96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB1123

 

Introduced 2/11/2009, by Rep. Susana A Mendoza

 

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

    Amends the Illinois Income Tax Act. Provides that an individual may deduct the amount paid for health insurance for a live-in domestic employee. Effective immediately.


LRB096 10292 RCE 20462 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB1123 LRB096 10292 RCE 20462 b

1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing Section 203 as follows:
 
6     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7     Sec. 203. Base income defined.
8     (a) Individuals.
9         (1) In general. In the case of an individual, base
10     income means an amount equal to the taxpayer's adjusted
11     gross income for the taxable year as modified by paragraph
12     (2).
13         (2) Modifications. The adjusted gross income referred
14     to in paragraph (1) shall be modified by adding thereto the
15     sum of the following amounts:
16             (A) An amount equal to all amounts paid or accrued
17         to the taxpayer as interest or dividends during the
18         taxable year to the extent excluded from gross income
19         in the computation of adjusted gross income, except
20         stock dividends of qualified public utilities
21         described in Section 305(e) of the Internal Revenue
22         Code;
23             (B) An amount equal to the amount of tax imposed by

 

 

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

 

 

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1         20 of the Medical Care Savings Account Act of 2000;
2             (D-10) For taxable years ending after December 31,
3         1997, an amount equal to any eligible remediation costs
4         that the individual deducted in computing adjusted
5         gross income and for which the individual claims a
6         credit under subsection (l) of Section 201;
7             (D-15) For taxable years 2001 and thereafter, an
8         amount equal to the bonus depreciation deduction taken
9         on the taxpayer's federal income tax return for the
10         taxable year under subsection (k) of Section 168 of the
11         Internal Revenue Code;
12             (D-16) 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 the aggregate amount of the
17         deductions taken in all taxable years under
18         subparagraph (Z) with respect to that property.
19             If the taxpayer continues to own property through
20         the last day of the last tax year for which the
21         taxpayer may claim a depreciation deduction for
22         federal income tax purposes and for which the taxpayer
23         was allowed in any taxable year to make a subtraction
24         modification under subparagraph (Z), then an amount
25         equal to that subtraction modification.
26             The taxpayer is required to make the addition

 

 

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1         modification under this subparagraph only once with
2         respect to any one piece of property;
3             (D-17) An amount equal to the amount otherwise
4         allowed as a deduction in computing base income for
5         interest paid, accrued, or incurred, directly or
6         indirectly, (i) for taxable years ending on or after
7         December 31, 2004, to a foreign person who would be a
8         member of the same unitary business group but for the
9         fact that foreign person's business activity outside
10         the United States is 80% or more of the foreign
11         person's total business activity and (ii) for taxable
12         years ending on or after December 31, 2008, to a person
13         who would be a member of the same unitary business
14         group but for the fact that the person is prohibited
15         under Section 1501(a)(27) from being included in the
16         unitary business group because he or she is ordinarily
17         required 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 under Sections 951 through 964
25         of the Internal Revenue Code and amounts included in
26         gross income under Section 78 of the Internal Revenue

 

 

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

 

 

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1             paid, accrued, or incurred relates to a contract or
2             agreement entered into at arm's-length rates and
3             terms and the principal purpose for the payment is
4             not federal or Illinois tax avoidance; or
5                 (iv) an item of interest paid, accrued, or
6             incurred, directly or indirectly, to a person if
7             the taxpayer establishes by clear and convincing
8             evidence that the adjustments are unreasonable; or
9             if the taxpayer and the Director agree in writing
10             to the application or use of an alternative method
11             of apportionment under Section 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 amount equal to the amount of intangible
22         expenses and costs otherwise allowed as a deduction in
23         computing base income, and that were paid, accrued, or
24         incurred, directly or indirectly, (i) for taxable
25         years ending on or after December 31, 2004, to a
26         foreign person who would be a member of the same

 

 

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

 

 

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

 

 

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

 

 

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1             by which the Department will utilize its authority
2             under Section 404 of this Act;
3             (D-19) For taxable years ending on or after
4         December 31, 2008, an amount equal to the amount of
5         insurance premium expenses and costs otherwise allowed
6         as a deduction in computing base income, and that were
7         paid, accrued, or incurred, directly or indirectly, to
8         a person who would be a member of the same unitary
9         business group but for the fact that the person is
10         prohibited under Section 1501(a)(27) from being
11         included in the unitary business group because he or
12         she is ordinarily required to apportion business
13         income under different subsections of Section 304. The
14         addition modification required by this subparagraph
15         shall be reduced to the extent that dividends were
16         included in base income of the unitary group for the
17         same taxable year and received by the taxpayer or by a
18         member of the taxpayer's unitary business group
19         (including amounts included in gross income under
20         Sections 951 through 964 of the Internal Revenue Code
21         and amounts included in gross income under Section 78
22         of the Internal Revenue Code) with respect to the stock
23         of the same person to whom the premiums and costs were
24         directly or indirectly paid, incurred, or accrued. The
25         preceding sentence does not apply to the extent that
26         the same dividends caused a reduction to the addition

 

 

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1         modification required under Section 203(a)(2)(D-17) or
2         Section 203(a)(2)(D-18) of this Act.
3             (D-20) For taxable years beginning on or after
4         January 1, 2002 and ending on or before December 31,
5         2006, in the case of a distribution from a qualified
6         tuition program under Section 529 of the Internal
7         Revenue Code, other than (i) a distribution from a
8         College Savings Pool created under Section 16.5 of the
9         State Treasurer Act or (ii) a distribution from the
10         Illinois Prepaid Tuition Trust Fund, an amount equal to
11         the amount excluded from gross income under Section
12         529(c)(3)(B). For taxable years beginning on or after
13         January 1, 2007, in the case of a distribution from a
14         qualified tuition program under Section 529 of the
15         Internal Revenue Code, other than (i) a distribution
16         from a College Savings Pool created under Section 16.5
17         of the State Treasurer Act, (ii) a distribution from
18         the Illinois Prepaid Tuition Trust Fund, or (iii) a
19         distribution from a qualified tuition program under
20         Section 529 of the Internal Revenue Code that (I)
21         adopts and determines that its offering materials
22         comply with the College Savings Plans Network's
23         disclosure principles and (II) has made reasonable
24         efforts to inform in-state residents of the existence
25         of in-state qualified tuition programs by informing
26         Illinois residents directly and, where applicable, to

 

 

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1         inform financial intermediaries distributing the
2         program to inform in-state residents of the existence
3         of in-state qualified tuition programs at least
4         annually, an amount equal to the amount excluded from
5         gross income under Section 529(c)(3)(B).
6             For the purposes of this subparagraph (D-20), a
7         qualified tuition program has made reasonable efforts
8         if it makes disclosures (which may use the term
9         "in-state program" or "in-state plan" and need not
10         specifically refer to Illinois or its qualified
11         programs by name) (i) directly to prospective
12         participants in its offering materials or makes a
13         public disclosure, such as a website posting; and (ii)
14         where applicable, to intermediaries selling the
15         out-of-state program in the same manner that the
16         out-of-state program distributes its offering
17         materials;
18                 (D-21) For taxable years beginning on or after
19         January 1, 2007, in the case of transfer of moneys from
20         a qualified tuition program under Section 529 of the
21         Internal Revenue Code that is administered by the State
22         to an out-of-state program, an amount equal to the
23         amount of moneys previously deducted from base income
24         under subsection (a)(2)(Y) of this Section.
25     and by deducting from the total so obtained the sum of the
26     following amounts:

 

 

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1             (E) For taxable years ending before December 31,
2         2001, any amount included in such total in respect of
3         any compensation (including but not limited to any
4         compensation paid or accrued to a serviceman while a
5         prisoner of war or missing in action) paid to a
6         resident by reason of being on active duty in the Armed
7         Forces of the United States and in respect of any
8         compensation paid or accrued to a resident who as a
9         governmental employee was a prisoner of war or missing
10         in action, and in respect of any compensation paid to a
11         resident in 1971 or thereafter for annual training
12         performed pursuant to Sections 502 and 503, Title 32,
13         United States Code as a member of the Illinois National
14         Guard or, beginning with taxable years ending on or
15         after December 31, 2007, the National Guard of any
16         other state. For taxable years ending on or after
17         December 31, 2001, any amount included in such total in
18         respect of any compensation (including but not limited
19         to any compensation paid or accrued to a serviceman
20         while a prisoner of war or missing in action) paid to a
21         resident by reason of being a member of any component
22         of the Armed Forces of the United States and in respect
23         of any compensation paid or accrued to a resident who
24         as a governmental employee was a prisoner of war or
25         missing in action, and in respect of any compensation
26         paid to a resident in 2001 or thereafter by reason of

 

 

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1         being a member of the Illinois National Guard or,
2         beginning with taxable years ending on or after
3         December 31, 2007, the National Guard of any other
4         state. The provisions of this amendatory Act of the
5         92nd General Assembly are exempt from the provisions of
6         Section 250;
7             (F) An amount equal to all amounts included in such
8         total pursuant to the provisions of Sections 402(a),
9         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
10         Internal Revenue Code, or included in such total as
11         distributions under the provisions of any retirement
12         or disability plan for employees of any governmental
13         agency or unit, or retirement payments to retired
14         partners, which payments are excluded in computing net
15         earnings from self employment by Section 1402 of the
16         Internal Revenue Code and regulations adopted pursuant
17         thereto;
18             (G) The valuation limitation amount;
19             (H) An amount equal to the amount of any tax
20         imposed by this Act which was refunded to the taxpayer
21         and included in such total for the taxable year;
22             (I) An amount equal to all amounts included in such
23         total pursuant to the provisions of Section 111 of the
24         Internal Revenue Code as a recovery of items previously
25         deducted from adjusted gross income in the computation
26         of taxable income;

 

 

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

 

 

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1         all amounts disallowed as deductions by (i) Sections
2         171(a) (2), and 265(2) of the Internal Revenue Code of
3         1954, 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             (N) An amount equal to all amounts included in such
13         total which are exempt from taxation by this State
14         either by reason of its statutes or Constitution or by
15         reason of the Constitution, treaties or statutes of the
16         United States; provided that, in the case of any
17         statute of this State that exempts income derived from
18         bonds or other obligations from the tax imposed under
19         this Act, the amount exempted shall be the interest net
20         of bond premium amortization;
21             (O) An amount equal to any contribution made to a
22         job training project established pursuant to the Tax
23         Increment Allocation Redevelopment Act;
24             (P) An amount equal to the amount of the deduction
25         used to compute the federal income tax credit for
26         restoration of substantial amounts held under claim of

 

 

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

 

 

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

 

 

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

 

 

HB1123 - 20 - LRB096 10292 RCE 20462 b

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

 

 

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1         of $10,000 contributed in the taxable year to (i) a
2         College Savings Pool account under Section 16.5 of the
3         State Treasurer Act or (ii) the Illinois Prepaid
4         Tuition Trust Fund, except that amounts excluded from
5         gross income under Section 529(c)(3)(C)(i) of the
6         Internal Revenue Code shall not be considered moneys
7         contributed under this subparagraph (Y). This
8         subparagraph (Y) is exempt from the provisions of
9         Section 250;
10             (Z) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         is taken on the taxpayer's federal income tax return
13         under subsection (k) of Section 168 of the Internal
14         Revenue Code and for each applicable taxable year
15         thereafter, an amount equal to "x", where:
16                 (1) "y" equals the amount of the depreciation
17             deduction taken for the taxable year on the
18             taxpayer's federal income tax return on property
19             for which the bonus depreciation deduction was
20             taken in any year under subsection (k) of Section
21             168 of the Internal Revenue Code, but not including
22             the bonus depreciation deduction;
23                 (2) for taxable years ending on or before
24             December 31, 2005, "x" equals "y" multiplied by 30
25             and then divided by 70 (or "y" multiplied by
26             0.429); and

 

 

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1                 (3) for taxable years ending after December
2             31, 2005:
3                     (i) for property on which a bonus
4                 depreciation deduction of 30% of the adjusted
5                 basis was taken, "x" equals "y" multiplied by
6                 30 and then divided by 70 (or "y" multiplied by
7                 0.429); and
8                     (ii) for property on which a bonus
9                 depreciation deduction of 50% of the adjusted
10                 basis was taken, "x" equals "y" multiplied by
11                 1.0.
12             The aggregate amount deducted under this
13         subparagraph in all taxable years for any one piece of
14         property may not exceed the amount of the bonus
15         depreciation deduction taken on that property on the
16         taxpayer's federal income tax return under subsection
17         (k) of Section 168 of the Internal Revenue Code. This
18         subparagraph (Z) is exempt from the provisions of
19         Section 250;
20             (AA) If the taxpayer sells, transfers, abandons,
21         or otherwise disposes of property for which the
22         taxpayer was required in any taxable year to make an
23         addition modification under subparagraph (D-15), then
24         an amount equal to that addition modification.
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 required in any taxable year to make an addition
4         modification under subparagraph (D-15), then an amount
5         equal to that addition modification.
6             The taxpayer is allowed to take the deduction under
7         this subparagraph only once with respect to any one
8         piece of property.
9             This subparagraph (AA) is exempt from the
10         provisions of Section 250;
11             (BB) Any amount included in adjusted gross income,
12         other than salary, received by a driver in a
13         ridesharing arrangement using a motor vehicle;
14             (CC) The amount of (i) any interest income (net of
15         the deductions allocable thereto) taken into account
16         for the taxable year with respect to a transaction with
17         a taxpayer that is required to make an addition
18         modification with respect to such transaction under
19         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
20         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
21         the amount of that addition modification, and (ii) any
22         income from intangible property (net of the deductions
23         allocable thereto) taken into account for the taxable
24         year with respect to a transaction with a taxpayer that
25         is required to make an addition modification with
26         respect to such transaction under Section

 

 

HB1123 - 24 - LRB096 10292 RCE 20462 b

1         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
2         203(d)(2)(D-8), but not to exceed the amount of that
3         addition modification. This subparagraph (CC) is
4         exempt from the provisions of Section 250;
5             (DD) An amount equal to the interest income taken
6         into account for the taxable year (net of the
7         deductions allocable thereto) with respect to
8         transactions with (i) 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 and (ii) for taxable
13         years ending on or after December 31, 2008, to a person
14         who would be a member of the same unitary business
15         group but for the fact that the person is prohibited
16         under Section 1501(a)(27) from being included in the
17         unitary business group because he or she is ordinarily
18         required to apportion business income under different
19         subsections of Section 304, but not to exceed the
20         addition modification required to be made for the same
21         taxable year under Section 203(a)(2)(D-17) for
22         interest paid, accrued, or incurred, directly or
23         indirectly, to the same person. This subparagraph (DD)
24         is exempt from the provisions of Section 250; and
25             (EE) An amount equal to the income from intangible
26         property taken into account for the taxable year (net

 

 

HB1123 - 25 - LRB096 10292 RCE 20462 b

1         of the deductions allocable thereto) with respect to
2         transactions with (i) a foreign person who would be a
3         member of the taxpayer's unitary business group but for
4         the fact that the foreign person's business activity
5         outside the United States is 80% or more of that
6         person's total business activity and (ii) for taxable
7         years ending on or after December 31, 2008, to a person
8         who would be a member of the same unitary business
9         group but for the fact that the person is prohibited
10         under Section 1501(a)(27) from being included in the
11         unitary business group because he or she is ordinarily
12         required to apportion business income under different
13         subsections of Section 304, but not to exceed the
14         addition modification required to be made for the same
15         taxable year under Section 203(a)(2)(D-18) for
16         intangible expenses and costs paid, accrued, or
17         incurred, directly or indirectly, to the same foreign
18         person. This subparagraph (EE) is exempt from the
19         provisions of Section 250.
20             (FF) An amount equal to the premiums paid for
21         health insurance for a live-in domestic employee.
 
22     (b) Corporations.
23         (1) In general. In the case of a corporation, base
24     income means an amount equal to the taxpayer's taxable
25     income for the taxable year as modified by paragraph (2).

 

 

HB1123 - 26 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 27 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 28 - LRB096 10292 RCE 20462 b

1         (E) shall be the sum of the amounts computed
2         independently under the preceding provisions of this
3         subparagraph (E) for each such taxable year;
4             (E-5) For taxable years ending after December 31,
5         1997, an amount equal to any eligible remediation costs
6         that the corporation deducted in computing adjusted
7         gross income and for which the corporation claims a
8         credit under subsection (l) of Section 201;
9             (E-10) For taxable years 2001 and thereafter, an
10         amount equal to the bonus depreciation deduction 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             (E-11) 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 (E-10), then
18         an amount equal to the aggregate amount of the
19         deductions taken in all taxable years under
20         subparagraph (T) 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 (T), then an amount

 

 

HB1123 - 29 - LRB096 10292 RCE 20462 b

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             (E-12) An amount equal to the amount otherwise
6         allowed as a deduction in computing base income for
7         interest paid, accrued, or incurred, directly or
8         indirectly, (i) for taxable years ending on or after
9         December 31, 2004, to a foreign person who would be a
10         member of the same unitary business group but for the
11         fact the foreign person's business activity outside
12         the United States is 80% or more of the foreign
13         person's total business activity and (ii) for taxable
14         years ending on or after December 31, 2008, to a person
15         who would be a member of the same unitary business
16         group but for the fact that the person is prohibited
17         under Section 1501(a)(27) from being included in the
18         unitary business group because he or she is ordinarily
19         required 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

 

 

HB1123 - 30 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 31 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 32 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 33 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 34 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 35 - LRB096 10292 RCE 20462 b

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

 

 

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1         directly or indirectly paid, incurred, or accrued. The
2         preceding sentence does not apply to the extent that
3         the same dividends caused a reduction to the addition
4         modification required under Section 203(b)(2)(E-12) or
5         Section 203(b)(2)(E-13) of this Act;
6             (E-15) For taxable years beginning after December
7         31, 2008, any deduction for dividends paid by a captive
8         real estate investment trust that is allowed to a real
9         estate investment trust under Section 857(b)(2)(B) of
10         the Internal Revenue Code for dividends paid;
11     and by deducting from the total so obtained the sum of the
12     following amounts:
13             (F) An amount equal to the amount of any tax
14         imposed by this Act which was refunded to the taxpayer
15         and included in such total for the taxable year;
16             (G) An amount equal to any amount included in such
17         total under Section 78 of the Internal Revenue Code;
18             (H) In the case of a regulated investment company,
19         an amount equal to the amount of exempt interest
20         dividends as defined in subsection (b) (5) of Section
21         852 of the Internal Revenue Code, paid to shareholders
22         for the taxable year;
23             (I) With the exception of any amounts subtracted
24         under subparagraph (J), an amount equal to the sum of
25         all amounts disallowed as deductions by (i) Sections
26         171(a) (2), and 265(a)(2) and amounts disallowed as

 

 

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

 

 

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1         Zone or zones or a River Edge Redevelopment Zone or
2         zones. This subparagraph (K) is exempt from the
3         provisions of Section 250;
4             (L) An amount equal to those dividends included in
5         such total that were paid by a corporation that
6         conducts business operations in a federally designated
7         Foreign Trade Zone or Sub-Zone and that is designated a
8         High Impact Business located in Illinois; provided
9         that dividends eligible for the deduction provided in
10         subparagraph (K) of paragraph 2 of this subsection
11         shall not be eligible for the deduction provided under
12         this subparagraph (L);
13             (M) For any taxpayer that is a financial
14         organization within the meaning of Section 304(c) of
15         this Act, an amount included in such total as interest
16         income from a loan or loans made by such taxpayer to a
17         borrower, to the extent that such a loan is secured by
18         property which is eligible for the Enterprise Zone
19         Investment Credit or the River Edge Redevelopment Zone
20         Investment Credit. To determine the portion of a loan
21         or loans that is secured by property eligible for a
22         Section 201(f) investment credit to the borrower, the
23         entire principal amount of the loan or loans between
24         the taxpayer and the borrower should be divided into
25         the basis of the Section 201(f) investment credit
26         property which secures the loan or loans, using for

 

 

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

 

 

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1         Illinois. No taxpayer that is eligible for the
2         deduction provided in subparagraph (M) of paragraph
3         (2) of this subsection shall be eligible for the
4         deduction provided under this subparagraph (M-1). The
5         subtraction modification available to taxpayers in any
6         year under this subsection shall be that portion of the
7         total interest paid by the borrower with respect to
8         such loan attributable to the eligible property as
9         calculated under the previous sentence;
10             (N) Two times any contribution made during the
11         taxable year to a designated zone organization to the
12         extent that the contribution (i) qualifies as a
13         charitable contribution under subsection (c) of
14         Section 170 of the Internal Revenue Code and (ii) must,
15         by its terms, be used for a project approved by the
16         Department of Commerce and Economic Opportunity under
17         Section 11 of the Illinois Enterprise Zone Act or under
18         Section 10-10 of the River Edge Redevelopment Zone Act.
19         This subparagraph (N) is exempt from the provisions of
20         Section 250;
21             (O) An amount equal to: (i) 85% for taxable years
22         ending on or before December 31, 1992, or, a percentage
23         equal to the percentage allowable under Section
24         243(a)(1) of the Internal Revenue Code of 1986 for
25         taxable years ending after December 31, 1992, of the
26         amount by which dividends included in taxable income

 

 

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1         and received from a corporation that is not created or
2         organized under the laws of the United States or any
3         state or political subdivision thereof, including, for
4         taxable years ending on or after December 31, 1988,
5         dividends received or deemed received or paid or deemed
6         paid under Sections 951 through 964 of the Internal
7         Revenue Code, exceed the amount of the modification
8         provided under subparagraph (G) of paragraph (2) of
9         this subsection (b) which is related to such dividends,
10         and including, for taxable years ending on or after
11         December 31, 2008, dividends received from a captive
12         real estate investment trust; plus (ii) 100% of the
13         amount by which dividends, included in taxable income
14         and received, including, for taxable years ending on or
15         after December 31, 1988, dividends received or deemed
16         received or paid or deemed paid under Sections 951
17         through 964 of the Internal Revenue Code and including,
18         for taxable years ending on or after December 31, 2008,
19         dividends received from a captive real estate
20         investment trust, from any such corporation specified
21         in clause (i) that would but for the provisions of
22         Section 1504 (b) (3) of the Internal Revenue Code be
23         treated as a member of the affiliated group which
24         includes the dividend recipient, exceed the amount of
25         the modification provided under subparagraph (G) of
26         paragraph (2) of this subsection (b) which is related

 

 

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1         to such dividends. This subparagraph (O) is exempt from
2         the provisions of Section 250 of this Act;
3             (P) An amount equal to any contribution made to a
4         job training project established pursuant to the Tax
5         Increment Allocation Redevelopment Act;
6             (Q) An amount equal to the amount of the deduction
7         used to compute the federal income tax credit for
8         restoration of substantial amounts held under claim of
9         right for the taxable year pursuant to Section 1341 of
10         the Internal Revenue Code of 1986;
11             (R) On and after July 20, 1999, in the case of an
12         attorney-in-fact with respect to whom an interinsurer
13         or a reciprocal insurer has made the election under
14         Section 835 of the Internal Revenue Code, 26 U.S.C.
15         835, an amount equal to the excess, if any, of the
16         amounts paid or incurred by that interinsurer or
17         reciprocal insurer in the taxable year to the
18         attorney-in-fact over the deduction allowed to that
19         interinsurer or reciprocal insurer with respect to the
20         attorney-in-fact under Section 835(b) of the Internal
21         Revenue Code for the taxable year; the provisions of
22         this subparagraph are exempt from the provisions of
23         Section 250;
24             (S) For taxable years ending on or after December
25         31, 1997, in the case of a Subchapter S corporation, an
26         amount equal to all amounts of income allocable to a

 

 

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1         shareholder subject to the Personal Property Tax
2         Replacement Income Tax imposed by subsections (c) and
3         (d) of Section 201 of this Act, including amounts
4         allocable to organizations exempt from federal income
5         tax by reason of Section 501(a) of the Internal Revenue
6         Code. This subparagraph (S) is exempt from the
7         provisions of Section 250;
8             (T) For taxable years 2001 and thereafter, for the
9         taxable year in which the bonus depreciation deduction
10         is taken on the taxpayer's federal income tax return
11         under subsection (k) of Section 168 of the Internal
12         Revenue Code and for each applicable taxable year
13         thereafter, an amount equal to "x", where:
14                 (1) "y" equals the amount of the depreciation
15             deduction taken for the taxable year on the
16             taxpayer's federal income tax return on property
17             for which the bonus depreciation deduction was
18             taken in any year under subsection (k) of Section
19             168 of the Internal Revenue Code, but not including
20             the bonus depreciation deduction;
21                 (2) for taxable years ending on or before
22             December 31, 2005, "x" equals "y" multiplied by 30
23             and then divided by 70 (or "y" multiplied by
24             0.429); and
25                 (3) for taxable years ending after December
26             31, 2005:

 

 

HB1123 - 44 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 45 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 46 - LRB096 10292 RCE 20462 b

1         transaction with a taxpayer that is required to make an
2         addition modification with respect to such transaction
3         under Section 203(a)(2)(D-19), Section
4         203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section
5         203(d)(2)(D-9), but not to exceed the amount of that
6         addition modification. This subparagraph (V) is exempt
7         from the provisions of Section 250;
8             (W) An amount equal to the interest income taken
9         into account for the taxable year (net of the
10         deductions allocable thereto) with respect to
11         transactions with (i) a foreign person who would be a
12         member of the taxpayer's unitary business group but for
13         the fact 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 person
17         who would be a member of the same unitary business
18         group but for the fact that the person is prohibited
19         under Section 1501(a)(27) from being included in the
20         unitary business group because he or she is ordinarily
21         required to apportion business income under different
22         subsections of Section 304, but not to exceed the
23         addition modification required to be made for the same
24         taxable year under Section 203(b)(2)(E-12) for
25         interest paid, accrued, or incurred, directly or
26         indirectly, to the same person. This subparagraph (W)

 

 

HB1123 - 47 - LRB096 10292 RCE 20462 b

1         is exempt from the provisions of Section 250; and
2             (X) An amount equal to the income from intangible
3         property taken into account for the taxable year (net
4         of the deductions allocable thereto) with respect to
5         transactions with (i) a foreign person who would be a
6         member of the taxpayer's unitary business group but for
7         the fact that the foreign person's business activity
8         outside the United States is 80% or more of that
9         person's total business activity and (ii) for taxable
10         years ending on or after December 31, 2008, to a person
11         who would be a member of the same unitary business
12         group but for the fact that the person is prohibited
13         under Section 1501(a)(27) from being included in the
14         unitary business group because he or she is ordinarily
15         required to apportion business income under different
16         subsections of Section 304, but not to exceed the
17         addition modification required to be made for the same
18         taxable year under Section 203(b)(2)(E-13) for
19         intangible expenses and costs paid, accrued, or
20         incurred, directly or indirectly, to the same foreign
21         person. This subparagraph (X) is exempt from the
22         provisions of Section 250. (Y)
23         (3) Special rule. For purposes of paragraph (2) (A),
24     "gross income" in the case of a life insurance company, for
25     tax years ending on and after December 31, 1994, shall mean
26     the gross investment income for the taxable year.
 

 

 

HB1123 - 48 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 49 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 50 - LRB096 10292 RCE 20462 b

1         addition modification provided in this subparagraph
2         (E) shall be the sum of the amounts computed
3         independently under the preceding provisions of this
4         subparagraph (E) for each such taxable year;
5             (F) For taxable years ending on or after January 1,
6         1989, an amount equal to the tax deducted pursuant to
7         Section 164 of the Internal Revenue Code if the trust
8         or estate is claiming the same tax for purposes of the
9         Illinois foreign tax credit under Section 601 of this
10         Act;
11             (G) An amount equal to the amount of the capital
12         gain deduction allowable under the Internal Revenue
13         Code, to the extent deducted from gross income in the
14         computation of taxable income;
15             (G-5) For taxable years ending after December 31,
16         1997, an amount equal to any eligible remediation costs
17         that the trust or estate deducted in computing adjusted
18         gross income and for which the trust or estate claims a
19         credit under subsection (l) of Section 201;
20             (G-10) For taxable years 2001 and thereafter, an
21         amount equal to the bonus depreciation deduction taken
22         on the taxpayer's federal income tax return for the
23         taxable year under subsection (k) of Section 168 of the
24         Internal Revenue Code; and
25             (G-11) If the taxpayer sells, transfers, abandons,
26         or otherwise disposes of property for which the

 

 

HB1123 - 51 - LRB096 10292 RCE 20462 b

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

 

 

HB1123 - 52 - LRB096 10292 RCE 20462 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         income under different subsections of Section 304. The
2         addition modification required by this subparagraph
3         shall be reduced to the extent that dividends were
4         included in base income of the unitary group for the
5         same taxable year and received by the taxpayer or by a
6         member of the taxpayer's unitary business group
7         (including amounts included in gross income under
8         Sections 951 through 964 of the Internal Revenue Code
9         and amounts included in gross income under Section 78
10         of the Internal Revenue Code) with respect to the stock
11         of the same person to whom the premiums and costs were
12         directly or indirectly paid, incurred, or accrued. The
13         preceding sentence does not apply to the extent that
14         the same dividends caused a reduction to the addition
15         modification required under Section 203(c)(2)(G-12) or
16         Section 203(c)(2)(G-13) of this Act.
17     and by deducting from the total so obtained the sum of the
18     following amounts:
19             (H) An amount equal to all amounts included in such
20         total pursuant to the provisions of Sections 402(a),
21         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
22         Internal Revenue Code or included in such total as
23         distributions under the provisions of any retirement
24         or disability plan for employees of any governmental
25         agency or unit, or retirement payments to retired
26         partners, which payments are excluded in computing net

 

 

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1         earnings from self employment by Section 1402 of the
2         Internal Revenue Code and regulations adopted pursuant
3         thereto;
4             (I) The valuation limitation amount;
5             (J) An amount equal to the amount of any tax
6         imposed by this Act which was refunded to the taxpayer
7         and included in such total for the taxable year;
8             (K) An amount equal to all amounts included in
9         taxable income as modified by subparagraphs (A), (B),
10         (C), (D), (E), (F) and (G) which are exempt from
11         taxation by this State either by reason of its statutes
12         or Constitution or by reason of the Constitution,
13         treaties or statutes of the United States; provided
14         that, in the case of any statute of this State that
15         exempts income derived from bonds or other obligations
16         from the tax imposed under this Act, the amount
17         exempted shall be the interest net of bond premium
18         amortization;
19             (L) With the exception of any amounts subtracted
20         under subparagraph (K), an amount equal to the sum of
21         all amounts disallowed as deductions by (i) Sections
22         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
23         as now or hereafter amended, and all amounts of
24         expenses allocable to interest and disallowed as
25         deductions by Section 265(1) of the Internal Revenue
26         Code of 1954, as now or hereafter amended; and (ii) for

 

 

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1         taxable years ending on or after August 13, 1999,
2         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
3         the Internal Revenue Code; the provisions of this
4         subparagraph are exempt from the provisions of Section
5         250;
6             (M) An amount equal to those dividends included in
7         such total which were paid by a corporation which
8         conducts business operations in an Enterprise Zone or
9         zones created under the Illinois Enterprise Zone Act or
10         a River Edge Redevelopment Zone or zones created under
11         the River Edge Redevelopment Zone Act and conducts
12         substantially all of its operations in an Enterprise
13         Zone or Zones or a River Edge Redevelopment Zone or
14         zones. This subparagraph (M) is exempt from the
15         provisions of Section 250;
16             (N) An amount equal to any contribution made to a
17         job training project established pursuant to the Tax
18         Increment Allocation Redevelopment Act;
19             (O) An amount equal to those dividends included in
20         such total that were paid by a corporation that
21         conducts business operations in a federally designated
22         Foreign Trade Zone or Sub-Zone and that is designated a
23         High Impact Business located in Illinois; provided
24         that dividends eligible for the deduction provided in
25         subparagraph (M) of paragraph (2) of this subsection
26         shall not be eligible for the deduction provided under

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         respect to such transaction under Section
2         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
3         203(d)(2)(D-8), but not to exceed the amount of such
4         addition modification. This subparagraph (T) is exempt
5         from the provisions of Section 250;
6             (U) An amount equal to the interest income taken
7         into account for the taxable year (net of the
8         deductions allocable thereto) with respect to
9         transactions with (i) a foreign person who would be a
10         member of the taxpayer's unitary business group but for
11         the fact the foreign person's business activity
12         outside the United States is 80% or more of that
13         person's total business activity and (ii) for taxable
14         years ending on or after December 31, 2008, to a person
15         who would be a member of the same unitary business
16         group but for the fact that the person is prohibited
17         under Section 1501(a)(27) from being included in the
18         unitary business group because he or she is ordinarily
19         required to apportion business income under different
20         subsections of Section 304, but not to exceed the
21         addition modification required to be made for the same
22         taxable year under Section 203(c)(2)(G-12) for
23         interest paid, accrued, or incurred, directly or
24         indirectly, to the same person. This subparagraph (U)
25         is exempt from the provisions of Section 250; and
26             (V) An amount equal to the income from intangible

 

 

HB1123 - 66 - LRB096 10292 RCE 20462 b

1         property taken into account for the taxable year (net
2         of the deductions allocable thereto) with respect to
3         transactions with (i) a foreign person who would be a
4         member of the taxpayer's unitary business group but for
5         the fact that the foreign person's business activity
6         outside the United States is 80% or more of that
7         person's total business activity and (ii) for taxable
8         years ending on or after December 31, 2008, to a person
9         who would be a member of the same unitary business
10         group but for the fact that the person is prohibited
11         under Section 1501(a)(27) from being included in the
12         unitary business group because he or she is ordinarily
13         required to apportion business income under different
14         subsections of Section 304, but not to exceed the
15         addition modification required to be made for the same
16         taxable year under Section 203(c)(2)(G-13) for
17         intangible expenses and costs paid, accrued, or
18         incurred, directly or indirectly, to the same foreign
19         person. This subparagraph (V) is exempt from the
20         provisions of Section 250. (W)
21         (3) Limitation. The amount of any modification
22     otherwise required under this subsection shall, under
23     regulations prescribed by the Department, be adjusted by
24     any amounts included therein which were properly paid,
25     credited, or required to be distributed, or permanently set
26     aside for charitable purposes pursuant to Internal Revenue

 

 

HB1123 - 67 - LRB096 10292 RCE 20462 b

1     Code Section 642(c) during the taxable year.
 
2     (d) Partnerships.
3         (1) In general. In the case of a partnership, base
4     income means an amount equal to the taxpayer's taxable
5     income for the taxable year as modified by paragraph (2).
6         (2) Modifications. The taxable income referred to in
7     paragraph (1) shall be modified by adding thereto the sum
8     of the following amounts:
9             (A) An amount equal to all amounts paid or accrued
10         to the taxpayer as interest or dividends during the
11         taxable year to the extent excluded from gross income
12         in the computation of taxable income;
13             (B) An amount equal to the amount of tax imposed by
14         this Act to the extent deducted from gross income for
15         the taxable year;
16             (C) The amount of deductions allowed to the
17         partnership pursuant to Section 707 (c) of the Internal
18         Revenue Code in calculating its taxable income;
19             (D) An amount equal to the amount of the capital
20         gain deduction allowable under the Internal Revenue
21         Code, to the extent deducted from gross income in the
22         computation of taxable income;
23             (D-5) For taxable years 2001 and thereafter, an
24         amount equal to the bonus depreciation deduction taken
25         on the taxpayer's federal income tax return for the

 

 

HB1123 - 68 - LRB096 10292 RCE 20462 b

1         taxable year under subsection (k) of Section 168 of the
2         Internal Revenue Code;
3             (D-6) If the taxpayer sells, transfers, abandons,
4         or otherwise disposes of property for which the
5         taxpayer was required in any taxable year to make an
6         addition modification under subparagraph (D-5), then
7         an amount equal to the aggregate amount of the
8         deductions taken in all taxable years under
9         subparagraph (O) with respect to that property.
10             If the taxpayer continues to own property through
11         the last day of the last tax year for which the
12         taxpayer may claim a depreciation deduction for
13         federal income tax purposes and for which the taxpayer
14         was allowed in any taxable year to make a subtraction
15         modification under subparagraph (O), then an amount
16         equal to that subtraction modification.
17             The taxpayer is required to make the addition
18         modification under this subparagraph only once with
19         respect to any one piece of property;
20             (D-7) An amount equal to the amount otherwise
21         allowed as a deduction in computing base income for
22         interest paid, accrued, or incurred, directly or
23         indirectly, (i) for taxable years ending on or after
24         December 31, 2004, to a foreign person who would be a
25         member of the same unitary business group but for the
26         fact the foreign person's business activity outside

 

 

HB1123 - 69 - LRB096 10292 RCE 20462 b

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

 

 

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

 

 

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1             if the taxpayer and the Director agree in writing
2             to the application or use of an alternative method
3             of apportionment under Section 304(f).
4                 Nothing in this subsection shall preclude the
5             Director from making any other adjustment
6             otherwise allowed under Section 404 of this Act for
7             any tax year beginning after the effective date of
8             this amendment provided such adjustment is made
9             pursuant to regulation adopted by the Department
10             and such regulations provide methods and standards
11             by which the Department will utilize its authority
12             under Section 404 of this Act; and
13             (D-8) An amount equal to the amount of intangible
14         expenses and costs otherwise allowed as a deduction in
15         computing base income, and that were paid, accrued, or
16         incurred, directly or indirectly, (i) for taxable
17         years ending on or after December 31, 2004, to a
18         foreign person who would be a member of the same
19         unitary business group but for the fact that the
20         foreign person's business activity outside the United
21         States is 80% or more of that person's total business
22         activity and (ii) for taxable years ending on or after
23         December 31, 2008, to a person who would be a member of
24         the same unitary business group but for the fact that
25         the person is prohibited under Section 1501(a)(27)
26         from being included in the unitary business group

 

 

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

 

 

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

 

 

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1                 income tax, and is paid pursuant to a contract
2                 or agreement that reflects arm's-length terms;
3                 or
4                 (iii) any item of intangible expense or cost
5             paid, accrued, or incurred, directly or
6             indirectly, from a transaction with a person if the
7             taxpayer establishes by clear and convincing
8             evidence, that the adjustments are unreasonable;
9             or if the taxpayer and the Director agree in
10             writing to the application or use of an alternative
11             method of apportionment under Section 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-9) For taxable years ending on or after December
22         31, 2008, an amount equal to the amount of insurance
23         premium expenses and costs otherwise allowed as a
24         deduction in computing base income, and that were paid,
25         accrued, or incurred, directly or indirectly, to a
26         person who would be a member of the same unitary

 

 

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1         business group but for the fact that the person is
2         prohibited under Section 1501(a)(27) from being
3         included in the unitary business group because he or
4         she is ordinarily required to apportion business
5         income under different subsections of Section 304. The
6         addition modification required by this subparagraph
7         shall be reduced to the extent that dividends were
8         included in base income of the unitary group for the
9         same taxable year and received by the taxpayer or by a
10         member of the taxpayer's unitary business group
11         (including amounts included in gross income under
12         Sections 951 through 964 of the Internal Revenue Code
13         and amounts included in gross income under Section 78
14         of the Internal Revenue Code) with respect to the stock
15         of the same person to whom the premiums and costs were
16         directly or indirectly paid, incurred, or accrued. The
17         preceding sentence does not apply to the extent that
18         the same dividends caused a reduction to the addition
19         modification required under Section 203(d)(2)(D-7) or
20         Section 203(d)(2)(D-8) of this Act.
21     and by deducting from the total so obtained the following
22     amounts:
23             (E) The valuation limitation amount;
24             (F) An amount equal to the amount of any tax
25         imposed by this Act which was refunded to the taxpayer
26         and included in such total for the taxable year;

 

 

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

 

 

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

 

 

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1         conducts business operations in a federally designated
2         Foreign Trade Zone or Sub-Zone and that is designated a
3         High Impact Business located in Illinois; provided
4         that dividends eligible for the deduction provided in
5         subparagraph (K) of paragraph (2) of this subsection
6         shall not be eligible for the deduction provided under
7         this subparagraph (M);
8             (N) 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             (O) For taxable years 2001 and thereafter, for the
14         taxable year in which the bonus depreciation deduction
15         is taken on the taxpayer's federal income tax return
16         under subsection (k) of Section 168 of the Internal
17         Revenue Code and for each applicable taxable year
18         thereafter, an amount equal to "x", where:
19                 (1) "y" equals the amount of the depreciation
20             deduction taken for the taxable year on the
21             taxpayer's federal income tax return on property
22             for which the bonus depreciation deduction was
23             taken in any year under subsection (k) of Section
24             168 of the Internal Revenue Code, but not including
25             the bonus depreciation deduction;
26                 (2) for taxable years ending on or before

 

 

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

 

 

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

 

 

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1         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
2         203(d)(2)(D-8), but not to exceed the amount of such
3         addition modification. This subparagraph (Q) is exempt
4         from Section 250;
5             (R) An amount equal to the interest income taken
6         into account for the taxable year (net of the
7         deductions allocable thereto) with respect to
8         transactions with (i) 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 and (ii) for taxable
13         years ending on or after December 31, 2008, to a person
14         who would be a member of the same unitary business
15         group but for the fact that the person is prohibited
16         under Section 1501(a)(27) from being included in the
17         unitary business group because he or she is ordinarily
18         required to apportion business income under different
19         subsections of Section 304, but not to exceed the
20         addition modification required to be made for the same
21         taxable year under Section 203(d)(2)(D-7) for interest
22         paid, accrued, or incurred, directly or indirectly, to
23         the same person. This subparagraph (R) is exempt from
24         Section 250; and
25             (S) An amount equal to the income from intangible
26         property taken into account for the taxable year (net

 

 

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1         of the deductions allocable thereto) with respect to
2         transactions with (i) a foreign person who would be a
3         member of the taxpayer's unitary business group but for
4         the fact that the foreign person's business activity
5         outside the United States is 80% or more of that
6         person's total business activity and (ii) for taxable
7         years ending on or after December 31, 2008, to a person
8         who would be a member of the same unitary business
9         group but for the fact that the person is prohibited
10         under Section 1501(a)(27) from being included in the
11         unitary business group because he or she is ordinarily
12         required to apportion business income under different
13         subsections of Section 304, but not to exceed the
14         addition modification required to be made for the same
15         taxable year under Section 203(d)(2)(D-8) for
16         intangible expenses and costs paid, accrued, or
17         incurred, directly or indirectly, to the same person.
18         This subparagraph (S) is exempt from Section 250. (T)
 
19     (e) Gross income; adjusted gross income; taxable income.
20         (1) In general. Subject to the provisions of paragraph
21     (2) and subsection (b) (3), for purposes of this Section
22     and Section 803(e), a taxpayer's gross income, adjusted
23     gross income, or taxable income for the taxable year shall
24     mean the amount of gross income, adjusted gross income or
25     taxable income properly reportable for federal income tax

 

 

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

 

 

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1         (2) Special rule. For purposes of paragraph (1) of this
2     subsection, the taxable income properly reportable for
3     federal income tax purposes shall mean:
4             (A) Certain life insurance companies. In the case
5         of a life insurance company subject to the tax imposed
6         by Section 801 of the Internal Revenue Code, life
7         insurance company taxable income, plus the amount of
8         distribution from pre-1984 policyholder surplus
9         accounts as calculated under Section 815a of the
10         Internal Revenue Code;
11             (B) Certain other insurance companies. In the case
12         of mutual insurance companies subject to the tax
13         imposed by Section 831 of the Internal Revenue Code,
14         insurance company taxable income;
15             (C) Regulated investment companies. In the case of
16         a regulated investment company subject to the tax
17         imposed by Section 852 of the Internal Revenue Code,
18         investment company taxable income;
19             (D) Real estate investment trusts. In the case of a
20         real estate investment trust subject to the tax imposed
21         by Section 857 of the Internal Revenue Code, real
22         estate investment trust taxable income;
23             (E) Consolidated corporations. In the case of a
24         corporation which is a member of an affiliated group of
25         corporations filing a consolidated income tax return
26         for the taxable year for federal income tax purposes,

 

 

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

 

 

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

 

 

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1     taxable years.
 
2     (f) Valuation limitation amount.
3         (1) In general. The valuation limitation amount
4     referred to in subsections (a) (2) (G), (c) (2) (I) and
5     (d)(2) (E) is an amount equal to:
6             (A) The sum of the pre-August 1, 1969 appreciation
7         amounts (to the extent consisting of gain reportable
8         under the provisions of Section 1245 or 1250 of the
9         Internal Revenue Code) for all property in respect of
10         which such gain was reported for the taxable year; plus
11             (B) The lesser of (i) the sum of the pre-August 1,
12         1969 appreciation amounts (to the extent consisting of
13         capital gain) for all property in respect of which such
14         gain was reported for federal income tax purposes for
15         the taxable year, or (ii) the net capital gain for the
16         taxable year, reduced in either case by any amount of
17         such gain included in the amount determined under
18         subsection (a) (2) (F) or (c) (2) (H).
19         (2) Pre-August 1, 1969 appreciation amount.
20             (A) If the fair market value of property referred
21         to in paragraph (1) was readily ascertainable on August
22         1, 1969, the pre-August 1, 1969 appreciation amount for
23         such property is the lesser of (i) the excess of such
24         fair market value over the taxpayer's basis (for
25         determining gain) for such property on that date

 

 

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1         (determined under the Internal Revenue Code as in
2         effect on that date), or (ii) the total gain realized
3         and reportable for federal income tax purposes in
4         respect of the sale, exchange or other disposition of
5         such property.
6             (B) If the fair market value of property referred
7         to in paragraph (1) was not readily ascertainable on
8         August 1, 1969, the pre-August 1, 1969 appreciation
9         amount for such property is that amount which bears the
10         same ratio to the total gain reported in respect of the
11         property for federal income tax purposes for the
12         taxable year, as the number of full calendar months in
13         that part of the taxpayer's holding period for the
14         property ending July 31, 1969 bears to the number of
15         full calendar months in the taxpayer's entire holding
16         period for the property.
17             (C) The Department shall prescribe such
18         regulations as may be necessary to carry out the
19         purposes of this paragraph.
 
20     (g) Double deductions. Unless specifically provided
21 otherwise, nothing in this Section shall permit the same item
22 to be deducted more than once.
 
23     (h) Legislative intention. Except as expressly provided by
24 this Section there shall be no modifications or limitations on

 

 

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1 the amounts of income, gain, loss or deduction taken into
2 account in determining gross income, adjusted gross income or
3 taxable income for federal income tax purposes for the taxable
4 year, or in the amount of such items entering into the
5 computation of base income and net income under this Act for
6 such taxable year, whether in respect of property values as of
7 August 1, 1969 or otherwise.
8 (Source: P.A. 94-776, eff. 5-19-06; 94-789, eff. 5-19-06;
9 94-1021, eff. 7-12-06; 94-1074, eff. 12-26-06; 95-23, eff.
10 8-3-07; 95-233, eff. 8-16-07; 95-286, eff. 8-20-07; 95-331,
11 eff. 8-21-07; 95-707, eff. 1-11-08; 95-876, eff. 8-21-08;
12 revised 10-15-08.)
 
13     Section 99. Effective date. This Act takes effect upon
14 becoming law.