Sen. James F. Clayborne Jr.

Filed: 4/13/2005

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 507

2     AMENDMENT NO. ______. Amend Senate Bill 507, AS AMENDED, by
3 replacing everything after the enacting clause with the
4 following:
 
5     "Section 5. The State Treasurer Act is amended by changing
6 Section 16.5 as follows:
 
7     (15 ILCS 505/16.5)
8     Sec. 16.5. College Savings Pool. The State Treasurer may
9 establish and administer a College Savings Pool to supplement
10 and enhance the investment opportunities otherwise available
11 to persons seeking to finance the costs of higher education.
12 The State Treasurer, in administering the College Savings Pool,
13 may receive moneys paid into the pool by a participant and may
14 serve as the fiscal agent of that participant for the purpose
15 of holding and investing those moneys.
16     "Participant", as used in this Section, means any person
17 who makes investments in the pool. "Designated beneficiary", as
18 used in this Section, means any person on whose behalf an
19 account is established in the College Savings Pool by a
20 participant. Both in-state and out-of-state persons may be
21 participants and designated beneficiaries in the College
22 Savings Pool.
23     New accounts in the College Savings Pool may shall be
24 processed through participating financial institutions.

 

 

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1 "Participating financial institution", as used in this
2 Section, means any financial institution insured by the Federal
3 Deposit Insurance Corporation and lawfully doing business in
4 the State of Illinois and any credit union approved by the
5 State Treasurer and lawfully doing business in the State of
6 Illinois that agrees to process new accounts in the College
7 Savings Pool. Participating financial institutions may charge
8 a processing fee to participants to open an account in the pool
9 that shall not exceed $30 until the year 2001. Beginning in
10 2001 and every year thereafter, the maximum fee limit shall be
11 adjusted by the Treasurer based on the Consumer Price Index for
12 the North Central Region as published by the United States
13 Department of Labor, Bureau of Labor Statistics for the
14 immediately preceding calendar year. Every contribution
15 received by a financial institution for investment in the
16 College Savings Pool shall be transferred from the financial
17 institution to a location selected by the State Treasurer
18 within one business day following the day that the funds must
19 be made available in accordance with federal law. All
20 communications from the State Treasurer to participants shall
21 reference the participating financial institution at which the
22 account was processed.
23     The Treasurer may invest the moneys in the College Savings
24 Pool in the same manner, in the same types of investments, and
25 subject to the same limitations provided for the investment of
26 moneys by the Illinois State Board of Investment. To enhance
27 the safety and liquidity of the College Savings Pool, to ensure
28 the diversification of the investment portfolio of the pool,
29 and in an effort to keep investment dollars in the State of
30 Illinois, the State Treasurer may shall make a percentage of
31 each account available for investment in participating
32 financial institutions doing business in the State. The State
33 Treasurer may shall deposit with the participating financial
34 institution at which the account was processed the following

 

 

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1 percentage of each account at a prevailing rate offered by the
2 institution, provided that the deposit is federally insured or
3 fully collateralized and the institution accepts the deposit:
4 10% of the total amount of each account for which the current
5 age of the beneficiary is less than 7 years of age, 20% of the
6 total amount of each account for which the beneficiary is at
7 least 7 years of age and less than 12 years of age, and 50% of
8 the total amount of each account for which the current age of
9 the beneficiary is at least 12 years of age. The State
10 Treasurer shall adjust each account at least annually to ensure
11 compliance with this Section. The Treasurer shall develop,
12 publish, and implement an investment policy covering the
13 investment of the moneys in the College Savings Pool. The
14 policy shall be published (i) at least once each year in at
15 least one newspaper of general circulation in both Springfield
16 and Chicago and (ii) each year as part of the audit of the
17 College Savings Pool by the Auditor General, which shall be
18 distributed to all participants. The Treasurer shall notify all
19 participants in writing, and the Treasurer shall publish in a
20 newspaper of general circulation in both Chicago and
21 Springfield, any changes to the previously published
22 investment policy at least 30 calendar days before implementing
23 the policy. Any investment policy adopted by the Treasurer
24 shall be reviewed and updated if necessary within 90 days
25 following the date that the State Treasurer takes office.
26     Participants shall be required to use moneys distributed
27 from the College Savings Pool for qualified expenses at
28 eligible educational institutions. "Qualified expenses", as
29 used in this Section, means the following: (i) tuition, fees,
30 and the costs of books, supplies, and equipment required for
31 enrollment or attendance at an eligible educational
32 institution and (ii) certain room and board expenses incurred
33 while attending an eligible educational institution at least
34 half-time. "Eligible educational institutions", as used in

 

 

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1 this Section, means public and private colleges, junior
2 colleges, graduate schools, and certain vocational
3 institutions that are described in Section 481 of the Higher
4 Education Act of 1965 (20 U.S.C. 1088) and that are eligible to
5 participate in Department of Education student aid programs. A
6 student shall be considered to be enrolled at least half-time
7 if the student is enrolled for at least half the full-time
8 academic work load for the course of study the student is
9 pursuing as determined under the standards of the institution
10 at which the student is enrolled. Distributions made from the
11 pool for qualified expenses shall be made directly to the
12 eligible educational institution, directly to a vendor, or in
13 the form of a check payable to both the beneficiary and the
14 institution or vendor. Any moneys that are distributed in any
15 other manner or that are used for expenses other than qualified
16 expenses at an eligible educational institution shall be
17 subject to a penalty of 10% of the earnings unless the
18 beneficiary dies, becomes disabled, or receives a scholarship
19 that equals or exceeds the distribution. Penalties shall be
20 withheld at the time the distribution is made.
21     The Treasurer shall limit the contributions that may be
22 made on behalf of a designated beneficiary based on the
23 limitations established by the Internal Revenue Service. an
24 actuarial estimate of what is required to pay tuition, fees,
25 and room and board for 5 undergraduate years at the highest
26 cost eligible educational institution. The contributions made
27 on behalf of a beneficiary who is also a beneficiary under the
28 Illinois Prepaid Tuition Program shall be further restricted to
29 ensure that the contributions in both programs combined do not
30 exceed the limit established for the College Savings Pool. The
31 Treasurer shall provide the Illinois Student Assistance
32 Commission each year at a time designated by the Commission, an
33 electronic report of all participant accounts in the
34 Treasurer's College Savings Pool, listing total contributions

 

 

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1 and disbursements from each individual account during the
2 previous calendar year. As soon thereafter as is possible
3 following receipt of the Treasurer's report, the Illinois
4 Student Assistance Commission shall, in turn, provide the
5 Treasurer with an electronic report listing those College
6 Savings Pool participants who also participate in the State's
7 prepaid tuition program, administered by the Commission. The
8 Commission shall be responsible for filing any combined tax
9 reports regarding State qualified savings programs required by
10 the United States Internal Revenue Service. The Treasurer shall
11 work with the Illinois Student Assistance Commission to
12 coordinate the marketing of the College Savings Pool and the
13 Illinois Prepaid Tuition Program when considered beneficial by
14 the Treasurer and the Director of the Illinois Student
15 Assistance Commission. The Treasurer's office shall not
16 publicize or otherwise market the College Savings Pool or
17 accept any moneys into the College Savings Pool prior to March
18 1, 2000. The Treasurer shall provide a separate accounting for
19 each designated beneficiary to each participant, the Illinois
20 Student Assistance Commission, and the participating financial
21 institution at which the account was processed. No interest in
22 the program may be pledged as security for a loan.
23     The assets of the College Savings Pool and its income and
24 operation shall be exempt from all taxation by the State of
25 Illinois and any of its subdivisions. The accrued earnings on
26 investments in the Pool once disbursed on behalf of a
27 designated beneficiary shall be similarly exempt from all
28 taxation by the State of Illinois and its subdivisions, so long
29 as they are used for qualified expenses. Contributions to a
30 College Savings Pool account during the taxable year may be
31 deducted from adjusted gross income as provided in Section 203
32 of the Illinois Income Tax Act. The provisions of this
33 paragraph are exempt from Section 250 of the Illinois Income
34 Tax Act.

 

 

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1     The Treasurer shall adopt rules he or she considers
2 necessary for the efficient administration of the College
3 Savings Pool. The rules shall provide whatever additional
4 parameters and restrictions are necessary to ensure that the
5 College Savings Pool meets all of the requirements for a
6 qualified state tuition program under Section 529 of the
7 Internal Revenue Code (26 U.S.C. 529). The rules shall provide
8 for the administration expenses of the pool to be paid from its
9 earnings and for the investment earnings in excess of the
10 expenses and all moneys collected as penalties to be credited
11 or paid monthly to the several participants in the pool in a
12 manner which equitably reflects the differing amounts of their
13 respective investments in the pool and the differing periods of
14 time for which those amounts were in the custody of the pool.
15 Also, the rules shall require the maintenance of records that
16 enable the Treasurer's office to produce a report for each
17 account in the pool at least annually that documents the
18 account balance and investment earnings. Notice of any proposed
19 amendments to the rules and regulations shall be provided to
20 all participants prior to adoption. Amendments to rules and
21 regulations shall apply only to contributions made after the
22 adoption of the amendment.
23     Upon creating the College Savings Pool, the State Treasurer
24 shall give bond with 2 or more sufficient sureties, payable to
25 and for the benefit of the participants in the College Savings
26 Pool, in the penal sum of $1,000,000, conditioned upon the
27 faithful discharge of his or her duties in relation to the
28 College Savings Pool.
29 (Source: P.A. 92-16, eff. 6-28-01; 92-439, eff. 8-17-01;
30 92-626, eff. 7-11-02; 93-812, eff. 1-1-05.)
 
31     Section 10. The Illinois Income Tax Act is amended by
32 changing Section 203 as follows:
 

 

 

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1     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
2     Sec. 203. Base income defined.
3     (a) Individuals.
4         (1) In general. In the case of an individual, base
5     income means an amount equal to the taxpayer's adjusted
6     gross income for the taxable year as modified by paragraph
7     (2).
8         (2) Modifications. The adjusted gross income referred
9     to in paragraph (1) shall be modified by adding thereto the
10     sum of the following amounts:
11             (A) An amount equal to all amounts paid or accrued
12         to the taxpayer as interest or dividends during the
13         taxable year to the extent excluded from gross income
14         in the computation of adjusted gross income, except
15         stock dividends of qualified public utilities
16         described in Section 305(e) of the Internal Revenue
17         Code;
18             (B) An amount equal to the amount of tax imposed by
19         this Act to the extent deducted from gross income in
20         the computation of adjusted gross income for the
21         taxable year;
22             (C) An amount equal to the amount received during
23         the taxable year as a recovery or refund of real
24         property taxes paid with respect to the taxpayer's
25         principal residence under the Revenue Act of 1939 and
26         for which a deduction was previously taken under
27         subparagraph (L) of this paragraph (2) prior to July 1,
28         1991, the retrospective application date of Article 4
29         of Public Act 87-17. In the case of multi-unit or
30         multi-use structures and farm dwellings, the taxes on
31         the taxpayer's principal residence shall be that
32         portion of the total taxes for the entire property
33         which is attributable to such principal residence;
34             (D) An amount equal to the amount of the capital

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         assets.
2             This paragraph shall not apply to the following:
3                 (i) any item of intangible expenses or costs
4             paid, accrued, or incurred, directly or
5             indirectly, from a transaction with a foreign
6             person who is subject in a foreign country or
7             state, other than a state which requires mandatory
8             unitary reporting, to a tax on or measured by net
9             income with respect to such item; or
10                 (ii) any item of intangible expense or cost
11             paid, accrued, or incurred, directly or
12             indirectly, if the taxpayer can establish, based
13             on a preponderance of the evidence, both of the
14             following:
15                     (a) the foreign person during the same
16                 taxable year paid, accrued, or incurred, the
17                 intangible expense or cost to a person that is
18                 not a related member, and
19                     (b) the transaction giving rise to the
20                 intangible expense or cost between the
21                 taxpayer and the foreign person did not have as
22                 a principal purpose the avoidance of Illinois
23                 income tax, and is paid pursuant to a contract
24                 or agreement that reflects arm's-length terms;
25                 or
26                 (iii) any item of intangible expense or cost
27             paid, accrued, or incurred, directly or
28             indirectly, from a transaction with a foreign
29             person if the taxpayer establishes by clear and
30             convincing evidence, that the adjustments are
31             unreasonable; or if the taxpayer and the Director
32             agree in writing to the application or use of an
33             alternative method of apportionment under Section
34             304(f);

 

 

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1                 Nothing in this subsection shall preclude the
2             Director from making any other adjustment
3             otherwise allowed under Section 404 of this Act for
4             any tax year beginning after the effective date of
5             this amendment provided such adjustment is made
6             pursuant to regulation adopted by the Department
7             and such regulations provide methods and standards
8             by which the Department will utilize its authority
9             under Section 404 of this Act;
10             (D-20) For taxable years beginning on or after
11         January 1, 2002 and ending on or before December 31,
12         2005, in the case of a distribution from a qualified
13         tuition program under Section 529 of the Internal
14         Revenue Code, other than (i) a distribution from a
15         College Savings Pool created under Section 16.5 of the
16         State Treasurer Act or (ii) a distribution from the
17         Illinois Prepaid Tuition Trust Fund, an amount equal to
18         the amount excluded from gross income under Section
19         529(c)(3)(B). For taxable years beginning on or after
20         January 1, 2006, in the case of a distribution from a
21         qualified tuition program under Section 529 of the
22         Internal Revenue Code, other than (i) a distribution
23         from a College Savings Pool created under Section 16.5
24         of the State Treasurer Act, (ii) a distribution from
25         the Illinois Prepaid Tuition Trust Fund, or (iii) a
26         distribution from a qualified tuition program under
27         Section 529 of the Internal Revenue Code that, at the
28         time of enrollment and as reasonably determined by
29         either the College Savings Plans Network or the State
30         Treasurer, (I) was in compliance with the College
31         Savings Plans Network's voluntary disclosure
32         principles and (II) was in compliance with the
33         requirement to inform Illinois residents of the
34         existence of the qualified tuition programs

 

 

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1         administered by the State by either informing Illinois
2         residents directly or informing financial
3         intermediaries distributing the program of the
4         requirement at least annually, an amount equal to the
5         amount excluded from gross income under Section
6         529(c)(3)(B);
7             (D-21) For taxable years beginning on or after
8         January 1, 2006, in the case of transfer of moneys from
9         a qualified tuition program under Section 529 of the
10         Internal Revenue Code that is administered by the State
11         to an out-of-state program, an amount equal to the
12         amount of moneys previously deducted from base income
13         under subsection (a)(2)(Y) of this Section.
14     and by deducting from the total so obtained the sum of the
15     following amounts:
16             (E) For taxable years ending before December 31,
17         2001, any amount included in such total in respect of
18         any compensation (including but not limited to any
19         compensation paid or accrued to a serviceman while a
20         prisoner of war or missing in action) paid to a
21         resident by reason of being on active duty in the Armed
22         Forces of the United States and in respect of any
23         compensation paid or accrued to a resident who as a
24         governmental employee was a prisoner of war or missing
25         in action, and in respect of any compensation paid to a
26         resident in 1971 or thereafter for annual training
27         performed pursuant to Sections 502 and 503, Title 32,
28         United States Code as a member of the Illinois National
29         Guard. For taxable years ending on or after December
30         31, 2001, any amount included in such total in respect
31         of any compensation (including but not limited to any
32         compensation paid or accrued to a serviceman while a
33         prisoner of war or missing in action) paid to a
34         resident by reason of being a member of any component

 

 

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

 

 

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

 

 

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

 

 

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

 

 

09400SB0507sam002 - 19 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 20 - LRB094 08414 BDD 45112 a

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

 

 

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

 

 

09400SB0507sam002 - 22 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 23 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 24 - LRB094 08414 BDD 45112 a

1         order that they are listed:
2                 (i) the addition modification relating to the
3             net operating loss carried back or forward to the
4             taxable year from any taxable year ending prior to
5             December 31, 1986 shall be reduced by the amount of
6             addition modification under this subparagraph (E)
7             which related to that net operating loss and which
8             was taken into account in calculating the base
9             income of an earlier taxable year, and
10                 (ii) the addition modification relating to the
11             net operating loss carried back or forward to the
12             taxable year from any taxable year ending prior to
13             December 31, 1986 shall not exceed the amount of
14             such carryback or carryforward;
15             For taxable years in which there is a net operating
16         loss carryback or carryforward from more than one other
17         taxable year ending prior to December 31, 1986, the
18         addition modification provided in this subparagraph
19         (E) shall be the sum of the amounts computed
20         independently under the preceding provisions of this
21         subparagraph (E) for each such taxable year;
22             (E-5) For taxable years ending after December 31,
23         1997, an amount equal to any eligible remediation costs
24         that the corporation deducted in computing adjusted
25         gross income and for which the corporation claims a
26         credit under subsection (l) of Section 201;
27             (E-10) For taxable years 2001 and thereafter, an
28         amount equal to the bonus depreciation deduction (30%
29         of the adjusted basis of the qualified property) taken
30         on the taxpayer's federal income tax return for the
31         taxable year under subsection (k) of Section 168 of the
32         Internal Revenue Code; and
33             (E-11) If the taxpayer reports a capital gain or
34         loss on the taxpayer's federal income tax return for

 

 

09400SB0507sam002 - 25 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 26 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 27 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 28 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 29 - LRB094 08414 BDD 45112 a

1                 or agreement that reflects arm's-length terms;
2                 or
3                 (iii) any item of intangible expense or cost
4             paid, accrued, or incurred, directly or
5             indirectly, from a transaction with a foreign
6             person if the taxpayer establishes by clear and
7             convincing evidence, that the adjustments are
8             unreasonable; or if the taxpayer and the Director
9             agree in writing to the application or use of an
10             alternative method of apportionment under Section
11             304(f);
12                 Nothing in this subsection shall preclude the
13             Director from making any other adjustment
14             otherwise allowed under Section 404 of this Act for
15             any tax year beginning after the effective date of
16             this amendment provided such adjustment is made
17             pursuant to regulation adopted by the Department
18             and such regulations provide methods and standards
19             by which the Department will utilize its authority
20             under Section 404 of this Act;
21     and by deducting from the total so obtained the sum of the
22     following amounts:
23             (F) An amount equal to the amount of any tax
24         imposed by this Act which was refunded to the taxpayer
25         and included in such total for the taxable year;
26             (G) An amount equal to any amount included in such
27         total under Section 78 of the Internal Revenue Code;
28             (H) In the case of a regulated investment company,
29         an amount equal to the amount of exempt interest
30         dividends as defined in subsection (b) (5) of Section
31         852 of the Internal Revenue Code, paid to shareholders
32         for the taxable year;
33             (I) With the exception of any amounts subtracted
34         under subparagraph (J), 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) and amounts disallowed as
3         interest expense by Section 291(a)(3) of the Internal
4         Revenue Code, as now or hereafter amended, and all
5         amounts of expenses allocable to interest and
6         disallowed as deductions by Section 265(a)(1) of the
7         Internal Revenue Code, as now or hereafter amended; and
8         (ii) for taxable years ending on or after August 13,
9         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
10         832(b)(5)(B)(i) of the Internal Revenue Code; the
11         provisions of this subparagraph are exempt from the
12         provisions of Section 250;
13             (J) An amount equal to all amounts included in such
14         total which are exempt from taxation by this State
15         either by reason of its statutes or Constitution or by
16         reason of the Constitution, treaties or statutes of the
17         United States; provided that, in the case of any
18         statute of this State that exempts income derived from
19         bonds or other obligations from the tax imposed under
20         this Act, the amount exempted shall be the interest net
21         of bond premium amortization;
22             (K) An amount equal to those dividends included in
23         such total which were paid by a corporation which
24         conducts business operations in an Enterprise Zone or
25         zones created under the Illinois Enterprise Zone Act
26         and conducts substantially all of its operations in an
27         Enterprise Zone or zones;
28             (L) An amount equal to those dividends included in
29         such total that were paid by a corporation that
30         conducts business operations in a federally designated
31         Foreign Trade Zone or Sub-Zone and that is designated a
32         High Impact Business located in Illinois; provided
33         that dividends eligible for the deduction provided in
34         subparagraph (K) of paragraph 2 of this subsection

 

 

09400SB0507sam002 - 31 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 32 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 33 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 34 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 35 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 36 - LRB094 08414 BDD 45112 a

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

 

 

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

 

 

09400SB0507sam002 - 38 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 39 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 40 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 41 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 42 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 43 - LRB094 08414 BDD 45112 a

1             paid, accrued, or incurred, directly or
2             indirectly, from a transaction with a foreign
3             person if the taxpayer establishes by clear and
4             convincing evidence, that the adjustments are
5             unreasonable; or if the taxpayer and the Director
6             agree in writing to the application or use of an
7             alternative method of apportionment under Section
8             304(f);
9                 Nothing in this subsection shall preclude the
10             Director from making any other adjustment
11             otherwise allowed under Section 404 of this Act for
12             any tax year beginning after the effective date of
13             this amendment provided such adjustment is made
14             pursuant to regulation adopted by the Department
15             and such regulations provide methods and standards
16             by which the Department will utilize its authority
17             under Section 404 of this Act;
18     and by deducting from the total so obtained the sum of the
19     following amounts:
20             (H) An amount equal to all amounts included in such
21         total pursuant to the provisions of Sections 402(a),
22         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
23         Internal Revenue Code or included in such total as
24         distributions under the provisions of any retirement
25         or disability plan for employees of any governmental
26         agency or unit, or retirement payments to retired
27         partners, which payments are excluded in computing net
28         earnings from self employment by Section 1402 of the
29         Internal Revenue Code and regulations adopted pursuant
30         thereto;
31             (I) The valuation limitation amount;
32             (J) An amount equal to the amount of any tax
33         imposed by this Act which was refunded to the taxpayer
34         and included in such total for the taxable year;

 

 

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1             (K) An amount equal to all amounts included in
2         taxable income as modified by subparagraphs (A), (B),
3         (C), (D), (E), (F) and (G) which are exempt from
4         taxation by this State either by reason of its statutes
5         or Constitution or by reason of the Constitution,
6         treaties or statutes of the United States; provided
7         that, in the case of any statute of this State that
8         exempts income derived from bonds or other obligations
9         from the tax imposed under this Act, the amount
10         exempted shall be the interest net of bond premium
11         amortization;
12             (L) With the exception of any amounts subtracted
13         under subparagraph (K), an amount equal to the sum of
14         all amounts disallowed as deductions by (i) Sections
15         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
16         as now or hereafter amended, and all amounts of
17         expenses allocable to interest and disallowed as
18         deductions by Section 265(1) of the Internal Revenue
19         Code of 1954, as now or hereafter amended; and (ii) for
20         taxable years ending on or after August 13, 1999,
21         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
22         the Internal Revenue Code; the provisions of this
23         subparagraph are exempt from the provisions of Section
24         250;
25             (M) An amount equal to those dividends included in
26         such total which were paid by a corporation which
27         conducts business operations in an Enterprise Zone or
28         zones created under the Illinois Enterprise Zone Act
29         and conducts substantially all of its operations in an
30         Enterprise Zone or Zones;
31             (N) An amount equal to any contribution made to a
32         job training project established pursuant to the Tax
33         Increment Allocation Redevelopment Act;
34             (O) An amount equal to those dividends included in

 

 

09400SB0507sam002 - 45 - LRB094 08414 BDD 45112 a

1         such total that were paid by a corporation that
2         conducts business operations in a federally designated
3         Foreign Trade Zone or Sub-Zone and that is designated a
4         High Impact Business located in Illinois; provided
5         that dividends eligible for the deduction provided in
6         subparagraph (M) of paragraph (2) of this subsection
7         shall not be eligible for the deduction provided under
8         this subparagraph (O);
9             (P) An amount equal to the amount of the deduction
10         used to compute the federal income tax credit for
11         restoration of substantial amounts held under claim of
12         right for the taxable year pursuant to Section 1341 of
13         the Internal Revenue Code of 1986;
14             (Q) For taxable year 1999 and thereafter, an amount
15         equal to the amount of any (i) distributions, to the
16         extent includible in gross income for federal income
17         tax purposes, made to the taxpayer because of his or
18         her status as a victim of persecution for racial or
19         religious reasons by Nazi Germany or any other Axis
20         regime or as an heir of the victim and (ii) items of
21         income, to the extent includible in gross income for
22         federal income tax purposes, attributable to, derived
23         from or in any way related to assets stolen from,
24         hidden from, or otherwise lost to a victim of
25         persecution for racial or religious reasons by Nazi
26         Germany or any other Axis regime immediately prior to,
27         during, and immediately after World War II, including,
28         but not limited to, interest on the proceeds receivable
29         as insurance under policies issued to a victim of
30         persecution for racial or religious reasons by Nazi
31         Germany or any other Axis regime by European insurance
32         companies immediately prior to and during World War II;
33         provided, however, this subtraction from federal
34         adjusted gross income does not apply to assets acquired

 

 

09400SB0507sam002 - 46 - LRB094 08414 BDD 45112 a

1         with such assets or with the proceeds from the sale of
2         such assets; provided, further, this paragraph shall
3         only apply to a taxpayer who was the first recipient of
4         such assets after their recovery and who is a victim of
5         persecution for racial or religious reasons by Nazi
6         Germany or any other Axis regime or as an heir of the
7         victim. The amount of and the eligibility for any
8         public assistance, benefit, or similar entitlement is
9         not affected by the inclusion of items (i) and (ii) of
10         this paragraph in gross income for federal income tax
11         purposes. This paragraph is exempt from the provisions
12         of Section 250;
13             (R) For taxable years 2001 and thereafter, for the
14         taxable year in which the bonus depreciation deduction
15         (30% of the adjusted basis of the qualified property)
16         is taken on the taxpayer's federal income tax return
17         under subsection (k) of Section 168 of the Internal
18         Revenue Code and for each applicable taxable year
19         thereafter, an amount equal to "x", where:
20                 (1) "y" equals the amount of the depreciation
21             deduction taken for the taxable year on the
22             taxpayer's federal income tax return on property
23             for which the bonus depreciation deduction (30% of
24             the adjusted basis of the qualified property) was
25             taken in any year under subsection (k) of Section
26             168 of the Internal Revenue Code, but not including
27             the bonus depreciation deduction; and
28                 (2) "x" equals "y" multiplied by 30 and then
29             divided by 70 (or "y" multiplied by 0.429).
30             The aggregate amount deducted under this
31         subparagraph in all taxable years for any one piece of
32         property may not exceed the amount of the bonus
33         depreciation deduction (30% of the adjusted basis of
34         the qualified property) taken on that property on the

 

 

09400SB0507sam002 - 47 - LRB094 08414 BDD 45112 a

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

 

 

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

 

 

09400SB0507sam002 - 50 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 51 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 52 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 53 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 54 - LRB094 08414 BDD 45112 a

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

 

 

09400SB0507sam002 - 55 - LRB094 08414 BDD 45112 a

1         exempt from federal income tax by reason of Section
2         501(a) of the Internal Revenue Code;
3             (J) With the exception of any amounts subtracted
4         under subparagraph (G), an amount equal to the sum of
5         all amounts disallowed as deductions by (i) Sections
6         171(a) (2), and 265(2) of the Internal Revenue Code of
7         1954, as now or hereafter amended, and all amounts of
8         expenses allocable to interest and disallowed as
9         deductions by Section 265(1) of the Internal Revenue
10         Code, as now or hereafter amended; and (ii) for taxable
11         years ending on or after August 13, 1999, Sections
12         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
13         Internal Revenue Code; the provisions of this
14         subparagraph are exempt from the provisions of Section
15         250;
16             (K) An amount equal to those dividends included in
17         such total which were paid by a corporation which
18         conducts business operations in an Enterprise Zone or
19         zones created under the Illinois Enterprise Zone Act,
20         enacted by the 82nd General Assembly, and conducts
21         substantially all of its operations in an Enterprise
22         Zone or Zones;
23             (L) An amount equal to any contribution made to a
24         job training project established pursuant to the Real
25         Property Tax Increment Allocation Redevelopment Act;
26             (M) An amount equal to those dividends included in
27         such total that were paid by a corporation that
28         conducts business operations in a federally designated
29         Foreign Trade Zone or Sub-Zone and that is designated a
30         High Impact Business located in Illinois; provided
31         that dividends eligible for the deduction provided in
32         subparagraph (K) of paragraph (2) of this subsection
33         shall not be eligible for the deduction provided under
34         this subparagraph (M);

 

 

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

 

 

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1         (D-5), then an amount equal to that addition
2         modification.
3             The taxpayer is allowed to take the deduction under
4         this subparagraph only once with respect to any one
5         piece of property;
6             (Q) The amount of (i) any interest income (net of
7         the deductions allocable thereto) taken into account
8         for the taxable year with respect to a transaction with
9         a taxpayer that is required to make an addition
10         modification with respect to such transaction under
11         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
12         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
13         the amount of such addition modification and (ii) any
14         income from intangible property (net of the deductions
15         allocable thereto) taken into account for the taxable
16         year with respect to a transaction with a taxpayer that
17         is required to make an addition modification with
18         respect to such transaction under Section
19         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
20         203(d)(2)(D-8), but not to exceed the amount of such
21         addition modification;
22             (R) An amount equal to the interest income taken
23         into account for the taxable year (net of the
24         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(d)(2)(D-7) for interest
32         paid, accrued, or incurred, directly or indirectly, to
33         the same foreign person; and
34             (S) An amount equal to the income from intangible

 

 

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

 

 

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1     trust, or estate is less than zero and addition
2     modifications, other than those provided by subparagraph
3     (E) of paragraph (2) of subsection (b) for corporations or
4     subparagraph (E) of paragraph (2) of subsection (c) for
5     trusts and estates, exceed subtraction modifications, an
6     addition modification must be made under those
7     subparagraphs for any other taxable year to which the
8     taxable income less than zero (net operating loss) is
9     applied under Section 172 of the Internal Revenue Code or
10     under subparagraph (E) of paragraph (2) of this subsection
11     (e) applied in conjunction with Section 172 of the Internal
12     Revenue Code.
13         (2) Special rule. For purposes of paragraph (1) of this
14     subsection, the taxable income properly reportable for
15     federal income tax purposes shall mean:
16             (A) Certain life insurance companies. In the case
17         of a life insurance company subject to the tax imposed
18         by Section 801 of the Internal Revenue Code, life
19         insurance company taxable income, plus the amount of
20         distribution from pre-1984 policyholder surplus
21         accounts as calculated under Section 815a of the
22         Internal Revenue Code;
23             (B) Certain other insurance companies. In the case
24         of mutual insurance companies subject to the tax
25         imposed by Section 831 of the Internal Revenue Code,
26         insurance company taxable income;
27             (C) Regulated investment companies. In the case of
28         a regulated investment company subject to the tax
29         imposed by Section 852 of the Internal Revenue Code,
30         investment company taxable income;
31             (D) Real estate investment trusts. In the case of a
32         real estate investment trust subject to the tax imposed
33         by Section 857 of the Internal Revenue Code, real
34         estate investment trust taxable income;

 

 

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

 

 

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

 

 

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

 

 

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1 otherwise, nothing in this Section shall permit the same item
2 to be deducted more than once.
 
3     (h) Legislative intention. Except as expressly provided by
4 this Section there shall be no modifications or limitations on
5 the amounts of income, gain, loss or deduction taken into
6 account in determining gross income, adjusted gross income or
7 taxable income for federal income tax purposes for the taxable
8 year, or in the amount of such items entering into the
9 computation of base income and net income under this Act for
10 such taxable year, whether in respect of property values as of
11 August 1, 1969 or otherwise.
12 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
13 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
14 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
15 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
16     Section 99. Effective date. This Act takes effect upon
17 becoming law.".