HB2239 Enrolled LRB096 11003 RCE 21288 b

1     AN ACT in relation to budget implementation.
 
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             (D-22) For taxable years beginning on or after
26         January 1, 2009, in the case of a nonqualified

 

 

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1         withdrawal or refund of moneys from a qualified tuition
2         program under Section 529 of the Internal Revenue Code
3         administered by the State that is not used for
4         qualified expenses at an eligible education
5         institution, an amount equal to the contribution
6         component of the nonqualified withdrawal or refund
7         that was previously deducted from base income under
8         subsection (a)(2)(y) of this Section, provided that
9         the withdrawal or refund did not result from the
10         beneficiary's death or disability; .
11             (D-23) (D-22) An amount equal to the credit
12         allowable to the taxpayer under Section 218(a) of this
13         Act, determined without regard to Section 218(c) of
14         this Act; .
15     and by deducting from the total so obtained the sum of the
16     following amounts:
17             (E) For taxable years ending before December 31,
18         2001, any amount included in such total in respect of
19         any compensation (including but not limited to any
20         compensation paid or accrued to a serviceman while a
21         prisoner of war or missing in action) paid to a
22         resident by reason of being on active duty in the Armed
23         Forces of the United States and in respect of any
24         compensation paid or accrued to a resident who as a
25         governmental employee was a prisoner of war or missing
26         in action, and in respect of any compensation paid to a

 

 

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1         resident in 1971 or thereafter for annual training
2         performed pursuant to Sections 502 and 503, Title 32,
3         United States Code as a member of the Illinois National
4         Guard or, beginning with taxable years ending on or
5         after December 31, 2007, the National Guard of any
6         other state. For taxable years ending on or after
7         December 31, 2001, any amount included in such total in
8         respect of any compensation (including but not limited
9         to any compensation paid or accrued to a serviceman
10         while a prisoner of war or missing in action) paid to a
11         resident by reason of being a member of any component
12         of the Armed Forces of the United States and in respect
13         of any compensation paid or accrued to a resident who
14         as a governmental employee was a prisoner of war or
15         missing in action, and in respect of any compensation
16         paid to a resident in 2001 or thereafter by reason of
17         being a member of the Illinois National Guard or,
18         beginning with taxable years ending on or after
19         December 31, 2007, the National Guard of any other
20         state. The provisions of this amendatory Act of the
21         92nd General Assembly are exempt from the provisions of
22         Section 250;
23             (F) An amount equal to all amounts included in such
24         total pursuant to the provisions of Sections 402(a),
25         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
26         Internal Revenue Code, or included in such total as

 

 

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1         distributions under the provisions of any retirement
2         or disability plan for employees of any governmental
3         agency or unit, or retirement payments to retired
4         partners, which payments are excluded in computing net
5         earnings from self employment by Section 1402 of the
6         Internal Revenue Code and regulations adopted pursuant
7         thereto;
8             (G) The valuation limitation amount;
9             (H) An amount equal to the amount of any tax
10         imposed by this Act which was refunded to the taxpayer
11         and included in such total for the taxable year;
12             (I) An amount equal to all amounts included in such
13         total pursuant to the provisions of Section 111 of the
14         Internal Revenue Code as a recovery of items previously
15         deducted from adjusted gross income in the computation
16         of taxable income;
17             (J) An amount equal to those dividends included in
18         such total which were paid by a corporation which
19         conducts business operations in an Enterprise Zone or
20         zones created under the Illinois Enterprise Zone Act or
21         a River Edge Redevelopment Zone or zones created under
22         the River Edge Redevelopment Zone Act, and conducts
23         substantially all of its operations in an Enterprise
24         Zone or zones or a River Edge Redevelopment Zone or
25         zones. This subparagraph (J) is exempt from the
26         provisions of Section 250;

 

 

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

 

 

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1         250;
2             (N) An amount equal to all amounts included in such
3         total which are exempt from taxation by this State
4         either by reason of its statutes or Constitution or by
5         reason of the Constitution, treaties or statutes of the
6         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             (O) An amount equal to any contribution made to a
12         job training project established pursuant to the Tax
13         Increment Allocation Redevelopment Act;
14             (P) An amount equal to the amount of the deduction
15         used to compute the federal income tax credit for
16         restoration of substantial amounts held under claim of
17         right for the taxable year pursuant to Section 1341 of
18         the Internal Revenue Code of 1986;
19             (Q) An amount equal to any amounts included in such
20         total, received by the taxpayer as an acceleration in
21         the payment of life, endowment or annuity benefits in
22         advance of the time they would otherwise be payable as
23         an indemnity for a terminal illness;
24             (R) An amount equal to the amount of any federal or
25         State bonus paid to veterans of the Persian Gulf War;
26             (S) An amount, to the extent included in adjusted

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         who would be a member of the same unitary business
2         group but for the fact that the person is prohibited
3         under Section 1501(a)(27) from being included in the
4         unitary business group because he or she is ordinarily
5         required to apportion business income under different
6         subsections of Section 304, but not to exceed the
7         addition modification required to be made for the same
8         taxable year under Section 203(a)(2)(D-18) for
9         intangible expenses and costs paid, accrued, or
10         incurred, directly or indirectly, to the same foreign
11         person. This subparagraph (EE) is exempt from the
12         provisions of Section 250.
 
13     (b) Corporations.
14         (1) In general. In the case of a corporation, base
15     income means an amount equal to the taxpayer's taxable
16     income for the taxable year as modified by paragraph (2).
17         (2) Modifications. The taxable income referred to in
18     paragraph (1) shall be modified by adding thereto the sum
19     of the following amounts:
20             (A) An amount equal to all amounts paid or accrued
21         to the taxpayer as interest and all distributions
22         received from regulated investment companies during
23         the taxable year to the extent excluded from gross
24         income in the computation of taxable income;
25             (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 taxable income for the taxable year;
3             (C) In the case of a regulated investment company,
4         an amount equal to the excess of (i) the net long-term
5         capital gain for the taxable year, over (ii) the amount
6         of the capital gain dividends designated as such in
7         accordance with Section 852(b)(3)(C) of the Internal
8         Revenue Code and any amount designated under Section
9         852(b)(3)(D) of the Internal Revenue Code,
10         attributable to the taxable year (this amendatory Act
11         of 1995 (Public Act 89-89) is declarative of existing
12         law and is not a new enactment);
13             (D) The amount of any net operating loss deduction
14         taken in arriving at taxable income, other than a net
15         operating loss carried forward from a taxable year
16         ending prior to December 31, 1986;
17             (E) For taxable years in which a net operating loss
18         carryback or carryforward from a taxable year ending
19         prior to December 31, 1986 is an element of taxable
20         income under paragraph (1) of subsection (e) or
21         subparagraph (E) of paragraph (2) of subsection (e),
22         the amount by which addition modifications other than
23         those provided by this subparagraph (E) exceeded
24         subtraction modifications in such earlier taxable
25         year, with the following limitations applied in the
26         order that they are listed:

 

 

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1                 (i) the addition modification relating to the
2             net operating loss carried back or forward to the
3             taxable year from any taxable year ending prior to
4             December 31, 1986 shall be reduced by the amount of
5             addition modification under this subparagraph (E)
6             which related to that net operating loss and which
7             was taken into account in calculating the base
8             income of an earlier taxable year, and
9                 (ii) the addition modification relating to the
10             net operating loss carried back or forward to the
11             taxable year from any taxable year ending prior to
12             December 31, 1986 shall not exceed the amount of
13             such carryback or carryforward;
14             For taxable years in which there is a net operating
15         loss carryback or carryforward from more than one other
16         taxable year ending prior to December 31, 1986, the
17         addition modification provided in this subparagraph
18         (E) shall be the sum of the amounts computed
19         independently under the preceding provisions of this
20         subparagraph (E) for each such taxable year;
21             (E-5) For taxable years ending after December 31,
22         1997, an amount equal to any eligible remediation costs
23         that the corporation deducted in computing adjusted
24         gross income and for which the corporation claims a
25         credit under subsection (l) of Section 201;
26             (E-10) For taxable years 2001 and thereafter, an

 

 

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1         amount equal to the bonus depreciation deduction taken
2         on the taxpayer's federal income tax return for the
3         taxable year under subsection (k) of Section 168 of the
4         Internal Revenue Code;
5             (E-11) If the taxpayer sells, transfers, abandons,
6         or otherwise disposes of property for which the
7         taxpayer was required in any taxable year to make an
8         addition modification under subparagraph (E-10), then
9         an amount equal to the aggregate amount of the
10         deductions taken in all taxable years under
11         subparagraph (T) with respect to that property.
12             If the taxpayer continues to own property through
13         the last day of the last tax year for which the
14         taxpayer may claim a depreciation deduction for
15         federal income tax purposes and for which the taxpayer
16         was allowed in any taxable year to make a subtraction
17         modification under subparagraph (T), then an amount
18         equal to that subtraction modification.
19             The taxpayer is required to make the addition
20         modification under this subparagraph only once with
21         respect to any one piece of property;
22             (E-12) An amount equal to the amount otherwise
23         allowed as a deduction in computing base income for
24         interest paid, accrued, or incurred, directly or
25         indirectly, (i) for taxable years ending on or after
26         December 31, 2004, to a foreign person who would be a

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

HB2239 Enrolled - 35 - LRB096 11003 RCE 21288 b

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

 

 

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1         paid, accrued, or incurred, directly or indirectly, to
2         a person who would be a member of the same unitary
3         business group but for the fact that the person is
4         prohibited under Section 1501(a)(27) from being
5         included in the unitary business group because he or
6         she is ordinarily required to apportion business
7         income under different subsections of Section 304. The
8         addition modification required by this subparagraph
9         shall be reduced to the extent that dividends were
10         included in base income of the unitary group for the
11         same taxable year and received by the taxpayer or by a
12         member of the taxpayer's unitary business group
13         (including amounts included in gross income under
14         Sections 951 through 964 of the Internal Revenue Code
15         and amounts included in gross income under Section 78
16         of the Internal Revenue Code) with respect to the stock
17         of the same person to whom the premiums and costs were
18         directly or indirectly paid, incurred, or accrued. The
19         preceding sentence does not apply to the extent that
20         the same dividends caused a reduction to the addition
21         modification required under Section 203(b)(2)(E-12) or
22         Section 203(b)(2)(E-13) of this Act;
23             (E-15) For taxable years beginning after December
24         31, 2008, any deduction for dividends paid by a captive
25         real estate investment trust that is allowed to a real
26         estate investment trust under Section 857(b)(2)(B) of

 

 

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1         the Internal Revenue Code for dividends paid;
2             (E-16) An amount equal to the credit allowable to
3         the taxpayer under Section 218(a) of this Act,
4         determined without regard to Section 218(c) of this
5         Act; .
6     and by deducting from the total so obtained the sum of the
7     following amounts:
8             (F) An amount equal to the amount of any tax
9         imposed by this Act which was refunded to the taxpayer
10         and included in such total for the taxable year;
11             (G) An amount equal to any amount included in such
12         total under Section 78 of the Internal Revenue Code;
13             (H) In the case of a regulated investment company,
14         an amount equal to the amount of exempt interest
15         dividends as defined in subsection (b) (5) of Section
16         852 of the Internal Revenue Code, paid to shareholders
17         for the taxable year;
18             (I) With the exception of any amounts subtracted
19         under subparagraph (J), an amount equal to the sum of
20         all amounts disallowed as deductions by (i) Sections
21         171(a) (2), and 265(a)(2) and amounts disallowed as
22         interest expense by Section 291(a)(3) of the Internal
23         Revenue Code, as now or hereafter amended, and all
24         amounts of expenses allocable to interest and
25         disallowed as deductions by Section 265(a)(1) of the
26         Internal Revenue Code, as now or hereafter amended; and

 

 

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1         (ii) for taxable years ending on or after August 13,
2         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
3         832(b)(5)(B)(i) of the Internal Revenue Code; the
4         provisions of this subparagraph are exempt from the
5         provisions of Section 250;
6             (J) An amount equal to all amounts included in such
7         total which are exempt from taxation by this State
8         either by reason of its statutes or Constitution or by
9         reason of the Constitution, treaties or statutes of the
10         United States; provided that, in the case of any
11         statute of this State that exempts income derived from
12         bonds or other obligations from the tax imposed under
13         this Act, the amount exempted shall be the interest net
14         of bond premium amortization;
15             (K) An amount equal to those dividends included in
16         such total which were paid by a corporation which
17         conducts business operations in an Enterprise Zone or
18         zones created under the Illinois Enterprise Zone Act or
19         a River Edge Redevelopment Zone or zones created under
20         the River Edge Redevelopment Zone Act and conducts
21         substantially all of its operations in an Enterprise
22         Zone or zones or a River Edge Redevelopment Zone or
23         zones. This subparagraph (K) is exempt from the
24         provisions of Section 250;
25             (L) 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 (L);
8             (M) For any taxpayer that is a financial
9         organization within the meaning of Section 304(c) of
10         this Act, an amount included in such total as interest
11         income from a loan or loans made by such taxpayer to a
12         borrower, to the extent that such a loan is secured by
13         property which is eligible for the Enterprise Zone
14         Investment Credit or the River Edge Redevelopment Zone
15         Investment Credit. To determine the portion of a loan
16         or loans that is secured by property eligible for a
17         Section 201(f) investment credit to the borrower, the
18         entire principal amount of the loan or loans between
19         the taxpayer and the borrower should be divided into
20         the basis of the Section 201(f) investment credit
21         property which secures the loan or loans, using for
22         this purpose the original basis of such property on the
23         date that it was placed in service in the Enterprise
24         Zone or the River Edge Redevelopment Zone. The
25         subtraction modification available to taxpayer in any
26         year under this subsection shall be that portion of the

 

 

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1         total interest paid by the borrower with respect to
2         such loan attributable to the eligible property as
3         calculated under the previous sentence. This
4         subparagraph (M) is exempt from the provisions of
5         Section 250;
6             (M-1) For any taxpayer that is a financial
7         organization within the meaning of Section 304(c) of
8         this Act, an amount included in such total as interest
9         income from a loan or loans made by such taxpayer to a
10         borrower, to the extent that such a loan is secured by
11         property which is eligible for the High Impact Business
12         Investment Credit. To determine the portion of a loan
13         or loans that is secured by property eligible for a
14         Section 201(h) investment credit to the borrower, the
15         entire principal amount of the loan or loans between
16         the taxpayer and the borrower should be divided into
17         the basis of the Section 201(h) investment credit
18         property which secures the loan or loans, using for
19         this purpose the original basis of such property on the
20         date that it was placed in service in a federally
21         designated Foreign Trade Zone or Sub-Zone located in
22         Illinois. No taxpayer that is eligible for the
23         deduction provided in subparagraph (M) of paragraph
24         (2) of this subsection shall be eligible for the
25         deduction provided under this subparagraph (M-1). The
26         subtraction modification available to taxpayers in any

 

 

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

 

 

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1         paid under Sections 951 through 964 of the Internal
2         Revenue Code, exceed the amount of the modification
3         provided under subparagraph (G) of paragraph (2) of
4         this subsection (b) which is related to such dividends,
5         and including, for taxable years ending on or after
6         December 31, 2008, dividends received from a captive
7         real estate investment trust; plus (ii) 100% of the
8         amount by which dividends, included in taxable income
9         and received, including, for taxable years ending on or
10         after December 31, 1988, dividends received or deemed
11         received or paid or deemed paid under Sections 951
12         through 964 of the Internal Revenue Code and including,
13         for taxable years ending on or after December 31, 2008,
14         dividends received from a captive real estate
15         investment trust, from any such corporation specified
16         in clause (i) that would but for the provisions of
17         Section 1504 (b) (3) of the Internal Revenue Code be
18         treated as a member of the affiliated group which
19         includes the dividend recipient, exceed the amount of
20         the modification provided under subparagraph (G) of
21         paragraph (2) of this subsection (b) which is related
22         to such dividends. This subparagraph (O) is exempt from
23         the provisions of Section 250 of this Act;
24             (P) An amount equal to any contribution made to a
25         job training project established pursuant to the Tax
26         Increment Allocation Redevelopment Act;

 

 

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1             (Q) An amount equal to the amount of the deduction
2         used to compute the federal income tax credit for
3         restoration of substantial amounts held under claim of
4         right for the taxable year pursuant to Section 1341 of
5         the Internal Revenue Code of 1986;
6             (R) On and after July 20, 1999, in the case of an
7         attorney-in-fact with respect to whom an interinsurer
8         or a reciprocal insurer has made the election under
9         Section 835 of the Internal Revenue Code, 26 U.S.C.
10         835, an amount equal to the excess, if any, of the
11         amounts paid or incurred by that interinsurer or
12         reciprocal insurer in the taxable year to the
13         attorney-in-fact over the deduction allowed to that
14         interinsurer or reciprocal insurer with respect to the
15         attorney-in-fact under Section 835(b) of the Internal
16         Revenue Code for the taxable year; the provisions of
17         this subparagraph are exempt from the provisions of
18         Section 250;
19             (S) For taxable years ending on or after December
20         31, 1997, in the case of a Subchapter S corporation, an
21         amount equal to all amounts of income allocable to a
22         shareholder subject to the Personal Property Tax
23         Replacement Income Tax imposed by subsections (c) and
24         (d) of Section 201 of this Act, including amounts
25         allocable to organizations exempt from federal income
26         tax by reason of Section 501(a) of the Internal Revenue

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         1989, an amount equal to the tax deducted pursuant to
2         Section 164 of the Internal Revenue Code if the trust
3         or estate is claiming the same tax for purposes of the
4         Illinois foreign tax credit under Section 601 of this
5         Act;
6             (G) An amount equal to the amount of the capital
7         gain deduction allowable under the Internal Revenue
8         Code, to the extent deducted from gross income in the
9         computation of taxable income;
10             (G-5) For taxable years ending after December 31,
11         1997, an amount equal to any eligible remediation costs
12         that the trust or estate deducted in computing adjusted
13         gross income and for which the trust or estate claims a
14         credit under subsection (l) of Section 201;
15             (G-10) For taxable years 2001 and thereafter, an
16         amount equal to the bonus depreciation deduction taken
17         on the taxpayer's federal income tax return for the
18         taxable year under subsection (k) of Section 168 of the
19         Internal Revenue Code; and
20             (G-11) 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 (G-10), then
24         an amount equal to the aggregate amount of the
25         deductions taken in all taxable years under
26         subparagraph (R) with respect to that property.

 

 

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

 

 

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

 

 

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

 

 

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1             and such regulations provide methods and standards
2             by which the Department will utilize its authority
3             under Section 404 of this Act;
4             (G-13) An amount equal to the amount of intangible
5         expenses and costs otherwise allowed as a deduction in
6         computing base income, and that were paid, accrued, or
7         incurred, directly or indirectly, (i) for taxable
8         years ending on or after December 31, 2004, to a
9         foreign person who would be a member of the same
10         unitary business group but for the fact that the
11         foreign person's business activity outside the United
12         States is 80% or more of that person's total business
13         activity and (ii) for taxable years ending on or after
14         December 31, 2008, to a person who would be a member of
15         the same unitary business group but for the fact that
16         the person is prohibited under Section 1501(a)(27)
17         from being included in the unitary business group
18         because he or she is ordinarily required to apportion
19         business income under different subsections of Section
20         304. The addition modification required by this
21         subparagraph shall be reduced to the extent that
22         dividends were included in base income of the unitary
23         group for the same taxable year and received by the
24         taxpayer or by a member of the taxpayer's unitary
25         business group (including amounts included in gross
26         income pursuant to Sections 951 through 964 of the

 

 

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

 

 

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

 

 

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

 

 

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1         member of the taxpayer's unitary business group
2         (including amounts included in gross income under
3         Sections 951 through 964 of the Internal Revenue Code
4         and amounts included in gross income under Section 78
5         of the Internal Revenue Code) with respect to the stock
6         of the same person to whom the premiums and costs were
7         directly or indirectly paid, incurred, or accrued. The
8         preceding sentence does not apply to the extent that
9         the same dividends caused a reduction to the addition
10         modification required under Section 203(c)(2)(G-12) or
11         Section 203(c)(2)(G-13) of this Act; .
12             (G-15) An amount equal to the credit allowable to
13         the taxpayer under Section 218(a) of this Act,
14         determined without regard to Section 218(c) of this
15         Act; .
16     and by deducting from the total so obtained the sum of the
17     following amounts:
18             (H) An amount equal to all amounts included in such
19         total pursuant to the provisions of Sections 402(a),
20         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
21         Internal Revenue Code or included in such total as
22         distributions under the provisions of any retirement
23         or disability plan for employees of any governmental
24         agency or unit, or retirement payments to retired
25         partners, which payments are excluded in computing net
26         earnings from self employment by Section 1402 of the

 

 

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1         Internal Revenue Code and regulations adopted pursuant
2         thereto;
3             (I) The valuation limitation amount;
4             (J) An amount equal to the amount of any tax
5         imposed by this Act which was refunded to the taxpayer
6         and included in such total for the taxable year;
7             (K) An amount equal to all amounts included in
8         taxable income as modified by subparagraphs (A), (B),
9         (C), (D), (E), (F) and (G) which are exempt from
10         taxation by this State either by reason of its statutes
11         or Constitution or by reason of the Constitution,
12         treaties or statutes of the United States; provided
13         that, in the case of any statute of this State that
14         exempts income derived from bonds or other obligations
15         from the tax imposed under this Act, the amount
16         exempted shall be the interest net of bond premium
17         amortization;
18             (L) With the exception of any amounts subtracted
19         under subparagraph (K), an amount equal to the sum of
20         all amounts disallowed as deductions by (i) Sections
21         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
22         as now or hereafter amended, and all amounts of
23         expenses allocable to interest and disallowed as
24         deductions by Section 265(1) of the Internal Revenue
25         Code of 1954, as now or hereafter amended; and (ii) for
26         taxable years ending on or after August 13, 1999,

 

 

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

 

 

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

 

 

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1         with such assets or with the proceeds from the sale of
2         such assets; provided, further, this paragraph shall
3         only apply to a taxpayer who was the first recipient of
4         such assets after their recovery and who is a victim of
5         persecution for racial or religious reasons by Nazi
6         Germany or any other Axis regime or as an heir of the
7         victim. The amount of and the eligibility for any
8         public assistance, benefit, or similar entitlement is
9         not affected by the inclusion of items (i) and (ii) of
10         this paragraph in gross income for federal income tax
11         purposes. This paragraph is exempt from the provisions
12         of Section 250;
13             (R) For taxable years 2001 and thereafter, for the
14         taxable year in which the bonus depreciation deduction
15         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 (R) is exempt from the provisions of
22         Section 250;
23             (S) 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 (G-10), 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 (G-10), 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 (S) is exempt from the
13         provisions of Section 250;
14             (T) 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 (T) is exempt
4         from the provisions of Section 250;
5             (U) 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 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(c)(2)(G-12) for
22         interest paid, accrued, or incurred, directly or
23         indirectly, to the same person. This subparagraph (U)
24         is exempt from the provisions of Section 250; and
25             (V) 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(c)(2)(G-13) for
16         intangible expenses and costs paid, accrued, or
17         incurred, directly or indirectly, to the same foreign
18         person. This subparagraph (V) is exempt from the
19         provisions of Section 250.
20         (3) Limitation. The amount of any modification
21     otherwise required under this subsection shall, under
22     regulations prescribed by the Department, be adjusted by
23     any amounts included therein which were properly paid,
24     credited, or required to be distributed, or permanently set
25     aside for charitable purposes pursuant to Internal Revenue
26     Code Section 642(c) during the taxable year.
 

 

 

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1     (d) Partnerships.
2         (1) In general. In the case of a partnership, base
3     income means an amount equal to the taxpayer's taxable
4     income for the taxable year as modified by paragraph (2).
5         (2) Modifications. The taxable income referred to in
6     paragraph (1) shall be modified by adding thereto the sum
7     of the following amounts:
8             (A) An amount equal to all amounts paid or accrued
9         to the taxpayer as interest or dividends during the
10         taxable year to the extent excluded from gross income
11         in the computation of taxable income;
12             (B) An amount equal to the amount of tax imposed by
13         this Act to the extent deducted from gross income for
14         the taxable year;
15             (C) The amount of deductions allowed to the
16         partnership pursuant to Section 707 (c) of the Internal
17         Revenue Code in calculating its taxable income;
18         provided that no addition shall be required under this
19         subparagraph (C) for taxable years ending on or after
20         December 31, 2009, for deductions allowed for
21         guaranteed payments to an individual partner for
22         personal services by that partner;
23             (D) An amount equal to the amount of the capital
24         gain deduction allowable under the Internal Revenue
25         Code, to the extent deducted from gross income in the

 

 

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

 

 

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1         indirectly, (i) for taxable years ending on or after
2         December 31, 2004, to a foreign person who would be a
3         member of the same unitary business group but for the
4         fact the foreign person's business activity outside
5         the United States is 80% or more of the foreign
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. The addition modification
14         required by this subparagraph shall be reduced to the
15         extent that dividends were included in base income of
16         the unitary group for the same taxable year and
17         received by the taxpayer or by a member of the
18         taxpayer's unitary business group (including amounts
19         included in gross income pursuant to Sections 951
20         through 964 of the Internal Revenue Code and amounts
21         included in gross income under Section 78 of the
22         Internal Revenue Code) with respect to the stock of the
23         same person to whom the interest was paid, accrued, or
24         incurred.
25             This paragraph shall not apply to the following:
26                 (i) an item of interest paid, accrued, or

 

 

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

 

 

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1                 (iv) an item of interest paid, accrued, or
2             incurred, directly or indirectly, to a person if
3             the taxpayer establishes by clear and convincing
4             evidence that the adjustments are unreasonable; or
5             if the taxpayer and the Director agree in writing
6             to the application or use of an alternative method
7             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; and
17             (D-8) An amount equal to the amount of intangible
18         expenses and costs otherwise allowed as a deduction in
19         computing base income, and that were paid, accrued, or
20         incurred, directly or indirectly, (i) for taxable
21         years ending on or after December 31, 2004, to a
22         foreign person who would be a member of the same
23         unitary business group but for the fact that the
24         foreign person's business activity outside the United
25         States is 80% or more of that person's total business
26         activity and (ii) for taxable years ending on or after

 

 

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1         December 31, 2008, to a person who would be a member of
2         the same unitary business group but for the fact that
3         the person is prohibited under Section 1501(a)(27)
4         from being included in the unitary business group
5         because he or she is ordinarily required to apportion
6         business income under different subsections of Section
7         304. The addition modification required by this
8         subparagraph shall be reduced to the extent that
9         dividends were included in base income of the unitary
10         group for the same taxable year and received by the
11         taxpayer or by a member of the taxpayer's unitary
12         business group (including amounts included in gross
13         income pursuant to Sections 951 through 964 of the
14         Internal Revenue Code and amounts included in gross
15         income under Section 78 of the Internal Revenue Code)
16         with respect to the stock of the same person to whom
17         the intangible expenses and costs were directly or
18         indirectly paid, incurred or accrued. The preceding
19         sentence shall not apply to the extent that the same
20         dividends caused a reduction to the addition
21         modification required under Section 203(d)(2)(D-7) of
22         this Act. As used in this subparagraph, the term
23         "intangible expenses and costs" includes (1) expenses,
24         losses, and costs for, or related to, the direct or
25         indirect acquisition, use, maintenance or management,
26         ownership, sale, exchange, or any other disposition of

 

 

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

 

 

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

 

 

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1         premium expenses and costs otherwise allowed as a
2         deduction in computing base income, and that were paid,
3         accrued, or incurred, directly or indirectly, to a
4         person who would be a member of the same unitary
5         business group but for the fact that the person is
6         prohibited under Section 1501(a)(27) from being
7         included in the unitary business group because he or
8         she is ordinarily required to apportion business
9         income under different subsections of Section 304. The
10         addition modification required by this subparagraph
11         shall be reduced to the extent that dividends were
12         included in base income of the unitary group for the
13         same taxable year and received by the taxpayer or by a
14         member of the taxpayer's unitary business group
15         (including amounts included in gross income under
16         Sections 951 through 964 of the Internal Revenue Code
17         and amounts included in gross income under Section 78
18         of the Internal Revenue Code) with respect to the stock
19         of the same person to whom the premiums and costs were
20         directly or indirectly paid, incurred, or accrued. The
21         preceding sentence does not apply to the extent that
22         the same dividends caused a reduction to the addition
23         modification required under Section 203(d)(2)(D-7) or
24         Section 203(d)(2)(D-8) of this Act; .
25             (D-10) An amount equal to the credit allowable to
26         the taxpayer under Section 218(a) of this Act,

 

 

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1         determined without regard to Section 218(c) of this
2         Act; .
3     and by deducting from the total so obtained the following
4     amounts:
5             (E) The valuation limitation amount;
6             (F) An amount equal to the amount of any tax
7         imposed by this Act which was refunded to the taxpayer
8         and included in such total for the taxable year;
9             (G) An amount equal to all amounts included in
10         taxable income as modified by subparagraphs (A), (B),
11         (C) and (D) which are exempt from taxation by this
12         State either by reason of its statutes or Constitution
13         or by reason of the Constitution, treaties or statutes
14         of the United States; provided that, in the case of any
15         statute of this State that exempts income derived from
16         bonds or other obligations from the tax imposed under
17         this Act, the amount exempted shall be the interest net
18         of bond premium amortization;
19             (H) Any For taxable years ending before December
20         31, 2009, income of the partnership which constitutes
21         personal service income as defined in Section 1348 (b)
22         (1) of the Internal Revenue Code (as in effect December
23         31, 1981) or a reasonable allowance for compensation
24         paid or accrued for services rendered by partners to
25         the partnership, whichever is greater;
26             (I) An amount equal to all amounts of income

 

 

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1         distributable to an entity subject to the Personal
2         Property Tax Replacement Income Tax imposed by
3         subsections (c) and (d) of Section 201 of this Act
4         including amounts distributable to organizations
5         exempt from federal income tax by reason of Section
6         501(a) of the Internal Revenue Code, provided that the
7         deduction under this subparagraph (I) shall not be
8         allowed to a publicly traded partnership under Section
9         7704 of the Internal Revenue Code for any taxable year
10         ending on or after December 31, 2009;
11             (J) With the exception of any amounts subtracted
12         under subparagraph (G), an amount equal to the sum of
13         all amounts disallowed as deductions by (i) Sections
14         171(a) (2), and 265(2) of the Internal Revenue Code of
15         1954, as now or hereafter amended, and all amounts of
16         expenses allocable to interest and disallowed as
17         deductions by Section 265(1) of the Internal Revenue
18         Code, as now or hereafter amended; and (ii) for taxable
19         years ending on or after August 13, 1999, Sections
20         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
21         Internal Revenue Code; the provisions of this
22         subparagraph are exempt from the provisions of Section
23         250;
24             (K) An amount equal to those dividends included in
25         such total which were paid by a corporation which
26         conducts business operations in an Enterprise Zone or

 

 

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1         zones created under the Illinois Enterprise Zone Act,
2         enacted by the 82nd General Assembly, or a River Edge
3         Redevelopment Zone or zones created under the River
4         Edge Redevelopment Zone Act and conducts substantially
5         all of its operations in an Enterprise Zone or Zones or
6         from a River Edge Redevelopment Zone or zones. This
7         subparagraph (K) is exempt from the provisions of
8         Section 250;
9             (L) An amount equal to any contribution made to a
10         job training project established pursuant to the Real
11         Property Tax Increment Allocation Redevelopment Act;
12             (M) An amount equal to those dividends included in
13         such total that were paid by a corporation that
14         conducts business operations in a federally designated
15         Foreign Trade Zone or Sub-Zone and that is designated a
16         High Impact Business located in Illinois; provided
17         that dividends eligible for the deduction provided in
18         subparagraph (K) of paragraph (2) of this subsection
19         shall not be eligible for the deduction provided under
20         this subparagraph (M);
21             (N) An amount equal to the amount of the deduction
22         used to compute the federal income tax credit for
23         restoration of substantial amounts held under claim of
24         right for the taxable year pursuant to Section 1341 of
25         the Internal Revenue Code of 1986;
26             (O) For taxable years 2001 and thereafter, for the

 

 

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

 

 

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

 

 

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1             (Q) The amount of (i) any interest income (net of
2         the deductions allocable thereto) taken into account
3         for the taxable year with respect to a transaction with
4         a taxpayer that is required to make an addition
5         modification with respect to such transaction under
6         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
7         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
8         the amount of such addition modification and (ii) any
9         income from intangible property (net of the deductions
10         allocable thereto) taken into account for the taxable
11         year with respect to a transaction with a taxpayer that
12         is required to make an addition modification with
13         respect to such transaction under Section
14         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
15         203(d)(2)(D-8), but not to exceed the amount of such
16         addition modification. This subparagraph (Q) is exempt
17         from Section 250;
18             (R) An amount equal to the interest income taken
19         into account for the taxable year (net of the
20         deductions allocable thereto) with respect to
21         transactions with (i) a foreign person who would be a
22         member of the taxpayer's unitary business group but for
23         the fact that the foreign person's business activity
24         outside the United States is 80% or more of that
25         person's total business activity and (ii) for taxable
26         years ending on or after December 31, 2008, to a person

 

 

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

 

 

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1         addition modification required to be made for the same
2         taxable year under Section 203(d)(2)(D-8) for
3         intangible expenses and costs paid, accrued, or
4         incurred, directly or indirectly, to the same person.
5         This subparagraph (S) is exempt from Section 250.
 
6     (e) Gross income; adjusted gross income; taxable income.
7         (1) In general. Subject to the provisions of paragraph
8     (2) and subsection (b) (3), for purposes of this Section
9     and Section 803(e), a taxpayer's gross income, adjusted
10     gross income, or taxable income for the taxable year shall
11     mean the amount of gross income, adjusted gross income or
12     taxable income properly reportable for federal income tax
13     purposes for the taxable year under the provisions of the
14     Internal Revenue Code. Taxable income may be less than
15     zero. However, for taxable years ending on or after
16     December 31, 1986, net operating loss carryforwards from
17     taxable years ending prior to December 31, 1986, may not
18     exceed the sum of federal taxable income for the taxable
19     year before net operating loss deduction, plus the excess
20     of addition modifications over subtraction modifications
21     for the taxable year. For taxable years ending prior to
22     December 31, 1986, taxable income may never be an amount in
23     excess of the net operating loss for the taxable year as
24     defined in subsections (c) and (d) of Section 172 of the
25     Internal Revenue Code, provided that when taxable income of

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         property ending July 31, 1969 bears to the number of
2         full calendar months in the taxpayer's entire holding
3         period for the property.
4             (C) The Department shall prescribe such
5         regulations as may be necessary to carry out the
6         purposes of this paragraph.
 
7     (g) Double deductions. Unless specifically provided
8 otherwise, nothing in this Section shall permit the same item
9 to be deducted more than once.
 
10     (h) Legislative intention. Except as expressly provided by
11 this Section there shall be no modifications or limitations on
12 the amounts of income, gain, loss or deduction taken into
13 account in determining gross income, adjusted gross income or
14 taxable income for federal income tax purposes for the taxable
15 year, or in the amount of such items entering into the
16 computation of base income and net income under this Act for
17 such taxable year, whether in respect of property values as of
18 August 1, 1969 or otherwise.
19 (Source: P.A. 95-23, eff. 8-3-07; 95-233, eff. 8-16-07; 95-286,
20 eff. 8-20-07; 95-331, eff. 8-21-07; 95-707, eff. 1-11-08;
21 95-876, eff. 8-21-08; 96-45, eff. 7-15-09; 96-120, eff. 8-4-09;
22 96-198, eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff.
23 8-14-09; revised 9-25-09.)
 
24     Section 99. Effective date. This Act takes effect upon

 

 

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1 becoming law.