Rep. Barbara Flynn Currie

Filed: 5/30/2007

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 1544

2     AMENDMENT NO. ______. Amend Senate Bill 1544 by replacing
3 everything after the enacting clause with the following:
 
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.
 

 

 

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1     Section 5-5. Definitions. As used in this Act:
2     "Secretary" means the Illinois Secretary of State.
3     "Rules" means any rules adopted or forms prescribed by the
4 Secretary.
5     "Taxable period" means any period of time for which any
6 franchise tax is imposed by and owned to the State of Illinois
7 by any domestic corporation or any license fee is imposed by
8 and owned to the State of Illinois by any foreign corporation.
9     "Taxpayer" means any domestic or foreign corporation,
10 subject to franchise tax or license fee imposed by Article XV
11 of the Business Corporation Act of 1983.
 
12     Section 5-10. Amnesty program. The Secretary shall
13 establish an amnesty program for all taxpayers owing any
14 franchise tax or license fee imposed by Article XV of the
15 Business Corporation Act of 1983. The amnesty program shall be
16 for a period from October 1, 2007 through November 15, 2007.
17 The amnesty program shall provide that, upon payment by a
18 taxpayer of all franchise taxes and license fees due from that
19 taxpayer to the State of Illinois for any taxable period, the
20 Secretary shall abate and not seek to collect any interest or
21 penalties that may be applicable, and the Secretary shall not
22 seek civil or criminal prosecution for any taxpayer for the
23 period of time for which amnesty has been granted to the
24 taxpayer. Failure to pay all taxes due to the State for a

 

 

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1 taxable period shall not invalidate any amnesty granted under
2 this Act with respect to the taxes paid pursuant to the amnesty
3 program. Amnesty shall be granted only if all amnesty
4 conditions are satisfied by the taxpayer. Amnesty shall not be
5 granted to taxpayers who are a party to any criminal
6 investigation or to any civil or criminal litigation that is
7 pending in any circuit court or appellate court or the Supreme
8 Court of this State for nonpayment, delinquency, or fraud in
9 relation to any franchise tax or license fee imposed by Article
10 XV of the Business Corporation Act of 1983. Voluntary payments
11 made under this Act shall be made by cash, check, guaranteed
12 remittance, or ACH debit. The Secretary shall adopt rules as
13 necessary to implement the provisions of this Act. Except as
14 otherwise provided in this Section, all money collected under
15 this Act that would otherwise be deposited into the General
16 Revenue Fund shall be deposited into the General Revenue Fund.
17 Two percent of all money collected under this Act shall be
18 deposited by the State Treasurer into the Department of
19 Business Services Special Operations Fund and, subject to
20 appropriation, shall be used by the Secretary to cover costs
21 associated with the administration of this Act.
 
22     Section 5-90. The Business Corporation Act of 1983 is
23 amended by changing Sections 15.90 and 16.05 as follows:
 
24     (805 ILCS 5/15.90)  (from Ch. 32, par. 15.90)

 

 

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1     Sec. 15.90. Statute of limitations.
2     (a) Except as otherwise provided in this Section and
3 notwithstanding anything to the contrary contained in any other
4 Section of this Act, no domestic corporation or foreign
5 corporation shall be obligated to pay any annual franchise tax,
6 fee, or penalty or interest thereon imposed under this Act, nor
7 shall any administrative or judicial sanction (including
8 dissolution) be imposed or enforced nor access to the courts of
9 this State be denied based upon nonpayment thereof more than 7
10 years after the date of filing the annual report with respect
11 to the period during which the obligation for the tax, fee,
12 penalty or interest arose, unless (1) within that 7 year period
13 the Secretary of State sends a written notice to the
14 corporation to the effect that (A) administrative or judicial
15 action to dissolve the corporation or revoke its certificate of
16 authority for nonpayment of a tax, fee, penalty or interest has
17 been commenced; or (B) the corporation has submitted a report
18 but has failed to pay a tax, fee, penalty or interest required
19 to be paid therewith; or (C) a report with respect to an event
20 or action giving rise to an obligation to pay a tax, fee,
21 penalty or interest is required but has not been filed, or has
22 been filed and is in error or incomplete; or (2) the annual
23 report by the corporation was filed with fraudulent intent to
24 evade taxes payable under this Act. A corporation nonetheless
25 shall be required to pay all taxes that would have been payable
26 during the most recent 7 year period due to a previously

 

 

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1 unreported increase in paid-in capital that occurred prior to
2 that 7 year period and interest and penalties thereon for that
3 period, except that with respect to any corporation that
4 participates in the Franchise Tax and License Fee Amnesty Act
5 of 2007, the corporation shall be only required to pay all
6 taxes that would have been payable during the most recent 4
7 year period due to a previously unreported increase in paid-in
8 capital that occurred prior to that 7 year period.
9     (b) If within 2 years following a change in control of a
10 corporation the corporation voluntarily pays in good faith all
11 known obligations of the corporation imposed by this Article 15
12 with respect to reports that were required to have been filed
13 since the beginning of the 7 year period ending on the
14 effective date of the change in control, no action shall be
15 taken to enforce or collect obligations of that corporation
16 imposed by this Article 15 with respect to reports that were
17 required to have been filed prior to that 7 year period
18 regardless of whether the limitation period set forth in
19 subsection (a) is otherwise applicable. For purposes of this
20 subsection (b), a change in control means a transaction, or a
21 series of transactions consummated within a period of 180
22 consecutive days, as a result of which a person which owned
23 less than 10% of the shares having the power to elect directors
24 of the corporation acquires shares such that the person becomes
25 the holder of 80% or more of the shares having such power. For
26 purposes of this subsection (b) a person means any natural

 

 

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1 person, corporation, partnership, trust or other entity
2 together with all other persons controlled by, controlling or
3 under common control with such person.
4     (c) Except as otherwise provided in this Section and
5 notwithstanding anything to the contrary contained in any other
6 Section of this Act, no foreign corporation that has not
7 previously obtained a certificate of authority under this Act
8 shall, upon voluntary application for a certificate of
9 authority filed with the Secretary of State prior to January 1,
10 2001, be obligated to pay any tax, fee, penalty, or interest
11 imposed under this Act, nor shall any administrative or
12 judicial sanction be imposed or enforced based upon nonpayment
13 thereof with respect to a period during which the obligation
14 arose that is prior to January 1, 1993 unless (1) prior to
15 receipt of the application for a certificate of authority the
16 Secretary of State had sent written notice to the corporation
17 regarding its failure to obtain a certificate of authority, (2)
18 the corporation had submitted an application for a certificate
19 of authority previously but had failed to pay any tax, fee,
20 penalty or interest to be paid therewith, or (3) the
21 application for a certificate of authority was submitted by the
22 corporation with fraudulent intent to evade taxes payable under
23 this Act. A corporation nonetheless shall be required to pay
24 all taxes and fees due under this Act that would have been
25 payable since January 1, 1993 as a result of commencing the
26 transaction of its business in this State and interest thereon

 

 

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1 for that period.
2 (Source: P.A. 90-421, eff. 1-1-98.)
 
3     (805 ILCS 5/16.05)  (from Ch. 32, par. 16.05)
4     Sec. 16.05. Penalties and interest imposed upon
5 corporations.
6     (a) Each corporation, domestic or foreign, that fails or
7 refuses to file any annual report or report of cumulative
8 changes in paid-in capital and pay any franchise tax due
9 pursuant to the report prior to the first day of its
10 anniversary month or, in the case of a corporation which has
11 established an extended filing month, the extended filing month
12 of the corporation shall pay a penalty of 10% of the amount of
13 any delinquent franchise tax due for the report. No penalty
14 shall be imposed with respect to any amount of delinquent
15 franchise tax paid pursuant to the Franchise Tax and License
16 Fee Amnesty Act of 2007.
17     (b) Each corporation, domestic or foreign, that fails or
18 refuses to file a report of issuance of shares or increase in
19 paid-in capital within the time prescribed by this Act is
20 subject to a penalty on any obligation occurring prior to
21 January 1, 1991, and interest on those obligations on or after
22 January 1, 1991, for each calendar month or part of month that
23 it is delinquent in the amount of 1% of the amount of license
24 fees and franchise taxes provided by this Act to be paid on
25 account of the issuance of shares or increase in paid-in

 

 

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

 

 

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1 any amount of delinquent franchise taxes paid pursuant to the
2 Franchise Tax and License Fee Amnesty Act of 2007.
3     (e) If the supplemental annual franchise tax assessed in
4 accordance with the provisions of this Act for the 12-month
5 period commencing July 1, 1967, is not paid by September 30,
6 1967, it is delinquent, and there is added a penalty prior to
7 January 1, 1991, and interest on and after January 1, 1991, of
8 1% for each month or part of month that it is delinquent
9 commencing with the month of October, 1967. No penalty shall be
10 imposed, or interest charged, with respect to any amount of
11 delinquent franchise taxes paid pursuant to the Franchise Tax
12 and License Fee Amnesty Act of 2007.
13     (f) If any annual franchise tax for any period beginning on
14 or after July 1, 1983, is not paid by the time period herein
15 prescribed, it is delinquent and there is added a penalty prior
16 to January 1, 1991, and interest on and after January 1, 1991,
17 of 1% for each month or part of a month that it is delinquent
18 commencing with the anniversary month or in the case of a
19 corporation that has established an extended filing month, the
20 extended filing month, or $1, whichever is greater. No penalty
21 shall be imposed, or interest charged, with respect to any
22 amount of delinquent franchise taxes paid pursuant to the
23 Franchise Tax and License Fee Amnesty Act of 2007.
24     (g) Any corporation, domestic or foreign, failing to pay
25 the prescribed fee for assumed corporate name renewal when due
26 and payable shall be given notice of nonpayment by the

 

 

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1 Secretary of State by regular mail; and if the fee together
2 with a penalty fee of $5 is not paid within 90 days after the
3 notice is mailed, the right to use the assumed name shall
4 cease.
5     (h) Any corporation which (i) puts forth any sign or
6 advertisement, assuming any name other than that by which it is
7 incorporated or otherwise authorized by law to act or (ii)
8 violates Section 3.25, shall be guilty of a Class C misdemeanor
9 and shall be deemed guilty of an additional offense for each
10 day it shall continue to so offend.
11     (i) Each corporation, domestic or foreign, that fails or
12 refuses (1) to file in the office of the recorder within the
13 time prescribed by this Act any document required by this Act
14 to be so filed, or (2) to answer truthfully and fully within
15 the time prescribed by this Act interrogatories propounded by
16 the Secretary of State in accordance with this Act, or (3) to
17 perform any other act required by this Act to be performed by
18 the corporation, is guilty of a Class C misdemeanor.
19     (j) Each corporation that fails or refuses to file articles
20 of revocation of dissolution within the time prescribed by this
21 Act is subject to a penalty for each calendar month or part of
22 the month that it is delinquent in the amount of $50.
23 (Source: P.A. 91-464, eff. 1-1-00; 91-906, eff. 1-1-01.)
 
24
ARTICLE 10. AMENDATORY PROVISIONS

 

 

 

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1     Section 10-5. The Illinois Income Tax Act is amended by
2 changing Sections 203, 205, 207, 304, 502, 711, 712, 713, 804,
3 911, and 1501 and by adding Section 709.5 as follows:
 
4     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
5     Sec. 203. Base income defined.
6     (a) Individuals.
7         (1) In general. In the case of an individual, base
8     income means an amount equal to the taxpayer's adjusted
9     gross income for the taxable year as modified by paragraph
10     (2).
11         (2) Modifications. The adjusted gross income referred
12     to in paragraph (1) shall be modified by adding thereto the
13     sum of the following amounts:
14             (A) An amount equal to all amounts paid or accrued
15         to the taxpayer as interest or dividends during the
16         taxable year to the extent excluded from gross income
17         in the computation of adjusted gross income, except
18         stock dividends of qualified public utilities
19         described in Section 305(e) of the Internal Revenue
20         Code;
21             (B) An amount equal to the amount of tax imposed by
22         this Act to the extent deducted from gross income in
23         the computation of adjusted gross income for the
24         taxable year;
25             (C) An amount equal to the amount received during

 

 

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1         the taxable year as a recovery or refund of real
2         property taxes paid with respect to the taxpayer's
3         principal residence under the Revenue Act of 1939 and
4         for which a deduction was previously taken under
5         subparagraph (L) of this paragraph (2) prior to July 1,
6         1991, the retrospective application date of Article 4
7         of Public Act 87-17. In the case of multi-unit or
8         multi-use structures and farm dwellings, the taxes on
9         the taxpayer's principal residence shall be that
10         portion of the total taxes for the entire property
11         which is attributable to such principal residence;
12             (D) An amount equal to the amount of the capital
13         gain deduction allowable under the Internal Revenue
14         Code, to the extent deducted from gross income in the
15         computation of adjusted gross income;
16             (D-5) An amount, to the extent not included in
17         adjusted gross income, equal to the amount of money
18         withdrawn by the taxpayer in the taxable year from a
19         medical care savings account and the interest earned on
20         the account in the taxable year of a withdrawal
21         pursuant to subsection (b) of Section 20 of the Medical
22         Care Savings Account Act or subsection (b) of Section
23         20 of the Medical Care Savings Account Act of 2000;
24             (D-10) For taxable years ending after December 31,
25         1997, an amount equal to any eligible remediation costs
26         that the individual deducted in computing adjusted

 

 

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1         gross income and for which the individual claims a
2         credit under subsection (l) of Section 201;
3             (D-15) For taxable years 2001 and thereafter, an
4         amount equal to the bonus depreciation deduction taken
5         on the taxpayer's federal income tax return for the
6         taxable year under subsection (k) of Section 168 of the
7         Internal Revenue Code;
8             (D-16) If the taxpayer sells, transfers, abandons,
9         or otherwise disposes of property for which the
10         taxpayer was required in any taxable year to make an
11         addition modification under subparagraph (D-15), then
12         an amount equal to the aggregate amount of the
13         deductions taken in all taxable years under
14         subparagraph (Z) with respect to that property.
15             If the taxpayer continues to own property through
16         the last day of the last tax year for which the
17         taxpayer may claim a depreciation deduction for
18         federal income tax purposes and for which the taxpayer
19         was allowed in any taxable year to make a subtraction
20         modification under subparagraph (Z), then an amount
21         equal to that subtraction modification.
22             The taxpayer is required to make the addition
23         modification under this subparagraph only once with
24         respect to any one piece of property;
25             (D-17) An For taxable years ending on or after
26         December 31, 2004, an amount equal to the amount

 

 

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

 

 

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

 

 

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

 

 

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1         a foreign person who would be a member of the same
2         unitary business group but for the fact that the
3         foreign person's business activity outside the United
4         States is 80% or more of that person's total business
5         activity and (ii) for taxable years ending on or after
6         December 31, 2008, to a foreign person who would be a
7         member of the same unitary business group but for the
8         fact that the person is prohibited under Section
9         1501(a)(27) from being included in the unitary
10         business group because he or she is ordinarily required
11         to apportion business income under different
12         subsections of Section 304. The addition modification
13         required by this subparagraph shall be reduced to the
14         extent that dividends were included in base income of
15         the unitary group for the same taxable year and
16         received by the taxpayer or by a member of the
17         taxpayer's unitary business group (including amounts
18         included in gross income under Sections 951 through 964
19         of the Internal Revenue Code and amounts included in
20         gross income under Section 78 of the Internal Revenue
21         Code) with respect to the stock of the same person to
22         whom the intangible expenses and costs were directly or
23         indirectly paid, incurred, or accrued. The preceding
24         sentence does not apply to the extent that the same
25         dividends caused a reduction to the addition
26         modification required under Section 203(a)(2)(D-17) of

 

 

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

 

 

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

 

 

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1             pursuant to regulation adopted by the Department
2             and such regulations provide methods and standards
3             by which the Department will utilize its authority
4             under Section 404 of this Act;
5             (D-19) For taxable years ending on or after
6         December 31, 2008, an amount equal to the amount of
7         insurance premium expenses and costs otherwise allowed
8         as a deduction in computing base income, and that were
9         paid, accrued, or incurred, directly or indirectly, to
10         a person who would be a member of the same unitary
11         business group but for the fact that the person is
12         prohibited under Section 1501(a)(27) from being
13         included in the unitary business group because he or
14         she is ordinarily required to apportion business
15         income under different subsections of Section 304. The
16         addition modification required by this subparagraph
17         shall be reduced to the extent that dividends were
18         included in base income of the unitary group for the
19         same taxable year and received by the taxpayer or by a
20         member of the taxpayer's unitary business group
21         (including amounts included in gross income under
22         Sections 951 through 964 of the Internal Revenue Code
23         and amounts included in gross income under Section 78
24         of the Internal Revenue Code) with respect to the stock
25         of the same person to whom the intangible expenses and
26         costs were directly or indirectly paid, incurred, or

 

 

09500SB1544ham001 - 21 - LRB095 10647 BDD 37280 a

1         accrued. The preceding sentence does not apply to the
2         extent that the same dividends caused a reduction to
3         the addition modification required under Section
4         203(a)(2)(D-17) of this Act.
5             (D-20) For taxable years beginning on or after
6         January 1, 2002, in the case of a distribution from a
7         qualified tuition program under Section 529 of the
8         Internal Revenue Code, other than (i) a distribution
9         from a College Savings Pool created under Section 16.5
10         of the State Treasurer Act or (ii) a distribution from
11         the Illinois Prepaid Tuition Trust Fund, an amount
12         equal to the amount excluded from gross income under
13         Section 529(c)(3)(B);
14     and by deducting from the total so obtained the sum of the
15     following amounts:
16             (E) For taxable years ending before December 31,
17         2001, any amount included in such total in respect of
18         any compensation (including but not limited to any
19         compensation paid or accrued to a serviceman while a
20         prisoner of war or missing in action) paid to a
21         resident by reason of being on active duty in the Armed
22         Forces of the United States and in respect of any
23         compensation paid or accrued to a resident who as a
24         governmental employee was a prisoner of war or missing
25         in action, and in respect of any compensation paid to a
26         resident in 1971 or thereafter for annual training

 

 

09500SB1544ham001 - 22 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 23 - LRB095 10647 BDD 37280 a

1         thereto;
2             (G) The valuation limitation amount;
3             (H) An amount equal to the amount of any tax
4         imposed by this Act which was refunded to the taxpayer
5         and included in such total for the taxable year;
6             (I) An amount equal to all amounts included in such
7         total pursuant to the provisions of Section 111 of the
8         Internal Revenue Code as a recovery of items previously
9         deducted from adjusted gross income in the computation
10         of taxable income;
11             (J) An amount equal to those dividends included in
12         such total which were paid by a corporation which
13         conducts business operations in an Enterprise Zone or
14         zones created under the Illinois Enterprise Zone Act or
15         a River Edge Redevelopment Zone or zones created under
16         the River Edge Redevelopment Zone Act, and conducts
17         substantially all of its operations in an Enterprise
18         Zone or zones or a River Edge Redevelopment Zone or
19         zones. This subparagraph (J) is exempt from the
20         provisions of Section 250;
21             (K) 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

 

 

09500SB1544ham001 - 24 - LRB095 10647 BDD 37280 a

1         subparagraph (J) of paragraph (2) of this subsection
2         shall not be eligible for the deduction provided under
3         this subparagraph (K);
4             (L) For taxable years ending after December 31,
5         1983, an amount equal to all social security benefits
6         and railroad retirement benefits included in such
7         total pursuant to Sections 72(r) and 86 of the Internal
8         Revenue Code;
9             (M) With the exception of any amounts subtracted
10         under subparagraph (N), an amount equal to the sum of
11         all amounts disallowed as deductions by (i) Sections
12         171(a) (2), and 265(2) of the Internal Revenue Code of
13         1954, as now or hereafter amended, and all amounts of
14         expenses allocable to interest and disallowed as
15         deductions by Section 265(1) of the Internal Revenue
16         Code of 1954, as now or hereafter amended; and (ii) for
17         taxable years ending on or after August 13, 1999,
18         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
19         the Internal Revenue Code; the provisions of this
20         subparagraph are exempt from the provisions of Section
21         250;
22             (N) An amount equal to all amounts included in such
23         total which are exempt from taxation by this State
24         either by reason of its statutes or Constitution or by
25         reason of the Constitution, treaties or statutes of the
26         United States; provided that, in the case of any

 

 

09500SB1544ham001 - 25 - LRB095 10647 BDD 37280 a

1         statute of this State or of the United States, any
2         treaty of the United States, the Illinois
3         Constitution, or the United States Constitution that
4         exempts income derived from bonds or other obligations
5         from the tax imposed under this Act, the amount
6         exempted shall be the income interest net of bond
7         premium amortization, interest expense incurred on
8         indebtedness to carry the bond or other obligation,
9         expenses incurred in producing the income to be
10         deducted, and all other related expenses. The amount of
11         expenses to be taken into account under this provision
12         may not exceed the amount of income that is exempted;
13             (O) An amount equal to any contribution made to a
14         job training project established pursuant to the Tax
15         Increment Allocation Redevelopment Act;
16             (P) An amount equal to the amount of the deduction
17         used to compute the federal income tax credit for
18         restoration of substantial amounts held under claim of
19         right for the taxable year pursuant to Section 1341 of
20         the Internal Revenue Code of 1986;
21             (Q) An amount equal to any amounts included in such
22         total, received by the taxpayer as an acceleration in
23         the payment of life, endowment or annuity benefits in
24         advance of the time they would otherwise be payable as
25         an indemnity for a terminal illness;
26             (R) An amount equal to the amount of any federal or

 

 

09500SB1544ham001 - 26 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 27 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 28 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 29 - LRB095 10647 BDD 37280 a

1         such assets after their recovery and who is a victim of
2         persecution for racial or religious reasons by Nazi
3         Germany or any other Axis regime or as an heir of the
4         victim. The amount of and the eligibility for any
5         public assistance, benefit, or similar entitlement is
6         not affected by the inclusion of items (i) and (ii) of
7         this paragraph in gross income for federal income tax
8         purposes. This paragraph is exempt from the provisions
9         of Section 250;
10             (Y) For taxable years beginning on or after January
11         1, 2002 and ending on or before December 31, 2004,
12         moneys contributed in the taxable year to a College
13         Savings Pool account under Section 16.5 of the State
14         Treasurer Act, except that amounts excluded from gross
15         income under Section 529(c)(3)(C)(i) of the Internal
16         Revenue Code shall not be considered moneys
17         contributed under this subparagraph (Y). For taxable
18         years beginning on or after January 1, 2005, a maximum
19         of $10,000 contributed in the taxable year to (i) a
20         College Savings Pool account under Section 16.5 of the
21         State Treasurer Act or (ii) the Illinois Prepaid
22         Tuition Trust Fund, except that amounts excluded from
23         gross income under Section 529(c)(3)(C)(i) of the
24         Internal Revenue Code shall not be considered moneys
25         contributed under this subparagraph (Y). This
26         subparagraph (Y) is exempt from the provisions of

 

 

09500SB1544ham001 - 30 - LRB095 10647 BDD 37280 a

1         Section 250;
2             (Z) For taxable years 2001 and thereafter, for the
3         taxable year in which the bonus depreciation deduction
4         is taken on the taxpayer's federal income tax return
5         under subsection (k) of Section 168 of the Internal
6         Revenue Code and for each applicable taxable year
7         thereafter, an amount equal to "x", where:
8                 (1) "y" equals the amount of the depreciation
9             deduction taken for the taxable year on the
10             taxpayer's federal income tax return on property
11             for which the bonus depreciation deduction was
12             taken in any year under subsection (k) of Section
13             168 of the Internal Revenue Code, but not including
14             the bonus depreciation deduction;
15                 (2) for taxable years ending on or before
16             December 31, 2005, "x" equals "y" multiplied by 30
17             and then divided by 70 (or "y" multiplied by
18             0.429); and
19                 (3) for taxable years ending after December
20             31, 2005:
21                     (i) for property on which a bonus
22                 depreciation deduction of 30% of the adjusted
23                 basis was taken, "x" equals "y" multiplied by
24                 30 and then divided by 70 (or "y" multiplied by
25                 0.429); and
26                     (ii) for property on which a bonus

 

 

09500SB1544ham001 - 31 - LRB095 10647 BDD 37280 a

1                 depreciation deduction of 50% of the adjusted
2                 basis was taken, "x" equals "y" multiplied by
3                 1.0.
4             The aggregate amount deducted under this
5         subparagraph in all taxable years for any one piece of
6         property may not exceed the amount of the bonus
7         depreciation deduction taken on that property on the
8         taxpayer's federal income tax return under subsection
9         (k) of Section 168 of the Internal Revenue Code. This
10         subparagraph (Z) is exempt from the provisions of
11         Section 250;
12             (AA) If the taxpayer sells, transfers, abandons,
13         or otherwise disposes of property for which the
14         taxpayer was required in any taxable year to make an
15         addition modification under subparagraph (D-15), then
16         an amount equal to that addition modification.
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 required in any taxable year to make an addition
22         modification under subparagraph (D-15), then an amount
23         equal to that addition modification.
24             The taxpayer is allowed to take the deduction under
25         this subparagraph only once with respect to any one
26         piece of property.

 

 

09500SB1544ham001 - 32 - LRB095 10647 BDD 37280 a

1             This subparagraph (AA) is exempt from the
2         provisions of Section 250;
3             (BB) Any amount included in adjusted gross income,
4         other than salary, received by a driver in a
5         ridesharing arrangement using a motor vehicle;
6             (CC) The amount of (i) any interest income (net of
7         the deductions allocable thereto) taken into account
8         for the taxable year with respect to a transaction with
9         a taxpayer that is required to make an addition
10         modification with respect to such transaction under
11         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
12         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
13         the amount of that addition modification, and (ii) any
14         income from intangible property (net of the deductions
15         allocable thereto) taken into account for the taxable
16         year with respect to a transaction with a taxpayer that
17         is required to make an addition modification with
18         respect to such transaction under Section
19         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
20         203(d)(2)(D-8), but not to exceed the amount of that
21         addition modification;
22             (DD) An amount equal to the interest income taken
23         into account for the taxable year (net of the
24         deductions allocable thereto) with respect to
25         transactions with (i) a foreign person who would be a
26         member of the taxpayer's unitary business group but for

 

 

09500SB1544ham001 - 33 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 34 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 35 - LRB095 10647 BDD 37280 a

1     income means an amount equal to the taxpayer's taxable
2     income for the taxable year as modified by paragraph (2).
3         (2) Modifications. The taxable income referred to in
4     paragraph (1) shall be modified by adding thereto the sum
5     of the following amounts:
6             (A) An amount equal to all amounts paid or accrued
7         to the taxpayer as interest and all distributions
8         received from regulated investment companies during
9         the taxable year to the extent excluded from gross
10         income in the computation of taxable income;
11             (B) An amount equal to the amount of tax imposed by
12         this Act to the extent deducted from gross income in
13         the computation of taxable income for the taxable year;
14             (C) In the case of a regulated investment company,
15         an amount equal to the excess of (i) the net long-term
16         capital gain for the taxable year, over (ii) the amount
17         of the capital gain dividends designated as such in
18         accordance with Section 852(b)(3)(C) of the Internal
19         Revenue Code and any amount designated under Section
20         852(b)(3)(D) of the Internal Revenue Code,
21         attributable to the taxable year (this amendatory Act
22         of 1995 (Public Act 89-89) is declarative of existing
23         law and is not a new enactment);
24             (D) The amount of any net operating loss deduction
25         taken in arriving at taxable income, other than a net
26         operating loss carried forward from a taxable year

 

 

09500SB1544ham001 - 36 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 37 - LRB095 10647 BDD 37280 a

1         taxable year ending prior to December 31, 1986, the
2         addition modification provided in this subparagraph
3         (E) shall be the sum of the amounts computed
4         independently under the preceding provisions of this
5         subparagraph (E) for each such taxable year;
6             (E-5) For taxable years ending after December 31,
7         1997, an amount equal to any eligible remediation costs
8         that the corporation deducted in computing adjusted
9         gross income and for which the corporation claims a
10         credit under subsection (l) of Section 201;
11             (E-10) For taxable years 2001 and thereafter, an
12         amount equal to the bonus depreciation deduction taken
13         on the taxpayer's federal income tax return for the
14         taxable year under subsection (k) of Section 168 of the
15         Internal Revenue Code; and
16             (E-11) If the taxpayer sells, transfers, abandons,
17         or otherwise disposes of property for which the
18         taxpayer was required in any taxable year to make an
19         addition modification under subparagraph (E-10), then
20         an amount equal to the aggregate amount of the
21         deductions taken in all taxable years under
22         subparagraph (T) with respect to that property.
23             If the taxpayer continues to own property through
24         the last day of the last tax year for which the
25         taxpayer may claim a depreciation deduction for
26         federal income tax purposes and for which the taxpayer

 

 

09500SB1544ham001 - 38 - LRB095 10647 BDD 37280 a

1         was allowed in any taxable year to make a subtraction
2         modification under subparagraph (T), then an amount
3         equal to that subtraction modification.
4             The taxpayer is required to make the addition
5         modification under this subparagraph only once with
6         respect to any one piece of property;
7             (E-12) An For taxable years ending on or after
8         December 31, 2004, an amount equal to the amount
9         otherwise allowed as a deduction in computing base
10         income for interest paid, accrued, or incurred,
11         directly or indirectly, (i) for taxable years ending on
12         or after December 31, 2004, to a foreign person who
13         would be a member of the same unitary business group
14         but for the fact the foreign person's business activity
15         outside the United States is 80% or more of the foreign
16         person's total business activity and (ii) for taxable
17         years ending on or after December 31, 2008, to a
18         foreign person who would be a member of the same
19         unitary business group but for the fact that the person
20         is prohibited under Section 1501(a)(27) from being
21         included in the unitary business group because he or
22         she is ordinarily required to apportion business
23         income under different subsections of Section 304. The
24         addition modification required by this subparagraph
25         shall be reduced to the extent that dividends were
26         included in base income of the unitary group for the

 

 

09500SB1544ham001 - 39 - LRB095 10647 BDD 37280 a

1         same taxable year and received by the taxpayer or by a
2         member of the taxpayer's unitary business group
3         (including amounts included in gross income pursuant
4         to Sections 951 through 964 of the Internal Revenue
5         Code and amounts included in gross income under Section
6         78 of the Internal Revenue Code) with respect to the
7         stock of the same person to whom the interest was paid,
8         accrued, or incurred.
9             This paragraph shall not apply to the following:
10                 (i) an item of interest paid, accrued, or
11             incurred, directly or indirectly, to 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 interest; or
16                 (ii) an item of interest paid, accrued, or
17             incurred, directly or indirectly, to a foreign
18             person if the taxpayer can establish, based on a
19             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                 interest to a person that is not a related
24                 member, and
25                     (b) the transaction giving rise to the
26                 interest expense between the taxpayer and the

 

 

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

 

 

09500SB1544ham001 - 41 - LRB095 10647 BDD 37280 a

1             by which the Department will utilize its authority
2             under Section 404 of this Act;
3             (E-13) An For taxable years ending on or after
4         December 31, 2004, an amount equal to the amount of
5         intangible expenses and costs otherwise allowed as a
6         deduction in computing base income, and that were paid,
7         accrued, or incurred, directly or indirectly, (i) for
8         taxable years ending on or after December 31, 2004, to
9         a foreign person who would be a member of the same
10         unitary business group but for the fact that the
11         foreign person's business activity outside the United
12         States is 80% or more of that person's total business
13         activity and (ii) for taxable years ending on or after
14         December 31, 2008, to a foreign person who would be a
15         member of the same unitary business group but for the
16         fact that the person is prohibited under Section
17         1501(a)(27) from being included in the unitary
18         business group because he or she is ordinarily required
19         to apportion business income under different
20         subsections of Section 304. The addition modification
21         required by this subparagraph shall be reduced to the
22         extent that dividends were included in base income of
23         the unitary group for the same taxable year and
24         received by the taxpayer or by a member of the
25         taxpayer's unitary business group (including amounts
26         included in gross income pursuant to Sections 951

 

 

09500SB1544ham001 - 42 - LRB095 10647 BDD 37280 a

1         through 964 of the Internal Revenue Code and amounts
2         included in gross income under Section 78 of the
3         Internal Revenue Code) with respect to the stock of the
4         same person to whom the intangible expenses and costs
5         were directly or indirectly paid, incurred, or
6         accrued. The preceding sentence shall not apply to the
7         extent that the same dividends caused a reduction to
8         the addition modification required under Section
9         203(b)(2)(E-12) of this Act. As used in this
10         subparagraph, the term "intangible expenses and costs"
11         includes (1) expenses, losses, and costs for, or
12         related to, the direct or indirect acquisition, use,
13         maintenance or management, ownership, sale, exchange,
14         or any other disposition of intangible property; (2)
15         losses incurred, directly or indirectly, from
16         factoring transactions or discounting transactions;
17         (3) royalty, patent, technical, and copyright fees;
18         (4) licensing fees; and (5) other similar expenses and
19         costs. For purposes of this subparagraph, "intangible
20         property" includes patents, patent applications, trade
21         names, trademarks, service marks, copyrights, mask
22         works, trade secrets, and similar types of intangible
23         assets.
24             This paragraph shall not apply to the following:
25                 (i) any item of intangible expenses or costs
26             paid, accrued, or incurred, directly or

 

 

09500SB1544ham001 - 43 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 44 - LRB095 10647 BDD 37280 a

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             (E-14) For taxable years ending on or after
15         December 31, 2008, an amount equal to the amount of
16         insurance premium expenses and costs otherwise allowed
17         as a deduction in computing base income, and that were
18         paid, accrued, or incurred, directly or indirectly, to
19         a person who would be a member of the same unitary
20         business group but for the fact that the person is
21         prohibited under Section 1501(a)(27) from being
22         included in the unitary business group because he or
23         she is ordinarily required to apportion business
24         income under different subsections of Section 304. The
25         addition modification required by this subparagraph
26         shall be reduced to the extent that dividends were

 

 

09500SB1544ham001 - 45 - LRB095 10647 BDD 37280 a

1         included in base income of the unitary group for the
2         same taxable year and received by the taxpayer or by a
3         member of the taxpayer's unitary business group
4         (including amounts included in gross income under
5         Sections 951 through 964 of the Internal Revenue Code
6         and amounts included in gross income under Section 78
7         of the Internal Revenue Code) with respect to the stock
8         of the same person to whom the intangible expenses and
9         costs were directly or indirectly paid, incurred, or
10         accrued. The preceding sentence does not apply to the
11         extent that the same dividends caused a reduction to
12         the addition modification required under Section
13         203(a)(2)(D-17) of this Act;
14             (E-15) For taxable years beginning after December
15         31, 2008, any deduction for dividends paid that is
16         allowed to a real estate investment trust under Section
17         857(b)(2)(B) of the Internal Revenue Code for
18         dividends paid;
19     and by deducting from the total so obtained the sum of the
20     following amounts:
21             (F) An amount equal to the amount of any tax
22         imposed by this Act which was refunded to the taxpayer
23         and included in such total for the taxable year;
24             (G) An amount equal to any amount included in such
25         total under Section 78 of the Internal Revenue Code;
26             (H) In the case of a regulated investment company,

 

 

09500SB1544ham001 - 46 - LRB095 10647 BDD 37280 a

1         an amount equal to the amount of exempt interest
2         dividends as defined in subsection (b) (5) of Section
3         852 of the Internal Revenue Code, paid to shareholders
4         for the taxable year;
5             (I) With the exception of any amounts subtracted
6         under subparagraph (J), an amount equal to the sum of
7         all amounts disallowed as deductions by (i) Sections
8         171(a) (2), and 265(a)(2) and amounts disallowed as
9         interest expense by Section 291(a)(3) of the Internal
10         Revenue Code, as now or hereafter amended, and all
11         amounts of expenses allocable to interest and
12         disallowed as deductions by Section 265(a)(1) of the
13         Internal Revenue Code, as now or hereafter amended; and
14         (ii) for taxable years ending on or after August 13,
15         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
16         832(b)(5)(B)(i) of the Internal Revenue Code; the
17         provisions of this subparagraph are exempt from the
18         provisions of Section 250;
19             (J) An amount equal to all amounts included in such
20         total which are exempt from taxation by this State
21         either by reason of its statutes or Constitution or by
22         reason of the Constitution, treaties or statutes of the
23         United States; provided that, in the case of any
24         statute of this State or of the United States, any
25         treaty of the United States, the Illinois
26         Constitution, or the United States Constitution that

 

 

09500SB1544ham001 - 47 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 48 - LRB095 10647 BDD 37280 a

1         shall not be eligible for the deduction provided under
2         this subparagraph (L);
3             (M) For any taxpayer that is a financial
4         organization within the meaning of Section 304(c) of
5         this Act, an amount included in such total as interest
6         income from a loan or loans made by such taxpayer to a
7         borrower, to the extent that such a loan is secured by
8         property which is eligible for the Enterprise Zone
9         Investment Credit or the River Edge Redevelopment Zone
10         Investment Credit. To determine the portion of a loan
11         or loans that is secured by property eligible for a
12         Section 201(f) investment credit to the borrower, the
13         entire principal amount of the loan or loans between
14         the taxpayer and the borrower should be divided into
15         the basis of the Section 201(f) investment credit
16         property which secures the loan or loans, using for
17         this purpose the original basis of such property on the
18         date that it was placed in service in the Enterprise
19         Zone or the River Edge Redevelopment Zone. The
20         subtraction modification available to taxpayer in any
21         year under this subsection shall be that portion of the
22         total interest paid by the borrower with respect to
23         such loan attributable to the eligible property as
24         calculated under the previous sentence. This
25         subparagraph (M) is exempt from the provisions of
26         Section 250;

 

 

09500SB1544ham001 - 49 - LRB095 10647 BDD 37280 a

1             (M-1) For any taxpayer that is a financial
2         organization within the meaning of Section 304(c) of
3         this Act, an amount included in such total as interest
4         income from a loan or loans made by such taxpayer to a
5         borrower, to the extent that such a loan is secured by
6         property which is eligible for the High Impact Business
7         Investment Credit. To determine the portion of a loan
8         or loans that is secured by property eligible for a
9         Section 201(h) investment credit to the borrower, the
10         entire principal amount of the loan or loans between
11         the taxpayer and the borrower should be divided into
12         the basis of the Section 201(h) investment credit
13         property which secures the loan or loans, using for
14         this purpose the original basis of such property on the
15         date that it was placed in service in a federally
16         designated Foreign Trade Zone or Sub-Zone located in
17         Illinois. No taxpayer that is eligible for the
18         deduction provided in subparagraph (M) of paragraph
19         (2) of this subsection shall be eligible for the
20         deduction provided under this subparagraph (M-1). The
21         subtraction modification available to taxpayers in any
22         year under this subsection shall be that portion of the
23         total interest paid by the borrower with respect to
24         such loan attributable to the eligible property as
25         calculated under the previous sentence;
26             (N) Two times any contribution made during the

 

 

09500SB1544ham001 - 50 - LRB095 10647 BDD 37280 a

1         taxable year to a designated zone organization to the
2         extent that the contribution (i) qualifies as a
3         charitable contribution under subsection (c) of
4         Section 170 of the Internal Revenue Code and (ii) must,
5         by its terms, be used for a project approved by the
6         Department of Commerce and Economic Opportunity under
7         Section 11 of the Illinois Enterprise Zone Act or under
8         Section 10-10 of the Illinois River Edge Redevelopment
9         Zone Act. This subparagraph (N) is exempt from the
10         provisions of Section 250;
11             (O) An amount equal to: (i) 85% for taxable years
12         ending on or before December 31, 1992, or, a percentage
13         equal to the percentage allowable under Section
14         243(a)(1) of the Internal Revenue Code of 1986 for
15         taxable years ending after December 31, 1992, of the
16         amount by which dividends included in taxable income
17         and received from a corporation that is not created or
18         organized under the laws of the United States or any
19         state or political subdivision thereof, including, for
20         taxable years ending on or after December 31, 1988,
21         dividends received or deemed received or paid or deemed
22         paid under Sections 951 through 964 of the Internal
23         Revenue Code, exceed the amount of the modification
24         provided under subparagraph (G) of paragraph (2) of
25         this subsection (b) which is related to such dividends,
26         and including, for taxable years ending on or after

 

 

09500SB1544ham001 - 51 - LRB095 10647 BDD 37280 a

1         December 31, 2008, dividends received from a real
2         estate investment trust; plus (ii) 100% of the amount
3         by which dividends, included in taxable income and
4         received, including, for taxable years ending on or
5         after December 31, 1988, dividends received or deemed
6         received or paid or deemed paid under Sections 951
7         through 964 of the Internal Revenue Code and including,
8         for taxable years ending on or after December 31, 2008,
9         dividends received from a real estate investment
10         trust, from any such corporation specified in clause
11         (i) that would but for the provisions of Section 1504
12         (b) (3) of the Internal Revenue Code be treated as a
13         member of the affiliated group which includes the
14         dividend recipient, exceed the amount of the
15         modification provided under subparagraph (G) of
16         paragraph (2) of this subsection (b) which is related
17         to such dividends;
18             (P) An amount equal to any contribution made to a
19         job training project established pursuant to the Tax
20         Increment Allocation Redevelopment Act;
21             (Q) An amount equal to the amount of the deduction
22         used to compute the federal income tax credit for
23         restoration of substantial amounts held under claim of
24         right for the taxable year pursuant to Section 1341 of
25         the Internal Revenue Code of 1986;
26             (R) On and after July 20, 1999, in the case of an

 

 

09500SB1544ham001 - 52 - LRB095 10647 BDD 37280 a

1         attorney-in-fact with respect to whom an interinsurer
2         or a reciprocal insurer has made the election under
3         Section 835 of the Internal Revenue Code, 26 U.S.C.
4         835, an amount equal to the excess, if any, of the
5         amounts paid or incurred by that interinsurer or
6         reciprocal insurer in the taxable year to the
7         attorney-in-fact over the deduction allowed to that
8         interinsurer or reciprocal insurer with respect to the
9         attorney-in-fact under Section 835(b) of the Internal
10         Revenue Code for the taxable year; the provisions of
11         this subparagraph are exempt from the provisions of
12         Section 250;
13             (S) For taxable years ending on or after December
14         31, 1997, in the case of a Subchapter S corporation, an
15         amount equal to all amounts of income allocable to a
16         shareholder subject to the Personal Property Tax
17         Replacement Income Tax imposed by subsections (c) and
18         (d) of Section 201 of this Act, including amounts
19         allocable to organizations exempt from federal income
20         tax by reason of Section 501(a) of the Internal Revenue
21         Code. This subparagraph (S) is exempt from the
22         provisions of Section 250;
23             (T) 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

 

 

09500SB1544ham001 - 53 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 54 - LRB095 10647 BDD 37280 a

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 (T) is exempt from the provisions of
6         Section 250;
7             (U) If the taxpayer sells, transfers, abandons, or
8         otherwise disposes of property for which the taxpayer
9         was required in any taxable year to make an addition
10         modification under subparagraph (E-10), then an amount
11         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 (E-10), 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 (U) is exempt from the
23         provisions of Section 250;
24             (V) The amount of: (i) any interest income (net of
25         the deductions allocable thereto) taken into account
26         for the taxable year with respect to a transaction with

 

 

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

 

 

09500SB1544ham001 - 56 - LRB095 10647 BDD 37280 a

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

 

 

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

 

 

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

 

 

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

 

 

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1         or estate is claiming the same tax for purposes of the
2         Illinois foreign tax credit under Section 601 of this
3         Act;
4             (G) An amount equal to the amount of the capital
5         gain deduction allowable under the Internal Revenue
6         Code, to the extent deducted from gross income in the
7         computation of taxable income;
8             (G-5) For taxable years ending after December 31,
9         1997, an amount equal to any eligible remediation costs
10         that the trust or estate deducted in computing adjusted
11         gross income and for which the trust or estate claims a
12         credit under subsection (l) of Section 201;
13             (G-10) For taxable years 2001 and thereafter, an
14         amount equal to the bonus depreciation deduction taken
15         on the taxpayer's federal income tax return for the
16         taxable year under subsection (k) of Section 168 of the
17         Internal Revenue Code; and
18             (G-11) If the taxpayer sells, transfers, abandons,
19         or otherwise disposes of property for which the
20         taxpayer was required in any taxable year to make an
21         addition modification under subparagraph (G-10), then
22         an amount equal to the aggregate amount of the
23         deductions taken in all taxable years under
24         subparagraph (R) with respect to that property.
25             If the taxpayer continues to own property through
26         the last day of the last tax year for which the

 

 

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1         taxpayer may claim a depreciation deduction for
2         federal income tax purposes and for which the taxpayer
3         was allowed in any taxable year to make a subtraction
4         modification under subparagraph (R), then an amount
5         equal to that subtraction modification.
6             The taxpayer is required to make the addition
7         modification under this subparagraph only once with
8         respect to any one piece of property;
9             (G-12) An For taxable years ending on or after
10         December 31, 2004, an amount equal to the amount
11         otherwise allowed as a deduction in computing base
12         income for interest paid, accrued, or incurred,
13         directly or indirectly, (i) for taxable years ending on
14         or after December 31, 2004, to a foreign person who
15         would be a member of the same unitary business group
16         but for the fact that the foreign person's business
17         activity outside the United States is 80% or more of
18         the foreign person's total business activity and (ii)
19         for taxable years ending on or after December 31, 2008,
20         to a foreign person who would be a member of the same
21         unitary business group but for the fact that the person
22         is prohibited under Section 1501(a)(27) from being
23         included in the unitary business group because he or
24         she is ordinarily required to apportion business
25         income under different subsections of Section 304. The
26         addition modification required by this subparagraph

 

 

09500SB1544ham001 - 62 - LRB095 10647 BDD 37280 a

1         shall be reduced to the extent that dividends were
2         included in base income of the unitary group for the
3         same taxable year and received by the taxpayer or by a
4         member of the taxpayer's unitary business group
5         (including amounts included in gross income pursuant
6         to Sections 951 through 964 of the Internal Revenue
7         Code and amounts included in gross income under Section
8         78 of the Internal Revenue Code) with respect to the
9         stock of the same person to whom the interest was paid,
10         accrued, or incurred.
11             This paragraph shall not apply to the following:
12                 (i) an item of interest paid, accrued, or
13             incurred, directly or indirectly, to a foreign
14             person who is subject in a foreign country or
15             state, other than a state which requires mandatory
16             unitary reporting, to a tax on or measured by net
17             income with respect to such interest; or
18                 (ii) an item of interest paid, accrued, or
19             incurred, directly or indirectly, to a foreign
20             person if the taxpayer can establish, based on a
21             preponderance of the evidence, both of the
22             following:
23                     (a) the foreign person, during the same
24                 taxable year, paid, accrued, or incurred, the
25                 interest to a person that is not a related
26                 member, and

 

 

09500SB1544ham001 - 63 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 64 - LRB095 10647 BDD 37280 a

1             pursuant to regulation adopted by the Department
2             and such regulations provide methods and standards
3             by which the Department will utilize its authority
4             under Section 404 of this Act;
5             (G-13) An For taxable years ending on or after
6         December 31, 2004, an amount equal to the amount of
7         intangible expenses and costs otherwise allowed as a
8         deduction in computing base income, and that were paid,
9         accrued, or incurred, directly or indirectly, (i) for
10         taxable years ending on or after December 31, 2004, to
11         a foreign person who would be a member of the same
12         unitary business group but for the fact that the
13         foreign person's business activity outside the United
14         States is 80% or more of that person's total business
15         activity and (ii) for taxable years ending on or after
16         December 31, 2008, to a foreign person who would be a
17         member of the same unitary business group but for the
18         fact that the person is prohibited under Section
19         1501(a)(27) from being included in the unitary
20         business group because he or she is ordinarily required
21         to apportion business income under different
22         subsections of Section 304. The addition modification
23         required by this subparagraph shall be reduced to the
24         extent that dividends were included in base income of
25         the unitary group for the same taxable year and
26         received by the taxpayer or by a member of the

 

 

09500SB1544ham001 - 65 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 66 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 67 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 68 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 69 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 70 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 71 - LRB095 10647 BDD 37280 a

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

 

 

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

 

 

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

 

 

09500SB1544ham001 - 74 - LRB095 10647 BDD 37280 a

1         (k) of Section 168 of the Internal Revenue Code. This
2         subparagraph (R) is exempt from the provisions of
3         Section 250;
4             (S) If the taxpayer sells, transfers, abandons, or
5         otherwise disposes of property for which the taxpayer
6         was required in any taxable year to make an addition
7         modification under subparagraph (G-10), then an amount
8         equal to that addition modification.
9             If the taxpayer continues to own property through
10         the last day of the last tax year for which the
11         taxpayer may claim a depreciation deduction for
12         federal income tax purposes and for which the taxpayer
13         was required in any taxable year to make an addition
14         modification under subparagraph (G-10), then an amount
15         equal to that addition modification.
16             The taxpayer is allowed to take the deduction under
17         this subparagraph only once with respect to any one
18         piece of property.
19             This subparagraph (S) is exempt from the
20         provisions of Section 250;
21             (T) The amount of (i) any interest income (net of
22         the deductions allocable thereto) taken into account
23         for the taxable year with respect to a transaction with
24         a taxpayer that is required to make an addition
25         modification with respect to such transaction under
26         Section 203(a)(2)(D-17), 203(b)(2)(E-12),

 

 

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

 

 

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

 

 

09500SB1544ham001 - 77 - LRB095 10647 BDD 37280 a

1         304, but not to exceed the addition modification
2         required to be made for the same taxable year under
3         Section 203(a)(2)(D-18) for intangible expenses and
4         costs paid, accrued, or incurred, directly or
5         indirectly, to the same person.
6         (3) Limitation. The amount of any modification
7     otherwise required under this subsection shall, under
8     regulations prescribed by the Department, be adjusted by
9     any amounts included therein which were properly paid,
10     credited, or required to be distributed, or permanently set
11     aside for charitable purposes pursuant to Internal Revenue
12     Code Section 642(c) during the taxable year.
 
13     (d) Partnerships.
14         (1) In general. In the case of a partnership, base
15     income means an amount equal to the taxpayer's taxable
16     income for the taxable year as modified by paragraph (2).
17         (2) Modifications. The taxable income referred to in
18     paragraph (1) shall be modified by adding thereto the sum
19     of the following amounts:
20             (A) An amount equal to all amounts paid or accrued
21         to the taxpayer as interest or dividends during the
22         taxable year to the extent excluded from gross income
23         in the computation of taxable income;
24             (B) An amount equal to the amount of tax imposed by
25         this Act to the extent deducted from gross income for

 

 

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1         the taxable year;
2             (C) The amount of deductions allowed to the
3         partnership pursuant to Section 707 (c) of the Internal
4         Revenue Code in calculating its taxable income;
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 taxable income;
9             (D-5) For taxable years 2001 and thereafter, an
10         amount equal to the bonus depreciation deduction taken
11         on the taxpayer's federal income tax return for the
12         taxable year under subsection (k) of Section 168 of the
13         Internal Revenue Code;
14             (D-6) If the taxpayer sells, transfers, abandons,
15         or otherwise disposes of property for which the
16         taxpayer was required in any taxable year to make an
17         addition modification under subparagraph (D-5), then
18         an amount equal to the aggregate amount of the
19         deductions taken in all taxable years under
20         subparagraph (O) with respect to that property.
21             If the taxpayer continues to own property through
22         the last day of the last tax year for which the
23         taxpayer may claim a depreciation deduction for
24         federal income tax purposes and for which the taxpayer
25         was allowed in any taxable year to make a subtraction
26         modification under subparagraph (O), then an amount

 

 

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

 

 

09500SB1544ham001 - 80 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 81 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 82 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 83 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 84 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 85 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 86 - LRB095 10647 BDD 37280 a

1         member of the taxpayer's unitary business group
2         (including amounts included in gross income under
3         Sections 951 through 964 of the Internal Revenue Code
4         and amounts included in gross income under Section 78
5         of the Internal Revenue Code) with respect to the stock
6         of the same person to whom the intangible expenses and
7         costs were directly or indirectly paid, incurred, or
8         accrued. The preceding sentence does not apply to the
9         extent that the same dividends caused a reduction to
10         the addition modification required under Section
11         203(a)(2)(D-17) of this Act.
12     and by deducting from the total so obtained the following
13     amounts:
14             (E) The valuation limitation amount;
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 all amounts included in
19         taxable income as modified by subparagraphs (A), (B),
20         (C) and (D) which are exempt from taxation by this
21         State either by reason of its statutes or Constitution
22         or by reason of the Constitution, treaties or statutes
23         of the United States; provided that, in the case of any
24         statute of this State or of the United States, any
25         treaty of the United States, the Illinois
26         Constitution, or the United States Constitution that

 

 

09500SB1544ham001 - 87 - LRB095 10647 BDD 37280 a

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

 

 

09500SB1544ham001 - 88 - LRB095 10647 BDD 37280 a

1         1954, as now or hereafter amended, and all amounts of
2         expenses allocable to interest and disallowed as
3         deductions by Section 265(1) of the Internal Revenue
4         Code, as now or hereafter amended; and (ii) for taxable
5         years ending on or after August 13, 1999, Sections
6         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
7         Internal Revenue Code; the provisions of this
8         subparagraph are exempt from the provisions of Section
9         250;
10             (K) An amount equal to those dividends included in
11         such total which were paid by a corporation which
12         conducts business operations in an Enterprise Zone or
13         zones created under the Illinois Enterprise Zone Act,
14         enacted by the 82nd General Assembly, or a River Edge
15         Redevelopment Zone or zones created under the River
16         Edge Redevelopment Zone Act and conducts substantially
17         all of its operations in an Enterprise Zone or Zones or
18         from a River Edge Redevelopment Zone or zones. This
19         subparagraph (K) is exempt from the provisions of
20         Section 250;
21             (L) An amount equal to any contribution made to a
22         job training project established pursuant to the Real
23         Property Tax Increment Allocation Redevelopment Act;
24             (M) An amount equal to those dividends included in
25         such total that were paid by a corporation that
26         conducts business operations in a federally designated

 

 

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

 

 

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

 

 

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

 

 

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1         203(d)(2)(D-8), but not to exceed the amount of such
2         addition modification;
3             (R) An amount equal to the interest income taken
4         into account for the taxable year (net of the
5         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
12         foreign person who would be a member of the same
13         unitary business group but for the fact that the person
14         is 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, but
18         not to exceed the addition modification required to be
19         made for the same taxable year under Section
20         203(d)(2)(D-7) for interest paid, accrued, or
21         incurred, directly or indirectly, to the same foreign
22         person; and
23             (S) An amount equal to the income from intangible
24         property taken into account for the taxable year (net
25         of the deductions allocable thereto) with respect to
26         transactions with (i) a foreign person who would be a

 

 

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

 

 

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

 

 

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

 

 

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1             (C) Regulated investment companies. In the case of
2         a regulated investment company subject to the tax
3         imposed by Section 852 of the Internal Revenue Code,
4         investment company taxable income;
5             (D) Real estate investment trusts. In the case of a
6         real estate investment trust subject to the tax imposed
7         by Section 857 of the Internal Revenue Code, real
8         estate investment trust taxable income;
9             (E) Consolidated corporations. In the case of a
10         corporation which is a member of an affiliated group of
11         corporations filing a consolidated income tax return
12         for the taxable year for federal income tax purposes,
13         taxable income determined as if such corporation had
14         filed a separate return for federal income tax purposes
15         for the taxable year and each preceding taxable year
16         for which it was a member of an affiliated group. For
17         purposes of this subparagraph, the taxpayer's separate
18         taxable income shall be determined as if the election
19         provided by Section 243(b) (2) of the Internal Revenue
20         Code had been in effect for all such years;
21             (F) Cooperatives. In the case of a cooperative
22         corporation or association, the taxable income of such
23         organization determined in accordance with the
24         provisions of Section 1381 through 1388 of the Internal
25         Revenue Code;
26             (G) Subchapter S corporations. In the case of: (i)

 

 

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1         a Subchapter S corporation for which there is in effect
2         an election for the taxable year under Section 1362 of
3         the Internal Revenue Code, the taxable income of such
4         corporation determined in accordance with Section
5         1363(b) of the Internal Revenue Code, except that
6         taxable income shall take into account those items
7         which are required by Section 1363(b)(1) of the
8         Internal Revenue Code to be separately stated; and (ii)
9         a Subchapter S corporation for which there is in effect
10         a federal election to opt out of the provisions of the
11         Subchapter S Revision Act of 1982 and have applied
12         instead the prior federal Subchapter S rules as in
13         effect on July 1, 1982, the taxable income of such
14         corporation determined in accordance with the federal
15         Subchapter S rules as in effect on July 1, 1982; and
16             (H) Partnerships. In the case of a partnership,
17         taxable income determined in accordance with Section
18         703 of the Internal Revenue Code, except that taxable
19         income shall take into account those items which are
20         required by Section 703(a)(1) to be separately stated
21         but which would be taken into account by an individual
22         in calculating his taxable income.
23         (3) Recapture of business expenses on disposition of
24     asset or business. Notwithstanding any other law to the
25     contrary, if in prior years income from an asset or
26     business has been classified as business income and in a

 

 

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1     later year is demonstrated to be non-business income, then
2     all expenses, without limitation, deducted in such later
3     year and in the 2 immediately preceding taxable years
4     related to that asset or business that generated the
5     non-business income shall be added back and recaptured as
6     business income in the year of the disposition of the asset
7     or business. Such amount shall be apportioned to Illinois
8     using the greater of the apportionment fraction computed
9     for the business under Section 304 of this Act for the
10     taxable year or the average of the apportionment fractions
11     computed for the business under Section 304 of this Act for
12     the taxable year and for the 2 immediately preceding
13     taxable years.
14     (f) Valuation limitation amount.
15         (1) In general. The valuation limitation amount
16     referred to in subsections (a) (2) (G), (c) (2) (I) and
17     (d)(2) (E) is an amount equal to:
18             (A) The sum of the pre-August 1, 1969 appreciation
19         amounts (to the extent consisting of gain reportable
20         under the provisions of Section 1245 or 1250 of the
21         Internal Revenue Code) for all property in respect of
22         which such gain was reported for the taxable year; plus
23             (B) The lesser of (i) the sum of the pre-August 1,
24         1969 appreciation amounts (to the extent consisting of
25         capital gain) for all property in respect of which such
26         gain was reported for federal income tax purposes for

 

 

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

 

 

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1         period for the property.
2             (C) The Department shall prescribe such
3         regulations as may be necessary to carry out the
4         purposes of this paragraph.
 
5     (g) Double deductions. Unless specifically provided
6 otherwise, nothing in this Section shall permit the same item
7 to be deducted more than once.
 
8     (h) Legislative intention. Except as expressly provided by
9 this Section there shall be no modifications or limitations on
10 the amounts of income, gain, loss or deduction taken into
11 account in determining gross income, adjusted gross income or
12 taxable income for federal income tax purposes for the taxable
13 year, or in the amount of such items entering into the
14 computation of base income and net income under this Act for
15 such taxable year, whether in respect of property values as of
16 August 1, 1969 or otherwise.
17 (Source: P.A. 93-812, eff. 7-26-04; 93-840, eff. 7-30-04;
18 94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 94-1021, eff.
19 7-12-06; 94-1074, eff. 12-26-06; revised 1-2-07.)
 
20     (35 ILCS 5/205)  (from Ch. 120, par. 2-205)
21     Sec. 205. Exempt organizations.
22     (a) Charitable, etc. organizations. The base income of an
23 organization which is exempt from the federal income tax by

 

 

09500SB1544ham001 - 101 - LRB095 10647 BDD 37280 a

1 reason of Section 501(a) of the Internal Revenue Code shall not
2 be determined under section 203 of this Act, but shall be its
3 unrelated business taxable income as determined under section
4 512 of the Internal Revenue Code, without any deduction for the
5 tax imposed by this Act. The standard exemption provided by
6 section 204 of this Act shall not be allowed in determining the
7 net income of an organization to which this subsection applies.
8     (b) Partnerships. A partnership as such shall not be
9 subject to the tax imposed by subsection 201 (a) and (b) of
10 this Act, but shall be subject to the replacement tax imposed
11 by subsection 201 (c) and (d) of this Act and shall compute its
12 base income as described in subsection (d) of Section 203 of
13 this Act. For taxable years ending on or after December 31,
14 2004, an investment partnership, as defined in Section
15 1501(a)(11.5) of this Act, shall not be subject to the tax
16 imposed by subsections (c) and (d) of Section 201 of this Act.
17 For taxable years ending on or after December 31, 2008, an
18 investment partnership, as defined in Section 1501(a)(11.5) of
19 this Act, shall not be subject to the tax imposed by
20 subsections (c) and (d) of Section 201 of this Act. A
21 partnership shall file such returns and other information at
22 such time and in such manner as may be required under Article 5
23 of this Act. The partners in a partnership shall be liable for
24 the replacement tax imposed by subsection 201 (c) and (d) of
25 this Act on such partnership, to the extent such tax is not
26 paid by the partnership, as provided under the laws of Illinois

 

 

09500SB1544ham001 - 102 - LRB095 10647 BDD 37280 a

1 governing the liability of partners for the obligations of a
2 partnership. Persons carrying on business as partners shall be
3 liable for the tax imposed by subsection 201 (a) and (b) of
4 this Act only in their separate or individual capacities.
5     (c) Subchapter S corporations. A Subchapter S corporation
6 shall not be subject to the tax imposed by subsection 201 (a)
7 and (b) of this Act but shall be subject to the replacement tax
8 imposed by subsection 201 (c) and (d) of this Act and shall
9 file such returns and other information at such time and in
10 such manner as may be required under Article 5 of this Act.
11     (d) Combat zone death. An individual relieved from the
12 federal income tax for any taxable year by reason of section
13 692 of the Internal Revenue Code shall not be subject to the
14 tax imposed by this Act for such taxable year.
15     (e) Certain trusts. A common trust fund described in
16 Section 584 of the Internal Revenue Code, and any other trust
17 to the extent that the grantor is treated as the owner thereof
18 under sections 671 through 678 of the Internal Revenue Code
19 shall not be subject to the tax imposed by this Act.
20     (f) Certain business activities. A person not otherwise
21 subject to the tax imposed by this Act shall not become subject
22 to the tax imposed by this Act by reason of:
23         (1) that person's ownership of tangible personal
24     property located at the premises of a printer in this State
25     with which the person has contracted for printing, or
26         (2) activities of the person's employees or agents

 

 

09500SB1544ham001 - 103 - LRB095 10647 BDD 37280 a

1     located solely at the premises of a printer and related to
2     quality control, distribution, or printing services
3     performed by a printer in the State with which the person
4     has contracted for printing.
5     (g) A nonprofit risk organization that holds a certificate
6 of authority under Article VIID of the Illinois Insurance Code
7 is exempt from the tax imposed under this Act with respect to
8 its activities or operations in furtherance of the powers
9 conferred upon it under that Article VIID of the Illinois
10 Insurance Code.
11 (Source: P.A. 93-840, eff. 7-30-04; 93-918, eff. 1-1-05;
12 revised 10-25-04.)
 
13     (35 ILCS 5/207)  (from Ch. 120, par. 2-207)
14     Sec. 207. Net Losses.
15     (a) If after applying all of the (i) modifications provided
16 for in paragraph (2) of Section 203(b), paragraph (2) of
17 Section 203(c) and paragraph (2) of Section 203(d) and (ii) the
18 allocation and apportionment provisions of Article 3 of this
19 Act and subsection (c) of this Section, the taxpayer's net
20 income results in a loss;
21         (1) for any taxable year ending prior to December 31,
22     1999, such loss shall be allowed as a carryover or
23     carryback deduction in the manner allowed under Section 172
24     of the Internal Revenue Code;
25         (2) for any taxable year ending on or after December

 

 

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1     31, 1999 and prior to December 31, 2003, such loss shall be
2     allowed as a carryback to each of the 2 taxable years
3     preceding the taxable year of such loss and shall be a net
4     operating loss carryover to each of the 20 taxable years
5     following the taxable year of such loss; and
6         (3) for any taxable year ending on or after December
7     31, 2003, such loss shall be allowed as a net operating
8     loss carryover to each of the 12 taxable years following
9     the taxable year of such loss.
10     (a-5) Election to relinquish carryback and order of
11 application of losses.
12             (A) For losses incurred in tax years ending prior
13         to December 31, 2003, the taxpayer may elect to
14         relinquish the entire carryback period with respect to
15         such loss. Such election shall be made in the form and
16         manner prescribed by the Department and shall be made
17         by the due date (including extensions of time) for
18         filing the taxpayer's return for the taxable year in
19         which such loss is incurred, and such election, once
20         made, shall be irrevocable.
21             (B) The entire amount of such loss shall be carried
22         to the earliest taxable year to which such loss may be
23         carried. The amount of such loss which shall be carried
24         to each of the other taxable years shall be the excess,
25         if any, of the amount of such loss over the sum of the
26         deductions for carryback or carryover of such loss

 

 

09500SB1544ham001 - 105 - LRB095 10647 BDD 37280 a

1         allowable for each of the prior taxable years to which
2         such loss may be carried.
3     (b) Any loss determined under subsection (a) of this
4 Section must be carried back or carried forward in the same
5 manner for purposes of subsections (a) and (b) of Section 201
6 of this Act as for purposes of subsections (c) and (d) of
7 Section 201 of this Act.
8     (c) Notwithstanding any other provision of this Act, for
9 each taxable year ending on or after December 31, 2008, for
10 purposes of computing the loss for the taxable year under
11 subsection (a) of this Section and the deduction taken into
12 account for the taxable year for a net operating loss carryover
13 under paragraphs (1), (2), and (3) of subsection (a) of this
14 Section, the loss and net operating loss carryover shall be
15 reduced in an amount equal to the reduction to the net
16 operating loss and net operating loss carryover to the taxable
17 year, respectively, required under Section 108(b)(2)(A) of the
18 Internal Revenue Code, multiplied by a fraction, the numerator
19 of which is the amount of discharge of indebtedness income that
20 is excluded from gross income for the taxable year (but only if
21 the taxable year ends on or after December 31, 2008) under
22 Section 108(a) of the Internal Revenue Code and that would have
23 been allocated and apportioned to this State under Article 3 of
24 this Act but for that exclusion, and the denominator of which
25 is the total amount of discharge of indebtedness income
26 excluded from gross income under Section 108(a) of the Internal

 

 

09500SB1544ham001 - 106 - LRB095 10647 BDD 37280 a

1 Revenue Code for the taxable year. The reduction required under
2 this subsection (c) shall be made after the determination of
3 Illinois net income for the taxable year in which the
4 indebtedness is discharged.
5 (Source: P.A. 93-29, eff. 6-20-03.)
 
6     (35 ILCS 5/304)  (from Ch. 120, par. 3-304)
7     Sec. 304. Business income of persons other than residents.
8     (a) In general. The business income of a person other than
9 a resident shall be allocated to this State if such person's
10 business income is derived solely from this State. If a person
11 other than a resident derives business income from this State
12 and one or more other states, then, for tax years ending on or
13 before December 30, 1998, and except as otherwise provided by
14 this Section, such person's business income shall be
15 apportioned to this State by multiplying the income by a
16 fraction, the numerator of which is the sum of the property
17 factor (if any), the payroll factor (if any) and 200% of the
18 sales factor (if any), and the denominator of which is 4
19 reduced by the number of factors other than the sales factor
20 which have a denominator of zero and by an additional 2 if the
21 sales factor has a denominator of zero. For tax years ending on
22 or after December 31, 1998, and except as otherwise provided by
23 this Section, persons other than residents who derive business
24 income from this State and one or more other states shall
25 compute their apportionment factor by weighting their

 

 

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1 property, payroll, and sales factors as provided in subsection
2 (h) of this Section.
3     (1) Property factor.
4         (A) The property factor is a fraction, the numerator of
5     which is the average value of the person's real and
6     tangible personal property owned or rented and used in the
7     trade or business in this State during the taxable year and
8     the denominator of which is the average value of all the
9     person's real and tangible personal property owned or
10     rented and used in the trade or business during the taxable
11     year.
12         (B) Property owned by the person is valued at its
13     original cost. Property rented by the person is valued at 8
14     times the net annual rental rate. Net annual rental rate is
15     the annual rental rate paid by the person less any annual
16     rental rate received by the person from sub-rentals.
17         (C) The average value of property shall be determined
18     by averaging the values at the beginning and ending of the
19     taxable year but the Director may require the averaging of
20     monthly values during the taxable year if reasonably
21     required to reflect properly the average value of the
22     person's property.
23     (2) Payroll factor.
24         (A) The payroll factor is a fraction, the numerator of
25     which is the total amount paid in this State during the
26     taxable year by the person for compensation, and the

 

 

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1     denominator of which is the total compensation paid
2     everywhere during the taxable year.
3         (B) Compensation is paid in this State if:
4             (i) The individual's service is performed entirely
5         within this State;
6             (ii) The individual's service is performed both
7         within and without this State, but the service
8         performed without this State is incidental to the
9         individual's service performed within this State; or
10             (iii) Some of the service is performed within this
11         State and either the base of operations, or if there is
12         no base of operations, the place from which the service
13         is directed or controlled is within this State, or the
14         base of operations or the place from which the service
15         is directed or controlled is not in any state in which
16         some part of the service is performed, but the
17         individual's residence is in this State.
18             (iv) Compensation paid to nonresident professional
19         athletes.
20             (a) General. The Illinois source income of a
21         nonresident individual who is a member of a
22         professional athletic team includes the portion of the
23         individual's total compensation for services performed
24         as a member of a professional athletic team during the
25         taxable year which the number of duty days spent within
26         this State performing services for the team in any

 

 

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1         manner during the taxable year bears to the total
2         number of duty days spent both within and without this
3         State during the taxable year.
4             (b) Travel days. Travel days that do not involve
5         either a game, practice, team meeting, or other similar
6         team event are not considered duty days spent in this
7         State. However, such travel days are considered in the
8         total duty days spent both within and without this
9         State.
10             (c) Definitions. For purposes of this subpart
11         (iv):
12                 (1) The term "professional athletic team"
13             includes, but is not limited to, any professional
14             baseball, basketball, football, soccer, or hockey
15             team.
16                 (2) The term "member of a professional
17             athletic team" includes those employees who are
18             active players, players on the disabled list, and
19             any other persons required to travel and who travel
20             with and perform services on behalf of a
21             professional athletic team on a regular basis.
22             This includes, but is not limited to, coaches,
23             managers, and trainers.
24                 (3) Except as provided in items (C) and (D) of
25             this subpart (3), the term "duty days" means all
26             days during the taxable year from the beginning of

 

 

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

 

 

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1                 team during the period from the beginning of
2                 the professional athletic team's official
3                 pre-season training period through the last
4                 game in which the team competes, or is
5                 scheduled to compete, shall begin on the day
6                 that person joins the team. Conversely, duty
7                 days for any person who leaves a team during
8                 this period shall end on the day that person
9                 leaves the team. Where a person switches teams
10                 during a taxable year, a separate duty-day
11                 calculation shall be made for the period the
12                 person was with each team.
13                     (D) Days for which a member of a
14                 professional athletic team is not compensated
15                 and is not performing services for the team in
16                 any manner, including days when such member of
17                 a professional athletic team has been
18                 suspended without pay and prohibited from
19                 performing any services for the team, shall not
20                 be treated as duty days.
21                     (E) Days for which a member of a
22                 professional athletic team is on the disabled
23                 list and does not conduct rehabilitation
24                 activities at facilities of the team, and is
25                 not otherwise performing services for the team
26                 in Illinois, shall not be considered duty days

 

 

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1                 spent in this State. All days on the disabled
2                 list, however, are considered to be included in
3                 total duty days spent both within and without
4                 this State.
5                 (4) The term "total compensation for services
6             performed as a member of a professional athletic
7             team" means the total compensation received during
8             the taxable year for services performed:
9                     (A) from the beginning of the official
10                 pre-season training period through the last
11                 game in which the team competes or is scheduled
12                 to compete during that taxable year; and
13                     (B) during the taxable year on a date which
14                 does not fall within the foregoing period
15                 (e.g., participation in instructional leagues,
16                 the "All Star Game", or promotional caravans).
17                 This compensation shall include, but is not
18             limited to, salaries, wages, bonuses as described
19             in this subpart, and any other type of compensation
20             paid during the taxable year to a member of a
21             professional athletic team for services performed
22             in that year. This compensation does not include
23             strike benefits, severance pay, termination pay,
24             contract or option year buy-out payments,
25             expansion or relocation payments, or any other
26             payments not related to services performed for the

 

 

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1             team.
2                 For purposes of this subparagraph, "bonuses"
3             included in "total compensation for services
4             performed as a member of a professional athletic
5             team" subject to the allocation described in
6             Section 302(c)(1) are: bonuses earned as a result
7             of play (i.e., performance bonuses) during the
8             season, including bonuses paid for championship,
9             playoff or "bowl" games played by a team, or for
10             selection to all-star league or other honorary
11             positions; and bonuses paid for signing a
12             contract, unless the payment of the signing bonus
13             is not conditional upon the signee playing any
14             games for the team or performing any subsequent
15             services for the team or even making the team, the
16             signing bonus is payable separately from the
17             salary and any other compensation, and the signing
18             bonus is nonrefundable.
19     (3) Sales factor.
20         (A) The sales factor is a fraction, the numerator of
21     which is the total sales of the person in this State during
22     the taxable year, and the denominator of which is the total
23     sales of the person everywhere during the taxable year.
24         (B) Sales of tangible personal property are in this
25     State if:
26             (i) The property is delivered or shipped to a

 

 

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1         purchaser, other than the United States government,
2         within this State regardless of the f. o. b. point or
3         other conditions of the sale; or
4             (ii) The property is shipped from an office, store,
5         warehouse, factory or other place of storage in this
6         State and either the purchaser is the United States
7         government or the person is not taxable in the state of
8         the purchaser; provided, however, that premises owned
9         or leased by a person who has independently contracted
10         with the seller for the printing of newspapers,
11         periodicals or books shall not be deemed to be an
12         office, store, warehouse, factory or other place of
13         storage for purposes of this Section. For taxable years
14         ending before December 31, 2008, sales Sales of
15         tangible personal property are not in this State if the
16         seller and purchaser would be members of the same
17         unitary business group but for the fact that either the
18         seller or purchaser is a person with 80% or more of
19         total business activity outside of the United States
20         and the property is purchased for resale.
21         (B-1) Patents, copyrights, trademarks, and similar
22     items of intangible personal property.
23             (i) Gross receipts from the licensing, sale, or
24         other disposition of a patent, copyright, trademark,
25         or similar item of intangible personal property are in
26         this State to the extent the item is utilized in this

 

 

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1         State during the year the gross receipts are included
2         in gross income.
3             (ii) Place of utilization.
4                 (I) A patent is utilized in a state to the
5             extent that it is employed in production,
6             fabrication, manufacturing, or other processing in
7             the state or to the extent that a patented product
8             is produced in the state. If a patent is utilized
9             in more than one state, the extent to which it is
10             utilized in any one state shall be a fraction equal
11             to the gross receipts of the licensee or purchaser
12             from sales or leases of items produced,
13             fabricated, manufactured, or processed within that
14             state using the patent and of patented items
15             produced within that state, divided by the total of
16             such gross receipts for all states in which the
17             patent is utilized.
18                 (II) A copyright is utilized in a state to the
19             extent that printing or other publication
20             originates in the state. If a copyright is utilized
21             in more than one state, the extent to which it is
22             utilized in any one state shall be a fraction equal
23             to the gross receipts from sales or licenses of
24             materials printed or published in that state
25             divided by the total of such gross receipts for all
26             states in which the copyright is utilized.

 

 

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1                 (III) Trademarks and other items of intangible
2             personal property governed by this paragraph (B-1)
3             are utilized in the state in which the commercial
4             domicile of the licensee or purchaser is located.
5             (iii) If the state of utilization of an item of
6         property governed by this paragraph (B-1) cannot be
7         determined from the taxpayer's books and records or
8         from the books and records of any person related to the
9         taxpayer within the meaning of Section 267(b) of the
10         Internal Revenue Code, 26 U.S.C. 267, the gross
11         receipts attributable to that item shall be excluded
12         from both the numerator and the denominator of the
13         sales factor.
14         (B-2) Gross receipts from the license, sale, or other
15     disposition of patents, copyrights, trademarks, and
16     similar items of intangible personal property may be
17     included in the numerator or denominator of the sales
18     factor only if gross receipts from licenses, sales, or
19     other disposition of such items comprise more than 50% of
20     the taxpayer's total gross receipts included in gross
21     income during the tax year and during each of the 2
22     immediately preceding tax years; provided that, when a
23     taxpayer is a member of a unitary business group, such
24     determination shall be made on the basis of the gross
25     receipts of the entire unitary business group.
26         (C) For taxable years ending before December 31, 2008,

 

 

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1     sales Sales, other than sales governed by paragraphs (B),
2     and (B-1), and (B-2), are in this State if:
3             (i) The income-producing activity is performed in
4         this State; or
5             (ii) The income-producing activity is performed
6         both within and without this State and a greater
7         proportion of the income-producing activity is
8         performed within this State than without this State,
9         based on performance costs.
10         (C-5) For taxable years ending on or after December 31,
11     2008, sales, other than sales governed by paragraphs (B),
12     (B-1), and (B-2), are in this State if the purchaser is in
13     this State or the sale is otherwise attributable to this
14     State's marketplace. The following examples are
15     illustrative:
16             (i) Sales from the sale or lease of real property
17         are in this State if the property is located in this
18         State.
19             (ii) Sales from the lease or rental of tangible
20         personal property are in this State if the property is
21         located in this State during the rental period. Sales
22         from the lease or rental of tangible personal property
23         that is characteristically moving property, including,
24         but not limited to, motor vehicles, rolling stock,
25         aircraft, vessels, or mobile equipment are in this
26         State to the extent that the property is used in this

 

 

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1         State.
2             (iii) Sales of intangible personal property are in
3         this State if the purchaser realizes benefit from the
4         property in this State. If the purchaser realizes
5         benefit from the property both within and without this
6         State, the gross receipts from the sale shall be
7         divided among those states in which the taxpayer is
8         taxable in proportion to the benefit in each state. If
9         the proportionate benefit in this State cannot be
10         determined, the sale shall be excluded from both the
11         numerator and the denominator of the sales factor.
12             (iv) Sales of services are in this State if the
13         benefit of the service is realized in this State. If
14         the benefit of the service is realized both within and
15         without this State, the gross receipts from the sale
16         shall be divided among those states in which the
17         taxpayer is taxable in proportion to the benefit of
18         service realized in each state. If the proportionate
19         benefit in this State cannot be determined, the sale
20         shall be excluded from both the numerator and the
21         denominator of the sales factor. The Department may
22         adopt rules prescribing where the benefit of specific
23         types of service, including, but not limited to,
24         telecommunications, broadcast, cable, advertising,
25         publishing, and utility service, is realized.
26         (D) For taxable years ending on or after December 31,

 

 

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1     1995, the following items of income shall not be included
2     in the numerator or denominator of the sales factor:
3     dividends; amounts included under Section 78 of the
4     Internal Revenue Code; and Subpart F income as defined in
5     Section 952 of the Internal Revenue Code. No inference
6     shall be drawn from the enactment of this paragraph (D) in
7     construing this Section for taxable years ending before
8     December 31, 1995.
9         (E) Paragraphs (B-1) and (B-2) shall apply to tax years
10     ending on or after December 31, 1999, provided that a
11     taxpayer may elect to apply the provisions of these
12     paragraphs to prior tax years. Such election shall be made
13     in the form and manner prescribed by the Department, shall
14     be irrevocable, and shall apply to all tax years; provided
15     that, if a taxpayer's Illinois income tax liability for any
16     tax year, as assessed under Section 903 prior to January 1,
17     1999, was computed in a manner contrary to the provisions
18     of paragraphs (B-1) or (B-2), no refund shall be payable to
19     the taxpayer for that tax year to the extent such refund is
20     the result of applying the provisions of paragraph (B-1) or
21     (B-2) retroactively. In the case of a unitary business
22     group, such election shall apply to all members of such
23     group for every tax year such group is in existence, but
24     shall not apply to any taxpayer for any period during which
25     that taxpayer is not a member of such group.
26     (b) Insurance companies.

 

 

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1         (1) In general. Except as otherwise provided by
2     paragraph (2), business income of an insurance company for
3     a taxable year shall be apportioned to this State by
4     multiplying such income by a fraction, the numerator of
5     which is the direct premiums written for insurance upon
6     property or risk in this State, and the denominator of
7     which is the direct premiums written for insurance upon
8     property or risk everywhere. For purposes of this
9     subsection, the term "direct premiums written" means the
10     total amount of direct premiums written, assessments and
11     annuity considerations, and surplus line contracts, but
12     excluding deposit-type funds, as reported for the taxable
13     year on the annual statement filed by the company with the
14     Illinois Director of Insurance in the form approved by the
15     National Convention of Insurance Commissioners as filed by
16     the taxpayer with the Department of Financial and
17     Professional Regulation or, if no report is filed with that
18     Department, as filed by the taxpayer with its state of
19     domicile. If no such annual report is filed with any of the
20     United States for a particular year, "direct premiums
21     written" shall be determined by applying the instructions
22     to the Illinois annual report form for that year or such
23     other form as may be prescribed in lieu thereof.
24         (2) Reinsurance. If the principal source of premiums
25     written by an insurance company consists of premiums for
26     reinsurance accepted by it, the business income of such

 

 

09500SB1544ham001 - 121 - LRB095 10647 BDD 37280 a

1     company shall be apportioned to this State by multiplying
2     such income by a fraction, the numerator of which is the
3     sum of (i) direct premiums written for insurance upon
4     property or risk in this State, plus (ii) premiums written
5     for reinsurance accepted in respect of property or risk in
6     this State, and the denominator of which is the sum of
7     (iii) direct premiums written for insurance upon property
8     or risk everywhere, plus (iv) premiums written for
9     reinsurance accepted in respect of property or risk
10     everywhere. For taxable years ending before December 31,
11     2008, for purposes of this paragraph, premiums written for
12     reinsurance accepted in respect of property or risk in this
13     State, whether or not otherwise determinable, may, at the
14     election of the company, be determined on the basis of the
15     proportion which premiums written for reinsurance accepted
16     from companies commercially domiciled in Illinois bears to
17     premiums written for reinsurance accepted from all
18     sources, or, alternatively, in the proportion which the sum
19     of the direct premiums written for insurance upon property
20     or risk in this State by each ceding company from which
21     reinsurance is accepted bears to the sum of the total
22     direct premiums written by each such ceding company for the
23     taxable year.
24     (c) Financial organizations.
25         (1) In general. For taxable years ending before
26     December 31, 2008, business Business income of a financial

 

 

09500SB1544ham001 - 122 - LRB095 10647 BDD 37280 a

1     organization shall be apportioned to this State by
2     multiplying such income by a fraction, the numerator of
3     which is its business income from sources within this
4     State, and the denominator of which is its business income
5     from all sources. For the purposes of this subsection, the
6     business income of a financial organization from sources
7     within this State is the sum of the amounts referred to in
8     subparagraphs (A) through (E) following, but excluding the
9     adjusted income of an international banking facility as
10     determined in paragraph (2):
11             (A) Fees, commissions or other compensation for
12         financial services rendered within this State;
13             (B) Gross profits from trading in stocks, bonds or
14         other securities managed within this State;
15             (C) Dividends, and interest from Illinois
16         customers, which are received within this State;
17             (D) Interest charged to customers at places of
18         business maintained within this State for carrying
19         debit balances of margin accounts, without deduction
20         of any costs incurred in carrying such accounts; and
21             (E) Any other gross income resulting from the
22         operation as a financial organization within this
23         State. In computing the amounts referred to in
24         paragraphs (A) through (E) of this subsection, any
25         amount received by a member of an affiliated group
26         (determined under Section 1504(a) of the Internal

 

 

09500SB1544ham001 - 123 - LRB095 10647 BDD 37280 a

1         Revenue Code but without reference to whether any such
2         corporation is an "includible corporation" under
3         Section 1504(b) of the Internal Revenue Code) from
4         another member of such group shall be included only to
5         the extent such amount exceeds expenses of the
6         recipient directly related thereto.
7         (2) International Banking Facility. For taxable years
8     ending before December 31, 2008:
9             (A) Adjusted Income. The adjusted income of an
10         international banking facility is its income reduced
11         by the amount of the floor amount.
12             (B) Floor Amount. The floor amount shall be the
13         amount, if any, determined by multiplying the income of
14         the international banking facility by a fraction, not
15         greater than one, which is determined as follows:
16                 (i) The numerator shall be:
17                 The average aggregate, determined on a
18             quarterly basis, of the financial organization's
19             loans to banks in foreign countries, to foreign
20             domiciled borrowers (except where secured
21             primarily by real estate) and to foreign
22             governments and other foreign official
23             institutions, as reported for its branches,
24             agencies and offices within the state on its
25             "Consolidated Report of Condition", Schedule A,
26             Lines 2.c., 5.b., and 7.a., which was filed with

 

 

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

 

 

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1         is altered so that the information required for
2         determining the floor amount is not found on Schedule
3         A, lines 2.c., 5.b. and 7.a., the financial institution
4         shall notify the Department and the Department may, by
5         regulations or otherwise, prescribe or authorize the
6         use of an alternative source for such information. The
7         financial institution shall also notify the Department
8         should its international banking facility fail to
9         qualify as such, in whole or in part, or should there
10         be any amendment or change to the Consolidated Report
11         of Condition, as originally filed, to the extent such
12         amendment or change alters the information used in
13         determining the floor amount.
14         (3) For taxable years ending on or after December 31,
15     2008, the business income of a financial organization shall
16     be apportioned to this State by multiplying such income by
17     a fraction, the numerator of which is its gross receipts
18     from sources in this State or otherwise attributable to
19     this State's marketplace and the denominator of which is
20     its gross receipts everywhere during the taxable year.
21     "Gross receipts" for purposes of this subparagraph (3)
22     means gross income, including net taxable gain on
23     disposition of assets, including securities and money
24     market instruments, when derived from transactions and
25     activities in the regular course of the financial
26     organization's trade or business. If a person derives

 

 

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1     business income from activities in addition to the
2     provision of financial services, this subparagraph (3)
3     shall apply only to its business income from financial
4     services, and its other business income shall be
5     apportioned to this State under the applicable provisions
6     of this Section. The following examples are illustrative:
7             (i) Receipts from the lease or rental of real or
8         tangible personal property are in this State if the
9         property is located in this State during the rental
10         period. Receipts from the lease or rental of tangible
11         personal property that is characteristically moving
12         property, including, but not limited to, motor
13         vehicles, rolling stock, aircraft, vessels, or mobile
14         equipment are from sources in this State to the extent
15         that the property is used in this State.
16             (ii) Interest income, commissions, fees, gains on
17         disposition, and other receipts from assets in the
18         nature of loans that are secured primarily by real
19         estate or tangible personal property are from sources
20         in this State if the security is located in this State.
21             (iii) Interest income, commissions, fees, gains on
22         disposition, and other receipts from consumer loans
23         that are not secured by real or tangible personal
24         property are from sources in this State if the debtor
25         is a resident of this State.
26             (iv) Interest income, commissions, fees, gains on

 

 

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1         disposition, and other receipts from commercial loans
2         and installment obligations that are not secured by
3         real or tangible personal property are from sources in
4         this State if the proceeds of the loan are to be
5         applied in this State. If it cannot be determined where
6         the funds are to be applied, the income and receipts
7         are from sources in this State if the office of the
8         borrower from which the loan was negotiated in the
9         regular course of business is located in this State. If
10         the location of this office cannot be determined, the
11         income and receipts shall be excluded from the
12         numerator and denominator of the sales factor.
13             (v) Interest income, fees, gains on disposition,
14         service charges, merchant discount income, and other
15         receipts from credit card receivables are from sources
16         in this State if the card charges are regularly billed
17         to a customer in this State.
18             (vi) Receipts from the performance of services,
19         including, but not limited to, fiduciary, advisory,
20         and brokerage services, are in this State if the
21         benefit of the service is realized in this State. If
22         the benefit of the service is realized both within and
23         without this State, the gross receipts from the sale
24         shall be divided among those states in which the
25         taxpayer is taxable in proportion to the benefit of
26         service realized in each state. If the proportionate

 

 

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1         benefit in this State cannot be determined, the sale
2         shall be excluded from both the numerator and the
3         denominator of the gross receipts factor.
4             (vii) Receipts from the issuance of travelers
5         checks and money orders are from sources in this State
6         if the checks and money orders are issued from a
7         location within this State.
8             (viii) In the case of a financial organization that
9         accepts deposits, receipts from investments and from
10         money market instruments are apportioned to this State
11         based on the ratio that the total deposits of the
12         financial organization (including all members of the
13         financial organization's unitary group) from this
14         State, its residents, (including businesses with an
15         office or other place of business in this State), and
16         its political subdivisions, agencies, and
17         instrumentalities bear to total deposits everywhere.
18         For purposes of this subdivision, deposits must be
19         attributed to this State under the preceding sentence,
20         whether or not the deposits are accepted or maintained
21         by the financial organization at locations within this
22         State. In the case of a financial organization that
23         does not accept deposits, receipts from investments in
24         securities and from money market instruments shall be
25         excluded from the numerator and the denominator of the
26         gross receipts factor.

 

 

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1         (4) As used in subparagraph (3), "deposit" includes but
2     is not limited to:
3             (i) the unpaid balance of money or its equivalent
4         received or held by a financial institution in the
5         usual course of business and for which it has given or
6         is obligated to give credit, either conditionally or
7         unconditionally, to a commercial, checking, savings,
8         time, or thrift account whether or not advance notice
9         is required to withdraw the credited funds, or which is
10         evidenced by its certificate of deposit, thrift
11         certificate, investment certificate, or certificate of
12         indebtedness, or other similar name, or a check or
13         draft drawn against a deposit account and certified by
14         the financial organization, or a letter of credit or a
15         traveler's check on which the financial organization
16         is primarily liable. However, without limiting the
17         generality of the term "money or its equivalent", any
18         such account or instrument must be regarded as
19         evidencing the receipt of the equivalent of money when
20         credited or issued in exchange for checks or drafts or
21         for a promissory note upon which the person obtaining
22         the credit or instrument is primarily or secondarily
23         liable, or for a charge against a deposit account, or
24         in settlement of checks, drafts, or other instruments
25         forwarded to the bank for collection;
26             (ii) trust funds received or held by the financial

 

 

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1         organization, whether held in the trust department or
2         held or deposited in any other department of the
3         financial organization;
4             (iii) money received or held by a financial
5         organization, or the credit given for money or its
6         equivalent received or held by a financial
7         organization, in the usual course of business for a
8         special or specific purpose, regardless of the legal
9         relationship so established. Under this paragraph,
10         "deposit" includes, but is not limited to, escrow
11         funds, funds held as security for an obligation due to
12         the financial organization or others, including funds
13         held as dealers reserves, or for securities loaned by
14         the financial organization, funds deposited by a
15         debtor to meet maturing obligations, funds deposited
16         as advance payment on subscriptions to United States
17         government securities, funds held for distribution or
18         purchase of securities, funds held to meet its
19         acceptances or letters of credit, and withheld taxes.
20         It does not include funds received by the financial
21         organization for immediate application to the
22         reduction of an indebtedness to the receiving
23         financial organization, or under condition that the
24         receipt of the funds immediately reduces or
25         extinguishes the indebtedness;
26             (iv) outstanding drafts, including advice of

 

 

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1         another financial organization, cashier's checks,
2         money orders, or other officer's checks issued in the
3         usual course of business for any purpose, but not
4         including those issued in payment for services,
5         dividends, or purchases or other costs or expenses of
6         the financial organization itself; and
7             (v) money or its equivalent held as a credit
8         balance by a financial organization on behalf of its
9         customer if the entity is engaged in soliciting and
10         holding such balances in the regular course of its
11         business.
12         (5) As used in subparagraph (3), "money market
13     instruments" includes but is not limited to:
14             (i) Interest-bearing deposits, federal funds sold
15         and securities purchased under agreements to resell,
16         commercial paper, banker's acceptances, and purchased
17         certificates of deposit and similar instruments to the
18         extent that the instruments are reflected as assets
19         under generally accepted accounting principles.
20             "Securities" means corporate stock, bonds, and
21         other securities (including, for purposes of taxation
22         of gains on securities and for purchases under
23         agreements to resell, United States Treasury
24         securities, obligations of United States government
25         agencies and corporations, obligations of state and
26         political subdivisions, the interest on which is

 

 

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1         exempt from Illinois income tax), participations in
2         securities backed by mortgages held by United States or
3         state government agencies, loan-backed securities, and
4         similar investments to the extent the investments are
5         reflected as assets under generally accepted
6         accounting principles.
7             (ii) For purposes of subparagraph (3), "money
8         market instruments" shall include investments in
9         investment partnerships, trusts, pools, funds,
10         investment companies, or any similar entity in
11         proportion to the investment of the entity in money
12         market instruments, and "securities" shall include
13         investments in investment partnerships, trusts, pools,
14         funds, investment companies, or any similar entity in
15         proportion to the investment of the entity in
16         securities.
17     (d) Transportation services. For taxable years ending
18 before December 31, 2008, business Business income derived from
19 furnishing transportation services shall be apportioned to
20 this State in accordance with paragraphs (1) and (2):
21         (1) Such business income (other than that derived from
22     transportation by pipeline) shall be apportioned to this
23     State by multiplying such income by a fraction, the
24     numerator of which is the revenue miles of the person in
25     this State, and the denominator of which is the revenue
26     miles of the person everywhere. For purposes of this

 

 

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1     paragraph, a revenue mile is the transportation of 1
2     passenger or 1 net ton of freight the distance of 1 mile
3     for a consideration. Where a person is engaged in the
4     transportation of both passengers and freight, the
5     fraction above referred to shall be determined by means of
6     an average of the passenger revenue mile fraction and the
7     freight revenue mile fraction, weighted to reflect the
8     person's
9             (A) relative railway operating income from total
10         passenger and total freight service, as reported to the
11         Interstate Commerce Commission, in the case of
12         transportation by railroad, and
13             (B) relative gross receipts from passenger and
14         freight transportation, in case of transportation
15         other than by railroad.
16         (2) Such business income derived from transportation
17     by pipeline shall be apportioned to this State by
18     multiplying such income by a fraction, the numerator of
19     which is the revenue miles of the person in this State, and
20     the denominator of which is the revenue miles of the person
21     everywhere. For the purposes of this paragraph, a revenue
22     mile is the transportation by pipeline of 1 barrel of oil,
23     1,000 cubic feet of gas, or of any specified quantity of
24     any other substance, the distance of 1 mile for a
25     consideration.
26         (3) For taxable years ending on or after December 31,

 

 

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

 

 

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1     aircraft to and departures from this State weighted as to
2     cost of aircraft by type and (b) the denominator of which
3     shall be total arrivals and departures of aircraft weighted
4     as to cost of aircraft by type. If a person derives
5     business income from activities in addition to the
6     provision of airline services, this subsection shall apply
7     only to its business income from airline services and its
8     other business income shall be apportioned to this State
9     under the applicable provisions of this Section.
10     (e) Combined apportionment. Where 2 or more persons are
11 engaged in a unitary business as described in subsection
12 (a)(27) of Section 1501, a part of which is conducted in this
13 State by one or more members of the group, the business income
14 attributable to this State by any such member or members shall
15 be apportioned by means of the combined apportionment method.
16     (f) Alternative allocation. If the allocation and
17 apportionment provisions of subsections (a) through (e) and of
18 subsection (h) do not fairly represent the extent of a person's
19 business activity in this State, the person may petition for,
20 or the Director may, without a petition, permit or require, in
21 respect of all or any part of the person's business activity,
22 if reasonable:
23         (1) Separate accounting;
24         (2) The exclusion of any one or more factors;
25         (3) The inclusion of one or more additional factors
26     which will fairly represent the person's business

 

 

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1     activities in this State; or
2         (4) The employment of any other method to effectuate an
3     equitable allocation and apportionment of the person's
4     business income.
5     (g) Cross reference. For allocation of business income by
6 residents, see Section 301(a).
7     (h) For tax years ending on or after December 31, 1998, the
8 apportionment factor of persons who apportion their business
9 income to this State under subsection (a) shall be equal to:
10         (1) for tax years ending on or after December 31, 1998
11     and before December 31, 1999, 16 2/3% of the property
12     factor plus 16 2/3% of the payroll factor plus 66 2/3% of
13     the sales factor;
14         (2) for tax years ending on or after December 31, 1999
15     and before December 31, 2000, 8 1/3% of the property factor
16     plus 8 1/3% of the payroll factor plus 83 1/3% of the sales
17     factor;
18         (3) for tax years ending on or after December 31, 2000,
19     the sales factor.
20 If, in any tax year ending on or after December 31, 1998 and
21 before December 31, 2000, the denominator of the payroll,
22 property, or sales factor is zero, the apportionment factor
23 computed in paragraph (1) or (2) of this subsection for that
24 year shall be divided by an amount equal to 100% minus the
25 percentage weight given to each factor whose denominator is
26 equal to zero.

 

 

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1 (Source: P.A. 94-247, eff. 1-1-06.)
 
2     (35 ILCS 5/502)  (from Ch. 120, par. 5-502)
3     Sec. 502. Returns and notices.
4     (a) In general. A return with respect to the taxes imposed
5 by this Act shall be made by every person for any taxable year:
6         (1) for which such person is liable for a tax imposed
7     by this Act, or
8         (2) in the case of a resident or in the case of a
9     corporation which is qualified to do business in this
10     State, for which such person is required to make a federal
11     income tax return, regardless of whether such person is
12     liable for a tax imposed by this Act. However, this
13     paragraph shall not require a resident to make a return if
14     such person has an Illinois base income of the basic amount
15     in Section 204(b) or less and is either claimed as a
16     dependent on another person's tax return under the Internal
17     Revenue Code of 1986, or is claimed as a dependent on
18     another person's tax return under this Act.
19     Notwithstanding the provisions of paragraph (1), a
20 nonresident whose Illinois income tax liability under
21 subsections (a), (b), (c), and (d) of Section 201 of this Act
22 is paid in full after taking into account the credits allowed
23 under subsection (f) of this Section or allowed under Section
24 709.5 of this Act shall not be required to file a return under
25 this subsection (a).

 

 

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1     (b) Fiduciaries and receivers.
2         (1) Decedents. If an individual is deceased, any return
3     or notice required of such individual under this Act shall
4     be made by his executor, administrator, or other person
5     charged with the property of such decedent.
6         (2) Individuals under a disability. If an individual is
7     unable to make a return or notice required under this Act,
8     the return or notice required of such individual shall be
9     made by his duly authorized agent, guardian, fiduciary or
10     other person charged with the care of the person or
11     property of such individual.
12         (3) Estates and trusts. Returns or notices required of
13     an estate or a trust shall be made by the fiduciary
14     thereof.
15         (4) Receivers, trustees and assignees for
16     corporations. In a case where a receiver, trustee in
17     bankruptcy, or assignee, by order of a court of competent
18     jurisdiction, by operation of law, or otherwise, has
19     possession of or holds title to all or substantially all
20     the property or business of a corporation, whether or not
21     such property or business is being operated, such receiver,
22     trustee, or assignee shall make the returns and notices
23     required of such corporation in the same manner and form as
24     corporations are required to make such returns and notices.
25     (c) Joint returns by husband and wife.
26         (1) Except as provided in paragraph (3), if a husband

 

 

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1     and wife file a joint federal income tax return for a
2     taxable year they shall file a joint return under this Act
3     for such taxable year and their liabilities shall be joint
4     and several, but if the federal income tax liability of
5     either spouse is determined on a separate federal income
6     tax return, they shall file separate returns under this
7     Act.
8         (2) If neither spouse is required to file a federal
9     income tax return and either or both are required to file a
10     return under this Act, they may elect to file separate or
11     joint returns and pursuant to such election their
12     liabilities shall be separate or joint and several.
13         (3) If either husband or wife is a resident and the
14     other is a nonresident, they shall file separate returns in
15     this State on such forms as may be required by the
16     Department in which event their tax liabilities shall be
17     separate; but they may elect to determine their joint net
18     income and file a joint return as if both were residents
19     and in such case, their liabilities shall be joint and
20     several.
21         (4) Innocent spouses.
22             (A) However, for tax liabilities arising and paid
23         prior to August 13, 1999, an innocent spouse shall be
24         relieved of liability for tax (including interest and
25         penalties) for any taxable year for which a joint
26         return has been made, upon submission of proof that the

 

 

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1         Internal Revenue Service has made a determination
2         under Section 6013(e) of the Internal Revenue Code, for
3         the same taxable year, which determination relieved
4         the spouse from liability for federal income taxes. If
5         there is no federal income tax liability at issue for
6         the same taxable year, the Department shall rely on the
7         provisions of Section 6013(e) to determine whether the
8         person requesting innocent spouse abatement of tax,
9         penalty, and interest is entitled to that relief.
10             (B) For tax liabilities arising on and after August
11         13, 1999 or which arose prior to that date, but remain
12         unpaid as of that date, if an individual who filed a
13         joint return for any taxable year has made an election
14         under this paragraph, the individual's liability for
15         any tax shown on the joint return shall not exceed the
16         individual's separate return amount and the
17         individual's liability for any deficiency assessed for
18         that taxable year shall not exceed the portion of the
19         deficiency properly allocable to the individual. For
20         purposes of this paragraph:
21                 (i) An election properly made pursuant to
22             Section 6015 of the Internal Revenue Code shall
23             constitute an election under this paragraph,
24             provided that the election shall not be effective
25             until the individual has notified the Department
26             of the election in the form and manner prescribed

 

 

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1             by the Department.
2                 (ii) If no election has been made under Section
3             6015, the individual may make an election under
4             this paragraph in the form and manner prescribed by
5             the Department, provided that no election may be
6             made if the Department finds that assets were
7             transferred between individuals filing a joint
8             return as part of a scheme by such individuals to
9             avoid payment of Illinois income tax and the
10             election shall not eliminate the individual's
11             liability for any portion of a deficiency
12             attributable to an error on the return of which the
13             individual had actual knowledge as of the date of
14             filing.
15                 (iii) In determining the separate return
16             amount or portion of any deficiency attributable
17             to an individual, the Department shall follow the
18             provisions in subsections (c) and (d) of Section
19             6015 of the Internal Revenue Code.
20                 (iv) In determining the validity of an
21             individual's election under subparagraph (ii) and
22             in determining an electing individual's separate
23             return amount or portion of any deficiency under
24             subparagraph (iii), any determination made by the
25             Secretary of the Treasury, by the United States Tax
26             Court on petition for review of a determination by

 

 

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1             the Secretary of the Treasury, or on appeal from
2             the United States Tax Court under Section 6015 of
3             the Internal Revenue Code regarding criteria for
4             eligibility or under subsection (d) of Section
5             6015 of the Internal Revenue Code regarding the
6             allocation of any item of income, deduction,
7             payment, or credit between an individual making
8             the federal election and that individual's spouse
9             shall be conclusively presumed to be correct. With
10             respect to any item that is not the subject of a
11             determination by the Secretary of the Treasury or
12             the federal courts, in any proceeding involving
13             this subsection, the individual making the
14             election shall have the burden of proof with
15             respect to any item except that the Department
16             shall have the burden of proof with respect to
17             items in subdivision (ii).
18                 (v) Any election made by an individual under
19             this subsection shall apply to all years for which
20             that individual and the spouse named in the
21             election have filed a joint return.
22                 (vi) After receiving a notice that the federal
23             election has been made or after receiving an
24             election under subdivision (ii), the Department
25             shall take no collection action against the
26             electing individual for any liability arising from

 

 

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1             a joint return covered by the election until the
2             Department has notified the electing individual in
3             writing that the election is invalid or of the
4             portion of the liability the Department has
5             allocated to the electing individual. Within 60
6             days (150 days if the individual is outside the
7             United States) after the issuance of such
8             notification, the individual may file a written
9             protest of the denial of the election or of the
10             Department's determination of the liability
11             allocated to him or her and shall be granted a
12             hearing within the Department under the provisions
13             of Section 908. If a protest is filed, the
14             Department shall take no collection action against
15             the electing individual until the decision
16             regarding the protest has become final under
17             subsection (d) of Section 908 or, if
18             administrative review of the Department's decision
19             is requested under Section 1201, until the
20             decision of the court becomes final.
21     (d) Partnerships. Every partnership having any base income
22 allocable to this State in accordance with section 305(c) shall
23 retain information concerning all items of income, gain, loss
24 and deduction; the names and addresses of all of the partners,
25 or names and addresses of members of a limited liability
26 company, or other persons who would be entitled to share in the

 

 

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1 base income of the partnership if distributed; the amount of
2 the distributive share of each; and such other pertinent
3 information as the Department may by forms or regulations
4 prescribe. The partnership shall make that information
5 available to the Department when requested by the Department.
6     (e) For taxable years ending on or after December 31, 1985,
7 and before December 31, 1993, taxpayers that are corporations
8 (other than Subchapter S corporations) having the same taxable
9 year and that are members of the same unitary business group
10 may elect to be treated as one taxpayer for purposes of any
11 original return, amended return which includes the same
12 taxpayers of the unitary group which joined in the election to
13 file the original return, extension, claim for refund,
14 assessment, collection and payment and determination of the
15 group's tax liability under this Act. This subsection (e) does
16 not permit the election to be made for some, but not all, of
17 the purposes enumerated above. For taxable years ending on or
18 after December 31, 1987, corporate members (other than
19 Subchapter S corporations) of the same unitary business group
20 making this subsection (e) election are not required to have
21 the same taxable year.
22     For taxable years ending on or after December 31, 1993,
23 taxpayers that are corporations (other than Subchapter S
24 corporations) and that are members of the same unitary business
25 group shall be treated as one taxpayer for purposes of any
26 original return, amended return which includes the same

 

 

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1 taxpayers of the unitary group which joined in filing the
2 original return, extension, claim for refund, assessment,
3 collection and payment and determination of the group's tax
4 liability under this Act.
5     (f) The Department may promulgate regulations to permit
6 nonresident individual partners of the same partnership,
7 nonresident Subchapter S corporation shareholders of the same
8 Subchapter S corporation, and nonresident individuals
9 transacting an insurance business in Illinois under a Lloyds
10 plan of operation, and nonresident individual members of the
11 same limited liability company that is treated as a partnership
12 under Section 1501 (a)(16) of this Act, to file composite
13 individual income tax returns reflecting the composite income
14 of such individuals allocable to Illinois and to make composite
15 individual income tax payments. The Department may by
16 regulation also permit such composite returns to include the
17 income tax owed by Illinois residents attributable to their
18 income from partnerships, Subchapter S corporations, insurance
19 businesses organized under a Lloyds plan of operation, or
20 limited liability companies that are treated as partnership
21 under Section 1501(a)(16) of this Act, in which case such
22 Illinois residents will be permitted to claim credits on their
23 individual returns for their shares of the composite tax
24 payments. This paragraph of subsection (f) applies to taxable
25 years ending on or after December 31, 1987.
26     For taxable years ending on or after December 31, 1999, the

 

 

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1 Department may, by regulation, also permit any persons
2 transacting an insurance business organized under a Lloyds plan
3 of operation to file composite returns reflecting the income of
4 such persons allocable to Illinois and the tax rates applicable
5 to such persons under Section 201 and to make composite tax
6 payments and shall, by regulation, also provide that the income
7 and apportionment factors attributable to the transaction of an
8 insurance business organized under a Lloyds plan of operation
9 by any person joining in the filing of a composite return
10 shall, for purposes of allocating and apportioning income under
11 Article 3 of this Act and computing net income under Section
12 202 of this Act, be excluded from any other income and
13 apportionment factors of that person or of any unitary business
14 group, as defined in subdivision (a)(27) of Section 1501, to
15 which that person may belong.
16     For taxable years ending on or after December 31, 2008,
17 every nonresident shall be allowed a credit against his or her
18 liability under subsections (a) and (b) of Section 201 for any
19 amount of tax reported on a composite return and paid on his or
20 her behalf under this subsection (f). Residents (other than
21 persons transacting an insurance business organized under a
22 Lloyds plan of operation) may claim a credit for taxes reported
23 on a composite return and paid on their behalf under this
24 subsection (f) only as permitted by the Department by rule.
25     (f-5) For taxable years ending on or after December 31,
26 2008, the Department may adopt rules to provide that, when a

 

 

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1 partnership or Subchapter S corporation has made an error in
2 determining the amount of any item of income, deduction,
3 addition, subtraction, or credit required to be reported on its
4 return that affects the liability imposed under this Act on a
5 partner or shareholder, the partnership or Subchapter S
6 corporation may report the changes in liabilities of its
7 partners or shareholders and claim a refund of the resulting
8 overpayments, or pay the resulting underpayments, on behalf of
9 its partners and shareholders.
10     (g) The Department may adopt rules to authorize the
11 electronic filing of any return required to be filed under this
12 Section.
13 (Source: P.A. 94-1074, eff. 12-26-06.)
 
14     (35 ILCS 5/709.5 new)
15     Sec. 709.5. Withholding by partnerships, Subchapter S
16 corporations, and trusts.
17     (a) In general. For each taxable year ending on or after
18 December 31, 2008, every partnership (other than a publicly
19 traded partnership under Section 7704 of the Internal Revenue
20 Code), Subchapter S corporation, and trust must withhold from
21 each nonresident partner, shareholder, or beneficiary (other
22 than a partner, shareholder, or beneficiary included on a
23 composite return filed by the partnership or Subchapter S
24 corporation for the taxable year under subsection (f) of
25 Section 502 of this Act) an amount equal to the distributable

 

 

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1 share of the business income of the partnership, Subchapter S
2 corporation, or trust apportionable to Illinois of that
3 partner, shareholder, or beneficiary under Sections 702 and 704
4 and Subchapter S of the Internal Revenue Code, whether or not
5 distributed, multiplied by the applicable rates of tax for that
6 partner or shareholder under subsections (a) through (d) of
7 Section 201 of this Act.
8     (b) Credit for taxes withheld. Any amount withheld under
9 subsection (a) of this Section and paid to the Department shall
10 be treated as a payment of the estimated tax liability or of
11 the liability for withholding under this Section of the
12 partner, shareholder, or beneficiary to whom the income is
13 distributable for the taxable year in which that person
14 incurred a liability under this Act with respect to that
15 income.
 
16     (35 ILCS 5/711)  (from Ch. 120, par. 7-711)
17     Sec. 711. Payor's Return and Payment of Tax Withheld. (a)
18 In general. Every payor required to deduct and withhold tax
19 under Section 710 (and until January 1, 1989, Sections 708 and
20 709) shall be subject to the same reporting requirements
21 regarding taxes withheld and the same monthly and quarter
22 monthly (weekly) payment requirements as an employer subject to
23 the provisions of Section 701. For purposes of monthly and
24 quarter monthly (weekly) payments, the total tax withheld under
25 Sections 701, 708, 709 and 710 shall be considered in the

 

 

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1 aggregate.
2     (a-5) Every partnership, Subchapter S corporation, or
3 trust required to withhold tax under Section 709.5 shall report
4 the amounts withheld and the partners, shareholders, or
5 beneficiaries from whom the amounts were withheld, and pay over
6 the amount withheld, no later than the due date (without regard
7 to extensions) of the tax return of the partnership, Subchapter
8 S corporation, or trust for the taxable year.
9     (b) Information statement. Every payor required to deduct
10 and withhold tax under Section 710 (and until January 1, 1989,
11 Sections 708 and 709) shall furnish in duplicate to each party
12 entitled to the credit for such withholding under subsection
13 (b) of Section 709.5 (c) of Section 708, subsection (c) of
14 Section 709, and subsection (b) of Section 710, respectively,
15 on or before January 31 of the succeeding calendar year for
16 amounts withheld under Section 710 or the due date (without
17 regard to extensions) of the return of the partnership,
18 Subchapter S corporation, or trust for the taxable year for
19 amounts withheld under Section 709.5 for the taxable year, a
20 written statement in such form as the Department may by
21 regulation prescribe showing the amount of the payments, the
22 amount deducted and withheld as tax, and such other information
23 as the Department may prescribe. A copy of such statement shall
24 be filed by the party entitled to the credit for the
25 withholding under subsection (b) of Section 709.5 (c) of
26 Section 708, subsection (c) of Section 709, or subsection (b)

 

 

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1 of Section 710 with his return for the taxable year to which it
2 relates.
3 (Source: P.A. 85-299; 85-982.)
 
4     (35 ILCS 5/712)  (from Ch. 120, par. 7-712)
5     Sec. 712. Payor's Liability For Withheld Taxes. Every payor
6 who deducts and withholds or is required to deduct and withhold
7 tax under Sections 709.5 or Section 710 (and until January 1,
8 1989, Sections 708 and 709) is liable for such tax. For
9 purposes of assessment and collection, any amount withheld or
10 required to be withheld and paid over to the Department, and
11 any penalties and interest with respect thereto, shall be
12 considered the tax of the payor. Any amount of tax actually
13 deducted and withheld under Sections 709.5 or Section 710 (and
14 until January 1, 1989, Sections 708 and 709) shall be held to
15 be a special fund in trust for the Department. No payee shall
16 have any right of action against his payor in respect of any
17 money deducted and withheld and paid over to the Department in
18 compliance or in intended compliance with Sections and 709.5 or
19 Section 710 (and until January 1, 1989, Sections 708 and 709).
20 (Source: P.A. 85-299; 85-982.)
 
21     (35 ILCS 5/713)  (from Ch. 120, par. 7-713)
22     Sec. 713. Payor's Failure To Withhold. If a payor fails to
23 deduct and withhold any amount of tax as required under
24 Sections and 709.5 or Section 710 (and until January 1, 1989,

 

 

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1 Sections 708 and 709) and thereafter the tax on account of
2 which such amount was required to be deducted and withheld is
3 paid, such amount of tax shall not be collected from the payor,
4 but the payor shall not be relieved from liability for
5 penalties or interest otherwise applicable in respect of such
6 failure to deduct and withhold. For purposes of this Section,
7 the tax on account of which an amount is required to be
8 deducted and withheld is the tax of the individual or
9 individuals who are entitled to a credit under subsection (b)
10 of Section 709.5 (c) of Section 708, subsection (c) of Section
11 709, or subsection (b) of Section 710 for the withheld tax.
12 (Source: P.A. 85-299; 85-982.)
 
13     (35 ILCS 5/804)  (from Ch. 120, par. 8-804)
14     Sec. 804. Failure to Pay Estimated Tax.
15     (a) In general. In case of any underpayment of estimated
16 tax by a taxpayer, except as provided in subsection (d) or (e),
17 the taxpayer shall be liable to a penalty in an amount
18 determined at the rate prescribed by Section 3-3 of the Uniform
19 Penalty and Interest Act upon the amount of the underpayment
20 (determined under subsection (b)) for each required
21 installment.
22     (b) Amount of underpayment. For purposes of subsection (a),
23 the amount of the underpayment shall be the excess of:
24         (1) the amount of the installment which would be
25     required to be paid under subsection (c), over

 

 

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1         (2) the amount, if any, of the installment paid on or
2     before the last date prescribed for payment.
3     (c) Amount of Required Installments.
4         (1) Amount.
5             (A) In General. Except as provided in paragraph
6         (2), the amount of any required installment shall be
7         25% of the required annual payment.
8             (B) Required Annual Payment. For purposes of
9         subparagraph (A), the term "required annual payment"
10         means the lesser of
11                 (i) 90% of the tax shown on the return for the
12             taxable year, or if no return is filed, 90% of the
13             tax for such year, or
14                 (ii) 100% of the tax shown on the return of the
15             taxpayer for the preceding taxable year if a return
16             showing a liability for tax was filed by the
17             taxpayer for the preceding taxable year and such
18             preceding year was a taxable year of 12 months.
19         (2) Lower Required Installment where Annualized Income
20     Installment is Less Than Amount Determined Under Paragraph
21     (1).
22             (A) In General. In the case of any required
23         installment if a taxpayer establishes that the
24         annualized income installment is less than the amount
25         determined under paragraph (1),
26                 (i) the amount of such required installment

 

 

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1             shall be the annualized income installment, and
2                 (ii) any reduction in a required installment
3             resulting from the application of this
4             subparagraph shall be recaptured by increasing the
5             amount of the next required installment determined
6             under paragraph (1) by the amount of such
7             reduction, and by increasing subsequent required
8             installments to the extent that the reduction has
9             not previously been recaptured under this clause.
10             (B) Determination of Annualized Income
11         Installment. In the case of any required installment,
12         the annualized income installment is the excess, if
13         any, of
14                 (i) an amount equal to the applicable
15             percentage of the tax for the taxable year computed
16             by placing on an annualized basis the net income
17             for months in the taxable year ending before the
18             due date for the installment, over
19                 (ii) the aggregate amount of any prior
20             required installments for the taxable year.
21             (C) Applicable Percentage.
22        In the case of the followingThe applicable
23        required installments:percentage is:
24        1st ..............................22.5%
25        2nd ...............................45%
26        3rd ...............................67.5%

 

 

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1        4th ...............................90%
2             (D) Annualized Net Income; Individuals. For
3         individuals, net income shall be placed on an
4         annualized basis by:
5                 (i) multiplying by 12, or in the case of a
6             taxable year of less than 12 months, by the number
7             of months in the taxable year, the net income
8             computed without regard to the standard exemption
9             for the months in the taxable year ending before
10             the month in which the installment is required to
11             be paid;
12                 (ii) dividing the resulting amount by the
13             number of months in the taxable year ending before
14             the month in which such installment date falls; and
15                 (iii) deducting from such amount the standard
16             exemption allowable for the taxable year, such
17             standard exemption being determined as of the last
18             date prescribed for payment of the installment.
19             (E) Annualized Net Income; Corporations. For
20         corporations, net income shall be placed on an
21         annualized basis by multiplying by 12 the taxable
22         income
23                 (i) for the first 3 months of the taxable year,
24             in the case of the installment required to be paid
25             in the 4th month,
26                 (ii) for the first 3 months or for the first 5

 

 

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1             months of the taxable year, in the case of the
2             installment required to be paid in the 6th month,
3                 (iii) for the first 6 months or for the first 8
4             months of the taxable year, in the case of the
5             installment required to be paid in the 9th month,
6             and
7                 (iv) for the first 9 months or for the first 11
8             months of the taxable year, in the case of the
9             installment required to be paid in the 12th month
10             of the taxable year,
11         then dividing the resulting amount by the number of
12         months in the taxable year (3, 5, 6, 8, 9, or 11 as the
13         case may be).
14     (d) Exceptions. Notwithstanding the provisions of the
15 preceding subsections, the penalty imposed by subsection (a)
16 shall not be imposed if the taxpayer was not required to file
17 an Illinois income tax return for the preceding taxable year,
18 or, for individuals, if the taxpayer had no tax liability for
19 the preceding taxable year and such year was a taxable year of
20 12 months. The penalty imposed by subsection (a) shall also not
21 be imposed on any underpayments of estimated tax due before the
22 effective date of this amendatory Act of 1998 which
23 underpayments are solely attributable to the change in
24 apportionment from subsection (a) to subsection (h) of Section
25 304. The provisions of this amendatory Act of 1998 apply to tax
26 years ending on or after December 31, 1998.

 

 

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1     (e) The penalty imposed for underpayment of estimated tax
2 by subsection (a) of this Section shall not be imposed to the
3 extent that the Director Department or his or her designate
4 determines, pursuant to Section 3-8 of the Uniform Penalty and
5 Interest Act that the penalty should not be imposed.
6     (f) Definition of tax. For purposes of subsections (b) and
7 (c), the term "tax" means the excess of the tax imposed under
8 Article 2 of this Act, over the amounts credited against such
9 tax under Sections 601(b) (3) and (4).
10     (g) Application of Section in case of tax withheld under
11 Article 7 on compensation. For purposes of applying this
12 Section:
13         (1) in the case of an individual, tax withheld from
14     compensation under Article 7 for the taxable year shall be
15     deemed a payment of estimated tax, and an equal part of
16     such amount shall be deemed paid on each installment date
17     for such taxable year, unless the taxpayer establishes the
18     dates on which all amounts were actually withheld, in which
19     case the amounts so withheld shall be deemed payments of
20     estimated tax on the dates on which such amounts were
21     actually withheld; .
22         (2) amounts timely paid by a partnership, Subchapter S
23     corporation, or trust on behalf of a partner, shareholder,
24     or beneficiary pursuant to subsection (f) of Section 502 or
25     Section 709.5 and claimed as a payment of estimated tax
26     shall be deemed a payment of estimated tax made on the last

 

 

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1     day of the taxable year of the partnership, Subchapter S
2     corporation, or trust for which the income from the
3     withholding is made was computed; and
4         (3) all other amounts pursuant to Article 7 shall be
5     deemed a payment of estimated tax on the date the payment
6     is made to the taxpayer of the amount from which the tax is
7     withheld.
8     (g-5) Amounts withheld under the State Salary and Annuity
9 Withholding Act. An individual who has amounts withheld under
10 paragraph (10) of Section 4 of the State Salary and Annuity
11 Withholding Act may elect to have those amounts treated as
12 payments of estimated tax made on the dates on which those
13 amounts are actually withheld.
14     (i) Short taxable year. The application of this Section to
15 taxable years of less than 12 months shall be in accordance
16 with regulations prescribed by the Department.
17     The changes in this Section made by Public Act 84-127 shall
18 apply to taxable years ending on or after January 1, 1986.
19 (Source: P.A. 90-448, eff. 8-16-97; 90-613, eff. 7-9-98.)
 
20     (35 ILCS 5/911)  (from Ch. 120, par. 9-911)
21     Sec. 911. Limitations on Claims for Refund.
22     (a) In general. Except as otherwise provided in this Act:
23         (1) A claim for refund shall be filed not later than 3
24     years after the date the return was filed (in the case of
25     returns required under Article 7 of this Act respecting any

 

 

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1     amounts withheld as tax, not later than 3 years after the
2     15th day of the 4th month following the close of the
3     calendar year in which such withholding was made), or one
4     year after the date the tax was paid, whichever is the
5     later; and
6         (2) No credit or refund shall be allowed or made with
7     respect to the year for which the claim was filed unless
8     such claim is filed within such period.
9     (b) Federal changes.
10         (1) In general. In any case where notification of an
11     alteration is required by Section 506(b), a claim for
12     refund may be filed within 2 years after the date on which
13     such notification was due (regardless of whether such
14     notice was given), but the amount recoverable pursuant to a
15     claim filed under this Section shall be limited to the
16     amount of any overpayment resulting under this Act from
17     recomputation of the taxpayer's net income, net loss, or
18     Article 2 credits for the taxable year after giving effect
19     to the item or items reflected in the alteration required
20     to be reported.
21         (2) Tentative carryback adjustments paid before
22     January 1, 1974. If, as the result of the payment before
23     January 1, 1974 of a federal tentative carryback
24     adjustment, a notification of an alteration is required
25     under Section 506(b), a claim for refund may be filed at
26     any time before January 1, 1976, but the amount recoverable

 

 

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1     pursuant to a claim filed under this Section shall be
2     limited to the amount of any overpayment resulting under
3     this Act from recomputation of the taxpayer's base income
4     for the taxable year after giving effect to the federal
5     alteration resulting from the tentative carryback
6     adjustment irrespective of any limitation imposed in
7     paragraph (l) of this subsection.
8     (c) Extension by agreement. Where, before the expiration of
9 the time prescribed in this section for the filing of a claim
10 for refund, both the Department and the claimant shall have
11 consented in writing to its filing after such time, such claim
12 may be filed at any time prior to the expiration of the period
13 agreed upon. The period so agreed upon may be extended by
14 subsequent agreements in writing made before the expiration of
15 the period previously agreed upon. In the case of a taxpayer
16 who is a partnership, Subchapter S corporation, or trust and
17 who enters into an agreement with the Department pursuant to
18 this subsection on or after January 1, 2003, a claim for refund
19 may be issued to the partners, shareholders, or beneficiaries
20 of the taxpayer at any time prior to the expiration of the
21 period agreed upon. Any refund allowed pursuant to the claim,
22 however, shall be limited to the amount of any overpayment of
23 tax due under this Act that results from recomputation of items
24 of income, deduction, credits, or other amounts of the taxpayer
25 that are taken into account by the partner, shareholder, or
26 beneficiary in computing its liability under this Act.

 

 

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1     (d) Limit on amount of credit or refund.
2         (1) Limit where claim filed within 3-year period. If
3     the claim was filed by the claimant during the 3-year
4     period prescribed in subsection (a), the amount of the
5     credit or refund shall not exceed the portion of the tax
6     paid within the period, immediately preceding the filing of
7     the claim, equal to 3 years plus the period of any
8     extension of time for filing the return.
9         (2) Limit where claim not filed within 3-year period.
10     If the claim was not filed within such 3-year period, the
11     amount of the credit or refund shall not exceed the portion
12     of the tax paid during the one year immediately preceding
13     the filing of the claim.
14     (e) Time return deemed filed. For purposes of this section
15 a tax return filed before the last day prescribed by law for
16 the filing of such return (including any extensions thereof)
17 shall be deemed to have been filed on such last day.
18     (f) No claim for refund based on the taxpayer's taking a
19 credit for estimated tax payments as provided by Section
20 601(b)(2) or for any amount paid by a taxpayer pursuant to
21 Section 602(a) or for any amount of credit for tax withheld
22 pursuant to Article 7 Section 701 may be filed more than 3
23 years after the due date, as provided by Section 505, of the
24 return which was required to be filed relative to the taxable
25 year for which the payments were made or for which the tax was
26 withheld. The changes in this subsection (f) made by this

 

 

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1 amendatory Act of 1987 shall apply to all taxable years ending
2 on or after December 31, 1969.
3     (g) Special Period of Limitation with Respect to Net Loss
4 Carrybacks. If the claim for refund relates to an overpayment
5 attributable to a net loss carryback as provided by Section
6 207, in lieu of the 3 year period of limitation prescribed in
7 subsection (a), the period shall be that period which ends 3
8 years after the time prescribed by law for filing the return
9 (including extensions thereof) for the taxable year of the net
10 loss which results in such carryback (or, on and after August
11 13, 1999, with respect to a change in the carryover of an
12 Article 2 credit to a taxable year resulting from the carryback
13 of a Section 207 loss incurred in a taxable year beginning on
14 or after January 1, 2000, the period shall be that period that
15 ends 3 years after the time prescribed by law for filing the
16 return (including extensions of that time) for that subsequent
17 taxable year), or the period prescribed in subsection (c) in
18 respect of such taxable year, whichever expires later. In the
19 case of such a claim, the amount of the refund may exceed the
20 portion of the tax paid within the period provided in
21 subsection (d) to the extent of the amount of the overpayment
22 attributable to such carryback. On and after August 13, 1999,
23 if the claim for refund relates to an overpayment attributable
24 to the carryover of an Article 2 credit, or of a Section 207
25 loss, earned, incurred (in a taxable year beginning on or after
26 January 1, 2000), or used in a year for which a notification of

 

 

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1 a change affecting federal taxable income must be filed under
2 subsection (b) of Section 506, the claim may be filed within
3 the period prescribed in paragraph (1) of subsection (b) in
4 respect of the year for which the notification is required. In
5 the case of such a claim, the amount of the refund may exceed
6 the portion of the tax paid within the period provided in
7 subsection (d) to the extent of the amount of the overpayment
8 attributable to the recomputation of the taxpayer's Article 2
9 credits, or Section 207 loss, earned, incurred, or used in the
10 taxable year for which the notification is given.
11     (h) Claim for refund based on net loss. On and after August
12 23, 2002, no claim for refund shall be allowed to the extent
13 the refund is the result of an amount of net loss incurred in
14 any taxable year ending prior to December 31, 2002 under
15 Section 207 of this Act that was not reported to the Department
16 within 3 years of the due date (including extensions) of the
17 return for the loss year on either the original return filed by
18 the taxpayer or on amended return or to the extent that the
19 refund is the result of an amount of net loss incurred in any
20 taxable year under Section 207 for which no return was filed
21 within 3 years of the due date (including extensions) of the
22 return for the loss year.
23 (Source: P.A. 94-836, eff. 6-6-06.)
 
24     (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)
25     Sec. 1501. Definitions.

 

 

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1     (a) In general. When used in this Act, where not otherwise
2 distinctly expressed or manifestly incompatible with the
3 intent thereof:
4         (1) Business income. The term "business income" means
5     all income that may be treated as apportionable business
6     income under the Constitution of the United States.
7     Business income is net of the deductions allocable thereto.
8     Such term does not include compensation or the deductions
9     allocable thereto. For each taxable year beginning on or
10     after January 1, 2003, a taxpayer may elect to treat all
11     income other than compensation as business income. This
12     election shall be made in accordance with rules adopted by
13     the Department and, once made, shall be irrevocable.
14         (2) Commercial domicile. The term "commercial
15     domicile" means the principal place from which the trade or
16     business of the taxpayer is directed or managed.
17         (3) Compensation. The term "compensation" means wages,
18     salaries, commissions and any other form of remuneration
19     paid to employees for personal services.
20         (4) Corporation. The term "corporation" includes
21     associations, joint-stock companies, insurance companies
22     and cooperatives. Any entity, including a limited
23     liability company formed under the Illinois Limited
24     Liability Company Act, shall be treated as a corporation if
25     it is so classified for federal income tax purposes. For
26     taxable years ending on or after December 31, 2008, a real

 

 

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

 

 

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1             (B) For purposes of subparagraph (A) of this
2         paragraph, the term "bank" includes (i) any entity that
3         is regulated by the Comptroller of the Currency under
4         the National Bank Act, or by the Federal Reserve Board,
5         or by the Federal Deposit Insurance Corporation and
6         (ii) any federally or State chartered bank operating as
7         a credit card bank.
8             (C) For purposes of subparagraph (A) of this
9         paragraph, the term "sales finance company" has the
10         meaning provided in the following item (i) or (ii):
11                 (i) A person primarily engaged in one or more
12             of the following businesses: the business of
13             purchasing customer receivables, the business of
14             making loans upon the security of customer
15             receivables, the business of making loans for the
16             express purpose of funding purchases of tangible
17             personal property or services by the borrower, or
18             the business of finance leasing. For purposes of
19             this item (i), "customer receivable" means:
20                     (a) a retail installment contract or
21                 retail charge agreement within the meaning of
22                 the Sales Finance Agency Act, the Retail
23                 Installment Sales Act, or the Motor Vehicle
24                 Retail Installment Sales Act;
25                     (b) an installment, charge, credit, or
26                 similar contract or agreement arising from the

 

 

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

 

 

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1                 of the corporation's affiliated group that
2                 originates customer receivables (within the
3                 meaning of item (i)) or to whom customer
4                 receivables originated by a member of the
5                 affiliated group have been transferred, to the
6                 extent the average outstanding balance of
7                 loans from that corporation to members of its
8                 affiliated group during the taxable year do not
9                 exceed the limitation amount for that
10                 corporation. The "limitation amount" for a
11                 corporation is the average outstanding
12                 balances during the taxable year of customer
13                 receivables (within the meaning of item (i))
14                 originated by all members of the affiliated
15                 group. If the average outstanding balances of
16                 the loans made by a corporation to members of
17                 its affiliated group exceed the limitation
18                 amount, the interest income of that
19                 corporation from qualifying loans shall be
20                 equal to its interest income from loans to
21                 members of its affiliated groups times a
22                 fraction equal to the limitation amount
23                 divided by the average outstanding balances of
24                 the loans made by that corporation to members
25                 of its affiliated group;
26                     (c) the total of all shareholder's equity

 

 

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1                 (including, without limitation, paid-in
2                 capital on common and preferred stock and
3                 retained earnings) of the corporation plus the
4                 total of all of its loans, advances, and other
5                 obligations payable or owed to members of its
6                 affiliated group may not exceed 20% of the
7                 total assets of the corporation at any time
8                 during the tax year; and
9                     (d) more than 50% of all interest-bearing
10                 obligations of the affiliated group payable to
11                 persons outside the group determined in
12                 accordance with generally accepted accounting
13                 principles must be obligations of the
14                 corporation.
15             This amendatory Act of the 91st General Assembly is
16         declaratory of existing law.
17             (D) Subparagraphs (B) and (C) of this paragraph are
18         declaratory of existing law and apply retroactively,
19         for all tax years beginning on or before December 31,
20         1996, to all original returns, to all amended returns
21         filed no later than 30 days after the effective date of
22         this amendatory Act of 1996, and to all notices issued
23         on or before the effective date of this amendatory Act
24         of 1996 under subsection (a) of Section 903, subsection
25         (a) of Section 904, subsection (e) of Section 909, or
26         Section 912. A taxpayer that is a "financial

 

 

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1         organization" that engages in any transaction with an
2         affiliate shall be a "financial organization" for all
3         purposes of this Act.
4             (E) For all tax years beginning on or before
5         December 31, 1996, a taxpayer that falls within the
6         definition of a "financial organization" under
7         subparagraphs (B) or (C) of this paragraph, but who
8         does not fall within the definition of a "financial
9         organization" under the Proposed Regulations issued by
10         the Department of Revenue on July 19, 1996, may
11         irrevocably elect to apply the Proposed Regulations
12         for all of those years as though the Proposed
13         Regulations had been lawfully promulgated, adopted,
14         and in effect for all of those years. For purposes of
15         applying subparagraphs (B) or (C) of this paragraph to
16         all of those years, the election allowed by this
17         subparagraph applies only to the taxpayer making the
18         election and to those members of the taxpayer's unitary
19         business group who are ordinarily required to
20         apportion business income under the same subsection of
21         Section 304 of this Act as the taxpayer making the
22         election. No election allowed by this subparagraph
23         shall be made under a claim filed under subsection (d)
24         of Section 909 more than 30 days after the effective
25         date of this amendatory Act of 1996.
26             (F) Finance Leases. For purposes of this

 

 

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1         subsection, a finance lease shall be treated as a loan
2         or other extension of credit, rather than as a lease,
3         regardless of how the transaction is characterized for
4         any other purpose, including the purposes of any
5         regulatory agency to which the lessor is subject. A
6         finance lease is any transaction in the form of a lease
7         in which the lessee is treated as the owner of the
8         leased asset entitled to any deduction for
9         depreciation allowed under Section 167 of the Internal
10         Revenue Code.
11         (9) Fiscal year. The term "fiscal year" means an
12     accounting period of 12 months ending on the last day of
13     any month other than December.
14         (10) Includes and including. The terms "includes" and
15     "including" when used in a definition contained in this Act
16     shall not be deemed to exclude other things otherwise
17     within the meaning of the term defined.
18         (11) Internal Revenue Code. The term "Internal Revenue
19     Code" means the United States Internal Revenue Code of 1954
20     or any successor law or laws relating to federal income
21     taxes in effect for the taxable year.
22         (11.5) Investment partnership.
23             (A) The term "investment partnership" means any
24         entity that is treated as a partnership for federal
25         income tax purposes that meets the following
26         requirements:

 

 

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

 

 

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1                 (v) repurchase agreements and loan
2             participations;
3                 (vi) foreign currency exchange contracts and
4             forward and futures contracts on foreign
5             currencies;
6                 (vii) stock and bond index securities and
7             futures contracts and other similar financial
8             securities and futures contracts on those
9             securities;
10                 (viii) options for the purchase or sale of any
11             of the securities, currencies, contracts, or
12             financial instruments described in items (i) to
13             (vii), inclusive;
14                 (ix) regulated futures contracts;
15                 (x) commodities (not described in Section
16             1221(a)(1) of the Internal Revenue Code) or
17             futures, forwards, and options with respect to
18             such commodities, provided, however, that any item
19             of a physical commodity to which title is actually
20             acquired in the partnership's capacity as a dealer
21             in such commodity shall not be a qualifying
22             investment security;
23                 (xi) derivatives; and
24                 (xii) a partnership interest in another
25             partnership that is an investment partnership.
26         (12) Mathematical error. The term "mathematical error"

 

 

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

 

 

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

 

 

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1     Section 1301 and 1302 of this Act, a "person" means (i) an
2     individual, (ii) a corporation, (iii) an officer, agent, or
3     employee of a corporation, (iv) a member, agent or employee
4     of a partnership, or (v) a member, manager, employee,
5     officer, director, or agent of a limited liability company
6     who in such capacity commits an offense specified in
7     Section 1301 and 1302.
8         (18A) Records. The term "records" includes all data
9     maintained by the taxpayer, whether on paper, microfilm,
10     microfiche, or any type of machine-sensible data
11     compilation.
12         (19) Regulations. The term "regulations" includes
13     rules promulgated and forms prescribed by the Department.
14         (20) Resident. The term "resident" means:
15             (A) an individual (i) who is in this State for
16         other than a temporary or transitory purpose during the
17         taxable year; or (ii) who is domiciled in this State
18         but is absent from the State for a temporary or
19         transitory purpose during the taxable year;
20             (B) The estate of a decedent who at his or her
21         death was domiciled in this State;
22             (C) A trust created by a will of a decedent who at
23         his death was domiciled in this State; and
24             (D) An irrevocable trust, the grantor of which was
25         domiciled in this State at the time such trust became
26         irrevocable. For purpose of this subparagraph, a trust

 

 

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1         shall be considered irrevocable to the extent that the
2         grantor is not treated as the owner thereof under
3         Sections 671 through 678 of the Internal Revenue Code.
4         (21) Sales. The term "sales" means all gross receipts
5     of the taxpayer not allocated under Sections 301, 302 and
6     303.
7         (22) State. The term "state" when applied to a
8     jurisdiction other than this State means any state of the
9     United States, the District of Columbia, the Commonwealth
10     of Puerto Rico, any Territory or Possession of the United
11     States, and any foreign country, or any political
12     subdivision of any of the foregoing. For purposes of the
13     foreign tax credit under Section 601, the term "state"
14     means any state of the United States, the District of
15     Columbia, the Commonwealth of Puerto Rico, and any
16     territory or possession of the United States, or any
17     political subdivision of any of the foregoing, effective
18     for tax years ending on or after December 31, 1989.
19         (23) Taxable year. The term "taxable year" means the
20     calendar year, or the fiscal year ending during such
21     calendar year, upon the basis of which the base income is
22     computed under this Act. "Taxable year" means, in the case
23     of a return made for a fractional part of a year under the
24     provisions of this Act, the period for which such return is
25     made.
26         (24) Taxpayer. The term "taxpayer" means any person

 

 

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

 

 

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

 

 

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1     property or payroll factor has a denominator of zero). The
2     computation required by the preceding sentence shall, in
3     each case, involve the division of the member's property,
4     payroll, or revenue miles in the United States, insurance
5     premiums on property or risk in the United States, or
6     financial organization business income from sources within
7     the United States, as the case may be, by the respective
8     worldwide figures for such items. Common ownership in the
9     case of corporations is the direct or indirect control or
10     ownership of more than 50% of the outstanding voting stock
11     of the persons carrying on unitary business activity.
12     Unitary business activity can ordinarily be illustrated
13     where the activities of the members are: (1) in the same
14     general line (such as manufacturing, wholesaling,
15     retailing of tangible personal property, insurance,
16     transportation or finance); or (2) are steps in a
17     vertically structured enterprise or process (such as the
18     steps involved in the production of natural resources,
19     which might include exploration, mining, refining, and
20     marketing); and, in either instance, the members are
21     functionally integrated through the exercise of strong
22     centralized management (where, for example, authority over
23     such matters as purchasing, financing, tax compliance,
24     product line, personnel, marketing and capital investment
25     is not left to each member). In no event, however, will any
26     unitary business group include members which are

 

 

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1     ordinarily required to apportion business income under
2     different subsections of Section 304 except that for tax
3     years ending on or after December 31, 1987 this prohibition
4     shall not apply to a unitary business group composed of one
5     or more taxpayers all of which apportion business income
6     pursuant to subsection (b) of Section 304, or all of which
7     apportion business income pursuant to subsection (d) of
8     Section 304, and a holding company of such single-factor
9     taxpayers (see definition of "financial organization" for
10     rule regarding holding companies of financial
11     organizations). If a unitary business group would, but for
12     the preceding sentence, include members that are
13     ordinarily required to apportion business income under
14     different subsections of Section 304, then for each
15     subsection of Section 304 for which there are two or more
16     members, there shall be a separate unitary business group
17     composed of such members. For purposes of the preceding two
18     sentences, a member is "ordinarily required to apportion
19     business income" under a particular subsection of Section
20     304 if it would be required to use the apportionment method
21     prescribed by such subsection except for the fact that it
22     derives business income solely from Illinois. As used in
23     this paragraph, the phrase "United States" means only the
24     50 states and the District of Columbia, but does not
25     include any territory or possession of the United States or
26     any area over which the United States has asserted

 

 

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1     jurisdiction or claimed exclusive rights with respect to
2     the exploration for or exploitation of natural resources.
3         If the unitary business group members' accounting
4     periods differ, the common parent's accounting period or,
5     if there is no common parent, the accounting period of the
6     member that is expected to have, on a recurring basis, the
7     greatest Illinois income tax liability must be used to
8     determine whether to use the apportionment method provided
9     in subsection (a) or subsection (h) of Section 304. The
10     prohibition against membership in a unitary business group
11     for taxpayers ordinarily required to apportion income
12     under different subsections of Section 304 does not apply
13     to taxpayers required to apportion income under subsection
14     (a) and subsection (h) of Section 304. The provisions of
15     this amendatory Act of 1998 apply to tax years ending on or
16     after December 31, 1998.
17         (28) Subchapter S corporation. The term "Subchapter S
18     corporation" means a corporation for which there is in
19     effect an election under Section 1362 of the Internal
20     Revenue Code, or for which there is a federal election to
21     opt out of the provisions of the Subchapter S Revision Act
22     of 1982 and have applied instead the prior federal
23     Subchapter S rules as in effect on July 1, 1982.
24         (30) Foreign person. The term "foreign person" means
25     any person who is a nonresident alien individual and any
26     nonindividual entity, regardless of where created or

 

 

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1     organized, whose business activity outside the United
2     States is 80% or more of the entity's total business
3     activity.
 
4     (b) Other definitions.
5         (1) Words denoting number, gender, and so forth, when
6     used in this Act, where not otherwise