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1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4
ARTICLE 1. SHORT TITLE; PURPOSE

 
5     Section 1-1. Short Title. This Act may be cited as the
6 FY2008 Budget Implementation (Revenue) Act.
 
7     Section 1-5. Purpose. It is the purpose of this Act to make
8 changes in State programs concerning revenue that are necessary
9 to implement the FY2008 Budget.
 
10
ARTICLE 5. FRANCHISE TAX AND LICENSE FEE AMNESTY ACT OF 2007

 
11     Section 5-1. Short title. This Article may be cited as the
12 Franchise Tax and License Fee Amnesty Act of 2007. References
13 in this Article to "this Act" mean this Article.
 
14     Section 5-5. Definitions. As used in this Act:
15     "Secretary" means the Illinois Secretary of State.
16     "Rules" means any rules adopted or forms prescribed by the
17 Secretary.
18     "Taxable period" means any period of time for which any
19 franchise tax is imposed by and owed to the State of Illinois

 

 

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1 by any domestic corporation or any license fee is imposed by
2 and owed to the State of Illinois by any foreign corporation.
3     "Taxpayer" means any domestic or foreign corporation,
4 subject to franchise tax or license fee imposed by Article XV
5 of the Business Corporation Act of 1983.
 
6     Section 5-10. Amnesty program. The Secretary shall
7 establish an amnesty program for all taxpayers owing any
8 franchise tax or license fee imposed by Article XV of the
9 Business Corporation Act of 1983. The amnesty program shall be
10 for a period from February 1, 2008 through March 15, 2008. The
11 amnesty program shall provide that, upon payment by a taxpayer
12 of all franchise taxes and license fees due from that taxpayer
13 to the State of Illinois for any taxable period, the Secretary
14 shall abate and not seek to collect any interest or penalties
15 that may be applicable, and the Secretary shall not seek civil
16 or criminal prosecution for any taxpayer for the period of time
17 for which amnesty has been granted to the taxpayer. Failure to
18 pay all taxes due to the State for a taxable period shall not
19 invalidate any amnesty granted under this Act with respect to
20 the taxes paid pursuant to the amnesty program. Amnesty shall
21 be granted only if all amnesty conditions are satisfied by the
22 taxpayer. Amnesty shall not be granted to taxpayers who are a
23 party to any criminal investigation or to any civil or criminal
24 litigation that is pending in any circuit court or appellate
25 court or the Supreme Court of this State for nonpayment,

 

 

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1 delinquency, or fraud in relation to any franchise tax or
2 license fee imposed by Article XV of the Business Corporation
3 Act of 1983. Voluntary payments made under this Act shall be
4 made by cash, check, guaranteed remittance, or ACH debit. The
5 Secretary shall adopt rules as necessary to implement the
6 provisions of this Act. Except as otherwise provided in this
7 Section, all money collected under this Act that would
8 otherwise be deposited into the General Revenue Fund shall be
9 deposited into the General Revenue Fund. Two percent of all
10 money collected under this Act shall be deposited by the State
11 Treasurer into the Department of Business Services Special
12 Operations Fund and, subject to appropriation, shall be used by
13 the Secretary to cover costs associated with the administration
14 of this Act.
 
15     Section 5-90. The Business Corporation Act of 1983 is
16 amended by changing Sections 15.90 and 16.05 as follows:
 
17     (805 ILCS 5/15.90)  (from Ch. 32, par. 15.90)
18     Sec. 15.90. Statute of limitations.
19     (a) Except as otherwise provided in this Section and
20 notwithstanding anything to the contrary contained in any other
21 Section of this Act, no domestic corporation or foreign
22 corporation shall be obligated to pay any annual franchise tax,
23 fee, or penalty or interest thereon imposed under this Act, nor
24 shall any administrative or judicial sanction (including

 

 

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1 dissolution) be imposed or enforced nor access to the courts of
2 this State be denied based upon nonpayment thereof more than 7
3 years after the date of filing the annual report with respect
4 to the period during which the obligation for the tax, fee,
5 penalty or interest arose, unless (1) within that 7 year period
6 the Secretary of State sends a written notice to the
7 corporation to the effect that (A) administrative or judicial
8 action to dissolve the corporation or revoke its certificate of
9 authority for nonpayment of a tax, fee, penalty or interest has
10 been commenced; or (B) the corporation has submitted a report
11 but has failed to pay a tax, fee, penalty or interest required
12 to be paid therewith; or (C) a report with respect to an event
13 or action giving rise to an obligation to pay a tax, fee,
14 penalty or interest is required but has not been filed, or has
15 been filed and is in error or incomplete; or (2) the annual
16 report by the corporation was filed with fraudulent intent to
17 evade taxes payable under this Act. A corporation nonetheless
18 shall be required to pay all taxes that would have been payable
19 during the most recent 7 year period due to a previously
20 unreported increase in paid-in capital that occurred prior to
21 that 7 year period and interest and penalties thereon for that
22 period, except that with respect to any corporation that
23 participates in the Franchise Tax and License Fee Amnesty Act
24 of 2007, the corporation shall be only required to pay all
25 taxes that would have been payable during the most recent 4
26 year period due to a previously unreported increase in paid-in

 

 

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1 capital that occurred prior to that 7 year period.
2     (b) If within 2 years following a change in control of a
3 corporation the corporation voluntarily pays in good faith all
4 known obligations of the corporation imposed by this Article 15
5 with respect to reports that were required to have been filed
6 since the beginning of the 7 year period ending on the
7 effective date of the change in control, no action shall be
8 taken to enforce or collect obligations of that corporation
9 imposed by this Article 15 with respect to reports that were
10 required to have been filed prior to that 7 year period
11 regardless of whether the limitation period set forth in
12 subsection (a) is otherwise applicable. For purposes of this
13 subsection (b), a change in control means a transaction, or a
14 series of transactions consummated within a period of 180
15 consecutive days, as a result of which a person which owned
16 less than 10% of the shares having the power to elect directors
17 of the corporation acquires shares such that the person becomes
18 the holder of 80% or more of the shares having such power. For
19 purposes of this subsection (b) a person means any natural
20 person, corporation, partnership, trust or other entity
21 together with all other persons controlled by, controlling or
22 under common control with such person.
23     (c) Except as otherwise provided in this Section and
24 notwithstanding anything to the contrary contained in any other
25 Section of this Act, no foreign corporation that has not
26 previously obtained a certificate of authority under this Act

 

 

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1 shall, upon voluntary application for a certificate of
2 authority filed with the Secretary of State prior to January 1,
3 2001, be obligated to pay any tax, fee, penalty, or interest
4 imposed under this Act, nor shall any administrative or
5 judicial sanction be imposed or enforced based upon nonpayment
6 thereof with respect to a period during which the obligation
7 arose that is prior to January 1, 1993 unless (1) prior to
8 receipt of the application for a certificate of authority the
9 Secretary of State had sent written notice to the corporation
10 regarding its failure to obtain a certificate of authority, (2)
11 the corporation had submitted an application for a certificate
12 of authority previously but had failed to pay any tax, fee,
13 penalty or interest to be paid therewith, or (3) the
14 application for a certificate of authority was submitted by the
15 corporation with fraudulent intent to evade taxes payable under
16 this Act. A corporation nonetheless shall be required to pay
17 all taxes and fees due under this Act that would have been
18 payable since January 1, 1993 as a result of commencing the
19 transaction of its business in this State and interest thereon
20 for that period.
21 (Source: P.A. 90-421, eff. 1-1-98.)
 
22     (805 ILCS 5/16.05)  (from Ch. 32, par. 16.05)
23     Sec. 16.05. Penalties and interest imposed upon
24 corporations.
25     (a) Each corporation, domestic or foreign, that fails or

 

 

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1 refuses to file any annual report or report of cumulative
2 changes in paid-in capital and pay any franchise tax due
3 pursuant to the report prior to the first day of its
4 anniversary month or, in the case of a corporation which has
5 established an extended filing month, the extended filing month
6 of the corporation shall pay a penalty of 10% of the amount of
7 any delinquent franchise tax due for the report. No penalty
8 shall be imposed with respect to any amount of delinquent
9 franchise tax paid pursuant to the Franchise Tax and License
10 Fee Amnesty Act of 2007.
11     (b) Each corporation, domestic or foreign, that fails or
12 refuses to file a report of issuance of shares or increase in
13 paid-in capital within the time prescribed by this Act is
14 subject to a penalty on any obligation occurring prior to
15 January 1, 1991, and interest on those obligations on or after
16 January 1, 1991, for each calendar month or part of month that
17 it is delinquent in the amount of 1% of the amount of license
18 fees and franchise taxes provided by this Act to be paid on
19 account of the issuance of shares or increase in paid-in
20 capital. No penalty shall be imposed, or interest charged, with
21 respect to any amount of delinquent license fees and franchise
22 taxes paid pursuant to the Franchise Tax and License Fee
23 Amnesty Act of 2007.
24     (c) Each corporation, domestic or foreign, that fails or
25 refuses to file a report of cumulative changes in paid-in
26 capital or report following merger within the time prescribed

 

 

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1 by this Act is subject to interest on or after January 1, 1992,
2 for each calendar month or part of month that it is delinquent,
3 in the amount of 1% of the amount of franchise taxes provided
4 by this Act to be paid on account of the issuance of shares or
5 increase in paid-in capital disclosed on the report of
6 cumulative changes in paid-in capital or report following
7 merger, or $1, whichever is greater. No interest shall be
8 charged with respect to any amount of delinquent franchise tax
9 paid pursuant to the Franchise Tax and License Fee Amnesty Act
10 of 2007.
11     (d) If the annual franchise tax, or the supplemental annual
12 franchise tax for any 12-month period commencing July 1, 1968,
13 or July 1 of any subsequent year through June 30, 1983,
14 assessed in accordance with this Act, is not paid by July 31,
15 it is delinquent, and there is added a penalty prior to January
16 1, 1991, and interest on and after January 1, 1991, of 1% for
17 each month or part of month that it is delinquent commencing
18 with the month of August, or $1, whichever is greater. No
19 penalty shall be imposed, or interest charged, with respect to
20 any amount of delinquent franchise taxes paid pursuant to the
21 Franchise Tax and License Fee Amnesty Act of 2007.
22     (e) If the supplemental annual franchise tax assessed in
23 accordance with the provisions of this Act for the 12-month
24 period commencing July 1, 1967, is not paid by September 30,
25 1967, it is delinquent, and there is added a penalty prior to
26 January 1, 1991, and interest on and after January 1, 1991, of

 

 

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1 1% for each month or part of month that it is delinquent
2 commencing with the month of October, 1967. No penalty shall be
3 imposed, or interest charged, with respect to any amount of
4 delinquent franchise taxes paid pursuant to the Franchise Tax
5 and License Fee Amnesty Act of 2007.
6     (f) If any annual franchise tax for any period beginning on
7 or after July 1, 1983, is not paid by the time period herein
8 prescribed, it is delinquent and there is added a penalty prior
9 to January 1, 1991, and interest on and after January 1, 1991,
10 of 1% for each month or part of a month that it is delinquent
11 commencing with the anniversary month or in the case of a
12 corporation that has established an extended filing month, the
13 extended filing month, or $1, whichever is greater. No penalty
14 shall be imposed, or interest charged, with respect to any
15 amount of delinquent franchise taxes paid pursuant to the
16 Franchise Tax and License Fee Amnesty Act of 2007.
17     (g) Any corporation, domestic or foreign, failing to pay
18 the prescribed fee for assumed corporate name renewal when due
19 and payable shall be given notice of nonpayment by the
20 Secretary of State by regular mail; and if the fee together
21 with a penalty fee of $5 is not paid within 90 days after the
22 notice is mailed, the right to use the assumed name shall
23 cease.
24     (h) Any corporation which (i) puts forth any sign or
25 advertisement, assuming any name other than that by which it is
26 incorporated or otherwise authorized by law to act or (ii)

 

 

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1 violates Section 3.25, shall be guilty of a Class C misdemeanor
2 and shall be deemed guilty of an additional offense for each
3 day it shall continue to so offend.
4     (i) Each corporation, domestic or foreign, that fails or
5 refuses (1) to file in the office of the recorder within the
6 time prescribed by this Act any document required by this Act
7 to be so filed, or (2) to answer truthfully and fully within
8 the time prescribed by this Act interrogatories propounded by
9 the Secretary of State in accordance with this Act, or (3) to
10 perform any other act required by this Act to be performed by
11 the corporation, is guilty of a Class C misdemeanor.
12     (j) Each corporation that fails or refuses to file articles
13 of revocation of dissolution within the time prescribed by this
14 Act is subject to a penalty for each calendar month or part of
15 the month that it is delinquent in the amount of $50.
16 (Source: P.A. 91-464, eff. 1-1-00; 91-906, eff. 1-1-01.)
 
17
ARTICLE 10. AMENDATORY PROVISIONS

 
18     Section 10-5. The Illinois Income Tax Act is amended by
19 changing Sections 203, 205, 207, 304, 502, 711, 712, 713, 804,
20 911, and 1501 and by adding Section 709.5 as follows:
 
21     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
22     Sec. 203. Base income defined.
23     (a) Individuals.

 

 

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1         (1) In general. In the case of an individual, base
2     income means an amount equal to the taxpayer's adjusted
3     gross income for the taxable year as modified by paragraph
4     (2).
5         (2) Modifications. The adjusted gross income referred
6     to in paragraph (1) shall be modified by adding thereto the
7     sum 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 adjusted gross income, except
12         stock dividends of qualified public utilities
13         described in Section 305(e) of the Internal Revenue
14         Code;
15             (B) An amount equal to the amount of tax imposed by
16         this Act to the extent deducted from gross income in
17         the computation of adjusted gross income for the
18         taxable year;
19             (C) An amount equal to the amount received during
20         the taxable year as a recovery or refund of real
21         property taxes paid with respect to the taxpayer's
22         principal residence under the Revenue Act of 1939 and
23         for which a deduction was previously taken under
24         subparagraph (L) of this paragraph (2) prior to July 1,
25         1991, the retrospective application date of Article 4
26         of Public Act 87-17. In the case of multi-unit or

 

 

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1         multi-use structures and farm dwellings, the taxes on
2         the taxpayer's principal residence shall be that
3         portion of the total taxes for the entire property
4         which is attributable to such principal residence;
5             (D) An amount equal to the amount of the capital
6         gain deduction allowable under the Internal Revenue
7         Code, to the extent deducted from gross income in the
8         computation of adjusted gross income;
9             (D-5) An amount, to the extent not included in
10         adjusted gross income, equal to the amount of money
11         withdrawn by the taxpayer in the taxable year from a
12         medical care savings account and the interest earned on
13         the account in the taxable year of a withdrawal
14         pursuant to subsection (b) of Section 20 of the Medical
15         Care Savings Account Act or subsection (b) of Section
16         20 of the Medical Care Savings Account Act of 2000;
17             (D-10) For taxable years ending after December 31,
18         1997, an amount equal to any eligible remediation costs
19         that the individual deducted in computing adjusted
20         gross income and for which the individual claims a
21         credit under subsection (l) of Section 201;
22             (D-15) For taxable years 2001 and thereafter, an
23         amount equal to the bonus depreciation deduction taken
24         on the taxpayer's federal income tax return for the
25         taxable year under subsection (k) of Section 168 of the
26         Internal Revenue Code;

 

 

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1             (D-16) If the taxpayer sells, transfers, abandons,
2         or otherwise disposes of property for which the
3         taxpayer was required in any taxable year to make an
4         addition modification under subparagraph (D-15), then
5         an amount equal to the aggregate amount of the
6         deductions taken in all taxable years under
7         subparagraph (Z) with respect to that property.
8             If the taxpayer continues to own property through
9         the last day of the last tax year for which the
10         taxpayer may claim a depreciation deduction for
11         federal income tax purposes and for which the taxpayer
12         was allowed in any taxable year to make a subtraction
13         modification under subparagraph (Z), then an amount
14         equal to that subtraction modification.
15             The taxpayer is required to make the addition
16         modification under this subparagraph only once with
17         respect to any one piece of property;
18             (D-17) An For taxable years ending on or after
19         December 31, 2004, an amount equal to the amount
20         otherwise allowed as a deduction in computing base
21         income for interest paid, accrued, or incurred,
22         directly or indirectly, (i) for taxable years ending on
23         or after December 31, 2004, to a foreign person who
24         would be a member of the same unitary business group
25         but for the fact that foreign person's business
26         activity outside the United States is 80% or more of

 

 

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1         the foreign person's total business activity and (ii)
2         for taxable years ending on or after December 31, 2008,
3         to a person who would be a member of the same unitary
4         business group but for the fact that the person is
5         prohibited under Section 1501(a)(27) from being
6         included in the unitary business group because he or
7         she is ordinarily required to apportion business
8         income under different subsections of Section 304. The
9         addition modification required by this subparagraph
10         shall be reduced to the extent that dividends were
11         included in base income of the unitary group for the
12         same taxable year and received by the taxpayer or by a
13         member of the taxpayer's unitary business group
14         (including amounts included in gross income under
15         Sections 951 through 964 of the Internal Revenue Code
16         and amounts included in gross income under Section 78
17         of the Internal Revenue Code) with respect to the stock
18         of the same person to whom the interest was paid,
19         accrued, or incurred.
20             This paragraph shall not apply to the following:
21                 (i) an item of interest paid, accrued, or
22             incurred, directly or indirectly, to a foreign
23             person who is subject in a foreign country or
24             state, other than a state which requires mandatory
25             unitary reporting, to a tax on or measured by net
26             income with respect to such interest; or

 

 

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

 

 

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1             unreasonable; or if the taxpayer and the Director
2             agree in writing to the application or use of an
3             alternative method of apportionment under Section
4             304(f).
5                 Nothing in this subsection shall preclude the
6             Director from making any other adjustment
7             otherwise allowed under Section 404 of this Act for
8             any tax year beginning after the effective date of
9             this amendment provided such adjustment is made
10             pursuant to regulation adopted by the Department
11             and such regulations provide methods and standards
12             by which the Department will utilize its authority
13             under Section 404 of this Act;
14             (D-18) An For taxable years ending on or after
15         December 31, 2004, an amount equal to the amount of
16         intangible expenses and costs otherwise allowed as a
17         deduction in computing base income, and that were paid,
18         accrued, or incurred, directly or indirectly, (i) for
19         taxable years ending on or after December 31, 2004, to
20         a foreign person who would be a member of the same
21         unitary business group but for the fact that the
22         foreign person's business activity outside the United
23         States is 80% or more of that person's total business
24         activity and (ii) for taxable years ending on or after
25         December 31, 2008, to a person who would be a member of
26         the same unitary business group but for the fact that

 

 

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1         the person is prohibited under Section 1501(a)(27)
2         from being included in the unitary business group
3         because he or she is ordinarily required to apportion
4         business income under different subsections of Section
5         304. The addition modification required by this
6         subparagraph shall be reduced to the extent that
7         dividends were included in base income of the unitary
8         group for the same taxable year and received by the
9         taxpayer or by a member of the taxpayer's unitary
10         business group (including amounts included in gross
11         income under Sections 951 through 964 of the Internal
12         Revenue Code and amounts included in gross income under
13         Section 78 of the Internal Revenue Code) with respect
14         to the stock of the same person to whom the intangible
15         expenses and costs were directly or indirectly paid,
16         incurred, or accrued. The preceding sentence does not
17         apply to the extent that the same dividends caused a
18         reduction to the addition modification required under
19         Section 203(a)(2)(D-17) of this Act. As used in this
20         subparagraph, the term "intangible expenses and costs"
21         includes (1) expenses, losses, and costs for, or
22         related to, the direct or indirect acquisition, use,
23         maintenance or management, ownership, sale, exchange,
24         or any other disposition of intangible property; (2)
25         losses incurred, directly or indirectly, from
26         factoring transactions or discounting transactions;

 

 

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

 

 

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1                 taxpayer and the foreign person did not have as
2                 a principal purpose the avoidance of Illinois
3                 income tax, and is paid pursuant to a contract
4                 or agreement that reflects arm's-length terms;
5                 or
6                 (iii) any item of intangible expense or cost
7             paid, accrued, or incurred, directly or
8             indirectly, from a transaction with a foreign
9             person if the taxpayer establishes by clear and
10             convincing evidence, that the adjustments are
11             unreasonable; or if the taxpayer and the Director
12             agree in writing to the application or use of an
13             alternative method of apportionment under Section
14             304(f);
15                 Nothing in this subsection shall preclude the
16             Director from making any other adjustment
17             otherwise allowed under Section 404 of this Act for
18             any tax year beginning after the effective date of
19             this amendment provided such adjustment is made
20             pursuant to regulation adopted by the Department
21             and such regulations provide methods and standards
22             by which the Department will utilize its authority
23             under Section 404 of this Act;
24             (D-19) For taxable years ending on or after
25         December 31, 2008, an amount equal to the amount of
26         insurance premium expenses and costs otherwise allowed

 

 

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1         as a deduction in computing base income, and that were
2         paid, accrued, or incurred, directly or indirectly, to
3         a person who would be a member of the same unitary
4         business group but for the fact that the person is
5         prohibited under Section 1501(a)(27) from being
6         included in the unitary business group because he or
7         she is ordinarily required to apportion business
8         income under different subsections of Section 304. The
9         addition modification required by this subparagraph
10         shall be reduced to the extent that dividends were
11         included in base income of the unitary group for the
12         same taxable year and received by the taxpayer or by a
13         member of the taxpayer's unitary business group
14         (including amounts included in gross income under
15         Sections 951 through 964 of the Internal Revenue Code
16         and amounts included in gross income under Section 78
17         of the Internal Revenue Code) with respect to the stock
18         of the same person to whom the intangible expenses and
19         costs were directly or indirectly paid, incurred, or
20         accrued. The preceding sentence does not apply to the
21         extent that the same dividends caused a reduction to
22         the addition modification required under Section
23         203(a)(2)(D-17) of this Act.
24             (D-20) For taxable years beginning on or after
25         January 1, 2002, in the case of a distribution from a
26         qualified tuition program under Section 529 of the

 

 

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1         Internal Revenue Code, other than (i) a distribution
2         from a College Savings Pool created under Section 16.5
3         of the State Treasurer Act or (ii) a distribution from
4         the Illinois Prepaid Tuition Trust Fund, an amount
5         equal to the amount excluded from gross income under
6         Section 529(c)(3)(B);
7     and by deducting from the total so obtained the sum of the
8     following amounts:
9             (E) For taxable years ending before December 31,
10         2001, any amount included in such total in respect of
11         any compensation (including but not limited to any
12         compensation paid or accrued to a serviceman while a
13         prisoner of war or missing in action) paid to a
14         resident by reason of being on active duty in the Armed
15         Forces of the United States and in respect of any
16         compensation paid or accrued to a resident who as a
17         governmental employee was a prisoner of war or missing
18         in action, and in respect of any compensation paid to a
19         resident in 1971 or thereafter for annual training
20         performed pursuant to Sections 502 and 503, Title 32,
21         United States Code as a member of the Illinois National
22         Guard. For taxable years ending on or after December
23         31, 2001, any amount included in such total in respect
24         of any compensation (including but not limited to any
25         compensation paid or accrued to a serviceman while a
26         prisoner of war or missing in action) paid to a

 

 

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

 

 

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1         Internal Revenue Code as a recovery of items previously
2         deducted from adjusted gross income in the computation
3         of taxable income;
4             (J) An amount equal to those dividends included in
5         such total which were paid by a corporation which
6         conducts business operations in an Enterprise Zone or
7         zones created under the Illinois Enterprise Zone Act or
8         a River Edge Redevelopment Zone or zones created under
9         the River Edge Redevelopment Zone Act, and conducts
10         substantially all of its operations in an Enterprise
11         Zone or zones or a River Edge Redevelopment Zone or
12         zones. This subparagraph (J) is exempt from the
13         provisions of Section 250;
14             (K) An amount equal to those dividends included in
15         such total that were paid by a corporation that
16         conducts business operations in a federally designated
17         Foreign Trade Zone or Sub-Zone and that is designated a
18         High Impact Business located in Illinois; provided
19         that dividends eligible for the deduction provided in
20         subparagraph (J) of paragraph (2) of this subsection
21         shall not be eligible for the deduction provided under
22         this subparagraph (K);
23             (L) For taxable years ending after December 31,
24         1983, an amount equal to all social security benefits
25         and railroad retirement benefits included in such
26         total pursuant to Sections 72(r) and 86 of the Internal

 

 

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1         Revenue Code;
2             (M) With the exception of any amounts subtracted
3         under subparagraph (N), an amount equal to the sum of
4         all amounts disallowed as deductions by (i) Sections
5         171(a) (2), and 265(2) of the Internal Revenue Code of
6         1954, as now or hereafter amended, and all amounts of
7         expenses allocable to interest and disallowed as
8         deductions by Section 265(1) of the Internal Revenue
9         Code of 1954, as now or hereafter amended; and (ii) for
10         taxable years ending on or after August 13, 1999,
11         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
12         the Internal Revenue Code; the provisions of this
13         subparagraph are exempt from the provisions of Section
14         250;
15             (N) An amount equal to all amounts included in such
16         total which are exempt from taxation by this State
17         either by reason of its statutes or Constitution or by
18         reason of the Constitution, treaties or statutes of the
19         United States; provided that, in the case of any
20         statute of this State or, for taxable years ending on
21         or after December 31, 2008, of the United States, any
22         treaty of the United States, the Illinois
23         Constitution, or the United States Constitution that
24         exempts income derived from bonds or other obligations
25         from the tax imposed under this Act, the amount
26         exempted shall be the income interest net of bond

 

 

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1         premium amortization, and, for taxable years ending on
2         or after December 31, 2008, interest expense incurred
3         on indebtedness to carry the bond or other obligation,
4         expenses incurred in producing the income to be
5         deducted, and all other related expenses. The amount of
6         expenses to be taken into account under this provision
7         may not exceed the amount of income that is exempted;
8             (O) An amount equal to any contribution made to a
9         job training project established pursuant to the Tax
10         Increment Allocation Redevelopment Act;
11             (P) An amount equal to the amount of the deduction
12         used to compute the federal income tax credit for
13         restoration of substantial amounts held under claim of
14         right for the taxable year pursuant to Section 1341 of
15         the Internal Revenue Code of 1986;
16             (Q) An amount equal to any amounts included in such
17         total, received by the taxpayer as an acceleration in
18         the payment of life, endowment or annuity benefits in
19         advance of the time they would otherwise be payable as
20         an indemnity for a terminal illness;
21             (R) An amount equal to the amount of any federal or
22         State bonus paid to veterans of the Persian Gulf War;
23             (S) An amount, to the extent included in adjusted
24         gross income, equal to the amount of a contribution
25         made in the taxable year on behalf of the taxpayer to a
26         medical care savings account established under the

 

 

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1         Medical Care Savings Account Act or the Medical Care
2         Savings Account Act of 2000 to the extent the
3         contribution is accepted by the account administrator
4         as provided in that Act;
5             (T) An amount, to the extent included in adjusted
6         gross income, equal to the amount of interest earned in
7         the taxable year on a medical care savings account
8         established under the Medical Care Savings Account Act
9         or the Medical Care Savings Account Act of 2000 on
10         behalf of the taxpayer, other than interest added
11         pursuant to item (D-5) of this paragraph (2);
12             (U) For one taxable year beginning on or after
13         January 1, 1994, an amount equal to the total amount of
14         tax imposed and paid under subsections (a) and (b) of
15         Section 201 of this Act on grant amounts received by
16         the taxpayer under the Nursing Home Grant Assistance
17         Act during the taxpayer's taxable years 1992 and 1993;
18             (V) Beginning with tax years ending on or after
19         December 31, 1995 and ending with tax years ending on
20         or before December 31, 2004, an amount equal to the
21         amount paid by a taxpayer who is a self-employed
22         taxpayer, a partner of a partnership, or a shareholder
23         in a Subchapter S corporation for health insurance or
24         long-term care insurance for that taxpayer or that
25         taxpayer's spouse or dependents, to the extent that the
26         amount paid for that health insurance or long-term care

 

 

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

 

 

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

 

 

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1         not affected by the inclusion of items (i) and (ii) of
2         this paragraph in gross income for federal income tax
3         purposes. This paragraph is exempt from the provisions
4         of Section 250;
5             (Y) For taxable years beginning on or after January
6         1, 2002 and ending on or before December 31, 2004,
7         moneys contributed in the taxable year to a College
8         Savings Pool account under Section 16.5 of the State
9         Treasurer Act, except that amounts excluded from gross
10         income under Section 529(c)(3)(C)(i) of the Internal
11         Revenue Code shall not be considered moneys
12         contributed under this subparagraph (Y). For taxable
13         years beginning on or after January 1, 2005, a maximum
14         of $10,000 contributed in the taxable year to (i) a
15         College Savings Pool account under Section 16.5 of the
16         State Treasurer Act or (ii) the Illinois Prepaid
17         Tuition Trust Fund, except that amounts excluded from
18         gross income under Section 529(c)(3)(C)(i) of the
19         Internal Revenue Code shall not be considered moneys
20         contributed under this subparagraph (Y). This
21         subparagraph (Y) is exempt from the provisions of
22         Section 250;
23             (Z) For taxable years 2001 and thereafter, for the
24         taxable year in which the bonus depreciation deduction
25         is taken on the taxpayer's federal income tax return
26         under subsection (k) of Section 168 of the Internal

 

 

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1         Revenue Code and for each applicable taxable year
2         thereafter, an amount equal to "x", where:
3                 (1) "y" equals the amount of the depreciation
4             deduction taken for the taxable year on the
5             taxpayer's federal income tax return on property
6             for which the bonus depreciation deduction was
7             taken in any year under subsection (k) of Section
8             168 of the Internal Revenue Code, but not including
9             the bonus depreciation deduction;
10                 (2) for taxable years ending on or before
11             December 31, 2005, "x" equals "y" multiplied by 30
12             and then divided by 70 (or "y" multiplied by
13             0.429); and
14                 (3) for taxable years ending after December
15             31, 2005:
16                     (i) for property on which a bonus
17                 depreciation deduction of 30% of the adjusted
18                 basis was taken, "x" equals "y" multiplied by
19                 30 and then divided by 70 (or "y" multiplied by
20                 0.429); and
21                     (ii) for property on which a bonus
22                 depreciation deduction of 50% of the adjusted
23                 basis was taken, "x" equals "y" multiplied by
24                 1.0.
25             The aggregate amount deducted under this
26         subparagraph in all taxable years for any one piece of

 

 

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1         property may not exceed the amount of the bonus
2         depreciation deduction taken on that property on the
3         taxpayer's federal income tax return under subsection
4         (k) of Section 168 of the Internal Revenue Code. This
5         subparagraph (Z) is exempt from the provisions of
6         Section 250;
7             (AA) If the taxpayer sells, transfers, abandons,
8         or otherwise disposes of property for which the
9         taxpayer was required in any taxable year to make an
10         addition modification under subparagraph (D-15), then
11         an amount equal to that addition modification.
12             If the taxpayer continues to own property through
13         the last day of the last tax year for which the
14         taxpayer may claim a depreciation deduction for
15         federal income tax purposes and for which the taxpayer
16         was required in any taxable year to make an addition
17         modification under subparagraph (D-15), then an amount
18         equal to that addition modification.
19             The taxpayer is allowed to take the deduction under
20         this subparagraph only once with respect to any one
21         piece of property.
22             This subparagraph (AA) is exempt from the
23         provisions of Section 250;
24             (BB) Any amount included in adjusted gross income,
25         other than salary, received by a driver in a
26         ridesharing arrangement using a motor vehicle;

 

 

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1             (CC) The amount of (i) any interest income (net of
2         the deductions allocable thereto) taken into account
3         for the taxable year with respect to a transaction with
4         a taxpayer that is required to make an addition
5         modification with respect to such transaction under
6         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
7         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
8         the amount of that addition modification, and (ii) any
9         income from intangible property (net of the deductions
10         allocable thereto) taken into account for the taxable
11         year with respect to a transaction with a taxpayer that
12         is required to make an addition modification with
13         respect to such transaction under Section
14         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
15         203(d)(2)(D-8), but not to exceed the amount of that
16         addition modification;
17             (DD) An amount equal to the interest income taken
18         into account for the taxable year (net of the
19         deductions allocable thereto) with respect to
20         transactions with (i) a foreign person who would be a
21         member of the taxpayer's unitary business group but for
22         the fact that the foreign person's business activity
23         outside the United States is 80% or more of that
24         person's total business activity and (ii) for taxable
25         years ending on or after December 31, 2008, to a person
26         who would be a member of the same unitary business

 

 

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1         group but for the fact that the person is prohibited
2         under Section 1501(a)(27) from being included in the
3         unitary business group because he or she is ordinarily
4         required to apportion business income under different
5         subsections of Section 304, but not to exceed the
6         addition modification required to be made for the same
7         taxable year under Section 203(a)(2)(D-17) for
8         interest paid, accrued, or incurred, directly or
9         indirectly, to the same foreign person; and
10             (EE) An amount equal to the income from intangible
11         property taken into account for the taxable year (net
12         of the deductions allocable thereto) with respect to
13         transactions with (i) a foreign person who would be a
14         member of the taxpayer's unitary business group but for
15         the fact that the foreign person's business activity
16         outside the United States is 80% or more of that
17         person's total business activity and (ii) for taxable
18         years ending on or after December 31, 2008, to a person
19         who would be a member of the same unitary business
20         group but for the fact that the person is prohibited
21         under Section 1501(a)(27) from being included in the
22         unitary business group because he or she is ordinarily
23         required to apportion business income under different
24         subsections of Section 304, but not to exceed the
25         addition modification required to be made for the same
26         taxable year under Section 203(a)(2)(D-18) for

 

 

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1         intangible expenses and costs paid, accrued, or
2         incurred, directly or indirectly, to the same foreign
3         person; and .
4             (FF) An amount equal to the income from insurance
5         premiums taken into account for the taxable year (net
6         of the deductions allocable thereto) with respect to
7         transactions with a person who would be a member of the
8         same unitary business group but for the fact that the
9         person is prohibited under Section 1501(a)(27) from
10         being included in the unitary business group because he
11         or she is ordinarily required to apportion business
12         income under different subsections of Section 304, but
13         not to exceed the addition modification required to be
14         made for the same taxable year under Section
15         203(a)(2)(D-18) for intangible expenses and costs
16         paid, accrued, or incurred, directly or indirectly, to
17         the same person.
 
18     (b) Corporations.
19         (1) In general. In the case of a corporation, 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. The taxable income referred to in
23     paragraph (1) shall be modified by adding thereto the sum
24     of the following amounts:
25             (A) An amount equal to all amounts paid or accrued

 

 

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

 

 

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

 

 

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1         1997, an amount equal to any eligible remediation costs
2         that the corporation deducted in computing adjusted
3         gross income and for which the corporation claims a
4         credit under subsection (l) of Section 201;
5             (E-10) For taxable years 2001 and thereafter, an
6         amount equal to the bonus depreciation deduction taken
7         on the taxpayer's federal income tax return for the
8         taxable year under subsection (k) of Section 168 of the
9         Internal Revenue Code; and
10             (E-11) If the taxpayer sells, transfers, abandons,
11         or otherwise disposes of property for which the
12         taxpayer was required in any taxable year to make an
13         addition modification under subparagraph (E-10), then
14         an amount equal to the aggregate amount of the
15         deductions taken in all taxable years under
16         subparagraph (T) with respect to that property.
17             If the taxpayer continues to own property through
18         the last day of the last tax year for which the
19         taxpayer may claim a depreciation deduction for
20         federal income tax purposes and for which the taxpayer
21         was allowed in any taxable year to make a subtraction
22         modification under subparagraph (T), then an amount
23         equal to that subtraction modification.
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;

 

 

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1             (E-12) An For taxable years ending on or after
2         December 31, 2004, an amount equal to the amount
3         otherwise allowed as a deduction in computing base
4         income for interest paid, accrued, or incurred,
5         directly or indirectly, (i) for taxable years ending on
6         or after December 31, 2004, to a foreign person who
7         would be a member of the same unitary business group
8         but for the fact the foreign person's business activity
9         outside the United States is 80% or more of the foreign
10         person's total business activity and (ii) for taxable
11         years ending on or after December 31, 2008, to a person
12         who would be a member of the same unitary business
13         group but for the fact that the person is prohibited
14         under Section 1501(a)(27) from being included in the
15         unitary business group because he or she is ordinarily
16         required to apportion business income under different
17         subsections of Section 304. The addition modification
18         required by this subparagraph shall be reduced to the
19         extent that dividends were included in base income of
20         the unitary group for the same taxable year and
21         received by the taxpayer or by a member of the
22         taxpayer's unitary business group (including amounts
23         included in gross income pursuant to Sections 951
24         through 964 of the Internal Revenue Code and amounts
25         included in gross income under Section 78 of the
26         Internal Revenue Code) with respect to the stock of the

 

 

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

 

 

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

 

 

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1         accrued, or incurred, directly or indirectly, (i) for
2         taxable years ending on or after December 31, 2004, to
3         a foreign person who would be a member of the same
4         unitary business group but for the fact that the
5         foreign person's business activity outside the United
6         States is 80% or more of that person's total business
7         activity and (ii) for taxable years ending on or after
8         December 31, 2008, to a person who would be a member of
9         the same unitary business group but for the fact that
10         the person is prohibited under Section 1501(a)(27)
11         from being included in the unitary business group
12         because he or she is ordinarily required to apportion
13         business income under different subsections of Section
14         304. The addition modification required by this
15         subparagraph shall be reduced to the extent that
16         dividends were included in base income of the unitary
17         group for the same taxable year and received by the
18         taxpayer or by a member of the taxpayer's unitary
19         business group (including amounts included in gross
20         income pursuant to Sections 951 through 964 of the
21         Internal Revenue Code and amounts included in gross
22         income under Section 78 of the Internal Revenue Code)
23         with respect to the stock of the same person to whom
24         the intangible expenses and costs were directly or
25         indirectly paid, incurred, or accrued. The preceding
26         sentence shall not apply to the extent that the same

 

 

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

 

 

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1             indirectly, if the taxpayer can establish, based
2             on a preponderance of the evidence, both of the
3             following:
4                     (a) the foreign person during the same
5                 taxable year paid, accrued, or incurred, the
6                 intangible expense or cost to a person that is
7                 not a related member, and
8                     (b) the transaction giving rise to the
9                 intangible expense or cost between the
10                 taxpayer and the foreign person did not have as
11                 a principal purpose the avoidance of Illinois
12                 income tax, and is paid pursuant to a contract
13                 or agreement that reflects arm's-length terms;
14                 or
15                 (iii) any item of intangible expense or cost
16             paid, accrued, or incurred, directly or
17             indirectly, from a transaction with 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

 

 

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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             (E-14) For taxable years ending on or after
8         December 31, 2008, an amount equal to the amount of
9         insurance premium expenses and costs otherwise allowed
10         as a deduction in computing base income, and that were
11         paid, accrued, or incurred, directly or indirectly, to
12         a person who would be a member of the same unitary
13         business group but for the fact that the person is
14         prohibited under Section 1501(a)(27) from being
15         included in the unitary business group because he or
16         she is ordinarily required to apportion business
17         income under different subsections of Section 304. The
18         addition modification required by this subparagraph
19         shall be reduced to the extent that dividends were
20         included in base income of the unitary group for the
21         same taxable year and received by the taxpayer or by a
22         member of the taxpayer's unitary business group
23         (including amounts included in gross income under
24         Sections 951 through 964 of the Internal Revenue Code
25         and amounts included in gross income under Section 78
26         of the Internal Revenue Code) with respect to the stock

 

 

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1         of the same person to whom the intangible expenses and
2         costs were directly or indirectly paid, incurred, or
3         accrued. The preceding sentence does not apply to the
4         extent that the same dividends caused a reduction to
5         the addition modification required under Section
6         203(a)(2)(D-17) of this Act;
7             (E-15) For taxable years beginning after December
8         31, 2008, any deduction for dividends paid to a
9         corporation by a captive real estate trust that is
10         allowed to a real estate investment trust under Section
11         857(b)(2)(B) of the Internal Revenue Code for
12         dividends paid;
13     and by deducting from the total so obtained the sum of the
14     following amounts:
15             (F) 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             (G) An amount equal to any amount included in such
19         total under Section 78 of the Internal Revenue Code;
20             (H) In the case of a regulated investment company,
21         an amount equal to the amount of exempt interest
22         dividends as defined in subsection (b) (5) of Section
23         852 of the Internal Revenue Code, paid to shareholders
24         for the taxable year;
25             (I) With the exception of any amounts subtracted
26         under subparagraph (J), an amount equal to the sum of

 

 

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1         all amounts disallowed as deductions by (i) Sections
2         171(a) (2), and 265(a)(2) and amounts disallowed as
3         interest expense by Section 291(a)(3) of the Internal
4         Revenue Code, as now or hereafter amended, and all
5         amounts of expenses allocable to interest and
6         disallowed as deductions by Section 265(a)(1) of the
7         Internal Revenue Code, as now or hereafter amended; and
8         (ii) for taxable years ending on or after August 13,
9         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
10         832(b)(5)(B)(i) of the Internal Revenue Code; the
11         provisions of this subparagraph are exempt from the
12         provisions of Section 250;
13             (J) An amount equal to all amounts included in such
14         total which are exempt from taxation by this State
15         either by reason of its statutes or Constitution or by
16         reason of the Constitution, treaties or statutes of the
17         United States; provided that, in the case of any
18         statute of this State or, for taxable years ending on
19         or after December 31, 2008, of the United States, any
20         treaty of the United States, the Illinois
21         Constitution, or the United States Constitution that
22         exempts income derived from bonds or other obligations
23         from the tax imposed under this Act, the amount
24         exempted shall be the income interest net of bond
25         premium amortization, and, for taxable years ending on
26         or after December 31, 2008, interest expense incurred

 

 

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1         on indebtedness to carry the bond or other obligation,
2         expenses incurred in producing the income to be
3         deducted, and all other related expenses. The amount of
4         expenses to be taken into account under this provision
5         may not exceed the amount of income that is exempted;
6             (K) 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 or
10         a River Edge Redevelopment Zone or zones created under
11         the River Edge Redevelopment Zone Act and conducts
12         substantially all of its operations in an Enterprise
13         Zone or zones or a River Edge Redevelopment Zone or
14         zones. This subparagraph (K) is exempt from the
15         provisions of Section 250;
16             (L) An amount equal to those dividends included in
17         such total that were paid by a corporation that
18         conducts business operations in a federally designated
19         Foreign Trade Zone or Sub-Zone and that is designated a
20         High Impact Business located in Illinois; provided
21         that dividends eligible for the deduction provided in
22         subparagraph (K) of paragraph 2 of this subsection
23         shall not be eligible for the deduction provided under
24         this subparagraph (L);
25             (M) For any taxpayer that is a financial
26         organization within the meaning of Section 304(c) of

 

 

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1         this Act, an amount included in such total as interest
2         income from a loan or loans made by such taxpayer to a
3         borrower, to the extent that such a loan is secured by
4         property which is eligible for the Enterprise Zone
5         Investment Credit or the River Edge Redevelopment Zone
6         Investment Credit. To determine the portion of a loan
7         or loans that is secured by property eligible for a
8         Section 201(f) investment credit to the borrower, the
9         entire principal amount of the loan or loans between
10         the taxpayer and the borrower should be divided into
11         the basis of the Section 201(f) investment credit
12         property which secures the loan or loans, using for
13         this purpose the original basis of such property on the
14         date that it was placed in service in the Enterprise
15         Zone or the River Edge Redevelopment Zone. The
16         subtraction modification available to taxpayer in any
17         year under this subsection shall be that portion of the
18         total interest paid by the borrower with respect to
19         such loan attributable to the eligible property as
20         calculated under the previous sentence. This
21         subparagraph (M) is exempt from the provisions of
22         Section 250;
23             (M-1) For any taxpayer that is a financial
24         organization within the meaning of Section 304(c) of
25         this Act, an amount included in such total as interest
26         income from a loan or loans made by such taxpayer to a

 

 

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1         borrower, to the extent that such a loan is secured by
2         property which is eligible for the High Impact Business
3         Investment Credit. To determine the portion of a loan
4         or loans that is secured by property eligible for a
5         Section 201(h) investment credit to the borrower, the
6         entire principal amount of the loan or loans between
7         the taxpayer and the borrower should be divided into
8         the basis of the Section 201(h) investment credit
9         property which secures the loan or loans, using for
10         this purpose the original basis of such property on the
11         date that it was placed in service in a federally
12         designated Foreign Trade Zone or Sub-Zone located in
13         Illinois. No taxpayer that is eligible for the
14         deduction provided in subparagraph (M) of paragraph
15         (2) of this subsection shall be eligible for the
16         deduction provided under this subparagraph (M-1). The
17         subtraction modification available to taxpayers in any
18         year under this subsection shall be that portion of the
19         total interest paid by the borrower with respect to
20         such loan attributable to the eligible property as
21         calculated under the previous sentence;
22             (N) Two times any contribution made during the
23         taxable year to a designated zone organization to the
24         extent that the contribution (i) qualifies as a
25         charitable contribution under subsection (c) of
26         Section 170 of the Internal Revenue Code and (ii) must,

 

 

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1         by its terms, be used for a project approved by the
2         Department of Commerce and Economic Opportunity under
3         Section 11 of the Illinois Enterprise Zone Act or under
4         Section 10-10 of the Illinois River Edge Redevelopment
5         Zone Act. This subparagraph (N) is exempt from the
6         provisions of Section 250;
7             (O) An amount equal to: (i) 85% for taxable years
8         ending on or before December 31, 1992, or, a percentage
9         equal to the percentage allowable under Section
10         243(a)(1) of the Internal Revenue Code of 1986 for
11         taxable years ending after December 31, 1992, of the
12         amount by which dividends included in taxable income
13         and received from a corporation that is not created or
14         organized under the laws of the United States or any
15         state or political subdivision thereof, including, for
16         taxable years ending on or after December 31, 1988,
17         dividends received or deemed received or paid or deemed
18         paid under Sections 951 through 964 of the Internal
19         Revenue Code, exceed the amount of the modification
20         provided under subparagraph (G) of paragraph (2) of
21         this subsection (b) which is related to such dividends,
22         and including, for taxable years ending on or after
23         December 31, 2008, dividends received from a real
24         estate investment trust; plus (ii) 100% of the amount
25         by which dividends, included in taxable income and
26         received, including, for taxable years ending on or

 

 

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1         after December 31, 1988, dividends received or deemed
2         received or paid or deemed paid under Sections 951
3         through 964 of the Internal Revenue Code and including,
4         for taxable years ending on or after December 31, 2008,
5         dividends received from a real estate investment
6         trust, from any such corporation specified in clause
7         (i) that would but for the provisions of Section 1504
8         (b) (3) of the Internal Revenue Code be treated as a
9         member of the affiliated group which includes the
10         dividend recipient, exceed the amount of the
11         modification provided under subparagraph (G) of
12         paragraph (2) of this subsection (b) which is related
13         to such dividends;
14             (P) An amount equal to any contribution made to a
15         job training project established pursuant to the Tax
16         Increment Allocation Redevelopment Act;
17             (Q) An amount equal to the amount of the deduction
18         used to compute the federal income tax credit for
19         restoration of substantial amounts held under claim of
20         right for the taxable year pursuant to Section 1341 of
21         the Internal Revenue Code of 1986;
22             (R) On and after July 20, 1999, in the case of an
23         attorney-in-fact with respect to whom an interinsurer
24         or a reciprocal insurer has made the election under
25         Section 835 of the Internal Revenue Code, 26 U.S.C.
26         835, an amount equal to the excess, if any, of the

 

 

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1         amounts paid or incurred by that interinsurer or
2         reciprocal insurer in the taxable year to the
3         attorney-in-fact over the deduction allowed to that
4         interinsurer or reciprocal insurer with respect to the
5         attorney-in-fact under Section 835(b) of the Internal
6         Revenue Code for the taxable year; the provisions of
7         this subparagraph are exempt from the provisions of
8         Section 250;
9             (S) For taxable years ending on or after December
10         31, 1997, in the case of a Subchapter S corporation, an
11         amount equal to all amounts of income allocable to a
12         shareholder subject to the Personal Property Tax
13         Replacement Income Tax imposed by subsections (c) and
14         (d) of Section 201 of this Act, including amounts
15         allocable to organizations exempt from federal income
16         tax by reason of Section 501(a) of the Internal Revenue
17         Code. This subparagraph (S) is exempt from the
18         provisions of Section 250;
19             (T) For taxable years 2001 and thereafter, for the
20         taxable year in which the bonus depreciation deduction
21         is taken on the taxpayer's federal income tax return
22         under subsection (k) of Section 168 of the Internal
23         Revenue Code and for each applicable taxable year
24         thereafter, an amount equal to "x", where:
25                 (1) "y" equals the amount of the depreciation
26             deduction taken for the taxable year on the

 

 

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1             taxpayer's federal income tax return on property
2             for which the bonus depreciation deduction was
3             taken in any year under subsection (k) of Section
4             168 of the Internal Revenue Code, but not including
5             the bonus depreciation deduction;
6                 (2) for taxable years ending on or before
7             December 31, 2005, "x" equals "y" multiplied by 30
8             and then divided by 70 (or "y" multiplied by
9             0.429); and
10                 (3) for taxable years ending after December
11             31, 2005:
12                     (i) for property on which a bonus
13                 depreciation deduction of 30% of the adjusted
14                 basis was taken, "x" equals "y" multiplied by
15                 30 and then divided by 70 (or "y" multiplied by
16                 0.429); and
17                     (ii) for property on which a bonus
18                 depreciation deduction of 50% of the adjusted
19                 basis was taken, "x" equals "y" multiplied by
20                 1.0.
21             The aggregate amount deducted under this
22         subparagraph in all taxable years for any one piece of
23         property may not exceed the amount of the bonus
24         depreciation deduction taken on that property on the
25         taxpayer's federal income tax return under subsection
26         (k) of Section 168 of the Internal Revenue Code. This

 

 

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1         subparagraph (T) is exempt from the provisions of
2         Section 250;
3             (U) If the taxpayer sells, transfers, abandons, or
4         otherwise disposes of property for which the taxpayer
5         was required in any taxable year to make an addition
6         modification under subparagraph (E-10), then an amount
7         equal to that addition modification.
8             If the taxpayer continues to own property through
9         the last day of the last tax year for which the
10         taxpayer may claim a depreciation deduction for
11         federal income tax purposes and for which the taxpayer
12         was required in any taxable year to make an addition
13         modification under subparagraph (E-10), then an amount
14         equal to that addition modification.
15             The taxpayer is allowed to take the deduction under
16         this subparagraph only once with respect to any one
17         piece of property.
18             This subparagraph (U) is exempt from the
19         provisions of Section 250;
20             (V) The amount of: (i) any interest income (net of
21         the deductions allocable thereto) taken into account
22         for the taxable year with respect to a transaction with
23         a taxpayer that is required to make an addition
24         modification with respect to such transaction under
25         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
26         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

 

 

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1         the amount of such addition modification and (ii) any
2         income from intangible property (net of the deductions
3         allocable thereto) taken into account for the taxable
4         year with respect to a transaction with a taxpayer that
5         is required to make an addition modification with
6         respect to such transaction under Section
7         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
8         203(d)(2)(D-8), but not to exceed the amount of such
9         addition modification;
10             (W) An amount equal to the interest income taken
11         into account for the taxable year (net of the
12         deductions allocable thereto) with respect to
13         transactions with (i) a foreign person who would be a
14         member of the taxpayer's unitary business group but for
15         the fact that the foreign person's business activity
16         outside the United States is 80% or more of that
17         person's total business activity and (ii) for taxable
18         years ending on or after December 31, 2008, to a person
19         who would be a member of the same unitary business
20         group but for the fact that the person is prohibited
21         under Section 1501(a)(27) from being included in the
22         unitary business group because he or she is ordinarily
23         required to apportion business income under different
24         subsections of Section 304, but not to exceed the
25         addition modification required to be made for the same
26         taxable year under Section 203(b)(2)(E-12) for

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, to the same foreign person; and
3             (X) 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 (i) 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 and (ii) for taxable
11         years ending on or after December 31, 2008, to a person
12         who would be a member of the same unitary business
13         group but for the fact that the person is prohibited
14         under Section 1501(a)(27) from being included in the
15         unitary business group because he or she is ordinarily
16         required to apportion business income under different
17         subsections of Section 304, but not to exceed the
18         addition modification required to be made for the same
19         taxable year under Section 203(b)(2)(E-13) for
20         intangible expenses and costs paid, accrued, or
21         incurred, directly or indirectly, to the same foreign
22         person; and .
23             (FF) An amount equal to the income from insurance
24         premiums taken into account for the taxable year (net
25         of the deductions allocable thereto) with respect to
26         transactions with a person who would be a member of the

 

 

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1         same unitary business group but for the fact that the
2         person is prohibited under Section 1501(a)(27) from
3         being included in the unitary business group because he
4         or she is ordinarily required to apportion business
5         income under different subsections of Section 304, but
6         not to exceed the addition modification required to be
7         made for the same taxable year under Section
8         203(a)(2)(D-18) for intangible expenses and costs
9         paid, accrued, or incurred, directly or indirectly, to
10         the same person.
11         (3) Special rule. For purposes of paragraph (2) (A),
12     "gross income" in the case of a life insurance company, for
13     tax years ending on and after December 31, 1994, shall mean
14     the gross investment income for the taxable year.
 
15     (c) Trusts and estates.
16         (1) In general. In the case of a trust or estate, base
17     income means an amount equal to the taxpayer's taxable
18     income for the taxable year as modified by paragraph (2).
19         (2) Modifications. Subject to the provisions of
20     paragraph (3), the taxable income referred to in paragraph
21     (1) shall be modified by adding thereto the sum of the
22     following amounts:
23             (A) An amount equal to all amounts paid or accrued
24         to the taxpayer as interest or dividends during the
25         taxable year to the extent excluded from gross income

 

 

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1         in the computation of taxable income;
2             (B) In the case of (i) an estate, $600; (ii) a
3         trust which, under its governing instrument, is
4         required to distribute all of its income currently,
5         $300; and (iii) any other trust, $100, but in each such
6         case, only to the extent such amount was deducted in
7         the computation of taxable income;
8             (C) An amount equal to the amount of tax imposed by
9         this Act to the extent deducted from gross income in
10         the computation of taxable income for the taxable year;
11             (D) The amount of any net operating loss deduction
12         taken in arriving at taxable income, other than a net
13         operating loss carried forward from a taxable year
14         ending prior to December 31, 1986;
15             (E) For taxable years in which a net operating loss
16         carryback or carryforward from a taxable year ending
17         prior to December 31, 1986 is an element of taxable
18         income under paragraph (1) of subsection (e) or
19         subparagraph (E) of paragraph (2) of subsection (e),
20         the amount by which addition modifications other than
21         those provided by this subparagraph (E) exceeded
22         subtraction modifications in such taxable year, with
23         the following limitations applied in the order that
24         they are listed:
25                 (i) the addition modification relating to the
26             net operating loss carried back or forward to the

 

 

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1             taxable year from any taxable year ending prior to
2             December 31, 1986 shall be reduced by the amount of
3             addition modification under this subparagraph (E)
4             which related to that net operating loss and which
5             was taken into account in calculating the base
6             income of an earlier taxable year, and
7                 (ii) the addition modification relating to the
8             net operating loss carried back or forward to the
9             taxable year from any taxable year ending prior to
10             December 31, 1986 shall not exceed the amount of
11             such carryback or carryforward;
12             For taxable years in which there is a net operating
13         loss carryback or carryforward from more than one other
14         taxable year ending prior to December 31, 1986, the
15         addition modification provided in this subparagraph
16         (E) shall be the sum of the amounts computed
17         independently under the preceding provisions of this
18         subparagraph (E) for each such taxable year;
19             (F) For taxable years ending on or after January 1,
20         1989, an amount equal to the tax deducted pursuant to
21         Section 164 of the Internal Revenue Code if the trust
22         or estate is claiming the same tax for purposes of the
23         Illinois foreign tax credit under Section 601 of this
24         Act;
25             (G) An amount equal to the amount of the capital
26         gain deduction allowable under the Internal Revenue

 

 

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1         Code, to the extent deducted from gross income in the
2         computation of taxable income;
3             (G-5) For taxable years ending after December 31,
4         1997, an amount equal to any eligible remediation costs
5         that the trust or estate deducted in computing adjusted
6         gross income and for which the trust or estate claims a
7         credit under subsection (l) of Section 201;
8             (G-10) For taxable years 2001 and thereafter, an
9         amount equal to the bonus depreciation deduction taken
10         on the taxpayer's federal income tax return for the
11         taxable year under subsection (k) of Section 168 of the
12         Internal Revenue Code; and
13             (G-11) If the taxpayer sells, transfers, abandons,
14         or otherwise disposes of property for which the
15         taxpayer was required in any taxable year to make an
16         addition modification under subparagraph (G-10), then
17         an amount equal to the aggregate amount of the
18         deductions taken in all taxable years under
19         subparagraph (R) with respect to that property.
20             If the taxpayer continues to own property through
21         the last day of the last tax year for which the
22         taxpayer may claim a depreciation deduction for
23         federal income tax purposes and for which the taxpayer
24         was allowed in any taxable year to make a subtraction
25         modification under subparagraph (R), then an amount
26         equal to that subtraction modification.

 

 

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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             (G-12) An For taxable years ending on or after
5         December 31, 2004, an amount equal to the amount
6         otherwise allowed as a deduction in computing base
7         income for interest paid, accrued, or incurred,
8         directly or indirectly, (i) for taxable years ending on
9         or after December 31, 2004, to a foreign person who
10         would be a member of the same unitary business group
11         but for the fact that the foreign person's business
12         activity outside the United States is 80% or more of
13         the foreign person's total business activity and (ii)
14         for taxable years ending on or after December 31, 2008,
15         to a person who would be a member of the same unitary
16         business group but for the fact that the person is
17         prohibited under Section 1501(a)(27) from being
18         included in the unitary business group because he or
19         she is ordinarily required to apportion business
20         income under different subsections of Section 304. The
21         addition modification required by this subparagraph
22         shall be reduced to the extent that dividends were
23         included in base income of the unitary group for the
24         same taxable year and received by the taxpayer or by a
25         member of the taxpayer's unitary business group
26         (including amounts included in gross income pursuant

 

 

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

 

 

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

 

 

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1         December 31, 2004, an amount equal to the amount of
2         intangible expenses and costs otherwise allowed as a
3         deduction in computing base income, and that were paid,
4         accrued, or incurred, directly or indirectly, (i) for
5         taxable years ending on or after December 31, 2004, to
6         a foreign person who would be a member of the same
7         unitary business group but for the fact that the
8         foreign person's business activity outside the United
9         States is 80% or more of that person's total business
10         activity and (ii) for taxable years ending on or after
11         December 31, 2008, to a person who would be a member of
12         the same unitary business group but for the fact that
13         the person is prohibited under Section 1501(a)(27)
14         from being included in the unitary business group
15         because he or she is ordinarily required to apportion
16         business income under different subsections of Section
17         304. The addition modification required by this
18         subparagraph shall be reduced to the extent that
19         dividends were included in base income of the unitary
20         group for the same taxable year and received by the
21         taxpayer or by a member of the taxpayer's unitary
22         business group (including amounts included in gross
23         income pursuant to Sections 951 through 964 of the
24         Internal Revenue Code and amounts included in gross
25         income under Section 78 of the Internal Revenue Code)
26         with respect to the stock of the same person to whom

 

 

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

 

 

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1             income with respect to such item; or
2                 (ii) any item of intangible expense or cost
3             paid, accrued, or incurred, directly or
4             indirectly, if the taxpayer can establish, based
5             on a preponderance of the evidence, both of the
6             following:
7                     (a) the foreign person during the same
8                 taxable year paid, accrued, or incurred, the
9                 intangible expense or cost to a person that is
10                 not a related member, and
11                     (b) the transaction giving rise to the
12                 intangible expense or cost between the
13                 taxpayer and the foreign person did not have as
14                 a principal purpose the avoidance of Illinois
15                 income tax, and is paid pursuant to a contract
16                 or agreement that reflects arm's-length terms;
17                 or
18                 (iii) any item of intangible expense or cost
19             paid, accrued, or incurred, directly or
20             indirectly, from a transaction with a foreign
21             person if the taxpayer establishes by clear and
22             convincing evidence, that the adjustments are
23             unreasonable; or if the taxpayer and the Director
24             agree in writing to the application or use of an
25             alternative method of apportionment under Section
26             304(f);

 

 

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1                 Nothing in this subsection shall preclude the
2             Director from making any other adjustment
3             otherwise allowed under Section 404 of this Act for
4             any tax year beginning after the effective date of
5             this amendment provided such adjustment is made
6             pursuant to regulation adopted by the Department
7             and such regulations provide methods and standards
8             by which the Department will utilize its authority
9             under Section 404 of this Act;
10             (G-14) For taxable years ending on or after
11         December 31, 2008, an amount equal to the amount of
12         insurance premium expenses and costs otherwise allowed
13         as a deduction in computing base income, and that were
14         paid, accrued, or incurred, directly or indirectly, to
15         a person who would be a member of the same unitary
16         business group but for the fact that the person is
17         prohibited under Section 1501(a)(27) from being
18         included in the unitary business group because he or
19         she is ordinarily required to apportion business
20         income under different subsections of Section 304. The
21         addition modification required by this subparagraph
22         shall be reduced to the extent that dividends were
23         included in base income of the unitary group for the
24         same taxable year and received by the taxpayer or by a
25         member of the taxpayer's unitary business group
26         (including amounts included in gross income under

 

 

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1         Sections 951 through 964 of the Internal Revenue Code
2         and amounts included in gross income under Section 78
3         of the Internal Revenue Code) with respect to the stock
4         of the same person to whom the intangible expenses and
5         costs were directly or indirectly paid, incurred, or
6         accrued. The preceding sentence does not apply to the
7         extent that the same dividends caused a reduction to
8         the addition modification required under Section
9         203(a)(2)(D-17) of this Act.
10     and by deducting from the total so obtained the sum of the
11     following amounts:
12             (H) An amount equal to all amounts included in such
13         total pursuant to the provisions of Sections 402(a),
14         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
15         Internal Revenue Code or included in such total as
16         distributions under the provisions of any retirement
17         or disability plan for employees of any governmental
18         agency or unit, or retirement payments to retired
19         partners, which payments are excluded in computing net
20         earnings from self employment by Section 1402 of the
21         Internal Revenue Code and regulations adopted pursuant
22         thereto;
23             (I) The valuation limitation amount;
24             (J) An amount equal to the amount of any tax
25         imposed by this Act which was refunded to the taxpayer
26         and included in such total for the taxable year;

 

 

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1             (K) An amount equal to all amounts included in
2         taxable income as modified by subparagraphs (A), (B),
3         (C), (D), (E), (F) and (G) which are exempt from
4         taxation by this State either by reason of its statutes
5         or Constitution or by reason of the Constitution,
6         treaties or statutes of the United States; provided
7         that, in the case of any statute of this State or, for
8         taxable years ending on or after December 31, 2008, of
9         the United States, any treaty of the United States, the
10         Illinois Constitution, or the United States
11         Constitution that exempts income derived from bonds or
12         other obligations from the tax imposed under this Act,
13         the amount exempted shall be the income interest net of
14         bond premium amortization, and, for taxable years
15         ending on or after December 31, 2008, interest expense
16         incurred on indebtedness to carry the bond or other
17         obligation, expenses incurred in producing the income
18         to be deducted, and all other related expenses. The
19         amount of expenses to be taken into account under this
20         provision may not exceed the amount of income that is
21         exempted;
22             (L) With the exception of any amounts subtracted
23         under subparagraph (K), an amount equal to the sum of
24         all amounts disallowed as deductions by (i) Sections
25         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
26         as now or hereafter amended, and all amounts of

 

 

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1         expenses allocable to interest and disallowed as
2         deductions by Section 265(1) of the Internal Revenue
3         Code of 1954, as now or hereafter amended; and (ii) for
4         taxable years ending on or after August 13, 1999,
5         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
6         the Internal Revenue Code; the provisions of this
7         subparagraph are exempt from the provisions of Section
8         250;
9             (M) An amount equal to those dividends included in
10         such total which were paid by a corporation which
11         conducts business operations in an Enterprise Zone or
12         zones created under the Illinois Enterprise Zone Act or
13         a River Edge Redevelopment Zone or zones created under
14         the River Edge Redevelopment Zone Act and conducts
15         substantially all of its operations in an Enterprise
16         Zone or Zones or a River Edge Redevelopment Zone or
17         zones. This subparagraph (M) is exempt from the
18         provisions of Section 250;
19             (N) An amount equal to any contribution made to a
20         job training project established pursuant to the Tax
21         Increment Allocation Redevelopment Act;
22             (O) An amount equal to those dividends included in
23         such total that were paid by a corporation that
24         conducts business operations in a federally designated
25         Foreign Trade Zone or Sub-Zone and that is designated a
26         High Impact Business located in Illinois; provided

 

 

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1         that dividends eligible for the deduction provided in
2         subparagraph (M) of paragraph (2) of this subsection
3         shall not be eligible for the deduction provided under
4         this subparagraph (O);
5             (P) An amount equal to the amount of the deduction
6         used to compute the federal income tax credit for
7         restoration of substantial amounts held under claim of
8         right for the taxable year pursuant to Section 1341 of
9         the Internal Revenue Code of 1986;
10             (Q) For taxable year 1999 and thereafter, an amount
11         equal to the amount of any (i) distributions, to the
12         extent includible in gross income for federal income
13         tax purposes, made to the taxpayer because of his or
14         her status as a victim of persecution for racial or
15         religious reasons by Nazi Germany or any other Axis
16         regime or as an heir of the victim and (ii) items of
17         income, to the extent includible in gross income for
18         federal income tax purposes, attributable to, derived
19         from or in any way related to assets stolen from,
20         hidden from, or otherwise lost to a victim of
21         persecution for racial or religious reasons by Nazi
22         Germany or any other Axis regime immediately prior to,
23         during, and immediately after World War II, including,
24         but not limited to, interest on the proceeds receivable
25         as insurance under policies issued to a victim of
26         persecution for racial or religious reasons by Nazi

 

 

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

 

 

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1             taken in any year under subsection (k) of Section
2             168 of the Internal Revenue Code, but not including
3             the bonus depreciation deduction;
4                 (2) for taxable years ending on or before
5             December 31, 2005, "x" equals "y" multiplied by 30
6             and then divided by 70 (or "y" multiplied by
7             0.429); and
8                 (3) for taxable years ending after December
9             31, 2005:
10                     (i) for property on which a bonus
11                 depreciation deduction of 30% of the adjusted
12                 basis was taken, "x" equals "y" multiplied by
13                 30 and then divided by 70 (or "y" multiplied by
14                 0.429); and
15                     (ii) for property on which a bonus
16                 depreciation deduction of 50% of the adjusted
17                 basis was taken, "x" equals "y" multiplied by
18                 1.0.
19             The aggregate amount deducted under this
20         subparagraph in all taxable years for any one piece of
21         property may not exceed the amount of the bonus
22         depreciation deduction taken on that property on the
23         taxpayer's federal income tax return under subsection
24         (k) of Section 168 of the Internal Revenue Code. This
25         subparagraph (R) is exempt from the provisions of
26         Section 250;

 

 

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1             (S) If the taxpayer sells, transfers, abandons, or
2         otherwise disposes of property for which the taxpayer
3         was required in any taxable year to make an addition
4         modification under subparagraph (G-10), then an amount
5         equal to that addition modification.
6             If the taxpayer continues to own property through
7         the last day of the last tax year for which the
8         taxpayer may claim a depreciation deduction for
9         federal income tax purposes and for which the taxpayer
10         was required in any taxable year to make an addition
11         modification under subparagraph (G-10), then an amount
12         equal to that addition modification.
13             The taxpayer is allowed to take the deduction under
14         this subparagraph only once with respect to any one
15         piece of property.
16             This subparagraph (S) is exempt from the
17         provisions of Section 250;
18             (T) The amount of (i) any interest income (net of
19         the deductions allocable thereto) taken into account
20         for the taxable year with respect to a transaction with
21         a taxpayer that is required to make an addition
22         modification with respect to such transaction under
23         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
24         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
25         the amount of such addition modification and (ii) any
26         income from intangible property (net of the deductions

 

 

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1         allocable thereto) taken into account for the taxable
2         year with respect to a transaction with a taxpayer that
3         is required to make an addition modification with
4         respect to such transaction under Section
5         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
6         203(d)(2)(D-8), but not to exceed the amount of such
7         addition modification;
8             (U) An amount equal to the interest income taken
9         into account for the taxable year (net of the
10         deductions allocable thereto) with respect to
11         transactions with (i) a foreign person who would be a
12         member of the taxpayer's unitary business group but for
13         the fact the foreign person's business activity
14         outside the United States is 80% or more of that
15         person's total business activity and (ii) for taxable
16         years ending on or after December 31, 2008, to a person
17         who would be a member of the same unitary business
18         group but for the fact that the person is prohibited
19         under Section 1501(a)(27) from being included in the
20         unitary business group because he or she is ordinarily
21         required to apportion business income under different
22         subsections of Section 304, but not to exceed the
23         addition modification required to be made for the same
24         taxable year under Section 203(c)(2)(G-12) for
25         interest paid, accrued, or incurred, directly or
26         indirectly, to the same foreign person; and

 

 

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1             (V) 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(c)(2)(G-13) for
11         intangible expenses and costs paid, accrued, or
12         incurred, directly or indirectly, to the same foreign
13         person; and .
14             (FF) An amount equal to the income from insurance
15         premiums taken into account for the taxable year (net
16         of the deductions allocable thereto) with respect to
17         transactions with a person who would be a member of the
18         same unitary business group but for the fact that the
19         person is prohibited under Section 1501(a)(27) from
20         being included in the unitary business group because he
21         or she is ordinarily required to apportion business
22         income under different subsections of Section 304, but
23         not to exceed the addition modification required to be
24         made for the same taxable year under Section
25         203(a)(2)(D-18) for intangible expenses and costs
26         paid, accrued, or incurred, directly or indirectly, to

 

 

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1         the same person.
2         (3) Limitation. The amount of any modification
3     otherwise required under this subsection shall, under
4     regulations prescribed by the Department, be adjusted by
5     any amounts included therein which were properly paid,
6     credited, or required to be distributed, or permanently set
7     aside for charitable purposes pursuant to Internal Revenue
8     Code Section 642(c) during the taxable year.
 
9     (d) Partnerships.
10         (1) In general. In the case of a partnership, base
11     income means an amount equal to the taxpayer's taxable
12     income for the taxable year as modified by paragraph (2).
13         (2) Modifications. The taxable income referred to in
14     paragraph (1) shall be modified by adding thereto the sum
15     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 taxable income;
20             (B) An amount equal to the amount of tax imposed by
21         this Act to the extent deducted from gross income for
22         the taxable year;
23             (C) The amount of deductions allowed to the
24         partnership pursuant to Section 707 (c) of the Internal
25         Revenue Code in calculating its taxable income;

 

 

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1             (D) An amount equal to the amount of the capital
2         gain deduction allowable under the Internal Revenue
3         Code, to the extent deducted from gross income in the
4         computation of taxable income;
5             (D-5) For taxable years 2001 and thereafter, an
6         amount equal to the bonus depreciation deduction taken
7         on the taxpayer's federal income tax return for the
8         taxable year under subsection (k) of Section 168 of the
9         Internal Revenue Code;
10             (D-6) If the taxpayer sells, transfers, abandons,
11         or otherwise disposes of property for which the
12         taxpayer was required in any taxable year to make an
13         addition modification under subparagraph (D-5), then
14         an amount equal to the aggregate amount of the
15         deductions taken in all taxable years under
16         subparagraph (O) with respect to that property.
17             If the taxpayer continues to own property through
18         the last day of the last tax year for which the
19         taxpayer may claim a depreciation deduction for
20         federal income tax purposes and for which the taxpayer
21         was allowed in any taxable year to make a subtraction
22         modification under subparagraph (O), then an amount
23         equal to that subtraction modification.
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;

 

 

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1             (D-7) An For taxable years ending on or after
2         December 31, 2004, an amount equal to the amount
3         otherwise allowed as a deduction in computing base
4         income for interest paid, accrued, or incurred,
5         directly or indirectly, (i) for taxable years ending on
6         or after December 31, 2004, to a foreign person who
7         would be a member of the same unitary business group
8         but for the fact the foreign person's business activity
9         outside the United States is 80% or more of the foreign
10         person's total business activity and (ii) for taxable
11         years ending on or after December 31, 2008, to a person
12         who would be a member of the same unitary business
13         group but for the fact that the person is prohibited
14         under Section 1501(a)(27) from being included in the
15         unitary business group because he or she is ordinarily
16         required to apportion business income under different
17         subsections of Section 304. The addition modification
18         required by this subparagraph shall be reduced to the
19         extent that dividends were included in base income of
20         the unitary group for the same taxable year and
21         received by the taxpayer or by a member of the
22         taxpayer's unitary business group (including amounts
23         included in gross income pursuant to Sections 951
24         through 964 of the Internal Revenue Code and amounts
25         included in gross income under Section 78 of the
26         Internal Revenue Code) with respect to the stock of the

 

 

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

 

 

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

 

 

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1         accrued, or incurred, directly or indirectly, (i) for
2         taxable years ending on or after December 31, 2004, to
3         a foreign person who would be a member of the same
4         unitary business group but for the fact that the
5         foreign person's business activity outside the United
6         States is 80% or more of that person's total business
7         activity and (ii) for taxable years ending on or after
8         December 31, 2008, to a person who would be a member of
9         the same unitary business group but for the fact that
10         the person is prohibited under Section 1501(a)(27)
11         from being included in the unitary business group
12         because he or she is ordinarily required to apportion
13         business income under different subsections of Section
14         304. The addition modification required by this
15         subparagraph shall be reduced to the extent that
16         dividends were included in base income of the unitary
17         group for the same taxable year and received by the
18         taxpayer or by a member of the taxpayer's unitary
19         business group (including amounts included in gross
20         income pursuant to Sections 951 through 964 of the
21         Internal Revenue Code and amounts included in gross
22         income under Section 78 of the Internal Revenue Code)
23         with respect to the stock of the same person to whom
24         the intangible expenses and costs were directly or
25         indirectly paid, incurred or accrued. The preceding
26         sentence shall not apply to the extent that the same

 

 

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

 

 

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1             indirectly, if the taxpayer can establish, based
2             on a preponderance of the evidence, both of the
3             following:
4                     (a) the foreign person during the same
5                 taxable year paid, accrued, or incurred, the
6                 intangible expense or cost to a person that is
7                 not a related member, and
8                     (b) the transaction giving rise to the
9                 intangible expense or cost between the
10                 taxpayer and the foreign person did not have as
11                 a principal purpose the avoidance of Illinois
12                 income tax, and is paid pursuant to a contract
13                 or agreement that reflects arm's-length terms;
14                 or
15                 (iii) any item of intangible expense or cost
16             paid, accrued, or incurred, directly or
17             indirectly, from a transaction with 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

 

 

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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-9) For taxable years ending on or after December
8         31, 2008, an amount equal to the amount of insurance
9         premium expenses and costs otherwise allowed as a
10         deduction in computing base income, and that were paid,
11         accrued, or incurred, directly or indirectly, to a
12         person who would be a member of the same unitary
13         business group but for the fact that the person is
14         prohibited under Section 1501(a)(27) from being
15         included in the unitary business group because he or
16         she is ordinarily required to apportion business
17         income under different subsections of Section 304. The
18         addition modification required by this subparagraph
19         shall be reduced to the extent that dividends were
20         included in base income of the unitary group for the
21         same taxable year and received by the taxpayer or by a
22         member of the taxpayer's unitary business group
23         (including amounts included in gross income under
24         Sections 951 through 964 of the Internal Revenue Code
25         and amounts included in gross income under Section 78
26         of the Internal Revenue Code) with respect to the stock

 

 

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1         of the same person to whom the intangible expenses and
2         costs were directly or indirectly paid, incurred, or
3         accrued. The preceding sentence does not apply to the
4         extent that the same dividends caused a reduction to
5         the addition modification required under Section
6         203(a)(2)(D-17) of this Act.
7     and by deducting from the total so obtained the following
8     amounts:
9             (E) The valuation limitation amount;
10             (F) An amount equal to the amount of any tax
11         imposed by this Act which was refunded to the taxpayer
12         and included in such total for the taxable year;
13             (G) An amount equal to all amounts included in
14         taxable income as modified by subparagraphs (A), (B),
15         (C) and (D) which are exempt from taxation by this
16         State either by reason of its statutes or Constitution
17         or by reason of the Constitution, treaties or statutes
18         of the United States; provided that, in the case of any
19         statute of this State or, for taxable years ending on
20         or after December 31, 2008, of the United States, any
21         treaty of the United States, the Illinois
22         Constitution, or the United States Constitution that
23         exempts income derived from bonds or other obligations
24         from the tax imposed under this Act, the amount
25         exempted shall be the income interest net of bond
26         premium amortization, and, for taxable years ending on

 

 

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1         or after December 31, 2008, interest expense incurred
2         on indebtedness to carry the bond or other obligation,
3         expenses incurred in producing the income to be
4         deducted, and all other related expenses. The amount of
5         expenses to be taken into account under this provision
6         may not exceed the amount of income that is exempted;
7             (H) Any income of the partnership which
8         constitutes personal service income as defined in
9         Section 1348 (b) (1) of the Internal Revenue Code (as
10         in effect December 31, 1981) or a reasonable allowance
11         for compensation paid or accrued for services rendered
12         by partners to the partnership, whichever is greater;
13             (I) An amount equal to all amounts of income
14         distributable to an entity subject to the Personal
15         Property Tax Replacement Income Tax imposed by
16         subsections (c) and (d) of Section 201 of this Act
17         including amounts distributable to organizations
18         exempt from federal income tax by reason of Section
19         501(a) of the Internal Revenue Code;
20             (J) With the exception of any amounts subtracted
21         under subparagraph (G), an amount equal to the sum of
22         all amounts disallowed as deductions by (i) Sections
23         171(a) (2), and 265(2) of the Internal Revenue Code of
24         1954, as now or hereafter amended, and all amounts of
25         expenses allocable to interest and disallowed as
26         deductions by Section 265(1) of the Internal Revenue

 

 

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1         Code, as now or hereafter amended; and (ii) for taxable
2         years ending on or after August 13, 1999, Sections
3         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
4         Internal Revenue Code; the provisions of this
5         subparagraph are exempt from the provisions of Section
6         250;
7             (K) An amount equal to those dividends included in
8         such total which were paid by a corporation which
9         conducts business operations in an Enterprise Zone or
10         zones created under the Illinois Enterprise Zone Act,
11         enacted by the 82nd General Assembly, or a River Edge
12         Redevelopment Zone or zones created under the River
13         Edge Redevelopment Zone Act and conducts substantially
14         all of its operations in an Enterprise Zone or Zones or
15         from a River Edge Redevelopment Zone or zones. This
16         subparagraph (K) is exempt from the provisions of
17         Section 250;
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

 

 

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1         subparagraph (K) of paragraph (2) of this subsection
2         shall not be eligible for the deduction provided under
3         this subparagraph (M);
4             (N) An amount equal to the amount of the deduction
5         used to compute the federal income tax credit for
6         restoration of substantial amounts held under claim of
7         right for the taxable year pursuant to Section 1341 of
8         the Internal Revenue Code of 1986;
9             (O) For taxable years 2001 and thereafter, for the
10         taxable year in which the bonus depreciation deduction
11         is taken on the taxpayer's federal income tax return
12         under subsection (k) of Section 168 of the Internal
13         Revenue Code and for each applicable taxable year
14         thereafter, an amount equal to "x", where:
15                 (1) "y" equals the amount of the depreciation
16             deduction taken for the taxable year on the
17             taxpayer's federal income tax return on property
18             for which the bonus depreciation deduction was
19             taken in any year under subsection (k) of Section
20             168 of the Internal Revenue Code, but not including
21             the bonus depreciation deduction;
22                 (2) for taxable years ending on or before
23             December 31, 2005, "x" equals "y" multiplied by 30
24             and then divided by 70 (or "y" multiplied by
25             0.429); and
26                 (3) for taxable years ending after December

 

 

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1             31, 2005:
2                     (i) for property on which a bonus
3                 depreciation deduction of 30% of the adjusted
4                 basis was taken, "x" equals "y" multiplied by
5                 30 and then divided by 70 (or "y" multiplied by
6                 0.429); and
7                     (ii) for property on which a bonus
8                 depreciation deduction of 50% of the adjusted
9                 basis was taken, "x" equals "y" multiplied by
10                 1.0.
11             The aggregate amount deducted under this
12         subparagraph in all taxable years for any one piece of
13         property may not exceed the amount of the bonus
14         depreciation deduction taken on that property on the
15         taxpayer's federal income tax return under subsection
16         (k) of Section 168 of the Internal Revenue Code. This
17         subparagraph (O) is exempt from the provisions of
18         Section 250;
19             (P) If the taxpayer sells, transfers, abandons, or
20         otherwise disposes of property for which the taxpayer
21         was required in any taxable year to make an addition
22         modification under subparagraph (D-5), then an amount
23         equal to that addition modification.
24             If the taxpayer continues to own property through
25         the last day of the last tax year for which the
26         taxpayer may claim a depreciation deduction for

 

 

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1         federal income tax purposes and for which the taxpayer
2         was required in any taxable year to make an addition
3         modification under subparagraph (D-5), then an amount
4         equal to that addition 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             This subparagraph (P) is exempt from the
9         provisions of Section 250;
10             (Q) The amount of (i) any interest income (net of
11         the deductions allocable thereto) taken into account
12         for the taxable year with respect to a transaction with
13         a taxpayer that is required to make an addition
14         modification with respect to such transaction under
15         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
16         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
17         the amount of such addition modification and (ii) any
18         income from intangible property (net of the deductions
19         allocable thereto) taken into account for the taxable
20         year with respect to a transaction with a taxpayer that
21         is required to make an addition modification with
22         respect to such transaction under Section
23         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
24         203(d)(2)(D-8), but not to exceed the amount of such
25         addition modification;
26             (R) An amount equal to the interest income taken

 

 

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1         into account for the taxable year (net of the
2         deductions allocable thereto) with respect to
3         transactions with (i) a foreign person who would be a
4         member of the taxpayer's unitary business group but for
5         the fact that the foreign person's business activity
6         outside the United States is 80% or more of that
7         person's total business activity and (ii) for taxable
8         years ending on or after December 31, 2008, to a person
9         who would be a member of the same unitary business
10         group but for the fact that the person is prohibited
11         under Section 1501(a)(27) from being included in the
12         unitary business group because he or she is ordinarily
13         required to apportion business income under different
14         subsections of Section 304, but not to exceed the
15         addition modification required to be made for the same
16         taxable year under Section 203(d)(2)(D-7) for interest
17         paid, accrued, or incurred, directly or indirectly, to
18         the same foreign person; and
19             (S) An amount equal to the income from intangible
20         property taken into account for the taxable year (net
21         of the deductions allocable thereto) with respect to
22         transactions with (i) a foreign person who would be a
23         member of the taxpayer's unitary business group but for
24         the fact that the foreign person's business activity
25         outside the United States is 80% or more of that
26         person's total business activity and (ii) for taxable

 

 

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1         years ending on or after December 31, 2008, to a person
2         who would be a member of the same unitary business
3         group but for the fact that the person is prohibited
4         under Section 1501(a)(27) from being included in the
5         unitary business group because he or she is ordinarily
6         required to apportion business income under different
7         subsections of Section 304, but not to exceed the
8         addition modification required to be made for the same
9         taxable year under Section 203(d)(2)(D-8) for
10         intangible expenses and costs paid, accrued, or
11         incurred, directly or indirectly, to the same foreign
12         person; and .
13             (FF) An amount equal to the income from insurance
14         premiums taken into account for the taxable year (net
15         of the deductions allocable thereto) with respect to
16         transactions with a person who would be a member of the
17         same unitary business group but for the fact that the
18         person is prohibited under Section 1501(a)(27) from
19         being included in the unitary business group because he
20         or she is ordinarily required to apportion business
21         income under different subsections of Section 304, but
22         not to exceed the addition modification required to be
23         made for the same taxable year under Section
24         203(a)(2)(D-18) for intangible expenses and costs
25         paid, accrued, or incurred, directly or indirectly, to
26         the same person.
 

 

 

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

 

 

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

 

 

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1             (D) Real estate investment trusts. In the case of a
2         real estate investment trust subject to the tax imposed
3         by Section 857 of the Internal Revenue Code, real
4         estate investment trust taxable income;
5             (E) Consolidated corporations. In the case of a
6         corporation which is a member of an affiliated group of
7         corporations filing a consolidated income tax return
8         for the taxable year for federal income tax purposes,
9         taxable income determined as if such corporation had
10         filed a separate return for federal income tax purposes
11         for the taxable year and each preceding taxable year
12         for which it was a member of an affiliated group. For
13         purposes of this subparagraph, the taxpayer's separate
14         taxable income shall be determined as if the election
15         provided by Section 243(b) (2) of the Internal Revenue
16         Code had been in effect for all such years;
17             (F) Cooperatives. In the case of a cooperative
18         corporation or association, the taxable income of such
19         organization determined in accordance with the
20         provisions of Section 1381 through 1388 of the Internal
21         Revenue Code;
22             (G) Subchapter S corporations. In the case of: (i)
23         a Subchapter S corporation for which there is in effect
24         an election for the taxable year under Section 1362 of
25         the Internal Revenue Code, the taxable income of such
26         corporation determined in accordance with Section

 

 

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

 

 

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

 

 

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

 

 

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1     (g) Double deductions. Unless specifically provided
2 otherwise, nothing in this Section shall permit the same item
3 to be deducted more than once.
 
4     (h) Legislative intention. Except as expressly provided by
5 this Section there shall be no modifications or limitations on
6 the amounts of income, gain, loss or deduction taken into
7 account in determining gross income, adjusted gross income or
8 taxable income for federal income tax purposes for the taxable
9 year, or in the amount of such items entering into the
10 computation of base income and net income under this Act for
11 such taxable year, whether in respect of property values as of
12 August 1, 1969 or otherwise.
13 (Source: P.A. 93-812, eff. 7-26-04; 93-840, eff. 7-30-04;
14 94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 94-1021, eff.
15 7-12-06; 94-1074, eff. 12-26-06; revised 1-2-07.)
 
16     (35 ILCS 5/205)  (from Ch. 120, par. 2-205)
17     Sec. 205. Exempt organizations.
18     (a) Charitable, etc. organizations. The base income of an
19 organization which is exempt from the federal income tax by
20 reason of Section 501(a) of the Internal Revenue Code shall not
21 be determined under section 203 of this Act, but shall be its
22 unrelated business taxable income as determined under section
23 512 of the Internal Revenue Code, without any deduction for the

 

 

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1 tax imposed by this Act. The standard exemption provided by
2 section 204 of this Act shall not be allowed in determining the
3 net income of an organization to which this subsection applies.
4     (b) Partnerships. A partnership as such shall not be
5 subject to the tax imposed by subsection 201 (a) and (b) of
6 this Act, but shall be subject to the replacement tax imposed
7 by subsection 201 (c) and (d) of this Act and shall compute its
8 base income as described in subsection (d) of Section 203 of
9 this Act. For taxable years ending on or after December 31,
10 2004, an investment partnership, as defined in Section
11 1501(a)(11.5) of this Act, shall not be subject to the tax
12 imposed by subsections (c) and (d) of Section 201 of this Act.
13 A partnership shall file such returns and other information at
14 such time and in such manner as may be required under Article 5
15 of this Act. The partners in a partnership shall be liable for
16 the replacement tax imposed by subsection 201 (c) and (d) of
17 this Act on such partnership, to the extent such tax is not
18 paid by the partnership, as provided under the laws of Illinois
19 governing the liability of partners for the obligations of a
20 partnership. Persons carrying on business as partners shall be
21 liable for the tax imposed by subsection 201 (a) and (b) of
22 this Act only in their separate or individual capacities.
23     (c) Subchapter S corporations. A Subchapter S corporation
24 shall not be subject to the tax imposed by subsection 201 (a)
25 and (b) of this Act but shall be subject to the replacement tax
26 imposed by subsection 201 (c) and (d) of this Act and shall

 

 

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1 file such returns and other information at such time and in
2 such manner as may be required under Article 5 of this Act.
3     (d) Combat zone death. An individual relieved from the
4 federal income tax for any taxable year by reason of section
5 692 of the Internal Revenue Code shall not be subject to the
6 tax imposed by this Act for such taxable year.
7     (e) Certain trusts. A common trust fund described in
8 Section 584 of the Internal Revenue Code, and any other trust
9 to the extent that the grantor is treated as the owner thereof
10 under sections 671 through 678 of the Internal Revenue Code
11 shall not be subject to the tax imposed by this Act.
12     (f) Certain business activities. A person not otherwise
13 subject to the tax imposed by this Act shall not become subject
14 to the tax imposed by this Act by reason of:
15         (1) that person's ownership of tangible personal
16     property located at the premises of a printer in this State
17     with which the person has contracted for printing, or
18         (2) activities of the person's employees or agents
19     located solely at the premises of a printer and related to
20     quality control, distribution, or printing services
21     performed by a printer in the State with which the person
22     has contracted for printing.
23     (g) A nonprofit risk organization that holds a certificate
24 of authority under Article VIID of the Illinois Insurance Code
25 is exempt from the tax imposed under this Act with respect to
26 its activities or operations in furtherance of the powers

 

 

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1 conferred upon it under that Article VIID of the Illinois
2 Insurance Code.
3 (Source: P.A. 93-840, eff. 7-30-04; 93-918, eff. 1-1-05;
4 revised 10-25-04.)
 
5     (35 ILCS 5/207)  (from Ch. 120, par. 2-207)
6     Sec. 207. Net Losses.
7     (a) If after applying all of the (i) modifications provided
8 for in paragraph (2) of Section 203(b), paragraph (2) of
9 Section 203(c) and paragraph (2) of Section 203(d) and (ii) the
10 allocation and apportionment provisions of Article 3 of this
11 Act and subsection (c) of this Section, the taxpayer's net
12 income results in a loss;
13         (1) for any taxable year ending prior to December 31,
14     1999, such loss shall be allowed as a carryover or
15     carryback deduction in the manner allowed under Section 172
16     of the Internal Revenue Code;
17         (2) for any taxable year ending on or after December
18     31, 1999 and prior to December 31, 2003, such loss shall be
19     allowed as a carryback to each of the 2 taxable years
20     preceding the taxable year of such loss and shall be a net
21     operating loss carryover to each of the 20 taxable years
22     following the taxable year of such loss; and
23         (3) for any taxable year ending on or after December
24     31, 2003, such loss shall be allowed as a net operating
25     loss carryover to each of the 12 taxable years following

 

 

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1     the taxable year of such loss.
2     (a-5) Election to relinquish carryback and order of
3 application of losses.
4             (A) For losses incurred in tax years ending prior
5         to December 31, 2003, the taxpayer may elect to
6         relinquish the entire carryback period with respect to
7         such loss. Such election shall be made in the form and
8         manner prescribed by the Department and shall be made
9         by the due date (including extensions of time) for
10         filing the taxpayer's return for the taxable year in
11         which such loss is incurred, and such election, once
12         made, shall be irrevocable.
13             (B) The entire amount of such loss shall be carried
14         to the earliest taxable year to which such loss may be
15         carried. The amount of such loss which shall be carried
16         to each of the other taxable years shall be the excess,
17         if any, of the amount of such loss over the sum of the
18         deductions for carryback or carryover of such loss
19         allowable for each of the prior taxable years to which
20         such loss may be carried.
21     (b) Any loss determined under subsection (a) of this
22 Section must be carried back or carried forward in the same
23 manner for purposes of subsections (a) and (b) of Section 201
24 of this Act as for purposes of subsections (c) and (d) of
25 Section 201 of this Act.
26     (c) Notwithstanding any other provision of this Act, for

 

 

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1 each taxable year ending on or after December 31, 2008, for
2 purposes of computing the loss for the taxable year under
3 subsection (a) of this Section and the deduction taken into
4 account for the taxable year for a net operating loss carryover
5 under paragraphs (1), (2), and (3) of subsection (a) of this
6 Section, the loss and net operating loss carryover shall be
7 reduced in an amount equal to the reduction to the net
8 operating loss and net operating loss carryover to the taxable
9 year, respectively, required under Section 108(b)(2)(A) of the
10 Internal Revenue Code, multiplied by a fraction, the numerator
11 of which is the amount of discharge of indebtedness income that
12 is excluded from gross income for the taxable year (but only if
13 the taxable year ends on or after December 31, 2008) under
14 Section 108(a) of the Internal Revenue Code and that would have
15 been allocated and apportioned to this State under Article 3 of
16 this Act but for that exclusion, and the denominator of which
17 is the total amount of discharge of indebtedness income
18 excluded from gross income under Section 108(a) of the Internal
19 Revenue Code for the taxable year. The reduction required under
20 this subsection (c) shall be made after the determination of
21 Illinois net income for the taxable year in which the
22 indebtedness is discharged.
23 (Source: P.A. 93-29, eff. 6-20-03.)
 
24     (35 ILCS 5/304)  (from Ch. 120, par. 3-304)
25     Sec. 304. Business income of persons other than residents.

 

 

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1     (a) In general. The business income of a person other than
2 a resident shall be allocated to this State if such person's
3 business income is derived solely from this State. If a person
4 other than a resident derives business income from this State
5 and one or more other states, then, for tax years ending on or
6 before December 30, 1998, and except as otherwise provided by
7 this Section, such person's business income shall be
8 apportioned to this State by multiplying the income by a
9 fraction, the numerator of which is the sum of the property
10 factor (if any), the payroll factor (if any) and 200% of the
11 sales factor (if any), and the denominator of which is 4
12 reduced by the number of factors other than the sales factor
13 which have a denominator of zero and by an additional 2 if the
14 sales factor has a denominator of zero. For tax years ending on
15 or after December 31, 1998, and except as otherwise provided by
16 this Section, persons other than residents who derive business
17 income from this State and one or more other states shall
18 compute their apportionment factor by weighting their
19 property, payroll, and sales factors as provided in subsection
20 (h) of this Section.
21     (1) Property factor.
22         (A) The property factor is a fraction, the numerator of
23     which is the average value of the person's real and
24     tangible personal property owned or rented and used in the
25     trade or business in this State during the taxable year and
26     the denominator of which is the average value of all the

 

 

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1     person's real and tangible personal property owned or
2     rented and used in the trade or business during the taxable
3     year.
4         (B) Property owned by the person is valued at its
5     original cost. Property rented by the person is valued at 8
6     times the net annual rental rate. Net annual rental rate is
7     the annual rental rate paid by the person less any annual
8     rental rate received by the person from sub-rentals.
9         (C) The average value of property shall be determined
10     by averaging the values at the beginning and ending of the
11     taxable year but the Director may require the averaging of
12     monthly values during the taxable year if reasonably
13     required to reflect properly the average value of the
14     person's property.
15     (2) Payroll factor.
16         (A) The payroll factor is a fraction, the numerator of
17     which is the total amount paid in this State during the
18     taxable year by the person for compensation, and the
19     denominator of which is the total compensation paid
20     everywhere during the taxable year.
21         (B) Compensation is paid in this State if:
22             (i) The individual's service is performed entirely
23         within this State;
24             (ii) The individual's service is performed both
25         within and without this State, but the service
26         performed without this State is incidental to the

 

 

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1         individual's service performed within this State; or
2             (iii) Some of the service is performed within this
3         State and either the base of operations, or if there is
4         no base of operations, the place from which the service
5         is directed or controlled is within this State, or the
6         base of operations or the place from which the service
7         is directed or controlled is not in any state in which
8         some part of the service is performed, but the
9         individual's residence is in this State.
10             (iv) Compensation paid to nonresident professional
11         athletes.
12             (a) General. The Illinois source income of a
13         nonresident individual who is a member of a
14         professional athletic team includes the portion of the
15         individual's total compensation for services performed
16         as a member of a professional athletic team during the
17         taxable year which the number of duty days spent within
18         this State performing services for the team in any
19         manner during the taxable year bears to the total
20         number of duty days spent both within and without this
21         State during the taxable year.
22             (b) Travel days. Travel days that do not involve
23         either a game, practice, team meeting, or other similar
24         team event are not considered duty days spent in this
25         State. However, such travel days are considered in the
26         total duty days spent both within and without this

 

 

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1         State.
2             (c) Definitions. For purposes of this subpart
3         (iv):
4                 (1) The term "professional athletic team"
5             includes, but is not limited to, any professional
6             baseball, basketball, football, soccer, or hockey
7             team.
8                 (2) The term "member of a professional
9             athletic team" includes those employees who are
10             active players, players on the disabled list, and
11             any other persons required to travel and who travel
12             with and perform services on behalf of a
13             professional athletic team on a regular basis.
14             This includes, but is not limited to, coaches,
15             managers, and trainers.
16                 (3) Except as provided in items (C) and (D) of
17             this subpart (3), the term "duty days" means all
18             days during the taxable year from the beginning of
19             the professional athletic team's official
20             pre-season training period through the last game
21             in which the team competes or is scheduled to
22             compete. Duty days shall be counted for the year in
23             which they occur, including where a team's
24             official pre-season training period through the
25             last game in which the team competes or is
26             scheduled to compete, occurs during more than one

 

 

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1             tax year.
2                     (A) Duty days shall also include days on
3                 which a member of a professional athletic team
4                 performs service for a team on a date that does
5                 not fall within the foregoing period (e.g.,
6                 participation in instructional leagues, the
7                 "All Star Game", or promotional "caravans").
8                 Performing a service for a professional
9                 athletic team includes conducting training and
10                 rehabilitation activities, when such
11                 activities are conducted at team facilities.
12                     (B) Also included in duty days are game
13                 days, practice days, days spent at team
14                 meetings, promotional caravans, preseason
15                 training camps, and days served with the team
16                 through all post-season games in which the team
17                 competes or is scheduled to compete.
18                     (C) Duty days for any person who joins a
19                 team during the period from the beginning of
20                 the professional athletic team's official
21                 pre-season training period through the last
22                 game in which the team competes, or is
23                 scheduled to compete, shall begin on the day
24                 that person joins the team. Conversely, duty
25                 days for any person who leaves a team during
26                 this period shall end on the day that person

 

 

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1                 leaves the team. Where a person switches teams
2                 during a taxable year, a separate duty-day
3                 calculation shall be made for the period the
4                 person was with each team.
5                     (D) Days for which a member of a
6                 professional athletic team is not compensated
7                 and is not performing services for the team in
8                 any manner, including days when such member of
9                 a professional athletic team has been
10                 suspended without pay and prohibited from
11                 performing any services for the team, shall not
12                 be treated as duty days.
13                     (E) Days for which a member of a
14                 professional athletic team is on the disabled
15                 list and does not conduct rehabilitation
16                 activities at facilities of the team, and is
17                 not otherwise performing services for the team
18                 in Illinois, shall not be considered duty days
19                 spent in this State. All days on the disabled
20                 list, however, are considered to be included in
21                 total duty days spent both within and without
22                 this State.
23                 (4) The term "total compensation for services
24             performed as a member of a professional athletic
25             team" means the total compensation received during
26             the taxable year for services performed:

 

 

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1                     (A) from the beginning of the official
2                 pre-season training period through the last
3                 game in which the team competes or is scheduled
4                 to compete during that taxable year; and
5                     (B) during the taxable year on a date which
6                 does not fall within the foregoing period
7                 (e.g., participation in instructional leagues,
8                 the "All Star Game", or promotional caravans).
9                 This compensation shall include, but is not
10             limited to, salaries, wages, bonuses as described
11             in this subpart, and any other type of compensation
12             paid during the taxable year to a member of a
13             professional athletic team for services performed
14             in that year. This compensation does not include
15             strike benefits, severance pay, termination pay,
16             contract or option year buy-out payments,
17             expansion or relocation payments, or any other
18             payments not related to services performed for the
19             team.
20                 For purposes of this subparagraph, "bonuses"
21             included in "total compensation for services
22             performed as a member of a professional athletic
23             team" subject to the allocation described in
24             Section 302(c)(1) are: bonuses earned as a result
25             of play (i.e., performance bonuses) during the
26             season, including bonuses paid for championship,

 

 

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1             playoff or "bowl" games played by a team, or for
2             selection to all-star league or other honorary
3             positions; and bonuses paid for signing a
4             contract, unless the payment of the signing bonus
5             is not conditional upon the signee playing any
6             games for the team or performing any subsequent
7             services for the team or even making the team, the
8             signing bonus is payable separately from the
9             salary and any other compensation, and the signing
10             bonus is nonrefundable.
11     (3) Sales factor.
12         (A) The sales factor is a fraction, the numerator of
13     which is the total sales of the person in this State during
14     the taxable year, and the denominator of which is the total
15     sales of the person everywhere during the taxable year.
16         (B) Sales of tangible personal property are in this
17     State if:
18             (i) The property is delivered or shipped to a
19         purchaser, other than the United States government,
20         within this State regardless of the f. o. b. point or
21         other conditions of the sale; or
22             (ii) The property is shipped from an office, store,
23         warehouse, factory or other place of storage in this
24         State and either the purchaser is the United States
25         government or the person is not taxable in the state of
26         the purchaser; provided, however, that premises owned

 

 

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1         or leased by a person who has independently contracted
2         with the seller for the printing of newspapers,
3         periodicals or books shall not be deemed to be an
4         office, store, warehouse, factory or other place of
5         storage for purposes of this Section. Sales of tangible
6         personal property are not in this State if the seller
7         and purchaser would be members of the same unitary
8         business group but for the fact that either the seller
9         or purchaser is a person with 80% or more of total
10         business activity outside of the United States and the
11         property is purchased for resale.
12         (B-1) Patents, copyrights, trademarks, and similar
13     items of intangible personal property.
14             (i) Gross receipts from the licensing, sale, or
15         other disposition of a patent, copyright, trademark,
16         or similar item of intangible personal property are in
17         this State to the extent the item is utilized in this
18         State during the year the gross receipts are included
19         in gross income.
20             (ii) Place of utilization.
21                 (I) A patent is utilized in a state to the
22             extent that it is employed in production,
23             fabrication, manufacturing, or other processing in
24             the state or to the extent that a patented product
25             is produced in the state. If a patent is utilized
26             in more than one state, the extent to which it is

 

 

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1             utilized in any one state shall be a fraction equal
2             to the gross receipts of the licensee or purchaser
3             from sales or leases of items produced,
4             fabricated, manufactured, or processed within that
5             state using the patent and of patented items
6             produced within that state, divided by the total of
7             such gross receipts for all states in which the
8             patent is utilized.
9                 (II) A copyright is utilized in a state to the
10             extent that printing or other publication
11             originates in the state. If a copyright is utilized
12             in more than one state, the extent to which it is
13             utilized in any one state shall be a fraction equal
14             to the gross receipts from sales or licenses of
15             materials printed or published in that state
16             divided by the total of such gross receipts for all
17             states in which the copyright is utilized.
18                 (III) Trademarks and other items of intangible
19             personal property governed by this paragraph (B-1)
20             are utilized in the state in which the commercial
21             domicile of the licensee or purchaser is located.
22             (iii) If the state of utilization of an item of
23         property governed by this paragraph (B-1) cannot be
24         determined from the taxpayer's books and records or
25         from the books and records of any person related to the
26         taxpayer within the meaning of Section 267(b) of the

 

 

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1         Internal Revenue Code, 26 U.S.C. 267, the gross
2         receipts attributable to that item shall be excluded
3         from both the numerator and the denominator of the
4         sales factor.
5         (B-2) Gross receipts from the license, sale, or other
6     disposition of patents, copyrights, trademarks, and
7     similar items of intangible personal property may be
8     included in the numerator or denominator of the sales
9     factor only if gross receipts from licenses, sales, or
10     other disposition of such items comprise more than 50% of
11     the taxpayer's total gross receipts included in gross
12     income during the tax year and during each of the 2
13     immediately preceding tax years; provided that, when a
14     taxpayer is a member of a unitary business group, such
15     determination shall be made on the basis of the gross
16     receipts of the entire unitary business group.
17         (C) For taxable years ending before December 31, 2008,
18     sales Sales, other than sales governed by paragraphs (B),
19     and (B-1), and (B-2), are in this State if:
20             (i) The income-producing activity is performed in
21         this State; or
22             (ii) The income-producing activity is performed
23         both within and without this State and a greater
24         proportion of the income-producing activity is
25         performed within this State than without this State,
26         based on performance costs.

 

 

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1         (C-5) For taxable years ending on or after December 31,
2     2008, sales, other than sales governed by paragraphs (B),
3     (B-1), and (B-2), are in this State if the purchaser is in
4     this State or the sale is otherwise attributable to this
5     State's marketplace. The following examples are
6     illustrative:
7             (i) Sales from the sale or lease of real property
8         are in this State if the property is located in this
9         State.
10             (ii) Sales from the lease or rental of tangible
11         personal property are in this State if the property is
12         located in this State during the rental period. Sales
13         from the lease or rental of tangible personal property
14         that is characteristically moving property, including,
15         but not limited to, motor vehicles, rolling stock,
16         aircraft, vessels, or mobile equipment are in this
17         State to the extent that the property is used in this
18         State.
19             (iii) Sales of intangible personal property are in
20         this State if the purchaser realizes benefit from the
21         property in this State. If the purchaser realizes
22         benefit from the property both within and without this
23         State, the gross receipts from the sale shall be
24         divided among those states in which the taxpayer is
25         taxable in proportion to the benefit in each state. If
26         the proportionate benefit in this State cannot be

 

 

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1         determined, the sale shall be excluded from both the
2         numerator and the denominator of the sales factor.
3             (iv) Sales of services are in this State if the
4         benefit of the service is realized in this State. If
5         the benefit of the service is realized both within and
6         without this State, the gross receipts from the sale
7         shall be divided among those states in which the
8         taxpayer is taxable in proportion to the benefit of
9         service realized in each state. If the proportionate
10         benefit in this State cannot be determined, the sale
11         shall be excluded from both the numerator and the
12         denominator of the sales factor. The Department may
13         adopt rules prescribing where the benefit of specific
14         types of service, including, but not limited to,
15         telecommunications, broadcast, cable, advertising,
16         publishing, and utility service, is realized.
17         (D) For taxable years ending on or after December 31,
18     1995, the following items of income shall not be included
19     in the numerator or denominator of the sales factor:
20     dividends; amounts included under Section 78 of the
21     Internal Revenue Code; and Subpart F income as defined in
22     Section 952 of the Internal Revenue Code. No inference
23     shall be drawn from the enactment of this paragraph (D) in
24     construing this Section for taxable years ending before
25     December 31, 1995.
26         (E) Paragraphs (B-1) and (B-2) shall apply to tax years

 

 

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1     ending on or after December 31, 1999, provided that a
2     taxpayer may elect to apply the provisions of these
3     paragraphs to prior tax years. Such election shall be made
4     in the form and manner prescribed by the Department, shall
5     be irrevocable, and shall apply to all tax years; provided
6     that, if a taxpayer's Illinois income tax liability for any
7     tax year, as assessed under Section 903 prior to January 1,
8     1999, was computed in a manner contrary to the provisions
9     of paragraphs (B-1) or (B-2), no refund shall be payable to
10     the taxpayer for that tax year to the extent such refund is
11     the result of applying the provisions of paragraph (B-1) or
12     (B-2) retroactively. In the case of a unitary business
13     group, such election shall apply to all members of such
14     group for every tax year such group is in existence, but
15     shall not apply to any taxpayer for any period during which
16     that taxpayer is not a member of such group.
17     (b) Insurance companies.
18         (1) In general. Except as otherwise provided by
19     paragraph (2), business income of an insurance company for
20     a taxable year shall be apportioned to this State by
21     multiplying such income by a fraction, the numerator of
22     which is the direct premiums written for insurance upon
23     property or risk in this State, and the denominator of
24     which is the direct premiums written for insurance upon
25     property or risk everywhere. For purposes of this
26     subsection, the term "direct premiums written" means the

 

 

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1     total amount of direct premiums written, assessments and
2     annuity considerations as reported for the taxable year on
3     the annual statement filed by the company with the Illinois
4     Director of Insurance in the form approved by the National
5     Convention of Insurance Commissioners or such other form as
6     may be prescribed in lieu thereof.
7         (2) Reinsurance. If the principal source of premiums
8     written by an insurance company consists of premiums for
9     reinsurance accepted by it, the business income of such
10     company shall be apportioned to this State by multiplying
11     such income by a fraction, the numerator of which is the
12     sum of (i) direct premiums written for insurance upon
13     property or risk in this State, plus (ii) premiums written
14     for reinsurance accepted in respect of property or risk in
15     this State, and the denominator of which is the sum of
16     (iii) direct premiums written for insurance upon property
17     or risk everywhere, plus (iv) premiums written for
18     reinsurance accepted in respect of property or risk
19     everywhere. For taxable years ending before December 31,
20     2008, for purposes of this paragraph, premiums written for
21     reinsurance accepted in respect of property or risk in this
22     State, whether or not otherwise determinable, may, at the
23     election of the company, be determined on the basis of the
24     proportion which premiums written for reinsurance accepted
25     from companies commercially domiciled in Illinois bears to
26     premiums written for reinsurance accepted from all

 

 

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1     sources, or, alternatively, in the proportion which the sum
2     of the direct premiums written for insurance upon property
3     or risk in this State by each ceding company from which
4     reinsurance is accepted bears to the sum of the total
5     direct premiums written by each such ceding company for the
6     taxable year.
7     (c) Financial organizations.
8         (1) In general. For taxable years ending before
9     December 31, 2008, business Business income of a financial
10     organization shall be apportioned to this State by
11     multiplying such income by a fraction, the numerator of
12     which is its business income from sources within this
13     State, and the denominator of which is its business income
14     from all sources. For the purposes of this subsection, the
15     business income of a financial organization from sources
16     within this State is the sum of the amounts referred to in
17     subparagraphs (A) through (E) following, but excluding the
18     adjusted income of an international banking facility as
19     determined in paragraph (2):
20             (A) Fees, commissions or other compensation for
21         financial services rendered within this State;
22             (B) Gross profits from trading in stocks, bonds or
23         other securities managed within this State;
24             (C) Dividends, and interest from Illinois
25         customers, which are received within this State;
26             (D) Interest charged to customers at places of

 

 

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1         business maintained within this State for carrying
2         debit balances of margin accounts, without deduction
3         of any costs incurred in carrying such accounts; and
4             (E) Any other gross income resulting from the
5         operation as a financial organization within this
6         State. In computing the amounts referred to in
7         paragraphs (A) through (E) of this subsection, any
8         amount received by a member of an affiliated group
9         (determined under Section 1504(a) of the Internal
10         Revenue Code but without reference to whether any such
11         corporation is an "includible corporation" under
12         Section 1504(b) of the Internal Revenue Code) from
13         another member of such group shall be included only to
14         the extent such amount exceeds expenses of the
15         recipient directly related thereto.
16         (2) International Banking Facility. For taxable years
17     ending before December 31, 2008:
18             (A) Adjusted Income. The adjusted income of an
19         international banking facility is its income reduced
20         by the amount of the floor amount.
21             (B) Floor Amount. The floor amount shall be the
22         amount, if any, determined by multiplying the income of
23         the international banking facility by a fraction, not
24         greater than one, which is determined as follows:
25                 (i) The numerator shall be:
26                 The average aggregate, determined on a

 

 

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1             quarterly basis, of the financial organization's
2             loans to banks in foreign countries, to foreign
3             domiciled borrowers (except where secured
4             primarily by real estate) and to foreign
5             governments and other foreign official
6             institutions, as reported for its branches,
7             agencies and offices within the state on its
8             "Consolidated Report of Condition", Schedule A,
9             Lines 2.c., 5.b., and 7.a., which was filed with
10             the Federal Deposit Insurance Corporation and
11             other regulatory authorities, for the year 1980,
12             minus
13                 The average aggregate, determined on a
14             quarterly basis, of such loans (other than loans of
15             an international banking facility), as reported by
16             the financial institution for its branches,
17             agencies and offices within the state, on the
18             corresponding Schedule and lines of the
19             Consolidated Report of Condition for the current
20             taxable year, provided, however, that in no case
21             shall the amount determined in this clause (the
22             subtrahend) exceed the amount determined in the
23             preceding clause (the minuend); and
24                 (ii) the denominator shall be the average
25             aggregate, determined on a quarterly basis, of the
26             international banking facility's loans to banks in

 

 

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1             foreign countries, to foreign domiciled borrowers
2             (except where secured primarily by real estate)
3             and to foreign governments and other foreign
4             official institutions, which were recorded in its
5             financial accounts for the current taxable year.
6             (C) Change to Consolidated Report of Condition and
7         in Qualification. In the event the Consolidated Report
8         of Condition which is filed with the Federal Deposit
9         Insurance Corporation and other regulatory authorities
10         is altered so that the information required for
11         determining the floor amount is not found on Schedule
12         A, lines 2.c., 5.b. and 7.a., the financial institution
13         shall notify the Department and the Department may, by
14         regulations or otherwise, prescribe or authorize the
15         use of an alternative source for such information. The
16         financial institution shall also notify the Department
17         should its international banking facility fail to
18         qualify as such, in whole or in part, or should there
19         be any amendment or change to the Consolidated Report
20         of Condition, as originally filed, to the extent such
21         amendment or change alters the information used in
22         determining the floor amount.
23         (3) For taxable years ending on or after December 31,
24     2008, the business income of a financial organization shall
25     be apportioned to this State by multiplying such income by
26     a fraction, the numerator of which is its gross receipts

 

 

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1     from sources in this State or otherwise attributable to
2     this State's marketplace and the denominator of which is
3     its gross receipts everywhere during the taxable year.
4     "Gross receipts" for purposes of this subparagraph (3)
5     means gross income, including net taxable gain on
6     disposition of assets, including securities and money
7     market instruments, when derived from transactions and
8     activities in the regular course of the financial
9     organization's trade or business. If a person derives
10     business income from activities in addition to the
11     provision of financial services, this subparagraph (3)
12     shall apply only to its business income from financial
13     services, and its other business income shall be
14     apportioned to this State under the applicable provisions
15     of this Section. The following examples are illustrative:
16             (i) Receipts from the lease or rental of real or
17         tangible personal property are in this State if the
18         property is located in this State during the rental
19         period. Receipts from the lease or rental of tangible
20         personal property that is characteristically moving
21         property, including, but not limited to, motor
22         vehicles, rolling stock, aircraft, vessels, or mobile
23         equipment are from sources in this State to the extent
24         that the property is used in this State.
25             (ii) Interest income, commissions, fees, gains on
26         disposition, and other receipts from assets in the

 

 

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1         nature of loans that are secured primarily by real
2         estate or tangible personal property are from sources
3         in this State if the security is located in this State.
4             (iii) Interest income, commissions, fees, gains on
5         disposition, and other receipts from consumer loans
6         that are not secured by real or tangible personal
7         property are from sources in this State if the debtor
8         is a resident of this State.
9             (iv) Interest income, commissions, fees, gains on
10         disposition, and other receipts from commercial loans
11         and installment obligations that are not secured by
12         real or tangible personal property are from sources in
13         this State if the proceeds of the loan are to be
14         applied in this State. If it cannot be determined where
15         the funds are to be applied, the income and receipts
16         are from sources in this State if the office of the
17         borrower from which the loan was negotiated in the
18         regular course of business is located in this State. If
19         the location of this office cannot be determined, the
20         income and receipts shall be excluded from the
21         numerator and denominator of the sales factor.
22             (v) Interest income, fees, gains on disposition,
23         service charges, merchant discount income, and other
24         receipts from credit card receivables are from sources
25         in this State if the card charges are regularly billed
26         to a customer in this State.

 

 

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1             (vi) Receipts from the performance of services,
2         including, but not limited to, fiduciary, advisory,
3         and brokerage services, are in this State if the
4         benefit of the service is realized in this State. If
5         the benefit of the service is realized both within and
6         without this State, the gross receipts from the sale
7         shall be divided among those states in which the
8         taxpayer is taxable in proportion to the benefit of
9         service realized in each state. If the proportionate
10         benefit in this State cannot be determined, the sale
11         shall be excluded from both the numerator and the
12         denominator of the gross receipts factor.
13             (vii) Receipts from the issuance of travelers
14         checks and money orders are from sources in this State
15         if the checks and money orders are issued from a
16         location within this State.
17             (viii) In the case of a financial organization that
18         accepts deposits, receipts from investments and from
19         money market instruments are apportioned to this State
20         based on the ratio that the total deposits of the
21         financial organization (including all members of the
22         financial organization's unitary group) from this
23         State, its residents, (including businesses with an
24         office or other place of business in this State), and
25         its political subdivisions, agencies, and
26         instrumentalities bear to total deposits everywhere.

 

 

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1         For purposes of this subdivision, deposits must be
2         attributed to this State under the preceding sentence,
3         whether or not the deposits are accepted or maintained
4         by the financial organization at locations within this
5         State. In the case of a financial organization that
6         does not accept deposits, receipts from investments in
7         securities and from money market instruments shall be
8         excluded from the numerator and the denominator of the
9         gross receipts factor.
10         (4) As used in subparagraph (3), "deposit" includes but
11     is not limited to:
12             (i) the unpaid balance of money or its equivalent
13         received or held by a financial institution in the
14         usual course of business and for which it has given or
15         is obligated to give credit, either conditionally or
16         unconditionally, to a commercial, checking, savings,
17         time, or thrift account whether or not advance notice
18         is required to withdraw the credited funds, or which is
19         evidenced by its certificate of deposit, thrift
20         certificate, investment certificate, or certificate of
21         indebtedness, or other similar name, or a check or
22         draft drawn against a deposit account and certified by
23         the financial organization, or a letter of credit or a
24         traveler's check on which the financial organization
25         is primarily liable. However, without limiting the
26         generality of the term "money or its equivalent", any

 

 

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1         such account or instrument must be regarded as
2         evidencing the receipt of the equivalent of money when
3         credited or issued in exchange for checks or drafts or
4         for a promissory note upon which the person obtaining
5         the credit or instrument is primarily or secondarily
6         liable, or for a charge against a deposit account, or
7         in settlement of checks, drafts, or other instruments
8         forwarded to the bank for collection;
9             (ii) trust funds received or held by the financial
10         organization, whether held in the trust department or
11         held or deposited in any other department of the
12         financial organization;
13             (iii) money received or held by a financial
14         organization, or the credit given for money or its
15         equivalent received or held by a financial
16         organization, in the usual course of business for a
17         special or specific purpose, regardless of the legal
18         relationship so established. Under this paragraph,
19         "deposit" includes, but is not limited to, escrow
20         funds, funds held as security for an obligation due to
21         the financial organization or others, including funds
22         held as dealers reserves, or for securities loaned by
23         the financial organization, funds deposited by a
24         debtor to meet maturing obligations, funds deposited
25         as advance payment on subscriptions to United States
26         government securities, funds held for distribution or

 

 

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1         purchase of securities, funds held to meet its
2         acceptances or letters of credit, and withheld taxes.
3         It does not include funds received by the financial
4         organization for immediate application to the
5         reduction of an indebtedness to the receiving
6         financial organization, or under condition that the
7         receipt of the funds immediately reduces or
8         extinguishes the indebtedness;
9             (iv) outstanding drafts, including advice of
10         another financial organization, cashier's checks,
11         money orders, or other officer's checks issued in the
12         usual course of business for any purpose, but not
13         including those issued in payment for services,
14         dividends, or purchases or other costs or expenses of
15         the financial organization itself; and
16             (v) money or its equivalent held as a credit
17         balance by a financial organization on behalf of its
18         customer if the entity is engaged in soliciting and
19         holding such balances in the regular course of its
20         business.
21         (5) As used in subparagraph (3), "money market
22     instruments" includes but is not limited to:
23             (i) Interest-bearing deposits, federal funds sold
24         and securities purchased under agreements to resell,
25         commercial paper, banker's acceptances, and purchased
26         certificates of deposit and similar instruments to the

 

 

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1         extent that the instruments are reflected as assets
2         under generally accepted accounting principles.
3             "Securities" means corporate stock, bonds, and
4         other securities (including, for purposes of taxation
5         of gains on securities and for purchases under
6         agreements to resell, United States Treasury
7         securities, obligations of United States government
8         agencies and corporations, obligations of state and
9         political subdivisions, the interest on which is
10         exempt from Illinois income tax), participations in
11         securities backed by mortgages held by United States or
12         state government agencies, loan-backed securities, and
13         similar investments to the extent the investments are
14         reflected as assets under generally accepted
15         accounting principles.
16             (ii) For purposes of subparagraph (3), "money
17         market instruments" shall include investments in
18         investment partnerships, trusts, pools, funds,
19         investment companies, or any similar entity in
20         proportion to the investment of the entity in money
21         market instruments, and "securities" shall include
22         investments in investment partnerships, trusts, pools,
23         funds, investment companies, or any similar entity in
24         proportion to the investment of the entity in
25         securities.
26     (d) Transportation services. For taxable years ending

 

 

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1 before December 31, 2008, business Business income derived from
2 furnishing transportation services shall be apportioned to
3 this State in accordance with paragraphs (1) and (2):
4         (1) Such business income (other than that derived from
5     transportation by pipeline) shall be apportioned to this
6     State by multiplying such income by a fraction, the
7     numerator of which is the revenue miles of the person in
8     this State, and the denominator of which is the revenue
9     miles of the person everywhere. For purposes of this
10     paragraph, a revenue mile is the transportation of 1
11     passenger or 1 net ton of freight the distance of 1 mile
12     for a consideration. Where a person is engaged in the
13     transportation of both passengers and freight, the
14     fraction above referred to shall be determined by means of
15     an average of the passenger revenue mile fraction and the
16     freight revenue mile fraction, weighted to reflect the
17     person's
18             (A) relative railway operating income from total
19         passenger and total freight service, as reported to the
20         Interstate Commerce Commission, in the case of
21         transportation by railroad, and
22             (B) relative gross receipts from passenger and
23         freight transportation, in case of transportation
24         other than by railroad.
25         (2) Such business income derived from transportation
26     by pipeline shall be apportioned to this State by

 

 

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1     multiplying such income by a fraction, the numerator of
2     which is the revenue miles of the person in this State, and
3     the denominator of which is the revenue miles of the person
4     everywhere. For the purposes of this paragraph, a revenue
5     mile is the transportation by pipeline of 1 barrel of oil,
6     1,000 cubic feet of gas, or of any specified quantity of
7     any other substance, the distance of 1 mile for a
8     consideration.
9         (3) For taxable years ending on or after December 31,
10     2008, business income derived from providing
11     transportation services other than airline services shall
12     be apportioned to this State by using a fraction, (a) the
13     numerator of which shall be (i) all receipts from any
14     movement or shipment of people, goods, mail, oil, gas, or
15     any other substance (other than by airline) that both
16     originates and terminates in this State, plus (ii) that
17     portion of the person's gross receipts from movements or
18     shipments of people, goods, mail, oil, gas, or any other
19     substance (other than by airline) passing through, into, or
20     out of this State, that is determined by the ratio that the
21     miles traveled in this State bears to total miles from
22     point of origin to point of destination and (b) the
23     denominator of which shall be all revenue derived from the
24     movement or shipment of people, goods, mail, oil, gas, or
25     any other substance (other than by airline). If a person
26     derives business income from activities in addition to the

 

 

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1     provision of transportation services (other than by
2     airline), this subsection shall apply only to its business
3     income from transportation services and its other business
4     income shall be apportioned to this State according to the
5     applicable provisions of this Section.
6         (4) For taxable years ending on or after December 31,
7     2008, business income derived from providing airline
8     services shall be apportioned to this State by using a
9     fraction, (a) the numerator of which shall be arrivals of
10     aircraft to and departures from this State weighted as to
11     cost of aircraft by type and (b) the denominator of which
12     shall be total arrivals and departures of aircraft weighted
13     as to cost of aircraft by type. If a person derives
14     business income from activities in addition to the
15     provision of airline services, this subsection shall apply
16     only to its business income from airline services and its
17     other business income shall be apportioned to this State
18     under the applicable provisions of this Section.
19     (e) Combined apportionment. Where 2 or more persons are
20 engaged in a unitary business as described in subsection
21 (a)(27) of Section 1501, a part of which is conducted in this
22 State by one or more members of the group, the business income
23 attributable to this State by any such member or members shall
24 be apportioned by means of the combined apportionment method.
25     (f) Alternative allocation. If the allocation and
26 apportionment provisions of subsections (a) through (e) and of

 

 

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1 subsection (h) do not fairly represent the extent of a person's
2 business activity in this State, the person may petition for,
3 or the Director may, without a petition, permit or require, in
4 respect of all or any part of the person's business activity,
5 if reasonable:
6         (1) Separate accounting;
7         (2) The exclusion of any one or more factors;
8         (3) The inclusion of one or more additional factors
9     which will fairly represent the person's business
10     activities in this State; or
11         (4) The employment of any other method to effectuate an
12     equitable allocation and apportionment of the person's
13     business income.
14     (g) Cross reference. For allocation of business income by
15 residents, see Section 301(a).
16     (h) For tax years ending on or after December 31, 1998, the
17 apportionment factor of persons who apportion their business
18 income to this State under subsection (a) shall be equal to:
19         (1) for tax years ending on or after December 31, 1998
20     and before December 31, 1999, 16 2/3% of the property
21     factor plus 16 2/3% of the payroll factor plus 66 2/3% of
22     the sales factor;
23         (2) for tax years ending on or after December 31, 1999
24     and before December 31, 2000, 8 1/3% of the property factor
25     plus 8 1/3% of the payroll factor plus 83 1/3% of the sales
26     factor;

 

 

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1         (3) for tax years ending on or after December 31, 2000,
2     the sales factor.
3 If, in any tax year ending on or after December 31, 1998 and
4 before December 31, 2000, the denominator of the payroll,
5 property, or sales factor is zero, the apportionment factor
6 computed in paragraph (1) or (2) of this subsection for that
7 year shall be divided by an amount equal to 100% minus the
8 percentage weight given to each factor whose denominator is
9 equal to zero.
10 (Source: P.A. 94-247, eff. 1-1-06.)
 
11     (35 ILCS 5/502)  (from Ch. 120, par. 5-502)
12     Sec. 502. Returns and notices.
13     (a) In general. A return with respect to the taxes imposed
14 by this Act shall be made by every person for any taxable year:
15         (1) for which such person is liable for a tax imposed
16     by this Act, or
17         (2) in the case of a resident or in the case of a
18     corporation which is qualified to do business in this
19     State, for which such person is required to make a federal
20     income tax return, regardless of whether such person is
21     liable for a tax imposed by this Act. However, this
22     paragraph shall not require a resident to make a return if
23     such person has an Illinois base income of the basic amount
24     in Section 204(b) or less and is either claimed as a
25     dependent on another person's tax return under the Internal

 

 

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1     Revenue Code of 1986, or is claimed as a dependent on
2     another person's tax return under this Act.
3     Notwithstanding the provisions of paragraph (1), a
4 nonresident whose Illinois income tax liability under
5 subsections (a), (b), (c), and (d) of Section 201 of this Act
6 is paid in full after taking into account the credits allowed
7 under subsection (f) of this Section or allowed under Section
8 709.5 of this Act shall not be required to file a return under
9 this subsection (a).
10     (b) Fiduciaries and receivers.
11         (1) Decedents. If an individual is deceased, any return
12     or notice required of such individual under this Act shall
13     be made by his executor, administrator, or other person
14     charged with the property of such decedent.
15         (2) Individuals under a disability. If an individual is
16     unable to make a return or notice required under this Act,
17     the return or notice required of such individual shall be
18     made by his duly authorized agent, guardian, fiduciary or
19     other person charged with the care of the person or
20     property of such individual.
21         (3) Estates and trusts. Returns or notices required of
22     an estate or a trust shall be made by the fiduciary
23     thereof.
24         (4) Receivers, trustees and assignees for
25     corporations. In a case where a receiver, trustee in
26     bankruptcy, or assignee, by order of a court of competent

 

 

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1     jurisdiction, by operation of law, or otherwise, has
2     possession of or holds title to all or substantially all
3     the property or business of a corporation, whether or not
4     such property or business is being operated, such receiver,
5     trustee, or assignee shall make the returns and notices
6     required of such corporation in the same manner and form as
7     corporations are required to make such returns and notices.
8     (c) Joint returns by husband and wife.
9         (1) Except as provided in paragraph (3), if a husband
10     and wife file a joint federal income tax return for a
11     taxable year they shall file a joint return under this Act
12     for such taxable year and their liabilities shall be joint
13     and several, but if the federal income tax liability of
14     either spouse is determined on a separate federal income
15     tax return, they shall file separate returns under this
16     Act.
17         (2) If neither spouse is required to file a federal
18     income tax return and either or both are required to file a
19     return under this Act, they may elect to file separate or
20     joint returns and pursuant to such election their
21     liabilities shall be separate or joint and several.
22         (3) If either husband or wife is a resident and the
23     other is a nonresident, they shall file separate returns in
24     this State on such forms as may be required by the
25     Department in which event their tax liabilities shall be
26     separate; but they may elect to determine their joint net

 

 

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1     income and file a joint return as if both were residents
2     and in such case, their liabilities shall be joint and
3     several.
4         (4) Innocent spouses.
5             (A) However, for tax liabilities arising and paid
6         prior to August 13, 1999, an innocent spouse shall be
7         relieved of liability for tax (including interest and
8         penalties) for any taxable year for which a joint
9         return has been made, upon submission of proof that the
10         Internal Revenue Service has made a determination
11         under Section 6013(e) of the Internal Revenue Code, for
12         the same taxable year, which determination relieved
13         the spouse from liability for federal income taxes. If
14         there is no federal income tax liability at issue for
15         the same taxable year, the Department shall rely on the
16         provisions of Section 6013(e) to determine whether the
17         person requesting innocent spouse abatement of tax,
18         penalty, and interest is entitled to that relief.
19             (B) For tax liabilities arising on and after August
20         13, 1999 or which arose prior to that date, but remain
21         unpaid as of that date, if an individual who filed a
22         joint return for any taxable year has made an election
23         under this paragraph, the individual's liability for
24         any tax shown on the joint return shall not exceed the
25         individual's separate return amount and the
26         individual's liability for any deficiency assessed for

 

 

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1         that taxable year shall not exceed the portion of the
2         deficiency properly allocable to the individual. For
3         purposes of this paragraph:
4                 (i) An election properly made pursuant to
5             Section 6015 of the Internal Revenue Code shall
6             constitute an election under this paragraph,
7             provided that the election shall not be effective
8             until the individual has notified the Department
9             of the election in the form and manner prescribed
10             by the Department.
11                 (ii) If no election has been made under Section
12             6015, the individual may make an election under
13             this paragraph in the form and manner prescribed by
14             the Department, provided that no election may be
15             made if the Department finds that assets were
16             transferred between individuals filing a joint
17             return as part of a scheme by such individuals to
18             avoid payment of Illinois income tax and the
19             election shall not eliminate the individual's
20             liability for any portion of a deficiency
21             attributable to an error on the return of which the
22             individual had actual knowledge as of the date of
23             filing.
24                 (iii) In determining the separate return
25             amount or portion of any deficiency attributable
26             to an individual, the Department shall follow the

 

 

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1             provisions in subsections (c) and (d) of Section
2             6015 of the Internal Revenue Code.
3                 (iv) In determining the validity of an
4             individual's election under subparagraph (ii) and
5             in determining an electing individual's separate
6             return amount or portion of any deficiency under
7             subparagraph (iii), any determination made by the
8             Secretary of the Treasury, by the United States Tax
9             Court on petition for review of a determination by
10             the Secretary of the Treasury, or on appeal from
11             the United States Tax Court under Section 6015 of
12             the Internal Revenue Code regarding criteria for
13             eligibility or under subsection (d) of Section
14             6015 of the Internal Revenue Code regarding the
15             allocation of any item of income, deduction,
16             payment, or credit between an individual making
17             the federal election and that individual's spouse
18             shall be conclusively presumed to be correct. With
19             respect to any item that is not the subject of a
20             determination by the Secretary of the Treasury or
21             the federal courts, in any proceeding involving
22             this subsection, the individual making the
23             election shall have the burden of proof with
24             respect to any item except that the Department
25             shall have the burden of proof with respect to
26             items in subdivision (ii).

 

 

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1                 (v) Any election made by an individual under
2             this subsection shall apply to all years for which
3             that individual and the spouse named in the
4             election have filed a joint return.
5                 (vi) After receiving a notice that the federal
6             election has been made or after receiving an
7             election under subdivision (ii), the Department
8             shall take no collection action against the
9             electing individual for any liability arising from
10             a joint return covered by the election until the
11             Department has notified the electing individual in
12             writing that the election is invalid or of the
13             portion of the liability the Department has
14             allocated to the electing individual. Within 60
15             days (150 days if the individual is outside the
16             United States) after the issuance of such
17             notification, the individual may file a written
18             protest of the denial of the election or of the
19             Department's determination of the liability
20             allocated to him or her and shall be granted a
21             hearing within the Department under the provisions
22             of Section 908. If a protest is filed, the
23             Department shall take no collection action against
24             the electing individual until the decision
25             regarding the protest has become final under
26             subsection (d) of Section 908 or, if

 

 

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1             administrative review of the Department's decision
2             is requested under Section 1201, until the
3             decision of the court becomes final.
4     (d) Partnerships. Every partnership having any base income
5 allocable to this State in accordance with section 305(c) shall
6 retain information concerning all items of income, gain, loss
7 and deduction; the names and addresses of all of the partners,
8 or names and addresses of members of a limited liability
9 company, or other persons who would be entitled to share in the
10 base income of the partnership if distributed; the amount of
11 the distributive share of each; and such other pertinent
12 information as the Department may by forms or regulations
13 prescribe. The partnership shall make that information
14 available to the Department when requested by the Department.
15     (e) For taxable years ending on or after December 31, 1985,
16 and before December 31, 1993, taxpayers that are corporations
17 (other than Subchapter S corporations) having the same taxable
18 year and that are members of the same unitary business group
19 may elect to be treated as one taxpayer for purposes of any
20 original return, amended return which includes the same
21 taxpayers of the unitary group which joined in the election to
22 file the original return, extension, claim for refund,
23 assessment, collection and payment and determination of the
24 group's tax liability under this Act. This subsection (e) does
25 not permit the election to be made for some, but not all, of
26 the purposes enumerated above. For taxable years ending on or

 

 

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1 after December 31, 1987, corporate members (other than
2 Subchapter S corporations) of the same unitary business group
3 making this subsection (e) election are not required to have
4 the same taxable year.
5     For taxable years ending on or after December 31, 1993,
6 taxpayers that are corporations (other than Subchapter S
7 corporations) and that are members of the same unitary business
8 group shall be treated as one taxpayer for purposes of any
9 original return, amended return which includes the same
10 taxpayers of the unitary group which joined in filing the
11 original return, extension, claim for refund, assessment,
12 collection and payment and determination of the group's tax
13 liability under this Act.
14     (f) The Department may promulgate regulations to permit
15 nonresident individual partners of the same partnership,
16 nonresident Subchapter S corporation shareholders of the same
17 Subchapter S corporation, and nonresident individuals
18 transacting an insurance business in Illinois under a Lloyds
19 plan of operation, and nonresident individual members of the
20 same limited liability company that is treated as a partnership
21 under Section 1501 (a)(16) of this Act, to file composite
22 individual income tax returns reflecting the composite income
23 of such individuals allocable to Illinois and to make composite
24 individual income tax payments. The Department may by
25 regulation also permit such composite returns to include the
26 income tax owed by Illinois residents attributable to their

 

 

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1 income from partnerships, Subchapter S corporations, insurance
2 businesses organized under a Lloyds plan of operation, or
3 limited liability companies that are treated as partnership
4 under Section 1501(a)(16) of this Act, in which case such
5 Illinois residents will be permitted to claim credits on their
6 individual returns for their shares of the composite tax
7 payments. This paragraph of subsection (f) applies to taxable
8 years ending on or after December 31, 1987.
9     For taxable years ending on or after December 31, 1999, the
10 Department may, by regulation, also permit any persons
11 transacting an insurance business organized under a Lloyds plan
12 of operation to file composite returns reflecting the income of
13 such persons allocable to Illinois and the tax rates applicable
14 to such persons under Section 201 and to make composite tax
15 payments and shall, by regulation, also provide that the income
16 and apportionment factors attributable to the transaction of an
17 insurance business organized under a Lloyds plan of operation
18 by any person joining in the filing of a composite return
19 shall, for purposes of allocating and apportioning income under
20 Article 3 of this Act and computing net income under Section
21 202 of this Act, be excluded from any other income and
22 apportionment factors of that person or of any unitary business
23 group, as defined in subdivision (a)(27) of Section 1501, to
24 which that person may belong.
25     For taxable years ending on or after December 31, 2008,
26 every nonresident shall be allowed a credit against his or her

 

 

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1 liability under subsections (a) and (b) of Section 201 for any
2 amount of tax reported on a composite return and paid on his or
3 her behalf under this subsection (f). Residents (other than
4 persons transacting an insurance business organized under a
5 Lloyds plan of operation) may claim a credit for taxes reported
6 on a composite return and paid on their behalf under this
7 subsection (f) only as permitted by the Department by rule.
8     (f-5) For taxable years ending on or after December 31,
9 2008, the Department may adopt rules to provide that, when a
10 partnership or Subchapter S corporation has made an error in
11 determining the amount of any item of income, deduction,
12 addition, subtraction, or credit required to be reported on its
13 return that affects the liability imposed under this Act on a
14 partner or shareholder, the partnership or Subchapter S
15 corporation may report the changes in liabilities of its
16 partners or shareholders and claim a refund of the resulting
17 overpayments, or pay the resulting underpayments, on behalf of
18 its partners and shareholders.
19     (g) The Department may adopt rules to authorize the
20 electronic filing of any return required to be filed under this
21 Section.
22 (Source: P.A. 94-1074, eff. 12-26-06.)
 
23     (35 ILCS 5/709.5 new)
24     Sec. 709.5. Withholding by partnerships, Subchapter S
25 corporations, and trusts.

 

 

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1     (a) In general. For each taxable year ending on or after
2 December 31, 2008, every partnership (other than a publicly
3 traded partnership under Section 7704 of the Internal Revenue
4 Code), Subchapter S corporation, and trust must withhold from
5 each nonresident partner, shareholder, or beneficiary (other
6 than a partner, shareholder, or beneficiary included on a
7 composite return filed by the partnership or Subchapter S
8 corporation for the taxable year under subsection (f) of
9 Section 502 of this Act) an amount equal to the distributable
10 share of the business income of the partnership, Subchapter S
11 corporation, or trust apportionable to Illinois of that
12 partner, shareholder, or beneficiary under Sections 702 and 704
13 and Subchapter S of the Internal Revenue Code, whether or not
14 distributed, multiplied by the applicable rates of tax for that
15 partner or shareholder under subsections (a) through (d) of
16 Section 201 of this Act.
17     (b) Credit for taxes withheld. Any amount withheld under
18 subsection (a) of this Section and paid to the Department shall
19 be treated as a payment of the estimated tax liability or of
20 the liability for withholding under this Section of the
21 partner, shareholder, or beneficiary to whom the income is
22 distributable for the taxable year in which that person
23 incurred a liability under this Act with respect to that
24 income.
 
25     (35 ILCS 5/711)  (from Ch. 120, par. 7-711)

 

 

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1     Sec. 711. Payor's Return and Payment of Tax Withheld. (a)
2 In general. Every payor required to deduct and withhold tax
3 under Section 710 (and until January 1, 1989, Sections 708 and
4 709) shall be subject to the same reporting requirements
5 regarding taxes withheld and the same monthly and quarter
6 monthly (weekly) payment requirements as an employer subject to
7 the provisions of Section 701. For purposes of monthly and
8 quarter monthly (weekly) payments, the total tax withheld under
9 Sections 701, 708, 709 and 710 shall be considered in the
10 aggregate.
11     (a-5) Every partnership, Subchapter S corporation, or
12 trust required to withhold tax under Section 709.5 shall report
13 the amounts withheld and the partners, shareholders, or
14 beneficiaries from whom the amounts were withheld, and pay over
15 the amount withheld, no later than the due date (without regard
16 to extensions) of the tax return of the partnership, Subchapter
17 S corporation, or trust for the taxable year.
18     (b) Information statement. Every payor required to deduct
19 and withhold tax under Section 710 (and until January 1, 1989,
20 Sections 708 and 709) shall furnish in duplicate to each party
21 entitled to the credit for such withholding under subsection
22 (b) of Section 709.5 (c) of Section 708, subsection (c) of
23 Section 709, and subsection (b) of Section 710, respectively,
24 on or before January 31 of the succeeding calendar year for
25 amounts withheld under Section 710 or the due date (without
26 regard to extensions) of the return of the partnership,

 

 

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1 Subchapter S corporation, or trust for the taxable year for
2 amounts withheld under Section 709.5 for the taxable year, a
3 written statement in such form as the Department may by
4 regulation prescribe showing the amount of the payments, the
5 amount deducted and withheld as tax, and such other information
6 as the Department may prescribe. A copy of such statement shall
7 be filed by the party entitled to the credit for the
8 withholding under subsection (b) of Section 709.5 (c) of
9 Section 708, subsection (c) of Section 709, or subsection (b)
10 of Section 710 with his return for the taxable year to which it
11 relates.
12 (Source: P.A. 85-299; 85-982.)
 
13     (35 ILCS 5/712)  (from Ch. 120, par. 7-712)
14     Sec. 712. Payor's Liability For Withheld Taxes. Every payor
15 who deducts and withholds or is required to deduct and withhold
16 tax under Sections 709.5 or Section 710 (and until January 1,
17 1989, Sections 708 and 709) is liable for such tax. For
18 purposes of assessment and collection, any amount withheld or
19 required to be withheld and paid over to the Department, and
20 any penalties and interest with respect thereto, shall be
21 considered the tax of the payor. Any amount of tax actually
22 deducted and withheld under Sections 709.5 or Section 710 (and
23 until January 1, 1989, Sections 708 and 709) shall be held to
24 be a special fund in trust for the Department. No payee shall
25 have any right of action against his payor in respect of any

 

 

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1 money deducted and withheld and paid over to the Department in
2 compliance or in intended compliance with Sections 709.5 or
3 Section 710 (and until January 1, 1989, Sections 708 and 709).
4 (Source: P.A. 85-299; 85-982.)
 
5     (35 ILCS 5/713)  (from Ch. 120, par. 7-713)
6     Sec. 713. Payor's Failure To Withhold. If a payor fails to
7 deduct and withhold any amount of tax as required under
8 Sections 709.5 or Section 710 (and until January 1, 1989,
9 Sections 708 and 709) and thereafter the tax on account of
10 which such amount was required to be deducted and withheld is
11 paid, such amount of tax shall not be collected from the payor,
12 but the payor shall not be relieved from liability for
13 penalties or interest otherwise applicable in respect of such
14 failure to deduct and withhold. For purposes of this Section,
15 the tax on account of which an amount is required to be
16 deducted and withheld is the tax of the individual or
17 individuals who are entitled to a credit under subsection (b)
18 of Section 709.5 (c) of Section 708, subsection (c) of Section
19 709, or subsection (b) of Section 710 for the withheld tax.
20 (Source: P.A. 85-299; 85-982.)
 
21     (35 ILCS 5/804)  (from Ch. 120, par. 8-804)
22     Sec. 804. Failure to Pay Estimated Tax.
23     (a) In general. In case of any underpayment of estimated
24 tax by a taxpayer, except as provided in subsection (d) or (e),

 

 

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1 the taxpayer shall be liable to a penalty in an amount
2 determined at the rate prescribed by Section 3-3 of the Uniform
3 Penalty and Interest Act upon the amount of the underpayment
4 (determined under subsection (b)) for each required
5 installment.
6     (b) Amount of underpayment. For purposes of subsection (a),
7 the amount of the underpayment shall be the excess of:
8         (1) the amount of the installment which would be
9     required to be paid under subsection (c), over
10         (2) the amount, if any, of the installment paid on or
11     before the last date prescribed for payment.
12     (c) Amount of Required Installments.
13         (1) Amount.
14             (A) In General. Except as provided in paragraph
15         (2), the amount of any required installment shall be
16         25% of the required annual payment.
17             (B) Required Annual Payment. For purposes of
18         subparagraph (A), the term "required annual payment"
19         means the lesser of
20                 (i) 90% of the tax shown on the return for the
21             taxable year, or if no return is filed, 90% of the
22             tax for such year, or
23                 (ii) 100% of the tax shown on the return of the
24             taxpayer for the preceding taxable year if a return
25             showing a liability for tax was filed by the
26             taxpayer for the preceding taxable year and such

 

 

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1             preceding year was a taxable year of 12 months.
2         (2) Lower Required Installment where Annualized Income
3     Installment is Less Than Amount Determined Under Paragraph
4     (1).
5             (A) In General. In the case of any required
6         installment if a taxpayer establishes that the
7         annualized income installment is less than the amount
8         determined under paragraph (1),
9                 (i) the amount of such required installment
10             shall be the annualized income installment, and
11                 (ii) any reduction in a required installment
12             resulting from the application of this
13             subparagraph shall be recaptured by increasing the
14             amount of the next required installment determined
15             under paragraph (1) by the amount of such
16             reduction, and by increasing subsequent required
17             installments to the extent that the reduction has
18             not previously been recaptured under this clause.
19             (B) Determination of Annualized Income
20         Installment. In the case of any required installment,
21         the annualized income installment is the excess, if
22         any, of
23                 (i) an amount equal to the applicable
24             percentage of the tax for the taxable year computed
25             by placing on an annualized basis the net income
26             for months in the taxable year ending before the

 

 

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1             due date for the installment, over
2                 (ii) the aggregate amount of any prior
3             required installments for the taxable year.
4             (C) Applicable Percentage.
5        In the case of the followingThe applicable
6        required installments:percentage is:
7        1st ..............................22.5%
8        2nd ...............................45%
9        3rd ...............................67.5%
10        4th ...............................90%
11             (D) Annualized Net Income; Individuals. For
12         individuals, net income shall be placed on an
13         annualized basis by:
14                 (i) multiplying by 12, or in the case of a
15             taxable year of less than 12 months, by the number
16             of months in the taxable year, the net income
17             computed without regard to the standard exemption
18             for the months in the taxable year ending before
19             the month in which the installment is required to
20             be paid;
21                 (ii) dividing the resulting amount by the
22             number of months in the taxable year ending before
23             the month in which such installment date falls; and
24                 (iii) deducting from such amount the standard
25             exemption allowable for the taxable year, such
26             standard exemption being determined as of the last

 

 

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1             date prescribed for payment of the installment.
2             (E) Annualized Net Income; Corporations. For
3         corporations, net income shall be placed on an
4         annualized basis by multiplying by 12 the taxable
5         income
6                 (i) for the first 3 months of the taxable year,
7             in the case of the installment required to be paid
8             in the 4th month,
9                 (ii) for the first 3 months or for the first 5
10             months of the taxable year, in the case of the
11             installment required to be paid in the 6th month,
12                 (iii) for the first 6 months or for the first 8
13             months of the taxable year, in the case of the
14             installment required to be paid in the 9th month,
15             and
16                 (iv) for the first 9 months or for the first 11
17             months of the taxable year, in the case of the
18             installment required to be paid in the 12th month
19             of the taxable year,
20         then dividing the resulting amount by the number of
21         months in the taxable year (3, 5, 6, 8, 9, or 11 as the
22         case may be).
23     (d) Exceptions. Notwithstanding the provisions of the
24 preceding subsections, the penalty imposed by subsection (a)
25 shall not be imposed if the taxpayer was not required to file
26 an Illinois income tax return for the preceding taxable year,

 

 

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1 or, for individuals, if the taxpayer had no tax liability for
2 the preceding taxable year and such year was a taxable year of
3 12 months. The penalty imposed by subsection (a) shall also not
4 be imposed on any underpayments of estimated tax due before the
5 effective date of this amendatory Act of 1998 which
6 underpayments are solely attributable to the change in
7 apportionment from subsection (a) to subsection (h) of Section
8 304. The provisions of this amendatory Act of 1998 apply to tax
9 years ending on or after December 31, 1998.
10     (e) The penalty imposed for underpayment of estimated tax
11 by subsection (a) of this Section shall not be imposed to the
12 extent that the Director Department or his or her designate
13 determines, pursuant to Section 3-8 of the Uniform Penalty and
14 Interest Act that the penalty should not be imposed.
15     (f) Definition of tax. For purposes of subsections (b) and
16 (c), the term "tax" means the excess of the tax imposed under
17 Article 2 of this Act, over the amounts credited against such
18 tax under Sections 601(b) (3) and (4).
19     (g) Application of Section in case of tax withheld under
20 Article 7 on compensation. For purposes of applying this
21 Section:
22         (1) in the case of an individual, tax withheld from
23     compensation under Article 7 for the taxable year shall be
24     deemed a payment of estimated tax, and an equal part of
25     such amount shall be deemed paid on each installment date
26     for such taxable year, unless the taxpayer establishes the

 

 

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1     dates on which all amounts were actually withheld, in which
2     case the amounts so withheld shall be deemed payments of
3     estimated tax on the dates on which such amounts were
4     actually withheld; .
5         (2) amounts timely paid by a partnership, Subchapter S
6     corporation, or trust on behalf of a partner, shareholder,
7     or beneficiary pursuant to subsection (f) of Section 502 or
8     Section 709.5 and claimed as a payment of estimated tax
9     shall be deemed a payment of estimated tax made on the last
10     day of the taxable year of the partnership, Subchapter S
11     corporation, or trust for which the income from the
12     withholding is made was computed; and
13         (3) all other amounts pursuant to Article 7 shall be
14     deemed a payment of estimated tax on the date the payment
15     is made to the taxpayer of the amount from which the tax is
16     withheld.
17     (g-5) Amounts withheld under the State Salary and Annuity
18 Withholding Act. An individual who has amounts withheld under
19 paragraph (10) of Section 4 of the State Salary and Annuity
20 Withholding Act may elect to have those amounts treated as
21 payments of estimated tax made on the dates on which those
22 amounts are actually withheld.
23     (i) Short taxable year. The application of this Section to
24 taxable years of less than 12 months shall be in accordance
25 with regulations prescribed by the Department.
26     The changes in this Section made by Public Act 84-127 shall

 

 

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1 apply to taxable years ending on or after January 1, 1986.
2 (Source: P.A. 90-448, eff. 8-16-97; 90-613, eff. 7-9-98.)
 
3     (35 ILCS 5/911)  (from Ch. 120, par. 9-911)
4     Sec. 911. Limitations on Claims for Refund.
5     (a) In general. Except as otherwise provided in this Act:
6         (1) A claim for refund shall be filed not later than 3
7     years after the date the return was filed (in the case of
8     returns required under Article 7 of this Act respecting any
9     amounts withheld as tax, not later than 3 years after the
10     15th day of the 4th month following the close of the
11     calendar year in which such withholding was made), or one
12     year after the date the tax was paid, whichever is the
13     later; and
14         (2) No credit or refund shall be allowed or made with
15     respect to the year for which the claim was filed unless
16     such claim is filed within such period.
17     (b) Federal changes.
18         (1) In general. In any case where notification of an
19     alteration is required by Section 506(b), a claim for
20     refund may be filed within 2 years after the date on which
21     such notification was due (regardless of whether such
22     notice was given), but the amount recoverable pursuant to a
23     claim filed under this Section shall be limited to the
24     amount of any overpayment resulting under this Act from
25     recomputation of the taxpayer's net income, net loss, or

 

 

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1     Article 2 credits for the taxable year after giving effect
2     to the item or items reflected in the alteration required
3     to be reported.
4         (2) Tentative carryback adjustments paid before
5     January 1, 1974. If, as the result of the payment before
6     January 1, 1974 of a federal tentative carryback
7     adjustment, a notification of an alteration is required
8     under Section 506(b), a claim for refund may be filed at
9     any time before January 1, 1976, but the amount recoverable
10     pursuant to a claim filed under this Section shall be
11     limited to the amount of any overpayment resulting under
12     this Act from recomputation of the taxpayer's base income
13     for the taxable year after giving effect to the federal
14     alteration resulting from the tentative carryback
15     adjustment irrespective of any limitation imposed in
16     paragraph (l) of this subsection.
17     (c) Extension by agreement. Where, before the expiration of
18 the time prescribed in this section for the filing of a claim
19 for refund, both the Department and the claimant shall have
20 consented in writing to its filing after such time, such claim
21 may be filed at any time prior to the expiration of the period
22 agreed upon. The period so agreed upon may be extended by
23 subsequent agreements in writing made before the expiration of
24 the period previously agreed upon. In the case of a taxpayer
25 who is a partnership, Subchapter S corporation, or trust and
26 who enters into an agreement with the Department pursuant to

 

 

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1 this subsection on or after January 1, 2003, a claim for refund
2 may be issued to the partners, shareholders, or beneficiaries
3 of the taxpayer at any time prior to the expiration of the
4 period agreed upon. Any refund allowed pursuant to the claim,
5 however, shall be limited to the amount of any overpayment of
6 tax due under this Act that results from recomputation of items
7 of income, deduction, credits, or other amounts of the taxpayer
8 that are taken into account by the partner, shareholder, or
9 beneficiary in computing its liability under this Act.
10     (d) Limit on amount of credit or refund.
11         (1) Limit where claim filed within 3-year period. If
12     the claim was filed by the claimant during the 3-year
13     period prescribed in subsection (a), the amount of the
14     credit or refund shall not exceed the portion of the tax
15     paid within the period, immediately preceding the filing of
16     the claim, equal to 3 years plus the period of any
17     extension of time for filing the return.
18         (2) Limit where claim not filed within 3-year period.
19     If the claim was not filed within such 3-year period, the
20     amount of the credit or refund shall not exceed the portion
21     of the tax paid during the one year immediately preceding
22     the filing of the claim.
23     (e) Time return deemed filed. For purposes of this section
24 a tax return filed before the last day prescribed by law for
25 the filing of such return (including any extensions thereof)
26 shall be deemed to have been filed on such last day.

 

 

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1     (f) No claim for refund based on the taxpayer's taking a
2 credit for estimated tax payments as provided by Section
3 601(b)(2) or for any amount paid by a taxpayer pursuant to
4 Section 602(a) or for any amount of credit for tax withheld
5 pursuant to Article 7 Section 701 may be filed more than 3
6 years after the due date, as provided by Section 505, of the
7 return which was required to be filed relative to the taxable
8 year for which the payments were made or for which the tax was
9 withheld. The changes in this subsection (f) made by this
10 amendatory Act of 1987 shall apply to all taxable years ending
11 on or after December 31, 1969.
12     (g) Special Period of Limitation with Respect to Net Loss
13 Carrybacks. If the claim for refund relates to an overpayment
14 attributable to a net loss carryback as provided by Section
15 207, in lieu of the 3 year period of limitation prescribed in
16 subsection (a), the period shall be that period which ends 3
17 years after the time prescribed by law for filing the return
18 (including extensions thereof) for the taxable year of the net
19 loss which results in such carryback (or, on and after August
20 13, 1999, with respect to a change in the carryover of an
21 Article 2 credit to a taxable year resulting from the carryback
22 of a Section 207 loss incurred in a taxable year beginning on
23 or after January 1, 2000, the period shall be that period that
24 ends 3 years after the time prescribed by law for filing the
25 return (including extensions of that time) for that subsequent
26 taxable year), or the period prescribed in subsection (c) in

 

 

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1 respect of such taxable year, whichever expires later. In the
2 case of such a claim, the amount of the refund may exceed the
3 portion of the tax paid within the period provided in
4 subsection (d) to the extent of the amount of the overpayment
5 attributable to such carryback. On and after August 13, 1999,
6 if the claim for refund relates to an overpayment attributable
7 to the carryover of an Article 2 credit, or of a Section 207
8 loss, earned, incurred (in a taxable year beginning on or after
9 January 1, 2000), or used in a year for which a notification of
10 a change affecting federal taxable income must be filed under
11 subsection (b) of Section 506, the claim may be filed within
12 the period prescribed in paragraph (1) of subsection (b) in
13 respect of the year for which the notification is required. In
14 the case of such a claim, the amount of the refund may exceed
15 the portion of the tax paid within the period provided in
16 subsection (d) to the extent of the amount of the overpayment
17 attributable to the recomputation of the taxpayer's Article 2
18 credits, or Section 207 loss, earned, incurred, or used in the
19 taxable year for which the notification is given.
20     (h) Claim for refund based on net loss. On and after August
21 23, 2002, no claim for refund shall be allowed to the extent
22 the refund is the result of an amount of net loss incurred in
23 any taxable year ending prior to December 31, 2002 under
24 Section 207 of this Act that was not reported to the Department
25 within 3 years of the due date (including extensions) of the
26 return for the loss year on either the original return filed by

 

 

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1 the taxpayer or on amended return or to the extent that the
2 refund is the result of an amount of net loss incurred in any
3 taxable year under Section 207 for which no return was filed
4 within 3 years of the due date (including extensions) of the
5 return for the loss year.
6 (Source: P.A. 94-836, eff. 6-6-06.)
 
7     (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)
8     Sec. 1501. Definitions.
9     (a) In general. When used in this Act, where not otherwise
10 distinctly expressed or manifestly incompatible with the
11 intent thereof:
12         (1) Business income. The term "business income" means
13     all income that may be treated as apportionable business
14     income under the Constitution of the United States.
15     Business income is net of the deductions allocable thereto.
16     Such term does not include compensation or the deductions
17     allocable thereto. For each taxable year beginning on or
18     after January 1, 2003, a taxpayer may elect to treat all
19     income other than compensation as business income. This
20     election shall be made in accordance with rules adopted by
21     the Department and, once made, shall be irrevocable.
22         (1.5) Captive real estate investment trust:
23         (A) The term "captive real estate investment trust"
24     means a corporation, trust, or association:
25             (i) that is considered a real estate investment

 

 

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1         trust for the taxable year under Section 856 of the
2         Internal Revenue Code;
3             (ii) that is not regularly traded on an established
4         securities market; and
5             (iii) of which more than 50% of the voting power or
6         value of the beneficial interest or shares, at any time
7         during the last half of the taxable year, is owned or
8         controlled, directly or indirectly, by a single entity
9         that is subject to the provisions of Subchapter C of
10         Chapter 1 of the Internal Revenue Code.
11         (B) The term "captive real estate investment trust"
12     does not include:
13             (i) a corporation, trust, or association of which
14         more than 50% of the voting power or value of the
15         beneficial interest or shares is owned or controlled,
16         at any time during which the corporation, trust, or
17         association satisfies item (A)(iii) of this subsection
18         (1.5), by:
19                 (a) a real estate investment trust, other than
20             a real estate investment trust described in item
21             (A) of this subsection;
22                 (b) a person who is exempt from taxation under
23             Section 501 of the Internal Revenue Code;
24                 (c) a listed Australian property trust; or
25                 (d) a real estate investment trust that,
26             subject to rules of the Secretary of State, is

 

 

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1             intended to become regularly traded on an
2             established securities market and that satisfies
3             the requirements of Sections 856(A)(5) and
4             856(A)(6) of the Internal Revenue Code by reason of
5             Section 856(H)(2) of the Internal Revenue Code.
6         (C) For the purposes of this subsection (1.5), the
7     constructive ownership rules prescribed under Section
8     318(A) of the Internal Revenue Code, as modified by Section
9     856(D)(5) of the Internal Revenue Code, apply in
10     determining the ownership of stock, assets, or net profits
11     of any person.
12         (2) Commercial domicile. The term "commercial
13     domicile" means the principal place from which the trade or
14     business of the taxpayer is directed or managed.
15         (3) Compensation. The term "compensation" means wages,
16     salaries, commissions and any other form of remuneration
17     paid to employees for personal services.
18         (4) Corporation. The term "corporation" includes
19     associations, joint-stock companies, insurance companies
20     and cooperatives. Any entity, including a limited
21     liability company formed under the Illinois Limited
22     Liability Company Act, shall be treated as a corporation if
23     it is so classified for federal income tax purposes.
24         (5) Department. The term "Department" means the
25     Department of Revenue of this State.
26         (6) Director. The term "Director" means the Director of

 

 

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1     Revenue of this State.
2         (7) Fiduciary. The term "fiduciary" means a guardian,
3     trustee, executor, administrator, receiver, or any person
4     acting in any fiduciary capacity for any person.
5         (8) Financial organization.
6             (A) The term "financial organization" means any
7         bank, bank holding company, trust company, savings
8         bank, industrial bank, land bank, safe deposit
9         company, private banker, savings and loan association,
10         building and loan association, credit union, currency
11         exchange, cooperative bank, small loan company, sales
12         finance company, investment company, or any person
13         which is owned by a bank or bank holding company. For
14         the purpose of this Section a "person" will include
15         only those persons which a bank holding company may
16         acquire and hold an interest in, directly or
17         indirectly, under the provisions of the Bank Holding
18         Company Act of 1956 (12 U.S.C. 1841, et seq.), except
19         where interests in any person must be disposed of
20         within certain required time limits under the Bank
21         Holding Company Act of 1956.
22             (B) For purposes of subparagraph (A) of this
23         paragraph, the term "bank" includes (i) any entity that
24         is regulated by the Comptroller of the Currency under
25         the National Bank Act, or by the Federal Reserve Board,
26         or by the Federal Deposit Insurance Corporation and

 

 

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1         (ii) any federally or State chartered bank operating as
2         a credit card bank.
3             (C) For purposes of subparagraph (A) of this
4         paragraph, the term "sales finance company" has the
5         meaning provided in the following item (i) or (ii):
6                 (i) A person primarily engaged in one or more
7             of the following businesses: the business of
8             purchasing customer receivables, the business of
9             making loans upon the security of customer
10             receivables, the business of making loans for the
11             express purpose of funding purchases of tangible
12             personal property or services by the borrower, or
13             the business of finance leasing. For purposes of
14             this item (i), "customer receivable" means:
15                     (a) a retail installment contract or
16                 retail charge agreement within the meaning of
17                 the Sales Finance Agency Act, the Retail
18                 Installment Sales Act, or the Motor Vehicle
19                 Retail Installment Sales Act;
20                     (b) an installment, charge, credit, or
21                 similar contract or agreement arising from the
22                 sale of tangible personal property or services
23                 in a transaction involving a deferred payment
24                 price payable in one or more installments
25                 subsequent to the sale; or
26                     (c) the outstanding balance of a contract

 

 

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1                 or agreement described in provisions (a) or (b)
2                 of this item (i).
3                 A customer receivable need not provide for
4             payment of interest on deferred payments. A sales
5             finance company may purchase a customer receivable
6             from, or make a loan secured by a customer
7             receivable to, the seller in the original
8             transaction or to a person who purchased the
9             customer receivable directly or indirectly from
10             that seller.
11                 (ii) A corporation meeting each of the
12             following criteria:
13                     (a) the corporation must be a member of an
14                 "affiliated group" within the meaning of
15                 Section 1504(a) of the Internal Revenue Code,
16                 determined without regard to Section 1504(b)
17                 of the Internal Revenue Code;
18                     (b) more than 50% of the gross income of
19                 the corporation for the taxable year must be
20                 interest income derived from qualifying loans.
21                 A "qualifying loan" is a loan made to a member
22                 of the corporation's affiliated group that
23                 originates customer receivables (within the
24                 meaning of item (i)) or to whom customer
25                 receivables originated by a member of the
26                 affiliated group have been transferred, to the

 

 

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1                 extent the average outstanding balance of
2                 loans from that corporation to members of its
3                 affiliated group during the taxable year do not
4                 exceed the limitation amount for that
5                 corporation. The "limitation amount" for a
6                 corporation is the average outstanding
7                 balances during the taxable year of customer
8                 receivables (within the meaning of item (i))
9                 originated by all members of the affiliated
10                 group. If the average outstanding balances of
11                 the loans made by a corporation to members of
12                 its affiliated group exceed the limitation
13                 amount, the interest income of that
14                 corporation from qualifying loans shall be
15                 equal to its interest income from loans to
16                 members of its affiliated groups times a
17                 fraction equal to the limitation amount
18                 divided by the average outstanding balances of
19                 the loans made by that corporation to members
20                 of its affiliated group;
21                     (c) the total of all shareholder's equity
22                 (including, without limitation, paid-in
23                 capital on common and preferred stock and
24                 retained earnings) of the corporation plus the
25                 total of all of its loans, advances, and other
26                 obligations payable or owed to members of its

 

 

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1                 affiliated group may not exceed 20% of the
2                 total assets of the corporation at any time
3                 during the tax year; and
4                     (d) more than 50% of all interest-bearing
5                 obligations of the affiliated group payable to
6                 persons outside the group determined in
7                 accordance with generally accepted accounting
8                 principles must be obligations of the
9                 corporation.
10             This amendatory Act of the 91st General Assembly is
11         declaratory of existing law.
12             (D) Subparagraphs (B) and (C) of this paragraph are
13         declaratory of existing law and apply retroactively,
14         for all tax years beginning on or before December 31,
15         1996, to all original returns, to all amended returns
16         filed no later than 30 days after the effective date of
17         this amendatory Act of 1996, and to all notices issued
18         on or before the effective date of this amendatory Act
19         of 1996 under subsection (a) of Section 903, subsection
20         (a) of Section 904, subsection (e) of Section 909, or
21         Section 912. A taxpayer that is a "financial
22         organization" that engages in any transaction with an
23         affiliate shall be a "financial organization" for all
24         purposes of this Act.
25             (E) For all tax years beginning on or before
26         December 31, 1996, a taxpayer that falls within the

 

 

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1         definition of a "financial organization" under
2         subparagraphs (B) or (C) of this paragraph, but who
3         does not fall within the definition of a "financial
4         organization" under the Proposed Regulations issued by
5         the Department of Revenue on July 19, 1996, may
6         irrevocably elect to apply the Proposed Regulations
7         for all of those years as though the Proposed
8         Regulations had been lawfully promulgated, adopted,
9         and in effect for all of those years. For purposes of
10         applying subparagraphs (B) or (C) of this paragraph to
11         all of those years, the election allowed by this
12         subparagraph applies only to the taxpayer making the
13         election and to those members of the taxpayer's unitary
14         business group who are ordinarily required to
15         apportion business income under the same subsection of
16         Section 304 of this Act as the taxpayer making the
17         election. No election allowed by this subparagraph
18         shall be made under a claim filed under subsection (d)
19         of Section 909 more than 30 days after the effective
20         date of this amendatory Act of 1996.
21             (F) Finance Leases. For purposes of this
22         subsection, a finance lease shall be treated as a loan
23         or other extension of credit, rather than as a lease,
24         regardless of how the transaction is characterized for
25         any other purpose, including the purposes of any
26         regulatory agency to which the lessor is subject. A

 

 

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1         finance lease is any transaction in the form of a lease
2         in which the lessee is treated as the owner of the
3         leased asset entitled to any deduction for
4         depreciation allowed under Section 167 of the Internal
5         Revenue Code.
6         (9) Fiscal year. The term "fiscal year" means an
7     accounting period of 12 months ending on the last day of
8     any month other than December.
9         (10) Includes and including. The terms "includes" and
10     "including" when used in a definition contained in this Act
11     shall not be deemed to exclude other things otherwise
12     within the meaning of the term defined.
13         (11) Internal Revenue Code. The term "Internal Revenue
14     Code" means the United States Internal Revenue Code of 1954
15     or any successor law or laws relating to federal income
16     taxes in effect for the taxable year.
17         (11.5) Investment partnership.
18             (A) The term "investment partnership" means any
19         entity that is treated as a partnership for federal
20         income tax purposes that meets the following
21         requirements:
22                 (i) no less than 90% of the partnership's cost
23             of its total assets consists of qualifying
24             investment securities, deposits at banks or other
25             financial institutions, and office space and
26             equipment reasonably necessary to carry on its

 

 

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1             activities as an investment partnership;
2                 (ii) no less than 90% of its gross income
3             consists of interest, dividends, and gains from
4             the sale or exchange of qualifying investment
5             securities; and
6                 (iii) the partnership is not a dealer in
7             qualifying investment securities.
8             (B) For purposes of this paragraph (11.5), the term
9         "qualifying investment securities" includes all of the
10         following:
11                 (i) common stock, including preferred or debt
12             securities convertible into common stock, and
13             preferred stock;
14                 (ii) bonds, debentures, and other debt
15             securities;
16                 (iii) foreign and domestic currency deposits
17             secured by federal, state, or local governmental
18             agencies;
19                 (iv) mortgage or asset-backed securities
20             secured by federal, state, or local governmental
21             agencies;
22                 (v) repurchase agreements and loan
23             participations;
24                 (vi) foreign currency exchange contracts and
25             forward and futures contracts on foreign
26             currencies;

 

 

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1                 (vii) stock and bond index securities and
2             futures contracts and other similar financial
3             securities and futures contracts on those
4             securities;
5                 (viii) options for the purchase or sale of any
6             of the securities, currencies, contracts, or
7             financial instruments described in items (i) to
8             (vii), inclusive;
9                 (ix) regulated futures contracts;
10                 (x) commodities (not described in Section
11             1221(a)(1) of the Internal Revenue Code) or
12             futures, forwards, and options with respect to
13             such commodities, provided, however, that any item
14             of a physical commodity to which title is actually
15             acquired in the partnership's capacity as a dealer
16             in such commodity shall not be a qualifying
17             investment security;
18                 (xi) derivatives; and
19                 (xii) a partnership interest in another
20             partnership that is an investment partnership.
21         (12) Mathematical error. The term "mathematical error"
22     includes the following types of errors, omissions, or
23     defects in a return filed by a taxpayer which prevents
24     acceptance of the return as filed for processing:
25             (A) arithmetic errors or incorrect computations on
26         the return or supporting schedules;

 

 

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1             (B) entries on the wrong lines;
2             (C) omission of required supporting forms or
3         schedules or the omission of the information in whole
4         or in part called for thereon; and
5             (D) an attempt to claim, exclude, deduct, or
6         improperly report, in a manner directly contrary to the
7         provisions of the Act and regulations thereunder any
8         item of income, exemption, deduction, or credit.
9         (13) Nonbusiness income. The term "nonbusiness income"
10     means all income other than business income or
11     compensation.
12         (14) Nonresident. The term "nonresident" means a
13     person who is not a resident.
14         (15) Paid, incurred and accrued. The terms "paid",
15     "incurred" and "accrued" shall be construed according to
16     the method of accounting upon the basis of which the
17     person's base income is computed under this Act.
18         (16) Partnership and partner. The term "partnership"
19     includes a syndicate, group, pool, joint venture or other
20     unincorporated organization, through or by means of which
21     any business, financial operation, or venture is carried
22     on, and which is not, within the meaning of this Act, a
23     trust or estate or a corporation; and the term "partner"
24     includes a member in such syndicate, group, pool, joint
25     venture or organization.
26         The term "partnership" includes any entity, including

 

 

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1     a limited liability company formed under the Illinois
2     Limited Liability Company Act, classified as a partnership
3     for federal income tax purposes.
4         The term "partnership" does not include a syndicate,
5     group, pool, joint venture, or other unincorporated
6     organization established for the sole purpose of playing
7     the Illinois State Lottery.
8         (17) Part-year resident. The term "part-year resident"
9     means an individual who became a resident during the
10     taxable year or ceased to be a resident during the taxable
11     year. Under Section 1501(a)(20)(A)(i) residence commences
12     with presence in this State for other than a temporary or
13     transitory purpose and ceases with absence from this State
14     for other than a temporary or transitory purpose. Under
15     Section 1501(a)(20)(A)(ii) residence commences with the
16     establishment of domicile in this State and ceases with the
17     establishment of domicile in another State.
18         (18) Person. The term "person" shall be construed to
19     mean and include an individual, a trust, estate,
20     partnership, association, firm, company, corporation,
21     limited liability company, or fiduciary. For purposes of
22     Section 1301 and 1302 of this Act, a "person" means (i) an
23     individual, (ii) a corporation, (iii) an officer, agent, or
24     employee of a corporation, (iv) a member, agent or employee
25     of a partnership, or (v) a member, manager, employee,
26     officer, director, or agent of a limited liability company

 

 

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1     who in such capacity commits an offense specified in
2     Section 1301 and 1302.
3         (18A) Records. The term "records" includes all data
4     maintained by the taxpayer, whether on paper, microfilm,
5     microfiche, or any type of machine-sensible data
6     compilation.
7         (19) Regulations. The term "regulations" includes
8     rules promulgated and forms prescribed by the Department.
9         (20) Resident. The term "resident" means:
10             (A) an individual (i) who is in this State for
11         other than a temporary or transitory purpose during the
12         taxable year; or (ii) who is domiciled in this State
13         but is absent from the State for a temporary or
14         transitory purpose during the taxable year;
15             (B) The estate of a decedent who at his or her
16         death was domiciled in this State;
17             (C) A trust created by a will of a decedent who at
18         his death was domiciled in this State; and
19             (D) An irrevocable trust, the grantor of which was
20         domiciled in this State at the time such trust became
21         irrevocable. For purpose of this subparagraph, a trust
22         shall be considered irrevocable to the extent that the
23         grantor is not treated as the owner thereof under
24         Sections 671 through 678 of the Internal Revenue Code.
25         (21) Sales. The term "sales" means all gross receipts
26     of the taxpayer not allocated under Sections 301, 302 and

 

 

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1     303.
2         (22) State. The term "state" when applied to a
3     jurisdiction other than this State means any state of the
4     United States, the District of Columbia, the Commonwealth
5     of Puerto Rico, any Territory or Possession of the United
6     States, and any foreign country, or any political
7     subdivision of any of the foregoing. For purposes of the
8     foreign tax credit under Section 601, the term "state"
9     means any state of the United States, the District of
10     Columbia, the Commonwealth of Puerto Rico, and any
11     territory or possession of the United States, or any
12     political subdivision of any of the foregoing, effective
13     for tax years ending on or after December 31, 1989.
14         (23) Taxable year. The term "taxable year" means the
15     calendar year, or the fiscal year ending during such
16     calendar year, upon the basis of which the base income is
17     computed under this Act. "Taxable year" means, in the case
18     of a return made for a fractional part of a year under the
19     provisions of this Act, the period for which such return is
20     made.
21         (24) Taxpayer. The term "taxpayer" means any person
22     subject to the tax imposed by this Act.
23         (25) International banking facility. The term
24     international banking facility shall have the same meaning
25     as is set forth in the Illinois Banking Act or as is set
26     forth in the laws of the United States or regulations of

 

 

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1     the Board of Governors of the Federal Reserve System.
2         (26) Income Tax Return Preparer.
3             (A) The term "income tax return preparer" means any
4         person who prepares for compensation, or who employs
5         one or more persons to prepare for compensation, any
6         return of tax imposed by this Act or any claim for
7         refund of tax imposed by this Act. The preparation of a
8         substantial portion of a return or claim for refund
9         shall be treated as the preparation of that return or
10         claim for refund.
11             (B) A person is not an income tax return preparer
12         if all he or she does is
13                 (i) furnish typing, reproducing, or other
14             mechanical assistance;
15                 (ii) prepare returns or claims for refunds for
16             the employer by whom he or she is regularly and
17             continuously employed;
18                 (iii) prepare as a fiduciary returns or claims
19             for refunds for any person; or
20                 (iv) prepare claims for refunds for a taxpayer
21             in response to any notice of deficiency issued to
22             that taxpayer or in response to any waiver of
23             restriction after the commencement of an audit of
24             that taxpayer or of another taxpayer if a
25             determination in the audit of the other taxpayer
26             directly or indirectly affects the tax liability

 

 

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1             of the taxpayer whose claims he or she is
2             preparing.
3         (27) Unitary business group. The term "unitary
4     business group" means a group of persons related through
5     common ownership whose business activities are integrated
6     with, dependent upon and contribute to each other. The
7     group will not include those members whose business
8     activity outside the United States is 80% or more of any
9     such member's total business activity; for purposes of this
10     paragraph and clause (a)(3)(B)(ii) of Section 304,
11     business activity within the United States shall be
12     measured by means of the factors ordinarily applicable
13     under subsections (a), (b), (c), (d), or (h) of Section 304
14     except that, in the case of members ordinarily required to
15     apportion business income by means of the 3 factor formula
16     of property, payroll and sales specified in subsection (a)
17     of Section 304, including the formula as weighted in
18     subsection (h) of Section 304, such members shall not use
19     the sales factor in the computation and the results of the
20     property and payroll factor computations of subsection (a)
21     of Section 304 shall be divided by 2 (by one if either the
22     property or payroll factor has a denominator of zero). The
23     computation required by the preceding sentence shall, in
24     each case, involve the division of the member's property,
25     payroll, or revenue miles in the United States, insurance
26     premiums on property or risk in the United States, or

 

 

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1     financial organization business income from sources within
2     the United States, as the case may be, by the respective
3     worldwide figures for such items. Common ownership in the
4     case of corporations is the direct or indirect control or
5     ownership of more than 50% of the outstanding voting stock
6     of the persons carrying on unitary business activity.
7     Unitary business activity can ordinarily be illustrated
8     where the activities of the members are: (1) in the same
9     general line (such as manufacturing, wholesaling,
10     retailing of tangible personal property, insurance,
11     transportation or finance); or (2) are steps in a
12     vertically structured enterprise or process (such as the
13     steps involved in the production of natural resources,
14     which might include exploration, mining, refining, and
15     marketing); and, in either instance, the members are
16     functionally integrated through the exercise of strong
17     centralized management (where, for example, authority over
18     such matters as purchasing, financing, tax compliance,
19     product line, personnel, marketing and capital investment
20     is not left to each member). In no event, however, will any
21     unitary business group include members which are
22     ordinarily required to apportion business income under
23     different subsections of Section 304 except that for tax
24     years ending on or after December 31, 1987 this prohibition
25     shall not apply to a unitary business group composed of one
26     or more taxpayers all of which apportion business income

 

 

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1     pursuant to subsection (b) of Section 304, or all of which
2     apportion business income pursuant to subsection (d) of
3     Section 304, and a holding company of such single-factor
4     taxpayers (see definition of "financial organization" for
5     rule regarding holding companies of financial
6     organizations). If a unitary business group would, but for
7     the preceding sentence, include members that are
8     ordinarily required to apportion business income under
9     different subsections of Section 304, then for each
10     subsection of Section 304 for which there are two or more
11     members, there shall be a separate unitary business group
12     composed of such members. For purposes of the preceding two
13     sentences, a member is "ordinarily required to apportion
14     business income" under a particular subsection of Section
15     304 if it would be required to use the apportionment method
16     prescribed by such subsection except for the fact that it
17     derives business income solely from Illinois. As used in
18     this paragraph, the phrase "United States" means only the
19     50 states and the District of Columbia, but does not
20     include any territory or possession of the United States or
21     any area over which the United States has asserted
22     jurisdiction or claimed exclusive rights with respect to
23     the exploration for or exploitation of natural resources.
24