99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB3086

 

Introduced , by Rep. John E. Bradley

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/1501  from Ch. 120, par. 15-1501

    Amends the Illinois Income Tax Act. Provides that the voting power or value of the beneficial interest or shares of a real estate investment trust does not include any voting power or value of beneficial interest or or shares in a real estate investment trust held directly or indirectly in a segregated asset account by a life insurance company for the benefit of persons who are immune or exempt from taxation under subtitle A of the Internal Revenue Code.


LRB099 10675 HLH 30934 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3086LRB099 10675 HLH 30934 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 1501 as follows:
 
6    (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)
7    Sec. 1501. Definitions.
8    (a) In general. When used in this Act, where not otherwise
9distinctly expressed or manifestly incompatible with the
10intent thereof:
11        (1) Business income. The term "business income" means
12    all income that may be treated as apportionable business
13    income under the Constitution of the United States.
14    Business income is net of the deductions allocable thereto.
15    Such term does not include compensation or the deductions
16    allocable thereto. For each taxable year beginning on or
17    after January 1, 2003, a taxpayer may elect to treat all
18    income other than compensation as business income. This
19    election shall be made in accordance with rules adopted by
20    the Department and, once made, shall be irrevocable.
21        (1.5) Captive real estate investment trust:
22            (A) The term "captive real estate investment
23        trust" means a corporation, trust, or association:

 

 

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1                (i) that is considered a real estate
2            investment trust for the taxable year under
3            Section 856 of the Internal Revenue Code;
4                (ii) the certificates of beneficial interest
5            or shares of which are not regularly traded on an
6            established securities market; and
7                (iii) of which more than 50% of the voting
8            power or value of the beneficial interest or
9            shares, at any time during the last half of the
10            taxable year, is owned or controlled, directly,
11            indirectly, or constructively, by a single
12            corporation.
13            (B) The term "captive real estate investment
14        trust" does not include:
15                (i) a real estate investment trust of which
16            more than 50% of the voting power or value of the
17            beneficial interest or shares is owned or
18            controlled, directly, indirectly, or
19            constructively, by:
20                    (a) a real estate investment trust, other
21                than a captive real estate investment trust;
22                    (b) a person who is exempt from taxation
23                under Section 501 of the Internal Revenue Code,
24                and who is not required to treat income
25                received from the real estate investment trust
26                as unrelated business taxable income under

 

 

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1                Section 512 of the Internal Revenue Code;
2                    (c) a listed Australian property trust, if
3                no more than 50% of the voting power or value
4                of the beneficial interest or shares of that
5                trust, at any time during the last half of the
6                taxable year, is owned or controlled, directly
7                or indirectly, by a single person;
8                    (d) an entity organized as a trust,
9                provided a listed Australian property trust
10                described in subparagraph (c) owns or
11                controls, directly or indirectly, or
12                constructively, 75% or more of the voting power
13                or value of the beneficial interests or shares
14                of such entity; or
15                    (e) an entity that is organized outside of
16                the laws of the United States and that
17                satisfies all of the following criteria:
18                        (1) at least 75% of the entity's total
19                    asset value at the close of its taxable
20                    year is represented by real estate assets
21                    (as defined in Section 856(c)(5)(B) of the
22                    Internal Revenue Code, thereby including
23                    shares or certificates of beneficial
24                    interest in any real estate investment
25                    trust), cash and cash equivalents, and
26                    U.S. Government securities;

 

 

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1                        (2) the entity is not subject to tax on
2                    amounts that are distributed to its
3                    beneficial owners or is exempt from
4                    entity-level taxation;
5                        (3) the entity distributes at least
6                    85% of its taxable income (as computed in
7                    the jurisdiction in which it is organized)
8                    to the holders of its shares or
9                    certificates of beneficial interest on an
10                    annual basis;
11                        (4) either (i) the shares or
12                    beneficial interests of the entity are
13                    regularly traded on an established
14                    securities market or (ii) not more than 10%
15                    of the voting power or value in the entity
16                    is held, directly, indirectly, or
17                    constructively, by a single entity or
18                    individual; and
19                        (5) the entity is organized in a
20                    country that has entered into a tax treaty
21                    with the United States; or
22                (ii) during its first taxable year for which it
23            elects to be treated as a real estate investment
24            trust under Section 856(c)(1) of the Internal
25            Revenue Code, a real estate investment trust the
26            certificates of beneficial interest or shares of

 

 

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1            which are not regularly traded on an established
2            securities market, but only if the certificates of
3            beneficial interest or shares of the real estate
4            investment trust are regularly traded on an
5            established securities market prior to the earlier
6            of the due date (including extensions) for filing
7            its return under this Act for that first taxable
8            year or the date it actually files that return.
9            (C) For the purposes of this subsection (1.5), the
10        constructive ownership rules prescribed under Section
11        318(a) of the Internal Revenue Code, as modified by
12        Section 856(d)(5) of the Internal Revenue Code, apply
13        in determining the ownership of stock, assets, or net
14        profits of any person.
15            (D) For the purposes of this item (1.5), the voting
16        power or value of the beneficial interest or shares of
17        a real estate investment trust does not include any
18        voting power or value of beneficial interest or shares
19        in a real estate investment trust held directly or
20        indirectly in a segregated asset account by a life
21        insurance company (as described in Section 817 of the
22        Internal Revenue Code) to the extent such voting power
23        or value is for the benefit of entities or persons who
24        are either immune from taxation or exempt from taxation
25        under subtitle A of the Internal Revenue Code. The
26        changes to this item (1.5) made by this amendatory Act

 

 

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1        of the 99th General Assembly are declarative of
2        existing law and do not change the substantive
3        operation of this item (1.5).
4        (2) Commercial domicile. The term "commercial
5    domicile" means the principal place from which the trade or
6    business of the taxpayer is directed or managed.
7        (3) Compensation. The term "compensation" means wages,
8    salaries, commissions and any other form of remuneration
9    paid to employees for personal services.
10        (4) Corporation. The term "corporation" includes
11    associations, joint-stock companies, insurance companies
12    and cooperatives. Any entity, including a limited
13    liability company formed under the Illinois Limited
14    Liability Company Act, shall be treated as a corporation if
15    it is so classified for federal income tax purposes.
16        (5) Department. The term "Department" means the
17    Department of Revenue of this State.
18        (6) Director. The term "Director" means the Director of
19    Revenue of this State.
20        (7) Fiduciary. The term "fiduciary" means a guardian,
21    trustee, executor, administrator, receiver, or any person
22    acting in any fiduciary capacity for any person.
23        (8) Financial organization.
24            (A) The term "financial organization" means any
25        bank, bank holding company, trust company, savings
26        bank, industrial bank, land bank, safe deposit

 

 

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1        company, private banker, savings and loan association,
2        building and loan association, credit union, currency
3        exchange, cooperative bank, small loan company, sales
4        finance company, investment company, or any person
5        which is owned by a bank or bank holding company. For
6        the purpose of this Section a "person" will include
7        only those persons which a bank holding company may
8        acquire and hold an interest in, directly or
9        indirectly, under the provisions of the Bank Holding
10        Company Act of 1956 (12 U.S.C. 1841, et seq.), except
11        where interests in any person must be disposed of
12        within certain required time limits under the Bank
13        Holding Company Act of 1956.
14            (B) For purposes of subparagraph (A) of this
15        paragraph, the term "bank" includes (i) any entity that
16        is regulated by the Comptroller of the Currency under
17        the National Bank Act, or by the Federal Reserve Board,
18        or by the Federal Deposit Insurance Corporation and
19        (ii) any federally or State chartered bank operating as
20        a credit card bank.
21            (C) For purposes of subparagraph (A) of this
22        paragraph, the term "sales finance company" has the
23        meaning provided in the following item (i) or (ii):
24                (i) A person primarily engaged in one or more
25            of the following businesses: the business of
26            purchasing customer receivables, the business of

 

 

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1            making loans upon the security of customer
2            receivables, the business of making loans for the
3            express purpose of funding purchases of tangible
4            personal property or services by the borrower, or
5            the business of finance leasing. For purposes of
6            this item (i), "customer receivable" means:
7                    (a) a retail installment contract or
8                retail charge agreement within the meaning of
9                the Sales Finance Agency Act, the Retail
10                Installment Sales Act, or the Motor Vehicle
11                Retail Installment Sales Act;
12                    (b) an installment, charge, credit, or
13                similar contract or agreement arising from the
14                sale of tangible personal property or services
15                in a transaction involving a deferred payment
16                price payable in one or more installments
17                subsequent to the sale; or
18                    (c) the outstanding balance of a contract
19                or agreement described in provisions (a) or (b)
20                of this item (i).
21                A customer receivable need not provide for
22            payment of interest on deferred payments. A sales
23            finance company may purchase a customer receivable
24            from, or make a loan secured by a customer
25            receivable to, the seller in the original
26            transaction or to a person who purchased the

 

 

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1            customer receivable directly or indirectly from
2            that seller.
3                (ii) A corporation meeting each of the
4            following criteria:
5                    (a) the corporation must be a member of an
6                "affiliated group" within the meaning of
7                Section 1504(a) of the Internal Revenue Code,
8                determined without regard to Section 1504(b)
9                of the Internal Revenue Code;
10                    (b) more than 50% of the gross income of
11                the corporation for the taxable year must be
12                interest income derived from qualifying loans.
13                A "qualifying loan" is a loan made to a member
14                of the corporation's affiliated group that
15                originates customer receivables (within the
16                meaning of item (i)) or to whom customer
17                receivables originated by a member of the
18                affiliated group have been transferred, to the
19                extent the average outstanding balance of
20                loans from that corporation to members of its
21                affiliated group during the taxable year do not
22                exceed the limitation amount for that
23                corporation. The "limitation amount" for a
24                corporation is the average outstanding
25                balances during the taxable year of customer
26                receivables (within the meaning of item (i))

 

 

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1                originated by all members of the affiliated
2                group. If the average outstanding balances of
3                the loans made by a corporation to members of
4                its affiliated group exceed the limitation
5                amount, the interest income of that
6                corporation from qualifying loans shall be
7                equal to its interest income from loans to
8                members of its affiliated groups times a
9                fraction equal to the limitation amount
10                divided by the average outstanding balances of
11                the loans made by that corporation to members
12                of its affiliated group;
13                    (c) the total of all shareholder's equity
14                (including, without limitation, paid-in
15                capital on common and preferred stock and
16                retained earnings) of the corporation plus the
17                total of all of its loans, advances, and other
18                obligations payable or owed to members of its
19                affiliated group may not exceed 20% of the
20                total assets of the corporation at any time
21                during the tax year; and
22                    (d) more than 50% of all interest-bearing
23                obligations of the affiliated group payable to
24                persons outside the group determined in
25                accordance with generally accepted accounting
26                principles must be obligations of the

 

 

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1                corporation.
2            This amendatory Act of the 91st General Assembly is
3        declaratory of existing law.
4            (D) Subparagraphs (B) and (C) of this paragraph are
5        declaratory of existing law and apply retroactively,
6        for all tax years beginning on or before December 31,
7        1996, to all original returns, to all amended returns
8        filed no later than 30 days after the effective date of
9        this amendatory Act of 1996, and to all notices issued
10        on or before the effective date of this amendatory Act
11        of 1996 under subsection (a) of Section 903, subsection
12        (a) of Section 904, subsection (e) of Section 909, or
13        Section 912. A taxpayer that is a "financial
14        organization" that engages in any transaction with an
15        affiliate shall be a "financial organization" for all
16        purposes of this Act.
17            (E) For all tax years beginning on or before
18        December 31, 1996, a taxpayer that falls within the
19        definition of a "financial organization" under
20        subparagraphs (B) or (C) of this paragraph, but who
21        does not fall within the definition of a "financial
22        organization" under the Proposed Regulations issued by
23        the Department of Revenue on July 19, 1996, may
24        irrevocably elect to apply the Proposed Regulations
25        for all of those years as though the Proposed
26        Regulations had been lawfully promulgated, adopted,

 

 

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1        and in effect for all of those years. For purposes of
2        applying subparagraphs (B) or (C) of this paragraph to
3        all of those years, the election allowed by this
4        subparagraph applies only to the taxpayer making the
5        election and to those members of the taxpayer's unitary
6        business group who are ordinarily required to
7        apportion business income under the same subsection of
8        Section 304 of this Act as the taxpayer making the
9        election. No election allowed by this subparagraph
10        shall be made under a claim filed under subsection (d)
11        of Section 909 more than 30 days after the effective
12        date of this amendatory Act of 1996.
13            (F) Finance Leases. For purposes of this
14        subsection, a finance lease shall be treated as a loan
15        or other extension of credit, rather than as a lease,
16        regardless of how the transaction is characterized for
17        any other purpose, including the purposes of any
18        regulatory agency to which the lessor is subject. A
19        finance lease is any transaction in the form of a lease
20        in which the lessee is treated as the owner of the
21        leased asset entitled to any deduction for
22        depreciation allowed under Section 167 of the Internal
23        Revenue Code.
24        (9) Fiscal year. The term "fiscal year" means an
25    accounting period of 12 months ending on the last day of
26    any month other than December.

 

 

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1        (9.5) Fixed place of business. The term "fixed place of
2    business" has the same meaning as that term is given in
3    Section 864 of the Internal Revenue Code and the related
4    Treasury regulations.
5        (10) Includes and including. The terms "includes" and
6    "including" when used in a definition contained in this Act
7    shall not be deemed to exclude other things otherwise
8    within the meaning of the term defined.
9        (11) Internal Revenue Code. The term "Internal Revenue
10    Code" means the United States Internal Revenue Code of 1954
11    or any successor law or laws relating to federal income
12    taxes in effect for the taxable year.
13        (11.5) Investment partnership.
14            (A) The term "investment partnership" means any
15        entity that is treated as a partnership for federal
16        income tax purposes that meets the following
17        requirements:
18                (i) no less than 90% of the partnership's cost
19            of its total assets consists of qualifying
20            investment securities, deposits at banks or other
21            financial institutions, and office space and
22            equipment reasonably necessary to carry on its
23            activities as an investment partnership;
24                (ii) no less than 90% of its gross income
25            consists of interest, dividends, and gains from
26            the sale or exchange of qualifying investment

 

 

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1            securities; and
2                (iii) the partnership is not a dealer in
3            qualifying investment securities.
4            (B) For purposes of this paragraph (11.5), the term
5        "qualifying investment securities" includes all of the
6        following:
7                (i) common stock, including preferred or debt
8            securities convertible into common stock, and
9            preferred stock;
10                (ii) bonds, debentures, and other debt
11            securities;
12                (iii) foreign and domestic currency deposits
13            secured by federal, state, or local governmental
14            agencies;
15                (iv) mortgage or asset-backed securities
16            secured by federal, state, or local governmental
17            agencies;
18                (v) repurchase agreements and loan
19            participations;
20                (vi) foreign currency exchange contracts and
21            forward and futures contracts on foreign
22            currencies;
23                (vii) stock and bond index securities and
24            futures contracts and other similar financial
25            securities and futures contracts on those
26            securities;

 

 

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1                (viii) options for the purchase or sale of any
2            of the securities, currencies, contracts, or
3            financial instruments described in items (i) to
4            (vii), inclusive;
5                (ix) regulated futures contracts;
6                (x) commodities (not described in Section
7            1221(a)(1) of the Internal Revenue Code) or
8            futures, forwards, and options with respect to
9            such commodities, provided, however, that any item
10            of a physical commodity to which title is actually
11            acquired in the partnership's capacity as a dealer
12            in such commodity shall not be a qualifying
13            investment security;
14                (xi) derivatives; and
15                (xii) a partnership interest in another
16            partnership that is an investment partnership.
17        (12) Mathematical error. The term "mathematical error"
18    includes the following types of errors, omissions, or
19    defects in a return filed by a taxpayer which prevents
20    acceptance of the return as filed for processing:
21            (A) arithmetic errors or incorrect computations on
22        the return or supporting schedules;
23            (B) entries on the wrong lines;
24            (C) omission of required supporting forms or
25        schedules or the omission of the information in whole
26        or in part called for thereon; and

 

 

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1            (D) an attempt to claim, exclude, deduct, or
2        improperly report, in a manner directly contrary to the
3        provisions of the Act and regulations thereunder any
4        item of income, exemption, deduction, or credit.
5        (13) Nonbusiness income. The term "nonbusiness income"
6    means all income other than business income or
7    compensation.
8        (14) Nonresident. The term "nonresident" means a
9    person who is not a resident.
10        (15) Paid, incurred and accrued. The terms "paid",
11    "incurred" and "accrued" shall be construed according to
12    the method of accounting upon the basis of which the
13    person's base income is computed under this Act.
14        (16) Partnership and partner. The term "partnership"
15    includes a syndicate, group, pool, joint venture or other
16    unincorporated organization, through or by means of which
17    any business, financial operation, or venture is carried
18    on, and which is not, within the meaning of this Act, a
19    trust or estate or a corporation; and the term "partner"
20    includes a member in such syndicate, group, pool, joint
21    venture or organization.
22        The term "partnership" includes any entity, including
23    a limited liability company formed under the Illinois
24    Limited Liability Company Act, classified as a partnership
25    for federal income tax purposes.
26        The term "partnership" does not include a syndicate,

 

 

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1    group, pool, joint venture, or other unincorporated
2    organization established for the sole purpose of playing
3    the Illinois State Lottery.
4        (17) Part-year resident. The term "part-year resident"
5    means an individual who became a resident during the
6    taxable year or ceased to be a resident during the taxable
7    year. Under Section 1501(a)(20)(A)(i) residence commences
8    with presence in this State for other than a temporary or
9    transitory purpose and ceases with absence from this State
10    for other than a temporary or transitory purpose. Under
11    Section 1501(a)(20)(A)(ii) residence commences with the
12    establishment of domicile in this State and ceases with the
13    establishment of domicile in another State.
14        (18) Person. The term "person" shall be construed to
15    mean and include an individual, a trust, estate,
16    partnership, association, firm, company, corporation,
17    limited liability company, or fiduciary. For purposes of
18    Section 1301 and 1302 of this Act, a "person" means (i) an
19    individual, (ii) a corporation, (iii) an officer, agent, or
20    employee of a corporation, (iv) a member, agent or employee
21    of a partnership, or (v) a member, manager, employee,
22    officer, director, or agent of a limited liability company
23    who in such capacity commits an offense specified in
24    Section 1301 and 1302.
25        (18A) Records. The term "records" includes all data
26    maintained by the taxpayer, whether on paper, microfilm,

 

 

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1    microfiche, or any type of machine-sensible data
2    compilation.
3        (19) Regulations. The term "regulations" includes
4    rules promulgated and forms prescribed by the Department.
5        (20) Resident. The term "resident" means:
6            (A) an individual (i) who is in this State for
7        other than a temporary or transitory purpose during the
8        taxable year; or (ii) who is domiciled in this State
9        but is absent from the State for a temporary or
10        transitory purpose during the taxable year;
11            (B) The estate of a decedent who at his or her
12        death was domiciled in this State;
13            (C) A trust created by a will of a decedent who at
14        his death was domiciled in this State; and
15            (D) An irrevocable trust, the grantor of which was
16        domiciled in this State at the time such trust became
17        irrevocable. For purpose of this subparagraph, a trust
18        shall be considered irrevocable to the extent that the
19        grantor is not treated as the owner thereof under
20        Sections 671 through 678 of the Internal Revenue Code.
21        (21) Sales. The term "sales" means all gross receipts
22    of the taxpayer not allocated under Sections 301, 302 and
23    303.
24        (22) State. The term "state" when applied to a
25    jurisdiction other than this State means any state of the
26    United States, the District of Columbia, the Commonwealth

 

 

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1    of Puerto Rico, any Territory or Possession of the United
2    States, and any foreign country, or any political
3    subdivision of any of the foregoing. For purposes of the
4    foreign tax credit under Section 601, the term "state"
5    means any state of the United States, the District of
6    Columbia, the Commonwealth of Puerto Rico, and any
7    territory or possession of the United States, or any
8    political subdivision of any of the foregoing, effective
9    for tax years ending on or after December 31, 1989.
10        (23) Taxable year. The term "taxable year" means the
11    calendar year, or the fiscal year ending during such
12    calendar year, upon the basis of which the base income is
13    computed under this Act. "Taxable year" means, in the case
14    of a return made for a fractional part of a year under the
15    provisions of this Act, the period for which such return is
16    made.
17        (24) Taxpayer. The term "taxpayer" means any person
18    subject to the tax imposed by this Act.
19        (25) International banking facility. The term
20    international banking facility shall have the same meaning
21    as is set forth in the Illinois Banking Act or as is set
22    forth in the laws of the United States or regulations of
23    the Board of Governors of the Federal Reserve System.
24        (26) Income Tax Return Preparer.
25            (A) The term "income tax return preparer" means any
26        person who prepares for compensation, or who employs

 

 

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1        one or more persons to prepare for compensation, any
2        return of tax imposed by this Act or any claim for
3        refund of tax imposed by this Act. The preparation of a
4        substantial portion of a return or claim for refund
5        shall be treated as the preparation of that return or
6        claim for refund.
7            (B) A person is not an income tax return preparer
8        if all he or she does is
9                (i) furnish typing, reproducing, or other
10            mechanical assistance;
11                (ii) prepare returns or claims for refunds for
12            the employer by whom he or she is regularly and
13            continuously employed;
14                (iii) prepare as a fiduciary returns or claims
15            for refunds for any person; or
16                (iv) prepare claims for refunds for a taxpayer
17            in response to any notice of deficiency issued to
18            that taxpayer or in response to any waiver of
19            restriction after the commencement of an audit of
20            that taxpayer or of another taxpayer if a
21            determination in the audit of the other taxpayer
22            directly or indirectly affects the tax liability
23            of the taxpayer whose claims he or she is
24            preparing.
25        (27) Unitary business group.
26            (A) The term "unitary business group" means a group

 

 

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1        of persons related through common ownership whose
2        business activities are integrated with, dependent
3        upon and contribute to each other. The group will not
4        include those members whose business activity outside
5        the United States is 80% or more of any such member's
6        total business activity; for purposes of this
7        paragraph and clause (a)(3)(B)(ii) of Section 304,
8        business activity within the United States shall be
9        measured by means of the factors ordinarily applicable
10        under subsections (a), (b), (c), (d), or (h) of Section
11        304 except that, in the case of members ordinarily
12        required to apportion business income by means of the 3
13        factor formula of property, payroll and sales
14        specified in subsection (a) of Section 304, including
15        the formula as weighted in subsection (h) of Section
16        304, such members shall not use the sales factor in the
17        computation and the results of the property and payroll
18        factor computations of subsection (a) of Section 304
19        shall be divided by 2 (by one if either the property or
20        payroll factor has a denominator of zero). The
21        computation required by the preceding sentence shall,
22        in each case, involve the division of the member's
23        property, payroll, or revenue miles in the United
24        States, insurance premiums on property or risk in the
25        United States, or financial organization business
26        income from sources within the United States, as the

 

 

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1        case may be, by the respective worldwide figures for
2        such items. Common ownership in the case of
3        corporations is the direct or indirect control or
4        ownership of more than 50% of the outstanding voting
5        stock of the persons carrying on unitary business
6        activity. Unitary business activity can ordinarily be
7        illustrated where the activities of the members are:
8        (1) in the same general line (such as manufacturing,
9        wholesaling, retailing of tangible personal property,
10        insurance, transportation or finance); or (2) are
11        steps in a vertically structured enterprise or process
12        (such as the steps involved in the production of
13        natural resources, which might include exploration,
14        mining, refining, and marketing); and, in either
15        instance, the members are functionally integrated
16        through the exercise of strong centralized management
17        (where, for example, authority over such matters as
18        purchasing, financing, tax compliance, product line,
19        personnel, marketing and capital investment is not
20        left to each member).
21            (B) In no event, shall any unitary business group
22        include members which are ordinarily required to
23        apportion business income under different subsections
24        of Section 304 except that for tax years ending on or
25        after December 31, 1987 this prohibition shall not
26        apply to a holding company that would otherwise be a

 

 

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1        member of a unitary business group with taxpayers that
2        apportion business income under any of subsections
3        (b), (c), (c-1), or (d) of Section 304. If a unitary
4        business group would, but for the preceding sentence,
5        include members that are ordinarily required to
6        apportion business income under different subsections
7        of Section 304, then for each subsection of Section 304
8        for which there are two or more members, there shall be
9        a separate unitary business group composed of such
10        members. For purposes of the preceding two sentences, a
11        member is "ordinarily required to apportion business
12        income" under a particular subsection of Section 304 if
13        it would be required to use the apportionment method
14        prescribed by such subsection except for the fact that
15        it derives business income solely from Illinois. As
16        used in this paragraph, the phrase "United States"
17        means only the 50 states and the District of Columbia,
18        but does not include any territory or possession of the
19        United States or any area over which the United States
20        has asserted jurisdiction or claimed exclusive rights
21        with respect to the exploration for or exploitation of
22        natural resources.
23            (C) Holding companies.
24                (i) For purposes of this subparagraph, a
25            "holding company" is a corporation (other than a
26            corporation that is a financial organization under

 

 

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1            paragraph (8) of this subsection (a) of Section
2            1501 because it is a bank holding company under the
3            provisions of the Bank Holding Company Act of 1956
4            (12 U.S.C. 1841, et seq.) or because it is owned by
5            a bank or a bank holding company) that owns a
6            controlling interest in one or more other
7            taxpayers ("controlled taxpayers"); that, during
8            the period that includes the taxable year and the 2
9            immediately preceding taxable years or, if the
10            corporation was formed during the current or
11            immediately preceding taxable year, the taxable
12            years in which the corporation has been in
13            existence, derived substantially all its gross
14            income from dividends, interest, rents, royalties,
15            fees or other charges received from controlled
16            taxpayers for the provision of services, and gains
17            on the sale or other disposition of interests in
18            controlled taxpayers or in property leased or
19            licensed to controlled taxpayers or used by the
20            taxpayer in providing services to controlled
21            taxpayers; and that incurs no substantial expenses
22            other than expenses (including interest and other
23            costs of borrowing) incurred in connection with
24            the acquisition and holding of interests in
25            controlled taxpayers and in the provision of
26            services to controlled taxpayers or in the leasing

 

 

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1            or licensing of property to controlled taxpayers.
2                (ii) The income of a holding company which is a
3            member of more than one unitary business group
4            shall be included in each unitary business group of
5            which it is a member on a pro rata basis, by
6            including in each unitary business group that
7            portion of the base income of the holding company
8            that bears the same proportion to the total base
9            income of the holding company as the gross receipts
10            of the unitary business group bears to the combined
11            gross receipts of all unitary business groups (in
12            both cases without regard to the holding company)
13            or on any other reasonable basis, consistently
14            applied.
15                (iii) A holding company shall apportion its
16            business income under the subsection of Section
17            304 used by the other members of its unitary
18            business group. The apportionment factors of a
19            holding company which would be a member of more
20            than one unitary business group shall be included
21            with the apportionment factors of each unitary
22            business group of which it is a member on a pro
23            rata basis using the same method used in clause
24            (ii).
25                (iv) The provisions of this subparagraph (C)
26            are intended to clarify existing law.

 

 

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1            (D) If including the base income and factors of a
2        holding company in more than one unitary business group
3        under subparagraph (C) does not fairly reflect the
4        degree of integration between the holding company and
5        one or more of the unitary business groups, the
6        dependence of the holding company and one or more of
7        the unitary business groups upon each other, or the
8        contributions between the holding company and one or
9        more of the unitary business groups, the holding
10        company may petition the Director, under the
11        procedures provided under Section 304(f), for
12        permission to include all base income and factors of
13        the holding company only with members of a unitary
14        business group apportioning their business income
15        under one subsection of subsections (a), (b), (c), or
16        (d) of Section 304. If the petition is granted, the
17        holding company shall be included in a unitary business
18        group only with persons apportioning their business
19        income under the selected subsection of Section 304
20        until the Director grants a petition of the holding
21        company either to be included in more than one unitary
22        business group under subparagraph (C) or to include its
23        base income and factors only with members of a unitary
24        business group apportioning their business income
25        under a different subsection of Section 304.
26            (E) If the unitary business group members'

 

 

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1        accounting periods differ, the common parent's
2        accounting period or, if there is no common parent, the
3        accounting period of the member that is expected to
4        have, on a recurring basis, the greatest Illinois
5        income tax liability must be used to determine whether
6        to use the apportionment method provided in subsection
7        (a) or subsection (h) of Section 304. The prohibition
8        against membership in a unitary business group for
9        taxpayers ordinarily required to apportion income
10        under different subsections of Section 304 does not
11        apply to taxpayers required to apportion income under
12        subsection (a) and subsection (h) of Section 304. The
13        provisions of this amendatory Act of 1998 apply to tax
14        years ending on or after December 31, 1998.
15        (28) Subchapter S corporation. The term "Subchapter S
16    corporation" means a corporation for which there is in
17    effect an election under Section 1362 of the Internal
18    Revenue Code, or for which there is a federal election to
19    opt out of the provisions of the Subchapter S Revision Act
20    of 1982 and have applied instead the prior federal
21    Subchapter S rules as in effect on July 1, 1982.
22        (30) Foreign person. The term "foreign person" means
23    any person who is a nonresident alien individual and any
24    nonindividual entity, regardless of where created or
25    organized, whose business activity outside the United
26    States is 80% or more of the entity's total business

 

 

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1    activity.
 
2    (b) Other definitions.
3        (1) Words denoting number, gender, and so forth, when
4    used in this Act, where not otherwise distinctly expressed
5    or manifestly incompatible with the intent thereof:
6            (A) Words importing the singular include and apply
7        to several persons, parties or things;
8            (B) Words importing the plural include the
9        singular; and
10            (C) Words importing the masculine gender include
11        the feminine as well.
12        (2) "Company" or "association" as including successors
13    and assigns. The word "company" or "association", when used
14    in reference to a corporation, shall be deemed to embrace
15    the words "successors and assigns of such company or
16    association", and in like manner as if these last-named
17    words, or words of similar import, were expressed.
18        (3) Other terms. Any term used in any Section of this
19    Act with respect to the application of, or in connection
20    with, the provisions of any other Section of this Act shall
21    have the same meaning as in such other Section.
22(Source: P.A. 96-641, eff. 8-24-09; 97-507, eff. 8-23-11;
2397-636, eff. 6-1-12.)