SB2582 Engrossed LRB094 18874 BDD 54316 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         Increment Allocation Redevelopment Act;
2             (P) An amount equal to the amount of the deduction
3         used to compute the federal income tax credit for
4         restoration of substantial amounts held under claim of
5         right for the taxable year pursuant to Section 1341 of
6         the Internal Revenue Code of 1986;
7             (Q) An amount equal to any amounts included in such
8         total, received by the taxpayer as an acceleration in
9         the payment of life, endowment or annuity benefits in
10         advance of the time they would otherwise be payable as
11         an indemnity for a terminal illness;
12             (R) An amount equal to the amount of any federal or
13         State bonus paid to veterans of the Persian Gulf War;
14             (S) An amount, to the extent included in adjusted
15         gross income, equal to the amount of a contribution
16         made in the taxable year on behalf of the taxpayer to a
17         medical care savings account established under the
18         Medical Care Savings Account Act or the Medical Care
19         Savings Account Act of 2000 to the extent the
20         contribution is accepted by the account administrator
21         as provided in that Act;
22             (T) An amount, to the extent included in adjusted
23         gross income, equal to the amount of interest earned in
24         the taxable year on a medical care savings account
25         established under the Medical Care Savings Account Act
26         or the Medical Care Savings Account Act of 2000 on
27         behalf of the taxpayer, other than interest added
28         pursuant to item (D-5) of this paragraph (2);
29             (U) For one taxable year beginning on or after
30         January 1, 1994, an amount equal to the total amount of
31         tax imposed and paid under subsections (a) and (b) of
32         Section 201 of this Act on grant amounts received by
33         the taxpayer under the Nursing Home Grant Assistance
34         Act during the taxpayer's taxable years 1992 and 1993;
35             (V) Beginning with tax years ending on or after
36         December 31, 1995 and ending with tax years ending on

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, to the same foreign person; and
3             (EE) An amount equal to the income from intangible
4         property taken into account for the taxable year (net
5         of the deductions allocable thereto) with respect to
6         transactions with a foreign person who would be a
7         member of the taxpayer's unitary business group but for
8         the fact that the foreign person's business activity
9         outside the United States is 80% or more of that
10         person's total business activity, but not to exceed the
11         addition modification required to be made for the same
12         taxable year under Section 203(a)(2)(D-18) for
13         intangible expenses and costs paid, accrued, or
14         incurred, directly or indirectly, to the same foreign
15         person.
 
16     (b) Corporations.
17         (1) In general. In the case of a corporation, base
18     income means an amount equal to the taxpayer's taxable
19     income for the taxable year as modified by paragraph (2).
20         (2) Modifications. The taxable income referred to in
21     paragraph (1) shall be modified by adding thereto the sum
22     of the following amounts:
23             (A) An amount equal to all amounts paid or accrued
24         to the taxpayer as interest and all distributions
25         received from regulated investment companies during
26         the taxable year to the extent excluded from gross
27         income in the computation of taxable income;
28             (B) An amount equal to the amount of tax imposed by
29         this Act to the extent deducted from gross income in
30         the computation of taxable income for the taxable year;
31             (C) In the case of a regulated investment company,
32         an amount equal to the excess of (i) the net long-term
33         capital gain for the taxable year, over (ii) the amount
34         of the capital gain dividends designated as such in
35         accordance with Section 852(b)(3)(C) of the Internal

 

 

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

 

 

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1         (E) shall be the sum of the amounts computed
2         independently under the preceding provisions of this
3         subparagraph (E) for each such taxable year;
4             (E-5) For taxable years ending after December 31,
5         1997, an amount equal to any eligible remediation costs
6         that the corporation deducted in computing adjusted
7         gross income and for which the corporation claims a
8         credit under subsection (l) of Section 201;
9             (E-10) For taxable years 2001 and thereafter, an
10         amount equal to the bonus depreciation deduction (30%
11         of the adjusted basis of the qualified property) taken
12         on the taxpayer's federal income tax return for the
13         taxable year under subsection (k) of Section 168 of the
14         Internal Revenue Code; and
15             (E-11) If the taxpayer reports a capital gain or
16         loss on the taxpayer's federal income tax return for
17         the taxable year based on a sale or transfer of
18         property for which the taxpayer was required in any
19         taxable year to make an addition modification under
20         subparagraph (E-10), then an amount equal to the
21         aggregate amount of the deductions taken in all taxable
22         years under subparagraph (T) with respect to that
23         property.
24             The taxpayer is required to make the addition
25         modification under this subparagraph only once with
26         respect to any one piece of property;
27             (E-12) For taxable years ending on or after
28         December 31, 2004, an amount equal to the amount
29         otherwise allowed as a deduction in computing base
30         income for interest paid, accrued, or incurred,
31         directly or indirectly, to a foreign person who would
32         be a member of the same unitary business group but for
33         the fact the foreign person's business activity
34         outside the United States is 80% or more of the foreign
35         person's total business activity. The addition
36         modification required by this subparagraph shall be

 

 

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1         reduced to the extent that dividends were included in
2         base income of the unitary group for the same taxable
3         year and received by the taxpayer or by a member of the
4         taxpayer's unitary business group (including amounts
5         included in gross income pursuant to Sections 951
6         through 964 of the Internal Revenue Code and amounts
7         included in gross income under Section 78 of the
8         Internal Revenue Code) with respect to the stock of the
9         same person to whom the interest was paid, accrued, or
10         incurred.
11             This paragraph shall not apply to the following:
12                 (i) an item of interest paid, accrued, or
13             incurred, directly or indirectly, to 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 interest; or
18                 (ii) an item of interest paid, accrued, or
19             incurred, directly or indirectly, to a foreign
20             person if the taxpayer can establish, based on a
21             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                 interest to a person that is not a related
26                 member, and
27                     (b) the transaction giving rise to the
28                 interest expense between the taxpayer and the
29                 foreign person did not have as a principal
30                 purpose the avoidance of Illinois income tax,
31                 and is paid pursuant to a contract or agreement
32                 that reflects an arm's-length interest rate
33                 and terms; or
34                 (iii) the taxpayer can establish, based on
35             clear and convincing evidence, that the interest
36             paid, accrued, or incurred relates to a contract or

 

 

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1             agreement entered into at arm's-length rates and
2             terms and the principal purpose for the payment is
3             not federal or Illinois tax avoidance; or
4                 (iv) an item of interest paid, accrued, or
5             incurred, directly or indirectly, to 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             (E-13) For taxable years ending on or after
22         December 31, 2004, an amount equal to the amount of
23         intangible expenses and costs otherwise allowed as a
24         deduction in computing base income, and that were paid,
25         accrued, or incurred, directly or indirectly, to a
26         foreign person who would be a member of the same
27         unitary business group but for the fact that the
28         foreign person's business activity outside the United
29         States is 80% or more of that person's total business
30         activity. The addition modification required by this
31         subparagraph shall be reduced to the extent that
32         dividends were included in base income of the unitary
33         group for the same taxable year and received by the
34         taxpayer or by a member of the taxpayer's unitary
35         business group (including amounts included in gross
36         income pursuant to Sections 951 through 964 of the

 

 

SB2582 Engrossed - 20 - LRB094 18874 BDD 54316 b

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

 

 

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

 

 

SB2582 Engrossed - 22 - LRB094 18874 BDD 54316 b

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

 

 

SB2582 Engrossed - 23 - LRB094 18874 BDD 54316 b

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

 

 

SB2582 Engrossed - 24 - LRB094 18874 BDD 54316 b

1         the taxpayer and the borrower should be divided into
2         the basis of the Section 201(h) investment credit
3         property which secures the loan or loans, using for
4         this purpose the original basis of such property on the
5         date that it was placed in service in a federally
6         designated Foreign Trade Zone or Sub-Zone located in
7         Illinois. No taxpayer that is eligible for the
8         deduction provided in subparagraph (M) of paragraph
9         (2) of this subsection shall be eligible for the
10         deduction provided under this subparagraph (M-1). The
11         subtraction modification available to taxpayers in any
12         year under this subsection shall be that portion of the
13         total interest paid by the borrower with respect to
14         such loan attributable to the eligible property as
15         calculated under the previous sentence;
16             (N) Two times any contribution made during the
17         taxable year to a designated zone organization to the
18         extent that the contribution (i) qualifies as a
19         charitable contribution under subsection (c) of
20         Section 170 of the Internal Revenue Code and (ii) must,
21         by its terms, be used for a project approved by the
22         Department of Commerce and Economic Opportunity under
23         Section 11 of the Illinois Enterprise Zone Act;
24             (O) An amount equal to: (i) 85% for taxable years
25         ending on or before December 31, 1992, or, a percentage
26         equal to the percentage allowable under Section
27         243(a)(1) of the Internal Revenue Code of 1986 for
28         taxable years ending after December 31, 1992, of the
29         amount by which dividends included in taxable income
30         and received from a corporation that is not created or
31         organized under the laws of the United States or any
32         state or political subdivision thereof, including, for
33         taxable years ending on or after December 31, 1988,
34         dividends received or deemed received or paid or deemed
35         paid under Sections 951 through 964 of the Internal
36         Revenue Code, exceed the amount of the modification

 

 

SB2582 Engrossed - 25 - LRB094 18874 BDD 54316 b

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) On and after July 20, 1999, in In the case of
25         an attorney-in-fact with respect to whom an
26         interinsurer or a reciprocal insurer has made the
27         election under Section 835 of the Internal Revenue
28         Code, 26 U.S.C. 835, an amount equal to the excess, if
29         any, of the amounts paid or incurred by that
30         interinsurer or reciprocal insurer in the taxable year
31         to the attorney-in-fact over the deduction allowed to
32         that interinsurer or reciprocal insurer with respect
33         to the attorney-in-fact under Section 835(b) of the
34         Internal Revenue Code for the taxable year; the
35         provisions of this subparagraph are exempt from the
36         provisions of Section 250;

 

 

SB2582 Engrossed - 26 - LRB094 18874 BDD 54316 b

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

 

 

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

 

 

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

 

 

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

 

 

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1         subparagraph (E) for each such taxable year;
2             (F) For taxable years ending on or after January 1,
3         1989, an amount equal to the tax deducted pursuant to
4         Section 164 of the Internal Revenue Code if the trust
5         or estate is claiming the same tax for purposes of the
6         Illinois foreign tax credit under Section 601 of this
7         Act;
8             (G) An amount equal to the amount of the capital
9         gain deduction allowable under the Internal Revenue
10         Code, to the extent deducted from gross income in the
11         computation of taxable income;
12             (G-5) For taxable years ending after December 31,
13         1997, an amount equal to any eligible remediation costs
14         that the trust or estate deducted in computing adjusted
15         gross income and for which the trust or estate claims a
16         credit under subsection (l) of Section 201;
17             (G-10) 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; and
23             (G-11) 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 (G-10), then an amount equal to the
29         aggregate amount of the deductions taken in all taxable
30         years under subparagraph (R) 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;
35             (G-12) For taxable years ending on or after
36         December 31, 2004, an amount equal to the amount

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
2         203(d)(2)(D-8), but not to exceed the amount of such
3         addition modification;
4             (U) An amount equal to the interest income taken
5         into account for the taxable year (net of the
6         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 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(c)(2)(G-12) for
14         interest paid, accrued, or incurred, directly or
15         indirectly, to the same foreign person; and
16             (V) An amount equal to the income from intangible
17         property taken into account for the taxable year (net
18         of the deductions allocable thereto) with respect to
19         transactions with a foreign person who would be a
20         member of the taxpayer's unitary business group but for
21         the fact that the foreign person's business activity
22         outside the United States is 80% or more of that
23         person's total business activity, but not to exceed the
24         addition modification required to be made for the same
25         taxable year under Section 203(c)(2)(G-13) for
26         intangible expenses and costs paid, accrued, or
27         incurred, directly or indirectly, to the same foreign
28         person.
29         (3) Limitation. The amount of any modification
30     otherwise required under this subsection shall, under
31     regulations prescribed by the Department, be adjusted by
32     any amounts included therein which were properly paid,
33     credited, or required to be distributed, or permanently set
34     aside for charitable purposes pursuant to Internal Revenue
35     Code Section 642(c) during the taxable year.
 

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

SB2582 Engrossed - 46 - LRB094 18874 BDD 54316 b

1         171(a) (2), and 265(2) of the Internal Revenue Code of
2         1954, as now or hereafter amended, and all amounts of
3         expenses allocable to interest and disallowed as
4         deductions by Section 265(1) of the Internal Revenue
5         Code, as now or hereafter amended; and (ii) for taxable
6         years ending on or after August 13, 1999, Sections
7         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
8         Internal Revenue Code; the provisions of this
9         subparagraph are exempt from the provisions of Section
10         250;
11             (K) An amount equal to those dividends included in
12         such total which were paid by a corporation which
13         conducts business operations in an Enterprise Zone or
14         zones created under the Illinois Enterprise Zone Act,
15         enacted by the 82nd General Assembly, and conducts
16         substantially all of its operations in an Enterprise
17         Zone or Zones;
18             (L) An amount equal to any contribution made to a
19         job training project established pursuant to the Real
20         Property Tax Increment Allocation Redevelopment Act;
21             (M) An amount equal to those dividends included in
22         such total that were paid by a corporation that
23         conducts business operations in a federally designated
24         Foreign Trade Zone or Sub-Zone and that is designated a
25         High Impact Business located in Illinois; provided
26         that dividends eligible for the deduction provided in
27         subparagraph (K) of paragraph (2) of this subsection
28         shall not be eligible for the deduction provided under
29         this subparagraph (M);
30             (N) An amount equal to the amount of the deduction
31         used to compute the federal income tax credit for
32         restoration of substantial amounts held under claim of
33         right for the taxable year pursuant to Section 1341 of
34         the Internal Revenue Code of 1986;
35             (O) For taxable years 2001 and thereafter, for the
36         taxable year in which the bonus depreciation deduction

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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