was reported for federal income tax purposes for
18         the taxable year, or (ii) the net capital gain for the
19         taxable year, reduced in either case by any amount of
20         such gain included in the amount determined under
21         subsection (a) (2) (F) or (c) (2) (H).
22         (2) Pre-August 1, 1969 appreciation amount.
23             (A) If the fair market value of property referred
24         to in paragraph (1) was readily ascertainable on August
25         1, 1969, the pre-August 1, 1969 appreciation amount for
26         such property is the lesser of (i) the excess of such
27         fair market value over the taxpayer's basis (for
28         determining gain) for such property on that date
29         (determined under the Internal Revenue Code as in
30         effect on that date), or (ii) the total gain realized
31         and reportable for federal income tax purposes in
32         respect of the sale, exchange or other disposition of
33         such property.
34             (B) If the fair market value of property referred
35         to in paragraph (1) was not readily ascertainable on
36         August 1, 1969, the pre-August 1, 1969 appreciation

 

 

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1         amount for such property is that amount which bears the
2         same ratio to the total gain reported in respect of the
3         property for federal income tax purposes for the
4         taxable year, as the number of full calendar months in
5         that part of the taxpayer's holding period for the
6         property ending July 31, 1969 bears to the number of
7         full calendar months in the taxpayer's entire holding
8         period for the property.
9             (C) The Department shall prescribe such
10         regulations as may be necessary to carry out the
11         purposes of this paragraph.
 
12     (g) Double deductions. Unless specifically provided
13 otherwise, nothing in this Section shall permit the same item
14 to be deducted more than once.
 
15     (h) Legislative intention. Except as expressly provided by
16 this Section there shall be no modifications or limitations on
17 the amounts of income, gain, loss or deduction taken into
18 account in determining gross income, adjusted gross income or
19 taxable income for federal income tax purposes for the taxable
20 year, or in the amount of such items entering into the
21 computation of base income and net income under this Act for
22 such taxable year, whether in respect of property values as of
23 August 1, 1969 or otherwise.
24 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
25 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
26 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
27 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
28     Section 10. The Toll Highway Act is amended by adding
29 Section 23.5 as follows:
 
30     (605 ILCS 10/23.5 new)
31     Sec. 23.5. Annual reports to toll payers. No later than
32 January 31 of each year, the Authority must send a written

 

 

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1 report to each person in the State who has paid a toll during
2 the previous calendar year through the use of a transponder or
3 other electronic equipment. The report must set forth all
4 payments by the person through the use of the transponder or
5 other electronic equipment.
 
6     Section 99. Effective date. This Act takes effect upon
7 becoming law.