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1    AN ACT concerning State government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Enterprise Zone Act is amended by
5changing Sections 4, 5.2, 5.3, 6, and 8.1 as follows:
 
6    (20 ILCS 655/4)  (from Ch. 67 1/2, par. 604)
7    Sec. 4. Qualifications for Enterprise Zones. (1) An area is
8qualified to become an enterprise zone which:
9    (a) is a contiguous area, provided that a zone area may
10exclude wholly surrounded territory within its boundaries;
11    (b) comprises a minimum of one-half square mile and not
12more than 18 12 square miles, or 20 15 square miles if the zone
13is located within the jurisdiction of 4 or more counties or
14municipalities, in total area, exclusive of lakes and
15waterways; however, in such cases where the enterprise zone is
16a joint effort of three or more units of government, or two or
17more units of government if situated in a township which is
18divided by a municipality of 1,000,000 or more inhabitants, and
19where the certification has been in effect at least one year,
20the total area shall comprise a minimum of one-half square mile
21and not more than thirteen square miles in total area exclusive
22of lakes and waterways;
23    (c) is a depressed area;

 

 

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1    (d) satisfies any additional criteria established by
2regulation of the Department consistent with the purposes of
3this Act; and
4    (e) is (1) entirely within a municipality or (2) entirely
5within the unincorporated areas of a county, except where
6reasonable need is established for such zone to cover portions
7of more than one municipality or county or (3) both comprises
8(i) all or part of a municipality and (ii) an unincorporated
9area of a county.
10    (2) Any criteria established by the Department or by law
11which utilize the rate of unemployment for a particular area
12shall provide that all persons who are not presently employed
13and have exhausted all unemployment benefits shall be
14considered unemployed, whether or not such persons are actively
15seeking employment.
16(Source: P.A. 86-803.)
 
17    (20 ILCS 655/5.2)  (from Ch. 67 1/2, par. 607)
18    Sec. 5.2. Department Review of Enterprise Zone
19Applications. (a) All applications which are to be considered
20and acted upon by the Department during a calendar year must be
21received by the Department no later than December 31 of the
22preceding calendar year.
23    Any application received on or after January 1 of any
24calendar year shall be held by the Department for consideration
25and action during the following calendar year.

 

 

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1    (b) Upon receipt of an application from a county or
2municipality the Department shall review the application to
3determine whether the designated area qualifies as an
4enterprise zone under Section 4 of this Act.
5    (c) No later than May 1, the Department shall notify all
6applicant municipalities and counties of the Department's
7determination of the qualification of their respective
8designated enterprise zone areas.
9    (d) If any such designated area is found to be qualified to
10be an enterprise zone, the Department shall, no later than May
1115, send a letter of notification to each member of the General
12Assembly whose legislative district or representative district
13contains all or part of the designated area and publish a
14notice in at least one newspaper of general circulation within
15the proposed zone area to notify the general public of the
16application and their opportunity to comment. Such notice shall
17include a description of the area and a brief summary of the
18application and shall indicate locations where the applicant
19has provided copies of the application for public inspection.
20The notice shall also indicate appropriate procedures for the
21filing of written comments from zone residents, business, civic
22and other organizations and property owners to the Department.
23    (e) By July 1 of each calendar year, the Department shall
24either approve or deny all applications filed by December 31 of
25the preceding calendar year. If approval of an application
26filed by December 31 of any calendar year is not received by

 

 

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1July 1 of the following calendar year, the application shall be
2considered denied. If an application is denied, the Department
3shall inform the county or municipality of the specific reasons
4for the denial.
5    (f) Preference in Designation. In determining which
6designated areas shall be approved and certified as Enterprise
7Zones, the Department shall give preference to:
8    (1) Areas with high levels of poverty, unemployment, job
9and population loss, and general distress; and
10    (2) Areas which have evidenced with widest support from the
11county or municipality seeking to have such areas designated as
12Enterprise Zones, community residents, local business, labor
13and neighborhood organizations and where there are plans for
14the disposal of publicly owned real property as described in
15Section 10; and
16    (3) Areas for which a specific plan has been submitted to
17effect economic growth and expansion and neighborhood
18revitalization for the benefit of Zone residents and existing
19business through efforts which may include but need not be
20limited to a reduction of tax rates or fees, an increase in the
21level and efficiency of local services, and a simplification or
22streamlining of governmental requirements applicable to
23employers or employees, taking into account the resources
24available to the county or municipality seeking to have an area
25designated as an Enterprise Zone to make such efforts; and
26    (4) Areas for which there is evidence of prior consultation

 

 

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1between the county or municipality seeking designation of an
2area as an Enterprise Zone and business, labor and neighborhood
3organizations within the proposed Zone;
4    (5) Areas for which a specific plan has been submitted
5which will or may be expected to benefit zone residents and
6workers by increasing their ownership opportunities and
7participation in enterprise zone development;
8    (6) Areas in which specific governmental functions are to
9be performed by designated neighborhood organizations in
10partnership with the county or municipality seeking
11designation of an area as an Enterprise Zone.
12    (g) At least 2/5 of all new enterprise zones approved and
13certified by the Department during any calendar year shall be
14located wholly or partially within counties with unemployment
15rates of or above 8% for at least one month during the 12-month
16calendar year preceding the calendar year in which the
17applications are to be considered and acted upon by the
18Department.
19    (h) The Department's determination of whether to certify an
20enterprise zone shall be based on the purposes of this Act, the
21criteria set forth in Section 4 and subsections (f) and (g) of
22Section 5.2, and any additional criteria adopted by regulation
23of the Department under paragraph (d) of Section 4.
24(Source: P.A. 85-870.)
 
25    (20 ILCS 655/5.3)  (from Ch. 67 1/2, par. 608)

 

 

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1    Sec. 5.3. Certification of Enterprise Zones; Effective
2date.
3    (a) Approval of designated Enterprise Zones shall be made
4by the Department by certification of the designating
5ordinance. The Department shall promptly issue a certificate
6for each Enterprise Zone upon its approval. The certificate
7shall be signed by the Director of the Department, shall make
8specific reference to the designating ordinance, which shall be
9attached thereto, and shall be filed in the office of the
10Secretary of State. A certified copy of the Enterprise Zone
11Certificate, or a duplicate original thereof, shall be recorded
12in the office of recorder of deeds of the county in which the
13Enterprise Zone lies.
14    (b) An Enterprise Zone shall be effective upon its
15certification. The Department shall transmit a copy of the
16certification to the Department of Revenue, and to the
17designating municipality or county.
18    Upon certification of an Enterprise Zone, the terms and
19provisions of the designating ordinance shall be in effect, and
20may not be amended or repealed except in accordance with
21Section 5.4.
22    (c) An Enterprise Zone shall be in effect for 55 30
23calendar years, or for a lesser number of years specified in
24the certified designating ordinance. Enterprise Zones shall
25terminate at midnight of December 31 of the final calendar year
26of the certified term, except as provided in Section 5.4.

 

 

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1    (d) No more than 12 Enterprise Zones may be certified by
2the Department in calendar year 1984, no more than 12
3Enterprise Zones may be certified by the Department in calendar
4year 1985, no more than 13 Enterprise Zones may be certified by
5the Department in calendar year 1986, no more than 15
6Enterprise Zones may be certified by the Department in calendar
7year 1987, and no more than 20 Enterprise Zones may be
8certified by the Department in calendar year 1990. In other
9calendar years, no more than 13 Enterprise Zones may be
10certified by the Department. The Department may also designate
11up to 8 additional Enterprise Zones outside the regular
12application cycle if warranted by the extreme economic
13circumstances as determined by the Department. The Department
14may also designate one additional Enterprise Zone outside the
15regular application cycle if an aircraft manufacturer agrees to
16locate an aircraft manufacturing facility in the proposed
17Enterprise Zone. Notwithstanding any other provision of this
18Act, no more than 89 Enterprise Zones may be certified by the
19Department for the 10 calendar years commencing with 1983. The
207 additional Enterprise Zones authorized by Public Act 86-15
21shall not lie within municipalities or unincorporated areas of
22counties that abut or are contiguous to Enterprise Zones
23certified pursuant to this Section prior to June 30, 1989. The
247 additional Enterprise Zones (excluding the additional
25Enterprise Zone which may be designated outside the regular
26application cycle) authorized by Public Act 86-1030 shall not

 

 

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1lie within municipalities or unincorporated areas of counties
2that abut or are contiguous to Enterprise Zones certified
3pursuant to this Section prior to February 28, 1990. Beginning
4in calendar year 2004 and until December 31, 2008, one
5additional enterprise zone may be certified by the Department.
6Beginning on January 1, 2013 and ending on December 31, 2022,
7the Department may certify an additional 10 enterprise zones,
8no more than 2 of which may be certified in any one calendar
9year. In any calendar year, the Department may not certify more
10than 3 Zones located within the same municipality. The
11Department may certify Enterprise Zones in each of the 10
12calendar years commencing with 1983. The Department may not
13certify more than a total of 18 Enterprise Zones located within
14the same county (whether within municipalities or within
15unincorporated territory) for the 10 calendar years commencing
16with 1983. Thereafter, the Department may not certify any
17additional Enterprise Zones, but may amend and rescind
18certifications of existing Enterprise Zones in accordance with
19Section 5.4.
20    (e) Notwithstanding any other provision of law, if (i) the
21county board of any county in which a current military base is
22located, in part or in whole, or in which a military base that
23has been closed within 20 years of the effective date of this
24amendatory Act of 1998 is located, in part or in whole, adopts
25a designating ordinance in accordance with Section 5 of this
26Act to designate the military base in that county as an

 

 

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1enterprise zone and (ii) the property otherwise meets the
2qualifications for an enterprise zone as prescribed in Section
34 of this Act, then the Department may certify the designating
4ordinance or ordinances, as the case may be.
5(Source: P.A. 92-16, eff. 6-28-01; 92-777, eff. 1-1-03; 93-436,
6eff. 1-1-04.)
 
7    (20 ILCS 655/6)  (from Ch. 67 1/2, par. 610)
8    Sec. 6. Powers and Duties of Department.
9    (A) General Powers. The Department shall administer this
10Act and shall have the following powers and duties:
11        (1) To monitor the implementation of this Act and
12    submit reports evaluating the effectiveness of the program
13    and any suggestions for legislation to the Governor and
14    General Assembly by October 1 of every year preceding a
15    regular Session of the General Assembly and to annually
16    report to the General Assembly initial and current
17    population, employment, per capita income, number of
18    business establishments, and dollar value of new
19    construction and improvements, and the aggregate value of
20    each tax incentive, based on information provided by the
21    Department of Revenue, for each Enterprise Zone.
22        (2) To promulgate all necessary rules and regulations
23    to carry out the purposes of this Act in accordance with
24    The Illinois Administrative Procedure Act.
25        (3) To assist municipalities and counties in obtaining

 

 

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1    Federal status as an Enterprise Zone.
2    (B) Specific Duties:
3        (1) The Department shall provide information and
4    appropriate assistance to persons desiring to locate and
5    engage in business in an enterprise zone, to persons
6    engaged in business in an enterprise zone and to designated
7    zone organizations operating there.
8        (2) The Department shall, in cooperation with
9    appropriate units of local government and State agencies,
10    coordinate and streamline existing State business
11    assistance programs and permit and license application
12    procedures for Enterprise Zone businesses.
13        (3) The Department shall publicize existing tax
14    incentives and economic development programs within the
15    Zone and upon request, offer technical assistance in
16    abatement and alternative revenue source development to
17    local units of government which have enterprise Zones
18    within their jurisdiction.
19        (4) The Department shall work together with the
20    responsible State and Federal agencies to promote the
21    coordination of other relevant programs, including but not
22    limited to housing, community and economic development,
23    small business, banking, financial assistance, and
24    employment training programs which are carried on in an
25    Enterprise Zone.
26        (5) In order to stimulate employment opportunities for

 

 

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1    Zone residents, the Department, in cooperation with the
2    Department of Human Services and the Department of
3    Employment Security, is to initiate a test of the following
4    2 programs within the 12 month period following designation
5    and approval by the Department of the first enterprise
6    zones: (i) the use of aid to families with dependent
7    children benefits payable under Article IV of the Illinois
8    Public Aid Code, General Assistance benefits payable under
9    Article VI of the Illinois Public Aid Code, the
10    unemployment insurance benefits payable under the
11    Unemployment Insurance Act as training or employment
12    subsidies leading to unsubsidized employment; and (ii) a
13    program for voucher reimbursement of the cost of training
14    zone residents eligible under the Targeted Jobs Tax Credit
15    provisions of the Internal Revenue Code for employment in
16    private industry. These programs shall not be designed to
17    subsidize businesses, but are intended to open up job and
18    training opportunities not otherwise available. Nothing in
19    this paragraph (5) shall be deemed to require zone
20    businesses to utilize these programs. These programs
21    should be designed (i) for those individuals whose
22    opportunities for job-finding are minimal without program
23    participation, (ii) to minimize the period of benefit
24    collection by such individuals, and (iii) to accelerate the
25    transition of those individuals to unsubsidized
26    employment. The Department is to seek agreement with

 

 

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1    business, organized labor and the appropriate State
2    Department and agencies on the design, operation and
3    evaluation of the test programs.
4    A report with recommendations including representative
5comments of these groups shall be submitted by the Department
6to the county or municipality which designated the area as an
7Enterprise Zone, Governor and General Assembly not later than
812 months after such test programs have commenced, or not later
9than 3 months following the termination of such test programs,
10whichever first occurs.
11(Source: P.A. 89-507, eff. 7-1-97.)
 
12    (20 ILCS 655/8.1 new)
13    Sec. 8.1. Zone Administrator.
14    (a) Each Zone Administrator designated under Section 8 of
15this Act shall post a copy of the boundaries of the Enterprise
16Zone on its official Internet website and shall provide an
17electronic copy to the Department. The Department shall post
18each copy of the boundaries of an Enterprise Zone that it
19receives from a Zone Administrator on its official Internet
20website.
21    (b) The Zone Administrator shall collect and aggregate the
22following information:
23        (1) the estimated cost of each building project, broken
24    down into labor and materials; new estimates shall be
25    provided each time an applicant requests an extension of

 

 

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1    the sales tax exemption certificate; and
2        (2) within 60 days after the end of the project, the
3    actual cost of each building project, broken down into
4    labor and materials.
5    (c) By April 1 of each year, each Zone Administrator shall
6file a copy of its fee schedule with the Department, and the
7Department shall review and approve the fee schedule. Zone
8Administrators shall charge no more than 0.1% of the actual
9cost of the project, with a maximum fee of no more than
10$100,000.
 
11    Section 10. The Corporate Accountability for Tax
12Expenditures Act is amended by changing Section 5 as follows:
 
13    (20 ILCS 715/5)
14    Sec. 5. Definitions. As used in this Act:
15    "Base years" means the first 2 complete calendar years
16following the effective date of a recipient receiving
17development assistance.
18    "Date of assistance" means the commencement date of the
19assistance agreement, which date triggers the period during
20which the recipient is obligated to create or retain jobs and
21continue operations at the specific project site.
22    "Default" means that a recipient has not achieved its job
23creation, job retention, or wage or benefit goals, as
24applicable, during the prescribed period therefor.

 

 

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1    "Department" means, unless otherwise noted, the Department
2of Commerce and Economic Opportunity or any successor agency.
3    "Development assistance" means (1) tax credits and tax
4exemptions (other than given under tax increment financing)
5given as an incentive to a recipient business organization
6pursuant to an initial certification or an initial designation
7made by the Department under the Economic Development for a
8Growing Economy Tax Credit Act, River Edge Redevelopment Zone
9Act, and the Illinois Enterprise Zone Act, including the High
10Impact Business program, (2) grants or loans given to a
11recipient as an incentive to a business organization pursuant
12to the River Edge Redevelopment Zone Act, Large Business
13Development Program, the Business Development Public
14Infrastructure Program, or the Industrial Training Program,
15(3) the State Treasurer's Economic Program Loans, (4) the
16Illinois Department of Transportation Economic Development
17Program, and (5) all successor and subsequent programs and tax
18credits designed to promote large business relocations and
19expansions. "Development assistance" does not include tax
20increment financing, assistance provided under the Illinois
21Enterprise Zone Act and River Edge Redevelopment Zone Act
22pursuant to local ordinance, participation loans, or financial
23transactions through statutorily authorized financial
24intermediaries in support of small business loans and
25investments or given in connection with the development of
26affordable housing. "Development assistance" includes

 

 

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1assistance under the Illinois Emergency Employment Program
2pursuant to the Illinois Emergency Development Act.
3    "Development assistance agreement" means any agreement
4executed by the State granting body and the recipient setting
5forth the terms and conditions of development assistance to be
6provided to the recipient consistent with the final application
7for development assistance, including but not limited to the
8date of assistance, submitted to and approved by the State
9granting body.
10    "Full-time, permanent job" means either: (1) the
11definition therefor in the legislation authorizing the
12programs described in the definition of development assistance
13in the Act or (2) if there is no such definition, then as
14defined in administrative rules implementing such legislation,
15provided the administrative rules were in place prior to the
16effective date of this Act. On and after the effective date of
17this Act, if there is no definition of "full-time, permanent
18job" in either the legislation authorizing a program that
19constitutes economic development assistance under this Act or
20in any administrative rule implementing such legislation that
21was in place prior to the effective date of this Act, then
22"full-time, permanent job" means a job in which the new
23employee works for the recipient or for a corporation under
24contract to the recipient at a rate of at least 35 hours per
25week. A recipient who employs labor or services at a specific
26site or facility under contract with another may declare one

 

 

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1full-time, permanent job for every 1820 man hours worked per
2year under that contract. Vacations, paid holidays, and sick
3time are included in this computation. Overtime is not
4considered a part of regular hours.
5    "New employee" means either: (1) the definition therefor in
6the legislation authorizing the programs described in the
7definition of development assistance in the Act or (2) if there
8is no such definition, then as defined in administrative rules
9implementing such legislation, provided the administrative
10rules were in place prior to the effective date of this Act. On
11and after the effective date of this Act, if there is no
12definition of "new employee" in either the legislation
13authorizing a program that constitutes economic development
14assistance under this Act nor in any administrative rule
15implementing such legislation that was in place prior to the
16effective date of this Act, then "new employee" means a
17full-time, permanent employee who represents a net increase in
18the number of the recipient's employees statewide. "New
19employee" includes an employee who previously filled a new
20employee position with the recipient who was rehired or called
21back from a layoff that occurs during or following the base
22years.
23    The term "New Employee" does not include any of the
24following:
25        (1) An employee of the recipient who performs a job
26    that was previously performed by another employee in this

 

 

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1    State, if that job existed in this State for at least 6
2    months before hiring the employee.
3        (2) A child, grandchild, parent, or spouse, other than
4    a spouse who is legally separated from the individual, of
5    any individual who has a direct or indirect ownership
6    interest of at least 5% in the profits, capital, or value
7    of any member of the recipient.
8    "Part-time job" means either: (1) the definition therefor
9in the legislation authorizing the programs described in the
10definition of development assistance in the Act or (2) if there
11is no such definition, then as defined in administrative rules
12implementing such legislation, provided the administrative
13rules were in place prior to the effective date of this Act. On
14and after the effective date of this Act, if there is no
15definition of "part-time job" in either the legislation
16authorizing a program that constitutes economic development
17assistance under this Act or in any administrative rule
18implementing such legislation that was in place prior to the
19effective date of this Act, then "part-time job" means a job in
20which the new employee works for the recipient at a rate of
21less than 35 hours per week.
22    "Recipient" means any business that receives economic
23development assistance. A business is any corporation, limited
24liability company, partnership, joint venture, association,
25sole proprietorship, or other legally recognized entity.
26    "Retained employee" means either: (1) the definition

 

 

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1therefor in the legislation authorizing the programs described
2in the definition of development assistance in the Act or (2)
3if there is no such definition, then as defined in
4administrative rules implementing such legislation, provided
5the administrative rules were in place prior to the effective
6date of this Act. On and after the effective date of this Act,
7if there is no definition of "retained employee" in either the
8legislation authorizing a program that constitutes economic
9development assistance under this Act or in any administrative
10rule implementing such legislation that was in place prior to
11the effective date of this Act, then "retained employee" means
12any employee defined as having a full-time or full-time
13equivalent job preserved at a specific facility or site, the
14continuance of which is threatened by a specific and
15demonstrable threat, which shall be specified in the
16application for development assistance. A recipient who
17employs labor or services at a specific site or facility under
18contract with another may declare one retained employee per
19year for every 1750 man hours worked per year under that
20contract, even if different individuals perform on-site labor
21or services.
22    "Specific project site" means that distinct operational
23unit to which any development assistance is applied.
24    "State granting body" means the Department, any State
25department or State agency that provides development
26assistance that has reporting requirements under this Act, and

 

 

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1any successor agencies to any of the preceding.
2    "Temporary job" means either: (1) the definition therefor
3in the legislation authorizing the programs described in the
4definition of development assistance in the Act or (2) if there
5is no such definition, then as defined in administrative rules
6implementing such legislation, provided the administrative
7rules were in place prior to the effective date of this Act. On
8and after the effective date of this Act, if there is no
9definition of "temporary job" in either the legislation
10authorizing a program that constitutes economic development
11assistance under this Act or in any administrative rule
12implementing such legislation that was in place prior to the
13effective date of this Act, then "temporary job" means a job in
14which the new employee is hired for a specific duration of time
15or season.
16    "Value of assistance" means the face value of any form of
17development assistance.
18(Source: P.A. 97-581, eff. 8-26-11.)
 
19    Section 15. The Illinois Income Tax Act is amended by
20changing Sections 201 and 203 as follows:
 
21    (35 ILCS 5/201)  (from Ch. 120, par. 2-201)
22    (Text of Section before amendment by P.A. 97-636)
23    Sec. 201. Tax Imposed.
24    (a) In general. A tax measured by net income is hereby

 

 

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1imposed on every individual, corporation, trust and estate for
2each taxable year ending after July 31, 1969 on the privilege
3of earning or receiving income in or as a resident of this
4State. Such tax shall be in addition to all other occupation or
5privilege taxes imposed by this State or by any municipal
6corporation or political subdivision thereof.
7    (b) Rates. The tax imposed by subsection (a) of this
8Section shall be determined as follows, except as adjusted by
9subsection (d-1):
10        (1) In the case of an individual, trust or estate, for
11    taxable years ending prior to July 1, 1989, an amount equal
12    to 2 1/2% of the taxpayer's net income for the taxable
13    year.
14        (2) In the case of an individual, trust or estate, for
15    taxable years beginning prior to July 1, 1989 and ending
16    after June 30, 1989, an amount equal to the sum of (i) 2
17    1/2% of the taxpayer's net income for the period prior to
18    July 1, 1989, as calculated under Section 202.3, and (ii)
19    3% of the taxpayer's net income for the period after June
20    30, 1989, as calculated under Section 202.3.
21        (3) In the case of an individual, trust or estate, for
22    taxable years beginning after June 30, 1989, and ending
23    prior to January 1, 2011, an amount equal to 3% of the
24    taxpayer's net income for the taxable year.
25        (4) In the case of an individual, trust, or estate, for
26    taxable years beginning prior to January 1, 2011, and

 

 

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1    ending after December 31, 2010, an amount equal to the sum
2    of (i) 3% of the taxpayer's net income for the period prior
3    to January 1, 2011, as calculated under Section 202.5, and
4    (ii) 5% of the taxpayer's net income for the period after
5    December 31, 2010, as calculated under Section 202.5.
6        (5) In the case of an individual, trust, or estate, for
7    taxable years beginning on or after January 1, 2011, and
8    ending prior to January 1, 2015, an amount equal to 5% of
9    the taxpayer's net income for the taxable year.
10        (5.1) In the case of an individual, trust, or estate,
11    for taxable years beginning prior to January 1, 2015, and
12    ending after December 31, 2014, an amount equal to the sum
13    of (i) 5% of the taxpayer's net income for the period prior
14    to January 1, 2015, as calculated under Section 202.5, and
15    (ii) 3.75% of the taxpayer's net income for the period
16    after December 31, 2014, as calculated under Section 202.5.
17        (5.2) In the case of an individual, trust, or estate,
18    for taxable years beginning on or after January 1, 2015,
19    and ending prior to January 1, 2025, an amount equal to
20    3.75% of the taxpayer's net income for the taxable year.
21        (5.3) In the case of an individual, trust, or estate,
22    for taxable years beginning prior to January 1, 2025, and
23    ending after December 31, 2024, an amount equal to the sum
24    of (i) 3.75% of the taxpayer's net income for the period
25    prior to January 1, 2025, as calculated under Section
26    202.5, and (ii) 3.25% of the taxpayer's net income for the

 

 

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1    period after December 31, 2024, as calculated under Section
2    202.5.
3        (5.4) In the case of an individual, trust, or estate,
4    for taxable years beginning on or after January 1, 2025, an
5    amount equal to 3.25% of the taxpayer's net income for the
6    taxable year.
7        (6) In the case of a corporation, for taxable years
8    ending prior to July 1, 1989, an amount equal to 4% of the
9    taxpayer's net income for the taxable year.
10        (7) In the case of a corporation, for taxable years
11    beginning prior to July 1, 1989 and ending after June 30,
12    1989, an amount equal to the sum of (i) 4% of the
13    taxpayer's net income for the period prior to July 1, 1989,
14    as calculated under Section 202.3, and (ii) 4.8% of the
15    taxpayer's net income for the period after June 30, 1989,
16    as calculated under Section 202.3.
17        (8) In the case of a corporation, for taxable years
18    beginning after June 30, 1989, and ending prior to January
19    1, 2011, an amount equal to 4.8% of the taxpayer's net
20    income for the taxable year.
21        (9) In the case of a corporation, for taxable years
22    beginning prior to January 1, 2011, and ending after
23    December 31, 2010, an amount equal to the sum of (i) 4.8%
24    of the taxpayer's net income for the period prior to
25    January 1, 2011, as calculated under Section 202.5, and
26    (ii) 7% of the taxpayer's net income for the period after

 

 

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1    December 31, 2010, as calculated under Section 202.5.
2        (10) In the case of a corporation, for taxable years
3    beginning on or after January 1, 2011, and ending prior to
4    January 1, 2015, an amount equal to 7% of the taxpayer's
5    net income for the taxable year.
6        (11) In the case of a corporation, for taxable years
7    beginning prior to January 1, 2015, and ending after
8    December 31, 2014, an amount equal to the sum of (i) 7% of
9    the taxpayer's net income for the period prior to January
10    1, 2015, as calculated under Section 202.5, and (ii) 5.25%
11    of the taxpayer's net income for the period after December
12    31, 2014, as calculated under Section 202.5.
13        (12) In the case of a corporation, for taxable years
14    beginning on or after January 1, 2015, and ending prior to
15    January 1, 2025, an amount equal to 5.25% of the taxpayer's
16    net income for the taxable year.
17        (13) In the case of a corporation, for taxable years
18    beginning prior to January 1, 2025, and ending after
19    December 31, 2024, an amount equal to the sum of (i) 5.25%
20    of the taxpayer's net income for the period prior to
21    January 1, 2025, as calculated under Section 202.5, and
22    (ii) 4.8% of the taxpayer's net income for the period after
23    December 31, 2024, as calculated under Section 202.5.
24        (14) In the case of a corporation, for taxable years
25    beginning on or after January 1, 2025, an amount equal to
26    4.8% of the taxpayer's net income for the taxable year.

 

 

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1    The rates under this subsection (b) are subject to the
2provisions of Section 201.5.
3    (c) Personal Property Tax Replacement Income Tax.
4Beginning on July 1, 1979 and thereafter, in addition to such
5income tax, there is also hereby imposed the Personal Property
6Tax Replacement Income Tax measured by net income on every
7corporation (including Subchapter S corporations), partnership
8and trust, for each taxable year ending after June 30, 1979.
9Such taxes are imposed on the privilege of earning or receiving
10income in or as a resident of this State. The Personal Property
11Tax Replacement Income Tax shall be in addition to the income
12tax imposed by subsections (a) and (b) of this Section and in
13addition to all other occupation or privilege taxes imposed by
14this State or by any municipal corporation or political
15subdivision thereof.
16    (d) Additional Personal Property Tax Replacement Income
17Tax Rates. The personal property tax replacement income tax
18imposed by this subsection and subsection (c) of this Section
19in the case of a corporation, other than a Subchapter S
20corporation and except as adjusted by subsection (d-1), shall
21be an additional amount equal to 2.85% of such taxpayer's net
22income for the taxable year, except that beginning on January
231, 1981, and thereafter, the rate of 2.85% specified in this
24subsection shall be reduced to 2.5%, and in the case of a
25partnership, trust or a Subchapter S corporation shall be an
26additional amount equal to 1.5% of such taxpayer's net income

 

 

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1for the taxable year.
2    (d-1) Rate reduction for certain foreign insurers. In the
3case of a foreign insurer, as defined by Section 35A-5 of the
4Illinois Insurance Code, whose state or country of domicile
5imposes on insurers domiciled in Illinois a retaliatory tax
6(excluding any insurer whose premiums from reinsurance assumed
7are 50% or more of its total insurance premiums as determined
8under paragraph (2) of subsection (b) of Section 304, except
9that for purposes of this determination premiums from
10reinsurance do not include premiums from inter-affiliate
11reinsurance arrangements), beginning with taxable years ending
12on or after December 31, 1999, the sum of the rates of tax
13imposed by subsections (b) and (d) shall be reduced (but not
14increased) to the rate at which the total amount of tax imposed
15under this Act, net of all credits allowed under this Act,
16shall equal (i) the total amount of tax that would be imposed
17on the foreign insurer's net income allocable to Illinois for
18the taxable year by such foreign insurer's state or country of
19domicile if that net income were subject to all income taxes
20and taxes measured by net income imposed by such foreign
21insurer's state or country of domicile, net of all credits
22allowed or (ii) a rate of zero if no such tax is imposed on such
23income by the foreign insurer's state of domicile. For the
24purposes of this subsection (d-1), an inter-affiliate includes
25a mutual insurer under common management.
26        (1) For the purposes of subsection (d-1), in no event

 

 

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1    shall the sum of the rates of tax imposed by subsections
2    (b) and (d) be reduced below the rate at which the sum of:
3            (A) the total amount of tax imposed on such foreign
4        insurer under this Act for a taxable year, net of all
5        credits allowed under this Act, plus
6            (B) the privilege tax imposed by Section 409 of the
7        Illinois Insurance Code, the fire insurance company
8        tax imposed by Section 12 of the Fire Investigation
9        Act, and the fire department taxes imposed under
10        Section 11-10-1 of the Illinois Municipal Code,
11    equals 1.25% for taxable years ending prior to December 31,
12    2003, or 1.75% for taxable years ending on or after
13    December 31, 2003, of the net taxable premiums written for
14    the taxable year, as described by subsection (1) of Section
15    409 of the Illinois Insurance Code. This paragraph will in
16    no event increase the rates imposed under subsections (b)
17    and (d).
18        (2) Any reduction in the rates of tax imposed by this
19    subsection shall be applied first against the rates imposed
20    by subsection (b) and only after the tax imposed by
21    subsection (a) net of all credits allowed under this
22    Section other than the credit allowed under subsection (i)
23    has been reduced to zero, against the rates imposed by
24    subsection (d).
25    This subsection (d-1) is exempt from the provisions of
26Section 250.

 

 

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1    (e) Investment credit. A taxpayer shall be allowed a credit
2against the Personal Property Tax Replacement Income Tax for
3investment in qualified property.
4        (1) A taxpayer shall be allowed a credit equal to .5%
5    of the basis of qualified property placed in service during
6    the taxable year, provided such property is placed in
7    service on or after July 1, 1984. There shall be allowed an
8    additional credit equal to .5% of the basis of qualified
9    property placed in service during the taxable year,
10    provided such property is placed in service on or after
11    July 1, 1986, and the taxpayer's base employment within
12    Illinois has increased by 1% or more over the preceding
13    year as determined by the taxpayer's employment records
14    filed with the Illinois Department of Employment Security.
15    Taxpayers who are new to Illinois shall be deemed to have
16    met the 1% growth in base employment for the first year in
17    which they file employment records with the Illinois
18    Department of Employment Security. The provisions added to
19    this Section by Public Act 85-1200 (and restored by Public
20    Act 87-895) shall be construed as declaratory of existing
21    law and not as a new enactment. If, in any year, the
22    increase in base employment within Illinois over the
23    preceding year is less than 1%, the additional credit shall
24    be limited to that percentage times a fraction, the
25    numerator of which is .5% and the denominator of which is
26    1%, but shall not exceed .5%. The investment credit shall

 

 

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1    not be allowed to the extent that it would reduce a
2    taxpayer's liability in any tax year below zero, nor may
3    any credit for qualified property be allowed for any year
4    other than the year in which the property was placed in
5    service in Illinois. For tax years ending on or after
6    December 31, 1987, and on or before December 31, 1988, the
7    credit shall be allowed for the tax year in which the
8    property is placed in service, or, if the amount of the
9    credit exceeds the tax liability for that year, whether it
10    exceeds the original liability or the liability as later
11    amended, such excess may be carried forward and applied to
12    the tax liability of the 5 taxable years following the
13    excess credit years if the taxpayer (i) makes investments
14    which cause the creation of a minimum of 2,000 full-time
15    equivalent jobs in Illinois, (ii) is located in an
16    enterprise zone established pursuant to the Illinois
17    Enterprise Zone Act and (iii) is certified by the
18    Department of Commerce and Community Affairs (now
19    Department of Commerce and Economic Opportunity) as
20    complying with the requirements specified in clause (i) and
21    (ii) by July 1, 1986. The Department of Commerce and
22    Community Affairs (now Department of Commerce and Economic
23    Opportunity) shall notify the Department of Revenue of all
24    such certifications immediately. For tax years ending
25    after December 31, 1988, the credit shall be allowed for
26    the tax year in which the property is placed in service,

 

 

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1    or, if the amount of the credit exceeds the tax liability
2    for that year, whether it exceeds the original liability or
3    the liability as later amended, such excess may be carried
4    forward and applied to the tax liability of the 5 taxable
5    years following the excess credit years. The credit shall
6    be applied to the earliest year for which there is a
7    liability. If there is credit from more than one tax year
8    that is available to offset a liability, earlier credit
9    shall be applied first.
10        (2) The term "qualified property" means property
11    which:
12            (A) is tangible, whether new or used, including
13        buildings and structural components of buildings and
14        signs that are real property, but not including land or
15        improvements to real property that are not a structural
16        component of a building such as landscaping, sewer
17        lines, local access roads, fencing, parking lots, and
18        other appurtenances;
19            (B) is depreciable pursuant to Section 167 of the
20        Internal Revenue Code, except that "3-year property"
21        as defined in Section 168(c)(2)(A) of that Code is not
22        eligible for the credit provided by this subsection
23        (e);
24            (C) is acquired by purchase as defined in Section
25        179(d) of the Internal Revenue Code;
26            (D) is used in Illinois by a taxpayer who is

 

 

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1        primarily engaged in manufacturing, or in mining coal
2        or fluorite, or in retailing, or was placed in service
3        on or after July 1, 2006 in a River Edge Redevelopment
4        Zone established pursuant to the River Edge
5        Redevelopment Zone Act; and
6            (E) has not previously been used in Illinois in
7        such a manner and by such a person as would qualify for
8        the credit provided by this subsection (e) or
9        subsection (f).
10        (3) For purposes of this subsection (e),
11    "manufacturing" means the material staging and production
12    of tangible personal property by procedures commonly
13    regarded as manufacturing, processing, fabrication, or
14    assembling which changes some existing material into new
15    shapes, new qualities, or new combinations. For purposes of
16    this subsection (e) the term "mining" shall have the same
17    meaning as the term "mining" in Section 613(c) of the
18    Internal Revenue Code. For purposes of this subsection (e),
19    the term "retailing" means the sale of tangible personal
20    property for use or consumption and not for resale, or
21    services rendered in conjunction with the sale of tangible
22    personal property for use or consumption and not for
23    resale. For purposes of this subsection (e), "tangible
24    personal property" has the same meaning as when that term
25    is used in the Retailers' Occupation Tax Act, and, for
26    taxable years ending after December 31, 2008, does not

 

 

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1    include the generation, transmission, or distribution of
2    electricity.
3        (4) The basis of qualified property shall be the basis
4    used to compute the depreciation deduction for federal
5    income tax purposes.
6        (5) If the basis of the property for federal income tax
7    depreciation purposes is increased after it has been placed
8    in service in Illinois by the taxpayer, the amount of such
9    increase shall be deemed property placed in service on the
10    date of such increase in basis.
11        (6) The term "placed in service" shall have the same
12    meaning as under Section 46 of the Internal Revenue Code.
13        (7) If during any taxable year, any property ceases to
14    be qualified property in the hands of the taxpayer within
15    48 months after being placed in service, or the situs of
16    any qualified property is moved outside Illinois within 48
17    months after being placed in service, the Personal Property
18    Tax Replacement Income Tax for such taxable year shall be
19    increased. Such increase shall be determined by (i)
20    recomputing the investment credit which would have been
21    allowed for the year in which credit for such property was
22    originally allowed by eliminating such property from such
23    computation and, (ii) subtracting such recomputed credit
24    from the amount of credit previously allowed. For the
25    purposes of this paragraph (7), a reduction of the basis of
26    qualified property resulting from a redetermination of the

 

 

SB3688 Engrossed- 32 -LRB097 17383 HLH 62585 b

1    purchase price shall be deemed a disposition of qualified
2    property to the extent of such reduction.
3        (8) Unless the investment credit is extended by law,
4    the basis of qualified property shall not include costs
5    incurred after December 31, 2013, except for costs incurred
6    pursuant to a binding contract entered into on or before
7    December 31, 2013.
8        (9) Each taxable year ending before December 31, 2000,
9    a partnership may elect to pass through to its partners the
10    credits to which the partnership is entitled under this
11    subsection (e) for the taxable year. A partner may use the
12    credit allocated to him or her under this paragraph only
13    against the tax imposed in subsections (c) and (d) of this
14    Section. If the partnership makes that election, those
15    credits shall be allocated among the partners in the
16    partnership in accordance with the rules set forth in
17    Section 704(b) of the Internal Revenue Code, and the rules
18    promulgated under that Section, and the allocated amount of
19    the credits shall be allowed to the partners for that
20    taxable year. The partnership shall make this election on
21    its Personal Property Tax Replacement Income Tax return for
22    that taxable year. The election to pass through the credits
23    shall be irrevocable.
24        For taxable years ending on or after December 31, 2000,
25    a partner that qualifies its partnership for a subtraction
26    under subparagraph (I) of paragraph (2) of subsection (d)

 

 

SB3688 Engrossed- 33 -LRB097 17383 HLH 62585 b

1    of Section 203 or a shareholder that qualifies a Subchapter
2    S corporation for a subtraction under subparagraph (S) of
3    paragraph (2) of subsection (b) of Section 203 shall be
4    allowed a credit under this subsection (e) equal to its
5    share of the credit earned under this subsection (e) during
6    the taxable year by the partnership or Subchapter S
7    corporation, determined in accordance with the
8    determination of income and distributive share of income
9    under Sections 702 and 704 and Subchapter S of the Internal
10    Revenue Code. This paragraph is exempt from the provisions
11    of Section 250.
12    (f) Investment credit; Enterprise Zone; River Edge
13Redevelopment Zone.
14        (1) A taxpayer shall be allowed a credit against the
15    tax imposed by subsections (a) and (b) of this Section for
16    investment in qualified property which is placed in service
17    in an Enterprise Zone created pursuant to the Illinois
18    Enterprise Zone Act or, for property placed in service on
19    or after July 1, 2006, a River Edge Redevelopment Zone
20    established pursuant to the River Edge Redevelopment Zone
21    Act. For partners, shareholders of Subchapter S
22    corporations, and owners of limited liability companies,
23    if the liability company is treated as a partnership for
24    purposes of federal and State income taxation, there shall
25    be allowed a credit under this subsection (f) to be
26    determined in accordance with the determination of income

 

 

SB3688 Engrossed- 34 -LRB097 17383 HLH 62585 b

1    and distributive share of income under Sections 702 and 704
2    and Subchapter S of the Internal Revenue Code. The credit
3    shall be .5% of the basis for such property. The credit
4    shall be available only in the taxable year in which the
5    property is placed in service in the Enterprise Zone or
6    River Edge Redevelopment Zone and shall not be allowed to
7    the extent that it would reduce a taxpayer's liability for
8    the tax imposed by subsections (a) and (b) of this Section
9    to below zero. For tax years ending on or after December
10    31, 1985, the credit shall be allowed for the tax year in
11    which the property is placed in service, or, if the amount
12    of the credit exceeds the tax liability for that year,
13    whether it exceeds the original liability or the liability
14    as later amended, such excess may be carried forward and
15    applied to the tax liability of the 5 taxable years
16    following the excess credit year. The credit shall be
17    applied to the earliest year for which there is a
18    liability. If there is credit from more than one tax year
19    that is available to offset a liability, the credit
20    accruing first in time shall be applied first.
21        (2) The term qualified property means property which:
22            (A) is tangible, whether new or used, including
23        buildings and structural components of buildings;
24            (B) is depreciable pursuant to Section 167 of the
25        Internal Revenue Code, except that "3-year property"
26        as defined in Section 168(c)(2)(A) of that Code is not

 

 

SB3688 Engrossed- 35 -LRB097 17383 HLH 62585 b

1        eligible for the credit provided by this subsection
2        (f);
3            (C) is acquired by purchase as defined in Section
4        179(d) of the Internal Revenue Code;
5            (D) is used in the Enterprise Zone or River Edge
6        Redevelopment Zone by the taxpayer; and
7            (E) has not been previously used in Illinois in
8        such a manner and by such a person as would qualify for
9        the credit provided by this subsection (f) or
10        subsection (e).
11        (3) The basis of qualified property shall be the basis
12    used to compute the depreciation deduction for federal
13    income tax purposes.
14        (4) If the basis of the property for federal income tax
15    depreciation purposes is increased after it has been placed
16    in service in the Enterprise Zone or River Edge
17    Redevelopment Zone by the taxpayer, the amount of such
18    increase shall be deemed property placed in service on the
19    date of such increase in basis.
20        (5) The term "placed in service" shall have the same
21    meaning as under Section 46 of the Internal Revenue Code.
22        (6) If during any taxable year, any property ceases to
23    be qualified property in the hands of the taxpayer within
24    48 months after being placed in service, or the situs of
25    any qualified property is moved outside the Enterprise Zone
26    or River Edge Redevelopment Zone within 48 months after

 

 

SB3688 Engrossed- 36 -LRB097 17383 HLH 62585 b

1    being placed in service, the tax imposed under subsections
2    (a) and (b) of this Section for such taxable year shall be
3    increased. Such increase shall be determined by (i)
4    recomputing the investment credit which would have been
5    allowed for the year in which credit for such property was
6    originally allowed by eliminating such property from such
7    computation, and (ii) subtracting such recomputed credit
8    from the amount of credit previously allowed. For the
9    purposes of this paragraph (6), a reduction of the basis of
10    qualified property resulting from a redetermination of the
11    purchase price shall be deemed a disposition of qualified
12    property to the extent of such reduction.
13        (7) There shall be allowed an additional credit equal
14    to 0.5% of the basis of qualified property placed in
15    service during the taxable year in a River Edge
16    Redevelopment Zone, provided such property is placed in
17    service on or after July 1, 2006, and the taxpayer's base
18    employment within Illinois has increased by 1% or more over
19    the preceding year as determined by the taxpayer's
20    employment records filed with the Illinois Department of
21    Employment Security. Taxpayers who are new to Illinois
22    shall be deemed to have met the 1% growth in base
23    employment for the first year in which they file employment
24    records with the Illinois Department of Employment
25    Security. If, in any year, the increase in base employment
26    within Illinois over the preceding year is less than 1%,

 

 

SB3688 Engrossed- 37 -LRB097 17383 HLH 62585 b

1    the additional credit shall be limited to that percentage
2    times a fraction, the numerator of which is 0.5% and the
3    denominator of which is 1%, but shall not exceed 0.5%.
4    (g) Jobs Tax Credit; Enterprise Zone, River Edge
5Redevelopment Zone, and Foreign Trade Zone or Sub-Zone.
6        (1) A taxpayer conducting a trade or business, in an
7    enterprise zone or a High Impact Business designated by the
8    Department of Commerce and Economic Opportunity or for
9    taxable years ending on or after December 31, 2006, in a
10    River Edge Redevelopment Zone or conducting a trade or
11    business in a federally designated Foreign Trade Zone or
12    Sub-Zone shall be allowed a credit against the tax imposed
13    by subsections (a) and (b) of this Section in the amount of
14    $500 per eligible employee hired to work in the zone during
15    the taxable year.
16        (2) To qualify for the credit:
17            (A) the taxpayer must hire 5 or more eligible
18        employees to work in a an enterprise zone, River Edge
19        Redevelopment Zone, or federally designated Foreign
20        Trade Zone or Sub-Zone during the taxable year;
21            (B) the taxpayer's total employment within the
22        enterprise zone, River Edge Redevelopment Zone, or
23        federally designated Foreign Trade Zone or Sub-Zone
24        must increase by 5 or more full-time employees beyond
25        the total employed in that zone at the end of the
26        previous tax year for which a jobs tax credit under

 

 

SB3688 Engrossed- 38 -LRB097 17383 HLH 62585 b

1        this Section was taken, or beyond the total employed by
2        the taxpayer as of December 31, 1985, whichever is
3        later; and
4            (C) the eligible employees must be employed 180
5        consecutive days in order to be deemed hired for
6        purposes of this subsection.
7        (3) An "eligible employee" means an employee who is:
8            (A) Certified by the Department of Commerce and
9        Economic Opportunity as "eligible for services"
10        pursuant to regulations promulgated in accordance with
11        Title II of the Job Training Partnership Act, Training
12        Services for the Disadvantaged or Title III of the Job
13        Training Partnership Act, Employment and Training
14        Assistance for Dislocated Workers Program.
15            (B) Hired after the enterprise zone, River Edge
16        Redevelopment Zone, or federally designated Foreign
17        Trade Zone or Sub-Zone was designated or the trade or
18        business was located in that zone, whichever is later.
19            (C) Employed in the enterprise zone, River Edge
20        Redevelopment Zone, or Foreign Trade Zone or Sub-Zone.
21        An employee is employed in a an enterprise zone or
22        federally designated Foreign Trade Zone or Sub-Zone if
23        his services are rendered there or it is the base of
24        operations for the services performed.
25            (D) A full-time employee working 30 or more hours
26        per week.

 

 

SB3688 Engrossed- 39 -LRB097 17383 HLH 62585 b

1        (4) For tax years ending on or after December 31, 1985
2    and prior to December 31, 1988, the credit shall be allowed
3    for the tax year in which the eligible employees are hired.
4    For tax years ending on or after December 31, 1988, the
5    credit shall be allowed for the tax year immediately
6    following the tax year in which the eligible employees are
7    hired. If the amount of the credit exceeds the tax
8    liability for that year, whether it exceeds the original
9    liability or the liability as later amended, such excess
10    may be carried forward and applied to the tax liability of
11    the 5 taxable years following the excess credit year. The
12    credit shall be applied to the earliest year for which
13    there is a liability. If there is credit from more than one
14    tax year that is available to offset a liability, earlier
15    credit shall be applied first.
16        (5) The Department of Revenue shall promulgate such
17    rules and regulations as may be deemed necessary to carry
18    out the purposes of this subsection (g).
19        (6) The credit shall be available for eligible
20    employees hired on or after January 1, 1986.
21    (h) Investment credit; High Impact Business.
22        (1) Subject to subsections (b) and (b-5) of Section 5.5
23    of the Illinois Enterprise Zone Act, a taxpayer shall be
24    allowed a credit against the tax imposed by subsections (a)
25    and (b) of this Section for investment in qualified
26    property which is placed in service by a Department of

 

 

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1    Commerce and Economic Opportunity designated High Impact
2    Business. The credit shall be .5% of the basis for such
3    property. The credit shall not be available (i) until the
4    minimum investments in qualified property set forth in
5    subdivision (a)(3)(A) of Section 5.5 of the Illinois
6    Enterprise Zone Act have been satisfied or (ii) until the
7    time authorized in subsection (b-5) of the Illinois
8    Enterprise Zone Act for entities designated as High Impact
9    Businesses under subdivisions (a)(3)(B), (a)(3)(C), and
10    (a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone
11    Act, and shall not be allowed to the extent that it would
12    reduce a taxpayer's liability for the tax imposed by
13    subsections (a) and (b) of this Section to below zero. The
14    credit applicable to such investments shall be taken in the
15    taxable year in which such investments have been completed.
16    The credit for additional investments beyond the minimum
17    investment by a designated high impact business authorized
18    under subdivision (a)(3)(A) of Section 5.5 of the Illinois
19    Enterprise Zone Act shall be available only in the taxable
20    year in which the property is placed in service and shall
21    not be allowed to the extent that it would reduce a
22    taxpayer's liability for the tax imposed by subsections (a)
23    and (b) of this Section to below zero. For tax years ending
24    on or after December 31, 1987, the credit shall be allowed
25    for the tax year in which the property is placed in
26    service, or, if the amount of the credit exceeds the tax

 

 

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1    liability for that year, whether it exceeds the original
2    liability or the liability as later amended, such excess
3    may be carried forward and applied to the tax liability of
4    the 5 taxable years following the excess credit year. The
5    credit shall be applied to the earliest year for which
6    there is a liability. If there is credit from more than one
7    tax year that is available to offset a liability, the
8    credit accruing first in time shall be applied first.
9        Changes made in this subdivision (h)(1) by Public Act
10    88-670 restore changes made by Public Act 85-1182 and
11    reflect existing law.
12        (2) The term qualified property means property which:
13            (A) is tangible, whether new or used, including
14        buildings and structural components of buildings;
15            (B) is depreciable pursuant to Section 167 of the
16        Internal Revenue Code, except that "3-year property"
17        as defined in Section 168(c)(2)(A) of that Code is not
18        eligible for the credit provided by this subsection
19        (h);
20            (C) is acquired by purchase as defined in Section
21        179(d) of the Internal Revenue Code; and
22            (D) is not eligible for the Enterprise Zone
23        Investment Credit provided by subsection (f) of this
24        Section.
25        (3) The basis of qualified property shall be the basis
26    used to compute the depreciation deduction for federal

 

 

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1    income tax purposes.
2        (4) If the basis of the property for federal income tax
3    depreciation purposes is increased after it has been placed
4    in service in a federally designated Foreign Trade Zone or
5    Sub-Zone located in Illinois by the taxpayer, the amount of
6    such increase shall be deemed property placed in service on
7    the date of such increase in basis.
8        (5) The term "placed in service" shall have the same
9    meaning as under Section 46 of the Internal Revenue Code.
10        (6) If during any taxable year ending on or before
11    December 31, 1996, any property ceases to be qualified
12    property in the hands of the taxpayer within 48 months
13    after being placed in service, or the situs of any
14    qualified property is moved outside Illinois within 48
15    months after being placed in service, the tax imposed under
16    subsections (a) and (b) of this Section for such taxable
17    year shall be increased. Such increase shall be determined
18    by (i) recomputing the investment credit which would have
19    been allowed for the year in which credit for such property
20    was originally allowed by eliminating such property from
21    such computation, and (ii) subtracting such recomputed
22    credit from the amount of credit previously allowed. For
23    the purposes of this paragraph (6), a reduction of the
24    basis of qualified property resulting from a
25    redetermination of the purchase price shall be deemed a
26    disposition of qualified property to the extent of such

 

 

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1    reduction.
2        (7) Beginning with tax years ending after December 31,
3    1996, if a taxpayer qualifies for the credit under this
4    subsection (h) and thereby is granted a tax abatement and
5    the taxpayer relocates its entire facility in violation of
6    the explicit terms and length of the contract under Section
7    18-183 of the Property Tax Code, the tax imposed under
8    subsections (a) and (b) of this Section shall be increased
9    for the taxable year in which the taxpayer relocated its
10    facility by an amount equal to the amount of credit
11    received by the taxpayer under this subsection (h).
12    (i) Credit for Personal Property Tax Replacement Income
13Tax. For tax years ending prior to December 31, 2003, a credit
14shall be allowed against the tax imposed by subsections (a) and
15(b) of this Section for the tax imposed by subsections (c) and
16(d) of this Section. This credit shall be computed by
17multiplying the tax imposed by subsections (c) and (d) of this
18Section by a fraction, the numerator of which is base income
19allocable to Illinois and the denominator of which is Illinois
20base income, and further multiplying the product by the tax
21rate imposed by subsections (a) and (b) of this Section.
22    Any credit earned on or after December 31, 1986 under this
23subsection which is unused in the year the credit is computed
24because it exceeds the tax liability imposed by subsections (a)
25and (b) for that year (whether it exceeds the original
26liability or the liability as later amended) may be carried

 

 

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1forward and applied to the tax liability imposed by subsections
2(a) and (b) of the 5 taxable years following the excess credit
3year, provided that no credit may be carried forward to any
4year ending on or after December 31, 2003. This credit shall be
5applied first to the earliest year for which there is a
6liability. If there is a credit under this subsection from more
7than one tax year that is available to offset a liability the
8earliest credit arising under this subsection shall be applied
9first.
10    If, during any taxable year ending on or after December 31,
111986, the tax imposed by subsections (c) and (d) of this
12Section for which a taxpayer has claimed a credit under this
13subsection (i) is reduced, the amount of credit for such tax
14shall also be reduced. Such reduction shall be determined by
15recomputing the credit to take into account the reduced tax
16imposed by subsections (c) and (d). If any portion of the
17reduced amount of credit has been carried to a different
18taxable year, an amended return shall be filed for such taxable
19year to reduce the amount of credit claimed.
20    (j) Training expense credit. Beginning with tax years
21ending on or after December 31, 1986 and prior to December 31,
222003, a taxpayer shall be allowed a credit against the tax
23imposed by subsections (a) and (b) under this Section for all
24amounts paid or accrued, on behalf of all persons employed by
25the taxpayer in Illinois or Illinois residents employed outside
26of Illinois by a taxpayer, for educational or vocational

 

 

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1training in semi-technical or technical fields or semi-skilled
2or skilled fields, which were deducted from gross income in the
3computation of taxable income. The credit against the tax
4imposed by subsections (a) and (b) shall be 1.6% of such
5training expenses. For partners, shareholders of subchapter S
6corporations, and owners of limited liability companies, if the
7liability company is treated as a partnership for purposes of
8federal and State income taxation, there shall be allowed a
9credit under this subsection (j) to be determined in accordance
10with the determination of income and distributive share of
11income under Sections 702 and 704 and subchapter S of the
12Internal Revenue Code.
13    Any credit allowed under this subsection which is unused in
14the year the credit is earned may be carried forward to each of
15the 5 taxable years following the year for which the credit is
16first computed until it is used. This credit shall be applied
17first to the earliest year for which there is a liability. If
18there is a credit under this subsection from more than one tax
19year that is available to offset a liability the earliest
20credit arising under this subsection shall be applied first. No
21carryforward credit may be claimed in any tax year ending on or
22after December 31, 2003.
23    (k) Research and development credit.
24    For tax years ending after July 1, 1990 and prior to
25December 31, 2003, and beginning again for tax years ending on
26or after December 31, 2004, and ending prior to January 1,

 

 

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12011, a taxpayer shall be allowed a credit against the tax
2imposed by subsections (a) and (b) of this Section for
3increasing research activities in this State. The credit
4allowed against the tax imposed by subsections (a) and (b)
5shall be equal to 6 1/2% of the qualifying expenditures for
6increasing research activities in this State. For partners,
7shareholders of subchapter S corporations, and owners of
8limited liability companies, if the liability company is
9treated as a partnership for purposes of federal and State
10income taxation, there shall be allowed a credit under this
11subsection to be determined in accordance with the
12determination of income and distributive share of income under
13Sections 702 and 704 and subchapter S of the Internal Revenue
14Code.
15    For purposes of this subsection, "qualifying expenditures"
16means the qualifying expenditures as defined for the federal
17credit for increasing research activities which would be
18allowable under Section 41 of the Internal Revenue Code and
19which are conducted in this State, "qualifying expenditures for
20increasing research activities in this State" means the excess
21of qualifying expenditures for the taxable year in which
22incurred over qualifying expenditures for the base period,
23"qualifying expenditures for the base period" means the average
24of the qualifying expenditures for each year in the base
25period, and "base period" means the 3 taxable years immediately
26preceding the taxable year for which the determination is being

 

 

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1made.
2    Any credit in excess of the tax liability for the taxable
3year may be carried forward. A taxpayer may elect to have the
4unused credit shown on its final completed return carried over
5as a credit against the tax liability for the following 5
6taxable years or until it has been fully used, whichever occurs
7first; provided that no credit earned in a tax year ending
8prior to December 31, 2003 may be carried forward to any year
9ending on or after December 31, 2003, and no credit may be
10carried forward to any taxable year ending on or after January
111, 2011.
12    If an unused credit is carried forward to a given year from
132 or more earlier years, that credit arising in the earliest
14year will be applied first against the tax liability for the
15given year. If a tax liability for the given year still
16remains, the credit from the next earliest year will then be
17applied, and so on, until all credits have been used or no tax
18liability for the given year remains. Any remaining unused
19credit or credits then will be carried forward to the next
20following year in which a tax liability is incurred, except
21that no credit can be carried forward to a year which is more
22than 5 years after the year in which the expense for which the
23credit is given was incurred.
24    No inference shall be drawn from this amendatory Act of the
2591st General Assembly in construing this Section for taxable
26years beginning before January 1, 1999.

 

 

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1    (l) Environmental Remediation Tax Credit.
2        (i) For tax years ending after December 31, 1997 and on
3    or before December 31, 2001, a taxpayer shall be allowed a
4    credit against the tax imposed by subsections (a) and (b)
5    of this Section for certain amounts paid for unreimbursed
6    eligible remediation costs, as specified in this
7    subsection. For purposes of this Section, "unreimbursed
8    eligible remediation costs" means costs approved by the
9    Illinois Environmental Protection Agency ("Agency") under
10    Section 58.14 of the Environmental Protection Act that were
11    paid in performing environmental remediation at a site for
12    which a No Further Remediation Letter was issued by the
13    Agency and recorded under Section 58.10 of the
14    Environmental Protection Act. The credit must be claimed
15    for the taxable year in which Agency approval of the
16    eligible remediation costs is granted. The credit is not
17    available to any taxpayer if the taxpayer or any related
18    party caused or contributed to, in any material respect, a
19    release of regulated substances on, in, or under the site
20    that was identified and addressed by the remedial action
21    pursuant to the Site Remediation Program of the
22    Environmental Protection Act. After the Pollution Control
23    Board rules are adopted pursuant to the Illinois
24    Administrative Procedure Act for the administration and
25    enforcement of Section 58.9 of the Environmental
26    Protection Act, determinations as to credit availability

 

 

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1    for purposes of this Section shall be made consistent with
2    those rules. For purposes of this Section, "taxpayer"
3    includes a person whose tax attributes the taxpayer has
4    succeeded to under Section 381 of the Internal Revenue Code
5    and "related party" includes the persons disallowed a
6    deduction for losses by paragraphs (b), (c), and (f)(1) of
7    Section 267 of the Internal Revenue Code by virtue of being
8    a related taxpayer, as well as any of its partners. The
9    credit allowed against the tax imposed by subsections (a)
10    and (b) shall be equal to 25% of the unreimbursed eligible
11    remediation costs in excess of $100,000 per site, except
12    that the $100,000 threshold shall not apply to any site
13    contained in an enterprise zone as determined by the
14    Department of Commerce and Community Affairs (now
15    Department of Commerce and Economic Opportunity). The
16    total credit allowed shall not exceed $40,000 per year with
17    a maximum total of $150,000 per site. For partners and
18    shareholders of subchapter S corporations, there shall be
19    allowed a credit under this subsection to be determined in
20    accordance with the determination of income and
21    distributive share of income under Sections 702 and 704 and
22    subchapter S of the Internal Revenue Code.
23        (ii) A credit allowed under this subsection that is
24    unused in the year the credit is earned may be carried
25    forward to each of the 5 taxable years following the year
26    for which the credit is first earned until it is used. The

 

 

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1    term "unused credit" does not include any amounts of
2    unreimbursed eligible remediation costs in excess of the
3    maximum credit per site authorized under paragraph (i).
4    This credit shall be applied first to the earliest year for
5    which there is a liability. If there is a credit under this
6    subsection from more than one tax year that is available to
7    offset a liability, the earliest credit arising under this
8    subsection shall be applied first. A credit allowed under
9    this subsection may be sold to a buyer as part of a sale of
10    all or part of the remediation site for which the credit
11    was granted. The purchaser of a remediation site and the
12    tax credit shall succeed to the unused credit and remaining
13    carry-forward period of the seller. To perfect the
14    transfer, the assignor shall record the transfer in the
15    chain of title for the site and provide written notice to
16    the Director of the Illinois Department of Revenue of the
17    assignor's intent to sell the remediation site and the
18    amount of the tax credit to be transferred as a portion of
19    the sale. In no event may a credit be transferred to any
20    taxpayer if the taxpayer or a related party would not be
21    eligible under the provisions of subsection (i).
22        (iii) For purposes of this Section, the term "site"
23    shall have the same meaning as under Section 58.2 of the
24    Environmental Protection Act.
25    (m) Education expense credit. Beginning with tax years
26ending after December 31, 1999, a taxpayer who is the custodian

 

 

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1of one or more qualifying pupils shall be allowed a credit
2against the tax imposed by subsections (a) and (b) of this
3Section for qualified education expenses incurred on behalf of
4the qualifying pupils. The credit shall be equal to 25% of
5qualified education expenses, but in no event may the total
6credit under this subsection claimed by a family that is the
7custodian of qualifying pupils exceed $500. In no event shall a
8credit under this subsection reduce the taxpayer's liability
9under this Act to less than zero. This subsection is exempt
10from the provisions of Section 250 of this Act.
11    For purposes of this subsection:
12    "Qualifying pupils" means individuals who (i) are
13residents of the State of Illinois, (ii) are under the age of
1421 at the close of the school year for which a credit is
15sought, and (iii) during the school year for which a credit is
16sought were full-time pupils enrolled in a kindergarten through
17twelfth grade education program at any school, as defined in
18this subsection.
19    "Qualified education expense" means the amount incurred on
20behalf of a qualifying pupil in excess of $250 for tuition,
21book fees, and lab fees at the school in which the pupil is
22enrolled during the regular school year.
23    "School" means any public or nonpublic elementary or
24secondary school in Illinois that is in compliance with Title
25VI of the Civil Rights Act of 1964 and attendance at which
26satisfies the requirements of Section 26-1 of the School Code,

 

 

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1except that nothing shall be construed to require a child to
2attend any particular public or nonpublic school to qualify for
3the credit under this Section.
4    "Custodian" means, with respect to qualifying pupils, an
5Illinois resident who is a parent, the parents, a legal
6guardian, or the legal guardians of the qualifying pupils.
7    (n) River Edge Redevelopment Zone site remediation tax
8credit.
9        (i) For tax years ending on or after December 31, 2006,
10    a taxpayer shall be allowed a credit against the tax
11    imposed by subsections (a) and (b) of this Section for
12    certain amounts paid for unreimbursed eligible remediation
13    costs, as specified in this subsection. For purposes of
14    this Section, "unreimbursed eligible remediation costs"
15    means costs approved by the Illinois Environmental
16    Protection Agency ("Agency") under Section 58.14a of the
17    Environmental Protection Act that were paid in performing
18    environmental remediation at a site within a River Edge
19    Redevelopment Zone for which a No Further Remediation
20    Letter was issued by the Agency and recorded under Section
21    58.10 of the Environmental Protection Act. The credit must
22    be claimed for the taxable year in which Agency approval of
23    the eligible remediation costs is granted. The credit is
24    not available to any taxpayer if the taxpayer or any
25    related party caused or contributed to, in any material
26    respect, a release of regulated substances on, in, or under

 

 

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1    the site that was identified and addressed by the remedial
2    action pursuant to the Site Remediation Program of the
3    Environmental Protection Act. Determinations as to credit
4    availability for purposes of this Section shall be made
5    consistent with rules adopted by the Pollution Control
6    Board pursuant to the Illinois Administrative Procedure
7    Act for the administration and enforcement of Section 58.9
8    of the Environmental Protection Act. For purposes of this
9    Section, "taxpayer" includes a person whose tax attributes
10    the taxpayer has succeeded to under Section 381 of the
11    Internal Revenue Code and "related party" includes the
12    persons disallowed a deduction for losses by paragraphs
13    (b), (c), and (f)(1) of Section 267 of the Internal Revenue
14    Code by virtue of being a related taxpayer, as well as any
15    of its partners. The credit allowed against the tax imposed
16    by subsections (a) and (b) shall be equal to 25% of the
17    unreimbursed eligible remediation costs in excess of
18    $100,000 per site.
19        (ii) A credit allowed under this subsection that is
20    unused in the year the credit is earned may be carried
21    forward to each of the 5 taxable years following the year
22    for which the credit is first earned until it is used. This
23    credit shall be applied first to the earliest year for
24    which there is a liability. If there is a credit under this
25    subsection from more than one tax year that is available to
26    offset a liability, the earliest credit arising under this

 

 

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1    subsection shall be applied first. A credit allowed under
2    this subsection may be sold to a buyer as part of a sale of
3    all or part of the remediation site for which the credit
4    was granted. The purchaser of a remediation site and the
5    tax credit shall succeed to the unused credit and remaining
6    carry-forward period of the seller. To perfect the
7    transfer, the assignor shall record the transfer in the
8    chain of title for the site and provide written notice to
9    the Director of the Illinois Department of Revenue of the
10    assignor's intent to sell the remediation site and the
11    amount of the tax credit to be transferred as a portion of
12    the sale. In no event may a credit be transferred to any
13    taxpayer if the taxpayer or a related party would not be
14    eligible under the provisions of subsection (i).
15        (iii) For purposes of this Section, the term "site"
16    shall have the same meaning as under Section 58.2 of the
17    Environmental Protection Act.
18(Source: P.A. 96-115, eff. 7-31-09; 96-116, eff. 7-31-09;
1996-937, eff. 6-23-10; 96-1000, eff. 7-2-10; 96-1496, eff.
201-13-11; 97-2, eff. 5-6-11.)
 
21    (Text of Section after amendment by P.A. 97-636)
22    Sec. 201. Tax Imposed.
23    (a) In general. A tax measured by net income is hereby
24imposed on every individual, corporation, trust and estate for
25each taxable year ending after July 31, 1969 on the privilege

 

 

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1of earning or receiving income in or as a resident of this
2State. Such tax shall be in addition to all other occupation or
3privilege taxes imposed by this State or by any municipal
4corporation or political subdivision thereof.
5    (b) Rates. The tax imposed by subsection (a) of this
6Section shall be determined as follows, except as adjusted by
7subsection (d-1):
8        (1) In the case of an individual, trust or estate, for
9    taxable years ending prior to July 1, 1989, an amount equal
10    to 2 1/2% of the taxpayer's net income for the taxable
11    year.
12        (2) In the case of an individual, trust or estate, for
13    taxable years beginning prior to July 1, 1989 and ending
14    after June 30, 1989, an amount equal to the sum of (i) 2
15    1/2% of the taxpayer's net income for the period prior to
16    July 1, 1989, as calculated under Section 202.3, and (ii)
17    3% of the taxpayer's net income for the period after June
18    30, 1989, as calculated under Section 202.3.
19        (3) In the case of an individual, trust or estate, for
20    taxable years beginning after June 30, 1989, and ending
21    prior to January 1, 2011, an amount equal to 3% of the
22    taxpayer's net income for the taxable year.
23        (4) In the case of an individual, trust, or estate, for
24    taxable years beginning prior to January 1, 2011, and
25    ending after December 31, 2010, an amount equal to the sum
26    of (i) 3% of the taxpayer's net income for the period prior

 

 

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1    to January 1, 2011, as calculated under Section 202.5, and
2    (ii) 5% of the taxpayer's net income for the period after
3    December 31, 2010, as calculated under Section 202.5.
4        (5) In the case of an individual, trust, or estate, for
5    taxable years beginning on or after January 1, 2011, and
6    ending prior to January 1, 2015, an amount equal to 5% of
7    the taxpayer's net income for the taxable year.
8        (5.1) In the case of an individual, trust, or estate,
9    for taxable years beginning prior to January 1, 2015, and
10    ending after December 31, 2014, an amount equal to the sum
11    of (i) 5% of the taxpayer's net income for the period prior
12    to January 1, 2015, as calculated under Section 202.5, and
13    (ii) 3.75% of the taxpayer's net income for the period
14    after December 31, 2014, as calculated under Section 202.5.
15        (5.2) In the case of an individual, trust, or estate,
16    for taxable years beginning on or after January 1, 2015,
17    and ending prior to January 1, 2025, an amount equal to
18    3.75% of the taxpayer's net income for the taxable year.
19        (5.3) In the case of an individual, trust, or estate,
20    for taxable years beginning prior to January 1, 2025, and
21    ending after December 31, 2024, an amount equal to the sum
22    of (i) 3.75% of the taxpayer's net income for the period
23    prior to January 1, 2025, as calculated under Section
24    202.5, and (ii) 3.25% of the taxpayer's net income for the
25    period after December 31, 2024, as calculated under Section
26    202.5.

 

 

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1        (5.4) In the case of an individual, trust, or estate,
2    for taxable years beginning on or after January 1, 2025, an
3    amount equal to 3.25% of the taxpayer's net income for the
4    taxable year.
5        (6) In the case of a corporation, for taxable years
6    ending prior to July 1, 1989, an amount equal to 4% of the
7    taxpayer's net income for the taxable year.
8        (7) In the case of a corporation, for taxable years
9    beginning prior to July 1, 1989 and ending after June 30,
10    1989, an amount equal to the sum of (i) 4% of the
11    taxpayer's net income for the period prior to July 1, 1989,
12    as calculated under Section 202.3, and (ii) 4.8% of the
13    taxpayer's net income for the period after June 30, 1989,
14    as calculated under Section 202.3.
15        (8) In the case of a corporation, for taxable years
16    beginning after June 30, 1989, and ending prior to January
17    1, 2011, an amount equal to 4.8% of the taxpayer's net
18    income for the taxable year.
19        (9) In the case of a corporation, for taxable years
20    beginning prior to January 1, 2011, and ending after
21    December 31, 2010, an amount equal to the sum of (i) 4.8%
22    of the taxpayer's net income for the period prior to
23    January 1, 2011, as calculated under Section 202.5, and
24    (ii) 7% of the taxpayer's net income for the period after
25    December 31, 2010, as calculated under Section 202.5.
26        (10) In the case of a corporation, for taxable years

 

 

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1    beginning on or after January 1, 2011, and ending prior to
2    January 1, 2015, an amount equal to 7% of the taxpayer's
3    net income for the taxable year.
4        (11) In the case of a corporation, for taxable years
5    beginning prior to January 1, 2015, and ending after
6    December 31, 2014, an amount equal to the sum of (i) 7% of
7    the taxpayer's net income for the period prior to January
8    1, 2015, as calculated under Section 202.5, and (ii) 5.25%
9    of the taxpayer's net income for the period after December
10    31, 2014, as calculated under Section 202.5.
11        (12) In the case of a corporation, for taxable years
12    beginning on or after January 1, 2015, and ending prior to
13    January 1, 2025, an amount equal to 5.25% of the taxpayer's
14    net income for the taxable year.
15        (13) In the case of a corporation, for taxable years
16    beginning prior to January 1, 2025, and ending after
17    December 31, 2024, an amount equal to the sum of (i) 5.25%
18    of the taxpayer's net income for the period prior to
19    January 1, 2025, as calculated under Section 202.5, and
20    (ii) 4.8% of the taxpayer's net income for the period after
21    December 31, 2024, as calculated under Section 202.5.
22        (14) In the case of a corporation, for taxable years
23    beginning on or after January 1, 2025, an amount equal to
24    4.8% of the taxpayer's net income for the taxable year.
25    The rates under this subsection (b) are subject to the
26provisions of Section 201.5.

 

 

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1    (c) Personal Property Tax Replacement Income Tax.
2Beginning on July 1, 1979 and thereafter, in addition to such
3income tax, there is also hereby imposed the Personal Property
4Tax Replacement Income Tax measured by net income on every
5corporation (including Subchapter S corporations), partnership
6and trust, for each taxable year ending after June 30, 1979.
7Such taxes are imposed on the privilege of earning or receiving
8income in or as a resident of this State. The Personal Property
9Tax Replacement Income Tax shall be in addition to the income
10tax imposed by subsections (a) and (b) of this Section and in
11addition to all other occupation or privilege taxes imposed by
12this State or by any municipal corporation or political
13subdivision thereof.
14    (d) Additional Personal Property Tax Replacement Income
15Tax Rates. The personal property tax replacement income tax
16imposed by this subsection and subsection (c) of this Section
17in the case of a corporation, other than a Subchapter S
18corporation and except as adjusted by subsection (d-1), shall
19be an additional amount equal to 2.85% of such taxpayer's net
20income for the taxable year, except that beginning on January
211, 1981, and thereafter, the rate of 2.85% specified in this
22subsection shall be reduced to 2.5%, and in the case of a
23partnership, trust or a Subchapter S corporation shall be an
24additional amount equal to 1.5% of such taxpayer's net income
25for the taxable year.
26    (d-1) Rate reduction for certain foreign insurers. In the

 

 

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1case of a foreign insurer, as defined by Section 35A-5 of the
2Illinois Insurance Code, whose state or country of domicile
3imposes on insurers domiciled in Illinois a retaliatory tax
4(excluding any insurer whose premiums from reinsurance assumed
5are 50% or more of its total insurance premiums as determined
6under paragraph (2) of subsection (b) of Section 304, except
7that for purposes of this determination premiums from
8reinsurance do not include premiums from inter-affiliate
9reinsurance arrangements), beginning with taxable years ending
10on or after December 31, 1999, the sum of the rates of tax
11imposed by subsections (b) and (d) shall be reduced (but not
12increased) to the rate at which the total amount of tax imposed
13under this Act, net of all credits allowed under this Act,
14shall equal (i) the total amount of tax that would be imposed
15on the foreign insurer's net income allocable to Illinois for
16the taxable year by such foreign insurer's state or country of
17domicile if that net income were subject to all income taxes
18and taxes measured by net income imposed by such foreign
19insurer's state or country of domicile, net of all credits
20allowed or (ii) a rate of zero if no such tax is imposed on such
21income by the foreign insurer's state of domicile. For the
22purposes of this subsection (d-1), an inter-affiliate includes
23a mutual insurer under common management.
24        (1) For the purposes of subsection (d-1), in no event
25    shall the sum of the rates of tax imposed by subsections
26    (b) and (d) be reduced below the rate at which the sum of:

 

 

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1            (A) the total amount of tax imposed on such foreign
2        insurer under this Act for a taxable year, net of all
3        credits allowed under this Act, plus
4            (B) the privilege tax imposed by Section 409 of the
5        Illinois Insurance Code, the fire insurance company
6        tax imposed by Section 12 of the Fire Investigation
7        Act, and the fire department taxes imposed under
8        Section 11-10-1 of the Illinois Municipal Code,
9    equals 1.25% for taxable years ending prior to December 31,
10    2003, or 1.75% for taxable years ending on or after
11    December 31, 2003, of the net taxable premiums written for
12    the taxable year, as described by subsection (1) of Section
13    409 of the Illinois Insurance Code. This paragraph will in
14    no event increase the rates imposed under subsections (b)
15    and (d).
16        (2) Any reduction in the rates of tax imposed by this
17    subsection shall be applied first against the rates imposed
18    by subsection (b) and only after the tax imposed by
19    subsection (a) net of all credits allowed under this
20    Section other than the credit allowed under subsection (i)
21    has been reduced to zero, against the rates imposed by
22    subsection (d).
23    This subsection (d-1) is exempt from the provisions of
24Section 250.
25    (e) Investment credit. A taxpayer shall be allowed a credit
26against the Personal Property Tax Replacement Income Tax for

 

 

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1investment in qualified property.
2        (1) A taxpayer shall be allowed a credit equal to .5%
3    of the basis of qualified property placed in service during
4    the taxable year, provided such property is placed in
5    service on or after July 1, 1984. There shall be allowed an
6    additional credit equal to .5% of the basis of qualified
7    property placed in service during the taxable year,
8    provided such property is placed in service on or after
9    July 1, 1986, and the taxpayer's base employment within
10    Illinois has increased by 1% or more over the preceding
11    year as determined by the taxpayer's employment records
12    filed with the Illinois Department of Employment Security.
13    Taxpayers who are new to Illinois shall be deemed to have
14    met the 1% growth in base employment for the first year in
15    which they file employment records with the Illinois
16    Department of Employment Security. The provisions added to
17    this Section by Public Act 85-1200 (and restored by Public
18    Act 87-895) shall be construed as declaratory of existing
19    law and not as a new enactment. If, in any year, the
20    increase in base employment within Illinois over the
21    preceding year is less than 1%, the additional credit shall
22    be limited to that percentage times a fraction, the
23    numerator of which is .5% and the denominator of which is
24    1%, but shall not exceed .5%. The investment credit shall
25    not be allowed to the extent that it would reduce a
26    taxpayer's liability in any tax year below zero, nor may

 

 

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1    any credit for qualified property be allowed for any year
2    other than the year in which the property was placed in
3    service in Illinois. For tax years ending on or after
4    December 31, 1987, and on or before December 31, 1988, the
5    credit shall be allowed for the tax year in which the
6    property is placed in service, or, if the amount of the
7    credit exceeds the tax liability for that year, whether it
8    exceeds the original liability or the liability as later
9    amended, such excess may be carried forward and applied to
10    the tax liability of the 5 taxable years following the
11    excess credit years if the taxpayer (i) makes investments
12    which cause the creation of a minimum of 2,000 full-time
13    equivalent jobs in Illinois, (ii) is located in an
14    enterprise zone established pursuant to the Illinois
15    Enterprise Zone Act and (iii) is certified by the
16    Department of Commerce and Community Affairs (now
17    Department of Commerce and Economic Opportunity) as
18    complying with the requirements specified in clause (i) and
19    (ii) by July 1, 1986. The Department of Commerce and
20    Community Affairs (now Department of Commerce and Economic
21    Opportunity) shall notify the Department of Revenue of all
22    such certifications immediately. For tax years ending
23    after December 31, 1988, the credit shall be allowed for
24    the tax year in which the property is placed in service,
25    or, if the amount of the credit exceeds the tax liability
26    for that year, whether it exceeds the original liability or

 

 

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1    the liability as later amended, such excess may be carried
2    forward and applied to the tax liability of the 5 taxable
3    years following the excess credit years. The credit shall
4    be applied to the earliest year for which there is a
5    liability. If there is credit from more than one tax year
6    that is available to offset a liability, earlier credit
7    shall be applied first.
8        (2) The term "qualified property" means property
9    which:
10            (A) is tangible, whether new or used, including
11        buildings and structural components of buildings and
12        signs that are real property, but not including land or
13        improvements to real property that are not a structural
14        component of a building such as landscaping, sewer
15        lines, local access roads, fencing, parking lots, and
16        other appurtenances;
17            (B) is depreciable pursuant to Section 167 of the
18        Internal Revenue Code, except that "3-year property"
19        as defined in Section 168(c)(2)(A) of that Code is not
20        eligible for the credit provided by this subsection
21        (e);
22            (C) is acquired by purchase as defined in Section
23        179(d) of the Internal Revenue Code;
24            (D) is used in Illinois by a taxpayer who is
25        primarily engaged in manufacturing, or in mining coal
26        or fluorite, or in retailing, or was placed in service

 

 

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1        on or after July 1, 2006 in a River Edge Redevelopment
2        Zone established pursuant to the River Edge
3        Redevelopment Zone Act; and
4            (E) has not previously been used in Illinois in
5        such a manner and by such a person as would qualify for
6        the credit provided by this subsection (e) or
7        subsection (f).
8        (3) For purposes of this subsection (e),
9    "manufacturing" means the material staging and production
10    of tangible personal property by procedures commonly
11    regarded as manufacturing, processing, fabrication, or
12    assembling which changes some existing material into new
13    shapes, new qualities, or new combinations. For purposes of
14    this subsection (e) the term "mining" shall have the same
15    meaning as the term "mining" in Section 613(c) of the
16    Internal Revenue Code. For purposes of this subsection (e),
17    the term "retailing" means the sale of tangible personal
18    property for use or consumption and not for resale, or
19    services rendered in conjunction with the sale of tangible
20    personal property for use or consumption and not for
21    resale. For purposes of this subsection (e), "tangible
22    personal property" has the same meaning as when that term
23    is used in the Retailers' Occupation Tax Act, and, for
24    taxable years ending after December 31, 2008, does not
25    include the generation, transmission, or distribution of
26    electricity.

 

 

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1        (4) The basis of qualified property shall be the basis
2    used to compute the depreciation deduction for federal
3    income tax purposes.
4        (5) If the basis of the property for federal income tax
5    depreciation purposes is increased after it has been placed
6    in service in Illinois by the taxpayer, the amount of such
7    increase shall be deemed property placed in service on the
8    date of such increase in basis.
9        (6) The term "placed in service" shall have the same
10    meaning as under Section 46 of the Internal Revenue Code.
11        (7) If during any taxable year, any property ceases to
12    be qualified property in the hands of the taxpayer within
13    48 months after being placed in service, or the situs of
14    any qualified property is moved outside Illinois within 48
15    months after being placed in service, the Personal Property
16    Tax Replacement Income Tax for such taxable year shall be
17    increased. Such increase shall be determined by (i)
18    recomputing the investment credit which would have been
19    allowed for the year in which credit for such property was
20    originally allowed by eliminating such property from such
21    computation and, (ii) subtracting such recomputed credit
22    from the amount of credit previously allowed. For the
23    purposes of this paragraph (7), a reduction of the basis of
24    qualified property resulting from a redetermination of the
25    purchase price shall be deemed a disposition of qualified
26    property to the extent of such reduction.

 

 

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1        (8) Unless the investment credit is extended by law,
2    the basis of qualified property shall not include costs
3    incurred after December 31, 2018, except for costs incurred
4    pursuant to a binding contract entered into on or before
5    December 31, 2018.
6        (9) Each taxable year ending before December 31, 2000,
7    a partnership may elect to pass through to its partners the
8    credits to which the partnership is entitled under this
9    subsection (e) for the taxable year. A partner may use the
10    credit allocated to him or her under this paragraph only
11    against the tax imposed in subsections (c) and (d) of this
12    Section. If the partnership makes that election, those
13    credits shall be allocated among the partners in the
14    partnership in accordance with the rules set forth in
15    Section 704(b) of the Internal Revenue Code, and the rules
16    promulgated under that Section, and the allocated amount of
17    the credits shall be allowed to the partners for that
18    taxable year. The partnership shall make this election on
19    its Personal Property Tax Replacement Income Tax return for
20    that taxable year. The election to pass through the credits
21    shall be irrevocable.
22        For taxable years ending on or after December 31, 2000,
23    a partner that qualifies its partnership for a subtraction
24    under subparagraph (I) of paragraph (2) of subsection (d)
25    of Section 203 or a shareholder that qualifies a Subchapter
26    S corporation for a subtraction under subparagraph (S) of

 

 

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1    paragraph (2) of subsection (b) of Section 203 shall be
2    allowed a credit under this subsection (e) equal to its
3    share of the credit earned under this subsection (e) during
4    the taxable year by the partnership or Subchapter S
5    corporation, determined in accordance with the
6    determination of income and distributive share of income
7    under Sections 702 and 704 and Subchapter S of the Internal
8    Revenue Code. This paragraph is exempt from the provisions
9    of Section 250.
10    (f) Investment credit; Enterprise Zone; River Edge
11Redevelopment Zone.
12        (1) A taxpayer shall be allowed a credit against the
13    tax imposed by subsections (a) and (b) of this Section for
14    investment in qualified property which is placed in service
15    in an Enterprise Zone created pursuant to the Illinois
16    Enterprise Zone Act or, for property placed in service on
17    or after July 1, 2006, a River Edge Redevelopment Zone
18    established pursuant to the River Edge Redevelopment Zone
19    Act. For partners, shareholders of Subchapter S
20    corporations, and owners of limited liability companies,
21    if the liability company is treated as a partnership for
22    purposes of federal and State income taxation, there shall
23    be allowed a credit under this subsection (f) to be
24    determined in accordance with the determination of income
25    and distributive share of income under Sections 702 and 704
26    and Subchapter S of the Internal Revenue Code. The credit

 

 

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1    shall be .5% of the basis for such property. The credit
2    shall be available only in the taxable year in which the
3    property is placed in service in the Enterprise Zone or
4    River Edge Redevelopment Zone and shall not be allowed to
5    the extent that it would reduce a taxpayer's liability for
6    the tax imposed by subsections (a) and (b) of this Section
7    to below zero. For tax years ending on or after December
8    31, 1985, the credit shall be allowed for the tax year in
9    which the property is placed in service, or, if the amount
10    of the credit exceeds the tax liability for that year,
11    whether it exceeds the original liability or the liability
12    as later amended, such excess may be carried forward and
13    applied to the tax liability of the 5 taxable years
14    following the excess credit year. The credit shall be
15    applied to the earliest year for which there is a
16    liability. If there is credit from more than one tax year
17    that is available to offset a liability, the credit
18    accruing first in time shall be applied first.
19        (2) The term qualified property means property which:
20            (A) is tangible, whether new or used, including
21        buildings and structural components of buildings;
22            (B) is depreciable pursuant to Section 167 of the
23        Internal Revenue Code, except that "3-year property"
24        as defined in Section 168(c)(2)(A) of that Code is not
25        eligible for the credit provided by this subsection
26        (f);

 

 

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1            (C) is acquired by purchase as defined in Section
2        179(d) of the Internal Revenue Code;
3            (D) is used in the Enterprise Zone or River Edge
4        Redevelopment Zone by the taxpayer; and
5            (E) has not been previously used in Illinois in
6        such a manner and by such a person as would qualify for
7        the credit provided by this subsection (f) or
8        subsection (e).
9        (3) The basis of qualified property shall be the basis
10    used to compute the depreciation deduction for federal
11    income tax purposes.
12        (4) If the basis of the property for federal income tax
13    depreciation purposes is increased after it has been placed
14    in service in the Enterprise Zone or River Edge
15    Redevelopment Zone by the taxpayer, the amount of such
16    increase shall be deemed property placed in service on the
17    date of such increase in basis.
18        (5) The term "placed in service" shall have the same
19    meaning as under Section 46 of the Internal Revenue Code.
20        (6) If during any taxable year, any property ceases to
21    be qualified property in the hands of the taxpayer within
22    48 months after being placed in service, or the situs of
23    any qualified property is moved outside the Enterprise Zone
24    or River Edge Redevelopment Zone within 48 months after
25    being placed in service, the tax imposed under subsections
26    (a) and (b) of this Section for such taxable year shall be

 

 

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1    increased. Such increase shall be determined by (i)
2    recomputing the investment credit which would have been
3    allowed for the year in which credit for such property was
4    originally allowed by eliminating such property from such
5    computation, and (ii) subtracting such recomputed credit
6    from the amount of credit previously allowed. For the
7    purposes of this paragraph (6), a reduction of the basis of
8    qualified property resulting from a redetermination of the
9    purchase price shall be deemed a disposition of qualified
10    property to the extent of such reduction.
11        (7) There shall be allowed an additional credit equal
12    to 0.5% of the basis of qualified property placed in
13    service during the taxable year in a River Edge
14    Redevelopment Zone, provided such property is placed in
15    service on or after July 1, 2006, and the taxpayer's base
16    employment within Illinois has increased by 1% or more over
17    the preceding year as determined by the taxpayer's
18    employment records filed with the Illinois Department of
19    Employment Security. Taxpayers who are new to Illinois
20    shall be deemed to have met the 1% growth in base
21    employment for the first year in which they file employment
22    records with the Illinois Department of Employment
23    Security. If, in any year, the increase in base employment
24    within Illinois over the preceding year is less than 1%,
25    the additional credit shall be limited to that percentage
26    times a fraction, the numerator of which is 0.5% and the

 

 

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1    denominator of which is 1%, but shall not exceed 0.5%.
2    (g) Jobs Tax Credit; Enterprise Zone, River Edge
3Redevelopment Zone, and Foreign Trade Zone or Sub-Zone.
4        (1) A taxpayer conducting a trade or business, in an
5    enterprise zone or a High Impact Business designated by the
6    Department of Commerce and Economic Opportunity or for
7    taxable years ending on or after December 31, 2006, in a
8    River Edge Redevelopment Zone or conducting a trade or
9    business in a federally designated Foreign Trade Zone or
10    Sub-Zone shall be allowed a credit against the tax imposed
11    by subsections (a) and (b) of this Section in the amount of
12    $500 per eligible employee hired to work in the zone during
13    the taxable year.
14        (2) To qualify for the credit:
15            (A) the taxpayer must hire 5 or more eligible
16        employees to work in a an enterprise zone, River Edge
17        Redevelopment Zone, or federally designated Foreign
18        Trade Zone or Sub-Zone during the taxable year;
19            (B) the taxpayer's total employment within the
20        enterprise zone, River Edge Redevelopment Zone, or
21        federally designated Foreign Trade Zone or Sub-Zone
22        must increase by 5 or more full-time employees beyond
23        the total employed in that zone at the end of the
24        previous tax year for which a jobs tax credit under
25        this Section was taken, or beyond the total employed by
26        the taxpayer as of December 31, 1985, whichever is

 

 

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1        later; and
2            (C) the eligible employees must be employed 180
3        consecutive days in order to be deemed hired for
4        purposes of this subsection.
5        (3) An "eligible employee" means an employee who is:
6            (A) Certified by the Department of Commerce and
7        Economic Opportunity as "eligible for services"
8        pursuant to regulations promulgated in accordance with
9        Title II of the Job Training Partnership Act, Training
10        Services for the Disadvantaged or Title III of the Job
11        Training Partnership Act, Employment and Training
12        Assistance for Dislocated Workers Program.
13            (B) Hired after the enterprise zone, River Edge
14        Redevelopment Zone, or federally designated Foreign
15        Trade Zone or Sub-Zone was designated or the trade or
16        business was located in that zone, whichever is later.
17            (C) Employed in the enterprise zone, River Edge
18        Redevelopment Zone, or Foreign Trade Zone or Sub-Zone.
19        An employee is employed in a an enterprise zone or
20        federally designated Foreign Trade Zone or Sub-Zone if
21        his services are rendered there or it is the base of
22        operations for the services performed.
23            (D) A full-time employee working 30 or more hours
24        per week.
25        (4) For tax years ending on or after December 31, 1985
26    and prior to December 31, 1988, the credit shall be allowed

 

 

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1    for the tax year in which the eligible employees are hired.
2    For tax years ending on or after December 31, 1988, the
3    credit shall be allowed for the tax year immediately
4    following the tax year in which the eligible employees are
5    hired. If the amount of the credit exceeds the tax
6    liability for that year, whether it exceeds the original
7    liability or the liability as later amended, such excess
8    may be carried forward and applied to the tax liability of
9    the 5 taxable years following the excess credit year. The
10    credit shall be applied to the earliest year for which
11    there is a liability. If there is credit from more than one
12    tax year that is available to offset a liability, earlier
13    credit shall be applied first.
14        (5) The Department of Revenue shall promulgate such
15    rules and regulations as may be deemed necessary to carry
16    out the purposes of this subsection (g).
17        (6) The credit shall be available for eligible
18    employees hired on or after January 1, 1986.
19    (h) Investment credit; High Impact Business.
20        (1) Subject to subsections (b) and (b-5) of Section 5.5
21    of the Illinois Enterprise Zone Act, a taxpayer shall be
22    allowed a credit against the tax imposed by subsections (a)
23    and (b) of this Section for investment in qualified
24    property which is placed in service by a Department of
25    Commerce and Economic Opportunity designated High Impact
26    Business. The credit shall be .5% of the basis for such

 

 

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1    property. The credit shall not be available (i) until the
2    minimum investments in qualified property set forth in
3    subdivision (a)(3)(A) of Section 5.5 of the Illinois
4    Enterprise Zone Act have been satisfied or (ii) until the
5    time authorized in subsection (b-5) of the Illinois
6    Enterprise Zone Act for entities designated as High Impact
7    Businesses under subdivisions (a)(3)(B), (a)(3)(C), and
8    (a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone
9    Act, and shall not be allowed to the extent that it would
10    reduce a taxpayer's liability for the tax imposed by
11    subsections (a) and (b) of this Section to below zero. The
12    credit applicable to such investments shall be taken in the
13    taxable year in which such investments have been completed.
14    The credit for additional investments beyond the minimum
15    investment by a designated high impact business authorized
16    under subdivision (a)(3)(A) of Section 5.5 of the Illinois
17    Enterprise Zone Act shall be available only in the taxable
18    year in which the property is placed in service and shall
19    not be allowed to the extent that it would reduce a
20    taxpayer's liability for the tax imposed by subsections (a)
21    and (b) of this Section to below zero. For tax years ending
22    on or after December 31, 1987, the credit shall be allowed
23    for the tax year in which the property is placed in
24    service, or, if the amount of the credit exceeds the tax
25    liability for that year, whether it exceeds the original
26    liability or the liability as later amended, such excess

 

 

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1    may be carried forward and applied to the tax liability of
2    the 5 taxable years following the excess credit year. The
3    credit shall be applied to the earliest year for which
4    there is a liability. If there is credit from more than one
5    tax year that is available to offset a liability, the
6    credit accruing first in time shall be applied first.
7        Changes made in this subdivision (h)(1) by Public Act
8    88-670 restore changes made by Public Act 85-1182 and
9    reflect existing law.
10        (2) The term qualified property means property which:
11            (A) is tangible, whether new or used, including
12        buildings and structural components of buildings;
13            (B) is depreciable pursuant to Section 167 of the
14        Internal Revenue Code, except that "3-year property"
15        as defined in Section 168(c)(2)(A) of that Code is not
16        eligible for the credit provided by this subsection
17        (h);
18            (C) is acquired by purchase as defined in Section
19        179(d) of the Internal Revenue Code; and
20            (D) is not eligible for the Enterprise Zone
21        Investment Credit provided by subsection (f) of this
22        Section.
23        (3) The basis of qualified property shall be the basis
24    used to compute the depreciation deduction for federal
25    income tax purposes.
26        (4) If the basis of the property for federal income tax

 

 

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1    depreciation purposes is increased after it has been placed
2    in service in a federally designated Foreign Trade Zone or
3    Sub-Zone located in Illinois by the taxpayer, the amount of
4    such increase shall be deemed property placed in service on
5    the date of such increase in basis.
6        (5) The term "placed in service" shall have the same
7    meaning as under Section 46 of the Internal Revenue Code.
8        (6) If during any taxable year ending on or before
9    December 31, 1996, any property ceases to be qualified
10    property in the hands of the taxpayer within 48 months
11    after being placed in service, or the situs of any
12    qualified property is moved outside Illinois within 48
13    months after being placed in service, the tax imposed under
14    subsections (a) and (b) of this Section for such taxable
15    year shall be increased. Such increase shall be determined
16    by (i) recomputing the investment credit which would have
17    been allowed for the year in which credit for such property
18    was originally allowed by eliminating such property from
19    such computation, and (ii) subtracting such recomputed
20    credit from the amount of credit previously allowed. For
21    the purposes of this paragraph (6), a reduction of the
22    basis of qualified property resulting from a
23    redetermination of the purchase price shall be deemed a
24    disposition of qualified property to the extent of such
25    reduction.
26        (7) Beginning with tax years ending after December 31,

 

 

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1    1996, if a taxpayer qualifies for the credit under this
2    subsection (h) and thereby is granted a tax abatement and
3    the taxpayer relocates its entire facility in violation of
4    the explicit terms and length of the contract under Section
5    18-183 of the Property Tax Code, the tax imposed under
6    subsections (a) and (b) of this Section shall be increased
7    for the taxable year in which the taxpayer relocated its
8    facility by an amount equal to the amount of credit
9    received by the taxpayer under this subsection (h).
10    (i) Credit for Personal Property Tax Replacement Income
11Tax. For tax years ending prior to December 31, 2003, a credit
12shall be allowed against the tax imposed by subsections (a) and
13(b) of this Section for the tax imposed by subsections (c) and
14(d) of this Section. This credit shall be computed by
15multiplying the tax imposed by subsections (c) and (d) of this
16Section by a fraction, the numerator of which is base income
17allocable to Illinois and the denominator of which is Illinois
18base income, and further multiplying the product by the tax
19rate imposed by subsections (a) and (b) of this Section.
20    Any credit earned on or after December 31, 1986 under this
21subsection which is unused in the year the credit is computed
22because it exceeds the tax liability imposed by subsections (a)
23and (b) for that year (whether it exceeds the original
24liability or the liability as later amended) may be carried
25forward and applied to the tax liability imposed by subsections
26(a) and (b) of the 5 taxable years following the excess credit

 

 

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1year, provided that no credit may be carried forward to any
2year ending on or after December 31, 2003. This credit shall be
3applied first to the earliest year for which there is a
4liability. If there is a credit under this subsection from more
5than one tax year that is available to offset a liability the
6earliest credit arising under this subsection shall be applied
7first.
8    If, during any taxable year ending on or after December 31,
91986, the tax imposed by subsections (c) and (d) of this
10Section for which a taxpayer has claimed a credit under this
11subsection (i) is reduced, the amount of credit for such tax
12shall also be reduced. Such reduction shall be determined by
13recomputing the credit to take into account the reduced tax
14imposed by subsections (c) and (d). If any portion of the
15reduced amount of credit has been carried to a different
16taxable year, an amended return shall be filed for such taxable
17year to reduce the amount of credit claimed.
18    (j) Training expense credit. Beginning with tax years
19ending on or after December 31, 1986 and prior to December 31,
202003, a taxpayer shall be allowed a credit against the tax
21imposed by subsections (a) and (b) under this Section for all
22amounts paid or accrued, on behalf of all persons employed by
23the taxpayer in Illinois or Illinois residents employed outside
24of Illinois by a taxpayer, for educational or vocational
25training in semi-technical or technical fields or semi-skilled
26or skilled fields, which were deducted from gross income in the

 

 

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1computation of taxable income. The credit against the tax
2imposed by subsections (a) and (b) shall be 1.6% of such
3training expenses. For partners, shareholders of subchapter S
4corporations, and owners of limited liability companies, if the
5liability company is treated as a partnership for purposes of
6federal and State income taxation, there shall be allowed a
7credit under this subsection (j) to be determined in accordance
8with the determination of income and distributive share of
9income under Sections 702 and 704 and subchapter S of the
10Internal Revenue Code.
11    Any credit allowed under this subsection which is unused in
12the year the credit is earned may be carried forward to each of
13the 5 taxable years following the year for which the credit is
14first computed until it is used. This credit shall be applied
15first to the earliest year for which there is a liability. If
16there is a credit under this subsection from more than one tax
17year that is available to offset a liability the earliest
18credit arising under this subsection shall be applied first. No
19carryforward credit may be claimed in any tax year ending on or
20after December 31, 2003.
21    (k) Research and development credit.
22    For tax years ending after July 1, 1990 and prior to
23December 31, 2003, and beginning again for tax years ending on
24or after December 31, 2004, and ending prior to January 1,
252016, a taxpayer shall be allowed a credit against the tax
26imposed by subsections (a) and (b) of this Section for

 

 

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1increasing research activities in this State. The credit
2allowed against the tax imposed by subsections (a) and (b)
3shall be equal to 6 1/2% of the qualifying expenditures for
4increasing research activities in this State. For partners,
5shareholders of subchapter S corporations, and owners of
6limited liability companies, if the liability company is
7treated as a partnership for purposes of federal and State
8income taxation, there shall be allowed a credit under this
9subsection to be determined in accordance with the
10determination of income and distributive share of income under
11Sections 702 and 704 and subchapter S of the Internal Revenue
12Code.
13    For purposes of this subsection, "qualifying expenditures"
14means the qualifying expenditures as defined for the federal
15credit for increasing research activities which would be
16allowable under Section 41 of the Internal Revenue Code and
17which are conducted in this State, "qualifying expenditures for
18increasing research activities in this State" means the excess
19of qualifying expenditures for the taxable year in which
20incurred over qualifying expenditures for the base period,
21"qualifying expenditures for the base period" means the average
22of the qualifying expenditures for each year in the base
23period, and "base period" means the 3 taxable years immediately
24preceding the taxable year for which the determination is being
25made.
26    Any credit in excess of the tax liability for the taxable

 

 

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1year may be carried forward. A taxpayer may elect to have the
2unused credit shown on its final completed return carried over
3as a credit against the tax liability for the following 5
4taxable years or until it has been fully used, whichever occurs
5first; provided that no credit earned in a tax year ending
6prior to December 31, 2003 may be carried forward to any year
7ending on or after December 31, 2003.
8    If an unused credit is carried forward to a given year from
92 or more earlier years, that credit arising in the earliest
10year will be applied first against the tax liability for the
11given year. If a tax liability for the given year still
12remains, the credit from the next earliest year will then be
13applied, and so on, until all credits have been used or no tax
14liability for the given year remains. Any remaining unused
15credit or credits then will be carried forward to the next
16following year in which a tax liability is incurred, except
17that no credit can be carried forward to a year which is more
18than 5 years after the year in which the expense for which the
19credit is given was incurred.
20    No inference shall be drawn from this amendatory Act of the
2191st General Assembly in construing this Section for taxable
22years beginning before January 1, 1999.
23    (l) Environmental Remediation Tax Credit.
24        (i) For tax years ending after December 31, 1997 and on
25    or before December 31, 2001, a taxpayer shall be allowed a
26    credit against the tax imposed by subsections (a) and (b)

 

 

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1    of this Section for certain amounts paid for unreimbursed
2    eligible remediation costs, as specified in this
3    subsection. For purposes of this Section, "unreimbursed
4    eligible remediation costs" means costs approved by the
5    Illinois Environmental Protection Agency ("Agency") under
6    Section 58.14 of the Environmental Protection Act that were
7    paid in performing environmental remediation at a site for
8    which a No Further Remediation Letter was issued by the
9    Agency and recorded under Section 58.10 of the
10    Environmental Protection Act. The credit must be claimed
11    for the taxable year in which Agency approval of the
12    eligible remediation costs is granted. The credit is not
13    available to any taxpayer if the taxpayer or any related
14    party caused or contributed to, in any material respect, a
15    release of regulated substances on, in, or under the site
16    that was identified and addressed by the remedial action
17    pursuant to the Site Remediation Program of the
18    Environmental Protection Act. After the Pollution Control
19    Board rules are adopted pursuant to the Illinois
20    Administrative Procedure Act for the administration and
21    enforcement of Section 58.9 of the Environmental
22    Protection Act, determinations as to credit availability
23    for purposes of this Section shall be made consistent with
24    those rules. For purposes of this Section, "taxpayer"
25    includes a person whose tax attributes the taxpayer has
26    succeeded to under Section 381 of the Internal Revenue Code

 

 

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1    and "related party" includes the persons disallowed a
2    deduction for losses by paragraphs (b), (c), and (f)(1) of
3    Section 267 of the Internal Revenue Code by virtue of being
4    a related taxpayer, as well as any of its partners. The
5    credit allowed against the tax imposed by subsections (a)
6    and (b) shall be equal to 25% of the unreimbursed eligible
7    remediation costs in excess of $100,000 per site, except
8    that the $100,000 threshold shall not apply to any site
9    contained in an enterprise zone as determined by the
10    Department of Commerce and Community Affairs (now
11    Department of Commerce and Economic Opportunity). The
12    total credit allowed shall not exceed $40,000 per year with
13    a maximum total of $150,000 per site. For partners and
14    shareholders of subchapter S corporations, there shall be
15    allowed a credit under this subsection to be determined in
16    accordance with the determination of income and
17    distributive share of income under Sections 702 and 704 and
18    subchapter S of the Internal Revenue Code.
19        (ii) A credit allowed under this subsection that is
20    unused in the year the credit is earned may be carried
21    forward to each of the 5 taxable years following the year
22    for which the credit is first earned until it is used. The
23    term "unused credit" does not include any amounts of
24    unreimbursed eligible remediation costs in excess of the
25    maximum credit per site authorized under paragraph (i).
26    This credit shall be applied first to the earliest year for

 

 

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1    which there is a liability. If there is a credit under this
2    subsection from more than one tax year that is available to
3    offset a liability, the earliest credit arising under this
4    subsection shall be applied first. A credit allowed under
5    this subsection may be sold to a buyer as part of a sale of
6    all or part of the remediation site for which the credit
7    was granted. The purchaser of a remediation site and the
8    tax credit shall succeed to the unused credit and remaining
9    carry-forward period of the seller. To perfect the
10    transfer, the assignor shall record the transfer in the
11    chain of title for the site and provide written notice to
12    the Director of the Illinois Department of Revenue of the
13    assignor's intent to sell the remediation site and the
14    amount of the tax credit to be transferred as a portion of
15    the sale. In no event may a credit be transferred to any
16    taxpayer if the taxpayer or a related party would not be
17    eligible under the provisions of subsection (i).
18        (iii) For purposes of this Section, the term "site"
19    shall have the same meaning as under Section 58.2 of the
20    Environmental Protection Act.
21    (m) Education expense credit. Beginning with tax years
22ending after December 31, 1999, a taxpayer who is the custodian
23of one or more qualifying pupils shall be allowed a credit
24against the tax imposed by subsections (a) and (b) of this
25Section for qualified education expenses incurred on behalf of
26the qualifying pupils. The credit shall be equal to 25% of

 

 

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1qualified education expenses, but in no event may the total
2credit under this subsection claimed by a family that is the
3custodian of qualifying pupils exceed $500. In no event shall a
4credit under this subsection reduce the taxpayer's liability
5under this Act to less than zero. This subsection is exempt
6from the provisions of Section 250 of this Act.
7    For purposes of this subsection:
8    "Qualifying pupils" means individuals who (i) are
9residents of the State of Illinois, (ii) are under the age of
1021 at the close of the school year for which a credit is
11sought, and (iii) during the school year for which a credit is
12sought were full-time pupils enrolled in a kindergarten through
13twelfth grade education program at any school, as defined in
14this subsection.
15    "Qualified education expense" means the amount incurred on
16behalf of a qualifying pupil in excess of $250 for tuition,
17book fees, and lab fees at the school in which the pupil is
18enrolled during the regular school year.
19    "School" means any public or nonpublic elementary or
20secondary school in Illinois that is in compliance with Title
21VI of the Civil Rights Act of 1964 and attendance at which
22satisfies the requirements of Section 26-1 of the School Code,
23except that nothing shall be construed to require a child to
24attend any particular public or nonpublic school to qualify for
25the credit under this Section.
26    "Custodian" means, with respect to qualifying pupils, an

 

 

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1Illinois resident who is a parent, the parents, a legal
2guardian, or the legal guardians of the qualifying pupils.
3    (n) River Edge Redevelopment Zone site remediation tax
4credit.
5        (i) For tax years ending on or after December 31, 2006,
6    a taxpayer shall be allowed a credit against the tax
7    imposed by subsections (a) and (b) of this Section for
8    certain amounts paid for unreimbursed eligible remediation
9    costs, as specified in this subsection. For purposes of
10    this Section, "unreimbursed eligible remediation costs"
11    means costs approved by the Illinois Environmental
12    Protection Agency ("Agency") under Section 58.14a of the
13    Environmental Protection Act that were paid in performing
14    environmental remediation at a site within a River Edge
15    Redevelopment Zone for which a No Further Remediation
16    Letter was issued by the Agency and recorded under Section
17    58.10 of the Environmental Protection Act. The credit must
18    be claimed for the taxable year in which Agency approval of
19    the eligible remediation costs is granted. The credit is
20    not available to any taxpayer if the taxpayer or any
21    related party caused or contributed to, in any material
22    respect, a release of regulated substances on, in, or under
23    the site that was identified and addressed by the remedial
24    action pursuant to the Site Remediation Program of the
25    Environmental Protection Act. Determinations as to credit
26    availability for purposes of this Section shall be made

 

 

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1    consistent with rules adopted by the Pollution Control
2    Board pursuant to the Illinois Administrative Procedure
3    Act for the administration and enforcement of Section 58.9
4    of the Environmental Protection Act. For purposes of this
5    Section, "taxpayer" includes a person whose tax attributes
6    the taxpayer has succeeded to under Section 381 of the
7    Internal Revenue Code and "related party" includes the
8    persons disallowed a deduction for losses by paragraphs
9    (b), (c), and (f)(1) of Section 267 of the Internal Revenue
10    Code by virtue of being a related taxpayer, as well as any
11    of its partners. The credit allowed against the tax imposed
12    by subsections (a) and (b) shall be equal to 25% of the
13    unreimbursed eligible remediation costs in excess of
14    $100,000 per site.
15        (ii) A credit allowed under this subsection that is
16    unused in the year the credit is earned may be carried
17    forward to each of the 5 taxable years following the year
18    for which the credit is first earned until it is used. This
19    credit shall be applied first to the earliest year for
20    which there is a liability. If there is a credit under this
21    subsection from more than one tax year that is available to
22    offset a liability, the earliest credit arising under this
23    subsection shall be applied first. A credit allowed under
24    this subsection may be sold to a buyer as part of a sale of
25    all or part of the remediation site for which the credit
26    was granted. The purchaser of a remediation site and the

 

 

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1    tax credit shall succeed to the unused credit and remaining
2    carry-forward period of the seller. To perfect the
3    transfer, the assignor shall record the transfer in the
4    chain of title for the site and provide written notice to
5    the Director of the Illinois Department of Revenue of the
6    assignor's intent to sell the remediation site and the
7    amount of the tax credit to be transferred as a portion of
8    the sale. In no event may a credit be transferred to any
9    taxpayer if the taxpayer or a related party would not be
10    eligible under the provisions of subsection (i).
11        (iii) For purposes of this Section, the term "site"
12    shall have the same meaning as under Section 58.2 of the
13    Environmental Protection Act.
14(Source: P.A. 96-115, eff. 7-31-09; 96-116, eff. 7-31-09;
1596-937, eff. 6-23-10; 96-1000, eff. 7-2-10; 96-1496, eff.
161-13-11; 97-2, eff. 5-6-11; 97-636, eff. 6-1-12.)
 
17    (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
18    Sec. 203. Base income defined.
19    (a) Individuals.
20        (1) In general. In the case of an individual, base
21    income means an amount equal to the taxpayer's adjusted
22    gross income for the taxable year as modified by paragraph
23    (2).
24        (2) Modifications. The adjusted gross income referred
25    to in paragraph (1) shall be modified by adding thereto the

 

 

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1    sum of the following amounts:
2            (A) An amount equal to all amounts paid or accrued
3        to the taxpayer as interest or dividends during the
4        taxable year to the extent excluded from gross income
5        in the computation of adjusted gross income, except
6        stock dividends of qualified public utilities
7        described in Section 305(e) of the Internal Revenue
8        Code;
9            (B) An amount equal to the amount of tax imposed by
10        this Act to the extent deducted from gross income in
11        the computation of adjusted gross income for the
12        taxable year;
13            (C) An amount equal to the amount received during
14        the taxable year as a recovery or refund of real
15        property taxes paid with respect to the taxpayer's
16        principal residence under the Revenue Act of 1939 and
17        for which a deduction was previously taken under
18        subparagraph (L) of this paragraph (2) prior to July 1,
19        1991, the retrospective application date of Article 4
20        of Public Act 87-17. In the case of multi-unit or
21        multi-use structures and farm dwellings, the taxes on
22        the taxpayer's principal residence shall be that
23        portion of the total taxes for the entire property
24        which is attributable to such principal residence;
25            (D) An amount equal to the amount of the capital
26        gain deduction allowable under the Internal Revenue

 

 

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1        Code, to the extent deducted from gross income in the
2        computation of adjusted gross income;
3            (D-5) An amount, to the extent not included in
4        adjusted gross income, equal to the amount of money
5        withdrawn by the taxpayer in the taxable year from a
6        medical care savings account and the interest earned on
7        the account in the taxable year of a withdrawal
8        pursuant to subsection (b) of Section 20 of the Medical
9        Care Savings Account Act or subsection (b) of Section
10        20 of the Medical Care Savings Account Act of 2000;
11            (D-10) For taxable years ending after December 31,
12        1997, an amount equal to any eligible remediation costs
13        that the individual deducted in computing adjusted
14        gross income and for which the individual claims a
15        credit under subsection (l) of Section 201;
16            (D-15) For taxable years 2001 and thereafter, an
17        amount equal to the bonus depreciation deduction taken
18        on the taxpayer's federal income tax return for the
19        taxable year under subsection (k) of Section 168 of the
20        Internal Revenue Code;
21            (D-16) If the taxpayer sells, transfers, abandons,
22        or otherwise disposes of property for which the
23        taxpayer was required in any taxable year to make an
24        addition modification under subparagraph (D-15), then
25        an amount equal to the aggregate amount of the
26        deductions taken in all taxable years under

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        member of the taxpayer's unitary business group
2        (including amounts included in gross income under
3        Sections 951 through 964 of the Internal Revenue Code
4        and amounts included in gross income under Section 78
5        of the Internal Revenue Code) with respect to the stock
6        of the same person to whom the premiums and costs were
7        directly or indirectly paid, incurred, or accrued. The
8        preceding sentence does not apply to the extent that
9        the same dividends caused a reduction to the addition
10        modification required under Section 203(a)(2)(D-17) or
11        Section 203(a)(2)(D-18) of this Act.
12            (D-20) For taxable years beginning on or after
13        January 1, 2002 and ending on or before December 31,
14        2006, in the case of a distribution from a qualified
15        tuition program under Section 529 of the Internal
16        Revenue Code, other than (i) a distribution from a
17        College Savings Pool created under Section 16.5 of the
18        State Treasurer Act or (ii) a distribution from the
19        Illinois Prepaid Tuition Trust Fund, an amount equal to
20        the amount excluded from gross income under Section
21        529(c)(3)(B). For taxable years beginning on or after
22        January 1, 2007, in the case of a distribution from a
23        qualified tuition program under Section 529 of the
24        Internal Revenue Code, other than (i) a distribution
25        from a College Savings Pool created under Section 16.5
26        of the State Treasurer Act, (ii) a distribution from

 

 

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1        the Illinois Prepaid Tuition Trust Fund, or (iii) a
2        distribution from a qualified tuition program under
3        Section 529 of the Internal Revenue Code that (I)
4        adopts and determines that its offering materials
5        comply with the College Savings Plans Network's
6        disclosure principles and (II) has made reasonable
7        efforts to inform in-state residents of the existence
8        of in-state qualified tuition programs by informing
9        Illinois residents directly and, where applicable, to
10        inform financial intermediaries distributing the
11        program to inform in-state residents of the existence
12        of in-state qualified tuition programs at least
13        annually, an amount equal to the amount excluded from
14        gross income under Section 529(c)(3)(B).
15            For the purposes of this subparagraph (D-20), a
16        qualified tuition program has made reasonable efforts
17        if it makes disclosures (which may use the term
18        "in-state program" or "in-state plan" and need not
19        specifically refer to Illinois or its qualified
20        programs by name) (i) directly to prospective
21        participants in its offering materials or makes a
22        public disclosure, such as a website posting; and (ii)
23        where applicable, to intermediaries selling the
24        out-of-state program in the same manner that the
25        out-of-state program distributes its offering
26        materials;

 

 

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1            (D-21) For taxable years beginning on or after
2        January 1, 2007, in the case of transfer of moneys from
3        a qualified tuition program under Section 529 of the
4        Internal Revenue Code that is administered by the State
5        to an out-of-state program, an amount equal to the
6        amount of moneys previously deducted from base income
7        under subsection (a)(2)(Y) of this Section;
8            (D-22) For taxable years beginning on or after
9        January 1, 2009, in the case of a nonqualified
10        withdrawal or refund of moneys from a qualified tuition
11        program under Section 529 of the Internal Revenue Code
12        administered by the State that is not used for
13        qualified expenses at an eligible education
14        institution, an amount equal to the contribution
15        component of the nonqualified withdrawal or refund
16        that was previously deducted from base income under
17        subsection (a)(2)(y) of this Section, provided that
18        the withdrawal or refund did not result from the
19        beneficiary's death or disability;
20            (D-23) An amount equal to the credit allowable to
21        the taxpayer under Section 218(a) of this Act,
22        determined without regard to Section 218(c) of this
23        Act;
24    and by deducting from the total so obtained the sum of the
25    following amounts:
26            (E) For taxable years ending before December 31,

 

 

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

 

 

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

 

 

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1        conducts business operations in an Enterprise Zone or
2        zones created under the Illinois Enterprise Zone Act or
3        a River Edge Redevelopment Zone or zones created under
4        the River Edge Redevelopment Zone Act, and conducts
5        substantially all of its operations in an Enterprise
6        Zone or zones or a River Edge Redevelopment Zone or
7        zones. This subparagraph (J) is exempt from the
8        provisions of Section 250;
9            (K) An amount equal to those dividends included in
10        such total that were paid by a corporation that
11        conducts business operations in a federally designated
12        Foreign Trade Zone or Sub-Zone and that is designated a
13        High Impact Business located in Illinois; provided
14        that dividends eligible for the deduction provided in
15        subparagraph (J) of paragraph (2) of this subsection
16        shall not be eligible for the deduction provided under
17        this subparagraph (K);
18            (L) For taxable years ending after December 31,
19        1983, an amount equal to all social security benefits
20        and railroad retirement benefits included in such
21        total pursuant to Sections 72(r) and 86 of the Internal
22        Revenue Code;
23            (M) With the exception of any amounts subtracted
24        under subparagraph (N), an amount equal to the sum of
25        all amounts disallowed as deductions by (i) Sections
26        171(a) (2), and 265(2) of the Internal Revenue Code,

 

 

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1        and all amounts of expenses allocable to interest and
2        disallowed as deductions by Section 265(1) of the
3        Internal Revenue Code; and (ii) for taxable years
4        ending on or after August 13, 1999, Sections 171(a)(2),
5        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue
6        Code, plus, for taxable years ending on or after
7        December 31, 2011, Section 45G(e)(3) of the Internal
8        Revenue Code and, for taxable years ending on or after
9        December 31, 2008, any amount included in gross income
10        under Section 87 of the Internal Revenue Code; the
11        provisions of this subparagraph are exempt from the
12        provisions of Section 250;
13            (N) An amount equal to all amounts included in such
14        total which are exempt from taxation by this State
15        either by reason of its statutes or Constitution or by
16        reason of the Constitution, treaties or statutes of the
17        United States; provided that, in the case of any
18        statute of this State that exempts income derived from
19        bonds or other obligations from the tax imposed under
20        this Act, the amount exempted shall be the interest net
21        of bond premium amortization;
22            (O) An amount equal to any contribution made to a
23        job training project established pursuant to the Tax
24        Increment Allocation Redevelopment Act;
25            (P) An amount equal to the amount of the deduction
26        used to compute the federal income tax credit for

 

 

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

 

 

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1        behalf of the taxpayer, other than interest added
2        pursuant to item (D-5) of this paragraph (2);
3            (U) For one taxable year beginning on or after
4        January 1, 1994, an amount equal to the total amount of
5        tax imposed and paid under subsections (a) and (b) of
6        Section 201 of this Act on grant amounts received by
7        the taxpayer under the Nursing Home Grant Assistance
8        Act during the taxpayer's taxable years 1992 and 1993;
9            (V) Beginning with tax years ending on or after
10        December 31, 1995 and ending with tax years ending on
11        or before December 31, 2004, an amount equal to the
12        amount paid by a taxpayer who is a self-employed
13        taxpayer, a partner of a partnership, or a shareholder
14        in a Subchapter S corporation for health insurance or
15        long-term care insurance for that taxpayer or that
16        taxpayer's spouse or dependents, to the extent that the
17        amount paid for that health insurance or long-term care
18        insurance may be deducted under Section 213 of the
19        Internal Revenue Code, has not been deducted on the
20        federal income tax return of the taxpayer, and does not
21        exceed the taxable income attributable to that
22        taxpayer's income, self-employment income, or
23        Subchapter S corporation income; except that no
24        deduction shall be allowed under this item (V) if the
25        taxpayer is eligible to participate in any health
26        insurance or long-term care insurance plan of an

 

 

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

 

 

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

 

 

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1        income under Section 529(c)(3)(C)(i) of the Internal
2        Revenue Code shall not be considered moneys
3        contributed under this subparagraph (Y). For taxable
4        years beginning on or after January 1, 2005, a maximum
5        of $10,000 contributed in the taxable year to (i) a
6        College Savings Pool account under Section 16.5 of the
7        State Treasurer Act or (ii) the Illinois Prepaid
8        Tuition Trust Fund, except that amounts excluded from
9        gross income under Section 529(c)(3)(C)(i) of the
10        Internal Revenue Code shall not be considered moneys
11        contributed under this subparagraph (Y). For purposes
12        of this subparagraph, contributions made by an
13        employer on behalf of an employee, or matching
14        contributions made by an employee, shall be treated as
15        made by the employee. This subparagraph (Y) is exempt
16        from the provisions of Section 250;
17            (Z) 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 (Z) is exempt from the provisions of
26        Section 250;

 

 

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1            (AA) If the taxpayer sells, transfers, abandons,
2        or otherwise disposes of property for which the
3        taxpayer was required in any taxable year to make an
4        addition modification under subparagraph (D-15), then
5        an amount equal to 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-15), 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 (AA) is exempt from the
17        provisions of Section 250;
18            (BB) Any amount included in adjusted gross income,
19        other than salary, received by a driver in a
20        ridesharing arrangement using a motor vehicle;
21            (CC) The amount of (i) any interest income (net of
22        the deductions allocable thereto) taken into account
23        for the taxable year with respect to a transaction with
24        a taxpayer that is required to make an addition
25        modification with respect to such transaction under
26        Section 203(a)(2)(D-17), 203(b)(2)(E-12),

 

 

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

 

 

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1        addition modification required to be made for the same
2        taxable year under Section 203(a)(2)(D-17) for
3        interest paid, accrued, or incurred, directly or
4        indirectly, to the same person. This subparagraph (DD)
5        is exempt from the provisions of Section 250;
6            (EE) An amount equal to the income from intangible
7        property taken into account for the taxable year (net
8        of the 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(a)(2)(D-18) for
23        intangible expenses and costs paid, accrued, or
24        incurred, directly or indirectly, to the same foreign
25        person. This subparagraph (EE) is exempt from the
26        provisions of Section 250;

 

 

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1            (FF) An amount equal to any amount awarded to the
2        taxpayer during the taxable year by the Court of Claims
3        under subsection (c) of Section 8 of the Court of
4        Claims Act for time unjustly served in a State prison.
5        This subparagraph (FF) is exempt from the provisions of
6        Section 250; and
7            (GG) For taxable years ending on or after December
8        31, 2011, in the case of a taxpayer who was required to
9        add back any insurance premiums under Section
10        203(a)(2)(D-19), such taxpayer may elect to subtract
11        that part of a reimbursement received from the
12        insurance company equal to the amount of the expense or
13        loss (including expenses incurred by the insurance
14        company) that would have been taken into account as a
15        deduction for federal income tax purposes if the
16        expense or loss had been uninsured. If a taxpayer makes
17        the election provided for by this subparagraph (GG),
18        the insurer to which the premiums were paid must add
19        back to income the amount subtracted by the taxpayer
20        pursuant to this subparagraph (GG). This subparagraph
21        (GG) is exempt from the provisions of Section 250.
 
22    (b) Corporations.
23        (1) In general. In the case of a corporation, base
24    income means an amount equal to the taxpayer's taxable
25    income for the taxable year as modified by paragraph (2).

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        directly or indirectly paid, incurred, or accrued. The
2        preceding sentence does not apply to the extent that
3        the same dividends caused a reduction to the addition
4        modification required under Section 203(b)(2)(E-12) or
5        Section 203(b)(2)(E-13) of this Act;
6            (E-15) For taxable years beginning after December
7        31, 2008, any deduction for dividends paid by a captive
8        real estate investment trust that is allowed to a real
9        estate investment trust under Section 857(b)(2)(B) of
10        the Internal Revenue Code for dividends paid;
11            (E-16) An amount equal to the credit allowable to
12        the taxpayer under Section 218(a) of this Act,
13        determined without regard to Section 218(c) of this
14        Act;
15    and by deducting from the total so obtained the sum of the
16    following amounts:
17            (F) An amount equal to the amount of any tax
18        imposed by this Act which was refunded to the taxpayer
19        and included in such total for the taxable year;
20            (G) An amount equal to any amount included in such
21        total under Section 78 of the Internal Revenue Code;
22            (H) In the case of a regulated investment company,
23        an amount equal to the amount of exempt interest
24        dividends as defined in subsection (b) (5) of Section
25        852 of the Internal Revenue Code, paid to shareholders
26        for the taxable year;

 

 

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1            (I) With the exception of any amounts subtracted
2        under subparagraph (J), an amount equal to the sum of
3        all amounts disallowed as deductions by (i) Sections
4        171(a) (2), and 265(a)(2) and amounts disallowed as
5        interest expense by Section 291(a)(3) of the Internal
6        Revenue Code, and all amounts of expenses allocable to
7        interest and disallowed as deductions by Section
8        265(a)(1) of the Internal Revenue Code; and (ii) for
9        taxable years ending on or after August 13, 1999,
10        Sections 171(a)(2), 265, 280C, 291(a)(3), and
11        832(b)(5)(B)(i) of the Internal Revenue Code, plus,
12        for tax years ending on or after December 31, 2011,
13        amounts disallowed as deductions by Section 45G(e)(3)
14        of the Internal Revenue Code and, for taxable years
15        ending on or after December 31, 2008, any amount
16        included in gross income under Section 87 of the
17        Internal Revenue Code and the policyholders' share of
18        tax-exempt interest of a life insurance company under
19        Section 807(a)(2)(B) of the Internal Revenue Code (in
20        the case of a life insurance company with gross income
21        from a decrease in reserves for the tax year) or
22        Section 807(b)(1)(B) of the Internal Revenue Code (in
23        the case of a life insurance company allowed a
24        deduction for an increase in reserves for the tax
25        year); the provisions of this subparagraph are exempt
26        from the provisions of Section 250;

 

 

SB3688 Engrossed- 128 -LRB097 17383 HLH 62585 b

1            (J) An amount equal to all amounts included in such
2        total which are exempt from taxation by this State
3        either by reason of its statutes or Constitution or by
4        reason of the Constitution, treaties or statutes of the
5        United States; provided that, in the case of any
6        statute of this State that exempts income derived from
7        bonds or other obligations from the tax imposed under
8        this Act, the amount exempted shall be the interest net
9        of bond premium amortization;
10            (K) An amount equal to those dividends included in
11        such total which were paid by a corporation which
12        conducts business operations in an Enterprise Zone or
13        zones created under the Illinois Enterprise Zone Act or
14        a River Edge Redevelopment Zone or zones created under
15        the River Edge Redevelopment Zone Act and conducts
16        substantially all of its operations in an Enterprise
17        Zone or zones or a River Edge Redevelopment Zone or
18        zones. This subparagraph (K) is exempt from the
19        provisions of Section 250;
20            (L) An amount equal to those dividends included in
21        such total that were paid by a corporation that
22        conducts business operations in a federally designated
23        Foreign Trade Zone or Sub-Zone and that is designated a
24        High Impact Business located in Illinois; provided
25        that dividends eligible for the deduction provided in
26        subparagraph (K) of paragraph 2 of this subsection

 

 

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

 

 

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

 

 

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1        taxable year to a designated zone organization to the
2        extent that the contribution (i) qualifies as a
3        charitable contribution under subsection (c) of
4        Section 170 of the Internal Revenue Code and (ii) must,
5        by its terms, be used for a project approved by the
6        Department of Commerce and Economic Opportunity under
7        Section 11 of the Illinois Enterprise Zone Act or under
8        Section 10-10 of the River Edge Redevelopment Zone Act.
9        This subparagraph (N) is exempt from the provisions of
10        Section 250;
11            (O) An amount equal to: (i) 85% for taxable years
12        ending on or before December 31, 1992, or, a percentage
13        equal to the percentage allowable under Section
14        243(a)(1) of the Internal Revenue Code of 1986 for
15        taxable years ending after December 31, 1992, of the
16        amount by which dividends included in taxable income
17        and received from a corporation that is not created or
18        organized under the laws of the United States or any
19        state or political subdivision thereof, including, for
20        taxable years ending on or after December 31, 1988,
21        dividends received or deemed received or paid or deemed
22        paid under Sections 951 through 965 of the Internal
23        Revenue Code, exceed the amount of the modification
24        provided under subparagraph (G) of paragraph (2) of
25        this subsection (b) which is related to such dividends,
26        and including, for taxable years ending on or after

 

 

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1        December 31, 2008, dividends received from a captive
2        real estate investment trust; plus (ii) 100% of the
3        amount by which dividends, included in taxable income
4        and received, including, for taxable years ending on or
5        after December 31, 1988, dividends received or deemed
6        received or paid or deemed paid under Sections 951
7        through 964 of the Internal Revenue Code and including,
8        for taxable years ending on or after December 31, 2008,
9        dividends received from a captive real estate
10        investment trust, from any such corporation specified
11        in clause (i) that would but for the provisions of
12        Section 1504 (b) (3) of the Internal Revenue Code be
13        treated as a member of the affiliated group which
14        includes the dividend recipient, exceed the amount of
15        the modification provided under subparagraph (G) of
16        paragraph (2) of this subsection (b) which is related
17        to such dividends. This subparagraph (O) is exempt from
18        the provisions of Section 250 of this Act;
19            (P) An amount equal to any contribution made to a
20        job training project established pursuant to the Tax
21        Increment Allocation Redevelopment Act;
22            (Q) An amount equal to the amount of the deduction
23        used to compute the federal income tax credit for
24        restoration of substantial amounts held under claim of
25        right for the taxable year pursuant to Section 1341 of
26        the Internal Revenue Code;

 

 

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1            (R) On and after July 20, 1999, in the case of an
2        attorney-in-fact with respect to whom an interinsurer
3        or a reciprocal insurer has made the election under
4        Section 835 of the Internal Revenue Code, 26 U.S.C.
5        835, an amount equal to the excess, if any, of the
6        amounts paid or incurred by that interinsurer or
7        reciprocal insurer in the taxable year to the
8        attorney-in-fact over the deduction allowed to that
9        interinsurer or reciprocal insurer with respect to the
10        attorney-in-fact under Section 835(b) of the Internal
11        Revenue Code for the taxable year; the provisions of
12        this subparagraph are exempt from the provisions of
13        Section 250;
14            (S) For taxable years ending on or after December
15        31, 1997, in the case of a Subchapter S corporation, an
16        amount equal to all amounts of income allocable to a
17        shareholder subject to the Personal Property Tax
18        Replacement Income Tax imposed by subsections (c) and
19        (d) of Section 201 of this Act, including amounts
20        allocable to organizations exempt from federal income
21        tax by reason of Section 501(a) of the Internal Revenue
22        Code. This subparagraph (S) is exempt from the
23        provisions of Section 250;
24            (T) For taxable years 2001 and thereafter, for the
25        taxable year in which the bonus depreciation deduction
26        is taken on the taxpayer's federal income tax return

 

 

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

 

 

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1        subparagraph in all taxable years for any one piece of
2        property may not exceed the amount of the bonus
3        depreciation deduction taken on that property on the
4        taxpayer's federal income tax return under subsection
5        (k) of Section 168 of the Internal Revenue Code. This
6        subparagraph (T) is exempt from the provisions of
7        Section 250;
8            (U) If the taxpayer sells, transfers, abandons, or
9        otherwise disposes of property for which the taxpayer
10        was required in any taxable year to make an addition
11        modification under subparagraph (E-10), then an amount
12        equal to that addition modification.
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 required in any taxable year to make an addition
18        modification under subparagraph (E-10), then an amount
19        equal to that addition modification.
20            The taxpayer is allowed to take the deduction under
21        this subparagraph only once with respect to any one
22        piece of property.
23            This subparagraph (U) is exempt from the
24        provisions of Section 250;
25            (V) The amount of: (i) any interest income (net of
26        the deductions allocable thereto) taken into account

 

 

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

 

 

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

 

 

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1        who would be a member of the same unitary business
2        group but for the fact that the person is prohibited
3        under Section 1501(a)(27) from being included in the
4        unitary business group because he or she is ordinarily
5        required to apportion business income under different
6        subsections of Section 304, but not to exceed the
7        addition modification required to be made for the same
8        taxable year under Section 203(b)(2)(E-13) for
9        intangible expenses and costs paid, accrued, or
10        incurred, directly or indirectly, to the same foreign
11        person. This subparagraph (X) is exempt from the
12        provisions of Section 250;
13            (Y) For taxable years ending on or after December
14        31, 2011, in the case of a taxpayer who was required to
15        add back any insurance premiums under Section
16        203(b)(2)(E-14), such taxpayer may elect to subtract
17        that part of a reimbursement received from the
18        insurance company equal to the amount of the expense or
19        loss (including expenses incurred by the insurance
20        company) that would have been taken into account as a
21        deduction for federal income tax purposes if the
22        expense or loss had been uninsured. If a taxpayer makes
23        the election provided for by this subparagraph (Y), the
24        insurer to which the premiums were paid must add back
25        to income the amount subtracted by the taxpayer
26        pursuant to this subparagraph (Y). This subparagraph

 

 

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1        (Y) is exempt from the provisions of Section 250; and
2            (Z) The difference between the nondeductible
3        controlled foreign corporation dividends under Section
4        965(e)(3) of the Internal Revenue Code over the taxable
5        income of the taxpayer, computed without regard to
6        Section 965(e)(2)(A) of the Internal Revenue Code, and
7        without regard to any net operating loss deduction.
8        This subparagraph (Z) is exempt from the provisions of
9        Section 250.
10        (3) Special rule. For purposes of paragraph (2) (A),
11    "gross income" in the case of a life insurance company, for
12    tax years ending on and after December 31, 1994, and prior
13    to December 31, 2011, shall mean the gross investment
14    income for the taxable year and, for tax years ending on or
15    after December 31, 2011, shall mean all amounts included in
16    life insurance gross income under Section 803(a)(3) of the
17    Internal Revenue Code.
 
18    (c) Trusts and estates.
19        (1) In general. In the case of a trust or estate, base
20    income means an amount equal to the taxpayer's taxable
21    income for the taxable year as modified by paragraph (2).
22        (2) Modifications. Subject to the provisions of
23    paragraph (3), the taxable income referred to in paragraph
24    (1) shall be modified by adding thereto the sum of the
25    following amounts:

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        imposed by this Act which was refunded to the taxpayer
2        and included in such total for the taxable year;
3            (K) An amount equal to all amounts included in
4        taxable income as modified by subparagraphs (A), (B),
5        (C), (D), (E), (F) and (G) which are exempt from
6        taxation by this State either by reason of its statutes
7        or Constitution or by reason of the Constitution,
8        treaties or statutes of the United States; provided
9        that, in the case of any statute of this State that
10        exempts income derived from bonds or other obligations
11        from the tax imposed under this Act, the amount
12        exempted shall be the interest net of bond premium
13        amortization;
14            (L) With the exception of any amounts subtracted
15        under subparagraph (K), an amount equal to the sum of
16        all amounts disallowed as deductions by (i) Sections
17        171(a) (2) and 265(a)(2) of the Internal Revenue Code,
18        and all amounts of expenses allocable to interest and
19        disallowed as deductions by Section 265(1) of the
20        Internal Revenue Code; and (ii) for taxable years
21        ending on or after August 13, 1999, Sections 171(a)(2),
22        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue
23        Code, plus, (iii) for taxable years ending on or after
24        December 31, 2011, Section 45G(e)(3) of the Internal
25        Revenue Code and, for taxable years ending on or after
26        December 31, 2008, any amount included in gross income

 

 

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1        under Section 87 of the Internal Revenue Code; the
2        provisions of this subparagraph are exempt from the
3        provisions of Section 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;
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;
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            (W) in the case of an estate, an amount equal to
20        all amounts included in such total pursuant to the
21        provisions of Section 111 of the Internal Revenue Code
22        as a recovery of items previously deducted by the
23        decedent from adjusted gross income in the computation
24        of taxable income. This subparagraph (W) is exempt from
25        Section 250;
26            (X) an amount equal to the refund included in such

 

 

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1        total of any tax deducted for federal income tax
2        purposes, to the extent that deduction was added back
3        under subparagraph (F). This subparagraph (X) is
4        exempt from the provisions of Section 250; and
5            (Y) For taxable years ending on or after December
6        31, 2011, in the case of a taxpayer who was required to
7        add back any insurance premiums under Section
8        203(c)(2)(G-14), such taxpayer may elect to subtract
9        that part of a reimbursement received from the
10        insurance company equal to the amount of the expense or
11        loss (including expenses incurred by the insurance
12        company) that would have been taken into account as a
13        deduction for federal income tax purposes if the
14        expense or loss had been uninsured. If a taxpayer makes
15        the election provided for by this subparagraph (Y), the
16        insurer to which the premiums were paid must add back
17        to income the amount subtracted by the taxpayer
18        pursuant to this subparagraph (Y). This subparagraph
19        (Y) is exempt from the provisions of Section 250.
20        (3) Limitation. The amount of any modification
21    otherwise required under this subsection shall, under
22    regulations prescribed by the Department, be adjusted by
23    any amounts included therein which were properly paid,
24    credited, or required to be distributed, or permanently set
25    aside for charitable purposes pursuant to Internal Revenue
26    Code Section 642(c) during the taxable year.
 

 

 

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1    (d) Partnerships.
2        (1) In general. In the case of a partnership, base
3    income means an amount equal to the taxpayer's taxable
4    income for the taxable year as modified by paragraph (2).
5        (2) Modifications. The taxable income referred to in
6    paragraph (1) shall be modified by adding thereto the sum
7    of the following amounts:
8            (A) An amount equal to all amounts paid or accrued
9        to the taxpayer as interest or dividends during the
10        taxable year to the extent excluded from gross income
11        in the computation of taxable income;
12            (B) An amount equal to the amount of tax imposed by
13        this Act to the extent deducted from gross income for
14        the taxable year;
15            (C) The amount of deductions allowed to the
16        partnership pursuant to Section 707 (c) of the Internal
17        Revenue Code in calculating its taxable income;
18            (D) An amount equal to the amount of the capital
19        gain deduction allowable under the Internal Revenue
20        Code, to the extent deducted from gross income in the
21        computation of taxable income;
22            (D-5) For taxable years 2001 and thereafter, an
23        amount equal to the bonus depreciation deduction taken
24        on the taxpayer's federal income tax return for the
25        taxable year under subsection (k) of Section 168 of the

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        prohibited under Section 1501(a)(27) from being
2        included in the unitary business group because he or
3        she is ordinarily required to apportion business
4        income under different subsections of Section 304. The
5        addition modification required by this subparagraph
6        shall be reduced to the extent that dividends were
7        included in base income of the unitary group for the
8        same taxable year and received by the taxpayer or by a
9        member of the taxpayer's unitary business group
10        (including amounts included in gross income under
11        Sections 951 through 964 of the Internal Revenue Code
12        and amounts included in gross income under Section 78
13        of the Internal Revenue Code) with respect to the stock
14        of the same person to whom the premiums and costs were
15        directly or indirectly paid, incurred, or accrued. The
16        preceding sentence does not apply to the extent that
17        the same dividends caused a reduction to the addition
18        modification required under Section 203(d)(2)(D-7) or
19        Section 203(d)(2)(D-8) of this Act;
20            (D-10) An amount equal to the credit allowable to
21        the taxpayer under Section 218(a) of this Act,
22        determined without regard to Section 218(c) of this
23        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 income of the partnership which
15        constitutes personal service income as defined in
16        Section 1348 (b) (1) of the Internal Revenue Code (as
17        in effect December 31, 1981) or a reasonable allowance
18        for compensation paid or accrued for services rendered
19        by partners to the partnership, whichever is greater;
20        this subparagraph (H) is exempt from the provisions of
21        Section 250;
22            (I) An amount equal to all amounts of income
23        distributable to an entity subject to the Personal
24        Property Tax Replacement Income Tax imposed by
25        subsections (c) and (d) of Section 201 of this Act
26        including amounts distributable to organizations

 

 

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1        exempt from federal income tax by reason of Section
2        501(a) of the Internal Revenue Code; this subparagraph
3        (I) is exempt from the provisions of Section 250;
4            (J) With the exception of any amounts subtracted
5        under subparagraph (G), an amount equal to the sum of
6        all amounts disallowed as deductions by (i) Sections
7        171(a) (2), and 265(2) of the Internal Revenue Code,
8        and all amounts of expenses allocable to interest and
9        disallowed as deductions by Section 265(1) of the
10        Internal Revenue Code; and (ii) for taxable years
11        ending on or after August 13, 1999, Sections 171(a)(2),
12        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue
13        Code, plus, (iii) for taxable years ending on or after
14        December 31, 2011, Section 45G(e)(3) of the Internal
15        Revenue Code and, for taxable years ending on or after
16        December 31, 2008, any amount included in gross income
17        under Section 87 of the Internal Revenue Code; the
18        provisions of this subparagraph are exempt from the
19        provisions of Section 250;
20            (K) An amount equal to those dividends included in
21        such total which were paid by a corporation which
22        conducts business operations in an Enterprise Zone or
23        zones created under the Illinois Enterprise Zone Act,
24        enacted by the 82nd General Assembly, or a River Edge
25        Redevelopment Zone or zones created under the River
26        Edge Redevelopment Zone Act and conducts substantially

 

 

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1        all of its operations in an Enterprise Zone or Zones or
2        from a River Edge Redevelopment Zone or zones. This
3        subparagraph (K) is exempt from the provisions of
4        Section 250;
5            (L) An amount equal to any contribution made to a
6        job training project established pursuant to the Real
7        Property Tax Increment Allocation Redevelopment Act;
8            (M) An amount equal to those dividends included in
9        such total that were paid by a corporation that
10        conducts business operations in a federally designated
11        Foreign Trade Zone or Sub-Zone and that is designated a
12        High Impact Business located in Illinois; provided
13        that dividends eligible for the deduction provided in
14        subparagraph (K) of paragraph (2) of this subsection
15        shall not be eligible for the deduction provided under
16        this subparagraph (M);
17            (N) An amount equal to the amount of the deduction
18        used to compute the federal income tax credit for
19        restoration of substantial amounts held under claim of
20        right for the taxable year pursuant to Section 1341 of
21        the Internal Revenue Code;
22            (O) For taxable years 2001 and thereafter, for the
23        taxable year in which the bonus depreciation deduction
24        is taken on the taxpayer's federal income tax return
25        under subsection (k) of Section 168 of the Internal
26        Revenue Code and for each applicable taxable year

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        This subparagraph (S) is exempt from Section 250; and
2            (T) For taxable years ending on or after December
3        31, 2011, in the case of a taxpayer who was required to
4        add back any insurance premiums under Section
5        203(d)(2)(D-9), such taxpayer may elect to subtract
6        that part of a reimbursement received from the
7        insurance company equal to the amount of the expense or
8        loss (including expenses incurred by the insurance
9        company) that would have been taken into account as a
10        deduction for federal income tax purposes if the
11        expense or loss had been uninsured. If a taxpayer makes
12        the election provided for by this subparagraph (T), the
13        insurer to which the premiums were paid must add back
14        to income the amount subtracted by the taxpayer
15        pursuant to this subparagraph (T). This subparagraph
16        (T) is exempt from the provisions of Section 250.
 
17    (e) Gross income; adjusted gross income; taxable income.
18        (1) In general. Subject to the provisions of paragraph
19    (2) and subsection (b) (3), for purposes of this Section
20    and Section 803(e), a taxpayer's gross income, adjusted
21    gross income, or taxable income for the taxable year shall
22    mean the amount of gross income, adjusted gross income or
23    taxable income properly reportable for federal income tax
24    purposes for the taxable year under the provisions of the
25    Internal Revenue Code. Taxable income may be less than

 

 

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

 

 

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

 

 

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1        for the taxable year and each preceding taxable year
2        for which it was a member of an affiliated group. For
3        purposes of this subparagraph, the taxpayer's separate
4        taxable income shall be determined as if the election
5        provided by Section 243(b) (2) of the Internal Revenue
6        Code had been in effect for all such years;
7            (F) Cooperatives. In the case of a cooperative
8        corporation or association, the taxable income of such
9        organization determined in accordance with the
10        provisions of Section 1381 through 1388 of the Internal
11        Revenue Code, but without regard to the prohibition
12        against offsetting losses from patronage activities
13        against income from nonpatronage activities; except
14        that a cooperative corporation or association may make
15        an election to follow its federal income tax treatment
16        of patronage losses and nonpatronage losses. In the
17        event such election is made, such losses shall be
18        computed and carried over in a manner consistent with
19        subsection (a) of Section 207 of this Act and
20        apportioned by the apportionment factor reported by
21        the cooperative on its Illinois income tax return filed
22        for the taxable year in which the losses are incurred.
23        The election shall be effective for all taxable years
24        with original returns due on or after the date of the
25        election. In addition, the cooperative may file an
26        amended return or returns, as allowed under this Act,

 

 

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1        to provide that the election shall be effective for
2        losses incurred or carried forward for taxable years
3        occurring prior to the date of the election. Once made,
4        the election may only be revoked upon approval of the
5        Director. The Department shall adopt rules setting
6        forth requirements for documenting the elections and
7        any resulting Illinois net loss and the standards to be
8        used by the Director in evaluating requests to revoke
9        elections. Public Act 96-932 is declaratory of
10        existing law;
11            (G) Subchapter S corporations. In the case of: (i)
12        a Subchapter S corporation for which there is in effect
13        an election for the taxable year under Section 1362 of
14        the Internal Revenue Code, the taxable income of such
15        corporation determined in accordance with Section
16        1363(b) of the Internal Revenue Code, except that
17        taxable income shall take into account those items
18        which are required by Section 1363(b)(1) of the
19        Internal Revenue Code to be separately stated; and (ii)
20        a Subchapter S corporation for which there is in effect
21        a federal election to opt out of the provisions of the
22        Subchapter S Revision Act of 1982 and have applied
23        instead the prior federal Subchapter S rules as in
24        effect on July 1, 1982, the taxable income of such
25        corporation determined in accordance with the federal
26        Subchapter S rules as in effect on July 1, 1982; and

 

 

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

 

 

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

 

 

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

 

 

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1year, or in the amount of such items entering into the
2computation of base income and net income under this Act for
3such taxable year, whether in respect of property values as of
4August 1, 1969 or otherwise.
5(Source: P.A. 96-45, eff. 7-15-09; 96-120, eff. 8-4-09; 96-198,
6eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff. 8-14-09;
796-835, eff. 12-16-09; 96-932, eff. 1-1-11; 96-935, eff.
86-21-10; 96-1214, eff. 7-22-10; 97-333, eff. 8-12-11; 97-507,
9eff. 8-23-11.)
 
10    Section 95. No acceleration or delay. Where this Act makes
11changes in a statute that is represented in this Act by text
12that is not yet or no longer in effect (for example, a Section
13represented by multiple versions), the use of that text does
14not accelerate or delay the taking effect of (i) the changes
15made by this Act or (ii) provisions derived from any other
16Public Act.
 
17    Section 99. Effective date. This Act takes effect upon
18becoming law.