96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
SB2463

 

Introduced 10/14/2009, by Sen. Bill Brady

 

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

    Amends the Illinois Income Tax Act. Restores a deduction allowed for personal services income of a partnership and certain compensation paid to partners (now, the deduction is available only for taxable years ending before December 31, 2009). Makes changes to a corresponding addition modification. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB2463 LRB096 13752 HLH 28521 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         all amounts disallowed as deductions by (i) Sections
2         171(a) (2), and 265(2) of the Internal Revenue Code of
3         1954, as now or hereafter amended, and all amounts of
4         expenses allocable to interest and disallowed as
5         deductions by Section 265(1) of the Internal Revenue
6         Code of 1954, as now or hereafter amended; and (ii) for
7         taxable years ending on or after August 13, 1999,
8         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
9         the Internal Revenue Code; the provisions of this
10         subparagraph are exempt from the provisions of Section
11         250;
12             (N) An amount equal to all amounts included in such
13         total which are exempt from taxation by this State
14         either by reason of its statutes or Constitution or by
15         reason of the Constitution, treaties or statutes of the
16         United States; provided that, in the case of any
17         statute of this State that exempts income derived from
18         bonds or other obligations from the tax imposed under
19         this Act, the amount exempted shall be the interest net
20         of bond premium amortization;
21             (O) An amount equal to any contribution made to a
22         job training project established pursuant to the Tax
23         Increment Allocation Redevelopment Act;
24             (P) An amount equal to the amount of the deduction
25         used to compute the federal income tax credit for
26         restoration of substantial amounts held under claim of

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

SB2463 - 24 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 25 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 26 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 27 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 28 - LRB096 13752 HLH 28521 b

1         subparagraph (E) for each such taxable year;
2             (E-5) For taxable years ending after December 31,
3         1997, an amount equal to any eligible remediation costs
4         that the corporation deducted in computing adjusted
5         gross income and for which the corporation claims a
6         credit under subsection (l) of Section 201;
7             (E-10) 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             (E-11) 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 (E-10), then
16         an amount equal to the aggregate amount of the
17         deductions taken in all taxable years under
18         subparagraph (T) 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 (T), then an amount
25         equal to that subtraction modification.
26             The taxpayer is required to make the addition

 

 

SB2463 - 29 - LRB096 13752 HLH 28521 b

1         modification under this subparagraph only once with
2         respect to any one piece of property;
3             (E-12) 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 the 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 pursuant to Sections 951
25         through 964 of the Internal Revenue Code and amounts
26         included in gross income under Section 78 of the

 

 

SB2463 - 30 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 31 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 32 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 33 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 34 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 35 - LRB096 13752 HLH 28521 b

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

 

 

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1         the same dividends caused a reduction to the addition
2         modification required under Section 203(b)(2)(E-12) or
3         Section 203(b)(2)(E-13) of this Act;
4             (E-15) For taxable years beginning after December
5         31, 2008, any deduction for dividends paid by a captive
6         real estate investment trust that is allowed to a real
7         estate investment trust under Section 857(b)(2)(B) of
8         the Internal Revenue Code for dividends paid;
9     and by deducting from the total so obtained the sum of the
10     following amounts:
11             (F) An amount equal to the amount of any tax
12         imposed by this Act which was refunded to the taxpayer
13         and included in such total for the taxable year;
14             (G) An amount equal to any amount included in such
15         total under Section 78 of the Internal Revenue Code;
16             (H) In the case of a regulated investment company,
17         an amount equal to the amount of exempt interest
18         dividends as defined in subsection (b) (5) of Section
19         852 of the Internal Revenue Code, paid to shareholders
20         for the taxable year;
21             (I) With the exception of any amounts subtracted
22         under subparagraph (J), an amount equal to the sum of
23         all amounts disallowed as deductions by (i) Sections
24         171(a) (2), and 265(a)(2) and amounts disallowed as
25         interest expense by Section 291(a)(3) of the Internal
26         Revenue Code, as now or hereafter amended, and all

 

 

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

 

 

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

 

 

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1         Zone or the River Edge Redevelopment Zone. The
2         subtraction modification available to taxpayer in any
3         year under this subsection shall be that portion of the
4         total interest paid by the borrower with respect to
5         such loan attributable to the eligible property as
6         calculated under the previous sentence. This
7         subparagraph (M) is exempt from the provisions of
8         Section 250;
9             (M-1) For any taxpayer that is a financial
10         organization within the meaning of Section 304(c) of
11         this Act, an amount included in such total as interest
12         income from a loan or loans made by such taxpayer to a
13         borrower, to the extent that such a loan is secured by
14         property which is eligible for the High Impact Business
15         Investment Credit. To determine the portion of a loan
16         or loans that is secured by property eligible for a
17         Section 201(h) 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(h) 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 a federally
24         designated Foreign Trade Zone or Sub-Zone located in
25         Illinois. No taxpayer that is eligible for the
26         deduction provided in subparagraph (M) of paragraph

 

 

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

 

 

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

 

 

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

 

 

SB2463 - 43 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 44 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 45 - LRB096 13752 HLH 28521 b

1         equal to that addition modification.
2             The taxpayer is allowed to take the deduction under
3         this subparagraph only once with respect to any one
4         piece of property.
5             This subparagraph (U) is exempt from the
6         provisions of Section 250;
7             (V) 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 such addition modification, (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 such
22         addition modification, and (iii) any insurance premium
23         income (net of deductions allocable thereto) taken
24         into account for the taxable year with respect to a
25         transaction with a taxpayer that is required to make an
26         addition modification with respect to such transaction

 

 

SB2463 - 46 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 47 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 48 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 49 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 50 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 51 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 52 - LRB096 13752 HLH 28521 b

1         unitary business group because he or she is ordinarily
2         required to apportion business income under different
3         subsections of Section 304. The addition modification
4         required by this subparagraph shall be reduced to the
5         extent that dividends were included in base income of
6         the unitary group for the same taxable year and
7         received by the taxpayer or by a member of the
8         taxpayer's unitary business group (including amounts
9         included in gross income pursuant to Sections 951
10         through 964 of the Internal Revenue Code and amounts
11         included in gross income under Section 78 of the
12         Internal Revenue Code) with respect to the stock of the
13         same person to whom the interest was paid, accrued, or
14         incurred.
15             This paragraph shall not apply to the following:
16                 (i) an item of interest paid, accrued, or
17             incurred, directly or indirectly, to a person who
18             is subject in a foreign country or state, other
19             than a state which requires mandatory unitary
20             reporting, to a tax on or measured by net income
21             with respect to such interest; or
22                 (ii) an item of interest paid, accrued, or
23             incurred, directly or indirectly, to a person if
24             the taxpayer can establish, based on a
25             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 interest
3                 to a person that is not a related member, and
4                     (b) the transaction giving rise to the
5                 interest expense between the taxpayer and the
6                 person did not have as a principal purpose the
7                 avoidance of Illinois income tax, and is paid
8                 pursuant to a contract or agreement that
9                 reflects an arm's-length interest rate and
10                 terms; or
11                 (iii) the taxpayer can establish, based on
12             clear and convincing evidence, that the interest
13             paid, accrued, or incurred relates to a contract or
14             agreement entered into at arm's-length rates and
15             terms and the principal purpose for the payment is
16             not federal or Illinois tax avoidance; or
17                 (iv) an item of interest paid, accrued, or
18             incurred, directly or indirectly, to a person if
19             the taxpayer establishes by clear and convincing
20             evidence that the adjustments are unreasonable; or
21             if the taxpayer and the Director agree in writing
22             to the application or use of an alternative method
23             of apportionment under Section 304(f).
24                 Nothing in this subsection shall preclude the
25             Director from making any other adjustment
26             otherwise allowed under Section 404 of this Act for

 

 

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

 

 

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

 

 

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

 

 

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1             taxpayer establishes by clear and convincing
2             evidence, that the adjustments are unreasonable;
3             or if the taxpayer and the Director agree in
4             writing to the application or use of an alternative
5             method 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             (G-14) For taxable years ending on or after
16         December 31, 2008, an amount equal to the amount of
17         insurance premium expenses and costs otherwise allowed
18         as a deduction in computing base income, and that were
19         paid, accrued, or incurred, directly or indirectly, to
20         a person who would be a member of the same unitary
21         business group but for the fact that the person is
22         prohibited under Section 1501(a)(27) from being
23         included in the unitary business group because he or
24         she is ordinarily required to apportion business
25         income under different subsections of Section 304. The
26         addition modification required by this subparagraph

 

 

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

 

 

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1         thereto;
2             (I) The valuation limitation amount;
3             (J) An amount equal to the amount of any tax
4         imposed by this Act which was refunded to the taxpayer
5         and included in such total for the taxable year;
6             (K) An amount equal to all amounts included in
7         taxable income as modified by subparagraphs (A), (B),
8         (C), (D), (E), (F) and (G) which are exempt from
9         taxation by this State either by reason of its statutes
10         or Constitution or by reason of the Constitution,
11         treaties or statutes of the United States; provided
12         that, in the case of any statute of this State that
13         exempts income derived from bonds or other obligations
14         from the tax imposed under this Act, the amount
15         exempted shall be the interest net of bond premium
16         amortization;
17             (L) With the exception of any amounts subtracted
18         under subparagraph (K), an amount equal to the sum of
19         all amounts disallowed as deductions by (i) Sections
20         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
21         as now or hereafter amended, and all amounts of
22         expenses allocable to interest and disallowed as
23         deductions by Section 265(1) of the Internal Revenue
24         Code of 1954, as now or hereafter amended; and (ii) for
25         taxable years ending on or after August 13, 1999,
26         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of

 

 

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

 

 

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

 

 

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1         such assets; provided, further, this paragraph shall
2         only apply to a taxpayer who was the first recipient of
3         such assets after their recovery and who is a victim of
4         persecution for racial or religious reasons by Nazi
5         Germany or any other Axis regime or as an heir of the
6         victim. The amount of and the eligibility for any
7         public assistance, benefit, or similar entitlement is
8         not affected by the inclusion of items (i) and (ii) of
9         this paragraph in gross income for federal income tax
10         purposes. This paragraph is exempt from the provisions
11         of Section 250;
12             (R) For taxable years 2001 and thereafter, for the
13         taxable year in which the bonus depreciation deduction
14         is taken on the taxpayer's federal income tax return
15         under subsection (k) of Section 168 of the Internal
16         Revenue Code and for each applicable taxable year
17         thereafter, an amount equal to "x", where:
18                 (1) "y" equals the amount of the depreciation
19             deduction taken for the taxable year on the
20             taxpayer's federal income tax return on property
21             for which the bonus depreciation deduction was
22             taken in any year under subsection (k) of Section
23             168 of the Internal Revenue Code, but not including
24             the bonus depreciation deduction;
25                 (2) for taxable years ending on or before
26             December 31, 2005, "x" equals "y" multiplied by 30

 

 

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

 

 

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

 

 

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

 

 

SB2463 - 68 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 69 - LRB096 13752 HLH 28521 b

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

 

 

SB2463 - 70 - LRB096 13752 HLH 28521 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             (F) An amount equal to the amount of any tax
2         imposed by this Act which was refunded to the taxpayer
3         and included in such total for the taxable year;
4             (G) An amount equal to all amounts included in
5         taxable income as modified by subparagraphs (A), (B),
6         (C) and (D) which are exempt from taxation by this
7         State either by reason of its statutes or Constitution
8         or by reason of the Constitution, treaties or statutes
9         of the United States; provided that, in the case of any
10         statute of this State that exempts income derived from
11         bonds or other obligations from the tax imposed under
12         this Act, the amount exempted shall be the interest net
13         of bond premium amortization;
14             (H) Any For taxable years ending before December
15         31, 2009, income of the partnership which constitutes
16         personal service income as defined in Section 1348 (b)
17         (1) of the Internal Revenue Code (as in effect December
18         31, 1981) or a reasonable allowance for compensation
19         paid or accrued for services rendered by partners to
20         the partnership, whichever is greater;
21             (I) An amount equal to all amounts of income
22         distributable to an entity subject to the Personal
23         Property Tax Replacement Income Tax imposed by
24         subsections (c) and (d) of Section 201 of this Act
25         including amounts distributable to organizations
26         exempt from federal income tax by reason of Section

 

 

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1         501(a) of the Internal Revenue Code;
2             (J) With the exception of any amounts subtracted
3         under subparagraph (G), an amount equal to the sum of
4         all amounts disallowed as deductions by (i) Sections
5         171(a) (2), and 265(2) of the Internal Revenue Code of
6         1954, as now or hereafter amended, and all amounts of
7         expenses allocable to interest and disallowed as
8         deductions by Section 265(1) of the Internal Revenue
9         Code, as now or hereafter amended; and (ii) for taxable
10         years ending on or after August 13, 1999, Sections
11         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
12         Internal Revenue Code; the provisions of this
13         subparagraph are exempt from the provisions of Section
14         250;
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,
19         enacted by the 82nd General Assembly, or a River Edge
20         Redevelopment Zone or zones created under the River
21         Edge Redevelopment Zone Act and conducts substantially
22         all of its operations in an Enterprise Zone or Zones or
23         from a River Edge Redevelopment Zone or zones. This
24         subparagraph (K) is exempt from the provisions of
25         Section 250;
26             (L) An amount equal to any contribution made to a

 

 

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1         job training project established pursuant to the Real
2         Property Tax Increment Allocation Redevelopment Act;
3             (M) An amount equal to those dividends included in
4         such total that were paid by a corporation that
5         conducts business operations in a federally designated
6         Foreign Trade Zone or Sub-Zone and that is designated a
7         High Impact Business located in Illinois; provided
8         that dividends eligible for the deduction provided in
9         subparagraph (K) of paragraph (2) of this subsection
10         shall not be eligible for the deduction provided under
11         this subparagraph (M);
12             (N) An amount equal to the amount of the deduction
13         used to compute the federal income tax credit for
14         restoration of substantial amounts held under claim of
15         right for the taxable year pursuant to Section 1341 of
16         the Internal Revenue Code of 1986;
17             (O) For taxable years 2001 and thereafter, for the
18         taxable year in which the bonus depreciation deduction
19         is taken on the taxpayer's federal income tax return
20         under subsection (k) of Section 168 of the Internal
21         Revenue Code and for each applicable taxable year
22         thereafter, an amount equal to "x", where:
23                 (1) "y" equals the amount of the depreciation
24             deduction taken for the taxable year on the
25             taxpayer's federal income tax return on property
26             for which the bonus depreciation deduction was

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1     applied under Section 172 of the Internal Revenue Code or
2     under subparagraph (E) of paragraph (2) of this subsection
3     (e) applied in conjunction with Section 172 of the Internal
4     Revenue Code.
5         (2) Special rule. For purposes of paragraph (1) of this
6     subsection, the taxable income properly reportable for
7     federal income tax purposes shall mean:
8             (A) Certain life insurance companies. In the case
9         of a life insurance company subject to the tax imposed
10         by Section 801 of the Internal Revenue Code, life
11         insurance company taxable income, plus the amount of
12         distribution from pre-1984 policyholder surplus
13         accounts as calculated under Section 815a of the
14         Internal Revenue Code;
15             (B) Certain other insurance companies. In the case
16         of mutual insurance companies subject to the tax
17         imposed by Section 831 of the Internal Revenue Code,
18         insurance company taxable income;
19             (C) Regulated investment companies. In the case of
20         a regulated investment company subject to the tax
21         imposed by Section 852 of the Internal Revenue Code,
22         investment company taxable income;
23             (D) Real estate investment trusts. In the case of a
24         real estate investment trust subject to the tax imposed
25         by Section 857 of the Internal Revenue Code, real
26         estate investment trust taxable income;

 

 

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

 

 

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

 

 

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

 

 

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1         1, 1969, the pre-August 1, 1969 appreciation amount for
2         such property is the lesser of (i) the excess of such
3         fair market value over the taxpayer's basis (for
4         determining gain) for such property on that date
5         (determined under the Internal Revenue Code as in
6         effect on that date), or (ii) the total gain realized
7         and reportable for federal income tax purposes in
8         respect of the sale, exchange or other disposition of
9         such property.
10             (B) If the fair market value of property referred
11         to in paragraph (1) was not readily ascertainable on
12         August 1, 1969, the pre-August 1, 1969 appreciation
13         amount for such property is that amount which bears the
14         same ratio to the total gain reported in respect of the
15         property for federal income tax purposes for the
16         taxable year, as the number of full calendar months in
17         that part of the taxpayer's holding period for the
18         property ending July 31, 1969 bears to the number of
19         full calendar months in the taxpayer's entire holding
20         period for the property.
21             (C) The Department shall prescribe such
22         regulations as may be necessary to carry out the
23         purposes of this paragraph.
 
24     (g) Double deductions. Unless specifically provided
25 otherwise, nothing in this Section shall permit the same item

 

 

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1 to be deducted more than once.
 
2     (h) Legislative intention. Except as expressly provided by
3 this Section there shall be no modifications or limitations on
4 the amounts of income, gain, loss or deduction taken into
5 account in determining gross income, adjusted gross income or
6 taxable income for federal income tax purposes for the taxable
7 year, or in the amount of such items entering into the
8 computation of base income and net income under this Act for
9 such taxable year, whether in respect of property values as of
10 August 1, 1969 or otherwise.
11 (Source: P.A. 95-23, eff. 8-3-07; 95-233, eff. 8-16-07; 95-286,
12 eff. 8-20-07; 95-331, eff. 8-21-07; 95-707, eff. 1-11-08;
13 95-876, eff. 8-21-08; 96-45, eff. 7-15-09.)
 
14     Section 99. Effective date. This Act takes effect upon
15 becoming law.